<PAGE>
================================================================================
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
November 30, 1997
(Date of earliest event reported)
- - --------------------------------------------------------------------------------
GOLDEN STATE BANCORP INC.
(Exact name of registrant as specified in its charter)
333-28037
(Commission File Number)
Delaware 95-4642135
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
414 North Central Avenue, Glendale, California 91203
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code
(818) 500-2000
================================================================================
<PAGE>
Item 5. Other Events
On December 1, 1997, Golden State Bancorp Inc. ("Golden State"),
parent company of Glendale Federal Bank, Federal Savings Bank
("Glendale Federal"), announced that it had entered into a definitive
agreement with RedFed Bancorp Inc. ("RedFed") pursuant to which Golden
State will acquire RedFed in a tax-free, stock-for-stock merger (the
"RedFed Merger") with a total transaction value of approximately $158
million. In the RedFed Merger, which will be accounted for as a
purchase business combination, Golden State will issue shares of
Golden State Common Stock with a value of $20.75 for each outstanding
share of the common stock of RedFed. The exact number of shares of
Golden State Common Stock to be issued to holders of RedFed common
stock will be determined based on the average closing price of Golden
State Common Stock for the ten trading days prior to the second
business day before the closing of the RedFed Merger. Golden State
intends to purchase shares of Golden State Common Stock in the open
market in an amount equal to the amount that will be issued in the
RedFed Merger.
Item 7. Financial Statements, Pro-Forma Financial Information and Exhibits
(c) Exhibits
99A. Press release, dated December 1, 1997, regarding purchase
of RedFed Bancorp, with attachments.
99B. Investor presentation - Golden State Bancorp Inc.
Acquisition of RedFed Bancorp Inc., dated December 1,
1997.
99C. Agreement and Plan of Merger between Golden State Bancorp
Inc. and RedFed Bancorp Inc., dated as of November 30,
1997.
<PAGE>
SIGNATURES
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 thereunto duly authorized.
Golden State Bancorp Inc.
------------------------------------
(Registrant)
Date: December 16, 1997 By: /s/ John E. Haynes
---------------------------- -------------------------------
John E. Haynes
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
-------------
SEQUENTIAL
EXHIBIT NUMBERING
NUMBER PAGE NO.
------ --------
99A. Press release, dated December 1, 1997, regarding
purchase of RedFed Bancorp, with attachments.
99B. Investor presentation - Golden State Bancorp Inc.
Acquisition of RedFed Bancorp Inc., dated
December 1, 1997.
99C. Agreement and Plan of Merger between Golden State Bancorp
Inc. and RedFed Bancorp Inc., dated as of November 30,
1997.
<PAGE>
EXHIBIT 99A
[LETTERHEAD OF GOLDEN STATE BANCORP]
FOR INFORMATION CONTACT: Ken Preston (818) 409-4550
Jeff Misakian (818) 500-2824
FOR IMMEDIATE RELEASE
GOLDEN STATE BANCORP TO ACQUIRE REDFED BANCORP
--Acquisition to be immediately accretive to earnings--
--Glendale Federal to have significant presence in Inland Empire--
GLENDALE, CA, December 1, 1997 -- Golden State Bancorp Inc. (NYSE: GSB),
parent company of Glendale Federal Bank, and RedFed Bancorp Inc. (NASDAQ: REDF),
parent company of Redlands Federal Bank, today announced the signing of a
definitive agreement for Golden State to acquire RedFed. The acquisition is
expected to be immediately accretive to Golden State's earnings, while also
expanding its franchise in the Inland Empire.
Golden State will issue $20.75 of its common stock for each RedFed common
share, representing a total transaction value of approximately $158 million, or
1.96 times RedFed's book value at September 30, 1997. The transaction will be a
tax-free exchange with the exact number of shares to be distributed to RedFed
stockholders to be determined based on Golden State's average closing stock
price for the ten trading days prior to the second business day before the close
of the transaction. The agreement is subject to regulatory and RedFed
stockholder approval.
The transaction will be accounted for as a purchase. Golden State Bancorp
will purchase its common shares in the open market in an amount equal to the
amount that will be issued in the transaction. The acquisition is expected to
close in the second calendar quarter of 1998. At that time, Redlands Federal
Bank will be merged into Glendale Federal Bank.
Stephen J. Trafton, chairman and chief executive officer of Golden State
Bancorp, stated: "The acquisition of RedFed enhances stockholder value in
several ways. It expands Glendale Federal's franchise in the Inland Empire
region of Southern California where we are currently under-represented and will
increase our deposit base by 7.7 percent, with estimated cost savings of 40
percent of RedFed's operating expense base. It will also be immediately
accretive to reported and cash earnings by approximately 1.8 percent and 4.8
percent, respectively, for the fiscal year ended June 30, 1999. In addition, the
transaction will be significantly accretive to our operating and cash returns on
equity, while also accelerating the achievement of our financial objectives. We
estimate that our operating return on average equity will increase by more than
-more-
<PAGE>
-2-
50 basis points, on a pro forma basis and including the impact of our pending
acquisition of CENFED Financial Corp., while cash return on equity is estimated
to increase by 200 basis points. The transaction also results in modest
improvements in Glendale Federal's efficiency ratio, the ratio of fee income to
expenses and the interest rate spread."
Trafton explained that Redlands Federal is an ideal strategic fit for
Glendale Federal in that it has pursued a similar community banking strategy.
For example, Redlands Federal has 12 percent of its deposits in checking
accounts and 36 percent in total transaction accounts, including checking, money
market and savings accounts. These low-cost deposits have helped Redlands
Federal increase its net interest margin to 3.30 percent, well above the average
of California's larger savings and loans.
On a pro forma basis as of September 30, 1997, including the impact of both
the CENFED Financial Corp. acquisition scheduled to close in early 1998 and
RedFed, Golden State Bancorp would have consolidated assets of $19.6 billion,
total deposits of $11.7 billion and 211 banking offices. Redlands Federal Bank
has 14 offices in Riverside and San Bernardino counties.
"Redlands Federal offers Glendale Federal an important opportunity to
significantly expand its presence in the growing Inland Empire and make it one
of the top five banks serving that area. Because Redlands Federal's offices
represent new markets, Glendale Federal does not anticipate closing any Redlands
Federal offices," Trafton said. "This is an area of Southern California that is
very conducive to business and consumer product growth. We will be able to
leverage our growing business and consumer banking lines in the Inland Empire by
offering a wider range of products to Redlands Federal Bank customers. In
addition, Redlands Federal customers will benefit from our larger and rapidly
growing proprietary ATM network."
"We are pleased with the proposed merger with Glendale Federal," said Anne
Bacon, president and chief executive officer of RedFed. "It provides an
excellent return to our stockholders. In addition, by joining RedFed's strong
presence in the Inland Empire to Glendale Federal's statewide presence, we can
provide our customers with a much larger range of products and services than we
could if we were to remain independent."
Trafton noted Glendale Federal will continue to operate in all markets
served by Redlands Federal. "Through our acquisitions, we have been able to
enhance the array of products and services provided to all areas served and to
determine ways to expand those services," Trafton said. "This includes ensuring
that banking services continue to be provided in the low- and moderate-
-more-
<PAGE>
-3-
income and minority communities served by Redlands Federal. Our ultimate goal is
to have a stronger presence in the area than before the two banks combined."
Given the importance of the Inland Empire as an emerging growth area for
California, Trafton said Glendale Federal will also look to open offices in new
locations there in the future.
In October 1997, Golden State announced plans to distribute Litigation
Tracking Warrants(TM) (LTW(TM)) to its security holders representing the right
to receive, upon exercise of the LTW(TM)s, Golden State common stock equal in
value to 85 percent of the net after-tax proceeds, if any, from Glendale
Federal's pending goodwill lawsuit against the United States Government. On
November 20, 1997, Golden State proposed a $1.5 billion settlement of the
goodwil litigation. Regardless of the closing date of the RedFed transaction,
the transaction is not expected to have a material impact on the number of
LTW(TM)s distributed, given Golden State Bancorp's intention to purchase an
equivalent number of shares to be issued to RedFed stockholders.
Golden State Bancorp, with $16.4 billion in assets, is the parent company of
Glendale Federal Bank - California's leading community bank, serving the
business and consumer banking needs of Californians through 179 banking offices
and 26 loan offices. Customers can reach the bank by calling 1-800-41FEDUP, or
get information through its Internet site at http://www.glenfed.com
###
This news release contains estimates of future financial condition, and certain
future earnings results, for Golden State Bancorp Inc. and RedFed Bancorp Inc.
on a pro forma combined basis, as well as statements regarding the expected
structure and impact of the proposed Merger. These estimates and statements
constitute forward-looking statements (within the meaning of the Private
Securities Litigation Reform Act of 1995), which involve significant risks and
uncertainties. Actual results may differ materially from the results discussed
in these forward-looking statements. Factors that might cause such a difference
include, but are not limited to: (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 pressures
among depository institutions increase significantly; (4) costs or difficulties
related to the integration of the business of Golden State and RedFed are
greater than expected; (5) changes in the interest rate environment reduce
interest margins; (6) general economic and credit conditions, either nationally
or in the region in which the combined company will be doing business, are less
favorable than expected; (7) legislative or regulatory changes adversely affect
the business in which the combined company would be engaged; and (8) the outcome
of Glendale Federal's "goodwill" litigation against the United States.
<PAGE>
EXHIBIT 99B
[LOGO OF GOLDEN STATE BANCORP INC.]
-Acquisition of-
[LOGO OF REDFED BANCORP INC.]
December 1, 1997
<PAGE>
Forward-Looking Statement
================================================================================
This presentation contains estimates of future operating results for fiscal 1999
and 2000 for both Golden State Bancorp Inc. ("Golden State") and RedFed Bancorp
Inc. ("RedFed") on a stand-alone and pro forma combined basis, as well as
estimates of financial condition and operating efficiencies on a combined basis.
These estimates constitute forward-looking statements (within the meaning of the
Private Securities Litigation Reform Act of 1995), which involve significant
risks and uncertainties. Actual results may differ materially from the results
discussed in these forward-looking statements. Factors that might cause such a
difference include, but are not limited to: (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 pressures
among depository institutions increase significantly; (4) costs or difficulties
related to the integration of the business of Golden State and RedFed are
greater than expected; (5) changes in the interest rate environment reduce
interest margins; (6) general economic and credit conditions, either nationally
or in the region in which the combined company will be doing business, are less
favorable than expected; (7) legislation or regulatory changes adversely affect
the business in which the combined company would be engaged; and (8) the outcome
of Golden State's "goodwill" litigation against the United States.
<PAGE>
Transaction Overview
================================================================================
Purchase Price: $20.75 per share in GSB stock
Transaction Value: $158 Million
Exchange Ratio: Floating exchange ratio, based on
GSB's average closing price for the ten
trading days prior to the second
business day before the close
Accounting Treatment: Purchase accounting.
GSB to repurchase shares to be
issued to RedFed
Premium to Market: 3.8%/(1)/
Expected Closing Date: Second quarter 1998
- - ------------------------------------------
/(1)/ Based on RedFed's closing price of $20.00 per share on November 28, 1997.
[LOGO OF GOLDEN STATE BANCORP INC.] [LOGO OF REDFED BANCORP INC.]
1
<PAGE>
Transaction Pricing
===============================================================================
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
GSB/ GSB\
REDF REDF
AS ANNOUNCED AT CLOSING
- - -------------------------------------------------------------------------------
<S> <C> <C>
Aggregate Value ($MM) $ 158 $ 158
Present Value of NOLs/(1)/ - (7)
----- -----
Net Transaction Value 158 151
Multiple to:
1997E EPS 25.2x/(2)/ 24.1x/(2)/
1998E EPS 16.3 /(2)/ 15.5 /(2)/
Book Value 1.96 1.71 /(3)/
Tang. Book Value 1.97 1.71 /(3)/
Deposit Premium 9.3% 7.2%
Transaction/Total Deposits 36% 36%
</TABLE>
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
COMPARABLE TRANSACTIONS
-----------------------------------------
GSB/CENF AHM/CSA
- - -------------------------------------------------------------------------------
<S> <C> <C>
Aggregate Value ($MM) $ 210 $ 901
Present Value of NOLs/(1)/ - -
----- -----
Net Transaction Value 210 901
Multiple to:
1997E EPS 13.6x 17.2x
1998E EPS 12.3 14.2
Book Value 1.76 1.91
Tang. Book Value 1.76 1.94
Deposit Premium 5.9% 7.1%
Transaction/Total Deposits 21% 31%
</TABLE>
- - --------------------------------------------------------------------------------
(1) Based on present value of NOLs utilized over three years subsequent to
closing, using a 6.5% discount rate.
(2) Based on analysts' consensus EPS estimates of $1.42 for CY1997 and $2.20
for CY1998, adjusted for a normalized tax rate of 42%.
(3) Based on RedFed's projected equity and tangible equity at closing.
[LOGO OF GOLDEN STATE BANCORP INC.] [LOGO OF REDFED BANCORP INC.]
2
<PAGE>
Merger Consequences Analysis
================================================================================
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED JUNE 30,
---------------------------------------------
1999 2000
---------------------- -------------------
$MM EPS $MM EPS
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GSB Net Income /(1)/ $165.8 $2.15 $182.3 $2.37
RedFed Net Income/(2)/ 10.0 -- 11.0 --
------ ------
Combined Net Income 175.8 -- 193.4 --
Add: Impact of NOLs 3.0 -- 2.5 --
Add: Impact of Cost Savings/(3)/ 3.0 -- 6.1 --
Less: Impact of Deposit Run-off/(4)/ (0.9) -- (0.9) --
Less: Financing Costs/(5)/ (6.8) -- (6.8) --
Less: Goodwill Amortization/(6)/ (5.3) -- (5.3) --
------ ------
Pro Forma Reported Earnings $168.8 $2.19 $189.1 $2.45
Accretion -- 1.8% -- 3.7%
GSB Stand Alone Cash Earnings $174.1 $2.26 $190.6 $2.47
Pro Forma Cash Earnings 182.4 2.37 202.7 2.63
Accretion -- 4.8% -- 6.3%
</TABLE>
- - --------------------------------------------------------------------------------
(1) Based on First Call estimates for fiscal 1999, with a 10% growth rate
thereafter. Net Income projections based on 77.1 million fully diluted
shares outstanding.
(2) Based on First Call estimates for calendar year 1998, fully taxed at 42%
and adjusted to a June fiscal year. FY 1999 and FY 2000 estimates based on
10% growth rate.
(3) Based on assumed cost savings equal to 40% of REDF's operating expenses,
phased in 50% in fiscal 1999 and 100% thereafter.
(4) Assumes 10% deposit run-off.
(5) Based on financing cost of 7.5% pre-tax.
(6) Based on straight line amortization over 15 years.
[LOGO OF GOLDEN STATE BANCORP INC.] [LOGO OF REDFED BANCORP INC.]
3
<PAGE>
Capital Impact
===============================================================================
Use of cash to fund transaction has a modestly dilutive impact to GSB's capital
ratios:
. Increases GSB's reported and cash ROE by over 0.5% and 2.0%, respectively
<TABLE>
<CAPTION>
================================================================================
GSB/CENF GSB DIFFERENCE OR
6/30/98 PRO FORMA/(1)/ % CHANGE
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Assets $ 18,572 $ 19,559 -
Intangibles 91 171 -
Total Equity 1,235 1,235 -
Equity/Assets/(2)/ 6.65% 6.31% (0.34)%
Tang. Equity/Tang. Assets/(2)/ 6.19 5.49 (0.70)
Book Value per Share/(3)/ $16.72 $16.72 -
Tang. Book Value per Share/(3)/ 15.66 14.73 (5.9)
- - --------------------------------------------------------------------------------
</TABLE>
/(1)/ Assumes restructuring charge equal to $10.4 million after tax and includes
the impact of 10% deposit runoff.
/(2)/ Based on projected equity and tangible equity levels at closing.
/(3)/ Based on 85.8 million fully distributed shares outstanding. Based on
projected book value per share and tangible book value per share at June
30, 1998.
[LOGO OF GOLDEN STATE BANCORP INC.] [LOGO OF REDFED BANCORP INC.]
4
<PAGE>
Overview of RedFed
================================================================================
RedFed is a $1.0 billion thrift headquartered in Redlands:
. Attractive deposit franchise, with 36% transaction accounts, including 12%
checking accounts:
. 4.63% cost of deposits
. 3.30% net interest margin
. Credit quality significantly improved since 1995:
. NPLs/Total loans of 0.87%
. Reserves to total NPAs of 121%
. Dramatically improving profitability statistics:
. Fully taxed ROA improved to 0.64% year to date from 0.32% in 1996
(excluding BIF/SAIF special assessment)
. Efficiency ratio, at 65%, remains above peer group
[LOGO OF GOLDEN STATE BANCORP INC.] [LOGO OF REDFED BANCORP INC.]
5
<PAGE>
Conclusion
================================================================================
. Financially attractive, low risk transaction:
. Yields IRR of 17%
. Attractive use of excess capital
. Consistent with GSB's stated financial goals:
. Increases reported and cash ROE by over 0.5% and 2.0%, respectively
. Transaction accounts equal to 36% of total deposits
. Is strategically attractive:
. Attractive fill in to existing franchise
. Increases total deposits by 7.7% to $11.7 billion
[LOGO OF GOLDEN STATE BANCORP] [LOGO OF REDFED BANCORP INC.]
6
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
GOLDEN STATE BANCORP INC.
AND
REDFED BANCORP INC.
DATED AS OF NOVEMBER 30, 1997
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RECITALS.................................................................. 1
ARTICLE I.
THE MERGER.............................................................. 1
1.1. Procedure and Effective Time of Merger............................. 1
1.2. Closing............................................................ 1
1.3. Effects of Merger.................................................. 1
1.4. Reservation of Right to Revise Transaction......................... 2
ARTICLE II.
EFFECT OF MERGER ON CAPITAL STOCK OF CONSTITUENT CORPORATIONS; EXCHANGE
OF CERTIFICATES........................................................ 2
2.1. Effect on Capital Stock............................................ 2
2.2. Exchange of Certificates........................................... 3
ARTICLE III.
REPRESENTATIONS AND WARRANTIES.......................................... 5
3.1. Disclosure Letters................................................. 5
3.2. Standards.......................................................... 5
3.3. Representations and Warranties of RedFed........................... 5
(a)Organization....................................................... 5
(b)Qualifications..................................................... 5
(c)Capital Stock...................................................... 5
(d)Redlands Federal; Significant Investments.......................... 6
(e)Authority and Stockholder Approvals................................ 6
(f)No Violations...................................................... 6
(g)Reports............................................................ 7
(h)Absence of Certain Changes or Events............................... 7
(i)Taxes.............................................................. 7
(j)Absence of Claims.................................................. 7
(k)Absence of Regulatory Actions...................................... 8
(l)Contracts.......................................................... 8
(m)Labor Matters...................................................... 8
(n)Employee Agreements................................................ 8
(o)Title to Assets.................................................... 9
(p)Compliance with Law................................................ 9
(q)Fees............................................................... 10
(r)Environmental Matters.............................................. 10
(s)Classified Assets.................................................. 11
(t)Material Interests of Certain Persons.............................. 12
(u)Insurance.......................................................... 12
(v)Books and Records.................................................. 12
(w)Corporate Documents................................................ 12
(x)Indemnification.................................................... 12
(y)Derivatives Contracts; Structured Notes; Etc. ..................... 12
(z)Disclosure......................................................... 12
3.4. Representations and Warranties of Golden State..................... 12
(a)Organization....................................................... 12
(b)Capital Stock...................................................... 13
(c)Authority and Stockholder Approvals................................ 13
(d)No Violations...................................................... 13
(e)Reports............................................................ 14
(f)Absence of Certain Changes or Events............................... 14
(g)Taxes.............................................................. 14
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(h)Absence of Claims................................................... 14
(i)Absence of Regulatory Actions....................................... 14
(j)Compliance with Law................................................. 15
(k)Fees................................................................ 15
(l)Books and Records................................................... 15
(m)Disclosure.......................................................... 15
ARTICLE IV.
CONDUCT PENDING MERGER................................................... 15
4.1. Conduct of Business Prior to Effective Time......................... 15
4.2. Forbearance by RedFed............................................... 16
ARTICLE V.
COVENANTS................................................................ 18
5.1. Acquisition Proposals............................................... 18
5.2. Certain Policies of RedFed.......................................... 18
5.3. Employees........................................................... 18
5.4. Access to Information............................................... 19
5.5. Regulatory Matters.................................................. 20
5.6. Other Actions....................................................... 20
5.7. Publicity........................................................... 21
5.8. Preparation of Form S-4 and Proxy Statement......................... 21
5.9. Letter of RedFed Accountants........................................ 21
5.10. Letter of Golden State Accountants................................. 21
5.11. Stockholder Action................................................. 21
5.12. Notification of Certain Matters.................................... 21
5.13. Tax Matters........................................................ 22
5.14. Updated Disclosure Letters......................................... 22
5.15. Stock Exchange Listing............................................. 22
5.16. Bank Merger........................................................ 22
5.17. Indemnification of Directors and Officers.......................... 22
5.18. RedFed ESOP........................................................ 23
5.19. Litigation Tracking Warrants....................................... 23
ARTICLE VI.
CONDITIONS TO CONSUMMATION............................................... 23
6.1. Conditions to All Parties' Obligations.............................. 23
6.2. Conditions to Obligations of Golden State........................... 24
6.3. Conditions to Obligations of RedFed................................. 24
ARTICLE VII.
TERMINATION.............................................................. 25
7.1. Termination......................................................... 25
7.2. Effect of Termination............................................... 25
ARTICLE VIII.
OTHER MATTERS............................................................ 26
8.1. Certain Definitions; Interpretation................................. 26
8.2. Survival............................................................ 26
8.3. Waiver.............................................................. 26
8.4. Counterparts........................................................ 27
8.5. Governing Law....................................................... 27
8.6. Expenses............................................................ 27
8.7. Notices............................................................. 27
8.8. Entire Agreement; No Third Party Beneficiaries...................... 28
8.9. Parties Bound; Assignment........................................... 28
8.10. Severability....................................................... 28
8.11. Captions........................................................... 28
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of November 30, 1997 ("Agreement") by
and between GOLDEN STATE BANCORP INC., A DELAWARE CORPORATION ("Golden
State"), and REDFED BANCORP INC., a Delaware corporation ("RedFed").
RECITALS
WHEREAS, the Boards of Directors of Golden State and RedFed have approved,
and deem it advisable and in the best interests of their respective
stockholders to consummate, the business combination provided for herein, in
which RedFed shall be merged (the "Merger") with and into a wholly-owned
subsidiary of Golden State ("Merger Sub") and Merger Sub shall thereafter
continue to be a wholly-owned subsidiary of Golden State;
WHEREAS, it is intended that the Merger shall qualify as a reorganization
under the provisions of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code");
WHEREAS, Golden State and RedFed contemplate that their respective
depository institution subsidiaries, Glendale Federal Bank, Federal Savings
Bank and Redlands Federal Bank (referred to herein as "Glendale Federal" and
"Redlands Federal", respectively) will be merged (the "Bank Merger")
concurrently with or promptly after the completion of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
Section 1.1 Procedure and Effective Time of Merger. As of the Effective Time
(as defined below), RedFed shall be merged with and into Merger Sub, with
Merger Sub to be the surviving corporation in the Merger, in accordance with
the following: Subject to the provisions of this Agreement, a certificate of
merger (the "Certificate of Merger") shall be duly prepared, executed and
acknowledged by the Surviving Corporation (as defined in Section 1.3(b)) and
thereafter delivered to the Secretary of State of the State of Delaware for
filing as provided in the Delaware General Corporation Law (the "DGCL"), as
soon as practicable on the Closing Date (as defined in Section 1.2). The
Merger shall become effective at the time of the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware or at such other
time as is provided in the Certificate of Merger (such time being referred to
herein as the "Effective Time").
Section 1.2 Closing. The completion of the transactions provided for herein
(the "Closing") shall take place at 10:00 a.m. on such date (referred to
herein as the "Closing Date") that is at least two business days after
satisfaction or appropriate waiver of each of the conditions set forth in
Article VI as shall be designated by Golden State, subject to the provisions
of Section 5.19 hereof. The Closing shall be conducted at the offices of
Mayer, Brown & Platt, 350 South Grand Avenue, 25th Floor, Los Angeles,
California 90071-1503, or at such other time, date and place as may be agreed
to in writing by the parties hereto.
Section 1.3 Effects of Merger. (a) At the Effective Time, (i) the separate
corporate existence of RedFed shall cease and RedFed shall be merged with and
into Merger Sub, (ii) the certificate of incorporation of Merger Sub as in
effect immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation, (iii) the by-laws of Merger Sub as
in effect immediately prior to the Effective Time shall be the by-laws of the
Surviving Corporation, and (iv) the directors of Merger Sub shall be the
directors of the Surviving Corporation.
(b) As used in this Agreement, "Constituent Corporations" shall mean Merger
Sub and RedFed and "Surviving Corporation" shall mean Merger Sub.
(c) At and after the Effective Time, the Merger will have the effects set
forth in Section 259 of the DGCL.
1
<PAGE>
Section 1.4 Reservation of Right to Revise Transaction. Notwithstanding any
other provision of this Agreement, Golden State may at any time change the
method of effecting the acquisition of RedFed by Golden State and RedFed shall
cooperate in such efforts, including to provide for a merger of RedFed with
and into Golden State, or to provide for mergers among certain of the
subsidiaries of Golden State and RedFed to occur substantially simultaneously
with, or promptly following, the Effective Time; provided, however, that no
such change shall (a) alter or change the amount or kind of consideration to
be issued to holders of RedFed Common Stock (as defined in Section 3.3(c)) as
provided for in this Agreement (the "Merger Consideration"), (b) adversely
affect the tax treatment to RedFed's stockholders as a result of receiving the
Merger Consideration or (c) materially delay receipt of any approval referred
to in Section 6.1(b) or the consummation of the transactions contemplated by
this Agreement.
ARTICLE II.
EFFECT OF MERGER ON CAPITAL STOCK OF
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1 Effect on Capital Stock As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder of shares of
capital stock of Merger Sub or RedFed Common Stock:
(a) Merger Sub Capital Stock to Remain Outstanding. Each issued and
outstanding share of the capital stock of Merger Sub shall remain outstanding
and shall not be affected by the Merger.
(b) Cancellation of Treasury Stock and Stock Owned by Golden State. All
shares of RedFed Common Stock that are owned by RedFed as treasury stock and
all shares of RedFed Common Stock that are owned by Golden State or any
wholly-owned subsidiary of Golden State, other than any shares in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties (any shares of stock held in any of such
capacities being referred to herein as "trust account shares"), shall be
canceled and retired and shall cease to exist and no stock of Golden State or
other consideration shall be delivered in exchange therefor. All shares of
Golden State Common Stock (as defined in Section 3.4(b)) that are owned by
RedFed or any subsidiary shall remain outstanding and shall not be affected by
the Merger.
(c) Conversion of RedFed Common Stock. Subject to Section 2.2(e), each
issued and outstanding share of RedFed Common Stock (other than shares
canceled in accordance with Section 2.1(b)) shall be converted into that
number (expressed as a decimal fraction rounded to the nearest one hundred
thousandth) of fully paid and nonassessable shares of Golden State Common
Stock that equals the quotient (referred to herein as the "Exchange Ratio")
derived by dividing (A) $20.75 by (B) the unweighted arithmetic average of the
daily closing prices of Golden State Common Stock, as reported on the New York
Stock Exchange Composite Tape, for the ten trading days on which Golden State
Common Stock is traded immediately preceding the date that is two business
days prior to the Closing Date (such average of daily closing prices being
referred to herein as the "Final Golden State Price" and such ten trading day
period being referred to herein as the "Pricing Period"). All such shares of
RedFed Common Stock shall cease to be outstanding and shall automatically be
canceled and retired, and each certificate previously representing any such
shares shall thereafter represent the shares of Golden State Common Stock into
which such RedFed Common Stock has been converted. Certificates previously
representing shares of RedFed Common Stock shall be exchanged for the
certificates representing whole shares of Golden State Common Stock and cash
in lieu of the issuance of fractional shares as provided in Section 2.2(e)
issued in consideration therefor upon the surrender of such certificates in
accordance with Section 2.2.
(d) Effect on RedFed Stock Option Plans. At the Effective Time, each then
outstanding and unexercised option to purchase shares of RedFed Common Stock,
if any, granted under the RedFed Stock Option Plans (as defined below) (each,
a "RedFed Stock Option"), whether vested or unvested (it being understood
that, under the terms of the RedFed Stock Plans, all such options will become
vested as a result of the transaction provided for in this Agreement), shall
be converted, subject to the penultimate sentence of this Section 2.1(d), into
an option (a "Replacement Option") to acquire, on the same terms and
conditions as were applicable under such
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RedFed Stock Option, the number of shares of Golden State Common Stock equal
to (a) the number of shares of RedFed Common Stock subject to the RedFed Stock
Option, multiplied by (b) the Exchange Ratio (such product to be rounded down
to the nearest whole number) at an exercise price per share (rounded up to the
nearest whole cent) equal to (y) the aggregate exercise price for the shares
of RedFed Common Stock which were purchasable pursuant to such RedFed Stock
Option divided by (z) the number of full shares of Golden State Common Stock
subject to such Replacement Option in accordance with the foregoing.
Notwithstanding the foregoing, each RedFed Stock Option which is intended to
be an "incentive stock option" (as defined in Section 422 of the Code) shall
be adjusted in accordance with the requirements of Section 424 of the Code. At
or prior to the Effective Time, RedFed shall take all such action, if any, as
shall be necessary with respect to the RedFed Stock Option Plans to permit the
replacement of the outstanding RedFed Stock Options by Golden State pursuant
to this Section. At the Effective Time Golden State shall assume the RedFed
Stock Option Plans; provided, that such assumption shall be only in respect of
the Replacement Options and that Golden State shall have no obligation with
respect to any awards under the RedFed Stock Option Plans other than with
respect to the Replacement Options and shall have no obligation to make any
additional grants or awards under such assumed RedFed Stock Option Plans. As
used herein, the term "RedFed Stock Option Plans" shall mean each of the
following plans of RedFed the 1995 Long-Term Incentive Plan, the 1994
Incentive Stock Option Plan, and the 1994 Stock Option Plan for Outside
Directors.
Section 2.2. Exchange of Certificates. (a) Exchange Agent. As of the
Effective Time, Golden State shall deposit, or shall cause to be deposited,
with a bank, trust company or other entity that regularly performs the
functions provided for in this Section 2.2 and that is designated by Golden
State and reasonably acceptable to RedFed (the "Exchange Agent"), for the
benefit of the holders of shares of RedFed Common Stock, and for exchange in
accordance with this Article II through the Exchange Agent, certificates
representing the shares of Golden State Common Stock and cash in lieu of the
issuance of any fractional shares pursuant to Section 2.2(e) (such
certificates for shares of Golden State Common Stock and cash, together with
any dividends or distributions with respect thereto, being hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 2.1.
(b) Exchange Procedures. As soon as practicable but in no event later than
five days after the Effective Time, Golden State shall cause the Exchange
Agent to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
RedFed Common Stock (the "Certificates") whose shares were converted into
shares of Golden State Common Stock pursuant to Section 2.1 (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Golden State and RedFed may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Golden State Common Stock.
Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Golden State Common Stock which
such holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article II (after taking into account all
shares of RedFed common stock then held by such holder), together with cash in
lieu of the issuance of any fractional shares as provided in Section 2.2(e),
and the Certificate so surrendered shall forthwith be canceled. In the event
of a transfer of ownership of RedFed Common Stock which is not registered in
the transfer records of RedFed, a certificate representing the proper number
of shares of Golden State Common Stock may be issued to a transferee if the
Certificate representing such RedFed Common Stock is presented to the Exchange
Agent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the certificate representing shares of
Golden State Common Stock and cash in lieu of the issuance of any fractional
shares of Golden State Common Stock as contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Golden
State Common Stock with a record date after the Effective
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Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Golden State Common Stock represented thereby, and no cash
payment in lieu of the issuance of fractional shares shall be paid to such
holder pursuant to Section 2.2(e), until such Certificate shall be surrendered
by the holder thereof. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of Golden State Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable with respect to a fractional share of Golden State
Common Stock to which such holder is entitled pursuant to Section 2.2(e) and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid or made with respect to such whole shares of
Golden State Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions payable or distributable with
respect to such whole shares of Golden State Common Stock having a record date
after the Effective Time but prior to such surrender and a payment or
distribution date subsequent to such surrender.
(d) No Further Ownership Rights in RedFed Common Stock. All shares of Golden
State Common Stock issued upon conversion of shares of RedFed Common Stock in
accordance with the terms hereof (and any cash paid pursuant to Section 2.2(c)
or 2.2(e)) shall be deemed to have been issued and paid in full satisfaction
of all rights pertaining to such shares of RedFed Common Stock; and there
shall be no further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of RedFed Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Golden State Common Stock shall be issued upon the
surrender of Certificates for exchange, and such fractional share interests
shall not entitle the owner thereof to vote or to any rights of a stockholder
of Golden State.
(ii) In lieu of the issuance of fractional shares of Golden State Stock,
Golden State shall pay or cause to be paid to each holder of RedFed Common
Stock an amount in cash equal to the product obtained by multiplying the
fractional share interest to which such holder (after taking into account
all shares of RedFed Common Stock then held by such holder) would otherwise
be entitled by the Final Golden State Price.
(iii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of RedFed Common Stock with respect to
any fractional share interests, the Exchange Agent shall make available
such amounts to such holders of RedFed Common Stock subject to and in
accordance with the terms of Section 2.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the stockholders of RedFed for 12 months after the
Effective Time shall be delivered to Golden State upon demand, and any
stockholders of RedFed who have not theretofore complied with this Article II
shall thereafter look only to Golden State for payment of their claims for
Golden State Common Stock and, if applicable, any cash in lieu of fractional
shares of Golden State Common Stock and any dividends or distributions with
respect to Golden State Common Stock.
(g) No Liability. Neither Golden State nor RedFed shall be liable to any
former holder of shares of RedFed Common Stock for shares of Golden State
Common Stock or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.1. Disclosure Letters. On or prior to the date of the execution
and delivery hereof, RedFed and Golden State have each delivered a letter to
the other (the "RedFed Disclosure Letter" and the "Golden State Disclosure
Letter," respectively, and each a "Disclosure Letter") setting forth, among
other things, facts, circumstances and events the disclosure of which is
required or appropriate in relation to its representations and warranties set
forth in Section 3.3 or 3.4, as applicable, and making specific reference to
the Section or Sections of this Agreement to which they relate. The inclusion
of a fact, circumstance or event in either Disclosure Letter, however, shall
not be deemed an admission that such item represents a material exception to
any such representation or warranty or that the absence of such item would
cause the representation or warranty to which it relates to be untrue or
incorrect.
Section 3.2. Standards. No representation or warranty of RedFed or Golden
State contained in Sections 3.3 or 3.4, respectively, shall be deemed untrue
or incorrect, and no party hereto shall be deemed to have breached a
representation or warranty, on account of the existence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of Sections 3.3 or 3.4, (i) is material and adverse to the
business, financial condition or results of operations of RedFed or Golden
State, as applicable, and its respective subsidiaries, in each case, taken as
a whole, (ii) materially and adversely affects the ability of RedFed or Golden
State, as applicable, to consummate the Merger by the Termination Date or to
perform its material obligations hereunder or (iii) enables any person to
prevent or materially delay the consummation of the Merger.
Section 3.3. Representations and Warranties of RedFed. Except as set forth
in the RedFed Disclosure Letter, RedFed represents and warrants to Golden
State that:
(a) Organization. (i) RedFed has been duly organized and is validly existing
and in good standing as a corporation under the laws of the State of Delaware.
RedFed has all requisite corporate power and authority to carry on its
business as it is now being conducted and to own its properties and assets.
(ii) Without limiting the generality of the foregoing, Redlands Federal
is duly chartered and in good standing as a federal savings bank organized
in capital stock form. The customer deposit accounts of Redlands Federal
are insured by the Savings Association Insurance Fund (the "SAIF") of the
Federal Deposit Insurance Corporation (the "FDIC") to the extent provided
for member institutions of the SAIF generally in the Federal Deposit
Insurance Act, without any special limitation or restriction. Redlands
Federal has all requisite corporate and other power and authority
(including all federal, state and local administrative and other
governmental and regulatory authorizations) to carry on its business as it
is now being conducted and to own its properties and assets.
(b) Qualifications. RedFed is duly qualified and in good standing in all
jurisdictions in which such qualification is required to carry on its business
as it is now being conducted and to own all its properties and assets.
(c) Capital Stock. The authorized capital stock of RedFed consists solely of
15,000,000 shares of common stock, par value $.01 per share (the "RedFed
Common Stock"), of which 7,421,308 shares are issued and outstanding as of the
date of this Agreement, and 3,000,000 shares of preferred stock, par value
$.01 per share, of which no shares are issued or outstanding as of the date of
this Agreement. RedFed has no outstanding voting securities other than the
outstanding shares of RedFed Common Stock referred to in the first sentence of
this paragraph. Except for the 454,744 shares of RedFed Common Stock that are
issuable pursuant to the stock options and plans listed in the RedFed
Disclosure Letter, no shares of capital stock of RedFed are reserved for
issuance upon the exercise of, or are otherwise subject to, any outstanding
options, warrants or other rights of any kind or upon conversion of or in
exchange for any other securities or pursuant to any other contractual
arrangement or understanding. All outstanding shares of capital stock of
RedFed and its subsidiaries are duly
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authorized, validly issued and outstanding, fully paid and non-assessable.
None of the shares of authorized capital stock of RedFed is subject to any
statutory or contractual preemptive or similar rights.
(d) Redlands Federal; Significant Investments. All of the outstanding shares
of capital stock of each subsidiary of RedFed are owned, directly or
indirectly, and not subject to any lien, charge, encumbrance, restriction on
transfer or adverse ownership or other claim of any third party, solely by
RedFed. Redlands Federal is the sole direct subsidiary (as defined in Section
8.1) of RedFed and all of the direct and indirect subsidiaries of Redlands
Federal are listed in the RedFed Disclosure Letter. No equity securities of
any subsidiary of RedFed are or may become required to be issued (other than
to RedFed or its subsidiaries) by reason of any securities or obligations
convertible into or exercisable or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value of
which is determined in whole or in part by reference to the market price or
value of such equity securities (each of the foregoing, a "Right"); there are
no contracts, commitments, understandings or arrangements by which any of the
subsidiaries of RedFed is or may be bound to sell or otherwise transfer any
shares of the capital stock of any such subsidiary (other than to RedFed or
its subsidiaries); and there are no contracts, commitments, understandings or
arrangements relating to its rights to vote or to dispose of such shares
(other than to RedFed or its subsidiaries).
(e) Authority and Stockholder Approvals. RedFed has the requisite power and
authority, and has taken all corporate action necessary, in order to execute
and deliver this Agreement and, subject to approval by its stockholders, to
consummate the transactions contemplated hereby. Each of this Agreement and
the other agreements contemplated hereby has been duly and validly executed
and delivered by RedFed and is a valid and binding agreement of RedFed
enforceable against RedFed in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. Upon the receipt of the
stockholder approval of this Agreement by the holders of RedFed Common Stock
required by the DGCL, the completion of the transactions contemplated by this
Agreement will have been authorized by all necessary corporate action of
RedFed. RedFed has taken all action required to be taken by it (including
approval by the appropriate number and type of members of the RedFed Board of
Directors) in order to exempt this Agreement and the transactions contemplated
hereby from (x) the requirements of Section 203 of the Delaware General
Corporation Law and (y) the "higher vote" requirement of Article Eighth of the
RedFed Certificate of Incorporation.
(f) No Violations. The execution, delivery and performance of this Agreement
by RedFed do not, and the consummation of the transactions contemplated hereby
by RedFed will not, constitute (A) a breach or violation of, or a default
under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument of
RedFed or to which RedFed or any of its properties is subject, or enable any
person to enjoin the Merger or the other transactions contemplated hereby, (B)
a breach or violation of, or a default under, the certificate of incorporation
or by-laws of RedFed or (C) a breach or violation of, or a default under (or
an event which with the giving of notice or lapse of time or both would
constitute a default under), or result in the termination of, accelerate the
performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties or
assets of RedFed under, any of the terms, conditions or provisions of any
note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which RedFed is a party, or by which any of its
properties or assets may be bound or affected; and the consummation of the
transactions contemplated hereby will not require RedFed to obtain any
approval, consent or waiver under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or the approval, consent or
waiver of any other party to any such agreement, indenture or instrument,
other than the required approvals, consents and waivers of governmental
authorities or other persons referred to in Section 6.1(b), the approval of
the stockholders of RedFed referred to in Section 3.3(e), and such approvals,
consents or waivers as are required under federal and state securities laws in
connection with the transactions contemplated by this Agreement.
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(g) Reports. (i) As of their respective dates, neither the Annual Report on
Form 10-K filed by RedFed with the Securities and Exchange Commission (the
"SEC") relating to the year ended December 31, 1996 (including the audited
financial statements of RedFed included therein), nor any other report or
other filing filed or made by RedFed subsequent to December 31, 1994
(including, without limitation, reports on Forms 10-K, 10-Q, and 8-K) with the
SEC, the Office of Thrift Supervision (the "OTS"), or the FDIC (all of the
financial statements and reports of the types referred to in this clause (i)
being collectively referred to in this Agreement as "Reports"), contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. True and complete copies of all such Reports filed on or after
December 31, 1994 have been made available to Golden State, and RedFed shall
provide Golden State with true and complete copies of all Reports filed after
the date hereof promptly after such Reports are filed and each such Report
filed with the SEC complied or will comply as to form with the applicable
requirements under the Securities Act or the Exchange Act. Each of the
statements of financial condition contained or incorporated by reference in
the Reports (including in each case any related notes and schedules) fairly
presented or will fairly present, as the case may be, the financial position
of the entity or entities to which it relates as of its date and each of the
statements of operations, cash flows and changes in stockholders' equity,
contained or incorporated by reference in the Reports (including in each case
any related notes and schedules), fairly presented or will fairly present, as
the case may be, the results of operations, cash flows, and changes in
stockholders' equity of the entity or entities to which it relates for the
periods set forth therein, in each case in accordance with generally accepted
accounting principles or applicable regulatory accounting principles and
instructions consistently applied throughout the periods involved, except as
may be stated therein (and subject, in the case of unaudited interim
statements, to normal year-end audit adjustments that are not material in
amount or effect and to the lack of complete footnotes).
(ii) RedFed and its subsidiaries, including Redlands Federal, have timely
filed all reports and statements, together with any amendments required to
be made with respect thereto, with the SEC, the OTS, the FDIC and any other
applicable Government Regulators (as defined in Section 3.3(k)) and all
other material reports and statements required to be filed by them, and
have paid all fees and assessments due and payable in connection therewith.
(h) Absence of Certain Changes or Events. Except as disclosed in the Reports
filed prior to the date hereof and except as contemplated by this Agreement or
as disclosed in the RedFed Disclosure Letter, since December 31, 1996: (i)
RedFed has not incurred any liability, other than in the ordinary course of
its business consistent with past practice; (ii) RedFed has conducted its
business only in the ordinary and usual course of such business; and (iii)
there has not been any change in the financial condition, properties,
business, or results of operations of RedFed which, individually or in the
aggregate, has had or would reasonably be expected to have a material adverse
effect on RedFed, including its subsidiaries, taken as a whole.
(i) Taxes. All federal, state, local, and foreign tax returns required to be
filed by or on behalf of RedFed have been timely filed or requests for
extensions have been timely filed, any such requested extensions have been
granted and have not expired, and all such filed returns are complete and
accurate in all material respects. All taxes shown on such returns to be due
have been paid in full or adequate provision has been made for the payment of
any such taxes in the financial statements of RedFed in accordance with
generally accepted accounting principles. There is no audit, examination,
deficiency assessment, or refund litigation currently pending with respect to
any taxes of RedFed. All taxes, interest, additions and penalties due with
respect to completed and settled examinations or concluded litigation relating
to RedFed have been paid in full or adequate provision has been made for the
payment of any such taxes in the financial statements of RedFed in accordance
with generally accepted accounting principles. No extensions or waivers of
statutes of limitations have been given by or requested with respect to any
taxes of RedFed.
(j) Absence of Claims. There is no material pending claim, action or
proceeding against RedFed before any court or administrative agency, nor, to
the knowledge of RedFed, have any of the foregoing been threatened, nor, to
the knowledge of RedFed, is there any reasonable basis therefor.
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(k) Absence of Regulatory Actions. Neither RedFed nor Redlands Federal is a
party to any cease and desist order, written agreement or memorandum of
understanding with, or 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
relating to the foregoing at the request of, federal or state governmental
authorities, including without limitation the SEC and regulatory agencies
charged with the supervision or regulation of depository institutions or
depository institution holding companies or engaged in the insurance of bank
and/or savings and loan deposits (collectively, "Government Regulators"), nor
has RedFed or Redlands Federal been advised by any Government Regulator that
it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking. RedFed is not
aware of any facts or circumstances relating to RedFed or Redlands Federal
that have not been disclosed to Golden State that would cause any of the
Government Regulators or any other person or entity to fail to give any of the
approvals, consents or waivers referred to in Section 6.1(b).
(l) Contracts. (i) Except for loans, loan commitments, letters of credit and
other arrangements, in each case, made in the ordinary course of business,
RedFed is not bound by any material contract to be performed after the date
hereof that is not listed in the RedFed Disclosure Letter. RedFed is not a
party to an oral or written (A) agreement containing covenants that limit the
ability of RedFed to compete in any line of business or with any person, or
that involve any restriction on the geographic area in which, or the method by
which, RedFed (including any successor thereof) may carry on its business
(other than as may be required by law or any regulatory agency), (B) agreement
not referred to in the preceding clause and providing for the payment by
RedFed of $50,000 or more per annum or (C) except as filed as an exhibit to
its Annual Report on Form 10-K for the year ended December 31, 1996, agreement
that is a "material contract" within the meaning of Item 601(b)(10) of SEC
Regulation S-K.
(ii) RedFed is not in default under or in violation of any provision of
the contracts or any note, bond, indenture, mortgage, deed of trust, loan
agreement, lease or other agreement to which it is a party or by which it
is bound or to which any of its respective properties or assets is subject,
and, to the knowledge of RedFed, there has not occurred any event that with
the lapse of time or the giving of notice or both would constitute such a
default.
(m) Labor Matters. RedFed is not a party to, or bound by, any collective
bargaining agreement, contract, or other agreement or understanding with a
labor union or labor organization, nor is RedFed the subject of any proceeding
asserting that it has committed an unfair labor practice or seeking to compel
it to bargain with any labor organization as to wages or conditions of
employment, nor is any strike, other labor dispute or organizational effort
involving RedFed pending or, to the knowledge of RedFed, threatened.
(n) Employee Agreements. The RedFed Disclosure Letter contains a complete
list of all employment agreements and all pension, retirement, stock option,
stock purchase, stock ownership, savings, stock appreciation right, profit
sharing, deferred compensation, consulting, bonus, group insurance,
employment, termination, severance, medical, health and other benefit plans,
contracts, agreements, arrangements, including, but not limited to, "employee
benefit plans," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), incentive and welfare policies,
contracts, plans and arrangements and all trust agreements related thereto in
respect of any present or former directors, officers, or other employees of
RedFed or with respect to which RedFed or any entity that would be treated as
a single employer with RedFed under Section 414 of the Code (which entities
are referred to herein as "ERISA Affiliates") may have any liability (all of
the foregoing being hereinafter collectively referred to as the "Employee
Agreements"). Except as set forth in the RedFed Disclosure Letter, (i) all of
the Employee Agreements comply, and have been administered in all material
respects in compliance, with all applicable requirements of ERISA, the Code,
and all other applicable laws and regulations, and no event has occurred which
will or could cause any such Employee Agreement to fail to comply with such
requirements and no notice has been issued by any governmental authority
questioning or challenging such compliance; (ii) none of RedFed or any of its
ERISA Affiliates has an obligation to accelerate the time of payment or
vesting of any benefit or compensation payable under any Employee
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Agreement; (iii) a true and correct copy of each of the Employee Agreements
and all contracts relating thereto, or to the funding thereof, including,
without limitation, all trust agreements, insurance contracts, administration
contracts, investment management agreements, subscription and participation
agreements, and recordkeeping agreements, each as in effect on the date
hereof, has been made available to Golden State; (iv) to the extent
applicable, a true and correct copy of the most recent annual report,
actuarial report, accountant's opinion of the plan's financial statements,
summary plan description and Internal Revenue Service determination letter
with respect to each Employee Agreement has been made available to Golden
State and there have been no material changes in the financial condition of
the respective plans from that stated in the annual reports and actuarial
reports supplied; (v) all Employee Agreements which are employee pension
benefit plans (as defined in Section 3(2) of ERISA) comply in form and in
operation with all applicable requirements of Sections 401(a) and 501(a) of
the Code, there have been no amendments to such plans which are not the
subject of a favorable determination letter issued with respect thereto by the
Internal Revenue Service and no event has occurred which will or could give
rise to disqualification of any such plan under such sections or to a tax
under Section 511 of the Code; (vi) there have been no "prohibited
transactions" (as described in Section 406 of ERISA or Section 4975 of the
Code) with respect to any Employee Agreement and none of RedFed or any of its
ERISA Affiliates has engaged in any prohibited transaction; (vii) there have
been no acts or omissions by RedFed or any of its ERISA Affiliates which have
given rise to or may give rise to fines, penalties, taxes or related charges
under Section 502 of ERISA or Chapters 43, 47 or 68 of the Code for which
RedFed or any of its ERISA Affiliates may be liable; (viii) there are no
actions, suits or claims (other than routine claims for benefits) pending or
threatened involving any Employee Agreement or assets thereof and to the best
knowledge of RedFed no facts exist which could give rise to any such actions,
suits or claims (other than routine claims for benefits); (ix) no Employee
Agreement is subject to Title IV of ERISA and no Employee Agreement is a
multiemployer plan (as defined in Section 3(37) of ERISA); (x) none of RedFed
or any of its ERISA Affiliates has any liability or contingent liability for
providing, under any Employee Agreement or otherwise, any post-retirement
medical or life insurance benefits, other than statutory liability for
providing group health plan continuation coverage under Part 6 of Title I of
ERISA and Section 4980B of the Code; and (xi) shareholder approval, or the
consummation, of the transactions contemplated by this Agreement would not
directly or indirectly (including as a result of any termination of
employment) reasonably be expected to (A) entitle any current or former
director, officer or employee to any payment or any increase in compensation,
(B) result in the vesting or acceleration of any benefits under any Employee
Agreement, (C) result in any material increase in benefits under any Employee
Agreement or (D) result in the payment of any "excess parachute payments"
under Section 280G of the Code.
(o) Title to Assets. RedFed does not own any real estate or interest therein
(other than real property security interests and real estate acquired in
settlement of defaulted loans) that is not described in the RedFed Disclosure
Letter. RedFed has good (and as to real property, marketable) title to its
properties and assets (including any trademark, service mark, trade name,
copyright or other intellectual property used in its business), other than
(i) as reflected in the Reports, (ii) properties or assets as to which RedFed
is a lessee or licensee and (iii) real estate owned as a result of
foreclosure, transfer in lieu of foreclosure or other transfer in satisfaction
of a debtor's obligation previously contracted. Such properties and assets are
subject to no liens, mortgages, security interests, encumbrances, pledges or
charges of any kind, except (i) as reflected in the Reports filed prior to the
date hereof; (ii) statutory liens for taxes not yet delinquent; (iii)
landlord's liens; and (iv) minor defects and irregularities in title and
encumbrances that do not materially impair the use thereof for the purposes
for which they are held. RedFed and its subsidiaries as lessee have the
unqualified right under valid and subsisting leases to occupy, use, possess
and control all property leased by RedFed and its subsidiaries.
(p) Compliance with Law. Each of RedFed and Redlands Federal:
(i) has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations
with, federal, state, local and foreign governmental or regulatory bodies
that are required in order to permit it to carry on its business as it is
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the knowledge of
RedFed and Redlands Federal, no suspension or cancellation of any of them
is threatened; and
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(ii) is in material compliance in the conduct of its business with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to
the employees conducting such businesses, including, without limitation,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act, the Americans With
Disabilities Act, and all other fair lending laws or other laws relating to
discrimination, and the Bank Secrecy Act.
(q) Fees. Other than financial advisory services performed for RedFed by
NationsBanc Montgomery Securities, Inc. in the amount and pursuant to the
agreement both disclosed to Golden State prior to the execution and delivery
of this Agreement, RedFed has not employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions, or
finder's fees in connection with the transaction provided for in this
Agreement.
(r) Environmental Matters.
(i) With respect to environmental matters:
A. To the knowledge of RedFed, RedFed is in material compliance with
all Environmental Laws (as defined below);
B. RedFed does not have knowledge of any material noncompliance with
any Environmental Laws relating to any of the Loan Properties (as
defined below)other than as may be set forth in the standard loan files
of Redlands Federal;
C. There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending
or, to the knowledge of RedFed, threatened, before any court,
governmental agency or board or other forum against RedFed (x) for
alleged noncompliance (including by any predecessor) with, or liability
under, any Environmental Law or (y) relating to the presence of or
release into the environment of any Hazardous Material (as defined
below), whether or not occurring at or on a site owned, leased or
operated by RedFed;
D. To the knowledge of RedFed, there is no suit, claim, action,
demand, executive or administrative order, directive, investigation or
proceeding pending or threatened before any court, governmental agency
or board or other forum relating to or against any Loan Property (or
RedFed in respect of such Loan Property) (x) relating to alleged
noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or (y) relating to the presence of or release
into the environment of any Hazardous Material whether or not occurring
at or on a site owned, leased or operated by a Loan Property;
E. To the knowledge of RedFed, there are no existing facts or
circumstances that could reasonably be expected to give rise to any
suit, claim, action, demand, executive or administrative order,
directive or proceeding of a type described in Section 3.3(r)(i)(B) or
(C) above;
F. To the knowledge of RedFed, the properties currently or formerly
owned or operated by RedFed (including, without limitation, soil,
groundwater or surface water on, under or adjacent to the properties,
and buildings thereon) are not contaminated with and, with the
exception of commercially available office and cleaning supplies, do
not otherwise contain any Hazardous Material that could reasonably be
expected to give rise to liability to RedFed;
G. RedFed has not received any notice, demand letter, executive or
administrative order, directive or request for information from any
federal, state, local or foreign governmental entity or any third party
indicating that it may be in violation of, or liable under, any
Environmental Law;
H. To the knowledge of RedFed, during the period of RedFed's
ownership or operation of any of its currently owned properties, there
has been no contamination by or release of Hazardous Material in, on,
under or affecting such properties which constituted a violation of any
Environmental Laws. To
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the knowledge of RedFed, prior to the period of RedFed's ownership or
operation of any of their respective current properties, there was no
contamination by or release of Hazardous Material or oil in, on, under
or affecting any such property which constituted a violation of any
Environmental Laws and as to which RedFed may have liability; and
I. RedFed does not participate in the management of a Loan Property
to an extent that it would be deemed an "owner or operator" as defined
in 42 U.S.C. (S) 9601 or any similar Environmental Law.
(ii) The following definitions apply for purposes of this Section 3.3(r):
(w) "Loan Property" means any property in which RedFed holds a security
interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property; (x)
"Environmental Law" means (i) any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, directive, executive or administrative order,
judgment, decree, injunction, requirement or agreement with any
governmental entity, relating to (A) the protection, preservation or
restoration of the environment (which includes, without limitation, air,
water vapor, surface water, groundwater, drinking water supply, structures,
soil, surface land, subsurface land, plant and animal life or any other
natural resource), or (B) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of, Hazardous Materials, in each case as
amended and as now or hereafter in effect, including all current
Environmental Laws, all future interpretations of current Environmental
Laws and all future Environmental Laws and subsequent interpretations
thereof. The term "Environmental Law" includes (i) all federal, state and
local laws, rules, regulations or requirements relating to the protection
of the environment, including the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments
and Reauthorization Act of 1986, the federal Water Pollution Control Act of
1972, the federal Clean Air Act, the federal Clean Water Act, the federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the federal Solid Waste Disposal Act and
the federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and Health
Act of 1970, the Federal Hazardous Materials Transportation Act, or any so-
called "Superfund" or "Superlien" law, each as amended and as now or
hereafter in effect, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such
as negligence, nuisance, trespass and strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Material; and (y)
"Hazardous Material" means any substance in any concentration which is or
could be detrimental to human health or safety or to the environment,
currently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated, under
any Environmental Law, whether by type or by quantity, including any
substance containing any such substance as a component. The term "Hazardous
Material" includes any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial
substance, oil or petroleum or any derivative or by-product thereof, radon,
radioactive material, asbestos, asbestos-containing material, urea
formaldehyde foam insulation, lead, lead-based paint and polychlorinated
biphenyl.
(s) Classified Assets. RedFed has annexed to the RedFed Disclosure Letter a
loan schedule identifying certain loan agreements, notes and borrowing
arrangements (the "RedFed Loan Schedule") between its subsidiaries and
borrowers of its subsidiaries. Except as specifically noted on the RedFed Loan
Schedule, as of October 31, 1997, no subsidiary is a party to any written or
oral (i) loan agreement, note or borrowing arrangement, other than loans the
unpaid balance of which does not exceed $100,000 per loan, under the terms of
which the obligor is over 60 days delinquent in payment of principal or
interest or loan agreement, note or borrowing arrangement which has been
classified as "substandard," "doubtful," "loss," or "other loans specially
mentioned" or any comparable classification by RedFed, a RedFed subsidiary,
the OTS or the FDIC or (ii) loan agreement, note or borrowing arrangement
including any loan guaranty, with any director, executive officer or ten
percent stockholder of RedFed or, to the knowledge of RedFed, any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing.
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(t) Material Interests of Certain Persons. No officer or director of RedFed,
or any "associate" (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (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
RedFed.
(u) Insurance. All policies of insurance or indemnity maintained by RedFed
for its benefit in its business are listed in the RedFed Disclosure Letter.
All of the insurance policies and bonds so listed are in full force and
effect, RedFed is not in default thereunder and all material claims thereunder
have been filed in due and timely fashion. Between the date hereof and the
Effective Time, RedFed will use commercially reasonable efforts to maintain
the levels of insurance coverage in effect on the date hereof.
(v) Books and Records. The books and records of RedFed have been maintained
in accordance with all applicable legal, regulatory and accounting
requirements and reflect in all material respects the substance of the events
and transactions that are required to be included therein.
(w) Corporate Documents. RedFed has delivered to Golden State true and
complete copies of its certificate of incorporation and by-laws, and the
charter and by-laws of Redlands Federal, as each of them is in effect on the
date hereof.
(x) Indemnification. Other than pursuant to the provisions of the
certificate of incorporation and by-laws of RedFed and the similar or
corresponding organizational documents of Redlands Federal and the other
subsidiaries of RedFed, neither RedFed nor any such subsidiary, is a party to
any indemnification agreement with any of its present or former directors,
officers, employees, agents or with any other persons who serve or served in
any other capacity with any other enterprise at the request of RedFed or any
such subsidiary.
(y) Derivatives Contracts; Structured Notes; Etc. RedFed is not a party to
and has not agreed to enter into, after the date hereof, any exchange traded
or over-the-counter equity, interest rate, foreign exchange or other swap,
forward, future, option, cap, floor or collar or other contract of the types
commonly referred to as derivative contracts, including various combinations
thereof (each a "Derivatives Contract") and RedFed does not own securities
that are referred to generically as "structured notes," "high risk mortgage
derivatives" (as defined for federal banking regulatory purposes), "capped
floating rate notes" or "capped floating rate mortgage derivatives", except
for those Derivatives Contracts and such other instruments listed (as of the
date hereof) in the RedFed Disclosure Letter or disclosed in its Reports filed
on or prior to the date hereof. All Derivative Contracts, whether entered into
for RedFed's own account, or for the account of one or more of its
subsidiaries or their customers, were entered into (i) in accordance with
applicable laws, rules and regulations and (ii) with counterparties believed
to be financially responsible at the time. Neither RedFed nor its
subsidiaries, nor to its knowledge any other party thereto, is in breach of
any of its obligations under any Derivative Contract.
(z) Disclosure. The written statements, certificates, schedules, lists and
other written information furnished by or on behalf of RedFed to Golden State
pursuant to this Agreement, including all information supplied in connection
with the preparation of the Form S-4 and the Proxy Statement (each as defined
in Section 5.8), do not contain any untrue statement of a material fact or,
taken as a whole, omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 3.4 Representations and Warranties of Golden State. Except as set
forth in the Golden State Disclosure Letter, Golden State represents and
warrants to RedFed that:
(a) Organization. (i) Golden State has been duly organized and is validly
existing and in good standing as a corporation under the laws of the State of
Delaware. Golden State has all requisite power and authority to carry on its
business as it is now being conducted and to own its properties and assets.
(ii) Without limiting the generality of the foregoing, Glendale Federal is
duly chartered and in good standing as a federal savings bank organized in
capital stock form. The customer deposit accounts of Glendale
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Federal are insured by the SAIF to the extent provided for member institutions
of the SAIF generally in the Federal Deposit Insurance Act, without any
special limitation or restriction. Glendale Federal has all requisite
corporate and other power and authority (including all federal, state and
local administrative and other governmental and regulatory authorizations) to
carry on its business as it is now being conducted and to own its properties
and assets.
(b) Capital Stock. The authorized capital stock of Golden State consists
solely of 100,000,000 shares of common stock, par value $1.00 per share (the
"Golden State Common Stock"), of which 51,017,094 shares are issued and
outstanding as of the date of this Agreement, and 50,000,000 shares of
preferred stock, par value $1.00 per share, of which 4,621,982 shares,
denominated "Noncumulative Convertible Preferred Stock, Series A" are issued
and outstanding as of the date of this Agreement. Golden State has no
outstanding voting securities other than the outstanding shares of Golden
State Common Stock referred to in the first sentence of this paragraph. Except
as described in the Golden State Disclosure Letter, no shares of capital stock
of Golden State are reserved for issuance upon the exercise of outstanding
options, warrants or other rights of any kind or upon conversion of or in
exchange for any other securities or pursuant to any other contractual
arrangement or understanding. All outstanding shares of capital stock of
Golden State and its subsidiaries are, and all of the shares of Golden State
Common Stock to be issued in the Merger will, when so issued pursuant to the
terms hereof, be duly authorized, validly issued and outstanding, fully paid
and non-assessable. None of the shares of authorized capital stock of Golden
State is subject to any statutory or contractual preemptive or similar rights.
All of the outstanding shares of capital stock of Glendale Federal are owned
directly or indirectly, and not subject to any lien, charge, encumbrance,
restriction on transfer or adverse ownership or other claim of any third
party, solely by Golden State.
(c) Authority and Stockholder Approvals. Golden State has the requisite
corporate power and authority, and has taken all corporate action necessary,
in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Golden State and is a valid and binding agreement of
Golden State enforceable against Golden State in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles. No
approval of this Agreement is required under applicable law, the certificate
of incorporation or by-laws of Golden State or for any other reason, to be
obtained from the stockholders of Golden State to enable Golden State to
complete the transactions provided for herein. Golden State has taken such
action, if any, as may be required to be taken by it pursuant to Rule 16b-3
promulgated by the SEC pursuant to the Exchange Act in order to exempt the
acquisition of shares of Golden State's common stock, in connection with the
transactions contemplated by this Agreement, by any person who, as a result of
the transactions contemplated by this Agreement, will become subject to the
requirements of Section 16(b) of the Exchange Act.
(d) No Violations. The execution, delivery and performance of this Agreement
by Golden State do not, and the consummation of the transactions contemplated
hereby by Golden State will not, constitute (A) a breach or violation of, or a
default under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument of
Golden State or to which Golden State (or any of its properties) is subject,
or enable any person to enjoin the Merger or the other transactions
contemplated hereby, (B) a breach or violation of, or a default under, the
certificate of incorporation or by-laws of Golden State or (C) a breach or
violation of, or a default under (or an event which with the giving of notice
or lapse of time or both would constitute a default under), or result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of Golden State under, any of the terms,
conditions or provisions of any note, bond, indenture, deed of trust, loan
agreement or other agreement, instrument or obligation to which Golden State
is a party, or by which any of its properties or assets may be bound or
affected; and the consummation of the transactions contemplated hereby will
not require Golden State to obtain any approval, consent or waiver under any
such law, rule, regulation, judgment, decree, order, governmental permit or
license or the approval, consent or waiver of any other party to any such
agreement, indenture or instrument, other than the required approvals,
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consents and waivers of governmental authorities or other persons referred to
in Section 6.1(b), and such approvals, consents or waivers as are required
under federal and state securities laws in connection with the transactions
contemplated by this Agreement.
(e) Reports. As of their respective dates, neither the Annual Report on Form
10-K filed by Glendale Federal, as the predecessor of Golden State, with the
OTS relating to its fiscal year ended June 30, 1997 (including the audited
financial statements of Glendale Federal, as such predecessor, included
therein) nor the unaudited financial statements of Golden State as of
September 30, 1997 and for the three months then ended contained in the
Quarterly Report on Form 10-Q filed by Golden State with the SEC, and no other
report filed by Glendale Federal or Golden State subsequent to June 30, 1995,
with the OTS, the SEC or the FDIC contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. True and complete
copies of all such reports filed on or after June 30, 1995 have been made
available to RedFed, and Golden State shall provide RedFed with true and
complete copies of all reports filed after the date hereof promptly after such
reports are filed. Each of the statements of financial condition contained or
incorporated by reference in the reports referred to in this Section 3.4(e)
(including in each case any related notes and schedules) fairly presented or
will fairly present, as the case may be, the financial position of the entity
or entities to which it relates as of its date and each of the statements of
operations, cash flows and changes in stockholders' equity, contained or
incorporated by reference in the reports (including in each case any related
notes and schedules), fairly presented or will fairly present, as the case may
be, the results of operations, cash flows, and changes in stockholders'
equity, of the entity or entities to which it relates for the periods set
forth therein, in each case in accordance with generally accepted accounting
principles or applicable regulatory accounting principles and instructions
consistently applied throughout the periods involved, except as may be stated
therein (and subject, in the case of unaudited interim statements, to normal
year-end audit adjustments that are not material in amount or effect and to
the lack of complete footnotes).
(f) Absence of Certain Changes or Events. Except as disclosed in the reports
referred to in Section 3.4(e) and except as contemplated by this Agreement or
disclosed in the Golden State Disclosure Letter, since June 30, 1997: (i)
Golden State has not incurred any liability, other than in the ordinary course
of its business consistent with past practice; (ii)Golden State has conducted
its business only in the ordinary and usual course of such business; and (iii)
there has not been any change in the financial condition, properties,
business, or results of operations of Golden State which, individually or in
the aggregate, has had or would reasonably be expected to have a material
adverse effect on Golden State, including its subsidiaries, taken as a whole.
(g) Taxes. All material federal, state, local, and foreign tax returns
required to be filed by or on behalf of Golden State have been timely filed or
requests for extensions have been timely filed, any such requested extensions
have been granted and have not expired, and all such filed returns are
complete and accurate in all material respects. All taxes shown on such
returns to be due have been paid in full or adequate provision for the payment
of any such taxes has been made in the financial statements of Golden State in
accordance with generally accepted accounting principles. There is no audit,
examination, deficiency assessment, or refund litigation currently pending
with respect to any taxes of Golden State. All taxes, interest, additions and
penalties due with respect to completed and settled examinations or concluded
litigation relating to Golden State have been paid in full or adequate
provision for the payment of has been made for any such taxes in the financial
statements of Golden State in accordance with generally accepted accounting
principles. No extensions or waivers of statutes of limitations have been
given by or requested with respect to any taxes of Golden State.
(h) Absence of Claims. There is no material pending claim, action or
proceeding against Golden State before any court or administrative agency,
nor, to the knowledge of Golden State, have any of the foregoing been
threatened, nor, to the knowledge of Golden State, is there any reasonable
basis therefor.
(i) Absence of Regulatory Actions. Neither Golden State nor Glendale Federal
is a party to any cease and desist order, written agreement or memorandum of
understanding with, or 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
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letter from, or has adopted any board resolutions relating to the foregoing at
the request of, any of the Government Regulators nor has Golden State or
Glendale Federal been advised by any Government Regulator that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, directive, written agreement,
memorandum of understanding, extraordinary supervisory letter, commitment
letter, board resolutions or similar undertaking. Golden State is not aware of
any facts or circumstances relating to Golden State or Glendale Federal that
have not been disclosed to RedFed that would cause any of the Government
Regulators or any other person or entity to fail to give any of the approvals,
consents or waivers referred to in Section 6.1(b).
(j) Compliance with Law. Each of Golden State and Glendale Federal:
(i) has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations
with, federal, state, local and foreign governmental or regulatory bodies
that are required in order to permit it to carry on its business as it is
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the knowledge of
Golden State and Glendale Federal, no suspension or cancellation of any of
them is threatened; and
(ii) is in material compliance in the conduct of its business with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to
the employees conducting such businesses, including, without limitation,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act, the Americans With
Disabilities Act, and all other fair lending laws or other laws relating to
discrimination, and the Bank Secrecy Act.
(k) Fees. Golden State has not incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees in connection
with the transaction provided for in this Agreement that could in any manner
be asserted to be payable by RedFed.
(l) Books and Records. The books and records of Golden State have been
maintained in accordance with all applicable legal, regulatory and accounting
requirements and reflect in all material respects the substance of the events
and transactions that are required to be included therein.
(m) Disclosure. The written statements, certificates, schedules, lists and
other written information furnished by or on behalf of Golden State to RedFed
pursuant to this Agreement, including all information supplied in connection
with the preparation of the Form S-4 and the Proxy Statement, do not contain
any untrue statement of a material fact or, taken as a whole, omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE IV.
CONDUCT PENDING MERGER
Section 4.1 Conduct of Business Prior to Effective Time. Except as required
by applicable law, rule or regulation, as expressly provided in this Agreement
or as agreed to in writing by Golden State, RedFed shall (i) conduct its
business and maintain its books and records in the usual, regular and ordinary
course, and in a manner consistent with past practice, (ii) use all
commercially reasonable efforts to maintain and preserve intact its business
organization, properties, leases, and advantageous business relationships and
to retain the services of its officers and employees, (iii) take no action
which could reasonably be expected to affect adversely or delay the ability of
RedFed or Golden State to obtain any necessary approvals, consents or waivers
of any governmental authority or other person required for the transactions
contemplated hereby or to perform its covenants and agreements on a timely
basis under this Agreement, and (iv) take no action that could reasonably be
expected to have a material adverse effect on RedFed.
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Section 4.2 Forbearance by RedFed. During the period from the date of this
Agreement to the Effective Time, and except as contemplated by this Agreement
or as set forth in the RedFed Disclosure Letter, RedFed shall not, without the
prior written consent of Golden State (which consent shall not be unreasonably
withheld or delayed), do any of the following:
(a) incur any indebtedness for borrowed money or assume, guarantee, endorse
or otherwise as an accommodation become responsible for the obligations of any
other person other than in the ordinary course of business consistent with
past practice and, in any event, subject to the following limitations: (i)
RedFed will not enter into new borrowings, or accept brokered certificates of
deposits with maturities greater than six months, except that, after
consultation with Golden State, it may obtain up to $90,000,000 of Federal
Home Loan Bank advances with maturities of up to two years, of which no more
than $60,000,000 may have maturities exceeding one year;
(b) issue any shares of its capital stock, except pursuant to options
outstanding as of the date hereof to purchase shares of RedFed Common Stock
and plans in existence as of the date hereof that, in each case, are listed in
the RedFed Disclosure Letter; adjust, split, combine or reclassify any shares
of capital stock; declare or pay any dividends, or make any other distribution
on, or directly or indirectly redeem, purchase or otherwise acquire, any
shares of its capital stock, or any securities or obligations convertible into
or exchangeable for any shares of its capital stock; or grant any stock
appreciation rights or grant, sell or issue to any individual, corporation or
other person any right or option to acquire, or securities evidencing a right
to convert into or acquire, any shares of its capital stock;
(c) other than in the ordinary course of business consistent with past
practice and with the other terms, covenants and conditions of this Agreement,
sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties, leases or assets to any person (it being agreed that sales in
accordance with RedFed's past practice of real estate acquired through
foreclosure or by deed or other transfer in lieu of foreclosure shall be
considered to be in the ordinary course of business), or cancel, release or
assign any indebtedness of any such person, except pursuant to contracts or
agreements requiring the same that are in force at the date of this Agreement
and have been disclosed to Golden State in the RedFed Disclosure Letter;
(d) hire any employee above the level of Assistant Vice President (other
than such replacement employees, if any, as RedFed determines to be necessary
to conduct its business); enter into, renew or amend any employment agreement
with any employee or director, increase in any manner the compensation or
fringe benefits of any of its employees or directors, or create or institute,
or make any payments pursuant to, any severance plan or package, or pay any
pension or retirement allowance, in each case not required by any existing
plan or agreement, to any such employees or directors, or become a party to,
amend, commit itself to, or establish, any trust or account related to, any
Employee Agreement (as defined in Section 3.3(n)), with or for the benefit of
any employee, other than general increases in compensation in the ordinary
course of business consistent with past practice; or accelerate the vesting of
any stock options or other compensation or benefit or declare or pay any bonus
(except that RedFed shall be permitted to pay annual bonuses in accordance
with RedFed's existing compensation policies and bonus plans disclosed to
Golden State in the RedFed Disclosure Letter);
(e) other than in the ordinary course of business consistent with past
practice (it being agreed that credit bids for collateral shall be considered
to be in the ordinary course of business), make any investment in any person
or entity, whether by purchase of stock or other securities or contributions
to the capital of such entity, make any property transfers to any person or
entity, or purchase any property or assets of any person or entity;
(f) enter into or renew any contract or agreement that requires payment by
RedFed of more than $50,000 in any year, that is of more than one year in
duration, or that is not cancelable without penalty on not more than sixty
days notice (except for any contract to sell real estate by foreclosure or by
deed or other transfer in lieu of foreclosure entered into in the ordinary
course of business) or amend, modify or terminate any material leases or
contracts of RedFed;
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(g) enter into any settlement or compromise of any material claim, action or
proceeding involving any liability of RedFed for money damages that would have
a material adverse effect or that would involve material restrictions upon the
operations of any RedFed subsidiary, or waive or release any material rights
or claims; provided, that Golden State may not withhold its consent to any
such settlement unless it concurrently agrees in writing to indemnify and hold
RedFed harmless from and against any liability, and subsequently incurred
litigation expenses, in connection with such matter that exceeds in the
aggregate the amount for which RedFed had proposed to settle such matter and
that would not have been incurred but for Golden State's withholding of such
consent;
(h) except in the ordinary course of business, make, renegotiate, renew,
increase, modify, extend or purchase any loan, lease, advance, credit
enhancement or other extension of credit, or make any commitment in respect of
any of the foregoing;
(i) change any of its methods of accounting as the same were in effect at
December 31, 1996, except as required by changes in generally accepted
accounting principles, as concurred in by the independent auditors of RedFed,
or as required by regulatory accounting principles or other regulatory
requirements;
(j) enter into any new activities or lines of business, cease to conduct any
material activities or lines of business that it conducts on the date hereof,
or conduct any material business activity not consistent with past practice;
(k) amend its certificate of incorporation or by-laws or adopt any plan of
liquidation, consolidation, merger or reorganization whether formal or
informal;
(l) make any capital expenditure other than in the ordinary course of
business or as necessary to maintain its assets, and in any event, whether or
not in the ordinary course of business, not exceeding $30,000;
(m) take any action that would prevent or impede the Merger from qualifying
as a "reorganization" within the meaning of Section 368 of the Code; or
(n) (i) enter into any Derivatives Contracts or purchase any of the types of
securities referred to in Section 3.3(y), except that RedFed may purchase or
acquire mortgage-backed securities rated "AA" or a more favorable rating
category by Standard & Poor's, or comparable rating categories of other
nationally recognized investment rating firms, so long as its aggregate
investment in mortgage-backed securities does not exceed $80 million; or
(ii) purchase or acquire municipal securities.
(o) agree, or make any commitment, to take any of the actions prohibited by
this Section 4.2.
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ARTICLE V.
COVENANTS
Section 5.1 Acquisition Proposals. RedFed agrees that neither it nor any of
its officers or directors shall, and RedFed shall use its best efforts to
cause its employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or
any of its subsidiaries) not to, directly or indirectly, initiate, solicit, or
encourage any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to stockholders of RedFed) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the consolidated assets,
deposits or any equity securities of, RedFed (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or, except to the extent
legally required for compliance by the directors of RedFed with their
fiduciary duties, in the written opinion of outside legal counsel, with
respect to an unsolicited offer from a third party, engage in any negotiations
concerning or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
RedFed shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties (other than Golden
State) conducted heretofore with respect to any of the foregoing. RedFed will
take the necessary steps to inform promptly the appropriate individuals or
entities referred to in the first sentence hereof of the obligations
undertaken in this Section 5.1. RedFed agrees that it will notify Golden State
immediately if any such inquiries, proposals or offers are received by, any
such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with RedFed. RedFed also agrees that
it shall promptly request each person (other than Golden State) that has
heretofore executed a confidentiality or standstill agreement in connection
with its consideration of acquiring RedFed to return all confidential
information heretofore furnished to such person by or on behalf of RedFed and
enforce any such confidentiality or standstill agreements.
Section 5.2 Certain Policies of RedFed. At the request of Golden State,
RedFed shall, to the extent consistent with generally accepted accounting
principles, modify its loan, litigation or real estate valuation policies and
practices (including loan classifications and levels of reserves) after the
date on which all required regulatory approvals are received for completion of
the Merger and not earlier than 15 days prior to nor later than the day prior
to, the Effective Time so as to be consistent with those of Golden State,
taking into account Golden State's intended operations after the closing;
provided, however, that RedFed shall not be required to take such action
unless Golden State agrees in writing that all conditions to Golden State's
obligation to consummate the Merger have been satisfied and that Golden State
will complete the Merger. RedFed's representations, warranties and covenants
contained in this Agreement shall not be deemed to be untrue or breached in
any respect for any purpose as a consequence of any modifications or changes
undertaken solely on account of this Section 5.2.
Section 5.3 Employees. (a) As soon as practicable after the date hereof and,
in any event, prior to the Closing Date, Golden State shall evaluate the
employees and existing operations of RedFed to determine which positions in
and employees of RedFed will be required for the continuing operations of the
Surviving Corporation and Glendale Federal as of and after the Effective Time.
RedFed shall cooperate in good faith with Golden State in assisting Golden
State's investigation by, among other things, making available to Golden State
employee evaluations and other records to the extent permitted by law, and
facilitating interviews with RedFed employees.
(b) As soon as practicable after the date hereof, Golden State shall
identify to RedFed those employees of RedFed to whom Golden State desires to
offer employment as of and after the Effective Time. Those employees whose
positions will be eliminated and to whom Golden State determines not to offer
employment shall be given notice prior to the Closing Date by RedFed and
Golden State of their termination and the effective dates thereof. Golden
State shall endeavor in good faith to identify employment opportunities for
any such employees with Golden State. Such efforts shall include posting of
employment opportunities with Golden State and interviewing any such employee
of RedFed who desires to be considered for such a position with Golden State.
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(c) It is the intention of Golden State to train all employees of RedFed
that Golden State expects to employ with Golden State in Golden State's
procedures prior to the Closing Date. RedFed shall cooperate in good faith
with Golden State in facilitating such training, including, without limitation
by making such employees available for such training for reasonable periods
during normal business hours.
(d) Employees accepting employment with Golden State will not receive a
guarantee of any minimum period of employment, it being the intention and
understanding of the parties hereto that such employment shall be solely at
the will of Golden State on the same basis as all other employees of Golden
State who do not have contractual rights of employment; provided, that
notwithstanding anything that may appear to be to the contrary herein, no
provision shall be deemed to terminate or modify any provision of any
employment, severance or similar agreement of any person with RedFed or any of
its subsidiaries. Employees who are employed by Golden State after the
Effective Time will receive credit for their prior service with RedFed for
purposes of eligibility and vesting only, and not for purposes of determining
the amount of benefits payable, under Golden State's existing employee benefit
plans and programs, except that such employees shall receive prior service
credit for purposes of determining (i) eligibility for annual amounts of
permitted vacation time, (ii) numbers of accrued sick days, and (iii) amounts
payable as severance payments under the applicable severance plan of Golden
State in the case of employees of RedFed who remain employed by Golden State
for more than one year following the Effective Time.
(e) Full time and part time employees of RedFed on the date hereof who are
involuntarily terminated, other than for cause, on or within one year after
the Closing Date, including those employees of RedFed who are terminated as of
a date prior to the Effective Time pursuant to paragraph (b) above, shall be
eligible for benefits to the extent and as provided under the RedFed Severance
Plan as in effect at the date hereof.
(f) This Agreement is intended to result solely in the acquisition of RedFed
by Golden State and is not intended to confer any continuing rights to
employment on the part of the employees of RedFed after the Effective Time.
RedFed shall make no representations to its employees regarding employment by
Golden State. RedFed shall remain solely responsible for its employees,
representatives and agents during their employment with RedFed prior to the
Effective Time and with respect to all matters arising from such employment
with RedFed during such period, including, without limitation, the payment of
any accrued vacation pay, sick pay, severance payments or other payments to
which such employees may be entitled (it being acknowledged that the Surviving
Corporation, or Glendale Federal, as applicable, shall succeed to such
obligations by operation of law upon, but only in the event of, the completion
of the Merger or the Bank Merger, as applicable). Such payments and RedFed's
obligations to make such payments shall be fully and fairly reflected in
RedFed's financial statements prior to and as of the Effective Time to the
extent required by generally accepted accounting principles.
(g) RedFed shall not complete the termination and liquidation of the
Retirement Plan for Employees of Redlands Federal Bank, and shall take such
actions as may be necessary or appropriate to enable Golden State to become
the sponsor of such plan as of the Effective Time. As of the Effective Time
Golden State shall assume such plan and all of RedFed's obligations in
connection therewith. Golden State and RedFed acknowledge that prior to the
proposed termination and liquidation of such plan, benefits ceased to accrue
thereunder, and that nothing in this Section 5.3(g) is intended to require the
reinstatement of benefit accruals under such plan.
Section 5.4 Access to Information. (a) Upon reasonable notice during the
period prior to the Effective Time, each party hereto shall afford the other
parties access to the officers, employees, accountants, counsel and other
representatives of such party, during normal business hours (provided such
access does not unreasonably interfere with the operations of Glendale Federal
or Redlands Federal) to all its properties, books, contracts, commitments,
records, officers, employees, accountants, counsel and other representatives
and, during such period, such party shall make available to each other party
(i) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
federal or state securities laws or federal or state banking laws (other than
any reports or documents which such party is not permitted to disclose under
applicable law) and (ii) all other information concerning its business,
properties
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and personnel as a party hereto may reasonably request. The parties hereto
shall not, however, be required to provide access to or to disclose
information to the extent that such access or disclosure would violate 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;
provided, that such party shall make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply that will provide all information to the other party that may
be relevant to its assessment of its obligation to complete the Merger. The
parties hereto will hold all such information in confidence in accordance with
the provisions of the confidentiality agreements, dated November 13, 1997,
between Golden State and RedFed (the "Confidentiality Agreements").
(b) No investigation by any party hereto shall affect the representations,
warranties, covenants or agreements of the other parties hereto.
(c) RedFed shall promptly after the end of each month inform Golden State of
any new classification of its assets (as referred to in Section 3.3(s)) that
is determined or modified at any time after October 31, 1997 and of any
changes in RedFed's allowance for loan and lease losses from the prior month-
end, including an explanation of the reasons therefor.
Section 5.5 Regulatory Matters. (a) The parties hereto shall cooperate with
each other and use their best efforts promptly to prepare and file within
thirty days of the date hereof all necessary applications, and thereafter to
effect all documentation, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and governmental authorities which are necessary or
advisable to consummate the transactions contemplated by this Agreement.
RedFed and Golden State shall have the right to review in advance, 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 of the
information relating to RedFed 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 authority
in connection with the transactions contemplated by this Agreement. 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 authorities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party will
keep the other apprised of the status of matters relating to completion of the
transactions contemplated herein.
(b) Golden State and RedFed shall, upon request, furnish each other with all
information concerning themselves, their subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or
advisable in connection with the Form S-4 and the Proxy Statement (each as
defined in Section 5.8) or any other statement, filing, notice or application
made by or on behalf of Golden State or RedFed to any governmental authority
in connection with the Merger and the other transactions contemplated by this
Agreement.
Section 5.6 Other Actions. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take
promptly, or cause to be taken promptly, all actions and to do promptly, or
cause to be done promptly, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable, including
using efforts to obtain all necessary actions or non-actions, extensions,
waivers, consents and approvals set forth in Section 5.6 of the RedFed
Disclosure Letter and from all applicable governmental entities, effecting all
necessary registrations, applications and filings (including, without
limitation, filings under federal and any applicable state securities laws)
and obtaining any required contractual consents and approvals (which shall be
the obligation of the party hereto bound by the contract in question), and
cause the Closing of the transactions contemplated hereby to occur as soon as
practicable after the receipt of all approvals, consents and waivers required
by Section 6.1(b). Without limiting the generality of the foregoing, Golden
State shall take such action as may be necessary to incorporate Merger Sub
under the DGCL, to cause Merger Sub to become a party signatory to this
Agreement and to perform its obligations under this Agreement in a timely
manner. In addition,
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each of Golden State and RedFed shall appoint a person who shall be
responsible for coordinating with the other party in order to consider and
respond to any requests for consents hereunder and otherwise to complete the
transactions contemplated hereby as soon as practicable.
Section 5.7 Publicity. The initial press release announcing this Agreement
shall be mutually agreed and, thereafter, subject to the provisions of
applicable law, RedFed and Golden State shall mutually agree with each other
prior to issuing any press releases or public statements with respect to the
other or the transactions contemplated hereby and in making any filings with
any governmental entity or with any national securities exchange with respect
thereto.
Section 5.8 Preparation of Form S-4 and Proxy Statement. Golden State and
RedFed, acting jointly, shall promptly prepare and file with the SEC an
appropriate form of proxy statement (the "Proxy Statement") in compliance with
the requirements of the Exchange Act and a registration statement under the
Securities Act on Form S-4 (the "Form S-4") in which the Proxy Statement will
be included as a prospectus. Each of Golden State and RedFed shall use all
reasonable efforts to have the Proxy Statement authorized for use pursuant to
the Exchange Act and the Form S-4 declared effective under the Securities Act
as promptly as practicable after such filing. Golden State shall also take any
such action (other than qualifying to do business in any jurisdiction in which
it is now not so qualified) as may be required to be taken under any
applicable state securities laws in connection with the issuance of Golden
State Common Stock in the Merger and RedFed shall furnish all information
concerning RedFed and the holders of RedFed Common Stock as may be reasonably
requested in connection with any such action.
Section 5.9 Letter of RedFed Accountants. RedFed shall use its best efforts
to cause to be delivered to Golden State a letter of RedFed's independent
auditors, dated as of a date within two business days before the date on which
the Form S-4 shall become effective and addressed to Golden State, and a
written reconfirmation of such letter dated as of the Closing Date, in each
case in form and substance reasonably satisfactory to Golden State, and in
scope and substance consistent with applicable professional standards for
letters delivered by independent public accountants in connection with
registration statements similar to Form S-4.
Section 5.10 Letter of Golden State Accountants. Golden State shall use its
best efforts to cause to be delivered to RedFed a letter of Golden State's
independent auditors, dated as of a date within two business days before the
date on which the Form S-4 shall become effective and addressed to RedFed, and
a written reconfirmation of such letter dated as of the Closing Date, in each
case in the form and substance reasonably satisfactory to RedFed, and in scope
and substance consistent with applicable professional standards for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4.
Section 5.11 Stockholder Action. RedFed shall take all action necessary, in
accordance with applicable law and regulations, and its certificate of
incorporation and by-laws, to obtain, as promptly as practicable, approval of
this Agreement and the transactions contemplated hereby by the vote of
stockholders of RedFed required under applicable law and regulations. Except
to the extent legally required for the discharge by such board of directors of
its fiduciary duties, in the written opinion of outside legal counsel, the
Board of Directors of RedFed shall recommend to the holders of the RedFed
Common Stock that they vote in favor of and approve the Merger and adopt and
approve this Agreement and the transactions contemplated hereby.
Section 5.12 Notification of Certain Matters. Each party hereto shall give
prompt notice to the other of: (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by them subsequent to the date of this
Agreement and prior to the Effective Time, under any contract material to the
financial condition, properties, businesses or results of operations of such
party and its subsidiaries taken as a whole to which either of them is a party
or is subject; (b) any material adverse change in the financial condition,
properties, business or results of operations of such party and its
subsidiaries taken as a whole or the occurrence of any event which, so far as
reasonably can be foreseen at the time of its occurrence, is reasonably likely
to result in any such change; and (c) any event or occurrence which may
adversely affect the likelihood that a condition set forth in Article VI will
be satisfied.
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Each party hereto shall give prompt notice to the other of any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated
by this Agreement.
Section 5.13 Tax Matters. RedFed shall keep Golden State apprised of its
progress in the preparation of its tax returns and shall provide to Golden
State copies of draft returns prior to filing. In addition, RedFed agrees that
it shall consult with Golden State prior to making any significant decisions
with respect to tax reporting or other tax matters, in order to ensure to the
extent possible that such decisions are consistent with the consummation of
the transactions contemplated hereby.
Section 5.14 Updated Disclosure Letters. Each party hereto shall provide the
other party hereto with an Updated Disclosure Letter within two days prior to
the Effective Date; provided, however, that no such Updated Disclosure Letter
shall be deemed to alter any party's representations and warranties or other
obligations herein for purposes of Articles VI or VII hereof.
Section 5.15 Stock Exchange Listing. Golden State shall use all reasonable
efforts to cause the shares of Golden State Common Stock to be issued in the
Merger to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the Effective Date.
Section 5.16 Bank Merger. The parties agree to use their reasonable efforts
between the date of this Agreement and the Closing to take all actions
necessary or desirable, including the filing of any regulatory applications,
so that the Bank Merger will occur as soon as possible after the Effective
Time.
Section 5.17 Indemnification of Directors and Officers. Golden State agrees
that all rights to indemnification or exculpation now existing in favor of the
directors, officers, employees and agents of RedFed and its subsidiaries,
whether acting in such capacity or as fiduciary of any such employee benefit
plan of RedFed or its subsidiaries which provides for such indemnification, as
provided in their respective certificates of incorporation, charter, by-laws
or similar charter documents or any employee benefit plan of RedFed or its
subsidiaries or any agreement disclosed in Section 3.3(x) of the RedFed
Disclosure Letter in effect as of the date hereof with respect to matters
occurring prior to the Effective Time, including matters relating to the
negotiation, execution, delivery and performance of this Agreement, shall
survive the Merger and shall continue in full force and effect at all times
thereafter. Golden State further agrees (i) that to the full extent permitted
by applicable law, regulations and the certificate of incorporation and by-
laws of Golden State as in effect on the date hereof, it shall indemnify,
defend and hold harmless each person who was an officer or director of RedFed
or its subsidiaries prior to the Effective Time for any claim or loss arising
out of their actions while serving as such director or officer, including any
acts relating to this Agreement, and shall pay, as and when incurred, the
expenses, including attorneys' fees, of such individual in advance of the
final resolution of any claim, provided that such individuals shall first, to
the extent required by law, execute an undertaking to return such advances in
the event it is finally determined by appropriate judicial proceedings that
such indemnification is not permitted under applicable law; and (ii) to cause
each of the persons referred to in the preceding clause (i) to be covered for
a period of six years from the Effective Time by the directors' and officers'
primary and excess liability insurance policies maintained by RedFed;
provided, that Golden State may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions that are not less
advantageous than such policies with respect to acts or omissions occurring
prior to the Effective Time committed by such officers and directors in their
capacity as such; provided, however, that in no event shall Golden State be
required to expend more than 200% of the current annual amount expended by
RedFed to maintain or procure insurance coverage pursuant hereto. In the event
Golden State, RedFed or any of their respective successors or assigns (i)
shall consolidate with or merge into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) shall transfer or convey all or substantially all of its properties
and assets to any person, then, and in each such case, proper provision shall
be made, to the extent necessary, so that the successors and assigns of Golden
State or RedFed, respectively, shall assume the obligation set forth in this
Section 5.17. The provisions of this Section 5.17 are intended to be for the
benefit of, and shall be enforceable by, each person entitled to
indemnification as provided herein and his or her heirs and representatives.
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Section 5.18. RedFed ESOP. Prior to the Effective Time, RedFed shall use its
best efforts to cause the following transactions (the "ESOP Transactions") to
occur with respect to the RedFed Employee Stock Ownership Plan (the "ESOP"),
subject to such governmental approvals, if any, as the fiduciaries of the ESOP
and Golden State deem to be necessary or appropriate: (i) in repayment of the
ESOP loan, the ESOP trustee shall transfer to RedFed the number of unallocated
shares of RedFed Common Stock held by the ESOP that are equal in value to the
then outstanding amount of principal and interest under the ESOP loan; (ii)
the ESOP's unallocated shares that are transferred to RedFed in exchange for
cancellation of the ESOP loan shall be canceled; (iii) the ESOP shall be
terminated and, in accordance with the provisions of the ESOP and its related
trust, the balance of the assets held in the trust, including any unallocated
shares, shall be allocated and thereafter distributed to the ESOP
participants.
Section 5.19 Litigation Tracking Warrants. In the event that Golden State
elects to complete the proposed distribution of Litigation Tracking Warrants
("LTWs") described in Golden State's Current Report on Form 8-K dated October
28, 1997 prior to the Closing, the Closing Date shall be set to occur on a
date such that the Pricing Period shall commence at least 15 days after the
distribution date for the LTWs, and the Closing shall take place no more than
60 days after such distribution date.
ARTICLE VI.
CONDITIONS TO CONSUMMATION
Section 6.1. Conditions to All Parties' Obligations. The respective
obligations of Golden State and RedFed to effect the Merger shall be subject
to the satisfaction or, to the extent permitted by applicable law, waiver
prior to the Effective Time of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have been
approved by the requisite vote of the stockholders of RedFed in accordance
with applicable law and its certificate of incorporation and by-laws.
(b) All necessary regulatory approvals, consents and waivers with respect to
this Agreement and the transactions contemplated hereby shall have been
received and shall remain in full force and effect, and all applicable
statutory waiting periods shall have expired; provided, however, that no
approval, consent or waiver referred to in this Section 6.1(b) shall be deemed
to have been received if it shall include any condition or requirement that,
individually or in the aggregate, would so materially and adversely impact the
economic and business benefits of the transactions contemplated hereby to
Golden State as to render it inadvisable in the judgment of Golden State to
proceed with the transactions contemplated hereby.
(c) Any other requirements prescribed by law which are necessary to the
consummation of the transactions contemplated by this Agreement shall have
been satisfied.
(d) No party hereto shall be subject to any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the Merger or any other transaction contemplated by this
Agreement, and no litigation or proceeding shall be pending against Golden
State or RedFed brought by any governmental agency seeking to prevent
consummation of the transactions contemplated hereby.
(e) No statute, rule or regulation shall have been enacted, promulgated,
interpreted, applied or enforced by any governmental authority which
prohibits, or makes illegal consummation of the Merger, the Bank Merger or any
other transaction contemplated by this Agreement.
(f) The shares of Golden State Common Stock issuable to RedFed stockholders
pursuant to this Agreement upon the completion of the Merger shall have been
authorized for listing on the NYSE upon official notice of issuance.
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(g) The Form S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop
order.
(h) Each of the letters from independent accountants, and written
confirmations thereof, referred to in Sections 5.9 and 5.10 shall have been
received at the times and in the form described in such Sections.
Section 6.2. Conditions to Obligations of Golden State. The obligations of
Golden State to effect the Merger shall be subject to the satisfaction prior
to the Effective Time of the following additional conditions, any or all of
which conditions may be waived by Golden State:
(a) Each of the representations and warranties of RedFed set forth in this
Agreement shall have been true and correct in all material respects as of the
date hereof and as of the Closing Date as if made on such date (or on the date
when made in the case of any representation or warranty which specifically
relates to an earlier date); RedFed shall have performed, in all material
respects, each of its covenants and agreements contained in this Agreement;
there shall have been no material adverse change in the financial condition,
business or assets of RedFed and its subsidiaries taken as a whole since
December 31, 1996; and Golden State shall have received a certificate signed
by the chief executive officer and the chief financial officer of RedFed,
dated the Closing Date, to the foregoing effect.
(b) Golden State shall have received the opinion of Mayer, Brown & Platt,
counsel to Golden State, dated the Closing Date, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, that Golden State, Merger Sub and
RedFed will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, and that no gain or loss will be recognized by
Golden State, Merger Sub or RedFed as a result of the Merger. In rendering
such opinion, such counsel may require and rely upon representations contained
in certificates of RedFed, Golden State and stockholders of RedFed.
(c) Golden State shall have received the Updated RedFed Disclosure Letter
from RedFed required by Section 5.14.
(d) Golden State shall have received satisfactory evidence from RedFed that
(i) the fiduciaries of the ESOP have determined that the ESOP Transactions are
prudent and in the best interests of the participants and beneficiaries of the
ESOP and (ii) the ESOP Transactions have been completed.
Section 6.3. Conditions to Obligations of RedFed. The obligation of RedFed
to effect the Merger shall be subject to the satisfaction prior to the
Effective Time of the following additional conditions, any or all of which
conditions may be waived by RedFed:
(a) Each of the representations and warranties of Golden State set forth in
this Agreement shall have been true and correct in all material respects as of
the date hereof and as of the Closing Date as if made on such date (or on the
date when made in the case of any representation or warranty which
specifically relates to an earlier date); Golden State shall have performed,
in all material respects, each of its covenants and agreements contained in
this Agreement; there shall have been no material adverse change in the
financial condition, business or assets of Golden State and its subsidiaries
taken as a whole since June 30, 1997. RedFed shall have received a certificate
signed by the chief executive officer and the chief financial officer of
Golden State, dated the Effective Date, to the foregoing effect.
(b) RedFed shall have received the opinion of Gibson, Dunn & Crutcher,
counsel to RedFed, dated the Closing Date, to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, that Golden State, Merger Sub and
RedFed will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, that no gain or loss will be recognized by holders
of RedFed Common Stock upon the receipt of Golden State Common Stock in the
Merger (except with respect to cash received in lieu of the issuance of
fractional shares) and that no gain or loss will be
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recognized by Golden State, Merger Sub or RedFed as a result of the Merger. In
rendering such opinion, such counsel may require and rely upon representations
contained in certificates of RedFed, Golden State and stockholders of RedFed.
(c) RedFed shall have received the Updated Golden State Disclosure Letter
required by Section 5.14.
ARTICLE VII.
TERMINATION
Section 7.1. Termination. This Agreement may be terminated, and the Merger
abandoned, prior to the Effective Time, either before or after its approval by
the stockholders of RedFed:
(a) by the mutual consent of Golden State and RedFed;
(b) by Golden State or RedFed, if its Board of Directors so determines by
vote of a majority of the members thereof, in the event of (i) the failure of
the stockholders of RedFed to approve this Agreement, or (ii) a material
breach by the other party hereto of any representation, warranty, covenant or
agreement contained herein which is not cured or not curable within 45 days
after written notice of such breach is given to the party committing such
breach by the other party; provided, however, that neither party shall have
the right to terminate this Agreement pursuant to clause (ii) of this Section
7.1(b) unless any breach of representation or warranty asserted as the basis
for such termination, together with all other such breaches, would entitle the
party receiving such representation or warranty under Section 6.2(a) (in the
case of a breach of representation or warranty by RedFed) or Section 6.3(a)
(in the case of a breach of representation or warranty by Golden State) not to
consummate the transactions contemplated hereby;
(c) by Golden State or RedFed by written notice to the other party if either
(i) the condition set forth in Section 6.1(b) shall not have been satisfied by
the Termination Date (as defined below); or (ii) any governmental authority of
competent jurisdiction shall have issued a final, nonappealable order
enjoining or otherwise prohibiting consummation of the transactions
contemplated by this Agreement;
(d) by Golden State or RedFed, if its Board of Directors so determines by
vote of a majority of the members thereof, in the event that the Merger is not
consummated by the Termination Date, unless the failure to so consummate by
such time is due to the breach of any material representation, warranty or
covenant contained in this Agreement by the party seeking to terminate. The
term "Termination Date" shall mean July 31, 1998; provided, however, that
either party hereto shall have the right to extend such Termination Date for
up to an additional 45 days if, prior to the Termination Date, such party
notifies the other party in writing that such party believes that the
approvals, consents or waivers to be obtained by such party are imminent and a
reasonable factual basis for such party's belief that such approvals, consents
or waivers are imminent is set forth in such written notice;
(e) by Golden State if the RedFed Board shall have failed to make its
recommendation referred to in Section 5.11, withdrawn such recommendation or
modified or changed such recommendation in a manner adverse in any respect to
the interests of Golden State.
(f) by RedFed if Golden State shall have entered into a letter of intent or
a definitive agreement with respect to a merger, consolidation or similar
transaction involving, or any purchase of all or substantially all of the
consolidated assets, deposits or equity securities of, Golden State, pursuant
to which the stockholders of Golden State would hold less than 50% of the
common equity of the surviving entity immediately after the transaction.
Section 7.2. Effect of Termination.
(a) In the event of the termination of this Agreement by either Golden State
or RedFed, as provided above, this Agreement shall thereafter become void and,
subject to Section 7.2(b) and the last sentence of Section 8.2,
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there shall be no liability on the part of any party hereto or their
respective officers or directors, except that any such termination shall be
without prejudice to the rights of any party hereto arising out of the
intentional breach by any other party hereto of any covenant or intentional
misrepresentation in any of the representations and warranties set forth in
this Agreement including, without limitation, rights to recover any out-of-
pocket or transaction-related expenses arising from the transactions
contemplated by this Agreement.
(b) If (i) this Agreement shall be terminated (A) by Golden State pursuant
to Section 7.1(b) or Section 7.1(e) and, at the time of the occurrence of the
circumstances permitting such termination pursuant to such Section, there
shall exist an Acquisition Proposal with respect to RedFed or any of its
Subsidiaries, or (B) by RedFed pursuant to Section 7.1(b)(i) and, at the time
of the occurrence of the circumstance permitting termination pursuant to such
Section, there shall exist an Acquisition Proposal with respect to RedFed or
any of its Subsidiaries, and (ii) within 12 months after any such termination
RedFed or any of its Subsidiaries enters into a definitive agreement with
respect to an Acquisition Proposal, RedFed shall promptly, and in any event
within one business day after demand by Golden State, pay to Golden State a
termination fee equal to $7.5 million.
ARTICLE VIII.
OTHER MATTERS
Section 8.1. Certain Definitions; Interpretation.
(a) As used in this Agreement, the following terms shall have the meanings
indicated:
"knowledge" when used with respect to a party to this Agreement means the
actual knowledge of the executive officers of such party after appropriate
inquiry of the person or persons employed by such party who have
responsibility for the matter being referred to;
"person" includes an individual, corporation, partnership, limited
liability company, association, trust or unincorporated organization; and
"subsidiary," with respect to a person, means any other person controlled,
directly or indirectly, by such person.
(b) Except as the context may otherwise require, references in this
Agreement to "Golden State" and to "RedFed" include each of their respective
direct and indirect subsidiaries, including Glendale Federal and Redlands
Federal, respectively, and references to "Golden State" shall mean Glendale
Federal when used with reference to periods prior to the time that Glendale
Federal became a wholly-owned subsidiary of Golden State.
(c) When a reference is made in this Agreement to Articles or Sections such
reference shall be to an Article or a Section of this Agreement unless
otherwise indicated. The table of contents and headings, contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation," whether or not so stated. Any singular term in
this Agreement shall be deemed to include the plural, and any plural term the
singular.
Section 8.2 Survival. Only those agreements and covenants of the parties
that are by their terms applicable in whole or in part after the Effective
Time shall survive the Effective Time. If this Agreement shall be terminated,
the agreements of the parties in the last sentence of Section 5.4(a) and in
Section 8.6 shall survive such termination.
Section 8.3 Waiver. Any provision of this Agreement may (to the extent
permitted by applicable law) be: (i) waived by the party benefited by the
provision, or (ii) as permitted by applicable law, amended or modified
(including the structure of the transaction), either prior to or after this
Agreement and the transactions contemplated hereby are approved by the
stockholders of RedFed; provided, that any such waiver, amendment or
modification shall be effective only if given or made by an agreement in
writing between the parties hereto
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approved or authorized by their respective boards of directors, but such
waiver or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other noncompliance.
Section 8.4. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and the same instrument.
Section 8.5. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of California, except to
the extent the laws of the State of Delaware (as the state of incorporation of
both parties hereto) shall be deemed controlling pursuant to the conflict of
laws provisions and principles of California law.
Section 8.6. Expenses. Each party hereto will pay all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby,
it being agreed that all regulatory application fees shall be expenses of
Golden State and that the costs of printing and mailing the Form S-4,
including the Proxy Statement, shall be borne equally by Golden State and
RedFed.
Section 8.7. Notices. All notices, requests, acknowledgments and other
communications hereunder to a party, or changes to this notice provision,
shall be in writing and shall be deemed to have been duly given when delivered
by hand or private courier, or when transmitted by telecopy or telegram to
such party at its address set forth below or such other address as such party
may specify by notice to the other party hereto.
If to Golden State:
Golden State Bancorp Inc.
414 North Central Avenue
Glendale, California 91203
Attention:Richard A. Fink
Vice Chairman
Facsimile:(818) 409-3151
With a copy to:
Mayer, Brown & Platt
350 South Grand Avenue
25th Floor
Los Angeles, California 90071
Attention: James R. Walther, Esq.
Facsimile:(213) 625-0248
If to RedFed:
RedFed Bancorp Inc.
300 East State Street
Redlands, California 92373
Attention:Anne Bacon
President and Chief Executive Officer
Facsimile:(909) 798-4495
With a copy to:
Gibson, Dunn & Crutcher
One Montgomery Street
Telesis Tower
San Francisco, CA 94104-4505
Attention: Todd H. Baker
Facsimile: (415) 986-5309
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Section 8.8. Entire Agreement; No Third Party Beneficiaries. This Agreement,
including the Disclosure Letters referred to herein, and the Confidentiality
Agreements referenced in Section 5.4(a), represent the entire agreement and
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersede any and all other oral or written agreements
heretofore made. Nothing in this Agreement, other than the provisions of
Section 5.17, is intended to confer upon any person other than Golden State
and RedFed any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
Section 8.9. Parties Bound; Assignment. All terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns. This Agreement
may not be assigned by any party hereto without the written prior consent of
the other parties hereto.
Section 8.10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or any
circumstance, is invalid or unenforceable, the remainder of this Agreement and
the application of such provision to other persons or circumstances shall not
be affected by such invalidity or unenforceability, nor shall such invalidity
or unenforceability affect the validity or enforceability of such provision,
or the application thereof, in any other jurisdiction.
Section 8.11. Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
GOLDEN STATE BANCORP INC.
REDFED BANCORP INC.
By: /s/ Richard A. Fink By: /s/ Anne Bacon
_____________________________________ _____________________________________
Richard A. Fink Anne Bacon
Vice Chairman President and Chief Executive
Officer
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