<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COAST FEDERAL LITIGATION CONTINGENT
PAYMENT RIGHTS TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS DECLARATION OF TRUST)
------------------------
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<S> <C> <C>
DELAWARE 6733 -
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) (TO BE APPLIED FOR)
</TABLE>
E.A. DELLE DONNE CORPORATE CENTER
MONTGOMERY BUILDING
1011 CENTRE ROAD
WILMINGTON, DELAWARE 19805-1266
(302) 636-3300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
LISA WILKINS
BANKERS TRUST (DELAWARE)
E.A. DELLE DONNE CORPORATE CENTER
MONTGOMERY BUILDING
1011 CENTRE ROAD
WILMINGTON, DELAWARE 19805-1266
(302) 636-3300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
VICTOR I. LEWKOW, ESQ. NORMAN H. RAIDEN, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON COAST SAVINGS FINANCIAL, INC.
ONE LIBERTY PLAZA 1000 WILSHIRE BOULEVARD
NEW YORK, NEW YORK 10006 LOS ANGELES, CALIFORNIA 90017-2457
(212) 225-2000 (213) 688-0837
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
======================================================================================================
- ------------------------------------------------------------------------------------------------------
TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE FEE
- ------------------------------------------------------------------------------------------------------
Contingent Payment Right 20,703,817
Certificate................. certificates N/A N/A (2)(3)
======================================================================================================
</TABLE>
(1) The number of Contingent Payment Right Certificates ("CPR Certificates") to
be registered pursuant to this Registration Statement is equal to (i) the
number (20,283,360) of shares of Common Stock, par value $.01 per share
("Coast Common Stock"), of Coast Savings Financial, Inc. ("Coast") presently
outstanding or reserved for issuance under various plans or otherwise
expected to be issued upon the consummation of the proposed transaction to
which this Registration Statement relates and (ii) the number (420,457) of
Coast Performance Share Awards and Stock Appreciation Rights with respect to
which CPR Certificates will be issued.
(2) Pursuant to Rules 457(f) and 457(c) under the Securities Act of 1933, as
amended, the registration fee is based on the average of the high and low
sales prices of Coast Common Stock, as reported by the New York Stock
Exchange on January 9, 1998 ($57.109375), and computed based on the number
of shares of Coast Common Stock and Coast Performance Share Awards and Stock
Appreciation Rights with respect to which CPR Certificates are being issued
under this Registration Statement.
(3) A registration fee of $348,802.70 is payable hereunder. However, in
connection with the merger (the "Merger") of Coast into H.F. Ahmanson &
Company ("Ahmanson"), Coast's stockholders will receive both CPR
Certificates registered under this Registration Statement and shares of
common stock of Ahmanson registered under Ahmanson's Form S-4 Registration
Statement No. 333-41645 and Form S-4 Registration Statement No. 333-
filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended (the
"Ahmanson Registration Statements"). In connection with the Ahmanson
Registration Statements, Ahmanson has previously paid a registration fee of
$352,081.28 (which fee was partially offset pursuant to Rule 457(b) of the
Securities Exchange Act of 1934), and will pay an additional fee of $8,337
on the date hereof, in each case based on the price of Coast Common Stock
pursuant to Rules 457(f) and 457(c) under the Securities Act of 1933, as
amended. The registration fee paid by Ahmanson reflects the market value of
20,283,360 shares of Coast Common Stock, which value is attributable in part
to the shares of Ahmanson common stock registered under the Ahmanson
Registration Statements and in part to the CPR Certificates registered under
this Registration Statement. Accordingly, the fee paid or being paid by
Ahmanson has been credited against the registration fee payable hereunder
pursuant to Rule 457(b) under the Securities Act, as amended and no fee is
payable hereunder.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INTRODUCTORY NOTE
This Registration Statement on Form S-4 is being filed in connection with
the registration and issuance of Contingent Payment Right Certificates (the "CPR
Certificates") of Coast Federal Litigation Contingent Payment Rights Trust, a
Delaware business trust (the "Registrant"), to be distributed to holders of
common stock of Coast Savings Financial, Inc. ("Coast") immediately prior to the
effective time of the proposed merger (the "Merger") of Coast with and into H.F.
Ahmanson & Company ("Ahmanson"). Prior to the special meeting of stockholders of
Coast to be held in connection with the Merger, Coast stockholders will receive
a proxy statement of Coast that will include the information contained in the
prospectus included in this Registration Statement and the information contained
in the prospectus included in the registration statement of Ahmanson on Form S-4
(Registration Statement No. 333-41645) with respect to the shares of Ahmanson
common stock to be issued to Coast stockholders in the Merger (the "Proxy
Statement/Prospectus"). The prospectus included in this Registration Statement
does not contain all of the information that will be included in the Proxy
Statement/Prospectus.
<PAGE> 3
PROSPECTUS OF
COAST FEDERAL LITIGATION CONTINGENT
PAYMENT RIGHTS TRUST
CONTINGENT PAYMENT RIGHT
CERTIFICATES
------------------------
Coast Savings Financial, Inc., a Delaware corporation, ("Coast") has
established the Coast Federal Litigation Contingent Payment Rights Trust (the
"CPR Trust"), a statutory business trust created under Delaware law. Prior to
the effective time (the "Effective Time") of the merger (the "Merger") of Coast
with and into H.F. Ahmanson & Company, a Delaware corporation ("Ahmanson"),
pursuant to an Amended and Restated Agreement and Plan of Merger (the "Merger
Agreement"), dated as of October 5, 1997, between Coast and Ahmanson, Coast, the
Institutional Trustee (as defined herein), the Delaware Trustee (as defined
herein) and certain Litigation Trustees (as defined herein) will enter into the
CPR Trust Agreement (as defined herein). Immediately prior to the Effective
Time, Coast will cause the CPR Trust to issue certificates (the "CPR
Certificates") to Coast which will represent assignable and transferable
undivided beneficial interests in the assets of the CPR Trust and which, as a
result of Ahmanson's entering into of the Commitment (as defined herein), will
represent interests in the right to receive an amount equal to the net after-tax
proceeds, if any, that may be received in the case brought by Coast's
subsidiary, Coast Federal Savings, FSB ("Coast Federal"), against the United
States government relating to the federal government's alleged breach of the
agreement entered into in 1987, in connection with Coast Federal's acquisition
of Central Savings and Loan Association, to treat certain amounts as a permanent
addition to Coast Federal's regulatory capital (the "Litigation"). Immediately
prior to the Effective Time (provided that all other conditions to consummation
of the Merger have been satisfied or waived), Coast will distribute (the "CPR
Certificate Distribution") to the Coast stockholders one CPR Certificate for
each share of Common Stock $.01 par value ("Coast Common Stock") of Coast held
by such stockholders, with record and payment dates for the CPR Certificate
Distribution immediately prior to the Effective Time on the effective date (the
"Effective Date") of the Merger. Coast will also retain a number of CPR
Certificates sufficient for the delivery of CPR Certificates in connection with
Coast Stock Options (as defined herein), Coast Performance Share Awards (as
defined herein) and Coast SARs (as defined herein). In addition, at the
Effective Date, Ahmanson will be entitled to receive CPR Certificates with
respect to any shares held by holders of Coast Common Stock ("Dissenters'
Shares") who perfect their rights to dissent from the Merger and any CPR
Certificates that would otherwise have been issuable with respect to Coast
Performance Share Awards and Coast SARs that are exercised between the date of
the Merger Agreement and the Effective Date. The establishment of the CPR Trust,
the CPR Certificate Distribution and Ahmanson's entering into of the Commitment
described below are, among other things, conditions to the consummation of the
Merger.
This Prospectus constitutes a prospectus of the CPR Trust in respect of the
CPR Certificates to be issued by the CPR Trust. As of the Record Date (as
defined herein), the number of CPR Certificates issuable in the CPR Certificate
Distribution to stockholders of record as of the Record Date would be
19,262,934. The number of CPR Certificates issuable with respect to Coast Stock
Options (as defined herein) outstanding on the Record Date would be 1,020,426
and the number of CPR Certificates issuable with respect to Coast Performance
Share Awards (as defined herein) and Coast SARs (as defined herein) outstanding
on the date of the Merger Agreement would be 420,457. Based on these numbers, up
to approximately 20,703,817 CPR Certificates will be issuable by the CPR Trust
immediately prior to the Effective Time.
Application has been made to have the CPR Certificates listed on the NASDAQ
National Market under the symbol "CCPR." No assurance can be given that the CPR
Certificates will satisfy the listing requirements for inclusion on the NASDAQ
National Market System or any other system.
THE CPR CERTIFICATES REPRESENT UNDIVIDED BENEFICIAL INTERESTS IN THE ASSETS
OF THE CPR TRUST AND WILL REPRESENT INTERESTS IN THE RIGHT (EVIDENCED BY THE
COMMITMENT) TO RECEIVE AN AMOUNT EQUAL TO THE NET AFTER-TAX PROCEEDS, IF ANY,
THAT MAY BE RECEIVED BY COAST FEDERAL (OR ITS SUCCESSOR) IN THE LITIGATION. THE
CPR CERTIFICATES DO NOT PROVIDE TO THEIR HOLDERS
(continued on next page)
<PAGE> 4
(cover page continued)
ANY RIGHTS IN THE LITIGATION OR AGAINST THE UNITED STATES GOVERNMENT. THE CPR
CERTIFICATES ARE HIGHLY SPECULATIVE SECURITIES THAT INVOLVE A HIGH DEGREE OF
RISK AND MAY NOT BE AN APPROPRIATE INVESTMENT FOR THE AVERAGE INVESTOR. SEE
"RISK FACTORS" BEGINNING ON PAGE 7 FOR FACTORS TO BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE CPR CERTIFICATES.
THE CPR CERTIFICATES OFFERED HEREBY 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 PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE CPR CERTIFICATES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY............................................................................... 3
Formation of the CPR Trust and the CPR Certificate Distribution..................... 3
Description of the CPR Certificates................................................. 4
Resales of CPR Certificates......................................................... 3
No Existing Trading Market for the CPR Certificates................................. 4
The CPR Certificate Distribution.................................................... 4
The Commitment...................................................................... 4
Definitions Related to the CPR Trust................................................ 4
Rights of Holders of the CPR Certificates........................................... 5
Expenses of the CPR Trust........................................................... 5
CPR Trust Prospectus................................................................ 5
Special Meeting..................................................................... 6
RISK FACTORS.......................................................................... 7
Control of the Litigation........................................................... 7
Establishing the Federal Government's Liability in the Litigation................... 7
Amount of Damages................................................................... 7
Payments, if any, to CPR Certificate Holders........................................ 8
Adequacy of Expense Fund............................................................ 9
Limitation on Rights of CPR Certificate Holders..................................... 9
No Existing Trading Market for the CPR Certificates................................. 10
Availability of Information Regarding Developments in the Litigation................ 11
FORMATION OF THE CPR TRUST............................................................ 11
THE LITIGATION........................................................................ 11
Introduction........................................................................ 11
The Litigation...................................................................... 11
Related Cases....................................................................... 12
Relation of the Litigation to the Related Cases..................................... 13
Damages............................................................................. 13
THE CPR CERTIFICATE DISTRIBUTION...................................................... 15
DELIVERY OF THE CPR CERTIFICATES...................................................... 15
THE COMMITMENT........................................................................ 15
DESCRIPTION OF THE CPR CERTIFICATES................................................... 16
General............................................................................. 16
Resales of CPR Certificates......................................................... 16
Tradability......................................................................... 17
Payment of Commitment Amount to the CPR Trust....................................... 17
Payment Procedures.................................................................. 17
Payment of Payment Amount to Holders................................................ 20
Timing of Payments.................................................................. 20
The Expense Fund, Other Expenses and the Retained Amount............................ 20
Tax Assumptions..................................................................... 21
Determination....................................................................... 23
Indemnification Obligations of the CPR Trust; Liability Insurance................... 24
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Limitation on Rights of CPR Certificate Holders..................................... 25
MANAGEMENT OF THE LITIGATION.......................................................... 26
The Litigation Trustees -- General.................................................. 26
The Litigation Trustees -- Authority................................................ 27
Liability of the Litigation Trustees................................................ 27
FILING OF EXCHANGE ACT REPORTS........................................................ 28
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................... 28
Characterization of the CPR Certificates and the CPR Trust.......................... 28
Characterization of the Commitment; Section 483..................................... 29
Sale of Certificates................................................................ 29
Receipt of Payments on the Commitment............................................... 30
Lack of a Cash Recovery............................................................. 30
Other Characterizations............................................................. 30
Funding of Additional Expenses...................................................... 30
Back-Up Withholding and Information Reporting....................................... 30
VALIDITY OF THE CPR CERTIFICATES...................................................... 31
APPENDICES:
APPENDIX A -- [Reserved]
APPENDIX B -- Form of Amended and Restated Declaration of Trust
APPENDIX C -- Form of Commitment
APPENDIX D -- [Reserved]
APPENDIX E -- [Reserved]
</TABLE>
ii
<PAGE> 7
SUMMARY
The following is a summary of certain information contained herein. This
summary is not intended to be a complete description of the matters covered
herein and is subject to and qualified in its entirety by reference to the more
detailed information contained elsewhere herein.
FORMATION OF THE CPR TRUST AND THE CPR CERTIFICATE DISTRIBUTION
The CPR Trust is a statutory business trust created under Delaware law
pursuant to a Declaration of Trust and the filing of a Certificate of Trust with
the Delaware Secretary of State on January 8, 1998 for the purpose of holding
the Commitment. The CPR Certificates will represent assignable and transferable
undivided beneficial interests in the assets of the CPR Trust, and, as a result
of Ahmanson's entering into of the Commitment, will represent interests in the
right to receive an amount equal to the net after-tax proceeds, if any, to be
received by Coast Federal (or its successor) in its regulatory capital
litigation claims against the United States government in the case entitled
Coast Federal Bank, FSB v. United States, No. 92-466C (Cl. Ct. filed July 9,
1992), as more fully described below. Immediately prior to the Effective Time,
Coast, the Litigation Trustees, Bankers Trust Company (the "Institutional
Trustee") and Bankers Trust (Delaware) (the "Delaware Trustee") will enter into
an Amended and Restated Declaration of Trust (the "CPR Trust Agreement"),
substantially in the form attached hereto as Appendix B. The CPR Trust Agreement
will govern the terms and conditions of the CPR Trust. Immediately prior to the
Effective Time of the Merger, the CPR Trust will issue the CPR Certificates to
Coast and Coast will distribute one CPR Certificate to the Coast stockholders
for each share of Coast Common Stock held by such stockholders. Coast will also
retain a number of CPR Certificates sufficient for the delivery (or retention by
Ahmanson as successor to Coast in certain circumstances) of CPR Certificates in
connection with Coast Stock Options, Coast Performance Share Awards and Coast
SARs.
At the Effective Time and effective at the Effective Time, Ahmanson will
enter into the Commitment with the CPR Trust, pursuant to which Ahmanson will be
obligated to pay to the CPR Trust from time to time an aggregate amount equal to
the Commitment Amount. The Litigation will remain a contingent asset of Coast
Federal upon effectiveness of the Merger and thus will become a contingent asset
of Ahmanson as successor to Coast and as parent company of Coast Federal. The
four senior executives of Coast with knowledge of the facts underlying the
Litigation will be appointed as "Litigation Trustees" of the CPR Trust, and will
be given full authority to make all decisions on behalf of Coast Federal (and
its successors) with respect to the prosecution of the Litigation at the CPR
Trust's expense, including selection and supervision of existing and any new
counsel and deciding whether or not to accept any settlement offer.
The only assets of the CPR Trust will be the Commitment and the right to
draw on amounts in the Expense Fund for purposes of funding expenses of the CPR
Trust including expenses of the Litigation, fees and expenses of the Litigation
Trustees and all administrative expenses. Within 60 days of the receipt of any
Commitment Amount, the CPR Trust will pay such amounts (other than $10 million
(or such greater amount as the Litigation Trustees reasonably determine may be
reasonably likely to be required to pay additional expenses or to satisfy the
CPR Trust's indemnification obligations (the "Retained Amount")) less the amount
of any accrued but unpaid expenses payable by the CPR Trust not covered by the
Expense Fund, to the holders of the CPR Certificates (as of a record date set by
the Litigation Trustees). The Retained Amount will be retained for a period of
two years (or such longer period as the Litigation Trustees reasonably determine
may be reasonably likely to be required).
THE CPR CERTIFICATES ARE HIGHLY SPECULATIVE SECURITIES THAT INVOLVE A HIGH
DEGREE OF RISK. See "Risk Factors."
DESCRIPTION OF THE CPR CERTIFICATES.
Each CPR Certificate will represent an undivided beneficial interest in the
assets of the CPR Trust, and will, as a result of Ahmanson's entering into of
the Commitment, represent a pro rata interest in the right to receive an amount
equal to the net after-tax proceeds, if any, that may be received in the
Litigation, as described below.
3
<PAGE> 8
RESALES OF CPR CERTIFICATES
The CPR Certificates will be freely transferable by the holders of such CPR
Certificates, except for those holders who may be deemed to be "affiliates" of
the CPR Trust under applicable federal securities laws. See "Description of the
CPR Certificates -- Resales of the CPR Certificates" and "Risk Factors."
NO EXISTING TRADING MARKET FOR THE CPR CERTIFICATES
There is no current market for the CPR Certificates. Coast, on behalf of
the CPR Trust, has applied for inclusion of the CPR Certificates on the NASDAQ
National Market System under the symbol "CCPR." No assurance can be given that
the CPR Certificates will satisfy the listing requirements for inclusion on the
NASDAQ National Market System or any other trading system. In the event that the
CPR Certificates cannot be listed on any trading system, there would likely be
only minimal or no trading channels for the CPR Certificates, resulting in
severely reduced or no liquidity for investors in the CPR Certificates. Even if
such listing is achieved, there can be no assurance that an active market for
the CPR Certificates will develop or be sustained. If such a market develops,
there can be no assurance as to the price at which the CPR Certificates would
trade at any time and such price could be subject to rapid and substantial
change, depending upon, among other things, developments in the Litigation and
similar pending litigation. See "Risk Factors."
THE CPR CERTIFICATE DISTRIBUTION
Immediately prior to the Effective Time of the Merger (provided that all
other conditions to consummation of the Merger under the Merger Agreement have
been satisfied or waived), the CPR Trust will issue the CPR Certificates to
Coast. Coast will then distribute one CPR Certificate to each Coast stockholder
for each share of Coast Common Stock held by such stockholder, and will retain a
certain number of CPR Certificates as described in "The CPR Certificate
Distribution."
THE COMMITMENT
At the Effective Time, and effective at the Effective Time, Ahmanson will
enter into a Commitment Agreement (the "Commitment"), substantially in the form
attached as Appendix C to this Prospectus, pursuant to which Ahmanson will be
obligated to pay to the CPR Trust from time to time an amount equal to the
Commitment Amount. See "The Commitment."
DEFINITIONS RELATED TO THE CPR TRUST
As used in this Prospectus, the "Commitment Amount" means the Litigation
Proceeds minus the Reimbursements plus the Assumed Tax Benefit (as defined in
"Description of the CPR Certificates.)"
"Litigation Proceeds" means any and all cash payments (the "Cash Proceeds")
actually received by Ahmanson, Coast Federal or Home Savings or any of their
affiliates (the "Ahmanson Group") pursuant to a final, non-appealable judgment
or a final settlement of the Litigation and the non-cash payments (the "Non-Cash
Proceeds"), if any, actually received by the Ahmanson Group pursuant to a final,
non-appealable judgment or a final settlement of the Litigation.
"Reimbursements" means (a) an amount equal to the Expense Fund plus (b)
interest on the portions of the Expense Fund withdrawn by the CPR Trust
calculated from the time of any such withdrawal at an annual interest rate equal
to the Reference Rate plus 250 basis points, compounded quarterly plus (c) the
Assumed Tax Liability (as defined in "Description of the CPR Certificates") plus
(d) in the event Litigation Proceeds are required to be included in income for
federal income tax purposes in a taxable year prior to the year such proceeds
are received in cash (either because of the accrual of Cash Proceeds before the
payment thereof or the time required to liquidate Non-Cash Proceeds), interest
at the Reference Rate plus 250 basis points from the date of such payment of
taxes on such income to the date of receipt of cash.
The "Expense Fund" means an amount equal to $20 million, less the expenses
relating to the Litigation incurred and paid between August 31, 1997 and the
Effective Date, which amount Ahmanson will deposit at
4
<PAGE> 9
the Effective Time in a non-interest bearing demand-deposit account in the name
of the CPR Trust at Home Savings.
The "Payment Amount" means the Commitment Amount received (including the
amount of cash resulting from the monetization by Ahmanson of any Non-Cash
Proceeds), less the amount of any accrued but unpaid expenses payable by the CPR
Trust and, for any reason, not covered by the Expense Fund, less amounts
retained by the CPR Trust as the "Retained Amount" (as defined in "-- The
Expense Fund, Other Expenses and the Retained Amount").
RIGHTS OF HOLDERS OF THE CPR CERTIFICATES
Within 60 days of the receipt of any Commitment Amount, the CPR Trust will
pay the Payment Amount to the holders of the CPR Certificates. The only assets
of the CPR Trust will be the Commitment and the right to draw on amounts in the
Expense Fund for the purpose of funding any expenses of the CPR Trust.
The Commitment and the CPR Trust Agreement will provide that holders of CPR
Certificates will have no rights to bring any action against Ahmanson or any
member of the Ahmanson Group, although the CPR Trust (or the Litigation Trustees
on behalf of the CPR Trust) may bring an action against Ahmanson for breach of
the Commitment or, after the Effective Time, under the CPR Trust Agreement, for
failure to deliver any CPR Certificate when due or to return to the CPR Trust
for cancellation any CPR Certificate required to be returned when so required,
for failure to deposit the Expense Fund at the Effective Time in a non-interest
bearing demand-deposit account in the name of the CPR Trust at Home Savings or
against Home Savings for breach of any depository relationship obligations it
may have with respect to the Expense Fund. The CPR Trust Agreement will provide
that the Litigation Trustees may only be held liable to the holders of the CPR
Certificates if it is established in a final judicial determination by clear and
convincing evidence that any decision or action of the Litigation Trustees was
undertaken with deliberate intent to injure the CPR Certificate holders or with
reckless disregard for the best interests of such holders, and, in any event,
any liability will be limited to actual, proximate, quantifiable damages. See
"Description of the CPR Certificates -- Limitations on Rights of CPR Certificate
Holders."
EXPENSES OF THE CPR TRUST
The Expense Fund will be used to pay all expenses of the CPR Trust,
including expenses of the Litigation, fees and expenses of the Litigation
Trustees and all administrative expenses. The CPR Trust may issue additional CPR
Certificates after the Effective Time that represent pro rata interests in the
assets of the CPR Trust to pay expenses. The CPR Trust may borrow funds in order
to pay expenses if such borrowings represent debt of the CPR Trust (and not
ownership interests) for federal income tax purposes. See "Risk
Factors -- Adequacy of the Expense Fund."
CPR TRUST PROSPECTUS
This Prospectus is being furnished by the CPR Trust as a prospectus in
respect of the CPR Certificates to be issued by the CPR Trust. As of the close
of business on December 23, 1997, which has been fixed by the Board of Directors
of Coast as the record date (the "Record Date") for determining the Coast
stockholders entitled to receive notice of and to vote at the Special Meeting
(as defined below), the number of CPR Certificates issuable in the CPR
Certificate Distribution to shareholders of record as of the Record Date would
be 19,262,934. The number of CPR Certificates issuable with respect to options
to acquire shares of Coast Common Stock (the "Coast Stock Options") outstanding
on the Record Date would be 1,020,426 and the number of CPR Certificates
issuable with respect to performance share awards ("Coast Performance Share
Awards") under the Coast Performance Share Award Plan and stock appreciation
rights ("Coast SARs") under Coast's 1996 Equity Incentive Plan or Coast's 1985
Stock Option and Stock Appreciation Rights Plan outstanding on the date of the
Merger Agreement would be 420,457. Based on these numbers, up to approximately
20,703,817 CPR Certificates will be issuable by the CPR Trust immediately prior
to the Effective Time.
5
<PAGE> 10
SPECIAL MEETING
A special meeting (the "Special Meeting") of Coast stockholders will be
held on February , 1998 at a.m., at the OMNI Hotel, 930 Wilshire Boulevard,
Los Angeles, California, to consider and vote upon a proposal to approve the
Merger Agreement and the transactions contemplated thereby, including the
approval of the Merger, the establishment of and the terms of the CPR Trust, the
CPR Certificate Distribution, the engagement of the Litigation Trustees
(including the terms of their engagement), the terms of the Commitment and the
rights of the holders of the CPR Certificates.
6
<PAGE> 11
RISK FACTORS
Stockholders should carefully consider the following risk factors, as well
as all the other information set forth in this Proxy Statement/Prospectus
regarding the CPR Certificates.
CONTROL OF THE LITIGATION
The CPR Trust Agreement will provide that the Litigation Trustees will
instruct Coast Federal (and its successors) with respect to the Litigation and
may, among other things, instruct Coast Federal (and its successors) to dismiss,
settle or cease prosecuting the Litigation at any time without regard to the
impact of any such settlement on the value of the CPR Certificates and without
obtaining any cash or other recovery. Coast shall be obligated to instruct Coast
Federal to follow these instructions other than instructions that are not
reasonable. There can be no assurance that Coast or Coast Federal will comply
with the instructions of the Litigation Trustees. The CPR Trust Agreement will
also provide that Ahmanson and Home Savings will have no liability to the
holders of the CPR Certificates and that the holders of CPR Certificates will
not have any rights against Ahmanson, Home Savings or the Litigation Trustees
for any decision regarding the conduct or disposition of the Litigation,
including, without limitation, any decision to dispose of the Litigation without
obtaining a cash or other recovery (unless, in the case of the Litigation
Trustees only, it is established in a final judicial determination by clear and
convincing evidence that any decision or action of the Litigation Trustees was
undertaken with deliberate intent to injure the CPR Certificate holders or with
reckless disregard for the best interests of such holders, and, in any event,
any liability will be limited to actual, proximate, quantifiable damages).
Although the Litigation Trustees currently intend to cause Coast Federal to
continue to prosecute the Litigation and to seek a cash recovery, there can be
no assurance that the Litigation Trustees will not make a different
determination in the future. There is also no assurance that any of the initial
Litigation Trustees, who are four current senior Coast executives (Ray Martin,
Robert L. Hunt II, Norman H. Raiden and James F. Barritt) with knowledge of the
facts underlying the Litigation, will remain a Litigation Trustee, and the
holders of the CPR Certificates will have no rights to elect, remove or replace
any Litigation Trustee.
ESTABLISHING THE FEDERAL GOVERNMENT'S LIABILITY IN THE LITIGATION
Coast Federal has asserted two principal legal theories to support its
claims in the Litigation against the United States: first, Coast Federal
maintains that the United States breached its contractual commitment with Coast
Federal regarding the computation of Coast Federal's regulatory capital; and
second, Coast Federal argues that changes to such computation methods
constituted an unlawful taking of its property without just compensation or due
process, in violation of the U.S. Constitution. There can be no assurance that
Coast Federal will prevail in establishing the federal government's liability
under either of such legal theories. In a decision involving three consolidated
Related Cases (as defined in "The Litigation -- Related Cases") (each of which
involved somewhat different contractual documentation) that present issues which
Coast Federal believes are similar in certain respects to those presented by the
Litigation, the U.S. Supreme Court (the "Supreme Court") held that the United
States was liable for the breach of contracts between the plaintiffs in those
cases and the United States by discontinuing certain promised regulatory capital
treatment of the plaintiff institutions. See "The Litigation." While Coast
Federal believes that the contractual documentation and language relating to its
1987 thrift acquisition present similarities to the contractual fact pattern
presented in the Related Cases, there can be no assurance that Coast Federal
will prevail in the Litigation on its breach of contract claim. In addition, the
Supreme Court did not consider the merits of the "unlawful taking" theory in the
Related Cases, and there can be no assurance that the plaintiffs in the Related
Cases or Coast Federal would ultimately prevail on that theory. On March 25,
1993, Coast Federal filed a motion for partial summary judgment as to the
federal government's liability to Coast Federal for breach of contract. This
motion remains pending.
AMOUNT OF DAMAGES
The Litigation, the Related Cases and other similar claims present issues
as to the amount, if any, and type of damages that may be recoverable by the
plaintiffs. The Litigation and the litigation of the Related Cases have to date
focused on liability issues, and there has been no final ruling to date with
respect to the
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amount or scope of damages. Although Coast Federal has conducted preliminary
reviews of the damages suffered by it, it has not specified the amount or type
of damages it seeks in the Litigation. The United States has argued in the
Related Cases that some or all of the damages as to which recovery is sought by
the plaintiffs in the Related Cases are too speculative to permit a recovery.
Trial of the damage phase of two of the Related Cases will occur prior to trial
of Coast Federal's damage claims, and rulings in the Related Cases may adversely
affect some or all of Coast Federal's damage claims. In addition, other cases
representing similar claims are scheduled for trial before Coast Federal's case
is likely to go to trial, and rulings in those cases may also adversely affect
some or all of Coast Federal's damage claims. For these and related reasons,
even if Coast Federal prevails in establishing the liability of the United
States, there can be no assurance as to the amount, if any, and type of damages
that it may recover. Without limiting the generality of the foregoing, there can
be no assurance that Coast Federal will obtain any monetary recovery in the
Litigation. Nor if there is recovery is there any assurance as to the timing of
the recovery, which could be very lengthy. Furthermore, assuming that there is a
monetary recovery, it is impossible to predict the Commitment Amount because the
fees, costs, taxes and tax benefits associated with the calculation of the
Commitment Amount cannot presently be estimated and could substantially exceed
the amount of the Expense Fund. To the extent that Coast Federal must engage in
protracted litigation, such fees and costs may increase significantly.
PAYMENTS, IF ANY, TO CPR CERTIFICATE HOLDERS
No assurance can be given as to how or when the Litigation will be resolved
and when, if ever, Coast Federal will receive a cash or other payment in respect
of the Litigation, or whether the value of any such recovery will exceed the CPR
Trust's reimbursement obligations and any other CPR Trust expenses. Even if the
Litigation is prosecuted to an initial favorable judgment, any such initial
favorable judgment in the Litigation is likely to be appealed by the federal
government. Any Litigation Proceeds received will first be applied by Ahmanson
to the Reimbursements. In addition, after it receives a payment of the
Commitment Amount from Ahmanson, the CPR Trust will be obligated to hold (and
not distribute to the holders of the CPR Certificates) the Retained Amount (as
defined herein) for two years (or such longer period as the Litigation Trustees
reasonably determine may be reasonably likely to be required) to cover all
expenses, costs and claims and the indemnification obligations of the CPR Trust
which may be incurred or which may arise after the Commitment Amount is paid in
full. See "Description of the CPR Certificates -- The Expense Fund, Other
Expenses and the Retained Amount."
Even in the event that a favorable final judgment or settlement is
obtained, it is possible that some or all damages will be in the form of
Non-Cash Proceeds, in which case Ahmanson will be obligated to monetize such
Non-Cash Proceeds pursuant to the instructions of the Litigation Trustees. No
assurance can be provided that Ahmanson will be able to convert such Non-Cash
Proceeds into cash or, even if this is possible, that the cash obtained will be
the equivalent of the fair market value of the Non-Cash Proceeds.
Even in the event that Cash Proceeds or monetizable Non-Cash Proceeds that
exceed the amount of the Reimbursements are received, there is no assurance that
Ahmanson will have funds sufficient to pay any portion of the Commitment Amount
to the CPR Trust when due. There is also no assurance that Ahmanson will be able
to, or be permitted under then applicable laws, rules or regulations to, cause
Coast Federal or, in the event of a merger between Coast Federal and Home
Savings, Home Savings to transfer the Litigation Proceeds to Ahmanson so as to
provide funds to Ahmanson to pay the Commitment Amount. In addition, pursuant to
the Commitment, Ahmanson will not be obligated to pay the Commitment Amount or
any portion thereof at the Due Date (as defined herein) and for a period of two
years thereafter (and will be deemed not to be in default of the Commitment and
not to have violated its obligations thereunder by virtue of not having paid the
Commitment Amount or such portion thereof) to the extent that Home Savings is
not permitted due to regulatory restrictions to distribute to Ahmanson the
Litigation Proceeds and provided that certain other conditions are met (although
Ahmanson will be obligated to pay interest on the Commitment Amount or such
portion thereof, as the case may be, from the Due Date until the date the
Commitment Amount or such portion thereof is paid, calculated at an annual
interest rate equal to the Reference Rate plus 250 basis points). In addition,
applicable laws, rules or regulations governing savings and loan holding
companies then in effect could limit or prevent the payment of the Commitment
Amount by Ahmanson to the CPR Trust.
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Although Ahmanson will be obligated under the Commitment to pay the
Commitment Amount to the CPR Trust, the Commitment, the CPR Trust Agreement and
the CPR Certificates will provide that no CPR Certificate holder will have the
right to enforce, institute or maintain any suit, action or proceeding against
any member of the Ahmanson Group for a breach of such obligation. The CPR Trust,
or the Litigation Trustees on behalf of the CPR Trust, however, will be
authorized to enforce, institute or maintain a suit, action or proceeding
against Ahmanson for breach of the Commitment.
ADEQUACY OF EXPENSE FUND
Amounts in the Expense Fund will be applied to a variety of expenses,
including the costs of prosecuting the Litigation (including the fees and
expenses of counsel, experts and consultants), compensation of the Institutional
Trustee, the Delaware Trustee and the Litigation Trustees, the CPR Trust's
indemnification obligations (see "The CPR Certificates -- Indemnification
Obligations of the CPR Trust; Liability Insurance") and liability insurance for
the CPR Trust's indemnification obligations and any liabilities of the
Litigation Trustees. There is no assurance that the Expense Fund will be
sufficient to cover such fees and expenses, and to the extent that Coast Federal
must engage in protracted litigation, such fees and expenses may increase
significantly.
Coast and counsel for the Litigation ("Litigation Counsel") have a
tentative understanding for a contingent fee arrangement pursuant to which
Litigation Counsel would defer or waive certain fees that they would otherwise
be entitled to receive and, in consideration thereof, they would be entitled to
receive from the CPR Trust an amount equal to 1% of the Commitment Amount, which
payment to Litigation Counsel would reduce the Payment Amount to be paid to
holders of CPR Certificates. However, there can be no assurance that a
contingent fee arrangement will be entered into on such terms or on any other
terms. Any contingent payment by the CPR Trust could significantly increase the
CPR Trust's expenses and thus significantly reduce the Payment Amount with
respect to the CPR Certificates.
The CPR Trust may issue additional CPR Certificates that represent pro rata
interests in the assets of the CPR Trust in order to pay expenses. However, it
may not be possible to obtain purchasers of the additional CPR Certificates and
there is no assurance that the terms of any such purchases would be reasonable.
In the event additional CPR Certificates are issued and existing CPR Certificate
holders are not given the opportunity to purchase, or do not purchase a pro rata
amount in such issuance, such CPR Certificate holders' indirect interest in the
Payment Amount will be diluted. The CPR Trust will be authorized to borrow
additional funds for the sole purpose of funding expenses of the CPR Trust, but
only if such borrowings represent debt of the CPR Trust (and not ownership
interests) for federal income tax purposes. Furthermore, it may not be possible
for the CPR Trust to borrow funds (or, if it is able to borrow funds, there can
be no assurance that the terms of such borrowings will be reasonable).
LIMITATION ON RIGHTS OF CPR CERTIFICATE HOLDERS
The CPR Trust Agreement and the CPR Certificates will provide that the
Litigation Trustees will have no liability to CPR Certificate holders unless it
is established in a final judicial determination by clear and convincing
evidence that any action or omission of the Litigation Trustees was undertaken
with deliberate intent to injure the CPR Certificate holders or with reckless
disregard for the best interests of such holders, and, in any event, any
liability will be limited to actual, proximate, quantifiable damages. In
addition, the CPR Trust Agreement will provide that the institutional trustee
and the Delaware trustee to the CPR Trust will have no liability to the CPR
Certificate holders other than for acts or omissions committed with gross
negligence or willful misconduct.
The CPR Trust Agreement and the CPR Certificates will provide that no CPR
Certificate holder will have the right to enforce, institute or maintain any
suit, action or proceeding against the Litigation Trustees or otherwise under
the CPR Trust Agreement to enforce or otherwise act in respect of the CPR
Certificates unless such holder has previously given written notice to the
Litigation Trustees of the substance of such dispute, and holders of at least a
majority in interest of the issued and outstanding CPR Certificates have given
written notice to such parties of their support of the institution of such
proceeding to resolve such dispute.
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The Commitment, the CPR Trust Agreement and the CPR Certificates will
provide that Ahmanson, Home Savings, their affiliates, officers, directors,
employees or agents will have no liability to the holders of the CPR
Certificates. Without limiting the generality of the foregoing, none of the CPR
Certificate holders, the Trustees or the CPR Trust will have the right to
enforce, institute or maintain any suit, action or proceeding against Ahmanson,
Home Savings, their affiliates, officers, directors, employees or agents
relating to the formation of the CPR Trust, the entering into of the Commitment,
the distribution of the CPR Certificates, the Litigation or the performance by
the Litigation Trustees of their duties as Litigation Trustees. Notwithstanding
the foregoing, the CPR Trust, or the Litigation Trustees on behalf of the CPR
Trust, may enforce, institute or maintain a suit, action or proceeding against
Ahmanson for breach of the Commitment or failure to deliver any CPR Certificate
required to be returned when so required or against Ahmanson for failure to
deposit the Expense Fund at the Effective Time in a non-interest bearing
demand-deposit account in the name of the CPR Trust or against Home Savings for
breach of any depository relationship obligations it may have with respect to
the Expense Fund.
The CPR Trust Agreement will provide that the CPR Certificate holders will
have no voting rights (except in connection with certain amendments to the CPR
Trust Agreement and except for limited rights in connection with the removal of
the institutional trustee and the Delaware trustee to the CPR Trust) no
liquidation preference and no rights to dividends or distributions other than
their pro rata share of the Payment Amount plus any other CPR Trust assets. In
addition, the CPR Trust will have no assets other than the Commitment and the
right to draw on amounts in the Expense Fund for the purpose of funding any
expenses of the CPR Trust.
NO EXISTING TRADING MARKET FOR THE CPR CERTIFICATES
There is no current market for the CPR Certificates. Coast, on behalf of
the CPR Trust, has applied for inclusion of the CPR Certificates on the NASDAQ
National Market System under the symbol "CCPR." No assurance can be given that
the CPR Certificates will satisfy the listing requirements for inclusion on the
NASDAQ National Market System or any other trading system. In the event that the
CPR Certificates cannot be listed on any trading system, there would likely be
only minimal or no trading channels for the CPR Certificates, resulting in
severely reduced or no liquidity for investors in the CPR Certificates. Even if
such listing is achieved, there can be no assurance that an active market for
the CPR Certificates will develop or be sustained. If such a market develops,
there can be no assurance as to the price at which the CPR Certificates would
trade at any time and such price could be subject to rapid and substantial
change, depending upon, among other things, developments in the Litigation and
similar pending litigation.
The price of the CPR Certificates may depend on a number of factors,
including, without limitation, the nature of court decisions and opinions in the
Litigation, the Related Cases and additional similar cases that may go to trial
prior to the Litigation and speculation about the outcome of the Litigation and
litigation of the Related Cases and similar cases, settlement of any Related
Cases or similar cases and Ahmanson's ability to pay the Commitment Amount to
the CPR Trust. Consequently, there could be wide fluctuations in the price of
CPR Certificates over short periods of time. The CPR Trust will include reports
of developments in the Litigation in its regular, periodic securities filings
and reports. In addition, the CPR Trust's ability to disclose details of the
Litigation on a regular basis may be limited by the inherent nature and rules of
judicial proceedings, including, among other things, proceedings and filings
that are sealed by the court, matters involving attorney-client privilege and
proceedings that are conducted on a confidential basis by agreement of the
parties, such as negotiations. However, important developments in the Litigation
and the Related Cases may occur and become known publicly prior to disclosure in
such filings or reports.
The nature of an investment in the CPR Certificates differs from the nature
of an investment in a savings and loan holding company such as Coast or
Ahmanson. Some current Coast stockholders may therefore determine that
investment in the CPR Certificates does not comport with their investment
policies or that such investment may be restricted by their charters (in the
case of corporate or institutional stockholders). Such determinations by
significant Coast stockholders, or by a large number of Coast stockholders, may
result in rapid divestment of CPR Certificates by these stockholders, causing
temporary selling pressure that would adversely affect the price of the CPR
Certificates for some period following the Effective Time.
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AVAILABILITY OF INFORMATION REGARDING DEVELOPMENTS IN THE LITIGATION
As described in "Filing of Exchange Act Reports," the CPR Trust will file
annual reports on Form 10-K and quarterly reports on Form 10-Q that will include
an overview of the status of the Litigation, and will also file a report on Form
8-K upon the occurrence of a material judicial decision in the Litigation or in
the event of any agreement to settle the Litigation. The CPR Trust's ability to
disclose details of the Litigation may be limited, however, by the inherent
nature and rules of judicial proceedings, including, among other things,
proceedings and filings that are sealed by the court, matters involving
attorney-client privilege and proceedings that are conducted on a confidential
basis by agreement of the parties, such as settlement negotiations.
FORMATION OF THE CPR TRUST
The CPR Trust is a statutory business trust created under Delaware law
pursuant to a Declaration of Trust and the filing of a Certificate of Trust with
the Delaware Secretary of State on January 8, 1998, for the purpose of holding
the Commitment. Immediately prior to the Effective Time of the Merger, Coast,
the Litigation Trustees, the Institutional Trustee and the Delaware Trustee will
enter into the CPR Trust Agreement, substantially in the form attached hereto as
Appendix B. The CPR Trust Agreement will govern the terms and conditions of the
CPR Trust. Pursuant to the CPR Trust Agreement, the four senior executives of
Coast with knowledge of the facts underlying the Litigation will be appointed as
Litigation Trustees of the CPR Trust, and will be given full authority to make
all decisions on behalf of Coast Federal (and its successors) with respect to
the prosecution of the Litigation at the CPR Trust's expense, including
selection and supervision of existing and any new counsel and deciding whether
or not to accept any settlement offer. See "Management of the Litigation."
Administration of the CPR Trust (including with respect to transfers of CPR
Certificates and receipt, holding and payment of funds) will be conducted by the
Institutional Trustee. As required by Delaware law, there will also be a
Delaware Trustee. The Litigation will remain a contingent asset of Coast Federal
and its successors (including Ahmanson's subsidiary, Home Savings of America,
FSB ("Home Savings"), if, following the Merger, Ahmanson causes Coast Federal to
merge into Home Savings) and thus will become a contingent asset of Ahmanson as
successor to Coast and as parent company of Coast Federal upon effectiveness of
the Merger.
THE LITIGATION
The following description of the Litigation does not purport to be a full
or complete description of the legal or factual issues presented, the court
opinions rendered or the relevant law, and the description is in all respects
qualified by reference to the documents filed in the Litigation, such opinions
and the relevant law.
INTRODUCTION
On July 9, 1992, Coast Federal commenced litigation entitled Coast Federal
Bank, Federal Savings Bank v. United States, Civil Action Number 92-466C,
against the United States in the U.S. Claims Court (now the U.S. Court of
Federal Claims, the "Claims Court") alleging that the United States is in breach
of contract with Coast Federal and has unlawfully taken Coast Federal's property
without just compensation or due process of law in violation of the U.S.
Constitution. Coast Federal's claims arose from changes, mandated by FIRREA and
certain regulations promulgated thereunder, with respect to the rules for
computing Coast Federal's regulatory capital. The United States has not yet
filed an answer to Coast Federal's complaint in the Litigation. However, on
March 25, 1993, Coast Federal filed a motion for partial summary judgment as to
the federal government's liability. This motion is still pending.
THE LITIGATION
On April 10, 1987, Coast Federal acquired substantially all of the assets
and liabilities of Central Savings and Loan Association ("Central") from the
Federal Savings and Loan Insurance Corporation (the "FSLIC") in a supervisory
transaction (the "Acquisition") that Coast Federal alleges was induced and
arranged by the FSLIC and the Federal Home Loan Bank Board ("FHLBB"). As part of
the Acquisition, Coast Federal entered into a contract with the FSLIC (the
"Assistance Agreement") under which the FSLIC made a cash
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contribution to Coast Federal in the amount of $298.3 million (the "Capital
Credit"). In the Litigation, Coast Federal alleges that the Assistance Agreement
and certain resolutions and a forbearance letter issued by the FHLBB in
connection with the Assistance Agreement each expressly provided that the
Capital Credit was to be treated as a permanent addition to Coast Federal's
regulatory capital. Coast Federal further alleges that such treatment of the
Capital Credit for regulatory capital purposes was essential to inducing Coast
Federal to consummate the Acquisition.
Pursuant to FIRREA, which became effective on August 9, 1989, the FSLIC and
the FHLBB were eliminated and were replaced as the regulators of federally
insured thrift institutions by the Office of Thrift Supervision (the "OTS"). In
regulations implementing FIRREA (the "Capital Regulations") and subsequent
actions, the OTS took the position that the Capital Credit should be classified
as supervisory goodwill, as defined in the Capital Regulations, which action
resulted in an immediate exclusion of the Capital Credit from one of the three
measures of Coast Federal's regulatory capital and effected a five year
phase-out of the Capital Credit from such inclusion in the other two measures.
Coast Federal alleges that FIRREA and the Capital Regulations constituted a
breach by the United States of its contractual commitment regarding the
regulatory capital treatment of the Capital Credit and an unlawful taking of
Coast Federal's property rights in the Capital Credit. Coast Federal seeks
damages for such breach by the United States of the alleged contract.
RELATED CASES
The Litigation is one of a number of cases filed against the federal
government in the Claims Court involving acquisitions of failed savings
institutions and alleging that the changes in regulatory capital calculation
brought about by FIRREA and the Capital Regulations constitute a breach of the
contract between the acquiring institution and the federal government. For
purposes of the administration of such claims, the Claims Court bifurcated the
trial proceedings in the first three of such cases to be heard by it (Winstar
Corporation, et al. v. United States, Docket No. 90-8C; Statesman Savings
Holding Corp., et al. v. United States, Docket No. 90-773C (the "Statesman
Case"); and Glendale Federal Bank v. United States, Docket No. 90-772C (the
"Glendale Case"), which cases are collectively referred to herein as the
"Related Cases"). The Claims Court decided to first take testimony and to issue
a ruling on the question of whether the federal government is in breach of the
respective contracts alleged by each of the plaintiffs in the Related Cases and
thereafter to take testimony and render a decision on the amount of damages, if
any, to which each such plaintiff is entitled. In July 1992, the Claims Court
ruled in favor of the plaintiffs on the initial liability question, finding in
each case that the plaintiff had a contract as alleged with the federal
government and that the federal government is in breach of that contract as a
result of the enactment of FIRREA and the issuance of the Capital Regulations
thereunder. The Claims Court did not rule on the respective plaintiffs'
constitutional or other claims and such claims remain pending and unresolved. In
connection with the Related Cases, the United States raised a number of defenses
against liability. Among other things, the United States claimed that the
agreements, resolutions, discussions and correspondence between the plaintiff
banks, the FHLBB and the FSLIC and the actions taken by those agencies did not
grant the subject plaintiffs any unmistakable contract rights regarding the
treatment of supervisory goodwill or contributions to a bank's permanent capital
by the FSLIC, such as the Capital Credit. The United States also maintained that
it is absolved of any liability by the "sovereign acts" doctrine, which
provides, generally, that although sovereign acts of the government may cause
injury to parties that have contracted with the government, no liability arises
if such acts were performed for the general good and without intent to repudiate
or alter the government's contractual obligations. The United States further
contended that the contracts did not prohibit changes in the regulatory
treatment of capital based upon subsequent legislative enactments and that the
plaintiff banks bore the risk of such changes.
The decision of the Claims Court on liability was appealed by the federal
government. After extended appellate proceedings, culminating in an appeal to
the Supreme Court, the Supreme Court ruled in favor of the plaintiffs in the
Related Cases in United States v. Winstar Corp., et al., No. 95-865 (the
"Winstar Case"). The Supreme Court ruled that each of the plaintiffs in the
Related Cases (each of which involved different forms of regulatory financial
assistance and contractual documentation) had an express and enforceable
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contractual right to treat supervisory goodwill as an asset includible in
capital for regulatory purposes and to amortize it over a specified period of
years. The Supreme Court also ruled that the plaintiffs in Statesman had an
express and enforceable contractual right to treat an FSLIC cash contribution as
a direct credit to its regulatory capital. The Supreme Court further held that,
by the passage and implementation of FIRREA, the United States breached those
contractual rights. The Supreme Court also held that the United States was not
immune from liability under the various defenses described above.
The Glendale Case is currently in trial on the issue of damages resulting
from the United States' breach of contract and the Statesman Case is scheduled
to begin trial on the same issue in 1998. In an attempt to manage the numerous
cases against the federal government involving the calculation of regulatory
capital as a result of the adoption of FIRREA, the Claims Court has determined
that no other case, including the Litigation, will go to trial until the damages
trials in both the Glendale Case and the Statesman Case have been completed. In
addition, the Claims Court has designated twelve cases as priority cases which
will be the first cases to go to trial following the trials on damages in the
Glendale Case and the Statesman Case. The first of the priority cases is
expected to begin trial in late 1998 or early 1999. The Litigation is scheduled
to be among the first group of thirty cases to go to trial following completion
of trial in the priority cases.
RELATION OF THE LITIGATION TO THE RELATED CASES
The Claims Court stayed proceedings in each of the other cases against the
federal government, including the Litigation, pending the outcome of the
liability phase of the Related Cases. Subsequent to the Supreme Court's decision
in the Winstar Case in July of 1996, such stay was lifted and Coast reinstated
its motion for partial summary judgment as to the federal government's
liability, which had been pending since March of 1993.
Coast Federal believes that the language in the Assistance Agreement, the
FHLBB resolutions and the related FHLBB forbearance letter concerning Coast
Federal's contractual right to include the Capital Credit in its regulatory
capital, which forms the basis for the Litigation, is substantially similar to
the language and contract documentation at issue in the Statesman Case.
Moreover, in response to Coast Federal's motion for summary judgment, the United
States has admitted that a contract was entered into with Coast, that FIRREA and
the Capital Regulations are inconsistent with that contract and that it is not
aware of any affirmative defenses to Coast's breach of contract claim. However,
the United States does not admit liability for any breach of the contract and
has sought certain limited discovery in what Coast believes to be an attempt to
ascertain whether any defenses may exist. There can be no assurance that the
Claims Court will grant Coast Federal's motion for partial summary judgment,
that the United States will not raise grounds in opposition to Coast Federal's
claim that were not previously ruled upon in the Related Cases or that Coast
Federal will ultimately prevail in the Litigation.
DAMAGES
Coast Federal has not to date specified the type or quantified the amount
of damages it seeks in the Litigation. In addition, there has been no final
ruling in the Related Cases with respect to the amount or appropriate measure of
damages.
Each savings institution affected by FIRREA's and the Capital Regulations'
limitation on the inclusion in regulatory capital of supervisory goodwill or
FSLIC capital contributions reacted to the resulting reduction in their
regulatory capital in an individual fashion dictated by the unique facts and
circumstances faced by the institution. Accordingly, the extent and amount of
damages awarded to each such institution that has brought an action against the
federal government is expected to be fact specific. Even if the plaintiffs in
the Related Cases are successful in securing damage awards, there can be no
assurance that Coast Federal will obtain a damage award.
Coast Federal alleges in its complaint (the "Complaint") that as a direct
and proximate result of the OTS' application of the Capital Regulations, Coast
Federal fell out of compliance with the risk-based capital standard of FIRREA
and the Capital Regulations. Coast Federal further alleges that as a direct
result of the breach of FSLIC's and FHLBB's agreements with Coast Federal, Coast
Federal was forced to decrease its
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size to meet its regulatory capital requirements. In May 1989, Coast Federal had
approximately $13 billion in assets. By December 31, 1990, Coast Federal had
reduced its size to $10.2 billion in assets. By March 31, 1992, Coast Federal
had further reduced its size to $8.7 billion in assets.
The Complaint further alleges that on January 23, 1991, Coast Federal
entered into a Supervisory Agreement with the OTS, which Supervisory Agreement,
among other things, required Coast Federal to (i) submit a capital plan to OTS
within 60 days of when Coast Federal went out of compliance with the capital
requirements (by March 2, 1991), (ii) refrain from declaring or paying any
dividends for any class of stock, repurchasing any class of stock or redeeming
any outstanding subordinated debt includible as supplementary capital without
the approval of OTS, (iii) limit growth of liabilities and (iv) undertake a
comprehensive review of executive compensation.
The Complaint alleges that the restrictions, supervisory consequences, and
potential penalties that FIRREA and the Capital Regulations imposed on federally
insured thrifts for failing to satisfy minimum regulatory capital requirements
caused ongoing and severe injury to Coast Federal. Under the restrictions
outlined above, Coast Federal was allegedly subjected to substantial competitive
disadvantage in the marketplace for loans and deposits. The Complaint alleges
that Coast Federal -- on pain of the full range of regulatory economic
sanctions, from cease and desist orders to receivership and liquidation -- was
subjected not only to OTS's close supervisory scrutiny, but to its direction and
control regarding virtually all of its business operations. It is further
alleged that Coast Federal's managerial discretion, which had produced a record
of conservative, sound and efficient management, was greatly circumscribed.
The Complaint further alleges that, in addition to the severe injury caused
by Coast Federal's inability to run its own business, the restrictions imposed
by FIRREA and the Capital Regulations produced other damaging results. It is
alleged that the restrictions reduced Coast Federal's ability to generate
mortgages and other loans, reduced its access to secondary mortgage markets, and
impaired its ability to generate profits. The growth restrictions allegedly
reduced Coast Federal's ability to obtain the advantages of growth available to
thrifts, banks, and other financial institutions competing with it for the
provision of mortgages and other loans and services in its market area.
Moreover, the restrictions imposed under FIRREA and the Capital Regulations
allegedly impaired Coast Federal's ability to serve the needs of savers and home
buyers in its market area.
The Complaint further alleges that other equally severe injury was visited
upon Coast Federal and its valuable business reputation as a consequence of the
federal government's breach of its contractual obligations to Coast Federal and
the resulting characterization of Coast Federal as an under-capitalized
institution. It is alleged that this obvious threat to public confidence in
Coast Federal impaired Coast Federal's ability to attract and retain depositors,
as well as its ability to borrow in capital markets.
Coast Federal's complaint concludes by alleging that as a direct and
proximate result of the federal government's repudiation of its contract with
Coast Federal, Coast Federal suffered substantial damages, including lost
profits.
Although Coast Federal has conducted preliminary reviews of the damages
allegedly suffered by Coast Federal, no conclusive determinations have been made
regarding the amount or type of such damages. The United States has argued in
the Related Cases that some or all of the damages alleged by the plaintiffs in
the Related Cases are too speculative to permit a recovery. Assuming Coast
Federal successfully establishes the federal government's liability, any trial
of Coast Federal's damage claims will occur after the trial of the damage phases
of two of the Related Cases, and rulings in the Related Cases may adversely
affect some or all of Coast Federal's damage claims. In addition, other cases
representing similar claims are scheduled for trial before the damages phase of
Coast Federal's case is likely to go to trial, and rulings in those cases may
also adversely affect some or all of Coast Federal's damage claims. For these
and related reasons, even if Coast Federal prevails in establishing the
liability of the United States, there can be no assurance as to the amount, if
any, and type of damages that Coast Federal may recover. Without limiting the
generality of the foregoing, there can be no assurance that Coast Federal will
obtain any monetary recovery in the Litigation.
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THE CPR CERTIFICATE DISTRIBUTION
Immediately prior to the Merger, the CPR Trust will issue to Coast the CPR
Certificates representing undivided beneficial interests in the assets of the
CPR Trust. Immediately thereafter, and immediately prior to the Effective Time
of the Merger (and when all other conditions to consummation of the Merger under
the Merger Agreement have been satisfied or waived), Coast will distribute to
each Coast stockholder one CPR Certificate for each share of Coast Common Stock
held by such stockholder (the "CPR Certificate Distribution"). The record and
payment dates for the CPR Certificate Distribution will be immediately prior to
the Effective Time of the Merger on the Effective Date of the Merger.
In addition to such number of CPR Certificates to be issued to Coast in
order to permit the CPR Certificate Distribution, the CPR Trust will initially
issue to Coast (i) one additional CPR Certificate for each share of Coast Common
Stock underlying the Coast SARs and Coast Performance Awards outstanding as of
the date of the Merger Agreement; (ii) one additional CPR Certificate for each
share of Coast Common Stock as to which a Coast Stock Option was outstanding
immediately prior to the Merger; and (iii) one additional CPR Certificate for
each share of Coast Common Stock with respect to which appraisal rights are
exercised. Ahmanson (as successor to Coast) will retain (and will be able to
sell) CPR Certificates in an amount equal to (x) the number of Coast shares as
to which stockholders have demanded to exercise appraisal rights, plus (y) the
number of Coast shares underlying Coast SARs and Coast Performance Awards that
are exercised for cash prior to the Merger or which are surrendered solely for
cash (rather than a combination of cash and CPR Certificates) in the Merger.
Ahmanson will also retain the number of CPR Certificates that is equal to the
number of Coast shares underlying Coast Stock Options outstanding immediately
prior to the Merger, for delivery by Ahmanson upon exercise, following the
Merger, of options (the "Replacement Options"), replacing Coast Stock Options,
to acquire shares of Ahmanson Common Stock. If any Replacement Options are
canceled or expire unexercised, Ahmanson will return the related number of CPR
Certificates to the CPR Trust for cancellation.
Each CPR Certificate distributed by the CPR Trust to each Coast stockholder
will be automatically redeemed for $0.01 in cash immediately following the
Merger if the holder of the share as to which such CPR Certificate was issued
has given notice, pursuant to Section 262 of the DGCL, of an intent to exercise
appraisal rights. If any such Coast stockholder subsequently withdraws, or fails
to perfect, as required by Section 262 of the DGCL, such appraisal demand,
Ahmanson will deliver to such stockholder CPR Certificates equal to the number
of Coast shares as to which such appraisal demand was withdrawn or not
perfected.
DELIVERY OF THE CPR CERTIFICATES
Immediately prior to the Effective Time, Coast will deposit, or will cause
to be deposited, with a depository institution of recognized standing selected
by Ahmanson (in such capacity, the "Exchange Agent") the CPR Certificates for
the benefit of the holders of Coast Common Stock. The Exchange Agent will cause
the CPR Certificates to be delivered to the holders of Coast Common Stock
together with certificates representing the shares of common stock, par value
$.01 per share, of Ahmanson (the "Ahmanson Common Stock") to which the holders
of certificates representing shares of Coast Common Stock are entitled pursuant
to the Merger Agreement and/or checks in lieu of fractional share interests.
THE COMMITMENT
At the Effective Time and effective at the Effective Time, Ahmanson will
enter into the Commitment, substantially in the form attached hereto as Appendix
C. Under the terms of the Commitment, Ahmanson will be obligated to pay to the
CPR Trust from time to time an amount equal to the Commitment Amount at the time
specified under "Description of the CPR Certificates -- Payment Procedures"
below. The Commitment will rank pari passu with other senior indebtedness of
Ahmanson. The terms of the Commitment provide that Ahmanson will not, and will
not permit Coast Federal or Home Savings (as applicable) to, "assign" (within
the meaning of 31 U.S.C. Section 3727, which prohibits such assignment without
prior approval of the
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federal government) any interest in the Litigation following consummation of the
Merger. The parties acknowledge that any merger of Ahmanson or Home Savings with
any other party will not be deemed to be or to effect an assignment (within the
meaning of 31 U.S.C. Section 3727) of the Litigation.
The Commitment will provide that Ahmanson (a) shall not (i) sell, transfer
or otherwise dispose of any shares of any series of Voting Stock (as defined
herein) of Home Savings or (ii) permit Home Savings to issue, sell or otherwise
dispose of shares of its Voting Stock unless in either case Home Savings remains
a Controlled Subsidiary (as defined herein), and (b) shall not permit Home
Savings to (i) merge or consolidate unless the surviving entity is Ahmanson or a
Controlled Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety to any person, except to Ahmanson or a Controlled
Subsidiary.
The Commitment will also provide that Ahmanson shall not create, assume,
incur or suffer to exist, as security for indebtedness for borrowed money, any
mortgage, pledge, encumbrance, lien or charge of any kind upon the Voting Stock
of Home Savings (other than directors' qualifying shares) without effectively
providing that the CPR Certificates shall be secured equally and ratably with
(or prior to) such indebtedness; provided, however, that Ahmanson may create,
assume, incur or suffer to exist any such mortgage, pledge, encumbrance, lien or
charge without regard to the foregoing provisions so long as after giving effect
thereto Ahmanson will own directly or indirectly at least 80% of the Voting
Stock of Home Savings then issued and outstanding, free and clear of any such
mortgage, pledge, encumbrance, lien or charge. "Voting Stock" will be defined in
the Commitment to mean, with respect to any person, stock of any class or
classes, however designated, having ordinary voting power for the election of a
majority of the board of such person, other than stock having such power only by
reason of the happening of a contingency. "Controlled Subsidiary" will be
defined in the Commitment to mean any person at least 80% of the outstanding
shares of Voting Stock (except for directors' qualifying shares) of which is at
the time owned directly or indirectly by Ahmanson.
The Commitment will also provide that, notwithstanding the foregoing,
Ahmanson may avoid the restrictions described above if prior to any such
transaction Home Savings shall have unconditionally guaranteed payment when due
of the Commitment Amount, if any, Home Savings shall have obtained all
regulatory approvals, if any, required to permit the guarantee of the payment of
the Commitment Amount, and Ahmanson shall have delivered to the Institutional
Trustee an opinion of counsel stating that the guarantee of the payment of the
Commitment Amount by Home Savings has been duly authorized, executed and
delivered and constitutes a valid, legally binding and enforceable obligation of
Home Savings.
DESCRIPTION OF THE CPR CERTIFICATES
GENERAL
Each CPR Certificate will represent an assignable and transferable
undivided beneficial interest in the assets of the CPR Trust and, as a result of
Ahmanson's entering into of the Commitment, will represent an interest in the
right to receive a pro rata share of the Payment Amount. Each CPR Certificate
will entitle the holder to receive (i) a fraction of the Payment Amount equal to
1 divided by the total number of CPR Certificates then outstanding and (ii) a
fraction of the Retained Amount (as defined in "-- The Expense Fund, Other
Expenses and the Retained Amount") remaining at the expiration of the Retained
Amount Period (as defined in "-- The Expense Fund, Other Expenses and the
Retained Amount") equal to 1 divided by the total number of CPR Certificates
then outstanding.
RESALES OF CPR CERTIFICATES
The CPR Certificates will be freely transferable by the holders of such CPR
Certificates under the Securities Act, except for CPR Certificates issued to any
holder of CPR Certificates who may be deemed to be an "affiliate" of the CPR
Trust for purposes of Rule 145 under the Securities Act as of the date of the
Special Meeting. Such affiliates may not sell their CPR Certificates except
pursuant to an effective registration statement under the Securities Act or
other applicable exemption from the registration requirements of the Securities
Act.
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TRADABILITY
The CPR Trust Agreement will require the CPR Trust to use its reasonable
best efforts to permit trading of the CPR Certificates on the NASDAQ National
Market System (or, if such trading is not possible, on such other NASDAQ or
other market selected in an effort to maximize liquidity). Coast, on behalf of
the CPR Trust, has applied for inclusion of the CPR Certificates on the NASDAQ
National Market System.
No assurance can be given that the CPR Certificates will satisfy the
listing requirements for inclusion on the NASDAQ National Market System or any
other trading system. In the event that the CPR Certificates cannot be listed on
any trading system, there would likely be only minimal or no trading channels
for the CPR Certificates, resulting in severely reduced or no liquidity for
investors in the CPR Certificates. Even if such listing is achieved, there can
be no assurance that an active market for the CPR Certificates will develop or
be sustained. If such a market develops, there can be no assurance as to the
price at which the CPR Certificates would trade at any time and such price could
be subject to rapid and substantial change, depending upon, among other things,
developments in the Litigation and similar pending litigation.
PAYMENT OF COMMITMENT AMOUNT TO THE CPR TRUST
The terms of the Commitment will require Ahmanson to pay to the CPR Trust
the Commitment Amount within the time specified under "-- Payment Procedures"
below. Any Litigation Proceeds actually received by the Ahmanson Group will
first be applied to the reimbursement to the Ahmanson Group of the
Reimbursements. The Commitment Amount may be paid to the CPR Trust in
installments if the terms of the judgment or settlement of the Litigation
provide that the Litigation Proceeds are to be paid in installments or if Coast
Federal receives the Litigation Proceeds in installments. If Ahmanson does not
timely pay the Commitment Amount to the CPR Trust, it must pay to the CPR Trust
such Commitment Amount plus interest accrued at the Reference Rate plus 250
basis points per annum. However, pursuant to the Commitment, Ahmanson will not
be obligated to pay all or any portion of the Commitment Amount when due under
certain circumstances more fully described below under "-- Payment Procedures."
PAYMENT PROCEDURES
Pursuant to the Commitment, within 10 days of the receipt by the Ahmanson
Group of any Litigation Proceeds, Ahmanson will deliver to the Litigation
Trustees a written notice (the "Proceeds Notice") specifying that such
Litigation Proceeds have been received and describing the type and amount of any
Non-Cash Proceeds received. Within 10 days of the delivery of the Proceeds
Notice, the Litigation Trustees shall deliver to Ahmanson written instructions
to liquidate the Non-Cash Proceeds received. If so instructed, Ahmanson will
then liquidate or cause to be liquidated the Non-Cash Proceeds in accordance
with the instructions. As promptly as practicable but in no event later than 30
days after the later of the receipt by Ahmanson of the Litigation Proceeds and
the liquidation by Ahmanson of Non-Cash Proceeds, Ahmanson will deliver to the
Litigation Trustees a certificate (the "Ahmanson Certificate") setting forth the
calculation of the portion of the Commitment Amount with respect to such
Litigation Proceeds, which Ahmanson Certificate will be valid and binding absent
manifest error. The Ahmanson Certificate will set forth each of the items
required under the Commitment to calculate the Commitment Amount, including the
amount of Litigation Proceeds and the amount of (and calculation of) each
component of the Reimbursements and the assumptions underlying the determination
of each item, and Ahmanson will attach to the Ahmanson Certificate financial and
other documentation reasonably sufficient to support each item and assumption
used to calculate the Commitment Amount. Within 30 days of delivery of the
Ahmanson Certificate, the CPR Trust will give written notice specifying whether
it agrees or objects (a "Notice of Agreement" and a "Notice of Objection",
respectively) to the calculation in the Ahmanson Certificate of the portion of
the Commitment Amount with respect to such Litigation Proceeds. If the CPR Trust
delivers a Notice of Agreement, Ahmanson will then deliver the portion of the
Commitment Amount with respect to such Litigation Proceeds to the Institutional
Trustee within 5 business days of such Notice of Agreement. If the CPR Trust
delivers a Notice of Objection within such 30-day period, Ahmanson will deliver
such portion of the Commitment Amount only upon a Resolution.
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If the CPR Trust delivers a Notice of Objection within such 30-day period,
the CPR Trust will, as promptly as practicable thereafter, deliver to Ahmanson a
certificate (the "CPR Calculation Certificate") setting forth its calculation of
such portion of the Commitment Amount. The CPR Calculation Certificate will set
forth each of the items required under the Commitment to calculate such portion
of the Commitment Amount, including the amount of Litigation Proceeds and the
amount of (and calculation of) each component of the Reimbursements and the
assumptions underlying the determination of each item, and the CPR Trust will
attach to the CPR Calculation Certificate financial and other documentation
reasonably sufficient to support each item and assumption used to calculate such
portion of the Commitment Amount. If Ahmanson does not agree with the CPR
Trust's calculation of such portion of the Commitment Amount, then within 10
business days of the delivery by the CPR Trust of the CPR Calculation
Certificate, Ahmanson and the CPR Trust will submit the calculation of such
portion of the Commitment Amount to a mutually agreed upon independent certified
public accountant (the "Accountant"). If Ahmanson and the CPR Trust cannot agree
upon such independent certified public accountant, then the Commitment will
provide that the Accountant will be Price Waterhouse. The Accountant will be
instructed to determine whether the calculation set forth in the Ahmanson
Certificate contained manifest error and the Accountant will be instructed to
conclude (i) that the calculation set forth in the Ahmanson Certificate does not
contain manifest error so long as the calculation is a reasonable calculation of
such portion of the Commitment Amount based upon a reasonable interpretation of
the provisions of the Commitment and (ii) that the calculation set forth in the
Ahmanson Certificate contains manifest error if the calculation is not a
"reasonable calculation of the Commitment Amount based upon a reasonable
interpretation of the provisions of the Commitment." If the Accountant
determines (a) that the calculation set forth in the Ahmanson Certificate did
not contain manifest error, such portion of the Commitment Amount will be as
calculated in the Ahmanson Certificate or (b) that the calculation set forth in
the Ahmanson Certificate did contain manifest error, the Accountant will
recompute such portion of the Commitment Amount based upon the formulae and
definitions set forth in the Commitment and described herein and the
Accountant's calculation will be binding on both Ahmanson and Coast (in either
of case (a) or (b), a "Resolution"). In the event it is determined that
Ahmanson's calculation contained manifest error, in addition to such portion of
the Commitment Amount, Ahmanson will pay to the CPR Trust interest on such
portion of the Commitment Amount calculated from the date that the CPR Trust
delivered its Notice of Objection at an annual interest rate equal to the
Reference Rate plus 250 basis points. If the CPR Trust delivers a Notice of
Objection with respect to the payment of any portion of the Commitment Amount
within the applicable 30-day period and prior to the Resolution there is a
Determination to the effect that no deduction is allowed (or that any allowed
deduction is limited) in respect of payments of the Commitment Amount under
Section 483(a) in whole or in part, then Ahmanson will have the right to deliver
a new Ahmanson Certificate with a new calculation of that portion of the
Commitment Amount, and the previously delivered Ahmanson Certificate with
respect to that portion of the Commitment Amount will be considered null and
void; provided, however, that if Ahmanson delivers such a new Ahmanson
Certificate, Ahmanson will be required to pay interest on that portion of the
Commitment Amount from the date of delivery of the first Ahmanson Certificate
relating to such portion of the Commitment Amount to the date of delivery of the
new Ahmanson Certificate relating to such portion of the Commitment Amount at a
rate equal to Home Savings' cost of funds as submitted monthly to the FHLBSF.
The same procedures described in this Section 2.02(b) for the resolution of any
disputes with respect to the calculation contained in an Ahmanson Certificate
will apply equally to the calculation in the new Ahmanson Certificate with
respect to such portion of the Commitment Amount.
Pursuant to the Commitment, Ahmanson will pay to the CPR Trust the portion
of the Commitment Amount with respect to the relevant Litigation Proceeds (a) if
the CPR Trust does not deliver a Notice of Objection within the 30-day period
described above, within 5 business days of the earlier of the delivery of the
Notice of Agreement with respect to such Ahmanson Certificate or the 30th day
following the delivery by Ahmanson of such Ahmanson Certificate or (b) if the
CPR Trust does deliver a Notice of Objection with respect to such Ahmanson
Certificate within the 30-day period described above within 5 business days of
the Resolution with respect to such portion of the Commitment Amount (each, a
"Due Date"). If Ahmanson does not pay such portion of the Commitment Amount by
the appropriate Due Date, Ahmanson will be obligated to pay to the CPR Trust
such portion of the Commitment Amount plus interest on such portion of
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the Commitment Amount from the Due Date until the date such portion of the
Commitment Amount is paid, calculated at an annual interest rate equal to the
Reference Rate plus 250 basis points.
Notwithstanding the foregoing, Ahmanson will not be obligated to pay the
Commitment Amount or any portion thereof at the Due Date and will be deemed not
to be in default of the Commitment and not to have violated its obligations
thereunder by virtue of not having paid the Commitment Amount or such portion
thereof (i) to the extent that Home Savings is not permitted due to regulatory
restrictions to distribute to Ahmanson the Litigation Proceeds and (ii) if prior
to the Due Date, Ahmanson has delivered to the CPR Trust a certificate (an
"Officer's Certificate") from the chief financial officer of Home Savings
specifying that portion of the Litigation Proceeds that cannot be paid due to
regulatory restrictions and the applicable law, regulation or other action of a
regulatory authority that is the source of the regulatory restrictions
preventing the distribution by Home Savings and either (i) an opinion of outside
counsel substantially to the effect that the distribution by Home Savings of the
Litigation Proceeds or the applicable portion thereof, as the case may be, would
result in the violation of the applicable law, regulation or other action of a
regulatory authority that is the source of the regulatory restrictions
preventing the distribution by Home Savings (an "Opinion of Counsel") or (ii)
either (A) a copy of written documentation from the applicable regulatory
authority to the effect that Home Savings may not distribute the Litigation
Proceeds, or any portion thereof, to Ahmanson, or (B), prior to the expiration
of any applicable prior notice or application period following Home Savings'
submission to the applicable regulatory authority of a notice or application for
approval of a distribution of the Litigation Proceeds to Ahmanson, an officer's
certificate from the chief financial officer of Home Savings certifying that
Home Savings has submitted such a notice or application and that Home Savings
has not received any written documentation from such regulatory authority to the
effect that Home Savings may make such distribution (in either of case (A) or
(B), a "Regulatory Document"). Under the Commitment, Ahmanson will be entitled
not to pay the Commitment Amount or any portion thereof as specified in the
immediately preceding sentence with the consequences specified in the
immediately preceding sentence for a period of two years from the Due Date on
which the Commitment Amount or such portion thereof would otherwise have been
payable so long as (x) Home Savings continues not to be permitted to distribute
such portion of the Litigation Proceeds to Ahmanson due to regulatory
restrictions and (y) Ahmanson delivers on a quarterly basis beginning with the
first full fiscal quarter following the Due Date an Officer's Certificate and
either an Opinion of Counsel or a Regulatory Document. After this two year
period, if Ahmanson does not pay that portion of the Commitment Amount that is
due, Ahmanson will be in default of the Commitment.
Notwithstanding the foregoing, Ahmanson will be deemed to be in default of
the Commitment, when payment of the Commitment Amount or such portion thereof
would otherwise be due but when Ahmanson would be entitled not to make such
payment and would be deemed not to be in default due to the regulatory
restrictions described therein if, at such time, there exists a default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any indebtedness for money borrowed by
Ahmanson (but not including any such mortgage, indenture or instrument pursuant
to which the creditor's remedy is limited to foreclosure of collateral), whether
such indebtedness now exists or will hereafter be created, which default will
constitute a failure to pay principal of such indebtedness in an amount
exceeding $50 million when due and payable after the expiration of any
applicable grace period with respect thereto or will have resulted in such
indebtedness in an aggregate principal amount exceeding $50 million becoming or
being declared due and payable prior to the date on which it would otherwise
have become due and payable, without such indebtedness being discharged, or such
acceleration having been rescinded or annulled, within a period of 35 days after
the occurrence of the event that gave rise to such default provided that any
such event of default will not be deemed to have occurred so long as Ahmanson is
contesting the validity thereof in good faith by appropriate proceedings.
Ahmanson will be obligated to pay the Commitment Amount or such portion
thereof at the earlier of such time as such regulatory restrictions no longer
exist or the second anniversary of the due date for the payment of the
Commitment Amount, and interest on the Commitment Amount or such portion
thereof, as the case may be, from the Due Date until the date the Commitment
Amount or such portion thereof is paid, calculated at an annual interest rate
equal to the Reference Rate plus 250 basis points.
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In the event that Home Savings is not permitted due to regulatory
restrictions to distribute to Ahmanson Litigation Proceeds as described hereof,
Ahmanson agrees to use its reasonable best efforts, or to cause Home Savings to
use its reasonable best efforts, to obtain regulatory approval for the
distribution to Ahmanson of such Litigation Proceeds.
PAYMENT OF PAYMENT AMOUNT TO HOLDERS
The CPR Trust Agreement and the CPR Certificates will require that the CPR
Trust will make payments from time to time to the CPR Certificate holders of the
Payment Amount upon the receipt of the applicable Commitment Amount from
Ahmanson. The CPR Trust Agreement will also provide that upon the expiration of
the Retained Amount Period, the CPR Trust will pay to each CPR Certificate
holder its pro rata share of any funds left in the Retained Amount at such time.
Pursuant to the CPR Trust Agreement, each CPR Certificate will entitle the
holder to receive (i) a fraction of the Payment Amount equal to 1 divided by the
total number of CPR Certificates then outstanding, and (ii) a fraction of the
amount remaining in the Retained Amount (as defined in "-- The Expense Fund,
Other Expenses and the Retained Amount") at the expiration of the Retained
Amount Period (as defined in "-- The Expense Fund, Other Expenses and the
Retained Amount") equal to 1 divided by the total number of CPR Certificates
then outstanding.
TIMING OF PAYMENTS
Pursuant to the CPR Trust Agreement, the CPR Trust will make payments of
the Payment Amount to the holders of CPR Certificates as of record dates
determined by the Litigation Trustees. Payment will be made on payment dates,
which will also be set by the Litigation Trustees, and which will be within 60
days after the CPR Trust receives a payment pursuant to the Commitment.
THE EXPENSE FUND, OTHER EXPENSES AND THE RETAINED AMOUNT
Pursuant to the Merger Agreement, at the Effective Time of the Merger,
Ahmanson will deposit in a non-interest bearing demand-deposit account in the
name of the CPR Trust at Home Savings an amount (the "Expense Fund") equal to
$20 million less the expenses relating to the Litigation incurred and paid
between August 31, 1997 and the Effective Date. The CPR Trust shall have the
right to draw on the Expense Fund for the purpose of funding any expenses of the
CPR Trust, including administration expenses, expenses of the Litigation, fees
and expenses of the Litigation Trustees, the Institutional Trustee and the
Delaware Trustee, amounts paid as indemnity to the Trustees or Ahmanson,
premiums for liability insurance, and fees and expenses of attorneys,
consultants and other experts retained by, or at the direction of, the
Litigation Trustees. Coast and Litigation Counsel have a tentative understanding
for a contingent fee arrangement pursuant to which Litigation Counsel would
defer or waive certain fees that they would otherwise be entitled to receive
and, in consideration thereof, they would be entitled to receive from the CPR
Trust an amount equal to 1% of the Commitment Amount, which payment to
Litigation Counsel would reduce the Payment Amount to be paid to holders of CPR
Certificates. However, there can be no assurance that a contingent fee
arrangement will be entered into on such terms or on any other terms. Any
contingent payment by the CPR Trust could significantly increase the CPR Trust's
expenses and thus significantly reduce the Payment Amount with respect to the
CPR Certificates. See "Risk Factors -- Adequacy of Expense Fund."
The CPR Trust may issue additional CPR Certificates after the Effective
Time which represent pro rata interests in the CPR Trust in order to pay
expenses upon depletion of the Expense Fund; the CPR Trust may issue CPR
Certificates of a different class than the CPR Certificates issued immediately
prior to the Merger or that represent non-pro rata interests in the CPR Trust,
if the CPR Trust obtains an opinion of nationally recognized counsel with
experience in tax matters that such issuance will not result in the CPR Trust
being classified as a taxable entity for federal income tax purposes. The CPR
Trust will be authorized to borrow additional funds for the sole purpose of
funding expenses of the CPR Trust upon depletion of the Expense Fund so long as
such indebtedness represents debt of the CPR Trust (and not an ownership
interest) for federal income tax purposes. Furthermore, it may not be possible
for the CPR Trust to borrow funds or to
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issue additional CPR Certificates. See "Risk Factors -- Adequacy of Expense
Fund." If the CPR Trust accrues expenses (including interest on borrowings) in
addition to the amounts withdrawn from the Expense Fund, whether before or after
it receives the Commitment Amount from Ahmanson, it will deduct the amount of
such expenses from the Commitment Amount in order to calculate the Payment
Amount.
Pursuant to the Commitment, if the amount of the Litigation Proceeds is
such that there would be no Commitment Amount payable under the Commitment to
the CPR Trust and if at the time of receipt of the Litigation Proceeds by the
Ahmanson Group (or at the time of a final judicial determination that there will
be no Litigation Proceeds) there are amounts remaining in the Expense Fund, the
CPR Trust will, as promptly as practicable, return to Ahmanson such amounts less
expenses (including obligations to compensate the Trustees) incurred by the CPR
Trust through the time of receipt of the Litigation Proceeds by the Ahmanson
Group (or the time of such final judicial determination) and expenses necessary,
in the reasonable judgment of the Litigation Trustees, to terminate the CPR
Trust pursuant to the CPR Trust Agreement. Alternatively, Ahmanson will have the
right to cause Home Savings to offset such amounts remaining in the Expense Fund
deposited with Home Savings against the amounts due to Ahmanson.
The Litigation Trustees' obligation to make payments to the holders of the
CPR Certificates shall be subject to the requirement that the CPR Trust retain,
from amounts remaining in the Expense Fund and from payments of the Commitment
Amount, the Retained Amount for a period (the "Retained Amount Period") of two
years (or such longer period as the Litigation Trustees reasonably determine may
be reasonably likely to be required) to cover all expenses, costs and claims and
the indemnification obligations of the CPR Trust which may be incurred or which
may arise after payment of the Commitment Amount is paid in full. The "Retained
Amount" shall mean $10 million (or such greater amount as the Litigation
Trustees shall reasonably determine may be reasonably likely to be required to
pay additional expenses or to satisfy the CPR Trust's indemnification
obligations).
The CPR Trust shall invest the Retained Amount in a Permitted Investment,
to the extent that portions of the Retained Amount are not required to be
disbursed for expenses of the CPR Trust, until the expiration of the Retained
Amount Period. "Permitted Investment" means the Merrill Lynch Government Fund
money market fund (including any successor) or, if at the time of the receipt of
the applicable Commitment Amount by the CPR Trust (i) such fund is not in
existence, (ii) such fund is no longer limited to investing in short-terms
obligations of or guaranteed by the United States government, (iii) such find is
not accepting new investors or new investments or will not accept the investment
of the Commitment Amount or the Retained Amount, as the case may be, or (iv)
such fund is not AAA rated by Standard & Poors, the AAA rated money market fund
reported in IBC Rated Money Fund Report to have the largest amount of assets
under management as of the end of the most recent year for which information is
publicly available and which will accept such investment.
TAX ASSUMPTIONS
Pursuant to the Commitment, regardless of any position taken by the
Ahmanson Group on any tax return or in any claim for refund with respect to the
receipt of the Litigation Proceeds or payments of the Commitment Amount (or of
the actual payment or actual receipt of any taxes with respect thereto), the
Assumed Tax Liability will, (a) if there is no Determination, be computed based
on the Tax Assumptions and (b) if there is a Determination to the effect that
Litigation Proceeds are not includible in gross income in whole or in part, be
computed on the basis of the Tax Assumptions as such Tax Assumptions are
modified by such Determination. In addition, pursuant to the Commitment,
regardless of any position taken by the Ahmanson Group on any tax return or in
any claim for refund with respect to the receipt of the Litigation Proceeds or
payments of the Commitment Amount (or of the actual payment or actual receipt of
any taxes with respect thereto), the Assumed Tax Benefit will, (i) if there is
no Determination, be computed based on the Tax Assumptions and (ii) if there is
a Determination that no deduction is allowed (or that any allowed deduction is
limited) with respect to the application of Section 483(a) of the Internal
Revenue Code of 1986 to payments of the Commitment Amount, be computed on the
basis of the Tax Assumptions as such Tax Assumptions are modified by such
Determination.
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As used herein, the "Assumed Tax Liability" means an amount equal to the
income (including franchise) tax liability of the Ahmanson Group (not giving
effect to any deductions attributable to payments of the Commitment Amount)
attributable to the receipt of the Litigation Proceeds computed in the manner
set forth above. As used herein, the "Assumed Tax Benefit" means an amount equal
to the tax benefit that would be allowed to the Ahmanson Group under Section
483(a) of the Code computed in the manner set forth above.
As used herein, the "Tax Assumptions"means (i) if there is no
Determination, the following assumptions, or (ii) if there is a Determination,
the following assumptions as modified by such Determination:
(a) The Litigation Proceeds will be includible in gross income as
ordinary income in full.
(b) Payments of the Commitment Amount will not be deductible except
that Section 483(a) will apply to payments of the Commitment Amount, other
than those allocable to CPR Certificates issued on exercise of employee
options or otherwise in a transaction that is not a sale or exchange, and
payments of the Commitment Amount will be deductible to the extent treated
by Section 483(a) as interest expense; it being understood that it is not
intended that the distribution of the CPR Certificates immediately prior to
the Effective Time of the Merger will result in the characterization of
such distribution as not constituting "a sale or exchange."
(c) The income tax liability attributable to the assumed inclusion of
all or a portion of the Litigation Proceeds in gross income as ordinary
income and the benefit of any deduction assumed to be allowed under Section
483(a) will be (i) the product of the amount of such income or deduction
and the highest statutory rate of federal income tax applicable to
corporations for the year in which the income is assumed to be included or
the deduction is assumed to be realized plus (ii) the product of such
income or deduction and the net combined marginal rate of state and local
income (or franchise) tax of the relevant member or members of the Ahmanson
Group for the year in which the income is assumed to be included and the
deduction is assumed to be realized, net of the federal income tax benefit
(calculated based on the rate in clause (i)) of such state or local income
(or franchise) tax. The relevant member or members of the Ahmanson Group
will be the member or members that is or are assumed to include the
Litigation Proceeds in income or is or are assumed to be allowed a
deduction under Section 483(a).
(d) Any benefit from any deduction allowable to the Ahmanson Group
under paragraph (c) of these Tax Assumptions for payments of the Commitment
Amount will be assumed to be realized (i) when those payments are made to
the extent those payments do not exceed the Litigation Proceeds included in
income for the same taxable year, or (ii) otherwise when, taking into
account other deductions or losses or credits of the Ahmanson Group, the
deduction would reduce the tax otherwise payable or result in a refund of
tax already paid.
(e) Ahmanson will be entitled to rely on a written opinion of either
Sullivan & Cromwell or another nationally recognized law firm with
expertise on the matter on which the opinion is sought (with a copy of such
opinion to the Litigation Trustees) that is selected by Ahmanson and
(unless such law firm is principal outside tax counsel to Ahmanson)
reasonably acceptable to the Litigation Trustees in determining whether
there has been a Determination and in otherwise applying the Tax
Assumptions to determine the income (including franchise) tax liability of
the Ahmanson Group attributable to the receipt of the Litigation Proceeds
and payments of the Commitment Amount and any tax benefit attributable to
payments of the Commitment Amount.
(f) If the Assumed Tax Liability or the Assumed Tax Benefit cannot be
computed at the time of the receipt of the Cash Proceeds or a payment of
the Commitment Amount because of the absence of information as to tax rates
and other factors described in the definition of Assumed Tax Liability or
the definition of Assumed Tax Benefit, as the case may be, the Ahmanson
Group will compute a tentative Assumed Tax Liability or a tentative Assumed
Tax Benefit, as the case may be, which are consistent with respect to the
Assumed Tax Liability and the Assumed Tax Benefit, that in the reasonable
opinion of the Ahmanson Group would protect the Ahmanson Group against any
risk of loss. The payment of the Commitment Amount will be based on such
tentative Assumed Tax Liability or such tentative Assumed
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Tax Benefit computation, as the case may be. As soon as feasible, but in no
event later than 12 months after the end of the taxable year in which the
Commitment Amount is paid, the Ahmanson Group will recompute the Assumed
Tax Liability or the Assumed Tax Benefit, as the case may be, and pay to
the CPR Trust any excess of the re-computed Commitment Amount over the
Commitment Amount that was initially calculated plus interest for the
period over which the payment was deferred at a rate of Home Savings' cost
of funds as submitted monthly to the Federal Home Loan Bank of San
Francisco.
DETERMINATION
Under the Commitment, a Determination that Litigation Proceeds are not
includible in gross income in whole or in part will be deemed to be made on the
earlier of (a) the date a final judicial determination to such effect, binding
upon Coast Federal (or its successor), is made in the Litigation, (b) the date a
final agreement to which Ahmanson is a party with the federal government to such
effect is entered into at the direction of the Litigation Trustees as part of
the resolution of the Litigation or a related Internal Revenue Service ("IRS")
ruling to such effect issued to a member of the Ahmanson Group in connection
with such agreement (it being understood that the Ahmanson Group will be under
no obligation to seek such a ruling or refund or enter into such an agreement;
provided that if requested the Ahmanson Group will enter into such an agreement
if such agreement does not impose any liability or obligation whatsoever (other
than a standard settlement release relating only to the Litigation or other
related claims that Coast or Coast Federal or Coast's stockholders might have
been able to bring as of immediately prior to the Merger) on the Ahmanson Group
or adversely affect or restrict the conduct of its business or adversely affect
its tax posture with respect to other matters) and (iii) the effective date of a
law, regulation or IRS ruling to such effect that applies to Ahmanson or
taxpayers generally, and would be applicable to claims against the federal
government arising out of capital credits affected by Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). Notwithstanding the
foregoing, no such Determination will be deemed to be made unless it is made
prior to the earlier of (x) thirty days before the date of filing by the
Ahmanson Group of the federal tax return for the taxable year in which the
Litigation Proceeds are assumed to be includible in gross income or (y) the
receipt by the Ahmanson Group of the Litigation Proceeds.
Under the Commitment, a Determination with respect to the application of
Section 483(a) to payments of the Commitment Amount will be deemed to be made on
the earlier of (i) the date a final judicial determination to such effect
binding upon Ahmanson is made in the Litigation, (ii) the date a final agreement
to which Ahmanson is a party with the federal government to such effect is
entered into at the direction of the Litigation Trustees as part of the
resolution of the Litigation or a related IRS ruling to such effect issued to a
member of the Ahmanson Group in connection with such agreement (it being
understood that the Ahmanson Group will be under no obligation to seek such a
ruling or refund or enter into such an agreement; provided that if requested the
Ahmanson Group will enter into such an agreement if such agreement does not
impose any liability or obligation whatsoever (other than a standard settlement
release relating only to the Litigation or other related claims that Coast or
Coast Federal or Coast's stockholders might have been able to bring as of
immediately prior to the Merger) on the Ahmanson Group or adversely affect or
restrict the conduct of its business or adversely affect its tax posture with
respect to other matters) and (iii) the effective date of a law, regulation or
IRS ruling or a judicial decision to such effect that applies to Ahmanson or
taxpayers generally. A deduction will be considered allowed under Section 483(a)
to the extent that a deduction is allowed, in an amount up to the deduction
calculated under Section 483(a), under another substantially equivalent
provision. Notwithstanding the foregoing, no such Determination will be deemed
to be made with respect to any payment of the Commitment Amount unless such
Determination is made prior to (i) the end of the 30th day following the
delivery to the CPR Trust of the Ahmanson Certificate with respect to such
payment of the Commitment Amount, if the CPR Trust does not deliver a Notice of
Objection within such 30-day period with respect to such Ahmanson Certificate,
or (ii) the Resolution with respect to such payment of the Commitment Amount, if
the CPR Trust delivers a Notice of Objection within such 30-day period with
respect to such Ahmanson Certificate. Subject to a Determination, the parties
intend to treat a portion of each payment of the Commitment Amount as interest
to the extent such payment is treated as interest under Section 483(a).
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INDEMNIFICATION OBLIGATIONS OF THE CPR TRUST; LIABILITY INSURANCE
Pursuant to the CPR Trust Agreement, the CPR Trust will indemnify and
advance expenses, without requirement of bond or other security, to each
Litigation Trustee, the Institutional Trustee and the Delaware Trustee against
any and all losses, liabilities, damages, judgments, demands, suits, claims,
assessments, charges, fines, penalties, costs and expenses (including reasonable
attorney's fees and expenses and other costs and expenses associated with the
defense of a claim or incurred in obtaining indemnification under the applicable
agreement, whether or not in a formal proceeding) arising out of or relating to
the CPR Trust, the CPR Certificate Distribution, the Litigation or actions by
the Trustees in their capacity or purportedly in their capacity as Trustees, or
any actions taken by the Litigation Trustees (including actions taken by the
Litigation Trustees in their capacity as officers or directors of Coast or
Ahmanson so long as such actions relate to the CPR Trust including, without
limitation, the negotiation of the terms of the CPR Trust and the CPR
Certificates and the approval of the establishment of the CPR Trust and the CPR
Certificate Distribution and related transactions, but otherwise excluding
actions taken by the Litigation Trustees in such capacities, except, in the case
of the indemnification of any Litigation Trustee, the Institutional Trustee or
the Delaware Trustee, if CPR Certificate holders meet the burden of establishing
in a final judicial determination by clear and convincing evidence that such
losses, claims, costs, expenses or liabilities arose as the result of actions or
decisions undertaken with deliberate intent to injure the CPR Certificate
holders or with reckless disregard for the best interests of such holders by
such Litigation Trustee, the Institutional Trustee or the Delaware Trustee, no
indemnification shall apply.
Pursuant to the Commitment and the CPR Trust Agreement, the CPR Trust will
indemnify and advance expenses, without requirement of bond or other security,
to Ahmanson, Home Savings, and their respective affiliates, officers, directors,
employees and agents (such persons and entities, the "Ahmanson Indemnified
Parties" and, individually, an "Ahmanson Indemnified Party"), against any and
all losses, liabilities, damages, judgments, demands, suits, claims,
assessments, charges, fines, penalties, costs and expenses, including reasonable
attorney's fees and expenses and other costs and expenses associated with
defense of a claim or incurred in obtaining indemnification hereunder, whether
or not in a formal proceeding ("Damages") (other than in connection with claims
by stockholders of Ahmanson against Ahmanson's directors with respect to actions
taken at or prior to the Merger), arising out of or relating to (a) with respect
to claims brought by holders of CPR Certificates in their capacity as holders of
CPR Certificates, any matter whatsoever and (b) with respect to claims brought
by any other party, any matter relating to the CPR Trust, the CPR Certificates,
the CPR Certificate Distribution, the Litigation or any actions taken by the
Litigation Trustees (including actions taken by the Litigation Trustees in their
capacity as officers or directors of Coast or Ahmanson so long as such actions
relate to the CPR Trust including, without limitation, the negotiation of the
terms of the CPR Trust and the CPR Certificates and the approval of the
establishment of the CPR Trust and the CPR Certificate Distribution and related
transactions, but otherwise excluding actions taken by the Litigation Trustees
in such capacities), other than with respect to Damages arising from claims
against (i) Ahmanson for breach of its obligations under the Commitment, (ii)
Ahmanson for breach after the Effective Time of its obligations as successor to
Coast under the CPR Trust Agreement, (iii) Ahmanson for failure to deliver any
CPR Certificate when due or to return to the CPR Trust for cancellation of any
CPR Certificate required to be returned when so required, (iv) Ahmanson for
failure to deposit the Expense Fund in a non-interest bearing demand-deposit
account in the name of the CPR Trust at Home Savings at the Effective Time or
(v) Home Savings for breach of any depositary relationship obligations it may
have with respect to the Expense Fund. Pursuant to the Commitment promptly after
receipt by an Ahmanson Indemnified Party of notice of the commencement of any
action, such Ahmanson Indemnified Party will, if a claim in respect thereof is
to be made against the CPR Trust, notify the CPR Trust of the commencement
thereof; but the omission so to notify the CPR Trust will not relieve the CPR
Trust from any liability which it may have to any Ahmanson Indemnified Party
otherwise than under the immediately preceding sentence.
Pursuant to the Commitment, if the indemnification provided for is
unavailable to or insufficient to hold harmless an Ahmanson Indemnified Party in
respect of any Damages referred to above, then the CPR Trust will contribute to
the amount paid or payable by such Ahmanson Indemnified Party as a result of
such Damages.
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The CPR Trust will obtain liability insurance to cover its indemnification
obligations and any liabilities of the Litigation Trustees. The CPR Trust will
use amounts from the Expense Fund (or, upon depletion of the Expense Fund,
amounts from other sources of the CPR Trust) to pay for any liability insurance.
LIMITATION ON RIGHTS OF CPR CERTIFICATE HOLDERS
The CPR Trust Agreement will provide that the Litigation Trustees will have
no liability to CPR Certificate holders unless it shall be established in a
final judicial determination by clear and convincing evidence that any decision
or action of the Litigation Trustees was undertaken with deliberate intent to
injure the CPR Certificate holders or with reckless disregard for the best
interests of such holders, and, in any event, any liability will be limited to
actual, proximate, quantifiable damages. In addition, the CPR Trust Agreement
will provide that the Institutional Trustee and the Delaware Trustee will have
no liability to the CPR Certificate holders other than for acts or omissions
committed with gross negligence or willful misconduct. Insofar as this
limitation on liability would apply to claims under the federal securities laws,
such limitation on liability may be unenforceable.
The CPR Trust Agreement and the CPR Certificates will provide that no CPR
Certificate holder will have the right to enforce, institute or maintain any
suit, action or proceeding against the Litigation Trustees to enforce or
otherwise act in respect of the CPR Certificates unless such holder has
previously given written notice to the Litigation Trustees of the substance of
such dispute, and holders of at least a majority in interest of the issued and
outstanding CPR Certificates have given written notice to such parties of their
support for the institution of such proceeding to resolve such dispute.
The Commitment, the CPR Trust Agreement and the CPR Certificates will also
provide that none of Ahmanson, Home Savings, their respective affiliates,
officers, directors, employees or agents shall have any liability to the CPR
Trust, the Trustees or the holders of CPR Certificates. Without limiting the
generality of the foregoing, the CPR Certificate holders, the Trustees and the
CPR Trust will not have the right to enforce, institute or maintain any suit,
action or proceeding against Ahmanson, Home Savings, their affiliates, officers,
directors, employees or agents relating to the formation of the CPR Trust, the
entering into of the Commitment, the distribution of the CPR Certificates, the
Litigation or the performance by the Litigation Trustees of their duties as
Litigation Trustees. Notwithstanding the foregoing, the CPR Trust, or the
Litigation Trustees on behalf of the CPR Trust, may enforce, institute or
maintain a suit, action or proceeding against (i) Ahmanson for breach of the
Commitment, (ii) Ahmanson for breach after the Effective Time of its obligations
as successor to Coast under the CPR Agreement, (iii) Ahmanson for failure to
deliver any CPR Certificate when due or to return to the CPR Trust for
cancellation any CPR Certificate required to be returned pursuant to the Merger
Agreement when so required, (iv) Ahmanson for failure to deposit the Expense
Fund at the Effective Time in a non-interest bearing demand-deposit account in
the name of the CPR Trust at Home Savings or (v) Home Savings for breach of any
depository relationship obligations it may have with respect to the Expense
Fund.
The Commitment will provide that except as expressly set forth in the
Commitment (or in any other documents to which Ahmanson has succeeded as a
matter of law), Ahmanson will have no other obligations to the CPR Trust, the
Litigation Trustees or the holders of CPR Certificates. Without limiting the
generality of the foregoing and except as provided in the Merger Agreement,
Ahmanson will have no obligation to advance funds to the CPR Trust, the
Litigation Trustees or the holders of CPR Certificates.
The CPR Trust Agreement will provide that the CPR Certificate holders will
have no voting rights, except the rights described in the following two
sentences, no liquidation preference and no rights to dividends or distributions
other than their pro rata share of the Payment Amount and any portion of the
Retained Amount remaining at the expiration of the Retained Amount Period, plus
any other CPR Trust assets. The CPR Trust Agreement provides that amendments to
the CPR Trust Agreement must be approved by a majority of the holders of CPR
Certificates outstanding, except that the CPR Trust Agreement may be amended by
the Institutional Trustees and a majority of the Litigation Trustees without the
consent of the holders of CPR Certificates to (i) cure any ambiguity; (ii)
correct or supplement any provision in the CPR Trust Agreement that may be
defective or inconsistent with any other provision of the CPR Trust Agreement;
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(iii) add to the covenants, restrictions or obligations of the Litigation
Trustees or to alter the allocation of duties between the Litigation Trustees
and the Institutional Trustee; (iv) to modify, eliminate or add to any provision
of the CPR Trust Agreement to ensure that the CPR Trust (A) will be classified
for United States federal income tax purposes at all times as a grantor trust,
(B) will not be required to register as an "investment company" under the
Investment Company Act of 1940, or (C) is able to issue additional CPR
Certificates. In addition, the holders of a majority of the outstanding CPR
Certificates may remove either the Institutional Trustee or the Delaware Trustee
with cause or, if a default by the CPR Trust with respect to its payment
obligations has occurred and is continuing, with or without cause. The holders
of the CPR Certificates will have no rights to elect, remove or replace the
Litigation Trustees.
MANAGEMENT OF THE LITIGATION
THE LITIGATION TRUSTEES -- GENERAL
The Litigation Trustees will be Ray Martin, Robert L. Hunt II, Norman H.
Raiden and James F. Barritt, who are four current senior Coast executives with
knowledge of the facts underlying the Litigation. Mr. Martin, Mr. Hunt and Mr.
Barritt were officers of Coast and Coast Federal both at the time of the
agreement with the federal government (to treat certain amounts as a permanent
addition to Coast Federal's regulatory capital) in connection with Coast
Federal's acquisition of Central Savings and Loan Association, and also at the
time of the alleged breach of this agreement by the federal government, which
gave rise to the claims underlying the Litigation. Mr. Martin, Mr. Hunt and Mr.
Barritt, together with Mr. Raiden, (who joined Coast soon after the alleged
breach of the agreement by the federal government), have been involved in the
prosecution of the Litigation to date. Pursuant to the CPR Trust Agreement, the
Litigation Trustees will have sole and exclusive right to instruct Coast Federal
(and its successors) with respect to the prosecution of the Litigation
(including all decisions as to retention, dismissal and the terms of engagement
of existing or new counsel for Coast Federal (which retention may involve fees
that are partly contingent) and other advisors), and Ahmanson shall cause Coast
Federal (and its successors) to follow these instructions other than
instructions that are not reasonable. Litigation Trustees may hold no other
full-time employment during the term of their tenure as Litigation Trustees
prior to the receipt of the Litigation Proceeds by the Ahmanson Group.
Mr. Martin is 61 years old and currently serves as Chairman of the Board,
Chief Executive Officer and Director of Coast and Coast Federal. In the Merger
Agreement, Ahmanson has agreed to appoint Mr. Martin to the Ahmanson board after
consummation of the Merger. Mr. Hunt is 46 years old and currently serves as
Director, President and Chief Operating Officer of Coast and Coast Federal. Mr.
Raiden is 65 years old and currently serves as Senior Executive Vice President
of Coast and Coast Federal and General Counsel of Coast, and until December 3,
1997, served as General Counsel of Coast Federal. Mr. Barritt is 38 years old
and currently serves as Senior Executive Vice President and Chief Financial
Officer of Coast and Coast Federal.
The CPR Trust Agreement will provide that the Litigation Trustees will have
the right, in their sole discretion and for any reason whatsoever, to instruct
Coast Federal (and its successors) to dismiss, settle or cease prosecution of
the Litigation at any time and on any terms and Ahmanson shall cause Coast
Federal (and its successors) to follow these instructions other than
instructions that are not reasonable. No settlement agreement or other ruling or
agreement entered into at the direction of the Litigation Trustees as part of
the resolution of the Litigation or a related IRS ruling to such effect issued
to a member of the Ahmanson Group in connection with such agreement may impose
any liability or obligation whatsoever (other than a standard settlement release
relating only to the Litigation or other related claims that Coast or Coast
Federal or Coast's stockholders might have been able to bring as of immediately
prior to the Merger) on any member or members of the Ahmanson Group or adversely
affect or restrict the conduct of its business or adversely affect its tax
posture with respect to other matters.
The CPR Trust Agreement will provide that as compensation, the CPR Trust
will pay each Litigation Trustee, during the term of his service as a Litigation
Trustee, fees of $400,000 per year for five years (except that if the Litigation
is sooner terminated, the remainder of such fees (but in no event with respect
to a period
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longer than the remainder of such year plus two additional years) will be
accelerated upon final resolution of the Litigation and receipt by the Ahmanson
Group of the Litigation Proceeds), plus reimbursement of all reasonable
out-of-pocket expenses. If the services of the Litigation Trustees continue to
be necessary after the initial five-year period or such receipt of Litigation
Proceeds, the Litigation Trustees shall be entitled to a fee of $200 per hour
until termination of the CPR Trust. Pursuant to the CPR Trust Agreement, each
Litigation Trustee may, but is not obligated to, defer all or part of his
compensation until 30 days after the earliest to occur of (i) the date on which
he elected to defer such compensation, (ii) the date he ceases to be a
Litigation Trustee, and (iii) the date of the receipt of the Commitment Amount
in full by the CPR Trust. Any Litigation Trustee electing to so defer will
receive the compensation he would have received plus an amount, calculated on a
monthly basis during the period of deferral (and included in the amount
deferred), equal to the product of the monthly balance of the amount deferred
and an annual rate equal to the Reference Rate plus 250 basis points. At the
date of this Proxy Statement/Prospectus, no Litigation Trustee has indicated his
intent to defer all or part of his compensation.
Pursuant to the CPR Trust Agreement, each of the initial Litigation
Trustees shall, as a condition of his continuation as a Litigation Trustee, be
obligated to retain not less than 50% of the CPR Certificates received in the
CPR Certificate Distribution and in respect of Coast Performance Share Awards,
Coast SARs, and/or Replacement Options held by such Litigation Trustee, until
the Litigation Proceeds are received by the Ahmanson Group. Transfers by a
Litigation Trustee to his family members or to any trust created for the benefit
of his family shall be included in such 50% calculation for so long as these
transferees retain the CPR Certificates. The number of CPR Certificates received
by each Litigation Trustee in the CPR Certificate Distribution and in respect of
Coast Performance Share Awards, Coast SARs, and/or Replacement Options will
depend upon the number of shares of Coast Common Stock, Coast Performance Share
Awards, Coast SARs and/or Coast Stock Options that such Litigation Trustee holds
immediately prior to the Effective Time, which number may be fewer than the
number held as of the date of this Proxy Statement/Prospectus.
The terms of the CPR Trust Agreement will require that there must be at
least three Litigation Trustees at all times. If a Litigation Trustee resigns,
dies, becomes incapacitated, or is no longer qualified, and as a result there
would be fewer than three Litigation Trustees, the remaining Litigation Trustees
will appoint a successor Litigation Trustee who will receive fees as determined
by the other Litigation Trustees (but in no event more than the fees payable to
the initial Litigation Trustees).
THE LITIGATION TRUSTEES -- AUTHORITY
The CPR Trust Agreement will provide that the Litigation Trustees may adopt
their own rules and procedures but may act only with the agreement of a majority
of the Litigation Trustees then in office. They may, in their discretion,
delegate to one or more of the Litigation Trustees the authority to act on
behalf of the Litigation Trustees as the Litigation Trustees may determine
appropriate (other than with respect to the retention or dismissal of counsel
for Coast Federal or the Litigation Trustees, or the approval of a settlement or
dismissal of the Litigation). The CPR Trust Agreement will provide that the
Litigation Trustees shall also have the authority to retain or dismiss counsel
for the Litigation Trustees and other experts, consultants or support staff as
the Litigation Trustees deem appropriate. The Litigation Trustees will have full
authority on behalf of Coast Federal (and its successors) to consult with and
instruct the attorneys for Coast Federal (and its successors) in connection with
the Litigation. Pursuant to the CPR Trust Agreement, Ahmanson will provide the
Litigation Trustees with access to the books, records, facilities,
representatives and independent accountants of Coast and Coast Federal as the
Litigation Trustees may reasonably require.
LIABILITY OF THE LITIGATION TRUSTEES
The CPR Trust Agreement will provide that the Litigation Trustees will have
no liability to Ahmanson, Coast or CPR Certificate holders unless it shall be
established in a final judicial determination by clear and convincing evidence
that any decision or action was undertaken with deliberate intent to injure the
CPR Certificate holders or with reckless disregard for the best interests of
such holders, and, in any event, any liability will be limited to actual,
proximate, quantifiable damages. See "Risk Factors -- Limitation on Rights of
CPR Certificate Holders" and "-- Limitation on Rights of Certificate Holders."
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FILING OF EXCHANGE ACT REPORTS
The CPR Certificates will be registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). So long as the CPR Certificates remain
so registered, the CPR Trust will be subject to the reporting obligations of
Section 13(a) of the Exchange Act, and will be obligated thereby to file with
the Commission annual reports on Form 10-K and quarterly reports on Form 10-Q.
Unless otherwise required by the Commission, such reports will contain only an
overview of the status of the Litigation and disclosure of the amounts of the
Expense Fund that have been disbursed for the relevant period and any contingent
or incurred but unpaid expenses that the CPR Trust will be obligated to pay from
the Expense Fund or in the Commitment Amount in the future. The CPR Trust will
also file a report on Form 8-K upon the occurrence of a material judicial
decision in the Litigation or in the event of any agreement to settle the
Litigation. Such reports will not include financial statements or any valuation
of the Litigation. The CPR Trust's ability to disclose details of the Litigation
may be limited, however, by the inherent nature and rules of judicial
proceedings, including, among other things, proceedings and filings that are
sealed by the court, matters involving attorney-client privilege and proceedings
that are conducted on a confidential basis by agreement of the parties, such as
settlement negotiations.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material United States federal income tax
consequences of the holding and sale of CPR Certificates applies to holders of
Coast Common Stock who receive CPR Certificates in the CPR Certificate
Distribution and hold them as capital assets. The discussion may not apply to
certain classes of taxpayers, including foreign holders, insurance companies,
tax-exempt organizations, financial institutions, dealers in securities, traders
in securities that elect to mark to market, persons who hold CPR Certificates in
a hedging transaction or as part of a straddle or conversion transaction and
persons to whom CPR Certificates are issued on the exercise of employee options
or otherwise in a transaction that is not a sale or exchange.
THERE ARE NO AUTHORITIES CONSIDERING THE TAX TREATMENT OF INSTRUMENTS THAT
ARE SUBSTANTIALLY THE SAME AS THE CPR CERTIFICATES. AS A RESULT, THEIR TAX
TREATMENT IS SOMEWHAT UNCERTAIN, AND COULD DIFFER FROM THE TREATMENT DESCRIBED
HEREIN. CPR CERTIFICATE HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE RECEIPT,
OWNERSHIP AND DISPOSITION OF THE CPR CERTIFICATES.
This summary represents the opinion of Cleary, Gottlieb, Steen & Hamilton,
special counsel to Coast. The parties do not intend to request any ruling from
the Internal Revenue Service as to the United States federal income tax
treatment of the CPR Certificates or CPR Trust.
CHARACTERIZATION OF THE CPR CERTIFICATES AND THE CPR TRUST
The following is the opinion of Cleary, Gottlieb, Steen & Hamilton, special
counsel to Coast. The CPR Certificates represent pro rata beneficial interests
in the CPR Trust. It is anticipated that the CPR Trust will be treated as a
grantor trust for federal income tax purposes, rather than as a separate taxable
entity, and it is a condition to Coast's obligation to consummate the Merger
that it receive an opinion of Cleary, Gottlieb, Steen & Hamilton, dated the
Effective Date, to the effect that the CPR Trust will not itself be subject to
any material federal income tax. Under the grantor trust rules, each holder of a
CPR Certificate will be treated for federal income tax purposes as the owner of
a pro rata share of the CPR Trust's assets and will be treated as receiving any
amounts received by the CPR Trust when those amounts are received by the CPR
Trust (and as making any payments to third parties when those amounts are paid
by the CPR Trust). Accordingly, a holder may (depending upon such holder's basis
in its interest in the assets of the CPR Trust) realize income attributable to
its pro rata share of the payments received by the CPR Trust without regard to
whether those payments have been distributed to the holder. Following the
Effective Time, the assets of the CPR Trust will consist of the Commitment and
rights to apply amounts in the Expense Fund to Litigation- and CPR Trust-related
expenses. For federal income tax purposes, the CPR Trust intends to treat the
Expense Fund as an
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asset of Ahmanson, and to treat any amounts paid out of the Expense Fund as
expenditures of Ahmanson that do not affect the CPR Trust except to the extent
they result in reductions in the Commitment Amount. In the absence of a change
in law, the CPR Trust will file returns and report to investors in a manner
consistent with this intention.
Income of the Trust which will be taxable to holders whether or not
distributed will include income attributable to the Commitment as well as income
from the temporary investment of proceeds of the Commitment by the Trust
(including proceeds that are retained by the Trust for a period of two years or
more as part of the Retained Amount).
CHARACTERIZATION OF THE COMMITMENT; SECTION 483
As described above, for federal income tax purposes, the CPR Certificates
are equivalent to an ownership interest in the Commitment. The CPR Trust
intends, under current law, that the payments made under the Commitment, to the
extent attributable to CPR Certificates issued to Coast stockholders in the
Merger, will be treated as payments under a contract for the sale or exchange of
Coast Common Stock that are subject to Section 483 of the Code. Given the wholly
contingent nature of the Commitment, it is not anticipated that the Commitment
will be treated as a debt instrument for federal income tax purposes.
Under Section 483, a holder of a CPR Certificate will not be required to
include any amount in income with respect to the CPR Certificate until payments
on the Commitment are received by the CPR Trust (or in some circumstances
described below, until the right to those payments becomes fixed), or the CPR
Certificate is sold. When a payment is received on the Commitment or the CPR
Certificate is sold, a portion of the amount received will be treated under
Section 483 as interest income that is ordinary income to the holder. The
balance of the amount will be treated as sales proceeds or amounts received in
respect of the Commitment, with the consequences described below. The interest
amount will equal the excess of the amount received over its present value as of
the Effective Date, calculated using as the discount rate the applicable federal
rate (AFR). The AFR is a rate reflecting an average of market yields on Treasury
debt obligations for different ranges of maturities that is published monthly by
the Internal Revenue Service. The relevant AFR will be the lower of (i) the
lowest AFR in effect during the 3-month period ending with the month which
includes the date on which the Agreement was signed or (ii) the lowest AFR in
effect during the 3-month period ending with the month which includes the
Effective Date; in each case, the maturity range of the relevant AFR will
correspond to the period from the Effective Date to the date the amount is
received or deemed received. Where a payment is due more than six months after
it is fixed, (i) the payment will be discounted back to the date when it became
fixed, using a discount rate equal to the AFR that would apply under Section 483
to a payment on the initial Commitment that is made when the fixed payment is
due, (ii) the discount on the deferred payment is treated as interest accruing
over the period of deferral, and (iii) the discounted amount is divided between
interest and principal under Section 483 as if it were paid in cash on the date
it becomes fixed. The Section 483 interest must be included in income by a
holder under its regular method of accounting (e.g., the accrual method or the
cash method).
The calculation of interest income realized by a holder under Section 483
does not depend on the period for which the holder has held its CPR
Certificates. Accordingly, a holder who bought CPR Certificates after the
Effective Date may be treated as receiving interest under Section 483 that
includes interest for the period from the Effective Date to the date of the
holder's purchase of the CPR Certificates. Although there are no specific rules
addressing the issue under current law, it is reasonable to assume that a
purchaser of CPR Certificates would be permitted to treat the portion of the
purchase price that is treated as interest to the seller under Section 483 as a
payment of accrued interest that may be offset against the portion of any amount
received by the purchaser that is treated as interest under Section 483.
SALE OF CERTIFICATES
Upon a sale of a CPR Certificate, a holder will recognize gain or loss
equal to the difference between the amount realized on the sale, net of imputed
interest under Section 483, and the holder's adjusted tax basis in the CPR
Certificate. Any such gain or loss will be treated as capital gain or loss
(which will be long-term if the
29
<PAGE> 34
holder has held the CPR Certificates for more than one year). Long-term capital
gain of a non-corporate holder is generally subject to a maximum tax rate of 28%
in respect of property held for more than one year and to a maximum tax rate of
20% in respect of property held in excess of 18 months.
RECEIPT OF PAYMENTS ON THE COMMITMENT
When a payment is received on the Commitment by the CPR Trust, a holder of
CPR Certificates will recognize gain equal to the difference between the amount
of the payment allocated to the CPR Certificates, net of imputed interest under
Section 483, and the portion of the holder's basis in the CPR Certificates that
is allocable to such payment. If multiple payments may be received on the
Commitment, the holder may be required to allocate its basis among those
payments. The method for making such allocation is unclear. If a holder receives
a payment that is less than its basis in the Commitment, the holder may not be
allowed a loss until it is determined that no further payments will be made.
Where the receipt of a payment terminates all rights of the CPR Trust under the
Commitment, any gain or loss attributable to the payment generally would be
capital gain or loss under Section 1234A of the Code. It is not clear whether
the same treatment would apply to a partial payment.
LACK OF A CASH RECOVERY
If identifiable events occur which establish the worthlessness of the CPR
Certificates, a CPR Certificate holder would be entitled to deduct as a capital
loss, in the year of such identifiable event, such holder's adjusted tax basis
in its CPR Certificates.
OTHER CHARACTERIZATIONS
Although unlikely, the Internal Revenue Service could take the position
that amounts drawn from the Expense Fund to pay expenses should be treated as a
payment by Ahmanson to the CPR Trust that is applied to pay expenses of the CPR
Trust. Such a payment could potentially be treated as current income to the CPR
Trust or as a deemed loan. Such a deemed loan would be repayable, with interest,
solely out of future payments on the Commitment. Under this characterization,
reductions in the Commitment amount paid to the CPR Trust that are attributable
to the reimbursement of such expenses or a related interest factor would be
treated as additional amounts on the Commitment that are paid to the CPR Trust
and applied by it to make payments of principal and interest on the deemed loan.
Deductions would be allowed for interest deemed paid only to the extent
permitted under the general rules of the Code. Further, if the deemed loan is
not repaid, the CPR Trust could have discharge of indebtedness income when the
loan is deemed to be discharged. In addition, any holders of CPR Certificates
that are pension plans or other tax-exempt organizations subject to the tax on
unrelated business taxable income may be required to treat income attributable
to the portion of the Commitment that is considered debt financed as unrelated
business taxable income.
FUNDING OF ADDITIONAL EXPENSES
The CPR Trust Agreement permits the issuance of additional CPR Certificates
that represent pro rata interests in the CPR Trust and permits borrowings to pay
expenses so long as the indebtedness represents debt of the CPR Trust (and not
an ownership interest) for federal income tax purposes. Any such issuance will
be treated as a sale by holders of existing CPR Certificates of a pro rata
interest in the Commitment corresponding to the interest in the Commitment
allocated to the newly issued CPR Certificates. Any borrowing will have the
consequences described in "-- Other Characterizations" above.
BACK-UP WITHHOLDING AND INFORMATION REPORTING
A CPR Certificate holder may be subject to a backup withholding tax of 31%
on the receipt of proceeds of a sale, exchange, redemption or satisfaction of
the CPR Certificates. In general, backup withholding will only apply if a holder
fails to comply with certain identification requirements. Backup withholding is
not an additional tax and may be claimed as a credit against the U.S. federal
income tax liability of a holder, provided
30
<PAGE> 35
that the required information is furnished to the Internal Revenue Service.
Holders should consult their tax advisors regarding their qualification for
exemption from back-up withholding and the procedure for obtaining any
applicable exemption. Payments of amounts treated as interest under Section 483
will also be subject to information reporting unless an exemption applies.
VALIDITY OF THE CPR CERTIFICATES
The validity of the CPR Certificates being offered hereby will be passed
upon for the CPR Trust by Morris, James, Hitchens & Williams, Wilmington,
Delaware.
31
<PAGE> 36
APPENDIX B
================================================================================
AMENDED
AND
RESTATED DECLARATION
OF TRUST
COAST FEDERAL LITIGATION
CONTINGENT PAYMENT RIGHTS TRUST
DATED AS OF
================================================================================
<PAGE> 37
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.............................................................. B-2
ARTICLE II
ORGANIZATION
SECTION 2.1 Name..................................................................... B-6
SECTION 2.2 Office................................................................... B-6
SECTION 2.3 Purposes and Powers of the Trust......................................... B-6
SECTION 2.4 Title to Property of the Trust........................................... B-7
SECTION 2.5 Mergers.................................................................. B-7
ARTICLE III
TRUSTEES
SECTION 3.1 Authority................................................................ B-8
SECTION 3.2 Number of Trustees....................................................... B-8
SECTION 3.3 Delaware Trustee......................................................... B-8
SECTION 3.4 Institutional Trustee; Eligibility....................................... B-9
SECTION 3.5 Appointment, Removal and Resignation of the Institutional and Delaware
Trustees................................................................. B-9
SECTION 3.6 Vacancies Among Relevant Trustees; Effect of Vacancies................... B-10
SECTION 3.7 The Litigation Trustees.................................................. B-11
SECTION 3.8 Compensation of the Litigation Trustees.................................. B-11
SECTION 3.9 Limitation on Liability of Litigation Trustees........................... B-12
SECTION 3.10 Resignation of a Litigation Trustee...................................... B-12
SECTION 3.11 Appointment of Successor Litigation Trustees............................. B-12
SECTION 3.12 Meetings of the Trustees................................................. B-13
SECTION 3.13 Powers and Duties of the Sponsor, the Litigation Trustees and the
Institutional Trustee.................................................... B-13
SECTION 3.14 Certain Duties and Responsibilities of the Trustees...................... B-17
SECTION 3.15 Certain Rights of the Institutional Trustee.............................. B-18
SECTION 3.16 Lists of Holders of CPR Certificates..................................... B-19
SECTION 3.17 Execution of Documents................................................... B-20
SECTION 3.18 Not Responsible for Recitals or Issuance of CPR Certificates............. B-20
SECTION 3.19 Filings with the Commission.............................................. B-20
SECTION 3.20 Default; Notice.......................................................... B-20
ARTICLE IV
PAYMENTS TO HOLDERS
SECTION 4.1 Payment to Holders........................................................ B-20
SECTION 4.2 Timing of Payments........................................................ B-21
SECTION 4.3 Default; Waiver........................................................... B-21
</TABLE>
i
<PAGE> 38
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE V
EXPENSES: THE EXPENSE FUND AND THE RETAINED AMOUNT
SECTION 5.1 Expense Fund............................................................. B-21
SECTION 5.2 Return of Expense Fund................................................... B-21
SECTION 5.3 Retained Amount.......................................................... B-21
ARTICLE VI
MANAGEMENT OF THE LITIGATION
SECTION 6.1 Authority of the Litigation Trustees..................................... B-22
SECTION 6.2 Retention of Attorneys, Accountants and Other Professionals.............. B-22
SECTION 6.3 Cooperation by the Sponsor............................................... B-23
ARTICLE VII
ISSUANCE AND DISTRIBUTION OF CPR CERTIFICATES
SECTION 7.1 General Provisions Regarding CPR Certificates............................ B-23
SECTION 7.2 Paying Agent, Transfer Agent and Registrar............................... B-24
SECTION 7.3 Form and Dating.......................................................... B-24
(a) Definitive and Global CPR Certificates......................... B-25
(b) Book-Entry Provisions.......................................... B-25
(c) Definitive CPR Certificates.................................... B-25
SECTION 7.4 Mutilated, Destroyed, Lost or Stolen Certificates........................ B-25
SECTION 7.5 Temporary CPR Certificates............................................... B-25
SECTION 7.6 Issuance of CPR Certificates on the Effective Date....................... B-26
SECTION 7.7 Redemption and Cancellation.............................................. B-26
ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.1 Dissolution and Termination of Trust..................................... B-26
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 General.................................................................. B-27
SECTION 9.2 Transfer Procedures...................................................... B-27
(a) Transfer and Exchange of Definitive CPR Certificates........... B-27
(b) Restrictions on Transfer of a Definitive CPR Certificate for a
Beneficial Interest in a Global CPR Certificate................ B-27
(c) Transfer and Exchange of Global CPR Certificates............... B-28
(d) Transfer of a Beneficial Interest in a Global CPR Certificate
for a Definitive CPR Certificate............................... B-28
(e) Definitive CPR Certificates If No Depositary................... B-28
(f) Cancellation or Adjustment of a Global CPR Certificate......... B-28
(g) Obligations with Respect to Transfers and Exchanges of CPR
Certificates................................................... B-29
SECTION 9.3 Deemed CPR Certificate Holders........................................... B-29
SECTION 9.4 Notices to Clearing Agency............................................... B-29
SECTION 9.5 Appointment of Successor Clearing Agency................................. B-29
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE X
HOLDERS OF CPR CERTIFICATES
SECTION 10.1 Limitations on Rights of Holders......................................... B-29
SECTION 10.2 Limitations on Suits by Holders.......................................... B-30
ARTICLE XI
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 11.1 Liability................................................................ B-31
SECTION 11.2 Exculpation.............................................................. B-31
SECTION 11.3 Fiduciary Duty........................................................... B-32
SECTION 11.4 Indemnification.......................................................... B-32
SECTION 11.5 Outside Businesses....................................................... B-34
SECTION 11.6 Compensation; Fee........................................................ B-34
ARTICLE XII
ACCOUNTING
SECTION 12.1 Fiscal Year.............................................................. B-34
SECTION 12.2 Certain Accounting Matters............................................... B-35
SECTION 12.3 Banking.................................................................. B-35
SECTION 12.4 Withholding.............................................................. B-35
ARTICLE XIII
AMENDMENTS AND MEETINGS
SECTION 13.1 Amendments............................................................... B-35
SECTION 13.2 Meetings of Holders of CPR Certificates; Action by Written Consent....... B-36
ARTICLE XIV
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
SECTION 14.1 Representations and Warranties of the Institutional Trustee.............. B-37
SECTION 14.2 Representations and Warranties of the Delaware Trustee................... B-38
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices.................................................................. B-38
SECTION 15.2 Governing Law............................................................ B-39
SECTION 15.3 Intention of Parties..................................................... B-39
SECTION 15.4 Headings................................................................. B-39
SECTION 15.5 Successors and Assigns................................................... B-40
SECTION 15.6 Partial Enforceability................................................... B-40
SECTION 15.7 Specific Performance..................................................... B-40
SECTION 15.8 Counterparts............................................................. B-40
EXHIBITS AND ANNEXES
EXHIBIT A Commitment Agreement
EXHIBIT B Form of CPR Certificate
EXHIBIT C Board Resolutions
</TABLE>
iii
<PAGE> 40
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
COAST FEDERAL LITIGATION CONTINGENT PAYMENT RIGHTS TRUST
[DATE]
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of [date], by the Trustees (as defined herein), the Sponsor (as
defined herein) and by the holders, from time to time, of undivided beneficial
interests in the assets of the Coast Federal Litigation Contingent Payment
Rights Trust (the "Trust") to be issued pursuant to this Declaration;
WHEREAS, the Institutional Trustee (as defined herein), the Delaware
Trustee (as defined herein) and the Sponsor established the Trust, a statutory
business trust under the Delaware Business Trust Act, pursuant to a Declaration
of Trust dated as of (the "Original Declaration") and a Certificate of
Trust filed with the Secretary of State of the State of Delaware on , for
the sole purpose of filing a registration statement under the Securities Act (as
defined herein) with the Securities and Exchange Commission for the issuance of
Contingent Payment Right Certificates;
WHEREAS, the Sponsor and H.F. Ahmanson & Company ("Ahmanson") have entered
into an Amended and Restated Agreement and Plan of Merger (the "Merger
Agreement"), dated as of October 5, 1997, pursuant to which (i) the Sponsor will
merge (the "Merger") with and into Ahmanson on the effective date (the
"Effective Date") and at the effective time (the "Effective Time") of the
Merger, (ii) immediately prior to the Effective Time, the Trust will issue to
the Sponsor CPR Certificates (as defined herein), representing assignable and
transferable undivided beneficial interests in the assets of the Trust, (iii)
upon such issuance, and immediately prior to the Effective Time (and provided
that all other conditions to consummation of the Merger have been satisfied or
waived), the Sponsor will distribute substantially all of the CPR Certificates
to its stockholders and, at the Effective Time, to the holders of its
outstanding stock appreciation rights and performance share awards, and (iv) at
the Effective Time, and effective at the Effective Time, Ahmanson will enter
into a Commitment Agreement (the "Commitment"), substantially in the form
attached hereto as Exhibit A, pursuant to which Ahmanson will be obligated to
pay to the Trust from time to time an aggregate amount equal to the Commitment
Amount (as defined herein);
WHEREAS, the Trust will hold the Commitment and the Litigation Trustees (as
defined herein) will, upon the effectiveness of the Commitment, instruct Coast
Federal (as defined herein) pursuant to the terms of this Declaration as to the
administration of the litigation claims of Coast Federal Bank, Federal Savings
Bank ("Coast Federal"), a wholly-owned subsidiary of the Sponsor, and any of its
successors, in Coast Federal Bank, Federal Savings Bank v. United States, Civil
Action Number 92-466C (Cl. Ct. filing July 9, 1992) or any substitute or
ancillary action, litigation or arbitration with respect to the claims made in
such action (the "Litigation");
WHEREAS, nothing in this Declaration shall be deemed to be or to effect an
assignment (within the meaning of 31 U.S.C. Section 3727) of the Litigation;
WHEREAS, as of the date hereof, no interests in the Trust have been issued;
and
WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend
and restate each and every term and provision of the Original Declaration;
NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a statutory business trust under the Business Trust Act (as defined
herein) and that this Declaration constitute the governing instrument of such
statutory business trust, the Trustees declare that all assets contributed to
the Trust will be held in trust for the benefit of the holders, from time to
time, of the CPR Certificates issued
B-1
<PAGE> 41
hereunder representing undivided beneficial interests in the assets of the
Trust, subject to the provisions of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to
this Declaration, in its entirety, as modified, supplemented or amended
from time to time, and not to any particular Article, Section or
subsection;
(d) all references to "herein" or "hereunder" refer to this
Declaration in its entirety, as modified, supplemented or amended from time
to time, and not to any particular Article, Section or subsection;
(e) all references in this Declaration to Articles and Sections and
Exhibits are to Articles and Sections of and Exhibits to this Declaration
unless otherwise specified;
(f) a reference to the singular includes the plural and vice versa;
and
(g) a reference to the masculine includes the feminine and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.
"Ahmanson" has the meaning set forth in the recitals hereof.
"Ahmanson Group" means Ahmanson, Home Savings and, after the Effective
Time, Coast Federal, and any of their respective Affiliates.
"Ahmanson Indemnified Persons" means Ahmanson, Home Savings, and their
affiliates, officers, directors, employees and agents.
"Authorized Officer" of a Person means any Person that is authorized to
bind such Person.
"Book Entry Interest" means a beneficial interest in one or more Global CPR
Certificates, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 9.2.
"Business Day" means any day other than Saturday, Sunday or any other day
on which banking institutions in New York City (in the State of New York), Los
Angeles (in the State of California), or Wilmington (in the State of Delaware)
are permitted or required by any applicable law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code Section 3801 et seq., as it may be amended from time to time, or any
successor legislation.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depositary for the
CPR Certificates and in whose name (or in the name of a nominee of that
organization) shall be registered a Global CPR Certificate and which shall
undertake to effect book entry transfers and pledges of the CPR Certificates.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Clearing Agency
effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
B-2
<PAGE> 42
"Coast" means Coast Savings Financial, Inc., a Delaware corporation.
"Coast Federal" has the meaning set forth in the recitals hereof.
"Coast Performance Share Awards" has the meaning set forth in Section
7.7(c).
"Coast SARs" has the meaning set forth in Section 7.7(c).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Commitment" has the meaning set forth in the recitals hereof.
"Commitment Amount" has the meaning set forth in the Commitment.
"Contract Year" has the meaning set forth in Section 3.8(a).
"Corporate Trust Office" means the office of the Institutional Trustee at
which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at Four Albany Street, New York, New
York 10006, Attention: Corporate Trust and Agency Group, Corporate Market
Services; facsimile number (212) 250-6961.
"CPR Certificates" means the Contingent Payment Right Certificates,
including the Contingent Payment Right Certificates issued immediately prior to
the Effective Time and any other Contingent Payment Right Certificates issued by
the Trust.
"Damages" has the meaning set forth in Section 11.4(a).
"Declaration" has the meaning set forth in the preamble hereto.
"Deferral Amount" has the meaning set forth in Section 3.8(b).
"Definitive CPR Certificate" has the meaning set forth in Section 7.3(a).
"Delaware Trustee" has the meaning set forth in Section 3.3(a).
"Depositary" means, with respect to the CPR Certificates, DTC or another
Clearing Agency.
"DTC" means The Depository Trust Company, New York, New York, the initial
Clearing Agency.
"Effective Date" has the meaning set forth in the recitals hereof.
"Effective Time" has the meaning set forth in the recitals hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Expense Fund" means an amount equal to $20 million, less the expenses
relating to the Litigation incurred and paid by Coast Federal between August 31,
1997 and the Effective Date, which amount Ahmanson will deposit at the Effective
Time in a non-interest bearing demand deposit account in the name of the Trust
at Home Savings.
"Fiscal Year" has the meaning set forth in Section 12.1.
"Global CPR Certificate" has the meaning set forth in Section 7.3(a).
"Holder" means a Person in whose name a CPR Certificate is registered on
the register maintained by the Registrar pursuant to Section 7.2, such Person
being a beneficial owner within the meaning of the Business Trust Act.
"Home Savings" means Home Savings of America, FSB, and its successors.
"Indemnified Person" means a Trust Indemnified Person or an Ahmanson
Indemnified Person.
B-3
<PAGE> 43
"Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 3.4 and duly appointed pursuant to this
Declaration.
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"List of Holders" has the meaning set forth in Section 3.16.
"Litigation" has the meaning set forth in the recitals hereof.
"Litigation Proceeds" has the meaning set forth in the Commitment.
"Litigation Trustee" has the meaning set forth in Section 3.7.
"Merger" has the meaning set forth in the recitals hereof.
"Merger Agreement" has the meaning set forth in the recitals hereof.
"Non-Cash Proceeds" has the meaning set forth in the Commitment.
"Officers' Certificates" means, (i) with respect to any Person other than
Litigation Trustees, a certificate signed by two Authorized Officers of such
Person, and (ii) with respect to the Litigation Trustees, a certificate signed
by a majority of the Litigation Trustees then in office. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in the Declaration shall include:
(a) a brief statement of the nature and scope of the examination or
investigation undertaken by each Authorized Officer or Litigation Trustee
in rendering the Certificate; and
(b) a statement as to whether, in the opinion of each such Authorized
Officer or Litigation Trustee, such condition or covenant has been complied
with.
"Original Declaration" has the meaning set forth in the recitals hereof.
"Paying Agent" has the meaning specified in Section 7.2.
"Payment Amount" shall mean, with respect to each payment of the Commitment
Amount received by the Trust pursuant to the Commitment, such payment of the
Commitment Amount received by the Trust (including the amount of cash resulting
from the monetization by Ahmanson of any Non-Cash Proceeds) less the amount of
any accrued but unpaid expenses payable by the Trust and, for any reason, not
covered by the Expense Fund (including, without limitation, contingent amounts
payable to attorneys, experts or others retained by the Trust or Coast Federal
(or any successor thereto) in connection with the prosecution of the Litigation
by Coast Federal (or any successor thereto)), plus interest or income, if any,
received by the Trust on such payment of the Commitment Amount, less amounts
retained by the Trust as the Retained Amount.
"Permitted Investment" means the Merrill Lynch Government Fund money market
fund (including any successor) or, if at the time of the receipt of the
applicable payment of the Commitment Amount by the Trust (i) such fund is not in
existence, (ii) such fund is no longer limited to investing in short-term
obligations of or guaranteed by the United States government, (iii) such fund is
not accepting new investors or new investments or will not accept the investment
of the Commitment Amount or the Retained Amount, as the case may be, or (iv)
such fund is not AAA rated by Standard and Poor's, the AAA rated money market
fund reported in the IBC Rated Money Fund Report to have the largest amount of
assets under management as of the end of the most recent year for which
information is publicly available and which will accept such investment.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
B-4
<PAGE> 44
"Reference Rate" means the reference rate or an equivalent rate publicly
announced from time to time of the Bank of America or any successor (or, if no
successor remains in existence or publicly announces a rate, the commercial bank
with the largest amount of deposits in the State of California as of the most
recent year end prior to the applicable date for which information is publicly
available and which publicly announces such a rate, as determined in good faith
by Ahmanson's Board of Directors), as in effect from time to time.
"Registrar" has the meaning set forth in Section 7.2.
"Reimbursements" has the meaning set forth in the Commitment.
"Relevant Trustee" has the meaning set forth in Section 3.5.
"Replacement Options" has the meaning set forth in the Merger Agreement.
"Responsible Officer" means, with respect to the Institutional Trustee, any
officer within the Corporate Trust Office of the Institutional Trustee,
including any managing director, vice-president, any assistant vice-president,
any assistant secretary, the treasurer, any assistant treasurer or other officer
of the Corporate Trust Office of the Institutional Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Retained Amount" has the meaning set forth in Section 5.3(a).
"Retained Amount Period" has the meaning set forth in Section 5.3(a).
"Securities Act" means the Securities Act of 1933, as amended from time to
time or any successor legislation.
"Sponsor" means Coast or any successor entity in a merger, consolidation or
amalgamation (including Ahmanson or any successor entity).
"Successor Certificates" has the meaning set forth in Section 2.5(b)(i)(B).
"Successor Delaware Trustee" has the meaning set forth in Section 3.5(a).
"Successor Entity" has the meaning set forth in Section 2.5(b)(i).
"Successor Institutional Trustee" has the meaning set forth in Section
3.5(a).
"Tax Opinion" means the opinion of Cleary, Gottlieb, Steen & Hamilton, or
Mayer, Brown & Platt or any other law firm selected by the Litigation Trustees
that is nationally recognized for its expertise in tax matters, to the effect
that the undertaking of a specified action would not cause the Trust to fail to
be classified as a grantor trust for United States federal income tax purposes.
"Transfer Agent" has the meaning set forth in Section 7.2.
"Trust" has the meaning set forth in the first paragraph of this
Declaration.
"Trustee" or "Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Institutional Trustee, Delaware Trustee or
Litigation Trustee in accordance with the provisions hereof, and references
herein to a Trustee or the Trustees shall refer to such Person or Persons solely
in their capacity as trustees hereunder.
"Trust Indemnified Person" means (a) the Institutional Trustee, the
Delaware Trustee, any Affiliate of the Institutional Trustee or the Delaware
Trustee, and any officers, directors, stockholders, members, partners,
employees, representatives, custodians, nominees or agents of the Institutional
Trustee and the Delaware Trustee; (b) any Litigation Trustee; (c) any Affiliate
of any Litigation Trustee; (d) any partners, employees, representatives or
agents of any Litigation Trustee; or (e) any officer, employee or agent of the
Trust or its Affiliates.
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"Trust Property" means (a) the Commitment and all proceeds and rights in
respect of the Commitment, (b) the right to draw on amounts in the Expense Fund
for the purpose of funding expenses of the Trust and (c) any other assets that
may be held from time to time by the Trust.
"Trust Purpose" shall have the meaning set forth in Section 2.3.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name. The Trust is named "Coast Federal Litigation Contingent
Payment Rights Trust", as such name may be modified from time to time by the
Litigation Trustees following written notice to the Holders of the CPR
Certificates. The Trust's activities may be conducted under the name of the
Trust or any other name deemed advisable by the Litigation Trustees.
SECTION 2.2 Office. The address of the principal office of the Trust on
the date of execution of this Declaration is:
E.A. Delle Donne Corporate Center
Montgomery Building
1011 Centre Road
Wilmington, Delaware 19805-1266
Attention: Lisa Wilkins
Facsimile: (302) 636-3222
On ten Business Days written notice to the Holders of the CPR Certificates,
the Institutional Trustee may designate another principal office at the
instruction of the Litigation Trustees.
SECTION 2.3 Purposes and Powers of the Trust. (a) The exclusive purposes
and functions of the Trust (each, a "Trust Purpose") are (i) to issue the CPR
Certificates, (ii) to hold the Commitment, (iii) for the purpose of, and in a
manner consistent with, achieving the realization and distribution of amounts
payable pursuant to the Commitment, upon the effectiveness of the Commitment, to
instruct Coast Federal and its successors to prosecute, appeal, resolve, settle,
compromise or otherwise pursue the Litigation, and (iv) upon receipt of payments
pursuant to the Commitment, to distribute the Payment Amount as provided herein,
and thereafter as provided herein, any portion of the Retained Amount remaining
at the end of the Retained Amount Period, to the Holders in as prompt and
orderly a fashion as possible consistent with this Declaration. Anything to the
contrary herein or in the Business Trust Act notwithstanding, the Trustees shall
not at any time, on behalf of the Trust or the Holders, enter into or engage in
any profit-making trade or business, and the Trustees shall have no powers to
take, and shall not take, any actions hereunder other than such as are
reasonably necessary and incidental to the achievement of the foregoing sole
Trust Purposes.
(b) Notwithstanding anything in this Declaration or in the Business Trust
Act to the contrary, none of the Trustees or any other Person in carrying out
the Trust Purposes to hold and liquidate Trust Property as described in Section
2.3(a) shall have any power to (i) modify the terms of the Commitment unless a
breach of Ahmanson has occurred thereunder or is reasonably foreseeable, (ii)
invest money held by the Trust except amounts held, pursuant to Sections
3.13(b)(ii)(D) and 5.3 hereof, pending their use to pay expenses or make
distributions, or (iii) after the Effective Time, issue any CPR Certificates
except as described in Sections 2.3(c)(i) and 9.2.
(c) In order to raise funds for, or meet its obligation to pay, expenses
reasonably necessary to preserve or protect assets of the Trust or to administer
the Trust (including, without limitation, expenses related to the Litigation and
expenses related to the liability and indemnification obligations of the Trust),
and solely in furtherance of Trust Purposes, the Trust (pursuant to a
determination by the Litigation Trustees on behalf of the Trust) may undertake
the following:
(i) issue additional CPR Certificates of the same class as the CPR
Certificates issued immediately prior to the Effective Time, which
represent pro rata interests in the Trust; provided, however, that the
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Trust may issue CPR Certificates of a different class than the CPR
Certificates issued immediately prior to the Effective Time or that
represent non-pro rata interests in the Trust, if the Trust receives a Tax
Opinion;
(ii) enter into, subject to the limitations set forth in Section
6.2(a), customary fee arrangements (including fees contingent on receipt by
the Trust of, and determined by reference to, all or any portion of the
Commitment Amount) with counsel for the Litigation, to the Trust or to the
Litigation Trustees, experts or consultants, which arrangements either (x)
provide for such counsel, experts or consultants to receive amounts that
represent for federal income tax purposes arms-length compensation for
services when paid in cash by the Trust or (y) otherwise do not create
ownership interests in the Trust for federal income tax purposes other than
CPR Certificates of the same class as the CPR Certificates issued
immediately prior to the Merger representing pro rata interests in the
Trust; and
(iii) incur indebtedness that represents debt of the Trust (and not an
ownership interest) for federal income tax purposes.
In satisfaction of its obligation to obtain a Tax Opinion in a specific
instance contemplated by clause (i) above, the Trust may rely upon a Tax
Opinion, which may have been issued prior to such specific instance, to the
effect that a course of conduct or type of action that includes the action the
Trust wishes to undertake in such specific instance would not cause the Trust to
fail to be classified as a grantor trust for United States federal income tax
purposes.
SECTION 2.4 Title to Property of the Trust. Legal title to all assets of
the Trust shall be vested in the Trust. The Holders shall not have legal title
to any part of the assets of the Trust, but shall have an undivided beneficial
interest in the assets of the Trust.
SECTION 2.5 Mergers. (a) The Trust may not consolidate, amalgamate, merge
with or into, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to any corporation or other body, except (i)
as described in paragraph (b) of this Section 2.5, (ii) in a liquidation of the
Trust in accordance with this Declaration, or (iii) as contemplated in Section
4.1 or Section 5.3 hereof.
(b) The Trust may, with the consent of the Institutional Trustee (acting in
reliance on the opinions delivered hereunder) and a majority of the Litigation
Trustees and without the consent of the Delaware Trustee or the Holders of the
CPR Certificates, consolidate, amalgamate, merge with or into, or be replaced by
a trust organized as such under the laws of any state of the United States;
provided that:
(i) if the Trust is not the survivor, such successor entity (the
"Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust under the
CPR Certificates; or
(B) substitutes for the CPR Certificates other securities having
substantially the same terms as the CPR Certificates (the "Successor
Certificates");
(ii) the Successor Certificates remain listed, or any Successor
Certificates will be listed or quoted upon notification of issuance, on any
national securities exchange or automated quotation system on which the CPR
Certificates are then listed or quoted, if any;
(iii) such merger, consolidation, amalgamation or replacement does not
result in any material alteration of the Trust Property or adversely affect
the rights, preferences and privileges of the Holders (including any
Successor Certificates) in any material respect (other than with respect to
any dilution of such Holders' interests in the Successor Entity);
(iv) such Successor Entity solely has purposes that are substantially
identical to that of the Trust;
(v) prior to such merger, consolidation, amalgamation or replacement,
the Trust has received an opinion of nationally recognized outside counsel
to the Trust experienced in such matters to the effect that:
(A) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the
Holders (including any Successor Certificates) in any
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material respect (other than with respect to any dilution of the
Holders' interest in the Successor Entity);
(B) such merger, consolidation, amalgamation or replacement, will
not cause the Trust (or the Successor Entity) to fail to be classified
as a grantor trust for United States federal income tax purposes;
provided, however, that the Trust shall not be required to receive
the opinion set forth in clause (B) if a majority of the Holders of CPR
Certificates outstanding shall have approved such merger, consolidation,
amalgamation or replacement;
(vi) without the unanimous consent of the Litigation Trustees, such
merger, consolidation, amalgamation or replacement shall not result in any
material change to the rights of the Litigation Trustees, including,
without limitation, their rights to indemnification, exculpation and
compensation set forth in this Declaration and under Delaware law; and
(vii) prior to such merger, consolidation, amalgamation or
replacement, the Institutional Trustee shall have received an opinion of
counsel to the effect that all conditions precedent of this paragraph (b)
to such transaction have been satisfied.
(c) pursuant to Section 3815(f) of the Business Trust Act, in the case of a
consolidation, amalgamation, or merger of the Trust with or into, or the
replacement by, a trust organized as such under the laws of any state of the
United States, subject to the requirements described in Section 2.5(b) above,
the agreement of merger or consolidation may effect any amendment to this
Declaration, or effect the adoption of a new governing instrument of the Trust
if it is the surviving or resulting business trust in the merger or
consolidation. Such amendment or new governing instrument shall be effective at
the effective time or date of the merger or consolidation.
ARTICLE III
TRUSTEES
SECTION 3.1 Authority. Except as specifically provided in this
Declaration, the Institutional Trustee and the Litigation Trustees shall have
exclusive and complete authority to carry out the Trust Purposes. An action
taken by a Trustee in accordance with its powers shall constitute the act of and
serve to bind the Trust, it being understood that except as provided expressly
herein the Litigation Trustees may act only upon the vote or consent (such
consent to be evidenced by a writing executed contemporaneously with or promptly
following any oral consent) of a majority of the Litigation Trustees. In dealing
with the Trustees acting on behalf of the Trust, no Person shall be required to
inquire into the authority of the Trustees to bind the Trust. Persons dealing
with the Trust are entitled to rely conclusively on the power and authority of
the Trustees as set forth in this Declaration.
SECTION 3.2 Number of Trustees. There shall be one Delaware Trustee if
required by Section 3.3; the Institutional Trustee may also serve as Delaware
Trustee if it meets the applicable requirements, in which case Section 3.3 shall
have no application to such entity in its capacity as Institutional Trustee.
There shall be one Institutional Trustee as required by Section 3.4. There shall
be four initial Litigation Trustees, and, subject to Section 3.12(b), there
shall at all times be at least three Litigation Trustees.
SECTION 3.3 Delaware Trustee. (a) If required by the Business Trust Act,
one trustee (the "Delaware Trustee") shall be:
(i) a natural person who is a resident of the State of Delaware; or
(ii) if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements
of applicable law, including sec. 3807 of the Business Trust Act.
(b) The Delaware Trustee shall be either a natural person who is at least
21 years of age or a legal entity that shall act through one or more Authorized
Officers.
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(c) The initial Delaware Trustee shall be Bankers Trust (Delaware).
(d) Notwithstanding any other provision of this Declaration, the Delaware
Trustee shall not be entitled to exercise any powers, nor shall the Delaware
Trustee have any of the duties and responsibilities of any of the Trustees
described in this Declaration. Except as set forth in this Section 3.3, the
Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of sec. 3807 of the Business Trust Act.
SECTION 3.4 Institutional Trustee; Eligibility. (a) There shall at all
times be one Trustee which shall act as Institutional Trustee, which Trustee
shall:
(i) not be an Affiliate of the Sponsor or of Ahmanson;
(ii) not offer or provide credit or credit enhancement to the Trust;
and
(iii) be a corporation or banking association organized and doing
business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, authorized under such
laws to exercise corporate trust powers, having a combined capital and
surplus of at least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by federal, state, territorial or District of
Columbia authority. If such corporation or banking association publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred to above,
then for the purposes of this Section 3.4(a)(iii), the combined capital and
surplus of such corporation or banking association shall be deemed to be
its combined capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Institutional Trustee shall cease to be eligible to
so act under Section 3.4(a), the Institutional Trustee shall immediately resign
in the manner and with the effect set forth in Section 3.5(a).
(c) The initial Institutional Trustee shall be Bankers Trust Company.
(d) The Institutional Trustee shall continue to serve as a Trustee until
either:
(i) the Trust has been completely liquidated and all amounts received
or receivable or potentially receivable pursuant to the Commitment
(including the final payment of the Commitment Amount and any portion
remaining in the Retained Amount upon the expiration of the Retained Amount
Period) and not otherwise applied as provided herein and any other amounts
shall have been distributed to the Holders pursuant to the terms hereof and
of the CPR Certificates; or
(ii) a Successor Institutional Trustee has been appointed and has
accepted that appointment in accordance with Section 3.5.
SECTION 3.5 Appointment, Removal and Resignation of the Institutional and
Delaware Trustees. (a) No resignation or removal of the Institutional or
Delaware Trustee (the "Relevant Trustee") and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of this Section 3.5.
Subject to the immediately preceding paragraph, a Relevant Trustee may
resign at any time by giving written notice thereof to the Litigation Trustees
and the Holders. Upon the resignation of the Relevant Trustee, the Litigation
Trustees shall appoint a successor (the "Successor Institutional Trustee" or the
"Successor Delaware Trustee," as applicable) who shall execute an instrument of
acceptance as described in Section 3.5(b) below. If the instrument of acceptance
by the successor Relevant Trustee required by this Section 3.5 shall not have
been delivered to the Relevant Trustee within 60 days after the giving of such
notice of resignation, the Relevant Trustee may petition, at the expense of the
Trust, any court of competent jurisdiction for the appointment of a successor
Relevant Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Relevant Trustee. The resigning Relevant
Trustee shall have no liability for the selection of such successor pursuant to
this Section 3.5.
The Institutional Trustee or the Delaware Trustee, or both of them, may be
removed by (i) the act of a majority of the Litigation Trustees or (ii) the act
of Holders of a majority of the CPR Certificates outstanding, in each case by
delivery of notification of removal to the Relevant Trustee (in its individual
capacity and on
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behalf of the Trust), and in each case for cause, or, if a default by the Trust
with respect to its payment obligations under Article IV shall have occurred and
be continuing, with or without cause. A Delaware Trustee who is a natural person
may also be removed by the act of a majority of the Litigation Trustees if such
Delaware Trustee becomes incompetent or incapacitated, and shall be deemed
removed if such Delaware Trustee dies. If a Relevant Trustee shall be so
removed, the Litigation Trustees shall promptly appoint a successor Relevant
Trustee or Trustees, and such successor Trustee or Trustees shall comply with
the applicable requirements of Section 3.3 or Section 3.4, as the case may be.
If no successor Relevant Trustee shall have been so appointed by the Litigation
Trustees and accepted appointment in the manner required by this Section 3.5,
within 30 days after delivery of notification of removal or after the Trust
receives notice of the Delaware Trustee's death, incompetence or incapacity, any
Holder who has been a Holder of CPR Certificates for at least six months may, on
behalf of himself and all others similarly situated, or the Relevant Trustee
being removed may, petition any court of competent jurisdiction for the
appointment of a successor Relevant Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a successor
Relevant Trustee or Trustees.
The Institutional Trustee shall give notice of each appointment of a
successor Relevant Trustee to all Holders. Each notice shall include the name of
the successor Relevant Trustee and the address of its Corporate Trust Office if
it is the Institutional Trustee.
(b) In the case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee (except in the case of the death,
incompetence or incapacity of a Delaware Trustee who is a natural person) and
each successor Relevant Trustee shall execute and deliver an amendment hereto
wherein each successor Relevant Trustee shall accept such appointment and which
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, trusts and duties of the retiring Relevant Trustee with respect to the
CPR Certificates and the Trust; it being understood that nothing herein or in
such amendment shall designate such Relevant Trustees as co-trustees and upon
the execution and delivery of such amendment the resignation or removal of the
retiring Relevant Trustee shall become effective to the extent provided therein
and each such successor Relevant Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Relevant Trustee; but, on request of the Trust or any successor
Relevant Trustee, such retiring Relevant Trustee shall duly assign, transfer and
deliver to such successor Relevant Trustee all Trust Property, all proceeds
thereof and money held by such retiring Relevant Trustee hereunder with respect
to the CPR Certificates and the Trust.
(c) No Institutional Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.
(d) Any Person into which the Institutional Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either may
be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Institutional Trustee
or the Delaware Trustee, as the case may be, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided such Person shall be otherwise qualified and eligible under this
Article.
SECTION 3.6 Vacancies Among Relevant Trustees; Effect of Vacancies. (a) If
the Institutional Trustee or the Delaware Trustee ceases to hold office for any
reason, a vacancy shall occur. A resolution by the remaining Relevant Trustee
certifying the existence of such vacancy by the Institutional Trustee and the
Delaware Trustee shall be conclusive evidence of the existence of such vacancy.
The vacancy shall be filled with a Trustee appointed in accordance with Section
3.5.
(b) The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to dissolve, terminate or annul the Trust. Whenever a vacancy in the
Institutional Trustee or the Delaware Trustee shall occur, until such vacancy is
filled by the appointment of a Trustee in accordance with Section 3.5, the
Institutional Trustee or the
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Delaware Trustee (as the case may be) remaining in office shall have all the
powers granted to both the Institutional Trustee and the Delaware Trustee and
shall discharge all the duties imposed upon both the Institutional Trustee and
the Delaware Trustee by this Declaration.
SECTION 3.7 The Litigation Trustees. (a) There shall be at all times
certain trustees (the "Litigation Trustees") who shall be natural persons over
the age of 21 years and who shall have the powers, duties and responsibilities
of the Litigation Trustees hereunder. The initial Litigation Trustees will be
Ray Martin, Robert L. Hunt II, Norman H. Raiden and James F. Barritt.
(b) Each of the initial Litigation Trustees shall, as a condition of his
continuation and qualification as a Litigation Trustee, be obligated to retain
at least 50% of the CPR Certificates received by such Litigation Trustee in (i)
the distribution of the CPR Certificates by Coast immediately prior to the
Merger, (ii) the Merger and (iii) upon exercise of Replacement Options, until
the Litigation Proceeds are received by the Ahmanson Group. Transfers of CPR
Certificates by a Litigation Trustee to his family members or to any trust
created for the benefit of his family shall be deemed to be retained for
purposes of such 50% calculation for so long as such transferees (and subsequent
transferees to other family members or other such trusts) retain such CPR
Certificates.
(c) Each of the initial Litigation Trustees shall, as a condition of his
continuation and qualification as such, hold no other full-time employment
during the term of his tenure as a Litigation Trustee prior to the receipt of
the Litigation Proceeds by the Ahmanson Group.
SECTION 3.8 Compensation of the Litigation Trustees. (a) In compensation
for his services as Litigation Trustee, the Trust shall pay to each initial
Litigation Trustee, during the term of his service as a Litigation Trustee,
$400,000 per twelve-month period (or portion thereof) for five years commencing
on the Effective Date (the twelve-month period commencing on the Effective Date
and each twelve-month period commencing on the anniversary of the Effective
Date, a "Contract Year"). Such compensation shall be paid by the Trust to the
Litigation Trustees in arrears on a monthly basis or on the basis of such other
longer period as the Litigation Trustees may determine. In the event the final
resolution of the Litigation and receipt by the Ahmanson Group of the Litigation
Proceeds occurs prior to the expiration of such five-year period, the remainder
of such fees, but in no event with respect to a period longer than two years
after the end of the Contract Year in which the later of such final resolution
or receipt of the Litigation Proceeds occurs, shall be automatically accelerated
and shall be immediately owing and payable to each Litigation Trustee then
serving. If the Litigation Trustees are required to provide service after the
initial five-year period or such final resolution and receipt of Litigation
Proceeds, the Trust shall compensate the Litigation Trustees for such service at
the rate of $200 per hour until termination of the Trust. Upon appointment of a
successor Litigation Trustee by the remaining Litigation Trustees pursuant to
Section 3.11, such successor Litigation Trustee shall receive fees as determined
by the other Litigation Trustees (but in no event more than the fees payable to
an initial Litigation Trustee). In addition to any other compensation specified
in this Section 3.8, the Trust shall reimburse all reasonable out-of-pocket
expenses of the Litigation Trustees.
(b) With respect to each Contract Year, each Litigation Trustee may elect
to defer the receipt of all or a portion of his compensation (not including any
reimbursement of out-of-pocket expenses) payable pursuant to Section 3.8(a)
hereof by filing with each of the other Litigation Trustees and the
Institutional Trustee a written election form. Such written election form shall
specify the percentage of such Litigation Trustee's compensation to be deferred,
the date on which such Litigation Trustee wishes to receive his Deferral Amount
(as defined below) and the name of a beneficiary to receive such Deferral Amount
upon the death of such Litigation Trustee. Such form must be filed at least 30
days prior to the beginning of the Contract Year to which the election relates
(except, with respect to the first Contract Year, such form must be filed within
30 days after the beginning of the Contract Year) and shall apply to such
Contract Year and all subsequent Contract Years unless and until a subsequent
election form is filed with respect to a subsequent Contract Year, which
subsequent election form must be filed with each of the other Litigation
Trustees and the Institutional Trustee at least 30 days prior to the beginning
of such subsequent Contract Year; provided, that a successor Litigation Trustee
appointed pursuant to Section 3.11 hereof shall be permitted to file an election
with respect to his first Contract Year within 30 days after the date of his
appointment as Litigation Trustee is
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effective. Any such subsequent election form may state that such Litigation
Trustee's deferral election is terminated with respect to future Contract Years
or specify a new percentage of such Litigation Trustee's compensation to be
deferred with respect to future Contract Years. A beneficiary designated in a
written election form may subsequently be changed by written instrument
delivered to each of the other Litigation Trustees and the Institutional Trustee
or by will.
On the last day of each month, an amount equal to the compensation that
would have been paid to a Litigation Trustee with respect to such month but for
such Litigation Trustee's properly filed written election form shall be credited
to a bookkeeping account in his name established and maintained by the Trust. As
of the last day of each month, each Litigation Trustee's bookkeeping account
shall be credited with an amount in addition to the balance credited to such
bookkeeping account on the first day of such month, which additional amount
shall be the product of such balance and an annual rate equal to [the Reference
Rate plus 250 basis points]. The aggregate amount credited to the bookkeeping
account of a Litigation Trustee at any time shall constitute the "Deferral
Amount" of such Litigation Trustee at such time.
A Litigation Trustee (or, if applicable, his beneficiary) shall receive his
Deferral Amount from the Trust within 30 days after the earliest to occur of (i)
the date on which he elected to receive his Deferral Amount, (ii) the date he
ceases to be a Litigation Trustee for any reason whatsoever, and (iii) the date
of the receipt of the Commitment Amount in full by the Trust. Any payment of a
Deferral Amount to a Litigation Trustee or his beneficiary pursuant to this
Section 3.8(b) shall be made in the form of a lump sum.
Each Litigation Trustee has the status of a general unsecured creditor of
the Trust with respect to any deferred compensation or deemed interest thereon.
The arrangements set forth in this Section 3.8(b) constitute an unfunded,
unsecured promise by the Trust to pay Deferral Amounts in the future. The rights
of a Litigation Trustee to his Deferral Amount are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Litigation Trustee or any
beneficiary thereof.
SECTION 3.9 Limitation on Liability of Litigation Trustees. As set forth
in Section 11.2(a), the Litigation Trustees will have no liability to any
Indemnified Person unless it shall be established in a final judicial
determination by clear and convincing evidence that any decision or action of
the Litigation Trustees was undertaken with deliberate intent to injure the CPR
Certificate Holders or with reckless disregard for the best interests of such
Holders, and, in any event, any liability will be limited to actual, proximate,
quantifiable damages.
SECTION 3.10 Resignation of a Litigation Trustee. Any Litigation Trustee
may resign as such by executing an instrument in writing and delivering that
instrument to the remaining Litigation Trustee or Trustees, if any, and to the
Institutional Trustee. In the event of the disqualification under Section 3.7(b)
or (c) or the resignation of a Litigation Trustee, such Litigation Trustee shall
promptly: (a) execute and deliver such documents, instruments and other writings
as may be reasonably requested by the remaining Litigation Trustees or
Litigation Trustee, or if there is no Litigation Trustee, the Institutional
Trustee, to effect the termination of such Litigation Trustee's capacity under
this Declaration; (b) deliver to the remaining Litigation Trustees or Litigation
Trustee all assets, documents, instruments, records and other writings related
to the Trust as may be in the possession of such Trustee; and (c) otherwise
assist and cooperate in effecting the assumption of such Litigation Trustee's
obligations and functions by his successor Litigation Trustee.
SECTION 3.11 Appointment of Successor Litigation Trustees. (a) Subject to
Section 3.12(b), there shall be no fewer than three Litigation Trustees. Upon
the death, resignation, incompetency (as determined by the unanimous vote of the
other Litigation Trustees or by a court of competent jurisdiction) or
disqualification under Section 3.7(b) or (c) of a Litigation Trustee, the
remaining Litigation Trustee or Litigation Trustees, and no other Person, shall
have the power to appoint a successor Litigation Trustee or Trustees, as
applicable. In the event of the death, resignation or incompetency (as
determined by a court of competent jurisdiction) of all of the Litigation
Trustees so that there are no remaining Litigation Trustees, three Litigation
Trustees shall be appointed by the written decision of a majority of the persons
who constituted the Board of Directors of Coast immediately prior to the
Effective Time.
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Such appointment shall specify the date on which such appointment shall be
effective. Every successor Litigation Trustee appointed hereunder shall execute,
acknowledge and deliver to the remaining Litigation Trustees (or, in the event
there are no remaining Litigation Trustees, the persons who were members of the
Coast Board of Directors immediately prior to the Effective Time) and to the
Institutional Trustee an instrument accepting such appointment, and thereupon
such successor Litigation Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and duties of a
Litigation Trustee. No successor Litigation Trustee shall have any duty to
investigate the administration of the Trust or the management of the Litigation
for any period prior to the effective date of such successor Litigation
Trustee's appointment, and no resigning Litigation Trustee shall be required or
permitted, prior to final termination of the Litigation (including any
proceedings to collect any recovery due the Litigation Trustees), to file any
accounting proceeding.
(b) The Holders will have no right to vote to appoint, remove or replace
the Litigation Trustees, which rights are vested exclusively in the Litigation
Trustees.
SECTION 3.12 Meetings of the Trustees. (a) Meetings of the Delaware
Trustee, the Institutional Trustee and the Litigation Trustees together may be
held from time to time upon the call of the Delaware Trustee, Institutional
Trustee or any Litigation Trustee. Notice of any in-person meetings of the
Trustees shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight mail) not less than five Business Days
before such meeting. Notice of any telephonic meetings of such Trustees shall be
hand delivered or otherwise delivered in writing (including by facsimile, with a
hard copy by overnight mail) not less than two Business Days before a meeting.
Notices shall contain a brief statement of the time, place and anticipated
purposes of the meeting. The presence (whether in person or by telephone) of a
Trustee at a meeting shall constitute a waiver of notice of such meeting except
where such Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been lawfully
called or convened. Any Trustee may also waive such notice of in-person or
telephonic meetings in writing by hand delivering or otherwise delivering
(including by facsimile, with a hard copy by overnight mail) such written waiver
to all other Trustees. Unless provided otherwise in this Declaration, any action
to be taken by the Institutional Trustee together with the Litigation Trustees
shall be taken with the approval of the Institutional Trustee and a majority of
the Litigation Trustees.
(b) The Litigation Trustees may adopt their own rules and procedures but,
unless otherwise provided by this Declaration, may act only with the agreement
of a majority of the Litigation Trustees then in office; provided, however, that
if there are fewer than three Litigation Trustees, any action taken by the
unanimous consent of the two remaining Litigation Trustees or by the sole
remaining Litigation Trustee prior to the appointment of a successor Litigation
Trustee pursuant to Section 3.11, shall be valid. The Litigation Trustees may,
in their discretion, delegate to one or more of the Litigation Trustees the
authority to act on behalf of the Litigation Trustees as the Litigation Trustees
may determine appropriate (other than with respect to the retention or dismissal
of counsel for Coast Federal (or any successor thereto) or the Litigation
Trustees, or the approval of a settlement or dismissal of the Litigation).
SECTION 3.13 Powers and Duties of the Sponsor, the Litigation Trustees and
the Institutional Trustee. (a) The Sponsor prior to the Effective Time, and the
Institutional Trustee and the Litigation Trustees, shall have the authority,
subject to any limitations set forth in Section 2.3, to conduct the affairs of
the Trust in accordance with the terms of this Declaration. In addition, prior
to the Effective Time, the Sponsor shall have the authority to take the actions
enumerated in (i) below on behalf of the Trust and, in connection therewith, to
enter into all transactions and agreements determined by the Sponsor to be
appropriate in exercising such authority and to perform all acts in furtherance
thereof:
(i) The Sponsor shall have the power and authority prior to the
Effective Time and is hereby authorized to act on behalf of the Trust prior
to the Effective Time with respect to the following matters:
(A) the issuance of the CPR Certificates issued immediately prior
to the Effective Time;
(B) the execution of the CPR Certificates issued immediately prior
to the Effective Time in accordance with this Declaration;
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(C) compliance with (or obtaining or qualifying for exceptions
from) the Securities Act, the Exchange Act or applicable state
securities or blue sky laws;
(D) the execution and filing of the registration statement under
the Securities Act to register the CPR Certificates to be issued to the
Sponsor immediately prior to the Effective Time and prospectuses
(including any amendments or supplements thereto) and the preparation
and filing of all documents filed therewith;
(E) the use of its best efforts to permit trading of the CPR
Certificates pursuant to the NASDAQ National Market System (or if,
despite such best efforts, trading on the NASDAQ National Market System
is not possible, on such other NASDAQ market or other market as shall,
in the good faith judgment of the Sponsor, provide maximum available
liquidity), commencing on the Effective Date and continuing until such
time as there are fewer than 400 Holders;
(F) the notification of the Institutional Trustee and the
Litigation Trustees in writing when the CPR Certificates are listed on
any stock exchange or quoted on any automated quotation system, if prior
to the Effective Time; and
(G) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
(ii) The Trustees on behalf of the Trust hereby (A) ratify and approve
all actions taken by the Sponsor on behalf of the Trust or for its benefit
prior to the Effective Time and all transactions and agreements entered
into in connection therewith; and (B) agree and acknowledge that the
Sponsor shall have no liability to the Trust, the Trustees or the Holders
for any such actions, transactions or agreements and that the Trust, the
Trustees and the Holders shall no right to enforce, institute or maintain a
suit, action or proceeding against the Sponsor, its successors or their
respective affiliates, officers, directors, employees or agents relating to
such actions, transactions or agreements; it being understood that this
Section 3.13(a)(ii) does not constitute a waiver by the Litigation Trustees
of their rights under Section 6.12(a) of the Merger Agreement or a waiver
by the Trustees or the Trust of their rights under the Commitment.
(b) in accordance with subparagraphs (i) and (ii) of this Section 3.13(b),
the Institutional Trustee and the Litigation Trustees shall have the authority
to enter into all transactions and agreements determined by such Trustees to be
appropriate in exercising the authority, express or implied, otherwise granted
to such Trustees, under this Declaration, and to perform all acts in furtherance
thereof (and all such transactions or agreements entered into or acts performed
prior to the date hereof are hereby ratified and approved), including without
limitation, the following:
(i) The Litigation Trustees shall have the power and authority and are
hereby authorized to act on behalf of the Trust with respect to the
following matters:
(A) the issuance and determination of the terms (including the
quantity and price) of any CPR Certificates issued after the Effective
Time in accordance with this Declaration;
(B) the execution of any CPR Certificates issued after the
Effective Time in accordance with this Declaration;
(C) after the Effective Time, the execution and delivery on behalf
of the Trust, subject to Section 2.3(b), of any agreement with Ahmanson,
and such other agreements as may, in the opinion of a majority of the
Litigation Trustees, be necessary or desirable in connection with the
Trust Purposes, including agreements with the Depositary and the Paying
Agent;
(D) after the Effective Time, compliance with (or obtaining or
qualifying for exceptions from) the Securities Act, the Exchange Act or
applicable state securities or blue sky laws or other applicable laws;
(E) after the Effective Time, the execution and filing of one or
more registration statements and prospectuses (including any amendments
or supplements thereto) relating to the CPR
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Certificates and the preparation and filing of all periodic and other
reports and other documents pursuant to the foregoing;
(F) after the Effective Time, the continuation of the designation
of the CPR Certificates for trading on any national stock exchange or
quotation on the NASDAQ Stock Market's National Market System or other
automated quotation system until such time as there are fewer than 400
Holders or such time as the CPR Certificates are no longer eligible for
such designation on any such exchange or quotation system;
(G) the carrying out of any of the powers or obligations of the
Trust or of the Litigation Trustees under the Commitment;
(H) upon the effectiveness of the Commitment and as necessary
thereafter, the instruction of Coast Federal and its successors as to
the prosecution, appeal, resolution, settlement, compromise or other
means of pursuing the Litigation and the taking of any action in
connection with the prosecution of the Litigation by Coast Federal (or
any successor thereto) or as permitted by Article VI hereof;
(I) the payment of all expenses of the Trust (including, without
limitation, expenses of the Litigation, compensation and expenses of the
Trustees, liability insurance and indemnification obligations) out of
the Expense Fund, the Retained Amount and any other sources of the Trust
(including, without limitation, funds raised pursuant to Section
2.3(c));
(J) the sending of notices (other than notice of default), and
other information regarding the CPR Certificates to the Holders in
accordance with this Declaration;
(K) the taking of any action to cause the Trust not to be deemed to
be an Investment Company under the Investment Company Act;
(L) the amendment of the Commitment subject to Section 2.3(b);
(M) the bringing, defense, payment, collection, compromise, taking
of legal action, or other adjustment of claims or demands of or against
Ahmanson or its successors which arise out of or in connection with a
breach by Ahmanson (or any successor thereto) of any of its obligations
under the Commitment or, subject to the limitations set forth in Section
3.13(a)(ii), the Sponsor of any of its obligations hereunder;
(N) the approval of all applicable tax returns and tax information
to be filed by the Institutional Trustee with respect to the Trust on
behalf of the Trust;
[(O) the compliance by the Trust with the indemnification
obligations of the Trust;] and
(P) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
(ii) The Institutional Trustee shall have the power, duty and
authority and is hereby authorized to act on behalf of the Trust with
respect to the following matters:
(A) the authentication of the CPR Certificates in accordance with
this Declaration;
(B) the application for a taxpayer identification number;
(C) the maintenance of the Expense Fund in a non-interest bearing
demand deposit account at Home Savings;
(D) upon receipt of a Commitment Amount from Ahmanson, and at the
written direction of the Litigation Trustees, the investment of the
Commitment Amount, until disbursed pursuant to the terms of this
Declaration, in a Permitted Investment which is not sold prior to the
date the Payment Amount is to be disbursed to the Holders;
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(E) the distribution through the Paying Agent of the Payment Amount
and other amounts owed to the Holders in respect of the CPR Certificates
in accordance with the terms of this Declaration;
(F) the sending of notices of a breach by Ahmanson of its
obligations under the Commitment or a breach by the Sponsor of its
obligations under this Declaration or default by the Trust of its
payment obligations pursuant to Article IV hereof;
(G) the execution and delivery of letters or documents to, or
instruments with, the Depositary relating to the CPR Certificates;
(H) to the extent provided in this Declaration, the winding up of
the affairs of and liquidation of the Trust and the execution and filing
of the certificate of cancellation provided to it with the Secretary of
State of the State of Delaware;
(I) the due preparation and filing, with the approval of the
Litigation Trustees, of all applicable tax returns and tax information
reports that are required to be filed with respect to the Trust on
behalf of the Trust, with the approval of the Litigation Trustees;
(J) the taking of all actions that may be necessary or appropriate
for the preservation and the continuation of the Trust's valid
existence, rights, franchises and privileges as a statutory business
trust under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Holders or to enable the Trust to effect the Trust
Purposes;
(K) the bringing, defense, payment, collection, compromise,
arbitration, taking of legal action, or other adjustment of claims or
demands of or against Ahmanson or its successors or the Trust which
arise out of or in connection with a breach by Ahmanson (or any
successor thereto) of any of its obligations under the Commitment or,
subject to the limitations set forth in Section 3.13(a)(ii), by the
Sponsor of any of its obligations hereunder;
(L) the taking of all actions and performance of such duties as may
be specifically required of the Institutional Trustee pursuant to the
terms of the CPR Certificates; and
(M) the taking of any action incidental to the foregoing as the
Institutional Trustee may from time to time determine to be necessary or
advisable to give effect to the terms of this Declaration for the
benefit of the Holders (without consideration of the effect of any such
action on any particular Holder).
(iii) The Institutional Trustee shall have the power and authority to
act on behalf of the Trust with respect to any of the duties, liabilities,
powers or the authority of the Litigation Trustees set forth in Section
3.13(b)(i)(J) herein but shall not have a duty to do any such act unless
specifically requested to do so in writing by the Litigation Trustees, and
shall then be fully protected in acting pursuant to such written request;
and in the event of a conflict between the action of the Litigation
Trustees and the action of the Institutional Trustee, the action of the
Institutional Trustee shall prevail.
(c) The Trustees are authorized and directed to conduct the affairs of the
Trust and to operate the Trust so that the Trust will not fail to be classified
as a grantor trust for United States federal income tax purposes. In this
connection, the Trustees are authorized to take any action, not inconsistent
with applicable laws, the Certificate of Trust or this Declaration, as amended
from time to time, that the Institutional Trustee or the Litigation Trustees, as
the case may be, determines in their discretion to be necessary or desirable for
such purpose, even if such action adversely affects the interests of the
Holders.
(d) The Litigation Trustees may consult with counsel (which counsel may be
counsel to the Trust or counsel to any member of the Ahmanson Group) and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by them hereunder in good
faith and in reliance thereon and in accordance with such advice. All oral or
written communications between any such counsel on the one hand, and the
Sponsor, Coast Federal, the Trust, any Trustee, any of their
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affiliates, or any successor entity or any affiliate of any successor entity, on
the other hand, will be protected by the attorney-client privilege and/or the
attorney work product doctrine, and no such communication will result in the
waiver of any applicable claim of confidentiality or privilege.
(e) Any Trustee may also be a Holder or an officer, director, employee or
Affiliate of a Holder, and will have all the rights of such a Holder to the same
extent as if such Trustee were not a trustee.
SECTION 3.14 Certain Duties and Responsibilities of the Trustees.
(a) The Institutional Trustee, before the occurrence of any breach by
Ahmanson of any of its obligations under the Commitment or a breach by the
Sponsor after the Effective Time of any of its obligations under this
Declaration, and after the curing of any such breach by Ahmanson or the Sponsor,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and no implied covenants shall be read into this Declaration
against the Institutional Trustee. In case of a breach by Ahmanson of any of its
obligations under the Commitment or a breach by the Sponsor of its obligations
hereunder after the Effective Time, the Institutional Trustee shall exercise
such of the rights and powers vested in it by this Declaration and use the same
degree of care and skill in their exercise as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.
(b) The duties and responsibilities of the Trustees shall be as provided by
this Declaration and the Business Trust Act. Notwithstanding the foregoing, no
provision of this Declaration shall require any Trustee to expend or risk such
Trustee's own funds or otherwise incur any financial liability in the
performance of any of such Trustee's duties hereunder, or in the exercise of any
of such Trustee's rights or powers. Whether or not therein expressly so
provided, every provision of this Declaration relating to the conduct or
affecting the liability of or affording protection to the Trustees shall be
subject to the provisions of this Article. To the extent that, at law or in
equity, a Trustee has duties and liabilities relating to the Trust or to the
Holders, such Trustee shall not be liable to the Trust or to any Holder for such
Trustee's good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of the Trustees otherwise existing at law or in equity, are agreed
by the Trust and the Holders to replace such other duties and liabilities of the
Trustees.
(c) All payments made by the Institutional Trustee or a Paying Agent in
respect of the CPR Certificates shall be made only from (i) payments received by
the Trust pursuant to the Commitment and only to the extent that the Payment
Amount is greater than zero or upon the expiration of the Retained Amount
Period, any remaining portion of the Retained Amount is greater than zero, in
each case so as to enable the Institutional Trustee or a Paying Agent to make
payments in accordance with the terms hereof and (ii) proceeds from the
liquidation of other assets of the Trust upon the winding up of the Trust. Each
Holder, by its acceptance of a CPR Certificate, agrees that it will look solely
to the Payment Amount and, upon the expiration of the Retained Amount Period, to
any remaining portion of the Retained Amount, to the extent legally available
for distribution to it as herein provided and that the Trustees are not
personally liable to such Holder for any amount distributable in respect of any
CPR Certificate or for any other liability in respect of any CPR Certificate.
(d) No provision of this Declaration shall be construed to relieve the
Institutional Trustee from liability with respect to matters that are within the
authority of the Institutional Trustee under this Declaration for its own bad
faith, its own grossly negligent action, its own grossly negligent failure to
act, or its own willful misconduct, except that:
(i) the Institutional Trustee shall not be liable for any error or
judgment made in good faith by an authorized officer of the Institutional
Trustee, unless it shall be proved that the Institutional Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Institutional Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a majority of the CPR
Certificates then outstanding, relating to the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee, or exercising any trust or power conferred upon the Institutional
Trustee under this Declaration;
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(iii) the Institutional Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Expense Fund and the
Payment Amount shall be to deal with such property in a similar manner as
the Institutional Trustee deals with similar property for its own account,
subject to the protections and limitations on liability afforded to the
Institutional Trustee under this Declaration;
(iv) the Institutional Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree in writing with
the Litigation Trustees; and money held by the Institutional Trustee need
not be segregated from other funds held by it except in relation to the
Expense Fund and the Commitment Amount maintained by the Institutional
Trustee pursuant to Section 3.13(b)(ii)(D) and except to the extent
otherwise required by law.
SECTION 3.15 Certain Rights of the Institutional Trustee. Subject to the
provisions of Section 3.14:
(a) the Institutional Trustee may conclusively rely and shall fully be
protected in acting or refraining from acting in good faith upon any
resolution, opinion of counsel, certificate, written representation of a
Holder, transferee or Litigation Trustee, certificate of auditors or any
other certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, approval, CPR Certificate, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed, sent or presented by the proper
party or parties;
(b) if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, or (ii) in construing any of the provisions of this Declaration,
the Institutional Trustee finds the same ambiguous or inconsistent with any
other provisions contained herein, or (iii) the Institutional Trustee is
unsure of the application of any provision of this Declaration, then,
except as to any matter as to which the Holders are entitled to vote under
the terms of this Declaration, the Institutional Trustee shall take such
action, or refrain from taking such action, as the Institutional Trustee in
its sole discretion shall deem advisable and in the best interests of the
Holders, in which event the Institutional Trustee shall have no liability
except for its own bad faith, negligence or willful misconduct;
(c) any direction or act of the Litigation Trustees contemplated by
this Declaration shall be sufficiently evidenced by an Officers'
Certificate;
(d) the Institutional Trustee may consult with counsel (which counsel
may be counsel to the Litigation Trustees or appointed by Coast Federal (or
any successor thereto) at the direction of the Litigation Trustees to
prosecute the Litigation) and the advice of such counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance thereon
and in accordance with such advice; the Institutional Trustee shall have
the right at any time to seek instructions concerning the administration of
this Declaration from any court of competent jurisdiction. All oral or
written communications between any such counsel on the one hand, and the
Sponsor, Coast Federal, the Trust, any Trustee, any of their affiliates, or
any successor entity or any affiliate of any successor entity, on the other
hand, will be protected by the attorney-client privilege and/or the
attorney work product doctrine, and no such communication will result in
the waiver of any applicable claim of confidentiality or privilege.
(e) the Institutional Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Declaration at the request
or direction of any of the Holders pursuant to this Declaration, unless
such Holders shall have offered to the Institutional Trustee security or
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in compliance with such request
or direction, provided that nothing contained in this Section 3.15(e) shall
be taken to relieve the Institutional Trustee, upon breach by Ahmanson of
any of its obligations under the Commitment, or by the Sponsor or its
successors after the Effective Time of any of the obligations of the
Sponsor hereunder, of its obligation to exercise, upon the instructions of
the Litigation Trustees, the rights and powers vested in it by this
Declaration;
(f) the Institutional Trustee shall not be required to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order,
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approval, CPR Certificate, bond, debenture, note or other evidence of
indebtedness or other paper or document, unless requested in writing to do
so by a majority of the Holders of CPR Certificates then outstanding, but
the Institutional Trustee may make such further inquiry or investigation
into such facts or matters as it may see fit;
(g) except as otherwise expressly provided in this Declaration, the
Institutional Trustee shall not be under any obligation to take any action
that is discretionary under the provisions of this Declaration;
(h) any action taken by the Institutional Trustee or its agents
authorized by this Declaration to be taken by the Institutional Trustee
shall bind the Trust and the Holders, and the signature of the
Institutional Trustee or its agents alone shall be sufficient and effective
to perform any such action and no third party shall be required to inquire
as to the authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both
of which shall be conclusively evidenced by the Institutional Trustee's or
its agent's taking such action;
(i) no provision of this Declaration shall be deemed to impose any
duty or obligation on the Institutional Trustee to perform any act or acts
or exercise any right, power, duty or obligation conferred or imposed on
it, in any jurisdiction in which it shall be illegal, or in which the
Institutional Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts, or to exercise any
such right, power, duty or obligation. No permissive power or authority
available to the Institutional Trustee shall be construed to be a duty;
(j) whenever in the administration of the provisions of this
Declaration the Institutional Trustee shall deem it necessary or desirable
that a matter be proved or established prior to taking or suffering any
action to be taken hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of gross
negligence or bad faith on the part of the Institutional Trustee, be deemed
to be conclusively proved and established by an Officer's Certificate
delivered to the Institutional Trustee and such certificate, in the absence
of gross negligence or bad faith on the part of the Institutional Trustee,
shall be full warrant to the Institutional Trustee for any action taken,
suffered or omitted by it under the provisions of this Declaration upon the
faith thereof;
(k) in no event shall the Institutional Trustee be liable for the
selection of investments for funds permitted to be invested hereunder or
for investment losses thereon, and the Institutional Trustee shall have no
liability in respect of losses incurred as a result of the liquidation of
any investment prior to its stated maturity or the failure of the
Litigation Trustees to provide timely written investment direction with
respect to funds permitted to be invested hereunder;
(l) the Institutional Trustee may execute any of the trusts of powers
hereunder or perform any duties hereunder either directly or by or through
agents, attorneys, custodians or nominees appointed with due care, and
shall not be responsible for any willful misconduct or gross negligence on
the part of, or for the supervision of any agent, attorney, custodian or
nominee so appointed; and
(m) the Institutional Trustee shall not be deemed to have notice of
the occurrence of the events described Section 3.20 herein unless the
Institutional Trustee shall have received written notice of such event or a
Responsible Officer of the Institutional Trustee shall have obtained actual
knowledge thereof.
SECTION 3.16 Lists of Holders of CPR Certificates. (a) At the Effective
Time, the Sponsor shall provide to the Institutional Trustee a list (the "List
of Holders"), in such form as the Institutional Trustee may reasonably require,
of the names and addresses of the Holders as of immediately prior to the
Effective Time;
(b) The Paying Agent, if other than the Institutional Trustee, shall
provide to the Institutional Trustee a List of Holders upon the request of
the Institutional Trustee; and
(c) The Institutional Trustee shall preserve, in as current a form as
is reasonably practicable, all information contained in any List of Holders
given to it or which it receives in its capacity as Paying Agent (if acting
in such capacity), provided that the Institutional Trustee may destroy any
List of Holders previously given to it on receipt of a new List of Holders;
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SECTION 3.17 Execution of Documents. (a) Unless otherwise determined in
writing by the Institutional Trustee, and except as otherwise required by the
Business Trust Act, the Institutional Trustee, or any one or more of the
Litigation Trustees, as the case may be, is authorized to execute on behalf of
the Trust any documents that the Institutional Trustee or the Litigation
Trustees, as the case may be, have the power and authority to execute pursuant
to Section 3.13.
(b) Any Institutional or Delaware Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over
the age of 21 his or her or its power for the purpose of executing any
documents contemplated in Section 3.13.
SECTION 3.18 Not Responsible for Recitals or Issuance of CPR
Certificates. The recitals contained in this Declaration and the CPR
Certificates shall be taken as the statements of the Trust, and the Trustees do
not assume any responsibility for their correctness. The Sponsor and the
Trustees make no representations as to the value or condition of the Trust
Property or any part thereof. Except as otherwise specifically provided in
Article XIV, the Sponsor and the Trustees make no representations as to the
validity or sufficiency of this Declaration or the CPR Certificates.
SECTION 3.19 Filings with the Commission. So long as the Trust is subject
to the reporting obligations of the Exchange Act, the Litigation Trustees shall,
on behalf of the Trust, cause to be prepared and filed with the Commission
quarterly reports on Form 10-Q and an annual report on Form 10-K. Unless
otherwise required by the Commission, such reports will contain only an overview
of the status of the Litigation and disclosure of the amounts of the Expense
Fund that have been disbursed for the relevant period and any contingent or
incurred but unpaid expenses (including compensation deferred by the Litigation
Trustees) that the Trust will be obligated to pay from the Expense Fund or the
Commitment Amount in the future. The Litigation Trustees shall also, on behalf
of the Trust, cause to be prepared and filed with the Commission, reports on
Form 8-K upon the occurrence of a material judicial decision in the Litigation
or in the event of any agreement to settle the Litigation. It is hereby agreed
and understood that such reports on Form 10-Q, 10-K or 8-K will not include
financial statements or any valuation of the Litigation.
SECTION 3.20 Default; Notice. The Institutional Trustee shall, within 90
days after the occurrence of (i) a breach by Ahmanson of any of its payment
obligations under the Commitment, (ii) a breach by the Sponsor after the
Effective Time of its obligations hereunder, (iii) a default by the Trust in
payment of the Payment Amount to the Holders pursuant to Article IV hereof, or
(iv) a default by the Trust upon the expiration of the Retained Amount Period in
payment of any remaining portion of the Retained Amount pursuant to Article IV
hereof, transmit by mail, first class postage prepaid, to the Holders, notice of
such default actually known to a Responsible Officer of the Institutional
Trustee, unless such default has been cured before the giving of such notice;
provided, however, the Institutional Trustee shall be protected in withholding
such notice if and so long as a Responsible Officer of the Institutional Trustee
in good faith determines that the withholding of such notice is in the best
interests of the Holders.
ARTICLE IV
PAYMENTS TO HOLDERS
SECTION 4.1 Payment to Holders. (a) The Trust will make payments from time
to time to the Holders of the Payment Amounts upon the receipt of the applicable
payments of the Commitment Amount from Ahmanson. Each CPR Certificate will
entitle the Holder thereof to receive a fraction (equal to 1 divided by the
total number of CPR Certificates then outstanding) of any Payment Amount within
60 days after the Trust receives a Commitment Amount.
(b) Within 90 days of the expiration of the Retained Amount Period, the
Trust will pay to the Holders any remaining portion of the Retained Amount. Each
CPR Certificate will entitle the Holder thereof to receive a fraction (equal to
1 divided by the total number of CPR Certificates then outstanding) of the
remaining portion of the Retained Amount.
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SECTION 4.2 Timing of Payments. The Trust will make payments of amounts as
contemplated by Section 4.1 to the Holders as of record dates determined by the
Litigation Trustees. Payment will be made on payment dates, which will also be
set by the Litigation Trustees. The Litigation Trustees shall promptly notify
the Institutional Trustee in writing of any such dates.
SECTION 4.3 Default; Waiver. The Holders of a majority of the CPR
Certificates then outstanding may, by vote or consent, on behalf of the Holders
of all of the CPR Certificates, waive any breach by Ahmanson of any of its
obligations under the Commitment or any default by the Trust in payment of the
Payment Amount or the funds remaining in the Retained Amount to the Holders
pursuant to this Article IV.
ARTICLE V
EXPENSES: THE EXPENSE FUND AND THE RETAINED AMOUNT
SECTION 5.1 Expense Fund. (a) The Litigation Trustees on behalf of the
Trust shall have the right to draw on the Expense Fund for the purpose of
funding any expenses of the Trust, including administration expenses, expenses
of the Litigation, compensation, fees and expenses of the Trustees, amounts paid
as indemnity to any Indemnified Person, premiums for insurance for the
Litigation Trustees, and fees and expenses of attorneys, consultants and other
experts retained by, or at the direction of, the Litigation Trustees, pursuant
to Section 6.2.
(b) It is hereby agreed and acknowledged that the Expense Fund will not be
invested in any interest-bearing or income-producing instrument.
(c) Subsequent to the receipt of a payment of the Commitment Amount by the
Trust, the Institutional Trustee will apply any amounts remaining in the Expense
Fund to the Retained Amount.
SECTION 5.2 Return of Expense Fund. Pursuant to Section 2.08 of the
Commitment, if the amount of the Litigation Proceeds is such that there would be
no Commitment Amount payable under the Commitment to the Trust and if at the
time of receipt of the Litigation Proceeds by the Ahmanson Group (or at the time
of a final judicial determination that there will be no Litigation Proceeds)
there are amounts remaining in the Expense Fund, the Trust shall, as promptly as
practicable, return to Ahmanson such amounts less expenses (including
obligations to compensate the Trustees) incurred by the Trust through the time
of receipt of the Litigation Proceeds by the Ahmanson Group (or the time of such
final judicial determination) and expenses necessary, in the reasonable judgment
of the Litigation Trustees, to terminate the Trust pursuant to the terms of this
Declaration, provided, however, that the Trust will have no such obligation to
return funds remaining in the Expense Fund less such expenses to Ahmanson if
Ahmanson causes Home Savings to pay such amounts remaining in the Expense Fund
less such expenses directly to Ahmanson.
SECTION 5.3 Retained Amount. (a) The Litigation Trustees' obligation to
make payments to the Holders shall be subject to the requirement that the Trust
retain, from amounts remaining in the Expense Fund and from payments of the
Commitment Amount, the Retained Amount for a period (the "Retained Amount
Period") of two years (or such longer period as the Litigation Trustees shall
reasonably determine (initially or at any time prior to the then scheduled
termination of the Retained Amount Period) may be reasonably likely to be
required) to satisfy all expenses, costs and claims and indemnification
obligations of the Trust which may be incurred or which may arise after the
Commitment Amount is paid in full. The "Retained Amount" shall mean $10 million
(or such greater amount as the Litigation Trustees shall reasonably determine
may be reasonably likely to be required to pay additional expenses or to satisfy
the Trust's indemnification obligations). Any portion of the Retained Amount in
excess of $10 million or retained longer than two years shall promptly be
distributed to the Holders after the Litigation Trustees reasonably determine
that such funds are no longer needed for such purposes.
(b) The Trust shall invest the Retained Amount in a Permitted Investment,
to the extent that portions of the Retained Amount are not required to be
disbursed for expenses of the Trust, until the expiration of the Retained Amount
Period.
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ARTICLE VI
MANAGEMENT OF THE LITIGATION
SECTION 6.1 Authority of the Litigation Trustees. (a) The Sponsor hereby
agrees to cause Coast Federal and its successors, upon the effectiveness of the
Commitment and as requested by the Litigation Trustees thereafter, to follow and
comply with all instructions of the Litigation Trustees, other than instructions
that are not reasonable, in connection with all aspects of the prosecution of
the Litigation, including, at the expense of the Trust, the retention of
attorneys, experts, consultants and others and the making of all decisions and
the taking of all actions necessary or appropriate to prosecute or otherwise
pursue the Litigation by litigation in trial or appellate courts, arbitration,
alternative dispute resolution, negotiation, settlement or compromise, or the
dismissal, settlement or cessation of prosecution of the Litigation, withdrawal
or abandonment of the Litigation; provided, that no settlement agreement or
other ruling or agreement entered into at the direction of the Litigation
Trustees as part of the resolution of the Litigation or a related Internal
Revenue Service ruling to such effect issued to a member of the Ahmanson Group
in connection with such agreement may impose any liability or obligation
whatsoever (other than a standard settlement release relating only to the
Litigation or other related claims that Coast, Coast Federal or Coast's
stockholders may have been able to bring as of immediately prior to the Merger)
on any member or members of the Ahmanson Group or adversely affect or restrict
the conduct of its business or adversely affect its tax posture with respect to
other matters. The Sponsor hereby agrees that it shall cause Coast Federal (or
any successor thereto) not to take any action with respect to the Litigation
except in accordance with the instructions of the Litigation Trustees.
(b) Prior to the Effective Time, the Sponsor shall certify by an Officers'
Certificate that it has taken the necessary corporate action evidenced by
resolutions substantially in the form set forth in Exhibit C hereto, to cause
Coast Federal to follow and comply with all instructions of the Litigation
Trustees as required by Section 6.1(a). Prior to the Effective Time, Coast
Federal shall certify by an Officers' Certificate that it has taken the
necessary action evidenced by resolutions to follow and comply with instructions
of the Litigation Trustees.
(c) Nothing in this Declaration shall constitute a grant by Coast Federal
or its successors of a power of attorney to the Litigation Trustees to appear on
behalf of Coast Federal and its successors in connection with the Litigation.
(d) Nothing in this Declaration shall be deemed to require Ahmanson to
advance or risk any funds or otherwise incur any financial liability in
connection with the Litigation or the Trust other than transfer of the Expense
Fund.
SECTION 6.2 Retention of Attorneys, Accountants and Other
Professionals. (a) The Litigation Trustees shall retain, at the expense of the
Trust, such attorneys as counsel to the Trust (including, without limitation,
counsel to Coast Federal or any successor thereto in connection with the
Litigation) as the Litigation Trustees in their sole discretion may select, and
the Litigation Trustees may dismiss such attorneys in their sole discretion. The
Litigation Trustees shall instruct Coast Federal (or any successor thereto), at
the expense of the Trust, to retain such attorneys as the Litigation Trustees
may select to aid in the prosecution of the Litigation and to perform such other
functions as may be appropriate in the Litigation Trustees' sole and absolute
discretion, and the Sponsor shall cause Coast Federal (or any successor
thereto), at the expense of the Trust, to follow and comply with such
instructions in the manner set forth in Section 6.1(a). The Litigation Trustees
may commit the Trust to and shall pay such attorneys compensation from the
Expense Fund or other funds of the Trust for services rendered and expenses
incurred and may enter into arrangements on such terms as may be approved by the
Litigation Trustees with such counsel, including terms providing that all or a
portion of such counsel's compensation may be contingent and may be based on a
percentage of any recovery, subject to Section 2.3(c)(ii), provided, however,
that no such arrangement shall provide for recourse against Coast Federal or its
successors. The Litigation Trustees shall have full authority to instruct Coast
Federal (or any successor thereto) to dismiss any such attorneys retained by
Coast Federal (or any successor thereto) and the Sponsor shall cause Coast
Federal (or any successor thereto) to comply with such instructions.
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Unless and until instructed to the contrary by the Litigation Trustees, the
attorneys currently retained to aid in the prosecution of the Litigation shall
continue in such role for Coast Federal (or any successor thereto) and, all
parties hereto, having been fully advised, waive any conflict of interest, if
any, which the attorneys currently retained may have with respect to any party
to this Declaration. In addition, any attorneys, experts, advisors, consultants
and investigators retained by or at the direction of the Litigation Trustees and
any experts, advisors, consultants and investigators retained by attorneys to
aid in the prosecution of the Litigation shall be authorized by this Declaration
to accept directions from the Litigation Trustees with respect to the
Litigation, notwithstanding any conflict of interest that may arise by reason of
such directions with the interests of any party to this Declaration. The
Litigation Trustees shall have no duty to the Sponsor or Coast Federal (or any
affiliate, successor entity, or affiliate of any successor entity) to consider
any interest the Sponsor, Coast Federal or any such entity may have with respect
to the Litigation. All oral and written communications between any attorneys
retained by or at the direction of the Litigation Trustees on one hand, and the
Sponsor, Coast Federal, the Trust, any Trustee, their affiliates, or any
successor entity or any affiliate of any successor entity, on the other hand,
relating to the Litigation and/or to the actions of the Litigation Trustees,
will be protected by the attorney-client privilege and/or the attorney work
product doctrine, and no such communication will result in the waiver of any
applicable claim of confidentiality or privilege.
(b) The Litigation Trustees may retain an independent public accounting
firm to audit the financial books and records of the Trust and to perform such
other reviews and/or audits as may be appropriate in the Litigation Trustees'
sole and absolute discretion. The Litigation Trustees may commit the Trust, and
shall cause the Trust, to pay such accounting firm compensation from the Expense
Fund or other funds of the Trust for services rendered and expenses incurred.
The Litigation Trustees shall have full authority to dismiss such accounting
firm.
(c) The Litigation Trustees may retain on behalf of the Trust or instruct
Coast Federal (or any successor thereto) to retain such other experts, advisors,
consultants, investigators or other support staff, assistants or employees as
the Litigation Trustees, in their sole and absolute discretion, may deem
necessary or appropriate to assist the Litigation Trustees to carry out their
powers and duties under this Declaration. The Litigation Trustees may commit the
Trust to and shall cause the Trust to pay all such persons or entities
compensation from the Expense Fund or other funds of the Trust for services
rendered and expenses incurred. The Litigation Trustees shall have full
authority to dismiss such persons retained by the Trust or to instruct Coast
Federal (or any successor thereto) to dismiss such persons retained by Coast
Federal (or any successor thereto).
SECTION 6.3 Cooperation by the Sponsor. (a) The Sponsor shall provide, and
shall cause Coast Federal (or any successor thereto) to provide the Litigation
Trustees with such access to the books, records, offices, other facilities,
employees, agents, representatives and independent accountants of Coast Savings
Financial, Inc. and Coast Federal (or any successor to Coast Federal) as the
Litigation Trustees shall reasonably require for the purpose of performing their
duties and exercising their powers under this Declaration. The Litigation
Trustees shall have full authority on behalf of Coast Federal and its successors
to consult with and instruct the attorneys for Coast Federal and its successors
in connection with the Litigation.
(b) The Sponsor shall use its reasonable best efforts to cause the relevant
officers of Coast Federal and its successors and the agents and representatives
of Coast Federal and its successors to be available to provide testimony and to
execute documents, in each case as required, in the reasonable judgment of the
Litigation Trustees, for the purpose of prosecuting the Litigation, including
execution of any complaints, motions, answers and other pleadings, affidavits,
requests and notices, other than pursuant to instructions that are not
reasonable.
ARTICLE VII
ISSUANCE AND DISTRIBUTION OF CPR CERTIFICATES
SECTION 7.1 General Provisions Regarding CPR Certificates. (a) The Trust
shall issue CPR Certificates substantially in the form of Exhibit B representing
undivided beneficial interests in the assets of the Trust.
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(b) The CPR Certificates issued immediately prior to the Effective Time
shall be signed on behalf of the Trust by an Authorized Officer of the Sponsor.
Any CPR Certificates issued by the Trust following the Merger shall be signed on
behalf of the Trust by a majority of the Litigation Trustees. Such signature
shall be the facsimile or manual signature of such Authorized Officer or
Litigation Trustees, as applicable. In case any Authorized Officer or Litigation
Trustee, as applicable, who shall have signed any of the CPR Certificates shall
cease to be an Authorized Officer or Litigation Trustee, as applicable, before
the CPR Certificates so signed shall be delivered by the Trust, such CPR
Certificates nevertheless may be delivered as though the person who signed such
CPR Certificates had not ceased to be an Authorized Officer or Litigation
Trustee, as applicable; and any CPR Certificate may be signed on behalf of the
Trust by such persons who, at the actual date of execution of such CPR
Certificate, shall be an Authorized Officer or Litigation Trustee, as
applicable, of the Trust, although at the date of the execution and delivery of
the Declaration any such person was not an Authorized Officer or Litigation
Trustee, as applicable. A CPR Certificate shall not be valid until authenticated
by the manual signature of a Responsible Officer of the Institutional Trustee.
Such signature shall be conclusive evidence that the CPR Certificate has been
authenticated under this Declaration. Upon written order of the Trust signed by
one Litigation Trustee, the Institutional Trustee shall authenticate the CPR
Certificates for original issue. The Institutional Trustee may appoint an
authenticating agent acceptable to the Litigation Trustees to authenticate the
CPR Certificates.
(c) Upon issuance of the CPR Certificates as provided in this Declaration,
the CPR Certificates so issued shall be deemed to be validly issued, fully paid
and non-assessable.
(d) Every Person, by virtue of having become a Holder in accordance with
the terms of this Declaration, shall be deemed to have expressly assented and
agreed to the terms of, and shall be bound by, this Declaration.
SECTION 7.2 Paying Agent, Transfer Agent and Registrar. The Trust shall
maintain in the Borough of Manhattan, City of New York, State of New York, an
office or agency where the CPR Certificates may be presented for payment (the
"Paying Agent"), and an office or agency where CPR Certificates may be presented
for registration of transfer (the "Transfer Agent"). The Trust shall keep or
cause to be kept at such office or agency a register for the purpose of
registering CPR Certificates and transfers and exchanges of CPR Certificates,
such register to be held by a registrar (the "Registrar"). The Litigation
Trustees may appoint the Paying Agent, the Registrar, and the Transfer Agent and
may appoint one or more additional Paying Agents or one or more co-Registrars,
or one or more co-Transfer Agents in such other locations as they shall
determine. The term "Paying Agent" includes any additional paying agent, the
term "Registrar" includes any additional registrar or co-Registrar and the term
"Transfer Agent" includes any additional or co-Transfer Agent. The Litigation
Trustees may change any Paying Agent without prior notice to any Holder. The
Litigation Trustees shall notify the Institutional Trustee of the name and
address of any Paying Agent, Transfer Agent and Registrar not a party to this
Declaration. The Litigation Trustees hereby appoint the Institutional Trustee to
act as Paying Agent, Transfer Agent and Registrar for the CPR Certificates. The
Institutional Trustee or any of its Affiliates may act as Paying Agent, Transfer
Agent or Registrar.
SECTION 7.3 Form and Dating. The CPR Certificates and the Institutional
Trustee's certificate of authentication thereon shall be substantially in the
form of Exhibit B, which is hereby incorporated in and expressly made a part of
this Declaration. CPR Certificates may be typed, printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Sponsor prior to the Effective Time, and the Litigation Trustees after the
Effective Time, as conclusively evidenced by the execution thereof. The CPR
Certificates may have letters, numbers, notations or other marks of
identification or designation and such legends or endorsements required by law,
stock exchange rule, agreements to which the Trust is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Sponsor prior to the Effective Time, and the Litigation Trustees after
the Effective Time). The Litigation Trustees shall furnish any such legend not
contained in Exhibit B to the Institutional Trustee in writing. Each CPR
Certificate shall be dated the date of its authentication. The form of CPR
Certificate set forth in Exhibit B is part of the terms of this Declaration and
to the extent applicable, the Institutional Trustee, the Delaware Trustee, the
Litigation Trustees and the Sponsor, by their execution and delivery of this
Declaration, expressly agree to such terms and provisions and to be bound
thereby. The Trust, in issuing the CPR Certificates may use "CUSIP" numbers (if
then generally in use), and, if so, the Institutional Trustee shall indicate the
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"CUSIP" numbers of the CPR Certificates in notices of redemption and related
materials as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the CPR Certificates or as contained in any notice of redemption and
related materials.
(a) Definitive and Global CPR Certificates. CPR Certificates shall be
issued, at the option of the Holder, in the form of individual certificates in
definitive, fully registered form without distribution coupons (each, a
"Definitive CPR Certificate"), or in the form of one or more permanent global
CPR Certificates in definitive, fully registered form without distribution
coupons with the appropriate global legends (each, a "Global CPR Certificate").
The number of CPR Certificates represented by the Global CPR Certificate may
from time to time be increased or decreased by adjustments made on the records
of the Institutional Trustee and the Depositary or its nominee as hereinafter
provided.
(b) Book-Entry Provisions. This Section 7.3(b) shall apply only to the
Global CPR Certificates. The Trust shall execute and the Institutional Trustee
shall, in accordance with this Section 7.3, authenticate and deliver initially
one or more Global CPR Certificates that (a) shall be registered in the name of
Cede & Co. or other nominee of such Depositary and (b) shall be delivered by the
Institutional Trustee to such Depositary or pursuant to such Depositary's
instructions or held by the Institutional Trustee as custodian for the
Depositary. Clearing Agency Participants shall have no rights under this
Declaration with respect to any Global CPR Certificates held on their behalf by
the Depositary or by the Institutional Trustee as the custodian of the
Depositary or under such Global CPR Certificates, and the Depositary may be
treated by the Trust, the Institutional Trustee and any officer, director,
employee, or agent of the Trust or the Institutional Trustee as the absolute
owner of such Global CPR Certificates for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Trust, the
Institutional Trustee or any agent of the Trust or the Institutional Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and the
Clearing Agency Participants, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global CPR Certificates.
(c) Definitive CPR Certificates. Any Person with a beneficial interest in a
Global CPR Certificate may exchange such interest for Definitive CPR
Certificates.
SECTION 7.4 Mutilated, Destroyed, Lost or Stolen Certificates. If: (a) any
mutilated CPR Certificates should be surrendered to the Registrar, or if the
Registrar shall receive evidence to its satisfaction of the destruction, loss or
theft of any CPR Certificate; and
(b) there shall be delivered to the Institutional Trustee, the Registrar
and the Litigation Trustees such security or indemnity as may be required by
them to keep each of them harmless; then, in the absence of notice that such CPR
Certificate shall have been acquired by a protected purchaser, a majority of the
Litigation Trustee on behalf of the Trust shall execute and the Institutional
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen CPR Certificate, a new CPR Certificate of
like denomination. In connection with the issuance of any new CPR Certificate
under this Section 7.4, the Registrar or the Institutional Trustee may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate CPR Certificate
issued pursuant to this Section shall constitute conclusive evidence of an
ownership interest in the relevant CPR Certificates, as if originally issued,
whether or not the lost, stolen or destroyed CPR Certificate shall be found at
any time.
SECTION 7.5 Temporary CPR Certificates. Until definitive CPR Certificates
are ready for delivery, the Litigation Trustees may prepare and the
Institutional Trustee shall authenticate temporary CPR Certificates. Temporary
CPR Certificates shall be substantially in the form of definitive CPR
Certificates but may have variations that the Litigation Trustees consider
appropriate for temporary CPR Certificates. Without unreasonable delay, the
Litigation Trustee shall prepare and the Institutional Trustee shall
authenticate definitive CPR Certificates in exchange for temporary CPR
Certificates.
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SECTION 7.6 Issuance of CPR Certificates on the Effective
Date. Immediately prior to the Effective Time, the Trust shall issue to the
Sponsor (i) one CPR Certificate for each share of the Sponsor's common stock
outstanding as of immediately prior to the Effective Time of the Merger, (ii)
1,440,883 CPR Certificates required to satisfy the Sponsor's obligations under
Sections 3.06 of the Merger Agreement and (iii) one CPR Certificate for each
share of the Sponsor's common stock with respect to which Coast stockholders
have provided a notice of intent to exercise appraisal rights in the Merger.
SECTION 7.7 Redemption and Cancellation. (a) The Sponsor and the
Litigation Trustees at any time may deliver CPR Certificates to the
Institutional Trustee for cancellation. The Registrar shall forward to the
Institutional Trustee any CPR Certificates surrendered to it for registration of
transfer, redemption or payment. The Institutional Trustee shall promptly cancel
all CPR Certificates surrendered for registration of transfer, payment,
replacement or cancellation and shall destroy such canceled CPR Certificates in
accordance with its customary practices and procedures. The Institutional
Trustee may not issue new CPR Certificates to replace CPR Certificates that have
been paid in full or that have been delivered to the Institutional Trustee for
cancellation.
(b) The Trust shall mandatorily redeem for $0.01 in cash each CPR
Certificate issued to a Coast stockholder who provides a notice of intent to
exercise appraisal rights in the Merger with respect to shares of Coast common
stock. If any such Coast stockholder subsequently withdraws, or fails to
perfect, such appraisal demand, Ahmanson, in its capacity as successor to the
Sponsor, shall deliver to such stockholder one CPR Certificate for each share of
Coast common stock as to which such appraisal demand was withdrawn and not
perfected.
(c) Ahmanson, in its capacity as successor to the Sponsor, shall only
retain CPR Certificates in an amount equal to, and shall return to the Trust for
cancellation any CPR Certificates held by it in excess of, (i) the number of
Coast shares as to which former stockholders of Coast exercised and perfected
and did not withdraw their appraisal rights plus (ii) the number of Coast shares
underlying Coast stock appreciation rights ("Coast SARs") and Coast performance
share awards ("Coast Performance Share Awards") that are exercised for cash
prior to the Merger or which are surrendered solely for cash in the Merger plus
(iii) that number of CPR Certificates as is equal to the number of Coast shares
underlying Coast stock options outstanding immediately prior to the Merger, for
delivery by the Sponsor to the holders of Replacement Options upon exercise of
Replacement Options following the Merger. If any Replacement Options are
canceled or expire unexercised, Ahmanson, in its capacity of successor to the
Sponsor, shall return the related number of CPR Certificates to the Trust and
the Institutional Trustee shall cancel such CPR Certificates.
ARTICLE VIII
DISSOLUTION AND TERMINATION OF TRUST
SECTION 8.1 Dissolution and Termination of Trust. (a) The Trust shall
dissolve:
(i) 30 days after the date on which the Institutional Trustee has
distributed any portion of the Retained Amount remaining upon the
expiration of the Retained Amount Period;
(ii) if the Litigation Trustees determine in writing that the final
Payment Amount is less than zero (whether because the Commitment Amount is
less than or equal to zero or because the expenses of the Trust exceed the
Commitment Amount) and there is no Retained Amount, thirty days after such
determination by the Litigation Trustees;
(iii) 30 days after the date of a final dismissal of the Litigation or
a determination by Coast Federal (or any successor thereto) not to continue
to prosecute the Litigation, in either case upon the instruction of the
Litigation Trustees; or
(iv) by the Sponsor before the issuance of any CPR Certificates.
(b) As soon as is practicable after the occurrence of an event referred to
in Section 8.1(a), and after completion of winding up of the Trust and
satisfaction of liabilities of the Trust in accordance with the
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Business Trust Act, the Trustees shall terminate the Trust by filing a
certificate of cancellation with the Secretary of State of the State of
Delaware.
(c) The provisions of Section 3.14 and Article XI shall survive the
termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 General. (a) Where CPR Certificates are presented to the
Registrar or a co-registrar with a request to register a transfer or to exchange
them for an equal number of CPR Certificates represented by different
certificates, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met. To permit registrations of
transfer and exchanges, a majority of the Litigation Trustees shall execute and
the Institutional Trustee shall authenticate CPR Certificates at the Registrar's
request.
(b) CPR Certificates may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the CPR Certificates. Any transfer or purported transfer of any CPR
Certificate not made in accordance with this Declaration shall be null and void
and will be deemed to be of no legal effect whatsoever and any such transferee
shall be deemed not to be the holder of such CPR Certificates for any purpose,
including but not limited to the receipt of the Payment Amount, and such
transferee shall be deemed to have no interest whatsoever in such CPR
Certificates.
(c) The Registrar shall provide for the registration of CPR Certificates
and of transfers of CPR Certificates, which will be effected without charge but
only upon payment (with such indemnity as the Registrar may require) in respect
of any tax or other governmental charges that may be imposed in relation to it.
Upon surrender for registration of transfer of any CPR Certificates, the
Registrar shall cause one or more new CPR Certificates to be issued in the name
of the designated transferee or transferees. Every CPR Certificate surrendered
for registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by the Holder or
such Holder's attorney duly authorized in writing. Each CPR Certificate
surrendered for registration of transfer shall be canceled by the Institutional
Trustee pursuant to Section 7.7. A transferee of a CPR Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder upon
the receipt by such transferee of a CPR Certificate. By acceptance of a CPR
Certificate, each transferee shall be deemed to have agreed to be bound by this
Declaration.
SECTION 9.2 Transfer Procedures.
(a) Transfer and Exchange of Definitive CPR Certificates. When Definitive
CPR Certificates are presented to the Registrar (x) to register the transfer of
such Definitive CPR Certificates, or (y) to exchange such Definitive CPR
Certificates for an equal number of Definitive CPR Certificates of another
number, the Registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction are met; provided,
however, that the Definitive CPR Certificates surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Trust and the
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.
(b) Restrictions on Transfer of a Definitive CPR Certificate for a
Beneficial Interest in a Global CPR Certificate. A Definitive CPR Certificate
may not be exchanged for a beneficial interest in a Global CPR Certificate
except upon satisfaction of the requirements set forth below. Upon receipt by
the Institutional Trustee of a Definitive CPR Certificate, duly endorsed or
accompanied by appropriate instruments of transfer, together with written
instructions directing the Institutional Trustee to make, or to direct the
Depositary to make, an adjustment on its books and records with respect to a
Global CPR Certificate to reflect an increase in the number of the CPR
Certificates represented by the Global CPR Certificate, then the Institutional
Trustee shall cancel such Definitive CPR Certificate and cause, or direct the
Depositary to cause, the aggregate number of CPR Certificates represented by the
Global CPR Certificate to be increased accordingly.
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If no Global CPR Certificates are then outstanding, a majority of Litigation
Trustees shall execute and the Institutional Trustee shall authenticate, an
appropriate number of CPR Certificates in global form.
(c) Transfer and Exchange of Global CPR Certificates. The transfer and
exchange of Global CPR Certificates or beneficial interests therein shall be
effected through the Depositary, in accordance with this Declaration and the
procedures of the Depositary therefor. Notwithstanding any other provisions of
this Declaration, a Global CPR Certificate may not be transferred as a whole
except by the Depositary to a nominee of the Depositary or another nominee of
the Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary.
(d) Transfer of a Beneficial Interest in a Global CPR Certificate for a
Definitive CPR Certificate.
(i) Any Person having a beneficial interest in a Global CPR
Certificate may upon request, and if accompanied by the information
specified below, exchange such beneficial interest for a Definitive CPR
Certificate, representing the same number of CPR Certificates. Upon receipt
by the Institutional Trustee from the Depositary or its nominee on behalf
of any Person having a beneficial interest in a Global CPR Certificate of
written instructions or such other form of instructions as is customary for
the Depositary or the Person designated by the Depositary as having such a
beneficial interest in such Global CPR Certificate, then the Institutional
Trustee shall cause, in accordance with the standing instructions and
procedures of the Depositary, the aggregate liquidation amount of the
Global CPR Certificate to be reduced on its books and records and,
following such reduction, a majority of the Litigation Trustees shall
execute and the Institutional Trustee shall authenticate, an appropriate
number of Definitive CPR Certificates.
(ii) Definitive CPR Certificate issued in exchange for a beneficial
interest in a Global CPR Certificate pursuant to this Section 9.2(d) shall
be registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from Clearing Agency Participants or
indirect participants or otherwise, shall instruct the Institutional
Trustee. The Institutional Trustee shall deliver such CPR Certificates to
the Persons in whose names such CPR Certificates are so registered in
accordance with the instructions of the Depositary.
(e) Definitive CPR Certificates If No Depositary.
If at any time:
(i) the Depositary notifies the Institutional Trustee and the
Litigation Trustees that the Depositary is unwilling or unable to continue
as Depositary for the Global CPR Certificates and a successor Depositary
for the Global CPR Certificates is not appointed by the Trust at the
direction of the Litigation Trustees within 90 days after delivery of such
notice; or
(ii) the Litigation Trustees notify the Institutional Trustee in
writing to issue Definitive CPR Certificates under this Declaration,
then a majority of the Litigation Trustee shall execute, and the
Institutional Trustee, upon receipt of a written order of the Trust signed
by a Litigation Trustee requesting the authentication and delivery of
Definitive CPR Certificates to the Persons designated by the Litigation
Trustees, shall authenticate and deliver Definitive CPR Certificates, in an
aggregate amount equal to the amount of Global CPR Certificates, in
exchange for such Global CPR Certificates.
(f) Cancellation or Adjustment of a Global CPR Certificate. At such time as
all beneficial interests in a Global CPR Certificate have either been exchanged
for Definitive CPR Certificates to the extent permitted by this Declaration or
redeemed, repurchased or canceled in accordance with the terms of this
Declaration, such Global CPR Certificate shall be returned to the Depositary for
cancellation or retained and canceled by the Institutional Trustee. At any time
prior to such cancellation, if any beneficial interest in a Global CPR
Certificate is exchanged for Definitive CPR Certificates, CPR Certificates
represented by such Global CPR Certificate shall be reduced and an adjustment
shall be made on the books and records of the Institutional Trustee (if it is
then the custodian for such Global CPR Certificate) with respect to such Global
CPR Certificate, by the Institutional Trustee to reflect such reduction.
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(g) Obligations with Respect to Transfers and Exchanges of CPR
Certificates.
(i) To permit registrations of transfers and exchanges, the a majority
of the Litigation Trustees shall execute and the Institutional Trustee
shall authenticate Definitive CPR Certificates and Global CPR Certificates
at the Registrar's request.
(ii) Registrations of transfers or exchanges will be effected without
charge, but only upon payment (with such indemnity as the Institutional
Trustee or the Registrar may require) in respect of any tax or other
governmental charge that may be imposed in relation to it.
(iii) All CPR Certificates issued upon any registration of transfer or
exchange pursuant to the terms of this Declaration shall evidence the same
security and shall be entitled to the same benefits under this Declaration
as the CPR Certificates surrendered upon such registration of transfer or
exchange.
SECTION 9.3 Deemed CPR Certificate Holders. The Trust, the Litigation
Trustees, the Trustees, the Paying Agent, the Transfer Agent or the Registrar
may treat the Person in whose name any CPR Certificate shall be registered on
the books and records of the Trust as the sole holder of such CPR Certificate
(and of the undivided beneficial interest in the assets of the Trust represented
by such CPR Certificate) for purposes of receiving payment of the Payment Amount
and for all other purposes whatsoever and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such CPR Certificate or
in the rights represented by such Certificate on the part of any other Person,
whether or not the Trust, the Litigation Trustees, the Trustees, the Paying
Agent, the Transfer Agent or the Registrar shall have actual or other notice
thereof.
With respect to Global CPR Certificates issued by the Trust: (i) the
Trustees may deal with the Depositary as the authorized representative of the
Holders; (ii) the rights of the holders of beneficial interests in the Trust
shall be exercised only through the Depositary and shall be limited to those
established by law and agreement between such holders of beneficial interests
and the Depositary and/or direct participants of the Depositary; (iii) the
Depositary will make book-entry transfers among the direct participants of the
Depositary and will receive and transmit distributions on the CPR Certificates
to such direct participants; and (iv) the direct participants of the Depositary
shall have not rights under this Declaration under or with respect to any of the
CPR Certificates held on their behalf by the Depositary, and the Depositary may
be treated by the Trustees and their respective agents, employees, officers and
directors as the absolute owner of the CPR Certificates for all purposes
whatsoever.
SECTION 9.4 Notices to Clearing Agency. Whenever a notice or other
communication to the Holders is required under this Declaration, unless and
until Definitive CPR Certificates shall have been issued to the beneficial
owners of CPR Certificates pursuant to Section 9.2(d) or Section 9.2(e), the
Trustees shall give all such notices and communications specified herein to be
given to the Holders to the Clearing Agency, and shall have no notice
obligations to the beneficial owners of CPR Certificates.
SECTION 9.5 Appointment of Successor Clearing Agency. If any Clearing
Agency elects to discontinue its services as securities depositary with respect
to the CPR Certificates, the Litigation Trustees, in their sole discretion,
shall appoint a successor Clearing Agency with respect to such CPR Certificates.
ARTICLE X
HOLDERS OF CPR CERTIFICATES
SECTION 10.1 Limitations on Rights of Holders. The Holders of the CPR
Certificates acknowledge that:
(a) the Holders, in their capacities as Holders, are not stockholders of
the Sponsor, Coast Federal or Ahmanson (or any successor of any of them) and
will have no rights to dividends, liquidation preferences or other distributions
other than the payments described in Article IV, and will have no voting rights
except as expressly described herein. The Commitment is solely a contractual
obligation between Ahmanson and the Trust, and the Holders have no rights under
the Commitment with respect to Ahmanson by reason of their ownership of CPR
Certificates and Ahmanson has no liability under the Commitment to the Holders;
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(b) the CPR Certificates are not savings accounts or deposits and are not
insured by the Federal Deposit Insurance Corporation;
(c) the Holders have no rights with respect to, or interest in, (i) the
Litigation, (ii) Coast Federal (or any successor thereto), or (iii) any amount
received by Coast Federal (or any successor thereto) or any other member of the
Ahmanson Group with respect to the Litigation, including any judgment or
settlement proceeds;
(d) nothing in this Declaration shall be construed to create any
partnership or joint venture between the Sponsor, Coast Federal (or any
successor thereto), Ahmanson or any member of the Ahmanson Group, and the
Holders;
(e) (i) the Litigation is solely an asset of Coast Federal and its
successors, (ii) the Litigation shall be conducted by and on behalf of Coast
Federal and its successors solely in accordance with the instructions of the
Litigation Trustees pursuant to this Declaration, (iii) the Litigation Trustees
shall have the sole and exclusive right to direct Coast Federal and its
successors to take (or not take) actions relating to the Litigation as
contemplated by this Declaration and may, among other things, instruct Coast
Federal and its successors to dismiss, settle or cease prosecuting the
Litigation at any time without obtaining any cash or other recovery, or upon
obtaining any such cash or other recovery as the Litigation Trustees may
determine, (iv) the Litigation Trustees have the sole and exclusive right to
take or not take other actions contemplated by this Declaration relating to the
Litigation (including, without limitation, any decision with respect to the
incurrence of expenses); and
(f) the liability of the Trustees and members of the Ahmanson Group is
limited to the extent set forth in Article XI.
SECTION 10.2 Limitations on Suits by Holders. (a) To the fullest extent
permitted by law, no Holder of CPR Certificates shall have any right by virtue
or by availing itself of any provision of this Declaration to institute any
action or proceeding other than a suit by such Holder for nonpayment of amounts
due and owing with respect to such Holder's CPR Certificates following a payment
of the Commitment Amount to the Trust and payment of the Payment Amount by the
Trust to other Holders, at law or in equity or in bankruptcy or otherwise upon
or under or with respect to this Declaration, or for the appointment of a
trustee, receiver, liquidator, custodian or other similar official or for any
other remedy hereunder, unless such Holder previously shall have given to the
Institutional Trustee written notice of default and of the continuance thereof
as herein before provided, and unless also the Holders of not less than 50% of
the CPR Certificates outstanding shall have made written request upon the
Institutional Trustee to institute such action or proceeding in its own name as
trustee hereunder and shall have offered to the Institutional Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby and the Institutional Trustee for
60 days after its receipt of such notice, request and offer of indemnity shall
have failed to institute any such action or proceeding; it being understood and
intended, and being expressly covenanted by the Holder of every CPR Certificate
with every other Holder of CPR Certificates and the Institutional Trustee, that
no one or more Holders shall have any right in any manner whatever by virtue or
by availing itself or themselves of any provision of this Declaration to effect,
disturb or prejudice the rights of any other such Holder, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Declaration, except in the manner herein provided and for the
equal, ratable and common benefit of all Holders. For the protection and
enforcement of the provisions of this Section, each and every Holder and the
Institutional Trustee shall be entitled to such relief as can be given either at
law or in equity.
(b) Any proceeding by Holders shall be instituted only in accordance with
the following procedures:
(i) The prospective plaintiff(s) shall deliver to the Institutional
Trustee (which shall promptly deliver a copy thereof to the Litigation
Trustees) a printed or typewritten statement not more than 10 pages in
length containing (i) the name(s) and address(es) of the prospective
plaintiff(s), (ii) a statement of the nature and amount of each plaintiff's
interest in the CPR Certificates, and (iii) a description of the nature and
grounds of the claims to be asserted and the relief or remedy sought.
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(ii) The Institutional Trustee shall promptly notify the prospective
plaintiff(s) of the number of copies needed for distribution to Holders and
the postage, printing and administrative costs for preparing and mailing
the statement of the prospective plaintiff(s), a response by the
Institutional Trustee or the Litigation Trustees, as applicable, which
shall not exceed 10 pages in length, a consent form described below and a
return envelope. Upon receipt of a certified check for such postage,
printing and administrative costs, the Institutional Trustee shall promptly
mail these materials to the Holders. Sixty days after mailing, the
responses received shall be open to inspection by the prospective
plaintiff(s) or any Holder at reasonable times during business hours at the
office of the Trust designated for such purposes.
(iii) The mailing to Holders shall include a consent form reading
substantially as follows:
"In response to the Coast Federal Litigation Contingent Payment
Rights Trust mailing dated ,
--------------------- I HEREBY CONSENT TO SUCH SUIT.
--------------------- I DO NOT CONSENT TO SUCH SUIT.
--------------------------------------
Signature
--------------------------------------
Printed or Typed Name of Holder
Date:
--------------------------------------
"If this response is not returned by , you will
be considered as not consenting to such suit."
ARTICLE XI
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 11.1 Liability. (a) Except as expressly set forth in this
Declaration, the Trustees shall not be:
(i) personally liable for the payment of any amounts, including,
without limitation, the Payment Amount or any portion of the Retained
Amount remaining upon the expiration of the Retained Amount Period, to the
Holders, which payment shall be made solely from the Commitment Amount, if
any, and the Retained Amount, if any, respectively, and other assets of the
Trust, if any; or
(ii) required to pay to the Trust or to any Holder any deficit upon
dissolution of the Trust or otherwise.
(b) Pursuant to sec. 3803(a) of the Business Trust Act, the Holders of the
CPR Certificates shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware.
SECTION 11.2 Exculpation. (a) To the fullest extent permitted by law, no
Trust Indemnified Person shall be liable, responsible or accountable in damages
or otherwise to the Trust or any Indemnified Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person, except that (i) the Litigation Trustees shall be liable for
any such loss, damage or claim incurred by reason of any act or omission
performed or omitted by them if it shall be established in a final judicial
determination by clear and convincing evidence that any such act or omission of
the Litigation Trustees was undertaken with deliberate intent to injure the
Holders or with reckless disregard for the best interests of such Holders and,
in any event, any liability will be limited to actual, proximate, quantifiable
damages, and (ii) the
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Institutional Trustee or the Delaware Trustee shall be liable for any such loss,
damage or claim incurred by reason of the Institutional Trustee's or Delaware
Trustee's (as the case may be) gross negligence or willful misconduct with
respect to such acts or omissions, provided, that nothing in this Section
11.2(a) is intended to limit the Litigation Trustees' right to insurance
obtained by the Trust and the proceeds of such insurance.
(b) To the fullest extent permitted by law, no Ahmanson Indemnified Person
shall have any liability to the Trust, the Trustees or the Holders. Without
limiting the generality of the foregoing, to the fullest extent permitted by
law, none of the Holders (in their capacity as Holders), the Trustees or the
Trust shall have the right to enforce, institute or maintain a suit, action or
proceeding against an Ahmanson Indemnified Person relating to the formation of
the Trust, the entering into of the Commitment, the distribution of the CPR
Certificates, the Litigation or actions of the Litigation Trustees in their
capacity (or purportedly in their capacity) as Litigation Trustees.
Notwithstanding the preceding two sentences of this Section 11.2(b), the Trust
(or the Litigation Trustees on behalf of the Trust) may enforce, institute or
maintain a suit, action or proceeding against (i), except as set forth in
Section 3.13(a)(ii), Ahmanson or its successors as successor to the Sponsor for
breach of its obligations hereunder, (ii) Ahmanson or its successors for its
breach of any of its obligations under the Commitment or its failure to deliver
any CPR Certificate when due or to return to the Trust for cancellation any CPR
Certificate required to be returned pursuant to the Merger Agreement when so
required, (iii) Ahmanson or its successors for failure to deposit the Expense
Fund at the Effective Time in a non-interest bearing demand deposit account in
the name of the CPR Trust at Home Savings or (iv) Home Savings or its successors
for breach of any depository relationship obligations it may have with respect
to the Expense Fund, and in each case, Ahmanson or Home Savings or their
successors, as the case may be, may be liable to the Trust in connection with
such suit, action or proceeding; provided, that fees and expenses incurred by
the Ahmanson Group in such a suit, action or proceeding shall not be set off
against the Litigation Proceeds (in order to calculate the Commitment Amount) if
the Trust or the Litigation Trustees prevail in such a suit, and, if in
connection with suits brought pursuant to clauses (i) through (iv) inclusive,
shall be deemed expenses of the Trust payable by the Trust out of the Commitment
Amount, including any Retained Amount, if the Litigation Trustees do not
prevail.
(c) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Trust and upon such information, opinions, reports or
statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and, if selected by such Indemnified Person, has been selected by
such Indemnified Person with reasonable care by or on behalf of the Trust,
including information, opinions, reports or statements as to the value and
amount of the assets, liabilities, profits, losses, or any other facts pertinent
to the existence and amount of assets from which payment to Holders might
properly be paid.
SECTION 11.3 Fiduciary Duty. (a) To the extent that, at law or in equity,
an Indemnified Person has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to any other Indemnified Person, an Indemnified
Person acting under this Declaration shall not be liable to the Trust or to any
other Indemnified Person for its good faith reliance on the provisions of this
Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity, are agreed by the parties hereto to replace such other
duties and liabilities of the Indemnified Person.
(b) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and factors
as it desires, including its own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors
affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or
by applicable law.
SECTION 11.4 Indemnification. (a) The Trust shall indemnify, to the
fullest extent permitted by law, any Trust Indemnified Person in connection with
any threatened, pending or completed action, suit or
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proceeding, whether civil, criminal, administrative or investigative, arising
out of or relating to the Trust, the CPR Certificates, the distribution of the
CPR Certificates, the Litigation or any acts or omissions of the Trustees in
their capacity or purportedly in their capacity as Trustees, or actions taken by
the Litigation Trustees (including actions taken by the Litigation Trustees in
their capacity as officers or directors of Coast or Ahmanson so long as such
actions relate to the Trust including, without limitation, the negotiation of
the terms of the Trust and the CPR Certificates and the approval of the
establishment of the Trust and the distribution of the CPR Certificates and
related transactions, but otherwise excluding actions taken by the Litigation
Trustees in such capacities), against any and all losses, liabilities, damages,
judgments, demands, suits, claims, assessments, charges, fines, penalties and
other costs and expenses, including attorneys' fees and expenses and other fees
and expenses associated with the defense of a claim or incurred by such
Indemnified Person in obtaining indemnification under this Declaration, whether
or not in a formal proceeding (collectively, "Damages").
(b) The Trust shall indemnify, to the fullest extent permitted by law, the
Ahmanson Indemnified Persons against any and all Damages (other than in
connection with claims by shareholders of Ahmanson against Ahmanson's directors
with respect to actions taken at or prior to the Merger) arising out of or
relating to, (i) with respect to claims brought by Holders in their capacity as
Holders, any matter whatsoever and (ii) with respect to claims brought by any
other party, any matter relating to the Trust, the CPR Certificates, the
distribution of the CPR Certificates, the Litigation, and actions taken by the
Litigation Trustees (including actions taken by the Litigation Trustees in their
capacity as officers or directors of Coast or Ahmanson so long as such actions
relate to the Trust including, without limitation, the negotiation of the terms
of the Trust and the CPR Certificates and the approval of the establishment of
the Trust and the distribution of the CPR Certificates and related transactions,
but otherwise excluding actions taken by the Litigation Trustees in such
capacities).
(c) Notwithstanding the preceding paragraphs (a) and (b), no
indemnification shall apply (i) in the case of the indemnification of the
Litigation Trustees, if Holders establish in a final judicial determination by
clear and convincing evidence that such Damages arose as the result of acts or
omissions of the Litigation Trustees with deliberate intent to injure the CPR
Certificate Holders or with reckless disregard for the best interests of such
Holders, (ii) in the case of the indemnification of the Delaware Trustee or the
Institutional Trustee, if Holders establish in a final judicial determination by
clear and convincing evidence that such damages arose because such Trustee was
grossly negligent or engaged in willful misconduct, and (iii) in the case of the
indemnification of the Ahmanson Indemnified Persons under paragraph (b)(ii)
above, with respect to Damages arising from claims against (A) Ahmanson or its
successors as successor to the Sponsor for breach of its obligations hereunder
after the Effective Time, (B) Ahmanson or its successors for its breach of any
of its obligations under the Commitment, (C) Ahmanson or its successors for
failure to deliver any CPR Certificate when due or to return to the Trust for
cancellation any CPR Certificate required to be returned when so required, (D)
Ahmanson or its successors for failure to deposit the Expense Fund at the
Effective Time in a non-interest bearing demand deposit account in the name of
the CPR Trust at Home Savings, or (E) Home Savings or its successors for breach
of any depository relationship obligations it may have with respect to the
Expense Fund. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that (i) the Litigation
Trustees acted or decided with deliberate intent to injure the Holders or with
reckless disregard for the best interests of such Holders or (ii) the Delaware
Trustee or Institutional Trustee was grossly negligent or engaged in willful
misconduct.
(d) To the fullest extent permitted by law, expenses (including attorneys'
fees and expenses) incurred by an Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding referred to
in Sections 11.4(a) and 11.4(b) shall be paid by the Trust in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking (without bond or security) by or on behalf of such Indemnified
Person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Trust as authorized in this Section 11.4.
(e) All rights to indemnification under this Section 11.4 shall be deemed
to be provided by a contract between the Trust and each Indemnified Person who
serves in such capacity at any time while this
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Section 11.4 is in effect. Any repeal or modification of this Section 11.4 shall
not affect any rights or obligations then existing.
(f) The Trust shall purchase and maintain insurance to cover its
indemnification obligations and any other liabilities of the Litigation
Trustees. The Trust will use amounts from the Expense Fund (or amounts from
other sources of the Trust) to pay for such insurance.
(g) For purposes of this Section 11.4, references to "the Trust" shall
include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger involving the Trust, so that any Person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was serving at
the request of such constituent entity as a director, trustee, officer, employee
or agent of another entity, shall stand in the same position under the
provisions of this Section 11.4 with respect to the resulting or surviving
entity as he would have with respect to such constituent entity if its separate
existence had continued.
(h) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section 11.4 shall continue as to a Person who has ceased to
be an Indemnified Person and shall inure to the benefit of the heirs, executors
and administrators of such a Person.
SECTION 11.5 Outside Businesses. Any Indemnified Person may engage in or
possess an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the Holders shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits derived
therefrom, and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. No Indemnified
Person shall be obligated to present any particular investment or other
opportunity to the Trust even if such opportunity is of a character that, if
presented to the Trust, could be taken by the Trust, and any Indemnified Person
shall have the right to take for its own account (individually or as a partner
or fiduciary) or to recommend to others any such particular investment or other
opportunity. Any Indemnified Person may engage or be interested in any financial
or other transaction with Ahmanson or any Affiliate of Ahmanson, or may act as
depositary for, trustee or agent for, or act on any committee or body of holders
of, securities or other obligations of Ahmanson or its Affiliates.
SECTION 11.6 Compensation; Fee. The Trust agrees:
(a) to pay to the Institutional Trustee and the Delaware Trustee from
time to time, upon the approval of the Litigation Trustees, reasonable
compensation for all services rendered by them hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(b) to pay to the Litigation Trustees the compensation set forth in
Section 3.8 (which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee or an express trust); and
(c) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all expenses, disbursements and advances incurred
or made by the Trustees in accordance with any provision of this
Declaration (including the compensation and the expenses and disbursements
of their respective agents and counsel).
The provisions of Section 11.4 and this Section 11.6 shall survive the
dissolution of the Trust and the termination of this Declaration and the removal
or resignation of any Trustee.
ARTICLE XII
ACCOUNTING
SECTION 12.1 Fiscal Year. The fiscal year ("Fiscal Year") of the Trust
shall be the calendar year, or such other year as is required by the Code.
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SECTION 12.2 Certain Accounting Matters. (a) At all times during the
existence of the Trust, the Litigation Trustees shall keep, or cause to be kept,
full books of account, records and supporting documents, which shall reflect in
reasonable detail each transaction of the Trust. The books of account shall be
maintained on the accrual method of accounting, in accordance with generally
accepted accounting principles, consistently applied. The books of account and
the records of the Trust shall be examined by and reported upon as of the end of
each Fiscal Year of the Trust by a firm of independent certified public
accountants selected by the Litigation Trustees.
(b) The Litigation Trustees shall cause to be duly prepared and delivered
to each of the Holders any annual United States federal income tax information
statement required by the Code, containing such information with regard to the
CPR Certificates held by each Holder as is required by the Code and the
regulations promulgated thereunder. Notwithstanding any right under the Code to
deliver any such statement at a later date, the Litigation Trustees shall
endeavor to deliver all such statements within 30 days after the end of each
Fiscal Year of the Trust.
(c) The Litigation Trustees shall cause to be duly prepared and filed an
annual United States federal income tax return on a Form 1041 or such other form
required by United States federal income tax law, and any other annual income
tax returns required to be filed by the Litigation Trustees on behalf of the
Trust with any state or local taxing authority.
SECTION 12.3 Banking. The Trust may maintain one or more bank accounts in
the name and for the sole benefit of the Trust; provided, however, that all
payments received by the Trust pursuant to the Commitment shall be maintained
separately from other funds as provided by Section 3.13(b)(ii)(D).
SECTION 12.4 Withholding. The Institutional Trustee or any Paying Agent
shall comply with all withholding requirements under United States federal,
state and local law. The Institutional Trustee or any Paying Agent shall
request, and the Holders shall provide to the Institutional Trustee or any
Paying Agent, such forms or certificates as are necessary to establish an
exemption from withholding with respect to each Holder, and any representations
and forms as shall reasonably be requested by the Institutional Trustee or any
Paying Agent to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Litigation Trustees shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the Holder
to applicable jurisdictions. To the extent that the Institutional Trustee or any
Paying Agent is required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a Distribution in the amount of the withholding to the
Holder. In the event of any claimed overwithholding, Holders shall be limited to
an action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Institutional
Trustee or any Paying Agent may reduce subsequent Distributions by the amount of
such withholding.
ARTICLE XIII
AMENDMENTS AND MEETINGS
SECTION 13.1 Amendments. (a) Except as otherwise provided in this
Declaration, this Declaration may only be amended by a written instrument
approved and executed by
(i) the Institutional Trustee;
(ii) the Litigation Trustees, acting by majority vote; and
(iii) if the amendment affects the rights, powers, duties, obligations
or immunities of the Delaware Trustee, the Delaware Trustee.
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(b) Notwithstanding any other provision of this Article XIII, no
amendment shall be made, and any such purported amendment shall be void and
ineffective unless the Institutional Trustee shall have first received:
(A) an Officers' Certificate from the Trust that such amendment is
permitted by, and conforms to, the terms of this Declaration (including
the terms of the CPR Certificates); and
(B) an opinion of counsel (who may be counsel to the Trust, the
Litigation Trustees or to a member of the Ahmanson Group) that such
amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the CPR Certificates).
(c) Except as provided in Section 13.1(d), (e), (f) or (g), no amendment
shall be made, and any such purported amendment shall be void and ineffective
unless the Holders of a majority of the CPR Certificates then outstanding shall
have consented to such amendment.
(d) In addition to and notwithstanding any other provision in this
Declaration, without the consent of each affected Holder, this Declaration may
not, except as permitted by Section 13.1(g)(i) or (ii), be amended to (i)
discriminate among Holders, (ii) restrict the right of a Holder to institute
suit for the enforcement of any such payment on or after such occurrence, or
(iii) modify the definition of Payment Amount or Retained Amount.
(e) Section 2.3(a) and this Section 13.1 shall not be amended without the
consent of all of the Holders of the CPR Certificates then outstanding.
(f) Sections 11.2(b) and 11.4(b) and (c)(iii) shall not be amended without
the consent of Ahmanson as successor to the Sponsor.
(g) Subject to Section 13.1(b), this Declaration may be amended by the
Institutional Trustee and the Litigation Trustees without the consent of the
Holders of the CPR Certificates:
(i) to cure any ambiguity;
(ii) to correct or supplement any provision in this Declaration that
may be defective or inconsistent with any other provision of this
Declaration;
(iii) to add to the covenants, restrictions or obligations of the
Litigation Trustees or to alter the allocation of duties between the
Litigation Trustees and the Institutional Trustee;
(iv) to modify, eliminate or add to any provision of this Declaration
to such extent as may be necessary to ensure that the Trust (A) will be
classified for United States federal income tax purposes at all times as a
grantor trust, (B) will not be required to register as an Investment
Company under the Investment Company Act (including without limitation to
conform to any change in any applicable rule under the Investment Company
Act or written change in interpretation or application thereof by any
legislative body, court, government agency or regulatory authority) or (C)
is able to issue additional CPR Certificates;
provided, however, that no such modification, elimination or addition
referred to in clauses (i), (ii), (iii) or (iv) shall adversely affect the
powers, preferences or special rights of Holders or cause the Trust to fail
to continue to be classified as a grantor trust for purposes of United
States federal income taxation.
(h) The Institutional Trustee may, but shall have no obligation to, execute
any amendment which materially adversely affects its rights, powers, immunities
or indemnities.
SECTION 13.2 Meetings of Holders of CPR Certificates; Action by Written
Consent. (a) Meetings of the Holders may be called at any time by the Litigation
Trustees to consider and act on any matter on which Holders are entitled to act
under the terms of this Declaration, the terms of the CPR Certificates or the
rules of any stock exchange or automated quotation system on which the CPR
Certificates are listed or admitted for trading, if any. The Litigation Trustees
shall call a meeting of the Holders if directed to do so by the Holders of at
least 25% of CPR Certificates. Such direction shall be given by delivering to
the Litigation Trustees one
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or more calls in a writing stating that the signing Holders wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called.
(b) Except to the extent otherwise provided in the terms of the CPR
Certificates, the following provisions shall apply to meetings of Holders:
(i) notice of any such meeting (with a copy to the Institutional
Trustee) shall be given to all the Holders having a right to vote thereat
at least 20 days and not more than 60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holders is permitted or
required under this Declaration or the rules of any stock exchange or
automated quotation system on which the CPR Certificates are listed or
admitted for trading, if any, such vote, consent or approval may be given
at a meeting of the Holders. Any action that may be taken at a meeting of
the Holders may be taken without a meeting if a consent in writing setting
forth the action so taken is signed by the Holders owning not less than the
minimum amount of CPR Certificates that would be necessary to authorize or
take such action at a meeting at which all Holders having a right to vote
thereon were present and voting. Prompt notice of the taking of action
without a meeting shall be given to the Holders entitled to vote who have
not consented in writing. The Litigation Trustees may specify that any
written ballot submitted to the Holders for the purpose of taking any
action without a meeting shall be returned to the Trust within the time
specified by the Litigation Trustees;
(ii) each Holder may authorize any Person to act for it by proxy on
all matters in which a Holder is entitled to participate, including waiving
notice of any meeting, or voting or participating at a meeting. No proxy
shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at
the pleasure of the Holder executing it. Except as otherwise provided
herein, all matters relating to the giving, voting or validity of proxies
shall be governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations thereunder, as if the
Trust were a Delaware corporation and the Holders were stockholders of a
Delaware corporation; each meeting of the Holders shall be conducted by the
Litigation Trustees or by such other Person that the Litigation Trustees
may designate; and
(iii) unless the Business Trust Act, this Declaration or the terms of
the CPR Certificates or the listing rules of any stock exchange on which
the CPR Certificates are then listed for trading, if any, otherwise
provides, the Litigation Trustees, in their sole discretion, shall
establish all other provisions relating to meetings of Holders, including
notice of the time, place or purpose of any meeting at which any matter is
to be voted on by any Holders, waiver of any such notice, action by consent
without a meeting, the establishment of a record date, quorum requirements,
voting in person or by proxy or any other matter with respect to the
exercise of any such right to vote.
ARTICLE XIV
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
SECTION 14.1 Representations and Warranties of the Institutional Trustee.
The Trustee that acts as initial Institutional Trustee represents and warrants
to the Trust and to the Sponsor at the date of this Declaration, and each
Successor Institutional Trustee represents and warrants to the Trust at the time
of the Successor Institutional Trustee's acceptance of its appointment as
Institutional Trustee, that:
(a) the Institutional Trustee is a corporation or banking association
with trust powers, duly organized, validly existing and in good standing
under the laws of the United States or a State thereof with power and
authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration;
(b) the execution, delivery and performance by the Institutional
Trustee of this Declaration has been duly authorized by all necessary
corporate action on the part of the Institutional Trustee. This Declaration
has been duly executed and delivered by the Institutional Trustee, and it
constitutes a legal,
B-37
<PAGE> 77
valid and binding obligation of the Institutional Trustee, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity (regardless
of whether considered in a proceeding in equity or at law); and
(c) the execution, delivery and performance of this Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee.
SECTION 14.2 Representations and Warranties of the Delaware Trustee. The
Trustee that acts as initial Delaware Trustee represents and warrants to the
Trust and to the Sponsor at the date of this Declaration, and each Successor
Delaware Trustee represents and warrants to the Trust at the time of the
Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee,
that:
(a) the Delaware Trustee, if other than an individual, is duly
organized, validly existing and in good standing under the laws of the
State of Delaware, with power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration;
(b) the Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and this Declaration. This
Declaration under Delaware law constitutes a legal, valid and binding
obligation of the Delaware Trustee, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity (regardless of whether
considered in a proceeding in equity or at law); and
(c) the Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware and, in either case, a
Person that satisfies for the Trust the requirements of Section 3807 of the
Business Trust Act.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices. All notices provided for in this Declaration shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Institutional Trustee at the
Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Holders of the CPR Certificates):
Bankers Trust (Delaware)
E.A. Delle Donne Corporate Center
Montgomery Building
1011 Centre Road
Wilmington, Delaware 19805-1266
Attention: Lisa Wilkins
Facsimile: (302) 636-3222
with a copy to:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Kevin Weeks
Facsimile: (212) 250-6961
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<PAGE> 78
(b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders of the CPR Certificates):
Bankers Trust (Delaware)
E.A. Delle Donne Corporate Center
Montgomery Building
1011 Centre Road
Wilmington, Delaware 19805-1266
Attention: Lisa Wilkins
Facsimile: (302) 636-3222
(c) if given to the Institutional Trustee, at the Institutional
Trustee's Corporate Trust Office (or such other address as the
Institutional Trustee may give notice of to the Holders of the CPR
Certificates).
(d) if given to the Litigation Trustees, at the mailing address set
forth below (or such other address as the Trust may give notice of to the
Holders of the CPR Certificates):
c/o Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Kevin Weeks
Facsimile: (212) 250-6961
(e) if given to any Holder, at the address set forth on the books and
records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver the same.
SECTION 15.2 Governing Law. This Declaration and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware and all rights and remedies shall be governed by such laws
without regard to the principles of conflict of laws of the State of Delaware or
any other jurisdiction that would call for the application of the law of any
jurisdiction other than the State of Delaware; provided, however, that, to the
fullest extent permitted by law, there shall not be applicable to the Trust, the
Trustees or this Declaration any provision of the laws (statutory or common) of
the State of Delaware pertaining to trusts that relate to or regulate, in a
manner inconsistent with the terms hereof (a) the filing with any court or
governmental body or agency of trustee accounts or schedules of trustee fees and
charges, (b) affirmative requirements to post bonds for trustees, officers,
agents or employees of a trust, (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (d) fees or other sums payable to trustees, officers,
agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, (f) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets or (g)
the establishment of fiduciary or other standards of responsibility or
limitations on the acts or powers of trustees that are inconsistent with the
limitations or liabilities or authorities and powers of the Trustees as set
forth or referenced in this Declaration. Section 3540 and Section 3561 of Title
12 of the Delaware Code shall not apply to the Trust.
SECTION 15.3 Intention of Parties. It is the intention of the parties
hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust that is formed to hold the Commitment and liquidate
the Commitment, as provided for herein. The provisions of this Declaration shall
be interpreted to further this intention of the parties.
SECTION 15.4 Headings. Headings contained in this Declaration are inserted
for convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
B-39
<PAGE> 79
SECTION 15.5 Successors and Assigns. Whenever in this Declaration any of
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included, and all covenants and agreements in this
Declaration by the Sponsor and the Trustees shall bind and inure to the benefit
of their respective successors and assigns, whether or not so expressed.
SECTION 15.6 Partial Enforceability. If any provision of this Declaration,
or the application of such provision to any Person or circumstance, shall be
held invalid, the remainder of this Declaration, or the application of such
provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
SECTION 15.7 Specific Performance. The Litigation Trustees and the Sponsor
hereby agree that the obligations imposed on them in this Declaration are
special, unique and of an extraordinary character, and that, in the event of
breach by the Litigation Trustees or the Sponsor, as the case may be, damages
would not be an adequate remedy and the Litigation Trustees or the Sponsor, as
the case may be, shall be entitled to specific performance and injunctive and
other equitable relief, including declaratory relief, in addition to any other
remedy to which it may be entitled, at law or in equity; and the Litigation
Trustees and the Sponsor hereby further agree to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any such
injunctive or other equitable relief.
SECTION 15.8 Counterparts. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees and the Sponsor to any of such
counterpart signature pages. All of such counterpart signature pages shall be
read as though one, and they shall have the same force and effect as though all
of the signers had signed a single signature page.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
BANKERS TRUST (DELAWARE)
as Delaware Trustee
By:
--------------------------------------
Name:
Title:
BANKERS TRUST COMPANY
as Institutional Trustee
By:
--------------------------------------
Name:
Title:
COAST SAVINGS FINANCIAL, INC.,
as Sponsor
By:
--------------------------------------
Name:
Title:
B-40
<PAGE> 80
COAST FEDERAL LITIGATION
CONTINGENT PAYMENT RIGHTS TRUST
By:
--------------------------------------
Ray Martin, as Litigation Trustee
By:
--------------------------------------
Robert L. Hunt II, as Litigation
Trustee
By:
--------------------------------------
James F. Barritt, as Litigation
Trustee
By:
--------------------------------------
Norman H. Raiden, as Litigation
Trustee
B-41
<PAGE> 81
EXHIBIT B TO AMENDED AND RESTATED DECLARATION OF TRUST
FORM OF CONTINGENT PAYMENT RIGHT CERTIFICATE
[FORM OF FACE OF CERTIFICATE]
[The following two paragraphs apply only to Certificates in global form.]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO
THE TRUST 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 IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO 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.]
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
DECLARATION REFERRED TO BELOW.]
<TABLE>
<S> <C>
- ------------------------------ --------------------------------------------------------------------------------
CERTIFICATE NUMBER NUMBER OF CONTINGENT PAYMENT RIGHT CERTIFICATES
</TABLE>
CUSIP NO
CERTIFICATE EVIDENCING UNDIVIDED BENEFICIAL INTERESTS IN THE ASSETS
OF
COAST FEDERAL LITIGATION CONTINGENT PAYMENT RIGHTS TRUST
CONTINGENT PAYMENT RIGHT CERTIFICATES
COAST FEDERAL LITIGATION CONTINGENT PAYMENT RIGHTS TRUST, a statutory
business trust created under the laws of the State of Delaware (the "Trust"),
hereby certifies that (the "Holder") is the registered owner of
certificates of the Trust representing undivided beneficial interests in the
assets of the Trust, designated the Contingent Payment Right Certificates (the
"CPR Certificates"). Subject to the Declaration (as defined below), the CPR
Certificates are transferable on the books and records of the Trust, in person
or by a duly authorized attorney, upon surrender of this Certificate duly
endorsed and in proper form for transfer. The CPR Certificates represented
hereby are issued pursuant to the designation, rights, privileges, restrictions,
preferences and other terms and provisions of, and shall in all respects be
subject to, the provisions of the Amended and Restated Declaration of Trust of
the Trust dated as of , 1998, among Ray Martin, Robert L. Hunt II,
Norman H. Raiden and James F. Barritt as Litigation Trustees (the "Litigation
Trustees"), Bankers Trust (Delaware), as Delaware Trustee, Bankers Trust
Company, as Institutional Trustee, Coast Savings Financial, Inc., as Sponsor,
and the holders from time to time of undivided beneficial interests in the
assets of the Trust, including the designation of the terms of the CPR
Certificates, as the same may be amended from time to time (the "Declaration").
Capitalized terms used herein but not defined shall have the meaning given them
in the Declaration. The [Institutional Trustee] will provide a copy of the
Declaration to the Holder without charge upon written request to the Trust at
its principal place of business.
B-42
<PAGE> 82
Upon receipt of this CPR Certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
This CPR Certificate is governed by, and construed in accordance with, the
laws of the State of Delaware, without regard to principles of conflict of laws.
IN WITNESS WHEREOF, the Trust has duly executed this CPR Certificate.
COAST FEDERAL LITIGATION
CONTINGENT PAYMENT RIGHTS TRUST
[By: COAST SAVINGS FINANCIAL, INC. as
Sponsor
By:
------------------------------------
Name:
Title: [Authorized Officer]]
[By:
------------------------------------
Name:
Title: Litigation Trustee
By:
------------------------------------
Name:
Title: Litigation Trustee
By:
------------------------------------
Name:
Title: Litigation Trustee
By:
------------------------------------
Name:
Title: Litigation Trustee]
Dated:
CERTIFICATE OF AUTHENTICATION
This is one of the CPR Certificates referred to in the within-mentioned
Declaration.
BANKERS TRUST COMPANY, as the
Institutional Trustee
By:
--------------------------------------
[Authorized Officer]
[FORM OF REVERSE OF CERTIFICATE]
Distributions payable on each CPR Certificate will be payable from time to
time upon the receipt by the Trust of payments of the Commitment Amount (as
defined herein) from H. F. Ahmanson & Company, a Delaware corporation
("Ahmanson") pursuant to the Commitment Agreement (the "Commitment") dated
B-43
<PAGE> 83
as of , 1998, between Ahmanson and the Trust, entered into by
Ahmanson as part of the consideration for the merger (the "Merger") of Coast
Savings Financial, Inc. ("Coast") with and into Ahmanson. The Commitment Amount
means the Litigation Proceeds (as defined herein) minus the Reimbursements (as
defined herein) plus the Assumed Tax Benefit (as defined herein). Litigation
Proceeds means any and all cash payments (the "Cash Proceeds") and non-cash
payments (the "Non-Cash Proceeds") actually received by Coast Federal or Home
Savings or any of their affiliates (the "Ahmanson Group") pursuant to a final,
non-appealable judgment or a final settlement of the litigation claims of Coast
Federal Bank, Federal Savings Bank, a wholly-owned subsidiary of Coast, ("Coast
Federal") and any of its successors, in Coast Federal Bank, Federal Savings Bank
v. United States, Civil Action Number 92-466C (Cl. Ct. filing July 9, 1992) (the
"Litigation"). Reimbursements means an amount equal to (a) the Expense Fund (as
defined herein), plus (b) interest on the portion of the Expense Fund withdrawn
by the Trust calculated from the time of any such withdrawal at an annual
interest rate equal to the reference rate of Bank of America (the "Reference
Rate") plus 250 basis points, compounded quarterly, plus (c) the Assumed Tax
Liability (as defined herein), plus (d) in the event the Litigation Proceeds are
required to be included in income for federal income tax purposes in a taxable
year prior to the year such proceeds are received in cash (because of either the
accrual of Cash Proceeds before the payment thereof or the time required to
liquidate Non-Cash Proceeds), interest at the Reference Rate plus 250 basis
points from the date of such payment of taxes to the date of receipt of cash.
Assumed Tax Benefit means an amount equal to the tax benefit that would be
allowed to the Ahmanson Group under Section 483(a) of the Internal Revenue Code,
computed based on certain assumptions, from payments on the Commitment. The
Expense Fund means an amount equal to $20 million, less the expenses relating to
the Litigation incurred and paid by Coast Federal between August 31, 1997 and
the effective date of the Merger, which amount Ahmanson will deposit at the
effective time of the Merger in a non-interest bearing demand-deposit account in
the name of the Trust at Home Savings. The Assumed Tax Liability means an amount
equal to the income (including franchise) tax liability of the Ahmanson Group
(not giving effect to any deductions attributable to payments of the Commitment
Amount) attributable to the receipt of the Litigation Proceeds computed on
certain assumptions. The Payment Amount means, with respect to each payment of
the Commitment Amount received by the Trust pursuant to the Commitment, such
payment of the Commitment Amount received by the Trust (including the amount of
cash resulting from the monetization by Ahmanson of any Non-Cash Proceeds) less
the amount of any accrued but unpaid expenses payable by the Trust and, for any
reason, not covered by the Expense Fund (including, without limitation,
contingent amounts payable to attorneys, experts or others retained by the Trust
or Coast Federal (or any successor thereto) in connection with the prosecution
of the Litigation by Coast Federal (or any successor thereto)), plus interest or
income, if any, received by the Trust on such payment of the Commitment Amount,
less amounts retained by the Trust as the Retained Amount (as defined herein).
The Retained Amount means $10 million (or such greater amount as the Litigation
Trustees shall reasonably determine may be reasonably likely to be required to
pay additional expenses or to satisfy the Trust's indemnification obligations).
The Litigation Trustees' obligation to make payments to the Holders shall be
subject to the requirement that the Trust retain, from amounts remaining in the
Expense Fund and from payments of the Commitment Amount, the Retained Amount for
a period (the "Retained Amount Period") of two years (or such longer period as
the Litigation Trustees shall reasonably determine (initially or at any time
prior to the then scheduled termination of the Retained Amount Period) may be
reasonably likely to be required) to satisfy all expenses, costs and claims and
indemnification obligations of the Trust which may be incurred or which may
arise after the Commitment Amount is paid in full.
The Trust will make payments from time to time to the Holders of the
Payment Amounts upon the receipt of the applicable payments of the Commitment
Amount from Ahmanson. Each CPR Certificate will entitle the Holder thereof to
receive a fraction (equal to 1 divided by the total number of CPR Certificates
outstanding) of any Payment Amount within 60 days after the Trust receives a
Commitment Amount.
Within 90 days of the expiration of the Retained Amount Period, the Trust
will pay to the Holders any remaining portion of the Retained Amount. Each CPR
Certificate will entitle the Holder thereof to receive a fraction (equal to 1
divided by the total number of CPR Certificates then outstanding) of the
remaining portion of the Retained Amount.
B-44
<PAGE> 84
The Trust shall mandatorily redeem for $0.01 in cash each CPR Certificate
issued to a Coast stockholder who provides a notice of intent to exercise
appraisal rights in the Merger with respect to shares of Coast common stock. If
any such Coast stockholder subsequently withdraws, or fails to perfect, such
appraisal demand, Ahmanson in its capacity as successor to the Sponsor, shall
deliver to such stockholder one CPR Certificate for each share of Coast common
stock as to which such appraisal demand was withdrawn and not perfected.
To the fullest extent permitted by law, no Trust Indemnified Person (as
defined in the Declaration) shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Indemnified Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Trust Indemnified Person, except that (i) the Litigation Trustees shall be
liable for any such loss, damage or claim incurred by reason of any act or
omission performed or omitted by them if it shall be established in a final
judicial determination by clear and convincing evidence that any such act or
omission of the Litigation Trustees was undertaken with deliberate intent to
injure the Holders or with reckless disregard for the best interests of such
Holders and, in any event, any liability will be limited to actual, proximate,
quantifiable damages, and (ii) the Institutional Trustee or the Delaware Trustee
shall be liable for any such loss, damage or claim incurred by reason of the
Institutional Trustee's or Delaware Trustee's (as the case may be) gross
negligence or willful misconduct with respect to such acts or omissions.
To the fullest extent permitted by law, no Ahmanson Indemnified Person (as
defined in the Declaration), shall have any liability to the Trust, the Trustees
or the Holders. Without limiting the generality of the foregoing, to the fullest
extent permitted by law, none of the Holders (in their capacity as Holders), the
Trustees or the Trust shall have the right to enforce, institute or maintain a
suit, action or proceeding against an Ahmanson Indemnified Person relating to
the formation of the Trust, the entering into of the Commitment, the
distribution of the CPR Certificates, the Litigation or actions of the
Litigation Trustees in their capacity (or purportedly in their capacity) as
Litigation Trustees. The Trust (or the Litigation Trustees on behalf of the
Trust) may enforce, institute or maintain a suit, action or proceeding against
(i) Ahmanson or its successors as successor to the Sponsor for breach of its
obligations under the Declaration, (ii) Ahmanson or its successors for its
breach of any of its obligations under the Commitment or its failure to deliver
any CPR Certificate when due or to return to the Trust for cancellation any CPR
Certificate required to be returned pursuant to the Merger Agreement when so
required, (iii) Ahmanson or its successors for failure to deposit the Expense
Fund at the Effective Time in a non-interest bearing demand deposit account in
the name of the CPR Trust at Home Savings, or (iv) Home Savings or its
successors for breach of any depository relationship obligations it may have
with respect to the Expense Fund, and in each case, Ahmanson or Home Savings or
their successors, as the case may be, may be liable to the Trust in connection
with such suit, action or proceeding; provided, that fees and expenses incurred
by the Ahmanson Group in such a suit, action or proceeding shall not be set off
against the Litigation Proceeds (in order to calculate the Commitment Amount) if
the Trust or the Litigation Trustees prevail in such a suit, and, if in
connection with suits brought pursuant to clauses (i) through (iv) inclusive,
shall be deemed expenses of the Trust payable by the Trust out of the Commitment
Amount, including any Retained Amount, if the Litigation Trustees do not
prevail.
The Holders will have no voting rights (except in connection with certain
amendments to the Declaration described in Article XIII of the Declaration and
except in connection with the removal of the Institutional Trustee and the
Delaware Trustee for cause, or, if a default by the Trust with respect to its
payment obligations under Article IV of the Declaration shall have occurred and
be continuing, with or without cause), no liquidation preference and no rights
to dividends or distributions other than their pro rata share of the Payment
Amount and any portion of the Retained Amount remaining at the expiration of the
Retained Amount Period, plus any other Trust assets.
THE CPR CERTIFICATES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION.
The Holders have no rights with respect to, or interest in, (i) the
Litigation, (ii) Coast Federal, or (iii) any amount received by Coast Federal or
any other member of the Ahmanson Group with respect to the Litigation, including
any judgment or settlement proceeds.
B-45
<PAGE> 85
Each Holder acknowledges that: (i) the Litigation is solely an asset of
Coast Federal and its successors, (ii) the Litigation shall be conducted by and
on behalf of Coast Federal and its successors solely in accordance with the
instructions of the Litigation Trustees pursuant to the Declaration, (iii) the
Litigation Trustees shall have the sole and exclusive right to direct Coast
Federal and its successors to take (or not take) actions relating to the
Litigation as contemplated by the Declaration and may, among other things,
instruct Coast Federal and its successors to dismiss, settle or cease
prosecuting the Litigation at any time without obtaining any cash or other
recovery, or upon obtaining any such cash or other recovery as the Litigation
Trustees may determine, and (iv) the Litigation Trustees have the sole and
exclusive right to take or not take other actions contemplated by the
Declaration relating to the Litigation (including, without limitation, any
decision with respect to the incurrence of expenses).
Nothing in the Declaration or this CPR Certificate shall be construed to
create any partnership or joint venture between the Sponsor, Coast Federal,
Ahmanson or any member of the Ahmanson Group, and the Holders.
B-46
<PAGE> 86
APPENDIX C
COMMITMENT AGREEMENT, dated as of , 1998 (this "Agreement"), by
and between H. F. Ahmanson & Company, a Delaware corporation ("Ahmanson"), and
the Coast Federal Litigation Contingent Payment Right Trust (the "CPR Trust"), a
Delaware business trust (the "CPR Trust").
RECITALS
WHEREAS, Ahmanson has entered into an Amended and Restated Agreement and
Plan of Merger, dated as of October 5, 1997 (the "Merger Agreement"), by and
between Ahmanson and Coast Savings Financial, Inc. ("Coast");
WHEREAS, prior to or simultaneously with the execution of this Agreement,
Ahmanson will have deposited or will deposit the Expense Fund in a non-interest
bearing demand-deposit account in the name of the CPR Trust at Home Savings; and
WHEREAS, pursuant to the Merger Agreement, Ahmanson has agreed to enter
into this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions. (a) The following terms are used in this
Agreement with the meanings set forth below:
"Accountant" has the meaning set forth in Section 2.02 hereof.
"Ahmanson" has the meaning set forth in the preamble to this
Agreement.
"Ahmanson Certificate" has the meaning set forth in Section 2.02
hereof.
"Ahmanson Group" means Ahmanson, Coast Federal or Home Savings or any
of their affiliates.
"Ahmanson Indemnified Parties" has the meaning set forth in Section
2.07 hereof.
"Assumed Tax Benefit" means an amount equal to the tax benefit that
would be allowed to the Ahmanson Group under Section 483(a) computed as set
forth in Section 2.03 hereof.
"Assumed Tax Liability" means an amount equal to the income (including
franchise) tax liability of the Ahmanson Group (not giving effect to any
deductions attributable to payments of the Commitment Amount) attributable
to the receipt of the Litigation Proceeds computed as set forth in Section
2.03 hereof.
"Cash Proceeds" means any cash payment actually received by the
Ahmanson Group pursuant to a final, nonappealable judgment or a final
settlement of the Litigation.
"Coast" has the meaning set forth in the recitals to this Agreement.
"Coast Federal" means Coast Federal Bank, Federal Savings Bank.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Amount" means the Litigation Proceeds minus the
Reimbursements plus the Assumed Tax Benefit.
"Controlled Subsidiary" means any person at least 80% of the
outstanding shares of Voting Stock (except for directors' qualifying
shares) of which is at the time owned directly or indirectly by Ahmanson.
C-1
<PAGE> 87
"CPR Calculation Certificate" has the meaning set forth in Section
2.02 hereof.
"CPR Trust" has the meaning set forth in the preamble to this
Agreement.
"CPR Trust Agreement" means the Amended and Restated Declaration of
Trust, dated as of , 1998, among Coast, the Litigation Trustees
and the other trustees named therein.
"Damages" has the meaning set forth in Section 2.07 hereof.
"Determination" means (a) a determination that Litigation Proceeds are
not includible in gross income in whole or in part or (b) a determination
that no deduction is allowed (or that any allowed deduction is limited) in
respect of payments of the Commitment Amount under Section 483(a) in whole
or in part. With respect to clause (a), no such Determination shall be
deemed to be made unless it is made prior to the earlier of (x) thirty days
before the date of filing by the Ahmanson Group of the federal tax return
for the taxable year in which the Litigation Proceeds are assumed to be
includible in gross income or (y) the receipt by the Ahmanson Group of the
Litigation Proceeds. With respect to clause (b), no such Determination
shall be deemed to be made with respect to any payment of the Commitment
Amount unless such Determination is made prior to (A) the end of the 30th
day following the delivery to the CPR Trust of the Ahmanson Certificate
with respect to such payment of the Commitment Amount, if the CPR Trust
does not deliver a Notice of Objection within such 30-day period with
respect to such Ahmanson Certificate, or (B) the Resolution with respect to
such payment of the Commitment Amount, if the CPR Trust delivers a Notice
of Objection within the 30-day period referred to in clause (A) above with
respect to such Ahmanson Certificate.
"Due Date" has the meaning set forth in Section 2.02 hereof.
"Expense Fund" means the $ million that Ahmanson is depositing
simultaneously with the effectiveness of this Agreement in a non-interest
bearing demand-deposit account in the name of the CPR Trust at Home
Savings.
"FHLBSF" means the Federal Home Loan Bank of San Francisco.
"FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
"Home Savings" means Home Savings of America, FSB.
"IRS" means the Internal Revenue Service.
"Litigation" means Coast Federal Bank, FSB v. United States, No.
92-466C (United States Court of Claims, filed July 9, 1992).
"Litigation Proceeds" means any and all Cash Proceeds and Non-Cash
Proceeds.
"Non-Cash Proceeds" means the non-cash payments, if any, actually
received by the Ahmanson Group pursuant to a final, non-appealable judgment
or a final settlement of the Litigation.
"Notice of Agreement" has the meaning set forth in Section 2.02
hereof.
"Notice of Objection" has the meaning set forth in Section 2.02
hereof.
"Officer's Certificate" means a certificate from the chief financial
officer of Home Savings specifying that portion of the Litigation Proceeds
that cannot be paid due to regulatory restrictions and the applicable law,
regulation or other action of a regulatory authority that is the source of
the regulatory restrictions described in Section 2.03 hereof.
"Opinion of Counsel" means an opinion of outside counsel substantially
to the effect that the distribution by Home Savings of the Litigation
Proceeds or the applicable portion thereof, as the case may be, would
result in the violation of the applicable law, regulation or other action
of a regulatory authority that is the source of the regulatory restrictions
described in Section 2.03 hereof.
"Proceeds Notice" has the meaning set forth in Section 2.02 hereof.
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"Reference Rate" means the reference rate or an equivalent rate
announced from time to time of the Bank of America or any successor (or, if
no successor remains in existence or publicly announces a rate, the
commercial bank with the largest amount of deposits in the State of
California as of the most recent year end prior to the applicable date for
which information is publicly available and which publicly announces such a
rate, as determined in good faith by Ahmanson's Board of Directors), as in
effect from time to time.
"Regulatory Document" means either (i) a copy of written documentation
from the applicable regulatory authority to the effect that Home Savings
may not distribute the Litigation Proceeds, or any portion thereof, to
Ahmanson, or (ii), prior to the expiration of any applicable prior notice
or application period following Home Savings' submission to the applicable
regulatory authority of a notice or application for approval of a
distribution of the Litigation Proceeds to Ahmanson, an officer's
certificate from the chief financial officer of Home Savings certifying
that Home Savings has submitted such a notice or application and that Home
Savings has not received any written documentation from such regulatory
authority to the effect that Home Savings may make such distribution.
"Reimbursements" means an amount equal to (i) the Expense Fund plus
(ii) interest on the portions of the Expense Fund withdrawn by the CPR
Trust calculated from the time of any such withdrawal at an annual interest
rate equal to the Reference Rate plus 250 basis points, compounded
quarterly plus (iii) the Assumed Tax Liability plus (iv) in the event
Litigation Proceeds are required to be included in income for federal
income tax purposes in a taxable year prior to the year such proceeds are
received in cash (because of either the accrual of Cash Proceeds before the
payment thereof or the time required to liquidate Non-Cash Proceeds),
interest at an annual interest rate equal to the Reference Rate plus 250
basis points from the date of payment of taxes on such income to the date
of receipt of cash.
"Resolution" has the meaning set forth in Section 2.02 hereof.
"Section 483(a)" means Section 483(a) of the Code.
"Tax Assumptions" means (i), if there is no Determination, the
following assumptions or (ii), if there is a Determination, the following
assumptions as modified by such Determination:
(a) The Litigation Proceeds will be includible in gross income as
ordinary income in full.
(b) Payments of the Commitment Amount will not be deductible except
that Section 483(a) will apply to payments of the Commitment Amount,
other than those allocable to CPR Certificates issued on exercise of
employee options or otherwise in a transaction that is not a sale or
exchange, and payments of the Commitment Amount will be deductible to
the extent treated by Section 483(a) as interest expense; it being
understood that it is not intended that the distribution of the CPR
Certificates immediately prior to the Effective Time of the Merger will
result in the characterization of such distribution as not constituting
"a sale or exchange."
(c) The income tax liability attributable to the assumed inclusion
of all or a portion of the Litigation Proceeds in gross income as
ordinary income and the benefit of any deduction assumed to be allowed
under Section 483(a) shall be (i) the product of the amount of such
income or deduction and the highest statutory rate of federal income tax
applicable to corporations for the year in which the income is assumed
to be included or the deduction is assumed to be realized plus (ii) the
product of such income or deduction and the net combined marginal rate
of state and local income (or franchise) tax of the relevant member or
members of the Ahmanson Group for the year in which the income is
assumed to be included and the deduction is assumed to be realized, net
of the federal income tax benefit (calculated based on the rate in
clause (i)) of such state or local income (or franchise) tax. The
relevant member or members of the Ahmanson Group shall be the member or
members that is or are assumed to include the Litigation Proceeds in
income or is or are assumed to be allowed a deduction under Section
483(a).
(d) Any benefit from any deduction allowable to the Ahmanson Group
under paragraph (c) of these assumptions for payments of the Commitment
Amount shall be assumed to be realized (i) when those payments are made
to the extent those payments do not exceed the Litigation
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Proceeds included in income for the same taxable year, or (ii) otherwise
when, taking into account other deductions or losses or credits of the
Ahmanson Group, the deduction would reduce the tax otherwise payable or
result in a refund of tax already paid.
(e) Ahmanson will be entitled to rely on a written opinion of
either Sullivan & Cromwell or another nationally recognized law firm
with expertise on the matter on which the opinion is sought (with a copy
of such opinion to the Litigation Trustees) that is selected by Ahmanson
and (unless such law firm is principal outside tax counsel to Ahmanson)
reasonably acceptable to the Litigation Trustees in determining whether
there has been a Determination and in otherwise applying the Tax
Assumptions to determine the income (including franchise) tax liability
of the Ahmanson Group attributable to the receipt of the Litigation
Proceeds and payments of the Commitment Amount and any tax benefit
attributable to payments of the Commitment Amount.
(f) If the Assumed Tax Liability or the Assumed Tax Benefit cannot
be computed at the time of the receipt of the Cash Proceeds or a payment
of the Commitment Amount because of the absence of information as to tax
rates and other factors described in the definition of Assumed Tax
Liability or the definition of Assumed Tax Benefit, as the case may be,
the Ahmanson Group shall compute a tentative Assumed Tax Liability or a
tentative Assumed Tax Benefit, as the case may be, based on such
assumptions, which are consistent with respect to the Assumed Tax
Liability and the Assumed Tax Benefit, that in the reasonable opinion of
the Ahmanson Group would protect the Ahmanson Group against any risk of
loss. The payment of the Commitment Amount shall be based on such
tentative Assumed Tax Liability or such tentative Assumed Tax Benefit
computation, as the case may be. As soon as feasible, but in no event
later than 12 months after the end of the taxable year in which the
Commitment Amount is paid based on the tentative Assumed Tax Liability
and Assumed Tax Benefit, the Ahmanson Group shall recompute the Assumed
Tax Liability or the Assumed Tax Benefit, as the case may be, and pay to
the CPR Trust any excess of the re-computed Commitment Amount over the
Commitment Amount that was initially calculated plus interest for the
period over which the payment was deferred at a rate equal to Home
Savings' cost of funds as submitted monthly to the FHLBSF.
"Trustees" means the Delaware trustee, the institutional trustee and
the Litigation Trustees to the CPR Trust.
"Voting Stock" means, with respect to any person, stock of any class
or classes, however designated, having ordinary voting power for the
election of a majority of the board of such person, other than stock having
such power only by reason of the happening of a contingency.
(a) Any capitalized terms used but not defined herein shall have
the meanings ascribed to such terms in the Merger Agreement.
ARTICLE II
THE COMMITMENT
2.01 The Commitment. (a) Ahmanson shall pay to the CPR Trust the Commitment
Amount within the time specified under Section 2.02 hereof. In the event that
the Ahmanson Group receives the Litigation Proceeds in staggered payments, the
procedures described in this Article II with respect to the calculation and
payment of the Commitment Amount will apply in full force to each such staggered
payment of the Commitment Amount.
2.02 Payment Procedures. (a) Proceeds Notice; Ahmanson Certificate. Within
10 days of the receipt by the Ahmanson Group of any Litigation Proceeds,
Ahmanson will deliver to the Litigation Trustees a written notice (the "Proceeds
Notice") specifying that such Litigation Proceeds have been received and
describing the type and amount of any Non-Cash Proceeds received. Within 10 days
of the delivery of the Proceeds Notice, the Litigation Trustees shall deliver to
Ahmanson written instructions to liquidate the Non-Cash Proceeds
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received. If so instructed, Ahmanson will then liquidate or cause to be
liquidated the Non-Cash Proceeds in accordance with the instructions.
As promptly as practicable but in no event later than 30 days after the
later of the receipt by Ahmanson of such Litigation Proceeds and of the
liquidation by Ahmanson of Non-Cash Proceeds, Ahmanson will deliver to the
Litigation Trustees a certificate (the "Ahmanson Certificate") setting forth the
calculation of the portion of the Commitment Amount with respect to such
Litigation Proceeds, which Ahmanson Certificate shall be valid and binding
absent manifest error. The Ahmanson Certificate shall set forth each of the
items required under this Agreement to calculate the Commitment Amount,
including the amount of Litigation Proceeds and the amount of (and calculation
of) each component of the Reimbursements and the assumptions underlying the
determination of each item and shall be substantially in the form of Exhibit A
hereto, and Ahmanson shall attach to the Ahmanson Certificate financial and
other documentation reasonably sufficient to support each item and assumption
used to calculate the Commitment Amount. Within 30 days of delivery of the
Ahmanson Certificate, the CPR Trust will give written notice specifying whether
it agrees or objects (a "Notice of Agreement" and a "Notice of Objection",
respectively) to the calculation in the Ahmanson Certificate of the portion of
the Commitment Amount with respect to such Litigation Proceeds. If the CPR Trust
delivers a Notice of Agreement, Ahmanson will then deliver the portion of the
Commitment Amount with respect to such Litigation Proceeds to the institutional
trustee for the CPR Trust within 5 business days of such Notice of Agreement. If
the CPR Trust delivers a Notice of Objection within such 30-day period, Ahmanson
will deliver such portion of the Commitment Amount only upon a Resolution.
(b) Dispute Resolution. If the CPR Trust delivers a Notice of
Objection within such 30-day period, the CPR Trust shall as promptly as
practicable following delivery of the Notice of Objection deliver to
Ahmanson a certificate (the "CPR Calculation Certificate") setting forth
its calculation of such portion of the Commitment Amount. The CPR
Calculation Certificate shall set forth each of the items required under
this Agreement to calculate such portion of the Commitment Amount,
including the amount of Litigation Proceeds and the amount of (and
calculation of) each component of the Reimbursements and the assumptions
underlying the determination of each item and shall be substantially in the
form of Exhibit A hereto, and the CPR Trust shall attach to the CPR
Calculation Certificate financial and other documentation reasonably
sufficient to support each item and assumption used to calculate such
portion of the Commitment Amount. If Ahmanson does not agree with the CPR
Trust's calculation of such portion of the Commitment Amount, then within
10 business days of the delivery by the CPR Trust of the CPR Calculation
Certificate, Ahmanson and the CPR Trust shall submit the calculation of
such portion of the Commitment Amount to a mutually agreed upon independent
certified public accountant (the "Accountant"). If Ahmanson and the CPR
Trust cannot agree upon such independent certified public accountant, then
Ahmanson and the CPR Trust agree that the Accountant shall be Price
Waterhouse. The Accountant shall be instructed to determine whether the
calculation set forth in the Ahmanson Certificate contained manifest error
and the Accountant shall be instructed to conclude (i) that the calculation
set forth in the Ahmanson Certificate does not contain manifest error so
long as the calculation is a reasonable calculation of such portion of the
Commitment Amount based upon a reasonable interpretation of the provisions
of this Agreement and (ii) that the calculation set forth in the Ahmanson
Certificate contains manifest error if the calculation is not a "reasonable
calculation of such portion of the Commitment Amount based upon a
reasonable interpretation of the provisions of this Agreement." If the
Accountant determines (a) that the calculation set forth in the Ahmanson
Certificate did not contain manifest error, such portion of the Commitment
Amount shall be as calculated in the Ahmanson Certificate or (b) that the
calculation set forth in the Ahmanson Certificate did contain manifest
error, the Accountant shall recompute such portion of the Commitment Amount
based upon the formulae and definitions set forth in this Agreement and the
Accountant's calculation shall be binding on both parties hereto (in either
of case (i) or (ii), a "Resolution"). In the event it is determined that
Ahmanson's calculation contained manifest error, in addition to such
portion of the Commitment Amount, Ahmanson shall pay to the CPR Trust
interest on such portion of the Commitment Amount calculated from the date
that the CPR Trust delivered its Notice of Objection at an annual interest
rate equal to the Reference Rate plus 250 basis points. Ahmanson and the
CPR Trust shall share equally the expenses of the Accountant in connection
with the performance of its duties described herein. If the CPR
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Trust delivers a Notice of Objection with respect the payment of any
portion of the Commitment Amount within the applicable 30-day period and
prior to the Resolution there is a Determination to the effect that no
deduction is allowed (or that any allowed deduction is limited) in respect
of payments of the Commitment Amount under Section 483(a) in whole or in
part, then Ahmanson shall have the right to deliver a new Ahmanson
Certificate with a new calculation of that portion of the Commitment
Amount, and the previously delivered Ahmanson Certificate with respect to
that portion of the Commitment Amount shall be considered null and void;
provided, however, that if Ahmanson delivers such a new Ahmanson
Certificate, Ahmanson shall be required to pay interest on that portion of
the Commitment Amount from the date of delivery of the first Ahmanson
Certificate relating to such portion of the Commitment Amount to the date
of delivery of the new Ahmanson Certificate relating to such portion of the
Commitment Amount at a rate equal to Home Savings' cost of funds as
submitted monthly to the FHLBSF. The same procedures described in this
Section 2.02(b) for the resolution of any disputes with respect to the
calculation contained in an Ahmanson Certificate will apply equally to the
calculation in the new Ahmanson Certificate with respect to such portion of
the Commitment Amount.
(c) Timing of Payments. Ahmanson shall pay to the CPR Trust the
portion of the Commitment Amount with respect to the relevant Litigation
Proceeds (i) if the CPR Trust does not deliver a Notice of Objection to the
Ahmanson Certificate with respect to such portion of the Commitment Amount
within the 30-day period described above, within 5 business days of the
earlier of the delivery of the Notice of Agreement with respect to such
Ahmanson Certificate or the 30th day following the delivery by Ahmanson of
such Ahmanson Certificate or (ii) if the CPR Trust does deliver a Notice of
Objection with respect to such Ahmanson Certificate within the 30-day
period described above, within 5 business days of the Resolution with
respect to such portion of the Commitment Amount (each, a "Due Date"). If
Ahmanson does not pay such portion of the Commitment Amount by the
appropriate Due Date, Ahmanson shall be obligated to pay to the CPR Trust
such portion of the Commitment Amount plus interest on such portion of the
Commitment Amount from the Due Date until the date such portion of the
Commitment Amount is paid, calculated at an annual interest rate equal to
the Reference Rate plus 250 basis points.
(d) Regulatory Restrictions. (i) Notwithstanding the foregoing,
Ahmanson shall not be obligated to pay the Commitment Amount or any portion
thereof at the Due Date and shall be deemed not to be in default of this
Agreement and not to have violated its obligations hereunder by virtue of
not having paid the Commitment Amount or such portion thereof (A) to the
extent that Home Savings is not permitted due to regulatory restrictions to
distribute to Ahmanson the Litigation Proceeds or such portion thereof and
(B) if prior to the Due Date, Ahmanson shall have delivered to the CPR
Trust an Officer's Certificate and either (y) an Opinion of Counsel or (z)
a Regulatory Document. Ahmanson shall be entitled not to pay the Commitment
Amount or any portion thereof as specified in the immediately preceding
sentence with the consequences specified in the immediately preceding
sentence for a period of 2 years from the Due Date on which the Commitment
Amount or such portion thereof would otherwise have been payable so long as
(I) Home Savings continues not to be permitted to distribute such portion
of the Litigation Proceeds to Ahmanson due to regulatory restrictions and
(II) Ahmanson delivers on a quarterly basis beginning with the first full
fiscal quarter following the Due Date an Officer's Certificate and either
(y) an Opinion of Counsel or (z) a Regulatory Document.
(ii) Notwithstanding the foregoing, Ahmanson shall be deemed to be
in default of this Agreement at any time specified under Section
2.02(d)(i) hereof when payment of the Commitment Amount or such portion
thereof would otherwise be due but when Ahmanson would be entitled not
to make such payment and would be deemed not to be in default due to the
regulatory restrictions described therein if, at such time, there shall
exist a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by Ahmanson (but not including any such
mortgage, indenture or instrument pursuant to which the creditor's
remedy is limited to foreclosure of collateral), whether such
indebtedness now exists or shall hereafter be created, which default
shall constitute a failure to pay principal of such indebtedness in an
amount exceeding $50 million when
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due and payable after the expiration of any applicable grace period with
respect thereto or shall have resulted in such indebtedness in an
aggregate principal amount exceeding $50 million becoming or being
declared due and payable prior to the date on which it would otherwise
have become due and payable, without such indebtedness being discharged,
or such acceleration having been rescinded or annulled, within a period
of 35 days after the occurrence of the event that gave rise to such
default provided that any such event of default shall not be deemed to
have occurred so long as Ahmanson is contesting the validity thereof in
good faith by appropriate proceedings.
(iii) Ahmanson shall be obligated to pay the Commitment Amount or
such portion thereof at such time as such regulatory restrictions no
longer exist, and interest on the Commitment Amount or such portion
thereof, as the case may be, from the Due Date until the date the
Commitment Amount or such portion thereof is paid, calculated at an
annual interest rate equal to the Reference Rate plus 250 basis points.
(iv) In the event that Home Savings is not permitted due to
regulatory restrictions to distribute to Ahmanson the Litigation
Proceeds as described in Section 2.02(d)(i) hereof, Ahmanson agrees to
use its reasonable best efforts, or to cause Home Savings to use its
reasonable best efforts, to obtain regulatory approval for the
distribution to Ahmanson of such Litigation Proceeds.
(e) Payment of Reconciliation Amount. As promptly as practicable but
in no event later than 30 days after the recomputation of the Assumed Tax
Liability and the Assumed Tax Benefit pursuant to paragraph (f) of the
definition of "Tax Assumptions" herein, Ahmanson shall pay to the CPR Trust
any excess of the re-computed Commitment Amount or portion thereof over the
Commitment Amount or portion thereof that was initially calculated plus
interest for the period over which the payment was deferred at a rate of
Home Savings' cost of funds as submitted monthly to the FHLBSF. Along with
such payment, Ahmanson shall provide to the CPR Trust an Ahmanson
Certificate setting forth the re-calculation of the Commitment Amount or
portion thereof, which Ahmanson Certificate shall be valid and binding
absent manifest error. The standards and procedures applicable to Ahmanson
Certificates and the calculation of the Commitment Amount and portions
thereof set forth in this Section 2.02 shall apply in full force to any
Ahmanson Certificate delivered pursuant to this paragraph (e); provided,
however, that the CPR Trust shall have no right to object to any item set
forth in an Ahmanson Certificate delivered pursuant to this paragraph (e)
if such item has not changed from the prior Ahmanson Certificate delivered
with respect to the same portion of the Commitment Amount.
2.03 Agreements With Respect to Federal Income Tax. (a) Regardless of any
position taken by the Ahmanson Group on any tax return or in any claim for
refund with respect to the receipt of the Litigation Proceeds or payments of the
Commitment Amount (or of the actual payment or actual receipt of any taxes with
respect thereto), the Assumed Tax Liability shall, (i) if there is no
Determination, be computed based on the Tax Assumptions and (ii) if there is a
Determination to the effect that Litigation Proceeds are not includable in gross
income in whole or in part, be computed on the basis of the Tax Assumptions as
such Tax Assumptions are modified by such Determination.
(b) Regardless of any position taken by the Ahmanson Group on any tax
return or in any claim for refund with respect to the receipt of the
Litigation Proceeds or payments of the Commitment Amount (or of the actual
payment or actual receipt of any taxes with respect thereto), the Assumed
Tax Benefit shall, (i) if there is no Determination, be computed based on
the Tax Assumptions and (ii) if there is a Determination that no deduction
is allowed (or that any allowed deduction is limited) with respect to the
application of Section 483(a) to payments of the Commitment Amount, be
computed on the basis of the Tax Assumptions as such Tax Assumptions are
modified by such Determination.
(c) A Determination that Litigation Proceeds are not includable in
gross income in whole or in part will be deemed to be made on the earlier
of (i) the date of a final judicial determination to such effect, binding
upon Coast Federal (or its successor), is made in the Litigation, (ii) the
date a final agreement to which Ahmanson is a party with the federal
government to such effect is entered into at the direction of the
Litigation Trustees as part of the resolution of the Litigation or a
related IRS ruling to such effect issued to a member of the Ahmanson Group
in connection with such agreement (it being understood that
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the Ahmanson Group shall be under no obligation to seek such a ruling or
refund or enter into such an agreement; provided that if requested the
Ahmanson Group will enter into such an agreement if such agreement does not
impose any liability or obligation whatsoever (other than a standard
settlement release relating only to the Litigation or other related claims
that Coast or Coast Federal or Coast's stockholders might have been able to
bring as of immediately prior to the Merger) on the Ahmanson Group or
adversely affect or restrict the conduct of its business or adversely
affect its tax posture with respect to other matters) and (iii) the
effective date of a law, regulation or IRS ruling to such effect that
applies to Ahmanson or taxpayers generally, and would be applicable to
claims against the federal government arising out of capital credits
affected by FIRREA. Notwithstanding the foregoing, no such Determination
shall be deemed to be made unless it is made prior to the earlier of (x)
thirty days before the date of filing by the Ahmanson Group of the federal
tax return for the taxable year in which the Litigation Proceeds are
assumed to be includible in gross income or (y) the receipt by the Ahmanson
Group of the Litigation Proceeds.
(d) A Determination with respect to the application of Section 483(a)
to payments of the Commitment Amount will be deemed to be made on the
earlier of (i) the date a final judicial determination to such effect
binding upon Ahmanson is made in the Litigation, (ii) the date a final
agreement to which Ahmanson is a party with the federal government to such
effect is entered into at the direction of the Litigation Trustees as part
of the resolution of the Litigation or a related IRS ruling to such effect
issued to a member of the Ahmanson Group in connection with such agreement
(it being understood that the Ahmanson Group shall be under no obligation
to seek such a ruling or refund or enter into such an agreement; provided
that if requested the Ahmanson Group will enter into such an agreement if
such agreement does not impose any liability or obligation whatsoever
(other than a standard settlement release relating only to the Litigation
or other related claims that Coast or Coast Federal or Coast's stockholders
might have been able to bring as of immediately prior to the Merger) on the
Ahmanson Group or adversely affect or restrict the conduct of its business
or adversely affect its tax posture with respect to other matters) and
(iii) the effective date of a law, regulation or IRS ruling or a judicial
decision to such effect that applies to Ahmanson or taxpayers generally. A
deduction shall be considered allowed under Section 483(a) to the extent
that a deduction is allowed, in an amount up to the deduction calculated
under Section 483(a), under another substantially equivalent provision.
Notwithstanding the foregoing, no such Determination shall be deemed to be
made with respect to any payment of the Commitment Amount unless such
Determination is made prior to (A) the end of the 30th day following the
delivery to the CPR Trust of the Ahmanson Certificate with respect to such
payment of the Commitment Amount, if the CPR Trust does not deliver a
Notice of Objection within such 30-day period with respect to such Ahmanson
Certificate, or (B) the Resolution with respect to such payment of the
Commitment Amount, if the CPR Trust delivers a Notice of Objection within
such 30-day period with respect to such Ahmanson Certificate. Subject to a
Determination, the parties intend to treat a portion of each payment of the
Commitment Amount as interest to the extent such payment is treated as
interest under Section 483(a).
2.04 Ranking. This Agreement shall rank pari passu with other senior
indebtedness of Ahmanson.
2.05 Restrictions on Sale or Pledge of Stock of Home Savings. (a) Ahmanson
(i) shall not (A) sell, transfer or otherwise dispose of any shares of any
series of Voting Stock of Home Savings or (B) permit Home Savings to issue, sell
or otherwise dispose of shares of its Voting Stock unless in either case Home
Savings remains a Controlled Subsidiary, and (ii) shall not permit Home Savings
to (A) merge or consolidate unless the surviving entity is Ahmanson or a
Controlled Subsidiary or (B) convey or transfer its properties and assets
substantially as an entirety to any person, except to Ahmanson or a Controlled
Subsidiary.
(b) Ahmanson shall not create, assume, incur or suffer to exist, as
security for indebtedness for borrowed money, any mortgage, pledge,
encumbrance, lien or charge of any kind upon the Voting Stock of Home
Savings (other than directors' qualifying shares) without effectively
providing that the CPR Certificates shall be secured equally and ratably
with (or prior to) such indebtedness; provided, however, that Ahmanson may
create, assume, incur or suffer to exist any such mortgage, pledge,
encumbrance, lien or charge without regard to the foregoing provisions so
long as after giving effect thereto Ahmanson will
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own directly or indirectly at least 80% of the Voting Stock of Home Savings
then issued and outstanding, free and clear of any such mortgage, pledge,
encumbrance, lien or charge.
(c) Notwithstanding the foregoing, Ahmanson may avoid the restrictions
described in the previous two paragraphs if prior to any such transaction
Home Savings shall have unconditionally guaranteed payment when due of the
Commitment Amount, if any, Home Savings shall have obtained all regulatory
approvals, if any, required to permit the guarantee of the payment of the
Commitment Amount, and Ahmanson shall have delivered to the institutional
trustee for the CPR Trust an opinion of counsel stating that the guarantee
of the payment of the Commitment Amount by Home Savings has been duly
authorized, executed and delivered and constitutes a valid, legally binding
and enforceable obligation of Home Savings.
2.06 No Assignment of Claim. Ahmanson will not, and will not permit Coast
Federal or Home Savings to, "assign" (within the meaning of 31 U.S.C. sec.3727)
any interest in the Litigation. The parties acknowledge that any merger of
Ahmanson or Home Savings with any other party shall not be deemed to be or to
effect an assignment (within the meaning of 31 U.S.C. sec.3727) of the
Litigation.
2.07 Indemnification. (a) The CPR Trust agrees to indemnify and advance
expenses, without requirement of bond or other security, to Ahmanson, Home
Savings, and their respective affiliates, officers, directors, employees and
agents (such persons and entities, the "Ahmanson Indemnified Parties" and,
individually, an "Ahmanson Indemnified Party"), against any and all losses,
liabilities, damages, judgments, demands, suits, claims, assessments, charges,
fines, penalties, costs and expenses, including reasonable attorney's fees and
expenses and other costs and expenses associated with defense of a claim or
incurred in obtaining indemnification hereunder, whether or not in a formal
proceeding ("Damages") (other than in connection with claims by stockholders of
Ahmanson against Ahmanson's directors with respect to actions taken at or prior
to the Merger), arising out of or relating to (i) any matter whatsoever and (ii)
with respect to claims brought by any other party, any matter relating to the
CPR Trust, the CPR Certificates, the CPR Certificate Distribution, the
Litigation and any actions taken by the Litigation Trustees (including actions
taken by the Litigation Trustees in their capacity as officers or directors of
Coast or Ahmanson so long as such actions relate to the CPR Trust including,
without limitation, the negotiation of the terms of the CPR Trust and the CPR
Certificates and the approval of the establishment of the CPR Trust and the CPR
Certificate Distribution and related transactions, but otherwise excluding
actions taken by the Litigation Trustees in such capacities), other than with
respect to Damages arising from claims against (i) Ahmanson for breach of this
Agreement, (ii) Ahmanson for breach after the Effective Time of its obligations
as successor to Coast under the CPR Trust Agreement, (iii) Ahmanson for failure
to deliver any CPR Certificate when due or to return to the CPR Trust for
cancellation of any CPR Certificate required to be returned when so required,
(iv) Ahmanson for failure to deposit the Expense Fund in a non-interest bearing
demand-deposit account in the name of the CPR Trust at Home Savings at the
Effective Time or (iv) Home Savings for breach of any depositary relationship
obligations it may have with respect to the Expense Fund. Promptly after receipt
by an Ahmanson Indemnified Party of notice of the commencement of any action,
such Ahmanson Indemnified Party shall, if a claim in respect thereof is to be
made against the CPR Trust, notify the CPR Trust of the commencement thereof;
but the omission so to notify the CPR Trust shall not relieve the CPR Trust from
any liability which it may have to any Ahmanson Indemnified Party otherwise than
under the immediately preceding sentence.
If the indemnification provided for in this Section 2.07 is unavailable to
or insufficient to hold harmless an Ahmanson Indemnified Party under the first
sentence of this Section 2.07 in respect of any Damages referred to therein,
then the CPR Trust shall contribute to the amount paid or payable by such
Ahmanson Indemnified Party as a result of such Damages .
2.08 Return of Excess Expense Fund. If the amount of the Litigation
Proceeds is such that there would be no Commitment Amount payable hereunder to
the CPR Trust and if at the time of receipt of the Litigation Proceeds by the
Ahmanson Group (or at the time of a final judicial determination that there will
be no Litigation Proceeds) there are amounts remaining in the Expense Fund, the
CPR Trust shall promptly return to Ahmanson such amounts less expenses
(including obligations to compensate the Trustees) incurred
C-9
<PAGE> 95
by the CPR Trust through the time of receipt of the Litigation Proceeds by the
Ahmanson Group (or the time of such final judicial determination) and expenses
necessary, in the reasonable judgment of the Litigation Trustees, to terminate
the CPR Trust pursuant to the terms of the CPR Trust Agreement. Alternatively,
Ahmanson shall have the right to cause Home Savings to off-set such amounts
remaining in the Expense Fund deposited with Home Savings against the amounts
due to Ahmanson under this Section 2.08.
ARTICLE III
MISCELLANEOUS
3.01 Waiver; Amendment. Any provision of this Agreement may be (i) waived
by the party benefitted by the provision, or (ii) amended or modified at any
time, by an agreement in writing between the parties hereto executed in the same
manner as this Agreement.
3.02 Counterparts. This Commitment may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
3.03 Governing Law. This Commitment shall be governed by, and interpreted
in accordance with, the laws of the State of California applicable to contracts
made and to be performed entirely within such State.
3.04 Notices. All notices, requests and other communications hereunder to
a party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) to Ahmanson at its address set forth in the Merger Agreement
or to the CPR Trust to its address set forth below or such other address as such
party may specify by notice to the parties hereto.
If to the CPR Trust to:
E.A. Delle Donne Corporate Center
Montgomery Building
1011 Centre Road, Suite 200
Wilmington, Delaware 19805-1266
Attention: Lisa Wilkins
Facsimile: (302) 636-3300
With copies to:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Kevin Weeks
Facsimile: (212) 250-6961
and
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Victor Lewkow
Facsimile: (212) 225-3999
and
Mayer, Brown & Platt
350 South Grand Avenue
Los Angeles, California 90017-1503
Attention: James R. Walther
Facsimile: (213) 625-0248
3.05 Entire Understanding. This Agreement and the Merger Agreement
represent the entire understanding of the parties hereto with reference to the
transactions contemplated hereby and thereby and this
C-10
<PAGE> 96
Agreement supersedes any and all other oral or written agreements heretofore
made except for the Merger Agreement.
3.06 No Third-Party Beneficiaries; Limitation on Liability. Except as
provided below, nothing in this Agreement expressed or implied is intended to
confer upon any person, other than the parties hereto or their respective
successors, any rights, remedies, obligations or liabilities under or by reason
of this Agreement. None of Ahmanson, Home Savings, their respective affiliates,
officers, directors, employees or agents shall have any liability to the CPR
Trust, the Litigation Trustees, any other trustee under the CPR Trust Agreement
or the holders of CPR Certificates. Without limiting the generality of the
foregoing, the holders of the CPR Certificates, the Trust and the trustees of
the Trust shall have no rights to enforce, institute or maintain any suit,
action or proceeding against Ahmanson, Home Savings, its affiliates, officers,
directors, employees or agents relating to the entering into of this Agreement,
the distribution of the CPR Certificates, the Litigation or the performance by
the Litigation Trustees of their duties as Litigation Trustees. Notwithstanding
the foregoing, the CPR Trust (or the Litigation Trustees on behalf of the CPR
Trust) may enforce, institute or maintain a suit, action or proceeding against
(i) Ahmanson for breach of this Agreement, (ii) Ahmanson for breach after the
Effective Time of its obligations as successor to Coast under the CPR Agreement,
(iii) Ahmanson for failure to deliver any CPR Certificate when due or to return
to the CPR Trust for cancellation of any CPR Certificate required to be returned
pursuant to the Merger Agreement when so required, (iv) Ahmanson for failure to
deposit the Expense Fund at the Effective Time in a non-interest bearing demand
deposit account in the name of the CPR Trust at Home Savings or (v) Home Savings
for breach of any depository relationship obligations it may have with respect
to the Expense Fund.
3.07 No Other Obligations. Except as expressly set forth herein (or in any
other documents to which Ahmanson has succeeded as a matter of law), Ahmanson
shall have no other obligations to the CPR Trust, the Litigation Trustees or the
holders of CPR Certificates. Without limiting the generality of the foregoing
and except as provided in the Merger Agreement, Ahmanson shall have no
obligation to advance funds to the CPR Trust, the Litigation Trustees or the
holders of CPR Certificates. The CPR Trust hereby acknowledges that it has no
interest in any Litigation Proceeds received by the Ahmanson Group except to the
extent of the obligation of Ahmanson hereunder to pay to the CPR Trust the
Commitment Amount.
* * *
C-11
<PAGE> 97
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
CPR TRUST
By:
------------------------------------
Name:
Title:
H. F. AHMANSON & COMPANY
By:
------------------------------------
Name:
Title:
C-12
<PAGE> 98
EXHIBIT A TO THE COMMITMENT AGREEMENT
FORM OF AHMANSON CERTIFICATE PURSUANT TO
SECTION 2.02 OF THE COMMITMENT AGREEMENT
The undersigned, , Chief Financial Officer, and ,
, of H.F. Ahmanson & Co. ("Ahmanson"), a
Delaware Corporation, DO HEREBY CERTIFY that this Certificate is signed by them
pursuant to Section 2.02 of the Commitment Agreement (the "Commitment
Agreement"), dated as of , 1998, between Ahmanson and the Coast
Federal Litigation Contingent Payment Rights Trust, and further CERTIFY that
capitalized terms used but not defined herein have the meanings assigned to them
in the Commitment Agreement, and further CERTIFY that the Commitment Amount is
$ on the date of this Certificate based on the following:
<TABLE>
<C> <S> <C> <C> <C>
(1) Litigation Proceeds received to date (amount in line A plus amount in line B). $
--------
A. Amount of Cash Proceeds.(1) $
--------
B. Amount of liquidated Non-Cash Proceeds.(2) $
--------
(2) Amount of Litigation Proceeds includible in gross income
(amount in line C minus amount in line D). $
--------
C. Litigation Proceeds (amount in line 1). $
--------
D. Amount of Litigation Proceeds not includible in gross income
pursuant to a Determination to that effect(3)
(if there has been no Determination, enter 0). $
--------
(3) Reimbursements (sum of the amounts in lines E, F, M and N). $
--------
E. Expense Fund. $
--------
F. Interest expense on withdrawals from Expense Fund(4)
(sum of the interest expenses for each withdrawal). $
--------
G. Relevant member of Ahmanson Group including Litigation Proceeds
in gross income.
--------
H. Taxable year in which Litigation Proceeds are included in gross
income.
--------
I. Highest federal corporate taxable rate for tax year in which
Litigation Proceeds are included in gross income. %
--------
</TABLE>
- ---------------
( 1) Attach supporting documentation.
( 2) Attach supporting documentation.
( 3) Attach supporting documentation.
( 4) Attach a separate Expense Fund Interest Schedule for each withdrawal,
detailing the following information:
a. Amount of withdrawal.
b. Date of withdrawal.
c. Reference Rate in effect from time to time since the date of
withdrawal, plus 250 basis points.
d. Interest expense incurred with respect to the withdrawal, between
the date of withdrawal and the later of the date of receipt by
Ahmanson of the Cash Proceeds and the date of liquidation by
Ahmanson of the Non-Cash Proceeds at the rate defined above in
line c., compounded quarterly.
C-13
<PAGE> 99
<TABLE>
<C> <S> <C> <C> <C>
J. Marginal state tax rate of relevant member (line G) for relevant
taxable year (line H). %
--------
K. Marginal local tax rate of relevant member (line G) for relevant
taxable year (line H). %
--------
L. Net combined marginal rate of state and local income (or
franchise) tax of relevant member (line G) for relevant taxable
year (line H) net of the federal income tax benefit of such
taxes (calculated based on the rate in line I). %
--------
M. Assumed Tax Liability (amount of Litigation Proceeds includible
in gross income (line 2) multiplied by the sum of the tax rates
in lines I and L). $
--------
N. Interest expense on taxes from inclusion of Litigation Proceeds
in income for federal income tax purposes that are paid by
Ahmanson in a taxable year prior to the year such Litigation
Proceeds are received in cash by Ahmanson(5) (sum of interest
expenses for each payment). $
--------
(4) Current payment amount before adjustment for interest and tax benefit
("Pre-Adjustment Payment Amount") (Line O minus Line P). $
--------
O. Commitment Amount before adjustments for interest and tax
benefit
(Line 2 minus Line 3) $
--------
P. Previously paid Commitment Amount before adjustments for
interest and tax benefit $
--------
(5) Interest on Pre-Adjustment Payment Amount $
--------
(Apply an interest rate equal to the Reference Rate in effect from
time to time since the Due Date, plus 250 basis points for the period
from the Due Date until the date of payment, to the amount on Line
Q).(6)
Q. Amount of Pre-Adjustment Payment Amount paid after the Due Date,
as defined in Section 2.02(c) of the Commitment Agreement. $
--------
(6) Assumed Tax Benefit (amount in line aa minus amount in line bb) $
--------
R. Relevant member of Ahmanson Group benefiting from a Section 483
deduction with respect to payment of the Commitment Amount.
--------
S. Taxable year in which deduction is taken.
--------
T. Highest federal corporate tax rate for taxable year in which
deduction is taken. %
--------
</TABLE>
- ---------------
(5) Attach a separate Tax Interest Schedule for each separate tax payment
made by Ahmanson in a taxable year prior to the year Litigation Proceeds
are received in cash by Ahmanson, detailing the following information:
a. Amount of taxes paid.
b. Date of payment.
c. Reference Rate in effect from time to time since the date of tax
payment, plus 250 basis points.
d. Interest expense incurred with respect to the payment, between
the date of payment and the later of the date of receipt by
Ahmanson of the Cash Proceeds and the date of liquidation by
Ahmanson of the Non-Cash Proceeds at the rate defined above in
line c., compounded quarterly.
(6) Attach a separate schedule showing the periods of each deferral and the
Reference Rates for those periods.
C-14
<PAGE> 100
<TABLE>
<C> <S> <C> <C> <C>
U. Marginal state tax rate of relevant member (line R) for relevant
taxable year (line S). %
--------
V. Marginal local tax rate of relevant member (line R) for relevant
taxable year (line S). %
--------
W. Net combined marginal rate of state and local income (or
franchise) tax of relevant member (line R) for relevant taxable
year (line S) net of federal income tax benefit of such taxes
(calculated based on rate on Line T). %
--------
X. Relevant AFR.(7) %
--------
Y. Present value factor(8) equal to the present value, calculated
using the rate in line X for purposes of applying Section 483,
on the Effective Date of a payment in the amount of 1 (one)
dollar in cash on the Payment Date, calculated to 12 decimal
places.(9)
--------
Z. Section 483 tax benefit factor ((one minus the amount on line Y)
times the sum of the tax rates in lines T and W (expressed as
decimals)).
--------
aa. Assumed Tax Benefit (The product of the amount in line 4, the
percentage of outstanding CPR Certificates issued pursuant to a
sale or exchange,(10) and a fraction, the numerator of which is
the amount in line Z and the denominator of which is (one minus
the amount in line Z). $
--------
bb. Adjustment if Section 483 deduction is disallowed pursuant to a
Determination to that effect(11) (amount disallowed times the
sum of the tax rates in lines T and W). $
--------
(7) Assumed Tax Benefit Currently Payable (sum of amounts in line cc and
line dd). $
--------
</TABLE>
- ---------------
(7) Applicable Federal Rate within the meaning of Section 1274(d). The
relevant AFR will be the lower of (i) the lowest AFR in effect during the
3-month period ending with the month which includes the date on which the
Merger Agreement was signed or (ii) the lowest AFR in effect during the
3-month period ending with the month which includes the Effective Date.
The relevant term (short-term, mid-term or long-term) will be the period
from the Effective Date until the date of payment on the Commitment (the
"Payment Date"), except to the extent the Commitment Date is more than 6
months after the date on which the amount of the payment on the
Commitment was fixed, in which case the AFRs for two different terms will
be used in accordance with Treas. Reg. sec. 1.1275-4(c)(4)(iii), one for
the period from the Effective Date until the date when the payment is
fixed (the "Fixing Date") and one for the period from the Effective Date
until the Payment Date. The first rate is used in calculating the present
value factor in (Y) for the period from the Effective Date until the
Fixing Date. The second is used in calculating the present value factor
for the period from the Fixing Date to the Payment Date.
(8) If the Payment Date is more than 6 months after the Fixing Date, see
supra note 7 for the applicable rates.
(9) For purposes of calculations pursuant to this Ahmanson Certificate only,
payment on the Commitment will be assumed to be made 20 days after the
date of the Ahmanson Certificate. This assumption shall not determine the
date of payment pursuant to a Resolution.
(10) Attach supporting documentation.
(11) Attach supporting documentation.
C-15
<PAGE> 101
<TABLE>
<C> <S> <C> <C> <C>
cc. Assumed Tax Benefit (line 6) to the extent the payment does not
exceed the Litigation Proceeds included in income for the same
taxable year. $
--------
dd. Past Assumed Tax Benefit (from line 6 of previous Ahmanson
Certificates) not previously included as Assumed Tax Benefit
Currently Payable to the extent realized under paragraph (d)(ii)
of the definition of Tax Assumptions in the Commitment
Agreement. $
--------
(8) Commitment Amount (the sum of amounts in line 1, line 5, and line 7,
minus amount in line 3). $
--------
(9) Current Payment on Commitment Amount (Commitment Amount from line 8,
minus all previous payments on Commitment Amount from line 9 of
previous Ahmanson Certificates).
--------
(10) Has any tax rate or other factor been adjusted under paragraph (f) of
the definition of Tax Assumptions in the Commitment Agreement? If so,
attach an explanation.
(11) If as a result of a recomputation of the Assumed Tax Liability and
the Assumed Tax Benefit pursuant to paragraph (f) of the definition
of "Tax Assumptions" in the Commitment Agreement, the recomputed
Commitment Amount or portion thereof is in excess of the Commitment
Amount or portion thereof initially calculated under this Ahmanson
Certificate, provide a separate Ahmanson Certificate setting forth
the recalculation of the Commitment Amount of portion thereof.
</TABLE>
IN WITNESS THEREOF, the undersigned have hereunto signed their names this
day of , 19 .
--------------------------------------
[name]
Chief Financial Officer
--------------------------------------
[name]
[title]
C-16
<PAGE> 102
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF TRUSTEES.
Section 3817 of the Delaware Business Trust Act and the Declaration of
Trust of the CPR Trust provide for indemnification of trustees of the Trust.
Section 3817 of the Delaware Business Trust Act generally provides that subject
to any standards or restrictions set forth in the governing instrument of a
business trust, a business trust shall have the power to indemnify and hold
harmless any trustee from and against any and all claims whatsoever. The Amended
and Restated Declaration of Trust (the "CPR Trust Agreement"), which will be
entered into prior to the Merger, provides that the CPR Trust will indemnify
various entities and individuals, including the Institutional Trustee, the
Delaware Trustee, the Litigation Trustees, Ahmanson and its affiliates. The CPR
Trust Agreement also provides that the CPR Trust will obtain liability insurance
to cover its indemnification obligations and other liabilities of the Litigation
Trustees. These provisions of the CPR Trust Agreement are described in Part I of
the Proxy Statement/Prospectus in "The CPR Trust and the CPR
Certificates -- Description of the CPR Certificates -- Indemnification
Obligations of the CPR Trust; Liability Insurance."
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<C> <S>
3.1 Declaration of Trust of the Registrant
3.2 Certificate of Trust of the Registrant
4.1 Form of Amended and Restated Declaration of Trust of the Registrant to be
entered into among Coast Savings Financial, Inc. as Sponsor, Bankers Trust
Company as Institutional Trustee, Bankers Trust (Delaware) as Delaware Trustee,
and Ray Martin, Robert L. Hunt II, Norman H. Raiden and James F. Barritt as
Litigation Trustees (included as Appendix B to the Prospectus)
5.1 Opinion of Morris, James, Hitchens & Williams
8.1 Tax Opinion of Cleary, Gottlieb, Steen & Hamilton
10.1 Form of Commitment to be entered into between the CPR Trust and Ahmanson
(included as Appendix C to the Prospectus)
23.1 Consent of Morris, James, Hitchens & Williams (included in Exhibit 5.1)
23.2 Consent of Cleary, Gottlieb, Steen & Hamilton (included in Exhibit 8.1)
24.1 Power of Attorney
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(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.
II-1
<PAGE> 103
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned registrant hereby undertakes as follows: 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 issuer 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.
(5) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (4) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to 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.
(6) 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 Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act 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
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(b) 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-2
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on the 12th day of
January, 1998.
COAST FEDERAL LITIGATION CONTINGENT
PAYMENT RIGHTS TRUST
By Coast Savings Financial, Inc., as
Sponsor
By: /s/ ROBERT L. HUNT, II
------------------------------------
Robert L. Hunt, II
President,
Director and Chief Operating Officer
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>
* Chairman of the Board, January 12, 1998
- --------------------------------------------- Director and Chief Executive
Ray Martin Officer
/s/ ROBERT L. HUNT, II President, Director and January 12, 1998
- --------------------------------------------- Chief Operating Officer
Robert L. Hunt, II
* Director January 12, 1998
- ---------------------------------------------
Thomas V. McKernan, Jr.
* Director January 12, 1998
- ---------------------------------------------
Keith W. Renken
* Director January 12, 1998
- ---------------------------------------------
Harold B. Starkey, Jr.
* Director January 12, 1998
- ---------------------------------------------
Gerald D. Barrone
* Director January 12, 1998
- ---------------------------------------------
Joan Milke Flores
* Director January 12, 1998
- ---------------------------------------------
Jack P. Libby
* Director January 12, 1998
- ---------------------------------------------
Leon S. Angvire
* Director January 12, 1998
- ---------------------------------------------
John C. Argue
* Director January 12, 1998
- ---------------------------------------------
James P. Miscoll
*By /s/ ROBERT L. HUNT, II January 12, 1998
-----------------------------------------
Robert L. Hunt, II
Pro se and as Attorney-in-Fact
</TABLE>
II-3
<PAGE> 105
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------ ------------
<C> <S> <C>
3.1 Declaration of Trust of the Registrant..................................
3.2 Certificate of Trust of the Registrant..................................
4.1 Form of Amended and Restated Declaration of Trust of the Registrant to
be entered into among Coast Savings Financial, Inc. as Sponsor, Bankers
Trust Company as Institutional Trustee, Bankers Trust (Delaware) as
Delaware Trustee, and Ray Martin, Robert L. Hunt II, Norman H. Raiden
and James F. Barritt as Litigation Trustees (included as Appendix B to
the Prospectus).........................................................
5.1 Opinion of Morris, James, Hitchens & Williams...........................
8.1 Tax Opinion of Cleary, Gottlieb, Steen & Hamilton.......................
10.1 Form of Commitment to be entered into between the CPR Trust and Ahmanson
(included as Appendix C to the Prospectus)..............................
23.1 Consent of Morris, James, Hitchens & Williams (included in Exhibit
5.1)....................................................................
23.2 Consent of Cleary, Gottlieb, Steen & Hamilton (included in Exhibit
8.1)....................................................................
24.1 Power of Attorney.......................................................
</TABLE>
<PAGE> 1
EXHIBIT 3.1
DECLARATION OF TRUST
OF
COAST FEDERAL LITIGATION CONTINGENT PAYMENT RIGHTS TRUST
THIS DECLARATION OF TRUST is made as of January 8, 1998 (this
"Declaration"), by and among Coast Savings Financial, Inc., a Delaware
corporation, as sponsor (the "Sponsor"), Bankers Trust (Delaware), a Delaware
banking corporation, as Delaware trustee (the "Delaware Trustee"), and Bankers
Trust Company, a New York banking corporation, as institutional trustee (the
"Institutional Trustee", and together with the Delaware Trustee, the
"Trustees"). The Sponsor and the Trustees hereby agree as follows:
1. The trust created hereby shall be known as "Coast Federal
Litigation Contingent Payment Rights Trust" (the "Trust"), in which name the
Institutional Trustee, or the Sponsor to the extent provided herein, may conduct
the business of the Trust, make and execute contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets
over to the Institutional Trustee the sum of $10. The Institutional Trustee
hereby acknowledges receipt of such amount in trust from the Sponsor, which
amount shall constitute the initial trust estate. The Institutional Trustee
hereby declares that it will hold the trust estate in trust for the holders of
the beneficial interests in the Trust. It is the intention of the parties hereto
that the Trust created hereby constitute a business trust under Chapter 38 of
Title 12 of the Delaware Code, 12 Del. C. ss. 3801, et seq. (the "Business Trust
Act"), and that this document constitute the governing instrument of the Trust.
The Trustees are hereby authorized and directed to execute and file a
certificate of trust with the Delaware Secretary of State in the form attached
hereto as Exhibit A.
3. The Sponsor and the Trustees will enter into an amended and
restated Declaration of Trust satisfactory to each such party to provide for the
contemplated operation of the Trust created hereby. Prior to the execution and
delivery of such amended and restated Declaration of Trust (i) the Delaware
Trustee shall not have any duty or obligation hereunder or with respect to the
trust estate, except as otherwise required by applicable law, and (ii) the
Institutional Trustee, at the written direction of the Sponsor, and the Sponsor
shall take any action as may be necessary to obtain prior to such execution and
delivery any licenses, consents or approvals required by applicable law or
otherwise. Notwithstanding the foregoing, the Trustees may take all actions
deemed proper as are necessary to effect the transactions contemplated herein.
4. The Sponsor hereby agrees to (i) reimburse each Trustee for
all reasonable expenses (including reasonable fees and expenses of counsel and
other experts), (ii) indemnify, defend and hold harmless each Trustee and the
officers, directors, employees and agents of such Trustee (collectively,
including such Trustee in its individual capacity, the "Indemnified Persons")
from and against any and all losses, damages, liabilities, claims, actions,
suits, costs, expenses, disbursements (including the reasonable fees and
expenses of counsel), taxes and penalties of any kind and nature whatsoever, to
the extent that such expenses arise out of or are imposed upon or asserted at
any time against one (1) or more Indemnified Persons with respect to the
performance of
<PAGE> 2
this Declaration, the creation, operation, administration or
termination of the Trust, or the transactions contemplated hereby (all such
expenses as provided in clause (i) and (ii) herein, collectively, "Expenses"),
provided, however, that the Sponsor shall not be required to indemnify an
Indemnified Person for Expenses to the extent such Expenses result from the
willful misconduct, bad faith or gross negligence of such Indemnified Person,
and (iii) advance to each Indemnified Person Expenses (including reasonable
legal fees) incurred by such Indemnified Person in defending any claim, demand,
action, suit or proceeding, prior to the final disposition of such claim,
demand, action, suit or proceeding, upon receipt by the Sponsor of a written
request therefor and of an undertaking by or on behalf of the Indemnified Person
to repay such amount if it shall ultimately be determined that the Indemnified
Person is not entitled to be indemnified therefor under this Section 4. The
obligations of the Sponsor under this Section 4 shall survive the termination of
the Trust or the earlier resignation or removal of either Trustee.
5. The Sponsor, as sponsor of the Trust, or the Institutional
Trustee, in accordance with Section 6, is hereby authorized, in the Sponsor's
discretion: (i) to prepare, execute and file on behalf of the Trust, such
applications, consents, appointments of attorney for service of process and
other papers and documents as the Sponsor, on behalf of the Trust, may deem
necessary or desirable; (ii) to negotiate, execute, deliver and perform on
behalf of the Trust one or more agreements, instruments and other documents;
(iii) to establish one or more accounts in the name of the Trust with the
Institutional Trustee for the purpose of crediting from time to time amounts
representing contributions from the Sponsor to the Trust, for use in the
operation of the Trust in accordance with the terms of this Agreement; and (iv)
to prepare, execute and deliver on behalf of the Trust any and all documents,
papers and instruments as may be desirable in connection with any of the
foregoing. Any power of the Sponsor, as sponsor of the Trust, hereunder to
execute any document or take other action on behalf of the Trust may be
exercised by the Sponsor directly or through one or more of its agents,
employees, partners, or delegates. In taking any action pursuant to this Section
5, the Sponsor is acting as Sponsor for the Trust and not in its individual
capacity, and all persons having any claim against the Sponsor by reason of the
transactions contemplated hereby, other than claim made by any Trustee pursuant
to Section 4 hereof, shall look only to the property of the Trust for payment or
satisfaction thereof.
6. The Institutional Trustee shall take such action or refrain
from taking such action under this Declaration as it may be directed in writing
by the Sponsor from time to time; provided, however, that the Institutional
Trustee shall not be required to take or refrain from taking any such action if
it shall have determined, or shall have been advised by counsel, that such
performance is likely to involve the Institutional Trustee in personal liability
or is contrary to the terms of this Declaration or of any document contemplated
hereby to which the Trust or the Institutional Trustee is a party or is
otherwise contrary to law. If at any time the Institutional Trustee determines
that it requires or desires guidance regarding the application of any provision
of this Declaration or any other document, then the Institutional Trustee may
deliver a notice to the Sponsor requesting written instructions as to the course
of action desired by the Sponsor, and such instructions shall constitute full
and complete authorization and protection for actions taken by the Trustee in
reliance thereon. If the Institutional Trustee does not receive such
instructions within five (5) business days after it has delivered to the Sponsor
such notice requesting instructions, or
<PAGE> 3
such shorter period of time as may be set forth in such notice, it shall refrain
from taking any action with respect to the matters described in such notice. The
Sponsor designates Robert L. Hunt II as its agent for the purpose of providing
written instructions to the Institutional Trustee as contemplated herein, and
the Institutional Trustee shall be entitled to rely on any such written
instructions.
7. This Declaration may be executed in one or more
counterparts.
8. The number of trustees of the Trust initially shall be two
(2) and thereafter the number of trustees of the Trust shall be such number as
shall be fixed from time to time by a written instrument signed by the Sponsor
which may increase or decrease the number of trustees of the Trust; provided,
however, that to the extent required by the Business Trust Act, one trustee of
the Trust shall either be a natural person who is a resident of the State of
Delaware or, if not a natural person, an entity which has its principal place of
business in the State of Delaware and otherwise meets the requirements of
applicable law. Subject to the foregoing, the Sponsor is entitled to appoint or
remove without cause any trustee of the Trust at any time. Any trustee of the
Trust may resign upon thirty days' prior notice to the Sponsor.
9. This Declaration shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles).
10. Any moneys held by the Institutional Trustee hereunder
shall be held as a special deposit account in trust for the purposes for which
held and the Institutional Trustee shall not have any liability for interest
upon any such moneys, and such moneys need not be segregated or invested.
11. The Institutional Trustee shall have no duties except as
are expressly provided herein and as otherwise required by applicable law. The
Trustees shall have no duty to confirm the completeness or accuracy of any
documentation provided to them by or on behalf of the Sponsor or to inspect or
confirm the acceptability of any property of the Trust. The Trustees shall not
be held responsible for the use of Trust property by the Sponsor or third
parties.
12. In executing the trust established hereby, the Trustees
act solely as trustees and not in their respective individual capacities and all
persons having any claim against the Trustees by reason of the transactions
contemplated hereby shall look only to the property of the Trust for payment or
satisfaction thereof.
13. No trustee, officer, shareholder, employee or agent of the
Sponsor shall be held to any personal liability, jointly or severally, for any
obligation of, or claim against, the Sponsor.
14. The recitals contained in this Declaration shall be taken
as statements of the Sponsor, and the Trustees do not assume any responsibility
for their correctness. The Trustees make no representations as to the value or
condition of the property of the Trust or any part thereof. The Trustees make no
representations as to the validity or sufficiency of this Declaration.
<PAGE> 4
15. (a) The Trustees shall not be liable, responsible or
accountable for damages or otherwise to the Trust, the Sponsor or any
beneficiary for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Trustee in good faith on behalf of the
Trust and in a manner such Trustee reasonably believed to be within the scope of
authority conferred on it by this Declaration or by law, except that such
Trustee shall be liable for any such loss, damage or claim incurred by reason of
its gross negligence or willful misconduct with respect to such acts or
omissions.
(b) The Trustees shall be fully protected in relying in
good faith upon the records of the Trust and upon such information, opinions,
reports or statements presented to the Trust by any person as to matters such
Trustee reasonably believes are within such other person's professional or
expert competence and who has been selected with reasonable care by or on behalf
of the Trust, including information, opinions, reports or statements as to the
value and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which distributions to
beneficiaries might properly be paid.
16. The Trust may terminate without issuing any securities or
beneficial interests at the election of the Sponsor.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Declaration of Trust to be duly executed as of the day and year first above
written.
Coast Savings Financial, Inc., as Sponsor
By: /s/ ROBERT L. HUNT II
-----------------------------------
Name: Robert L. Hunt II
Title: President, Director and
Chief Operating Officer
Bankers Trust Company, not in its
individual capacity but solely as
Institutional Trustee
By: /s/ KEVIN WEEKS
-----------------------------------
Name: Kevin Weeks
Title: Assistant Vice President
Bankers Trust (Delaware), not in its
individual capacity but solely as
Delaware Trustee
By: /s/ LISA WILKINS
-----------------------------------
Name: Lisa Wilkins
Title: Assistant Secretary
<PAGE> 6
EXHIBIT A
CERTIFICATE OF TRUST
The undersigned, the trustees of Coast Federal Litigation Contingent
Payment Rights Trust, desiring to form a business trust pursuant to the Delaware
Business Trust Act, 12 Del. C. ss.3801, et seq., hereby certify as follows:
(a) The name of the business trust being formed hereby
(the "Trust") is Coast Federal Litigation Contingent
Payment Rights Trust.
(b) The name and business address of the trustee of the
Trust which has its principal place of business in
the State of Delaware is as follows:
Bankers Trust (Delaware)
E.A. Delle Donne Corporate Center
Montgomery Building
1011 Centre Road
Wilmington, Delaware 19805-1266
IN WITNESS WHEREOF, the undersigned have duly executed this
Certificate of Trust.
Bankers Trust (Delaware), not in its
individual capacity but solely as Trustee
By:____________________________________
Name: Lisa Wilkins
Title: Assistant Secretary
Bankers Trust Company, not in its
individual capacity but solely as Trustee
By:____________________________________
Name: Kevin Weeks
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF TRUST
The undersigned, the trustees of Coast Federal Litigation Contingent
Payment Rights Trust, desiring to form a business trust pursuant to the Delaware
Business Trust Act, 12 Del. C. ss.3801, et seq., hereby certify as follows:
(a) The name of the business trust being formed hereby (the
"Trust") is Coast Federal Litigation Contingent Payment Rights
Trust.
(b) The name and business address of the trustee of the Trust
which has its principal place of business in the State of
Delaware is as follows:
Bankers Trust (Delaware)
E.A. Delle Donne Corporate Center
Montgomery Building
1011 Centre Road
Wilmington, Delaware 19805-1266
IN WITNESS WHEREOF, the undersigned have duly executed this Certificate
of Trust.
Bankers Trust (Delaware), not in its
individual capacity but solely as Trustee
By: /s/ LISA WILKINS
-----------------------------------
Name: Lisa Wilkins
Title: Assistant Secretary
Bankers Trust Company, not in its
individual capacity but solely as Trustee
By: /s/ KEVIN WEEKS
-----------------------------------
Name: Kevin Weeks
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF MORRIS, JAMES, HITCHENS & WILLIAMS]
JANUARY 13, 1998
Coast Federal Litigation
Contingent Payment Rights Trust
E. A. Delle Donne Corporate Center
Montgomery Building
1011 Centre Road
Wilmington, Delaware 19805-1266
Re: COAST FEDERAL LITIGATION CONTINGENT PAYMENT RIGHTS TRUST
Ladies and Gentlemen:
We have acted as special Delaware counsel for Coast Federal Litigation
Contingent Payment Rights Trust, a Delaware business trust (the "Trust"), in
connection with the matters set forth herein. This opinion letter is being
furnished to you at your request.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies
furnished to us of the following:
(a) The Declaration of Trust of the Trust, dated as of January 8,
1998, between Coast Savings Financial, Inc. ("CSF") and the trustees of the
Trust named therein;
(b) The Certificate of Trust of the Trust, as filed in the office of
the Secretary of State of the State of Delaware (the "Secretary of State")
on January 8, 1998 (the "Certificate");
(c) The form of the Amended and Restated Declaration of Trust of the
Trust, dated as of , 1998 (the "Declaration"), among CSF, as
Sponsor, the trustees of the Trust named therein and the holders, from time
to time, of undivided beneficial interests in the assets of the Trust;
(d) The Form S-4 Registration Statement (Registration No. 333- )
(the "Registration Statement"), including a prospectus (the "Prospectus"),
relating to the Contingent Payment Right Certificates of the Trust (each, a
"CPR Certificate" and collectively, the "CPR Certificates"); and
(e) A Certificate of Good Standing for the Trust, dated January 12,
1998, obtained from the Secretary of State.
Unless otherwise defined herein, all capitalized terms used in this opinion
letter shall have the respective meanings provided in the Declaration, except
that reference herein to any document shall mean such document as in effect on
the date hereof.
For the purposes of this opinion letter, we have not reviewed any documents
other than the documents listed in paragraphs (a) through (e) above. In
particular, we have not reviewed any document (other than the documents listed
in paragraphs (a) through (e) above) that is referred to in or incorporated by
reference into the documents reviewed by us. We have assumed that there exists
no provision in any document that we have not reviewed that is inconsistent with
the opinions stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
complete and accurate in all material respects.
<PAGE> 2
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity to the executed originals of all documents submitted to us as copies
or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion letter, we have assumed (i) that the
Declaration constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the creation,
operation, and termination of the Trust, and that the Declaration and the
Certificate are in full force and effect and have not been amended, (ii) except
to the extent provided in paragraph 1 below, the due creation, due formation or
due organization, as the case may be, and valid existence in good standing of
each party to the documents examined by us under the laws of the jurisdiction
governing its creation, formation or organization, (iii) the legal capacity of
each natural person who is a party to the documents examined by us, (iv) that
each of the parties to the documents examined by us has the power and authority
to execute and deliver, and to perform its obligations under, such documents,
(v) that each of the parties to the documents examined by us has duly
authorized, executed and delivered such documents, (vi) the receipt by each
Person who is a Holder to whom a CPR Certificate is to be issued immediately
prior to the Effective Time on the date hereof by the Trust (the "Holders"), of
a certificate in the form attached as Exhibit B to the Declaration for such CPR
Certificates, in accordance with the Declaration and as described in the
Registration Statement, and (vii) that the CPR Certificates are duly
authenticated and are issued to the Holders in accordance with the Declaration
and as described in the Registration Statement. We have not participated in the
preparation of the Registration Statement and assume no responsibility for its
contents.
The opinions in this letter are limited to the laws of the State of
Delaware (excluding the securities laws of the State of Delaware), and we have
not considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto.
Based upon the foregoing, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly formed and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del.
C. sec. 3801, et seq. (the "Act").
2. The CPR Certificates, when duly issued, executed and authenticated
in accordance with the Declaration and as described in the Registration
Statement, will be validly issued and, subject to the qualifications set
forth in paragraph 3 below, fully paid and nonassessable undivided
beneficial interests in the assets of the Trust.
3. The Holders, as beneficial owners of the Trust, will be entitled to
the same limitation of personal liability extended to stockholders of
private corporations for profit organized under the General Corporation Law
of the State of Delaware. We note that the Holders may be obligated to make
payments as provided in the Declaration.
We consent to the filing of this opinion letter with the Securities and
Exchange Commission as an exhibit to the Registration Statement and we consent
to the use of our name under the heading "Validity of the CPR Certificates" in
the Prospectus under the heading "The CPR Trust and the CPR
Certificates -- Validity of the CPR Certificates" in the Proxy
Statement/Prospectus of CSF and H.F. Ahmanson & Company. In giving the foregoing
consent, we do not hereby admit that we come within the category of Persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder. Except as stated above, without our prior written consent, this
opinion letter may not be furnished or quoted to, or relied upon by, any other
Person for any purpose.
Very truly yours,
Morris, James, Hitchens & Williams
2
<PAGE> 1
EXHIBIT 8.1
[CLEARY, GOTTLIEB, STEEN & HAMILTON LETTERHEAD]
January 13, 1998
Coast Savings Financial, Inc.
1000 Wilshire Boulevard
Los Angeles, California 90017-2457
Ladies and Gentlemen:
We have acted as special counsel to Coast Savings Financial, Inc. in
connection with the Registration Statement of the Coast Federal Litigation
Contingent Payment Rights Trust on Form S-4 filed with the Securities and
Exchange Commission on January 13, 1998 (the "Registration Statement") and
hereby confirm to you our opinions, set forth under the heading "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES" in the Prospectus included in the Registration
Statement, under currently applicable law.
We hereby consent to the use of our name and the making of statements with
respect to us under the caption "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" in the
Prospectus.
In giving this consent, we do not hereby admit that we are in the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By: /s/ James M. Peaslee
------------------------------------
James M. Peaslee, a Partner
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
We, the undersigned directors of Coast Savings Financial, Inc., hereby
severally and individually constitute and appoint Ray Martin, Robert L. Hunt, II
and Norman H. Raiden and each of them, the true and lawful attorneys-in-fact and
agents of each of us to execute in the name, place and stead of each of us
(individually and in any capacity stated below), a Registration Statement of the
Coast Federal Litigation Contingent Payment Rights Trust on Form S-4 to register
Contingent Payment Right Certificates and any and all amendments (including
post-effective amendments) to such Registration Statement, and to file the same,
with all exhibits thereto, and other documents or instruments necessary or
advisable in connection therewith, with the Securities and Exchange Commission,
each of said attorneys-in-fact and agents to have the power to act with or
without the others and to have full power and authority to do and perform in the
name and on behalf of each of the undersigned every act whatsoever necessary or
advisable to be done in and about the premises, as fully to all intents and
purposes as any of the undersigned might or could do in person, and we hereby
ratify and confirm our signatures as they may be signed by our said
attorneys-in-fact and agents or each of them to any and all such amendments and
instruments.
This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
instrument.
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- -------------------------- -----------------
<S> <C> <C>
/s/ RAY MARTIN Chairman of the Board, January 6, 1998
- --------------------------------------------- Director and Chief
Ray Martin Executive Officer
/s/ ROBERT L. HUNT II President, Director and
- --------------------------------------------- Chief Operating Officer
Robert L. Hunt II
/s/ THOMAS V. MCKERNAN Director January 6, 1998
- ---------------------------------------------
Thomas V. McKernan
/s/ KEITH W. RENKEN Director January 6, 1998
- ---------------------------------------------
Keith W. Renken
/s/ HAROLD B. STARKEY Director January 6, 1998
- ---------------------------------------------
Harold B. Starkey
/s/ GERALD D. BARRONE Director January 6, 1998
- ---------------------------------------------
Gerald D. Barrone
/s/ JOAN MILKE FLORES Director January 6, 1998
- ---------------------------------------------
Joan Milke Flores
/s/ JACK P. LIBBY Director January 6, 1998
- ---------------------------------------------
Jack P. Libby
/s/ LEON S. ANGVIRE Director January 6, 1998
- ---------------------------------------------
Leon S. Angvire
/s/ JOHN C. ARGUE Director January 6, 1998
- ---------------------------------------------
John C. Argue
/s/ JAMES P. MISCOLL Director January 6, 1998
- ---------------------------------------------
James P. Miscoll
</TABLE>
