<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
GOLDEN STATE BANCORP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6712 95-4642135
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
414 NORTH CENTRAL AVENUE
GLENDALE, CALIFORNIA 91203
(818) 500-2175
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
JOHN E. HAYNES
GOLDEN STATE BANCORP INC.
414 NORTH CENTRAL AVENUE
GLENDALE, CALIFORNIA 91203
(818) 500-2175
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
CRAIG M. WASSERMAN, ESQ. JAMES R. WALTHER, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ AND MAYER, BROWN & PLATT
51 WEST 52ND STREET 350 SOUTH GRAND AVENUE
NEW YORK, NEW YORK 10019 LOS ANGELES, CALIFORNIA 90071-
(212) 403-1000 1503
(213) 229-9500
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock........... 7,560,000 $35.00 $264,600,000 $31,042
</TABLE>
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(1) Based upon the maximum number of shares that may be issued upon
consummation of the merger described herein, and upon exercise of
securities exercisable for shares of common stock of Golden State Bancorp
Inc.
(2) Pursuant to Rule 457(f), and solely for the purpose of calculating the
registration fee, the proposed maximum offering price is based upon the
average of the high and the low sale prices of the common stock, par value
$.01 per share, of CENFED Financial Corporation on The Nasdaq Stock Market
National Market on March 4, 1998 and the number of shares of Golden State
Bancorp Inc. common stock being registered.
(3) In accordance with Rule 457(b), the filing fee of $49,140 paid pursuant to
Section 14(g) of the Securities Exchange Act of 1934, as amended, and Rule
0-11 thereunder at the time of the filing of the Joint Proxy Statement-
Prospectus contained in this Registration Statement as preliminary proxy
materials of CENFED Financial Corporation has been credited to offset the
$80,182 registration fee that would otherwise be payable.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
CENFED
FINANCIAL CORPORATION
March 9, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the stockholders of
CENFED Financial Corporation, to be held on Tuesday, April 7, 1998 at 10:30
a.m., California time, at 199 North Lake Avenue, Pasadena, California.
At the Special Meeting, you will be asked to vote on the proposed merger
(the "Merger") of CENFED into Golden State Bancorp Inc. ("Golden State")
pursuant to an Agreement and Plan of Merger, dated as of August 17, 1997, as
amended (the "Merger Agreement"). The Merger Agreement provides that each
share of CENFED common stock will be converted into 1.2 shares of Golden State
common stock as of the effective time of the Merger. This strategic
transaction for CENFED will allow our stockholders to participate in a banking
institution with 188 banking offices, combined assets of over $18 billion and
a strong presence throughout California.
A Notice of Special Meeting of Stockholders and a Proxy Statement-Prospectus
which describe the Merger and the background of the proposed transactions are
enclosed with this letter. I URGE ALL STOCKHOLDERS TO READ THE PROXY
STATEMENT-PROSPECTUS AND THE MERGER AGREEMENT BEFORE DECIDING WHETHER TO VOTE
TO APPROVE THE MERGER. The full text of the Merger Agreement can be found in
Appendix A to the Proxy Statement-Prospectus.
I would especially like to call your attention to two sections of the Proxy
Statement-Prospectus entitled "THE MERGER--Background of the Merger" and "--
Recommendation of CENFED Board and Reasons for the Merger." These two sections
describe the events leading up to the CENFED Board of Directors' decision to
enter into merger negotiations with Golden State and the reasons why the
CENFED Board of Directors believes that the Merger is in the best interests of
CENFED stockholders, customers and employees.
CENFED has engaged Merrill Lynch, Pierce, Fenner & Smith Incorporated to
provide financial advisory services in connection with its consideration of
the Merger. Merrill Lynch has delivered to the Board of Directors its written
opinion that, as of this date, the exchange ratio in the Merger is fair to
CENFED's stockholders from a financial point of view.
THE BOARD OF DIRECTORS OF CENFED HAS UNANIMOUSLY APPROVED THE MERGER AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE AND ADOPT THE MERGER
AGREEMENT.
I strongly support the Merger and join with the other members of the Board
in recommending the Merger to you. We urge you to vote in favor of approval
and adoption of the Merger Agreement today.
Very truly yours,
/s/ D. Tad Lowrey
D. Tad Lowrey
Chief Executive Officer,
President and Director
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING,
WHETHER OR NOT YOU PLAN TO ATTEND. ACCORDINGLY, YOU ARE REQUESTED TO COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
<PAGE>
CENFED
FINANCIAL CORPORATION
199 NORTH LAKE AVENUE
PASADENA, CALIFORNIA 91101
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 7, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of CENFED
Financial Corporation, a Delaware corporation ("CENFED"), will be held on
April 7, 1998, 10:30 a.m., local time, at 199 North Lake Avenue, Pasadena,
California, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of August 17, 1997, as amended (the
"Merger Agreement"), between CENFED and Golden State Bancorp Inc., a
Delaware corporation ("Golden State"), and the consummation of the
transactions contemplated thereby, pursuant to which CENFED will merge with
and into a wholly-owned subsidiary of Golden State (the "Merger") upon the
terms and subject to the conditions set forth in the Merger Agreement, as
more fully described in the enclosed Proxy Statement-Prospectus. The Merger
Agreement is set forth as Appendix A to the Proxy Statement-Prospectus.
2. To transact such other business as may properly be brought before the
Special Meeting, or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on February 17, 1998
as the record date for determining stockholders entitled to vote at the
Special Meeting and any adjournments or postponements thereof. Only
stockholders of record at the close of business on that date will be entitled
to notice of and to vote at the Special Meeting and any adjournments or
postponements thereof.
THE BOARD OF DIRECTORS OF CENFED UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
By Order of the Board of Directors
/s/ Steven P. Neiffer
Steven P. Neiffer
Secretary
March 9, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
PROXY STATEMENT
CENFED FINANCIAL CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 7, 1998
PROSPECTUS
GOLDEN STATE BANCORP INC.
This Proxy Statement-Prospectus relates to up to 7,560,000 shares of common
stock, par value $1.00 per share ("Golden State Common Stock"), of Golden
State Bancorp Inc., a Delaware corporation ("Golden State"), offered hereby to
the stockholders of CENFED Financial Corporation, a Delaware corporation
("CENFED"), upon consummation of a proposed merger (the "Merger") of CENFED
with and into Golden State Financial Corporation, a Delaware corporation and a
wholly-owned subsidiary of Golden State organized to effect the Merger
("Merger Sub") (Merger Sub, as the surviving corporation in the Merger, being
sometimes referred to herein as the "Surviving Corporation") pursuant to an
Agreement and Plan of Merger, dated as of August 17, 1997, as amended as of
December 1, 1997 by Amendment No. 1 thereto ("Amendment No. 1"), by and among
Golden State, Merger Sub and CENFED (the "Merger Agreement"). This Proxy
Statement-Prospectus also serves as the Proxy Statement of CENFED for use in
connection with the solicitation of proxies by the Board of Directors of
CENFED to be used at the Special Meeting of Stockholders of CENFED (the
"Special Meeting") to approve and adopt the Merger Agreement. The Merger
Agreement is set forth as Appendix A-1, and Amendment No. 1 is set forth as
Appendix A-2, to this Proxy Statement-Prospectus and each is incorporated
herein by reference.
Upon consummation of the Merger, each share of CENFED common stock, $.01 par
value per share ("CENFED Common Stock"), will be converted into the right to
receive 1.2 shares (subject to certain potential adjustments pursuant to the
Merger Agreement, the "Exchange Ratio") of Golden State Common Stock (with
cash to be paid in lieu of fractional shares). Based on the Exchange Ratio,
stockholders of CENFED are expected to hold approximately 9.5% of the
outstanding shares of Golden State Common Stock immediately following
consummation of the Merger.
The Merger is subject to the requisite approval of the holders of CENFED
Common Stock (the "CENFED Stockholder Approval"). The Merger is also subject
to the satisfaction of certain other conditions, including obtaining certain
regulatory approvals. The Merger Agreement may be terminated (among other
circumstances described herein) by CENFED if both (a) the average of the per
share closing prices of Golden State Common Stock on The New York Stock
Exchange, Inc. (the "NYSE") during the ten Golden State Common Stock trading
days preceding the proposed closing date of the Merger (the "Determination
Period") (the "Final Golden State Stock Price") is less than $24.40 and (b)
the quotient obtained by dividing the Final Golden State Stock Price by $28.69
(the closing price of Golden State Common Stock on August 15, 1997, the last
NYSE trading day preceding announcement of the Merger) does not equal at least
85% of the quotient obtained by dividing the weighted average (determined as
described herein) of the closing prices of common stock of a group of thrift
holding companies specified in the Merger Agreement during the Determination
Period by the average of such closing prices over the ten trading day period
preceding August 15, 1997. See "THE MERGER--Termination of the Merger
Agreement."
For a more complete description of the Merger Agreement and the Merger, see
"THE MERGER."
The last reported sale price of Golden State Common Stock as reported on the
NYSE Composite Transactions List on March 5, 1998 was $34.63 per share. On
August 15, 1997, the last trading day preceding public announcement of the
proposed Merger, the last reported sale price of Golden State Common Stock as
reported on the NYSE Composite Transactions List was $28.69 per share. The
last reported sale price of CENFED Common Stock as reported on the Nasdaq
Stock Market National Market ("Nasdaq") on March 5, 1998 was $42.00 per share.
On August 15, 1997, the last reported sale price of CENFED Common Stock as
reported on Nasdaq was $34.00 per share.
On February 4, 1998, Golden State entered into an Agreement and Plan of
Reorganization (the "California Federal Merger Agreement") with First
Nationwide (Parent) Holdings, Inc., a Delaware corporation ("FNPH"), First
Nationwide Holdings, Inc., a Delaware corporation ("FHN"), Merger Sub, First
Gibraltar Holdings, Inc., a Delaware corporation ("FGH"), and Hunter's
Glen/Ford, Ltd. FNH, the holding company of California Federal Bank, A Federal
Savings Bank ("California Federal"), is controlled, through intermediate
entities, by MacAndrews and Forbes Holdings Inc. ("MAF") and Gerald J. Ford
("Ford"), the Chairman of the Board and Chief Executive Officer of California
Federal. The California Federal Merger Agreement provides, among other things,
for the merger (together with certain related subsidiary mergers, the
"California Federal Merger") of FNPH with and into Golden State, and is
subject to several conditions to consummation, including the approval of the
holders of Golden State Common Stock. If the California Federal Merger is
consummated, it is expected that affiliates of MAF and Ford would together own
between 42% and 45% of the combined company, before giving effect to the
contingent issuance of additional shares of Golden State Common Stock under
the California Federal Merger Agreement that could substantially increase such
percentage ownership. The California Federal Merger Agreement also
contemplates that two-thirds of the Board of Directors of Golden State
immediately after the California Merger will be individuals designated by
affiliates of MAF and Ford. The California Federal Merger Agreement has been
filed as Exhibit 2.1 to Golden State's Current Report on Form 8-K, dated
February 4, 1998, as amended by Amendment No. 1 thereto, filed with the
Commission on March 5, 1998. See "INFORMATION ABOUT GOLDEN STATE AND MERGER
SUB--Subsequent Events."
THIS PROXY STATEMENT-PROSPECTUS AND FORM OF PROXY ARE FIRST BEING MAILED TO
STOCKHOLDERS ON OR ABOUT MARCH 10, 1998.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF ANY SAVINGS AND LOAN OR OTHER SUBSIDIARY OF GOLDEN
STATE AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION (THE "FDIC") OR ANY OTHER GOVERNMENTAL AGENCY.
The date of this Proxy Statement-Prospectus is March 9, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information...................................................... 1
Incorporation of Certain Documents by Reference............................ 1
Forward-Looking Statements................................................. 2
Summary.................................................................... 3
General.................................................................. 3
The Companies............................................................ 3
Special Meeting and Vote Required........................................ 6
The Merger............................................................... 6
Recommendation of CENFED Board of Directors.............................. 7
Opinion of CENFED's Financial Advisor.................................... 7
Effective Time of the Merger............................................. 7
Conditions to Consummation of Merger..................................... 7
Termination of Merger Agreement; Waiver and Amendment; Expenses.......... 8
Stock Option Agreement................................................... 9
Interests of Certain Persons in the Merger............................... 10
Appraisal Rights......................................................... 10
Certain Federal Income Tax Consequences.................................. 10
Accounting Treatment..................................................... 10
Regulatory Approvals..................................................... 11
Certain Differences in the Rights of Stockholders........................ 11
Share Information and Market Prices...................................... 11
Unaudited Pro Forma Comparative Per Share Data........................... 12
Selected Financial Data.................................................. 15
Special Meeting............................................................ 28
General.................................................................. 28
Matters to be Considered................................................. 28
Proxies.................................................................. 28
Solicitation of Proxies.................................................. 28
Record Date and Voting Rights............................................ 28
Recommendation of CENFED Board........................................... 29
The Merger................................................................. 30
General.................................................................. 30
Background of the Merger................................................. 30
Recommendation of CENFED Board and Reasons for the Merger................ 32
Opinion of CENFED's Financial Advisor.................................... 34
Structure of the Merger.................................................. 41
Conversion of CENFED Common Stock; Treatment of CENFED Stock Options..... 41
Exchange of Certificates; Fractional Shares.............................. 42
Effective Time........................................................... 43
Representations and Warranties........................................... 43
Conduct of Business Pending the Merger and Other Agreements.............. 44
Conditions to Consummation of Merger..................................... 45
Regulatory Approvals Required for the Merger............................. 47
Certain Federal Income Tax Consequences.................................. 48
Accounting Treatment..................................................... 49
Termination of Merger Agreement.......................................... 49
Waiver and Amendment of Merger Agreement................................. 51
Employee Benefits and Plans.............................................. 52
Stock Exchange Listing................................................... 52
</TABLE>
i
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<TABLE>
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PAGE
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<S> <C>
Expenses............................................................................. 52
Interests of Certain Persons in the Merger........................................... 53
Stock Option Agreement............................................................... 55
CENFED Rights Agreement.............................................................. 59
Restrictions on Resales by Affiliates................................................ 59
Management and Operations After the Merger........................................... 60
Price Range of Common Stock and Dividends............................................ 61
Market Prices........................................................................ 61
Dividends............................................................................ 62
Information About Golden State and Merger Sub ....................................... 63
Information About CENFED............................................................. 68
Comparison of Stockholder Rights..................................................... 69
Description of Golden State Capital Stock............................................ 69
Comparison of Golden State Common Stock and CENFED Common Stock...................... 74
Rights of Dissenting Stockholders.................................................... 78
Legal Matters........................................................................ 78
Experts.............................................................................. 78
Stockholder Proposals................................................................ 79
Other Matters........................................................................ 79
Unaudited Pro Forma Condensed Combined Financial Statements.......................... 80
Appendix A-1Agreement and Plan of Merger............................................. A-1-1
Appendix A-2Amendment No. 1 to Agreement and Plan of Merger.......................... A-2-1
Appendix BStock Option Agreement..................................................... B-1
Appendix COpinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated.............. C-1
</TABLE>
----------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT-PROSPECTUS, AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GOLDEN
STATE OR CENFED. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO EXCHANGE OR SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE,
THE SECURITIES OFFERED BY THIS PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION
OF A PROXY, IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR TO OR FROM ANY PERSON WITH RESPECT TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT-PROSPECTUS SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE
SPECIFICALLY INDICATED. INFORMATION CONTAINED IN THIS PROXY STATEMENT-
PROSPECTUS REGARDING GOLDEN STATE AND PRO FORMA INFORMATION, EXCEPT TO THE
EXTENT INDICATED BELOW, HAS BEEN FURNISHED BY GOLDEN STATE. INFORMATION IN
THIS PROXY STATEMENT-PROSPECTUS REGARDING CENFED, INCLUDING CERTAIN
INFORMATION REGARDING CENFED INCLUDED IN THE PRO FORMA INFORMATION SET FORTH
HEREIN, HAS BEEN FURNISHED BY CENFED.
ii
<PAGE>
AVAILABLE INFORMATION
Golden State has filed a Registration Statement (the "Registration
Statement") on Form S-4 with the Commission under the Securities Act of 1933,
as amended (the "Securities Act"), relating to the securities to be issued in
connection with the Merger. For further information pertaining to the
securities of Golden State to which this Proxy Statement-Prospectus relates,
reference is made to the Registration Statement, including the exhibits and
schedules filed as a part thereof. As permitted by the rules and regulations
of the Commission, certain information included in the Registration Statement
is omitted from this Proxy Statement-Prospectus. In addition, Golden State and
CENFED are subject to certain of the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file certain reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information may be inspected and copied at the public reference room of the
Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
copies of such materials may be obtained by mail from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. The Commission maintains an Internet web site that
contains reports, proxy and information statements and other information
regarding issuers who file electronically with the Commission. That site may
be accessed by setting a web browser to http://www.sec.gov. In addition,
copies of such materials are available for inspection and reproduction at the
public reference facilities of the Commission at its New York Regional Office,
7 World Trade Center, Suite 1300, New York, New York 10048; and at its Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Reports, proxy statements and other information
concerning Golden State and CENFED also may be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005 and at the offices of The
Pacific Exchange, Inc. (the "Pacific Exchange"), 301 Pine Street, San
Francisco, California 94104 (in the case of Golden State), and at the offices
of the National Association of Securities Dealers, Inc. 1735 K Street, N.W.,
Washington, D.C. 20006 (in the case of CENFED).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed (except as otherwise indicated
below) with the Office of Thrift Supervision (the "OTS") under OTS Docket No.
3088 by Glendale Federal Bank, Federal Savings Bank ("Glendale Federal"), of
which Golden State became the parent holding company in connection with a
reorganization consummated on July 24, 1997, are hereby incorporated by
reference in this Proxy Statement-Prospectus: (i) the Annual Report on Form
10-K for the year ended June 30, 1997; (ii) the Quarterly Reports on Form 10-Q
of Golden State for the quarterly periods ended September 30, 1997, and
December 31, 1997; (iii) the Proxy Statement on Schedule 14A, dated June 24,
1997, sent to Glendale Federal stockholders in connection with the special
meeting thereof held on July 23, 1997; (iv) the Proxy Statement on Schedule
14A, dated March 4, 1998, sent to Golden State Stockholders in connection with
the special meeting thereof to be held April 8, 1998; (v) the description of
Golden State Common Stock contained in the Registration Statement on Form S-3,
File No. 333-28037, of Golden State filed with the Commission on May 29, 1997,
including any amendment or report filed for the purpose of updating such
description; and (vi) the Golden State Current Reports on Form 8-K filed with
the Commission dated July 24, 1997, August 17, 1997, September 26, 1997,
October 28, 1997 (as amended by Amendment No. 1 thereto, filed with the
Commission on February 3, 1998), November 30, 1997 and February 4, 1998 (as
amended by Amendment No. 1 thereto, filed with the Commission on March 5,
1998).
The following documents previously filed by CENFED with the Commission are
hereby incorporated by reference in this Proxy Statement-Prospectus: (i) the
CENFED Annual Report on Form 10-K for the year ended December 31, 1996; (ii)
the CENFED Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 1997, June 30, 1997, and September 30, 1997; (iii) the description
of the CENFED Common Stock contained in the CENFED Registration Statement
filed pursuant to Section 12 of the Exchange Act on Form 8-A on August 30,
1991; (iv) the CENFED Current Report on Form 8-K dated August 17, 1997; and
(v) the CENFED Annual Report on Form 11-K for the fiscal year ended December
31, 1996.
In addition, all documents filed by Golden State and CENFED with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date hereof and prior to the time at which the Special Meeting has
been finally adjourned are hereby deemed to be incorporated by reference
herein. Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement-Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement-Prospectus.
1
<PAGE>
In addition, this Registration Statement incorporates by reference the
consolidated financial statements of (1) FNPH, including the notes thereto,
set forth in FNPH's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 and FNPH's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, June 30, and September 30, 1997; and (2) RedFed
Bancorp Inc.'s Annual Report on Form 10-K for the fiscal year ended December
31, 1996, and RedFed Bancorp Inc.'s Quarterly Reports on Form 10-Q for the
quarterly period ended March 31, 1997 (as amended by the Form 10-Q/A filed
with the Commission on May 15, 1997), June 30, 1997 and September 30, 1997 (as
amended by the Form 10-Q/A filed with the Commission on November 13, 1997).
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS ARE
INCORPORATED BY REFERENCE AT THE LOCATIONS IN THIS PROXY STATEMENT--PROSPECTUS
WHERE SUCH INFORMATION IS REQUIRED TO BE SET FORTH. THE DOCUMENTS RELATING TO
GOLDEN STATE OR GLENDALE FEDERAL (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH
EXHIBITS ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST TO GOLDEN STATE BANCORP
INC., 700 NORTH BRAND BOULEVARD, GLENDALE, CALIFORNIA 91203, ATTENTION:
INVESTOR RELATIONS, TELEPHONE NUMBER (818) 500-2723. THE DOCUMENTS RELATING TO
CENFED (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH EXHIBITS ARE NOT
SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST TO CENFED FINANCIAL CORPORATION,
199 NORTH LAKE AVENUE, PASADENA, CALIFORNIA 91101, ATTENTION: INVESTOR
RELATIONS, TELEPHONE NUMBER (626) 585-2595. GOLDEN STATE OR CENFED, AS THE
CASE MAY BE, WILL SEND THE REQUESTED DOCUMENTS BY FIRST-CLASS MAIL WITHIN ONE
BUSINESS DAY AFTER THE RECEIPT OF THE REQUEST. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MARCH 31, 1998.
FORWARD-LOOKING STATEMENTS
THIS PROXY STATEMENT-PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF
GOLDEN STATE, CENFED AND THE COMBINED COMPANY FOLLOWING THE CONSUMMATION OF
THE MERGER, INCLUDING STATEMENTS RELATING TO THE COST SAVINGS, REVENUE
ENHANCEMENTS AND FUNDING ADVANTAGES THAT ARE EXPECTED TO BE REALIZED FROM THE
MERGER AND THE EXPECTED IMPACT OF THE MERGER ON GOLDEN STATE'S FINANCIAL
PERFORMANCE (SEE "SUMMARY," "THE MERGER--RECOMMENDATION OF CENFED BOARD AND
REASONS FOR THE MERGER," "MANAGEMENT AND OPERATIONS AFTER THE MERGER,"
"INFORMATION ABOUT GOLDEN STATE AND MERGER SUB," "INFORMATION ABOUT CENFED"
AND "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."). THESE
FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES THAT MAY
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SET FORTH HEREIN. FACTORS
THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY
SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING
POSSIBILITIES: (1) EXPECTED COST SAVINGS FROM THE MERGER MAY NOT BE FULLY
REALIZED OR REALIZED WITHIN THE EXPECTED TIME FRAME; (2) REVENUES FOLLOWING
THE MERGER MAY BE LOWER THAN EXPECTED; (3) COMPETITIVE PRESSURES AMONG
DEPOSITORY INSTITUTIONS MAY INCREASE SIGNIFICANTLY; (4) COSTS RELATED TO THE
INTEGRATION OF THE BUSINESS OF GOLDEN STATE AND CENFED MAY BE GREATER THAN
EXPECTED; (5) CHANGES IN THE INTEREST RATE ENVIRONMENT MAY REDUCE INTEREST
MARGINS; (6) GENERAL ECONOMIC AND CREDIT CONDITIONS, EITHER NATIONALLY OR IN
THE REGION IN WHICH THE COMBINED COMPANY WILL BE DOING BUSINESS, MAY BE LESS
FAVORABLE THAN EXPECTED; (7) LEGISLATION OR REGULATORY CHANGES MAY ADVERSELY
AFFECT THE BUSINESS IN WHICH THE COMBINED COMPANY WOULD BE ENGAGED; (8) THE
OUTCOME OF GOLDEN STATE'S "GOODWILL" CLAIM AGAINST THE UNITED STATES
GOVERNMENT; AND (9) CHANGES IN MANAGEMENT POLICIES OR GOLDEN STATE'S BUSINESS
RELATED TO THE CALIFORNIA FEDERAL MERGER.
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SUMMARY
THE FOLLOWING IS A BRIEF SUMMARY OF CERTAIN INFORMATION SET FORTH ELSEWHERE
IN THIS PROXY STATEMENT-PROSPECTUS AND IS NOT INTENDED TO BE COMPLETE. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT-PROSPECTUS, THE
ACCOMPANYING APPENDICES AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
GENERAL
This Proxy Statement-Prospectus and notice of the Special Meeting to be held
on April 7, 1998, and form of proxy solicited in connection therewith are first
being mailed to holders of CENFED Common Stock ("CENFED Stockholders") on or
about March 10, 1998.
At the Special Meeting, CENFED Stockholders will consider and vote on whether
to approve the Merger Agreement and the transactions contemplated thereby.
The Merger Agreement is set forth as Appendix A-1, and Amendment No. 1
thereto is set forth as Appendix A-2, to this Proxy Statement-Prospectus and
each is incorporated herein by reference.
THE COMPANIES
Golden State. Golden State was incorporated under Delaware law on June 9,
1997 by Glendale Federal for the purposes of becoming the holding company for
Glendale Federal pursuant to the Reorganization (as defined under "INFORMATION
ABOUT GOLDEN STATE AND MERGER SUB"), which was consummated on July 24, 1997.
Upon completion of the Reorganization, Glendale Federal became a wholly owned
savings bank subsidiary of Golden State, which conducted no business prior to
the Reorganization. Glendale Federal is a federally chartered savings bank and
is one of the largest savings institutions in the United States. At December
31, 1997, Golden State had total consolidated assets of $16.0 billion, deposits
of $9.5 billion and stockholders' equity of $1.1 billion. Golden State's
business consists primarily, through Glendale Federal, of attracting deposits
from the general public and using such deposits, together with the proceeds of
borrowings and its stockholders' equity, to originate and purchase loans,
including residential real estate loans as well as business and consumer
banking loans and other products. Glendale Federal is headquartered in
Glendale, California and, at the date hereof, operated 181 banking offices and
26 loan offices located throughout the State of California. The principal
executive offices of Golden State are located at 414 North Central Avenue,
Glendale, California 91203 and the telephone number of such offices is (818)
500-2000. All references herein to Golden State refer to Golden State Bancorp
Inc. and its subsidiaries on a consolidated basis, unless the context otherwise
requires. References to Golden State herein with respect to periods preceding
the effective date of the Reorganization refer to Glendale Federal and its
subsidiaries on a consolidated basis as of such date, unless the context
otherwise requires. For additional information regarding Golden State and the
combined company that would result from the Merger, see "THE MERGER," "SELECTED
FINANCIAL DATA," "MANAGEMENT AND OPERATIONS AFTER THE MERGER," "INFORMATION
ABOUT GOLDEN STATE AND MERGER SUB," and "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION."
On November 30, 1997, Golden State entered into an Agreement and Plan of
Merger (the "RedFed Merger Agreement") providing for the acquisition of RedFed
Bancorp Inc. ("RedFed") through the merger of RedFed with and into a wholly-
owned subsidiary of Golden State (the "RedFed Merger"). Concurrently with or
shortly after completion of the RedFed Merger, RedFed's wholly-owned banking
subsidiary, Redlands Federal Bank, will be merged into Golden State's wholly-
owned banking subsidiary, Glendale Federal Bank. Golden State Common Stock will
be issued to the stockholders of RedFed in the RedFed Merger in exchange for
their shares of RedFed Common Stock at an exchange ratio to be derived by
dividing $20.75 by the average daily closing
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price 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
effective date of the RedFed Merger. Cash will be paid in lieu of the issuance
of fractional shares. RedFed operates 14 banking offices in Southern
California's Riverside and San Bernardino Counties. At December 31, 1997,
RedFed had total assets of $1.0 billion, deposits of $845 million and
stockholders' equity of $84 million. The transaction, which is subject to
regulatory approval, approval by the RedFed stockholders and satisfaction or
waiver of other conditions, will be accounted for as a purchase business
combination under GAAP.
On February 4, 1998, Golden State entered into the California Federal Merger
Agreement. Pursuant to the California Federal Merger Agreement, it is expected
that, among other things, FNPH will be merged with and into Golden State, with
Golden State as the surviving company in such merger. Shares of Golden State
Common Stock issued and outstanding immediately prior to the California Federal
Merger, including those issued to CENFED Stockholders pursuant to the Merger,
will remain issued and outstanding following consummation of the California
Federal Merger. Consummation of the transactions contemplated by the California
Federal Merger Agreement, including the California Federal Merger, is subject
to a number of conditions, including regulatory approval, approval and adoption
of the California Federal Merger Agreement by the Golden State Stockholders and
distribution by Golden State of the Litigation Tracking Warrants (as defined
herein). If the California Federal Merger is consummated, it is expected that
affiliates of MAF and Ford would together own between 42% and 45% of the
outstanding common stock of the combined company, before giving effect to the
contingent issuance of additional shares of Golden State Common Stock (the
"Contingent Shares") under the California Federal Merger Agreement that could
substantially increase such percentage ownership. Before giving effect to the
contingent issuance of additional shares, affiliates of MAF and Ford will
acquire 42% of the outstanding common stock of the combined company if the
adjusted average price of Golden State Common Stock is $32.00 or less,
increasing to 45% of the outstanding common stock of the combined company if
such adjusted average price is $33.00 or more. The adjusted average per share
price is to be determined using a random sampling of 15 trading days' closing
prices for Golden State Common Stock during a 30-day period following
distribution to Golden State Stockholders of the Litigation Tracking Warrants
and ended three days before the closing date of the California Federal Merger,
adjusted to omit the value attributable to the portion of the potential
recovery in the Goodwill Litigation (as defined herein) not distributed to
Golden State Stockholders through distribution of the Litigation Tracking
Warrants.
The number of Contingent Shares cannot be determined at the present time and
also will not be determinable upon consummation of the California Federal
Merger, as such number depends upon factors that are not or will not be subject
to determination at such times. These factors include, among other things, the
net value to the surviving corporation in the California Federal Merger of
certain contingent assets and liabilities of Golden State and FNPH (including
potential recoveries in the Goodwill Litigation, comparable litigation with
respect to the treatment of regulatory goodwill in which California Federal is
engaged against the United States government (the "California Federal Goodwill
Litigation"), certain other litigation to which affiliates of FNPH are parties
(the "Other Litigation"), potential tax benefits resulting from certain net
operating loss carryforwards of the consolidated group of which FNPH is a part
and other contingent tax assets and liabilities of Golden State and FNPH) and
the market price of the common stock of the surviving corporation at the times
issuance of such Contingent Shares would be required under the California
Federal Merger Agreement. Subject to the foregoing, assuming for illustrative
purposes only a valuation of the Goodwill Litigation of approximately $550
million (based on the trading prices at the time of the execution of the
California Federal Merger Agreement of California Federal's Contingent
Litigation Recovery Participation Interests (the "CALGZs") and Secondary
Contingent Litigation Recovery Participation Interests (the "CALGLs"), adjusted
to reflect the amount of supervisory goodwill reflected on Glendale Federal's
balance sheet at the time the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") became effective, relative to that of
California Federal), a valuation of the California Federal Goodwill Litigation
of approximately $440 million (based on the trading prices at the time of the
execution of the California Federal Merger Agreement of the CALGZs and the
CALGLs)
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and tax benefits resulting from the use of FNPH net operating loss
carryforwards of approximately $350 million (based on net operating loss
carryforwards of approximately $1 billion and an assumed federal tax rate of
35%), the number of Contingent Shares issuable under the California Federal
Merger Agreement can be expected to result in an incremental increase in the
percentage ownership of outstanding surviving corporation common stock by
affiliates of MAF and Ford of approximately 4.3 to 5.5 percentage points,
assuming that during all relevant periods the market price of a share of common
stock of the surviving corporation is between $35 and $45 per share. Due to the
preliminary stage of the Other Litigation, no value has been ascribed thereto
for these illustrative purposes. In addition to the variables that may affect
the number of Contingent Shares, a number of additional variables, including
without limitation other changes in the number of outstanding shares of the
surviving corporation in the California Federal Merger (including, without
limitation, the number of shares outstanding after exercise of the Litigation
Tracking Warrants), could affect the relative ownership of a stockholder of the
surviving corporation. Further, the timing of the issuance of the Contingent
Shares is not presently ascertainable, and Contingent Shares with respect to
the use by the surviving corporation of FNPH net operating loss carryforwards,
which will be subject to limitation under the Code in any particular tax year,
may be issued over a substantial number of years.
The foregoing estimates and assumptions, and the ownership percentages
derived from them, are presented for illustrative purposes only and are not
intended to represent the view of Golden State, its management or of any other
person as to likely actual damages, results or values, or the appropriate
amount of damages in the Goodwill Litigation or the California Federal
Litigation, and there can be no assurance that the foregoing estimates and
assumptions will prove to be accurate or that the actual number of Contingent
Shares, and change in such percentage ownership, will not be substantially
different than the estimate disclosed herein. The California Federal Merger
Agreement, which is included in Exhibit 2.1 to Golden State's Current Report on
Form 8-K, as amended by Amendment No. 1 thereto filed with the Commission on
March 5, 1998, sets forth more detailed information concerning how such
ownership percentages are expected to be calculated. See "INFORMATION OF
CERTAIN DOCUMENTS BY REFERENCE," "FORWARD-LOOKING INFORMATION" and "INFORMATION
ABOUT GOLDEN STATE AND MERGER SUB--Subsequent Events."
The California Federal Merger Agreement also contemplates that two-thirds of
the Board of Directors of Golden State after the California Federal Merger will
be individuals designated by affiliates of MAF and Ford. In connection with the
execution of the California Federal Merger Agreement, Golden State, Glendale
Federal, California Federal, Stephen J. Trafton, Chairman of the Board,
President and Chief Executive Officer of Golden State and Richard A. Fink, Vice
Chairman of Golden State, entered into a litigation management agreement, dated
as of February 4, 1998 (the "Management Agreement"), pursuant to which, among
other things, Messrs. Trafton and Fink will continue to oversee and manage the
Goodwill Litigation and the California Federal Goodwill Litigation following
the California Federal Merger.
The description in this Proxy Statement-Prospectus of certain terms of the
California Federal Merger Agreement and related documents is not intended to be
complete and is qualified in its entirety by reference to the full text of such
documents, which have been filed as exhibits to Golden State's Current Report
on Form 8-K, dated as of February 4, 1998, as amended by Amendment No. 1
thereto, filed with the Commission on March 5, 1998. See "AVAILABLE
INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "FORWARD-
LOOKING INFORMATION."
CENFED. CENFED is the holding company for CenFed Bank, a Federal Savings Bank
("CenFed Bank"), a federally chartered savings bank. CENFED is primarily
engaged in the business of attracting deposits from the general public and
using such deposits, together with borrowings and equity capital, to originate
and purchase real estate loans, small business loans and mortgage-backed
securities. Prior to 1996, CENFED's primary emphasis was on single family
lending. The Company conducts business through 18 branch offices located in Los
Angeles, Orange, Riverside and San Bernardino Counties in Southern California.
At December
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31, 1997, CENFED had total assets of $2.2 billion, deposits of $1.6 billion and
stockholders' equity of $136 million. The principal executive offices of CENFED
are located at 199 North Lake Avenue, Pasadena, California 91101, and the
telephone number of such offices is (626) 585-2400. All references herein to
CENFED refer to CENFED Financial Corporation and its subsidiaries on a
consolidated basis, unless the context otherwise requires. For additional
information regarding CENFED, see "--Selected Financial Data" and "INFORMATION
ABOUT CENFED."
Merger Sub. Merger Sub, a Delaware corporation, is a wholly-owned subsidiary
of Golden State formed to effect the merger and is not engaged in any
significant business activity. The principal executive offices and telephone
number of Merger Sub are the same as those of Golden State.
SPECIAL MEETING AND VOTE REQUIRED
The Special Meeting of CENFED Stockholders will be held on April 7, 1998 at
10:30 a.m., California time, at 199 North Lake Avenue, Pasadena, California, at
which time the CENFED Stockholders will be asked to approve and adopt the
Merger Agreement and the transactions contemplated thereby. The record holders
of CENFED Common Stock at the close of business on February 17, 1998 (the
"Record Date") are entitled to notice of and to vote at the Special Meeting.
CENFED Stockholders will be entitled to cast one vote for each share of CENFED
Common Stock held as of the Record Date on all matters submitted to the CENFED
Stockholders for a vote. On the Record Date, there were approximately 550
holders of record of CENFED Common Stock and 6,099,777 shares of CENFED Common
Stock outstanding.
The presence, in person or by proxy, of a majority of the shares of CENFED
Common Stock entitled to vote is necessary to constitute a quorum at the
Special Meeting. The affirmative vote of a majority of the outstanding shares
of CENFED Common Stock entitled to vote at the Special Meeting is required to
approve the Merger Agreement and the transactions contemplated thereby. As of
the CENFED Record Date, directors and executive officers of CENFED beneficially
owned approximately 235,295 shares of CENFED Common Stock (not including
options to purchase approximately 29,300 shares of CENFED Common Stock that are
exercisable within 60 days of the date hereof), entitling them to exercise
approximately 4% of the voting power of the CENFED Common Stock entitled to
vote at the Special Meeting. It is currently expected that each such director
and executive officer of CENFED will vote the shares of CENFED Common Stock
beneficially owned by him or her for approval of the Merger Agreement and the
transactions contemplated thereby. As of the CENFED Record Date, none of the
directors, executive officers or affiliates of Golden State beneficially owned
any shares of CENFED Common Stock. See "SPECIAL MEETING."
THE MERGER
Subject to the terms of the Merger Agreement, CENFED will merge with and into
Merger Sub (with Merger Sub being the Surviving Corporation), and each
outstanding share of CENFED Common Stock will be converted into 1.2 shares
(subject to certain potential adjustments pursuant to the Merger Agreement) of
Golden State Common Stock (with cash to be paid in lieu of fractional shares).
Each share of Golden State Common Stock outstanding prior to the Merger will
continue to be outstanding after the Effective Time.
Each CENFED Option (as defined herein) granted under the CENFED Stock Plans
(as defined herein) that is outstanding and unexercised immediately prior to
the Effective Time will be converted automatically at the Effective Time into
an option to purchase Golden State Common Stock and will continue to be
governed by the terms of the CENFED Stock Plans, which will be assumed by
Golden State. The number of shares of Golden State Common Stock subject to such
options and the exercise price of such options will be adjusted as provided in
the Merger Agreement to give effect to the Exchange Ratio.
See "THE MERGER--Conversion of CENFED Common Stock; Treatment of CENFED Stock
Options."
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RECOMMENDATION OF CENFED BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF CENFED (THE "CENFED BOARD") HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE
CENFED BOARD BELIEVES THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF
CENFED AND THE CENFED STOCKHOLDERS AND RECOMMENDS THAT CENFED STOCKHOLDERS VOTE
"FOR" THE ADOPTION AND APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE MERGER. FOR A DISCUSSION OF THE FACTORS
CONSIDERED BY THE CENFED BOARD IN REACHING ITS CONCLUSION, SEE "THE MERGER--
BACKGROUND OF THE MERGER" AND "--RECOMMENDATION OF THE CENFED BOARD AND REASONS
FOR THE MERGER."
OPINION OF CENFED'S FINANCIAL ADVISOR
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), which
has served as financial advisor to CENFED in connection with the Merger, has
rendered its opinion to the CENFED Board that the Exchange Ratio to be used in
the Merger is fair to the holders of shares of CENFED (other than Golden State
and its affiliates) from a financial point of view. Such opinion was delivered
to the CENFED Board at its meeting on August 15, 1997 and again on the date of
this Proxy Statement-Prospectus. A copy of the opinion delivered by Merrill
Lynch on the date hereof is set forth as Appendix C to this Proxy Statement-
Prospectus and should be read in its entirety with respect to the assumptions
made, matters considered and limitations of the review undertaken by Merrill
Lynch in rendering such opinion. See "THE MERGER--Opinion of CENFED's Financial
Advisor."
EFFECTIVE TIME OF THE MERGER
The Merger will 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 (the "Effective Time").
See "THE MERGER--Structure of the Merger," "--Conversion of CENFED Common
Stock; Treatment of CENFED Stock Options," "--Exchange of Certificates;
Fractional Shares," "--Effective Time."
CONDITIONS TO CONSUMMATION OF MERGER
The obligations of the parties to consummate the Merger are subject to
certain conditions, including (i) the CENFED Stockholder Approval; (ii) the
receipt of all necessary regulatory approvals, consents and waivers (with no
such approval, consent or waiver including 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 by the Merger
Agreement to Golden State as to render it inadvisable in the judgment of Golden
State to proceed with the Merger); (iii) the satisfaction of any other
requirements prescribed by law necessary to the consummation of the Merger;
(iv) no party to the Merger Agreement being subject to any order, decree or
injunction of a court or agency that enjoins or prohibits, there being no
litigation or proceeding pending against Golden State or CENFED by any
governmental agency seeking to prevent, and there having been no statute, rule
or regulation enacted, promulgated, interpreted, applied or enforced by any
governmental authority which prohibits or makes illegal, the consummation of
the Merger or the other transactions contemplated by the Merger Agreement; (v)
the shares of Golden State Common Stock issuable to CENFED Stockholders in the
Merger having been authorized for listing on the NYSE subject to official
notice of issuance; (vi) the effectiveness of the Registration Statement under
the Securities Act (without being subject to any stop order or proceedings
seeking such an order); (vii) the receipt by Golden State of an opinion of
Wachtell, Lipton, Rosen & Katz, counsel to Golden State, and the receipt by
CENFED of an opinion of Mayer, Brown & Platt, counsel to CENFED, in each case
dated as of the closing date of the Merger, and in each case to the effect
described under "--Certain Federal Income Tax Consequences"; (viii) the
nonoccurrence of any event provided for in the Rights Agreement, dated as of
July 26, 1995, by and between CENFED and Chase Mellon Shareholder Services LLC,
as rights agent (the "CENFED Rights Agreement"), that would make the rights
provided for therein (the "CENFED Rights") exercisable or cause the CENFED
Rights to trade separately from the CENFED Common Stock; and (ix) other
customary closing conditions.
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TERMINATION OF MERGER AGREEMENT; WAIVER AND AMENDMENT; EXPENSES
The Merger Agreement may be terminated at any time prior to the Effective
Time (i) by the mutual consent of Golden State and CENFED; (ii) by Golden State
or CENFED, in either case if its Board of Directors so determines by a vote of
the majority of the members thereof, in the event of (A) the failure of CENFED
Stockholder Approval to be received or (B) a material breach by CENFED, in the
case of a termination by Golden State, or by Golden State, in the case of a
termination by CENFED, of any representation, warranty, covenant or agreement
contained in the Merger Agreement not cured or curable within 45 days after
written notice of such breach is given to the breaching party (provided that
there shall be no such right of termination in the case of a breach of a
representation or warranty unless such breach, taken together with all other
such breaches, would result in the representations and warranties of the
breaching party not being true and correct in all material respects); (iii) by
Golden State or CENFED, if (A) the Consent Condition (as defined under "THE
MERGER--Conditions to the Merger") is not satisfied by the Termination Date (as
defined below in this paragraph) or (B) a governmental authority shall have
issued a final, unappealable order enjoining or otherwise prohibiting the
Merger; (iv) by Golden State or CENFED, if its respective Board of Directors
determines so to terminate by a vote of a majority of its members, if the
Merger is not consummated by the Termination Date, unless such failure to
consummate the Merger is due to the breach of any material representation,
warranty or covenant in the Merger Agreement by the party seeking such
termination (the "Termination Date" being April 30, 1998, subject to extension
by either party of not more than 45 days if, prior to April 30, 1998, either
party provides the other with notice of its belief that the approvals, consents
or waivers to be obtained by such party are imminent and the reasonable factual
basis for such belief); and (v) by CENFED, if both (A) the Final Golden State
Stock Price is less than $24.40 and (B) the quotient obtained by dividing the
Final Golden State Stock Price by $28.69 (the closing price of Golden State
Common Stock on August 15, 1997, the last NYSE trading day preceding
announcement of the Merger) does not equal at least 85% of the quotient
obtained by dividing the weighted average (determined as set forth herein) of
the closing prices of a group of thrift holding companies specified in the
Merger Agreement during the Determination Period by the average of such closing
prices over the ten trading day period preceding August 15, 1997 (the
satisfaction of both of the foregoing clauses (A) and (B) being referred to
herein as a "Termination Event"). The companies included in the index are
thrift holding companies the common stocks of all of which are publicly traded
and as to which there will not have been, since August 15, 1997 and before the
date of determination of the weighted average price of such index during the
Determination Period, any public announcement of a proposal for such company to
be acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market
capitalization. If any of the companies comprising such index fails to meet the
foregoing criteria, such company will be deemed removed from such index and the
weights (which are determined based upon the number of each company's
outstanding shares of common stock) will be redistributed proportionately for
purposes of determining the price of such index. If a company listed in the
index, or Golden State, declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction, the prices for the common stock of such company or of Golden
State, as the case may be, will be appropriately adjusted for purposes of
applying this provision of the Merger Agreement.
Whether a Termination Event will occur will not be known until after the end
of the Determination Period. If such date were the date of this Proxy
Statement-Prospectus, no such right of termination would exist based on the
prevailing market price of Golden State Common Stock and of the prevailing
market prices of the common stocks of the thrift holding companies comprising
the index referred to in the preceding paragraph. The CENFED Board has made no
decision as to whether it would exercise its termination right in the event of
a Termination Event. If a Termination Event occurs, in connection with making
such a decision, the CENFED Board would, consistent with its fiduciary duties,
take into account all relevant facts and circumstances as they exist at such
time, including its assessment of CENFED's and Golden State's respective future
business prospects, the potential availability to CENFED of alternative
transactions and the potential timing thereof, and would consult with its
financial advisors and legal counsel. Approval of the Merger Agreement by the
CENFED Stockholders will confer on the CENFED Board the power, consistent with
its fiduciary duties, to elect to consummate the
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Merger notwithstanding the occurrence of a Termination Event without any
further action by, or resolicitation of the votes of, CENFED Stockholders, and,
to such extent, will result in CENFED Stockholders assuming market risk
associated with Golden State's stock value. The fairness opinion provided to
the CENFED Board by its financial advisor is dated as of the date of this Proxy
Statement-Prospectus and is based on conditions in effect on the date hereof.
Accordingly, such fairness opinion does not address the circumstances that
might arise if a Termination Event were to occur.
Prior to the Effective Time, any provision of the Merger Agreement may, to
the extent permitted by applicable law, be (i) waived by the party benefited
thereby or (ii) amended or modified at any time by a written instrument signed
by both parties and authorized by their respective Boards of Directors.
Notwithstanding the foregoing, Golden State may at any time change the method
of effecting the acquisition of CENFED contemplated by the Merger Agreement, as
long as no such change would alter or change the amount or kind of
consideration to be issued to holders of CENFED Common Stock in connection with
the Merger (the "Merger Consideration"), adversely affect the proposed
accounting treatment of the Merger or the tax treatment of CENFED Stockholders
as a result of receiving the Merger Consideration or materially delay the
receipt of any approval required to satisfy the Consent Condition or the
consummation of the transactions contemplated by the Merger Agreement.
Each party to the Merger Agreement will bear all expenses incurred by it in
connection with the Merger Agreement and the transactions contemplated thereby,
except that all regulatory application fees will be expenses of Golden State
and that the printing and mailing expenses with respect to this Proxy
Statement-Prospectus will be shared equally between CENFED and Golden State.
See "THE MERGER--Termination of Merger Agreement," "--Stock Option
Agreement," "--Waiver and Amendment of Merger Agreement" and "--Expenses."
STOCK OPTION AGREEMENT
As an inducement to Golden State to enter into the Merger Agreement, CENFED
agreed to enter into a Stock Option Agreement, dated August 17, 1997 (the
"Stock Option Agreement"), pursuant to which CENFED granted Golden State an
option (the "Option") to purchase from CENFED 1,140,784 shares of CENFED Common
Stock (subject to adjustment, but in no event to exceed 19.9% of the then
outstanding CENFED Common Stock), at a price of $34.00 per share. The closing
price on the NYSE of CENFED Common Stock on Friday, August 15, 1997, the last
trading day prior to the date of the Stock Option Agreement, was $34.00. Golden
State may exercise the Option only upon the occurrence of certain events (none
of which has occurred as of the date hereof). At the request of the holder of
the Option, under certain circumstances, CENFED is required to repurchase, at a
formula price, the Option and certain shares of CENFED Common Stock purchased
upon the exercise of the Option. The Stock Option Agreement limits the amount
that Golden State may realize through exercise of the Option for all shares of
CENFED Common Stock covered thereby or through repurchase to $11 million.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms set forth in the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreement may have
the effect of discouraging persons who might now or at any time prior to the
Effective Time be interested in acquiring all of or a significant interest in
CENFED from considering or proposing such an acquisition, even if such persons
were prepared to offer to pay consideration to CENFED Stockholders which had a
higher current market price than the shares of Golden State Common Stock to be
received for each share of CENFED Common Stock pursuant to the Merger
Agreement.
See "THE MERGER--Stock Option Agreement."
9
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of CENFED's management (including D. Tad Lowrey, President
and Chief Executive Officer, William D. Nichol, Executive Vice President and
Chief Financial Officer, and Lawrence J. Winslow, Executive Vice President and
Chief Lending Officer of CenFed Bank) and the CENFED Board may be deemed to
have certain interests in the Merger that are in addition to their interests as
CENFED Stockholders generally. These interests include (a) Golden State's
agreement in the Merger Agreement to indemnify CENFED officers and directors
and to provide CENFED directors and officers with liability insurance coverage
for a specified period after the Merger; (b) acceleration of the exercisability
of CENFED stock incentive awards pursuant to their terms (pursuant to which the
vesting of options with respect to 5,299, 2,257 and 2,420 shares of CENFED
Common Stock, and the lapsing of restrictions with respect to 6,252, 2,915 and
3,606 restricted shares of CENFED Common Stock, will occur in connection with
the Merger with respect to Messrs. Lowrey, Nichol and Winslow, respectively);
(c) activation of certain change in control severance provisions in the
employment agreements of CENFED executive officers (pursuant to which Messrs.
Lowrey, Nichol and Winslow are expected to receive payments of approximately
$1,732,000, $1,002,000 and $935,000, respectively); (d) the establishment of a
retention bonus program to be in effect during the period prior to the
Effective Time (pursuant to which bonuses aggregating $2 million may be paid to
certain officers and key employees of CENFED, including up to $175,000,
$150,000 and $100,000 to Messrs. Lowrey, Nichol and Winslow, respectively); and
(e) the agreement of Golden State to elect D. Tad Lowrey, CENFED's chief
executive officer, to each of the Golden State and Glendale Federal Board of
Directors. See "THE MERGER--Interests of Certain Persons in the Merger" and
"MANAGEMENT AND OPERATIONS AFTER THE MERGER." The CENFED Board was aware of
these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby.
APPRAISAL RIGHTS
CENFED Stockholders will not be entitled to any appraisal rights under
Delaware law or any other statute in connection with the Merger. See "RIGHTS OF
DISSENTING STOCKHOLDERS."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The respective obligations of the parties to effect the Merger are
conditioned on delivery of an opinion, in the case of Golden State, from
Wachtell, Lipton, Rosen & Katz, counsel to Golden State, and, in the case of
CENFED, from Mayer, Brown & Platt, counsel to CENFED, each dated as of the
Effective Time, based upon certain customary representations and assumptions
set forth therein, 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 Internal Revenue Code of 1986, as amended (the "Code"), that Golden State,
Merger Sub and CENFED 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 CENFED Common Stock upon the receipt of Golden State Common Stock
in the Merger (except with respect to cash received in lieu of fractional
shares) and that no gain or loss will be recognized by Golden State, Merger Sub
or CENFED as a result of the Merger. In rendering such opinion, such counsel
may require and rely upon representations contained in certificates of CENFED,
Golden State and CENFED Stockholders.
Each CENFED Stockholder should consult such Stockholder's own tax advisors as
to the tax consequences to them of the Merger under federal, state, local or
any other applicable law.
See "THE MERGER--Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a purchase business
combination by Golden State under generally accepted accounting principles
("GAAP"). See "THE MERGER--Accounting Treatment."
10
<PAGE>
REGULATORY APPROVALS
The Merger and the Bank Merger (as defined under the caption "THE MERGER--
General") are subject to the approval of the OTS. In addition, the United
States Department of Justice ("DOJ") has the authority to challenge the Merger
on antitrust grounds until the expiration of a certain period following OTS
approval. See "THE MERGER--Conditions to the Consummation of the Merger" and
"--Regulatory Approvals Required for the Merger."
CERTAIN DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS
The rights of CENFED Stockholders are currently governed by the Delaware
General Corporation Law (the "Delaware Law") and, as Golden State is
incorporated in the State of Delaware, their rights as holders of Golden State
Common Stock will also be governed by the Delaware Law as of the Effective
Time. The rights of CENFED Stockholders are also currently governed by the
CENFED Certificate of Incorporation (the "CENFED Certificate of Incorporation")
and the CENFED Bylaws (the "CENFED Bylaws"). Upon consummation of the Merger,
the rights of CENFED Stockholders who receive Golden State Common Stock in the
Merger will also be governed by, in addition to the Delaware Law, the Golden
State Certificate of Incorporation (the "Golden State Certificate of
Incorporation") and the Golden State Bylaws (the "Golden State Bylaws").
See "COMPARISON OF STOCKHOLDER RIGHTS."
SHARE INFORMATION AND MARKET PRICES
The Golden State Common Stock is listed on the NYSE and the Pacific Exchange
under the symbol "GSB." As of January 31, 1998, there were 51,085,174 shares of
Golden State Common Stock outstanding held by approximately 6,252 holders of
record. The CENFED Common Stock is listed on Nasdaq under the symbol "CENF." As
of the Record Date, there were 6,099,777 shares of CENFED Common Stock
outstanding held by approximately 550 holders of record.
The following table sets forth the last sale price reported on the NYSE
Composite Transactions List for shares of Golden State Common Stock and on the
Nasdaq/NMS for shares of CENFED Common Stock, in each case on August 15, 1997,
the last trading day preceding public announcement of the Merger, and on March
5, 1998. The "CENFED Common Stock Equivalent" amounts shown below represent the
last sale price of a share of Golden State Common Stock on the indicated dates
multiplied by the Exchange Ratio.
<TABLE>
<CAPTION>
CENFED
GOLDEN STATE CENFED COMMON
COMMON COMMON STOCK
STOCK STOCK EQUIVALENT
------------ ------ ----------
<S> <C> <C> <C>
August 15, 1997............................... $28.69 $34.00 $34.43
March 5, 1998................................. 34.63 42.00 41.55
</TABLE>
For additional information regarding the market prices of the Golden State
Common Stock and CENFED Common Stock during the previous two years, see "PRICE
RANGE OF COMMON STOCK AND DIVIDENDS--Market Prices."
11
<PAGE>
UNAUDITED PRO FORMA COMPARATIVE PER SHARE DATA
The following table sets forth (i) selected comparative per share data for
each of Golden State and CENFED on an historical basis and (ii) selected
unaudited pro forma comparative per share data at December 31, 1997 and for the
six- and twelve-month periods ended December 31, 1997 and June 30, 1997,
respectively, giving effect to the Merger, the RedFed Merger and the California
Federal Merger using the purchase method of accounting. The unaudited pro forma
comparative earnings per share data assume the Merger, the RedFed Merger and
the California Federal Merger had been consummated at the beginning of each of
the periods presented. The unaudited pro forma dividends, book value and
tangible book value per share assumes the Merger, the RedFed Merger and the
California Federal Merger had been consummated at the end of the periods
presented. See "THE MERGER--Accounting Treatment." The unaudited pro forma
comparative per share data reflect the Merger, the RedFed Merger and the
California Federal Merger based upon preliminary purchase accounting
adjustments. Actual adjustments will be made on the basis of appraisals and
evaluations as of the Effective Time and, therefore, actual amounts will differ
from those reflected below. See "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS."
The historical and unaudited pro forma comparative per share data presented
herein are based on and derived from, and should be read in conjunction with,
the historical consolidated financial statements and the related notes thereto
of Golden State (and its predecessor, Glendale Federal) and the historical
consolidated financial statements and the related notes thereto of CENFED,
RedFed and FNPH, all of which are incorporated by reference herein, and the
unaudited pro forma condensed combined financial data giving effect to the
Merger, the RedFed Merger and the California Federal Merger, including the
related notes thereto, appearing elsewhere herein. See "AVAILABLE INFORMATION,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "--Selected Financial Data"
and "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS." Pro forma
amounts are not necessarily indicative of results of operations or the combined
financial position that would have resulted had the Merger, the RedFed Merger
and the California Federal Merger been consummated at the beginning or at the
end of the periods indicated.
12
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997
----------------- --------------
<S> <C> <C>
GOLDEN STATE COMMON STOCK
Basic earnings (loss) per common share(1):
Historical................................... $ 1.03 $ 0.72
Pro Forma Giving Effect to the Merger(2)(3).. 0.97 0.73
Pro Forma Giving Effect to the Merger, the
RedFed Merger and the California Federal
Merger(4)(5)................................ 0.40 (0.52)
Diluted earnings (loss) per common share(1):
Historical................................... $ 0.82 $ 0.64
Pro Forma Giving Effect to the Merger(2)(3).. 0.79 0.66
Pro Forma Giving Effect to the Merger, the
RedFed Merger and the California Federal
Merger(4)(5)................................ 0.37 (0.52)
Cash dividends declared per common share(6):
Historical................................... $ -- $ --
Pro Forma Giving Effect to the Merger(2)..... -- --
Pro Forma Giving Effect to the Merger, the
RedFed Merger and the California Federal
Merger(4)................................... -- --
Book value per common share as of end of
period:
Historical................................... $18.96 $17.81
Pro Forma Giving Effect to the Merger(2)(7).. 20.10
Pro Forma Giving Effect to the Merger, the
RedFed Merger and the California Federal
Merger(4)(8)................................ 20.18
Tangible book value per common share as of end
of period:
Historical .................................. $17.11 $15.83
Pro Forma Giving Effect to the Merger(2)(9).. 17.08
Pro Forma Giving Effect to the Merger, the
RedFed Merger and the
California Federal Merger(4)(9)............. 3.54
<CAPTION>
AT OR FOR THE AT OR FOR THE
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997
----------------- --------------
<S> <C> <C>
CENFED COMMON STOCK
Basic earnings (loss) per common share:
Historical(10)............................... $ 1.10 $ 2.00
Equivalent Pro Forma Giving Effect to the
Merger (11)................................. 1.16 0.88
Equivalent Pro Forma Giving Effect to the
Merger, the RedFed Merger and the California
Federal Merger(11).......................... 0.48 (0.62)
Diluted earnings (loss) per common share:
Historical(10)............................... $ 1.06 $ 1.90
Equivalent Pro Forma Giving Effect to the
Merger(11).................................. 0.95 0.79
Equivalent Pro Forma Giving Effect to the
Merger, the RedFed Merger and the California
Federal Merger(11).......................... 0.44 (0.62)
Cash dividends declared per common share:
Historical(10)............................... $ 0.18 $ 0.34
Equivalent Pro Forma Giving Effect to the
Merger(6)................................... --
Equivalent Pro Forma Giving Effect to the
Merger, the RedFed Merger and the California
Federal Merger(11).......................... --
Book value per common share as of end of
period:
Historical(10)............................... $22.58 $20.85
Equivalent Pro Forma Giving Effect to the
Merger(11).................................. 24.12
Equivalent Pro Forma Giving Effect to the
Merger, the RedFed Merger and the California
Federal Merger(11).......................... 24.22
Tangible book value per common share as of end
of period:
Historical(10) .............................. $22.55 $20.82
Equivalent Pro Forma Giving Effect to the
Merger(11).................................. 20.50
Equivalent Pro Forma Giving Effect to the
Merger, the RedFed Merger and the California
Federal Merger(11).......................... 4.25
</TABLE>
13
<PAGE>
- --------
(1) Earnings per share for the six months ended December 31, 1997 have been
calculated in accordance with Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("SFAS 128"). Earnings per share for the year
ended June 30, 1997 have been restated to reflect the adoption of SFAS 128.
(2) The unaudited pro forma comparative per share data reflect the combined
financial information of Golden State for the fiscal year ended June 30,
1997 with the financial information of CENFED for the twelve-month period
ended June 30, 1997 and the financial information of Golden State for the
six months ended December 31, 1997 with the financial information of CENFED
for the six months ended December 31, 1997. Golden State has a fiscal year
ending June 30, and CENFED has a fiscal year ending December 31.
(3) The pro forma average common shares used in the calculation reflects the
sum of the historical weighted average outstanding shares of Golden State
Common Stock plus the new shares of Golden State Common Stock to be issued
in the Merger (based on the number of shares of CENFED Common Stock
outstanding and the number of shares of CENFED Common Stock issuable upon
the exercise of outstanding CENFED Stock Options at December 31, 1997
multiplied by the Exchange Ratio of 1.2).
(4) The unaudited pro forma comparative per share data reflect the combined
financial information of Golden State for the fiscal year ended June 30,
1997 with the financial information of CENFED, RedFed and FNPH for the
twelve-month period ended June 30, 1997 and the financial information of
Golden State for the six months ended December 31, 1997 with the financial
information of CENFED, RedFed and FNPH for the six months ended December
31, 1997. Golden State has a fiscal year ending June 30, and CENFED, RedFed
and FNPH each have a fiscal year ending December 31.
(5) The pro forma average common shares used in the basic earnings per share
calculation reflects the sum of the shares described in Note 3 above plus
additional shares of Golden State Common Stock to be issued in the
California Federal Merger. The pro forma average common shares used in the
diluted earnings per share calculation for the year ended June 30, 1997 is
the same number as that used in the basic earnings per share computation
because an increase in shares would produce an anti-dilutive result. The
pro forma average common shares used in the diluted earnings per share
calculation for the six months ended December 31, 1997 starts with the
number that is used in the basic earnings per share computation and adds
the dilutive impact of the assumed conversion of options and warrants. The
conversion of the Golden State Preferred Stock (and the corresponding
addition of preferred stock dividends to net earnings available to common
stockholders) is not assumed in this calculation as it would produce an
anti-dilutive result.
(6) Golden State has not paid cash dividends on the Golden State Common Stock.
(7) The pro forma book value per common share was calculated by dividing total
pro forma stockholders' equity (net of the Golden State Preferred Stock at
its liquidation value) by the sum of the number of shares of Golden State
Common Stock outstanding at December 31, 1997 plus the number of shares of
Golden State Common Stock to be issued in the Merger (based on the number
of shares of CENFED Common Stock outstanding and the number of shares of
CENFED Common Stock issuable upon the exercise of outstanding CENFED Stock
Options at December 31, 1997 multiplied by the Exchange Ratio of 1.2).
(8) The pro forma book value per common share was calculated in the same manner
as that described in Note 7 above, except that the number of shares was
increased by the additional shares of Golden State Common Stock to be
issued in the California Federal Merger.
(9) The pro forma tangible book value per common share was calculated in the
same manner as pro forma book value per common share as described in Notes
7 and 8, except that total pro forma stockholders' equity was reduced by
total pro forma goodwill and other intangible assets.
(10) Reflects the effect of 10% stock dividends distributed in 1997.
(11) The CENFED equivalent pro forma amounts are computed by multiplying the
Golden State pro forma amounts by a factor of 1.2 to reflect the Exchange
Ratio.
14
<PAGE>
SELECTED FINANCIAL DATA
The following tables present (i) summary selected financial data for each of
Golden State, CENFED, RedFed, and FNPH on an historical basis; (ii) summary
selected unaudited pro forma financial data of Golden State reflecting the
consummation by Golden State of the Merger; and (iii) summary selected
unaudited pro forma financial data of Golden State reflecting the consummation
by Golden State of the Merger, the proposed RedFed Merger, and the California
Federal Merger. The selected unaudited pro forma financial data have been
prepared giving effect to the Merger, the RedFed Merger and the California
Federal Merger using the purchase method of accounting and for purposes of such
selected pro forma financial data, the CENFED, RedFed, and FNPH financial
information has been recast to conform to the June 30 fiscal year end used by
Golden State. See "THE MERGER--Accounting Treatment." The selected unaudited
pro forma financial data reflect the Merger, the RedFed Merger, and the
California Federal Merger based upon preliminary purchase accounting
adjustments. Actual adjustments, which may include additional adjustments to
assets, liabilities and other items, will be made on the basis of appraisals
and evaluations as of the Effective Time and the consummation of the RedFed and
California Federal Mergers, as the case may be, and, therefore, actual amounts
will differ from those reflected below.
The summary selected historical financial data for Golden State for each of
the five years ended June 30, 1997 are based on and derived from, and should be
read in conjunction with, the historical consolidated financial statements and
the related notes thereto of Golden State (and its predecessor, Glendale
Federal) which are incorporated by reference herein. The summary selected
historical financial data for CENFED, RedFed, and FNPH for each of the years
prior to and including the year ended December 31, 1996 are based on and
derived from, and should be read in conjunction with, the historical
consolidated financial statements and the related notes thereto of CENFED,
RedFed, and FNPH which are incorporated by reference herein. The summary
selected financial data for Golden State for the six-month periods ended
December 31, 1997 and 1996 and for CENFED, RedFed, and FNPH for the year ended
December 31, 1997 are unaudited. The information set forth in the selected
unaudited pro forma financial data should be read in conjunction with the
unaudited pro forma condensed combined financial statements appearing elsewhere
herein. Results of Golden State for less than a full financial year are not
necessarily indicative of results expected for the entire year. See "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
15
<PAGE>
GOLDEN STATE BANCORP INC.
CONSOLIDATED SUMMARY OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
------------------ ---------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
-------- -------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $576,319 $528,254 $1,072,956 $1,080,035 $1,086,658 $ 989,945 $1,134,310
Interest expense........ 363,494 345,659 693,972 746,970 768,939 678,664 774,997
-------- -------- ---------- ---------- ---------- --------- ----------
Net interest income... 212,825 182,595 378,984 333,065 317,719 311,281 359,313
Provision for loan
losses................. 1,994 15,183 25,204 40,350 66,150 139,726 251,261
-------- -------- ---------- ---------- ---------- --------- ----------
Net interest income
after provision for
loan losses.......... 210,831 167,412 353,780 292,715 251,569 171,555 108,052
Other income:
Fee income............. 49,719 43,548 90,696 69,977 69,311 60,513 58,051
Gain (loss) on sale of
loans, net............ (191) (119) (291) (690) 146 665 3,147
Gain (loss) on sale of
mortgage-backed
securities, net....... 132 (1,446) (1,804) (34,222) (11,725) 1,099 29,258
Gain on sale of banking
operations............ -- -- -- -- 73,713 -- --
Other income (loss),
net................... 1,433 278 62 (707) 3,001 (1,936) (3,461)
-------- -------- ---------- ---------- ---------- --------- ----------
Total other income.... 51,093 42,261 88,663 34,358 134,446 60,341 86,995
Other expenses:
Compensation and
employee benefits..... 65,517 55,095 114,270 101,502 105,218 126,037 123,388
Occupancy expense,
net................... 17,328 15,637 31,777 29,698 31,433 37,691 39,535
Regulatory insurance... 3,828 11,196 16,317 27,491 29,077 38,233 34,881
Advertising and
promotion............. 11,382 13,090 24,416 24,798 18,855 16,285 11,078
Furniture, fixtures and
equipment............. 6,969 5,905 12,585 11,605 14,559 24,793 29,585
Stationery, supplies
and postage........... 6,735 5,467 11,628 10,158 9,065 11,174 11,221
Other general and
administrative
expenses.............. 31,748 25,653 52,231 41,683 35,265 37,449 30,440
-------- -------- ---------- ---------- ---------- --------- ----------
Total general and
administrative
expenses............. 143,507 132,043 263,224 246,935 243,472 291,662 280,128
SAIF special
assessment............ -- 58,672 55,519 -- -- -- --
Acquisition and
restructuring costs... 2,487 -- -- -- -- -- --
Legal expense--goodwill
lawsuit............... 9,977 5,518 24,058 1,929 369 304 1,525
Operations of real
estate held for sale
or investment......... (710) 612 935 1,242 (31) 2,690 31,488
Operations of real
estate acquired in
settlement of loans... 1,218 3,820 6,623 8,426 15,034 24,089 44,367
Amortization of
goodwill and other
intangible assets..... 4,099 2,573 5,530 5,147 1,724 9,764 16,028
Write-off of assets
held for Florida
disposition........... -- -- -- -- -- 136,209 --
-------- -------- ---------- ---------- ---------- --------- ----------
Total other expenses.. 160,578 203,238 355,889 263,679 260,568 464,718 373,536
Earnings (loss) before
income tax provision
(benefit) and
extraordinary items.... 101,346 6,435 86,554 63,394 125,447 (232,822) (178,489)
Income tax provision
(benefit).............. 43,918 3,198 36,131 21,342 52,146 (10,171) (39,299)
-------- -------- ---------- ---------- ---------- --------- ----------
Earnings (loss) before
extraordinary items.... 57,428 3,237 50,423 42,052 73,301 (222,651) (139,190)
Extraordinary items,
net.................... -- -- -- -- 1,755 14,092 58,344
-------- -------- ---------- ---------- ---------- --------- ----------
Net earnings (loss)... $ 57,428 $ 3,237 $ 50,423 $ 42,052 $ 75,056 $(208,559) $ (80,846)
======== ======== ========== ========== ========== ========= ==========
Net earnings (loss)
applicable to common
shareholders:
Net earnings (loss).... $ 57,428 $ 3,237 $ 50,423 $ 42,052 $ 75,056 $(208,559) $ (80,846)
Dividends declared on
preferred stock....... (5,055) (5,786) (10,841) (16,156) (17,668) (13,759) --
Premium on exchange of
preferred stock for
common stock.......... -- (3,932) (4,173) (9,443) -- -- --
-------- -------- ---------- ---------- ---------- --------- ----------
$ 52,373 $ (6,481) $ 35,409 $ 16,453 $ 57,388 $(222,318) $ (80,846)
======== ======== ========== ========== ========== ========= ==========
Earnings (loss) per
share(1):
Basic.................. $ 1.03 $ (0.14) $ 0.72 $ 0.39 $ 1.43 $ (6.10) (2)
Diluted................ $ 0.82 $ (0.14) $ 0.64 $ 0.36 $ 1.25 $ (6.10) (2)
Weighted average shares
outstanding:
Common shares.......... 50,612 47,976 49,095 42,185 40,243 36,469 (2)
Common shares and
dilutive potential
common shares......... 69,988 47,976 55,169 45,946 60,039 36,469 (2)
</TABLE>
- --------
(1) Earnings per share have been restated to reflect the adoption of Statement
of Financial Accounting Standards No. 128, "Earnings Per Share."
(2) Prior to Glendale Federal's comprehensive recapitalization on September 17,
1993.
16
<PAGE>
GOLDEN STATE BANCORP INC.
CONSOLIDATED SUMMARY OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF AS OF JUNE 30,
DECEMBER 31, -----------------------------------------------------------
1997 1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and amounts due
from banks............. $ 305,766 $ 221,557 $ 153,608 $ 139,697 $ 164,576 $ 217,689
Federal funds sold and
assets purchased under
resale agreements...... 505,000 632,000 433,000 296,000 315,961 842,767
Other investments....... 27,134 31,799 18,877 42,326 166,040 523,725
Loans receivable, net... 11,734,561 11,905,093 10,727,909 9,899,297 9,595,780 10,850,039
Mortgage-backed
securities, net........ 2,323,943 2,279,534 2,240,790 4,723,457 5,363,779 4,044,744
Real estate held for
sale or investment..... 6,324 8,689 12,072 13,303 16,995 48,040
Real estate acquired in
settlement of loans.... 45,319 61,500 78,249 105,730 146,835 194,187
Investment in capital
stock of FHLB,
at cost................ 267,793 259,587 192,842 185,799 139,678 126,390
Mortgage servicing
assets................. 261,171 284,472 127,399 99,122 68,719 83,217
Goodwill and other
intangible assets...... 94,511 99,533 59,216 63,538 47,781 385,754
Assets held for Florida
disposition, net....... -- -- -- -- 257,363 --
Other assets............ 457,594 434,495 412,602 475,977 519,524 592,281
----------- ----------- ----------- ----------- ----------- -----------
$16,029,116 $16,218,259 $14,456,564 $16,044,246 $16,803,031 $17,908,833
=========== =========== =========== =========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits................ $ 9,543,338 $ 9,356,909 $ 8,723,976 $ 8,734,880 $10,919,806 $11,615,529
Securities sold under
agreements to
repurchase............. 817,374 768,682 758,050 2,695,176 2,306,274 3,064,995
Borrowings from the
FHLB................... 4,324,000 4,788,000 3,838,000 3,495,000 2,443,428 2,192,272
Other borrowings........ 76 10,782 10,599 28,883 96,890 141,971
Other liabilities....... 261,257 281,812 168,488 148,460 158,419 233,779
Stockholders' equity.... 1,083,071 1,012,074 957,451 941,847 878,214 660,287
----------- ----------- ----------- ----------- ----------- -----------
$16,029,116 $16,218,259 $14,456,564 $16,044,246 $16,803,031 $17,908,833
=========== =========== =========== =========== =========== ===========
Common shares
outstanding............ 51,023 50,349 46,730 40,720 37,737 (2)
Book value per common
share(1)............... $ 18.96 $ 17.81 $ 17.37 $ 18.19 $ 17.24 (2)
</TABLE>
- --------
(1) Calculated net of Golden State Preferred Stock at its liquidation value.
(2) Prior to Glendale Federal's comprehensive recapitalization on September 17,
1993.
17
<PAGE>
CENFED FINANCIAL CORPORATION
CONSOLIDATED SUMMARY OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest income......... $164,410 $157,083 $136,449 $99,137 $86,488 $90,858
Interest expense........ 113,179 105,924 97,964 60,141 47,145 53,305
-------- -------- -------- ------- ------- -------
Net interest
income............ 51,231 51,159 38,485 38,996 39,343 37,553
Provision for loan
losses................. 6,000 8,050 2,900 2,300 4,075 4,099
-------- -------- -------- ------- ------- -------
Net interest income
after provisions
for loan losses... 45,231 43,109 35,585 36,696 35,268 33,454
Non-interest income:
Loan servicing fees.... 3,652 3,940 3,977 3,421 2,970 1,748
Customer deposit
account fees.......... 1,946 1,947 1,921 2,044 2,143 2,231
Gain on sale of
investment securities
and MBS............... 2,029 1,124 82 1,307 90 442
Gain (loss) on sale of
loans................. 3 40 101 (25) 1,122 1,113
Gain (loss) from real
estate operations..... (1,545) 3,288 (682) (1,417) (3,221) (2,387)
Commissions from sales
of investment
products.............. 1,694 1,721 1,226 1,705 1,164 944
Other income........... 828 573 629 328 401 (207)
-------- -------- -------- ------- ------- -------
Total non-interest
income............ 8,607 12,633 7,254 7,363 4,669 3,884
Operating expenses:
Compensation and
employee benefits..... 17,451 16,272 17,078 14,923 12,028 11,343
Net occupancy.......... 5,755 6,187 5,288 5,294 3,574 3,761
Deposit insurance
premiums.............. 985 3,329 3,149 2,740 1,703 1,887
Savings Association
Insurance Fund
recapitalization
premium............... -- 9,106 -- -- -- --
Data and check
processing............ 1,367 1,549 1,707 2,056 1,822 1,894
Advertising and
marketing............. 719 942 820 973 653 1,376
Intangible
amortization.......... 3 62 (46) 922 359 400
Other expenses......... 6,760 6,620 5,155 5,161 5,388 5,307
-------- -------- -------- ------- ------- -------
Total operating
expenses.......... 33,040 44,067 33,151 32,069 25,527 25,968
Earnings before income
tax provision (benefit)
and extraordinary
items.................. 20,798 11,675 9,688 11,990 14,410 11,370
Income tax provi-
sion (benefit).... 7,008 (27) 2,491 2,992 5,802 4,423
-------- -------- -------- ------- ------- -------
Earnings before ex-
traordinary
items............. 13,790 11,702 7,197 8,998 8,608 6,947
Extraordinary items,
net.................... -- (364) -- -- -- --
-------- -------- -------- ------- ------- -------
Net earnings....... $ 13,790 $ 11,338 $ 7,197 $ 8,998 $ 8,608 $ 6,947
======== ======== ======== ======= ======= =======
Earnings per share(1):
Basic.................. $ 2.37 $ 2.03 $ 1.32 $ 1.73 $ 1.72 $ 1.39
Diluted................ $ 2.27 $ 1.92 $ 1.26 $ 1.66 $ 1.66 $ 1.37
Weighted average shares
outstanding:
Common shares.......... 5,807 5,574 5,455 5,189 4,998 4,994
Common shares and
dilutive potential
common shares......... 6,074 5,897 5,730 5,431 5,188 5,082
</TABLE>
- --------
(1) Earnings per share have been restated to reflect the adoption of Statement
of Financial Accounting Standards No. 128, "Earnings Per Share."
18
<PAGE>
CENFED FINANCIAL CORPORATION
CONSOLIDATED SUMMARY OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and amounts due
from banks............. $ 24,947 $ 17,441 $ 21,928 $ 22,560 $ 15,823 $ 11,408
Federal funds sold...... 2,000 7,500 7,288 1,394 394 1,000
Investment securities... 189,799 161,719 133,778 114,631 111,639 30,003
Loans held for
investment and for
sale, net.............. 1,525,558 1,500,958 1,592,277 1,327,269 941,245 729,580
Mortgage-backed
securities............. 417,393 442,015 341,288 315,753 375,905 362,338
Real estate held for
sale or investment..... 204 202 5,410 4,891 5,530 10,143
Real estate acquired in
settlement of loans.... 4,004 10,466 6,236 9,826 3,907 3,491
Deferred income taxes... 6,902 6,201 3,818 11,990 -- 1,413
Accrued interest
receivable............. 15,700 14,685 14,894 11,669 8,272 7,518
Goodwill and other
intangible assets...... 203 205 248 701 3,745 1,503
Other assets............ 22,328 23,255 28,074 28,999 22,394 23,078
---------- ---------- ---------- ---------- ---------- ----------
$2,209,038 $2,184,647 $2,155,239 $1,849,683 $1,488,854 $1,181,475
========== ========== ========== ========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Customer deposit
accounts............... $1,551,240 $1,558,470 $1,551,329 $1,310,505 $1,040,181 $ 817,852
Securities sold under
agreements to
repurchase............. 74,488 130,639 150,052 147,412 94,277 80,930
Borrowings from the
FHLB................... 413,500 349,479 300,500 265,700 252,500 199,000
Other borrowings........ 17,750 17,750 22,800 23,000 7,881 4,466
Other liabilities....... 16,454 14,491 26,006 11,845 7,509 6,050
Stockholders' equity.... 135,606 113,818 104,552 91,221 86,506 73,177
---------- ---------- ---------- ---------- ---------- ----------
$2,209,038 $2,184,647 $2,155,239 $1,849,683 $1,488,854 $1,181,475
========== ========== ========== ========== ========== ==========
Common shares
outstanding(1) ........ 6,006 5,670 5,515 5,401 5,004 4,994
Book value per common
share(1) .............. $ 22.58 $ 20.07 $ 18.96 $ 16.89 $ 17.29 $ 14.65
</TABLE>
- --------
(1) Gives effect to a stock split in April 1993 and stock dividends declared in
April 1996 and April 1997.
19
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA(1)
GOLDEN STATE AND CENFED
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
Interest income................................ $659,605 $1,234,877
Interest expense............................... 421,110 803,275
-------- ----------
Net interest income.......................... 238,495 431,602
Provision for loan losses...................... 3,994 32,204
-------- ----------
Net interest income after provision for loan
losses...................................... 234,501 399,398
Other income:
Fee income.................................... 53,030 97,520
Gain (loss) on sale of loans, net............. (188) (199)
Gain (loss) on sale of mortgage-backed
securities, net.............................. 325 (5)
Other income (loss), net...................... 1,961 (7)
-------- ----------
Total other income........................... 55,128 97,309
Other expenses:
Compensation and employee benefits............ 75,014 131,230
Occupancy expense, net........................ 19,273 35,863
Regulatory insurance.......................... 4,315 18,397
Advertising and promotion..................... 11,756 25,371
Furniture, fixtures and equipment............. 8,058 14,722
Other general and administrative expenses..... 42,309 70,954
-------- ----------
Total general and administrative expenses.... 160,725 296,537
SAIF special assessment....................... -- 64,625
Legal expense--goodwill lawsuit............... 9,977 24,058
Acquisition and restructuring costs........... 2,487 --
Operations of real estate held for sale or
investment................................... (812) 796
Operations of real estate acquired in
settlement of loans.......................... 2,210 7,927
Amortization of goodwill and other intangible
assets....................................... 6,814 10,984
-------- ----------
Total other expenses......................... 181,401 404,927
Earnings before income tax provision........... 108,228 91,780
Income tax provision........................... 47,070 35,476
-------- ----------
Net earnings................................. $ 61,158 $ 56,304
======== ==========
Net earnings applicable to common shareholders:
Net earnings.................................. $ 61,158 $ 56,304
Dividends declared on preferred stock......... (5,055) (10,841)
Premium on exchange of preferred stock for
common stock................................. -- (4,173)
-------- ----------
$ 56,103 $ 41,290
======== ==========
Earnings per share:
Basic......................................... $ 0.97 $ 0.73
Diluted....................................... $ 0.79 $ 0.66
Weighted average shares outstanding:
Common shares................................. 57,932 56,415
Common shares and dilutive potential common
shares....................................... 77,308 62,489
</TABLE>
- --------
(1) The selected unaudited pro forma financial data combines the financial
information of Golden State for the fiscal year ended June 30, 1997, with
the financial information of CENFED for the twelve-month period ended June
30, 1997 and the financial data of Golden State for the six months ended
December 31, 1997 with the financial data of CENFED for the six months
ended December 31, 1997.
20
<PAGE>
GOLDEN STATE AND CENFED
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
ASSETS
Cash and amounts due from banks.................................... $ 315,413
Federal funds sold and assets purchased under resale agreements.... 507,000
Other investments.................................................. 194,018
Loans receivable, net.............................................. 13,255,633
Mortgage-backed securities, net.................................... 2,741,336
Real estate held for sale or investment............................ 6,528
Real estate acquired in settlement of loans........................ 49,323
Investment in capital stock of FHLB, at cost....................... 290,707
Mortgage servicing assets.......................................... 272,370
Goodwill and other intangible assets............................... 176,126
Other assets....................................................... 501,893
-----------
$18,310,347
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits........................................................... $11,096,232
Securities sold under agreements to repurchase..................... 891,516
Borrowing from the FHLB............................................ 4,735,682
Other borrowings................................................... 19,326
Other liabilities.................................................. 279,325
Stockholders' equity............................................... 1,288,266
-----------
$18,310,347
===========
Common shares outstanding.......................................... 58,343
Book value per common share(1) .................................... $ 20.10
Tangible book value per common share(1)............................ $ 17.08
</TABLE>
- --------
(1) Calculated net of Golden State Preferred Stock at its liquidation value of
$115,550.
21
<PAGE>
REDFED BANCORP INC.
CONSOLIDATED SUMMARY OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $ 34,200 $ 33,746 $ 30,985 $ 23,074 $ 28,022 $ 76,533
Investment securities... 21,604 34,695 41,655 38,899 55,101 35,559
Loans receivable, net... 895,056 729,862 682,984 733,132 645,670 647,889
Mortgage-backed
securities............. 15,975 43,547 52,116 79,971 109,982 100,771
Real estate held for
sale or investment..... 1,372 1,372 1,698 10,228 12,582 13,878
Real estate acquired
through foreclosure.... 4,758 5,800 24,560 31,041 9,429 14,471
Investment in capital
stock of Federal Home
Loan Bank.............. 9,115 6,486 6,914 8,561 6,623 6,445
Accrued interest
receivable............. 5,962 4,953 5,014 4,590 4,657 4,777
Property and equipment,
net.................... 16,935 17,656 17,619 19,164 18,731 18,915
Other assets............ 4,777 4,387 8,269 12,193 26,049 12,994
---------- -------- -------- -------- -------- --------
$1,009,754 $882,504 $871,814 $960,853 $916,846 932,232
========== ======== ======== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits................ $ 844,619 $790,803 $776,528 $805,334 $835,134 828,054
FHLB advances........... 60,000 -- -- -- -- --
Other borrowings........ 4,418 4,418 31,133 80,085 8,845 26,845
Other liabilities....... 16,467 15,165 16,075 19,926 19,506 21,094
Stockholders' equity.... 84,250 72,118 48,078 55,508 53,361 56,239
---------- -------- -------- -------- -------- --------
$1,009,754 $882,504 $871,814 $960,853 $916,846 $932,232
========== ======== ======== ======== ======== ========
Common shares
outstanding............ 7,200 7,058 3,961 3,977 (1) (1)
Book value per common
share.................. $ 11.70 $ 10.22 $ 12.14 $ 13.96 (1) (1)
</TABLE>
- --------
(1) RedFed was incorporated in April, 1994, to acquire all of the outstanding
shares of Redlands Federal Bank as part of Redlands Federal Bank's
conversion from a mutual savings bank to a stock chartered savings bank.
Accordingly, book value per share information is not presented as of
December 31, 1993 and 1992 as RedFed had no shares issued or outstanding as
of such dates.
22
<PAGE>
REDFED BANCORP INC.
CONSOLIDATED SUMMARY OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993 1992
------- ------- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest income......... $66,508 $61,499 $64,224 $ 56,515 $59,436 69,257
Interest expense........ 36,731 33,038 38,366 29,869 30,869 37,154
------- ------- ------- -------- ------- ------
Net interest income.... 29,777 28,461 25,858 26,646 28,567 32,103
Provisions for loan
losses................. 1,139 2,838 7,938 12,651 12,990 6,106
------- ------- ------- -------- ------- ------
Net interest income
after provisions for
loan losses........... 28,638 25,623 17,920 13,995 15,577 25,997
Non-interest income:
Letter of credit fees
and other fee income
...................... 6,612 5,822 6,212 6,280 6,404 5,231
Gain on sale of
servicing ............ -- 803 -- -- -- --
Gain/(loss) on sale of
loans, investments
and mortgage-backed
securities ........... 13 (4) 1,383 (486) 365 603
Curtailment gain on
retirement plan ...... -- -- 3,390 -- -- --
Other income........... 421 346 213 481 115 232
------- ------- ------- -------- ------- ------
Total non-interest
income............ 7,046 6,967 11,198 6,275 6,884 6,066
Non-interest expense:
Compensation and
benefits.............. 11,999 11,438 12,063 14,200 12,494 12,285
Occupancy and
equipment ............ 7,122 7,038 6,831 7,816 6,973 6,943
Federal deposit
insurance premiums.... 1,448 2,388 2,401 2,423 2,274 1,727
Acquisition costs ..... 397 -- -- -- -- --
FDIC Special
Assessment............ -- 5,421 -- -- -- --
Other expense, net .... 3,019 2,942 2,990 2,756 3,717 2,976
------- ------- ------- -------- ------- ------
Total general and
administrative
expense........... 23,985 29,227 24,285 27,195 25,458 23,931
Real estate operations,
net 1,200 1,311 10,258 8,370 3,222 2,148
Provision for losses on
letters of credit...... -- 2,402 2,536 9,895 694 1,866
------- ------- ------- -------- ------- ------
Total non-interest
expense........... 25,185 32,940 37,079 45,460 29,374 27,945
Earnings (loss) before
income taxes........... 10,499 (350) (7,961) (25,190) (6,913) 4,118
Income taxes
(benefits)............. 66 7 124 1,150 (3,669) 1,868
------- ------- ------- -------- ------- ------
Earnings (loss) before
cumulative effect of
change in accounting
principle ............ 10,433 (357) (8,085) (26,340) (3,244) 2,250
Cumulative effect of
change in accounting
principle -- -- -- -- -- 1,311
------- ------- ------- -------- ------- ------
Net earnings
(loss)............ $10,433 $(357) $(8,085) $(26,340) $(3,244) $3,561
======= ======= ======= ======== ======= ======
Earnings (loss) per
share(1):
Basic.................. $ 1.46 $ (0.07) $ (2.04) $ (6.14)(2) (3) (3)
Diluted................ $ 1.41 $ (0.07) $ (2.04) $ (6.14)(2) (3) (3)
Weighted average shares
outstanding:
Common shares.......... 7,141 5,146 3,955 3,977 (3) (3)
Common shares and
dilutive potential
common shares......... 7,419 5,146 3,955 3,977 (3) (3)
</TABLE>
- --------
(1) Earnings per share have been restated to reflect the adoption of Statement
of Financial Accounting Standards No. 128, "Earnings Per Share."
(2) Calculated on net loss of $24.4 million for the period April 7, 1994 (the
date of RedFed's initial public offering) through December 31, 1994.
(3) RedFed was incorporated in April, 1994, to acquire all of the outstanding
shares of Redlands Federal Bank as part of Redlands Federal Bank's
conversion from a mutual savings bank to a stock chartered savings bank.
Accordingly, earnings per share information is not presented for the years
ended December 31, 1993 and 1992 as RedFed had no shares issued or
outstanding during these periods.
23
<PAGE>
FNPH
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and amounts due
from banks............. $ 350,214 $ 135,534 $ 154,758 $ 149,564 $ 1,848 $ 120,926
Interest-bearing
deposits in other
banks.................. 36,164 20,619 32,778 39,219 42,156 4,220,271
Short-term investment
securities............. 25,933 113,716 125,035 -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Cash and cash
equivalents........... 412,311 269,869 312,571 188,783 44,004 4,341,197
Securities available for
sale, at fair value.... 813,085 542,019 348,561 45,000 -- --
Securities held to
maturity............... 58,299 4,272 1,455 411,859 15,118 2,034,842
Mortgage-backed
securities available
for sale, at fair
value.................. 5,076,598 1,598,652 1,477,514 3,153,812 341,224 77,622
Mortgage-backed
securities held to
maturity............... 1,337,877 1,621,662 1,524,488 -- -- --
Loans held for sale,
net.................... 1,483,466 825,316 1,203,412 26,354 -- --
Loans held for
investment and for
sale, net.............. 19,424,410 10,212,583 8,829,974 9,966,886 33,931 1,253,163
Receivables from FSLIC
Resolution Fund, net... -- -- -- -- 16,450 45,132
Covered assets.......... -- -- 39,349 311,603 592,593 839,538
Investment in Federal
Home Loan Bank System.. 468,191 220,962 109,943 128,557 41,996 40,563
Office premises and
equipment, net......... 159,349 100,164 93,509 76,523 3,272 68,828
Foreclosed real estate,
net.................... 76,997 51,987 48,535 37,369 399 7,732
Accrued interest
receivable............. 188,198 106,034 100,604 87,706 2,104 29,218
Intangible assets....... 675,927 140,564 18,606 12,217 -- 59,974
Mortgage servicing
rights................. 536,703 423,692 241,355 86,840 -- 74,669
Other assets............ 650,745 517,297 316,905 150,050 34,131 88,995
----------- ----------- ----------- ----------- ---------- ----------
$31,362,156 $16,635,073 $14,666,781 $14,683,559 $1,125,222 $8,961,473
=========== =========== =========== =========== ========== ==========
LIABILITIES, MINORITY
INTEREST AND
STOCKHOLDERS' EQUITY
Deposits................ $16,202,605 $ 8,501,883 $10,241,628 $ 9,196,656 $ 431,778 $7,809,478
Securities sold under
agreements to
repurchase............. 1,842,442 1,583,387 969,510 1,883,490 119,144 30,647
Other borrowings........ 11,232,530 5,364,894 2,392,862 2,808,979 440,792 597,564
Other liabilities....... 702,959 399,446 299,635 140,832 20,614 51,008
----------- ----------- ----------- ----------- ---------- ----------
Total liabilities...... 29,980,536 15,849,610 13,903,635 14,029,957 1,012,328 8,488,697
----------- ----------- ----------- ----------- ---------- ----------
Minority Interest....... 1,175,704 613,852 358,991 323,935 -- --
----------- ----------- ----------- ----------- ---------- ----------
Stockholders' Equity:
Preferred stock........ -- -- -- -- -- 124,500
Common stock........... 1 1 1 1 1 1
Additional paid-in
capital............... -- 161 267,055 267,055 85,569 277,069
Net unrealized holding
gain on securities
available for sale.... 28,129 36,975 50,810 8,800 -- --
Retained earnings
(substantially
restricted)........... 177,786 134,474 86,289 53,811 27,324 71,206
----------- ----------- ----------- ----------- ---------- ----------
Stockholders' equity.... 205,916 171,611 404,155 329,667 112,894 472,776
----------- ----------- ----------- ----------- ---------- ----------
$31,362,156 $16,635,073 $14,666,781 $14,683,559 $1,125,222 $8,961,473
=========== =========== =========== =========== ========== ==========
Common shares
outstanding............ (1) (1) (1) (1) (1) (1)
Book value per common
share.................. (1) (1) (1) (1) (1) (1)
</TABLE>
- --------
(1)Per share information is not presented as FNPH is a closely held
corporation.
24
<PAGE>
FNPH
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- -------- -------- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $2,102,700 $1,233,799 $1,075,845 $293,139 $ 95,264 $659,201
Interest expense........ 1,498,417 848,294 734,815 199,845 74,728 450,240
---------- ---------- ---------- -------- -------- --------
Net interest income.... 604,283 385,505 341,030 93,294 20,536 208,961
Provision for loan
losses................ 79,800 39,600 37,000 6,226 1,402 16,193
---------- ---------- ---------- -------- -------- --------
Net interest income
after provision for
loan losses........... 524,483 345,905 304,030 87,068 19,134 192,768
---------- ---------- ---------- -------- -------- --------
Noninterest income:
Loan servicing fees,
net................... 143,919 123,887 70,265 10,042 11,731 70,013
Customer banking fees
and service charges... 100,048 45,044 47,493 10,595 -- --
Management fees........ 6,211 9,694 15,141 13,121 -- --
Gain on sales of assets
and deposits.......... 38,230 38,118 173 6 24,373 203,060
Gain on sale of
branches.............. 3,569 363,342 -- -- 140,877 19,358
Gain (loss) on sales of
loans, net............ 24,721 17,802 (26) (158) -- --
Gain from termination
of Assistance
Agreement............. -- 25,632 -- -- -- --
Dividends on FHLB
stock................. 24,790 11,670 6,546 -- -- --
Other income........... 22,996 18,189 11,381 7,552 14,621 91,905
---------- ---------- ---------- -------- -------- --------
Total noninterest
income................ 364,484 653,378 150,973 41,158 191,602 384,336
---------- ---------- ---------- -------- -------- --------
Noninterest expense:
Compensation and
employee benefits..... 256,448 204,818 154,288 48,846 24,951 115,145
Occupancy and
equipment............. 81,914 51,936 49,897 12,247 5,343 32,909
Data processing........ 12,402 10,491 9,787 2,888 3,739 39,264
Savings Association
Insurance Fund deposit
insurance premium..... 10,680 81,149 22,262 6,813 3,259 20,547
Marketing.............. 20,186 10,908 10,810 3,385 -- --
Professional fees...... 48,771 18,986 11,202 2,622 -- --
Loan expense........... 60,437 31,282 12,431 1,132 -- --
Foreclosed real estate
operations, net....... (3,304) (7,390) (927) (528) -- --
Amortization of core
deposit and other
intangible assets..... 49,153 9,445 1,474 222 468 7,162
Other.................. 113,882 80,111 61,329 18,671 26,358 146,522
---------- ---------- ---------- -------- -------- --------
Total noninterest
expense............... 650,569 491,736 332,553 96,298 64,118 361,549
---------- ---------- ---------- -------- -------- --------
Income before income
taxes, extraordinary
item and minority
interest............... 238,398 507,547 122,450 31,928 146,618 215,555
Income tax expense
(benefit).............. 41,315 (75,807) (57,185) 2,558 2,500 --
---------- ---------- ---------- -------- -------- --------
Income before
extraordinary item and
minority interest...... 197,083 583,354 179,635 29,370 144,118 215,555
Extraordinary items--
(loss) gain on early
extinguishment of debt,
net.................... -- (1,586) 1,967 1,376 -- --
---------- ---------- ---------- -------- -------- --------
Income before minority
interest............... 197,083 581,768 181,602 30,746 144,118 215,555
Minority interest....... 131,851 161,191 59,138 4,259 -- --
---------- ---------- ---------- -------- -------- --------
Net income............. $ 65,232 $ 420,577 $ 122,464 $ 26,487 $144,118 $215,555
========== ========== ========== ======== ======== ========
</TABLE>
- --------
Earnings per share data are not presented as FNPH is a closely held
corporation.
25
<PAGE>
Summary Unaudited Pro Forma Condensed Combined Financial Statements
The following sets forth certain unaudited pro forma condensed combined
financial statements for Golden State (after giving effect to the Merger) and
RedFed and FNPH, as if the Merger and the RedFed and California Federal Mergers
each had occurred on December 31, 1997 and at the beginning of each of the
periods presented. See "INFORMATION ABOUT GOLDEN STATE AND MERGER SUB--
Subsequent Events." This information should be read in conjunction with the
historical consolidated financial statements of Golden State (and its
predecessor, Glendale Federal), CENFED, RedFed and FNPH including the notes
thereto, incorporated herein by reference. Financial statement data for CENFED,
RedFed and FNPH included herein are derived solely from each of CENFED's,
RedFed's and FNPH's unaudited financial statements. Golden State financial
statement data as of December 31, 1997 and for the six month period ended
December 31, 1997 have been derived from unaudited financial statements. Golden
State financial statement data for the year ended June 30, 1997 is derived from
the audited historical financial statements which are incorporated by reference
herein. See "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
GIVING EFFECT TO THE MERGER, THE REDFED MERGER AND THE CALIFORNIA FEDERAL
MERGER
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1997
-----------------
<S> <C>
ASSETS
Cash and amounts due from banks............................. $ 522,791
Federal funds sold and assets purchased under resale
agreements................................................. 557,436
Other investments........................................... 1,114,403
Loans receivable, net....................................... 35,077,354
Mortgage-backed securities, net............................. 9,215,897
Real estate held for sale or investment..................... 7,900
Real estate acquired in settlement of loans................. 131,078
Investment in capital stock of FHLB, at cost................ 768,013
Mortgage servicing assets................................... 831,773
Goodwill and other intangible assets........................ 1,900,890
Other assets................................................ 1,752,960
-----------
$51,880,495
===========
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
Deposits.................................................... $28,143,456
Securities sold under agreements to repurchase.............. 2,733,958
Borrowings from the FHLB.................................... 14,337,294
Other borrowings............................................ 1,714,662
Other liabilities........................................... 1,517,609
Minority interest........................................... 1,012,136
Stockholders' equity........................................ 2,421,380
-----------
$51,880,495
===========
Common shares outstanding................................... 114,271
Book value per common share................................. $ 20.18
Tangible book value per common share........................ $ 3.54
</TABLE>
26
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE MERGER, THE REDFED MERGER AND THE CALIFORNIA FEDERAL
MERGER
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
Interest income................................ $1,759,798 $3,422,151
Interest expense............................... 1,204,279 2,313,118
---------- ----------
Net interest income........................ 555,519 1,109,033
Provision for loan losses...................... 44,516 113,831
---------- ----------
Net interest income after provision for
loan losses............................... 511,003 995,202
Other income:
Fee income................................... 177,052 331,137
Gain (loss) on sale of loans, net............ (190) (182)
Gain on sale of mortgage-backed securities,
net......................................... 325 57
Other income, net............................ 70,151 107,380
---------- ----------
Total other income......................... 247,338 438,392
Other expenses:
Compensation and employee benefits........... 209,948 401,138
Occupancy expense, net....................... 61,342 104,860
Regulatory insurance......................... 9,915 95,629
Advertising and promotion.................... 24,809 39,564
Furniture, fixtures and equipment............ 10,255 19,201
Other general and administrative expenses.... 159,466 375,129
---------- ----------
Total general and administrative expenses.. 475,735 1,035,521
Restructuring charges........................ 2,487 70,046
Legal expense-goodwill lawsuit............... 9,977 24,058
Operations of real estate held for sale or
investment.................................. (736) 1,139
Operations of real estate acquired in
settlement of loans......................... 124 6,479
Amortization of goodwill and other intangible
assets...................................... 66,337 128,400
---------- ----------
Total other expenses....................... 553,924 1,265,643
Earnings before income tax provision........... 204,417 167,951
Income tax provision........................... 110,128 115,848
---------- ----------
Earnings before minority interest and
extraordinary items........................... 94,289 52,103
Minority interest.............................. 44,233 93,360
Extraordinary items, net....................... -- (1,586)
---------- ----------
Net earnings (loss)........................ $ 50,056 $ (42,843)
========== ==========
Net earnings applicable to common shareholders:
Net earnings (loss).......................... $ 50,056 $ (42,843)
Dividends declared on preferred stock........ (5,055) (10,841)
Premium on exchange of preferred stock for
common stock................................ -- (4,173)
---------- ----------
$ 45,001 $ (57,857)
========== ==========
Earnings (loss) per share:
Basic........................................ $ 0.40 $ (0.52)
Diluted...................................... 0.37 (0.52)
Weighted average shares outstanding:
Common shares................................ 113,860 112,343
Common shares and dilutive potential common
shares ..................................... 121,730 112,343
</TABLE>
27
<PAGE>
SPECIAL MEETING
GENERAL
This Proxy Statement-Prospectus is first being mailed to CENFED Stockholders
on or about March 10, 1998, and is accompanied by the notice of the Special
Meeting and a form of proxy that is solicited by the CENFED Board for use at
the Special Meeting to be held on April 7, 1998, at 10:30 a.m., local time, at
199 North Lake Avenue, Pasadena California, and at any adjournments or
postponements thereof.
MATTERS TO BE CONSIDERED
The purpose of the Special Meeting is to take action with respect to the
approval of the Merger Agreement and the transactions contemplated thereby.
The CENFED Stockholders may also be asked to vote upon a proposal to adjourn
or postpone the Special Meeting, which adjournment or postponement could be
used for the purpose, among others, of allowing additional time for the
soliciting of additional votes to approve the Merger Agreement.
PROXIES
The accompanying form of proxy is for use at the Special Meeting if a CENFED
Stockholder will be unable to attend in person. The proxy may be revoked by a
CENFED Stockholder at any time before it is exercised, by submitting to the
Secretary of CENFED written notice of revocation, including a properly
executed proxy bearing a later date, or by attending the Special Meeting and
electing to vote in person. Written notices of revocation and other
communications with respect to the revocation of CENFED proxies should be
addressed to CENFED Financial Corporation, 199 North Lake Avenue, Pasadena,
California 91101, Attention: Investor Relations.
All shares represented by valid proxies received pursuant to this
solicitation, and not revoked before they are exercised, will be voted in the
manner specified therein. If no specification is made, the proxies will be
voted in favor of approval of the Merger Agreement. The CENFED Board is
unaware of any other matters that may be presented for action at the Special
Meeting. If other matters do properly come before the Special Meeting,
however, it is intended that shares represented by proxies in the accompanying
form will be voted or not voted by the persons named in the proxies in their
discretion, provided that no proxy that is voted against approval and adoption
of the Merger Agreement will be voted in favor of any adjournment or
postponement of the Special Meeting for the purpose of soliciting additional
proxies.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the CENFED Stockholders will
be borne by CENFED, except that Golden State and CENFED have each agreed to
pay one-half of the printing costs of this Proxy Statement-Prospectus and
related materials. In addition to the solicitation of the proxies by mail,
CENFED will request banks, brokers and other record holders to send proxies
and proxy material to the beneficial owners of the stock and secure their
voting instructions, if necessary. CENFED will reimburse such record holders
for their reasonable expenses in so doing. CENFED has also made arrangements
with McCormick & Pryor to assist it in soliciting proxies from banks, brokers
and nominees and has agreed to pay approximately $4,500 plus expenses for such
services. If necessary, CENFED may also use several of its regular employees,
who will not be specially compensated, to solicit proxies from shareholders,
either personally or by telephone, telegram, facsimile or special delivery
letter.
RECORD DATE AND VOTING RIGHTS
Pursuant to the provisions of the Delaware Law and the CENFED Bylaws,
February 17, 1998 has been fixed as the Record Date for determination of
holders of CENFED Common Stock entitled to notice of and to vote at the
Special Meeting. Accordingly, only holders of shares of CENFED Common Stock of
record at the
28
<PAGE>
close of business on the Record Date will be entitled to notice of and to vote
at the Special Meeting. At the close of business on the Record Date, there
were 6,099,777 shares of CENFED Common Stock outstanding held by approximately
550 holders of record. The presence, in person or by proxy, of shares of
CENFED Common Stock representing a majority of such shares entitled to vote is
necessary to constitute a quorum at the Special Meeting. Each share of CENFED
Common Stock outstanding on the Record Date entitles its holder to one vote.
Shares of CENFED Common Stock present in person at the Special Meeting but
not voting, and shares of CENFED Common Stock for which CENFED has received
proxies but with respect to which holders of such shares have abstained, will
be counted as present at the Special Meeting for purposes of determining the
presence or absence of a quorum for the transaction of business. Brokers who
hold shares of CENFED Common Stock in nominee or "street" name for customers
who are the beneficial owners of such shares are prohibited from giving a
proxy to vote shares held for such customers with respect to the matters to be
considered and voted upon at the Special Meeting without specific instructions
from such customers. Shares represented by proxies returned by a broker
holding such shares in "street" name will be counted for purposes of
determining whether a quorum exists, even if such shares are not voted in
matters where discretionary voting by the broker is not allowed ("broker non-
votes").
Under the Delaware Law, approval of the Merger Agreement and the
transactions contemplated thereby requires the affirmative vote of a majority
of the outstanding shares of CENFED Common Stock entitled to vote at the
Special Meeting. Accordingly, abstentions and broker non-votes will have the
effect of votes "against" the Merger. CENFED Stockholders are therefore urged
to mark, sign and return the enclosed proxy card.
As of the Record Date, directors and executive officers of CENFED
beneficially owned approximately 235,295 shares of CENFED Common Stock (not
including options to purchase approximately 29,300 shares of CENFED Common
Stock), entitling them to exercise 4% of the voting power of the CENFED Common
Stock entitled to vote at the Special Meeting. It is currently expected that
each such director and executive officer of CENFED will vote the shares of
CENFED Common Stock beneficially owned by him or her for approval of the
Merger Agreement and the transactions contemplated thereby. As of the CENFED
Record Date, none of the directors, executive officers or affiliates of Golden
State beneficially owned any shares of CENFED Common Stock.
Additional information with respect to beneficial ownership of CENFED Common
Stock by persons and entities owning more than 5% of such stock and more
detailed information with respect to beneficial ownership of CENFED Common
Stock by directors and executive officers of CENFED is incorporated herein by
reference to Item 12 of the Annual Report on Form 10-K of CENFED for the
fiscal year ended December 31, 1996. See "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE."
RECOMMENDATION OF CENFED BOARD
The CENFED Board has unanimously approved the Merger Agreement and the
transactions contemplated thereby. The CENFED Board believes that the Merger
Agreement is fair to and in the best interests of CENFED and the CENFED
Stockholders and recommends that the CENFED Stockholders vote "FOR" the
approval and adoption of the Merger Agreement. See "THE MERGER--Recommendation
of CENFED Board and Reasons for the Merger."
29
<PAGE>
THE MERGER
THE FOLLOWING SUMMARY OF THE MATERIAL TERMS AND PROVISIONS OF THE MERGER
AGREEMENT AND THE STOCK OPTION AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT, AMENDMENT NO. 1 AND THE STOCK OPTION
AGREEMENT, WHICH ARE SET FORTH AS APPENDICES A-1, A-2 AND B, RESPECTIVELY, TO
THIS PROXY STATEMENT-PROSPECTUS AND ARE INCORPORATED HEREIN BY REFERENCE.
GENERAL
The Golden State Board of Directors (the "Golden State Board") and the
CENFED Board have each approved the Merger Agreement, which provides for the
Merger at the Effective Time, pursuant to which CENFED will be merged with and
into Merger Sub, a wholly-owned subsidiary of Golden State, organized by
Golden State to effect the Merger, with Merger Sub as the Surviving
Corporation in the Merger. Immediately after giving effect to the Merger,
Merger Sub will continue to be a wholly-owned subsidiary of Golden State.
Following the Merger, Golden State and the Surviving Corporation expect to
effect a further merger (the "Bank Merger") of Glendale Federal and CenFed
Bank into a single federal savings bank. With certain limited exceptions
described below, each share of CENFED Common Stock outstanding at the
Effective Time shall be converted into the right to receive a number of shares
of Golden State Common Stock equal to the Exchange Ratio. Shares of Golden
State capital stock, including Golden State Common Stock, issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding after the Merger.
THE CENFED BOARD BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO
AND IN THE BEST INTEREST OF CENFED AND THE CENFED STOCKHOLDERS, AND
UNANIMOUSLY RECOMMENDS THAT THE CENFED STOCKHOLDERS VOTE TO APPROVE AND ADOPT
THE MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
THEREBY.
This section of the Proxy Statement-Prospectus describes certain aspects of
the proposed Merger, including the principal provisions of the Merger
Agreement and the Stock Option Agreement. Certain capitalized terms used
herein without definition have the meanings ascribed them in the Merger
Agreement or the Stock Option Agreement.
BACKGROUND OF THE MERGER
Since the date CENFED first became a publicly traded company, the CENFED
Board has periodically received presentations from management and from
investment banking firms regarding CENFED's strategic direction and prospects,
the valuation of publicly traded thrift institutions, and merger and
acquisition activities in the thrift and commercial banking industries. In May
1994, the CENFED Board authorized the retention of Merrill Lynch to provide
financial advice on these subjects, among others, on a regular basis.
As part of CENFED's annual strategic planning process, management presented
its 1997 business plan to the CENFED Board at a meeting held in January 1997.
At this meeting management discussed with the CENFED Board the factors
influencing the selection and execution of CENFED's business strategy. Among
the factors discussed were (i) the asset growth and corresponding business
line expansion that would be required for CENFED to achieve its goals,
including a 15% return on equity, and risks associated therewith, (ii)
acquisition premiums being paid in the current market and the adverse impact
thereof on the prospects of CENFED executing a strategy of growth though
acquisitions, (iii) competitive forces that make achievement of growth
objectives dependent on significant investments in marketing and technology
with no assurance of success, and (iv) record premiums being paid for thrift
institutions, as measured by ratios of price-to-earnings, price-to-book value
and price-to-tangible book value. After discussing these factors, the CENFED
Board authorized management to approach potential merger partners on a
confidential basis to determine their levels of interest in
30
<PAGE>
entering into a strategic business combination with CENFED, including the
range of the values such potential partners might offer in such a business
combination transaction.
In February 1997, management and Merrill Lynch developed a list of potential
business combination partners, which included Golden State and several other
large- and medium-sized thrift institutions, commercial banks and other
financial services companies. In May 1997, Merrill Lynch reported that Golden
State might be interested in discussing a business combination. CENFED entered
into a confidentiality agreement with Golden State on June 27, 1997 and
thereafter provided non-public information concerning CENFED to assist Golden
State in its due diligence evaluation of a possible business combination with
CENFED. On July 21, 1997, Merrill Lynch reported to CENFED that Golden State
had proposed a merger in which Golden State Common Stock would be exchanged
for CENFED Common Stock at an exchange ratio based upon the relationship of
Golden State's current stock price to a value of $34 per CENFED share.
Although several of the other companies approached had expressed interest in
an acquisition of CENFED, none indicated a willingness to offer value
exceeding that proposed by Golden State.
At a regularly scheduled meeting of the CENFED Board in July 1997, Merrill
Lynch reported on the status of negotiations with Golden State and summarized
the preliminary discussions that had been conducted with other potential
acquirors. Management and Merrill Lynch discussed with the CENFED Board their
analyses of the current trading range of CENFED Common Stock, the implied
price-to-earnings ratio and the potential ranges of asset and earnings growth
for CENFED over the long term. After discussion of these matters, the CENFED
Board authorized management and Merrill Lynch to continue discussions with
potential business combination partners. Of such potential partners, Golden
State appeared to be most interested in a business combination, and it
indicated a willingness to increase its offer, subject to further due
diligence investigations.
At an August 6, 1997 meeting of CENFED's Board, CENFED's chief executive
officer, D. Tad Lowrey, discussed his conversations with Golden State's chief
executive officer, Stephen J. Trafton, on a variety of subjects, including the
relative merits of a fixed or floating exchange ratio, the CENFED Board's
desire that Golden State's Board be expanded to include a CENFED director and
other transaction-related matters. At this meeting, Merrill Lynch discussed
comparable business combinations involving thrift institutions. CENFED's Board
authorized management and Merrill Lynch to continue to negotiate with Golden
State with the objective of achieving value equivalent to at least $36 per
CENFED share.
Following discussions between Merrill Lynch and Golden State's investment
bankers, Credit Suisse First Boston Corporation, Golden State indicated its
willingness to offer a fixed exchange ratio that, based on the then current
prices for Golden State stock, would yield a value equivalent to $36 per
CENFED share, and to add a CENFED director to the Golden State Board. Golden
State expressed its desire that CENFED establish a retention plan for the
purpose of assuring that key personnel would work to further enhance CENFED's
operations between the period of announcement of any definitive agreement and
the completion of the transaction. Golden State also stated that it would
require, as a condition of its willingness to complete negotiations and to
execute a definitive agreement, a stock option to purchase up to 19.9% of the
CENFED Common Stock. During this time, discussions took place between
representatives of Golden State and CENFED and their respective legal and
financial advisors with respect to the terms of a definitive merger agreement
and stock option agreement, and due diligence investigations were continued.
A special meeting of the CENFED Board was convened on August 15, 1997 for
the purpose of considering the final terms of the transaction, the definitive
Merger Agreement and the Option. Pro forma presentations of the financial
condition and future results of operations of the proposed combined company
were discussed. Based on the results presented, CENFED management and the
CENFED Board concluded that the proposed business combination reasonably could
be expected to have a favorable impact on the future value of the combined
company. CENFED's legal counsel discussed the definitive Merger Agreement, the
Stock Option Agreement and the regulatory and shareholder approval processes
and other matters of a legal nature relating to the proposed transaction.
After these discussions, CENFED's Board of Directors unanimously approved the
transaction and
31
<PAGE>
authorized execution and delivery of the Merger Agreement and the Stock Option
Agreement on behalf of CENFED.
RECOMMENDATION OF CENFED BOARD AND
REASONS FOR THE MERGER
The CENFED Board has determined that the terms of the Merger Agreement are
fair to and in the best interests of CENFED and the CENFED Stockholders. In
reaching this determination, the CENFED Board consulted with its financial
advisor, Merrill Lynch, with respect to, among other things, the fairness from
a financial point of view of the Exchange Ratio for determining the
consideration to be received by CENFED Stockholders in the Merger. The CENFED
Board also discussed with CENFED's senior management a variety of matters
relating to CENFED's business and prospects including, among other things,
operational, competitive and personnel matters, together with considerations
such as the increased costs that would be entailed in upgrading CENFED's
technology and increased risks that might be entailed in making significant
acquisitions or entering new lines of business in the future. The CENFED Board
also considered advice received from CENFED's legal counsel, Mayer, Brown &
Platt, concerning various legal and regulatory matters relevant to its
consideration of the proposed transaction.
In reaching its determination to approve the Merger Agreement and the
related Stock Option Agreement described in this proxy statement, the CENFED
Board considered the following factors that it deemed material:
(i) Fairness of Consideration. Based on historical and anticipated
trading ranges for Golden State Common Stock, the CENFED Board was of the
view that the implied value of the consideration to be received by CENFED
Stockholders represented a fair multiple of CENFED's per share book value
and earnings. In its consideration of these factors, the CENFED Board
received detailed presentations from Merrill Lynch regarding current and
historical trading prices for the stocks of CENFED, Golden State and other
thrift institutions and holding companies, together with additional
information and analyses regarding the consideration paid in comparable
acquisition transactions. The Board further considered Merrill Lynch's
opinion given to the CENFED Board that, based on the analyses that Merrill
Lynch had conducted and discussed with the Board, the Exchange Ratio is
fair to CENFED Stockholders from a financial point of view. For a further
discussion of Merrill Lynch's opinion and analyses, including the scope
thereof and the limitations thereon, see "--Opinion of CENFED's Financial
Advisor."
(ii) CENFED's Business Plan. The CENFED Board considered CENFED's
prospects for growth and expansion of the products and services it offers,
including business loans and checking accounts and possible acquisition
opportunities. The CENFED Board considered management's view that CENFED
would have to expand its products and services significantly while
simultaneously seeking acquisition opportunities if it wished to continue
to grow and that such strategies could entail significant risk. The CENFED
Board also considered the increasingly competitive environment in which
CENFED operates and CENFED's relative size and market share in the markets
it serves.
(iii) Benefits of the Combination. The CENFED Board considered the
prospect that combining with Golden State would enable CENFED's business
lines to make a favorable contribution to the combined entity. The CENFED
Board believes that Golden State's strategic emphasis on small businesses
and consumers is compatible with CENFED's own strategic emphasis and that,
following a combination, a wider array of products and services will be
made available to CENFED's customers. The CENFED Board anticipates that the
Merger will provide opportunities for CENFED's small business lending
operations to expand following the Merger and for CENFED's small business
customer relationships to deepen as these customers avail themselves of the
additional products and services that Golden State offers. The CENFED Board
believed that CENFED's retail customers will also benefit similarly from
Golden State's broader array of products and services. The CENFED Board
also considered Golden State's relative effectiveness in designing and
marketing new products to the general public in light of its strong sales
orientation, effective marketing and retail delivery system. The CENFED
Board considered that Golden State's size enables it to market its products
more efficiently and effectively through mass media channels to broad
geographic
32
<PAGE>
markets than can smaller-sized CENFED. All of these factors led CENFED's
Board to conclude that Golden State was in a position to further advance
the franchise that CENFED has built.
(iv) Golden State Financial Condition and Operations. The CENFED Board
considered the business and financial condition of Golden State and its
profitability and asset quality. The CENFED Board further considered the
reputation and business practices of Golden State and its management as
they would affect the employees of CENFED. The CENFED Board considered
management's assessment of the Golden State business plan, noting that
Golden State's business plan is very similar to CENFED's in terms of
targeted customers and product emphasis. The CENFED Board considered Golden
State's progress in the development of a wide array of consumer and
business products and services. In addition, the CENFED Board considered
Golden State's progress in the transformation of its company culture into
that of a sales-oriented organization. Also, the results of the due
diligence investigations conducted by CENFED's management and Merrill Lynch
were considered by the CENFED Board. The CENFED Board further considered
the potential beneficial impact on stockholder value of Golden State's
goodwill litigation against the United States Government and the
uncertainties relating thereto.
(v) CENFED Prospects. The CENFED Board considered the potential effect on
stockholder value of CENFED's continuing as an independent entity, as
compared with the effect on CENFED Stock value of combining with Golden
State, in light of the belief of the CENFED Board and management that the
Merger offers the most attractive currently available terms and
consideration for CENFED Stockholders.
(vi) Terms and Tax-Free Nature of Transaction. The CENFED Board
considered the terms of the Merger Agreement and the Stock Option
Agreement, including the following: (i) the tax consequences are expected
to be favorable to CENFED Stockholders; (ii) the fact that CENFED
Stockholders will receive Golden State Common Stock pursuant to the Merger,
which will permit CENFED shareholders to continue to participate in the
business of the combined entity or to sell their shares for cash at such
time as they wish to liquidate their investment (subject to certain
restrictions in the case of CENFED affiliates); (iii) the fact that Golden
State's Common Stock is actively traded on the New York Stock Exchange; and
(iv) the fact that the Merger Agreement provides CENFED with the ability to
terminate the Merger Agreement if the price of Golden State Common Stock
declines by a specified amount on both an absolute basis and in comparison
to an index of other thrift institution stocks (see "THE MERGER--
Termination of Merger Agreement").
(vii) Prospects for Regulatory Approval. The CENFED Board considered the
prospects of the Merger being approved by the OTS, which the CENFED Board,
after consultation with legal counsel, considered to be favorable.
The above summary of the information and factors considered by the CENFED
Board is not intended to be exhaustive, but is believed to include the
material factors considered by the CENFED Board. In reaching its determination
to approve and recommend the Merger, the CENFED Board did not assign any
relative or specific weights to the foregoing factors. In addition, individual
members of the CENFED Board may have had differing views regarding one or more
of the subjects summarized above and may have had different views as to the
weights to be accorded to each in reaching their individual decisions.
FOR THE REASONS SET FORTH ABOVE, THE CENFED BOARD HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AS BEING ADVISABLE AND IN THE BEST INTERESTS OF THE
CENFED STOCKHOLDERS. THE CENFED BOARD RECOMMENDS THAT CENFED STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE MERGER AGREEMENT AT THE SPECIAL MEETING.
GOLDEN STATE. The Golden State Board views the acquisition of CENFED as an
important strategic fill-in to Glendale Federal's southern California branch
system and an enhanced platform from which to offer Glendale Federal's product
line. The Merger is expected to increase Glendale Federal's deposit base by
16% and, while no assurances can be given as to future financial performance,
is expected to provide entry for Glendale Federal into attractive southern
California markets in which it does not presently operate, including
33
<PAGE>
Cypress, Chino Hills, City of Industry and Placentia. In particular, the
Merger is expected to result in Glendale Federal holding a significant share
of banking deposits in the city of Pasadena, California, with six branches
expected to hold over $600 million in deposits. The assimilation of CENFED's
portfolio of Small Business Administration ("SBA") loans and its portfolio of
SBA loan servicing is expected to permit Glendale Federal, which is an SBA
preferred lender, to become California's fourth largest servicer of SBA loans.
OPINION OF CENFED'S FINANCIAL ADVISOR
CENFED retained Merrill Lynch to act as its exclusive financial advisor in
connection with a possible business combination with one or more parties.
Pursuant to the terms of its engagement, Merrill Lynch agreed to assist CENFED
in analyzing, structuring, negotiating and effecting a transaction with Golden
State. CENFED selected Merrill Lynch because Merrill Lynch is a nationally
recognized investment banking firm with substantial experience in transactions
similar to the Merger and was familiar with CENFED and its business. As part
of its investment banking business, Merrill Lynch is continually engaged in
the valuation of businesses and their securities in connection with mergers
and acquisitions.
As part of its engagement, representatives of Merrill Lynch attended the
meeting of the CENFED Board held on August 15, 1997 at which the CENFED Board
considered the Merger and approved the Merger Agreement. At that meeting,
Merrill Lynch rendered its written opinion that, as of such date, the Exchange
Ratio to be used in the Merger was fair to the holders of shares of CENFED
(other than Golden State and its affiliates) from a financial point of view.
Such opinion was reconfirmed in writing as of the date of this Proxy
Statement.
The full text of Merrill Lynch's written opinion (the "Opinion") dated as of
the date of this Proxy Statement is attached hereto as Appendix C and is
incorporated herein by reference. The description of the Opinion set forth
herein is qualified in its entirety by reference to Appendix C. CENFED
Stockholders are urged to read the Opinion in its entirety for a description
of the procedures followed, assumptions made, matters considered, and
qualifications and limitations on the review undertaken, by Merrill Lynch in
connection therewith.
MERRILL LYNCH'S OPINION IS DIRECTED TO THE CENFED BOARD OF DIRECTORS AND
ADDRESSES ONLY THE EXCHANGE RATIO TO BE RECEIVED BY CENFED STOCKHOLDERS IN THE
MERGER. IT DOES NOT ADDRESS THE UNDERLYING BUSINESS DECISION TO PROCEED WITH
THE MERGER AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY CENFED STOCKHOLDER
AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE CENFED SPECIAL MEETING OR ANY
OTHER MATTER IN CONNECTION THEREWITH.
Merrill Lynch has informed CENFED that in arriving at its written opinion,
Merrill Lynch, among other things: (1) reviewed certain publicly available
business and financial information relating to CENFED and Golden State (and
its predecessor, Glendale Federal) that Merrill Lynch deemed to be relevant;
(2) reviewed certain information, including financial forecasts, related to
the respective businesses, earnings, assets, liabilities and prospects of
CENFED and Golden State furnished to Merrill Lynch by senior management of
CENFED and Golden State, as well as the amount and timing of the cost savings
and related expenses expected to result from the Merger (the "Expected
Synergies") furnished to Merrill Lynch by senior management of Golden State;
(3) conducted discussions with members of senior management of CENFED and
Golden State concerning the matters described above, as well as their
respective businesses and prospects before and after giving effect to the
Merger and the Expected Synergies; (4) reviewed the market prices and
valuation multiples for CENFED Common Stock and Golden State Common Stock and
compared them with those of certain publicly-traded companies which Merrill
Lynch deemed to be relevant; (5) reviewed the results of operations of CENFED
and Golden State and compared them with those of certain publicly-traded
companies which Merrill Lynch deemed to be relevant; (6) compared the proposed
financial terms of the Merger with the financial terms of certain other
transactions which Merrill Lynch deemed to be relevant; (7) participated in
certain discussions and negotiations among representatives of CENFED and
Golden State and their financial and legal advisors; (8) reviewed the
potential pro forma impact of the Merger; (9) reviewed the Merger Agreement
and the Stock Option Agreement;
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and (10) reviewed such other financial studies and analyses and took into
account such other matters as Merrill Lynch deemed necessary, including an
assessment of general economic, market and monetary conditions.
In preparing its Opinion, Merrill Lynch assumed and relied upon the accuracy
and completeness of all financial and other information supplied or otherwise
made available to it, discussed with or reviewed by or for it, or publicly
available, and Merrill Lynch has not assumed responsibility for independently
verifying such information or undertaking an independent evaluation or
appraisal of the assets or liabilities of CENFED or Golden State nor has it
been furnished any such evaluation or appraisal. Merrill Lynch assumed that
the trading prices for the Golden State Common Stock to be issued in
connection with the Merger fully reflect the value of Golden State's
supervisory goodwill litigation claim and for the purpose of rendering the
Opinion, Merrill Lynch assumed that the value of such claim is properly and
fully reflected in the trading prices of Golden State Common Stock to be
offered in the Merger. Merrill Lynch is not an expert in the evaluation of
allowances for loan losses, and it has not made an independent evaluation of
the adequacy of the allowances for loan losses of CENFED or Golden State, nor
has it reviewed any individual credit files relating to CENFED or Golden
State, and it has assumed that the aggregate allowances for loan losses for
both CENFED and Golden State are adequate to cover such losses and will be
adequate on a pro forma basis for the combined entity following the Merger. In
addition, it has not assumed any obligation to conduct, nor has it conducted,
any physical inspection of the properties or facilities of CENFED or Golden
State. Merrill Lynch also assumed and relied upon the senior management of
CENFED and Golden State as to the reasonableness and achievability of the
financial forecasts (and the assumptions and bases therefor) provided to, and
discussed with, Merrill Lynch. In that regard, Merrill Lynch has assumed with
CENFED's consent that such forecasts, including without limitation the
Expected Synergies and projections regarding underperforming and non-
performing assets, net charge-offs, adequacy of reserves, future economic
conditions and results of operations reflect the best currently available
estimates, allocations and judgments of such senior management as to the
expected future financial performance of CENFED, Golden State and the combined
entity following the Merger, as the case may be. The Opinion is predicated on
the Merger being accounted for as a "purchase" under GAAP and receiving the
tax treatment contemplated in the Merger Agreement and was necessarily based
on economic, market and other conditions as in effect on, and the information
made available to it, as of the date thereof.
The Opinion was also rendered without regard to the necessity for, or level
of, any restrictions, obligations, undertakings or divestitures which may be
imposed or required in the course of obtaining regulatory approvals for the
Merger.
In connection with rendering the Opinion, Merrill Lynch performed a variety
of financial analyses, including those summarized below. The summary set forth
below does not purport to be a complete description of the analyses performed
by Merrill Lynch in this regard, although it describes all material analyses
performed by Merrill Lynch in connection therewith. The preparation of a
fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to a partial analysis or summary description. Accordingly,
notwithstanding the separate analyses summarized below, Merrill Lynch believes
that its analyses must be considered as a whole and that selecting portions of
the analyses and factors considered by it, without considering all such
analyses and factors, or attempting to ascribe relative weights to some or all
such analyses and factors, could create an incomplete view of the evaluation
process underlying Merrill Lynch's Opinion.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond CENFED's control. The analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Merrill Lynch's analysis of the fairness to CENFED Stockholders of the
Exchange Ratio and were provided to the CENFED Board in connection with the
delivery of the Opinion. Merrill Lynch gave the various analyses described
below approximately similar weight and did not draw any specific conclusions
from or with regard to any one method of analysis. With respect to the
comparison of selected companies analysis and the
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analysis of selected thrift merger transactions summarized herein, no public
company utilized as a comparison is identical to CENFED and no transaction is
identical to the Merger. Accordingly, an analysis of publicly-traded
comparable companies and comparable business combinations is not mathematical;
rather, it involves complex considerations and judgments concerning the
differences in financial and operating characteristics of the companies and
other factors that could affect the public trading values or announced merger
transaction values, as the case may be, of CENFED and the companies to which
it is being compared. The analyses do not purport to be appraisals or to
reflect the prices at which CENFED might actually be sold or the prices at
which any securities may trade at the present time or at any time in the
future. In addition, as described below, the Opinion is just one of many
factors taken into consideration by the CENFED Board.
The projections furnished to Merrill Lynch and used by it in certain of its
analyses were prepared by the senior management of CENFED and Golden State.
CENFED and Golden State do not publicly disclose internal management
projections of the type provided to Merrill Lynch in connection with its
review of the Merger, and as a result, such projections were not prepared with
a view towards public disclosure. The projections were based on numerous
variables and assumptions which are inherently uncertain, including, without
limitation, factors related to general economic and competitive conditions
and, accordingly, actual results could vary significantly from those set forth
in such projections.
The following is a summary of the material analyses presented by Merrill
Lynch to the CENFED Board on August 15, 1997 (the "Merrill Lynch Report") in
connection with Merrill Lynch's opinion dated August 15, 1997.
Summary of Proposal. Merrill Lynch reviewed the terms of the proposed
transaction, including the Exchange Ratio and the implied aggregate
transaction value. Based on the price of Golden State Common Stock ranging
from $28.50 to $30.00, Merrill Lynch calculated the implied transaction value
per share of CENFED of $34.20 to $36.00 and an imputed total transaction value
of approximately $207 million to $218 million. Based upon this imputed
transaction value range, Merrill Lynch calculated the price to market, price
to book, price to tangible book and price to earnings multiples, and the
implied deposit premium paid (defined as the transaction value minus the
tangible book value divided by total deposits) in the contemplated
transaction. This analysis yielded a price to market multiple of 1.00x to
1.05x on August 13, 1997, a price to book value multiple of 1.73x to 1.82x, a
price to tangible book value multiple of 1.73x to 1.83x, a price to earnings
multiples of 17.38x to 18.33x (based on CENFED earnings, excluding the impact
of the SAIF assessment, for the twelve months ended June 30, 1997), and an
implied deposit premium to stated tangible book value of 5.66% to 6.39%.
Discounted Dividend Stream Analysis--CENFED. Using a discounted dividend
stream analysis, Merrill Lynch estimated the present value, as of December 31,
1997, of the future streams of after tax cash flows that CENFED could produce
on a stand-alone basis from 1998 through 2003 and distribute to stockholders
("dividendable net income"). In this analysis, Merrill Lynch assumed that
CENFED performed in accordance with the earnings forecasts provided to Merrill
Lynch by CENFED's senior management and that CENFED's tangible common equity
to tangible asset ratio would be maintained at a minimum 5.00% level. Merrill
Lynch estimated the terminal values for the CENFED Common Stock at 10.0, 11.0
and 12.0 times CENFED's 2003 estimated operating income (defined as net income
before intangible amortization). The dividendable net income streams and
terminal values were then discounted to present values using different
discount rates (ranging from 12% to 14%) chosen to reflect different
assumptions regarding required rates of return of holders or prospective
buyers of CENFED Common Stock. This discounted dividend stream analysis
indicated a reference range of between $25.14 and $31.04 per share for CENFED
Common Stock. As indicated above, this analysis is not necessarily indicative
of actual values or actual future results and does not purport to reflect the
prices at which any securities may trade at the present or at any time in the
future. Merrill Lynch noted that the discounted dividend stream analysis was
included because it is a widely used valuation methodology, but noted that the
results of such methodology are highly dependent upon the numerous assumptions
that must be made, including earnings growth rates, dividend payout rates,
terminal values and discount rates.
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Analysis of Selected Thrift Merger Transactions. Merrill Lynch reviewed
publicly available information regarding thrift merger transactions with a
value greater than $25 million and less than $500 million which had occurred
in the United States since January 1, 1996. Merrill Lynch compared the price
to book value, price to tangible book value and price to earnings ratios
(excluding SAIF recapitalization charge) and the implied deposit premium paid
in the contemplated transaction and in such selected thrift merger
transactions. This analysis yielded a range of price to book value multiples
of 0.97x to 2.81x with a mean of 1.67x and a median of 1.66x (compared with a
transaction multiple range of 1.73x to 1.82x for CENFED), a range of price to
tangible book value multiples of 1.07x to 3.03x with a mean of 1.74x and a
median of 1.69x (compared with a transaction multiple range of 1.73x to 1.83x
for CENFED), a range of price to trailing twelve months earnings multiples of
7.66x to 24.69x with a mean of 17.46x and a median of 17.23x (compared with a
transaction multiple range of 17.38x to 18.33x for CENFED), and a range of
implied deposit premiums paid of 1.35% to 21.37% with a mean of 8.35% and a
median of 7.61% (compared with a transaction premium range of 5.66% to 6.39%
for CENFED). This analysis yielded an overall imputed reference range per
share of CENFED Common Stock of $32.80 to $41.08 based on the mean and median
imputed range.
In addition, Merrill Lynch reviewed publicly available information regarding
thrift merger transactions with a value greater than $25 million and less than
$500 million which had occurred in the western region (consisting of Alaska,
Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington and
Wyoming) of the United States, the region in which CENFED operates, since
January 1, 1996. Merrill Lynch compared the price to book value, price to
tangible book value and price to earnings ratios (excluding SAIF
recapitalization charge) and the implied deposit premium paid in the
contemplated transaction and in such selected thrift merger transactions. This
analysis yielded a range of price to book value multiples of 0.97x to 2.59x
with a mean of 1.50x and a median of 1.44x (compared with a transaction
multiple range of 1.73x to 1.82x for CENFED), a range of price to tangible
book value multiples of 1.17x to 2.67x with a mean of 1.61x and a median of
1.56x (compared with a transaction multiple range of 1.73x to 1.83x for
CENFED), a range of price to trailing twelve months earnings multiples of
11.05x to 24.69x with a mean of 17.95x and a median of 17.57x (compared with a
transaction multiple range of 17.38x to 18.33x for CENFED), and a range of
implied deposit premiums paid of 1.89% to 15.13% with a mean of 6.56% and a
median of 5.09% (compared with a transaction premium range of 5.66% to 6.39%
for CENFED). This analysis yielded an overall imputed reference range per
share of CENFED Common Stock of $28.45 to $36.51 based on the mean and median
imputed range.
Merrill Lynch also reviewed publicly available information regarding thrift
merger transactions with a value greater than $100 million and less than or
equal to $300 million which had occurred in California, CENFED's principal
market, since January 1, 1996. Merrill Lynch compared the price to book value,
price to tangible book value and price to earnings ratios and the implied
deposit premium paid in the contemplated transaction and in such selected
thrift merger transactions. This analysis yielded a range of price to book
value multiples of 1.68x to 1.69x with both a mean and median of 1.68x
(compared with a transaction multiple range of 1.73x to 1.82x for CENFED), a
range of price to tangible book value multiples of 1.68x to 1.70x with both a
mean and median of 1.69x (compared with a transaction multiple range of 1.73x
to 1.83x for CENFED), a range of price to trailing twelve months earnings
multiples of 13.55x to 17.03x with both a mean and median of 15.29x (compared
with a transaction multiple range of 17.38x to 18.33x for CENFED), and a range
of implied deposit premiums paid of 6.41% to 6.44% with both a mean and median
of 6.43% (compared with a transaction premium range of 5.66% to 6.39% for
CENFED). This analysis yielded an overall imputed reference range per share of
CENFED Common Stock of $30.06 to $36.18 based on the mean and median imputed
range.
No company or transaction used in the above analysis as a comparison is
identical to CENFED or the Merger. Accordingly, an analysis of the results of
the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value or
announced merger transaction value, as the case may be, of the companies to
which they are being compared.
Comparison of Selected Comparable Companies--CENFED. Merrill Lynch compared
selected operating and stock market results of CENFED to the publicly
available corresponding data of certain other companies
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which Merrill Lynch deemed to be relevant, including Anchor BanCorp Wisconsin,
Coastal Bancorp Inc., CFX Corporation, Commonwealth Bancorp Inc., D&N
Financial Corp., Eagle Financial Corp., First Financial Holdings Inc., First
Palm Beach Bancorp Inc., First Republic Bancorp., First Federal Capital
Corporation and Haven Bancorp Inc. (collectively, the "CENFED Nationwide
Composite"). This comparison showed, among other things, that (i) as of August
13, 1997, the ratio of CENFED's market price to book value per share at June
30, 1997 was 1.74x, compared to a mean of 1.73x for the CENFED Nationwide
Composite; (ii) as of August 13, 1997, the ratio of CENFED's market price to
tangible book value per share at June 30, 1997 was 1.74x, compared to a mean
of 1.88x for the CENFED Nationwide Composite; (iii) as of August 13, 1997, the
ratio of CENFED's market price to estimated earnings for the twelve-month
period ending December 31, 1997 was 14.03x, compared to a mean of 13.95x for
the CENFED Nationwide Composite (assuming reported average earnings estimates
based on data from First Call for the CENFED Nationwide Composite and CENFED
management estimates for the Company); (iv) as of August 13, 1997, the ratio
of CENFED's market price to estimated earnings for the twelve month period
ending December 31, 1998 was 12.97x, compared to a mean of 12.26x for the
CENFED Nationwide Composite (assuming reported average earnings estimates
based on data from First Call for the CENFED Nationwide Composite and CENFED
management estimates for the Company); (v) for the latest quarter ended June
30, 1997, CENFED's annualized return on average assets was 0.67% compared to a
mean of 0.84% for the CENFED Nationwide Composite; (vi) for the latest quarter
ended June 30, 1997, CENFED's annualized return on average equity was 13.05%
compared to a mean of 12.85% for the CENFED Nationwide Composite; (vii) at
June 30, 1997 CENFED's ratio of nonperforming loans to total loans was 1.26%
compared with a mean of 1.01% for the CENFED Nationwide Composite; and (viii)
at June 30, 1997, CENFED's ratio of loan loss reserves to nonperforming assets
was 58.93% compared with a mean of 113.37% for the CENFED Nationwide
Composite.
Merrill Lynch also compared selected operating and stock market results of
CENFED to the publicly available corresponding data of certain other companies
located in California which Merrill Lynch deemed to be relevant, including Bay
View Capital Corporation, Downey Financial Corporation, FirstFed Financial
Corporation and First Republic Bancorp (collectively, the "CENFED California
Composite"). This comparison showed, among other things, that (i) as of August
13, 1997, the ratio of CENFED's market price to book value per share at June
30, 1997, was 1.74x, compared to a mean of 1.62x for the CENFED California
Composite; (ii) as of August 13, 1997, the ratio of CENFED's market price to
tangible book value per share at June 30, 1997, was 1.74x, compared to a mean
of 1.65x for the CENFED California Composite; (iii) as of August 13, 1997, the
ratio of CENFED's market price to estimated earnings for the twelve-month
period ending December 31, 1997, was 14.03x, compared to a mean of 14.29x for
the CENFED California Composite (assuming reported average earnings estimates
based on data from First Call for the CENFED California Composite and CENFED
Management estimates for the Company); (iv) as of August 13, 1997, the ratio
of CENFED's market price to estimated earnings for the twelve month period
ending December 31, 1998, was 12.97x, compared to a mean of 11.86x for the
CENFED California Composite (assuming reported average earnings estimates
based on data from First Call for the CENFED California Composite and CENFED
Management estimates for the Company); (v) for the quarter ended June 30,
1997, CENFED's annualized return on average assets was 0.67% compared to mean
of 0.71% for the CENFED California Composite; (vi) for the quarter ended June
30, 1997, CENFED's annualized return on average equity was 13.05% compared to
a mean of 11.27% for the CENFED California Composite; (vii) at June 30, 1997
CENFED's ratio of nonperforming loans to total loans was 1.26% compared with a
mean of 1.13% for the CENFED California Composite; and (viii) at June 30,
1997, CENFED's ratio of loan loss reserves to nonperforming assets was 58.93%
compared with a mean of 87.14% for the CENFED California Composite.
Valuation of Goodwill Lawsuit Claim-Glendale Federal is currently engaged in
litigation against the United States Government for breach of contract
regarding the treatment of supervisory goodwill, which was changed as a result
of the Financial Institutions Reform, Recovery and Enforcement Act of 1989. It
is the view of Merrill Lynch that the possibility exists that Glendale Federal
may receive a material payment from the United States Government as
compensation for damages related to this case. As part of its analysis,
Merrill Lynch analyzed this litigation and the effect, including the
possibility and potential of any damage payment that may be made,
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on the value of Golden State Common Stock, including shares of Golden State
Common Stock to be received by CENFED Stockholders.
At this time, Merrill Lynch has no basis upon which to evaluate the Glendale
Federal claims described in the preceding paragraph, and Golden State did not
provide any valuation thereof. In attempting to consider the value of such
claim, with the consent of CENFED and Golden State, Merrill Lynch considered
the current trading value of certain publicly-traded certificates (the
"Goodwill Certificates") issued by California Federal Bank ("California
Federal") in July of 1995. California Federal agreed to pay over to holders of
the Goodwill Certificates, which were issued to all of its then existing
shareholders, a portion of any damages which California Federal might receive
in relation to its supervisory goodwill lawsuit, a lawsuit which raises issues
similar to those involved in Glendale Federal's lawsuit against the United
States Government (although there can be no assurance that the Glendale
Federal and California Federal litigations will be resolved in a similar
manner). The market value of these Goodwill Certificates, divided by the
supervisory goodwill required to be written off by California Federal,
provides a percentage basis upon which it is possible to estimate an imputed
value to other companies' goodwill claims (including that of Glendale Federal)
by multiplying this percentage by the supervisory goodwill required to be
written off by such companies.
At the time of the Merrill Lynch Report, the Goodwill Certificates were
trading at a value of $17.00 per certificate. This implied a market value of
the legal claim at 70.2% of the supervisory goodwill required to be written
off by California Federal. If this same valuation is applied to Golden State's
lost supervisory goodwill of approximately $565 million, then a market value
of $5.67 per fully diluted Golden State share can be attributed to the
goodwill lawsuit.
Discounted Dividend Stream Analysis-Golden State Bancorp. Using a discounted
dividend stream analysis, Merrill Lynch estimated the present value of the
future streams of after tax cash flows that Golden State could produce on a
stand-alone basis from 1998 through 2003 and distribute to stockholders
("dividendable net income"). In this analysis, Merrill Lynch assumed that
Golden State performed in accordance with the consensus earnings forecasts
reported by First Call and that Golden State's tangible common equity to
tangible asset ratio would be maintained at a minimum 5.66% level (based upon
Golden State's present ratio). Merrill Lynch estimated the terminal values for
the Golden State Common Stock at 10.0, 11.0 and 12.0 times Golden State's 2003
estimated operating income (defined as net income before intangible
amortization). The dividendable net income streams and terminal values were
then discounted to present values using different discount rates (ranging from
12% to 14%) chosen to reflect different assumptions regarding required rates
of return of holders or prospective buyers of Golden State Common Stock. The
fundamental reference range indicated by this analysis was then adjusted by
the value of Golden State's goodwill litigation against the United States
Government, as implied by the Goodwill Certificates, and indicated a median
reference value of $28.17 per share as compared to the market price of Golden
State's stock on August 13, 1997 of $28.75. As indicated above, this analysis
is not necessarily indicative of actual values or actual future results and
does not purport to reflect the prices at which any securities may trade at
the present or at any time in the future. Merrill Lynch noted that the
discounted dividend stream analysis was included because it is a widely used
valuation methodology, but noted that the results of such methodology are
highly dependent upon the numerous assumptions that must be made, including
earnings growth rates, dividend payout rates, terminal values and discount
rates.
Comparison of Selected Comparable Companies-Golden State Bancorp. Merrill
Lynch compared selected operating and stock market results of Golden State to
the publicly available corresponding data of certain other companies which
Merrill Lynch deemed to be relevant, including Charter One Financial, H.F.
Ahmanson & Company, Golden West Financial, Bank United Corporation, Dime
Bancorp Inc., GreenPoint Financial and Coast Savings Financial (collectively
the "Golden State Composite"). This comparison showed, among other things,
that (i) as of August 13, 1997, the ratio of Golden State's market price to
book value per share at June 30, 1997 was 1.84x, compared to a mean of 2.07x
for the Golden State Composite; (ii) as of August 13, 1997, the ratio of
Golden State's market price to tangible book value per share at June 30, 1997
was 2.07x, compared to a mean of 2.39x for the Golden State Composite; (iii)
as of August 13, 1997, the ratio of Golden State's market price to estimated
earnings for the twelve month period ending December 31, 1997 was 19.69x,
compared to a
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mean of 15.39x for the Golden State Composite (assuming reported average
earnings estimates based on data from First Call for both Golden State and the
Golden State Composite); (iv) as of August 13, 1997, the ratio of Golden
State's market price to estimated earnings for the twelve month period ending
December 31, 1998 was 15.63x, compared to a mean of 13.51x for the Golden
State Composite (assuming reported average earnings estimates based on data
from First Call for both Golden State and the Golden State Composite); (v) for
the quarter ended June 30, 1997, Golden State's annualized return on average
assets was 0.73% compared to a mean of 0.87% for the Golden State Composite;
(vi) for the quarter ended June 30, 1997, Golden State's annualized return on
average common equity was 12.81% compared to a mean of 14.88% for the Golden
State Composite; (vii) at June 30, 1997, Golden State's ratio of nonperforming
loans to total loans was 1.42% compared with a mean of 1.82% for the Golden
State Composite; and (viii) at June 30, 1997, Golden State's ratio of loan
loss reserves to nonperforming assets was 69.38% compared with a mean of
67.26% for the Golden State Composite.
In addition, Merrill Lynch compared selected stock market results of Golden
State to the Golden State Composite after adjusting the prices of all members
of the Golden State Composite that have significant supervisory goodwill
claims. These adjustments were made based upon the market value of the
individual claims, as implied by the Goodwill Certificates. This comparison
showed, among other things, that (i) as of August 13, 1997, the ratio of
Golden State's adjusted market price to book value per share at June 30, 1997
was 1.48x, compared to a mean of 1.91x for the Golden State Composite; (ii) as
of August 13, 1997, the ratio of Golden State's adjusted market price to
tangible book value per share at June 30, 1997 was 1.66x, compared to a mean
of 2.22x for the Golden State Composite; (iii) as of August 13, 1997, the
ratio of Golden State's adjusted market price to estimated earnings for the
twelve month period ending December 31, 1997 was 15.82x, compared to a mean of
14.09x for the Golden State Composite (assuming reported average earnings
estimates based on data from First Call for both Golden State and the Golden
State Composite); and (iv) as of August 13, 1997, the ratio of Golden State's
adjusted market price to estimated earnings for the twelve month period ending
December 31, 1998 was 12.55x, compared to a mean of 12.37x for the Golden
State Composite (assuming reported average earnings estimates based on data
from First Call for both Golden State and the Golden State Composite).
In connection with the Opinion (dated as of the date of this Proxy
Statement-Prospectus), Merrill Lynch performed procedures to update, as
necessary, certain of the analyses described above and reviewed the
assumptions on which such analyses described above were based and the factors
considered in connection therewith. Merrill Lynch did not perform any analyses
in addition to those described above in updating its August 15, 1997, opinion,
except that in connection with the Opinion, Merrill Lynch assumed that the
Merger would be accounted for as a purchase under GAAP. In the Opinion,
Merrill Lynch noted that Golden State has publicly announced an intention to
distribute Litigation Tracking Warrants relating to the supervisory goodwill
litigation instituted by Golden State, the terms and conditions of which
Warrants have not yet been finally determined. For purposes of the Opinion,
with CENFED's consent Merrill Lynch assumed that, if the Litigation Tracking
Warrants are distributed in a manner consistent with the information made
publicly available by Golden State (the "Information"), the aggregate value of
the Litigation Tracking Warrants and the Golden State Common Stock following
such distribution will not be materially different from the value of the
Golden State Common Stock considered by Merrill Lynch in performing the
financial analyses underlying the Opinion. While Merrill Lynch did not conduct
a financial analysis of the Litigation Tracking Warrants or the effect of the
distribution of the Litigation Tracking Warrants (or include the Litigation
Tracking Warrants in any of the financial or other analyses underlying the
Opinion), on the basis of the Information and the foregoing assumption,
Merrill Lynch stated in the Opinion that it had no reason to believe that the
distribution of the Litigation Tracking Warrants on the terms and conditions
indicated in the Information would materially adversely affect the Opinion.
Further, Merrill Lynch reviewed the RedFed Merger Agreement and the California
Federal Merger Agreement and other publicly available information concerning
the proposed RedFed Merger and California Federal Merger.
Merrill Lynch has been retained by the CENFED Board as an independent
contractor to act as financial adviser to CENFED with respect to the Merger.
Merrill Lynch is a nationally recognized investment banking firm which, among
other things, regularly engages in the valuation of businesses and securities,
including banking institutions, in connection with mergers and acquisitions.
In addition, within the past two years, Merrill
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Lynch has provided financial advisory, investment banking and other services
to CENFED and has received fees of approximately $272,000 for the rendering of
such investment banking services. In the ordinary course of its securities
business, Merrill Lynch and its affiliates may trade debt and/or equity
securities of CENFED or Golden State for its own account and the account of
its customers, and accordingly, may from time to time hold a long or short
position in such securities.
CENFED and Merrill Lynch entered into a letter agreement dated August 1,
1997 relating to the services to be provided by Merrill Lynch in connection
with the Merger. CENFED has agreed to pay fees to Merrill Lynch as follows:
(i) a cash fee of $200,000, which was payable upon execution of the Merger
Agreement; (ii) a cash fee of $200,000, which was payable at the mailing of
this Proxy Statement-Prospectus; and (iii) an additional cash fee equal to
$1,779,087, payable at the closing of the Merger. In such letter agreement,
CENFED also agreed to reimburse Merrill Lynch for its reasonable out-of-pocket
expenses incurred in connection with its advisory work, including the
reasonable fees and disbursements of its legal counsel, and to indemnify
Merrill Lynch against certain liabilities relating to or arising out of the
Merger, including liabilities which might also arise under the federal
securities laws.
STRUCTURE OF THE MERGER
Subject to the terms and conditions of the Merger Agreement and in
accordance with the Delaware Law, at the Effective Time, CENFED will be merged
with and into Merger Sub. Merger Sub will be the Surviving Corporation in the
Merger and will continue to be a wholly-owned subsidiary of Golden State. At
the Effective Time, the separate corporate existence of CENFED will terminate.
The Certificate of Incorporation of Merger Sub, as in effect immediately prior
to the Effective Time, will be the certificate of incorporation of the
Surviving Corporation and the Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, will be the bylaws of the Surviving Corporation.
Contemporaneously with or shortly following consummation of the Merger, it is
expected that CenFed Bank will be merged with Glendale Federal to form a
single federally chartered savings institution.
CONVERSION OF CENFED COMMON STOCK; TREATMENT OF CENFED STOCK OPTIONS
At the Effective Time, each outstanding share of CENFED Common Stock, other
than shares held in CENFED's treasury or held by Golden State or any
subsidiary thereof (except, in both cases, for shares held in trust accounts,
managed accounts, custodial accounts and the like that are beneficially owned
by third parties ("Trust Account Shares")), will be converted into the right
to receive a number of shares of Golden State Common Stock equal to the
Exchange Ratio, 1.2, subject to adjustments as provided in the Merger
Agreement. Because the Exchange Ratio is fixed and because the market price of
Golden State Common Stock is subject to fluctuation, the value of the shares
of Golden State Common Stock that holders of CENFED Common Stock will receive
in the Merger may increase or decrease prior to and following the Merger.
CENFED may terminate the Merger Agreement in the event that the price per
share of Golden State Common Stock declines below a threshold (based on both
the absolute price of Golden State Common Stock and the change in such price
in relation to an index of thrift institutions and thrift holding companies)
specified in the Merger Agreement during a specified period preceding the
Effective Time. See "--Termination of Merger Agreement."
Each issued and outstanding share of the capital stock of Merger Sub will be
converted at the Effective Time into one share of common stock, par value $.01
per share, of the Surviving Corporation. Each share of CENFED Common Stock
owned by Golden State or its subsidiaries (other than Trust Account Shares) or
by CENFED as treasury stock will be cancelled at the Effective Time and will
cease to exist, and no Golden State Common Stock or other consideration will
be delivered in exchange therefor.
Each stock option to acquire CENFED Common Stock (each, a "CENFED Option")
granted under the CENFED Financial Corporation 1992 Long-Term Incentive Plan,
the CENFED Financial Corporation 1994 Long-Term Incentive Plan and the CENFED
Financial Corporation 1994 Directors' Stock Option Plan (collectively, the
"CENFED Stock Plans") which is outstanding and unexercised immediately prior
to the
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Effective Time will be converted automatically at the Effective Time into a
stock option (a "Replacement Option") to purchase Golden State Common Stock
and will continue to be governed by the terms of the CENFED Stock Plans, which
will be assumed by Golden State. In each case, (i) the number of shares of
Golden State Common Stock subject to the Replacement Option will be equal to
the number of shares of CENFED Common Stock subject to the related CENFED
Option multiplied by the Exchange Ratio and rounded down to the nearest whole
share, and (ii) the exercise price per share of Golden State Common Stock
subject to the Replacement Option will be equal to the aggregate exercise
price for the shares of CENFED Common Stock purchasable pursuant to the CENFED
Option divided by the number of full shares of Golden State Common Stock
subject to the Replacement Option, rounded up to the nearest whole cent. The
duration and other terms of each such Replacement Option will be substantially
the same as the prior CENFED Option. In any event, each CENFED Option intended
to be an "incentive stock option" as defined in Section 422 of the Code will
be adjusted in accordance with the requirements of Section 424 of the Code.
Pursuant to the CENFED Stock Plans, each CENFED Option, if not already
exercisable in full, will become exercisable in full upon consummation of the
Merger. In addition, pursuant to the terms of the California Federal Merger
Agreement, each holder of a Replacement Option that is outstanding and
unexercised immediately prior to the consummation of the California Federal
Merger may elect to surrender such option in exchange for (i) a per share cash
payment based on the prevailing market price per share of Golden State Common
Stock less the per share exercise price of such option, and (ii) either (a) a
distribution to such holder of one Litigation Tracking Warrant (see
"INFORMATION ABOUT GOLDEN STATE AND MERGER SUB--Subsequent Events") for each
share of Golden State Common Stock underlying such option or (b) a cash
payment equal to the product of the number of shares of Golden State Common
Stock underlying such option and the prevailing market price per Litigation
Tracking Warrant.
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
At or prior to the Effective Time, Golden State will deposit, or cause to be
deposited, with a bank or trust company selected by Golden State and
reasonably acceptable to CENFED (the "Exchange Agent"), for the benefit of the
holders of certificates of CENFED Common Stock, certificates representing the
shares of Golden State Common Stock and cash in lieu of the issuance of any
fractional shares (such certificates and cash, together with any dividends or
distributions with respect thereto, the "Exchange Fund") to be issued pursuant
to the Merger Agreement in exchange for outstanding shares of CENFED Common
Stock.
As soon as is practicable (but in no event later than five days) after the
Effective Time, a form of transmittal letter will be mailed by the Exchange
Agent to the CENFED Stockholders. The form of transmittal letter will contain
instructions with respect to the surrender of certificates representing CENFED
Common Stock.
CENFED STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY AND
SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT UNLESS AND UNTIL THE CENFED
STOCKHOLDER RECEIVES A LETTER OF TRANSMITTAL FOLLOWING THE EFFECTIVE TIME.
Until the certificates representing CENFED Common Stock are surrendered for
exchange after the Effective Time, holders of such certificates will accrue
but will not be paid dividends or other distributions declared after the
Effective Time with respect to the Golden State Common Stock into which their
shares have been converted. When such certificates are surrendered, any unpaid
dividends or other distributions will be paid, without interest. As of the
date hereof, Golden State does not currently pay, and does not anticipate that
it will pay, regular cash dividends with respect to the Golden State Common
Stock. After the Effective Time, no transfers on the stock transfer books of
CENFED of shares of CENFED Common Stock issued and outstanding immediately
prior to the Effective Time will be permitted. If certificates representing
shares of CENFED Common Stock are presented after the Effective Time, they
will be cancelled and exchanged for the relevant certificate representing the
applicable shares of Golden State Common Stock.
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No fractional shares of Golden State Common Stock will be issued to any
CENFED Stockholder upon consummation of the Merger. For each fractional share
that would otherwise be issued, Golden State will pay cash in an amount equal
to such fraction multiplied by the average of the closing sale prices of
Golden State Common Stock on the NYSE Composite Transactions Tape for the ten
trading days ending on the second trading day immediately preceding the
Effective Time. No interest will be paid or accrued on the cash in lieu of
fractional shares payable to holders of such certificates.
None of Golden State, CENFED or any other person will be liable to any
former CENFED Stockholder for any property or amount properly delivered from
the Exchange Fund to a public official pursuant to applicable abandoned
property, escheat or similar laws.
If a certificate for CENFED Common Stock has been lost, stolen or destroyed,
the Exchange Agent will issue the consideration properly payable in accordance
with the Merger Agreement upon receipt of appropriate evidence as to such
loss, theft or destruction, appropriate evidence as to the ownership of such
certificate by the claimant, and appropriate and customary indemnification.
For a description of the Golden State Common Stock and a description of the
differences between the rights of the holders of Golden State Common Stock and
the holders of CENFED Common Stock, see "COMPARISON OF STOCKHOLDER RIGHTS."
Shares of Golden State capital stock, including Golden State Common Stock,
issued and outstanding immediately prior to the Effective Time will remain
issued and outstanding and be unaffected by the Merger, and holders of such
stock will not be required to exchange the certificates representing such
stock or take any other action by reason of the consummation of the Merger.
EFFECTIVE TIME
The Merger will become effective at the Effective Time, which will occur 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. The closing date will occur on the date that is at
least two business days after satisfaction or appropriate waiver of each of
the conditions set forth in Article VI of the Merger Agreement (or another
time to which Golden State and CENFED agree) (the "Closing Date"). As of the
date of this Proxy Statement-Prospectus, Golden State and CENFED each
anticipate that the Merger will be consummated during the fiscal quarter
ending March 31, 1998. However, the consummation of the Merger could be
delayed as a result of delays in obtaining the Requisite Regulatory Approvals
(as defined herein). There can be no assurances whether or when such approvals
will be obtained or that the Merger will be consummated. If the Merger is not
effected on or before April 30, 1998, then, subject to a 45 day extension in
certain circumstances specified in the Merger Agreement, the Merger Agreement
may be terminated by either Golden State or CENFED, unless the failure to
effect the Merger by such date is due to the failure of the party seeking to
terminate the Merger Agreement to perform or observe the covenants and
agreements of such party set forth therein. See "--Conditions to the
Consummation of the Merger" and "--Regulatory Approvals Required for the
Merger."
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, CENFED has made certain representations and
warranties to Golden State with respect to certain matters, including (i)
CENFED's organization and existence, its corporate power and authority, and
CenFed Bank's organizational status; (ii) CENFED's qualification to do
business; (iii) CENFED's capitalization; (iv) CENFED's investment in CenFed
Bank; (v) the enforceability of the Merger Agreement, CENFED's authority to
consummate the Merger, required stockholder approval and the nonapplicability
of certain antitakeover provisions; (vi) the absence of violations of or
defaults under laws, the CENFED Certificate of Incorporation or CENFED Bylaws
or certain agreements, and the approvals required for the Merger; (vii)
CENFED's reports to government regulators and the accuracy of CENFED's
consolidated financial statements; (viii) the absence of liabilities other
than in the ordinary course of business, the conduct of CENFED's business
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in the ordinary and usual course of business, and the absence of any change
that would reasonably be expected to have a material adverse effect; (ix)
certain tax matters; (x) the absence of actual or threatened claims, actions
or proceedings; (xi) the absence of actual or threatened regulatory actions or
of any basis for failing to receive regulatory approval of the Merger; (xii)
the absence of certain types of contracts and of defaults and violations of
certain agreements; (xiii) the absence of collective bargaining agreements,
certain labor-related proceedings and labor disputes or organizational
efforts; (xiv) status of employment agreements, including compliance with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"); (xv)
title to CENFED assets; (xvi) holding of requisite permits and approvals and
compliance with law; (xvii) broker's or finder's fees; (xviii) environmental
matters; (xix) classified assets, including certain loans; (xx) absence of
interest of certain affiliates, or associates thereof, of CENFED in CENFED
property; (xxi) insurance policies; (xxii) books and records; (xxiii)
corporate documents of CENFED and CenFed Bank; (xxiv) indemnification
agreements with certain persons; (xxv) derivatives contracts; and (xxvi) the
absence of material misstatements or omissions in certain written information
supplied by CENFED to Golden State in connection with the Merger.
Additionally, Golden State has made certain representations and warranties
to CENFED in the Merger Agreement with respect to certain matters, including:
(i) Golden State's organization and existence and its corporate power and
authority, and Glendale Federal's organizational status; (ii) Golden State's
capitalization and its ownership of Glendale Federal; (iii) the enforceability
of the Merger Agreement and the absence of any requirement of Golden State
Stockholder approval in connection with the Merger; (iv) the absence of
violations of or defaults under laws, the Golden State Certificate of
Incorporation or Golden State Bylaws or certain agreements, and the approvals
required for the Merger; (v) Golden State's and Glendale Federal's reports to
government regulators and the accuracy of Golden State's consolidated
financial statements; (vi) the absence of liabilities other than in the
ordinary course of business, the conduct of Golden State's business in the
ordinary and usual course of business, and the absence of any change that
would reasonably be expected to have a material adverse effect; (vii) certain
tax matters; (viii) the absence of actual or threatened claims, actions or
proceedings; (ix) the absence of actual or threatened regulatory actions or of
any basis for failing to receive regulatory approval of the Merger; holding of
requisite permits and approvals and compliance with law; (x) broker's or
finder's fees; (xi) books and records; and (xii) the absence of material
misstatements or omissions in certain written information supplied by Golden
State to CENFED in connection with the Merger.
The Merger Agreement provides that no representation or warranty of a party
will be deemed untrue or incorrect, nor will any party be deemed to have
breached a representation or warranty, on account of any matter unless such
matter, together with all other matters inconsistent with any of the party's
representations and warranties, is material and adverse to the business,
financial condition or results of operations of Golden State or CENFED, as the
case may be, materially adversely affects the ability of Golden State or
CENFED, as applicable, to consummate the Merger by the Termination Date or
enables any person to prevent or materially delay the consummation of the
Merger.
CONDUCT OF BUSINESS PENDING THE MERGER AND OTHER AGREEMENTS
In the Merger Agreement, CENFED has agreed to conduct its business and
maintain its books and records in the usual, regular and ordinary course, in a
manner consistent with past practice; to use all commercially reasonable
efforts to preserve intact its business organization, properties, leases and
advantageous business relationships and to retain the services of its officers
and employees; to take no action that could reasonably be expected to
adversely affect or delay the ability of CENFED or Golden State to obtain any
necessary approvals, consents or waivers of any governmental authority or
other person required for the transactions contemplated by the Merger
Agreement or to timely perform its covenants and agreements under the Merger
Agreement; and to take no action that would reasonably be expected to have a
material adverse effect on CENFED.
Until the Effective Time, and except as contemplated by the Merger Agreement
or as set forth in the disclosure letter delivered by CENFED to Golden State
in connection with entering into the Merger Agreement (the "CENFED Disclosure
Letter"), CENFED may not, without the consent of Golden State (which consent
may not be unreasonably withheld or delayed by Golden State), and subject to
certain limited exceptions set
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forth in the Merger Agreement, take (or agree or commit to take) certain
actions, including among others, actions relating to (i) the incurrence of
indebtedness, (ii) its capital stock (including issuing, declaring or paying
dividends on, making distributions with respect to, redeeming, or granting
options or other rights with respect to, such capital stock), (iii)
disposition of its properties, (iv) employees or employment-related
arrangements, contracts, compensation or benefit plans; (v) investments in,
and certain asset- or property-related transactions with, any other person or
entity; (vi) certain significant contracts; (vii) the settlement of any
material claim, action or proceeding; (viii) certain loans, leases, advances,
credit enhancements or extensions of credit; (ix) changes to its accounting
methods; (x) its business activities or lines of business; (xi) significant
corporate changes including amending the CENFED Certificate of Incorporation
or the CENFED Bylaws; (xii) capital expenditures; (xiii) actions that would
affect the accounting or tax treatment of the Merger; and (xiv) the making,
entering into or purchase of swaps, futures, options and other derivatives and
certain securities.
In addition, CENFED has agreed in the Merger Agreement to certain
restrictions and obligations in respect of any competing proposals to acquire
CENFED, including without limitation not to initiate, solicit or encourage any
inquiries, or the making of any proposal or offer, with respect to certain
business combinations or acquisition transactions (each, an "Acquisition
Proposal") involving CENFED, or, except as legally required for compliance by
CENFED directors with their fiduciary duties in the written opinion of outside
legal counsel, with respect to an unsolicited third party offer, engage in any
negotiations concerning or provide confidential information to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make an Acquisition Proposal.
Further, Golden State and CENFED have agreed to take certain other actions
pursuant to the Merger Agreement, including, among others, the following: (i)
CENFED has agreed, under certain circumstances, to take actions shortly before
the Effective Time to conform certain of its accounting and valuation
practices to those of Golden State; (ii) each party has agreed to provide to
the other reasonable access to its books, documents, records, employees and
representatives and to provide other information and reports, except, subject
to appropriate substitute disclosure arrangements, as otherwise required by
law, existing agreements or as would violate the rights of customers or
jeopardize any attorney-client privilege; (iii) each party has agreed to
cooperate with the other and use its best efforts to obtain the approvals of
all third parties and governmental authorities necessary or advisable to
consummate the Merger; (iv) each party has agreed to use its best efforts to
promptly take all actions and do all things necessary, proper or advisable
under applicable law or regulation to consummate the Merger; (v) the parties
have agreed that they will mutually agree upon public statements and
government or securities exchange filings in connection with the Merger; (vi)
each party has agreed to promptly prepare and file this Proxy Statement-
Prospectus and the Registration Statement and to use all reasonable efforts to
have the Registration Statement declared effective, and in connection with the
Registration Statement, each of Golden State and CENFED agreed to cause their
respective independent auditors to deliver to the other party "comfort"
letters (which letters were delivered shortly before the Registration
Statement became effective); (vii) CENFED has agreed to take all action
necessary to obtain approval of the Merger Agreement and the Merger by the
CENFED Stockholders, and to recommend that the CENFED Stockholders vote in
favor of and approve the Merger and the Merger Agreement, except as legally
required for the discharge by the CENFED Board of its fiduciary duties in the
written opinion of CENFED's legal counsel; (viii) each party has agreed to
notify the other promptly in the event of certain events specified in the
Merger Agreement which could have an adverse effect on the parties or the
Merger; (ix) CENFED has agreed to communicate and consult with Golden State in
respect of tax matters; and (x) the parties have each agreed to use their
respective best efforts to cause the Bank Merger to occur as soon as possible
after the Effective Time.
CONDITIONS TO CONSUMMATION OF MERGER
Except as otherwise specifically noted below, each party's obligation to
effect the Merger is subject to the satisfaction or waiver, where permitted by
applicable law, of the following conditions at or prior to the Effective Time:
(a) The CENFED Stockholder Approval shall have been obtained;
(b) All necessary regulatory approvals, consents and waivers with respect
to the Merger Agreement and the transactions contemplated hereby shall
have been received and shall remain in full force and effect,
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and all applicable statutory waiting periods shall have expired (the
"Requisite Regulatory Approvals"); however, no approval, consent or
waiver referred to in this paragraph (b) will be deemed to have been
received under the Merger Agreement if it includes 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 by the Merger Agreement to Golden State as to
render it inadvisable in the judgment of Golden State to proceed with
such transactions (the "Consent Condition");
(c) Any other requirements prescribed by law necessary to consummate the
transactions contemplated by the Merger Agreement shall have been
satisfied;
(d) No party to the Merger Agreement shall be subject to any order, decree
or injunction of a court or agency of competent jurisdiction that
enjoins or prohibits the consummation of any transaction contemplated
by the Merger Agreement, and no litigation or proceeding shall be
pending against Golden State or CENFED brought by any governmental
agency seeking to prevent consummation of such transactions;
(e) No statute, rule or regulation shall have been enacted, promulgated,
interpreted, applied or enforced by any governmental authority that
prohibits or makes illegal consummation of the transactions
contemplated by the Merger Agreement;
(f) The representations and warranties of CENFED, in the case of the
obligation of Golden State to consummate the Merger, and of Golden
State, in the case of the obligation of CENFED to consummate the
Merger, shall have been true and correct in all material respect as of
the date of the Merger Agreement 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 that specifically relates to an earlier
date); CENFED or Golden State, as the case may be, shall have performed
in all material respects each of its covenants and agreements contained
in the Merger Agreement; there shall have been no material adverse
change in the financial condition, business or assets of CENFED or
Golden State, as the case may be, and its respective subsidiaries taken
as a whole since December 31, 1996; and Golden State or CENFED, as the
case may be, shall have received a certificate signed by the chief
executive officer and the chief financial officer of the other party to
the Merger Agreement, dated the Closing Date, to the foregoing effect;
(g) Each of Golden State and CENFED shall have received the opinion, in
each case dated the Closing Date, described under "--Certain Federal
Income Tax Consequences";
(h) Each of Golden State and CENFED shall have received an updated
disclosure letter from the other party to the Merger Agreement;
(i) In the case of Golden State's obligation to consummate the Merger, none
of the events provided for in the CENFED Rights Agreement shall have
occurred that would make the CENFED Rights nonredeemable or that would
make the CENFED Rights exercisable or cause them to trade separately
from the CENFED Common Stock;
(j) The shares of Golden State Common Stock issuable to CENFED Stockholders
in the Merger shall have been authorized for listing on the NYSE upon
official notice of issuance;
(k) The Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order; and
(l) the comfort letters of the parties' respective independent accountants
shall have been received.
The Merger Agreement permits waiver of the above conditions only where
permitted by applicable law. See "--Waiver and Amendment of Merger Agreement."
The waiver of certain of the foregoing conditions (including those relating to
CENFED Stockholder approval, necessary regulatory approvals, the expiration of
applicable waiting periods, other requirements prescribed by law necessary to
consummate the transactions contemplated by the Merger Agreement, the absence
of orders, decrees or injunctions enjoining or prohibiting
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the Merger or of any statute, rule or regulation prohibiting or making illegal
the Merger, and the effectiveness of the Registration Statement) is not
legally permissible and consummation of the Merger depends on the satisfaction
of such conditions. With respect to conditions the waiver of which is
permitted by applicable law, such conditions may or may not be waived
depending on the particular conditions, if any, that are not satisfied and the
anticipated effect of proceeding with the consummation of the Merger in the
absence of the satisfaction of such conditions. Accordingly, although the
parties have no present intention of waiving any unfulfilled conditions to
consummation of the Merger, none has finally determined whether it would waive
any such conditions where permissible. For further information with respect to
the condition that CENFED receive an opinion of its counsel as to the U.S.
federal income tax consequences of the Merger, see "--Certain Federal Income
Tax Consequences."
REGULATORY APPROVALS REQUIRED FOR THE MERGER
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVAL, WHICH APPROVAL HAS NOT YET BEEN RECEIVED. THERE CAN BE NO ASSURANCE
THAT SUCH APPROVAL WILL BE OBTAINED OR AS TO THE DATE OF SUCH APPROVAL. THERE
CAN ALSO BE NO ASSURANCE THAT SUCH APPROVAL WILL NOT CONTAIN A CONDITION OR
REQUIREMENT WHICH CAUSES SUCH APPROVAL TO FAIL TO SATISFY THE CONDITIONS SET
FORTH IN THE MERGER AGREEMENT OR THAT WOULD CAUSE THE PARTIES TO TERMINATE THE
MERGER AGREEMENT. SEE "--CONDITIONS TO THE CONSUMMATION OF THE MERGER." THERE
CAN LIKEWISE BE NO ASSURANCE THAT THE DOJ WILL NOT CHALLENGE THE MERGER, OR,
IF SUCH A CHALLENGE IS MADE, AS TO THE RESULT THEREOF.
Under the Merger Agreement, the obligations of both Golden State and CENFED
to consummate the Merger are conditioned upon the receipt of all Requisite
Regulatory Approvals. See "--Conditions to Consummation of the Merger." Each
of Golden State and CENFED has agreed to use its best efforts to obtain the
Requisite Regulatory Approvals.
The Merger and the Bank Merger are subject to the approval of the OTS under
Section 10(e) of the Home Owner's Loan Act of 1933 and the Bank Merger Act
provisions of the Federal Deposit Insurance Act, respectively, and related OTS
regulations. These approvals require consideration by the OTS of various
factors, including assessments of the competitive effect of the contemplated
transactions, the managerial and financial resources and future prospects of
the resulting institutions and the effect of the contemplated transactions on
the convenience and needs of the communities to be served. The Community
Reinvestment Act of 1977, as amended (the "CRA"), also requires that the OTS,
in deciding whether to approve the Merger and the Bank Merger, assess the
records of performance of Glendale Federal and CenFed Bank in meeting the
credit needs of the communities they serve, including low and moderate income
neighborhoods. Each of Glendale Federal and CenFed Bank currently has a
"satisfactory" CRA rating, in each case from the OTS. The regulations of the
OTS require publication of notice of, and an opportunity for public comment
with respect to, the applications filed in connection with the Merger and the
Bank Merger, and authorize the OTS to hold oral arguments in connection
therewith. A protest was filed with the OTS by a community group which has
stated that it is not seeking to prevent completion of the Merger, but is
instead asking that certain conditions relating to community service by the
combined company be placed on the OTS approval thereof. An OTS oral argument
proceeding was held with respect to this protest on January 9, 1998. In
accordance with OTS application procedures, the views expressed at this oral
argument will be made a part of the record that will be considered by the
Director of the OTS or the Director's designate in determining whether to
approve or disapprove Golden State's application for approval of the Merger.
The Merger and the Bank Merger may not be consummated for a period of 15 to
30 days following OTS approval (the precise length of the period to be
determined by the OTS with the concurrence of the DOJ), during which time the
DOJ has authority to challenge the Merger or the Bank Merger on antitrust
grounds. The commencement of an antitrust action would stay the effectiveness
of any approval granted by the OTS unless a court specifically orders
otherwise. If the DOJ does not commence a legal action during the waiting
period, it
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may not thereafter challenge the transaction, except in an action commenced
under Section 2 of the Sherman Antitrust Act.
Golden State has filed applications and notices seeking the requisite OTS
approval. The public comment period for the OTS application expired on
November 21, 1997. To date, Golden State has not received any approvals or
notices of disapproval.
Golden State and CENFED are not aware of any other significant governmental
approvals that are required for consummation of the Merger except as described
above. Should any other approval or action be required, it is presently
contemplated that such approval would be sought.
See "--The Effective Time," "--Conditions to Consummation of Merger" and "--
Termination of Merger Agreement."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary description of the material U.S. federal income
tax consequences of the Merger to holders of CENFED Common Stock who hold such
stock as a capital asset. This summary is not a complete description of all of
the consequences of the Merger and, in particular, may not address U.S.
federal income tax considerations applicable to shareholders subject to
special treatment under U.S. federal income tax law (including, for example, a
shareholder that is not a U.S. person, is a financial institution, insurance
company or a dealer in securities or is a tax-exempt entity or an individual
who acquired CENFED Common Stock pursuant to the exercise of an employee stock
option or otherwise as compensation). In addition, no information is provided
herein with respect to the tax consequences of the Merger under applicable
foreign, state or local laws. The following discussion is based on the Code,
Treasury Regulations thereunder, and administrative rulings and court
decisions as in effect on the date of this Proxy Statement-Prospectus, without
consideration of the particular facts or circumstances of any CENFED
Stockholder. CENFED STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR TAX ADVISORS
REGARDING THE TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE EFFECTS OF
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
The respective obligations of the parties to effect the Merger are
conditioned on delivery of an opinion, in the case of Golden State, from
Wachtell, Lipton, Rosen & Katz, its counsel, and an opinion, in the case of
CENFED, from Mayer, Brown & Platt, its counsel, each dated as of the Effective
Time (and each of Golden State and CENFED has received such an opinion, dated
as of the date of this Proxy Statement-Prospectus, from its respective
counsel), based upon certain customary representations and assumptions set
forth therein or on certificates of executive officers of Golden State or
CENFED attached thereto, 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 CENFED 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 CENFED Stockholders upon the
receipt of Golden State Common Stock in the Merger (except with respect to
cash received in lieu of fractional shares) and that no gain or loss will be
recognized by Golden State, Merger Sub or CENFED as a result of the Merger. In
the event that CENFED fails to receive the opinion of its counsel dated as of
the Effective Time as contemplated by this paragraph and determines to waive
the condition to its obligation to consummate the Merger relating thereto and
the federal income tax consequences to CENFED Stockholders are materially
different from those described herein, CENFED would resolicit the approval of
CENFED Stockholders prior to proceeding with consummation of the Merger.
Assuming that the Merger will qualify as a reorganization within the meaning
of Section 368(a) of the Code, and subject to the foregoing, the Merger will
have the federal income tax consequences discussed below.
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Tax Implications to CENFED Stockholders. Except to the extent CENFED
Stockholders receive cash in lieu of a fractional share interest, CENFED
Stockholders who exchange shares of Common Stock in the Merger for shares of
Golden State Common Stock will not recognize gain or loss for federal income
tax purposes upon the receipt of shares of Golden State Common Stock in
exchange for their shares of CENFED Common Stock. The aggregate tax basis of
shares of Golden State Common Stock received as a result of the Merger will be
the same as the CENFED Stockholder's aggregate tax basis in the shares of
CENFED Common Stock surrendered in the exchange, reduced by the portion of
such stockholder's tax basis properly allocated to the fractional share
interest, if any, for which such stockholder receives cash. The holding period
of the shares of Golden State Common Stock received by CENFED Stockholders as
a result of the Merger will include the period during which such CENFED
Stockholder held the shares of CENFED Common Stock exchanged by such CENFED
Stockholder in the Merger, provided that the shares of CENFED Common Stock so
exchanged were held as capital assets at the Effective Time. A CENFED
Stockholder that receives cash in lieu of a fractional share interest in
Golden State Common Stock in the Merger will be treated as having received the
fractional share interest in shares of Golden State Common Stock in the Merger
and as having received the cash in redemption of the fractional share
interest. The cash payment will be treated as a distribution in payment of the
fractional interest deemed redeemed under Code Section 302. A CENFED
Stockholder who (i) is not involved in directing corporate affairs, (ii) holds
a minimal interest in CENFED, and (iii) is not considered to own indirectly
shares of CENFED or Golden State under the constructive ownership rules of
Code Section 318, will recognize gain or loss on the deemed redemption in an
amount equal to the difference between the amount of cash received and such
CENFED Stockholder's adjusted tax basis allocable to such fractional share.
Such gain or loss will be capital gain or loss if such Stockholder's shares of
CENFED Common Stock are held as a capital asset at the Effective Time. The
capital gain or loss so recognized generally will be long-term capital gain or
loss if the holding period for the fractional share interest exceeds one year.
In the case of individual CENFED Stockholders, such capital gain will be taxed
at a maximum rate of 28%, if such CENFED Stockholder's holding period is more
than one year but not more than 18 months, and at a maximum rate of 20% if
such holding period is more than 18 months. In the case of other CENFED
Stockholders, Code Section 302 sets forth other tests, which, if met, would
also result in similar treatment of the Stockholder. In the event, however,
that none of these tests could be met, the cash payment would be taxed as a
dividend.
Tax Implications to Golden State, Merger Sub and CENFED. Golden State,
Merger Sub and CENFED will not recognize any gain or loss for federal income
tax purposes as a result of the Merger.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for using the purchase
method of accounting in accordance with generally accepted accounting
principles. Under the purchase method of accounting, all of the assets and
liabilities of CENFED will be recorded in Golden State's consolidated
financial statements at their estimated fair value at the Effective Time, and
the consideration to be paid in the Merger will be allocated to such assets
and liabilities based on such fair values. The amount by which such
consideration exceeds the fair value of the net assets acquired by Golden
State through the Merger will be recorded as goodwill. Golden State's
consolidated financial statements will include the operations of CENFED after
the Effective Time. Income (or loss) of CENFED prior to the Effective Time
will not be included in the income of the combined company.
The selected unaudited pro forma financial data and the unaudited pro forma
condensed combined financial statements contained in this Proxy Statement-
Prospectus have been prepared using the purchase accounting method to account
for the Merger. See "SUMMARY--Selected Financial Data" and "UNAUDITED PRO
FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
TERMINATION OF MERGER AGREEMENT
The Merger Agreement provides that it may be terminated, and the Merger
abandoned, at any time prior to the Effective Time, whether before or after
CENFED Stockholder Approval:
(a) by the mutual consent of Golden State and CENFED;
(b) by Golden State or CENFED, if determined by a majority vote of its
respective board of directors, if (i) the CENFED Stockholders fail to
approve the Merger Agreement or (ii) the other party materially
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breaches any representation, warranty, covenant or agreement in the
Merger Agreement, which breach is not cured or curable within 45 days
after written notice of such breach is given to the breaching party by
the other, provided that there will be no such right of termination in
the case of a breach of a representation or warranty unless such breach,
taken together with all other such breaches, would result in the
representations and warranties of the breaching party not being true and
correct in all material respects;
(c) by Golden State or CENFED by written notice to the other if the Consent
Condition has not been satisfied by the Termination Date or if any
governmental authority of competent jurisdiction has issued a final,
unappealable order enjoining or otherwise prohibiting consummation of
the Merger;
(d) by Golden State or CENFED, if so determined by a majority vote of its
respective board of directors, if the Merger has not been consummated
by the Termination Date, unless the failure of the Merger to be
consummated at such time is due to the breach of any material
representation, warranty or covenant in the Merger Agreement by the
party seeking to terminate, and subject to the right of either party to
extend the Termination Date for up to an additional 45 days if such
party believes that approvals required to be obtained by it are
imminent and such party provides the reasonable factual basis for such
belief to the other party; or
(e) by CENFED if both (i) the Final Golden State Stock Price is less than
$24.40 and (ii) the quotient obtained by dividing the Final Golden
State Stock Price by $28.69 (the closing price of Golden State Common
Stock on August 15, 1997, the last NYSE trading day preceding
announcement of the Merger) does not equal at least 85% of the quotient
obtained by dividing the average Index Price during the Determination
Period by the average Index Price for the 10 trading days for Golden
State Common Stock preceding August 15, 1997. "Index Price" means, on
any given date, the weighted average (determined as described below) of
the closing prices of the companies comprising the Index Group. "Index
Group" means the following thrift holding companies:
<TABLE>
<CAPTION>
WEIGHTING
COMPANY NAME INDEX
------------ ---------
<S> <C>
Ahmanson & Company (H.F.)........................................ 9.38%
Astoria Financial Corp........................................... 2.02%
Bank United Corp................................................. 3.04%
Charter One Financial............................................ 4.45%
Coast Savings Financial.......................................... 1.79%
Commercial Federal Corp.......................................... 2.08%
Dime Bancorp Inc................................................. 9.99%
Downey Financial Corp............................................ 2.58%
Golden State Bancorp. Inc........................................ 4.85%
Golden West Financial Corp....................................... 5.47%
GreenPoint Financial Corp........................................ 4.34%
Long Island Bancorp Inc.......................................... 2.31%
MAF Bancorp Inc.................................................. 1.48%
New York Bancorp Inc............................................. 2.08%
People's Bank (MHC).............................................. 5.88%
Peoples-Heritage Financial Group................................. 2.64%
Queens County Bancorp Inc........................................ .98%
Roslyn Bancorp Inc............................................... 4.20%
Sovereign Bancorp Inc............................................ 6.74%
St. Paul Bancorp. Inc............................................ 3.27%
Washington Federal Inc........................................... 4.57%
Washington Mutual Inc............................................ 12.17%
Webster Financial Corp........................................... 1.15%
Westcorp......................................................... 2.52%
</TABLE>
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provided, that the common stocks of all of such companies are publicly
traded and as to any such company there will not have been, since August
15, 1997 and before the date of determination of the Index Price, any
public announcement of a proposal for such company to be acquired or for
such company to acquire another company or companies in transactions
with a value exceeding 25% of the acquiror's market capitalization. In
the event that any of the companies comprising the Index Group fails to
meet the foregoing criteria, that company will be deemed removed from
the Index Group, and the weights (which are determined based upon the
number of each company's outstanding shares of common stock) will be
redistributed proportionately for purposes of determining the Index
Price. Between the date of the Merger Agreement and the date of this
Proxy Statement--Prospectus, the following companies have, based on the
foregoing criteria, been removed from the Index Group: Coast Savings
Financial, Golden State Bancorp Inc., New York Bancorp Inc., Peoples-
Heritage Financial Group, Sovereign Bancorp Inc. and Webster Financial
Corporation. Accordingly, if a determination of whether there had been a
Termination Event were being made as of the date of this Proxy
Statement--Prospectus, the weights set forth above would be
redistributed among the remaining companies based on the number of their
outstanding shares of common stock. If a company belonging to the Index
Group, or Golden State, declares or effects a stock dividend,
reclassification, recapitalization, split-up, combination, exchange of
shares or similar transaction, the prices for the common stock of such
company or of Golden State, as the case may be, will be appropriately
adjusted for purposes of applying this provision of the Merger
Agreement.
Whether a Termination Event will occur will not be known until after the end
of the Determination Period. If such date were the date of this Proxy
Statement-Prospectus, no such event would exist based on the prevailing market
price of Golden State Common Stock and of the prevailing market prices of the
common stocks of the companies comprising the Index Group. The CENFED Board
has made no decision as to whether it would exercise its termination right in
the event of a Termination Event. In the event that a Termination Event
occurs, the CENFED Board would, consistent with its fiduciary duties, take
into account all relevant facts and circumstances as they exist at such time,
including its assessment of CENFED's and Golden States' respective future
business prospects, the potential availability to CENFED of alternative
transactions and the potential timing thereof, and would consult with its
respective financial advisors and legal counsel with respect to any such
decision. Approval of the Merger Agreement by the CENFED Stockholders will
confer on the CENFED Board the power, consistent with its fiduciary duties, to
elect to consummate the Merger notwithstanding the occurrence of a Termination
Event without any further action by, or resolicitation of the votes of, CENFED
Stockholders, and, to such extent, will result in CENFED Stockholders assuming
market risk associated with Golden States' stock value. The Opinion provided
to the CENFED Board by its financial advisor is dated as of the date of this
Proxy Statement--Prospectus and is based on conditions in effect on the date
thereof. Accordingly, the Opinion does not address the circumstances that
might arise if a Termination Event were to occur.
WAIVER AND AMENDMENT OF MERGER AGREEMENT
Any provision of the Merger Agreement may, to the extent permitted by law,
be (i) waived by the party benefited by the provision or (ii) amended or
modified, either before or after the Merger Agreement and the transactions
contemplated thereby are approved by the CENFED Stockholders, but any such
waiver, amendment or modification will be effective only if given or made by
an agreement in writing between the parties to the Merger Agreement, approved
or authorized by their respective boards of directors. In addition, Delaware
law prohibits any change in any of the terms and conditions of the Merger
Agreement subsequent to stockholder approval if such change or alteration
would, among other things, adversely affect any stockholder of a constituent
corporation such as CENFED.
In addition, the Merger Agreement permits Golden State at any time to change
the method of effecting the acquisition of CENFED, and CENFED has agreed to
cooperate in such efforts by Golden State. Such changes may include, but are
not limited to, a merger of CENFED with and into Golden State or mergers among
certain
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subsidiaries of CENFED and Golden State to occur substantially simultaneously
with or promptly following the Effective Time. However, no such change may (a)
alter or change the amount or kind of the Merger Consideration, (b) adversely
affect the proposed accounting treatment for the Merger or the tax treatment
to CENFED Stockholders as a result of receiving the Merger Consideration or
(c) materially delay receipt of any approval required to satisfy the Consent
Condition or the consummation of the transactions contemplated by the Merger
Agreement.
EMPLOYEE BENEFITS AND PLANS
Golden State has agreed, as soon as practicable after the date of the Merger
Agreement, to evaluate the employees and existing operations of CENFED to
determine which positions in and employees of CENFED will be required for the
continuing operations of the Surviving Corporation and Glendale Federal as of
and after the Effective Time, and CENFED has agreed to cooperate in such
efforts.
In connection with the foregoing, Golden State has agreed to identify to
CENFED those employees of CENFED to whom Golden State desires to offer
employment as of and after the Effective Time. CENFED and Golden State will
give notice to the other employees of their termination prior to the Closing
Date, and Golden State will endeavor in good faith to identify employment
opportunities for such employees with Golden State. CENFED has also agreed to
make no representations to its employees regarding employment by Golden State.
Golden State intends to train, prior to the Closing Date, all CENFED employees
that Golden State expects to employ in Golden State's procedures, and CENFED
has agreed to cooperate in such training.
Employees accepting employment with Golden State will not receive a
guarantee of any minimum period of employment, and Golden State and CENFED
intend that any such employment will be solely at the will of Golden State on
the same basis as all other Golden State employees without contractual rights
of employment. No provision of the Merger Agreement, however, will be deemed
to terminate or modify any provision of any employment, severance or similar
agreement of any person with CENFED or its subsidiaries. CENFED employees who
continue as Golden State employees after the Effective Time will receive
credit for prior service with CENFED for purposes of eligibility for and
vesting of benefits only, but not for purposes of determining the amount of
such 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 CENFED employees who remain employed by Golden State for more than one
year following the Effective Time.
Full time and part time employees of CENFED on the date of the Merger
Agreement who are involuntarily terminated, other than for cause, on or within
one year after the Closing Date (including those employees who are terminated
pursuant to the notice of termination to be given to certain employees by
CENFED and Golden State described above) will be eligible for benefits to the
extent and as provided under the CENFED Severance Plan as in effect as of the
date of the Merger Agreement. In addition, Golden State and CENFED have agreed
that CENFED will establish a retention bonus plan. See "--Interests of Certain
Persons in the Merger."
STOCK EXCHANGE LISTING
Golden State has agreed to use all reasonable efforts to cause the shares of
Golden State Common Stock issuable in the Merger to be approved for listing on
the NYSE prior to the Effective Date, subject to official notice of issuance.
It is a condition to the consummation of the Merger that such shares of Golden
State Common Stock be authorized for listing on the NYSE, subject to official
notice of issuance.
EXPENSES
The Merger Agreement provides that Golden State and CENFED will each pay its
own expenses in connection with the Merger and the transactions contemplated
thereby, provided that all regulatory application
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fees will be expenses of Golden State and that Golden State and CENFED will
divide equally all printing and mailing costs, in connection with this Proxy
Statement-Prospectus.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of CENFED's management and the CENFED Board may be deemed to
have certain interests in the Merger that are in addition to their interests
as CENFED Stockholders generally. The CENFED Board was aware of these
interests and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby.
Employment Agreements. CenFed Bank is a party to an employment agreement,
dated as of March 26, 1996, with D. Tad Lowrey, President and Chief Executive
Officer of CenFed Bank and of CENFED. Under the terms of such agreement, if
Mr. Lowrey terminates his employment with CenFed Bank for Good Reason, CenFed
Bank is obligated to pay to Mr. Lowrey a lump sum payment equal to the sum of
(i) 2.99 times Mr. Lowrey's annual salary, based on his base salary prevailing
at the time of termination, plus (ii) an amount equal to 2.99 times the higher
of Mr. Lowrey's last two performance incentive bonuses, whether or not such
bonuses were paid in cash. Moreover, in such event Mr. Lowrey will continue to
receive all insurance, retirement and any other benefits in which he
participates at the time of termination, or the cash equivalent thereof, for
the then-remaining term of the employment agreement. Mr. Lowrey's employment
agreement initially expires three years from January 1, 1996, but is subject
to automatic renewal on each January 1 thereafter unless the Board of
Directors of CenFed Bank notifies Mr. Lowrey in writing that such renewal will
not take place. Pursuant to Mr. Lowrey's employment agreement, "Good Reason"
includes any voluntary termination by Mr. Lowrey at any time during a 30 day
period commencing on the 366th day following the effective date of a change of
control. Although "change of control" is not expressly defined for purposes of
Mr. Lowrey's employment agreement, Mr. Lowrey could assert that a change of
control of CenFed Bank has taken place as a result of the consummation of the
Merger, as a result of which Golden State will have effective control of
CenFed Bank through its control or acquisition of CENFED. If the total amounts
payable to Mr. Lowrey under the employment agreement, together with all other
payments to which he is entitled, would constitute an excess parachute payment
as defined in Section 280G of the Code, such payments will be reduced to the
largest amount that may be paid without any portion of such amount being
subject to the excise tax imposed by Section 4999 of the Code. Based on his
current salary and the higher of the two most recent annual bonus amounts (and
not including any cash equivalent payments in lieu of benefits), the aggregate
amount payable to Mr. Lowrey pursuant to his employment agreement upon
completion of the Merger would be $1,732,000. At the time payment is expected
to be made pursuant to Mr. Lowrey's employment agreement, the bonus amount
with respect to 1998 is expected to be known and will be substituted for the
1996 bonus amount, possibly resulting in a higher payment to Mr. Lowrey.
CenFed Bank is a party to employment agreements, each dated as of September
24, 1996, with William D. Nichol, Executive Vice President and Chief Financial
Officer of CenFed Bank and of CENFED and Lawrence J. Winslow, Executive Vice
President and Chief Lending Officer of CenFed Bank. Under the terms of each
such agreement, if Mr. Nichol or Mr. Winslow, as the case may be, terminates
his employment with CenFed Bank for Good Reason in connection with a Change in
Control (which, as defined in the agreement, would include the Merger), he
would be entitled to receive, as his sole and exclusive remedy, a lump sum
payment equivalent to the base salary and bonus to which he would have been
entitled had he continued in CenFed Bank's employ for the remaining term of
the respective agreement. Upon a Change in Control of CenFed Bank, the term of
each agreement is extended so that the remaining term is three years. For
purposes of determining the bonus due in such a case to Mr. Nichol or Mr.
Winslow, the amount of the annual bonus is the higher of such executive's
prior two bonuses under the CENFED Officer's Executive Performance Incentive
Plan, whether or not paid in cash. "Good Reason," as defined in the Agreement,
includes any voluntary termination by Mr. Nichol or Mr. Winslow, as the case
may be, at any time during a 30 day period commencing upon the 366th day
following the effective date of a Change in Control. If the total amounts
payable to Mr. Nichol or Mr. Winslow under his respective employment
agreement, together with all other payments to which he is entitled, would
constitute an
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excess parachute payment as defined in Section 280G of the Code, such payments
will be reduced to the largest amount that may be paid without any portion of
such amount being subject to the excise tax imposed by Section 4999 of the
Code. Based on their current salaries and the higher of the two most recent
annual bonus amounts (and not including any cash equivalent payments in lieu
of benefits), the aggregate amounts payable to Mr. Nichol and Mr. Winslow
pursuant to their employment agreements upon completion of the Merger would be
$1,002,000 and $935,000, respectively. At the time payment is expected to be
made pursuant to Mr. Nichol's and Mr. Winslow's employment agreements, the
bonus amounts with respect to 1998 are expected to be known and will be
substituted for the 1996 bonus amounts, possibly resulting in higher payments
to Messrs. Nichol and Winslow.
Outstanding Stock-Based Awards. The effect of the Merger on outstanding
CENFED Options is described under "--Conversion of CENFED Common Stock;
Treatment of CENFED Stock Options." Under the terms of the CENFED Stock Plans,
as a result of the Merger each such CENFED Option will become immediately
exercisable, and all restricted shares of CENFED Common Stock previously
granted to CENFED executive officers will immediately vest free of all
applicable restrictions. As of the Record Date, the following executive
officers of CENFED held CENFED Options with respect to the indicated numbers
of shares of CENFED Common Stock at the indicated weighted average exercise
prices: Mr. Lowrey, 8,392 shares (including 5,299 shares subject to unvested
options) at $23.19; Mr. Nichol, 9,413 shares (including 2,257 shares subject
to unvested options) at $16.91; and Mr. Winslow, 2,420 shares (including 2,420
shares subject to unvested options) at $13.18. Also at that date, such
officers held the following numbers of shares of restricted stock: Mr. Lowrey,
6,252 shares; Mr. Nichol, 2,915 shares; and Mr. Winslow, 3,606 shares.
Retention Bonus Plan. In connection with the negotiation of the Merger
Agreement, Golden State requested and CENFED agreed to establish a retention
bonus program to be effective during the period between the date of the Merger
Agreement and the Effective Date. The purpose of this program is to provide
additional cash incentives to officers and key employees of CENFED for the
purpose of encouraging their continued efforts to preserve and develop the
business of CENFED prior to the Effective Date. The aggregate maximum amount
of bonuses that may be paid pursuant to this plan is $2 million. The
individual maximum bonus amounts that may be paid to Messrs. Lowrey, Nichol
and Winslow pursuant to this plan are $175,000, $150,000 and $100,000,
respectively; the balance of the amounts payable under this plan have been
allocated to 98 additional officers and key employees of CENFED. In each case,
the officer or employee must remain with CENFED or Golden State for specified
periods in order to be eligible to receive a bonus and the amount of bonus
received will depend upon an evaluation of the extent to which the officer or
employee has met specified bonus plan objectives.
Election to Golden State Board of Directors. It is the intention of Golden
State and CENFED that Mr. Lowrey will be elected to the Golden State Board and
the Glendale Federal Board of Directors effective as of the Effective Time.
Mr. Lowrey will receive customary compensation for his services as a director.
Indemnification; Directors and Officers Insurance. All rights to
indemnification or exculpation in existence as of the date of the Merger
Agreement in favor of CENFED's and its subsidiaries' directors, officers,
employees and agents provided in their charter documents or bylaws in effect
as of the date of the Merger Agreement with respect to matters occurring prior
to the Effective Time will survive the Merger and will continue in full force
and effect at all times thereafter. Golden State has agreed that, to the full
extent permitted by law and the Golden State Certificate of Incorporation and
Bylaws as in effect on the date of the Merger Agreement, it will indemnify,
defend and hold harmless each officer or director of CENFED or its
subsidiaries prior to the Effective Time for any claim or loss arising out of
their actions as such, and will pay, when incurred, the expenses (including
attorneys' fees) of such individual in advance of the final resolution of any
claim, provided that any such individual first, to the extent required by law,
executes an undertaking to return such advances to Golden State if it is
finally determined by appropriate judicial proceedings that such
indemnification is not permitted under applicable law.
Golden State has also agreed to cause each of the persons referred to in the
preceding sentence to be covered for six years from the Effective Time by
CENFED's directors' and officers' liability insurance policy, provided that
Golden State may substitute policies of at least the same coverage and amounts
with terms not materially
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less advantageous and covering acts or omissions occurring prior to the
Effective Time committed by such directors and officers in such capacities.
Notwithstanding the foregoing, Golden State is not required to expend more
than 200% of the amount currently expended annually by CENFED to maintain or
procure such insurance.
STOCK OPTION AGREEMENT
Concurrently with the execution of the Merger Agreement, CENFED and Golden
State executed and delivered the Stock Option Agreement, pursuant to which
CENFED granted the Option to Golden State. CENFED approved and entered into
the Stock Option Agreement to induce Golden State to enter into the Merger
Agreement. The Stock Option Agreement is set forth as Appendix B to this Proxy
Statement-Prospectus and is incorporated herein by reference. The following
description of the Stock Option Agreement is qualified in its entirety by
reference to such Appendix B.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreement may
have the effect of discouraging persons who might now or at any other time
prior to the Effective Time be interested in acquiring all of or a significant
interest in CENFED from considering or proposing such an acquisition, even if
such persons were prepared to pay consideration to the CENFED Stockholders
having a higher current market price than the shares of Golden State Common
Stock to be received per share of CENFED Common Stock pursuant to the Merger
Agreement. Certain events relating to an acquisition of CENFED could cause the
Option to become exercisable. The existence of the Option could significantly
increase the cost to a potential acquiror of acquiring CENFED compared to its
cost had the Stock Option Agreement and the Merger Agreement not been entered
into. Such increased cost might discourage a potential acquiror from
considering or proposing an acquisition or might result in a potential
acquiror proposing to pay a lower per share price to acquire CENFED than it
might otherwise have proposed to pay. Moreover, following consultation with
their respective independent accountants, CENFED and Golden State believe that
the exercise or repurchase of the Option is likely to prohibit any other
acquiror of CENFED from accounting for any acquisition of CENFED using the
pooling of interests accounting method for a period of two years. As used in
this description of the Stock Option Agreement, the term "third party" means
any person other than Golden State or its subsidiaries.
The Stock Option Agreement provides for the purchase by Golden State of
1,140,784 shares (the "Option Shares") of CENFED Common Stock (or 19.9% of the
number of shares of CENFED Common Stock outstanding as of the date of the
Merger Agreement) at an exercise price of $34.00 per share, payable in cash
(the "Option Price"). Notwithstanding the other provisions of the Stock Option
Agreement, Golden State may not purchase more than the number of Option Shares
having a Spread Value of $11 million, and if the Spread Value exceeds $11
million when Golden State wishes to exercise the Option, the number of shares
purchasable will be reduced to the extent necessary to maintain a Spread Value
of $11 million or less.
"Spread Value," as of a particular closing date for the purchase of Option
Shares pursuant to the exercise of the Option, means the difference between
the aggregate market value of the Option Shares Golden State intends to then
purchase and of the Option Shares previously purchased (based on the closing
price of CENFED Common Stock as quoted on Nasdaq/NMS on the last trading day
prior to the date of the closing) and the aggregate exercise price in respect
of such Option Shares.
The Option is only exercisable during the period following an Exercise Event
and prior to the Expiration Date, and only if at the time of such exercise
Golden State is not in breach of any of its covenants or obligations under the
Merger Agreement and there is no injunction or order of any court of competent
jurisdiction preventing or restraining the issuance and delivery of the Option
Shares.
The term "Expiration Date" means that time at which the right to exercise
the Option, or any part thereof not previously exercised, shall expire,
terminate and be of no further force or effect, and shall occur at the
earliest to occur of (i) the Effective Time, (ii) the date the Merger
Agreement is terminated, if for the reasons set forth in paragraphs (a) and
(e) under "--Termination of Merger Agreement," or if for the reasons set forth
in paragraphs
55
<PAGE>
(b), (c) or (d) under "--Termination of the Merger Agreement" if such
termination occurs prior to either an Exercise Event or a Preliminary
Acquisition Transaction; or (iii) 18 months following the earliest to occur of
(x) the date of any other termination of the Merger Agreement or (y) the first
occurrence of an Exercise Event.
"Exercise Event" means (i) the occurrence of an Acquisition Transaction;
(ii) the public authorization, recommendation or endorsement by CENFED of an
Acquisition Transaction; (iii) a public announcement by CENFED of an intention
to authorize, recommend or announce an Acquisition Transaction described in
paragraphs (i), (ii), (iii) or (v) of the definition thereof; or (iv) the
entering into by CENFED of any agreement with any person or group of persons
to effect an Acquisition Transaction.
"Acquisition Transaction" means (i) a merger, consolidation or similar
transaction involving CENFED or any of its subsidiaries (other than certain
intercompany transactions); (ii) the disposition (except as the Merger
Agreement expressly permits) by sale, lease, exchange or otherwise, of assets
or deposits of CENFED or any of its subsidiaries representing all or a
substantial portion of the consolidated assets or deposits of CENFED and its
subsidiaries not in the ordinary course of business; (iii) the issuance, sale
or other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities representing 20 percent or
more of the voting power of CENFED or any of its subsidiaries; (iv) the
acquisition by any person or group (other than Golden State and its
affiliates) of beneficial ownership of, or the right to acquire beneficial
ownership of, 20 percent or more of the then-outstanding shares of CENFED
Common Stock; or (v) any substantially similar transaction.
"Preliminary Acquisition Transaction" means (i) the commencement (within the
meaning of Rule 14d-2 under the Exchange Act) by any third party of, or the
filing by any third party of a Securities Act registration statement with
respect to, a tender offer (a "Tender Offer") or exchange offer (an "Exchange
Offer") to purchase shares of CENFED Common Stock such that, upon consummation
of the offer, the third party would own or control 20 percent or more of the
then-outstanding shares of CENFED Common Stock; or (ii) the CENFED
Stockholders having voted and failed to approve the Merger and the Merger
Agreement at any meeting held for that purpose, the failure of such a meeting
to occur prior to termination of the Merger Agreement or the withdrawal or
modification of the recommendation of CENFED's Board of Directors that the
CENFED Stockholders approve the Merger and the Merger Agreement, in each case
after a public announcement that any third party has (A) made or disclosed an
intention to make a proposal to engage in an Acquisition Transaction, (B)
commenced a Tender Offer or filed a registration statement with respect to an
Exchange Offer or (C) filed an application (or given a notice), in draft or
final form, with the OTS or under any federal or state thrift institution or
banking law or regulation for approval to engage in an Acquisition
Transaction.
If the Option becomes exercisable, then as promptly as practicable (but in
no event more than six months) after Golden State's request, CENFED is
obligated to prepare and file a registration statement with respect to the
disposition of Option Shares by Golden State and to use its best efforts to
cause the registration statement to become effective expeditiously and remain
in effect for a period of not less than 180 days (or such shorter period as
may be required in the written opinion of counsel to CENFED and reasonably
acceptable to Golden State and its counsel). In certain circumstances, CENFED
may delay the filing of such registration statement for up to 60 days, but may
only do so once in any twelve-month period. In connection with any such
registration, CENFED is obligated to pay any fees, expenses and charges it
incurs and to provide Golden State and its affiliates, officers, directors,
attorneys and agents with indemnification in connection with any statements,
omissions or alleged omissions in the registration statement (other than those
made in reliance upon information furnished by Golden State). The Stock Option
Agreement provides Golden State with the right to two demand registrations
that must be requested during the three years following the first Exercise
Event and with unlimited "piggyback" registration rights.
At any time before the Option becomes exercisable, CENFED is required to
give Golden State prior notice of any record date for determining the record
holders of CENFED Common Stock entitled to vote on any matter, to receive any
dividend or distribution or to receive any other benefit or right or for any
other purpose that a record date is set. If Golden State duly elects to
exercise the Option after the record date set by CENFED in
56
<PAGE>
connection with a meeting of CENFED Stockholders, CENFED, if requested by
Golden State, will cancel the meeting and the related record date and
reschedule it for a later date which will not be fewer than 10 nor more than
30 business days after the cancellation of the originally scheduled meeting.
The number and type of securities subject to the Option and the Option Price
therefor are subject to customary antidilution adjustment in the event of any
dividend, stock split, split-up, recapitalization, reclassification,
combination, exchange of shares or similar transaction or event with respect
to the CENFED Common Stock. If shares of CENFED Common Stock are otherwise
issued after the date of the Stock Option Agreement, the number of shares of
CENFED Common Stock subject to the Option will be adjusted so that, after such
issuance, such number, together with any Option Shares previously issued to
Golden State pursuant to exercise of the Option, will equal 19.9% of the
issued and outstanding shares of CENFED Common Stock other than those subject
to or issued pursuant to the Option.
If, prior to the Expiration Date, CENFED enters into certain transactions as
a result of which it would not be the surviving corporation, or the
outstanding shares of CENFED Common Stock are changed or exchanged for
securities of CENFED or any other person, cash or other property and the
shares of CENFED Common Stock that were outstanding immediately prior such
transaction thereafter represent less than 50% of the outstanding shares or
share equivalents of the continuing or surviving corporation, or substantially
all of its assets are sold or otherwise transferred to a third person, then
the agreement governing the transaction will provide that the Option will be
converted into or exchanged for an option (the "Substitute Option") of either
the Acquiring Corporation, any person controlling the Acquiring Corporation or
CENFED (if CENFED is the continuing or surviving corporation), at the election
of Golden State (in each case, such person being the "Substitute Option
Issuer"). To the extent permitted by law or regulation, the Substitute Option
would have the same terms as the Option, but such terms will in no event be
less advantageous to Golden State than those of the Option.
The number of shares for which the Substitute Option will be exercisable is
equal to the Assigned Value multiplied by the number of shares of CENFED
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (but in no event more than 19.9% of the outstanding shares of
common stock of the Substitute Option Issuer (the "Substitute Common Stock")
immediately prior to exercise of the Substitute Option). The per share
exercise price of the Substitute Option (the "Substitute Option Price") is
equal to the Option Price multiplied by the number of shares of CENFED Common
Stock for which the Option was theretofore exercisable, divided by the number
of shares for which the Substitute Option is exercisable.
"Acquiring Corporation" means the continuing or surviving corporation of a
consolidation or merger, including CENFED if such corporation is CENFED, or
the transferee of all or any substantial part of CENFED's assets or those of
its subsidiaries.
"Assigned Value" means the highest of (i) the price per share of the CENFED
Common Stock at which a Tender Offer or Exchange Offer therefor has been made
by any third party, (ii) the price per share of CENFED Common Stock to be paid
by any third party pursuant to an agreement with CENFED and (iii) the highest
closing sale price per share of CENFED Common Stock quoted on Nasdaq (or, if
not so quoted, the highest bid price per share on any day as quoted on the
principal market or exchange on which such shares are traded) within the six-
month period immediately preceding any such agreement. If the transaction in
question is a sale of less than all of CENFED's assets, the Assigned Value
will be the sum of the price paid for such assets and the current market value
of those assets not sold as determined in good faith by a nationally
recognized investment banking firm selected by Golden State and reasonably
acceptable to CENFED, divided by the number of outstanding shares of CENFED
Common Stock as of the date of the sale.
"Average Price" means the average closing price of a share of the Substitute
Common Stock for the year immediately preceding the transaction in question,
but in no event higher than the closing price of the Substitute Common Stock
on the day preceding the transaction, provided that if CENFED is the
Substitute Option Issuer, the Average Price will be computed with respect to a
share of common stock issued by CENFED, the person merging into CENFED or by
any company that controls or is controlled by such merging person, at Golden
State's election.
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<PAGE>
Pursuant to the Stock Option Agreement, CENFED may not enter into any
transaction of the type described above unless the Acquiring Corporation and
any person controlling it assume CENFED's obligations and take all actions
necessary to effect the foregoing and so that the shares of Substitute Common
Stock are in no material way distinguishable or less valuable than other
issued shares of Substitute Common Stock.
If, after a Repurchase Event, Golden State so requests (the date of such
request being the "Request Date"), CENFED will repurchase the Option from
Golden State and, to the extent permitted by law, all shares of CENFED Common
Stock purchased by Golden State pursuant to the Option that Golden State then
beneficially owns. The Request Date must be no later than 12 months after a
Repurchase Event first occurs.
A "Repurchase Event" will be deemed to have occurred if (i) any third party
not affiliated with Golden State (or a group) shall have acquired beneficial
ownership (or the right to acquire beneficial ownership) of 50 percent or more
of the shares of CENFED Common Stock then outstanding, (ii) any of the
transactions that would give rise to the obligation to convert or exchange the
Option for a Substitute Option is consummated or (iii) Golden State receives
notice that an approval of the OTS or other regulatory authority required for
the exercise of the Option and the purchase of the Option Shares will not be
issued or granted.
The price at which CENFED would be obligated to repurchase the Option (the
"Repurchase Consideration") equals the sum of (i) the aggregate Option Price
paid by Golden State for any shares of CENFED Common Stock acquired pursuant
to the Option and still beneficially owned by Golden State; (ii) the excess,
if any, of the Applicable Price for each share of CENFED Common Stock over the
Option Price, such excess multiplied by the number of shares of CENFED Common
Stock with respect to which the Option has not yet been exercised; and (iii)
the excess, if any, of the Applicable Price over the Option Price paid (or, in
the case of Option Shares with respect to which the Option has been exercised
but the purchase of which has not yet closed, payable) by Golden State for
each share of CENFED Common Stock with respect to which the Option has been
exercised and that is still beneficially owned by Golden State, such excess
multiplied by the number of such shares. Notwithstanding the foregoing, the
amount calculated pursuant to clauses (ii) and (iii) of the previous sentence
may not exceed $11 million in the aggregate.
"Applicable Price" means the highest of (i) the highest price per share of
CENFED Common Stock paid for any such share by any person or group described
in clause (i) of the definition of Repurchase Event, (ii) the price per share
of CENFED Common Stock received by holders thereof in connection with any
merger or other business combination transaction of the type that would give
rise to the obligation to convert or exchange the Option into a Substitute
Option or (iii) the highest closing sales price per share of CENFED Common
Stock quoted on Nasdaq (or, if CENFED Common Stock is not quoted thereon, the
highest bid price per share as quoted on the principal market or exchange on
which such shares are traded) during the 60 business days preceding the
Request Date. If the transaction in question is a sale of less than all of
CENFED's assets, the Applicable Price will be the sum of the price paid for
such assets and the current market value of those assets not sold as
determined in good faith by a nationally recognized investment banking firm
selected by Golden State and reasonably acceptable to CENFED, divided by the
number of outstanding shares of CENFED Common Stock as of the date of the
sale.
To the extent that prior notification to or approval of the OTS or any other
regulatory authority is required for the payment of all or any part of the
Repurchase Consideration, Golden State will have an ongoing option to revoke
its request for repurchase, in whole or in part, or to require that CENFED
deliver, from time to time, that portion of the Repurchase Consideration as it
is permitted to pay, and act promptly to obtain the approvals necessary to pay
the balance. If the OTS or any other regulatory authority disapproves of any
part of a proposed repurchase, CENFED is obligated to notify Golden State
promptly. If such prohibition is in part but not in whole, Golden State may
revoke the repurchase request or, to the extent permitted by the relevant
regulatory agencies, determine whether the repurchase should apply to the
Option and/or the Option Shares and to what extent to each, and Golden State
may exercise the Option for the number of Option Shares for which it was
exercisable at the Request Date, less the sum of the number of shares covered
by the Option in respect of which payment has been made pursuant to a partial
repurchase of the Option and the number of shares covered by the portion of
the
58
<PAGE>
Option previously repurchased. Golden State's rights with respect to any
unexercised Options under the repurchase provisions of the Stock Option
Agreement will terminate on the Expiration Date.
CENFED RIGHTS AGREEMENT
In 1995, CENFED adopted a stockholder rights plan pursuant to the CENFED
Rights Agreement and declared a dividend distribution of the CENFED Rights on
the outstanding CENFED Common Stock to stockholders of record at the close of
business on August 10, 1995. The distribution consisted of one CENFED Right
for each outstanding share of CENFED Common Stock held on such date. Each
CENFED Right, when exercisable, entitles the registered holder to purchase
from CENFED one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $.01 per share, at a price of $80.00, subject to
adjustment. One additional CENFED Right has been issued with each share of
CENFED Common Stock issued after August 10, 1995. The CENFED Rights are
currently not exercisable. The description and terms of the CENFED Rights are
set forth in the CENFED Rights Agreement, a copy of which is incorporated by
reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
The CENFED Rights have certain anti-takeover effects and will cause
substantial dilution to a person or group that attempts to acquire CENFED on
terms not approved by the CENFED Board.
Immediately prior to the execution of the Merger Agreement, the CENFED Board
amended the CENFED Rights Agreement to provide that neither the execution of
the Merger Agreement or the Stock Option Agreement nor the consummation of the
transactions contemplated therein, including completion of the Merger or any
exercise of the Option, will be deemed to cause the CENFED Rights to become
exercisable or otherwise to have any effect under the CENFED Rights Agreement.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Golden State Common Stock to be issued to CENFED Stockholders
in the Merger have been registered under the Securities Act. Such shares may
be traded freely and without restriction by those CENFED Stockholders not
deemed to be "affiliates" of CENFED as that term is defined under the
Securities Act. An affiliate of CENFED, as defined by the rules promulgated
pursuant to the Securities Act, is a person who directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, CENFED. Any subsequent transfer of such shares by any
person who is an affiliate of CENFED at the time the Merger is submitted for
vote of the CENFED Stockholders will, under existing law, require either
(i) the further registration under the Securities Act of the shares of Golden
State stock to be transferred, (ii) compliance with Rule 145 promulgated under
the Securities Act (permitting limited sales under certain circumstances) or
(iii) the availability of another exemption from registration. The foregoing
restrictions are expected to apply to the directors, executive officers and
holders of 10% or more of the CENFED Common Stock (and to certain relatives or
the spouse of any such person and any trusts, estates, corporations or other
entities in which any such person has a 10% or greater beneficial or equity
interest). Stop transfer instructions will be given by Golden State to the
transfer agent with respect to the Golden State Common Stock to be received by
persons subject to the restrictions described above, and the certificates for
such stock will be appropriately legended.
59
<PAGE>
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Pursuant to the Merger Agreement, Mr. Lowrey will be elected to the Golden
State Board of Directors and the Glendale Federal Board of Directors,
effective as of the Effective Time. Subject to the following, it is
anticipated that each of the other directors of Golden State will continue to
serve on the Golden State Board of Directors as of the Effective Time.
The California Federal Merger Agreement provides for the merger of FNPH with
and into Golden State, with Golden State as the surviving corporation, and
contemplates the merger of Glendale Federal with and into California Federal,
with California Federal as the surviving federal savings bank. The California
Federal Merger Agreement provides that, effective upon consummation of the
California Federal Merger, the number of directors of Golden State will be
increased to fifteen with five such individuals (the "Golden State Directors")
being selected from among the then-existing Golden State Board and the
remaining ten such individuals, or two-thirds of the whole Board, being
appointed by the Board of Directors of FNPH. From and after the consummation
of the California Federal Merger until the earlier of a change in control of
Golden State or the resolution of all matters relating to the Goodwill
Litigation (as defined herein) and the Litigation Tracking Warrants (see
"INFORMATION ABOUT GOLDEN STATE AND MERGER SUB--Subsequent Events"), Golden
State will continue to include each Golden State Director, or such Golden
State Director's successor as designated by the Golden State Directors, on the
list of nominees for director presented by the Golden State Board at any
annual meeting of Golden State Stockholders at which such Golden State
Director's term would expire. Further, it is anticipated that, following the
consummation of the California Federal Merger, affiliates of FNPH, FNH and
California Federal will generally be in a position to control the management
of the surviving corporation.
In addition, in connection with the execution of the California Federal
Merger Agreement, Golden State, Glendale Federal, California Federal and
Messrs. Trafton and Fink entered into the Management Agreement which is
generally to become effective upon the consummation of the California Federal
Merger. The Management Agreement contemplates, among other things, that
Messrs. Trafton and Fink will, pursuant to the terms thereof, manage and be
responsible for determinations concerning the Goodwill Litigation (as well as
comparable litigation with respect to the treatment of regulatory goodwill in
which California Federal is engaged against the United States government) on
behalf of the combined company after the California Federal Merger. In this
connection, Messrs. Trafton and Fink will report to a committee of the Board
of Directors of the surviving corporation of the California Federal Merger
(the "Golden State Committee") with respect to matters related to the Goodwill
Litigation and the Litigation Tracking Warrants, and the Board of Directors of
such surviving corporation will generally delegate its authority with respect
to such matters to the Golden State Committee. The California Federal Merger
Agreement provides that the surviving corporation in the California Federal
Merger will cause each Golden State Director serving on such corporation's
Board of Directors to be appointed as a member of the Golden State Committee
and that it will maintain the Golden State Committee as contemplated by the
Management Agreement. The services of Messrs. Trafton and Fink under the
Management Agreement may be terminated under certain circumstances set forth
in the Management Agreement. The description of the provisions of the
Management Agreement set forth above is not complete and is qualified in its
entirety by reference to the Management Agreement, which is incorporated by
reference herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MARKET PRICES
Golden State Common Stock is, and the shares offered hereby will be, listed
on the NYSE and the Pacific Exchange and traded under the symbol "GSB." The
following table sets forth, for the periods indicated, the high and low
reported sale prices per share of Golden State Common Stock. Prices for dates
prior to July 24, 1997, the date on which the Reorganization was completed
and, in connection therewith, Golden State became the holding company of
Glendale Federal and shares of Glendale Federal were exchanged on a one-for-
one basis for shares of Golden State, are for the common stock of Glendale
Federal (which prior to consummation of the Reorganization traded on the NYSE
and the PSE under the symbol "GLN"). See "INFORMATION ABOUT GOLDEN STATE."
<TABLE>
<CAPTION>
GOLDEN STATE/
GLENDALE
FEDERAL
COMMON STOCK
-------------
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year Ending June 30, 1996
First Quarter................................................ $17.00 $12.13
Second Quarter............................................... 18.00 14.63
Third Quarter................................................ 19.13 15.50
Fourth Quarter............................................... 19.13 16.00
Fiscal Year Ending June 30, 1997
First Quarter................................................ 20.00 15.88
Second Quarter............................................... 23.88 17.38
Third Quarter................................................ 28.13 22.50
Fourth Quarter............................................... 27.00 22.25
Fiscal Year Ending June 30, 1998
First Quarter................................................ 31.88 26.13
Second Quarter............................................... 37.75 26.13
Third Quarter (through March 5, 1998)........................ 39.00 29.88
</TABLE>
CENFED Common Stock is listed on Nasdaq and traded under the symbol "CENF."
The following table sets forth, for the periods indicated, the high and low
reported closing sale prices per share of CENFED Common Stock on Nasdaq. The
prices have been adjusted to reflect two previous 10% stock dividends
effective in May, 1996 and April, 1997, respectively (the "CENFED Stock
Dividends").
<TABLE>
<CAPTION>
CENFED COMMON
STOCK
-------------
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year Ending December 31, 1996
First Quarter................................................ $20.66 $18.59
Second Quarter............................................... 21.28 18.86
Third Quarter................................................ 22.73 19.09
Fourth Quarter............................................... 27.62 21.82
Fiscal Year Ending December 31, 1997
First Quarter................................................ 32.73 25.91
Second Quarter............................................... 34.75 26.38
Third Quarter................................................ 37.00 32.38
Fourth Quarter............................................... 45.38 32.38
Fiscal Year Ending December 31, 1998
First Quarter (through March 5, 1998)........................ 46.00 33.75
</TABLE>
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<PAGE>
DIVIDENDS
The following tables set forth cash dividends declared per share of CENFED
Common Stock. The cash dividend information has been adjusted to reflect the
CENFED Stock Dividends. Golden State has not paid cash dividends on the Golden
State Common Stock with respect to the periods covered hereby. The ability of
either Golden State or CENFED to pay cash dividends to its stockholders is
subject to certain regulatory restrictions and additionally, in the case of
CENFED, to certain restrictions set forth in the Merger Agreement. See "THE
MERGER--Dividends" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
CENFED
COMMON STOCK
------------
<S> <C>
Fiscal Year Ending December 31, 1996
First Quarter.................................................. $.075
Second Quarter................................................. .082
Third Quarter.................................................. .082
Fourth Quarter................................................. .082
Fiscal Year Ending December 31, 1997
First Quarter.................................................. .082
Second Quarter................................................. .09
Third Quarter.................................................. .09
Fourth Quarter................................................. .09
Fiscal Year Ending December 31, 1998
First Quarter (through March 5, 1998).......................... .09
</TABLE>
62
<PAGE>
INFORMATION ABOUT GOLDEN STATE AND MERGER SUB
Golden State. Golden State Bancorp Inc. is a corporation formed and existing
under the Delaware Law and is a savings and loan holding company subject to
examination and supervision by the OTS. Golden State was organized by Glendale
Federal for the purpose of becoming the holding company for Glendale Federal
pursuant to an Agreement and Plan of Reorganization, dated as of May 28, 1997
(the "Reorganization Agreement"), by and among Glendale Federal, Golden State
and Glendale Interim Federal Savings Bank ("Glendale Interim"). Under the
Reorganization Agreement, Glendale Interim, a wholly-owned subsidiary of
Golden State, was merged with and into Glendale Federal, with, among other
things, all outstanding shares of Glendale Federal common stock (other than
certain shares held by a subsidiary of Glendale Federal) being exchanged for
Golden State Common Stock (the "Reorganization"). In the Reorganization, the
stockholders of Glendale Federal immediately prior to the effective time of
the Reorganization became the sole stockholders of Golden State as the holding
company for Glendale Federal. The Reorganization is described under the
caption "THE REORGANIZATION" in the Proxy Statement on Schedule 14A filed with
the OTS in connection with the July 23, 1997 meeting of Glendale Federal
stockholders held in connection with the Reorganization, and is incorporated
herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Glendale Federal, the sole savings and loan association subsidiary of Golden
State, is one of the largest savings institutions in the United States. At
December 31, 1997, Golden State had total consolidated assets of $16.0
billion, deposits of $9.5 billion and stockholders' equity of $1.1 billion.
Glendale Federal's business consists primarily of attracting deposits from the
public and originating and purchasing loans secured by mortgages on
residential real estate as well as business and consumer loans. Glendale
Federal derives its income primarily from the interest it charges on real
estate, consumer and business loans and, to a lesser extent, from interest on
investment securities, fees received in connection with loan servicing and
deposit services, as well as other services. Glendale Federal's major expenses
are the interest it pays on deposits and on borrowings and general operating
expenses. Glendale Federal's operations, like those of other depository
institutions, are significantly influenced by general economic conditions, by
the strength of the real estate market, by the monetary, fiscal and regulatory
policies of the federal government and by the policies of financial
institution regulatory authorities. The deposits of Glendale Federal are
insured by the Savings Association Insurance Fund ("SAIF") of the FDIC.
Golden State's goal is for Glendale Federal to be a full-service
relationship-based community bank that is large enough to meet the business
and consumer banking needs of the local California communities served by
Glendale Federal without sacrificing its strong customer service philosophy.
To achieve this goal, Glendale Federal began offering business banking
products and services in fiscal year 1996 and has since built the customer
base and expanded the variety of products and services offered in this
program. In addition to internal growth, Glendale Federal acquired TransWorld
Bancorp (which, as of the consummation of such acquisition, had approximately
$378 million in assets and $335 million in deposits) and OneCentral Bank
(which as of the consummation of such acquisition had approximately $74
million in assets and $68 million in deposits), both during fiscal 1997,
thereby adding business banking accounts and relationships and nine banking
offices to Glendale Federal's retail network. During fiscal 1996, Glendale
Federal also expanded its consumer lending product offerings. While no
assurances can be given as to the future success of its business strategy,
Glendale Federal has been successful in attracting business and consumer
checking account customers, in increasing its consumer lending balances and in
actively developing relationships with small- to medium-sized business
customers, and has expanded its franchise through the extension of its retail
delivery network into non-traditional outlets. See "FORWARD-LOOKING
INFORMATION."
The principal executive offices of Golden State are located at 414 North
Central Avenue, Glendale, California 91203 and the telephone number of such
offices is (818) 500-2000.
Subsequent Events. Proposed Distribution of Litigation Tracking Warrants. On
October 28, 1997, Golden State announced that it was considering, subject to
further action of the Golden State Board and the
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approval by Golden State Stockholders of certain necessary amendments to the
Golden State Certificate of Incorporation, declaration of a distribution of
Litigation Tracking Warrants to its security holders, including Golden State
Stockholders, representing the right to receive upon the exercise thereof
Golden State Common Stock equal in value to 85 percent of the net after-tax
proceeds, if any, of Glendale Federal's pending Goodwill Litigation (as
defined herein) against the United State Government. The anticipated terms of
the Litigation Tracking Warrants are set forth in Exhibit 99A to Golden
State's Current Report on Form 8-K dated October 28, 1997, as amended by
Amendment No. 1 thereto, filed with the Commission on February 3, 1998, and
the Management Agreement (see "MANAGEMENT AND OPERATIONS AFTER THE MERGER")
has been filed as Exhibit 99.2 to Golden State's Current Report on Form 8-K
dated February 4, 1998, as amended by Amendment No. 1 thereto, filed with the
Commission on March 5, 1998, each of which is incorporated by reference
herein, and the following description of such warrants is qualified in its
entirety by reference to such Current Reports.
Following the adoption of FIRREA, Glendale Federal brought an action (the
"Goodwill Litigation") against the United States Government contending that
FIRREA's treatment of supervisory goodwill constituted a breach of the
government's contract with Glendale Federal, under which contract Glendale
Federal had merged with a Florida thrift and was permitted to include the
goodwill resulting from the merger in Glendale Federal's regulatory capital.
On July 1, 1996, the United States Supreme Court affirmed the decision of
certain lower federal courts that the United States Government had breached
its contract with Glendale Federal and was liable to Glendale Federal for
damages. The damages phase of the Goodwill Litigation is currently pending. On
November 20, 1997, Golden State proposed a settlement that would involve a
payment of $1.5 billion to Glendale Federal. There can be no assurance as to
the occurrence or timing of any resolution of the Goodwill Litigation or
whether or when Glendale Federal will receive payment of any damages or
amounts in settlement in connection with the Goodwill Litigation.
It is anticipated that, if issued, the Litigation Tracking Warrants would
become exercisable after notification by Golden State of its receipt of
proceeds net of expenses from a final judgment in, or settlement of, the
Goodwill Litigation and following any requisite regulatory filings and
approvals. The Litigation Tracking Warrants would remain exercisable for 60
days after such notification. Golden State expects that any distributed
Litigation Tracking Warrants would be exercisable, if at all, for Golden State
Common Stock at an exercise price of $1.00 per share thereof. The number of
shares of Golden State Common Stock for which a Litigation Tracking Warrant
would be exercisable would be determined by a fraction, the numerator of which
is 85 percent of the net after-tax proceeds to Golden State of the Goodwill
Litigation and the denominator of which is the product of the number of
Litigation Tracking Warrants distributed or reserved for distribution times
the average closing price of a share of Golden State Common Stock on the NYSE
during the 30 trading days ending on and including the 30th calendar day prior
to the date on which Glendale Federal receives the full amount of any payment
due it pursuant to the Goodwill Litigation.
It is currently expected that the distribution of the Litigation Tracking
Warrants would be declared, and the record date with respect thereto set to
occur, during the quarter ending June 30, 1998. While the record date has not
yet been established, any such record date will be after the consummation of
the Merger, and therefore CENFED Stockholders who receive shares of Golden
State Common Stock in the Merger and who retain those shares through such
record date would receive a per share distribution of Litigation Tracking
Warrants on the same basis as other record holders of Golden State Common
Stock.
It is currently expected that sufficient Litigation Tracking Warrants would
be reserved for future distribution to holders of certain securities of Golden
State that are exercisable for or convertible into Golden State Common Stock.
During the period that the Litigation Tracking Warrants are outstanding but
not yet exercisable, holders of Golden State Preferred Stock, Five-Year
Warrants and Seven-Year Warrants (each as defined herein) and options
exercisable for Golden State Common Stock issued by Golden State (including
options issued upon conversion of CENFED Options in the Merger) who convert or
exercise such securities would receive, in
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addition to the shares of Golden State Common Stock otherwise issuable
pursuant to such conversion or exercise, one Litigation Tracking Warrant for
each such share of Golden State Common Stock. Such holders who convert or
exercise such securities after the Litigation Tracking Warrants become
exercisable would not receive Litigation Tracking Warrants, but would instead
receive, in addition to the shares of Golden State Common Stock otherwise
issuable pursuant to such conversion or exercise, the additional shares of
Golden State Common Stock which such holders would have received as described
in the previous sentence had such holders converted or exercised such
securities prior to the Litigation Tracking Warrants becoming exercisable and
then exercised such Litigation Tracking Warrants, and in such event the
exercise or conversion price of such securities would be adjusted to reflect
the exercise price of the Litigation Tracking Warrants. See "THE MERGER--
Conversion of CENFED Common Stock; Treatment of CENFED Stock Options" and
"COMPARISON OF STOCKHOLDER RIGHTS--Description of Golden State Capital Stock."
Certain approvals of holders of Golden State Common Stock would be required
if the Litigation Tracking Warrants are to be distributed as currently
contemplated, including with respect to amending the Golden State Certificate
of Incorporation to reflect an increase in the number of authorized shares of
Golden State Common Stock (to provide sufficient shares to issue the shares of
Golden State Common Stock expected to be issuable upon exercise of the
Litigation Tracking Warrants) and to clarify certain terms of the Golden State
Preferred Stock. The record date for the determination of Golden State
Stockholders entitled to vote at the special meeting expected to be held in
connection with obtaining such approvals is expected to precede the Effective
Date. The record date in respect of any distribution of Litigation Tracking
Warrants would, however, not occur until after the Effective Date.
Consequently, CENFED Stockholders who retain the shares of Golden State Common
Stock issued in the Merger through such record date would participate in the
distribution of Litigation Tracking Warrants. However, because the record date
in respect of the special meeting of Golden State Stockholders referred to
above is expected to precede the Effective Date, CENFED Stockholders are not
expected to have the opportunity to vote as Golden State Stockholders at any
such meeting. If the foregoing stockholder approvals are not received, Golden
State expects that the distribution of the Litigation Tracking Warrants would
not occur.
There can be no assurance that a distribution of Litigation Tracking
Warrants will take place in the time frame currently expected or at all, and
there can be no assurance as to the timing or amount, if any, of any net
damages or net settlement received by Golden State in connection with the
Goodwill Litigation. Pursuant to the California Federal Merger Agreement,
Golden State has agreed to take all actions necessary, and to use its
reasonable best efforts, to, among other things, cause the distribution of the
Litigation Tracking Warrants as soon as practicable after the date of the
California Federal Merger Agreement. Further, the distribution of the
Litigation Tracking Warrants is a condition to the obligations of both Golden
State and FNPH to consummate the California Federal Merger. Because Golden
State is expected to be the surviving corporation in the California Federal
Merger, it is anticipated that immediately after consummation of that merger
the Litigation Tracking Warrants will continue to be outstanding and will
continue to represent the contingent right to receive shares of Golden State
Common Stock.
RedFed Merger. On November 30, 1997, Golden State entered into the RedFed
Merger Agreement pursuant to which Golden State expects to acquire RedFed in a
tax-free, stock-for-stock 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 expects to issue shares of
Golden State Common Stock with a value of $20.75 for each outstanding share of
the common stock of RedFed, with the exact number of shares of Golden State
Common Stock to be issued to holders of RedFed common stock to 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 close of the RedFed
Merger. Golden State expects 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. Regardless of the closing date of the RedFed Merger, the RedFed
Merger is not expected to have a material impact on the number of Litigation
Tracking Warrants distributed, given Golden State's intention to purchase an
equivalent number of shares of Golden State Common Stock to be issued in the
RedFed Merger, although
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Golden State has no commitment or obligation to do so. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" and "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS."
California Federal Merger. On February 4, 1998, Golden State entered into
the California Federal Merger Agreement. The California Federal Merger
Agreement provides for the merger of FNPH with and into Golden State, with
Golden State as the surviving corporation in the merger. The California
Federal Merger Agreement also contemplates the merger of Glendale Federal into
California Federal, with California Federal as the surviving federal savings
bank in the merger. Based on information available as of the date of this
Proxy Statement--Prospectus, the combined company resulting from the
California Federal Merger is expected to have approximately $28 billion in
total deposits and $51 billion in total assets (after giving pro forma effect
to the Merger and the RedFed Merger).
The terms of the California Federal Merger Agreement contemplate that
affiliates of MAF and Ford will in the aggregate own between 42% and 45% of
the combined company after the merger (the exact amount depending upon the
price of Golden State Common Stock during a specified period after
distribution of the Litigation Tracking Warrants and preceding the
consummation of the merger, adjusted to omit the value of the portion of any
recovery in the Goodwill Litigation retained by Golden State and not
distributed to holders of Litigation Tracking Warrants pursuant to the terms
thereof). In addition, the California Federal Merger Agreement provides that,
subject to the terms provided therein, Golden State will issue the Contingent
Shares to affiliates of MAF and Ford after consummation of the California
Federal Merger (in respect of the utilization by Golden State of certain tax
benefits and the potential recovery in certain litigation, including a portion
of any net recovery in the California Federal Goodwill Litigation). Due to the
issuance of such Contingent Shares, affiliates of MAF and Ford may own a
substantially higher percentage of the outstanding common stock of the
surviving corporation in the California Federal Merger than they will be
issued upon consummation of such merger.
The number of Contingent Shares cannot be determined at the present time and
also will not be determinable upon consummation of the California Federal
Merger, as such number depends upon factors that are not or will not be
subject to determination at such times. These factors include, among other
things, the net value to the surviving corporation in the California Federal
Merger of certain contingent assets and liabilities of Golden State and FNPH
(including potential recoveries in the Goodwill Litigation, the California
Federal Goodwill Litigation, the Other Litigation, potential tax benefits
resulting from certain net operating loss carryforwards of the consolidated
group of which FNPH is a part and other contingent tax assets and liabilities
of Golden State and FNPH) and the market price of the common stock of the
surviving corporation at the times issuance of such Contingent Shares would be
required under the California Federal Merger Agreement. Subject to the
foregoing, assuming for illustrative purposes only a net after-tax recovery in
the Goodwill Litigation of approximately $550 million (based on the trading
prices at the time of the execution of the California Federal Merger Agreement
of the CALGZs and the CALGLs adjusted to reflect the amount of supervisory
goodwill reflected on Glendale Federal's balance sheet at the time FIRREA
became effective, relative to that of California Federal), a net after-tax
recovery in the California Federal Goodwill Litigation of approximately $440
million (based on the trading prices at the time of the execution of the
California Federal Merger Agreement of the CALGZs and the CALGLs) and tax
benefits resulting from the use of FNPH net operating loss carryforwards of
approximately $350 million (based on net operating loss carryforwards of
approximately $1 billion and an assumed federal tax rate of 35%), the number
of Contingent Shares issuable under the California Federal Merger Agreement
can be expected to result in an incremental increase in the percentage
ownership of outstanding surviving corporation common stock by affiliates of
MAF and Ford of approximately 4.3 to 5.5 percentage points, assuming that
during all relevant periods the market price of a share of common stock of the
surviving corporation is between $35 and $45 per share. Due to the preliminary
stage of the Other Litigation, no value has been ascribed thereto for these
illustrative purposes. In addition to the variables that may affect the number
of Contingent Shares, a number of additional variables, including without
limitation other changes in the number of outstanding shares of the surviving
corporation in the California Federal Merger, could affect the relative
ownership of a stockholder of the surviving corporation. Further, the timing
of the issuance of the Contingent Shares is not presently
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ascertainable, and Contingent Shares with respect to the use by the surviving
corporation of FNPH net operating loss carryforwards, which will be subject to
limitation under the Code in any particular tax year, may be issued over a
substantial number of years.
The foregoing estimates and assumptions, and the ownership percentages
derived from them, are presented for illustrative purposes only and are not
intended to represent the view of Golden State, its management or of any other
person as to likely actual results or values or the appropriate amount of
damages in the Goodwill Litigation, the California Federal Litigation or the
Other Litigation, and there can be no assurance that the foregoing estimates
and assumptions will prove to be accurate or that the actual number of
Contingent Shares, and change in such percentage ownership, will not be
substantially different than the estimate disclosed herein. The California
Federal Merger Agreement, which is included as Exhibit 2.1 to Golden State's
Current Report on Form 8-K, as amended by Amendment No. 1 thereto filed with
the Commission on March 5, 1998, sets forth more detailed information
concerning how such ownership percentages are expected to be calculated. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "FORWARD-LOOKING
INFORMATION."
In addition, the Board of Directors of FNPH will have the right to appoint
two-thirds of the initial members of the Board of Directors of the surviving
corporation and it is expected that affiliates of FNPH, FNH and California
Federal will generally be in a position to control the management of the
surviving corporation. See "MANAGEMENT AND OPERATIONS AFTER THE MERGER."
In addition, in connection with the execution of the California Federal
Merger Agreement, Golden State, Glendale Federal, California Federal and
Messrs. Trafton and Fink have entered into the Management Agreement which sets
forth provisions regarding the manner in which the Goodwill Litigation will be
managed and controlled from and after the consummation of the California
Federal Merger. See "MANAGEMENT AND OPERATIONS AFTER THE MERGER."
Consummation of the California Federal Merger is subject to several
conditions set forth in the California Federal Merger Agreement, including
regulatory approval, adoption and approval of the California Federal Merger
Agreement by the Golden State Stockholders and the distribution of the
Litigation Tracking Warrants (see "--Proposed Distribution of Litigation
Tracking Warrants"), and there can be no assurance as to when or if the
California Federal Merger will be consummated.
The description in this Proxy Statement-Prospectus of certain terms of the
California Federal Merger Agreement and related documents is not intended to
be complete and is qualified in its entirety by reference to the full text of
such documents, which have been filed as exhibits to Golden State's Current
Report on Form 8-K, dated as of February 4, 1998, as amended by Amendment No.
1 thereto filed with the Commission on March 5, 1998. See "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"FORWARD LOOKING INFORMATION."
Merger Sub. Merger Sub, a Delaware corporation, is a wholly-owned subsidiary
of Golden State formed for the purposes of effecting the Merger and is not
engaged in any significant business activity. The address of the principal
executive offices and telephone number of Merger Sub are the same as those of
Golden State.
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INFORMATION ABOUT CENFED
CENFED was organized in 1991 to become the holding company for Century
Federal Savings and Loan Association ("Century") in connection with Century's
conversion from mutual to stock form. On April 1, 1992, Century changed its
name to CenFed Bank, A Federal Savings Bank, and its charter was changed to
that of a federally chartered savings bank. CENFED is a savings and loan
holding company and is subject to examination and regulation by the OTS, and
the deposits of CenFed Bank are insured by the SAIF.
CENFED conducts business through 18 branch offices located in Los Angeles,
Orange, Riverside and San Bernardino Counties in Southern California. At
December 31, 1997, CENFED had total assets of $2.2 billion, deposits of $1.6
billion and stockholders' equity of $136 million. CENFED is primarily engaged
in the business of attracting deposits from the general public and using such
deposits, together with borrowings and equity capital, to originate and
purchase real estate loans, small business loans and mortgage-backed
securities, such as those issued or guaranteed by the Federal National
Mortgage Association, the Government National Mortgage Association, the
Federal Home Loan Mortgage Corporation and other financial institutions and
intermediaries.
CENFED's results of operations are dependent primarily upon net interest
income, which is the difference between interest income from interest earning
assets and interest expense on interest bearing liabilities. Results of
operations are also influenced by noninterest income derived from loan
servicing fees, customer deposit service charges, commissions from sales of
alternative investments, real estate operations and gains and losses from the
sale of loans, mortgage-backed securities and investments. Operating expenses
of CENFED include general and administrative expenses such as salaries,
employee benefits, federal deposit insurance premiums and branch occupancy and
related expenses. CENFED's operations are significantly influenced by general
economic conditions, the monetary and fiscal policies of the federal
government and the regulatory policies of governmental authorities. Deposit
flows and the cost of interest bearing liabilities are influenced by the
interest rates and rates of return available on competing investments and
general market interest rates. Similarly, loan volume and yields, and the
level of prepayments on loans, are affected by market interest rates on loans
and the availability of funds.
The principal executive offices of CENFED are located at 199 North Lake
Avenue, Pasadena, California 91101 and the telephone number at such offices is
(626) 585-2400.
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COMPARISON OF STOCKHOLDER RIGHTS
DESCRIPTION OF GOLDEN STATE CAPITAL STOCK
GENERAL
The Golden State Certificate of Incorporation authorizes Golden State to
issue 100,000,000 shares of Golden State Common Stock and 50,000,000 shares of
preferred stock, each with a par value of $1.00 per share. In connection with
the California Federal Merger Agreement, Golden State has agreed to use its
reasonable best efforts to cause the Golden State Certificate of Incorporation
to be amended to increase the number of authorized shares of Golden State
Common Stock from 100,000,000 to 250,000,000. See "INFORMATION ABOUT GOLDEN
STATE AND MERGER SUB--Subsequent Events."
GOLDEN STATE COMMON STOCK
Rights and Priority. Each share of Golden State Common Stock has the same
relative rights as, and is identical in all respects with, each other share of
Golden State Common Stock. Each share of Golden Common Stock entitles the
holder thereof to one vote on all matters upon which stockholders have the
right to vote, except that stockholders of Golden State are entitled, upon
compliance with applicable requirements, to cumulate their votes in the
election of directors. Subject to the rights of the holders of Golden State's
Noncumulative Convertible Preferred Stock, Series A, par value $1.00 per share
("Golden State Preferred Stock") (currently the only outstanding series of
preferred stock of Golden State), or any other preferred stock that may
hereafter be issued by the Golden State, the holders of Golden State Common
Stock are entitled to dividends when, as and if declared by the Golden State
Board of Directors out of funds legally available therefor. Holders of shares
of Golden State Common Stock are not entitled to preemptive rights with
respect to any shares which may be issued. Golden State Common Stock is not
subject to call or redemption and, upon receipt by Golden State of the full
purchase price therefor, each share of Golden State Common Stock will be fully
paid and non-assessable. In the event of any liquidation or dissolution of
Golden State, the holders of Golden State Common Stock would be entitled to
receive all assets of Golden State remaining available for distribution, after
payment or provision for payment of all debts and liabilities of Golden State,
except to the extent that the holders of Golden State Preferred Stock, or any
other preferred stock that may hereafter be issued by the company, then have a
priority over the holders of Golden State Common Stock in the event of
liquidation or dissolution.
The following is a discussion of certain securities of Golden State that may
be exercised for shares of Golden State Common Stock on the terms and under
the conditions described below. For a description of the Litigation Tracking
Warrants that Golden State is currently contemplating issuing, see
"INFORMATION ABOUT GOLDEN STATE AND MERGER SUB--Subsequent Events".
Five-Year Warrants. Golden State has a class of common stock purchase
warrants outstanding (the "Five-Year Warrants") that were originally issued
pursuant to that certain Warrant Agreement, dated as of February 23, 1993,
entered into between Glendale Federal and Chemical Trust Company of California
("Chemical") as Warrant Agent. ChaseMellon Shareholder Services LLC
("ChaseMellon") has succeeded to Chemical's position as such Warrant Agent.
Each Five-Year Warrant will expire on March 10, 1999. The Five-Year Warrants
entitle the registered holder thereof (a "Five-Year Warrant Holder") to
receive from Golden State one share of Golden State Common Stock for every ten
Five-Year Warrants (or such other number as may result from adjustment as
provided in the warrant agreement) at an exercise price of zero dollars
($0.00) per share, at any time after one year from the date of issuance until
the expiration of the Five-Year Warrant five years from the date such Five-
Year Warrants first became exercisable. The number of shares of Golden State
Common Stock for which a Five-Year Warrant may be exercised is subject to
adjustment from time to time upon the occurrence of certain events, including
(i) dividends, subdivisions, combinations or reclassifications of shares of
Golden State Common Stock, (ii) certain issuances of options, rights or
warrants to all holders of shares of Golden State Common Stock, (iii) certain
issuances of Golden State Common Stock at less than the then-current market
value of such stock and (iv) certain
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distributions to all holders of Golden State Common Stock of other types of
stock, evidences of indebtedness or assets. Pursuant to the foregoing
provisions, the number of shares issuable upon exercise of the Five-Year
Warrants was adjusted to reflect the one-for-ten reverse stock split that was
effected in connection with the recapitalization of Glendale Federal that was
completed in August 1993. Accordingly, each currently outstanding Five-Year
Warrant entitles the holder thereof to receive one-tenth of the number of
shares of Golden State Common Stock stated in the original form of such Five-
Year Warrant.
Holders of Five-Year Warrants are not entitled, by virtue of being such
holders, to receive dividends, vote, receive notice of any meetings of
stockholders or otherwise have any rights of stockholders of Golden State.
Prior to the Reorganization, the Five-Year Warrants represented obligations
of Glendale Federal. At the effective time of the Reorganization, each of the
unexercised Five-Year Warrants then issued and outstanding, in accordance with
its original terms, automatically by operation of law, became a Five-Year
Warrant to purchase the number of shares of Golden State Common Stock that
equaled the number of shares of Glendale Federal Common Stock for which such
Five-Year Warrant was exercisable immediately prior thereto, on the same terms
and conditions and at the same price, and Golden State assumed all of Glendale
Federal's obligations with respect to such Five-Year Warrants.
As of December 31, 1997 the Five-Year Warrants outstanding were exercisable
for an aggregate of 1,522 shares of Golden State Common Stock.
Seven-Year Warrants. Golden State also has a class of common stock purchase
warrants outstanding (the "Seven-Year Warrants") that were originally issued
under that certain Warrant Agreement, dated as of August 15, 1993, entered
into between Glendale Federal and Chemical. ChaseMellon has succeeded to
Chemical's position as such Warrant Agent. Each Seven-Year Warrant entitles
the holder thereof to purchase one share of Golden State Common Stock for a
purchase price of $12.00 per share payable in cash (the "Exercise Price"),
subject to adjustment as described below.
Each Seven-Year Warrant became exercisable on September 14, 1994 and will
expire on August 21, 2000. No adjustment will be made for any cash dividends
paid on shares of Golden State Common Stock issuable upon exercise of the
Seven-Year Warrants. The Seven-Year Warrants may be exercised only for whole
shares of Golden State Common Stock.
The number of shares of Golden State Common Stock or other securities
issuable upon exercise of each Seven-Year Warrant and the Exercise Price are
subject to adjustment upon the issuance of a stock dividend to holders of
Golden State Common Stock, or a combination, subdivision or reclassification
of Golden State Common Stock. The Exercise Price is subject to adjustment upon
the distribution by Golden State to the holders of Golden State Common Stock
generally of certain rights to subscribe for Golden State Common Stock at less
than current market value, but the number of shares of Golden State Common
Stock or other securities issuable upon exercise of each Seven-Year Warrant
will not be adjusted proportionately. No adjustment in the Exercise Price or
the number of shares of Golden State Common Stock issuable upon the exercise
of Seven-Year Warrants of less than 1% will be required to be made, but any
such adjustment not made must be carried forward and taken into account in any
subsequent adjustment determination until cumulative adjustments reach 1%.
Notwithstanding the foregoing, in case of a consolidation, merger, sale or
conveyance of the property of Golden State as an entirety or substantially as
an entirety, the holder of each outstanding Seven-Year Warrant shall continue
to have the right to exercise the Seven-Year Warrant for the kind and amount
of shares and other securities and property (including cash) receivable by a
holder of the number of shares of Golden State Common Stock for which such
Seven-Year Warrant was exercisable immediately prior thereto.
The Warrant Agreement for the Seven-Year Warrants may be amended or
supplemented without the consent of the registered holders of the Seven-Year
Warrants to effect changes that are not inconsistent with the provisions of
the Seven-Year Warrants and that do not adversely affect the interests of the
holders of Seven-Year
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Warrants. The Warrant Agreement for the Seven-Year Warrants may also be
amended with the consent of the holders of more than 50% in number of the
Seven-Year Warrants then outstanding, but no such amendment may modify the
terms on which the Seven-Year Warrants are exercisable or change the
percentage of holders of Seven-Year Warrants who must consent to such
amendments.
No holder of Seven-Year Warrants is entitled to vote or receive dividends or
will be deemed for any purpose to be a holder of Golden State Common Stock or
any other securities of Golden State that may at any time be issuable upon the
exercise of the Seven-Year Warrants until the Seven-Year Warrants are properly
exercised as provided in the warrant agreement. The Seven-Year Warrants are
listed for trading on Nasdaq Small Capitalization Market.
Prior to the Reorganization, the Seven-Year Warrants represented obligations
of Glendale Federal. At the effective time of the Reorganization, each of the
unexercised Seven-Year Warrants then issued and outstanding, in accordance
with its original terms, automatically by operation of law, became a warrant
to purchase the number of shares of Golden State Common Stock that equaled the
number of shares of Glendale Federal Common Stock for which such warrant was
exercisable immediately prior thereto, on the same terms and conditions and at
the same exercise price, and the Company assumed all of Glendale Federal's
obligations with respect to the Seven-Year Warrants.
As of December 31, 1997, the Seven-Year Warrants outstanding were
exercisable for an aggregate of 10,847,917 shares of Golden State Common
Stock.
GOLDEN STATE PREFERRED STOCK
The outstanding shares of Noncumulative Convertible Preferred Stock, Series
A (which is referred to elsewhere herein as the Golden State Preferred Stock)
currently constitute Golden State's only outstanding series of preferred
stock.
Priority. The Golden State Preferred Stock is subordinate to all
indebtedness of Golden State. The Golden State Preferred Stock is, prior to
conversion, superior and prior in rank to Golden State Common Stock and to all
other Junior Stock. "Junior Stock" means Golden State Common Stock and any
other classes or series of equity securities of Golden State not expressly
designated as being on a parity with, or senior to, the Golden State Preferred
Stock. Golden State has the power to create and issue additional preferred
stock or other classes of stock ranking on a parity with the Golden State
Preferred Stock, or that constitute Junior Stock, without any approval or
consent of the holders of the Golden State Preferred Stock.
Dividends. Holders of the Golden State Preferred Stock are entitled to
receive, when, as, and if declared by the Golden State Board of Directors out
of funds legally available therefor, noncumulative cash dividends at an annual
rate of 8.75 percent (expressed as a percentage of the $25.00 per share
liquidation preference of the Golden State Preferred Stock). Dividends on the
Golden State Preferred Stock are payable in quarterly installments as of the
first day of January, April, July and October of each year to holders of
record as of a date fixed by the Golden State Board not less than 30 or more
than 60 days prior to the date such dividend is paid. Quarterly dividend
periods (each a "Preferred Stock Dividend Period") commence on December 1,
March 1, June 1 and September 1 of each year and end on and include the date
preceding commencement of the next following Preferred Stock Dividend Period.
Dividends on the shares of Golden State Preferred Stock are noncumulative so
that if a dividend on the shares of Golden State Preferred Stock with respect
to any Preferred Stock Dividend Period is not declared by the Golden State
Board, then Golden State will not be obligated at any time to pay a dividend
on the shares of Golden State Preferred Stock in respect of such Preferred
Stock Dividend Period, whether or not dividends are declared and paid in
respect of any subsequent dividend period.
Unless full cash dividends on the Golden State Preferred Stock for a
Preferred Stock Dividend Period have been or are contemporaneously declared
and paid (or declared and a sum sufficient for the payment thereof set apart),
no full dividends may be declared or paid or set apart for payment on
preferred stock of Golden State of
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any series ranking, as to dividends, on a parity with the Golden State
Preferred Stock for any period. When cash dividends are not paid in full (or
declared and a sum sufficient for such full payment so set apart) upon the
preferred stock of Golden State of any series ranking, as to dividends, on a
parity with the Golden State Preferred Stock, no dividends may be declared on
any series of stock ranking, as to dividends, junior to the Golden State
Preferred Stock and all dividends declared upon shares of Golden State
Preferred Stock and any such parity stock will be declared pro rata based upon
the respective amounts that would have been paid thereon had dividends been
paid in full.
Unless (i) full cash dividends on the Golden State Preferred Stock have been
declared and paid or set aside for payment for the four most recent Preferred
Stock Dividend Periods and (ii) Golden State has declared a cash dividend on
the Golden State Preferred Stock at the annual dividend rate for the current
Preferred Stock Dividend Period and sufficient funds have been set apart for
the payment of such cash dividend, Golden State may not declare or pay or set
aside for payment any dividends (other than dividends payable in Junior Stock)
or make any other distribution upon Junior Stock or redeem, purchase or
otherwise acquire any Junior Stock for any consideration (and no monies may be
paid to or made available for a sinking fund for the redemption of any shares
of any such stock) except by conversion into or exchange for Junior Stock.
Conversion. The Golden State Preferred Stock is convertible, at the option
of the holders thereof, into Golden State Common Stock at a conversion ratio
of 2.404 shares of Golden State Common Stock for each share of Golden State
Preferred Stock, subject to adjustment in certain events as described below.
The conversion right with respect to such shares terminates at the close of
business on the fifth day immediately preceding the date fixed for redemption
(as described under "--Redemption") of such shares, provided that no default
by Golden State in the payment of the applicable redemption price (including
any declared and unpaid dividends) shall have occurred and be continuing on
the date fixed for such redemption, unless a notice of conversion shall have
been received, and the certificate(s) representing the shares to be converted
shall have been surrendered, prior to that time.
The holder of record of a share of Golden State Preferred Stock on a record
date with respect to the payment of a dividend declared on the Golden State
Preferred Stock is entitled to receive such dividend on such share of Golden
State Preferred Stock on the corresponding dividend payment date
notwithstanding the conversion thereof after such record date. No payment or
adjustment is to be made on conversion for dividends declared on the shares of
Golden State Preferred Stock or for dividends on Golden State Common Stock
issued on conversion.
The conversion price is subject to adjustment in certain events, including:
(i) the issuance of any capital stock of Golden State as a dividend or
distribution on Golden State Common Stock; (ii) the combination, subdivision
or reclassification of Golden State Common Stock; (iii) the issuance to all
holders of Golden State Common Stock of rights or warrants entitling them to
subscribe for or purchase Golden State Common Stock at less than the then-
current market price of Golden State Common Stock; (iv) the distribution to
all holders of Golden State Common Stock of evidences of Golden State's
indebtedness or other assets (including securities, but excluding the
dividends, distributions, rights and warrants, referred to in clauses (i) and
(iii) above, and any dividend or distribution paid in cash out of surplus or
retained earnings); or (v) the issuance, sale or exchange of shares of Golden
State Common Stock for consideration having a fair market value that is less
than the current market value. No such adjustment of less than 1% of the
conversion rate will be required, but any such adjustment not made due to this
limitation must be carried forward and taken into account in any subsequent
adjustment determination.
In the event of a consolidation or merger or similar transaction pursuant to
which the outstanding shares of Golden State Common Stock are by operation of
law exchanged for, or changed, reclassified or converted into, other stock or
securities, or cash or other property, or any combination thereof, there shall
be no adjustment to the conversion price by virtue thereof. The outstanding
shares of Golden State Preferred Stock shall, in such case, be assumed by and
shall become preferred stock of any successor or resulting entity having in
respect of
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such entity, insofar as possible, the same powers, preferences, and relative,
participating, optional and other special rights, and qualifications,
limitations or restrictions, that the Golden State Preferred Stock had
immediately prior to such transaction, except that after such transaction each
share of Golden State Preferred Stock shall be convertible, otherwise on the
same terms and conditions, into the consideration so receivable by a holder of
the number of shares of Golden State Common Stock into which such shares of
Golden State Preferred Stock could have been converted immediately prior to
such transaction if such holder failed to exercise any rights of election to
receive any kind or amount of consideration receivable upon such transaction.
Fractional shares of Golden State Common Stock will not be delivered upon
conversion, but a cash adjustment will be paid in respect of such fractional
interests, based on the average of the closing sales prices of Golden State
Common Stock on the NYSE for the five business days immediately preceding the
date of conversion. Golden State shall at all times reserve a sufficient
number of shares of Golden State Common Stock to effect the conversion of all
shares of Golden State Preferred Stock then outstanding.
Redemption. Subject to applicable laws or regulations, the shares of Golden
State Preferred Stock are redeemable, in whole or in part, at the option of
Golden State, on 20 to 45 days notice, from time to time at any time on or
after October 1, 1998 at the following per share redemption prices, plus in
each case an amount equal to any dividends that have been declared thereon but
remain unpaid as of the date of redemption, if redeemed during the twelve-
month period beginning October 1 of each of the following years:
<TABLE>
<CAPTION>
REDEMPTION PRICE
PER SHARE
OF GOLDEN STATE
YEAR PREFERRED STOCK
---- ----------------
<S> <C>
1998.................................................... $26.09375
1999.................................................... 25.87500
2000.................................................... 25.65625
2001.................................................... 25.43750
2002.................................................... 25.21875
2003 and thereafter..................................... 25.00000
</TABLE>
The redemption of shares of Golden State Preferred Stock is subject to
certain limitations imposed by OTS regulations of general application.
If a notice to convert shares of Golden State Preferred Stock into shares of
Golden State Common Stock, as described above, shall have been received by
Golden State and the certificates representing such shares shall have been
surrendered on or prior to the fifth day immediately preceding the redemption
date specified in the notice of redemption, such shares may not be redeemed.
After a notice of redemption has been given, if on or before the redemption
date specified therein all funds necessary for such redemption have been set
aside by Golden State separate and apart from its other funds or deposited in
trust for the account of the holders of the shares to be redeemed, on and
after such redemption date, notwithstanding that any certificate for shares of
the Golden State Preferred Stock so called for redemption has not been
surrendered for cancellation, the shares represented thereby will be deemed no
longer to be outstanding, the dividends thereon will cease to accrue, and all
rights with respect to such shares so called for redemption will cease and
terminate, except only the right to receive such money set aside or deposited
in trust without interest.
Voting Rights. Except as described below or as otherwise required by law,
the holders of Golden State Preferred Stock do not have any voting rights.
If Golden State fails to pay cash dividends on the Golden State Preferred
Stock with respect to any six Preferred Stock Dividend Periods, the number of
directors of Golden State will be increased by two and, subject to compliance
with any requirement for regulatory approval of (or nonobjection to) persons
serving as directors,
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the holders of Golden State Preferred Stock, together with any other holders
of preferred stock of Golden State having similar voting rights, voting
together as a single class, will have the right to elect up to two members of
the Golden State Board.
The holders of Golden State Preferred Stock and such other holders may only
exercise such special class voting rights at the next annual meeting and each
subsequent annual meeting until dividends have been paid or declared and set
aside on the Golden State Preferred Stock and such other Golden State
preferred stock for four consecutive Preferred Stock Dividend Periods. The
term of directors elected by holders of Golden State Preferred Stock and such
other holders shall terminate upon the payment or declaration and setting
aside for payment of full dividends on the shares held thereby for four
consecutive Preferred Stock Dividend Periods.
So long as any Golden State Preferred Stock is outstanding and unless the
consent or approval of a greater number of shares is then required by law or
regulation, Golden State may not, without the affirmative vote or consent of
the holders of two-thirds of the outstanding shares of Golden State Preferred
Stock voting as a separate class, amend or otherwise alter or repeal any
provision of the Golden State Certificate of Incorporation that would
materially and adversely affect the rights, preferences, powers or privileges
of the Golden State Preferred Stock.
Additionally, Golden State is not permitted to incur Indebtedness that ranks
prior to the Golden State Preferred Stock without the affirmative vote or
consent of the holders of a majority of the outstanding shares of Golden State
Preferred Stock. The term "Indebtedness" is defined as indebtedness for money
borrowed, indebtedness evidenced by notes, debentures, bonds or other
securities and any renewals, deferrals, increases or extensions of any such
indebtedness, but does not include any of the foregoing types of indebtedness
incurred by a subsidiary of Golden State or the proceeds of which are to be
applied to redeem or repurchase all then-outstanding shares of the Golden
State Preferred Stock.
Liquidation Rights. Upon liquidation, dissolution or winding up of the
affairs of Golden State, after payment or provision for payment of the debts
and other liabilities of Golden State, the holders of Golden State Preferred
Stock are entitled to receive in full out of the assets of Golden State,
including its capital, $25.00 per share of Golden State Preferred Stock, plus
any dividends that have been declared but remain unpaid as of such date,
before any amount shall be paid or distributed to the holders of Golden State
Common Stock or other Junior Stock. If, upon any liquidation, dissolution or
winding up of Golden State, the amounts payable with respect to the Golden
State Preferred Stock and all other outstanding parity stock cannot be paid in
full, the holders of each series of such stock will share ratably in any such
distribution of assets in proportion to the full respective preferential
amount to which they are entitled. After payment of the full preferential
amount to which they are entitled upon any liquidation, dissolution or winding
up, the holders of Golden State Preferred Stock will have no right or claim to
any of the remaining assets of Golden State. The merger or consolidation of
Golden State into or with any other company or the merger of any other company
into it, or the sale, lease or conveyance of all or part of the assets of
Golden State, shall not be deemed to be a voluntary or involuntary
dissolution, liquidation, or winding up.
As of December 31, 1997, 4,621,982 shares of Golden State Preferred Stock
were outstanding.
COMPARISON OF GOLDEN STATE COMMON STOCK AND CENFED COMMON STOCK
Upon the conversion of their shares of CENFED Common Stock into the right to
receive shares of Golden State Common Stock pursuant to the Merger, the
stockholders of CENFED, a Delaware corporation, will become stockholders of
Golden State, also a Delaware corporation. The following is a summary of the
material differences between the rights of holders of CENFED Common Stock and
the rights of holders of Golden State Common Stock. These differences arise
from the governing instruments of the two companies (in the case of CENFED,
the CENFED Certificate of Incorporation and the CENFED Bylaws, and, in the
case of Golden State, the Golden State Certificate of Incorporation and the
Golden State Bylaws). Although it is impractical to compare
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all of the aspects in which the companies' governing instruments differ with
respect to stockholders' rights, the following discussion summarizes the
material differences between them.
Amendment of Charter Documents. The Golden State Certificate of
Incorporation provides that the affirmative vote of two-thirds, or such
greater proportion as may otherwise be required pursuant to any specific
provision of such Certificate of Incorporation, of the votes eligible to be
cast at a legal meeting is required to amend, repeal or adopt any provisions
inconsistent with such provision and the provisions of the Certificate of
Incorporation governing (i) the Golden State Board of Directors (including,
without limitation, vacancies thereon and the election and removal of the
members thereof), (ii) approval of business combinations, (iii) the persons
afforded the right to call special meetings of Golden State Stockholders, (iv)
the adoption or modification of the Golden State Bylaws; (v) the ability of
Golden State Stockholders to act by written consent in lieu of a meeting; (vi)
stockholder nominations for members of the Golden State Board of Directors;
(vii) the liability for money damages of directors of Golden State and (viii)
the indemnification of certain persons, including directors or officers of
Golden State. Otherwise, amendments, alterations, changes and repeals of
provisions of the Golden State Certificate of Incorporation are to be made in
the manner prescribed by the Delaware Law.
The CENFED Certificate of Incorporation contains a substantially similar
provision, except that the amendment or modification of the business
combination provision of the CENFED Certificate of Incorporation requires a
two-thirds vote of the voting stock of CENFED.
Amendment and Repeal of Bylaws and Regulations. Each of the Golden State and
CENFED Certificates of Incorporation and Bylaws provides that the Bylaws of
the respective corporation may be adopted, amended or repealed by the
affirmative vote of the holders of at least two-thirds of the total votes
eligible to be cast at a legal meeting of the stockholders or by a resolution
adopted by a majority of the directors then in office. The Golden State Bylaws
provide that no amendment, termination or repeal of the provisions of the
Golden State Bylaws concerning indemnification of certain persons, including
officers and directors of Golden State, shall affect or impair in any way the
rights of any director or officer of Golden State with respect to any
proceeding arising out of any facts occurring prior to such amendment,
termination or repeal.
Vacancies on the Board. The Golden State Bylaws provide that any vacancies
on the Golden State Board resulting from any cause shall be filled by the
affirmative vote of a majority of directors then in office, although less than
a quorum, or by the sole remaining director, or, in the event of the failure
of the directors or sole remaining director to so act, by the stockholders at
the next election of directors, subject to the rights of holders of any class
of stock or series thereof that is voting separately and is entitled to elect
one or more directors. If the number of directors is changed, any increase or
decrease must be apportioned among the three classes of the directors so as to
make all classes as nearly equal in number as possible.
The CENFED Bylaws provide that any vacancies on the CENFED Board resulting
from any cause may be filled only by the affirmative vote of a majority of
directors then in office, although less than a quorum, or by the sole
remaining director or, in the event of the failure of the directors or sole
remaining director to act, by the stockholders at the next annual meeting that
occurs after the expiration of a 90-day period commencing on the day the
vacancy is created. If the number of directors is changed, any increase or
decrease may be allocated to any such class as the CENFED Board selects in its
discretion.
Removal of Directors. Each of the Golden State Certificate of Incorporation
and Bylaws and the CENFED Certificate of Incorporation and Bylaws contains
substantially identical provisions with respect to the removal of directors,
each providing that such removal may only be for cause as determined by the
vote of the holders of at least a majority of the shares then entitled to vote
in the election of directors, which vote may only be taken at an annual or
special meeting. Cause for removal is deemed to exist only in the event of a
conviction of a felony by a court of competent jurisdiction, a judgment by a
court of competent jurisdiction of gross negligence or misconduct in the
performance of the duties of a director of Golden State or CENFED,
respectively, such adjudication no longer being subject to appeal.
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Right to Call Special Meetings of Stockholders. The Golden State Certificate
of Incorporation provides that special meetings of Golden State Stockholders
may only be called by the Chairman of the Golden State Board or by a majority
of the directors then in office. The CENFED Certificate of Incorporation
provides that special meetings of CENFED Stockholders may only be called by a
majority of the directors then in office.
Shareholder Action Without a Meeting. Each of the Golden State and CENFED
Certificates of Incorporation provide that any action required to be taken or
that may be taken at any annual or special meeting of the stockholders of the
respective corporation may be taken by written consent without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all
of the stockholders of the respective corporation entitled to vote on such
action.
Cumulative Voting. The CENFED Certificate of Incorporation does not permit
stockholders to cumulate their votes in the election of directors. The Golden
State Certificate of Incorporation permits stockholders to cumulate votes in
the election of directors in the manner provided in Section 214 of the
Delaware Law. Pursuant to such Section, each stockholder is entitled to as
many votes as shall equal the number of votes which, except for such provision
as to cumulative voting, he would be entitled to cast for the election of
directors with respect to his shares of stock, multiplied by the number of
directors to be elected by him, and he may cast all of such votes for a single
director or may distribute them among the number to be voted for, or for any
two or more of them, as he may see fit.
Provisions Affecting Business Combinations. The CENFED Certificate of
Incorporation provides that, in addition to any affirmative vote of holders of
a class or series of CENFED capital stock required by law or the provisions
thereof, and with certain exceptions described herein, a Business Combination
(as defined herein) with or upon a proposal by an Interested Stockholder (as
defined herein) requires the affirmative vote of the holders of at least two-
thirds of the voting stock of CENFED voting together as a single class
(excluding all shares beneficially owned by the Interested Stockholder). Such
an affirmative vote is required notwithstanding the fact that no vote, or a
lesser percentage vote, may be required or may be specified by law or
regulation.
Such a supermajority vote is not required if (i) the proposed Business
Combination is approved by a vote of a majority of all of the Disinterested
Directors (as defined herein), (ii) the proposed Business Combination is
solely between CENFED and a CENFED subsidiary, and such Business Combination
does not have the direct or indirect effect set forth in clause (v) of the
definition of Business Combination below or (iii) the proposed Business
Combination is consummated three years after the date that the Interested
Stockholder became such and certain criteria are met with respect to the
amount and form of the consideration with respect to such Business
Combination, the absence of certain extraordinary events described in the
CENFED Certificate of Incorporation (including, without limitation, certain
failures to pay, or reductions in, dividends and certain self-dealing
transactions) and the provision to holders of CENFED capital stock of certain
information (including the recommendation of CENFED's Disinterested Directors
upon the proposed transaction and the opinion or evaluation of an investment
banking firm selected by the Disinterested Directors as to the fairness of the
proposed transaction).
For the purposes of the above provisions of the CENFED Certificate of
Incorporation, "Business Combination" means any of the following combinations
between CENFED or a subsidiary, on the one hand, and an Interested
Stockholder, on the other: (i) the merger or consolidation of CENFED or any
subsidiary of CENFED; or (ii) the sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one or a series of transactions) of any
assets of CENFED or of any CENFED subsidiary having an aggregate fair market
value of $20 million or more; or (iii) the issuance or transfer by CENFED or
by any subsidiary of CENFED (in one transactions or a series of transactions)
of securities of CENFED or a subsidiary of CENFED having an aggregate fair
market value of $20 million or more; or (iv) the adoption of a plan or
proposal for the liquidation or dissolution of any subsidiary of CENFED; or
(v) the reclassification of securities (including a reverse stock split),
recapitalization, consolidation or any other transaction (whether or not
involving an Interested Stockholder) which has the direct or indirect effect
of increasing the voting power, whether or not then exercisable, of an
Interested Stockholder in any class or series of capital stock of CENFED or
any CENFED subsidiary; or (vi) any agreement, contract or other arrangement
providing directly or indirectly for any of the foregoing. "Interested
Stockholder" means any person (other than CENFED, its subsidiaries, an
employee stock ownership
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or other employee benefit plan of CENFED or any trustee or fiduciary with
respect to any such plan acting in such capacity) that is the direct or
indirect beneficial owner (as defined in Rule 13d-3 and Rule 13d-5 under the
Securities Exchange Act of 1934 as in effect on January 1, 1990) of more than
10 percent of the outstanding voting stock of CENFED, and any affiliate or
associate of such person (as such terms are defined in the Securities Exchange
Act of 1934 as in effect on January 1, 1990). "Disinterested Director" means
any member of the CENFED Board not affiliated with an Interested Stockholder
and who was a member of such Board immediately prior to the time that any
Interested Stockholder became such, and any successor to a Disinterested
Director not affiliated with an Interested Stockholder and recommended to
succeed a Disinterested Director by a majority of the Disinterested Directors
who are then members of the CENFED Board of Directors.
The Golden State Certificate of Incorporation contains a substantially
identical provision with respect to business combinations involving Golden
State, except that the corresponding dollar amount in clauses (ii) and (iii)
of the definition of "Business Combination" is $25 million.
Preemptive Rights of Stockholders. The Delaware Law provides that no
stockholder shall have any preemptive rights to purchase additional securities
of the corporation unless the certificate of incorporation expressly grants
such rights. Neither the Golden State Certificate of Incorporation nor the
CENFED Certificate of Incorporation grants preemptive rights.
Stockholder Rights Plan. CENFED has issued the CENFED Rights and is party to
the CENFED Rights Agreement. See "THE MERGER--CENFED Rights Agreement." Golden
State is not party to any similar plan and has neither authorized nor issued
similar securities.
Nomination of Directors. The CENFED Bylaws provide that nominations of
candidates for election as directors at any stockholder meeting may be made by
any stockholder of record entitled to vote thereat, provided that such notice
is delivered to or received by the Secretary of CENFED, in the case of an
annual meeting, not less than 60 nor more than 90 days in advance of the
anniversary date of the prior year's annual meeting, and for a special
meeting, not less than 60 nor more than 90 days in advance of the date of the
special meeting, regardless of any postponements or adjournments of such
meeting to a later date, and provided further that such notice meets certain
requirements as to content and form, including setting forth the information
relating to the nominees and the nominating stockholder specified in the
CENFED Bylaws. The CENFED Board may reject any stockholder nomination not made
in accordance with the foregoing, provided that the proposing stockholder has
a right to be notified of any defect in such stockholder's notice and to cure
such deficiency within five days of such notice, and if the CENFED Board makes
no such determination, the presiding officer of the stockholders' meeting
shall make the determination.
The Golden State Bylaws provide that nominations of candidates for election
as directors at any stockholder meeting may be made by any stockholder
entitled to vote at such annual meeting, and that such nominations must be
made pursuant to timely written notice to the Secretary of Golden State. Such
notice is timely if delivered to or received at the principal executive
offices of Golden State not less than five days prior to the scheduled date
for the meeting, regardless of any postponements or adjournments of such
meeting to a later date. The Golden State Board may reject any nomination by a
stockholder not timely made in accordance with the provisions of the Golden
State Bylaws.
New Business Proposals. The CENFED Bylaws provide that any new business to
be conducted at any annual meeting of CENFED Stockholders must be stated in
writing and filed with the Secretary of CENFED on or before 30 days in advance
of the anniversary of the prior year's annual meeting, and such business will
be considered at the annual meeting unless prior action by the CENFED Board
would be required. Any other proposal made by a CENFED Stockholder may be made
and may be discussed and considered at such meeting, but unless the notice of
such business complies with the foregoing, such a proposal may only be voted
upon at a meeting held at least 30 days after the annual meeting at which such
business is presented.
The Golden State Bylaws provide that, for stockholder proposals to be acted
upon at any meeting of Golden State Stockholders, timely notice thereof must
be given. Notice is timely if given in the manner required for stockholder
nominations for candidates for election to the Golden State Board described
above under "--Nomination of Directors."
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RIGHTS OF DISSENTING STOCKHOLDERS
CENFED Stockholders will not be entitled to dissenters' appraisal rights
under Delaware law or any other statute in connection with the Merger. As
stockholders of a Delaware corporation, the appraisal rights of CENFED
Stockholders are governed by Section 262 of the Delaware Law. CENFED Common
Stock is designated as a national market system security on Nasdaq and holders
of CENFED Common Stock will be required to accept only shares of Golden State
Common Stock (which is listed on the NYSE, a national securities exchange) and
cash in lieu of fractional shares. Section 262 of the Delaware Law does not
provide for appraisal rights under such circumstances.
LEGAL MATTERS
The validity of the Golden State Common Stock to be issued in connection
with the Merger will be passed upon by James R. Eller, Jr., Corporate Counsel
of Glendale Federal. As of the date of this Proxy Statement-Prospectus, Mr.
Eller may be deemed to beneficially own 7,292 shares of Golden State Common
Stock, which in the aggregate constitute less than 1% of the Golden State
Common Stock outstanding.
EXPERTS
The consolidated financial statements of Golden State Bancorp Inc. and
subsidiaries (formerly Glendale Federal Bank, Federal Savings Bank) as of June
30, 1997 and 1996, and for each of the years in the three year period ended
June 30, 1997, have been incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of CENFED Financial Corporation and
subsidiary as of December 31, 1996 and 1995 and for the years then ended, have
been incorporated by reference herein in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of such firm as experts in accounting
and auditing.
The consolidated statements of operations, stockholders' equity and cash
flows of CENFED Financial Corporation and subsidiary for the year ended
December 31, 1994 have been audited by Deloitte and Touche LLP, independent
auditors, as stated in their report which is incorporated by reference herein,
and have been so incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of FNPH and subsidiaries as of
December 31, 1996 and 1995, and for each of the years in the three year period
ended December 31, 1996, have been incorporated by reference herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of RedFed and subsidiaries as of
December 31, 1996 and 1995, and for each of the years in the three year period
ended December 31, 1996, have been incorporated by reference herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority
of such firm as experts in accounting and auditing.
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STOCKHOLDER PROPOSALS
CENFED will hold a 1998 Annual Meeting of CENFED Stockholders only if the
Merger is not consummated before the time of such meeting. In the event that
such a meeting is held, any proposals of CENFED Stockholders intended to be
presented at the 1998 Annual Meeting must have been received by the Secretary
of CENFED no later than December 31, 1997 in order to be considered for
inclusion in the CENFED 1998 proxy materials.
OTHER MATTERS
As of the date of this Proxy Statement-Prospectus, the CENFED Board knows of
no matters that will be presented for consideration at the Special Meeting
other than as described in this Proxy Statement-Prospectus. If any other
matters shall properly come before either such meeting or any adjournments or
postponements thereof and be voted upon, the enclosed proxies will be deemed
to confer discretionary authority on the individuals named as proxies therein
to vote the shares represented by such proxies as to any such matters. The
persons named as proxies intend to vote or not to vote in accordance with the
recommendation of the management of CENFED.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Financial Statements
have been prepared to reflect the Merger, the RedFed Merger, and the
California Federal Merger. The Unaudited Pro Forma Condensed Combined
Financial Statements are organized as follows: first, Unaudited Pro Forma
Condensed Combined Financial Statements are presented to reflect the Merger;
second, Unaudited Pro Forma Condensed Combined Financial Statements are
presented to reflect the Merger and the RedFed Merger; and finally, Unaudited
Pro Forma Condensed Combined Financial Statements are presented to reflect the
Merger, the RedFed Merger, and the California Federal Merger. The Merger, the
RedFed Merger and the California Federal Merger will each be accounted for as
a purchase. The recorded assets, liabilities and other items of CENFED and
RedFed will be recorded in Golden State's consolidated financial statements at
their estimated fair value at the respective closing dates. See "THE MERGER--
Accounting Treatment." The recorded assets, liabilities, and other items of
Golden State will be adjusted to their estimated fair value in Golden State's
consolidated financial statements at the closing date of the California
Federal Merger. Golden State's assets, liabilities, and other items will be
adjusted to their estimated fair value at the closing date of the California
Federal Merger because affiliates of MAF and Ford are expected to retain
controlling interests in the merged entity, and it is expected that Golden
State will be managed by California Federal's management after the California
Federal Merger. While the Golden State name is expected to remain, for
financial reporting purposes FNPH is treated as the accounting and reporting
acquirer.
The Unaudited Pro Forma Condensed Combined Financial Statements reflect
preliminary purchase accounting adjustments in compliance with GAAP. Estimates
relating to the fair value of certain assets, liabilities, and other events
requiring recognition have been made as more fully described in the Notes to
the Unaudited Pro Forma Condensed Combined Financial Statements. Actual
adjustments will be made on the basis of actual assets, liabilities and other
items as of the respective closing dates of the Merger, the RedFed Merger and
the California Federal Merger on the basis of appraisals and evaluations and,
therefore, estimated fair value amounts will differ from those reflected in
the Unaudited Pro Forma Condensed Combined Financial Statements.
The Unaudited Pro Forma Condensed Combined Statements of Financial Condition
assume that each of the proposed mergers was consummated on December 31, 1997.
The Unaudited Pro Forma Condensed Combined Statements of Operations for the
six months ended December 31, 1997, assume that each of the proposed mergers
was consummated on July 1, 1997. The Unaudited Pro Forma Condensed Combined
Statements of Operations for the year ended June 30, 1997, assume that each of
the proposed mergers was consummated on July 1, 1996. For purposes of pro
forma presentation, CENFED's, RedFed's, and FNPH's consolidated statements of
operations have been recast to conform to the June 30 fiscal year end used by
Golden State.
The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with the consolidated historical financial statements and
the related notes thereto of Golden State, CENFED, RedFed, and FNPH, which are
incorporated by reference herein. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
The Unaudited Pro Forma Condensed Combined Financial Statements presented
are not necessarily indicative of the combined financial condition or results
of the future operations of the combined entity or the actual results that
would have been achieved had the proposed mergers been consummated prior to
the periods indicated.
Subject to the terms of the Merger Agreement, CENFED will merge with and
into Merger Sub, a wholly-owned subsidiary of Golden State formed to effect
the Merger. Merger Sub will be the Surviving Corporation. Each outstanding
share of CENFED Common Stock will be converted into 1.2 shares (subject to
certain potential adjustments pursuant to the Merger Agreement) of Golden
State Common Stock (with cash to be paid in lieu of fractional shares). Each
share of Golden State Common Stock outstanding prior to the
Merger will continue to be outstanding after the Effective Time. Each CENFED
Option granted under the CENFED Stock Plans that is outstanding and
unexercised immediately prior to the Effective Time will be converted
automatically at the
80
<PAGE>
Effective Time into an option to purchase Golden State Common Stock and will
continue to be governed by the terms of the CENFED Stock Plans, which will be
assumed by Golden State. The number of shares of Golden State Common Stock
subject to such options and the exercise price of such options will be
adjusted as provided in the Merger Agreement to give effect to the Exchange
Ratio.
The RedFed Merger provides for the acquisition of RedFed through the merger
of RedFed into a wholly-owned subsidiary of Golden State. Concurrently with or
shortly after completion of the RedFed Merger, RedFed's wholly-owned banking
subsidiary, Redlands Federal Bank, will be merged into Golden State's wholly-
owned banking subsidiary, Glendale Federal Bank. Golden State Common Stock
will be issued to the stockholders of RedFed in the RedFed Merger in exchange
for their shares of RedFed Common Stock at an exchange ratio to be derived by
dividing $20.75 by the average daily closing price 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 effective date of
the RedFed Merger. Cash will be paid in lieu of the issuance of fractional
shares.
The California Federal Merger Agreement provides, among other things, for
the merger of FNPH with and into Golden State, and is subject to several
conditions to consummation, including the approval of Golden State
Stockholders. If the California Federal Merger is consummated, it is expected
that affiliates of MAF and Ford would together own between 42% and 45% of the
combined company based on the average price of Golden State Common Stock
during a period, described below, occurring after distribution of the
Litigation Tracking Warrants and adjusted to omit the value of the portion of
the potential recovery in the Goodwill Litigation not distributed to holders
of the Litigation Tracking Warrants, with such stockholders acquiring 42% of
the combined company if such adjusted average price is $32.00 or less,
increasing to 45% of the combined company if such adjusted average price is
$33.00 or more. The adjusted average per share price is to be determined using
a random sampling of fifteen trading days' closing prices for Golden State
Common Stock during a 30-day period following distribution of the Litigation
Tracking Warrants and ending three days before the closing date of the
California Federal Merger. The California Federal Merger Agreement provides
for the contingent issuance of additional shares of Golden State Common Stock
following closing that could increase the ownership of such stockholders to a
substantially higher percentage. See "SUMMARY--The Companies" and "INFORMATION
ABOUT GOLDEN STATE AND MERGER SUB--California Federal Merger."
81
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION GIVING
EFFECT TO THE MERGER
AS OF DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
GOLDEN PRO FORMA
STATE CENFED ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and amounts due
from banks............ $ 305,766 $ 24,947 $(15,300)(E) $ 315,413
Federal funds sold and
assets purchased under
resale agreements..... 505,000 2,000 -- 507,000
Other investments...... 27,134 166,884 -- 194,018
Loans receivable, net.. 11,734,561 1,525,558 (4,486)(D) 13,255,633
Mortgage-backed
securities, net....... 2,323,943 417,393 -- 2,741,336
Real estate held for
sale or investment.... 6,324 204 -- 6,528
Real estate acquired in
settlement of loans... 45,319 4,004 -- 49,323
Investment in capital
stock of FHLB, at
cost.................. 267,793 22,914 -- 290,707
Mortgage servicing
assets................ 261,171 5,205 5,994(D) 272,370
Goodwill and other
intangible assets..... 94,511 203 81,412(D) 176,126
Other assets........... 457,594 39,726 4,573(D) 501,893
----------- ---------- -------- -----------
$16,029,116 $2,209,038 $ 72,193 $18,310,347
=========== ========== ======== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits............... $ 9,543,338 $1,551,240 $ 1,654(D) $11,096,232
Securities sold under
agreements to
repurchase............ 817,374 74,488 (346)(D) 891,516
Borrowings from the
FHLB.................. 4,324,000 413,500 (1,818)(D) 4,735,682
Other borrowings....... 76 17,750 1,500(D) 19,326
Other liabilities...... 261,257 16,454 1,614(F) 279,325
Stockholders' equity... 1,083,071 135,606 69,589(G) 1,288,266
----------- ---------- -------- -----------
$16,029,116 $2,209,038 $ 72,193 $18,310,347
=========== ========== ======== ===========
Common shares
outstanding........... 51,023 6,006 58,343(H)
Book value per common
share................. $ 18.96(1) $ 22.58 $ 20.10(1)
Tangible book value per
common share.......... $ 17.11(1) $ 22.55 $ 17.08(1)
</TABLE>
- --------
(1) Calculated net of Golden State Preferred Stock at its liquidation value of
$115,550.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements Giving Effect to the Merger.
82
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE MERGER
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- ADJUSTMENTS PRO FORMA
GOLDEN STATE CENFED (NOTE D) COMBINED
------------ ------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income.................... $576,319 $82,706 $ 580 $659,605
Interest expense................... 363,494 57,589 27 421,110
-------- ------- ------- --------
Net interest income.............. 212,825 25,117 553 238,495
Provision for loan losses.......... 1,994 2,000 -- 3,994
-------- ------- ------- --------
Net interest income after
provision for loan losses....... 210,831 23,117 553 234,501
Other income:
Fee income........................ 49,719 3,761 (450) 53,030
Gain (loss) on sale of loans,
net.............................. (191) 3 -- (188)
Gain on sale of mortgage-backed
securities, net.................. 132 193 -- 325
Other income, net................. 1,433 528 -- 1,961
-------- ------- ------- --------
Total other income............... 51,093 4,485 (450) 55,128
Other expenses:
Compensation and employee
benefits......................... 65,517 9,497 -- 75,014
Occupancy expense, net............ 17,328 1,818 127 19,273
Regulatory insurance.............. 3,828 487 -- 4,315
Advertising and promotion......... 11,382 374 -- 11,756
Furniture, fixtures and
equipment........................ 6,969 1,089 -- 8,058
Other general and administrative
expenses......................... 38,483 3,826 -- 42,309
-------- ------- ------- --------
Total general and administrative
expenses........................ 143,507 17,091 127 160,725
Legal expense--goodwill lawsuit... 9,977 -- -- 9,977
Acquisition and restructuring
costs............................ 2,487 -- -- 2,487
Operations of real estate held for
sale or investment............... (710) (102) -- (812)
Operations of real estate acquired
in settlement of loans........... 1,218 992 -- 2,210
Amortization of goodwill and other
intangible assets................ 4,099 1 2,714 6,814
-------- ------- ------- --------
Total other expenses............. 160,578 17,982 2,841 181,401
Earnings before income tax
provision......................... 101,346 9,620 (2,738) 108,228
Income tax provision............... 43,918 3,162 (10) 47,070
-------- ------- ------- --------
Net earnings..................... $ 57,428 $ 6,458 $(2,728) $ 61,158
======== ======= ======= ========
Net earnings applicable to common
shareholders:
Net earnings...................... $ 57,428 $ 6,458 $(2,728) $ 61,158
Dividends declared on preferred
stock............................ (5,055) -- -- (5,055)
-------- ------- ------- --------
$ 52,373 $ 6,458 $(2,728) $ 56,103
======== ======= ======= ========
Earnings per share:
Basic............................. $ 1.03 $ 1.10 $ 0.97
Diluted........................... $ 0.82 $ 1.06 $ 0.79
Weighted average shares
outstanding:
Common shares..................... 50,612 5,887 57,932
Common shares and dilutive
potential common shares.......... 69,988 6,098 77,308
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Giving Effect to the Merger.
83
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE MERGER
FOR THE YEAR ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
--------------------
GOLDEN ADJUSTMENTS PRO FORMA
STATE CENFED (NOTE D) COMBINED
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income.................. $1,072,956 $160,761 $ 1,160 $1,234,877
Interest expense................. 693,972 109,239 64 803,275
---------- -------- ------- ----------
Net interest income........... 378,984 51,522 1,096 431,602
Provision for loan losses........ 25,204 7,000 -- 32,204
---------- -------- ------- ----------
Net interest income after
provision for loan losses.... 353,780 44,522 1,096 399,398
Other income:
Fee income...................... 90,696 7,723 (899) 97,520
Gain (loss) on sale of loans,
net............................ (291) 92 -- (199)
Gain (loss) on sale of mortgage-
backed securities, net......... (1,804) 1,799 -- (5)
Other income (loss), net........ 62 (69) -- (7)
---------- -------- ------- ----------
Total other income............ 88,663 9,545 (899) 97,309
Other expenses:
Compensation and employee
benefits....................... 114,270 16,960 -- 131,230
Occupancy expense, net.......... 31,777 3,837 249 35,863
Regulatory insurance............ 16,317 2,080 -- 18,397
Advertising and promotion....... 24,416 955 -- 25,371
Furniture, fixtures and
equipment...................... 12,585 2,137 -- 14,722
Other general and administrative
expenses....................... 63,859 7,095 -- 70,954
---------- -------- ------- ----------
Total general and
administrative expenses...... 263,224 33,064 249 296,537
SAIF special assessment......... 55,519 9,106 -- 64,625
Legal expense - goodwill
lawsuit........................ 24,058 -- -- 24,058
Operations of real estate held
for sale or investment......... 935 (139) -- 796
Operations of real estate
acquired in settlement of
loans.......................... 6,623 1,304 -- 7,927
Amortization of goodwill and
other intangible assets........ 5,530 27 5,427 10,984
---------- -------- ------- ----------
Total other expenses.......... 355,889 43,362 5,676 404,927
Earnings before income tax
provision (benefit)............. 86,554 10,705 (5,479) 91,780
Income tax provision (benefit)... 36,131 (633) (22) 35,476
---------- -------- ------- ----------
Net earnings.................. $ 50,423 $ 11,338 $(5,457) $ 56,304
========== ======== ======= ==========
Net earnings applicable to common
shareholders:
Net earnings.................... $ 50,423 $ 11,338 $(5,457) $ 56,304
Dividends declared on preferred
stock.......................... (10,841) -- -- (10,841)
Premium on exchange of preferred
stock for common stock......... (4,173) -- -- (4,173)
---------- -------- ------- ----------
$ 35,409 $ 11,338 $(5,457) $ 41,290
========== ======== ======= ==========
Earnings per share:
Basic........................... $ 0.72 $ 2.00 $ 0.73
Diluted......................... 0.64 1.90 0.66
Weighted average shares
outstanding:
Common shares................... 49,095 5,673 56,415
Common shares and dilutive
potential common shares........ 55,169 5,977 62,489
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Giving Effect to the Merger.
84
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
NOTE A: BASIS OF PRESENTATION
The Unaudited Pro Forma Condensed Combined Statement of Financial Condition
combines the historical unaudited consolidated statements of financial
condition of Golden State and CENFED as if the Merger was consummated on
December 31, 1997. The Unaudited Pro Forma Condensed Combined Statement of
Operations for the six months ended December 31, 1997 combines the unaudited
historical consolidated statements of operations of Golden State and CENFED as
if the Merger was consummated on July 1, 1997. The Unaudited Pro Forma
Condensed Combined Statement of Operations for the year ended June 30, 1997,
assumes that the Merger was consummated on July 1, 1996. Certain items in the
Unaudited Pro Forma Condensed Combined Financial Statements related to CENFED
have been reclassified to conform to the Golden State presentation.
The Merger will be accounted for as a purchase. Under this method of
accounting, the assets and liabilities of CENFED are adjusted to their
estimated fair value and combined with the recorded book values of the assets
and liabilities of Golden State. Applicable income tax effects of such
adjustments are included as a component of Golden State's deferred tax
liability. The difference between the estimated fair value of the assets,
liabilities and other items acquired, adjusted as discussed above, and the
purchase price, is recorded as Goodwill.
For purposes of the Unaudited Pro Forma Condensed Combined Financial
Statements, estimates relating to the fair value of certain assets,
liabilities, and other items acquired have been made as of December 31, 1997.
Actual adjustments will be made on the basis of actual assets, liabilities and
other items acquired as of the Effective Time on the basis of appraisals and
evaluations made as of that time and, therefore, fair value amounts will
differ from those reflected in the Unaudited Pro Forma Condensed Combined
Financial Statements.
NOTE B: PURCHASE PRICE
The purchase price is based on exchanging 1.2 shares of Golden State Common
Stock for each outstanding share of CENFED Common Stock. Shares of CENFED
Common Stock issuable upon the exercise of CENFED Stock Options are added to
CENFED's shares outstanding for purposes of determining the purchase price.
The purchase price will include certain other direct acquisition costs, such
as investment banking, legal, accounting and other professional fees, printing
and mailing costs, and Securities and Exchange Commission filing fees.
The shares of Golden State Common Stock to be issued to the stockholders of
CENFED in connection with the Merger have been valued at $28.563 per share for
purposes of the Unaudited Pro Forma Condensed Combined Financial Statements,
based on the quoted market price of Golden State Common Stock for a period of
time shortly before and after the time Golden State and CENFED announced the
proposed Merger.
The total consideration to be paid in connection with the Merger is
calculated as follows (in thousands, except price per share and exchange
ratio):
<TABLE>
<S> <C>
Shares of CENFED Common Stock outstanding at December 31, 1997.... 6,006
Shares of CENFED Common Stock issuable upon the exercise of CENFED
Stock Options outstanding at December 31, 1997................... 94
---------
Subtotal....................................................... 6,100
Exchange ratio.................................................... X 1.2
---------
Shares of Golden State Common Stock to be issued in the Merger.... 7,320
Price per share................................................... X $28.563
---------
Total purchase price........................................... $209,081
=========
</TABLE>
85
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
NOTE C: ALLOCATION OF PURCHASE PRICE
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
CENFED stockholders' equity................................... $135,606
Goodwill due to the Merger.................................... 81,412
Fair value adjustments (Note D)............................... 5,091
Deferred taxes on fair value adjustments (Note D)............. (2,138)
Merger costs (Note E)......................................... (15,300)
Deferred taxes on merger costs (Note E)....................... 4,410
--------
Total purchase price (Note B)................................. $209,081
========
</TABLE>
Actual adjustments will be made on the basis of actual assets, liabilities
and other items as of the Effective Time on the basis of appraisals and
evaluations made as of that time and, therefore, fair value amounts will
differ from those above.
NOTE D: PURCHASE ACCOUNTING ADJUSTMENTS
The estimated purchase accounting adjustments relating to the Merger are
detailed below:
<TABLE>
<CAPTION>
IMPACT ON PRE-TAX
EARNINGS
-----------------------
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, JUNE 30,
AMOUNT 1997 1997
------- ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
FAIR VALUE ADJUSTMENTS
Loans receivable.............................. $(4,486) $ 580 $ 1,160
Mortgage servicing assets..................... 5,994 (450) (899)
Buildings and land............................ 4,573 (127) (249)
Interest-bearing liabilities:
Deposits.................................... (1,654) 1,654 1,654
Securities sold under agreements to repur-
chase...................................... 346 (346) (346)
Borrowings from the FHLB.................... 1,818 (1,558) (1,818)
Other borrowings............................ (1,500) 223 446
------- ------- -------
Subtotal.................................. (990) (27) (64)
------- ------- -------
Total fair value adjustments.................. 5,091 (24) (52)
OTHER ADJUSTMENTS
Deferred taxes on fair value adjustments...... (2,138) -- --
Goodwill due to the CENFED Merger............. 81,412 (2,714) (5,427)
------- ------- -------
$84,365 $(2,738) $(5,479)
======= ======= =======
</TABLE>
The discount on the loans and adjustment to the mortgage servicing assets
are amortized using a level-yield method over the weighted average maturity of
the underlying loans. The new basis in the buildings is depreciated over the
remaining lives of the properties on the straight line basis. Fair value
adjustments to deposits and borrowings are amortized on the straight line
basis over the weighted average remaining lives. Goodwill is amortized on the
straight line basis over fifteen years.
86
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
NOTE E: MERGER AND RESTRUCTURING COSTS
The table below reflects Golden State's current estimate, for purposes of
pro forma presentation, of the aggregate estimated merger and restructuring
costs of $22 million ($14.8 million net of taxes, computed using a combined
federal and state tax rate of 42%) expected to be incurred in connection with
the Merger. While a portion of these costs may be required to be recognized in
Golden State's results of operations over time, the current estimate of these
costs has been reflected in the Unaudited Pro Forma Condensed Combined
Statement of Financial Condition as an adjustment to other liabilities and
stockholders' equity, net of tax, or as an adjustment to cash to disclose the
effect of these activities on Golden State's pro forma condensed combined
financial position.
<TABLE>
<CAPTION>
RELATED
GROSS TAX NET
COSTS BENEFIT COSTS
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Merger costs:
Severance/other compensation.......................... $10,500 $4,410 $ 6,090
Nondeductible investment banking and other profes-
sional fees.......................................... 4,800 -- 4,800
------- ------ -------
Subtotal--merger costs included in the allocation of
the purchase price
and reflected as an adjustment to cash............ 15,300 4,410 10,890
------- ------ -------
Other restructuring costs:
Data processing conversion............................ 5,500 2,310 3,190
Branch closures....................................... 1,200 504 696
------- ------ -------
Subtotal--other restructuring costs reflected as an
adjustment to stockholders' equity................. 6,700 2,814 3,886
------- ------ -------
Total merger and restructuring costs.................... $22,000 $7,224 $14,776
======= ====== =======
</TABLE>
Golden State's cost estimates are forward looking statements. While the
costs represent management's current estimate of merger and restructuring
costs that will be incurred, the ultimate level and timing of recognition of
such costs will be based on the final merger and integration plan to be
completed in the coming months; the type and amount of actual costs incurred
could vary materially from these estimates if future developments differ from
the underlying assumptions used by management in determining its current
estimate of these costs. See "FORWARD-LOOKING STATEMENTS."
NOTE F: ADJUSTMENT TO OTHER LIABILITIES
The adjustment to other liabilities is comprised of the following (in
thousands):
<TABLE>
<S> <C>
Accrual of other restructuring costs (Note E)..................... $6,700
Deferred taxes on fair value adjustments (Note D)................. 2,138
Deferred taxes on merger and restructuring costs (Note E)......... (7,224)
------
Total adjustment to other liabilities............................. $1,614
======
</TABLE>
87
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
NOTE G: ADJUSTMENT TO STOCKHOLDERS' EQUITY
The adjustment to stockholders' equity is calculated as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Total purchase price............................................... $209,081
CENFED stockholders' equity........................................ (135,606)
--------
Subtotal......................................................... 73,475
Other restructuring costs, net of tax (Note E)..................... (3,886)
--------
Net adjustment to stockholders' equity............................. $ 69,589
========
</TABLE>
NOTE H: COMMON STOCK OUTSTANDING
The pro forma combined common shares outstanding giving effect to the Merger
at December 31, 1997 was computed as follows (shares in thousands, except
exchange ratio):
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING
-----------
<S> <C> <C>
Golden State.......................................................... 51,023
CENFED................................................................
Common......................... 6,006
Options to convert at closing.. 94
-----
Total..........................6,100
Exchange Ratio................. X 1.2 7,320
----- ------
58,343
======
</TABLE>
88
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
GIVING EFFECT TO THE MERGER AND THE REDFED MERGER
AS OF DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PURCHASE STOCK
GOLDEN ACCOUNTING REPURCHASE
STATE AND ADJUSTMENTS ADJUSTMENTS PRO FORMA
CENFED REDFED (NOTE D) (NOTE B) COMBINED
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and amounts due
from banks............. $ 315,413 $ 18,464 $(3,300) $(158,000) $ 172,577
Federal funds sold and
assets purchased under
resale agreements...... 507,000 15,736 -- -- 522,736
Other investments....... 194,018 21,604 -- -- 215,622
Loans receivable, net... 13,255,633 895,056 -- -- 14,150,689
Mortgage-backed
securities, net........ 2,741,336 15,975 -- -- 2,757,311
Real estate held for
sale or investment..... 6,528 1,372 -- -- 7,900
Real estate acquired in
settlement of loans.... 49,323 4,758 -- -- 54,081
Investment in capital
stock of FHLB, at
cost................... 290,707 9,115 -- -- 299,822
Mortgage servicing
assets................. 272,370 -- -- -- 272,370
Goodwill and other
intangible assets...... 176,126 299 68,200 -- 244,625
Other assets............ 501,893 27,375 (800) -- 528,468
----------- ---------- ------- --------- -----------
$18,310,347 $1,009,754 $64,100 $(158,000) $19,226,201
=========== ========== ======= ========= ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits................ $11,096,232 $844,619 -- -- $11,940,851
Securities sold under
agreements to
repurchase............. 891,516 -- -- -- 891,516
Borrowings from the
FHLB................... 4,735,682 60,000 -- -- 4,795,682
Other borrowings........ 19,326 4,418 -- -- 23,744
Other liabilities....... 279,325 16,467 (8,142) -- 287,650
Stockholders' equity.... 1,288,266 84,250 72,242 (158,000) 1,286,758
----------- ---------- ------- --------- -----------
$18,310,347 $1,009,754 $64,100 $(158,000) $19,226,201
=========== ========== ======= ========= ===========
Common shares
outstanding............ 58,343 7,200 58,343
Book value per common
share.................. $ 20.10(1) $ 11.70 $ 20.07(1)
Tangible book value per
common share........... $ 17.08(1) $ 11.66 $ 15.88(1)
</TABLE>
- --------
(1) Calculated net of Golden State Preferred Stock at its liquidation value of
$115,550.
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial
Statements
Giving Effect to the Merger and the RedFed Merger.
89
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE MERGER AND THE REDFED MERGER
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
GOLDEN STATE ADJUSTMENTS PRO FORMA
AND CENFED REDFED (NOTE D) COMBINED
------------ ------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income.................... $659,605 $34,800 $ -- $694,405
Interest expense................... 421,110 19,615 -- 440,725
-------- ------- ------- --------
Net interest income............. 238,495 15,185 -- 253,680
Provision for loan losses.......... 3,994 622 -- 4,616
-------- ------- ------- --------
Net interest income after
provision for loan losses...... 234,501 14,563 -- 249,064
Other income:
Fee income........................ 53,030 3,489 -- 56,519
Loss on sale of loans, net........ (188) (2) -- (190)
Gain on sale of mortgage-backed
securities, net.................. 325 -- -- 325
Other income, net................. 1,961 159 -- 2,120
-------- ------- ------- --------
Total other income.............. 55,128 3,646 -- 58,774
Other expenses:
Compensation and employee
benefits......................... 75,014 5,988 -- 81,002
Occupancy expense, net............ 19,273 1,091 (92) 20,272
Regulatory insurance.............. 4,315 370 -- 4,685
Advertising and promotion......... 11,756 551 -- 12,307
Furniture, fixtures and
equipment........................ 8,058 2,197 -- 10,255
Other general and administrative
expenses......................... 42,309 1,815 -- 44,124
-------- ------- ------- --------
Total general and administrative
expenses....................... 160,725 12,012 (92) 172,645
Legal expense--goodwill lawsuit... 9,977 -- -- 9,977
Acquisition and restructuring
costs............................ 2,487 -- -- 2,487
Operations of real estate held for
sale or investment............... (812) 76 -- (736)
Operations of real estate acquired
in settlement of loans........... 2,210 361 -- 2,571
Amortization of goodwill and other
intangible assets................ 6,814 14 2,273 9,101
-------- ------- ------- --------
Total other expenses............ 181,401 12,463 2,181 196,045
Earnings before income tax
provision ........................ 108,228 5,746 (2,181) 111,793
Income tax provision .............. 47,070 78 39 47,187
-------- ------- ------- --------
Net earnings ................... $ 61,158 $ 5,668 $(2,220) $ 64,606
======== ======= ======= ========
Net earnings applicable to common
shareholders:
Net earnings ..................... $ 61,158 $ 5,668 $(2,220) $ 64,606
Dividends declared on preferred
stock............................ (5,055) -- -- (5,055)
-------- ------- ------- --------
$ 56,103 $ 5,668 $(2,220) $ 59,551
======== ======= ======= ========
Earnings per share:
Basic............................. $ 0.97 $ 0.79 $ 1.03
Diluted........................... $ 0.79 $ 0.76 $ 0.84
Weighted average shares
outstanding:
Common shares..................... 57,932 7,147 57,932
Common shares and dilutive
potential common shares.......... 77,308 7,446 77,308
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Giving Effect to the Merger and the RedFed Merger.
90
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS GIVING EFFECT TO
THE MERGER AND THE REDFED MERGER
FOR THE YEAR ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
GOLDEN
STATE ADJUSTMENTS PRO FORMA
AND CENFED REDFED (NOTE D) COMBINED
---------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income................... $1,234,877 $62,676 $ -- $1,297,553
Interest expense.................. 803,275 33,571 -- 836,846
---------- ------- ------- ----------
Net interest income.............. 431,602 29,105 -- 460,707
Provision for loan losses......... 32,204 1,277 -- 33,481
---------- ------- ------- ----------
Net interest income after
provision for loan losses....... 399,398 27,828 -- 427,226
Other income:
Fee income....................... 97,520 5,970 -- 103,490
Gain (loss) on sale of loans,
net............................. (199) 17 -- (182)
Gain (loss) on sale of mortgage-
backed securities, net.......... (5) 62 -- 57
Other income (loss), net......... (7) 404 -- 397
---------- ------- ------- ----------
Total other income............. 97,309 6,453 -- 103,762
Other expenses:
Compensation and employee
benefits........................ 131,230 11,959 -- 143,189
Occupancy expense, net........... 35,863 1,978 (183) 37,658
Regulatory insurance............. 18,397 2,217 -- 20,614
Advertising and promotion........ 25,371 413 -- 25,784
Furniture, fixtures and
equipment....................... 14,722 4,479 -- 19,201
Other general and administrative
expenses........................ 70,954 3,385 -- 74,339
---------- ------- ------- ----------
Total general and
administrative expenses....... 296,537 24,431 (183) 320,785
SAIF special assessment.......... 64,625 5,421 -- 70,046
Legal expense--goodwill lawsuit.. 24,058 -- -- 24,058
Operations of real estate held
for sale or investment.......... 796 343 -- 1,139
Operations of real estate
acquired in settlement
of loans........................ 7,927 1,889 -- 9,816
Amortization of goodwill and
other intangible assets......... 10,984 15 4,547 15,546
---------- ------- ------- ----------
Total other expenses........... 404,927 32,099 4,364 441,390
Earnings before income tax
provision (benefit).............. 91,780 2,182 (4,364) 89,598
Income tax provision (benefit).... 35,476 (12) 77 35,541
---------- ------- ------- ----------
Net earnings..................... $ 56,304 $ 2,194 $(4,441) $ 54,057
========== ======= ======= ==========
Net earnings applicable to common
shareholders:
Net earnings..................... $ 56,304 $ 2,194 $(4,441) $ 54,057
Dividends declared on preferred
stock........................... (10,841) -- -- (10,841)
Premium on exchange of preferred
stock for common stock.......... (4,173) -- -- (4,173)
---------- ------- ------- ----------
$ 41,290 $ 2,194 $(4,441) $ 39,043
========== ======= ======= ==========
Earnings per share:
Basic............................ $ 0.73 $ 0.32 $ 0.69
Diluted.......................... $ 0.66 $ 0.31 $ 0.62
Weighted average shares
outstanding:
Common shares.................... 56,415 6,790 56,415
Common shares and dilutive
potential common shares......... 62,489 6,993 62,489
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements Giving Effect to the Merger and the Redfed Merger.
91
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER AND THE REDFED MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
NOTE A: BASIS OF PRESENTATION
The Unaudited Pro Forma Condensed Combined Statement of Financial Condition
Giving Effect to the Merger and the RedFed Merger combines the unaudited pro
forma condensed combined statement of financial condition of Golden State and
CENFED and the historical unaudited consolidated statement of financial
condition of RedFed as if the Merger and the RedFed Merger were consummated on
December 31, 1997. The Unaudited Pro Forma Condensed Combined Statement of
Operations Giving Effect to the Merger and the RedFed Merger for the six
months ended December 31, 1997 combines the unaudited pro forma condensed
combined statement of operations of Golden State and CENFED and the historical
unaudited consolidated statement of operations of RedFed as if the Merger and
the RedFed Merger were consummated on July 1, 1997. The Unaudited Pro Forma
Condensed Combined Statement of Operations Giving Effect to the Merger and the
RedFed Merger for the year ended June 30, 1997 assumes that the Merger and the
RedFed Merger were consummated on July 1, 1996. Certain items in the Unaudited
Pro Forma Condensed Combined Financial Statements related to RedFed have been
reclassified to conform to the Golden State presentation.
The RedFed Merger will be accounted for as a purchase. Under this method of
accounting, the assets and liabilities of RedFed are adjusted to their
estimated fair value and combined with the recorded book values of the assets
and liabilities of Golden State. Applicable income tax effects of such
adjustments are included as a component of Golden State's deferred tax
liability. The difference between the estimated fair value of the assets,
liabilities and other items acquired (adjusted as discussed above) and the
purchase price is recorded as Goodwill.
For purposes of the Unaudited Pro Forma Condensed Combined Financial
Statement Giving Effect to the Merger and the RedFed Merger estimates relating
to the fair value of certain assets, liabilities, and other items, have been
made as of December 31, 1997. Actual adjustments will be made on the basis of
actual assets, liabilities and other items as of the date of the RedFed Merger
on the basis of appraisals and evaluations made as of that time and,
therefore, fair value amounts will differ from those reflected in the
Unaudited Pro Forma Condensed Combined Financial Statements Giving Effect to
the Merger and the RedFed Merger.
NOTE B: PURCHASE PRICE
The purchase price in the RedFed Merger is based on exchanging shares of
Golden State Common Stock with a value of $20.75 for each outstanding share of
the common stock and common stock options of RedFed (adjusted for the exercise
price thereof) with the exact number of shares of Golden State Common Stock to
be issued to holders of RedFed common stock to 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 close of the RedFed Merger. The
purchase price will include certain other direct acquisition costs, such as
investment banking, legal, accounting and other professional fees; printing
and mailing costs; and Securities and Exchange Commission filing fees. Golden
State expects 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.
The total consideration to be paid in connection with the RedFed Merger is
calculated as follows (in thousands, except per share amounts):
<TABLE>
<S> <C>
Shares of RedFed common stock outstanding at November 30, 1997... 7,421
Shares issuable to outstanding options on RedFed common stock ... 269
Less: Treasury stock............................................. (78)
--------
Shares of Golden State Common Stock to be issued in the RedFed
Merger ......................................................... 7,612
Price per share ................................................. X $20.75
--------
Total purchase price........................................... $157,949
========
For purposes of pro forma presentation rounded to.............. $158,000
========
</TABLE>
92
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER AND THE REDFED MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
NOTE C: ALLOCATION OF PURCHASE PRICE
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
RedFed stockholders' equity at December 31, 1997............ $ 84,250
Goodwill due to the RedFed Merger........................... 68,200
Fair value adjustments (Note D) ............................ (800)
Deferred taxes on fair value adjustments (Note D) .......... 336
Merger costs (Note E) ...................................... (7,000)
Deferred taxes on merger costs (Note E) .................... 1,554
Deferred taxes on RedFed net operating loss carryforward
(Note D)................................................... 11,460
--------
Total purchase price........................................ $158,000
========
</TABLE>
Actual adjustments will be made on the basis of actual assets, liabilities
and other items as of the date of the RedFed Merger on the basis of appraisals
and evaluations made as of that time and, therefore, fair value amounts will
differ from those above.
NOTE D: PURCHASE ACCOUNTING ADJUSTMENTS
The estimated purchase accounting adjustments relating to the proposed
merger between Golden State and RedFed are detailed below:
<TABLE>
<CAPTION>
OTHER OTHER STOCKHOLDERS'
CASH GOODWILL ASSETS LIABILITIES EQUITY
------- -------- ------ ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Purchase price in excess of
RedFed's stockholders'
equity..................... $ -- $73,750 $ -- $ -- $73,750
Fair value adjustments, net
of taxes................... -- 464 (800) (336) --
Severance/other compensation
costs, net of taxes
(Note E) .................. -- 2,146 -- 2,146 --
Investment banking and other
professional fees
(Note E)................... (3,300) 3,300 -- -- --
Other restructuring costs,
net of taxes (Note E)...... -- -- -- 1,508 (1,508)
Deferred tax asset arising
from RedFed's net operating
loss carryforwards......... -- (11,460) -- (11,460) --
------- ------- ----- ------- -------
$(3,300) $68,200 $(800) $(8,142) $72,242
======= ======= ===== ======= =======
<CAPTION>
TOTAL
-------------
IMPACT ON PRE-TAX EARNINGS
FOR:
<S> <C> <C> <C> <C> <C>
Six months ended December
31, 1997................... $ -- $(2,273) $ 92 $ -- $(2,181)
=======
Year ended June 30, 1997.... $ -- $(4,547) $ 183 $ -- $(4,364)
=======
</TABLE>
The new basis in buildings and land, included in other assets, is
depreciated over the remaining lives of the corresponding assets on the
straight line basis. Goodwill is amortized on the straight line basis over
fifteen years.
93
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER AND THE REDFED MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
NOTE E: MERGER AND RESTRUCTURING COSTS
The table below reflects Golden State's current estimate, for purposes of
pro forma presentation, of the aggregate estimated merger and restructuring
cost of $9.6 million ($7.0 million net of taxes using a combined federal and
state tax rate of 42%) expected to be incurred in connection with the RedFed
Merger. While a portion of these costs may be required to be recognized over
time, the current estimate of these costs has been reflected in the Unaudited
Pro Forma Condensed Combined Statement of Financial Condition Giving Effect to
the Merger and the RedFed Merger as an adjustment to other liabilities and
stockholders' equity, net of tax, or as an adjustment to cash to disclose the
effect of these activities on Golden State's pro forma condensed combined
financial position.
<TABLE>
<CAPTION>
RELATED
GROSS TAX NET
COSTS BENEFIT COSTS
------ ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Merger costs:
Severance/other compensation costs..................... $3,700 $1,554 $2,146
Nondeductible investment banking and other professional
fees.................................................. 3,300 -- 3,300
------ ------ ------
Subtotal--merger costs included in the allocation of
the purchase price.................................. 7,000 1,554 5,446
------ ------ ------
Other restructuring costs:
Data processing conversion............................. 1,900 798 1,102
Building conversion.................................... 700 294 406
------ ------ ------
Subtotal--other restructuring costs reflected as an
adjustment to stockholders' equity.................. 2,600 1,092 1,508
------ ------ ------
Total merger and restructuring costs..................... $9,600 $2,646 $6,954
====== ====== ======
</TABLE>
Golden State's cost estimates are forward looking statements. While the
costs represent management's current estimate of merger and restructuring
costs that will be incurred, the ultimate level and timing of recognition of
such costs will be based on the final merger and integration plan to be
completed in the coming months; the type and amount of actual costs incurred
could vary materially from these estimates if future developments differ from
the underlying assumptions used by management in determining its current
estimate of these costs. See "FORWARD-LOOKING STATEMENTS."
94
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION GIVING
EFFECT TO THE MERGER, THE REDFED MERGER AND THE CALIFORNIA FEDERAL MERGER
AS OF DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
GOLDEN STATE,
CENFED ADJUSTMENTS PRO FORMA
AND REDFED FNPH (NOTE D) COMBINED
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and amounts due
from banks............. $ 172,577 $ 350,214 $ -- $ 522,791
Federal funds sold and
assets purchased under
resale agreements...... 522,736 34,700 -- 557,436
Other investments....... 215,622 898,781 -- 1,114,403
Loans receivable, net... 14,150,689 20,907,876 18,789 35,077,354
Mortgage-backed
securities, net........ 2,757,311 6,414,475 44,111 9,215,897
Real estate held for
sale or investment..... 7,900 -- -- 7,900
Real estate acquired in
settlement of loans.... 54,081 76,997 -- 131,078
Investment in capital
stock of FHLB, at
cost................... 299,822 468,191 -- 768,013
Mortgage servicing
assets................. 272,370 536,703 22,700 831,773
Goodwill and other
intangible assets...... 244,625 675,927 980,338 1,900,890
Other assets............ 528,468 998,292 226,200 1,752,960
----------- ----------- ---------- -----------
$19,226,201 $31,362,156 $1,292,138 $51,880,495
=========== =========== ========== ===========
LIABILITIES, MINORITY INTEREST AND
STOCKHOLDERS' EQUITY
Deposits................ $11,940,851 $16,202,605 $ -- $28,143,456
Securities sold under
agreements to
repurchase............. 891,516 1,842,442 -- 2,733,958
Borrowings from the
FHLB................... 4,795,682 9,541,612 -- 14,337,294
Other borrowings........ 23,744 1,690,918 -- 1,714,662
Other liabilities....... 287,650 702,959 527,000 1,517,609
Minority interest....... -- 1,175,704 (163,568) 1,012,136
Stockholders' equity.... 1,286,758 205,916 928,706 2,421,380
----------- ----------- ---------- -----------
$19,226,201 $31,362,156 $1,292,138 $51,880,495
=========== =========== ========== ===========
Common shares
outstanding............ 58,343 (2) 114,271(4)(I)
Book value per common
share(1)............... $ 20.07 (2) $ 20.18(3)(4)(I)
Tangible book value per
common share(1)........ $ 15.88 (2) $ 3.54(3)(4)(I)
</TABLE>
- --------
(1) Calculated net of Golden State Preferred Stock at its liquidation value of
$115,550.
(2) Per share information is not presented as FNPH is a closely held
corporation.
(3) The Golden State Preferred Stock is, under its terms, convertible into
Golden State Common Stock. Assuming conversion as of December 31, 1997,
the book value and tangible book value per common share would be $19.31
and $4.15, respectively, based on common shares outstanding of 125,382.
(4) Does not reflect the impact of 5,366 Golden State stock options, which
vesting accelerates at the consummation date of the California Federal
Merger.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Giving Effect to the Merger, the RedFed Merger and the California Federal
Merger.
95
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS GIVING EFFECT
TO THE MERGER, THE REDFED MERGER AND THE CALIFORNIA FEDERAL MERGER
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
GOLDEN STATE,
CENFED ADJUSTMENTS PRO FORMA
AND REDFED FNPH (NOTE D) COMBINED
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income......... $694,405 $1,075,042 $ (9,649) $1,759,798
Interest expense........ 440,725 763,554 -- 1,204,279
-------- ---------- -------- ----------
Net interest income... 253,680 311,488 (9,649) 555,519
Provision for loan
losses................. 4,616 39,900 -- 44,516
-------- ---------- -------- ----------
Net interest income
after provision for
loan losses.......... 249,064 271,588 (9,649) 511,003
Other income:
Fee income............. 56,519 122,236 (1,703) 177,052
Gain (loss) on sale of
loans, net............ (190) -- -- (190)
Gain on sale of
mortgage-backed
securities, net....... 325 -- -- 325
Other income, net...... 2,120 68,031 -- 70,151
-------- ---------- -------- ----------
Total other income.... 58,774 190,267 (1,703) 247,338
Other expenses:
Compensation and
employee benefits..... 81,002 128,946 -- 209,948
Occupancy expense,
net................... 20,272 41,070 -- 61,342
Regulatory insurance... 4,685 5,230 -- 9,915
Advertising and
promotion............. 12,307 12,502 -- 24,809
Furniture, fixtures and
equipment............. 10,255 -- -- 10,255
Other general and
administrative
expenses.............. 44,124 115,342 -- 159,466
-------- ---------- -------- ----------
Total general and ad-
ministrative ex-
penses............... 172,645 303,090 -- 475,735
Restructuring charges.. 2,487 -- -- 2,487
Legal expense--goodwill
lawsuit............... 9,977 -- -- 9,977
Operations of real
estate held for sale
or investment......... (736) -- -- (736)
Operations of real
estate acquired in
settlement of loans... 2,571 (2,447) -- 124
Amortization of
goodwill and other
intangible assets..... 9,101 24,558 32,678 66,337
-------- ---------- -------- ----------
Total other expenses.. 196,045 325,201 32,678 553,924
Earnings before income
tax provision
(benefit).............. 111,793 136,654 (44,030) 204,417
Income tax provision
(benefit).............. 47,187 22,097 40,844(2) 110,128
-------- ---------- -------- ----------
Earnings before minority
interest............... 64,606 114,557 (84,874) 94,289
Minority interest....... -- 68,951 (24,718) 44,233
-------- ---------- -------- ----------
Net earnings.......... $ 64,606 $ 45,606 $(60,156) $ 50,056
======== ========== ======== ==========
Net earnings applicable
to common shareholders:
Net earnings........... $ 64,606 $ 45,606 $(60,156) $ 50,056
Dividends declared on
preferred stock....... (5,055) -- -- (5,055)
-------- ---------- -------- ----------
$ 59,551 $ 45,606 $(60,156) $ 45,001
======== ========== ======== ==========
Earnings per share:
Basic................. $ 1.03 (1) $ 0.40(3)(I)
Diluted............... $ 0.84 (1) $ 0.37(I)
Weighted average shares
outstanding:
Common shares......... 57,932 (1) 113,860(3)
Common shares and
dilutive potential
common shares........ 77,308 (1) 121,730
</TABLE>
- --------
(1) Per share information is not presented as FNPH is a closely held
corporation.
(2) The adjustment to income tax expense includes adjustments for
nondeductible goodwill amortization and to adjust FNPH's historical
effective tax rate to 42%.
(3) Does not reflect the impact of 5,366 Golden State stock options, which
vesting accelerates at the consummation date of the California Federal
Merger.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Giving Effect to the Merger, the RedFed Merger and the California Federal
Merger.
96
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE MERGER, THE REDFED MERGER AND THE CALIFORNIA FEDERAL
MERGER
FOR THE YEAR ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
GOLDEN STATE,
CENFED ADJUSTMENTS PRO FORMA
AND REDFED FNPH (NOTE D) COMBINED
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income......... $1,297,553 $2,143,895 $ (19,297) $3,422,151
Interest expense........ 836,846 1,476,272 -- 2,313,118
---------- ---------- --------- ----------
Net interest income.. 460,707 667,623 (19,297) 1,109,033
Provision for loan
losses................. 33,481 80,350 -- 113,831
---------- ---------- --------- ----------
Net interest income
after provision for
loan losses......... 427,226 587,273 (19,297) 995,202
Other income:
Fee income............. 103,490 231,052 (3,405) 331,137
Gain (loss) on sale of
loans, net............ (182) -- -- (182)
Gain on sale of
mortgage-backed
securities, net....... 57 -- -- 57
Other income, net...... 397 106,983 -- 107,380
---------- ---------- --------- ----------
Total other income... 103,762 338,035 (3,405) 438,392
Other expenses:
Compensation and
employee benefits..... 143,189 257,949 -- 401,138
Occupancy expense,
net................... 37,658 67,202 -- 104,860
Regulatory insurance... 20,614 75,015 -- 95,629
Advertising and
promotion............. 25,784 13,780 -- 39,564
Furniture, fixtures and
equipment............. 19,201 -- -- 19,201
Other general and
administrative
expenses.............. 74,339 300,790 -- 375,129
---------- ---------- --------- ----------
Total general and
administrative
expenses............ 320,785 714,736 -- 1,035,521
SAIF special
assessment............ 70,046 -- -- 70,046
Legal expense -
goodwill lawsuit...... 24,058 -- -- 24,058
Operations of real
estate held for sale
or investment......... 1,139 -- -- 1,139
Operations of real
estate acquired in
settlement of loans... 9,816 (3,337) -- 6,479
Amortization of
goodwill and other
intangible assets..... 15,546 47,498 65,356 128,400
---------- ---------- --------- ----------
Total other
expenses............ 441,390 758,897 65,356 1,265,643
Earnings before income
tax provision
(benefit).............. 89,598 166,411 (88,058) 167,951
Income tax provision
(benefit).............. 35,541 29,452 50,855(2) 115,848
---------- ---------- --------- ----------
Earnings before minority
interest and
extraordinary items ... 54,057 136,959 (138,913) 52,103
Minority interest....... -- 123,171 (29,811) 93,360
Extraordinary items,
net.................... -- (1,586) -- (1,586)
---------- ---------- --------- ----------
Net earnings (loss).. $ 54,057 $ 12,202 $(109,102) $ (42,843)
========== ========== ========= ==========
Net earnings (loss)
applicable to common
shareholders:
Net earnings (loss).... $ 54,057 $ 12,202 $(109,102) $ (42,843)
Dividends declared on
preferred stock....... (10,841) -- -- (10,841)
Premium on exchange of
preferred stock for
common stock.......... (4,173) -- -- (4,173)
---------- ---------- --------- ----------
$ 39,043 $ 12,202 $(109,102) $ (57,857)
========== ========== ========= ==========
Earnings (loss) per
share:
Basic.................. $ 0.69 (1) $ (0.52)(3)(I)
Diluted................ $ 0.62 (1) $ (0.52)(I)
Weighted average shares
outstanding;
Common shares.......... 56,415 (1) 112,343(3)
Common shares and
dilutive potential
common shares......... 62,489 (1) 112,343
</TABLE>
- -------
(1) Per share information is not presented as FNPH is a closely held
corporation.
(2) The adjustment to income tax expense includes adjustments for
nondeductible goodwill amortization and to adjust FNPH's historical
effective tax rate to 42%.
(3) Does not reflect the impact of 5,366 Golden State stock options, which
vesting accelerates at the consummation date of the California Federal
Merger.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Giving Effect to the Merger, the RedFed Merger and the California Federal
Merger.
97
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER, THE REDFED MERGER AND
THE CALIFORNIA FEDERAL MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
NOTE A: BASIS OF PRESENTATION
The Unaudited Pro Forma Condensed Combined Statement of Financial Condition
Giving Effect to the Merger, the RedFed Merger and the California Federal
Merger combines the unaudited pro forma condensed combined statements of
financial condition of Golden State, CENFED and RedFed and the historical
unaudited consolidated statement of financial condition of FNPH as if the
Merger, the RedFed Merger and the California Federal Merger were consummated
on December 31, 1997. The Unaudited Pro Forma Condensed Combined Statement of
Operations Giving Effect to the Merger, the RedFed Merger and the California
Federal Merger for the six months ended December 31, 1997 combines the
unaudited pro forma condensed combined statement of operations of Golden
State, CENFED and RedFed and the historical unaudited consolidated statement
of operations of FNPH as if the Merger, the RedFed Merger and the California
Federal Merger were consummated on July 1, 1997. The Unaudited Pro Forma
Condensed Combined Statement of Operations Giving Effect to the Merger, the
RedFed Merger and the California Federal Merger for the year ended June 30,
1997, assumes that the Merger, the RedFed Merger and the California Federal
Merger were consummated on July 1, 1996. Certain items in the unaudited pro
forma condensed combined financial statements related to FNPH have been
reclassified to conform to the Golden State presentation.
The California Federal Merger will be accounted for as a purchase. Golden
State's assets, liabilities, and other items acquired will be adjusted to
their estimated fair value at the closing date of the California Federal
Merger because FNPH's stockholders will retain controlling interests in the
merged entity, and Golden State will be managed by FNPH's management after the
merger. While the Golden State name remains, for financial reporting purposes,
FNPH is the accounting and reporting acquirer. Under this method of
accounting, the assets and liabilities of Golden State are adjusted to their
estimated fair value and combined with the recorded book values of the assets
and liabilities of FNPH. Applicable income tax effects of such adjustments are
included as a component of the combined entity's deferred tax liability. The
difference between the estimated fair value of the assets, liabilities and
other items acquired, adjusted as discussed above, and the purchase price, is
recorded as Goodwill.
For purposes of the Unaudited Pro Forma Condensed Combined Financial
Statements Giving Effect to the Merger, the RedFed Merger and the California
Federal Merger, estimates relating to the fair value of certain assets,
liabilities, and other items, have been made as of December 31, 1997. Actual
adjustments will be made on the basis of actual assets, liabilities and other
items as of the date of the California Federal Merger on the basis of
appraisals and evaluations made as of that time and, therefore, estimated fair
value amounts will differ from those reflected in the Unaudited Pro Forma
Condensed Combined Financial Statements Giving Effect to the Merger, the
RedFed Merger and the California Federal Merger.
NOTE B: PURCHASE PRICE
Golden State stockholders initially will own 55 percent to 58 percent of the
combined entity immediately after the California Federal Merger. The ownership
percentage to be initially retained in the new entity by Golden State
stockholders will be determined based on the Golden State Common Stock
adjusted volume weighted average trading price (the "Adjusted Average Price")
during a specified period preceding the completion of the transaction.
The terms of the California Federal Merger Agreement call for Golden State
Stockholders, immediately after consummation of the California Federal Merger,
to own 58 percent of the combined entity if the Adjusted
98
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER, THE REDFED MERGER AND THE CALIFORNIA FEDERAL
MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
Average Price, as determined after distribution of the Litigation Tracking
Warrants, is $32 per share or less, and to own 55 percent of the combined
entity if that price is $33 per share or more (with intermediate percentages
corresponding to Adjusted Average Prices between $32 and $33). The California
Federal Merger Agreement also provides for the contingent issuance to
affiliates of MAF and Ford of additional shares of Golden State Common Stock
in connection with the use by Golden State of certain tax benefits of FNPH and
in connection with certain litigation, including a portion of any net recovery
in California Federal's goodwill litigation against the United States
government.
Using a per-share stock price of $29.81 (as described below), Golden State's
fully diluted outstanding shares, applying the treasury stock method under
Statement of Financial Accounting Standards No. 128, "Earnings Per Share," per
the California Federal Merger Agreement, would be as follows:
<TABLE>
<S> <C>
GOLDEN STATE
------------
Common shares outstanding (i)................................... 51,023,321
Shares issuable pursuant to outstanding Series A Preferred Stock
convertible to
common stock (ii).............................................. 11,111,245
Shares issuable pursuant to outstanding 5 Year Warrants on
common stock (iii)............................................. 1,522
Shares issuable pursuant to outstanding 7 Year Warrants on
common stock (iv).............................................. 6,481,094
Shares issuable pursuant to outstanding Stock Options on common
stock (v)...................................................... 1,387,744
-----------
Subtotal - Golden State fully diluted outstanding shares ....... 70,004,926
-----------
CENFED
------
Common shares outstanding (vi).................................. 6,005,638
Shares issuable to outstanding options on CENFED common stock
(vii).......................................................... 19,000
-----------
Subtotal - CENFED fully diluted outstanding shares ............. 6,024,638
Exchange Ratio.................................................. 1.2
-----------
7,229,566
-----------
Total - fully diluted outstanding shares........................ 77,234,492
-----------
Golden State ownership percentage at $29.81 per share........... 58%
Total outstanding shares for the combined entity................ 133,162,917
-----------
</TABLE>
- --------
(i) Based on 51,023,321 shares of Golden State Common Stock outstanding.
(ii) Based on 4,621,982 shares convertible into 2.404 shares of Golden State
Common Stock.
(iii) Warrants convertible at an exchange rate of 10 warrants for one share of
Golden State Common Stock.
(iv) 10,847,917 warrants with $12.00 exercise price per warrant.
(v) Based on 5,366,032 stock options with a weighted average exercise price
per share of Golden State Common Stock of $16.518.
(vi) Based on 6,005,638 common shares outstanding.
(vii) Based on 94,366 stock options with a weighted average exercise price per
share of CENFED Common Stock of $12.621.
The adjusted purchase price of $29.81 per share of Golden State Common Stock
is based on the market price of $35.75 one day prior to the announcement of
the execution of the California Federal Merger Agreement, adjusted by
subtracting 85% of the implied net after-tax value of the Goodwill Litigation,
estimated to be $5.94 per share of Golden State Common Stock based on a
comparison to the trading value of the outstanding securities issued by
California Federal representing participation interests in the potential
recoveries in its goodwill litigation against the United States government,
including an adjustment for the time value of money.
<TABLE>
<S> <C>
Purchase Price:
Number of Golden State fully diluted outstanding shares ......... 77,234,492
Adjusted price per share ........................................ X $29.81
----------
Purchase price (in thousands).................................. $2,302,360
==========
</TABLE>
99
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER, THE REDFED MERGER AND THE CALIFORNIA FEDERAL
MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
NOTE C: ALLOCATION OF PURCHASE PRICE
<TABLE>
<S> <C>
(IN THOUSANDS)
--------------
Golden State stockholders' equity, giving effect to the
Merger and the RedFed Merger ............................. $ 1,286,758
Goodwill due to the California Federal Merger (Note D)..... 980,338
Fair value adjustments (Note D)............................ 49,600
Merger costs, net of taxes (Note E)........................ (96,436)
Goodwill litigation proceeds participation (Note F)........ 82,100
--------------
Total purchase price..................................... $ 2,302,360
==============
</TABLE>
NOTE D: PURCHASE ACCOUNTING ADJUSTMENTS
The estimated purchase accounting adjustments relating to the California
Federal Merger are detailed below:
<TABLE>
<CAPTION>
MORTGAGE- MORTGAGE
LOANS BACKED SERVICING OTHER OTHER MINORITY STOCKHOLDERS'
RECEIVABLE SECURITIES ASSETS GOODWILL ASSETS LIABILITIES INTEREST EQUITY
---------- ---------- --------- ---------- -------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Purchase price in excess
of Golden State's net
stockholders' equity,
giving effect to the
Merger and the RedFed
Merger................. $ -- $ -- $ -- $1,015,602 $ -- $ -- $ -- $1,015,602
Fair value adjustments
....................... 18,789 44,111 22,700 (49,600) -- 36,000 -- --
Merger costs, net of
taxes (Note E)......... -- -- -- 96,436 70,264 166,700 -- --
Other integration costs,
net of taxes (Note E).. -- -- -- -- 14,036 33,300 -- (19,264)
Value of Golden State's
retained participation
in the Goodwill
Litigation after
issuance of the
Litigation Tracking
Warrants (Note F)...... -- -- -- (82,100) 141,900 59,800 -- --
Liability reflecting
proportionate ownership
of goodwill litigation
asset (Note G)......... -- -- -- -- -- 37,200 -- (37,200)
Reduction of deferred
tax asset pursuant to
the California Federal
Merger Agreement (Note
H)..................... -- -- -- -- -- 194,000 -- (194,000)
Conversion of minority
interest triggered by
the California Federal
Merger................. -- -- -- -- -- -- (163,568) 163,568
------- -------- -------- ---------- -------- -------- --------- ----------
$18,789 $ 44,111 $ 22,700 $ 980,338 $226,200 $527,000 $(163,568) $ 928,706
======= ======== ======== ========== ======== ======== ========= ==========
IMPACT ON PRE-TAX
EARNINGS FOR: TOTAL
----------
Six months ended
December 31, 1997...... $(2,582) $ (7,067) $ (1,703) $ (32,678) $ -- $ -- $ -- $ (44,030)
==========
Year ended June 30,
1997................... $(5,163) $(14,134) $ (3,405) $ (65,356) $ -- $ -- $ -- $ (88,058)
==========
</TABLE>
Premiums relating to mortgage-backed securities and loans receivable are
amortized to interest income using an interest method over the weighted average
life of the asset. The premium on mortgage servicing assets is amortized in
proportion to, and over the period of, estimated net servicing income. Goodwill
is amortized on the straight line basis over fifteen years.
NOTE E: MERGER AND INTEGRATION COSTS
The table below reflects Golden State's current estimate, for purposes of pro
forma presentation, of the aggregate estimated merger and integration costs,
net of taxes, expected to be incurred in connection with the
100
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER, THE REDFED MERGER AND
THE CALIFORNIA FEDERAL MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
California Federal Merger. While a portion of these costs may be required to
be recognized in the combined entity's results of operations as incurred, the
current estimate of these costs has been reflected in the pro forma condensed
combined statement of financial condition to disclose the effect of these
activities on Golden State's pro forma condensed combined financial position.
<TABLE>
<CAPTION>
RELATED
GROSS TAX NET
COSTS BENEFIT COSTS
-------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Merger costs:
Severance costs..................................... $ 55,000 $23,183 $ 31,817
Contract termination costs.......................... 46,500 19,600 26,900
Investment banking, legal and other professional
fees............................................... 45,000 18,967 26,033
Benefit plan termination costs...................... 15,000 6,322 8,678
Branch consolidation costs.......................... 5,200 2,192 3,008
-------- ------- --------
Subtotal--merger costs included in the allocation
of the purchase price............................ 166,700 70,264 96,436
-------- ------- --------
Other integration costs:
Conversion costs.................................... 15,500 6,533 8,967
Branch consolidation costs.......................... 6,800 2,866 3,934
Other costs......................................... 11,000 4,637 6,363
-------- ------- --------
Subtotal--other integration costs reflected as an
adjustment to stockholders' equity............... 33,300 14,036 19,264
-------- ------- --------
Total merger and integration costs.................... $200,000 $84,300 $115,700
======== ======= ========
</TABLE>
Golden State's cost estimates are forward looking statements. While the
costs represent management's current estimate of merger and integration costs
that will be incurred, the ultimate level and timing of recognition of such
costs will be based on the final merger and integration plan to be completed
in the coming months; the types and amounts of actual costs incurred could
vary materially from these estimates if future developments differ from the
underlying assumptions used by management in determining its current estimate
of these costs. See "FORWARD-LOOKING STATEMENTS."
NOTE F: GOODWILL LITIGATION TRACKING WARRANTS
Represents the estimated fair value of the combined entity's 15% interest in
any recovery pursuant to the Goodwill Litigation as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Glendale Federal's unamortized balance of goodwill at the time
FIRREA became effective....................................... $550,000
--------
Estimated pre-tax litigation proceeds, net of litigation
costs(1)...................................................... 946,000
--------
Combined entity's 15% interest................................. 141,900
Deferred taxes at combined federal and state tax rate of 42%... (59,800)
--------
Net adjustment to Golden State's net book value................ $ 82,100
========
</TABLE>
- --------
(1) Represents Glendale Federal's balance, gross of taxes (using Glendale
Federal's 42% combined tax rate), of goodwill of approximately $550
million at the time FIRREA became effective.
101
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER, THE REDFED MERGER ANDTHE CALIFORNIA FEDERAL
MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
The amount of the pre-tax litigation proceeds reflected above is provided
for illustrative purposes only. Such amount does not necessarily represent
management's evaluation of the likely outcome of the Glendale Goodwill
Litigation.
NOTE G: GOODWILL EQUALIZATION ADJUSTMENT
As part of the California Federal Merger Agreement, affiliates of MAF and
Ford will receive, after a final resolution of California Federal's goodwill
litigation, additional Golden State Common Stock in an amount equal to the net
after-tax proceeds, if any, from that litigation, net of (i) the amount paid
to holders of California Federal's previously issued participation
certificates with respect to such litigation and (ii) an amount equal to the
proceeds retained by the combined entity pursuant to a resolution of the
Goodwill Litigation and not included for purposes of calculating the number of
shares of Golden State Common Stock to be issued pursuant to the Litigation
Tracking Warrants. The estimated pre-tax differential of $64.3 million will be
recorded as a liability. The combined entity will reflect an offsetting
benefit to deferred taxes of $27.1 million and a $37.2 million reduction to
stockholders' equity.
NOTE H: INCOME TAX BENEFITS
As part of the California Federal Merger Agreement, affiliates of MAF and
Ford will receive additional Golden State Common Stock based on the amount of
FNPH's pre-merger tax benefit realized by the combined entity. These federal
tax benefits are currently estimated at $194 million. The pro-forma adjustment
reflects this transaction in a manner similar to a dividend, resulting in a
reduction to stockholders' equity and an increase in other liabilities. The
historical financial statements of FNPH and pro forma adjustments have been
adjusted to reflect a 42% tax rate as all of the net operating loss
carryforwards will accrue to the benefit of affiliates of MAF and Ford.
102
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE MERGER, THE REDFED MERGER AND
THE CALIFORNIA FEDERAL MERGER
AS OF DECEMBER 31, 1997 AND FOR THE SIX MONTH AND TWELVE MONTH PERIODS
ENDED DECEMBER 31, 1997 AND JUNE 30, 1997, RESPECTIVELY
NOTE I: CONTINGENT SHARES
The California Federal Merger Agreement provides for the issuance of the
Contingent Shares. For more information about the number of Contingent Shares
that could be issued under certain circumstances as a result of the California
Federal Merger, see the information, including the illustrative example, set
forth under the caption "SUMMARY--The Companies" and "INFORMATION ABOUT GOLDEN
STATE AND MERGER SUB--Subsequent Events." Based on such assumptions, and for
illustrative purposes only, the issuance of the Contingent Shares would have
the following effect on certain information disclosed in the Unaudited Pro
Forma Condensed Combined Financial Statements Giving Effect to the Merger, the
RedFed Merger and the California Federal Merger (in thousands, except per-
share amounts):
<TABLE>
<CAPTION>
PRO FORMA AMOUNTS
-----------------------------
PER THE MARKET
PRICE
AS AND OWNERSHIP
PRESENTED ASSUMPTIONS BELOW
--------- ------------------
<S> <C> <C> <C>
Market price per share of common stock......... $ 29.81 $ 35.00 $ 45.00
Incremental ownership percentage to affiliates
of MAF and Ford .............................. -- 5.5% 4.3%
AT DECEMBER 31, 1997:
Book value per common share.................. $ 20.18 $ 18.00 $ 18.44
Tangible book value per common share......... $ 3.54 $ 3.16 $ 3.24
Common shares outstanding.................... 114,271 128,137 125,055
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997:
Basic earnings per share..................... $ 0.40 $ 0.35 $ 0.36
Diluted earnings per share................... $ 0.37 $ 0.33 $ 0.34
Weighted average common shares outstanding... 113,860 127,726 124,644
Weighted average common shares and dilutive
potential common
shares outstanding.......................... 121,730 135,596 132,514
FOR THE YEAR ENDED JUNE 30, 1997:
Basic loss per share......................... $ (0.52) $ (0.46) $ (0.47)
Diluted loss per share....................... $ (0.52) $ (0.46) $ (0.47)
Weighted average common shares outstanding... 112,343 126,209 123,127
Weighted average common shares and dilutive
potential common
shares outstanding.......................... 112,343 126,209 123,127
</TABLE>
There can be no assurance that the foregoing illustrative examples will
prove to be accurate or that the actual number of Contingent Shares and change
in such percentage ownership will not be substantially different than the
preceding illustrative examples.
103
<PAGE>
APPENDIX A-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
GOLDEN STATE BANCORP INC.
AND
CENFED FINANCIAL CORPORATION
DATED AS OF AUGUST 17, 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............................................................ 2
1.3.Effects of Merger.................................................. 2
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 CENFED........................... 5
3.4.Representations and Warranties of Golden State..................... 13
ARTICLE IV.
CONDUCT PENDING MERGER................................................... 16
4.1.Conduct of Business Prior to Effective Time........................ 16
4.2.Forbearance by CENFED ............................................. 16
ARTICLE V.
COVENANTS................................................................ 18
5.1.Acquisition Proposals.............................................. 18
5.2.Certain Policies of CENFED......................................... 18
5.3.Employees.......................................................... 19
5.4.Access to Information.............................................. 20
5.5.Regulatory Matters................................................. 20
5.6.Other Actions...................................................... 21
5.7.Publicity.......................................................... 21
5.8.Preparation of Form S-4 and Proxy Statement........................ 21
5.9.Letter of CENFED Accountants....................................... 21
5.10.Letter of Golden State Accountants................................ 21
5.11.Stockholder Action................................................ 22
5.12.Notification of Certain Matters................................... 22
5.13.Tax Matters....................................................... 22
5.14.Updated Disclosure Letters........................................ 22
5.15.Affiliates........................................................ 22
5.16.Stock Exchange Listing............................................ 23
5.17.Bank Merger....................................................... 23
5.18.Corporate Governance.............................................. 23
5.19.Indemnification of Directors and Officers......................... 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 CENFED ............................... 25
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VII.
TERMINATION................................................................ 25
7.1.Termination.......................................................... 25
7.2.Effect of Termination................................................ 27
ARTICLE VIII.
OTHER MATTERS.............................................................. 27
8.1.Certain Definitions; Interpretation.................................. 27
8.2.Survival............................................................. 27
8.3.Waiver............................................................... 27
8.4.Counterparts......................................................... 28
8.5.Governing Law........................................................ 28
8.6.Expenses............................................................. 28
8.7.Notices.............................................................. 28
8.8.Entire Agreement; No Third Party Beneficiaries....................... 29
8.9.Parties Bound; Assignment............................................ 29
8.10.Severability........................................................ 29
8.11.Captions............................................................ 29
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of August 17, 1997 ("Agreement"), by
and between GOLDEN STATE BANCORP INC., a Delaware corporation ("Golden
State"), and CENFED FINANCIAL CORPORATION, a Delaware corporation ("CENFED").
RECITALS
WHEREAS, the Boards of Directors of Golden State and CENFED 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 a wholly-owned subsidiary of Golden State ("Merger Sub") is to be merged
with and into CENFED and CENFED is thereby to become a wholly-owned subsidiary
of Golden State (the "Merger");
WHEREAS, the parties hereto desire to make certain representations,
warranties and agreements in connection with the Merger and also desire to
prescribe various conditions thereto;
WHEREAS, as a condition to Golden State's willingness to enter into this
Agreement, Golden State has required that CENFED enter into a Stock Option
Agreement, dated as of the date hereof (the "Stock Option Agreement"),
providing for the grant by CENFED to Golden State of an option to purchase
shares of CENFED Common Stock (as defined herein), and, as an inducement to
Golden State to enter into this Agreement, CENFED has agreed to enter into the
Stock Option Agreement;
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, it is intended that the Merger shall be accounted for as a pooling
of interests under generally accepted accounting principles; and
WHEREAS, Golden State and CENFED contemplate that their respective
depository institution subsidiaries, Glendale Federal Bank, Federal Savings
Bank and CenFed Bank (referred to herein as "Glendale Bank" and "CenFed Bank",
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), Merger Sub shall be merged with and into CENFED, with
CENFED 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").
A-1-1
<PAGE>
Section 1.2. Closing. The completion of the transactions provided for herein
(the "Closing") shall take place at 10:00 a.m. on the date (referred to herein
as the "Closing Date") that is the first day after December 31, 1997 that is
at least two business days after satisfaction or appropriate waiver of each of
the conditions set forth in Article VI 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 Merger Sub shall cease and Merger Sub shall be merged
with and into CENFED, (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 become the
directors of the Surviving Corporation.
(b) As used in this Agreement, "Constituent Corporations" shall mean Merger
Sub and CENFED and "Surviving Corporation" shall mean CENFED.
(c) At and after the Effective Time, the Merger will have the effects set
forth in Section 259 of the DGCL.
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 CENFED by Golden State (and CENFED
shall cooperate in such efforts), including to provide for a merger of CENFED
with and into Golden State, or to provide for mergers among certain of the
Subsidiaries of Golden State and CENFED 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 CENFED Common Stock as provided for in this Agreement
(the "Merger Consideration"), (b) adversely affect the proposed accounting
treatment for the Merger or the tax treatment to CENFED'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 CENFED Common Stock (as defined in Section
3.3(c)):
(a) Conversion of Merger Sub Capital Stock. Each issued and outstanding
share of the capital stock of Merger Sub shall be converted into one share
of the common stock, par value $.01 per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Stock Owned by Golden State. All
shares of CENFED Common Stock that are owned by CENFED as treasury stock
and all shares of CENFED Common Stock that are owned by Golden State or any
wholly-owned subsidiary of Golden State, other than 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 CENFED or any subsidiary (other than trust account shares) shall
remain outstanding and shall not be affected by the Merger.
(c) Conversion of CENFED Common Stock. Subject to Section 2.2(e), each
issued and outstanding share of CENFED Common Stock (other than shares
canceled in accordance with Section 2.1(b)) shall be
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converted into 1.2 fully paid and nonassessable shares of Golden State
Common Stock (the ratio of such number of shares of Golden State Common
Stock for each share of CENFED Common Stock being referred to herein as the
"Exchange Ratio"). All such shares of CENFED 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 CENFED
Common Stock has been converted. Certificates previously representing
shares of CENFED Common Stock shall be exchanged for certificates
representing whole shares of Golden State Common Stock issued in
consideration therefor upon the surrender of such certificates in
accordance with Section 2.2. If prior to the Effective Time the outstanding
shares of Golden State Common Stock shall have been increased, decreased,
changed into or exchanged for a different number or kind of shares or
securities as a result of a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or
other similar change in the capitalization of Golden State, or if Golden
State shall declare any extraordinary dividend with a record date that is
prior to the Effective Time, then an appropriate and proportionate
adjustment, as mutually agreed by Golden State and CENFED, shall be made to
the Exchange Ratio, which adjustment may include, as appropriate, the
issuance of securities, property or cash on the same basis as that on which
any of the foregoing shall have been issued, distributed or paid to the
holders of Golden State Common Stock generally.
(d) Effect on CENFED Stock Option Plans. At the Effective Time, each then
outstanding and unexercised option to purchase shares of CENFED Common
Stock granted under the CENFED Stock Plans (as defined below) (each, a
"CENFED Stock Option"), whether vested or unvested (it being understood
that, under the terms of the CENFED 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 CENFED Stock
Option, the number of shares of Golden State Common Stock equal to (a) the
number of shares of CENFED Common Stock subject to the CENFED 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 CENFED Common Stock which were purchasable pursuant to such
CENFED 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 CENFED 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, CENFED shall
take all such action, if any, as shall be necessary with respect to the
CENFED Stock Plans to permit the replacement of the outstanding CENFED
Stock Options by Golden State pursuant to this Section. At the Effective
Time Golden State shall assume the CENFED 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 CENFED Stock Plans other than the Replacement Options and shall
have no obligation to make any additional grants or awards under such
assumed CENFED Stock Plans. As used herein, the term "CENFED Stock Plans"
shall mean each of the CENFED Financial Corporation 1992 Long-Term
Incentive Plan, the CENFED Financial Corporation 1994 Long-Term Incentive
Plan and the CENFED Financial Corporation 1994 Directors' Stock Option
Plan.
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 which regularly performs the
functions provided for in this Section 2.2 that is designated by Golden State
and reasonably acceptable to CENFED (the "Exchange Agent"), for the benefit of
the holders of shares of CENFED Common Stock, and for exchange in accordance
with this Article II through the Exchange Agent, certificates representing the
shares of Golden State Common Stock (such certificates for shares of Golden
State Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.1.
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(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
CENFED 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 CENFED 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 CENFED common stock then held by such holder), and the Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of CENFED Common Stock which is not registered in the transfer
records of CENFED, a certificate representing the proper number of shares of
Golden State Common Stock may be issued to a transferee if the Certificate
representing such CENFED 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 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 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
fractional shares shall be paid to any 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 with a record date after the Effective Time but prior to such
surrender and a payment or distribution date subsequent to such surrender
payable or distributable with respect to such whole shares of Golden State
Common Stock.
(d) No Further Ownership Rights in CENFED Common Stock. All shares of Golden
State Common Stock issued upon conversion of shares of CENFED 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 CENFED Common Stock; subject,
however, to the Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time
which may have been declared or made by CENFED on such shares of CENFED Common
Stock not in violation of the terms of this Agreement on or prior to the
Effective Time and which remain unpaid or have not been made at the Effective
Time, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of CENFED 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.
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(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 CENFED 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 CENFED Common Stock then held by such holder) would otherwise be
entitled by the average of the closing prices for a share of Golden State
Common Stock on the NYSE Composite Transactions Tape for the ten trading days
ending on the second trading day immediately preceding the Effective Time.
(iii) As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of CENFED Common Stock with respect to any
fractional share interests, the Exchange Agent shall make available such
amounts to such holders of CENFED 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 CENFED for twelve months after
the Effective Time shall be delivered to Golden State upon demand, and any
stockholders of CENFED 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 CENFED shall be liable to any
holder of shares of CENFED Common Stock or Golden State Common Stock, as the
case may be, for such shares (or dividends or distributions with respect
thereto) or cash from the Common Shares Trust delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.1. Disclosure Letters. On or prior to the date of the execution
and delivery hereof, CENFED and Golden State have each delivered a letter to
the other (the "CENFED 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 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 CENFED 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 CENFED or Golden
State, as applicable, and its respective subsidiaries, in each case, taken as
a whole, (ii) materially and adversely affects the ability of CENFED 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 CENFED. Except as set forth
in the CENFED Disclosure Letter, CENFED represents and warrants to Golden
State that:
(a) Organization. (i) CENFED has been duly organized and is validly
existing and in good standing as a corporation under the laws of the State
of Delaware. CENFED 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.
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(ii) Without limiting the generality of the foregoing, CenFed Bank is
duly chartered and in good standing as a federal savings bank organized in
capital stock form. The customer deposit accounts of CenFed Bank 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. CenFed Bank
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. CENFED 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 CENFED consists solely
of 14,000,000 shares of common stock, par value $.01 per share (the "CENFED
Common Stock"), of which 5,732,581 shares are issued and outstanding as of
the date of this Agreement, and 2,000,000 shares of preferred stock, par
value $.01 per share, of which no shares are issued or outstanding as of
the date of this Agreement. CENFED has no outstanding voting securities
other than the outstanding shares of CENFED Common Stock referred to in the
first sentence of this paragraph. Except for shares of CENFED Common Stock
that are issuable pursuant to the employee stock options listed in the
CENFED Disclosure Letter, the Stock Option Agreement and the Rights
Agreement referred to in the CENFED Disclosure Letter (the "CENFED Rights
Plan") no shares of capital stock of CENFED 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 CENFED and its
subsidiaries are duly authorized, validly issued and outstanding, fully
paid and non-assessable. None of the shares of authorized capital stock of
CENFED is subject to any statutory or contractual preemptive or similar
rights.
(d) CenFed Bank; Significant Investments. All of the outstanding shares
of capital stock of each subsidiary of CENFED 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 CENFED. CenFed Bank is the sole direct subsidiary (as defined in Section
8.1) of CENFED and all of the direct and indirect subsidiaries of CenFed
Bank are listed in the CENFED Disclosure Letter. No equity securities of
any subsidiary of CENFED are or may become required to be issued (other
than to CENFED 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 CENFED
is or may be bound to sell or otherwise transfer any shares of the capital
stock of any such subsidiary (other than to CENFED 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
CENFED or its subsidiaries).
(e) Authority and Stockholder Approvals. Each of this Agreement and the
other agreements contemplated hereby is a valid and binding agreement of
CENFED enforceable against CENFED 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 CENFED 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 CENFED. The CENFED Rights
Plan has been amended so as to provide that Golden State will not become an
"Acquiring Person" and that no "Shares Acquisition Date" or "Distribution
Date" (as such terms are defined in the CENFED Rights Agreement) will occur
as a result of the approval, execution or delivery of this Agreement or the
Stock Option Agreement or the consummation of the Merger or the acquisition
of shares of CENFED Common Stock by Golden State pursuant to the Stock
Option Agreement or any other
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transaction contemplated hereby or thereby. CENFED has taken all action
required to be taken by it (including approval by the appropriate number of
members of the CENFED Board of Directors) in order to exempt this Agreement
and the CENFED Stock Option Agreement and the transactions contemplated
hereby and thereby, and the foregoing are exempt from, (x) the requirements
of Section 203 of the Delaware General Corporation Law and (y) the "higher
vote" requirement of Article Seventh of the CENFED Certificate of
Incorporation. Article Thirteenth of the CENFED Certificate of
Incorporation does not apply to this Agreement, the CENFED Stock Option
Agreement or the transactions contemplated hereby or thereby.
(f) No Violations. The execution, delivery and performance of this
Agreement by CENFED do not, and the consummation of the transactions
contemplated hereby by CENFED 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 CENFED or to which CENFED 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 CENFED 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 CENFED 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 CENFED 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 CENFED 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 CENFED 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.
(g) Reports. (i) As of their respective dates, neither the Annual Report
on Form 10-K filed by CENFED with the Securities and Exchange Commission
(the "SEC") relating to the year ended December 31, 1996 (including the
audited financial statements of CENFED included therein), nor any other
report filed by CENFED 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 CENFED
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).
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(ii) CENFED and its subsidiaries, including CenFed Bank, 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 disclosed in the CENFED Disclosure Letter, since December 31,
1996: (i) CENFED has not incurred any liability, other than in the ordinary
course of its business consistent with past practice; (ii) CENFED 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 CENFED which,
individually or in the aggregate, has had or would reasonably be expected
to have a material adverse effect on CENFED, 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 CENFED 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 CENFED 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 CENFED. All taxes, interest, additions
and penalties due with respect to completed and settled examinations or
concluded litigation relating to CENFED have been paid in full or adequate
provision has been made for the payment of any such taxes in the financial
statements of CENFED 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 CENFED.
(j) Absence of Claims. There is no pending claim, action or proceeding
against CENFED before any court or administrative agency, nor, to the
knowledge of CENFED, have any of the foregoing been threatened, nor, to the
knowledge of CENFED, is there any reasonable basis therefor.
(k) Absence of Regulatory Actions. Neither CENFED nor CenFed Bank 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 CENFED or CenFed Bank 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. CENFED is not aware of any facts or circumstances
relating to CENFED or CenFed Bank 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 5.1(b).
(l) Contracts. (i) Except for arrangements made in the ordinary course of
business, CENFED is not bound by any material contract to be performed
after the date hereof that is not listed in the CENFED Disclosure Letter.
CENFED is not a party to an oral or written (A) agreement containing
covenants that limit the ability of CENFED 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, CENFED (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 CENFED of $100,000 or
more per annum or (C) except as filed as an exhibit to its Annual Report on
Form 10-K for the year
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ended December 31, 1996, agreement that is a "material contract" within the
meaning of Item 601(b)(10) of SEC Regulation S-K.
(ii) CENFED 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 CENFED, 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. CENFED 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 CENFED 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 CENFED pending or, to the knowledge of
CENFED, threatened.
(n) Employee Agreements. The CENFED 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 CENFED or with respect to which CENFED or
any entity that would be treated as a single employer with CENFED under
Section 414(b) or (c) 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 CENFED 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 CENFED 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
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 CENFED or any of its ERISA Affiliates has engaged in
any prohibited transaction; (vii) there have been no acts or omissions by
CENFED 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 CENFED 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 CENFED no facts exist which could give rise to any such
actions, suits or claims (other than routine claims for benefits); (ix) no
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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 CENFED 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. CENFED does not own any real estate or interest
therein (other than real property security interests) that is not described
in the CENFED Disclosure Letter. CENFED 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 CENFED 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. CENFED and
its subsidiaries as lessee have the unqualified right under valid and
subsisting leases to occupy, use, possess and control all property leased
by CENFED and its subsidiaries.
(p) Compliance with Law. Each of CENFED and CenFed Bank:
(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 CENFED and CenFed Bank, 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.
(q) Fees. Other than financial advisory services performed for CENFED by
Merrill Lynch & Co., Inc. in the amount and pursuant to the agreement both
disclosed to Golden State prior to the execution and delivery of this
Agreement, CENFED 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 CENFED, CENFED is in material compliance
with all Environmental Laws (as defined below);
B. CENFED 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 CenFed Bank;
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C. There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending
or, to the knowledge of CENFED, threatened, before any court,
governmental agency or board or other forum against CENFED (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 CENFED;
D. To the knowledge of CENFED, 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 CENFED 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 the CENFED, 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 CENFED, the properties currently or
formerly owned or operated by CENFED (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 CENFED;
G. CENFED 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 CENFED, during the period of CENFED'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 the knowledge of CENFED,
prior to the period of CENFED'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 CENFED may have liability; and
I. CENFED 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. Section 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 CENFED 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
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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. CENFED has annexed to the CENFED Disclosure Letter
a loan schedule identifying certain loan agreements, notes and borrowing
arrangements (the "CENFED Loan Schedule") between its subsidiaries and
borrowers of its subsidiaries. Except as specifically noted on the CENFED
Loan Schedule, no subsidiary was, as of July 31, 1997, 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 CENFED, a
CENFED 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 CENFED or, to the knowledge
of CENFED, any person, corporation or enterprise controlling, controlled by
or under common control with any of the foregoing.
(t) Material Interests of Certain Persons. No officer or director of
CENFED, 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 CENFED.
(u) Insurance. All policies of insurance or indemnity maintained by
CENFED for its benefit in its business are listed in the CENFED Disclosure
Letter. All of the insurance policies and bonds so listed are in full force
and effect, CENFED 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, CENFED 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 CENFED 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. CENFED has delivered to Golden State true and
complete copies of its certificate of incorporation and by-laws, and the
charter and by-laws of CenFed Bank, 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 CENFED and the similar or
corresponding organizational documents of CenFed Bank and the other
subsidiaries of CENFED, neither CENFED nor any such subsidiary, is a party
to any indemnification
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agreement with any of its present or former directors, officers, employees,
agents or other persons who serve or served in any other capacity with any
other enterprise at the request of CENFED or any such subsidiary.
(y) Derivatives Contracts; Structured Notes; Etc. CENFED 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 CENFED 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 CENFED Disclosure Letter
or disclosed in its Reports filed on or prior to the date hereof. All
Derivative Contracts, whether entered into for CENFED'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 CENFED nor its subsidiaries, nor to its knowledge any other
party thereto, is in breach of any of its obligations under any Derivative
Contract.
(z) Accounting Matters. None of CENFED nor, to CENFED's best knowledge,
any of its affiliates has taken or agreed to take any action that would
prevent Golden State from accounting for the transactions contemplated
hereby as a "pooling of interests" under GAAP and SEC regulations, and
CENFED has no reason to believe that such transactions will not qualify as
a "pooling of interests" for accounting purposes.
(aa) Disclosure. The written statements, certificates, schedules, lists
and other written information furnished by or on behalf of CENFED 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 CENFED 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 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, Glendale Bank is
duly chartered and in good standing as a federal savings bank organized in
capital stock form. The customer deposit accounts of Glendale Bank 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 Bank 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 50,382,460 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,
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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 Bank 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. This Agreement 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.
(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, 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 Bank, as the predecessor of Golden State, with
the OTS relating to its fiscal year ended June 30, 1996 (including the
audited financial statements of Glendale Bank, as such predecessor,
included therein) nor the unaudited financial statements of Glendale Bank
as the predecessor of Golden State, as of March 31, 1997 and for the nine
months then ended contained in the Quarterly Report on Form 10-Q filed by
Glendale Bank with the OTS, and no other report filed by Glendale Bank or
Golden State subsequent to June 30, 1994, 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, 1994 have been made available to CENFED, and
Golden State shall provide CENFED 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
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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, 1996: (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 has been made for any such taxes 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 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 Bank
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, any of the
Government Regulators nor has Golden State or Glendale Bank 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 Bank that have not been
disclosed to CENFED 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 5.1(b).
(j) Compliance with Law. Each of Golden State and Glendale Bank:
(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 Bank, 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.
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(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 CENFED.
(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
CENFED 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, as agreed to in writing by Golden State or as set forth in Section
4.1 of the CENFED Disclosure Letter, CENFED 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 CENFED 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 CENFED.
Section 4.2. Forbearance by CENFED. 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 Section 4.2 of the CENFED Disclosure Letter with respect to
certain employee compensation plans of CENFED, CENFED 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) CENFED 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 $150,000,000 of Federal Home Loan Bank advances with maturities of up to
two years, of which no more than $100,000,000 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 CENFED Common Stock
that are listed in the CENFED Disclosure Letter; adjust, split, combine or
reclassify any shares of capital stock; declare or pay any dividends, other
than normal quarterly dividends at a rate per share not exceeding that of
the most recently declared quarterly cash dividend of CENFED prior to the
date hereof, 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 (except, if Golden State and CENFED so agree,
for redemption of the "Rights" provided for in the CENFED Rights Plan); 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;
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(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 CENFED'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 CENFED
Disclosure Letter;
(d) hire any employee above the level of Assistant Vice President (other
than such replacement employees, if any, as CENFED 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 CENFED
shall be permitted to pay annual bonuses in accordance with CENFED's
existing compensation policies and bonus plans disclosed to Golden State in
the CENFED 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 CENFED 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 CENFED;
(g) enter into any settlement or compromise of any material claim, action
or proceeding involving any liability of CENFED for money damages that
would have a material adverse effect or that would involve material
restrictions upon the operations of any CENFED 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 CENFED 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 CENFED
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
CENFED, 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;
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(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 (i) for "pooling of interests" accounting treatment or (ii) as a
"reorganization" within the meaning of Section 368 of the Code; or
(n) enter into any Derivatives Contracts or purchase any of the types of
securities referred to in Section 3.3(y), except that CENFED 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 102.5% of the
aggregate amount of such investments as of the date hereof; or (ii)
purchase or acquire municipal securities, except that CENFED may purchase
municipal securities rated "AAA" by Standard & Poor's or a more favorable
rating category, or comparable rating categories of other nationally
recognized investment rating firms, so long as the aggregate amount of its
investments in such securities does not exceed the aggregate amount of such
investments as of the date hereof.
(o) agree, or make any commitment, to take any of the actions prohibited
by this Section 4.2.
ARTICLE V.
COVENANTS
Section 5.1. Acquisition Proposals. CENFED agrees that neither it nor any of
its officers or directors shall, and CENFED 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 CENFED) 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, CENFED (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 CENFED 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.
CENFED 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. CENFED 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. CENFED 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 CENFED. CENFED 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 CENFED to return all confidential
information heretofore furnished to such person by or on behalf of CENFED and
enforce any such confidentiality or standstill agreements.
Section 5.2. Certain Policies of CENFED. At the request of Golden State,
CENFED 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 CENFED shall not be required to take such action
unless Golden State agrees in writing that all conditions to Golden State's
obligation to
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consummate the Merger have been satisfied and that Golden State will complete
the Merger. CENFED'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 CENFED to determine which positions in
and employees of CENFED will be required for the continuing operations of the
Surviving Corporation and Glendale Bank as of and after the Effective Time.
CENFED 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 CENFED employees.
(b) As soon as practicable after the date hereof, Golden State shall
identify to CENFED those employees of CENFED 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 CENFED 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 CENFED who desires to be considered for such a position with Golden State.
(c) It is the intention of Golden State to train all employees of CENFED
that Golden State expects to employ with Golden State in Golden State's
procedures prior to the Closing Date. CENFED 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 CENFED or any of
its subsidiaries. Employees who are employed by Golden State after the
Effective Time will receive credit for their prior service with CENFED 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 CENFED who remain employed by Golden State
for more than one year following the Effective Time.
(e) Full time and part time employees of CENFED 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 CENFED 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 CENFED Severance
Plan as in effect at the date hereof. In addition to amounts that may be
payable pursuant to the CENFED Severance Plan, Golden State and CENFED have
agreed that CENFED will establish a Retention Bonus Plan in accordance with
the letter agreement (the "Benefits Letter") between Golden State and CENFED
entered into contemporaneously herewith.
(f) This Agreement is intended to result solely in the acquisition by Golden
State of CENFED and is not intended to confer any continuing rights to
employment on the part of the employees of CENFED after the Effective Time.
CENFED shall make no representations to its employees regarding employment by
Golden State. CENFED shall remain solely responsible for its employees,
representatives and agents during their employment
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with CENFED prior to the Effective Time and with respect to all matters
arising from such employment with CENFED 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 Bank, 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 CENFED's obligations to make such payments
shall be fully and fairly reflected in CENFED's financial statements prior to
and as of the Effective Time to the extent required by generally accepted
accounting principles.
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 Bank or
CenFed Bank) 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 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 agreement, dated June 26, 1997, between
Golden State and CENFED (the "Confidentiality Agreement").
(b) No investigation by any party hereto shall affect the representations,
warranties, covenants or agreements of the other parties hereto.
(c) CENFED 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 the date hereof and of any changes
in CENFED'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.
CENFED 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 the information
relating to CENFED or Golden State, as the case may be, and any of their
respective subsidiaries, which appear 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 CENFED 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
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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 CENFED 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 CENFED
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 all appropriate action 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,
each of Golden State and CENFED 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, CENFED 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
CENFED, 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 CENFED 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 CENFED shall furnish all information
concerning CENFED and the holders of CENFED Common Stock as may be reasonably
requested in connection with any such action.
Section 5.9. Letter of CENFED Accountants. CENFED shall use its best efforts
to cause to be delivered to Golden State a letter of CENFED'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 CENFED 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 CENFED, and
a written reconfirmation of such letter dated as of the Closing Date, in each
case in the form and substance reasonably
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satisfactory to CENFED, 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. CENFED 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 CENFED 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 CENFED shall recommend to the holders of the CENFED
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. 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. CENFED 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, CENFED 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. Affiliates. (a) Each of Golden State and CENFED shall use its
best efforts to cause each director, executive officer and other person who is
an "affiliate" (for purposes of Rule 145 under the Securities Act and for
purposes of qualifying the Merger for "pooling of interests" accounting
treatment) of such party to deliver to the other party hereto, as soon as
practicable after the date of this Agreement, and prior to the date of the
stockholder meeting called by CENFED to approve this Agreement, a written
agreement, in the form of Exhibit A(1) hereto (in the case of affiliates of
Golden State) or A(2) hereto (in the case of affiliates of CENFED), as
applicable, providing that such person will not sell, pledge, transfer or
otherwise dispose of any shares of capital stock of Golden State or capital
stock of CENFED held by such "affiliate" and, in the case of the "affiliates"
of CENFED, the shares of Golden State Common Stock to be received by such
"affiliate" in the Merger: (i) in the case of shares of Golden State Common
Stock to be received by "affiliates" of CENFED in the Merger, except in
compliance with the applicable provisions of the Securities Act and the rules
and regulations thereunder; and (ii) except to the extent and under the
conditions permitted therein, during the period commencing 30 days prior to
the Effective Time and ending at the time of the publication of financial
results covering at least 30 days of combined operations of Golden State and
CENFED.
(b) Golden State shall use its best efforts to publish no later than 90 days
after the end of the first month after the Effective Time in which there are
at least 30 days of post-Merger combined operations (which month
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may be the month in which the Effective Time occurs), combined sales and net
income figures as contemplated by and in accordance with the terms of SEC
Accounting Series Release No. 135.
Section 5.16. 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 5.17. 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 5.18. Corporate Governance. Golden State's Board of Directors shall
take appropriate action to elect D. Tad Lowrey to the Board of Directors of
Golden State and of Glendale Bank, such election to be effective as of the
Effective Time.
Section 5.19. Indemnification of Directors and Officers. Golden State agrees
that all rights to indemnification or excupation now existing in favor of the
directors, officers, employees and agents of CENFED and its subsidiaries as
provided in their respective certificates of incorporation, charter, by-laws
or similar charter documents 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 CENFED
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'
liability insurance policy maintained by CENFED, 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
policy 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 CENFED to maintain or procure
insurance coverage pursuant hereto. In the event Golden State, CENFED 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 CENFED, respectively, shall
assume the obligation set forth in this Section 5.19. The provisions of this
Section 5.19 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.
ARTICLE VI.
CONDITIONS TO CONSUMMATION
Section 6.1. Conditions to All Parties' Obligations. The respective
obligations of Golden State and CENFED 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 CENFED in
accordance with applicable law and its certificate of incorporation and by-
laws.
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(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 5.1(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 so 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 CENFED 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 or any other
transaction contemplated by this Agreement.
(f) The shares of Golden State Common Stock issuable to CENFED
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.
(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 CENFED 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); CENFED 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 CENFED 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 CENFED, dated the Closing Date, to the foregoing
effect.
(b) Golden State shall have received the opinion of Wachtell, Lipton,
Rosen & Katz, 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 and CENFED 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 CENFED Common Stock upon the receipt of Golden
State Common Stock in the Merger (except with respect to cash received in
lieu of fractional shares) and that no gain or loss will be recognized by
Golden State or CENFED as a result of the Merger. In rendering such
opinion, such counsel may require and rely upon representations contained
in certificates of CENFED, Golden State and stockholders of CENFED.
(c) Golden State shall have received the updated CENFED Disclosure Letter
from CENFED required by Section 5.14.
A-1-24
<PAGE>
(d) None of the events provided for in the CENFED Rights Plan shall have
occurred which would make the Rights provided for therein nonredeemable or
which would make such Rights exercisable or cause them to trade separately
from the CENFED Common Stock.
Section 6.3. Conditions to Obligations of CENFED. The obligation of CENFED
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 CENFED:
(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 December 31, 1996. CENFED 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) CENFED shall have received the opinion of Mayer, Brown & Platt,
counsel to CENFED, 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 and CENFED
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
CENFED Common Stock upon the receipt of Golden State Common Stock in the
Merger (except with respect to cash received in lieu of fractional shares)
and that no gain or loss will be recognized by Golden State or CENFED as a
result of the Merger. In rendering such opinion, such counsel may require
and rely upon representations contained in certificates of CENFED, Golden
State and stockholders of CENFED.
(c) CENFED 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 CENFED:
(a) by the mutual consent of Golden State and CENFED;
(b) by Golden State or CENFED, 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 CENFED 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
CENFED) 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 CENFED 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; or (ii) any governmental authority of
competent jurisdiction shall have issued a final, unappealable order
enjoining or otherwise prohibiting consummation of the transactions
contemplated by this Agreement;
(d) by Golden State or CENFED, 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
A-1-25
<PAGE>
covenant contained in this Agreement by the party seeking to terminate. The
term "Termination Date" shall mean April 30, 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 CENFED if both (i) the Final Golden State Stock Price is less than
$24.40, and (ii) the quotient obtained by dividing the Final Golden State
Stock Price by $28.69 does not equal at least 85% of the quotient obtained
by dividing the average Index Price during the 10 trading days for Golden
State Common Stock (on which shares of Golden State Stock were traded)
preceding the proposed Closing Date (the "Determination Period") by the
average Index Price during the 10 trading days for Golden State Common
Stock preceding August 15, 1997. As used herein, (i) the "Final Golden
State Stock Price" shall mean the average of the per share closing prices
of Golden State Common Stock on the NYSE Composite Transactions List (as
reported in the Wall Street Journal or, in the absence thereof, as reported
by another authoritative source mutually agreed upon by CENFED and Golden
State) during the Determination Period, (ii) the "Index Price" shall mean,
on any given date, the weighted average (weighted in accordance with the
factors listed in the following clause (iii)) of the closing prices of the
companies comprising the Index Group, and (iii) the "Index Group" shall
mean the thrift holding companies listed below, the common stocks of all of
which shall be publicly traded and as to which there shall not have been,
since August 15, 1997 and before the date of determination of an Index
Price, any public announcement of a proposal for such company to be
acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market
capitalization. In the event that any such company or companies fails to
meet any of the foregoing criteria, such company shall be deemed removed
from the Index Group, and the weights (which shall be determined based upon
the number of each company's outstanding shares of common stock) shall be
redistributed proportionately for purposes of determining the Index Price.
If any company belonging to the Index Group or Golden State declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares, or similar transaction, the prices for the
common stock of such company or Golden State shall be appropriately
adjusted for the purposes of applying this Section 7.1(e). The thrift
holding companies and the weights to be attributed to them are as follows:
<TABLE>
<CAPTION>
WEIGHTING
COMPANY NAME INDEX
------------ ---------
<S> <C>
Ahmanson & Company (H.F.)....................................... 9.38%
Astoria Financial Corp.......................................... 2.02%
Bank United Corp................................................ 3.04%
Charter One Financial........................................... 4.45%
Coast Savings Financial......................................... 1.79%
Commercial Federal Corp......................................... 2.08%
Dime Bancorp Inc................................................ 9.99%
Downey Financial Corp........................................... 2.58%
Golden State Bancorp. Inc....................................... 4.85%
Golden West Financial Corp...................................... 5.47%
GreenPoint Financial Corp....................................... 4.34%
Long Island Bancorp Inc......................................... 2.31%
MAF Bancorp Inc................................................. 1.48%
New York Bancorp Inc............................................ 2.08%
People's Bank (MHC)............................................. 5.88%
Peoples-Heritage Financial Group................................ 2.64%
Queens County Bancorp Inc....................................... .98%
Roslyn Bancorp Inc.............................................. 4.20%
Sovereign Bancorp Inc........................................... 6.74%
</TABLE>
A-1-26
<PAGE>
<TABLE>
<CAPTION>
WEIGHTING
COMPANY NAME INDEX
------------ ---------
<S> <C>
St. Paul Bancorp. Inc........................................... 3.27%
Washington Federal Inc.......................................... 4.57%
Washington Mutual Inc........................................... 12.17%
Webster Financial Corp.......................................... 1.15%
Westcorp........................................................ 2.52%
-------
Total......................................................... 100.00%
=======
</TABLE>
Section 7.2. Effect of Termination. In the event of the termination of this
Agreement by either Golden State or CENFED, as provided above, this Agreement
shall thereafter become void and, subject to the last sentence of Section 8.2,
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.
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 "CENFED" include each of their respective
direct and indirect subsidiaries, including Glendale Bank and CenFed Bank,
respectively, and references to "Golden State" shall mean Glendale Bank when
used with reference to periods prior to the time that Glendale Bank became a
wholly-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
A-1-27
<PAGE>
(including the structure of the transaction), either prior to or after this
Agreement and the transactions contemplated hereby are approved by the
stockholders of CENFED; 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 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 Delaware without
regard to the conflict of laws provisions and principles thereof.
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 shall be
borne equally by Golden State and CENFED.
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:(626) 409-3151
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention:Craig M. Wasserman, Esq.
Facsimile:(212) 403-2000
If to CENFED:
CENFED Financial Corporation
199 North Lake Avenue
Pasadena, California 91101
Attention:D. Tad Lowrey
President and Chief Executive Officer
Facsimile:(626) 585-2580
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
A-1-28
<PAGE>
Section 8.8. Entire Agreement; No Third Party Beneficiaries. This Agreement,
the Confidentiality Agreement referenced in Section 5.4(a) the Stock Option
Agreement and the Benefit Letter referenced in Section 5.3(e) 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 5.19, is intended to confer upon any person other than
Golden State and CENFED 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. CENFED Financial Corporation
/s/ Richard A. Fink /s/ D. Tad Lowrey
By:__________________________________ By:__________________________________
Richard A. Fink D. Tad Lowrey
Vice Chairman President and Chief Executive
Officer
A-1-29
<PAGE>
APPENDIX A-2
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT dated as of December 1, 1997 ("Amendment") is entered into by
Golden State Bancorp Inc., a Delaware corporation ("Golden State"), Golden
State Financial Corporation, a Delaware corporation and a wholly-owned
subsidiary of Golden State ("Golden State Financial"), and CENFED Financial
Corporation, a Delaware corporation ("CENFED"), for the purpose of amending
the Merger Agreement between Golden State and CENFED referred to herein.
RECITALS
WHEREAS, Golden State and CENFED have heretofore entered into that certain
Agreement and Plan of Merger dated as of August 17, 1997 (the "Merger
Agreement") providing for the acquisition of CENFED by Golden State on the
terms and subject to the conditions set forth therein;
WHEREAS, the parties to the Merger Agreement desire to amend the terms
thereof in certain respects and further desire that the Merger Agreement, as
so amended, shall continue in full force and effect;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree
as follows:
Section 1. Recitals. The first paragraph of the Recitals to the Merger
Agreement is hereby amended to read in full as set forth below:
WHEREAS, the Boards of Directors of Golden State and CENFED 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 CENFED is to be merged with and into Golden State
Financial Corporation, a Delaware corporation a wholly-owned subsidiary of
Golden State ("Merger Sub") and Merger Sub shall thereafter continue to be
a wholly-owned subsidiary of Golden State (the "Merger").
Section 2. Amendment to Section 1.1. Section 1.1 of the Merger Agreement is
hereby amended to read in full as set forth below:
Section 1.1 Procedure and Effective Time of Merger. As of the Effective
Time (as defined below), CENFED 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 Amendment,
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 3. Amendment to Section 1.3. Sections 1.3(a) and (b) of the Merger
Agreement are hereby amended to read in full as set forth below:
Section 1.3. Effects of Merger. (a) At the Effective Time, (i) the
separate corporate existence of CENFED shall cease and CENFED 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 become the directors of the Surviving Corporation.
A-2-1
<PAGE>
(b) As used in this Amendment, "Constituent Corporations" shall mean
Merger Sub and CENFED and "Surviving Corporation" shall mean Merger Sub.
Section 4. Amendment to Section 6.2. Section 6.2(b) of the Merger Agreement
is hereby amended to read in full as set forth below:
(b) Golden State shall have received the opinion of Wachtell, Lipton, Rosen
& Katz, 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 CENFED 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 CENFED Common Stock upon the
receipt of Golden State Common Stock in the Merger (except with respect to
cash received in lieu of fractional shares) and that no gain or loss will
be recognized by Golden State, Merger Sub or CENFED as a result of the
Merger. In rendering such opinion, such counsel may require and rely upon
representations contained in certificates of CENFED, Golden State and
Stockholders of CENFED.
Section 5. Amendment to Section 6.3. Section 6.3(b) of the Merger Agreement
is hereby amended to read in full as set forth below:
(b) CENFED shall have received the opinion of Mayer, Brown & Platt,
counsel to CENFED, 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 CENFED 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 CENFED Common Stock upon the receipt of Golden State Common
Stock in the Merger (except with respect to cash received in lieu of
fractional shares) and that no gain or loss will be recognized by Golden
State, Merger Sub or CENFED as a result of the Merger. In rendering such
opinion, such counsel may require and rely upon representations contained
in certificates of CENFED, Golden State and stockholders of CENFED.
Section 6. Parties. Upon execution and delivery of this Amendment by each of
the parties hereto, Golden State Financial shall become a party to the Merger
Agreement with such rights and obligations as are provided herein and therein.
Section 7. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the state of Delaware without regard to the
conflict of law principles thereof.
Section 8. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
Section 9. Continued Effectiveness of Merger Agreement. Except as set forth
in this Amendment, the original terms and provisions of the Merger Agreement
shall continue in full force and effect as originally set forth therein.
Section 10. Amendment and Restatements. The parties hereto agree that
whenever either party hereto desires to present or reproduce the Merger
Agreement as hereby modified it shall not be necessary to set forth this
Amendment separately or to identify the Merger Agreement as so amended by the
designation "Amended and Restated" or any other similar designation.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the day and year first above
written.
Golden State Bancorp Inc. CENFED Financial Corporation
/s/ Richard A. Fink /s/ D. Tad Lowrey
By: _________________________________ By: _________________________________
Richard A. Fink D. Tad Lowrey
Vice Chairman President and Chief Executive
Officer
Golden State Financial Corporation
/s/ Richard A. Fink
By: _________________________________
Richard A. Fink
Vice Chairman
A-2-3
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, dated as of August 17, 1997 ("Agreement"), is
made and entered into by and between GOLDEN STATE BANCORP INC., a Delaware
corporation ("Golden State") and CENFED FINANCIAL CORPORATION, a Delaware
corporation ("CENFED").
WHEREAS, Golden State and CENFED are entering into an Agreement and Plan of
Merger with respect to a business combination of Golden State and CENFED (the
"Merger Agreement") concurrently herewith; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Golden State has required that CENFED agree, and in order to induce
Golden State to enter into the Merger Agreement, CENFED has agreed, to grant
an option to Golden State to purchase certain shares of the common stock, par
value $.01 per share of CENFED (the "CENFED Common Stock");
NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, and intending to be legally bound, the parties hereto agree as
follows:
1. Grant of Option. CENFED hereby grants to Golden State an irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to
1,140,784 fully paid and nonassessable shares (the "Option Shares") of CENFED
Common Stock, which Option shall be exercisable by giving notice and making
payment of the Option Price (as defined in Section 4 hereof) in the manner
provided herein. The number of shares of CENFED Common Stock that may be
received upon the exercise of the Option and the Option Price is subject to
adjustment as set forth herein.
2. Exercise of Option.
(a) Golden State may, subject to the provisions of this Section 2 and
subject to the conditions of exercise contained in Section 3 hereof, exercise
the Option, in whole or in part, at any time during the period following the
occurrence of an Exercise Event and prior to the Expiration Date (as defined
in Section 3 hereof).
(b) Notwithstanding any provision of this Agreement to the contrary, in no
event shall Golden State have a right to purchase under the terms of this
Agreement more than the number of Option Shares that has a Spread Value (as
defined in Section 11 hereof) of $11,000,000. In the event that the Spread
Value exceeds $11,000,000 at the time Golden State wishes to exercise the
Option, the number of Option Shares that Golden State is entitled to purchase
on the date of the Closing (as defined herein) shall be reduced to the extent
necessary to reduce the Spread Value following such reduction to an amount
equal to or less than $11,000,000.
3. Conditions to Exercise; Expiration.
(a) It shall be a condition to Golden State's exercise of the Option that,
at the time of such exercise (i) Golden State is not in breach of any covenant
or obligation set forth herein or in the Merger Agreement and (ii) there is
not in effect any preliminary or permanent injunction or other order by any
court of competent jurisdiction which prevents or restrains the issuance and
delivery of the Option Shares.
(b) The right to exercise any part of the Option not previously exercised
shall expire, terminate and be of no further force or effect upon the earliest
to occur (the date of such earliest occurring event being referred to herein
as the "Expiration Date") of (i) the Effective Time of the Merger, (ii) the
date the Merger Agreement is terminated pursuant to Sections 7.1(a) or (e)
thereof; (iii) the date the Merger Agreement is terminated by CENFED or Golden
State pursuant to Sections 7.1(b), (c) or (d) thereof, if such date is prior
to the occurrence of an Exercise Event or Preliminary Acquisition Transaction;
or (iv) 18 months following the earliest to occur of (A) the date of any
termination of the Merger Agreement other than as described in clauses (ii)
and (iii) of this sentence or (B) the date of the first occurrence of an
Exercise Event.
B-1
<PAGE>
4. Manner of Exercise.
(a) In the event that Golden State wishes to exercise the Option, in whole
or in part, Golden State shall send a written notice (the date of such notice
being herein referred to as the "Notice Date") to CENFED specifying the number
of Option Shares to be purchased and a place and date not earlier than three
nor later than ten business days following any such Notice Date for the
closing of such purchase (the "Closing"); provided that, if prior notification
to or approval of the Office of Thrift Supervision (the "OTS") or any other
regulatory agency is required in connection with such purchase, each party
hereto shall cooperate with the other party hereto in the filing of the
required notice or application for approval and shall expeditiously process
the same and use its best efforts to obtain any required approval, and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired
or been terminated or such approvals have been obtained and any requisite
waiting period or periods shall have passed.
(b) At any Closing, Golden State shall make payment to CENFED for the Option
Shares so purchased at such date by delivery of immediately available funds to
CENFED equal to $34.00 per Option Share (the "Option Price"). If the Option is
exercised in part only, Golden State shall also deliver all originally
executed copies of this Agreement to CENFED at the Closing in exchange for a
new agreement duly authorized and executed by CENFED identical to this
Agreement evidencing the right to purchase the remaining balance of the Option
Shares.
(c) Upon payment of the Option Price, CENFED shall immediately deliver to
Golden State a certificate or certificates representing such Option Shares
registered in the name of Golden State or its assignee or designee.
(d) Certificates for Option Shares delivered at a Closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
the issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of the issuer and will be provided to the holder hereof without
charge upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "Securities Act"),
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if Golden State shall have delivered to CENFED a letter
from the staff of the Securities and Exchange Commission ("SEC"), or an
opinion of counsel, in form and substance reasonably satisfactory to CENFED,
to the effect that such legend is not required for purposes of the Securities
Act; and (ii) the reference to the provisions of this Agreement in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require the
retention of such reference. In addition, such certificates shall bear any
other legend that may be required by law.
5. Registration of Shares.
(a) In the event that the Option has become exercisable in accordance with
Section 2 hereof, then, as promptly as practicable upon Golden State's
request, but, in any event, within six months from the date of Golden State's
request, CENFED agrees to prepare and file a registration statement
("Registration Event") under the Securities Act, and any applicable state
securities laws, with respect to any proposed disposition by Golden State of
any or all of the Option Shares and to use its best efforts to cause such
registration statement to become effective as expeditiously as possible and to
keep such registration effective for a period of not less than 180 days,
unless, in the written opinion of counsel to CENFED, addressed to Golden State
and reasonably satisfactory in form and substance to Golden State and its
counsel, registration is not required for such proposed distribution of the
Option Shares. Notwithstanding the foregoing, CENFED shall have the right to
delay (the "Delay Right") a Registration Event for a period of up to sixty
days in the event it receives a request from Golden State to effect a
Registration Event if CENFED (i) is involved in a material transaction, (ii)
determines, in the good faith
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exercise of its reasonable business judgment, that such registration and
offering could adversely affect or interfere with bona fide material financing
plans of CENFED or would require disclosure of information the premature
disclosure of which could materially adversely affect CENFED or any
transaction under active consideration by CENFED, or (iii) reasonably requires
such delay in order to prepare audited financial statements required to be
included in such registration statement. CENFED may exercise its Delay Right
not more than once in any twelve-month period. All fees, expenses and charges
incurred by CENFED in connection with the registration of the Option Shares
pursuant to this Section 5 shall be borne and paid by CENFED. CENFED shall
indemnify and hold harmless Golden State, its affiliates and its officers,
directors, attorneys and agents from and against any and all losses, claims,
damages, liabilities and expenses (including, without limitation, all out-of-
pocket expenses, investigation expenses, expenses incurred with respect to any
judgment and fees, charges and disbursements of counsel and accountants)
arising out of or based upon any statements contained in, or omissions or
alleged omissions from, each registration statement (and related prospectus)
required to be filed pursuant to this Section 5, other than any losses,
claims, damages, liabilities and expenses arising out of or based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement or prospectus in reliance upon information
furnished to CENFED by Golden State.
(b) Golden State shall be limited to the benefit of two effective demand
registrations as described in Section 5(a), which demand registrations may
only be requested during the three years following the date of the first
Exercise Event, but shall have an unlimited number of so-called "piggyback"
registration rights. CENFED agrees, if requested by Golden State, to enter
into a Registration Rights agreement with Golden State consistent with the
terms and conditions hereof and containing customary terms, including
appropriate indemnities, which shall only allow underwriters the ability to
cut back the number of shares Golden State seeks to have registered on a pro
rata basis.
6. Representations and Warranties of CENFED. CENFED hereby represents and
warrants to, and agrees with, Golden State as follows:
(a) Authority Relative to this Agreement. CENFED has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of CENFED and no
other corporate proceedings on the part of CENFED are necessary to
authorize this Agreement or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by CENFED
and, assuming that this Agreement has been duly and validly authorized,
executed and delivered by Golden State, this Agreement constitutes a valid
and binding agreement of CENFED, enforceable against CENFED in accordance
with its terms.
(b) Option Shares. CENFED has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the
date hereof through the Expiration Date will have reserved for issuance
upon exercise of the Option, 1,140,784 shares of CENFED Common Stock, each
of which, upon delivery pursuant hereto, shall be duly authorized, validly
issued, fully paid and nonassessable, and shall be delivered free and clear
of all claims, liens, encumbrances and security interests and not be
subject to any preemptive rights. CENFED will take all necessary corporate
action to authorize and reserve for issuance upon exercise of the Option
such additional shares as may be required pursuant to Section 9 hereof.
CENFED will not take any action which could reasonably have the effect of
preventing or disabling CENFED from (i) delivery of the Option Shares to
Golden State upon exercise of the Option or (ii) otherwise performing its
obligations under this Agreement.
(c) Conflicting Instruments; Consents. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated
hereby will violate or result in any violation of or be in conflict with or
constitute a default under any term of the certificate of incorporation or
by-laws of CENFED, or of any material agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to
CENFED. No consent or approval by any governmental authority, other than
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compliance with applicable federal and state securities and banking laws,
including the regulations of the OTS, is required of CENFED in connection
with the execution and delivery by CENFED of this Agreement or the
consummation by CENFED of the transactions contemplated hereby.
(d) Notice. CENFED shall give notice to Golden State promptly, but in any
event within two business days, of CENFED's first obtaining knowledge of
any Exercise Event or Repurchase Event.
7. Representations and Warranties of Golden State. Golden State hereby
represents and warrants to CENFED as follows:
(a) Golden State has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Golden State and no other corporate
proceedings on the part of Golden State are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by Golden State and,
assuming this Agreement has been duly and validly authorized, executed and
delivered by CENFED, this Agreement constitutes a valid and binding
agreement of Golden State, enforceable against Golden State in accordance
with its terms.
(b) Golden State will acquire the Option Shares issued upon exercise of
the Option for its own account, without a view toward the distribution
thereof, and will not sell such Option Shares unless such sale is
registered as required by the Securities Act or unless an exemption from
such registration requirement is available.
8. Notification of Record Date; Postponement of Meeting. At any time during
the period that this Option may become exercisable by Golden State, CENFED
shall give Golden State thirty business days' (or such shorter time as is
possible under the circumstances) prior written notice of any record date for
determining the holders of CENFED Common Stock of record and entitled to vote
on any matter, to receive any dividend or distribution, or to receive any
other benefit or right, or for any other purpose that a record date is taken
or declared with respect to the CENFED Common Stock. In the event that Golden
State, in accordance with this Agreement, elects to exercise the Option
granted hereunder by delivery of the notice required pursuant to Section 4
after the record date set by CENFED for any such shareholders' meeting, then
CENFED shall, upon request by Golden State, cancel the scheduled meeting and
its related record date and reschedule it for a later date; provided, however,
that the record date for such rescheduled meeting shall be a date that is not
fewer than ten nor more than thirty business days after the cancellation of
the originally scheduled shareholders' meeting.
9. Adjustment upon Changes in Capitalization, Etc.
(a) In the event of any dividend, stock split, split-up, recapitalization,
reclassification, combination, exchange of shares or similar transaction or
event with respect to the CENFED Common Stock, the type and number of shares
or securities subject to the Option, and the Option Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Golden State shall receive, upon exercise
of the Option, the number and class of shares or other securities or property
that Golden State would have received in respect of CENFED Common Stock if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable. If any shares of CENFED Common Stock are issued after
the date of this Agreement (other than pursuant to an event described in the
first sentence of this Section 9(a)), the number of shares of CENFED Common
Stock subject to the Option shall be adjusted so that, after such issuance,
such number, together with any shares of CENFED Common Stock previously issued
to Golden State pursuant hereto, equals 19.9% of the number of shares of
CENFED Common Stock then issued and outstanding, without giving effect to any
shares subject to or issued pursuant to this Option.
(b) In the event that CENFED shall, prior to the Expiration Date, enter in
an agreement (i) to consolidate with or merge into any person, other than
Golden State or one of its Subsidiaries, and shall not be the continuing or
surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Golden State or one of its Subsidiaries, to merge into
CENFED and CENFED shall be the continuing or surviving corporation,
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but, in connection with such merger, the then outstanding shares of CENFED
Common Stock shall be changed into or exchanged for stock or other securities
of CENFED or any other person or cash or any other property and the
outstanding shares of CENFED Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the continuing or surviving corporation, or (iii) to sell
or otherwise transfer all or substantially all of its assets to any person,
other than Golden State or one of its Subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provisions so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged
for, an option (the "Substitute Option"), at the election of Golden State, of
either (x) the Acquiring Corporation (as defined below), (y) any person that
controls the Acquiring Corporation, or (z) in the case of a merger described
in clause (ii), CENFED (in each case, such person being referred to as the
"Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option, provided
that, if the terms of the Substitute Option cannot, for legal or regulatory
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Golden State. The Substitute Option
Issuer shall also enter into an agreement with the then-holder or holders of
the Substitute Option in substantially the same form as this Agreement, which
shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
the Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
the CENFED Common Stock for which the Option was theretofore exercisable,
divided by the Average Price (as hereinafter defined). The exercise price of
the Substitute Option per share of the Substitute Common Stock (the
"Substitute Option Price") shall then be equal to the Option Price multiplied
by a fraction in which the numerator is the number of shares of the CENFED
Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or surviving
corporation of a consolidation or merger with CENFED (if other than
CENFED), (y) CENFED in a merger in which CENFED is the continuing or
surviving corporation, and (z) the transferee of all or any substantial
part of CENFED's assets (or the assets of its Subsidiaries).
(ii) "Assigned Value" shall mean the highest of (x) the price per share
of the CENFED Common Stock at which a Tender Offer or Exchange Offer
therefor has been made by any person (other than Golden State or its
Subsidiaries or affiliates), (y) the price per share of the CENFED Common
Stock to be paid by any person (other than Golden State or its Subsidiaries
or affiliates) pursuant to an agreement with CENFED, and (z) the highest
closing sale price per share of CENFED Common Stock quoted on the Nasdaq
National Market (or if CENFED Common Stock is not quoted on the Nasdaq
National Market, the highest bid price per share on any day as quoted on
the principal trading market or securities exchange on which such shares
are traded as reported by a recognized source chosen by Golden State)
within the six-month period immediately preceding any such agreement;
provided, that in the event of a sale of less than all of CENFED's assets,
the Assigned Value shall be the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of CENFED as
determined in good faith by a nationally recognized investment banking firm
selected by Golden State and reasonably acceptable to CENFED, divided by
the number of shares of the CENFED Common Stock outstanding at the time of
such sale. In the event that an Exchange Offer is made for the CENFED
Common Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or
other property issuable or deliverable in exchange for the CENFED Common
Stock shall be determined in good faith by a nationally recognized
investment banking firm mutually selected by Golden State and CENFED (or,
if applicable, Acquiring Corporation), provided, that if a mutual selection
cannot be made as to such investment banking firm, it shall be selected by
Golden State.
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(iii) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one-year period immediately preceding
the consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale, provided, that if CENFED is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by CENFED, the person
merging into CENFED or by any company which controls or is controlled by
such merging person, as Golden State may elect.
(iv) "Substitute Common Stock" shall mean the common stock issued by the
Substitute Option Issuer upon exercise of the Substitute Option.
(f) In no event pursuant to any of the foregoing paragraphs shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option.
(g) CENFED shall not enter into any transaction described in subsection (b)
of this Section 9 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
CENFED hereunder and take all other actions that may be necessary so that the
provisions of this Section 9 are given full force and effect (including,
without limitation, any action that may be necessary so that the shares of
Substitute Common Stock are in no material way distinguishable from or have
less economic value than other shares of common stock issued by the Substitute
Option Issuer).
10. Repurchase at the Option of Golden State.
(a) At the written request of Golden State at any time commencing upon the
first occurrence of a Repurchase Event (as defined in Section 10(d)), CENFED
shall repurchase the Option from Golden State and, to the extent permitted by
applicable law, all shares of CENFED Common Stock purchased by Golden State
pursuant hereto with respect to which Golden State then has Beneficial
Ownership. The date on which Golden State exercises its rights under this
Section 10 is referred to as the "Request Date", and the Request Date must be
no later than 12 months after the first occurrence of a Repurchase Event. Such
repurchase shall be at an aggregate price (the "Repurchase Consideration")
equal to the sum of:
(i) the aggregate Option Price paid by Golden State for any shares of
CENFED Common Stock acquired pursuant to the Option with respect to which
Golden State then has Beneficial Ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined below)
for each share of CENFED Common Stock over (y) the Option Price (subject to
adjustment pursuant to Section 9), multiplied by the number of shares of
CENFED Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Option Price
(subject to adjustment pursuant to Section 9) paid (or, in the case of
Option Shares with respect to which the Option has been exercised but the
Closing has not occurred, payable) by Golden State for each share of CENFED
Common Stock with respect to which the Option has been exercised and with
respect to which Golden State then has Beneficial Ownership, multiplied by
the number of such shares; provided, that the amount calculated pursuant to
clause (ii) and (iii) of this Section 10(a) shall not exceed $11,000,000.
(b) If Golden State exercises its rights under this Section 10, CENFED
shall, within ten business days after the Request Date, pay the Repurchase
Consideration to Golden State in immediately available funds, and
contemporaneously with such payment Golden State shall surrender to CENFED the
Option and the certificates evidencing the shares of CENFED Common Stock
purchased thereunder with respect to which Golden State then has Beneficial
Ownership, and Golden State shall represent and warrant that it has sole
record and Beneficial Ownership of such shares, that it has not granted any
rights to purchase or otherwise acquire such shares to any person, and that
the same are then free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or approval of the OTS or any
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other regulatory authority is required in connection with the payment of all
or any portion of the Repurchase Consideration, Golden State shall have the
ongoing option to revoke its request for repurchase pursuant to this Section
10, in whole or in part, or to require that CENFED deliver from time to time
that portion of the Repurchase Consideration that it is not then so prohibited
from paying and promptly file the required notice or application for approval
with the respect to the balance and expeditiously process the same (and each
party shall cooperate with the other in the filing of any such notice or
application and the obtaining of any such approval). If the OTS or any other
regulatory authority disapproves of any part of CENFED's proposed repurchase
pursuant to this Section 10, CENFED shall promptly give notice of such fact to
Golden State. If the OTS or such other regulatory agency prohibits the
repurchase in part but not in whole, then Golden State shall have the right
(i) to revoke the repurchase request or (ii) to the extent permitted by the
OTS or such other regulatory agency, determine whether the repurchase should
apply to the Option and/or Option Shares and to what extent to each, and
Golden State shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request
Date less the sum of the number of shares covered by the Option in respect of
which payment has been made pursuant to Section 10(a)(ii) and the number of
shares covered by the portion of the Option (if any) that has previously been
repurchased. Golden State shall notify CENFED of its determination under the
preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Golden State's
rights with respect to any unexercised Options under this Section 10 shall
terminate on the Expiration Date.
(c) For purposes of this Agreement, the "Applicable Price" means the highest
of (i) the highest price per share of CENFED Common Stock paid for any such
share by the person or groups described in Section 10(d)(i), (ii) the price
per share of CENFED Common Stock received by holders of CENFED Common Stock in
connection with any merger or other business combination transaction described
in Section 9(b)(i), (ii) or (iii), or (iii) the highest closing sales price
per share of CENFED Common Stock quoted on the Nasdaq National Market (or if
CENFED Common Stock is not quoted on the Nasdaq National Market, the highest
bid price per share as quoted on the principal trading market or securities
exchange on which such shares are traded as reported by a recognized source
chosen by Golden State) during the 60 business days preceding the Request
Date; provided, however, that in the event of a sale of less than all of
CENFED's assets, the Applicable Price shall be the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of CENFED as determined in good faith by an independent nationally recognized
investment banking firm selected by Golden State and reasonably acceptable to
CENFED (which determination shall be conclusive for all purposes of this
Agreement), divided by the number of shares of the CENFED Common Stock
outstanding at the time of such sale. If the consideration to be offered, paid
or received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in
good faith by an independent nationally recognized investment banking firm
selected by Golden State and reasonably acceptable to CENFED, which
determination shall be conclusive for all purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall be deemed to occur if (i) any
person (other than Golden State or any Subsidiary or affiliate of Golden
State) shall have acquired Beneficial Ownership, or the right to acquire
Beneficial Ownership, or any "group" (as such term is defined under the
Exchange Act) shall have been formed which Beneficially Owns or has the right
to acquire Beneficial Ownership, of 50% or more of the then outstanding shares
of CENFED Common Stock, (ii) any of the transactions described in Section
9(b)(i), 9(b)(ii) or 9(b)(iii) shall have been consummated, or (iii) following
an Exercise Event, Golden State receives official notice that an approval of
the OTS or any other regulatory authority required for the exercise of the
Option and purchase of the Option Shares will not be issued or granted.
11. Definitional Matters.
(a) Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Merger Agreement.
(b) The following definitions shall have the meanings set forth herein:
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"Acquisition Transaction" shall mean:
(i) a merger, consolidation or similar transaction involving CENFED or
any of its Subsidiaries (other than internal transactions solely involving
CENFED and any of its wholly owned Subsidiaries);
(ii) except as expressly permitted by the Merger Agreement, the
disposition, by sale, lease, exchange or otherwise, of assets or deposits
of CENFED or any of its Subsidiaries representing all or a substantial
portion of the consolidated assets or deposits of CENFED and its
Subsidiaries not in the ordinary course of business;
(iii) the issuance, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 20% or more of the voting power of CENFED or any of
its Subsidiaries;
(iv) the acquisition by any person or group of persons (other than by
Golden State or any of its Subsidiaries or affiliates) of Beneficial
Ownership of, or the right to acquire beneficial ownership of, 20% or more
of the then-outstanding shares of CENFED Common Stock; or
(v) any substantially similar transaction.
"Beneficial Ownership" or "Beneficially Owns" shall be defined by, or have
the meaning set forth in Rule 13d-3 promulgated under the Exchange Act.
"Exercise Event" means the (i) occurrence of an Acquisition Transaction;
(ii) the public authorization, recommendation or endorsement by CENFED of an
Acquisition Transaction; (iii) a public announcement by CENFED of an intention
to authorize, recommend or announce an Acquisition Transaction described in
paragraphs (i), (ii), (iii) or (v) definition of Acquisition Transaction; or
(iv) the entering into by CENFED of any agreement with any person or group of
persons to effect an Acquisition Transaction.
"Person" shall have the meaning specified in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act.
"Preliminary Acquisition Transaction" shall mean:
(i) the commencement (as such term is defined in Rule 14d-2 promulgated
under the Exchange, Act) by any person (other than Golden State or any
Subsidiary or affiliate of Golden State) of, or the filing by any person
(other than Golden State or any Subsidiary or affiliate of Golden State) of
a registration statement under the Securities Act with respect to, a tender
offer or exchange offer to purchase shares of CENFED Common Stock such
that, upon consummation of such offer, such person would own or control 20%
or more of the then-outstanding shares of CENFED Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively); or
(ii) the shareholders of CENFED shall have voted and failed to approve
the Merger and the Merger Agreement at any meeting of such shareholders
which has been held for that, purpose, including any adjournment or
postponement thereof, the failure of such a shareholder meeting to occur
prior to termination of the Merger Agreement, or the withdrawal or
modification of the recommendation of CENFED's Board of Directors that the
shareholders of CENFED approve the Merger and Merger Agreement, in each
case after there shall have been a public announcement that any person
(other than Golden State or any Subsidiary or affiliate of Golden State)
shall have (A) made, or disclosed an intention to make, a proposal to
engage in an Acquisition Transaction, (B) commenced a Tender Offer or filed
a registration statement under the Securities Act with respect to an
Exchange Offer, or (C) filed an application (or given a notice), whether in
draft or final form, with the OTS or under any federal or state thrift
institution or banking law or regulation, for approval to engage in an
Acquisition Transaction.
"Spread Value" shall mean the difference between (i) the product of (A) the
sum of the number of Option Shares that Golden State intends to purchase at a
Closing pursuant to the exercise of the Option and the number of Option Shares
that Golden State has previously purchased pursuant to the prior exercise of
the Option, and
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(B) the closing price of CENFED Common Stock as quoted on the Nasdaq National
Market on the last trading day immediately preceding the Closing Date, and
(ii) the product of (A) the total number of Option Shares that Golden State
intends to purchase on the day of the Closing pursuant to the exercise of the
Option and the number of Option Shares that Golden State has previously
purchased pursuant to the prior exercise of the Option and (B) the applicable
Option Price of such Option Shares.
12. Consents. Each of the parties hereto will use its best efforts to
consummate and make effective the transactions contemplated by this Agreement.
13. Further Assurances. CENFED and Golden State will execute and deliver all
such further documents and instruments and take all such further action as may
be necessary in order to consummate the transactions contemplated hereby.
14. Entire Agreement; Assignment. This Agreement and the Merger Agreement
(including the separate agreements referred to therein) (a) constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof, (b) shall
not be amended, altered or modified in any manner whatsoever, except by a
written instrument executed by the parties hereto and (c) shall not, without
the express written consent of the other party hereto, be assigned by
operation of law or otherwise; provided, however, that Golden State may assign
its rights and obligations to any wholly owned Subsidiary of Golden State, but
such assignment shall not relieve Golden State of its obligations hereunder.
15. Validity. The invalidity or unenforceability of any provision of this
Agreement or of any provision of the Merger Agreement shall not affect the
validity or enforceability of any other provisions of this Agreement, each of
which shall remain in full force and effect.
16. Notices. Any notices or other communications required or permitted
hereunder shall be in writing and shall be deemed duly given upon (a)
transmitter's confirmation of a receipt of a facsimile transmission, (b)
confirmed delivery by a standard overnight carrier or (c) the expiration of
five business days after the day mailed, when mailed by certified or
registered mail, postage prepaid, addressed as follows (or at such other
address or addresses as the parties hereto shall specify by like notice):
If to CENFED:
CENFED Financial Corporation
199 North Lake Avenue
Pasadena, CA 91101
Attention: D. Tad Lowrey
President and
Chief Executive Officer
Facsimile: (626) 585-2580
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 Golden State:
Golden State Bancorp Inc.
414 North Central Avenue
Glendale, CA 91203
Attention: Richard A. Fink
Vice Chairman
Facsimile: (818) 409-3151
B-9
<PAGE>
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019-6119
Attention:Craig M. Wasserman, Esq.
Facsimile:(212) 403-2000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
17. Governing Law. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of Delaware without regard to the
conflict of laws provisions and principles thereof.
18. Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of, this Agreement.
19. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person or any rights
or remedies of any nature whatsoever under or by reason of this Agreement.
20. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
21. Expenses. Except as set forth in Section 5 hereof, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
their behalf by their officers thereunto duly authorized, all as of the day
and year first written above.
CENFED Financial Corporation Golden State Bancorp Inc.
/s/ D. Tad Lowrey /s/ Richard A. Fink
By: _________________________________ By: _________________________________
D. TAD LOWREY RICHARD A. FINK
PRESIDENT AND CHIEF EXECUTIVE VICE CHAIRMAN
OFFICER
B-10
<PAGE>
APPENDIX C
Investment Banking
[LOGO OF MERRILL LYNCH]
Corporate and
Institutional
Client Group
World Financial Center
North Tower
New York, New York
10281-1325
212 449 1000
March 9, 1998
Board of Directors
CENFED Financial Corporation
199 North Lake Avenue
Pasadena, CA 91101
Members of the Board:
We understand that Golden State Bancorp ("Golden State") and CENFED
Financial Corporation ("CENFED") have entered into an Agreement and Plan of
Merger (the "Agreement") dated August 17, 1997 pursuant to which CENFED will
be merged with and into Golden State in a transaction ("the Merger") in which
each outstanding share of CENFED's common stock, par value $0.01 per share
(the "CENFED Shares"), will be converted into the right to receive 1.2 shares
(the "Exchange Ratio") of the common stock, par value $1.00 per share, of
Golden State (the "Golden State Shares"), all as set forth more fully in the
Agreement. In connection with the Merger, the parties have entered into the
Stock Option Agreement, dated August 17, 1997, (the "Option Agreement")
pursuant to which CENFED has granted to Golden State an option to acquire,
under certain circumstances, 19.9% of outstanding CENFED Shares, as set forth
more fully in the Option Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the holders of CENFED Shares, other than Golden
State and its affiliates.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to CENFED and Golden State (and its predecessor Glendale
Federal Bank, F.S.B.) that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the respective businesses, earnings, assets, liabilities and
prospects of CENFED and Golden State furnished to us by senior
management of CENFED and Golden State as well as the amount and timing
of the cost savings and related expenses expected to result from the
Merger (the "Expected Synergies") furnished to us by senior management
of Golden State;
(3) Conducted discussions with members of senior management of CENFED and
Golden State concerning the matters described in clauses 1 and 2
above, as well as their businesses and prospects before and after
giving effect to the merger and the Expected Synergies;
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(4) Reviewed the market prices and valuation multiples for the CENFED
Shares and the Golden State Shares and compared them with those of
certain publicly traded companies which we deemed to be relevant;
(5) Reviewed the results of operations of CENFED and Golden State and
compared them with those of certain publicly traded companies which we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the financial
terms of certain other transactions which we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of CENFED and Golden State and their financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement and Plan of Merger and the Stock Option
Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have
not assumed responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of the assets or liabilities
of CENFED or Golden State or been furnished any such evaluation or appraisal.
With your consent, we have assumed that the trading prices for the Acquiror
stock to be issued in connection with the acquisition transaction fully
reflects the value of the Acquiror's supervisory goodwill litigation claim,
and for the purposes of rendering this opinion, we have assumed that the value
of such claim is properly and fully reflected in such stock price. We are not
experts in the evaluation of allowances for loan losses, and we have not made
an independent evaluation of the adequacy of the allowance for loan losses of
CENFED or Golden State, nor have we reviewed any individual credit files
relating to CENFED or Golden State, and we have assumed that the aggregate
allowance for loan losses for both CENFED and Golden State is adequate to
cover such losses and will be adequate on a pro forma basis for the combined
entity. In addition, we have not assumed any obligation to conduct, nor have
we conducted, any physical inspection of the properties or facilities of
CENFED or Golden State. With respect to the financial forecast information and
Expected Synergies furnished to or discussed with us by CENFED or Golden
State, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgments of the senior management of
CENFED and Golden State as to the future financial performance of CENFED,
Golden State or the combined entity, as the case may be. We have further
assumed that the Merger will be accounted for as a purchase under generally
accepted accounting principles and that it will qualify as a tax-free
reorganization for U.S. federal income tax purposes.
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<PAGE>
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available
to us as of the date hereof. We have assumed that in the course of obtaining
the necessary regulatory or other constraints or approvals (contractual or
otherwise) for the Merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed that will have a
material adverse effect on the contemplated benefits of the Merger.
We are acting as financial advisor to CENFED in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the merger. In addition, CENFED has agreed
to indemnify us for certain liabilities arising out of our engagement. We have
in the past two years provided financial advisory, investment banking and
other services to CENFED and received customary fees for the rendering of such
services. In addition, in the ordinary course of our securities business, we
may actively trade debt and/or equity securities of CENFED and Golden State
and their respective affiliates for our own account and the accounts of our
customers, and we therefore may from time to time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Board of Directors of CENFED.
Our opinion does not address the merits of the underlying decision by CENFED
to engage in the Merger and does not constitute a recommendation to any
shareholder of CENFED as to how such shareholder should vote on the proposed
Merger.
We are not expressing any opinion herein as to the prices at which Golden
State shares will trade following the announcement or consummation of the
merger.
On the basis of and subject to the foregoing, we are of the opinion that, as
the date hereof, the Exchange Ratio is fair from a financial point of view to
the shareholders of CENFED (other than Golden State and its affiliates).
Very truly yours,
/s/ Michael Barry
MERRILL LYNCH, PIERCE, FENNER &
SMITH
INCORPORATED
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Article FOURTEENTH of the Golden State Certificate of Incorporation and
Article XII of the Golden State Bylaws provide for indemnification of the
officers and directors of Golden State to the fullest extent permitted by
applicable law. Section 145 of the Delaware General Corporation Law provides,
in relevant part, that a corporation shall have the power to indemnify any
person who was or is a party or is threatened to be made a party to any suit
or proceeding because such person is or was a director, officer, employee or
agent of the corporation or is or was serving, at the request of the
corporation, as a director, officer, employee or agent of another corporation,
against all costs actually and reasonably incurred by him in connection with
such suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. Similar indemnity is permitted to be provided to such persons in
connection with an action or suit by or in right of the corporation, provided
such person acted in good faith and in a manner he believed to be in or not
opposed to the best interests of the corporation, and provided further (unless
a court of competent jurisdiction otherwise determines) that such person shall
not have been adjudged liable to the corporation.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed herewith except those which are
incorporated herein by reference.
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of August 17, 1997, by and
between Golden State Bancorp Inc. and CENFED Financial Corporation
(included in the Proxy Statement-Prospectus as Appendix
A-1). The Registrant agrees to furnish supplementally a copy of omitted
schedules to the Commission upon request.
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as of December
1, 1997, by and among Golden State Bancorp Inc., Golden State Financial
Corporation and CENFED Financial Corporation (included in the Proxy
Statement Prospectus as Appendix A-2).
3.1 Certificate of Incorporation of Registrant (included as Appendix B to
Exhibit 99.6).
3.2 Bylaws of Registrant (included as Appendix C to Exhibit 99.6).
4.1 Agreement and Plan of Reorganization, dated May 28, 1997, by and among
Golden State Bancorp Inc., Glendale Federal Bank, Federal Savings Bank
and Glendale Interim Federal Savings Bank, a federal savings bank
(incorporated by reference to Exhibit 2.1 to the Registration Statement
on Form S-3 of the Registrant, Commission File No. 333-28037).
4.2 Certificate of Designations of the Registrant's Noncumulative
Convertible Preferred Stock, Series A.
4.3 Warrant Agreement, dated as of February 23, 1993, between the Glendale
Federal Bank, Federal Savings Bank and Chemical Trust Company of
California.
4.4 Amendment No. 1 to Warrant Agreement, dated as of July 24, 1997, by and
among Glendale Federal Bank, Federal Savings Bank, ChaseMellon
Shareholder Services, LLC and Golden State Bancorp Inc.
4.5 Warrant Agreement, dated as of August 15, 1993, between Glendale
Federal Bank, Federal Savings Bank, and Chemical Trust Company of
California.
4.6 Amendment No. 1 to Warrant Agreement, dated as of July 24, 1997, by and
among Glendale Federal Bank, Federal Savings Bank, ChaseMellon
Shareholder Services, LLC and Golden State Bancorp Inc.
5.1 Opinion and consent of James R. Eller, Jr. as to legality of the
securities being registered.
8.1 Opinion and consent of Wachtell, Lipton, Rosen & Katz.
8.2 Opinion and consent of Mayer, Brown & Platt.
23.1 Consent of James R. Eller, Jr. (included in Exhibit 5.1).
23.2 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.1).
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
23.3 Consent of Mayer, Brown & Platt (included in Exhibit 8.2).
23.4 Consent of KPMG Peat Marwick LLP (relating to financial statements of
Glendale Federal Bank, Federal Savings Bank).
23.5 Consent of KPMG Peat Marwick LLP (relating to financial statements of
CENFED Financial Corporation).
23.6 Consent of Deloitte & Touche LLP.
23.7 Consent of KPMG Peat Marwick LLP (relating to financial statements of
First Nationwide (Parent) Holdings, Inc.).
23.8 Consent of KPMG Peat Marwick LLP (relating to financial statements of
RedFed Bancorp Inc.).
24.1 Powers of Attorney (included on the signature pages hereto).
99.1 Form of proxy for special meeting of CENFED Financial Corporation.
99.2 Stock Option Agreement, dated as of August 17, 1997, between the
Registrant and CENFED Financial Corporation (included in the Proxy
Statement-Prospectus as Appendix B).
99.3 Consent of D. Tad Lowrey.
99.4 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
99.5 Annual Report on Form 10-K for the year ended June 30, 1997 of Glendale
Federal Bank, Federal Savings Bank (incorporated by reference to
Exhibit 99B to the Current Report on Form 8-K, dated September 26,
1997, of the Registrant).
99.6 Proxy Statement on Schedule 14A, dated June 24, 1997, of Glendale
Federal Bank, Federal Savings Bank (incorporated by reference to
Exhibit 99.6 to the Registration Statement on Form S-3 of the
Registrant, Commission File No. 333-28037).
</TABLE>
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement (notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement); and (iii) to include any material
information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
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<PAGE>
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
above, or (ii) that purports to meet the requirements of Section 10(a)(3)
of the Securities Act of 1933 and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
this registration statement and will not be used until such amendment has
become effective, and that for the purpose of determining liabilities under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this registration statement
when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING THIS REGISTRATION STATEMENT AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF GLENDALE, STATE OF CALIFORNIA, ON
MARCH 9, 1998.
GOLDEN STATE BANCORP INC.
/s/ James R. Eller, Jr.
By: _________________________________
JAMES R. ELLER, JR.
SECRETARY
POWER OF ATTORNEY
We, the undersigned officers and directors of Golden State Bancorp Inc.,
hereby severally constitute and appoint Stephen J. Trafton, Richard A. Fink or
James R. Eller, Jr., and each of them our true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for us and in
our stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and all
documents relating thereto, and any subsequent registration statement filed by
Golden State Bancorp Inc. pursuant to Rule 462(b) of the Securities Act of
1933, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing necessary or
advisable to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
WITNESS our hands on March 9, 1998.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MARCH 9, 1998:
SIGNATURES TITLE
/s/ Stephen J. Trafton Chairman of the
- ------------------------------------- Board, Chief
STEPHEN J. TRAFTON Executive Officer
and Director
/s/ John E. Haynes Chief Financial
- ------------------------------------- Officer
JOHN E. HAYNES and Controller
/s/ Diane C. Creel Director
- -------------------------------------
DIANE C. CREEL
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<PAGE>
SIGNATURES TITLE
/s/ Brian P. Dempsey Director
- -------------------------------------
BRIAN P. DEMPSEY
/s/ Richard A. Fink Vice Chairman and
- ------------------------------------- Director
RICHARD A. FINK
/s/ John F. King Director
- -------------------------------------
JOHN F. KING
/s/ John F. Kooken Director
- -------------------------------------
JOHN F. KOOKEN
Director
- -------------------------------------
PAUL J. ORFALEA
/s/ Thomas S. Sayles Director
- -------------------------------------
THOMAS S. SAYLES
/s/ Cora M. Tellez Director
- -------------------------------------
CORA M. TELLEZ
/s/ Gilbert R. Vasquez Director
- -------------------------------------
GILBERT R. VASQUEZ
II-5
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of August 17, 1997, by and
between Golden State Bancorp, Inc. and CENFED Financial Corporation
(included in the Proxy Statement-Prospectus as Appendix A-1). The
Registrant agrees to furnish supplementally a copy of omitted schedules
to the Commission upon request.
2.2 Amendment No. 1 to Agreement and Plan of Merger, dated as of December 1,
1997, by and among Golden State Bancorp Inc., Golden State Financial
Corporation and CENFED Financial Corporation (included in the Proxy
Statement Prospectus as Appendix A-2).
3.1 Certificate of Incorporation of Registrant (included as Appendix B to
Exhibit 99.6).
3.2 Bylaws of Registrant (included as Appendix C to Exhibit 99.6).
4.1 Agreement and Plan of Reorganization, dated May 28, 1997, by and among
Golden State Bancorp Inc., Glendale Federal Bank, Federal Savings Bank
and Glendale Interim Federal Savings Bank, a federal savings bank
(incorporated by reference to Exhibit 2.1 to the Registration Statement
on Form S-3 of the Registrant, Commission File No. 333-28037).
4.2 Certificate of Designations of the Registrant's Noncumulative
Convertible Preferred Stock, Series A.
4.3 Warrant Agreement, dated as of February 23, 1993, between the Glendale
Federal Bank, Federal Savings Bank and Chemical Trust Company of
California.
4.4 Amendment No. 1 to Warrant Agreement, dated as of July 24, 1997, by and
among Glendale Federal Bank, Federal Savings Bank, ChaseMellon
Shareholder Services, LLC and Golden State Bancorp Inc.
4.5 Warrant Agreement, dated as of August 15, 1993, between Glendale Federal
Bank, Federal Savings Bank, and Chemical Trust Company of California.
4.6 Amendment No. 1 to Warrant Agreement, dated as of July 24, 1997, by and
among Glendale Federal Bank, Federal Savings Bank, ChaseMellon
Shareholder Services, LLC and Golden State Bancorp Inc.
5.1 Opinion and consent of James R. Eller, Jr. as to legality of the
securities being registered.
8.1 Opinion and consent of Wachtell, Lipton, Rosen & Katz.
8.2 Opinion and consent of Mayer, Brown & Platt.
23.1 Consent of James R. Eller, Jr. (included in Exhibit 5.1).
23.2 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.1).
23.3 Consent of Mayer, Brown & Platt (included in Exhibit 8.2).
23.4 Consent of KPMG Peat Marwick LLP (relating to financial statements of
Glendale Federal Bank, Federal Savings Bank).
23.5 Consent of KPMG Peat Marwick LLP (relating to financial statements of
CENFED Financial Corporation).
23.6 Consent of Deloitte & Touche LLP.
23.7 Consent of KPMG Peat Marwick LLP (relating to financial statements of
First Nationwide (Parent) Holdings, Inc.).
23.8 Consent of KPMG Peat Marwick LLP (relating to financial statements of
RedFed Bancorp Inc.).
24.1 Powers of Attorney (included on the signature pages hereto).
99.1 Form of proxy for special meeting of CENFED Financial Corporation.
99.2 Stock Option Agreement, dated as of August 17, 1997, between the
Registrant and CENFED Financial Corporation (included in the Proxy
Statement-Prospectus as Appendix B).
99.3 Consent of D. Tad Lowrey.
99.4 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
99.5 Annual Report on Form 10-K for the year ended June 30, 1997 of Glendale
Federal Bank, Federal Savings Bank (incorporated by reference to Exhibit
99B to the Current Report on Form 8-K, dated September 26, 1997, of the
Registrant).
99.6 Proxy Statement on Schedule 14A, dated June 24, 1997, of Glendale
Federal Bank, Federal Savings Bank (incorporated by reference to Exhibit
99.6 to the Registration Statement on Form S-3 of the Registrant.
Commission File No. 333-28037).
<PAGE>
EXHIBIT 4.2
CERTIFICATE OF DESIGNATION
OF
GOLDEN STATE BANCORP INC.
FOR
NONCUMULATIVE CONVERTIBLE PREFERRED STOCK,
SERIES A
GOLDEN STATE BANCORP INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Company"), in accordance
-------
with the provisions of Section 151(g) thereof,
HEREBY CERTIFIES:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation, the Board of Directors on June 23, 1997 duly
adopted the following resolution creating a series of preferred stock to be
designated "Noncumulative Convertible Preferred Stock, Series A" and to consist
of 5,000,000 shares:
WHEREAS, the Certificate of Incorporation of the Company provides that the
Company shall have authority to issue up to 50,000,000 shares of preferred
stock; and
WHEREAS, the Certificate of Incorporation of the Company provides that the
Board of Directors is authorized to fix by resolution the designations and the
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, including
without limitation the voting rights, the dividend rate and preference,
redemption rights and liquidation preference, of any series of shares of
preferred stock, to fix the number of shares constituting any such series and to
increase or decrease the number of shares of any such series; and
WHEREAS, the Series A Preferred Stock referred to and provided for herein
is to be issued in exchange for outstanding shares of the Noncumulative
Preferred Stock, Series E (the "Glendale Federal Series E Preferred Stock")
-----------------------------------------
heretofore issued by Glendale Federal Bank, Federal Savings Bank ("Glendale"),
--------
which exchange is to be effected in connection with the reorganization
transaction (the "Reorganization") pursuant to which the Company is to become
--------------
the sole stockholder of and holding company for Glendale;
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<PAGE>
NOW, THEREFORE, BE IT RESOLVED, that the designation, powers, preferences
and relative, participating, optional and other special rights of the
Noncumulative Convertible Preferred Stock, Series A, and the qualifications,
limitations and restrictions thereof, are as set forth below:
I. Designation and Rank.
--------------------
There is hereby established a series of shares of preferred stock,
which series of preferred stock shall be designated as the "Noncumulative
Convertible Preferred Stock, Series A" (the "Series A Preferred Stock"). The
------------------------
authorized number of shares of Series A Preferred Stock shall be 5,000,000.
Each share of Series A Preferred Stock shall have a par value of $1.00 per
share and a liquidation preference of $25.00 per share as hereinafter provided.
The Series A Preferred Stock shall be superior and prior in rank to
all classes of common stock of the Company (collectively, the "Common Stock")
------------
and to all other classes and series of equity securities of the Company now or
hereafter authorized, issued or outstanding other than the Series A Preferred
Stock and any other class or series of equity securities of the Company that is
expressly designated as ranking on a parity with (the "Parity Stock") or senior
------------
to (the "Senior Stock") the Series A Preferred Stock as to either or both of
------------
dividend rights and rights upon liquidation, winding up or dissolution of the
Company. The Series A Preferred Stock shall be junior to all creditors of the
Company. The Common Stock and all other classes and series of equity securities
of the Company that do not constitute Parity Stock or Senior Stock are
collectively referred to herein as "Junior Stock." There shall be no limitation
------------
on the number of shares, series or classes of Parity Stock and Junior Stock that
may be created or established.
The number of shares of Series A Preferred Stock may be increased or
decreased from time to time by action of not less than a majority of the members
of the board of directors then in office; provided, that no decrease effected
--------
solely through such action of the board of directors shall reduce the number of
shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants, if any, to purchase shares
of Series A Preferred Stock, or upon the conversion of any outstanding
securities issued by the Company that are convertible into shares of Series A
Preferred Stock.
II. Dividends.
---------
A. Payment of Dividends. Holders of shares of Series A Preferred
--------------------
Stock shall be entitled to receive, when, as and if declared by the board of
A-2
<PAGE>
directors or a duly authorized committee thereof, out of funds legally available
therefor, noncumulative cash dividends at an annual rate (the "Annual Dividend
---------------
Rate") of 8.75% of the amount of the per share liquidation preference of the
- ----
Series A Preferred Stock. Such noncumulative cash dividends shall be payable, if
declared, quarterly on January 1, April 1, July 1 and October 1 in each year, or
if such day is not a business day, then on the next business day (each such date
being referred to herein as a "Dividend Payment Date"). The first Dividend
---------------------
Payment Date shall be October 1, 1997. Each declared dividend shall be payable
to the holders of Series A Preferred Stock of record whose names appear on the
stock books of the Company at the close of business on such record dates, not
more than 60 calendar days nor less than 30 calendar days preceding the related
Dividend Payment Date, as determined by the Board of the directors or a duly
authorized committee thereof (each such date being referred to herein as "Record
------
Date"). Quarterly dividend periods (each a "Dividend Period") shall commence on
- ---- ---------------
and include December 1, March 1, June 1, and September 1 of each year and end on
and include the day next preceding the commencement of the next following
Dividends Period; provided, that the first Dividend Period shall commence on the
--------
day of the commencement of the Dividend Period in which shares of Series A
Preferred Stock first shall be issued and outstanding and shall end on and
include the last day of such Dividend Period, it being hereby intended that such
First Dividend Period shall permit the payment of dividends on the Series A
Preferred Stock in the amount sufficient to equal the full dividend in respect
of such Dividend Period that would be paid in respect of the Glendale Federal
Series E Preferred Stock in exchange for which the Series A Preferred Stock is
to be issued if the Series E Preferred Stock had remained outstanding throughout
such Dividend Period, but no more than such amount shall be paid in the
aggregate in respect of such Dividend Period on the Glendale Federal Series E
Preferred Stock and the Series A Preferred Stock taken together.
The amount of dividends per share for each full Dividend Period shall
be computed by dividing by four an amount equal to (i) the Annual Dividend Rate,
(ii) multiplied by the amount of the liquidation preference of such share.
Dividends for any periods of less than a full three months shall be computed on
the basis of a 360-day year composed of twelve 30 day months and the actual
number of days elapsed in such period.
B. Dividends Noncumulative. The right of holders of Series A
-----------------------
Preferred Stock to receive dividends shall be noncumulative. Accordingly, if the
board of directors or duly authorized committee thereof does not declare a
dividend to be payable in respect of any Dividends Period, the holders of shares
of Series A Preferred Stock shall have no right to receive a dividend in respect
of such Dividend Period, and the Company shall have no obligation to pay a
dividend in respect of such Dividend Period, at any time thereafter, whether or
not dividends are declared and payable in respect of any future Dividends
Period.
A-3
<PAGE>
C. Priority as to Dividends. No full dividends shall be declared or
------------------------
paid or set apart for payment on any class or series of equity securities
ranking, as to dividends, on a party with the Series A Preferred Stock for any
Dividend Period (in whole or in part) unless full dividends have been or
contemporaneously are declared and paid (or declared and a sum sufficient for
the payment thereof set apart for such payment) on the Series A Preferred Stock
for such Dividend Period. If dividends are not paid in full (or declared and a
sum sufficient for such full payment is no so set apart) in any Dividend Period
upon the Series A Preferred Stock and any other equity security ranking on a
party with the Series A Preferred Stock as the dividends, dividends declared
upon shares of Series A Preferred Stock and such other equity security shall be
declared pro rate based upon the respective amounts that would have been paid on
the Series A Preferred Stock and such other equity security had dividends been
paid thereon in full.
The Company shall not declare, pay or set apart funds for the payment
of any dividend or other distribution (other than in Common Stock or other
Junior Stock) with respect to any Common Stock or other Junior Stock of the
Company, or purchase or redeem, or set apart funds for the purchase or
redemption of, any such Common Stock or other Junior Stock through a sinking
fund or otherwise, (i) unless and until the Company shall have paid full
dividends on the Series A Preferred Stock in respect of the four most recent
Dividend Periods (or such lesser number of Dividend Periods as shares of Series
A Preferred Stock have been outstanding), or funds have been paid over to the
dividend disbursing agent of the Company for payment of such dividends (or set
apart for such purpose if the Company then has no separate dividend disbursing
agent), and (ii) the Company has declared a cash dividend on the Series A
Preferred Stock at the Annual Dividend Rate for the current Dividend Period, and
sufficient funds have been paid over to the dividend disbursing agent for the
Company for the payment of such cash dividend for such current Dividend Period
(or set apart for such purpose if the Company then has no separate dividend
disbursing agent).
No dividend shall be paid or set aside for holders of Series A
Preferred Stock for any Dividend Period unless full dividends have been paid or
set aside for the holders of each class or series of equity securities of the
Company, if any, ranking prior to the Series A Preferred Stock as to dividends
for such Dividend Period.
III. Redemption.
----------
A. General. The shares of Series A Preferred Stock are not subject to
-------
mandatory redemption, and shall not be redeemable prior to October 1, 1998. On
or after October 1, 1998, the Company may, at its option, redeem the shares of
Series A Preferred Stock at any time or from time to time, in whole or in part,
upon notice as provided in paragraph III.B. below, by resolution of the board of
A-4
<PAGE>
directors, the following redemption prices per share: If redeemed during the
twelve-month period beginning on October 1 of the years indicated below
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
---- ---------- ---- ----------
<S> <C> <C> <C>
1998 $ 26.09375 2001 $ 25.43750
1999 $ 25.87500 2002 $ 25.21875
2000 $ 25.65625 2003 $ 25.00000
</TABLE>
and thereafter at a redemption price equal to the $25.00 liquidation preference
per share of Series A Preferred Stock plus, in each case, an amount equal to any
declared but unpaid dividend, without interest. The holders of shares of the
Series A Preferred Stock shall not have the option or right to compel the
Company to redeem any shares of Series A Preferred Stock.
If less than all of the outstanding shares of Series A Preferred Stock
are to be redeemed, the Company shall select the shares that are to be redeemed
pro rata, by lot or by a substantially equivalent method. On and after the date
selected for redemption, dividends shall cease to accrue on the shares of Series
A Preferred Stock called for redemption, and such shares shall be deemed no
longer to be outstanding; provided, that the redemption price (including any
--------
declared but unpaid dividends to the date fixed for redemption) has been duly
paid or provided for. If a notice to convert shares of Series A Preferred Stock
as provided in paragraph IV.B. below relating to shares of Series A Preferred
Stock that are to be redeemed shall be received by the Company, and the
certificates representing such shares shall be surrendered to the Company, on or
prior to the fifth day immediately preceding the redemption date specified in
the Notice of Redemption relating to such shares, then such shares may not be
redeemed.
B. Notice of Redemption. Notice of any redemption, setting forth (i)
--------------------
the date and place fixed for redemption, (ii) the redemption price and (iii) a
statement that dividends on the shares of Series A Preferred Stock to be
redeemed will cease to accrue on the stated date fixed for redemption, shall be
mailed, postage prepaid, at least 20 days but not more than 45 days prior to
such redemption date to each holder of record of Series A Preferred Stock to be
redeemed at his or her address as the same shall appear on the stock books of
the Company. If less than all of the shares of Series A Preferred Stock owned by
such holder are then to be redeemed, such notice shall spacify the number of
shares thereof that are to be redeemed and the numbers of the certificates
representing such shares.
If such notice of redemption shall have been so mailed, and if on or
immediately preceding the redemption date specified in such notice all funds
A-5
<PAGE>
necessary for such redemption shall have been set aside by the Company separate
and apart from its other funds in trust for the account of the holders of the
shares of Series A Preferred Stock to be redeemed so as to be and continue to be
available therefor, then, on and immediately following such redemption date,
notwithstanding that any certificate for shares of Series A Preferred Stock so
called for redemption shall not have been surrendered for cancellation, the
shares of Series A Preferred Stock so called for redemption shall be deemed no
longer to be outstanding and all rights with respect to such shares of Series A
Preferred Stock so called for redemption shall forthwith cease and terminate,
except for the right of the holders thereof to receive out of the funds so set
aside in trust the amount payable on redemption thereof, but without interest,
upon surrender (and endorsement or assignment for transfer, if required by the
Company) of the certificates for such shares of Series A Preferred Stock.
In the event that holders of shares of Series A Preferred Stock that
shall have been redeemed shall not within two years (or any longer period if
required by law) immediately following the redemption date therefor claim any
amount deposited in trust with a bank or trust company for the redemption of
such shares, such bank or trust company shall, upon demand and if permitted by
applicable law, pay over to the Company any such unclaimed amount so deposited
with it, and shall thereupon be relieved of all responsibility in respect
thereof, and thereafter the holders of such shares shall, subject to applicable
escheat laws, look only to the Company for payment of the redemption price
thereof, but without interest from the date of redemption.
C. Status of Shares Redeemed. Shares of Series A Preferred Stock
-------------------------
redeemed, purchased or otherwise acquired for value by the Company shall, after
such acquisition, have the status of authorized and unissued shares of preferred
stock and may be reissued by the Company at any time as shares of any series of
preferred stock other than as shares of Series A Preferred Stock.
IV. Conversion.
----------
A. General. Holders of Series A Preferred Stock shall be entitled
-------
to convert any or all of their shares of Series A Preferred Stock into fully
paid and nonassessable shares of Common Stock. Shares of Series A Preferred
Stock may initially be converted into shares of Common Stock at a conversion
price per share of Common Stock (the "Conversion Price") initially as set forth
----------------
in subparagraph C.(1) below, and subject to adjustment as provided herein. The
number of shares of Common Stock issuable upon conversion of each share of
Series A Preferred Stock shall be equal to $25.00 divided by the Conversion
Price then in effect; provided, that no fractional shares shall be issued upon
--------
conversion of any shares of Series A Preferred Stock. If the calculation of the
number of shares of Common Stock issuable upon such conversion in accordance
with the preceding sentence
A-6
<PAGE>
results in a fraction, an amount shall be paid by the Company in cash to the
holder of the shares of Series A Preferred Stock being converted of record as of
the date of such conversion based upon the Current Market Price of the Common
Stock (determined as provided in subparagraph IV.C. hereof) as of the date of
conversion.
B. Surrender of Certificates. Each conversion of shares of Series A
-------------------------
Preferred Stock shall be effected by the surrender of the certificate
representing the shares of Series A Preferred Stock to be converted at the
office of the Company or trust company appointed by the Company for such purpose
(or at such other location or locations in the continental United States as may
from time to time be designated by the Secretary of the Company in a notice to
the registered holders of shares of Series A Preferred Stock), together with any
required stock transfer tax stamps and a written notice by the holder of such
Series A Preferred Stock stating such holder's desire to convert such shares in
Common Stock, the number in whole shares) of shares to be converted, and the
name (with addresses) in which holder wishes the certificate or certificates for
the shares of Common Stock to be issued and shall include instructions for
delivery thereof. Promptly after such surrender and the receipt by the Company
of such written notice, each person named in the prescribed notice shall be
entitled to become, and shall be registered in the original stock books of the
Company as, the record holder of the number of shares of Common Stock issuable
upon such conversion. In the event less than all of the shares of Series A
Preferred Stock represented by a certificate are to be converted by a holder,
upon such conversion the Company shall issue and deliver, or cause to be issued
and delivered, to the holder a certificate or certificates for the shares of
Series A Preferred Stock not so converted. If the Company calls for the
redemption of any shares of Series A Preferred Stock, the rights of conversion
provided herein shall cease and terminate, as to the shares designated for such
redemption, at the close of business on the fifth day immediately preceding the
redemption date specified in the notice provided in paragraph III.B., unless the
Company defaults in the payment of the redemption price therefor.
C. Conversion Price Determination and Adjustment.
---------------------------------------------
(1) The Conversion Price shall be equal to $10.40.
(2) In the event the Company shall, at any time or from time to
time while any shares of Series A Preferred Stock are outstanding, (i) declare
and pay a dividend on its Common Stock that is payable in shares of Common
Stock, (ii) subdivide its outstanding Common Stock into a greater number of
shares, (iii) combine its outstanding Common Stock into a smaller number of
shares, or (iv) issue by reclassification of or capital reorganization relating
to its Common Stock any shares of capital stock of the Company, the Conversion
Price
A-7
<PAGE>
in effect immediately prior to such action shall be adjusted so that the holder
of any shares of Series A Preferred Stock thereafter surrendered for conversion
shall be entitled to receive the number and kind of shares of capital stock of
the Company that such holder would have owned immediately following, and as a
result of, such action had such shares of Series A Preferred Stock been
converted immediately prior to the record date for such action (or if no record
date is established in connection with such event, the effective date for such
action). An adjustment made pursuant to this subparagraph C.(2) shall become
effective immediately following the record date in the event of a stock dividend
and shall become effective immediately following the effective date in the event
of any subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this subparagraph C.(2), the holder of any shares of
Series A Preferred Stock thereafter surrendered for conversion shall become
entitled to receive shares of two or more classes capital stock of the Company,
the board or directors (whose determination with respect to the matter shall be
conclusive and shall be described in a resolution adopted with respect thereto)
shall determine the allocation of the adjusted Conversion Price between or among
share of such classes of capital stock.
(3) In the event that the Company shall, at any time or from time
to time while any shares of the Series A Preferred Stock are outstanding, issue
to holders of shares of Common Stock as a dividend or distribution, including by
way of reclassification, recapitalization, merger or otherwise, any right or
warrant to purchase shares of Common Stock at a purchase price per share that is
less than the Current Market Price of a share Common Stock on the record date
for such dividend or distribution or if, upon the occurrence of some event,
holders of then outstanding rights or warrants become entitled by the terms of
such rights or warrants to purchase shares of Common Stock at such a purchase
price, then the Conversion Price shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding on the day immediately preceding such record
date or event plus the number of shares of Common Stock that could be purchased
at the Current Market Price of a share of Common Stock on such record date or
event for the maximum aggregate consideration payable upon exercise in full of
all such rights or warrants, and the denominator of which shall be the number of
shares of Common Stock outstanding on the day immediately preceding such record
date or event plus the maximum number of shares of Common Stock that could be
acquired upon exercise in full of all such rights or warrants, such adjustment
to become effective immediately prior to the opening of business on the day
immediately following such record date or event.
(4) In the event that the Company shall, at any time or from time
to time while any shares of the Series A Preferred Stock are outstanding, issue
to holders of shares of Common Stock as a dividend or distribution, including
A-8
<PAGE>
by way of reclassification, recapitalization, merger or otherwise, any evidence
of indebtedness or assets (including rights or warrants to purchase capital
stock or other securities, but excluding any rights or warrants referred to in
subparagraph C.(3) hereof, any dividend or distribution paid in cash out of the
surplus or retained earnings of the Company and any dividend or distribution
referred to in subparagraph C.(2) hereof), then the Conversion Price in effect
immediately prior to such action shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which shall be the Current
Market Price of a share of Common Stock on the record date such issuance, less
the fair market value (as determined by the board of directors, whose
determination shall be conclusive) of the portion of the assets or evidences of
indebtedness so distributed allocable to one share of Common Stock, and the
denominator of which shall be the Current Market Price of a share of Common
Stock, such adjustment to become effective immediately prior to the opening of
business on the day immediately following such record date.
(5) In the event the Common shall, at any time or from time to
time while any shares of the Series A Preferred Stock are outstanding, issue,
sell or exchange shares of Common Stock (other than pursuant to any right or
warrant to purchase or acquire shares of Common Stock referred to in
subparagraph C.(3) hereof and other than pursuant to any dividend reinvestment
plan or employee or director incentive or benefit plan or arrangement, including
any employment, severance or consulting agreement of the Company or any
subsidiary of the Company heretofore or hereafter adopted) for consideration
having a fair market value (as determined by the board of directors, whose
determination of the matter shall be conclusive) on the date of such issuance,
sale or exchange less than the Current Market Price of such shares on the date
of such issuance, sale or exchange, then the Conversion Price in effect
immediately prior to such action shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which shall be the sum of (i)
the Current Market Price of the shares of Common Stock outstanding on the day
the first public announcement of such issuance, sale or exchange plus (ii) the
fair market value of the consideration received by the Company in respect of
such issuance, sale or exchange of shares of Common Stock (including any amount
received by the Company in connection with the issuance of a right or warrant),
and the denominator of which shall be the product of (A) the Current Market
Price of a share of Common Stock on the day the first public announcement of
such issuance, sale or exchange, multiplied by (B) the sum of the number of
shares of Common Stock outstanding on such day and the number of shares of
Common Stock so issued, sold or exchanged by the Company, such adjustment to
become effective immediately prior to the opening of business on the day
immediately following the date of such issuance.
(6) For all purposes relating to the Series A Preferred Stock:
the "Current Market Price" of a security on any day mean the average of the
--------------------
A-9
<PAGE>
Closing Prices (as hereinafter defined) of such security for the ten consecutive
Trading Days (as hereinafter defined) ending on the Trading Day immediately
preceding the day in question; the "Closing Price" of a security shall mean the
-------------
last sale price for such security as shown on the New York Stock Exchange
Composite Transactions Tape, or if no such sale has taken place on such day,
then the average of the closing bid and ask prices for such security on the New
York Stock Exchange, or, if such security is not listed or admitted to trading
on the New York Stock Exchange, then on the principal national securities
exchange on which such security is listed or admitted to trading, or, if such
security is not listed or admitted to trading on any national securities
exchange, then on the National Association of Securities Dealers Automated
Quotations National Market System, or, if such security is not quoted on such
National Market System, then the average of the closing bid and ask prices as
furnished by any New York Stock Exchange member firm selected from time to time
by the board of directors of the Company for such purposes (other than the
Company or any affiliate thereof); and "Trading Day" shall mean a day on which
-----------
the New York Stock Exchange or, if such security is not listed or admitted to
trading thereon, the principal national securities exchange on which the Common
Stock is listed or admitted to trading is open for the transaction of business
or, if the Common Stock is not so listed or admitted, then any day that is not a
Saturday, Sunday or other day on which depositary institutions in the City of
Los Angeles or the City of New York are authorized or obligated by law to close.
(7) Whenever the Conversion Price is adjusted as provided herein, the
Company shall (i) compute the adjusted Conversion Price and cause to be prepared
a certificate signed by the chief financial or accounting officer of the Company
setting forth the adjusted Conversion Price and showing in reasonable detail the
facts upon which such adjustment is based and the computation thereof, (ii) file
such certificate with the transfer agent for the Series A Preferred Stock, and
(iii) notify the registered holders of the Series A Preferred Stock of such
adjustment and the adjusted Conversion Price.
(8) Notwithstanding the provisions of this paragraph IV.C., no
adjustment in the Conversion Price shall be required unless such adjustment
(plus any adjustments not previously made) would require an increase or decrease
of at least one percent (1%) in the Conversion Price; provided that any
--------
adjustments which by reason of this subparagraph IV.C.(8) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. Notwithstanding any other provision of this paragraph IV.C., the
Company shall not be required to make any adjustment to the Conversion Price for
the issuance of any shares of Common Stock pursuant to any plan providing for
the reinvestment of dividends or interest payable on securities of the Company
and the investment of additional optional accounts in shares of Common Stock
under such plan. The Company may make such adjustments in the Conversion Price,
in addition to those required by this paragraph IV.C., as it considers to be
advisable in
A-10
<PAGE>
order to avoid or diminish any income tax to holder of the Series A Preferred
Stock resulting from any dividend or distribution or other reason. The Company
shall have the power to resolve any ambiguity or correct any error in this
paragraph IV.C. and its actions in doing so shall be final and conclusive.
D. Consolidation, Merger or Certain Other Actions. In the event of a
----------------------------------------------
consolidation or merger or similar transaction (however named) pursuant to which
the outstanding shares of Common Stock are by operation of law exchanged for, or
changed, reclassified or converted into other stock or securities, or cash or
other property, or any combination thereof ("Consideration"), there shall be no
-------------
adjustment to the Conversion Price by virtue thereof, but the outstanding shares
of Series A Preferred Stock shall be assumed by and shall become preferred stock
of any successor or resulting entity (including the Company and any entity that
directly or indirectly owns all or any part of the outstanding capital stock of
such successor or resulting entity), having in respect of such entity insofar as
possible the same powers, preferences, and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions, that the
Series A Preferred Stock had immediately prior to such transaction, except that
after such transaction each share of Series A Preferred Stock shall be
convertible, otherwise on the terms and conditions provided hereby, into the
Consideration so receivable by a holder of the number of shares of Common Stock
into which such shares of Series A Preferred Stock could have been converted
immediately prior to such transaction if such holder failed to exercise any
rights of election to receive any kind or amount of Consideration receivable
upon such transaction. If the Company shall enter into any agreement providing
for such transaction, then the Company shall as soon as practicable thereafter
give notice of such agreement and the material terms thereof to each holder of
Series A Preferred Stock.
E. Reserved Shares. The Company shall reserve out of the authorized
---------------
but unissued shares of its Common Stock, sufficient shares of such Common Stock
to provide for the conversion of shares of Series A Preferred Stock from time to
time as such shares of Series A Preferred Stock are presented for conversion.
The Company shall take all action necessary so that all shares of Common Stock
that may be issued upon conversion of shares of Series A Preferred Stock will
upon issue by validly issued, fully paid and nonassessable, and free from all
liens and charges in respect of the issuance or delivery thereof.
F. Repayment of Certain Dividends to the Company. Any funds that at
---------------------------------------------
any time shall have been deposited by the Company or on its behalf with a paying
or disbursing agent for the purpose of paying dividends on any shares of Series
A Preferred Stock which shall not be required for such purpose because of the
conversion of such shares of Series A Preferred Stock shall forthwith after such
conversion be repaid to the Company by such paying or disbursing agent.
A-11
<PAGE>
V. Liquidation Preference.
----------------------
A. Liquidation Distributions. In the event of any liquidation,
-------------------------
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of shares of Series A Preferred Stock shall be entitled to receive for
each share thereof, out of the assets of the Company legally available for
distribution to shareholders under applicable law, or the proceeds thereof,
before any payment or distribution of such assets or proceeds shall be made to
holders of shares of Common Stock or any other Junior Stock (subject to the
rights of the holders of any class or series of equity securities having
preference with respect to distributions upon liquidation and the Company's
general creditors, including its depositors), liquidating distributions in the
amount of $25.00 per share, plus an amount per share equal to any dividends
theretofore declared but unpaid, without interest.
If the amounts available for distribution in respect of shares of
Series A Preferred Stock and any other outstanding Parity Stock are not
sufficient to satisfy the full liquidation rights of all of the outstanding
shares of Series A Preferred Stock and such Parity Stock, then the holders of
such outstanding shares shall share ratably in any such distribution of assets
in proportion to the full respective preferential amounts to which they are
entitled.
After payment of the full amount of the liquidating distribution to
which they are entitled pursuant to this paragraph V.A., the holders of shares
of Series A Preferred Stock will not be entitled to any further participation in
any liquidation distribution of assets by the Company. All distributions made in
respect of Series A Preferred Stock in connection with such a liquidation,
dissolution or winding up of the Company shall be made pro rata to the holder
entitled thereto.
B. Consolidation, Merger or Certain Other Actions. Neither the
----------------------------------------------
merger or other business combination of the Company with or into any other
person, nor the sale of all or substantially all of the assets of the Company,
shall be deemed to be a liquidation, dissolution or winding up of the Company
for purposes of this paragraph V.
VI. Voting Rights.
-------------
A. General. The holders of Series A Preferred Stock shall not be
-------
entitled to any voting rights, except to the extent, if any, required by
applicable law or as set forth below in this paragraph VI.
B. Right to Elect Directors. If dividends on the shares of Series A
------------------------
Preferred Stock shall not have been paid for six Dividend Periods the authorized
number of directors of the Company shall thereupon be increased by two. Subject
A-12
<PAGE>
to compliance with any requirement for regulatory approval of (or non-objection
to) persons serving as directors, the holders of shares of Series A Preferred
Stock, voting together as a class with the holders of any other stock
constituting Parity Stock as to dividends and upon which the same voting rights
as those of the Series A Preferred Stock have been conferred and are
irrevocable, shall have the exclusive right to elect the two additional
directors at the Company's next annual meeting of shareholders and at each
subsequent annual meeting until dividends have been paid or declared on the
Series A Preferred Stock and set apart for payment for four consecutive Dividend
Periods. Such directors shall be deemed to be in a class separate from the
classes of directors established by Article Six of the Certificate of
Incorporation of the Company. The term of such directors elected thereby shall
terminate upon the payment or the declaration and setting aside for payment of
full dividends on the Series A Preferred Stock for four consecutive Dividend
Periods.
C. Certain Voting Rights. So long as any shares of Series A
---------------------
Preferred Stock are outstanding, the Company shall not (1) without the consent
or vote of the holders of at least two-thirds of the outstanding shares of
Series A Preferred Stock, voting separately as a class, (a) amend, alter, or
repeal or otherwise change any provision of the Certificate of Incorporation of
the Company or this Section of the Certificate of Designation if such amendment,
alteration, repeal or change would materially and adversely affect the rights,
preferences, powers or privileges of the Series A Preferred Stock, or (b)
authorize, create, issue or increase the authorized or issued amount of any
class or series of any equity securities of the Company, or any warrants,
options or other rights convertible or exchangeable into any class or series of
any equity securities of the Company, ranking prior to the Series A Preferred
Stock, either as to dividend rights or rights on liquidation, dissolution or
winding up of the Company; or (2) without the consent or vote of the holders of
at least fifty percent of the outstanding shares of Series A Preferred Stock,
voting separately as a class, incur any Indebtedness which is senior in right of
payment to the Series A Preferred Stock. For purposes of this paragraph VI.C.,
"Indebtedness" shall mean (i) indebtedness for money borrowed, (ii) indebtedness
evidenced by notes, debentures, bonds or other securities, and (iii) any
renewals, deferrals, increases or extensions of indebtedness of the kinds
described in the preceding clauses (i) and (ii), but shall not include any of
the foregoing types of indebtedness incurred by a subsidiary of the Company, or
the proceeds of which are to be applied to redeem or repurchase all then
outstanding shares of Series A Preferred Stock.
The creation or issuance of stock that is Parity Stock or Junior Stock
in respect of the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up of the Company, or a merger,
consolidation, reorganization or other business combination in which the Company
is not the surviving or successor entity, or an amendment that increases the
number of authorized shares of Series A preferred Stock or substitutes the
surviving entity in
A-13
<PAGE>
a merger or consolidation for the Company, shall not be deemed to be a material
and adverse change requiring a vote of the holders of shares of Series A
Preferred Stock pursuant to this paragraph VI.C.
VII. No Sinking Fund.
---------------
No sinking fund shall be established for the retirement or redemption
of shares of Series A Preferred Stock.
VIII. Preemptive Rights.
-----------------
No holder of shares of Series A Preferred Stock shall have any
preemptive rights in respect of any shares of the Company that may be issued.
IX. No Other Rights.
---------------
The Shares of Series A Preferred Stock shall not have any powers,
designations, preferences or relative, participating, optional and other
special rights except as set forth in the Certificate of Incorporation,
including this Certificate of Designation or as otherwise required by law.
X. Compliance with Applicable Law.
------------------------------
Payments by the Company to holders of Series A Preferred Stock in
respect of dividends or the redemption of shares of Series A Preferred Stock
shall be subject to any restrictions and limitations placed on capital
distributions by the Company under applicable law and regulations.
A-14
<PAGE>
IN WITNESS WHEREOF, Golden State Bancorp Inc. has caused this Certificate
of Designation to be duly executed by John E. Haynes, its Chief Financial
Officer, and attested to by James R. Eller, Jr. its Secretary, as of July 18,
1997.
GOLDEN STATE BANCORP INC.
By:/s/ John E. Haynes
------------------------------
John E. Haynes
Chief Financial Officer
Attest:
/s/ James R. Eller, Jr.
- -----------------------------------
James R. Eller, Jr., Secretary
A-15
<PAGE>
Exhibit 4.3
WARRANT AGREEMENT
between
GLENDALE FEDERAL BANK,
FEDERAL SAVINGS BANK
and
CHEMICAL TRUST COMPANY OF CALIFORNIA,
Warrant Agent
---------------------------------------------
Dated as of February 23, 1993
<PAGE>
WARRANT AGREEMENT
AGREEMENT, dated as of February 23, 1993 between Glendale Federal Bank,
Federal Savings Bank, a federally chartered stock savings bank (the "Bank"), and
Chemical Trust Company of California, Warrant Agent (the "Warrant Agent").
WHEREAS, the Bank proposes to issue and deliver its warrant certificates
(the "Warrant Certificates") evidencing warrants (the "Warrants") to acquire,
under certain circumstances, up to an aggregate of 110,000 shares, subject to
adjustment, of its common stock, par value $1.00 per share (the "Common Stock"),
in connection with an exchange offer by the Bank to issue 100 shares of its 12%
Noncumulative Perpetual Preferred stock, Series B (the "New Preferred Stock") in
exchange for each $1,000 principal amount of the Bank's outstanding 14-7/8%
Capital Notes due August 15, 1997 (the "Notes"); and,
WHEREAS, each such Warrant will entitle the registered owner thereof to
acquire one share of the Bank's Common stock, subject to adjustment.
In consideration of the foregoing, and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder of the Bank and the record holders of the Warrants, the Bank and the
Warrant Agent each hereby agrees as follows:
ARTICLE I
ISSUANCE AND EXECUTION OF WARRANTS
Section 1.01 Form of Warrant Certificates. The text of each Warrant
----------------------------
Certificate (and the related forms of exercise and assignment) shall be
substantially in the form attached hereto as Exhibit A and may have such legends
and endorsements typed, stamped, printed, lithographed or engraved thereon as
the Bank may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto or
<PAGE>
- 2 -
with any rule or regulation of any securities exchange on which the Warrants may
be listed, or to conform to customary usage.
Section 1.02 Execution and Countersignature of Warrant Certificates.
------------------------------------------------------
Warrant Certificates shall be executed on behalf of the Bank by its Chief
Executive Officer, President or any Vice President and attested by its Secretary
or an Assistant Secretary, and delivered to the Warrant Agent, and shall be
countersigned and delivered by the Warrant Agent upon the written order of the
Bank signed by any such officer of the Bank. Each Warrant Certificate shall be
dated the date of its countersignature by the Warrant Agent either upon initial
issuance or upon division, exchange, substitution or transfer. Warrant
Certificates shall be executed on behalf of the Bank either manually or by
facsimile signature printed thereon. The Warrant Agent shall countersign the
Warrant Certificate manually, and no Warrant Certificate shall be valid for any
purpose unless so countersigned. In case any officer whose signature has been
placed upon any Warrant Certificate ceases to be such before such Warrant
Certificate is issued, it may be issued with the same effect as if such officer
had not ceased to be such at the date of issuance.
ARTICLE II
EXERCISE PRICE, TERM, REDEMPTION
AND METHOD OF EXERCISE
Section 2.01 Exercise Price. Each Warrant Certificate shall, when
--------------
countersigned by the warrant Agent, entitle the holder of record thereof (the
"Warrant Holder"), subject to the provisions thereof and of this Agreement, to
receive one share of Common Stock for each Warrant represented thereby at an
exercise price of zero ($0.00) per share.
Section 2.02 Warrant Rights and Term. Each Warrant shall entitle the
-----------------------
Warrant Holder, upon exercise thereof and subject to the provisions thereof and
of this Agreement, including provisions relating to adjustments upon the
occurrence of certain events as set forth in Article III hereof, to receive one
fully paid and nonassessable share of Common stock at any time after one year
from the date of initial issuance of Warrants hereunder until the expiration of
the Warrant at 5:00 p.m., New York City time, on the sixth anniversary of such
date or, if such date is not a business day in the City of New York, then on the
next succeeding business day (the "Expiration Date").
<PAGE>
- 3 -
Section 2.03 Expiration. Each Warrant not exercised by 5:00 p.m., New York
----------
City time, on the Expiration Date shall become void, and all rights thereunder
and all rights in respect thereof under this Agreement shall thereupon cease.
Section 2.04 Method of Exercise. Exercise of a Warrant shall be effected
------------------
by surrender of the Warrant Certificate evidencing such Warrant to the Warrant
Agent, with one of the forms on the reverse of or attached to the Warrant
Certificate duly executed. In the event that any Warrant Holder shall exercise
rights with respect to less than all of the Warrants evidenced by a Warrant
Certificate surrendered upon exercise of Warrants, a new Warrant Certificate for
the balance of such Warrants shall be countersigned and delivered to, or in
accordance with the instructions of, such Warrant Holder.
Upon surrender of a Warrant Certificate in conformity with the foregoing
provisions, the Warrant Agent (after requisitioning any certificates for shares
of Common Stock from the Bank's transfer agent, if necessary) shall deliver to,
or in accordance with the instructions of, the Warrant Holder certificates for
the total number of whole shares of Common Stock for which the Warrants
evidenced by such Warrant Certificates are being exercised (subject to the
provisions of Section 4.04) in such names and denominations as the Warrant
Holder has directed; provided, however, that, if, on the date of surrender of
-------- -------
such Warrant Certificate, the transfer books for the Common Stock shall be
closed, the certificates for the shares of Common Stock shall be issuable as of
the date on which such books shall next be open (whether before, on or after the
Expiration Date) at the Exercise Price and upon the other conditions in effect
on the date of such surrender.
Section 2.05 Cancellation of Warrants. In the event the Bank shall purchase
------------------------
or otherwise acquire Warrants, the same shall thereupon be delivered to the
Warrant Agent and be cancelled by it and retired. The Warrant Agent shall cancel
any Warrant surrendered for exchange, substitution, transfer or exercise in
whole or in part.
ARTICLE III
ADJUSTMENTS TO WARRANTS UPON CERTAIN EVENTS
Section 3.01 Mechanical Adjustments. The number of shares of Common Stock
----------------------
issuable upon the exercise of each Warrant (such shares being referred to in
this Article III as the "Warrant Shares") shall be subject to adjustment as
follows:
<PAGE>
- 4 -
(a) Stock Dividends; Stock Splits; Reverse Stock Splits;
---------------------------------------------------
Reclassifications. In case the Bank shall (i) pay a dividend in shares of Common
- -----------------
Stock or make a distribution in shares of Common Stock, (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock other securities of the Bank
(excluding any such reclassification in connection with a consolidation or
merger in which the Bank is the continuing corporation), the number of Warrant
Shares issuable upon exercise of each Warrant immediately prior thereto shall be
adjusted so that each Warrant Holder shall be entitled to receive the kind and
number of Warrant Shares or other securities of the Bank which he would have
owned or have been entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this paragraph (a) shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
(b) Rights; Options; Warrants. In case the Bank shall issue rights,
-------------------------
options or warrants to all holders of its shares of Common Stock, without any
charge to such holders, entitling them (for a period expiring within 45 days
after the record date mentioned below in this paragraph (b)) to subscribe for or
purchase shares of Common Stock at a price per share which is lower at the
record date mentioned below than the then current market price per share of
Common Stock (as determined pursuant to paragraph (f) hereof), the number of
Warrant Shares thereafter issuable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon exercise of each Warrant by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on such record date plus the number
of additional shares of Common Stock offered for subscription or purchase, and
of which the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares which the aggregate
offering price of the total number of shares of Common Stock so offered would
purchase at the then current market price per share of Common Stock. Such
adjustment shall be made whenever such rights, options or warrants are issued,
and shall become effective retroactively immediately after the record date for
the determination of shareholders entitled to receive such rights, options or
warrants.
<PAGE>
- 5 -
(c) Issuance of Common Stock at Lower Values. In case the Bank shall, in
----------------------------------------
a transaction in which Section 3.01(b) is inapplicable, issue or sell shares of
Common Stock, or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, at a price per share of Common Stock (determined in the case of such
rights, options, warrants or convertible or exchangeable securities, by dividing
(A) the total amount receivable by the Bank in consideration of the sale and
issuance of such rights, options, warrants or convertible or exchangeable
securities, plus the total consideration, if any, payable to the Company upon
exercise, conversion or exchange thereof, by (B) the total number of shares of
Common Stock covered by such rights, options, warrants or convertible or
exchangeable securities) that is lower than the current market value per share
of the Common Stock in effect immediately prior to such sale or issuance (as
determined pursuant to paragraph (f) hereof), then the number of shares of
Common Stock thereafter issuable upon the exercise of all Warrants then
outstanding shall be determined by multiplying the number of shares of Common
Stock theretofore issuable upon exercise of all Warrants then outstanding by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such shares of Common Stock or rights,
options, warrants or convertible or exchangeable securities, plus the number of
additional shares of Common Stock offered for subscription or purchase or to be
issued upon conversion or exchange of such convertible or exchangeable
securities and of which the denominator shall be the number of shares of Common
Stock outstanding on the date of issuance of such shares of Common Stock or
rights, options, warrants or convertible or exchangeable securities, plus the
number of shares which the aggregate consideration to be received by the Bank in
connection with such issuance would purchase at the then current market value
per share of Common Stock.
For the purposes of such adjustments, the shares of Common Stock which the
holder of any such rights, options, warrants or convertible or exchangeable
securities shall be entitled to subscribe for or purchase shall be deemed to be
issued and outstanding as of the date of the sale and issuance of the rights,
warrants or convertible or exchangeable securities and the consideration
received by the Bank therefor shall be deemed to be the consideration received
by the Bank for such rights, options, warrants or convertible or exchangeable
securities, plus the consideration or
<PAGE>
-6-
premiums stated in such rights, options, warrants or convertible or exchangeable
securities to be paid for the shares of Common Stock covered thereby.
In case the Bank shall issue and sell shares of Common Stock or rights,
options, warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase shares of Common Stock for a consideration
consisting, in whole or in part, of property other than cash or its equivalent,
then in determining the "price per share of Common Stock" and the
"consideration" receivable by or payable to the Bank for purposes of the first
sentence of this Section 3.01(c), the Board of Directors of the Bank shall
determine, in good faith, the fair value of such property, and such
determination shall be conclusive; provided, however, that if the Board of
-------- -------
Directors of the Bank determines that the aggregate fair value of such property
equals or exceeds $50,000,000, the Board of Directors shall have obtained the
advice of a nationally recognized investment banking firm in support of such
determination. In case the Bank shall issue and sell rights, options, warrants
or convertible or exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, together with one or more other securities
as part of a unit at a price per unit, then in determining the "price per share
of Common Stock" and the "consideration" receivable by or payable to the Bank
for purposes of the first sentence of this Section 3.01(c), the Board of
Directors of the Bank shall determine, in good faith, the fair value of the
rights, options, warrants, or convertible or exchangeable securities then being
sold as part of such unit, and such determination shall be conclusive; provided,
--------
however, that if the Board of Directors of the Bank determines that the
- -------
aggregate fair value of such securities equals or exceeds $50,000,000, the Board
of Directors shall have obtained the advice of a nationally recognized
investment banking firm in support of such determination.
Any adjustment to the number of shares of Common Stock issuable upon
exercise of all Warrants then outstanding made pursuant to this Section 3.01(c)
shall be allocated among each Warrant then outstanding on a pro rata basis.
(d) Distribution of Debt, Assets, Subscription Rights or Convertible
----------------------------------------------------------------
Securities. In case the Bank shall distribute to all holders of its shares of
- ----------
Common Stock shares of stock other than Common Stock or evidences of its
indebtedness or assets (excluding cash dividends or
<PAGE>
-7-
distributions payable out of consolidated earnings or retained earnings and
dividends or distributions referred to in paragraph (a) above) or rights,
options or warrants or convertible or exchangeable securities containing the
right to subscribe for or purchase shares of Common Stock (excluding those
referred to in paragraph (b) above), then in each case the number of Warrant
Shares thereafter issuable upon the exercise of each Warrant shall be determined
by multiplying the number of Warrant Shares theretofore issuable upon the
exercise of each Warrant, by a fraction of which the numerator shall be the
current market price per share of Common Stock (as determined pursuant to
paragraph (f) hereof) on the record date mentioned below in this paragraph (d),
and of which the denominator shall be the current market price per share of
Common Stock on such record date, less the then fair value (as determined by the
Board of Directors of the Bank, whose determination shall be conclusive) of the
portion of the shares of stock other than Common Stock or assets or evidences of
indebtedness so distributed or of such subscription rights, options or warrants,
or of such convertible or exchangeable securities applicable to one share of
Common Stock; provided, however, that if the Board of Directors of the Bank
-------- -------
determines that the aggregate fair value of such securities equals or exceeds
$50,000,000, the Board of Directors shall have obtained the advice of a
nationally recognized investment banking firm in support of such determination.
Such adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distribution retroactive to the record date for
the determination of shareholders entitled to receive such distribution.
(e) Expiration of Rights, Options and Conversion Privileges. Upon the
--------------------------------------------------------
expiration of any rights, options, warrants or conversion or exchange
privileges that have previously resulted in an adjustment hereunder, if any
thereof shall not have been exercised, the number of shares of Common Stock
issuable upon the exercise of each Warrant shall, upon such expiration, be
readjusted and shall thereafter, upon any future exercise, be such as they
would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only shares of
Common Stock so issued were the shares of Common Stock, if any, actually issued
or sold upon the exercise of such rights, options, warrants or conversion or
exchange rights and (ii) such shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Bank upon such exercise plus
the consideration, if any, actually received by the Bank (before consideration
of
<PAGE>
- 8 -
underwriting documents and placement fees) for issuance, sale or grant of all
such rights, options, warrants or conversion or exchange rights whether or not
exercised; provided, further, that no such readjustment shall have provided,
-------- -------
further, that no such readjustment shall have the effect of decreasing the
number of share issuable upon exercise of each Warrant by a number, in excess of
the number of the adjustment initially made in respect to the issuance, sale or
grant of such rights, options, warrants or conversion or exchange rights.
(f) Current Market Price. For the purpose of any computation under this
--------------------
Agreement, the "current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily Closing Prices of the shares of
Common stock for the thirty (30) consecutive Trading Days preceding the
applicable date. The "Closing Price" for each day shall be (i) the last
reported sale price regular way or, in case no such sale takes place on such
date, the average of the closing bid and asked quotations regular way, in either
case on the New York Stock Exchange, or, if the Common stock is not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading; or (ii) if
the Common Stock is not listed or admitted to trading on any national securities
exchange, the last reported sale price regular way or, in case no such sale
takes place on such day, the average of the closing bid and asked quotations
regular way, in either case on the National Market system of the National
Association of Securities Dealers, Inc. ("NASD"); or (iii) if not authorized for
trading or quotation on such system, the average of the highest reported bid and
lowest reported asked quotations as furnished by the NASD or similar
organization if the NASD is no longer reporting such information; or (iv) if no
such prices or quotations are available, the fair market value of the Common
Stock as determined by good faith action of the Board of Directors of the Bank
(whose determination shall be conclusive if based on the financial advice of a
nationally recognized investment banking firm and shall be described in a
statement delivered to each Warrant Holder). A "Trading Day" shall be any day
that the principal national securities exchange on which the Common Stock listed
or admitted to trading is open for the transaction of business or, if not so
listed or admitted, that the New York Stock Exchange is open for the transaction
of business.
(g) Adjustment for De Minimis Change. No adjustment in the number of
--------------------------------
Warrant Shares purchasable hereunder shall be required unless such adjustment
would
<PAGE>
- 9 -
require an increase or decrease of at least 1% in the number of Warrant
Shares purchasable upon the exercise of each warrant; provided, however,
-------- -------
that any adjustments which by reason of this Section 3.01 are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest one
thousandth of a share.
Section 3.02 Notice of Adjustment. Whenever the number of Warrant Shares
--------------------
purchasable upon the exercise of each Warrant is adjusted, as herein provided,
the Bank shall cause the Warrant Agent promptly to mail to each Warrant Holder,
in accordance with Section 6.08, a notice of such adjustment or adjustments,
prepared and signed by the Chief Financial Officer or Secretary of the Bank,
which sets forth the number of Warrant Shares issuable upon the exercise of each
Warrant after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made.
Section 3.03 Effect of Sale, Merger or Consolidation. In the event of any
---------------------------------------
capital reorganization of the Bank, or of any reclassification (other than a
change in par value) of the Common Stock, or of any conversion of the Common
Stock into securities of another corporation, or the consolidation of the Bank
with, or the merger of the Bank with or into, any other corporation where the
Common Stock is converted into other securities or property (including cash) or
in the event of the sale of all or substantially all of the properties and
assets of the Bank to any other corporation (each such event hereinafter being
referred to as a "Capital Change"), each Warrant shall be exercisable after such
Capital Change, upon the terms and conditions specified in this Agreement, only
for the number of shares of stock or other securities or property (including
cash) of the Bank or of the corporation into which shares of Common Stock are
converted or resulting from such consolidation or surviving such merger or to
which such sale shall be made, as the case may be, to which the shares of Common
Stock issuable (immediately prior to such Capital Change) upon exercise of such
Warrant would have been entitled upon such Capital Change. In any such case, if
necessary, the provisions set forth in this Article III with respect to the
rights and interests thereafter of the holders of the Warrants shall be
appropriately adjusted so as to be reasonably applicable to any shares of stock
or other securities or property thereafter deliverable on the exercise of the
Warrants.
The subdivision or combination of shares of Common Stock at any time
outstanding into a greater or lesser number of shares of Common Stock shall not
be deemed to be a reclassification of the Common Stock of the Bank for the
<PAGE>
-10-
purpose of this Section. The Bank shall not effect any consolidation, merger or
sale resulting in a Capital Change, unless prior to or simultaneously with the
consummation thereof, any successor corporation or corporation purchasing such
assets shall assume, by written instrument executed and delivered to the Warrant
Agent, the obligation to deliver to the holder of each Warrant such shares of
stock, securities or property (including cash) as the Warrant Holders may be
entitled to receive upon exercise of the Warrants in accordance with the
foregoing provisions, and the other obligations of the Bank under this Warrant
Agreement.
Section 3.04 Effect of Adjustment on Warrant Certificates. The form
--------------------------------------------
of Warrant Certificate need not be changed because of any change the number of
Warrant Shares issuable upon the exercise of a Warrant or the number of Warrants
outstanding pursuant to this Article, and Warrant Certificates issued before or
after such change may state the same Exercise Price, the same number of Warrants
and the same number of Warrant Shares issuable upon exercise of Warrant as are
stated in the Warrant Certificates theretofore issued pursuant to this
Agreement. The Bank may, however, at any time, in its sole discretion, make any
change in the form of Warrant Certificate that it may deem appropriate and that
does not affect the substance therof, and any Warrant Certificates thereafter
issued or countersigned, whether in exchange or substitution for an outstanding
Warrant Certificate or otherwise, may be in the form as so changed.
ARTICLE IV
RIGHTS OF WARRANT HOLDERS
Section 4.01 No Rights as Stockholders. No Warrant Holder, as such,
-------------------------
shall be entitled to vote or to receive dividends or shall otherwise be deemed
to be the holder of shares of Common Stock for any purpose, nor shall anything
contained herein or in any Warrant Certificate be construed to confer upon any
Warrant Holder, as such, any of the rights of a stockholder of the Bank or any
right to vote upon or give or withhold consent to any action of the Bank
(whether upon any reorganization, issuance of securities, reclassification or
conversion of Common Stock, consolidation, merger, sale, lease, conveyance or
otherwise), receive notice of meetings or other action affecting stockholders
(except for notices expressly provided for in this Agreement) or receive
dividends or subscription rights, until such Warrant Certificate shall have been
surrendered for exercise as provided in this Agreement and shares of Common
Stock thereunder shall have become issuable
<PAGE>
- 11 -
and until such person shall have been deemed to have become a holder or record
of such shares. If, at the date of surrender of such Warrant Certificate, the
transfer books for the Common Stock shall be closed, certificates for the shares
of Common Stock shall be issuable on the date on which such books shall next be
open (whether before, on or after the Expiration Date) and, until such date, the
Bank shall be under no duty to deliver any certificate for such shares of Common
Stock. No Warrant Holder shall, upon the exercise of Warrants, be entitled to
any dividends if the record date with respect to payment of such dividends shall
be a date prior to the date such shares of Common Stock became issuable upon the
exercise of such Warrants.
Section 4.02 Lost Warrants. If any Warrant Certificate is lost, stolen,
-------------
mutilated or destroyed, the Warrant Agent may, upon receipt of evidence
satisfactory to the Bank and the Warrant Agent of such loss, theft, mutilation
or destruction and on such terms as to indemnity or otherwise as the Bank and
the Warrant Agent may in their discretion require (which shall, in the case of a
mutilated Warrant Certificate, include the surrender thereof), issue a new
Warrant Certificate of like denomination and tenor as the lost, stolen,
mutilated or destroyed Certificate, and the Warrant Agent shall countersign and
deliver such new Certificate. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
any such reasonable charges as the Bank or the Warrant Agent may prescribe. In
the event any Warrant Certificate is lost, stolen, mutilated or destroyed, and
the owner thereof desires to exercise the Warrants evidenced thereby, the
Company may, in lieu of issuing a substitute Warrant Certificate, authorized the
exercise thereof upon receipt of the above evidence and on such terms of
indemnity as it may require.
Section 4.03 Maintenance of Sufficient and Proper Shares of Common Stock.
-----------------------------------------------------------
(1) The Bank shall at all times reserve and keep available a number
of authorized shares of Common Stock sufficient to permit the exercise in full
of all outstanding Warrants and will cause to be available to the Warrant Agent
a sufficient number of certificates therefor.
(2) If at any time hereafter the Common Stock shall become listed
on a national securities exchange, prior to the issuance of any shares of Common
Stock upon the exercise of Warrants, the Bank shall use its best efforts to
secure the listing of shares of Common Stock issuable upon the exercise of the
Warrants upon any and all such securities exchanges.
<PAGE>
- 12 -
(3) If any shares of Common Stock issuable upon the exercise of
the Warrants require registration or approval of any governmental authority, or
the taking of any other action under the laws of the United States or any
political subdivision thereof or any other jurisdiction before such shares of
Common Stock may be legally and validly issued, then the Bank shall in good
faith and with reasonable diligence endeavor to secure such registration or
approval or to take such other action as may be appropriate to allow for the
lawful issuance of shares of Common Stock upon exercise of the Warrants;
provided that no shares of Common Stock shall be issued for the period during
- --------
which the Bank is endeavoring to obtain such registration or approval or is
taking such other actions. Warrant Holders may exercise Warrants during any such
period as provided herein and shall be entitled to the issuance of the shares of
Common Stock on such date as the shares of Common Stock may be legally and
validly issued upon the other conditions in effect on the date of surrender of
the Warrant Certificates.
Section 4.04 Fractional Shares and Warrants
------------------------------
(1) Anything contained herein to the contrary notwithstanding,
the Bank shall not be required to issue any fraction of a share of Common Stock
in connection with the exercise of Warrants. Warrants may not be exercised in
such number as would result (except for the provisions of this Section) in the
issuance of a fraction of a share of Common Stock unless the Warrant Holder is
presenting for exercise Warrant Certificates representing all Warrants then
owned of record by such Warrant Holder. In such event, the Bank shall, upon the
exercise of all of such Warrants, issue to such Warrant Holder the aggregate
number of shares of Common Stock called for thereby, rounded to the nearest
whole number of shares.
(2) Anything herein to the contrary notwithstanding, the Bank
shall not be required to issue fractions of Warrants on any distribution of
Warrants to Warrant Holders or to distribute Warrant Certificates that evidence
fractional Warrants.
Section 4.05 Transfer and Exchange of Warrants. The Warrant
---------------------------------
Certificates shall be issued in registered form only. The Bank shall cause to
be kept at the office of the Warrant Agent a register in which, subject to such
reasonable regulations as the Warrant Agent may prescribe, the Bank shall
provide for the registration of Warrant Certificates and of transfers or
exchanges of Warrant Certificates as herein provided.
<PAGE>
-13-
At the option of the Warrant Holder, Warrant Certificates may be exchanged
at such office, and upon payment of the charges hereinafter provided. Whenever
any Warrant Certificates are so surrendered for exchange, the Bank shall
execute, and the Warrant Agent shall countersign and deliver, the Warrant
Certificates that the Warrant Holder making the exchange is entitled to receive.
All Warrant Certificates issued upon any registration of transfer or
exchange of Warrant Certificates shall be the valid obligations of the Bank,
evidencing the same obligations, and entitled to the same benefits under this
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange.
Every Warrant Certificate surrendered for registration of transfer or
exchange shall (if so required by the Bank or the Warrant Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Bank and the Warrant Agent, duly executed by the Warrant
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Warrant Certificates. The Bank may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Warrant
Certificates.
Any Warrant Certificate when duly endorsed in blank shall be deemed
negotiable and when a Warrant Certificate shall have been so endorsed, the
Warrant Holder thereof may be treated by the Bank, the Warrant Agent and all
other persons dealing therewith as the absolute owner thereof for any purpose
and as the person entitled to exercise the rights represented thereby, or to the
transfer thereof on the register of the Bank maintained by the Warrant Agent,
any notice to the contrary maintained by the Warrant Agent, any notice to the
contrary notwithstanding; but until such transfer on such register, the Bank and
the Warrant Agent may treat the registered Warrant Holder thereof as the owner
for all purposes.
ARTICLE V
WARRANT AGENT
Section 5.01 Nature of Duties and Responsibilities Assumed. The Bank hereby
---------------------------------------------
appoints the Warrant Agent to act as agent of the Bank as set forth in this
Agreement. The Warrant Agent hereby accepts the appointment as agent of the Bank
and agrees to perform that agency upon the terms and conditions
<PAGE>
- 14 -
herein set forth, by all of which the Bank and the Warrant Holders, by their
acceptance thereof, shall be bound.
Whenever in the performance of its duties under this Agreement, the Warrant
Agent shall deem it necessary or desirable that any fact or matter be proved or
established by the Bank prior to taking or suffering any action hereunder, such
fact or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chief Executive Officer, the President, any Vice
President or the Secretary of the Company and delivered to the Warrant Agent;
and such certificate shall be full authorization to the Warrant Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
The Warrant Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct. The Warrant Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Warrant Certificates (except its countersignature on the Warrant
Certificates and such statements or recitals as described the Warrant Agent or
action taken or to be taken by it) or be required to verify the same, but all
such statements and recitals are and shall be deemed to have been made by the
Bank only. The Warrant Agent shall not have any liability or responsibility in
respect of the legality, validity or enforceability of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Warrant
Agent) or in respect of the validity or execution of any Warrant Certificate
(except its countersignature thereof); nor shall it be responsible or liable for
any breach by the Bank of any covenant or condition contained in this Agreement
or in any Warrant Certificate; nor shall it be responsible or liable for the
making of any change in the number of shares of Common Stock required under the
provisions of Article III or responsible for the manner, method or amount of any
such change or the ascertaining of the existence of any facts that would require
any such adjustment or change; nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or reservation of
any shares of Common Stock to be issued pursuant to this Agreement or any
Warrant Certificate or as to wether any shares of Common Stock will, when
issued, be validly issued, fully paid and nonassessable.
The Warrant Agent shall be under no obligation to institute any action,
suit or legal proceeding or take any other action likely to involve expense
unless the Bank or one or more registered holders of Warrants shall furnish the
Warrant Agent with reasonable security and indemnity for any
<PAGE>
- 15 -
costs and expenses which may be incurred. All rights of action under this
Agreement or under any of the Warrants may be enforced by the Warrant Agent
without the possession of any of the Warrants or the production thereof at any
trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable benefit of
the Holders of the Warrants, as their respective rights or interests may appear.
The Warrant Agent shall promptly notify the Bank in writing of any claim made
or action, suit proceeding instituted against it arising out of or in connection
with this Agreement.
The Warrant Agent is hereby authorized and directed to accept written
instructions with respect to the performance of its duties hereunder from the
Chief Executive Officer, the President, any Vice President or the Secretary of
the Company, and to apply to any such officer for the advice or instructions in
connection with the Warrant Agent's duties, and it shall not be liable for any
action taken or suffered to be taken or omitted by it in good faith in
accordance with the instructions of any such officer.
The Warrant Agent will not be responsible or liable for any failure of the
Bank to comply with any of the covenants contained in this Agreement or in the
Warrant Certificates to be complied with by the Bank. The Warrant Agent will not
incur any liability or responsibility to the Bank or to any Warrant Holder for
any action taken, or any failure to take action, in reliance on any notice,
resolution, waiver, consent, order, certificate, or other paper, document or
instrument reasonably believed by the Warrant Agent to be genuine and to have
been signed, sent or presented by the proper party or parties.
The Warrant Agent may execute and exercise any of the rights and powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys, agents or employees, provided reasonable care has been exercised
in the selection and in the continued employment of any such attorney, agent or
employee.
The Bank will perform, execute, acknowledge and deliver or cause to be
performed, executed, acknowledged and delivered all such further acts,
instruments and assurances as may reasonably be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
The Warrant Agent will act hereunder solely as agent of the Bank in a
ministerial capacity, and its duties will be determined solely by the provisions
hereof. The Warrant Agent will not be liable for anything which it may do or
refrain from
<PAGE>
- 16 -
doing in connection with this Agreement expect for its own negligence, bad faith
or willful conduct.
Section 5.02 Right to Consult Counsel. The Warrant Agent may at any time
------------------------
consult with legal counsel satisfactory to it (who may be legal counsel for the
Bank), and the opinion of such counsel shall be full and complete authorization
and protection to the Warrant Agent as to any action taken, suffered or omitted
by it in good faith in accordance with such opinion; provided, however, that the
-------- -------
Warrant Agent shall have exercised reasonable care in the selection of such
counsel.
Section 5.03 Compensation and Reimbursement. The Bank agrees to pay to
------------------------------
the Warrant Agent from time to time compensation for all services rendered by it
hereunder as the Bank and the Warrant Agent may agree from time to time, and to
reimburse the Warrant Agent for reasonable expenses and disbursements incurred
in connection with the execution and administration of this Agreement (including
the reasonable compensation and the expenses of its counsel), and further agrees
to indemnify the Warrant Agent for, and to hold it harmless against, any loss,
liability or expense incurred without negligence, bad faith or willful
misconduct on its part, arising out of or in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
Section 5.04 Warrant Agent May Hold Bank Securities. The Warrant Agent and
--------------------------------------
any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Bank or its
affiliates or have a pecuniary interest in any transaction in which the Bank or
its affiliates may be interested, or contract with or lend money to the Bank or
its affiliates or otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Bank or for any other legal
entity.
Section 5.05 Change of Warrant Agent. The Warrant Agent may resign and be
-----------------------
discharged from its duties under this Agreement upon 60 days' prior notice in
writing mailed, by registered or certified mail, to the Bank. The Bank may
remove the Warrant Agent or any successor warrant agent upon 60 days' prior
notice in writing, mailed to the Warrant Agent or successor warrant agent, as
the case may be, by registered or certified mail. If the Warrant Agent shall
resign or be removed or shall otherwise become incapable of acting, the Bank
shall appoint a successor to the Warrant Agent and shall,
<PAGE>
- 17 -
within 30 days following such appointment, give notice thereof in writing to
each registered holder of the Warrant Certificates. If the Bank shall fail to
make such appointment within a period of 30 days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent, then the Bank agrees
to perform the duties of the Warrant Agent hereunder until a successor warrant
agent is appointed. After appointment the successor warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor Warrant Agent
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
give any notice provided for in this Section, however, or any defect therein
shall not affect the legality or validity of the resignation or removal of the
Warrant Agent or the appointment of the successor agent, as the case may be.
ARTICLE VI
GENERAL
Section 6.01 Purchase of Warrants by the Bank. The Bank shall have the
--------------------------------
right, except as limited by law or other agreement, to purchase or otherwise
acquire Warrants at such times, in such manner and for such consideration as it
may deem appropriate.
Section 6.02 Cancelled Warrants. The Warrant Agent shall cancel any
------------------
Warrant Certificate delivered to it for exercise, in whole or in part, or
delivered to it for transfer, or for split-up, combination, exchange or
substitution and shall deliver to the Bank, in a manner satisfactory to the
Bank, such cancelled Warrant Certificates.
Section 6.03 Taxes on Issuance of Shares of Common Stock. The Bank shall
-------------------------------------------
from time to time promptly pay all documentary stamp taxes, if any, that may be
imposed upon the Bank or the Warrant Agent with respect to the issuance or
delivery of shares of Common Stock upon the exercise of Warrants, but the Bank
shall not be obligated to pay any transfer taxes with respect to the issuance or
delivery of the Warrant Certificates or shares of Common Stock in a name other
than that of the Warrant Holder.
<PAGE>
-18-
Section 6.04 Dates and Times. If any date set forth in this Warrant
---------------
Agreement shall fall on a day other than a full business day in New York City,
said date shall be deemed to be the next full business day succeeding that date.
All times shall be the legal time then in effect in New York City.
Section 6.05 Amendments to Warrant Agreement. The Bank and the Warrant
-------------------------------
Agent may, jointly, without the consent or concurrence of the Warrant Holders,
by supplemental agreement or otherwise, make any amendments, alterations,
deletions or corrections in this Agreement that they deem necessary or
desirable: (a) to cure any ambiguity or correct any defect, inconsistency,
clerical omission or mistake, or manifest error contained herein; (b) to confer
additional rights upon the Warrant Holders; or (c) in any other respect that is
not inconsistent with the provisions of the Warrants and which does not
adversely affect the rights of the Warrant Holders hereunder. The Bank and the
Warrant Agent also may supplement or amend the Warrant Agreement in any other
respect without notice to any Warrant Holder but with the written consent of the
holders of at least 50% in number of the Warrants then outstanding; provided,
--------
however, that no such supplement or amendment may (i) make any modification of
- -------
the terms upon which the Warrants are exercisable or (ii) change the percentage
of the holders of the Warrants who must consent to such amendment or supplement,
without the consent of each Warrant Holder affected thereby.
Section 6.06 Binding Agreements. All of the covenants and provisions of
------------------
this Agreement by or for the benefit of the Bank or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Nothing expressed in this Agreement and nothing that may be implied from any of
the provisions hereof is intended, or shall be construed, to confer upon or give
to any person or corporation, other than the Bank, the Warrant Agent and the
Warrant Holders, any legal or equitable right, remedy or claim under or by
reason of this Agreement or of any covenant, condition, stipulation, promise or
agreement herein, and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Bank, the Warrant Agent, the Warrant Holders and their respective
successors and assigns.
Section 6.07 Copies of Agreement with Warrant Agent. A copy of this
--------------------------------------
Agreement, as such may be amended from time to time, shall be available for
inspection by any Warrant Holder at the office of the Warrant Agent, as
designated in Section 6.08, during normal business hours. As a condition of such
inspection, the Warrant Agent may require any such Warrant Holder to submit his
or her Warrant Certificate for inspection.
<PAGE>
- 19 -
Section 6.08 Notices. Any communication, notice or demand to be given
-------
hereunder shall be duly given if in writing and delivered, or sent by first
class mail, certified or registered, postage prepaid and addressed as follows:
(a) If to the Bank:
Glendale Federal Bank, FSB
700 N. Brand Boulevard
Glendale, California 91203
Attention: Secretary
(b) If to the Warrant Agent:
Chemical Trust Company of California
300 South Grand Avenue, 2nd Floor
Los Angeles, California 90071
Attention: Office Manager
(c) If to a Warrant Holder, at such person's last known address as
such shall appear on the registration books maintained by the Warrant Agent.
Any party may change the address to which any communications, notice
or demand shall be given by giving notice of such change in conformity with the
provisions of this Section.
Section 6.09 Governing Law. This Agreement and each Warrant issued
-------------
hereunder shall be governed by and construed in accordance with the laws of the
State of California, without giving effect to conflict of laws.
Section 6.10 Headings. The Article and Section headings herein are for
--------
convenience only and are not part of this Agreement and shall not affect the
interpretation thereof.
Section 6.11 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which so executed shall be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
<PAGE>
- 20 -
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
GLENDALE FEDERAL BANK,
FEDERAL SAVINGS BANK
By: /s/ Richard A. Fink
-------------------------
Name: Richard A. Fink
Title: Senior Executive Vice President
and Chief Legal Officer
Attest:
/s/ James R. Eller, Jr.
- -------------------------------
Secretary
CHEMICAL TRUST COMPANY OF CALIFORNIA
As Warrant Agent
By: /s/ Derek R. Lenington
-------------------------
Name: Derek R. Lenington
Title: Vice-President
Attest:
[SIGNATURE APPEARS HERE]
- -------------------------------
Assistant Vice President
<PAGE>
EXHIBIT A
(FORM OF WARRANT CERTIFICATE)
No. Certificate for ____ Warrants
--------------
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
[FEBRUARY __, 1999]
GLENDALE FEDERAL BANK, FEDERAL SAVINGS BANK
WARRANTS TO PURCHASE COMMON STOCK
this Warrant Certificate certifies that _____________________, or
registered assigns, is the registered holder of the number of Warrants set forth
above. Each Warrant entitles the holder thereof, subject to the provisions
contained herein and in the Warrant Agreement referred to below, to receive from
Glendale Federal Bank, Federal Savings Bank, a federally chartered stock savings
bank (the "Bank"), one fully paid and nonassessable share of Common stock, par
value $1.00 per share, of the Bank ("Common Stock"), at the exercise price of
zero ($0.00) per share, at any time after one year from the date of initial
issuance of the Warrants under the Warrant Agreement referred to below until the
expiration of the Warrant at 5:00 p.m., New York City time, on the sixth
anniversary of such date or, if such anniversary date is not a business day in
the City of New York, then on the next succeeding business day (the "Expiration
Date".)
This Warrant Certificate is issued under and in accordance with the Warrant
Agreement, dated as of ,
-----------------
<PAGE>
A - 2
1993 (the "Warrant Agreement"), between the Bank and Chemical Trust Company of
California, warrant agent (the "Warrant Agent," which term includes any
successor Warrant Agent under the Warrant Agreement), and is subject to the
terms and provisions contained in the Warrant Agreement, to all of which terms
and provisions the holder of this Warrant Agreement consents by acceptance
hereof. The Warrant Agreement is hereby incorporated herein by reference and
made a part hereof. Reference is hereby made to the Warrant Agreement for a
full statement of the respective rights, duties, obligations and immunities
thereunder of the Bank, the Warrant Agent and the holders of the Warrants.
Copies of the Warrant Agreement, as such may be amended from time to time, are
available for inspection at the Los Angeles office of the Warrant Agent.
The number of shares of Common Stock issuable upon the exercise of each
Warrant is subject to adjustment as provided in the Warrant Agreement.
All shares of Common Stock issuable by the Bank upon the exercise of
Warrants shall, upon such issue, be duly and validly issued and fully paid and
non-assessable.
In order to exercise a Warrant, the registered holder hereof must surrender
this Warrant Certificate at the office of the Warrant Agent, with the Exercise
Subscription Form on the reverse hereof duly executed by the holder hereof,
with signature guaranteed as therein specified.
<PAGE>
A - 3
This Warrant Certificate, with or without other Warrant Certificates, upon
surrender to the Warrant Agent, may be exchanged for another Warrant Certificate
or Warrant Certificates evidencing a like aggregate number of Warrants. If this
Warrant Certificate shall be exercised in part, the holder hereof shall be
entitled to receive upon surrender hereof another Warrant Certificate or Warrant
Certificates evidencing the number of Warrants not exercised.
No holder of this Warrant Certificate shall be deemed to be the holder of
Common Stock or any other securities of the Bank that may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained in
the Warrant Agreement or herein be construed to confer upon the holder of this
Warrant Certificate as such any of the rights of a stockholder of the Bank or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any reorganization, issuance of stock,
reclassification or conversion of stock, change of par value, or exchange of
stock to no par value, consolidation, merger, conveyance or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise, until this Warrant Certificate shall have been exercised and the
Common Stock issuable upon the exercise hereof shall have become issuable as
provided in the Warrant Agreement.
<PAGE>
A - 4
This Warrant Certificate and all rights hereunder are transferable by the
registered holder hereof, in whole or in part, on the register of the Bank, upon
surrender of this Warrant Certificate for registration of transfer at the office
of the Warrant Agent maintained for such purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the Bank
and the Warrant Agent duly executed by, the Holder hereof or his attorney duly
authorized in writing, with signature guaranteed as specified in the attached
Form of Assignment. Upon any partial transfer, the Bank will issue and deliver
to such holder a new Warrant Certificate or Certificates with respect to any
portion not so transferred. No service charge shall be made for any
registration of transfer or exchange of the Warrant Certificates, but the Bank
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Each taker and holder of this Warrant Certificate by taking or holding the
same consents and agrees that this Warrant Certificate when duly endorsed in
blank shall be deemed negotiable and that when this Warrant Certificate shall
have been so endorsed, the holder hereof may be treated by the Bank, the Warrant
Agent and all other persons dealing with this Warrant Certificate as the
absolute owner hereof for any purpose and as the person entitled to exercise the
rights represented hereby, or to the transfer hereof on the register of the Bank
maintained by the Warrant Agent, any notice to the
<PAGE>
A - 5
contrary notwithstanding, but until such transfer on such register, the Bank
and the Warrant Agent may treat the registered Holder hereof as the owner for
all purposes.
Anything herein to the contrary notwithstanding, in no event shall the Bank
or the Warrant Agent be obligated to issue Warrant Certificates evidencing other
than a whole number of Warrants or issue certificates evidencing other than a
whole number of shares of Common Stock upon the exercise of this Warrant
Certificate.
This Warrant Certificate and the Warrant Agreement are subject to amendment
as provided in the Warrant Agreement.
All terms used in this Warrant Certificate that are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
This Warrant Certificate shall not be valid for any purpose until it shall
have been countersigned by the Warrant Agent.
GLENDALE FEDERAL BANK,
FEDERAL SAVINGS BANK
Dated:________________, 1993 By:
--------------------------
Name:
Title:
Countersigned:
CHEMICAL TRUST COMPANY OF CALIFORNIA
By:
------------------------
Name:
Title:
<PAGE>
A - 6
FORM OF REVERSE OF WARRANT CERTIFICATE
EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
TO: Glendale Federal Bank, Federal Savings Bank
The undersigned irrevocably exercises __________________ of the Warrants
for the acquisition of one share (subject to adjustment) of Common Stock, par
value $1.00 per share, of Glendale Federal Bank, Federal Savings Bank, for each
Warrant represented by the Warrant Certificate, on the terms and conditions
specified in the within Warrant Certificate and the Warrant Agreement therein
referred to, surrenders this Warrant Certificate and all right, title and
interest therein to Glendale Federal Bank, Federal Savings Bank, and directs
that the shares of Common Stock deliverable upon the exercise of such Warrants
be registered or placed in the name and the address specified below and
delivered thereto.
Dated: , 19
-------------------- ----
(1)
---------------------------------
(Signature of Owner)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
---------------------------------
- -------------------------
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by an eligible
guarantor institution pursuant to S.E.C. Rule 17Ad-15.
<PAGE>
A - 7
Securities to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be
issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
<PAGE>
A - 8
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of the within Warrant
Certificate hereby sells, assigns, and transfers unto the Assignee(s) named
below (including the undersigned with respect to any Warrants constituting a
part of the Warrants evidenced by the within Warrant Certificate not being
assigned hereby) all of the right of the undersigned under the within Warrant
Certificate, with respect to the number of Warrants set forth below:
<TABLE>
<CAPTION>
<C>
Social Security
or other
<S> <C> identifying <C>
Names of number of Number of
Assignees Address assignee(s) Warrants
- --------- ------- ----------------- ---------
</TABLE>
and does hereby irrevocably constitute and appoint ____________________ the
undersigned's attorney to make such transfer on the books of Glendale Federal
Bank, Federal Savings Bank maintained for that purpose with full power of
substitution in the premises.
Date: 19
-------------------- ----
(1)
----------------------------------
(Signature of Owner)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
----------------------------------
- -------------------------
(1) The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by an eligible
guarantor institution under S.E.C. Rule 17Ad-15.
<PAGE>
EXHIBIT 4.4
AMENDMENT NO. 1 TO WARRANT AGREEMENT
THIS AMENDMENT NO.1 TO WARRANT AGREEMENT (this "Amendment No. 1") dated as
of July 24, 1997 is entered into by and among Glendale Federal Bank, Federal
Savings Bank ("the Bank"), ChaseMellon Shareholder Services, LLC (as successor
to Chemical Trust Company of California ("Chemical"), the "Warrant Agent"), and
Golden State Bancorp Inc. ("Golden State") on the basis of the following facts:
WHEREAS, the Bank and Chemical entered into that certain Warrant Agreement
(the "Warrant Agreement") dated as of February 23, 1993 with respect to warrants
(the "Five-Year Warrants") to acquire common stock, par value $1.00 per share of
the Bank (the "Bank Common Stock")
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Reorganization (the "Reorganization Agreement") dated as of May 28, 1997 by and
among the Bank, Golden State and Glendale Interim Federal Savings Bank, among
other things, (i) Golden State will become the holding company for the Bank, and
(ii) the Five-Year Warrants will become exercisable, in accordance with their
terms and without the necessity of any exchange by the holders thereof, solely
to receive the number of shares of common stock, par value $1.00 per share of
Golden State (the "Golden State Common Stock") that equals the number of shares
of Bank Common Stock for which the Five-Year Warrants were exercisable
immediately prior to the effective time (the "Effective Time") of the
reorganization transaction provided for in the Reorganization Agreement (the
"Reorganization"); and
WHEREAS, the parties hereto desire to amend the Warrant Agreement to
reflect the transactions comprising the Reorganization and their effects.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. The terms "Common Stock" as used in the Warrant Agreement shall mean
Golden State Common Stock instead of Bank Common Stock.
2. All references to the "Bank" or the "Company" in Articles III and IV
of the Warrant Agreement shall be deemed to refer to Golden State instead of the
Bank.
3. All references to the "Bank" in Sections 6.01 and 6.05 shall be deemed
to refer to both the Bank and Golden State.
4. Section 6.08 shall be amended in its entirety as follows:
"Section 6.08 Notices. Any communication, notice or demand to be given
-------
hereunder shall be duly given if in writing and delivered, or sent by first
class mail, certified or registered, postage prepaid and addressed as follows:
1
<PAGE>
(a) If to the Bank or Golden State:
414 N. Central Avenue
Glendale, California 91203
Attn: Corporate Secretary
If to the Warrant Agent:
(b) ChaseMellon Shareholder Services, LLC
400 South Hope Street
4th Floor
Los Angeles, California 90071
Attn: Office Manager
(c) If to a Warrant Holder, at such person's last known address as
such address shall appear on the registration books maintained by the Warrant
Agent.
Any party may change the address to which any communication, notice or
demand shall be given by giving notice of such change in conformity with the
provisions of this Section."
5. This Amendment No. 1 shall be deemed effective as of the Effective
Time.
6. Except as otherwise specifically provided herein, the Warrant
Agreement shall remain unchanged.
2
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 1 has been duly executed by
the parties hereto as of the day and year first above written.
GLENDALE FEDERAL BANK,
FEDERAL SAVINGS BANK
By: /s/ John E. Haynes
-----------------------------
Title: Chief Financial Officer
--------------------------
CHASEMELLON SHAREHOLDER
SERVICES, LLC
By: /s/ Michael E. Dzleoiolowski
-----------------------------
Michael E. Dzleoiolowski
Title: Assistant Vice President
--------------------------
GOLDEN STATE BANCORP INC.
By: /s/ John E. Haynes
-----------------------------
Title: Chief Financial Officer
--------------------------
3
<PAGE>
Exhibit 4.5
WARRANT AGREEMENT
between
GLENDALE FEDERAL BANK,
FEDERAL SAVINGS BANK
and
CHEMICAL TRUST COMPANY OF CALIFORNIA
as Warrant Agent
Warrants to Purchase Common Stock
-------------------------------------------------------------
Dated as of August 15, 1993
<PAGE>
WARRANT AGREEMENT
AGREEMENT, dated as of August 15, 1993, between GLENDALE FEDERAL BANK,
FEDERAL SAVINGS BANK, a federally chartered stock savings bank (the "Bank"), and
----
CHEMICAL TRUST COMPANY OF CALIFORNIA, as Warrant Agent (the "Warrant Agent").
-------------
WHEREAS, pursuant to the Plan of Reorganization entered into among the
Bank, GLENFED, Inc. and Glendale Investment Corporation (the "Reorganization
--------------
Plan"), the Bank proposes to conduct several interdependent transactions for the
- ----
purpose of increasing the regulatory capital of the Bank; and
WHEREAS, in connection with the Reorganization Plan, the Bank proposes to
issue and deliver its warrant certificates (the "Warrant Certificates")
--------------------
evidencing warrants (the "Warrants") to acquire, under certain circumstances, an
--------
aggregate of up to approximately 10.85 million shares, subject to adjustment, of
its common stock, par value $1.00 per share (the "Bank Common Stock"), and
-----------------
WHEREAS, each such Warrant will entitle the owner of record thereof to
acquire one share of Bank Common stock, subject to adjustment.
NOW THEREFORE, in consideration of the foregoing, and for the purpose of
defining the terms and provisions of the Warrants and the respective rights and
obligations thereunder of the Bank and the record holders of the Warrants, the
Bank and the Warrant Agent each hereby agrees as follows:
ARTICLE I
ISSUANCE AND EXECUTION OF WARRANTS
Section 1.01 Form of Warrant Certificates. The text of each Warrant
----------------------------
Certificate (and the related forms of exercise and assignment) shall be
substantially in the form attached hereto as Exhibit A and may have such legends
---------
and endorsements typed, stamped, printed, lithographed or engraved thereon as
the Bank may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto or with any rule or regulation of any securities
exchange or over-the-counter market on which the Warrants may be listed or
quoted, or to conform to customary usage.
<PAGE>
Section 1.02 Execution and Countersignature of Warrant Certificates.
------------------------------------------------------
Warrant Certificates shall be executed on behalf of the Bank by its Chief
Executive Officer, President or any Vice President and attested by its Secretary
or an Assistant Secretary, and delivered to the Warrant Agent, and shall be
countersigned and delivered by the Warrant Agent, upon the written order of the
Bank signed by any such officer of the Bank. Each Warrant Certificate shall be
dated the date of its counter-signature by the Warrant Agent either upon initial
issuance or upon division, exchange, substitution or transfer. Warrant
Certificates shall be executed on behalf of the Bank either manually or by
facsimile signature printed thereon. The Warrant Agent shall countersign the
Warrant Certificate manually, and no Warrant Certificate shall be valid for any
purpose unless so countersigned. In case any officer whose signature has been
placed upon any Warrant Certificate ceases to be such before such Warrant
Certificate is issued, it may be issued with the same effect as if such officer
had not ceased to be such at the date of issuance.
ARTICLE II
EXERCISE PRICE, TERM, REDEMPTION
AND METHOD OF EXERCISE
Section 2.01 Exercise Price. Each Warrant Certificate shall, when
--------------
countersigned by the Warrant Agent, entitle the registered holder thereof (the
"Warrant Holder"), subject to the provisions thereof and of this Agreement, to
--------------
purchase one share of Bank Common Stock for each Warrant represented thereby at
an exercise price of Twelve Dollars ($12.00) per share in lawful money of the
United States of America (such exercise price per share, as adjusted from time
to time as provided herein, is referred to herein as the "Exercise Price").
--------------
Section 2.02 Warrant Rights. Each Warrant shall entitle the Warrant
--------------
Holder, upon exercise thereof and payment of the Exercise Price (and any taxes
as contemplated in this Agreement) within the period described in Section 2.03,
------------
and subject to the provisions of the Warrant Certificate evidencing such Warrant
and this Agreement, including provisions relating to adjustments upon the
occurrence of certain events as set forth in Article III hereof, to receive one
-----------
fully paid and nonassessable share of Bank Common Stock.
Section 2.03 Period of Exercise; Expiration. Each Warrant may be
------------------------------
exercised on any business day during the period commencing on the day following
the first anniversary of the completion of the Recapitalization (as defined in
the Reorganization Plan) and
- 2 -
<PAGE>
ending at 5:00 p.m., New York City time, on the seventh anniversary of the date
of the initial issuance of the Warrants or, if such date is not a business day
in the City of New York, then on the next succeeding business day (the
"Expiration Date"). Each Warrant not exercised by 5:00 p.m., New York City
time, on the Expiration Date shall become void, and all rights thereunder and
all rights in respect thereof under this Agreement shall thereupon cease.
Section 2.04 Method of Exercise. Exercise of Warrants shall be effected
------------------
by: (a) surrender of the Warrant Certificate evidencing such Warrants to the
Warrant Agent, with one of the forms on the reverse of or attached to the
Warrant Certificate duly completed and executed by the Warrant Holder thereof or
by a duly appointed legal representative thereof or by a duly authorized
attorney (and with any signatures guaranteed as may be required pursuant to the
Warrant Certificate); and (b) payment of the aggregate Exercise Price for the
shares of Bank Common Stock to which such exercise relates. Warrant
Certificates representing Warrants being exercised (accompanied by payment
therefor) shall be surrendered at the office of the Warrant Agent. In the event
that any Warrant Holder shall exercise less than all of the Warrants evidenced
by a Warrant Certificate surrendered upon exercise of Warrants, a new Warrant
Certificate for the balance of such Warrants shall be countersigned and
delivered to, or in accordance with the instructions of, such Warrant Holder.
Promptly upon surrender of a Warrant Certificate in conformity with the
foregoing provisions, the Warrant Agent (after requisitioning any certificates
for shares of Bank Common Stock from the Bank's transfer agent, if necessary)
shall deliver to, or in accordance with the instructions of, the Warrant Holder
certificates for the total number of whole shares of Bank Common Stock for which
the Warrants evidenced by such Warrant Certificates are being exercised (subject
to the provisions of Section 4.04) in such names and denominations as the
------------
Warrant Holder has directed; provided, however, that, if, on the date of
-------- -------
surrender of such Warrant Certificate, the transfer books for the Bank Common
Stock shall be closed, the certificates for the shares of Bank Common Stock
shall be issuable as of the date on which such books shall next be open (whether
before, on or after the Expiration Date) at the Exercise Price and upon the
other conditions in effect on the date of such surrender.
Section 2.05 Disposition of Proceeds on Exercise of Warrants. The Warrant
-----------------------------------------------
Agent shall account promptly to the Bank with respect to Warrants exercised and
concurrently pay to the Bank all moneys received by the Warrant Agent for the
purchase of shares of Bank Common Stock through the exercise of such Warrants.
- 3 -
<PAGE>
Section 2.06. Cancellation of Warrants. In the event the Bank shall
------------------------
purchase or otherwise acquire Warrants, the same shall thereupon be delivered
to the Warrant Agent and be cancelled by it and retired. The Warrant Agent
shall cancel any Warrant surrendered for exchange, substitution, transfer or
exercise in whole or in part.
ARTICLE III
ADJUSTMENTS TO WARRANTS UPON CERTAIN EVENTS
Section 3.01. Adjustments to Warrant Shares or Exercise Price. The number
-----------------------------------------------
of shares of Bank Common Stock issuable upon the exercise of each Warrant (such
shares being referred to in this Article III as the "Warrant Shares") and the
----------- --------------
Exercise Price, as applicable, shall be subject to adjustment solely as follows:
(a) In case the Bank shall at any time after the date of this Agreement
(i) declare a dividend on, or make a distribution with respect to, Bank Common
Stock which is payable in shares of Bank Common Stock, (ii) subdivide the
outstanding shares of Bank Common Stock, (iii) combine the outstanding shares of
Bank Common Stock into a smaller number of shares, or (iv) issue any shares of
capital stock of the Bank in a reclassification of the Bank Common Stock, the
number of Warrant Shares shall be adjusted so that the holder of each Warrant
shall be entitled to receive upon payment of the Exercise Price the aggregate
number and kind of shares of Bank Common Stock or other capital stock of the
Bank which, if such Warrant had been exercised immediately prior to the
occurrence of such event, such holder would have owned or have been entitled to
receive immediately after the occurrence of such event. The time of occurrence
of an event giving rise to an adjustment made pursuant to this Section 3.01(a)
---------------
shall, in the case of a subdivision, combination or reclassification, be the
effective date thereof and shall, in case of a dividend or distribution, be the
record date thereof.
(b) If at any time after the date hereof, the Bank shall, to or for the
account or benefit of all holders of the outstanding shares of Bank Common
Stock, make, without any charge, any distribution of rights to subscribe or
warrants to purchase Bank Common Stock at a price per share less than the
Current Market Price (as defined below) of such Bank Common Stock (not
including, in any event, the rights to purchase Bank Common Stock to be issued
pursuant to the Reorganization Plan) on the record date for such distribution or
issuance, the Exercise Price shall be adjusted immediately thereafter so that it
shall equal the price determined in accordance with the following formula:
- 4 -
<PAGE>
WP' = WP X A + B(SP/CMP)
------------------
A + B
Where:
WP' = Adjusted Exercise Price;
WP = Exercise Price in effect immediately prior to adjustment;
A = Number of shares of Bank Common Stock outstanding on the
record date for such distribution or issuance;
B = Number of shares of Bank Common Stock so offered for
subscription or purchase;
SP = Subscription or purchase price per share issuable upon
exercise of such rights or warrants; and
CMP = Current Market Price on the record date for such distribution or
issuance
An adjustment made pursuant to this Section 3.01(b) shall become effective
---------------
immediately after the record date for the determination of shareholders entitled
to receive such distribution or issuance.
(c) Upon each adjustment of the number or kind of shares of capital
stock purchasable upon exercise of each Warrant pursuant to Section 3.01(a),
---------------
the Exercise Price shall also be adjusted such that upon the exercise of a
Warrant by a Warrant Holder thereafter, and payment of an amount equal to the
Exercise Price immediately prior to such adjustment, such Warrant Holder shall
be entitled to receive the number and kind of such shares of capital stock that
such Warrant Holder would have owned or been entitled to receive immediately
after the occurrence, and as a result, of the event giving rise to such
adjustment had such Warrant been exercised immediately prior to the occurrence
of such event. If, as a result of an adjustment made pursuant to Section
-------
3.01(a), a Warrant Holder shall become entitled to receive, upon exercise of its
- -------
Warrants and payment therefor, shares of two or more classes of capital stock,
the Board of Directors of the Bank (whose determination with respect to the
matter shall be conclusive and shall be described in a resolution adopted with
respect thereto) shall determine the allocation of the adjusted Exercise Price
between or among shares of such classes of capital stock. After each adjustment
of the Exercise Price pursuant to Section 3.01(b), the total number of Warrant
---------------
- 5 -
<PAGE>
Shares or fractional part thereof purchasable upon the exercise of each Warrant
shall not be proportionately adjusted.
(d) Except for adjustments required by Section 3.01(e), no adjustment in
---------------
the Exercise Price or in the number of Warrant Shares shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in such Exercise Price or in the number of Warrant Shares purchasable;
provided, however, that any adjustments which by reason of this Section 3.01(d)
- -------- ------- ---------------
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 3.01 shall be
------------
made to the nearest cent and to the nearest one-hundredth of a share, as the
case may be.
(e) In case of any consolidation of the Bank with, or merger of the Bank
into, another corporation or in case of any sale or conveyance to another
corporation or entity of the property of the Bank as an entirety or
substantially as an entirety (such successor or purchaser corporation or entity
being referred to for purposes of this Section 3.01(e) as the "Acquiring
--------------- ---------
Corporation"), the Bank or the Acquiring Corporation, as the case may be, shall
- -----------
execute with the Warrant Agent an agreement that each Warrant Holder shall have
the right, upon exercise of each of its Warrants and payment, prior to 5:00
p.m., New York City time, on the Expiration Date, of the Exercise Price in
effect immediately prior to such consolidation, merger, sale or conveyance, to
purchase upon exercise of such Warrant or Warrants the kind and amount of shares
or other securities or property (including cash) that such holder would have
owned or have been entitled to receive immediately after the happening of such
action, had such Warrant been exercised immediately prior thereto. The Bank
shall mail or cause to be mailed by first-class mail, postage prepaid, to each
Warrant Holder, notice of the execution of any such agreement. Such agreement
shall provide for adjustments, which shall be as nearly equivalent as may
be practicable to the adjustments provided for herein. The provisions of this
Section 3.01(e) shall similarly apply to successive consolidations, mergers,
- ---------------
sales or conveyances. The Warrant Agent shall be under no responsibility to
determine the correctness of any provisions contained in any such agreement
relating either to the kind or amount of shares or other securities or property
receivable upon exercise of Warrants or with respect to the method employed and
provided therein for any adjustments and shall be entitled to rely upon the
provisions contained in any such agreement.
(f) Upon the expiration of any rights or warrants pursuant to which an
adjustment in the Exercise Price has been made pursuant to Section 3.01(b)
---------------
hereof, if any of such rights or warrants shall not have been exercised, the
Exercise Price in
- 6 -
<PAGE>
effect upon such expiration shall be readjusted in the following manner: (i)
the adjusted Exercise Price determined in respect of the original distribution
of the expired rights or warrants pursuant to Section 3.01(b) hereof (the
---------------
"Original Adjusted Exercise Price") shall be replaced with a revised Exercise
--------------------------------
Price (the "Revised Exercise Price")determined by applying the formula set forth
----------------------
in Section 3.01(b) hereof, using the same values for each of the variables in
---------------
such formula as were used in calculating the Original Adjusted Exercise Price,
except that the value for variable "B" shall equal the number of shares of Bank
Common Stock, if any, actually issued or sold upon the exercise of such rights
or warrants, rather than the number of shares of Bank Common Stock offered for
subscription or purchase; and (ii) if any further adjustments shall have been
made to the Original Adjusted Exercise Price pursuant to either Section 3.01(b)
---------------
or (c) subsequent to the original distribution of the expired rights or
---
warrants, then each such subsequent adjustment shall be recalculated in the same
manner as originally determined, using as a starting point for such subsequent
adjustments the Revised Exercise Price in place of the Original Adjusted
Exercise Price.
(g) Whenever the Exercise Price or the number of Warrant Shares shall be
adjusted as provided in this Section 3.01, the Bank shall forthwith file with
------------
the Warrant Agent a certificate, signed by the chief financial officer of the
Bank, showing in detail the facts requiring such adjustment and the Exercise
Price and the number of Warrant Shares that will be effective after such
adjustment. The Warrant Agent shall have no duty with respect to any certificate
filed with it except to keep the same on file and available for inspection by
Warrant Holders during reasonable business hours. The Warrant Agent shall not at
any time be under any duty or responsibility to any Warrant Holder to determine
whether any facts exists which may require any adjustment of the Exercise Price
or in the number of Warrant Shares, or with respect to the nature of any
adjustment of the Exercise Price or in the number of Warrant Shares purchasable
upon the exercise of each Warrant when made, or with respect to the method
employed in making such adjustment, and shall not be deemed to have knowledge of
any such adjustment unless and until it shall receive such certificate.
(h) In case the Bank after the date hereof shall propose to take any action
of the type described in this Section 3.01 (except for actions which, pursuant
------------
to Section 3.01(d), would not require an adjustment of the Exercise Price or the
---------------
number of Warrant Shares), the Bank shall give notice thereof to the Warrant
Agent by filing with the Warrant Agent a certificate, signed by the Chairman or
Vice Chairman of the Board of directors, the President or any Vice President of
the Bank and the Bank's Treasurer or any Assistant Treasurer or Secretary or any
Assistant Secretary, specifying the date on which such action
- 7 -
<PAGE>
shall take place, and shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action (to the
extent such facts may be known on the date of such notice) on the Exercise Price
and the number, kind or class of shares or other securities or property which
shall be purchaseable upon exercise of Warrants. The Bank also shall cause a
notice setting forth any such proposed adjustments to be sent by mailing first
class, postage prepaid, to each Warrant Holder as of a date within ten (10) days
of the date of such notice at its address appearing on the Warrant register.
Failure to give such notice or any defect therein shall not affect the legality
or validity of such action. Such notices shall be given, in the case of any
action of the type specified in Sections 3.01(a) and (b), at least ten (10) days
---------------- ---
prior to the effective date or the record date, as applicable, with respect
thereto and in the case of any action of the type specified in Sections 3.01(e)
----------------
and (f), at least ten (10) days prior to the taking of such proposed action.
---
(i) Irrespective of any of the adjustments in the Exercise Price or the
number of Warrant Shares, Warrant Certificates shall continue to express on the
face thereof the same price and number of Warrant Shares as stated in a similar
Warrant Certificate issuable initially pursuant to this Agreement and such
number of Warrant Shares and price specified therein shall be deemed to have
been so adjusted.
(j) For purposes of this Section 3.01, the "Current Market Price" per
------------ --------------------
share of Bank Common Stock on any date shall be deemed to be the arithmetic
average of the Market Price per share of Bank Common Stock (as defined below)
for the ten (10) consecutive Trading Days (as defined below) ending of the
Trading Day immediately preceding the day in question. "Market Price" for each
------------
Trading Day shall be the closing sale price for the Bank Common Stock of the New
York Stock Exchange, or if no such sale has taken place on such day, then the
average of the closing bid and ask prices for the Bank Common Stock on the New
York Stock Exchange. If the Bank Common Stock hereafter ceases to be listed or
admitted for trading on the New York Stock Exchange, but is listed or admitted
for trading on a national securities exchange, the Market Price shall be the
closing price (or if no such sale has taken place on such day, then the average
of the closing bid and ask prices) on the principal national securities exchange
on which the Bank Common Stock is listed or admitted for trading. If the Bank
Common Stock is not, or hereafter ceases to be, listed or admitted for trading
on any national securities exchange, the Market Price shall be the closing sale
price quoted (or, if no such price is quoted for such day, then the average of
the closing bid and ask prices quoted) for the Bank Common Stock on the NASDAQ
National Market System, or, if the Bank Common Stock is not quoted on such
National Market System, the average
- 8 -
<PAGE>
of the closing bid and ask prices as furnished by any New York Stock Exchange
member firm selected from time to time by the Board of Directors of the Bank for
such purposes (other than the Bank or any affiliate thereof). In the event that
it is impracticable for the Board of Directors of the Bank to establish the
Market Price of the Bank Common Stock as contemplated herein, Market Price shall
mean the fair market value of the Bank Common Stock as determined in good faith
by the Board of Directors of the Bank. "Trading Day" shall be each Monday
-----------
through Friday, other than any day on which securities are not traded in the
system or on the exchange that is the principal market for the Bank Common
Stock, as determined by the Board of Directors of the Bank.
(k) For the purposes of this Section 3.01, the term "Bank Common Stock"
------------ -----------------
shall mean (i) the class of capital stock designated as the Common Stock, par
value $1.00 per share, of the Bank, at the date of this Agreement or (ii) any
other class of stock resulting from successive changes or reclassifications of
such capital stock consisting solely of changes in par value, or from par value
to no par value, or from no par value to par value. In the event that at any
time, as a result of an adjustment made pursuant to Section 3.01(a) or (e),
--------------- ---
shares of the Bank other than shares of Bank Common Stock are issuable upon
exercise of the Warrants, thereafter the number and Exercise Price of such other
shares so issuable shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with respect
to the Bank Common Stock contained in this Section 3.01, as may be determined in
------------
good faith by the Board of Directors of the Bank, and all other provisions of
this Agreement with respect to Bank Common Stock shall apply on like terms to
any such other shares. Subject to the foregoing, and unless the context
requires otherwise, all references to Bank Common Stock and Warrant Shares in
this Agreement and in the Warrant Certificates shall, in the event of an
adjustment pursuant to this Section 3.01, be deemed to refer also to any other
------------
securities or property then issuable upon exercise of the Warrants as a result
of such adjustment.
Section 3.02 No Adjustment for Cash Dividends. No adjustment shall be
--------------------------------
made in the Exercise Price or in the number of Warrant Shares purchasable upon
exercise of the Warrants in respect of any cash dividends paid or payable on
shares of Bank Common Stock or other securities of the Bank.
ARTICLE IV
RIGHTS OF WARRANT HOLDERS
<PAGE>
Section 4.01 No Rights as Stockholders. No Warrant Holder, as such, shall
-------------------------
be entitled to vote or to receive dividends or shall otherwise be deemed to be
the holder of shares of Bank Common Stock for any purpose, nor shall anything
contained herein or in any Warrant Certificate be construed to confer upon any
Warrant Holder, as such, any of the rights of a stockholder of the Bank or any
right to vote upon or give or withhold consent to any action of the Bank
(whether upon any reorganization, issuance of securities, reclassification or
conversion of Bank Common Stock, consolidation, merger, sale, lease, conveyance
or otherwise), receive notice of meetings or other action affecting stockholders
(except for notices expressly provided for in this Agreement) or receive
dividends or subscription rights, unless and until such Warrant Certificate
shall have been surrendered for exercise as provided in this Agreement, payment
in respect of such exercise shall have been received by the Warrant Agent, and
shares of Bank Common Stock thereunder shall have become issuable and such
person shall have been deemed to have become a holder of record of such shares.
If, at the date of surrender of such Warrant Certificate, the transfer books for
the Bank Common Stock shall be closed, certificates for the shares of Bank
Common Stock shall be issuable on the date on which such books shall next be
open (whether before, on or after the Expiration Date) and, until such date, the
Bank shall be under no duty to deliver any certificate for such shares of Bank
Common Stock. No Warrant Holder shall, upon the exercise of Warrants, be
entitled to any dividends if the record date with respect to payment of such
dividends shall be a date prior to the date such shares of Bank Common Stock
became issuable upon the exercise of such Warrants.
Section 4.02 Lost Warrants. If any Warrant Certificate is lost, stolen,
-------------
mutilated or destroyed, the Warrant Agent may, upon receipt of evidence
satisfactory to the Bank and the Warrant Agent of such loss, theft, mutilation
or destruction and on such terms as to indemnity or otherwise as the Bank and
the Warrant Agent may in their discretion require (which shall, in the case of a
mutilated Warrant Certificate, include the surrender thereof), issue a new
Warrant Certificate of like denomination and tenor as the lost, stolen,
mutilated or destroyed Certificate, and the Warrant Agent shall countersign and
deliver such new Certificate. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
such reasonable charges as the Bank or the Warrant Agent may prescribe. In the
event any Warrant Certificate is lost, stolen, mutilated or destroyed, and the
owner thereof desires to exercise the Warrants evidenced thereby, the Bank may,
in lieu of issuing a substitute Warrant Certificate, authorize the exercise
thereof upon receipt of the above evidence and on such terms of indemnity as it
may require.
- 10 -
<PAGE>
Section 4.03 Maintenance of Sufficient and Proper Shares of Bank Common
----------------------------------------------------------
Stock; Listing; Continuing Registration.
- ---------------------------------------
(a) The Bank shall at all times reserve and keep available a number of
authorized shares of Bank Common stock (and any other securities that may become
issuable upon the exercise of Warrants) sufficient to permit the exercise in
full of all outstanding Warrants and will cause to be available to the Warrant
Agent a sufficient number of certificates therefor. The transfer agent for the
Bank Common Stock is hereby irrevocably authorized and directed at all times to
reserve such number of authorized shares of Bank Common Stock (or other
securities) for such purpose. The Warrant Agent is hereby irrevocably
authorized to requisition from time to time from such transfer agent
certificates for shares of Bank Common stock issuable upon exercise of
outstanding Warrants and the Bank shall supply such transfer agent with duly
executed certificates for such purpose.
(b) The Bank covenants and agrees that it will use its best efforts to
secure the listing of shares of Bank Common Stock issuable upon the exercise of
the Warrants upon any and all securities exchanges on which the Bank Common
Stock shall be listed at the dates of exercise of such Warrants.
(c) So long as any unexpired Warrants remain outstanding and to the
extent required in order to comply with the applicable regulations of the Office
of Thrift Supervision (the "OTS Rules"), the Bank covenants and agrees to file
---------
such post-effective amendments to the offering circular filed with respect to
the Warrants under cover of Form OC pursuant to the OTS Rules (OTS No. 3088), or
such other offering circulars, post-effective amendments or supplements, as may
be necessary to permit the Bank to offer and sell in accordance with the OTS
Rules shares of Bank Common Stock upon the exercise of Warrants pursuant to this
Agreement. The Bank further covenants and agrees that, so long as any unexpired
Warrants remain outstanding, it shall exercise its reasonable diligence to
obtain and keep effective any other permits, consents and approvals of other
governmental authorities, and to qualify the shares of Bank Common Stock
issuable upon the exercise of Warrants, and maintain such qualification, under
the securities laws of such of the States of the United States, as may be
necessary to permit the offer and sale of shares of Bank Common Stock upon the
exercise of Warrants pursuant to this Agreement. The Bank shall not be required
to issue any shares of Bank Common Stock pursuant to the exercise of Warrants
for any period during which the Bank is endeavoring to obtain such continuing
registration, permits, consents, approvals or qualifications.
Section 4.04 Fractional Shares and Warrants.
------------------------------
- 11 -
<PAGE>
(a) Anything contained herein to the contrary notwithstanding, the Bank
shall not be required to issue any fraction of a share of Bank Common Stock in
connection with the exercise of Warrants. Warrants may not be exercised in such
number as would result (except for the provisions of this Section) in the
issuance of a fraction of a share of Bank Common Stock unless the Warrant Holder
is presenting for exercise Warrant Certificates representing all Warrants then
owned of record by such Warrant Holder. In such event, the Bank shall, upon the
exercise of all of such Warrants, issue to such Warrant Holder the aggregate
number of shares of Bank Common Stock called for thereby, rounded to the nearest
whole number of shares.
(b) Anything herein to the contrary notwithstanding, the Bank shall not
be required to issue fractions of Warrants on any distribution of Warrants to
Warrant Holders or to distribute Warrant Certificates that evidence fractional
Warrants. In such event, the Bank shall issue to such Warrant Holders the
aggregate number of Warrants to which such Warrant Holders are entitled, in each
case rounded to the nearest whole Warrant.
Section 4.05 Transfer and Exchange of Warrants. The Warrant Certificates
---------------------------------
shall be issued in registered form only. The Bank shall cause to be kept at the
office of the Warrant Agent a register in which, subject to such reasonable
regulations as the Warrant Agent may prescribe, the Bank shall provide for the
registration of Warrant Certificates and of transfers or exchanges of Warrant
Certificates as herein provided.
At the option of the Warrant Holder, Warrant Certificates may be exchanged
at such office, and upon payment of the charges hereinafter provided. Whenever
any Warrant Certificates are so surrendered for exchange, the Bank shall
execute, and the Warrant Agent shall countersign and deliver, the Warrant
Certificates that the Warrant Holder making the exchange is entitled to receive.
All Warrant Certificates issued upon any registration of transfer or
exchange of Warrant Certificates shall be the valid obligations of the Bank,
evidencing the same obligations, and entitled to the same benefits under this
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange.
Every Warrant Certificate surrendered for registration of transfer or
exchange shall (if so required by the Bank of the Warrant Agent) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Bank and the Warrant Agent, duly executed by the Warrant
Holder thereof by a duly appointed legal representative or by a duly authorized
- 12 -
<PAGE>
attorney (and with any signatures guaranteed as may be required pursuant to the
Warrant Certificate).
No service charge shall be made by the Warrant Agent for any registration
of transfer or exchange of Warrant Certificates. The Bank may require payment of
a sum sufficient to cover certain taxes or other governmental charges as
provided in Section 6.03.
------------
Any Warrant Certificate when duly endorsed in blank shall be deemed
negotiable and when a Warrant Certificate shall have been so endorsed, the
holder thereof may be treated by the Bank, the Warrant Agent and all other
persons dealing therewith as the absolute owner thereof for any purpose and as
the person entitled to exercise the rights represented thereby, or to transfer
thereof on the register of the Bank maintained by the Warrant Agent, any notice
to the contrary notwithstanding; but until such transfer on such register, the
Bank and the Warrant Agent may treat the Warrant Holder thereof as the owner for
all purposes.
ARTICLE V
WARRANT AGENT
Section 5.01 Nature of Duties and Responsibilities Assumed. The Bank hereby
---------------------------------------------
appoints the Warrant Agent to act as agent of the Bank as set forth in this
Agreement. The Warrant Agent hereby accepts the appointment as agent of the Bank
and agrees to perform that agency upon the terms and conditions herein set
forth, by all of which the Bank and conditions herein set forth by all of which
the Bank and the Warrant Holders, by their acceptance of the Warrants, shall be
bound.
Whenever in the performance of its duties under this Agreement, the Warrant
Agent shall deem it necessary or desirable that any fact or matter be proved or
established by the Bank prior to taking or suffering any action hereunder, such
fact or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chief Executive Officer, the President, any Vice
President or the Secretary of the Bank and delivered to the Warrant Agent; and
such certificate shall be full authorization to the Warrant Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
The Warrant Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct. The Warrant Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Warrant Certificates (except its countersignature on the Warrant
- 13 -
<PAGE>
Certificates and such statements or recitals as describe the Warrant Agent or
action taken or to be taken by it) or be required to verify the same, but all
such statements and recitals are and shall be deemed to have been made by the
Bank only. The Warrant Agent shall not have any liability or responsibility in
respect of the legality, validity or enforceability of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Warrant
Agent) or in respect of the validity or execution of any Warrant Certificate
(except its countersignature thereof); nor shall it be responsible or liable for
any breach by the Bank of any covenant or condition contained in this Agreement
or in any Warrant Certificate; nor shall it be responsible or liable for the
making of any change in the number of shares of Bank Common Stock required under
the provisions of Article III or responsible for the manner, method or amount of
-----------
any such change or the ascertaining of the existence of any facts that would
require any such adjustment or change; nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Bank Common Stock to be issued pursuant to this
Agreement or any Warrant Certificate or as to whether any shares of Bank Common
Stock will, when issued, be validly issued, fully paid and nonassessable.
The Warrant Agent shall be under no obligation to institute any action,
suit or legal proceeding or take any other action likely to involve expense
unless the Bank or one or more Warrant Holders shall furnish the Warrant Agent
with reasonable security and indemnity for any costs and expenses which may be
incurred. All rights of action under this Agreement or under any of the Warrants
may be enforced by the Warrant Agent without the possession of any of the
Warrants or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent, and any recovery of judgement
shall be for the ratable benefit of the Warrant Holders, as their respective
rights or interests may appear. The Warrant Agent shall promptly notify the Bank
in writing of any claim made or action, suit or proceeding instituted against it
arising out of or in connection with this Agreement.
The Warrant Agent is hereby authorized and directed to accept written
instructions with respect to the performance of its duties hereunder from the
Chief Executive Officer, the President, any Vice President or the Secretary of
the Bank, and to apply to any such officer for advice or instructions in
connection with the Warrant Agent's duties, and it shall not be liable for any
action taken or suffered to be taken or omitted by it in good faith in
accordance with the instructions of any such officer.
- 14 -
<PAGE>
The Warrant Agent will not be responsible or liable for any failure of the
Bank to comply with any of the covenants contained in this Agreement or in the
Warrant Certificates to be complied with by the Bank. The Warrant Agent will
not incur any liability or responsibility to the Bank or to any Warrant Holder
for any action taken, or any failure to take action, in reliance on any notice,
resolution, waiver, consent, order, certificate, or other paper, document or
instrument reasonably believed by the Warrant Agent to be genuine and to have
been signed, sent or presented by the proper party or parties.
The Warrant Agent may execute and exercise any of the rights and powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys, agents or employees, provided reasonable care has been exercised
in the selection and in the continued employment of any such attorney, agent or
employee.
The Bank will perform, execute, acknowledge and deliver or cause to be
performed, executed, acknowledged and delivered all such further acts,
instruments and assurances as may reasonably be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
The Warrant Agent will act hereunder solely as agent of the Bank in a
ministerial capacity, and its duties will be determined solely by the provisions
hereof. The Warrant Agent will not be liable for anything which it may do or
refrain from doing in connection with this Agreement except for its own
negligence, bad faith or willful misconduct.
Anything in this Agreement to the contrary notwithstanding, in no event
shall the Warrant Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Warrant Agent has been advised of the likelihood of such loss or damage
and regardless of the form of action.
Section 5.02 Right to Consult Counsel. The Warrant Agent may at any time
------------------------
consult with legal counsel satisfactory to it (who may be legal counsel for the
Bank), and the opinion of such counsel shall be full and complete authorization
and protection to the Warrant Agent as to any action taken, suffered or omitted
by it in good faith in accordance with such opinion; provided, however, that the
-------- -------
Warrant Agent shall have exercised reasonable care in the selection of such
counsel.
Section 5.03 Compensation and Reimbursement. The Bank agrees to pay to
------------------------------
the Warrant Agent from time to time compensation for all services rendered by it
hereunder as the Bank and the Warrant Agent may agree from time to time, and to
reimburse the
- 15 -
<PAGE>
Warrant Agent for reasonable expenses and disbursements incurred in connection
with the execution and administration of this Agreement (including the
reasonable compensation and the expenses of its counsel), and further agrees to
indemnify the Warrant Agent for, and to hold it harmless against, any loss,
liability or expense incurred without negligence, bad faith or willful
misconduct on its part, arising out of or in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
Section 5.04 Warrant Agent May Hold Bank Securities. The Warrant Agent
--------------------------------------
and any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Bank or its
affiliates or have a pecuniary interest in any transaction in which the Bank or
its affiliates may be interested, or contract with or lend money to the Bank or
its affiliates or otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Bank or for any other legal
entity.
Section 5.05 Change of Warrant Agent. The Warrant Agent may resign and be
-----------------------
discharged from its duties under this Agreement upon 60 days' prior notice in
writing mailed, by registered or certified mail, to the Bank. The Bank may
remove the Warrant Agent upon 60 days' prior notice in writing, mailed to the
Warrant Agent by registered or certified mail. If the Warrant Agent shall
resign or be removed or shall otherwise become incapable of acting, the Bank
shall appoint a successor to the Warrant Agent (the "Successor Warrant Agent")
-----------------------
and shall, within 30 days following such appointment, give notice thereof in
writing to each Warrant Holder. If the Bank shall fail to make such appointment
within a period of 30 days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent, then the Bank agrees to perform the duties of the
Warrant Agent hereunder until the Successor Warrant Agent is appointed. After
appointment, the Successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the Warrant Agent shall deliver
and transfer to the Successor Warrant Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Failure to give any notice provided for in this
Section, however, or any defect therein shall not affect the legality or
validity of the registration or removal of the Warrant Agent or the appointment
of the Successor Warrant Agent, as the case may be.
- 16 -
<PAGE>
ARTICLE VI
GENERAL
Section 6.01 Purchase of Warrants by the Bank. The Bank shall have the
--------------------------------
right, except as limited by law or other agreement, to purchase or otherwise
acquire Warrants at such times, in such manner and for such consideration as it
may deem appropriate.
Section 6.02 Cancelled Warrants. The Warrant Agent shall cancel any
------------------
Warrant Certificate delivered to it for exercise, in whole or in part, or
delivered to it for transfer, or for split-up, combination, exchange or
substitution and shall deliver to the Bank, in a manner satisfactory to the
Bank, such cancelled Warrant Certificates.
Section 6.03 Taxes on Issuance of Shares of Bank Common Stock. The Bank
------------------------------------------------
shall from time to time promptly pay all documentary stamp taxes, if any, that
may be imposed upon the Bank or the Warrant Agent with respect to the initial
issuance of Warrants and of shares of Bank Common Stock upon the exercise of
Warrants, provided, however, that the Bank shall not be required to pay any tax
-------- -------
or taxes that may be payable in respect of any transfer involved in the issue of
any Warrant Certificates or any certificates for shares of Bank Common Stock in
a name other than that of the Warrant Holder of the Warrant Certificate
surrendered upon the exercise of Warrants, and the Bank shall not be required to
issue or deliver such certificates unless and until the person or persons
requesting issuance thereof shall have paid to the Bank the amount of such tax
or shall have established to the satisfaction of the Bank that such tax has been
paid.
Section 6.04 Dates and Times. If any date set forth in this Warrant
---------------
Agreement shall fall on a day other than a full business day in New York City,
said date shall be deemed to be the next full business day succeeding that date.
All times shall be the legal time then in effect in New York City.
Section 6.05 Amendments to Warrant Agreement. The Bank and the Warrant
-------------------------------
Agent may, jointly, without the consent or concurrence of the Warrant Holders,
by supplemental agreement or otherwise, make any amendments, alterations,
deletions or corrections in this Agreement that they deem necessary or
desirable: (a) to cure any ambiguity or correct any defect, inconsistency,
clerical omission or mistake, or manifest error contained herein; (b) to confer
additional rights upon the Warrant Holders; or (c) in any other respect that is
not
- 17 -
<PAGE>
inconsistent with the provisions of the Warrants and which does not adversely
affect the interests of the Warrant Holders hereunder. The Bank and the Warrant
Agent also may supplement or amend the Warrant Agreement in any other respect
without notice to any Warrant Holder but with the written consent of the holders
of more than 50% in number of the Warrants then outstanding; provided, however,
-------- -------
that no such supplement or amendment may (i) many any modification of the terms
upon which the Warrants are exercisable or (ii) change the percentage of the
holders of the Warrants who must consent to such amendment or supplement,
without the consent of each Warrant Holder affected thereby.
Section 6.06 Binding Agreements. All of the covenants and provisions of
------------------
this Agreement by or for the benefit of the Bank or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Nothing expressed in this Agreement and nothing that may be implied from any of
the provisions hereof is intended, or shall be construed, to confer upon or give
to any person or corporation, other than the Bank, the Warrant Agent and the
Warrant Holders, any legal or equitable right, remedy or claim under or by
reason of this Agreement or of any covenant, condition, stipulation, promise or
agreement, herein, and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Bank, the Warrant Agent, the Warrant Holders, and their
respective successors and assigns.
Section 6.07 Copies of Agreement with Warrant Agent. A copy of this
--------------------------------------
Agreement, as such may be amended from time to time, shall be available for
inspection by any Warrant Holder at the office of the Warrant Agent, as
designated in Section 6.08, during normal business hours. As a condition of such
------------
inspection, the Warrant Agent may require any such Warrant Holder to submit his
or her Warrant Certificate for inspection.
Section 6.08 Notices. Any communication, notice or demand to be given
-------
hereunder shall be duly given if in writing and delivered, or sent by first
class mail, certified or registered, postage prepaid and addressed as follows:
(a) If to the Bank:
Glendale Federal Bank, FSB
700 N. Brand Boulevard
Glendale, California 91203
Attention: Secretary
- 18 -
<PAGE>
(b) If to the Warrant Agent:
Chemical Trust Company of California
300 South Grand Avenue, 2nd Floor
Los Angeles, California 90071
Attention: Office Manager
(c) If to a Warrant Holder, at such person's last known address as such
shall appear on the registration books maintained by the Warrant Agent.
Any party may change the address to which any communications, notice or
demand shall be given by giving notice of such change in conformity with the
provisions of this Section.
Section 6.09 Governing Law. This Agreement and each Warrant issued
-------------
hereunder shall be governed by and construed in accordance with the laws of the
State of California, without giving effect to conflict of laws.
Section 6.10 Headings. The Article and Section headings herein are for
--------
convenience only and are not part of this Agreement and shall not affect the
interpretation thereof.
Section 6.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which so executed shall be deemed to be an original, and
all such counterparts shall together constitute but one and the same instrument.
- 19 -
<PAGE>
IN WITNESS WHEREOF , this Agreement has been duly executed by the parties
hereto as of the day and year above written.
GLENDALE FEDERAL BANK,
FEDERAL SAVINGS BANK
By: /s/ Richard A. Fink
-------------------------------------
Name: Richard A. Fink
Title: Senior Executive Vice
President and Chief Legal
Officer
Attest:
/s/ James R. Eller Jr.
- -------------------------
Secretary
CHEMICAL TRUST COMPANY OF CALIFORNIA
As Warrant Agent
By: /s/ Sharon Magidson
--------------------------------------
Name: Sharon Magidson
Title: Vice President
Attest:
[SIGNATURE APPEARS HERE]
- -------------------------
Assistant Vice President
- 20 -
<PAGE>
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
Void After 5:00 p.m., New York City Time, on August 21, 2000
No.
__________WARRANT(S) TO PURCHASE SHARES
OF BANK COMMON STOCK
GLENDALE FEDERAL BANK, FEDERAL SAVINGS BANK
WARRANT TO PURCHASE BANK COMMON STOCK
This Warrant Certificate certifies that __________________________________
_______________________________________________________, or registered assigns,
is the registered holder of the number of warrants (the "Warrants") of Glendale
Federal Bank, Federal Savings Bank (the "Bank") set forth above. Each Warrant
entitles the registered holder thereof to purchase one fully paid and
nonassessable share of the Common Stock, par value $1.00 per share (the "Bank
Common Stock"), of the Bank at the exercise price (as may be adjusted as
provided in the Warrant Agreement referred to on the reverse hereof, the
"Exercise Price") of $12.00 per share, in lawful money of the United States of
America. The Warrants expire at 5:00 p.m., New York City time, on August 21,
2000 (the "Expiration Date"). Subject to the terms and conditions set forth
herein and in the Warrant Agreement, the Warrants evidenced hereby may be
exercised upon surrender of this Warrant Certificate and payment of the
aggregate Exercise Price at the office or agency of the Warrant Agent in Los
Angeles, San Francisco or in the city of New York (each such office, a "Warrant
Agent Office"), on any business day during the period commencing on the first
day following the first anniversary of the completion of the Recapitalization
referred to in the Warrant Agreement and ending at 5:00 p.m., New York City
time, on the Expiration Date.
The Exercise Price and the number of shares of Bank Common Stock
purchasable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events as set forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City time, on the
Expiration Date. After such time, the Warrants will become wholly void and of no
value.
<PAGE>
A - 2
REFERENCE HEREBY IS MADE TO THE FURTHER PROVISIONS OF THIS WARRANT
CERTIFICATE SET FORTH ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR
ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Holder.
IN WITNESS WHEREOF, the Bank has caused this Warrant Certificate to be
executed by its duly authorized officers, and the corporate seal hereunto
affixed.
Dated:
GLENDALE FEDERAL BANK, FEDERAL
SAVINGS BANK
(Corporate Seal) By:
---------------------------
Attest:
By:
-------------------------------
Countersigned:
CHEMICAL TRUST COMPANY OF CALIFORNIA,
as Warrant Agent
By:
-------------------------------
<PAGE>
A - 3
(FORM OF REVERSE OF WARRANT CERTIFICATE)
GLENDALE FEDERAL BANK, FEDERAL SAVINGS BANK
The Warrants evidenced by this Warrant Certificate is a part of a duly
authorized issue of Warrants to purchase a maximum of up to approximately 10.85
million shares of Bank Common Stock issued pursuant to a Warrant Agreement,
dated as of August 15, 1993 (the "Warrant Agreement"), duly executed and
delivered by the Bank to Chemical Trust Company of California, as Warrant Agent
(the "Warrant Agent"). The Warrant Agreement hereby is incorporated by reference
in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Bank and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be inspected at the Warrant
Agent Office in Los Angeles and is available upon written request addressed to
the Bank. All terms used herein that are defined in the Warrant Agreement have
the meanings assigned to them therein.
Warrants may be exercised to purchase shares of Bank Common Stock on any
business day during the period commencing on the first day following the first
anniversary of the completion of the Recapitalization referred to in the Warrant
Agreement and ending at 5:00 p.m., New York City time, on the Expiration Date,
at the Exercise Price set forth on the face hereof, subject to adjustment as
described in the Warrant Agreement. The holder of the Warrants evidenced by this
Warrant Certificate may exercise such Warrants by surrendering the Warrant
Certificate, with the form of election to purchase set forth hereon properly
completed and executed, together with payment of the aggregate Exercise Price,
in lawful money of the United States of America, and any applicable transfer
taxes, at the Warrant Agent Office.
In the event that less than all of the Warrants evidenced hereby are
exercised, there shall be issued to the holder hereof, or such holder's
assignee, a new Warrant Certificate evidencing Warrants not so exercised. No
adjustment shall be made for any cash dividends on any shares of Bank Common
Stock issuable upon exercise of the Warrants. After 5:00 p.m., New York City
time, on the Expiration Date, unexercised Warrants shall become wholly void and
of no value.
The Bank shall not be required to issue fractions of shares of Bank Common
Stock or any certificates that evidence fractional shares of Bank Common Stock.
Except as provided in the Warrant Agreement, Warrants may not be exercised in
such number as would
<PAGE>
A - 4
result in the issuance of a fraction of a share of Bank Common Stock.
Warrant Certificates, when surrendered at the Warrant Agent Office by the
registered holder thereof in person or by a legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in Warrant Agreement, but without payment of any service
charge, for another Warrant Certificate or Warrant Certificates of like tenor
evidencing in the aggregate a like number of Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Agent Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge, except for any tax or other governmental charge imposed in
connection therewith.
The Bank and Warrant Agent may deem and treat the registered holder hereof
as the absolute owner of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone) for the purpose of any
exercise hereof and for all other purposes, and neither the Bank nor the Warrant
Agent shall be affected by any notice to the contrary.
<PAGE>
A - 5
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants)
The undersigned hereby irrevocably elects to exercise ______ Warrants to
purchase shares of Bank Common Stock and herewith tenders in payment for such
shares of Bank Common Stock $________ in lawful money of the United States of
America, in accordance with the terms hereof. The undersigned requests that a
certificate representing the shares of Bank Common Stock be registered and
delivered as follows:
Name:
------------------------------------
Address:
------------------------------------
------------------------------------
Delivery Address:
(if different) ------------------------------------
------------------------------------
If such number of Warrants is less than the aggregate number of Warrants
represented by this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the balance of such shares of Bank Common Stock
be registered and delivered as follows:
Name:
------------------------------------
Address:
------------------------------------
------------------------------------
Delivery Address:
(if different) ------------------------------------
------------------------------------
- ------------------------------------
(Insert social security or other Signature:
identifying number of holder) --------------------------
NOTE: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration
or enlargement or any change whatsoever. If the certificate representing
the shares of Bank Common Stock or any Warrant
<PAGE>
A - 6
Certificate representing Warrants not exercised is to be registered in
a name other than that in which this Warrant Certificate is registered,
the signature of the holder hereof must be guaranteed by an eligible
guarantor institution pursuant to SEC Rule 17Ad-15.
Signature Guaranteed:
- -----------------------------------
<PAGE>
A - 7
ASSIGNMENT
(To be executed by the registered
holder if such holder desires to
transfer the Warrant Certificate)
FOR VALUE RECEIVED, the undersigned registered holder hereby sells, assigns
and transfers unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of assignee)
this Warrant Certificate, together with all right, title and interest therein,
and does irrevocably constitute and appoint_____________________________________
________________attorney, to transfer the within Warrant Certificate on the
books of the Warrant Agent, with full power of substitution.
Dated: Signature:
----------------------- --------------------------
- -----------------------------
(Insert social security or other
identifying number of assignee
NOTE: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever and must be
guaranteed by an eligible guarantor institution pursuant to SEC Rule
17Ad-15.
Signature Guaranteed:
- -----------------------------
<PAGE>
EXHIBIT 4.6
AMENDMENT NO.1 TO WARRANT AGREEMENT
THIS AMENDMENT NO. 1 TO WARRANT AGREEMENT (this "Amendment No. 1") dated as
of July 24, 1997 is entered into by and among Glendale Federal Bank, Federal
--
Savings Bank (the "Bank"), ChaseMellon Shareholder Services, LLC (as successor
to Chemical Trust Company of California ("Chemical"), the "Warrant Agent"), and
Golden State Bancorp Inc. ("Golden State") on the basis of the following facts:
WHEREAS, the Bank and Chemical entered into that certain Warrant Agreement
(the "Warrant Agreement") dated as of August 15, 1993 with respect to warrants
(the "Seven-Year Warrants") to acquire common stock, par value $1.00 per share
of the Bank (the "Bank Common Stock");
WHEREAS, pursuant to the terms of that certain Agreement and Plan of
Reorganization (the "Reorganization Agreement") dated as of May 28, 1997 by and
among the Bank, Golden State and Glendale Interim Federal Savings Bank, among
other things, (i) Golden State will become the holding company for the Bank, and
(ii) the Seven-Year Warrants will become exercisable, in accordance with their
terms and without the necessity of any exchange by the holders thereof, solely
to receive the number of shares of common stock, par value $1.00 per share of
Golden State (the "Golden State Common Stock") that equals the number of shares
of Bank Common Stock for which the Seven-Year Warrants were exercisable
immediately prior to the effective time (the "Effective Time") of the
reorganization transaction provided for in the Reorganization Agreement (the
"Reorganization"); and
WHEREAS, the parties hereto desire to amend the Warrant Agreement to
reflect the transactions comprising the Reorganization and their effects.
NOW THEREFORE, the parties hereto hereby agree as follows:
1. The term "Bank Common Stock" as used in the Warrant Agreement shall
mean Golden State Common Stock instead of Bank Common Stock.
2. All references to the "Bank" or the "Company" in Articles III and IV
of the Warrant Agreement shall be deemed to refer to Golden State instead of the
Bank.
3. All references to the "Bank" in Section 6.01 and 6.05 shall be deemed
to refer to both the Bank and Golden State.
4. As provided in the Reorganization Agreement and pursuant to Section
3.01(e) of the Warrant Agreement, the Warrant Holders shall have the right to
exercise their Warrants for the number of shares of Golden State Common Stock
that such Warrant Holder would have been entitled to receive at the Effective
Time if such Warrant Holder had exercised their Warrants immediately prior
thereto.
1
<PAGE>
5. Golden State shall cause the Warrant Agent to deliver the notice
required by Section 3.01(e) regarding this Amendment No. 1 to each Warrant
Holder.
6. Section 6.08 shall be amended in its entirety as follows:
"Section 6.08 Notices. Any communication, notice or demand to be given
-------
hereunder shall be duly given if in writing and delivered, or sent by first
class mail, certified or registered, postage prepaid and addressed as follows:
(a) If to the Bank or Golden State:
414 N. Central Avenue
Glendale, California 91203
Attn: Corporate Secretary
If to the Warrant Agent:
(b) ChaseMellon Shareholder Services, LLC
400 South Hope Street
4th Floor
Los Angeles, California 90071
Attn: Office Manager
(c) If to a Warrant Holder, at such person's last known address as
such address shall appear on the registration books maintained by the Warrant
Agent.
Any party may change the address to which any communication, notice or
demand shall be given by giving notice of such change in conformity with the
provisions of this Section."
7. This Amendment No. 1 shall be deemed effective as of the Effective
Time.
8. Except as otherwise specifically provided herein, the Warrant
Agreement shall remain unchanged.
2
<PAGE>
IN WITNESS WHEREOF, this Amendment No. 1 has been duly executed by the
parties hereto as of the day and year first above written.
GLENDALE FEDERAL BANK,
FEDERAL SAVINGS BANK
By: /s/ John E. Haynes
------------------------
Title: Chief Financial Officer
------------------------
CHASEMELLON SHAREHOLDER
SERVICES, LLC
By: /s/ Michael E. Dzieciolowski
------------------------------
Michael E. Dzieciolowski
Title: Assistant Vice President
---------------------------
GOLDEN STATE BANCORP INC.
By: /s/ John E. Haynes
------------------------
Title: Chief Financial Officer
------------------------
3
<PAGE>
Exhibit 5.1
[GOLDEN STATE BANCORP LETTERHEAD]
March 9, 1998
Golden State Bancorp Inc.
414 North Central Avenue
Glendale, California 91203
Re: Issuance of Common Stock Related to Acquisition of CENFED Financial
Corporation
Ladies and Gentlemen:
I have acted as counsel to Golden State Bancorp Inc., a Delaware
corporation (the "Corporation") for purposes of rendering this opinion relating
to the issuance (pursuant to a Registration Statement on Form S-4 (the
"Registration Statement")) of up to 7,560,000 shares of the Corporation's common
stock, par value $1.00 per share (the "Common Stock"). Such shares of Common
Stock are to be issued by the Corporation in connection with the merger of
CENFED Financial Corporation ("CENFED") with and into a newly formed, wholly-
owned subsidiary of the Corporation in accordance with that certain Agreement
and Plan of Merger, dated as of August 17, 1997, as amended through the date
hereof, by and between the Corporation and CENFED.
In rendering this opinion, I have examined such corporate records and other
documents, and I have reviewed such matters of law, as I have deemed necessary
or appropriate. Based on the foregoing, I am of the opinion that the Common
Stock is legally authorized and, when the Registration Statement has been
declared legally effective and the Common Stock has been issued and paid for
upon the terms and conditions set forth in the Registration Statement, the
Common Stock will be validly issued, fully paid and nonassessable.
I hereby consent to be named in the Registration Statement and in the
related proxy statement-prospectus contained therein as the attorney who passed
upon the legality of the Common Stock, and to the filing of a copy of this
opinion as Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ James R. Eller, Jr.
-----------------------
James R. Eller, Jr.
<PAGE>
Exhibit 8.1
[LETTERHEAD OF WACHTELL, LIPTON, ROSEN & KATZ]
March 9, 1998
Golden State Bancorp Inc.
414 North Central Avenue
Glendale, California 91203
Ladies/Gentlemen:
We have acted as special counsel to Golden State Bancorp Inc., a
Delaware corporation ("Golden State"), in connection with the proposed merger
(the "Merger") of CENFED Financial Corporation, a Delaware corporation
("CENFED"), with and into Golden State Financial Corporation, a Delaware
corporation and a direct wholly-owned subsidiary of Golden State ("Merger Sub"),
upon the terms and conditions set forth in the Agreement and Plan of Merger
dated as of August 17, 1997, as amended to the date hereof, between Golden State
and CENFED (the "Agreement"). At your request, in connection with the filing of
the Registration Statement on Form S-4 filed with the Securities and Exchange
Commission in connection with the Merger (the "Registration Statement"), we are
rendering our opinion concerning certain federal income tax consequences of the
Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of Golden State and the consent of CENFED, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in the certificates of the officers of Golden State and CENFED
(copies of which are attached hereto and which are incorporated herein by
reference), and have assumed that such certificates will be complete and
accurate as of
<PAGE>
Golden State Bancorp Inc.
March 9, 1998
Page 2
the Effective Time. We have also relied upon the accuracy of the Registration
Statement and the Proxy Statement-Prospectus included therein (together, the
"Proxy Statement"). Any capitalized term used and not defined herein has the
meaning given to it in the Proxy Statement or the appendices thereto (including
the Agreement).
We have also assumed that the transactions contemplated by the Agreement
will be consummated in accordance therewith and as described in the Proxy
Statement and that the Merger will qualify as a statutory merger under the
applicable laws of the State of Delaware.
Based upon and subject to the foregoing, it is our opinion that, under
currently applicable United States federal income tax law:
(1) The Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code.
(2) Golden State, Merger Sub and CENFED will each be a party to that
reorganization within the meaning of Section 368(b).
(3) No gain or loss will be recognized by holders of CENFED Common Stock
upon the receipt of Golden State Common stock in the Merger (except with respect
to cash received in lieu of fractional shares).
(4) No gain or loss will be recognized by Golden State, Merger Sub or
CENFED as a result of the Merger.
We express no opinion as to the United States federal income tax
considerations applicable to shareholders subject to special treatment under
United States federal income tax law (including, for example, a shareholder that
is not a U.S. person, is a financial institution, insurance company or a dealer
in securities or is a tax-exempt entity or individual who acquired CENFED Common
Stock pursuant to the exercise of an employee stock option or otherwise as
compensation). In addition, we express no opinion with respect to the tax
consequences of the Merger under applicable foreign, state or local laws.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to
<PAGE>
Golden State Bancorp Inc.
March 9, 1998
Page 3
the Registration Statement, and to the references to us under the caption "THE
MERGER -- Certain Federal Income Tax Consequences" and elsewhere in the Proxy
Statement. In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended.
Very truly yours,
/s/ Wachtell, Lipton, Rosen & Katz
<PAGE>
Exhibit 8.2
[LETTERHEAD OF MAYER, BROWN & PLATT]
March 9, 1998
CENFED Financial Corporation
CenFed Bank, a Federal Savings Bank
199 North Lake Avenue
Pasadena, California 91101
Re: Merger of CENFED Financial Corporation with and into a
Wholly-Owned Subsidiary of Golden State Bancorp Inc.
----------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to CENFED Financial Corporation ("CENFED")
in connection with a proposed merger pursuant to which CENFED will be merged
with and into Golden State Financial Corporation ("Merger Sub"), a wholly owned
direct subsidiary of Golden State Bancorp Inc. ("Golden State"), as provided for
in the Agreement and Plan of Reorganization dated as of August 17, 1997, as
amended on December 1, 1997 (the "Merger Agreement"). Upon consummation of this
transaction (the "Merger"), each issued and outstanding share of CENFED (other
than shares of CENFED common stock held in treasury), will be converted into the
right to receive shares of Golden State common stock as provided in the Merger
Agreement. Cash will be paid to each holder of CENFED Common Stock in lieu of
the issuance of fractional shares. You have requested that we provide opinions,
as required by section 6.3(b) of the Merger Agreement, regarding qualification
of the Merger as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and certain related matters.
The opinions set forth below are based upon the Internal Revenue Code of
1986, as amended (the "Code"), the legislative history with respect thereto,
rules and regulations promulgated thereunder, published rulings and court
decisions, all as in effect and existing on the date hereof, and all of which
are subject to change at any time, possibly on a retroactive basis. There can be
no assurance that our conclusions will not be rendered invalid as a result of
subsequent changes in the law, including changes to the Code, the regulations
thereunder, or the interpretation thereof by the courts or the Internal Revenue
Service.
In addition, in providing these opinions, we have relied upon (1) the
Merger Agreement,(2) the description of the Merger and related transactions set
forth in the OTS Application on Form H-(e)3 filed in connection with the
<PAGE>
CENFED Financial Corporation
March 9, 1998
Page 2
Merger, (3) the description of the
Merger and related transactions set forth in the Proxy Statement-Prospectus on
Form S-4 filed in connection with the Merger (the "Registration Statement"); and
(4) written representations provided by CENFED and Golden State concerning
certain facts underlying and relating to the proposed transactions (the
"Representations"). This opinion is conditioned on the Representations remaining
true, correct and complete at the effective date of the Merger. In the
Representations, the signatories thereof have undertaken to inform us if any
prior statement made therein becomes untrue prior to the Effective Date. In
addition, we have assumed that any representation or statement made "to the best
knowledge" or similarly qualified is correct without such qualification.
Based on the foregoing, we offer the following opinion:
1. The Merger will be treated for purposes of the Federal income tax as
a "reorganization" within the meaning of Section 368(a) of the Code.
2. Golden State, CENFED and Merger Sub will each be a "party" to that
reorganization within the meaning of Section 368(b) of the Code.
3. No gain or loss will be recognized by holders of CENFED Common Stock
upon the receipt of Golden State Common Stock in the Merger (except
with respect to cash received in lieu of fractional shares).
4. No gain or loss will be recognized by Golden State, CENFED or Merger
Sub as a result of the Merger.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to this firm under the heading
"Certain Federal Income Tax Consequences" in the Registration Statement.
Very truly yours,
/s/ Mayer, Brown & Platt
Mayer, Brown & Platt
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Golden State Bancorp Inc.:
We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Golden State Bancorp Inc. of our report dated July 23, 1997, except
for Note 24 of notes to the consolidated financial statements which is as of
August 18, 1997, with respect to the consolidated balance sheets of Glendale
Federal Bank, Federal Savings Bank, and subsidiaries as of June 30, 1997 and
1996, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1997, which report appears in the Form 8-K of Golden State
Bancorp Inc. dated September 23, 1997, and to the reference to our firm under
the heading "Experts" in the Proxy Statement-Prospectus.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
March 9, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Cenfed Financial Corporation
We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Golden State Bancorp Inc. (Registration Statement) of our report
dated January 27, 1997, with respect to the consolidated statements of financial
condition of CENFED Financial Corporation as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended, and to the reference to our firm under the
heading "Experts" in the Proxy Statement-Prospectus with respect to CENFED
Financial Corporation and subsidiaries.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
March 9, 1998
<PAGE>
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Golden State Bancorp Inc. on Form S-4 of our report dated March 8, 1995, on the
1994 consolidated financial statements of CENFED Financial Corporation appearing
in the Annual Report on Form 10-K of CENFED Financial Corporation for the year
ended December 31, 1996. We also consent to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte & Touche LLP
Los Angeles, California
March 9, 1998
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
First Nationwide (Parent) Holdings Inc.:
We consent to the incorporation by reference in the Registration Statement
on Form S-4 of Golden State Bancorp Inc. of our report dated March 7, 1997
with respect to the consolidated statements of financial condition of First
Nationwide (Parent) Holdings Inc. and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1996, which report appears in the Form 10-K of First Nationwide
(Parent) Holdings Inc. dated March 25, 1997, and to the reference to our Firm
under the heading "Experts" in the Proxy Statement--Prospectus. Our report
refers to a change in accounting for mortgage servicing rights in 1995.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
March 9, 1998
<PAGE>
EXHIBIT 23.8
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
RedFed Bancorp Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-4 of Golden State Bancorp Inc. of our report dated January 29, 1997,
with respect to the consolidated statements of financial condition of RedFed
Bancorp Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996,
which report appears in the Form 10-K of RedFed Bancorp Inc. for the year
ended December 31, 1996, and to the reference to our firm under the heading
"Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Orange County, California
March 9, 1998
<PAGE>
EXHIBIT 99.1
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CENFED FINANCIAL CORPORATION
The undersigned holder of shares of common stock of CENFED Financial
Corporation ("Company") hereby appoints John H. Michel and Robert K. Leishman,
or either of them, each with full powers of substitution, to vote all shares of
said stock which the undersigned could vote if personally present at the
Special Meeting of Stockholders of the Company to be held on April 7, 1998, at
10:30 a.m., California time, at 199 North Lake Avenue, Pasadena, California
("Special Meeting") and at any adjournments or postponements thereof on the
matters listed on the reverse side.
The undersigned acknowledges receipt of the Notice of Special Meeting of
Stockholders of the Company called for the date indicated herein and the Proxy
Statement-Prospectus (the "Proxy Statement-Prospectus") relating to such
meeting prior to the signing of this Proxy.
This revocable proxy will be voted as directed below. In the absence of any
direction, this proxy will be voted FOR the proposal set forth below.
1. Proposal to approve and adopt the Merger Agreement, as described in the
Proxy Statement-Prospectus.
[_] FOR[_] AGAINST[_] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
(Continued, and to be dated and signed, on the reverse side.)
<PAGE>
(Continued from other side)
2. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the Special Meeting of Stockholders or any
other adjournments thereof.
NOTE: PLEASE SIGN AS NAME APPEARS HEREON.
JOINT OWNERS SHOULD EACH SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH.
Date ________________________________, 1998
-------------------------------------------
SIGNATURE
-------------------------------------------
SIGNATURE
-------------------------------------------
TITLE
<PAGE>
EXHIBIT 99.3
CONSENT OF DIRECTOR NOMINEE
The undersigned hereby consents to the reference to the undersigned as having
agreed to become a director of Golden State Bancorp Inc. (the "Company") in the
Company's Registration Statement on Form S-4.
/s/ D. Tad Lowrey
_____________________________________
D. Tad Lowrey
November 24, 1997
<PAGE>
EXHIBIT 99.4
March 9, 1998
Board of Directors
CENFED Financial Corporation
199 North Lake Avenue
Pasadena, California 91101
Members of the Board:
We hereby consent to the use of our opinion letter to the Board of
Directors of CENFED Financial Corporation ("CENFED"), included as Appendix C to
the Proxy Statement/Prospectus that forms a part of the Registration Statement
on Form S-4 relating to the proposed merger of CENFED with and into Golden State
Bancorp, and to the references to such opinion in such Proxy Statement/
Prospectus under the captions "SUMMARY--Opinion of CENFED's Financial Advisor,"
"THE MERGER--Background of the Merger," "--Recommendation of CENFED Board and
Reasons for the Merger" and "--Opinion of CENFED's Financial Advisor". In giving
such consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended
(the "Securities Act"), or the rules and regulations of the Securities and
Exchange Commission (the "Commission") thereunder, nor do we admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act, or the rules and
regulations of the Commission thereunder.
Very truly yours,
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
/s/ Michael Barry
-----------------------------
Managing Director
