<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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)
<TABLE>
<S> <C> <C>
DELAWARE 6035 95-4642135
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
</TABLE>
414 NORTH CENTRAL AVENUE
GLENDALE, CALIFORNIA 91203
(818) 500-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
RICHARD A. FINK
VICE CHAIRMAN
GOLDEN STATE BANCORP INC.
414 NORTH CENTRAL AVENUE
GLENDALE, CALIFORNIA 91203
(818) 500-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
<TABLE>
<S> <C> <C>
JAMES R. WALTHER TODD H. BAKER
MAYER, BROWN & PLATT GIBSON, DUNN & CRUTCHER
350 SOUTH GRAND AVENUE AND ONE MONTGOMERY STREET
LOS ANGELES, CALIFORNIA 90071-1503 TELESIS TOWER
(213) 229-9597 SAN FRANCISCO, CALIFORNIA 94104-4505
(415) 393-8200
</TABLE>
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE 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. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE(2)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1.00 par value... (1) N/A N/A $52,543.98
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</TABLE>
(1) Not applicable. Pursuant to Rule 457(f), the registration fee is
calculated with reference to the number of shares of Common Stock of
RedFed Bancorp Inc. ("RedFed Common Stock") outstanding and issuable
pursuant to options.
(2) Pursuant to Rule 457(f) and 457(c),the registration fee is based on the
average of high and low prices of RedFed Common Stock, on March 31, 1998
($19.9375).
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
BECOMES EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[LOGO]
REDFED BANCORP INC.
300 EAST STATE STREET
REDLANDS, CALIFORNIA 92373
April 21, 1998
Dear Stockholder:
You are cordially invited to attend the annual meeting of the stockholders
of RedFed Bancorp Inc. ("RedFed"), the holding company for Redlands Federal
Bank, a federal savings bank, to be held May 26, 1998 at 10:00 a.m.,
California time, at the Redlands Federal Bank Headquarters, 300 East State
Street, Redlands, California.
The attached notice of annual meeting and Proxy Statement/Prospectus
describe the formal business to be transacted at the meeting. Directors and
officers of RedFed as well as a representative of KPMG Peat Marwick LLP,
RedFed's independent auditors, will be present at the meeting to respond to
any questions that you may have.
At the annual meeting, you will be asked to vote (i) for the election of
directors of RedFed, and (ii) on the proposed acquisition (the "Merger") of
RedFed by Golden State Bancorp Inc. ("Golden State") pursuant to an Agreement
and Plan of Merger, dated as of November 30, 1997 (the "Merger Agreement").
If the Merger is approved, the newly elected directors will serve until the
Merger is consummated, at which time the separate corporate existence of
RedFed will cease and consequently the RedFed board of directors will be
dissolved by operation of law. If the Merger is not approved or fails to be
consummated for any other reason, the newly elected members of the RedFed
board of directors shall serve their full three-year terms until their
successors have been duly elected and qualified.
The Merger Agreement provides that, as of the effective time of the Merger,
each share of RedFed common stock will be converted into the right to receive
the number of whole shares of common stock of Golden State ("Golden State
Common Stock") that equals the quotient derived by dividing (A) $20.75 by (B)
the unweighted arithmetic average of the daily closing prices of Golden State
Common Stock, as reported on the New York Stock Exchange, for the ten trading
days immediately preceding the date that is two business days prior to the
closing date for the Merger. Cash will be paid in lieu of the issuance of
fractional shares.
I urge all stockholders to read the Proxy Statement/Prospectus 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 "THE
MERGER--Reasons for the Merger and Recommendation of the RedFed Board of
Directors." These two sections describe the events leading up to the RedFed
Board of Directors' decision to enter into merger negotiations with Golden
State and the reasons why the RedFed Board of Directors believes that the
Merger is in the best interests of RedFed stockholders, customers and
employees.
<PAGE>
RedFed engaged NationsBanc Montgomery Securities LLC ("NationsBanc
Montgomery") to provide financial advisory services in connection with its
consideration of the Merger. NationsBanc Montgomery has delivered to the Board
of Directors its written opinion that, as of the date of the Merger Agreement,
the consideration to be received by holders of RedFed common stock in the
Merger was fair to RedFed's stockholders from a financial point of view.
THE BOARD OF DIRECTORS OF REDFED HAS APPROVED THE MERGER AND RECOMMENDS THAT
YOU VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT.
I strongly support the Merger and join with the Board in recommending the
Merger to you. We urge you to vote in favor of approval and adoption of the
Merger Agreement today.
Sincerely yours,
/s/ Anne Bacon
Anne Bacon
Chief Executive Officer,
President and Director
<PAGE>
REDFED BANCORP INC.
300 EAST STATE STREET
REDLANDS, CALIFORNIA 92373
(909) 793-2391
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 26, 1998
----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of RedFed
Bancorp Inc. ("RedFed") will be held on May 26, 1998, at 10:00 a.m., at the
Redlands Federal Bank Headquarters, 300 East State Street, Redlands,
California. Stockholders will be asked at the meeting to consider and vote
upon the following matters:
1. A proposal to approve and adopt the Agreement and Plan of Merger,
dated as of November 30, 1997 (the "Merger Agreement"), entered into
between RedFed and Golden State Bancorp Inc. ("Golden State"), pursuant to
which RedFed will be merged into a wholly-owned subsidiary of Golden State
and shares of Golden State Common Stock will be issued in exchange for
outstanding shares of RedFed Common Stock upon the terms and subject to the
conditions more fully set forth and described in the Merger Agreement and
the enclosed Proxy Statement/Prospectus.
2. The election of three directors for terms of three years each or until
their successors are elected and qualified.
3. Such other matters as may properly come before the meeting or any
adjournments or postponements thereof.
The Board of Directors has established April 15, 1998, as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting and at any adjournments or postponements thereof. Only holders of
RedFed Common Stock of record as of the close of business on that date will be
entitled to notice and to vote at the meeting or any adjournments or
postponements thereof.
By Order of the Board of Directors
/s/ Annemarie Mead
Annemarie Mead
Secretary
Redlands, California
April 21, 1998
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 3, 1998
PROXY STATEMENT
REDFED BANCORP INC.
ANNUAL MEETING TO BE HELD ON MAY 26, 1998
--------------
PROSPECTUS
GOLDEN STATE BANCORP INC.
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
This Proxy Statement/Prospectus is being furnished to the holders of the
common stock, par value $.01 per share ("RedFed Common Stock"), of RedFed
Bancorp Inc., a Delaware corporation ("RedFed"), in connection with the
solicitation of proxies by the Board of Directors of RedFed (the "RedFed
Board") for use at the meeting of the holders of the RedFed Common Stock (the
"RedFed Stockholders") to be held on May 26, 1998 at 10:00 a.m., at the
Redlands Federal Bank headquarters building, 300 East State Street, Redlands,
California, and at any postponements or adjournments thereof (the
"Stockholders Meeting").
At the Stockholders Meeting, RedFed stockholders will be asked to consider
and vote upon a proposal to approve the Agreement and Plan of Merger, dated as
of November 30, 1997 (the "Merger Agreement"), entered into between Golden
State Bancorp Inc., a Delaware corporation ("Golden State"), and RedFed,
pursuant to which RedFed will be merged (the "Merger" or the "RedFed Merger")
into a wholly-owned subsidiary of Golden State. See "The Merger". Upon the
completion of the Merger, each outstanding share of RedFed Common Stock will,
with certain exceptions more particularly described in the Merger Agreement
and in the accompanying Proxy Statement/Prospectus, be converted into the
right to receive the number of whole shares of Golden State Common Stock that
equals the quotient derived by dividing (i) $20.75 by (ii) the unweighted
arithmetic average of the daily closing prices of Golden State Common Stock
for the ten trading days for such stock preceding the date that is two
business days prior to the Closing Date (as defined herein) of the Merger,
with cash being paid in lieu of the issuance of fractional shares. See "THE
MERGER--Exchange Ratio for Conversion of RedFed Common Stock".
This Proxy Statement/Prospectus also constitutes the prospectus of Golden
State in respect of the shares of Golden State Common Stock to be issued
pursuant to the Merger Agreement (including shares issuable upon exercise of
employee stock options) currently estimated to aggregate shares.
The outstanding shares of Golden State Common Stock are listed on the New
York Stock Exchange (the "NYSE"). The last reported sale price of Golden State
Common Stock on the NYSE Composite Transactions Tape on April , 1998 was
$ 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"), Golden State
Financial Corporation ("Merger Sub"), First Gibraltar Holdings, Inc., a
Delaware corporation ("FGH"), and Hunter's Glen/Ford, Ltd., a Texas limited
partnership. 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 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 common stock of the combined company on a fully diluted basis
(without giving effect to any shares that may be issuable pursuant to the
Litigation Tracking Warrants(TM) described herein) or to the contingent
issuance of additional shares of Golden State Common Stock to FGH and Hunter's
Glen 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 Federal 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 "THE MERGER--Parties to the Merger--Golden
State--California Federal Merger."
--------------
This Proxy Statement/Prospectus and the accompanying proxy card are first
being mailed to shareholders of RedFed on or about April 21, 1998.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE 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 SHARES OF GOLDEN STATE COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
--------------
The date of this Proxy Statement/Prospectus is April 21, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
FORWARD-LOOKING STATEMENTS................................................ 1
AVAILABLE INFORMATION..................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 3
SUMMARY................................................................... 5
General................................................................. 5
Parties to the Merger................................................... 6
RedFed................................................................ 6
Golden State.......................................................... 6
Exchange Ratio for Conversion of RedFed Common Stock.................... 9
Required Vote of RedFed Stockholders.................................... 9
Recommendation of RedFed Board of Directors............................. 9
Opinion of RedFed Financial Advisor..................................... 9
Interests of Certain Persons in the Merger.............................. 9
Conditions to Completion of Merger...................................... 10
Termination of Merger Agreement; Termination Fee........................ 10
Federal Income Tax Consequences......................................... 11
Accounting Treatment.................................................... 11
Absence of Appraisal Rights............................................. 11
Trading Markets and Market Prices....................................... 11
Historical and Pro Forma Per Share Data................................. 13
Selected Financial Data................................................. 17
THE MERGER................................................................ 30
General................................................................. 30
Parties to the Merger................................................... 30
Background of the Merger................................................ 33
Reasons for the Merger and Recommendation of RedFed Board of Directors.. 35
Opinion of RedFed's Financial Advisor................................... 37
Effective Time of the Merger............................................ 41
Exchange Ratio for Conversion of RedFed Common Stock.................... 41
Treatment of RedFed Stock Options....................................... 42
Exchange of Stock Certificates.......................................... 42
Representations and Warranties.......................................... 43
Conditions to Completion of Merger...................................... 44
Required Regulatory Approvals........................................... 45
Conduct of Business Pending the Merger; No Solicitation of Competing
Offers................................................................. 46
ESOP Transactions....................................................... 47
Termination of Merger Agreement; Termination Fee........................ 47
Interests of Certain Persons in the Merger.............................. 48
Certain Federal Income Tax Consequences................................. 49
Comparison of Rights of Holders of Golden State Common Stock and RedFed
Common Stock........................................................... 50
Absence of Dissenter's Appraisal Rights................................. 53
Accounting Treatment.................................................... 54
Waiver; Amendment....................................................... 54
Expenses................................................................ 54
</TABLE>
i
<PAGE>
TABLE OF CONTENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C>
MANAGEMENT AND OPERATIONS AFTER THE MERGER................................ 55
TRADING MARKETS AND MARKET PRICES......................................... 56
ELECTION OF DIRECTORS..................................................... 57
Information with Respect to Nominees, Directors and Certain Executive
Officers............................................................... 57
Compliance with Section 16(a) of the Exchange Act....................... 59
Meetings of the RedFed Board and Committees of the RedFed Board......... 59
Directors' Compensation................................................. 60
Executive Compensation.................................................. 61
Security Ownership of Certain Beneficial Owners......................... 69
DESCRIPTION OF GOLDEN STATE CAPITAL STOCK................................. 70
General................................................................. 70
Golden State Common Stock............................................... 70
Golden State Preferred Stock............................................ 70
Warrants to Purchase Common Stock....................................... 74
VOTING AT THE STOCKHOLDERS MEETING AND RELATED MATTERS.................... 78
General................................................................. 78
Matters To Be Considered................................................ 78
Record Date; Voting Rights; Voting of Proxies........................... 78
Solicitation of Proxies................................................. 80
Notice of Business to be Conducted at an Annual Meeting................. 80
LEGAL MATTERS............................................................. 81
EXPERTS................................................................... 81
OTHER MATTERS............................................................. 81
STOCKHOLDER PROPOSALS..................................................... 81
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS............... 82
Appendix A--Agreement and Plan of Merger.................................. A-1
Appendix B--Opinion of NationsBanc Montgomery Securities, Inc. ........... B-1
</TABLE>
----------------
NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATION OR GIVE ANY INFORMATION
OTHER THAN THE INFORMATION 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 REDFED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO EXCHANGE FOR OR SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE FOR 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 ONLY 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 OTHERWISE INDICATED, HAS
BEEN FURNISHED BY GOLDEN STATE. INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS
REGARDING REDFED, INCLUDING CERTAIN INFORMATION REGARDING REDFED INCLUDED IN
THE PRO FORMA INFORMATION SET FORTH HEREIN, HAS BEEN FURNISHED BY REDFED.
ii
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Proxy Statement/Prospectus and the
documents incorporated herein by reference may constitute forward-looking
statements within the meaning of the Private Litigation Reform Act of 1995 and
involve known and unknown risks, uncertainties and other factors which may
cause the actual results of operations, financial condition, and other
performance or achievements of either or both of Golden State and RedFed to be
materially different from any such results, financial condition, performance
or achievements expressed or that may be implied by such forward-looking
statements. Golden State and RedFed each caution readers of this Proxy
Statement/Prospectus that the following important factors, among others, could
affect Golden State's or RedFed's respective businesses and cause actual
results to differ materially from those expressed in any forward-looking
statement made by Golden State or RedFed in, or incorporated by reference
into, this Proxy Statement/Prospectus:
1. Economic Conditions. Golden State's and RedFed's respective results of
operations and financial condition are strongly influenced by general economic
conditions in their respective market areas. Deterioration in these conditions
could have a material adverse impact on the quality of their loan portfolios
and the demand for their products and services. In particular, changes in
economic conditions in the residential real estate markets may affect their
results of operations and financial condition.
2. Interest Rates. Changes in interest rates from present levels may cause
Golden State's and RedFed's results of operations to differ materially from
the results currently anticipated.
3. Government Regulation and Monetary Policy. All forward-looking statements
made or incorporated by reference herein presume a continuation of the
existing regulatory environment and United States government monetary
policies. The banking and thrift industries are subject to extensive federal
and state regulation. Significant new laws or changes in, or repeals of,
existing laws may cause results to differ materially. In addition, federal
monetary policy significantly affects credit conditions for Golden State and
RedFed and a material change in such policies or conditions could have a
material impact on Golden State's or RedFed's results of operations.
4. Competition. Golden State and RedFed each compete with numerous other
domestic and foreign financial institutions and non-depository financial
intermediaries. Results of operations of Golden State and RedFed may differ if
circumstances affecting the nature or level of such competition change, such
as through the merger of competing financial institutions or the acquisition
of California institutions by out-of-state companies.
5. Credit Quality. A significant source of risk to both Golden State and
RedFed arises from the possibility that losses will be sustained because
borrowers, guarantors and related parties may fail to perform in accordance
with the terms of their loans or other credit agreements. Golden State and
RedFed have each adopted loan underwriting and credit monitoring procedures
and policies, including the establishment and review of allowances for credit
losses, that their respective managements believe are appropriate to reduce
this risk by assessing the likelihood of nonperformance, tracking loan
performance and diversifying their respective company's credit portfolios, but
such policies and procedures may not prevent unexpected losses that could have
material adverse effects on Golden State's and RedFed's results of operations
and financial condition.
6. Merger-Related Risks. Forward-looking statements with respect to the
results of operations, financial condition and business prospects of the
combined company resulting from the merger of Golden State and RedFed
described herein, including statements relating to expected cost savings,
revenue enhancements and funding advantages, involve risks and uncertainties
that may cause actual results to differ materially from those contemplated by
such statements due to the following possibilities, among others: (i) expected
cost savings from the Merger may not be fully realized or may not be realized
within the expected time frame, (ii) revenues following the Merger may be
lower than expected, (iii) competitive pressures among depository institutions
and other competing companies may increase significantly, (iv) costs related
to the integration of the businesses of Golden State and RedFed may be greater
than expected, (v) the other transactions contemplated by Golden State which
are described in "THE MERGER--Parties to the Merger--Golden State," including
the proposed
1
<PAGE>
California Federal Merger with FNPH, may not be completed or, if completed,
may not have the expected consequences, and (vi) the interest rate environment
and general economic and credit conditions, either nationally or in the
markets served by the combined company, may be less favorable than expected.
7. Other Risks. From time to time Golden State and RedFed have detailed
other risks with respect to their respective businesses and/or their financial
results in their respective filings with the Commission. RedFed shareholders
are urged to review the risks described in such filings. See "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
While management of Golden State and RedFed believe that their respective
assumptions regarding the above-described factors and other factors on which
forward-looking statements are based are reasonable, such assumptions are
necessarily speculative in nature, with the result that actual outcomes can be
expected to differ from those contemplated by such forward-looking statements
to greater or lesser degree. Consequently, there can be no assurances that the
results described in such forward-looking statements will, in fact, be
achieved.
2
<PAGE>
AVAILABLE INFORMATION
Golden State has filed a registration statement (the "Registration
Statement") on Form S-4 with the Securities and Exchange Commission (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 RedFed 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, including the Registration
Statement and other registration statements under the Securities Act,
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 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. Reports, proxy statements and other information concerning
RedFed also may be inspected at the offices of the National Association of
Securities Dealers, Inc. 1735 K Street, N.W., Washington, D.C. 20006.
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 (the "Reorganization"), 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 the holders of Golden State Common
Stock (the "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 RedFed Annual Report on Form 10-K for the year ended December 31, 1997
previously filed by RedFed with the Commission is hereby incorporated by
reference in this Proxy Statement/Prospectus.
In addition, all documents filed by Golden State and RedFed 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 Stockholders Meeting
has been finally adjourned are hereby deemed to be incorporated by reference
herein. Any
3
<PAGE>
statements contained in a documents 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.
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, 1997 and
(ii) 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.
In addition, this Registration Statement incorporates by reference the
consolidated financial statements of FNPH, including the notes thereto, set
forth in FNPH's Annual Report on Form 10-K for the fiscal year ended December
31, 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 THAT
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
REDFED (OTHER THAN EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST TO REDFED BANCORP INC., 300 EAST STATE STREET,
REDLANDS, CALIFORNIA 92373, ATTENTION: MS. ANNEMARIE MEAD, TELEPHONE NUMBER
(909) 793-2391 EXTENSION 201. GOLDEN STATE OR REDFED, 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 MAY 18, 1998.
4
<PAGE>
SUMMARY
This summary is not intended to be a complete description of all material
facts regarding the proposed Merger of Golden State and RedFed and the other
matters to be considered at the Stockholders Meeting to which this Proxy
Statement/Prospectus relates. It is qualified in all respects by the more
detailed information appearing, or incorporated by reference, elsewhere in this
Proxy Statement/Prospectus, the Appendices hereto and the documents referred to
herein. Capitalized terms used but not defined in this summary have the
meanings ascribed to such terms elsewhere in this Proxy Statement/Prospectus.
REDFED STOCKHOLDERS MEETING
This Proxy Statement/Prospectus relates to the Annual Meeting of Stockholders
of RedFed Bancorp Inc. (the "Stockholders Meeting") to be held at 10:00 a.m. on
May 26, 1998, at the Redlands Federal Bank headquarters building, 300 East
State Street, Redlands, California. RedFed stockholders will be asked at the
Stockholders Meeting to (i) approve and adopt the Merger Agreement more fully
described below and elsewhere in this Proxy Statement/Prospectus, pursuant to
which RedFed will be merged into a wholly-owned subsidiary of Golden State
Bancorp Inc., the holding company for Glendale Federal Bank, Federal Savings
Bank, and (ii) elect three persons to serve as members of the RedFed Board
pending consummation of the proposed Merger described herein or, if the Merger
is not approved or consummated, for terms of three years each and until their
successors are elected and qualified. Information concerning the proposed
Merger of RedFed and Golden State is set forth under the caption "THE MERGER"
below and elsewhere in this Proxy Statement/Prospectus. Information regarding
the persons nominated for election as Directors and related information is set
forth under the caption "ELECTION OF DIRECTORS" elsewhere in this Proxy
Statement/Prospectus. The RedFed Board has established the close of business on
April 15, 1998 as the record date for the determination of stockholders
entitled to notice of and to vote at the Stockholders Meeting and at any
adjournments or postponements thereof.
Stockholders may vote at the Stockholders Meeting in person or by proxy. This
Proxy Statement/Prospectus is being distributed to the RedFed stockholders by
the RedFed Board for the purpose of seeking the votes of RedFed stockholders
necessary to approve the Merger Agreement and to elect the three persons
nominated by the Board for election as Directors described herein. Only those
holders of RedFed Common Stock of record as of the close of business on the
April 15, 1998 record date established for the Stockholders Meeting by the
RedFed Board will be entitled to vote at the Stockholders Meeting or at any
adjournments or postponements thereof.
THE MERGER
GENERAL
The Merger Agreement was entered into between Golden State and RedFed on
November 30, 1997. The Merger Agreement provides for the acquisition of RedFed
through the Merger of RedFed into a wholly-owned subsidiary of Golden State
(the "Merger" or the "RedFed Merger"). It is further contemplated that
concurrently with or shortly after completion of the Merger, RedFed's wholly-
owned banking subsidiary, Redlands Federal Bank, a federal savings bank
("Redlands Federal Bank") will be merged into Golden State's wholly-owned
banking subsidiary, Glendale Federal Bank, Federal Savings Bank ("Glendale
Federal") (such Merger being referred to herein as the "Bank Merger"). Golden
State Common Stock will be issued to the stockholders of RedFed in the Merger
in exchange for their shares of RedFed Common Stock at the Exchange Ratio
described below. As a result of the Merger, and of the Bank Merger, the
separate corporate existence of RedFed, and of Redlands Federal Bank, will
cease and the resulting combined entities will conduct business thereafter
under the names and organizational documents of Golden State Bancorp Inc. and
Glendale Federal Bank, Federal Savings Bank, respectively.
5
<PAGE>
PARTIES TO THE MERGER
RedFed
RedFed was incorporated under Delaware law on October 18, 1993 for the
purpose of becoming the holding company for Redlands Federal Bank in connection
with Redlands Federal Bank's conversion from a federally chartered mutual
savings bank to a federally chartered stock savings bank. RedFed is one of the
three largest financial institutions headquartered in Southern California's
Inland Empire Region, which is comprised of 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. RedFed is
primarily engaged in the business of attracting retail transaction and term
deposits from the general public and using such deposits, together with
borrowings and equity capital, to originate and purchase real estate loans,
consumer loans, small business commercial loans, U.S. government and agency
securities, and mortgage-backed securities. RedFed also has sold loans from its
portfolio from time to time and offers insurance and securities brokerage
services through a subsidiary of Redlands Federal Bank.
RedFed is subject to examination and regulation as a savings and loan holding
company by the OTS. Redlands Federal Bank is regulated by the OTS and the
Federal Deposit Insurance Corporation (the "FDIC") and its customer deposits
are insured by the Savings Association Insurance Fund (the "SAIF") of the FDIC.
Redlands Federal Bank is also a member of the Federal Home Loan Bank of San
Francisco. RedFed's common stock is traded on the Nasdaq National Market under
the symbol REDF. At April 15, 1998, RedFed had approximately stockholders
of record (not including the number of persons or entities holding stock in
nominee or street name through various brokerage firms) and
outstanding shares of common stock.
The principal executive offices of RedFed are located at 300 East State
Street, Redlands, California 92373 and the telephone number at such offices is
(909) 793-2391. See "THE MERGER--Parties to the Merger--RedFed."
Golden State
Golden State is the holding company for Glendale Federal, which is one of the
largest savings institutions in the United States. Golden State had total
consolidated assets of $16.0 billion, deposits of $9.5 billion and
stockholders' equity of $1.1 billion at December 31, 1997. Golden State's
business consists primarily, through Glendale Federal, of attracting deposits
from the general public and using such deposits, together with the 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 180 banking offices and 26 loan offices
located throughout the State of California. Glendale Federal is subject to
regulation and examination by the OTS and its customer deposits are insured by
the SAIF of the FDIC. As a savings and loan holding company, Golden State is
also subject to examination and regulation by the OTS.
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 RedFed 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
6
<PAGE>
Merger is consummated, it is expected that affiliates of MAF and Ford would
together own between 42% and 45% of the common stock of the combined company on
a fully diluted basis (without giving effect to shares issuable pursuant to the
Litigation Tracking Warrants), or to the contingent issuance of additional
shares of Golden State Common Stock (the "Contingent Shares") to FGH and
Hunter's Glen under the California Federal Merger Agreement that could
substantially increase such percentage ownership. Before giving effect to the
possible issuance of Contingent Shares, affiliates of MAF and Ford will acquire
42% of the 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 price of Golden State Common Stock will
be the daily volume-weighted average price per share for Golden State Common
Stock on the NYSE for 15 randomly selected trading days during a 30-day period
following distribution to Golden State Stockholders of the Litigation Tracking
Warrants and ending three days before the closing date of the California
Federal Merger, adjusted to subtract the value attributable to 15% of the value
of the potential recovery in the Goodwill Litigation (as defined herein) not
included for purposes of calculating the number of shares of Golden State
Common Stock issuable upon exercise 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 (as defined herein), 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
combined company 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 valuation of the
California Federal Goodwill Litigation as derived from 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) 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 combined
company 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 combined company 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 combined company (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 combined
company. Further, the timing of the issuance of the Contingent Shares is not
presently ascertainable, and Contingent Shares with respect to the use by the
combined company 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 RedFed, Golden State, their respective
7
<PAGE>
managements 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 the actual 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
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "FORWARD-LOOKING STATEMENTS"
and "THE MERGER--Parties to the Merger--Golden State--California Federal
Merger."
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 foregoing description 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 complete text of such agreements, 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 STATEMENTS."
Golden State acquired CENFED Financial Corporation ("CENFED") on April ,
1998 pursuant to an Agreement and Plan of Merger, as amended, entered into
between Golden State and CENFED as of August 17, 1997. CENFED was the holding
company for CenFed Bank, a federally chartered savings bank that had 18
branches in southern California.
On [April 8], 1998, Golden State stockholders approved certain necessary
amendments to the Golden State Certificate of Incorporation that would permit
the distribution of Litigation Tracking Warrants(TM) ("Litigation Tracking
Warrants") to existing Golden State security holders. The Litigation Tracking
Warrants would entitle the holders thereof to receive upon the exercise
thereof, in the aggregate, Golden State Common Stock in an amount equal to
approximately 85% of the net after-tax proceeds, if any, received by Glendale
Federal in its litigation against the federal government seeking the recovery
of damages as a result of the government's breach of contract with Glendale
Federal regarding the regulatory treatment of goodwill. It is expected that the
Litigation Tracking Warrants will be distributed prior to the completion of the
Merger. RedFed Stockholders will not be entitled to receive Litigation Tracking
Warrants with respect to the shares of Golden State Common Stock they receive
in the Merger.
For additional information regarding the CalFed Transaction, the acquisition
of CENFED and the terms and issuance of the Litigation Tracking Warrants, see
"THE MERGER--Parties to the Merger--Golden State" and "DESCRIPTION OF GOLDEN
STATE CAPITAL STOCK--Warrants to Purchase Common Stock--Litigation Tracking
Warrants."
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.
Golden State's outstanding common stock is listed on the NYSE and the Pacific
Exchange. See "Trading Markets and Market Prices."
- --------
(TM)"Litigation Tracking Warrant" and "LTW" are trademarks of Credit Suisse
First Boston Corporation in connection with its investment banking services.
8
<PAGE>
EXCHANGE RATIO FOR CONVERSION OF REDFED COMMON STOCK
At the Effective Time (as defined herein) of the Merger, each outstanding
share of RedFed Common Stock will be converted into the right to receive the
number of whole shares of Golden State Common Stock that equals the quotient
(the "Exchange Ratio") derived by dividing (A) $20.75 by (B) the unweighted
arithmetic average of the daily closing prices of Golden State Common Stock, as
reported on the New York Stock Exchange Composite Tape, for the ten trading
days on which Golden State Common Stock is traded immediately preceding the
date that is two business days prior to the Closing Date (such average of daily
closing prices being referred to in the Merger Agreement as the "Final Golden
State Price"). Cash will be paid in lieu of the issuance of fractional shares
based on the Final Golden State Price.
REQUIRED VOTE OF REDFED STOCKHOLDERS
The affirmative vote of the holders of a majority of the issued and
outstanding shares of RedFed Common Stock will be required to approve and adopt
the Merger Agreement. Accordingly, failure to vote on this matter will have the
same effect as a vote against the Merger. The election of directors requires
the affirmative vote of a majority of the shares of RedFed Common Stock present
in person or represented by proxy at the Stockholders Meeting.
RECOMMENDATION OF REDFED BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF REDFED (THE "REDFED BOARD") HAS APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE REDFED BOARD BELIEVES
THAT THE MERGER IS FAIR AND IN THE BEST INTERESTS OF REDFED AND THE REDFED
STOCKHOLDERS AND RECOMMENDS THAT THE REDFED STOCKHOLDERS VOTE "FOR" THE
ADOPTION AND APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER, AT THE STOCKHOLDERS MEETING.
For a discussion of the factors considered by the RedFed Board in reaching
its conclusion, see "THE MERGER--Background of the Merger" and "--Reasons for
the Merger and Recommendation of RedFed Board of Directors."
OPINION OF REDFED FINANCIAL ADVISOR
NationsBanc Montgomery Securities LLC (through its predecessor NationsBanc
Montgomery Securities, Inc., "NationsBanc Montgomery"), which served as
financial advisor to RedFed in connection with the Merger, has rendered its
opinion to the RedFed Board that the consideration to be received by the
holders of shares of RedFed was fair from a financial point of view, as of the
date of such opinion. Such opinion was delivered to the RedFed Board at its
meeting on November 30, 1997. A copy of the opinion delivered by NationsBanc
Montgomery is set forth as Appendix B 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 NationsBanc Montgomery
in rendering such opinion. See "THE MERGER--Opinion of RedFed Financial
Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the RedFed Board with respect to the
Merger Agreement and the transactions contemplated thereby, stockholders should
be aware that certain members of RedFed management and the RedFed Board have
certain interests in the Merger that are in addition to the interests of
stockholders of RedFed generally. These interests arise from, among other
things, certain employee and director benefit and bonus plans, indemnification
arrangements and other matters which Golden State will assume or has agreed to
provide after the Merger. See "THE MERGER--Interests of Certain Persons in the
Merger."
9
<PAGE>
CONDITIONS TO COMPLETION OF MERGER
Completion of the Merger is subject to the satisfaction or waiver (to the
extent permitted by applicable law) prior to the Effective Time by Golden State
and RedFed of the following conditions, among others: (i) approval of the
Merger Agreement by the stockholders of RedFed, (ii) receipt of all necessary
regulatory approvals, consents and waivers and compliance with all other legal
requirements, without the imposition of 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; (iii) no party to the Merger
Agreement shall be subject to any order, decree or injunction of any court or
agency of competent jurisdiction enjoining or prohibiting the consummation of
the Merger or any other transaction contemplated by the Merger Agreement, and
no litigation or proceeding brought by any governmental agency seeking to
prevent consummation of the transactions contemplated by the Merger Agreement
shall be pending against Golden State or RedFed; (iv) approval of the shares of
Golden State Common Stock issuable to RedFed stockholders pursuant to the
Merger for listing on NYSE upon official notice of issuance; and (v) receipt by
each of Golden State and RedFed of certain letters from the independent
accountants of the other party relating to the financial statements of such
party and financial information relating to such party set forth or
incorporated by reference in this Proxy Statement/Prospectus. The conditions
relating to stockholder approval, regulatory approval and compliance with
certain other legal requirements are not subject to waiver by either party to
Merger Agreement.
Golden State's and RedFed's respective obligations to complete the Merger are
subject to the satisfaction or waiver prior to the Effective Time of the
following additional conditions, among others: (i) the representations and
warranties of Golden State and RedFed set forth in the Merger Agreement must
have been true and correct in all material respects when made and must continue
to be true and correct in all material respects as of the Closing Date;
(ii) each party must have performed its covenants and agreements contained in
the Merger Agreement in all material respects; (iii) there must have been no
material adverse change in the financial condition, business or assets of each
party and its subsidiaries taken as a whole since December 31, 1996, in the
case of RedFed, and June 30, 1997, in the case of Golden State; (iv) each party
must have received the favorable opinion of its counsel as to certain of the
federal income tax consequences of the Merger (see "THE MERGER--Certain Federal
Income Tax Consequences"); and (v) Golden State must have received satisfactory
evidence from RedFed that the fiduciaries of the RedFed ESOP have determined
that certain transactions in connection with termination of the RedFed ESOP are
prudent and in the best interest of the participants and beneficiaries of the
RedFed ESOP and that the ESOP Transactions have been completed (see "THE
MERGER--ESOP Transactions" for a further description of such transactions).
Satisfaction of any of these conditions may be waived only by the party for
whose benefit the condition was included in the Merger Agreement.
TERMINATION OF MERGER AGREEMENT; TERMINATION FEE
The Merger Agreement may be terminated at any time, before or after approval
of the Merger Agreement by RedFed stockholders, by the mutual consent of Golden
State and RedFed. The Merger Agreement may also be terminated by either Golden
State or RedFed: (i) if a majority of the board of directors of either party so
elects in the event of the failure of RedFed stockholders to approve the Merger
Agreement or in the event of a material breach by the other party of any
representation, warranty, covenant or agreement contained in the Merger
Agreement which remains uncured; (ii) by written notice of either party to the
other in the event that any required regulatory approval to the Merger or any
of the other transactions contemplated by the Merger Agreement is not obtained
or that any governmental authority of competent jurisdiction shall have issued
a final, nonappealable order enjoining or otherwise prohibiting consummation of
the transactions contemplated by the Merger Agreement; or (iii) upon a majority
vote of the board of directors of either party if the Merger is not completed
by July 31, 1998, provided that either party will have the right to extend the
effectiveness of the Merger Agreement for up to an additional 45 days if prior
to July 31, 1998, such party notifies the other party in writing of its belief
that the approvals, consents or waivers can be obtained and of a reasonable
factual basis for such party's belief that such approvals, consents or waivers
are imminent.
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<PAGE>
The Merger Agreement may also be terminated by: (i) Golden State if the
RedFed Board fails to recommend approval of the Merger to the RedFed
stockholders or shall have withdrawn such recommendation or modified or changed
such recommendation in a manner adverse in any respect to the interests of
Golden State, and (ii) by RedFed if Golden State shall have entered into a
letter of intent or a definitive agreement with respect to a merger,
consolidation or similar transaction involving, or any purchase of all or
substantially all of the consolidated assets, deposits or equity securities,
of, Golden State, pursuant to which the stockholders of Golden State would have
less than 50% of the common equity of the surviving entity immediately after
the transaction.
As an inducement to Golden State to agree to enter into the Merger Agreement,
RedFed agreed in the Merger Agreement to pay a termination fee of $7.5 million
to Golden State in the event the Merger Agreement is terminated under certain
circumstances involving an Acquisition Proposal with respect to RedFed from a
party other than Golden State. Such termination fee would be payable if (i) the
Merger Agreement is terminated under specified circumstances at a time when
such an Acquisition Proposal exists, and (ii) within 12 months after any such
termination RedFed or any of its subsidiaries enters into a definitive
agreement with respect to an Acquisition Proposal. The term "Acquisition
Proposal" is defined in the Merger Agreement to mean any proposal or offer to
RedFed or to stockholders of RedFed with respect to a merger, consolidation or
similar transaction involving, or any purchase of all or any significant
portion of the consolidated assets, deposits or any equity securities of,
RedFed.
FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will be treated as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), and that, accordingly, no gain or loss will be recognized for
federal income tax purposes by the stockholders of RedFed, except with respect
to cash received in lieu of the issuance of fractional shares, or by Golden
State or RedFed. The obligations of Golden State and RedFed to complete the
Merger are conditioned upon receipt from their respective legal counsel of
favorable legal opinions regarding these tax consequences. Such counsel have
each indicated that they expect to be able to render such opinions, based on
current law and Internal Revenue Service regulations and applicable judicial
and administrative interpretations thereof. In rendering such opinions, counsel
will rely upon representations contained in certificates of executive officers
of RedFed and Golden State.
ACCOUNTING TREATMENT
Golden State will account for the acquisition of RedFed in the Merger using
the purchase method of accounting. Under this method of accounting, the value
of the consideration to be paid by Golden State in the Merger will be allocated
to the assets acquired and liabilities assumed based upon their estimated fair
values at the date of completion of the Merger. The results of operations of
RedFed prior to the Merger will not be included in the reported results of
operations of the combined company thereafter.
ABSENCE OF APPRAISAL RIGHTS
Under Delaware law, RedFed stockholders will not be entitled to exercise any
dissenter's appraisal rights with respect to the Merger.
TRADING MARKETS AND MARKET PRICES
The Golden State Common Stock is listed on the NYSE and the Pacific Exchange
under the symbol "GSB." As of February 28, 1998, there were 51,236,994 shares
of Golden State Common Stock outstanding held by approximately 6,252 holders of
record. The RedFed Common Stock is listed on the Nasdaq National Market System
under the symbol "REDF." As of the Record Date, there were shares of RedFed
Common Stock outstanding held by approximately holders of record.
11
<PAGE>
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 National Market System for shares of RedFed Common Stock, in each case
on November 28, 1997, the last trading day preceding public announcement of the
Merger, and on April , 1998.
<TABLE>
<CAPTION>
GOLDEN STATE REDFED
COMMON COMMON
STOCK STOCK
------------ ------
<S> <C> <C>
November 28, 1997........................................ $33.31 $20.00
April , 1998..........................................
------ ------
</TABLE>
For additional information regarding the market prices of the Golden State
Common Stock and RedFed Common Stock during the previous two years, see
"TRADING MARKETS AND MARKET PRICES."
12
<PAGE>
HISTORICAL AND PRO FORMA PER SHARE DATA
The following table sets forth (i) selected comparative per share data for
each of Golden State and RedFed 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 CENFED Merger, the Other Pro
Forma Events (as defined herein) and the California Federal Merger using the
purchase method of accounting. The unaudited pro forma comparative earnings per
share data assume the Merger, the CENFED Merger, the Other Pro Forma Events 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 assume the Merger, the CENFED 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 CENFED 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 times of such transactions and, therefore,
actual amounts are expected to differ from those reflected below. See
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS."
The historical and unaudited pro forma 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 RedFed,
CENFED and FNPH, all of which are incorporated by reference herein, and the
unaudited pro forma condensed combined financial statements giving effect to
the Merger, the CENFED Merger, the Other Pro Forma Events 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 CENFED Merger, the Other Pro Forma
Events and the California Federal Merger been consummated at the beginning or
at the end of the periods indicated.
13
<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>
BASIC EARNINGS (LOSS) PER COMMON SHARE(1)
Historical:
Golden State............................... $ 1.03 $ 0.72
RedFed..................................... 0.79 0.32
Pro forma giving effect to the:
Merger and CENFED Merger(2)(3)(10)......... 1.03 0.69
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma
Events(4)(5)(10)(11)...................... 0.40 (0.52)
Equivalent pro forma giving effect to the:
Merger and CENFED Merger(9)(10)............ 0.72 0.49
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma
Events(9)(10)............................. 0.28 (0.37)
DILUTED EARNINGS (LOSS) PER COMMON SHARE(1)
Historical:
Golden State............................... $ 0.82 $ 0.64
RedFed..................................... 0.76 0.31
Pro forma giving effect to the:
Merger and CENFED Merger(2)(3)(10)......... 0.84 0.62
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma
Events(4)(5)(10)(11)...................... 0.37 (0.52)
Equivalent pro forma giving effect to the:
Merger and CENFED Merger(9)(10)............ 0.59 0.44
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma
Events(9)(10)............................. 0.26 (0.37)
BOOK VALUE PER COMMON SHARE (AS OF END OF
PERIOD)
Historical:
Golden State............................... $18.96 $17.81
RedFed..................................... 11.70 10.80
Pro forma giving effect to the:
Merger and CENFED Merger(6)................ 20.07 19.08
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma
Events(7)(11)............................. 20.18 20.09
Equivalent pro forma giving effect to the:
Merger and CENFED Merger(9)................ 14.11 13.42
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma Events(9).. 14.19 14.13
TANGIBLE BOOK VALUE PER COMMON SHARE (AS OF END
OF PERIOD)
Historical:
Golden State............................... $17.11 $15.83
RedFed..................................... 11.66 10.76
Pro forma giving effect to the:
Merger and CENFED Merger(8)................ 15.88 14.35
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma
Events(8)(11)............................. 3.54 2.29
Equivalent pro forma giving effect to the:
Merger and CENFED Merger(9)................ 11.17 10.09
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma Events(9).. 2.49 1.61
</TABLE>
14
<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) Golden State has a fiscal year ending June 30, and RedFed and CENFED have
a fiscal year ending December 31. The unaudited pro forma comparative per
share data reflect the combined financial information of Golden State for
the fiscal year ended June 30, 1997 and of RedFed and CENFED for the
twelve-month period ended June 30, 1997 and the combined financial
information of Golden State for the six months ended December 31, 1997 and
of RedFed and CENFED for the six months ended December 31, 1997.
(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 CENFED 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 CENFED Exchange Ratio of 1.2). This computation does not
reflect the impact of new shares of Golden State Common Stock to be issued
pursuant to the Merger as Golden State expects to repurchase in the open
market the same number of shares that will be issued in the Merger.
(4) Golden State has a fiscal year ending June 30, and RedFed, CENFED and FNPH
each have a fiscal year ending December 31. The unaudited pro forma
comparative per share data reflect the combined financial information of
Golden State for the fiscal year ended June 30, 1997 and of RedFed, CENFED
and FNPH (considering the Other Pro Forma Events) for the twelve-month
period ended June 30, 1997 and the combined financial information of
Golden State for the six months ended December 31, 1997 and of RedFed,
CENFED and FNPH for the six months ended December 31, 1997.
(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) 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 the end of the period presented) plus the
number of shares of Golden State Common Stock to be issued in the CENFED
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
CENFED Exchange Ratio of 1.2). This computation does not reflect the
impact of new shares of Golden State Common Stock to be issued pursuant to
the Merger as Golden State expects to repurchase in the open market the
same number of shares that will be issued in the Merger.
(7) 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.
(8) 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
6 and 7, except that total pro forma stockholders' equity was reduced by
total pro forma goodwill and other intangible assets.
(9) The equivalent pro forma per share amounts are computed by multiplying the
related pro forma per share amounts by an estimated Exchange Ratio of
0.7032. For pro forma presentation purposes, the closing price of Golden
State Common Stock on March 13, 1998, adjusted for the assumed issuance of
Golden State Litigation Tracking Warrants(TM), was used to estimate the
Exchange Ratio. Golden State's closing price on March 13, 1998, $35.50 per
share, reduced by an assumed per-share value of the Litigation Tracking
Warrants(TM) of $5.99, results in an estimated Exchange Ratio of 0.7032
shares of Golden State Common Stock for each share of RedFed Common Stock.
15
<PAGE>
(10) Golden State expects to repurchase shares of Golden State Common Stock in
the open market in an amount not to exceed the number of shares to be
issued in the RedFed Merger. For pro forma presentation purposes, the
number of shares of Golden State Common Stock expected to be issued in the
RedFed Merger was assumed to be repurchased at the beginning of each
period presented for an aggregate amount of $158.0 million. As a result of
the use of cash in such repurchase, pro forma net income for the six
months ended December 31, 1997 and the year ended June 30, 1997 would be
reduced by approximately $2.6 million and $5.2 million, respectively,
representing increased interest expense at an interest rate of 5.625% and
the related income tax effect at a combined marginal rate of 42%.
Accordingly, pro forma and equivalent pro forma basic and diluted earnings
per share, after giving effect to such repurchase, would be as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
BASIC EARNINGS (LOSS) PER COMMON SHARE
Pro forma giving effect to the:
Merger and CENFED Merger................... $0.98 $0.60
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma Events..... 0.37 (0.56)
Equivalent pro forma giving effect to the:
Merger and CENFED Merger (9)............... 0.69 0.42
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma Events
(9)....................................... 0.26 (0.39)
DILUTED EARNINGS (LOSS) PER COMMON SHARE
Pro forma giving effect to the:
Merger and CENFED Merger................... $0.80 $0.54
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma Events..... 0.35 (0.56)
Equivalent pro forma giving effect to the:
Merger and CENFED Merger (9)............... 0.56 0.38
Merger, CENFED Merger, California Federal
Merger and the Other Pro Forma Events
(9)....................................... 0.25 (0.39)
</TABLE>
(11) The pro forma amounts do not reflect the issuance of any Contingent
Shares. See Note I of the Notes to Unaudited Pro Forma Condensed Combined
Financial Statements Giving Effect to the CENFED Merger, the RedFed Merger
and the California Federal Merger.
16
<PAGE>
SELECTED FINANCIAL DATA
The following tables present (i) summary selected financial data for each of
Golden State, RedFed, CENFED, 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 the CENFED Merger, and (iii)
summary selected unaudited pro forma financial data of Golden State reflecting
the consummation by Golden State of the Merger, the CENFED Merger, and the
California Federal Merger. The selected unaudited pro forma financial data have
been prepared giving effect to the Merger, the CENFED Merger and the California
Federal Merger using the purchase method of accounting and for purposes of such
selected pro forma financial data, the RedFed, CENFED, 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." In addition, the FNPH
consolidated statement of operations for the year ended June 30, 1997 gives
effect to the merger of First Nationwide Bank, A Federal Savings Bank with and
into California Federal Bank, A Federal Savings Bank (the "Cal Fed
Acquisition"), the issuance of First Nationwide Escrow Corp.'s $575 million of
Senior Subordinated Notes due 2003 (the "10 5/8% Notes"), and the issuance to
the public of $500 million of California Federal Preferred Capital
Corporation's 9 1/8% Noncumulative Exchangeable Preferred Stock (the "REIT
Preferred Stock", and collectively with the Cal Fed Acquisition and the 10 5/8%
Notes, the "Other Pro Forma Events"). The selected unaudited pro forma
financial data reflect the Merger, the CENFED 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 CENFED Merger and California
Federal Merger, as the case may be, and, therefore actual amounts are expected
to 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 RedFed, CENFED, and FNPH for each of the years
prior to and including the year ended December 31, 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 RedFed,
CENFED, 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 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."
17
<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)
Tangible book value per
common share(1)........ $ 17.11 $ 15.83 $ 16.11 $ 16.63 $ 10.89 (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.
18
<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.
19
<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
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents...... $ 34,200 $ 33,746 $ 30,985 $ 23,074 $ 28,022
Investment securities.......... 21,604 34,695 41,655 38,899 55,101
Loans receivable, net.......... 895,056 729,862 682,984 733,132 645,670
Mortgage-backed securities..... 15,975 43,547 52,116 79,971 109,982
Real estate held for sale or
investment.................... 1,372 1,372 1,698 10,228 12,582
Real estate acquired through
foreclosure................... 4,758 5,800 24,560 31,041 9,429
Investment in capital stock of
Federal Home Loan Bank........ 9,115 6,486 6,914 8,561 6,623
Accrued interest receivable.... 5,962 4,953 5,014 4,590 4,657
Property and equipment, net.... 16,935 17,656 17,619 19,164 18,731
Other assets................... 4,777 4,387 8,269 12,193 26,049
---------- -------- -------- -------- --------
$1,009,754 $882,504 $871,814 $960,853 $916,846
========== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Deposits....................... $ 844,619 $790,803 $776,528 $805,334 $835,134
FHLB advances.................. 60,000 -- -- -- --
Other borrowings............... 4,418 4,418 31,133 80,085 8,845
Other liabilities.............. 16,467 15,165 16,075 19,926 19,506
Stockholders' equity........... 84,250 72,118 48,078 55,508 53,361
---------- -------- -------- -------- --------
$1,009,754 $882,504 $871,814 $960,853 $916,846
========== ======== ======== ======== ========
Common shares outstanding...... 7,200 7,058 3,961 3,977 (1)
Book value per common share.... $ 11.70 $ 10.22 $ 12.14 $ 13.96 (1)
Tangible book value per common
share......................... $ 11.66 $ 10.21 $ 12.14 $ 13.96 (1)
</TABLE>
- --------
(1) RedFed was incorporated in October, 1993, 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 as RedFed had no shares issued or outstanding as of such
date.
20
<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
------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Interest income................ $66,508 $61,499 $64,224 $ 56,515 $59,436
Interest expense............... 36,731 33,038 38,366 29,869 30,869
------- ------- ------- -------- -------
Net interest income........... 29,777 28,461 25,858 26,646 28,567
Provisions for loan losses..... 1,139 2,838 7,938 12,651 12,990
------- ------- ------- -------- -------
Net interest income after
provisions for loan losses... 28,638 25,623 17,920 13,995 15,577
Non-interest income:
Letter of credit fees and
other fee income ............ 6,612 5,822 6,212 6,280 6,404
Gain on sale of servicing .... -- 803 -- -- --
Gain/(loss) on sale of loans,
investments and mortgage-
backed securities ........... 13 (4) 1,383 (486) 365
Curtailment gain on
retirement plan ............. -- -- 3,390 -- --
Other income.................. 421 346 213 481 115
------- ------- ------- -------- -------
Total non-interest
income................... 7,046 6,967 11,198 6,275 6,884
Non-interest expense:
Compensation and benefits..... 11,999 11,438 12,063 14,200 12,494
Occupancy and equipment ...... 7,122 7,038 6,831 7,816 6,973
Federal deposit insurance
premiums..................... 1,448 2,388 2,401 2,423 2,274
Acquisition costs ............ 397 -- -- -- --
FDIC Special Assessment....... -- 5,421 -- -- --
Other expense, net ........... 3,019 2,942 2,990 2,756 3,717
------- ------- ------- -------- -------
Total general and
administrative expense... 23,985 29,227 24,285 27,195 25,458
Real estate operations, net.... 1,200 1,311 10,258 8,370 3,222
Provision for losses on letters
of credit..................... -- 2,402 2,536 9,895 694
------- ------- ------- -------- -------
Total non-interest ex-
pense.................... 25,185 32,940 37,079 45,460 29,374
Earnings (loss) before income
taxes......................... 10,499 (350) (7,961) (25,190) (6,913)
Income taxes (benefits)........ 66 7 124 1,150 (3,669)
------- ------- ------- -------- -------
Earnings (loss) before
cumulative effect of change
in accounting principle ..... 10,433 (357) (8,085) (26,340) (3,244)
Cumulative effect of change
in accounting principle...... -- -- -- -- --
------- ------- ------- -------- -------
Net earnings (loss)....... $10,433 $ (357) $(8,085) $(26,340) $(3,244)
======= ======= ======= ======== =======
Earnings (loss) per share(1):
Basic......................... $ 1.46 $ (0.07) $ (2.04) $ (6.14)(2) (3)
Diluted....................... $ 1.41 $ (0.07) $ (2.04) $ (6.14)(2) (3)
Weighted average shares
outstanding:
Common shares................. 7,141 5,146 3,955 3,977 (3)
Common shares and dilutive
potential common shares...... 7,426 5,146 3,955 3,977 (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 October, 1993, 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 year
ended December 31, 1993 as RedFed had no shares issued or outstanding
during that period.
21
<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
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and amounts due
from banks............. $ 24,947 $ 17,441 $ 21,928 $ 22,560 $ 15,823
Federal funds sold...... 2,000 7,500 7,288 1,394 394
Investment securities... 189,799 161,719 133,778 114,631 111,639
Loans held for
investment and for
sale, net.............. 1,525,558 1,500,958 1,592,277 1,327,269 941,245
Mortgage-backed
securities............. 417,393 442,015 341,288 315,753 375,905
Real estate held for
sale or investment..... 204 202 5,410 4,891 5,530
Real estate acquired in
settlement of loans.... 4,004 10,466 6,236 9,826 3,907
Deferred income taxes... 3,558 6,201 3,818 11,990 --
Accrued interest
receivable............. 15,700 14,685 14,894 11,669 8,272
Goodwill and other
intangible assets...... 203 205 248 701 3,745
Other assets............ 24,107 23,255 28,074 28,999 22,394
---------- ---------- ---------- ---------- ----------
$2,207,473 $2,184,647 $2,155,239 $1,849,683 $1,488,854
========== ========== ========== ========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Customer deposit
accounts............... $1,551,240 $1,558,470 $1,551,329 $1,310,505 $1,040,181
Securities sold under
agreements to
repurchase............. 74,488 130,639 150,052 147,412 94,277
Borrowings from the
FHLB................... 413,500 349,479 300,500 265,700 252,500
Other borrowings........ 17,750 17,750 22,800 23,000 7,881
Other liabilities....... 14,889 14,491 26,006 11,845 7,509
Stockholders' equity.... 135,606 113,818 104,552 91,221 86,506
---------- ---------- ---------- ---------- ----------
$2,207,473 $2,184,647 $2,155,239 $1,849,683 $1,488,854
========== ========== ========== ========== ==========
Common shares
outstanding(1) ........ 6,006 5,670 5,515 5,401 5,004
Book value per common
share(1) .............. $ 22.58 $ 20.07 $ 18.96 $ 16.89 $ 17.29
Tangible book value per
common share(1)........ $ 22.54 $ 20.04 $ 18.91 $ 16.76 $ 16.54
</TABLE>
- --------
(1) Gives effect to a stock split in April 1993 and stock dividends declared in
April 1996 and April 1997.
22
<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
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Interest income............... $164,410 $157,083 $136,449 $99,137 $86,488
Interest expense.............. 113,179 105,924 97,964 60,141 47,145
-------- -------- -------- ------- -------
Net interest income...... 51,231 51,159 38,485 38,996 39,343
Provision for loan losses..... 6,000 8,050 2,900 2,300 4,075
-------- -------- -------- ------- -------
Net interest income after
provisions for loan
losses.................. 45,231 43,109 35,585 36,696 35,268
Non-interest income:
Loan servicing fees.......... 3,652 3,940 3,977 3,421 2,970
Customer deposit account
fees........................ 1,946 1,947 1,921 2,044 2,143
Gain on sale of investment
securities and MBS.......... 2,029 1,124 82 1,307 90
Gain (loss) on sale of
loans....................... 3 40 101 (25) 1,122
Gain (loss) from real estate
operations.................. (1,545) 3,288 (682) (1,417) (3,221)
Commissions from sales of
investment products......... 1,694 1,721 1,226 1,705 1,164
Other income................. 828 573 629 328 401
-------- -------- -------- ------- -------
Total non-interest
income.................. 8,607 12,633 7,254 7,363 4,669
Operating expenses:
Compensation and employee
benefits.................... 17,451 16,272 17,078 14,923 12,028
Net occupancy................ 5,755 6,187 5,288 5,294 3,574
Deposit insurance premiums... 985 3,329 3,149 2,740 1,703
Savings Association
Insurance Fund
recapitalization premium.... -- 9,106 -- -- --
Data and check processing.... 1,367 1,549 1,707 2,056 1,822
Advertising and marketing.... 719 942 820 973 653
Intangible amortization...... 3 62 (46) 922 359
Other expenses............... 6,760 6,620 5,155 5,161 5,388
-------- -------- -------- ------- -------
Total operating
expenses................ 33,040 44,067 33,151 32,069 25,527
Earnings before income tax
provision (benefit) and
extraordinary items.......... 20,798 11,675 9,688 11,990 14,410
Income tax provision
(benefit)............... 7,008 (27) 2,491 2,992 5,802
-------- -------- -------- ------- -------
Earnings before extraor-
dinary items............ 13,790 11,702 7,197 8,998 8,608
Extraordinary items, net...... -- (364) -- -- --
-------- -------- -------- ------- -------
Net earnings............. $ 13,790 $ 11,338 $ 7,197 $ 8,998 $ 8,608
======== ======== ======== ======= =======
Earnings per share(1):
Basic........................ $ 2.37 $ 2.03 $ 1.32 $ 1.73 $ 1.72
Diluted...................... $ 2.27 $ 1.92 $ 1.26 $ 1.66 $ 1.66
Weighted average shares
outstanding:
Common shares................ 5,807 5,574 5,455 5,189 4,998
Common shares and dilutive
potential common shares..... 6,074 5,897 5,730 5,431 5,188
</TABLE>
- --------
(1) Earnings per share have been restated to reflect the adoption of Statement
of Financial Accounting Standards No. 128, "Earnings Per Share."
23
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
GOLDEN STATE, REDFED 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(1)................................. $ 172,577
Federal funds sold and assets purchased under resale agreements.... 522,736
Other investments.................................................. 215,622
Loans receivable, net.............................................. 14,150,689
Mortgage-backed securities, net.................................... 2,757,311
Real estate held for sale or investment............................ 7,900
Real estate acquired in settlement of loans........................ 54,081
Investment in capital stock of FHLB, at cost....................... 299,822
Mortgage servicing assets.......................................... 272,370
Goodwill and other intangible assets............................... 244,625
Other assets....................................................... 526,903
-----------
$19,224,636
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits........................................................... $11,940,851
Securities sold under agreements to repurchase..................... 891,516
Borrowing from the FHLB............................................ 4,795,682
Other borrowings................................................... 23,744
Other liabilities.................................................. 286,085
Stockholders' equity(1)............................................ 1,286,758
-----------
$19,224,636
===========
Common shares outstanding(1)....................................... 58,343
Book value per common share(2) .................................... $ 20.07
Tangible book value per common share(2)............................ $ 15.88
</TABLE>
- --------
(1) Calculated net of an expected repurchase by Golden State of shares of
Golden State Common Stock in the open market in an amount not to exceed the
number of shares to be issued in the Merger at an estimated cost of $158.0
million.
(2) Calculated net of Golden State Preferred Stock at its liquidation value of
$115,550.
24
<PAGE>
GOLDEN STATE, REDFED AND CENFED(1)
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................................ $694,405 $1,297,553
Interest expense............................... 440,725 836,846
-------- ----------
Net interest income.......................... 253,680 460,707
Provision for loan losses...................... 4,616 33,481
-------- ----------
Net interest income after provision for loan
losses...................................... 249,064 427,226
Other income:
Fee income.................................... 56,519 103,490
Loss on sale of loans, net.................... (190) (182)
Gain on sale of mortgage-backed securities,
net.......................................... 325 57
Other income, net............................. 2,120 397
-------- ----------
Total other income........................... 58,774 103,762
Other expenses:
Compensation and employee benefits............ 81,002 143,189
Occupancy expense, net........................ 20,272 37,658
Regulatory insurance.......................... 4,685 20,614
Advertising and promotion..................... 12,307 25,784
Furniture, fixtures and equipment............. 10,255 19,201
Other general and administrative expenses..... 44,124 74,339
-------- ----------
Total general and administrative expenses.... 172,645 320,785
SAIF special assessment....................... -- 70,046
Legal expense--goodwill lawsuit............... 9,977 24,058
Acquisition and restructuring costs........... 2,487 --
Operations of real estate held for sale or
investment................................... (736) 1,139
Operations of real estate acquired in
settlement of loans.......................... 2,571 9,816
Amortization of goodwill and other intangible
assets....................................... 9,101 15,546
-------- ----------
Total other expenses......................... 196,045 441,390
Earnings before income tax provision........... 111,793 89,598
Income tax provision........................... 47,187 35,541
-------- ----------
Net earnings................................. $ 64,606 $ 54,057
======== ==========
Net earnings applicable to common shareholders:
Net earnings.................................. $ 64,606 $ 54,057
Dividends declared on preferred stock......... (5,055) (10,841)
Premium on exchange of preferred stock for
common stock................................. -- (4,173)
-------- ----------
$ 59,551 $ 39,043
======== ==========
Earnings per share:
Basic(2)...................................... $ 1.03 $ 0.69
Diluted(2).................................... $ 0.84 $ 0.62
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 six months ended December 31, 1997,
with the financial information of RedFed and CENFED for the six months
ended December 31, 1997 and the financial data of Golden State for the year
ended June 30, 1997 with the financial data of RedFed and CENFED for the
twelve month period ended June 30, 1997.
(2) Golden State expects to repurchase shares of Golden State Common Stock in
the open market in an amount not to exceed the number of shares to be
issued in the RedFed Merger. For pro forma presentation purposes, the
number of shares of Golden State Common Stock expected to be issued in the
RedFed Merger was assumed to be repurchased at the beginning of each period
presented for an aggregate amount of $158.0 million. As a result of the use
of cash in such repurchase, pro forma net income for the six months ended
December 31, 1997 and the year ended June 30, 1997 would be reduced by
approximately $2.6 million and $5.2 million, respectively, representing
increased interest expense at an interest rate of 5.625% and the related
income tax effect at a combined marginal rate of 42%. Accordingly, pro
forma basic and diluted earnings per share, after giving effect to such
repurchase, would be $0.98 and $0.80, respectively, for the six months
ended December 31, 1997, and $0.60 and $0.54, respectively, for the year
ended June 30, 1997.
25
<PAGE>
FNPH
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and amounts due
from banks............. $ 350,214 $ 135,534 $ 154,758 $ 149,564 $ 1,848
Interest-bearing
deposits in other
banks.................. 36,164 20,619 32,778 39,219 42,156
Short-term investment
securities............. 25,933 113,716 125,035 -- --
----------- ----------- ----------- ----------- ----------
Cash and cash
equivalents........... 412,311 269,869 312,571 188,783 44,004
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
Mortgage-backed
securities available
for sale, at fair
value.................. 5,076,598 1,598,652 1,477,514 -- --
Mortgage-backed
securities held to
maturity............... 1,337,877 1,621,662 1,524,488 3,153,812 341,224
Loans held for sale,
net.................... 1,483,466 825,316 1,203,412 26,354 4,687
Loans receivable, net... 19,424,410 10,212,583 8,829,974 9,966,886 29,244
Receivables from FSLIC
Resolution Fund, net... -- -- -- -- 16,450
Covered assets.......... -- -- 39,349 311,603 592,593
Investment in Federal
Home Loan Bank System.. 468,191 220,962 109,943 128,557 41,996
Office premises and
equipment, net......... 159,349 100,164 93,509 76,523 3,272
Foreclosed real estate,
net.................... 76,997 51,987 48,535 37,369 399
Accrued interest
receivable............. 188,203 106,034 100,604 87,706 2,104
Intangible assets....... 675,927 140,564 18,606 12,217 --
Mortgage servicing
rights................. 536,703 423,692 241,355 86,840 --
Other assets............ 650,740 517,297 316,905 150,050 34,131
----------- ----------- ----------- ----------- ----------
$31,362,156 $16,635,073 $14,666,781 $14,683,559 $1,125,222
=========== =========== =========== =========== ==========
LIABILITIES, MINORITY
INTEREST AND
STOCKHOLDER'S EQUITY
Deposits................ $16,202,605 $ 8,501,883 $10,241,628 $ 9,196,656 $ 431,778
Securities sold under
agreements to
repurchase............. 1,842,442 1,583,387 969,510 1,883,490 119,144
Other borrowings........ 11,232,530 5,364,894 2,392,862 2,808,979 440,792
Other liabilities....... 702,959 399,446 299,635 140,832 20,614
----------- ----------- ----------- ----------- ----------
Total liabilities...... 29,980,536 15,849,610 13,903,635 14,029,957 1,012,328
----------- ----------- ----------- ----------- ----------
Minority Interest....... 1,175,704 613,852 358,991 323,935 --
----------- ----------- ----------- ----------- ----------
Stockholder's Equity:
Common stock........... 1 1 1 1 1
Additional paid-in
capital............... -- 161 267,055 267,055 85,569
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
----------- ----------- ----------- ----------- ----------
Stockholder's equity.... 205,916 171,611 404,155 329,667 112,894
----------- ----------- ----------- ----------- ----------
$31,362,156 $16,635,073 $14,666,781 $14,683,559 $1,125,222
=========== =========== =========== =========== ==========
</TABLE>
- --------
Per share information is not presented as FNPH is a closely held corporation.
26
<PAGE>
FNPH
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- -------- -------- ---
<S> <C> <C> <C> <C> <C> <C>
Interest income......... $2,102,700 $1,233,799 $1,075,845 $293,139 $ 95,264
Interest expense........ 1,498,417 848,294 734,815 199,845 74,728
---------- ---------- ---------- -------- --------
Net interest income.... 604,283 385,505 341,030 93,294 20,536
Provision for loan
losses................ 79,800 39,600 37,000 6,226 1,402
---------- ---------- ---------- -------- --------
Net interest income
after provision for
loan losses........... 524,483 345,905 304,030 87,068 19,134
---------- ---------- ---------- -------- --------
Noninterest income:
Loan servicing fees,
net................... 143,919 123,887 70,265 10,042 11,731
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
Gain on sale of
branches.............. 3,569 363,342 -- -- 140,877
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 13,895
---------- ---------- ---------- -------- --------
Total noninterest
income................ 364,484 653,378 150,973 41,158 190,876
---------- ---------- ---------- -------- --------
Noninterest expense:
Compensation and
employee benefits..... 256,448 204,818 154,288 48,846 24,951
Occupancy and
equipment............. 81,914 51,936 49,897 12,247 5,343
Data processing........ 12,402 10,491 9,787 2,888 3,739
Savings Association
Insurance Fund deposit
insurance premium..... 10,680 81,149 22,262 6,813 3,259
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
Other.................. 113,882 80,111 61,329 18,671 25,632
---------- ---------- ---------- -------- --------
Total noninterest
expense............... 650,569 491,736 332,553 96,298 63,392
---------- ---------- ---------- -------- --------
Income before income
taxes, extraordinary
item and minority
interest............... 238,398 507,547 122,450 31,928 146,618
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
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
Minority interest....... 131,851 161,191 59,138 4,259 --
---------- ---------- ---------- -------- --------
Net income............. $ 65,232 $ 420,577 $ 122,464 $ 26,487 $144,118
========== ========== ========== ======== ========
</TABLE>
- --------
Earnings per share data are not presented as FNPH is a closely held
corporation.
27
<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, the
CENFED Merger, and the California Federal Merger, as if the Merger, the CENFED
Merger, and the California Federal Merger each had occurred on December 31,
1997 in the case of the statement of financial condition, and at the beginning
of each of the periods presented in the case of the statements of operations.
See "THE MERGER--Parties to the Merger--Golden State." In addition, the
unaudited pro forma condensed statement of operations for the year ended June
30, 1997 gives effect to the Other Pro Forma Events. This information should be
read in conjunction with the historical consolidated financial statements of
Golden State (and its predecessor, Glendale Federal), RedFed, CENFED, and FNPH,
including the notes thereto, incorporated herein by reference. Financial
statement data for RedFed, CENFED, and FNPH included herein are derived solely
from each of RedFed's, CENFED'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 have been 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 CENFED MERGER AND THE CALIFORNIA FEDERAL
MERGER
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<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................................................ 1,751,395
-----------
$51,878,930
===========
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........................................... 1,516,044
Minority interest........................................... 1,012,136
Stockholders' equity........................................ 2,421,380
-----------
$51,878,930
===========
Common shares outstanding................................... 114,271
Book value per common share................................. $ 20.18
Tangible book value per common share........................ $ 3.54
</TABLE>
28
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
GIVING EFFECT TO THE MERGER, THE CENFED MERGER AND THE CALIFORNIA FEDERAL
MERGER
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
Interest income................................ $1,759,798 $3,420,800
Interest expense............................... 1,204,279 2,342,465
---------- ----------
Net interest income........................ 555,519 1,078,335
Provision for loan losses...................... 44,516 114,081
---------- ----------
Net interest income after provision for
loan losses............................... 511,003 964,254
Other income:
Fee income................................... 177,052 336,476
Gain (loss) on sale of loans, net............ (190) 218
Gain on sale of mortgage-backed securities,
net......................................... 325 1,157
Other income, net............................ 70,151 128,841
---------- ----------
Total other income......................... 247,338 466,692
Other expenses:
Compensation and employee benefits........... 209,948 399,755
Occupancy expense, net....................... 61,342 123,516
Regulatory insurance......................... 9,915 105,729
Advertising and promotion.................... 24,809 39,650
Furniture, fixtures and equipment............ 10,255 19,201
Other general and administrative expenses.... 159,466 226,896
---------- ----------
Total general and administrative expenses.. 475,735 914,747
Restructuring charges........................ 2,487 --
SAIF special assessment...................... -- 188,246
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...................................... 66,337 128,738
---------- ----------
Total other expenses....................... 553,924 1,263,407
Earnings before income tax provision........... 204,417 167,539
Income tax provision........................... 110,128 115,817
---------- ----------
Earnings before minority interest and
extraordinary items........................... 94,289 51,722
Minority interest.............................. 44,233 93,360
Extraordinary items, net....................... -- (1,586)
---------- ----------
Net earnings (loss)........................ $ 50,056 $ (43,224)
========== ==========
Net earnings applicable to common shareholders:
Net earnings (loss).......................... $ 50,056 $ (43,224)
Dividends declared on preferred stock........ (5,055) (10,841)
Premium on exchange of preferred stock for
common stock................................ -- (4,173)
---------- ----------
$ 45,001 $ (58,238)
========== ==========
Earnings (loss) per share:
Basic(1) .................................... $ 0.40 $ (0.52)
Diluted(1)................................... 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>
- -------
(1) Golden State expects to repurchase shares of Golden State Common Stock in
the open market in an amount not to exceed the number of shares to be
issued in the RedFed Merger. For pro forma presentation purposes, the
number of shares of Golden State Common Stock expected to be issued in the
RedFed Merger was assumed to be repurchased at the beginning of each period
presented for an aggregate amount of $158.0 million. As a result of the use
of cash in such repurchase, pro forma net income for the six months ended
December 31, 1997 and the year ended June 30, 1997 would be reduced by
approximately $2.6 million and $5.2 million, respectively, representing
increased interest expense at an interest rate of 5.625% and the related
income tax effect at a combined marginal rate of 42%. Accordingly, pro
forma basic and diluted earnings per share, after giving effect to such
repurchase would be $0.37 and $0.35, respectively, for the six months ended
December 31, 1997, and a loss per share of $(0.56) for the year ended June
30, 1997.
29
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THE MERGER
THE FOLLOWING SUMMARY OF THE MATERIAL TERMS AND PROVISIONS OF THE MERGER
AGREEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT
WHICH IS SET FORTH AS APPENDIX A TO THIS PROXY STATEMENT/ PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE.
GENERAL
RedFed has entered into an Agreement and Plan of Merger (the "Merger
Agreement"), dated November 30, 1997, with Golden State. Pursuant to the
Merger Agreement, Golden State will acquire RedFed through the Merger (the
"Merger" or the "RedFed Merger") of RedFed into a wholly-owned subsidiary of
Golden State (referred to in the Merger Agreement as "Merger Sub"). As part of
the Merger, the issued and outstanding shares of common stock of RedFed
("RedFed Common Stock") will be converted into shares of the common stock of
Golden State ("Golden State Common Stock") having a value, determined on the
basis of an average of the closing prices for Golden State Common Stock over a
ten-day period preceding the completion of the Merger, equal to $20.75 per
share of RedFed Common Stock.
The following discussion provides further information concerning the Merger
and its effects, the reasons why the RedFed Board is recommending that the
stockholders of RedFed adopt and approve the Merger Agreement, the opinion of
RedFed's financial advisor, NationsBanc Montgomery, that the consideration to
be received by RedFed stockholders in the Merger was fair from a financial
point of view, as of the date of such opinion, and other information that
should be considered by RedFed stockholders in determining whether to approve
the Merger Agreement. The following discussion is only a summary of the Merger
Agreement and the other matters discussed and is qualified in its entirety by
reference to the full Merger Agreement and opinion of NationsBanc Montgomery,
both of which are attached as appendices hereto, as well as the reports,
financial statements and other documents incorporated in this Proxy
Statement/Prospectus by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
PARTIES TO THE MERGER
Golden State
General. Golden State is the holding company for Glendale Federal, which is
one of the largest savings institutions in the United States. Golden State had
total consolidated assets of $16.0 billion, deposits of $9.5 billion and
stockholders' equity of $1.1 billion at December 31, 1997. 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, and fees received in connection with loan servicing, deposit
services, and other customer 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. Glendale Federal is subject to regulation
and examination by the OTS and its customer deposits are insured by the SAIF
of the FDIC. As a savings and loan holding company, Golden State is also
subject to examination and limited regulation by the OTS.
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
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<PAGE>
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.
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.
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 $52 billion in total assets (after giving pro forma effect to the Merger
and the CENFED Merger).
The terms of the California Federal Merger Agreement contemplate that, upon
consummation of the merger, affiliates of MAF and Ford will in the aggregate
own between 42% and 45% of the common stock of the combined company on a fully
diluted basis, without giving effect to shares issuable pursuant to the
Litigation Tracking Warrants (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 15% of the value of the potential recovery in the
Goodwill Litigation not included for purposes of determining the number of
shares of Golden State Common Stock issuable upon exercise of the Litigation
Tracking Warrants). 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 combined company 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 combined company 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 value of the California Federal Goodwill Litigation
derived from 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
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<PAGE>
percentage ownership of outstanding common stock of the combined company 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 combined company, could affect the relative
ownership of a stockholder of the combined company. Further, the timing of the
issuance of the Contingent Shares is not presently ascertainable, and
Contingent Shares with respect to the use by the combined company 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
STATEMENTS."
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 combined
company and it is expected that affiliates of FNPH, FNH and California Federal
will generally be in a position to control the management of the combined
company. See "MANAGEMENT AND OPERATIONS AFTER THE MERGER."
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 STATEMENTS."
Acquisition of CENFED. Golden State acquired CENFED Financial Corporation
("CENFED") on April , 1998 pursuant to an Agreement and Plan of Merger
entered into between Golden State and CENFED as of August 17, 1997. CENFED was
the holding company for CenFed Bank, a federally chartered savings bank that
had 18 branches in Pasadena and in other locations in Los Angeles, Orange,
Riverside and San Bernardino Counties in southern California. Pursuant to the
CENFED Merger, Golden State issued 7,320,000 shares of Common Stock. At
December 31, 1997, CENFED had total assets of $2.2 billion, deposits of $1.6
billion and stockholders' equity of $136 million.
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<PAGE>
Proposed Distribution of Litigation Tracking Warrants. On April , 1998,
Golden State stockholders approved certain necessary amendments to the Golden
State Certificate of Incorporation that would permit the distribution of
Litigation Tracking Warrants ("Litigation Tracking Warrants") to existing
Golden State securityholders. The Litigation Tracking Warrants would entitle
the holders thereof to receive upon the exercise thereof, in the aggregate,
Golden State Common Stock in an amount equal to approximately 85% of net
after-tax proceeds, if any, received by Glendale Federal in its litigation
against the federal government seeking the recovery of damages as a result of
the government's breach of contract with Glendale Federal regarding the
regulatory treatment of goodwill. It is expected that the Litigation Tracking
Warrants will be distributed prior to the completion of the Merger. RedFed
Stockholders will not be entitled to receive Litigation Tracking Warrants with
respect to the shares of Golden State Common Stock they receive in the Merger.
See "DESCRIPTION OF GOLDEN STATE CAPITAL STOCK--Warrants to Purchase Common
Stock--Litigation Tracking Warrants."
RedFed
RedFed was incorporated under Delaware law on October 18, 1993 for the
purpose of becoming the holding company for Redlands Federal Bank in
connection with Redlands Federal Bank's conversion from a federally chartered
mutual savings bank to a federally chartered stock savings bank. RedFed is one
of the three largest financial institutions headquartered in Southern
California's Inland Empire Region which is comprised of 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.
RedFed is primarily engaged in the business of attracting retail transactions
and term deposits from the general public and using such deposits, together
with borrowings and equity capital, to originate and purchase real estate
loans, consumer loans, small business commercial loans, U.S. government and
agency securities, and mortgage-backed securities. RedFed also has sold loans
from its portfolio from time to time and offers insurance and securities
brokerage services through a subsidiary of Redlands Federal Bank.
RedFed is subject to examination and regulation as a savings and loan
holding company by the OTS. Redlands Federal Bank is regulated by the FDIC and
by the OTS and its customer deposits are insured by the SAIF of the FDIC.
Redlands Federal Bank is also a member of the Federal Home Loan Bank of San
Francisco. The RedFed Common Stock is traded on the Nasdaq National Market
under the symbol REDF. At April 15, 1998, RedFed had approximately
stockholders of record (not including the number of persons or entities
holding stock in nominee or street name through various brokerage firms) and
outstanding shares of RedFed Common Stock.
The principal executive offices of RedFed are located at 300 East State
Street, Redlands, California 92373 and the telephone number at such offices is
(909) 793-2391.
Merger Sub
Merger Sub is a Delaware corporation that is a wholly-owned subsidiary of
Golden State formed for the original purpose of acquiring CENFED. Merger Sub
is not engaged in any significant business activity other than its ownership
of stock of Glendale Federal. Its principal executive offices and telephone
number are the same as those of Golden State.
BACKGROUND OF THE MERGER
In the course of RedFed's business, the RedFed Board has periodically
received presentations from management and from investment banking firms
regarding RedFed's strategic direction and prospects, the valuation of
publicly traded thrift institutions, and merger and acquisition activities of
the thrift and commercial banking industries. In August 1996, RedFed retained
NationsBanc Montgomery to provide financial advice on these subjects, among
others, on a regular basis.
In early August 1997, David Britt of KPMG Peat Marwick LLP contacted Anne
Bacon, President and Chief Executive Officer of RedFed, and stated that one of
KPMG Peat Marwick LLP's clients was interested in
33
<PAGE>
discussing the potential sale of RedFed to such client. Ms. Bacon expressed a
willingness to talk to KPMG Peat Marwick LLP's client.
Robert Trujillo, Executive Vice President and Director, Franchise Management
and Sales of Golden State, contacted Ms. Bacon, identified himself as KPMG
Peat Marwick LLP's client and scheduled a meeting with Ms. Bacon. On August
29, 1997, Mr. Trujillo and John Haynes, Executive Vice President and Chief
Financial Officer of Golden State, met with Ms. Bacon to discuss the potential
of an acquisition of RedFed by Golden State. At the meeting Golden State
presented pricing information that assumed a pricing structure for an
acquisition of RedFed similar to the pricing structure used by Golden State in
its acquisition of CENFED, which had been announced the previous day, but did
not indicate a specific price at which Golden State would be interested in
combining with RedFed.
At the regularly scheduled meeting of the RedFed Board held on August 26,
1997, Ms. Bacon informed the RedFed Board of the potential for a transaction
with Golden State. The RedFed Board determined that management should continue
exploratory discussions with Golden State. Ms. Bacon directed Alan Rothenberg
of NationsBanc Montgomery to continue dialogue with Golden State and to point
out the potential benefits of RedFed's tax net operating losses ("NOLs").
On September 4, 1997, Ms. Bacon authorized Michael Davis of KPMG Peat
Marwick LLP to discuss RedFed's NOL position with CS First Boston, Golden
State's investment advisor, and to provide schedules of such NOLs to CS First
Boston and Golden State.
Mr. Rothenberg attended the regularly scheduled RedFed Board meeting on
September 30, 1997 to discuss the competitive environment surrounding the
thrift industry and to assess the continued management and economic and
operating risks of running RedFed. On October 13, 1997 the RedFed Board had an
informal workshop with Dr. Tom Parliament, President of Parliament Consulting
Services, Inc., in which he discussed various strategic options for RedFed,
including the possibility of being the target of an acquisition, participating
in a merger of equals or remaining independent. The possibility of a
transaction with Golden State was not discussed at the workshop, although Dr.
Parliament was informed that RedFed was engaged in informal merger
conversations with one or more financial institutions. Dr. Parliament
discussed, among other things, the increasing competition from insurance
companies and money center banks as well as the growth rates in returns on
equity that the financial markets expect thrifts such as RedFed to achieve.
Although Dr. Parliament concluded that a sale of RedFed was ultimately
inevitable due to these competitive and stockholder pressures, he did not
address any specific acquisition proposals or alternatives.
On October 27, 1997, Ms. Bacon and Mr. Rothenberg met with Stephen J.
Trafton, Chief Executive Officer of Golden State, and a representative of CS
First Boston to discuss pricing for the proposed Merger and the timing of the
proposed issuance of the Litigation Tracking Warrants by Golden State.
On October 28, 1997, a preliminary non-binding indication of interest was
delivered by Golden State to Mr. Rothenberg and Ms. Bacon that included an
offer of $20.50 per share in Golden State common stock. Ms. Bacon updated the
RedFed Board regarding the status of conversations with Golden State and asked
Mr. Rothenberg to contact several other institutions regarding their interest
in combining with RedFed.
During the next several days Mr. Rothenberg spoke with representatives of
several institutions identified by NationsBanc Montgomery, Ms. Bacon and the
RedFed Board.
On November 5, 1997, a special meeting of the RedFed Board was held to
discuss the proposed transaction. Also in attendance were representatives of
NationsBanc Montgomery and Gibson, Dunn & Crutcher LLP, special counsel to
RedFed. NationsBanc Montgomery distributed materials prepared by NationsBanc
Montgomery containing various financial analyses and other information
regarding Golden State, the proposed transaction, and pro forma projections of
Golden State following the proposed transaction. The RedFed Board and its
advisors discussed merger transactions generally and the proposed transaction
in particular, including the proposed pricing
34
<PAGE>
structure. Mr. Rothenberg reported on his exploratory contacts with other
potential buyers. After consideration of the foregoing matters, the RedFed
Board decided to continue price discussions with Golden State.
During the following week Mr. Rothenberg and Ms. Bacon had several
discussions with Golden State and their advisors relating to the pricing of
the potential transaction.
On November 12, 1997, a special meeting of the RedFed Board was held to
discuss the proposed transaction. Also participating via telephone were
representatives of NationsBanc Montgomery and Gibson, Dunn & Crutcher LLP. The
progress of the ongoing discussions with Golden State was discussed with the
RedFed Board. The RedFed Board voted to allow Golden State to conduct a due
diligence review of RedFed.
On November 13, 1997, RedFed and Golden State entered into mutual
confidentiality agreements to facilitate due diligence.
Golden State began its due diligence review of RedFed on November 14, 1997.
On November 19, 1997, Ms. Bacon and other representatives of RedFed,
accompanied by advisors from NationsBanc Montgomery and Gibson, Dunn &
Crutcher LLP, conducted due diligence at Golden State's headquarters in
Glendale, California.
On November 25, 1997, Golden State informed Mr. Rothenberg and Ms. Bacon of
its decision to increase the price offered to an effective $20.75 per share,
based upon a final full share count.
RedFed's regularly scheduled board meeting was held on November 25, 1997. A
draft of the Merger Agreement, which had been previously distributed to the
directors, was discussed at the meeting. In addition, the RedFed Board and its
advisors discussed in detail the negotiations leading up to Golden State's
decision to increase its price offer to an effective $20.75 per share.
NationsBanc Montgomery delivered its oral opinion that the consideration to be
received by RedFed stockholders in Golden State's revised proposal was fair
from a financial point of view. Management and its advisors were directed to
continue negotiations.
On November 30, 1997, at a special meeting of the RedFed Board, (i) the
management of RedFed reported the financial and structural terms of the
proposed merger with Golden State, (ii) RedFed's legal counsel presented to
the RedFed Board the proposed final terms of the Merger Agreement, (iii)
NationsBanc Montgomery delivered its written opinion that, as of such date,
the consideration to be received by the RedFed stockholders was fair, from a
financial point of view, to such stockholders, and (iv) the RedFed Board
approved the Merger Agreement and the consummation of the Merger by a vote of
six to one, with Director Wiens casting the sole vote against the approval of
the Merger Agreement and the consummation of the Merger.
On November 30, 1997, following the meeting of the RedFed Board, the duly
authorized representatives of the parties executed the Merger Agreement.
On December 1, 1997, RedFed and Golden State issued a joint news release
announcing the Merger.
REASON FOR THE MERGER AND RECOMMENDATION OF REDFED BOARD OF DIRECTORS
The RedFed Board has determined that the terms of the Merger Agreement are
fair to and in the best interests of RedFed and the RedFed stockholders. In
reaching this determination, the RedFed Board consulted with its financial
advisor, NationsBanc Montgomery, 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 RedFed stockholders in the Merger. The
RedFed Board also discussed with RedFed's senior management a variety of
matters relating to RedFed's business and prospects including, among other
things, operational and competitive matters, together with considerations such
as the risks that might be entailed in making significant acquisitions or
entering new lines of business in the future. The RedFed Board also considered
advice received from RedFed's legal counsel, Gibson, Dunn & Crutcher LLP,
concerning various legal and regulatory matters relevant to its consideration
of the proposed transaction.
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<PAGE>
In reaching its determination to approve the Merger Agreement described in
this proxy statement, the RedFed 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 RedFed Board was of the
view that the implied value of the consideration to be received by RedFed
stockholders represented a fair multiple of RedFed's per share book value
and earnings. In its consideration of these factors, the RedFed Board
received detailed presentations from NationsBanc Montgomery regarding
current and historical trading prices for the stocks of RedFed, 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
NationsBanc Montgomery's oral and written opinions delivered to the RedFed
Board on November 25, 1997 and November 30, 1997, respectively, that, based
on the analyses that NationsBanc Montgomery had conducted and discussed
with the RedFed Board, the consideration to be received by holders of
RedFed Common Stock pursuant to the Merger was fair to such stockholders
from a financial point of view, as of the date of such opinion. For a
further discussion of the NationsBanc Montgomery opinion and analyses,
including the scope thereof and the limitations thereon, see "--Opinion of
RedFed's Financial Advisor."
(ii) RedFed's Business Plan. The RedFed Board considered RedFed's
prospects for growth and expansion of the products and services it offers
and possible acquisition opportunities. The RedFed Board considered
management's view that RedFed 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 RedFed Board also considered the
increasingly competitive environment in which RedFed operates, including
the likelihood that new entrants will adversely affect deposit pricing, and
RedFed's relative size and market share in the markets it serves.
(iii) Benefits of the Combination. The RedFed Board considered the
prospect that combining with Golden State would enable RedFed's business
lines to make a favorable contribution to the combined entity. The RedFed
Board believed that Golden State's strategic emphasis on small businesses
and consumers is compatible with RedFed's own strategic emphasis and that,
following a combination, a wider array of products and services will be
made available to RedFed's customers. The RedFed Board anticipated that the
Merger would provide opportunities for RedFed's customer relationships to
deepen as these customers availed themselves of the additional products and
services that Golden State offers. All of these factors led RedFed's Board
to conclude that Golden State was in a position to further advance the
franchise that RedFed has built.
(iv) Golden State Financial Condition and Operations. The RedFed Board
considered the business and financial condition of Golden State and its
profitability and asset quality. The RedFed Board also considered the
benefits to the combined entity from a dramatic growth in Golden State's
presence in Riverside and San Bernardino counties. The RedFed Board further
considered the reputation and business practices of Golden State and its
management as they would affect the employees of RedFed. The RedFed Board
considered management's assessment of the Golden State business plan noting
that Golden State's business plan was very similar to RedFed's in terms of
targeted customers and product emphasis, and that the proposed combination
would result in the closure of few, if any, RedFed branches. Also, the
results of the due diligence investigations conducted by RedFed's
management and NationsBanc Montgomery were considered by the RedFed Board.
The RedFed Board further considered the potential impact on stockholder
value of Golden State's goodwill litigation against the United States
Government and the uncertainties relating thereto, including the status of
the proposed Litigation Tracking Warrants.
(v) RedFed Prospects. The RedFed Board considered the potential effect on
stockholder value of RedFed's continuing as an independent entity as
compared with the effect on RedFed Stock value of combining with Golden
State, in light of the belief of the RedFed Board and management that the
Merger offered the most attractive currently available terms and
consideration for RedFed stockholders and the risks that similar
opportunities may not be available in the future.
(vi) Terms and Tax-Free Nature of Transaction. The RedFed Board
considered the terms of the Merger Agreement including the following: (i)
the tax consequences were expected to be favorable to
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<PAGE>
RedFed Stockholders, (ii) the fact that RedFed Stockholders would receive
Golden State Common Stock pursuant to the Merger, which would permit RedFed
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
RedFed affiliates), and (iii) the fact that Golden State's Common Stock is
actively traded on the NYSE.
(vii) Potential for Subsequent Acquisition. The RedFed Board considered
the potential that Golden State could itself be the target of an
acquisition after the consummation of the Merger at a premium to its market
price, which could in certain circumstances be beneficial to the RedFed
Stockholders who continued to hold Golden State Common Stock after the
Merger.
(viii) Prospects for Regulatory Approval. The RedFed Board considered the
prospects of the Merger being approved by the OTS, which the RedFed Board,
after consultation with legal counsel, considered to be favorable.
The above summary of the information and factors considered by the RedFed
Board is not intended to be exhaustive, but is believed to include the
material factors considered by the RedFed Board. In reaching its determination
to approve and recommend the Merger, the RedFed Board did not assign any
relative or specific weights to the foregoing factors. In addition, individual
members of the RedFed 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 REDFED BOARD HAS APPROVED THE MERGER
AGREEMENT AS BEING ADVISABLE AND IN THE BEST INTERESTS OF THE REDFED
STOCKHOLDERS. THE REDFED BOARD RECOMMENDS THAT REDFED STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE MERGER AGREEMENT AT THE STOCKHOLDERS MEETING.
OPINION OF REDFED'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated November 4, 1997 (the "Engagement
Letter"), RedFed engaged NationsBanc Montgomery to perform general advisory
investment banking services, including acting as the financial advisor in
connection with opportunities to sell RedFed. As part of its engagement,
NationsBanc Montgomery, among other things, assisted in the negotiations of
the Merger, consulted with RedFed regarding financial aspects of the Merger,
and contacted potentially interested buyers (although no formal or informal
auction of RedFed was conducted). NationsBanc Montgomery also agreed to render
to the RedFed Board an opinion with respect to the fairness of the
consideration to be received by holders of RedFed Common Stock from a
financial point of view in any potential sale of RedFed. NationsBanc
Montgomery is a nationally recognized investment banking firm and, as part of
its investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with merger transactions and
other types of acquisitions, negotiated underwritings, private placements and
valuations for corporate and other purposes. RedFed selected NationsBanc
Montgomery to render the opinion on the basis of its experience and expertise
in California thrift merger transactions and its reputation in the banking and
investment communities.
At a meeting of the RedFed Board on November 25, 1997, NationsBanc
Montgomery delivered its oral opinion that the consideration to be received by
holders of RedFed Common Stock pursuant to the Merger was fair to such
shareholders from a financial point of view, as of the date of such opinion.
NationsBanc Montgomery's oral opinion was subsequently confirmed in writing as
of November 30, 1997.
THE FULL TEXT OF NATIONSBANC MONTGOMERY'S WRITTEN OPINION TO THE REDFED
BOARD, DATED NOVEMBER 30, 1997, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED, AND LIMITATIONS OF THE REVIEW BY NATIONSBANC MONTGOMERY, IS
ATTACHED HERETO AS APPENDIX B AND IS INCORPORATED HEREIN BY REFERENCE. THE
FOLLOWING SUMMARY OF NATIONSBANC MONTGOMERY'S OPINION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION, WHICH SHOULD BE READ
CAREFULLY AND IN ITS ENTIRETY. IN FURNISHING SUCH OPINION, NATIONSBANC
MONTGOMERY DOES NOT ADMIT THAT IT IS AN EXPERT WITH RESPECT TO THE
REGISTRATION STATEMENT OF WHICH THIS PROXY STATEMENT/PROSPECTUS IS A PART
WITHIN THE MEANING OF THE TERM "EXPERTS"
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<PAGE>
AS USED IN THE SECURITIES ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER NOR DOES IT ADMIT THAT ITS OPINION CONSTITUTES A REPORT OR
VALUATION WITHIN THE MEANING OF SECTION 11 OF THE SECURITIES ACT. NATIONSBANC
MONTGOMERY'S OPINION IS DIRECTED TO THE REDFED BOARD, COVERS ONLY THE FAIRNESS
OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF REDFED COMMON STOCK FROM
A FINANCIAL POINT OF VIEW AS OF THE DATE OF THE OPINION AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF REDFED COMMON STOCK AS TO HOW
SUCH STOCKHOLDER SHOULD VOTE AT THE STOCKHOLDERS MEETING.
In connection with its opinion, NationsBanc Montgomery, among other things:
(i) reviewed certain publicly available financial and other data with respect
to RedFed and Golden State, including the audited, consolidated financial
statements of RedFed for the fiscal years ended December 31, 1995 and 1996 and
unaudited consolidated financial statements for the nine-month period ended
September 30, 1997, the audited, consolidated financial statements of Golden
State for the fiscal years ended June 30, 1995, 1996 and 1997 and unaudited
consolidated financial statements of Golden State for the three-month period
ending September 30, 1997 and certain other relevant financial and operating
data relating to RedFed and Golden State made available to NationsBanc
Montgomery from published sources and from the internal records of RedFed and
Golden State; (ii) reviewed a draft of the Merger Agreement dated November 30,
1997; (iii) reviewed certain publicly available information concerning the
trading of, and the trading market for, RedFed Common Stock and Golden State
Common Stock; (iv) compared RedFed and Golden State from a financial point of
view with certain companies which NationsBanc Montgomery deemed to be
relevant; (v) considered the financial terms, to the extent publicly
available, of selected recent business combinations of companies in the thrift
industry which NationsBanc Montgomery deemed to be comparable, in whole or in
part, to the Merger; (vi) reviewed and discussed with representatives of the
management of RedFed and Golden State certain information of a business and
financial nature regarding RedFed and Golden State, including financial
forecasts and related assumptions for RedFed furnished to NationsBanc
Montgomery by RedFed and third party analysts' estimates for Golden State
obtained by NationsBanc Montgomery from First Call; (vii) made inquiries
regarding and discussed the Merger and the Merger Agreement and other matters
related thereto with RedFed's counsel; and (viii) performed such other
analyses and examinations as NationsBanc Montgomery deemed appropriate.
In connection with NationsBanc Montgomery's review, NationsBanc Montgomery
did not assume any obligation independently to verify the foregoing
information and relied on its being accurate and complete in all material
respects. With respect to the financial forecasts for RedFed provided to
NationsBanc Montgomery by RedFed's management, upon their advice and with
RedFed's consent, NationsBanc Montgomery assumed for purposes of its opinion
that the forecasts (including the assumption regarding potential cost savings
estimated by Golden State to result from the Merger) were reasonably prepared
on bases reflecting the best available estimates and judgments of RedFed's
management as to the future financial performance of RedFed and that they
provided a reasonable basis upon which NationsBanc Montgomery could form its
opinion. With respect to the third party analysts' estimates for Golden State
obtained by NationsBanc Montgomery from First Call, with RedFed's consent
NationsBanc Montgomery assumed that the estimates provided a reasonable basis
upon which it could form its opinion. NationsBanc Montgomery assumed that
there were no material changes in RedFed's or Golden State's assets, financial
condition, results of operations, business or prospects since the respective
dates of their last financial statements made available to NationsBanc
Montgomery. NationsBanc Montgomery relied on advice of counsel to RedFed as to
all legal matters with respect to RedFed, the Merger and the Merger Agreement.
NationsBanc Montgomery assumed that the Merger will be consummated in a manner
that complies in all respects with the applicable provisions of the Securities
Act, the Exchange Act and all other applicable federal and state statutes,
rules and regulations. NationsBanc Montgomery is not an expert in the
evaluation of loan portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto and assumed, with RedFed's consent,
that such allowances for each of RedFed and Golden State were in the aggregate
adequate to cover such losses. In addition, NationsBanc Montgomery did not
assume responsibility for reviewing any individual credit files, or making an
independent evaluation, appraisal or physical inspection of any of the assets
or liabilities (contingent or otherwise) of RedFed or Golden State, nor was
NationsBanc Montgomery furnished with any such appraisals. RedFed informed
NationsBanc Montgomery, and NationsBanc Montgomery assumed that the Merger
will be recorded as a purchase under generally accepted accounting principles.
Finally,
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NationsBanc Montgomery's opinion was based on economic, monetary, market and
other conditions as in effect on, and the information made available to
NationsBanc Montgomery as of, the date of the opinion. Accordingly, although
subsequent developments may affect the opinion, NationsBanc Montgomery did not
assume any obligation to update, revise or reaffirm its opinion.
Set forth below is a brief summary of the report presented by NationsBanc
Montgomery to the RedFed Board on November 25, 1997 in connection with its
opinion. For purposes of the report, NationsBanc Montgomery assumed with
RedFed's consent that there were 7.6 million fully diluted shares of RedFed
Common Stock outstanding and that, based upon the closing price of Golden
State Common Stock on November 24, 1997 of $32.00 per share, Golden State
would issue in exchange therefor 6.5 million shares of Golden State Common
Stock. NationsBanc Montgomery also assumed that Golden State would complete
its pending acquisition of CENFED prior to consummation of the Merger.
ANALYSIS OF SELECTED MERGER TRANSACTIONS: NationsBanc Montgomery reviewed
the consideration paid in selected categories of thrift acquisition
transactions. Specifically, NationsBanc Montgomery reviewed thrift
transactions from January 1, 1996 to November 24, 1997 involving (i) mergers
in California and (ii) national mergers with transaction values equal to or
greater than $100 million and equal to or less than $200 million. For each
transaction, NationsBanc Montgomery analyzed data illustrating, among other
things, purchase price to book value, purchase price to tangible book value,
purchase price to adjusted book value, purchase price to deposits, premium
(i.e., purchase price in excess of tangible book value) to core deposits, and
purchase price to last twelve-months ("LTM") earnings.
A summary of the median multiples in the analysis is as follows:
<TABLE>
<CAPTION>
PRICE TO PRICE TO PRICE TO PREMIUM PRICE TO
BOOK TAN. BK. ADJ. BK. PRICE TO TO CORE LTM
TRANSACTION CATEGORIES VALUE VALUE VALUE DEPOSITS DEPOSITS EARNINGS
---------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Mergers in California in
1997
(8 transactions)....... 1.79x 1.80x 1.91x 13.83% 7.95% 17.93x
Mergers in California in
1996 and 1997
(17 transactions)...... 1.59x 1.59x 1.65x 13.25% 4.16% 13.38x
National Mergers in 1996
and 1997 With
Transaction Value Equal
to or Greater Than $100
Million and Equal to or
Less Than $200 Million
(16 transactions)...... 1.59x 1.68x 1.91x 20.45% 11.16% 20.14x
</TABLE>
A summary of the results of NationsBanc Montgomery's analysis concerning the
Merger is as follows:
<TABLE>
<CAPTION>
PRICE TO PRICE TO PRICE TO PREMIUM PRICE TO
BOOK TAN. BK. ADJ. BK. PRICE TO TO CORE LTM
VALUE VALUE VALUE DEPOSITS DEPOSITS EARNINGS
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1.85x 1.86x 2.64x 18.72% 9.84% 25.34x
</TABLE>
PREMIUMS PAID TO STOCK PRICE: NationsBanc Montgomery used a group of 16
national thrift acquisitions announced since January 1, 1996 with purchase
prices equal to or greater than $100 million and equal to or less than $200
million where pricing information was available to analyze premiums paid
compared to the target's stock price at various times prior to the
announcement of the acquisition. These figures produced a median premium to
the target's stock price one month prior to announcement of 25.6% and a median
premium to the target's stock price six days prior to announcement of 19.9%.
In comparison, Golden State's offer of $20.75 per share exceeded RedFed's
stock price one month prior to the announcement by 5.7% and RedFed's stock
price six days prior to the announcement by 6.1%.
CONTRIBUTION ANALYSIS: NationsBanc Montgomery analyzed the contribution of
each of RedFed and Golden State to loans, assets, deposits, common equity, net
interest income, non-interest expense and LTM net
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<PAGE>
income of the pro forma combined companies for the period ending September 30,
1997 and projected net income for the calendar year ending December 31, 1998.
This analysis showed, among other things, that based on pro forma combined
balance sheets and income statements for RedFed and Golden State at September
30, 1997, RedFed would have contributed 5.7% of the loans, 4.9% of assets,
7.1% of deposits, 7.1% of common equity, 6.2% of net interest income, 7.7% of
non-interest expense, and 4.4% of LTM net income. The pro forma projected
income statement for the period ending December 31, 1998 showed that RedFed
would contribute 6.3% of the projected net income of the combined companies.
Based on the assumed number of shares of Golden State Common Stock to be
issued in the Merger, holders of RedFed Common Stock would own approximately
7.6% of the combined companies.
DILUTION ANALYSIS: Using earnings estimates and projected growth rates for
RedFed provided by its management and third party analysts' estimates from
First Call for Golden State, NationsBanc Montgomery compared estimated
reported earnings per share ("Reported EPS") of Golden State on a stand-alone
basis to the estimated Reported EPS of the pro forma combined company for the
calendar year ending December 31, 1998. NationsBanc Montgomery noted that,
based upon RedFed's projections after giving effect to Golden State's pretax
cost savings estimates, the future benefit of historical losses and certain
assumptions as to, among other things, the Merger consideration, the Merger
would be mildly dilutive to Golden State's Reported EPS for the year ending
December 31, 1998. This analysis did not include the effect of share
repurchases contemplated by Golden State's management. These estimates were
used for purposes of this analysis only and are not necessarily indicative of
expected results or plans of RedFed, Golden State or the combined institution.
PRESENT VALUE ANALYSIS: NationsBanc Montgomery estimated the discounted
present value of future earnings per share of RedFed over a five-year period.
RedFed's projected earnings per share in the year 2002 were multiplied by
price to earnings multiples ranging from 13.0x to 16.0x. This product was
discounted to the present using a discount rate of 13%. This analysis
indicated that the present value of RedFed's future stock price plus dividends
ranged from $17.63 to $21.70 per share, as compared to Golden State's offer of
$20.75 per share. NationsBanc Montgomery also completed a similar analysis but
used terminal multiples ranging from 13.0x to 15.0x times and discount rates
ranging from 9.7% to 15.3%. This analysis showed that the present value of
RedFed's future stock price plus dividends ranged from $14.11 to $20.84 per
share.
COMPARABLE COMPANY ANALYSIS: Using public and other available information,
NationsBanc Montgomery compared certain financial ratios of RedFed and Golden
State, including net income to average total assets ("return on average
assets"), net income to average total equity ("return on average equity"),
equity to assets, noninterest expense to revenue ("efficiency"), net interest
margin and numerous other credit ratios as of September 30, 1997 and for the
twelve months ended September 30, 1997. The analysis necessarily involved
complex considerations and judgments concerning differences in financial and
operating characteristics of the companies.
The summary set forth above does not purport to be a complete description of
the presentation by NationsBanc Montgomery to the RedFed Board or of the
analyses performed by NationsBanc Montgomery. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. NationsBanc Montgomery believes that its analyses and the summary
set forth above must be considered as a whole and that selecting a portion of
its analyses and factors, without considering all analyses and factors, would
create an incomplete view of the process underlying the analyses set forth in
its presentation to the RedFed Board. In addition, NationsBanc Montgomery may
have given various analyses more or less weight than other analyses, and may
have deemed various assumptions more or less probable than other assumptions,
so that the ranges of valuations resulting from any particular analysis
described above should not be taken to be NationsBanc Montgomery's view of the
actual value of RedFed or the combined companies. The fact that any specific
analysis has been referred to in the summary above is not meant to indicate
that such analysis was given greater weight than any other analysis.
In performing its analyses, NationsBanc Montgomery made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control
40
<PAGE>
of RedFed or Golden State. The analyses performed by NationsBanc Montgomery
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 NationsBanc
Montgomery's analysis of the fairness of the consideration to be received by
the holders of RedFed Common Stock in the Merger and were provided to the
RedFed Board in connection with the delivery of NationsBanc Montgomery's
opinion. The analyses do not purport to be appraisals or to reflect the prices
at which RedFed might actually be sold or the prices at which any securities
may trade at the present time or any time in the future. The forecasts used by
NationsBanc Montgomery in certain of its analyses are based on numerous
variables and assumptions which are inherently unpredictable and must be
considered not certain of occurrence as projected. Accordingly, actual results
could vary significantly from those contemplated in such forecasts.
As described above under "THE MERGER--Reasons for the Merger and
Recommendation of RedFed Board of Directors", NationsBanc Montgomery's opinion
and presentation to the RedFed Board were among the many factors taken into
consideration by the RedFed Board in making its determination to approve the
Merger Agreement.
Pursuant to the Engagement Letter, RedFed paid NationsBanc Montgomery a fee
of $250,000 upon delivery of its November 30, 1997 fairness opinion.
NationsBanc Montgomery will also receive $250,000 upon the mailing of this
Proxy Statement and approximately $1,475,000 upon the closing of the Merger.
Accordingly, a significant portion of NationsBanc Montgomery's fee is
contingent upon the closing of the Merger. RedFed has also agreed to reimburse
NationsBanc Montgomery for its reasonable out-of-pocket expenses, including
any fees and disbursements for NationsBanc Montgomery's legal counsel and
other experts retained by NationsBanc Montgomery. RedFed has agreed to
indemnify NationsBanc Montgomery, its affiliates, and their respective
partners, directors, officers, agents, consultants, employees and controlling
persons against certain liabilities, including liabilities under the federal
securities laws.
In the ordinary course of its business, NationsBanc Montgomery actively
trades equity securities of RedFed and Golden State for its own account and
for the account of its customers and, accordingly, may at any time hold a long
or short position in such securities.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at the time of the filing of a certificate
of merger with the Secretary of State of Delaware or at such other time as is
provided in such certificate of merger. The time at which the Merger becomes
effective is referred to in the Merger Agreement as the "Effective Time." The
date on which the transactions provided for in the Merger Agreement are to be
completed (the "Closing Date") will occur on the date that is the first day
that is at least two business days after satisfaction or appropriate waiver of
each of the conditions set forth in the Merger Agreement, or such other date
as Golden State and RedFed agree.
As of the date of this Proxy Statement/Prospectus, Golden State and RedFed
anticipate that the Merger will be consummated during June 1998. However, the
consummation of the Merger could be delayed as a result of delays in obtaining
the regulatory approvals or satisfying other conditions. If the Merger is not
effected on or before July 31, 1998 (referred to in the Merger Agreement as
the "Termination Date"), then, the Merger Agreement may be terminated by
either Golden State or RedFed, subject to the right of either party to extend
such date by a period up to 45 days in certain circumstances specified in the
Merger Agreement; except that the Merger Agreement may not be terminated by a
party if 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.
EXCHANGE RATIO FOR CONVERSION OF REDFED COMMON STOCK
At the Effective Time, each outstanding share of RedFed Common Stock, other
than shares held in RedFed's treasury or held by Golden State or any wholly-
owned subsidiary thereof (except, in both cases, for shares held in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by
41
<PAGE>
third parties ("Trust Account Shares")), will be converted into the right to
receive the number of whole shares of Golden State Common Stock (expressed as
a decimal fraction rounded to the nearest one hundred thousandth) of shares of
Golden State Common Stock that equals the quotient (the "Exchange Ratio")
derived by dividing (A) $20.75 by (B) the unweighted arithmetic average of the
daily closing prices of Golden State Common Stock, as reported on the New York
Stock Exchange Composite Tape, for the ten trading days on which Golden State
Common Stock is traded immediately preceding the date that is two business
days prior to the Closing Date (such average of daily closing prices being
referred to herein and in the Merger Agreement as the "Final Golden State
Price"). Cash will be paid in lieu of the issuance of fractional shares based
on the Final Golden State Price.
Each share of RedFed Common Stock owned by Golden State or its wholly-owned
subsidiaries (other than Trust Account Shares) or by RedFed as treasury stock
will be canceled at the Effective Time and will cease to exist, and no Golden
State Common Stock or other consideration will be delivered in exchange
therefor.
TREATMENT OF REDFED STOCK OPTIONS
At the Effective Time, each stock option to acquire RedFed Common Stock
(each, a "RedFed Option") granted under the existing stock option plans for
RedFed officers, directors and employees (collectively, the "RedFed Stock
Plans") which is outstanding and unexercised immediately prior to the
Effective Time, whether vested or unvested, 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
RedFed Stock Plans, which will be assumed by Golden State. In each case, the
number of shares of Golden State Common Stock subject to the Replacement
Option will be equal to the number of shares of RedFed Common Stock subject to
the related RedFed Option multiplied by the Exchange Ratio and rounded down to
the nearest whole share, and the exercise price per share of Golden State
Common Stock subject to the Replacement Option shall be equal to the aggregate
exercise price for the shares of RedFed Common Stock purchasable pursuant to
the RedFed Option divided by the number of full shares of Golden State Common
Stock subject to the Replacement Option. The duration and other terms of each
such Replacement Option will be substantially the same as the prior RedFed
Option. In any event, each RedFed 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 RedFed Stock
Plans, each RedFed Option, if not already exercisable in full, will become
exercisable in full upon consummation of the Merger.
EXCHANGE OF STOCK CERTIFICATES
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 RedFed (the "Exchange Agent"), for the benefit of the
holders of certificates of RedFed Common Stock, certificates representing the
shares of Golden State Common Stock to be issued to RedFed stockholders in the
merger, together with cash for payment in lieu of the issuance of fractional
shares of Golden State Common Stock.
As soon as is practicable after the Effective Time, and in no event later
than five days thereafter, the Exchange Agent will mail transmittal forms to
the holders of certificates representing shares of RedFed Common Stock to be
used by them to send in their RedFed stock certificates for exchange for
certificates representing the Golden State stock to which they are entitled as
a result of the Merger. The transmittal letter forms will contain instructions
with respect to the surrender of such certificates in exchange for shares of
Common Stock and cash in lieu of the issuance of fractional shares, if
applicable.
REDFED STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY
CARD AND SHOULD ONLY BE FORWARDED TO THE EXCHANGE AGENT WITH THE LETTER OF
TRANSMITTAL FORM THAT WILL BE PROVIDED TO HOLDERS FOLLOWING THE EFFECTIVE
TIME.
No dividends or other distributions declared with respect to Golden State
Common Stock with a record date after the Effective Time will be paid to the
holder of any certificate representing shares of RedFed Common
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<PAGE>
Stock until such certificate or receipt has been surrendered for exchange.
Holders of certificates representing shares of RedFed Common Stock will be
paid the amount of dividends or other distributions with a record date after
the Effective Time after surrender of such certificates, without any interest
thereon.
None of Golden State, RedFed, the Exchange Agent or any other person will be
liable to any former holder of RedFed Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
If a certificate representing RedFed 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 or receipt by the claimant, and appropriate and customary
indemnification.
REPRESENTATIONS AND WARRANTIES
RedFed has made representations and warranties to Golden State in the Merger
Agreement with respect to certain matters, including (i) RedFed's organization
and existence, its corporate power and authority, and Redlands Federal Bank's
organizational status and FDIC deposit insurance; (ii) RedFed's qualification
to do business in relevant jurisdictions; (iii) RedFed's capitalization; (iv)
RedFed's investment in Redlands Federal Bank; (v) the enforceability of the
Merger Agreement, RedFed'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 applicable
laws, the RedFed Certificate of Incorporation or RedFed Bylaws or certain
agreements, and the approvals required for the Merger; (vii) RedFed's reports
to government regulators and the accuracy of RedFed's consolidated financial
statements; (viii) the absence of liabilities, other than liabilities incurred
in the ordinary course of business, the conduct of RedFed's business in the
ordinary and usual course, and the absence of any change that would reasonably
be expected to have a material adverse effect on RedFed; (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 and compensation and employee
benefit plans, including compliance with the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"); (xv) title to RedFed assets; (xvi)
holding of requisite permits and approvals and compliance with law;
(xvii) brokers' or finder's fees; (xviii) environmental matters; (xix)
classified assets, including certain loans; (xx) absence of interest of
certain affiliates, or associates of RedFed in RedFed property; (xxi)
insurance policies of RedFed; (xxii) RedFed's books and records; (xxiii)
corporate material documents of RedFed and Redlands Federal 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 RedFed to Golden State in connection with the
Merger.
Golden State has also made representations and warranties to RedFed 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 and FDIC deposit insurance; (ii)
Golden State's capitalization and its ownership of Glendale Federal; (iii) the
enforceability of the Merger Agreement, Golden State's authority to consummate
the Merger 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 applicable 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 liabilities incurred 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 on Golden
State; (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,
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<PAGE>
(x) holding of requisite permits and approvals and compliance with law; (xi)
Golden State's books and records; and (xii) the absence of material
misstatements or omissions in certain written information supplied by Golden
State to RedFed 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 RedFed, as the
case may be, materially adversely affects the ability of Golden State or
RedFed, as applicable, to consummate the Merger by the Termination Date or
enables any person to prevent or materially delay the consummation of the
Merger.
CONDITIONS TO COMPLETION OF MERGER
The respective obligations of Golden State and RedFed to complete the Merger
are subject to the satisfaction or waiver (to the extent permitted by
applicable law) of the following conditions: (i) the Merger Agreement shall
have been approved by the stockholders of RedFed, (ii) all necessary
regulatory approvals, consents and waivers with respect to the Merger
Agreement and transactions contemplated thereby must have been received and
remain in full force in effect (and all applicable statutory waiting periods
must have expired) without the imposition of 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; (iii) any other
requirements prescribed by law which are necessary to the consummation of the
transactions contemplated by the Merger Agreement must have been satisfied
(Golden State and RedFed are not aware of any such requirements of a material
nature other than those described in this Proxy Statement/Prospectus); (iv) no
party to the Merger Agreement shall be subject to any order, decree or
injunction of any court or agency of competent jurisdiction enjoining or
prohibiting the consummation of the Merger or any other transaction
contemplated by the Merger Agreement, no litigation or proceeding brought by
any governmental agency seeking to prevent consummation of the transactions
contemplated by the Merger Agreement shall be pending against Golden State or
RedFed; (v) no statute, rule or regulation shall have been enacted,
promulgated, interpreted, applied or enforced by any governmental authority
which prohibits, or makes illegal consummation of the Merger, the contemplated
Bank Merger (of Redlands Federal Bank into Glendale Federal) or any
transaction contemplated by the Merger Agreement; (vi) the shares of Golden
State Common Stock issuable to RedFed stockholders pursuant to the Merger
shall have been authorized for listing on the NYSE upon official notice of
issuance; (vii) the Registration Statement filed with the Commission (of which
this Proxy Statement/Prospectus Forms a part) relating to the shares of Golden
State Common Stock issuable in connection with the Merger shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order; (viii) Golden State and RedFed
shall each have received certain letters from the independent accountants of
the other party relating to the financial statements of such party and to
financial information relating to such party set forth or incorporated by
reference in this Proxy Statement/Prospectus. The foregoing conditions
relating to shareholder approval and regulatory approval are not subject to
waiver by either party to Merger Agreement.
Golden State's obligation to complete the Merger is subject to the
satisfaction or waiver by Golden State prior to the Effective Time of the
following additional conditions: (i) each of the representations and
warranties of RedFed set forth in the Merger Agreement must have been true and
correct in all material respects when made and must continue to be true and
correct in all material respects as of the Closing Date (except for any
representation or warranty that specifically relates to an earlier date); (ii)
RedFed must have performed each of its covenants and agreements contained in
the Merger Agreement in all material respects; (iii) there must have been no
material adverse change in the financial condition, business or assets of
RedFed and its subsidiaries taken as a whole since December 31, 1996; (iv)
Golden State must have received a certificate signed by the chief executive
officer and the chief financial officer of RedFed, dated the Closing Date, to
the effect that each of the foregoing conditions has been satisfied; (v)
Golden State must have received the opinion of its counsel, Mayer,
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Brown & Platt, dated the Closing Date, to the effect that the Merger will be
treated for federal income tax purposes as a "reorganization" within the
meaning of Section 368(a) of the Code, that Golden State, Merger Sub and
RedFed will each be a party to that reorganization within the meaning of
Section 368(b) of the Code and that no gain or loss will be recognized by
Golden State, Merger Sub or RedFed as a result of the Merger; and (vi) Golden
State must have received satisfactory evidence from RedFed that the
fiduciaries of the RedFed ESOP have determined that the ESOP Transactions
(described herein under the caption "--ESOP Transactions") are prudent and in
the best interest of the participants and beneficiaries of the ESOP and that
the ESOP Transactions have been completed.
RedFed's obligation to complete the Merger is subject to the satisfaction or
waiver by RedFed prior to the Effective Time of the following additional
conditions: (i) each of the representations and warranties of Golden State set
forth in the Merger Agreement must have been true and correct in all material
respects when made and must continue to be true and correct in all material
respects as of the Closing Date (except for any representation or warranty
that specifically relates to an earlier date); (ii) Golden State must have
performed each of its covenants and agreements contained in the Merger
Agreement in all material respects; (iii) there must have been no material
adverse change in the financial condition, business or assets of Golden State
and its subsidiaries taken as a whole since June 30, 1997; (iv) RedFed must
have received a certificate signed by the chief executive officer and the
chief financial officer of Golden State, dated the Closing Date to the effect
that each of the foregoing conditions has been satisfied; and (v) RedFed must
have received an opinion of its counsel, Gibson, Dunn & Crutcher LLP, dated
the Closing Date, regarding the tax effects of the Merger generally to the
same effect as that of the opinion of Mayer, Brown & Platt described above,
together with the additional opinion that no gain or loss will be recognized
by holders of RedFed Common Stock upon the receipt of Golden State Common
Stock in the Merger, except with respect to cash received in lieu of the
issuance of fractional shares.
REQUIRED REGULATORY APPROVALS
Completion of the Merger is subject to the approval of the OTS under Section
10(e) of the Home Owner's Loan Act of 1933 and under the Bank Merger Act
provisions of the Federal Deposit Insurance Act 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
institution 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 Redlands Federal Bank in meeting the credit needs of
the communities they serve, including low and moderate income neighborhoods.
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 Department of Justice
("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 may not thereafter challenge the transaction,
except in an action commenced under Section 2 of the Sherman Antitrust Act.
Golden State filed an application seeking the approval of the Merger by the
OTS on January 21, 1998, which application is currently pending.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVAL, WHICH APPROVAL HAS NOT YET BEEN RECEIVED. THERE CAN BE NO ASSURANCE
AS TO THE DATE OF SUCH APPROVAL. THERE CAN ALSO BE NO ASSURANCE THAT SUCH
APPROVAL, IF OBTAINED, 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 COMPLETION OF MERGER."
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CONDUCT OF BUSINESS PENDING THE MERGER; NO SOLICITATION OF COMPETING OFFERS
In the Merger Agreement, RedFed 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 RedFed 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 RedFed.
Until the Effective Time, and except as contemplated by the Merger Agreement
or as set forth in the disclosure letter delivered by RedFed to Golden State
in connection with entering into the Merger Agreement (the "RedFed Disclosure
Letter"), RedFed may not, without the prior written consent of Golden State
(which consent may not be unreasonably withheld or delayed by Golden State),
and subject to certain exceptions set 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) transactions affecting or
with respect to 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, leases or assets; (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 RedFed Certificate of Incorporation
or the RedFed Bylaws; (xii) capital expenditures; (xiii) actions that would
affect the tax effects of the Merger, and (xiv) the making, entering into or
purchase of swaps, futures, options and other derivatives and certain
securities.
As a material inducement to Golden State to enter into the Merger Agreement,
RedFed has also agreed in the Merger Agreement to comply with certain
restrictions and obligations in respect of any competing proposals to acquire
RedFed, including without limitation, a requirement that RedFed not initiate,
solicit or encourage any inquiries, or make any proposal or offer, with
respect to certain business combinations or acquisition transactions (each, an
"Acquisition Proposal") involving RedFed, or, except as legally required for
compliance by RedFed 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.
Golden State and RedFed have further agreed to take certain other actions
pursuant to the Merger Agreement, including, among others, the following: (i)
RedFed 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,
jeopardize any attorney-client privilege or violate any law, rule or
regulation, order, judgment, fiduciary duty or written agreement; (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 agreed to promptly prepare and file this Proxy
Statement/Prospectus (and the Registration Statement of which it forms a
part), and to use all reasonable efforts to have the Registration Statement
declared effective, and in connection with the Registration Statement, each of
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Golden State and RedFed 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) RedFed has
agreed to take all action necessary to obtain approval of the Merger Agreement
and the Merger by the RedFed Stockholders, and to recommend that the RedFed
Stockholders vote in favor of and approve the Merger and the Merger Agreement,
except as legally required for the discharge by the RedFed directors of their
fiduciary duties in the written opinion of RedFed's outside 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) RedFed has agreed to terminate the
RedFed ESOP in the manner described under "--ESOP Transactions" herein; 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.
ESOP TRANSACTIONS
Redlands Federal Bank maintains an employee stock ownership plan (the
"RedFed ESOP") for the benefit of its eligible employees. At December 31,
1997, the RedFed ESOP held 305,900 shares of RedFed Common Stock (the "ESOP
Shares"), 174,800 shares of which have been committed to particular employees
(the "Allocated ESOP Shares") and 131,100 shares of which are unallocated (the
"Unallocated ESOP Shares"). The RedFed ESOP financed the purchase price of the
ESOP Shares by borrowing $2,447,000 (the "ESOP Loan") from RedFed in 1994. The
outstanding balance of the ESOP Loan was $1,048,800 as of January 1, 1998.
The Merger Agreement requires RedFed to use its best efforts prior to the
Effective Time to cause the following transactions to occur with respect to
the RedFed ESOP, subject to such governmental approvals, if any, as the
fiduciaries of the RedFed ESOP and Golden State deem necessary or appropriate:
(i) in repayment of the ESOP Loan, the RedFed ESOP trustee will transfer to
RedFed the number of Unallocated ESOP Shares that are equal in value to the
then outstanding amount of principal and interest under the ESOP Loan; (ii)
the Unallocated ESOP Shares that are transferred to RedFed in exchange for
cancellation of the ESOP loan will be canceled; (iii) the RedFed ESOP will be
terminated and, in accordance with the provisions of the RedFed ESOP and its
related trust, the balance of the assets held in the trust, including any
Unallocated ESOP Shares, will be allocated and thereafter distributed to the
RedFed ESOP participants.
TERMINATION OF MERGER AGREEMENT; TERMINATION FEE
The Merger Agreement may be terminated at any time, before or after approval
of the Merger Agreement by the stockholders of RedFed, with the mutual consent
of Golden State and RedFed. The Merger Agreement also provides that it may be
terminated by either Golden State or RedFed: (i) if the board of directors of
either party so determines by majority vote of the members thereof in the
event of the failure of stockholders of RedFed to approve the Merger Agreement
or in the event of a material breach by the other party of any representation,
warranty, covenant or agreement contained in the Merger Agreement that is not
cured, or is not curable, within 45 days after written notice of such breach
is given to the breaching party by the other party; (ii) by written notice of
either party to the other in the event that any required regulatory approval
to the Merger or any of the other transactions contemplated by the Merger
Agreement or that any governmental authority of competent jurisdiction shall
have issued a final, nonappealable order enjoining or otherwise prohibiting
consummation of the transactions contemplated by the Merger Agreement; (iii)
by majority vote of the board of directors by the party if the Merger is not
completed by the July 31, 1998 Termination Date, provided that either party
will have the right to extend the effectiveness of the Merger Agreement for up
to an additional 45 days if, prior to the Termination Date, such party
notifies the other party in writing of its belief that the approvals, consents
or waivers to be obtained are imminent and a reasonable factual basis for such
party's belief that such approvals, consents or waivers are imminent.
The Merger Agreement may also be terminated by: (i) Golden State if the
RedFed Board fails to recommend approval of the Merger to the RedFed
stockholders or shall have withdrawn such recommendation or modified or
changed such recommendation in a manner adverse in any respect to the
interests of Golden State and (ii) by RedFed if Golden State shall have
entered into a letter of intent or a definitive agreement with respect to a
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merger, consolidation or similar transaction involving, or any purchase of all
or substantially all of the consolidated assets, deposits or equity
securities, of, Golden State, pursuant to which the stockholders of Golden
State would have less than 50% of the common equity of the surviving entity
immediately after the transaction.
The Merger Agreement provides generally that in the event of a termination
thereof by either Golden State or RedFed that is permitted by any of the
provisions summarized above there shall be no liability on the part of any
party to the Merger Agreement or their respective officers or directors,
except that any such termination shall be without prejudice to the rights of
any party to the Merger Agreement arising out of the intentional breach by any
other party thereto of any covenant or intentional misrepresentation and that
certain provisions of the Merger Agreement, relating to maintaining the
confidentially of information provided by the parties to such other and the
allocation of expenses, shall remain in effect after any such termination.
As an inducement to Golden State to agree to enter into the Merger
Agreement, RedFed agreed in the Merger Agreement to pay the termination fee
$7.5 million to Golden State in the event the Merger Agreement is terminated
under certain circumstances involving an Acquisition Proposal with respect to
RedFed made by a party other than Golden State. Such termination fee would be
payable if the Merger Agreement is terminated under specified circumstances at
a time when such an Acquisition Proposal exists and if within 12 months after
any such termination RedFed or any of its subsidiaries enters into a
definitive agreement with respect to an Acquisition Proposal. The term
"Acquisition Proposal" is defined in the Merger Agreement to mean any proposal
or offer to RedFed or to stockholders of RedFed with respect to a merger,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the consolidated assets, deposits or any equity
securities of, RedFed.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of RedFed's management (including Anne Bacon, President and
Chief Executive Officer, David C. Gray, Treasurer and Chief Financial Officer,
D. Brian Reider, Vice President, General Counsel and Assistant Secretary,
Carol A. Snodgress, Vice President and Investor Relations Officer, and Norman
E. Bellefeuille, Jr., Senior Vice President and Chief Loan Officer of Redlands
Federal Bank) and the RedFed Board may be deemed to have certain interests in
the Merger that are in addition to their interests as RedFed stockholders
generally. These interests are (a) Golden State's agreement in the Merger
Agreement that all rights to indemnification or exculpation in existence as of
the date of the Merger Agreement in favor of RedFed'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 RedFed 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 RedFed'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 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 RedFed to maintain or procure such insurance; (b) that as
of the Effective Time, the rights of each holder of options to purchase shares
of RedFed Common Stock shall immediately vest pursuant to their terms and
under the terms of the Merger Agreement such options shall be converted as of
the Effective Time into options to purchase shares of Golden State Common
Stock (pursuant to which the vesting of options with respect to 30,000 shares
of RedFed Common Stock, will occur in connection with the Merger with respect
to Ms. Bacon and 3,496 shares of RedFed Common Stock with respect to each of
Messrs. Gray, Reider and Bellefeuille and Ms. Snodgress
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respectively, the acceleration of the award of 22,800, 1,643, 1,299, 1,643,
1,643, 4,195, 857, 857, 857, 857, and 857, shares of RedFed Common Stock under
restricted stock awards and recognition and retention plans will occur in
connection with the Merger with respect to Ms. Bacon, Messrs. Gray, Reider and
Bellefeuille and Ms. Snodgress and Directors Robert G. Wiens, John D.
McAlearney, Jr., William C. Buster, Jr., Stanley C. Weisser, Douglas R. McAdam
and William T. Hardy, Jr.); (c) activation of certain change in control
severance provisions in the employment agreements of RedFed executive officers
which will be triggered upon the consummation of the Merger Agreement if such
executive officers are terminated from the present positions (pursuant to
which Ms. Bacon, Messrs. Gray, Reider and Bellefeuille and Ms. Snodgress are
expected to receive payments of approximately $700,000, $267,030, $315,560,
$230,000 and $225,216, respectively, plus certain other noncash benefits such
as the continuance of life, medical, dental and disability coverage for up to
two years). The RedFed Board was aware of these interests and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
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 RedFed 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 RedFed 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 RedFed
Stockholder.
REDFED 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
Mayer, Brown & Platt, its counsel, and an opinion, in the case of RedFed, from
Gibson, Dunn & Crutcher LLP, its counsel, each dated as of the Closing Date,
based upon certain customary representations and assumptions set forth therein
or on certificates of executive officers of Golden State or RedFed 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 RedFed will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, and that no
gain or loss will be recognized by Golden State, Merger Sub or RedFed as a
result of the Merger. The opinion of RedFed's counsel must further state that
no gain or loss will be recognized by RedFed Stockholders upon the receipt of
Golden State Common Stock in the Merger (except with respect to cash received
in lieu of fractional shares). In the event that RedFed 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 obligations to
consummate the Merger relating thereto and the federal income tax consequences
to RedFed Stockholders are materially different from those described herein,
RedFed expects that it will resolicit the approval of RedFed 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.
Tax Implications to RedFed Stockholders. Except to the extent that a RedFed
Stockholder receives cash in lieu of a fractional share interest, RedFed
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
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the exchange. The aggregate tax basis of shares of Golden State Common Stock
received as a result of the Merger will be the same as the RedFed
Stockholder's aggregate tax basis in the shares of RedFed 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 RedFed Stockholders as a result of the Merger
will include the period during which such RedFed Stockholder held the shares
of RedFed Common Stock exchanged by such RedFed Stockholder in the Merger,
provided that the shares of RedFed Common Stock so exchanged were held as
capital assets at the Effective Time. A RedFed 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 RedFed Stockholder who (i) is not involved
in directing corporate affairs, (ii) holds a minimal interest in RedFed, and
(iii) is not considered to own indirectly shares of RedFed or Golden State
under the constructive ownership rules of Code Section 318 (a "RedFed Public
Stockholder"), will recognize gain or loss on the deemed redemption in an
amount equal to the difference between the amount of cash received and such
RedFed Stockholder's adjusted tax basis allocable to such fractional share.
Such gain or loss will be capital gain or loss if such RedFed Stockholder's
shares of RedFed 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 RedFed Stockholders, such capital
gain will be taxed at a maximum rate of 28% if such RedFed Stockholder's
holding period is more than one year but not more than 18 months, and a
maximum rate of 20% if such holding period is more than 18 months. In the case
of RedFed Stockholders who are not "RedFed Public Stockholders" (as defined
above), Code Section 302 sets forth other tests, which, if met, would also
result in similar treatment of the RedFed Stockholder. In the event, however,
that none of these tests are met, the cash payment would be taxed as a
dividend.
Tax Implications to Golden State, Merger Sub and RedFed. Golden State,
Merger Sub and RedFed will not recognize any gain or loss for federal income
tax purposes as a result of the Merger.
COMPARISON OF RIGHTS OF HOLDERS OF GOLDEN STATE COMMON STOCK AND REDFED COMMON
STOCK
The following is a summary of differences between the rights of holders of
RedFed Common Stock and the rights of holders of Golden State Common Stock.
Both companies are incorporated under Delaware law. The differences summarized
below arise from the governing instruments of the two companies (in the case
of RedFed, the RedFed Certificate of Incorporation and the RedFed Bylaws, and,
in the case of Golden State, the Golden State Certificate of Incorporation and
the Golden State Bylaws). Although it is not practical to compare all of the
aspects in which the companies' governing instruments differ, the following
discussion summarizes the differences between them that Golden State and
RedFed believe to be material.
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 (the "Golden
State Board") (including, without limitation, vacancies thereon and the
election and removal of the members thereof); (ii) approval of Business
Combinations (as defined); (iii) the calling of 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 election of members of
the Golden State Board; (vii) the liability of directors of Golden State for
monetary damages in the event of certain breaches of fiduciary duty; and
(viii) the indemnification of certain persons, including directors and
officers of Golden State. Otherwise, amendments, alterations, changes and
repeals of the remaining provisions of the Golden State Certificate of
Incorporation are to be made in the manner prescribed by Delaware law which,
in general, would require the
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approval of a majority of the outstanding shares of Golden State Common Stock
and could, in certain cases, also require the approval of a majority, or
greater proportion, of outstanding shares of Golden State preferred stock.
The RedFed Certificate of Incorporation provides that a vote of 80 percent
of all then-outstanding common shares is required to amend or repeal articles
governing: (i) amendments to the RedFed Certificate of Incorporation;
(ii) limits on the voting rights of stockholders who own in excess of ten
percent of the then-outstanding shares; (iii) action by written consent of the
stockholders; (iv) the calling of special meetings of stockholders;
(v) election, removal and terms of directors; (vi) adoption, amendment or
repeal of the Bylaws of RedFed; (vii) voting on certain business combinations;
and (viii) indemnification of officers and directors. The other provisions of
the RedFed Certificate of Incorporation may be repealed or amended in any
manner prescribed by the laws of the State of Delaware.
Amendment and Repeal of Bylaws. The Golden State Certificate of
Incorporation provides that the Golden State Bylaws may be adopted, amended or
repealed by a resolution adopted by a majority of directors then in office.
The RedFed Certificate of Incorporation requires that the RedFed Bylaws be
adopted, amended or repealed by a resolution adopted by a majority of the
entire authorized directorships whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is
presented for adoption. The Golden State Certificate of Incorporation further
provides that the Golden State Bylaws 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. 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. The RedFed Bylaws may be amended, altered or repealed
by RedFed stockholders only upon the affirmative vote of at least 80% of the
voting power of all then outstanding shares of RedFed voting stock.
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 RedFed Bylaws provide that, subject to any rights of holders of RedFed
preferred stock that may at the time be outstanding, any vacancies on the
RedFed 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.
Removal of Directors. The Golden State and RedFed Certificates of
Incorporation each provide that directors may only be removed for cause. The
Golden State Certificate of Incorporation provides (i) that such determination
must be made 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 a special meeting, and (ii) that cause for removal will be deemed to
exist only in the event of a conviction of a felony by a court of competent
jurisdiction or 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, such adjudication no longer being subject to appeal. The RedFed
Certificate of Incorporation provides that such determination must be made by
the affirmative vote of at least 80% of the voting power of all then
outstanding shares of RedFed capital stock entitled to vote generally in the
election of RedFed directors.
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 RedFed Bylaws provide that special
meetings of RedFed stockholders may only be called by majority of the
authorized number of directors.
51
<PAGE>
Shareholder Action Without a Meeting. The Golden State Certificate of
Incorporation provides 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.
The RedFed Certificate of Incorporation provides that RedFed stockholders may
only take action at an annual or special meeting of RedFed stockholders and
may not take action by written consent.
Cumulative Voting. The RedFed Certificate of Incorporation does not permit
stockholders to cumulate their votes in the election of directors. The Golden
State Certificate of Incorporation permits stockholder to cumulate votes in
the election of directors in the manner provided in Section 214 of the
Delaware General Corporation Law. Pursuant to that 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, such stockholder would be entitled
to cast for the election of directors with respect to such stockholder's
shares of stock, multiplied by the number of directors to be elected, and may
cast all of such votes for a single director or may distribute them among the
number to be voted for, or by any two or more of them, as such stockholder may
see fit.
Provisions Affecting Business Combinations. The RedFed Certificate of
Incorporation provides that, in addition to any affirmative vote of holders of
a class of series of RedFed capital stock required by law or the provisions
thereof, and with certain exceptions described herein, a Business Combination
(as defined herein) with or involving an Interested Stockholder (as defined)
requires the affirmative vote of the holders of at least 80% of the voting
stock of RedFed voting together as a single class. Such an affirmative vote is
required notwithstanding the fact that no vote, or a lesser percentage of
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) or (ii) certain pricing, procedural and other criteria
are satisfied.
For the purposes of the above provisions of the RedFed Certificate of
Incorporation, the term "Business Combination" means by any of the following
combinations between RedFed or a subsidiary, on the one hand, and an
Interested Stockholder or affiliate thereof on the other: (i) the merger or
consolidation of RedFed or any subsidiary of RedFed; or (ii) the sale, lease
exchange, mortgage, pledge, transfer or other disposition (in one or a series
of transactions) of any assets of RedFed or any RedFed subsidiary having an
aggregate fair market value equal to 25% or more of the combined assets of
RedFed and its subsidiaries; or (iii) issuance or transfer of RedFed or by any
subsidiary of RedFed (in one transactions or a series of transactions) of
securities of RedFed or a subsidiary of RedFed having an aggregate fair market
value equal to 25% or more of the combined fair market value of the
outstanding Common Stock of RedFed and its subsidiaries (except for issuances
and transfers pursuant to employee benefit plans of RedFed or any subsidiary);
or (iv) the adoption of a plan or proposal for the liquidation or dissolution
of RedFed proposed by an Interested Stockholder; 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
classes or series of capital stock RedFed or any RedFed subsidiary. The term
"Interested Stockholder" means any person (other than RedFed) its
subsidiaries, an employee stock ownership or other employee benefits plan of
RedFed or any trustee or fiduciary with respect to any such plan acting in
such capacity) that is the direct or indirect beneficial owner of more than
10% of the outstanding voting stock of RedFed, and any affiliate or associate
of such person. The term "Disinterested Director" means any member of the
RedFed 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 RedFed Board.
The Golden State Certificate of Incorporation also contains special vote
provisions with respect to Business Combinations involving Golden State and a
Related Person (defined similarly to the RedFed definition of
52
<PAGE>
"Interested Stockholder"), except that the stockholder vote required under the
Golden State provisions is that such Business Combinations must be approved by
the affirmative vote of the holders of at least two-thirds of the voting stock
of Golden State voting together as a single class (excluding shares
beneficially owned by the Related Person), or must meet certain other pricing
and procedural requirements. In addition, the Golden State Certificate of
Incorporation provisions relate to proposed Business Combinations that involve
sales or other dispositions of assets or issuances of shares having an
aggregate fair market value, in either case, of $25 million or more.
Nomination of Directors. The RedFed 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 and received at the principal executive offices of RedFed, not
less than 90 days prior to the meeting at which such election is to occur. Any
such notice must meet certain requirements as to content and form, including
setting forth the information relating to the nominees and the nominating
stockholder. The RedFed Board may reject any stockholder nomination not made
in accordance with the foregoing requirements.
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 and 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 nomination by a
stockholder not timely made in accordance with the provisions of the Golden
State Bylaws.
New Business Proposals. The RedFed Bylaws provide that any new business to
be conducted at any annual meeting of RedFed Stockholders must be stated in
writing and received at the principal executive offices of RedFed not less
than 90 days in advance of the annual meeting, at which such business is to be
presented. Any such statement must be accompanied by specified types of
information relating to such proposed new business and the proponent thereof.
The Golden State Bylaws provide that, for stockholder proposals to be acted
upon at any meeting of the Golden State Stockholders, timely notice thereof
must be given. Notice is deemed 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."
Other Provisions. The RedFed Certificate of Incorporation contains a
provision that generally prohibits any person who beneficially owns more than
10% of the then outstanding shares of RedFed Common Stock from voting any
shares of such stock in excess of such 10% limit. The RedFed Certificate of
Incorporation also authorizes the RedFed Board to consider the social and
economic effect of offers or proposals involving a tender offer or exchange
offer for securities of RedFed, mergers or consolidations of RedFed with
another entity or purchases or other acquisitions of all or substantially all
of its properties and assets in determining what is in the best interest of
RedFed and its stockholders. The RedFed Board is further authorized by such
provision to consider RedFed's present and future customers and employees and
those of its subsidiaries, the effects of any such proposal on communities in
which RedFed and its subsidiaries operate or are located and on the ability of
RedFed to fulfill its corporate objective as a savings bank holding company
and the ability of its subsidiary, Redlands Federal Bank to fulfill the
objectives of a federally-chartered stock form savings bank under applicable
statutes and regulations. The Golden State Certificate of Incorporation does
not contain any similar provisions.
ABSENCE OF DISSENTER'S APPRAISAL RIGHTS
RedFed is incorporated under Delaware law and the laws of that state govern
the availability of dissenter's appraisal rights with respect to mergers or
other corporate transactions involving RedFed. The holders of RedFed Common
Stock will not have any dissenter's appraisal rights under Delaware law in
connection with the Merger Agreement and the consummation of the transactions
contemplated thereby.
53
<PAGE>
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 RedFed 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 RedFed after
the Effective Time. Income (or loss) of RedFed 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 the 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."
WAIVER; AMENDMENT
The Merger Agreement provides that any of its provisions may be waived by
the party benefited by the provision or, to the extent permitted by applicable
law, amended or modified, either before or after the Merger Agreement and the
transactions contemplated thereby are approved by the stockholders of RedFed.
Any such waiver or amendment must be set forth in an agreement in writing
between Golden State and RedFed that has been approved or authorized by their
respective boards of directors. Under Delaware law, a merger agreement may be
amended after a corporation's stockholders have adopted the agreement if such
amendment does not: (i) alter or change the amount or kind of shares,
securities, cash, property and/or rights that are to be received in exchange
for or on conversion of shares of any class of a corporation that is a party
to the merger; (ii) alter or change any term of the certificate of
incorporation of the surviving corporation that is to be effected by the
merger; or (iii) alter or change any of the terms and conditions of the
agreement if such alteration would adversely effect the holders of any class
or series of stock or securities such constituent corporation.
EXPENSES
The Merger Agreement provides that the costs and expenses incurred in
connection with such agreement and the transactions contemplated thereby will
be paid by the party incurring such costs and expenses. The Merger Agreement
further provides that all regulatory application fees shall be deemed to be
expenses of Golden State and that the costs of printing and mailing this Proxy
Statement/Prospectus shall be borne equally by Golden State and RedFed.
54
<PAGE>
MANAGEMENT AND OPERATIONS AFTER THE CALIFORNIA FEDERAL MERGER
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 "THE
MERGER--Parties to the Merger--Golden State--Proposed Distribution of
Litigation Tracking Warrants"), 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 an exhibit 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, and which is incorporated by reference herein. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
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<PAGE>
TRADING MARKETS AND 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").
<TABLE>
<CAPTION>
GOLDEN STATE/
GLENDALE FEDERAL
COMMON STOCK
-----------------
HIGH LOW
-------- --------
<S> <C> <C>
Fiscal Year Ended June 30, 1996
First Quarter........................................... $ 17.000 $ 12.125
Second Quarter.......................................... 18.000 14.625
Third Quarter........................................... 19.125 15.500
Fourth Quarter.......................................... 19.125 16.000
Fiscal Year Ended June 30, 1997
First Quarter........................................... 20.000 15.875
Second Quarter.......................................... 23.875 17.375
Third Quarter........................................... 18.125 22.500
Fourth Quarter.......................................... 27.000 22.250
Fiscal Year Ending June 30, 1998
First Quarter........................................... 31.875 26.125
Second Quarter.......................................... 37.750 26.125
Third Quarter........................................... 38.813 31.500
Fourth Quarter, through April , 1998..................
</TABLE>
RedFed Common Stock is listed on the Nasdaq National Market System and
traded under the symbol "REDF." The following table sets forth, for the
periods indicated, the high and low reported closing sale prices per share of
RedFed Common Stock on Nasdaq.
<TABLE>
<CAPTION>
REDFED COMMON
STOCK
---------------
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year Ended December 31, 1996
First Quarter............................................. $10.000 $ 8.875
Second Quarter............................................ 10.000 8.375
Third Quarter............................................. 12.125 8.375
Fourth Quarter............................................ 13.500 11.500
Fiscal Year Ended December 31, 1997
First Quarter............................................. 15.750 12.875
Second Quarter............................................ 16.500 12.250
Third Quarter............................................. 18.000 15.500
Fourth Quarter............................................ 21.125 17.375
Fiscal Year Ending December 31, 1998
First Quarter............................................. 20.125 19.750
Second Quarter, through April , 1998....................
</TABLE>
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<PAGE>
ELECTION OF DIRECTORS
Each of the members of the RedFed Board also presently serves as a director
of Redlands Federal Bank. RedFed's Directors are elected for staggered terms
of three years each, with the term of office of one of the three classes of
directors expiring each year. RedFed's Directors serve until their successors
are elected and qualified.
The three nominees proposed for election at the Stockholders Meeting are Ms.
Anne Bacon and Messrs. John D. McAlearney and William C. Buster Jr. Each of
the nominees named is presently a director of RedFed and Redlands Federal
Bank. In the event that a nominee is unable to serve or declines to serve for
any reason, it is intended that proxies will be voted for the election of such
other person or persons as may be designated by the present RedFed Board. The
RedFed Board has no reason to believe that any of the persons named will be
unable or unwilling to serve. UNLESS AUTHORITY TO VOTE FOR THE DIRECTORS IS
WITHHELD, THE SHARES REPRESENTED BY THE ENCLOSED PROXY CARD IF EXECUTED AND
RETURNED WILL BE VOTED "FOR" THE ELECTION OF EACH OF THE NOMINEES PROPOSED BY
THE REDFED BOARD.
THE REDFED BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH NOMINEE NAMED
IN THIS PROXY STATEMENT.
INFORMATION WITH RESPECT TO NOMINEES, DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
The following table sets forth, as of the Record Date, the names of the
nominees, other directors and "Named Executive Officers" (as defined below) of
RedFed, their ages, a brief description of their recent business experience,
including present occupations and employment, certain directorships held by
each, the year in which each became a director of Redlands Federal Bank, and
the year in which their individual terms (or in the case of nominees, their
proposed terms) as directors of RedFed expire. This table also sets forth the
amount of RedFed Common Stock and the percent thereof beneficially owned by
each director and Named Executive Officers and all directors and executive
officers as a group as of the Record Date.
<TABLE>
<CAPTION>
OWNERSHIP
NAME AND PRINCIPAL SHARES OF AS A
OCCUPATION AT PRESENT EXPIRATION COMMON STOCK PERCENT
AND FOR THE DIRECTOR OF TERM AS BENEFICIALLY OF
PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2) CLASS(9)
--------------------- --- -------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
NOMINEES FOR DIRECTOR
Anne Bacon....................... 53 1995 2001 56,067
President and Chief Executive (5)(8)
Officer of RedFed and the
Redlands Federal Bank; former
President and Chief Executive
Officer of First Western Bank
John D. McAlearney, Jr........... 53 1989 2001 68,714
Chairman of the Board of (3)(4)
Directors of RedFed and Redlands
Federal Bank; Attorney, officer,
director and shareholder of
McPeters McAlearney Shimoff &
Hatt, a Professional Corporation
William C. Buster, Jr. .......... 61 1989 2001 51,464
President of Wm. C. Buster, (3)(4)
Inc., a general contracting firm
and Vespar Development Co., a
residential and commercial real
estate development company
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
OWNERSHIP
NAME AND PRINCIPAL SHARES OF AS A
OCCUPATION AT PRESENT EXPIRATION COMMON STOCK PERCENT
AND FOR THE DIRECTOR OF TERM AS BENEFICIALLY OF
PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2) CLASS(9)
--------------------- --- -------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
CONTINUING DIRECTORS
Stanley C. Weisser.............. 56 1986 1999 65,464
Pharmacist and President, Chief (3)
Executive Officer and Director
of Network Pharmaceutical Inc.,
operator of local pharmacies
Robert G. Wiens................. 62 1986 2000 98,484
Retired President, Chief (3)(7)(8)
Executive Officer and Chairman
of the Board of Directors of
RedFed and Redlands Federal
Bank
Douglas R. McAdam............... 53 1987 2000 37,389
CPA; Officer, director and (3)(4)
shareholder of Soren McAdam
Bartells, Certified Public
Accountants, Inc.
William T. Hardy, Jr............ 54 1990 1999 48,889
President of Renown LLC, a (3)(4)
produce exporter
</TABLE>
<TABLE>
<CAPTION>
OWNERSHIP
NAME AND PRINCIPAL SHARES OF AS A
OCCUPATION AT PRESENT COMMON STOCK PERCENT
AND FOR THE BENEFICIALLY OF CLASS
PAST FIVE YEARS AGE OWNED(2) (9)
--------------------- --- ------------ ---------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS
D. Brian Reider..................................... 47 14,379
Vice President, General Counsel and Assistant (3)(6)(7)(8)
Secretary of RedFed; Executive Vice President,
Chief Operating Officer and General Counsel of
Redlands Federal Bank; President and Director of
Redlands Financial Services, Inc., RedFed, Inc. and
RedFed Escrow, Inc.
David C. Gray, CPA.................................. 55 34,427
Treasurer and Chief Financial Officer of RedFed, (3)(6)(7)(8)
Senior Vice President and Chief Financial Officer
of Redlands Federal Bank; and Treasurer of Redlands
Financial Services, Inc., RedFed, Inc. and RedFed
Escrow, Inc.
Norman E. Bellefeuille, Jr.......................... 45 25,152
Senior Vice President and Chief Loan Officer of (3)(6)(7)(8)
Redlands Federal Bank
Carol A. Snodgress.................................. 42 34,760
Vice President and Investor Relations Officer of (3)(6)(7)(8)
RedFed; Senior Vice President/Retail Banking
Officer of Redlands Federal Bank; and Senior Vice
President of RedFed, Inc.
Stock Ownership of all directors and executive
officers as a group (11 Persons)................... 535,189
</TABLE>
- --------
(1) Includes years of service as a director of Redlands Federal Bank.
(2) Each person or relative of such person whose shares are included herein
exercises sole (or shared with spouse, relative or affiliate) voting or
dispositive power as to the shares reported.
(3) Includes 4,196, 1,299, 1,644, 1,644 and 1,644 shares awarded to Messrs.
Wiens, Reider, Gray and Bellefeuille and Ms. Snodgress, respectively,
under the Redlands Federal Bank Recognition and Retention Plan for
Officers and Employees ("RRP") Trust and includes 857 shares each awarded
to Messrs. McAdam, Weisser, Buster, McAlearney and Hardy, respectively,
under the Redlands Federal Bank Recognition and Retention Plan for Outside
Directors ("DRP") Trust, as to which voting may be directed which will
vest on April 7, 1999.
58
<PAGE>
(4) Includes 17,480 shares subject to options currently exercisable granted to
Messrs. McAdam, Buster, McAlearney and Hardy, respectively, under the
RedFed Bancorp Inc. 1994 Option Plan for Outside Directors ("Directors'
Option Plan") which began vesting on April 7, 1995, one year from the date
of grant.
(5) Includes 15,000 shares subject to options granted under the 1995 Long Term
Incentive Plan (the "Incentive Plan"), which shares become exercisable
within 60 days after the Record Date. Does not include 30,000 shares
subject to options which become exercisable in two equal annual
installments commencing April 25, 1999. Includes 20,200 performance
restricted stock awards granted under the Incentive Plan which have vested
and 1,867 shares allocated to Ms. Bacon under the Bank's ESOP. Does not
include 22,800 shares of performance restricted stock awards which vest
April 25, 2000, subject to the discretionary authority of the Board of
Directors to accelerate vesting, in whole or in part, based upon
performance.
(6) Includes 6,984, 12,734, 10,488 and 11,584 shares subject to the portions
of the options granted to Messrs. Reider, Gray and Bellefeuille and Ms.
Snodgress, respectively, under the RedFed Bancorp 1994 Incentive Stock
Option Plan (the "Stock Option Plan") that were exercisable as of the
Record Date. Does not include 3,496 shares subject to options granted to
each of Messrs. Reider, Gray and Bellefeuille and Ms. Snodgress under the
Stock Option Plan which become exercisable on April 7, 1999.
(7) Includes 50,862, 1,631, 14,269, 8,694 and 10,802 shares held in the
Employer Stock Fund of the Redlands Bank Employee 401(k) Trust and
allocated to the accounts of Messrs. Wiens, Reider, Gray and Bellefeuillle
and Ms. Snodgress, respectively, as to which voting may be directed.
(8) Includes 1,867, 1,645, 3,165, 2,886, 2,558 and 2,447 shares allocated to
Ms. Bacon, Messrs. Wiens, Reider, Gray and Bellefeuille and Ms. Snodgress,
respectively, under Redlands Federal Bank's ESOP.
(9) Calculated as of the Record Date.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires RedFed's officers and directors
and persons who own more than ten percent of a registered class of RedFed's
equity securities to file with the SEC and with each exchange on which the
RedFed Common Stock trades, initial reports of ownership and reports of
changes in ownership of RedFed Common Stock and other equity securities of
RedFed. Officers, directors and greater than ten percent beneficial owners are
required by the SEC's regulation to furnish RedFed with copies of all Section
16(a) forms they file.
To RedFed's knowledge, based solely on review of the copies of such reports
furnished to RedFed and written representations that no other reports were
required during the fiscal year ended December 31, 1997, its officers,
directors and greater than ten percent beneficial owners have complied with
all Section 16(a) filing requirements applicable to them, except that Mr. Gray
inadvertently failed to timely file a Form 4 with respect to the acquisition
of 1,324 shares of RedFed Common Stock on March 26, 1997 in his 401(k)
account. The Form 4 was filed on June 3, 1997, promptly after the failure to
file was discovered.
MEETINGS OF THE REDFED BOARD AND COMMITTEES OF THE REDFED BOARD
The RedFed Board conducts its business through meetings of the RedFed Board
and through activities of its committees. The RedFed Board meets on a monthly
basis and has additional meetings as needed. During fiscal 1997, the RedFed
Board held 15 meetings. The Boards of Directors of the RedFed and Redlands
Federal Bank maintain the following committees, among others:
Executive Committee. The Executive Committee consists of Messrs. McAlearney
(Chairman), Weisser, McAdam and Ms. Bacon. The Committee has the authority,
subject to certain exceptions, to act on all matters of RedFed Board business
between RedFed Board meetings subject to notification to the RedFed Board at
its next meeting. This Committee did not meet in 1997.
Audit Committee. The Audit Committee consists of Messrs. McAdam (Chairman),
Weisser, McAlearney, and Hardy, all of whom are non-employee directors. This
committee meets at least quarterly and recommends
59
<PAGE>
an independent audit firm to the full RedFed Board for approval, approves
internal audit schedules, and reviews internal audit reports. The Audit
Committee met four times in 1997.
Nominating Committee. The Nominating Committee consists of Messrs. Weisser
(Chairman), Wiens, McAdam, and Hardy. The Nominating Committee makes
recommendations to the RedFed Board of nominees for election as directors at
the annual meetings and met for this purpose on January 27, 1998. The
Nominating Committee will consider nominees proposed by stockholders who give
appropriate and timely notice of such proposed nominations in accordance with
the requirements of Section 6(c)(ii) of Article I of RedFed's Bylaws. Any such
stockholder notice of proposed nomination must contain specified types of
information relating to the nominee, including information of the type
required pursuant to the Exchange Act.
Compensation and Benefit Plans Committee. The Compensation and Benefit Plans
Committee determines executive compensation, and other matters regarding
personnel and employee benefit plans. The Committee consists of Messrs. Hardy
(Chairman), McAlearney, Weisser and Buster and met once in 1997.
DIRECTORS' COMPENSATION
Directors' Fees. Directors do not receive any fees for serving on RedFed's
Board. Non-employee directors of Redlands Federal Bank receive an annual
retainer fee of $34,200 each, and do not receive any additional fees for
attending meetings. The Chairman receives an additional fee of $1,000 per
month. The fees are paid by Redlands Federal Bank.
Directors Retirement Plan. Redlands Federal Bank maintains the Redlands
Federal Bank Outside Directors Retirement Plan (the "Directors' Retirement
Plan"), a retirement plan for non-employee directors with six or more years of
service with Redlands Federal Bank. The Directors' Retirement Plan provides
that, upon retirement, retiring Directors are eligible to receive an annual
benefit equal to 100% of the retiring Directors' compensation in the last year
of service which shall continue to be paid annually for a number of years
equal to the number of years the participant served as an outside Director,
but not for longer than 15 years. The Directors' Retirement Plan provides that
in the event of a participant's death prior to payment of all benefits due to
a participant under the Directors' Retirement Plan, the remaining benefits are
to be paid to the beneficiary or beneficiaries designated by the participant
or, if no such designation has been made, to the estate of the participant.
Effective June 30, 1995, RedFed elected to partially freeze the Directors'
Retirement Plan.
Directors' Option Plan. Under the RedFed Bancorp. Inc. 1994 Stock Option
Plan for Outside Directors (the "Directors' Option Plan"), each outside
Director was granted options to purchase 17,480 shares of RedFed Common Stock
at an exercise price of $8.00 per share, which was the fair market value of
the shares on the date of grant (April 7, 1994). To the extent options for
shares are available for grants under the Directors' Option Plan, on each
anniversary of the Effective Date of the Directors' Option Plan, each
subsequently elected outside director will be granted, if such outside
director is qualified, non- statutory stock options to purchase a number of
shares of Common Stock equal to 2,185 shares or options to purchase such
lesser number of shares as remain in the Directors' Option Plan. If options
for sufficient shares are not available to fulfill the grant of options to an
outside director, and thereafter options become available, such persons shall
receive options to purchase an amount of shares of Common Stock determined by
dividing pro rata among such persons the number of options available. The
exercise price of each option granted to subsequent Directors will be equal to
the fair market value of the Common Stock on the date of the grant. All
options initially granted under the Directors' Option Plan become exercisable
in three equal installments commencing one year from the date of grant, except
that in the event of death, disability or retirement of the participant or
upon a change in control of RedFed or Redlands Federal Bank, such as will
occur upon the consummation of the Merger, all options previously granted
would automatically become exercisable.
Directors' Retention and Recognition Plan. Under the Redlands Federal Bank
Recognition and Retention Plan for Outside Directors (the "DRP"), each outside
Director was awarded 4,283 shares of RedFed Common Stock. Each emeritus
Director received awards equal to 1,286 shares. Awards to Directors began
vesting in five
60
<PAGE>
equal annual installments on April 7, 1995, the first anniversary of the
effective date of the award. Awards will be 100% vested upon termination of
service as a Director due to death or disability of the Director or following
a change in the control of Redlands Federal Bank or RedFed, such as will occur
upon the consummation of the Merger, or the failure of the Director to be
reelected at any annual meeting of shareholders at which such director has
been duly nominated for election unless such director continues to serve as a
consulting Director. In the event that a Director terminates service with
Redlands Federal Bank or RedFed before his or her DRP awards have been fully
vested, the Director's nonvested awards will be forfeited.
Consulting Agreement. Mr. Wiens has entered into a consulting agreement with
Redlands Federal Bank (the "Consulting Agreement"). The Consulting Agreement
will continue through April 30, 2000 unless earlier terminated. Under the
terms of the Consulting Agreement, Mr. Wiens will be available to advise
Redlands Federal Bank as to strategies for dealing with business issues it may
confront, as well as providing certain historical information regarding prior
business Mr. Wiens is compensated on an hourly basis for any advice he may
render. During the year ended December 31, 1997, Mr. Wiens received no
payments pursuant to the Consulting Agreement.
EXECUTIVE COMPENSATION
The report of the compensation committee and the stock performance graph
shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement/Prospectus into any filing
under the Securities Act or the Exchange Act, except to the extent that RedFed
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Compensation Committee Report on Executive Compensation. Under rules
established by the Commission, RedFed is required to provide certain data and
information in regard to the compensation and benefits provided to RedFed's
Chief Executive Officer and other executive officers of RedFed. The disclosure
requirements for the Chief Executive Officer and other executive officers
include a report explaining the rationale and considerations that led to
fundamental compensation decisions affecting those individuals. In fulfillment
of this requirement, the Compensation and Benefit Plans Committee (the
"Compensation Committee") of Redlands Federal Bank, at the direction of the
Board of Directors of Redlands Federal Bank has prepared the following report
for inclusion in this Proxy Statement/Prospectus.
General. The purpose of the Compensation Committee of RedFed and Redlands
Federal Bank is to review the respective compensation philosophy and programs,
exercise authority with respect to the payment of salaries and incentive
compensation to the officers of Redlands Federal Bank and serve as
administrator for certain benefit plans for Redlands Federal Bank as may be
determined by the Board of Directors of Redlands Federal Bank. Redlands
Federal Bank's Compensation Committee periodically reviews and determines the
compensation of the Chief Executive Officer and certain other executive
officers and authorizes the compensation paid to the remaining officers and
employees.
Base Salary. Officers' salaries are reviewed annually. Management prepares
its recommendations (for all employees and officers other than the Chief
Executive Officer and President) and supplies the Committee with reference
materials such as various published compensation surveys and other supporting
documentation. Salary levels are designed to be competitive with cash
compensation levels paid by peer group institutions. Redlands Federal Bank
generally considers its peer group to be thrift institutions and banks with
assets between $500 million and $3 billion operating within the western
region, which consists of the states of Arizona, California, Idaho, Montana,
Nevada, Oregon, Utah, Washington and Wyoming. The peer group used in making
compensation decisions is not necessarily composed of the same institutions as
those used for the stock performance graph included in this Proxy Statement-
Prospectus. Although the evaluations of specific levels of compensation for
the executive officers of Redlands Federal Bank are based, in part, on peer
group surveys, including a survey performed for the Western League of Savings
Institutions, no specific formula is utilized to fix annual compensation.
61
<PAGE>
Bonus. In November 1996, the Redlands Federal Bank Board of Directors
adopted an Incentive Program to reward officers based on performance criteria
as determined by the Committee, and the profitability of Redlands Federal
Bank, as well as achievement of goals set forth in Redlands Federal Bank's
Business Plan. This Incentive Program was used in 1997 as adopted and the
Redlands Federal Bank Board of Directors has taken action to continue with the
Incentive Program through the first quarter of 1998. No other bonuses were
awarded to officers of Redlands Federal Bank in fiscal year 1997.
Stock Programs. In conjunction with and after Redlands Federal Bank's
conversion from mutual to stock form, in 1994, various stock programs were
established. The Redlands Federal Bank Employee Stock Ownership Plan, the
RedFed Bancorp. Inc. 1994 Incentive Stock Option Plan (the "Incentive Stock
Ownership Plan"), the Redlands Federal Bank Recognition and Retention Plan
(the "RRP") and the RedFed Bancorp Inc. 1995 Long Term Incentive Plan (the
"Incentive Plan") are designed as an incentive to the executive officers and
employees of Redlands Federal Bank and act so as to align the interests of the
officers and employees of Redlands Federal Bank with stockholders. The awards
under such plans become exercisable over a multi-year period, enhancing their
value as a long-term incentive. The awards of options and shares under the
Incentive Stock Option Plan and the RRP were allocated by the Compensation
Committee based upon regulatory practices and policies, the practices of other
recently converted financial institutions as verified by external surveys and
based upon the executive officer's level of responsibility and contributions
to Redlands Federal Bank as determined by the Compensation Committee on a
discretionary basis.
Chief Executive Officer. Upon her assumption of duties as President and
Chief Executive Officer in April 1995, Anne Bacon was given a package which
included an annual salary of $250,000, a potential performance bonus and stock
grants and options as disclosed in the Summary Compensation Table. This salary
was established through negotiations the Compensation Committee had with Ms.
Bacon regarding her Employment Agreement, and was based upon information
gathered by the Committee during the search for a new Chief Executive Officer.
This information included results of a survey conducted by an outside
executive compensation consultant of Chief Executive Officer compensation in
banks and thrifts in California, and data provided by the executive search
firm engaged by Redlands Federal Bank to assist in locating a new Chief
Executive Officer.
Annually, the Board adopts a Business Plan for Redlands Federal Bank, and
subsequently uses the Business Plan to set measurable performance goals for
the Chief Executive Officer, including a continued reduction of classified and
non-performing assets and further reductions in general and administrative
expenses, as well as other specific goals. The Compensation Committee agreed
that these goals would be used to review Ms. Bacon's performance. Following
Ms. Bacon's annual performance evaluation conducted in March 1997, during
which it was agreed that the performance criteria had been met and exceeded,
Ms. Bacon was granted a bonus as set forth in the Summary Compensation Table,
and awarded 7,600 shares of performance based stock from the Incentive Plan.
COMPENSATION COMMITTEE OF REDFED AND BANK
William T. Hardy, Jr. (Chairman)
Stanley C. Weisser
John D. McAlearney, Jr.
William C. Buster, Jr.
62
<PAGE>
Summary Compensation Table. The following table shows, for the fiscal years
ending December 31, 1997, 1996, and 1995, the cash compensation paid by
Redlands Federal Bank, as well as certain other compensation paid or accrued
for those years, to the Chief Executive Officer and those executive officers
("Named Executive Officers") of RedFed, who received salary and bonus in
excess of $100,000 in 1997.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------------
AWARDS PAYOUTS
---------- -------
OTHER SECURITIES
ANNUAL COMPENSATION ANNUAL RESTRICTED UNDERLYING LTIP
NAME AND PRINCIPAL ------------------------- COMPENSATION STOCK OPTIONS/ PAYOUTS OTHER
OFFICE YEAR SALARY ($) BONUS ($) ($) AWARDS ($) SARS(#)(1) ($) COMP ($)
------------------ ---- ---------- --------- ------------ ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anne Bacon(3)........... 1997 $250,000 $100,000 $ -- -- 8,128(2)
President and Chief 1996 250,000 100,000 -- -- 6,808
Executive Officer of 1995 203,506 -- -- $432,580(4) 75,000 --
RedFed and the
Redlands Federal Bank
D. Brian Reider......... 1997 137,200 20,580 -- -- 7,360(2)
Vice President, General 1996 137,200 20,580 -- -- 6,808
Counsel and Assistant 1995 134,200 -- -- 51,960(5) 17,480 6,992
Secretary of RedFed;
Executive Vice
President, Chief
Operating Officer and
General Counsel of
Redlands Federal Bank
David C. Gray, CPA...... 1997 116,100 17,415 -- -- 6,232(2)
Treasurer and Chief 1996 116,100 17,415 -- -- 6,752
Financial Officer 1995 116,100 -- -- 65,728(5) 17,480 6,048
of RedFed; Senior
Vice President and
Chief Financial Officer
of Redlands Federal
Bank
Norman E. Bellefeuille,
Jr. ................... 1997 100,000 15,000 -- -- 5,368(2)
Senior Vice President 1996 100,000 15,000 -- -- 5,912
and Chief Loan Officer 1995 107,092 -- -- 65,728(5) 17,480 5,584
of Redlands Federal
Bank
Carol A. Snodgress...... 1997 97,920 14,688 -- -- 5,256(2)
Vice President and 1996 97,920 14,688 -- -- 5,800
Investor Relations 1995 97,920 -- -- 65,728(5) 17,480 5,104
Officer of RedFed;
Senior Vice President/
Retail Banking Officer
of Redlands Federal
Bank
</TABLE>
- -------
(1) Includes 75,000 shares subject to options granted to Ms. Bacon under the
Long Term Incentive Plan which become exercisable in five equal annual
installments commencing April 25, 1996. Includes 17,480 shares subject to
options granted to Messrs. Reider, Gray and Bellefeuille and Ms. Snodgress
under the Stock Option Plan, which options will be exercisable in five
equal annual installments, commencing April 7, 1995 and continuing on each
anniversary date thereafter.
(2) Includes 1,016, 920, 779, 671 and 657 shares contributed by the Bank
pursuant to the ESOP and allocated respectively for the benefit of Ms.
Bacon, Messrs. Reider, Gray and Bellefeuille and Ms. Snodgress for fiscal
1997.
(3) Ms. Bacon was appointed as President and Chief Executive Officer of the
Company and the Bank, effective April 3, 1995.
63
<PAGE>
(4) Pursuant to the Incentive Plan, Ms. Bacon was awarded 43,000 performance
restricted stock awards which had a market value of $432,580 on the date
of the grant. 20,200 shares have vested and 22,800 shares vest on April
25, 2000, subject to the discretionary authority of the Board of Directors
to accelerate vesting in whole or in part, based upon performance. When
awards become vested and are distributed, the recipient will also receive
an amount equal to accumulated dividends and any earnings thereon. All
awards will vest upon a change in control. In the event of retirement,
death or disability, restricted awards which represent the percentage of
time which had already passed in the pendency of the contingency will
vest. At December 31, 1997, the shares comprising such unvested portion of
the restricted stock award to Ms. Bacon had a market value of $19.8125 per
share, for a total value of $451,725 and the shares comprising the entire
restricted stock award had a total value of $851,937.
(5) Pursuant to the RRP, Messrs. Reider, Gray and Bellefeuille and Ms.
Snodgress were awarded 6,495, 8,216, 8,216 and 8,216 shares of common
stock, respective, in fiscal 1994, which had a market value of $8.00 per
share on the date of the grant. Such awards vest in five annual
installments at a rate of 20% per year commencing on April 7, 1995, one
year from the date of the grant. When shares become vested and are
distributed, the recipient will also receive an amount equal to
accumulated dividends and any earnings thereon. Awards will be 100% vested
upon termination of employment due to death, disability or following a
change of control. If a recipient terminates employment due to retirement,
such awards will continue to be earned in annual installments of 20% if
the Compensation Committee determines that such recipient is expected to
continue to provide valuable services to the Bank. At December 31, 1997,
the shares comprising the unvested portion of such awards to Messrs.
Reider, Gray and Bellefeuille and Ms. Snodgress had a market value of
$19.8125 per share, for a total value of $51,473, $65,112, $65,112 and
$65,112, respectively and the total amount of such awards, including
vested portions had a market value of $128,682, $162,780, $162,780 and
$162,780, respectively.
64
<PAGE>
Stock Performance Graph. The following table shows a forty-four month
comparison of cumulative total shareholder return on RedFed's Common Stock,
based on the market price of the RedFed Common Stock, with the cumulative total
return of U.S. Companies in the Nasdaq National Market and the SNL Thrift
Index. RedFed's Common Stock began trading on April 8, 1994. The indices were
compiled by SNL Securities.
COMPARISON OF FORTY-FOUR MONTH TOTAL RETURN
AMONG REDFED BANCORP INC.,
NASDAQ MARKET INDEX AND SNL THRIFT INDEX
TOTAL RETURN PERFORMANCE
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
PERIOD ENDING
------------------------------------------
INDEX 4/8/94 12/31/94 12/31/95 12/31/96 12/31/97
- ----- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
RedFed Bancorp Inc................... 100.00 94.12 119.12 158.82 233.82
NASDAQ -- Total US................... 100.00 101.30 143.27 176.21 216.23
SNL Thrift Index..................... 100.00 101.89 158.68 206.76 351.51
</TABLE>
65
<PAGE>
Employment Agreements. Redlands Federal Bank and RedFed have entered into
employment agreements with Ms. Bacon, each of which provides for a two-year
term. Commencing on the first anniversary date and continuing on each
anniversary date thereafter, the Board of Directors of Redlands Federal Bank
and RedFed may extend the agreements for an additional year such that the
remaining term shall be two years, unless written notice of non-renewal is
given by the Boards of Directors after conducting a performance evaluation of
Ms. Bacon. The agreements provide that Ms. Bacon will receive an annual base
salary of $250,000, which will be reviewed at least annually by the Boards of
Directors. In addition to the base salary, the employment agreements provide
for, among other things, participation in stock benefit plans and other fringe
benefits applicable to executive personnel. The employment agreements provide
for termination by Redlands Federal Bank or RedFed for cause at any time.
In the event Redlands Federal Bank or RedFed chooses to terminate Ms.
Bacon's employment for reasons other than cause, or for disability, or in the
event of Ms. Bacon's resignation from Redlands Federal Bank and RedFed upon:
(i) failure to re-elect Ms. Bacon to her current offices; (ii) a material
change in Ms. Bacon's functions, duties or responsibilities, or relocation of
her principal place of employment, or a material reduction in benefits or
perquisites; (iii) liquidation or dissolution of Redlands Federal Bank or
RedFed; or (iv) a breach of the agreement by Redlands Federal Bank or RedFed
(each, an "Event of Termination"), the executive or, in the event of death,
her beneficiary would be entitled to receive an amount equal to the payments
due for the remaining term of the employment agreements including base salary
for the remaining term of the agreements (not to exceed one year of base
salary) and any bonuses and other cash compensation paid or expected to be
paid to executive in the year of the Event of Termination, and the amount of
benefits received or to be received pursuant to any employee benefit plan at
the time of termination including all payments made to the executive, or for
the executive's benefit, during the twelve months preceding termination.
If termination of employment follows a "change in control" of Redlands
Federal Bank or RedFed, as defined in the employment agreements, Ms. Bacon or,
in the event of death, Ms. Bacon's beneficiary, is entitled to a severance
payment equal to the greater of: (1) the payments due under the remaining term
of the agreement; or (2) two times the average of the five preceding years'
base salary or such lesser number of years as executive was employed,
including bonuses and the amount of contributions made or to be made to
employee benefit plans on behalf of executive. Redlands Federal Bank and
RedFed will also continue Ms. Bacon's life, health, and disability coverage
for two years to the extent allowed by the plans or policies maintained by
RedFed or Redlands Federal Bank from time to time. Payments to Ms. Bacon under
Redlands Federal Bank's employment agreement are guaranteed by RedFed in the
event that payments or benefits are not paid by Redlands Federal Bank. In the
event of a change in control, based upon 1997 salary and 1997 and 1996
bonuses, Ms. Bacon would receive approximately $700,000 in severance payments
in addition to other cash and noncash benefits provided under the agreements.
The Merger will result in such a "change in control."
Change in Control Agreements. Redlands Federal Bank has entered into two-
year Change in Control Agreements with four executive officers who are not
covered by employment agreements, including Messrs. Reider, Gray, Bellefeuille
and Ms. Snodgress. These executive officers, with the exception of
Mr. Bellefeuille, also have Change in Control Agreements with RedFed. Each
Change in Control Agreement provides for a 24-month term. Commencing on the
first anniversary date of Redlands Federal Bank's conversion from mutual to
stock form and continuing on each anniversary thereafter, the Change in
Control Agreements may be extended by the respective Boards of Directors for
an additional 12 months so that the remaining term is 24 months. Each Change
in Control Agreement provides that at any time following a change in control
of Redlands Federal Bank, if RedFed or Redlands Federal Bank terminates the
employee's employment for any reason other than cause, or if the employee
terminates his or her employment following demotion, loss of title, office or
significant authority, a reduction in compensation, or relocation of the
principal place of employment, the employee or, in the event of death, the
employee's beneficiary, would be entitled to receive a payment equal to two
times the employee's then current annual compensation, including bonuses and
any other cash compensation. Redlands Federal Bank and RedFed will also
continue the employee's life, health, and disability coverage for the
remaining unexpired term of his or her agreement to the extent allowed by the
plans or policies
66
<PAGE>
maintained by RedFed or Bank from time to time. Payments to the employee under
Redlands Federal Bank's change in control agreements will be guaranteed by
RedFed in the event that payments or benefits are not paid by Redlands Federal
Bank.
If a change in control occurs, based upon 1997 salaries and 1997 and 1996
bonuses, the amounts payable in the aggregate, pursuant to change in control
agreements, would be approximately $315,560, $267,030, $230,000 and $225,216,
in addition to other cash and noncash benefits provided for under the Change
in Control Agreements for Messrs. Reider, Gray and Bellefeuille, and Ms.
Snodgress, respectively. The Merger will result in such a "change in control."
Stock Option Plan and Incentive Plan. The following table provides certain
information with respect to the number of shares of Common Stock represented
by outstanding options held by the Named Executive Officers as of December 31,
1997. Also reported are the values for "in-the-money" options which represent
the positive spread between the exercise price of any such existing stock
options and the year end price of the Common Stock.
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED ON REALIZED OPTIONS/SARS AT OPTIONS/SARS AT
NAME EXERCISE (#) ($)(1) FISCAL YEAR END (#) FISCAL YEAR END ($)
- ---- ------------ -------- ---------------------------- ----------------------------
EXERCISABLE/UNEXERCISABLE(2) EXERCISABLE/UNEXERCISABLE (3)
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Anne Bacon.............. 30,000 290,700 -0-/45,000 -0-/438,863
Robert G. Wiens......... -0- -0- 69,920/-0- 825,930/-0-
D. Brian Reider......... 7,000 67,375 3,488/6,992 41,202/82,593
David C. Gray, CPA...... 1,250 14,763 9,238/6,992 109,124/82,593
Norman E. Bellefeuille,
Jr. ................... -0- -0- 10,488/6,992 123,890/82,593
Carol A. Snodgress...... 900 10,593 9,588/6,992 113,258/82,593
</TABLE>
- --------
(1) Based on the fair market value of the underlying stock at exercise, minus
the exercise price.
(2) The options held by Messrs. Wiens, Reider, Gray and Bellefeuille and Ms.
Snodgress have an exercise price of $8.00, and except for the options held
by Mr. Wiens, which are all currently exercisable, such options become
exercisable at an annual rate of 20% beginning April 7, 1995. The options
will expire ten years from the date of the grant. The options held by Ms.
Bacon have an exercise price of $10.06 and become exercisable at an annual
rate of 20% beginning April 25, 1996.
(3) Based on the market value of the underlying stock at December 31, 1997,
minus the exercise price.
Defined Benefit Plan. Redlands Federal Bank currently maintains a qualified
noncontributory defined benefit plan ("Retirement Plan"). All employees are
eligible to participate in the Retirement Plan on the first day of the month
following the date on which one hour of service is performed. Redlands Federal
Bank annually contributes an amount to the Retirement Plan necessary to
satisfy requirements in accordance with the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Effective June 30, 1995, the
Retirement Plan was frozen and Participants ceased the accrual of additional
benefits thereunder although vesting continued according to the terms of the
Retirement Plan. Pursuant to the Retirement Plan, an unrelated trustee has the
authority to invest up to 10 percent of the plan assets in RedFed Common
Stock. As of the Record Date, the trustee held no shares RedFed Common Stock,
for the benefit of participants in the Retirement Plan.
On December 19, 1996, the Board of Directors of Redlands Federal Bank took
action to terminate the Retirement Plan as of March 15, 1997. On November 30,
1997, the Board of Directors of Redlands Federal Bank took action to rescind
the termination.
67
<PAGE>
The following table sets forth the estimated annual benefits payable upon
retirement at age 65 in calendar year 1997, expressed in the form of a single
life annuity, for the final average salary and benefit service classifications
specified pursuant to the Retirement Plan. Upon the death of the participant,
the participant's spouse shall continue to receive 50% of the benefit that had
been paid to the participant, continuing until the death of the spouse. Upon
early retirement, the Retirement Benefit shall be reduced by 0.40% for each
month that the participant's retirement date precedes his or her 60th
birthday; provided, however, that the participant must have (i) received
approval of the RedFed Board; (ii) completed 15 or more years of service; and
(iii) achieved the age of 55 years.
<TABLE>
<CAPTION>
CREDITABLE YEARS OF SERVICE AT AGE
FINAL AVERAGE 65(1)
ANNUAL BASE ------------------------------------
WAGE($) 15 20 25 30 35
------------- ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
25,000 9,099 12,132 14,466 16,800 19,134
50,000 18,533 24,710 29,491 34,270 39,050
75,000 27,967 37,289 44,516 51,741 58,967
100,000 37,401 49,869 59,541 69,213 78,885
150,000(2) 56,271 75,027 89,591 104,154 118,718
</TABLE>
- --------
(1) Benefit accruals were frozen at June 30, 1995.
(2) For 1997, the maximum compensation for plan purposes under Internal
Revenue Code ("IRC") Section 401(a)(17) is $160,000 and the maximum annual
defined benefit payable under IRC Section 415 is $125,000. The amounts
shown above were determined without regard to any combined defined
benefit/defined contribution limit under IRC Section 415.
The following table sets forth the years of credited service (i.e., benefit
service) as of June 30, 1995 (the freeze date of the Retirement Plan) for each
of the individuals named in the Summary Compensation Table.
<TABLE>
<CAPTION>
CREDITED
SERVICE (1)
------------
YEARS MONTHS
----- ------
<S> <C> <C>
Anne Bacon(2)............................................... 0 3
Robert G. Wiens(3).......................................... 38 6
D. Brian Reider............................................. 6 3
David C. Gray, CPA.......................................... 18 2
Norman E. Bellefeuille, Jr.................................. 20 8
Carol A. Snodgress.......................................... 18 2
</TABLE>
- --------
(1) Assumes 0.5 years of credited service was earned by all participants
active throughout 1995.
(2) Ms. Bacon's date of hire was April 3, 1995.
(3) Mr. Wiens terminated service at December 31, 1994.
Deferred Compensation Plan. Redlands Federal Bank maintains the Deferred
Compensation Program of Redlands Federal Bank (the "Deferred Compensation
Plan"), a supplemental benefit plan, for executives selected by the Board of
Directors of Redlands Federal Bank. Participants are entitled to receive
benefits upon attaining the normal retirement age of 65 years. The
supplemental retirement benefit is the amount payable in monthly installments
during the joint lifetime of the participant and his or her spouse. The
payment is equal to the excess of the amount that would be payable under the
Retirement Plan, over the maximum permissible benefit determined under Section
401(a)(17) and 415 of the Internal Revenue Code (the "Code"). Upon the death
of the participant, the participant's spouse shall continue to receive 50% of
the benefit that had been paid to the participant, continuing until the death
of the spouse. Upon early retirement, the Supplemental Retirement Benefit
shall be reduced by 0.40% for each month that the participant's retirement
date precedes his or her 60th birthday; provided, however, that the
participant must have (i) received approval of the RedFed Board; (ii)
completed 15 or more years of service; and (iii) achieved the age of 55 years.
68
<PAGE>
Under the Deferred Compensation Plan, Redlands Federal Bank also maintains a
Supplemental Profit Sharing Account (the "Account") for each participant. The
participant's account is annually credited with an amount by which Redlands
Federal Bank's contribution under the Profit Sharing Plan exceeds the limit
determined by Sections 401(a)(17) and 415 of the Code. The amount in the
Account is then paid to the participant in one lump sum upon normal
retirement. In the event of the participant's death before retirement, the
lump sum is payable to the participant's designated beneficiary. Upon
disability, the participant is entitled to receive the entire lump sum. An
irrevocable grantor trust is maintained to add funds for the payment of
benefits under the Deferred Compensation Plan. Effective June 30, 1995, RedFed
elected to freeze the Deferred Compensation Plan.
Transactions With Certain Related Persons. Set forth below is certain
information at December 31, 1997 as to loans made by Redlands Federal Bank to
directors and executive officers on preferential terms with aggregate
indebtedness which exceeded $60,000 at any time since January 1, 1997:
<TABLE>
<CAPTION>
DATE OF DATE OF HIGHEST BALANCE BALANCE AS OF
LOAN LOAN OUTSTANDING SINCE DECEMBER 31, INTEREST
NAME ORIGINATION MATURITY JANUARY 1, 1997($) 1997($) LOAN TYPE RATE(1)
---- ----------- -------- ------------------ ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Anne Bacon.............. 1995 2025 146,558.17 134,574.55 Mortgage 5.154%
Robert G. Wiens......... 1986 2017 205,228.48 199,484.94 Mortgage 5.191%
D. Brian Reider......... 1989 2019 169,549.11 165,748.04 Mortgage 5.191%
David C. Gray, CPA...... 1988 2019 178,719.51 173,644.23 Mortgage 5.191%
David C. Gray, CPA...... 1997 2007 52,000.00 45,777.39 Mortgage 6.125%
Norman E. Bellefeuille,
Jr. ................... 1991 2021 153,618.81 150,319.43 Mortgage 5.103%
Carol A. Snodgress...... 1985 2015 90,024.63 87,067.83 Mortgage 5.191%
John D. McAlearney,
Jr. ................... 1997 2027 296,000.00 289,165.87 Mortgage 5.103%
</TABLE>
- --------
(1) All interest rates set forth are adjustable rates.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as to the only persons
believed by management to be beneficial owners of more than 5% of the
outstanding shares of Common Stock as of December 31, 1997, as disclosed in
certain reports regarding such ownership filed with the Company and with the
Securities and Exchange Commission in accordance with Sections 13(d) or 13(g)
of the Securities Exchange Act of 1934 ("Exchange Act") by such persons and
groups.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS(6)
------------------------------------ --------- ----------
<S> <C> <C>
Wellington Management Company, L.L.P. ............ 1,026,000(1) 13.74%
75 State Street
Boston, MA 02109
FMR Corp. ........................................ 517,500(2) 6.93
82 Devonshire Street
Boston, MA 02109
First Manhattan Corporation....................... 463,760(3) 6.21
437 Madison Avenue
New York, NY 10022
New York Life Trust Company....................... 454,068(4) 6.08
51 Madison Avenue
New York, NY 10010
Bay Pond Partners, L.P. ......................... 428,100(5) 5.73
75 State Street
Boston, MA 02109
</TABLE>
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<PAGE>
- --------
(1) Based upon information filed in a Schedule 13G/A by Wellington Management
Company, LLP filed as of February 10, 1998.
(2) Based upon information filed in a Schedule 13G by FMR Corp. filed as of
February 10, 1998.
(3) Based upon information filed in a Schedule 13G/A by First Manhattan
Corporation as of February 12, 1998.
(4) Based upon information filed in a Schedule 13G and a Schedule 13G/A by New
York Life Trust Company filed as of February 17, 1998 with respect to
shares owned by the Redlands Federal Bank 401(k) savings plan and the
Redlands Federal Bank Employee Stock Ownership Plan.
(5) Based upon information filed in a Schedule 13D for Bay Pond Partners, L.P.
by its general partner, Wellington Hedge Management Limited Partnership,
on January 28, 1997 (these shares are duplicated in the 13G filing by
Wellington Management Company LLC.)
(6)Calculated using number of shares outstanding as of December 31, 1997.
DESCRIPTION OF GOLDEN STATE CAPITAL STOCK
GENERAL
The Golden State Certificate of Incorporation authorizes Golden State to
issue up to 100,000,000 shares of Golden State Common Stock and up to
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, and Golden State Stockholders are expected to vote on such
amendment on April 8, 1998. See "THE MERGER--Parties to the Merger--Golden
State--California Federal Merger."
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 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.
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
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<PAGE>
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 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 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
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<PAGE>
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 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>
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<PAGE>
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, 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
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<PAGE>
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 February 28, 1998, 4,621,982 shares of Golden State Preferred Stock
were outstanding.
WARRANTS TO PURCHASE COMMON STOCK
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 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 February 28, 1998, the Five-Year Warrants outstanding were exercisable
for an aggregate of 1,522 shares of Golden State Common Stock. In addition, it
is currently anticipated that holders of Five-Year Warrants who convert or
exercise their warrants would be entitled to receive, under certain
circumstances, one
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<PAGE>
Litigation Tracking Warrant for each share of Golden State Common Stock
issuable upon such exercise or conversion. See "--Litigation Tracking
Warrants."
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 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 Golden State assumed all of Glendale Federal's
obligations with respect to the Seven-Year Warrants.
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<PAGE>
As of February 28, 1998, the Seven-Year Warrants outstanding were
exercisable for an aggregate of 10,825,607 shares of Golden State Common
Stock. In addition, it is currently anticipated that holders of Seven-Year
Warrants who convert or exercise their warrants would be entitled to receive,
under certain circumstances, one Litigation Tracking Warrant for each share of
Golden State Common Stock issuable upon such exercise or conversion. See "--
Litigation Tracking Warrants."
Litigation Tracking Warrants.
On April 8, 1998, Golden State stockholders approved certain necessary
amendments to the Golden State Certificate of Incorporation to permit the
declaration by the Golden State Board of a distribution of Litigation Tracking
Warrants to its security holders, including the holders of Golden State Common
Stock, representing the right to receive upon the exercise thereof, in the
aggregate, 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 below) against the United States 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, 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, which is incorporated by reference herein,
and the following description of such warrants is qualified in its entirety by
reference to such Current Report.
Following the adoption of the 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 received 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, on or before , 1998. While the record date has not yet been
established (and there is no assurance that such record date will be
established), any such record date is expected to be before the consummation
of the Merger. RedFed Stockholders who receive shares of Golden State Common
Stock in the Merger will not receive a distribution of Litigation Tracking
Warrants with respect to such shares of Golden State Common Stock.
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<PAGE>
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 (but not
including options issued upon conversion of RedFed Options in the Merger) and
who convert or exercise such securities would receive in 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 of the
Litigation Tracking Warrants.
There can be no assurance that such distribution 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.
77
<PAGE>
VOTING AT THE STOCKHOLDERS MEETING AND RELATED MATTERS
GENERAL
This Proxy Statement/Prospectus is being furnished to stockholders of RedFed
in connection with the solicitation by the RedFed Board of proxies to be used
at the annual meeting of Stockholders and at any adjournments or postponements
thereof ("Stockholders Meeting") to be held on May 26, 1998, at 10:00 a.m., at
the Redlands Federal Bank headquarters, 300 East State Street, Redlands,
California, and at any adjournments thereof. The 1997 Annual Report to
Stockholders accompanies this Proxy Statement/Prospectus, which is first being
mailed to record holders on or about April 21, 1998.
MATTERS TO BE CONSIDERED
The purpose of the Stockholders Meeting is (i) to take action with respect
to the approval of the Merger Agreement and the transactions contemplated
thereby, and (ii) the election of nominees to the RedFed Board. CONSUMMATION
OF THE MERGER IS CONDITIONED UPON THE APPROVAL OF THE REDFED STOCKHOLDERS. If
the consummation of the Merger is approved, the RedFed Board, including such
newly elected members, will serve until the Closing Date of the Merger, at
which time the separate corporate existence of RedFed will cease to exist and
consequently the RedFed Board will be simultaneously dissolved by operation of
law. If the Merger is not approved or fails to be consummated for any other
reason, the new elected members of the RedFed Board shall serve their full
three year terms until their successors have been duly elected and qualified.
For a description of the Merger and the Merger Agreement, see "THE MERGER."
For a description of the nominees to the RedFed Board, see "ELECTION OF
DIRECTORS--Information Regarding Nominees, Directors and Certain Executive
Officers." The RedFed stockholders may also be asked to vote upon such other
matters as may properly be brought before the meeting.
THE REDFED BOARD HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY. THE REDFED BOARD BELIEVES THAT THE MERGER AGREEMENT IS
FAIR TO AND IN THE BEST INTERESTS OF REDFED AND THE REDFED STOCKHOLDERS AND
RECOMMENDS THAT THE REDFED STOCKHOLDERS VOTE "FOR" THE APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT. THE REDFED BOARD HAS ALSO APPROVED AND RECOMMENDS A
VOTE "FOR" THE NOMINEES TO THE REDFED BOARD. SEE "THE MERGER--REASONS FOR THE
MERGER AND RECOMMENDATION OF REDFED BOARD" AND "ELECTION OF DIRECTORS."
RECORD DATE; VOTING RIGHTS; VOTING OF PROXIES
The securities which may be voted at the Stockholders Meeting consist of
shares of common stock of RedFed ("RedFed Common Stock"), with each share
entitling its owner to one vote on all matters to be voted on at the
Stockholders Meeting except as described below. There is no cumulative voting
for the election of directors.
The close of business on April 15, 1998, has been fixed by the RedFed Board
as the record date (the "Record Date") for the determination of stockholders
of record entitled to notice of and to vote at the Stockholders Meeting and
any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was shares.
As provided in RedFed's Certificate of Incorporation, record holders of
RedFed Common Stock who beneficially own in excess of 10% of the outstanding
shares of RedFed Common Stock (the "Limit") are not entitled to any vote in
respect of the shares held in excess of the Limit. A person or entity is
deemed to beneficially own shares owned by an affiliate of, as well as persons
acting in concert with, such person or entity. RedFed's Certificate of
Incorporation authorizes the RedFed Board (i) to make all determinations
necessary to implement and apply the Limit, including determining whether
persons or entities are acting in concert, and (ii) to demand that any person
who is reasonably believed to beneficially own stock in excess of the Limit
supply information to RedFed to enable the RedFed Board to implement the
Limit.
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<PAGE>
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of RedFed Common Stock entitled to vote (after
subtracting any shares in excess of the Limit pursuant to RedFed's Certificate
of Incorporation) is necessary to constitute a quorum at the Stockholders
Meeting. In the event there are not sufficient votes for a quorum or to
approve or ratify any proposal at the time of the Stockholders Meeting, the
Stockholders Meeting may be adjourned in order to permit the further
solicitation of proxies.
Shares of RedFed Common Stock present in person at the Stockholders Meeting
but not voting, and shares of RedFed Common Stock for which RedFed has
received proxies but with respect to which holders of such shares have
abstained, will he counted as present at the Stockholders Meeting for purposes
of determining the presence or absence of a quorum for the transaction of
business. Brokers who hold shares of RedFed 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 Stockholders
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").
As to the vote with respect to the approval of the Merger Agreement, the
proxy card being provided by the RedFed Board enables a shareholder to vote
"FOR" or "AGAINST" approval of the Merger Agreement, or to "ABSTAIN" with
respect thereto. Under Delaware law, the RedFed Certificate of Incorporation,
and the RedFed Bylaws, approval of the Merger Agreement and the transactions
contemplated thereby requires the affirmative vote of the majority of shares
represented and voting at the Stockholders Meeting, provided that the
Stockholders Meeting is duly held, that a quorum is present and that such
shares voting affirmatively also constitute at least a majority of the
required quorum.
As to the election of directors, the proxy card being provided by the RedFed
Board enables a shareholder to vote "FOR" the election of the nominees
proposed by the RedFed Board, or to "WITHHOLD AUTHORITY" to vote for one or
more of the nominees being proposed. Under Delaware law and RedFed's
Certificate of Incorporation and Bylaws, Directors are elected by a plurality
of shares voted, without regard to either (i) broker non-votes, or (ii)
proxies as to which authority to vote for one or more of the nominees being
proposed is withheld.
As of the Record Date, directors and executive officers of RedFed
beneficially owned approximately shares of RedFed Common Stock (not
including options to purchase and restricted stock awards of approximately
shares of RedFed Common Stock), entitling them to exercise % of the
voting power of the RedFed Common Stock entitled to vote at the Stockholders
Meeting. It is currently expected that each such director and executive
officer, with the exception of Director Robert Wiens, of RedFed will vote the
shares of RedFed Common Stock beneficially owned by him or her for approval of
the Merger Agreement and the transactions contemplated thereby. As of the
Record Date, to the best of RedFed's knowledge none of the directors,
executive officers or affiliates of Golden State beneficially owned any shares
of RedFed Common Stock. For additional information with respect to beneficial
ownership of RedFed Common Stock by persons and entities owning more than 5%
of such stock and more detailed information with respect to beneficial
ownership of RedFed Common Stock by directors and executive officers of RedFed
see "ELECTION OF DIRECTORS--Security Ownership of Certain Beneficial Owners"
and "--Information with respect to Nominees, Directors and Certain Executive
Officers."
The accompanying form of proxy is for use at the Stockholders Meeting if a
RedFed Stockholder will be unable to attend in person. The proxy may be
revoked by a RedFed Stockholder at any time before it is exercised, by
submitting to the Secretary of RedFed written notice of revocation, including
a properly executed proxy bearing a later date, or by attending the
Stockholders Meeting and electing to vote in person. Written notices of
revocation and other communications with respect to the revocation of RedFed
proxies should be addressed to RedFed Bancorp Inc., 300 East State Street,
Redlands, California 92373, Attention: Corporate Secretary/Investor Relations.
79
<PAGE>
Regardless of the number of shares of common stock owned, it is important
that record holders of a majority of the shares be present in person or
represented by proxy at the Stockholders Meeting. RedFed stockholders are
requested to vote by completing the enclosed proxy card and returning it,
signed and dated, in the enclosed postage-paid envelope. Stockholders are
urged to indicate their vote in the spaces provided on the proxy card. 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 AND FOR THE EACH OF THE NOMINEES FOR
DIRECTORS NAMED IN THIS PROXY STATEMENT/PROSPECTUS.
The RedFed Board is unaware of any other matters that may be presented for
action at the Stockholders Meeting. If other matters do properly come before
the Stockholders 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 Stockholders Meeting for the purpose
of soliciting additional proxies.
SOLICITATION OF PROXIES
The entire cost of soliciting the proxies from the RedFed stockholders will
be borne by RedFed, except that Golden State and RedFed 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,
Kissel-Blake Inc., a proxy solicitation firm, will assist RedFed in soliciting
proxies for the meeting and will be paid a fee of $4,500 plus out-of-pocket
expenses. RedFed will also 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. RedFed will reimburse such
record holders for their reasonable expenses in so doing. Proxies may also be
solicited personally or by telephone or other means of communication by
directors, officers and regular employees of RedFed and Redlands Federal Bank,
without additional compensation therefor.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The bylaws of RedFed provide an advance notice procedure for a stockholder
to bring business before an Annual Meeting. The stockholder must give written
advance notice to the Secretary of RedFed not less than ninety days before the
date originally fixed for such meeting; provided, however, that in the event
that less than one hundred days notice or prior public disclosure of the date
of the meeting is given or made to stockholders, notice by the stockholder to
be timely must be received not later than the close of business on the tenth
day following the date on which RedFed's notice to stockholders of the annual
meeting date was mailed or such public disclosure was made. The advance notice
by stockholders must include the stockholder's name and address, as it appears
on RedFed's record of stockholders, a brief description of the proposed
business, the reason for conducting such business at the Annual Meeting, the
class and number of shares of RedFed's Common Stock that are beneficially
owned by such stockholder and any material interest of such stockholder in the
proposed business. In the case of nominations to the RedFed Board, certain
information regarding the nominee must be provided. RedFed is not required to
include in its proxy statement and proxy relating to an annual meeting any
stockholder proposal which does not meet all of the requirements for inclusion
established by the Commission in effect at the time such proposal is received.
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<PAGE>
LEGAL MATTERS
The validity of the Golden State Common Stock to be issued in connection
with the Merger will be passed upon for Golden State by Mayer, Brown & Platt,
Los Angeles, California.
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 RedFed Bancorp Inc. and
subsidiaries as of December 31, 1997 and 1996, and for each of the years in
the three-year period ended December 31, 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
subsidiaries as of December 31, 1997 and 1996, and for each of the years in
the three-year period ended December 31, 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 FNPH and subsidiaries as of
December 31, 1997 and 1996, and for each of the years in the three-year period
ended December 31, 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.
OTHER MATTERS
The RedFed Board knows of no business which will be presented for
consideration at the Stockholders Meeting other than as stated in the Notice
of Annual Meeting of Stockholders. If, however, other matters are properly
brought before the Stockholders Meeting, it is the intention of the persons
named in the accompanying proxy to vote the shares represented thereby on such
matters in accordance with their best judgment.
STOCKHOLDER PROPOSALS
RedFed will hold a 1999 Annual Meeting of Stockholders only if the Merger is
not consummated. In the event that such a meeting is held, any proposals of
RedFed Stockholders intended to be presented at the 1999 Annual Meeting will
be required to be received by the Secretary of RedFed no later than December
26, 1998 in order to be considered for inclusion in the RedFed 1999 proxy
materials. Any such proposal will be subject to Rule 14a-8 of the Rules and
Regulations under the Exchange Act.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Basis of Presentation. The following Unaudited Pro Forma Condensed Combined
Financial Statements have been prepared to reflect the Merger, the CENFED
Merger, the California Federal Merger and the Other Pro Forma Events. 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 CENFED Merger; second, Unaudited Pro Forma
Condensed Combined Financial Statements are presented to reflect the CENFED
Merger and the Merger; and finally, Unaudited Pro Forma Condensed Combined
Financial Statements are presented to reflect the CENFED Merger, the Merger,
the California Federal Merger and the Other Pro Forma Events. The CENFED
Merger, the 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 CENFED Merger and
the California Federal Merger on the basis of appraisals and evaluations and,
therefore, actual fair value amounts are expected to differ from those
reflected in the Unaudited Pro Forma Condensed Combined Financial Statements.
The Unaudited Pro Forma Condensed Combined Statement of Financial Condition
assumes that each of the proposed mergers was consummated on December 31,
1997. The Unaudited Pro Forma Condensed Combined Statement of Operations for
the six months ended December 31, 1997, assumes that each of the proposed
mergers were 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 and the Other Pro Forma Events were
consummated on July 1, 1996. See "SUMMARY--Selected Financial Data--Summary
Unaudited Pro Forma Condensed Combined Financial Statements." 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.
CENFED Merger. Pursuant to the terms of the CENFED Merger Agreement, CENFED
was merged with and into Golden State Financial, with Golden State Financial
as the surviving corporation. Each outstanding share of CENFED common stock
was converted into 1.2 shares of Golden State Common Stock (with cash paid in
lieu of issuing fractional shares).
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<PAGE>
The Merger. The Merger Agreement provides for the merger of RedFed into a
wholly-owned subsidiary of Golden State. Concurrently with or shortly after
completion of the Merger, RedFed's wholly-owned banking subsidiary, Redlands
Federal Bank, will be merged into Glendale Federal. Golden State Common Stock
will be issued to the stockholders of RedFed in the 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 NYSE 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 Merger. Cash will be paid in
lieu of the issuance of fractional shares. Each option to acquire shares of
RedFed Common Stock granted under RedFed's stock option plans that is
outstanding and unexercised immediately prior to the effective time of the
Merger will be converted into an option to purchase Golden State Common Stock
and will continue to be governed by the terms of the RedFed stock option
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."
The California Federal Merger. The California Federal Agreement provides,
among other things, for the merger of FNPH with and into Golden State. 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 common stock of the
combined company outstanding, immediately after giving effect to the
California Federal Merger, on a fully-diluted basis (without giving effect to
shares issuable pursuant to the Litigation Tracking Warrants or to the
issuance of Contingent Shares), depending on the volume-weighted average price
of Golden State Common Stock during a period, described below, occurring after
distribution of the Litigation Tracking Warrants, as adjusted to omit the
value of 15% of the potential recovery in the Goodwill Litigation excluded for
purposes of calculating the number of shares of Golden State Common Stock
issuable upon exercise of the Litigation Tracking Warrants. The affiliates of
MAF and Ford together will own 42% of such common stock if such adjusted
average price is $32.00 or less, increasing incrementally to 45% of such
common stock if such adjusted average price is $33.00 or more. The adjusted
volume-weighted average per share price will 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
potential issuance of the Contingent Shares following the closing of the
California Federal Merger. See "THE MERGER--Parties to the Merger--Golden
State--California Federal Merger."
83
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION GIVING
EFFECT TO THE CENFED 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 38,161 4,573(D) 500,328
----------- ---------- -------- -----------
$16,029,116 $2,207,473 $ 72,193 $18,308,782
=========== ========== ======== ===========
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 14,889 1,614(F) 277,760
Stockholders' equity... 1,083,071 135,606 69,589(G) 1,288,266
----------- ---------- -------- -----------
$16,029,116 $2,207,473 $ 72,193 $18,308,782
=========== ========== ======== ===========
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 CENFED Merger.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE CENFED 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 CENFED Merger.
85
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE CENFED 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 CENFED Merger.
86
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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 CENFED 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 CENFED 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 CENFED 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 CENFED 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 of the CENFED 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.
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 CENFED 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 CENFED Merger.
The total consideration to be paid in connection with the CENFED 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 CENFED
Merger........................................................... 7,320
Price per share................................................... X $28.563
---------
Total purchase price........................................... $209,081
=========
</TABLE>
87
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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 CENFED Merger............................. 81,412
Fair value adjustments (Note D)............................... 5,091
Deferred taxes on fair value adjustments (Note D)............. (2,138)
CENFED 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 of the CENFED 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 CENFED 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.
88
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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 CENFED 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>
89
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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 CENFED
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>
90
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
GIVING EFFECT TO THE CENFED 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............ 500,328 27,375 (800) -- 526,903
----------- ---------- ------- --------- -----------
$18,308,782 $1,009,754 $64,100 $(158,000) $19,224,636
=========== ========== ======= ========= ===========
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....... 277,760 16,467 (8,142) -- 286,085
Stockholders' equity.... 1,288,266 84,250 72,242 (158,000) 1,286,758
----------- ---------- ------- --------- -----------
$18,308,782 $1,009,754 $64,100 $(158,000) $19,224,636
=========== ========== ======= ========= ===========
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 CENFED Merger and the RedFed Merger.
91
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE CENFED 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 (1)
Diluted........................ $ 0.79 $ 0.76 $ 0.84 (1)
Weighted average shares
outstanding:
Common shares.................. 57,932 7,147 57,932
Common shares and dilutive
potential common shares....... 77,308 7,454 77,308
</TABLE>
- --------
(1) Golden State expects to repurchase shares of Golden State Common Stock in
the open market in an amount not to exceed the number of shares to be
issued in the RedFed Merger. For purposes of the Unaudited Pro Forma
Condensed Combined Statement of Operations for the six months ended
December 31, 1997, the number of shares of Golden State Common Stock
expected to be issued in the RedFed Merger was assumed to be repurchased on
July 1, 1997 for an aggregate amount of $158.0 million. As a result of the
use of cash in such repurchase, pro forma net income for the six months
ended December 31, 1997 would be reduced by approximately $2.6 million,
representing increased interest expense at an interest rate of 5.625% and
the related income tax effect at a combined marginal rate of 42%.
Accordingly, pro forma basic and diluted earnings per share, after giving
effect to such repurchase, would be $0.98 and $0.80, respectively.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements Giving Effect to the CENFED Merger and the RedFed Merger.
92
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE CENFED 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 (1)
Diluted....................... $ 0.66 $ 0.31 $ 0.62 (1)
Weighted average shares
outstanding:
Common shares................. 56,415 6,790 56,415
Common shares and dilutive
potential common shares...... 62,489 7,001 62,489
</TABLE>
- --------
(1) Golden State expects to repurchase shares of Golden State Common Stock in
the open market in an amount not to exceed the number of shares to be
issued in the RedFed Merger. For purposes of the Unaudited Pro Forma
Condensed Combined Statement of Operations for the year ended June 30,
1997, the number of shares of Golden State Common Stock expected to be
issued in the RedFed Merger was assumed to be repurchased on July 1, 1996
for an aggregate amount of $158.0 million. As a result of the use of cash
in such repurchase, pro forma net income for the year ended June 30, 1997
would be reduced by approximately $5.2 million, representing increased
interest expense at an interest rate of 5.625% and the related income tax
effect at a combined marginal rate of 42%. Accordingly, pro forma basic
and diluted earnings per share, after giving effect to such repurchase,
would be $0.60 and $0.54, respectively.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements Giving Effect to the CENFED Merger and the Redfed Merger.
93
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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 CENFED 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 CENFED Merger and the RedFed Merger were
consummated on December 31, 1997. The Unaudited Pro Forma Condensed Combined
Statement of Operations Giving Effect to the CENFED 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 CENFED Merger and the RedFed Merger were consummated on July 1, 1997.
The Unaudited Pro Forma Condensed Combined Statement of Operations Giving
Effect to the CENFED Merger and the RedFed Merger for the year ended June 30,
1997 assumes that the CENFED 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
Statements Giving Effect to the CENFED 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 CENFED 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 not in excess of an amount equal to the amount that will be issued in
the RedFed Merger.
94
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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
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 RedFed Common Stock to be exchanged for Golden State
Common Stock 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>
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.
95
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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 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 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.
96
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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 CENFED 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."
97
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION GIVING
EFFECT TO THE CENFED 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............ 526,903 998,292 226,200 1,751,395
----------- ----------- ---------- -----------
$19,224,636 $31,362,156 $1,292,138 $51,878,930
=========== =========== ========== ===========
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....... 286,085 702,959 527,000 1,516,044
Minority interest....... -- 1,175,704 (163,568) 1,012,136
Stockholders' equity.... 1,286,758 205,916 928,706 2,421,380
----------- ----------- ---------- -----------
$19,224,636 $31,362,156 $1,292,138 $51,878,930
=========== =========== ========== ===========
Common shares
outstanding............ 58,343(2) (3) 114,271(I)
Book value per common
share(1)............... $ 20.07(2) (3) $ 20.18(4)(I)
Tangible book value per
common share(1)........ $ 15.88(2) (3) $ 3.54(4)(I)
</TABLE>
- --------
(1) Calculated net of Golden State Preferred Stock at its liquidation value of
$115,550.
(2) Does not reflect the impact of 5,366 Golden State stock options, the
vesting of which accelerates at the consummation date of the California
Federal Merger.
(3) Per share information is not presented as FNPH is a closely held
corporation.
(4) 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.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Giving Effect to the CENFED Merger, the RedFed Merger and the California
Federal Merger.
98
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS GIVING EFFECT TO
THE CENFED 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 PRO FORMA
AND REDFED FNPH ADJUSTMENTS COMBINED
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income......... $694,405 $1,075,042 $ (9,649)(D) $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)(D) 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
administrative
expenses............ 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 (D) 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 (3) 110,128
-------- ---------- -------- ----------
Earnings before minority
interest............... 64,606 114,557 (84,874) 94,289
Minority interest....... -- 68,951 (24,718)(4) 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) (2) $ 0.40(5)(I)
Diluted................ $ 0.84 (2) $ 0.37(5)(I)
Weighted average shares
outstanding:
Common shares.......... 57,932 (1) (2) 113,860
Common shares and
dilutive potential
common shares......... 77,308 (2) 121,730
</TABLE>
- --------
(1) Does not reflect the impact of 5,366 Golden State stock options, the
vesting of which accelerates at the consummation date of the California
Federal Merger.
(2) Per share information is not presented as FNPH is a closely held
corporation.
(3) The adjustment to income tax expense includes adjustments for nondeductible
goodwill amortization and to adjust FNPH's historical effective tax rate to
42%.
(4) Represents the exchange of Hunter's Glen minority interest in FNH for
Golden State Common Stock.
(5) Golden State expects to repurchase shares of Golden State Common Stock in
the open market in an amount not to exceed the number of shares to be
issued in the RedFed Merger. For purposes of the Unaudited Pro Forma
Condensed Combined Statement of Operations for the six months ended
December 31, 1997, the number of shares of Golden State Common Stock
expected to be issued in the RedFed Merger was assumed to be repurchased on
July 1, 1997 for an aggregate amount of $158.0 million. As a result of the
use of cash in such repurchase, pro forma net income for the six months
ended December 31, 1997 would be reduced by approximately $2.6 million,
representing increased interest expense at an interest rate of 5.625% and
the related income tax effect at a combined marginal rate of 42%.
Accordingly, pro forma basic and diluted earnings per share, after giving
effect to such repurchase, would be $0.37 and $0.35, respectively.
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Giving Effect to the CENFED Merger, the RedFed Merger and the California
Federal Merger.
99
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
GIVING EFFECT TO THE CENFED 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 PRO FORMA
AND REDFED FNPH(6) ADJUSTMENTS COMBINED
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income......... $1,297,553 $2,142,544 $ (19,297)(D) $3,420,800
Interest expense........ 836,846 1,505,619 -- 2,342,465
---------- ---------- --------- ----------
Net interest income.. 460,707 636,925 (19,297) 1,078,335
Provision for loan
losses................. 33,481 80,600 -- 114,081
---------- ---------- --------- ----------
Net interest income
after provision for
loan losses......... 427,226 556,325 (19,297) 964,254
Other income:
Fee income............. 103,490 236,391 (3,405)(D) 336,476
Gain (loss) on sale of
loans, net............ (182) 400 -- 218
Gain on sale of
mortgage-backed
securities, net....... 57 1,100 -- 1,157
Other income, net...... 397 128,444 -- 128,841
---------- ---------- --------- ----------
Total other income... 103,762 366,335 (3,405) 466,692
Other expenses:
Compensation and
employee benefits..... 143,189 256,566 -- 399,755
Occupancy expense,
net................... 37,658 85,858 -- 123,516
Regulatory insurance... 20,614 85,115 -- 105,729
Advertising and
promotion............. 25,784 13,866 -- 39,650
Furniture, fixtures and
equipment............. 19,201 -- -- 19,201
Other general and
administrative
expenses.............. 74,339 152,557 -- 226,896
---------- ---------- --------- ----------
Total general and
administrative
expenses............ 320,785 593,962 -- 914,747
SAIF special
assessment............ 70,046 118,200 -- 188,246
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 47,836 65,356 (D) 128,738
---------- ---------- --------- ----------
Total other
expenses............ 441,390 756,661 65,356 1,263,407
Earnings before income
tax provision
(benefit).............. 89,598 165,999 (88,058) 167,539
Income tax provision
(benefit).............. 35,541 31,210 49,066 (3) 115,817
---------- ---------- --------- ----------
Earnings before minority
interest and
extraordinary items ... 54,057 134,789 (137,124) 51,722
Minority interest....... -- 122,736 (29,376)(4) 93,360
Extraordinary items,
net.................... -- (1,586) -- (1,586)
---------- ---------- --------- ----------
Net earnings (loss).. $ 54,057 $ 10,467 $(107,748) $ (43,224)
========== ========== ========= ==========
Net earnings (loss)
applicable to common
shareholders:
Net earnings (loss).... $ 54,057 $ 10,467 $(107,748) $ (43,224)
Dividends declared on
preferred stock....... (10,841) -- -- (10,841)
Premium on exchange of
preferred stock for
common stock.......... (4,173) -- -- (4,173)
---------- ---------- --------- ----------
$ 39,043 $ 10,467 $(107,748) $ (58,238)
========== ========== ========= ==========
Earnings (loss) per
share:
Basic.................. $ 0.69 (1) (2) $ (0.52)(5)(I)
Diluted................ $ 0.62 (2) $ (0.52)(5)(I)
Weighted average shares
outstanding;
Common shares.......... 56,415 (1) (2) 112,343
Common shares and
dilutive potential
common shares......... 62,489 (2) 112,343
</TABLE>
- --------
(1) Does not reflect the impact of 5,366 Golden State stock options, the
vesting of which accelerates at the consummation date of the California
Federal Merger.
(2) Per share information is not presented as FNPH is a closely held
corporation.
(3) The adjustment to income tax expense includes adjustments for
nondeductible goodwill amortization and to adjust FNPH's historical
effective tax rate to 42%.
(4) Represents the exchange of Hunter's Glen minority interest in FNH for
Golden State Common Stock.
(5) Golden State expects to repurchase shares of Golden State Common Stock in
the open market in an amount not to exceed the number of shares to be
issued in the RedFed Merger. For purposes of the Unaudited Pro Forma
Condensed Combined Statement of Operations for the year ended June 30,
1997, the number of shares of Golden State Common Stock expected to be
issued in the RedFed Merger was assumed to be repurchased on July 1, 1996
for an aggregate amount of $158.0 million. As a result of the use of cash
in such repurchase, pro forma net income for the year ended June 30, 1997
would be reduced by approximately $5.2 million, representing increased
interest expense at an interest rate of 5.625% and the related income tax
effect at a combined marginal rate of 42%. Accordingly, pro forma basic
and diluted loss per share, after giving effect to such repurchase, would
each be $(0.56).
See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Giving Effect to the CENFED Merger, the RedFed Merger and the California
Federal Merger.
100
<PAGE>
(6) Represents historical results of FNPH, adjusted to reflect (i) the impact
of the Cal Fed Acquisition, (ii) the issuance of the 10 5/8% Notes, both
of which occurred on January 3, 1997, and (iii) the issuance of the REIT
Preferred Stock, which occurred on January 31, 1997, as if each of such
transactions had occurred on July 1, 1996, which transactions are
reflected as follows (in thousands):
<TABLE>
<CAPTION>
REIT
CAL FED PREFERRED 10 5/8% FNPH
FNPH ACQUISITION STOCK NOTES PRO FORMA
HISTORICAL PRO FORMA(A) PRO FORMA(B) PRO FORMA(C) COMBINED
---------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Interest income......... $1,648,112 $494,432 $ -- $ -- $2,142,544
Interest expense........ 1,163,236 328,018 (16,182) 30,547 1,505,619
---------- -------- -------- -------- ----------
Net interest income... 484,876 166,414 16,182 (30,547) 636,925
Provision for loan
losses................. 59,700 20,900 -- -- 80,600
---------- -------- -------- -------- ----------
Net interest income
after provision for
loan losses.......... 425,176 145,514 16,182 (30,547) 556,325
Other income............ 295,074 71,261 -- -- 366,335
Other expenses.......... 594,496 158,847 -- 3,318 756,661
---------- -------- -------- -------- ----------
Earnings before income
tax provision
(benefit).............. 125,754 57,928 16,182 (33,865) 165,999
Income tax provision
(benefit).............. 25,386 7,593 1,618 (3,387) 31,210
---------- -------- -------- -------- ----------
Earnings before minority
interest and
extraordinary item..... 100,368 50,335 14,564 (30,478) 134,789
Extraordinary item,
net.................... (1,586) -- -- -- (1,586)
Minority interest....... 89,358 17,398 22,076 (6,096) 122,736
---------- -------- -------- -------- ----------
Net earnings (loss)... $ 9,424 $ 32,937 $ (7,512) $(24,382) $ 10,467
========== ======== ======== ======== ==========
</TABLE>
--------
(a) Represents historical results of operations of California Federal Bank,
prior to its acquisition by First Nationwide Bank ("Old California
Federal"), for the six months ended December 31, 1996, adjusted to
reflect: (i) the amortization or accretion of fair value adjustments;
(ii) the elimination of amortization of historical intangible assets;
(iii) the reduction in interest income relating to the loss in yield on
the portion of the purchase price of the Cal Fed Acquisition which was
funded with existing cash; (iv) the elimination of certain noninterest
expense due to consolidation of Old California Federal's operations
with those of FNPH; and (v) income taxes and minority interest relating
to the Cal Fed Acquisition.
(b) Represents adjustments, for the six months ended December 31, 1996, to
reflect: (i) the reduction in interest expense on borrowings related to
the utilization of proceeds from the issuance of REIT Preferred Stock
to reduce debt; (ii) dividends on the REIT Preferred Stock, net of
income tax benefit; and (iii) income taxes and minority interest
relating to (i).
(c) Represents adjustments, for the seven months ended January 31, 1997, to
reflect: (i) interest expense and amortization of debt issuance costs
associated with the 10 5/8% Notes and (ii) income taxes and minority
interest relative to (i).
101
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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 CENFED 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
CENFED 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 CENFED 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 CENFED 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
CENFED Merger, the RedFed Merger and the California Federal Merger for the
year ended June 30, 1997, assumes that the CENFED Merger, the RedFed Merger,
the California Federal Merger and the Other Pro Forma Events 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 using the "purchase"
method of accounting. Golden State is treated as the acquired corporation for
financial reporting purposes. 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 and combined with the historical 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 asset/liability. The difference between the estimated fair value of the
assets, liabilities and other items, 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 CENFED 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 are expected to differ from those reflected in the Unaudited Pro
Forma Condensed Combined Financial Statements Giving Effect to the CENFED
Merger, the RedFed Merger and the California Federal Merger.
NOTE B: PURCHASE PRICE
Golden State Stockholders, as described in greater detail in the next
paragraph, initially will own approximately 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 volume-weighted average trading
price of Golden State Common Stock during a specified period preceding the
completion of the transaction and following distribution of the Litigation
Tracking Warrants (the "Adjusted Average Price").
The terms of the California Federal Merger Agreement call for Golden State
Stockholders to own 58 percent of the common stock of the combined entity
outstanding, immediately after giving effect to the California Federal Merger,
on a fully-diluted basis (without giving effect to shares issuable pursuant to
the Litigation Tracking
102
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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
Warrants or the issuance of Contingent Shares) if the Adjusted Average Price
(as defined herein) is $32 per share or less, and to own 55 percent of such
common stock 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 (i) the use by Golden State of certain tax benefits
of FNPH and the realization of certain other potential tax benefits and
liabilities of Golden State and FNPH and (ii) the receipt by the combined
company of a net after-tax recovery in certain litigation, including a portion
of the net recovery, if any, in the California Federal Goodwill Litigation.
Using an Adjusted Average Price of $29.81 (derived as described below),
Golden State's fully diluted outstanding shares, as of December 31, 1997,
applying the treasury stock method under Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," as required by the California Federal
Merger Agreement, would be as follows:
<TABLE>
<S> <C>
GOLDEN STATE
------------
Common shares outstanding as of December 31, 1997............... 51,023,321
Shares issuable pursuant to outstanding Series A Preferred Stock
convertible to common stock (i)................................ 11,111,245
Shares issuable pursuant to outstanding 5 Year Warrants on
common stock (ii).............................................. 1,522
Shares issuable pursuant to outstanding 7 Year Warrants on
common stock (iii)............................................. 6,481,094
Shares issuable pursuant to outstanding Stock Options on common
stock (iv)..................................................... 1,387,744
-----------
Subtotal - Golden State fully diluted outstanding shares ....... 70,004,926
-----------
CENFED
------
Common shares outstanding as of December 31, 1997............... 6,005,638
Shares issuable to outstanding options on CENFED common stock
(v)............................................................ 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 4,621,982 shares, each convertible into 2.404 shares of Golden
State Common Stock.
(ii) Warrants convertible at an exchange rate of 10 warrants for one share of
Golden State Common Stock.
(iii) 10,847,917 warrants with $12.00 exercise price per warrant.
(iv) Based on 5,366,032 stock options with a weighted average exercise price
per share of Golden State Common Stock of $16.518.
(v) Based on 94,366 stock options with a weighted average exercise price per
share of CENFED Common Stock of $12.621.
103
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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
The Adjusted Average Price of $29.81 per share of Golden State Common Stock
is based on the closing price of Golden State Common Stock on the NYSE of
$35.75 on the 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 to reflect the subsequent
distribution of the Litigation Tracking Warrants. Such implied value is
estimated, solely for purposes of this presentation, 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>
NOTE C: ALLOCATION OF PURCHASE PRICE
<TABLE>
<S> <C>
(IN THOUSANDS)
--------------
Golden State stockholders' equity, giving effect to the
Merger and the CENFED 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>
104
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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 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
CENFED 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
value of Golden State
Common Stock to be
distributed to
affiliates of MAF and
Ford in respect of
their proportionate
ownership of the
California Federal
Goodwill Litigation
asset (Note G)......... -- -- -- -- -- 37,200 -- (37,200)
Liability reflecting
value of Golden State
Common Stock to be
distributed to
affiliates of MAF and
Ford upon use of FNPH's
pre-merger tax benefits
(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.
105
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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
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
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."
106
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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 F: GOODWILL LITIGATION TRACKING WARRANTS
Represents the estimated fair value of the combined entity's 15% interest in
the after-tax any recovery, if any, in the Goodwill Litigation to be excluded
in calculating the number of shares issuable upon exercise of the Litigation
Tracking Warrants, 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.
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 the California Federal 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 15%
of the net after-tax recovery in the Goodwill Litigation to be excluded for
purposes of calculating the number of shares of Golden State Common Stock
issuable upon exercise of the Litigation Tracking Warrants, adjusted to
reflect the pro forma ownership interest of affiliates of MAF and Ford in the
combined company at the time of the California Federal Merger. The estimated
pre-tax difference between the amount calculated pursuant to the preceding
sentence and the amount of the California Federal Goodwill Litigation asset as
of December 31, 1997, $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.
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
107
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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
of the California Federal Merger, see the information, including the
illustrative example, set forth under the caption "SUMMARY--The Merger--
Parties to the Merger--Golden State" and "THE MERGER--Parties to the Merger--
Golden State--California Federal Merger." 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 CENFED
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(1).................. $ 0.40 $ 0.35 $ 0.36
Diluted earnings per share(1)................ $ 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(1)...................... $ (0.52) $ (0.46) $ (0.47)
Diluted loss per share(1).................... $ (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>
108
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
GIVING EFFECT TO THE CENFED 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
(1) Golden State expects to repurchase shares of Golden State Common Stock in
the open market in an amount not to exceed the number of shares to be
issued in the RedFed Merger. For pro forma presentation purposes, the
number of shares of Golden State Common Stock expected to be issued in the
RedFed Merger was assumed to be repurchased at the beginning of each
period presented for an aggregate amount of $158.0 million. As a result of
the use of cash in such repurchase, pro forma net income for the six
months ended December 31, 1997 and the year ended June 30, 1997 would be
reduced by approximately $2.6 million and $5.2 million, respectively,
representing increased interest expense at an interest rate of 5.625% and
the related income tax effect at a combined marginal rate of 42%.
Accordingly, pro forma basic and diluted earnings per share, after giving
effect to such repurchase, would be as follows for the above illustrative
examples:
<TABLE>
<S> <C> <C> <C>
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997:
Basic earnings per share........................ $ 0.37 $ 0.33 $ 0.34
Diluted earnings per share...................... $ 0.35 $ 0.31 $ 0.32
FOR THE YEAR ENDED JUNE 30, 1997:
Basic loss per share............................ $(0.56) $(0.50) $(0.52)
Diluted loss per share.......................... $(0.56) $(0.50) $(0.52)
</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.
109
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
GOLDEN STATE BANCORP INC.
AND
REDFED BANCORP INC.
DATED AS OF NOVEMBER 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
RECITALS.................................................................. A-1
ARTICLE I. THE MERGER..................................................... A-1
1.1. Procedure and Effective Time of Merger.............................. A-1
1.2. Closing............................................................. A-1
1.3. Effects of Merger................................................... A-1
1.4. Reservation of Right to Revise Transaction.......................... A-2
ARTICLE II. EFFECT OF MERGER ON CAPITAL STOCK OF CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES................................................. A-2
2.1. Effect on Capital Stock............................................. A-2
2.2. Exchange of Certificates............................................ A-3
ARTICLE III. REPRESENTATIONS AND WARRANTIES............................... A-5
3.1. Disclosure Letters.................................................. A-5
3.2. Standards........................................................... A-5
3.3. Representations and Warranties of RedFed............................ A-5
(a)Organization..................................................... A-5
(b)Qualifications................................................... A-5
(c)Capital Stock.................................................... A-5
(d)Redlands Federal; Significant Investments........................ A-6
(e)Authority and Stockholder Approvals.............................. A-6
(f)No Violations.................................................... A-6
(g)Reports.......................................................... A-6
(h)Absence of Certain Changes or Events............................. A-7
(i)Taxes............................................................ A-7
(j)Absence of Claims................................................ A-7
(k)Absence of Regulatory Actions.................................... A-7
(l)Contracts........................................................ A-8
(m)Labor Matters.................................................... A-8
(n)Employee Agreements.............................................. A-8
(o)Title to Assets.................................................. A-9
(p)Compliance with Law.............................................. A-9
(q)Fees............................................................. A-10
(r)Environmental Matters............................................ A-10
(s)Classified Assets................................................ A-11
(t)Material Interests of Certain Persons............................ A-11
(u)Insurance........................................................ A-11
(v)Books and Records................................................ A-12
(w)Corporate Documents.............................................. A-12
(x)Indemnification.................................................. A-12
(y)Derivatives Contracts; Structured Notes; Etc. ................... A-12
(z)Disclosure....................................................... A-12
3.4. Representations and Warranties of Golden State...................... A-12
(a)Organization..................................................... A-12
(b)Capital Stock.................................................... A-13
(c)Authority and Stockholder Approvals.............................. A-13
(d)No Violations.................................................... A-13
(e)Reports.......................................................... A-13
(f)Absence of Certain Changes or Events............................. A-14
(g)Taxes............................................................ A-14
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
(h)Absence of Claims............................................... A-14
(i)Absence of Regulatory Actions................................... A-14
(j)Compliance with Law............................................. A-15
(k)Fees............................................................ A-15
(l)Books and Records............................................... A-15
(m)Disclosure...................................................... A-15
ARTICLE IV. CONDUCT PENDING MERGER........................................ A-15
4.1. Conduct of Business Prior to Effective Time........................ A-15
4.2. Forbearance by RedFed.............................................. A-15
ARTICLE V. COVENANTS...................................................... A-17
5.1. Acquisition Proposals.............................................. A-17
5.2. Certain Policies of RedFed......................................... A-17
5.3. Employees.......................................................... A-18
5.4. Access to Information.............................................. A-19
5.5. Regulatory Matters................................................. A-19
5.6. Other Actions...................................................... A-20
5.7. Publicity.......................................................... A-20
5.8. Preparation of Form S-4 and Proxy Statement........................ A-20
5.9. Letter of RedFed Accountants....................................... A-20
5.10. Letter of Golden State Accountants................................. A-21
5.11. Stockholder Action................................................. A-21
5.12. Notification of Certain Matters.................................... A-21
5.13. Tax Matters........................................................ A-21
5.14. Updated Disclosure Letters......................................... A-21
5.15. Stock Exchange Listing............................................. A-21
5.16. Bank Merger........................................................ A-21
5.17. Indemnification of Directors and Officers.......................... A-21
5.18. RedFed ESOP........................................................ A-22
5.19. Litigation Tracking Warrants....................................... A-22
ARTICLE VI. CONDITIONS TO CONSUMMATION.................................... A-23
6.1. Conditions to All Parties' Obligations............................. A-23
6.2. Conditions to Obligations of Golden State.......................... A-23
6.3. Conditions to Obligations of RedFed................................ A-24
ARTICLE VII. TERMINATION.................................................. A-25
7.1. Termination........................................................ A-25
7.2. Effect of Termination.............................................. A-25
ARTICLE VIII. OTHER MATTERS............................................... A-26
8.1. Certain Definitions; Interpretation................................ A-26
8.2. Survival........................................................... A-26
8.3. Waiver............................................................. A-26
8.4. Counterparts....................................................... A-26
8.5. Governing Law...................................................... A-27
8.6. Expenses........................................................... A-27
8.7. Notices............................................................ A-27
8.8. Entire Agreement; No Third Party Beneficiaries..................... A-27
8.9. Parties Bound; Assignment.......................................... A-28
8.10. Severability....................................................... A-28
8.11. Captions........................................................... A-28
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of November 30, 1997 ("Agreement") by
and between GOLDEN STATE BANCORP INC., a Delaware corporation ("Golden
State"), and REDFED BANCORP INC., a Delaware corporation ("RedFed").
RECITALS
WHEREAS, the Boards of Directors of Golden State and RedFed have approved,
and deem it advisable and in the best interests of their respective
stockholders to consummate, the business combination provided for herein, in
which RedFed shall be merged (the "Merger") with and into a wholly-owned
subsidiary of Golden State ("Merger Sub") and Merger Sub shall thereafter
continue to be a wholly-owned subsidiary of Golden State;
WHEREAS, it is intended that the Merger shall qualify as a reorganization
under the provisions of Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code");
WHEREAS, Golden State and RedFed contemplate that their respective
depository institution subsidiaries, Glendale Federal Bank, Federal Savings
Bank and Redlands Federal Bank (referred to herein as "Glendale Federal" and
"Redlands Federal", respectively) will be merged (the "Bank Merger")
concurrently with or promptly after the completion of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
Section 1.1. Procedure and Effective Time of Merger. As of the Effective
Time (as defined below), RedFed shall be merged with and into Merger Sub, with
Merger Sub to be the surviving corporation in the Merger, in accordance with
the following: Subject to the provisions of this Agreement, a certificate of
merger (the "Certificate of Merger") shall be duly prepared, executed and
acknowledged by the Surviving Corporation (as defined in Section 1.3(b)) and
thereafter delivered to the Secretary of State of the State of Delaware for
filing as provided in the Delaware General Corporation Law (the "DGCL"), as
soon as practicable on the Closing Date (as defined in Section 1.2). The
Merger shall become effective at the time of the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware or at such other
time as is provided in the Certificate of Merger (such time being referred to
herein as the "Effective Time").
Section 1.2. Closing. The completion of the transactions provided for herein
(the "Closing") shall take place at 10:00 a.m. on such date (referred to
herein as the "Closing Date") that is at least two business days after
satisfaction or appropriate waiver of each of the conditions set forth in
Article VI as shall be designated by Golden State, subject to the provisions
of Section 5.19 hereof. The Closing shall be conducted at the offices of
Mayer, Brown & Platt, 350 South Grand Avenue, 25th Floor, Los Angeles,
California 90071-1503, or at such other time, date and place as may be agreed
to in writing by the parties hereto.
Section 1.3. Effects of Merger. (a) At the Effective Time, (i) the separate
corporate existence of RedFed shall cease and RedFed shall be merged with and
into Merger Sub, (ii) the certificate of incorporation of Merger Sub as in
effect immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation, (iii) the by-laws of Merger Sub as
in effect immediately prior to the Effective Time shall be the by-laws of the
Surviving Corporation, and (iv) the directors of Merger Sub shall be the
directors of the Surviving Corporation.
(b) As used in this Agreement, "Constituent Corporations" shall mean Merger
Sub and RedFed and "Surviving Corporation" shall mean Merger Sub.
(c) At and after the Effective Time, the Merger will have the effects set
forth in Section 259 of the DGCL.
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Section 1.4. Reservation of Right to Revise Transaction. Notwithstanding any
other provision of this Agreement, Golden State may at any time change the
method of effecting the acquisition of RedFed by Golden State and RedFed shall
cooperate in such efforts, including to provide for a merger of RedFed with
and into Golden State, or to provide for mergers among certain of the
subsidiaries of Golden State and RedFed to occur substantially simultaneously
with, or promptly following, the Effective Time; provided, however, that no
such change shall (a) alter or change the amount or kind of consideration to
be issued to holders of RedFed Common Stock (as defined in Section 3.3(c)) as
provided for in this Agreement (the "Merger Consideration"), (b) adversely
affect the tax treatment to RedFed's stockholders as a result of receiving the
Merger Consideration or (c) materially delay receipt of any approval referred
to in Section 6.1(b) or the consummation of the transactions contemplated by
this Agreement.
ARTICLE II.
EFFECT OF MERGER ON CAPITAL STOCK OF
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1. Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder of shares of
capital stock of Merger Sub or RedFed Common Stock:
(a) Merger Sub Capital Stock to Remain Outstanding. Each issued and
outstanding share of the capital stock of Merger Sub shall remain outstanding
and shall not be affected by the Merger.
(b) Cancellation of Treasury Stock and Stock Owned by Golden State. All
shares of RedFed Common Stock that are owned by RedFed as treasury stock and
all shares of RedFed Common Stock that are owned by Golden State or any
wholly-owned subsidiary of Golden State, other than any shares in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties (any shares of stock held in any of such
capacities being referred to herein as "trust account shares"), shall be
canceled and retired and shall cease to exist and no stock of Golden State or
other consideration shall be delivered in exchange therefor. All shares of
Golden State Common Stock (as defined in Section 3.4(b)) that are owned by
RedFed or any subsidiary shall remain outstanding and shall not be affected by
the Merger.
(c) Conversion of RedFed Common Stock. Subject to Section 2.2(e), each
issued and outstanding share of RedFed Common Stock (other than shares
canceled in accordance with Section 2.1(b)) shall be converted into that
number (expressed as a decimal fraction rounded to the nearest one hundred
thousandth) of fully paid and nonassessable shares of Golden State Common
Stock that equals the quotient (referred to herein as the "Exchange Ratio")
derived by dividing (A) $20.75 by (B) the unweighted arithmetic average of the
daily closing prices of Golden State Common Stock, as reported on the New York
Stock Exchange Composite Tape, for the ten trading days on which Golden State
Common Stock is traded immediately preceding the date that is two business
days prior to the Closing Date (such average of daily closing prices being
referred to herein as the "Final Golden State Price" and such ten trading day
period being referred to herein as the "Pricing Period"). All such shares of
RedFed Common Stock shall cease to be outstanding and shall automatically be
canceled and retired, and each certificate previously representing any such
shares shall thereafter represent the shares of Golden State Common Stock into
which such RedFed Common Stock has been converted. Certificates previously
representing shares of RedFed Common Stock shall be exchanged for the
certificates representing whole shares of Golden State Common Stock and cash
in lieu of the issuance of fractional shares as provided in Section 2.2(e)
issued in consideration therefor upon the surrender of such certificates in
accordance with Section 2.2.
(d) Effect on RedFed Stock Option Plans. At the Effective Time, each then
outstanding and unexercised option to purchase shares of RedFed Common Stock,
if any, granted under the RedFed Stock Option Plans (as defined below) (each,
a "RedFed Stock Option"), whether vested or unvested (it being understood
that, under the terms of the RedFed Stock Plans, all such options will become
vested as a result of the transaction provided for in this Agreement), shall
be converted, subject to the penultimate sentence of this Section 2.1(d), into
an option (a "Replacement Option") to acquire, on the same terms and
conditions as were applicable under such
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RedFed Stock Option, the number of shares of Golden State Common Stock equal
to (a) the number of shares of RedFed Common Stock subject to the RedFed Stock
Option, multiplied by (b) the Exchange Ratio (such product to be rounded down
to the nearest whole number) at an exercise price per share (rounded up to the
nearest whole cent) equal to (y) the aggregate exercise price for the shares
of RedFed Common Stock which were purchasable pursuant to such RedFed Stock
Option divided by (z) the number of full shares of Golden State Common Stock
subject to such Replacement Option in accordance with the foregoing.
Notwithstanding the foregoing, each RedFed Stock Option which is intended to
be an "incentive stock option" (as defined in Section 422 of the Code) shall
be adjusted in accordance with the requirements of Section 424 of the Code. At
or prior to the Effective Time, RedFed shall take all such action, if any, as
shall be necessary with respect to the RedFed Stock Option Plans to permit the
replacement of the outstanding RedFed Stock Options by Golden State pursuant
to this Section. At the Effective Time Golden State shall assume the RedFed
Stock Option Plans; provided, that such assumption shall be only in respect of
the Replacement Options and that Golden State shall have no obligation with
respect to any awards under the RedFed Stock Option Plans other than with
respect to the Replacement Options and shall have no obligation to make any
additional grants or awards under such assumed RedFed Stock Option Plans. As
used herein, the term "RedFed Stock Option Plans" shall mean each of the
following plans of RedFed the 1995 Long-Term Incentive Plan, the 1994
Incentive Stock Option Plan, and the 1994 Stock Option Plan for Outside
Directors.
Section 2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Golden State shall deposit, or
shall cause to be deposited, with a bank, trust company or other entity that
regularly performs the functions provided for in this Section 2.2 and that is
designated by Golden State and reasonably acceptable to RedFed (the "Exchange
Agent"), for the benefit of the holders of shares of RedFed Common Stock, and
for exchange in accordance with this Article II through the Exchange Agent,
certificates representing the shares of Golden State Common Stock and cash in
lieu of the issuance of any fractional shares pursuant to Section 2.2(e) (such
certificates for shares of Golden State Common Stock and cash, together with
any dividends or distributions with respect thereto, being hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 2.1.
(b) Exchange Procedures. As soon as practicable but in no event later than
five days after the Effective Time, Golden State shall cause the Exchange
Agent to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
RedFed Common Stock (the "Certificates") whose shares were converted into
shares of Golden State Common Stock pursuant to Section 2.1 (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Golden State and RedFed may reasonably specify), and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Golden State Common Stock.
Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Golden State Common Stock which
such holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article II (after taking into account all
shares of RedFed common stock then held by such holder), together with cash in
lieu of the issuance of any fractional shares as provided in Section 2.2(e),
and the Certificate so surrendered shall forthwith be canceled. In the event
of a transfer of ownership of RedFed Common Stock which is not registered in
the transfer records of RedFed, a certificate representing the proper number
of shares of Golden State Common Stock may be issued to a transferee if the
Certificate representing such RedFed Common Stock is presented to the Exchange
Agent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the certificate representing shares of
Golden State Common Stock and cash in lieu of the issuance of any fractional
shares of Golden State Common Stock as contemplated by this Section 2.2.
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(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
the issuance of fractional shares shall be paid to such holder pursuant to
Section 2.2(e), until such Certificate shall be surrendered by the holder
thereof. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Golden State Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
any cash payable with respect to a fractional share of Golden State Common
Stock to which such holder is entitled pursuant to Section 2.2(e) and the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid or made with respect to such whole shares of
Golden State Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions payable or distributable with
respect to such whole shares of Golden State Common Stock having a record date
after the Effective Time but prior to such surrender and a payment or
distribution date subsequent to such surrender.
(d) No Further Ownership Rights in RedFed Common Stock. All shares of Golden
State Common Stock issued upon conversion of shares of RedFed Common Stock in
accordance with the terms hereof (and any cash paid pursuant to Section 2.2(c)
or 2.2(e)) shall be deemed to have been issued and paid in full satisfaction
of all rights pertaining to such shares of RedFed Common Stock; and there
shall be no further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of RedFed Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Golden State Common Stock shall be issued upon the
surrender of Certificates for exchange, and such fractional share interests
shall not entitle the owner thereof to vote or to any rights of a stockholder
of Golden State.
(ii) In lieu of the issuance of fractional shares of Golden State Stock,
Golden State shall pay or cause to be paid to each holder of RedFed Common
Stock an amount in cash equal to the product obtained by multiplying the
fractional share interest to which such holder (after taking into account
all shares of RedFed Common Stock then held by such holder) would otherwise
be entitled by the Final Golden State Price.
(iii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of RedFed Common Stock with respect to
any fractional share interests, the Exchange Agent shall make available
such amounts to such holders of RedFed Common Stock subject to and in
accordance with the terms of Section 2.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the stockholders of RedFed for 12 months after the
Effective Time shall be delivered to Golden State upon demand, and any
stockholders of RedFed who have not theretofore complied with this Article II
shall thereafter look only to Golden State for payment of their claims for
Golden State Common Stock and, if applicable, any cash in lieu of fractional
shares of Golden State Common Stock and any dividends or distributions with
respect to Golden State Common Stock.
(g) No Liability. Neither Golden State nor RedFed shall be liable to any
former holder of shares of RedFed Common Stock for shares of Golden State
Common Stock or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.1. Disclosure Letters. On or prior to the date of the execution
and delivery hereof, RedFed and Golden State have each delivered a letter to
the other (the "RedFed Disclosure Letter" and the "Golden State Disclosure
Letter," respectively, and each a "Disclosure Letter") setting forth, among
other things, facts, circumstances and events the disclosure of which is
required or appropriate in relation to its representations and warranties set
forth in Section 3.3 or 3.4, as applicable, and making specific reference to
the Section or Sections of this Agreement to which they relate. The inclusion
of a fact, circumstance or event in either Disclosure Letter, however, shall
not be deemed an admission that such item represents a material exception to
any such representation or warranty or that the absence of such item would
cause the representation or warranty to which it relates to be untrue or
incorrect.
Section 3.2. Standards. No representation or warranty of RedFed or Golden
State contained in Sections 3.3 or 3.4, respectively, shall be deemed untrue
or incorrect, and no party hereto shall be deemed to have breached a
representation or warranty, on account of the existence of any fact,
circumstance or event unless such fact, circumstance or event, individually or
taken together with all other facts, circumstances or events inconsistent with
any paragraph of Sections 3.3 or 3.4, (i) is material and adverse to the
business, financial condition or results of operations of RedFed or Golden
State, as applicable, and its respective subsidiaries, in each case, taken as
a whole, (ii) materially and adversely affects the ability of RedFed or Golden
State, as applicable, to consummate the Merger by the Termination Date or to
perform its material obligations hereunder or (iii) enables any person to
prevent or materially delay the consummation of the Merger.
Section 3.3. Representations and Warranties of RedFed. Except as set forth
in the RedFed Disclosure Letter, RedFed represents and warrants to Golden
State that:
(a) Organization. (i) RedFed has been duly organized and is validly existing
and in good standing as a corporation under the laws of the State of Delaware.
RedFed has all requisite corporate power and authority to carry on its
business as it is now being conducted and to own its properties and assets.
(ii) Without limiting the generality of the foregoing, Redlands Federal is
duly chartered and in good standing as a federal savings bank organized in
capital stock form. The customer deposit accounts of Redlands Federal are
insured by the Savings Association Insurance Fund (the "SAIF") of the Federal
Deposit Insurance Corporation (the "FDIC") to the extent provided for member
institutions of the SAIF generally in the Federal Deposit Insurance Act,
without any special limitation or restriction. Redlands Federal has all
requisite corporate and other power and authority (including all federal,
state and local administrative and other governmental and regulatory
authorizations) to carry on its business as it is now being conducted and to
own its properties and assets.
(b) Qualifications. RedFed is duly qualified and in good standing in all
jurisdictions in which such qualification is required to carry on its business
as it is now being conducted and to own all its properties and assets.
(c) Capital Stock. The authorized capital stock of RedFed consists solely of
15,000,000 shares of common stock, par value $.01 per share (the "RedFed
Common Stock"), of which 7,421,308 shares are issued and outstanding as of the
date of this Agreement, and 3,000,000 shares of preferred stock, par value
$.01 per share, of which no shares are issued or outstanding as of the date of
this Agreement. RedFed has no outstanding voting securities other than the
outstanding shares of RedFed Common Stock referred to in the first sentence of
this paragraph. Except for the 454,744 shares of RedFed Common Stock that are
issuable pursuant to the stock options and plans listed in the RedFed
Disclosure Letter, no shares of capital stock of RedFed are reserved for
issuance upon the exercise of, or are otherwise subject to, any outstanding
options, warrants or other rights of any kind or upon conversion of or in
exchange for any other securities or pursuant to any other contractual
arrangement or understanding. All outstanding shares of capital stock of
RedFed and its subsidiaries are duly authorized, validly issued and
outstanding, fully paid and non-assessable. None of the shares of authorized
capital stock of RedFed is subject to any statutory or contractual preemptive
or similar rights.
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(d) Redlands Federal; Significant Investments. All of the outstanding shares
of capital stock of each subsidiary of RedFed are owned, directly or
indirectly, and not subject to any lien, charge, encumbrance, restriction on
transfer or adverse ownership or other claim of any third party, solely by
RedFed. Redlands Federal is the sole direct subsidiary (as defined in Section
8.1) of RedFed and all of the direct and indirect subsidiaries of Redlands
Federal are listed in the RedFed Disclosure Letter. No equity securities of
any subsidiary of RedFed are or may become required to be issued (other than
to RedFed or its subsidiaries) by reason of any securities or obligations
convertible into or exercisable or exchangeable for, or giving any person any
right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value of
which is determined in whole or in part by reference to the market price or
value of such equity securities (each of the foregoing, a "Right"); there are
no contracts, commitments, understandings or arrangements by which any of the
subsidiaries of RedFed is or may be bound to sell or otherwise transfer any
shares of the capital stock of any such subsidiary (other than to RedFed or
its subsidiaries); and there are no contracts, commitments, understandings or
arrangements relating to its rights to vote or to dispose of such shares
(other than to RedFed or its subsidiaries).
(e) Authority and Stockholder Approvals. RedFed has the requisite power and
authority, and has taken all corporate action necessary, in order to execute
and deliver this Agreement and, subject to approval by its stockholders, to
consummate the transactions contemplated hereby. Each of this Agreement and
the other agreements contemplated hereby has been duly and validly executed
and delivered by RedFed and is a valid and binding agreement of RedFed
enforceable against RedFed in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. Upon the receipt of the
stockholder approval of this Agreement by the holders of RedFed Common Stock
required by the DGCL, the completion of the transactions contemplated by this
Agreement will have been authorized by all necessary corporate action of
RedFed. RedFed has taken all action required to be taken by it (including
approval by the appropriate number and type of members of the RedFed Board of
Directors) in order to exempt this Agreement and the transactions contemplated
hereby from (x) the requirements of Section 203 of the Delaware General
Corporation Law and (y) the "higher vote" requirement of Article Eighth of the
RedFed Certificate of Incorporation.
(f) No Violations. The execution, delivery and performance of this Agreement
by RedFed do not, and the consummation of the transactions contemplated hereby
by RedFed will not, constitute (A) a breach or violation of, or a default
under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument of
RedFed or to which RedFed or any of its properties is subject, or enable any
person to enjoin the Merger or the other transactions contemplated hereby, (B)
a breach or violation of, or a default under, the certificate of incorporation
or by-laws of RedFed or (C) a breach or violation of, or a default under (or
an event which with the giving of notice or lapse of time or both would
constitute a default under), or result in the termination of, accelerate the
performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the properties or
assets of RedFed under, any of the terms, conditions or provisions of any
note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which RedFed is a party, or by which any of its
properties or assets may be bound or affected; and the consummation of the
transactions contemplated hereby will not require RedFed to obtain any
approval, consent or waiver under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or the approval, consent or
waiver of any other party to any such agreement, indenture or instrument,
other than the required approvals, consents and waivers of governmental
authorities or other persons referred to in Section 6.1(b), the approval of
the stockholders of RedFed referred to in Section 3.3(e), and such approvals,
consents or waivers as are required under federal and state securities laws in
connection with the transactions contemplated by this Agreement.
(g) Reports. (i) As of their respective dates, neither the Annual Report on
Form 10-K filed by RedFed with the Securities and Exchange Commission (the
"SEC") relating to the year ended December 31, 1996 (including the audited
financial statements of RedFed included therein), nor any other report or
other filing filed or made by RedFed subsequent to December 31, 1994
(including, without limitation, reports on Forms 10-K,
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10-Q, and 8-K) with the SEC, the Office of Thrift Supervision (the "OTS"), or
the FDIC (all of the financial statements and reports of the types referred to
in this clause (i) being collectively referred to in this Agreement as
"Reports"), contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. True and complete copies of all such Reports filed
on or after December 31, 1994 have been made available to Golden State, and
RedFed shall provide Golden State with true and complete copies of all Reports
filed after the date hereof promptly after such Reports are filed and each
such Report filed with the SEC complied or will comply as to form with the
applicable requirements under the Securities Act or the Exchange Act. Each of
the statements of financial condition contained or incorporated by reference
in the Reports (including in each case any related notes and schedules) fairly
presented or will fairly present, as the case may be, the financial position
of the entity or entities to which it relates as of its date and each of the
statements of operations, cash flows and changes in stockholders' equity,
contained or incorporated by reference in the Reports (including in each case
any related notes and schedules), fairly presented or will fairly present, as
the case may be, the results of operations, cash flows, and changes in
stockholders' equity of the entity or entities to which it relates for the
periods set forth therein, in each case in accordance with generally accepted
accounting principles or applicable regulatory accounting principles and
instructions consistently applied throughout the periods involved, except as
may be stated therein (and subject, in the case of unaudited interim
statements, to normal year-end audit adjustments that are not material in
amount or effect and to the lack of complete footnotes).
(ii) RedFed and its subsidiaries, including Redlands Federal, have timely
filed all reports and statements, together with any amendments required to
be made with respect thereto, with the SEC, the OTS, the FDIC and any other
applicable Government Regulators (as defined in Section 3.3(k)) and all
other material reports and statements required to be filed by them, and
have paid all fees and assessments due and payable in connection therewith.
(h) Absence of Certain Changes or Events. Except as disclosed in the Reports
filed prior to the date hereof and except as contemplated by this Agreement or
as disclosed in the RedFed Disclosure Letter, since December 31, 1996: (i)
RedFed has not incurred any liability, other than in the ordinary course of
its business consistent with past practice; (ii) RedFed has conducted its
business only in the ordinary and usual course of such business; and (iii)
there has not been any change in the financial condition, properties,
business, or results of operations of RedFed which, individually or in the
aggregate, has had or would reasonably be expected to have a material adverse
effect on RedFed, including its subsidiaries, taken as a whole.
(i) Taxes. All federal, state, local, and foreign tax returns required to be
filed by or on behalf of RedFed have been timely filed or requests for
extensions have been timely filed, any such requested extensions have been
granted and have not expired, and all such filed returns are complete and
accurate in all material respects. All taxes shown on such returns to be due
have been paid in full or adequate provision has been made for the payment of
any such taxes in the financial statements of RedFed in accordance with
generally accepted accounting principles. There is no audit, examination,
deficiency assessment, or refund litigation currently pending with respect to
any taxes of RedFed. All taxes, interest, additions and penalties due with
respect to completed and settled examinations or concluded litigation relating
to RedFed have been paid in full or adequate provision has been made for the
payment of any such taxes in the financial statements of RedFed in accordance
with generally accepted accounting principles. No extensions or waivers of
statutes of limitations have been given by or requested with respect to any
taxes of RedFed.
(j) Absence of Claims. There is no material pending claim, action or
proceeding against RedFed before any court or administrative agency, nor, to
the knowledge of RedFed, have any of the foregoing been threatened, nor, to
the knowledge of RedFed, is there any reasonable basis therefor.
(k) Absence of Regulatory Actions. Neither RedFed nor Redlands Federal is a
party to any cease and desist order, written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory
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letter from, or has adopted any board resolutions relating to the foregoing at
the request of, federal or state governmental authorities, including without
limitation the SEC and regulatory agencies charged with the supervision or
regulation of depository institutions or depository institution holding
companies or engaged in the insurance of bank and/or savings and loan deposits
(collectively, "Government Regulators"), nor has RedFed or Redlands Federal
been advised by any Government Regulator that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolutions or
similar undertaking. RedFed is not aware of any facts or circumstances
relating to RedFed or Redlands Federal that have not been disclosed to Golden
State that would cause any of the Government Regulators or any other person or
entity to fail to give any of the approvals, consents or waivers referred to
in Section 6.1(b).
(l) Contracts. (i) Except for loans, loan commitments, letters of credit and
other arrangements, in each case, made in the ordinary course of business,
RedFed is not bound by any material contract to be performed after the date
hereof that is not listed in the RedFed Disclosure Letter. RedFed is not a
party to an oral or written (A) agreement containing covenants that limit the
ability of RedFed to compete in any line of business or with any person, or
that involve any restriction on the geographic area in which, or the method by
which, RedFed (including any successor thereof) may carry on its business
(other than as may be required by law or any regulatory agency),(B) agreement
not referred to in the preceding clause and providing for the payment by
RedFed of $50,000 or more per annum or (C) except as filed as an exhibit to
its Annual Report on Form 10-K for the year ended December 31, 1996, agreement
that is a "material contract" within the meaning of Item 601(b)(10)of SEC
Regulation S-K.
(ii) RedFed is not in default under or in violation of any provision of
the contracts or any note, bond, indenture, mortgage, deed of trust, loan
agreement, lease or other agreement to which it is a party or by which it
is bound or to which any of its respective properties or assets is subject,
and, to the knowledge of RedFed, there has not occurred any event that with
the lapse of time or the giving of notice or both would constitute such a
default.
(m) Labor Matters. RedFed is not a party to, or bound by, any collective
bargaining agreement, contract, or other agreement or understanding with a
labor union or labor organization, nor is RedFed the subject of any proceeding
asserting that it has committed an unfair labor practice or seeking to compel
it to bargain with any labor organization as to wages or conditions of
employment, nor is any strike, other labor dispute or organizational effort
involving RedFed pending or, to the knowledge of RedFed, threatened.
(n) Employee Agreements. The RedFed Disclosure Letter contains a complete
list of all employment agreements and all pension, retirement, stock option,
stock purchase, stock ownership, savings, stock appreciation right, profit
sharing, deferred compensation, consulting, bonus, group insurance,
employment, termination, severance, medical, health and other benefit plans,
contracts, agreements, arrangements, including, but not limited to, "employee
benefit plans," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), incentive and welfare policies,
contracts, plans and arrangements and all trust agreements related thereto in
respect of any present or former directors, officers, or other employees of
RedFed or with respect to which RedFed or any entity that would be treated as
a single employer with RedFed under Section 414 of the Code (which entities
are referred to herein as "ERISA Affiliates") may have any liability (all of
the foregoing being hereinafter collectively referred to as the "Employee
Agreements"). Except as set forth in the RedFed Disclosure Letter, (i) all of
the Employee Agreements comply, and have been administered in all material
respects in compliance, with all applicable requirements of ERISA, the Code,
and all other applicable laws and regulations, and no event has occurred which
will or could cause any such Employee Agreement to fail to comply with such
requirements and no notice has been issued by any governmental authority
questioning or challenging such compliance; (ii) none of RedFed or any of its
ERISA Affiliates has an obligation to accelerate the time of payment or
vesting of any benefit or compensation payable under any Employee 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
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agreements, each as in effect on the date hereof, has been made available to
Golden State; (iv) to the extent applicable, a true and correct copy of the
most recent annual report, actuarial report, accountant's opinion of the
plan's financial statements, summary plan description and Internal Revenue
Service determination letter with respect to each Employee Agreement has been
made available to Golden State and there have been no material changes in the
financial condition of the respective plans from that stated in the annual
reports and actuarial reports supplied; (v) all Employee Agreements which are
employee pension benefit plans (as defined in Section 3(2) of ERISA) comply in
form and in operation with all applicable requirements of Sections 401(a) and
501(a) of the Code, there have been no amendments to such plans which are not
the subject of a favorable determination letter issued with respect thereto by
the Internal Revenue Service and no event has occurred which will or could
give rise to disqualification of any such plan under such sections or to a tax
under Section 511 of the Code; (vi) there have been no "prohibited
transactions" (as described in Section 406 of ERISA or Section 4975 of the
Code) with respect to any Employee Agreement and none of RedFed or any of its
ERISA Affiliates has engaged in any prohibited transaction; (vii) there have
been no acts or omissions by RedFed or any of its ERISA Affiliates which have
given rise to or may give rise to fines, penalties, taxes or related charges
under Section 502 of ERISA or Chapters 43, 47 or 68 of the Code for which
RedFed or any of its ERISA Affiliates may be liable; (viii) there are no
actions, suits or claims (other than routine claims for benefits) pending or
threatened involving any Employee Agreement or assets thereof and to the best
knowledge of RedFed no facts exist which could give rise to any such actions,
suits or claims (other than routine claims for benefits); (ix) no Employee
Agreement is subject to Title IV of ERISA and no Employee Agreement is a
multiemployer plan (as defined in Section 3(37) of ERISA); (x) none of RedFed
or any of its ERISA Affiliates has any liability or contingent liability for
providing, under any Employee Agreement or otherwise, any post-retirement
medical or life insurance benefits, other than statutory liability for
providing group health plan continuation coverage under Part 6 of Title I of
ERISA and Section 4980B of the Code; and (xi) shareholder approval, or the
consummation, of the transactions contemplated by this Agreement would not
directly or indirectly (including as a result of any termination of
employment) reasonably be expected to (A) entitle any current or former
director, officer or employee to any payment or any increase in compensation,
(B) result in the vesting or acceleration of any benefits under any Employee
Agreement, (C) result in any material increase in benefits under any Employee
Agreement or (D) result in the payment of any "excess parachute payments"
under Section 280G of the Code.
(o) Title to Assets. RedFed does not own any real estate or interest therein
(other than real property security interests and real estate acquired in
settlement of defaulted loans) that is not described in the RedFed Disclosure
Letter. RedFed has good (and as to real property, marketable) title to its
properties and assets (including any trademark, service mark, trade name,
copyright or other intellectual property used in its business), other than (i)
as reflected in the Reports, (ii) properties or assets as to which RedFed is a
lessee or licensee and (iii) real estate owned as a result of foreclosure,
transfer in lieu of foreclosure or other transfer in satisfaction of a
debtor's obligation previously contracted. Such properties and assets are
subject to no liens, mortgages, security interests, encumbrances, pledges or
charges of any kind, except (i) as reflected in the Reports filed prior to the
date hereof; (ii) statutory liens for taxes not yet delinquent; (iii)
landlord's liens; and (iv) minor defects and irregularities in title and
encumbrances that do not materially impair the use thereof for the purposes
for which they are held. RedFed and its subsidiaries as lessee have the
unqualified right under valid and subsisting leases to occupy, use, possess
and control all property leased by RedFed and its subsidiaries.
(p) Compliance with Law. Each of RedFed and Redlands Federal:
(i) has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations
with, federal, state, local and foreign governmental or regulatory bodies
that are required in order to permit it to carry on its business as it is
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the knowledge of
RedFed and Redlands Federal, no suspension or cancellation of any of them
is threatened; and
(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
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Americans With Disabilities Act, and all other fair lending laws or other
laws relating to discrimination, and the Bank Secrecy Act.
(q) Fees. Other than financial advisory services performed for RedFed by
NationsBanc Montgomery Securities, Inc. in the amount and pursuant to the
agreement both disclosed to Golden State prior to the execution and delivery
of this Agreement, RedFed has not employed any broker or finder or incurred
any liability for any financial advisory fees, brokerage fees, commissions, or
finder's fees in connection with the transaction provided for in this
Agreement.
(r) Environmental Matters.
(i) With respect to environmental matters:
A. To the knowledge of RedFed, RedFed is in material compliance with
all Environmental Laws (as defined below);
B. RedFed does not have knowledge of any material noncompliance with
any Environmental Laws relating to any of the Loan Properties (as
defined below)other than as may be set forth in the standard loan files
of Redlands Federal;
C. There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending
or, to the knowledge of RedFed, threatened, before any court,
governmental agency or board or other forum against RedFed (x) for
alleged noncompliance (including by any predecessor) with, or liability
under, any Environmental Law or (y) relating to the presence of or
release into the environment of any Hazardous Material (as defined
below), whether or not occurring at or on a site owned, leased or
operated by RedFed;
D. To the knowledge of RedFed, there is no suit, claim, action,
demand, executive or administrative order, directive, investigation or
proceeding pending or threatened before any court, governmental agency
or board or other forum relating to or against any Loan Property (or
RedFed in respect of such Loan Property) (x) relating to alleged
noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or (y) relating to the presence of or release
into the environment of any Hazardous Material whether or not occurring
at or on a site owned, leased or operated by a Loan Property;
E. To the knowledge of RedFed, there are no existing facts or
circumstances that could reasonably be expected to give rise to any
suit, claim, action, demand, executive or administrative order,
directive or proceeding of a type described in Section 3.3(r)(i)(B) or
(C) above;
F. To the knowledge of RedFed, the properties currently or formerly
owned or operated by RedFed (including, without limitation, soil,
groundwater or surface water on, under or adjacent to the properties,
and buildings thereon) are not contaminated with and, with the
exception of commercially available office and cleaning supplies, do
not otherwise contain any Hazardous Material that could reasonably be
expected to give rise to liability to RedFed;
G. RedFed has not received any notice, demand letter, executive or
administrative order, directive or request for information from any
federal, state, local or foreign governmental entity or any third party
indicating that it may be in violation of, or liable under, any
Environmental Law;
H. To the knowledge of RedFed, during the period of RedFed's
ownership or operation of any of its currently owned properties, there
has been no contamination by or release of Hazardous Material in, on,
under or affecting such properties which constituted a violation of any
Environmental Laws. To the knowledge of RedFed, prior to the period of
RedFed's ownership or operation of any of their respective current
properties, there was no contamination by or release of Hazardous
Material or oil in, on, under or affecting any such property which
constituted a violation of any Environmental Laws and as to which
RedFed may have liability; and
I. RedFed does not participate in the management of a Loan Property
to an extent that it would be deemed an "owner or operator" as defined
in 42 U.S.C. (S) 9601 or any similar Environmental Law.
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(ii) The following definitions apply for purposes of this Section 3.3(r):
(w) "Loan Property" means any property in which RedFed holds a security
interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property; (x)
"Environmental Law" means (i) any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, directive, executive or administrative order,
judgment, decree, injunction, requirement or agreement with any
governmental entity, relating to (A) the protection, preservation or
restoration of the environment (which includes, without limitation, air,
water vapor, surface water, groundwater, drinking water supply, structures,
soil, surface land, subsurface land, plant and animal life or any other
natural resource), or (B) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of, Hazardous Materials, in each case as
amended and as now or hereafter in effect, including all current
Environmental Laws, all future interpretations of current Environmental
Laws and all future Environmental Laws and subsequent interpretations
thereof. The term "Environmental Law" includes (i) all federal, state and
local laws, rules, regulations or requirements relating to the protection
of the environment, including the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments
and Reauthorization Act of 1986, the federal Water Pollution Control Act of
1972, the federal Clean Air Act, the federal Clean Water Act, the federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the federal Solid Waste Disposal Act and
the federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and Health
Act of 1970, the Federal Hazardous Materials Transportation Act, or any so-
called "Superfund" or "Superlien" law, each as amended and as now or
hereafter in effect, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such
as negligence, nuisance, trespass and strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Material; and (y)
"Hazardous Material" means any substance in any concentration which is or
could be detrimental to human health or safety or to the environment,
currently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive or dangerous, or otherwise regulated, under
any Environmental Law, whether by type or by quantity, including any
substance containing any such substance as a component. The term "Hazardous
Material" includes any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial
substance, oil or petroleum or any derivative or by-product thereof, radon,
radioactive material, asbestos, asbestos-containing material, urea
formaldehyde foam insulation, lead, lead-based paint and polychlorinated
biphenyl.
(s) Classified Assets. RedFed has annexed to the RedFed Disclosure Letter a
loan schedule identifying certain loan agreements, notes and borrowing
arrangements (the "RedFed Loan Schedule") between its subsidiaries and
borrowers of its subsidiaries. Except as specifically noted on the RedFed Loan
Schedule, as of October 31, 1997, no subsidiary is a party to any written or
oral (i) loan agreement, note or borrowing arrangement, other than loans the
unpaid balance of which does not exceed $100,000 per loan, under the terms of
which the obligor is over 60 days delinquent in payment of principal or
interest or loan agreement, note or borrowing arrangement which has been
classified as "substandard," "doubtful," "loss," or "other loans specially
mentioned" or any comparable classification by RedFed, a RedFed subsidiary,
the OTS or the FDIC or (ii) loan agreement, note or borrowing arrangement
including any loan guaranty, with any director, executive officer or ten
percent stockholder of RedFed or, to the knowledge of RedFed, any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing.
(t) Material Interests of Certain Persons. No officer or director of RedFed,
or any "associate" (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of any such officer or
director, has any material interest in any material contract or property (real
or personal), tangible or intangible, used in or pertaining to the business of
RedFed.
(u) Insurance. All policies of insurance or indemnity maintained by RedFed
for its benefit in its business are listed in the RedFed Disclosure Letter.
All of the insurance policies and bonds so listed are in full force and
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effect, RedFed is not in default thereunder and all material claims thereunder
have been filed in due and timely fashion. Between the date hereof and the
Effective Time, RedFed will use commercially reasonable efforts to maintain
the levels of insurance coverage in effect on the date hereof.
(v) Books and Records. The books and records of RedFed have been maintained
in accordance with all applicable legal, regulatory and accounting
requirements and reflect in all material respects the substance of the events
and transactions that are required to be included therein.
(w) Corporate Documents. RedFed has delivered to Golden State true and
complete copies of its certificate of incorporation and by-laws, and the
charter and by-laws of Redlands Federal, as each of them is in effect on the
date hereof.
(x) Indemnification. Other than pursuant to the provisions of the
certificate of incorporation and by-laws of RedFed and the similar or
corresponding organizational documents of Redlands Federal and the other
subsidiaries of RedFed, neither RedFed nor any such subsidiary, is a party to
any indemnification agreement with any of its present or former directors,
officers, employees, agents or with any other persons who serve or served in
any other capacity with any other enterprise at the request of RedFed or any
such subsidiary.
(y) Derivatives Contracts; Structured Notes; Etc. RedFed is not a party to
and has not agreed to enter into, after the date hereof, any exchange traded
or over-the-counter equity, interest rate, foreign exchange or other swap,
forward, future, option, cap, floor or collar or other contract of the types
commonly referred to as derivative contracts, including various combinations
thereof (each a "Derivatives Contract") and RedFed does not own securities
that are referred to generically as "structured notes," "high risk mortgage
derivatives" (as defined for federal banking regulatory purposes), "capped
floating rate notes" or "capped floating rate mortgage derivatives", except
for those Derivatives Contracts and such other instruments listed (as of the
date hereof) in the RedFed Disclosure Letter or disclosed in its Reports filed
on or prior to the date hereof. All Derivative Contracts, whether entered into
for RedFed's own account, or for the account of one or more of its
subsidiaries or their customers, were entered into (i) in accordance with
applicable laws, rules and regulations and (ii) with counterparties believed
to be financially responsible at the time. Neither RedFed nor its
subsidiaries, nor to its knowledge any other party thereto, is in breach of
any of its obligations under any Derivative Contract.
(z) Disclosure. The written statements, certificates, schedules, lists and
other written information furnished by or on behalf of RedFed to Golden State
pursuant to this Agreement, including all information supplied in connection
with the preparation of the Form S-4 and the Proxy Statement (each as defined
in Section 5.8), do not contain any untrue statement of a material fact or,
taken as a whole, omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 3.4. Representations and Warranties of Golden State. Except as set
forth in the Golden State Disclosure Letter, Golden State represents and
warrants to RedFed that:
(a) Organization. (i) Golden State has been duly organized and is validly
existing and in good standing as a corporation under the laws of the State of
Delaware. Golden State has all requisite power and authority to carry on its
business as it is now being conducted and to own its properties and assets.
(ii) Without limiting the generality of the foregoing, Glendale Federal
is duly chartered and in good standing as a federal savings bank organized
in capital stock form. The customer deposit accounts of Glendale Federal
are insured by the SAIF to the extent provided for member institutions of
the SAIF generally in the Federal Deposit Insurance Act, without any
special limitation or restriction. Glendale Federal has all requisite
corporate and other power and authority (including all federal, state and
local administrative and other governmental and regulatory authorizations)
to carry on its business as it is now being conducted and to own its
properties and assets.
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(b) Capital Stock. The authorized capital stock of Golden State consists
solely of 100,000,000 shares of common stock, par value $1.00 per share (the
"Golden State Common Stock"), of which 51,017,094 shares are issued and
outstanding as of the date of this Agreement, and 50,000,000 shares of
preferred stock, par value $1.00 per share, of which 4,621,982 shares,
denominated "Noncumulative Convertible Preferred Stock, Series A" are issued
and outstanding as of the date of this Agreement. Golden State has no
outstanding voting securities other than the outstanding shares of Golden
State Common Stock referred to in the first sentence of this paragraph. Except
as described in the Golden State Disclosure Letter, no shares of capital stock
of Golden State are reserved for issuance upon the exercise of outstanding
options, warrants or other rights of any kind or upon conversion of or in
exchange for any other securities or pursuant to any other contractual
arrangement or understanding. All outstanding shares of capital stock of
Golden State and its subsidiaries are, and all of the shares of Golden State
Common Stock to be issued in the Merger will, when so issued pursuant to the
terms hereof, be duly authorized, validly issued and outstanding, fully paid
and non-assessable. None of the shares of authorized capital stock of Golden
State is subject to any statutory or contractual preemptive or similar rights.
All of the outstanding shares of capital stock of Glendale Federal are owned
directly or indirectly, and not subject to any lien, charge, encumbrance,
restriction on transfer or adverse ownership or other claim of any third
party, solely by Golden State.
(c) Authority and Stockholder Approvals. Golden State has the requisite
corporate power and authority, and has taken all corporate action necessary,
in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Golden State and is a valid and binding agreement of
Golden State enforceable against Golden State in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles. No
approval of this Agreement is required under applicable law, the certificate
of incorporation or by-laws of Golden State or for any other reason, to be
obtained from the stockholders of Golden State to enable Golden State to
complete the transactions provided for herein. Golden State has taken such
action, if any, as may be required to be taken by it pursuant to Rule 16b-3
promulgated by the SEC pursuant to the Exchange Act in order to exempt the
acquisition of shares of Golden State's common stock, in connection with the
transactions contemplated by this Agreement, by any person who, as a result of
the transactions contemplated by this Agreement, will become subject to the
requirements of Section 16(b) of the Exchange Act.
(d) No Violations. The execution, delivery and performance of this Agreement
by Golden State do not, and the consummation of the transactions contemplated
hereby by Golden State will not, constitute (A) a breach or violation of, or a
default under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument of
Golden State or to which Golden State (or any of its properties) is subject,
or enable any person to enjoin the Merger or the other transactions
contemplated hereby, (B) a breach or violation of, or a default under, the
certificate of incorporation or by-laws of Golden State or (C) a breach or
violation of, or a default under (or an event which with the giving of notice
or lapse of time or both would constitute a default under), or result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of Golden State under, any of the terms,
conditions or provisions of any note, bond, indenture, deed of trust, loan
agreement or other agreement, instrument or obligation to which Golden State
is a party, or by which any of its properties or assets may be bound or
affected; and the consummation of the transactions contemplated hereby will
not require Golden State to obtain any approval, consent or waiver under any
such law, rule, regulation, judgment, decree, order, governmental permit or
license or the approval, consent or waiver of any other party to any such
agreement, indenture or instrument, other than the required approvals,
consents and waivers of governmental authorities or other persons referred to
in Section 6.1(b), and such approvals, consents or waivers as are required
under federal and state securities laws in connection with the transactions
contemplated by this Agreement.
(e) Reports. As of their respective dates, neither the Annual Report on Form
10-K filed by Glendale Federal, as the predecessor of Golden State, with the
OTS relating to its fiscal year ended June 30, 1997 (including the audited
financial statements of Glendale Federal, as such predecessor, included
therein) nor the
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unaudited financial statements of Golden State as of September 30, 1997 and
for the three months then ended contained in the Quarterly Report on Form 10-Q
filed by Golden State with the SEC, and no other report filed by Glendale
Federal or Golden State subsequent to June 30, 1995, with the OTS, the SEC or
the FDIC contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. True and complete copies of all such reports filed
on or after June 30, 1995 have been made available to RedFed, and Golden State
shall provide RedFed with true and complete copies of all reports filed after
the date hereof promptly after such reports are filed. Each of the statements
of financial condition contained or incorporated by reference in the reports
referred to in this Section 3.4(e) (including in each case any related notes
and schedules) fairly presented or will fairly present, as the case may be,
the financial position of the entity or entities to which it relates as of its
date and each of the statements of operations, cash flows and changes in
stockholders' equity, contained or incorporated by reference in the reports
(including in each case any related notes and schedules), fairly presented or
will fairly present, as the case may be, the results of operations, cash
flows, and changes in stockholders' equity, of the entity or entities to which
it relates for the periods set forth therein, in each case in accordance with
generally accepted accounting principles or applicable regulatory accounting
principles and instructions consistently applied throughout the periods
involved, except as may be stated therein (and subject, in the case of
unaudited interim statements, to normal year-end audit adjustments that are
not material in amount or effect and to the lack of complete footnotes).
(f) Absence of Certain Changes or Events. Except as disclosed in the reports
referred to in Section 3.4(e) and except as contemplated by this Agreement or
disclosed in the Golden State Disclosure Letter, since June 30, 1997: (i)
Golden State has not incurred any liability, other than in the ordinary course
of its business consistent with past practice; (ii) Golden State has conducted
its business only in the ordinary and usual course of such business; and (iii)
there has not been any change in the financial condition, properties,
business, or results of operations of Golden State which, individually or in
the aggregate, has had or would reasonably be expected to have a material
adverse effect on Golden State, including its subsidiaries, taken as a whole.
(g) Taxes. All material federal, state, local, and foreign tax returns
required to be filed by or on behalf of Golden State have been timely filed or
requests for extensions have been timely filed, any such requested extensions
have been granted and have not expired, and all such filed returns are
complete and accurate in all material respects. All taxes shown on such
returns to be due have been paid in full or adequate provision for the payment
of any such taxes has been made in the financial statements of Golden State in
accordance with generally accepted accounting principles. There is no audit,
examination, deficiency assessment, or refund litigation currently pending
with respect to any taxes of Golden State. All taxes, interest, additions and
penalties due with respect to completed and settled examinations or concluded
litigation relating to Golden State have been paid in full or adequate
provision for the payment of has been made for any such taxes in the financial
statements of Golden State in accordance with generally accepted accounting
principles. No extensions or waivers of statutes of limitations have been
given by or requested with respect to any taxes of Golden State.
(h) Absence of Claims. There is no material pending claim, action or
proceeding against Golden State before any court or administrative agency,
nor, to the knowledge of Golden State, have any of the foregoing been
threatened, nor, to the knowledge of Golden State, is there any reasonable
basis therefor.
(i) Absence of Regulatory Actions. Neither Golden State nor Glendale Federal
is a party to any cease and desist order, written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, or has adopted any board resolutions
relating to the foregoing at the request of, any of the Government Regulators
nor has Golden State or Glendale Federal been advised by any Government
Regulator that it is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any such order, directive,
written agreement, memorandum of understanding, extraordinary supervisory
letter, commitment letter, board resolutions or similar undertaking. Golden
State is not aware of any facts or circumstances relating to Golden State or
Glendale Federal that have not been disclosed to RedFed that would cause any
of the Government Regulators or any other person or entity to fail to give any
of the approvals, consents or waivers referred to in Section 6.1(b).
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(j) Compliance with Law. Each of Golden State and Glendale Federal:
(i) has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations
with, federal, state, local and foreign governmental or regulatory bodies
that are required in order to permit it to carry on its business as it is
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the knowledge of
Golden State and Glendale Federal, no suspension or cancellation of any of
them is threatened; and
(ii) is in material compliance in the conduct of its business with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to
the employees conducting such businesses, including, without limitation,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act, the Americans With
Disabilities Act, and all other fair lending laws or other laws relating to
discrimination, and the Bank Secrecy Act.
(k) Fees. Golden State has not incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees in connection
with the transaction provided for in this Agreement that could in any manner
be asserted to be payable by RedFed.
(l) Books and Records. The books and records of Golden State have been
maintained in accordance with all applicable legal, regulatory and accounting
requirements and reflect in all material respects the substance of the events
and transactions that are required to be included therein.
(m) Disclosure. The written statements, certificates, schedules, lists and
other written information furnished by or on behalf of Golden State to RedFed
pursuant to this Agreement, including all information supplied in connection
with the preparation of the Form S-4 and the Proxy Statement, do not contain
any untrue statement of a material fact or, taken as a whole, omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE IV.
CONDUCT PENDING MERGER
Section 4.1. Conduct of Business Prior to Effective Time. Except as required
by applicable law, rule or regulation, as expressly provided in this Agreement
or as agreed to in writing by Golden State, RedFed shall (i) conduct its
business and maintain its books and records in the usual, regular and ordinary
course, and in a manner consistent with past practice, (ii) use all
commercially reasonable efforts to maintain and preserve intact its business
organization, properties, leases, and advantageous business relationships and
to retain the services of its officers and employees, (iii) take no action
which could reasonably be expected to affect adversely or delay the ability of
RedFed or Golden State to obtain any necessary approvals, consents or waivers
of any governmental authority or other person required for the transactions
contemplated hereby or to perform its covenants and agreements on a timely
basis under this Agreement, and (iv) take no action that could reasonably be
expected to have a material adverse effect on RedFed.
Section 4.2. Forbearance by RedFed. During the period from the date of this
Agreement to the Effective Time, and except as contemplated by this Agreement
or as set forth in the RedFed Disclosure Letter, RedFed shall not, without the
prior written consent of Golden State (which consent shall not be unreasonably
withheld or delayed), do any of the following:
(a) incur any indebtedness for borrowed money or assume, guarantee, endorse
or otherwise as an accommodation become responsible for the obligations of any
other person other than in the ordinary course of business consistent with
past practice and, in any event, subject to the following limitations: (i)
RedFed will not enter into new borrowings, or accept brokered certificates of
deposits with maturities greater than six months, except that, after
consultation with Golden State, it may obtain up to $90,000,000 of Federal
Home Loan Bank advances with maturities of up to two years, of which no more
than $60,000,000 may have maturities exceeding one year;
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(b) issue any shares of its capital stock, except pursuant to options
outstanding as of the date hereof to purchase shares of RedFed Common Stock
and plans in existence as of the date hereof that, in each case, are listed in
the RedFed Disclosure Letter; adjust, split, combine or reclassify any shares
of capital stock; declare or pay any dividends, or make any other distribution
on, or directly or indirectly redeem, purchase or otherwise acquire, any
shares of its capital stock, or any securities or obligations convertible into
or exchangeable for any shares of its capital stock; or grant any stock
appreciation rights or grant, sell or issue to any individual, corporation or
other person any right or option to acquire, or securities evidencing a right
to convert into or acquire, any shares of its capital stock;
(c) other than in the ordinary course of business consistent with past
practice and with the other terms, covenants and conditions of this Agreement,
sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties, leases or assets to any person (it being agreed that sales in
accordance with RedFed's past practice of real estate acquired through
foreclosure or by deed or other transfer in lieu of foreclosure shall be
considered to be in the ordinary course of business), or cancel, release or
assign any indebtedness of any such person, except pursuant to contracts or
agreements requiring the same that are in force at the date of this Agreement
and have been disclosed to Golden State in the RedFed Disclosure Letter;
(d) hire any employee above the level of Assistant Vice President (other
than such replacement employees, if any, as RedFed determines to be necessary
to conduct its business); enter into, renew or amend any employment agreement
with any employee or director, increase in any manner the compensation or
fringe benefits of any of its employees or directors, or create or institute,
or make any payments pursuant to, any severance plan or package, or pay any
pension or retirement allowance, in each case not required by any existing
plan or agreement, to any such employees or directors, or become a party to,
amend, commit itself to, or establish, any trust or account related to, any
Employee Agreement (as defined in Section 3.3(n)), with or for the benefit of
any employee, other than general increases in compensation in the ordinary
course of business consistent with past practice; or accelerate the vesting of
any stock options or other compensation or benefit or declare or pay any bonus
(except that RedFed shall be permitted to pay annual bonuses in accordance
with RedFed's existing compensation policies and bonus plans disclosed to
Golden State in the RedFed Disclosure Letter);
(e) other than in the ordinary course of business consistent with past
practice (it being agreed that credit bids for collateral shall be considered
to be in the ordinary course of business), make any investment in any person
or entity, whether by purchase of stock or other securities or contributions
to the capital of such entity, make any property transfers to any person or
entity, or purchase any property or assets of any person or entity;
(f) enter into or renew any contract or agreement that requires payment by
RedFed of more than $50,000 in any year, that is of more than one year in
duration, or that is not cancelable without penalty on not more than sixty
days notice (except for any contract to sell real estate by foreclosure or by
deed or other transfer in lieu of foreclosure entered into in the ordinary
course of business) or amend, modify or terminate any material leases or
contracts of RedFed;
(g) enter into any settlement or compromise of any material claim, action or
proceeding involving any liability of RedFed for money damages that would have
a material adverse effect or that would involve material restrictions upon the
operations of any RedFed subsidiary, or waive or release any material rights
or claims; provided, that Golden State may not withhold its consent to any
such settlement unless it concurrently agrees in writing to indemnify and hold
RedFed harmless from and against any liability, and subsequently incurred
litigation expenses, in connection with such matter that exceeds in the
aggregate the amount for which RedFed had proposed to settle such matter and
that would not have been incurred but for Golden State's withholding of such
consent;
(h) except in the ordinary course of business, make, renegotiate, renew,
increase, modify, extend or purchase any loan, lease, advance, credit
enhancement or other extension of credit, or make any commitment in respect of
any of the foregoing;
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(i) change any of its methods of accounting as the same were in effect at
December 31, 1996, except as required by changes in generally accepted
accounting principles, as concurred in by the independent auditors of RedFed,
or as required by regulatory accounting principles or other regulatory
requirements;
(j) enter into any new activities or lines of business, cease to conduct any
material activities or lines of business that it conducts on the date hereof,
or conduct any material business activity not consistent with past practice;
(k) amend its certificate of incorporation or by-laws or adopt any plan of
liquidation, consolidation, merger or reorganization whether formal or
informal;
(l) make any capital expenditure other than in the ordinary course of
business or as necessary to maintain its assets, and in any event, whether or
not in the ordinary course of business, not exceeding $30,000;
(m) take any action that would prevent or impede the Merger from qualifying
as a "reorganization" within the meaning of Section 368 of the Code; or
(n) (i) enter into any Derivatives Contracts or purchase any of the types of
securities referred to in Section 3.3(y), except that RedFed may purchase or
acquire mortgage-backed securities rated "AA" or a more favorable rating
category by Standard & Poor's, or comparable rating categories of other
nationally recognized investment rating firms, so long as its aggregate
investment in mortgage-backed securities does not exceed $80 million; or (ii)
purchase or acquire municipal securities.
(o) agree, or make any commitment, to take any of the actions prohibited by
this Section 4.2.
ARTICLE V.
COVENANTS
Section 5.1. Acquisition Proposals. RedFed agrees that neither it nor any of
its officers or directors shall, and RedFed shall use its best efforts to
cause its employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or
any of its subsidiaries) not to, directly or indirectly, initiate, solicit, or
encourage any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to stockholders of RedFed) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the consolidated assets,
deposits or any equity securities of, RedFed (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or, except to the extent
legally required for compliance by the directors of RedFed with their
fiduciary duties, in the written opinion of outside legal counsel, with
respect to an unsolicited offer from a third party, engage in any negotiations
concerning or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
RedFed shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties (other than Golden
State) conducted heretofore with respect to any of the foregoing. RedFed will
take the necessary steps to inform promptly the appropriate individuals or
entities referred to in the first sentence hereof of the obligations
undertaken in this Section 5.1. RedFed agrees that it will notify Golden State
immediately if any such inquiries, proposals or offers are received by, any
such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with RedFed. RedFed also agrees that
it shall promptly request each person (other than Golden State) that has
heretofore executed a confidentiality or standstill agreement in connection
with its consideration of acquiring RedFed to return all confidential
information heretofore furnished to such person by or on behalf of RedFed and
enforce any such confidentiality or standstill agreements.
Section 5.2. Certain Policies of RedFed. At the request of Golden State,
RedFed shall, to the extent consistent with generally accepted accounting
principles, modify its loan, litigation or real estate valuation
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policies and practices (including loan classifications and levels of reserves)
after the date on which all required regulatory approvals are received for
completion of the Merger and not earlier than 15 days prior to nor later than
the day prior to, the Effective Time so as to be consistent with those of
Golden State, taking into account Golden State's intended operations after the
closing; provided, however, that RedFed shall not be required to take such
action unless Golden State agrees in writing that all conditions to Golden
State's obligation to consummate the Merger have been satisfied and that
Golden State will complete the Merger. RedFed's representations, warranties
and covenants contained in this Agreement shall not be deemed to be untrue or
breached in any respect for any purpose as a consequence of any modifications
or changes undertaken solely on account of this Section 5.2.
Section 5.3. Employees. (a) As soon as practicable after the date hereof
and, in any event, prior to the Closing Date, Golden State shall evaluate the
employees and existing operations of RedFed to determine which positions in
and employees of RedFed will be required for the continuing operations of the
Surviving Corporation and Glendale Federal as of and after the Effective Time.
RedFed shall cooperate in good faith with Golden State in assisting Golden
State's investigation by, among other things, making available to Golden State
employee evaluations and other records to the extent permitted by law, and
facilitating interviews with RedFed employees.
(b) As soon as practicable after the date hereof, Golden State shall
identify to RedFed those employees of RedFed to whom Golden State desires to
offer employment as of and after the Effective Time. Those employees whose
positions will be eliminated and to whom Golden State determines not to offer
employment shall be given notice prior to the Closing Date by RedFed and
Golden State of their termination and the effective dates thereof. Golden
State shall endeavor in good faith to identify employment opportunities for
any such employees with Golden State. Such efforts shall include posting of
employment opportunities with Golden State and interviewing any such employee
of RedFed who desires to be considered for such a position with Golden State.
(c) It is the intention of Golden State to train all employees of RedFed
that Golden State expects to employ with Golden State in Golden State's
procedures prior to the Closing Date. RedFed shall cooperate in good faith
with Golden State in facilitating such training, including, without limitation
by making such employees available for such training for reasonable periods
during normal business hours.
(d) Employees accepting employment with Golden State will not receive a
guarantee of any minimum period of employment, it being the intention and
understanding of the parties hereto that such employment shall be solely at
the will of Golden State on the same basis as all other employees of Golden
State who do not have contractual rights of employment; provided, that
notwithstanding anything that may appear to be to the contrary herein, no
provision shall be deemed to terminate or modify any provision of any
employment, severance or similar agreement of any person with RedFed or any of
its subsidiaries. Employees who are employed by Golden State after the
Effective Time will receive credit for their prior service with RedFed for
purposes of eligibility and vesting only, and not for purposes of determining
the amount of benefits payable, under Golden State's existing employee benefit
plans and programs, except that such employees shall receive prior service
credit for purposes of determining (i) eligibility for annual amounts of
permitted vacation time, (ii) numbers of accrued sick days, and (iii) amounts
payable as severance payments under the applicable severance plan of Golden
State in the case of employees of RedFed who remain employed by Golden State
for more than one year following the Effective Time.
(e) Full time and part time employees of RedFed on the date hereof who are
involuntarily terminated, other than for cause, on or within one year after
the Closing Date, including those employees of RedFed who are terminated as of
a date prior to the Effective Time pursuant to paragraph (b) above, shall be
eligible for benefits to the extent and as provided under the RedFed Severance
Plan as in effect at the date hereof.
(f) This Agreement is intended to result solely in the acquisition of RedFed
by Golden State and is not intended to confer any continuing rights to
employment on the part of the employees of RedFed after the Effective Time.
RedFed shall make no representations to its employees regarding employment by
Golden State. RedFed shall remain solely responsible for its employees,
representatives and agents during their employment
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with RedFed prior to the Effective Time and with respect to all matters
arising from such employment with RedFed during such period, including,
without limitation, the payment of any accrued vacation pay, sick pay,
severance payments or other payments to which such employees may be entitled
(it being acknowledged that the Surviving Corporation, or Glendale Federal, as
applicable, shall succeed to such obligations by operation of law upon, but
only in the event of, the completion of the Merger or the Bank Merger, as
applicable). Such payments and RedFed's obligations to make such payments
shall be fully and fairly reflected in RedFed's financial statements prior to
and as of the Effective Time to the extent required by generally accepted
accounting principles.
(g) RedFed shall not complete the termination and liquidation of the
Retirement Plan for Employees of Redlands Federal Bank, and shall take such
actions as may be necessary or appropriate to enable Golden State to become
the sponsor of such plan as of the Effective Time. As of the Effective Time
Golden State shall assume such plan and all of RedFed's obligations in
connection therewith. Golden State and RedFed acknowledge that prior to the
proposed termination and liquidation of such plan, benefits ceased to accrue
thereunder, and that nothing in this Section 5.3(g) is intended to require the
reinstatement of benefit accruals under such plan.
Section 5.4. Access to Information. (a) Upon reasonable notice during the
period prior to the Effective Time, each party hereto shall afford the other
parties access to the officers, employees, accountants, counsel and other
representatives of such party, during normal business hours (provided such
access does not unreasonably interfere with the operations of Glendale Federal
or Redlands Federal) to all its properties, books, contracts, commitments,
records, officers, employees, accountants, counsel and other representatives
and, during such period, such party shall make available to each other party
(i) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
federal or state securities laws or federal or state banking laws (other than
any reports or documents which such party is not permitted to disclose under
applicable law) and (ii) all other information concerning its business,
properties and personnel as a party hereto may reasonably request. The parties
hereto shall not, however, be required to provide access to or to disclose
information to the extent that such access or disclosure would violate the
rights of such party's customers, jeopardize any attorney-client privilege or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty
or binding agreement entered into prior to the date of this Agreement;
provided, that such party shall make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply that will provide all information to the other party that may
be relevant to its assessment of its obligation to complete the Merger. The
parties hereto will hold all such information in confidence in accordance with
the provisions of the confidentiality agreements, dated November 13, 1997,
between Golden State and RedFed (the "Confidentiality Agreements").
(b) No investigation by any party hereto shall affect the representations,
warranties, covenants or agreements of the other parties hereto.
(c) RedFed shall promptly after the end of each month inform Golden State of
any new classification of its assets (as referred to in Section 3.3(s)) that
is determined or modified at any time after October 31, 1997 and of any
changes in RedFed's allowance for loan and lease losses from the prior month-
end, including an explanation of the reasons therefor.
Section 5.5. Regulatory Matters. (a) The parties hereto shall cooperate with
each other and use their best efforts promptly to prepare and file within
thirty days of the date hereof all necessary applications, and thereafter to
effect all documentation, notices, petitions and filings, and to obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and governmental authorities which are necessary or
advisable to consummate the transactions contemplated by this Agreement.
RedFed and Golden State shall have the right to review in advance, and to the
extent practicable each will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all of the
information relating to RedFed or Golden State, as the case may be, and any of
their respective subsidiaries, which appears in any filing made with, or
written materials submitted to, any third party or any governmental authority
in connection with the transactions contemplated by this Agreement. The
parties hereto agree that they will consult with each other with respect to
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the obtaining of all permits, consents, approvals and authorizations of all
third parties and governmental authorities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party will
keep the other apprised of the status of matters relating to completion of the
transactions contemplated herein.
(b) Golden State and RedFed shall, upon request, furnish each other with all
information concerning themselves, their subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or
advisable in connection with the Form S-4 and the Proxy Statement (each as
defined in Section 5.8) or any other statement, filing, notice or application
made by or on behalf of Golden State or RedFed to any governmental authority
in connection with the Merger and the other transactions contemplated by this
Agreement.
Section 5.6. Other Actions. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take
promptly, or cause to be taken promptly, all actions and to do promptly, or
cause to be done promptly, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable, including
using efforts to obtain all necessary actions or non-actions, extensions,
waivers, consents and approvals set forth in Section 5.6 of the RedFed
Disclosure Letter and from all applicable governmental entities, effecting all
necessary registrations, applications and filings (including, without
limitation, filings under federal and any applicable state securities laws)
and obtaining any required contractual consents and approvals (which shall be
the obligation of the party hereto bound by the contract in question), and
cause the Closing of the transactions contemplated hereby to occur as soon as
practicable after the receipt of all approvals, consents and waivers required
by Section 6.1(b). Without limiting the generality of the foregoing, Golden
State shall take such action as may be necessary to incorporate Merger Sub
under the DGCL, to cause Merger Sub to become a party signatory to this
Agreement and to perform its obligations under this Agreement in a timely
manner. In addition, each of Golden State and RedFed shall appoint a person
who shall be responsible for coordinating with the other party in order to
consider and respond to any requests for consents hereunder and otherwise to
complete the transactions contemplated hereby as soon as practicable.
Section 5.7. Publicity. The initial press release announcing this Agreement
shall be mutually agreed and, thereafter, subject to the provisions of
applicable law, RedFed and Golden State shall mutually agree with each other
prior to issuing any press releases or public statements with respect to the
other or the transactions contemplated hereby and in making any filings with
any governmental entity or with any national securities exchange with respect
thereto.
Section 5.8. Preparation of Form S-4 and Proxy Statement. Golden State and
RedFed, acting jointly, shall promptly prepare and file with the SEC an
appropriate form of proxy statement (the "Proxy Statement") in compliance with
the requirements of the Exchange Act and a registration statement under the
Securities Act on Form S-4 (the "Form S-4") in which the Proxy Statement will
be included as a prospectus. Each of Golden State and RedFed shall use all
reasonable efforts to have the Proxy Statement authorized for use pursuant to
the Exchange Act and the Form S-4 declared effective under the Securities Act
as promptly as practicable after such filing. Golden State shall also take any
such action (other than qualifying to do business in any jurisdiction in which
it is now not so qualified) as may be required to be taken under any
applicable state securities laws in connection with the issuance of Golden
State Common Stock in the Merger and RedFed shall furnish all information
concerning RedFed and the holders of RedFed Common Stock as may be reasonably
requested in connection with any such action.
Section 5.9. Letter of RedFed Accountants. RedFed shall use its best efforts
to cause to be delivered to Golden State a letter of RedFed's independent
auditors, dated as of a date within two business days before the date on which
the Form S-4 shall become effective and addressed to Golden State, and a
written reconfirmation of such letter dated as of the Closing Date, in each
case in form and substance reasonably satisfactory to Golden State, and in
scope and substance consistent with applicable professional standards for
letters delivered by independent public accountants in connection with
registration statements similar to Form S-4.
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Section 5.10. Letter of Golden State Accountants. Golden State shall use its
best efforts to cause to be delivered to RedFed a letter of Golden State's
independent auditors, dated as of a date within two business days before the
date on which the Form S-4 shall become effective and addressed to RedFed, and
a written reconfirmation of such letter dated as of the Closing Date, in each
case in the form and substance reasonably satisfactory to RedFed, and in scope
and substance consistent with applicable professional standards for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4.
Section 5.11. Stockholder Action. RedFed shall take all action necessary, in
accordance with applicable law and regulations, and its certificate of
incorporation and by-laws, to obtain, as promptly as practicable, approval of
this Agreement and the transactions contemplated hereby by the vote of
stockholders of RedFed required under applicable law and regulations. Except
to the extent legally required for the discharge by such board of directors of
its fiduciary duties, in the written opinion of outside legal counsel, the
Board of Directors of RedFed shall recommend to the holders of the RedFed
Common Stock that they vote in favor of and approve the Merger and adopt and
approve this Agreement and the transactions contemplated hereby.
Section 5.12. Notification of Certain Matters. Each party hereto shall give
prompt notice to the other of: (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by them subsequent to the date of this
Agreement and prior to the Effective Time, under any contract material to the
financial condition, properties, businesses or results of operations of such
party and its subsidiaries taken as a whole to which either of them is a party
or is subject; (b) any material adverse change in the financial condition,
properties, business or results of operations of such party and its
subsidiaries taken as a whole or the occurrence of any event which, so far as
reasonably can be foreseen at the time of its occurrence, is reasonably likely
to result in any such change; and (c) any event or occurrence which may
adversely affect the likelihood that a condition set forth in Article VI will
be satisfied. Each party hereto shall give prompt notice to the other of any
notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by this Agreement.
Section 5.13. Tax Matters. RedFed shall keep Golden State apprised of its
progress in the preparation of its tax returns and shall provide to Golden
State copies of draft returns prior to filing. In addition, RedFed agrees that
it shall consult with Golden State prior to making any significant decisions
with respect to tax reporting or other tax matters, in order to ensure to the
extent possible that such decisions are consistent with the consummation of
the transactions contemplated hereby.
Section 5.14. Updated Disclosure Letters. Each party hereto shall provide
the other party hereto with an Updated Disclosure Letter within two days prior
to the Effective Date; provided, however, that no such Updated Disclosure
Letter shall be deemed to alter any party's representations and warranties or
other obligations herein for purposes of Articles VI or VII hereof.
Section 5.15. Stock Exchange Listing. Golden State shall use all reasonable
efforts to cause the shares of Golden State Common Stock to be issued in the
Merger to be approved for listing on the NYSE, subject to official notice of
issuance, prior to the Effective Date.
Section 5.16. Bank Merger. The parties agree to use their reasonable efforts
between the date of this Agreement and the Closing to take all actions
necessary or desirable, including the filing of any regulatory applications,
so that the Bank Merger will occur as soon as possible after the Effective
Time.
Section 5.17. Indemnification of Directors and Officers. Golden State agrees
that all rights to indemnification or exculpation now existing in favor of the
directors, officers, employees and agents of RedFed and its subsidiaries,
whether acting in such capacity or as fiduciary of any such employee benefit
plan of RedFed or its subsidiaries which provides for such indemnification, as
provided in their respective certificates of incorporation, charter, by-laws
or similar charter documents or any employee benefit plan of RedFed or its
subsidiaries or any agreement disclosed in Section 3.3(x) of the RedFed
Disclosure Letter in effect as of the date
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hereof with respect to matters occurring prior to the Effective Time,
including matters relating to the negotiation, execution, delivery and
performance of this Agreement, shall survive the Merger and shall continue in
full force and effect at all times thereafter. Golden State further agrees (i)
that to the full extent permitted by applicable law, regulations and the
certificate of incorporation and by-laws of Golden State as in effect on the
date hereof, it shall indemnify, defend and hold harmless each person who was
an officer or director of RedFed or its subsidiaries prior to the Effective
Time for any claim or loss arising out of their actions while serving as such
director or officer, including any acts relating to this Agreement, and shall
pay, as and when incurred, the expenses, including attorneys' fees, of such
individual in advance of the final resolution of any claim, provided that such
individuals shall first, to the extent required by law, execute an undertaking
to return such advances in the event it is finally determined by appropriate
judicial proceedings that such indemnification is not permitted under
applicable law; and (ii) to cause each of the persons referred to in the
preceding clause (i) to be covered for a period of six years from the
Effective Time by the directors' and officers' primary and excess liability
insurance policies maintained by RedFed; provided, that Golden State may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions that are not less advantageous than such
policies with respect to acts or omissions occurring prior to the Effective
Time committed by such officers and directors in their capacity as such;
provided, however, that in no event shall Golden State be required to expend
more than 200% of the current annual amount expended by RedFed to maintain or
procure insurance coverage pursuant hereto. In the event Golden State, RedFed
or any of their respective successors or assigns (i) shall consolidate with or
merge into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) shall transfer
or convey all or substantially all of its properties and assets to any person,
then, and in each such case, proper provision shall be made, to the extent
necessary, so that the successors and assigns of Golden State or RedFed,
respectively, shall assume the obligation set forth in this Section 5.17. The
provisions of this Section 5.17 are intended to be for the benefit of, and
shall be enforceable by, each person entitled to indemnification as provided
herein and his or her heirs and representatives.
Section 5.18. RedFed ESOP. Prior to the Effective Time, RedFed shall use its
best efforts to cause the following transactions (the "ESOP Transactions") to
occur with respect to the RedFed Employee Stock Ownership Plan ("the ESOP"),
subject to such governmental approvals, if any, as the fiduciaries of the ESOP
and Golden State deem to be necessary or appropriate: (i) in repayment of the
ESOP loan, the ESOP trustee shall transfer to RedFed the number of unallocated
shares of RedFed Common Stock held by the ESOP that are equal in value to the
then outstanding amount of principal and interest under the ESOP loan; (ii)
the ESOP's unallocated shares that are transferred to RedFed in exchange for
cancellation of the ESOP loan shall be canceled; (iii) the ESOP shall be
terminated and, in accordance with the provisions of the ESOP and its related
trust, the balance of the assets held in the trust, including any unallocated
shares, shall be allocated and thereafter distributed to the ESOP
participants.
Section 5.19. Litigation Tracking Warrants. In the event that Golden State
elects to complete the proposed distribution of Litigation Tracking Warrants
("LTWs") described in Golden State's Current Report on Form 8-K dated October
28, 1997 prior to the Closing, the Closing Date shall be set to occur on a
date such that the Pricing Period shall commence at least 15 days after the
distribution date for the LTWs, and the Closing shall take place no more than
60 days after such distribution date.
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ARTICLE VI.
CONDITIONS TO CONSUMMATION
Section 6.1. Conditions to All Parties' Obligations. The respective
obligations of Golden State and RedFed to effect the Merger shall be subject
to the satisfaction or, to the extent permitted by applicable law, waiver
prior to the Effective Time of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have been
approved by the requisite vote of the stockholders of RedFed in accordance
with applicable law and its certificate of incorporation and by-laws.
(b) All necessary regulatory approvals, consents and waivers with respect to
this Agreement and the transactions contemplated hereby shall have been
received and shall remain in full force and effect, and all applicable
statutory waiting periods shall have expired; provided, however, that no
approval, consent or waiver referred to in this Section 6.1(b) shall be deemed
to have been received if it shall include any condition or requirement that,
individually or in the aggregate, would so materially and adversely impact the
economic and business benefits of the transactions contemplated hereby to
Golden State as to render it inadvisable in the judgment of Golden State to
proceed with the transactions contemplated hereby.
(c) Any other requirements prescribed by law which are necessary to the
consummation of the transactions contemplated by this Agreement shall have
been satisfied.
(d) No party hereto shall be subject to any order, decree or injunction of a
court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the Merger or any other transaction contemplated by this
Agreement, and no litigation or proceeding shall be pending against Golden
State or RedFed brought by any governmental agency seeking to prevent
consummation of the transactions contemplated hereby.
(e) No statute, rule or regulation shall have been enacted, promulgated,
interpreted, applied or enforced by any governmental authority which
prohibits, or makes illegal consummation of the Merger, the Bank Merger or any
other transaction contemplated by this Agreement.
(f) The shares of Golden State Common Stock issuable to RedFed stockholders
pursuant to this Agreement upon the completion of the Merger shall have been
authorized for listing on the NYSE upon official notice of issuance.
(g) The Form S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop
order.
(h) Each of the letters from independent accountants, and written
confirmations thereof, referred to in Sections 5.9 and 5.10 shall have been
received at the times and in the form described in such Sections.
Section 6.2. Conditions to Obligations of Golden State. The obligations of
Golden State to effect the Merger shall be subject to the satisfaction prior
to the Effective Time of the following additional conditions, any or all of
which conditions may be waived by Golden State:
(a) Each of the representations and warranties of RedFed set forth in this
Agreement shall have been true and correct in all material respects as of the
date hereof and as of the Closing Date as if made on such date (or on the date
when made in the case of any representation or warranty which specifically
relates to an earlier date); RedFed shall have performed, in all material
respects, each of its covenants and agreements contained in this Agreement;
there shall have been no material adverse change in the financial condition,
business or assets of RedFed and its subsidiaries taken as a whole since
December 31, 1996; and Golden State shall have received a certificate signed
by the chief executive officer and the chief financial officer of RedFed,
dated the Closing Date, to the foregoing effect.
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(b) Golden State shall have received the opinion of Mayer, Brown & Platt,
counsel to Golden State, dated the Closing Date, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, that Golden State, Merger Sub and
RedFed will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, and that no gain or loss will be recognized by
Golden State, Merger Sub or RedFed as a result of the Merger. In rendering
such opinion, such counsel may require and rely upon representations contained
in certificates of RedFed, Golden State and stockholders of RedFed.
(c) Golden State shall have received the Updated RedFed Disclosure Letter
from RedFed required by Section 5.14.
(d) Golden State shall have received satisfactory evidence from RedFed that
(i) the fiduciaries of the ESOP have determined that the ESOP Transactions are
prudent and in the best interests of the participants and beneficiaries of the
ESOP and (ii) the ESOP Transactions have been completed.
Section 6.3. Conditions to Obligations of RedFed. The obligation of RedFed
to effect the Merger shall be subject to the satisfaction prior to the
Effective Time of the following additional conditions, any or all of which
conditions may be waived by RedFed:
(a) Each of the representations and warranties of Golden State set forth in
this Agreement shall have been true and correct in all material respects as of
the date hereof and as of the Closing Date as if made on such date (or on the
date when made in the case of any representation or warranty which
specifically relates to an earlier date); Golden State shall have performed,
in all material respects, each of its covenants and agreements contained in
this Agreement; there shall have been no material adverse change in the
financial condition, business or assets of Golden State and its subsidiaries
taken as a whole since June 30, 1997. RedFed shall have received a certificate
signed by the chief executive officer and the chief financial officer of
Golden State, dated the Effective Date, to the foregoing effect.
(b) RedFed shall have received the opinion of Gibson, Dunn & Crutcher,
counsel to RedFed, dated the Closing Date, to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, that Golden State, Merger Sub and
RedFed will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, that no gain or loss will be recognized by holders
of RedFed Common Stock upon the receipt of Golden State Common Stock in the
Merger (except with respect to cash received in lieu of the issuance of
fractional shares) and that no gain or loss will be recognized by Golden
State, Merger Sub or RedFed as a result of the Merger. In rendering such
opinion, such counsel may require and rely upon representations contained in
certificates of RedFed, Golden State and stockholders of RedFed.
(c) RedFed shall have received the Updated Golden State Disclosure Letter
required by Section 5.14.
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<PAGE>
ARTICLE VII.
TERMINATION
Section 7.1. Termination. This Agreement may be terminated, and the Merger
abandoned, prior to the Effective Time, either before or after its approval by
the stockholders of RedFed:
(a) by the mutual consent of Golden State and RedFed;
(b) by Golden State or RedFed, if its Board of Directors so determines by
vote of a majority of the members thereof, in the event of (i) the failure of
the stockholders of RedFed to approve this Agreement, or (ii) a material
breach by the other party hereto of any representation, warranty, covenant or
agreement contained herein which is not cured or not curable within 45 days
after written notice of such breach is given to the party committing such
breach by the other party; provided, however, that neither party shall have
the right to terminate this Agreement pursuant to clause (ii) of this Section
7.1(b) unless any breach of representation or warranty asserted as the basis
for such termination, together with all other such breaches, would entitle the
party receiving such representation or warranty under Section 6.2(a) (in the
case of a breach of representation or warranty by RedFed) or Section 6.3(a)
(in the case of a breach of representation or warranty by Golden State) not to
consummate the transactions contemplated hereby;
(c) by Golden State or RedFed by written notice to the other party if either
(i) the condition set forth in Section 6.1(b) shall not have been satisfied by
the Termination Date (as defined below); or (ii) any governmental authority of
competent jurisdiction shall have issued a final, nonappealable order
enjoining or otherwise prohibiting consummation of the transactions
contemplated by this Agreement;
(d) by Golden State or RedFed, if its Board of Directors so determines by
vote of a majority of the members thereof, in the event that the Merger is not
consummated by the Termination Date, unless the failure to so consummate by
such time is due to the breach of any material representation, warranty or
covenant contained in this Agreement by the party seeking to terminate. The
term "Termination Date" shall mean July 31, 1998; provided, however, that
either party hereto shall have the right to extend such Termination Date for
up to an additional 45 days if, prior to the Termination Date, such party
notifies the other party in writing that such party believes that the
approvals, consents or waivers to be obtained by such party are imminent and a
reasonable factual basis for such party's belief that such approvals, consents
or waivers are imminent is set forth in such written notice;
(e) By Golden State if the RedFed Board shall have failed to make its
recommendation referred to in Section 5.11, withdrawn such recommendation or
modified or changed such recommendation in a manner adverse in any respect to
the interests of Golden State.
(f) By RedFed if Golden State shall have entered into a letter of intent or
a definitive agreement with respect to a merger, consolidation or similar
transaction involving, or any purchase of all or substantially all of the
consolidated assets, deposits or equity securities of, Golden State, pursuant
to which the stockholders of Golden State would hold less than 50% of the
common equity of the surviving entity immediately after the transaction.
Section 7.2. Effect of Termination.
(a) In the event of the termination of this Agreement by either Golden State
or RedFed, as provided above, this Agreement shall thereafter become void and,
subject to Section 7.2(b) and the last sentence of Section 8.2, 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.
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<PAGE>
(b) If (i) this Agreement shall be terminated (A) by Golden State pursuant
to Section 7.1(b) or Section 7.1(e) and, at the time of the occurrence of the
circumstances permitting such termination pursuant to such Section, there
shall exist an Acquisition Proposal with respect to RedFed or any of its
Subsidiaries, or (B) by RedFed pursuant to Section 7.1(b)(i) and, at the time
of the occurrence of the circumstance permitting termination pursuant to such
Section, there shall exist an Acquisition Proposal with respect to RedFed or
any of its Subsidiaries, and (ii) within 12 months after any such termination
RedFed or any of its Subsidiaries enters into a definitive agreement with
respect to an Acquisition Proposal, RedFed shall promptly, and in any event
within one business day after demand by Golden State, pay to Golden State a
termination fee equal to $7.5 million.
ARTICLE VIII.
OTHER MATTERS
Section 8.1. Certain Definitions; Interpretation.
(a) As used in this Agreement, the following terms shall have the meanings
indicated:
"knowledge" when used with respect to a party to this Agreement means the
actual knowledge of the executive officers of such party after appropriate
inquiry of the person or persons employed by such party who have
responsibility for the matter being referred to.
"person" includes an individual, corporation, partnership, limited
liability company, association, trust or unincorporated organization; and
"subsidiary," with respect to a person, means any other person controlled,
directly or indirectly, by such person.
(b) Except as the context may otherwise require, references in this
Agreement to "Golden State" and to "RedFed" include each of their respective
direct and indirect subsidiaries, including Glendale Federal and Redlands
Federal, respectively, and references to "Golden State" shall mean Glendale
Federal when used with reference to periods prior to the time that Glendale
Federal became a wholly-owned subsidiary of Golden State.
(c) When a reference is made in this Agreement to Articles or Sections such
reference shall be to an Article or a Section of this Agreement unless
otherwise indicated. The table of contents and headings, contained in this
Agreement are for ease of reference only and shall not affect the meaning or
interpretation of this Agreement. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation", whether or not so stated. Any singular term in
this Agreement shall be deemed to include the plural, and any plural term the
singular.
Section 8.2. Survival. Only those agreements and covenants of the parties
that are by their terms applicable in whole or in part after the Effective
Time shall survive the Effective Time. If this Agreement shall be terminated,
the agreements of the parties in the last sentence of Section 5.4(a) and in
Section 8.6 shall survive such termination.
Section 8.3. Waiver. Any provision of this Agreement may (to the extent
permitted by applicable law) be: (i) waived by the party benefited by the
provision, or (ii) as permitted by applicable law, amended or modified
(including the structure of the transaction), either prior to or after this
Agreement and the transactions contemplated hereby are approved by the
stockholders of RedFed; provided, that any such waiver, amendment or
modification shall be effective only if given or made by an agreement in
writing between the parties hereto 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.
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<PAGE>
Section 8.5. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of California, except to
the extent the laws of the State of Delaware (as the state of incorporation of
both parties hereto) shall be deemed controlling pursuant to the conflict of
laws provisions and principles of California law.
Section 8.6. Expenses. Each party hereto will pay all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby,
it being agreed that all regulatory application fees shall be expenses of
Golden State and that the costs of printing and mailing the Form S-4,
including the Proxy Statement, shall be borne equally by Golden State and
RedFed.
Section 8.7. Notices. All notices, requests, acknowledgments and other
communications hereunder to a party, or changes to this notice provision,
shall be in writing and shall be deemed to have been duly given when delivered
by hand or private courier, or when transmitted by telecopy or telegram to
such party at its address set forth below or such other address as such party
may specify by notice to the other party hereto.
If to Golden State:
Golden State Bancorp Inc.
414 North Central Avenue
Glendale, California 91203
Attention: Richard A. Fink
Vice Chairman
Facsimile: (818) 409-3151
With a copy to:
Mayer, Brown & Platt
350 South Grand Avenue
25th Floor
Los Angeles, California 90071
Attention: James R. Walther, Esq.
Facsimile: (213) 625-0248
If to RedFed:
RedFed Bancorp Inc.
300 East State Street
Redlands, California 92373
Attention: Anne Bacon
President and Chief Executive Officer
Facsimile: (909) 798-4495
With a copy to:
Gibson, Dunn & Crutcher
One Montgomery Street
Telesis Tower
San Francisco, CA 94104-4505
Attention: Todd H. Baker
Facsimile: (415) 986-5309
Section 8.8. Entire Agreement; No Third Party Beneficiaries. This Agreement,
including the Disclosure Letters referred to herein, and the Confidentiality
Agreements referenced in Section 5.4(a), represent the entire agreement and
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersede any and all other oral or written agreements
heretofore made. Nothing in this Agreement, other than
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<PAGE>
the provisions of Section 5.17, is intended to confer upon any person other
than Golden State and RedFed any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 8.9. Parties Bound; Assignment. All terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted successors and assigns. This Agreement
may not be assigned by any party hereto without the written prior consent of
the other parties hereto.
Section 8.10. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or any
circumstance, is invalid or unenforceable, the remainder of this Agreement and
the application of such provision to other persons or circumstances shall not
be affected by such invalidity or unenforceability, nor shall such invalidity
or unenforceability affect the validity or enforceability of such provision,
or the application thereof, in any other jurisdiction.
Section 8.11. Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
<TABLE>
<S> <C>
GOLDEN STATE BANCORP INC. REDFED BANCORP INC.
By: /s/ Richard A. Fink By: /s/ Anne Bacon
___________________________________________ ___________________________________________
</TABLE>
<TABLE>
<S> <C>
Richard A. Fink Anne Bacon
Vice Chairman President and Chief
Executive Officer
</TABLE>
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<PAGE>
APPENDIX B
[LETTERHEAD OF NATIONSBANC MONTGOMERY SECURITIES, INC.]
November 30, 1997
Board of Directors
RedFed Bancorp, Inc.
300 East State Street
Redlands, CA 92373
Gentlemen:
We understand that RedFed Bancorp, Inc., a Delaware corporation ("RedFed"),
and Golden State Bancorp Inc., a Delaware corporation ("GSB"), propose to
enter into an Agreement and Plan of Reorganization to be dated as of November
30, 1997 (the "Merger Agreement"), pursuant to which RedFed will be merged
with and into GSB, which will be the surviving entity (the "Merger"). Pursuant
to the Merger, as more fully described in the November 30, 1997 draft of the
Merger Agreement provided to us by management of RedFed and as further
described to us by management of RedFed, we understand that each outstanding
share of RedFed common stock, $0.01 par value per share ("RedFed Common
Stock"), will be converted into that number of shares of GSB Common Stock
("GSB Common Stock") that equals the quotient derived by dividing (A) $20.75
by (B) the unweighted arithmetic average of the daily closing prices of GSB
Common Stock on the New York Stock Exchange for the ten trading days
immediately preceding the date that is two business days prior to the closing
date of the Merger (the "Consideration"). The terms and conditions of the
Merger are set forth in more detail in the Merger Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the stockholders of RedFed pursuant to the
Merger is fair to such stockholders from a financial point of view, as of the
date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to RedFed and
GSB, including the consolidated financial statements for recent years and
interim periods to September 30, 1997, and certain other relevant financial
and operating data relating to RedFed and GSB made available to us from
published sources and, in the case of RedFed, from the internal records of
RedFed; (ii) reviewed the draft Merger Agreement; (iii) reviewed certain
publicly available information concerning the trading of, and the trading
market for, RedFed Common Stock and GSB Common Stock; (iv) compared RedFed and
GSB from a financial point of view with certain other companies in the thrift
industry which we deemed to be relevant; (v) considererd the financial terms,
to the extent publicly available, of selected recent business combinations of
companies in the thrift industry which we deemed to be comparable, in whole or
in part, to the Merger; (vi) reviewed and discussed with representatives of
the management of RedFed certain information of a business and financial
nature regarding RedFed, furnished to us by them, including financial
forecasts and related assumptions of RedFed; (vii) reviewed management's
estimates regarding RedFed and third party analysts' estimates regarding GSB;
(viii) made inquiries regarding and discussed the Merger and the Merger
Agreement and other matters related thereto with RedFed's counsel; and (ix)
peformed such other analyses and examinations as we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for RedFed provided to us by RedFed's management, upon your advice
and with your consent we have assumed for purposes of our opinion that the
forecasts have been reasonably prepared on bases reflecting the best available
estimates and judgments of RedFed's management at the time of preparation as
to the future financial performance of RedFed and that they provide a
reasonable basis upon which we can form our opinion.
<PAGE>
We have also assumed with your consent that the third party analysts'
estimates as to the future financial performance of GSB provide a reasonable
basis upon which we can form our opinion. We have assumed that there have been
no material changes in RedFed's or GSB's assets, financial condition, results
of operations, business or prospects since the respective dates of their last
financial statements made available to us. We have relied on advice of counsel
to RedFed on all legal matters with respect to RedFed, the Merger and the
Merger Agreement. We have assumed that the Merger will be consummated in a
manner that complies in all respects with the applicable provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934 and all other applicable federal and state statutes,
rules and regulations. We are not experts in the evaluation of loan portfolios
for purposes of assessing the adequacy of the allowances for losses with
respect thereto and have assumed, with your consent, that such allowances for
each of RedFed and GSB are in the aggregate adequate to cover such losses. In
addition, we have not assumed responsibility for reviewing any individual
credit files, or making an independent evaluation, appraisal or physical
inspection of any of the assets or liabilities (contingent or otherwise), of
RedFed or GSB, nor have we been furnished with any such appraisals. You have
informed us, and we have assumed, that the Merger will be recorded as a
purchase under generally accepted accounting principles. Finally, our opinion
is based on economic, monetary and market and other conditions as in effect
on, and the information made available to us as of, the date hereof.
Accordingly, although subsequent developments may affect this opinion, we have
not assumed any obligation to update, revise or reaffirm this opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the draft Merger
Agreement, without any further amendments thereto, and without waiver by
RedFed of any of the conditions to its obligations thereunder.
We have acted as financial advisor to RedFed in connection with the Merger
and will receive a fee for our services, including rendering this opinion, a
significant portion of which is contingent upon the consummation of the
Merger.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the stockholders
of RedFed pursuant to the Merger is fair to such stockholders from a financial
point of view, as of the date hereof.
This opinion is directed to the Board of Directors of RedFed in its
consideration of the Merger and is not a recommendation to any stockholder as
to how such stockholder should vote with respect to the Merger. Further, this
opinion addresses only the financial fairness of the Consideration to the
stockholders and does not address the relative merits of the Merger and any
alternatives to the Merger, RedFed's underlying decision to proceed with or
effect the Merger, or any other aspect of the Merger. This opinion may not be
used or referred to by RedFed, or quoted or disclosed to any person in any
manner, without our prior written consent, which consent is hereby given to
the inclusion of this opinion in any proxy statement or prospectus filed with
the Securities and Exchange Commission in connection with the Merger. In
furnishing this opinion, we do not admit that we are experts within the
meaning of the term "experts" as used in the Securities Act and the rules and
regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act.
Very truly yours,
NATIONSBANC MONTGOMERY SECURITIES, INC.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
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
EXHIBIT INDEX
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of November 30, 1997, by and
between Golden State Bancorp, Inc. and RedFed Bancorp Inc. included in
the Proxy Statement/Prospectus as Appendix A. The Registrant agrees to
furnish supplementally a copy of omitted schedules to the Commission
upon request.
3.1 Certificate of Incorporation of Registrant (included as Appendix B to
Exhibit 99.4).
3.2 Bylaws of Registrant (included as Appendix C to Exhibit 99.4).
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 (incorporated by reference to Exhibit 4.2 to
the Registration Statement on Form S-4 of the Registrant, Commission
File No. 333-47607).
4.3 Warrant Agreement, dated as of February 23, 1993, between Glendale
Federal Bank, Federal Savings Bank and Chemical Trust Company of
California (incorporated by reference to Exhibit 4.3 to the Registration
Statement on Form S-4 of the Registrant, Commission File No. 333-47607).
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, L.L.C. and Golden State Bancorp Inc. (incorporated
by reference to Exhibit 4.4 to the Registration Statement on Form S-4 of
the Registrant, Commission File No. 333-47607).
4.5 Warrant Agreement, dated as of August 15, 1993, between Glendale Federal
Bank, Federal Savings Bank, and Chemical Trust Company of California
(incorporated by reference to Exhibit 4.5 to the Registration Statement
on Form S-4 of the Registrant, Commission File No. 333-47607).
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, L.L.C. and Golden State Bancorp. Inc.
(incorporated by reference to Exhibit 4.6 to the Registration Statement
on Form S-4 of the Registrant, Commission File No. 333-47607).
4.7 Form of Warrant Agreement, dated as of , 1998, between the Registrant
and ChaseMellon Shareholder Services, L.L.C., pertaining to the
Litigation Tracking Warrants.
5.1 Opinion and consent of Mayer, Brown & Platt (re legality of securities
being registered).
8.1 Opinion and consent of Gibson, Dunn & Crutcher (re certain tax matters).
8.2 Opinion and consent of Mayer, Brown & Platt (re certain tax matters).
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
23.1 Consent of Gibson, Dunn & Crutcher (included in Exhibit 8.1).
23.2 Consent of Mayer, Brown & Platt (included in Exhibits 5.1 and 8.2).
23.3 Consent of KPMG Peat Marwick LLP (relating to financial statements of
Glendale Federal Bank, Federal Savings Bank).
23.4 Consent of KPMG Peat Marwick LLP (relating to financial statements of
RedFed Bancorp Inc.).
23.5 Consent of KPMG Peat Marwick LLP (relating to financial statements of
CENFED Financial Corporation).
23.6 Consent of KPMG Peat Marwick LLP (relating to financial statements of
First Nationwide (Parent) Holdings Inc.).
24.1 Powers of Attorney (included on the signature pages hereto).
99.1 Form of proxy for meeting of RedFed Bancorp Inc. stockholders.
99.2 Consent of NationsBanc Montgomery Securities LLC.
99.3 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).
99.4 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
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, 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;
(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;
provided, however, that paragraphs (i) and (ii) do not apply if information
required to be included in the post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Exchange Act that are incorporated by reference 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 relating to the securities offered
therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
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<PAGE>
(3) To remove from registration by means of 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.
(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 (a) that is filed pursuant to paragraph (4)
immediately preceding, or (b) 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 the Registration Statement and will
not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(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 (See Item 20), or otherwise, the Registrant has been advised
that in the opinion of the 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 of whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus
pursuant to Items 4, 19(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.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Glendale,
State of California on April 1, 1998.
GOLDEN STATE BANCORP INC.
/s/ Stephen J. Trafton
By: _________________________________
Name: Stephen J. Trafton
Title: Chairman of the Board
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.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Stephen J. Trafton Chairman of the Board, Chief April 1, 1998
______________________________________ Executive Officer, President
Stephen J. Trafton and Director
[principal executive officer]
/s/ John E. Haynes Chief Financial Officer April 1, 1998
____________________________________ [principal financial
John E. Haynes and accounting officer]
Director April , 1998
____________________________________
Diane Creel
/s/ Brian P. Dempsey Director April 1, 1998
____________________________________
Brian P. Dempsey
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard A. Fink Vice Chairman and Director April 1, 1998
____________________________________
Richard A. Fink
/s/ John F. King Director April 1, 1998
____________________________________
John F. King
/s/ John F. Kooken Director April 1, 1998
____________________________________
John F. Kooken
Director April , 1998
____________________________________
Paul J. Orfalea
/s/ Thomas S. Sayles Director April 1, 1998
____________________________________
Thomas S. Sayles
Director April , 1998
____________________________________
Cora M. Tellez
/s/ Gilbert R. Vasquez Director April 1, 1998
____________________________________
Gilbert R. Vasquez
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------- --------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of November 30, 1997, by and
between Golden State Bancorp, Inc. and RedFed Bancorp Inc. (included
in the Proxy Statement/Prospectus as Appendix A). The Registrant
agrees to furnish supplementally a copy of omitted schedules to the
Commission upon request.
3.1 Certificate of Incorporation of Registrant (included as Appendix B to
Exhibit 99.4).
3.2 Bylaws of Registrant (included as Appendix C to Exhibit 99.4).
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. (incorporated by reference to
Exhibit 4.2 to the Registration Statement on Form S-4 of the
Registrant, Commission File No. 333-47607).
4.3 Warrant Agreement, dated as of February 23, 1993, between Glendale
Federal Bank, Federal Savings Bank and Chemical Trust Company of
California (incorporated by reference to Exhibit 4.3 to the
Registration Statement on Form S-4 of the Registrant, Commission File
No. 333-47607).
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, L.L.C. and Golden State Bancorp Inc.
(incorporated by reference to Exhibit 4.4 to the Registration
Statement on Form S-4 of the Registrant, Commission File No. 333-
47607).
4.5 Warrant Agreement, dated as of August 15, 1993, between Glendale
Federal Bank, Federal Savings Bank, and Chemical Trust Company of
California. (incorporated by reference to Exhibit 4.5 to the
Registration Statement on Form S-4 of the Registrant, Commission File
No. 333-47607).
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, L.L.C. and Golden State Bancorp Inc.
(incorporated by reference to Exhibit 4.6 to the Registration
Statement on Form S-4 of the Registrant, Commission File No. 333-
47607).
4.7 Form of Warrant Agreement, dated as of , 1998, between the
Registrant and ChaseMellon Shareholder Services, L.L.C., pertaining
to the Litigation Tracking Warrants.
5.1 Opinion and consent of Mayer, Brown & Platt (re legality of the
securities being registered).
8.1 Opinion and consent of Gibson, Dunn & Crutcher (re certain tax
matters).
8.2 Opinion and consent of Mayer, Brown & Platt (re certain tax matters).
23.1 Consent of Gibson, Dunn & Crutcher (included in Exhibit 8.1).
23.2 Consent of Mayer, Brown & Platt (included in Exhibits 5.1 and 8.2).
23.3 Consent of KPMG Peat Marwick LLP (relating to financial statements of
Glendale Federal Bank, Federal Savings Bank).
23.4 Consent of KPMG Peat Marwick LLP (relating to financial statements of
RedFed Bancorp Inc.).
23.5 Consent of KPMG Peat Marwick LLP (relating to financial statements of
CENFED Financial Corporation).
23.6 Consent of KPMG Peat Marwick LLP (relating to financial statements of
First Nationwide (Parent) Holdings Inc.).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------- --------------------
<C> <S>
24.1 Powers of Attorney (included on the signature pages hereto).
99.1 Form of proxy for meeting of RedFed Bancorp stockholders.
99.2 Consent of NationsBanc Montgomery Securities LLC.
99.3 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).
99.4 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>
<PAGE>
EXHIBIT 4.7
-----------------------------------------------------------------------------
WARRANT AGREEMENT
Dated as of
________ __, 1998
between
GOLDEN STATE BANCORP INC.
and
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
---------------------------------------
as the Warrant Agent
Warrants for
Common Stock of
Golden State Bancorp Inc.
---------------------------------------
-----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1.
<S> <C> <C>
Defined Terms
SECTION 1.1 Definitions................................... 1
SECTION 1.2 Other Definitions............................. 4
ARTICLE 2.
Warrant Certificates
SECTION 2.1 Issuance of Warrant Certificates.............. 5
SECTION 2.2 Form and Dating............................... 6
SECTION 2.3 Execution and Countersignature................ 6
SECTION 2.4 Certificate Register.......................... 7
SECTION 2.5 Transfer and Exchange......................... 7
SECTION 2.6 Replacement Certificates...................... 9
SECTION 2.7 Temporary Certificates........................ 9
SECTION 2.8 Cancellation..................................10
ARTICLE 3.
Exercise Terms
SECTION 3.1 Number of Warrant Shares; Exercise Price......10
SECTION 3.2 Exercise Period...............................10
SECTION 3.3 Expiration....................................11
SECTION 3.4 Manner of Exercise............................11
SECTION 3.5 Issuance of Warrant Shares....................12
SECTION 3.6 Fractional Warrant Shares.....................12
SECTION 3.7 Reservation of Warrant Shares.................12
SECTION 3.8 Compliance with Law...........................13
SECTION 3.9 Cancellation of Warrants......................13
ARTICLE 4.
Adjustments
SECTION 4.1 Reclassifications, Redesignations or
Reorganizations of Common Stock.............14
SECTION 4.2 Combination...................................14
SECTION 4.3 Exercise Price Adjustment.....................15
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 4.4 Examples......................................... 15
SECTION 4.5 Other Events..................................... 16
SECTION 4.6 Notice of Certain Transactions................... 16
SECTION 4.7 Adjustment to Warrant Certificate................ 16
ARTICLE 5.
Warrant Agent
Section 5.1 Nature of Duties and Responsibilities Assumed.... 17
Section 5.2 Right to Consult Counsel......................... 18
Section 5.3 Compensation and Reimbursement................... 19
Section 5.4 Warrant Agent May Hold Company Securities........ 19
Section 5.5 Change of Warrant Agent.......................... 19
ARTICLE 6.
Miscellaneous
SECTION 6.1 Information...................................... 20
SECTION 6.2 Persons Benefitting.............................. 20
SECTION 6.3 Rights of Holders................................ 20
SECTION 6.4 Purchase of Warrants by the Company.............. 20
SECTION 6.5 Amendment........................................ 20
SECTION 6.6 Notices.......................................... 21
SECTION 6.7 Governing Law.................................... 21
SECTION 6.8 Successors....................................... 22
SECTION 6.9 Counterparts..................................... 22
SECTION 6.10 Table of Contents............................... 22
SECTION 6.11 Severability.................................... 22
EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Form of Election to Purchase
EXHIBIT C - Information Memorandum
</TABLE>
-ii-
<PAGE>
WARRANT AGREEMENT, dated as of ________ __, 1998 (this "Agreement"),
between GOLDEN STATE BANCORP INC., a Delaware corporation (the "Company"), and
CHASEMELLON SHAREHOLDER SERVICES L.L.C., a New York limited liability Company,
as Warrant Agent (in such capacity, the "Warrant Agent").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company has authorized a
distribution (the "Distribution") of one warrant (a "Warrant") for each share of
the Company's common stock, par value $1.00 per share ("Common Stock"),
outstanding as of the Close of Business (as defined below) on _____ __ , 1998
(the "Record Date"), each Warrant representing the right to purchase shares or a
portion of a share of Common Stock (subject to adjustment as provided herein),
upon the terms and subject to the conditions herein set forth; and
WHEREAS, in order to issue Warrants in the Distribution and to issue
Warrants to holders of outstanding Convertible Securities (as defined herein)
who exercise or convert such Convertible Securities at any time and from time to
time prior to the occurrence of the Triggering Event (as defined herein), the
Company has determined to enter into this Agreement with the Warrant Agent.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE 1.
Defined Terms
-------------
SECTION 1.1 Definitions. As used in this Agreement, the following terms
-----------
shall have the following meanings:
"Adjusted Litigation Recovery" means an amount equal to 85% of the amount
obtained from the following equation: (a) the Payment, minus (b) the sum of the
following: (i) the aggregate of all expenses incurred by or on behalf of the
Bank in prosecuting the Litigation and obtaining the Payment (whether incurred
prior to or after the date hereof), (ii) the aggregate of all expenses incurred
by the Company in connection with the creation, issuance and trading of the
Warrants, including, without limitation, legal and accounting fees and the fees
and expenses of the Warrant Agent (whether incurred prior to or after the date
hereof) and (iii) an amount equal to the Payment (less the expenses described in
the preceding clauses (i) and (ii)) multiplied by the highest, combined
statutory rate of federal, state and local income taxes applicable to the
Company during the tax year in which the full Payment is received.
<PAGE>
2
"Adjusted Market Value" means the average daily Closing Prices of a share
of Common Stock for the thirty consecutive Trading Days ending on and including
the Determination Date, minus $1.00; provided that if the context in which this
--------
defined term is used is with respect to securities other than Common Stock, then
"Adjusted Market Value" means the average daily Closing Prices of a unit of such
securities for the thirty consecutive Trading Days ending on and including the
Determination Date, minus $1.00 and provided further that if the context in
-------- -------
which this defined term is used is with respect to property other than
securities, then "Adjusted Market Value" means the Fair Market Value of such
property, minus $1.00.
"Bank" means Glendale Federal Bank, Federal Savings Bank, a federally
chartered stock savings bank.
"Board" means the Board of Directors of the Company or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.
"Close of Business" on any given date shall mean 5:00 P.M., New York City
time, on such date; provided, however, that if such date is not a Business Day
-------- -------
it shall mean 5:00 P.M., New York City time, on the next succeeding Business
Day.
"Closing Price" on any day shall mean the closing sale price regular way
(with any relevant due bills attached) of a share of Common Stock on such day,
or in case no such sale takes place on such day, the average of the reported
closing bid and asked prices regular way (with any relevant due bills attached)
of a share of Common Stock, in each case on the New York Stock Exchange
Consolidated Tape (or any successor composite tape reporting transactions on
national securities exchanges), or, if the Common Stock is not listed or
admitted to trading on the NYSE, on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (which shall be the
national securities exchange on which the greatest number of shares of Common
Stock has been traded during the five consecutive Trading Dates ending on and
including the Determination Date), or, if not listed or admitted to trading on
any national securities exchange, the average of the closing bid and asked
prices regular way (with any relevant due bills attached) of a share of Common
Stock on the over-the-counter market on the day in question as reported by
Nasdaq, or a similar generally accepted reporting service, or if not so
available as determined in good faith by the Board of Directors of the Company,
on the basis of such relevant factors as it in good faith considers appropriate.
"Combination" means an event in which the Company consolidates with, merges
with or into, or sells all or substantially all its property and assets to
another Person.
"Determination Date" means the 30th calendar day prior to the date on which
the Bank receives the total amount of the Payment. If the Payment is payable by
the United
<PAGE>
3
States Government in installments, the Determination Date will be the 30th
calendar day prior to the date on which the Bank receives the last installment
of the Payment.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the fair market value of the relevant property on
the Determination Date as determined in good faith by the Board of Directors of
the Company, on the basis of such factors as it in good faith considers
appropriate.
"Holder" means the duly registered holder of a Warrant under the terms of
this Agreement.
"Litigation" means the Bank's case against the United States Government in
the United States Court of Federal Claims entitled Glendale Federal Bank, F.S.B.
v. United States, No. 90-772C, filed on August 15, 1990.
"Nasdaq" shall mean the stock market operated by the National Association
of Securities Dealers, Inc.
"NYSE" shall mean the stock exchange operated by New York Stock Exchange,
Inc.
"Officer" means the Chairman, the Vice Chairman, the Chief Executive
Officer, the President, the Chief Financial Officer, the Secretary or any Vice
President of the Company.
"Payment" means the aggregate amount of any cash payment and the Fair
Market Value of any property or assets actually received by the Bank pursuant to
a final, nonappealable judgment in or final settlement of the Litigation
(including any post-judgment interest actually received by the Bank on any
payment).
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Trading Date" means a date on which the NYSE or Nasdaq (or any successor
thereto) is open for the transaction of business.
"Triggering Event" means, the occurrence of all of the following events:
(a) receipt by the Bank of the Payment, (b) determination by the Bank of the
amount of the Adjusted Litigation Recovery and (c) receipt of all regulatory
approvals necessary to issue the shares of Common Stock to be issued upon the
exercise of the Warrants, including without
<PAGE>
4
limitation, the effectiveness of a registration statement relating to the
issuance of the Warrant Shares under the Securities Act.
"Warrant Shares" means the shares of Common Stock of the Company received,
or issued and received, as the case may be, upon exercise of the Warrants.
SECTION 1.2 Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
---- -----------
<S> <C>
"Agent Members".................... 2.2(c)
"Certificate Register.............. 2.4
"Certificated Warrants"............ 2.2(a)
"Convertible Securities"........... 2.1(c)
"Common Stock"..................... Recitals
"Company".......................... Recitals
"Distribution"..................... Recitals
"DTC".............................. 2.2(b)
"Exercise Notice:.................. 3.2
"Exercise Price"................... 3.1
"Five-Year Warrants"............... 2.1(c)
"Global Warrants".................. 2.2(b)
"Number of Shortfall Shares"....... 3.7(b)
"Preferred Stock".................. 2.1(c)
"Record Date"...................... Recitals
"Registrar"........................ 3.7(a)
"Seven-Year Warrants".............. 2.1(c)
"Stock Options".................... 2.1(c)
"Successor Company"................ 4.2(d)
"Termination Date"................. 3.3(a)
"Termination Notice"............... 3.3(a)
"Transfer Agent"................... 3.5
"Warrant".......................... Recitals
"Warrant Agent".................... Recitals
"Warrant Certificate".............. 2.1
"Warrant Exercise Period".......... 3.2(b)
</TABLE>
SECTION 1.3 Rules of Construction. Unless the text otherwise requires
---------------------
(i) a term has the meaning assigned to it herein;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with U.S. generally accepted accounting
principles as in effect from time to time;
<PAGE>
5
(iii) "or" is not exclusive;
(iv) "including" means including, without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
ARTICLE 2.
Warrant Certificates
--------------------
SECTION 2.1 Issuance of Warrant Certificates. (a) As soon as
--------------------------------
practicable after the Record Date, the Company will prepare and execute, the
Warrant Agent will countersign, and the Company will send or cause to be sent
(and the Warrant Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Stock as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company, one or more Warrant Certificates, in substantially the form of
Exhibit A hereto (a "Warrant Certificate"), evidencing one Warrant (subject to
adjustment as provided herein) for each share of Common Stock so held.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of an Information Memorandum, in substantially the form
of Exhibit C hereto, by first-class, postage-prepaid mail, to each record holder
of Common Stock as of the Close of Business on the Record Date, at the address
of such holder shown on the records of the Company.
(c) At any time and from time to time prior to the occurrence of the
Triggering Event, the Company may cause the Warrant Agent to issue, in
accordance with the provisions of this Article 2, Warrants to holders of (i)
shares of the Company's Noncumulative Convertible Preferred Stock, Series A (the
"Preferred Stock"); (ii) common stock purchase warrants (the "Five-Year
Warrants") issued under the Warrant Agreement, dated February 23, 1993, by and
between the Company and ChaseMellon Shareholder Services L.L.C. (as successor to
Chemical Trust Company of California), as Warrant Agent; (iii) common stock
purchase warrants (the "Seven-Year Warrants") issued under the Warrant
Agreement, dated August 15, 1993, by and between the Company and ChaseMellon
Shareholder Services L.L.C. (as successor to Chemical Trust Company of
California), as Warrant Agent; and (iv) stock options of the Company and its
subsidiaries (the "Stock Options", and together with the Preferred Stock, the
Five-Year Warrants, the Seven-Year Warrants and the Stock Options, the
"Convertible Securities") that were outstanding on the Record Date, who in any
such case exercise or convert such Convertible Securities into shares of Common
Stock and Warrants in accordance with the terms and conditions of such
Convertible Securities.
(d) The maximum number of Warrants that may be issued hereunder is
_________, of which ___________ are available for issuance under Section 2.1(a)
hereof and _________ are available for issuance under Section 2.1(c) hereof.
The Company will not
<PAGE>
6
issue any Warrants or securities substantially similar to the Warrants other
than in accordance with this Section 2.1.
SECTION 2.2 Form and Dating. The Warrant Certificates shall be
---------------
substantially in the form of Exhibit A, which is hereby incorporated in and
expressly made a part of this Agreement. The Warrants may have such notations,
legends or endorsements as the Company may deem appropriate and as are not
inconsistent with the provisions hereof, or as may be required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). Each Warrant shall be dated the date of its countersignature.
(a) Certificated Warrants. The Warrants may be issued in definitive
---------------------
form represented by a physical Warrant Certificate (such certificate and all
other certificates representing physical delivery of Warrants in definitive form
being called "Certificated Warrants").
(b) Global Warrant. The Warrants may be issued in the form of one or
--------------
more fully registered global certificates with the global securities legend set
forth in Exhibit A hereto (the "Global Warrant"), which shall be deposited on
behalf of beneficial owners of Warrants with the Warrant Agent, as custodian for
the Depository Trust Corporation ("DTC") (or with such other custodian as DTC
may direct), and registered in the name of DTC or a nominee of DTC, duly
executed by the Company and countersigned by the Warrant Agent as hereinafter
provided. The number of Warrants represented by Global Warrants may from time
to time be increased or decreased by adjustments made on the records of the
Warrant Agent and DTC or its nominee as hereinafter provided. Except as
provided in Section 2.5, owners of beneficial interests in a Global Warrant will
not be entitled to receive physical delivery of Certificated Warrants.
(c) Book-Entry Provisions. Members of, or participants in, DTC
---------------------
("Agent Members") shall have no rights under this Agreement with respect to any
Global Warrant held on their behalf by DTC or by the Warrant Agent as the
custodian of DTC or under such Global Warrant, and DTC may be treated by the
Company, the Warrant Agent and any agent of the Company or the Warrant Agent as
the absolute owner of such Global Warrant for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Warrant Agent or any agent of the Company or the Warrant Agent from giving
effect to any written certification, proxy or other authorization furnished by
DTC or impair, as between DTC and its Agent Members, the operation of customary
practices of DTC governing the exercise of the rights of a holder of a
beneficial interest in any Global Warrant.
SECTION 2.3 Execution and Countersignature. (a) With respect to any
------------------------------
Global Warrant to be issued hereunder, one Officer shall sign, and the Company's
Secretary or any of its Assistant Secretaries shall attest, such Global Warrant.
The Warrant Agent, upon the written order of the Company signed by an Officer,
shall countersign any Global Warrant certificate by manual or facsimile
signature, and such Global Warrant shall be deposited in accordance with Section
2.2 hereof.
<PAGE>
7
(b) With respect to all other Warrants, an Officer shall sign, and
the Company's Secretary or any of its Assistant Secretaries shall attest, the
Warrant Certificates for the Company by manual or facsimile signature. If an
Officer whose signature is on a Warrant Certificate no longer holds that office
at the time the Warrant Agent countersigns the Warrant Certificate, the Warrant
shall be valid nevertheless. A Warrant shall not be valid until an authorized
signatory of the Warrant Agent manually countersigns the Warrant Certificate.
The signature shall be conclusive evidence that the Warrant Certificate has been
countersigned under this Agreement.
The Warrant Agent shall countersign and deliver the Warrants
Certificates for original issue, in each case upon a written order of the
Company signed by an Officer of the Company. Such order shall specify (in
addition to the number of Warrants) the date on which the original issue of
Warrants is to be countersigned.
(c) The Warrant Agent may appoint an agent reasonably acceptable to
the Company to countersign the Warrant Certificates. Unless limited by the
terms of such appointment, such agent may countersign Warrant Certificates
whenever the Warrant Agent may do so. Each reference in this Agreement to
countersignature by the Warrant Agent includes by such agent. Such agent will
have the same rights as the Warrant Agent for service of notices and demands.
SECTION 2.4 Certificate Register. The Warrant Agent shall keep a
--------------------
register ("Certificate Register") of the Warrant Certificates and of their
transfer and exchange. The Certificate Register shall show the names and
addresses of the respective Holders and the date and number of Warrants
evidenced on the face of each of the Warrant Certificates. The Company and the
Warrant Agent may deem and treat the Person in whose name a Warrant Certificate
is registered as the absolute owner of such Warrant Certificate for all purposes
whatsoever and neither the Company nor the Warrant Agent shall be affected by
notice to the contrary.
SECTION 2.5 Transfer and Exchange. (a) Transfer and Exchange of
---------------------
Certificated Warrants. When Certificated Warrants are presented to the Warrant
Agent with a request to register the transfer of such Certificated Warrants or
to exchange such Certificated Warrants for an equal number of Certificated
Warrants of other authorized denominations, the Warrant Agent shall register the
transfer or make the exchange as requested if its reasonable requirements for
such transaction are met; provided, however, that the Certificated Warrants
-------- -------
surrendered for transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory to the Company
and the Warrant Agent, duly executed by the Holder thereof or its attorney duly
authorized in writing.
(b) Restrictions on Transfer of Certificated Warrants for a
Beneficial Interest in a Global Warrant. Certificated Warrants may not be
exchanged for a beneficial interest in a Global Warrant except upon satisfaction
of the requirements set forth below. Upon receipt by the Warrant Agent of
Certificated Warrants, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Warrant Agent, together with written
<PAGE>
8
instructions directing the Warrant Agent to make, or to direct DTC to make, an
adjustment on its books and records with respect to such Global Warrants to
reflect an increase in the number of Warrants represented by the Global Warrant,
then the Warrant Agent shall cancel such Certificated Warrants and cause, or
direct DTC to cause, in accordance with the standing instructions and procedures
existing between DTC and the Warrant Agent, the number of Warrants represented
by the Global Warrant to be increased accordingly.
(c) Transfer and Exchange of Global Warrants. The transfer and
exchange of beneficial interests in a Global Warrant shall be effected through
DTC, in accordance with this Agreement and the procedures of DTC therefor.
(d) Restrictions on Transfer and Exchange of the Global Warrant.
Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in Section 2.5(g)), Global Warrants may not be transferred
as a whole except by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any such nominee to a successor depository
or a nominee of such successor depository.
(e) Authentication and Distribution of Certificated Warrants. If at
any time:
(i) DTC notifies the Company that DTC is unwilling or unable to
continue as depository for Global Warrants and a successor depository for
Global Warrants is not appointed by the Company within 90 calendar days
after delivery of such notice;
(ii) DTC ceases to be a clearing agency registered under the
Exchange Act; or
(iii) the Company, in its sole discretion, notifies the
Warrant Agent in writing that it elects to cause the issuance of
Certificated Warrants under this Agreement;
then, the Company will execute, and the Warrant Agent, upon receipt of a written
order of the Company signed by an Officer requesting the delivery of
Certificated Warrants to the holders of beneficial interests in the Global
Warrant, will countersign and deliver Certificated Warrants equal to the number
of Warrants represented by Global Warrants, in exchange for such Global
Warrants. Certificated Warrants issued in exchange for a beneficial interest in
a Global Warrant shall be registered in such names and in such authorized
denominations as DTC, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Warrant Agent. The Warrant Agent
shall deliver such Certificated Warrants to the Persons in whose names such
Warrants are so registered in accordance with the instructions of DTC.
(f) Cancellation or Adjustment of Global Warrants. At such time as
all beneficial interests in Global Warrants have either been exchanged for
Certificated Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to DTC for cancellation or retained and canceled by the
Warrant Agent. At any time prior to such cancellation, if any beneficial
interest in a Global Warrant is exchanged for Certificated
<PAGE>
9
Warrants, redeemed, repurchased or canceled, the number of Warrants represented
by such Global Warrant shall be reduced and an adjustment shall be made on the
books and records of the Warrant Agent with respect to such Global Warrant, by
the Warrant Agent or DTC, to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of Warrants.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Warrant Agent shall countersign Certificated Warrants and Global
Warrants as required pursuant to the provisions of this Section 2.5.
(ii) All Certificated Warrants and Global Warrants issued upon any
registration of transfer or exchange of Certificated Warrants shall be the valid
obligations of the Company, entitled to the same benefits under this Agreement
as the Certificated Warrants or Global Warrants surrendered upon such
registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat the Person in
whose name any Warrant is registered as the absolute owner of such Warrant and
neither the Warrant Agent nor the Company shall be affected by notice to the
contrary.
(iv) No service charge shall be made to a Holder for any
registration of transfer or exchange upon surrender of any Warrant Certificate
at the office of the Warrant Agent maintained for that purpose. The Company 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.
SECTION 2.6 Replacement Certificates. If a mutilated Warrant
------------------------
Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue and the Warrant Agent shall
countersign a replacement Warrant Certificate if the reasonable requirements of
the Warrant Agent and of Section 8-405 of the Uniform Commercial Code as in
effect in the State of California are met. If required by the Warrant Agent or
the Company, such Holder shall furnish an indemnity bond or other instrument
sufficient in the judgment of the Company and the Warrant Agent to protect the
Company and the Warrant Agent from any loss which either of them may suffer if a
Warrant Certificate is replaced. The Company and the Warrant Agent may charge
the Holder for their expenses in replacing a Warrant Certificate. Every
replacement Warrant Certificate is an additional obligation of the Company.
SECTION 2.7 Temporary Certificates. Until definitive Warrant
----------------------
Certificates are ready for delivery, the Company may prepare and the Warrant
Agent shall countersign temporary Warrant Certificates. Temporary Warrant
Certificates shall be substantially in the form of definitive Warrant
Certificates but may have variations that the Company considers appropriate for
temporary Warrant Certificates. Without unreasonable delay, the Company shall
prepare and the Warrant Agent shall countersign definitive Warrant Certificates
and deliver them in exchange for temporary Warrant Certificates.
<PAGE>
10
SECTION 2.8 Cancellation. (a) In the event the Company shall
------------
purchase or otherwise acquire Certificated Warrants, the same shall thereupon be
delivered to the Warrant Agent for cancellation.
(b) The Warrant Agent and no one else shall cancel and destroy all
Warrant Certificates surrendered for transfer, exchange, replacement, exercise
or cancellation and deliver a certificate of such destruction to the Company
unless the Company directs the Warrant Agent to deliver canceled Warrant
Certificates to the Company. The Company may not issue new Warrant Certificates
to replace Warrant Certificates to the extent they evidence Warrants which have
been exercised or Warrants which the Company has purchased or otherwise
acquired.
ARTICLE 3.
Exercise Terms
--------------
SECTION 3.1 Number of Warrant Shares; Exercise Price. Each Warrant
----------------------------------------
shall, upon exercise thereof as provided herein, initially entitle the
registered Holder thereof to purchase the number of shares of Common Stock
having an Adjusted Market Value equal to the Adjusted Litigation Recovery
divided by [86,000,000] [the number of Warrants issued or reserved for issuance
on the Record Date] at an exercise price per Warrant equal to the number of
shares of Common Stock for which the Warrant is exercisable multiplied by $1.00
(the "Exercise Price").
SECTION 3.2 Exercise Period. (a) The Company will provide notice,
---------------
as described below (the "Exercise Notice"), of the occurrence of the Triggering
Event not more than 15 calendar days after the occurrence thereof. If the
Payment is payable by the United States Government in installments, the
Triggering Event will not be deemed to have occurred until the Bank receives the
last installment of the Payment. The Exercise Notice shall be dated the date it
is first sent to Holders and shall be provided by means of a press release to
the one or more national news services and by mailing such notice first class,
postage prepaid, to each Holder at such Holder's address as it appears on the
Certificate Register; provided, however, that no failure to give such notice by
mail nor any defect therein shall affect the validity of the Exercise Notice or
the expiration of all Warrants on the Close of Business on the last day of the
Warrant Exercise Period, except as to the Holder to whom the Company has failed
to give such notice by mail or except as to the Holder whose notice was
defective. The Exercise Notice shall state the following:
(i) that the Triggering Event has occurred,
(ii) the aggregate number of shares for which the Warrants
are exercisable,
(iii) the number of shares of Common Stock for which one
Warrant is exercisable,
<PAGE>
11
(iv) the Exercise Price per Warrant,
(v) the manner in which the Warrants are exercisable and
(vi) the date on which the Warrants will no longer be
exercisable.
(b) Subject to the terms and conditions set forth herein, each
Warrant shall be exercisable at any time or from time to time during the sixty-
day period commencing on the date on which the Exercise Notice is first sent to
Holders pursuant to Section 3.2(a) (the "Warrant Exercise Period").
(c) No Warrant shall be exercisable after the Close of Business on
the last day of the Warrant Exercise Period.
SECTION 3.3 Expiration. (a) A Warrant shall terminate and become
----------
void as of the earlier of (i) the Close of Business on the last day of the
Warrant Exercise Period, (ii) the Close of Business on the date the Litigation
has been disposed of in a manner such that no shares of Common Stock or other
securities or property will be issuable under the term of the Warrants (the
"Termination Date") or (iii) the time and date such Warrant is exercised. The
Company will provide notice, as described below (the "Termination Notice"), of
the occurrence of the Termination Date or the expiration of the Warrant Exercise
Period not more than 60 calendar days after the occurrence thereof. The
Termination Notice shall be dated the date it is first sent to Holders and shall
be provided by means of a press release to a national news service and by
mailing such notice first class, postage prepaid, to each Holder at such
Holder's address as it appears on the Certificate Register. The Termination
Notice shall state the following:
(i) that the Termination Date has occurred or the Warrant
Exercise Period has expired, as the case may be, and
(ii) that all outstanding Warrants have terminated and
become void.
The Warrants shall terminate and become void as provided herein notwithstanding
the Company's failure to give the Termination Notice.
SECTION 3.4 Manner of Exercise. Warrants may be exercised upon (i)
------------------
surrender to the Warrant Agent of the Warrant Certificates, together with the
form of election to purchase Common Stock on the reverse thereof properly
completed and validly executed by the Holder thereof and (ii) payment to the
Warrant Agent, for the account of the Company, of the Exercise Price. Such
payment shall be made by certified or official bank check or personal check
payable to the order of the Company. Subject to Section 3.2, the Warrants shall
be exercisable at the election of the Holders thereof either in full at any time
or from time to time in part and in the event that a Warrant Certificate is
surrendered for exercise in respect of less than all the Warrant Shares
purchasable on such exercise at any time prior to the Expiration Date a new
Warrant Certificate exercisable for the remaining Warrant Shares will be issued.
The Warrant Agent shall countersign and deliver the required
<PAGE>
12
new Warrant Certificates, and the Company, at the Warrant Agent's request, shall
supply the Warrant Agent with Warrant Certificates duly signed on behalf of the
Company for such purpose. The Warrant Agent shall account promptly to the
Company with respect to all Warrants exercised and concurrently pay to the
Company all moneys received by the Warrant Agent for the purchase of shares of
Common Stock through the exercise of such Warrants.
SECTION 3.5 Issuance of Warrant Shares. Subject to Section 3.6, upon
--------------------------
the surrender of Warrant Certificates and payment of the Exercise Price, as set
forth in Section 3.4, the Company shall issue and cause the Warrant Agent or, if
appointed, a transfer agent for the Common Stock ("Transfer Agent") to
countersign and deliver to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate or certificates for the
number of full Warrant Shares so purchased upon the exercise of such Warrants or
other securities or property to which it is entitled, registered or otherwise to
the Person or Persons entitled to receive the same, together with cash as
provided in Section 3.6 in respect of any fractional Warrant Shares otherwise
issuable upon such exercise. Such certificate or certificates shall be deemed
to have been issued and any Person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrant Certificates and payment of the Exercise Price.
SECTION 3.6 Fractional Warrant Shares. The Company shall not be
-------------------------
required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be exercised in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis of the aggregate number of Warrant
Shares purchasable pursuant thereto. If any fraction of a Warrant Share would,
except for the provisions of this Section 3.6, be issuable on the exercise of
any Warrant (or specified portion thereof), the Company shall pay an amount in
cash equal to the sum of (i) the Adjusted Market Value for one Warrant Share and
(ii) $1.00, multiplied by such fraction, rounded upwards or downwards, as the
case may be, to the nearest whole cent.
SECTION 3.7 Reservation of Warrant Shares. (a) The Company shall
-----------------------------
use its best efforts to at all times keep reserved out of its authorized shares
of Common Stock or shares of Common Stock held in its treasury and unissued a
number of shares of Common Stock sufficient to provide for the exercise in full
of all Warrants then outstanding or reserved for issuance pursuant to Section
2.1. The registrar for the Common Stock (the "Registrar") shall at all times
until the Termination Date, or the time at which all Warrants have been
exercised or cancelled, reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
file with the Transfer Agent. The Company will supply such Transfer Agent with
duly executed stock certificates for such purpose and will itself provide or
otherwise make available any cash which may be payable as provided in Section
3.6. The Company will furnish to such Transfer Agent a copy of all notices of
adjustments and certificates related thereto transmitted to each Holder.
(b) If, upon the Triggering Event, the number of shares of Common
Stock authorized but not issued plus the number of shares of Common Stock held
in the Company's
<PAGE>
13
treasury is less than the number of shares of Common Stock necessary to permit
the exercise in full of the Warrants then outstanding or reserved for issuance
pursuant to Section 2.1 (the number of shares of Common Stock comprising such
deficiency being the "Number of Shortfall Shares"), then the Company shall
either (i) to the extent permitted by applicable law and any material agreements
then in effect to which the Company is a party, commence a tender offer for the
aggregate number of shares of Common Stock at least equal to the Number of
Shortfall Shares or (ii) call a special meeting of the Common Stockholders for
the purpose of increasing the number of authorized shares of Common Stock in an
amount at least equal to the Number of Shortfall Shares. In such an event, the
Warrant Exercise Period shall be automatically extended to 60 calendar days
after the date on which either (a) the tender offer referred to in clause (i)
above is successfully completed or (b) the effective date of the increase in the
number of authorized shares of Common Stock referred to in clause (ii) above.
(c) The Company covenants that all shares of Common Stock which may
be issued upon exercise of Warrants will, upon issue, be fully paid,
nonassessable, free of preemptive rights, free from all taxes and free from all
liens, charges and security interests, created by or through the Company, with
respect to the issue thereof.
SECTION 3.8 Compliance with Law. (a) Notwithstanding anything in
-------------------
this Agreement to the contrary, in no event shall a Holder be entitled to
exercise a Warrant unless (i) a registration statement filed under the
Securities Act in respect of the issuance of the Warrant Shares is then
effective or (ii) an exemption from such registration requirements is available
to all Holders under the Securities Act at the time of such exercise.
(b) If any shares of Common Stock required to be reserved for
purposes of exercise of Warrants require, under any other Federal or state law
or applicable governing rule or regulation of any national securities exchange,
registration with or approval of any governmental authority, or listing on any
such national securities exchange before such shares may be issued upon
exercise, the Company will cause such shares to be duly registered or approved
by such governmental authority or listed on the relevant national securities
exchange.
SECTION 3.9 Cancellation of Warrants In the event the Company 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.
<PAGE>
14
ARTICLE 4.
Adjustments
-----------
SECTION 4.1 Reclassifications, Redesignations or Reorganizations of
-------------------------------------------------------
Common Stock. (a) In the event that at any time or from time to time after
- ------------
the date hereof the Company shall issue by reclassification, redesignation or
reorganization of the shares of its class of Common Stock any shares of capital
stock of the Company then, in any such event, the Holders shall have the right
to receive upon exercise of the Warrants the number of shares of such capital
stock of the Company equal to the Adjusted Litigation Recovery divided by
[86,000,000] [the number of Warrants issued or reserved for issuance on the
Record Date] divided by the aggregate Adjusted Market Value of the capital stock
of the Company that one share of Common Stock was exchanged for or converted
into as a result of such reclassification, redesignation or reorganization.
(b) The proportion and type of capital stock of the Company that the
Holders shall have the right to receive in the circumstance set forth in the
preceding sentence will be in the same proportion and type as one share of
Common Stock was exchanged for or converted into as a result of such
reclassification, redesignation or reorganization. Such adjustment shall become
effective immediately after the effective date of such reclassification,
redesignation or reorganization. In the event of the occurrence of more than
one of the foregoing, such adjustments shall be made successively.
SECTION 4.2 Combination. (a) Except as provided in Section 4.2(c),
-----------
in the event of a Combination, the Holders shall have the right to receive upon
exercise of the Warrants the number of shares of capital stock or other
securities or an amount of property equal to the Adjusted Litigation Recovery
divided by [86,000,000] [the number of Warrants issued or reserved for issuance
on the Record Date] divided by the aggregate Adjusted Market Value of the
capital stock, other securities or property that one share of Common Stock was
exchanged for or converted into as a result of such Combination.
(b) The proportion and type of capital stock, other securities or
property that the Holders shall have the right to receive in the circumstance
set forth in the preceding sentence will be in the same proportion and type as
one share of Common Stock was exchanged for or converted into as a result of
such Combination. The provisions of this Section 4.2 shall similarly apply to
successive Combinations involving any Successor Company.
(c) In the event of a Combination where consideration is payable to
holders of Common Stock in exchange for their shares solely in cash, each
Warrant will upon exercise thereof be entitled to receive cash in an amount
equal to the Adjusted Litigation Recovery divided by [86,000,000] [the number of
Warrants issued or reserved for issuance on the Record Date], less the Exercise
Price.
In case of any Combination described in this Section 4.2(c), the
surviving or acquiring Person shall promptly after the occurrence of the
Triggering Event deposit with the
<PAGE>
15
Warrant Agent the funds necessary to pay to the Holders of the Warrants the
amounts to which they are entitled as described above. After such funds and the
surrendered Warrant Certificates are received, the Warrant Agent shall make
payment to the Holders by delivering a check in such amount as is appropriate to
such Person or Persons as it may be directed in writing by the Holders
surrendering such Warrants.
(d) The Company shall provide that the surviving or acquiring Person
(the "Successor Company") in such Combination will enter into an agreement with
the Warrant Agent confirming the Holders' rights pursuant to this Section 4.2
and providing for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 4.
SECTION 4.3 Exercise Price Adjustment. In case of any
-------------------------
reclassification, redesignation or reorganization described in Section 4.1 or
any Combination descried in Section 4.2, the Exercise Price of one Warrant after
such reclassification, redesignation, reorganization or Combination will equal
(i) if the Warrants are exercisable into stock only, the per share par value of
such stock multiplied by the number of shares of stock into which one Warrant is
exercisable, (ii) if the Warrants are exercisable for cash or property only, an
amount equal to a fraction the numerator of which is the product of $1.00 and
the Fair Market Value of amount of cash or property into which one Warrant is
exercisable and the denominator of which is the amount of cash or property one
share of Common Stock was exchanged for in such Combination and (iii) if the
Warrants are exercisable for cash or property and stock, an amount equal to the
Exercise Price determined by clause (i) above with respect to the stock portion
and the Exercise Price determined by clause (ii) with respect to the cash or
property portion.
SECTION 4.4 Examples. (a) If the Company effects a reclassification,
--------
redesignation or reorganization such that one share of its class of Common Stock
was converted into a one share of class A common stock and two shares of class B
common stock, then, after giving effect to such event, the Holders shall have
the right to receive upon exercise of one Warrant shares of class A common stock
and class B common stock equal to the Adjusted Litigation Recovery divided by
[86,000,000] [the number of Warrants issued or reserved for issuance on the
Record Date] divided by the aggregate Adjusted Market Value of one share of
class A common stock and two shares of class B common stock. Accordingly,
pursuant to Section 4.1(b), if the Adjusted Litigation Recovery were $500
million and the Adjusted Market Value of one share of class A common stock and
two shares of class B common stock were $30, then one Warrant would be
exercisable for 0.0646 of a share of class A common stock and 0.1292 of a share
of class B common stock. The Exercise Price of one Warrant would be the par
value of the class A common stock multiplied by 0.0646, plus the par value of
the class B common stock multiplied by 0.1292.
(b) In the case of a Combination described in Section 4.2(a), if as a
result of such Combination one share of Common Stock is exchanged for one share
of Surviving Company common stock and $15, then, after giving effect to such
event, the Holders shall have the right to receive upon exercise of one Warrant
shares of Surviving Company common stock and cash equal to the Adjusted
Litigation Recovery divided by [86,000,000] [the
<PAGE>
16
number of Warrants issued or reserved for issuance on the Record Date] divided
by the sum of the Adjusted Market Value of one share of Surviving Company common
stock plus $15. Accordingly, pursuant to Section 4.2(b), if the Adjusted
Litigation Recovery were $500 million and the Adjusted Market Value of one share
of Surviving Company Common Stock were $15, then one Warrant would be
exercisable for 0.1938 of a share of Class A Common Stock and $2.907 ($15
multiplied by 0.1938). The Exercise Price of one Warrant would be the par value
of the Surviving Company Common Stock multiplied by .1292, plus $.1938.
(c) In the case of a Combination described in Section 4.2(c), if as a
result of such Combination one share of Common Stock is exchanged for $30, then,
after giving effect to such event, the Holders shall have the right to receive
upon exercise of one Warrant cash equal to the Adjusted Litigation Recovery
divided by [86,000,000] [the number of Warrants issued or reserved for issuance
on the Record Date], less the Exercise Price of the Warrant. Accordingly, if
the Adjusted Litigation Recovery were $500 million, then one Warrant would be
exercisable for $5.620. The Exercise Price of one Warrant would be $.1938.
SECTION 4.5 Other Events. If any event occurs as to which the
------------
foregoing provisions of this Article 4 are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Warrants in accordance with
the essential intent and principles of such provisions, then such Board shall
make such adjustments to the terms of this Article 4, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
faith opinion of such Board, to protect such purchase rights as aforesaid.
SECTION 4.6 Notice of Certain Transactions. In the event that the
------------------------------
Company shall publicly announce a plan (a) to effect any reclassification,
redesignation or reorganization of its shares of its class of Common Stock, (b)
to effect any capital reorganization, consolidation or merger or (c) to effect
the voluntary or involuntary dissolution, liquidation or winding-up of the
Company, the Company shall within 5 calendar days after such public announcement
send to the Warrant Agent and the Warrant Agent shall within 5 calendar days
send the Holders a notice (in such form as shall be furnished to the Warrant
Agent by the Company) of such proposed action, such notice to be mailed by the
Warrant Agent to the Holders at their addresses as they appear in the
Certificate Register, which notice shall specify the expected date that such
issuance or event is to take place and the expected date of participation
therein by the holders of Common Stock and shall briefly indicate the effect of
such action on the Common Stock and on the number and kind of any other shares
of stock and on other securities or property, if any, and the number of shares
of Common Stock and other securities or property, if any, purchasable upon
exercise of each Warrant and the Exercise Price after giving effect to any
adjustment which will be required as a result of such action.
SECTION 4.7 Adjustment to Warrant Certificate. The form of Warrant
---------------------------------
Certificate need not be changed because of any adjustment made pursuant to this
Article 4, and Warrant Certificates issued after such adjustment may have the
same terms and conditions as are stated in any Warrant Certificates issued prior
to the adjustment. The Company, however, may at any time in its sole discretion
make any change in the form of
<PAGE>
17
Warrant Certificate that it may deem appropriate to give effect to such
adjustments and that does not affect the substance of the Warrant Certificate,
and any Warrant Certificate 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 5.
Warrant Agent
-------------
Section 5.1 Nature of Duties and Responsibilities Assumed. The
---------------------------------------------
Company hereby appoints the Warrant Agent to act as agent of the Company as set
forth in this Agreement. The Warrant Agent hereby accepts the appointment as
agent of the Company and agrees to perform that agency upon the terms and
conditions herein set forth, by all of which the Company 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 Company 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 an Officer 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 Company 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 Company 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 IV 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 whether any shares of
Common Stock will, when issued, by 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 Company or
<PAGE>
18
one or more registered holders of Warrants 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 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
Company 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 an
Officer, 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.
The Warrant Agent will not be responsible or liable for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Company. The Warrant Agent
will not incur any liability or responsibility to the Company 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 Company 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 Company 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 so doing in connection with this Agreement except for its
own negligence, bad faith or willful conduct.
Section 5.2 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 Company) 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.
<PAGE>
19
Section 5.3 Compensation and Reimbursement. The Company agrees to
------------------------------
pay to the Warrant Agent from time to time compensation for all services
rendered by it hereunder as the Company 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 expenses 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 5.4 Warrant Agent May Hold Company 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 Company
or its affiliates or have a pecuniary interest in any transaction in which the
Company or its affiliates may be interested, or contract with or lend money to
the Company 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 Company or for any
other legal entity.
Section 5.5 Change of Warrant Agent. The Warrant Agent may resign
-----------------------
and be discharged from its duties under this Agreement upon 90 calendar days'
prior notice in writing mailed, by registered or certified mail, to the Company.
The Company may remove the Warrant Agent or any successor warrant agent upon 60
calendar 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 Company shall appoint a successor to the Warrant Agent and shall,
within 30 calendar days following such appointment, give notice thereof in
writing to each registered holder of the Warrant Certificates. If the Company
shall fail to make such appointment within a period of 30 calendar 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 Company 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 this 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 warrant agent, as the case may
be.
<PAGE>
20
ARTICLE 6.
Miscellaneous
-------------
SECTION 6.1 Information. As soon as any Warrant becomes outstanding,
-----------
the Company shall promptly deliver to the Warrant Agent and the Holders its
annual report to stockholders and such other information as is provided to any
holders of equity securities of the Company in their capacity as holders of such
securities.
SECTION 6.2 Persons Benefitting. Nothing in this Agreement is
-------------------
intended or shall be construed to confer upon any Person other than the Company,
the Warrant Agent and the Holders any right, remedy or claim under or by reason
of this agreement or any part hereof.
SECTION 6.3 Rights of Holders. (a) No 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 Holder, as
such, any of the rights of a stockholder of the Company or any right to vote
upon or give or withhold consent to any action of the Company (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, 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 Common Stock
thereunder shall have become issuable and such person shall have been deemed to
have become a holder of record of such shares. No 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.
(b) The Bank will retain sole and exclusive control of the Litigation
and will retain 100% of any recovery from the Litigation. The Holders will not
have any right to control or manage the course or disposition of the Litigation
or the proceeds of any recovery therefrom.
SECTION 6.4 Purchase of Warrants by the Company. The Company 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 6.5 Amendment. This Agreement may be amended by the parties
---------
hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company and the Warrant Agent may
deem necessary or desirable; provided, however, that
-------- -------
<PAGE>
21
such action shall not affect adversely the rights of the Holders. Any amendment
or supplement to this Agreement that has an adverse effect on the interests of
the Holders shall require the written consent of the Holders of a majority of
the then outstanding Warrants. The consent of each Holder affected shall be
required for any amendment pursuant to which the Exercise Price would be
increased or the number of Warrant Shares purchasable upon exercise of Warrants
would be decreased (other than pursuant to adjustments provided for herein). In
determining whether the Holders of the required number of Warrants have
concurred in any direction, waiver or consent, Warrants owned by the Company or
by any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Warrant Agent shall be protected in relying on any such direction,
waiver or consent, only Warrants which the Warrant Agent knows are so owned
shall be so disregarded. Also, subject to the foregoing, only Warrants
outstanding at the time shall be considered in any such determination.
SECTION 6.6 Notices. Any notice or communication shall be in writing
-------
and delivered in Person or mailed by first-class mail addressed as follows:
if to the Company: Golden State Bancorp Inc.
414 North Central Avenue
Glendale, CA 91203
Attention: Chief Financial Officer
Telecopy: (818) 409-3151
if to the Warrant Agent: ChaseMellon Shareholder Services L.L.C.
Reorganization Department
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention:
Telecopy:
The Company or the Warrant Agent by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the Certificate Register and
shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 6.7 Governing Law. This Agreement and the Warrant
-------------
Certificates shall be governed by, and construed and interpreted in accordance
with, the laws of the State of California.
<PAGE>
22
SECTION 6.8 Successors. All agreements of the Company in this
----------
Agreement and the Warrant Certificates shall bind its successors. All
agreements of the Warrant Agent in this Agreement shall bind its successors.
SECTION 6.9 Counterparts. The parties may sign any number of copies
------------
of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Agreement.
SECTION 6.10 Table of Contents. The table of contents and headings
-----------------
of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 6.11 Severability. The provisions of this Agreement are
------------
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
GOLDEN STATE BANCORP INC.
By:
-----------------------------------
Name:
Title:
CHASEMELLON SHAREHOLDER
SERVICES L.L.C., as Warrant
Agent,
By:
-----------------------------------
Name:
Title:
<PAGE>
EXHIBIT A TO
WARRANT AGREEMENT
-----------------
[FORM OF FACE OF WARRANT CERTIFICATE]
[Unless and until it is exchanged in whole or in part for Warrants in
definitive form, this Warrant may not be transferred except as a whole by the
depository to a nominee of the depository or by a nominee of the depository to
the depository or another nominee of the depository or by the depository or any
such nominee to a successor depository or a nominee of such successor
depository. The Depository Trust Company ("DTC") (55 Water Street, New York,
New York) shall act as the depository until a successor shall be appointed by
the Company and the Warrant Agent. Unless this certificate is presented by an
authorized representative of DTC to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.]/1/
No. __ Certificate for ___ Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
GOLDEN STATE BANCORP INC.
THIS CERTIFIES THAT, ____________, or its registered assigns, is the
registered holder of the number of Warrants set forth above (the "Warrants").
Each Warrant entitles the holder thereof (the "Holder"), at its option and
subject to the provisions contained herein and in the Warrant Agreement referred
to below, to purchase from GOLDEN STATE BANCORP INC., a Delaware corporation
("the Company"), the number of shares of Common Stock, par value of $1.00 per
share, of the Company (the "Common Stock") having an Adjusted Market Value equal
to the Adjusted Litigation Recovery divided by [86,000,000] [the number of
Warrants issued or reserved for issuance on the Record Date] at an exercise
price per Warrant equal to the number of shares of Common Stock for which one
Warrant is exercisable multiplied by $1.00 (the "Exercise Price"). This Warrant
Certificate shall terminate and become void on the earliest of (i) the Close of
Business on the last day of the Warrant Exercise Period, (ii) the Close of
Business on the date the Litigation has been disposed of in a manner such that
no shares of Common Stock or other securities or property will be issuable under
the terms of the Warrants and (iii) the time and date such Warrant is exercised.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of _________ __, 1998 (the "Warrant Agreement"),
between the Company and ChaseMellon Shareholder Services L.L.C. (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
- -------------
/1/ To be included only if the Warrant is in global form.
<PAGE>
2
provisions the Holder of this Warrant Certificate 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, limitations of rights, duties and obligations of the
Company, the Warrant Agent and the Holders of the Warrants. Capitalized terms
used but not defined herein shall have the meanings ascribed thereto in the
Warrant Agreement. A copy of the Warrant Agreement may be obtained for
inspection by the Holder hereof upon written request to the Warrant Agent at
[______________________________].
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part by surrender of this Warrant Certificate with the
form of election to purchase Warrant Shares attached hereto duly executed and
with the simultaneous payment of the Exercise Price in cash (subject to
adjustment) to the Warrant Agent for the account of the Company at the office of
the Warrant Agent. Payment of the Exercise Price shall be made by certified or
official bank check or personal check payable to the order of the Company or by
wire transfer of funds to an account designated by the Company for such
purpose.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, each Warrant shall be exercisable at any time from
and from time to time during the Warrant Exercise Period only and shall not be
exercisable after the expiration of the Warrant Exercise Period.
In the event the Company enters into a Combination, the Holder hereof
will be entitled to receive upon exercise of the Warrants the shares of capital
stock or other securities or other property such that each Warrant may be
exercisable for a number of shares of capital stock or other securities or an
amount of property equal to the Adjusted Litigation Recovery divided by
[86,000,000] [the number of Warrants issued or reserved for issuance on the
Record Date] divided by the aggregate Adjusted Market Value of the capital
stock, other securities or property that one share of Common Stock was exchanged
for or converted into as a result of such Combination; provided, however, that
-------- -------
in the event that, in connection with such Combination, consideration to holders
of Common Stock in exchange for their shares is payable solely in cash, the
Holder hereof will be entitled to receive cash in an amount equal to the
Adjusted Litigation Recovery divided by [86,000,000] [the number of Warrants
issued or reserved for issuance on the Record Date], less the Exercise Price.
The amount and type of capital stock, other securities or property that the
Holders shall have the right to receive in the circumstance set forth in the
preceding sentence would be the same amount and type as one share of Common
Stock was exchanged for or converted into as a result of such Combination.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 2.5 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
<PAGE>
3
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the shares of Common Stock as to which the Warrants shall not have
been exercised. This Warrant Certificate may be exchanged at the office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for other Warrant Certificates
evidencing an equal number of Warrants. No fractional Warrant Shares will be
issued upon the exercise of the Warrants, but the Company shall pay an amount in
cash equal to the Adjusted Market Value for one Warrant Share on the
Determination Date, multiplied by such fraction, computed to the nearest whole
cent.
All shares of Common Stock issuable by the Company upon the exercise
of the Warrants shall, upon such issue, be duly and validly issued and fully
paid and non-assessable.
The holder in whose name the Warrant Certificate is registered may be
deemed and treated by the Company and the Warrant Agent as the absolute owner of
the Warrant Certificate for all purposes whatsoever and neither the Company nor
the Warrant Agent shall be affected by notice to the contrary.
THE WARRANTS REPRESENT A CONTINGENT RIGHT TO PURCHASE SHARES OF COMMON
STOCK WITH AN AGGREGATE VALUE BASED ON A PORTION OF ANY PROCEEDS THAT MAY BE
RECEIVED BY THE BANK FROM THE LITIGATION. THE WARRANTS DO NOT PROVIDE TO THEIR
HOLDERS ANY RIGHTS IN THE LITIGATION INCLUDING ANY RIGHTS TO RECEIVE ANY CASH OR
PROPERTY RECEIVED BY THE BANK IN CONNECTION THEREWITH, OR TO CONTROL THE
LITIGATION. THERE CAN BE NO ASSURANCE AS TO WHEN THE LITIGATION WILL BE
RESOLVED OR THE AMOUNT OF PROCEEDS, IF ANY, THE BANK WILL RECEIVE THEREFROM.
THE BANK WILL RETAIN SOLE AND EXCLUSIVE CONTROL OF THE LITIGATION AND WILL
RETAIN 100% OF ANY RECOVERY FROM THE LITIGATION. THE HOLDERS WILL NOT HAVE ANY
RIGHT TO CONTROL OR MANAGE THE COURSE OR DISPOSITION OF THE LITIGATION OR THE
PROCEEDS OF ANY RECOVERY THEREFROM.
The Warrants do not entitle any holder hereof to any of the rights of
a shareholder of the Company.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
GOLDEN STATE BANCORP INC.
By ___________________________________
<PAGE>
4
[SEAL]
Attest: ___________________________
Secretary
DATED:
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
as Warrant Agent,
by _________________________________
Authorized Signatory
<PAGE>
EXHIBIT B TO
WARRANT AGREEMENT
-----------------
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
GOLDEN STATE BANCORP INC.
The undersigned hereby irrevocably elects to exercise [ ] Warrants
at an exercise price per Warrant of $[ ] to acquire [ ] shares of Common
Stock, par value $1.00 per share, of Golden State Bancorp Inc. (the "Company"),
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 the Company, and directs that the
shares of Common Stock deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
Date: ________________, ____
_______________________________/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 a national
bank or trust company or by a member firm of any national securities
exchange.
<PAGE>
2
Securities and/or check 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>
EXHIBIT C TO
WARRANT AGREEMENT
The following exchanges of a part of this Global Warrant for definitive Warrants
have been made:
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Golden State Bancorp
Inc. (the "Company")
This Certificate relates to __________ Warrants held in definitive form by
_______________ (the "Transferor").
The Transferor has requested the Warrant Agent by written order to exchange
or register the transfer of a Warrant or Warrants. The Warrant Agent and the
Company are entitled to rely upon this Certificate and are irrevocably
authorized to produce this Certificate or a copy hereof to any interested party
in any administrative or legal proceedings or official inquiry with respect to
the matters covered hereby.
[INSERT NAME OF TRANSFEROR]
by ________________________
Date: ____________________
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF MAYER, BROWN & PLATT]
APRIL 3, 1997
Golden State Bancorp Inc.
414 North Central Avenue
Glendale, California 91203
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
You have requested this opinion in connection with the offering (the
"Offering") by Golden State Bancorp Inc., a Delaware corporation (the
"Company"), of shares of its common stock, par value $1.00 per share (the
"Common Stock"). Capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Registration Statement (as defined
below).
In connection with your request, you have provided us with and we have
reviewed: (i) the Company's Certificate of Incorporation, as amended through
the date hereof, (ii) the Company's Bylaws, as amended through the date
hereof, (iii) the Registration Statement on Form S-4, as filed with the
Securities and Exchange Commission on April 3, 1997 (the "Registration
Statement"), including the form of proxy statement/prospectus to be used in
connection with the Offering (the "Prospectus") and (iv) resolutions of the
Board of Directors of the Company concerning the Offering.
Subject to (i) the effectiveness of the Registration Statement under the
Securities Act of 1933, (ii) the due execution, registration and delivery of
the certificates evidencing the Common Stock and (iii) the Board of Directors
having taken all necessary action to approve the specific terms of the Common
Stock to be issued, we are of the opinion that the Common Stock to be issued
by the Company will, when issued and paid for in the manner provided in the
Registration Statement, be legally issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under
the caption "Legal Matters" in the Prospectus.
Our opinions expressed herein are limited to the Delaware General
Corporation Law as in effect on the date hereof, and we do not express any
opinion herein concerning or arising under any other law.
Very truly yours,
MAYER, BROWN & PLATT
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF GIBSON, DUNN & CRUTCHER LLP]
April 3, 1998
(213) 229-7000
RedFed Bancorp Inc.
300 East State Street
Redlands, California 92373
Re: Federal Income Tax Consequences of Merger
With Golden State Bancorp Inc.
Gentlemen:
We have served as special tax counsel to RedFed Bancorp Inc., a Delaware
corporation (the "RedFed") in connection with a merger (the "Merger") of RedFed
into a newly formed and wholly-owned subsidiary ("Merger Sub") of Golden State
Bancorp Inc., a Delaware corporation ("Golden State"). The Merger is being
undertaken pursuant to the terms of that certain Agreement and Plan of Merger,
dated as of November 30, 1997 (the "Merger Agreement"), by and between RedFed
and Golden State. This opinion is issued pursuant to Section 6.3(b) of the
Merger Agreement which conditions the obligation of RedFed to effect the Merger
on, among other things, the receipt of our opinion that the Merger will be
treated for federal income tax purposes as reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Unless otherwise indicated, each capitalized term used herein has the meaning
ascribed to it in the Agreement.
If the Merger is consummated on the terms and subject to the conditions set
forth in the Merger Agreement, then (i) the RedFed will merge into Merger Sub
with Merger Sub being the Surviving Corporation and a wholly-owned subsidiary of
Golden State and (ii) each share of outstanding RedFed Common Stock will be
converted into shares of Golden State Common Stock in an amount calculated
pursuant to Article II of the Merger Agreement. Cash will be paid to each holder
of RedFed Common Stock in lieu of the issuance of fractional shares.
<PAGE>
GIBSON, DUNN & CRUTCHER LLP
RedFed Bancorp Inc.
April 3, 1998
Page 2
In rendering our opinion we have examined (i) the Agreement, including all
exhibits thereto; (ii) the description of the Merger and related transactions
set forth in the OTS Application on Form H-(e)3 filed in connection with the
Merger; (iii) the description of the Merger and related transactions set forth
in the Proxy Statement-Prospectus on Form S-4 filed with the Securities and
Exchange Commission in connection with the Merger (the "Registration
Statement"); and (iv) written representations provided by the management of
RedFed and of Golden State concerning certain facts underlying and relating to
the Merger transaction (the "Representations"). The opinions expressed herein
are conditioned on the initial and continuing accuracy of the facts, information
and representations set forth in the foregoing documents. We have assumed that
any representation or statement made "to the best of knowledge" or similarly
qualified is correct without such qualification. As to all matters in which a
person or entity making a representation has represented that such person or
entity either does not have or is not aware of any plan or intention, we have
assumed that there is in fact no such plan or intention.
In our examination we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as copies and the
authenticity of the originals of such documents. We are assuming that the
Merger will qualify as a statutory merger in accordance with applicable Delaware
law and that the Merger will be carried out in conformance with the terms and
conditions as set forth in the Merger Agreement.
In formulating our opinion, we have considered the applicable provisions of
the Code, the Treasury Regulations promulgated thereunder and pertinent Internal
Revenue Service rulings and judicial authorities, all as they exist as of the
date of this letter. We caution that such authorities are subject to change in
the future, possibly with retroactive effect, and any such change could affect
the conclusions set forth below.
Based on the foregoing and on the continuing accuracy of the
Representations and provided that the Merger is consummated in a manner
contemplated by the Merger Agreement, we are of the opinion that:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and Golden State, Merger Sub and the RedFed will
each be a party to the reorganization within the meaning of Section 368(b) of
the Code;
2. No gain or loss will be recognized for purposes of federal income
taxation by Golden State, RedFed or Merger Sub as a result of the Merger;
3. No gain or loss will be recognized by the RedFed shareholders upon the
receipt of shares of Golden State Common Stock in exchange for shares of RedFed
Common Stock pursuant to the Merger, except that a shareholder who receives cash
in lieu of fractional shares
<PAGE>
GIBSON, DUNN & CRUTCHER LLP
RedFed Bancorp Inc.
April 3, 1998
Page 3
will recognize gain or loss equal to the difference between such cash and the
basis allocated to such fractional shares;
4. The aggregate basis of the shares of Golden State Common Stock received
by a RedFed shareholder (including any fractional share interest treated as
received) will be same as the shareholder's aggregate basis in his shares of
RedFed Common Stock immediately prior to the Merger; and
5. The holding period of the shares of Golden State Common Stock received
by a RedFed shareholder (including any fractional share interest treated as
received) will include the shareholder's holding period in his shares of RedFed
Common Stock exchanged for Golden State Common Stock, provided the shares of
RedFed Common Stock were held as capital assets on the Effective Date.
The foregoing opinions represent our best legal judgment, but you should be
aware of the fact that opinions of counsel have no binding effect on or official
status of any kind with respect to the Internal Revenue Service or any court
considering the issues. Except as to matters set forth expressly herein, we are
giving no opinion as to any other tax consequences related to the Merger,
whether under federal, state, local or foreign law. We hereby consent to the
filing of this opinion as an exhibit to the OTS Application on Form H-(e)3 filed
in connection with the Merger. We further 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,
GIBSON, DUNN & CRUTCHER LLP
<PAGE>
EXHIBIT 8.2
[LETTERHEAD OF MAYER, BROWN & PLATT]
April 3, 1998
Golden State Bancorp Inc.
414 North Central Avenue
Glendale, California 91203
Re: Merger of RedFed Bancorp, Inc. with and into a
Wholly-Owned Subsidiary of Golden State Bancorp Inc.
----------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Golden State Bancorp Inc. ("Golden
State") in connection with a proposed merger pursuant to which RedFed Bancorp,
Inc. ("RedFed") will be merged with and into Golden State Financial Corporation
("Merger Sub"), a wholly owned direct subsidiary of Golden State, as provided
for in the Agreement and Plan of Merger dated as of November 30, 1997 (the
"Merger Agreement"). Upon consummation of this transaction (the "Merger"), each
issued and outstanding share of RedFed common stock (other than shares of RedFed
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 RedFed common stock in lieu of the issuance of
fractional shares. You have requested that we provide opinions, as required by
section 6.2(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 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.
<PAGE>
[LETTERHEAD OF MAYER, BROWN & PLATT]
Golden State Bancorp Inc.
April 3, 1998
Page 2
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 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 the
management of RedFed and of 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 Time (as defined in the Merger Agreement). In the Representations,
the signatories thereof have undertaken to inform us if any prior statement made
therein becomes untrue prior to the Effective Time. 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 opinions:
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, RedFed 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 for purposes of the Federal income
tax by Golden State, RedFed or Merger Sub as a result of the Merger.
The opinions herein are rendered to you solely in connection with the
contemplated Merger and may not be relied upon by any other person or entity or
used for any other purpose without our prior written consent. We hereby consent
to the filing of this opinion as an exhibit to the OTS Application on Form H-
(e)3 filed in connection with the Merger. We further 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 23.3
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
KPMG Peat Marwick LLP
Los Angeles, California
April 2, 1998
<PAGE>
EXHIBIT 23.4
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 28, 1998,
except as to note 19 to the consolidated financial statements, which is as of
February 4, 1998, with respect to the consolidated statements of financial
condition of RedFed Bancorp Inc. and subsidiaries as of December 31, 1997 and
1996, 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, 1997, which report appears in the Form 10-K of RedFed Bancorp
Inc. for the year ended December 31, 1997, and to the references to our firm
under the headings "The Merger--Background of the Merger" and "Experts" in the
prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Orange County, California
April 1, 1998
<PAGE>
EXHIBIT 23.5
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
CENFED Financial Corporation:
We consent to incorporation by reference in the Registration Statement on
Form S-4 of Golden State Bancorp Inc. (Registration Statement) of our report
dated March 17, 1998, with respect to the consolidated statements of financial
condition of CENFED Financial Corporation and subsidiaries as of December 31,
1997 and 1996, 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
KPMG Peat Marwick LLP
Los Angeles, California
April 2, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
First Nationwide (Parent) Holdings Inc.:
We consent to the incorporation by reference in the Registration Statement
of Form S-4 of Golden State Bancorp Inc. of our report dated February 23, 1998
with respect to the consolidated balance sheets of First Nationwide (Parent)
Holdings Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, comprehensive income, stockholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1997, which report appears in the Form 10-K of First Nationwide
(Parent) Holdings Inc., and to the reference to our firm under the heading
"Experts" in the Registration Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Dallas, Texas
April 2, 1998
<PAGE>
EXHIBIT 99.1
REDFED BANCORP INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 26, 1998
Revoking all prior proxies, the undersigned, a stockholder of REDFED BANCORP
INC. (the "Company"), hereby appoints Stanley C. Weisser, Robert G. Wiens,
Douglas R. McAdam, and William T. Hardy, Jr., and each of them, attorneys and
agents of the undersigned, with full power of substitution, to vote all shares
of the Common Stock, par value $.01 per share ("Common Stock"), of the
undersigned of the Company at the Annual Meeting of Stockholders of the
Company to be held at the Company's offices located at 300 East State Street,
Redlands, California 92373 on May 26, 1998 at 10:00 a.m., local time, and at
any adjournment thereof, as fully and effectively as the undersigned could do
if personally present and voting, hereby approving, ratifying and confirming
all that said attorneys and agents or their substitutes may lawfully do in
place of the undersigned as indicated on the reverse. The undersigned
acknowledges receipt of the Notice of Annual 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.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
LISTED NOMINEES AS DIRECTORS AND FOR APPROVAL OF THE MERGER AGREEMENT AND
CONSUMMATION OF THE MERGER.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
<PAGE>
- --------------------------------------------------------------------------------
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all WITHHOLD
nominees AUTHORITY
1. Election of [_] [_]
Directors:
NOMINEES: Ms. Anne Bacon and
Messrs. John D. McAlearney
and William C. Buster Jr.
INSTRUCTIONS: For all nominees listed, except votes withheld from the following
nominees:
- ----------------
NOTE: If the Merger Agreement (as defined below) and the transactions
contemplated thereby shall be approved by the stockholders of the Company, the
Company's Board of Directors will serve until the consummation of the
transactions contemplated by the Merger Agreement (as described in the
Company's Proxy Statement/Prospectus dated April 21, 1998), at which time the
separate corporate existence of the Company will cease to exist and
consequently the Company's Board of Directors will be simultaneously dissolved
by operation of law.
2. To approve the Agreement and Plan of FOR AGANIST ABSTAIN
Merger, dated as of November 30, 1997 [_] [_] [_]
by and between the Company and Golden
State Bancorp Inc. (the "Merger
Agreement"), and the consummation of
the transactions contemplated thereby,
all as described in the Company's Proxy
Statement/Prospectus dated April 21,
1998.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED ENVELOPE.
Signature Date
--------------------------------- ------------------------
Signature Date
--------------------------------- -------------------------
Signature if held jointly
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, ALL SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.2
NOTE: THIS CONSENT SHOULD BE FILED WITH THE "ADDITIONAL EXHIBITS," NOT WITH
THE "CONSENTS OF EXPERTS AND COUNSEL." SEE ITEM 601 OF REGULATION S-K.
Members of the Board of Directors
RedFed Bancorp Inc.
300 East State Street
Redlands, California 92373
Gentlemen:
We hereby consent to the inclusion of our opinion letter dated November 30,
1997 to the Board of Directors of RedFed Bancorp Inc. (the "Company")
regarding the acquisition of RedFed Bancorp Inc. by Golden State Bancorp Inc.,
in Golden State Bancorp's Registration Statement on Form S-4 (the
"Registration Statement") and to the references therein to our firm and to our
opinion under the headings "SUMMARY--Opinion of RedFed Financial Advisor",
"THE MERGER--Background of the Merger", "THE MERGER--Reasons for the Merger
and Recommendation of RedFed Board of Directors" and "THE MERGER--Opinion of
RedFed Financial Advisor". In giving the foregoing consent, we do not admit
(i) that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of the 1933, as amended (the "Securities
Act"), or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder, and (ii) that we are experts with respect to any part
of the Registration Statement within the meaning of the term "experts" as used
in the Securities Act and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Very truly yours,
NATIONSBANC MONTGOMERY SECURITIES LLC
