<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
---------------------- ----------------------
Commission File Number: 33-82654
-------------------------------------------------------
First Nationwide Holdings Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3778552
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
135 Main Street, San Francisco, CA 94105
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
415-904-0100
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
----- -----
The number of shares outstanding of registrant's classes of $1.00 par
value common stock, as of the close of business on May 8, 1998: 800 shares of
class A common stock; and 200 shares of class B common stock.
Page 1 of 32 pages
Exhibit index on page: 31
<PAGE>
FIRST NATIONWIDE HOLDINGS INC.
FIRST QUARTER 1998 REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Unaudited Consolidated Balance Sheets
March 31, 1998 and December 31, 1997......................... 3
Unaudited Consolidated Statements of Income
Three Months ended March 31, 1998 and 1997................... 4
Unaudited Consolidated Statements of Comprehensive Income
Three Months ended March 31, 1998 and 1997................... 5
Unaudited Consolidated Statement of Stockholders' Equity
Three Months ended March 31, 1998............................ 6
Unaudited Consolidated Statements of Cash Flows
Three Months ended March 31, 1998 and 1997................... 7
Notes to Unaudited Consolidated Financial Statements......... 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................ 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................ 30
Item 2. Changes in Securities........................................ 30
Item 3. Defaults Upon Senior Securities.............................. 30
Item 4. Submission of Matters to a Vote of Security Holders.......... 30
Item 5. Other Information............................................ 31
Item 6. Exhibits and Reports on Form 8-K............................. 31
Page 2
<PAGE>
FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(Unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
Assets
Cash and amounts due from banks $ 379,831 $ 350,214
Interest-bearing deposits in other banks 128 36,164
Short-term investment securities 84,305 25,933
----------- -----------
Cash and cash equivalents 464,264 412,311
Securities available for sale, at fair value 988,235 813,085
Securities held to maturity 58,424 58,299
Mortgage-backed securities available for sale, at fair value 5,695,135 5,076,598
Mortgage-backed securities held to maturity 1,250,639 1,337,877
Loans held for sale, net 1,887,856 1,483,466
Loans receivable, net 18,977,777 19,424,410
Investment in Federal Home Loan Bank ("FHLB") System 485,793 468,191
Office premises and equipment, net 161,047 159,349
Foreclosed real estate, net 75,674 76,997
Accrued interest receivable 196,637 188,203
Intangible assets (net of accumulated amortization of
$71,383 in 1998 and $60,294 in 1997) 669,831 675,927
Mortgage servicing rights 625,554 536,703
Other assets 651,119 635,663
----------- -----------
Total assets $32,187,985 $31,347,079
=========== ===========
Liabilities, Minority Interest and Stockholders' Equity
Deposits $16,403,429 $16,202,605
Securities sold under agreements to repurchase 1,965,818 1,842,442
Borrowings 11,257,067 10,769,594
Other liabilities 699,027 702,475
----------- -----------
Total liabilities 30,325,341 29,517,116
----------- -----------
Commitments and contingencies -- --
Minority interest 986,810 986,456
Stockholders' equity:
Floating rate cumulative perpetual preferred stock, $1.00 par value,
liquidation value of $15,000 per share, 24,000 shares authorized, 0
shares and 1,712 shares issued and outstanding
at March 31, 1998 and December 31, 1997, respectively -- 25,680
Class A common stock, $1.00 par value, 800 shares
authorized, issued and outstanding 1 1
Class B common stock, $1.00 par value, 200 shares
authorized, issued and outstanding -- --
Additional paid-in capital 32,677 31,890
Net unrealized holding gain on securities available for sale 31,159 35,162
Retained earnings (substantially restricted) 811,997 750,774
----------- -----------
Total stockholders' equity 875,834 843,507
----------- -----------
Total liabilities, minority interest and stockholders' equity $32,187,985 $31,347,079
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 3
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FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Interest income:
Loans receivable $384,720 $390,643
Mortgage-backed securities available for sale 81,502 61,005
Mortgage-backed securities held to maturity 24,857 29,940
Loans held for sale 27,336 17,253
Securities available for sale 13,723 10,971
Securities held to maturity 874 71
Interest-bearing deposits in other banks 410 2,868
--------- ---------
Total interest income 533,422 512,751
--------- ---------
Interest expense:
Deposits 178,175 187,020
Securities sold under agreements to repurchase 26,528 34,383
Borrowings 163,760 123,588
--------- ---------
Total interest expense 368,463 344,991
--------- ---------
Net interest income 164,959 167,760
Provision for loan losses 10,000 19,950
--------- ---------
Net interest income after provision for loan losses 154,959 147,810
--------- ---------
Noninterest income:
Loan servicing fees, net 36,962 39,714
Customer banking fees and service charges 25,346 22,519
Gain on sale of loans, net 14,505 2,869
(Loss) gain on sale of assets, net (379) 22
Dividends on FHLB stock 7,007 5,962
Other income 6,337 7,753
--------- ---------
Total noninterest income 89,778 78,839
--------- ---------
Noninterest expense:
Compensation and employee benefits 62,981 64,480
Occupancy and equipment 21,483 20,682
Savings Association Insurance Fund ("SAIF") deposit insurance premium 2,573 2,653
Loan expense 9,595 7,824
Marketing 3,505 4,068
Professional fees 8,710 9,103
Data processing 2,840 2,935
Foreclosed real estate operations, net (1,720) 1,005
Amortization of intangible assets 11,089 12,106
Other 23,696 28,430
--------- ---------
Total noninterest expense 144,752 153,286
--------- ---------
Income before income taxes and minority interest 99,985 73,363
Income tax expense 15,232 11,654
--------- ---------
Income before minority interest 84,753 61,709
Minority interest 22,952 19,849
--------- ---------
Net income 61,801 41,860
Preferred stock dividends 578 4,523
--------- ---------
Net income available to common stockholders $ 61,223 $ 37,337
========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 4
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FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net income $61,801 $41,860
Other comprehensive income, net of tax:
Unrealized holding (loss) gain on securities
available for sale:
Unrealized holding (loss) gain arising during (3,855) 25,608
the period
Less: reclassification adjustment for gains
included in net loss (148) --
------- -------
Other comprehensive (loss) income (4,003) 25,608
------- -------
Comprehensive income $57,798 $67,468
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 5
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FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Net unrealized
Additional holding gains on Total
Preferred Common paid-in securities Retained stockholders'
stock stock capital available for sale earnings equity
--------- ------ ---------- ------------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 25,680 $1 $31,890 $35,162 $750,774 $843,507
Net income -- -- -- -- 61,801 61,801
Redemption of FN Holdings
Preferred Stock (25,787) -- 787 -- -- (25,000)
Change in net unrealized holding
gains on securities available for
sale -- -- -- (4,003) -- (4,003)
Stock dividends 107 -- -- -- (107) --
Cash dividends on preferred stock -- -- -- -- (471) (471)
--------- --- ------- ------- --------- --------
Balance at March 31, 1998 $ -- $1 $32,677 $31,159 $811,997 $875,834
========= === ======= ======= ========= ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 6
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FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 61,801 $ 41,860
Adjustments to reconcile net income to net cash used in
operating activities:
Amortization of intangible assets 11,089 12,106
Accretion of purchase accounting premiums and discounts, net (2,239) (4,847)
Amortization of mortgage servicing rights 27,218 24,285
Provision for loan losses 10,000 19,950
Loss (gain) on sales of assets, net 379 (22)
Loss on sale of branches 86 --
Gain on sales of foreclosed real estate, net (3,812) (3,066)
Loss on sale of loans, net 24,473 23,024
Depreciation and amortization of office premises and equipment 5,469 3,638
Amortization of deferred debt issuance costs 1,662 880
FHLB stock dividends (7,007) (5,962)
Capitalization of originated mortgage servicing rights
and excess servicing fees receivable (38,978) (25,893)
Purchases and originations of loans held for sale (2,267,462) (1,502,274)
Proceeds from the sale of loans held for sale 1,835,401 1,201,502
(Increase) decrease in other assets (9,833) 80,172
Increase in accrued interest receivable (7,852) (4,854)
Increase (decrease) in other liabilities 21,777 (13,377)
Minority interest 22,952 19,849
----------- -----------
Net cash used in operating activities (314,876) (133,029)
----------- -----------
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
(Continued)
Page 7
<PAGE>
FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from investing activities:
Acquisitions:
Cal Fed Acquisition $ -- $ (161,196)
GSAC Acquisition (123,718) --
Purchases of securities available for sale (481,588) (394,709)
Proceeds from maturities of securities available for sale 312,262 105,810
Purchases of securities held to maturity (407) --
Proceeds from maturities of securities held to maturity 282 3,800
Purchases of mortgage-backed securities available for sale (1,052,098) (686,510)
Principal payments on mortgage-backed securities available for sale 422,098 147,843
Proceeds from sales of mortgage-backed securities available for sale 3,195 7,589
Principal payments on mortgage-backed securities held to maturity 87,101 69,400
Proceeds from sales of loans 346 2,000
Net decrease in loans receivable 521,816 460,166
Purchases of FHLB stock, net (17,602) --
Purchases of office premises and equipment (9,615) (12,815)
Proceeds from disposal of office premises and equipment 2,501 5,282
Proceeds from sales of foreclosed real estate 33,904 34,181
Purchases of mortgage servicing rights (77,091) (11,697)
---------- -----------
Net cash flows used in investing activities (378,614) (430,856)
---------- -----------
Cash flows from financing activities:
Net increase (decrease) in deposits 201,008 (476,129)
Proceeds from additional borrowings 4,828,742 3,821,502
Principal payments on borrowings (4,359,104) (4,605,063)
Net increase in securities sold under agreements to repurchase 123,445 1,037,114
Proceeds from FN Escrow Merger -- 603,313
Issuance of REIT Preferred Stock, net -- 482,650
Redemption of FN Holdings/FN Escrow Preferred Stock -- (17,250)
Redemption of FN Holdings Preferred Stock (25,000) (31,250)
Dividends on preferred stock (471) --
Dividends paid to minority stockholders, net of taxes (23,177) (20,959)
Capital distribution to parent -- (550)
----------- -----------
Net cash flows provided by financing activities 745,443 793,378
----------- ------------
Net change in cash and cash equivalents 51,953 229,493
Cash and cash equivalents at beginning of period 412,311 269,869
----------- ------------
Cash and cash equivalents at end of period $ 464,264 $ 499,362
=========== ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
Page 8
<PAGE>
FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
(1) Basis of Presentation
The accompanying consolidated financial statements were prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for meeting the requirements of
Regulation S-X, Article 10 and therefore do not include all disclosures
necessary for complete financial statements. In the opinion of management, all
adjustments have been made that are necessary for a fair presentation of the
financial position and results of operations and cash flows as of and for the
periods presented. All such adjustments are of a normal recurring nature. The
results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the entire
fiscal year or any other interim period. Certain amounts for the three month
period in the prior year have been reclassified to conform with the current
period's presentation.
The accompanying consolidated financial statements include the accounts of
First Nationwide Holdings Inc. ("FN Holdings" or the "Company"), California
Federal Bank, A Federal Savings Bank and its subsidiaries. On January 3, 1997,
First Nationwide Bank, A Federal Savings Bank merged with and into California
Federal Bank, A Federal Savings Bank (the "Cal Fed Acquisition"). Unless the
context otherwise indicates, (i) "Old California Federal" refers to California
Federal Bank, A Federal Savings Bank prior to the consummation of the Cal Fed
Acquisition and (ii) "California Federal" or "Bank" refers to California
Federal Bank, A Federal Savings Bank, as the surviving entity after the
consummation of the Cal Fed Acquisition, and to First Nationwide and its
predecessors for periods prior to the Cal Fed Acquisition. All significant
intercompany balances and transactions have been eliminated in consolidation.
These financial statements should be read in conjunction with the consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997. All terms used but not defined elsewhere
herein have meanings ascribed to them in the Company's Annual Report on Form
10-K.
Minority interest represents amounts attributable to the preferred stock
of the Bank, the preferred stock ("REIT Preferred Stock") of California Federal
Preferred Capital Corporation, whose common stock is wholly owned by the Bank,
and that portion of stockholders' equity of Auto One Acceptance Corporation, a
subsidiary of the Bank ("Auto One"), attributable to 20% of its common stock.
Earnings per share data is not presented due to the limited ownership of
the Company. FN Holdings is a holding company whose only significant asset is
all of the common stock of the Bank, and therefore all activities for the
consolidated entity are carried out by the Bank and its operating subsidiaries.
(2) Acquisitions
On February 4, 1998, Auto One acquired 100% of the partnership interests
in Gulf States Acceptance Company, a Delaware limited partnership ("GSAC") and
its general partner, Gulf States Financial Services, Inc., a Texas corporation;
GSAC was liquidated and its assets and liabilities were transferred to Auto One
(the "GSAC Acquisition"). The aggregate consideration paid in connection with
the GSAC Acquisition was approximately $13.6 million plus a 20% interest in the
common stock of Auto One.
On February 4, 1998, First Nationwide (Parent) Holdings Inc. ("Parent
Holdings"), parent company of FN Holdings and the Bank, and Hunter's Glen/Ford
Ltd. ("Hunter's Glen"), a 20% minority shareholder of FN Holdings, entered into
a definitive merger agreement ("Golden State Merger Agreement") with Golden
State Bancorp Inc. ("Golden State"), the publicly traded parent company of
Glendale Federal Bank, Federal Savings Bank ("Glendale Federal"), pursuant to
which Parent Holdings, Hunter's Glen and Golden State agreed to a tax-free
exchange of shares in a merger transaction (the "Golden State Merger"), to be
accounted for under the purchase method of accounting. In connection with the
execution of the Golden State Merger Agreement, Golden State, Glendale Federal,
the Bank, Stephen J. Trafton, Chairman of the Board, President and Chief
Executive Officer of Golden State and Richard A. Fink, Vice Chairman of Golden
State, entered into a Litigation Management Agreement ("Litigation Management
Agreement") pursuant to which, among other things, Messrs. Trafton and Fink
will oversee and manage the California Federal Litigation (hereinafter defined)
and continue to oversee and manage similar litigation being prosecuted by
Glendale Federal, following the consummation of the Golden State Merger.
Following the Golden State Merger, the combined parent company, Golden State,
will have 135 to 145 million common shares outstanding and will continue to be
a publicly traded company. As part of the Golden State Merger Agreement,
Glendale Federal will be merged with and into the Bank. At December 31, 1997,
Glendale Federal had total assets of approximately $16.0 billion and deposits
of $9.5
Page 9
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FIRST NATIONWIDE HOLDINGS INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
billion and operated 181 branches and 26 loan offices in California. The Golden
State Merger is subject to regulatory and stockholder approval and is expected
to close during the third quarter of 1998.
On March 29, 1998, the Company signed a definitive agreement to sell its
Florida bank franchise (consisting of 24 branches with deposits of $1.5
billion) to Union Planters Bank of Florida, a wholly owned subsidiary of Union
Planters Corp. (the "Florida Branch Sale"). The Company expects to record a
pre-tax gain of approximately $110 million in connection with the Florida
Branch Sale, representing a deposit premium of approximately 7.5%. This
transaction is subject to regulatory approval and is expected to close in the
third quarter of 1998.
(3) Cash, Cash Equivalents, and Statement of Cash Flows
The Company uses the indirect method to present cash flows from operating
activities. Cash paid for interest for the three months ended March 31, 1998
and 1997 was $341.2 million and $318.9 million, respectively.
During the three months ended March 31, 1998, noncash activity consisted
of transfers of $33.9 million from loans receivable to foreclosed real estate,
$4.4 million of loans made to facilitate sales of real estate owned and
transfers of $3.2 million from loans held for sale (at lower of cost or market)
to mortgage-backed securities classified as trading securities upon the
securitization of certain of the Bank's single-family loans. Noncash activity
also includes the retirement of preferred stock of $.8 million and the issuance
of additional preferred stock through preferred stock dividends of $.1 million.
During the three months ended March 31, 1997, noncash activity consisted
of transfers of $41.2 million from loans receivable and $1.2 million from loans
held for sale (at lower of cost or market) to foreclosed real estate, the
retirement of preferred stock of $.3 million, the issuance of additional
preferred stock through preferred stock dividends of $.8 million and the
forgiveness of a $19 million loan from an affiliate of FN Holdings in exchange
for the redemption of the FN Holdings/FN Escrow Preferred Stock.
(4) Minority Interest
In connection with the GSAC Acquisition, Auto One issued 250 shares of
common stock, par value $1.00 per share, representing a 20% interest in Auto
One.
(5) Stockholders' Equity
Cash dividends on the FN Holdings Preferred Stock totalled $.5 million and
$3.8 million during the three months ended March 31, 1998 and 1997,
respectively. There were no dividends or distributions on common stock during
the three months ended March 31, 1998 or 1997.
(6) Newly Issued Accounting Pronouncements
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS No. 131"). SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. SFAS No. 131 also establishes standards for related disclosures
about products and services, geographic areas, and major customers. This
statement supersedes FASB Statement No. 14, Financial Reporting for Segments of
a Business Enterprise, but retains the requirement to report information about
major customers. It amends FASB Statement No. 94, Consolidation of All
Majority-Owned Subsidiaries, to remove the special disclosure requirements for
previously unconsolidated subsidiaries. This statement is effective for fiscal
years beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years is to be restated. This statement
need not be applied to interim financial statements in the initial year of
application, but comparative information for interim periods in the initial
year of application is to be reported in financial statements for interim
periods in the second year of application. This statement has no impact on the
financial condition or results of operations of the Company, but will require
changes in the Company's disclosure requirements.
Page 10
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CALIFORNIA FEDERAL BANK, A FEDERAL SAVINGS BANK AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("SFAS No. 132"), an amendment of FASB Statements No.
87, 88 and 106. SFAS No. 132 revises employers' disclosures about pension and
other postretirement benefit plans. It does not change the measurement or
recognition of those plans. It standardizes the disclosure requirements for
pensions and other postretirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis, and eliminates certain
disclosures that are no longer useful as they were when FASB Statements No. 87,
Employers' Accounting for Pensions, No. 88, Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits, and No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, were issued. SFAS No. 132 is effective for fiscal
years beginning after December 15, 1997 and requires restatement of disclosures
for earlier periods provided for comparative purposes, if available. It is not
expected that the Company will experience any material revision in its
disclosures when SFAS No. 132 is adopted.
Page 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements contained in this Report on Form 10-Q that are not purely
historical are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Company's expectations, intentions,
beliefs or strategies regarding the future. Forward-looking statements include
the Company's statements regarding liquidity, provision for loan losses,
capital resources and anticipated expense levels in "Management's Discussion
and Analysis of Financial Condition and Results of Operations." In addition, in
those and other portions of this document, the words "anticipate," "believe,"
"estimate," "expect," "intend," and other similar expressions, as they relate
to the Company or the Company's management, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions. It is important to note that the Company's
actual results could differ materially from those described herein as
anticipated, believed, estimated or expected. Among the factors that could
cause results to differ materially are the risks discussed in the "Risk
Factors" section included in the Company's Registration Statement on Form S-1
filed with the Securities and Exchange Commission on February 3, 1997 (File No.
333-21015) and declared effective on February 26, 1997. The Company assumes no
obligation to update any such forward-looking statement.
OVERVIEW
The principal business of FN Holdings, through California Federal,
consists of (i) operating retail deposit branches to serve consumers in
California and, to a lesser extent, in Florida and Nevada, (ii) originating
and/or purchasing, on a nationwide basis, 1-4 unit residential loans and, to a
lesser extent, certain commercial real estate and consumer loans, for
investment and (iii) mortgage banking activities, including originating and
servicing 1-4 unit residential loans for others. Revenues are derived primarily
from interest earned on loans, interest received on government and agency
securities and mortgage-backed securities, gains on sales of loans and other
investments and fees received in connection with loan servicing, securities
brokerage and other customer service transactions. Expenses primarily consist
of interest on customer deposit accounts, interest on short-term and long-term
borrowings, provisions for losses, general and administrative expenses
consisting of compensation and benefits, advertising and marketing, premises
and equipment, loan expenses, deposit insurance assessments, data processing
and other general and administrative expenses.
Acquisitions and Sales
On February 4, 1998, Auto One consummated the GSAC Acquisition for a
purchase price of $22.5 million plus a 20% interest in the common stock of Auto
One.
Net Income
FN Holdings reported net income for the three months ended March 31, 1998
of $61.8 million compared with net income of $41.9 million for the
corresponding period in 1997.
Net interest income was $165.0 million for the three months ended March
31, 1998, compared to $167.8 million in the same period in 1997. The decrease
in 1998 over 1997 is primarily due to a reduction in the net interest margin
resulting from prepayments of higher rate interest-earning assets being
replaced with interest-earning assets having comparatively lower rates,
primarily reflecting the flattening of the yield curve which occurred in 1997
and management's steps to limit interest rate risk.
Year 2000
During the year ended December 31, 1997, the Company finalized its plan to
address issues related to required changes in computer systems for the year
2000 ("Year 2000"). Issues arise because computer systems and related software
have been designed to recognize only dates that relate to the 20th century.
Accordingly, if no changes are implemented, computer systems would interpret
"1/1/00" as January 1, 1900 instead of January 1, 2000. Additionally, some
equipment, being controlled by microprocessor chips, may not deal appropriately
with a year "00."
Page 12
<PAGE>
The Company has formed an internal task force to determine what changes
are needed in its custom software and what changes are required to be made in
software purchased from third party vendors as well as what steps will be
necessary to ensure continued operations of the Company's equipment.
It is expected that, by December 31, 1998, all issues related to Year 2000
will be addressed, either by programming changes to the Company's custom
software, by programming changes implemented by third party vendors to
purchased systems, or through the upgrading or purchase of Year 2000-compliant
hardware and equipment. Extensive testing is expected to occur during 1999.
Year 2000 is the highest priority project within the Information and Technology
Services unit of the Company. Management believes there is no material risk
that the Company will fail to address Year 2000 issues in a timely manner. It
is currently expected that costs related to Year 2000, not including Year 2000
costs associated with the Golden State Merger, will total approximately $14
million over the years 1997 to 1999, of which $1.9 million and $3.3 million
have been incurred during the three months ended March 31, 1998 and since the
inception of the Year 2000 project, respectively.
Financial Condition
During the three months ended March 31, 1998, consolidated total assets
increased $.8 billion, to $32.2 billion, from December 31, 1997, and total
liabilities increased from $29.5 billion to $30.3 billion.
During the three months ended March 31, 1998, minority interest increased
by $.4 million. This increase is the result of the issuance of Auto One common
stock as part of the GSAC Acquisition.
The Company's non-performing assets, consisting of non-performing loans,
net of purchase accounting adjustments and specific allowances for loan losses,
foreclosed real estate, net, and repossessed assets, decreased to $261 million
at March 31, 1998 compared with $272 million at December 31, 1997. Total
non-performing assets as a percentage of the Bank's total assets decreased to
.81% at March 31, 1998 from .87% at December 31, 1997.
Page 13
<PAGE>
RESULTS OF OPERATIONS
Three Months ended March 31, 1998 versus Three Months ended March 31, 1997
The following table sets forth, for the periods and at the dates
indicated, information regarding the Company's consolidated average balance
sheets, together with the total dollar amounts of interest income and interest
expense and the weighted average interest rates for the periods presented.
Average balances are calculated on a daily basis. The information presented
represents the historical activity of the Company.
<TABLE>
<CAPTION>
Three months ended
March 31, 1998
------------------------------------------
Average Average
Balance Interest Rate
------- -------- -------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Interest-earning assets (1):
Securities and interest-bearing deposits in banks (2) $ 955 $ 15 6.29%
Mortgage-backed securities available for sale 5,087 81 6.41
Mortgage-backed securities held to maturity 1,292 25 7.69
Loans held for sale, net 1,485 27 7.36
Loans receivable, net 19,744 385 7.79
-------- ----- ----
Total interest-earning assets 28,563 533 7.47%
----- ----
Noninterest-earning assets 2,932
--------
Total assets $31,495
========
LIABILITIES, MINORITY INTEREST
AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits $16,133 178 4.48%
Securities sold under agreements to repurchase 1,864 27 5.69
Borrowings (3) 10,659 163 6.23
-------- ----- ----
Total interest-bearing liabilities 28,656 368 5.21%
----- ----
Noninterest-bearing liabilities 995
Minority interest 984
Stockholders' equity 860
--------
Total liabilities, minority interest and
stockholders' equity $31,495
========
Net interest income $165
=====
Interest rate spread 2.26%
====
Net interest margin 2.24%
====
Average equity to average assets 2.73%
====
</TABLE>
Page 14
<PAGE>
<TABLE>
<CAPTION>
Three months ended
March 31, 1997
------------------------------------------
Average Average
Balance Interest Rate
------- -------- -------
(dollars in millions)
<S> <C> <C> <C>
ASSETS
Interest-earning assets (1):
Securities and interest-bearing deposits in banks (2) $ 950 $ 14 5.86%
Mortgage-backed securities available for sale 3,552 61 6.87
Mortgage-backed securities held to maturity 1,577 30 7.59
Loans held for sale, net 995 17 6.93
Loans receivable, net 20,050 391 7.79
--------- ----- ----
Total interest-earning assets 27,124 513 7.56%
----- ----
Noninterest-earning assets 3,095
---------
Total assets $30,219
=========
LIABILITIES, MINORITY INTEREST
AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits $ 16,845 187 4.50%
Securities sold under agreements to repurchase 2,457 34 5.60
Borrowings (3) 7,796 124 6.43
--------- ----- ----
Total interest-bearing liabilities 27,098 345 5.16%
----- ----
Noninterest-bearing liabilities 1,409
Minority interest 812
Stockholders' equity 900
---------
Total liabilities, minority interest
and stockholders' equity $30,219
=========
Net interest income $168
=====
Interest rate spread 2.40%
====
Net interest margin 2.40%
====
Average equity to average assets 2.98%
====
</TABLE>
- ------------------
(1) Non-performing assets are included in the average balances for the periods
indicated.
(2) The information presented includes securities held to maturity, securities
available for sale and interest-bearing deposits in other banks.
(3) Interest and average rate include the impact of interest rate swaps.
Page 15
<PAGE>
The following table presents certain information regarding changes in
interest income and interest expense of the Company during the periods
indicated. The dollar amount of interest income and interest expense fluctuates
depending upon changes in the respective interest rates and upon changes in the
respective amounts (volume) of the Company's interest-earning assets and
interest-bearing liabilities. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable
to (i) changes in volume (changes in average outstanding balances multiplied by
the prior period's rate) and (ii) changes in rate (changes in average interest
rate multiplied by the prior period's volume). Changes attributable to both
volume and rate have been allocated proportionately.
<TABLE>
<CAPTION>
Three months ended March 31, 1998 vs. 1997
Increase (Decrease) Due to
------------------------------------------
Volume Rate Net
------ ---- ---
<S> <C> <C> <C>
INTEREST INCOME: (in millions)
Securities and interest-bearing deposits in banks $ -- $ 1 $ 1
Mortgage-backed securities available for sale 24 (4) 20
Mortgage-backed securities held to maturity (5) -- (5)
Loans held for sale 9 1 10
Loans receivable, net (6) -- (6)
------- ----- -----
Total 22 (2) 20
------- ----- -----
INTEREST EXPENSE:
Deposits (8) (1) (9)
Securities sold under agreements to repurchase (9) 1 (8)
Borrowings 44 (4) 40
------- ----- -----
Total 27 (4) 23
------- ----- -----
Change in net interest income $ (5) $ 2 $ (3)
======= ===== =====
</TABLE>
The volume variances in total interest income and total interest expense
for the three months ended March 31, 1998 compared to the corresponding period
in 1997 are largely due to increased purchases of mortgage-backed securities
funded with FHLB advances. The positive total rate variance of $2 million is
primarily attributed to the increase in FHLB advances, partially offset by the
comparatively lower market rates on mortgage-backed securities purchased in
1998 and 1997 and prepayments of higher rate interest-earning assets as a
result of the flattening of the yield curve.
Interest Income. Total interest income was $533.4 million for the three
months ended March 31, 1998, an increase of $20.7 million from the three months
ended March 31, 1997. Total interest-earning assets for the three months ended
March 31, 1998 averaged $28.6 billion, compared to $27.1 billion for the
corresponding period in 1997. The yield on total interest-earning assets during
the three months ended March 31, 1998 decreased to 7.47% from 7.56% for the
three months ended March 31, 1997, primarily due to the lower market rates on
new mortgage-backed securities purchased in 1998 and 1997 and prepayments of
higher rate interest-earning assets.
FN Holdings earned $27.3 million of interest income on loans held for sale
for the three months ended March 31, 1998, an increase of $10.1 million from
the three months ended March 31, 1997. The average balance of loans held for
sale was $1.5 billion for the three months ended March 31, 1998, an increase of
$490 million from the comparable period in 1997, due to increased originations.
The weighted average yield on loans held for sale increased to 7.36% for the
three months ended March 31, 1998 from 6.93% for the three months ended March
31, 1997, primarily due to a higher percentage of comparatively higher
fixed-rate portfolio in 1998 compared to 1997.
Interest income on mortgage-backed securities available for sale was $81.5
million for the three months ended March 31, 1998, an increase of $20.5 million
from the three months ended March 31, 1997. The average portfolio balances
increased $1.5 billion, to $5.1 billion, during the three months ended March
31, 1998 compared to the same period in 1997. The weighted average yield on
these assets decreased from 6.87% for the three months ended March 31, 1997 to
6.41% for the three months ended March 31, 1998. The increase in the volume and
decrease in the weighted
Page 16
<PAGE>
average yield is primarily due to the purchases of $1.0 billion in other
mortgage-backed securities during the three months ended March 31, 1998 and
$2.0 billion during the last nine months of 1997 at comparatively lower market
rates.
There were no material variances between the three months ended March 31,
1998 and the three months ended March 31, 1997 with respect to interest income
from loans receivable, mortgage-backed securities held to maturity, and
securities and interest-bearing deposits in banks.
Interest Expense. Total interest expense was $368.5 million for the three
months ended March 31, 1998, an increase of $23.5 million from the three months
ended March 31, 1997. The increase is primarily the result of increased
borrowings on FHLB advances, partially offset by a decline in the average
balance of deposits resulting from net deposit run-off.
Interest expense on customer deposits, including Brokered Deposits, was
$178.2 million for the three months ended March 31, 1998, a decrease of $8.8
million from the three months ended March 31, 1997. The average balance of
customer deposits outstanding decreased from $16.8 billion to $16.1 billion for
the three months ended March 31, 1997 and 1998, respectively. The decrease in
the average balance is primarily due to net deposit run-off, anticipated
following the Cal Fed Acquisition. The overall weighted average cost of
deposits was 4.48% for the three months ended March 31, 1998 and 4.50% for the
three months ended March 31, 1997.
Interest expense on securities sold under agreements to repurchase
totalled $26.5 million for the three months ended March 31, 1998, a decrease of
$7.9 million from the three months ended March 31, 1997. The average balance of
such borrowings for the three months ended March 31, 1998 and 1997 was $1.9
billion and $2.5 billion, respectively. The decrease in the average balance is
primarily attributed to maturities and payoffs refinanced with FHLB advances at
more favorable rates. The weighted average interest rate on these instruments
increased to 5.69% during the three months ended March 31, 1998 from 5.60% for
the three months ended March 31, 1997, primarily due to an increase in rates on
new borrowings compared to such borrowings during 1997.
Interest expense on borrowings totalled $163.8 million for the three
months ended March 31, 1998, an increase of $40.2 million from the three months
ended March 31, 1997. The increase is primarily attributed to the increase in
FHLB advances used to fund the purchases of mortgage-backed securities and
replace reverse repurchase agreements which matured. The average balance
outstanding for the three months ended March 31, 1998 and 1997 was $10.7
billion and $7.8 billion, respectively. The weighted average interest rate on
these instruments decreased to 6.23% during the three months ended March 31,
1998 from 6.43% for the three months ended March 31, 1997, primarily due to the
shorter average maturity of the portfolio at March 31, 1998 compared to March
31, 1997.
Net Interest Income. Net interest income was $165.0 million for the three
months ended March 31, 1998, a decrease of $2.8 million from the three months
ended March 31, 1997. The interest rate spread decreased to 2.26% for the three
months ended March 31, 1998 from 2.40% for the three months ended March 31,
1997.
Noninterest Income. Total noninterest income, consisting primarily of loan
servicing fees, customer banking fees, gains on sales of loans and dividends on
FHLB stock, was $89.8 million for the three months ended March 31, 1998, an
increase of $10.9 million from the three months ended March 31, 1997. Income
for the three months ended March 31, 1998 reflects an $11.6 million increase in
gain on sales of loans attributed to an increase in early payoffs of commercial
loans with unamortized discounts and an increase in gains from the sales of 1-4
unit residential loans.
Loan servicing fees, net of amortization of mortgage servicing rights,
were $37.0 million for the three months ended March 31, 1998, compared to $39.7
million for the three months ended March 31, 1997. The single-family
residential loan servicing portfolio, excluding loans serviced for the Bank,
decreased from $47.5 billion at March 31, 1997 to $46.7 billion at March 31,
1998. During the three months ended March 31, 1998, the Company sold $1.8
billion in single-family mortgage loans originated for sale as part of its
ongoing mortgage banking operations compared to $1.2 billion of such sales for
the corresponding period in 1997.
Page 17
<PAGE>
Gain on sales of loans was $14.5 million for the three months ended March
31, 1998, compared to a gain of $2.9 million for the three months ended March
31, 1997. The increase is primarily attributed to early pay-offs of commercial
loans with unamortized discounts.
Dividends on FHLB stock were $7.0 million for the three months ended March
31, 1998, an increase of $1.0 million from the three months ended March 31,
1997, representing an increase in the amount of such stock owned by the
Company, primarily as a result of an increase in borrowings on FHLB advances.
There were no material variances between the three months ended March 31,
1998 and the comparable period in 1997 with respect to customer banking fees,
gain (loss) on sales of assets and other noninterest income.
Noninterest Expense. Total noninterest expense was $144.8 million for the
three months ended March 31, 1998, a decrease of $8.5 million from the three
months ended March 31, 1997. The variance between the two periods is primarily
attributed to transitional expenses (primarily reflected in compensation
expense and other noninterest expense) incurred during the three months ended
March 31, 1997 related to the Cal Fed Acquisition.
Provision for Income Tax. During the three months ended March 31, 1998 and
1997, FN Holdings recorded income tax expense of $15.2 million and $11.7
million, respectively. FN Holdings' effective Federal tax rate was 2% during
the three months ended March 31, 1998 and 1997, while its statutory Federal tax
rate was 35% during both periods. The difference between the effective and
statutory rates was primarily the result of the utilization of net operating
loss carryforwards for both periods. FN Holdings' effective state tax rate was
13% during the three months ended March 31, 1998 and 1997.
Minority Interest. Dividends on the REIT Preferred Stock totalling $11.4
million and $7.7 million were declared and paid during the three months ended
March 31, 1998 and 1997, respectively. Minority interest relative to the REIT
Preferred Stock is reflected on the consolidated statements of income net of
the income tax benefit of $1.5 million and $1.0 million for the three months
ended March 31, 1998 and 1997, respectively, which will inure to the Company as
a result of the deductibility of such dividends for income tax purposes.
Dividends on the preferred stock of the Bank of $13.2 million and $13.1 million
were also recorded during the three months ended March 31, 1998 and 1997,
respectively. Minority interest for the three months ended March 31, 1998 also
includes $.2 million representing that portion of Auto One's loss attributable
to the 20% interest in the common stock of Auto One that was issued as part of
the GSAC Acquisition.
PROVISION FOR LOAN LOSSES
The adequacy of the allowance for loan losses is periodically evaluated by
management in order to maintain the allowance at a level that is sufficient to
absorb expected loan losses. The Company charges current earnings with a
provision for estimated credit losses on loans receivable. The provision
considers both specifically identified problem loans as well as credit risks
not specifically identified in the loan portfolio. The Company established
provisions for loan losses of $10.0 million and $20.0 million during the three
months ended March 31, 1998 and 1997, respectively. The decrease in the
provision for loan losses during the three months ended March 31, 1998 compared
to the same period in 1997 is the result of management's evaluation of the
adequacy of the allowance based on, among other things, past loan loss
experience and known and inherent risks in the portfolio, evidenced in part by
the continued decline in the Company's level of non-performing assets. In
addition, management's periodic evaluation of the adequacy of the allowance for
loan losses considers potential adverse situations that may affect the
borrower's ability to repay, the estimated value of underlying collateral, and
current and prospective economic conditions. The allowance for loan losses is
increased by provisions for loan losses and allowances on acquired loans, while
it is decreased by charge-offs (net of recoveries).
Page 18
<PAGE>
Activity in the allowance for loan losses during the three months ended
March 31, 1998 and 1997 is as follows (in thousands):
1998 1997
---- ----
Balance - January 1 $418,674 $246,556
Purchase - Cal Fed Acquisition -- 143,820
Provision for loan losses 10,000 19,950
Charge-offs (11,399) (10,773)
Recoveries 1,855 866
-------- --------
Balance - March 31 $419,130 $400,419
======== ========
Although management believes that the allowance for loan losses is
adequate for its current portfolios, it will continue to review its loan
portfolio to determine the extent to which any changes in economic conditions
or loss experience may require additional provisions in the future.
ASSET AND LIABILITY MANAGEMENT
Banks and savings associations are subject to interest rate risk to the
degree that their interest-bearing liabilities, consisting principally of
deposits, securities sold under agreements to repurchase and FHLB advances,
mature or reprice more or less frequently, or on a different basis, than their
interest-earning assets. The process of planning and controlling asset and
liability mixes, volumes and maturities to influence the net interest spread is
referred to as asset and liability management. The objective of the Company's
asset and liability management is to maximize its net interest income over
changing interest rate cycles within the constraints imposed by prudent lending
and investing practices, liquidity needs and capital planning.
FN Holdings, through the Bank, actively pursues investment and funding
strategies intended to minimize the sensitivity of its earnings to interest
rate fluctuations while maintaining the flexibility required to execute its
business strategies. The Company measures the interest rate sensitivity of the
balance sheet through gap and duration analysis, as well as net interest income
and market value simulation, and, after taking into consideration both the
variability of rates and the maturities of various instruments, evaluates
strategies which may reduce the sensitivity of its earnings to interest rate
and market value fluctuations. An important decision is the selection of
interest-bearing liabilities and the generation of interest-earning assets
which best match relative to interest rate changes. In order to reduce interest
rate risk by increasing the percentage of interest sensitive assets, the
Company has continued its emphasis on the origination of adjustable rate
mortgage ("ARM") products for its portfolio. Where possible, the Company seeks
to purchase assets or originate real estate loans that reprice frequently and
that on the whole adjust in accordance with the repricing of its liabilities.
At March 31, 1998, approximately 91% of the Company's real estate loan
portfolio consisted of ARMs.
ARMs have from time to time been offered with low initial interest rates
as marketing inducements. In addition, most ARMs are also subject to periodic
interest rate adjustment caps or floors. In a period of rising interest rates,
ARMs could reach a periodic adjustment cap while still at a rate significantly
below their contractual margin over existing market rates. Since repricing
liabilities are typically not subject to such interest rate adjustment
constraints, the Company's net interest margin would most likely be negatively
impacted in this situation. Certain ARMs now offered by the Company have a
fixed monthly payment for a given period, with any changes as a result of
market interest rates reflected in the unpaid principal balance through
negative amortization. From the lender's perspective, these loans respond most
quickly to rate changes because interest accruals immediately reflect the loans
as though they were fully indexed.
One of the most important sources of a financial institution's net income
is net interest income, which is the difference between the combined interest
earned on interest-earning assets and the combined interest paid on
interest-bearing liabilities. Net interest income is also dependent on the
relative balances of interest-earning assets and interest-bearing liabilities.
Page 19
<PAGE>
A traditional measure of interest rate risk within the savings industry is
the interest rate sensitivity gap, which is the sum of all interest-earning
assets minus the sum of all interest-bearing liabilities to be repriced within
given periods. A gap is considered positive when the interest rate sensitive
assets exceed interest rate sensitive liabilities, while the opposite results
in a negative gap. During a period of rising interest rates, a negative gap
would tend to adversely affect net interest income, and a positive gap would
tend to result in an increase in net interest income, while the opposite would
tend to occur in a period of falling rates.
Page 20
<PAGE>
The following table sets forth the projected maturities based upon
contractual maturities as adjusted for projected prepayments and "repricing
mechanisms" (provisions for changes in the interest rates of assets and
liabilities), and the impact of interest rate swap agreements as of March 31,
1998. Prepayment rates are assumed in each period on substantially all of the
Company's loan portfolio based upon expected loan prepayments. Repricing
mechanisms on the Company's assets are subject to limitations such as caps on
the amount that interest rates and payments on its loans may adjust and,
accordingly, such assets may not respond in the same manner or to the same
extent to changes in interest rates as the Company's liabilities. In addition,
the interest rate sensitivity of the Company's assets and liabilities
illustrated in the table would vary substantially if different assumptions were
used or if actual experience differed from the assumptions set forth. The
Company's estimated interest rate sensitivity gap at March 31, 1998 is as
follows:
<TABLE>
<CAPTION>
Maturity/Rate Sensitivity
----------------------------------------------------------
Within 1-5 Over 5 Noninterest
1 Year Years Years Bearing Total
------ ----- ------ ----------- -----
(dollars in millions)
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Securities held to maturity, interest-bearing
deposits in other banks and short-term
investment securities(1)(2) $ 84 $ -- $ 58 $ -- $ 142
Securities available for sale (3) 988 -- -- -- 988
Mortgage-backed securities
available for sale (3) 5,695 -- -- -- 5,695
Mortgage-backed securities
held to maturity (1)(4) 1,243 -- 2 -- 1,245
Loans held for sale, net (3)(5) 1,887 -- -- -- 1,887
Loans receivable, net (1)(6) 16,873 1,723 628 -- 19,224
Investment in FHLB 486 -- -- -- 486
---------- ----------- -------- ----------- ----------
Total interest-earning assets 27,256 1,723 688 -- 29,667
Noninterest-earning assets -- -- -- 2,521 2,521
---------- ----------- -------- ----------- ----------
$27,256 $1,723 $ 688 $2,521 $32,188
========== =========== ======== =========== ==========
INTEREST-BEARING LIABILITIES:
Deposits (7) $14,442 $1,955 $ 6 $ -- $16,403
Securities sold under agreements to
repurchase (1) 1,866 100 -- -- 1,966
FHLB advances (1) 7,085 2,831 2 -- 9,918
Other borrowings (1) 276 359 704 -- 1,339
---------- ----------- -------- ----------- ----------
Total interest-bearing liabilities 23,669 5,245 712 -- 29,626
Noninterest-bearing liabilities -- -- -- 699 699
Minority interest -- -- -- 987 987
Stockholders' equity -- -- -- 876 876
---------- ----------- -------- ----------- ----------
$23,669 $5,245 $712 $2,562 $32,188
========== =========== ======== =========== ==========
Gap before interest rate swap agreements $3,587 $ (3,522) $(24) $41
Interest rate swap agreements (8) -- -- -- --
---------- ----------- -------- ----------
Gap adjusted for interest rate swap agreements $3,587 $ (3,522) $(24) $41
========== =========== ======== ==========
Cumulative gap $3,587 $65 $41 $41
====== === === ===
Gap as a percentage of total assets 11.1% (10.9)% (0.1)% 0.1%
==== ====== ===== ===
Cumulative gap as a percentage of total assets 11.1% 0.2% 0.1% 0.1%
==== ====== ===== ===
</TABLE>
Page 21
<PAGE>
- -------------
(1) Based upon (a) contractual maturity, (b) instrument repricing date, if
applicable, and (c) projected repayments and prepayments of principal, if
applicable. Prepayments were estimated generally by using the prepayment
rates forecast by various large brokerage firms as of March 31, 1998. The
actual maturity and rate sensitivity of these assets could vary
substantially if future prepayments differ from the Company's prepayment
estimates.
(2) Consists of $58 million of securities held to maturity, $.1 million of
interest-bearing deposits in other banks and $84 million of short-term
investment securities.
(3) As loans held for sale and securities and mortgage-backed securities
available for sale may be sold within one year, they are considered to be
maturing within one year.
(4) Excludes underlying non-performing loans of $6 million.
(5) Excludes non-performing loans of $1 million.
(6) Excludes allowance for loan losses of $419 million and non-performing
loans of $173 million.
(7) Fixed rate deposits and deposits with a fixed pricing interval are
reflected as maturing in the year of contractual maturity or first
repricing date. Money market deposit accounts, demand deposit accounts and
passbook accounts are reflected as maturing within one year.
(8) Agreements with notional amounts of $400 million maturing in April 1998
have no impact within the time periods presented.
At March 31, 1998, interest-earning assets of the Company exceeded
interest-bearing liabilities by approximately $41 million. At December 31,
1997, interest-earning assets of the Company exceeded interest-bearing
liabilities by approximately $154 million.
The maturity/rate sensitivity analysis is a static view of the balance
sheet with assets and liabilities grouped into certain defined time periods,
and thus only partially depicts the dynamics of the Company's sensitivity to
interest rate changes. Since it is measured at a single point in time, this
analysis may not fully describe the complexity of relationships between product
features and pricing, market rates and future management of the balance sheet
mix. The Company utilizes computer modeling, under various interest rate
scenarios, to provide a dynamic view of the effects of the changes in rates,
spreads, and yield curve shifts on net interest income.
The Company's risk management policies are established by the
Asset/Liability Management Committee ("ALCO") of the Bank. ALCO meets monthly
to formulate the Bank's investment and risk management strategies. The basic
responsibilities of ALCO include management of net interest income and market
value of portfolio equity, management of liquidity to provide adequate funding,
and the establishment of asset product priorities by formulating performance
evaluation criteria, risk evaluation techniques and a system to standardize the
analysis and reporting of originations, competitive trends, profitability and
risk. On a quarterly basis, the Board of Directors of the Bank is apprised of
ALCO strategies adopted and their impact on operations, and, at least annually,
the Board of Directors of the Bank reviews the Bank's interest rate risk
management policy statements.
LIQUIDITY
The standard measure of liquidity in the savings industry is the ratio of
cash and short-term U. S. government securities and other specified securities
to deposits and borrowings due within one year. Effective November 24, 1997,
the OTS established a minimum liquidity requirement for the Bank of 4.00%, a
reduction from 5.00%, which had been in effect prior to that date in 1997 and
1996. California Federal has been in compliance with the liquidity regulations
during 1998 and 1997.
The Company's funds are obtained from the repayment and maturities of
loans and mortgage-backed securities, customer and Brokered Deposits, loan
sales, securities sold under agreements to repurchase, FHLB advances and other
secured and unsecured borrowings.
A major source of the Company's funding is expected to be the Bank's
retail deposit branch network, which management believes will be sufficient to
meet its long-term liquidity needs. The ability of the Company to retain and
attract new deposits is dependent upon the variety and effectiveness of its
customer account products, customer service and convenience, and rates paid to
customers. The Company also obtains funds from the repayment and maturities of
loans and mortgage-backed securities, while additional funds can be obtained
from a variety of sources including
Page 22
<PAGE>
customer and Brokered Deposits, loan sales, securities sold under agreements to
repurchase, FHLB advances, and other secured and unsecured borrowings. It is
anticipated that FHLB advances and securities sold under agreements to
repurchase will continue to be important sources of funding, and management
expects there to be adequate collateral for such funding requirements.
The Company's primary uses of funds are the origination or purchase of
loans, the purchase of mortgage-backed securities, the funding of maturing
certificates of deposit, demand deposit withdrawals, the repayment of
borrowings, and the payment of dividends with respect to the REIT Preferred
Stock and the Bank Preferred Stock. Certificates of deposit scheduled to mature
during the twelve months ending March 31, 1999 aggregate $8.2 billion. The
Company may renew these certificates, attract new replacement deposits, replace
such funds with other borrowings, or it may elect to reduce the size of the
balance sheet. In addition, at March 31, 1998, FN Holdings had securities sold
under agreements to repurchase, FHLB advances and other borrowings aggregating
$8.0 billion maturing within twelve months. The Company may elect to pay off
such debt or to replace such borrowings with additional FHLB advances or other
borrowings at prevailing rates.
FN Holdings' primary source of cash to pay the interest on and principal
of its long-term debt is expected to be distributions from the Bank. The annual
interest on the Company's long-term debt is $98.4 million. Although FN Holdings
expects that distributions from the Bank will be sufficient to pay interest
when due and the principal amount of its long-term debt at maturity, there can
be no assurance that earnings from the Bank will be sufficient to make such
distributions to FN Holdings. In addition, there can be no assurance that such
distributions will be permitted by the terms of any debt instruments of FN
Holdings' subsidiaries then in effect, by the terms of any class of preferred
stock issued by the Bank, including the REIT Preferred Stock and the Bank
Preferred Stock, or under applicable federal thrift laws.
The Company anticipates that cash and cash equivalents on hand, the cash
flow from assets as well as other sources of funds will provide adequate
liquidity for its operating, investing and financing needs and the Bank's
regulatory liquidity requirements for the foreseeable future. In addition to
cash and cash equivalents of $464.3 million at March 31, 1998, the Company has
substantial additional borrowing capacity with the FHLB and other sources.
As presented in the accompanying unaudited consolidated statements of cash
flows, the sources of liquidity vary between periods. The primary sources of
funds during the three months ended March 31, 1998 were net loan repayments of
$521.8 million, proceeds from sales of loans of $1.8 billion, $4.8 billion in
additional borrowings, a $123.4 million net increase in securities sold under
agreements to repurchase, $734.4 million in proceeds from principal payments
and maturities of securities and mortgage-backed securities available for sale
and $201.0 million from a net increase in deposits. The primary uses of funds
were $4.4 billion in principal payments on borrowings, $1.5 billion in
purchases of securities and mortgage-backed securities available for sale, $2.3
billion in originations of loans and $123.7 million in net cash paid for the
GSAC Acquisition.
PROBLEM AND POTENTIAL PROBLEM ASSETS
The Company considers a loan to be impaired when, based upon current
information and events, it believes it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the
loan agreement. Any insignificant delay (i.e., 60 days or less) or
insignificant shortfall in amount of payments will not cause a loan to be
considered impaired. In determining impairment, the Company considers large
non-homogeneous loans including non-performing loans, troubled debt
restructurings, and performing loans which exhibit, among other
characteristics, high LTV ratios, low debt-coverage ratios or other indications
that the borrowers are experiencing increased levels of financial difficulty.
The Company bases the measurement of collateral-dependent impaired loans on the
fair value of the loan's collateral. The amount, if any, by which the recorded
investment of the loan exceeds the measure of the impaired loan's value is
recognized by recording a valuation allowance.
At March 31, 1998, the carrying value of loans that are considered to be
impaired totalled $102.2 million (of which $26.1 million were on non-performing
status). The average recorded investment in impaired loans during the three
months ended March 31, 1998 was approximately $103.4 million. For the three
months ended March 31, 1998, FN
Page 23
<PAGE>
Holdings recognized interest income on those impaired loans of $2.0 million,
which included less than $.1 million of interest income recognized using the
cash basis method of income recognition.
The following table presents the amounts, net of specific allowances for
loan losses and purchase accounting adjustments, of the Company's
non-performing loans, foreclosed real estate, repossessed assets, troubled debt
restructurings and impaired loans as of the dates indicated. These categories
are not mutually exclusive; certain loans are included in more than one
classification.
March 31, 1998
-------------------------------------
Non-performing Impaired Restructured
-------------- -------- ------------
(in millions)
Real Estate:
1-4 unit residential $148 $ -- $ 2
5+ unit residential 12 41 7
Commercial and other 13 60 34
Land -- -- --
Construction 1 1 --
----- ------ ----
Total real estate 174 102 43
Non-real estate 6 -- --
----- ------ ----
Total loans, net 180 $ 102(b) $43(c)
====== ====
Foreclosed real estate, net 76
Repossessed assets 5
-----
Total non-performing assets $261(a)
=====
December 31, 1997
--------------------------------------
Non-performing Impaired Restructured
-------------- -------- ------------
(in millions)
Real Estate:
1-4 unit residential $165 $ -- $ 2
5+ unit residential 12 43 7
Commercial and other 6 67 26
Land -- -- --
Construction 2 -- --
----- ------ ----
Total real estate 185 110 35
Non-real estate 7 -- --
----- ------ ----
Total loans 192 $ 110(b) $35(c)
====== ====
Foreclosed real estate, net 77
Repossessed assets 3
-----
Total non-performing assets $272(a)
=====
- ------------------
(a) Includes loans securitized with recourse on non-performing status of $5.5
million and $5.2 million at March 31, 1998 and December 31, 1997,
respectively, and loans held for sale on non-performing status of $1.1
million and $1.2 million at March 31, 1998 and December 31, 1997.
(b) Includes $26.1 million and $18.6 million of loans on non-performing status
at March 31, 1998 and December 31, 1997, respectively. Also includes $21.3
million and $17.5 million of loans classified as troubled debt
restructurings at March 31, 1998 and December 31, 1997, respectively.
(c) Includes non-performing loans of $2.1 million at March 31, 1998 and
December 31, 1997. At March 31, 1998 and December 31, 1997, $2.1 million
and $1.7 million, respectively, of these non-performing troubled debt
restructurings were also considered impaired.
There were no accruing loans contractually past due 90 days or more at
March 31, 1998 or December 31, 1997.
Page 24
<PAGE>
FN Holdings' non-performing assets, consisting of non-performing loans,
net of purchase accounting adjustments, foreclosed real estate, net, and
repossessed assets, decreased to $261 million at March 31, 1998, from $272
million at December 31, 1997. Non-performing assets as a percentage of the
Bank's total assets decreased to .81% at March 31, 1998, from .87% at December
31, 1997.
FN Holdings, through the Bank, manages its credit risk by regularly
assessing the current and estimated future performance of the real estate
markets in which it operates. The Company continues to place a high degree of
emphasis on the management of its asset portfolio. The Company has three
distinct asset management functions: performing loan asset management, problem
loan asset management and credit review. These three functions are charged with
the responsibility of reducing the risk profile within the residential,
commercial and multi-family asset portfolios by applying asset management and
risk evaluation techniques that are consistent with the Company's portfolio
management strategy and regulatory requirements. In addition to these asset
management functions, the Company has a specialized credit risk management
group that is charged with the development of credit policies and performing
credit risk analyses for all asset portfolios.
The following table presents non-performing real estate assets by
geographic region of the country as of March 31, 1998:
Total
Non-performing Foreclosed Non-performing
Real Estate Real Estate, Real Estate Geographic
Loans, Net (2) Net (2) Assets Concentration
-------------- ------------ -------------- -------------
(dollars in millions)
Region:
California $108 $49 $157 62.81%
Northeast (1) 30 13 43 17.19
Other regions 36 14 50 20.00
---- --- ---- ------
Total $174 $76 $250 100.00%
==== === ==== ======
- --------------
(1) Includes Connecticut, Massachusetts, New Hampshire, New Jersey, New York,
Pennsylvania, Rhode Island and Delaware.
(2) Net of purchase accounting adjustments and specific allowances for losses.
At March 31, 1998, the Company's largest non-performing asset was
approximately $5.4 million, and it had three non-performing assets over $2
million in size with balances averaging approximately $4.4 million. The Company
has 2,116 non-performing assets below $2 million in size, including 2,017
non-performing 1-4 unit residential assets.
Page 25
<PAGE>
A summary of the activity in the allowance for loan losses by loan type is
as follows for the three months ended March 31, 1998:
5+ Unit
Residential
1-4 Unit and Commercial Consumer
Residential Real Estate and Other Total
----------- -------------- --------- -----
(dollars in millions)
Balance - December 31, 1997 $202 $198 $ 19 $419
Provision for loan losses 6 3 1 10
Charge-offs (8) (1) (3) (12)
Recoveries 1 -- 1 2
---- ---- ---- ----
Balance - March 31, 1998 $201 $200 $18 $419
==== ==== ==== ====
The ratio of allowance for loan losses to non-performing loans at March
31, 1998 and December 31, 1997 was 232.9% and 217.8%, respectively.
MORTGAGE BANKING OPERATIONS
Since 1994, the Company, through the Bank's wholly owned mortgage bank
subsidiary, First Nationwide Mortgage Corporation ("FNMC"), has significantly
expanded its mortgage banking operations. During May 1997 and January 1998,
FNMC acquired mortgage servicing assets of $3.2 billion and $3.6 billion,
respectively, as a result of four bulk servicing acquisitions. With the
consummation of the 1997 and 1998 bulk acquisitions, a 1997 servicing sale of
loans with an unpaid principal balance of $2.3 billion, the acquisition of
additional 1-4 unit residential loan servicing portfolios in the Cal Fed
Acquisition and the originated servicing, the 1-4 unit residential loans
serviced for others totalled $46.7 billion at March 31, 1998, an increase of
$.1 billion and a decrease of $.8 billion from December 31, 1997 and March 31,
1997, respectively. During the three months ended March 31, 1998, the Company,
through FNMC, originated $2.3 billion and sold (generally with servicing
retained) $1.8 billion 1-4 unit residential loans. Gross revenues from mortgage
loan servicing activities for the three months ended March 31, 1998 totalled
$59.6 million, a decrease of $.9 million from the three months ended March 31,
1997.
A decline in long-term interest rates generally results in an acceleration
of mortgage loan prepayments. Higher than anticipated levels of prepayments
generally cause the accelerated amortization of mortgage servicing rights
("MSRs"), and generally will result in a reduction in the market value of MSRs
and in the Company's servicing fee income. To reduce the sensitivity of its
earnings to interest rate and market value fluctuations, the Company hedged the
change in value of its MSRs based on changes in interest rates ("MSR Hedge").
At March 31, 1998, the Company, through FNMC, was a party to several
interest rate floor contracts maturing from October 2001 through June 2002. The
Company paid counterparties a premium in exchange for cash payments in the
event that the 10-year Constant Maturity Treasury rate falls below negotiated
strike prices. At March 31, 1998, the notional amount of the interest rate
floors was $1.4 billion and the strike prices were between 5.5% and 6.5%. In
addition, the Company, through FNMC, was a party to principal-only swap
agreements related to principal-only securities and prepayment-linked swap
agreements with a remaining notional amount of $113.1 million and $1.3 billion,
respectively. The estimated market values of interest rate floor contracts and
swaps designated as hedges against MSRs at March 31, 1998 were $24.1 million
and $16.9 million, respectively.
Page 26
<PAGE>
The following is a summary of activity in MSRs and the MSR Hedge for the
three months ended March 31, 1998 (in thousands):
<TABLE>
<CAPTION>
Total MSR
MSRs MSR Hedge Balance
---- --------- ---------
<S> <C> <C> <C>
Balance at December 31, 1997 $531,269 $5,434 $536,703
Additions - bulk purchases 57,495 -- 57,495
Originated servicing 38,978 -- 38,978
Additions - other 7,633 -- 7,633
Additions to MSR Hedge -- 13,478 13,478
Payments received under interest rate floor contracts -- (3,550) (3,550)
Net payments made under principal-only swap agreements -- 381 381
Net payments made under futures contracts -- 1,654 1,654
Amortization (25,750) (1,468) (27,218)
------- ------ --------
Balance at March 31, 1998 $609,625 $15,929 $625,554
======== ======= ========
</TABLE>
Capitalized mortgage servicing rights are amortized in proportion to, and
over the period of, estimated future net servicing income. SFAS No. 125
requires enterprises to measure the impairment of servicing rights based on the
difference between the carrying amount of the servicing rights and their
current fair value. At March 31, 1998 and December 31, 1997, no allowance for
impairment of the mortgage servicing rights was necessary.
CAPITAL RESOURCES
OTS capital regulations require savings associations to satisfy three
minimum capital requirements: tangible capital, core (leverage) capital and
risk-based capital. In general, an association's tangible capital, which must
be at least 1.5% of adjusted total assets, is the sum of common stockholders'
equity (including retained earnings), noncumulative perpetual preferred stock
and minority interest in equity accounts of fully consolidated subsidiaries,
less disallowed intangibles. An association's ratio of core capital to adjusted
total assets (the "core capital ratio") must be at least 4%, recently amended
from 3% which had been in effect prior to March 1998. Core capital generally is
the sum of tangible capital plus certain qualifying intangibles. Under the
risk-based capital requirement, a savings association must have total capital
(core capital plus supplementary capital) equal to at least 8% of risk-weighted
assets (which equals assets plus the credit risk equivalent of certain
off-balance sheet items, each multiplied by the appropriate risk weight).
Supplementary capital, which may not exceed 100% of core capital for purposes
of the risk-based requirements, includes, among other things, certain permanent
capital instruments such as qualifying cumulative perpetual preferred stock, as
well as some forms of term capital instruments, such as qualifying subordinated
debt. The capital requirements are viewed as minimum standards by the OTS, and
most associations are expected to maintain capital levels well above the
minimum. In addition, the OTS regulations provide that minimum capital levels
higher than those provided in the regulations may be established by the OTS for
individual savings associations, depending upon their particular circumstances.
The Bank is not subject to any such individual minimum regulatory capital
requirement. These capital requirements are applicable to the Bank but not to
FN Holdings.
Page 27
<PAGE>
At March 31, 1998, the Bank's regulatory capital levels exceeded the
minimum regulatory capital requirements, with tangible, core and risk-based
capital ratios of 5.53%, 5.53% and 11.70%, respectively. The following is a
reconciliation of the Bank's stockholders' equity to regulatory capital as of
March 31, 1998:
Tangible Core Risk-based
Capital Capital Capital
-------- ------- ----------
(dollars in millions)
Stockholders' equity of the Bank at
March 31, 1998 $ 2,261 $ 2,261 $ 2,261
Minority interest - REIT Preferred Stock 500 500 500
Unrealized holding gain on securities available
for sale, net (31) (31) (31)
Non-qualifying MSRs (62) (62) (62)
Non-allowable capital:
REIT Preferred Stock in excess of 25% of
Tier 1 capital (70) (70) (70)
Intangible assets (670) (670) (670)
Goodwill Litigation Asset (100) (100) (100)
Investment in subsidiaries (53) (53) (53)
Excess deferred tax asset (53) (53) (53)
Supplemental capital:
Qualifying subordinated debt debentures -- -- 94
General loan loss allowance -- -- 219
Assets required to be deducted:
Low level recourse deduction -- -- (2)
Land loans with more than 80% LTV ratio -- -- (3)
------ ------- -------
Regulatory capital of the Bank 1,722 1,722 2,030
Minimum regulatory capital requirement 467 1,246 1,388
------ ------- -------
Excess above minimum capital requirement $1,255 $ 476 $ 642
====== ======= =======
Regulatory capital of the Bank 5.53% 5.53% 11.70%
Minimum regulatory capital requirement 1.50 4.00 8.00
------ ------- -------
Excess above minimum capital requirement 4.03% 1.53% 3.70%
====== ======= =======
The amount of adjusted total assets used for the tangible and core capital
ratios is $31.1 billion. Risk-weighted assets used for the risk-based capital
ratio amounted to $17.4 billion.
The Bank is also subject to the "prompt corrective action" standards
prescribed in the FDICIA and related OTS regulations, which, among other
things, define specific capital categories based on an association's capital
ratios. The capital categories, in declining order, are "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized,"
and "critically undercapitalized." Associations categorized as
"undercapitalized" or worse are subject to certain restrictions, including the
requirement to file a capital plan with the OTS, prohibitions on the payment of
dividends and management fees, restrictions on executive compensation, and
increased supervisory monitoring, among other things. Other restrictions may be
imposed on the association either by the OTS or by the FDIC, including
requirements to raise additional capital, sell assets, or sell the entire
association. Once an association becomes "critically undercapitalized" it is
generally placed in receivership or conservatorship within 90 days.
Page 28
<PAGE>
To be considered "well capitalized," a savings association must generally
have a leverage capital ratio of at least 5.00%, a Tier 1 (core capital)
risk-based capital ratio of at least 6.00%, and a total risk-based capital
ratio of at least 10.00%. An association is deemed to be "critically
undercapitalized" if it has a tangible equity ratio of 2.00% or less. At March
31, 1998, the Bank's capital levels were sufficient for it to be considered
"well capitalized:"
Risk-based
Leverage -----------------------
Capital Tier 1 Total Capital
-------- ------ -------------
Regulatory capital of the Bank 5.53% 9.92% 11.70
Well capitalized ratio 5.00 6.00 10.00
---- ------ -----
Excess above well capitalized ratio 0.53% 3.92% 1.70%
==== ====== =====
OTS capital regulations allow a savings association to include a net
deferred tax asset in regulatory capital, subject to certain limitations. To
the extent that the realization of a deferred tax asset depends on a savings
association's future taxable income, such deferred tax asset is limited for
regulatory capital purposes to the lesser of the amount that can be realized
within one year or 10 percent of core capital. At March 31, 1998, $53 million
of the net tax benefit was determined to be attributable to the amount of
taxable income that may be realized in periods beyond one year. Accordingly,
such amount has been excluded from regulatory capital at March 31, 1998.
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in reported market risks faced by the
Company since the Company's report in ITEM 7A of its Form 10-K for the year
ended December 31, 1997.
Page 29
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
FN Holdings and California Federal are involved in legal proceedings on
claims incidental to the normal conduct of its business. Although it is
impossible to predict the outcome of any outstanding legal proceedings,
management believes that such legal proceedings and claims, individually or in
the aggregate, will not have a material effect on the financial condition or
results of operations of the Company.
In addition to legal proceedings within the normal course of business, the
Bank is the plaintiff in a claim against the United States in the lawsuit,
California Federal Bank v. United States, Civil Action No. 92-138C (the
"California Federal Litigation"). In the California Federal Litigation, the
Bank alleges, among other things, that the United States breached certain
contractual commitments regarding the computation of its regulatory capital for
which the Bank seeks damages and restitution. The Bank's claims arose from
changes, mandated by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA"), with respect to the rules for computing Old
California Federal's regulatory capital.
On July 1, 1996, the United States Supreme Court issued its opinion for
United States v. Winstar Corporation, No. 95-865, which affirmed the decisions
of the United States Court of Appeals for the Federal Circuit and the United
States Court of Federal Claims in various consolidated cases (the "Winstar
Cases") granting summary judgment to the plaintiff thrift institutions on the
liability portion of their breach of contract claims against the United States.
The Supreme Court held that the government breached certain express contracts
when Congress enacted FIRREA, and the Supreme Court remanded the proceedings
for a determination of the appropriate measure and amount of damages, which to
date have not been awarded.
On October 30, 1996, Old California Federal filed a motion for partial
summary judgment as to the Federal government's liability to the Bank for
breach of contract, which was opposed by the Federal government in briefs filed
on December 30, 1996 and February 27, 1997. In addition, the government filed a
cross-motion for partial summary judgment as to certain liability issues on
December 30, 1996. A hearing on the motions for partial summary judgment on
liability was held on August 7, 1997. On December 22, 1997, a U.S. Claims Court
Judge ruled in favor of this motion to establish the government's liability.
The trial of the damages phase of the Bank's case is expected to begin in early
1999.
In connection with the Cal Fed Acquisition, the Company recorded as an
asset part of the estimated after-tax cash recovery from the California Federal
Litigation that will inure to the Company, net of amounts payable to holders of
the Litigation Interests and the Secondary Litigation Interests in any such
recovery (the "Goodwill Litigation Asset"). The Goodwill Litigation Asset was
recorded at its estimated fair value of $100 million, net of estimated tax
liabilities, as of January 3, 1997, and is included in the consolidated balance
sheets as of March 31, 1998 and December 31, 1997.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Page 30
<PAGE>
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Fifth Restated Certificate of Incorporation of the
Registrant. (Incorporated by reference to Exhibit 3.1 to
Amendment No. 1 to the Registrant's Registration Statement on
Form S-1 (File No. 333- 21015)).
3.2 By-laws of the Registrant, as amended. (Incorporated by
reference to Exhibit 3.2 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-1 (File No.
333-21015)).
10.1 Asset Purchase and Sale Agreement between California Federal
Bank, A Federal Savings Bank and Union Planters Bank of
Florida dated March 29, 1998.
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
During the quarter ended March 31, 1998, the Company made one filing
on Form 8-K:
1. Form 8-K dated February 4, 1998, and filed on February 17,
1998 (as amended by Form 8-K/A filed on March 6, 1998)
reporting on Item 5, "Other Events" and Item 7, "Financial
Statements, Pro Forma Financial Information and Exhibits."
This filing reported that FN Holdings entered into an
agreement and plan of reorganization with Parent Holdings,
First Gibraltar Holdings Inc., Hunter's Glen/Ford Ltd.,
Golden State Bancorp Inc. and Golden State Financial
Corporation, providing for the merger of Parent Holdings with
and into Golden State and the merger of FN Holdings with and
into Golden State Financial. The agreement also contemplates
that immediately following the mergers, Glendale Federal Bank
will merge with and into California Federal.
Page 31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
First Nationwide Holdings Inc.
/s/ Laurence Winoker
-------------------------------------
By: Laurence Winoker
Vice President and Controller
(Signing on behalf of the
Registrant and as the
Principal Accounting Officer)
May 14, 1997
Page 32
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of
March 29, 1998, by and between CALIFORNIA FEDERAL BANK, A Federal Savings Bank
(the "Seller") and UNION PLANTERS BANK OF FLORIDA, an insured depository
subsidiary of Union Planters Corporation (the "Purchaser").
R E C I T A L S
WHEREAS, Seller desires to sell and Purchaser desires to acquire and
operate the branch offices described in Exhibit A, which is attached hereto and
incorporated herein by this reference (the "Branch Offices") and the business
conducted at the Branch Offices;
WHEREAS, Seller desires to assign to Purchaser and Purchaser desires
to assume from Seller certain liabilities relating to the Branch Offices and
the business conducted at the Branch Offices, including certain obligations and
liabilities relating to the deposits of the Branch Offices and certain other
obligations of Seller;
NOW, THEREFORE, in consideration of the foregoing recitals and the
following terms, covenants, and conditions, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 "ACH Accounts" is defined in the definition of "Deposits".
1.2 "ACH Items" is defined in the definition of "Deposits".
1.3 "Additional Contract" is defined in Section 5.13.
1.4 "Affiliates" is defined in Section 12.1.
1.5 "Assumed Liabilities" is defined in Section 2.4.
1.6 "Assets" is defined in Section 2.1.
1.7 "ATM" is defined in Section 2.1(a).
1.8 "Book Value Schedule" is defined in Section 2.6(a).
1.9 "Branch Account" is defined in Section 5.8.
1.10 "Branch Account Report" is defined in Section 5.8.
<PAGE>
1.11 "Business Day" means any day (other than a Saturday) on which banking
institutions shall generally be open for the transaction of business in the
State of Florida.
1.12 "Business Retirement Plan", "BRP", "Keogh Account" or "Keogh" means an
account created by a trust for the benefit of employees (some or all of whom
are owner-employees) that complies with the provisions of Section 401 of the
Code.
1.13 "Cash" is defined in Section 2.1(a).
1.14 "Closing" is defined in Section 8.1(b).
1.15 "Closing Date" is defined in Section 8.1(a).
1.16 [Space reserved].
1.17 "Code" is defined in Section 2.9.
1.18 "Collection Accounts" is defined in the definition of "Deposits".
1.19 "Comparable Position" is defined in Section 6.1(b).
1.20 "Confidential Information" is defined in Section 5.2.
1.21 "Contracts" is defined in Section 2.1(f).
1.22 "Covenant Not To Compete" is defined in Section 5.10.
1.23 The term "Deposits" shall mean all deposits (as defined in Section
31(l) of the Federal Deposit Insurance Act ("FDIA") as amended, 12 U.S.C.
Section 1813(l)), including without limitation the aggregate balances of all
savings accounts (including certificates of deposit) domiciled at each Branch
Office as of the close of business on the Closing Date, including accounts
accessible by negotiable orders of withdrawal ("NOW") or other demand
instruments; all deposit accounts maintained by a customer for the stated
purpose of the accumulation of funds to be drawn upon at retirement
("Retirement Accounts"); all deposit accounts domiciled at each Branch Office
through which Seller accepts payments or deposits for credit or deposit to
another account domiciled at such Branch Office (the "Collection Accounts");
all deposit accounts subject to arrangements between the owner of the account
and a third party which directly makes automated clearing house debits and
credits, including, but not limited to, social security payments, Federal
recurring payments, and other payments debited and/or credited on a regularly
scheduled basis to or from such accounts (such payments being hereinafter
referred to as the "ACH Items" and such accounts being hereinafter referred to
as the "ACH Accounts"); and all other accounts and deposits, together with
interest, if any, that is accrued but unposted as of the close of business on
the Closing Date.
2
<PAGE>
1.24 "Deposit Obligations" is defined in Section 2.3.
1.25 "Deposit Premium" means one hundred ten million dollars ($110,000,000)
1.26 "Designated Employees" is defined in Section 6.1(g).
1.27 "Disagreement" is defined in Section 2.7(b).
1.28 "Employees" means all persons employed by Seller at any Branch Office
and all persons serving as employees or independent contractors of FN
Investment Center, Inc. whose place of business is located at any Branch
Office.
1.29 "Encumbrances" is defined in Section 3.5.
1.30 "Environmental Laws" means all applicable federal, state and local
laws and regulations and rules relating to pollution or the discharge of
Hazardous Substances into the environment.
1.31 "ERISA" is defined in Section 6.1(c).
1.32 [Space reserved].
1.33 "Estimation Date" is defined in Section 2.6(a).
1.34 "Estimated Cash" is defined in Section 2.6(a).
1.35 "Estimated Deposits" is defined in Section 2.6(a).
1.36 "Estimated Loan Payment" is defined in Section 2.6(a).
1.37 "Estimated Pro-Rata Adjustment" is defined in Section 2.6(a).
1.38 "Estimated Transfer Amount" is defined in Section 2.6(b).
1.39 "Excluded Assets" is defined in Section 2.2(a).
1.40 "Excluded Liabilities" is defined in Section 2.2(b).
1.41 "Fee Properties" is defined in Section 2.1(c).
1.42 "FDIA" is defined in the definition of "Deposits".
1.43 "FDIC" means Federal Deposit Insurance Corporation.
1.44 "Final Settlement Date" is defined in Section 2.8.
3
<PAGE>
1.45 "Final Transfer Amount" is defined in Section 2.8.
1.46 "FIRPTA Affidavit" is defined in Section 7.1(d).
1.47 "GAAP" is defined in Section 3.11(a).
1.48 "Government Entity" is defined in Section 3.3(a).
1.49 "Hazardous Substances" means the definition of hazardous substances
set forth in the Federal Comprehensive Environmental Response Compensation and
Liability Act, as amended.
1.50 "Indemnitee" is defined in Section 12.3(a).
1.51 "Indemnifying Party" is defined in Section 12.3(a).
1.52 "Interest Period" is defined in Section 2.8.
1.53 "IRA" means individual retirement account.
1.54 "IRS" means Internal Revenue Service.
1.55 "Keogh Account" or "Keogh" has the same meaning as "Business
Retirement Plan" or "BRP".
1.56 "Leased Properties" is defined in Section 2.1(c).
1.57 "Leasehold Improvements" is defined in Section 2.1(g).
1.58 "Leases" is defined in Section 2.1(c).
1.59 [Space reserved].
1.60 "Loans" is defined in Section 2.1(b).
1.61 "Losses" is defined in Section 12.1.
1.62 "Material Adverse Effect" means (i) in the case of the Seller, a
material adverse effect on the Assets or on the business or operations
conducted by Seller at the Branch Offices or in the case of the Purchaser, a
material adverse effect on the business or operations of Purchaser.
1.63 "Material Part" is defined in Section 2.11(d).
1.64 "Material Violation" means a violation which, individually or in the
aggregate with all
4
<PAGE>
other such violations, would have a Material Adverse Effect or constitute or
give rise to a default under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the Assets or any of the assets of Seller relating to
the Branch Offices under any Seller Agreement.
1.65 "Names" is defined in Section 5.12.
1.66 "NOW" is defined in the definition of "Deposits".
1.67 "Notice of Disagreement" is defined in Section 2.7(b).
1.68 "Other Liabilities" is defined in Section 2.4.
1.69 "Permits" is defined in Section 3.4(c).
1.70 "Personal Property" is defined in Section 2.1(d).
1.71 "Post-Closing Schedule" is defined in Section 2.7(a).
1.72 "Properties" is defined in Section 3.9.
1.73 "Pro-Rata Adjustment" is defined in Section 2.5.
1.74 "Purchaser" means Union Planters Bank of Florida, an insured
depository subsidiary of Union Planters Corporation.
1.75 "Purchaser Agreement" is defined in Section 4.2(b).
1.76 "Purchaser's Account" is defined in Section 2.6(b).
1.77 "Purchaser's Indemnified Parties" is defined in Section 12.1.
1.78 "Real Properties" is defined in Section 3.14.
1.79 "Records" means all records and original documents in Seller's
possession which pertain to and are utilized by Seller to administer, reflect,
monitor, evidence or record information respecting the business or conduct of
any of the Branch Offices and all such records and original documents
respecting (i) the Contracts, (ii) the Assets, (iii) the Deposits and (iv) the
Employees (except confidential employee records for which consents to release
such records to Purchaser shall not have been obtained from the relevant
employee), including all such records maintained on electronic or magnetic
media in the electronic data base system of Seller or to comply with any
applicable federal or state law or governmental regulation to which the
Deposits are subject, including but not limited to Federal Reserve Board
Regulation E (12 C.F.R. ss.205), Federal Reserve Board Regulation CC
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(12 C.F.R. ss.229) and the escheat and unclaimed property laws of the State of
Florida.
1.80 "Requisite Regulatory Approvals" is defined in Section 9.1.
1.81 "Retirement Accounts" is defined in Section 1.23.
1.82 "Returned Items" is defined in Exhibit B.
1.83 "Review Period" is defined in Section 2.7(b).
1.84 "Safe Deposit Box Assets" is defined in Section 2.1(h).
1.85 "Seller" means California Federal Bank, A Federal Savings Bank.
1.86 "Seller Agreement" is defined in Section 3.2(b)(iii).
1.87 "Seller's Account" is defined in Section 2.8.
1.88 "Seller's Indemnified Parties" is defined in Section 12.2.
1.89 "SAIF" means Savings Association Insurance Fund.
1.90 "Taxes" means all taxes, charges, fees, levies or other like
assessments, including, without limitation, income, gross receipts, excise,
real and personal and intangible property, sales, use, transfer, withholding,
license, payroll, recording, ad valorem and franchise taxes imposed by the
United States, or any state, local or foreign government or subdivision or
agency thereof; and such term shall include any interest, penalties or
additions to tax attributable to such assessments.
1.91 "Tax Return" shall mean any report, return or other information
required to be supplied to a taxing authority in connection with Taxes.
1.92 "Taxpayer Information" is defined in Exhibit B.
1.93 "Termination Date" is defined in Section 13.1(b).
1.94 "TIN" means taxpayer identification number.
1.95 "Third Party" is defined in Section 12.3(a).
1.96 "Third Party Claim" is defined in Section 12.3(a).
1.97 "Transfer Taxes" is defined in Section 7.1(b).
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ARTICLE II
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale of Assets.
On the Closing Date, Seller shall sell, transfer, assign, convey and
deliver to Purchaser, and Purchaser shall purchase and acquire from Seller, all
of Seller's right, title and interest in and to the following assets
(collectively, the "Assets") relating to the Branch Offices as of the Closing
Date:
(a) Cash on Hand. All petty cash, vault cash, teller cash, automated
teller machine ("ATM") cash and any other cash at or held for the account of
the Branch Offices (the "Cash") as of the close of business on the Closing
Date.
(b) Loans. All savings account loans secured by an interest in
Deposits and loans made by the Branch Offices in connection with automatic loan
reserves (i.e., overdraft protection), together with all interest thereon that
shall accrue but not be received by Seller on or prior to the Closing Date (the
"Loans"). Prior to the Closing Date, Seller shall provide Purchaser with
Schedule 2.1(b) which sets forth all Loans.
(c) Real Property. (i) All real property described on Schedule
2.1(c)(i), including the buildings, improvements and structures thereon and the
appurtenances belonging thereto (the "Fee Properties") and (ii) all leasehold
interests in real property identified on Schedule 2.1(c)(ii) (the "Leased
Properties") and all of Seller's rights with respect to the occupancy of the
Leased Properties (the "Leases").
(d) Personal Property. The personal property set forth on Schedule
2.1(d)-1, which is located at the Branch Offices on the Closing Date and owned
by Seller (including without limitation furniture, fixtures and equipment) but
excluding the property set forth on Schedule 2.1(d)-2 ("Personal Property").
(e) Records. All segregated Records.
(f) Contracts. The contract rights, licenses, permits, approvals,
authorizations and franchises set forth on Schedule 2.1(f), together with any
additional contract rights added to such Schedule pursuant to Section 5.13
hereof (the "Contracts").
(g) Leasehold Improvements. All leasehold improvements (to the extent
not otherwise included as Personal Property) located at the Branch Offices on
the Closing Date (the "Leasehold Improvements").
(h) Safe Deposit Box Assets. All assets including, but not limited to,
safe deposit
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contracts and leases related to the safe deposit box business located at the
Branch Offices as of the close of business on the Closing Date (the "Safe
Deposit Box Assets").
(i) Intangibles. The Covenant Not to Compete and the core deposit
intangibles associated with the assumption of Deposits pursuant to Section 2.3
hereto.
2.2 Excluded Assets and Liabilities.
(a) It is understood and agreed that Purchaser is not acquiring from
Seller, and Seller shall retain ownership of all right, title and interest in
and to, any property or asset which is not being transferred pursuant to
Section 2.1 hereof (including but not limited to (i) the existing or any
currently anticipated future name of Seller or derivation thereof and (ii) any
logos, service marks, trademarks, advertising material, slogans, or similar
items used on or prior to the Closing Date by Seller in connection with its
business) and the assets and liabilities set forth on Schedule 2.2
(collectively, the "Excluded Assets").
(b) Except as expressly set forth in this Agreement, Purchaser shall
not assume or be liable for any of the debts, obligations or liabilities of
Seller of any kind or nature whatsoever (whether or not accrued or fixed,
absolute or contingent, known or unknown), and Seller shall remain and be
solely and exclusively liable with regard to such debts, liabilities and
obligations (collectively, the "Excluded Liabilities").
2.3 Assignment and Assumption of Deposits.
At the Closing, Seller shall assign to Purchaser, and Purchaser
shall (a) accept and assume from Seller and (b) pay, perform and discharge all
obligations with respect to and be solely liable for all Deposits domiciled at
the Branch Offices (the "Deposit Obligations"). Prior to the Closing Date,
Seller shall provide Purchaser with Schedule 2.3 which sets forth a list of all
the Deposits as of the date of the Schedule.
2.4 Assignment and Assumption of Other Liabilities.
Subject to the terms and conditions set forth in this Agreement, on
the Closing Date, Seller shall assign to Purchaser, and Purchaser shall (a)
accept and assume from Seller and (b) pay, perform and discharge all
obligations with respect to and be solely liable for, the liabilities and
obligations that arise under the Leases and the Contracts, which liabilities
and obligations become due and payable after the Closing Date (the "Other
Liabilities"). The Deposit Obligations and the Other Liabilities shall
collectively be referred to as the "Assumed Liabilities".
2.5 Adjustment for Income, Expenses, Pre-Payments and Fees.
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(a) All items of income, operating expenses, pre-payments and fees
relating to the Assets and Assumed Liabilities, whether incurred, accrued,
assessed, paid, prepaid, or otherwise attributable to the operation of the
Branch Offices or the maintenance of the Deposit Obligations prior to, on or
after the Closing Date (including without limitation, wages, salaries, rents,
equipment charges, safe deposit fees, utility payments, personal property
taxes, nondelinquent real property taxes, insurance, assessments and other
costs, expenses, investments and capital expenditures relating to the Branch
Offices or the Fee Properties, any fees paid or payable to Seller with respect
to the Loans or the IRA and Keogh Accounts, and any FDIC/SAIF fees, premiums or
assessments), shall be pro-rated between the parties as of the Closing Date.
Seller shall be responsible for (or entitled to receive, as the case may be)
all such items which are allocable to the period on or prior to the Closing
Date, and Purchaser shall be responsible for (or entitled to receive, as the
case may be) all such items which are allocable to the period subsequent to the
Closing Date. With regard to the pro-ration of FDIC/SAIF fees and premiums, the
amount for which Purchaser is responsible shall include, in addition to any
prepaid assessment, that portion of the FDIC deposit insurance assessment
payable by Seller on the payment date next succeeding the Closing Date in
respect of the portion of Seller's insurance assessment attributable to the
deposits assumed by Purchaser pursuant to the Agreement for the period
subsequent to the Closing Date; and such assessment shall be based on the
insurance assessment rate payable by Seller. The aggregate net amount of such
proration adjustments shall be referred to herein as the "Pro-Rata Adjustment".
The Pro-Rata Adjustment shall be included as part of the calculation of the
Estimated Transfer Amount and the Final Transfer Amount as provided for in this
Agreement.
(b) The Pro-Rata Adjustment shall include the dollar amount of all
security deposits which Seller has paid to lessors under the Leases, as
indicated in the assignments to be signed by such lessors.
(c) To the extent that any of the items of income, fees or expenses
described in paragraph (a) of this section are not discovered prior to the
preparation of the Post-Closing Schedule, the parties shall cooperate with one
another so that Purchaser or Seller, as the case may be, pays any such fee or
expense, or receives any such income, depending upon whether such fee, expense
or income relates to the period before, on or after the Closing Date.
(d) All prorations made pursuant to this section shall be based upon
the ratio of the number of days up to and including the Closing Date related to
such item compared to the total number of days related to such item.
2.6 Estimated Transfer Payment.
(a) Five (5) Business Days prior to the Closing, Seller shall deliver
to Purchaser a schedule estimating the following, in each case as of the close
of business on the last day of the month preceding the month in which the
Closing Date shall occur (the "Estimation Date"): (i) the aggregate balance of
the Deposits (the "Estimated Deposits"), (ii) the aggregate book value, net of
specific loan loss reserves, of the Loans, plus (to the extent not reflected in
such book value) all interest thereon that shall accrue but not be received by
Seller on or prior to the Estimation Date (such book value,
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as so adjusted, the "Estimated Loan Payment"), (iii) the aggregate amount of
the Cash (the "Estimated Cash") and (iv) the Pro-Rata Adjustment (the
"Estimated Pro-Rata Adjustment"). At the Closing, Seller shall deliver to
Purchaser a true and complete schedule (the "Book Value Schedule") setting
forth the aggregate book value, net of accumulated depreciation, as of the
Closing Date, of the Personal Property located at the Branch Offices, the
Leasehold Improvements and the Fee Properties.
(b) In connection with the sale by Seller to Purchaser of the Assets
and the assumption by Purchaser of the Deposits as provided for herein, at the
Closing, Seller shall transfer to Purchaser in immediately available funds, by
wire transfer to an account designated in writing by Purchaser to Seller at
least two days prior to the Closing Date ("Purchaser's Account"), an amount
(the "Estimated Transfer Amount") equal to the Estimated Deposits minus the sum
of (i) the "Deposit Premium", (ii) the Estimated Loan Payment, (iii) the
Estimated Cash, (iv) the aggregate book value (net of accumulated depreciation)
as of the Closing Date of the Personal Property located at the Branch Offices,
the Leasehold Improvements and the Fee Properties (not to exceed $5,220,000)
and (v) the Estimated Pro-Rata Adjustment.
2.7 Post-Closing Schedule.
(a) Within ten (10) Business Days after the Closing Date, Seller shall
deliver to Purchaser a schedule (the "Post-Closing Schedule") setting forth the
actual amount of (i) the aggregate balance of the Deposits as of the close of
business on the Closing Date, (ii) the aggregate book value, net of specific
loan loss reserves, as of the Closing Date of the Loans, plus (to the extent
not reflected in such book value) all interest thereon that shall accrue but
not be received by Seller on or prior to the Closing Date, (iii) the aggregate
amount of the Cash as of the close of business on the Closing Date, (iv) the
Deposit Premium and (v) the Pro-Rata Adjustment. Purchaser shall cooperate with
Seller in the preparation of the Post-Closing Sched ule. Purchaser shall
provide Seller and its independent accountants with reasonable access to the
books, records, facilities and personnel of the Branch Offices in a manner
which does not unduly disrupt or interfere with the operation of the Branch
Offices so that Seller and its independent accountants may prepare the
Post-Closing Schedule.
(b) Within thirty (30) calendar days after delivery of the
Post-Closing Schedule to Purchaser (the "Review Period"), Purchaser may dispute
all or any portion of the Post-Closing Schedule by giving written notice (a
"Notice of Disagreement") to Seller setting forth in reasonable detail the
basis for such dispute (hereinafter called a "Disagreement"). The failure by
Purchaser to deliver a Notice of Disagreement during the Review Period shall
constitute an irrevocable acceptance by Purchaser of the Post-Closing Schedule
in the form delivered by Seller. If Purchaser delivers a Notice of Disagreement
during the Review Period, the parties shall promptly commence good faith
negotiations with a view to resolving such Disagreement. If Seller shall not
dispute all or any portion of the Notice of Disagreement by giving written
notice to Purchaser setting forth in reasonable detail the basis for such
dispute within 10 Business Days following the delivery of the Notice of
Disagreement, Seller shall be deemed to have irrevocably accepted the
Post-Closing Schedule as modified by the Notice of Disagreement.
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(c) If Seller disputes all or any portion of the Notice of
Disagreement within the 10 Business Days following the delivery of the Notice
of Disagreement and the parties are not able to resolve any Disagreement within
30 calendar days after the delivery by Seller of its dispute of the Notice of
Disagreement, such Disagreement shall be referred to a nationally recognized
accounting firm for determination of the disputed amounts in accordance with
this Agreement. If Purchaser and Seller do not promptly agree on the selection
of a nationally recognized accounting firm, their respective independent public
accountants shall immediately select such accounting firm. The determination of
such firm shall be final and binding upon the parties and the amount so
determined shall be used to complete the final Post-Closing Schedule. Such firm
shall render its determination as soon as practicable after referral of the
Disagreement. The fees and expenses of such firm shall be paid one-half by
Purchaser and one-half by Seller. The parties shall cooperate with each other
and such firm with respect to the resolution of any Disagreement, such
cooperation to include reasonable access to books, records, facilities and
personnel.
2.8 Final Settlement.
On the Business Day immediately following the day on which the
Post-Closing Schedule is finally determined pursuant to the terms of Section
2.7 of this Agreement (the "Final Settlement Date"), the Estimated Transfer
Amount shall be recalculated using the amounts reflected in the final
Post-Closing Schedule (the "Final Transfer Amount"). If the Final Transfer
Amount exceeds the Estimated Transfer Amount, Seller shall pay the difference
to Purchaser by wire transfer in immediately available funds to Purchaser's
Account. If the Estimated Transfer Amount exceeds the Final Transfer Amount,
Purchaser shall refund the difference to Seller by wire transfer in immediately
available funds to an account designated in writing by Seller ("Seller's
Account"). Any payment pursuant to this section shall include interest on such
amount for the number of days after the Closing Date to, but excluding, the
Final Settlement Date (the "Interest Period") calculated at the Federal Funds
Rate as published in the "Money Rates" section of The Wall Street Journal as of
the Closing Date.
2.9 Allocation of Purchase Price.
The consideration paid by Purchaser to Seller pursuant to this
Agreement shall be allocated among the Assets, including any intangible assets,
as set forth on Schedule 2.9. The allocation of the purchase price was
bargained and negotiated for, and each party agrees to report the transactions
contemplated hereby for federal income tax and all other tax purposes
(including, without limitation, for purposes of Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code")) in a manner consistent with the
allocation set forth on Schedule 2.9 determined pursuant to this Section 2.9
and in accordance with all applicable rules and regulations, and to take no
position inconsistent with such allocation in any administrative or judicial
examination or other proceeding. Each of Purchaser and Seller shall timely file
the appropriate forms in accordance with the requirements of Section 1060 of
the Code and this section.
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2.10 Limited Warranty; Nonrecourse; Conveyance
(a) EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, THE
CONVEYANCE OF ALL ASSETS, INCLUDING PERSONAL PROPERTY INTERESTS, PURCHASED BY
PURCHASER UNDER THIS AGREEMENT AND UNDER ANY CONVEYANCING DOCUMENT EXECUTED IN
CONNECTION HEREWITH SHALL BE MADE, AS NECESSARY, BY SELLER'S BARGAIN AND SALE
DEED WITHOUT COVENANTS, ASSIGNMENT OR BILL OF SALE, IN "AS IS" AND "WHERE IS"
CONDITION, WITHOUT RECOURSE AND, WITHOUT ANY WARRANTIES WHATSOEVER WITH RESPECT
TO SUCH ACQUIRED ASSETS, EXPRESS OR IMPLIED, WITH RESPECT TO TITLE,
ENVIRONMENTAL CONDITION, ENFORCEABILITY, COLLECTABILITY, DOCUMENTATION OR
FREEDOM FROM LIENS OR ENCUMBRANCES (IN WHOLE OR IN PART), CONDITION OF PROPERTY
OR ANY OTHER MATTER.
(b) Purchaser shall prepare and deliver to Seller, and Seller shall
execute and deliver to Purchaser, such further instruments and documents of
conveyance (in form and substance satisfactory to Seller and Purchaser) as
shall be reasonably necessary to vest in Purchaser the full legal or equitable
title of Seller in and to the Acquired Assets.
(c) On and after the Closing Date, Purchaser shall execute,
acknowledge and deliver all such acknowledgments and other instruments as
Seller shall reasonably request to effectively relieve and discharge Seller
from any of the Assumed Liabilities.
2.11 Risk of Loss; Repairs.
(a) If, on or before the Closing Date, any of the Leased Properties or
Fee Properties is damaged in material part by fire or other cause, Seller shall
promptly notify Purchaser thereof in writing. In such event, Seller may elect
to:
(i) In the case of the Fee Property or Leased Property, allow
as a credit against the purchase price an amount equal to the
estimated cost of restoration (to the extent of the damaged property
interest owned by Seller) as determined by an independent construction
contracting firm satisfactory to both Seller and Purchaser; or
(ii) (A) In the case of the Fee Property, assign at Closing
to Purchaser, without recourse to Seller, the insurance proceeds for
the casualty and the right to collect same, without any abatement to
the purchase price or (B) in the case of a Leased Property, assign at
Closing to Purchaser, without recourse to Seller, the insurance
proceeds for the casualty and the right to collect same (but only to
the extent that Seller, pursuant to the terms of the applicable lease,
is entitled to such insurance proceeds payable in connection with such
fire or other cause), without any abatement to the purchase price.
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(b) If, on or before the Closing Date, any condemnation or eminent
domain proceedings are initiated which could result in the taking of any part
of any Fee Property or Leased Property, Seller shall promptly notify Purchaser
of the initiation of any such proceedings. Upon receipt of such notice, if a
material part of the premises is to be taken, Purchaser may elect to:
(i) (A) In the case of the Fee Property, consummate the
purchase of the Fee Property and receive an abatement to the purchase
price in an amount equal to the book value of the Fee Property at such
time, in which case Seller shall receive and retain any award made in
connection with such condemnation or eminent domain proceedings or (B)
in the case of a Leased Property, consummate the purchase of the real
property leasehold interest in such Leased Property and receive an
abatement to the purchase price in an amount equal to the current book
value of the real property leasehold interest in such Leased Property,
in which case Seller shall receive any award made in connection with
such condemnation or eminent domain proceedings which is payable to
Seller pursuant to the applicable lease; or
(ii) (A) In the case of the Fee Property, consummate the
purchase of the Fee Property without abatement to the purchase price,
in which event Seller shall assign to Purchaser, without recourse to
Seller, all of Seller's right, title and interest in and to any award
made in connection with such condemnation or eminent domain
proceedings or (B) in the case of a Leased Property, consummate the
purchase of the real property leasehold interest in such Leased
Property, without abatement to the purchase price, in which event
Seller shall assign to Purchaser, without recourse to Seller, all of
Seller's right, title and interest in and to any award made in
connection with such condemnation or eminent domain proceedings as
provided in the applicable lease.
(c) Purchaser shall have ten (10) Business Days from the date of
receipt of Seller's written notice within which to make such election, and a
failure to make an election shall be deemed an election to consummate this
transaction pursuant to subsection 2.11(a)(i) or 2.11(b)(i) above, as
applicable.
(d) A "material part" shall be deemed to mean (i) any taking or damage
which would leave remaining a balance of such Fee Property or Leased Property
which, due either to the area so taken or damaged or the location of the part
so taken or damaged in relation to the part not so taken or damaged, would not
permit it to be used effectively for its intended purpose and, under economic
conditions, zoning laws or building regulations then existing or prevailing,
would not readily accommodate a new or reconstructed building or buildings of a
type not materially different from the building or buildings existing on the
date of such taking or damage or (ii) any damage or taking that would require
Purchaser to incur costs or expenses exceeding fifty thousand dollars ($50,000)
to repair the branch or to compensate for such taking.
(e) If any Fee Property or Leased Property requires any capital
improvements between the date of this Agreement and the Closing Date, Seller
shall give Purchaser notice of the proposed improvements and the cost thereof.
If Purchaser does not object to such proposal within five (5)
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Business Days, Seller shall have the right to make such capital improvements
and the cost of such capital improvements shall be added to the purchase price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as follows:
3.1 Corporate Organization and Powers.
(a) Seller is a federally chartered savings bank, duly organized,
validly existing and in good standing under the laws of the United States of
America.
(b) Seller has the corporate power and authority to own, lease or
operate the Assets and to carry on the business of the Branch Offices as
presently conducted and is duly qualified and in good standing to do business
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so qualified would not, individually or in the aggregate with all
other such failures, have a Material Adverse Effect.
(c) Seller's deposits are, subject to applicable monetary limits
established by law, insured by the SAIF of the FDIC, and all premiums and
assessments required in connection therewith have been paid when due by Seller.
3.2 Corporate Authority; No Violation.
(a) Seller has the corporate power and authority to execute and
deliver this Agreement and any documents, agreements or instruments to be
executed by Seller pursuant to this Agreement, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and any documents, agreements or instruments to be executed by
Seller pursuant to this Agreement, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action on the part of Seller, and no further corporate authorization
on the part of Seller is necessary to approve this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller. Assuming the due authorization, execution and delivery of
this Agreement by Purchaser, and except as enforcement may be limited by
general principles of equity, whether applied in a court of law or a court of
equity, and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally, (i) this Agreement constitutes a legal, valid
and binding obligation of Seller, enforceable against Seller in accordance with
its terms and (ii) the other documents, agreements and instruments to be
delivered by Seller to Purchaser pursuant to this Agreement, when executed and
delivered, will be duly executed and delivered by Seller and will constitute
legal, valid and binding obligations of Seller.
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(b) The execution and delivery by Seller of this Agreement or any
document, agreement or instrument to be executed by Seller pursuant to this
Agreement, the consummation by Seller of the transactions contemplated hereby
or thereby, and compliance by Seller with the terms or provisions hereof or
thereof, shall not result:
(i) in a violation of any provision of the Charter or Bylaws
of Seller,
(ii) in a Material Violation of any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction
applicable to Seller or any of its properties or assets (including,
without limitation, the Assets), or
(iii) in a Material Violation of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, or other
instrument or obligation to which Seller is a party or by which Seller
or any of the Assets may be bound or affected (a "Seller Agreement").
3.3 Consents and Approvals.
(a) Except as set forth on Schedule 3.3, Seller is not required to
obtain any consent, approval, order, authorization, registration, declaration
from, or to make any filing with, any court, agency, or governmental authority
or instrumentality (each a "Governmental Entity") or any other third party in
connection with (a) Seller's execution and delivery of this Agreement or any
document, agreement or instrument to be executed pursuant to this Agreement or
(b) the consummation by Seller of the transactions contemplated hereby or
thereby (including without limitation the transfer of the Assets to Purchaser).
(b) As of the date of this Agreement, Seller knows of no reason,
specifically relating to its business or operations, why all of the Requisite
Regulatory Approvals shall not be obtained.
3.4 Compliance With Law.
(a) Except as set forth on Schedule 3.4, with respect to the Assets
and the business of the Seller related to the Branch Offices, Seller is in
compliance in all material respects with the provisions of all applicable
federal, state and local statutes, regulations and ordinances, and Seller will
not be in default in any material respect under any said statutes, regulations
and ordinances.
(b) Except as set forth on Schedule 3.4, and except for regularly
scheduled examinations, audits and full and limited scope reviews conducted by
governmental authorities under applicable laws relating to federal savings
banks and their holding companies, no investigation or review by any
governmental authority concerning any possible conflicts or violations by
Seller is pending or threatened to the knowledge of Seller.
(c) Seller has all licenses, franchises, permits, certificates of
public convenience, orders
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and other authorizations ("Permits") of all federal, state and local
governments and governmental authorities necessary for the lawful conduct of
the business being conducted at each of the Branch Offices, all such Permits
shall be valid and in good standing, and all such Permits will not be subject
to any suspension, modification or revocation or proceedings related thereto
except where the failure to have such Permits, or the invalidity thereof, would
not, individually or in the aggregate, have a Material Adverse Effect.
3.5 Title to Assets.
As of the Closing Date, Seller or one of its subsidiaries will have,
and will deliver to Purchaser at the Closing, good, valid and, with respect to
the Fee Properties, insurable title to, and, with respect to leased property, a
valid leasehold interest in, all of the Assets, free and clear of all
mortgages, claims, charges, liens, encumbrances, easements, limitations,
restrictions, commitments and security interests ("Encumbrances") except for
Encumbrances:
(a) Securing any Assumed Liability;
(b) Disclosed on Schedule 3.5 or properly recorded in any title
reports, opinions or insurance binders delivered or made available to Purchaser
prior to the execution of this Agreement;
(c) Incurred in connection with the acquisition of property and
securing the purchase price therefor, in either case only if such liability
relating thereto is an Assumed Liability;
(d) For Taxes or assessments, special or otherwise, either not due and
payable or being contested in good faith and subject to escrow, reserves, or
other appropriate protection for Purchaser;
(e) Consisting of easements, rights of way, restrictions, covenants of
record, claims and covenants not shown on record, and other similar charges and
encumbrances which, if the rights granted under such instruments were
exercised, would not individually, or in the aggregate, impair or interfere
with the present and continued use and operation of the affected property;
(f) Consisting of rights of parties in possession, matters which would
be shown on an accurate survey, and any other defect or exception to title,
which in any case does not materially impair the use, operation, value or
marketability of the Asset to which it relates; and
(g) Consisting of, with respect to each Fee Property, any other title
exceptions affecting the Fee Property which do not impair or interfere with the
present and continued use and operation of the Fee Property. Seller shall
cooperate with Purchaser to remove those encumbrances on the Fee Property which
the title company may agree to delete as exceptions to the title thereto, but
the title company's failure to delete any such encumbrance shall not constitute
a breach of this representation.
3.6 Contracts and Leases.
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(a) Seller is not a party to or bound by any agreements or
arrangements for the purchase or sale of any of the Assets, or for the grant of
any preferential right to purchase any of the Assets, other than in the
ordinary course of business.
(b) Schedule 3.6(b) sets forth each Contract for transactions:
(i) with an aggregate value of five thousand dollars ($5,000)
or more during the past three (3) months or twenty-five thousand
dollars ($25,000) or more during the past 12 months;
(ii) with a remaining term of more than one (1) year; or
(iii) that has or may have a material effect on the Assets or
on the business or operations conducted by Seller at the Branch
Offices.
(c) Upon the Closing, each of the Contracts set forth on Schedule
3.6(b):
(i) will constitute the legal, valid and binding obligation
of Seller, and to the knowledge of Seller, each of the other parties
thereto,
(ii) will be enforceable in accordance with its terms, and
(iii) will not be subject to any material defaults or
existing acts, events or conditions which, with notice or lapse of
time, or both, will result in a material default under any of such
Contract.
Seller has made available to Purchaser true and correct copies of each
Contract set forth on Schedules 2.1(f) and 3.6(b), and all attachments,
amendments and addenda thereto, excluding those Contacts added pursuant to
Section 5.13.
(d) Seller has delivered to Purchaser true, complete and correct
copies of the Leases, together with all amendments, modifications, and other
changes. The Leases are also listed on Schedule 3.6(b).
(e) All sums due and owing by Seller pursuant to the Leases, through
the Closing Date, have or will be paid prior to the Closing Date.
(f) Except as set forth on Schedule 3.6(f), Seller did not sublease
any of its interests in any Leased Property.
(g) Seller has not received any notice of (i) non-compliance with any
restriction encumbering any Leased Property, or (ii) any zoning violations
adversely affecting the value or use of any Leased Property or (iii) any
default in connection with any of the Leases.
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3.7 Assignment of Assumed Liabilities.
As of the Closing Date, each of the Assumed Liabilities will be
assigned to Purchaser, and to the best of Seller's knowledge, there are no
material defaults under any of such Assumed Liabilities.
3.8 Litigation.
Schedule 3.8 sets forth each action, suit, proceeding, inquiry or
investigation, at law or in equity, before any court, arbitrator, mediator or
any governmental body, agency or official, pending, or, to Seller's knowledge,
threatened, against Seller relating to any of the Assets, Assumed Liabilities,
or the business or operation of the Branch Offices ("Legal Action").
Except as set forth on Schedule 3.8, there is no action, suit, or
proceeding, at law or in equity, before any court or any governmental body,
agency or official, wherein an unfavorable decision, ruling or finding would
adversely affect (a) the validity or enforceability of this Agreement or any
document necessary to consummate the transactions contemplated herein, (b) the
consummation of the transactions contemplated hereby, (c) any approval, consent
or permission required to be obtained by Seller hereunder, (d) the ability of
Seller to perform its obligations under this Agreement or (e) the business or
operations of any of the Branch Offices.
3.9 Environmental.
Seller represents and warrants concerning the Fee Properties, the
Leased Properties and all other property contained therein which shall be
transferred pursuant hereto (for purposes of this Section 3.9, "properties")
that, except as set forth on Schedule 3.9 and breaches of this representation
that, individually or in the aggregate, would not have a Material Adverse
Effect on the Acquired Assets or the Assumed Liabilities:
(a) Except as otherwise provided herein or as disclosed in any
environmental studies, reports, investigations or other documents referred to
in this section, such properties are and have been in substantial compliance
with all Environmental Laws,
(b) there has been no storage, disposal, arrangement for disposal,
presence or release of Hazardous Substances, from, in, upon or below any such
properties,
(c) Seller has not engaged in any activity that involves or involved
the generation, use, manufacture, treatment, transportation, storage in tanks
or otherwise, or disposal of Hazardous Substances on or from any property,
(d) Seller has not received any communication from any person or
entity that alleges a violation of Environmental Laws concerning, or that
Seller may be responsible for any Loss (as defined in this Agreement) under
Environmental Laws with respect to, any of the properties,
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(e) Seller has not received any claim, action, demand, or
investigation from any person or entity alleging or describing potential Loss
under Environmental Laws based on or resulting from (a) the presence, release
or threatened release of any Hazardous Substance from, in, upon or below any of
the properties or (b) the violation or alleged violation of any Environmental
Laws concerning any of the properties, and
(f) Seller has made available to Purchaser copies of all environmental
studies, reports, investigations and other documents relating to the properties
of which Seller has possession.
3.10 Finders or Brokers.
Except as disclosed on Schedule 3.10, Seller has not paid or agreed to
pay any fee or commission to any agent, broker, finder or other person for or
on account of services rendered as a broker or finder in connection with this
Agreement or the transactions covered and contemplated hereby.
3.11 Financial Information.
(a) The books of account of the Branch Offices fairly and accurately
reflect the respective Assets and Assumed Liabilities of the Branch Offices, in
accordance with generally accepted accounting principles ("GAAP") or regulatory
accounting principles, whichever is applicable, consistently applied.
(b) The books of account of the Branch Offices (i) are being
maintained by Seller substantially in accordance with applicable legal and
accounting requirements and (ii) reflect only actual transactions.
3.12 Taxes.
(a) All Taxes which are due or payable by Seller relating to the
Assets (except those Taxes which are Purchaser's responsibility under a
different covenant of this Agreement) have been paid in full or properly
accrued and adequately provided for by reserves shown in the books and records
of Seller, or will be so paid or accrued and provided for in the books and
records of the Seller.
(b) All Tax Returns required to be filed with respect to the Assets
have been filed with the appropriate federal, state or local taxing authority
and each such Tax Return is true, complete and correct in all material
respects.
(c) All Taxes shown to be due on such Tax Returns, and all Taxes
arising from or attributable to the Assets required to be withheld by or with
respect to the Seller have been paid or, if applicable, withheld and paid to
the appropriate taxing authority, other than those Taxes the failure of which
to be paid would not result in a lien on the Assets or become a liability of
Purchaser.
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(d) No notice of deficiency or assessment of Taxes has been received
from any taxing authority with respect to the Assets.
(e) There are no ongoing audits or examinations of any of the Tax
Returns relating to or attributable to the Assets, other than with respect to
Taxes that would not result in a lien on the Assets or become a liability of
Purchaser.
(f) No consents or waivers to extend the statutory period of
limitations applicable to the assessment of any Taxes with respect to the
Assets has been granted, other than with respect to Taxes that would not result
in a lien on the Assets or become a liability of Purchaser.
3.13 Approvals.
As of the date of this Agreement, Seller knows of no reason why all of
the Requisite Regulatory Approvals shall not be obtained.
3.14 State of the Real Property.
The following are true statements with respect to the Fee Properties
and the Leased Properties (for purposes of this Section 3.14, collectively
"Real Properties"):
(a) Schedule 3.14 contains a list, that is complete and accurate in
all material respects, which sets forth as of a recent date identified on said
schedule (i) the address of each Fee Property and Leased Property and (ii) the
Leases with respect to the Leased Properties and all material amendments
thereto;
(b) The improvements and building systems are in good operating
condition and repair, subject to ordinary wear and tear and routine maintenance
needs; and
(c) The present use, operation and physical condition of the Real
Properties are in material compliance with all applicable laws.
3.15 Employees.
(a) There are no claims (statutory or otherwise), demands, proceedings
or other actions pending or, to Seller's actual knowledge, threatened against
Seller by (a) any of its present or former employees at the Branch Offices or
(b) any person who sought to become employed by Seller at the Branch Offices.
(b) None of the Employees is a member of any labor union or is
otherwise subject to collective bargaining.
3.16 Deposits and Branches.
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(a) The Deposits are insured by SAIF up to the maximum extent
permitted by law, and Seller has filed and will file all reports and paid all
fees, premiums and assessments required under the Federal Deposit Insurance
Act, as amended.
(b) The Branch Offices constitute all of the banking offices, which
accept deposits, of the Seller, and its affiliates, which are located in the
State of Florida.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
4.1. Corporate Organization and Powers.
(a) Purchaser is an insured depository institution, duly organized,
validly existing and in good standing under the laws of the State of Florida.
(b) Purchaser has the corporate power and authority to own, lease or
operate the Assets and to carry on the business of the Branch Offices as
presently conducted and is duly qualified and in good standing to do business
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so qualified would not, individually or in the aggregate with all
other such failures, have a Material Adverse Effect.
(c) Purchaser's deposits are, subject to applicable monetary limits
established by law, insured by the FDIC, and all premiums and assessments
required in connection therewith have been paid when due by Purchaser.
4.2 Corporate Authority; No Violation.
(a) Purchaser has the corporate power and authority to execute and
deliver this Agreement and any documents, agreements or instruments to be
executed by Purchaser pursuant to this Agreement, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and any documents, agreements or instruments to be executed by
Purchaser pursuant to this Agreement, and the consummation of the transactions
con templated hereby and thereby, have been duly authorized by all necessary
corporate action on the part of Purchaser, and no further corporate
authorization on the part of Purchaser is necessary to approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Purchaser. Assuming the due authorization,
execution and delivery of this Agreement by Seller, and except as enforcement
may be limited by general principles of equity, whether applied in a court of
law or a court of equity, and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally, (i) this Agreement
constitutes a legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms
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and (ii) the other documents, agreements and instruments to be delivered by
Purchaser to Seller pursuant to this Agreement, when executed and delivered,
will be duly executed and delivered by Purchaser and will constitute legal,
valid and binding obligations of Purchaser.
(b) The execution and delivery by Purchaser of this Agreement or any
document, agreement or instrument to be executed by Purchaser pursuant to this
Agreement, the consummation by Purchaser of the transactions contemplated
hereby or thereby, and compliance by Purchaser with the terms or provisions
hereof or thereof, shall not result:
(i) in a violation of any provision of the Charter or Bylaws
of Purchaser,
(ii) in a material violation of any statute, code, ordinance,
rule, regulation, judgment, order, writ, decree or injunction
applicable to Purchaser or any of its properties or assets (including,
without limitation, the Assets), or
(iii) in a material violation of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, or other
instrument or obligation to which Purchaser is a party or by which
Purchaser or any of the Assets may be bound or affected (a "Purchaser
Agreement").
4.3 Consents and Approvals.
(a) Except as set forth on Schedule 4.3, Purchaser is not required to
obtain any consent, approval, order, authorization, registration, declaration
from, or to make any filing with, any Governmental Entity or any other third
party in connection with (a) Purchaser's execution and delivery of this
Agreement or any document, agreement or instrument to be executed pursuant to
this Agreement or (b) the consummation by Purchaser of the transactions
contemplated hereby or thereby.
(b) As of the date of this Agreement, Purchaser knows of no reason,
specifically relating to its business or operations, why all of the Requisite
Regulatory Approvals shall not be obtained.
4.4 Litigation.
Except as set forth on Schedule 4.4, there is no action, suit, or
proceeding, at law or in equity, before any court or any governmental body,
agency or official, wherein an unfavorable decision, ruling or finding would
adversely affect (a) the validity or enforceability of this Agreement or any
document necessary to consummate the transactions contemplated herein, (b) the
consummation of the transactions contemplated hereby, (c) any approval, consent
or permission required to be obtained by Purchaser hereunder, (d) the ability
of Purchaser to perform its obligations under this Agreement or (e) the
business or operations of any of the Branch Offices.
4.5 Finders or Brokers.
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Except as disclosed on Schedule 4.5, Purchaser has not paid or agreed
to pay any fee or commission to any agent, broker, finder or other person for
or on account of services rendered as a broker or finder in connection with
this Agreement or the transactions covered and contemplated hereby.
4.6 Estimates, Projections and Other Predictions.
It is understood that any cost estimates, projections or other
predictions contained or referred to in any Exhibit or Schedule hereto or which
otherwise have been provided to Purchaser are not and shall not be deemed to be
representations or warranties of Seller. Purchaser acknowledges that there are
uncertainties inherent in attempting to make such estimates, projections and
other predictions, that Purchaser is familiar with such uncertainties, that
Purchaser is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all estimates, projections and other predictions so
furnished to it, and that Purchaser shall have no claim against anyone with
respect thereto.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 Business Obligations.
Except as set forth on Schedule 5.1, as otherwise provided in this
Agreement, or as required by applicable law, between the date of this Agreement
and the Closing Date:
Seller shall:
(a) conduct the business of the Branch Offices and the
operations of Seller relating thereto in the ordinary course of
business, consistent with Seller's past practice and applicable law,
and consistent with prudent banking practice,
(b) maintain its books and records in accordance with GAAP or
regulatory accounting principles, where applicable, applied
consistently, and
(c) use its reasonable efforts to preserve its present
business organization and relationships.
(d) consult with Purchaser with respect to the pricing of the
Deposits and the establishment of the interest rates or other terms
thereof and will establish, with Purchaser's approval, such interest
rates and other terms which are substantially similar to the interest
rates and other terms established by Purchaser and other commercial
banks operating in the market for deposits of comparable maturities
and terms.
Seller shall not:
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(e) cause any Branch Office to transfer any Deposits, except
upon the unsolicited request of a depositor in the ordinary course of
business;
(f) agree to increase the salary, remuneration or
compensation (including insurance, pension or other benefit plan)
payable or to become payable to persons employed at the Branch Offices
other than in accordance with Seller's customary policies and/or
bank-wide changes, or pay or agree to pay any uncommitted bonus to any
such employees other than regular bonuses granted based on historical
practice.
(g) hire any new employees (not including replacement
employees or employees to fill existing openings) at the Branch
Offices without Purchaser's consent, which consent shall not be
unreasonably withheld;
(h) invest in any fixed assets on behalf of the Branch
Offices, except for commitments made on before the date of the
Agreement and for replacements of furniture, furnishings and equipment
and normal maintenance and refurbishing purchased or made in the
ordinary course of business.
5.2 Access.
(a) Between the date of this Agreement and the Closing Date, Seller
shall provide Purchaser and its authorized representatives access, upon
reasonable notice and during normal business hours, to copies of Seller's
confidential, proprietary and non-public information ("Confidential
Information") including without limitation Seller's books, records, contracts,
documents, Loan files, and other information of or relating to the Branch
Offices except the Confidential Information that Seller is by law not permitted
to disclose.
(b) Purchaser's investigations shall be conducted in a manner which
does not unreasonably interfere with Seller's normal operations, customers, and
employee relations. Seller and its employees shall cooperate with and assist
Purchaser to perform said investigations.
(c) All of Seller's Confidential Information shall be treated as and
remain the sole property of Seller. If the transactions contemplated by this
Agreement do not occur, Purchaser and its representatives shall return to
Seller, or destroy, all of Seller's Confidential Information, and all
documents, notes, summaries and other materials that contain, refer to, or are
derived from such Confidential Information; Purchaser shall certify to the
return or destruction of such Confidential Information.
(d) Purchaser shall keep confidential and not disclose any of Seller's
Confidential Information that is not acquired by Purchaser. Purchaser shall not
directly or indirectly use Seller's Confidential Information for any purpose
other than the consummation of this Agreement.
(e) Purchaser's obligations to keep confidential and to not disclose
Seller's Confidential Information shall not apply to any information which was
(i) in Purchaser's possession prior to its
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disclosure by Seller, (ii) generally known to the public, (iii) rightfully
disclosed to Purchaser by a third party or (iv) disclosed pursuant to a
securities filing or requirement of law following at least 30 days prior
written notice to Seller.
(f) Upon receipt of all of the Requisite Regulatory Approvals other
than the expiration of any statutory waiting period relating thereto, and upon
notice to Seller of a proposed Closing Date, Purchaser may communicate with,
and deliver information, brochures, bulletins, press releases, and other
communications to, depositors, Loan borrowers and other customers of the Branch
Offices concerning (i) the transactions contemplated by this Agreement and (ii)
the business and operations of Purchaser. The communications described
hereinabove must be made with Seller's prior written consent (which consent
shall not be unreasonably withheld) and shall be made at Purchaser's sole cost
and expense. Seller, if so requested by Purchaser, shall on behalf and at the
sole cost and expense of Purchaser, furnish information and communications to
depositors, Loan borrowers, and other customers of the Branch Offices in a
commercially reasonable manner.
(g) Except as may be required in connection with the obtaining of the
Requisite Regulatory Approvals, Purchaser shall not disclose to any person,
including to employees of the Branch Offices, the possible closing of any of
the Branch Offices prior to the Closing Date.
5.3 Legal and Regulatory Matters.
With respect to the making of filings to any Governmental Entity or
third party:
(a) Seller and Purchaser shall cooperate with each other and use their
best efforts to promptly prepare and file all necessary documentation; to
effect all applications, notices, petitions and filings; and to promptly obtain
all permits, consents, approvals, waivers and authorizations of all third
parties and Governmental Entities which are necessary or advisable to
consummate the transactions contemplated by this Agreement.
(b) Within 30 days after the execution of this Agreement, Seller and
Purchaser shall each file all the applications for the regulatory approvals,
consents, permits and authorizations which such party is required to obtain in
connection with the consummation of the transactions contemplated by this
Agreement.
(c) Subject to the applicable laws relating to the exchange of
information, Seller and Purchaser shall consult with each other and exchange
information in order to obtain all the permits, consents, approvals and
authorizations that are necessary or advisable to consummate the transactions
contemplated by this Agreement from all third parties and Governmental
Entities.
(d) Seller and Purchaser will keep the other party apprised of the
status of all applications and filings.
(e) Except for any confidential portions thereof, the party
responsible for making a filing shall promptly (i) provide a copy of the
filing, and any supplement, amendment or item of additional
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information in connection with the filing, to the other party and (ii) deliver
a copy of each material notice, order, opinion and other item of correspondence
received by it from any Governmental Entity to the other party.
(f) Purchaser and Seller shall promptly advise each other of any
communication received from a Governmental Entity which causes such party to
believe that there is a reasonable likelihood that a Requisite Regulatory
Approval will not be obtained or that the receipt of such approval will be
materially delayed.
5.4 Payment of Liabilities.
From and after the Closing Date, Purchaser shall pay all properly
drawn checks, drafts and non-negotiable withdrawal orders timely presented to
it (including without limitation those presented by mail, over the counter, or
through clearings) by depositors whose deposits or accounts on which such items
are drawn are Deposits. Payment of said items shall be made without regard to
whether the items are drawn on the check or draft forms provided by Seller or
by Purchaser. Further, Purchaser shall, in all other respects, discharge the
duties and obligations of Seller with respect to the balances due and owing to
the depositors whose accounts are assumed by Purchaser. The obligations set
forth in this section shall be in addition to the Purchaser's obligations under
Sections 2.3 and 2.4.
5.5 Interest Reporting.
From January 1 of the current calendar year through the Closing Date,
Seller shall report all interest credited to, interest withheld from, and early
withdrawal penalties charged to the Deposits. After the Closing Date and
through the end of the calendar year in which the Closing occurs, Purchaser
shall report all interest credited to, interest withheld from, and early
withdrawal penalties charged to the Deposits. Said reports shall be made to the
holders of the Deposits and to the applicable federal and state regulatory
agencies.
5.6 Transfer Fees.
(a) Seller and Purchaser shall equally bear all fees incurred in
connection with the obtaining of third party consents for transfer of the
Assets from Seller to Purchaser and the assumption by Purchaser of the Assumed
Liabilities.
(b) Notwithstanding the foregoing, if any lessor requires an increase
in the amounts payable under any of the Leases as a condition to its consent to
the assumption of such Lease by Purchaser, Purchaser shall be solely
responsible for the payment of all such increases after the Closing. Seller
shall not negotiate or agree to any such increase without the consent of
Purchaser, which consent shall not be unreasonably withheld.
5.7 Reports.
(a) Subsequent to the Closing Date, Purchaser shall make all the
reports that are
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required to be made in the ordinary course of business to any Governmental
Entity or otherwise with respect to the Branch Offices, including without
limitation, federal, state and local income tax reporting of Retirement
Accounts, 1099 information returns and other required tax forms, and cash
transaction reports. Notwithstanding the foregoing, Purchaser's obligations
with respect to said reports shall only apply to the extent that any such
reports relate to matters occurring after the Closing Date.
(b) Seller shall have the obligation to make all such reports with
respect to matters occurring on or prior to the Closing Date.
(c) All reports shall be made to the holders of accounts and to the
applicable federal, state and local regulatory agencies.
5.8 Branch Account Report.
As soon as practicable after the date of this Agreement, Seller shall
furnish Purchaser with a report of the Deposits as of the date of such report
(the "Branch Account Report"). To the extent such information is maintained by
Seller on its computer systems, the Branch Account Report shall enumerate for
each account constituting a Deposit ("Branch Account"): (a) the address and
taxpayer identification number of the owner of the Branch Account, (b) the type
of account, (c) the date the Branch Account was opened, (d) the current
interest rate paid on the Branch Account, if any, (e) the balance of the Branch
Account, (f) the term and maturity of any Branch Account that is a certificate
of deposit or similar time deposit and (g) with respect to all ACH Accounts and
ACH Items, all information reasonably necessary to identify (i) the owner of
such account and the third party which directly makes automated clearing house
debits and credits to such account and (ii) the nature of such ACH Accounts and
ACH Items.
5.9 General Notices to Depositors.
(a) Seller shall provide Purchaser with an intermediate customer list
of the accounts that are to be assumed by Purchaser pursuant to this Agreement.
The customer list shall contain information that is accurate as of the
month-end prior to the giving of the notice referred to in Section 5.9(b) of
this Agreement.
(b) Within five (5) Business Days following the receipt of all of the
Requisite Regulatory Approvals (other than the expiration of all statutory
waiting periods relating thereto), Seller shall notify the holders of the
Deposits that are to be assumed under this Agreement that Purchaser will assume
the liability for the Deposits, subject to satisfaction of the conditions to
closing contained herein. Such notifications shall include notice that
Purchaser shall not continue services to depositors provided by Seller but not
routinely offered by Purchaser, as specified by Purchaser prior to the giving
of such notification. The notifications shall be based on the list referred to
in Section 5.9(a) of this Agreement and a listing maintained at the Branch
Offices of the new accounts opened since the date of such list. Seller shall
provide Purchaser with the documentation of such lists up to the date of
Seller's mailing. Prior to the Closing, Purchaser shall send notifications to
the appropriate holders setting out the details of its administration of the
assumed accounts. Each party shall obtain
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approval of its notification letter(s) from the other party, and said approval
shall not be unreasonably withheld. Each party shall bear the cost of its own
mailing.
(c) Within five (5) Business Days following the receipt of all of the
Requisite Regulatory Approvals (other than the expiration of all statutory
waiting periods relating thereto), Seller shall provide a notice to the owners
of each of the safe deposit boxes at the Branch Offices stating that Seller
shall assign to Purchaser the safe deposit agreements between Seller and each
of such parties on the Closing Date. The notice shall be made by a letter that
is mutually acceptable to Purchaser and Seller. Seller and Purchaser shall
cooperate with one another in order to transfer the Safe Deposit Box Assets
from Seller to Purchaser. As soon as practicable after the date of this
Agreement, Seller shall deliver copies of all safe deposit box lease forms
currently used in connection with the Safe Deposit Box Assets to Purchaser.
(d) At least thirty (30) days before the Closing Date, Seller shall
prominently and continuously display a sign in each Branch Office stating that
the Branch Office will be closed on the Saturday following the Closing Date and
will not reopen until the following Monday (unless such Monday is a bank
holiday, in which case the sign will indicate that the Branch Office will
reopen the following Tuesday). The contents and form of the sign shall be
subject to Purchaser's prior approval, which shall not be unreasonably
withheld. At a mutually agreeable time on the Closing Date, Seller shall
provide Purchaser and their agents access to each Branch Office in order for
Purchaser to take such steps as are necessary to enable Purchaser to reopen
such Branch Office on the date described above as a functioning branch office
of Purchaser.
5.10 Covenant Not to Compete.
(a) For a period of two (2) years following the Closing Date, Seller
shall not, and shall not allow any of its Affiliates to, directly or indirectly
solicit any deposit business of the Branch Offices, or establish or maintain a
branch office or other physical facility for the purpose of accepting deposits
within a five (5) mile radius of any of the Branch Offices, nor directly
contact any customer of the Branch Offices as of the Closing Date for the
purpose of soliciting any deposit.
(b) For two years following the Closing Date, Seller shall not
directly contact any customer of the Branch Offices as of the Closing Date for
the purpose of soliciting any deposit or conducting general solicitations
specifically targeted to such customers.
(c) For two years following the Closing Date, Seller shall not, and
shall not allow any of its Affiliates to, solicit loans to any of the Deposit
customers of the Branch Offices, unless such customer is currently a secured
real estate borrower.
(d) Notwithstanding the foregoing, Seller and its Affiliates may
conduct general solicitations and mailings that are not specifically targeted
to such customers, and notwithstanding the foregoing, Seller may sell, transfer
or convey all or substantially all its assets, or the shareholders of Seller
may sell, transfer or convey all or substantially all of its outstanding
classes of stock, to an unrelated third party, and said unrelated third party
shall not be bound by any provision of this
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Section 5.10.
(e) The obligations of Seller created by this Section 5.10 are
referred to herein as the "Covenant Not To Compete".
5.11 Insurance.
Following execution of this Agreement until the Closing Date, Seller
shall maintain in full force and effect all of its insurance policies relating
to the Branch Offices and the Personal Property. Seller represents and warrants
to Purchaser that (a) such insurance will be customary in type and amount for
Assets of the nature just described, (b) such insurance will be sufficient to
replace (less any deductible amount) the Branch Offices or any of the Personal
Property which are damaged, destroyed or lost prior to the Closing Date, (c)
such insurance will be "occurrence" insurance, meaning that Seller or such
lessors, as the case may be, will have the enforceable right to submit and
pursue claims and receive proceeds under such insurance after the Closing Date
with respect to events occurring prior to the Closing Date, and (d) Seller's
rights under Seller's insurance can be assigned to Purchaser without the
consent of any person.
5.12 Use of Names, Trademarks and Service Marks.
(a) Except for the trademarks set forth in Schedule 5.12, no interest
in or right to use any logo, name, trademark or service mark presently or
previously used by Seller is being conveyed pursuant to this Agreement.
(b) Purchaser agrees that from and after the Closing Date neither it
nor any of its affiliates (including the Branch Offices) will use the name
"California Federal Bank", "First Nationwide", or any similar name indicating
affiliation after the Closing with Seller or any of its affiliates, in
connection with any business or activity engaged in by Purchaser or any of its
affiliates.
(c) Promptly after the Closing Date, Purchaser shall commence the
removal of the trade names, names, service marks, logos, insignia, slogans,
emblems, symbols, designs, and other identifying characteristics ("Names"),
except the Names set forth on Schedule 5.12, from all premises, equipment,
signs, interior decor items, fixtures and furnishings, and from all printed
materials and related business literature associated with the Transferred
Branches and the Personal Property acquired. The costs associated with such
removal shall be at the sole expense of the Purchaser and shall be completed
not later than 30 days after the Closing Date.
5.13 Additional Contracts.
(a) From the date of this Agreement until the Closing Date, the
parties shall take the following actions for any contract or group of related
contracts which are related to the operations of the Branch Offices or the
other operations that are the subject of this Agreement, and which are expected
to result in payments of more than $50,000 in any year or $25,000 in the case
of contracts
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which are not cancelable on 60 days or less notice without cost or penalty (an
"Additional Contract").
(b) Prior to entering into an Additional Contract, Seller shall
provide written notice to Purchaser of its intention to enter into the
Additional Contract and shall afford Purchaser reasonable access to the
documents relating thereto.
(c) By 12:00 p.m. of the fifth Business Date following notice by
Seller, Purchaser shall state to Seller its decision as to whether or not to
accept such Additional Contract. The failure by Purchaser to respond prior to
12:00 p.m. on such fifth Business Day shall be deemed an acceptance of such
Additional Contract.
(d) Any Additional Contracts accepted or deemed accepted by Purchaser
under this section, and any contract entered into by Seller subsequent to the
date hereof for which Seller is not required to notify Purchaser pursuant to
the terms of this section, shall be added to Schedule 2.1(f) and become part of
the Contracts to be assumed by Purchaser.
5.14 Updating Schedules.
On the Closing Date, Seller shall deliver to Purchaser updated
versions of all Schedules hereto with the latest information available to
Seller as of two (2) Business Days prior to the Closing Date. Within five (5)
calendar days after the Closing Date, Seller shall deliver to Purchaser final
versions of all Schedules covering all transactions through the close of
business on the Closing Date.
5.15 General Conversion Matters.
Seller and Purchaser agree to terms, covenants and conditions related
to the conversion of the Branch Offices set forth in Exhibit B.
5.16 FNIC.
Seller and Purchaser agree to discuss Purchaser acquiring the assets
and assuming certain liabilities of FN Investment Center ("FNIC") which relate
to business being conducted by FNIC at the Branch Offices.
ARTICLE VI
EMPLOYEE MATTERS
6.1 Employee Matters.
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(a) As of the day after the Closing Date, Purchaser shall offer to
employ all of the Employees. Seller shall pay, discharge and be responsible for
(i) all salary, wages and claims arising out of or relating to the employment
of the Employees on or before the Closing Date and (ii) any employee benefits
(including, but not limited to, accrued vacation, annual or long-term incentive
program, 401(k) plan, non-qualified deferred compensation plan and group health
coverage continuation pursuant to the Code) arising under Seller's employee
benefit plans and employee programs prior to the Closing Date, including
benefits with respect to claims incurred prior to or on the Closing Date but
reported after the Closing Date. After the Closing Date, except as provided
below, Purchaser shall pay, discharge and be responsible for all salary, wages,
claims and benefits arising out of or relating to the employment of the
Employees by Purchaser after the Closing Date.
(b) After the Closing Date, Purchaser shall provide to the Employees
employee benefits under employee benefit and welfare plans, including severance
plans, on terms and conditions which when taken as a whole are substantially
similar to those provided by Purchaser to its similarly situated officers and
employees. For purposes of participation ,vesting, and (except in the case of
defined benefit plans) benefit accrual under such employee benefit plans, the
service of the Employees with Seller prior to the Closing Date shall be treated
as service with Purchaser participating in such employee benefit plans.
Purchaser shall cause the Purchaser welfare benefit plans that cover the
Employees after the Closing Date to (i) waive any waiting period and
restriction and limitation for pre-existing conditions or insurability and (ii)
cause any deductible, co-insurance, or maximum out-of-pocket payments made by
the Employees under Seller's welfare benefit plans to be credited to such
Employees under Purchaser's welfare benefit plans, so as to reduce the amount
of any deductible, co-insurance, or maximum out-of-pocket payments payable by
the Employees under Purchaser's welfare benefits plans.
(c) With respect to any Employee whose employment is terminated by
Purchaser other than for "cause" at any time during the 180 days following the
Closing Date, such terminated Employee shall receive severance benefits
calculated in accordance with the severance plan currently maintained by Seller
as disclosed in Schedule 6.1(c) in lieu of receiving severance benefits under
the severance plan currently maintained by Purchaser. Seller and Purchaser
agree that the severance benefits payable to all Employees terminated by
Purchaser during the 180 days following the Closing Date will be payable (i) by
Purchaser for the amount such aggregate severance benefits do not exceed $1.0
million; (ii) by Seller for the amount such aggregate severance benefits exceed
$1.0 million but do not exceed $2.0 million; and (iii) by Purchaser for the
amount such aggregate severance benefits exceed $2.0 million.
(d) Except with the prior written consent of Purchaser, Seller shall
not for a period of one (1) year after the Closing Date solicit any Employee to
again become an employee of Seller or any of its affiliates. Seller shall
inform Purchaser of any Employee who resigns prior to the Closing Date, within
five (5) days of such resignation.
(e) If the transactions contemplated by this Agreement are not
consummated for any reason, Purchaser shall not solicit for hire any Employee
for a period of one (1) year from the
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date hereof.
(f) For each Employee, Seller shall use its reasonable efforts to
deliver to Purchaser with copies of Seller's general employee benefit
information, staff lists that include title and hire date, all records relating
to withholding and payment of income and unemployment taxes (federal, state and
local) and FICA taxes (including, without limitation, Forms W-4, Forms I-9,
Employee's Withholding Allowance Certificate) with respect to wages paid by
Seller during the 1995 calendar year, and other employee records (including,
without limitation, performance reviews, pre-employment investigation and
background checks). Seller shall provide Purchaser with such information no
later than 30 days after the execution of this Agreement.
(g) As soon as practicable following the Closing Date, Purchaser and
Seller shall cooperate to transfer from Seller's 401(k) plan, as applicable to
Purchaser's 401(k) plan, the assets and liabilities in Seller's 401(k) plan
attributable to the Employees.
(h) Seller shall promptly reimburse Purchaser for all costs incurred
by Purchaser with respect to any Employee on leave or disability on the Closing
Date who does not return to work within 180 days after the Closing Date, which
are paid by Purchaser within said 180-day period.
6.2 Notice of Closing.
Except as necessary in order to obtain the Required Regulatory
Approvals, prior to the Closing Date Purchaser shall not give any notice or
notification of the closing of any of the Branch Offices, or that any Employees
are not to be offered employment by Purchaser, or be responsible for any such
notice or notification or the communication of any such information to any
person.
ARTICLE VII
CERTAIN TAX MATTERS
7.1 Certain Tax Matters.
(a) Except as otherwise provided in this section hereof (relating to
Transfer Taxes), Seller shall be responsible for the payment of all Taxes
relating to the Assets for all taxable periods that end prior to the close of
business on the Closing Date. Responsibility for Taxes relating to the Assets
(for all taxable periods which include but do not end on the Closing Date)
shall be allocated between Purchaser and Seller in accordance with the method
of Section 164(d) of the Code. The party which has the primary obligation to do
so under applicable law shall file any Tax Return that is required to be filed
in respect of Taxes described in this section, and that party shall pay the
Taxes shown on such Tax Return and notify the other party in writing of the
other party's share of Taxes for which it is responsible, if any, of the Taxes
shown on such Tax Return and how such Taxes and share were calculated, which
the other party shall reimburse by wire transfer of immediately available funds
no later than ten days after receipt of such notice.
(b) Purchaser and Seller shall each pay half of all transfer,
recording, sales, use (including all bulk sales taxes) and other similar taxes
and fees (collectively, the "Transfer Taxes")
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arising out of or in connection with the transactions effected pursuant to this
Agreement, other than such Taxes as are calculated with reference to the income
or gain of the Seller. Responsibility for Taxes relating to the Assets (for all
taxable periods which include but do not end on the Closing Date) shall be
allocated between Purchaser and Seller in accordance with the method of Section
164(d) of the Code. The party which has the primary obligation to do so under
applicable law shall file any Tax Return that is required to be filed in
respect of Taxes described in this section, and that party shall pay the Taxes
shown on such Tax Return and notify the other party in writing of the other
party's share of Taxes for which it is responsible, if any, of the Taxes shown
on such Tax Return and how such Taxes and share were calculated, which the
other party shall reimburse by wire transfer of immediately available funds no
later than ten days after receipt of such notice.
(c) Seller and the Purchaser shall provide each other with such
assistance as reasonably may be requested by either of them in connection with
(i) the preparation of any Tax Return, or (ii) any audit or other examination
by any taxing authority, or any judicial or administrative proceedings relating
to liability for Taxes. The party requesting assistance hereunder shall
reimburse the other party for reasonable out-of-pocket expenses incurred in
providing such assistance, provided, however, that no independent contractors,
such as accountants or attorneys, shall be consulted without the written
consent of the party requesting assistance, which consent shall not be
unreasonably withheld.
(d) Seller shall deliver to the Purchaser at the Closing a true,
correct and complete affidavit which meets the requirements of Treasury
Regulation Section 1.1445-2(b)(2) and which attests to Seller's non-foreign
status (the "FIRPTA Affidavit"). If Purchaser receives the FIRPTA Affidavit at
the Closing, Purchaser shall not withhold any of the consideration paid to
Seller under this agreement pursuant to Section 1445 of the Code (and
regulations thereunder).
ARTICLE VIII
OBLIGATIONS OF PARTIES ON THE CLOSING DATE
8.1 Closing Date/Closing.
(a) Except as otherwise hereinafter provided, the closing date (the
"Closing Date") shall be the second Friday upon which all conditions set forth
in this Agreement are satisfied or waived or such other date as may be mutually
agreeable to the parties hereto; provided, however, that unless otherwise
mutually agreed by the parties, the Closing Date shall not be later than
_________________.
(b) The delivery of the instruments of assignment and transfer to be
delivered by Seller and payment by Seller of the amount set forth under this
Agreement, delivery of the instruments of assumption to be delivered by
Purchaser, and the other transactions herein contemplated to take place
concurrently with such deliveries, assumptions, and payments (the "Closing"),
shall take place on the Closing Date, at 9:00 a.m. Pacific Time, at the offices
of Seller, 135 Main Street, San Francisco, California (or at such other time
and place as are agreed to by the parties), and all such deliveries,
assumptions, and payments shall be effective as of the close of business on the
Closing
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Date.
(c) At the Closing, any funds to be paid on the Closing Date shall be
paid by wire transfer of immediately available funds on the Closing Date as
early as possible and, in any event, before 11:00 a.m. Pacific Time on the
Closing Date, and, no effect shall be given to any assignment or assumption by
Seller or Purchaser contained in this Agreement until Seller's wire transfer of
funds is actually received on the Closing Date. Purchaser shall reimburse
Seller for one day's interest attributable to the Closing Date, at the Federal
Funds Rate, on the amount transferred.
(d) Any deliveries, assignments, or transfers required under this
Agreement, other than the foregoing, shall be made at the time and date
specified in this Agreement (and where no time is specified, on or before the
close of business on the date specified) and in the manner and place specified
in this Agreement (or, where not specified, in the manner and place as may be
reasonably requested in writing by the party that is to receive such delivery,
assignment or transfer).
(e) The payment of the Final Transfer Amount, to the extent based on
any of the items to be reflected on the Post-Closing Schedule, shall be
determined as of the close of business on the Closing Date.
8.2 Obligations of Seller on the Closing Date.
On the Closing Date, Seller shall:
(a) deliver to Purchaser the Records referred to in Section 2.1(a)(v),
to the extent that any such Records are not located at the Branch Offices; and
(b) execute, acknowledge and deliver to Purchaser (i) a Bill of Sale
substantially similar in form and substance to Exhibit C attached hereto and
made a part hereof, (ii) with respect to the Fee Properties, special warranty
deeds with covenants against grantor's acts and (iii) all such endorsements,
assignments, bills of sale, and other instruments of conveyance, assignment and
transfer as shall be reasonably necessary or advisable to consummate the sale
and transfer to Purchaser of the assets to be sold hereunder.
8.3 Obligations of Purchaser on the Closing Date. On the Closing Date,
Purchaser shall execute, acknowledge and deliver to Seller an Instrument of
Assumption of Assumed Liabilities substantially similar in form and substance
to Exhibit D attached hereto and made a part hereof, and all such other
instruments as shall be reasonably necessary or advisable to consummate the
sale and transfer of assets to Purchaser and the assumption of Assumed
Liabilities by Purchaser.
ARTICLE IX
CONDITIONS TO EACH PARTY'S OBLIGATIONS
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The obligations of the parties under this Agreement are to the
satisfaction, on or before the Closing Date, of the following conditions:
9.1 Approval of Governmental Authorities.
All regulatory approvals required to consummate the transactions
contemplated hereby were obtained and remain in full force and effect, and all
applicable statutory waiting periods expired (all such approvals and the
expiration of all such waiting periods being referred to herein as the
"Requisite Regulatory Approvals").
9.2 No Injunctions or Restraints.
There is no order, injunction or decree issued by a court or agency of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the transactions contemplated by
this Agreement in effect.
9.3 Illegality.
There is no statute, rule, regulation, order, injunction or decree
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the transactions
contemplated by this Agreement.
ARTICLE X
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser under this Agreement are subject to the
satisfaction or waiver, on or before the Closing Date, of the following
conditions:
10.1 Representations and Warranties True; Obligations Performed.
(a) The representations and warranties made by Seller in 3.1(a) and
Sections 3.2 and 3.3 of this Agreement shall be true and correct as of the date
of this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) all of the representations and warranties made by
Seller in this Agreement shall be true and correct as of the Closing Date at
and as though such representations and warranties were made as of the Closing
Date. The condition contained in this Section 10.1(a) shall be deemed to have
been satisfied even if such representations or warranties are not true and
correct unless the failure of any of the representations or warranties to be so
true and correct, individually or in the aggregate, would have a Material
Adverse Effect, and, nothing contained in this section 10.1(a) shall be deemed
to preclude, or otherwise limit, the
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right of Purchaser to be indemnified for any breach of a representation or
warranty by Seller in accordance with the provisions of Article XII hereof.
(b) Seller performed and complied in all material respects with all
obligations, covenants and agreements required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
(c) Seller delivered to Purchaser a certificate of an executive
officer of Seller, dated the Closing Date, certifying to the fulfillment of the
foregoing conditions.
10.2 Opinion of Counsel.
Purchaser received an opinion of counsel for Seller, dated the Closing
Date, with respect to the matters set forth on Exhibit E attached hereto.
10.3 No Pending Governmental Actions.
There is no pending proceeding, initiated by any Governmental Entity,
seeking an Injunction.
10.4 Consents.
All of the consents contemplated by Schedule 3.3 (other than those
contemplated by Section 9.1) or required by the Leases were obtained by Seller,
except for such third party consents (other than those consents required by the
Leases) the failure of which to obtain would not have a Material Adverse
Effect.
ARTICLE XI
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller under this Agreement to be performed at the
Closing shall be subject to the satisfaction or waiver, on or before the
Closing Date, of the following conditions:
11.1 Representations and Warranties True; Obligations Performed.
(a) The representations and warranties made by Purchaser in this
Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though such representations and
warranties were made at and as of such date. Notwithstanding the foregoing, the
conditions contained in this Section 11.1(a) shall be deemed to have been
satisfied even if such representations or warranties are not true and correct
unless the failure of any of the representations or warranties to be so true
and correct, individually or in the aggregate, would have a Material Adverse
Effect, and, nothing contained in this section 11.1(a) shall be deemed to
preclude, or otherwise limit, the right of Seller to be indemnified for any
breach of a representation or warranty by Seller in
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accordance with the provisions of Article XII hereof).
(b) Purchaser performed and complied in all material respects with all
obligations and agreements required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
(c) Purchaser delivered to Seller a certificate of an executive
officer of Purchaser, dated the Closing Date, certifying to the fulfillment of
the foregoing conditions.
11.2 Opinion of Counsel.
Seller received an opinion of counsel for Purchaser, dated the Closing
Date, with respect to the matters set forth on Exhibit F attached hereto.
11.3 No Governmental Actions.
There is no pending proceeding, initiated by any Governmental Entity,
seeking an Injunction.
11.4 Consents.
All of the consents contemplated by Schedule 4.3 (other than those
contemplated by Section 9.1) were obtained by Purchaser, except for such third
party consents the failure of which to obtain would not have a Material Adverse
Effect.
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ARTICLE XII
INDEMNIFICATION
12.1 Seller to Indemnify.
Seller agrees to indemnify, hold harmless and defend Purchaser, and
Purchaser's directors, officers, subsidiaries, successors and assigns, and
"Affiliates", as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended (collectively, the "Purchaser's Indemnified
Parties"), from and against any and all claims, losses, liabilities, costs and
expenses, including legal fees and expenses, damages, expenditures,
proceedings, judgments, awards, demands and obligations to third parties
("Losses") of any kind whatsoever which may at any time be incurred by, imposed
upon, or asserted or awarded against Purchaser's Indemnified Parties that:
(a) arise out of or result from the breach or inaccuracy of any
representation or warranty made by Seller in this Agreement (which shall
include the Exhibits and Schedules attached hereto) or any certificate
delivered to Purchaser hereunder,
(b) arise out of or result from any breach or failure to comply with
any covenant made by Seller in this Agreement,
(c) arise out of or result from or based upon any Excluded Asset and
any asset other than the Assets or any Excluded Liability,
(d) are a claim, liability, obligation or penalty related to the
Deposits transferred pursuant to this Agreement arising out of or relating to
Seller's preparation or submission (or failure to prepare or submit) of the
information, returns or reports required by applicable laws with respect to
periods prior to the Closing Date,
(e) are a claim, liability, obligation, Tax, contract or commitment
arising out of or relating to any of the Assets, the Branch Offices, or Seller
or its business or operations, except to the extent specifically assumed by
Purchaser hereunder,
(f) are a claim or liability asserted by any former employee of Seller
relating to any condition which existed in the Branch Offices during the time
that Seller operated such Branch Offices and Seller employed such employee, or
(g) are a claim or liability arising out of Seller's failure to
properly record accrued interest on the Deposits prior to the Closing Date.
12.2 Purchaser to Indemnify.
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Purchaser agrees to indemnify, hold harmless and defend Seller, and
Seller's directors, officers, subsidiaries, successors and assigns, and
Affiliates (collectively, the "Seller's Indemnified Parties"), from and against
any and all Losses of any kind whatsoever which may at any time be incurred by,
imposed upon, or asserted or awarded against the Seller's Indemnified Parties
that:
(a) arise out of or result from the breach or inaccuracy of any
representation or warranty made by Purchaser in this Agreement (which shall
include the Exhibits and Schedules attached hereto) or any certificate
delivered to Seller hereunder,
(b) arise out of or result from any breach or failure to comply with
any covenant made by Purchaser in this Agreement,
(c) are sustained or incurred by the Seller's Indemnified Parties by
reason of any failure of the Purchaser to pay, perform or otherwise discharge
the Assumed Liabilities,
(d) are a claim, liability, obligation, Tax, contract or commitment
arising out of or relating to the Purchaser's operation of the Branch Offices
subsequent to the Closing Date,
(e) are for any exit or entrance fees payable to the FDIC as a result
of the consummation of the transactions contemplated hereby.
12.3 Procedure for Indemnification.
(a) if a party entitled to be indemnified under this Agreement (an
"Indemnitee") receives notice of the assertion by an unaffiliated third party
(a "Third Party") of any claim or potential liability or of the commencement by
any such person of any action or proceeding (a "Third Party Claim") with
respect to which another party hereto (an "Indemnifying Party") is obligated to
provide indemnification, the Indemnitee shall give the Indemnifying Party
prompt notice thereof after becoming aware of such Third Party Claim. Such
notice shall describe the Third Party Claim in reasonable detail and shall
indicate the amount (estimated if necessary) of the Loss that has been or may
be sustained by the Indemnitee. Such notice shall be a condition precedent to
any liability of the Indemnifying Party for any Third Party Claim under the
provisions for indemnification contained in this Agreement; provided, however,
that the failure of the Indemnitee to give prompt notice to the Indemnifying
Party of such Third Party Claim shall adversely affect the Indemnitee's rights
to indemnification hereunder solely to the extent that such failure prejudices
the Indemnifying Party in the defense of such Third Party Claim.
(b) The Indemnifying Party may elect to compromise or defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own counsel,
any Third Party Claim. If the Indemnifying Party elects to compromise or defend
such Third Party Claim, it shall, within 30 days after receiving notice of the
Third Party Claim, notify the Indemnitee of its intent to do so, and the
Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the
compromise of, or defense against, such Third Party Claim. If the Indemnifying
Party elects not to compromise or defend against the Third Party Claim, or
fails to notify the Indemnitee of its election as herein
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provided, or otherwise abandons the defense of such Third Party Claim, (i) the
Indemnitee may pay (without prejudice of any of its rights as against the
Indemnifying Party), compromise or defend such Third Party Claim and (ii) the
costs and expenses of the Indemnitee incurred in connection therewith shall be
indemnifiable by the Indemnifying Party pursuant to the terms of this
Agreement.
(c) In addition, in connection with any Third Party Claim in which the
Indemnitee shall reasonably conclude, based upon an opinion of its counsel,
that (i) there is a conflict of interest between the Indemnifying Party and the
Indemnitee in the conduct of the defense of such Third Party Claim or (ii)
there are specific defenses available to the Indemnitee which are different
from or additional to those available to the Indemnifying Party and which could
be materially adverse to the Indemnifying Party, then the Indemnitee shall have
the right to retain separate counsel in connection with such Third Party Claim.
In such an event, the Indemnifying Party shall pay the reasonable fees and
disbursements of counsel to each of the Indemnifying Party and the Indemnitee.
(d) Notwithstanding the foregoing, neither the Indemnifying Party nor
the Indemnitee may settle or compromise any claim (unless the sole relief
payable to a Third Party in respect of such Third Party Claim is monetary
damages that are paid in full by the party settling or compromising such claim)
over the objection of the other, provided, however, that consent to settlement
or compromise shall not be unreasonably withheld.
(e) In any event, except as otherwise provided herein, the Indemnitee
and the Indemnifying Party may each participate, at its own expense, in the
defense of such Third Party Claim.
(f) If the Indemnifying Party chooses to defend any claim, the
Indemnitee shall make available to the Indemnifying Party any personnel or any
books, records or other documents within its control that are reasonably
necessary or appropriate for such defense, subject to the receipt of
appropriate confidentiality agreements.
(g) Notwithstanding anything to the contrary stated hereinabove in
this section, in the event prompt action is required with respect to the
defense of a Third Party Claim, the Indemnitee shall, subject to the terms and
conditions of this Article, have the right to assume the defense of such Third
Party Claim; provided, however, that in the event that the Indemnifying Party
subsequently elects to assume the defense of such Third Party Claim, then the
provisions set forth hereinabove shall be applicable and the Indemnifying Party
shall, subject to the terms and conditions of this Article, reimburse the
Indemnitee for any costs and expenses incurred by the Indemnitee prior to the
date the Indemnifying Party assumes control of such Third Party Claim.
(h) Notwithstanding the foregoing, if an offer of settlement or
compromise is received by or communicated to the Indemnifying Party with
respect to a Third Party Claim and the Indemnifying Party notifies the
Indemnitee in writing of the Indemnifying Party's willingness to settle or
compromise such Third Party Claim on the basis set forth in such notice and the
Indemnitee declines to accept such settlement or compromise, the Indemnitee may
continue to contest such
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Third Party Claim, free of any participation by the Indemnifying Party, at the
Indemnitee's sole expense. The obligation of the Indemnifying Party to the
Indemnitee with respect to such Third Party Claim shall be equal to the lesser
of (i) the amount of the offer of settlement or compromise which the Indemnitee
declined to accept plus the costs and expenses of the Indemnitee prior to the
date the Indemnifying Party notifies the Indemnitee of the Indemnifying Party's
willingness to settle or compromise such Third Party Claim or (ii) the amount
the Indemnitee is obligated to pay as a result of the Indemnitee's continuing
to contest such Third Party Claim including costs and expenses with respect
thereto; and the Indemnifying Party shall be entitled to recover (by set-off or
otherwise) from the Indemnitee any additional expenses incurred by the
Indemnifying Party as a result of the Indemnitee's decision to continue to
contest such Third Party Claim.
(i) Any claim on account of a Loss which does not involve a Third
Party Claim shall be asserted by a written notice given by the party claiming
indemnity to the party from which indemnity is claimed. The recipient of such
notice shall have a period for 60 days within which to respond thereto. If such
recipient does not respond within such 60-day period, such recipient shall be
deemed to have accepted responsibility to make payment, subject to the
provisions hereof, and shall have no further right to contest the validity of
such claim. If the recipient does respond within such 60-day period and rejects
such claim in whole or in part, the party claiming indemnity shall be free to
pursue such remedies as may be available to such party by applicable law.
(j) If the amount of any Loss shall, at any time subsequent to payment
of indemnification pursuant to this Agreement, be reduced by receipt of
insurance proceeds by the Indemnitee in respect of such Loss, the amount of
such reduction less any expenses incurred in connection therewith shall
promptly be repaid by the Indemnitee to the Indemnifying Party.
(k) Notwithstanding anything to the contrary contained in this
Agreement, no claim shall be made against Seller for indemnification under
Section 12.1(a) with respect to any Loss which any of Purchaser's Indemnified
Parties may suffer, incur or sustain unless the aggregate of all such Losses
described in Section l2.l(a) shall exceed $150,000, and Seller shall only be
required to pay or be liable for any such Losses described in Section l2.l(a)
to the extent that their aggregate amount exceeds $150,000, and then only with
respect to Losses incurred in excess of such amount, provided, however, that
the $150,000 limitation contained in this Section 12.3(k) shall not apply to,
and Purchaser's Indemnified Parties shall be entitled to dollar-for-dollar
recovery with respect to, Losses suffered, incurred or sustained which arise
out of, result from or are attributable to breaches of the representations
contained in Sections 3.5 and 3.12 hereof.
(l) Notwithstanding anything to the contrary contained in this
Agreement, no claim shall be made against Purchaser for indemnification under
Section 12.2(a) with respect to any Loss which any of Seller's Indemnified
Parties may suffer, incur or sustain unless the aggregate of all such Losses
described in Section 12.2(a) shall exceed $150,000, and Purchaser shall only be
required to pay or be liable for any such Losses described in Section 12.2(a)
to the extent that their aggregate amount exceeds $150,000, and then only with
respect to Losses incurred in excess of such amount.
12.4 Production of Witnesses.
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Following the Closing, each party shall use its best efforts to make
available to the other party, upon written request, its employees and agents as
witnesses to the extent that any such person may be reasonably required in
connection with any legal, administrative or other proceedings in which the
requesting party may from time to time be involved.
12.5 Survival.
No rights to indemnification with respect to breaches of the
representations and warranties of the parties contained in this Agreement shall
be asserted by any party unless notice thereof is given on or before the date
such representation or warranty no longer survives as provided in this Section
l2.5. The representations and warranties of Seller, on the one hand, and of
Purchaser, on the other hand, contained in this Agreement or in any certificate
or instrument delivered pursuant to this Agreement shall survive the Closing
Date and shall expire on the first anniversary of the Closing Date.
ARTICLE XIII
TERMINATION
13.1 Methods of Termination.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
(a) by mutual written consent of Seller and Purchaser;
(b) by either Seller or Purchaser, upon written notice to the other,
if the transactions contemplated by this Agreement are not consummated on or
before August 31, 1998 (the "Termination Date"), unless the failure of such
occurrence is due to the failure of the party seeking to terminate this
Agreement to perform or to observe the agreements set forth herein at or before
the Closing;
(c) by either Seller or Purchaser, upon written notice to the other,
if there is a material breach of an obligation of the other party hereunder and
such breach is not remedied within 30 days after receipt by such breaching
party of notice in writing from the non-breaching party, specifying the nature
of such breach and requesting that it be remedied;
(d) by either Seller or Purchaser, upon written notice to the other,
if any court or governmental authority of competent jurisdiction issues a final
unappealable order prohibiting consummation of any material transaction
contemplated hereby; or
(e) by either Seller or Purchaser, upon written notice to the other,
following the expiration of thirty (30) days after any Governmental Entity
shall have denied or refused to grant the
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approvals or consents required to be obtained pursuant to this Agreement,
unless within said thirty (30) day period Purchaser and Seller agree to submit
or resubmit an application to, or appeal the decision of, the regulatory
authority which denied or refused to grant approval thereof.
13.2 Effect of Termination.
In the event of the termination and abandonment of this Agreement
pursuant to Section 13.1 hereof, this Agreement shall become void and have no
effect, without any liability on the part of any party to this Agreement or its
Affiliates, directors, officers or stockholders, other than the provisions of
this Section 13.2, Section 14.4 and the confidentiality provisions of Section
5.2(a). Notwithstanding the foregoing sentence, in the event this Agreement is
terminated by a party as a result of the willful breach of this Agreement by
the other party (which shall not be deemed to include the failure to obtain the
Requisite Regulatory Approvals provided the breaching party shall have used its
reasonable best efforts to obtain such approvals), the breaching party shall
pay to the nonbreaching party the sum of $3.0 million which shall serve as
liquidated damages and as the exclusive remedy of the nonbreaching party.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Entire Agreement; Modification; Waiver.
This Agreement, including all Exhibits and Schedules hereto,
constitutes the entire agreement of the parties pertaining to the subject
matter contained herein and this Agreement supersedes all prior or
contemporaneous agreements, representations and understandings of the parties.
No supplement, modification or amendment to, or waiver of this Agreement shall
be binding unless executed in writing by Seller and Purchaser. No waiver of any
provision of this Agreement shall be deemed or shall constitute a waiver of any
other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver.
14.2 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14.3 Headings.
The headings of the Sections, Articles, Exhibits and Schedules of this
Agreement are inserted for convenience only and shall not constitute a part of
this Agreement.
14.4 Payment of Expenses.
Except as otherwise provided in this Agreement, whether or not the
transactions
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contemplated hereby are consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses.
14.5 Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida without giving effect to the principles of
conflict of laws thereof.
14.6 Addresses of Notice, Etc.
All notices, requests, demands and other communications provided for
under this Agreement and under the related documents shall be in writing
(including telegraphic communication) and mailed (by registered or certified
mail, return receipt requested, or by Federal Express or other similar express
overnight delivery service), or telegraphed, or delivered to the applicable
party at the addresses indicated below.
If to Purchaser:
UNION PLANTERS CORPORATION
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy Number: (901) 580-2939
Attention: Jackson W. Moore
President and Chief Operating Officer
With a copy to:
UNION PLANTERS CORPORATION
7130 Goodlett Farms Parkway
Memphis, Tennessee 38018
Telecopy Number: (901) 580-2939
Attention: E. James House, Jr.
Manager, Legal Division
And
ALSTON & BIRD LLP
601 Pennsylvania Avenue , N.W.
North Building, 11th Floor
Washington, DC 20004
Telecopy Number: (202) 756-3333
Attention: Frank M. Conner III
44
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If to Seller:
CALIFORNIA FEDERAL BANK, A Federal Savings Bank
135 Main Street, 20th Floor
San Francisco, California 94105
Attention: Carl Webb, President
With a copy to:
CALIFORNIA FEDERAL BANK, A Federal Savings Bank
200 Crescent Ct., Ste. 1350
Dallas, TX 75201
Attention: Christie S. Flanagan, General Counsel
or, to each party, at such other address that party designates in a written
notice to the other party in accordance with this section. All such notices,
requests, demands or other communications shall be deemed delivered (i) if sent
by messenger, upon personal delivery to the party to whom the notice is
directed, (ii) if sent by telecopier, upon electronic or telephonic
confirmation of receipt from the receiving telecopier machine, (iii) if sent by
reputable overnight courier, one (1) day after delivery to such courier, or
(iv) if sent by mail, three (3) days following deposit in the United States
mail, postage prepaid, certified mail, return receipt requested.
14.7 Publicity.
Except as may be required by law or by the rules or regulations of any
governmental authority or securities exchange or as may be necessary with
respect to any rating agency, or, with respect to Purchaser, where deemed by
Purchaser to be necessary in connection with any securities filings, or, with
respect to Seller, where deemed by Seller required in connection with Seller's
efforts to obtain the financing necessary for it to close the Agreement and
adequately capitalize itself upon such close, prior to the Closing Date,
neither party shall, directly or indirect ly, make or cause to be made any
public announcement or disclosure, or issue any notice, relating to any of the
transactions contemplated by this Agreement, without the prior written consent
of the other party, which consent shall not be unreasonably withheld. Both
parties will limit the distribution of information relative to this transaction
to those persons who must be aware of the Agreement for the performance of
their duties.
14.8 Severability.
If any paragraph, section, sentence, clause, phrase, word or covenant
contained in this Agreement shall become illegal, null or void, or against
public policy, for any reason, or shall be held by any court of competent
jurisdiction to be illegal, null or void, or against public policy, the
remaining paragraphs, sections, sentences, clauses, phrases, words and
covenants contained in this Agreement shall not be affected.
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14.9 Enforcement of the Agreement.
The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
14.10 Binding Nature; Assignment.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their permitted successors and assigns. Neither party shall
assign or otherwise transfer any rights or obligations under this Agreement
without the express written consent of the other party; provided, however, that
either party may assign its rights or obligations under this Agreement to any
Affiliate of such party; provided, further, that no such assignment shall
relieve the assigning party of its obligations hereunder.
14.11 No Third Party Rights.
This Agreement is not intended, nor shall it be construed, to create
any express or implied third party beneficiary rights in any person, including
present or former employees of Seller, the Employees, or any beneficiaries or
dependents thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
March 29, 1998.
SELLER:
CALIFORNIA FEDERAL BANK,
A FEDERAL SAVINGS BANK
By: /s/ Peter K. Thomsen
-----------------------------
Name: Peter K. Thomsen
---------------------------
Title: EVP
--------------------------
PURCHASER:
46
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UNION PLANTERS BANK OF FLORIDA
By: /s/ Adolfo Henriques
-----------------------------
Name: Adolfo Henriques
Title: President
47
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
CALIFORNIA FEDERAL BANK, AFSB (AS OF 03/30/98)
- --------------------------------------------------------------- --------- ------- --------------------------
FLORIDA BRANCHES
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
300 1234 Washington Avenue Miami Beach Dade Florida 33139 Miami
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
301 1133 Normandy Drive Miami Beach Dade Florida 33141 Miami
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
303 633 N.E. 167th Street No. Miami Beach Dade Florida 33162 Miami
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
304 450 No. Park Road Hollywood Broward Florida 33021 Ft. Lauderdale
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
305 1132 Kane Consourse Bay Harbor Islands Dade Florida 33154 Miami
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
308 2525 LeJeune Road Coral Gables Dade Florida 33134 Miami
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
309 517 Arthur Godfrey Road Miami Beach Dade Florida 33140 Miami
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
311 6080 Okeechobee Blvd. W. Palm Beach Palm Beach Florida 33417 West Palm Beach
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
313 9469 So. Dixie Highway Miami Dade Florida 33156 Miami
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
314 8337 W. Sunrise Blvd. Plantation Broward Florida 33322 Ft. Lauderdale
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
315 230 So. Federal Highway Deerfield Beach Broward Florida 33441 Ft. Lauderdale
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
316 4677 So. University Drive Davie Broward Florida 33328 Ft. Lauderdale
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
319 13892 S.W. 56th Street Kendale Lakes Dade Florida 33175 Miami
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
321 9834 Glades Rd. #C-15 Boca Raton Broward Florida 33434 West Palm Beach/Boca Raton
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
324 6213 Country Road 54 New Port Richey Pasco Florida 34653 Tampa/St. Petersburg
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
325 113 No. Congress Avenue Boynton Beach Palm Beach Florida 33426 West Palm Beach/Boca Raton
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
326 9431 U.S. Highway 19 Port Richey Pasco Florida 34668 Tampa/St. Petersburg
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
330 2440 Sunset Point Road Clearwater Pinellas Florida 34625 Tampa/St. Petersburg
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
331 35098 U.S. 19 North Palm Harbor Pinellas Florida 34684 Tampa/St. Petersburg
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
332 5580 Cortez Road West Bradenton Manatee Florida 34210 Bradenton
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
334 3957 Cattleman Road Sarasota Sarasota Florida 34233 Sarasota
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
335 7681 Lake Worth Road Lake Worth Palm Beach Florida 33467 West Palm Beach/Boca Raton
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
339 8201 Pine Island Road Tamarac Broward Florida 33321 Ft. Lauderdale
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
342 11125 Park Boulevard Seminole Pinellas Florida 34642 Tampa/St. Petersburg
- ----------------------------- ------------------ ------------ --------- ------- --------------------------
</TABLE>
<PAGE>
EXHIBIT B
5.15 General Conversion Matters.
(a) Taxpayer Information. Seller shall deliver to Purchaser within
three (3) Business Days after the Closing Date (a) TINs (or record of
appropriate exemption) for all holders of Accounts and (b) all other
information in Seller's possession or reasonably available to Seller required
by applicable law to be provided to the IRS with respect to the Assets and
Deposits and the holders thereof (collectively, the "Taxpayer Information").
(b) Data Processing Tapes and File Packages.
(i) No later than thirty (30) days following the execution of
this Agreement, Seller will provide Purchaser with tape record layouts
of all account types at the Branch Offices, initial data processing
test file packages, and related product and marketing information.
(ii) On the day immediately following the Closing Date,
Seller will provide Purchaser with magnetic tapes for the conversion
of the data processing for the Deposits.
(iii) Data processing conversion will occur on the calendar
day following the Closing Date.
(iv) Seller and Purchaser shall cooperate with one another in
order to ensure the orderly transfer of all data processing
information. If Seller uses third party data processing services to
support Seller's pre-closing or closing activities, Seller shall be
responsible for ensuring that all such third party processing services
are provided for the benefit of Purchaser. If Purchaser expects to use
third party data processing services to support post-closing
activities, Purchaser shall be responsible for ensuring that all such
third party processing services are provided, and Seller shall
cooperate with Purchaser to ensure that the services are provided by
the third parties.
(v) Within ninety (90) days following the Closing Date, to
the extent that Seller has such items and information in its
possession, Seller shall deliver to Purchaser information with respect
to the Deposits for the three (3) annual periods ending December 31 of
the previous three (3) years and the period elapsed of the current
year through the Closing Date. Such information shall be delivered in
the format (whether tape or microfiche) on which such information is
maintained by Seller, and such information shall include, with respect
to each Deposit account, as applicable and to the extent Seller has
such information in its possession, customer name, account number,
taxpayer identification number, deposit type, account opening date,
average collected balance, current balance, branch code, interest
method and frequency, maturity date,
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last rollover date, term, and next interest payment due date.
(c) Missing Taxpayer Identification Numbers. At or prior to the
Closing Date, Seller shall provide Purchaser with a list of all Deposits with
respect to which notice was received from the Internal Revenue Service stating
that the taxpayer identification number is missing or incorrect. Said list
shall also set forth the date on which the notice was received by Seller.
(d) Assumption of IRA Deposits. With respect to Deposits which are
IRAs, Seller will use its reasonable efforts and will cooperate with Purchaser,
both before and after the Closing, in taking whatever actions are reasonably
necessary to accomplish the appointment of Purchaser as successor
trustee/custodian, such appointment to be effective as of the Closing Date,
including but not limited to sending to the depositors thereof appropriate
notices and cooperating with Purchaser in soliciting consents from such
depositors to the extent such consents may be required.
(e) Retirement Accounts. Seller shall provide Purchaser with the trust
documents for the Retirement Accounts assumed by Purchaser under Article II of
this Agreement. Purchaser acknowledges that Seller uses the IRA Plan and Trust
and the Business Retirement Plan and Trust of the Western League of Savings
Institutions and if Purchaser desires to continue using these documents,
Purchaser must acquire the right to do so, at its own expense, directly from
the Western League of Savings Institutions.
(f) Assumption of Keogh Deposits. With respect to Purchaser's proposed
assumption of Retirement Accounts which are Keogh Accounts, Seller shall
cooperate with Purchaser to invite depositors to direct a transfer of each such
depositor's Keogh Account and the related Retirement Account to Purchaser, as
trustee thereof. Notwithstanding the foregoing, Purchaser will not assume any
Retirement Accounts which are Keogh Accounts (and such Retirement Accounts will
not be considered in calculating the payments to be made pursuant to Article
II) unless Purchaser has received the documents necessary for such assumption
or transfer at or before the Closing. With respect to depositors who do not
appoint a successor trustee, Seller will use its reasonable efforts after
Closing in order to enable Purchaser to retain such Keogh Accounts at the
Branch Offices.
(g) ATM Access Cards. As of the close of business on the Closing Date,
all ATM access cards issued by Seller to customers of the Branch Offices shall
be void. In connection with the notices to depositors described in Section 5.9
of this Agreement, at least thirty (30) days prior to the Closing Date, Seller
shall notify Branch Office customers in writing of such cancellation of the ATM
access cards. At least 30 days prior to the Closing Date, Seller agrees to
provide the necessary data tapes required to accommodate the processing of ATM
cards. The ATM access card data will be provided by Seller in the format that
is maintained by Seller. Purchaser may issue, but it may not activate, ATM
access cards to depositors prior to the Closing Date. Except as otherwise
permitted in this Agreement, Seller shall take such other actions as are
necessary to limit the Branch Office customers' access to funds transferred to
Purchaser after the Closing Date.
(h) Schedule of Holds and Stop Payments. At the Closing, Seller will
deliver to Purchaser a schedule of holds and stop payments placed on particular
accounts or individual checks
49
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at the Branch Offices and the terms of such holds.
(i) Certain Items Credited For Deposit. After the Closing Date, any
items (other than those issued by the federal, state or local government or any
related entity) that were credited for deposit to an account at any Branch
Office prior to the Closing Date and are returned unpaid and any checks issued
by the federal, state, or local government or any related entity that were
credited for deposit to an account at any Branch Office prior to the Closing
Date and are returned unpaid ("Returned Items") will be handled in the
following manner:
(i) If Purchaser's bank account is charged for the Returned
Item and there are sufficient funds in the account to which such
Returned Item was credited or any other accounts on deposit at the
Branch Offices or at any other branch office of Purchaser standing in
the name of the party liable for such item, Purchaser will, to the
extent legally permissible, debit any or all of such accounts an
amount equal in the aggregate to the Returned Item. If Purchaser's
bank account is charged for the Returned Item and there are not
sufficient funds in the account, Purchaser shall attempt to obtain
reimbursement from the account to which, or from the party to whom,
the Returned Item was credited; and
(ii) If Seller's bank account is charged for the Returned
Item and there are sufficient funds in the account to which such
Returned Item was credited or any other accounts on deposit at the
Branch Offices standing in the name of the party liable for such item,
Purchaser shall, to the extent legally permissible, debit any or all
of such accounts an amount equal in the aggregate to such Returned
Item and shall repay that amount to Seller. If those accounts do not
contain funds sufficient to reimburse Seller fully or Purchaser is
otherwise unable to debit such accounts, Purchaser shall immediately
repay to Seller the amount of the Returned Item and Seller shall
assign the Returned Item to Purchaser for collection.
(j) New Checks. As soon as possible and no later than thirty (30) days
following the Closing Date, Purchaser shall provide holders of checking
accounts at the Branch Offices some new checks MICR encoded with Purchaser's
routing and transit numbers and Purchaser's customer identification number at
its sole cost and expense. For a period no longer than ninety (90) days
following the Closing Date, Seller shall immediately pass through to Purchaser
checks received by it drawn on such accounts. Purchaser accepts full
responsibility to either pay the items or return them in accordance with the
customer agreement and the applicable state uniform commercial code. During the
ninety (90) day or shorter period described, Seller shall give Purchaser a
daily accounting of debits for its clearing account. On a daily basis, upon
review of such debits, Purchaser shall reimburse Seller by wire transfer in
immediately available funds to Seller's Account; provided, however, after
thirty (30) days following the Closing, Seller shall settle by wire transfer in
immediately available funds on a weekly basis.
(k) Remittance of Payments. For ninety (90) days following the Closing
Date,
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(i) Seller shall remit to Purchaser all payments received by
Seller at its other offices after the Closing Date which relate to the
Branch Offices with respect to Loans or amounts intended for deposit
to the accounts which are part of the Deposits or otherwise relating
to the Deposits or Loans, and after such ninety (90) day period Seller
shall return such items;
(ii) Purchaser shall remit to Seller all payments received by
Purchaser at the Branch Offices or its other offices after the Closing
Date which relate to Seller's other offices, and after such ninety
(90) day period Purchaser shall return such items; and
(iii) With respect to checks or drafts drawn against accounts
which are Deposits, Seller shall cooperate with Purchaser and take all
reasonable steps requested by Purchaser to ensure that each such item
that is coded for presentment to Seller or to any bank for the account
of Seller is delivered to Purchaser in accordance with applicable law
and Clearing House rules or agreement, and after such ninety (90) day
period Seller shall return such items marked "Account Closed".
(l) Check Sorting. For ninety (90) days following the Closing Date, on
a daily basis Seller shall out sort all checks drawn on an account maintained
at any Branch office and prepare them to be couriered to Purchaser at a
location designated by Purchaser by the close of business on the day they are
received; provided that Seller shall also transmit to Purchaser, as instructed
by Purchaser, copies of all items payable in the amount of $2,500 or more.
Purchaser shall arrange and pay for all couriers that are necessary for check
processing activity during this period. Purchaser shall settle for the gross
dollar amount of out sorted checks drawn on an account maintained at any Branch
Office by wire transfer in immediately available funds to Seller's Account on
the day that Purchaser receives the daily accounting of debits from Seller;
provided, however, that after thirty (30) days following the Closing Date,
Purchaser shall settle on a weekly basis by wire transfer in immediately
available funds. All rejected checks written on an account maintained at any
Branch Office which is transferred to Purchaser pursuant to this Agreement are
to be the responsibility of Purchaser. After the ninety (90) day period, Seller
may return such items marked "Account Closed".
(m) ACH Items. ACH items will be handled in the following manner:
(i) At least thirty (30) calendar days prior to the Closing
Date, Seller will deliver to Purchaser (A) a modem transmission of all
ACH Items and recurring debit arrangements in standard ACH format, (B)
copies of all ACH origination forms for social security payments and
recurring debit arrangements being assumed by Purchaser hereunder, and
(C) all other records and information in Seller's possession necessary
for Purchaser to administer such arrangements.
(ii) As soon as possible after the Closing Date, Seller and
Purchaser will use their reasonable efforts to transfer all ACH
arrangements to Purchaser. Purchaser shall continue such ACH
arrangements and such recurring debit arrangements as are originated
and administered by third parties and for which Purchaser need act
only as
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processor.
(iii) Beginning on the Closing Date and for one hundred and
twenty (120) days after the Closing Date, Seller shall use
commercially reasonable efforts to, prior to 12:00 p.m. on each
Business Day, (A) telecopy or deliver to Purchaser at such address as
Purchaser may from time to time designate, a summary of ACH Items
activity affecting the Deposits at the Branch Offices during the prior
Business Day, and (B) remit by wire transfer to Purchaser all ACH
Items funds then known by Seller which are intended for deposit
accounts at the Branch Offices being transferred to Purchaser on such
Business Day. One hundred and twenty (120) days after the Closing
Date, Seller will return all such ACH Items to the paying party and
Purchaser shall assume no responsibility with respect to such ACH
Items.
(n) Reclamations. Purchaser will make every effort to recover funds on
reclamations received for federal recurring payments and ACH transfers. If
collection efforts are unsuccessful, Seller shall be responsible for
reimbursing Purchaser for those transactions that were processed prior to and
through the Closing Date.
52
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EXHIBIT C
BILL OF SALE
This BILL OF SALE (this "Bill of Sale"), is made as of
______________________ from California Federal Bank, a Federal Savings Bank,
("Seller"), to _____________________________________ ("Purchaser").
WHEREAS, pursuant to the Asset Purchase and Sale Agreement, dated as
of __________________ (the "Agreement"), by and between Seller and Purchaser,
Purchaser has agreed to purchase from Seller all of its right, title and
interest in and to certain assets.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged by Seller, Seller does hereby sell, convey, assign, transfer and
deliver to Purchaser, and its successors and assigns, all of Seller's right,
title and interest in and to the Assets (such capitalized term and, except as
otherwise defined herein, all other capitalized terms used herein shall have
the meaning ascribed to such terms in the Agreement) as of the date hereof.
In accordance with the Agreement, the Assets shall not include, and
Purchaser is not acquiring from Seller, any of the Excluded Assets, and Seller
shall retain ownership of all right, title and interest in and to the Excluded
Assets.
Seller covenants and agrees with Purchaser that Seller will execute,
acknowledge and deliver such other and further instruments and will take such
other action as may be necessary or desirable to carry out more effectively the
transfer of assets provided for herein.
Nothing in this instrument, express or implied, is intended or shall
be construed to confer upon, or give to, any person other than Purchaser and
its successors and assigns, any remedy or claim under or by reason of this
instrument or any agreements, covenants or terms hereof, and all the
agreements, covenants and terms contained in this instrument shall be for the
sole and exclusive benefit of Purchaser and its successors and permitted
assigns.
This Bill of Sale shall inure to the benefit of Purchaser and its
successors and permitted assigns and be binding upon and enforceable against
Seller and its successors and permitted assigns.
IN WITNESS WHEREOF, this Bill of Sale has been duly executed and
delivered by the duly authorized office of Seller as of the date first written
above.
1
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California Federal Bank,
A FEDERAL SAVINGS BANK
By:
---------------------------------
Name:
Title:
AGREED AND ACCEPTED:
Name of Purchaser
By:
--------------------------------
Name:
Title:
2
<PAGE>
EXHIBIT D
INSTRUMENT OF ASSUMPTION
This INSTRUMENT OF ASSUMPTION (this "Instrument of Assumption") is
made as of ____________________, by
__________________________________________________ ("Purchaser"), in favor of
California Federal Bank, A Federal Savings Bank ("Seller"), pursuant to the
Asset Purchase and Sale Agreement dated as of __________________ (the
"Agreement"), by and between Purchaser and Seller.
In partial consideration of the sale, conveyance, assignment, transfer
and delivery by Seller to Purchaser, pursuant to the Agreement, of all of
Seller's right, title and interest in and to the Assets (such capitalized term
and, except as otherwise defined herein, all other capitalized terms used
herein shall have the meaning ascribed to such terms in the Agreement), (i)
Seller does hereby assign to Purchaser, and Purchaser does hereby assume from
Seller, the Deposits, and Purchaser does hereby agree to pay, honor, perform
and discharge all obligations with respect to, and shall be solely and
exclusively liable for, the Deposits and (ii) Seller does hereby assign to
Purchaser, and Purchaser does hereby assume from Seller, the Other Liabilities,
and Purchaser does hereby agreed to pay, honor, perform and discharge all
obligations with respect to, and shall be solely and exclusively liable for,
the Other Liabilities. The Deposits and the Other Liabilities are collectively
referred to herein as the "Assumed Liabilities."
In accordance with the Agreement, the Assumed Liabilities shall not
include and Purchaser is not assuming, and shall not be deemed to have assumed
any of, the Excluded Liabilities, and, accordingly, Purchaser has not agreed to
assume or pay, and shall not assume or be deemed to have assumed, any liability
or obligation, direct or indirect, absolute or contingent, of Seller or any
other person or entity, the assumption of which is not expressly provided for
in the Agreement.
The assumption by Purchaser of the Assumed Liabilities shall not be
construed to defeat, impair or limit in any way any rights or remedies of
Purchaser to contest or dispute the validity or amount thereof.
1
<PAGE>
For the consideration aforesaid, Purchaser, for itself and its
successors and assigns, has covenanted, and by this Instrument of Assumption
does covenant, with Seller and its successors and assigns that Purchaser and
its successors and assigns will do, execute and deliver, or will cause to be
done, executed and delivered, all such further acts and instruments which
Seller may reasonably request in order to more fully effectuate the assumption
of liabilities provided for herein.
This Instrument of Assumption will be enforceable against the
successors and assigns of Purchaser and will inure to the benefit of the
successors and assigns of Seller.
IN WITNESS WHEREOF, this Instrument of Assumption has been duly
executed and delivered by the duly authorized officer of Purchaser as of the
date first set forth above.
NAME OF PURCHASER
By:
------------------------------
Name:
Title:
AGREED AND ACCEPTED:
California Federal Bank,
A FEDERAL SAVINGS BANK
By:
----------------------------
Name:
Title:
2
<PAGE>
EXHIBIT E
Date
Name of Purchaser
Address of Purchaser
Re: Branch Purchase Agreement, dated as of _______________, by
and between California Federal Bank, A Federal Savings Bank
and ______________
Gentlemen:
I am (title) of California Federal Bank, A Federal Savings Bank
("First Nationwide"), a federal savings association organized under the laws of
the United States of America, and have acted as such in connection with the
Asset Purchase and Sale Agreement, dated as of ____________________ (the
"Agreement"), by and between First Nationwide and
____________________________________ ("Purchaser"), and the transactions
contemplated thereby pursuant to which Purchaser will acquire (the
"Acquisitions") certain assets and assume certain liabilities related to First
Nationwide's branch banking operations in the State of Florida.
The opinions expressed herein are being rendered pursuant to Section
(10.2) of the Agreement. Unless otherwise defined herein, all capitalized terms
used herein shall have the meanings set forth in the Agreement.
In connection with the opinions expressed herein, I have examined and
am familiar with originals or copies, certified or otherwise identified to my
satisfaction, of (i) the Agreement, (ii) the Charter and Bylaws of First
Nationwide, (iii) minutes and resolutions of the Board of Directors of First
Nationwide relating to the Agreement and the transactions contemplated thereby,
(iv) action by written consent of the sole shareholder of First Nationwide
approving the Agreement and the transactions contemplated thereby, (v)
certificates from public officials as to the subsistence and good standing of
First Nationwide under the laws of the United States of America, (vi) a letter,
dated ___________________, to First Nationwide from the Office of Thrift
Supervision (the "OTS"), approving the Acquisition, and (vii) such other
documents and matters of fact and law as I have deemed necessary or appropriate
as a basis for the opinions set forth below.
1
<PAGE>
In my examination, I have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified, conformed or photostatic copies and the
authenticity of the originals of such copies. In making my examination of
documents executed by parties other than First Nationwide, I have assumed that
(i) such parties had the power, corporate or other, to enter into and perform
their respective obligations thereunder, (ii) the due authorization by all
requisite action, corporate or other, and execution and delivery, by such
parties of such documents and (iii) the validity and binding effect of such
documents on such parties. As of factual matters relevant to the opinions
expressed below, I have relied upon, among any other things, First Nationwide's
factual representations in Sections (3.1) and (3.2) of the Agreement. With
respect to my opinion on the subsistence and good standing of First Nationwide,
I have relied upon certificates or other confirmation from public officials.
I am admitted to the Bar of the State(s) of ____________________ and I
express no opinion as to the laws of any other jurisdiction other than the laws
of the United States of America.
Based upon and subject to the foregoing, I am of the opinion that:
(a) First Nationwide has been organized, and is subsisting
and in good standing, as a federally chartered savings association under the
laws of the United States.
(b) The execution, delivery and performance of the Agreement
by First Nationwide and the consummation by First Nationwide for the
transactions provided for therein have been duly authorized by all requisite
corporate action on the part of First Nationwide.
(c) The Agreement has been duly executed and delivered by
First Nationwide.
(d) Subject to the satisfaction of all conditions to the
approval of the OTS of the transactions contemplated by the Agreement, the
execution, delivery and performance by First Nationwide of the Agreement will
not violate the Charter or Bylaws of First Nationwide.
2
<PAGE>
The opinions expressed herein are solely for your benefit in
connection with the transactions contemplated by the Agreement and may not be
relied upon by you or anyone else for any other purpose. The opinions expressed
herein may not be quoted from, circulated, relied upon or otherwise referred to
by any other person or entity without the prior written consent of the
undersigned.
Very truly yours,
California Federal Bank,
A FEDERAL SAVINGS BANK
3
<PAGE>
EXHIBIT F
Date
Board of Directors
California Federal Bank,
A Federal Savings Bank
135 Main Street
San Francisco, California 94105
Gentlemen:
This opinion is rendered to California Federal Bank, A Federal Savings
Bank, ("Seller") pursuant to Section (11.2) of the Branch Purchase Agreement by
and between _______________________________ ("Purchaser") and Seller, dated as
of __________________ ("Agreement"), relating to the transfer to Purchaser by
Seller of the assets and deposit liabilities of its branch offices located in
______________, and other assets and liabilities more fully described in the
Agreement. Unless the context otherwise requires, all terms used herein and not
otherwise defined shall have the same meaning as in the Agreement.
I am (title) . I have examined originals or copies, identified to my
satisfaction, of such documents, corporate records and other instruments, and
have otherwise made such examination of matters, either personally or through
appropriate officers, employees or agents of Purchaser (when appropriate,
relying without any independent investigation on my part upon information or
reports from such officers, employees or agents having knowledge of the
relevant facts), as I have deemed necessary for the purpose of this opinion.
Except as relates to the opinions set forth herein, I express no opinion as to
any statute, regulation, policy, practice, procedure, order, directive,
agreement, condition or any other matter relating to the ongoing operations of
Purchaser.
In my examination, I have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents,
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified, conformed or photostatic copies and the
authenticity of the originals of such copies. In making my examination of
documents executed by parties other than Purchaser, I have assumed that (i)
such parties had the power, corporate or other, to enter into and perform their
respective obligations thereunder, (ii) the due authorization by all requisite
action, corporate or other, and execution and delivery, by such parties of such
documents and (iii) the validity and binding effect of such documents on such
parties. As to factual matters relevant to the opinions expressed below, I have
relied upon, among any other things, Purchaser's factual representations in
Sections (4.1) and (4.2) of the Agreement. With respect to my opinion on the
subsistence and good standing of Purchaser, I have relied upon certificates or
other confirmation from public officials.
Based upon and subject to the foregoing, I am of the opinion
that:
1
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(1) Purchaser is duly organized and is subsisting and in good standing
as a _____________________________ under the laws of ________________________.
(2) The execution, delivery and performance of the Agreement by
Purchaser and the consummation by Purchaser of the transactions have been duly
authorized by all requisite corporate action on the part of Purchaser.
(3) Subject to the satisfaction of all conditions to the approval of
the Office of Thrift Supervision ("OTS") of the transactions contemplated by
the Agreement, the Agreement constitutes a valid and legally binding obligation
of Purchaser, enforceable against Purchaser in accordance with its terms except
as may be limited by (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, conservatorship, receivership or similar laws affecting the
enforcement of creditors' rights generally or the rights of creditors under the
laws of the State of _________, (ii) laws relating to the safety and soundness
of federally insured depository institutions, and (iii) general equitable
principles (regardless of whether the issue of enforceability is considered in
a proceeding in equity or at law).
(4) Subject to the satisfaction of all conditions to the approval of
the OTS of the transactions contemplated by the Agreement, the execution,
delivery and performance by Purchaser of the Agreement will not violate the
charter or bylaws of Purchaser. The opinions expressed herein are being
provided to Seller for the sole purpose of satisfying the requirements of
Section (11.2) of the Agreement, and may be relied upon by Seller specifically
with respect to the specific transactions described by the Agreement as to
which these opinions relate, and may not be quoted or reproduced, in whole or
in part, or otherwise referred to for nay other purpose or filed with or
transmitted to any other person (including any governmental agency) without
Purchaser's prior written consent.
Very truly yours,
Name of Purchaser
By:
-------------------------------
Name:
Title:
2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and statements of income found on pages 3 and 4 of
the Company's unaudited financial statements for the three months ended March
31, 1998.
</LEGEND>
<CIK> 0000928358
<NAME> FIRST NATIONWIDE HOLDINGS INC.
<MULTIPLIER> 1,000
<CURRENCY> US $
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 379,831
<INT-BEARING-DEPOSITS> 128
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,683,370
<INVESTMENTS-CARRYING> 1,309,063
<INVESTMENTS-MARKET> 1,309,063
<LOANS> 20,865,633<F1>
<ALLOWANCE> 419,130
<TOTAL-ASSETS> 32,187,985
<DEPOSITS> 16,403,429
<SHORT-TERM> 8,950,149
<LIABILITIES-OTHER> 699,027
<LONG-TERM> 4,272,736
0
0
<COMMON> 1
<OTHER-SE> 875,833
<TOTAL-LIABILITIES-AND-EQUITY> 32,187,985
<INTEREST-LOAN> 412,056
<INTEREST-INVEST> 121,366
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 533,422
<INTEREST-DEPOSIT> 178,175
<INTEREST-EXPENSE> 368,463
<INTEREST-INCOME-NET> 164,959
<LOAN-LOSSES> 10,000
<SECURITIES-GAINS> 170
<EXPENSE-OTHER> 144,752
<INCOME-PRETAX> 99,985
<INCOME-PRE-EXTRAORDINARY> 99,985
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,801<F2>
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 7.47
<LOANS-NON> 179,947
<LOANS-PAST> 0
<LOANS-TROUBLED> 43,398
<LOANS-PROBLEM> 54,817
<ALLOWANCE-OPEN> 418,674
<CHARGE-OFFS> 11,399
<RECOVERIES> 1,855
<ALLOWANCE-CLOSE> 419,130
<ALLOWANCE-DOMESTIC> 6,317
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 412,813
<FN>
<F1>Tag 17 - Loans includes Loans held for sale of $1,887,856 and Allowance for
loan losses of $419,130
<F2>Tag 43 - Net income available to common stockholders: $61,223
</FN>
</TABLE>
