<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 17, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNIONFED FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
330 EAST LAMBERT ROAD
BREA, CALIFORNIA 92621
(714) 255-8100
(Address, including zip code, and telephone number,
including area code, of Registrant's Principal Executive Offices)
<TABLE>
<S> <C>
DELAWARE 95-4074126
(State or other jurisdiction (I.R.S. Employer
of Identification
incorporation or No.)
organization)
</TABLE>
------------------------
RONALD M. GRIFFITH, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND CORPORATE SECRETARY
UNIONFED FINANCIAL CORPORATION
330 EAST LAMBERT ROAD
BREA, CALIFORNIA 92621
(714) 255-8100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPY TO:
Robert E. Dean, Esq.
GIBSON, DUNN & CRUTCHER
4 Park Plaza
Irvine, California 92714
(714) 451-3800
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If the only securities being registered on this form are being offered to
dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than the securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SHARES AMOUNT TO OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED BE REGISTERED PER SHARE (1) PRICE (1) FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value........................ 742,857 shares $0.53 $393,714 $135.76
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average of the high and low
prices of the Registrant's common stock as reported on the New York Stock
Exchange Composite Transactions on January 12, 1995.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOME
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOT SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION: DATED JANUARY 17, 1995
PROSPECTUS
742,857 SHARES
UNIONFED FINANCIAL CORPORATION
COMMON STOCK
---------------------
All of the shares of Common Stock, $.01 par value, of UnionFed Financial
Corporation ("UnionFed" or the "Company") offered hereby are being sold by a
stockholder of the Company (the "Selling Stockholder"). The Company will not
receive any of the proceeds from the sale of the shares offered hereby. See
"Selling Stockholder."
The Selling Stockholder has advised the Company that it may sell, directly
or through brokers, all or a portion of the shares of Common Stock offered
hereby in negotiated transactions or in one or more transactions on the New York
Stock Exchange (the "NYSE") at the price prevailing at the time of sale. See
"Plan of Distribution." The Common Stock is listed on the NYSE under the symbol
"UFF." On January 12, 1995, the last reported sales price of the Common Stock,
as reported by the NYSE, was $0.56 per share.
PURCHASE OF THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. POTENTIAL
PURCHASERS OF COMMON STOCK SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER
"RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY OTHER FEDERAL AGENCY OR ANY STATE SECURITIES
COMMISSION, NOR HAVE SUCH COMMISSIONS OR AGENCY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, SAVINGS ASSOCIATION
INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
PROCEEDS TO SELLING
PRICE TO PUBLIC(1) STOCKHOLDER(2)
<S> <C> <C>
Per Share................................. $0.53 $0.53
Total..................................... $393,714 $393,714
</TABLE>
(1) Based on the average of the high and low sale prices of the Common Stock on
the NYSE on January 12, 1995.
(2) All expenses (other than selling expenses) in connection with the offering,
which are not estimated to exceed $40,000, will be payable by the Company.
See "Selling Stockholder."
The date of this Prospectus is January , 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission") pursuant to the
Exchange Act relating to its business, financial statements and other
information. Such reports, proxy statements and other information may be
inspected and copies may be obtained (at prescribed rates) at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and should also be available for inspection and copying
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048, and Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. The Common Stock of the Company is
listed on the New York Stock Exchange, Inc. ("NYSE") and such material should be
available for inspection at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth or incorporated by reference in the
Registration Statement. For further information with respect to the Company and
the Common Stock offered hereby, reference is hereby made to the Registration
Statement. Statements contained in this Prospectus concerning the provisions of
certain documents are not necessarily complete and, in each instance, references
made to the copy of the document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of all or any part of the Registration Statement, including
exhibits thereto, may be obtained, upon payment of the prescribed fees, or
inspected at the offices of the Commission and the NYSE as set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company under the Exchange
Act with the Commission are hereby incorporated herein by reference: (i) Annual
Report on Form 10-K for the fiscal year ended June 30, 1994; (ii) Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1994 (and related
Form 10-Q/A filed January 4, 1995); and (iii) the Company's Report on Form 8-K
filed on December 19, 1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering shall be deemed to be incorporated in this
Prospectus by reference and to be a part hereof from the date of filing of such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, on the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated in this Prospectus by reference other than exhibits to
such documents, unless such exhibits are also specifically incorporated by
reference herein. Requests for such copies should be directed to UnionFed
Financial Corporation, 330 East Lambert Road, Brea, California 92621. Attention:
Ronald M. Griffith, General Counsel and Secretary, telephone number (714)
255-8100.
2
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROSPECTUS. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING
ELSEWHERE HEREIN AND INCORPORATED BY REFERENCE HEREIN. UNLESS OTHERWISE
INDICATED, REFERENCES HEREIN TO SPECIFIC YEARS AND QUARTERS ARE TO THE COMPANY'S
FISCAL YEARS ENDING JUNE 30 AND FISCAL QUARTERS.
THE COMPANY
UnionFed Financial Corporation ("UnionFed" or the "Company") was
incorporated in Delaware in 1986 and is a financial services holding company
engaged primarily in the savings and loan business through its wholly-owned
subsidiary, Union Federal Bank, a federal savings bank (the "Bank"). The Bank is
a federally-chartered savings bank which began operations in 1927. The Bank
currently has 14 full service neighborhood banking offices located in Southern
California. Consolidated assets of the Company at September 30, 1994 were $912
million.
The Bank has experienced significant losses since 1990 as a result of its
real estate development activities and its commercial and land development
lending activities, which have required significant charge-offs and provisions
for loan and real estate losses. The Bank's loan and real estate portfolios have
been negatively impacted by the deterioration of real estate markets,
particularly for commercial and land development projects, in Southern
California and in the other regions of the United States where the Bank
previously conducted loan and real estate development activities. In mid-1990,
the Company ceased undertaking any new real estate investment and development
projects. Since 1990, the Bank has been the subject of significant regulatory
oversight and review by the Office of Thrift Supervision ("OTS") and the Federal
Deposit Insurance Corporation ("FDIC").
In late September 1993, the Company completed a recapitalization equity
offering to investors, management and stockholders (the "Offering") and received
net proceeds of approximately $44.1 million. Receipt of this capital resulted in
the Bank achieving capital levels at that time in excess of the 4% leverage
(core), 4% Tier 1 risk-based and 8% total risk-based capital ratios required by
OTS "Prompt Corrective Action" regulations. At such levels, the Bank became an
"adequately capitalized" institution under OTS rules. The Company currently has
approximately 27.2 million shares outstanding and has outstanding warrants
entitling certain investors to purchase an additional 6.9 million shares at
$2.33 per share up to five years after the closing.
In the fiscal year ended June 30, 1994, the Bank experienced additional
losses of $26.5 million primarily due to loan loss provisions and to continued
losses from real estate operations. Such losses continued into the first quarter
of fiscal 1995, resulting in a $3.7 million loss for the quarter ended September
30, 1994. As a result, at September 30, 1994, two of the Bank's regulatory
capital ratios, the leverage (core) capital ratio of 3.37% and risk-based
capital ratio of 6.47%, were less than the respective required minimum ratios of
4.00% and 8.00%. At September 30, 1994, the Bank's capital was approximately $9
million below the level required to be considered "adequately capitalized." The
Bank's Tier 1 risk-based capital ratio at September 30, 1994 of 5.21% exceeded
the 4.00% minimum requirement.
Since the Bank's leverage (core) and total risk-based capital ratios were
below the required regulatory minimums at June 30, 1994, the Bank was required
to file a capital restoration plan with the OTS and is subject to various
regulatory restrictions. The Bank's Capital Restoration Plan (the "Capital
Restoration Plan"), which was approved by the OTS in late November, 1994,
contemplates that the Bank will pursue all feasible alternatives to resolve the
Bank's capital deficiency through the possible sale, merger or recapitalization
of the Bank by March 31, 1995. Those measures could include a sale or merger of
the Bank or the Bank's retail banking network or a recapitalization of the Bank
through one or more equity or debt offerings. In connection with the OTS
approval of the Capital Restoration Plan, the Board of Directors of the Bank
consented to the issuance of a Prompt Corrective Action directive (the
"Directive") directing the Bank to comply with its Capital Restoration Plan by
3
<PAGE>
March 31, 1995. There can be no assurance that the Bank will be able to comply
with the Directive or achieve the objectives of the Capital Restoration Plan as
approved or as such Directive or plan may be revised or extended from time to
time.
The Bank intends to pursue a sale or merger of the Bank and all other
feasible alternatives for maximizing value to the Company's stockholders,
including the raising of additional required capital. The nature of any sale or
merger transaction or the form of any recapitalization transaction may not be
determined for some time. A sale or merger transaction may involve cash
consideration or securities of the acquiror, depending upon market interest. The
Bank may consider the reduction of the Bank's risk profile in order to enhance
the prospects for a successful sale or merger or recapitalization transaction,
primarily through disposition of the Bank's classified assets, which may include
a bulk sale of such assets. However, the Company and the Bank do not intend to
implement a bulk sale of classified assets in the absence of a sale or merger of
the Bank or of a recapitalization transaction. In addition, the Bank will
explore the extent to which a sale or merger transaction or recapitalization can
be completed without a bulk sale of classified assets.
A recapitalization could be accomplished through a private offering, through
a public offering, through a public offering incorporating a rights offering
with or without stand-by purchasers, or through a combination of transactions.
Based on investor acceptance, the securities involved in a recapitalization
could include common or preferred stock, warrants and debt securities. The
securities could be issued by either the Company or the Bank. Any equity
recapitalization could involve substantial dilution of the interests of the
stockholders of the Company (including the holders of the Common Stock offered
hereby).
If the Bank does not comply with the terms of the Directive and the Capital
Restoration Plan, the OTS is required to impose certain operating restrictions
and may impose additional restrictions if it deems such actions necessary. If
the Bank continues to fail to meet its required capital levels, the operations
and future prospects of the Bank will depend principally on regulatory attitudes
and actions at the time, including those of the OTS and FDIC, within applicable
legal constraints. Such failure could result in the issuance of a cease and
desist order or additional capital directive to the Bank, the imposition of such
operating restrictions as the OTS deems appropriate at the time, such other
actions by the OTS as it may be authorized or required to take under applicable
statutes and regulations and/or the appointment of a conservator or receiver for
the Bank. In the event that the Bank were to become "critically
undercapitalized," with its ratio of "tangible equity" to total assets less than
2%, it must be placed in receivership or conservatorship within 90 days unless
the OTS and FDIC determine that taking other action would better serve the
purpose of prompt corrective action. At September 30, 1994, the Bank's ratio of
"tangible equity" to total assets was 3.12%. The appointment of a receiver or
conservator for the Bank effectively would eliminate the interests of the
stockholders of the Company (including the holders of the Common Stock offered
hereby).
The Company's principal executive offices are located at 330 East Lambert
Road, Brea, California 92621, and its telephone number is (714) 255-8100. As
used herein, the terms "Company" and "UnionFed" refer to UnionFed Financial
Corporation and its wholly-owned subsidiaries unless the context otherwise
requires.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by Selling Stockholder.............. 742,857 shares
Common Stock outstanding as of December 31, 1994......... 27,201,993 shares
New York Stock Exchange symbol........................... UFF
</TABLE>
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth historical consolidated financial data for
the Company and its subsidiaries as of and for each of the three month periods
ended September 30, 1994 and 1993 and as of and for each of the five years ended
June 30, 1994. The consolidated financial data as of and for each of the five
years ended June 30, 1994 have been derived from the audited consolidated
financial statements of the Company. The consolidated financial information as
of and for the three months ended September 30, 1994 and 1993 has not been
audited, but in the opinion of management of the Company, all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
have been included. The results of operations for the three months ended
September 30, 1994 are not necessarily indicative of the results of operations
that may be expected for the entire year. The data is qualified in its entirety
by the detailed information and financial statements included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AT OR FOR
THREE MONTHS ENDED
AT OR FOR
SEPTEMBER 30, YEAR ENDED JUNE 30,
-------------------- -------------------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
--------- --------- --------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION AT END OF PERIOD:
Total assets................................ $ 912,043 $ 981,732 $ 903,976 $ 1,161,945 $ 1,642,784 $ 2,152,756 $ 2,482,000
Loans (excluding mortgage-backed securities)
(1)........................................ 582,104 716,066 581,384 882,133 1,036,571 1,311,342 1,584,954
Mortgage-backed securities.................. 185,177 67,282 157,783 90,708 61,709 395,527 384,263
General valuation allowance for loan losses
losses..................................... 13,101 17,490 14,429 17,951 15,585 20,769 12,516
Investments and cash (2).................... 85,904 119,312 65,119 63,736 328,841 125,434 143,146
Total nonperforming loans (3)............... 18,521 13,479 22,125 18,978 53,375 66,479 23,947
REO (4)..................................... 33,653 47,414 39,234 54,962 85,599 89,449 86,275
Total nonperforming assets (5).............. 52,174 60,893 61,359 73,940 138,974 155,928 110,222
Total restructured loans (6)................ 107,162 140,227 113,676 162,532 82,032 23,174 37,257
Total classified assets (7)................. 181,183 236,017 201,060 266,092 301,343 460,114 316,283
Total loans delinquent 30-89 days........... 17,460 19,090 15,772 13,554 43,052 85,344 14,571
Core deposit intangible..................... 2,310 3,024 2,533 3,233 4,892 6,072 6,905
Capitalized loan servicing assets (8)....... 128 56 118 3,402 5,137 18,292 21,954
Deposits.................................... 848,289 850,928 847,957 1,022,046 1,298,367 1,565,311 1,697,057
Borrowed funds.............................. 26,814 54,223 15,464 104,823 270,193 466,363 597,404
Stockholders' equity........................ 31,009 55,754 34,685 17,042 49,126 71,254 136,729
SUMMARY OF OPERATIONS:
Total interest income....................... 14,950 18,545 64,134 91,772 143,263 206,677 231,769
Less: interest expense...................... 8,344 11,137 36,297 65,973 113,940 170,783 178,088
--------- --------- --------- ----------- ----------- ----------- -----------
Net interest income......................... 6,606 7,408 27,837 25,799 29,323 35,894 53,681
Less: provision for estimated loan losses... 3,859 5,039 14,350 18,603 6,666 25,127 45,103
--------- --------- --------- ----------- ----------- ----------- -----------
Net interest income after provision for
estimated losses........................... 2,747 2,369 13,487 7,196 22,657 10,767 8,578
--------- --------- --------- ----------- ----------- ----------- -----------
Non-interest income:
Loan servicing fees, net of
amortization............................. 239 416 893 230 1,012 3,892 (1,969)
Loan fees................................. 106 261 832 1,375 1,918 1,872 1,934
(Loss)/gain on sale of loans, mortgage-
backed securities, investments and loan
servicing................................ 143 2,630 (239) 7,655 11,165 2,465 721
Gain on sale of branches.................. -- 1,496 1,496 1,315 -- -- --
Other, net................................ 544 884 2,488 3,181 4,421 1,720 6,702
--------- --------- --------- ----------- ----------- ----------- -----------
Total non-interest income................... 1,032 5,687 5,470 13,756 18,516 9,949 7,388
--------- --------- --------- ----------- ----------- ----------- -----------
Non-interest expense:
General and administrative expense........ 6,795 7,423 29,006 30,910 36,328 42,053 40,087
Real estate operations, net (9)........... 438 4,549 15,743 27,277 33,770 66,839 4,429
Amortization of core deposit intangible... 222 171 662 845 1,181 1,046 889
--------- --------- --------- ----------- ----------- ----------- -----------
Total non-interest expense.................. 7,455 12,143 45,411 59,032 71,279 109,938 45,405
--------- --------- --------- ----------- ----------- ----------- -----------
Income (loss) before income taxes........... (3,676) (4,087) (26,454) (38,080) (30,106) (89,222) (29,439)
Income tax provision (benefit).............. -- -- 3 (5,996) (7,978) (24,566) (11,330)
--------- --------- --------- ----------- ----------- ----------- -----------
Net loss.................................... $ (3,676) $ (4,087) $ (26,457) $ (32,084) $ (22,128) $ (64,656) $ (18,109)
--------- --------- --------- ----------- ----------- ----------- -----------
</TABLE>
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
AT OR FOR
THREE MONTHS ENDED
AT OR FOR
SEPTEMBER 30, YEAR ENDED JUNE 30,
-------------------- -----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
PER COMMON SHARE: (10)
Net loss -- primary........................... $ (0.14) $ (3.10) $ (1.28) $(43.07) $(29.70) $(86.80) $(26.70)
Net loss -- fully diluted..................... (0.14) (3.10) (1.28) (43.07) (29.70) (86.80) (26.70)
Book value -- primary......................... 1.14 2.10 1.28 22.88 66.00 95.70 183.60
Book value -- fully diluted................... 1.14 2.10 1.28 22.88 66.00 95.70 183.60
Average number of shares outstanding
(In thousands)............................... 27,202 1,320 20,674 745 745 745 628
RATIOS:
Return on average assets*..................... (1.61)% (1.46)% (2.65)% (2.27)% (1.18)% (2.69)% (0.75)%
Return on average stockholders' equity*....... (2.96)% (1.83)% (65.48)% (88.82)% (38.23)% (52.25)% (11.75)%
Interest rate spread during period............ 3.46% 3.38% 3.39% 2.51% 2.32% 2.18% 2.30%
Net yield on interest-earning assets during
period....................................... 3.28% 3.03% 3.17% 2.09% 1.82% 1.54% 2.19%
Expense Ratios:
Gross (11)*................................. 2.82% 2.84% 4.16% 3.29% 2.90% 4.16% 1.58%
Adjusted (12)*.............................. 2.63% 1.87% 2.98% 1.36% 1.11% 1.38% 1.40%
Efficiency Ratios:
Gross (13)*................................. 97.60% 104.69% 142.75% 154.37% 154.97% 239.81% 74.35%
Adjusted (14)*.............................. 91.87% 65.47% 93.26% 83.04% 81.55% 94.01% 67.10%
Dividend payout ratio (15).................... -- -- -- -- -- -- --
Stockholders' equity to total assets.......... 3.40% 5.68% 3.84% 1.47% 2.99% 3.31% 5.51%
Tangible capital ratio........................ 3.12% 5.46% 3.53% 1.09% 2.60% 2.70% 3.70%
Leverage capital ratio........................ 3.37% 5.80% 3.80% 1.36% 2.90% 3.00% 4.00%
Risk-based capital ratio...................... 6.47% 8.70% 6.99% 3.08% 5.20% 5.40% 6.10%
General valuation allowance for loan losses to
loans and mortgage-backed securities......... 1.71% 2.23% 1.95% 1.85% 1.42% 1.22% 0.64%
General valuation allowance for loan losses to
loans, excluding mortgage-backed
securities................................... 2.25% 2.44% 2.48% 2.03% 1.50% 1.58% 0.79%
General valuation allowance for loan losses to
nonperforming loans.......................... 70.74% 129.76% 65.22% 94.59% 29.20% 31.24% 52.27%
Nonperforming assets to total loans, mortgage-
backed securities and REO.................... 6.51% 7.33% 7.88% 7.19% 11.74% 8.68% 5.36%
Nonperforming assets to total assets.......... 5.72% 6.20% 6.79% 6.36% 8.46% 7.24% 4.44%
Restructured loans and nonperforming assets to
total assets................................. 17.47% 20.49% 19.36% 20.35% 13.45% 8.32% 5.94%
Classified assets to total assets............. 19.87% 24.04% 22.24% 22.90% 18.34% 21.37% 12.74%
Net loan chargeoffs to average total loans.... 0.50% 0.48% 1.45% 1.72% 1.71% 0.52% 2.03%
<FN>
- ------------------------------
*Ratios for three month periods ended September 30, 1994 and 1993 are annualized
for comparison purposes.
</TABLE>
6
<PAGE>
NOTES TO SUMMARY FINANCIAL INFORMATION:
(1) Includes both held for investment and held for sale and net of unamortized
premiums, unearned income, deferred fees and specific loan loss
allowances.
(2) Investment securities does not include the stock held by the Bank as a
member of the Federal Home Loan Bank of San Francisco.
(3) Nonperforming loans are those loans placed on nonaccrual status and other
loans delinquent for 90 days or more.
(4) REO includes real estate acquired in settlement of loans and in-substance
foreclosures, net of general and specific real estate valuation allowances
and excludes real estate held for investment.
(5) Nonperforming assets include nonperforming loans and REO (net of specific
and general reserves).
(6) Restructured loans are loans that have been modified, resulting in
concessions from original terms with respect to interest payments,
maturity, or partial forgiveness of principal or interest.
(7) Classified assets include loans classified Substandard or Doubtful, REO
(before general valuation allowance), and the Bank's investment in Uni-Cal
Financial Corporation.
(8) Capitalized loan servicing assets include purchased mortgage servicing
rights and capitalized excess servicing on loans originated by the Bank.
Capitalized excess servicing for a loan is the discounted present value of
any difference between (i) the interest rate received by the Bank from the
borrower and (ii) the interest rate passed through to the purchaser of the
loan, less a "normal servicing fee."
(9) Real estate operations, net includes net revenues and expenses of REO and
real estate held for investment, development, or sale.
(10) Per share data is adjusted to give effect to the one-for-ten reverse stock
split effected on August 18, 1993.
(11) The gross expense ratio is the ratio of net non-interest expense to
average total assets. Net non-interest expense is total non-interest
expense minus fee income, gains and losses from sales of loans, MBS,
investments and loan servicing, and other income, net (except for
exclusion in 1992 of the $1.84 million gain on curtailment of pension
plan).
(12) The adjusted expense ratio is the ratio of net non-interest expense, less
real estate operations, net to average total assets.
(13) The gross efficiency ratio is the ratio of non-interest expense to total
revenue. Total revenue is net interest income plus fee income, gains and
losses from sales of loans, MBS, investments and loan servicing, and
other, net (except for exclusion in 1992 of the $1.84 million gain on
curtailment of pension plan).
(14) The adjusted efficiency ratio is the ratio of non-interest expense less
real estate operations, net to total revenue.
(15) The dividend payout ratio is the ratio of dividends paid (if any) during
the fiscal year to net income, if any.
7
<PAGE>
RISK FACTORS
A PURCHASE OF THE COMPANY'S COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
POTENTIAL PURCHASERS OF COMMON STOCK SHOULD CAREFULLY CONSIDER, IN ADDITION TO
THE OTHER INFORMATION SET FORTH HEREIN, THE FOLLOWING RISK FACTORS:
UNDERCAPITALIZED STATUS AND CAPITAL DIRECTIVE. Under federal law and OTS
regulations, savings institutions such as the Bank are required to comply with
each of the three capital adequacy standards; a "tangible capital" requirement
of at least 1.5% of adjusted total assets, a "leverage limit" or "core capital"
requirement of at least 4% of adjusted total assets and a "risk-based capital"
requirement of at least 8% of risk-weighted assets. At September 30, 1994, the
Bank had a core capital ratio of 3.37% and a risk-based capital ratio of 6.47%
which were less than the respective minimum ratios of 4.00% and 8.00%. As a
result of the Bank's regulatory capital deficiency, the Bank was required by the
OTS to file a Capital Restoration Plan (the "Capital Restoration Plan") under
the "prompt corrective action" provisions described below.
In late November, 1994, the OTS approved the Bank's Capital Restoration Plan
which provides for the Bank to become "adequately capitalized" by March 31,
1995. In connection with the approval of the Capital Restoration Plan, the OTS
issued, with the consent of the Company's Board of Directors, a Prompt
Corrective Action Directive (the "Directive") which directs the Bank to comply
with its Capital Restoration Plan by March 31, 1995.
UNCERTAIN IMPACT OF RECAPITALIZATION ON COMPANY STOCKHOLDERS. The Bank
intends to pursue a sale or merger of the Bank and all other feasible
alternatives for maximizing value to the Company's stockholders, including the
raising of additional required capital. The nature of any sale or merger
transaction or the form of any recapitalization transaction may not be
determined for some time. A sale or merger transaction may involve cash
consideration or securities of the acquiror, depending upon market interest. The
Bank may consider the reduction of the Bank's risk profile in order to enhance
the prospects for a successful sale or merger or recapitalization transaction,
primarily through disposition of the Bank's classified assets, which may include
a bulk sale of such assets. However, the Company and the Bank do not intend to
implement a bulk sale of classified assets in the absence of a sale or merger of
the Bank or of a recapitalization transaction. In addition, the Bank will
explore the extent to which a sale or merger transaction or recapitalization can
be completed without a bulk sale of classified assets.
A recapitalization could be accomplished through a private offering, through
a public offering, through a public offering incorporating a rights offering
with or without stand-by purchasers, or through a combination of transactions.
Based on investor acceptance, the securities involved in a recapitalization
could include common or preferred stock, warrants and debt securities. The
securities could be issued by either the Company or the Bank. Any equity
recapitalization could involve substantial dilution of the interests of the
stockholders of the Company (including the holders of the Common Stock offered
hereby).
There can be no assurance that the Bank will be able to recapitalize within
the time period required by the Capital Restoration Plan and the Directive, or
that the terms of any recapitalization will be favorable to the existing
stockholders of the Company (including the holders of the Common Stock offered
hereby).
POSSIBILITY OF ADDITIONAL REGULATORY RESTRICTIONS AND/OR TAKEOVER. If the
OTS does not comply with the terms of the Capital Restoration Plan, the OTS is
required to impose certain operating restrictions and may impose additional
restrictions if it deems such actions necessary. The OTS or the FDIC may appoint
a receiver or conservator for an institution if the institution is
undercapitalized and (i) has no reasonable prospect of becoming adequately
capitalized, (ii) fails to submit a capital restoration plan within the required
time period, or (iii) materially fails to implement its capital restoration
plan.
8
<PAGE>
If the Bank continues to fail to meet its required capital levels, the
operations and future prospects of the Bank will depend principally on
regulatory attitudes and actions at the time, including those of the OTS and
FDIC, within applicable legal constraints. Such failure could result in the
issuance of a cease and desist order or an additional capital directive to the
Bank, the imposition of such operating restrictions as the OTS deems appropriate
at the time, such other actions by the OTS as it may be authorized or required
to take under applicable statutes and regulations and/or the appointment of a
conservator or receiver for the Bank. In the event that the Bank were to become
"critically undercapitalized," it must be placed in receivership or
conservatorship not later than 90 days thereafter unless the OTS and FDIC
determine that taking other action would better serve the purpose of prompt
corrective action. Such determinations are required to be reviewed at 90-day
intervals, and if the Bank remains critically undercapitalized for more than 270
days, the decision not to appoint a receiver would require certain affirmative
findings by the OTS and FDIC regarding the viability of the institution. An
institution is treated as critically undercapitalized if its ratio of "tangible
equity" (core capital plus cumulative preferred stock minus intangible assets
other than supervisory goodwill and purchased mortgage servicing rights) to
total assets is equal to or less than 2%. At September 30, 1994, the Bank's
"tangible equity" ratio was 3.12%. Additional operating losses would cause the
Bank's "tangible equity" ratio and other regulatory capital ratios to decrease
from September 30, 1994 ratios.
RECENT FINANCIAL CONDITION AND LACK OF PROFITABLE OPERATIONS. The Company's
recent financial condition and results of operations reflect the troubled
California economy and the real estate markets in which the Company operates.
The Company reported a net loss of $3.7 million for the quarter ended September
30, 1994. During the fiscal year ended June 30, 1994, the Company incurred a net
loss of $26.5 million as compared to a net loss of $32.1 million in fiscal 1993
and a net loss of $22.1 million in the fiscal year ended June 30, 1992. The
Company also incurred net losses of $64.7 million and $18.1 million in fiscal
1991 and 1990, respectively. These losses were primarily due to deteriorating
asset quality, as reflected in the provisions for loan and real estate losses to
specific and general allowances in view of high levels of charge-offs of loans
and REOs; losses on the disposition of REO and real estate investments; and the
loss of income on nonperforming assets. The Company's consolidated stockholders'
equity declined to $31.0 million at September 30, 1994 due to the net losses
described above. The fully diluted book value of the Common Stock declined to
$1.14 per share at September 30, 1994.
The Bank's business is subject to fluctuations in interest rates, general
national and local economic and political conditions and consumer confidence in
the Bank. These fluctuations are neither predictable nor controllable, and may
have materially adverse consequences upon the operations and financial condition
of the Bank. The Bank is especially subject to fluctuations in the economic
conditions prevailing in Southern California, where the vast majority of its
borrowers and all of its neighborhood banking offices are located.
FUTURE OPERATING LOSSES ANTICIPATED; NO ASSURANCE OF PROFITABLE
OPERATIONS. The Capital Restoration Plan contemplates additional losses
(principally due to potential loan losses and losses from real estate
operations) during at least the two quarters ending March 31, 1995, assuming the
recapitalization occurs on that date. The extent of future losses and a return
to profitable operations are dependent on numerous factors, including the Bank's
disposition of problem assets (and whether or not a bulk sale or other
accelerated resolution of such assets is undertaken), a reduction in the Bank's
non-interest expenses, and the status of the California economy and real estate
markets. No assurances can be given that future events, including changes in
prevailing interest rates, or a further deterioration in the Bank's asset
quality, will not preclude the Bank from having additional operating losses or
from returning to profitable operations.
HIGH LEVEL OF NONPERFORMING ASSETS. Nonperforming assets of the Bank, which
include nonaccrual loans and REO, remain high as a percentage of total assets.
At September 30, 1994, total nonperforming assets were $52.2 million (5.72% of
total assets). The ability of the Bank to resolve nonperforming assets and
realize proceeds approximating net book value and to reduce the level of
9
<PAGE>
nonperforming assets and restructured loans is highly dependent upon a variety
of factors outside the control of the Bank, including the market value of real
estate, the strength of the national and local economy, interest rates and the
availability of other financing. No assurances can be given that the Bank will
not experience further deterioration in asset quality.
The Bank's current interest income remains impaired by the large amount of
nonperforming loans. The Bank is continuing its efforts to dispose of problem
assets in order to return to profitability. In addition, the Bank may consider a
possible bulk sale of problem assets in connection with its efforts to comply
with the Capital Restoration Plan and Directive. No assurances can be given,
however, that the Bank will be successful in arranging for the prompt and
cost-effective disposition of nonperforming assets.
RESTRUCTURED LOANS. It is the Bank's policy to consider a troubled debt
restructuring when a determination is made that greater economic value will be
realized under new terms than through foreclosure, liquidation or other
disposition. In such circumstances, the Bank may grant a concession to the
borrower that it would not otherwise grant, including the reduction of interest
charged, the forgiveness of certain penalties and, in certain cases, the
reduction of the principal balance on a loan. Restructured loans which are
performing in accordance with their new terms and, therefore, are not included
in nonaccrual loans, amounted to $107.2 million at September 30, 1994. Due to
their nature, however, restructured loans will continue to carry greater risks
for some period of time. Since April 1991, the Bank has restructured 43 loans
aggregating $248.4 million in original principal balance. As of September 30,
1994, ten loans aggregating $44.8 million which were restructured since April,
1991 have become non-performing assets. Of such loans, four loans aggregating
$13.0 million were foreclosed upon and the collateral subsequently sold; two
loans aggregating $6.9 million were subsequently restructured and are performing
in accordance with their new terms; and four loans aggregating $24.9 million are
included in non-performing assets at September 30, 1994.
POTENTIAL PROBLEM LOANS. The Bank has established a monitoring system for
its loan and real estate portfolios and classifies potential problem loans as
Substandard, Doubtful or Loss. The following table sets forth the Bank's total
classified loan portfolio, including classified restructured loans, at September
30, 1994, and excludes a conditional commitment under a classified letter of
credit for $12.0 million:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
--------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
SUBSTANDARD
Residential 1-4....................................................... $ 9,096
Multifamily........................................................... 89,101
Commercial............................................................ 42,832
Construction.......................................................... 5,609
Consumer.............................................................. 603
----------
147,241
DOUBTFUL
Multifamily........................................................... --
Consumer.............................................................. --
----------
--
----------
TOTAL............................................................... $ 147,241
----------
----------
</TABLE>
In addition to classified assets, the Bank monitors Special Mention assets
which have been identified to include potential weaknesses that deserve
management's close attention. According to OTS guidelines, Special Mention
assets are not adversely classified and do not expose an institution to
sufficient risk to warrant adverse classification. At September 30, 1994, $105.4
million of assets were categorized as Special Mention.
10
<PAGE>
ALLOWANCE FOR LOAN AND REAL ESTATE LOSSES. The Bank provides an allowance
for estimated losses on loans and real estate when it is probable that the value
of the asset has been impaired and the loss can be reasonably estimated. At
September 30, 1994, the Bank's general valuation allowance for loan losses was
$13.1 million, representing 2.25% of total loans and 70.74% of nonperforming
loans. At September 30, 1994 the Bank's total general valuation allowances for
loan and real estate losses aggregated $15.0 million (28.73% of total
nonperforming assets).
The Bank has recorded significant amounts of provisions for loan and real
estate losses to reflect the continued deterioration of the real estate market
as well as the effects of disposing of real estate assets. Total provisions for
loan and real estate losses aggregated $3.9 million for the quarter ended
September 30, 1994, and $27.1 million in fiscal 1994. Loan and real estate
chargeoffs, net of recoveries and realized gains and losses on sales of real
estate, by the Bank amounted to $10.3 million in the quarter ended September 30,
1994 and $28.4 million in fiscal 1994.
While the Bank believes its allowances for estimated losses on loans and
real estate are adequate, no assurances can be given that future events will not
require significant additional provisions for loan and real estate losses.
IMPACT OF FLUCTUATIONS IN INTEREST RATES. Prevailing economic conditions,
particularly changes in market interest rates, as well as governmental policies
and regulations concerning, among other things, monetary and fiscal affairs,
significantly affect interest rates and savings institutions' net interest
income. The Bank actively manages its assets and liabilities in an effort to
mitigate its exposure to interest rate risk, but it cannot eliminate this
exposure entirely without unduly affecting its profitability. As is the case
with many savings institutions, the Bank's deposits historically have matured or
repriced more rapidly than its loans and other investments, and consequently,
increases in market interest rates have tended to reduce the Bank's net interest
income, while decreases in market interest rates have tended to increase its net
interest income. Active management of assets and liabilities is fundamental to
the achievement of many corporate goals, including the management of interest
rate risk. Accordingly, each balance sheet decision has a rate risk component.
The Bank incorporates its rate risk objectives into loan sale decisions, deposit
pricing, borrowing plans, and loan origination and pricing goals.
As part of its assets/liability management strategy, the Bank generally
retains in portfolio adjustable rate mortgage ("ARM") loans which mature or
reprice within one year. Because the Bank's ARM portfolio is principally tied to
the Eleventh District Cost of Funds Index, which tends to lag behind changes in
the Bank's cost of funds, the recent rising interest rate environment and
competitive pricing for deposits in the Bank's market areas have decreased
interest rate spreads. In addition, increases in prevailing interest rates
generally negatively impact the values of the Bank's "held to maturity"
mortgage-backed and other investment securities and may adversely impact
potential acquirors' assessments of the value of the Bank. As of December 31,
1994, the Bank estimates that the market value of its "held to maturity"
mortgage-backed and other investment securities was approximately $11.6 million
below carrying values, compared to $4.8 million below carrying values at June
30, 1994.
INDEPENDENT AUDITORS' REPORT -- EXPLANATORY PARAGRAPH RE "GOING
CONCERN." In connection with its audit of the 1994 consolidated financial
statements of the Company, KPMG Peat Marwick LLP, the Company's independent
auditors, issued a report that contained an explanatory paragraph regarding the
Company's ability to continue as a going concern. The report makes reference to
Note 12 to the consolidated financial statements, which describes the following
issues: (i) the Bank's failure to meet its regulatory capital requirements; (ii)
the fact that the Bank has filed a capital restoration plan with the OTS; (iii)
regulatory sanctions that the OTS may impose for failure to meet the capital
requirements in accordance with its capital plan or further declines in its
capital ratios as a result of continued operating losses; and (iv) these matters
raise substantial doubt about the Company's ability to continue as a going
concern. The report stated that consolidated financial statements of the
11
<PAGE>
Company had been prepared assuming that the Company would continue as a going
concern, and no adjustments that might result from the outcome of the stated
uncertainties were reflected in the consolidated financial statements.
COMPETITION. Financial institutions operate in a competitive environment.
The Bank competes with commercial banks, other savings institutions, finance
companies, money market funds, credit unions and other financial intermediaries,
many of which have substantially greater resources in capital than do the
Company and the Bank. In addition, lending limits are based upon capital, and
many of the Bank's competitors have higher legal lending limits than the Bank.
Particularly intense competition exists for sources of funds, loans, and other
services that the Bank offers.
EXTENSIVE AND UNCERTAIN REGULATION. The thrift industry is extensively
regulated and currently faces an uncertain regulatory environment. Applicable
laws, regulations, and enforcement policies have been subject to significant,
and sometimes retroactively applied, change in recent years, and may be subject
to significant further change. There can be no assurance that future changes in
the regulations or in their interpretation will not adversely affect the
business of the Bank. In addition, certain regulatory actions, including any
future increases in federal deposit insurance premiums, may increase the Bank's
non-interest expense in future periods.
EXPOSURE TO ECONOMIC TRENDS AND REAL ESTATE MARKETS. The savings
institutions industry is exposed to economic trends and fluctuations in real
estate values. In recent periods, those trends have been recessionary in nature,
particularly in Southern California where the bulk of the Bank's assets are
located. Accordingly, the trends have adversely affected both the delinquencies
being experienced by savings institutions, such as the Bank, and the ability of
such institutions to recoup principal and accrued interest by realization upon
sale of the underlying collateral. No assurances can be given that such trends
will not continue in future periods creating increasing downward pressure on the
capital and earnings of savings institutions, including the Bank. The impact of
the recent bankruptcy filing by the County of Orange on the economic climate in
Orange County and Southern California, where the Bank's offices and much of its
property are located, is uncertain at this time.
LIMITATION ON USE OF TAX LOSSES. At June 30, 1994, the Company had unused
net operating losses for federal income tax and California franchise tax
purposes of $50 million and $49 million, respectively. On August 5, 1994, the
Company incurred an "ownership change" within the meaning of Section 382 of the
Internal Revenue Code ("Section 382"). Section 382 generally provides that if a
corporation undergoes an ownership change, the amount of taxable income that the
corporation may offset after the date of the ownership change (the "change
date") with net operating loss carryforwards and certain built-in losses
existing on the change date will be subject to an annual limitation. In general,
the annual limitation equals the product of (i) the fair market value of the
corporation's equity on the change date (with certain adjustments) and (ii) a
long-term tax exempt bond rate of return published by the Internal Revenue
Service.
The Section 382 limitation will not have a material impact on the financial
position of the Company as of September 30, 1994 as the Company has not utilized
any net operating losses to offset the reversal of taxable temporary
differences. Although the Section 382 limitation will affect the Company's
ability to utilize its net operating loss carryovers and certain recognized
built-losses, any income tax benefits attributable to those net operating loss
carryovers and recognized built-losses will not be available until operations of
the Company result in additional taxable income. The amount of the Section 382
limitation for the Company has not yet been determined.
Any sale, merger or recapitalization transaction undertaken by the Company
or the Bank may result in an new "ownership change" for the purpose of Section
382, based upon the facts and circumstances of the transaction. Such a
transaction may result in additional limitations on the use of unused net
operating losses by the Company.
DIVIDEND RESTRICTIONS. The Company has not paid dividends on the Common
Stock since the first quarter of fiscal 1991 and is currently restricted from
paying dividends. The Company's ability to pay
12
<PAGE>
dividends is largely dependent on the receipt of funds to pay such dividends
from the Bank, which is prohibited from paying dividends to the Company without
the consent of the OTS. The Company does not anticipate the resumption of
dividend payments to holders of Common Stock in the near term.
EFFECT OF OUTSTANDING WARRANTS. As of December 31, 1994, there were 6.9
million shares of Common Stock reserved for issuance upon the exercise of
warrants at an exercise price of $2.33 per share, all of which are currently
exercisable. To the extent of the trading price of the Common Stock at the time
of exercise of any such warrants exceeds the exercise price, such exercise will
have a dilutive effect on the Company's stockholders.
RECENT DEVELOPMENTS
At June 30, 1994, the Bank's leverage (core) and risk-based ratios decreased
below the required OTS regulatory minimums. As a result, the Bank became subject
to certain operating restrictions applicable to "undercapitalized" institutions,
including among other things, restrictions on asset growth, capital
distribution, acquisitions, branching and new lines of business. In addition,
the Bank was required to file a Capital Restoration Plan with the OTS. In late
November, 1994, the OTS approved the Bank's Capital Restoration Plan and issued,
with the unanimous consent of the Board of Directors of the Bank, a Prompt
Corrective Action Directive (the "Directive") requiring that the Bank be
recapitalized by March 31, 1995. There can be no assurance that the Bank will be
able to comply with the Directive or achieve the objectives of the Capital
Restoration Plan as approved or as such plan may be revised from time to time.
The Bank may seek to extend the March 31, 1995 date in the Directive. There can
be no assurance that such an extension would be approved by the OTS.
In early December, 1994, the Company announced that it has engaged the
investment banking firm of Friedman, Billings, Ramsey & Co., Inc. ("FBR") to act
as financial advisor to the Company and the Bank in connection with its
evaluation and implementation of strategic recapitalization alternatives
available to the Bank. FBR specializes in investment banking services for
banking and thrift institutions.
The Bank intends to pursue a sale or merger of the Bank and all other
feasible alternatives for maximizing value to the Company's stockholders,
including the raising of additional required capital. The nature of any sale or
merger transaction or the form of any recapitalization transaction may not be
determined for some time. A sale or merger transaction may involve cash
consideration or securities of the acquiror, depending upon market interest.
Initially, the Company and FBR will seek to identify potential buyers who have
an interest in acquiring all of the operations of the Bank or who are interested
in buying all of the operations of the Bank with the exception of some or all of
three pools of classified assets of the Bank having unpaid principal balances of
approximately $207 million, which would be retained by the Company. No assurance
can be given that any such sale or merger transaction will proceed or be
consummated, or that the terms of any such transaction, if completed, will be
favorable to the stockholders of the Company (including the holders of the
Common Stock offered hereby).
The Bank may consider the reduction of the Bank's risk profile in order to
enhance the prospects for a successful sale or merger or recapitalization
transaction, primarily through disposition of the Bank's classified assets,
which may include a bulk sale or other accelerated resolution of all or a
portion of such assets. Based upon a review of the Bank's classified assets by a
real estate consultant engaged by the Bank and other available information, the
Company believes that any bulk sale of classified assets would involve
substantial discounts from the Bank's current net book values and the unpaid
principal balances of classified loans. No assurance can be given that any such
transaction could be implemented or that prevailing market conditions or other
factors would not increase the discount required to effect a bulk sale of such
assets. The Company and the Bank do not intend to implement a bulk sale of
classified assets in the absence of a sale or merger of the Bank or of a
recapitalization transaction. In addition, the Bank will explore the extent to
which a sale or merger transaction or recapitalization can be completed without
a bulk sale of classified assets. The Company may also consider formation of a
workout entity to hold certain identified troubled assets to attempt to enhance
the return from those assets.
13
<PAGE>
A recapitalization could be accomplished through a private offering, through
a public offering, through a public offering incorporating a rights offering
with or without stand-by purchasers, or through a combination of transactions.
Based on investor acceptance, the securities involved in a recapitalization
could include common or preferred stock, warrants and debt securities. The
securities could be issued by either the Company or the Bank. Any equity
recapitalization could involve substantial dilution of the interests of the
stockholders of the Company (including the holders of the Common Stock offered
hereby).
Effective December 12, 1994, the Bank, with the approval of the OTS, entered
into severance agreements with several members of senior management of the Bank.
The agreements are designed to ensure that the Bank's senior management group is
maintained through completion of a sale, merger or recapitalization transaction.
The severance agreements generally provide for the payment of certain severance
amounts (generally 6 to 12 months' salary plus benefits) in the event that such
executives' employment is terminated following a change of control (as defined
in the severance agreement) of the Bank. The Company has entered into guaranty
agreements of even date to guarantee performance of the Bank's obligations under
the severance agreements.
During the quarter ended September 30, 1994, the Company reported a net loss
of $3.7 million. The Company also anticipates reporting a net loss for its
second fiscal quarter ended December 31, 1994.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the shares
of Common Stock offered hereby.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's common stock is traded on the New York Stock Exchange ("NYSE")
with the trading symbol UFF. At December 31, 1994, the Company had approximately
850 stockholders of record (not including the number of persons or entities
holding stock in nominee or street name through various brokerage firms) and
27,201,993 outstanding shares of common stock. The following table sets forth
for the fiscal quarters indicated the range of high and low sale prices per
share of the common stock of UnionFed as reported on the New York Stock Exchange
Composite Tape.
<TABLE>
<CAPTION>
QUARTER ENDING HIGH* LOW*
- ------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
FISCAL 1993
September 30, 1992................................................................. $ 13.75 $ 3.75
December 31, 1992.................................................................. 8.75 2.50
March 31, 1993..................................................................... 16.25 5.00
June 30, 1993...................................................................... 11.25 3.75
FISCAL 1994
September 30, 1993................................................................. 3.75 1.50
December 31, 1993.................................................................. 2.25 1.63
March 31, 1994..................................................................... 2.63 1.50
June 30, 1994...................................................................... 1.75 0.75
FISCAL 1995
September 30, 1994................................................................. 0.94 0.25
December 31, 1994.................................................................. 0.69 0.38
March 31, 1995 (through January 12, 1995).......................................... 0.56 0.47
<FN>
- ------------------------
*Price per share is adjusted to give effect to the one-for-ten reverse stock
split effected on August 18, 1993.
</TABLE>
14
<PAGE>
On January 12, 1995, the last reported sales price for the Company's Common
Stock on the New York Stock Exchange was $0.56 per share.
UnionFed may pay dividends out of funds legally available therefor at such
times as the Board of Directors determines that dividend payments are
appropriate, after considering UnionFed's net income, capital requirements,
financial condition, alternate investment options, prevailing economic
conditions, industry practices and other factors deemed to be relevant at the
time. UnionFed's principal source of income currently consists of dividends, if
any, from the Bank. As an undercapitalized institution, the Bank generally may
not pay dividends to the Company. UnionFed's ability to pay dividends also is
limited by certain restrictions generally imposed on Delaware corporations. In
general, dividends may be paid only out of a Delaware corporation's surplus, as
defined in the Delaware General Corporation Law, or net profits for the fiscal
in which the dividend is declare and/or the preceding fiscal year. "Surplus" is
defined for this purpose as the amount by which a corporation's net assets
(total assets minus total liabilities) exceed the amount designated by the Board
of Directors of the corporation in accordance with Delaware law as the
corporation's capital. The Board of Directors of UnionFed has designated as
UnionFed's capital the amount equal to the aggregate par value of its
outstanding shares of common stock.
15
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company and its subsidiaries as of September 30, 1994.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
------------------
(IN THOUSANDS)
<S> <C>
Borrowings
Federal Home Loan Bank advances................................................... $ 13,000
Other borrowed funds.............................................................. 13,814
----------
Total borrowings.................................................................. 26,814
----------
Stockholders' Equity
Preferred stock par value $.01 per share; authorized, 1,000,000 shares, issued and
outstanding, none................................................................ --
Common stock -- par value $.01 per share; authorized, 60,000,000 shares, issued
and outstanding, 27,201,993 shares............................................... 272
Additional paid-in capital........................................................ 107,943
Retained earnings (deficit)....................................................... (77,206)
----------
Total Stockholders' Equity...................................................... $ 31,009
----------
----------
Book value per share................................................................ $1.14
</TABLE>
SELLING STOCKHOLDER
Keefe, Bruyette & Woods, Inc. (the "Selling Stockholder") was the financial
advisor to the Company in connection with its September 1993 recapitalization,
which raised $44.1 million of capital for the Bank. In connection with the
September 1993 recapitalization, the Company agreed to pay the Selling
Stockholder for its services rendered through delivery of 742,857 shares of
Common Stock at the subscription price of $1.75 per share. The Common Stock was
delivered to the Selling Stockholder pursuant to a stock purchase agreement (the
"Stock Purchase Agreement") between the Company and the Selling Stockholder.
In addition, the Selling Stockholder was engaged by the Company in August
1994 as the Company's financial advisor to advise it in connection with its
submission of the Capital Restoration Plan to the OTS. Such services were
completed in September, 1994.
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock by the Selling Stockholder set forth below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OWNED AND
NAME OFFERED HEREBY
- --------------------------------------------------------------------------- -----------------
<S> <C>
Keefe, Bruyette & Woods, Inc............................................... 742,857
Two World Trade Center, 85th Floor
New York, NY 10048
</TABLE>
The Common Stock is being registered by the Company following a demand by
the Selling Stockholder under the Stock Purchase Agreement pursuant to which the
Company agreed, among other things, to file a Registration Statement for the
sale of the shares of Common Stock offered hereby. With certain exceptions, the
Company is required to bear the expenses of the registration of the shares of
Common Stock offered hereby. Expenses of the registration of the shares of
Common Stock offered hereby are estimated not to exceed $40,000, all of which
will be paid by the Company. Selling expenses for individual transactions will
be borne by the Selling Stockholder. The Company has agreed to indemnify the
Selling Stockholder against certain liabilities, including liabilities under the
Securities Act of 1933. The Stock Purchase Agreement entitles the Selling
Stockholder to an additional demand registration in which the Company must bear
expenses and to unlimited additional rights to join most registrations of Common
Stock initiated by the Company.
16
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholder may sell all or a portion of the Common Stock
offered hereby directly in negotiated transactions or in one or more
transactions on the NYSE at the price prevailing at the time of sale.
Alternatively, the Selling Stockholder may, from time to time, offer the Common
Stock offered hereby through underwriters, dealers or agents (including the
Selling Stockholder) who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholder and/or the
purchaser of any such Common Stock for whom they act as agent. The Selling
Stockholder and any such underwriters, dealers or agents that participate in the
distribution of the Common Stock may be deemed to be underwriters, and any
profit on the sale of the Common Stock by the Selling Stockholder and any
discounts, commissions or concessions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act. At the time a particular offer of Common Stock is made, to the
extent required by applicable law, a Prospectus Supplement will be distributed
that will set forth the number of shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
any discounts, commissions and other items constituting compensation from the
Selling Stockholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers. The Company will not receive any of the proceeds
from the sale by the Selling Stockholder of the Common Stock offered hereby.
LEGAL MATTERS
Gibson, Dunn & Crutcher, Orange County, California, has rendered an opinion
to the effect that the Common Stock offered hereby by the Selling Stockholder
has been duly and validly issued, is fully paid and nonassessable.
EXPERTS
The consolidated financial statements of UnionFed Financial Corporation as
of June 30, 1994 and 1993, and for each of the years in the three-year period
ended June 30, 1994, have been incorporated by reference in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference, and upon the authority
of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the June 30, 1994, consolidated
financial statements contains the following explanatory paragraph:
"The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 12 to the consolidated financial statements, the prompt
corrective action provisions of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA) place restrictions on any
insured depository institution that does not meet certain requirements,
including minimum capital ratios. These restrictions are based on an
institution's FDICIA defined capital category and become increasingly
more severe as an institution's capital category declines. Union Federal
Bank, a federal savings bank (the Bank) and wholly owned subsidiary of
the Company, was deemed "undercapitalized" based upon the Bank's capital
position at June 30, 1994. The Bank has filed a capital restoration plan
with the Office of Thrift Supervision outlining its plans for attaining
the required levels of regulatory capital and that plan has not yet been
approved by the Office of Thrift Supervision. Because the Bank does not
meet the minimum capital thresholds to be considered "adequately
capitalized," it is subject to certain operating restrictions such as
growth limitations, prohibitions on dividend payments and increased
supervisory monitoring by its primary federal regulator. Failure to
increase its capital ratios in accordance with its capital restoration
plan or further declines in its capital ratios as a result of continued
operating losses, such that it becomes "significantly undercapitalized"
or "critically undercapitalized" exposes the Bank to additional
restrictions and regulatory
17
<PAGE>
actions, including limitations on executive compensation, restrictions
on deposit interest rates and regulatory take-over. These matters raise
substantial doubt about the Company's ability to continue as a going
concern. The ability of the Company to continue as a going concern is
dependent upon many factors, including regulatory action and the ability
of management to achieve its capital restoration plan. Management's
plans in regard to these matters are described in Note 12 to the
consolidated financial statements. The accompanying consolidated
financial statements do not include any adjustments that might result
from the outcome of these uncertainties."
The report of KPMG Peat Marwick LLP covering the June 30, 1994 consolidated
financial statements refers to the Company adopting the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" in 1994.
18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
STOCKHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN
ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents
by Reference.................................. 2
Summary........................................ 3
Risk Factors................................... 8
Recent Developments............................ 13
Use of Proceeds................................ 14
Price Range of Common Stock and Dividends...... 14
Capitalization................................. 16
Selling Stockholder............................ 16
Plan of Distribution........................... 17
Legal Matters.................................. 17
Experts........................................ 17
</TABLE>
742,857 SHARES
[LOGO]
UNIONFED FINANCIAL
CORPORATION
COMMON STOCK
---------------------
PROSPECTUS
---------------------
JANUARY , 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this offering to be borne by the
Company are:
<TABLE>
<S> <C>
Registration fees................................................. $ 135
Printing fees and expenses........................................ 2,000
Accounting fees and expenses...................................... 15,000
Legal fees and expenses........................................... 20,000
Blue Sky fees..................................................... 1,000
Miscellaneous..................................................... 1,865
---------
Total....................................................... $ 40,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law (the "DGCL"), the
Company is in certain circumstances permitted to indemnify its directors and
officers and those serving at request of the corporation as director, officer,
employee or agent of another entity against any liability incurred in such
capacity or arising out of such statute, whether or not the Corporation would
have the power to indemnify him against such liability under Section 145 of the
DGCL against certain expenses (including attorneys' fees), judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with threatened, pending or completed civil, criminal, administrative or
investigative actions, suits or proceedings (other than an action by or in the
right of the Company), in which such persons were or are parties, or are
threatened to be made parties, by reason of the fact that they were or are
directors or officers of the Company, if such persons acted in good faith and in
a manner they reasonably believed to be in or not opposed to the best interests
of the Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. In addition, the Company
is in certain circumstances permitted to indemnify its directors and officers
against expenses incurred in connection with the defense or settlement of a
threatened, pending or completed action by or in the right of the Company, and
against amounts paid in settlement of any such action, if such persons acted in
good faith and in a manner they believed to be in or not opposed to the best
interests of the Company provided that the specified court approval is obtained.
Also, under Section 145 of the DGCL, the Company may purchase and maintain
insurance on behalf of any current or former director or officer and those
serving at request of corporation as director, officer, employee or agent of
another entity against any liability incurred in such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
him against such liability under Section 145 of the DGCL.
As permitted by Section 145 of the DGCL, the Bylaws of the Company provide
that the officers and directors of the Company shall be indemnified and held
harmless by the Company to the extent authorized by the DGCL. In addition, the
Bylaws of the Company have a provision allowing the Company to purchase
insurance to the extent permitted in Section 145 of the DGCL.
ITEM 16. EXHIBITS.*
<TABLE>
<S> <C>
1 Stock Purchase Agreement
4.1 Copies of instruments defining the rights of holders of long-term debt of the Company
or any of its subsidiaries are, under Item 601(b)(4)(iii)(A) of Regulation S-K, not
required to be filed, but will be filed upon request of the Securities and Exchange
Commission.
4.2 Form of Warrant to Purchase Common Stock.**
5 Opinion of Gibson, Dunn & Crutcher.
23.1 Consent of Gibson, Dunn & Crutcher (to be included in Exhibit 5).
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
23.2 Consent of KPMG Peat Marwick LLP.
24 Power of Attorney of the Company (reference is hereby made to page II-3).
<FN>
- ------------------------
* Exhibit descriptions followed by a parenthetical reference or asterisks
indicate that the exhibit is incorporated herein by reference from the
described document.
** Filed as an exhibit to UnionFed's 1993 Annual Report on Form 10-K.
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Brea, State of California, on January 12, 1995.
UNIONFED FINANCIAL CORPORATION
By: /s/ DAVID S. ENGELMAN
-----------------------------------
David S. Engelman
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints David S.
Engelman and Ronald M. Griffith, his true and lawful attorneys-in-fact and
agents, each acting alone, with full powers of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all Amendments (including Post-Effective Amendments) to this Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
<C> <S> <C>
Director, Chairman of the
Board,
/s/ DAVID S. ENGELMAN President and
- ----------------------------------- Chief Executive Officer January 12, 1995
David S. Engelman (PRINCIPAL EXECUTIVE
OFFICER)
Senior Vice President,
/s/ STEPHEN J. AUSTIN Chief Financial Officer
- ----------------------------------- and Treasurer January 12, 1995
Stephen J. Austin (PRINCIPAL FINANCIAL
OFFICER)
- ----------------------------------- Director January , 1995
Donald L. Criswell
/s/ WILLIAM DONOVAN
- ----------------------------------- Director January 12, 1995
William Donovan
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------
<C> <S> <C>
/s/ J. DAVID KALL
- ----------------------------------- Director January 12, 1995
J. David Kall
- ----------------------------------- Director January , 1995
Thomas P. Kemp
/s/ WM. S. MARTIN, JR.
- ----------------------------------- Director January 12, 1995
Wm. S. Martin, Jr.
/s/ DAVID PRIMUTH
- ----------------------------------- Director January 12, 1995
David Primuth
/s/ DALE A. WELKE
- ----------------------------------- Director January 12, 1995
Dale A. Welke
/s/ JOHN R. WISE
- ----------------------------------- Director January 12, 1995
John R. Wise
</TABLE>
II-4
<PAGE>
EXHIBIT 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made effective as
of the 28th day of September, 1993, by and between UnionFed Financial
Corporation, a Delaware corporation with its principal place of business located
in Brea, California (the "Company"), and Keefe, Bruyette & Woods, Inc., a
Delaware corporation with its principal place of business in New York, New York
(the "Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, as of September 28, 1993, the Company effected a
recapitalization of the Company and its principal subsidiary, Union Federal
Bank, a federal savings bank (the "Recapitalization");
WHEREAS, the Purchaser acted as a financial advisor to the Company in
connection with the Recapitalization pursuant to an engagement letter dated
April 16, 1993 as amended and supplemented by two letters dated August 30, 1993,
WHEREAS, the Company and the Purchaser have agreed to modify the
manner of payment for such financial advisory services;
WHEREAS, as payment for the services provided to the Company by the
Purchaser in connection with the Recapitalization, the Company has paid
Purchaser an aggregate of $1,532,300.25, including expenses; and
WHEREAS, as more fully set forth below, the Purchaser desires to
purchase shares of common stock, $.01 par value of the Company (the "Common
Stock"), and the Company has agreed to allow the Purchaser to subscribe for such
Common Stock as of the date of the Recapitalization.
NOW, THEREFORE, for and in consideration of the foregoing premises,
and other good and valuable consideration the receipt and sufficiency of all of
which is hereby acknowledged, the parties hereto agree as follows:
1. COMMON STOCK; REGISTRATION RIGHTS. The Common Stock purchased by
the Purchaser hereunder will be issued without registration under the Securities
Act of 1933, as amended (the "Act"), or qualification under the California
Corporate Securities Law of 1968, as amended or any other "Blue Sky" laws (the
"Blue Sky Laws"), pursuant to exemptions from the registration requirements of
the Act and the qualification requirements of the Blue Sky Laws. Such
exemptions only exempt the issuance of the Common Stock to the Purchaser and not
any sale or other disposition of the Common Stock or any interest therein by the
Purchaser. There can be no assurance that the Purchaser will be able to sell,
transfer or otherwise dispose of any of the Common Stock or any interest therein
without registration under the Act. The Purchaser is hereby granted
registration rights in accordance with the Registration Rights terms and
conditions attached hereto as Exhibit A, which are incorporated herein by
reference and by which each of the Purchaser and UnionFed hereby agree to be
bound. The Purchaser agrees that none of the Common Stock or any interest
therein will be sold, transferred or otherwise disposed of unless registered
under the Act, or similar successor law, unless a specific
<PAGE>
exemption from such registration requirements is available with respect to such
resale or disposition. The Purchaser represents that it is acquiring the Common
Stock for its own account and not with a view to or for sale in connection with
any public distribution thereof. It is understood that the disposition of the
Common Stock shall be within the sole control of the Purchase.
2. PURCHASE AND DELIVERY OF SHARES. Subject to the terms,
conditions and limitations herein set forth, the Company hereby agrees to issue
and sell to the Purchaser, and the Purchaser hereby agrees to purchase from the
Company, at the Subscription Price of $1.75 per share, 742,857 shares of Common
Stock (the "Shares"), for an aggregate purchase price for the Shares of
$1,299,999.75.
3. THE CLOSING. Delivery of the Shares, against payment therefor in
the manner contemplated by Section 4, shall take place as soon as practicable
following the date of this Agreement (but in no event later than October 31,
1993) (the "Closing").
4. DELIVERY OF SHARES. On the Closing date, the Shares to be
purchased by the Purchaser hereunder, registered in the name of the Purchaser or
its nominees, as the Purchaser may specify at least two business days prior to
the Closing Date, shall be delivered by or on behalf of the Company to the
Purchaser, for the Purchaser's account, against delivery by the Purchaser of the
purchase price therefor in immediately available funds in the form of one or
more federal funds checks or wire transfer to an account designated by the
Company to the Purchaser or by certified or cashier's check.
5. NOTICES. All communications hereunder will be in writing and, if
to the Company, will be mailed, delivered or telecopied and confirmed to it, at
the offices of the Company at 330 East Lambert Road, Brea, California, 92621,
Attention: Ronald M. Griffith, Senior Vice President, General Counsel and
Corporate Secretary, Facsimile: (714) 256-4841; and if to the Purchaser, will be
mailed, delivered or telecopied and confirmed to it at the offices of Keefe,
Bruyette & Woods, Two World Trade Center, New York, New York 10048 Attention:
Guy G. Woelk, Facsimile: (212) 323-8306.
6. EXPENSES. The Company will pay all expenses incident to the
performance of its obligations hereunder including (i) the preparation, issuance
and delivery of the certificates for the Shares, (ii) the fees and disbursements
of the Company's counsel and accountants, (iii) the fees and expenses incurred
in connection with the listing of the Shares on the New York Stock Exchange,
(iv) the costs and charges of any transfer agent or registrar and (v) all other
costs and expenses incident to the performance of its obligations hereunder that
are not explicitly provided for herein.
7. ENTIRE AGREEMENT. This Agreement and Exhibit A hereto represents
the entire understanding of the parties with respect to the matters addressed
herein, and supersedes all prior written and oral understanding concerning the
subject matter herein.
8. BINDING EFFECT. This Agreement shall be binding upon, and shall
inure solely to the benefit of, each of the parties hereto, and each of their
respective heirs, executors, administrators, successors and permitted assigns,
and no other person shall acquire or have any right under by virtue of this
Agreement. The Purchaser may not assign any of its rights or obligations
hereunder to any other person or entity without the prior written consent of the
Company.
2
<PAGE>
9. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York in effect at the
time of the execution hereof.
10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which counterparts when so executed shall be
deemed to be an original, but all such respective counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, and intending to be legally bound thereby, each of
the Purchaser and UnionFed Financial Corporation has signed or caused to be
signed its name, all on the 27th day of October, 1993.
UNIONFED FINANCIAL CORPORATION
By: ____________________________
Name: Stephen J. Austin
Title: Senior Vice President
KEEFE, BRUYETTE & WOODS, INC.
By: ____________________________
Name: Peter J. Wirth
Title: Senior Vice President
3
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS
SECTION 1. DEFINITIONS. As used in this Exhibit A, the following
terms shall have the meanings specified below:
"BANKING DAY" shall mean a day (a) other than Saturday or Sunday and
(b) on which banks are open for business in New York, New York.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"COMMISSION" shall mean the United States Securities and Exchange
Commission, or any other Federal agency then administering the Securities Act
and the Exchange Act.
"COMPANY" shall mean UnionFed Financial Corporation, a Delaware
corporation.
"DEMAND REGISTRATION" shall have the meaning assigned to such term in
Section 2(B) of this Exhibit A.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar United States federal statute, and the rules and
regulations of the Commission thereunder, as the same shall be in effect from
time to time.
"HOLDER" shall mean any registered holder of KBW Shares designated as
such on the Company's Stock Register.
"KBW" shall mean Keefe, Bruyette & Woods, Inc.
"KBW SHARES" shall mean the 742,857 Shares issued to KBW pursuant to
the Stock Purchase Agreement, any Shares issued as stock dividends or otherwise
distributed to the Holders of such Shares in respect thereof and any securities
into which such Shares may thereafter be changed.
"PERSON" shall mean any individual, association, joint venture,
partnership, joint stock company, corporation, trust, business trust,
government, governmental authority, regulatory authority or other entity.
"PIGGYBACK REGISTRATION" shall have the meaning assigned to such term
in Section 2(A) of this Exhibit A.
"PROSPECTUS" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Shares or Restricted Shares
covered by the Registration Statement and all other amendments and supplements
to the prospectus, including any post-effective amendments and all materials
incorporated by reference in the prospectus.
<PAGE>
"REGISTRATION" shall mean the Demand Registration or a Piggyback
Registration.
"REGISTRATION EXPENSES" shall mean all of the costs and expenses of
each Registration, including all registration and filing fees, fees and expenses
of compliance with securities or blue sky laws, printing expenses, listing fees
and expenses, and fees and disbursements of counsel for the Company and its
independent certified public accountants (including the expenses of any special
audit or cold comfort letters required by or incident to such performance) and
reasonable fees and expenses of one counsel (who shall be selected by the
Required Holders) for the Selling Holders incurred in connection with each
Registration (but not including any underwriting fees, discounts or commissions
attributable to the sale of Restricted Shares except (i) up to $52,000 in fees,
discounts and commissions of an underwriter or selling agent of Restricted
Shares if KBW is not the underwriter and (ii) in the event that KBW is the
underwriter or selling agent up to $25,000 in the event that a qualified
independent underwriter is required by law).
"REGISTRATION STATEMENT" shall have the meaning assigned to such term
in Section 2(C)(i) of this Exhibit A.
"REQUIRED HOLDERS" shall mean the Holders of at least 50% of the
Restricted Shares, as outstanding from time to time.
"RESTRICTED SHARES" shall mean, from and after issuance, each of the
KBW Shares held by the Holder thereof other than Shares (i) sold pursuant to an
effective registration under Section 5 of the Securities Act, or (ii) sold
pursuant to Rule 144 or any similar provision; PROVIDED, however, that a Share
that has ceased to be a Restricted Share shall not thereafter become a
Restricted Share.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar United States federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"SELLING HOLDER" shall mean a Holder who is selling Restricted Shares
pursuant to a Registration.
"SHARES" shall mean shares of the Company's authorized common stock,
par value $.01 per share, and any securities into which such shares may
thereafter be changed.
"Stock Purchase Agreement" shall mean that certain Stock Purchase
Agreement, effective as of September 28, 1993, relating to the purchase by KBW
of 742,857 shares.
"TRANSFER AGENT" shall mean the Person designated by the Company to
keep and maintain the stock books, stockholder lists and stock transfer records
with respect to the Shares or, if no Person is so designated, the Secretary of
the Company.
"WARRANT AGREEMENT" shall mean that certain Warrant Agreement, dated
as of September 28, 1993, between the Company and the investors listed on the
signature pages thereof.
The definitions in this Section 1 shall apply equally to both the
singular and the plural forms of the terms defined. Whenever the context may
require, any pronoun
<PAGE>
shall include the corresponding masculine, feminine and neuter forms. The words
"include," "includes" and "including" shall be deemed to be followed by the
phrase "without limitation."
SECTION 2. REGISTRATION RIGHTS.
(A) PIGGYBACK REGISTRATION RIGHTS.
(i) RIGHT TO PIGGYBACK. Whenever the Company
proposes to register any Shares for its benefit under the Securities Act
(other than under a Registration Statement on Form S-4 or Form S-8 or filed
in connection with an exchange offer or an offering of securities solely to
the Company's existing stockholders) (a "Piggyback Registration"), the
Company will give prompt (in no event less than 20 Banking Days prior to
filing a Registration Statement) written notice to all Holders of its
intention to effect such a Piggyback Registration and will, subject to
Section 2(A)(ii) below, include in such Piggyback Registration all
Restricted Shares with respect to which the Company has received written
requests for inclusion therein within 15 Banking Days after giving of the
Company's notice. Except as may otherwise be provided herein, Restricted
Shares with respect to which such request for Piggyback Registration has
been received will be registered by the Company and offered to the public
on the same terms and subject to the same conditions applicable to the
Shares to be sold by the Company and/or by any other Person selling under
such Piggyback Registration.
(ii) PRIORITY ON PIGGYBACK REGISTRATIONS. If the
managing underwriter or underwriters advise the Company in writing that in
its or their opinion the number of securities proposed to be sold in a
Piggyback Registration exceeds the number that can be sold in such
offering, the Company will include in such Piggyback Registration the
number of securities that, in the opinion of such underwriter or
underwriters, can be sold as follows: (a) first, the securities the
Company proposes to sell; (b) second, the Restricted Warrant Shares (as
defined in the Warrant Agreement) on the basis described in the Warrant
Agreement on a PARI PASSU basis with the Restricted Shares the Holders who
have made requests to be included in such Piggyback Registration propose to
sell, pro rata among such Holders; and (c) third, all other securities
requested to be included in such Piggyback Registration.
(iii) SELECTION OF UNDERWRITERS. If any Piggyback
Registration is an underwritten offering, the Company will select a
managing underwriter or underwriters to administer the offering. In
connection with any Piggyback Registration involving an underwriting, the
Company shall not be required to include any of the Holders' Restricted
Shares in such Piggyback Registration unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters
selected by it.
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(B) DEMAND REGISTRATION RIGHTS.
(i) RIGHT TO DEMAND. The Required Holders may make
a written request to the Company for an underwritten or non-underwritten
registration with the Commission under and in accordance with the
provisions of the Securities Act to register not less than 50% of the
Restricted Shares (a "Demand Registration"). The Company will give prompt
written notice to all Holders who did not join in such request and will,
subject to Section 2(B)(ii) below, include in the Demand Registration all
Restricted Shares requested by such Holders. The Holders shall be entitled
to two Demand Registrations hereunder. Notwithstanding the foregoing, if
the Company shall furnish to the Required Holders a certificate signed by
the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be detrimental to the Company
and its stockholders for a Registration Statement to be filed, the Company
shall have the right to defer such filing for a period of not more than 180
days after receipt of the request of the Required Holders; PROVIDED,
however, that the Company may not utilize such deferral right more than
once with respect to each demand for registration.
(ii) PRIORITY ON A DEMAND REGISTRATION. If the
managing underwriter or underwriters of the Demand Registration advise the
Company in writing that in its or their opinion the number of Restricted
Shares proposed to be sold in such Demand Registration exceeds the number
that can be sold in such offering, the Company will include in the Demand
Registration only the number of Restricted Shares that, in the opinion of
such underwriter or underwriters, can be sold in such offering on a pro
rata basis.
(iii) SELECTION OF UNDERWRITERS. The Required Holders
will select a managing underwriter or underwriters to administer the
offering, which managing underwriter or underwriters shall be of nationally
recognized standing and shall be reasonably acceptable to the Company. No
Holder's Restricted Shares shall be included in the Demand Registration
unless such Holder accepts the terms of the underwriting as agreed upon
between the Required Holders and the underwriters selected by the Required
Holders.
(C) REGISTRATION PROCEDURES. With respect to any Registration, the
Company will:
(i) prepare and file with the Commission a
Registration Statement (a "Registration Statement") that includes the
Restricted Shares and use its best efforts to cause such Registration
Statement to become effective as promptly as reasonably practicable;
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement as
may be necessary to keep the Registration Statement effective for a period
of not less than four months (or such shorter period that will terminate
when all Restricted Shares covered by such Registration Statement have been
sold or withdrawn); cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule
424 under the Securities Act; and comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
securities covered by such Registration Statement during the
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applicable period in accordance with the intended methods of disposition by
the sellers thereof set forth in such Registration Statement or Prospectus
supplement; PROVIDED, however, that if in the opinion of counsel to the
Company the Company is eligible to effect a registration on Form S-3, the
Company shall keep the Registration Statement effective for a period of not
less than nine months (or such shorter period that will terminate when all
Restricted Shares covered by such Registration Statement have been sold or
withdrawn);
(iii) furnish to any Holder of Restricted Shares
included in such Registration Statement such number of conformed copies of
the Registration Statement and any post-effective amendment thereto and
such number of copies of the Prospectus (including each preliminary
Prospectus), and any documents incorporated by reference therein, as such
Holder may reasonably request in order to facilitate the disposition of the
Restricted Shares being sold by such Holder;
(iv) notify each Holder of Restricted Shares included
in such Registration Statement, at any time when a Prospectus relating
thereto is required to be delivered under the Securities Act, when the
Company becomes aware of the happening of any event as a result of which
the Prospectus included in such Registration Statement (as then in effect)
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein in light of the
circumstances under which they were made, not misleading and, as promptly
as reasonably practicable thereafter, prepare and file with the Commission
and make available a supplement or amendment to such Prospectus so that, as
thereafter delivered to the purchasers of such Restricted Shares, such
Prospectus will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;
(v) use its best efforts to cause all KBW Shares to
be listed, by the date such KBW Shares cease to be Restricted Shares as a
result of a Registration or otherwise, on each securities exchange on which
the Shares are then listed or proposed to be listed, if any;
(vi) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement at the earliest possible moment; and
(vii) on or prior to the date on which the
Registration Statement is declared effective, use its best efforts to
register or qualify the Restricted Shares covered by the Registration
Statement for offer and sale under the securities or blue sky laws of each
state and other jurisdiction of the United States as any Holder reasonably
requests in writing; PROVIDED, however, that the Company will not be
required in connection therewith to qualify generally to do business, or to
take any action that would subject it to general service of process in any
such jurisdiction.
Each Holder, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 2(C)(iv) will
discontinue disposition of the Restricted Shares until such Holders' receipt of
the copies of the supplemented or amended Prospectus contemplated by
Section 2(C)(iv) or until it is advised in writing by the Company that the use
of the Prospectus may be resumed, and, if
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so directed by the Company such Holder will, or will request the managing
underwriter or underwriters, if any, to deliver to the Company all copies of the
Prospectus covering such Restricted Shares at the time of receipt of such
notice. If the Company shall give any such notice, the Company shall extend the
period during which such Registration Statement shall be maintained effective
pursuant to this Agreement by the number of days during the period from and
including the date of the giving of such notice pursuant to this Section 2(C)
and including the date when each seller of Restricted Shares covered by such
Registration Statement shall have received copies of the supplemented or amended
prospectus contemplated by this Section 2(C).
(D) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF RESTRICTED SHARES. Each
Holder whose Restricted Shares are included in an underwritten Piggyback
Registration agrees not to effect any public sale or distribution of the
securities being registered or a similar security of the Company or any
securities convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144 or Rule 144A under the Securities Act,
during the 14 days prior to, and during the 180 day period beginning on, the
effective date of such Registration Statement, if and to the extent requested by
the managing underwriter or underwriters of such underwritten public offering.
In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the securities of the Company held by each such
Holder until the end of such period.
(E) INDEMNIFICATION; CONTRIBUTION.
(i) INDEMNIFICATION BY THE COMPANY. To the extent
permitted by law, the Company agrees to indemnify and hold harmless each
Selling Holder of Restricted Shares, any underwriter and each of their
respective officers, directors and agents, and each Person, if any, who
controls such Selling Holder or underwriter within the meaning of the
Securities Act or the Exchange Act (each an "Indemnitee") from and against
any and all losses, claims, damages, liabilities and expenses (including
reasonable attorneys fees and costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement or Prospectus, or arising out
of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of, or are based upon
information with respect to such Indemnitee furnished in writing to the
Company by such Indemnitee expressly for use therein; PROVIDED, however,
that the indemnification contained in this Section 2(E) with respect to any
preliminary prospectus shall not inure to the benefit of any Selling Holder
or underwriter (or to the benefit of any person controlling such Selling
Holder or underwriter) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Shares to any person if a
copy of the Prospectus, as amended or supplemented, shall not have been
delivered or sent to such Person within the time required by the Securities
Act and the regulations thereunder, and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact
contained in such preliminary prospectus was corrected in the Prospectus,
as amended or supplemented, provided that the Company has delivered the
Prospectus, as amended or supplemented, to the Selling Holders or
underwriters on a timely basis to permit such delivery or sending. The
indemnity contained in this Section 2(E) shall not apply to amounts paid in
settlement of any such claim, if
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such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld).
(ii) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any
action or proceeding (including any governmental investigation) shall be
brought or asserted against any Selling Holder or underwriter (or its
officers, directors or agents) or any Person controlling any such Selling
Holder or underwriter in respect of which indemnity may be sought from the
Company, the Company shall be permitted to assume the defense of such
claim; PROVIDED, however, that an Indemnitee shall have the right to retain
its own counsel, with the fees and expenses to be paid by the Company, if
representation of such Indemnitee by counsel retained by the Company would
be inappropriate due to actual or potential differing interests between
such Indemnitee and any other party represented by such counsel in such
proceeding. Any Selling Holder entitled to indemnification hereunder
agrees to give prompt written notice to the Company after the receipt by
such Selling Holder of any notice of the commencement of any action, suit,
proceedings or investigation or threat thereof for which such Selling
Holder may claim indemnification or contribution pursuant to the Stock
Purchase Agreement; PROVIDED, however, that failure to deliver written
notice to the Company within a reasonable time of receiving notice thereof,
if prejudicial to its ability to defend such action, shall relieve the
Company of any liability to the Indemnitee under this Section 2(E), but the
omission so to deliver written notice to the Company will not relieve it of
any liability that it may have to any Indemnitee otherwise than under this
Section 2(E).
(iii) INDEMNIFICATION BY SELLING HOLDERS OF RESTRICTED
SHARES. Each Selling Holder agrees to indemnify and hold harmless the
Company, the other Selling Holders and underwriters and each of their
respective directors, officers and agents, and each Person, if any, who
controls the Company, any other Selling Holders or underwriters within the
meaning of the Securities Act or Exchange Act to the same extent as the
foregoing indemnity from the Company to such Selling Holders and
underwriters, but only with respect to information furnished in writing by
such Selling Holder expressly for use in any Registration Statement or any
amendment thereto or any Prospectus, or any preliminary Prospectus relating
to the Restricted Shares. In case any action or proceeding shall be
brought against the Company, each other Selling Holder, the underwriters or
each of their respective directors, officers or agents, or any such
controlling Person, in respect of which indemnity may be sought against
such Selling Holder, such Selling Holder shall have the rights and duties
given to the Company, and the Company, each other Selling Holder, the
underwriters or each of their respective directors, officers or agents, or
such controlling Person shall have the rights and duties given to such
Selling Holder, by Section 2(E)(ii).
(iv) CONTRIBUTION. If the indemnification provided
for in this Section 2(E) is unavailable to the Company, the Selling Holders
or the underwriters in respect of any losses, claims, damages, liabilities
or judgments referred to herein, then each such indemnifying party, in lieu
of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments in such proportion as is appropriate to
reflect the relative fault of the indemnifying parties and indemnified
parties in connection with such statements or omissions which resulted in
the losses, claims, damages, liabilities or judgments, as
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well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not
be just and equitable if contribution pursuant to this Section 2(E)(iv)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in
the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities
or judgments referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No Person guilty
of fraudulent misrepresentations shall be entitled to contribution from any
Person who was not so guilty. For the purposes of this Section 2(E)(iv),
each director of the Company, each officer who signed the Registration
Statement and each Person, if any, who controls the Company within the
meaning of the Securities Act shall have the same rights to contribution as
the Company.
(F) REPORTING REQUIREMENTS UNDER THE EXCHANGE ACT. The Company shall
timely file such information, documents and reports as the Commission may
require or prescribe under Section 13 or 15(d) (whichever is applicable) of the
Exchange Act.
(G) OTHER REGISTRATION RIGHTS. The Company will not grant any Person
any demand or piggyback registration rights with respect to the Shares that are
superior to the demand or piggyback registration rights granted to the Holders
of Restricted Shares pursuant to this Section 2.
(H) REGISTRATION EXPENSES. The Registration Expenses related to the
Demand Registrations and the Piggyback Registrations shall be paid by the
Company.
SECTION 3. TRANSFER.
(A) The KBW Shares may be transferred by the Holders thereof to a
third party; PROVIDED, however, that any such transfer shall be in compliance
with, and subject to, the terms and conditions of the Stock Purchase Agreement
and all state and Federal securities laws applicable to such transfer.
(B) Unless otherwise permitted by this Section 3, each stock
certificate for KBW Shares initially issued, and each stock certificate for KBW
Shares issued to any subsequent transferee of any such stock certificate, shall
bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
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TO THE SHARES UNDER SUCH ACTS OR AN EXEMPTION FROM REGISTRATION IS NOT
REQUIRED. THESE SHARES ARE SUBJECT TO THE TERMS OF THAT CERTAIN STOCK
PURCHASE AGREEMENT, EFFECTIVE AS OF SEPTEMBER 28, 1993 (INCLUDING EXHIBIT A
ATTACHED THERETO AND INCORPORATED THEREIN) BETWEEN THE COMPANY AND KEEFE,
BRUYETTE & WOODS."
together with any legend required by the laws of any state or other
jurisdiction.
(C) Notwithstanding the foregoing provisions of this Section 3, the
restrictions imposed by this Section 3 upon the transferability of the KBW
Shares shall cease and terminate when such KBW Shares shall no longer be
Restricted Shares. Whenever the restrictions imposed by this Section 3 shall
terminate as to any KBW Shares, the holder thereof shall be entitled to receive
from the Company, without expense to the Holder, a new stock certificate not
bearing the restrictive legend set forth in this Section 3.
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EXHIBIT 5
[GIBSON, DUNN & CRUTCHER LETTERHEAD]
January 17, 1995
UnionFed Financial Corporation
330 East Lambert Road
Brea, California 92621
Re: Registration Statement on Form S-3 for up to
742,857 Shares of Common Stock
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (the
"Registration Statement") filed by UnionFed Financial Corporation, a Delaware
corporation (the "Company"), with the Securities and Exchange Commission on
January 17, 1995 in connection with the registration under the Securities Act of
1933, as amended, of up to 742,857 shares of the Company's Common Stock, par
value $.01 per share (the "Shares") to be sold in connection with the proposed
offering by Keefe, Bruyette & Woods, Inc. (the "Selling Stockholder") described
in the Registration Statement.
As your counsel, we have examined the Company's Certificate of
Incorporation, as amended to date, and Bylaws and the records of corporate
proceedings and other actions taken by the Company in connection with the
authorization, issuance and sale of the Shares to the Selling Stockholder.
Based upon the foregoing and in reliance thereon, it is our opinion that the
Shares are legally issued, fully paid, and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under the
caption "Legal Matters" in the Prospectus forming a part of said Registration
Statement.
Very truly yours,
/s/ Gibson, Dunn & Crutcher
GIBSON, DUNN & CRUTCHER
<PAGE>
EXHIBIT 23.2
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
UnionFed Financial Corporation:
We consent to the use of our reports incorporated herein by reference and
to the reference to our firm under the heading "Experts" in the prospectus.
Our report dated July 29, 1994, except for Notes 11 and 12 to the
consolidated financial statements which are as of August 5, 1994 and September
15, 1994, respectively, contains an explanatory paragraph that states:
"The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 12 to the consolidated financial statements, the
prompt corrective action provisions of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (FDICIA) place restrictions on any
insured depository institution that does not meet certain
requirements, including minimum capital ratios. These restrictions
are based on an institution's FDICIA defined capital category and
become increasingly more severe as an institution's capital category
declines. Union Federal Bank, a federal savings bank (the Bank) and
wholly owned subsidiary of the Company, was deemed "undercapitalized"
based upon the Bank's capital position at June 30, 1994. The Bank has
filed a capital restoration plan with the Office of Thrift Supervision
outlining its plans for attaining the required levels of regulatory
capital and that plan has not yet been approved by the Office of
Thrift Supervision. Because the Bank does not meet the minimum
capital thresholds to be considered "adequately capitalized," it is
subject to certain operating restrictions such as growth limitations,
prohibitions on dividend payments and increased supervisory monitoring
by its primary federal regulator. Failure to increase its capital
ratios in accordance with its capital restoration plan or further
declines in its capital ratios as a result of continued operating
losses, such that it becomes "significantly undercapitalized" or
"critically undercapitalized" exposes the Bank to additional
restrictions and regulatory actions, including limitations on
executive compensation, restrictions on deposit interest rates and
regulatory take-over. These matters raise substantial doubt about the
Company's ability to continue as a going concern. The ability of the
Company to continue as a going concern is dependent upon many factors,
including regulatory action and the ability of management to achieve
its capital restoration plan. Management's plans in regard to these
matters are described in Note 12 to the consolidated financial
statements. The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties."
Our report also refers to the Company adopting the provisions of the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" in 1994.
KPMG PEAT MARWICK LLP
Los Angeles, California
January 17, 1995
