-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V4JJ2h0RPMuWQ0WsD2qQXXoPhwcUqw6bcMaM3UUETl0IWLf80fl8mW36jw2kEH4j +WpPnOetmD6lvqzzSVk3hg== 0000950123-97-004518.txt : 19970521 0000950123-97-004518.hdr.sgml : 19970521 ACCESSION NUMBER: 0000950123-97-004518 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19970520 SROS: NYSE SROS: PSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GREAT WESTERN FINANCIAL CORP CENTRAL INDEX KEY: 0000043512 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 951913457 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: 1934 Act SEC FILE NUMBER: 005-12285 FILM NUMBER: 97611580 BUSINESS ADDRESS: STREET 1: 9200 OAKDALE AVENUE CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8187753411 MAIL ADDRESS: STREET 1: 9200 OAKDALE AVENUE CITY: CHATSWORTH STATE: CA ZIP: 91311 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GREAT WESTERN FINANCIAL CORP CENTRAL INDEX KEY: 0000043512 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 951913457 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 9200 OAKDALE AVENUE CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8187753411 MAIL ADDRESS: STREET 1: 9200 OAKDALE AVENUE CITY: CHATSWORTH STATE: CA ZIP: 91311 SC 14D9 1 SCHEDULE 14D9 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 20, 1997 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ GREAT WESTERN FINANCIAL CORPORATION (NAME OF SUBJECT COMPANY) GREAT WESTERN FINANCIAL CORPORATION (NAME OF PERSON FILING STATEMENT) COMMON STOCK, PAR VALUE $1.00 PER SHARE (INCLUDING THE ACCOMPANYING PREFERRED STOCK PURCHASE RIGHTS) (TITLE OF CLASS OF SECURITIES) 391442100 (CUSIP NUMBER OF CLASS OF SECURITIES) ------------------------ J. LANCE ERIKSON, ESQ. EXECUTIVE VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL GREAT WESTERN FINANCIAL CORPORATION 9200 OAKDALE AVENUE CHATSWORTH, CALIFORNIA 91311 (818) 775-3411 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT) ------------------------ COPY TO: PETER ALLAN ATKINS, ESQ. FRED B. WHITE III, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 919 THIRD AVENUE NEW YORK, NEW YORK 10022 (212) 735-3000 ================================================================================ 2 ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is Great Western Financial Corporation, a Delaware corporation ("Great Western"). The address of the principal executive offices of Great Western is 9200 Oakdale Avenue, Chatsworth, California 91311. The title of the class of equity securities to which this Statement relates is Great Western's common stock, par value $1.00 per share (the "Great Western Common Stock"), including the accompanying Preferred Stock Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of June 27, 1995, between Great Western and First Chicago Trust Company of New York, as Rights Agent (the "Great Western Rights Plan"). Except where the context otherwise requires, all references herein to the Great Western Common Stock shall include the Rights. ITEM 2. TENDER OFFER OF THE BIDDER. This Statement relates to an exchange offer described in a Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the "Commission") on May 13, 1997 (the "Ahmanson Form S-4") by H.F. Ahmanson & Company, a Delaware corporation ("Ahmanson"), to exchange Ahmanson common stock, par value $0.01 per share ("Ahmanson Common Stock"), for all of the outstanding shares of Great Western Common Stock. The Ahmanson S-4 has not yet been declared effective. According to a preliminary prospectus included in the Ahmanson Form S-4 (the "Ahmanson Preliminary Prospectus"), Ahmanson intends to offer, upon the terms and subject to the conditions set forth in the Ahmanson Preliminary Prospectus and in a related Letter of Transmittal (together, the "Ahmanson Exchange Offer"), to exchange shares of Ahmanson Common Stock for each outstanding share of Great Western Common Stock validly tendered on or prior to the Expiration Date (as defined in the Ahmanson Preliminary Prospectus) of the Ahmanson Exchange Offer and not properly withdrawn. Each such share of Ahmanson Common Stock would be entitled to receive shares of Ahmanson Common Stock equal to the quotient (rounded to the nearest 1/100,000) determined by dividing $50.00 by the average of the high and low sales prices of the Ahmanson Common Stock (as reported on the New York Stock Exchange Composite Transactions reporting system as published in The Wall Street Journal or, if not published therein, in another authoritative source) on each of the twenty consecutive trading days ending with the third trading day immediately preceding the Expiration Date, subject to a minimum ratio of 1.10 (which would apply when such average closing price is $45.45 or above) and a maximum ratio of 1.20 (which would apply when such average closing price is $41.67 or below). According to the Ahmanson Preliminary Prospectus, Ahmanson intends, as soon as practicable after consummation of the Ahmanson Exchange Offer, to seek to merge Great Western with and into Ahmanson. According to the Ahmanson Preliminary Prospectus, the principal executive offices of Ahmanson are located at 4900 Rivergrade Road, Irwindale, California 91706. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and business address of Great Western, which is the person filing this Statement, are set forth in Item 1 above. (b) Certain contracts, agreements, arrangements or understandings between Great Western or its affiliates and certain of Great Western's directors and executive officers ("Compensation Arrangements") are described on pages 17-33 of the proxy statement (the "Annual Meeting Proxy Statement"), dated May 12, 1997, sent by Great Western to its stockholders in connection with Great Western's Annual Meeting of Stockholders scheduled to be held on June 13, 1997 (the "Annual Meeting"). A copy of these pages of the Annual Meeting Proxy Statement is filed as Exhibit 1 hereto and is incorporated herein by reference. Additional Compensation Arrangements are described under the heading "The Washington Mutual/Great Western Merger -- Interests of Certain Persons in the Washington Mutual/Great Western Merger" at pages 70-75 in the Joint Proxy Statement/Prospectus of Great Western, dated May 13, 1997 (the "Joint Proxy Statement/Prospectus"), sent by Great Western to its stockholders in connection with Great Western's Special Meeting of Stockholders also scheduled to be held on June 13, 1997. A copy of these pages of the Joint Proxy Statement/Prospectus is filed as Exhibit 2 hereto and is incorporated herein by reference. 1 3 The consummation of the Ahmanson Exchange Offer on the terms described in the Ahmanson Preliminary Prospectus would constitute a Change in Control (as defined on page 5 of Exhibit 1) for purposes of the Compensation Arrangements. Except as described herein or in Exhibit 1 and Exhibit 2 hereto, to the knowledge of Great Western, as of the date of this Schedule 14D-9, there are no material contracts, agreements, arrangements or understandings, or any actual or potential conflicts of interest, between Great Western or its affiliates and (i) Great Western, its executive officers, directors or affiliates or (ii) Ahmanson or its executive officers, directors or affiliates. ITEM 4. THE SOLICITATION OR RECOMMENDATION. (a) and (b). On March 5, 1997, Great Western, Washington Mutual, Inc. ("Washington Mutual") and New American Capital, Inc., a wholly owned subsidiary of Washington Mutual ("NACI"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which, subject to the satisfaction or waiver of certain conditions, Great Western will be merged with and into NACI (the "Washington Mutual/ Great Western Merger"). The Merger Agreement is filed as Exhibit 3 hereto and is incorporated herein by reference. At the effective time of the Washington Mutual/Great Western Merger, (i) each outstanding share of Great Western Common Stock will be converted into the right to receive 0.9 shares (the "Exchange Ratio") of Washington Mutual common stock, with cash being paid in lieu of fractional shares, and (ii) each outstanding share of Great Western preferred stock will be converted into a share of Washington Mutual preferred stock with substantially identical terms, preferences, limitations, privileges and rights. AS MORE FULLY DESCRIBED BELOW, THE GREAT WESTERN BOARD, BY UNANIMOUS VOTE OF THOSE DIRECTORS PRESENT, HAS RECOMMENDED THAT GREAT WESTERN STOCKHOLDERS REJECT THE AHMANSON EXCHANGE OFFER AND, IF AND WHEN SUCH OFFER IS COMMENCED, NOT TENDER THEIR SHARES OF GREAT WESTERN COMMON STOCK PURSUANT TO THE AHMANSON EXCHANGE OFFER. THE GREAT WESTERN BOARD, BY UNANIMOUS VOTE OF THOSE DIRECTORS PRESENT, HAS ALSO REAFFIRMED ITS DETERMINATION THAT THE TERMS OF THE WASHINGTON MUTUAL/GREAT WESTERN MERGER ARE FAIR TO, AND IN THE BEST INTEREST OF, GREAT WESTERN AND ITS STOCKHOLDERS. On the evening of February 17, 1997, Charles R. Rinehart, Chairman of the Board and Chief Executive Officer of Ahmanson, telephoned John F. Maher, President and Chief Executive Officer of Great Western, with a request to meet that evening to discuss a merger of Ahmanson and Great Western. Mr. Maher declined to meet and informed Mr. Rinehart that such a meeting could take place only after Mr. Maher discussed the matter with the Great Western Board and Great Western's management and legal and financial advisors. The conversation between Mr. Maher and Mr. Rinehart was the first regarding a potential merger of the two companies since October 1995, when Mr. Maher informed Mr. Rinehart that a Great Western and Ahmanson combination did not advance the strategic objectives of Great Western or the interests of its stockholders and that, therefore, Great Western was not interested in pursuing a business combination with Ahmanson. Following his February 17, 1997 telephone call, Mr. Rinehart delivered a letter to Mr. Maher outlining a proposed transaction (the "Original Ahmanson Proposal") whereby Great Western would be merged with and into Ahmanson in a tax-free transaction to be accounted for as a purchase. Under the terms of the Original Ahmanson Proposal, each share of Great Western Common Stock would have been exchanged for 1.05 shares of Ahmanson common stock. Prior to the receipt of the Original Ahmanson Proposal, Great Western had not been considering a business combination, strategic or otherwise, with any third parties. On the morning of February 18, Ahmanson issued a press release describing the Original Ahmanson Proposal and held an analyst conference call to discuss its views as to the merits of such proposal. Also that morning, Ahmanson filed with the Commission preliminary solicitation materials relating to a consent solicitation by Ahmanson in favor of an amendment to Great Western's By-Laws and a non-binding stockholder resolution and to a proposed proxy solicitation by Ahmanson in connection with Great Western's annual meeting of stockholders seeking the adoption of additional by-law amendments and the election of three Ahmanson-nominated directors to the Great Western Board. 2 4 On the same day, Kerry K. Killinger, Chairman, President and Chief Executive Officer of Washington Mutual, called Mr. Maher and indicated that he was following developments at Great Western and would be open to discussions with Mr. Maher if the Great Western Board determined that discussions were appropriate. Later that day, the Washington Mutual Board of Directors (the "Washington Mutual Board") met for its regularly scheduled meeting. At that meeting, Mr. Killinger discussed the Original Ahmanson Proposal with the directors. After the Washington Mutual Board meeting, Mr. Killinger had additional discussions with certain members of the Washington Mutual Board. The chief executive officer of a large super-regional bank (the "Other Interested Party") also called Mr. Maher that day to express similar interest. Mr. Maher informed both parties that the management of Great Western would need time to consult with the Great Western Board and its advisors in order to assess the situation. On the evening of February 18, the Great Western Board held a telephonic board meeting during which Mr. Maher discussed the receipt of the Original Ahmanson Proposal as well as the other actions taken by Ahmanson. Mr. Maher informed the Great Western Board of the two indications of interest that he had received that day. Representatives of Goldman, Sachs & Co. ("Goldman Sachs") and Merrill Lynch & Co. ("Merrill Lynch"), Great Western's financial advisors, and of Skadden, Arps, Slate, Meagher & Flom LLP, Great Western's special counsel, participated in the call. At such meeting, no action was taken by the Great Western Board with respect to the Original Ahmanson Proposal or with respect to the other two indications of interest. Later that week, Mr. Maher separately responded to both Mr. Killinger and the chief executive officer of the Other Interested Party. Mr. Maher stated that, as a condition to further discussions with Great Western, each party would be required to enter reciprocal confidentiality/standstill agreements. Mr. Maher also asked Washington Mutual and the Other Interested Party to submit preliminary due diligence request lists. Mr. Maher indicated that he would be meeting with the Great Western Board on the following Monday and, depending on the outcome of those discussions, there might be an opportunity for the interested parties to visit Great Western and conduct due diligence later in that week. Neither Mr. Maher nor any other members of Great Western management or Great Western's financial advisors contacted any representatives of Ahmanson. On February 20, Mr. Killinger discussed developments with certain members of the Washington Mutual Board. On February 21, Washington Mutual and Great Western entered into a reciprocal confidentiality/standstill agreement and thereafter the parties exchanged confidential information regarding the businesses and operations of the two companies and their respective subsidiaries. Also on February 21, Great Western and the Other Interested Party entered into a reciprocal confidentiality/standstill agreement. Over the course of the week of February 17, Great Western's management and its financial advisors received inquiries from a few other potentially interested parties. These parties expressed interest in discussing possible transactions with Great Western, ranging from business combinations to the acquisition of only certain of Great Western's business lines or operations. However, none of the parties received confidential information, none of the discussions with any of these parties proceeded to a stage where confidentiality agreements were signed, and no formal indications of interest were ever received. On February 24, the Great Western Board met with its advisors to consider and analyze (i) the Original Ahmanson Proposal, (ii) continuing to operate as a stand-alone entity and to implement the strategic initiatives that had been previously undertaken to make Great Western more "bank-like," (iii) seeking a strategic partnership with either a larger or similar-sized bank or thrift holding company with a similar strategic focus and (iv) other possible alternative strategies (none of which the Great Western Board chose to pursue) for enhancing shareholder value, including the sale or spin-off of certain of Great Western's business lines and operations. After consideration of each of these alternatives, the Great Western Board determined that, in light of recent events and the value that each alternative could potentially yield, the best possible course for enhancing stockholder value would be to pursue a strategic business combination. Accordingly, the Great Western Board authorized the management of Great Western to pursue strategic business combinations and not to pursue any of the other alternatives considered. Mr. Maher called Mr. Killinger after the meeting of the Great Western Board and invited Washington Mutual to undertake a due diligence investigation of Great Western and to present a proposal for discussion on 3 5 March 3. On that same day, Mr. Maher extended the same offer to the chief executive officer of the Other Interested Party. During the week of February 24, Great Western's financial advisors made inquiries, on behalf of Great Western, of other potential strategic partners who had not previously contacted Great Western, although no formal proposals were made as a result of such inquiries. On February 25, the Other Interested Party commenced its due diligence investigation of Great Western and reviewed both public and non-public information concerning the business and operations of Great Western. This investigation lasted for two days. On March 2 and March 3 the Other Interested Party conducted further due diligence on Great Western. On February 26, Mr. Killinger traveled to California, where he met with Mr. Maher and discussed Great Western's operating progress, operating philosophies and objectives and the potential strategic benefits of a combination between the two companies. That same day, Washington Mutual began its on-site due diligence investigation of Great Western. From February 26 through March 1, members of Washington Mutual's officers' executive committee, other members of management, a due diligence team composed of representatives of different operational areas of Washington Mutual and Washington Mutual's advisors continued their intensive, on-site due diligence investigation of Great Western. On February 27, Great Western's legal advisors delivered a form of merger agreement to Washington Mutual and to the Other Interested Party and to each of their respective legal advisors. On March 3, Mr. Killinger and Mr. Craig E. Tall, Washington Mutual's Executive Vice President of Corporate Development, as well as certain representatives from Foster Pepper & Shefelman and Lehman Brothers, Washington Mutual's respective legal and financial advisors, traveled to Great Western's executive offices in Chatsworth, California. There they met with Messrs. James F. Montgomery, Chairman of the Board; John F. Maher; Carl F. Geuther, Vice Chairman and Chief Financial Officer; A. William Schenck, Vice Chairman; J. Lance Erikson, Executive Vice President and General Counsel; other members of the Great Western management team; and representatives from Goldman Sachs and Merrill Lynch, financial advisors to Great Western. The meeting consisted primarily of a presentation by Mr. Killinger of the background and current status of Washington Mutual, a preliminary transaction proposal and exchange ratio, and a discussion of the possible benefits of a merger of Washington Mutual and Great Western. That same day, the Other Interested Party made a similar presentation to the Great Western directors and executive officers listed above and indicated a preliminary exchange ratio which had an implied value that was less than the then current implied value of Washington Mutual's preliminary exchange ratio. However, the Other Interested Party subsequently informed Great Western that it would not make a definitive proposal. Prior to and during the week of March 3, other members of Great Western's senior management team and representatives of its advisors conducted on-site and off-site due diligence reviews of Washington Mutual and the Other Interested Party during which both public and non-public information concerning such companies was reviewed by Great Western. On March 4, legal advisors of Great Western and Washington Mutual met for preliminary discussions of issues raised by Washington Mutual's initial response to the draft Merger Agreement proposed by Great Western, particularly Washington Mutual's request for a termination fee and a stock option agreement. Later that day, representatives of Goldman Sachs and Merrill Lynch telephoned Mr. Killinger and Mr. Tall and advised them that Great Western was interested in Washington Mutual's preliminary transaction proposal, but that the proposed exchange ratio was insufficient. Following that call, Mr. Killinger and Mr. Tall discussed the status of the negotiations with certain members of the Washington Mutual Board and, with their concurrence, Mr. Killinger proposed, subject to approval by the Washington Mutual Board and resolution of all outstanding issues, to increase the exchange ratio to 0.9 shares of Washington Mutual common stock for each share of Great Western Common Stock. Washington Mutual and Great Western's respective legal advisors met the next day to negotiate the Merger Agreement. At the meetings of the Great Western Board held on March 4 and March 5, the Great Western Board reviewed, with the assistance of its legal advisors, Great Western's management and legal and financial 4 6 advisors, among other things, a summary of management's due diligence findings concerning Washington Mutual, presentations by management and Goldman Sachs and Merrill Lynch concerning the Washington Mutual proposal and the Original Ahmanson Proposal, the terms of the definitive Merger Agreement and both Goldman Sachs' and Merrill Lynch's fairness opinions concerning the Exchange Ratio. At these meetings, as well as at the above-described meetings, the Great Western Board specifically considered its obligations under state law with respect to discussions with Washington Mutual, Ahmanson and others and were advised by legal counsel. Based upon that review, and after consideration of other factors, the Great Western Board unanimously approved and authorized the execution of the Merger Agreement on the evening of March 5. At that meeting, the Great Western Board rescinded in its entirety Great Western's previously authorized share repurchase program. The Washington Mutual Board met on March 5 in person and telephonically to consider management's proposal for a merger with Great Western. With the assistance of Washington Mutual's legal and financial advisors, the Washington Mutual Board reviewed, among other things, management's due diligence findings concerning Great Western, presentations by management and Lehman Brothers concerning the merger proposal, the terms of the Merger Agreement and Lehman Brothers' fairness opinion concerning the Exchange Ratio. Based upon that review, the Washington Mutual Board, by unanimous vote of all directors present (with Messrs. Beighle, Bridge and Reed absent), approved and authorized the execution of the Merger Agreement on the evening of March 5. The Merger Agreement was executed and delivered by the parties shortly thereafter. Messrs. Beighle, Bridge and Reed subsequently expressed their approval of the Merger Agreement. On March 6, the proposed Washington Mutual/Great Western Merger was publicly announced. On March 17, 1997, Ahmanson announced that the Original Ahmanson Proposal had been revised to contemplate that each outstanding share of Great Western Common Stock would be converted into the right to receive not less than 1.10 nor more than 1.20 shares of Ahmanson common stock based upon a floating exchange ratio (as so revised, the "Ahmanson Proposal"). On March 25, the Great Western Board met with its advisors to consider the Ahmanson Proposal. On March 26, 1997, Great Western announced that, after careful consideration of Ahmanson's request that Great Western provide information to and engage in negotiations or discussions with Ahmanson, the Great Western Board had unanimously determined not to authorize such actions. The Great Western Board also stated its belief that a combination of Great Western and Washington Mutual will provide Great Western's stockholders with a superior value opportunity and reiterated its strong commitment to the Washington Mutual/Great Western Merger as being in the best interests of Great Western's stockholders. On May 12, 1997, Ahmanson publicly announced that it intended to commence the Ahmanson Exchange Offer. Ahmanson filed the Ahmanson S-4 the following day. On May 19, 1997, the Great Western Board met to review, with the assistance of its legal advisors, Great Western management and Great Western's legal and financial advisors, the Ahmanson Exchange Offer, which contained the same financial terms as the Ahmanson Proposal considered by the Great Western Board at the meeting held on March 25, 1997. For the same reasons the Great Western Board determined to authorize the execution of the Merger Agreement and not to authorize negotiations with Ahmanson following the receipt of the Ahmanson Proposal (which reasons are set forth below), the Great Western Board, by unanimous vote of those directors present, determined that the Ahmanson Exchange Offer is not in the best interests of Great Western and its stockholders. Accordingly, the Great Western Board, by unanimous vote of those directors present, determined to recommend that Great Western stockholders reject the Ahmanson Exchange Offer and, if and when such offer is commenced, not tender their shares of Great Western Common Stock pursuant to the Ahmanson Exchange Offer. In making its determination, the Great Western Board noted that the current implied value of the Exchange Ratio was higher than that of the Ahmanson Exchange Offer for each of the two trading days ended May 19, 1997 and was less than 2% lower than that of the Ahmanson Exchange Offer for each of the four trading days ended May 15, 1997. A copy of the letter to Great Western's stockholders communicating the Great Western Board's recommendation and the press release relating thereto are filed as Exhibits 4 and 5 hereto and incorporated herein by reference. A copy of such letter is also attached hereto. 5 7 At its May 19 meeting, the Great Western Board, by unanimous vote of those directors present, also reaffirmed its determination that the terms of the Washington Mutual/Great Western Merger are fair to, and in the best interests of, Great Western and its stockholders. Goldman Sachs and Merrill Lynch delivered to the Great Western Board their respective opinions, each dated May 19, 1997, that as of such date (i) the Exchange Ratio was fair to the stockholders of Great Western, in the case of the Goldman Sachs opinion and (ii) the Exchange Ratio was fair to the stockholders of Great Western from a financial point of view, in the case of the Merrill Lynch opinion. Copies of such opinions setting forth the assumptions made, matters considered and review undertaken are filed as Exhibits 10 and 11, respectively. The full text of each such opinion is incorporated herein by reference and the foregoing descriptions thereof are qualified in their entirety by such reference. Copies of such opinions are also attached hereto and Great Western stockholders are urged to read such opinions in their entirety. In reaching its determination to approve and adopt the Merger Agreement, at meetings of the Great Western Board held on March 4, and March 5, 1997, the Great Western Board considered the following factors: (i) the Great Western Board's familiarity with and review of Great Western's business, operations, financial condition and earnings on both an historical and a prospective basis, including Great Western's current strategic initiatives to, among other things, become more like a retail consumer bank; (ii) the Great Western Board's review, based in part on presentations by its financial advisors and Great Western management (which presentations took into account Washington Mutual's March 3 presentation described above), of (a) the strategy, business, operations, earnings and financial condition of Washington Mutual on both an historical and a prospective basis and (b) the historical stock price performance of the Washington Mutual common stock. In this regard, the Great Western Board noted that (I) Great Western and Washington Mutual possess compatible and complementary corporate cultures and, in recent years, have implemented similar strategies for enhancing profitability through the reduction of cost of funds and the development of new sources of revenue, (II) Washington Mutual has significant market presence in California, Washington, Oregon, Utah and, to a lesser extent, certain other Western states and that, as a result, the combined entity of Great Western and Washington Mutual (the "Combined Company") not only would be able to achieve the same market position in California (ranked third in deposits) that a merger with Ahmanson would bring, but would also have more geographically diverse assets and operations (pro forma at December 31, 1996 the Combined Company would have approximately 67%, 15%, 13% and 4% of its total deposits located in California, Washington, Florida and Oregon, respectively) and be less vulnerable to regional economic fluctuations and regional real estate market downturns and (III) in contrast to a combination with Ahmanson, the Combined Company would have (A) a stronger capital position to take advantage of future growth opportunities (At December 31, 1996, Ahmanson had a ratio of tangible common equity to total assets of 3.31% (which is expected to decrease based on Ahmanson's projected share repurchases) compared to 4.38% for Washington Mutual), and (B) a stronger credit position (At December 31, 1996, Ahmanson had a ratio of non-performing assets to net loans plus other real-estate owned of 3.33% compared to 1.46% for Washington Mutual). The Great Western Board also noted that the Great Western's stockholders, as owners of approximately 50% of the Combined Company, would have the ability to realize the benefits of this strategic business combination (under the terms of the Ahmanson Proposal, Great Western's stockholders would own approximately 60% of a combined Great Western/Ahmanson (assuming a maximum exchange ratio of 1.2)); (iii) the Great Western Board's review, based in part on presentations by its financial advisors and Great Western management, of (a) the strategy, business, operations, earnings and financial condition of Ahmanson on both a historical and a prospective basis and (b) the historical stock price performance of the Ahmanson common stock. In this regard, the Great Western Board noted that over the course of the past five years, Ahmanson has experienced relatively flat growth in earning assets and that loans and deposits have decreased. The Great Western Board also noted that Ahmanson has pursued different strategies than Great Western, including a strategy of consolidating its operations in California rather than attempting to diversify geographic risk. The Great Western Board also noted that a merger with Ahmanson would hinder many of the initiatives implemented by Great Western over the past few years in 6 8 order to become more "bank-like" because Ahmanson had only recently begun to implement a similar strategic focus and the Great Western Board believed that Ahmanson's efforts in this respect lagged behind those of Great Western. In particular, the Great Western Board noted that Ahmanson (I) has had a business strategy that has emphasized, and continues to emphasize, stock repurchases and other financial strategies rather than core business growth as a key means of increasing earnings per share and stockholder value, (II) has, through a systematic program of branch acquisitions and divestitures, concentrated its operations in California, which concentration is inconsistent with Great Western's desire to achieve greater geographic diversification and stands in contrast to the strong Western United States franchise that a merger with Washington Mutual would bring and (III) has a higher risk profile with a greater exposure to multifamily loans and commercial real estate. With respect to the Great Western Board's observation described in (I) concerning Ahmanson's emphasis on stock repurchases, the Great Western Board noted the presentation of its financial advisors which indicated that Ahmanson had repurchased approximately 14.5% of its outstanding stock at December 31, 1994 over the course of 1995 and 1996 and had demonstrated relatively flat asset growth over the same period and that Ahmanson's projected repurchases, as set forth in the Original Ahmanson Proposal, did not appear to allow for additional asset growth. The foregoing review by the Great Western Board was based on publicly available information regarding Ahmanson and the Great Western Board and management's knowledge of Ahmanson's business and operations derived from years of competition with Ahmanson in California and Florida banking markets, and not on any direct face-to-face discussions with Ahmanson or its representatives; (iv) the Great Western Board noted that, based on the closing market prices of the Washington Mutual common stock and Ahmanson common stock on March 4, 1997, the implied per share value of the Exchange Ratio was $47.87 as compared to the implied per share value of the Original Ahmanson Proposal of $43.44. The Great Western Board also compared the implied per share value for the two offers on a historical longer-term basis and noted that, since July, 1996, the implied value of the Exchange Ratio was always greater than the implied value of the Original Ahmanson Proposal; (v) the Great Western Board reviewed commonly-used financial benchmarks that demonstrated that Washington Mutual had a higher level of asset quality, higher reserve coverage ratio, higher capital ratios, a better efficiency ratio (excluding amortization of intangibles and non-recurring items), a higher net interest margin and a greater rate of growth in earning assets, loans and deposits. The Great Western Board noted that Washington Mutual had increased its dividend over the past six consecutive quarters and, over a longer term, for every year since 1990. In contrast, the Great Western Board noted that Ahmanson had not increased its dividend since 1987. The Great Western Board also considered that the historical pro forma dividend for Great Western's stockholders would be higher in a merger with Ahmanson than in a merger with Washington Mutual; (vi) the financial presentation of its financial advisors (including presentations of pro forma financial information with respect to both the Washington Mutual/Great Western Merger and a merger of Great Western and Ahmanson and the implied value of the Exchange Ratio and the initial exchange ratio proposed by Ahmanson in the Original Ahmanson Proposal over certain historical periods) and (a) the written opinion of Goldman Sachs rendered on March 5, 1997 that, as of the date of such opinion, the Exchange Ratio was fair to the stockholders of Great Western and (b) the written opinion of Merrill Lynch rendered on March 5, 1997 that, as of the date of such opinion, the Exchange Ratio was fair to the stockholders of Great Western from a financial point of view. Copies of such opinions, setting forth the assumptions made, matters considered and review undertaken are filed as Exhibits 6 and 7, respectively. The full text of each such opinion is incorporated herein by reference and the foregoing descriptions thereof are qualified in their entirety by such reference; (vii) the Great Western Board compared reported earnings per share and cash earnings per share on a pro forma per share equivalent basis which, with the exception of cash earnings per share for 1997, indicated that higher per share values on an equivalent basis could be realized by the Combined Company compared to a combination of Ahmanson and Great Western; 7 9 (viii) the anticipated cost savings and operating efficiencies available to Great Western and Washington Mutual as a combined institution following the Washington Mutual/Great Western Merger, the potential for revenue enhancements at the combined institution and the likelihood of achieving these cost savings, operating efficiencies and revenue enhancements relative to the likelihood that they could be achieved in a merger with Ahmanson; (ix) the anticipated cost savings and operating efficiencies available to Great Western and Ahmanson as a combined institution following a combination of the two institutions and the potential for revenue enhancements at the combined institution. In this regard, the Great Western Board considered that Ahmanson utilizes an information system which is outdated and is not compatible with Great Western's, which in turn could increase the difficulty of implementing the technology conversion required in such a merger on a timely basis and which would require significant expenditures. In contrast, Washington Mutual shares common information systems which should greatly facilitate the integration of the two companies' operations and the achievement of cost savings and operating efficiencies at a minimal cost and on a timely basis; (x) the significant experience of the senior management of Washington Mutual and its proven record of achieving cost savings, operating efficiencies and revenue enhancements in connection with the integration of acquired companies. In particular, the Great Western Board noted that Washington Mutual's current management team has successfully integrated numerous significant acquisitions since 1990 and that Washington Mutual had consummated more than 20 acquisitions over a longer period, including both in-market and out-of-market acquisitions of banks and thrifts of varying size. In contrast, Ahmanson's current management team, many members of which have been hired by Ahmanson within the past several years, has limited its focus to the acquisitions and divestitures of branches; (xi) the Great Western Board's concern, based upon presentations by its financial advisors and Great Western management, that, as a result of substantial share repurchases (during fiscal 1995 and 1996, Ahmanson is estimated to have repurchased 14.5% of its total outstanding shares as of December 31, 1994), Ahmanson's tangible common equity as a percentage of tangible assets, a ratio that Great Western's financial advisors believe is generally regarded by the investment community and by bank regulatory authorities as an indication of the relative capital strength of a financial institution, was among the lowest of any publicly traded thrift with assets in excess of one billion dollars. The Great Western Board expressed concern that Ahmanson's capital position, when combined with its loan loss reserve coverage, its exposure to multifamily loans and commercial real estate and its concentration of California-based assets, made Ahmanson particularly vulnerable to economic downturns and attendant decreases in credit quality. At December 31, 1996, Ahmanson and Washington Mutual had: (i) ratios of tangible common equity to tangible assets of 3.31% and 4.83%, respectively; and (ii) ratios of total capital (including capital securities, preferred and common stock) to total assets of 5.18% and 5.38%, respectively. The Office of Thrift Supervision (the "OTS") applies regulatory capital ratios only to savings associations and banks that it regulates and not to the holding companies of such associations or banks. At December 31, 1996, each of the respective subsidiary federal savings banks of Washington Mutual and Ahmanson were "well-capitalized" within the meaning of OTS rules and regulations. Washington Mutual Bank is subject to the capital requirements of the Federal Deposit Insurance Corporation (the "FDIC") and, at December 31, 1996, was "well-capitalized" within the meaning of FDIC rules and regulations. (xii) the Great Western Board's concerns that because the transaction contemplated by Ahmanson would be accounted for as a purchase rather than as a pooling of interests, (a) the combined institution would carry on its books a substantial amount of goodwill (and that the level of the combined institution's intangible assets (of which goodwill is the major component) to common equity would be amongst the highest in the financial services industry), which goodwill would have to be amortized and, as a result, would reduce reported earnings per share, and lead to a substantial difference between reported earnings per share and cash earnings per share and (b) a risk existed that the value of the Ahmanson common stock received by Great Western's stockholders in a merger with Ahmanson would decline if the market did not value Ahmanson with an emphasis on cash earnings rather than on reported earnings. In contrast, 8 10 neither of these concerns were raised by the Washington Mutual/Great Western Merger, which will be accounted for as a pooling-of-interests; (xiii) the Great Western Board's belief regarding the impact of the Washington Mutual/Great Western Merger on Great Western's employees relative to their response to a transaction with Ahmanson, and the positive effect such impact could have on the business, financial condition and results of operations of the Combined Company and, conversely, the possible negative effect of such impact in a combination of Ahmanson and Great Western. The Great Western Board expressed concern that the low employee morale among Great Western employees concerning a merger with Ahmanson, which the Great Western Board believed was attributable to public statements by Mr. Rinehart relating to Ahmanson's intentions regarding such employees, could pose integration risks to a combined Great Western/Ahmanson; (xiv) the Great Western Board's belief, based on Washington Mutual's and Great Western's past history of community service and lending, that the Washington Mutual/Great Western Merger would have a positive impact on other non-stockholder constituencies, and the positive effect such impact could have on the business, financial condition and results of operations of the Combined Company; (xv) the Great Western Board's review, based in part on presentations by its financial advisors, of alternatives to the Washington Mutual/Great Western Merger and the Original Ahmanson Proposal, the range of possible values to Great Western's stockholders obtainable through implementation of such alternatives and the timing and likelihood of actually receiving such values; (xvi) the following additional factors which contributed to the Great Western Board's conclusion that the Washington Mutual/Great Western Merger is in the best interests of Great Western and its stockholders: (A) the results of the due diligence investigations regarding Washington Mutual; (B) the Great Western Board's assessment, with the assistance of counsel, concerning the likelihood that Washington Mutual would obtain all required regulatory approvals for the Washington Mutual/Great Western Merger; (C) the expectation that the Washington Mutual/Great Western Merger will generally be a tax-free transaction to Great Western and its stockholders; (D) the terms of the Merger Agreement, and certain other information regarding the Washington Mutual/Great Western Merger, including the terms and structure of the Washington Mutual/Great Western Merger and the proposed arrangements with respect to the board of the Combined Company following the Washington Mutual/Great Western Merger. With respect to the termination fee provided for in the Merger Agreement, the Great Western Board actively directed negotiations with a view to substantially reducing the fee and expense reimbursement provisions from those initially proposed by Washington Mutual in response to Great Western's draft merger agreement (which contained no termination fee or expense reimbursement). After being advised that Washington Mutual's final position was a condition to its merger proposal, the Great Western Board ultimately concluded that such provisions were necessary in order to secure a transaction that the Great Western Board believed to be superior to that proposed by Ahmanson. The Great Western Board also considered that Washington Mutual had informed Great Western that, in order to pursue a merger with Great Western, Washington Mutual would be foregoing significant business opportunities. The Great Western Board also noted that, although originally included in the proposal by Washington Mutual, Washington Mutual had dropped its request for reciprocal stock option agreements in connection with the Merger Agreement after negotiations with Great Western. On March 25, 1997, the Great Western Board convened with its legal and financial advisors to consider the Ahmanson Proposal, and determined not to authorize Great Western management to provide information to, or engage in negotiations or discussions with, Ahmanson. In reaching this determination, the Great 9 11 Western Board considered the factors listed above (other than the factor set forth in clause (iv) above) as well as additional factors, including: (i) the Great Western Board's review, based on a presentation by its financial advisors, of the terms of the Ahmanson Proposal; (ii) the Great Western Board's review, based on a presentation by its financial advisors, of Ahmanson's revised projections with respect to the amount of its share repurchase plan and the anticipated cost savings and revenue enhancements available to Great Western and Ahmanson as a combined institution; (iii) the Great Western Board's concern that Ahmanson's projected net income to common stock, contained in public filings by Ahmanson, for the period of October 1, 1997 through December 31, 1999, would be insufficient to cover the cost of Ahmanson's projected share repurchases and dividends for common stock for the same period, and that, as a result, Ahmanson's pro forma capital position would be further weakened; (iv) the financial presentation of its financial advisors and (a) the opinion of Goldman Sachs rendered on March 25, 1997 that, as of the date of such opinion, the Exchange Ratio was fair to the stockholders of Great Western and (b) the opinion of Merrill Lynch rendered on March 25, 1997 that, as of the date of such opinion, the Exchange Ratio was fair to Great Western's stockholders from a financial point of view. Copies of such opinions, setting forth the assumptions made, matters considered and review undertaken, are set forth as Exhibits 8 and 9, respectively. The full text of each such opinion is incorporated herein by reference and the foregoing descriptions thereof are qualified in their entirety by such reference. Great Western's stockholders are urged to read these opinions carefully in their entirety; (v) the terms of the Merger Agreement that prohibit such negotiations unless the Great Western Board "after having consulted with and considered the advice of its financial advisors and outside counsel, has determined in good faith that the failure to do so would create a reasonable possibility of a breach of the fiduciary duties of the Great Western Board" and, after consultation with its financial advisors and outside counsel, the absence of such a determination by the Great Western Board; (vi) that the Great Western Board had made a determination to pursue a strategic business combination with Washington Mutual, rather than a sale of Great Western, and that no factors or combination of factors (including the recognition that, during the period of March 17 through March 24, 1997, the current nominal implied value of the Ahmanson Proposal was between 3 and 4.5% higher than that of the Exchange Ratio, although the average implied nominal value of the Ahmanson Proposal for the three month period ended March 24, 1997 (which was based on the average of the daily closing prices for such period) had been essentially the same as, and for the six month period ended March 24, 1997 (which was based on the average of the daily closing prices for such period) had been lower than, the implied value of the Exchange Ratio for the corresponding periods had come to its attention that altered its conclusion, formulated based on the factors described herein, that Washington Mutual was a more compelling strategic merger partner than Ahmanson and that the Washington Mutual merger presented Great Western's stockholders with a superior value opportunity; and (vii) the Great Western Board recognized its duty, and its continuing ability, to engage in careful, informed and disinterested decision making for the purpose of advancing the best interests of Great Western's stockholders. The foregoing discussion of the information and factors considered by the Great Western Board is not intended to be exhaustive. In reaching its determination to approve and recommend the Washington Mutual/Great Western Merger, during its consideration of the Ahmanson Proposal on March 25, 1997 and during its consideration of the Ahmanson Exchange Offer on May 19, 1997, the Great Western Board did not assign any relative or specific weights to the foregoing factors, and individual directors may have given differing weights to different factors. Throughout its deliberations, the Great Western Board received the advice of its financial advisors and representatives of Skadden, Arps, Slate, Meagher & Flom LLP, the firm retained to serve as special counsel to Great Western, and Latham & Watkins, special counsel to the outside directors of Great Western. 10 12 ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. Great Western has entered into letter agreements with Goldman Sachs and Merrill Lynch dated February 18, 1997 and February 25, 1997, respectively (collectively, the "Engagement Letters"). Pursuant to the Engagement Letters, Great Western agreed to pay each of Goldman Sachs and Merrill Lynch (i) a retainer of $1 million, (ii) a fee equal to .125% of the aggregate value of an acquisition transaction (which, as defined in each of the Engagement Letters, would include both the Washington Mutual/Great Western Merger and the Ahmanson Exchange Offer if consummated on the terms described in the Ahmanson Preliminary Prospectus) which is payable upon execution of a definitive agreement relating to such a transaction and (iii) a fee equal to .25% of the aggregate value of an acquisition transaction involving Great Western payable upon consummation of such transaction, against which the fee set forth in clauses (i) and (ii) above will be credited. Pursuant to the Engagement Letters, Great Western has paid each of Goldman Sachs and Merrill Lynch the $1 million retainer and a fee of $8.8 million upon execution of the Merger Agreement. Great Western also agreed to reimburse each of Goldman Sachs and Merrill Lynch for its reasonable out-of-pocket expenses, including all reasonable fees and disbursements of its attorneys, and to indemnify each of Goldman Sachs and Merrill Lynch and certain related persons against certain liabilities, including certain liabilities under federal securities law, arising out of its engagement. Great Western has retained Georgeson & Company Inc. ("Georgeson") and Alan M. Miller to assist Great Western in connection with its communications with its stockholders with respect to, and to provide other services to Great Western in connection with, the Washington Mutual/Great Western Merger and the Ahmanson Exchange Offer. Georgeson and Mr. Miller will each receive reasonable and customary compensation for its services and reimbursement of out-of-pocket expenses in connection therewith. Great Western has agreed to indemnify each of Georgeson and Mr. Miller against certain liabilities arising out of or in connection with their engagement. Great Western has retained The Abernathy/MacGregor Group, Inc. ("Abernathy") as its public relations advisor in connection with the Washington Mutual/Great Western Merger and the Ahmanson Exchange Offer. Abernathy will receive reasonable and customary compensation for its services and reimbursement of out-of-pocket expenses in connection therewith. Great Western has agreed to indemnify Abernathy against certain liabilities arising out of or in connection with its engagement. Except as set forth above, neither Great Western nor any person acting on its behalf has employed, retained or compensated any other person to make any solicitations or recommendations to stockholders on its behalf concerning the Washington Mutual/Great Western Merger or the Ahmanson Exchange Offer. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) To the best knowledge of Great Western, no transactions in Great Western Common Stock have been effected during the past 60 days by Great Western or any executive officer, director, affiliate or subsidiary of Great Western. (b) To the best knowledge of Great Western, none of its executive officers, directors, affiliates or subsidiaries presently intends to tender shares of Great Western Common Stock to Ahmanson pursuant to the Ahmanson Exchange Offer or to sell any shares of Great Western Common Stock that are owned beneficially or held of record by such persons. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY (a) and (b). As described under Item 3(b) above, Great Western, Washington Mutual and NACI entered into the Merger Agreement on March 5, 1997. The terms of the Washington Mutual/Great Western Merger are more fully set forth in the Merger Agreement, which is incorporated herein by reference and filed as Exhibit 3, and in the Summary of the Joint Proxy Statement/Prospectus, which is filed as Exhibit 12 and is incorporated herein by reference. A description of the background of the Washington Mutual/Great Western Merger is contained in Item 4 above. 11 13 As more fully described in Item 4, at its May 19, 1997 meeting, the Great Western Board, by unanimous vote of those directors present, (i) reaffirmed its determination that the terms of the Washington Mutual/Great Western Merger are fair to, and in the best interests of, Great Western and its stockholders and (ii) determined that the Ahmanson Exchange Offer is not in the best interests of Great Western and its stockholders and recommended that Great Western stockholders reject the Ahmanson Exchange Offer and not tender their shares of Great Western Common Stock pursuant to the Ahmanson Exchange Offer, if and when such offer is commenced. The factors considered by the Great Western Board in making its determinations with respect to the Washington Mutual/Great Western Merger, the Ahmanson Proposal and the Ahmanson Exchange Offer are described in Item 4 above. At its May 19 meeting, the Great Western Board determined to postpone the occurrence of a Distribution Date (as defined in the Great Western Rights Plan) until such later date as determined by the Great Western Board. Except as described in this Item 7, Great Western is not engaged in any negotiation in response to the Ahmanson Exchange Offer which relates to or would result in (i) an extraordinary transaction, such as a merger or reorganization, involving Great Western or any of its subsidiaries, (ii) a purchase, sale or transfer of a material amount of assets of Great Western or any of its subsidiaries, (iii) a tender offer for or other acquisition or securities by or of Great Western or (iv) a material change in the present capitalization or dividend policy of Great Western. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. Litigation. On February 18, 1997, Ahmanson filed a Verified Complaint for Declaratory and Injunctive Relief against Great Western and its directors (the "Ahmanson Complaint") in the Court of Chancery of the State of Delaware. The Ahmanson Complaint is entitled H. F. Ahmanson & Company v. Great Western Financial Corp., et al., Del. Ch., C.A. No. 15547. The Ahmanson Complaint alleges, among other things, that: (i) the defendants have breached their fiduciary duties with respect to the Great Western Rights Plan; (ii) the adoption of any defensive measure by the defendants which has the effect of impeding, thwarting, frustrating or interfering with the Ahmanson Proposal would constitute a breach of the defendants' fiduciary duties; and (iii) the individual directors of Great Western have breached their fiduciary duties with respect to Section 203 of the Delaware General Corporation Law (the "Delaware Business Combination Statute"). Ahmanson seeks declaratory and injunctive relief as follows: (i) an order enjoining the defendants from adopting any defensive measure which has the effect of impeding, thwarting, frustrating or interfering with the Ahmanson Proposal; (ii) an order compelling the defendants to redeem the rights associated with the Great Western Rights Plan or to amend the Great Western Rights Plan so as to make it inapplicable to the Ahmanson Proposal; (iii) an order enjoining the defendants from taking any action pursuant to the Great Western Rights Plan that would dilute or interfere with Ahmanson's voting rights or otherwise discriminate against Ahmanson; (iv) an order compelling the defendants to approve the Ahmanson Proposal for the purposes of the Delaware Business Combination Statute; (v) an order enjoining the defendants from taking any action to enforce or apply the Delaware Business Combination Statute that would impede, thwart, frustrate or interfere with the Ahmanson Proposal; and (vi) an order awarding Ahmanson its costs and expenses in the action. On February 26, 1997, Great Western and the individual defendants filed their Answer, and Affirmative Defenses to the Ahmanson Complaint and Great Western and the individual defendants filed its Counterclaims to the Ahmanson Complaint. In the Answer, Great Western and the individual defendants denied all of the material allegations raised by the Ahmanson Complaint and asserted affirmative defenses, including that: (i) the Ahmanson Complaint fails to state a claim on which relief can be granted; and (ii) Ahmanson is acting in its own self interest at the expense of Great Western and its stockholders and thus comes to Court with unclean hands. In its Counterclaims to the Ahmanson Complaint, Great Western seeks, among other things, declaratory and injunctive relief, including dismissal of the Ahmanson Complaint with prejudice and denial of the relief requested by Ahmanson. Ahmanson and Great Western have commenced discovery. Great Western and Ahmanson are currently in the process of responding to reciprocal requests for documents. 12 14 Between February 18, 1997 and February 26, 1997, six complaints (the "Complaints") were filed against Great Western and its directors in the Court of Chancery of the State of Delaware. Those complaints are entitled: Isquith v. Great Western Financial Corp., et al., Del. Ch., C.A. No. 15549; Lewis v. Maher, et al., Great Western Financial Corp., Del. Ch., C.A. No. 15555; Bildstein v. Great Western Financial Corp., et al., Del. Ch., C.A. No. 15556; Utternreither v. Great Western Financial Corp., et al., Del. Ch., C.A. No. 15557; Zupnick v. Maher, et al., Great Western Financial Corp., Del. Ch., C.A. No. 15561; Schacter v. Maher, et al., Great Western Financial Corp., Del. Ch., C.A. No. 15577. Each action was brought on behalf of the plaintiff, individually, and as a purported class action on behalf of all stockholders of Great Western. The Complaints allege, among other things, that the defendants are violating their fiduciary duties owed to the stockholders of Great Western with respect to the Ahmanson Proposal. The plaintiffs generally seek: (i) an order declaring that the action may be maintained as a class action; (ii) an order preliminarily and permanently enjoining the defendants to consider and negotiate with respect to all bona fide offers or proposals for Great Western or its assets, in the best interests of Great Western's stockholders; and (iii) compensatory damages, the costs and disbursements of the action and such other and further relief as may be just and proper. In addition, certain plaintiffs seek judgments ordering Great Western's directors, individually, to announce their intention with respect to certain matters relating to the Ahmanson Proposal. Great Western and its directors deny the operative allegations of the Complaints and will file responses thereto as appropriate; however, answers have not been filed. On March 7, 1997, Ahmanson filed a Motion for Leave to File Amended and Supplemental Complaint against Great Western and its directors (the "Ahmanson Supplemental Complaint") in the Court of Chancery of the State of Delaware. In addition to the allegations made in the Ahmanson Complaint, the Ahmanson Supplemental Complaint further alleges, among other things, that: (i) the defendants have failed to create a level playing field by discriminatorily favoring other potential bidders to the exclusion of Ahmanson and by entering into the Merger Agreement; (ii) the defendants have actively and unlawfully sought to thwart its stockholders from exercising certain of their rights for the purpose of entrenchment; (iii) the defendants have failed to find the best value reasonably available; and (iv) the defendants have irreparably harmed Ahmanson by depriving it of the unique opportunity to acquire Great Western. Consequently, Ahmanson seeks additional declaratory and injunctive relief enjoining Great Western and the individual defendants from, among other things, discriminating against Ahmanson, delaying the Annual Meeting, or taking steps to consummate the Washington Mutual/Great Western Merger or other transactions with Washington Mutual. On March 14, 1997, a complaint (an "Additional Complaint") was filed against Great Western and its directors in the Court of Chancery of the State of Delaware entitled Ullman v. Maher, et al., Great Western Financial Corp., Del. Ch., C.A. No. 15561. The Additional Complaint was brought on behalf of the plaintiffs, individually, and as a purported class action on behalf of all stockholders of Great Western. The Additional Complaint alleges, among other things, that the defendants are violating their fiduciary duties owed to the stockholders of Great Western by failing to hold an open and fair auction of Great Western, failing to negotiate the acquisition of Great Western with all interested parties, and failing to provide a level playing field through the use of a termination fee in the Merger Agreement and employment of a "poison pill." The plaintiffs generally seek: (i) an order declaring that the action may be maintained as a class action; (ii) an order that the defendants carry out their fiduciary duties and requiring them to respond in good faith to all bona fide potential acquirors of Great Western; (iii) an order preliminarily and permanently enjoining implementation of Great Western's poison pill; (iv) an order rescinding the severance agreements to be paid to the defendants and the termination fee to be made to Washington Mutual; and (v) the costs and disbursements of the action and such other and further relief as may be just and proper. Great Western and its directors deny the operative allegations of the Additional Complaint; however, an answer has not yet been filed. On March 18, 1997, Fred T. Isquith, Harris Lewis, Bernard Bildstein, Charles Uttenreither and Emil Schachter filed an Amended Class Action Complaint against Great Western and its directors in the Court of Chancery of the State of Delaware (the "Amended Class Action Complaint"). The Amended Class Action Complaint alleges, among other things, that: (i) the individual defendants are violating their fiduciary duties owed to plaintiffs and other members of the class with respect to the Ahmanson Proposal; (ii) the individual 13 15 defendants have violated their fiduciary duties with respect to certain actions taken in connection with the proposed merger between Great Western and Washington Mutual; and (iii) the individual defendants are acting to entrench themselves by favoring Washington Mutual at the expense and to the detriment of the public stockholders of Great Western. The plaintiffs seek judgments: (i) declaring that the action is a proper class action and certifying plaintiffs as class representatives; (ii) ordering the individual defendants to announce their intention with respect to certain matters relating to, among other things, the maximization of stockholder value and the employment of the Great Western Rights Plan; (iii) enjoining any transaction between Great Western and Washington Mutual which does not maximize stockholder value; (iv) declaring the approval of the termination fee to be paid to Washington Mutual in the event that the Merger Agreement is terminated to be a breach of fiduciary duty and rescinding it; (v) ordering the individual defendants, jointly and severally, to account to plaintiffs and the class for all damages suffered as a result of the acts and transactions alleged in the Amended Class Action Complaint; and (vi) awarding plaintiffs the costs and disbursements of the action and granting such other and further relief as may be just and proper. Great Western and its directors deny the operative allegations of the Amended Class Action Complaint; however, an answer has not yet been filed. On March 21, 1997, Ahmanson filed a second Motion for Leave to File Amended and Supplemental Complaint against Great Western and its directors (the "Ahmanson Second Supplemental Complaint") in the Court of Chancery of the State of Delaware and on April 14, 1997, pursuant to a stipulation among the parties, Ahmanson filed the Ahmanson Second Supplemental Complaint. In addition to the allegations made in the Ahmanson Complaint and the Ahmanson Supplemental Complaint, the Ahmanson Second Supplemental Complaint further alleges, among other things, that: (i) Great Western is attempting to impede Ahmanson's solicitation of consents from Great Western stockholders with respect to certain proposals by not recognizing March 13, 1997 (which was the record date for Ahmanson's original proposals set by the Great Western Board in accordance with Great Western's By-laws) as the record date for Ahmanson's solicitation of consents for two additional proposals (the "New Ahmanson Proposals"), with respect to which, to date, Great Western has not received a request from Ahmanson to fix a record date; and (ii) Great Western has failed to make full disclosure of matters relating to the availability of the pooling of interests method of accounting for the Washington Mutual/Great Western Merger. Consequently, Ahmanson seeks additional declaratory and injunctive relief compelling Great Western and the individual defendants to, among other things, (i) recognize March 13, 1997 as the record date for Ahmanson's solicitation of consents for the New Ahmanson Proposals; and (ii) disclose certain information that Ahmanson alleges relates to the availability of pooling of interests accounting for the Washington Mutual/Great Western Merger. A description of Ahmanson's consent solicitation is more fully set forth on pages 3-5 of the Annual Meeting Proxy Statement, which is filed as Exhibit 13 and is incorporated herein by reference. On April 9, 1997, Ahmanson filed a Complaint against Great Western pursuant to Section 225 of the DGCL (the "225 Complaint") in the Court of Chancery of the State of Delaware entitled H. F. Ahmanson & Company v. Great Western Financial Corp., Del. Ch., C.A. No. 15650. The 225 Complaint alleges, among other things, that written consents executed by the record holders of a majority of the Great Western Common Stock outstanding on March 13, 1997 were delivered to Great Western on April 9, 1997 that were effective at the time of delivery to adopt a by-law amendment that would require that Great Western hold its annual meeting of stockholders on the fourth Tuesday in April or within two weeks thereof (the "Annual Meeting By-law"). Ahmanson seeks an order (i) declaring that the Annual Meeting By-law was duly and validly adopted on April 9, 1997; and (ii) compelling Great Western to hold the Annual Meeting on or before May 6, 1997 (which was 14 days after April 22, 1997, the fourth Tuesday in April). On April 11, 1997, Ahmanson filed an Amended Complaint against Great Western and, additionally, its directors (the "Amended 225 Complaint") in the Court of Chancery of the State of Delaware. In addition to the allegations made in the 225 Complaint, the Amended 225 Complaint alleges, among other things, that: (i) the Annual Meeting By-law was effective at the time the consents were delivered; and (ii) by their actions in announcing a May 9, 1997 record date and setting the Annual Meeting for June 13, 1997, Great Western's directors violated the Annual Meeting By-law and the provision of Great Western's By-laws regarding special meetings, thereby breaching their fiduciary duties. In addition to the relief sought in the 225 Complaint, 14 16 Ahmanson seeks an order enjoining Great Western from scheduling or holding any vote on any proposed transaction, including but not limited to the Washington Mutual/Great Western Merger, prior to two weeks following the certification of the election of directors. On April 18, 1997, Ahmanson filed a Motion for Leave to File a Second Amended Complaint against Great Western and its directors (the "Second Amended 225 Complaint") in the Court of Chancery of the State of Delaware. In addition to the allegations made in the 225 Complaint and the Amended 225 Complaint, the Second Amended 225 Complaint further alleged, among other things, that the Great Western directors breached their fiduciary duties and engaged in "unlawful manipulation of the corporate machinery" by changing the date of the Annual Meeting. Consequently, Ahmanson seeks additional injunctive relief enjoining Great Western from scheduling or holding any vote on any proposed transaction, including but not limited to the Washington Mutual/Great Western Merger, for a "reasonable time" following the election of directors and enjoining Great Western from failing to comply with the Great Western By-laws regarding special meetings. On April 25, 1997, the Court of Chancery of the State of Delaware (i) granted, in part, Great Western and its directors' April 16, 1997 Motion to Dismiss and for a Protective Order by dismissing, insofar as it sought injunctive relief before the date of the Annual Meeting, Ahmanson's claim in the Second Amended 225 Complaint that the Great Western directors breached their fiduciary duties by manipulating the corporate machinery; and (ii) ordered limited discovery concerning the scheduling of the Annual Meeting for June 13, 1997. On April 28, 1997, Great Western filed a Complaint for Declaratory and Injunctive Relief against Ahmanson in the Court of Chancery of the State of Delaware entitled Great Western Financial Corp. v. H. F. Ahmanson & Company, Del. Ch., C.A. No. 15680. On April 29, 1997, Great Western filed an Amended Complaint for Declaratory Relief against Ahmanson (the "Amended Great Western Complaint") in the Court of Chancery of the State of Delaware. The Amended Great Western Complaint alleges, among other things, that an approximately 5.2 million share double vote occurred in connection with the Ahmanson consent solicitation resulting in a substantial overvote, that certain revocations and abstentions were not properly given effect and that certain Ahmanson consent cards indicating consent to one or more but not all of the proposals for which Ahmanson was soliciting consents were improperly counted as having consented to all of such proposals. Great Western seeks, among other things, an order declaring that there was an overvote entitling the inspectors of election to consider extrinsic evidence concerning the duplicate vote of approximately 5.2 million shares, that the revocations and abstentions at issue revoked consent only as to the specific proposals marked. On May 1, 1997, Great Western and Ahmanson each requested that the independent inspectors retabulate the vote without giving effect to the double-counted shares and recertify the results of the Ahmanson consent solicitation. On May 1, 1997, Fred T. Isquith, Harry Lewis, Bernard Bildstein, Charles Uttenreither and Emil Schachter filed a Motion for Leave to File Second Amended Class Action Complaint against Great Western and its directors in the Court of Chancery of the State of Delaware (the "Second Amended Class Action Complaint"). The Second Amended Class Action Complaint further alleges, among other things, that the defendants are: (i) violating their fiduciary duties by wrongfully manipulating the proxy solicitation machinery; (ii) failing to timely call a stockholder meeting in contravention of Great Western's By-laws; and (iii) interfering with and delaying the consideration of a slate of directors proposed by Ahmanson for election to the Great Western Board. Consequently, the plaintiffs seek additional relief including, among other things: (i) an order that the Great Western Board refrain from taking any action which impedes or interferes with the voting rights of Great Western stockholders; and (ii) an order that the Great Western Board schedule a stockholder meeting to elect directors on May 6, 1997 or as soon thereafter as practicable. The parties have agreed to initiate discovery on a limited basis. On May 6, 1997, Great Western and the individual defendants filed their Answer and Affirmative Defenses to the Ahmanson Second Supplemental Complaint. In the Answer, the defendants denied all of the material allegations raised by the Ahmanson Second Supplemental Complaint and asserted affirmative defenses, including that: (i) the Ahmanson Second Supplemental Complaint fails to state a claim on which 15 17 relief can be granted; (ii) Ahmanson is acting in its own self interest at the expense of Great Western and its stockholders and thus comes to the Court with unclean hands; and (iii) Ahmanson's claims are not ripe. On May 7, 1997, Great Western and the individual defendants filed their Answer and Affirmative Defenses to the Ahmanson Second Amended 225 Complaint. In the Answer, the defendants denied all of the material allegations raised by the Ahmanson Second Amended 225 Complaint and asserted affirmative defenses, including that: (i) the Ahmanson Second Amended 225 Complaint fails to state a claim on which relief can be granted; (ii) Ahmanson is acting in its own self interest at the expense of Great Western and its stockholders and thus comes to the Court with unclean hands; and (iii) Ahmanson's claims are not ripe. On May 8, 1997, Ahmanson submitted a letter (the "May 8 Letter") to the Court of Chancery of the State of Delaware relating to its claims in the Second Amended 225 Complaint. In the May 8 Letter, Ahmanson (i) states that it is no longer seeking to advance the date of the Annual Meeting forward from June 13, 1997, and (ii) requests that the Court require that the separate special meeting of stockholders of Great Western at which the Washington Mutual/Great Western Merger will be voted upon occur no earlier than six weeks after certification of the results of the Annual Meeting. On May 13, 1997, Ahmanson filed a motion with the Court of Chancery of the State of Delaware seeking to require a six-week gap between the certification of results of the election of directors at the Annual Meeting and the vote by the Great Western's stockholders on the Washington Mutual/Great Western Merger. The Court will hear the motion on May 30, 1997 and discovery has commenced with respect thereto. Great Western and its directors intend to vigorously defend the claims in the Ahmanson Complaint, the Ahmanson Supplemental Complaint, the Complaints and the Additional Complaint, the Amended Class Action Complaint, the Ahmanson Second Supplemental Complaint, the 225 Complaint, the Amended 225 Complaint and the Second Amended Class Action Complaint. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. The following Exhibits are filed herewith: Exhibit 1: Pages 17-33 from the Annual Meeting Proxy Statement. Exhibit 2: Pages 70-75 from the Joint Proxy Statement/Prospectus. Exhibit 3: Agreement and Plan of Merger, dated as of March 5, 1997, by and among Washington Mutual, NACI and Great Western (incorporated herein by reference to Appendix A to the Joint Proxy Statement/Prospectus). Exhibit 4: Letter to Stockholders of Great Western, dated May 20, 1997. Exhibit 5: Press Release issued by Great Western, dated May 20, 1997. Exhibit 6: Opinion of Goldman, Sachs & Co., dated March 5, 1997. Exhibit 7: Opinion of Merrill Lynch & Co., dated March 5, 1997. Exhibit 8: Opinion of Goldman, Sachs & Co., dated March 25, 1997. Exhibit 9: Opinion of Merrill Lynch & Co., dated March 25, 1997. Exhibit 10: Opinion of Goldman, Sachs & Co., dated May 19, 1997. Exhibit 11: Opinion of Merrill Lynch & Co., dated May 19, 1997. Exhibit 12: Summary from the Joint Proxy Statement/Prospectus. Exhibit 13: Pages 3-5 from the Annual Meeting Proxy Statement.
16 18 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. GREAT WESTERN FINANCIAL CORPORATION By: /s/ J. LANCE ERIKSON ------------------------------------ J. Lance Erikson Executive Vice President, Secretary and General Counsel Dated: May 19, 1997 17 19 Exhibit 1: Pages 17-33 from the Annual Meeting Proxy Statement. Exhibit 2: Pages 70-75 from the Joint Proxy Statement/Prospectus. Exhibit 3: Agreement and Plan of Merger, dated as of March 5, 1997, by and among Washington Mutual, NACI and Great Western (incorporated herein by reference to Appendix A to the Joint Proxy Statement/Prospectus). Exhibit 4: Letter to Stockholders of Great Western, dated May 20, 1997. Exhibit 5: Press Release issued by Great Western, dated May 20, 1997. Exhibit 6: Opinion of Goldman, Sachs & Co., dated March 5, 1997. Exhibit 7: Opinion of Merrill Lynch & Co., dated March 5, 1997. Exhibit 8: Opinion of Goldman, Sachs & Co., dated March 25, 1997. Exhibit 9: Opinion of Merrill Lynch & Co., dated March 25, 1997. Exhibit 10: Opinion of Goldman, Sachs & Co., dated May 19, 1997. Exhibit 11: Opinion of Merrill Lynch & Co., dated May 19, 1997. Exhibit 12: Summary from the Joint Proxy Statement/Prospectus. Exhibit 13: Pages 3-5 from the Annual Meeting Proxy Statement.
18 EX-99.1 2 PAGES FROM THE ANNUAL MEETING PROXY STATEMENT 1 EXHIBIT 1 COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS DIRECTORS FEES Mr. Maher is the only director who is an employee of Great Western. See "-- Employment Agreements" below for a description of Mr. Maher's employment contract. Directors, other than Mr. Maher, are paid an annual retainer of $25,000 for Board service to both Great Western and GWB and combined attendance fees totalling $1,800 for each Great Western and GWB Board meeting attended. Chairpersons of committees receive an attendance fee of $1,500 for presiding over their committee meetings, vice chairs receive an attendance fee of $1,250 and committee members receive an attendance fee of $1,000. Additionally, each chairperson of a committee receives an annual fee of $3,000, vice chairs receive an annual fee of $1,500 and the secretary of the Audit and Finance Committee receives an annual fee of $2,000. Directors are also offered insurance coverage similar to that provided under the Company's health and dental plans and are provided with travel and accident insurance coverage for travel to and from Board and committee meetings at no cost to them. Mr. Maher is not paid any fees or additional remuneration for his service as a member of the Board or any committee, but he is eligible to receive benefits under the Directors' Retirement Plan, described below. The amounts referred to above do not include the economic benefit of preferential loans under the Company's Home Loan Program described on pages 32 and 33. CONSULTING AGREEMENT WITH MR. MONTGOMERY Mr. Montgomery's consulting agreement with Great Western (the "Consulting Agreement"), effective December 29, 1995 for an initial term of five years (the "Consulting Period"), contemplates that Mr. Montgomery serve as Chairman of the Board of Great Western through December 31, 1997, and thereafter upon election by the Board (but he shall continue in any case to serve as a director of Great Western and GWB during the Consulting Period). Pursuant to the terms of the Consulting Agreement, during the Consulting Period, Mr. Montgomery will devote substantial time and attention as required, but no less than half time (if and to the extent requested), to promoting the business affairs and interests of Great Western and its affiliates. In addition to his compensation as a director (including non-employee director stock options under the Company's stock incentive plans, and benefits under the Director's Retirement Plan described below), Mr. Montgomery receives an annual consulting fee of $485,000. He is not entitled to receive awards under any bonus plan or incentive plan for employees of Great Western during the Consulting Period. The Consulting Agreement extends Mr. Montgomery's outstanding $500,000 personal, unsecured loan maturity to December 31, 1999 or, under certain circumstances, to the end of the Consulting Period. In connection with his retirement as Chief Executive of Great Western and GWB, the Company granted to Mr. Montgomery a stock option (the "Special Option") to purchase 300,000 Common Shares, which will generally become exercisable at the rate of 25% per year commencing April 26, 1996, and, once exercisable, the Special Option may be exercised at any time thereafter until the first to occur of (i) April 24, 2005, (ii) termination for cause (as defined in the Consulting Agreement), (iii) termination of the Consulting Agreement, or if it is deemed terminated in accordance with its terms, two years after the Consulting Agreement would have otherwise terminated (until the assumed date of termination, the Special Option will continue to vest as provided therein), or (iv) two years after a termination of all services (including services as a Director) for any other reason (except that the Special Option will be exercisable only to the extent exercisable on the date of a termination by reason of death or disability (as defined in the Consulting Agreement) or a termination of such services by Mr. Montgomery (other than a termination to which clause (iii) applies)). During the term of the Consulting Agreement, awards of restricted stock granted to Mr. Montgomery while he was an employee of Great Western and GWB will continue to vest in accordance with the terms of the related restricted stock award agreement and generally will vest in full on December 31, 2000 if Mr. Montgomery has continued to provide services to Great Western in accordance with the terms of the Consulting Agreement. 1 2 Mr. Montgomery's payments under the Company's Supplemental Executive Retirement Plan commenced on January 1, 1996, without any offset for benefits payable under the Retirement Plan, which generally will not be payable until he ceases to perform services for Great Western and GWB. The Consulting Agreement provides that, in the event of his death, Mr. Montgomery's beneficiaries would be entitled to a payment equal to 250% of Mr. Montgomery's then current annual consulting fee, reduced by the amount of Company-provided life insurance proceeds. Mr. Montgomery's beneficiaries would also be entitled to receive continued payment of 50% of his then current annual consulting fee for a period of 10 years, also reduced by life insurance proceeds. In addition, Mr. Montgomery's family would be entitled to continuation of certain insurance benefits for two years. Upon termination of the Consulting Agreement due to disability, Mr. Montgomery would continue to receive, until the disability ends, but no later than age 65, 50% of his then current annual consulting fee, less benefits payable under the Company's long-term disability plan. He would also be entitled to continuation of certain other benefits. In the event of a termination without cause, or if Mr. Montgomery voluntarily terminates the Consulting Agreement following a material breach by the Company, he will receive his consulting fees at the current rate for what would have been the remainder of the term of the Consulting Agreement absent such termination, and the Special Option and awards of restricted stock previously granted to Mr. Montgomery would continue to vest during the same period. In the event of a voluntary termination of Mr. Montgomery's service following a material breach by the Company after a Change in Control (as defined in the Consulting Agreement), all restricted shares and that portion of the Special Option which is then unvested shall immediately vest. In no event will payments to Mr. Montgomery which are contingent upon a Change in Control under applicable tax rules ("parachute payments") exceed limits specified by the Internal Revenue Code of 1986, as amended (the "Code"), that currently approximate three times the average of his compensation for the prior five years (the "Section 280G Limit"). Notwithstanding the foregoing, if the value of such aggregate entitlement constituting parachute payments is less than the Section 280G Limit for any reason (including that some or all of such entitlement does not constitute a parachute payment), Mr. Montgomery is entitled to receive the Section 280G Limit. A Change in Control occurs under the Consulting Agreement when anyone acquires ownership of 25% or more of the Company's outstanding voting stock and the directors of the Company immediately before such acquisition cease to constitute five-sixths of the Board of Directors of the Company or any successor. Under the terms of the Merger Agreement, consummation of the Washington Mutual Merger will constitute a Change in Control for purposes of the Consulting Agreement. DIRECTORS' RETIREMENT PLAN The Great Western Directors' Retirement Plan, as amended to date ("Directors' Retirement Plan"), provides retirement benefits to directors. Upon termination of service on the Board, each eligible director is entitled to an annual retirement benefit equal to the sum of the annual retainer paid to members of the Board plus twelve times the monthly meeting fee, both as in effect at the time of the director's termination. Benefits are payable for a period equal to the number of years that the eligible director served as a director. Such benefits will be provided to the surviving spouse or other designated beneficiary following the death of an eligible director. DIRECTOR STOCK OPTION PROGRAM Upon adoption of the 1988 Stock Option and Incentive Plan, as amended to date (the "1988 Stock Plan"), each non-employee director was granted automatically, subject to stockholder approval of such Plan, a nonqualified option under the 1988 Stock Plan's Non-Employee Director Program to purchase 2,500 Common Shares at the then fair market value of such shares. Each non-employee who thereafter becomes a director is also automatically granted such an option upon becoming a Director. Annually, each non-employee director automatically is granted an option (an "Annual Option") to purchase 2,500 Common Shares. No non-employee director may receive options to purchase more than 2,500 shares in any calendar year. The purchase price per Common Share covered by each Annual Option, payable in cash and/or shares, is the fair market value of the Common Shares on the date the option is granted. Annual Options become exercisable in 50% installments on the first and second anniversary of their grant, and, unless earlier terminated, terminate 2 3 ten years after they are granted. The exercise prices of Annual Options granted in 1995, 1996 and 1997 were $16.00, $26.125, and $28.75, respectively. If a non-employee director's services as a Board member are terminated as a result of death, disability or retirement after age 72, Annual Options will become immediately exercisable in full and will remain exercisable for a period of two years or until the expiration of the stated term of the option, whichever period is shorter. If a non-employee director's services are terminated for any other reason, any then exercisable portion of an Annual Option will be exercisable for a period of three months or the balance of the option's term, whichever period is shorter. The 1988 Stock Plan provides for full vesting and exercisability of the Annual Options in the event of a Change in Control of the Company. The term "Change in Control" is defined in the 1988 Stock Plan as it is defined in Mr. Maher's employment agreement (described on pages 21 and 22 of this Proxy Statement). Under the terms of the Merger Agreement, consummation of the Washington Mutual Merger will constitute a Change in Control for purposes of the 1988 Stock Plan. EXECUTIVE OFFICERS The following table and accompanying notes show for John F. Maher, Chief Executive Officer, and the four next highest paid executive officers of the Company as of December 31, 1996 (the "named Executive Officers"), the aggregate indicated compensation paid by the Company and its subsidiaries to such persons during the three fiscal years then ending. SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION --------------------------------------- ---------------------------- AWARDS PAYOUTS ------------ ------------- (A) (B) (C) (D) (E) (F) (G) (H) OTHER ANNUAL SECURITIES ALL OTHER NAME AND PRINCIPAL SALARY BONUS COMPENSATION UNDERLYING LTIP COMPENSATION POSITION YEAR ($)(1) ($)(1) ($)(2) OPTIONS/SARS PAYOUTS($)(3) ($)(4) - --------------------- ---- -------- -------- ------------ ------------ ------------- ------------ John F. Maher........ 1996 780,000 369,720 196,380 375,000 3,396,094 33,594 President and Chief 1995 650,000 303,225 165,505 0 -- 27,780 Executive Officer 1994 650,000 295,750 239,966 150,000 -- 27,638 Michael M. Pappas.... 1996 437,500 157,500 63,072 120,000 1,455,469 17,500 Vice Chairman and 1995 420,000 163,850 -- 0 -- 16,800 President, Consumer 1994 410,000 176,988 832 70,000 -- 16,400 Finance Division A. William Schenck III........ 1996 416,000 131,456 61,950 150,000 423,475 14,800 Vice Chairman 1995 399,996 153,500 45,178 0 -- 0 Carl F. Geuther...... 1996 385,000 121,660 89,022 130,000 1,164,375 15,400 Vice Chairman and 1995 372,000 129,018 70,035 0 -- 14,900 Chief Financial 1994 360,000 131,040 81,316 70,000 -- 14,400 Officer J. Lance Erikson..... 1996 300,000 94,800 42,301 90,000 582,188 12,000 Executive Vice 1995 285,000 106,362 50,835 0 -- 11,400 President, Secretary 1994 275,000 100,100 55,464 40,000 -- 11,000 and General Counsel
- --------------- (1) Amounts shown include cash compensation earned and received by executive officers as well as amounts earned but deferred at the election of those officers. (2) Amounts shown include, when applicable, that portion of interest earned on deferred compensation accounts above 120% of the applicable federal rate, country club dues, personal use of corporate aircraft, the estimated economic benefit of preferential loans made under the Home Loan Program shown in the table on page 27 and described further at pages 32 and 33, and the incremental cost to the Company of (a) Company provided automobiles; (b) tax and financial planning advice by third parties; and 3 4 (c) insurance which provides reimbursement for health and dental costs in excess of the amount payable under the Company's group health and dental plans. Perquisites in excess of 25% of the total perquisites reported in column (e) for 1996 include the following: Mr. Maher: economic benefit of personal use of aircraft -- $46,665; Mr. Pappas: economic benefit of company automobiles -- $17,931, excess medical and dental coverage -- $19,189, economic benefit of preferential loans -- $25,952; Mr. Schenck: economic benefit of preferential loans -- $42,888; Mr. Geuther: economic benefit of excess medical and dental coverage -- $28,661, economic benefit of preferential loans -- $35,044; Mr. Erikson: economic benefit of preferential loans -- $23,726. (3) Mr. Schenck was awarded a total of 21,544 shares of performance-based restricted stock in 1995. Such restricted shares generally vest in three to ten years; vesting may be accelerated upon the occurrence of certain events, including the achievement of performance goals, and all such restricted shares vest immediately upon the occurrence of a Change in Control (as described under the caption "EMPLOYEE BENEFIT PLANS -- Restricted Stock"). On January 23, 1996, shares of restricted stock held by the named Executive Officers, valued at the then current market value of $23.375 per share, vested as follows: Mr. Maher, 87,500 shares, valued at $2,045,313; Mr. Pappas, 37,500 shares, valued at $876,563; Mr. Geuther, 30,000 shares, valued at $701,250; and Mr. Erikson, 15,000 shares, valued at $350,625. On February 1, 1996, 10,772 shares of restricted stock held by Mr. Schenck vested, valued at $257,182 (based on the then current market value of $23.875 per share). On December 9, 1996, shares of restricted stock held by the named Executive Officers, valued at the then current market value of $30.875 per share, vested as follows: Mr. Maher, 43,750 shares, valued at $1,350,781; Mr. Pappas, 18,750 shares, valued at $578,906; Mr. Schenck, 5,386 shares, valued at $166,293; Mr. Geuther, 15,000 shares, valued at $463,125; and Mr. Erikson, 7,500 shares, valued at $231,563. At year-end 1996, the named Executive Officers held shares of restricted stock, valued at the then current market value of $29.00 per share, as follows: Mr. Maher, 43,750 shares, valued at $1,268,750; Mr. Pappas, 18,750 shares, valued at $543,750; Mr. Schenck, 5,386 shares, valued at $156,194; Mr. Geuther, 15,000 shares, valued at $435,000; and Mr. Erikson, 7,500 shares, valued at $217,500. Dividends are paid on restricted stock at the same rate payable to common stockholders and are not reflected in the amount reported. (4) The amounts shown in this column for 1996 consist of the following respective amounts: (a) Mr. Maher: Employee Savings Incentive Plan and related supplemental matches -- $31,200; Split Dollar Term Insurance Premium -- $2,394; (b) Mr. Pappas: Employee Savings Incentive Plan and related supplemental matches -- $17,500; (c) Mr. Schenck: Employee Savings Incentive Plan and related supplemental matches -- $14,800; (d) Mr. Geuther: Employee Savings Incentive Plan and related supplemental matches -- $14,476; deferred compensation plan matches and makeups -- $924; (e) Mr. Erikson: Employee Savings Incentive Plan and related supplemental matches -- $12,000. EMPLOYMENT AGREEMENTS Mr. Maher's employment agreement with Great Western, as amended to date, provides for a rolling three-year term and provides for various benefits, including a current annual salary of $860,000 which is subject to periodic review and increase, but not decrease. The agreement provides for various payments to Mr. Maher or his beneficiaries in the event of his death, disability, or termination without "Cause" (as defined in the agreement), including a death benefit payment to his beneficiaries equal to 250% of his then current salary, reduced by the amount of company-provided life insurance proceeds. Mr. Maher's beneficiaries would also be entitled to receive continued payment of 50% of his then current salary until the time when he would have been age 65 but in no event for a period less than ten years, as well as continuation of certain insurance benefits for two years. Upon termination due to disability, Mr. Maher would continue to receive, until death or his 65th birthday, whichever occurs first, 50% of the sum of his current salary plus his average bonus over the prior three years, less benefits payable under the Company's long-term disability plan, and continuation of certain other benefits. In the event of a termination without Cause, Mr. Maher would receive his current salary for the remaining term of the agreement and a full or partial bonus payment for the year of termination, without offset for subsequent employment. He would also be entitled to continuation of certain other benefits for the same period, and a pro-rata payment of long-term incentive benefits. In the event of a qualifying termination following a Change in Control (or during the pendency of a Potential Change in Control or during 4 5 the 6-month period thereafter), Mr. Maher is entitled to a lump-sum severance payment equal to three times the sum of his salary and target bonus; payment of a pro-rata target bonus to the date of termination (if termination occurs in the same year in which a Change in Control occurs, such payment will be offset by amounts received under the Annual Incentive Compensation Plan for Executive Officers in connection with such Change in Control); continuation of welfare-type benefits for three years; immediate vesting of restricted shares and stock options (where such qualifying termination occurs during the pendency of a Potential Change in Control or during the 6-month period thereafter); and credit for years of service and years of age equal to the remaining term of his agreement for purposes of calculating his benefits under the Supplemental Executive Retirement Plan. For purposes of Mr. Maher's employment agreement: (i) a "Change in Control" is defined generally as (a) a change in the majority of the Board, subject to certain exceptions; (b) any Person (as defined in the agreement) becoming the beneficial owner of 25% or more of either the outstanding Common Shares or the combined voting power of the Company's then outstanding securities; (c) consummation of the sale of all or substantially all of the assets of the Company; (d) consummation of a merger or consolidation of the Company other than one immediately following which the Company's stockholders continue to hold at least 75% of the combined voting power of the voting securities of the Company or the surviving corporation or any parent thereof (provided, that if a February 20, 1997 amendment to Mr. Maher's agreement which raised the threshold percentage to 75% would prevent a transaction intended to qualify as a "pooling of interests" from so qualifying, such threshold percentage will be 60%); or (e) stockholder approval of the liquidation or dissolution of the Company; and (ii) a "Potential Change in Control" generally occurs upon (a) any Person becoming the beneficial owner of 15% or more of either the outstanding Common Shares or the combined voting power of the Company's then outstanding securities; (b) the execution by the Company of an agreement, or the public announcement by the Company or any Person of an intention to take (or to consider taking) actions the consummation of which would result in a Change in Control; (c) the filing with the FDIC or the Office of Thrift Supervision of an application for Change in Control; or (d) the Board's adoption of a resolution to the effect that a Potential Change in Control has occurred. Mr. Maher's agreement provides that he may elect to terminate his employment, without a material breach by the Company, and receive the benefits described above during the period commencing no earlier than eighteen months following a Change in Control and ending no later than the second anniversary of such Change in Control; provided, that the eighteen-month minimum period will not apply if, at any time during the first year following such Change in Control, more than 50% of the non-employee members of the Board as of the date immediately preceding the Change in Control are no longer members of the Board; and provided further, that, if Mr. Maher elects to so terminate his agreement, cash benefits which would become payable will be reduced by 25%. In addition, the Company will pay any additional amount necessary to make Mr. Maher whole with respect to any excise tax that may be assessed under Section 4999 of the Code, in respect of payments made to Mr. Maher under his employment agreement and any other Great Western plan, agreement or arrangement in which Mr. Maher participates. If all of the payments and benefits to which Mr. Maher may become entitled in connection with a Change in Control are in the aggregate less than the maximum amount he is entitled to receive without incurring a liability under Section 4999 of the Code for any reason (including that some or all of such entitlements do not constitute parachute payments), then he will be entitled to receive such maximum amount. In the event of a good-faith dispute regarding interpretation of the terms or enforcement of the provisions of his employment agreement, Mr. Maher is entitled to recover reasonable attorney's fees. Under the terms of the Merger Agreement, consummation of the Washington Mutual Merger will constitute a Change in Control for purposes of Mr. Maher's employment agreement. Great Western has employment agreements with the other named Executive Officers (and with Jaynie M. Studenmund and Ray W. Sims, the other executive officers of Great Western that are not named Executive Officers), which have initial terms of three years and provide for rolling two-year terms at the end of the first contract year unless earlier terminated. The base annual salaries for Messrs. Pappas, Schenck, Geuther, Erikson and Sims and Ms. Studenmund under their employment agreements are $450,000, $450,000, $400,000, $315,000, $340,000 and $350,000, respectively, subject to periodic review and increase, but not subject to decrease unless done in conjunction with a pro-rata salary reduction applicable to all Great Western officers. 5 6 The employment agreements, as amended to date, provide for various benefits to each other executive officer or such officer's beneficiaries in the event of death, disability, or termination without "Cause" (as defined in the agreements) and in the event of a qualifying termination following a Change in Control or during the pendency of a Potential Change in Control (or during the 6-month period thereafter). In the event of the executive officer's death, his or her beneficiaries would be entitled to payment of the executive officer's salary and continuation of certain insurance benefits for one year. Upon termination due to disability, the executive officer would receive 50% of the sum of his or her current salary plus average bonus over the prior three years, less benefits under the Company's long term disability plan, until the disability ends, but not later than age 65 or for a period greater than ten years. In all other respects, the terms of these agreements are substantially similar to those contained in Mr. Maher's employment agreement, except that the agreements do not provide the right to terminate the agreements without a material breach by the Company during the period commencing eighteen months following a Change in Control and ending twenty-four months following such Change in Control. Under the terms of the Merger Agreement, consummation of the Washington Mutual Merger will constitute a Change in Control for purposes of these employment agreements. In December 1996, the Board adopted amendments to the employment agreements with the executive officers which, among other things, revised the definition of a Change in Control and provided for severance and other benefits to become payable upon a qualifying termination of employment during the pendency of a Potential Change in Control or during the 6-month period thereafter. In February 1997, the Board adopted an amendment to these agreements which further revised the definition of a Change in Control, with the proviso that if such revision would prevent a transaction intended to qualify as a pooling of interests from so qualifying, such amendment would have no force and effect. The definition of a Change in Control, as amended, and the provision of certain benefits as described above, are as set forth in the description of Mr. Maher's employment agreement. The following Report of the Compensation Committee and the Performance Graph included in this Proxy Statement shall not be deemed to be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report or the Performance Graph by reference therein, and shall not be deemed soliciting material or otherwise deemed filed under either of such Acts. REPORT OF THE COMPENSATION COMMITTEE Since 1989, the Company has retained the services of Strategic Compensation Associates ("SCA"), a nationally known consulting firm specializing in executive compensation issues, to assist the Compensation Committee (the "Committee") in connection with the performance of its various responsibilities. SCA advises the Committee with respect to the reasonableness and appropriateness of compensation for the Company's Executive Officers. In doing so, the firm prepares and reviews with the Compensation Committee various materials reflecting the compensation practices of a peer group consisting primarily of major regional commercial banks and other factors which SCA and the Compensation Committee consider relevant. In determining the compensation levels for all executive officers, it has been the policy and practice of the Committee to consider the advice of SCA, the contributions of individual executive officers, the performance and prospects of the Company over time, and the desirability of attracting and retaining a highly capable and experienced executive management group. All of the executive officers have employment agreements with the Company as described on pages 21 and 22. It is the Company's policy to place an increasingly significant percentage of total executive compensation "at risk," principally through the award of annual cash bonuses based on performance. Consistent with this policy, annual salary increases are limited, resulting in total compensation for executive officers as a group, excluding bonuses, at approximately the 50th percentile for companies included in the compensation analysis. The executive officers have an opportunity to significantly increase their compensation through bonuses and stock option awards if performance targets set by the Committee are achieved. 6 7 As the chief executive officer, Mr. Maher's compensation and related benefits are based principally on his rights under an employment agreement with the Company. For 1996, the Compensation Committee set Mr. Maher's salary, target bonus opportunity and total direct pay, which includes the economic value of stock option awards based on the Black-Scholes Option Pricing Model, in relation to compensation levels for chief executive officers in the peer group. Over time, the Committee believes it appropriate to provide total direct pay to the chief executive officer at a level between the 60th and 75th percentile for chief executive officers in the peer group. Because of Mr. Maher's recent promotion to this position, however, he was compensated substantially below the target level for 1996. Mr. Maher's cash compensation for 1996 was also directly related to the Company's earnings per share because, as described in the succeeding paragraph, his cash bonus opportunity under the Company's Annual Incentive Compensation Plan for Executive Officers (the "Annual Plan") is dependent upon the attainment of earnings per share targets established by the Compensation Committee. Under the terms of the Annual Plan approved by stockholders in 1994, a substantial part of an executive's cash compensation is contingent upon the achievement of the Company's performance goals set by the Compensation Committee. The performance goal for the executive officers, other than the President of the Consumer Finance Division, is a targeted earnings per share as established on an annual basis by the Compensation Committee. For the President of the Consumer Finance Division, the performance goal is based upon the attainment of an earnings before taxes goal for the Consumer Finance Division established annually by the Committee and the attainment of the earnings per share target applicable to the other executive officers. The target goals are established annually by the Compensation Committee on or before the applicable deadline under the federal income tax rules. In fiscal year 1996, targeted levels of incentive compensation were 40% of adjusted base salary for the Company's Vice Chairmen, Executive Vice Presidents and the President of the Consumer Finance Division, and 60% of adjusted base salary for the Chief Executive. Depending upon the degree of attainment of the performance goals, the executive's compensation is supplemented by fiscal year-end cash bonus payments equal to as little as 0% or as much as 200% of the executive officer's respective targeted level of incentive compensation. For 1996, the Committee approved an earnings per share goal and, based on the Company's reported earnings per share of $2.09, after adjustment in accordance with the Plan provisions to account for non-recurring events, the executive officers, other than the President of the Consumer Finance Division, were entitled to receive 79% of their respective targeted levels of incentive compensation. The 1996 earnings before taxes goal for the Consumer Finance Division was $102.2 million, and $98.7 million was reported. Based upon the Company's reported earnings per share and the reported earnings before taxes of the Consumer Finance Division, the President of the Consumer Finance Division received 90% of his targeted level of incentive compensation. Based on the competitive compensation analysis provided by SCA, the Company believes that the level of the Company's aggregate salary and bonus compensation and total compensation in 1996 for the executive officers as a group was at approximately the 40th percentile for companies included in the compensation analysis. In 1996, the Compensation Committee adopted stock ownership guidelines for the Company's executive and senior officers requiring certain levels of ownership of the Common Shares by the end of a five year period, except for recently hired officers, for whom the period is seven years. The guidelines provide for ownership of the Company's Common Shares by the Chief Executive in an amount equal to five times his salary, ownership by the Vice Chairmen and Executive Vice Presidents in amounts equal to three times their salaries, and ownership by senior officers in amounts equal to one or two times their salaries. Recent stock option grants for the Company's executive and senior officers also provide that so long as may be necessary to comply with stock ownership guidelines, the officers will retain upon exercise of stock options at least one-half of the net number of shares received on exercise. In 1992, following a comprehensive study of long term incentive programs and recommendations made by SCA, the Compensation Committee approved performance based restricted stock awards under the Company's 1988 Stock Plan for the Company's senior and executive officers to provide long-term incentive awards in amounts comparable to those awarded to executives of the companies included in the SCA compensation analysis. Shares awarded under the program are subject to forfeiture in certain circumstances and do not vest for ten years unless vesting is accelerated by the Company's exceeding the median total 7 8 stockholder return of other major financial institutions over rolling three year performance cycles. See the description of the restricted stock on pages 29 and 30. In 1996, 75% of the original awards vested based on the Company's stockholder return. In addition, the Committee approved year-end stock option grants for the named Executive Officers under the 1988 Stock Plan. In deciding the number of Common Shares to award each executive officer, the Committee considered the officer's performance during 1996, and their individual contribution toward reaching the Company's goals, their overall level of compensation in comparison to their peers, both within the Company and among the companies included in the SCA compensation analysis. The options awarded during the last fiscal year to each named Executive Officer are set forth in the table on page 28. To the extent readily determinable and as one of the factors in its consideration of compensation matters, the Compensation Committee considers the anticipated tax treatment to the Company and to the executives of various compensation. Some types of compensation and their deductibility depend upon the timing of an executive's vesting or exercise of previously granted rights. Further, interpretations of and changes in the tax laws also affect the deductibility of compensation. To the extent reasonably practicable and to the extent it is within the Committee's control, the Compensation Committee intends to limit executive compensation in ordinary circumstances to that deductible under Section 162(m) of the Code. In doing so, the Committee may utilize alternatives (such as deferring compensation) to qualify executive compensation for deductibility and may rely on grandfathering provisions with respect to existing contractual commitments. Compensation Committee of the Board of Directors, Great Western Financial Corporation Willis B. Wood, Jr., Chairman H. Frederick Christie Stephen E. Frank John V. Giovenco Enrique Hernandez, Jr. Charles D. Miller 8 9 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS LOAN TRANSACTIONS The following table shows as to certain of the Company's executive officers and directors: (i) the largest aggregate amount of indebtedness to the Company in excess of $60,000 outstanding from January 1, 1996 to March 31, 1997; (ii) the nature of the indebtedness; (iii) the outstanding balance of the indebtedness on March 31, 1997; and (iv) the annual rate of interest charged on the indebtedness. Information concerning the indebtedness to the Company by members of the Compensation Committee of the Board of Directors is given under the caption "ELECTION OF DIRECTORS -- Compensation Committee Interlocks and Insider Participation" on page 15.
INDEBTEDNESS OUTSTANDING LARGEST AT NAME OF EXECUTIVE AGGREGATE NATURE OF MARCH 31, INTEREST OFFICER OR DIRECTOR INDEBTEDNESS($) INDEBTEDNESS(1) 1997($) RATE(%)(2) - -------------------------------------------- --------------- --------------- ------------ ---------- David Alexander............................. 249,485 Residential 240,829 4.71 J. Lance Erikson............................ 787,500 Residential 782,598 4.81 222,098 Residential 215,340 4.71 Carl F. Geuther............................. 156,154 Residential 150,763 4.71 1,335,074 Residential 1,304,735 4.71 John F. Maher............................... 417,003 Residential 403,012 4.71 751,391 Residential 726,200 4.71 James F. Montgomery......................... 958,390 Residential 0 1,498,197 Residential 1,467,615 4.81 690,000 Residential 683,058 4.81 500,000 Unsecured 500,000 8.50 Michael M. Pappas........................... 900,000 Residential 893,330 4.81 204,347 Residential 198,323 4.71 A. William Schenck III...................... 613,000 Residential 600,502 4.81 1,212,000 Residential 1,188,638 4.81
- --------------- (1) Loans secured by the same residence are aggregated. (2) Interest on these loans, except for Mr. Montgomery's prime rate unsecured loan, is generally at monthly adjustable rates equal to the Company's cost of funds plus .25%. This rate was approximately 2.22% to 2.42% below that on similar loans to the public during 1996. The residential loans described above were made pursuant to the Company's Home Loan Program described on pages 32 and 33 and are secured by trust deeds or mortgages on the respective residences of the named Directors and Executive Officers. Interest on Mr. Montgomery's unsecured, personal loan is payable annually and the entire principal amount is payable on December 31, 1999 or, under certain circumstances, at the end of the Consulting Period on December 31, 2000. From time to time, directors, executive officers, members of their immediate families and entities with which such persons are known by Great Western or GWB to be affiliated or associated may obtain "margin" loans from a subsidiary of Great Western, obtain secured and unsecured loans from GWB, place interest bearing deposits with GWB, maintain checking accounts with GWB and avail themselves of check guarantee and overdraft features allowed on these accounts, all in accordance with applicable law. The transactions described in this paragraph are all in the ordinary course of Great Western or GWB's business and are made on terms substantially the same, including interest rate (which in the case of all Great Western and GWB employees may, with respect to certain types of loans, include a slight discount) and collateral, as those 9 10 prevailing at the time for comparable transactions with other unaffiliated persons and do not involve more than the normal risk of collectibility or present other unfavorable features. EMPLOYEE BENEFIT PLANS The material which follows in this section describes certain provisions made by the Company and its subsidiaries pursuant to certain stock option, restricted stock, deferred compensation, employee savings, pension or other incentive plans now in effect, that provide for severance, termination or Change in Control benefits to the named Executive Officers, other than group life and accident insurance, group hospitalization and similar group payments and benefits. STOCK BENEFIT PLANS The 1988 Stock Plan provides for various types of stock incentives, including stock options, restricted shares, bonus stock and performance shares. The only awards granted to date under the 1988 Stock Plan have been stock options and restricted stock (with performance vesting features). With respect to options granted under the 1988 Stock Plan, the Administrator may, with the consent of a holder, substitute awards or modify the terms and conditions of any outstanding award to extend the exercisability and term (subject to the maximum term limits), reduce the price, accelerate exercisability or vesting or preserve benefits of the award. The 1988 Stock Plan provides for automatic acceleration of the exercisability of awards and accelerated vesting of awards upon a Change in Control or upon a qualifying termination of employment during the pendency of a Potential Change in Control (or during the six-month period thereafter). Under the 1988 Stock Plan, the terms "Change in Control" and "Potential Change in Control" are defined as they are in Mr. Maher's employment agreement. Under the terms of the Merger Agreement, consummation of the Washington Mutual Merger will constitute a Change in Control for purposes of the 1988 Stock Plan. OPTIONS There were no grants of SARs to the named Executive Officers in 1996 and the following market priced stock options were granted to the named Executive Officers in 1996 based in part on performance in 1995 and 1996 (the first number in each column represents the award for 1995 performance and the second number represents the award for 1996 performance): OPTION GRANTS IN LAST FISCAL YEAR
(A) (B) (C) (D) (E) (F) - ------------------------------- --------------- ------------ -------------- --------------- ----------- NUMBER OF SECURITIES % OF TOTAL UNDERLYING GRANTED TO GRANT DATE OPTIONS GRANTED EMPLOYEES IN EXERCISE PRICE PRESENT NAME (#)(1) FISCAL YEAR ($/SHARE)(2) EXPIRATION DATE VALUE($)(3) - ------------------------------- --------------- ------------ -------------- --------------- ----------- John F. Maher.................. 175,000 4.58 23.375 01/23/06 $ 971,250 200,000 5.23 30.875 12/09/06 $ 1,334,000 Michael M. Pappas.............. 70,000 1.83 23.375 01/23/06 $ 388,500 50,000 1.31 30.875 12/09/06 $ 333,500 A. William Schenck III......... 70,000 1.83 23.375 01/23/06 $ 388,500 80,000 2.09 30.875 12/09/06 $ 533,600 Carl F. Geuther................ 60,000 1.57 23.375 01/23/06 $ 333,000 70,000 1.83 30.875 12/09/06 $ 466,900 J. Lance Erikson............... 40,000 1.05 23.375 01/23/06 $ 222,000 50,000 1.31 30.875 12/09/06 $ 333,500
- --------------- (1) These options vest and become exercisable in 25% installments on each of the first four anniversaries of their grant, subject to acceleration in certain circumstances such as a Change in Control. The options 10 11 have a 10-year term, subject to earlier termination in certain circumstances related to termination of employment. The instrument setting forth the terms of the option may provide that the exercise price of the option may be satisfied by delivery of previously owned shares or by the withholding of shares having a fair market value at the date of exercise equal to such exercise price. At the election of the optionee, the Company's tax withholding obligation with respect to the exercise of the option may also be satisfied by the withholding of shares having a fair market value at the date of exercise equal to such obligation. (2) All stock options were granted at the fair market value on the date of grant. (3) The shares were valued based on the Black-Scholes option pricing model adapted for use in valuing executive stock options using the following assumptions for the January 23, 1996 grant: the 52 week average stock price of $19.82, three year historical average stock price volatility of .2288, a three year historical average dividend yield of 3.63%, a risk-free rate equal to the 52 week average of ten-year Treasury Bonds of 6.60% and an option term of 10 years. The shares granted on December 9, 1996, were valued based on the Black-Scholes option pricing model adapted for use valuing executive stock options using the following assumptions: the 52 week average stock price of $24.37, three year historical average stock price volatility of .2319, a three year historical average dividend yield of 3.69%, a risk free rate equal to the 52 week average of ten year Treasury Bonds of 6.53% and an option term of 10 years. The valuation method is hypothetical. The following table shows for each of the named Executive Officers the shares acquired on exercise of options during 1996, the difference between the exercise price and the market value of the underlying shares on the date of exercise, and (as to outstanding options at December 31, 1996) the number of unexercised options and the aggregate unrealized appreciation on "in-the-money," unexercised options held at such date: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
(A) (B) (C) (D) (E) - ------------------------------------- --------- -------- -------------------- -------------------- NUMBER OF SECURITIES VALUE OF SHARES UNDERLYING UNEXERCISED ACQUIRED UNEXERCISED IN-THE-MONEY ON OPTIONS AT FY-END OPTIONS AT FY-END EXERCISE VALUE (#) EXERCISABLE/ EXERCISABLE/ NAME (#) REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2) - ------------------------------------- --------- -------- -------------------- -------------------- John F. Maher........................ 62,500 $433,241 358,542/450,000 $4,967,373/1,912,500 Michael M. Pappas.................... 50,000 $485,688 155,000/155,000 2,149,375/826,875 A. William Schenck III............... 0 0 32,262/246,786 245,998/1,131,743 Carl F. Geuther...................... 35,000 $252,125 171,000/165,000 2,381,625/770,625 J. Lance Erikson..................... 25,000 $139,767 89,010/110,000 122,604/472,500
- --------------- (1) The numbers shown in column (d) include all unexercised options held by the named Executive Officers, 1,482,600 of which were "in the money." None of the named Executive Officers holds any outstanding SARs. (2) All values are based solely on the market value of the Common Shares at the end of 1996, minus the exercise price of "in the money" options. RESTRICTED STOCK In January 1992, the Administrator first authorized awards of performance-based restricted stock under the 1988 Stock Plan and established the specific vesting provisions for such awards as described below. If the recipient remained with the Company, the shares would vest completely 10 years after the award date. Prior to that, they were subject to both accelerated vesting and risk of forfeiture to the Company, in whole or in part, upon certain events. The vesting was and is accelerated if and to the extent that the Company's common stock performance, as measured by appreciation, dividends and other distributions ("stockholder return"), over three-year performance cycles, representing the three-year period ending December 31, 1995 and periodically thereafter, exceeded and exceeds by specified amounts the stockholder return (subject to certain adjustments) 11 12 on common stocks of other designated banks, savings associations or related holding companies (the "Peer Group"). If the Company's percentile ranking relative to the Peer Group for the applicable three-year period equals or exceeds the 50th percentile, the remaining performance-based restricted shares vest in amounts ranging from 25% to 100% of the original award. Seventy-five percent of the original awards vested in 1996, based on the Company's stockholder return. The remainder will continue to vest under the terms of the related agreement and a portion of the remaining award will vest in the event of death or disability of the holder, at the rate of 20% per year. Vesting of these awards may be accelerated in certain other circumstances, including upon a Change in Control, or in the case of a qualifying termination of employment during the pendency of a Potential Change in Control (or during the six-month period thereafter) or upon retirement. Except as noted above, the unvested performance-based restricted shares generally will be forfeited upon a termination of employment (or, in Mr. Montgomery's case, termination of service as a consultant and a director). The performance-based restricted shares are registered to the recipient subject to transfer and forfeiture restrictions, but are held by the Company until such restrictions lapse. The recipients are entitled to dividends and have voting rights on these performance-based restricted shares prior to the time the restrictions lapse. Under the terms of the Merger Agreement, consummation of the Washington Mutual Merger will constitute a Change in Control for purposes of the 1988 Stock Plan. No awards of performance-based restricted stock or other long-term incentive awards were granted to the named Executive Officers in 1996. DEFERRED COMPENSATION PLANS Under the Great Western deferred compensation plans, as amended to date, participants are entitled to defer compensation until retirement, death, other termination of employment or service, or until specified dates. Participants receive a fixed rate yield based on the average annual interest rate of ten-year United States Treasury Notes for the previous ten years. An enhanced yield of up to 125% of the fixed rate yield will be payable in the event of death, under certain circumstances upon retirement after age 55, and upon termination of employment after plan participation for a specified number of years. The plans also provide for Company matching contributions on deferred compensation similar to that provided under the Employee Savings Incentive Plan described below. The Senior Officers' Deferred Compensation Plan supplements benefits payable to Executive Officers participating in the Employee Savings Incentive Plan (the "Savings Plan") to the extent that Savings Plan benefits are reduced under applicable Code limitations. The deferred compensation plans provide for full vesting of employer matching contributions upon a Change in Control or upon a qualifying termination of employment during the pendency of a Potential Change in Control (or during the six-month period thereafter). (Under the deferred compensation plans, the terms "Change in Control" and "Potential Change in Control" are defined as they are in Mr. Maher's employment agreement.) The plans also permit participants to make an advance irrevocable election to receive a cash lump sum payment of their account balance within 45 days after a Change in Control, and to elect within two years after a Change in Control to withdraw their account balance in a lump sum with a 5% penalty; if a participant's employment or service has terminated because of Retirement (as defined in the plans) at the time of such election, such participant is entitled to the enhanced yield on his or her account. During the pendency of a Potential Change in Control, and for six months thereafter, and for a period of two years following a Change in Control, the plans may not be terminated, nor may they be adversely amended without the consent of two-thirds of the participants. Mr. Montgomery's Consulting Agreement and Mr. Maher's employment agreement, however, provide for the preservation of previously elected deferrals and payment options in the event of a Change in Control. The plans also provide for pension benefits based on deferred compensation similar to those provided under the Company's Retirement Plan (described below). Under the terms of the Merger Agreement, consummation of the Washington Mutual Merger will constitute a Change in Control for purposes of the deferred compensation plans. EMPLOYEE SAVINGS INCENTIVE PLAN Under the Savings Plan, eligible employees may authorize payroll deductions for contributions which, at the participant's direction, may be invested in money market, equity, debt, balanced and Company stock 12 13 funds. Under the Savings Plan, employee contributions are matched by the Company in an amount equal to 50% of such contribution up to a maximum contribution of 6% of the employee's base salary, including overtime. The Board of Directors may authorize annually an additional contribution in an amount not to exceed the Company's mandatory contribution. Matching contributions vest at the rate of 30% for each of the first two years of participation in the Savings Plan and the remaining 40% vests in the third year of participation. Certain participant borrowings against vested benefits are permitted under the Savings Plan. RETIREMENT PLAN The Retirement Plan is a non-contributory group pension plan providing for monthly benefits in the event of retirement or, at the election of the participant, a cash balance at retirement or termination of employment. On January 1, 1997, the Company converted the Retirement Plan to a cash balance plan based upon the results of extensive research regarding employee demographics and competitive practices among the Company's peers. Benefits under the Retirement Plan depend on factors such as length of service, average monthly wage base and certain Social Security benefits. Employees over age 21 are eligible to participate after one year of service. Contributions to the plan trust are made by the Company on an actuarial basis and in an amount to obtain the maximum federal income tax deduction. Accrued benefits vest fully after five years of participation and employees may elect to take the value of their account as a lump sum payment if they terminate their employment with the Company. Forfeitures of non-vested benefits are applied to reduce the Company's contributions. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN The Supplemental Executive Retirement Plan, as amended to date (the "SERP"), provides a target retirement benefit at the participant's Normal Retirement Date (defined under the SERP as following the later to occur of the attainment of age 60 or 20 years of service for Mr. Maher and the later to occur of the attainment of age 62 or 25 years of service for the other named Executive Officers) equal to a percentage of average salary and bonus (65% for Mr. Maher and 60% for the other named Executive Officers). The SERP provides that Mr. Schenck will be credited for service with a previous employer. Under the terms of the SERP, upon a qualifying termination of employment within the two-year period following a Change in Control (or during the pendency of a Potential Change in Control or during the six-month period thereafter), the named Executive Officers will become entitled to receive retirement benefits with no reduction for early retirement. (Under the SERP, the terms "Change in Control" and "Potential Change in Control" are defined as they are in Mr. Maher's employment agreement.) In addition, the SERP provides that during the pendency of a Potential Change in Control, and for six months thereafter, and for a period of two years following a Change in Control, the SERP may not be terminated, nor may it be adversely amended without the approval of two-thirds of SERP participants. The SERP also provides the participants with retirement benefits that would otherwise exceed the annual limit on such benefits imposed by the Code. Under the terms of the Merger Agreement, consummation of the Washington Mutual Merger will constitute a Change in Control for purposes of the SERP. PENSION TABLES The amounts shown in the summary compensation table do not include any amounts expensed by the Company under the Company's Retirement Plan or under the SERP, both of which are defined benefit plans, since the amount of the accruals thereunder were not determined on an individual basis by the actuaries for either of the plans during 1996. The following table illustrates the total annual retirement benefits which would be provided under the benefit formula described in the Retirement Plan and SERP to the named Executive Officers (other than Mr. Maher) in various earnings classifications upon normal retirement in 1996. The benefit formula presently in both plans provides for an offset of certain Social Security benefits, and 13 14 Mr. Schenck's benefits under the SERP will be offset by benefits payable under retirement plans of a previous employer. The amounts shown in the following table do not reflect these offsets.
YEARS OF CREDITED SERVICE -------------------------------- AVERAGE PAY FOR 15 25 YEARS RETIREMENT PLAN PURPOSES YEARS 20 YEARS OR MORE ------------------------------------------------------ -------- -------- -------- $350,000.............................................. 126,000 168,000 210,000 $400,000.............................................. 144,000 192,000 240,000 $500,000.............................................. 180,000 240,000 300,000 $600,000.............................................. 216,000 288,000 360,000 $700,000.............................................. 252,000 336,000 420,000 $800,000.............................................. 288,000 384,000 480,000
The following table illustrates the total annual retirement benefits which would be provided under both plans to Mr. Maher. The table below does not include the amount of the annual benefit ($46,600 based on present Directors' fees) that will be payable to Mr. Maher under the Directors' Retirement Plan.
AVERAGE PAY FOR YEARS OF CREDITED SERVICE RETIREMENT PLAN PURPOSES 20 YEARS OR MORE -------------------------------------------------------------- ------------------------- $1,400,000.................................................... 910,000 $1,600,000.................................................... 1,040,000 $1,800,000.................................................... 1,170,000
Except as noted in the immediately succeeding sentence, the compensation covered by the benefit formula under the combined retirement plans is salary and bonus compensation (reduced by Social Security benefits), which is reported for the past three fiscal years in columns (c) and (d) in the summary compensation table on page 20. Mr. Maher's employment agreement provides that, for purposes of calculating his benefits under the SERP, the following levels of compensation will be assumed: on any date in 1997, SERP benefits will be based on annual compensation of $1,462,000; on any date in 1998, SERP benefits will be based on actual compensation for 1997; on any date in 1999, SERP benefits will be based on the average actual compensation for 1997 and 1998; and for any date after 1999, SERP benefits will be based on the definition of "average monthly compensation" set forth in the SERP. The named Executive Officers have the following number of years of credited service: Mr. Maher, 23 years; Mr. Pappas, 42 years; Mr. Schenck, 28 years; Mr. Geuther, 22 years; and Mr. Erikson, 28 years. UMBRELLA TRUSTS The Board has authorized the establishment of two separate Umbrella Trusts (the "Trusts") as a security arrangement for some or all of the participants in the Company's SERP, Retirement Restoration Plan, Director's Retirement Plan, supplemental retirement benefit for Mr. Gryp, the employment agreements with the executive officers, the consulting agreement with Mr. Montgomery and the deferred compensation plans (collectively, the "Plans"). The Trusts, as amended to date, provide for the full funding of benefits provided through the Trusts upon a Potential Change in Control, subject to return following the expiration of the Potential Change in Control Period (generally defined in the Trusts as six months following the date on which such Potential Change in Control ceases to exist, if no Change in Control has occurred during such period). (Under the Trusts, the terms "Change in Control" and "Potential Change in Control" are defined as they are in Mr. Maher's employment agreement.) In addition, the Trusts provide that within 30 days following the end of each year following a Change in Control, the Company shall be required to contribute to the Trusts the amount, when added to the assets in the Trusts, needed to provide the benefits under the Plans. Following a Change in Control or during the pendency of a Potential Change in Control (and for 6 months thereafter), the amended Trusts may not be adversely amended without the consent of two-thirds of the participants in the Plans. Under the terms of the Trusts, the Trustee shall hold the trust assets for the benefit of the participants in the Plans unless the Company is unable to pay its debts as they become due or the Company is the subject of a 14 15 pending proceeding as a debtor under the federal Bankruptcy Code. If either of those events occurs, the Trustee shall hold the trust assets for the benefit of the general creditors of the Company, which may include participants in the Plans. For purposes of the Trusts, a Potential Change in Control has occurred. HOME LOAN PROGRAM The Company has a Home Loan Program (the "Program") permitting secured loans to employees, officers and Directors at adjustable rates beginning at .25% over the Company's cost of funds. Loans under the Program may be made to finance the employee participant's principal residence and generally must be secured by a first trust deed or mortgage on such residence. Executive officers and directors may obtain loans from Great Western for a primary residence in amounts up to 90% of the first $1,000,000 of appraised value and 80% of the excess appraised value. Executive officers and directors may also obtain loans for secondary residences in amounts up to 90% of the first $500,000 in appraised value, 80% of the next $500,000 in appraised value and 70% of the excess appraised value. Loans granted under the Program to executive officers and directors are reviewed and approved by the Board of Directors. See "ELECTION OF DIRECTORS -- Compensation Committee Interlocks and Insider Participation" and "CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS" for information regarding loans to directors and executive officers of the Company. Program participants are disqualified from further participation after certain terminations of employment or service, however, the Program, as amended to date, provides all participants with protection from adverse amendments to the terms of existing loans or suspension of the Program following a Change in Control, protection against disqualification from participation following a termination without cause or a reduction in hours to less than 20 1/2 per week following a Change in Control, and protection against disqualification from participation following a termination during the pendency of a Potential Change in Control (or during the six-month period thereafter). Under the Program, the terms "Change in Control" and "Potential Change in Control" are defined as they are in Mr. Maher's employment agreement. Under the terms of the Merger Agreement, consummation of the Washington Mutual Merger will constitute a Change in Control for purposes of the Program. The Company does not expect to approve any additional loans under the Program pending consummation of the Washington Mutual Merger. [LEFT BLANK INTENTIONALLY] 15 EX-99.2 3 PAGES FROM THE JOINT PROXY STATEMENT/PROSPECTUS 1 EXHIBIT 2 INTERESTS OF CERTAIN PERSONS IN THE WASHINGTON MUTUAL/GREAT WESTERN MERGER Certain members of Great Western's management and the Great Western Board, respectively, may be deemed to have certain interests in the Washington Mutual/Great Western Merger that are in addition to their interests as stockholders of Great Western generally. The Great Western Board was aware of these interests and considered them, among other matters, in approving the Merger Agreement and the transactions contemplated thereby. Board of Directors. Pursuant to the terms of the Merger Agreement, members of the Washington Mutual Board will continue to serve on the Washington Mutual Board and, at the Effective Time, Washington Mutual will take all action necessary to appoint four representatives of Great Western, mutually agreeable to Washington Mutual and Great Western, to the Washington Mutual Board. See "Management and Operations of Washington Mutual Following the Washington Mutual/Great Western Merger." Indemnification; Directors' and Officers' Insurance. The Merger Agreement requires that Washington Mutual and Great Western, to the extent set forth in the following paragraph, cooperate and use their best efforts to defend and respond to any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, whether asserted or arising before or after the Effective Time (each a "Claim"), against each present and former director, officer and employee of Great Western and its subsidiaries (each an "Indemnified Party"), arising in whole or in part out of (i) his or her actions as such a director, officer, employee, or serving on behalf of such a person, or (ii) the Merger Agreement or any actions in connection therewith. The Merger Agreement also requires Washington Mutual after the Effective Time to indemnify and hold harmless, as and to the fullest extent permitted by the corporate governance documents of Great Western and its subsidiaries, the indemnification letters between Great Western and each of its directors and executive officers and by law, each 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 from such Indemnified Party to repay such advanced expenses if it is finally and unappealably determined that such Indemnified Party was not entitled to indemnification hereunder), judgments, fines and amounts paid in settlement in connection with any such threatened or actual claim, action, suit, proceeding or investigation, and in the event of any such threatened or actual claim, action, suit, proceeding or investigation (whether asserted or arising before or after the Effective Time), the Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with Washington Mutual except as provided in the Merger Agreement. These indemnification obligations of Washington Mutual will continue in full force for at least six years after the Effective Time and will apply to any Claim asserted or made within such period (including, without limitation, Claims arising out of or pertaining to the transactions contemplated by the Merger Agreement). The Merger Agreement requires that Washington Mutual use its best efforts to cause the persons serving as officers and directors of Great Western immediately prior to the Effective Time to be covered for a period of six years from the Effective Time by the directors' and officers' liability insurance policy maintained by Great Western (provided that Washington Mutual may substitute therefor policies of at least the same coverage and amounts containing terms and conditions which are not less advantageous to such directors and officers of Great Western than the terms and conditions of such existing policy) 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. Employment Agreements. Great Western has entered into employment agreements (the "EMC Agreements") with each of its seven executive officers (Messrs. Maher, Pappas, Schenck, Geuther, Sims, Erikson and Ms. Studenmund) who constitute the members of Great Western's Executive Management Committee, which provide, among other things, for severance payments upon certain terminations of employment prior to, or during the two year period (three years, in the case of Mr. Maher's agreement) 1 2 following, a change in control of Great Western. In order to qualify for the severance benefits described below, termination of employment must be (i) by Great Western or a successor employer other than for "cause" (as such term is defined in the EMC Agreements) or (ii) by the executive because of a material breach of the EMC Agreement by Great Western or a successor employer which is not cured within fifteen days after receipt of notice thereof. The EMC Agreements provide that, following a qualifying termination, the executive is entitled to receive (a) a lump sum payment equal to the product of (1) the sum of (A) the executive's annual base salary plus (B) the executive's target bonus under Great Western's Annual Incentive Plan for Executive Officers (the "Executive Officer Incentive Plan") in respect of the year in which such termination occurs (or the year in which the change in control occurs, whichever is greater) and (2) the number three, and (b) a pro-rata target bonus under the Executive Officer Incentive Plan in respect of the year in which such termination occurs, provided, that if the termination occurs during the same year in which the change in control occurs, the amount described in this clause (b) will be offset by any payments received under the Executive Officer Incentive Plan in connection with the change in control. In addition, the executive would be entitled to continuation of welfare-type benefits for three years following such termination. Mr. Maher's EMC Agreement provides that he may elect to terminate his employment, without a material breach by Great Western or a successor employer, and receive the benefits described above during the period commencing no earlier than eighteen months following a change in control of Great Western and ending no later than the second anniversary of such change in control; provided, that the eighteen-month minimum period shall not apply if, at any time during the first year following such change in control, more than 50% of the non-employee members of the Great Western Board as of the date immediately preceding the change in control are no longer members of the Great Western Board; and provided further, that, if Mr. Maher elects to so terminate his EMC Agreement, cash benefits which would become payable will be reduced by 25%. If any payments received by an executive under his or her EMC Agreement or any other benefit plan, agreement or arrangement in which such executive participates would be subject to an excise tax ("Excise Tax") under Section 4999 of the Code, he or she will be entitled to receive any additional amount necessary to make such executive whole with respect to such Excise Tax. If the value of the aggregate payments which are contingent upon a change in control of Great Western ("parachute payments") is less than specified Code limits that currently approximate three times the average of an executive's compensation for the prior five years (the "Section 280G Limit") for any reason (including that some or all of such entitlement does not constitute a parachute payment), the executive is entitled to receive the Section 280G Limit. Consummation of the Washington Mutual/Great Western Merger will constitute a change in control of Great Western for purposes of the EMC Agreements. If the employment of the seven executive officers of Great Western were terminated on or about the effective date of the Washington Mutual/Great Western Merger under circumstances entitling them to severance benefits under the EMC Agreements, such officers would be entitled to the following approximate amounts in respect of the benefits described in clause (a) above: Mr. Maher, $4,386,000; Mr. Pappas, $2,160,000; Mr. Schenck, $2,160,000; Mr. Geuther, $1,920,000; Mr. Sims, $1,632,000; Mr. Erikson, $1,512,000; and Ms. Studenmund, $1,680,000. There would be no amounts payable in respect of clause (b) under these circumstances; the pro-rata target bonus amounts payable to such officers upon a change in control of Great Western are set forth below under "Great Western Cash-Based Incentive Plans." Consulting Agreement. Great Western has entered into a consulting agreement (the "Consulting Agreement") with Mr. James F. Montgomery, the Chairman and former Chief Executive of Great Western, that has a term which expires December 31, 2000 and which provides, among other things, that Mr. Montgomery will serve as Chairman of the Board of Great Western for a term ending no earlier than December 31, 1997. If, during the term of the Consulting Agreement, Great Western or its successor materially breaches the Consulting Agreement and fails to cure such breach within fifteen days of notice thereof, Mr. Montgomery is entitled to terminate the Consulting Agreement and receive, among other things, his consulting fees ($485,000 per year) and continuation of his benefits under Great Western's executive medical program until the expiration of the term. If, during the term of the Consulting Agreement, there should occur a change in control of Great Western, Mr. Montgomery may, within 6 months after he first has knowledge of such event, elect to terminate the Consulting Agreement and receive the benefits described in the immediately preceding sentence. If the Consulting Agreement were terminated on or about the effective 2 3 date of the Washington Mutual/Great Western Merger under circumstances entitling him to termination benefits described above, Mr. Montgomery would be entitled to approximately $1,657,000 in respect of consulting fees. Supplemental Retirement Plans. Great Western's Supplemental Executive Retirement Plan (the "SERP") provides that if, prior to, or within 24 months following, a change in control of Great Western, an executive officer's employment is terminated under circumstances which would entitle such officer to receive the severance benefits payable under his or her EMC Agreement, such officer will be entitled to receive (i) for executive officers who have attained age 55 for purposes of the SERP, immediate commencement of retirement benefits that are not actuarially reduced for early retirement, or (ii) for executive officers who have not attained age 55 for purposes of the SERP, vesting of his or her accrued retirement benefits as of such termination and commencement of payment on such officer's attainment (or deemed attainment) of age 55, without reduction for commencement prior to normal retirement. SERP participants will be entitled to an additional 3 years of age and service credit as of their termination date in calculating the amount and commencement date of their retirement benefits. If the employment of the seven executive officers of Great Western were terminated on or about the effective date of the Washington Mutual/Great Western Merger under circumstances entitling them to the benefits described above under the SERP, such officers would be entitled to the following approximate annual benefit: Mr. Maher, $950,000; Mr. Pappas, $357,870; Mr. Schenck, $324,029; Mr. Geuther, $310,848; Mr. Sims, $39,596; Mr. Erikson, $238,252; and Ms. Studenmund, $121,864. The preceding amounts represent the aggregate benefit which the individual will be entitled to receive under the SERP generally in the form of a single-life annuity: these aggregate amounts are subject to adjustment based on actual 1997 compensation, and amounts received by the individual from Great Western's tax-qualified retirement plans (and for Mr. Schenck and Ms. Studenmund, benefits paid from tax qualified retirement plans of previous employers) and Social Security payments will serve to offset and reduce these SERP benefits. Great Western's Retirement Restoration Plan provides for the vesting of benefits payable thereunder if a participant incurs a qualifying termination of employment prior to, or within 24 months following, a change in control of Great Western. Consummation of the Washington Mutual/Great Western Merger will constitute a change in control of Great Western for purposes of these plans. Deferred Compensation Plans. Great Western's deferred compensation plans provide for deferral until retirement of portions of a participant's income. Employee participants may also receive employer matching contributions under the plans. Amounts deferred under each of these plans are credited with earnings based upon rates applicable to U.S. Treasury Notes, which rates increase based upon years of participation in such plan. The plans provide for full vesting (where applicable) of employer matching contributions upon a change in control of Great Western or if an employee participant incurs a termination of employment under circumstances that would entitle such employee participant to receive severance benefits under his or her EMC Agreement (if such participant is an executive officer) or, if the employee is not an executive officer, under the Special Severance Plan (as defined below) (whether or not a participant in such Plan). In addition, if an employee participant's employment is terminated under the circumstances described in the immediately preceding sentence, such participant is entitled to be credited with the fully enhanced earnings rate on his or her account balance. A participant may, prior to a change in control, elect to receive the full amount of his or her account balances in a lump sum within 45 days following such change in control, and may, during the 2-year period following a change in control, elect to receive 95% of his or her account balances in a lump sum. Consummation of the Washington Mutual/Great Western Merger will constitute a change in control of Great Western for purposes of these plans. The account balances of the executive officers of Great Western under the deferred compensation plans as of the effective date of the Washington Mutual/Great Western Merger will be approximately the following (all of these amounts became vested prior to the Washington Mutual/Great Western Merger except as noted in the immediately following sentence): Mr. Maher, $4,758,000; Mr. Pappas, $132,000; Mr. Schenck, $89,000; Mr. Geuther, $794,000; Mr. Sims, $0; Mr. Erikson, $29,000; and Ms. Studenmund, $106,000. The following approximate amounts represent that portion of the executive officers' total account balances which is attributable to crediting the fully enhanced earnings rate: Mr. Maher, $266,000; Mr. Pappas, $0; Mr. Schenck, $2,500; Mr. Geuther, $39,000; Mr. Erikson, $0; and Ms. Studenmund, $2,400. The following fully vested amounts are currently credited to the accounts of the non-employee members of the Great Western Board: Mr. Alexander, $723,500; Mr. Christie, $454,500; 3 4 Mr. Frank, $189,100; Mr. Giovenco, $831,200; Mr. Gryp, $187,200; Mr. Hernandez, $187,600; Mr. Miller, $490,600; Mr. Montgomery, $2,490,600; Ms. Siegel, $204,500; and Mr. Wood, $209,400. Great Western Equity-Based Incentive Awards. The provisions of the Merger Agreement relating to the conversion of Great Western Stock Options outstanding under Great Western Stock Plans into stock options for Washington Mutual Common Stock are described under "The Washington Mutual/Great Western Merger -- Conversion of Great Western Capital Stock." Pursuant to the terms of the Great Western Stock Plans, upon consummation of the Washington Mutual/Great Western Merger, each Great Western Common Stock Option held by employees and directors will become immediately exercisable, all shares of restricted stock will immediately vest free of restrictions and all other awards granted thereunder will become fully vested and exercisable. As of April 1, 1997, the seven executive officers of Great Western held unvested Great Western Stock Options with respect to the following number of shares of Great Western Common Stock at the indicated weighted average exercise price: Mr. Maher, 406,250 shares at $25.821; Mr. Pappas, 137,500 shares at $24.384; Mr. Schenck, 197,024 shares at $25.765; Mr. Geuther, 150,000 shares at $25.300; Mr. Sims, 60,028 shares at $31.250, Mr. Erikson, 100,000 shares at $25.775; and Ms. Studenmund, 97,500 shares at $27.846. As of April 1, 1997, certain of these executive officers of Great Western held shares of restricted stock, as follows: Mr. Maher, 43,750 shares; Mr. Pappas, 18,750 shares; Mr. Schenck, 5,386 shares, Mr. Geuther, 15,000 shares; and Mr. Erikson, 7,500 shares. As of April 1, 1997, all other employees of Great Western, as a group, held unvested Great Western Stock Options with respect to 3,079,226 shares at a weighted average exercise price of $25.082. As of April 1, 1997, Mr. Montgomery held unvested Great Western Stock Options with respect to 153,750 shares at a weighted average exercise price of $20.436, and held 43,750 shares of restricted stock; and each other non-employee member of the Great Western Board held unvested Great Western Stock Options with respect to 3,750 shares at a weighted average exercise price of $27.875. Great Western Cash-Based Incentive Awards. Great Western maintains separate cash-based incentive plans for the benefit of its executive officers and its subsidiaries' senior officers, respectively. Each of these plans provides that, within five days following a change in control of Great Western, a participant will receive a pro-rata portion of such participant's target bonus for the year in which such change in control occurs. The consummation of the Washington Mutual/Great Western Merger will constitute a change in control of Great Western for purposes of these cash-based incentive plans. Assuming that the consummation of the Washington Mutual/Great Western Merger takes place on the date currently anticipated, the seven executive officers of Great Western would be entitled to receive, within five days thereafter, the following approximate amounts in respect of the pro-rata portion of such individual's 1997 target bonus: Mr. Maher, $351,000; Mr. Pappas, $158,000; Mr. Schenck, $146,000; Mr. Geuther; $140,000; Mr. Sims, $119,000; Mr. Erikson, $110,000; and Ms. Studenmund, $123,000. These amounts are in addition to any severance benefits which may be paid to executive officers under the EMC Agreements, to participants in the Special Severance Plan and to certain participants under the Severance Plan (each as defined below); however, the amounts payable upon a change in control of Great Western under these cash-based incentive plans will offset any pro-rata bonus which may become payable under the EMC Agreements and the Special Severance Plan as a part of severance benefits, if such pro-rata bonus becomes payable during the year in which a change in control occurs. Umbrella Trusts. Great Western maintains two "rabbi trusts" (the "Trusts") for the purposes of funding benefits payable under the following Great Western benefit plans and agreements: the EMC Agreements; the Great Western deferred compensation plans; the SERP; the Retirement Restoration Plan; the Consulting Agreement; supplemental retirement benefit for Mr. Firmin A. Gryp, a director of Great Western; and Great Western's retirement plan for directors. Each of the Trusts provides for full funding thereof upon the occurrence of certain events which would anticipate a change in control of Great Western. The Trusts are funding vehicles for benefits payable to participants in the plans and agreements funded thereby and do not provide any separate or additional benefits. The delivery of the Original Ahmanson Proposal on February 17, 1997 constituted such an event. 4 5 EMPLOYEE MATTERS Employee Benefit Plans. The Merger Agreement provides that for a period of at least one year from and after the Effective Time, Washington Mutual will provide to employees of Great Western immediately prior to the Effective Time ("Great Western Employees") compensation and benefits on terms no less favorable in the aggregate than those provided to similarly situated employees of Washington Mutual. For purposes of all employee benefit plans of Washington Mutual or its subsidiaries in which Great Western Employees participate from and after the Effective Time (including all policies and employee fringe benefit programs, including vacation policies, of Washington Mutual or its subsidiaries but excluding Washington Mutual's Service Award Plan) and under which an employee's benefit depends, in whole or in part, on length of service, credit will be given to Great Western Employees for service previously credited with Great Western or its subsidiaries prior to the Effective Time to the extent that such crediting of service does not result in duplication of benefits, provided that Washington Mutual will determine each Great Western Employee's length of service in a manner consistent with Washington Mutual's customary practice with respect to its employees. Washington Mutual will also cause each employee benefit plan in which Great Western Employees participate from and after the Effective Time to waive (i) any preexisting condition restriction which was waived under the terms of any analogous Great Western employee benefit plan immediately prior to the Effective Time or (ii) any waiting period limitation which would otherwise be applicable to a Great Western Employee on or after the Effective Time to the extent such Great Western Employee had satisfied any similar waiting period limitation under an analogous Great Western employee benefit plan prior to the Effective Time. For a period of three years, in the case of those beneficiaries who are entitled to participate in such program pursuant to employment agreements, or two years, in the case of those beneficiaries who are otherwise entitled to participate in such program, commencing on the Effective Time, Washington Mutual has agreed that it will continue to maintain Great Western's Executive Medical Program, on terms no less favorable than those in effect as of March 5, 1997, for the benefit of those Great Western Employees who are as of the date of the Merger Agreement eligible to participate in such Program. Pursuant to the Merger Agreement, Washington Mutual has agreed to honor in accordance with their terms all of Great Western's employee benefit plans ("Great Western Plans"), provided that Washington Mutual will be entitled to terminate such plans, agreements and arrangements in accordance with their terms and applicable law. In addition, Washington Mutual and Great Western have agreed that consummation of the Washington Mutual/Great Western Merger will constitute a "Change in Control" for purposes of Great Western's employee benefit plans that contain change in control provisions and have agreed to honor such change in control provisions, including, but not limited to, the accelerated vesting and/or payment of equity-based awards under Great Western's employee benefit plans. Great Western has agreed to make no further mortgage loans to employees under the Great Western employee home loan program; to amend the Great Western retiree medical plans so that no additional retirees shall become entitled to continuing medical insurance benefits thereunder; and to amend Great Western's 401(k) plan prior to Closing so that participant loans are no longer available. Severance Plans. Great Western has adopted for the benefit of its senior vice presidents (and officers of equivalent rank) and first vice presidents (and officers of equivalent rank) a severance plan (the "Special Severance Plan") which provides for certain benefits to be paid and provided in the event of a qualifying termination of employment prior to, or during the two-year period following, a change in control of Great Western. Approximately 33 Great Western employees participate in the Special Severance Plan at the senior vice president level, and approximately 81 Great Western employees participate in the Special Severance Plan at the first vice president level. In order to qualify for the severance benefits described below, termination of employment must be (i) by Great Western or a successor employer other than for "cause" or (ii) by the executive for "good reason" (as each such term is defined in the Special Severance Plan). The Special Severance Plan provides that, following a qualifying termination, a participant is entitled to receive (a) a lump sum payment equal to two times (for senior vice presidents and officers of equivalent rank) or one and one-half times (for first vice presidents and officers of equivalent rank) the sum of (1) such executive's annual base salary and (2) such executive's target bonus under Great Western's annual incentive program for the year in which the termination of employment occurs (or the year in which the change in control occurs, 5 6 whichever is higher), and (b) a pro-rata bonus for the year during which the termination of employment occurs, provided, that if the termination occurs during the same year in which the change in control occurs, the amount described in this clause (b) will be offset by any payments received under Great Western's annual incentive program in connection with the change in control. In addition, the executive will be entitled to the continuation of welfare-type benefits for 24 months (in the case of senior vice presidents and officers of equivalent rank) or 18 months (in the case of first vice presidents and officers of equivalent rank). The Special Severance Plan provides that no payment will be made to a participant that would be nondeductible by reason of Section 280G of the Code. Consummation of the Washington Mutual/Great Western Merger will constitute a change in control of Great Western for purposes of the Special Severance Plan. Great Western has also adopted a broad-based severance plan (the "Severance Plan") for the benefit of eligible Great Western Employees who are not offered a comparable position by an acquiring company or whose employment is terminated within twelve months of a change in control of Great Western. Eligible employees may receive the following benefits and payments: 60 days' non-working notice pay; one month's salary for every full year of service, payable at such employee's election in a lump sum or pursuant to Great Western's payroll policies (subject to a four-month minimum and sixteen-month maximum); continuation of group insurance coverage for a period corresponding to the aggregate number of months of non-working notice pay and severance pay (but not if severance is paid in a lump sum); additional contribution credits under Great Western's retirement plan and credit for additional service for purposes of calculating benefits thereunder; extension of mortgage loans under Great Western's employee home loan program so long as the employee resides in the residence; and certain other benefits. [LEFT BLANK INTENTIONALLY] 6 EX-99.4 4 LETTER TO STOCKHOLDERS DATED MAY 1997 1 EXHIBIT 4 [GREAT WESTERN LOGO] MAY 20, 1997 Dear Great Western Stockholder: As you undoubtedly know, on March 6, 1997, Great Western Financial Corporation announced that it had entered into a merger agreement with Washington Mutual, Inc. pursuant to which Great Western would merge with a subsidiary of Washington Mutual and each of your shares of Great Western common stock would be converted into 0.9 shares of Washington Mutual common stock. On May 12, 1997, H.F. Ahmanson & Company announced that it intended to commence an unsolicited exchange offer in which holders of Great Western common stock would have the right to exchange each of their shares for not less than 1.10 nor more than 1.2 shares of Ahmanson common stock. The proposed exchange offer contains the same financial terms as Ahmanson's previously announced unsolicited merger proposal. Your Board of Directors believes that the merger with Washington Mutual is in the best interests of Great Western and its stockholders. Accordingly, the Board recommends that you reject the Ahmanson exchange offer and, if and when such offer is commenced, not tender any of your shares to Ahmanson pursuant to its exchange offer. The factors considered by the Board of Directors in determining to approve the merger with Washington Mutual and in rejecting Ahmanson's proposed exchange offer are more fully described in the Schedule 14D-9 filed by Great Western with the Securities and Exchange Commission and enclosed with this letter. We urge you to read carefully the Schedule 14D-9 in its entirety so that you will be fully informed as to the Board's recommendation. At a Special Meeting of Great Western's Stockholders scheduled to be held on June 13, 1997, stockholders will have the opportunity to vote on the merger with Washington Mutual. A Joint Proxy Statement/Prospectus of Great Western and Washington Mutual has been mailed to Great Western's stockholders of record as of May 9, 1997 in connection with such meeting. Very Truly Yours, /s/ John F. Maher /s/ James F. Montgomery John F. Maher James F. Montgomery President and Chief Chairman of the Board Executive Officer
EX-99.5 5 PRESS RELEASE DATED MAY 1997 1 EXHIBIT 5 FOR IMMEDIATE RELEASE MAY 20, 1997 Contact: Ian Campbell (818) 775-3773 Charlie Coleman (818) 775-3766 GREAT WESTERN BOARD REJECTS AHMANSON'S PROPOSED EXCHANGE OFFER REAFFIRMS COMMITMENT TO WASHINGTON MUTUAL MERGER CHATSWORTH, CALIF. -- Great Western Financial Corporation (NYSE: GWF) today announced that its Board of Directors, by unanimous vote of those directors present, determined that H.F. Ahmanson & Company's proposed exchange offer, which contains the same financial terms as Ahmanson's unsolicited merger proposal, is not in the best interests of Great Western and its stockholders. The Board, by unanimous vote of those directors present, recommended that Great Western stockholders reject Ahmanson's proposed exchange offer and, if and when that offer is commenced, not tender their Great Western shares to Ahmanson. The Board also reaffirmed its determination that the terms of its announced merger with Washington Mutual, Inc. (Nasdaq: WAMU) are fair to, and in the best interests of, Great Western and its stockholders. Great Western said: "In sharp contrast to Ahmanson's unsolicited proposal, our merger with Washington Mutual makes compelling economic and strategic sense for Great Western stockholders. Washington Mutual, with a superior record of stockholder returns, dividend history, financial strength, market valuation and cost management, is clearly the superior partner. We remain strongly committed to our merger with Washington Mutual and look forward to the upcoming stockholder vote on June 13, 1997." With assets of $42.9 billion, Great Western Financial Corporation is a diversified financial services company operating more than 1,150 mortgage lending, retail banking, and consumer finance offices nationwide. Great Western's principal subsidiary, Great Western Bank, is a mortgage-oriented consumer bank with banking branch networks in California and Florida. EX-99.6 6 OPINION OF GOLDMAN SACHS & CO. 1 EXHIBIT 6 Goldman, Sachs & Co. / 85 Broad Street / New York, New York 10004 Tel: 212-902-1000 / Fax: 212-357-4449 [GOLDMAN SACHS LOGO] PERSONAL AND CONFIDENTIAL March 5, 1997 Board of Directors Great Western Financial Corporation 9200 Oakdale Avenue Chatsworth, California 91311 Gentlemen and Madame: You have requested our opinion as to the fairness to the holders of the outstanding shares of Common Stock, par value $1.00 per share (the "Shares"), of Great Western Financial Corporation (the "Company") of the exchange ratio of 0.9 shares of Common Stock, no par value, of Washington Mutual, Inc. ("Washington Mutual") to be received for each Share (the "Exchange Ratio") pursuant to the merger (the "Merger") contemplated by the Agreement and Plan of Merger dated as of March 5, 1997 by and among Washington Mutual, New American Capital, Inc. and the Company (the "Agreement"). Goldman, Sachs & Co., as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. We are familiar with the Company having provided certain investment banking services to the Company from time to time, including having acted as managing underwriter of its $300 million issue of Capital Securities in January 1997, and having acted as its financial advisor in connection with, and participated in certain of the negotiations leading to, the Agreement. We also have provided certain investment banking services to Washington Mutual from time to time and may provide investment banking services to Washington Mutual in the future. In addition, Goldman, Sachs & Co. is a full service securities firm and in the course of its trading activities it may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company and Washington Mutual. In connection with this opinion, we have reviewed, among other things, the Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the Company for the five years ended December 31, 1995; Annual Reports to Stockholders and Annual Reports on Form 10-K of Washington Mutual for the two years ended December 31, 1995; Annual Reports to Stockholders and Annual Reports to the FDIC on Form F-2 of Washington Mutual Savings Bank, predecessor to Washington Mutual, for the three years ended December 31, 1993; certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company and Washington Mutual; certain other communications from the Company and Washington Mutual to their respective stockholders; and certain internal financial analyses and forecasts for the Company and Washington Mutual prepared by their respective managements, including analyses and forecasts of certain cost savings, operating efficiencies, revenue effects and financial synergies (collectively, the "Synergies"). We also have held discussions with members of the senior managements of the Company and Washington Mutual regarding the past and current business operations, financial condition and future prospects of their respective companies and each senior managements' assessment of the future prospects of the combined company. In addition, we have reviewed the reported price and trading activity for the Shares and Washington Mutual Common Stock, compared certain financial and stock market information for the Company and Washington Mutual with similar information for certain other companies the securities of which are publicly traded, 1 2 reviewed the financial terms of certain recent business combinations in the savings and loan industry specifically and in other industries generally and performed such other studies and analyses as we considered appropriate. We have relied without independent verification upon the accuracy and completeness of all of the financial and other information reviewed by us for purposes of this opinion. In that regard, we have assumed, with your consent, that the financial forecasts, including, without limitation, the Synergies and projections regarding under-performing and non-performing assets and net charge-offs have been reasonably prepared on a basis reflecting the best currently available judgments and estimates of the Company and Washington Mutual and that such forecasts will be realized in the amounts and at the times contemplated thereby. We are not experts in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for losses with respect thereto and have assumed, with your consent, that such allowances for each of the Company and Washington Mutual are in the aggregate adequate to cover all such losses. In addition, we have not reviewed individual credit files nor have we made an independent evaluation or appraisal of the assets and liabilities of the Company or Washington Mutual or any of their subsidiaries and we have not been furnished with any such evaluation or appraisal. We also have assumed, with your consent, that the Merger will be accounted for as a pooling of interests under generally accepted accounting principles. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of the Company in connection with its consideration of the transaction contemplated by the Agreement. Based upon and subject to the foregoing and based upon such other matters as we consider relevant, it is our opinion that as of the date hereof the Exchange Ratio pursuant to the Agreement is fair to the holders of Shares. Very truly yours, /s/ GOLDMAN, SACHS & CO. - --------------------------------------------------------- GOLDMAN, SACHS & CO. 2 EX-99.7 7 OPINION OF MERRILL LYNCH & CO. 1 EXHIBIT 7 [MERRILL LYNCH LOGO] Investment Banking Corporate and Institutional Client Group World Financial Center North Tower New York, New York 10281-1325 212-449-1000 March 5, 1997 Board of Directors Great Western Financial Corporation 9200 Oakdale Avenue Chatsworth, CA 91311 Members of the Board: We understand that it is proposed that Washington Mutual, Inc. ("Washington Mutual") and Great Western Financial Corporation ("Great Western") are proposing to enter into an Agreement and Plan of Merger (the "Agreement") pursuant to which Great Western will be merged with and into Washington Mutual in a transaction (the "Merger") in which each outstanding share of Great Western's common stock, par value $1.00 per share (the "Great Western Shares"), will be converted into the right to receive 0.90 shares (the "Exchange Ratio") of the common stock, no par value, of Washington Mutual (the "Washington Mutual Shares"), all as set forth more fully in the Agreement. You have asked us whether, in our opinion, the proposed Exchange Ratio in the Merger is fair to the shareholders of Great Western from a financial point of view. In arriving at the opinion set forth below, we have, among other things: (1) Reviewed Great Western's Annual Reports on Form 10-K and related audited financial information for the five fiscal years ended December 31, 1995, a draft of Great Western's Annual Report on Form 10-K for the period ended December 31, 1996, and Great Western's Quarterly Reports on Form 10-Q and the related unaudited financial information for the quarterly periods ending March 31, 1996, June 30, 1996 and September 30, 1996; (2) Reviewed Washington Mutual's Annual Reports on Form 10-K and related audited financial information for the two fiscal years ended December 31, 1995, a draft of Washington Mutual's Annual Report on Form 10-K for the period ended December 31, 1996, Washington Mutual's Quarterly Reports on Form 10-Q and the related unaudited financial information for the quarterly periods ending March 31, 1996, June 30, 1996 and September 30, 1996, and Annual Reports to the FDIC on Form S-2 of Washington Mutual Savings Bank, predecessor to Washington Mutual for the three years ended December 31, 1993; (3) Reviewed certain limited financial information, including financial forecasts, relating to the respective business, earnings, assets, liabilities and prospects of Great Western and Washington Mutual furnished to us by senior management of Great Western and Washington Mutual; (4) Conducted certain discussions with members of senior management of Great Western and Washington Mutual concerning respective financial condition, businesses, earnings, assets, liabilities, operations, regulatory condition, financial forecasts, contingencies and prospects, of Great Western and 1 2 [MERRILL LYNCH LOGO] Washington Mutual and their respective view as to the future financial performance of Great Western, Washington Mutual and the combined entity, as the case may be, following the Merger; (5) Reviewed the historical market prices and trading activity for the Great Western Shares and the Washington Mutual Shares and compared them with that of certain publicly traded companies which we deemed to be relevant; (6) Compared the respective results of operations of Great Western and Washington Mutual with those of certain publicly traded companies which we deemed to be relevant; (7) Compared the proposed financial terms of the Merger contemplated by the Agreement with the financial terms of certain other mergers and acquisitions which we deemed to be relevant; (8) Reviewed the amount and timing of the projected cost savings, related expenses and revenue enhancements expected to result from the Merger (the "Expected Synergies"), as presented by the senior management of Washington Mutual; (9) Considered, based upon information provided by the senior management of Great Western and Washington Mutual, the pro forma impact of the transaction on the earnings and book value per share, consolidated capitalization and certain balance sheet and profitability ratios of Washington Mutual; (10) Reviewed a draft of the Agreement and Plan of Merger and related agreements; and (11) Reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as we deemed appropriate. In preparing our opinion, with your consent, we have assumed and relied on the accuracy and completeness of all information supplied or otherwise made available to us by Great Western and Washington Mutual, including that contemplated in the numbered items above, and we have not assumed responsibility for independently verifying such information or undertaken an independent evaluation or appraisal of the assets or liabilities, contingent or otherwise, of Great Western or Washington Mutual or any of their subsidiaries, nor have we been furnished any such evaluation or appraisal. We are not experts in the evaluation of allowances for loan losses and, with your consent, we have not made an independent evaluation of the adequacy of the allowance for loan losses of Great Western or Washington Mutual, nor have we reviewed any individual credit files relating to Washington Mutual or Great Western and, with your consent, we have assumed that the aggregate allowance for loan losses for each of Washington Mutual and Great Western is adequate to cover such losses and will be adequate on a pro forma basis for the combined entity. In addition, we have not conducted any physical inspection of the properties or facilities of Great Western or Washington Mutual. With your consent, we have also assumed and relied upon the senior management of Great Western and Washington Mutual as to the reasonableness and achievability of the financial forecasts (and the assumptions and bases therefor) provided to, and discussed with, us. In that regard, we have assumed and relied with your consent that such forecasts, including without limitation, financial forecasts, evaluations of contingencies. Expected Synergies and projections regarding underperforming and non-performing assets, net charge-offs, adequacy of reserves, and future economic conditions reflect the best currently available estimates, allocations and judgments of the senior management of Great Western and Washington Mutual as to the future financial performance of Great Western, Washington Mutual or the combined entity, as the case may be. Our opinion is predicated on the Merger receiving the tax and accounting treatment contemplated in the Agreement. Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. Our opinion has been rendered without regard to the necessity for, or level of, any restrictions, obligations, undertakings or divestitures which may be imposed or required in the course of obtaining regulatory approval for the Merger. We have been retained by the Board of Directors of Great Western as an independent contractor to act as financial advisor to Great Western with respect to the Merger Proposal and will receive a fee for our services. 2 3 [MERRILL LYNCH LOGO] We have, in the past, provided financial advisory and financing services to Great Western and Washington Mutual and received customary fees for the rendering of such services, including acting as lead underwriter for a 14.6 million share secondary public offering of Washington Mutual common stock in January 1997. In addition, in the ordinary course of our securities business, we may actively trade debt and/or equity securities of Great Western and Washington Mutual and their respective affiliates for our own account and the accounts of our customers, and we therefore may from time to time hold a long or short position in such securities. In addition, certain affiliates of Merrill Lynch & Co. act as investment advisors to publicly held mutual funds which owned, as of March 4, 1997, approximately 5.1 million shares of Great Western's Common Stock and approximately 0.5 million shares of Washington Mutual's Common Stock. Our opinion is directed to the Board of Directors of Great Western and does not constitute a recommendation to any shareholder of Great Western as to how such shareholder should vote at any shareholder meeting of Great Western held in connection with the Merger Proposal. This opinion is directed only to the proposed Exchange Ratio and is for the confidential use of the Board of Directors of Great Western and may not be reproduced, summarized, described or referred to or given to any other person without our consent. On the basis of, and subject to the foregoing, we are of the opinion that the proposed Exchange Ratio in the Merger is fair to the shareholders of Great Western from a financial point of view. Very truly yours, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 3 EX-99.8 8 OPINION OF GOLDMAN, SACHS & CO. 1 EXHIBIT 8 Goldman, Sachs & Co. / 85 Broad Street / New York, New York 10004 Tel: 212-902-1000 / Fax: 212-357-4449 [GOLDMAN SACHS LOGO] PERSONAL AND CONFIDENTIAL March 25, 1997 Board of Directors Great Western Financial Corporation 9200 Oakdale Avenue Chatsworth, California 91311 Gentlemen and Madame You have requested our opinion as to the fairness to the holders of the outstanding shares of Common Stock, par value $1.00 per share (the "Shares"), of Great Western Financial Corporation (the "Company") of the exchange ratio of 0.9 shares of Common Stock, no par value, of Washington Mutual, Inc. ("Washington Mutual") to be received for each Share (the "Exchange Ratio") pursuant to the merger (the "Merger") contemplated by the Agreement and Plan of Merger dated as of March 5, 1997 by and among Washington Mutual, New American Capital, Inc. and the Company (the "Agreement"). Goldman, Sachs & Co., as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. We are familiar with the Company having provided certain investment banking services to the Company from time to time, including having acted as managing underwriter of its $300 million issue of Capital Securities in January 1997, and having acted as its financial advisor in connection with, and participated in certain of the negotiations leading to, the Agreement. We also have provided certain investment banking services to Washington Mutual from time to time and may provide investment banking services to Washington Mutual in the future. In addition, Goldman, Sachs & Co. is a full service securities firm and in the course of its trading activities it may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company and Washington Mutual. In connection with this opinion, we have reviewed, among other things, the Agreement; the Registration Statement on Form S-4 of Washington Mutual dated March 13, 1997, including the Joint Proxy Statement/ Prospectus of Washington Mutual and the Company; Annual Reports to Stockholders and Annual Reports on Form 10-K of the Company for the five years ended December 31, 1996; Annual Reports to Stockholders and Annual Reports on Form 10-K of Washington Mutual for the three years ended December 31, 1996; Annual Reports to Stockholders and Annual Reports to the FDIC on Form F-2 of Washington Mutual Savings Bank, predecessor to Washington Mutual, for the two years ended December 31, 1993; certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company and Washington Mutual; certain other communications from the Company and Washington Mutual to their respective stockholders; certain internal financial analyses and forecasts for the Company and Washington Mutual prepared by their respective managements, including analyses and forecasts of certain cost savings, operating efficiencies, revenue effects and financial synergies (collectively, the "Synergies"); the S-4 Registration Statement dated February 18, 1997 as amended March 18, 1997 of H.F. Ahmanson & Company ("Ahmanson"); and certain press releases and filings with the Securities and Exchange Commission by the Company, Washington Mutual and Ahmanson in connection with the Merger, the Ahmanson proposal and related matters. We also have held discussions with members of the senior managements of the Company and Washington Mutual regarding the past and current business operations, financial condition and future prospects of their respective companies and each senior management's assessment of the future prospects of the combined company. In addition, we 1 2 have reviewed the reported price and trading activity for the Shares and Washington Mutual Common Stock, compared certain financial and stock market information for the Company and Washington Mutual with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the savings and loan industry specifically and in other industries generally and performed such other studies and analyses as we considered appropriate. We have relied without independent verification upon the accuracy and completeness of all of the financial and other information reviewed by us for purposes of this opinion. In that regard, we have assumed, with your consent, that the financial forecasts, including, without limitation, the Synergies and projections regarding under performing and non performing assets and net charge-offs have been reasonably prepared on a basis reflecting the best currently available judgments and estimates of the Company and Washington Mutual and that such forecasts will be realized in the amounts and at the times contemplated thereby. We are not experts in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for losses with respect thereto and have assumed, with your consent, that such allowances for each of the Company and Washington Mutual are in the aggregate adequate to cover all such losses. In addition, we have not reviewed individual credit files nor have we made an independent evaluation or appraisal of the assets and liabilities of the Company or Washington Mutual or any of their subsidiaries and we have not been furnished with any such evaluation or appraisal. We also have assumed, with your consent, that the Merger will be accounted for as a pooling of interests under generally accepted accounting principles. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of the Company in connection with its consideration of the transaction contemplated by the Agreement and does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote at the stockholders' meeting to be held in connection with the Merger. Based upon and subject to the foregoing and based upon such other matters as we consider relevant, it is our opinion that as of the date hereof the Exchange Ratio pursuant to the Agreement is fair to the holders of Shares. Very truly yours, /s/ GOLDMAN, SACHS & CO. - --------------------------------------------------------- GOLDMAN, SACHS & CO. 2 EX-99.9 9 OPINION OF MERRILL LYNCH & CO. 1 EXHIBIT 9 [MERRILL LYNCH LOGO] Investment Banking Corporate and Institutional Client Group World Financial Center North Tower New York, New York 10281-1325 212 449 1000 March 25, 1997 Board of Directors Great Western Financial Corporation 9200 Oakdale Avenue Chatsworth, CA 91311 Members of the Board: Washington Mutual, Inc. ("Washington Mutual") and Great Western Financial Corporation ("Great Western") have entered into an Agreement and Plan of Merger, dated March 5, 1997 (the "Agreement"), pursuant to which Great Western will be merged with and into Washington Mutual in a transaction (the "Merger") in which each outstanding share of Great Western's common stock, par value $1.00 per share (the "Great Western Shares"), will be converted into the right to receive 0.90 shares (the "Exchange Ratio") of the common stock, no par value, of Washington Mutual (the "Washington Mutual Shares"), all as set forth more fully in the Agreement. You have asked us to confirm, as of the date hereof, whether, in our opinion, the proposed Exchange Ratio in the Merger is fair to the shareholders of Great Western from a financial point of view. In arriving at the opinion set forth below, we have, among other things: (1) Reviewed Great Western's Annual Reports on Form 10-K and related audited financial information for the five fiscal years ended December 31, 1996; (2) Reviewed Washington Mutual's Annual Reports on Form 10-K, and related audited financial information for the three fiscal years ended December 31, 1996 and Annual Reports to the FDIC on Form F-2 of Washington Mutual Savings Bank, predecessor to Washington Mutual for the two years ended December 31, 1993; (3) Reviewed the Washington Mutual Registration Statement on Form S-4 dated March 13, 1997; (4) Reviewed certain financial information, including financial forecasts, relating to the respective business, earnings, assets, liabilities and prospects of Great Western and Washington Mutual furnished to us by senior management of Great Western and Washington Mutual; (5) Conducted certain discussions with members of senior management of Great Western and Washington Mutual concerning the respective financial condition, businesses, earnings, assets, liabilities, operations, regulatory condition, financial forecasts, contingencies and prospects, of Great Western and Washington Mutual and their respective view as to the future financial performance of Great Western, Washington Mutual and the combined entity, as the case may be, following the Merger; 1 2 [MERRILL LYNCH LOGO] (6) Reviewed the historical market prices and trading activity for the Great Western Shares and the Washington Mutual Shares and compared them with that of certain publicly traded companies which we deemed to be relevant; (7) Compared the respective results of operations of Great Western and Washington Mutual with those of certain publicly traded companies which we deemed to be relevant; (8) Compared the proposed financial terms of the Merger as set forth in the Agreement with the financial terms of certain other mergers and acquisitions which we deemed to be relevant; (9) Reviewed the amount and timing of the projected cost savings, related expenses and revenue enhancements expected to result from the Merger (the "Expected Synergies"), as presented by the senior management of Washington Mutual; (10) Considered, based upon information provided by the senior management of Great Western and Washington Mutual, the pro forma impact of the transaction on the earnings and book value per share, consolidated capitalization and certain balance sheet and profitability ratios of Washington Mutual; (11) Reviewed the Agreement and Plan of Merger and related agreements; (12) Reviewed the H.F. Ahmanson & Company ("Ahmanson") proposal to merge with Great Western pursuant to which each share of Great Western would be exchanged for between 1.10 and 1.20 shares of Ahmanson common stock, as set forth more fully in Ahmanson's Registration Statement on Form S-4 dated February 18, 1997 and Amendment No. 1 thereto dated March 18, 1997; (13) Reviewed certain press releases and filings with the SEC by Great Western, Washington Mutual and Ahmanson in connection with the Merger and the Ahmanson merger proposal and related matters; and (14) Reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as we deemed appropriate. In preparing our opinion, with your consent we have assumed and relied on the accuracy and completeness of all information supplied or otherwise made available to us by Great Western and Washington Mutual, including that contemplated in the numbered items above, and we have not assumed responsibility for independently verifying such information or undertaken an independent evaluation or appraisal of the assets or liabilities, contingent or otherwise, of Great Western or Washington Mutual or any of their subsidiaries, nor have we been furnished any such evaluation or appraisal. We are not experts in the evaluation of allowances for loan losses and, with your consent, we have not made an independent evaluation of the adequacy of the allowance for loan losses of Great Western or Washington Mutual, nor have we reviewed any individual credit files relating to Washington Mutual or Great Western and, with your consent, we have assumed that the aggregate allowance for loan losses for each of Washington Mutual and Great Western is adequate to cover such losses and will be adequate on a pro forma basis for the combined entity. In addition, we have not conducted any physical inspection of the properties or facilities of Great Western or Washington Mutual. With your consent, we have also assumed and relied upon the senior management of Great Western and Washington Mutual as to the reasonableness and achievability of the financial forecasts (and the assumptions and bases therefor) provided to, and discussed with, us. In that regard, we have assumed and relied with your consent that such forecasts, including without limitation, financial forecasts, evaluations of contingencies, Expected Synergies and projections regarding underperforming and nonperforming assets, net charge-offs, adequacy of reserves and future economic conditions reflect the best currently available estimates, allocations and judgments of the senior management of Great Western and Washington Mutual as to the future financial performance of Great Western, Washington Mutual or the combined entity, as the case may be. Our opinion is predicated on the Merger receiving the tax and accounting treatment contemplated in the Agreement. Our 2 3 [MERRILL LYNCH LOGO] opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. Our opinion has been rendered without regard to the necessity for, or level of, any restrictions, obligations, undertakings or divestitures which may be imposed or required in the course of obtaining regulatory approval for the Merger. We have been retained by the Board of Directors of Great Western as an independent contractor to act as financial advisor to Great Western with respect to the Merger Proposal and will receive a fee for our services. We have, in the past, provided financial advisory and financing services to Great Western and Washington Mutual and received customary fees for the rendering of such services, including acting as lead underwriter for a 14.6 million share secondary public offering of Washington Mutual common stock in January 1997. In addition, in the ordinary course of our securities business, we may actively trade debt and/or equity securities of Great Western and Washington Mutual and their respective affiliates for our own account and the accounts of our customers, and we therefore may from time to time hold a long or short position in such securities. In addition, certain affiliates of Merrill Lynch & Co. act as investment advisors to publicly held mutual funds which owned, as of March 21, 1997, approximately 4.93 million shares of Great Western's Common Stock and approximately 0.08 million shares of Washington Mutual's Common Stock. Our opinion is directed to the Board of Directors of Great Western and does not constitute a recommendation to any shareholder of Great Western as to how such shareholder should vote at any shareholder meeting of Great Western held in connection with the Merger Proposal. This opinion is directed only to the proposed Exchange Ratio and is for the confidential use of the Board of Directors of Great Western and may not be reproduced, summarized, described or referred to or given to any other person without our consent. On the basis of, and subject to the foregoing, we are of the opinion that the proposed Exchange Ratio in the Merger is fair to the shareholders of Great Western from a financial point of view. Very truly yours, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 3 EX-99.10 10 OPINION OF GOLDMAN, SACHS, & CO. 1 EXHIBIT 10 Goldman, Sachs & Co. / 85 Broad Street / New York, New York 10004 Tel: 212-902-1000 / Fax: 212-357-4449 [GOLDMAN SACHS LOGO] PERSONAL AND CONFIDENTIAL May 19, 1997 Board of Directors Great Western Financial Corporation 9200 Oakdale Avenue Chatsworth, California 91311 Gentlemen and Madame: You have requested our opinion as to the fairness to the holders of the outstanding shares of Common Stock, par value $1.00 per share (the "Shares"), of Great Western Financial Corporation (the "Company") of the exchange ratio of 0.9 shares of Common Stock, no par value, of Washington Mutual, Inc. ("Washington Mutual") to be received for each Share (the "Exchange Ratio") pursuant to the merger (the "Merger") contemplated by the Agreement and Plan of Merger dated as of March 5, 1997 by and among Washington Mutual, New American Capital, Inc. and the Company (the "Agreement"). Goldman, Sachs & Co., as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. We are familiar with the Company having provided certain investment banking services to the Company from time to time, including having acted as managing underwriter of its $300 million issue of Capital Securities in January 1997, and having acted as its financial advisor in connection with, and participated in certain of the negotiations leading to, the Agreement. We also have provided certain investment banking services to Washington Mutual from time to time and may provide investment banking services to Washington Mutual in the future. In addition, Goldman, Sachs & Co. is a full service securities firm and in the course of its trading activities it may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company and Washington Mutual. In connection with this opinion, we have reviewed, among other things, the Agreement; the Registration Statement on Form S-4 of Washington Mutual dated March 13, 1997 as amended through May 13, 1997, including the Joint Proxy Statement/Prospectus of Washington Mutual and the Company; Annual Reports to Stockholders and Annual Reports on Form 10-K of the Company for the five years ended December 31, 1996; Annual Reports to Stockholders and Annual Reports on Form 10-K of Washington Mutual for the three years ended December 31, 1996; Annual Reports to Stockholders and Annual Reports to the FDIC on Form F-2 of Washington Mutual Savings Bank, predecessor to Washington Mutual, for the two years ended December 31, 1993; certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company and Washington Mutual; certain other communications from the Company and Washington Mutual to their respective stockholders; certain internal financial analyses and forecasts for the Company and Washington Mutual prepared by their respective managements, including analyses and forecasts of certain cost savings, 1 2 Great Western Financial Corporation May 19, 1997 Page Two operating efficiencies, revenue effects and financial synergies (collectively, the "Synergies"); the S-4 Registration Statement dated February 18, 1997, as amended through May 13, 1997, of H.F. Ahmanson & Company ("Ahmanson"), including the merger proposal and the subsequently proposed exchange offer to the Company's stockholders referred to therein (the "Ahmanson Exchange Offer Proposal"); and certain press releases and filings with the Securities and Exchange Commission by the Company, Washington Mutual and Ahmanson in connection with the Merger, the Ahmanson proposals and related matters. We also have held discussions with members of the senior managements of the Company and Washington Mutual regarding the past and current business operations, financial condition and future prospects of their respective companies and each senior management's assessment of the future prospects of the combined company. In addition, we have reviewed the reported price and trading activity for the Shares and Washington Mutual Common Stock, compared certain financial and stock market information for the Company and Washington Mutual with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the savings and loan industry specifically and in other industries generally and performed such other studies and analyses as we considered appropriate. We have relied without independent verification upon the accuracy and completeness of all of the financial and other information reviewed by us for purposes of this opinion. In that regard, we have assumed, with your consent, that the financial forecasts, including, without limitation, the Synergies and projections regarding under-performing and non-performing assets and net charge-offs have been reasonably prepared on a basis reflecting the best currently available judgments and estimates of the Company and Washington Mutual and that such forecasts will be realized in the amounts and at the times contemplated thereby. We are not experts in the evaluation of loan and lease portfolios for purposes of assessing the adequacy of the allowances for losses with respect thereto and have assumed, with your consent, that such allowances for each of the Company and Washington Mutual are in the aggregate adequate to cover all such losses. In addition, we have not reviewed individual credit files nor have we made an independent evaluation or appraisal of the assets and liabilities of the Company or Washington Mutual or any of their subsidiaries and we have not been furnished with any such evaluation or appraisal. We also have assumed, with your consent, that the Merger will be accounted for as a pooling of interests under generally accepted accounting principles. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of the Company in connection with its consideration of the transaction contemplated by the Agreement and does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote at the stockholders' meeting to be held in connection with the Merger, nor does this opinion constitute a recommendation as to how stockholders should respond to the Ahmanson Exchange Offer Proposal. Based upon and subject to the foregoing and based upon such other matters as we consider relevant, it is our opinion that as of the date hereof the Exchange Ratio pursuant to the Agreement is fair to the holders of Shares. Very truly yours, /s/ GOLDMAN, SACHS & CO. - --------------------------------------------------------- GOLDMAN, SACHS & CO. 2 EX-99.11 11 OPINION OF MERRILL LYNCH AND CO. 1 EXHIBIT 11 [MERRILL LYNCH LOGO] Investment Banking Group Merrill Lynch & Co., Inc. World Financial Center North Tower New York, New York 10281-1325 212 449 1000 May 19, 1997 Board of Directors Great Western Financial Corporation 9200 Oakdale Avenue Chatsworth, CA 91311 Members of the Board: Washington Mutual, Inc. ("Washington Mutual") and Great Western Financial Corporation ("Great Western") have entered into an Agreement and Plan of Merger, dated March 5, 1997 (the "Agreement"), pursuant to which Great Western will be merged with and into Washington Mutual in a transaction (the "Merger") in which each outstanding share of Great Western's common stock, par value $1.00 per share (the "Great Western Shares"), will be converted into the right to receive 0.90 shares (the "Exchange Ratio") of the common stock, no par value, of Washington Mutual (the "Washington Mutual Shares"), all as set forth more fully in the Agreement. You have asked us to confirm, as of the date hereof, whether, in our opinion, the proposed Exchange Ratio in the Merger is fair to the shareholders of Great Western from a financial point of view. In arriving at the opinion set forth below, we have, among other things: 1) Reviewed Great Western's Annual Reports on Form 10-K and related audited financial information for the five fiscal years ended December 31, 1996, and Great Western's Quarterly Report on Form 10-Q and the related unaudited financial information for the quarterly period ended March 31, 1997; 2) Reviewed Washington Mutual's Annual Reports on Form 10-K, and related audited financial information for the three fiscal years ended December 31, 1996 and Annual Report to the FDIC on Form F-2 of Washington Mutual Savings Bank, predecessor to Washington Mutual for the two years ended December 31, 1993, and Washington Mutual's Quarterly Report on Form 10-Q and the related unaudited financial information for the quarterly period ended March 31, 1997; 3) Reviewed the Washington Mutual Registration Statement on Form S-4 dated March 13, 1997, as amended through May 13, 1997; 4) Reviewed certain financial information, including financial forecasts, relating to the respective business, earnings, assets, liabilities and prospects of Great Western and Washington Mutual furnished to us by senior management of Great Western and Washington Mutual; 5) Conducted certain discussions with members of senior management of Great Western and Washington Mutual concerning the respective financial condition, businesses, earnings, assets, liabilities, operations, regulatory condition, financial forecasts, contingencies and prospects, of Great Western and Washington Mutual and their respective view as to the future financial performance of Great Western, Washington Mutual and the combined entity, as the case may be, following the Merger; 1 2 [MERRILL LYNCH LOGO] 6) Reviewed the historical market prices and trading activity for the Great Western Shares and the Washington Mutual Shares and compared them with that of certain publicly traded companies which we deemed to be relevant; 7) Compared the respective results of operations of Great Western and Washington Mutual with those of certain publicly traded companies which we deemed to be relevant; 8) Compared the proposed financial terms of the Merger as set forth in the Agreement with the financial terms of certain other mergers and acquisitions which we deemed to be relevant; 9) Reviewed the amount and timing of the projected cost savings, related expenses and revenue enhancements expected to result from the Merger (the "Expected Synergies"), as presented by the senior management of Washington Mutual; 10) Considered, based upon information provided by the senior management of Great Western and Washington Mutual, the pro forma impact of the transaction on the earnings and book value per share, consolidated capitalization and certain balance sheet and profitability ratios of Washington Mutual; 11) Reviewed the Agreement and related agreements; 12) Reviewed the H.F. Ahmanson & Company ("Ahmanson") merger proposal and the subsequently proposed exchange offer (the "Ahmanson Exchange Offer Proposal") pursuant to which, in each case, each outstanding share of Great Western would be exchanged for between 1.10 and 1.20 shares of Ahmanson common stock, as set forth more fully in Ahmanson's Registration Statement on Form S-4 dated February 18, 1997, as amended through May 13, 1997; 13) Reviewed certain press releases and filings with the SEC by Great Western, Washington Mutual and Ahmanson in connection with the Merger and the Ahmanson exchange ratio and related matters; and 14) Reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as we deemed appropriate. In preparing our opinion, with your consent we have assumed and relied on the accuracy and completeness of all information supplied or otherwise made available to us by Great Western and Washington Mutual, including that contemplated in the numbered items above, and we have not assumed responsibility for independently verifying such information or undertaken an independent evaluation or appraisal of the assets or liabilities, contingent or otherwise, of Great Western or Washington Mutual or any of their subsidiaries, nor have we been furnished any such evaluation or appraisal. We are not experts in the evaluation of allowances for loan losses and, with your consent, we have not made an independent evaluation of the adequacy of the allowance for loan losses of Great Western or Washington Mutual, nor have we reviewed any individual credit files relating to Washington Mutual or Great Western and, with your consent, we have assumed that the aggregate allowance for loan losses for each of Washington Mutual and Great Western is adequate to cover such losses and will be adequate on a pro forma basis for the combined entity. In addition, we have not conducted any physical inspection of the properties or facilities of Great Western or Washington Mutual. With your consent, we have also assumed and relied upon the senior management of Great Western and Washington Mutual as to the reasonableness and achievability of the financial forecasts (and the assumptions and bases therefor) provided to, and discussed with, us. In that regard, we have assumed and relied with your consent that such forecasts, including without limitation, financial forecasts, evaluations of contingencies, Expected Synergies and projections regarding underperforming and non-performing assets, net charge-offs, adequacy of reserves, and future economic conditions reflect the best currently available estimates, allocations and judgments of the senior management of Great Western and Washington Mutual as to the future financial performance of Great Western, Washington Mutual or the combined entity, as the case may be. Our opinion is predicated on the Merger receiving the tax and accounting treatment contemplated in the Agreement. Our 2 3 [MERRILL LYNCH LOGO] opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. Our opinion has been rendered without regard to the necessity for, or level of, any restrictions, obligations, undertakings or divestitures which may be imposed or required in the course of obtaining regulatory approval for the Merger. We have been retained by the Board of Directors of Great Western as an independent contractor to act as financial advisor to Great Western with respect to the Merger and will receive a fee for our services. We have, in the past, provided financial advisory and financing services to Great Western and Washington Mutual and received customary fees for the rendering of such services, including acting as lead underwriter for a 14.6 million share secondary public offering of Washington Mutual common stock in January 1997. In addition, in the ordinary course of our securities business, we may actively trade debt and/or equity securities of Great Western and Washington Mutual and their respective affiliates for our own account and the accounts of our customers, and we therefore may from time to time hold a long or short position in such securities. In addition, certain affiliates of Merrill Lynch & Co. act as investment advisors to publicly held mutual funds which owned, as of May 16, 1997, approximately 4.93 million shares of Great Western's common stock and approximately 0.06 million shares of Washington Mutual's common stock. Our opinion is directed to the Board of Directors of Great Western and does not constitute a recommendation to any shareholder of Great Western as to how such shareholder should vote at any shareholder meeting of Great Western held in connection with the Merger, nor does our opinion constitute a recommendation as to how such shareholders should respond to the Ahmanson Exchange Offer Proposal. Our opinion is directed only to the proposed Exchange Ratio and is for the confidential use of the Board of Directors of Great Western and may not be reproduced, summarized, described or referred to or given to any other person without our consent. On the basis of, and subject to the foregoing, we are of the opinion that the proposed Exchange Ratio in the Merger is fair to the shareholders of Great Western from a financial point of view. Very truly yours, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 3 EX-99.12 12 SUMMARY FROM THE JOINT PROXY STATEMENT/PROSPECTUS 1 EXHIBIT 12 SUMMARY The information below is qualified in its entirety by the more detailed information appearing elsewhere in this Joint Proxy Statement/Prospectus, including the documents incorporated by reference in this Joint Proxy Statement/Prospectus. As used in this Joint Proxy Statement/Prospectus, the term "Washington Mutual" refers to Washington Mutual and, unless the context otherwise requires, its subsidiaries, and the term "Great Western" refers to Great Western and, unless the context otherwise requires, its subsidiaries. The term "Combined Company" is sometimes used herein to refer to Washington Mutual following consummation of the Merger. All references to the Great Western Common Stock in this Joint Proxy Statement/Prospectus include the associated Great Western Rights issued pursuant to the Great Western Rights Plan (as defined herein) and all references to the Washington Mutual Common Stock include the associated Washington Mutual Rights issued pursuant to the Washington Mutual Rights Plan (as defined herein). Forward-looking statements are contained in this Joint Proxy Statement/Prospectus and in documents incorporated by reference herein regarding Washington Mutual, Great Western and the Combined Company. Actual results may vary materially from the forward-looking statements contained in such documents for reasons which include the factors set forth herein under "Risk Factors" and in Washington Mutual's Current Report on Form 8-K dated March 6, 1997, which is incorporated by reference herein. See "Incorporation of Certain Documents by Reference." THE SPECIAL MEETINGS THE WASHINGTON MUTUAL MEETING Time, Date and Place. The Washington Mutual Meeting will be held at 2:00 p.m., local time, on Friday, June 13, 1997, at Washington State Convention and Trade Center, 800 Convention Place, Seattle, Washington. See "The Special Meetings -- General." Matters to be Considered. Shareholders of Washington Mutual will be asked to consider and vote upon proposals to (i) approve the issuance of shares of Washington Mutual Common Stock to Great Western Stockholders pursuant to the Merger Agreement (the "Share Issuance/Merger Proposal"), and (ii) to amend the Washington Mutual Articles to increase the number of authorized shares of Washington Mutual Common Stock from 350,000,000 shares to 800,000,000 shares (the "Articles Amendment Proposal"). The approval of the Articles Amendment Proposal is not a condition to the consummation of the Washington Mutual/Great Western Merger. See "The Special Meetings -- Matters to be Considered at the Special Meetings." Record Date; Shares Entitled to Vote; Quorum. The Board of Directors of Washington Mutual (the "Washington Mutual Board") has fixed the close of business on May 9, 1997 as the record date (the "Washington Mutual Record Date") for the determination of the holders of Washington Mutual Common Stock and holders of Washington Mutual Preferred Stock (as defined below) entitled to receive notice of and to vote at the Washington Mutual Meeting. As of the Washington Mutual Record Date, there were 126,291,687 shares of Washington Mutual Common Stock entitled to vote at the Washington Mutual Meeting, 2,252,500 shares of 9.12% Noncumulative Perpetual Preferred Stock, Series C ("Series C Preferred") entitled to vote at the Washington Mutual Meeting and 1,970,000 shares of 7.60% Noncumulative Perpetual Preferred Stock, Series E entitled to vote at the Washington Mutual Meeting ("Series E Preferred" and together with the Series C Preferred, the "Washington Mutual Preferred Stock"). Each share of Washington Mutual Common Stock is entitled to one vote on each of the matters properly presented at the Washington Mutual Meeting. Each share of Washington Mutual Preferred Stock is entitled to one vote only on the Articles Amendment Proposal. For the vote on the Share Issuance/Merger Proposal, the presence, in person or by proxy, of the holders of a majority of the outstanding shares of Washington Mutual Common Stock will constitute a quorum. For the vote on the Articles Amendment Proposal, the presence, in person or by proxy, of the holders of a majority of (i) the outstanding shares of Washington Mutual Common Stock (for the separate vote of holders of Washington 1 2 Mutual Common Stock as a class) and (ii) the aggregate of the outstanding shares of Washington Mutual Common Stock and Washington Mutual Preferred Stock (for the vote of holders of Washington Mutual Common Stock and Washington Mutual Preferred Stock as a single class) will constitute a quorum, respectively. See "The Special Meetings -- Record Date and Voting" and " -- Quorum; Votes Required." Votes Required. Under NASDAQ rules, the Share Issuance/Merger Proposal will require the affirmative vote of a majority of the shares of Washington Mutual Common Stock voting on such proposal. Approval of the Articles Amendment Proposal will require the affirmative votes of the holders of (i) two-thirds of the shares of Washington Mutual Common Stock and Washington Mutual Preferred Stock entitled to vote at the Washington Mutual Meeting voting together as a single class and (ii) two-thirds of the shares of Washington Mutual Common Stock entitled to vote at the Washington Mutual Meeting voting as a single class. Accordingly, assuming a quorum is present, a failure to submit a proxy (or to vote in person at the Washington Mutual Meeting), an abstention by a Washington Mutual shareholder or a broker non-vote, which is an indication by a broker that it does not have discretionary authority to vote on a particular matter, will have no effect on the Share Issuance/Merger Proposal, but will have the same effect as a "NO" vote with respect to the vote on the Articles Amendment Proposal. For shares of Washington Mutual Common Stock or Washington Mutual Preferred Stock held in street name by a broker, the failure of a Washington Mutual shareholder to give such broker voting instructions with regard to any proposal on which such shareholder is entitled to vote will result in a broker non-vote and will have the effects described in the preceding sentence. See "The Special Meetings -- Record Date and Voting" and " -- Quorum; Votes Required." THE WASHINGTON MUTUAL BOARD HAS DETERMINED, BY A UNANIMOUS VOTE OF ALL DIRECTORS PRESENT (WITH THREE DIRECTORS ABSENT), THAT THE TERMS OF THE WASHINGTON MUTUAL/GREAT WESTERN MERGER ARE FAIR AND IN THE BEST INTERESTS OF WASHINGTON MUTUAL AND ITS SHAREHOLDERS AND, ACCORDINGLY, RECOMMENDS THAT YOU VOTE "FOR" THE SHARE ISSUANCE/MERGER PROPOSAL. IN ADDITION, THE WASHINGTON MUTUAL BOARD HAS APPROVED, BY A UNANIMOUS VOTE OF ALL DIRECTORS PRESENT (WITH THREE DIRECTORS ABSENT), THE ARTICLES AMENDMENT PROPOSAL AND, ACCORDINGLY, RECOMMENDS THAT YOU VOTE "FOR" THE ARTICLES AMENDMENT PROPOSAL. EACH OF THE DIRECTORS NOT PRESENT AT THE MEETING HAS SUBSEQUENTLY EXPRESSED THEIR APPROVAL OF EACH OF THE PROPOSALS. For a discussion of the factors considered by the Washington Mutual Board in reaching its decision to approve and adopt the Merger Agreement and approve the Share Issuance/Merger Proposal, see "The Washington Mutual/Great Western Merger -- Background of the Washington Mutual/Great Western Merger" and "-- Reasons for the Washington Mutual/Great Western Merger; Recommendations of the Boards of Directors." Security Ownership of Management and Others. As of the Washington Mutual Record Date, directors and executive officers of Washington Mutual and their affiliates (excluding any shares owned by or through Acadia Partners, L.P. and affiliates thereof) beneficially owned and were entitled to vote 3,636,798 shares of Washington Mutual Common Stock and 500 shares of Washington Mutual Preferred Stock, which represented approximately 2.88% of the shares of Washington Mutual Common Stock and less than 1% of Washington Mutual Preferred Stock, respectively, outstanding on such date. In addition, as of the Washington Mutual Record Date, Mr. Robert M. Bass and Acadia Partners, L.P. beneficially owned and were entitled to vote 11,546,451 shares and 6,215,004 shares, respectively, of Washington Mutual Common Stock, which represented approximately 9.14% and 4.92%, respectively, of the shares of Washington Mutual Common Stock outstanding on such date. Mr. Bass, Acadia Partners, L.P. and each Washington Mutual director and executive officer has indicated a present intention to vote, or cause to be voted, the Washington Mutual Common Stock and Washington Mutual Preferred Stock so owned for approval of the Share Issuance/Merger Proposal and the Articles Amendment Proposal. See "The Special Meetings -- Quorum; Votes Required." THE GREAT WESTERN MEETING Time, Date and Place. The Great Western Meeting will be held at 10:00 a.m., local time, on Friday, June 13, 1997, at Great Western's Employee Center at 19809 Prairie Street, Chatsworth, California 91311. See "The Special Meetings -- General." 2 3 Matters to be Considered. Great Western Stockholders will be asked to consider and vote upon a proposal to approve the Washington Mutual/Great Western Merger Agreement. See "The Special Meetings -- Matters to be Considered at the Special Meetings." Record Date; Shares Entitled to Vote; Quorum. The Board of Directors of Great Western (the "Great Western Board") has fixed the close of business on May 9, 1997 as the record date (the "Great Western Record Date") for the determination of the Great Western Stockholders entitled to receive notice of and to vote at the Great Western Meeting. Holders of record of Great Western Preferred Stock as of the Great Western Record Date are entitled to notice of but are not entitled to vote at the Great Western Meeting. As of the Great Western Record Date, there were 137,922,037 issued and outstanding shares of Great Western Common Stock. Each share of Great Western Common Stock is entitled to one vote on each of the matters properly presented at the Great Western Meeting. The presence, in person or by proxy, of the holders of a majority of the issued and outstanding shares of Great Western Common Stock will constitute a quorum. See "The Special Meetings -- Record Date and Voting" and " -- Quorum; Votes Required." Votes Required. Pursuant to Delaware law, the affirmative vote of the holders of a majority of the shares of Great Western Common Stock entitled to vote at the Great Western Meeting is required to approve the Washington Mutual/Great Western Merger Proposal. Accordingly, a failure to submit a proxy (or to vote in person at the Great Western Meeting), an abstention by a Great Western Stockholder or a broker non-vote, which is an indication by a broker that it does not have discretionary authority to vote on a particular matter, will have the same effect as a "NO" vote with respect to the vote on the Washington Mutual/Great Western Merger Proposal. For shares of Great Western Common Stock held in street name by a broker, the failure of a Great Western Stockholder to give such broker voting instructions with regard to the Washington Mutual/ Great Western Merger Proposal will result in a broker non-vote and will have the same effect as a "NO" vote with respect to such proposal. Holders of Great Western Preferred Stock are not entitled to and are not being asked to vote on approval and adoption of the Washington Mutual/Great Western Merger Proposal or any other matters that may be considered at the Great Western Meeting. See "The Special Meetings -- Record Date and Voting" and " -- Quorum; Votes Required." THE GREAT WESTERN BOARD HAS UNANIMOUSLY DETERMINED THAT THE TERMS OF THE WASHINGTON MUTUAL/ GREAT WESTERN MERGER ARE FAIR AND IN THE BEST INTERESTS OF GREAT WESTERN AND ITS STOCKHOLDERS AND, ACCORDINGLY, RECOMMENDS THAT YOU VOTE "FOR" THE WASHINGTON MUTUAL/GREAT WESTERN MERGER. Security Ownership of Management and Others. As of the Great Western Record Date, directors and executive officers of Great Western and their affiliates beneficially owned and were entitled to vote 617,897 shares of Great Western Common Stock, which represented less than 1% of the shares of Great Western Common Stock outstanding on such date. Each Great Western director and executive officer has indicated his or her present intention to vote, or cause to be voted, the Great Western Common Stock so owned by him or her for approval of the Washington Mutual/Great Western Merger Proposal. As of the Great Western Record Date, various subsidiaries of Great Western, as fiduciaries, custodians or agents, did not have sole or shared voting power with respect to any shares of Great Western Common Stock. See "The Special Meetings -- Quorum; Votes Required." Pending Litigation in the Court of Chancery of the State of Delaware. In certain pending litigation in the Court of Chancery in the State of Delaware, Ahmanson has requested the Court to require that the Great Western Meeting occur no earlier than six weeks after certification of the results of Great Western's 1997 Annual Meeting of Stockholders. Great Western has scheduled both meetings for June 13, 1997, and intends to vigorously oppose Ahmanson's requested relief. See "Litigation." 3 4 THE PARTIES TO THE WASHINGTON MUTUAL/GREAT WESTERN MERGER Washington Mutual Washington Mutual is a regional financial services company committed to serving consumers and small to mid-sized businesses throughout the Western United States. Through its subsidiaries, Washington Mutual engages in the following activities: - MORTGAGE LENDING AND CONSUMER BANKING ACTIVITIES. Through its principal subsidiaries, Washington Mutual Bank ("WMB"), American Savings Bank, F.A. ("ASB"), and Washington Mutual Bank fsb ("WMBfsb"), at December 31, 1996, Washington Mutual operated 413 consumer financial centers and 96 loan centers offering a full complement of mortgage lending and consumer banking products and services. In 1996, WMB was the leading originator of first-lien, single-family residential loans in Washington and Oregon, and ASB was the second largest such originator in California. - COMMERCIAL BANKING ACTIVITIES. Through the commercial banking division of WMB, at December 31, 1996, Washington Mutual operated 48 full-service business branches offering a range of commercial banking products and services to small and mid-sized businesses. WMB commenced its commercial banking activities through the acquisition of Enterprise Bank of Bellevue, Washington ("Enterprise") in 1995 and Western Bank of Coos Bay, Oregon ("Western") in 1996. - INSURANCE ACTIVITIES. Through WM Life Insurance Company ("WM Life") and ASB Insurance Services Inc. ("ASB Insurance"), Washington Mutual underwrites and sells annuities and sells a range of life insurance contracts, and selected property and casualty insurance policies. - SECURITIES ACTIVITIES. Through ASB Financial Services, Inc. ("ASB Financial"), Murphey Favre, Inc. ("Murphey Favre") and Composite Research & Management Co. ("Composite Research"), Washington Mutual offers full service securities brokerage and acts as the investment advisor to and the distributor of mutual funds. Washington Mutual operates in Washington, California, Oregon, Utah, Idaho, Montana, Arizona, Colorado and Nevada. At December 31, 1996, Washington Mutual had consolidated assets of $44.6 billion, deposits of $24.1 billion and stockholders' equity of $2.4 billion. Based on deposits, Washington Mutual was at that date the second largest banking organization in Washington and the 28th largest in the United States. Washington Mutual has its principal executive offices at 1201 Third Avenue, Seattle, Washington 98101, telephone number (206) 461-2000. Great Western Great Western is a savings and loan holding company organized in 1955 under the laws of the state of Delaware. The principal assets of Great Western are the capital stock of Great Western Bank, a Federal Savings Bank ("GW Bank"), and Aristar, Inc. ("Aristar"). GW Bank is a federally chartered stock savings bank which has 416 branches in California and Florida. Real estate lending operations are conducted directly by GW Bank and by direct subsidiaries through more than 200 offices in 27 states with concentrations in California, Florida, Texas and Washington. Aristar conducts consumer finance operations through 502 offices in 23 states, most of which operate principally under the names of Blazer Financial Services or City Finance Company, provides direct installment loans and related credit insurance services, and purchases retail installment contracts. Great Western and its subsidiaries also engage in related service businesses, including investment company advisory and administrative activities, insurance operations and real estate development. At December 31, 1996, Great Western had total assets of $42.9 billion, deposits of $28.6 billion and stockholders' equity of $2.6 billion. Based on deposits, Great Western was at that date the fourth largest banking organization in California and the 24th largest in the United States. Great Western has its principal executive offices at 9200 Oakdale Avenue, Chatsworth, California 91311, telephone number (818) 775-3411. 4 5 THE WASHINGTON MUTUAL/GREAT WESTERN MERGER Exchange Ratio At the Effective Time, (i) each outstanding share of Great Western Common Stock will be converted into the right to receive 0.9 shares of Washington Mutual Common Stock, with cash being paid in lieu of fractional shares, and (ii) each outstanding share of Great Western Preferred Stock will be converted into the right to receive one share of Series F Preferred Stock. The terms, preferences, limitations, privileges and rights of the Series F Preferred Stock will be substantially identical to those of the Great Western Preferred Stock. On May 12, 1997, the closing sales price of Washington Mutual Common Stock on NASDAQ was $52.69 per share. If the Washington Mutual/Great Western Merger had occurred at such time, the Exchange Ratio would have resulted in an indicated per share value for the Great Western Common Stock of $47.42. Because the Exchange Ratio is fixed, a change in the market price of Washington Mutual Common Stock before the Effective Time would affect the implied market value of the consideration to be received by Great Western Stockholders in the Washington Mutual/Great Western Merger. There can be no assurance as to the market price of Washington Mutual Common Stock at any time before, at or after the Effective Time. Stockholders are urged to obtain current market quotations. See "The Washington Mutual/Great Western Merger -- Conversion of Great Western Capital Stock." At the Effective Time, each option to purchase shares of Great Western Common Stock (each a "Great Western Common Stock Option") issued by Great Western pursuant to any of its employee or director stock option programs (each a "Great Western Common Stock Plan") that is outstanding and unexercised immediately prior to the Effective Time will be converted automatically into an option to purchase shares of Washington Mutual Common Stock (each a "Washington Mutual Stock Option"). The number of shares of Washington Mutual Common Stock subject to a Washington Mutual Stock Option will be equal to the product of the number of shares of Great Western Common Stock underlying the Great Western Common Stock Option multiplied by the Exchange Ratio and rounded down to the nearest share, and the exercise price per share of Washington Mutual Common Stock subject to a Washington Mutual Stock Option will be equal to the exercise price per share of Great Western Common Stock underlying the Great Western Common Stock Option divided by the Exchange Ratio and rounded up to the nearest cent. See "The Washington Mutual/Great Western Merger -- Conversion of Great Western Capital Stock." Reasons for the Washington Mutual/Great Western Merger; Recommendations of the Boards of Directors The Boards of Directors of Washington Mutual and Great Western believe that the Washington Mutual/Great Western Merger represents a unique opportunity to create one of the premier consumer banking franchises on the West Coast. As a result of the Washington Mutual/Great Western Merger, the Combined Company would rank as the third largest banking organization in the western United States and the twelfth largest in the United States, with over 1,500 retail and business banking, consumer lending and mortgage lending offices located in 36 states and serving an estimated 4.1 million households. The Combined Company would have a strong deposit market share in Washington, Oregon, Utah and the key consumer banking state of California, as well as a strong market presence in parts of Florida. The Combined Company also would rank as one of the largest originators and servicers of residential mortgage loans in the United States, giving it the economies of scale and efficiencies to compete effectively in the rapidly consolidating financial services industry. In addition, management of Washington Mutual has identified potential cost savings, estimated at $340 million annually (pre-tax) by 1999, and opportunities for possible significant revenue enhancements from the Washington Mutual/Great Western Merger. See "Management and Operations of Washington Mutual Following the Washington Mutual/Great Western Merger -- Operations After the Washington Mutual/Great Western Merger." EACH OF THE WASHINGTON MUTUAL BOARD AND THE GREAT WESTERN BOARD BELIEVES THAT THE TERMS OF THE WASHINGTON MUTUAL/GREAT WESTERN MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THEIR RESPECTIVE SHAREHOLDERS. THE WASHINGTON MUTUAL BOARD AND THE GREAT WESTERN BOARD HAVE EACH, BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND 5 6 RECOMMEND THAT THEIR RESPECTIVE SHAREHOLDERS APPROVE AND ADOPT THE SHARE ISSUANCE/MERGER PROPOSAL (IN THE CASE OF WASHINGTON MUTUAL SHAREHOLDERS) AND THE WASHINGTON MUTUAL/GREAT WESTERN MERGER PROPOSAL (IN THE CASE OF GREAT WESTERN STOCKHOLDERS). IN ADDITION, THE WASHINGTON MUTUAL BOARD HAS, BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, APPROVED THE ARTICLES AMENDMENT PROPOSAL AND RECOMMENDS THAT THE WASHINGTON MUTUAL SHAREHOLDERS AND THE HOLDERS OF WASHINGTON MUTUAL PREFERRED STOCK VOTE TO APPROVE THE ARTICLES AMENDMENT PROPOSAL. For a discussion of the factors considered by each of the Washington Mutual Board and the Great Western Board in reaching its decision to approve and adopt the Merger Agreement, see "The Washington Mutual/Great Western Merger -- Background of the Washington Mutual/Great Western Merger" and "-- Reasons for the Washington Mutual/Great Western Merger; Recommendations of the Boards of Directors." On February 18, 1997, H.F. Ahmanson & Company ("Ahmanson") publicly announced its unsolicited proposal for a merger of Great Western and Ahmanson pursuant to which each share of Great Western Common Stock would be converted into 1.05 shares of Ahmanson common stock (the "Original Ahmanson Proposal"). On March 17, 1997, Ahmanson announced a revised merger proposal pursuant to which each share of Great Western Common Stock would be converted into not less than 1.10 nor more than 1.20 shares of Ahmanson common stock (as so revised, the "Ahmanson Proposal"). The Great Western Board, after consulting with its legal and financial advisors, has determined not to authorize negotiations or discussions with Ahmanson concerning the Ahmanson Proposal. See "The Washington Mutual/Great Western Merger -- Background of the Washington Mutual/Great Western Merger." No presentations have been made by Ahmanson to the Great Western Board concerning the Ahmanson Proposal. The Great Western Board has determined that Washington Mutual represents a superior merger partner and its proposal represents a superior value opportunity. Consequently, Great Western Stockholders are not being asked to consider and vote upon the Ahmanson Proposal. For a discussion of the factors considered by the Great Western Board in connection with its consideration of the Ahmanson Proposal, see "The Washington Mutual/Great Western Merger -- Reasons for the Washington Mutual/Great Western Merger; Recommendations of the Boards of Directors." On May 12, 1997, Ahmanson publicly announced that it intended to commence an exchange offer for all of the outstanding shares of Great Western Common Stock on the same financial terms as the Ahmanson Proposal. The Great Western Board has not yet reviewed the terms of Ahmanson's exchange offer as set forth in its May 13, 1997 filing with the Securities and Exchange Commission. Promptly after its consideration thereof, the Great Western Board will advise Great Western stockholders of its position with respect to the Ahmanson exchange offer. Based on the closing market prices of Washington Mutual Common Stock and Ahmanson common stock on March 17, 1997, the day that Ahmanson announced the Ahmanson Proposal, the nominal implied value per share of Great Western Common Stock under the Great Western/Washington Mutual Merger Proposal was $46.01 and under the Ahmanson Proposal was $47.70. Based on the closing market prices of Washington Mutual Common Stock and Ahmanson common stock on May 12, 1997, the indicated value per share of Great Western Common Stock under the Great Western/Washington Mutual Merger was $47.42 and under the Ahmanson Proposal was $48.00. If the Washington Mutual/Great Western Merger is not approved, there can be no assurances that any alternative business combination would be consummated or as to the timing or terms of any such alternative business combination. Opinions of Financial Advisors Lehman Brothers Inc. ("Lehman Brothers"), which is serving as financial advisor to the Washington Mutual Board, has delivered its written opinion, dated March 5, 1997 (the "Lehman Brothers Opinion"), to the Washington Mutual Board, that the Exchange Ratio is fair, from a financial point of view, to Washington Mutual. See "The Washington Mutual/Great Western Merger -- Opinions of Financial Advisors." THE FULL TEXT OF THE LEHMAN BROTHERS OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS 6 7 ON ITS REVIEW, IS ATTACHED HERETO AS APPENDIX B AND IS INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. Washington Mutual has agreed to pay fees to Lehman Brothers for its services in connection with the Washington Mutual/Great Western Merger, which fees were payable, in part, at the time of signing of the Merger Agreement and a substantial portion of which is contingent upon consummation of the Washington Mutual/Great Western Merger. Goldman, Sachs & Co. ("Goldman Sachs") and Merrill Lynch & Co. ("Merrill Lynch"), which are serving as financial advisors to Great Western, have delivered their written opinions, each dated as of March 5, 1997 and March 25, 1997, to the Great Western Board to the effect that, as of such dates, and based upon and subject to various qualifications and assumptions described therein, the Exchange Ratio (i) in the case of Goldman Sachs, is fair to Great Western Stockholders and (ii) in the case of Merrill Lynch, is fair to Great Western Stockholders from a financial point of view. See "The Washington Mutual/Great Western Merger -- Opinions of Financial Advisors." THE FULL TEXTS OF THE GOLDMAN SACHS OPINIONS AND THE MERRILL LYNCH OPINIONS, EACH DATED AS OF MARCH 5, 1997 AND MARCH 25, 1997 AND EACH OF WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON ITS REVIEW, ARE ATTACHED HERETO AS APPENDICES C THROUGH F, AND ARE INCORPORATED BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. GREAT WESTERN STOCKHOLDERS ARE URGED TO READ SUCH OPINIONS IN THEIR ENTIRETY. SEE "THE WASHINGTON MUTUAL/GREAT WESTERN MERGER -- OPINIONS OF FINANCIAL ADVISORS." Great Western has agreed to pay fees to Goldman Sachs and Merrill Lynch for their services in connection with the Washington Mutual/Great Western Merger, which fees were payable, in part, upon execution of the Merger Agreement and a substantial portion of which is contingent upon consummation of the Washington Mutual/Great Western Merger. See "The Washington Mutual/Great Western Merger -- Opinions of Financial Advisors." Conditions to the Washington Mutual/Great Western Merger; Regulatory Approvals The obligations of Washington Mutual and Great Western to consummate the Washington Mutual/ Great Western Merger are subject to various conditions, including, among others, obtaining the requisite stockholder approvals; obtaining requisite regulatory approvals, as described below; the effectiveness of the Registration Statement of which this Joint Proxy Statement/Prospectus is a part; approval for listing on NASDAQ of the shares of Washington Mutual Common Stock and Series F Preferred Stock to be issued in the Washington Mutual/Great Western Merger, subject to official notice of issuance; receipt of opinions of counsel at the closing of the Washington Mutual/Great Western Merger in respect of certain federal income tax consequences of the Washington Mutual/Great Western Merger; and receipt of accountants' letters to the effect that the Washington Mutual/Great Western Merger qualifies for "pooling-of-interests" accounting treatment. The Washington Mutual/Great Western Merger is conditioned on obtaining all required regulatory approvals (the "Requisite Regulatory Approvals"). The principal Requisite Regulatory Approval is approval of the Office of Thrift Supervision (the "OTS") under the Home Owners' Loan Act and the Federal Deposit Insurance Act. As described under "The Washington Mutual/Great Western Merger -- Regulatory Approvals," Washington Mutual has filed an application seeking this OTS approval. Based on the advice of its legal advisors and its own prior acquisition experience, Washington Mutual expects that it will be able to obtain the OTS approval on a timely basis and without the imposition of any condition that would have a material adverse effect on the Combined Company. See "The Washington Mutual/Great Western Merger -- Conditions to the Consummation of the Washington Mutual/Great Western Merger" and "-- Regulatory Approvals Required." Termination of the Merger Agreement The Merger Agreement may be terminated by mutual consent of the Washington Mutual Board and the Great Western Board. The Merger Agreement may also be terminated by either the Washington Mutual Board or the Great Western Board (i) if a governmental authority issues a final denial of an application with 7 8 respect to any of the Requisite Regulatory Approvals or issues a final order prohibiting the consummation of the Washington Mutual/Great Western Merger, (ii) if the Washington Mutual/Great Western Merger does not occur on or before March 31, 1998, (iii) in certain events involving a material breach by the other party of any of its representations, warranties, covenants or agreements in the Merger Agreement, (iv) if the requisite approval of either the Washington Mutual shareholders or the Great Western Stockholders is not obtained at their respective Special Meetings, or (v) if the board of directors of the other party withdraws, modifies or changes its approval or recommendation of the Merger Agreement. The Merger Agreement may also be terminated (i) by the Washington Mutual Board if a tender offer or exchange offer for 25% or more of the outstanding shares of Great Western Common Stock is commenced (other than by Washington Mutual), and the Great Western Board recommends that the Great Western Stockholders tender their shares in such tender or exchange offer or otherwise fails to recommend that Great Western Stockholders reject such tender offer or exchange offer within ten business days after the commencement thereof, or (ii) by the Great Western Board if a tender offer or exchange offer for 25% or more of the outstanding shares of Washington Mutual Common Stock is commenced, and the Washington Mutual Board recommends that the Washington Mutual shareholders tender their shares in such tender or exchange offer or otherwise fails to recommend that Washington Mutual shareholders reject such tender offer or exchange offer within ten business days after the commencement thereof. See "The Washington Mutual/Great Western Merger -- Termination of the Merger Agreement." Pursuant to the Merger Agreement, Great Western has agreed to pay a $75 million fee (plus reimbursement for documented reasonable out-of-pocket expenses up to $20 million) to Washington Mutual if (a) Washington Mutual terminates the Merger Agreement because the Great Western Board withdraws, modifies or changes in a manner adverse to Washington Mutual its approval or recommendation of the Washington Mutual/Great Western Merger, (b) Washington Mutual terminates the Merger Agreement because the Great Western Board either recommends a third party tender or exchange offer for 25% or more of the outstanding shares of Common Stock or fails to recommend that Great Western Stockholders reject such tender or exchange offer, (c) either Washington Mutual or Great Western terminates the Merger Agreement because the Great Western Stockholders fail to approve the Merger Agreement, but only if at the time of such failure, an alternative proposal to acquire Great Western has been publicly disclosed (or any person shall have publicly disclosed an intention (whether or not conditional) to make such an alternative proposal), or (d) Washington Mutual terminates the Merger Agreement as a result of the willful breach by Great Western of any material representation, warranty, covenant or other agreement in the Merger Agreement, but only if at or prior to the time of termination, an alternative proposal to acquire Great Western has been made known to Great Western or has been publicly disclosed, whether or not such alternative proposal is rejected by Great Western or withdrawn prior to the time of termination. An additional $100 million fee is payable by Great Western to Washington Mutual if, within 18 months after termination of the Merger Agreement under any of the circumstances described above, Great Western enters into a definitive agreement with respect to or consummates an alternative proposal for an acquisition of Great Western by a third party. The Ahmanson Proposal, if not unconditionally withdrawn prior to the mailing to Great Western Stockholders of this Joint Proxy Statement/Prospectus, would constitute an alternative proposal for purposes of clause (c) of the preceding paragraph. For purposes of clause (d) above, the Ahmanson Proposal constitutes such an alternative proposal. See "The Washington Mutual/Great Western Merger -- Background of the Washington Mutual/Great Western Merger." The termination fees described above, which Washington Mutual and Great Western believe are customary and typical for transactions such as the Washington Mutual/Great Western Merger, are intended, among other things, to increase the likelihood that the Washington Mutual/Great Western Merger will be consummated on the terms set forth in the Merger Agreement and, if the Washington Mutual/Great Western Merger is not consummated under certain circumstances involving an acquisition or potential acquisition of Great Western by a third party, to compensate Washington Mutual for its efforts undertaken, expenses incurred and business opportunities lost in connection with the proposed Washington Mutual/Great Western Merger. These agreements may have the effect of discouraging offers by third parties to acquire Great 8 9 Western prior to the Washington Mutual/Great Western Merger, even if such persons were prepared to offer to pay consideration to Great Western Stockholders that has a higher current market price than the shares of Washington Mutual Common Stock to be received by the Great Western Stockholders pursuant to the Merger Agreement. See "The Washington Mutual/Great Western Merger -- Background of the Washington Mutual/Great Western Merger." Ahmanson has filed suit in the Court of Chancery of the State of Delaware to enjoin all steps necessary for consummation of the Washington Mutual/Great Western Merger and is challenging the termination fee described above. See "Litigation." Certain Federal Income Tax Consequences The Washington Mutual/Great Western Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code). Accordingly, no gain or loss will be recognized by Great Western Stockholders or the holders of the Great Western Preferred Stock, respectively, upon the receipt of Washington Mutual Common Stock or Series F Preferred Stock, respectively, in exchange for Great Western Common Stock or Great Western Preferred Stock, respectively, except with respect to any cash received in lieu of a fractional share interest in Washington Mutual Common Stock. There will be no federal income tax consequences to the shareholders of Washington Mutual as a result of either voting on the proposals described herein or consummation of the Washington Mutual/Great Western Merger. All shareholders should carefully read the discussion of the material federal income tax consequences of the Washington Mutual/Great Western Merger under "The Washington Mutual/Great Western Merger -- Certain Federal Income Tax Consequences" and are urged to consult with their own tax advisors as to the federal, state, local and foreign tax consequences of the Washington Mutual/Great Western Merger in their particular circumstances. Accounting Treatment The Washington Mutual/Great Western Merger is expected to be treated as a pooling-of-interests for accounting and financial reporting purposes. Accordingly, under generally accepted accounting principles, the assets and liabilities of Great Western will be recorded on the books of Washington Mutual at their values on the books of Great Western at the Effective Time. If completed as proposed, no goodwill will be created as a result of the Washington Mutual/Great Western Merger. See "The Washington Mutual/Great Western Merger -- Accounting Treatment." Interests of Certain Persons in the Washington Mutual/Great Western Merger Certain members of Great Western's management and the Great Western Board have interests in the Washington Mutual/Great Western Merger in addition to their interests as stockholders of Great Western generally. These include, among other things, provisions in the Merger Agreement relating to indemnification, the appointment of four members to the Washington Mutual Board following the Washington Mutual/Great Western Merger and the acceleration of benefits under certain employee benefit plans. The seven executive officers of Great Western would become entitled to receive benefits pursuant to the terms of certain agreements and benefit plans in connection with a change in control of Great Western as follows: (i) if employment is terminated under certain circumstances on or about the currently anticipated effective date of the Washington Mutual/Great Western Merger, severance under his or her employment agreement; (ii) within 5 days following a change in control of Great Western, a pro-rata bonus under Great Western's annual bonus plan; (iii) payment of amounts previously deferred under Great Western's deferred compensation plans, with interest thereon credited at an enhanced rate; and (iv) an annual benefit under Great Western's Supplemental Executive Retirement Plan. The approximate amounts such executive officers would be entitled to receive in respect of such benefits is as follows: Mr. Maher -- $4,386,000, $351,000, 9 10 $4,758,000 and $950,000, respectively; Mr. Pappas -- $2,160,000, $158,000, $132,000 and $357,870, respectively; Mr. Schenck -- $2,160,000, $146,000, $89,000 and $324,029, respectively; Mr. Geuther -- $1,920,000, $140,000, $794,000 and $310,848, respectively; Mr. Sims -- $1,632,000, $119,000, $0 and $39,596, respectively; Mr. Erikson -- $1,512,000, $110,000, $29,000 and $238,252, respectively; and Ms. Studenmund -- $1,680,000, $123,000, $106,000 and $121,864, respectively. In addition, upon the consummation of the Washington Mutual/Great Western Merger, all then unvested Great Western Stock Options held by such executive officers will become immediately vested and exercisable and restricted shares of Great Western Common Stock held by such officers will become immediately vested and free of restrictions. See "Interests of Certain Persons in the Washington Mutual/Great Western Merger" for a more detailed discussion of such agreements and plans and the benefits payable thereunder. The Great Western Board was aware of these interests and considered them, among other matters, in unanimously approving the Merger Agreement and transactions contemplated thereby. For additional information, including amounts payable under such employee benefit plans in certain circumstances, see "The Washington Mutual/Great Western Merger -- Interests of Certain Persons in the Washington Mutual/Great Western Merger." No Appraisal or Dissenters' Rights Under Delaware law, holders of Great Western Common Stock and Great Western Preferred Stock (including the holders of Great Western Depositary Shares) will have no appraisal rights in connection with the Washington Mutual/Great Western Merger. Under Washington law, holders of Washington Mutual Common Stock and Washington Mutual Preferred Stock will have no dissenters' rights with respect to the Share Issuance/Merger Proposal or the Articles Amendment Proposal. See "The Washington Mutual/Great Western Merger -- No Appraisal or Dissenters' Rights." MANAGEMENT AND OPERATIONS OF WASHINGTON MUTUAL FOLLOWING THE WASHINGTON MUTUAL/GREAT WESTERN MERGER At the Effective Time, Great Western will merge with and into NACI (which, as of the Effective Time, will be a direct, wholly owned subsidiary of Washington Mutual), with NACI as the surviving corporation. NACI will be, at the Effective Time, the direct parent company of ASB. It is intended that, as soon as practicable after consummation of the Washington Mutual/Great Western Merger, GW Bank and ASB will merge (the "Bank Merger") and that the name of the surviving corporation will be Great Western Bank. At the Effective Time, four representatives mutually agreeable to Washington Mutual and Great Western will be added to the existing Washington Mutual Board to form the Board of Directors of the Combined Company. While there are no agreements, arrangements or contracts to appoint any specific person to the Washington Mutual Board, it is expected that John F. Maher, the President and Chief Executive Officer of Great Western, will be one of the four representatives of Great Western chosen to serve on the Board of Directors of the Combined Company. Washington Mutual intends to consolidate the branch systems and loan offices of ASB and GW Bank in California and the loan offices of WMB and GW Bank in Washington. It is anticipated that approximately 100 branches (in addition to the seven branches already scheduled for closure by Great Western) and 100 loan offices (including 38 loan offices already scheduled for closure by Great Western) will be closed. Washington Mutual also intends to consolidate certain administrative functions. Initial branch and loan office consolidations will occur in 1998. It is anticipated that further branch and loan office consolidations, back office consolidations and efficiencies will be achieved in 1999. These consolidations, together with cost reductions which result from the introduction of Washington Mutual's loan origination system and an integrated data/communications system throughout the GW Bank branches and other steps, are expected to achieve annual operating cost savings of approximately $208 million and $340 million (pre-tax) in 1998 and 1999, respectively. In addition, Washington Mutual believes that the Washington Mutual/Great Western Merger should provide opportunities for significant revenue enhancements for the Combined Company. Washington Mutual 10 11 anticipates increased asset growth through additional production and retention of residential mortgage and consumer loans as portfolio loans (based on leveraging of the additional capital made available as a result of the Washington Mutual/Great Western Merger and the introduction of new loan products and systems at GW Bank). It is estimated that this strategy will increase pre-tax net interest income in 1999 by approximately $246 million, although this strategy will cause a decrease of $5.0 million in gain on sale of loans in 1999. In addition, Washington Mutual estimates additional pre-tax fee income in 1999 of approximately $88 million may be obtainable primarily as a result of implementing Washington Mutual's pricing policies and products throughout the GW Bank branch network. The projected revenue enhancements are in addition to the revenue levels projected in current First Call estimates of future earnings of Great Western on a stand alone basis and do not include any potential increases over First Call estimates for Washington Mutual on a stand alone basis. Merger-related expenses of approximately $343 million (pre-tax) are expected to be recorded by Washington Mutual at the Effective Time. This charge includes the creation of reserves of $145 million for severance and management payments (which includes all payments anticipated to be payable under all Great Western severance plans, including the broad-based severance plan adopted in the first quarter of 1997), $106 million for facilities and system conversion related expenses and $92 million for other transaction costs. Washington Mutual also intends to provide an additional $100 million in loan loss provisions as a charge to earnings at the Effective Time. This additional loan loss provision is being provided because Washington Mutual's plan for managing certain of the loans in Great Western's portfolio which were originated between 1989 and 1993 differs from Great Western's and therefore requires a different level of reserves. See "Management and Operations of Washington Mutual Following the Washington Mutual/Great Western Merger." The estimates of cost savings, revenue enhancements and merger-related and other expenses described above are forward-looking statements that, while prepared on the basis of Washington Mutual's best judgments and currently available information regarding Great Western's business and the future operating performance of the two companies, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of either company, and upon assumptions with respect to future business decisions that are subject to change. Accordingly, there can be no assurance that such cost-savings and revenue enhancements will be realized in the amounts or within the time periods currently estimated or that such charges for merger-related expenses will be sufficient. See "Risk Factors." See "Management and Operations of Washington Mutual Following the Washington Mutual/Great Western Merger." DESCRIPTION OF WASHINGTON MUTUAL CAPITAL STOCK Upon consummation of the Washington Mutual/Great Western Merger, holders of Great Western Common Stock will become holders of Washington Mutual Common Stock. Holders of shares of Washington Mutual Common Stock are entitled to one vote per share for each share held. Subject to the rights of holders of shares of the outstanding Washington Mutual Preferred Stock, holders of shares of Washington Mutual Common Stock have equal rights to participate in dividends when declared and, in the event of liquidation, in the net assets of Washington Mutual available for distribution to shareholders. Washington Mutual may not declare any dividends on the Washington Mutual Common Stock unless full preferential amounts to which holders of the Washington Mutual Preferred Stock are entitled have been paid or declared and set apart for payment. Washington Mutual is also subject to certain regulatory restrictions on the payment of dividends. Each share of Washington Mutual Common Stock currently has attached thereto a stock purchase right (a "Washington Mutual Right") issued under the Washington Mutual Rights Plan. Upon consummation of the Merger, holders of Great Western Preferred Stock will become holders of the Series F Preferred Stock, which has substantially identical terms, limitations, privileges and rights as the Great Western Preferred Stock. 11 12 For additional information concerning the capital stock of Washington Mutual and certain differences between Washington and Delaware corporate laws, see "Description of Washington Mutual Capital Stock" and "Certain Differences Between Washington and Delaware Corporate Laws." [LEFT BLANK INTENTIONALLY] 12 EX-99.13 13 PAGES FROM THE ANNUAL MEETING PROXY STATEMENT 1 EXHIBIT 13 THE AHMANSON CONSENT SOLICITATION. On March 3, 1997, Ahmanson commenced the Ahmanson Consent Solicitation and sought consents from Great Western stockholders to approve five proposals. That same day, pursuant to Great Western's By-laws, the Board fixed March 13, 1997 as the record date for these five proposals. On March 17, 1997 (concurrently with the announcement of the Revised Ahmanson Merger Proposal and subsequent to the announcement of the Washington Mutual Merger), Ahmanson withdrew two of the five proposals and commenced a solicitation of consents for two new proposals (the "New Ahmanson Consent Proposals"), in addition to proposals 3, 4 and 5 of the Ahmanson Consent Solicitation as originally commenced. To date, Great Western has not received a request from Ahmanson to fix a record date with respect to the New Ahmanson Consent Proposals and, accordingly, no such record date has been so fixed. See "LITIGATION." On April 9, 1997, Ahmanson presented to the Company consents which Ahmanson claimed represented consents from a majority of the outstanding Common Shares for adoption of three of the five Ahmanson proposals. One of the proposals for which Ahmanson presented consents would amend the Company's By-laws to require that the Company's annual meeting of stockholders be held on the fourth Tuesday in April or within two weeks thereof (the "Annual Meeting By-law"). This year, the fourth Tuesday in April was April 22, 1997 and the fourteenth day thereafter was May 6, 1997. On April 11, 1997, Ahmanson presented to the Company consents which Ahmanson claimed represented consents from a majority of the outstanding Common Shares for adoption of one of the two New Ahmanson Consent Proposals. The consents presented by Ahmanson and the revocations of consent received by Great Western were turned over to independent inspectors of election. After the independent inspectors reported the results of their preliminary tabulation as of April 9 with respect to proposals 3, 4 and 5 of the Ahmanson Consent Solicitation, which indicated that those proposals had been adopted, Great Western identified a voting irregularity involving the double voting of more than five million Common Shares held by a major institutional stockholder. That stockholder promptly sent a letter to the independent inspectors stating that approximately 5.2 million of its shares "represent a duplicate vote" and requesting that such duplicate vote be disregarded. Ahmanson insisted that the independent inspectors were not authorized to take cognizance of the letter from the major institutional stockholder and that the shares be counted twice. The independent inspectors took the position that they were not empowered to address the double vote issue. On April 28, 1997, the independent inspectors certified that Ahmanson had received consents representing a majority of the outstanding Common Shares with respect to proposals 3, 4 and 5 as of April 9, 1997. On that same day Great Western filed suit in the Court of Chancery of the State of Delaware seeking an order declaring, among other things, that there was an overvote entitling the independent inspectors to consider extrinsic evidence concerning the double-voted shares. See "LITIGATION." On May 1, 1997, Great Western and Ahmanson each requested that the independent inspectors retabulate the vote without giving effect to the double-counted shares and recertify the results of the Ahmanson Consent Solicitation. On May 5, 1997, the independent inspectors completed a second tabulation regarding certain of Ahmanson's proposals, certifying that, as of April 9, 1997, Ahmanson had received consents representing a majority of the outstanding Common Shares with respect to proposal 3. Also, on May 5, 1997, the independent inspectors reported on a preliminary basis, and are expected to certify shortly, that Ahmanson received unrevoked consents representing a majority of the outstanding Common Shares with respect to proposals 4 and 5 as of April 10, 1997. In light of the dispute between Great Western and Ahmanson as to whether a record date exists with respect to the New Ahmanson Consent Proposals, the independent inspectors have not tabulated the results of the solicitation with respect to such proposals. Under Great Western's By-laws, any stockholder of Great Western seeking to have Great Western's stockholders authorize or take corporate action by written consent must, by written notice to Great Western's Secretary, request that the Board fix a record date. The Board is then required, within ten days after the date on which such request is received, to adopt a resolution fixing the record date. Under Section 213 of the Delaware General Corporation Law ("DGCL") and Section 11 of Great Western's By-laws, the record date must be within ten days of the date of the resolution fixing the record date. Ahmanson has never requested the setting of a record date with respect to the New Ahmanson 1 2 Consent Proposals. Pursuant to the Company's By-laws, a record date will be fixed by the Board upon Ahmanson's written request that such a date be fixed. Even though the independent inspectors certified on May 5, 1997 that, as of April 9, 1997, consents from a majority of the outstanding Common Shares have been presented to the Company with respect to the Annual Meeting By-law, Rule 14a-13 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company to disseminate broker search cards at least 20 business days prior to the record date for the Annual Meeting and New York Stock Exchange rules recommend that a listed company, such as Great Western, allow a minimum of 30 days from the record date to the stockholder meeting date for the solicitation of proxies. Therefore, in light of the relevant timing constraints, rules and regulations governing the Company and practical considerations relating to the time required for dissemination of proxy materials to beneficial owners of Common Shares, the time required for the solicitation of proxies as well as the time necessary to permit meaningful deliberation by holders of Common Shares and the return of proxies by both record and beneficial owners of Common Shares, on April 10, 1997 the Board scheduled the Annual Meeting for June 13, 1997 and fixed May 9, 1997 as the record date for holders of Common Shares entitled to receive notice of and to vote at the Annual Meeting (the "Record Date"). On April 9, 1997, Ahmanson filed a Complaint in the Court of Chancery of the State of Delaware seeking an order compelling Great Western to hold the Annual Meeting on or before May 6, 1997. See "LITIGATION." On May 8, 1997, Ahmanson publicly announced that it would no longer seek to advance the date of the Annual Meeting. [LEFT BLANK INTENTIONALLY] 2 -----END PRIVACY-ENHANCED MESSAGE-----