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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
February 4, 1998
Date of Report (Date Of Earliest Event Reported)
FIRST NATIONWIDE (PARENT) HOLDINGS INC.
(Exact Name Of Registrant As Specified In Its Charter)
Delaware
(State Or Other Jurisdiction Of Incorporation)
333-4026 13-3778550
(Commission File Number) (IRS Employer Identification No.)
35 East 62nd Street
New York, New York 10021
(Address Of Principal Executive Offices) (Zip Code)
(212) 572-8600
(Registrant's Telephone Number, including Area Code)
NOT APPLICABLE
(Former Name Or Former Address, If Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On February 4, 1998, First Nationwide (Parent) Holdings Inc.,
a Delaware corporation ("Parent Holdings"), entered into an Agreement and Plan
of Reorganization (the "Agreement") with First Nationwide Holdings Inc., a
Delaware corporation ("FNH"), First Gibraltar Holdings Inc., a Delaware
corporation and the sole stockholder of Parent Holdings ("FGH"), Hunter's
Glen/Ford, Ltd., a Texas limited partnership ("Ford"), Golden State Bancorp
Inc., a Delaware corporation ("Golden State") and Golden State Financial
Corporation, a Delaware corporation and a wholly-owned subsidiary of Golden
State ("Golden State Financial"). The Agreement provides for, among other
things, the merger of Parent Holdings with and into Golden State and the merger
of FNH with and into Golden State Financial (such transactions being referred
to herein as the "Mergers"). The Agreement also contemplates that immediately
following the Mergers, Glendale Federal Bank, Federal Savings Bank ("Glendale
Federal"), a wholly owned subsidiary of Golden State, will merge with and into
California Federal Bank, A Federal Savings Bank ("Cal Fed"), a wholly owned
subsidiary of FNH. FNH is owned 80% by Parent Holdings and 20% by Ford. Parent
Holdings is an indirect wholly owned subsidiary of MacAndrews & Forbes Holdings
Inc. ("MacAndrews & Forbes"). Ford is a limited partnership controlled by
Gerald J. Ford, the Chairman and Chief Executive Officer of Cal Fed.
Pursuant to the Agreement, FGH and Ford will receive at the
closing of the Mergers, in respect of their interests as direct and/or indirect
stockholders of Parent Holdings and FNH, a number of shares of common stock,
par value $1.00 per share, of Golden State ("Golden State Common Stock"), as
determined pursuant to a formula set forth in the Agreement, that will consti
tute an aggregate pro forma ownership interest of between 42% and 45% of the
combined company. The actual ownership percentage will be determined based
upon the adjusted volume-weighted average price of Golden State Common Stock
during a specified pricing period ending shortly before the closing of the
Mergers and following distribution by Golden State of its Litigation Tracking
Warrants (as described below). In addition, the Agreement provides that FGH
and Ford will be entitled to receive contingent consideration, through the
issuance by
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Golden State of additional shares of Golden State Common Stock to FGH and Ford
following consummation of the Mergers, based on (i) the utilization by the
combined corporation of certain tax benefits of Parent Holdings, FNH and Cal
Fed and (ii) Cal Fed's net after-tax recovery in certain specified litigation,
including a percentage of the net after-tax recovery in Cal Fed's goodwill
litigation against the United States (following payment by Cal Fed of all
amounts due to the holders of its contingent litigation recovery participation
interests (the "CALGZs") and its secondary contingent litigation recovery
participation interests (the "CALGLs")). The Litigation Tracking Warrants
("LTWs"), which will be distributed by Golden State to its stockholders prior
to the closing of the Mergers, will represent the right to receive upon
exercise thereof Golden State Common Stock in an amount equal, in the
aggregate, to a specified percentage of the net after-tax recovery in Glendale
Federal's goodwill lawsuit against the United States, with the remaining
percentage of such net recovery being retained by the combined company. The
Agreement provides generally that the amount of the net after-tax recovery
resulting from Cal Fed's goodwill lawsuit which will be retained by the
combined company will be based on the amount of the net after-tax recovery in
the Glendale Federal goodwill litigation being retained by the combined
company, adjusted to reflect the pro forma ownership interest of FGH and Ford
in the combined company, with the remaining amount of Cal Fed's net litigation
recovery, if any, to be distributed to FGH and Ford through the issuance of
additional shares of Golden State Common Stock as described above.
The Agreement provides that, immediately after the
consummation of the Mergers, the board of directors of the surviving
corporation will be composed of 15 directors, with five directors being
designated by Golden State and the remaining ten directors being designated by
Parent Holdings. Upon consummation of the Mergers, Mr. Ford will serve as
Chairman and Chief Executive Officer of the combined company, and Carl B. Webb,
the President and Chief Operating Officer of Cal Fed, will become President and
Chief Operating Officer of the combined company. The Mergers are conditioned
upon, among other things, the receipt of all necessary regulatory approvals,
the approval and adoption of the Agreement by the stockholders of Golden State,
the distribution by Golden State of the LTWs and certain other customary
conditions. The foregoing description of the Agreement is not in-
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tended to be complete and is qualified in its entirety by reference to the full
text thereof, which is attached hereto as Exhibit 2.1 and is incorporated
herein by reference.
In connection with and as a condition to the willingness of
Parent Holdings to enter into the Agreement, on February 4, 1998, Parent
Holdings and Golden State entered into a Stock Option Agreement (the "Stock
Option Agreement"), pursuant to which Golden State granted to Parent Holdings
an option (the "Option") to purchase, upon the terms and subject to the
conditions set forth therein, up to 10,165,950 shares of Golden State Common
Stock (approximately 19.9% of the total number of outstanding shares of Golden
State Common Stock) at a price of $24.00 per share. Pursuant to the Stock
Option Agreement, the aggregate amount that Parent Holdings may realize in
respect of the Option, or the shares of Golden State Common Stock issued
pursuant to the Option, may not exceed $25 million. The Option will become
exercisable only upon the occurrence of certain events, none of which has
occurred as of the date hereof. At such time, if any, as the Option becomes
exercisable, the Agreement provides that Golden State must pay Parent Holdings
a $50 million termination fee. The foregoing description of the Stock Option
Agreement is not intended to be complete and is qualified in its entirety by
reference to the full text of such agreement, which is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
In addition, in connection with the execution of the
Agreement, Golden State, Glendale Federal and Cal Fed entered into a litigation
management agreement (the "Management Agreement") with Stephen J. Trafton,
Chairman, President and Chief Executive Officer of Golden State, and Richard
A. Fink, Vice Chairman of Golden State. Pursuant to the Management Agreement,
which will become effective at the closing of the Mergers, Messrs. Trafton and
Fink will, subject to the provisions of the Management Agreement, manage
Glendale Federal's and Cal Fed's respective goodwill lawsuits against the
United States. The foregoing description of the Management Agreement is
qualified in its entirety by reference to the full text of such agreement,
which is attached hereto as Exhibit 99.2 and is incorporated herein by
reference.
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On February 5, 1998, the parties to the Agreement issued a
joint press release announcing the Agreement and the transactions contemplated
thereby. Also on February 5, 1998, the managements of Cal Fed and Golden State
made a presentation to securities analysts with respect to the Agreement and
the transactions contemplated thereby. A copy of the press release is attached
as Exhibit 99.3 hereto, and a copy of the analyst presentation materials is
attached as Exhibit 99.4 hereto, and each is incorporated herein by reference.
Following the public announcement of the Agreement and the
proposed Mergers, five separate purported class action lawsuits (collectively,
the "Litigation") were filed by certain stockholders of Golden State naming
Golden State, its individual directors and, in certain cases, FNH and
MacAndrews & Forbes as defendants. The Litigation was consolidated into one
action in the Court of Chancery in Delaware captioned IN RE GOLDEN STATE
BANCORP INC. SHAREHOLDERS LITIGATION, Consolidated C.A. No. 16175NC. The
plaintiffs in the Litigation have alleged, among other things, that the
individual members of Golden State's board of directors have breached their
fiduciary duties to Golden State's stockholders by entering into the Agreement.
The plaintiffs are seeking, on behalf of themselves and all similarly situated
stockholders of Golden State, among other things, (i) class certification,
(ii) an order enjoining, preliminarily and permanently, the Mergers, or, in
the event the Mergers are consummated prior to the entry of a final order,
rescission of the Mergers and/or damages, including rescissory damages, and
(iii) costs and disbursements, including attorneys' fees. In addition, a
purported class action complaint alleging substantially similar claims, and
seeking substantially similar relief, has been filed in Los Angeles Superior
Court in the State of California. FNH believes, and has been advised by
MacAndrews & Forbes that it believes, that their actions taken in respect of
the Agreement were proper in all respects, and FNH and MacAndrews & Forbes
intend to defend the Litigation vigorously.
This Current Report on Form 8-K contains forward looking
statements with respect to management beliefs, estimates, projections,
assumptions and the financial condition, results of operations and business of
Parent Holdings and Golden State (and their respective subsidiaries) and,
assuming the consummation of the Mergers, a combined Golden State Bancorp
Inc./First Nationwide (Parent) Holdings Inc., including statements relating to
the cost savings and accretion to cash earnings that are expected to be
realized from the Mergers, the pro forma assets and deposits of the combined
company and the restructuring charges expected to be incurred in connection
with the Mergers. These forward looking statements involve certain risks and
uncertainties. Factors that may cause results to differ materially from those
contemplated by such forward looking statements include, among others, the
following possibilities: (1) expected cost savings from the Mergers cannot be
fully realized or realized within the expected time frame; (2) revenues
following the Mergers are lower than expected; (3) competitive pressure among
depository institutions increases significantly; (4) costs or difficulties
related to the integration of the businesses of Parent Holdings and Golden
State are greater than expected; (5) changes in the interest rate environment
reduce interest margins; (6) general economic conditions, either nationally or
in the states in which the combined company will be doing business, are less
favorable than expected; (7) legislation or regulatory changes adversely
affect the businesses in which the combined company would be engaged; or (8)
the respective goodwill lawsuits of Glendale Federal and Cal Fed are not
finally resolved in the time frames expected by the parties, or a final
resolution of either or both of such lawsuits does not result in a net
recovery or results in a net recovery that is less than that anticipated by
the parties.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
The following exhibits are filed as part of this report:
2.1 Agreement and Plan of Reorganization, dated as of February 4, 1998, by
and among First Nation wide (Parent) Holdings Inc., First Nationwide
Holdings Inc., First Gibraltar Holdings Inc., Hunter's Glen/Ford,
Ltd., Golden State Bancorp Inc. and Golden State Financial Corporation
99.1 Stock Option Agreement, dated as of February 4, 1998, by and between
Golden State Bancorp Inc. and First Nationwide (Parent) Holdings Inc.
99.2 Litigation Management Agreement, dated as of February 4, 1998, by and
among Golden State Bancorp Inc., Glendale Federal Bank, Federal
Savings Bank, California Federal Bank, A Fed eral Savings Bank,
Stephen J. Trafton and Richard A. Fink
99.3 Joint Press Release, dated February 5, 1998
99.4 Analyst Presentation Materials, dated February 5, 1998
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunder duly authorized.
Dated: February 13, 1998
FIRST NATIONWIDE (PARENT)
HOLDINGS INC.
By: /s/ Glenn P. Dickes
--------------------------
Name: Glenn P. Dickes
Title: Vice President
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EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
2.1 Agreement and Plan of Reorganization, dated as of February 4, 1998, by
and among First Nationwide (Parent) Holdings Inc., First Nationwide
Holdings Inc., First Gibraltar Holdings Inc., Hunter's Glen/Ford, Ltd.,
Golden State Bancorp Inc. and Golden State Financial Corporation
99.1 Stock Option Agreement, dated as of February 4, 1998, by and between
Golden State Bancorp Inc. and First Nationwide (Parent) Holdings Inc.
99.2 Litigation Management Agreement, dated as of February 4, 1998, by and
among Golden State Bancorp Inc., Glendale Federal Bank, Federal
Savings Bank, California Federal Bank, A Federal Savings Bank,
Stephen J. Trafton and Richard A. Fink
99.3 Joint Press release, dated February 5, 1998
99.4 Analyst Presentation Materials, dated February 5, 1998
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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
GOLDEN STATE BANCORP INC.
GOLDEN STATE FINANCIAL CORPORATION
FIRST NATIONWIDE (PARENT) HOLDINGS INC.
FIRST NATIONWIDE HOLDINGS INC.
FIRST GIBRALTAR HOLDINGS INC.
AND
HUNTER'S GLEN/FORD, LTD.
DATED AS OF FEBRUARY 4, 1998
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TABLE of CONTENTS
Page
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ARTICLE I
THE MERGER.......................................................2
1.1. The Merger.................................................2
1.2. Effective Time.............................................2
1.3. Conversion of Parent Holdings Common Stock,
FNH Common Stock and FNH Preferred Stock................3
1.4. Golden State Common Stock and Merger Sub Common Stock......5
1.5. Tax Consequences...........................................6
1.6. Contingent Consideration...................................6
ARTICLE II
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES..............................31
2.1. Disclosure Schedules...................................31
2.2. Standards..............................................32
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GOLDEN STATE..................34
3.1. Corporate Organization....................................34
3.2. Capitalization............................................36
3.3. Authority; No Violation...................................40
3.4. Consents and Approvals....................................44
3.5. Reports...................................................45
3.6. Financial Statements......................................46
3.7. Broker's Fees.............................................49
3.8. Absence of Certain Changes or Events......................49
3.9. Legal Proceedings.........................................51
3.10. Taxes....................................................51
3.11. Employees................................................54
3.12. SEC Reports..............................................58
3.13. Golden State Information.................................59
3.14. Compliance with Applicable Law...........................59
3.15. Certain Contracts........................................60
3.16. Agreements with Regulatory Agencies......................62
3.17. State Takeover Laws; Charter Provision...................63
3.18. Environmental Matters....................................63
3.19. Derivative Transactions..................................65
3.20. Opinion..................................................66
3.21. Approvals................................................67
3.22. Loan Portfolio...........................................67
3.23. Reorganization...........................................69
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Page
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3.24. Material Interests of Certain Persons....................69
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT HOLDINGS..............................................70
4.1. Corporate Organization....................................70
4.2. Capitalization............................................72
4.3. Authority; No Violation...................................74
4.4. Consents and Approvals....................................78
4.5. Reports...................................................79
4.6. Financial Statements......................................79
4.7. Broker's Fees.............................................82
4.8. Absence of Certain Changes or Events......................82
4.9. Legal Proceedings.........................................84
4.10. Taxes.....................................................84
4.11. Employees.................................................87
4.12. SEC Reports...............................................92
4.13. Parent Holdings Information...............................93
4.14. Compliance with Applicable Law............................93
4.15. Ownership of Golden State Common Stock; Affiliates
and Associates..........................................94
4.16. Agreements with Regulatory Agencies.......................94
4.17. Approvals.................................................95
4.18. Reorganization............................................95
4.19. Certain Contracts.........................................96
4.20. Environmental Matters.....................................98
4.21. Derivative Transactions...................................99
4.22. Loan Portfolio...........................................100
4.23. Material Interests of Certain Persons....................102
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS......................103
5.1. Covenants Relating to Conduct of Business................103
ARTICLE VI
ADDITIONAL AGREEMENTS..........................................112
6.1. Regulatory Matters.......................................112
6.2. Access to Information....................................115
6.3. Stockholder Meeting......................................118
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Page
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6.4. Legal Conditions to Merger..............................118
6.5. Cash-out of Stock Options...............................119
6.6. Employee Benefit Plans; Existing Agreements.............120
6.7. Indemnification.........................................122
6.8. Additional Agreements...................................127
6.9. Advice of Changes.......................................128
6.10. Execution and Authorization of Bank Merger
Agreement.............................................128
6.11. Board of Directors......................................128
6.12. Registration Rights Agreement...........................130
6.13. Distribution and Listing of LTWs; Amendment
of Certificate of Incorporation.......................130
6.14. Tax Sharing Agreement...................................131
6.15. Transfer and Similar Taxes..............................132
6.16. Purchases of Golden State Securities....................132
6.17. Stock Exchange Listing..................................133
6.18. Certain Agreements of FGH, Parent Holdings
and Ford..............................................133
6.19. Bank Charter Amendment..................................135
ARTICLE VII
CONDITIONS PRECEDENT...........................................136
7.1. Conditions to Each Party's Obligation To Effect
the Mergers...........................................136
7.2. Conditions to Obligations of Parent Holdings
and FNH...............................................138
7.3. Conditions to Obligations of Golden State and
Merger Sub............................................141
ARTICLE VIII
TERMINATION AND AMENDMENT......................................144
8.1. Termination..............................................144
8.2. Effect of Termination; Expenses..........................148
8.3. Amendment................................................149
8.4. Extension; Waiver........................................149
ARTICLE IX
GENERAL PROVISIONS.............................................150
9.1. Closing..................................................150
9.2. Alternative Structure....................................151
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Page
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9.3. Nonsurvival of Representations, Warranties and
Agreements............................................151
9.4. Expenses................................................152
9.5. Notices.................................................152
9.6. Interpretation..........................................153
9.7. Counterparts............................................154
9.8. Entire Agreement........................................154
9.9. Governing Law...........................................154
9.10. Enforcement of Agreement................................155
9.11. Severability............................................155
9.12. Publicity...............................................156
9.13. Assignment; No Third Party Beneficiaries .............. 156
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as
of February 4, 1998, by and among First Nationwide (Parent) Holdings Inc., a
Delaware corporation ("Parent Holdings"), First Nationwide Holdings Inc., a
Delaware corporation and a subsidiary of Parent Holdings ("FNH"), Golden State
Bancorp Inc., a Delaware corporation ("Golden State"), Golden State Financial
Corporation, a Delaware corporation and a wholly owned subsidiary of Golden
State ("Merger Sub"), First Gibraltar Holdings Inc., a Delaware corporation
("FGH"), and Hunter's Glen/Ford, Ltd., a limited partnership organized under
the laws of the State of Texas ("Ford," and, together with FGH, the
"Shareholders").
WHEREAS, the respective Boards of Directors of Parent
Holdings, FNH, Golden State and Merger Sub have determined that it is in the
best interests of their respective companies and their stockholders to
consummate the business combination transactions provided for herein in which,
subject to the terms and conditions set forth herein, Parent Holdings will
merge with and into Golden State (the "Parent Merger") and FNH, following the
contribution of all of its assets and liabilities (including 100% of the
common stock of CFB (as defined below)) to a
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newly-formed, wholly owned subsidiary of FNH ("New FNH"), will merge with and
into Merger Sub (the "FNH Merger")(the Parent Merger and the FNH Merger
together are referred to herein as the "Mergers");
WHEREAS, as soon as practicable after the execution and
delivery of this Agreement, California Federal Bank, A Federal Savings Bank, a
federally chartered stock savings bank and a wholly owned subsidiary of FNH
("CFB," and sometimes referred to herein as the "Surviving Bank"), and Glendale
Federal Bank, Federal Savings Bank, a federally chartered stock savings bank
and a wholly owned subsidiary of Golden State ("GFB"), will enter into a
Subsidiary Agreement and Plan of Merger (the "Bank Merger Agreement") providing
for the merger (the "Subsidiary Merger") of GFB with and into CFB, and it is
intended that the Subsidiary Merger be consummated immediately following the
consummation of the Mergers;
WHEREAS, as a condition to, and immediately after the
execution of this Agreement, Parent Holdings and Golden State are entering into
a Stock Option Agreement in the form attached hereto as Annex C;
WHEREAS, as a condition to, and contemporaneously with the
execution of this Agreement, Parent Holdings, CFB, Golden State, GFB, Stephen
J. Trafton and
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Richard A. Fink are entering into a Litigation Management Agreement (the
"Management Agreement");
WHEREAS, Golden State and the Shareholders have agreed, in
connection with the Mergers and upon the terms and subject to the conditions
set forth herein, to enter into a Registration Rights Agreement in
substantially the form attached hereto as Annex D (the "Registration Rights
Agreement") relating to the shares of Golden State Common Stock (as defined
herein) to be issued to the Shareholders in the Mergers; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Mergers and also to prescribe
certain conditions to the consummation of the Mergers.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to
be legally bound hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the Delaware General Corporation Law (the
"DGCL"), simulta-
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neously at the Effective Time (as defined in Section 1.2 hereof), (a) Parent
Holdings shall merge with and into Golden State pursuant to an Agreement and
Plan of Merger substantially in the form attached hereto as Annex A (the
"Parent Plan of Merger"), and (b) FNH shall merge with and into Merger Sub
pursuant to an Agreement and Plan of Merger substantially in the form attached
hereto as Annex B (the "FNH Plan of Merger"). Golden State and Merger Sub shall
be the surviving corporations in the Mergers, and shall continue their
respective corporate existences under the laws of the State of Delaware. Upon
consummation of the Mergers, the separate corporate existence of each of
Parent Holdings and FNH shall terminate. Golden State is sometimes referred to
herein as the "Surviving Corporation."
1.2. Effective Time. The Mergers shall become effective as
set forth in the certificates of merger (the "Certificates of Merger") which
shall be filed with the Secretary of State of the State of Delaware (the
"Secretary") on the Closing Date (as defined in Section 9.1 hereof). The term
"Effective Time" shall be the date and time when the Mergers become effective,
as set forth in the Certificates of Merger. The term "Effective Date" shall be
the date on which the Effective Time occurs.
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1.3. Conversion of Parent Holdings Common Stock, FNH Common
Stock and FNH Preferred Stock. (a) At the Effective Time, the 1,000 shares of
the common stock, par value $1.00 per share, of Parent Holdings (the "Parent
Holdings Common Stock") issued and outstanding shall, by virtue of this
Agreement and the Parent Plan of Merger, and without any action on the part of
the holder thereof, be converted into and exchangeable for (i) that number of
shares of the common stock, par value $1.00 per share, of Golden State ("Golden
State Common Stock") equal to (x) the Closing Issuance Number less (y) the Ford
Shares Number, and (ii) the right to receive the contingent consideration
attributable to FGH as set forth in Section 1.6.
(b) At the Effective Time, each of the 800 shares
of Class A common stock, par value $1.00 per share, of FNH (the "FNH Class A
Common Stock") issued and outstanding shall, by virtue of this Agreement
and the FNH Plan of Merger, and without any action on the part of the holder
thereof, be canceled and no consideration shall be paid in respect thereof.
(c) At the Effective Time, the 200 shares
of Class B common stock, par value $1.00 per share, of FNH (the "FNH Class B
Common Stock") issued and outstand-
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ing shall, by virtue of this Agreement and the FNH Plan of Merger, and without
any action on the part of the holder thereof, be converted into and
exchangeable for (i) that number of shares of Golden State Common Stock equal
to (rounded up to the nearest share) the Ford Shares Number, and (ii) the right
to receive the contingent consideration attributable to Ford as set forth in
Section 1.6.
(d) For purposes of this Agreement, the following terms
have the meanings indicated:
"Adjusted Average Daily Price" means (a) the
Average Daily Price less (b) the Glendale Litigation
Adjustment.
"Aggregate LTW Value" means the product of (x) the Average
Daily LTW Price and (y) the total number of LTWs outstanding plus those
reserved for issuance as of the business day immediately prior to the Closing
Date.
"Average Daily LTW Price" means the daily volume weighted
average price of the LTWs on the New York Stock Exchange (the "NYSE"), or on
such other stock market or securities trading system on which the LTWs may be
listed or quoted from time to time (as reported by Bloomberg Financial Services
or, if not reported therein, in another mutually agreed upon authoritative
source) for
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15 randomly selected days during the 30 consecutive NYSE trading days ending on
the third business day prior to the Closing Date. The random selection shall be
made in a manner reasonably acceptable to both Golden State and Parent
Holdings.
"Average Daily Price" means the daily volume weighted average
price per share of Golden State Common Stock on the NYSE (as reported by
Bloomberg Financial Services or, if not reported therein, in another mutually
agreed upon authoritative source) for 15 randomly selected days during the 30
consecutive NYSE trading days ending on the third business day prior to the
Closing Date. The random selection shall be made in a manner reasonably
acceptable to both Golden State and Parent Holdings.
"Closing Issuance Number" means (x) the Pro
Forma Shares Number less (y) the Outstanding Shares
Number.
"Ford Shares Number" means the amount obtained by (I) dividing (A) (1)
the product of the Closing Issuance Number and the Average Daily Price, plus
(2) the sum of $455 million and the amount of all interest on the outstanding
principal amount of 12 1/2% Senior Exchange Notes due 2003 of Parent Holdings
which is accrued but
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unpaid as of the Closing Date, less (3) the aggregate amount of cash and cash
equivalents held by Parent Holdings as of the Closing Date, by (B) the Average
Daily Price and (II) multiplying the result obtained in clause (I) by 0.2.
"Glendale Litigation Adjustment" means the quotient obtained
by dividing (x) the product of (1) the Glendale Litigation Value and (2) the
Glendale Retention Factor, by (y) the Outstanding Shares Number.
"Glendale Litigation Value" means the quotient obtained by
dividing (x) the Aggregate LTW Value by (y) one minus the Glendale Retention
Factor.
"Glendale Retention Factor" means a number, expressed as a
decimal, equal to one minus the percentage (expressed as a decimal) of the net
after-tax recovery in the Glendale Litigation to be distributed in the
aggregate to the holders of the LTWs as set forth in the final terms of the
LTWs as issued (provided that the Glendale Retention Factor shall in no event
exceed 0.15).
"LTW" means the Litigation Tracking Warrants to be issued and
distributed by Golden State to its stockholders after the date of this
Agreement and having substantially the terms set forth in Annex E attached
hereto.
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"Outstanding Shares Number" means the total number of
fully-diluted shares of Golden State Common Stock as of the Closing Date
(excluding shares of Golden State Common Stock issuable upon exercise of LTWs
or upon exercise of the option granted to Parent Holdings under the Option
Agreement), with all Golden State Options which have been surrendered for a
cash payment after the date of this Agreement pursuant to Section 6.5 treated
as if they had remained outstanding, and computed on the "treasury stock
method" of calculating earnings per share under Statement of Financial
Accounting Standards No. 128 as in effect as of the date hereof, in all cases
using the Average Daily Price as the "market price" of Golden State Common
Stock.
"Pro Forma Factor" is determined as follows:
IF THE ADJUSTED THE PRO FORMA
AVERAGE DAILY PRICE IS: FACTOR IS:
$32.00 or less..................................... 0.58
greater than $32.00 but
less than $32.50................................... 0.57
$32.50 or greater but less
than $33.00........................................ 0.56
$33.00 or greater.................................. 0.55
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"Pro Forma Shares Number" means the quotient,
rounded up to the nearest whole share, obtained by dividing (x) the
Outstanding Shares Number by (y) the Pro Forma Factor.
1.4. Golden State Common Stock and Merger Sub Common Stock.
The shares of Golden State Common Stock and Merger Sub Common Stock issued and
outstanding immediately prior to the Effective Time shall be unaffected by the
Mergers and shall remain issued and outstanding following the Effective Time.
1.5. Tax Consequences. It is intended that the Mergers and
the Subsidiary Merger constitute reorganizations within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement (together with the FNH Plan of Merger and the Parent Plan of
Merger) shall constitute a "plan of reorganization" for purposes of Section 368
of the Code.
1.6. Contingent Consideration. FGH and Ford, as holders of
the Parent Holdings Common Stock and the FNH Class B Common Stock,
respectively, shall be entitled to receive additional merger consideration in
accordance with the terms and provisions of this Section 1.6.
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(a) Goodwill Litigation Recovery.
(i) Not later than the tenth business
day following the date on which CFB shall have received the CFB Cash
Payment (as defined below), Golden State shall issue to FGH and Ford an
aggregate number of shares of Golden State Common Stock (the "Goodwill Recovery
Shares Number") equal to the quotient obtained by dividing (x) the CFB
Litigation Distribution Amount (as defined below) by (y) the daily volume
weighted average price per share of Golden State Common Stock on the NYSE (as
reported by Bloomberg Financial Services or, if not reported therein, in
another mutually agreed upon authoritative source) (the "Average Stock Price")
for 15 randomly selected days during the 30 consecutive trading-day period
ending on the business day immediately prior to the date of issuance of such
shares. The number of such shares to be issued to FGH shall be 80% of the
Goodwill Recovery Shares Number, and the number of such shares to be issued to
Ford shall be 20% of the Goodwill Recovery Shares Number.
(ii) In the event that a final, nonappealable judgment
in or final settlement of the Goodwill Litigation does not result in a CFB
Cash Payment, or in the event that the sum of the Net Cash Pay-
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ment and the CFB Litigation Tax Benefits is less than the sum of the Litigation
Recovery Retention Amount and the Interest Factor, then FGH and Ford shall each
make a cash payment to Golden State, within twenty business days following the
date of such final judgment or settlement, which cash payments shall equal, in
the aggregate, an amount (the "Contribution Amount") equal to the difference
between (i) the sum of the Litigation Recovery Retention Amount and the
Interest Factor, and (ii) the sum of the Net Cash Payment and the CFB
Litigation Tax Benefits, with FGH being severally liable for 80% of the
Contribution Amount and Ford being severally liable for 20% of the Contribution
Amount; provided, however, that in lieu of paying such amounts to Golden State
in cash, each of FGH and Ford may elect to tender shares of Golden State Common
Stock in payment of all or a portion of such party's percentage share of the
Contribution Amount, with such shares being accepted as payment by Golden State
at a per share value equal to the Average Stock Price for 15 randomly selected
days during the 30 trading-day period ending on the business day immediately
prior to the date of payment.
(iii) In the event that CFB receives
the CFB Cash Payment prior to such time as GFB receives a
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GFB Payment in the Glendale Litigation, then Golden State shall issue shares of
Golden State Common Stock to FGH and Ford as contemplated by and in accordance
with the terms of paragraph (i) above, except that for purposes of calculating
the CFB Litigation Distribution Amount, the Litigation Recovery Retention
Amount shall be estimated as the excess of (x) the quotient obtained by
dividing (1) the product of the Glendale Litigation Value and the Glendale
Retention Factor, by (2) the Pro Forma Factor, over (y) the product of the
Glendale Litigation Value and the Glendale Retention Factor (the result of such
calculation being referred to herein as the "Estimated Litigation Recovery
Retention Amount") (provided that for purposes of calculating the Glendale
Litigation Value in this clause (iii), the Average Daily LTW Price shall be
calculated for 15 randomly-selected days during a 30 trading-day period ending
on the business day immediately prior to the date of issuance of the shares of
Golden State Common Stock). Within ten business days following the actual
receipt by GFB of a GFB Payment in the Glendale Litigation, the Estimated
Litigation Recovery Retention Amount shall be compared to the actual
Litigation Recovery Retention Amount calculated pursuant to this Section 1.6,
and the parties shall effect a settlement as
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follows:
(A) If the Estimated Litigation Recovery Retention
Amount exceeds the Litigation Recovery Retention Amount,
then Golden State shall issue to FGH and Ford additional
shares of Golden State Common Stock having an aggregate
value (valued at the Average Stock Price for 15 randomly
selected days during the 30 trading-day period ending on
the business day immediately prior to the date of issuance
of such shares) equal to the amount of such excess, with
80% of such shares being issued to FGH and 20% of such
shares being issued to Ford; or
(B) If the Estimated Litigation Recovery Retention
Amount is less than the Litigation Recovery Retention
Amount, then each of FGH and Ford shall contribute the
difference in cash and/or stock, at its election, in the
same manner and proportion as contemplated by paragraph
(ii) above.
(b) Guarini Litigation Recovery. Not later than
the tenth business day following the date on which CFB
shall have actually received a cash payment or other
property (a "Guarini Payment") pursuant to a final,
nonappealable judgment in, or final settlement of, the
Guarini Litigation (as defined below), Golden State shall
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issue to FGH and Ford an aggregate number of shares of Golden State Common
Stock (the "Guarini Recovery Shares Number") equal to the quotient
obtained by dividing (x) the aggregate amount of any such cash payment
plus the fair market value (as determined by the Board of Directors of
Golden State in good faith) of any such other property, less the sum of
(1) the aggregate expenses incurred previously and hereafter by CFB in
prosecuting the Guarini Litigation and obtaining the Guarini Payment and
(2) an amount equal to the net amount of the taxable portion of the
Guarini Payment after deducting the expenses in clause (1), multiplied by
the highest combined statutory rate of federal, state and local income
taxes in effect in the taxable year in which the Guarini Payment is
received, by (y) the Average Stock Price for 15 randomly selected days
during the 30 trading-day period ending on the business day immediately
prior to the date of issuance of the shares. The number of such shares to
be issued to FGH shall be 80% of the Guarini Recovery Shares Number, and
the number of such shares to be issued to Ford shall be 20% of the Guarini
Recovery Shares Number.
(c) Tax Benefits.
(i) For each taxable period that
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ends after the Effective Date (a "Taxable Period"), without duplication of any
amount payable to FGH or Ford pursuant to Section 1.6(a) or 1.6(b), Golden
State shall make a payment (a "Tax Payment") to each of FGH and Ford within
five (5) days after the filing of the federal income tax return for such
Taxable Period of any Taxpayer or the receipt of a refund under Section
1.6(c)(ii)(C)(2), an amount equal to 80%, in the case of FGH, and 20%, in the
case of Ford, of the Federal Net Tax Benefits of Parent Holdings, FNH, CFB or
any Subsidiary of CFB, if any, as and when realized by the Taxpayer in the
Taxable Period, as reviewed and attested to by KPMG Peat Marwick LLP. In the
event that Federal Net Tax Benefits is a negative number for any Taxable
Period, FGH and Ford shall pay Golden State 80% and 20%, respectively, of such
negative amount.
(ii) For purposes of this Agreement:
(A) With respect to Parent Holdings, FNH, CFB or any
subsidiary of CFB, the "Tax Benefits" shall be the sum of
(1) the excess (if any) of "deductible temporary
differences" over "taxable temporary differences" as those
terms are defined in Statement of Financial Accounting
Standards No. 109 ("SFAS 109") (including, without
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limitation, net operating loss, capital loss, credit carryovers, including
alternative minimum tax credit, and other carryovers but not including any tax
benefits taken into account in determining the aggregate amount of payments to
the holders of the CALGZs and CALGLs immediately after the Effective Date) not
including the amount of any taxable temporary difference attributable to the
Goodwill Litigation (but taking into account the deconsolidation of Parent
Holdings and FNH from the Mafco Holdings Inc. group and the ownership change
that will occur with respect to Parent Holdings and FNH under Section 382 of
the Code as a result of the Mergers), as reviewed and attested to by KPMG Peat
Marwick LLP; provided, however, such amount shall be adjusted for any final
determination of tax liability or tax attributes for taxable periods ending on
or before the date of the Effective Time; provided further, however, that such
deductible temporary differences and taxable temporary differences shall not
be adjusted for any purchase accounting adjustments as a result of the
transactions contemplated by this Agreement, and (2) any federal income tax
benefit (other than tax benefits taken into account in determining the
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aggregate amount of payments to the holders of the
CALGZs and CALGLs) actually realized by the Taxpayer in any
Taxable Period by reason of the treatment as interest under
Section 483 of the Code (or any successor provision
thereto) of any Tax Payment, payment of the Goodwill
Recovery Shares Number or payment of the Guarini Recovery
Shares Number or any other payment under Section 1.6
hereof, or any increase in Tax Payment, payment of the
Goodwill Recovery Shares Number or payment of the Guarini
Recovery Shares Number or any other payment under Section
1.6 hereof.
(B) "Taxpayer" shall mean:
(1) after the Effective Date the affiliated
group of corporations within the meaning of Section 1504
of the Code of which Golden State or its successor is
the common parent and Parent Holdings, FNH, CFB or their
successors are members, or
(2) after the Effective Date each of Golden State,
Parent Holdings, FNH, New FNH, CFB or any successor.
(C) The "Federal Net Tax Benefits" shall be equal to
the aggregate of:
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(1) the excess, if any, of (x) the federal income tax
liability for the Taxable Period (calculated with all
carryovers and carrybacks to the Taxable Period that would
have been allowable) which would have been incurred by the
Taxpayer if the Tax Benefits had not been deducted,
credited or used to offset income or tax liability in the
Taxable Period, over (y) the federal income tax liability
for the Taxable Period (calculated with all available
carryovers and carrybacks to the Taxable Period) actually
incurred by the Taxpayer (for purposes of determining the
use of items of any deductible temporary differences and
taxable temporary differences for purposes of (C)(1)(x)
above, such items will be deemed deductible or taxable to
the extent of the amount of such items at the Effective
Date multiplied by a fraction the numerator of which is the
actual use of the net operating loss carryover for any
Taxable Period and the denominator of which is the total
net operating loss carryover immediately after the
Effective Date), plus
(2) any federal income tax refunds with Applicable
Interest (including refunds
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or interest with respect to payments in lieu of
federal income taxes under the Tax Sharing Agreement (as
defined in Section 6.14)) of Parent Holdings, FNH, CFB, any
subsidiary of CFB or any predecessor of any of them for any
taxable period ending on or before the Effective Date that
have not been reflected on the books of Parent Holdings,
FNH, CFB or any Subsidiary of CFB as of the Effective Date,
minus
(3) any federal income tax deficiencies with
Applicable Interest (including any tax sharing payment
obligations or interest with respect to payments in lieu of
federal income taxes under the Tax Sharing Agreement (as
defined in Section 6.14)), of Parent Holdings, FNH, CFB,
any subsidiary of CFB or any predecessor of any of them for
any taxable period ending on or before the Effective Date
that have not been reflected on the books of Parent
Holdings, FNH, CFB or any Subsidiary of CFB as of the
Effective Date.
(iii) All Tax Payments shall be made in shares of Golden State Common
Stock valued at the daily volume weighted average price per share of Golden
State Common Stock for the Taxable Period except that in
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the case of a further Tax Payment pursuant to paragraph (iv), payment shall be
made in shares of Golden State Common Stock valued at the daily volume weighted
average price per share of Golden State Common Stock for 15 randomly selected
days during the 30 trading-day period ending on the date immediately prior to
the date of such Tax Payment; provided, however, that no Tax Payment need be
made in Golden State Common Stock to the extent that the aggregate Tax
Payments including any adjustment pursuant to paragraph (iv) below (provided,
however, that for this purpose only Federal Net Tax Benefits shall not include
any Tax Benefits used to offset any recovery attributable to the Goodwill
Litigation), exceed $100 million times the number of years from the year of
the Closing until the year of such Tax Payment ("Limitation"). The amount of
any Tax Payment that exceeds the Limitation shall carry forward and become a
Tax Payment in the succeeding year. Notwithstanding the foregoing, any return
of Tax Payment pursuant to paragraph (iv) below shall be made in cash except
that any return of Tax Payment made within six months of a Tax Payment shall
be made in shares of Golden State Common Stock valued at the value of such
stock for purposes of such Tax Payment. Any payment by FGH or Ford pursuant
to the final sentence of Section 1.6(c)(i) shall be made in cash.
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(iv) If for any reason there is any adjustment to Tax Benefits for any
Taxable Period that is reviewed and attested to by KPMG Peat Marwick LLP,
Federal Net Tax Benefits shall be recalculated and either a further Tax Payment
(in the case of an increase in Federal Net Tax Benefit) or a return of Tax
Payment (in the case of a decrease in Federal Net Tax Benefit) shall be made by
Golden State or by FGH and Ford, as the case may be, to the other party, in
accordance with paragraph (iii) above, within five (5) days of the filing of a
federal income tax return, claim for refund or final assessment or other event
finally fixing such adjustment.
(v) At any time following the Closing, if Golden State incurs any
federal or state tax liability arising out of any adjustment or adjustments
(each, a "382 Adjustment Event") to the limitation on net operating losses and
other attributes or net unrealized built-in losses of GFB and its Subsidiaries,
as defined in Section 382 of the Code, resulting from a change of ownership of
GFB and its Subsidiaries in 1993, as described in the July 2, 1993 prospectus
with respect to the Plan of Reorganization of Glenfed, Inc. and GFB, then
Golden State shall issue to FGH and Ford an aggregate amount of shares of
Golden State Common Stock equal to
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the quotient obtained by dividing (A) the product of (x) one minus the Pro
Forma Factor times (y) the increase in federal and state tax liability plus
interest and penalties arising thereon on account of any 382 Adjustment Event
(such amount in this clause (y), the "382 Adjustment Amount"), by (B) the
Average Stock Price for 15 randomly selected days during the 30 trading-day
period immediately preceding the date of issuance of such shares (such
quotient, the "382 Adjustment Number"). If Golden State suffers any increase in
federal or state tax liability arising out of a 382 Adjustment Event which
occurs after the date of this Agreement and prior to the Effective Date, then
Golden State shall issue to FGH and Ford on the Effective Date, in addition to
the shares issuable pursuant to Section 1.3, a number of shares of Golden State
Common Stock equal to the 382 Adjustment Number with respect to such 382
Adjustment Event. In all cases under this subsection (v), the number of shares
to be issued to FGH shall be 80% of the 382 Adjustment Number, and the number
of such shares to be issued to Ford shall be 20% of the 382 Adjustment Number.
"Applicable Interest" means (A) for federal income tax refunds, the
interest received that has not been reflected on the books of Parent Holdings,
FNB, CFB,
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or any Subsidiary of CFB as of the Effective Date, less the product of such
excess interest times the highest combined statutory rates of federal, state,
and local income taxes in effect during the tax year in which the interest is
received, or (B) for federal income tax deficiencies, the interest paid for any
federal income tax that has not been reflected on the books of Parent Holdings,
FNB, CFB, or any Subsidiary of CFB as of the Effective Date, less the product
of such excess interest times the highest combined statutory rates of federal,
state, and local income taxes in effect during the tax year in which the
interest is paid.
(d) Definitions. For purposes of this Section 1.6, the following terms
have the meanings indicated:
"CFB Cash Payment" means the aggregate amount of the cash payment (or
the cash resulting from the monetization of any non-cash payment) actually
received by CFB in respect of a final, non-appealable judgment in or final
settlement of the Goodwill Litigation.
"Net Cash Payment" means (A) the CFB Cash Payment minus (B) the sum of
the following: (i) the aggregate expenses incurred previously and hereafter by
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CFB in prosecuting the Goodwill Litigation and obtaining such CFB Cash Payment,
(ii) the expenses incurred by CFB in connection with the creation, issuance and
trading of the CALGZs and the CALGLs, including, without limitation, legal and
accounting fees and the fees and expenses of the interest agent, (iii) an
amount equal to the taxable portion of the net CFB Cash Payment (the taxable
portion of the CFB Cash Payment less the expenses described in the preceding
clauses (i) and (ii)) multiplied by the highest combined statutory rate of
federal, state and local income taxes in effect in the taxable year in which
the CFB Cash Payment is received, (iv) the aggregate amount of the payments due
to the holders of the CALGZs, and (v) the aggregate amount of the payments due
to the holders of the CALGLs.
"CALGZs" means the Contingent Litigation Recovery Participation
Interests of CFB.
"CALGLs" means the Secondary Contingent Litigation Recovery
Participation Interests of CFB.
"CFB Litigation Distribution Amount" means (i) the sum of (A) the
amount of the Net Cash Payment and (B) the CFB Litigation Tax Benefits, less
(ii) the sum of (A) the Litigation Recovery Retention Amount and (B) the
Interest Factor.
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"CFB Litigation Tax Benefits" means the tax benefits (other than tax
benefits taken into account in determining the aggregate amount of payments to
the holders of the CALGZs and the CALGLs), if any, actually realized by the
Taxpayer for a Taxable Period as a result of tax items (including items of loss
or deduction and recovery of basis but not including any exclusion from income)
derived from the receipt or paying over of the proceeds of the Goodwill
Litigation, including from the basis (if any) of the property that is the
subject of the Goodwill Litigation that are not reflected on the books of
Parent Holdings, FNH, CFB or any Subsidiary of CFB as of the Effective Date,
measured by the excess of the federal income tax liability that would have
been incurred by the Taxpayer for the Taxable Period without such items over
the federal income tax liability actually incurred by the Taxpayer for the
Taxable Period.
"Glendale Litigation Tax Benefits" means
the tax benefits, if any, actually realized by the Taxpayer for any Taxable
Period as a result of tax items (including items of loss or deduction and
recovery of basis) derived from the receipt or paying over of the proceeds of
the Glendale Litigation, including from the basis (if any) of the property that
is the subject of the
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Glendale Litigation that are not reflected on the books of Golden State or any
Subsidiary of Golden State as of the Effective Date or from the permanent
exclusion from income of the receipt of any payment of proceeds from the
Glendale Litigation, measured by the excess of the federal income tax
liability that would have been incurred by the Taxpayer for the Taxable Period
without such items over the federal income tax liability actually incurred by
the Taxpayer for such Taxable Period.
"Litigation Recovery Retention Amount" means the sum of (1) (x) the
quotient obtained by dividing the Glendale Litigation Retention Amount by the
Pro Forma Factor, less (y) the Glendale Litigation Retention Amount and (2) the
Glendale Litigation Tax Benefits.
"Glendale Litigation Retention Amount" means an amount equal to the
Glendale Retention Factor multiplied by the amount obtained from the following
equation: (a) the aggregate amount (the "GFB Payment") of any cash payment and
the fair market value (as determined pursuant to the Management Agreement) of
any property actually received by GFB pursuant to a final, nonappealable
judgment in or final settlement of the Glendale Litigation (including any
post-judgment interest actually received by GFB or a successor thereto on any
27
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such payment), minus (b) the sum of the following: (i) the aggregate expenses
incurred previously and hereafter by GFB or its successor in prosecuting the
Glendale Litigation and obtaining the GFB Payment, (ii) the aggregate expenses
incurred by Golden State or its successor in connection with the creation,
issuance and trading of the LTWs, including, without limitation, legal,
financial advisory and accounting fees and the fees and expenses of the warrant
agent; and (iii) an amount equal to the net GFB Payment (the GFB Payment less
the expenses described in the preceding clauses (i) and (ii)) multiplied by the
highest, combined statutory rate of federal, state and local income taxes in
effect during the tax year in which the full GFB Payment is received.
"Interest Factor" means an amount equal to
the interest deemed to be accrued on the Litigation Recovery Retention Amount,
at a rate of 10.0% per annum, compounded semiannually, from the date on which
GFB actually receives the GFB Payment (or if the GFB Payment is received in
installments, the final installment of the GFB Payment) to and including the
date on which CFB actually receives the full amount of the CFB Cash Payment.
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"Goodwill Litigation" means California Federal Bank v. United States,
Civil Action No. 92-138C, filed on February 28, 1992, in the United States
Court of Federal Claims.
"Glendale Litigation" means the case against the United States in the
Claims Court captioned Glendale Federal Bank, F.S.B. v. United States, No. 90-
772C, filed on August 15, 1990.
"Guarini Litigation" means the case against the United States in the
Claims Court captioned First Nationwide Bank, et al., v. United States, Civil
Action No. 96-590C, filed on September 20, 1996.
(d) Netting of Obligations; Expenses; Limit on Payments.
(i) Notwithstanding anything to the contrary in Sections 1.6(a)-(d)
and subject to the following provisions of this Section 1.6(e), whenever FGH
and Ford are required to pay an amount to Golden State under this Section 1.6,
such amount (expressed as the number of shares of Golden State Common Stock
required assuming FGH and Ford had elected to tender payment in such form
(regardless of whether Ford and FGH had the right to make such an election))
shall be limited to the
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number of shares of Golden State Common Stock previously issued to FGH and Ford
under this Section 1.6 (the "Section 1.6 Share Amount"). The Section 1.6 Share
Amount shall be adjusted upwards from time to time to reflect the issuance of
additional shares to FGH and Ford under this Section 1.6 and downwards, but not
below zero, to reflect any amount paid or payable by FGH and Ford (expressed
as the number of shares of Golden State Common Stock required assuming FGH and
Ford had elected to tender payment in such form (regardless of whether Ford and
FGH had the right to make such an election)) under this Section 1.6. If, but
for the immediately preceding sentence, any payment to Golden State by FGH and
Ford under Section 1.6 would result in a Section 1.6 Share Amount that is less
than zero, such negative number (expressed as a positive number and converted
to a dollar amount based on the Average Stock Price for 15 randomly selected
days during the 30 trading-day period ending on the date such payment is due)
shall be added to the balance of a notional account (the "Shortfall Account").
The balance of the Shortfall Account shall be $0.00 on the Effective Date, and
any positive balance in the Shortfall Account shall bear interest, compounded
semiannually, at the rate contemplated in the definition of
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"Interest Factor" from the date such balance is established until there is an
offsetting debit against such balance as set forth in Section 1.6(e)(ii).
(ii) At any time that Golden State would otherwise be obligated to
issue shares of Golden State Common Stock to FGH and Ford pursuant to Sections
1.6(a), (b) or (c), the CFB Litigation Distribution Amount, the Guarini Payment
or the Tax Payment, as the case may be, shall be offset by the balance of the
Shortfall Account as of such time for purposes of determining the number of
shares of Golden State Common Stock to be issued. If, as a result of such
offset, the number of shares of Golden State Common Stock to be issued to FGH
and Ford would be zero or less, no such shares shall be issued; in all other
cases the number of such shares to be issued shall be calculated as set forth
in Section 1.6(a), (b) or (c), as the case may be, after application of such
offset. In either case, the balance of the Shortfall Account shall be reduced,
but not below $0.00, by the amount of such offset.
(iii) All computations of the Section 1.6 Share Amount and the balance of the
Shortfall Account from time to time hereunder shall be performed by the
parties hereto and reviewed and attested by KPMG Peat
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Marwick LLP, and the parties hereto agree to cooperate therewith in such
connection (it being understood that this paragraph (iii) shall not require
review and attes tation by KPMG Peat Marwick LLP of any calculations made
pursuant to Sections 1.6(a), (b) or (c) which would not otherwise be required
pursuant to the express provisions of Sections 1.6(a), (b) and (c)).
(iv) Notwithstanding anything to the contrary contained herein, for
all purposes under this Section 1.6, (a) any payments required to be made to
FGH and Ford pursuant to this Section 1.6, and the amount of the Glendale
Litigation Tax Benefits and the CFB Litigation Tax Benefits, shall be
calculated net of all third party out-of-pocket expenses incurred by Golden
State or Parent Holdings or any of their respective Subsidiaries in connection
with the event or recovery giving rise to such payment or its determination
((including, without limitation, all attorneys' fees incurred in any
proceedings or discussions with any tax authority, but excluding any allocation
of general management overhead or similar internal expenses) and (b) any
Section 382 Amount calculated pursuant to Section 1.6(c)(v) shall include
(and shall be increased by) the aggregate amount of all third party
out-of-pocket expenses incurred by Golden State or
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Parent Holdings or any of their respective Subsidiaries, as the case may be, in
connection with the determination of such amounts (including, without
limitation, all attorneys' fees incurred in any proceedings or discussions
with any tax authority, but excluding any allocation of general management
overhead or similar internal expenses). All third party out-of-pocket expenses
referred to in this paragraph (iv) shall be computed on a tax-effected basis
(taking into account any tax benefits actually realized as a result of the
payment thereof as attested to by KPMG Peat Marwick LLP).
(v) Notwithstanding anything to the contrary in this Agreement, the
aggregate amount of the value of the shares of Golden State Common Stock (based
on the Average Stock Price calculated for the purpose of issuing such shares in
accordance with the applicable subsection of this Section 1.6) issued to Ford
and FGH pursuant to this Section 1.6 (net of the value of any payments, in cash
or stock, made by Ford and FGH to Golden State pursuant to this Section 1.6)
shall in no event exceed the aggregate value of the shares of Golden State
Common Stock issued to FGH and Ford pursuant to Section 1.3 (valued at the
Average Daily Price).
(vi) Notwithstanding any provision
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of this Section 1.6 to the contrary, in the event that there is a business
combination or similar transaction involving Golden State as a result of which
Golden State Common Stock is no longer publicly traded, all payments due any
party under this Section 1.6 after the date of such transaction (the
"Determination Date") shall be payable in cash and not in shares of Golden
State Common Stock; provided, however, that, solely for the purposes of
determining the Section 1.6 Share Amount and the Shortfall Account from time to
time, such subsequent payments shall be deemed made in shares of Golden State
Common Stock, as though there continued to be a public market in such shares,
and the number of such shares represented by any such payment shall be
determined using a valuation per share equal to the Notional Market Value. The
"Notional Market Value" as of any date shall equal the Average Stock Price of
Golden State Common Stock for 15 randomly selected days during the 30
trading-day period ending on the Determination Date, grown during the period
from the Determination Date to such date at the rate of interest (compounded
semiannually) contemplated by the definition of "Interest Factor."
(vii) The parties hereto may mutually agree to substitute another
nationally-recognized
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independent accounting firm in place of KPMG Peat Marwick LLP for all purposes
under this Section 1.6, and from and after such substitution, all references
herein to KPMG Peat Marwick LLP shall be deemed to be references to such other
accounting firm.
(f) Each party hereto agrees to cooperate in good faith with the other
parties to this Agreement, and to take such further actions as are reasonably
necessary, to carry out the purpose and intent of and to effect the
transactions contemplated by this Section 1.6.
ARTICLE II
DISCLOSURE SCHEDULES; STANDARDS
FOR REPRESENTATIONS AND WARRANTIES
2.1. Disclosure Schedules. Prior to the execution and delivery of
this Agreement, Golden State has delivered to Parent Holdings, and Parent
Holdings has delivered to Golden State, a schedule (in the case of Golden
State, the "Golden State Disclosure Schedule," and in the case of Parent
Holdings, the "Parent Holdings Disclosure Schedule") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision hereof
or as an exception to one
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or more of such party's representations or warranties contained in Article III,
in the case of Golden State, or Article IV, in the case of Parent Holdings, or
to one or more of such party's covenants contained in Article V; provided,
however, that notwithstanding anything in this Agreement to the contrary (a) no
such item is required to be set forth in the Disclosure Schedule as an
exception to a representation or warranty if its absence would not result in
the related representation or warranty being deemed untrue or incorrect under
the standard established by Section 2.2, and (b) the mere inclusion of an item
in a Disclosure Schedule as an exception to a representation or warranty shall
not be deemed an admission by a party that such item represents a material
exception or material fact, event or circumstance or that such item has had or
would have a Material Adverse Effect (as defined herein) with respect to
either Golden State or Parent Holdings, respectively.
2.2. Standards. (a) No representation or warranty of Golden State
contained in Article III or of Parent Holdings contained in Article IV shall be
deemed untrue or incorrect for any purpose under this Agreement, and no party
hereto shall be deemed to have breached a representation or warranty for any
purpose under this
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Agreement, in any case as a consequence of the existence or absence of any
fact, circumstance or event unless such fact, circumstance or event,
individually or when taken together with all other facts, circumstances or
events inconsistent with any representations or warranties contained in Article
III, in the case of Golden State, or Article IV, in the case of Parent
Holdings, has had a Material Adverse Effect with respect to Golden State or
Parent Holdings, respectively (but disregarding, for purposes of applying this
test, any materiality or "Material Adverse Effect" exceptions or qualifiers
contained in any individual representation or warranty).
(b) As used in this Agreement, the term
"Material Adverse Effect" means, with respect to Parent Holdings or Golden
State, as the case may be, a material adverse effect on (i) the business,
results of operations or financial condition of such party and its Subsidiaries
(as defined below) taken as a whole, other than any such effect attributable to
or resulting from (w) any change in banking or similar laws, rules or
regulations of general applicability or interpretations thereof by courts or
governmental authorities, (x) any change in GAAP (as defined herein) or
regulatory accounting principles applicable to banks, thrifts or their holding
compa-
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nies generally, (y) any action or omission of Parent Holdings or Golden State
or any Subsidiary of either of them taken with the prior written consent of the
other party hereto, or (z) any expenses incurred by such party in connection
with this Agreement or the transactions contemplated hereby, or (ii) the
ability of such party and its Subsidiaries to consummate the transactions
contemplated hereby. As used in this Agreement, the word "Subsidiary" when used
with respect to any party means any corporation, partnership or other
organization, whether incorporated or unincorporated, which is consolidated
with such party for financial reporting purposes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GOLDEN STATE
Subject to Article II, Golden State hereby represents and warrants to
Parent Holdings and FNH as follows:
3.1. Corporate Organization. (a) Golden State is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Golden State has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is now
being
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conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. Golden State is duly registered as a
unitary savings and loan holding company under the Home Owners' Loan Act of
1933, as amended (the "HOLA"). The Certificate of Incorporation and Bylaws of
Golden State, copies of which have previously been made available to Parent
Holdings, are true, complete and correct copies of such documents as in effect
as of the date of this Agreement.
(b) As of the Effective Time, Merger Sub will be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. GFB is a stock savings bank duly organized, validly existing and in
good standing under the laws of the United States of America. The deposit
accounts of GFB are insured by the Federal Deposit Insurance Corporation (the
"FDIC") through the Savings Association Insurance Fund (the "SAIF") to the
fullest extent permitted by law, and all premiums and assessments required to
be paid in connection therewith have been paid when due. Each of Golden State's
other Subsidiaries is a corpora-
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tion duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization. Each of Golden State's
Subsidiaries has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being conducted
and is duly licensed or qualified to do business in each jurisdiction in which
the nature of the business conducted by it or the character or the location of
the properties and assets owned or leased by it makes such licensing or
qualification necessary. The articles of incorporation, bylaws and similar
governing documents of each Subsidiary of Golden State, copies of which have
previously been made available to Parent Holdings, are true, complete and
correct copies of such documents as in effect as of the date of this Agreement.
(c) The minute books of Golden State and each of its Subsidiaries
contain true and correct records of all meetings and other corporate actions
held or taken since June 30, 1995 of their respective stockholders and Boards
of Directors (including committees of their respective Boards of Directors).
3.2. Capitalization. (a) As of the date of this Agreement, the
authorized capital stock of Golden
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State consists of 100,000,000 shares of Golden State Common Stock and
50,000,000 shares of preferred stock, par value $1.00 per share (the "Golden
State Preferred Stock"). At the Effective Time, the authorized capital stock of
Golden State will consist of 250,000,000 shares of Golden State Common Stock
and 50,000,000 shares of Golden State Preferred Stock. As of January 31, 1998,
there are (x) 51,085,174 shares of Golden State Common Stock outstanding and no
shares of Golden State Common Stock held in the Golden State treasury, (y) no
shares of Golden State Common Stock reserved for issuance upon exercise of
outstanding stock options or otherwise except for (i) 5,310,680 shares of
Golden State Common Stock reserved for issuance pursuant to the Golden State
Option Plans (as defined in Section 6.5) and described in Section 3.2(a) of
the Golden State Disclosure Schedule, (ii) 7,800,000 shares of Golden State
Common Stock reserved for issuance in connection with the merger of CENFED
Financial Corporation with and into a wholly owned Subsidiary of Golden State
(the "CENFED Merger") pursuant to the Agreement and Plan of Merger (the "CENFED
Merger Agreement"), dated as of August 17, 1997, as amended, by and among
Golden State, Golden State Financial Corporation ("GSFC") and CENFED, (iii)
3,500,000 to 7,500,000
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shares of Golden State Common Stock, based on a floating Exchange Ratio,
reserved for issuance in connection with the merger (the "Redfed Merger") of
RedFed Bancorp Inc. ("Redfed") with and into a wholly owned Subsidiary of
Golden State pursuant to the Agreement and Plan of Merger (the "Redfed Merger
Agreement"), dated as of November 30, 1997, by and between Golden State and
Redfed, (iv) 1,522 shares of Golden State Common Stock reserved for issuance
upon the exercise of common stock purchase warrants (the "Five-Year Warrants")
issued pursuant to that certain Warrant Agreement, dated as of February 23,
1993, between GFB and Chemical Trust Company of California, as Warrant Agent,
(v) 10,836,417 shares of Golden State Common Stock reserved for issuance upon
exercise of common stock purchase warrants (the "Seven-Year Warrants") issued
pursuant to that certain Warrant Agreement, dated as of August 15, 1993,
between GFB and Chemical Trust Company of California, as Warrant Agent, (vi)
11,200,00 shares of Golden State Common Stock reserved for issuance upon
conversion of shares of Series A Preferred Stock, and (vii) 10,165,950 shares
of Golden State Common Stock reserved for issuance upon exercise of the option
issued by Golden State to Parent Holdings pursuant to the Stock Option
Agreement, dated February 4, 1998, between Parent
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Holdings and Golden State (the "Option Agreement") and (z) 4,621,982 shares of
Golden State Preferred Stock designated "Noncumulative Convertible Preferred
Stock, Series A" (the "Series A Preferred Stock") issued and outstanding. All
of the issued and outstanding shares of Golden State Common Stock and Golden
State Preferred Stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. The shares of Golden State Common
Stock to be issued pursuant to this Agreement will be duly authorized and
validly issued and, when issued, all such shares will be fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except as referred to above or reflected in
Section 3.2(a) of the Golden State Disclosure Schedule, Golden State does not
have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of Golden State Common Stock or Golden State Preferred
Stock or any other equity security of Golden State or any securities
representing the right to purchase or otherwise receive any shares of Golden
State Common Stock or Golden
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State Preferred Stock or any other equity security of Golden State. The names
of the optionees, the date of each option to purchase Golden State Common Stock
granted, the number of shares subject to each such option, the expiration date
of each such option, and the price at which each such option may be exercised
under the Golden State Option Plans, are set forth in Section 3.2(a) of Golden
State Disclosure Schedule.
(b) Section 3.2(b) of the Golden State Disclosure Schedule sets forth
a true and correct list of all of the Subsidiaries of Golden State. Except as
set forth in Section 3.2(b) of the Golden State Disclosure Schedule, Golden
State owns, directly or indirectly, all of the issued and outstanding shares of
the capital stock of each of such Subsidiaries, free and clear of all liens,
charges, encumbrances and security interests whatsoever, and all of such shares
are duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof. No Subsidiary of Golden State has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of capital
stock or any other equity
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security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other equity
security of such Subsidiary.
3.3. Authority; No Violation. (a) Each of Golden State and Merger Sub
has full corporate power and authority to execute and deliver this Agreement
(and, in the case of Golden State, the Management Agreement and the Option
Agreement (this Agreement, the Management Agreement and the Option Agreement,
collectively, the "Golden State Documents")) and to consummate the transactions
contemplated hereby (and, in the case of Golden State, thereby). The execution
and delivery by Merger Sub of this Agreement and by Golden State of each of the
Golden State Documents, and the consummation of the transactions contemplated
hereby and thereby have been duly and validly approved by the respective Boards
of Directors of Merger Sub and Golden State. The Board of Directors of Golden
State has directed that this Agreement and the Parent Plan of Merger be
submitted to Golden State's stockholders for approval at a meeting of such
stockholders and, except for the approval and adoption of this Agreement and
the Parent Plan of Merger by the requisite vote of Golden State's stockholders,
no other
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corporate proceedings on the part of either Golden State or Merger Sub are
necessary to approve the Golden State Documents and to consummate the
transactions contemplated thereby. Each of the Golden State Documents has been
duly and validly executed and delivered by Golden State and, in the case of
this Agreement, will be by Merger Sub prior to the Effective Time, and
(assuming due authorization, execution and delivery by each of Parent Holdings
and FNH) this Agreement constitutes or, in the case of Merger Sub, will at the
Effective Time constitute a valid and binding obligation of each of Golden
State and Merger Sub, enforceable against Golden State and Merger Sub in
accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(b) GFB has full corporate power and authority to execute and deliver
the Bank Merger Agreement and to consummate the transactions contemplated
thereby. The execution and delivery of the Bank Merger Agreement and the
consummation of the transactions contemplated thereby will be duly and validly
approved by the Board of Directors of GFB. Upon the due and valid
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approval of the Bank Merger Agreement by Golden State or GSFC, as applicable,
as the sole stockholder of GFB and by the Board of Directors of GFB, no other
corporate proceedings on the part of GFB will be necessary to consummate the
transactions contemplated thereby. The Bank Merger Agreement, upon execution
and delivery by GFB, will be duly and validly executed and delivered by GFB and
will (assuming due authorization, execution and delivery by CFB) constitute a
valid and binding obligation of GFB, enforceable against GFB in accordance
with its terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.
(c) Except as set forth in Section 3.3(c) of the Golden State
Disclosure Schedule, neither the execution and delivery of the Golden State
Documents by Golden State and Merger Sub or the Bank Merger Agreement by GFB,
nor the consummation by Golden State, Merger Sub or GFB, as applicable, of the
transactions contemplated hereby or thereby, nor compliance by Golden State,
Merger Sub or GFB, as applicable, with any of the terms or provisions hereof or
thereof, will (i) violate any provi-
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sion of the Certificate of Incorporation or Bylaws of Golden State or the
certificate of incorporation, bylaws or similar governing documents of any of
its Subsidiaries, or (ii) assuming that the consents and approvals referred to
in Section 3.4 hereof are duly obtained, (x) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Golden State or any of its Subsidiaries, or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of Golden State or
any of its Subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which Golden State or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected.
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3.4. Consents and Approvals. Except for (a) the filing of applications
and notices, as applicable, with the Office of Thrift Supervision (the "OTS")
under the HOLA and the Bank Merger Act, and approval of such applications and
notices, (b) the filing with the Securities and Exchange Commission (the
"SEC") of a proxy statement in definitive form relating to the meeting of
Golden State's stockholders to be held as contemplated by this Agreement (the
"Proxy Statement"), (c) the approval and adoption of this Agreement and the
Parent Plan of Merger by the requisite votes of the stockholders of Golden
State, (d) approval of the listing of Golden State Common Stock to be issued
pursuant to this Agreement on the NYSE, (e) the filing of the Certificates of
Merger with the Secretary pursuant to the DGCL, (f) the filings required by the
Bank Merger Agreement, and (g) such filings, authorizations or approvals as
may be set forth in Section 3.4 of the Golden State Disclosure Schedule, no
consents or approvals of or filings or registrations with any court,
administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with (1) the execution and delivery by Golden State of
the Golden State Documents and by Merger Sub of this Agreement, (2) the
consummation by Golden State and Merger
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Sub of the transactions contemplated thereby, (3) the execution and delivery by
GFB of the Bank Merger Agreement, and (4) the consummation by GFB of the
transactions contemplated thereby.
3.5. Reports. Golden State and each of its Subsidiaries have timely
filed all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
June 30, 1995 with (i) the OTS, (ii) the FDIC, (iii) any state banking
commissions or any other state regulatory authority (each a "State Regulator")
and (iv) any other self-regulatory organization ("SRO") (collectively with the
Board of Governors of the Federal Reserve System, the "Regulatory Agencies"),
and have paid all fees and assessments due and payable in connection therewith.
Except for normal examinations conducted by a Regulatory Agency in the regular
course of the business of Golden State and its Subsidiaries, and except as
set forth in Section 3.5 of the Golden State Disclosure Schedule, no
Regulatory Agency has initiated any proceeding or, to the knowledge of Golden
State, investigation into the business or operations of Golden State or any of
its Subsidiaries since June 30, 1995. There is no unre-
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solved violation, criticism, or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations of Golden State
its Subsidiaries.
3.6. Financial Statements. Golden State has previously made available
to Parent Holdings copies of (a) the consolidated statements of financial
condition of GFB and its Subsidiaries as of June 30 for the fiscal years 1996
and 1997, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the fiscal years 1995 through 1997,
inclusive, as reported in GFB's Annual Report on Form 10-K for the fiscal year
ended June 30, 1997 filed with the OTS under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in each case accompanied by the audit
report of KPMG Peat Marwick LLP, independent public accountants with respect to
GFB, and (b) the unaudited consolidated statements of financial condition of
Golden State and its Subsidiaries as of September 30, 1997 and the related
unaudited consolidated statements of operations and cash flows for the
three-month period then ended as reported in Golden State's Quarterly Report on
Form 10-Q for the period ended September 30, 1997 filed with the Securities and
Exchange Commission (the "SEC")
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under the Exchange Act. The June 30, 1997 consolidated statement of financial
condition of GFB (including the related notes, where applicable) fairly
presents the consolidated financial position of GFB and its Subsidiaries as of
the date thereof, and the other financial statements referred to in this
Section 3.6 (including the related notes, where applicable) fairly present, and
the financial statements to be filed by Golden State with the SEC after the
date hereof will fairly present (subject, in the case of the unaudited
statements, to recurring audit adjustments normal in nature and amount), the
results of the consolidated operations and consolidated financial position of
GFB and its Subsidiaries, and Golden State and its Subsidiaries, as the case
may be, for the respective fiscal periods or as of the respective dates therein
set forth; each of such statements (including the related notes, where
applicable) complies, and the financial statements to be filed by Golden State
with the SEC after the date hereof will comply, with applicable accounting
requirements and with the published rules and regulations of the OTS and the
SEC, as applicable, with respect thereto; and each of such statements
(including the related notes, where applicable) has been, and the financial
statements to be filed by Golden State
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with the SEC after the date hereof will be, prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved, except as indicated in the notes thereto or, in the case
of unaudited statements, as permitted by Form 10-Q. The books and records of
Golden State and its Subsidiaries have been, and are being, maintained in
accordance with GAAP and any other applicable legal and accounting
requirements.
3.7. Broker's Fees. Neither Golden State nor any Subsidiary of Golden
State nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker's fees, commissions
or finder's fees in connection with any of the transactions contemplated by the
Golden State Documents or the Bank Merger Agreement, except that Golden State
has engaged, and will pay a fee or commission to, Credit Suisse First Boston
Corporation ("CS First Boston") in accordance with the terms of a letter
agreement between CS First Boston and Golden State, a true and correct copy of
which has been previously made available by Golden State to Parent Holdings.
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3.8. Absence of Certain Changes or Events. (a) Except as may be set
forth in Section 3.8(a) of the Golden State Disclosure Schedule, or as
disclosed in any Golden State Report (as defined in Section 3.12) filed with
the SEC or the OTS prior to the date of this Agreement, since June 30, 1997,
(i) neither Golden State nor any of its Subsidiaries has incurred any
liability, except in the ordinary course of their business consistent with
their past practices, and (ii) no event has occurred which has caused, or is
reasonably likely to cause, individually or in the aggregate, a Material
Adverse Effect on Golden State.
(b) Except as set forth in Section 3.8(b) of the Golden State
Disclosure Schedule or as disclosed in any Golden State Report filed with the
SEC or the OTS prior to the date of this Agreement, since June 30, 1997, Golden
State and its Subsidiaries have carried on their respective businesses in the
ordinary course consistent with their past practices.
(c) Except as set forth in Section 3.8(c) of the Golden State
Disclosure Schedule, since December 31, 1997, neither Golden State nor any of
its Subsidiaries has (i) increased the wages, salaries, compensation, pension,
or other fringe benefits or perquisites payable
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to any executive officer, employee, or director from the amount thereof in
effect as of December 31, 1997 (which amounts have been previously made
available to Parent Holdings), granted any severance or termination pay,
entered into any contract to make or grant any severance or termination pay, or
paid any bonus, (ii) suffered any strike, work stoppage, slow-down, or other
labor disturbance, (iii) been a party to a collective bargaining agreement,
contract or other agreement or understanding with a labor union or
organization, or (iv) had any union organizing activities.
3.9. Legal Proceedings. (a) Except as set forth in Section 3.9 of the
Golden State Disclosure Schedule, neither Golden State nor any of its
Subsidiaries is a party to any, and there are no pending or, to Golden State's
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against Golden State or any of its Subsidiaries or challenging the validity or
propriety of the transactions contemplated by any of the Golden State Documents
or the Bank Merger Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon
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Golden State, any of its Subsidiaries or the assets of Golden State or any of
its Subsidiaries.
3.10. Taxes. (a) Except as set forth in Section 3.10 of the Golden
State Disclosure Schedule, each of Golden State and its Subsidiaries has or
will have prior to the Effective Time (i) duly and timely filed (including
applicable extensions granted without penalty) or there has been filed on its
behalf, all Tax Returns (as hereinafter defined) required to be filed at or
prior to the Effective Time, and such Tax Returns are true, correct and
complete, and (ii) paid (or there has been paid on its behalf) in full or made
provision in the financial statements of Golden State (in accordance with GAAP)
for all Taxes (as hereinafter defined) due or claimed to be due from it by any
taxing authority with respect to all periods ending on or before the Effective
Time. No deficiencies for any Taxes have been proposed, asserted, assessed or
threatened in writing against or with respect to Golden State or any of its
Subsidiaries which have not been finally resolved. Except as set forth in
Section 3.10 of the Golden State Disclosure Schedule, (i) there are no liens
for Taxes upon the assets of either Golden State or any of its Subsidiaries
except for statutory liens for current Taxes not yet due
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or liens for Taxes that are being contested in good faith, as to the fact or
the amount of liability, by appropriate proceedings and that have been reserved
against in accordance with GAAP, (ii) neither Golden State nor any of its
Subsidiaries has requested any extension of time within which to file any Tax
Returns in respect of any tax year which have not since been filed and no
request for waivers or extensions of the time to assess or collect any Taxes
are pending or outstanding, (iii) with respect to each taxable period of Golden
State and its Subsidiaries through and including December 31, 1992, the federal
and state income Tax Returns of Golden State and its Subsidiaries have been
audited by the Internal Revenue Service or appropriate state tax authorities
or the time for assessing and collecting Taxes with respect to such taxable
period has closed and such taxable period is not subject to review, (iv)
neither Golden State nor any of its Subsidiaries has filed or been included in
a combined, consolidated or unitary income Tax Return for any tax year that is
open for the purpose of assessing a deficiency other than one in which Golden
State, GFB or GLENFED, INC., the former parent of GFB, is the parent of the
group filing such Tax Return, (v) neither Golden State nor any of its
Subsidiaries is a
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party to, is bound by or has an obligation under, any Tax sharing agreement,
Tax indemnification agreement or similar contract or arrangement providing for
the allocation or sharing of Taxes (other than the allocation of federal income
taxes as provided by Treasury Regulation Section 1.1552-1(a)(1) under the
Code), (vi) neither Golden State nor any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code, (vii) no power of attorney
which is currently in force has been granted by or with respect to Golden State
or any Subsidiary thereof with respect to any matter relating to Taxes, and
(viii) no closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar provision of any state, local or foreign
law has been entered into by or with respect to Golden State or its
Subsidiaries.
(b) For the purposes of this Agreement, "Tax" or "Taxes" shall mean
all taxes, charges, fees, levies, penalties or other assessments imposed by any
United States federal, state, local or foreign taxing authority, including, but
not limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other taxes, including any interest,
penalties or additions attributable thereto.
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(c) For purposes of this Agreement, "Tax Return" shall mean any
return, report, information return or other document (including any related or
supporting information) with respect to Taxes.
3.11. Employees. (a) Section 3.11(a) of the Golden State Disclosure
Schedule sets forth a true and correct list of each deferred compensation plan,
incentive compensation plan, equity compensation plan, "welfare" plan, fund
or program (within the meaning of section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")); "pension" plan, fund or
program (within the meaning of section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to as of the date of this
Agreement (the "Plans") by Golden State, any of its Subsidiaries or by any
trade or business, whether or not incorporated (an "ERISA Affiliate"), all of
which together with Golden State would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, for the benefit of any employee or former
employee of Golden State, any Subsidiary of Golden State or any ERISA
Affiliate.
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(b) Golden State has heretofore made available to Parent Holdings true
and complete copies of each of the Plans and all related documents, including
but not limited to (i) the actuarial report for such Plan (if applicable) for
each of the last two years, and (ii) the most recent determination letter from
the Internal Revenue Service (if applicable) for such Plan.
(c) Except as set forth in Section 3.11(c) of the Golden State
Disclosure Schedule, (i) each of the Plans has been operated and administered
in accordance with its terms and applicable law, including but not limited to
ERISA and the Code, (ii) each of the Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code either (1) has received a favorable
determination letter from the IRS, or (2) is or will be the subject of an
application for a favorable determination letter, and the Company is not aware
of any circumstances likely to result in the revocation or denial of any such
favorable determination letter, (iii) with respect to each Plan which is
subject to Title IV of ERISA, the present value of accrued benefits under such
Plan, based upon the actuarial assumptions used for funding purposes in the
most recent actuarial report prepared by such Plan's actuary with respect to
such
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Plan, did not, as of its latest valuation date, exceed the then current
value of the assets of such Plan allocable to such accrued benefits, (iv) no
Plan provides welfare benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former employees
of Golden State, its Subsidiaries beyond their retirement or other termination
of service, other than coverage mandated by applicable law or benefits the full
cost of which is borne by the current or former employee (or his beneficiary),
(v) no liability under Title IV of ERISA has been incurred by Golden State, its
Subsidiaries or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a risk to Golden State, its Subsidiaries or an
ERISA Affiliate of incurring a material liability thereunder, (vi) no Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of
ERISA, (vii) all contributions or other amounts payable by Golden State, its
Subsidiaries or any ERISA Affiliate as of the Effective Time with respect to
each Plan in respect of current or prior plan years have been paid or accrued
in accordance with generally accepted accounting practices and Section 412 of
the Code, (viii) neither Golden State nor its Subsidiaries has engaged in
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a transaction in connection with which Golden State or its Subsidiaries could
reasonably be expected to be subject to either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section
4975 or 4976 of the Code, (ix) there are no pending, or, to the best knowledge
of Golden State, threatened or anticipated claims (other than routine claims
for benefits) by, on behalf of or against any of the Plans or any trusts
related thereto and (x) the consummation of the transactions contemplated by
this Agreement or the Bank Merger Agreement, either alone or in conjunction
with another event, including a termination of employment, will not (A)
entitle any current or former employee or officer of Golden State or any ERISA
Affiliate to severance pay, termination pay or any other payment or benefit,
except as expressly provided in this Agreement or (B) accelerate the time of
payment or vesting or increase the amount or value of compensation or benefits
due any such employee or officer.
3.12. SEC Reports. Golden State has previously made available (to the
extent filed prior to the date hereof) to Parent Holdings an accurate and
complete copy of each (a) final registration statement, prospectus, report,
schedule and definitive proxy statement
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filed since June 30, 1995 by GFB or Golden State with the OTS or the SEC, as
the case may be, pursuant to the Securities Act of 1933, as amended (the
"Securities Act") or the Exchange Act (the "Golden State Reports") and (b)
communication mailed by GFB or Golden State, as the case may be, to its
stockholders since June 30, 1995, and no such registration statement,
prospectus, report, schedule, proxy statement or communication contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances in which they were made, not misleading,
except that information as of a later date shall be deemed to modify
information as of an earlier date. Each of GFB and Golden State has timely
filed all Golden State Reports and other documents required to be filed by such
party under the Securities Act and the Exchange Act, and, as of their
respective dates, all Golden State Reports complied with the published rules
and regulations of the OTS and the SEC, as applicable, with respect thereto.
3.13. Golden State Information. The information relating to Golden
State and its Subsidiaries to be contained in the Proxy Statement, or in any
other document filed with any other regulatory agency in connection
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herewith, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circum stances in which they are made, not misleading. The Proxy Statement
(except for such portions thereof that relate only to Parent Holdings or any of
its Subsidiaries) will comply with the provisions of the Exchange Act and the
rules and regulations thereunder.
3.14. Compliance with Applicable Law. Golden State and each of its
Subsidiaries hold, and have at all times held, all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied with and are
not in default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to
Golden State or any of its Subsidiaries, and neither Golden State nor any of
its Subsidiaries knows of, or has received notice of, any violations of any of
the above.
3.15. Certain Contracts. (a) Except as set forth in Section 3.15(a) of
the Golden State Disclosure Schedule and except for this Agreement, the Stock
Option Agreement, the Bank Merger Agreement and the Management
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Agreement, neither Golden State nor any of its Subsidiaries is a party to or
bound by any contract, arrangement, commitment or understanding (whether
written or oral) (i) with respect to the employment of any directors, offi
cers, employees or consultants, (ii) which, upon the consummation of the
transactions contemplated by this Agreement or the Bank Merger Agreement, will
(either alone or upon the occurrence of any additional acts or events) result
in any payment or benefits (whether of severance pay or otherwise) becoming
due, or the acceleration or vesting of any rights to any payment or benefits,
from Golden State, GFB, the Surviving Bank or any of their respective
Subsidiaries to any director, officer or employee thereof, (iii) which is a
material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC)
to be performed after the date of this Agreement that has not been filed or
incorporated by reference in the Golden State Reports, (iv) which is a
consulting agreement (including data processing, software programming and
licensing contracts) not terminable on 60 days or less notice involving the
payment of more than $100,000 per annum, or (v) which materially restricts the
conduct of any line of business by Golden State or any of its Subsidiaries.
Each contract, arrangement, commitment
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or understanding of the type described in this Section 3.15(a), whether or not
set forth in Section 3.15(a) of the Golden State Disclosure Schedule, is
referred to herein as a "Golden State Contract". Golden State has previously
delivered or made available to Parent Holdings true and correct copies of each
Golden State Contract.
(b) Except as set forth in Section 3.15(b) of the Golden State
Disclosure Schedule, (i) each Golden State Contract is valid and binding and in
full force and effect, (ii) Golden State and each of its Subsidiaries has
performed all obligations required to be performed by it to date under each
Golden State Contract, (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a default on the part
of Golden State or any of its Subsidiaries under any Golden State Contract, and
(iv) no other party to any Golden State Contract is, to the knowledge of Golden
State, in default in any respect thereunder.
3.16. Agreements with Regulatory Agencies. Except as set forth in
Section 3.16 of the Golden State Disclosure Schedule, neither Golden State nor
any of its Subsidiaries is subject to any cease-and-desist or other order
issued by, or is a party to any written agreement,
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consent agreement or memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or is subject to any order or
directive by, or is a recipient of any extraordinary supervisory letter from,
or has adopted any board resolutions at the request of (each, whether or not
set forth on Section 3.16 of the Golden State Disclosure Schedule, a
"Regulatory Agreement"), any Regulatory Agency or other Governmental Entity
that restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor has
Golden State or any of its Subsidiaries been advised by any Regulatory Agency
or other Governmental Entity that it is considering issuing or requesting any
Regulatory Agreement.
3.17. State Takeover Laws; Charter Provision. The provisions of
Section 203 of the DGCL and Article Seventh of Golden State's Certificate of
Incorporation will not, assuming the accuracy of the representations contained
in Section 4.15 hereof, apply to this Agreement, the Bank Merger Agreement or
the Option Agreement or any of the transactions contemplated hereby or thereby.
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3.18. Environmental Matters. Except as set forth in Section 3.18 of
the Golden State Disclosure Schedule:
(a) Each of Golden State and its Subsidiaries, the Participation
Facilities and the Loan Properties (each as hereinafter defined) are, and have
been, in compliance with all applicable federal, state and local laws including
common law, regulations and ordinances and with all applicable decrees, orders
and contractual obligations relating to pollution or the discharge of, or
exposure to Hazardous Materials (as hereinafter defined) in the environment or
workplace ("Environmental Laws");
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of Golden State, threatened, before any Governmental Entity or other
forum in which Golden State, any of its Subsidiaries, any Participation
Facility or any Loan Property, has been or, with respect to threatened
proceedings, may be, named as a defendant (x) for alleged noncompliance
(including by any predecessor), with any Environmental Laws, or (y) relating to
the release, threatened release or exposure to any Hazardous Material whether
or not occurring at or on a site owned, leased or operated by Golden State or
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any of its Subsidiaries, any Participation Facility or any Loan Property;
(c) During the period of (x) Golden State's or any of its
Subsidiaries' ownership or operation of any of their respective current or
former properties, (y) Golden State's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z) to the
knowledge of Golden State, Golden State's or any of its Subsidiaries' holding
of a security interest in a Loan Property, there has been no release of
Hazardous Materials in, on, under or affecting any such property that has had
or would reasonably be expected to have, individually or in the aggregate with
such other events, a Material Adverse Effect on Golden State; and
(d) The following definitions apply for purposes of this Section 3.18:
(x) "Hazardous Materials" means any chemicals, pollutants, contaminants,
wastes, toxic substances, petroleum or other regulated substances or materials,
(y) "Loan Property" means any property in which Golden State or any of its
Subsidiaries holds a security interest, and, where required by the context,
said term means the owner or operator of such property; and (z) "Participation
Facility" means any facility in which Golden State or any of its Subsidiaries
partici-
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pates in the management and, where required by the context, said term means
the owner or operator of such property.
3.19. Derivative Transactions. Except as set forth in Section 3.19 of
the Golden State Disclosure Schedule, since June 30, 1997, neither Golden State
nor any of its Subsidiaries has engaged in transactions in or involving
forwards, futures, options on futures, swaps or other derivative instruments
except (i) as agent on the order and for the account of others, or (ii) as
principal for purposes of hedging interest rate risk on U.S. dollar-denominated
securities and other financial instruments. None of the counterparties to any
contract or agreement with respect to any such instrument is in default with
respect to such contract or agreement and no such contract or agreement, were
it to be a Loan (as defined below) held by Golden State or any of its
Subsidiaries, would be classified as "Other Loans Specially Mentioned",
"Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans" or words of similar
import. The financial position of Golden State and its Subsidiaries on a
consolidated basis under or with respect to each such instrument has been
reflected in the books and records of
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Golden State and such Subsidiaries in accordance with GAAP consistently
applied, and no open exposure of Golden State or any of its Subsidiaries with
respect to any such instrument (or with respect to multiple instruments with
respect to any single counterparty) exists as of the date hereof.
3.20. Opinion. Prior to the execution of this Agreement, Golden State
received an opinion from CS First Boston to the effect that, as of the date
thereof and based upon and subject to the matters set forth therein, the
consideration to be paid by Golden State pursuant to this Agreement is fair to
the stockholders of Golden State from a financial point of view. Such opinion
has not been amended or rescinded as of the date of this Agreement.
3.21. Approvals. As of the date of this Agreement, Golden State knows
of no reason why all regulatory approvals required for the consummation of the
transactions contemplated hereby should not be obtained.
3.22. Loan Portfolio. (a) Section 3.22 of the Golden State Disclosure
Schedule sets forth the aggregate principal amount of all written or oral loan
agreements, notes or borrowing arrangements (including, without limitation,
leases, credit enhancements, commit-
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ments, guarantees and interest-bearing assets) (collectively, "Loans"), other
than Loans the unpaid principal balance of which does not exceed $1,000,000,
under the terms of which the obligor is, as of December 31, 1997, over 90 days
delinquent in payment of principal or interest or in default of any other
provision and, except as disclosed in Section 3.22, neither Golden State nor
any of its Subsidiaries is a party to any Loan with any director, executive
officer or five percent or greater stockholder of Golden State or any of its
Subsidiaries, or to the knowledge of Golden State, any person, corporation or
enterprise controlling, controlled by or under common control with any of the
foregoing. Section 3.22 of the Golden State Disclosure Schedule sets forth as
of December 31, 1997 (i) all of the Loans in original principal amount in
excess of $1,000,000 of Golden State or any of its Subsidiaries that as of the
date of this Agreement are classified by Golden State as "Special Mention",
"Substandard", "Doubtful", "Loss", or words of similar import, together with
the principal amount of and accrued and unpaid interest on each such Loan and
the identity of the borrower thereunder, (ii) by category of Loan (i.e.,
commercial, consumer, etc.), all of the Loans of Golden State and its
Subsidiaries that as of the date
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of this Agreement are classified as such, together with the aggregate principal
amount of such Loans by category and (iii) each asset of Golden State that as
of the date of this Agreement is classified as "Other Real Estate Owned" and
the book value thereof.
(b) Each Loan in original principal amount in excess of $1,000,000 (i)
is evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been perfected and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
3.23. Reorganization. As of the date of this Agreement, Golden State
has no reason to believe that any of the Mergers or the Subsidiary Merger will
fail to qualify as a reorganization under Section 368(a) of the Code.
3.24. Material Interests of Certain Persons. Except as disclosed in
the Golden State Reports filed
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prior to the date of this Agreement, no officer or director of Golden State,
or any "associate" (as such term is officer or director, has any material
interest in any material contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of Golden State.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT HOLDINGS
Subject to Article II, Parent Holdings hereby represents and warrants
to Golden State and Merger Sub as follows:
4.1. Corporate Organization. (a) Parent Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Parent Holdings has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is
now being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
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such licensing or qualification necessary. Parent Holdings is duly registered
as a savings and loan holding company under the HOLA. The Third Restated
Certificate of Incorporation and the By-laws of Parent Holdings, copies of
which have previously been made available to Golden State, are true and correct
copies of such documents as in effect as of the date of this Agreement.
(b) FNH is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. CFB is a stock savings bank
duly organized, validly existing and in good standing under the laws of the
United States of America. The deposit accounts of CFB are insured by the FDIC
through the SAIF to the fullest extent permitted by law, and all premiums and
assessments required in connection therewith have been paid when due. Each of
Parent Holdings's other Subsidiaries is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation. Each
Subsidiary of Parent Holdings has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is
now being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character
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or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary. The articles of organization and
by-laws of CFB, copies of which have previously been made available to Golden
State, are true and correct copies of such documents as in effect as of the
date of this Agreement.
(c) The minute books of Parent Holdings and each of its Subsidiaries
contain true and correct records of all meetings and other corporate actions
held or taken since December 31, 1995 of their respective stockholders and
Boards of Directors (including committees of their respective Boards of
Directors).
4.2. Capitalization. (a) As of the date of this Agreement, (i) the
authorized capital stock of Parent Holdings consists of 1,000 shares of Parent
Holdings Common Stock and no shares of preferred stock and (ii) the authorized
capital stock of FNH consists of 800 shares of FNH Class A Common Stock, 200
shares of FNH Class B Common Stock and 24,000 shares of preferred stock, par
value $1.00 per share ("FNH Preferred Stock"), of which 10,000 shares have been
designated as Series A Cumulative Perpetual Preferred Stock (the "FNH Series A
Preferred Stock"), and 2,000 shares have been designated as Series B Cumulative
Perpetual Preferred Stock (the
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"FNH Series B Preferred Stock"). As of the date of this Agreement, there were
(i) 1,000 shares of Parent Holdings Common Stock and no shares of preferred
stock of Parent Holdings issued and outstanding, and no shares of Parent
Holdings Common Stock held in its treasury and (ii) 800 shares of FNH Class A
Common Stock, 200 shares of FNH Class B Common Stock, 1,666.667 shares of FNH
Series A Preferred Stock and 45.32 shares of FNH Series B Preferred Stock
issued and outstanding. As of the date of this Agreement, no shares of capital
stock of Parent Holdings or FNH were reserved for issuance. All of the issued
and outstanding shares of Parent Holdings Common Stock, FNH Class A Common
Stock, FNH Class B Common Stock and FNH Preferred Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except as set forth on Section
4.2(a) of the Parent Holdings Disclosure Schedule, neither Parent Holdings nor
FNH has or is bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock of Parent Holdings or FNH or any other
equity securities of Parent
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Holdings or FNH or any securities representing the right to purchase or
otherwise receive any shares of capital stock of Parent Holdings or FNH or
any other equity securities of Parent Holdings or FNH.
(b) Section 4.2(b) of the Parent Holdings Disclosure Schedule sets
forth a true and correct list of all of the Subsidiaries of Parent Holdings.
Except as set forth in Section 4.2(b) of the Parent Holdings Disclosure
Schedule, Parent Holdings owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of the Subsidiaries of Parent
Holdings, free and clear of all liens, charges, encumbrances and security
interests whatsoever, and all of such shares are duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. No Subsidiary of Parent
Holdings has or is bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity security of such
Subsidiary or any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security of such
Subsidiary.
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4.3. Authority; No Violation. (a) Each of Parent Holdings and FNH has
full corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of each of Parent
Holdings and FNH, by the sole stockholder of Parent Holdings and by Parent
Holdings and Ford as the stockholders of FNH, and no other corporate
proceedings on the part of either Parent Holdings or FNH are necessary to
approve this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of
Parent Holdings and FNH and (assuming due authorization, execution and delivery
by each of Golden State and Merger Sub) this Agreement constitutes a valid and
binding obligation of each of Parent Holdings and FNH, enforceable against
each of Parent Holdings and FNH in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally.
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(b) CFB has full corporate power and authority to execute and deliver
the Bank Merger Agreement and the Management Agreement and to consummate the
transactions contemplated thereby. The execution and delivery of the Bank
Merger Agreement and the Management Agreement and the consummation of the
transactions contemplated thereby will be duly and validly approved by the
Board of Directors of CFB. Upon the due and valid approval of the Bank Merger
Agreement by FNH as the sole stockholder of CFB, and by the Board of Directors
of CFB, no other corporate proceedings on the part of CFB will be necessary to
consummate the transactions contemplated thereby. Each of the Bank Merger
Agreement and the Management Agreement, upon execution and delivery by CFB,
will be duly and validly executed and delivered by CFB and will (assuming due
authorization, execution and delivery by the GFB) constitute a valid and
binding obligation of CFB, enforceable against CFB in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(c) Except as set forth in Section 4.3(c)
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of the Parent Holdings Disclosure Schedule, neither the execution and delivery
of this Agreement by Parent Holdings or FNH or the Bank Merger Agreement and
the Management Agreement by CFB, nor the consummation by Parent Holdings, FNH
or CFB, as applicable, of the transactions contemplated hereby or thereby, nor
compliance by Parent Holdings, FNH or CFB with any of the terms or provisions
hereof or thereof, will (i) violate any provision of the Certificate of
Incorporation or By-Laws of Parent Holdings, or the certificate of
incorporation or by-laws or similar governing documents of any of its
Subsidiaries or (ii) assuming that the consents and approvals referred to in
Section 4.4 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Parent
Holdings or any of its Subsidiaries or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any provision of
or the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encum-
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brance upon any of the respective properties or assets of Parent Holdings or
any of its Subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which Parent Holdings or any of its
Subsidiaries is a party, or by which they or any of their respective properties
or assets may be bound or affected.
4.4. Consents and Approvals. Except for (a) the filing of applications
and notices, as applicable, with the OTS under the HOLA and the Bank Merger
Act, and approval of such applications and notices, (b) the filing with the SEC
of the Proxy Statement, (c) the approval and adoption of this Agreement and the
Parent Plan of Merger by the requisite vote of the stockholders of Golden
State, (d) approval of the listing of the Golden State Common Stock to be
issued in the Merger on the NYSE, (e) the filing of the Certificates of Merger
with the Secretary, (f) filings required by the Bank Merger Agreement, (g) the
approval of the Bank Merger Agreement by the sole stockholder of CFB, and (h)
such filings, authorizations or approvals as may be set forth in Section 4.4 of
the Parent Holdings Disclosure Schedule, no consents or approvals of or filings
or registrations with any Govern-
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mental Entity or with any third party are cessary in connection with (1) the
execution and delivery by Parent Holdings and FNH of this Agreement, (2) the
consummation by Parent Holdings and FNH of the Mergers and the other
transactions contemplated hereby, (3) the execution and delivery by CFB of the
Bank Merger Agreement and the Management Agreement and the consummation of the
transactions contemplated by the Management Agreement, and (4) the
consummation of CFB of the transactions contemplated by the Bank Merger
Agreement.
4.5. Reports. Parent Holdings and each of its Subsidiaries have timely
filed all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1995 with any Regulatory Agency, and have paid all fees and
assessments due and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency in the regular course of the
business of Parent Holdings and its Subsidiaries, and except as set forth in
Section 4.5 of Parent Holdings Disclosure Schedule, no Regulatory Agency has
initiated any proceeding or, to the knowledge of Parent Holdings, investigation
into the business or operations of Parent Holdings or any of its Subsidiaries
since December 31,
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1995. There is no unresolved violation, criticism, or exception by any
Regulatory Agency with respect to any report or statement relating to any
examinations of Parent Holdings or any of its Subsidiaries.
4.6. Financial Statements. Parent Holdings has previously made
available to Golden State copies of (a) the consolidated statements of
financial condition of Parent Holdings and its Subsidiaries as of December 31
for the fiscal years 1995 and 1996 and the related consolidated statements of
operations, stockholder's equity and cash flows for the fiscal years 1994
through 1996, inclusive, as reported in Parent Holdings' Annual Report on Form
10-K for the fiscal year ended December 31, 1996 filed with the SEC under the
Exchange Act, in each case accompanied by the audit report of KPMG Peat Marwick
LLP, independent public accountants with respect to Parent Holdings, and (b)
the unaudited consolidated statements of financial condition of Parent Holdings
and its Subsidiaries as of September 30, 1997 and September 30, 1996 and the
related unaudited consolidated statements of operations, stockholder's equity
and cash flows for the nine-month periods then ended as reported in Parent
Holdings' Quarterly Report on Form 10-Q for the period ended September 30, 1997
filed with the SEC under the Ex-
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change Act. The December 31, 1996 consolidated statement of financial position
of Parent Holdings (including the related notes, where applicable) fairly
presents the consolidated financial position of Parent Holdings and its
Subsidiaries as of the date thereof, and the other financial statements
referred to in this Section 4.6 (including the related notes, where applicable)
fairly present, and the financial statements to be filed by Parent Holdings
with the SEC after the date hereof will fairly present (subject, in the case of
the unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and changes in
stockholder's equity and consolidated financial position of Parent Holdings
and its Subsidiaries for the respective fiscal periods or as of the respective
dates therein set forth; each of such statements (including the related notes,
where applicable) complies, and the financial statements to be filed by Parent
Holdings with the SEC after the date hereof will comply, with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto; and each of such statements (including the related notes,
where applicable) has been, and the financial statements to be filed by Parent
Holdings with
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the SEC after the date hereof will be, prepared in accordance with GAAP
consistently applied during the periods involved, except as indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q. The books and records of Parent Holdings and its Subsidiaries have been,
and are being, maintained in accordance with GAAP and any other applicable
legal and accounting requirements.
4.7. Broker's Fees. Neither Parent Holdings nor any Subsidiary of
Parent Holdings, nor any of their respective officers or directors, has
employed any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions
contemplated by this Agreement, the Option Agreement or the Bank Merger
Agreement, except that Parent Holdings has engaged, and will pay a fee or
commission to, Goldman, Sachs & Co. ("Goldman Sachs") in accordance with the
terms of a letter agreement between Goldman Sachs and Parent Holdings, a true
and correct copy of which has been previously made available by Parent Holdings
to Golden State.
4.8. Absence of Certain Changes or Events. (a) Except as may be set
forth in Section 4.8 of the Parent Holdings Disclosure Schedule, or as
disclosed in
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any Parent Holdings Report (as defined in Section 4.12) filed with
the SEC or the OTS prior to the date of this Agreement, since December 31,
1996, (i) neither Parent Holdings nor any of its Subsidiaries has incurred any
liability, except in the ordinary course of their business consistent with
their past practices, and (ii) no event has occurred which has caused, or is
reasonably likely to cause, individually or in the aggregate, a Material
Adverse Effect on Parent Holdings.
(b) Except as set forth in Section 4.8(b) of the Parent Holdings
Disclosure Schedule or as disclosed in any Parent Holdings Report filed with
the SEC or the OTS prior to the date of this Agreement, since September 30,
1997, Parent Holdings and its Subsidiaries have carried on their respective
businesses in the ordinary course consistent with their past practices.
(c) Except as set forth in Section 4.8(c) of the Parent Holdings
Disclosure Schedule, since December 31, 1997, neither Parent Holdings nor any
of its Subsidiaries has (i) increased the wages, salaries, compen sation,
pension, or other fringe benefits or perquisites payable to any executive
officer, employee, or director from the amount thereof in effect as of December
31, 1997 (which amounts have been previously made available to
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Golden State), granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or paid any bonus,
(ii) suffered any strike, work stoppage, slow-down, or other labor disturbance,
(iii) been a party to a collective bargaining agreement, contract or other
agreement or understanding with a labor union or organization, or (iv) had
any union organizing activities.
4.9. Legal Proceedings. (a) Except as set forth in Section 4.9 of the
Parent Holdings Disclosure Schedule, neither Parent Holdings nor any of its
Subsidiaries is a party to any and there are no pending or, to the knowledge
of Parent Holdings, threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory investigations of
any nature against Parent Holdings or any of its Subsidiaries or challenging
the validity or propriety of the transactions contemplated by this Agreement or
the Bank Merger Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Parent Holdings, any of its Subsidiaries or the assets
of Parent Holdings or any of its Subsidiaries.
4.10. Taxes. Except as set forth in Section
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4.10 of the Parent Holdings Disclosure Schedule, each of Parent Holdings and
its Subsidiaries has or will have prior to the Effective Time (i) duly and
timely filed (including applicable extensions granted without penalty), or
there has been filed on its behalf, all Tax Returns required to be filed at or
prior to the Effective Time, and such Tax Returns are true, correct and
complete, and (ii) paid, or there has been paid on its behalf, in full or made
provision in the financial statements of Parent Holdings (in accordance with
GAAP) for all Taxes due or claimed to be due from it by any taxing authority
with respect to all periods ending on or before the Effective Time. No
deficiencies for any Taxes have been proposed, asserted, assessed or threatened
in writing against or with respect to Parent Holdings or any of its
Subsidiaries. Except as set forth in Section 4.10 of the Parent Holdings
Disclosure Schedule, (i) there are no liens for Taxes upon the assets of either
Parent Holdings or any of its Subsidiaries except for statutory liens for
current Taxes not yet due or liens for Taxes that are being contested in good
faith, as to the fact or the amount of liability, by appropriate proceedings
and that have been reserved against in accordance with GAAP, (ii) neither
Parent Holdings nor any of its Subsidiaries has
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requested any extension of time within which to file any Tax Returns in respect
of any fiscal year which have not since been filed and no request for waivers
or extensions of the time to assess or collect any Taxes are pending or
outstanding, (iii) with respect to each taxable period of Parent Holdings and
its Subsidiaries, the federal and state income Tax Returns of Parent Holdings
and its Subsidiaries have been audited by the Internal Revenue Service or
appropriate state tax authorities or the time for assessing and collecting
Taxes with respect to such taxable period has closed and such taxable period is
not subject to review, (iv) neither Parent Holdings nor any of its Subsidiaries
has filed or been included in a combined, consolidated or unitary income Tax
Return other than one in which Parent Holdings is the parent of the group
filing such Tax Return, (v) neither Parent Holdings nor any of its Subsidiaries
is a party to, is bound by, or has an obligation under, any Tax sharing
agreement, Tax indemnification agreement or similar contract or arrangement
providing for the allocation or sharing of Taxes (other than the allocation of
federal income taxes as provided by Regulation 1.1552-1(a)(1) under the Code),
(vi) neither Parent Holdings nor any of its Subsidiaries has filed a consent
pursuant to Section 341(f) of the
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Code, (vii) no power of attorney which is currently in force has been granted
by or with respect to Parent Holdings or any Subsidiary thereof with respect to
any matter relating to Taxes; and (viii) no closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision) or any similar
provision of any state, local or foreign Law has been entered into by or with
respect to the Parent Holdings or its Subsidiaries. California Federal
Preferred Capital Corporation ("CFPCC") (formerly First Nationwide Preferred
Capital Corporation) was formed in 1996 and included in the 1996 consolidated
federal income tax return of the affiliated group of which Mafco Holdings Inc.
is the common parent and (i) has been at all times since January 1, 1997, and
at the Effective Time will be, a "real estate investment trust" ("REIT") as
defined in Section 856(a) of the Code, (ii) has met at all times since January
1, 1997, and at the Effective Time will meet, the requirements of Section
857(a) of the Code, (iii) has not been at any time since January 1, 1997, and
at the Effective Time will not be, described in Section 856(c)(7) of the Code,
(iv) has not had at any time since January 1, 1997, and at the Effective Time
will not have had, any "net income derived from prohibited transactions" within
the meaning of Section
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857(b)(6) of the Code and (v) has not, and at the Effective Time will not
have, issued any stock or securities as part of a multiple party financing
transaction described in Internal Revenue Service Notice 97-21, 1997-11 I.R.B.
2.
4.11. Employees. (a) Section 4.11(a) of the Parent Holdings Disclosure
Schedule sets forth a true and complete list of each deferred compensation
plan, incentive compensation plan, equity compensation plan, "welfare" plan,
fund or program (within the meaning of section 3(1) of the ERISA); "pension"
plan, fund or program (within the meaning of section 3(2) of ERISA); each
employment, termination or severance agreement; and each other employee benefit
plan, fund, program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to as of the date of
this Agreement (the "Parent Holdings Plans") by Parent Holdings, any of its
Subsidiaries or by any trade or business, whether or not incorporated, which is
owned by Parent Holdings or any of its Subsidiaries (a "Parent Holdings ERISA
Affiliate"), all of which together with Parent Holdings would be deemed a
"single employer" within the meaning of Section 4001 of ERISA, for the benefit
of any employee or former employee of Parent
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Holdings, any Subsidiary of Parent Holdings or any Parent Holdings ERISA
Affiliate.
(b) Parent Holdings has heretofore made available to Golden State each
of the Parent Holdings Plans and all related documents, including but not
limited to (i) the actuarial report for such Parent Holdings Plan (if
applicable) for each of the last two years and (ii) the most recent
determination letter from the Internal Revenue Service (if applicable) for
such Parent Holdings Plan.
(c) Except as set forth in Section 4.11(c) of the Parent Holdings
Disclosure Schedule, (i) each of the Parent Holdings Plans has been operated
and administered in all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and the Code, (ii) each of
the Parent Holdings Plans intended to be "qualified" within the meaning of
Section 401(a) of the Code either (1) has received a favorable determination
letter from the IRS, or (2) is or will be the subject of an application for a
favorable determination letter, and Parent Holdings is not aware of any
circumstances likely to result in the revocation or denial of any such
favorable determination letter, (iii) with respect to each Parent Holdings Plan
which is sub-
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ject to Title IV of ERISA, the present value of accrued benefits under such
Parent Holdings Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Parent Holdings
Plan's actuary with respect to such Parent Holdings Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such
Parent Holdings Plan allocable to such accrued benefits, (iv) no Parent
Holdings Plan provides welfare benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of Parent Holdings or its Subsidiaries beyond their retirement or
other termination of service, other than (w) coverage mandated by applicable
law or (x) benefits the full cost of which is borne by the current or former
employee (or his beneficiary), (v) no liability under Title IV of ERISA has
been incurred (directly or indirectly) by Parent Holdings, its Subsidiaries or
any Parent Holdings ERISA Affiliate that has not been satisfied in full, and
no condition exists that presents a risk to Parent Holdings, its Subsidiaries
or a Parent Holdings ERISA Affiliate of incurring (directly or indirectly) a
material liability thereunder, (vi) no Parent Holdings Plan is a "multiemployer
pension plan," as such
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term is defined in Section 3(37) of ERISA, (vii) all contributions or other
amounts payable by Parent Holdings, its Subsidiaries or any ERISA Affiliate as
of the Effective Time with respect to each Parent Holdings Plan in respect of
current or prior plan years have been paid or accrued in accordance with GAAP
and Section 412 of the Code, (viii) neither Parent Holdings nor its
Subsidiaries has engaged in a transaction in connection with which Parent
Holdings or its Subsidiaries could reasonably be expected to be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
tax imposed pursuant to Section 4975 or 4976 of the Code, (ix) there are no
pending, or, to the best knowledge of Parent Holdings, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the Parent Holdings Plans or any trusts related thereto and (x)
the consummation of the transactions contemplated by this Agreement or the
Bank Merger Agreement, either alone or in conjunction with another event,
including a termination of employment, will not (A) entitle any current or
former employee or officer of Parent Holdings, any of its Subsidiaries or any
Parent Holdings ERISA Affiliate to severance pay, termination pay or any other
payment or benefit, except as expressly
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provided in this Agreement or (B) accelerate the time of payment or vesting or
increase in the amount or value of compensation or benefits due any such
employee or officer.
4.12. SEC Reports. Parent Holdings has previously made available to
Golden State (to the extent filed prior to the date hereof) a true and complete
copy of each (a) final registration statement, prospectus, report, schedule
and definitive proxy statement filed since December 31, 1995 by Parent Holdings
or any of its Subsidiaries with the SEC or the OTS pursuant to the Securities
Act or the Exchange Act (the "Parent Holdings Reports") and (b) communication
mailed by Parent Holdings or any of its Subsidiaries to its shareholders since
December 31, 1995, and no such registration statement, prospectus, report,
schedule, proxy statement or communication contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that information
as of a later date shall be deemed to modify information as of an earlier date.
Parent Holdings and each of its Subsidiaries has timely filed all Parent
Holdings Reports
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and other documents required to be filed by it under the Securities Act and the
Exchange Act, and, as of their respective dates, all Parent Holdings Reports
complied with the published rules and regulations of the OTS and SEC, as
applicable, with respect thereto.
4.13. Parent Holdings Information. The information relating to Parent
Holdings and its Subsidiaries which is provided by Parent Holdings to Golden
State for inclusion in the Proxy Statement, or in any other document filed
with any other regulatory agency in connection herewith, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances in which they
are made, not misleading.
4.14. Compliance with Applicable Law. Parent Holdings and each of its
Subsidiaries holds, and has at all times held, all licenses, franchises,
permits and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
default in any respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to
Parent Holdings or any of its Subsidiaries, and neither Parent Holdings nor any
of its Subsidiaries knows
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of, or has received notice of violation of, any violations of any of the
above.
4.15. Ownership of Golden State Common Stock; Affiliates and
Associates. (a) Except for the Option Agreement, neither Parent Holdings nor
any of its affiliates or associates (as such terms are defined under the
Exchange Act) (i) beneficially owns, directly or indirectly, or (ii) is a
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, any shares of capital
stock of Golden State (other than shares held in a fiduciary capacity or in
respect of a debt previously contracted).
(b) Neither Parent Holdings nor any of its Subsidiaries is an
"affiliate" (as such term is defined in DGCL ss. 203(c)(1)) or an "associate"
(as such term is defined in DGCL ss. 203(c)(2)) of Golden State or a "Related
Person" (as such term is defined in Article Seventh of Golden State's
Certificate of Incorporation).
4.16. Agreements with Regulatory Agencies. Except as set forth in
Section 4.16 of the Parent Holdings Disclosure Schedule, neither Parent
Holdings nor any of its Subsidiaries is subject to any cease-and-desist or
other order issued by, or is a party to any written
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agreement, consent agreement or memorandum of understanding with, or is a
party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any extraordinary supervisory
letter from, or has adopted any board resolutions at the request of (each,
whether or not set forth in Section 4.16 of the Parent Holdings Disclosure
Schedule, a "Parent Holdings Regulatory Agreement"), any Regulatory Agency or
other Governmental Entity that restricts the conduct of its business or that in
any manner relates to its capital adequacy, its credit policies, its management
or its business, nor has Parent Holdings or any of its Subsidiaries been
advised by any Regulatory Agency or other Governmental Entity that it is
considering issuing or requesting any Parent Holdings Regulatory Agreement.
4.17. Approvals. As of the date of this Agreement, Parent Holdings
knows of no reason why all regulatory approvals required for the consummation
of the transactions contemplated hereby (including, without limitation, the
Mergers and the Subsidiary Merger) should not be obtained.
4.18. Reorganization. As of the date of this Agreement, Parent
Holdings has no reason to believe that
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any of the Mergers or the Subsidiary Merger will fail to qualify as a
reorganization under Section 368(a) of the Code.
4.19. Certain Contracts. (a) Except as set forth in Section 4.19(a) of
the Parent Holdings Disclosure Schedule and except for this Agreement, the
Stock Option Agreement, the Bank Merger Agreement and the Management Agreement,
neither Parent Holdings nor any of its Subsidiaries is a party to or bound by
any contract, arrangement, commitment or understanding (whether written or
oral) (i) with respect to the employment of any directors, officers, employees
or consultants, (ii) which, upon the consummation of the transactions
contemplated by this Agreement or the Bank Merger Agreement, will (either alone
or upon the occurrence of any additional acts or events) result in any payment
or benefits (whether of severance pay or otherwise) becoming due, or the
acceleration or vesting of any rights to any payment or benefits, from Golden
State, GFB, Parent Holdings, the Surviving Bank or any of their respective
Subsidiaries to any director, officer or employee thereof, (iii) which is a
material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC)
to be performed after the date of this Agreement that has not been filed or
incorporated
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by reference in the Parent Holdings Reports, (iv) which is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on 60 days or less notice involving the payment of
more than $100,000 per annum, or (v) which materially restricts the conduct of
any line of business by Parent Holdings or any of its Subsidiaries. Each
contract, arrangement, commitment or understanding of the type described in
this Section 4.19(a), whether or not set forth in Section 4.19(a) of the Parent
Holdings Disclosure Schedule, is referred to herein as a "Parent Holdings
Contract". Parent Holdings has previously delivered or made available to Golden
State true and correct copies of each Parent Holdings Contract.
(b) Except as set forth in Section 4.19(b) of the Parent Holdings
Disclosure Schedule, (i) each Parent Holdings Contract is valid and binding and
in full force and effect, (ii) Parent Holdings and each of its Subsidiaries has
performed all obligations required to be performed by it to date under each
Parent Holdings Contract, (iii) no event or condition exists which constitutes
or, after notice or lapse of time or both, would constitute, a default on the
part of Parent Holdings or any of its Subsidiaries under any Parent Holdings
Con-
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tract, and (iv) no other party to any Parent Holdings Contract is, to the
knowledge of Parent Holdings, in default in any respect thereunder.
4.20. Environmental Matters. Except as set forth in Section 4.20 of
the Parent Holdings Disclosure Schedule:
(a) Each of Parent Holdings and its Subsidiaries, the Participation
Facilities and the Loan Properties (each as hereinafter defined) are, and have
been, in compliance with all Environmental Laws;
(b) There is no suit, claim, action or proceeding, pending or, to the
knowledge of Parent Holdings, threatened, before any Governmental Entity or
other forum in which Parent Holdings, any of its Subsidiaries, any
Participation Facility or any Loan Property, has been or, with respect to
threatened proceedings, may be, named as a defendant (x) for alleged
noncompliance (including by any predecessor), with any Environmental Laws, or
(y) relating to the release, threatened release or exposure to any Hazardous
Material whether or not occurring at or on a site owned, leased or operated by
Parent Holdings or any of its Subsidiaries, any Participation Facility or any
Loan Property;
(c) During the period of (x) Parent
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Holdings' or any of its Subsidiaries' ownership or operation of any of their
respective current or former properties, (y) Parent Holdings' or any of its
Subsidiaries' participation in the management of any Participation Facility, or
(z) to the knowledge of Parent Holdings, Parent Holdings' or any of its
Subsidiaries' holding of a security interest in a Loan Property, there has been
no release of Hazardous Materials in, on, under or affecting any such property
that has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent Holdings; and
(d) The following definitions apply for purposes of this Section 4.20:
(x) "Loan Property" means any property in which Parent Holdings or any of its
Subsidiaries holds a security interest, and, where required by the context,
said term means the owner or operator of such property; and (y) "Participation
Facility" means any facility in which Parent Holdings or any of its
Subsidiaries participates in the management and, where required by the context,
said term means the owner or operator of such property.
4.21. Derivative Transactions. Except as set forth in Section 4.21 of
the Parent Holdings Disclosure Schedule, since December 31, 1997, neither
Parent Hold-
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ings nor any of its Subsidiaries has engaged in transactions in or
involving forwards, futures, options on futures, swaps or other derivative
instruments except (i) as agent on the order and for the account of others, or
(ii) as principal for purposes of hedging interest rate risk on U.S.
dollar-denominated securities and other financial instruments. None of the
counterparties to any contract or agreement with respect to any such instrument
is in default with respect to such contract or agreement and no such contract
or agreement, were it to be a Loan (as defined below) held by Parent Holdings
or any of its Subsidiaries, would be classified as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans" or words of similar
import. The financial position of Parent Holdings and its Subsidiaries on a
consolidated basis under or with respect to each such instrument has been
reflected in the books and records of Parent Holdings and such Subsidiaries in
accordance with GAAP consistently applied, and neither Parent Holdings nor any
of its Subsidiaries has any open exposure with respect to any such instrument
(or with respect to multiple instruments with respect to any single
counterparty) as of the date hereof.
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4.22. Loan Portfolio. (a) Section 4.22 of the Parent Holdings
Disclosure Schedule sets forth the aggregate principal amount of all written or
oral loan agreements, notes or borrowing arrangements (including, without
limitation, leases, credit enhancements, commitments, guarantees and
interest-bearing assets) (collectively, "Loans"), other than Loans the unpaid
principal balance of which does not exceed $1,000,000, under the terms of which
the obligor is, as of December 31, 1997, over 90 days delinquent in payment of
principal or interest or in default of any other provision and, except as
disclosed in Section 4.22, neither Parent Holdings nor any of its Subsidiaries
is a party to any Loan with any director, executive officer or five percent or
greater stockholder of Parent Holdings or any of its Subsidiaries, or to the
knowledge of Parent Holdings, any person, corporation or enterprise
controlling, controlled by or under common control with any of the foregoing.
Section 4.22 of the Parent Holdings Disclosure Schedule sets forth as of
December 31, 1997 (i) all of the Loans in original principal amount in excess
of $1,000,000 of Parent Holdings or any of its Subsidiaries that as of the date
of this Agreement are classified by Parent Holdings as "Special Mention",
"Substandard", "Doubtful", "Loss",
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or words of similar import, together with the principal amount of and accrued
and unpaid interest on each such Loan and the identity of the borrower
thereunder, (ii) by category of Loan (i.e., commercial, consumer, etc.), all of
the Loans of Parent Holdings and its Subsidiaries that as of the date of this
Agreement are classified as such, together with the aggregate principal amount
of such Loans by category and (iii) each asset of Parent Holdings that as of
the date of this Agreement is classified as "Other Real Estate Owned" and the
book value thereof.
(b) Each Loan in original principal amount in excess of $1,000,000 (i)
is evidenced by notes, agreements or other evidences of indebtedness which are
true, genuine and what they purport to be, (ii) to the extent secured, has been
secured by valid liens and security interests which have been perfected and
(iii) is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
4.23. Material Interests of Certain Persons. Except as disclosed in
the Parent Holdings Reports filed
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prior to the date of this Agreement, no officer or director of Parent
Holdings, or any "associate" (as such term is defined in Rule 12b-2 under the
Exchange Act) of any such officer or director, has any material interest in any
material contract or property (real or personal), tangible or intangible, used
in or pertaining to the business of Parent Holdings.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1. Covenants Relating to Conduct of Business. During the period
from the date of this Agreement and continuing until the Effective Time, except
as expressly contemplated or permitted by this Agreement, the Bank Merger
Agreement, the Management Agreement or the Option Agreement or with the prior
written consent of the other parties hereto, each of Golden State and Parent
Holdings shall, and shall cause its Subsidiaries to, carry on their respective
businesses in the ordinary course consistent with past practice. Without
limiting the generality of the foregoing, and except as set forth on Section
5.1 of the applicable Disclosure Schedule or as otherwise contemplated by this
Agreement, the Bank Merger Agreement, the Management Agreement or the Option
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Agreement or consented to in writing by the other parties hereto, neither
Golden State nor Parent Holdings shall, and neither of them shall permit any of
its Subsidiaries to:
(a) declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock, other than (1) in the case of Golden
State, dividends payable on the outstanding shares of Series A Preferred Stock
in accordance with the provisions of the certificate of designations for such
preferred stock, (2) in the case of Parent Holdings and its Subsidiaries,
dividends payable on the outstanding shares of preferred stock in accordance
with the provisions of the applicable charter, certificate of incorporation or
certificate of designations for such preferred stock, (3) in the case of any
Subsidiary of Golden State or Parent Holdings, as applicable, the payment of
dividends to the extent necessary to enable its direct and indirect parent
companies to pay all preferred stock dividends and all principal and interest
payments on its outstanding debt obligations, to enable FNH to redeem its
outstanding shares of FNH Preferred Stock as permitted by Section
5.1(b)(ii)(D), to fund the cash settlement of Golden State Options (as defined
herein) contemplated by Section
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6.5 hereof, or to enable CFPCC to maintain its status as a REIT, and (4) any
payments made to holders of the CALGZs, CALGLs or LTWs in accordance with the
terms of such securities;
(b) (i) split, combine or reclassify any shares of its capital stock
or, other than the LTWs, issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, except upon the exercise or fulfillment of rights or options
issued or existing pursuant to employee benefit plans, programs or
arrangements, all to the extent outstanding and in existence on the date of
this Agreement and in accordance with their present terms, or (ii) repurchase,
redeem or otherwise acquire (except for the acquisition of shares in a
fiduciary capacity or in respect of a debt previously contracted) any shares of
its capital stock or the capital stock of any of its Subsidiaries, or any
securities convertible into or exercisable for any shares of its capital stock
or the capital stock of any of its Subsidiaries, or any CALGZs, CALHZs or
LTWs, except (A) in the case of Golden State, for repurchases by Golden State
of Golden State Common Stock made prior to the commencement of the 30
trading-day period contemplated by the defini-
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tion of "Average Daily Price" and in an amount not to exceed the aggregate
number of shares of Golden State Common Stock issued pursuant to the Redfed
Merger Agreement, (B) in addition to the repurchases contemplated by the
preceding clause (A), Golden State may use all proceeds obtained through the
exercise of outstanding Golden State Options, Five-Year Warrants and Seven Year
Warrants to repurchase shares of its Common Stock, (C) Golden State may redeem
its outstanding shares of Golden State Preferred Stock in accordance with the
terms of the Certificate of Designations relating thereto, and (D) FNH may
redeem its outstanding shares of FNH Series A Preferred Stock and FNH Series B
Preferred Stock;
(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of
the foregoing, other than the issuance of the LTWs and the issuance of Golden
State Common Stock pursuant to (i) stock options or similar rights to acquire
Golden State Common Stock granted pursuant to the Golden State Option Plans and
outstanding prior to the date of this Agreement, in each case in
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accordance with their present terms, (ii) the CENFED Merger Agreement and the
Redfed Merger Agreement, (iii) the exercise of Five-Year Warrants or Seven-Year
Warrants outstanding prior to the date of this Agreement and in each case in
accordance with their present terms, (iv) the conversion of shares of Series A
Preferred Stock in accordance with their terms, and (v) the exercise of LTWs in
accordance with their terms;
(d) amend its Certificate of Incorporation, By-laws or other similar
governing documents;
(e) authorize or permit any of its officers, directors, employees or
agents to directly or indirectly solicit, initiate or encourage any inquiries
relating to, or the making of any proposal which constitutes, a "takeover
proposal" (as defined below), or recommend or endorse any takeover proposal, or
participate in any discussions or negotiations, or provide third parties with
any nonpublic information, relating to any such inquiry or proposal or
otherwise facilitate any effort or attempt to make or implement a takeover
proposal; provided, however, that a party hereto may communicate information
about any such takeover proposal to its stockholders if, in the judgment of
such party's Board of Directors, based upon the advice of outside counsel, such
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communication is required under applicable law. Golden State and Parent
Holdings shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations previously conducted with any parties
other than the parties hereto and their representatives with respect to any of
the foregoing. Each party shall take all actions necessary or advisable to
inform the appropriate individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 5.1(e). Golden
State will notify Parent Holdings, and Parent Holdings will notify Golden
State, immediately if any such inquiries or takeover proposals are received by,
any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with, such party, and such party will
promptly inform the other in writing of all of the relevant details with
respect to the foregoing. As used in this Agreement, "takeover proposal" shall
mean any tender or exchange offer, proposal for a merger, consolidation or
other business combination involving Golden State or Parent Holdings or any
Subsidiary thereof or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of,
Golden State or Parent Holdings or any Subsid-
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iary thereof other than the transactions contemplated or permitted by this
Agreement, the Bank Merger Agreement and the Option Agreement;
(f) make any capital expenditures other than those which (i) are made
in the ordinary course of business or are necessary to maintain existing assets
in good repair and (ii) in any event are in an amount of no more than
$10,000,000 in the aggregate (excluding, in the case of Parent Holdings or any
Subsidiary, capital expenditures made in connection with the consummation of
the transactions contemplated hereby);
(g) enter into any new line of business;
(h) other than as contemplated by the CENFED Merger Agreement and the
Redfed Merger Agreement, acquire or agree to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire any assets, which would be material,
individually or in the aggregate, to such party and its Subsidiaries, other
than in connection with foreclosures, settlements in lieu of foreclosure or
troubled loan or debt restructurings in the ordinary
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course of business consistent with past practice;
(i) take any action that is intended to result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect, or that is intended or may reasonably be
expected to result in any of the conditions to the Mergers set forth in Article
VII not being satisfied;
(j) change its methods of accounting in effect at September 30, 1997,
except as required by changes in GAAP or regulatory accounting principles as
concurred to by such party's independent auditors;
(k) (i) except as required by applicable law or as required to
maintain qualification pursuant to the Code, adopt, amend, renew or terminate
any employee benefit plan or any agreement, arrangement, plan or policy between
such party and one or more of its current or former directors, officers or
employees or (ii) except for normal increases in the ordinary course of
business consistent with past practice or except as required by applicable law,
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any Plan or agreement as
in effect as of the date hereof (including, without limitation, the granting of
stock options, stock appreci-
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ation rights, restricted stock, restricted stock units or performance units or
shares);
(l) other than activities in the ordinary
course of business consistent with past practice, sell, lease, encumber, assign
or otherwise dispose of, or agree to sell, lease, encumber, assign or otherwise
dispose of, any of its material assets, properties or other rights or
agreements;
(m) other than (i) as a result of the CENFED Merger or the Redfed
Merger or as required to fund the cash settlement of Golden State Options
contemplated by Section 6.5 hereof or (ii) in the ordinary course of business
consistent with past practice, incur any indebtedness for borrowed money or
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other individual, corporation or other entity;
(n) other than in connection with the CENFED Merger and the Redfed
Merger, file any application to relocate or terminate the operations of any
banking office;
(o) create, renew, amend or terminate or give notice of a proposed
renewal, amendment or termination of, any material contract, agreement or
lease for
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goods, services or office space to which such party or any of its
Subsidiaries is a party or by which such party or any of its Subsidiaries or
their respective properties is bound, other than the renewal in the ordinary
course of business of any lease or contract the term of which expires prior to
the Closing Date;
(p) other than in prior consultation with the other parties hereto,
restructure or materially change its investment securities portfolio or its gap
position, through purchases, sales or otherwise, or the manner in which the
portfolio is classified or reported;
(q) take or cause to be taken any action which would disqualify the
Mergers or the Bank Merger as tax free reorganizations under Section 368(a) of
the Code;
(r) reduce, or authorize the reduction of, the exercise, conversion or
"strike" price of any of any warrants, options or other rights to acquire any
of its securities; or
(s) agree to do any of the foregoing.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1. Regulatory Matters. (a) Golden State shall promptly prepare and
file with the SEC the Proxy Statement and shall thereafter mail the Proxy
Statement to its stockholders. Golden State shall also use its reasonable best
efforts to obtain all necessary state securities law or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this
Agreement and the Bank Merger Agreement, and Parent Holdings shall furnish all
information concerning Parent Holdings as may be reasonably requested in
connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement (including without limitation the Mergers and the Subsidiary Merger).
Each of Parent Holdings and Golden State shall have the right to review in
advance,
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and to the extent practicable each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all
the information relating to Parent Holdings or Golden State, as the case may
be, and any of their respective Subsidiaries, which appears in any filing made
with, or written materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this Agreement,
provided, however, that nothing contained herein shall be deemed to provide
either party with a right to review any information (other than pro forma
financial information or financial projections) provided to any Governmental
Entity on a confidential basis in connection with the transactions contemplated
hereby. In exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable. The parties hereto agree that they
will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will keep the other appraised of the status of
matters relating to completion of the transactions contemplated herein.
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(c) Each of Parent Holdings and Golden State shall, upon request,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may be
reasonably necessary or advisable in connection with the Proxy Statement or any
other statement, filing, notice or application made by or on behalf of Parent
Holdings, Golden State or any of their respective Subsidiaries to any
Governmental Entity in connection with the Mergers and the other transactions
contemplated by this Agreement.
(d) Each of Parent Holdings and Golden State shall promptly furnish
the other with copies of written communications received by it or any of its
Subsidiaries, Affiliates or Associates (as such terms are defined in Rule 12b-2
under the Exchange Act as in effect on the date of this Agreement) from, or
delivered by any of the foregoing to, any Governmental Entity in respect of the
transactions contemplated hereby.
6.2. Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each of Parent
Holdings and Golden State shall, and shall cause its Subsidiaries to, afford to
the officers, employees, accountants, counsel
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and other representatives of the other party, access, during normal business
hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments, records, officers, employees, ac countants,
counsel and other representatives and, during such period, it shall, and shall
cause its Subsidiaries to, make available to the other party all information
concerning its business, properties and personnel as the other party may
reasonably request. Neither Parent Holdings nor Golden State nor any of their
respective Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of such party's customers, jeopardize any attorney-client privilege or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty
or binding agreement entered into prior to the date of this Agreement. The
parties hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
(b) All information furnished by any party hereto or its Subsidiaries
(the "Delivering Party") to any other party hereto or its Subsidiaries (the
"Receiving Party") or their representatives pursuant hereto
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shall be treated as the sole property of the Delivering Party and, if the
Mergers shall not occur, the Receiving Party and its representatives shall
return to the Delivering Party all of such written information and all
documents, notes, summaries or other materials containing, reflecting or
referring to, or derived from, such information. The Receiving Party shall, and
shall use its reasonable best efforts to cause its representatives to, keep
confidential all such information, and shall not directly or indirectly use
such information for any competitive or other commercial purpose. The
obligation to keep such information confidential shall continue for five years
from the date the proposed Merger is abandoned and shall not apply to (i) any
information which (x) was already in the Receiving Party's possession prior to
the disclosure thereof by the Delivering Party; (y) was then generally known to
the public; or (z) was disclosed to the Receiving Party by a third party not
bound by an obligation of confidentiality or (ii) disclosures made as required
by law. It is further agreed that, if in the absence of a protective order
(which the Receiving Party shall use reasonable best efforts to obtain) or the
receipt of a waiver hereunder the Receiving party is nonetheless, in the
opinion of its counsel, compelled to
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disclose information concerning the Delivering Party to any tribunal or
governmental body or agency or else stand liable for contempt or suffer other
censure or penalty, the Receiving Party may disclose such information to such
tribunal or governmental body or agency without liability hereunder.
(c) No investigation by either of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other party set forth herein.
6.3. Stockholder Meeting. Golden State shall take all steps necessary
to duly call, give notice of, convene and hold a meeting of its stockholders to
be held as soon as is reasonably practicable after the date of this Agreement
for the purpose of voting upon the approval and adoption of this Agreement and
the Parent Plan of Merger. Golden State shall, through its Board of Directors,
recommend to its stockholders approval of this Agreement and the Parent Plan of
Merger and such other matters as may be submitted to its stockholders in
connection with this Agreement.
6.4. Legal Conditions to Merger. Each of Parent Holdings and Golden
State shall, and shall cause its Subsidiaries to, use its reasonable best
efforts (a)
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to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
or its Subsidiaries with respect to the Mergers or the SubsidIary Merger and,
subject to the conditions set forth in Article VII hereof, to consummate the
transactions contemplated by this Agreement and (b) to obtain (and to
cooperate with the other party to obtain) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity and any other third
party which is required to be obtained by Parent Holdings or Golden State or
any of their respective Subsidiaries in connection with the Mergers and the
Subsidiary Merger and the other transactions contemplated by this Agreement,
and to comply with the terms and conditions of such consent, authorization,
order or approval.
6.5. Cash-out of Stock Options. Each holder of an option to purchase
Golden State Common Stock (a "Golden State Option") granted under Golden
State's Stock Option and Long-Term Performance Incentive Plan or under existing
stock option plans of CENFED or Redfed which are assumed by Golden State in
connection with the CENFED Merger and the Glenfed Merger, respectively
(collectively, the "Golden State Option Plans") which is out-
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standing and unexercised on the day immediately prior to the Closing Date may
elect, by giving written notice to Golden State on or prior to the second
business day prior to the Closing Date, to surrender such Golden State Option
in exchange for a lump sum cash payment in an amount equal to the sum of (x)(i)
the Average Daily Price less the per share exercise price of such Golden State
Option, multiplied by (ii) the number of shares of Golden State Common Stock
covered by such Golden State Option, plus (y) at the election of the holder
thereof, either (i) one LTW in respect of each share of Golden State Common
Stock underlying such Golden State Option, or (ii) the product of the number of
shares of Golden State Common Stock underlying such Golden State Option and the
Average Daily LTW Price, whereupon such Golden State Option shall terminate and
be of no further force and effect. All such cash payments shall be paid by
Golden State on the day immediately prior to the Closing Date.
6.6. Employee Benefit Plans; Existing Agreements. (a) As soon as
practicable following the Effec tive Time, the employees of GFB (the "GFB
Employees") shall be entitled to participate in the employee benefit plans of
CFB in which similarly situated employees of CFB participate, to the same
extent as similarly-situated
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employees of CFB (it being understood that inclusion of GFB Employees in CFB's
employee benefit plans may occur at different times with respect to different
plans).
(b) With respect to each CFB Plan that is an "employee benefit plan,"
as defined in Section 3(3)of ERISA, for purposes of determining eligibility to
participate, vesting, and entitlement to benefits, including for severance
benefits and vacation entitlement (but not for accrual of pension benefits),
service with GFB shall be treated as service with CFB; provided however, that
such service shall not be recognized to the extent that such recognition would
result in a duplication of bene fits. Such service also shall apply for
purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any preexisting condition limitations. GFB
Employees shall be given credit for amounts paid under a corresponding benefit
plan during the same period for purposes of applying deductibles, copayments
and out-of-pocket maximums as though such amounts had been paid in accordance
with the terms and conditions of the CFB Plan.
(c) Following the Effective Time, the Surviving Corporation shall
honor and shall cause CFB to honor in accordance with their terms all
employment,
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severance and other compensation agreements and arrangements
existing on or prior to the execution of this Agreement which are between
Golden State or GFB and any director, officer or employee thereof and which
have been disclosed in the Golden State Disclosure Schedule and previously have
been delivered to Parent Holdings (provided that nothing in this Section
6.6(c) shall be deemed to adversely affect the rights of any party to or
beneficiary of any such employment, severance and compensation agreements and
arrangements under the same, whether or not disclosed in the Golden State
Disclosure Schedule or previously delivered to Parent Holdings).
Notwithstanding anything to the contrary contained in this Agreement, Parent
Holdings or the Surviving Corporation, as the case may be, shall take and
shall cause CFB to take all actions necessary to effect the items set forth in
Section 6.6 of the Golden State Disclosure Schedule, and Section 6.6 of the
Golden State Disclosure Schedule shall be deemed incorporated into this
Section 6.6(c).
6.7. Indemnification. (a) In the event of any threatened or actual
claim, action, suit, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any
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person who is now, or has been at any time prior to the date of this Agreement,
or who becomes prior to the Effective Time, a director or officer or employee
of Golden State or any of its Subsidiaries (the "Indemnified Parties") is, or
is threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he is or was a
director, officer or employee of Golden State, any of the Subsidiaries of
Golden State or any of their respective predecessors or (ii) this Agreement or
any of the transactions contemplated hereby, whether in any case asserted or
arising before or after the Effective Time, the par ties hereto agree to
cooperate and use their best efforts to defend against and respond thereto. It
is understood and agreed that after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless, as and to the extent permitted
by Delaware law, each such Indemnified Party against any losses, claims,
damages, liabili ties, costs, expenses (including reasonable attorney's 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 any undertaking required by applicable law), judgments,
fines and amounts paid in settlement in
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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 the Surviving
Corporation; provided, however, that (1) the Surviving Corporation shall have
the right to assume the defense thereof and upon such assumption the Surviving
Corporation shall not be liable to any Indemnified Party for any legal expenses
of other counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except that if the
Surviving Corporation elects not to assume such defense or counsel for the
Indemnified Parties reasonably advises that there are issues which raise
conflicts of interest between the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them after consultation with the Surviving Corporation, and the Surviving
Corporation shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties, (2) the Surviving Corporation shall in all cases be
obligated pursuant to this paragraph to
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pay for only one firm of counsel for all Indemnified Parties (except that if
counsel for the Indemnified Parties reasonably advises that there are issues
that raise conflicts of interest among the Indemnified Parties, the
Indemnified Parties may retain separate counsel paid for by the Surviving
Corporation to the extent reasonably necessary to remove such conflicts), (3)
the Surviving Corporation shall not be liable for any settle ment effected
without its prior written consent (which consent shall not be unreasonably
withheld) and (4) the Surviving Corporation shall have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. Any Indemnified Party
wishing to claim Indemnification under this Section 6.7, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify promptly
the Surviving Corporation thereof, provided that the failure to so notify shall
not affect the obligations of the Surviving Corporation under this Section 6.7
except to the extent such failure to notify prejudices the Surviving
Corporation. The Surviving Corporation's
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obligations under this Section 6.7 shall continue in full force and effect for
a period of six (6) years from the Effective Time; provided, however, that all
rights to indemnification in respect of any claim (a "Claim") asserted or made
within such period shall continue until the final disposition of such Claim.
(b) Parent Holdings shall use its reasonable best efforts to cause
the persons serving as officers and directors of Golden State immediately
prior to the Effective Time to be covered for a period of six (6) years from
the Effective Time by annual policies of directors' and officers' liability
insurance of at least the same coverage and amounts and containing terms and
conditions which are not less advantageous to such direc tors and officers of
Golden State than the terms and conditions of the existing policy of Golden
State 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;
provided that Parent Holdings shall not be required as to any such policy to
pay premiums in excess of 300% of the amount currently expended annually be
Golden State to obtain such insurance, and if such insurance cannot be
obtained for such premium Parent Holdings shall obtain for such persons
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the maximum coverage that may be obtained for such premiums.
(c) In the event the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation assume the obligations set forth in this section.
(d) The provisions of this Section 6.7 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
6.8. Additional Agreements. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or the Bank Merger Agreement or to vest the Surviving
Corporation or the Surviving Bank with full title to all properties, assets,
rights, approvals, immunities and franchises of any of the parties to the
Mergers or the Subsidiary Merger, the proper officers and directors of each
party to this Agreement and their
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respective Subsidiaries shall take all such necessary action as may be
reasonably requested by the Surviving Corporation.
6.9. Advice of Changes. Each of Parent Holdings and Golden State
shall promptly advise the other party of any change or event having a Material
Adverse Effect on it or which it believes would or would be reasonably likely
to cause or constitute a material breach of any of its representations,
warranties or covenants contained herein.
6.10. Execution and Authorization of Bank Merger Agreement. As soon as
reasonably practicable after the date of this Agreement, (a) FNH shall (i)
cause the Board of Directors of CFB to approve the Bank Merger Agreement, (ii)
cause CFB to execute and deliver the Bank Merger Agreement, and (iii) approve
the Bank Merger Agreement as the sole stockholder of CFB, and (b) GFC shall (i)
cause the Board of Directors of GFB to approve the Bank Merger Agreement, (ii)
cause GFB to execute and deliver the Bank Merger Agreement, and (iii) approve
the Bank Merger Agreement as the sole stockholder of GFB. The Bank Merger
Agreement shall contain terms that are normal and customary in light of the
transactions contemplated hereby and such additional terms as are necessary
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to carry out the purposes of this Agreement.
6.11. Board of Directors. Golden State shall use its best efforts to
obtain on or prior to the Closing Date the signed resignations of all of the
directors of Golden State and each of its Subsidiaries other than five
directors (the "GSB Directors") who shall remain on the Board of Directors of
Golden State following the Effective Time. The five GSB Directors remaining on
the Board of Directors of Golden State following the Effective Time shall be
apportioned among the three classes of Golden State directors such that at
least one but no more than two of such five directors shall serve in each of
the three classes of director following the Effective Time. Effective as of the
Closing Date, Golden State shall cause its Board of Directors to be expanded to
fifteen members and to appoint ten persons designated by the Board of Directors
of Parent Holdings to fill the vacancies on Golden State's Board of Directors
resulting from the aforementioned resignations and such increase as of the
Effective Time. From and after the Effective Time until the earlier of a Change
in Control (as defined in the Management Agreement) or the resolution of all
matters relating to the Glendale Litigation and the LTWs, the Surviving
Corporation shall continue to elect each
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GSB Director to the Board of Directorsof the Surviving Bank and to include each
GSB Director or his successor as designated by such GSB Directors on the list
of nominees for director presented by the Board of Directors of the Surviving
Corporation at any annual meeting of stockholders of the Surviving Corporation
at which such GSB Director's term shall expire, and, subject to the Management
Agreement, the Surviving Corporation shall cause each GSB Director while such
GSB Director is serving on the Board of Directors of the Surviving Corporation
or the Surviving Bank to be appointed as a member of the Glendale Committee
(as defined in the Management Agreement) and shall maintain such Glendale
Committee as contemplated by the Management Agreement. The provisions of the
immediately preceding sentence shall be enforceable by each such GSB Director
and any such successor.
6.12. Registration Rights Agreement. On or prior to the Closing Date,
Golden State shall enter into the Registration Rights Agreement.
6.13. Distribution and Listing of LTWs; Amendment of Certificate of
Incorporation. Golden State shall take all actions necessary, and shall use its
reasonable best efforts, to cause the issuance and distribution of the LTWs to
the stockholders of Golden State as soon as
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practicable following the date hereof and shall use its best efforts to cause
the LTWs to be listed on the NYSE or Nasdaq. The terms of the LTWs shall be
substantially as set forth on Annex E to this Agreement. Golden State shall use
its reasonable best efforts to effect an amendment to its Certificate of
Incorporation to increase the total number of shares of Golden State Common
Stock authorized thereunder to 250,000,000. From and after the Effective Time,
the Surviving Corporation shall honor the LTWs in accordance with their terms.
6.14. Tax Sharing Agreement. (a) For any taxable period ending after
the Effective Time, (i) Golden State shall, at the Effective Time, replace
Mafco Holdings Inc. under the tax sharing agreement entered into on January
1st, 1994, between Mafco Holdings Inc., FNH, and First Madison Bank, FSB, the
predecessor of CFB (the "Tax Sharing Agreement") and will assume all of the
rights and obligations of Mafco Holdings Inc. under the Tax Sharing Agreement
with respect to such taxable periods; (ii) Merger Sub shall, at the Effective
Time, replace FNH under the Tax Sharing Agreement and will assume all of the
rights and obligations of FNH under the Tax Sharing Agreement with respect to
such taxable periods; and (iii) CFB shall continue to be bound by the Tax
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Sharing Agreement.
(b) For any taxable period ending on or before the Effective Time (i)
Merger Sub shall be at the Effective Time the successor to FNH pursuant to the
Tax Sharing Agreement, and will assume all of the rights and obligations of FNH
under the Tax Sharing Agreement; and (ii) CFB and MAFCO Holdings, Inc. shall
continue to be bound by the Tax Sharing Agreement.
6.15. Transfer and Similar Taxes. Each party to this
Agreement, shall promptly pay all sales, use, privilege, transfer, documentary,
gains, stamp, duties, recording and similar Taxes and fees (including any
penalties, interest or additions) imposed upon such party incurred in
connection with the transactions contemplated by this Agreement (collectively,
the "Transfer Taxes"), and each such party shall, at its own expense, procure
any stock transfer stamps required by, and accurately file all necessary Tax
Returns and other documentation with respect to, any Transfer Tax.
6.16. Purchases of Golden State Securities. Parent Holdings shall not,
and shall cause its Subsidiaries not to, purchase or otherwise acquire,
directly or indirectly (other than in a fiduciary capacity or in respect of a
debt previously contracted or as contem-
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plated by the Option Agreement), any shares of capital stock of Golden State
(x) during the period beginning fourteen days prior to the 30 trading-day
period contemplated by the definition of "Average Daily Price" in Section 1.3
of this Agreement and ending on the Closing Date, or (y) at any time prior to
the Closing Date, if the purchase price paid in such transaction would be more
than $30.00 per share.
6.17. Stock Exchange Listing. Golden State shall use its reasonable
best efforts to cause the shares of Golden State Common Stock to be issued
pursuant to this Agreement to be approved for listing on the NYSE, subject to
official notice of issuance.
6.18. Certain Agreements of FGH, Parent Holdings and Ford. (a) FGH
represents and warrants that FGH is the record or beneficial owner of 100% of
the outstanding shares of Parent Holdings Common Stock (the "Parent Shares")
and that FGH is the lawful owner of all such shares, free and clear of all
liens, charges, encumbrances, voting agreements (other than as set forth
below) and commitments of every kind. Parent Holdings and Ford represent and
warrant that Parent Holdings and Ford are the lawful record or beneficial
owners of 800 shares of FNH Class A Common Stock and 200 shares of FNH
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Class B Common Stock (collectively, the "FNH Shares"), respectively, free and
clear of all liens, charges, encumbrances, voting agreements and commitments of
every kind.
(b) FGH agrees that, prior to the Effective Time, FGH will not, and
will use its reasonable best efforts to cause any affiliate thereof not to,
contract to sell, sell or otherwise transfer or dispose of any of the Parent
Shares, or the FNH Shares owned by Parent Holdings, and Ford agrees that, prior
to the Effective Time, Ford will not, and will use its reasonable best efforts
to cause any affiliate thereof not to, contract to sell, sell or otherwise
transfer or dispose of any of the FNH Shares owned by Ford, or in each case any
interest therein or securities convertible thereinto or any voting rights with
respect thereto, other than pursuant to the Mergers or with Golden State's
prior written consent.
(c) Each of FGH and Ford represents and warrants that it is not the
beneficial or record owner, directly or indirectly, of any shares of capital
stock of Golden State (other than those held by a subsidiary in a fiduciary
capacity or in respect of a debt previously contracted or, in the case of FGH,
pursuant to the Option
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Agreement). Each of Ford and FGH agrees that it shall not, and shall use its
reasonable best efforts to cause its affiliates (other than those affiliates
that are parties to this Agreement) not to, purchase or otherwise acquire,
directly or indirectly (other than in a fiduciary capacity or in respect of a
debt previously contracted or as contemplated by the Option Agreement), any
shares of Golden State Common Stock (i) during the period beginning fourteen
days prior to the 30 trading-day period contemplated by the definition of
"Average Daily Price" in Section 1.3 of this Agreement and ending on the
Closing Date, or (y) at any time prior to the Closing Date, if at a purchase
price in excess of $30.00 per share.
(d) FGH agrees that all of the Parent Shares beneficially owned
thereby, or over which FGH has voting power or control, directly or indirectly,
will be voted in favor of this Agreement and the Parent Plan of Merger and the
transactions contemplated thereby, and against any proposal by a party other
than Golden State for a business combination, merger, consolidation or similar
transaction.
6.19. Bank Charter Amendment. Prior to the Effective Time, Parent
Holdings shall use its commer-
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cially reasonable efforts to cause CFB to amend its federal stock charter for
the purposes of granting to the holders of preferred stock of CFB and to the
holders of the CALGZs and the CALGLs voting rights not to exceed in the
aggregate 10% of the voting power of all voting securities of CFB.
ARTICLE VII
CONDITIONS PRECEDENT
7.1. Conditions to Each Party's Obligation To Effect the Mergers. The
respective obligation of each party hereto to effect the Mergers shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement and the Parent Plan of Merger
shall have been approved and adopted by the requisite votes of the holders of
the outstanding capital stock of Golden State under applicable law and the
Certificate of Incorporation and By-laws of Golden State.
(b) Other Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby (including the Mergers and the Subsidiary
Merger) shall have been obtained and shall remain in full
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force and effect and all statutory waiting periods in respect thereof shall
have expired (all such approvals and the expiration of all such waiting periods
being referred to herein as the "Requisite Regulatory Approvals").
(c) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition (an "Injunction") preventing the consummation of the
Mergers, the Subsidiary Merger or any of the other transactions contemplated by
this Agreement or the Bank Merger Agreement shall be in effect. No statute,
rule, regulation, order, injunction or decree shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits, restricts
or makes illegal consummation of the Mergers or the Subsidiary Merger.
(d) Amendment to Certificate of Incorporation. Golden State shall
have effected an amendment to its Certificate of Incorporation to increase the
total number of shares of Golden State Common Stock authorized thereunder to
250,000,000.
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7.2. Conditions to Obligations of Parent Holdings and FNH. The
obligation of Parent Holdings and FNH to effect the Mergers is also subject to
the satisfaction or waiver by Parent Holdings and FNH at or prior to the
Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 2.2, the
representations and warranties of Golden State set forth in this Agreement
(other than those set forth in Sections 3.2 and 3.17) shall be true and correct
as of the date of this Agreement and (except to the extent such representations
and warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date; and (ii) the representations and warranties
of Golden State set forth in Sections 3.2 and 3.17 of this Agreement shall be
true and correct in all material respects (without giving effect to Section 2.2
of this Agreement) as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date. Parent Holdings
shall have received a certificate signed on behalf of Golden State by the
Chief Executive Officer and the Chief Financial Officer of Golden State to the
foregoing effect.
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(b) Performance of Obligations of Golden State and Merger Sub. Golden
State and Merger Sub shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior
to the Closing Date, and Parent Holdings shall have received a certificate
signed on behalf of Golden State by the Chief Executive Officer and the Chief
Financial Officer of Golden State to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Federal Tax Opinion. Parent Holdings shall have received an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Parent Holdings
("Parent Holdings's Counsel"), dated the Effective Date, in form and substance
reasonably satisfactory to Parent Holdings, substantially to the effect that,
on the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing at the Effective
Time, the Mergers and Subsidiary Merger will be treated as reorganizations
within the meaning of Section 368(a) of the Code and that, accordingly, for
federal income tax purposes:
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(i) No gain or loss will be recognized by Golden State,
Merger Sub, Parent Holdings or FNH as a result of the Mergers;
(ii) No gain or loss will be recognized by CFB or GFB as a
result of the Subsidiary Merger (except to the extent CFB or GFB
may be required to recognize income due to the recapture of bad
debt reserves as a result of the Subsidiary Merger); and
(iii) No gain or loss will be recognized by the
shareholders of Parent Holdings or FNH solely as a result of the
receipt of Golden State Common Stock at the Effective Time in
exchange for Parent Holdings Common Stock or FNH Class B Common
Stock pursuant to the Mergers.
In rendering such opinion, Parent Holding's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Parent Holdings, FNH, CFB, Golden State, Merger Sub, GFB and
others, including FGH and Ford, reasonably satisfactory in form and substance
to such counsel.
(e) Board of Directors. Golden State shall have received the director
resignations, and the Golden State Board of Directors shall have been expanded,
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in each case as contemplated by Section 6.11, and the vacancies resulting from
such resignations and expansion shall have been filled as contemplated by
Section 6.11.
(f) Registration Rights Agreement. Golden State shall have executed
the Registration Rights Agreement.
(g) Distribution of LTWs. Golden State shall have issued and
distributed to its stockholders the LTWs as contemplated by Section 6.13.
(h) Listing of Shares. The shares of Golden State Common Stock to be
issued upon consummation of the Mergers pursuant to Section 1.3 shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
7.3. Conditions to Obligations of Golden State and Merger Sub. The
obligations of Golden State and Merger Sub to effect the Mergers are also
subject to the satisfaction or waiver by Golden State and Merger Sub at or
prior to the Effective Time of the following conditions:
(a) Representations and Warranties. (i) Subject to Section 2.2, the
representations and warranties of Parent Holdings, Ford and FGH set forth in
this Agreement (other than those representations of Parent
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Holdings, FGH and Ford set forth in Sections 4.2 and 6.18) shall be true and
correct as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date; and (ii) the representations
and warranties of Parent Holdings, Ford and FGH set forth in Sections 4.2 and
6.18 of this Agreement shall be true and correct in all material respects
(without giving effect to Section 2.2 of this Agreement) as of the date of this
Agreement and (except to the extent such representations and warranties speak
as of an earlier date) as of the Closing Date as though made on and as of the
Closing Date. Golden State shall have received a certificate signed on behalf
of Parent Holdings by the Executive Vice President and any Vice President of
Parent Holdings to the foregoing effect.
(b) Performance of Obligations of Parent Holdings and
FNH. Parent Holdings and FNH shall have performed in all material respects
all obligations required to be performed by them under this Agreement
at or prior to the Closing Date, and Golden State shall have received a
certificate signed on behalf of Parent Holdings by the Executive Vice
President and any Vice Presi-
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dent of Parent Holdings to such effect.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(d) Federal Tax Opinion. Golden State shall have received an opinion
of Wachtell, Lipton, Rosen & Katz ("Golden State's Counsel"), in form and
substance reasonably satisfactory to Golden State, dated the date of the
Effective Time, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time, the Mergers and the
Subsidiary Merger will be treated as reorganizations within the meaning of
Section 368(a) of the Code and that accordingly for federal income tax
purposes:
(i) No gain or loss will be recognized by Golden
State, Merger Sub, Parent Holdings or FNH as a result of the Mergers;
(ii) No gain or loss will be recognized by CFB or
GFB as a result of the Subsidiary Merger (except to the extent CFB or
GFB may be required to recognize income due to the recapture of bad
debt reserves as a result of
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the Subsidiary Merger); and
(iii) No gain or loss will be recognized by the
shareholders of Parent Holdings or FNH solely as a result of the
receipt of Golden State Common Stock at the Effective Time in exchange
for Parent Holdings Common Stock or FNH Class B Common Stock pursuant
to the Mergers.
In rendering such opinion, Golden State's Counsel may require and rely upon
representations and covenants, including those contained in certificates of
officers of Parent Holdings, FNH, CFB, Merger Sub, GFB and others, including
FGH and Ford, reasonably satisfactory in form and substance to such counsel.
(e) Distribution of LTWs. Golden State shall have issued and
distributed to its stockholders the LTWs as contemplated by Section 6.13.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1. Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the matters
presented in connection with the Mergers by the stockholders of
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Golden State:
(a) by mutual consent of Golden State and Parent Holdings in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either Golden State or Parent Holdings upon written notice to
the other party (i) 60 days after the date on which any request or application
for a Requisite Regulatory Approval shall have been denied or withdrawn at the
request or recommendation of the Governmental Entity which must grant such
Requisite Regulatory Approval, unless within the 60-day period following such
denial or withdrawal a petition for rehearing or an amended application has
been filed with the applicable Governmental Entity, provided, however, that no
party shall have the right to terminate this Agreement pursuant to this Section
8.1(b)(i) if such denial or request or recommendation for withdrawal shall be
due to the failure of the party seeking to terminate this Agreement to perform
or observe the covenants and agreements of such party set forth herein or (ii)
if any Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the Mergers or the
Subsidiary Merger;
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(c) by either Parent Holdings or Golden
State if the Mergers shall not have been consummated on or before December 31,
1998, unless the failure of the Closing to occur by such date shall be due to
the failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein;
(d) by either Parent Holdings or Golden
State (provided that if the terminating party is Golden State, Golden State
shall not be in material breach of any of its obligations under Section 6.3) if
any approval of the stockholders of Golden State required for the consummation
of the Mergers shall not have been obtained by reason of the failure to obtain
the required vote at a duly held meeting of such stockholders or at any
adjournment or postponement thereof;
(e) by either Parent Holdings or Golden
State (provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained herein) if
there shall have been a material breach of any of the representations or
warranties set forth in this Agreement on the part of the other party, which
breach is not cured within thirty days following written notice to the party
committing such
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breach, or which breach, by its nature, cannot be cured prior to the Closing;
0provided, however, that neither party shall have the right to terminate this
Agreement pursuant to this Section 8.1(e) unless the breach of representation
or warranty, together with all other such breaches, would entitle the party
receiving such representation not to consummate the transactions contemplated
hereby under Section 7.2(a) (in the case of a breach of representation or
warranty by Golden State) or Section 7.3(a) (in the case of a breach of
representation or warranty by Parent Holdings); or
(f) by either Parent Holdings or Golden
State (provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained herein) if
there shall have been a material breach of any of the covenants or agreements
set forth in this Agreement on the part of the other party, which breach shall
not have been cured within thirty days following receipt by the breaching party
of written notice of such breach from the other party hereto, or which breach,
by its nature, cannot be cured prior to the Closing.
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8.2. Effect of Termination; Expenses. In the event of termination of
this Agreement by either Parent Holdings or Golden State as provided in Section
8.1, this Agreement shall forthwith become void and have no effect except (i)
Sections 6.2(b), 8.2 and 9.4 shall survive any termination of this Agreement,
(ii) that notwithstanding anything to the contrary contained in this Agreement,
no party shall be relieved or released from any liabilities or damages arising
out of its willful breach of any provision of this Agreement, and (iii) in the
event that both an Initial Triggering Event and a Subsequent Triggering Event
(each as defined in the Option Agreement) shall have occurred prior to the
occurrence of an Exercise Termination Event (as defined in the Option
Agreement), then, in addition to any rights which Parent Holdings may have
under the Option Agreement, Golden State shall pay to Parent Holdings a cash
termination fee of $50 million. Such fee shall be payable in immediately
available funds on or before the second business day following the occurrence
of the Subsequent Triggering Event. Subject to the foregoing, the fee payable
pursuant to this Section 8.2 shall be payable by Golden State regardless of
any prior or subsequent termination of this Agreement.
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8.3. Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto, by action taken or authorized
by their respective Boards of Directors, at any time before or after approval
of the matters presented in connection with the Mergers by the stockholders of
Golden State. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.4. Extension; Waiver. At any time prior to the Effective
Time, each of the parties hereto, by action taken or authorized by its Board of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of any of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party, but such extension or waiver or failure to insist on strict compliance
with an obligation, covenant, agreement or condition shall not operate
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as a waiver of, or estoppel with respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1. Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") will take place at 10:00 a.m. on the
first day which is (a) the last business day of a month and (b) at least two
business days after the satisfaction or waiver (subject to applicable law) of
the latest to occur of the conditions set forth in Article VII hereof (other
than those conditions which relate to actions to be taken at the Closing)(the
"Closing Date"), at the offices of CFB, unless another time, date or place is
agreed to in writing by the parties hereto. At the Closing, upon surrender by
FGH and Ford of the certificates representing the Parent Shares and FNH Shares
owned by them, Golden State shall issue, or cause to be issued, to each of FGH
and Ford, in the manner specified by them, certificates representing the shares
of Golden State Common Stock which they shall be entitled to receive pursuant
to Section 1.3 of this Agreement.
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9.2. Alternative Structure. Notwithstanding anything to the contrary
contained in this Agreement, prior to the Effective Time, Parent Holdings shall
be entitled to revise the structure of the Mergers and/or the Subsidiary Merger
and related transactions provided that each of the transactions comprising such
revised structure shall (i) fully qualify as, or fully be treated as part of,
one or more tax-free reorganizations within the meaning of Section 368(a) of
the Code, and not change the amount of consideration to be received by the
stockholders of Parent Holdings and FNH, (ii) be capable of consummation in as
timely a manner as the structure contemplated herein and (iii) not otherwise be
materially prejudicial to the interests of the stockholders of Golden State.
This Agreement and any related documents shall be appropriately amended in
order to reflect any such revised structure.
9.3. Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties, covenants and agreements in this Agreement
or in any instrument delivered pursuant to this Agreement (other than pursuant
to the Option Agreement and the Management Agreement which shall terminate in
accordance with their respective terms) shall survive the Effective
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Time, except for those covenants and agreements contained herein and therein
which by their terms apply in whole or in part after the Effective Time.
9.4. Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such cost or expense, provided, however, that nothing
contained herein shall limit either party's rights to recover any liabilities
or damages arising out of the other party's willful breach of any provision of
this Agreement.
9.5. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), mailed by registered or certified mail (return
receipt requested) or delivered by an express courier (with confirmation) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent Holdings, FNH or FGH, to:
MacAndrews & Forbes Holdings Inc.
35 East 62nd Street
New York, New York 10021
Attention: General Counsel
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with a copy to:
Skadden, Arps Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Fred B. White, III, Esq.
(b) if to Golden State and Merger Sub, to:
Golden State Bancorp Inc.
414 North Central Avenue
Glendale, California 91203
Attention: Chief Executive Officer
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, New York 10019
Attn: Edward D. Herlihy, Esq.
(c) if to Ford, to:
Hunter's Glen/Ford, Ltd.
c/o Gerald J. Ford
California Federal Bank
200 Crescent Court, Suite 1350
Dallas, Texas 75201
9.6. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be
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deemed to be followed by the words "without limitation". The phrases "the date
of this Agreement", "the date hereof" and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to February 4, 1998.
9.7. Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.8. Entire Agreement. This Agreement (including the documents and
the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, other than the
Parent Plan of Merger, the FNH Plan of Merger, the Bank Merger Agreement, the
Management Agreement and the Option Agreement.
9.9. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable conflicts of law.
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9.10. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that the provisions contained in
Section 6.2(b) of this Agreement were not performed in accordance with its
specific terms or was otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of Section 6.2(b) of this Agreement and to enforce specifically the terms and
provisions thereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
9.11. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
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9.12. Publicity. Except as otherwise required by law or the rules of
the NYSE or Nasdaq, if applicable, so long as this Agreement is in effect,
neither Parent Holdings nor Golden State shall, or shall permit any of its
Subsidiaries to, issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be unreasonably withheld.
Without limiting the foregoing, the parties shall cooperate in any investor or
analyst presentation or conferences in respect of the transactions contemplated
by this Agreement.
9.13. Assignment; No Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns. Except as otherwise expressly provided in this Agreement and in
the documents expressly incorporated herein, this Agreement (including the
documents
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and instruments referred to herein) is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
GOLDEN STATE BANCORP INC.
By /s/ Stephen J. Trafton
----------------------------------------
Name: Stephen J. Trafton
Title: Chairman, President and
Chief Executive Officer
GOLDEN STATE FINANCIAL CORPORATION
By /s/ Stephen J. Trafton
----------------------------------------
Name: Stephen J. Trafton
Title: Chairman, President and
Chief Executive Officer
FIRST NATIONWIDE (PARENT)
HOLDINGS INC.
By /s/ Howard Gittis
----------------------------------------
Name: Howard Gittis
Title: Vice Chairman
FIRST NATIONWIDE HOLDINGS INC.
By /s/ Howard Gittis
----------------------------------------
Name: Howard Gittis
Title: Vice Chairman
FIRST GIBRALTAR HOLDINGS INC.
By /s/ Howard Gittis
----------------------------------------
Name: Howard Gittis
Title: Vice Chairman
HUNTER'S GLEN/FORD, LTD.
By /s/ Gerald J. Ford
----------------------------------------
Name: Gerald J. Ford
Title: General Partner
<PAGE>
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated February 4, 1998, between
Golden State Bancorp Inc., a Delaware corporation ("Issuer"), and First
Nationwide (Parent) Holdings Inc., a Delaware corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee, Issuer, First Nationwide Holdings Inc., a
Delaware corporation and a wholly owned subsidiary of Grantee ("FNH"), and
Golden State Financial Corporation, a Delaware corporation and a wholly owned
subsidiary of Issuer ("Merger Sub") have entered into an Agreement and Plan of
Reorganization of even date herewith (the"Reorganization Agreement"), and
Grantee and Issuer have entered into an Agreement and Plan of Merger of even
date herewith (together with the Reorganization Agreement, the "Merger
Agreement"), which agreements have been executed by the parties hereto
immediately prior to this Stock Option Agreement (this "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 10,165,950 fully paid and nonassessable shares of Issuer's Common Stock, par
value $1.00 per share ("Common Stock"), at a price of $24.00 per share (the
"Option Price"); provided, however, that in no event shall the number of shares
of Common Stock for which this Option is exercisable exceed 19.9% of the
Issuer's issued and outstanding shares of Common Stock without giving effect to
any shares subject to or issued pursuant to
<PAGE>
the Option. The number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to adjustment as herein
set forth. Notwithstanding any other provision of this Agreement, Issuer and
Grantee agree that this Agreement shall not entitle Grantee to any LTWs (as
defined in the Reorganization Agreement) or any payment in respect thereof,
and, in the event Grantee becomes entitled to receive any shares of Common
Stock pursuant to the terms of this Agreement, Issuer may make such provisions
as are necessary to effectuate the provisions of this sentence.
(b) In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement) or (ii) redeemed,
repurchased, retired or otherwise cease to be outstanding after the date of
this Agreement, the number of shares of Common Stock subject to the Option
shall be increased or decreased, as appropriate, so that, after such issuance,
such number equals 19.9% of the number of shares of Common Stock then issued
and outstanding without giving effect to any shares subject or issued pursuant
to the Option. Nothing contained in this Section 1(b) or elsewhere in this
Agreement shall be deemed to authorize Issuer or Grantee to breach any
provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if, both an
Initial Triggering Event (as hereinafter defined) and a Subsequent Triggering
Event (as hereinafter defined) shall have occurred prior to the occurrence of
an Exercise Termination Event (as hereinafter defined), provided that the
Holder shall have sent the written notice of such exercise (as provided in
subsection (e) of this Section 2) within ninety days following such Subsequent
Triggering Event (or such longer period as provided in Section 10), provided
further, however, that if the Option cannot be exercised on any day because of
any injunction, order or similar restraint issued by a court of competent
jurisdiction, the period during which the Option may be exercised shall be
extended so that the Option shall expire no earlier than on the tenth business
day after such injunction, order or restraint shall have been dissolved or when
such injunction, order or restraint shall have become permanent and no longer
subject to appeal, as the case may be. Each of the following shall be an
"Exercise Termination Event": (i) the Effective Time (as defined in the
Reorganization Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event except a termination by
Grantee pursuant to Section 8.1(f) of the Reorganization Agreement (unless the
breach by Issuer giving rise to such right of
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termination is non-volitional); or (iii) the passage of 12 months after
termination of the Merger Agreement if such termination follows the occurrence
of an Initial Triggering Event or is a termination by Grantee pursuant to
Section 8.1(f) of the Reorganization Agreement (unless the breach by Issuer
giving rise to such right of termination is non-volitional). The term "Holder"
shall mean the holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an
"Issuer Subsidiary"), without having received Grantee's prior written
consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the
term "person" for purposes of this Agreement having the meaning
assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the rules and
regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer
shall have recommended that the stockholders of Issuer approve or
accept any Acquisition Transaction with any person other than Grantee
or a Subsidiary of Grantee. For purposes of this Agreement,
"Acquisition Transaction" shall mean (w) a merger or consolidation, or
any similar transaction, involving Issuer or any Significant
Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated by
the Securities and Exchange Commission (the "SEC")) of Issuer, (x) a
purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power
of Issuer, or (z) any substantially similar transaction; provided,
however, that in no event shall any merger, consolidation, purchase or
similar transaction involving only the Issuer and one or more of its
Subsidiaries or involving only two or more of such Subsidiaries, be
deemed to be an Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the
Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having
received Grantee's prior written consent, shall have authorized,
recommended, proposed or publicly announced its intention to
authorize,
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<PAGE>
recommend or propose, to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary, or the Board of
Directors of Issuer shall have publicly withdrawn or modified, or
publicly announced its interest to withdraw or modify, in any manner
adverse to Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement in
anticipation of engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee
Subsidiary or any Issuer Subsidiary acting in a fiduciary capacity in
the ordinary course of its business shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or more
of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or its
stockholders by public announcement or written communication that is
or becomes the subject of public disclosure to engage in an
Acquisition Transaction;
(v) After an overture is made by a third party to
Issuer or its stockholders to engage in an Acquisition Transaction,
Issuer shall have breached any covenant or obligation contained in the
Merger Agreement and such breach (x) would entitle Grantee to
terminate the Merger Agreement and (y) shall not have been cured prior
to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board, or other federal
or state bank regulatory authority, which application or notice has
been accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean either
of the following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership
of 20% or more of the then outstanding shares of Common Stock;
or
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<PAGE>
(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of subsection (b) of this Section 2, except
that the percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event of
which it has notice (together, a "Triggering Event"), it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the total
number of shares it will purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 60 business days
from the Notice Date for the closing of such purchase (the "Closing Date");
provided that if prior notification to or approval of the Federal Reserve Board
or the Office of Thrift Supervision (the "OTS") or any other regulatory agency
is required in connection with such purchase, the Holder shall promptly file
the required notice or application for approval and shall expeditiously process
the same and the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained
and any requisite waiting period or periods shall have passed. Any exercise of
the Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to designate such a bank
account shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer this Agreement and a letter agreeing that
the Holder will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder
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<PAGE>
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the reference to the provisions to
this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii)
the legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered
to the Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Issuer agrees: (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or treasury
shares of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of
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<PAGE>
assets, or by any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by Issuer; (iii) promptly to take all action as may from
time to time be required (including (x) complying with all premerger
notification, reporting and waiting period requirements specified in 15 U.S.C.
ss. 18a and regulations promulgated thereunder and (y) in the event, under any
federal or state banking law, prior approval of or notice to the Federal
Reserve Board, the OTS or to any state regulatory authority is necessary before
the Option may be exercised, cooperating fully with the Holder in preparing
such applications or notices and providing such in formation to the Federal
Reserve Board, the OTS or such state regulatory authority as they may require)
in order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Stock Option Agreements and related Options for which
this Agreement (and the Option granted hereby) may be exchanged. Upon receipt
by Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute and deliver a
new Agreement of like tenor and date. Any such new Agreement executed and
delivered shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed or mutilated
shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option pursuant to
Section 1 of this Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event of any
change in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the Common
Stock that would be prohibited under the terms of the Merger Agreement, or the
like, the type and number of shares of
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<PAGE>
Common Stock purchasable upon exercise hereof and the Option Price shall be
appropriately adjusted in such manner as shall fully preserve the economic
benefits provided hereunder and proper provision shall be made in any agreement
governing any such transaction to provide for such proper adjustment and the
full satisfaction of the Issuer's obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee (whether on its own behalf or on behalf of any subsequent holder of
this Option (or part thereof) or any of the shares of Common Stock issued
pursuant hereto) delivered within six months of such Subsequent Triggering
Event (or such longer period as provided in Section 10), promptly prepare, file
and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and
shall use its reasonable best efforts to cause such registration statement to
become effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance with any plan
of disposition requested by Grantee. Issuer will use its reasonable best
efforts to cause such registration statement first to become effective and then
to remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee shall
have the right to demand two such registrations. The foregoing notwithstanding,
if, at the time of any request by Grantee for registration of the Option or
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the inclusion of
the Holder's Option or Option Shares would interfere with the successful
marketing of the shares of Common Stock offered by Issuer, the number of Option
Shares otherwise to be covered in the registration statement contemplated
hereby may be reduced; provided, however, that after any such required
reduction the number of Option Shares to be included in such offering for the
account of the Holder shall constitute at least 25% of the total number of
shares to be sold by the Holder and Issuer in the aggregate; and provided
further, however, that if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practicable and no
reduction shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements cus-
-8-
<PAGE>
tomarily included in secondary offering underwriting agreements for the Issuer.
Upon receiving any request under this Section 6 from any Holder, Issuer agrees
to send a copy thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained
herein, in no event shall Issuer be obligated to effect more than two
registrations pursuant to this Section 6 by reason of the fact that there shall
be more than one Grantee as a result of any assignment or division of this
Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase
Event (as defined below), (i) following a request of the Holder, delivered
prior to an Exercise Termination Event, Issuer (or any successor thereto) shall
repurchase the Option from the Holder at a price (the "Option Repurchase
Price") equal to the amount by which (A) the Market/Offer Price (as defined
below) exceeds (B) the Option Price, multiplied by the number of shares for
which this Option may then be exercised and (ii) at the request of the owner of
Option Shares from time to time (the "Owner"), delivered within 90 days of such
occurrence (or such longer period as provided in Section 10), Issuer shall
repurchase such number of the Option Shares from the Owner as the Owner shall
designate at a price (the "Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so designated.
The term "Market/Offer Price" shall mean the highest of (i) the price per share
of Common Stock at which a tender offer or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares, as the case may
be, or (iv) in the event of a sale of all or a substantial portion of Issuer's
assets, the sum of the price paid in such sale for such assets and the current
market value of the remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as the
case may be, and reasonably acceptable to Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the Market/Offer Price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be, and reasonably acceptable to
Issuer.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and any Option
Shares pursuant to this Section 7 by surrendering for such purpose to Issuer,
at its principal office, this
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<PAGE>
Agreement or certificates for Option Shares, as applicable, accompanied by a
written notice or notices stating that the Holder or the Owner, as the case may
be, elects to require Issuer to repurchase this Option and/or the Option Shares
in accordance with the provisions of this Section 7. Within the latter to occur
of (x) five business days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or notices relating
thereto and (y) the time that is immediately prior to the occurrence of a
Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder
the Option Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof that Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable
law or regulation from repurchasing the Option and/or the Option Shares in
full, Issuer shall immediately so notify the Holder and/or the Owner and
thereafter deliver or cause to be delivered, from time to time, to the Holder
and/or the Owner, as appropriate, the portion of the Option Repurchase Price
and the Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any
time after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation from delivering to
the Holder and/or the Owner, as appropriate, the Option Repurchase Price and
the Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase
by a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of
which is the Option Repurchase Price, or (B) to the Owner, a certificate for
the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall
be deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease or
other acquisition of all
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<PAGE>
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such event shall constitute a Repurchase Event
unless a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
8. (a) In the event that prior to an Exercise Termination
Event, Issuer shall enter into an agreement (i) to consolidate with or merge
into any person, other than Grantee or one of its Subsidiaries, and shall not
be the continuing or surviving corporation of such consolidation or merger,
(ii) to permit any person, other than Grantee or one of its Subsidiaries, to
merge into Issuer and Issuer shall be the continuing or surviving corporation,
but, in connection with such merger, the then outstanding shares of Common
Stock shall be changed into or exchanged for stock or other securities of any
other person or cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of the outstanding
voting shares and voting share equivalents of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Grantee or one of its Subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving person, and (iii) the transferee of all
or substantially all of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon exercise of
the Substitute Option.
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<PAGE>
(3) "Assigned Value" shall mean the Market/ Offer
Price, as defined in Section 7.
(4) "Average Price" shall mean the average closing
price of a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in question,
but in no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to
a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the
Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Option shall also enter into an agreement with the then Holder or Holders of
the Substitute Option in substantially the same form as this Agreement, which
shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then exercisable and
the denominator of which shall be the number of shares of Substitute Common
Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more than
19.9% of the shares of Substitute Common Stock outstanding prior to exercise
but for this clause (e), the issuer of the Substitute Option (the "Substitute
Option Issuer") shall make a cash payment to Holder equal to the excess of (i)
the value of the Substitute Option without giving effect to the limitation in
this clause (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment
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<PAGE>
banking firm selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the Substitute Option Issuer shall repurchase
the Substitute Option from the Substitute Option Holder at a price (the
"Substitute Option Repurchase Price") equal to the amount by which (i) the
Highest Closing Price (as hereinafter defined) exceeds (ii) the exercise price
of the Substitute Option, multiplied by the number of shares of Substitute
Common Stock for which the Substitute Option may then be exercised, and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute Share Repurchase
Price") equal to the Highest Closing Price multiplied by the number of
Substitute Shares so designated. The term "Highest Closing Price" shall mean
the highest closing price for shares of Substitute Common Stock within the
six-month period immediately preceding the date the Substitute Option Holder
gives notice of the required repurchase of the Substitute Option or the
Substitute Share Owner gives notice of the required repurchase of the
Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share
Owner, as the case may be, may exercise its respective right to require the
Substitute Option Issuer to repurchase the Substitute Option and the Substitute
Shares pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option Issuer
to repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall deliver
or cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or, in either case, the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
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<PAGE>
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the Substitute
Option and/or the Substitute Shares in part or in full, the Substitute Option
Issuer following a request for repurchase pursuant to this Section 9 shall
immediately so notify the Substitute Option Holder and/ or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to
the Substitute Option Holder and/or the Substitute Share Owner, as appropriate,
the portion of the Substitute Share Repurchase Price, respectively, which it is
no longer prohibited from delivering, within five business days after the date
on which the Substitute Option Issuer is no longer so prohibited; provided,
however, that if the Substitute Option Issuer is at any time after delivery of
a notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to receive
all required regulatory and legal approvals as promptly as practicable in order
to accomplish such repurchase), the Substitute Option Holder or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at
the time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day or six-month period for exercise of certain
rights under Sections 2, 6, 7 and 14 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights,
and for the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act by reason of
such exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
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<PAGE>
(a) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of Issuer and no other corporate proceedings on the part
of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required
redeeming all of the Rights or amending or terminating the Rights Agreement) so
that the entering into of this Option Agreement, the acquisition of shares of
Common Stock hereunder and the other transactions contemplated hereby do not
and will not result in the grant of any rights to any person under the Rights
Agreement or enable or require the Rights to be exercised, distributed or
triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority
to enter into this Agreement and, subject to any approvals or consents referred
to herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Grantee. This Agreement has been duly executed and delivered by
Grantee.
(b) The Option is not being, and any shares of Common Stock
or other securities acquired by Grantee upon exercise of the Option will not
be, acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.
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<PAGE>
13. (a) Notwithstanding anything to the contrary contained herein, in
no event shall Grantee's Total Profit (as defined below in Section 13(c)
hereof) exceed $25 million.
(b) Notwithstanding anything to the contrary contained
herein, the Option may not be exercised for a number of shares as would, as of
the date of exercise, result in a Notional Total Profit (as defined below in
Section 13(d) hereof) of more than $25 million; provided, that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by
Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 7 hereof, (ii) (x) the amount received by Grantee pursuant
to Issuer's repurchase of Option Shares pursuant to Section 7 hereof, less (y)
Grantee's purchase price for such Option Shares, (iii) (x) the net cash amounts
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares shall be converted or exchanged) to
any unaffiliated party, less (y) Grantee's purchase price of such Option
Shares, (iv) any amounts received by Grantee on the transfer of the Option (or
any portion thereof) to any unaffiliated party, and (v) any equivalent amount
with respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose to exercise the
Option shall be the Total Profit determined as of the date of such proposed
exercise assuming that the Option were exercised on such date for such number
of shares and assuming that such shares, together with all other Option Shares
held by Grantee and its affiliates as of such date, were sold for cash at the
closing market price for the Issuer Common Stock as of the close of business on
the preceding trading day (less customary brokerage commissions).
14. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created hereunder to
any other person, without the express written consent of the other party,
except that in the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and obligations
hereunder within 90 days following such Subsequent Triggering Event (or such
longer period as provided in Section 10); provided, however, that until the
date 15 days following the date on which the Federal Reserve Board or the OTS,
as applicable, approves an application by Grantee to acquire the shares of
Common Stock subject to the Option, Grantee may not
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<PAGE>
assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf, or (iv)
any other manner approved by the Federal Reserve Board or the OTS, as
applicable.
15. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation making application
to list the shares of Common Stock issuable hereunder on the New York Stock
Exchange upon official notice of issuance and applying to the Federal Reserve
Board and/or the OTS, as applicable, for approval to acquire the shares
issuable hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
17. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 7, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pursuant to Section
1(b) or 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Reorganization Agreement.
19. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
20. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
21. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or
oral. The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is intended
to confer upon any party, other than the parties hereto, and their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
23. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
GOLDEN STATE BANCORP INC.
By: /s/ Stephen J. Trafton
-------------------------------------
Name: Stephen J. Trafton
Title: Chairman, President and
Chief Executive Officer
FIRST NATIONWIDE (PARENT)
HOLDINGS INC.
By: /s/ Howard Gittis
-----------------------------------
Name: Howard Gittis
Title: Vice Chairman
<PAGE>
LITIGATION MANAGEMENT AGREEMENT
THIS AGREEMENT (the "Management Agreement"), dated as of
February 4, 1998, is by and among Golden State Bancorp Inc., a Delaware
corporation ("GSB" and, as the surviving corporation in the merger contemplated
by the Agreement (as defined herein), the "Company"), Glendale Federal Bank,
Federal Savings Bank ("Glendale Federal"), California Federal Bank, A Federal
Savings Bank ("California Federal" and, together with Glendale Federal, the
"Banks")), and the other persons whose names are set forth on the signature
pages hereto.
WHEREAS, Glendale Federal is currently a plaintiff in an
action titled Glendale Federal Bank, F.S.B. v. United States of America, Civil
Action No. 90-772C, U.S. Court of Federal Claims (together with any appeal
thereof or other proceeding related thereto, the "Glendale Litigation"); and
WHEREAS, California Federal is currently a plaintiff in an
action titled California Federal Bank, A Federal Savings Bank v. United States
of America, Civil Action No. 92-138C, U.S. Court of Federal Claims (together
with any appeal thereof or other proceedings related thereto, the "CalFed
Litigation" and, together with the Glendale Litigation, the "Goodwill
Litigation"); and
WHEREAS, on July 28, 1995, California Federal distributed
Participation Interests representing the right to receive a pro rata portion of
approximately 25 percent of the net after-tax proceeds of the CalFed Litigation
(each, a "CALGZ") and on January 3, 1997, California Federal distributed
Secondary Participation Interests representing the right to receive a pro rata
portion of 60 percent of the net after-tax proceeds, in excess of certain
threshold recovery amounts and net of distributions to the holders of the
CALGZs, of the CalFed Litigation (each, a "CALGL" and, together with the
CALGZs, the "CalFed Securities"); and
WHEREAS, GSB has announced its intention to distribute
Litigation Tracking Warrants, each representing the right to receive a pro rata
distribution of shares of Golden State Common Stock with an aggregate value
equal to the a percentage, set forth in the Warrant Agreement relating to such
Warrants, of the net after-tax proceeds of the Glendale Litigation (each, a
"GSB LTW"), which distribution is expected to take place prior to consummation
of the Merger; and
<PAGE>
WHEREAS, GSB, through its subsidiaries, will, after giving
effect to the distribution of the GSB LTWs and the CalFed Securities, retain an
interest in the proceeds of the Glendale Litigation and the CalFed litigation,
respectively; and
WHEREAS, the parties hereto intend that the Goodwill
Litigation be pursued, prosecuted, managed and conducted in a manner that is
consistent with the best interests of the holders of the GSB LTWs, the CalFed
Securities, the Banks and the Company; and
WHEREAS, the parties hereto have agreed to conduct the
Goodwill Litigation as provided in this Management Agreement in connection with
the execution of the Agreement and Plan of Reorganization, dated February,
1998, by and among First Nationwide (Parent) Holdings, a Delaware corporation,
First Nationwide Holdings, Inc. a Delaware corporation, First Gibraltar
Holdings, Inc., a Delaware corporation, Hunter's Glen/Ford, Ltd. and GSB (the
"Agreement") (capitalized terms used but not otherwise defined in this
Management Agreement shall have the meanings ascribed to them in the
Agreement);
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
Pursuit and Management of Goodwill Litigation
1.1 In order to assure that those parties with prior
knowledge of and experience regarding the Goodwill Litigation, including the
facts forming the basis for the claims underlying the Goodwill Litigation and
regarding the strategies developed to pursue those claims, remain involved in
the Goodwill Litigation, the parties hereto agree that the Company shall,
effective as of the Effective Time, employ and retain Stephen J. Trafton and
Richard A. Fink (the "Litigation Managers") as Litigation Managers with respect
to the Glendale Litigation, and that the Company shall employ and retain
Messrs. Trafton and Fink as Litigation Managers with respect to the CalFed
Litigation.
1.2 The Litigation Managers, on behalf of the holders of the
GSB LTWs (the "GSB Holders"), Glendale Federal and the Company from and after
the Effective Time, shall be granted authority, subject to the terms of this
Management Agreement, to prosecute, appeal, negotiate, resolve, settle,
compromise, arbitrate or otherwise pursue the Glendale Litigation, in whole or
in part, and to oversee
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<PAGE>
for Glendale Federal and the Company the matters related to the GSB LTWs and
the recovery, disposition or other handling of any proceeds of the Glendale
Litigation and any expenses thereof (except with respect to the tax treatment
of the receipt or payment of any recovery, proceeds or expenses), subject to
and in accordance with the provisions of this Management Agreement.
1.3 The Litigation Managers, on behalf of the holders of the
CalFed Securities (the "CalFed Holders" and, together with the GSB Holders, the
"Holders"), California Federal and the Company from and after the Effective
Time shall be granted authority, subject to the terms of this Management
Agreement, to prosecute, appeal, negotiate, resolve, settle, compromise,
arbitrate or otherwise pursue the CalFed Litigation, in whole or in part, and
to oversee for the Surviving Bank and the Company the matters related to the
CalFed Certificates and the recovery, disposition or other handling of any
proceeds of the CalFed Litigation and any expenses thereof (except with respect
to the tax treatment of the receipt or payment of any recovery, proceeds or
expenses), subject to and in accordance with the provisions of this Management
Agreement.
1.4 As of and following the Effective Time, the Board of
Directors of the Company will establish a Glendale Litigation committee (the
"Glendale Committee") and a CalFed Litigation committee (the "CalFed
Committee"). As of and following the Effective Time, the powers and rights of
the Board of Directors of the Company shall be vested in the Glendale Committee
with respect to all matters related to the Glendale Litigation and the GSB LTWs
and in the CalFed Committee with respect to all matters related to the CalFed
Litigation and the CalFed Certificates. The Litigation Managers will report
directly to the Glendale Committee with respect to matters related to the
Glendale Litigation and the GSB LTWs, and will report directly to the CalFed
Committee with respect to matters related to the CalFed Litigation and the
CalFed Certificates.
1.5 The CalFed Committee may at any time, or from time to
time, reduce or terminate any or all of the specific powers of one or both of
the Litigation Managers with respect to the CalFed Litigation and in such event
shall provide prior written notice thereof to such Litigation Manager or
Litigation Managers. The decision of the CalFed Committee in this respect shall
not be subject to arbitration, dispute or litigation. Any dimunition of the
powers of the Litigation Managers shall not reduce any compensation due to the
Litigation Managers under this Agreement.
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<PAGE>
ARTICLE II
The Litigation Managers
2.1 (a) Subject to the terms of this Agreement, the
Litigation Managers shall have all power to carry out in their sole discretion
their responsibilities pursuant to Article 1 hereof, subject to (a) periodic
consultation with the Glendale Committee as to the Glendale Litigation and with
the CalFed Committee as to the CalFed Litigation and (b) the approval of the
Glendale Committee (with respect to the Glendale Litigation) or the CalFed
Committee (with respect to the CalFed Litigation) with respect to any final
settlement of the Glendale Litigation or the CalFed Litigation, any decision to
permanently abandon or otherwise cease to prosecute the Glendale Litigation or
the CalFed Litigation or any decision to expend funds of the Company or the
Surviving Bank. The powers and authority of the Litigation Managers shall
include, without limitation, the power and authority to, and the Litigation
Managers shall:
(i) without prior or further authorization, to control
and exercise authority over, subject to the terms of the GSB LTWs and
the CalFed Securities, the management and conduct of the Glendale
Litigation and the CalFed Litigation and matters relating to the GSB
LTWs and the CalFed Securities;
(ii) to coordinate and manage the application for any
regulatory, stock exchange, stock market or other approvals or the
making of any filings required to carry out the transactions
contemplated by the GSB LTWs or the CalFed Certificates, including
without limitation directing the Company to issue the shares of common
stock of the Company or any successor thereto upon exercise of the GSB
LTWs;
(iii) to authorize the payment by the Company or its
subsidiaries of expenses relating to the Glendale Litigation and the
GSB LTWs, or to the CalFed Litigation and the CalFed LTWs, as the case
may be;
(iv) to retain counsel and advisors, including
accountants, investment bankers, experts, transfer agents, escrow
4
<PAGE>
agents, consultants, and other assistances, in connection with the
Goodwill Litigation or the GSB LTWs or the CalFed Certificates (or any
other matters contemplated by this Management Agreement), or to retain
sub-managers or other agents, and to cause the same to be reasonably
compensated by the Company or its subsidiaries for services rendered;
(v) to enter into contracts, agreements, commitments
and other arrangements and to execute pleadings, affidavits and other
court documents, and to participate in, initiate or request settlement
or other conferences, hearings or discussions on behalf of the
Company, or Glendale Federal or California Federal or their
successors, necessary or appropriate to carry out their
responsibilities hereunder;
(vi) subject to Section 2.1(b), to make any
determinations or valuations contemplated by the terms of the GSB LTWs
or that are otherwise required to be made in order to fulfill the
intent of the terms of such securities;
(vii) with respect to any non-cash proceeds of the
Goodwill Litigation, to sell, convey, transfer, assign, pledge,
encumber or liquidate on behalf of the Company such non-cash proceeds
or any part thereof or any interest therein, upon such terms and for
such consideration as the Litigation Managers in their sole and
absolute discretion deem desirable, and to file on behalf of the
Company such documents as are customarily required to effect any of
the foregoing, including the filing of necessary UCC financing
statements; and
(viii) to publish or mail, or cause to be published or
mailed, any notices contemplated by the GSB LTWs or the CalFed
Securities or otherwise deemed advisable by the Litigation Managers in
connection with such securities.
Notwithstanding anything contained in this Management Agreement that may be
deemed to be to the contrary, the Board of Directors of the Company shall
(solely through the Glendale Committee in the case of the Glendale Litigation
and the GSB LTWs) have and maintain ultimate authority with respect to all
matters relating to the Goodwill Litigation, the GSB LTWs and the CalFed
Securities, and nothing
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<PAGE>
contained herein shall be deemed to relieve the Board of Directors (or, with
respect to matters related to the Glendale Litigation and the GSB LTWs, the
Glendale Committee) of any of its rights, authorities or obligations under
applicable law or to create any obligations in conflict with or in derogation
of such rights, authorities or obligations.
(b) Any determinations or valuations contemplated by the
terms of the GSB LTWs or the CalFed Securities or that are otherwise required
to be made in order to fulfill the intent of the terms of such securities
(including without limitation determination of the "Adjusted Litigation
Recovery," as such term is used in the GSB LTWs and the CALGLs, or the
"Litigation Recovery," as such term is used in the CALGZs, or whether or when
any event triggering any obligations thereunder has occurred) shall be made in
the first instance by the Litigation Managers. Such determinations and
valuations of the Litigation Managers shall be subject to review by the
Glendale Committee (in the case of the GSB LTWs) or the CalFed Committee (in
the case of the CalFed Securities), the decision of which Committee in respect
of such matters shall be final and binding on the Company and the Holders,
absent manifest error. In making such determinations or valuations the
Litigation Managers shall be entitled to retain such accountants, investment
bankers, counsel or other advisers and experts as they deem appropriate, and
shall be fully protected in relying upon the foregoing in such connection.
(c) During his employment as Litigation Manager, each
Litigation Manager shall be an Executive Vice President of the Company and
shall be entitled to (i) receive from the Company an annual salary of $600,000,
payable monthly, in the case of Mr. Trafton, and an annual salary of $400,000,
payable monthly, in the case of Mr. Fink; (ii) participation in employee
welfare benefit plans, deferred compensation and other plans, policies and
perquisites, in each case on a basis no less beneficial than that made
available to any other Executive Vice President of the Company or its
successors (other than participation in any stock option plan, the Severance
Pay Plan for Executive Officers or in the Deferred Executive Compensation Plan
of the Company); and (iii) office space comparable to such space as is
presently provided to such individuals by GSB in such location as Messrs.
Trafton and Fink may reasonably specify, secretarial and clerical assistance,
travel allowance and expense reimbursement, in each case no less beneficial
than made available to any other Executive Vice President of the Company or its
successors. In addition, in consideration for their services hereunder and for
the restrictions imposed by the noncompetition and nonsolicitation provisions
set forth in Section 6.2 hereof, Stephen J. Trafton shall be entitled to the
benefits set forth with respect to
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<PAGE>
him on Schedule 2.1(c)(i) hereto (the "Trafton Benefits") and Richard A. Fink
shall be entitled to the benefits set forth with respect to him on Schedule
2.1(c)(ii) hereto (the "Fink Benefits"). The cost to the Company or any of its
subsidiaries of any of the compensation payable or benefits due to the
Litigation Managers contemplated by this Section 2.1(c) (including without
limitation Schedules 2.1(c)(i) and 2.1(c)(ii)) or Section 2.1(d) shall be
deemed to be expenses of the Glendale Litigation and the GSB LTWs (to the
extent related thereto) or the CalFed Litigation and the CalFed Securities (to
the extent related thereto) for purposes of determining the amount of any
proceeds payable or securities issuable to the Holders under the GSB LTWs or
the CalFed Securities, as the case may be.
(d) In addition to the compensation contemplated by Section
2.1(c), the Litigation Managers shall each be entitled (and shall be fully
vested in such entitlement) to receive out of any recovery pursuant to the
Goodwill Litigation an incentive fee in an amount equal to 0.25% of the
aggregate value of the pre-tax recovery including post-judgment interest
(whether paid in cash or noncash consideration, or in a lump sum or in
installments) in respect of each of the Glendale Litigation (the "Glendale
Incentive Fee") and the CalFed Litigation (the "CalFed Incentive Fee" and,
together with the Glendale Incentive Fee, the "Incentive Fees"). If any
recovery is paid, in whole or in part, in a form other than cash or other than
in a single lump sum, the Litigation Managers shall determine in the first
instance the value of such recovery, subject to review by the Glendale
Committee (in the case of the Glendale Litigation) or the CalFed Committee (in
the case of the CalFed Litigation). The Glendale Incentive Fee and the CalFed
Incentive Fee, as the case may be, shall be payable upon the receipt of a final
nonappealable judgment or in the event of a final settlement (a "Final
Resolution") of the Glendale Litigation or the CalFed Litigation, respectively
(whether or not any consideration in respect of such judgment or settlement has
been received as of such time). Notwithstanding the foregoing, a Litigation
Manager shall be divested of his right to receive such Litigation Manager's
share of the Glendale Incentive Fee or CalFed Incentive Fee if his employment
hereunder in respect of the Glendale Litigation or the CalFed Litigation,
respectively, is terminated prior to the date of a Final Resolution (1) by such
Litigation Manager other than for Good Reason (as defined herein), death or
incapacity, or (2) by the Company for Cause (as defined herein).
(e) Each of the Litigation Managers may be removed from his
position as such (including as an Executive Vice President of the Company) with
respect to the Glendale Litigation or the CalFed Litigation or both, but only
for Cause and only upon the unanimous vote of the Glendale Committee (with
respect to
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the Glendale Litigation) or the CalFed Committee (with respect to the CalFed
Litigation) as to such removal (provided that any Litigation Manager shall
cease to be an Executive Vice President of the Company upon removal as to both
the Glendale Litigation and the CalFed Litigation). The Company or a Committee
shall have "Cause" to terminate a Litigation Manager's employment hereunder
only upon (i) the conviction of the Litigation Manager for the commission of a
felony involving dishonesty with respect to the Company or the Holders or (ii)
gross and willful misconduct undertaken in bad faith by the Litigation Manager
that is demonstrably and materially injurious to the Company or to the economic
interests of the Holders as a group. Further, no breach, act or failure to act
on the Litigation Manager's part shall constitute "Cause" if such breach, act
or failure to act resulted from the Litigation Manager's incapacity due to
physical or mental illness or any such actual or anticipated breach, act or
failure to act resulted from a resignation by the Litigation Manager for Good
Reason.
(f) A Litigation Manager may terminate his employment
hereunder as to either or both of the Glendale Litigation and the CalFed
Litigation for "Good Reason." "Good Reason" shall mean (i) a material breach by
the Company of a material obligation of the Company under this Management
Agreement after the Litigation Manager has given the Company notice of the
breach within 90 days of the breach and the Company has not remedied the breach
in accordance with the next sentence or (ii) the existence of a conflict of
interest not due to any misconduct by the Litigation Manager which in the
reasonable judgment of the Litigation Manager renders inappropriate the
Litigation Manager's employment hereunder with respect to either the Glendale
Litigation or the CalFed Litigation. A breach described in this clause
includes, without limitation, (i) a detrimental alteration to the terms of the
Litigation Manager's employment as described herein, (ii) any reduction in the
Litigation Manager's annual salary or other fees, benefits or working
conditions described herein or the failure of the Company to pay when due to
the Litigation Manager any salary or fee or other benefits referred to in this
Management Agreement, (iii) the failure of the Company to obtain an agreement
reasonably satisfactory to the Litigation Manager from any successor to the
Company to assume and agree to perform this Management Agreement, or if the
business for which the Litigation Manager's services are principally performed
is sold or transferred, the failure of the Company to obtain such an agreement
from the purchaser or transferee of such business or (iv) any termination of
the Litigation Manager's employment which is not effected pursuant to the terms
of this Management Agreement and which is not remedied within 30 days after
receipt of written notice from the Litigation Manager delineating each such
claimed breach and setting forth the
8
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Litigation Manager's intention to terminate employment if such breach is not
remedied; provided, that if the specified breach cannot reasonably be remedied
within such 30-day period and the Company commences reasonable steps within
such 30-day period to remedy such breach and diligently continues such steps
thereafter until a remedy is effected, such breach shall not constitute "Good
Reason" provided that such breach is remedied within 60 days after receipt of
written notice.
(g) In the event of the removal, resignation, retirement,
death or incapacity of a Litigation Manager with respect to the Glendale
Litigation, the CalFed Litigation or both, such Litigation Manager shall not be
replaced and the remaining Litigation Manager shall continue to serve in such
capacity until such service is terminated pursuant hereto. Resignation or
removal as to one of the Goodwill Litigations shall not affect a Litigation
Manager's rights, powers, privileges, immunities or obligations hereunder with
respect to the Goodwill Litigation as to which such Litigation Manager has not
resigned or been removed. In the event that a Litigation Manager resigns or is
removed or ceases to serve in such capacity for any reason, the remaining
Litigation Manager shall be entitled to such former Litigation Manager's rights
hereunder in respect of compensation and otherwise, including salary and any
forfeited portion of the Incentive Fees, provided that only Stephen J. Trafton
shall be entitled to the Trafton Benefits, and only Richard A. Fink shall be
entitled to the Fink Benefits.
(h) At such time as there are no Litigation Managers with
respect to the Glendale Litigation (or the remaining Litigation Manager has
informed the Company in writing that such Litigation Manager intends to retire,
resign or otherwise cease to serve in such capacity), the Glendale Committee,
by majority vote, shall be authorized to appoint a successor Litigation Manager
or Litigation Managers with respect to the Glendale Litigation and the GSB
LTWs. At such time as there are no Litigation Managers with respect to the
CalFed Litigation (or the remaining Litigation Manager has informed the Company
in writing that such Litigation Manager intends to retire, resign or otherwise
cease to serve in such capacity), the CalFed Committee, by majority vote, shall
be authorized to appoint a successor Litigation Manager or Litigation Managers
with respect to the CalFed Litigation and the CalFed Securities.
2.2 California Federal, GSB and Glendale Federal, and their
respective successors, shall cooperate with the Litigation Managers with
respect to the duties and responsibilities of the Litigation Managers hereunder
and, without limiting the generality of the foregoing, shall provide the
Litigation Managers with
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such access to their books, records, offices and other facilities and to their
employees, agents, attorneys and independent accountants as the Litigation
Managers shall reasonably require for the purpose of performing their
respective duties and exercising their powers hereunder. The Litigation
Managers shall have the authority on behalf of the Company and its
subsidiaries, as the case may be, to consult with and instruct attorneys of
California Federal and Glendale Federal in connection with the CalFed
Litigation and the Glendale Litigation, respectively. GSB agrees to use its
reasonable best efforts to cause the relevant officers, employees, agents and
representatives of the Surviving Bank and its successors to be available to
provide testimony and to execute documents, in each case required in the
reasonable judgment of the Litigation Managers, for the purpose of prosecuting
the Goodwill Litigation, including execution of any complaints, motions,
answers and other pleadings, affidavits, requests and notices, other than
pursuant to instructions that are determined to be unreasonable by the Glendale
Committee or the CalFed Committee, as applicable.
2.3 (a) The Company shall provide the Litigation Managers and
the Committees with drafts of any tax return, report, declaration or
certification (each, a "Tax Return") reporting, reflecting or relating to any
Final Resolution or receipt of proceeds in respect thereof at least 30 days
prior to the date such Tax Return is required to be filed. The Litigation
Managers shall provide comments upon such Tax Returns within 10 days of the
receipt thereof, and the Company shall give due consideration of such comments
of the Litigation Managers as are provided within such period.
(b) The Committees (as defined in the Agreement), in
consultation with the KPMG Peat Marwick LLP (or any successor thereto), shall
review (i) any Tax Return, audit, contest, claim, proceeding or inquiry with
respect to taxes arising from or relating to (A) any Final Resolution or
receipt of proceeds in respect thereof or (B) the distribution of the CalFed
Securities or the GSB LTWs or any payment in respect of the CalFed Securities
or (ii) matters related to any responsibility of KPMG Peat Marwick LLP (or any
successor thereto) under Section 1.6 of the Agreement.
(c) The Company shall use its best efforts not to take any
action that would or would be reasonably likely to have the effect of
increasing the tax benefits or decreasing the tax burden associated with (i)
any Final Resolution of the CalFed Litigation or the receipt of proceeds in
respect thereof or (ii) the distribution of the CalFed Securities or any
payment in respect of the CalFed Securities, at the
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cost of decreasing the tax benefits or increasing the tax burden associated
with (i) any Final Resolution of the Glendale Litigation or receipt of proceeds
in respect thereof or (ii) the distribution of the GSB LTWs.
ARTICLE III
The Committees
3.1 (a) The initial members of the Glendale Committee shall
be the GSB Directors. The initial members of the CalFed Committee shall be
[_________]. Each of the Glendale Committee and the CalFed Committee shall at
all times have at least two members, and all such members shall be members of
the Board of Directors of the Company and of the federal savings bank that is
the surviving corporation in the merger of Glendale Federal and California
Federal pursuant to the Agreement (the "Bank"); provided, however, that members
of the Committees shall not be required to be members of such Boards of
Directors after a Change of Control of the Company (it being understood that
any such Change of Control shall not diminish, to the extent permitted under
applicable law, the rights and powers of such Committee members hereunder). In
order to maintain continuity in respect of the prosecution of the Goodwill
Litigation, the Board of Directors of the Company shall, subject to Section 3.3
hereof, nominate the persons who are members of the Committees from time to
time to be elected to further terms as Directors of the Company or of the Bank,
as the case may be, it being the understanding of the parties hereto that
continuity of membership on such Committees is in the best interests of the
Company and the Holders.
For the purpose of this Management Agreement, a "Change of
Control" shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended) of beneficial ownership of 50% or
more of either (x) the then outstanding shares of common stock of the
Company (the "Outstanding Common Stock") or (y) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); provided, however, that such
acquisitions by any of First Gibraltar Holdings, Inc. or Hunter's
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Glen/Ford, Ltd., their respective successors or any affiliate or
associate of the foregoing (each, an "FGH Entity") shall not
constitute a "Change of Control" hereunder; or
(ii) Individuals who, as of the Effective Time,
constitute the Board of Directors of the Company (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board; or
(iii) Consummation by the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of
assets of another entity (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Common Stock and Outstanding
Voting Securities, as the case may be, (ii) no Person (excluding the
Company, such corporation resulting from such Business Combination or
the FGH Entities) beneficially owns, directly or indirectly, 50% or
more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent
12
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that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of
the corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company. The Company agrees
not to effect or allow to be effected any Change of Control unless any
acquiror or successor in such Change of Control agrees to take such
actions as are necessary and appropriate to assure that the rights of
the Litigation Managers hereunder, as well as the rights of the
Holders, are honored and not affected in any adverse manner.
(b) Except as otherwise expressly provided herein, each
Committee may act only with the concurrence of a majority of its members;
provided, however, that a Committee may, in its discretion, designate a
Chairman to act as the administrative Committee member. A Committee may
delegate to its Chairman such authority as the Committee may determine.
3.2 Each member of the Committees shall be entitled to
receive reasonable fees for service thereon as determined by the Board of
Directors of the Company from time to time, but in no event less than the
highest fees received by members of other committees of the Board of Directors
of the Company.
3.3 If any member of a Committee shall resign, die or become
incapacitated, or shall otherwise become unable to act as a member of such
Committee, a majority of the remaining members of such Committee (or the
remaining member, if only one) shall have the sole authority to appoint a
successor. If such successor is required pursuant to Section 3.1(a) to be a
member of the Board of Directors of the Company, such Board of Directors shall
promptly appoint the individual chosen as successor to such Board of Directors
and shall cause such individual to be nominated for election to such Board of
Directors at the next meeting at which directors are to be elected (provided
that such individual is reasonably acceptable to the Board of Directors of the
Company). A majority of the members of a Committee may vote at any time to
remove a committee member and to appoint a new member to fill the vacancy so
created. A successor or a new Committee member appointed pursuant to this
Section 3.3 shall be entitled to all of
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the rights, powers, immunities and privileges of the other members of such
Committee, without the need of any further act or writing.
3.4 Subject to Section 2.1 hereof, each Committee may commit
to and shall pay its attorneys' compensation for services rendered and expenses
incurred and may enter into arrangements on such terms as may be approved by
such Committee with such counsel. A Committee may commit to and shall pay all
such persons or entities that it retains compensation for services rendered and
expenses incurred.
3.5 Any member of a Committee and any Litigation Manager may
also be a GSB Holder or a CalFed Holder or an officer, director, employee or
affiliate of a GSB Holder or of a CalFed Holder and will have all the rights of
such a Holder to the same extent as if he or she were not a member of the
Committee.
ARTICLE IV
Costs and Expenses
4.1 (a) The GSB Committee and the Litigation Managers shall
have the power to authorize the expenditure by the Company of all funds deemed
by the GSB Committee or the Litigation Managers to be reasonably necessary to
pursue the Glendale Litigation or in respect of the GSB LTWs (it being the
understanding of the parties that such funds are expected to amount to at least
$10 million), such expenditures including, without limitation, all legal and
other professional fees and costs incurred in connection with the Glendale
Litigation, the GSB LTWs, the compensation and expense reimbursements of the
Committee described in Sections 3.2 and 3.4, payment of any expenses incurred
by or on behalf of the Litigation Managers pursuant hereto and the compensation
of the Litigation Managers, costs and expenses of counsel and experts retained
by the GSB Committee pursuant to Section 3.4, and any amounts paid pursuant to
Article 5.
(b) The CalFed Committee and the Litigation Managers shall
have the power to authorize the expenditure by the Company of all funds deemed
by the CalFed Committee or the Litigation Managers to be reasonably necessary
to pursue the CalFed Litigation or in respect of the CalFed Securities (it
being the understanding of the parties that such funds are expected to amount
to at least $20 million), such expenditures including, without limitation, all
legal and other
14
<PAGE>
professional fees and costs incurred in connection with the CalFed Litigation,
the CalFed Securities, the compensation and expense reimbursements of the
CalFed Committee described in Sections 3.2 and 3.4, payment of any expenses
incurred by or on behalf of the Litigation Managers pursuant hereto and the
compensation of such Litigation Managers, costs and expenses of counsel and
experts retained by the CalFed Committee pursuant to Section 3.4, and any
amounts paid pursuant to Article 5.
ARTICLE V
Indemnification; Limitation of Liability
5.1 In taking any action hereunder, or in refraining
therefrom, a Committee, the members thereof and the Litigation Managers shall
each be protected in relying upon any notice, paper or other document
reasonably believed by it or them to be genuine and signed by the proper
parties, or upon any evidence reasonably deemed by it or them to be sufficient.
A Committee, the members thereof and the Litigation Managers may each rely on
the statements contained in such writings. In no event shall the Committee, any
member thereof or the Litigation Managers be liable to the Company, any
subsidiary thereof or to the CalFed Holders or GSB Holders for any action,
omission, decision, determination or undertaking by such Committee, any of its
members or a Litigation Manager unless it has been shown by clear and
convincing evidence in a court of competent jurisdiction that such action,
omission, decision, determination or undertaking was undertaken with deliberate
intent to cause substantial injury to the Company or the CalFed Holders or GSB
Holders or with reckless disregard for the best interests of such persons. If a
Committee, any member thereof or a Litigation Manager consults with counsel or
other experts in connection with its or their duties hereunder, it and they
shall be fully protected by any action, omission, decision, determination or
undertaking taken, suffered or permitted by it or them in good faith and in
accordance with the advice of such counsel or other experts, including counsel
or experts who are affiliates of one or more of the members of a Committee or
of one or both Litigation Managers.
5.2 Each member of the Committees and each of the Litigation
Managers shall be indemnified and held harmless by the Company against all
claims, demands, obligations, liabilities and expenses, including amounts paid
in satisfaction of judgments, in compromise (so long as the Company has
approved such compromise, which approval shall not be unreasonably withheld),
or as fines or
15
<PAGE>
penalties, and counsel fees, reasonably incurred by him or her in connection
with the defense or disposition of any action, suit or other proceeding by one
or more GSB Holders or CalFed Holders or by any other person, whether civil or
criminal, in which he or she may be involved, or with which he or she may be
threatened, by reason of the fact that he or she is or was a Committee Member
or a Litigation Manager, provided that such Committee member or Litigation
Manager shall not be entitled to have such indemnification in respect of any
matter as to which it shall have been shown in a court of competent
jurisdiction that an action, omission, decision, determination or undertaking
of a Committee member or Litigation Manager was undertaken by such person with
deliberate intent to cause substantial injury to the Company or the CalFed
Holders or GSB Holders or with reckless disregard for the best interests of
such persons.
5.3 Advance payments in connection with indemnification under
this Article 5 shall be made by the Company, if so requested by any person
entitled to indemnity pursuant to Section 5.2, provided that such indemnified
person shall have given a written undertaking to repay any amount advanced by
or on behalf of the Company in the event it is subsequently determined that he
or she is not entitled to indemnification under the standard set forth in
Section 5.2.
5.4 The Company shall use its reasonable best efforts to
cause an endorsement to its Directors and Officers insurance policy to
adequately insure that each of the members of such Committee and the Litigation
Managers shall be indemnified against any loss, liability or damage for which
such person is entitled to be indemnified pursuant to this Article 5 and that
is attributable to the Glendale Litigation or the GSB LTWs, in the case of the
GSB Committee, or the CalFed Litigation or the CalFed Securities, in the case
of the CalFed Committee.
5.5 The rights accruing to any Committee member or Litigation
Manager under this Article 5 shall not exclude any other right to which such
person may be entitled, and, notwithstanding the other provisions of this
Article 5, each Committee member and Litigation Manager shall be indemnified
and insured as a director and employee of the Company to the fullest extent
provided to directors and executive officers, respectively, of the Company,
provided that no such indemnification or insurance shall be less favorable than
that provided by GSB in favor of such persons as of the date hereof.
16
<PAGE>
ARTICLE VI
Amendments; Miscellaneous
6.1 This Management Agreement may be amended from time to
time, but only by an instrument in writing executed by the parties hereto or
their successors and approved by resolution of a majority of the members of
each Committee; provided, however, that any amendment or other modification of
this Management Agreement that would result in any change to, or any provision
inconsistent with, a provision of this Management Agreement that contemplates
Committee action by more than a majority of the members thereof shall not be
amended except by an instrument in writing executed by the parties hereto or
their successors and approved by resolution of such higher number of the
members of each Committee.
6.2 (a) Subject to Section 6.2(b), nothing in this Management
Agreement shall be construed to prevent service by any Litigation Manager as a
director or employee of, or a consultant to, a financial institution or other
business, other than the Company.
(b) As of the Effective Time and for three years thereafter,
neither Litigation Manager will directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or control of,
or be connected as an officer, employee, partner, director or otherwise with,
or have any financial interest in, any business principally engaged in the
savings and loan or federally insured thrift business in California which is in
material competition with the business conducted by the Company. Ownership for
personal investment purposes only of less than 5% of the voting stock of any
publicly held corporation shall not constitute a violation hereof.
(c) As of the Effective Time and for three years thereafter,
neither Litigation Manager will, directly or indirectly, solicit for employment
by other than the Company any person employed by the Company at the Effective
Time, nor will either Litigation Manager, directly or indirectly, solicit for
employment by other than the Company any person known by such Litigation
Manager to be employed at the time by the Company.
17
<PAGE>
(d) Each Litigation Manager shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company, which shall have been obtained by
the Litigation Manager during his employment by the Company and which shall not
be or become public knowledge (other than by acts by the Litigation Manager in
violation of this Management Agreement). After termination of the Litigation
Manager's employment with the Company, the Litigation Manager shall not,
without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of this Section 6.2
constitute a basis for deferring or withholding any amounts otherwise payable
to a Litigation Manager under this Management Agreement.
6.3 This Management Agreement and the Agreement constitute
the entire agreement among the parties and their affiliates with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties and their affiliates
or any of them with respect to the subject matter hereof, and nothing in this
Management Agreement shall be deemed to create any fiduciary or additional
obligations on the part of any person in favor of the Holders or to affect in
any manner the rights of the Holders under the GSB LTWs and the CalFed
Securities (and, without limiting the foregoing, no Litigation Manager shall be
deemed to owe a fiduciary duty to the Company or the Holders as a result of
their service as such hereunder).
6.4 This Management Agreement, and all of the provisions
hereof, shall be binding upon and inure to the benefit of the parties hereto
and their respective permitted successors (including without limitation any
transferee of all or substantially all of the assets of a party hereto or the
entity resulting from or surviving a Change of Control or succeeding to a party
hereto in such Change of Control) and assigns, but the obligations and
responsibilities of the Litigation Managers under this Management Agreement
with respect to the Glendale Litigation and the GSB LTWs, on the one hand, or
the CalFed Litigation and the CalFed Certificates, on the other hand, shall not
be assigned by such Litigation Managers without the prior consent of the
Company.
6.5 The parties hereto hereby agree to execute, acknowledge
and deliver such further agreements and instruments and to do such further
acts, or to cause their respective affiliates to execute, acknowledge and
deliver such further
18
<PAGE>
agreements and instruments and to do such further acts, as may be necessary or
proper to effectively carry out the purposes and intents of this Management
Agreement.
6.6 Any provision of this Management Agreement that is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable any such
provision in any other jurisdiction.
6.7 This Management Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware and the
applicable laws of the United States of America, without reference to
principles of conflict of laws. The captions of this Management Agreement are
not part of the provisions hereof and shall have no force or effect.
6.8 All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Litigation Managers:
Stephen J. Trafton
Richard A. Fink
c/o Golden State Bancorp Inc.
414 North Central Avenue
Glendale, California 91203
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, New York 10019
Attention: Edward D. Herlihy, Esq.
If to the Company or the Surviving Bank:
MacAndrews & Forbes Holdings Inc.
35 East 62nd Street
19
<PAGE>
New York, New York 10021
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Fred B. White, III, Esq.
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
6.9 The parties hereto agree that irreparable damage would
occur in the event that the provisions of this Management Agreement were not
performed by the Company in accordance with its specific terms or otherwise
breached. Accordingly, it is agreed that the parties hereto shall be entitled
to an injunction or injunctions to prevent breaches of this Management
Agreement and to enforce specifically the terms and provisions thereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
6.10 This Management Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
6.11 Any dispute or controversy arising under or in
connection with this Management Agreement (relating to any issue other than the
compensation, fees or benefits of the Litigation Managers hereunder, including
without limitation the matters contemplated by Sections 2.1(c) (and the
schedules referred to therein) and 2.1(d) hereunder) shall be settled
exclusively by arbitration, conducted before a panel of three arbitrators in
Los Angeles, California, in accordance with the rules of the American
Arbitration Association then in effect or of such similar organization as the
parties hereto may mutually agree. Judgment may be entered on the arbitrator's
award in any court having jurisdiction. The Company agrees to pay, as incurred,
all legal or arbitration fees and expenses which a Litigation Manager may
reasonably incur as a result of any proceeding with respect to such enforcement
hereunder, plus interest on any delayed payment at the rate set forth in
Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended.
20
<PAGE>
6.12 This Agreement shall automatically terminate and be of
no further force or effect upon the earlier to occur of (a) the termination of
the Agreement in accordance with its terms or (b) the occurrence of all of the
following events: (i) a final nonappealable judgment or order in or a final
settlement of the Goodwill Litigation, (ii) fulfillment of all obligations to
the Holders under the terms of the GSB LTWs and the CalFed Securities and (iii)
the payment of all amounts owing hereunder to the Litigation Managers in
respect of the subject matter of this Management Agreement (except that, in the
case of a termination pursuant to clause (b), (A) the provisions of Sections
5.2 and 5.3 shall continue for a period of six years following such
termination; provided, however, that all rights to indemnification in respect
of any claim asserted or made within such period shall continue until the final
disposition of such claim, and (B) the obligations of the Company set forth in
Schedules 2.1(c)(i) and 2.1(c)(ii) to this Management Agreement shall survive
such termination.
IN WITNESS WHEREOF, the parties hereto have executed this
Management Agreement, or caused this Management Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
GOLDEN STATE BANCORP INC.
By: /s/ Stephen J. Trafton
-------------------------------
Name: Stephen J. Trafton
Title: Chairman of the
Board, President and
Chief Executive Officer
GLENDALE FEDERAL BANK, FEDERAL
SAVINGS BANK
By: /s/ Stephen J. Trafton
-------------------------------
Name: Stephen J. Trafton
Title: Chairman of the
Board, President and
Chief Executive Officer
CALIFORNIA FEDERAL BANK, A
FEDERAL SAVINGS BANK
By: /s/ Carl B. Webb
-------------------------------
<PAGE>
Name: Carl B. Webb
Title: President and Chief
Operating Officer
/s/ Stephen J. Trafton
-------------------------------
Stephen J. Trafton
/s/ Richard A. Fink
-------------------------------
Richard A. Fink
<PAGE>
SCHEDULE 2.1(C)(I)
Notwithstanding any provision of the Management Agreement or
the Agreement to the contrary, Stephen J. Trafton ("Trafton") shall be provided
with the following benefits:
1. Retirement Benefit. Trafton shall be entitled to an annual
pension benefit of $1,000,000 (the "Pension Benefit"), payable, at Trafton's
election, in one of the forms and commencing at the times described herein: (i)
the Pension Benefit payable monthly in advance commencing on Trafton's 60th
birthday and for the rest of his life; (ii) the actuarial equivalent of the
Pension Benefit, payable in a lump sum on Trafton's 60th birthday; or (iii) the
actuarial equivalent of the Pension Benefit payable upon Trafton's termination
of employment as a Litigation Manager for any reason, either in a lump-sum or
on an annuity basis, and actuarially reduced to take into account commencement
prior to Trafton's 60th birthday. In the event Trafton's Pension Benefit is
payable in accordance with clauses (ii) or (iii) of the foregoing sentence, the
amount of such benefit shall be determined in good faith based on reasonable
assumptions by the Company's actuaries. Upon Trafton's death and provided that
the Pension Benefit has not previously been paid as a lump-sum, his spouse,
should she survive him, shall be entitled to an annual pension benefit of 50%
of the Pension Benefit, payable monthly in advance. Trafton shall be fully
vested in the Pension Benefit at the Effective Time.
2. Medical Benefits. Notwithstanding anything to the contrary
contained in Section 2.1(c) of the Management Agreement, during Trafton's
employment as Litigation Manager and thereafter, upon Trafton's termination of
employment for any reason, for the remainder of Trafton's life and the life of
his spouse, he and his spouse shall be provided with medical benefits at the
Company's expense pursuant to an indemnity plan reasonably acceptable to
Trafton (the "Medical Benefits"). Trafton shall be fully vested in the Medical
Benefits at the Effective Time.
3. Enforceability. The provisions of this Schedule 2.1(c)(i)
are for the benefit of Trafton and shall be enforceable by him against the
Company in a court of competent jurisdiction. The Company agrees to pay, as
incurred, all legal fees and expenses which Trafton may reasonably incur as a
result of any proceeding with respect to such enforcement hereunder, plus
interest on any delayed payment at the rate set forth in Section 7872(f)(2)(A)
of the Internal Revenue Code of 1986, as amended.
<PAGE>
SCHEDULE 2.1(C)(II)
Notwithstanding any provision of the Management Agreement or
the Agreement to the contrary, Richard A. Fink ("Fink") shall be provided with
the following benefits:
1. Retirement Benefit. Fink shall be entitled to an annual
pension benefit of $325,000 (the "Pension Benefit"), payable at Fink's election
in one of the forms and commencing at the times described herein: (i) the
Pension Benefit payable monthly in advance commencing on Fink's 65th birthday
and for the rest of his life; (ii) the actuarial equivalent of the Pension
Benefit, payable in a lump sum on Fink's 65th birthday; or (iii) the actuarial
equivalent of the Pension Benefit payable upon Fink's termination of employment
as a Litigation Manager for any reason, either in a lump-sum or on an annuity
basis, and actuarially reduced to take into account commencement prior to
Fink's 65th birthday. In the event Fink's Pension Benefit is payable in
accordance with clauses (ii) or (iii) of the foregoing sentence, the amount of
such benefit shall be determined in good faith based on reasonable assumptions
by the Company's actuaries. Upon Fink's death and provided that the Pension
Benefit has not previously been paid as a lump-sum, his spouse, should she
survive him, shall be entitled to an annual pension benefit of 50% of the
Pension Benefit, payable monthly in advance. Fink's Pension Benefit shall vest
in two equal installments on each of the first and second anniversaries of the
Effective Time and shall be fully vested on the second anniversary of the
Effective Time, provided that the Pension Benefit shall be immediately and
fully vested upon Fink's termination of employment as a Litigation Manager for
Good Reason or without Cause or upon Fink's disability. For purposes hereof,
"disability" shall have the meaning set forth in the change of control
employment agreement between Fink and Glendale Federal Bank, Federal Savings
Bank, dated as of December 31, 1997, as amended.
2. Medical Benefits. Notwithstanding anything to the contrary
contained in Section 2.1(c) of the Management Agreement, during Fink's
employment as Litigation Manager and thereafter, upon Fink's termination of
employment for any reason, for the remainder of Fink's life and the life of his
spouse, he and his spouse shall be provided with medical benefits at the
Company's expense pursuant to an indemnity plan reasonably acceptable to Fink
(the "Medical Benefits"). Fink shall be fully vested in the Medical Benefits at
the Effective Time.
3. Enforceability. The provisions of this Schedule 2.1(c)(ii)
are for the benefit of Fink and shall be enforceable by him against the Company
in a court of competent jurisdiction. The Company agrees to pay, as incurred,
all legal fees and expenses which Fink may reasonably incur as a result of any
proceeding with respect to such enforcement hereunder, plus interest on any
delayed payment at the rate set forth in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended.
<PAGE>
FOR INFORMATION CONTACT:
GOLDEN STATE BANCORP
Ken Preston (818) 409-4550
Jeff Misakian (818) 500-2824
CALIFORNIA FEDERAL BANK
Walter Montgomery (212) 484-6721
Janis Tarter (415) 904-1199
FOR IMMEDIATE RELEASE
CALIFORNIA FEDERAL BANK AND GLENDALE FEDERAL BANK TO MERGE
-Parent Companies - First Nationwide Holdings and Golden State Bancorp -
Agree to Tax-Free Exchange of Shares Through "Reverse Merger"--
--Merger Will Realize Approximately $131 Million in Annualized Cost Savings;
Expected To Be Approximately 17% Accretive to 1999 Pro Forma Cash EPS--
--Golden State to Proceed with Previously Announced Distribution of
Litigation Tracking Warrants(TM) Prior to Closing--
--New Entity, to be Led by Cal Fed's Management Team of Gerald Ford and
Carl Webb, Will Be Largest Statewide Community Bank in California--
GLENDALE & SAN FRANCISCO, CA, February 5, 1998 - First Nationwide
Holdings Inc., parent of California Federal Bank FSB (Cal Fed), and Golden
State Bancorp Inc. (NYSE:GSB), parent of Glendale Federal Bank, today announced
an agreement to merge in a tax-free exchange of shares. The merged companies
will be named California Federal Bank at the operating level and Golden State
Bancorp at the holding company level.
The new Cal Fed will be California's largest statewide community bank
- - and fifth-largest depository institution, with a 6.4 percent statewide
deposit market share, as well as a leading in-state provider of consumer,
business and mortgage banking services. The third-largest thrift in the country
with assets in excess of $51 billion, the new company will operate more than
400 branches with $28 billion in deposits. It is estimated that cost savings
from the merger will reach approximately $131 million by 1999. It is expected
that the merger will be approximately 17 percent and 23 percent accretive to
Golden State's 1999 and 2000 pro forma cash earnings per share, respectively.
The transaction will take the form of a reverse merger. Following the
merger, Golden State shareholders will own 55 percent to 58 percent of the
combined entity. The ownership percentage to be retained in the new entity by
Golden State Bancorp's shareholders will be determined based on Golden State's
adjusted volume weighted average trading price (the adjusted average price)
during a period preceding the close of the transaction.
Terms of the merger call for Golden State's shareholders to own 58
percent of the combined entity if Golden State's adjusted volume weighted
average trading price, as determined after distribution of the
-more-
<PAGE>
-2-
Litigation Tracing Warrants(TM) (LTW(TM)s), is $32 per share or less, and to
own 55 percent of the combined entity if that price is more than $33 per share.
For purposes of determining Golden State's adjusted price, Golden
State's volume weighted average trading price during the Pricing Period will be
adjusted downward by the implied market value per Golden State share of the
interest in the Golden State goodwill lawsuit retained by Glendale Federal at
the time of issuance of the LTW(TM)s, as determined by the volume weighted
average trading price of the LTW(TM)s during the Pricing Period.
The remainder of the merged company will be owned by the principal
shareholders of First Nationwide, Gerald J. Ford, chairman and chief executive
officer of Cal Fed, and MacAndrews & Forbes Holdings Inc. Following the merger,
which will be accounted for under the purchase accounting method, the combined
parent company, Golden State Bancorp, will have 135-145 million shares
outstanding. Two-thirds of the members of the new entity's Board of Directors
will be named by California Federal and one-third by Golden State.
Following the merger, Cal Fed's management team of Mr. Ford and Carl
Webb, currently Cal Fed's president and chief operating officer, will head the
new company, with Ford assuming the role of chairman and chief executive
officer and Webb becoming president and chief operating officer. Stephen J.
Trafton, chairman and chief executive officer of Golden State Bancorp, and
Richard A. Fink, Golden State Bancorp's vice chairman, will oversee management
of the ongoing litigation by both Cal Fed and Glendale Federal of the goodwill
lawsuits against the federal government.
The transaction has been unanimously approved by the Boards of
Directors of both companies and requires regulatory approval and the approval
of shareholders of both companies - in addition to being subject to customary
closing conditions. It is expected to close in the third quarter of 1998. The
new company's headquarters will be in San Francisco, California.
CREATING THE LARGEST STATEWIDE COMMUNITY BANK
"This combination," said Mr. Ford, "propels both banks closer than
either could come on its own to our mutual goal of building a true statewide
community bank for businesses and consumers. A strong institution that
functions as a service-oriented community bank in California must have a
leading share of deposits in key markets and strong operations in businesses
such as mortgages and business lending. The combined Cal Fed will meet those
demands, ranking in the top five depositories in crucial areas such as Los
Angeles, San Francisco, San Diego and Orange County, and servicing a $100
billion mortgage portfolio. In addition, we are expanding the number of banking
offices in-state by joining together two institutions with successful,
complementary approaches to community banking. Customers will have more
products, more branches and more ATMs to choose from, and businesses will have
an even broader level of credit support.
Mr. Trafton added: "This merger is driven by the spirit of community
bank opportunity, not big bank consolidation. By bringing Cal Fed's proven
track record of acquisitions and mortgage banking together with Glendale
Federal's strong consumer and business banking operations, we'll be able to
serve customers more efficiently and with a broader range of products than ever
before - yet with the same face-to-face contact and personal treatment for which
we have become well known. This relationship banking approach has made Glendale
Federal the fastest-growing community bank in the nation and helped to create
significant value for shareholders. We are expanding the number of in-state
banking offices and building a strong presence in California markets that we
had already targeted for expansion.
-more-
<PAGE>
-3-
As an in-market merger predicated on the ability to achieve meaningful
cost savings, the transaction is financially attractive, low risk and helps
fulfill our vision of a statewide community banking franchise. The new
executive management team will have an excellent group of Glendale Federal
associates to support their goals."
Mr. Ford continued, "Realizing cost savings is crucial in California's
competitive banking environment, and requires difficult decisions about
eliminating redundant administrative positions and rationalizing branch
locations. we will not be leaving any market that we currently serve, but we do
expect that a few of our branches in neighborhoods served by both banks will be
affected. However, we anticipate that a substantial portion of any staff
reductions may come through normal-course-of business attrition. When
circumstances are otherwise, we will make every effort to reassign employees
and to provide outplacement services as well as comprehensive severance
packages for those affected by staff reductions. To the extent possible, we
want the best people from both institutions working together for the new
company."
Both executives hailed the transactions as "a victory for common sense
and community relationships over big-bank economics, and a testament to the
importance of local banking to retail and business customers." They added that
the new company will be better positioned to pursue a strategy of growth
through aggressive acquisitions, while also maintaining a strong commitment to
customers.
GSB WILL PROCEED WITH DISTRIBUTION OF LTW(TM)S
In addition, and as previously announced, Golden State - prior to the
close of the transaction - will distribute to its stockholders Litigation
Tracking Warrants (LTW(TM)s). The litigation involves attempted recovery of
damages from the federal government incurred as a result of the government's
breach of contract with Glendale Federal regarding regulatory treatment of
goodwill. The LTW(TM)s give shareholders the right to receive Golden State
stock in an amount equal to approximately 85 percent of net after-tax proceeds,
if any, received by Glendale Federal in the litigation.
As part of the merger agreement, the owners of First Nationwide
(Parent) Holdings, Inc. will receive, after a final resolution of California
Federal's goodwill litigation, additional Golden State Bancorp stock in an
amount equal to the net after-tax proceeds, if any, from that litigation, net
of (i) the amount paid to holders of California Federal's previously issued
participation certificates evidencing the right to receive portions of the
proceeds of the California Federal goodwill lawsuit (the "CALGZ" and "CALGL"
securities) and (ii) an amount equal to the proceeds retained by the new entity
following the settlement of Glendale Federal's lawsuit and the issuance of
stock to the holders of the Golden State LTW(TM)s to be issued.
The structure of the transaction is designed to equalize the
contribution of each company's goodwill lawsuit asset to the combined company
on a relative basis. When combined with the pre-closing issuance by Golden
State of the LTW(TM)s, Golden State's shareholders will not suffer any dilution
to their interest in the Glendale Federal goodwill lawsuit.
The new entity is expected to remain well capitalized after taking
into consideration the impact of a planned after-tax restructuring charge of
$116 million.
Credit Suisse First Boston advised Golden State Bancorp and Goldman
Sachs advised First Nationwide Holdings.
San Francisco-based Cal Fed, the fourth-largest thrift in the United
States with over $30 billion in assets, has 225 branches, 194 serving customers
in California, 24 in Florida and seven in Nevada. The institution also services
a $61 billion mortgage portfolio through a subsidiary, First Nationwide
Mortgage
-more-
<PAGE>
-4-
Corp., which loans in 44 states. Cal Fed and its subsidiaries earned $230
million in the first nine months of 1997. On September 30, 1997, retail
deposits totaled $16 billion and loans outstanding totaled $20 billion.
Glendale Federal Bank is the sixth largest thrift in the country with
$16 billion in assets, 181 banking offices and 26 loan offices in California.
During the 12 months ended December 31, 1997, the bank's checking accounts rose
65 percent to represent 15.9 percent of total deposits. A the same time, the
bank's interest rate spread rose to 2.82 percent. Additionally, non-performing
assets dropped to 0.95 percent, a level second to only one other major thrift.
Glendale Federal intends to proceed as planned with its acquisition of CENFED
Financial Corp. and RedFed Bancorp, with closings anticipated for the March and
June quarters, respectively.
This press release contains forward looking statements with respect to
management beliefs, estimates, projections, assumption, the financial
condition, the results of operations and business of First Nationwide (Parent)
Holdings Inc., Golden State Bancorp Inc. (and their respective subsidiaries)
and, assuming the consummation of the merger, a combined Golden State Bancorp
Inc./First Nationwide (Parent) Holdings Inc., including statements relating to:
(a) the cost savings and accretion to the reported and cash earnings that will
be realized from the merger; (b) the impact on revenues of the merger; and (c)
the restructuring charges expected to be incurred in connection with the
merger. These forward looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ materially from
those contemplated by such forward looking statements include, among others,
the following possibilities: (1) expected cost savings from the merger cannot
be fully realized or realized within the expected time frame; (2) revenues
following the merger are lower than expected; (3) competitive pressure among
depository institutions increases significantly; (4) costs or difficulties
related to the integration of the businesses of Golden State Bancorp Inc. and
First Nationwide (Parent) Holdings Inc. are greater than expected; (5) changes
in the interest rate environment reduce interest margins; (6) general economic
conditions, either nationally or in the states in which the combined company
will be doing business, are less favorable than expected; or (7) legislation or
regulatory changes adversely affect the businesses in which the combined
company would be engaged.
###
<PAGE>
-5-
GOLDEN STATE BANCORP/FIRST NATIONWIDE PARENT HOLDINGS
MERGER HIGHLIGHTS*
as of December 31, 1997
(assets, deposits, loans in $ billions)
GOLDEN
STATE CAL FED PRO FORMA
- ----------------------------------------------------------------------------
Total assets $19.2 $31.4 $51.5**
Total deposits $11.9 $16.2 $28.1
Loans receivable, gross $14.4 $21.4 $35.8
GOLDEN
OTHER STATISTICS STATE CAL FED
- ---------------------------------- ------------------- ----------------------
Banking offices 205 225
Lending offices 26 ___
Number of ATMs 291 278
Number of checking accounts 399,000 569,000
Total number of accounts 1,049,000 1,304,000
Total households served 696,000 1,022,000
Servicing portfolio $38.3 $61.6
Servicing portfolio U.S. rank 23 10
Number of loans serviced 293,014 811,243
*Pro forma for the CENFED and RedFed acquisitions
**excludes purchase accounting adjustments
<PAGE>
THE NEW
GOLDEN STATE BANCORP INC.
(GSB)
===============================================================================
<PAGE>
MERGER OF
CALIFORNIA FEDERAL BANK, FSB
AND
GLENDALE FEDERAL BANK, FSB
================================================================================
THROUGH THE ACQUISITION BY GOLDEN STATE BANCORP INC. OF
FIRST NATIONWIDE (PARENT) HOLDINGS INC.
February 5, 1998
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
<PAGE>
FORWARD LOOKING STATEMENT
================================================================================
This presentation contains forward looking statements with respect to
management beliefs, estimates, projections, assumptions, the financial
condition, results of operations and business of First Nationwide (Parent)
Holdings Inc. and Golden State Bancorp Inc. (and their respective subsidiaries)
and, assuming the consummation of the merger, a combined Golden State Bancorp
Inc./First Nationwide (Parent) Holdings Inc. including statements relating to:
(a) the cost savings and accretion to reported and cash earnings that will be
realized from the merger; (b) the impact on revenues of the merger; and (c) the
restructuring charges expected to be incurred in connection with the merger.
These forward looking statements involve certain risks and uncertainties,
including the risks and uncertainties detailed from time to time in Glendale
Federal's and California Federal's OTS reports and filings. Factors that may
cause actual results to differ materially from those contemplated by such
forward looking statements include, among others, the following possibilities:
(1) expected cost savings from the merger cannot be fully realized or realized
within the expected time frame; (2) revenues following the merger are lower
than expected; (3) competitive pressure among depository institutions increases
significantly; (4) costs or difficulties related to the integration of the
businesses of Golden State Bancorp Inc. and First Nationwide (Parent) Holdings
Inc. are greater than expected; (5) changes in the interest rate environment
reduce interest margins or accelerate mortgage refinancings; (6) general
economic conditions, either nationally or in the states in which the combined
company will be doing business, are less favorable than expected; or (7)
legislation or regulatory changes adversely affect the businesses in which the
combined company would be engaged.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
TRANSACTION OVERVIEW
===============================================================================
<PAGE>
TRANSACTION OVERVIEW
===============================================================================
Transaction: Merger of First Nationwide (Parent) Holdings
Inc. ("FNPH") into Golden State Bancorp Inc.
("GSB"). GSB SHAREHOLDERS RETAIN THEIR
EXISTING SHARES
Consideration: o Current GSB shareholders to own between 55%
and 58% of pro forma company
o GSB to distribute LTWs(TM) for 85% of
goodwill lawsuit as planned
o CalFed to leave a proportional amount of
proceeds from their lawsuit behind in the
company upon settlement
Accounting: Purchase Accounting applied to GSB/Fiscal
year changed to December 31
Tax Treatment: Tax-free to both GSB and FNPH shareholders
Management: CalFed management team to manage pro forma
company
o Gerald J. Ford - Chairman and CEO
o Carl B. Webb - President and COO
Board of Directors: 10 CalFed / 5 GSB
Corporate Name: Golden State Bancorp - Holding Company
California Federal Bank - Operating
Subsidiary
Management of Goodwill Lawsuits: Stephen J. Trafton and Richard A. Fink to
assume primary responsibility for management
of both GSB's and CalFed's goodwill lawsuits
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
TRANSACTION RATIONALE
================================================================================
o Financially Attractive
o Strategically Compelling
o Low Risk Transaction
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
TRANSACTION RATIONALE - FINANCIALLY ATTRACTIVE
===============================================================================
o Availability of cost savings results in significant accretion to GSB's
pro forma EPS:
- Cash EPS estimated to increase by 17% and 23% to $2.75 and $3.15 in
CY 1999 and CY 2000
o Transaction is tax-efficient:
- Separation of goodwill lawsuit effectuated on a tax-advantaged
basis
o Ability to reduce leverage provides opportunity to generate earnings
growth
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
TRANSACTION RATIONALE - STRATEGICALLY COMPELLING
===============================================================================
o Creates CA's 5th largest depository institution:
- $25 billion in deposits with a 6.4% statewide market share
- $28 billion in total deposits and $51 billion in total assets
o Marries GSB's low-cost deposit generation franchise with CalFed's strong
mortgage origination capability:
- GSB pro forma cost of funds at 4.83%
- Combined mortgage banking business among top 10 in the US:
- Approximately $100 billion servicing portfolio, 7th
nationally
- $10 billion in pro forma 1997 originations, 12th nationally
o Broader base to grow consumer and business banking franchise:
- Combined $287 million in business loans outstanding
- $1 billion in consumer loans
o Provides CalFed with currency for ongoing M&A activity
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
TRANSACTION RATIONALE - LOW RISK
================================================================================
o Estimated cost savings of $160 million, including CENFED and RedFed cost
savings
o In-market transaction: 45% of GSB branches within 2 miles of a CalFed
branch
- Currently anticipates closing over 50 branches
o CalFed has a proven consolidation track record:
- CalFed has acquired over $20 billion of deposits over the past four
years, extracting approximately $180 million in annual cost savings
o Both companies have exemplary credit quality:
- Pro forma NPAs/Assets below 1.0%
- Pro forma Reserves/NPLs at 196%, providing significant cushion
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
TRANSACTION RATIONALE
================================================================================
TOP QUARTILE
FINANCIAL ENHANCED
PERFORMANCE SHAREHOLDER
+ VALUE
STRENGTHENED AND BOTH AS AN
GROWING CALIFORNIA INDEPENDENT
FRANCHISE ENTITY AND A
+ CONSOLIDATION
LOW RISK IN-MARKET CANDIDATE
TRANSACTION
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
ANTICIPATED TIMETABLE
================================================================================
- -------------------------------------------------------------------------------
FEB MAR APR MAY JUN JUL AUG SEP
- -------------------------------------------------------------------------------
- -----------
ANNOUNCE
GSB/CALFED
TRANSACTION
- -----------
-------------
GSB COMPLETES
CENFED
ACQUISITION
-------------
----------
GSB ISSUES
LTWs(TM)
----------
-----------------
GSB REPURCHASES
SHARES TO BE
ISSUED FOR REDFED
-----------------
-------------
GSB COMPLETES
REDFED
ACQUISITION
-------------
--------------------
GSB/FNPH TRANSACTION
--------------------
PRICING CLOSING
PERIOD
--------------------
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
OVERVIEW OF CALIFORNIA
FEDERAL
===============================================================================
<PAGE>
OVERVIEW OF CALFED
===============================================================================
o Fourth largest thrift in the U.S., with over $30 billion in assets
o Serves consumers in California, Florida and Nevada
o 225 branches with $16.2 billion in deposits
o Large mortgage banking operation servicing over $60 billion at a
dedicated facility in Frederick, MD
o Strong credit quality (229% Reserves/NPLs)
o 80% owned by Ronald O. Perelman and 20% by Gerald J. Ford
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
CALFED'S PROVEN ACQUISITION
TRACK RECORD
===============================================================================
<TABLE>
<CAPTION>
DEPOSITS COST SAVINGS
DATE TYPE TARGET (MM) $ %**
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Depository Institutions:
9/94 Thrift First Nationwide Bank $10,048 $50.0 18%
8/95 Branch 3 Branches of ITT Federal 356 -- --
12/95 Branch 4 Branches of Citizens Federal 144 -- --
2/96 Thrift San Francisco Federal 2,679 45.6 58
6/96 Thrift Home Federal 632 -- --
1/97 Thrift California Federal 8,986 88.9 37
Other: SERVICING
2/95 Loan Servicing Portfolio Standard Federal $11,400* N/A N/A
10/95 Loan Servicing Portfolio Lomas Mortgage 11,100* N/A N/A
1/96 Loan Servicing Portfolio Lomas Mortgage 14,100* N/A N/A
5/97 Loan Servicing Portfolio Weyerhaeuser 3,200* N/A N/A
9/97 Finance Auto One N/A N/A N/A
2/98 Finance Gulf States Acceptance N/A N/A N/A
</TABLE>
* Acquisition of a servicing portfolio.
** Expressed as a percentage of target non-interest expense.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
CALFED HISTORICAL AND PROJECTED
FINANCIAL DATA
===============================================================================
<TABLE>
<CAPTION>
($ IN MILLIONS) PRO FORMA* PROJECTED
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------
1997 1998E 1999E 2000E
=======================================================================================================
<S> <C> <C> <C> <C>
Net Interest Income after Provision $ 679 $ 734 $ 750 $ 765
Non-interest Income 364 312 328 340
Non-interest Expense (586) (546) (575) (596)
Amortization of Intangibles (49) (47) (47) (47)
-------- -------- -------- --------
Pre-Tax Income 408 453 456 462
Income Tax Expense (193) (211) (212) (215)
-------- -------- -------- --------
Net Income Before Minority Interest 215 242 244 247
REIT Preferred (26) (26) (26) (26)
-------- -------- -------- --------
Net Income 189 216 218 221
======== ======== ======== ========
Preferred Dividends (53) (53) (53) (53)
-------- -------- -------- --------
Net Income to Common $ 136 $ 163 $ 165 $ 168
======== ======== ======== ========
- -------------------------------------------------------------------------------------------------------
Cash Net Income to Common $ 185 $ 210 $ 212 $ 215
- -------------------------------------------------------------------------------------------------------
Cash ROAA** 0.79% 0.81% 0.79% 0.78%
Cash ROACE** 16.57 18.07 17.68 16.58
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Reflects pro forma tax rate of 42%.
** Cash net income divided by average tangible assets and common equity,
respectively.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
FNPH HISTORICAL AND PROJECTED
FINANCIAL DATA
===============================================================================
($ IN MILLIONS)
PRO FORMA* PROJECTED PRO FORMA*
---------- -----------------------
1997 1998E 1999E 2000E
===============================================================================
CALFED CASH NET INCOME TO COMMON $ 185 $ 210 $ 212 $ 215
INTEREST EXPENSE (90) (90) (90) (90)
OTHER EXPENSE (9) (9) (9) (9)
----- ----- ----- -----
- -------------------------------------------------------------------------------
CASH NET INCOME** $ 86 $ 111 $ 113 $ 116
===== ===== ===== =====
- -------------------------------------------------------------------------------
GAAP NET INCOME** $ 37 $ 64 $ 66 $ 69
CASH ROAA*** 0.28% 0.33% 0.33% 0.33%
* Reflects pro forma tax rate of 42%.
** Includes Ford's minority interest in First Nationwide Holdings.
*** Net income before goodwill amortization divided by average tangible
assets.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
BALANCE SHEET
(AT DECEMBER 31, 1997)
===============================================================================
($ IN BILLIONS) CALFED FNPH*
- -------------------------------------------------------------------------------
ASSETS
Cash & Investments $ 1.3 $ 1.3
Mortgage-Backed Securities 6.4 6.4
Loans, Net 20.9 20.9
----- -----
Total Earning Assets 28.6 28.6
Goodwill 0.7 0.7
Mortgage Servicing Rights 0.5 0.5
Other Assets 1.5 1.5
----- -----
TOTAL ASSETS $31.3 $31.4
===== =====
LIABILITIES & SHAREHOLDERS' EQUITY
Deposits $16.2 $16.2
Borrowings 11.7 13.1
Other Liabilities 0.7 0.7
----- -----
TOTAL LIABILITIES 28.5 30.0
Minority Interest 0.5 1.0
Preferred Equity 0.5 --
Common Equity 1.8 0.4
----- -----
TOTAL EQUITY 2.3 0.4
----- -----
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $31.3 $31.4
===== =====
* Pro forma for reclassification of Gerald Ford's minority interest in First
Nationwide Holdings as an equity interest in FNPH.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
PRO FORMA FRANCHISE
===============================================================================
<PAGE>
CREATES A LEADING CALIFORNIA FRANCHISE
================================================================================
($ IN BILLIONS)
CALIFORNIA MARKET
RANK COMPANY DEPOSITS SHARE
- -------------------------------------------------------------------------------
1. BankAmerica $ 81.4 20.7%
2. Wells Fargo 54.2 13.8
3. Ahmanson* 33.8 8.6
4. Washington Mutual 33.3 8.5
-------------------------------------------------------------------
PRO FORMA 25.3 6.4
-------------------------------------------------------------------
5. UnionBanCal 20.3 5.2
6. CALFED 13.7 3.5
7. Golden West 13.7 3.5
8. GSB* 11.6 3.0
9. Sanwa Bank 5.8 1.5
10. Citicorp 4.8 1.2
- -------------------------------------------------------------------------------
* Pro forma for all acquisitions
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
CALIFORNIA BRANCH OVERLAP
PRO FORMA COMPANY HAS A TOP RANKING IN EACH OF CA'S MOST POPULOUS REGIONS
===============================================================================
[PICTURE OF MAP]
[ ] GlenFed
[ ] CalFed
[ ] Both
PRO FORMA MARKET SHARE ($ BN)
===========================================================
MSA DEPOSITS SHARE RANK
- --- -------- ----- ----
Los Angeles $9.4 7.3% 4
San Francisco 3.7 6.5 4
Orange County 2.4 7.1 5
Riverside - 2.0 10.4 3
San Bernadino
Oakland 1.6 5.0 5
Central Valley* 1.4 6.6 4
San Diego 0.9 3.9 6
- -----------------------------------------------------------
* Includes Fresno, Kern, Kings, Madera, Merced, San Joaquin, Stanislaus and
Tulare counties.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
MORTGAGE BANKING
===============================================================================
($ IN BILLIONS)
CALFED GSB** PRO FORMA
- -------------------------------------------------------------------------------
12/31/97 Servicing Portfolio $61.6 $38.2 $ 99.9
U.S. Rank* 10 23 7
Number of Loans Serviced (000s) 811 293 1,104
1997 Origination Volume $ 8.5 $ 1.5 $ 10.0
U.S. Rank* 15 -- 12
* Most recent available, as of or for the nine months ended September 30,
1997.
** Pro forma for CENFED and RedFed.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
INTEREST RATE ENVIRONMENT
===============================================================================
ASSUMING A 100BP PARALLEL ASSUMING A 200BP PARALLEL
INCREASE IN INTEREST RATES INCREASE IN INTEREST RATES
% Change in ------------------------------------------------------------
Market GSB GSB GSB GSB
Value of Net Stand Alone Pro Forma Stand Alone Pro Forma
Assets* (9.2)% (3.3)% (20.6)% (12.7)%
(greater than) (greater than)
-------------------------------------
Combination with CalFed reduces interest rate sensitivity
* Based on position as of September 30, 1997.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
DEPOSIT PORTFOLIO COMPARISON
<TABLE>
<CAPTION>
=======================================================================================================
AT OR FOR THE YEAR ENDED DECEMBER 31, 1997
PRO
($ IN MILLIONS) CALFED GSB* FORMA AHM** GDW
=======================================================================================================
<S> <C> <C> <C> <C> <C>
TRANSACTION ACCOUNTS
Savings & Money Market $3,142 $3,037 $ 6,179 $10,028 $ 3,413
Checking 2,316 1,746 4,062 2,173 286
------ ------ ------- ------- -------
Total $5,458 $4,783 $10,241 $12,201 $ 3,699
====== ====== ======= ======= =======
-------
Transaction Accounts/Total Deposits 33.4% 40.1% 36.4% 31.4% 15.3%
-------
DDA Accounts/Total Deposits 14.3 14.6 14.4 5.6 1.2
# of Checking Accounts (000s) 569 399 968 N/A N/A
# of Total Accounts (000s) 1,304 1,049 2,353 N/A N/A
# of ATMs 278 291 569 N/A N/A
# of Branches 225 205 430 N/A N/A
# of Households Served (000s) 1,022 696 1,718 N/A N/A
=======================================================================================================
</TABLE>
* Pro forma for the CENFED and RedFed acquisitions.
** Deposits as of September 30, 1997.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
COMPARISON OF THRIFT FRANCHISES
===============================================================================
PRO FORMA
($ IN BILLIONS) GSB* AHM GDW WAMU
- -------------------------------------------------------------------------------
Market Cap $ 4.0 $ 6.9 $ 4.8 $16.8
Total Equity 2.6 3.4 2.7 5.3
Total Assets 51.3 55.5 39.6 97.1
1999E Cash Net Income* 0.4 0.6 0.4 1.5
1999E Cash P/E** 10.9x 11.2x 11.5x 11.3x
* Assumes full phase-in of cost savings and refinancing all debt and
preferred.
** Based on closing market price on February 4, 1998. GSB and AHM adjusted
for 85% of goodwill claim.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
COST SAVINGS
ACHIEVED IN FIFTEEN MONTHS
===============================================================================
($ IN MILLIONS)
RESULTS FROM FIRST NATIONWIDE
RUN RATE ACQUISITION OF CALFED
- -------------------------------------------------------------------------------
COMPENSATION AND BENEFITS $ 90.4 $40.5
OCCUPANCY AND EQUIPMENT 23.4 )
MARKETING 12.1 )> 48.4
OTHER NON-INTEREST EXPENSE 34.3 )
------ -----
TOTAL* $160.2 $88.9
====== =====
% OF GSB 1997 NON-INTEREST EXPENSE 45% 37%**
AT OR FOR THE YEAR ENDED DECEMBER 31, 1997
-------------------------------------------
CLOSINGS & ESTIMATED
CALFED GSB ATTRITION COMBINED
- -------------------------------------------------------------------------------
BRANCHES 225 205 (54) 376
FTES 4,983 3,454 (1,123) 7,314
* Includes $29 million fully phased-in cost savings from CENFED and RedFed.
** % of CalFed's 1996 non-interest expense.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
DEBT REFINANCING OPPORTUNITY
($ IN MILLIONS)
<TABLE>
<CAPTION>
=============================================================================================
($ IN MILLIONS) AFTER-TAX
EXPECTED SAVINGS BY
SECURITY REDEMPTION BALANCE REFINANCING*
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FIRST NATIONWIDE PARENT HOLDINGS 12 1/2% Senior Notes 2000 $ 455 $11.8
FIRST NATIONWIDE HOLDINGS 12 1/4% Senior Notes 1999 200 4.9
9 1/8% Senior Notes 2001 140 0.9
10 5/8% Notes 2001 575 8.7
CALIFORNIA FEDERAL 11 1/2% Preferred At Closing 301 25.0
10 5/8% Preferred 1999 172 12.8
------ -----
$1,843 $64.3
====== =====
- ------------------------------------------------------------------------------------------
TOTAL AFTER-TAX SAVINGS BY REFINANCING $64.3
SAVINGS PER SHARE $0.48
- ------------------------------------------------------------------------------------------
</TABLE>
* Assumes an average financing cost of 8.0% for subordinated debt, 5.5% for
cash and a 42% tax rate. Debt refinanced with sub debt; preferred refinanced
with excess cash.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
PRO FORMA FINANCIAL RESULTS
NET INCOME
===============================================================================
($ IN MILLIONS)
YEARS ENDING DECEMBER 31,
RUN-RATE ----------------------
1999E* 1999E 2000E
- -------------------------------------------------------------------------------
FNPH NET INCOME TO COMMON $ 66.5 $ 66.5 $ 69.6
GSB NET INCOME TO COMMON** 165.9 165.9 182.9
AFTER-TAX ADJUSTMENTS
COST SAVINGS*** 75.7 56.8 79.6
INCREMENTAL GOODWILL AMORTIZATION**** (69.3) (69.3) (69.3)
REFINANCING 64.3 34.6 45.8
-------- -------- --------
PRO FORMA GAAP NET INCOME $ 303.1 $ 254.5 $ 308.6
======== ======== ========
INCREMENTAL GOODWILL AMORTIZATION $ 69.3 $ 69.3 $ 69.3
EXISTING FNPH GOODWILL AMORTIZATION 47.0 47.0 47.0
- -------------------------------------------------------------------------------
PRO FORMA CASH NET INCOME $ 419.4 $ 370.9 $ 424.9
- -------------------------------------------------------------------------------
* Assumes fully phased-in cost savings and full benefit of refinancing.
** 1999E and 2000E based on First Call median 1998E estimates and long-term
growth rate of 10%. Estimates converted to calendar year-end.
*** Assumes cost savings are phased-in 75% in 1999 and 100% in 2000; assumes
5% growth from 1999 to 2000.
**** Goodwill amortized over 15 years.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
PRO FORMA FINANCIAL RESULTS
EPS ACCRETION / (DILUTION)
===============================================================================
YEARS ENDING DECEMBER 31,
RUN-RATE --------------------------
1999E* 1999E 2000E
- -------------------------------------------------------------------------------
GAAP
GSB EPS** $ 2.12 $ 2.12 $ 2.34
Pro Forma EPS 2.25 1.89 2.29
% Accretion/(Dilution) 6.0% (11.0)% (2.2)%
Cash
GSB Cash EPS** $ 2.35 $ 2.35 $ 2.57
Pro Forma Cash EPS 3.11 2.75 3.15
% Accretion/(Dilution) 32.2% 16.9% 22.6%
FD Shares 135.0 135.0 135.0
* Assumes fully phased-in cost savings and full benefit of refinancing.
** 1999E and 2000E based on First Call median 1998E estimates and long-term
growth rate of 10%. Estimates converted to calendar year-end and adjusted
for CENFED transaction as a purchase.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
PRO FORMA BALANCE SHEET DATA
===============================================================================
AT DECEMBER 31, 1997 PRO
($ IN MILLIONS) FNPH GSB* ADJUSTMENTS FORMA
- -------------------------------------------------------------------------------
Loans, net $20,908 $14,173 -- $35,081
MBS 6,414 2,757 -- 9,171
Intangibles 676 236 $1,075 1,988
Total Assets 31,362 19,243 658 51,263
Wholesale Borrowings 11,232 4,821 -- 16,054
Deposits 16,203 11,942 -- 28,145
Common Equity 370 1,177 1,042 2,589
Preferred Equity -- 116 (116) --
Book Value / FD Share -- $ 15.03 -- $ 19.18
* Pro forma for acquisitions of CENFED and RedFed.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
PRO FORMA CAPITAL AT THE
BANK LEVEL
===============================================================================
ESTIMATED AT CLOSING
($ IN MILLIONS) GLENDALE
FEDERAL PRO
CALFED BANK* ADJUSTMENTS FORMA
- -------------------------------------------------------------------------------
Preferred Equity $ 473 $ -- $ (301) $ 172
Convertible Preferred Equity -- 116 (116) --
Common Equity 1,787 1,161 1,236 4,184
------ ------ ------- ------
Total Equity $2,260 $1,277 $ 819 $4,356
====== ====== ======= ======
Intangibles $ 676 $ 236 $ 1,076 $1,988
Core Leverage Ratio 5.65% 5.16% -- 5.45%
Risk-Based Capital 11.93 10.32 -- 10.97
* Pro forma for acquisitions of CENFED and RedFed.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
PRO FORMA ASSET QUALITY DATA
===============================================================================
($ IN MILLIONS)
PRO
CALFED GSB* FORMA
- -------------------------------------------------------------------------------
Non-Performing Loans (NPLs) $ 192.2 $ 127.7 $ 319.9
REO 80.1 57.5 137.6
Non-Performing Assets (NPAs) 272.3 185.2 457.5
Loan Loss Reserve 439.2 188.3 627.5
NPAs / Assets 0.87% 0.96% 0.88%
Reserves / NPLs 2.29x 1.01x 1.96x
Reserves / Loans 2.10% 1.33% 1.79%
* Pro forma for CENFED and RedFed.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
SUMMARY OF COLLAR
===============================================================================
GSB PRO FORMA GSB PRO FORMA
ADJUSTED FULLY-DILUTED PERELMAN/FORD
PRICE OWNERSHIP OWNERSHIP
- -------------------------------------------------------------------------------
$32.00 or less 58% 42%
greater than $32.00 but less than $32.50 57% 43%
greater than or equal to $32.50 but less than $33.00 56% 44%
$33.00 or more 55% 45%
- -------------------------------------------------------------------------------
o Shares issued to Perelman/Ford at closing according to pro forma
ownership percentage
o Assuming an adjusted price of $32.00, the implied current trading value
of GSB shares would approximate $38.00, based on a $6.00 per share value
ascribed to GSB's goodwill litigation claim
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
TRANSACTION SUMMARY
GOODWILL LITIGATION
===============================================================================
o GSB will continue its plan to distribute to shareholders Litigation
Tracking Warrants(TM) ("LTWs(TM)") for 85% of its existing goodwill
litigation claim in late April
o Upon settlement of CalFed goodwill litigation claim, distributions will
be as follows:
- CALGZ and CALGL will receive cash proceeds in accordance with their
terms
- An amount is retained in the Company equal to (i) the value of 15%
of GSB's goodwill litigation proceeds not distributed to GSB's
shareholders through the LTWsTM multiplied by (ii) Perelman/Ford's
ownership as a percentage of the current GSB shareholders'
ownership in the pro forma Company
- GSB shares equal to the remaining value (if any) will be
distributed to Perelman/Ford
o After closing, litigation value embedded in pro forma company estimated
at approximately $1.00 per share
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
CONCLUSION
===============================================================================
TOP QUARTILE
FINANCIAL
PERFORMANCE ENHANCED
SHAREHOLDER
+ VALUE
BOTH AS AN
STRENGTHENED INDEPENDENT
AND GROWING ENTITY AND A
CALIFORNIA CONSOLIDATION
FRANCHISE CANDIDATE
+
LOW RISK IN-MARKET
TRANSACTION
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
APPENDIX
===============================================================================
<PAGE>
SUMMARY STRUCTURE
GSB SHAREHOLDERS RETAIN THEIR EXISTING SHARES
===============================================================================
RONALD O. PERELMAN [-------
| -------
| --------
| 100% -------GSB SHARES
| -------
FIRST NATIONWIDE STOCK MERGER -
PARENT HOLDINGS ------------------------------------] GOLDEN STATE
| --- BANCORP
| --- GSB SHARES |
| 80% --- |
| -- |
FIRST NATIONWIDE 20% [--- |
HOLDINGS ------------GERALD J. FORD* |
| |
| |
| 100% |
| |
CALIFORNIA OPERATIONS COMBINED GLENDALE
FEDERAL BANK [----------------------] FEDERAL BANK
* Ford's interest in First Nationwide Holdings to be exchanged for GSB stock.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
ILLUSTRATION OF PRO FORMA SHARES*
(IN MILLIONS OF SHARES)
===============================================================================
GSB ADJUSTED PRICE
------------------------------
$28.76** $32.00 $33.00
- -------------------------------------------------------------------------------
GSB Outstanding Common Shares 51.0 51.0 51.0
Series A Preferred Stock 11.1 11.1 11.1
Options 2.4 2.7 2.8
Warrants 6.5 6.9 7.0
Shares Issued for CENFED 7.3 7.3 7.3
----- ----- -----
Fully-Diluted GSB Shares 78.3 79.0 79.2
% Ownership 58.0% 58.0% 55.0%
Shares Issued to Perelman/Ford 56.7 57.2 64.8
% Ownership 42.0% 42.0% 45.0%
Pro Forma Fully-Diluted Shares 135.0 136.2 144.0
% Ownership 100.0% 100.0% 100.0%
- -------------------------------------------------------------------------------
GSB Adjusted Price:
o Calculated as the average GSB closing price during the 15 trading days
selected randomly from the 30 trading days immediately prior to the third
day preceding closing
o Adjusted to exclude 100% of the value of GSB's goodwill litigation
- -------------------------------------------------------------------------------
* Assumes the treasury stock method used to calculate fully diluted shares.
** Value assuming the February 4, 1998 GSB closing price of $35.75.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
ESTIMATED TRANSACTION GOODWILL
===============================================================================
($ IN MILLIONS)
Purchase Price $ 2,334*
Less: Tangible Equity (1,056)
Less: Value of 15% of Goodwill Claim (82)
Plus: Transaction Reserve (after tax) 116
-------
Goodwill Created 1,312
=======
Existing Goodwill at GSB (236)
-------
Net Goodwill Generated $ 1,076
=======
* Assumes an adjusted price of $29.81 and 78.3 million fully diluted shares.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
TAX BENEFITS TO BE RETAINED BY PERELMAN/FORD
===============================================================================
o Going forward tax rate to approximate statutory rate
o CalFed's existing $1 billion net operating loss (NOL) will be transferred
to GSB
o Annual usage of the NOL to shelter taxable income will be limited by
Section 382
o As, if and when tax benefits are realized, GSB will pay Perelman/Ford the
value of the benefits
o Payments to Perelman/Ford to be made in shares of GSB stock. It is the
Company's current intention to repurchase an equal number of shares in
the open market
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
ILLUSTRATION OF GOODWILL
LITIGATION ADJUSTMENT
===============================================================================
- -------------------------------------------------------------------------------
CURRENT
- -------------------------------------------------------------------------------
Aggregate Litigation Value $ 598.7
LTWTM Value (508.9)
--------
Net GSB Litigation Retained by Pro Forma GSB $ 89.8
========
- -------------------------------------------------------------------------------
PRO FORMA
- -------------------------------------------------------------------------------
CalFed Litigation Value $ 440.0
Distribution to Certificate Holders:
CALGZ (110.0)
CALGL (123.0)
Distribution to Perelman/Ford (142.0)
--------
Net CalFed Litigation Retained by Pro Forma GSB $ 65.0
========
- -------------------------------------------------------------------------------
Key Assumptions
o Based on settlement today with both claims valued using the average
prices for CALGL and GALGZ as of February 4, 1998. LTWsTM value accreted
by a 20% time value of money premium.
o Ownership based on current GSB stock price (58% GSB; 42% Perelman/Ford)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
<PAGE>
LOAN AND MORTGAGE-BACKED SECURITIES
COMPARISON
===============================================================================
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
($ IN BILLIONS)
CALFED GSB* COMBINED
------------------ -------------------- ---------------------
BALANCE % BALANCE % BALANCE %
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1-4 Family $ 15.5** 72.4% $ 10.3 71.5% $ 25.8 72.1%
Multi-Family 3.0 14.1 2.1 14.6 5.1 14.3
Commercial Real Estate 2.2 10.3 1.4 9.7 3.6 10.1
Consumer Loans 0.7 3.3 0.3 2.1 1.0 2.8
Business -- -- 0.3 2.1 0.3 0.8
------ ----- ------ ----- ------ -----
Total Gross Loans $ 21.4 100.0% $ 14.4 100.0% $ 35.8 100.0%
====== ===== ====== ===== ====== =====
MBS $ 6.4 $ 2.8 $ 9.2
</TABLE>
* Adjusted for the CENFED and RedFed acquisitions.
** Includes $1.5 billion of loans held for sale.
- -------------------------------------------------------------------------------
[CAL FED LOGO] [CHEETAH LOGO]
CALIFORNIA FEDERAL BANK F.S.B. GOLDEN STATE BANCORP INC.
- -------------------------------------------------------------------------------
