<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CAL FED BANCORP INC.
--------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
--------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF CAL FED BANCORP INC.]
5700 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90036
November 13, 1996
Dear Stockholder:
It is a pleasure to extend to you a cordial invitation to attend a Special
Meeting of Stockholders of Cal Fed Bancorp Inc. to be held at the Park Hyatt
Los Angeles at Century City, located at 2151 Avenue of the Stars, Los Angeles,
California, on Monday, December 16, 1996 at 1:30 P.M., local time.
At the Special Meeting, stockholders will vote on a proposal to approve and
adopt an Amended and Restated Agreement and Plan of Merger which provides for
the Company's acquisition by First Nationwide Holdings Inc. through a merger
of a subsidiary of First Nationwide into the Company and related transactions.
As a result of this merger, Company stockholders will receive $23.50 in cash
for each of their shares and, for each ten shares owned, a Secondary
Contingent Litigation Recovery Participation Interest issued by the Company's
wholly-owned subsidiary, California Federal Bank, A Federal Savings Bank (cash
will be paid to stockholders who would otherwise receive a fractional
Secondary Participation Interest).
THE SECONDARY PARTICIPATION INTERESTS, WHICH WILL BE DISTRIBUTED TO
STOCKHOLDERS ONLY IF THE FIRST NATIONWIDE MERGER IS CONSUMMATED, ARE HIGHLY
SPECULATIVE SECURITIES THAT INVOLVE A HIGH DEGREE OF RISK. STOCKHOLDERS ARE
URGED TO READ CAREFULLY NOT ONLY THIS PROXY STATEMENT BUT ALSO THE
ACCOMPANYING OFFERING CIRCULAR OF CALIFORNIA FEDERAL BANK, A FEDERAL SAVINGS
BANK, WHICH RELATES SPECIFICALLY TO THE SECONDARY PARTICIPATION INTERESTS,
(AND IS AN EXHIBIT TO AN SEC FILING MADE BY THE COMPANY WHICH IS REFERRED TO
IN, AND INCORPORATED BY REFERENCE INTO, OUR PROXY STATEMENT) IN DECIDING HOW
TO VOTE ON THE MERGER WITH FIRST NATIONWIDE. THE SECONDARY PARTICIPATION
INTERESTS ARE EXEMPT FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE
COMMISSION BUT THEY HAVE BEEN REGISTERED WITH THE OFFICE OF THRIFT
SUPERVISION.
<PAGE>
Your Board of Directors has unanimously determined that the First Nationwide
merger is advisable and in the best interests of the Company and its
stockholders. THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY. Our recommendation and our reasons for it, as well as the background
of the transaction, the required regulatory approvals and other conditions to
closing, and other important information regarding the transaction are set
forth in the accompanying Proxy Statement of the Company. The Proxy Statement
also includes the opinion of our financial adviser CS First Boston Corporation
that, as of the date of this letter, the per share merger consideration of
$23.50 in cash and one Secondary Contingent Litigation Recovery Participation
Interest for each ten shares is fair to the holders of the Company's Common
Stock from a financial point of view.
APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY
OF THE OUTSTANDING SHARES OF COMPANY COMMON STOCK AND THE CONSUMMATION OF THE
MERGER IS CONDITIONED ON (AMONG OTHER THINGS) SUCH APPROVAL. YOUR VOTE IS
IMPORTANT REGARDLESS OF HOW MANY SHARES YOU OWN. IN ORDER TO INSURE THAT YOU
WILL BE REPRESENTED AT THE SPECIAL MEETING WHETHER OR NOT YOU ARE PERSONALLY
ABLE TO ATTEND, WE ADVISE YOU TO COMPLETE THE ENCLOSED PROXY CARD PROMPTLY AND
RETURN IT IN THE ENVELOPE PROVIDED.
Please do not send us any of your stock certificates at this time. Following
the consummation of the First Nationwide transaction, you will receive
information about the procedure for surrendering your stock certificates in
exchange for the per share merger consideration.
If you have any questions, please call the Company at 213-932-4200. I look
forward to seeing you on Monday, December 16, 1996.
Sincerely,
/s/ David Gilbert
DAVID GILBERT, Ph.D
Chairman of the Board
2
<PAGE>
[LOGO OF CAL FED BANCORP INC.]
5700 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90036
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, DECEMBER 16, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of Cal Fed Bancorp Inc., a Delaware corporation (the "Company"),
will be held at the Park Hyatt Los Angeles at Century City, located at 2151
Avenue of the Stars, Los Angeles, California, on Monday, December 16, 1996, at
1:30 P.M., local time.
The Special Meeting is called for the following purposes (as more fully
described in the accompanying Proxy Statement):
1. To consider and vote upon a proposal to approve and adopt the Amended
and Restated Agreement and Plan of Merger, dated as of July 27, 1996 (the
"Merger Agreement"), by and among First Nationwide Holdings, Inc., a
Delaware corporation ("FNH"), CFB Holdings, Inc., a Delaware corporation
and a wholly-owned subsidiary of FNH ("Merger Sub"), the Company and
California Federal Bank, A Federal Savings Bank, a wholly-owned subsidiary
of the Company ("Cal Fed Bank"), and the transactions contemplated thereby,
including the merger (the "Merger") of Merger Sub with and into the
Company, pursuant to which, among other things: (a) the Company will be the
surviving entity (the "Surviving Corporation") and will become a wholly-
owned subsidiary of FNH; (b) each outstanding share of the Common Stock,
par value $1.00 per share ("Company Common Stock"), of the Company (other
than "Excluded Shares," as defined in the Merger Agreement) will be
converted into the right to receive Merger consideration per share
consisting of (x) $23.50 in cash without interest and (y) one-tenth of a
Secondary Contingent Litigation Recovery Participation Interest, as defined
in the Merger Agreement (each a "Secondary Participation Interest"),
subject to the payment of cash in lieu of issuing fractional Secondary
Participation Interests to individual stockholders, as described below; and
(c) each employee or director stock option or warrant to purchase shares of
Company Common Stock will be terminated and each grantee thereof will be
entitled to receive from the Company, in lieu of each share of Company
Common Stock that would otherwise be issuable upon exercise thereof, (A) an
amount in cash computed by multiplying (i) the difference between (x)
$23.50 and (y) the applicable per share exercise price by (ii) the number
of shares subject to such option or warrant, (B) to the extent applicable,
the number of Contingent Litigation Recovery Participation Interests of Cal
Fed Bank reserved for issuance upon exercise of such stock option or
warrant, and (C) one-tenth of a Secondary Participation Interest for each
share of Company Common Stock subject to such option or warrant; provided,
however, that one Secondary Participation Interest will be issued for each
ten shares of Company Common Stock outstanding or subject to any such stock
option or warrant, no fractional Secondary Participation Interests will be
issued, and those stockholders of the Company ("Company Stockholders") and
holders of options or warrants who would otherwise receive such fractions
will not be entitled thereto and will receive their respective pro rata
portions of the aggregate cash proceeds (net of aggregate commissions and
any other selling expenses) obtained from ChaseMellon Shareholder Services,
L.L.C., as Exchange Agent, batching such fractions into the nearest
aggregate whole number of Secondary Participation Interests (the "Batched
Secondary Participation Interests") and effecting (through the use of one
or more broker-dealers) the sale of the Batched Secondary Participation
Interests on the open market at prevailing prices on behalf of the
Surviving Corporation. The Merger Agreement sets
<PAGE>
forth FNH's intention, unless it specifies otherwise in accordance
therewith, that, immediately following the Effective Time (as defined in
the Merger Agreement), (i) FNH will contribute all of the shares of capital
stock of the Surviving Corporation to its wholly-owned subsidiary, First
Nationwide Bank, A Federal Savings Bank ("FNB"), (ii) the Surviving
Corporation will be liquidated by FNB, and (iii) FNB will be merged with
and into Cal Fed Bank, immediately thereafter. The approval and adoption of
the Merger Agreement by Company Stockholders will also constitute a vote to
approve, as exempt from Section 16 of the Securities Exchange Act of 1934,
the disposition of employee and director stock options as provided for in
the Merger Agreement. A copy of the Merger Agreement is attached as
Appendix A to the accompanying Proxy Statement of the Company. A copy of
the Offering Circular of Cal Fed Bank specifically relating to the
Secondary Participation Interests (which has been filed by the Company with
the Securities and Exchange Commission as an exhibit to a Current Report on
Form 8-K of the Company, which is incorporated by reference into the
Company's Proxy Statement) is separately enclosed herewith. STOCKHOLDERS
ARE URGED TO READ CAREFULLY BOTH THE COMPANY'S PROXY STATEMENT AND CAL FED
BANK'S OFFERING CIRCULAR.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
Only holders of shares of Company Common Stock of record at the close of
business on November 8, 1996 will be entitled to notice of and to vote at the
Special Meeting. A list of such stockholders will be open for examination by
any stockholder at the Special Meeting and for a period of ten days prior to
the date of the Special Meeting during ordinary business hours at the
principal executive office of the Company.
EACH STOCKHOLDER, EVEN IF HE OR SHE CURRENTLY PLANS TO ATTEND THE SPECIAL
MEETING, IS REQUESTED TO SIGN AND DATE THE ENCLOSED PROXY CARD AND TO RETURN
IT WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. Any stockholder
present at the Special Meeting may withdraw his or her proxy and vote
personally on each matter properly brought before the Special Meeting.
By Order of the Board of Directors
/s/ Douglas J. Wallis
DOUGLAS J. WALLIS
Secretary
November 13, 1996
2
<PAGE>
[LOGO OF CAL FED BANCORP INC.]
5700 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90036
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS--MONDAY, DECEMBER 16, 1996
----------------
This Proxy Statement is being furnished to holders of shares of the Common
Stock, par value $1.00 per share ("Company Common Stock"), of Cal Fed Bancorp
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Company
Board") for use at the Special Meeting of Stockholders of the Company to be
held at the Park Hyatt Los Angeles at Century City, 2151 Avenue of the Stars,
Los Angeles, California, at 1:30 P.M., local time, on Monday, December 16,
1996 and at any adjournments or postponements thereof (the "Special Meeting").
At the Special Meeting, the holders of shares of Company Common Stock (the
"Company Stockholders") will consider and vote upon a proposal to approve and
adopt the Amended and Restated Agreement and Plan of Merger, dated as of July
27, 1996 (the "Merger Agreement"), by and among First Nationwide Holdings,
Inc., a Delaware corporation ("FNH"), CFB Holdings, Inc., a Delaware
corporation and a wholly-owned subsidiary of FNH ("Merger Sub"), the Company
and California Federal Bank, A Federal Savings Bank, a wholly-owned subsidiary
of the Company ("Cal Fed Bank"), and the transactions contemplated thereby,
including the merger (the "Merger") of Merger Sub with and into the Company,
pursuant to which, among other things: (a) the Company will be the surviving
entity (the "Surviving Corporation") and will become a wholly-owned subsidiary
of FNH; (b) each outstanding share of the Company Common Stock (other than
"Excluded Shares," as defined in the Merger Agreement; see "The Merger
Agreement--General") will be converted into the right to receive Merger
consideration per share (the "Per Share Merger Consideration") consisting of
(x) $23.50 in cash without interest and (y) one-tenth of a Secondary
Contingent Litigation Recovery Participation Interest, as defined below (each
a "Secondary Participation Interest"), subject to the payment of cash in lieu
of issuing fractional Secondary Participation Interests to individual Company
Stockholders, as described below; and (c) each employee or director stock
option or warrant to purchase shares of Company Common Stock will be
terminated and each grantee thereof will be entitled to receive from the
Company, in lieu of each share of Company Common Stock that would otherwise be
issuable upon exercise thereof, (A) an amount in cash computed by multiplying
(i) the difference between (x) $23.50 and (y) the applicable per share
exercise price by (ii) the number of shares subject to such option or warrant,
(B) to the extent applicable, the number of Contingent Litigation Recovery
Participation Interests of Cal Fed Bank (which were issued as a pro rata
dividend on July 28, 1995, represent 25%, in the aggregate, of the net
distributable cash proceeds (if any) of the Goodwill Litigation (as defined
below) after deduction of certain taxes and expenses, and trade in the NASDAQ
Small Cap Market System under the symbol "CALGZ" (the "CALGZ Interests"))
reserved for issuance upon exercise of such stock option or warrant, and (C)
one-tenth of a Secondary Participation Interest for each share of Company
Common Stock subject to such option or warrant; provided, however, that one
Secondary Participation Interest will be issued for each ten shares of Company
Common Stock outstanding or subject to any such stock option or warrant, no
fractional Secondary Participation Interests will be issued, and those Company
Stockholders and holders of options or warrants who would otherwise receive
such fractions will not be entitled thereto and will receive their respective
pro rata portions of the aggregate cash proceeds (net of aggregate commissions
and any other selling expenses) obtained from ChaseMellon Shareholder Services
L.L.C., as Exchange Agent for the
<PAGE>
Merger (the "Exchange Agent"), batching such fractions into the nearest
aggregate whole number of Secondary
Participation Interests (the "Batched Secondary Participation Interests") and
effecting (through the use of one or more broker-dealers) the sale of the
Batched Secondary Participation Interests on the open market at prevailing
prices on behalf of the Surviving Corporation (the "Batched Sales"). NONE OF
THE COMPANY, THE SURVIVING CORPORATION, CAL FED BANK, FNH, FNH'S WHOLLY-OWNED
SUBSIDIARY FIRST NATIONWIDE BANK, A FEDERAL SAVINGS BANK ("FNB"), OR THE
EXCHANGE AGENT WILL GUARANTEE ANY MINIMUM SALE PRICE FOR THE BATCHED SECONDARY
PARTICIPATION INTERESTS AND NO INTEREST WILL BE PAID ON THE PROCEEDS FROM THE
BATCHED SALES. The Merger Agreement sets forth FNH's intention, unless it
specifies otherwise in accordance therewith, that, immediately following the
Effective Time (as defined in the Merger Agreement), (i) FNH will contribute
all of the shares of capital stock of the Surviving Corporation to FNB, (ii)
the Surviving Corporation will be liquidated by FNB, and (iii) FNB will be
merged with and into Cal Fed Bank (the "Bank Merger") immediately thereafter.
A copy of the Merger Agreement is attached as Appendix A to this Proxy
Statement.
The Secondary Participation Interests, in the aggregate, will entitle the
holders thereof to receive an amount equal to the "Adjusted Litigation
Recovery," as defined below. The Adjusted Litigation Recovery will equal 60%
of the amount obtained from the following equation: (A) the cash payment, if
any (the "Cash Payment"), actually received by Cal Fed Bank pursuant to a
final, nonappealable judgment in or final settlement of the Goodwill
Litigation minus (B) the sum of the following: (i) the aggregate expenses
incurred previously and hereafter by Cal Fed Bank, in prosecuting the Goodwill
Litigation and obtaining the Cash Payment, (ii) any income tax liability of
Cal Fed Bank, computed on a pro forma basis, as a result of Cal Fed Bank's
receipt of the Cash Payment (net of any income tax benefit to Cal Fed Bank,
computed on a pro forma basis, from the payment of the Adjusted Litigation
Recovery to the holders of the Secondary Participation Interests), (iii) the
expenses incurred by Cal Fed Bank in connection with the creation, issuance
and trading of the CALGZ Interests and the Secondary Participation Interests,
including, without limitation, legal and accounting fees and fees and expenses
of ChaseMellon Shareholder Services L.L.C. in its capacity as Interest Agent
for the CALGZ Interests and the Secondary Participation Interests, (iv) the
payment due to the holders of the CALGZ Interests, and (v) $125 million (which
will be retained by Cal Fed Bank). The term "Goodwill Litigation" refers to
California Federal Bank v. United States, Civil Action No. 92-138C, filed on
February 28, 1992, in the United States Court of Federal Claims, in which Cal
Fed Bank alleges that the United States breached certain contractual
commitments regarding the computation of its regulatory capital and deprived
Cal Fed Bank of certain of its property without just compensation in violation
of the United States Constitution (for further information with respect to the
Goodwill Litigation, see the Cal Fed Bank Offering Circular).
The consummation of the Merger is subject to a number of conditions in
addition to approval and adoption of the Merger Agreement and the transactions
contemplated thereby (including, without limitation, the Merger) by Company
Stockholders at the Special Meeting. See "The Merger Agreement--Conditions to
the Merger."
COMPANY STOCKHOLDERS ARE URGED TO READ AND CONSIDER CAREFULLY THE IMPORTANT
INFORMATION THAT IS CONTAINED IN THIS PROXY STATEMENT RELATING TO THE MERGER
AGREEMENT AND THE MERGER. COMPANY STOCKHOLDERS ARE ALSO URGED TO READ AND
CONSIDER CAREFULLY THE IMPORTANT INFORMATION THAT IS SEPARATELY CONTAINED IN
THE ACCOMPANYING OFFERING CIRCULAR OF CAL FED BANK SPECIFICALLY RELATING TO
THE SECONDARY PARTICIPATION INTERESTS (THE "CAL FED BANK OFFERING CIRCULAR")
AND THE GOODWILL LITIGATION (INCLUDING, WITHOUT LIMITATION, THE DEFINITION OF
CERTAIN TERMS USED IN THE COMPUTATION OF THE "ADJUSTED LITIGATION RECOVERY").
THE CAL FED BANK OFFERING CIRCULAR HAS BEEN FILED BY THE COMPANY WITH THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") AS AN EXHIBIT TO A
CURRENT REPORT ON FORM 8-K OF THE COMPANY, WHICH IS INCORPORATED BY REFERENCE
INTO THIS PROXY STATEMENT (SEE "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE").
AS MORE FULLY DISCUSSED IN THE CAL FED BANK OFFERING CIRCULAR, THERE ARE
CERTAIN RISK FACTORS ASSOCIATED WITH, AND CERTAIN SIGNIFICANT CONTINGENCIES
AND UNCERTAINTIES AFFECTING THE POTENTIAL VALUE OF, THE SECONDARY
PARTICIPATION INTERESTS, INCLUDING THE RISK FACTORS, CONTINGENCIES AND
UNCERTAINTIES ARISING FROM THE FACT THAT AMOUNTS WILL ONLY BE PAYABLE BY CAL
FED BANK TO HOLDERS OF THE SECONDARY PARTICIPATION
2
<PAGE>
INTERESTS IN THE EVENT THAT CAL FED BANK RECEIVES PROCEEDS FROM THE GOODWILL
LITIGATION WHICH EXCEED, IN THE AGGREGATE, ALL AMOUNTS THAT HAVE PRIORITY OVER
THE SECONDARY PARTICIPATION INTERESTS WITH RESPECT TO THE DISTRIBUTION OF SUCH
PROCEEDS (INCLUDING, WITHOUT LIMITATION, CERTAIN EXPENSES AND TAXES, PAYMENTS
DUE TO THE HOLDERS OF THE CALGZ INTERESTS AND THE RETENTION OF $125 MILLION BY
CAL FED BANK). ACCORDINGLY, WHILE THE $23.50 CASH COMPONENT OF THE PER SHARE
MERGER CONSIDERATION, WHICH WILL BE PAID IF THE MERGER IS CONSUMMATED, IS
QUANTIFIED, THE VALUE OF THE NON-CASH COMPONENT, IN THE FORM OF THE SECONDARY
PARTICIPATION INTERESTS WHICH WILL BE DISTRIBUTED IF THE MERGER IS CONSUMMATED
BUT WITH RESPECT TO WHICH NO PAYMENT WILL BE MADE BY CAL FED BANK OTHER THAN
FROM THE NET DISTRIBUTABLE CASH PROCEEDS (IF ANY) OF THE GOODWILL LITIGATION,
IS INHERENTLY INDETERMINABLE.
As an inducement to FNH to enter into the Merger Agreement, the Company has
granted FNH an unconditional and irrevocable option (the "FNH Option"),
pursuant to a Stock Option Agreement dated as of July 27, 1996 (the "Stock
Option Agreement"), to purchase, subject to the terms and conditions of the
Option Agreement, up to 9,829,992 newly-issued shares of Company Common Stock
(representing approximately 19.9% of the Company Common Stock outstanding as
of the date of the Option Agreement and approximately 16.6% of the Company
Common Stock that would be outstanding upon exercise in full of the FNH
Option) for an exercise price (subject to adjustment under certain
circumstances) of $21.375 per share (the closing price of Company Common Stock
on the New York Stock Exchange (the "NYSE") on July 26, 1996). A copy of the
Option Agreement is attached as Appendix B to this Proxy Statement.
Under the terms of the Merger Agreement, the 10 5/8% Non-Cumulative
Perpetual Preferred Stock, Series B, of Cal Fed Bank (the "Cal Fed Bank Series
B Preferred Stock") will remain outstanding after the Effective Time. The 6
1/2% Convertible Subordinated Debentures Due 2001 of XCF Acceptance
Corporation, a wholly-owned subsidiary of Cal Fed Bank (the "XCF Debentures"),
will also remain outstanding after the Effective Time but, in accordance with
their terms, will become convertible, at their specified conversion price of
$143.95 per share, into the Per Share Merger Consideration multiplied by the
number of shares of Company Common Stock into which they were previously
convertible at such specified conversion price.
This Proxy Statement, the accompanying Notice of Special Meeting and the
accompanying proxy card, as well as the accompanying Cal Fed Bank Offering
Circular, are first being mailed to Company Stockholders on or about November
14, 1996.
THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT COMPANY STOCKHOLDERS VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY (INCLUDING, WITHOUT LIMITATION, THE MERGER).
IT IS IMPORTANT THAT PROXY CARDS BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THE SECONDARY PARTICIPATION INTERESTS HAVE NOT BEEN REGISTERED WITH THE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), BECAUSE THEY ARE EXEMPT FROM REGISTRATION UNDER THE EXEMPTION FOR
SECURITIES ISSUED BY CERTAIN FEDERALLY-SUPERVISED AND EXAMINED FINANCIAL
INSTITUTIONS CONTAINED IN SECTION 3(a)(5) OF THE SECURITIES ACT. HOWEVER, THE
SECONDARY PARTICIPATION INTERESTS HAVE BEEN REGISTERED WITH THE OFFICE OF
THRIFT SUPERVISION (THE "OTS"), ALTHOUGH, AS INDICATED IN THE CAL FED BANK
OFFERING CIRCULAR, THE OTS HAS NOT APPROVED OR DISAPPROVED THEM.
----------------
The date of this Proxy Statement is November 13, 1996
----------------
3
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE COMPANY
OTHER THAN AS CONTAINED IN THIS PROXY STATEMENT AND, IF GIVEN OR MADE, ANY
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THE DELIVERY OF THIS PROXY
STATEMENT SHALL NOT UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
FOR CERTAIN RISK FACTORS ASSOCIATED WITH, AND CERTAIN OTHER CONSIDERATIONS
SPECIFICALLY AFFECTING, THE SECONDARY PARTICIPATION INTERESTS, REFERENCE IS
MADE TO THE CAL FED BANK OFFERING CIRCULAR.
ADDITIONAL INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission under Commission File No. 1-14098. Such reports, proxy statements
and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices at 7 World Trade Center, Suite 1300,
New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained at prescribed
rates from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission maintains a Web site that
contains reports, proxy, information statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy, information statements and other information may be found on
the Commission's site address, http://www.sec.gov. Company Common Stock is
listed on the NYSE and the Pacific Stock Exchange (the "PSE"). The reports,
proxy statements and other information filed by the Company with the
Commission may also be inspected at the offices of the NYSE, 20 Broad Street,
New York, New York 10005 and the offices of the PSE, 301 Pine Street, San
Francisco, California 94104.
Cal Fed Bank is also subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports and other information
with the OTS under OTS Docket No. 5099. Such reports and other information
filed by Cal Fed Bank with the OTS, as well as the Registration Statement on
Form OC of Cal Fed Bank, filed under Section 563g of the OTS' regulations,
covering the Secondary Participation Interests and containing as part thereof
the Cal Fed Bank Offering Circular (the "Cal Fed Bank Registration
Statement"), can be inspected and copied at the public reference facilities
maintained by the OTS at 1700 G Street, N.W., Washington D.C. 20552, and at
the OTS Western Regional Office at One Montgomery Street, San Francisco,
California 94120. The reports and other information filed by Cal Fed Bank with
the OTS may also be inspected at the offices of the NYSE referred to above and
at the offices of The National Association of Securities Dealers 1735 K
Street, N.W., Washington, D.C. 20006.
All information contained in this Proxy Statement concerning FNH and its
subsidiaries has been supplied by FNH and has not been independently verified
by the Company. Except as otherwise identified herein, all other information
contained in this Proxy Statement has been supplied by the Company.
Also see "Incorporation of Certain Documents by Reference."
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 7
The Special Meeting..................................................... 7
The Merger.............................................................. 8
The Merger Agreement.................................................... 10
The Stock Option Agreement.............................................. 12
Market Prices of Company Common Stock................................... 13
Selected Consolidated Financial and Other Data.......................... 13
THE SPECIAL MEETING....................................................... 14
Matters To Be Considered at the Special Meeting......................... 14
Record Date and Voting.................................................. 14
Vote Required; Revocability of Proxies.................................. 15
Solicitation of Proxies................................................. 15
Appraisal Rights........................................................ 15
THE MERGER................................................................ 18
Parties to the Merger Agreement......................................... 18
Background of the Merger................................................ 19
Reasons for the Merger; Recommendation of the Company Board............. 22
Opinion of Financial Adviser............................................ 25
Interests of Certain Persons in the Merger; Effect of the Merger on Cer-
tain Company Benefit Plans............................................. 30
Regulatory Approvals.................................................... 38
Accounting Treatment.................................................... 39
Certain Federal Income Tax Consequences................................. 39
THE MERGER AGREEMENT...................................................... 41
General................................................................. 41
Effective Date; Effective Time.......................................... 42
Payment for Shares...................................................... 42
Financing Arrangements of FNH........................................... 43
Conditions to the Merger................................................ 44
Representations and Warranties.......................................... 45
Conduct of Company Business Pending the Merger.......................... 46
No Solicitation of Transactions by Company.............................. 49
Company Rights Plan..................................................... 49
Prosecution of Goodwill Litigation...................................... 49
Termination of the Merger Agreement..................................... 50
Expenses................................................................ 51
THE STOCK OPTION AGREEMENT................................................ 51
General................................................................. 51
Exercisability.......................................................... 51
FNH Put Right........................................................... 52
Limitation on Total Profit.............................................. 53
FNH Registration Rights................................................. 53
Regulatory Approval..................................................... 54
BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK.............................. 55
Ownership of Directors and Executive Officers........................... 55
Ownership of Certain Beneficial Owners.................................. 56
</TABLE>
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<TABLE>
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<S> <C>
MARKET PRICES OF COMPANY COMMON STOCK..................................... 57
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA............................ 58
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 61
INDEPENDENT PUBLIC ACCOUNTANTS............................................ 61
OTHER MATTERS............................................................. 62
OTHER MEETINGS............................................................ 62
APPENDIX A Amended and Restated Agreement and Plan of Merger dated as of
July 27, 1996 by and among First Nationwide Holdings Inc., CFB
Holdings, Inc., Cal Fed Bancorp Inc. and California Federal
Bank, A Federal Savings Bank.................................. A-1
APPENDIX B Stock Option Agreement dated as of July 27, 1996 between First
Nationwide Holdings Inc. and Cal Fed Bancorp Inc.............. B-1
APPENDIX C Fairness Opinion of CS First Boston Corporation............... C-1
APPENDIX D Delaware General Corporation Law (S) 262...................... D-1
</TABLE>
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SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement. Capitalized terms used and not defined in this summary have
the meanings ascribed thereto elsewhere in this Proxy Statement. Reference is
made to, and this summary is qualified in its entirety by, the more detailed
information contained or incorporated by reference in this Proxy Statement and
the Appendices hereto (including the full texts of the Merger Agreement,
Appendix A, and the Stock Option Agreement, Appendix B). Company Stockholders
are urged to read this Proxy Statement and such Appendices in their entirety.
COMPANY STOCKHOLDERS ARE ALSO URGED TO READ IN ITS ENTIRETY THE CAL FED BANK
OFFERING CIRCULAR ENCLOSED WITH, AND INCORPORATED BY REFERENCE INTO, THIS PROXY
STATEMENT FOR IMPORTANT ADDITIONAL INFORMATION REGARDING THE SECONDARY
PARTICIPATION INTERESTS BEING OFFERED AS PART OF THE PER SHARE MERGER
CONSIDERATION AND THE GOODWILL LITIGATION TO WHICH THE SECONDARY PARTICIPATION
INTERESTS RELATE, INCLUDING CERTAIN RISK FACTORS ASSOCIATED WITH, AND CERTAIN
SIGNIFICANT CONTINGENCIES AND UNCERTAINTIES AFFECTING THE POTENTIAL VALUE OF,
THE SECONDARY PARTICIPATION INTERESTS. SEE "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." THE SECONDARY PARTICIPATION INTERESTS HAVE NOT BEEN REGISTERED
WITH THE COMMISSION UNDER THE SECURITIES ACT BECAUSE THEY ARE EXEMPT FROM
REGISTRATION UNDER SECTION 3(a)(5) THEREOF BUT THEY HAVE BEEN REGISTERED WITH
THE OTS, ALTHOUGH THE OTS HAS NOT APPROVED OR DISAPPROVED THEM.
THE SPECIAL MEETING
DATE, TIME AND LOCATION. The Special Meeting is scheduled to be held at 1:30
P.M., local time, on Monday, December 16, 1996 at the Park Hyatt Los Angeles at
Century City, 2151 Avenue of the Stars, Los Angeles, California. See "The
Special Meeting--Matters to be Considered at the Special Meeting."
MATTERS TO BE CONSIDERED. At the Special Meeting, Company Stockholders will
consider and vote upon (i) a proposal to approve and adopt the Merger Agreement
(Appendix A to this Proxy Statement) and the transactions contemplated thereby
(including, without limitation, the Merger), and (ii) such other matters as may
properly be brought before the Special Meeting (the Company Board is not aware
of any such matters). See "The Special Meeting--Matters to be Considered at the
Special Meeting" and "Other Matters."
RECORD DATE AND VOTING; VOTE REQUIRED; REVOCABILITY OF PROXIES. Only Company
Stockholders of record as of the Record Date (November 8, 1996) will be
entitled to notice of, and to vote at, the Special Meeting. As of the Record
Date, there were 49,427,074 shares of Company Common Stock outstanding and
entitled to vote at the Special Meeting, held by approximately 3,570 Company
Stockholders of record. The affirmative vote of a majority of the outstanding
shares of Company Common Stock entitled to vote thereon is required to approve
and adopt the Merger Agreement and the transactions contemplated thereby
(including, without limitation, the Merger). The presence of a Company
Stockholder at the Special Meeting will not automatically revoke a proxy given
by such Company Stockholder on the enclosed proxy card. However, a Company
Stockholder may revoke a proxy at any time prior to its exercise by (1)
attending the Special Meeting and voting in person, (2) executing and
delivering a proxy for the Special Meeting bearing a later date, or (3)
delivering a written notice of revocation to the Secretary of the Company, at
its principal executive office address set forth at the beginning of this Proxy
Statement, prior to the Special Meeting. The approval and adoption of the
Merger Agreement by Company Stockholders will also constitute a vote to
approve, as exempt from Section 16 of the Exchange Act, the disposition of
employee and director stock options as provided for in the Merger Agreement.
See "The Special Meeting--Record Date and Voting" and "--Vote Required;
Revocability of Proxies," and "The Merger Agreement--Interests of Certain
Persons in the Merger; Effect of the Merger on Certain Company Benefit Plans--
Stock Option Plans." As of the Record Date, directors and executive officers of
the Company and Cal Fed Bank were entitled to vote an aggregate of 126,463
shares of Company Common
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Stock, or approximately 0.26% of the Company Common Stock outstanding as of the
Record Date (see "Beneficial Ownership of Company Common Stock"). Such
individuals have indicated that they intend to vote their shares of Company
Common Stock "FOR" approval and adoption of the Merger Agreement and the
transactions contemplated thereby (including, without limitation, the Merger).
APPRAISAL RIGHTS. Under certain conditions and by complying with specific
procedures required by Section 262 of the DGCL (which is printed in its
entirety as Appendix D to this Proxy Statement), a Company Stockholder of
record who does not vote in favor of the Merger Agreement will have the right,
if the Merger is consummated, to receive in cash the judicially determined
"fair value" of such Company Stockholder's shares of Company Common Stock. See
"The Special Meeting--Appraisal Rights."
THE MERGER
PARTIES TO THE MERGER AGREEMENT. The parties to the Merger Agreement are the
Company, Cal Fed Bank, FNH and Merger Sub. See "The Merger--Parties to the
Merger Agreement."
THE COMPANY AND CAL FED BANK. The Company is a Delaware corporation with
its executive offices located at 5700 Wilshire Boulevard, Los Angeles,
California 90036, telephone number (213) 932-4200. Effective January 1,
1996, through the Holding Company Reorganization, the Company became the
parent company of Cal Fed Bank, a federally chartered savings bank which
maintains more than 120 savings branches and lending offices in California
and Nevada. Cal Fed Bank's principal operating activity consists of
originating or purchasing loans secured by residential property of one to
four units.
FNH AND MERGER SUB. FNH is a savings and loan holding company organized
under the laws of the State of Delaware with its principal executive
offices located at 625 Madison Avenue, New York, New York 10022. FNH's only
significant asset is all of the common stock of FNB, a federally chartered
stock savings bank whose principal business is conducted primarily in
California, Florida and Texas and consists of operating retail deposit
branches, and originating and/or purchasing residential real estate loans
and, to a lesser extent, certain consumer loans. As of June 30, 1996, FNB
had approximately $17.7 billion in assets, approximately $9.0 billion in
deposits and operated 117 branches. FNB has grown significantly since
October 1994 and has strengthened its position as a leading thrift in
California (in terms of assets) principally through a series of
acquisitions and dispositions, including its acquisition of Home Federal
Financial Corporation on June 1, 1996 and its acquisition of SFFed Corp. on
February 1, 1996. Merger Sub is a wholly-owned subsidiary of FNH, organized
solely for the purpose of effecting the Merger, and will be merged with and
into the Company in the Merger. It is anticipated that Merger Sub will
conduct no business other than in connection with the implementation of the
Merger Agreement and that it will have no significant assets at any time
prior to the Effective Time.
BACKGROUND OF THE MERGER. For a discussion of the background to the execution
of the Merger Agreement and the Stock Option Agreement on July 27, 1996, see
"The Merger--Background of the Merger."
REASONS FOR THE MERGER; RECOMMENDATION OF THE COMPANY BOARD. The Company
Board has unanimously determined that the Merger Agreement and the transactions
contemplated thereby (including, without limitation, the Merger) are advisable
and in the best interests of the Company and Company Stockholders. ACCORDINGLY,
THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT COMPANY STOCKHOLDERS VOTE "FOR"
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY (INCLUDING, WITHOUT LIMITATION, THE MERGER). For a
discussion of the factors considered by the Company Board in reaching such
determination and making such recommendation, see "The Merger--Reasons for the
Merger; Recommendation of the Company Board."
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OPINION OF FINANCIAL ADVISER. CS First Boston, the Company's financial
adviser in connection with the Merger, has delivered to the Company Board its
written opinions, dated July 26, 1996 and dated the date of this Proxy
Statement, to the effect that, based upon and subject to the factors and
assumptions set forth in such written opinions, and as of the date of each such
opinion, the Per Share Merger Consideration was fair to the holders of Company
Common Stock from a financial point of view. The full text of the written
opinion of CS First Boston dated the date of this Proxy Statement, which sets
forth assumptions made, procedures followed, matters considered and limits on
the review undertaken by CS First Boston, is attached hereto as Appendix C.
COMPANY STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY. CS FIRST
BOSTON'S OPINIONS ARE DIRECTED ONLY TO THE FAIRNESS OF THE PER SHARE MERGER
CONSIDERATION AND DO NOT CONSTITUTE A RECOMMENDATION TO ANY COMPANY STOCKHOLDER
AS TO HOW SUCH COMPANY STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING. See "The
Merger--Opinion of Financial Adviser" for a further description of the opinions
of CS First Boston, a summary of certain analyses utilized in arriving at its
opinions and that it discussed with the Company Board on July 26, 1996, and a
description of fees payable to CS First Boston by the Company.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; EFFECT OF THE MERGER ON CERTAIN
COMPANY BENEFIT PLANS. The consummation of the Merger will result in
substantial payments being made and/or benefits provided to the directors and
executive officers of the Company and Cal Fed Bank under various existing
Company employment agreements, and tax-qualified, non-qualified, bonus,
incentive and stock option plans. In particular, all executive officers of the
Company and Cal Fed Bank will be entitled to severance payments and benefits,
under existing Transitional Compensation Agreements upon termination of
employment following the Merger, in an amount estimated to be $13.6 million in
the aggregate, and all directors and such executive officers will be entitled
to receive, in consideration for the termination of outstanding stock options
and warrants as of the Effective Time, cash payments in an amount estimated to
be $17.9 million in the aggregate, plus any CALGZ Interests reserved for
issuance upon the exercise of such stock options and one-tenth of a Secondary
Participation Interest for each share of Company Common Stock covered by such
stock options and warrants. In consideration of the commitments made by certain
executive officers, including Mr. Harshfield (the President and Chief Executive
Officer of the Company and Cal Fed Bank), with respect to certain tax planning
matters beneficial to FNH, and in recognition of their cooperation with respect
thereto, FNH has agreed to pay supplemental transaction bonuses to such
executive officers in an amount equal to $9.5 million in the aggregate, which
aggregate amount takes into account certain anticipated tax benefits and
savings to be realized by FNH as a result of such commitments and cooperation.
FNH has also entered into consulting agreements with certain executive officers
of the Company, including Mr. Harshfield, with respect to the pursuit of the
Goodwill Litigation and assistance to FNH during the transitional period
following the Merger. Such executive officers will be entitled to payments in
the amount of $500,000 in the aggregate under the consulting agreements. Under
the Merger Agreement, FNH has agreed to provide certain indemnification and
continuing directors and officers liability insurance to the directors and
executive officers of the Company and Cal Fed Bank through the sixth
anniversary of the Merger. See "The Merger Agreement--Interests of Certain
Persons in the Merger; Effect of the Merger on Certain Company Benefit Plans."
Mr Ford (the Chairman and Chief Executive Officer of FNB) currently anticipates
intending to nominate Mr. Harshfield to the Board of Directors of Cal Fed Bank
as its Vice Chairman at the first regular meeting of the Board after the
Effective Time. If nominated and elected, Mr. Harshfield currently anticipates
accepting such nomination and election.
REGULATORY APPROVALS. For a description of certain regulatory approvals
required from the OTS, without which the Merger and the Bank Merger cannot
proceed, see "The Merger--Regulatory Approvals." For OTS approval requirements
in connection with the exercise of the FNH Option, see "The Stock Option
Agreement."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. In general, the Company intends to
treat the exchange of shares of Company Common Stock for cash pursuant to the
Merger (or, in the case of a dissenting stockholder,
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<PAGE>
pursuant to any appraisal proceeding), as well as the receipt of Secondary
Participation Interests and/or (where applicable) cash from the proceeds of the
Batched Sales, as a sale or exchange of those shares for federal income tax
purposes. Under such treatment, each Company Stockholder (including a
dissenting stockholder) will recognize gain or loss for federal income tax
purposes generally in an amount equal to the difference, if any, between (i)
the amount of cash received plus the fair market value of Secondary
Participation Interests received and (ii) the adjusted tax basis of such
Company Stockholder's shares of Company Common Stock surrendered (except, in
the case of dissenting stockholders, for any amount constituting interest,
which will be taxable as ordinary income). All Company Stockholders should read
carefully the discussion in "The Merger--Certain Federal Income Tax
Consequences" for a more complete discussion of certain federal income tax
consequences of the Merger to certain Company Stockholders. CERTAIN FEDERAL
INCOME TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF THE SECONDARY
PARTICIPATION INTERESTS ARE DISCUSSED IN THE CAL FED BANK OFFERING CIRCULAR.
COMPANY STOCKHOLDERS ARE URGED TO READ SUCH DISCUSSION IN THE CAL FED BANK
OFFERING CIRCULAR. EACH COMPANY STOCKHOLDER IS URGED TO CONSULT SUCH COMPANY
STOCKHOLDER'S OWN TAX ADVISER WITH RESPECT TO THE FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER, AS WELL AS WITH RESPECT TO ANY STATE, LOCAL,
FOREIGN OR OTHER FEDERAL TAX CONSEQUENCES, IN LIGHT OF SUCH COMPANY
STOCKHOLDER'S PARTICULAR SITUATION.
THE MERGER AGREEMENT
GENERAL. The Merger Agreement provides that Merger Sub will be merged with
and into the Company, with the Company being the Surviving Corporation in the
Merger, and each share of Company Common Stock issued and outstanding at the
Effective Time (other than Excluded Shares) will be converted into the right to
receive the Per Share Merger Consideration, provided, however, that, one
Secondary Participation Interest will be issued for each ten shares of Company
Common Stock outstanding, no fractional Secondary Participation Interests will
be issued, and those Company Stockholders who would otherwise receive such
fractions will not be entitled thereto and will receive their respective pro
rata portions of the aggregate cash proceeds (after deducting aggregate
commissions and any other selling expenses) obtained from the Batched Sales
(which will be effected by the Exchange Agent, through the use of one or more
broker-dealers, on behalf of the Surviving Corporation on the open market at
prevailing market prices). NONE OF THE COMPANY, THE SURVIVING CORPORATION, CAL
FED BANK, FNH, FNB OR THE EXCHANGE AGENT WILL GUARANTEE ANY MINIMUM SALE PRICE
FOR THE BATCHED SECONDARY PARTICIPATION INTERESTS AND NO INTEREST WILL BE PAID
ON THE PROCEEDS FROM THE BATCHED SALES. The Merger Agreement sets forth FNH's
intention, unless it otherwise specifies in accordance therewith (which FNH has
advised the Company it has no present intention of doing), that, immediately
following the consummation of the Merger, (i) FNH will contribute all of the
shares of capital stock of the Surviving Corporation to FNB, (ii) the Surviving
Corporation will be liquidated by FNB, and (iii) the Bank Merger between Cal
Fed Bank and FNB will be consummated with Cal Fed Bank being the surviving
bank. For a complete summary of the Merger Agreement (the full text of which is
attached to this Proxy Statement as Appendix A), including certain
representations, warranties and agreements (including agreements regarding
limitations on the conduct of business pending the Merger), see "The Merger
Agreement."
The Merger Agreement also provides that each option or warrant to purchase
shares of Company Common Stock pursuant to the Company Stock Plans will be
terminated and each grantee thereof will be entitled to receive from the
Company, in lieu of each share of Company Common Stock that would otherwise be
issuable upon exercise thereof, (A) an amount in cash computed by multiplying
(i) the difference between (x) $23.50 and (y) the applicable per share exercise
price by (ii) the number of shares subject to such option or warrant, (B) to
the extent applicable, the number of CALGZ Interests reserved for issuance upon
exercise of such stock option or warrant, and (C) one-tenth of a Secondary
Participation Interest for each share of Company Common Stock subject to such
option or warrant; provided, however, that one Secondary Participation Interest
will be issued for each ten shares of Company Common Stock subject to any such
stock option or warrant, no fractional Secondary
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Participation Interests will be issued, and those holders of options or
warrants who would otherwise receive such fractions will not be entitled
thereto and will receive their respective pro rata portion of the aggregate net
cash proceeds obtained from the Batched Sales. See "The Merger--Interests of
Certain Persons in the Merger; Effect of the Merger on Certain Company Benefit
Plans--Stock Option Plans."
FOR IMPORTANT ADDITIONAL INFORMATION REGARDING THE TERMS OF THE SECONDARY
PARTICIPATION INTERESTS AND THE GOODWILL LITIGATION, SEE THE CAL FED BANK
OFFERING CIRCULAR. AS MORE FULLY DISCUSSED IN THE CAL FED BANK OFFERING
CIRCULAR, THERE ARE CERTAIN RISK FACTORS ASSOCIATED WITH, AND CERTAIN
SIGNIFICANT CONTINGENCIES AND UNCERTAINTIES AFFECTING THE POTENTIAL VALUE OF,
THE SECONDARY PARTICIPATION INTERESTS, INCLUDING THE RISK FACTORS,
CONTINGENCIES AND UNCERTAINTIES ARISING FROM THE FACT THAT AMOUNTS WILL ONLY BE
PAYABLE BY CAL FED BANK TO HOLDERS OF THE SECONDARY PARTICIPATION INTERESTS IN
THE EVENT THAT CAL FED BANK RECEIVES PROCEEDS FROM THE GOODWILL LITIGATION
WHICH EXCEED, IN THE AGGREGATE, ALL AMOUNTS THAT HAVE PRIORITY OVER THE
SECONDARY PARTICIPATION INTERESTS WITH RESPECT TO THE DISTRIBUTION OF SUCH
PROCEEDS (INCLUDING, WITHOUT LIMITATION, CERTAIN EXPENSES AND TAXES, PAYMENTS
DUE TO THE HOLDERS OF THE CALGZ INTERESTS AND THE RETENTION OF $125 MILLION BY
CAL FED BANK). ACCORDINGLY, WHILE THE $23.50 CASH COMPONENT OF THE PER SHARE
MERGER CONSIDERATION, WHICH WILL BE PAID IF THE MERGER IS CONSUMMATED, IS
QUANTIFIED, THE VALUE OF THE NON-CASH COMPONENT, IN THE FORM OF THE SECONDARY
PARTICIPATION INTERESTS WHICH WILL BE DISTRIBUTED IF THE MERGER IS CONSUMMATED
BUT WITH RESPECT TO WHICH NO PAYMENT WILL BE MADE BY CAL FED BANK OTHER THAN
FROM THE NET DISTRIBUTABLE CASH PROCEEDS (IF ANY) OF THE GOODWILL LITIGATION,
IS INHERENTLY INDETERMINABLE.
PAYMENT OF SHARES. If the Merger is consummated, Company Stockholders will
receive instructions regarding the procedure for surrendering their Company
Common Stock certificates and receiving the Per Share Merger Consideration.
COMPANY STOCKHOLDERS SHOULD NOT FORWARD ANY OF THEIR COMPANY COMMON STOCK
CERTIFICATES UNTIL THEY HAVE RECEIVED AND COMPLIED WITH SUCH INSTRUCTIONS.
FINANCING ARRANGEMENTS OF FNH. Consummation of the Merger is not conditioned
upon FNH obtaining the cash necessary to pay the aggregate cash portion of the
Per Share Merger Consideration. In the Merger Agreement, FNH has represented
that on the Effective Date it will have all funds necessary to pay such
aggregate cash portion. The Company has agreed to cooperate with, and provide
reasonable assistance to, FNH, at FNH's expense, in connection with any sale or
distribution of securities made by FNH or any of its affiliates in connection
with the consummation of the transactions contemplated by the Merger Agreement
and FNH has agreed that, for a period of six years following the Effective
Date, it will provide indemnification to the Company's directors, officers and
advisors in connection with actions taken by them in fulfillment of the
foregoing commitments. See "The Merger Agreement--Financing Arrangements of
FNH."
CONDITIONS TO THE MERGER. Each party's obligations to effect the Merger are
subject to the satisfaction, prior to the Effective Time, of a number of
customary conditions, including (without limitation) (i) the approval of the
Merger Agreement by the requisite vote of the Company Stockholders in
accordance with applicable law, (ii) the receipt of all Requisite Regulatory
Approvals required to consummate the transactions contemplated by the Merger
Agreement (including, without limitation, the Merger, the Bank Merger, and the
registration, issuance and distribution of the Secondary Participation
Interests) and (iii) material compliance by the other party with its
representations, warranties and agreements. See "The Merger Agreement--
Conditions to the Merger."
NO SOLICITATION OF TRANSACTIONS BY COMPANY. The Company has agreed that
neither it nor any of its subsidiaries will authorize or permit any of its
officers, directors, employees, agents or representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or any
of its subsidiaries) to directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any Acquisition Proposal
or, except to the extent legally required for the discharge by the Company
Board of its fiduciary duties as advised by its counsel with respect to an
unsolicited offer from a third party, engage in any negotiations concerning or
provide any confidential information or data to, or have any discussions with,
any
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person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal. See "The Merger
Agreement--Transactions by Company."
PROSECUTION OF GOODWILL LITIGATION. The Company has agreed not to settle,
compromise, dismiss or cease prosecution of the Goodwill Litigation or sell,
transfer, assign, distribute or convey all or part of, or otherwise take any
action that could reasonably be expected to adversely affect the value of, its
rights or interest in the Goodwill Litigation. FNH has agreed with the Company
(although the Merger Agreement provides that the covenants set forth in clauses
(i) and (ii) below are not enforceable by third parties) that, following the
Effective Time, it will, and will cause Cal Fed Bank and (subject to certain
anti-assignment provisions of the U.S. Code) any permitted successor to Cal Fed
Bank, as applicable, to (i) take all actions necessary or desirable to pursue
Cal Fed Bank's claims in the Goodwill Litigation and (ii) refrain from taking
any action to dismiss, settle, compromise or otherwise cease prosecution of the
Goodwill Litigation on terms that do not result solely in the payment of cash
or other readily monetizable consideration by or on behalf of the United States
to Cal Fed Bank. FNH has also agreed that, as soon as practicable after the
receipt of any payment from the United States in settlement of, or in
satisfaction of a final judgment obtained in, the Goodwill Litigation, FNH will
cause Cal Fed Bank to distribute the applicable portion of such payment in a
manner consistent with the terms of the CALGZ Interests and the Secondary
Participation Interests. See "The Merger Agreement--Prosecution of Goodwill
Litigation."
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated,
and the Merger abandoned, prior to the Effective Date, either before or after
its approval by Company Stockholders, by the mutual consent of FNH and the
Company or by either FNH or the Company, acting alone, under specified
circumstances, including (without limitation), denial of any application for a
Requisite Regulatory Approval, failure to obtain the required approval of the
Company Stockholders, or in the event that the Merger is not consummated by
March 31, 1997 (other than due to a breach of a material representation,
warranty or covenant contained in the Merger Agreement by the party seeking to
terminate), provided, however, that FNH may extend such termination date to
June 30, 1997 if the Merger is not consummated by March 31, 1997 as a result of
the failure to obtain any Requisite Regulatory Approval for reasons entirely
unrelated to the financing of the Merger, the capital structure of FNH or
Merger Sub, the adequacy of FNH's or Merger Sub's financial condition and/or
the prospective effect of such financing, structure or condition on Cal Fed
Bank. Under certain circumstances involving a termination of the Merger
Agreement, the FNH Option may become exercisable. See "The Merger Agreement--
Termination of the Merger Agreement" and "The Stock Option Agreement."
THE STOCK OPTION AGREEMENT
As an inducement to FNH to execute and deliver the Merger Agreement, FNH and
the Company entered into the Stock Option Agreement, the execution of which was
a condition to FNH's merger proposal. Pursuant to the Stock Option Agreement,
the Company granted FNH the FNH Option, entitling FNH to purchase up to
9,829,992 authorized but unissued shares of Company Common Stock (an amount
equal to approximately 19.9% of its then outstanding shares and 16.6% of the
shares that would be outstanding upon exercise in full of the FNH Option) for
an exercise price (subject to adjustment under certain circumstances) of
$21.375 per share (the closing price of Company Common Stock on the NYSE on
July 26, 1996). The FNH Option may only be exercised upon the occurrence of a
Purchase Event (which, to the Company's knowledge, has not occurred as of the
date of this Proxy Statement). The Stock Option Agreement is intended to
increase the likelihood that the Merger will be consummated in accordance with
the terms of the Merger Agreement. Consequently, certain aspects of the Stock
Option Agreement may have the effect of discouraging persons who might now or
prior to the Effective Time be interested in acquiring all of, or a significant
interest in, the Company, from considering or proposing such an acquisition,
even if such persons were prepared to pay a higher price per share for Company
Common Stock than the then-current market price of such shares. See, generally,
"The Stock Option Agreement."
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MARKET PRICES OF COMPANY COMMON STOCK
Company Common Stock is listed on the NYSE and the PSE under the name Cal Fed
Bancorp Inc. and traded under the symbol "CAL." On June 21, 1996 (the last
trading day preceding the meeting of the Company Board at which FNH's merger
proposal was first considered by the Company Board), the closing price of
Company Common Stock on the NYSE was $17 7/8. On July 24, 1996 (the last
trading day preceding the publication of an article in The Wall Street Journal
reporting that FNH was rumored to be in talks to acquire the Company for
between $22 and $24 per share in cash), the closing price of Company Common
Stock on the NYSE was $20 1/8. On July 25, 1996 (the last trading day preceding
the meeting of the Company Board at which the Merger Agreement was approved),
the closing price of Company Common Stock on the NYSE was $21 3/8. On July 26,
1996 (the last trading day preceding the public announcements by the Company
and FNH of the execution of the Merger Agreement), the closing price of Company
Common Stock on the NYSE was $21 3/8. COMPANY STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT INFORMATION WITH RESPECT TO THE TRADING PRICE OF COMPANY COMMON STOCK.
See "Market Prices of Company Common Stock."
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
Certain selected historical financial and other data of the Company (and, for
certain years prior to 1996, during which the Company either did not exist or
was not subject to the informational requirements of the Exchange Act, Cal Fed
Bank) are set forth under "Selected Consolidated Financial and Other Data."
That data is derived from, should be read in conjunction with, and is qualified
by reference to, the more comprehensive financial and other data contained in
the Company Reports filed with the Commission and incorporated by reference in
this Proxy Statement and the Cal Fed Bank Reports filed under the Exchange Act
with the OTS. See "Additional Information" and Incorporation of Certain
Documents by Reference."
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THE SPECIAL MEETING
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
Each copy of this Proxy Statement mailed to Company Stockholders is
accompanied by a proxy card furnished in connection with the solicitation of
proxies by the Company Board for use at the Special Meeting. The Special
Meeting is scheduled to be held at 1:30 P.M., local time, on Monday, December
16, 1996 at the Park Hyatt Los Angeles at Century City, 2151 Avenue of the
Stars, Los Angeles, California. At the Special Meeting, Company Stockholders
will consider and vote upon (i) a proposal to approve and adopt the Merger
Agreement (Appendix A to this Proxy Statement) and the transactions
contemplated thereby (including, without limitation, the Merger) and (ii) such
other matters as may properly be brought before the Special Meeting.
The Company Board has determined that the Merger Agreement and the
transactions contemplated thereby (including, without limitation, the Merger)
are advisable and in the best interests of the Company and Company
Stockholders, and has unanimously approved them. ACCORDINGLY, THE COMPANY
BOARD UNANIMOUSLY RECOMMENDS THAT COMPANY STOCKHOLDERS VOTE "FOR" THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY
(INCLUDING, WITHOUT LIMITATION, THE MERGER). See "The Merger--Background of
the Merger" and "--Reasons for the Merger; Recommendation of the Company
Board".
COMPANY STOCKHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND
RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL
MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT AND
THE MERGER.
RECORD DATE AND VOTING
The Company Board has fixed the close of business on November 8, 1996 (the
"Record Date") as the record date for the Special Meeting. Only Company
Stockholders of record at the close of business on the Record Date will be
entitled to notice of, and to vote at, the Special Meeting. At the close of
business on the Record Date, there were 49,427,074 shares of Company Common
Stock outstanding and entitled to vote at the Special Meeting, held by
approximately 3,570 Company Stockholders of record.
Each holder of Company Common Stock on the Record Date will be entitled to
one vote for each share held of record. The presence, in person or by proxy,
of a majority of the outstanding shares of Company Common Stock entitled to be
voted at the Special Meeting is necessary to constitute a quorum thereat.
Abstentions and proxies as to which a broker has indicated that such broker
does not have discretionary authority to vote on the Merger Agreement pursuant
to applicable NYSE rules (each a "broker non-vote") will be included in the
calculation of the number of votes represented at the Special Meeting for
purposes of determining whether a quorum has been achieved.
If the enclosed proxy card is properly executed and received by the Company
in time to be voted at the Special Meeting, the shares represented thereby
will be voted in accordance with the instructions marked thereon. Executed
proxies with no instructions indicated thereon will be voted "FOR" approval
and adoption of the Merger Agreement and the transactions contemplated thereby
(including, without limitation, the Merger). Also see "Other Matters."
COMPANY STOCKHOLDERS SHOULD NOT FORWARD ANY OF THEIR COMPANY COMMON STOCK
CERTIFICATES WITH THEIR PROXY CARDS. IN THE EVENT THE MERGER IS CONSUMMATED,
STOCK CERTIFICATES SHOULD BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET
FORTH IN A LETTER OF TRANSMITTAL, WHICH WILL BE SENT TO COMPANY STOCKHOLDERS
BY THE EXCHANGE AGENT AS SOON AS REASONABLY PRACTICABLE AFTER THE EFFECTIVE
TIME.
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VOTE REQUIRED; REVOCABILITY OF PROXIES
The affirmative vote of holders of a majority of the outstanding shares of
Company Common Stock entitled to vote thereon is required to approve and adopt
the Merger Agreement and the transactions contemplated thereby (including,
without limitation, the Merger). The approval and adoption of the Merger
Agreement by Company Stockholders will also constitute a vote to approve, as
exempt from Section 16 of the Exchange Act, the disposition of employee and
director stock options as provided for in the provisions of the Merger
Agreement summarized in "The Merger Agreement--Interests of Certain Persons in
the Merger; Effect of the Merger on Certain Company Benefit Plans--Stock
Option Plans."
As of the Record Date, directors and executive officers of the Company and
Cal Fed Bank were entitled to vote an aggregate of 126,463 shares of Company
Common Stock, or approximately 0.26% of the Company Common Stock outstanding
as of the Record Date (see "Beneficial Ownership of Company Common Stock").
Such individuals have indicated that they intend to vote their shares of
Company Common Stock "FOR" approval and adoption of the Merger Agreement and
the transactions contemplated thereby (including, without limitation, the
Merger).
Because the required vote of the Company Stockholders on the Merger
Agreement and the transactions contemplated thereby, including the Merger, is
a majority of the total number of shares of Company Common Stock outstanding
on the Record Date, the failure to submit a proxy card (or to vote in person
at the Special Meeting) or the abstention from voting by Company Stockholders
(including broker non-votes) will have the same effect as a vote "against"
such approval and adoption.
The presence of a Company Stockholder at the Special Meeting will not
automatically revoke such Company Stockholder's proxy. However, a Company
Stockholder may revoke a proxy at any time prior to its exercise by (1)
attending the Special Meeting and voting in person, (2) executing and
delivering a proxy for the Special Meeting bearing a later date, or (3)
delivering written notice of revocation to the Secretary of the Company, at
its principal executive office address set forth at the beginning of this
Proxy Statement, prior to the Special Meeting.
SOLICITATION OF PROXIES
The Company will bear the costs of soliciting proxies from Company
Stockholders. In addition to soliciting proxies by mail, directors, officers
and employees of the Company, without receiving additional compensation
therefor, may solicit proxies by telephone, by telegram or in person.
Arrangements also will be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation materials to the beneficial
owners of shares held of record by such persons, and the Company will
reimburse such brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith.
The Company has retained McCormick & Pryor Ltd. to aid in the solicitation of
proxies. Such firm's fee for solicitation of the proxies is estimated to be
$7,000 plus reimbursement for out-of-pocket costs and expenses.
APPRAISAL RIGHTS
If the Merger is consummated, a Company Stockholder who does not wish to
accept the Per Share Merger Consideration will be entitled to appraisal rights
under Section 262 ("Section 262") of the Delaware General Corporation Law (the
"DGCL"), provided such Company Stockholder complies with the conditions
established by Section 262.
Section 262 is reprinted in its entirety as Appendix D to this Proxy
Statement. The following discussion is not a complete statement of the law
relating to statutory appraisal rights and is qualified in its entirety by
reference to Appendix D. This discussion and Appendix D should be reviewed
carefully by any Company Stockholder who wishes to exercise statutory
appraisal rights or who wishes to preserve the right to do so, as failure to
comply with the procedures set forth herein or therein will result in the loss
of such appraisal rights.
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A record holder of shares of Company Common Stock who makes the demand
described below with respect to such shares, who continuously is the record
holder of such shares through the Effective Time, who otherwise complies with
the statutory requirements of Section 262 and who neither votes in favor of
the Merger Agreement nor consents thereto in writing will be entitled to an
appraisal by the Delaware Court of Chancery (the "Delaware Court") of the fair
value of such Company Stockholder's shares of Company Common Stock. All
references to a "Company Stockholder" or "holders of shares of Company Common
Stock" in this summary of appraisal rights are references to the record holder
or holders of shares of Company Common Stock. Although the Merger Agreement
sets forth FNH's current intention to liquidate the Surviving Corporation
immediately following the Effective Time, under Section 278 of the DGCL the
existence of the Surviving Corporation will automatically continue for at
least three years following its dissolution for the purpose of (among other
things) prosecuting or defending lawsuits and, accordingly, the Surviving
Corporation will remain the relevant legal entity for the purpose of claims
timely and properly made in connection with the Merger under the provisions of
Section 262 summarized below.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, such as the Special Meeting, not less than 20 days
prior to the meeting a constituent corporation must notify each of the
holders, as of the record date for such meeting, of its stock for whom
appraisal rights are available that such appraisal rights are available and
include in each such notice a copy of Section 262. This Proxy Statement shall
constitute such notice to the record holders of Company Common Stock.
Company Stockholders who desire to exercise their appraisal rights must not
vote in favor of the Merger Agreement and must deliver a separate written
demand for appraisal to the Company prior to the vote of Company Stockholders
on the Merger Agreement. A demand for appraisal must be executed by or on
behalf of the stockholder of record and must reasonably inform the Company of
the identity of the stockholder of record and that such stockholder intends
thereby to demand appraisal of the Company Common Stock. A proxy or vote
against the Merger Agreement will not by itself constitute such a demand.
Within ten days after the Effective Time, the Surviving Corporation must
provide notice of the Effective Time to all stockholders who have complied
with Section 262.
A Company Stockholder who elects to exercise appraisal rights should mail or
deliver such Company Stockholder's written demand to the Secretary of the
Company at its principal executive office address set forth at the beginning
of this Proxy Statement.
A person having a beneficial interest in shares of Company Common Stock that
are held of record in the name of another person, such as a broker, fiduciary,
depositary or other nominee, must act promptly to cause the record holder to
follow the steps summarized herein properly and in a timely manner to perfect
appraisal rights. If the shares of Company Common Stock are owned of record by
a person other than the beneficial owner, including a broker, fiduciary (such
as a trustee, guardian or custodian), depositary or other nominee, such demand
must be executed by or for the record owner. If the shares of Company Common
Stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, such demand must be executed by or for all joint owners. An
authorized agent, including an agent for two or more joint owners, may execute
the demand for appraisal for a stockholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in exercising
the demand, such person is acting as agent for the record owner. If a Company
Stockholder holds shares of Company Common Stock through a broker who in turn
holds the shares through a central securities depository nominee such as Cede
& Co., a demand for appraisal of such shares must be made by or on behalf of
the depository nominee and must identify the depository nominee as record
holder.
A record holder, such as a broker, fiduciary, depositary or other nominee,
who holds shares of Company Common Stock as a nominee for others, may exercise
appraisal rights with respect to the shares held for all or less than all
beneficial owners of shares as to which such person is the record owner. In
such case, the written demand must set forth the number of shares covered by
such demand. Where the number of shares is not expressly stated, the demand
will be presumed to cover all shares of Company Common Stock outstanding in
the name of such record owner.
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Within 120 days after the Effective Time, either the Surviving Corporation
or any Company Stockholder who has complied with the required conditions of
Section 262 may file a petition in the Delaware Court, with a copy served on
the Surviving Corporation in the case of a petition filed by a Company
Stockholder, demanding a determination of the fair value of the shares of all
dissenting stockholders. FNH has advised the Company that there is no present
intent on its part to cause the Surviving Corporation to file an appraisal
petition and Company Stockholders seeking to exercise appraisal rights should
not assume that the Surviving Corporation will file such a petition or
initiate any negotiations with respect to the fair value of such shares.
Accordingly, Company Stockholders who desire to have their shares appraised
should initiate any petitions necessary for the perfection of their appraisal
rights within the time periods and in the manner prescribed in Section 262.
Within 120 days after the Effective Time, any Company Stockholder who has
theretofore complied with the applicable provisions of Section 262 will be
entitled, upon written request, to receive from the Surviving Corporation a
statement setting forth the aggregate number of shares of Company Common Stock
not voting in favor of the Merger Agreement and with respect to which demands
for appraisal were received by the Surviving Corporation and the number of
holders of such shares. Such statement must be mailed within 10 days after the
written request therefor has been received by the Surviving Corporation.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which Company Stockholders are
entitled to appraisal rights. The Delaware Court may require the Company
Stockholders who have demanded an appraisal for their shares and who hold
stock represented by certificates to submit their certificates of stock to the
Delaware Register in Chancery for notation thereon of the pendency of the
appraisal proceedings; and if any Company Stockholder fails to comply with
such direction, the Delaware Court may dismiss the proceedings as to such
stockholder. Where proceedings are not dismissed, the Delaware Court will
appraise the shares of Company Common Stock owned by such Company
Stockholders, determining the fair value of such shares exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value.
Although the Company believes that the Per Share Merger Consideration is
fair, no representation is made as to the outcome of the appraisal of fair
value as determined by the Delaware Court and Company Stockholders should
recognize that such an appraisal could result in a determination of a value
higher or lower than, or the same as, the Per Share Merger Consideration.
Moreover, FNH has advised the Company that it does not anticipate causing the
Surviving Corporation to offer more than the Per Share Merger Consideration to
any Company Stockholder exercising appraisal rights and reserves the right to
assert, in any appraisal proceeding, that, for purposes of Section 262, the
"fair value" of a share of Company Common Stock is less than the Per Share
Merger Consideration. In determining "fair value", the Delaware Court is
required to take into account all relevant factors. In Weinberger v. UOP,
Inc., 457 A.2d 701 (Del. 1983), the Delaware Supreme Court stated, among other
things, that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered in an appraisal proceeding. Section 262 provides
that "fair value" is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger." In Weinberger, the Delaware
Supreme court held that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the
merger and not the product of speculation, may be considered."
Holders of shares of Company Common Stock considering seeking appraisal
should recognize that the fair value of their shares determined under Section
262 could be more than, the same as or less than the Per Share Merger
Consideration to which they will be entitled if the Merger is consummated and
if they do not seek appraisal of their shares. The cost of the appraisal
proceeding may be determined by the Delaware Court and taxed against the
parties as the Delaware Court deems equitable in the circumstances. Upon
application of a dissenting stockholder of the Surviving Corporation, the
Delaware Court may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including
without limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all shares of stock entitled
to appraisal.
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Any holder of shares of Company Common Stock who has duly demanded appraisal
in compliance with Section 262 will not, after the Effective Time, be entitled
to vote for any purpose any shares subject to such demand or to receive
payment of dividends or other distributions on such shares, except for
dividends or distributions payable to stockholders of record at a date prior
to the Effective Time.
At any time within 60 days after the Effective Time, any stockholder will
have the right to withdraw such demand for appraisal and to accept the terms
offered in the Merger; after this period, the stockholder may withdraw such
demand for appraisal only with the consent of the Surviving Corporation. If no
petition for appraisal is filed with the Delaware Court within 120 days after
the Effective Time, appraisal rights under Section 262 will cease, and all
Company Stockholders will be entitled to receive the Per Share Merger
Consideration. Inasmuch as the Surviving Corporation has no obligation to file
such a petition, and FNH has advised the Company that it has no present
intention of causing the Surviving Corporation to do so, any holder of shares
of Company Common Stock who desires such a petition to be filed is advised to
file it on a timely basis. Any Company Stockholder may withdraw such Company
Stockholder's demand for appraisal by delivering to the Surviving Corporation
a written withdrawal of such Company Stockholder's demand for appraisal and
acceptance of the Per Share Merger Consideration, except (i) that any such
attempt to withdraw made more than 60 days after the Effective Time will
require written approval of the Surviving Corporation and (ii) that no
appraisal proceeding in the Delaware Court may be dismissed as to any Company
Stockholder without the approval of the Delaware Court, and such approval may
be conditioned upon such terms as the Delaware Court deems just.
THE MERGER
PARTIES TO THE MERGER AGREEMENT
THE COMPANY AND CAL FED BANK. During the 1995 fourth quarter, Cal Fed Bank
received both regulatory and shareholder approval to reorganize (the "Holding
Company Reorganization") into a holding company structure. The Company was
incorporated as a Delaware corporation to serve as the holding company for Cal
Fed Bank in the Holding Company Reorganization. Prior to the January 1, 1996
effective date of the Holding Company Reorganization, the Company was a
wholly-owned subsidiary of Cal Fed Bank and on December 22, 1995, as part of
the Holding Company Reorganization, Cal Fed Bank contributed $22 million in
capital to the Company. On January 1, 1996, the Holding Company Reorganization
was effected and each share of Cal Fed Bank's common stock was converted into
one share of Company Common Stock. As a result of the Holding Company
Reorganization, Cal Fed Bank became a wholly-owned subsidiary of the Company.
During 1995, the Company had no operations. The Company's executive offices
are located at 5700 Wilshire Boulevard, Los Angeles, California 90036 and its
telephone number is (213) 932-4200.
Cal Fed Bank, a federally chartered savings bank, maintains more than 120
full service branches in California and Nevada and is one of the largest
savings institutions in the United States. Cal Fed Bank offers a broad range
of consumer financial services, including demand and term deposits and
mortgage and consumer loans. Subsidiaries of Cal Fed Bank sell insurance and
investment products to Cal Fed Bank's customers, and have previously engaged
in the real estate investment and development business and trust business.
Cal Fed Bank's principal operating activity consists of originating or
purchasing loans secured by residential property of one to four units. Cal Fed
Bank's primary funding source is savings deposits, which are insured by the
Federal Deposit Insurance Corporation through the Savings Association
Insurance Fund. Cal Fed Bank's net earnings are principally generated by the
excess of interest earned on loans and interest earning securities over the
interest paid on savings deposits and borrowings less general and
administrative expenses.
REFERENCE IS MADE TO THE CAL FED BANK OFFERING CIRCULAR FOR ADDITIONAL
INFORMATION REGARDING THE GOODWILL LITIGATION. THE CAL FED BANK OFFERING
CIRCULAR IS INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT; SEE
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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FNH AND MERGER SUB. FNH is a savings and loan holding company organized
under the laws of the State of Delaware with its principal executive offices
located at 625 Madison Avenue, New York, New York 10022. FNH's only
significant asset is all of the common stock of FNB, and as such, FNH's
principal business operations are conducted by FNB and its subsidiaries.
FNB is a federally chartered stock savings bank whose principal business is
conducted primarily in California, Florida and Texas and consists of operating
retail deposit branches and originating and/or purchasing residential real
estate loans and, to a lesser extent, certain consumer loans. FNB also
actively manages its portfolio of commercial real estate loans acquired
through acquisitions and is active in mortgage banking and loan servicing.
These operating activities are financed principally with customer deposits,
secured short-term and long-term borrowings, collections on loans, asset sales
and retained earnings. As of June 30, 1996, FNB had approximately $17.7
billion in assets, approximately $9.0 billion in deposits and operated 117
branches.
FNB has grown significantly since October 1994 and has strengthened its
position as a leading thrift in California (in terms of assets) principally
through a series of acquisitions and dispositions, including the following
transactions;
. On June 1, 1996, FNB completed its acquisition of Home Federal Financial
Corporation and its wholly-owned federally-chartered savings association
subsidiary, Home Federal Savings and Loan Association of San Francisco,
which had approximately $717 million in assets and $626 million in
deposits and operated 15 branches in Northern California.
. On February 1, 1996, FNB acquired SFFed Corp. and its wholly-owned
subsidiary, San Francisco Federal Savings and Loan Association, which
had approximately $4.0 billion in assets and approximately $2.7 billion
in deposits and operated 35 branches in the Northern California area.
. On October 2, 1995, FNB (through its wholly-owned mortgage bank
operating subsidiary, First Nationwide Mortgage Corporation ("FNMC")),
purchased from Lomas Mortgage USA, Inc. ("LMUSA") a loan servicing
portfolio of approximately $11.1 billion, a master servicing portfolio
of $2.9 billion and other assets. On January 31, 1996, FNMC purchased
LMUSA's remaining loan servicing portfolio which, as of December 31,
1995, totalled $14.1 billion, a master servicing portfolio of $2.7
billion and certain other assets.
. On February 28, 1995, FNMC acquired from the Resolution Trust
Corporation, as conservator for Standard Federal Savings Association and
several other financial institutions, a 1-4 unit residential mortgage
loan servicing portfolio of approximately $11.4 billion and certain
other assets and liabilities.
. From January through June of 1996, FNB consummated the sale of its
retail branches in Ohio, New York, New Jersey and Michigan, representing
an aggregate of approximately $4.6 billion of deposits sold.
Merger Sub is a wholly-owned subsidiary of FNH, organized under the laws of
the State of Delaware. Merger Sub was organized solely for the purpose of
effecting the Merger and will be merged with and into the Company in the
Merger. It is anticipated that Merger Sub will conduct no business other than
in connection with the implementation of the Merger Agreement and that it will
have no significant assets at any time prior to the Effective Time.
BACKGROUND OF THE MERGER
On May 22, 1996, Gerald J. Ford, the Chairman and Chief Executive Officer of
FNB, met with Edward G. Harshfield, the President and Chief Executive Officer
of the Company and Cal Fed Bank and a member of the boards of directors of
both entities. Such meeting was initiated by Mr. Ford, following a preliminary
and general discussion that had been initiated by Mr. Ford in April 1996, in
which Mr. Ford had inquired as to the possible response that might be
encountered in the event that a proposal were made for the acquisition of the
Company, and Mr. Harshfield had indicated that he anticipated the Company
Board being willing to give serious consideration to a credible proposal for a
transaction that offered full value to Company Stockholders. At the May 22
meeting, Mr. Ford preliminarily indicated that FNH was willing to acquire the
Company for a per share
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cash price of approximately $20.00 plus some continued participation of
Company Stockholders in the net distributable cash proceeds (if any) of the
Goodwill Litigation in excess of any recovery payable to the holders of the
CALGZ Interests. Mr. Harshfield indicated that he did not expect the Company
Board to be supportive of a transaction at that price.
The May 22, 1996 meeting was followed by a meeting on May 30, 1996,
telephone conversations on June 8 and 13, and a further meeting on June 19,
between Messrs. Ford and Harshfield. During these conversations, preliminary
discussions took place relating to the possible material business terms--
including a possible cash price per share, a possible formula permitting
Company Stockholders to participate in the distributable net cash proceeds (if
any) of the Goodwill Litigation in excess of any recovery payable to the
holders of the CALGZ Interests, and transaction protection mechanisms sought
by FNH--on the basis of which, on the one hand, FNH would be prepared to
acquire the Company (subject to a satisfactory due diligence investigation of
the Company, and the negotiation and execution of acceptable definitive
agreements) and, on the other hand, the Company Board would be willing to
support such an acquisition. During the course of these discussions, Mr.
Harshfield expressed his view that the Company Board would require a
substantial increase in the per share price as a condition for its support of
a transaction; and Mr. Ford offered increases from $20.00 to (at the June 19
meeting) $23.00 in the per share cash component of the consideration FNH was
prepared to offer, proposed that Company Stockholders also be given an
additional 25% participation in the net distributable cash proceeds (if any)
of the Goodwill Litigation, indicated that FNH would require an option to
acquire approximately 19.9% of the outstanding shares of Company Common Stock
as an inducement to enter into a definitive merger agreement, and conditioned
FNH's proposal on the satisfactory completion of a due diligence investigation
of the Company and on the negotiation and execution of mutually acceptable
definitive agreements.
On June 20 through 22, 1996, Mr. Harshfield briefed various members of the
Company Board on the status of the preliminary discussions that Mr. Ford had
initiated. The matter was then taken under deliberation by the Company Board
at a meeting held on June 24, 1996 that was also attended by the Company's
senior executives, its financial adviser, CS First Boston Corporation ("CS
First Boston"), its corporate counsel Irell & Manella, and its regulatory
counsel Vedder, Price, Kaufman & Kammholz.
At its June 24, 1996 meeting, the Company Board was advised by Mr.
Harshfield that the terms then being proposed by FNH would involve a per share
cash price of $23.00 and a formula for dividing any net distributable cash
proceeds of the Goodwill Litigation after any recovery payable to the holders
of the CALGZ Interests, whereby Cal Fed Bank would retain $125 million thereof
and the balance (if any) would be split 50/50 between Cal Fed Bank, on the one
hand, and the Company Stockholders, on the other hand.
At its June 24, 1996 meeting, the Company Board considered, among other
things: (i) a presentation from the Company's senior executive officers
regarding the Company's recent financial performance in relation to its 1996
business plan; (ii) a presentation from its counsel with respect to its
obligations in responding to FNH's acquisition proposal in a manner consistent
with its fiduciary duties, and with respect to the status of the Goodwill
Litigation; and (iii) a presentation from CS First Boston analyzing the then-
current FNH proposal, using a number of analytical methodologies, in relation
to the Company's value on a stand-alone basis and as a potential acquisition
candidate, and evaluating the Company's strategic alternatives (including the
Company remaining independent and continuing to pursue its own business plan
and the Company investigating the possibility that there might be other
qualified potential acquirors interested in the Company) in light of, among
other things, the current environment for mergers and acquisitions in the
financial institutions sector of the economy both nationally and in
California. The Company Board concluded that the then-current FNH proposal was
sufficiently attractive and credible as to merit authorizing the Company's
officers to enter into negotiations with FNH in an effort to improve the per
share price for Company Stockholders and to provide non-public information to
FNH under an appropriate confidentiality agreement. The Company also decided
that, while the FNH proposal presented a valuable unsolicited opportunity for
a transaction offering full value to Company Stockholders, it was not in the
best interests of Company Stockholders for the Company to explore other
potential acquirors or otherwise initiate any process for the sale of the
Company since such actions would likely jeopardize both (i) the prospects of
concluding an acceptable agreement with FNH on a timely basis and (ii) the
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Company's ability to pursue its business plan at a time of intense competition
and maintain its valued employee and customer relationships.
In late June 1996, following the June 24 meeting of the Company Board
referred to above, Messrs. Ford and Harshfield had several telephone
conversations regarding the terms of FNH's then-current proposal and
Mr. Harshfield's direction from the Company Board to negotiate for an improved
per share price, as well as the arrangements for the commencement of due
diligence by FNH.
On July 1, 1996, the Company and FNH entered into a confidentiality
agreement pursuant to which the Company began to provide to FNH non-public
information regarding the Company and Cal Fed Bank.
On July 2, 1996, the Company Board received a presentation from its counsel
with respect to the opinion issued by the United Stated Supreme Court on July
1, 1996 (the "Winstar Opinion") in United States v. Winstar Corporation, et
al. (upholding the grant of summary judgment on the issue of liability, and
remanding for further proceedings on the issue of damages, in cases brought
against the federal government by three other financial institutions on
theories substantially similar to those on which liability is claimed by the
Company in the Goodwill Litigation) and its implications for the Goodwill
Litigation. (See the Cal Fed Bank Offering Circular for a discussion of the
Winstar Opinion.)
On July 3, 1996, the Company Board received a presentation from its counsel
regarding the status of the draft agreements previously received from FNH's
counsel, deliberated further with respect to FNH's then-current proposal and
authorized Mr. Harshfield to continue to negotiate with a view to seeking an
improvement in the price being offered by FNH.
On several occasions during early July 1996, as FNH proceeded with its due
diligence investigation of the Company, Mr. Harshfield discussed the FNH
proposal, including in particular the proposed per share price and transaction
protection mechanisms, as well as the progress of FNH's due diligence
investigation, with Mr. Ford. During these discussions, Mr. Harshfield
continued to express the Company Board's desire for an improved price. On July
19, 1996, Mr. Harshfield informally briefed a number of members of the Company
Board with respect to the status of his negotiations with Mr. Ford.
On July 25, 1996, Mr. Ford indicated to Mr. Harshfield that FNH was willing
to propose a change in the split of the residual net distributable cash
proceeds (if any) of the Goodwill Litigation (after payment of any recovery
due to the holders of the CALGZ Interests and the retention of the next $125
million by Cal Fed Bank) to increase the Company Stockholders' aggregate
participation thereof from 50% to 60%, subject to the execution of acceptable
agreements including the previously-requested stock option.
On July 26, 1996, the Company Board (at a meeting held jointly with the
Board of Directors of Cal Fed Bank, some of the members of which are employees
of the Bank who are not members of the Company Board) considered this revised
proposal from FNH and received presentations, updating those received on June
24, from its senior executives, its counsel and CS First Boston, as well as a
briefing from its counsel on the current drafts of the Merger Agreement, the
Stock Option Agreement and a letter agreement to be entered into between FNH
and the Company addressing certain employee severance and benefits issues
presented by a possible acquisition of the Company by FNH (the "Benefits
Letter").
During the course of its meeting on July 26, 1996, the Company Board
received an unsolicited written proposal (the "Unsolicited GlenFed Proposal")
from Glendale Federal Bank, A Federal Savings Bank ("GlenFed"), for a merger
in the form of a stock-for-stock tax-free exchange at an unspecified exchange
ratio which, GlenFed stated, it believed could exceed the values being
reported in the public press accounts of the Company's discussions with FNH
(on July 25, 1996, The Wall Street Journal reported that FNH was rumored to be
in talks to acquire the Company for between $22 and $24 per share in cash).
The Company Board considered, with its financial and legal advisors, the
Unsolicited GlenFed Proposal in relation to the then-current FNH proposal.
Concurrently, the Company advised FNH of the receipt of the Unsolicited
GlenFed Proposal.
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During its deliberations on July 26, 1996, the Company Board invited Mr.
Ford into the meeting. On behalf of the Company Board, its Chairman, David
Gilbert, advised Mr. Ford that the Company Board was willing to approve an
acquisition of the Company by FNH on the terms then proposed, and recommend it
to Company Stockholders, provided the per share cash component of the
consideration was increased from $23.00 to $23.50. After consulting with his
co-investors, Mr. Ford advised the Company Board that this increase was
acceptable provided the transaction agreements were completed as soon as
possible with a view to a public announcement before the opening of trading on
July 29, 1996. Thereupon, the Board considered the matter further. Among other
things, the Company Board was advised: (i) by Mr. Harshfield that Mr. Ford had
informed him of FNH's receipt of a letter from a nationally-recognized
investment banking firm to the effect that, subject to certain assumptions and
conditions contained in such letter, such firm was "highly confident" of its
ability to raise a portion of the funds necessary to finance the Merger
through the underwriting or private placement of securities of FNH or its
affiliates, which letter (the "Highly Confident Letter") would be made
available to the Company prior to the execution of definitive agreements; and
(ii) by CS First Boston of its oral opinion, which would be confirmed in
writing, that the Per Share Merger Consideration is fair to the Company
Stockholders from a financial point of view as of July 26, 1996. The Company
Board then decided to approve the Merger Agreement and the transactions
contemplated thereby (including, without limitation, the Merger), as well as
the Stock Option Agreement and the Benefits Letter (see "--Reasons for the
Merger; Recommendation of the Company Board" for a discussion of the Company
Board's reasons for this decision). In addition, the Board of Directors of Cal
Fed Bank decided to approve the Merger Agreement and the transactions
contemplated thereby (including, without limitation, the issuance of the
Secondary Participation Interests).
Negotiations on the final terms of the Merger Agreement, the Option
Agreement and the Benefits Letter were completed on July 27, 1996, on which
date such documents were executed by the respective parties. See "The Merger
Agreement" and "The Stock Option Agreement." Copies of the Highly Confident
Letter and CS First Boston's written fairness opinion dated July 26, 1996 were
received on such date prior to execution of such agreements. On July 29, 1996,
the Company and FNH publicly announced the execution of the Merger Agreement.
REASONS FOR THE MERGER; RECOMMENDATION OF THE COMPANY BOARD
On July 26, 1996, the Company Board unanimously determined that the Merger
Agreement and the transactions contemplated thereby (including, without
limitation, the Merger), are advisable and in the best interests of the
Company and Company Stockholders and unanimously decided to recommend approval
and adoption thereof to Company Stockholders. In making its decision, the
Company Board considered the factors listed below:
1. The Company Board concluded that the Per Share Merger Consideration
offered full value to Company Stockholders for their shares of Company Common
Stock and exceeded the market price that Company Stockholders could reasonably
expect to realize in the near term, taking into account the following factors:
(i) The opinion of CS First Boston that the Per Share Merger
Consideration was fair to Company Stockholders from a financial point of
view as of July 26, 1996 (see "--Opinion of Financial Adviser"). A copy of
CS First Boston's written opinion dated the date of this Proxy Statement,
setting forth the assumptions made, matters considered and review
undertaken, is attached to this Proxy Statement as Appendix C. The full
text of such opinion is incorporated herein by reference and the foregoing
description thereof is qualified in its entirety by such reference. Company
Stockholders are urged to read such opinion carefully in its entirety;
(ii) The Company Board's evaluation of the methodology employed by CS
First Boston as a basis for its fairness opinion and the financial data
presented in connection with CS First Boston's analysis, including an
estimate of the potential value of the Company on a stand-alone basis and
in relation to other potential acquirors (see "--Opinion of Financial
Adviser"). On the basis of this data, the Company Board concluded that the
Per Share Merger Consideration compared favorably to the per share prices
negotiated in recent comparable acquisitions of financial institutions,
both within and outside California, and to any reasonable estimate of the
near-term value of the Company if it were to remain independent;
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(iii) Information presented to the Board relating to the recent financial
condition and results of operations of the Company (see "Selected
Consolidated Financial And Other Data") and management's evaluation of the
Company's prospects, including the Company's progress in implementing the
Company's 1996 business plan, as well as the Company Board's general
familiarity with the Company's business, operations, financial condition
and earnings on both a historical and a prospective basis;
(iv) The relationship of the Per Share Merger Consideration to the
historical market prices for Company Common Stock, including the fact that
the cash portion of the Per Share Merger Consideration, without ascribing
any value to the Secondary Participation Interests, represented a premium
of approximately 31% over the closing price of Company Common Stock on the
NYSE on June 21, 1996 (the last trading day preceding the meeting of the
Company Board at which FNH's merger proposal was first considered by the
Company), approximately 17% over the closing price of Company Common Stock
on the NYSE on July 24, 1996 (the last trading day preceding the
publication of the above-referenced article in The Wall Street Journal
reporting that FNH was rumored to be in talks to acquire the Company for
between $22 and $24 per share in cash) and approximately 10% over the
closing price of Company Common Stock on the NYSE on July 25, 1996 (the
last trading day preceding the meeting of the Company Board at which the
Merger Agreement was approved (see "Market Prices of Company Common
Stock"));
(v) The vigorous nature of the negotiations that had resulted in FNH
offering the Per Share Merger Consideration and the fact that FNH had
conducted extensive due diligence on the Company prior to making that offer
(see "--Background of the Merger"); and
(vi) The considerations referred to in paragraph 2 below.
2. The Company Board concluded that the Per Share Merger Consideration
offered Company Stockholders a meaningful opportunity to participate in any
distributable net cash proceeds from the Goodwill Litigation but at the same
time, by providing a premium cash price for their shares of Company Common
Stock in the near term, also offered Company Stockholders a transaction in
which the per share consideration was not unduly dependent on the outcome of
the Goodwill Litigation. In that regard, the Company Board determined that,
notwithstanding the enhanced prospects for a favorable outcome of the Goodwill
Litigation resulting from the Winstar Opinion, the ultimate disposition of the
Goodwill Litigation, and the impact of the Goodwill Litigation on the value of
Company Common Stock pending and following such ultimate disposition, would
likely not be known for several years and remained subject to substantial
risks and uncertainties.
3. The Company Board concluded that--having regard to the facts that (i) it
had taken several weeks for FNH to complete its due diligence investigation of
the Company and conclude that it was willing to consummate an acquisition of
the Company at a price and on other terms that were acceptable to the Company
Board, (ii) it had taken a corresponding period for the Company Board, with
the advice of the Company's senior management and advisers, to conclude that
it was in a position to make a business judgment approving the Merger, and
(iii) FNH was a particularly well-qualified buyer by reason of its "track
record" (see paragraph 5 below) and its commitment to a strategy of expanding
into the Southern California market--it was unlikely the Company, were it
actively to pursue alternative possibilities for an acquisition of the
Company, would be able to find an acquiror willing and able to consummate,
within a timeframe comparable to the Merger, an acquisition that would provide
superior value to the Company Stockholders. In that regard, the Company Board
took note of the fact that the Unsolicited GlenFed Proposal contained no
proposed exchange ratio, and that--having regard to the factors referred to in
the preceding sentence and the fact that the Company would have needed to
conduct extensive due diligence in order for the Company Board to be in a
position to compare the qualifications of GlenFed as a potential buyer (for
consideration consisting of its own stock) of the Company to the
qualifications of FNH as a potential buyer (for consideration consisting of
cash and Secondary Participation Interests) the Company Board had already
determined to exist--it would likely take a substantial period of time to
determine whether a transaction offering value superior to the Merger could be
negotiated with GlenFed, obtain the required approval of both companies'
respective stockholders and be consummated within a comparable timeframe. The
Company Board further concluded that it would be detrimental to the best
interests of Company Stockholders to defer action on the Merger, and run the
potential risk that FNH would decide to pursue alternative acquisition
candidates to implement its strategy of expanding into the Southern California
market, in order to pursue possible
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alternatives that were subject to significant uncertainty. Although the
Company Board formed a preliminary view, based on its general knowledge of
GlenFed's business and publicly-available financial information, that it was
unlikely GlenFed would be able to provide a stock-for-stock transaction that
would offer value superior to the Per Share Merger Consideration offered by
FNH, the Company Board's decision not to pursue, or request First Boston to
further analyze, the Unsolicited GlenFed Proposal was principally based on its
conclusion that the Merger that had been vigorously negotiated with FNH was in
the best interests of Company Stockholders and should not be subjected to the
risks referred to above in this paragraph.
4. The Company Board took note of the fact, as reported to it by Company
management, that following the article in The Wall Street Journal on July 25,
1996 reporting rumored talks of an acquisition of the Company by FNH for
between $22 and $24 per share in cash, a number of the Company's principal
institutional stockholders, representing in the aggregate approximately 24% of
the outstanding Company Common Stock, had made unsolicited calls to the
Company indicating that if such a transaction were to be proposed they would
support it. The Company Board considered, on the basis of these calls and its
general familiarity with the Company's stockholder base and the relationship
that had developed with Company Stockholders generally over the past several
years, that Company Stockholders would welcome the opportunity to sell their
shares in a transaction that afforded them both a cash price at a premium
above market and an opportunity for continued participation in any recovery
from the Goodwill Litigation beyond the amount that might be paid to the
holders of the CALGZ Interests. The Company Board also took note of the
provisions of the Stock Option Agreement and considered that, while such
provisions would increase the cost to any potential competing acquiror of
acquiring the Company and thereby enhance the likelihood of the consummation
of the Merger, they were unlikely--having regard to other recent situations in
which third parties had made unsolicited bids for companies that had entered
into negotiated merger agreements and similar stock option arrangements and
where such third parties had been willing to abide by the terms of, or
negotiate terminations of, such options--to preclude a third party from making
a proposal for a transaction that was meaningfully superior to the Merger, in
which event the Merger Agreement would not prevent the Company Board, if it
determined it was required to do so, from pursuing such proposal (see "The
Merger Agreement--No Solicitation of Transactions by Company" and "The Stock
Option Agreement"). The Company Board took note of the advice of the Company's
independent auditing firm that the exercise of the FNH Option would preclude
the Company, for two years thereafter, from consummating a business
combination transaction with any party that was intended to qualify for the
"pooling of interests" method of accounting, in contrast to the "purchase"
method that would be applicable to the Merger (see "--Accounting Treatment"),
and that the consummation of a "pooling" transaction was, in any event,
potentially precluded until July 1997 by reason of the issuance of the CALGZ
Interests in July 1995. In addition, the Company Board was advised that any
issuance, in contemplation of a negotiated business combination, of securities
representing an additional contingent participation interest in the Goodwill
Litigation would preclude a "pooling" transaction with any third party for two
years following such issuance.
5. The Company Board concluded, based on (i) the identity of FNH's owners,
(ii) FNH's "track record" of financing, obtaining regulatory approval for and
consummating significant acquisitions of other financial institutions (see "--
Parties to the Merger Agreement--FNH and Merger Sub"), (iii) the Highly
Confident Letter (a copy of which was reviewed by the Company's senior
management and counsel, as directed by the Company Board at its July 26, 1996
meeting, prior to the execution of the Merger Agreement and the Stock Option
Agreement on July 27, 1996), and (iv) the fact that the Merger Agreement would
contain no financing contingency and would contain FNH's representation and
warranty that it had, or would at the Effective Time have, access to all funds
necessary to consummate the Merger (see "The Merger Agreement--Financing
Arrangements of FNH"), that FNH would be able to finance and complete the
Merger prior to March 31, 1997 (the date after which either party, if not in
breach of any material representation or covenant, could terminate the Merger
Agreement if the Merger had not been consummated for any reason; see "The
Merger Agreement--Termination of the Merger Agreement").
6. The Company Board considered generally the material terms of the Merger,
including the conditions to consummation set forth in the Merger Agreement
(see "The Merger Agreement--Conditions to the Merger")
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and the treatment of employee stock options and warrants (see "--Interests of
Certain Persons in the Merger; Effect of the Merger on Certain Company Benefit
Plans--Stock Option Plans"), and concluded that such terms were appropriate
for a transaction of the nature of the Merger. The Company Board also
considered the provisions of the Benefits Letter with the advice of its
benefits counsel and a compensation consultant. The Company Board concluded
that the benefits to be provided to the officers and directors of the Company
and Cal Fed Bank under the Benefits Letter were customary for a transaction of
the nature of the Merger, where the services of such individuals were expected
to be terminated promptly following the Effective Time, and were appropriate
to further the interests of Company Stockholders in the consummation of the
Merger and the effective prosecution of the Goodwill Litigation. See "--
Interests of Certain Persons in the Merger; Effect of the Merger on Certain
Company Benefit Plans."
The foregoing discussion of the factors considered by the Company Board is
not intended to be exhaustive but summarizes all material factors considered.
The Company Board did not assign any relative or specific weights to the
foregoing factors nor did it specifically characterize any factor as positive
or negative (except as described above), and individual directors may have
given differing weights to differing factors and may have viewed certain
factors more positively or negatively than others. Throughout its
deliberations, the Company Board received the advice of its financial and
legal advisers.
THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT COMPANY STOCKHOLDERS VOTE TO
APPROVE AND ADOPT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY (INCLUDING, WITHOUT LIMITATION, THE MERGER).
OPINION OF FINANCIAL ADVISER
GENERAL. The Company has retained CS First Boston to act as its financial
adviser in connection with the Merger. CS First Boston orally advised the
Company Board and later delivered to the Company Board its written opinions,
dated July 26, 1996, and dated the date of this Proxy Statement, to the effect
that, based upon and subject to the factors and assumptions set forth in such
written opinions, and as of the date of each such opinion, the Per Share
Merger Consideration was fair to the holders of Company Common Stock from a
financial point of view. No limitations were imposed by the Company Board upon
CS First Boston with respect to investigations made or procedures followed by
CS First Boston in rendering its opinions. CS First Boston was not asked by
the Company Board to solicit any expressions of interest from third parties.
The full text of the written opinion of CS First Boston dated the date of
this Proxy Statement, which sets forth assumptions made, procedures followed,
matters considered and limits on the review undertaken by CS First Boston, is
attached hereto as Appendix C. COMPANY STOCKHOLDERS ARE URGED TO READ THE
OPINION IN ITS ENTIRETY. CS FIRST BOSTON'S OPINIONS ARE DIRECTED ONLY TO THE
FAIRNESS OF THE PER SHARE MERGER CONSIDERATION AND DO NOT CONSTITUTE A
RECOMMENDATION TO ANY COMPANY STOCKHOLDER AS TO HOW SUCH COMPANY STOCKHOLDER
SHOULD VOTE AT THE SPECIAL MEETING. The summary of the opinions of CS First
Boston set forth in this Proxy Statement is qualified in its entirety by
reference to the full text of its opinion dated the date of this Proxy
Statement set forth in Appendix C. CS First Boston has consented to the
references to it and its opinions contained, and to the inclusion as Appendix
C of its written opinion dated the date hereof, in this Proxy Statement.
In arriving at its opinions, CS First Boston (i) reviewed certain publicly
available business and financial information relating to the Company and FNH,
(ii) reviewed certain other information, including financial forecasts,
provided by the Company and FNH, (iii) met with the Company's and FNH's
management to discuss the business and prospects of the Company, (iv)
considered certain financial and stock market data of the Company and FNH,
including market data related to the CALGZ Interests, and compared that data
with similar data for other publicly held thrift companies, (v) considered the
financial terms of certain other business combinations in the thrift industry
that have recently been effected, and (vi) considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which CS First Boston deemed relevant.
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In connection with its review, CS First Boston has not assumed any
responsibility for independent verification of any of the information provided
to or otherwise reviewed by CS First Boston and has relied on such information
being complete and accurate in all material respects. With respect to the
financial forecasts referred to above, CS First Boston has assumed that they
were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the Company's management as to the future financial
performance of Company. In addition, CS First Boston has not made, nor has it
assumed responsibility for making, an independent evaluation or appraisal of
any of the assets or liabilities (contingent or otherwise) of the Company, nor
has CS First Boston examined any individual loan files or been furnished with
any such appraisals.
The opinions of CS First Boston were based on proposed merger consideration,
per share of Company Common Stock, to be received by Company Stockholders of
$23.00 in cash (the cash portion of the Per Share Merger Consideration was
increased to $23.50 after CS First Boston had performed its analysis; see "--
Background of the Merger") and one-tenth of a Secondary Participation
Interest. CS First Boston is not an expert in making legal determinations, and
has made no determinations or drawn any conclusions, legal or otherwise, as to
the merits or possible outcomes of the Goodwill Litigation. In arriving at its
opinions, CS First Boston determined the value offered for the underlying
franchise of the Company (the "Imputed Adjusted Consideration Value" as
defined below) using the then-current market value of the CALGZ Interests to
estimate the then-current market value of the Goodwill Litigation and compared
such Imputed Adjusted Consideration Value to the underlying franchise value
implied based upon the computations described below. CS First Boston did not
prepare an independent valuation of the Goodwill Litigation and used this
method for analyzing the Per Share Merger Consideration because, as of the
date of its analysis, the then-current market value of the CALGZ Interests
provided an independent means for estimating the then-current market value of
the Goodwill Litigation.
The Imputed Adjusted Consideration Value was defined to equal the imputed
value of the Per Share Merger Consideration minus the imputed value of the
Non-CALGZ Litigation Recovery (as defined below). The Imputed Adjusted
Consideration Value computation implicitly assumed that the Company
Stockholders received consideration for the underlying franchise value of the
Company equal to $23.50 per share in cash minus the difference between (x)
100% of the implied market value of the potential recovery of the Goodwill
Litigation based upon the then-current market value of the CALGZ Interests
exclusive of any amounts payable to the holders of the CALGZ Interests (the
"Non-CALGZ Litigation Recovery") and (y) the imputed value of one-tenth of a
Secondary Participation Interest. The Imputed Adjusted Consideration Value was
calculated to be in the range of $20.75 to $21.01 per share with the detail of
the calculation shown in the following paragraphs.
CS First Boston calculated the Imputed Adjusted Consideration Value by (i)
calculating the imputed value of the Non-CALGZ Litigation Recovery as
described below, (ii) calculating the imputed value of the Per Share Merger
Consideration as described below, and (iii) subtracting the imputed value of
the Non-CALGZ Litigation Recovery from the imputed value of the Per Share
Merger Consideration. Based upon the $11.69 latest 10-day average market price
of the CALGZ Interests as of July 26, 1996, the approximately 5 million CALGZ
Interests outstanding and the fact that the CALGZ Interests, in total, are
entitled to approximately 25% of the potential recovery of the Goodwill
Litigation, CS First Boston calculated the implied market value of the
potential recovery to be $234 million (5 million multiplied by $11.69 divided
by 0.25). Deducting the CALGZ's approximate 25% entitlement from the $234
million yielded an imputed value of the Non-CALGZ Litigation Recovery of $174
million, or $3.47 per share of Company Common Stock.
The then-current value of the Per Share Merger Consideration was computed as
equal to the sum of (i) $23.00 in cash consideration and (ii) the imputed
value of one-tenth of a Secondary Participation Interest. The imputed value of
the Secondary Participation Interests was calculated by subtracting from the
$174 million value of the non-CALGZ Litigation Recovery, the present value of
FNB's $125 million preference (which equaled $50-$72 million assuming a 20%
discount rate and a 3 to 5 year estimated time to recovery) and multiplying
the difference by the 60% which the Secondary Participation Interests are
entitled to receive. CS First Boston was advised by the Company that a 3 to 5
year estimated time to recovery was a reasonable estimate given the complexity
of the Goodwill Litigation, the number of steps anticipated to be required to
be completed prior to a final disposition thereof and the possible affect of
other pending cases on the court calendar. CS First
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Boston determined that a 20% discount rate was a reasonable estimate of the
lowest rate of return an investor would expect on a speculative security of
the nature of the CALGZ Interests. CS First Boston calculated the imputed
value of the Secondary Participation Interests to be $61 to $74 million, which
equates to a value for one-tenth of a Secondary Participation Interest of
$1.22 to $1.48 per share of Company Common Stock. Based upon the foregoing
computations, CS First Boston noted that the imputed value of the Per Share
Merger Consideration was equal to $24.22 to $24.48 per share and, after
subtracting the imputed value of the Non-CALGZ Litigation Recovery of $3.47
per share, the Imputed Adjusted Consideration Value was equal to $20.75 to
$21.01 per share. CS FIRST BOSTON HAS EXPRESSED NO OPINION AS TO THE ACTUAL
VALUE OF THE CALGZ INTERESTS, THE SECONDARY PARTICIPATION INTERESTS OR THE
NON-CALGZ LITIGATION RECOVERY, NOR HAS IT EXPRESSED ANY VIEWS AS TO THE ACTUAL
PRICES AT WHICH THE CALGZ INTERESTS OR THE SECONDARY PARTICIPATION INTERESTS
MAY TRADE IN THE PUBLIC MARKET PRESENTLY OR AT ANY TIME IN THE FUTURE. Using a
lower market value for the CALGZ Interests in the computation would have
caused the value of the Non-CALGZ Litigation Recovery to decrease by an amount
more than the Per Share Merger Consideration and the value of the Imputed
Adjusted Consideration Value would have correspondingly increased. Using a
higher market value for the CALGZ Interests in the computation would have
caused the value of the Non-CALGZ Litigation Recovery to increase by an amount
more than the Per Share Merger Consideration and the value of the Imputed
Adjusted Consideration Value would have correspondingly decreased.
CS First Boston has indicated that its opinions are not affected by the
difference in the per share merger consideration proposed at the time it
performed its analysis and the Per Share Merger Consideration.
The following is a summary of certain analyses CS First Boston utilized in
arriving at its opinions as to the fairness of the Per Share Merger
Consideration and that CS First Boston discussed with the Company Board on
July 26, 1996. CS First Boston arrived at its ultimate opinion based on the
results of all of the analyses described below assessed as a whole and did not
draw any specific conclusions from or with regard to any one method of
analysis.
COMPANY VALUATION ANALYSIS. CS First Boston analyzed the premium represented
by the Adjusted Consideration Value to values for the Company on a stand-alone
basis using three valuation methodologies, namely a comparable company
analysis, a regression analysis of price to book multiples and a discounted
cash flow analysis (without giving effect to the potential net cost savings
realizable from the Merger); and analyzed the Adjusted Consideration Value to
acquisition values for the Company using two valuation methodologies, namely a
discounted cash flow analysis (giving effect to the potential net cost savings
realizable from the Merger) and an analysis of prices of recent mergers and
acquisitions involving comparable thrift companies. These methodologies are
discussed below:
Comparable Company Analysis. CS First Boston reviewed and compared
certain financial, operating and market information of the Company with the
following five publicly traded thrift companies that it believed to be
appropriate for comparison: Golden West; Great Western; H.F. Ahmanson; Bay
View Capital; and Washington Mutual (collectively, the "Comparable
Companies"). Such companies were believed to be comparable in light of a
combination of factors such as their size, relative performance, geographic
location and/or types of business conducted generally. Such information
included market valuation, profitability, asset quality, reserve coverage
and capital ratios. Among the market price information compared were market
price to book value, tangible book value and market price to estimated
earnings per share for 1996 and 1997. The hypothetical values for the
Company derived from the analysis of the Comparable Companies' market price
to earnings per share estimates and market price to book value and tangible
book value yielded an equity reference range of approximately $13.00 to
$14.00 per share of Company Common Stock, inclusive of the Company's $0.80
per share of present value of estimated future tax benefits. The Adjusted
Imputed Consideration Value (ranging from $20.75 to $21.01 per share)
represented a premium of approximately 48% to 62% over such values. Because
the Company's 1996 projected return on equity ("ROE") of 8.5% was
significantly below the average of 12.0% for the Comparable Companies, CS
First Boston conducted the regression analysis described below. The book
values used in the analysis were as of June 30, 1996, and the market
information used in the analysis was
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as of July 25, 1996. Earnings per share estimates were based on First Call
estimates as of July 25, 1996. The Company's earnings per share estimates
were based on management's earnings forecast assuming a 40% tax rate. First
Call is a data service that monitors and publishes a compilation of
earnings estimates produced by selected research analysts regarding
companies of interest to institutional investors.
Regression Analysis. CS First Boston undertook a regression analysis to
determine the price to book multiple at which the Company might trade on a
stand-alone basis. The R-squared of such regression of 0.9224 indicated a
high degree of correlation between ROE and price-to-book value. Based on
management's projected ROE of 8.5% for 1996, this analysis yielded an
implied price to book multiple at which the Company might trade of 1.09x
(as compared to the 1.37x average multiple of the Comparable Companies
implied by the 12.0% average ROE of such companies), an implied equity
value of approximately $14.83 per share of Company Common Stock, before
adding the Company's $0.80 per share present value of estimated future tax
benefits, and an equity reference range of approximately $15.00 to $16.00
per share of Company Common Stock. The Imputed Adjusted Consideration Value
(ranging from $20.75 to $21.01 per share) represented a premium of
approximately 30% to 40% over such values. The 1996 ROE estimates for the
Comparable Companies were based on First Call estimates as of July 25,
1996.
Discounted Cash Flow Analysis. CS First Boston performed a discounted
cash flow analysis to estimate the present value of the future free cash
flows that the Company could be expected to generate on a stand-alone basis
through 2001. CS First Boston calculated estimated free cash flows during
such period based on management earnings forecasts and based on a 6.0%
tangible equity to asset ratio, and discounted these cash flows to present
values applying discount rates ranging from 14% to 16%. To determine the
terminal value of the Company at the end of the forecast period, CS First
Boston applied a range of terminal multiples of 10.0x to 12.0x to the
forecasted fiscal year 2001 earnings and discounted such value estimates to
present value using the range of discount rates described above. This
discounted cash flow analysis yielded an equity reference range of
approximately $14.00 to $16.00 per share of Company Common Stock. The
Imputed Adjusted Consideration Value (ranging from $20.75 to $21.01 per
share) represented a premium of approximately 30% to 50% over such values.
In addition to performing the above-described discounted cash flow
analysis on the Company's cash flows, without giving effect to the
potential net cost savings realizable from the Merger, CS First Boston
estimated the present value of the net cost savings which an acquiror could
expect to achieve in the context of an acquisition of the Company and added
such value to the net present value of the Company on a stand-alone basis
calculated above. In performing this analysis, CS First Boston assumed that
an acquiror of the Company would achieve cost savings equal to
approximately 35% of the Company's non-interest expense base by the second
full year of combined operations, that an upfront restructuring charge
equal to the full pretax projected cost savings would be required in order
to achieve such cost savings, and that the full value of such cost savings
would accrue to the benefit of Company Stockholders. CS First Boston
discounted such cost savings to present value using a 0% perpetual dividend
growth rate and a 15% discount rate, yielding an additional present value
per share of Company Common Stock of $6.00 and an equity reference range of
approximately $20.00 to $22.00 per share of Company Common Stock.
COMPARABLE MERGER AND ACQUISITION ANALYSIS. CS First Boston reviewed and
analyzed certain financial, operating and stock market information relating to
(i) the following selected merger and acquisition transactions (Buyer/Seller)
in excess of $70 million announced since January 1, 1994 involving California
thrift companies: Washington Mutual/American Savings Bank; MacAndrews &
Forbes/SFFed; MacAndrews & Forbes/HomeFed; First Interstate/Sacramento
Savings; and MacAndrews & Forbes/First Nationwide Bank (collectively, the
"California Comparable Transactions"), (ii) the Washington Mutual/American
Savings Bank transaction and (iii) the following selected merger and
acquisition transactions (Buyer/Seller) in excess of $250 million announced
since January 1, 1995 involving non-California thrift companies: First Union
Corporation/Center Financial Corp.; First Union Corporation/Home Financial
Corp.; NationsBank Corp./TAC Bancshares; Union Planters Corp./Leader Financial
Corp.; Standard Federal Bank/Bell Bancorp; MAF Bancorp/ N.S. Bancorp; Republic
New York/Brooklyn Bancorp; NationsBank Corp./CSF Holdings; Charter One
Financial/FirstFed Michigan; Crestar Financial/Loyola Capital Corp.; and First
Union Corp./Coral Gables Fedcorp (collectively, the
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"Non-California Comparable Transactions," and together with the California
Comparable Transactions, the "Comparable Transactions").
This analysis indicated that the consideration received in the California
Comparable Transactions, the Washington Mutual/American Savings Bank
transaction and the Non-California Comparable Transactions represented: (i)
multiples of last twelve-months ("LTM") earnings per share ("EPS") ranging
from 11.8x to 35.6x (with an average multiple of 19.9x), 11.8x and from 10.5x
to 27.2x (with an average multiple of 14.8x, excluding the Standard Federal
Bank/Bell Bancorp multiple of 27.2x), respectively; (ii) multiples of forward
year EPS of 11.0x (for the Washington Mutual/American Savings Bank
transaction) and ranging from 10.8x to 26.4x (with an average multiple of
14.7x, excluding the Standard Federal Bank/Bell Bancorp multiple of 26.4x)
(for the Non-California Comparable Transactions); (iii) multiples of book
value per share ranging from 0.85x to 1.54x (with an average multiple of
1.26x), 1.36x and from 1.22x to 2.12x (with an average multiple of 1.65x),
respectively; (iv) multiples of tangible book value per share ranging from
1.11x to 1.68x (with an average multiple of 1.35x), 1.36x and from 1.22x to
2.12x (with an average multiple of 1.67x) (normalizing the target's book value
and earnings to reflect a 6.5% tangible equity to assets ratio for the First
Union Corporation/Home Financial Corp., Standard Federal Bank/Bell Bancorp,
MAF Bancorp/N.S. Bancorp and First Union Corp./Coral Gables Fedcorp
transactions), respectively; (v) an implied deposit premium ranging from
approximately 1.2% to 4.5% (with an average premium of 3.1%), 3.3% and from
approximately 2.7% to 17.5% (with an average premium of 5.6%, excluding the
Union Planters Corp./Leader Financial Corp. deposit premium of 17.5%),
respectively; and (vi) a percentage above market value ranging from
approximately 16% to 42% (with an average percentage of 29%) (for the
California Comparable Transactions) and from approximately (-3%) to 63% (with
an average percentage of 31%) (for the Non-California Comparable
Transactions), in each case based on the closing stock price of the seller one
month prior to public announcement of the respective transaction.
The mid-point of the range of Imputed Adjusted Consideration Value of $20.88
per share represented: (i) a multiple of Company LTM EPS of 24.3x; (ii) a
multiple of Company forward year EPS of 18.2x (based on management estimates);
(iii) a multiple of Company book value per share of 1.53x; (iv) a multiple of
Company tangible book value per share of 1.57x; (v) an implied deposit premium
for the Company of approximately 4.3%; and (vi) a percentage above the market
value of Company Common Stock (net of the implied market value of the Non-
CALGZ Litigation Recovery of $3.47 per share) of approximately 52%.
No company used in the Comparable Company Analysis is identical to the
Company and no transaction used in the Comparable Merger and Acquisition
Analysis is identical to the Merger. Accordingly, an analysis of the results
of the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading value or the
acquisition value of the companies to which they are being compared.
Mathematical analysis (such as determining the average or median) is not, in
itself, a meaningful method of using comparable company data.
The summary set forth above does not purport to be a complete description of
the analyses underlying CS First Boston's opinions or presentation to the
Company Board. In connection with its opinion dated the date of this Proxy
Statement set forth as Appendix C hereto, CS First Boston updated certain of
its analyses, as necessary, and reviewed the assumptions on which such
analyses were based and the factors considered in connection therewith. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Each methodology utilized by CS First Boston that
resulted in an implied range of value for the Company supported CS First
Boston's opinion that the consideration to be received by holders of common
stock of the Company in the Merger was fair to such holders from a financial
point of view. However, in arriving at its opinion, CS First Boston did not
attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, CS First Boston believes that its
analyses must be considered as a whole and that selecting portions of its
analyses, without considering all analyses, would create an incomplete view of
the process underlying its opinions.
29
<PAGE>
In performing its analyses, CS First Boston made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the Company or FNH. The
analyses performed by CS First Boston are not necessarily indicative of actual
values, which may be significantly more or less favorable than suggested by
such analyses. Such analyses were prepared solely as part of CS First Boston's
analysis of the fairness of the Per Share Merger Consideration and were
provided to the Company Board in connection with the delivery of CS First
Boston's opinions. The analyses do not purport to be appraisals or to reflect
the prices at which a company might actually be sold. In addition, as
described above, CS First Boston's opinion and presentation to the Company
Board was one of many factors taken into consideration by the Company Board in
making its determination to approve the Merger Agreement (see "-- Reasons for
the Merger; Recommendation of the Company Board"). Consequently, the CS First
Boston analyses described above should not be viewed as determinative of the
Company Board's or the Company management's opinion with respect to the value
of the Company or of whether the Company Board would have been willing to
agree to different consideration to be received by Company Stockholders.
Further, CS First Boston is not qualified to make legal determinations, and
has made no determinations or drawn any conclusions, legal or otherwise, as to
the merits or possible outcomes of the Goodwill Litigation.
The Company Board retained CS First Boston based upon CS First Boston's
experience and expertise and its familiarity with the Company. CS First Boston
is an internationally recognized investment banking and advisory firm. CS
First Boston, as part of its investment banking business, is continuously
engaged in the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In the past, CS First Boston
and its affiliates have provided investment banking services to the Company
and FNH and have received customary fees for the rendering of these services.
CS First Boston and its affiliates may provide additional services to the
Company and to FNH in the future. In the ordinary course of its business, CS
First Boston and its affiliates may actively trade the debt and equity
securities of both the Company and FNH for their own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
Pursuant to an engagement letter agreement dated June 17, 1996, between the
Company and CS First Boston, the Company paid CS First Boston a financial
advisory fee of $250,000 upon the execution of such engagement letter and an
execution fee of $2,000,000 upon the execution of the Merger Agreement. In
addition, the Company will pay CS First Boston, only in the event the Merger
is consummated, a transaction fee equal to 0.65% times the aggregate
consideration to be received by holders of Company Common Stock in the Merger,
less the fees totaling $2,250,000 described above. Aggregate consideration is
defined as the total fair market value at the Effective Time of all
consideration received, directly or indirectly, by the Company or its
stockholders in connection with the Merger. Based on the foregoing, the fees
to be paid to CS First Boston in connection with, and assuming consummation
of, the Merger are estimated to total approximately $5.8 million. The Company
has also agreed, pursuant to another letter agreement dated June 17, 1996 with
CS First Boston, to indemnify CS First Boston and its affiliates against
certain liabilities, including liabilities under securities laws, incurred in
connection with its services.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; EFFECT OF THE MERGER ON CERTAIN
COMPANY BENEFIT PLANS
GENERAL. The Merger Agreement sets forth FNH's intention that, after the
consummation of the Merger, the Surviving Corporation will first become a
wholly-owned subsidiary of FNB and will then be liquidated by FNB, which
thereafter will be merged with and into Cal Fed Bank. It is anticipated that
none of the directors or executive officers of the Company or Cal Fed Bank
will continue to serve (other than, possibly, for a brief transitional period)
after the Effective Date (as defined in the Merger Agreement; see "The Merger
Agreement--Effective Date; Effective Time") as directors, officers or
employees of the Company, Cal Fed Bank, FNH, FNB or any other subsidiary of
FNH. The Merger Agreement, the Benefits Letter and other documents provide for
certain actions as to various benefit plans and programs maintained by the
Company or FNH and for certain additional actions concerning compensation for
directors, executive officers and employees of the Company and Cal Fed Bank.
Set forth below is certain information relating to various plans and
30
<PAGE>
arrangements of the Company and FNH as they would be affected by the Merger,
the Merger Agreement, the Benefits Letter and such other documents, including
estimates of amounts to be paid thereunder. Actual payments or distributions
under such plans and arrangements will depend on the date the Merger is
consummated. For purposes of the information set forth below, references to
the Company or FNH are to be interpreted as also being references to Cal Fed
Bank or FNB, as appropriate in context. (For purposes of the information set
forth in the following tables with respect to executive officers of the
Company and Cal Fed Bank, an asterisk next to an individual's name denotes
that such individual is an executive officer of Cal Fed Bank but not also an
executive officer of the Company.)
PARTICIPATION IN FNH BENEFIT PLANS. Under the Benefits Letter, as soon as
practicable after the Effective Date, FNH is required to provide each employee
of the Company who continues as an employee of FNH (a "Continuing Employee"),
and who meets the minimum eligibility requirements necessary for participation
in the FNH benefit plans existing on the Effective Date, with the opportunity
to participate in such plans on a basis comparable to that applicable to
similarly situated employees of FNH. With respect to such participation, the
service credited to each Continuing Employee for purposes of determining
eligibility and vesting under each of the FNH benefit plans will include all
service recognized by the Company as of the Effective Date for Company benefit
plan purposes. In addition, for all FNH benefit plans other than the FNH
Section 401(k) Plan (which Plan requires one year of service with either the
Company or FNH), Continuing Employees will not be subject to any additional
waiting periods or pre-existing condition exclusions beyond those applicable
under the corresponding Company plan. During the interim period after the
Effective Date and prior to the time when Continuing Employees begin
participation in FNH benefit plans, FNH will maintain existing Company benefit
plans without substantive change, except as may be required by applicable law.
EMPLOYEE SEVERANCE BENEFIT PROGRAM. Pursuant to the Benefits Letter, the
Company will establish a new Severance Benefits Program providing severance
benefits for each individual (other than any executive officer of the Company
who is a party to a written employment agreement) who, as of the Effective
Date, is an employee of the Company (either in active service or on approved
leave of absence of not more than 120 days) and who executes a release
reasonably required by FNH ("Eligible Employees"). Each Eligible Employee will
be entitled to receive certain severance pay and benefits under the Severance
Benefits Program if, as of the Effective Date or within nine months after the
Effective Date, (i) his or her employment with FNH is terminated by FNH for
reasons other than "cause" as determined pursuant to FNH's policies applicable
to its employees generally, (ii) the Eligible Employee resigns from employment
with FNH, at a time when his or her annual base pay is less than $40,000,
because of his or her refusal to transfer employment to an FNH facility which
is more than 10 miles from his or her then-current place of employment, (iii)
the Eligible Employee resigns from employment with FNH, at a time when his or
her annual base pay is $40,000 or more, because of his or her refusal to
transfer employment to an FNH facility which is more than 30 miles from his or
her then-current place of employment, or (iv) the Eligible Employee resigns
from employment within 90 days after the effective date of (a) a reduction of
5% or more in his or her base compensation (other than a reduction applicable
to employees generally) and/or (b) any material diminution in his or her job
classification, authority and/or duties (each of the foregoing being a
"Severance Event"). The amount of severance pay for an Eligible Employee under
the Severance Benefits Program will be based upon the Eligible Employee's base
pay, years of service and salary grade and will be paid as a lump sum within
two weeks after the termination of employment. The amount of severance pay
will include a base component equal to three weeks of base pay for each full
year of service, subject to a minimum of two months of base pay and a maximum
of 12 months of base pay. A supplemental severance payment in an amount
ranging from five to 30 weeks of additional base pay will be paid to Eligible
Employees employed above certain salary grades. The minimum amount of
severance pay will be 12 months of base pay for any Eligible Employee who is a
Senior Vice President on the Effective Date or at the time of the applicable
Severance Event, or is party to an individual written agreement with the
Company which provides minimum severance compensation of 12 months of base
pay. An Eligible Employee who is entitled to receive severance pay under the
Severance Benefits Program will also be entitled to continuation (for a
specified period of time not to exceed 12 months from the applicable Severance
Event) of any favorable home mortgage loan rate from the Company which is in
effect for him or her at the time of termination of employment.
31
<PAGE>
CONTINUATION OF CERTAIN BENEFITS. Under the Benefits Letter, for certain
specified periods of time after the Effective Date, FNH is required to
continue to provide Company retirees and Continuing Employees with certain
customary banking benefits, including home mortgage loans made prior to the
Effective Date at favorable interest rates. After the designated time periods,
Continuing Employees will be provided with banking benefits and services in
the manner and on the terms that such benefits and services are provided to
similarly situated employees and retirees of FNH from time to time. In
addition, in the Benefits Letter FNH acknowledges that, after the Effective
Date, it may have certain legally enforceable obligations to continue medical
and other benefits for certain retirees of the Company. To the extent, if any,
that FNH is not legally obligated to continue such benefits at the level in
effect on the Effective Date, FNH is required by the Benefits Letter, prior to
any reduction or discontinuance of such benefits, to give reasonable written
notice to all retirees or other beneficiaries who would be affected by such
reduction or discontinuance.
PAYMENT UNDER EXISTING COMPANY BONUS AND INCENTIVE PLANS. Pursuant to the
Benefits Letter, all Company employees participating in any bonus and/or
short-term or long-term incentive compensation plans and programs of the
Company as of the Effective Date (other than participants in the Company's
Executive Incentive Compensation Plan discussed below; see "--Transitional
Compensation Agreements") will receive, promptly after the Effective Date,
full payment of (i) all amounts due and not already paid with respect to the
year ended December 31, 1996 under such plans and programs and (ii) all
amounts due and not already paid under such plans and programs, prorated as of
the Effective Date, with respect to any relevant time period (e.g., calendar
quarter or month) in 1997 which ends with the last month ending on or prior to
the Effective Date. The amounts of such payments will be determined in
accordance with the terms of the relevant Company plan or program, but the
amounts of such payments may not exceed the lesser of (i) the maximum levels
established therefor under the relevant Company plan or program or (ii) the
amounts properly accrued under the relevant Company plan or program as of the
Effective Date.
RETENTION AGREEMENTS. The Benefits Letter authorizes Mr. Harshfield, to the
extent he considers it necessary in order to provide the appropriate degree of
stability and continuity in the business operations of the Company prior to
the Effective Date, to enter into retention agreements with selected key
employees of the Company at levels up to and including that of Senior Vice
President calling for the payment of transitional incentive compensation to
the selected key employee if, and only if, he or she remains an employee of
the Company through the Effective Date.
COMPANY TAX-QUALIFIED RETIREMENT PLANS. Under the tax-qualified defined
contribution retirement plan of the Company, all contributions by the Company
for all participants in that plan which are not otherwise vested as of the
Effective Date will fully vest immediately upon consummation of the Merger.
All executive officers are already fully vested as to such contributions. FNH
has indicated it intends to terminate the tax-qualified defined contribution
plan of the Company as soon as practicable following the Effective Date.
32
<PAGE>
In addition, the Company will, prior to the Effective Date, amend the
Company's previously-frozen tax-qualified defined benefit retirement plan (the
"Retirement Income Plan") to provide that an optional form of distribution in
a single cash lump sum will be available to all individuals who are active
participants in the Retirement Income Plan on the Effective Date. Because of
that amendment to the Retirement Income Plan, any executive officers who are
participants in that Plan (all of whom are 100% vested in Plan benefits) and
who are not already eligible to receive a lump sum as an optional form of
distribution thereunder will become eligible to receive benefits under that
Plan in a lump sum, in addition to other optional forms of distribution
currently available. Set forth below are the estimated lump sum amounts which
would be payable to the executive officers under the Retirement Income Plan if
their employment terminated on January 2, 1997, and the proposed amendment
were then in effect. No new participants were permitted under the Retirement
Income Plan as of May 31, 1993, the date the plan was frozen. As a result,
Messrs. Harshfield and Warren A. Raybould do not participate in the Retirement
Income Plan.
<TABLE>
<CAPTION>
ESTIMATED LUMP
EXECUTIVE OFFICER SUM BENEFIT PAYMENT
----------------- -------------------
<S> <C>
Gary W. Brummett......................................... $ 59,700
Dale E. Cohen............................................ 70,700
Richard A. Fitch......................................... 166,900
Douglas J. Wallis........................................ 97,600
James F. Hurley.......................................... 258,000
Joseph M. Petitti*....................................... 36,100
Jeffrey A. Rigsby*....................................... 21,800
Peter G. Wyman*.......................................... 47,300
</TABLE>
If necessary, the Company will make additional contributions to the
Retirement Income Plan prior to the Effective Date so that, on the Effective
Date, the Plan will be fully funded on a termination basis in accordance with
the Employee Retirement Income Security Act of 1974, as amended. Under the
Benefits Letter, FNH agreed to cause to be paid, upon termination of the
Retirement Income Plan or upon termination of a Plan participant's employment
after the Effective Date, such lump sum distributions as may be elected by any
eligible participant in the Plan.
STOCK OPTION PLANS. Under the Company's 1993 Employee Stock Incentive Plan
(the "Employee Stock Option Plan") and the Company's 1994 Non-Employee
Director Stock Option Plan (the "Non-Employee Director Stock Option Plan"),
options and warrants to purchase 1,355,140 shares of Company Common Stock were
outstanding as of September 30, 1996. No options have been issued under the
Company's 1995 Employee Stock Incentive Plan or its 1995 Non-Employee Director
Stock Option Plan (the Plans referred to above in this sentence, together with
the Employee Stock Option Plan and the Non-Employee Director Stock Option
Plan, are sometimes hereinafter referred to collectively as the "Company Stock
Plans"). All of the outstanding stock options granted under the Non-Employee
Director Stock Option Plan, which cover 120,000 shares of Company Common Stock
in the aggregate, are currently exercisable. Of the 1,235,140 options
currently outstanding under the Employee Stock Option Plan, 1,118,076 are
currently exercisable. Pursuant to their terms, all outstanding stock options
granted under both the Employee Stock Option Plan and the Non-Employee
Director Stock Option Plan which are not otherwise vested will become fully
vested upon the approval of the Merger by the Company Stockholders.
The Merger Agreement provides that, at the Effective Time, each option and
warrant to purchase shares of Company Common Stock pursuant to the Company
Stock Plans, whether or not then vested and exercisable, shall be terminated
and each grantee thereof shall be entitled to receive from the Company, in
lieu of each share of Company Common Stock that would otherwise have been
issuable upon exercise thereof: (A) an amount in cash computed by multiplying
(i) the difference between (x) $23.50 and (y) the per share exercise price
applicable to such option or warrant by (ii) the number of such shares of
Company Common Stock subject to such option or warrant; (B) to the extent
applicable, the number of CALGZ Interests reserved for issuance upon exercise
of such stock option or warrant; and (C) one-tenth of a Secondary
Participation Interest for every share
33
<PAGE>
of Company Common Stock subject to such option or warrant, provided, however,
that one Secondary Participation Interest will be issued for each ten shares
of Company Common Stock subject to any such stock option or warrant, no
fractional Secondary Participation Interests will be issued, and those holders
of options or warrants who would otherwise receive such fractions will not be
entitled thereto and will receive their respective pro rata portions of the
aggregate net cash proceeds obtained from the Batched Sales (see "The Merger
Agreement--Payment for Shares"). The Company has agreed to use its best
efforts to take or cause to be taken all action necessary under such options
and warrants to provide for such termination and payment, including obtaining
any necessary consents from grantees, the receipt of which necessary consents,
in form and substance reasonably satisfactory to FNH, is a condition to FNH's
obligation to consummate the Merger (see "The Merger Agreement--Conditions to
the Merger"). The approval and adoption of the Merger Agreement by Company
Stockholders will also constitute a vote to approve, as exempt from the short-
swing profit recovery provisions of Section 16 of the Exchange Act, the
disposition of options and warrants outstanding under the Company Stock Plans
pursuant to the above-described provisions of the Merger Agreement.
Except as otherwise noted, all currently outstanding stock options and
warrants held by executive officers and directors of the Company are currently
vested. Set forth below are the numbers of shares of Company Common Stock
covered by such currently vested stock options and warrants and, where
applicable, the number of shares of Company Common Stock covered by stock
options and warrants which will become vested in connection with the Merger.
Also set forth below are the respective cash values of such stock options,
assuming surrender and exchange for a per share payment equal to the excess of
$23.50 over the applicable exercise price:
<TABLE>
<CAPTION>
SHARES COVERED
SHARES COVERED BY STOCK
BY VESTED STOCK OPTIONS VESTING
EXECUTIVE OPTIONS AND THROUGH THE
OFFICERS WARRANTS CASH VALUE MERGER CASH VALUE
--------- --------------- ---------- --------------- ----------
<S> <C> <C> <C> <C>
Edward G. Harshfield.. 300,000 $4,860,000 -0- $ -0-
Gary W. Brummett...... 100,000 1,620,000 -0- -0-
Dale E. Cohen......... 100,000 1,620,000 -0- -0-
Richard A. Fitch...... 100,000 1,620,000 -0- -0-
Douglas J. Wallis..... 137,500 2,463,750 -0- -0-
James F. Hurley....... 137,500 2,463,750 -0- -0-
Joseph M. Petitti*.... 25,000 405,000 -0- -0-
Warren A. Raybould*... 33,333 433,329 16,667 216,671
Jeffrey A. Rigsby*.... 25,000 405,000 -0- -0-
Peter G. Wyman*....... 9,800 101,475 4,900 50,738
DIRECTORS
---------
Michael W. Arthur..... 20,000 $ 270,000 -0- $ -0-
John F. Davis......... 20,000 270,000 -0- -0-
James J. Gaffney...... 20,000 270,000 -0- -0-
David Gilbert, Ph.D... 20,000 270,000 -0- -0-
Carl A. LoBue......... 20,000 270,000 -0- -0-
Thomas F. Michaels.... 20,000 270,000 -0- -0-
</TABLE>
TRANSITIONAL COMPENSATION AGREEMENTS. The Company entered into transitional
compensation agreements in February 1996 with each of Messrs. Harshfield,
Brummett, Cohen, Wallis, Fitch, Hurley, Petitti, Rigsby and Wyman and in April
1996 with Mr. Raybould (the "Transitional Compensation Agreements"). Each of
such Transitional Compensation Agreements provides that, if a "Change of
Control" of the Company (as defined in the Transitional Compensation
Agreements) occurs during the "Change of Control Period" (as defined in the
applicable Transitional Compensation Agreement and currently extending until
February 14, 1999 or, in the case of Mr. Raybould, April 30, 1999), the
Transitional Compensation Agreement will become effective and supersede the
executive's prior employment agreement with the Company, if any. Each of the
Transitional Compensation Agreements provides for an employment term of three
years and for compensation
34
<PAGE>
and other terms of employment at least as favorable as those during the
twelve-month period prior to the Effective Date. Each of the Transitional
Compensation Agreements also provides for severance payments and other
benefits in the event that the executive's employment is terminated by the
Company other than for death, disability or "cause" (as defined in the
Transitional Compensation Agreements) or by the executive for "good reason"
(as defined in the Transitional Compensation Agreements). The agreements with
each of Messrs. Harshfield, Brummett and Cohen provide for a severance payment
equal to three times the executive's annual base salary, plus three times an
amount based on the greater of the executive's then current target bonus
amount for the then current year or the average of the executive's bonus
amounts paid for the two most recent completed years, plus amounts
representing the value of additional retirement and other benefits which would
have accrued if the executive's employment had continued for three additional
years. The Transitional Compensation Agreements with Messrs. Harshfield,
Brummett and Cohen also provide for continuation of other benefits for a
period of three years and for the payment, under certain specified
circumstances, of an additional amount to cover the federal excise tax imposed
on some "golden parachute" payments. Each of the Transitional Compensation
Agreements with Messrs. Wallis, Fitch, Hurley, Petitti, Raybould, Rigsby and
Wyman provides for a severance payment equal to two times the executive's
annual base salary, plus amounts representing the value of additional
retirement and other benefits which would have accrued if the executive's
employment had continued for two additional years. Each of those Transitional
Compensation Agreements also provides for continuation of other benefits for a
period of two years. Under the Transitional Compensation Agreements with all
of the executives involved, the executive may elect to receive cash in lieu of
the continuation of some benefits.
The employment of Messrs. Harshfield, Brummett, Cohen, Fitch, Wallis and
Hurley will be terminated following the consummation of the Merger, and those
six executives will be entitled to receive the full severance payments and
benefits provided for by their respective Transition Compensation Agreements.
The estimated values of the respective severance payments and benefits to
which those executives and Messrs. Petitti, Raybould, Rigsby and Wyman will
become so entitled (exclusive, in the case of Messrs. Harshfield, Brummett and
Cohen, of amounts that would otherwise be payable to cover federal excise
taxes; see "--Certain Other Payments"), assuming termination of employment on
or after January 2, 1997, are set forth below.
<TABLE>
<CAPTION>
ESTIMATED VALUE OF
EXECUTIVE OFFICER SEVERANCE PAYMENTS AND BENEFITS
----------------- -------------------------------
<S> <C>
Edward G. Harshfield......................... $5,036,514
Gary W. Brummett............................. 1,798,774
Dale E. Cohen................................ 1,697,067
Richard A. Fitch............................. 753,929
Douglas J. Wallis............................ 824,065
James F. Hurley.............................. 817,690
Joseph M. Petitti*........................... 722,028
Warren A. Raybould*.......................... 987,541
Jeffrey A. Rigsby*........................... 702,747
Peter G. Wyman*.............................. 592,140
</TABLE>
EXECUTIVE INCENTIVE COMPENSATION PLAN. Under the Benefits Letter and the
employment agreements currently in effect with the executive officers, annual
bonuses earned by such executives under the Company's Executive Incentive
Compensation Plan in respect of the year ended December 31, 1996 will be paid
by the Company to those executives not later than December 31, 1996. The
amounts of those bonuses will be determined in accordance with that Plan,
without regard to any other payments to be made to those executives, and the
amounts of those bonuses may exceed the target levels established under that
Plan but shall not exceed the lesser of (i) the maximum levels provided for by
such Plan or (ii) the amounts properly accrued under such Plans provided,
however, that the aggregate amount of bonuses properly accrued under the Plan
on or before December 31, 1996 shall not, without the approval of FNH, exceed
the aggregate amount of bonuses paid to all participants in the Plan,
including non-executive officers, for 1995.
35
<PAGE>
COMPANY LONG TERM INCENTIVE PLAN. In January 1996, the Compensation
Committee of the Company Board adopted the Long Term Incentive Plan (the
"LTIP") to promote the long-term growth and profitability of the Company. The
LTIP provides that if a "Change of Control" (as defined in the LTIP) of the
Company occurs prior to December 31, 1998 the target amounts payable under the
LTIP for the three-year period ending December 31, 1998, will be accelerated.
Because the Effective Date will occur (if at all) prior to the end of such
three-year period, based on the target amounts established by the Committee
for such three-year period these accelerated payments would be $400,000 in the
case of Mr. Harshfield and $250,000 in the case of Messrs. Brummett and Cohen,
respectively.
COMPANY NONQUALIFIED EXCESS 401(k) PLAN. Under the Benefits Letter, FNH will
terminate the Company nonqualified excess 401(k) plan on the Effective Date
and in connection therewith will pay to the participants in that plan, in
single lump sum cash amounts as soon as practicable following such
termination, all benefits accrued prior to the Effective Date. If the
Effective Date is on or before January 2, 1997, the following are the
estimated amounts attributable to employer matching contributions and total
account balances that will become payable under that Plan to the following
executive officers:
<TABLE>
<CAPTION>
EMPLOYER TOTAL
EXECUTIVE OFFICER MATCHING CONTRIBUTION ACCOUNT BALANCE
----------------- --------------------- ---------------
<S> <C> <C>
Edward G. Harshfield................... $131,778 $175,014
Gary W. Brummett....................... 19,129 20,063
Dale E. Cohen.......................... 16,172 16,172
Richard A. Fitch....................... 9,908 9,908
Douglas J. Wallis...................... 16,172 16,172
James F. Hurley........................ 2,869 2,869
Joseph M. Petitti*..................... 9,848 9,848
Warren A. Raybould*.................... 27,785 34,895
Jeffrey A. Rigsby*..................... 9,546 9,546
Peter G. Wyman*........................ 778 778
</TABLE>
COMPANY RETIREMENT PLAN FOR OUTSIDE DIRECTORS. Under the Company Retirement
Plan for Outside Directors, such directors are entitled to receive monthly
payments from the Company for a certain period of time after the later of (i)
the date on which the director ceases to serve on the Company Board or (ii)
the date the retired director attains age 62. The Plan also provides that in
the event of a "Change of Control" (as defined in the Plan) after January 1,
1996, the remaining benefits payable under the Plan to a retired director
(including the benefits payable to a director who thereafter becomes a retired
director) will be paid in a single cash lump sum without regard to the retired
director's age at that time. If the Effective Date is on or before January 2,
1997, the respective estimated lump sum amounts shown below will become
payable to the current outside directors of the Company:
<TABLE>
<CAPTION>
ESTIMATED LUMP
OUTSIDE DIRECTOR SUM AMOUNT PAYABLE
---------------- ------------------
<S> <C>
Michael W. Arthur......................................... $146,450
John F. Davis............................................. 144,817
James J. Gaffney.......................................... 162,600
David Gilbert, Ph.D....................................... 224,600
Carl A. LoBue............................................. 174,983
Thomas F. Michaels........................................ 154,067
</TABLE>
CONSULTING AGREEMENTS. FNH intends to enter into consulting agreements,
effective as of the Effective Date, with Messrs. Harshfield, Brummett, Cohen
and Wallis. Under those agreements, those former executive officers of the
Company will be required to cooperate with FNH with respect to pursuing the
Goodwill Litigation, assist FNH with respect to the continuing operations of
the Company during the transitional period following the Effective Date and,
in such further ways as FNH may reasonably request, assist the realization by
FNH of the full benefits which are expected to result from the Merger. Each of
those consulting agreements will have a term of two years, and the amounts
payable by FNH under the agreements will be $100,000 per year to Mr.
Harshfield and $50,000 per year to each of Messrs. Brummett, Cohen and Wallis.
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<PAGE>
CERTAIN OTHER PAYMENTS. The Company and FNH have agreed to take such actions
as are deemed necessary or appropriate to implement the provisions of the
Benefits Letter and to implement the amendment or termination of, or payment
of benefits under, the various Company employee benefit plans, programs and
agreements. In this regard, to enable the Company and FNH to recognize tax
benefits that will otherwise be unavailable if the payments are not made until
the Effective Date, the Company and FNH may agree to amend or otherwise act
under some or all of the employee benefit plans and agreements described above
to accelerate some or all of the severance or other benefit payments provided
for therein.
In addition, in consideration of commitments made by Messrs. Harshfield,
Brummett, Cohen, Wallis, Fitch and Hurley with respect to certain tax planning
matters beneficial to FNH, and in recognition of their cooperation with
respect thereto, including exercise by them of all of their outstanding stock
options and warrants prior to January 1, 1997, FNH has agreed to pay on the
Effective Date a supplemental transaction bonus of $3.3 million to Mr.
Harshfield, $1.4 million to each of Messrs. Brummett, Cohen and Wallis, and
$1.0 million to each of Messrs. Fitch and Hurley. The aggregate amount of such
bonuses takes account of certain anticipated tax benefits and savings (in the
nature of the anticipated preservation of certain deductions relating to the
payment of employee severance and termination expenses and the anticipated
savings from not having to make certain excise tax-related payments under the
Transitional Compensation Agreements) that FNH expects to realize as a result
of such commitments and cooperation. At its meeting on July 26, 1996,
following its approval of the Merger Agreement (see "Background of the
Merger"), the Company Board authorized senior management of the Company to
have discussions with FNH regarding possible arrangements of the kind
described above in this paragraph and under "Consulting Agreements." The
details of such arrangements were thereafter worked out between FNH and senior
management of the Company, and the Company Board was notified of them at a
meeting held on September 20, 1996.
CERTAIN ADDITIONAL INFORMATION. The Merger Agreement provides that FNH
shall, through the sixth anniversary of the Effective Date, indemnify and hold
harmless each person who was as of the date of the Merger Agreement, or had
been at any time prior thereto, or who becomes prior to the Effective Time, a
director or officer of the Company or any of its subsidiaries (an "Indemnified
Party") against any costs and expenses, judgments, fines, losses, claims,
damages or liabilities and amounts paid in settlement incurred in connection
with any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of (i) the fact that such Indemnified Party was a director,
officer or employee of the Company, any of its subsidiaries or any of their
respective predecessors or (ii) the Merger Agreement, the Stock Option
Agreement or any of the transactions contemplated by either of the foregoing
(including, without limitation, cooperation in connection with the financing
of the Merger, pursuant to the provisions of the Merger Agreement described
under "The Merger Agreement--Financing Arrangements of FNH," and in connection
with any actions taken at the request of FNH under the provisions of the
Merger Agreement described in the last paragraph under "The Merger Agreement--
Conduct of Company Business Pending the Merger;" FNH has also agreed that for
a period of six years from the Effective Date it will similarly indemnify the
Company's advisers solely for claims arising out of actions taken by them in
connection with such provisions). The Merger Agreement also provides that,
prior to the Effective Time, the Company shall purchase, and for a period of
six years thereafter FNH shall use its commercially reasonable efforts to
maintain, directors and officers liability insurance "tail" or "runoff"
coverage with respect to wrongful acts and/or omissions committed or allegedly
committed prior to the Effective Time. Such coverage shall have an aggregate
coverage limit over the term of the policy in an amount no less than the
annual aggregate coverage limit under the Company's existing directors and
officers liability policy, and in all other respects shall be at least
comparable to such existing policy.
John F. Davis, a member of the Company Board, in his capacity as an attorney
in private practice specializing in financial institutions regulation and real
estate, represents FNB on a part-time contract basis in connection with its
program of disposition of real estate assets in the Los Angeles area. For such
services, Mr. Davis receives retainer fees which, in 1995, aggregated
approximately $66,000. Approximately 80% of such fees are paid by a subsidiary
of Ford Motor Company in connection with the 1994 transaction in which it sold
certain assets to FNB. At its June 24, 1996 meeting, Mr. Davis advised the
Company Board of the foregoing
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<PAGE>
facts as well as discussions that had taken place between him and a senior
representative of FNB who had indicated that FNB would have no objection to
his continued participation in the Company's Board deliberations regarding the
FNH acquisition proposal. The Company Board, having considered the foregoing
facts, unanimously (except for Mr. Davis, who recused himself) determined that
Mr. Davis should be invited to continue to participate in the Company Board's
deliberations regarding the FNH acquisition proposal.
Mr. Ford currently anticipates intending to nominate Mr. Harshfield to the
Board of Directors of Cal Fed Bank as its Vice Chairman at the first regular
meeting of the Board after the Effective Time. If nominated and elected, Mr.
Harshfield currently anticipates accepting such nomination and election.
REGULATORY APPROVALS
Pursuant to the Merger Agreement, the respective obligations of the Company,
FNH and Merger Sub to effect the Merger are subject to the receipt of all
regulatory approvals, consents and waivers necessary to consummate the
transactions contemplated by the Merger Agreement, including the Merger, the
Bank Merger, and the registration, issuance and distribution of the Secondary
Participation Interests. See "The Merger Agreement--Conditions to the Merger."
Both the Merger and the subsequent contribution by FNH to FNB of the shares
of common stock of the Surviving Corporation are subject to the prior approval
of the OTS, under the Home Owners' Loan Act, as amended (the "HOLA"), and the
related OTS regulations. In reviewing an application for such approvals under
the HOLA, the OTS will consider, among other factors, the financial and
managerial resources (including a consideration of the competence, experience
and integrity of officers, directors and principal shareholders) and future
prospects of the parties to the transaction, the effect of the acquisition on
the insured institutions, the insurance risk to the Savings Association
Insurance Fund and the convenience and needs of the community to be served. In
addition, the OTS may not approve a transaction that will result in a monopoly
or be in furtherance of any combination or conspiracy to monopolize or to
attempt to monopolize the savings and loan business in any part of the United
States, or if its effect in any section of the country may be substantially to
lessen competition or to tend to create a monopoly, or if it would in any
other manner be a restraint of trade, unless the OTS finds that the
anticompetitive effects of the transaction are clearly outweighed in the
public interest by the probable effect of the transaction on meeting the
convenience and needs of the communities to be served. The OTS will also
request from the Attorney General and consider any report rendered within 30
days on the competitive factors involved.
In addition, the Bank Merger is subject to the prior approval of the OTS
under the Bank Merger Act and the related OTS regulations. In reviewing
applications under the Bank Merger Act, the OTS must consider factors
substantially similar to the factors described in the prior paragraph with
respect to applications under the HOLA, including the financial and managerial
resources and future prospects of the existing and proposed institutions, and
the convenience and needs of the communities to be served. Also, the OTS may
not approve a transaction that will result in the types of anticompetitive
effects described in the prior paragraph with respect to applications under
the HOLA. In addition to the criteria mandated by the Bank Merger Act, the OTS
considers the fairness and disclosure of the combination plan, the proposed
treatment of goodwill and the tax effects of the proposed merger, among other
things.
Any transaction approved by the OTS under the Bank Merger Act and the
related OTS regulations may not be consummated until 30 days after such
approval, during which time the Department of Justice may challenge such
transaction on antitrust grounds and seek the divestiture of certain assets
and liabilities. With the approval of the OTS and the Department of Justice,
the waiting period may be reduced to no less than 15 days.
Under the Community Reinvestment Act of 1977, as amended (the "CRA"), the
OTS must take into account the record of performance of each of FNB and Cal
Fed Bank in meeting the credit needs of the entire community, including low
and moderate income neighborhoods, served by each institution, in connection
with consideration of applications for regulatory approvals under the HOLA and
the Bank Merger Act. As part of the
38
<PAGE>
application review process, the OTS may receive, and must consider, properly
filed comments and protests from community groups and others regarding (among
other issues) each institution's CRA performance.
The Company is not aware of any regulatory approvals that would be required
for consummation of the transactions contemplated by the Merger Agreement
other than as described above. Should any other approvals be required, it is
presently contemplated that such approvals would be sought. There can be no
assurance that any other approvals, if required, will be obtained.
The Merger and the Bank Merger cannot proceed in the absence of the
foregoing regulatory approvals. FNH has informed the Company that on August 8,
1996, FNH filed an application with the OTS seeking the aforementioned
approvals under the HOLA, the Bank Merger Act and the related OTS regulations
and that, on October 22, 1996, the OTS deemed the application complete and
accepted it for filing. There can be no assurance that such regulatory
approvals will be obtained, and if obtained, there can be no assurance as to
the date of any such approval. There can likewise be no assurance that the
Department of Justice or the California Attorney General will not challenge
the proposed transactions or, if such a challenge is made, as to the result
thereof.
For OTS approval requirements in connection with the exercise of the FNH
Option, see "The Stock Option Agreement."
ACCOUNTING TREATMENT
The Merger will be accounted for as a "purchase," as such term is used under
generally accepted accounting principles, for accounting and financial
reporting purposes. Accordingly, a determination of the fair value of the
Company's assets and liabilities will be made in order to allocate the
purchase price to the assets acquired and the liabilities assumed, with any
excess of the purchase price of the acquisition over the sum of the fair
values of tangible and identifiable intangible assets, less the liabilities
assumed, being recorded as goodwill.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of material federal income tax consequences of the
Merger to certain Company Stockholders is based on present law and does not
purport to be a complete analysis of all tax consequences that may be relevant
to any particular Company Stockholder. The state, local, foreign and estate
tax consequences to Company Stockholders are not discussed. Certain Company
Stockholders (including, but not limited to, insurance companies, tax exempt
organizations, financial institutions, securities dealers, broker-dealers,
employee stockholders, foreign corporations, persons who are not citizens or
residents of the United States and persons who acquired shares of the Company
Common Stock as part of a straddle or conversion transaction) may be subject
to special rules not discussed below. The following discussion assumes that
each Company Stockholder holds all of such Company Stockholder's shares of
Company Common Stock as a capital asset. However, certain Company Stockholders
who are employees or directors of the Company may not be entitled to treat
certain of the shares which they may have acquired from the Company as capital
assets and may be required to report any gain on the sale of the shares as
taxable compensation from the Company. The following discussion is based on
laws, regulations, rulings, practice and judicial decisions now in effect, all
of which are subject to change (possibly with retroactive effect) by
legislation, administrative action or judicial decision.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF THE
SECONDARY PARTICIPATION INTERESTS ARE DISCUSSED IN THE CAL FED BANK OFFERING
CIRCULAR. COMPANY STOCKHOLDERS ARE URGED TO READ SUCH DISCUSSION IN THE CAL
FED BANK OFFERING CIRCULAR.
The Company intends to treat the exchange of shares of Company Common Stock
for cash pursuant to the Merger (or, in the case of a dissenting stockholder,
pursuant to any appraisal proceedings; see "The Special Meeting--Appraisal
Rights"), as well as the receipt of Secondary Participation Interests and/or
(where
39
<PAGE>
applicable) cash from the proceeds of the Batched Sales, as a sale or exchange
of those shares for federal income tax purposes. Under this treatment, each
Company Stockholder (including a dissenting stockholder) will recognize gain
or loss for federal income tax purposes generally in an amount equal to the
difference, if any, between (i) the amount of cash received plus the fair
market value of Secondary Participation Interests received and (ii) the
adjusted tax basis of such Company Stockholder's shares of Company Common
Stock surrendered (except, in the case of dissenting stockholders, for any
amount constituting interest, which will be taxable as ordinary income). Gain
or loss on the sale of the shares will be long-term capital gain or loss if
the shares of Company Common Stock have been held by the Company Stockholder
for more than one year and will be short-term capital gain or loss if the
shares of the Company Common Stock have been held by the Company Stockholder
for one year or less.
It is possible that the distribution of the Secondary Participation
Interests by the Company and the payment (where applicable) of cash from the
proceeds of the Batched Sales could be treated as a distribution of property
in an amount equal to the fair market value of the Secondary Participation
Interests and/or (where applicable) cash from the proceeds of the Batched
Sales. Such distribution would be a dividend, taxable as ordinary income to a
holder of Company Common Stock to the extent of the Company's current or
accumulated earnings and profits allocable to distributions on Company Common
Stock as determined for federal income tax purposes. To the extent the fair
market value of the Secondary Participation Interests distributed exceeds the
Company's current and accumulated earnings and profits allocable to such
distributions on Company Common Stock, such distribution would be treated
first as a non-taxable return of capital, reducing the holders' adjusted tax
basis in the Company Common Stock to the extent thereof, and then as a capital
gain with the characterizations as described in the foregoing paragraph. The
availability of current and accumulated earnings and profits would depend upon
multiple factors, including the profitability of the Company and Cal Fed Bank
during 1996 and 1997. The receipt of the cash proceeds from the Merger would
constitute capital gain (with the characterizations as described in the
foregoing paragraph) to the extent such proceeds exceed any remaining basis in
the Company Common Stock held by the recipient.
The receipt of Secondary Participation Interests and cash for shares of
Company Common Stock may be subject to backup withholding at the rate of 31%
unless the holder (i) is a corporation or comes within certain other exempt
categories, or (ii) provides a certified taxpayer identification number and
otherwise complies with the backup withholding rules. Backup withholding is
not an additional tax; any amounts so withheld may be credited against the
federal income tax liability of the person subject to the withholding.
THE FOREGOING DISCUSSION IS ONLY A SUMMARY OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER. ACCORDINGLY, EACH COMPANY STOCKHOLDER IS URGED
TO CONSULT SUCH COMPANY STOCKHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER, AS WELL AS WITH RESPECT TO ANY
STATE, LOCAL, FOREIGN OR OTHER FEDERAL TAX CONSEQUENCES, IN LIGHT OF THE
STOCKHOLDER'S PARTICULAR SITUATION.
40
<PAGE>
THE MERGER AGREEMENT
IMPORTANT INFORMATION REGARDING THE SECONDARY PARTICIPATION INTERESTS THAT
CONSTITUTE PART OF THE PER SHARE MERGER CONSIDERATION, AS WELL AS THE GOODWILL
LITIGATION TO WHICH THEY RELATE, IS CONTAINED IN THE CAL FED BANK OFFERING
CIRCULAR. COMPANY STOCKHOLDERS ARE URGED TO READ THE CAL FED BANK OFFERING
CIRCULAR, AS WELL AS THIS PROXY STATEMENT, FOR COMPLETE INFORMATION REGARDING
THE TERMS OF THE MERGER AND OTHER INFORMATION RELEVANT TO THEIR VOTE.
The following description of certain provisions of the Merger Agreement is
qualified in its entirety by reference to the full text of the Merger
Agreement, a copy of which is attached to this Proxy Statement as Appendix A
and incorporated herein by reference.
GENERAL
The Merger Agreement provides that Merger Sub will be merged with and into
the Company, with the Company being the Surviving Corporation in the Merger,
and each share of Company Common Stock issued and outstanding at the Effective
Time (other than "Excluded Shares," which is defined to mean (i) shares for
which dissenter's rights have been perfected under the DGCL (see "The Special
Meeting--Appraisal Rights"), (ii) shares held directly or indirectly by FNH
(other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted), which will be cancelled, and (iii) shares held by the
Company as treasury stock, which will be cancelled) will be converted into the
right to receive the Per Share Merger Consideration, consisting of (x) $23.50
in cash without interest and (y) one-tenth of a Secondary Participation
Interest, provided, however, that no fractional Secondary Participation
Interests will be issued and those Company Stockholders who would otherwise
receive such fractions will not be entitled thereto and will receive their
respective pro rata portions of the aggregate cash proceeds (after deducting
aggregate commissions and any other selling expenses) obtained from the
Batched Sales (see "--Payment for Shares"). NONE OF THE COMPANY, THE SURVIVING
CORPORATION, CAL FED BANK, FNH, FNB OR THE EXCHANGE AGENT WILL GUARANTEE ANY
MINIMUM SALE PRICE FOR THE BATCHED SECONDARY PARTICIPATION INTERESTS AND NO
INTEREST WILL BE PAID ON THE PROCEEDS FROM THE BATCHED SALES.
The Merger Agreement sets forth FNH's intention, unless it otherwise
specifies in accordance therewith (which FNH has advised the Company it has no
present intention of doing), that, immediately following the consummation of
the Merger, (i) FNH will contribute all of the shares of capital stock of the
Surviving Corporation to FNB, (ii) the Surviving Corporation will be
liquidated by FNB, and (iii) FNB will be merged with and into Cal Fed Bank in
the Bank Merger immediately thereafter, with Cal Fed Bank being the surviving
bank in the Bank Merger.
The Merger Agreement permits FNH to specify that, before or after the
Merger, the Company, FNH, Cal Fed Bank and any other subsidiary or affiliate
of FNH shall enter into transactions other than as described above in order to
effect the purposes of the Merger Agreement; provided, however, that no such
specification may (i) materially and adversely affect the timing of the
consummation of the transactions contemplated in the Merger Agreement or the
tax effect or economic benefits of the Merger to the holders of Company Common
Stock, CALGZ Interests or Secondary Participation Interests, or (ii) cause any
event or condition to exist which constitutes or, after notice or lapse of
time or both, would constitute a breach of FNH's obligations with respect to
the prosecution of the Goodwill Litigation, as summarized under "--Prosecution
of Goodwill Litigation." In the Merger Agreement, FNH has agreed that it
shall, and shall cause Cal Fed Bank and (subject to clause (iii) below in this
paragraph) any permitted successor to Cal Fed Bank, as applicable, to (i) take
all actions necessary or desirable to pursue Cal Fed Bank's claims in the
Goodwill Litigation, (ii) file with applicable regulatory agencies such
periodic and other reports as are necessary to furnish and update information
to holders of the CALGZ Interests or the Secondary Participation Interests,
(iii) refrain from taking any action that would violate certain provisions of
the U.S. Code relating to claims against the U.S. Government, including,
without limitation, any action that would constitute an "assignment" (as
defined in those provisions) of the claims in the Goodwill Litigation, or (iv)
refrain from taking any action to dismiss, settle, compromise or otherwise
cease prosecution of
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<PAGE>
the Goodwill Litigation on terms that do not result solely in the payment of
cash or other readily monetizable consideration by or on behalf of the United
States to Cal Fed Bank.
FOR IMPORTANT ADDITIONAL INFORMATION REGARDING THE TERMS OF THE SECONDARY
PARTICIPATION INTERESTS AND THE GOODWILL LITIGATION, SEE THE CAL FED BANK
OFFERING CIRCULAR. As more fully discussed in the Cal Fed Bank Offering
Circular, there are certain risk factors associated with, and certain
significant contingencies and uncertainties affecting the potential value of,
the Secondary Participation Interests, including the risk factors,
contingencies and uncertainties arising from the fact that amounts will only
be payable to holders of the Secondary Participation Interests by Cal Fed Bank
in the event that Cal Fed Bank receives proceeds from the Goodwill Litigation
which exceed, in the aggregate, all amounts that have priority over the
Secondary Participation Interests with respect to the distribution of such
proceeds (including, without limitation, certain expenses and taxes, payments
due to the holders of the CALGZ Interests and the retention of $125 million by
Cal Fed Bank). Accordingly, while the $23.50 cash component of the Per Share
Merger Consideration, which will be paid if the Merger is consummated, is
quantified, the value of the non-cash component, in the form of the Secondary
Participation Interests which will be distributed if the Merger is consummated
but with respect to which no payment will be made by Cal Fed Bank other than
from the net distributable cash proceeds (if any) of the Goodwill Litigation,
is inherently indeterminable.
EFFECTIVE DATE; EFFECTIVE TIME
The Merger will become effective on such date as FNH selects, which shall be
within 30 days after the last to occur of the expiration of all applicable
waiting periods in connection with the Requisite Regulatory Approvals (as
defined in "--Conditions to the Merger") and the satisfaction or waiver of all
other conditions to consummation of the transactions contemplated by the
Merger Agreement (other than conditions relating to the receipt of certain
closing certificates and legal opinions), or on such other date as may be
agreed in writing by the parties (subject to the provision described in
subparagraph (c) under "--Termination of the Merger Agreement"). The
"Effective Date" of the Merger will be the date on which the Certificate of
Merger is filed as required by the DGCL (or such later date as may be set
forth therein). The "Effective Time" of the Merger will be the time of such
filing or such other time as set forth in the Certificate of Merger.
PAYMENT FOR SHARES
The Merger Agreement provides that, at and after the Effective Time, each
certificate (each a "Certificate") previously representing shares of Company
Common Stock will represent only the right to receive the Per Share Merger
Consideration (without interest on the cash portion thereof). As of the
Effective Time, (i) FNH is required to deposit, or to cause to be deposited,
with the Exchange Agent, for the benefit of the holders of shares of Company
Common Stock, for exchange in accordance with the Merger Agreement, the amount
constituting the cash portion of the Per Share Merger Consideration, and (ii)
the Company will deposit, or will cause to be deposited, with the Exchange
Agent, for the benefit of the holders of shares of Company Common Stock, one
or more certificates representing (x) the Secondary Participation Interests to
be distributed to Company Stockholders pursuant to the Merger Agreement in
exchange for their Certificates, and (y) the Batched Secondary Participation
Interests to be sold in the Batched Sales. As soon as practicable after the
Effective Time, FNH will cause the Exchange Agent to mail to each holder of
record of a Certificate or Certificates the following: (i) a letter of
transmittal specifying that delivery will be effected, and risk of loss and
title to the Certificates will pass, only upon delivery of the Certificates to
the Exchange Agent, and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for the Per Share Merger Consideration. The
Merger Agreement requires the Surviving Corporation to instruct the Exchange
Agent to effect the Batched Sales on behalf of the Surviving Corporation,
through the use of one or more broker-dealers, over a period of time following
the Effective Time and in a manner designed not to adversely affect the market
prices of the Secondary Participation Interests.
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<PAGE>
COMPANY STOCKHOLDERS SHOULD NOT FORWARD THEIR STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED SUCH INSTRUCTIONS AND LETTER OF
TRANSMITTAL AND HAVE COMPLETED THE LETTER OF TRANSMITTAL ACCORDINGLY.
The Merger Agreement provides that, upon the proper surrender of a
Certificate to the Exchange Agent, together with a properly completed and duly
executed letter of transmittal, the holder of such Certificate will be
entitled to receive in exchange therefor a check representing the cash portion
of the Per Share Merger Consideration and a certificate representing such
number of Secondary Participation Interests which such holder has the right to
receive in respect of the Certificate surrendered pursuant to the Merger
Agreement, and the Certificate so surrendered will forthwith be cancelled. No
interest will be paid or accrued on the cash portion of the Per Share Merger
Consideration. In the event of a transfer of ownership of any shares of
Company Common Stock not registered in the transfer records of the Company, a
check for the cash portion of the Per Share Merger Consideration and a
certificate representing the applicable number of Secondary Participation
Interests may be issued to the transferee if the Certificate representing such
Company Common Stock is presented to the Exchange Agent, accompanied by
documents sufficient, in the reasonable discretion of FNH and the Exchange
Agent, (i) to evidence and effect such transfer and (ii) to evidence that all
applicable stock transfer taxes have been paid.
The Merger Agreement provides that, from and after the Effective Time, there
will be no transfers on the stock transfer records of the Company of any
shares of Company Common Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
FNH or the Surviving Corporation, they will be cancelled and exchanged for the
Per Share Merger Consideration deliverable in respect thereof in accordance
with the procedures set forth in the Merger Agreement.
The Merger Agreement provides that any portion of the aggregate Per Share
Merger Consideration or the proceeds of any investments thereof that remains
unclaimed by the stockholders of the Company for one year after the Effective
Time will be repaid or delivered, as applicable, by the Exchange Agent to FNH.
Any stockholders of the Company who have not theretofore complied with the
procedures regarding payment for shares in accordance with the Merger
Agreement will thereafter look only to FNH for payment of their Per Share
Merger Consideration deliverable in respect of each share of Company Common
Stock such stockholder holds as determined pursuant to the Merger Agreement
without any interest on the cash portion of the Per Share Merger
Consideration. If outstanding Certificates are not surrendered or the payment
for them is not claimed prior to the date on which such payments would
otherwise escheat to or become the property of any governmental unit or
agency, the unclaimed items will, to the extent permitted by abandoned
property and any other applicable law, become the property of FNH (and to the
extent not in its possession will be paid over to it), free and clear of all
claims or interest of any person previously entitled to such claims.
Notwithstanding the foregoing, none of FNH, the Surviving Corporation, the
Exchange Agent or any other person will be liable to any former holder of
Company Common Stock for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
The Merger Agreement provides that, in the event any Certificate has been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Exchange Agent, the posting by such person of a bond in such
amount as the Exchange Agent may reasonably direct as indemnity against any
claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Per Share Merger Consideration deliverable in respect thereof
pursuant to the Merger Agreement.
FINANCING ARRANGEMENTS OF FNH
Consummation of the Merger is not conditioned upon FNH obtaining the cash
necessary to pay the aggregate cash portion of the Per Share Merger
Consideration. In the Merger Agreement, FNH has represented that on the
Effective Date it will have all funds necessary to pay such aggregate cash
portion and FNH has advised the Company that it has raised all such funds and
they are being held in escrow pending the consummation of the Merger. The
Company has agreed to cooperate with, and provide reasonable assistance to,
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<PAGE>
FNH, at FNH's expense, in connection with any sale or distribution of
securities made by FNH or any of its affiliates in connection with the
consummation of the transactions contemplated by the Merger Agreement
including, without limitation, (i) using its reasonable best efforts to make
available requested financial information on a timely basis, (ii) obtaining
customary comfort letters from the Company's independent certified public
accountants and opinion letters from the Company's attorneys, and (iii) making
available its representatives and its accountants and attorneys in connection
with any such sale or distribution. FNH has agreed that, for a period of six
years following the Effective Date, it will provide indemnification to the
Company's directors, officers and advisers in connection with actions taken by
them in fulfillment of the foregoing commitments (see "The Merger--Interests
of Certain Persons in the Merger; Effect of the Merger on Certain Company
Benefit Plans--Certain Additional Information").
CONDITIONS TO THE MERGER
Under the Merger Agreement, each party's obligation to effect the Merger is
subject to the satisfaction, prior to the Effective Time, of the following
conditions: (a) the approval of the Merger Agreement by the requisite vote of
the Company Stockholders in accordance with applicable law (see "The Special
Meeting--Vote Required; Revocability of Proxies"); (b) the receipt of all
regulatory approvals, consents and waivers required to consummate the
transactions contemplated by the Merger Agreement (including, without
limitation, the Merger, the Bank Merger, and the registration, issuance and
distribution of the Secondary Participation Interests), and the expiration of
all applicable statutory waiting periods in respect thereof (all such
approvals and the expirations of all such waiting periods being referred to
herein as the "Requisite Regulatory Approvals") (see "The Merger--Regulatory
Approvals"); (c) no party to the Merger Agreement being subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger, the Bank Merger or any
other transaction contemplated by the Merger Agreement, and no litigation or
proceeding being pending against FNH or the Company or any of their respective
subsidiaries by any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity")
seeking to prevent consummation of the transactions contemplated by the Merger
Agreement; and (d) no statute, rule, regulation, order, injunction or decree
having been enacted, entered, promulgated, interpreted, applied or enforced by
any Governmental Entity which prohibits, restricts or makes illegal the
consummation of the Merger, the Bank Merger or any other transaction
contemplated by the Merger Agreement.
Under the Merger Agreement, the obligations of FNH and Merger Sub to effect
the Merger are subject to the satisfaction or waiver prior to the Effective
Time of the following additional conditions: (a) FNH shall have received from
the Company's independent certified public accountants certain "comfort"
letters with respect to certain financial information of the Company, in the
form customarily issued by such accountants in connection with transactions of
this type; (b) (i) certain representations and warranties of the Company set
forth in the Merger Agreement shall be true and correct in all respects as of
the date of the Merger Agreement and (except to the extent such
representations and warranties speak as of an earlier date or may be modified
by actions taken in compliance with the Merger Agreement) as of the Effective
Date as though made on and as of the Effective Date and (ii) the
representations and warranties of the Company set forth in the Merger
Agreement other than those specifically enumerated in the provision described
in clause (i) hereof shall be true and correct in all respects as of the date
of the Merger Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Effective Date as though
made on and as of the Effective Date; provided, however, that for purposes of
determining the satisfaction of the condition described in this clause (ii),
no effect will be given to any exception in such representations and
warranties relating to the best knowledge of the Company, materiality or a
"Material Adverse Effect" (as defined below), and provided further, however,
that, for purposes of the condition described in this clause (ii), such
representations and warranties will be deemed to be true and correct in all
material respects unless the failure or failures of such representations and
warranties to be so true and correct, individually or in the aggregate,
results or would reasonably be expected to result in a Material Adverse Effect
on the Company; (c) the Company shall have performed in all material respects
all obligations required to be performed by it under the Merger Agreement at
or prior to the Effective Date; (d) FNH shall have received legal opinions,
dated the Effective Date, from counsel to the Company, covering certain
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matters as set forth in the Merger Agreement; and (e) FNH shall have received
from the Company, to the extent necessary under the relevant option or warrant
agreements, the written consent, in form and substance reasonably satisfactory
to FNH, of all holders of options or warrants to purchase Company Common Stock
to the termination of such options (to the extent not exercised prior to the
Effective Time) in accordance with the provisions of the Merger Agreement (see
"The Merger--Interests of Certain Persons in the Merger; Effect of the Merger
on Certain Company Benefit Plans--Stock Option Plans").
Under the Merger Agreement, the obligation of the Company to effect the
Merger is subject to the satisfaction or waiver prior to the Effective Time of
the following additional conditions: (a) the representations and warranties of
FNH set forth in the Merger Agreement shall be true and correct in all
material respects as of the date of the Merger Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Effective Date as though made on and as of the Effective Date; (b) FNH
shall have performed in all material respects each of its covenants and
agreements contained in the Merger Agreement; (c) the Cal Fed Bank
Registration Statement shall have been declared effective by the OTS, and the
OTS shall not have issued any order preventing or suspending the use of the
Cal Fed Bank Registration Statement or the delivery of the Secondary
Participation Interests to the Exchange Agent or to the holders of Company
Common Stock; and (d) the Company shall have received legal opinions, dated
the Effective Date, from counsel to FNH and Merger Sub, covering certain
matters as set forth in the Merger Agreement.
As used in the Merger Agreement, the term "Material Adverse Effect" means an
effect which (i) is material and adverse to the business, properties, assets,
liabilities, financial condition or results of operations of the Company or
FNH, as the context may dictate, and its subsidiaries taken as a whole, or
(ii) significantly and adversely affects the ability of the Company or FNH, as
the context may dictate, to consummate the Merger by March 31, 1997 (or June
30, 1997, if such termination date is extended to that date as provided in the
Merger Agreement; see "--Termination of the Merger Agreement"), or to perform
its material obligations thereunder, provided however, that any actions taken
by the Company or any of its subsidiaries at the request of FNH pursuant to
the cooperation provisions described under "--Financing Arrangements of FNH"
and in the last paragraph under "--Conduct of Company Business Pending the
Merger," or pursuant to the Benefits Letter (see "THE MERGER--Interests of
Certain Persons in the Merger; Effect of the Merger on Certain Company Benefit
Plans"), or any consequences of such actions will not, individually or in the
aggregate, constitute a Material Adverse Effect on the Company.
No assurance can be provided as to when, or whether, the Requisite
Regulatory Approvals will be obtained or whether all of the other conditions
precedent to the Merger will be satisfied or waived by the party permitted to
do so (see "THE MERGER--Regulatory Approvals"). If the Merger is not effected
on or before March 31, 1997, (which date may, under certain circumstances, be
extended to June 30, 1997 by FNH), either party may terminate the Merger
Agreement; see "--Termination of the Merger Agreement."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of each
of the Company and FNH. These include, among other things, representations and
warranties of the Company as to (i) its organization, good standing and legal
status; (ii) its capitalization; (iii) the identity and ownership of its
subsidiaries; (iv) its corporate power and authority to enter into, and its
due authorization and delivery of, the Merger Agreement; (v) the Merger
Agreement not violating its charter, by-laws, applicable law and certain
material agreements, and the absence of the need (except as specified) for
governmental or third party consents to the Merger; (vi) the conformity to
applicable accounting standards of the Company's financial statements and the
accuracy of the Company's filings with the Commission and Cal Fed Bank's
filings with the OTS; (vii) the timely filing of required regulatory reports;
(viii) the absence of certain changes or events which would have, or would
reasonably be expected to have, a Material Adverse Effect on the Company; (ix)
certain tax matters; (x) the absence of pending or threatened legal
proceedings as to which there is a reasonable possibility of an adverse
determination and which, if adversely determined, would, individually or in
the aggregate, have or be reasonably expected to have, a Material Adverse
Effect on the Company; (xi) the absence of undisclosed liabilities which
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have had, or could be reasonably expected to have, a Material Adverse Effect
on the Company; (xii) certain material contracts of the Company; (xiii) the
absence of any agreements between it and any labor union or labor
organization, as well as the absence of any known labor disputes involving the
Company or any of its subsidiaries; (xiv) its employee benefit plans and
related matters; (xv) its good and marketable title to its material properties
and assets; (xvi) compliance with applicable material laws; (xvii) certain
environmental matters; (xviii) insurance; (xix) the identification of certain
substandard loans outstanding; (xx) the inapplicability of Section 203 of the
DGCL to the Merger Agreement and the Stock Option Agreement, and the receipt
of the approval of the Board of Directors of the Company necessary to exempt
the transactions contemplated by the Merger Agreement and the Stock Option
Agreement from the Company Rights Plan (see "--Company Rights Plan"); and
(xxi) certain interest rate management instruments.
The representations and warranties of FNH contained in the Merger Agreement
relate to, among other things, those as to (i) its organization and good
standing, (ii) its corporate power and authority to enter into, and its due
authorization and delivery of, the Merger Agreement; (iii) the Merger
Agreement not violating its charter, bylaws, applicable law and certain
material agreements; (iv) the absence of the need (except as specified) for
governmental or third party consents to the Merger; and (v) the availability
to FNH of sufficient funds to consummate the Merger and pay the aggregate cash
portion of the Per Share Merger Consideration (see "--Financing Arrangements
of FNH").
CONDUCT OF COMPANY BUSINESS PENDING THE MERGER
Except as expressly provided in the Merger Agreement or the Stock Option
Agreement or as agreed to by FNH, during the period from the date of the
Merger Agreement to the Effective Time, the Company has agreed that it will,
and that it will cause its subsidiaries to, (i) conduct its business and
maintain its books and records in the usual, regular and ordinary course
consistent with past practice, (ii) use its commercially reasonable efforts to
maintain and preserve intact its business organization, properties, leases,
employees and advantageous business relationships and retain the services of
its officers and key employees, (iii) except as required by applicable law,
refrain from taking any action which would adversely affect or delay the
ability of the Company, Cal Fed Bank, FNH, or Merger Sub to obtain any
necessary approvals, consents or waivers of any governmental authority
required for the transactions contemplated by the Merger Agreement or to
perform its covenants and agreements on a timely basis under the Merger
Agreement and (iv) except as required by applicable law, refrain from taking
any action that could be deemed to have a Material Adverse Effect on the
Company.
It is contemplated by the parties that during the period from the date of
the Merger Agreement to the Effective Time, the Company will continue to
operate in accordance with the 1996 Cal Fed Bancorp Inc. Business Plan as in
effect on the date of the Merger Agreement, or the 1997 Cal Fed Bancorp Inc.
Business Plan when such a Plan is adopted and put into effect. Notwithstanding
the foregoing, the Company has agreed that, during the period from the date of
the Merger Agreement to the Effective Time, and except as otherwise
contemplated by the Merger Agreement or the Stock Option Agreement, the
Company will not, and will not permit any of its subsidiaries, without the
prior written consent of FNH, to:
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other person; provided, however, that neither the
Company nor any of its subsidiaries will incur any indebtedness for
borrowed money (including reverse repurchase agreements) with a final
maturity date on or after July 28, 1998;
(b) adjust, split, combine or reclassify any capital stock; make, declare
or pay any dividend or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock (except for dividends paid by Cal Fed Bank to the Company) or any
securities or obligations convertible into or exchangeable for any shares
of its capital stock, or grant any stock appreciation rights or grant, sell
or issue to any individual, corporation or other person any right or option
to acquire, or securities evidencing a right to convert into or acquire,
any shares of its capital stock (except for regular quarterly cash
dividends on the Cal Fed Bank Series B Preferred Stock at the rate set
forth in the certificate of
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designation for such stock and except pursuant to the Company's Stockholder
Rights Plan (the "Company Rights Plan"); see "--Company Rights Plan"), or
issue any additional shares of capital stock except pursuant to (i) the
exercise of stock options or warrants outstanding as of the date of the
Merger Agreement and on the terms in effect on the date of the Merger
Agreement, (ii) the Stock Option Agreement and (iii) the conversion of the
XCF Debentures;
(c) other than in the ordinary course of business consistent with past
practice, sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties, leases or assets to any person, or cancel, release or
assign any indebtedness of any person, except pursuant to contracts or
agreements in force at the date of the Merger Agreement and disclosed to
FNH;
(d) enter into, renew or amend any employment agreement with any employee
or director, increase in any manner the compensation or fringe benefits of
any of its employees or directors, or create or institute, or make any
payments pursuant to, any severance plan, bonus plan, incentive
compensation plan, or package, or pay any pension or retirement allowance
not required by any existing plan or agreement to any such employees or
directors, or become a party to, amend or commit itself to, or otherwise
establish any trust or account related to, any employee benefit plan, with
or for the benefit of any employee, other than general increases in
compensation in the ordinary course of business consistent with past
practice or any amendment to any employee plan, program or arrangement
required by applicable law (provided that the Company will use its best
efforts to minimize the cost of any such amendment as permitted under such
applicable law), or voluntarily accelerate the vesting of any stock options
or other compensation or benefit;
(e) other than in the ordinary course of business consistent with past
practice, make any investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property
or assets of any person; provided, however, that no investment or series of
related investments may be made in an amount in excess of $1,000,000 except
in (i) securities which would be reported under the caption "cash and cash
equivalents" on the Company's consolidated statement of financial condition
and (ii) federal government securities with a maturity of not more than two
years, provided further, however, that in no event may the Company or any
of its subsidiaries make any acquisition of equity securities or business
operations without FNH's prior consent;
(f) enter into, renew or terminate any contract or agreement, or make any
change in any of its leases or contracts, other than any lease, contract or
agreement involving aggregate payments of $250,000 or less per annum, and
either (i) having a term of less than or equal to one year or (ii) which
may be terminated with notice of thirty days without payment by the Company
or any of its subsidiaries of a fee, penalty or other payment;
(g) settle any claim, action or proceeding involving any liability of the
Company or any of its subsidiaries for money damages in excess of $250,000,
exclusive of contributions from insurers, or involving material
restrictions upon the business or operations of the Company or any of its
subsidiaries;
(h) except in the ordinary course of business, waive or release any
material right or collateral or cancel or compromise any extension of
credit or other debt or claim;
(i) make, renegotiate, renew, increase, extend or purchase any loan,
lease (credit equivalent), advance, credit enhancement or other extension
of credit, or make any commitment in respect of any of the foregoing,
except for loans, advances or commitments in amounts (A) less than
$1,000,000 made in the ordinary course of business consistent with past
practice and made in conformity with all applicable policies and procedures
or (B) greater than $1,000,000 if such loans, advances or commitments
conform to the Company's written loan underwriting policies as of the date
of the Merger Agreement;
(j) except as otherwise contemplated by the Merger Agreement, change its
method of accounting as in effect at December 31, 1995, except as required
by changes in generally accepted accounting principles ("GAAP") as
concurred in by the Company's independent auditors, or as required by
regulatory accounting principles or regulatory requirements;
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(k) enter into any new activities or lines of business, or cease to
conduct any material activities or lines of business that it conducts on
the date hereof, or conduct any material business activity not consistent
with past practice;
(l) amend its certificate of incorporation, by-laws or other similar
governing documents;
(m) make any capital expenditure other than (A) in accordance with the
1996 Cal Fed Bancorp Inc. Business Plan or the 1997 Cal Fed Bancorp Inc.
Business Plan, as applicable, or (B) as necessary to maintain its assets in
good repair; provided, however, that no capital expenditure (other than
expenditures in accordance with the 1996 Cal Fed Bancorp Inc. Business Plan
or the 1997 Cal Fed Bancorp Inc. Business Plan, as applicable) may be made
which individually or in the aggregate with all other capital expenditures
exceeds $1,500,000;
(n) take certain action with respect to, or that could reasonably be
expected to adversely affect the value of its rights or interest in, the
Goodwill Litigation (see "--Prosecution of Goodwill Litigation");
(o) hold any formal meeting with the Appeals Office of the Internal
Revenue Service or any similar state taxing authority to settle or
compromise any audit, examination or other proceeding with respect to any
federal or state income tax liability of the Company or any of its
subsidiaries without prior notification to FNH and allowing a
representative of FNH to attend, but not participate in, such formal
meeting;
(p) agree to the finality of any audit, examination or other proceeding
with respect to any federal or state income tax liability of the Company or
any of its subsidiaries; or
(q) agree to, or make any commitment to, take any of the foregoing
prohibited actions.
The Merger Agreement requires the Company to cooperate with FNH and Merger
Sub in completing the transactions contemplated thereby and to refrain from
taking, or making any commitment to take, any action that is intended or may
reasonably be expected to cause any of its representations and warrants not to
be true and correct (see "--Representations and Warranties") or that is
inconsistent with or prohibited by the provisions summarized above under this
caption.
Pursuant to its obligation in the Merger Agreement, the Company has
restructured its acquisition of First Citizens Bank of Sherman Oaks,
California, which was pending when the Merger Agreement was signed, as a
branch purchase and has withdrawn its application to the Board of Governors of
the Federal Reserve System to become a bank holding company in connection with
such purchase.
The Merger Agreement also provides that, at the request of FNH, after the
date on which all required federal depository institution regulatory approvals
are received and prior to the Effective Time, the Company will (i) to the
extent consistent with GAAP and regulatory accounting principles and
requirements, in each case as applied to financial institutions and not
objected to by the Company's independent certified public accountants, modify
its loan, litigation and real estate valuation policies and practices
(including modifying its loan classifications and levels of reserves and
establishing specific reserves on loans and REO properties) and its other
accounting methods or periods so as to be consistent with those of FNH, (ii)
pay or accrue certain expenses, (iii) dispose of certain assets, and (iv) take
any other action as FNH may reasonably request in order to facilitate and
effect the transfer of contractual and other rights to FNH and the integration
of the businesses and operations of the Company and FNH; provided, however,
that the Company will not be required to take such action unless (A) FNH
agrees in writing that all conditions to FNH's obligation to consummate the
Merger set forth in the Merger Agreement (other than the expiration of the 30-
day statutory waiting period following approval of the Merger by the OTS) have
been satisfied or waived (see "--Conditions to the Merger"), (B) the Company
has received a written, irrevocable waiver by FNH of its rights to terminate
the Merger Agreement (see "--Termination of the Merger Agreement"), (C) all of
the conditions to the Company's obligation to consummate the Merger (other
than the statutory waiting period described above) have been satisfied (see
"--Conditions to the Merger"), and (D) FNH has delivered to the Company
documentary evidence reasonably satisfactory to the Company certifying that
FNH has sufficient cash to pay the aggregate cash portion of the Per Share
Merger Consideration (see "--Financing Arrangements of FNH"). The Company's
representations, warranties and covenants contained in the Merger Agreement
will not be deemed to be untrue or breached in any respect for any purpose as
a consequence of any modifications or changes undertaken solely pursuant to
the foregoing covenants.
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NO SOLICITATION OF TRANSACTIONS BY COMPANY
In the Merger Agreement, the Company has agreed that neither it nor any of
its subsidiaries will authorize or permit any of its officers, directors,
employees, agents or representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of its
subsidiaries) to directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any proposal or offer
(including, without limitation, any proposal, tender offer or exchange offer
to stockholders of the Company) with respect to a merger, consolidation or
similar transaction involving, or any purchase of all or any significant
portion of the assets, deposits or any equity securities of, the Company or
any of its subsidiaries (any such proposal or offer being referred to as an
"Acquisition Proposal") or, except to the extent legally required for the
discharge by the Company Board of its fiduciary duties as advised by its
counsel with respect to an unsolicited offer from a third party, engage in any
negotiations concerning or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal. The Company has agreed that it will notify FNH immediately if any
such inquiries, proposals or offers are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with the Company or any of its subsidiaries, and the
Company will promptly thereafter provide the details of any such communication
to FNH in writing.
COMPANY RIGHTS PLAN
On February 16, 1996, the Company Board adopted the Company Rights Plan,
pursuant to which it declared a dividend of certain stock purchase rights (the
"Rights;" see Note (2) to the table under "Beneficial Ownership Company Common
Stock--Ownership of Directors and Executive Officers"). Pursuant to the
Company Rights Plan, if a person or group, without the prior approval of the
Company Board, becomes the beneficial owner of 15% or more of the outstanding
Company Common Stock, each Right, except any Rights held by the non-approved
Acquiror (or its affiliates or transferees), will entitle the holder to
purchase a number of shares of Company Common Stock that has a then-current
market value of twice the exercise price of the Rights, which is $55 (subject
to adjustment). As contemplated by the Merger Agreement, the Company Board has
taken action under the terms of the Company Rights Plan to exempt thereunder
both the Merger and any exercise of the FNH Option and to prevent such
transactions, as well as the execution of the Merger Agreement and the Stock
Option Agreement, from triggering the Rights. In addition, as contemplated by
the Merger Agreement, the Company Rights Plan has been amended to provide that
the Rights will expire at the Effective Time.
PROSECUTION OF GOODWILL LITIGATION
In the Merger Agreement, the Company has agreed not to settle, compromise,
dismiss or cease prosecution of the Goodwill Litigation or sell, transfer,
assign, distribute or convey all or part of, or otherwise take any action that
could reasonably be expected to adversely affect the value of, its rights or
interest in the Goodwill Litigation.
In the Merger Agreement, FNH has agreed with the Company (although the
Merger Agreement provides that the covenants set forth in clauses (i), (ii)
and (iv) below are not enforceable by third parties) that, following the
Effective Time, it will, and will cause Cal Fed Bank and (subject to clause
(iii) below in this paragraph) any permitted successor to Cal Fed Bank, as
applicable, to (i) take all actions necessary or desirable to pursue Cal Fed
Bank's claims in the Goodwill Litigation, (ii) file with applicable regulatory
agencies such periodic and other reports as are necessary to furnish and
update information to holders of the CALGZ Interests or the Secondary
Participation Interests, (iii) refrain from taking any action that would
violate certain provisions of the U.S. Code relating to claims against the
U.S. Government, including, without limitation, any action that would
constitute an "assignment" (as defined in those provisions) of the claims in
the Goodwill Litigation and (iv) refrain from taking any action to dismiss,
settle, compromise or otherwise cease prosecution of the Goodwill Litigation
on terms that do not result solely in the payment of cash or other readily
monetizable consideration by or on behalf of the United States to Cal Fed
Bank.
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In the Merger Agreement, FNH has also agreed that, as soon as practicable
after the receipt of any payment from the United States in settlement of, or
satisfaction of a final judgment obtained in, the Goodwill Litigation, FNH
will cause Cal Fed Bank to distribute the applicable portion of such payment
in a manner consistent with the terms of the CALGZ Interests and the Secondary
Participation Interests.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated, and the Merger abandoned, prior to
the Effective Date, either before or after its approval by Company
Stockholders, under the following circumstances:
(a) by the mutual consent of FNH and the Company, if the board of
directors of each so determines by vote of a majority of the members of its
entire board;
(b) by either of FNH or the Company if either (i) any request or
application for a Requisite Regulatory Approval has been denied or (ii) any
governmental authority of competent jurisdiction has issued a final,
unappealable order enjoining or otherwise prohibiting consummation of the
transactions contemplated by this Merger Agreement;
(c) by either of FNH or the Company, if its board of directors so
determines by vote of a majority of the members of its entire board, in the
event that the Merger is not consummated by March 31, 1997, unless the
failure to so consummate by such time is due to the breach of any material
representation, warranty or covenant contained in the Merger Agreement by
the party seeking to terminate; provided, however that in the event the
Merger is not consummated by March 31, 1997 as a result of the failure to
obtain any Requisite Regulatory Approval for reasons entirely unrelated to
the financing of the Merger, the capital structure of FNH or Merger Sub,
the adequacy of FNH's or Merger Sub's financial condition and/or the
prospective effect of such financing, structure or condition on Cal Fed
Bank, FNH may extend the termination date described in this subparagraph
(c) to June 30, 1997;
(d) by either of FNH or the Company (provided that the Company will not
be entitled to terminate the Merger Agreement pursuant to this subparagraph
(d) if it is in material breach of its obligations under the Merger
Agreement with respect to the Special Meeting) if any approval of the
Company Stockholders required for the consummation of the Merger has not
been obtained by reason of the failure to obtain the required vote at a
duly held meeting of Company Stockholders or at any adjournment or
postponement thereof;
(e) by either of FNH or the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained in the Merger Agreement) if there has been a
material breach of any of the representations or warranties set forth in
the Merger Agreement on the part of the other party, which breach is not
cured within thirty days following written notice to the party committing
such breach, or which breach, by its nature, cannot be cured prior to the
Effective Time; provided, however, that the non-breaching party will not
have the right to terminate the Merger Agreement pursuant to this
subparagraph (e) unless such breach, together with all other such breaches,
would entitle the non-breaching party not to consummate the transactions
contemplated by the Merger Agreement (see "--Conditions to the Merger");
(f) by either of FNH or the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained in the Merger Agreement) if there has been a
material breach of any of the covenants or agreements set forth in the
Merger Agreement on the part of the other party, which breach has not been
cured or is incapable of being cured within thirty days following receipt
by the breaching party of written notice of such breach from the other
party; or
(g) by FNH, if the Company Board withdraws, modifies or amends its
recommendation contained in this Proxy Statement that Company Stockholders
approve and adopt the Merger Agreement.
In the event of any termination of the Merger Agreement by either FNH or the
Company, as provided above, the Merger Agreement will thereafter become void
and there will be no liability on the part of any of the parties thereto or
their respective officers or directors, except that (i) certain provisions in
the Merger Agreement relating
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to confidentiality of information and expenses will survive any such
termination and (ii) no party will be relieved or released from any
liabilities or damages arising out of its willful breach of any provisions of
the Merger Agreement. Under certain circumstances involving a termination of
the Merger Agreement, the FNH Option may become exercisable. See "The Stock
Option Agreement."
EXPENSES
The Merger Agreement provides that each of FNH and the Company will bear all
expenses incurred by it in connection with the Merger Agreement and the
transactions contemplated thereby.
THE STOCK OPTION AGREEMENT
The following description of certain provisions of the Stock Option
Agreement is qualified in its entirety by reference to the full text of the
Stock Option Agreement, a copy of which is attached to this Proxy Statement as
Appendix B and incorporated herein by reference.
GENERAL
As an inducement to FNH to execute and deliver the Merger Agreement, on July
27, 1996 FNH and the Company entered into the Stock Option Agreement, the
execution of which was a condition to FNH's merger proposal (see "The Merger--
Background of the Merger"). Pursuant to the Stock Option Agreement, the
Company granted FNH the FNH Option, entitling FNH to purchase up to 9,829,992
authorized but unissued shares of Company Common Stock (an amount equal to
approximately 19.9% of its then outstanding shares and 16.6% of the shares
that would be outstanding upon exercise in full of the FNH Option) for $21.375
per share (the closing price of Company Common Stock on the NYSE on July 26,
1996; see "Market Prices of Company Common Stock"). The terms of the FNH
Option are subject to adjustment so that, in the event of any change in
Company Common Stock by reason of stock dividends, split-ups,
recapitalizations or the like, the type and number of shares of Company Common
Stock subject to the FNH Option, and the purchase price per share, as the case
may be, will be adjusted appropriately so that, after such issuance and
together with shares of Company Common Stock previously issued pursuant to the
exercise of the FNH Option, the number of shares of Company Common Stock
subject to the FNH Option equals 19.9% of the number of shares of Company
Common Stock then issued and outstanding.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreement may
have the effect of discouraging persons who might now or prior to the
Effective Time be interested in acquiring all of, or a significant interest
in, the Company, from considering or proposing such an acquisition, even if
such persons were prepared to pay a higher price per share for Company Common
Stock than the then-current market price of such shares. The acquisition of,
or of an interest in, the Company, or an agreement to do either, could cause
the FNH Option to become exercisable. The existence of the Stock Option
Agreement could significantly increase the cost to a potential acquiror of
acquiring the Company compared to its cost had the Stock Option Agreement not
been entered into. Such increased cost might discourage a potential acquiror
from considering or proposing an acquisition or might result in a potential
acquiror proposing to pay a lower per share price to acquire the Company than
it might otherwise have proposed to pay.
EXERCISABILITY
The FNH Option will become exercisable in whole or in part at any time prior
to its expiration, if, but only if, both a Preliminary Purchase Event (as
hereinafter defined) and a Purchase Event (as hereinafter defined) has
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined). To the Company's knowledge, no Preliminary Purchase
Event or Purchase Event has occurred as of the date of this Proxy Statement.
51
<PAGE>
For purposes of the Stock Option Agreement, the term "Preliminary Purchase
Event" means any of the following: (i) the Company or any of its subsidiaries,
without FNH's prior written consent, shall have entered into an agreement with
any person (other than FNH or any of it subsidiaries) to engage in, or the
Company Board shall have recommended that Company Stockholders approve, (x) a
merger, consolidation or similar transaction involving the Company or any
Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X promulgated
by the Commission) of the Company, (y) a purchase, lease or other acquisition
of all or substantially all of the assets or deposits of the Company or any of
its Significant Subsidiaries, or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of the Company or any
of its Significant Subsidiaries (any such transaction of the type referred to
in clauses (x), (y) and (z) being referred to hereinafter as an "Acquisition
Transaction"); (ii) any person other than FNH or any of its subsidiaries shall
have acquired beneficial ownership of 10% or more of the outstanding shares of
Company Common Stock; (iii) the Company Stockholders shall have voted and
failed to approve the transactions contemplated by the Merger Agreement at a
meeting held for that purpose, or such meeting has not been held in violation
of the Merger Agreement or has been cancelled prior to termination of the
Merger Agreement and, prior to (x) such meeting or (y) if such meeting has not
been held or has been cancelled, such termination, it was publicly announced
that any person (other than FNH or any of its subsidiaries) has made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction; (iv) the Company Board has withdrawn or modified its
recommendation that the Company Stockholders approve the transactions
contemplated by the Merger Agreement, or the Company or any of its
subsidiaries, without FNH's prior written consent, has authorized, recommended
or proposed an agreement to engage in an Acquisition Transaction with any
person other than FNH or any of its subsidiaries; (v) any person other than
FNH or any of its subsidiaries has made a proposal to the Company or its
stockholders to engage in an Acquisition Transaction (including through a
tender offer or exchange offer), any such proposal has been publicly
announced, or any person other than FNH or any of its subsidiaries shall have
filed with the Commission a registration statement with respect to a potential
exchange offer that would constitute an Acquisition Transaction described in
clause (i)(z) above; (vi) the Company has wilfully breached any covenant or
obligation contained in the Merger Agreement following a proposal made by a
third party to the Company or its stockholders to engage in an Acquisition
Transaction, and such breach would entitle FNH to terminate the Merger
Agreement; or (vii) any person other than FNH or any of its subsidiaries,
other than in connection with a transaction to which FNH has given its prior
written consent, has filed an application or notice with the OTS or other
governmental or regulatory authority, for approval to engage in an Acquisition
Transaction.
The term "Purchase Event" means either of the following: (i) the acquisition
by any person (other than FNH or any of its subsidiaries) of beneficial
ownership of 20% or more of the then-outstanding shares of Company Common
Stock; or (ii) the occurrence of a Preliminary Purchase Event described in
clause (i) of the immediately preceding paragraph above, except that the
percentage referred to in clause (z) thereof is 20%.
The term "Exercise Termination Event" means the earliest to occur of the
following: (i) the Effective Time; (ii) termination of the Merger Agreement in
accordance with the provisions thereof if such termination occurs prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event (unless such
termination results from a material breach of any covenant or agreement of the
Company set forth in the Merger Agreement); (iii) the passage of 18 months
after termination of the Merger Agreement if such termination is concurrent
with or follows the occurrence of a Preliminary Purchase Event; (iv) 18 months
after the termination of the Merger Agreement if such termination results from
a material breach by the Company of any of its covenants or agreements
contained in the Merger Agreement, or (v) 12 months after the first occurrence
of a Purchase Event. Notwithstanding the termination of the FNH Option, FNH
shall be entitled to purchase the shares of Company Common Stock with respect
to which it has exercised the FNH Option in accordance with the terms of the
Stock Option Agreement prior to the termination of the FNH Option.
FNH PUT RIGHT
Upon the occurrence of a "Put Purchase Event" (as hereinafter defined), (i)
FNH has the right to request (the date of such request being the "FNH Option
Repurchase Request Date") the Company to repurchase the
52
<PAGE>
FNH Option and (ii) any owner (the "Owner") of shares of Company Common Stock
purchased through the exercise of the FNH Option ("Option Shares") has the
right to request (the date of such request being the "FNH Option Share
Repurchase Request Date") the Company to repurchase the Owner's Option Shares.
The term "Put Purchase Event" means either of the following: (i) the
acquisition by any person (other than FNH or any of its subsidiaries) of
beneficial ownership of 50% of more of the then-outstanding shares of Company
Common Stock; or (ii) the consummation of an Acquisition Transaction with any
person other than FNH or any subsidiaries of FNH. Where this put right is
exercised with respect to the FNH Option, the price payable by the Company is
equal to the amount by which (A) the "market/offer price" (as hereinafter
defined) exceeds (B) the then-applicable exercise price of the FNH Option
multiplied by the number of option shares for which the FNH Option may then be
exercised. Where this put right is exercised with respect to any Option
Shares, the price payable by the Company is equal to the "market/offer price"
multiplied by the applicable number of Option Shares.
The term "market/offer price" shall mean, as of any determination date, the
highest of (i) the price per share of Company Common Stock at which a tender
offer or exchange offer therefor has been made after the date of the Stock
Option Agreement and on or prior to the FNH Option Repurchase Request Date or
the Option Share Repurchase Request Date, as the case may be, (ii) the price
per share of Company Common Stock paid or to be paid by any third party
pursuant to an agreement with the Company (whether by way of a merger,
consolidation or otherwise), (iii) the highest last sale price for shares of
Company Common Stock within the 360-day period ending on the FNH Option
Repurchase Request Date or the Option Share Repurchase Request Date, as the
case may be, which is reported by The Wall Street Journal or, if not reported
thereby, another authoritative source, or (iv) in the event of a sale of all
or substantially all of the Company's assets, the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of the Company as determined by a nationally recognized independent investment
banking firm selected by FNH or the Owner, as the case may be, divided by the
number of shares of Company Common Stock outstanding at the time of such sale.
In determining the market/offer price, the value of consideration other than
cash shall be the value determined by a nationally recognized independent
investment banking firm selected by FNH or the Owner, as the case may be,
whose determination shall be conclusive and binding on all parties.
LIMITATION ON TOTAL PROFIT
Notwithstanding any other provisions of the Stock Option Agreement, the
Total Profit (as hereinafter defined) which FNH may realize from the FNH
Option may not exceed $25 million, and, if the Total Profit otherwise would
exceed such amount, FNH, at its sole election, shall (a) reduce the number of
shares of Company Common Stock subject to the FNH Option, (b) deliver to the
Company for cancellation Option Shares, (c) pay cash to the Company or (d)
take a combination of any of the foregoing, so that FNH's Total Profit will
not exceed $25 million after taking into account such actions. For these
purposes, the term "Total Profit" means the aggregate amount (before taxes) of
(i) the amount received by FNH pursuant to the Company's repurchase of the FNH
Option (or any portion thereof) in accordance with the terms of the Stock
Option Agreement, (ii) (x) the amount received by FNH pursuant to the
Company's repurchase of Option Shares in accordance with the terms of the
Stock Option Agreement, less (y) FNH's purchase price for such Option Shares,
(iii) the net cash amounts received by FNH pursuant to the sale of Option
Shares (or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, less FNH's purchase price of such Option
Shares, and (iv) any amounts received by FNH on the transfer of the FNH Option
(or any portion thereof) to any unaffiliated party.
FNH REGISTRATION RIGHTS
The Company has granted FNB certain registration rights with respect to the
FNH Option and the Option Shares. These rights include that the Company will
file up to two registration statements under the Securities Act, if requested
by FNB during the period of exercisability of the FNH Option, to permit the
sale or other disposition of Option Shares with respect to which the FNH has
been, or is concurrently with FNH's registration
53
<PAGE>
request, exercised. Such registration rights are subject to an exception that
allows the Company, or person assisting the Company in a public offering of
shares, in the exercise of its business judgment, to delay such registration
(but by no more than 90 days) or reduce the number of shares purchasable by
FNB (such reduction affecting only the then current exercise of the FNH
Option, and not the total number of Option Shares) under certain enumerated
circumstances. In connection with any registration described above, the
Company and FNB have agreed that they will provide to each other and any
underwriter of the offering customary representations, warranties, indemnities
and other agreements.
REGULATORY APPROVAL
Under HOLA, without the prior approval of the OTS, FNH may not directly or
indirectly acquire more than 5% of the voting shares of any savings
association or any savings and loan holding company (including the Company)
which is not a subsidiary of FNH. Accordingly, the exercise of the FNH Option
for a number of Option Shares that would result in FNH directly or indirectly
owning more than 5% of the outstanding shares of Company Common Stock will
require such prior approval.
54
<PAGE>
BENEFICIAL OWNERSHIP OF COMPANY COMMON STOCK
OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding beneficial ownership,
as of the Record Date and within the meaning of Rule 13d-3 under the Exchange
Act, of Company Common Stock by the directors of the Company individually, the
executive officers of the Company individually and the executive officers of
Cal Fed Bank (who are not also executive officers of the Company)
individually. Since the table reflects beneficial ownership determined
pursuant to the applicable rules of the Commission, the information is not
necessarily indicative of beneficial ownership for any other purpose.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED(1)(2) CLASS
------------------------ ------------ ----------
<S> <C> <C>
Michael W. Arthur............................ 80,002(3)(4) *
Gary W. Brummett............................. 100,026(5)(6) *
Dale E. Cohen................................ 100,025(5)(7) *
John F. Davis................................ 20,000(3) *
Richard A. Fitch............................. 100,000(5) *
James J. Gaffney............................. 33,334(3) *
David Gilbert, Ph.D. ........................ 20,000(3) *
Edward G. Harshfield......................... 300,000(8) *
James F. Hurley.............................. 138,655(9) *
Carl A. LoBue................................ 71,335(3)(10) *
Thomas F. Michels............................ 20,440(3) *
Joseph M. Petitti............................ 25,003(11) *
Warren A. Raybould........................... 33,436(12) *
Jeffrey A. Rigsby............................ 25,000(11) *
Douglas J. Wallis............................ 137,540(9) *
Peter G. Wyman............................... 9,800(13) *
All directors and executive officers of the
Company and of Cal Fed Bank as a group (16
persons).................................... 1,214,596(14) 2.41
</TABLE>
- --------
* Less than 1%.
(1) Unless otherwise indicated, (i) beneficial ownership is direct and (ii)
the person indicated has sole voting and investment power.
(2) On February 16, 1996, the Company Board declared a dividend distribution
of one Right for each outstanding share of Company Common Stock to
stockholders of record on March 15, 1996 and with respect to shares of
Company Common Stock issued thereafter until certain events occur.
Consequently, each share of Company Common Stock shown in this table and
the table set forth below under "--Ownership of Certain Beneficial
Owners" includes an associated Right. See "The Merger Agreement--Company
Rights Plan."
(3) Includes 20,000 shares of Company Common Stock represented by non-
employee director stock options held by such person under the Non-
Employee Director Stock Option Plan, which are currently exercisable and
as to which shares no voting or investment power is currently held.
(4) Of these holdings, 6,667 shares are held by Mr. Arthur's wife.
Additionally, each of Mr. Arthur's two daughters owns 3,334 shares. Mr.
Arthur has shared voting and investment power in the 13,335 shares.
(5) Includes 100,000 shares of Company Common Stock represented by stock
options granted pursuant to the Employee Stock Option Plan which are
currently exercisable, and as to which shares no voting or investment
power is currently held.
(6) Includes 26 shares held indirectly through Cal Fed Bank's Investment Plus
Plan, a qualified plan under Section 401(k) of the Internal Revenue Code.
(7) Includes 25 shares held indirectly through Cal Fed Bank's Investment Plus
Plan.
(8) Consists of 300,000 shares of Company Common Stock represented by stock
options granted pursuant to the Employee Stock Option Plan which are
currently exercisable, and as to which shares no voting or investment
power is currently held.
55
<PAGE>
(9) Includes 137,500 shares of Company Common Stock represented by stock
options and warrants granted pursuant to the Employee Stock Option Plan
which are currently exercisable, and as to which shares no voting or
investment power is currently held.
(10) Of these holdings, 3,334 shares are held indirectly through a corporation
in which Mr. LoBue owns a 79% interest, and has shared investment and
voting power with respect to the shares. Additionally, 3,900 shares are
held by Mr. LoBue's wife, as to which he has no voting or investment
power.
(11) Includes 25,000 shares of Company Common Stock represented by stock
options granted pursuant to the Employee Stock Option Plan which are
currently exercisable, and as to which shares no voting or investment
power is currently held.
(12) Includes 33,333 shares of Company Common Stock represented by stock
options granted pursuant to the Employee Stock Option Plan which are
currently exercisable, and as to which shares no voting or investment
power is currently held.
(13) Includes 9,800 shares of Company Common Stock represented by stock
options granted pursuant to the Employee Stock Option Plan which are
currently exercisable, and as to which shares no voting or investment
power is currently held.
(14) Includes 1,088,133 shares of Company Common Stock represented by stock
options and warrants held by the non-employee directors and executive
officers under the Non-Employee Director Stock Option Plan and the
Employee Stock Option Plan, respectively, which options are currently
exercisable, and as to which shares no voting or investment power is
currently held.
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, management knows of no person, except as set forth
below, who is the beneficial owner of more than 5% of the issued and
outstanding Company Common Stock. The following information was filed with the
OTS and was also provided to Cal Fed Bank.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------------------ -------------------- --------
<S> <C> <C>
T. Rowe Price Associates, Inc.
T. Rowe Price Growth and Income Fund, Inc. ... 3,476,100 (1) 7.03%
100 East Pratt Street
Baltimore, Maryland 21202
Pioneering Management Corporation............. 3,304,200 (2) 6.69%
60 State Street
Boston, Massachusetts 02109
</TABLE>
- --------
(1) Based upon a Schedule 13G dated February 14, 1996. These shares are owned
by various individual and institutional investors, including T. Rowe Price
Growth and Income Fund, Inc. (which owns 3,372,100 shares of Company
Common Stock, representing 6.82% of the class) to which T. Rowe Price
Associates, Inc. ("Price Associates") serves as investment adviser with
power to direct investments and/or power to vote the securities. Price
Associates has informed Cal Fed Bank that it has sole power to dispose of
the shares and has sole voting power over 79,000 shares of Company Common
Stock. In addition, T. Rowe Price Growth and Income Fund, Inc. has
informed Cal Fed Bank that it has sole voting power over 3,372,100 shares
of Company Common Stock. For purposes of the reporting requirements of the
Exchange Act, Price Associates is deemed to be a beneficial owner of such
securities; however, Price Associates has informed Cal Fed Bank that it
expressly disclaims such beneficial ownership.
(2) Based upon a Schedule 13G dated January 26, 1996. Pioneering Management
Corporation has informed Cal Fed Bank that with respect to these shares of
Common Stock, it has sole power to vote the securities and shared power to
dispose of the securities.
56
<PAGE>
MARKET PRICES OF COMPANY COMMON STOCK
Company Common Stock is listed on the NYSE and the PSE under the name Cal
Fed Bancorp Inc. and traded under the symbol "CAL." Prior to January 1, 1996,
when Cal Fed Bank became a subsidiary of the Company (see "The Merger--Parties
to the Merger Agreement--The Company and Cal Fed Bank"), the Common Stock of
Cal Fed Bank was listed on the NYSE and the PSE under the name California
Federal Bank, A Federal Savings Bank, and the same symbol (the Cal Fed Bank
Series B Preferred Stock is also traded on the NYSE under the symbol
"CALPRB"). The following table sets forth, for the quarters indicated, the
high and low sales price per share of Company Common Stock or, in the case of
quarters occurring in 1994 and 1995, the Common Stock of Cal Fed Bank, on the
NYSE.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994 HIGH LOW
----------------- ------- ------
<S> <C> <C>
First Quarter................................................. $16 3/4 9 1/4
Second Quarter................................................ 12 3/4 9 3/8
Third Quarter................................................. 14 3/8 11 5/8
Fourth Quarter................................................ 13 1/2 9 1/4
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995 HIGH LOW
----------------- ------- ------
<S> <C> <C>
First Quarter................................................. $11 1/8 9 1/2
Second Quarter................................................ 13 1/8 10 1/2
Third Quarter................................................. 16 5/8 13 1/8
Fourth Quarter................................................ 16 14 1/8
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996 HIGH LOW
----------------- ------- ------
<S> <C> <C>
First Quarter................................................. $18 1/8 14 3/4
Second Quarter................................................ 19 16 1/8
Third Quarter................................................. 23 1/4 16 1/2
Fourth Quarter (through November 6, 1996)..................... 23 3/8 23 1/4
</TABLE>
On June 21, 1996 (the last trading day preceding the meeting of the Company
Board at which FNH's merger proposal was first considered by the Company
Board), the closing price of Company Common Stock on the NYSE was $17 7/8. On
July 24, 1996 (the last trading day preceding the publication of an article in
The Wall Street Journal reporting that FNH was rumored to be in talks to
acquire the Company for between $22 and $24 per share in cash), the closing
price of Company Common Stock on the NYSE was $20 1/8. On July 25, 1996 (the
last trading day preceding the meeting of the Company Board at which the
Merger Agreement was approved), the closing price of Company Common Stock on
the NYSE was $21 3/8. On July 26, 1996 (the last trading day preceding the
public announcements by the Company and FNH of the execution of the Merger
Agreement), the closing price of Company Common Stock on the NYSE was $21 3/8.
On November 6, 1996 (the most recent practicable date prior to the printing of
this Proxy Statement), the closing price of Company Common Stock on the NYSE
was $23 1/4. See "The Merger--Background of the Merger." COMPANY STOCKHOLDERS
ARE URGED TO OBTAIN CURRENT INFORMATION WITH RESPECT TO THE TRADING PRICE OF
COMPANY COMMON STOCK.
During the period reflected in the table above, neither Cal Fed Bank (prior
to January 1, 1996) nor the Company (thereafter) paid cash dividends on its
respective Common Stock. On July 28, 1995, Cal Fed Bank distributed the CALGZ
Interests as a dividend on its Common Stock.
57
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
EXPLANATORY NOTE
Subject to the next paragraph, the selected consolidated financial data and
other data shown on the following pages as of December 31, 1991 through 1995,
respectively, and for each the years in the five-year period ended December
31, 1995, is derived from, and should be read in conjunction with, the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 (the
"1995 Form 10-K") and the audited consolidated financial statements of the
Company and its subsidiaries included in the Company's Current Report on
Form 8-K dated September 13, 1996 (the "September 1996 Form 8-K"), in each
case as filed with the Commission. The selected consolidated financial and
other data shown on the following pages as of June 30, 1996 and 1995,
respectively, and for the six-month periods ended June 30, 1996 and June 30,
1995, has been derived from, and should be read in conjunction with, the
unaudited consolidated financial statements contained in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 (the "June
1996 Form 10-Q"), as filed with the Commission. The 1995 Form 10-K, the June
1996 Form 10-Q and the September 1996 Form 8-K (collectively, the "Company
Reports"), which are incorporated herein by reference (see "Incorporation of
Certain Documents by Reference"), contain more comprehensive financial and
other information than is shown on the following pages and the information
that is shown on the following pages is qualified by reference to the
financial and other information contained in the Company Reports.
Prior to the consummation of the Holding Company Reorganization on January
1, 1996 (see "The Merger--Parties to the Merger Agreement--The Company and Cal
Fed Bank"), the Company either did not exist or was not subject to the
informational requirements of the Exchange Act whereas Cal Fed Bank was so
subject. However, the audited consolidated financial statements of the Company
contained in the September 1996 Form 8-K and the unaudited consolidated
financial statements of the Company contained in the June 1996 Form 10-Q each
give effect to the Holding Company Reorganization on an "as if" pooling-of-
interests basis, and the selected consolidated financial and other data shown
on the following pages reflects the same adjustments to give effect to the
consummation of the Holding Company Reorganization as were made to the audited
consolidated financial statements of Cal Fed Bank and its subsidiaries
contained in the 1995 Form 10-K in preparing such audited consolidated
financial statements of the Company. The audited consolidated financial
statements of the Company included in the September 1996 Form 8-K do not
include consolidated statements of financial condition of the Company for
years prior to 1994 nor consolidated statements of operations, consolidated
statements of changes in stockholders' equity or consolidated statements of
cash flows of the Company for years prior to 1993. Accordingly, certain of the
selected consolidated financial data and other data shown on the following
pages is derived not from the more comprehensive financial and other
information contained in the Company Reports but from the more comprehensive
financial and other information contained in, and should be read in
conjunction with, the Annual Reports on Form 10-K of Cal Fed Bank for each of
the years ended December 31, 1991, 1992 and 1993, respectively (collectively,
the "Cal Fed Bank Reports"), in each case as filed with the OTS, which Reports
are available as indicated under "Additional Information," and the information
that is shown on the following pages is qualified by reference to the
financial and other information contained in the Cal Fed Bank Reports as well
as in the Company Reports.
Dollar amounts on the following pages are in millions, except for per share
amounts.
58
<PAGE>
SUMMARY OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash.................... $ 255.0 $ 198.4 $ 273.7 $ 292.8 $ 820.1 $ 469.4 $ 450.4
Short-term liquid
investments............ -- 203.8 74.1 333.8 306.8 447.5 55.8
Securities purchased
under agreements to
resell................. 1,352.9 868.2 1,674.6 48.2 30.2 39.8 398.2
Loans receivable(1)..... 9,669.1 8,944.6 9,303.6 8,747.3 9,571.9 11,102.1 13,576.7
Investment
securities(2).......... 357.5 1,074.4 336.0 1,877.0 1,027.7 1,204.3 997.5
Mortgage-backed
securities............. 2,140.0 2,643.5 2,366.7 2,513.7 2,622.0 2,745.3 1,387.3
Real estate held for
sale................... 32.9 85.7 49.5 77.9 351.6 549.3 492.0
Goodwill................ -- -- -- -- 273.7 289.2 309.6
Other assets............ 238.0 301.2 242.4 291.7 321.9 388.9 518.2
Assets of discontinued
operations............. -- -- -- -- -- -- 34.4
--------- --------- --------- --------- --------- --------- ---------
Total assets............ $14,045.4 $14,319.8 $14,320.6 $14,182.4 $15,325.9 $17,235.8 $18,220.1
========= ========= ========= ========= ========= ========= =========
Deposits................ $ 8,844.2 $ 9,368.2 $ 9,476.7 $ 8,360.9 $12,600.8 $13,465.0 $14,827.7
Borrowings.............. 4,185.9 3,930.0 3,786.4 4,818.8 1,647.0 2,639.4 2,218.4
Other liabilities....... 159.6 174.1 170.0 204.4 187.4 189.5 310.9
Liabilities of
discontinued
operations............. -- -- -- -- -- -- 7.3
Total liabilities....... 13,189.7 13,472.3 13,433.1 13,384.1 14,435.2 16,293.9 17,364.3
Preferred stock of
subsidiary(3).......... 172.5 266.0 266.0 266.0 93.5 -- --
Stockholders'
equity(3).............. 683.2 581.5 621.5 532.3 797.2 941.9 855.8
--------- --------- --------- --------- --------- --------- ---------
Total liabilities and
stockholders' equity... $14,045.4 $14,319.8 $14,320.6 $14,182.4 $15,325.9 $17,235.8 $18,220.1
========= ========= ========= ========= ========= ========= =========
SPREAD DATA AT END OF
PERIOD:
Yield on earning
assets................. 7.30% 7.35% 7.54% 6.67% 6.30% 7.24% 8.78%
Cost of funds........... 4.95% 5.30% 5.19% 4.83% 3.70% 4.44% 6.18%
Spread.................. 2.35% 2.05% 2.35% 1.84% 2.60% 2.80% 2.60%
OTHER STATISTICAL AND
OPERATIONS DATA:
Return on average as-
sets(4)................ 0.95% 0.51% 0.66% (2.87%) (0.89%) (0.55%) (0.80%)
Return on average
equity(4)(5)........... 15.52% 8.85% 11.10% (50.10%) (15.88%) (10.82%) (18.06%)
Equity to assets ratio:
At end of period....... 4.86% 4.06% 4.34% 3.75% 5.20% 5.46% 4.70%
Average for the
period................ 4.60% 3.91% 4.05% 4.51% 5.34% 5.07% 4.42%
Nonperforming
assets/total assets.... 1.33% 1.58% 1.62% 1.57% 5.26% 7.11% 5.64%
Number of full service
branches............... 118 125 125 119 168 186 200
</TABLE>
- --------
(1) Amounts include loans held for sale.
(2) Amounts include Federal Home Loan Bank stock, securities held to maturity
(excluding mortgage-backed securities) and securities available for sale.
(3) The total amount of stockholders' equity at December 31, 1993 gives effect
to the Holding Company Reorganization on an "as if" pooling-of-interest
basis. See the Explanatory Note above.
(4) Ratios are annualized for the six months ended June 30, 1996 and June 30,
1995, without giving effect to the $12 million non-recurring gain from the
sale of Cal Fed Bank's six San Diego branches during 1996.
(5) Average equity includes preferred stock of subsidiary totaling $172.5
million at June 30, 1996, $266.0 million at December 31, 1995, June 30,
1995 and December 31, 1994 and $93.5 million at December 31, 1993. The
computation of return on average equity is based on earnings before
dividends on preferred stock of subsidiary.
59
<PAGE>
SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- -------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $ 509.0 $ 497.7 $1,008.0 $ 908.1 $1,013.9 $1,305.8 $1,794.4
Interest expense........ 334.6 348.5 696.1 566.5 611.9 866.6 1,364.1
Net interest income..... 174.4 149.2 311.9 341.6 402.0 439.2 430.3
Provision for loan loss-
es..................... 20.4 16.9 31.8 74.9 163.5 126.4 175.0
Net interest income af-
ter provision for loan
losses................. 154.0 132.3 280.1 266.7 238.5 312.8 255.3
Net gains (losses) on
sales of loans and se-
curities............... 0.3 (0.2) 6.6 0.7 5.4 6.6 32.9
Other income............ 43.4 29.0 56.9 200.5 64.8 96.7 110.2
Loss on assets held for
accelerated
disposition............ -- -- -- 274.8 -- -- --
Other expenses.......... 124.0 124.6 249.9 336.2 457.1 470.1 571.8
Income tax expense (ben-
efit).................. 0.1 0.1 0.1 6.3 (2.9) 7.9 (11.0)
--------- --------- -------- ------- -------- -------- --------
Earnings (loss) from
continuing operations
before dividends on
preferred stock of
subsidiary............. 73.6 36.4 93.6 (149.4) (145.5) (61.9) (162.4)
Dividends on preferred
stock of subsidiary.... 14.3 12.8 25.6 16.9 3.8 -- --
Earnings from
discontinued
operations............. -- -- -- -- -- -- 3.6
Gain (loss) on sale of
discontinued
operations, net........ -- -- -- -- -- 16.0 (10.8)
Cumulative effect of
change in accounting
for goodwill........... -- -- -- (273.7) -- -- --
Loss from extraordinary
item................... -- -- -- -- -- (51.4) --
--------- --------- -------- ------- -------- -------- --------
Net earnings (loss)
available for common
stockholders........... $ 59.3 $ 23.6 $ 68.0 $(440.0) $ (149.3) $ (97.3) $ (169.6)
========= ========= ======== ======= ======== ======== ========
EARNINGS PER SHARE IN-
FORMATION:
Primary and fully
diluted earnings (loss)
per common share from
continuing operations.. $ 1.18 $ 0.47 $ 1.36 $ (3.82) $ (5.98) $ (10.44) $ (31.71)
Primary and fully
diluted loss per common
share of the cumulative
effect of change in
accounting for
goodwill............... -- -- -- $ (6.28) -- -- --
Primary and fully
diluted earnings (loss)
per common share from
discontinuing
operations............. -- -- -- -- -- $ 2.70 $ (1.41)
Primary and fully
diluted loss per common
share from
extraordinary item..... -- -- -- -- -- $ (8.66) --
Primary and fully
diluted earnings (loss)
per common share....... $ 1.18 $ 0.47 $ 1.36 $(10.10) $ (5.98) $ (16.40) $ (33.12)
</TABLE>
60
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
As indicated under "Additional Information," the Company is subject to the
informational requirements of the Exchange Act and, in accordance therewith,
files certain reports, proxy statements and other information with the
Commission (Commission File No. 1-14098). Prior to the consummation of the
Holding Company Reorganization on January 1, 1996 (see "The Merger--Parties to
the Merger Agreement --The Company and Cal Fed Bank"), the Company either did
not exist or was not subject to the informational requirements of the Exchange
Act, whereas Cal Fed Bank was so subject. Reports, proxy statements and other
information filed by Cal Fed Bank with the OTS prior to and following the
Holding Company Reorganization (including, without limitation, each of the Cal
Fed Bank Reports, as such term is defined in the "Explanatory Note" to
"Selected Consolidated Financial and Other Data") are available from the OTS
as indicated under "Additional Information."
The following documents filed with the Commission by the Company are
incorporated by reference into this Proxy Statement:
1. Each of the Company Reports, as such term is defined in the "Explanatory
Note" to "Selected Consolidated Financial and Other Data;"
2. The Quarterly Report on Form 10-Q of the Company for the quarter ended
March 31, 1996;
3. The Proxy Statement of the Company on Schedule 14-A, filed on March 12,
1996;
4. The Current Report on Form 8-K of the Company dated July 27, 1996; and
5. The Current Report on Form 8-K of the Company dated November 8, 1996
(which contains, as an exhibit, the Cal Fed Bank Offering Circular).
All documents and reports subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof
and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference into this Proxy Statement and to be a part of this
Proxy Statement from the respective dates of filing of such documents and
reports. Any statement contained herein, or in a document or report (or
portion thereof) incorporated or deemed to be incorporated by reference
herein, shall be deemed to be modified or superseded for purposes of this
Proxy Statement to the extent that a statement contained herein or in any
subsequently filed document or report which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE FILED WITH THE
COMMISSION THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS
(OTHER THAN AN EXHIBIT TO ANY SUCH DOCUMENT UNLESS SUCH EXHIBIT IS
SPECIFICALLY INCORPORATED BY REFERENCE INTO THE TEXT OF SUCH DOCUMENT) ARE
AVAILABLE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY
STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, DIRECTED
TO: INVESTOR RELATIONS AND CORPORATE COMMUNICATIONS, CAL FED BANCORP INC.,
5700 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90036, (213)932-4200.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated financial statements of Cal Fed Bank included in the 1995
Form 10-K and the consolidated financial statements of the Company included in
the September 1996 Form 8-K, which are incorporated by reference in this Proxy
Statement (see "Incorporation of Certain Documents by Reference"), have been
audited by KPMG Peat Marwick LLP, independent public accountants, as indicated
in their respective reports with respect thereto, and are incorporated herein
in reliance upon the authority of said firm as independent certified public
accountants in giving such reports.
The reports of KPMG Peat Marwick LLP covering the consolidated financial
statements of Cal Fed Bank and the Company, respectively, referred to in the
preceding paragraph state that, as discussed in Note 1 of the
61
<PAGE>
notes to such respective consolidated financial statements, Cal Fed Bank and
the Company, respectively, adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 72,
Accounting for Certain Acquisitions of Banking or Thrift Institutions, in
1994, and No. 115, Accounting for Certain Investments in Debt and Equity
Securities, in 1993.
A representative of KPMG Peat Marwick LLP will be at the Special Meeting to
answer questions from Company Stockholders and will be given an opportunity to
make a statement, if so desired.
OTHER MATTERS
The Company Board is not aware of any matters, other than that set forth in
the accompanying Notice of Special Meeting of Stockholders, to be brought
before the Special Meeting. If any other matters properly come before the
Special Meeting, the persons named in the accompanying proxy will vote the
shares represented by all properly executed proxies on such matters in such
manner as shall be determined by a majority of the Company Board, except that
shares represented by proxies which have been voted "against," or have
abstained with respect to, the proposal to approve and adopt the Merger
Agreement and the transactions contemplated thereby (including, without
limitation, the Merger), will not be used to vote "for" postponement or
adjournment of the Special Meeting for the purpose of allowing additional time
for soliciting additional votes "for" such approval and adoption. See "The
Special Meeting--Vote Required; Revocability of Proxies."
OTHER MEETINGS
The Company will hold a 1997 Annual Meeting of Stockholders only if the
Merger has not been consummated. In the event that the Company holds a 1997
Annual Meeting of Stockholders, any proposals from Company Stockholders
intended to be presented thereat and included in the Company's proxy statement
relating thereto must, in addition to meeting the eligibility and other
requirements of the Commission's rules governing shareholder proposals, be
received by the Company at its principal executive offices by no later than
October 22, 1996 or, in the event that the date of the 1997 Annual Meeting of
Stockholders is changed by more than 30 calendar days from April 19, 1997,
within a reasonable time before the Company solicits proxies in connection
therewith.
By Order of the Board of Directors
/s/ Douglas J. Wallis
DOUGLAS J. WALLIS
Secretary
November 13, 1996
62
<PAGE>
APPENDIX A
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of the 27th day
of July, 1996 (this "Plan"), by and among FIRST NATIONWIDE HOLDINGS INC., a
Delaware corporation (the "Acquiror"), CFB HOLDINGS, INC., a Delaware
corporation ("Merger Sub"), CAL FED BANCORP INC., a Delaware corporation (the
"Company") and CALIFORNIA FEDERAL BANK, A FEDERAL SAVINGS BANK (the "Bank").
RECITALS:
A. The Acquiror. The Acquiror has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware.
B. Merger Sub. Merger Sub is a corporation in good standing under the laws
of the State of Delaware. All the shares of the capital stock of Merger Sub
are owned directly by the Acquiror.
C. The Company. The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with its
principal executive offices located in Los Angeles, California. The Company
has 100,000,000 authorized shares of common stock, par value $1.00 per share
("Company Common Stock"), of which 49,396,947 shares were outstanding as of
the date hereof, and 25,000,000 authorized shares of preferred stock, par
value $.01 per share, of which no shares were outstanding as of June 30, 1996
(no other class of capital stock of the Company being authorized). The Company
is a savings and loan holding company duly registered under the Home Owners'
Loan Act of 1933, as amended ("HOLA"), and owns 100% of the outstanding common
stock of the Bank. As of the date hereof, the Company had (i) an aggregate of
3,656,433 shares of Company Common Stock reserved for issuance upon exercise
of stock options, warrants or other rights granted pursuant to its 1995
Employee Stock Incentive Plan, its 1995 Non-Employee Director Stock Option
Plan, the Bank's 1983 Stock Incentive Plan, the Bank's 1993 Stock Incentive
Plan and the Bank's 1994 Non-Employee Director Stock Option Plan
(collectively, the "Company Stock Plans"), (ii) 18,407 shares of Company
Common Stock reserved for issuance upon conversion of the 6 1/2% Convertible
Subordinated Debentures Due 2001 (the "6 1/2% Subordinated Notes") of XCF
Acceptance Corporation, a California corporation and a wholly owned subsidiary
of the Bank, and (iii) 100,000 shares of the Company's Series RP Preferred
Stock reserved for issuance pursuant to exercise of the Purchase Rights (as
defined below). As of the date hereof, the Bank has 5,075,549 authorized and
4,941,498 issued and outstanding contingent litigation recovery participation
interests (the "Participation Interests"), each of which represents the right
to receive in cash five millionths of one percent (0.000005%) of the
Litigation Recovery (as defined in the certificates evidencing the
Participation Interests) in the Bank's litigation against the United States,
California Federal Bank v. United States, Civil Action No. 92-138C (the
"Goodwill Litigation"). Unless the context otherwise requires, all references
herein to the Company Common Stock shall be deemed to include the
corresponding rights (the "Purchase Rights") to purchase from the Company, for
each share of Company Common Stock held, one-thousandth of a share of the
Company's Series RP Preferred Stock, par value $.01 per share, pursuant to the
terms and conditions of the Rights Agreement (as defined below).
D. Rights, Etc. The Company does not have any shares of its capital stock
reserved for issuance, any outstanding option, call or commitment relating to
shares of its capital stock or any outstanding securities, obligations or
agreements convertible into or exchangeable for, or giving any person any
right (including, without limitation, preemptive rights) to subscribe for or
acquire from it, any shares of its capital stock (collectively, "Rights")
except (i) pursuant to the Option Agreement (as defined below) which is being
entered into simultaneously with the execution and delivery of this Plan, (ii)
pursuant to the Rights Agreement, dated as of February 16, 1996, between the
Company and Chemical Bank, as Rights Agent (the "Rights Agreement"), (iii)
subject to Section 4.23 hereof, the 6 1/2% Subordinated Notes, and (iv)
pursuant to stock options or other rights granted pursuant to the Company
Stock Plans as previously disclosed to the Acquiror.
A-1
<PAGE>
E. The Option Agreement. As an inducement to the willingness of the Acquiror
to enter into this Plan, the Company will, immediately after the execution and
delivery of this Plan by the parties hereto, enter into a Stock Option
Agreement with the Acquiror in the form set forth in Annex 1 (the "Option
Agreement"), pursuant to which the Company will grant to the Acquiror an
option to purchase authorized but unissued shares of Company Common Stock in
an amount equal to 19.9% of the outstanding shares of Company Common Stock
upon the terms and conditions therein contained.
F. Bank Merger Agreement. It is the intention of the Acquiror that, unless
otherwise determined pursuant to Section 1.6 hereof, immediately following the
Effective Time (as defined in Section 7.1) of the Merger, (i) the Acquiror
will contribute all of the shares of capital stock of the Surviving
Corporation (as defined below) to its wholly-owned subsidiary, First
Nationwide Bank, a Federal Savings Bank ("FNB"), (ii) the Surviving
Corporation will be liquidated by FNB, and (iii) FNB will be merged with and
into the Bank (the "Bank Merger") immediately thereafter.
G. Board Approvals. The respective Boards of Directors of the Acquiror, the
Company and the Bank have duly approved this Plan and have duly authorized its
execution and delivery.
NOW, THEREFORE, in consideration of their mutual promises and obligations
hereunder, the parties hereto adopt and make this Plan and prescribe the terms
and conditions hereof and the manner and basis of carrying it into effect,
which shall be as follows:
ARTICLE I. THE MERGER
Section 1.1. Structure of the Merger. On the Effective Date, Merger Sub will
merge (the "Merger") with and into the Company, with the Company being the
surviving corporation (the "Surviving Corporation"), pursuant to the
provisions of, and with the effect provided in, the Delaware General
Corporation Law (the "State Corporation Law"). The separate corporate
existence of Merger Sub shall thereupon cease. The Surviving Corporation shall
continue to be governed by the State Corporation Law and its separate
corporate existence with all of its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. At the Effective Time, the
certificate of incorporation and by-laws of Merger Sub, in effect immediately
prior to the Effective Time, shall become the certificate of incorporation and
by-laws of the Surviving Corporation. At the Effective Time, the directors and
officers of Merger Sub shall become the directors and officers of the
Surviving Corporation.
Section 1.2. Effect on Outstanding Shares. (a) By virtue of the Merger,
automatically and without any action on the part of the holders of Company
Common Stock, each share of Company Common Stock issued and outstanding at the
Effective Time (other than Excluded Shares (as defined below)) shall become
and be converted into the right to receive (i) $23.50 in cash without interest
and (ii) one-tenth of a Secondary Participation Interest (as defined below),
provided, however, that no fractional Secondary Participation Interests shall
be issued, holders of Company Common Stock who would otherwise receive
fractional Secondary Participation Interests shall not be entitled thereto and
such holders shall receive their respective pro rata portion of the cash
proceeds (net of aggregate commissions and any other selling expenses)
obtained from the Exchange Agent (as hereinafter defined) batching such
fractional Secondary Participation Interests together with the fractional
Secondary Participation Interests that would otherwise be received by holders
of options and warrants pursuant to Section 1.5 into the nearest aggregate
whole number of Secondary Participation Interests (collectively, the "Batched
Secondary Participation Interests") and effecting the sale (the "Batched
Sales") of the Batched Secondary Participation Interests on the open market at
prevailing prices in accordance with Section 1.3(c) (collectively the
consideration described in the foregoing clauses (i) and (ii), including any
cash payment from the proceeds of the Batched Sales, is referred to herein as
the "Merger Consideration"). As of the Effective Time, each share of Company
Common Stock held directly or indirectly by the Acquiror, other than shares
held in a fiduciary capacity or in satisfaction of a debt previously
contracted, and shares held as treasury stock of the Company, shall be
cancelled and retired and cease to exist, and no exchange or payment shall be
made with respect thereto.
(b) The shares of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall become shares of the Surviving
Corporation after the Merger and shall thereafter constitute all of the issued
and outstanding shares of the capital stock of the Surviving Corporation.
A-2
<PAGE>
(c) "Excluded Shares" shall mean (i) shares of Company Common Stock the
holder of which (the "Dissenting Stockholder"), pursuant to the State
Corporation Law providing for dissenters' or appraisal rights, is entitled to
receive payment in accordance with the provisions of such State Corporation
Law, such holder to have only the rights provided in such State Corporation
Law (the "Dissenters' Shares"), (ii) shares of Company Common Stock held
directly or indirectly by the Acquiror, other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted and (iii) shares
of Company Common Stock held as treasury stock by the Company.
Section 1.3. Exchange Procedures. (a) At and after the Effective Time, each
certificate (each a "Certificate") previously representing shares of Company
Common Stock shall represent only the right to receive the Merger
Consideration (without interest on the cash portion thereof).
(b) As of the Effective Time, (i) the Acquiror shall deposit, or shall cause
to be deposited, with ChaseMellon Shareholder Services, L.L.C., a New Jersey
limited liability company (the "Exchange Agent"), for the benefit of the
holders of shares of Company Common Stock, for exchange in accordance with
this Section 1.3, the amount constituting the cash portion of the Merger
Consideration to be paid pursuant to Section 1.2, and (ii) the Company shall
deposit, or shall cause to be deposited, with the Exchange Agent, for the
benefit of the holders of shares of Company Common Stock, one or more
certificates representing (x) the Secondary Participation Interests to be
distributed to holders of Company Common Stock in exchange for their
Certificates pursuant to this Section 1.3 and (y) the Batched Secondary
Participation Interests to be sold by the Exchange Agent on behalf of the
Company in the Batched Sales pursuant to Sections 1.2 and 1.3(c).
(c) As soon as practicable after the Effective Time, the Acquiror shall
cause the Exchange Agent to mail to each holder of record of a Certificate or
Certificates the following: (i) a letter of transmittal specifying that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent,
which shall be in a form and contain any other reasonable provisions as the
Acquiror may determine; and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. In
addition, as soon as practicable after the Effective Time, the Batched
Secondary Participation Interests shall be sold on the open market at
prevailing prices by means of the Batched Sales. The Exchange Agent shall be
instructed by the Surviving Corporation to effect the Batched Sales on behalf
of the Surviving Corporation, through the use of one or more broker-dealers,
over a period of time following the Effective Time and in a manner designed
not to adversely affect the market prices of the Secondary Participation
Interests. Upon the proper surrender of a Certificate to the Exchange Agent,
together with a properly completed and duly executed letter of transmittal,
the holder of such Certificate shall be entitled to receive in exchange
therefor a check representing the cash portion of the Merger Consideration and
a certificate representing such number of Secondary Participation Interests
which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions hereof, and the Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or accrued
on the cash portion of the Merger Consideration. In the event of a transfer of
ownership of any shares of Company Common Stock not registered in the transfer
records of the Company, a check for the cash portion of the Merger
Consideration and a certificate representing the applicable number of
Secondary Participation Interests may be issued to the transferee if the
Certificate representing such Company Common Stock is presented to the
Exchange Agent, accompanied by documents sufficient, in the reasonable
discretion of the Acquiror and the Exchange Agent, (i) to evidence and effect
such transfer and (ii) to evidence that all applicable stock transfer taxes
have been paid.
(d) From and after the Effective Time, there shall be no transfers on the
stock transfer records of the Company of any shares of Company Common Stock
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Acquiror or the Surviving
Corporation, they shall be cancelled and exchanged for the Merger
Consideration deliverable in respect thereof pursuant to this Plan in
accordance with the procedures set forth in this Section 1.3.
(e) Any portion of the aggregate Merger Consideration or the proceeds of any
investments thereof that remains unclaimed by the stockholders of the Company
for one year after the Effective Time shall be repaid or delivered, as
applicable, by the Exchange Agent to the Acquiror. Any stockholders of the
Company who have not theretofore complied with this Section 1.3 shall
thereafter look only to the Acquiror for payment of their Merger Consideration
deliverable in respect of each share of Company Common Stock such stockholder
holds
A-3
<PAGE>
as determined pursuant to this Plan without any interest on the cash portion
of the Merger Consideration. If outstanding Certificates are not surrendered
or the payment for them not claimed prior to the date on which such payments
would otherwise escheat to or become the property of any governmental unit or
agency, the unclaimed items shall, to the extent permitted by abandoned
property and any other applicable law, become the property of the Acquiror
(and to the extent not in its possession shall be paid over to it), free and
clear of all claims or interest of any person previously entitled to such
claims. Notwithstanding the foregoing, none of the Acquiror, the Surviving
Corporation, the Exchange Agent or any other person shall be liable to any
former holder of Company Common Stock for any amount delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Exchange
Agent, the posting by such person of a bond in such amount as the Exchange
Agent may reasonably direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof pursuant to this Plan.
Section 1.4. Dissenters' Rights. Any Dissenting Stockholder who shall be
entitled to be paid the "fair value" of his or her Dissenters' Shares, as
provided in Section 262 of the State Corporation Law, shall not be entitled to
the Merger Consideration, unless and until the holder thereof shall have
failed to perfect or shall have effectively withdrawn or lost such holder's
right to dissent from the Merger under the State Corporation Law, and shall be
entitled to receive only the payment to the extent provided for by Section 262
of the State Corporation Law with respect to such Dissenters' Shares. If any
Dissenting Stockholder shall fail to perfect or shall have effectively
withdrawn or lost the right to dissent, the Dissenters' Shares held by such
Dissenting Stockholder shall thereupon be treated as though such Dissenters'
Shares had been converted into the right to receive the Merger Consideration
pursuant to Section 1.2.
Section 1.5. Options. At the Effective Time, each option or warrant granted
by the Company pursuant to the Company Stock Plans to purchase shares of
Company Common Stock, which is outstanding and unexercised immediately prior
to the Effective Time, whether or not then vested and exercisable, shall be
terminated and each grantee thereof shall be entitled to receive from the
Company, in lieu of each share of Company Common Stock that would otherwise
have been issuable upon exercise, (A) an amount in cash computed by
multiplying (i) the difference between (x) $23.50 and (y) the per share
exercise price applicable to such option or warrant by (ii) the number of such
shares of Company Common Stock subject to such option or warrant, (B) to the
extent applicable, the number of Participation Interests reserved for issuance
upon exercise of such stock options, and (C) one-tenth of a Secondary
Participation Interest for every share of Company Common Stock subject to such
option or warrant, provided however, that no fractional Secondary
Participation Interests shall be issued, holders of such options or warrants
who would otherwise receive fractional Secondary Participation Interests shall
not be entitled thereto and such holders shall receive their respective pro
rata portion of the aggregate net cash proceeds (determined under Section 1.2)
obtained from the Batched Sales. The Company agrees to use its best efforts to
take or cause to be taken all action necessary under such options to provide
for such termination and payment, including obtaining any necessary consents
from grantees. The Company will make the payments required to be made to
grantees of options under this Section 1.5 immediately prior to the Effective
Time.
Section 1.6. Alternative Structure. Notwithstanding anything in this Plan to
the contrary, the Acquiror may specify that, before or after the Merger, the
Company, the Acquiror, the Bank and any other subsidiary or affiliate of the
Acquiror shall enter into transactions other than those described in Article I
hereof in order to effect the purposes of this Plan, and the Company and the
Acquiror shall take all action necessary and appropriate to effect, or cause
to be effected, such transactions; provided, however, that no such
specification may (i) materially and adversely affect the timing of the
consummation of the transactions contemplated herein or the tax effect or
economic benefits of the Merger to the holders of Company Common Stock,
Participation Interests or Secondary Participation Interests, or (ii) cause
any event or condition to exist which constitutes or, after notice or lapse of
time or both, would constitute a breach of Section 4.20 hereof.
A-4
<PAGE>
Section 1.7. Issuance of Secondary Participation Interests. Prior to the
Effective Date, the Bank shall have issued to the Company and the Company
shall have delivered to the Exchange Agent pursuant to Section 1.3,
certificates representing the secondary contingent litigation recovery
participation interests in substantially the form attached hereto as Annex
4.21(b) (the "Secondary Participation Interests").
ARTICLE II. CONDUCT PENDING THE MERGER
Section 2.1. Conduct of the Company's Business Prior to the Effective
Time. Except as expressly provided in this Plan or the Option Agreement or as
agreed to by the Acquiror, during the period from the date of this Plan to the
Effective Time, the Company shall, and shall cause its Subsidiaries (as
defined below) to, (i) conduct its business and maintain its books and records
in the usual, regular and ordinary course consistent with past practice, (ii)
use its commercially reasonable efforts to maintain and preserve intact its
business organization, properties, leases, employees and advantageous business
relationships and retain the services of its officers and key employees, (iii)
except as required by applicable law, take no action which would adversely
affect or delay the ability of the Company, the Bank, the Acquiror, or the
Merger Sub to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated hereby or to
perform its covenants and agreements on a timely basis under this Plan and
(iv) except as required by applicable law, take no action that could be deemed
to have a Material Adverse Effect (as defined in Section 3.2 hereof) on the
Company. As used in this Plan, the word "Subsidiary" when used with respect to
any party means any corporation, partnership or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes.
Section 2.2. Forbearance by the Company. It is contemplated that during the
period from the date of this Plan to the Effective Time, the Company shall
continue to operate in accordance with the 1996 Cal Fed Bancorp Inc. Business
Plan as in effect on the date hereof, a copy of which has been made available
to Acquiror, or the 1997 Cal Fed Bancorp Inc. Business Plan when such a plan
is adopted and put into effect. Notwithstanding the foregoing, during the
period from the date of this Plan to the Effective Time, and except as
contemplated by this Plan (including, without limitation, Section 1.7 hereof)
or the Option Agreement or as set forth in Section 2.2 of the Company's
Disclosure Letter, the Company shall not, and shall not permit any of its
Subsidiaries, without the prior written consent of the Acquiror, to:
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other person; provided, however, that neither the
Company nor any of its Subsidiaries shall incur any indebtedness for
borrowed money (including reverse repurchase agreements) with a final
maturity date on or after July 28, 1998.
(b) adjust, split, combine or reclassify any capital stock; make, declare
or pay any dividend or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock (except for dividends paid by the Bank to the Company) or any
securities or obligations convertible into or exchangeable for any shares
of its capital stock, or grant any stock appreciation rights or grant, sell
or issue to any individual, corporation or other person any right or option
to acquire, or securities evidencing a right to convert into or acquire,
any shares of its capital stock (except for regular quarterly cash
dividends on the Series B Preferred Stock (as defined below) at the rate
set forth in the certificate of designation for such stock and except
pursuant to the Rights Agreement), or issue any additional shares of
capital stock except pursuant to (i) the exercise of stock options or
warrants outstanding as of the date hereof as previously disclosed to the
Acquiror and on the terms in effect on the date hereof, (ii) the Option
Agreement and (iii) the conversion of 6 1/2% Subordinated Notes;
(c) other than in the ordinary course of business consistent with past
practice, sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties, leases or assets to any person, or cancel, release or
assign any indebtedness of any person, except pursuant to contracts or
agreements in force at the date of this Plan and disclosed to Acquiror;
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(d) enter into, renew or amend any employment agreement with any employee
or director, increase in any manner the compensation or fringe benefits of
any of its employees or directors, or create or institute, or make any
payments pursuant to, any severance plan, bonus plan, incentive
compensation plan, or package, or pay any pension or retirement allowance
not required by any existing plan or agreement to any such employees or
directors, or become a party to, amend or commit itself to, or otherwise
establish any trust or account related to, any Employee Plan (as defined in
Section 3.3(o)), with or for the benefit of any employee, other than
general increases in compensation in the ordinary course of business
consistent with past practice or any amendment to any Employee Plan
required by applicable law (provided that the Company shall use its best
efforts to minimize the cost of any such amendment as permitted under such
applicable law), or voluntarily accelerate the vesting of any stock options
or other compensation or benefit;
(e) other than in the ordinary course of business consistent with past
practice, make any investment either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property
or assets of any person; provided, however, that no investment or series of
related investments shall be made in an amount in excess of $1,000,000
except in (i) securities which would be reported under the caption "cash
and cash equivalents" on the Company's consolidated statement of financial
condition and (ii) federal government securities with a maturity of not
more than two (2) years, provided further, however, that in no event shall
the Company or any of its Subsidiaries make any acquisition of equity
securities or business operations without the Acquiror's prior consent;
(f) enter into, renew or terminate any contract or agreement, or make any
change in any of its leases or contracts, other than any lease, contract or
agreement involving aggregate payments of $250,000 or less per annum, and
either (i) having a term of less than or equal to one year or (ii) which
may be terminated with notice of thirty days without payment by the Company
or any of its Subsidiaries of a fee, penalty or other payment;
(g) settle any claim, action or proceeding involving any liability of the
Company or any of its Subsidiaries for money damages in excess of $250,000,
exclusive of contributions from insurers, or involving material
restrictions upon the business or operations of the Company or any of its
Subsidiaries;
(h) except in the ordinary course of business, waive or release any
material right or collateral or cancel or compromise any extension of
credit or other debt or claim;
(i) make, renegotiate, renew, increase, extend or purchase any loan,
lease (credit equivalent), advance, credit enhancement or other extension
of credit, or make any commitment in respect of any of the foregoing,
except for loans, advances or commitments in amounts (A) less than
$1,000,000 made in the ordinary course of business consistent with past
practice and made in conformity with all applicable policies and procedures
or (B) greater than $1,000,000 if such loans, advances or commitments
conform to the Company's present written loan underwriting policies;
(j) except as contemplated by Section 4.2, change its method of
accounting as in effect at December 31, 1995, except as required by changes
in generally accepted accounting principles ("GAAP") as concurred in by the
Company's independent auditors, or as required by regulatory accounting
principles or regulatory requirements;
(k) enter into any new activities or lines of business, or cease to
conduct any material activities or lines of business that it conducts on
the date hereof, or conduct any material business activity not consistent
with past practice;
(l) amend its certificate of incorporation, by-laws or other similar
governing documents;
(m) make any capital expenditure other than (A) in accordance with the
1996 Cal Fed Bancorp Inc. Business Plan or the 1997 Cal Fed Bancorp Inc.
Business Plan, as applicable, or (B) as necessary to maintain its assets in
good repair; provided, however, that no capital expenditure (other than
expenditures in accordance with the 1996 Cal Fed Bancorp Inc. Business Plan
or the 1997 Cal Fed Bancorp Inc. Business Plan, as applicable) shall be
made which individually or in the aggregate with all other capital
expenditures exceeds $1,500,000;
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(n) settle, compromise, dismiss or cease prosecution of the Goodwill
Litigation; or sell, transfer, assign, distribute or convey all or part of,
or otherwise take any action that could reasonably be expected to adversely
affect the value of, its rights or interest in the Goodwill Litigation;
(o) hold any formal meeting with the Appeals Office of the Internal
Revenue Service or any similar state taxing authority to settle or
compromise any audit, examination or other proceeding with respect to any
federal or state income tax liability of the Company or any of its
Subsidiaries without prior notification to Acquiror and allowing a
representative of Acquiror to attend, but not participate in, such formal
meeting;
(p) execute Form 870-AD or comparable document agreeing to the finality
of any audit, examination or other proceeding with respect to any federal
or state income tax liability of the Company or any of its Subsidiaries; or
(q) agree to, or make any commitment to, take any of the actions
prohibited by this Section 2.2.
Section 2.3. Cooperation. The Company shall cooperate with Acquiror and
Merger Sub in completing the transactions contemplated hereby and shall not
take, cause to be taken or agree or make any commitment to take any action:
(i) that is intended or may reasonably be expected to cause any of its
representations or warranties set forth in Article III hereof not to be true
and correct, or (ii) that is inconsistent with or prohibited by Section 2.1 or
Section 2.2; except in any case as may be required by law, rule or regulation.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Section 3.1. Disclosure Letters. On or prior to the date hereof, the Company
has delivered to the Acquiror, and the Acquiror has delivered to the Company,
a letter (as the case may be, its "Disclosure Letter") setting forth, among
other things, facts, circumstances and events the disclosure of which is
required or appropriate in relation to any or all of its representations and
warranties (and making specific reference to the Section of this Plan to which
they relate); provided, however, that the mere inclusion of a fact,
circumstance or event in a Disclosure Letter shall not be deemed an admission
by a party that such item represents a material exception or that such item is
reasonably likely to result in a Material Adverse Effect (as defined in
Section 3.2).
Section 3.2. Definitions. As used in this Plan, (A) the term "Material
Adverse Effect" means an effect which (i) is material and adverse to the
business, properties, assets, liabilities, financial condition or results of
operations of the Company or the Acquiror, as the context may dictate, and its
Subsidiaries taken as a whole, or (ii) significantly and adversely affects the
ability of the Company or the Acquiror, as the context may dictate, to
consummate the Merger by March 31, 1997 (or such later date as provided in
Section 6.1(c)), or to perform its material obligations hereunder, provided
however, that any actions taken by the Company or any of its Subsidiaries at
the request of Acquiror with respect to the matters described in Sections 4.2
or 4.24 of this Plan or the Benefits Letter (as defined in Section 4.3 hereof)
or any consequences of such actions shall not, individually or in the
aggregate, constitute a Material Adverse Effect on the Company; and (ii) the
term "to the best knowledge of the Company" means the actual knowledge of the
following officers of the Company: the President and Chief Executive Officer,
the Executive Vice President, Controller and Co-Principal Financial Officer,
the Executive Vice President, Treasurer and Co-Principal Financial Officer,
the Executive Vice President, General Counsel and Secretary, the Executive
Vice President--Human Resources and Administration and the Executive Vice
President--Investor Relations; the Executive Vice President--Retail Bank, the
Executive Vice President--Residential Lending and the Executive Vice
President--Credit Cycle Management.
Section 3.3. Representations and Warranties of the Company. The Company
represents and warrants to the Acquiror that:
(a) Recitals True. The facts set forth in the Recitals of this Plan with
respect to the Company are true and correct in all material respects.
(b) Capital Stock. All outstanding shares of capital stock of the Company
and its Subsidiaries are duly authorized, validly issued and outstanding,
fully paid and non-assessable, and subject to no preemptive rights. As of
the date hereof, the Bank has 100,000,000 authorized shares of common
stock, par value $1.00 per share, of which 100 shares are issued and
outstanding, and 25,000,000 authorized shares of preferred
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stock of which 3,800,000 shares have been designated and 150,403 formerly
issued shares of 7 3/4% Noncumulative Convertible Preferred Stock, Series A
have been called, but are unexchanged, and 1,725,000 shares have been
designated and 1,725,000 shares are issued and outstanding as 10 5/8%
Noncumulative Perpetual Preferred Stock, Series B (the "Series B Preferred
Stock"). Except for the Series B Preferred Stock, the shares of capital
stock of each of the Company's Subsidiaries are owned directly or
indirectly by the Company free and clear of all liens, claims, encumbrances
and restrictions on transfer, and there are no Rights with respect to such
capital stock.
(c) Qualification. Each of the Company and its Subsidiaries has the power
and authority, and is duly qualified in all jurisdictions where such
qualification is required, to carry on its business as it is now being
conducted and to own all its properties and assets, and it has all federal,
state, local, and foreign governmental authorizations necessary for it to
own or lease its properties and assets and to carry on its business as it
is now being conducted.
(d) Subsidiaries. The only Subsidiaries of the Company are those listed
on Section 3.3(d) of the Company's Disclosure Letter. The Bank is a federal
savings bank duly organized, validly existing and in good standing under
the laws of the United States of America. The deposit accounts of the Bank
are insured by the Federal Deposit Insurance Corporation (the "FDIC")
through the Savings Association Insurance Fund (the "SAIF") to the fullest
extent permitted by law, and all premiums and assessments required to be
paid in connection therewith have been paid when due by the Bank. Each of
the other Subsidiaries of the Company is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. The minute books of the Company and each of
its Subsidiaries contain true, complete and accurate records in all
material respects of all meetings and other corporate actions held or taken
since December 31, 1993 of their respective stockholders and Boards of
Directors (including committees of their respective Boards of Directors).
(e) Authority and Stockholder Approvals.
(i) Each of the Company and the Bank has the requisite corporate
power and authority to execute and deliver this Plan and, subject to
the receipt of all necessary stockholder and regulatory approvals,
consents or nonobjections, as the case may be, and to the receipt by
the Bank of board and stockholder approval (collectively, the "Bank
Merger Approval") to the definitive documents to be used to effect the
Bank Merger (the "Bank Merger Documents"), to consummate the
transactions contemplated hereby. Subject in the case of the Company to
the receipt of required stockholder approval of this Plan by the
holders of the Company Common Stock and in the case of the Bank to the
receipt of the Bank Merger Approval, the execution and delivery of this
Plan and consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the
Company and the Bank. This Plan has been duly and validly executed and
delivered by each of the Company and the Bank and (assuming due
authorization, execution and delivery by the Acquiror) constitutes a
valid and binding agreement of the Company and the Bank enforceable
against each entity in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(ii) The affirmative vote of at least a majority of the outstanding
shares of Company Common Stock entitled to vote on this Plan is the
only vote of holders of any of the capital stock of the Company or any
of its Subsidiaries required for approval of this Plan and consummation
of the Merger.
(f) No Violations; Consents and Approvals.
(i) Neither the execution, delivery and performance of this Plan by
the Company or the Bank nor the consummation by the Company or the Bank
of the transactions contemplated hereby will constitute (A) a breach or
violation of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries (or any of their
respective properties) is subject, or enable any person to enjoin the
Merger, the Bank Merger or the other
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transactions contemplated hereby and thereby, (B) a breach or violation
of, or a default under, the certificate of incorporation or by-laws or
similar organizational documents of the Company or any of its
Subsidiaries or (C) a breach or violation of, or a default under (or an
event which with due notice or lapse of time or both would constitute a
default under), or result in the termination of, accelerate the
performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond,
indenture, deed of trust, loan agreement or other agreement, instrument
or obligation to which the Company or any of its Subsidiaries is a
party, or to which any of their respective properties or assets may be
bound or affected, provided, however, that with respect to the Bank and
the Bank Merger, the foregoing representation is subject to the
execution and delivery of the Bank Merger Documents and the receipt of
Bank Merger Approval.
(ii) Except for (A) the filing of an application with the Office of
Thrift Supervision (the "OTS") and approval of such application, (B)
the filing with the Securities and Exchange Commission (the "SEC") of a
proxy statement in definitive form relating to the meeting of the
Company's stockholders to be held in connection with this Plan and the
transactions contemplated hereby (the "Proxy Statement"), (C) the
adoption of the agreement of merger (within the meaning of Section 251
of the State Corporation Law) contained in this Plan by the requisite
vote of the stockholders of the Company, (D) the filing of the
certificate of merger with the Secretary of State of the State of
Delaware pursuant to the State Corporation Law (the "Certificate of
Merger"), (E) the consents and approvals set forth in Section 3.3
(f)(ii) of the Company's Disclosure Letter, (F) the filing with the OTS
of a registration statement covering the issuance and distribution of
the Secondary Participation Interests and the declaration of the
effectiveness of such registration statement, and (G) such consents and
approvals of third parties which are not Governmental Entities (as
defined below) the failure of which to obtain will not have and would
not be reasonably expected to have a Material Adverse Effect on the
Company, no consents or approvals of, or filings or registrations with,
any court, administrative agency or commission or other governmental
authority or instrumentality (each a "Governmental Entity") or with any
third party are necessary in connection with the execution and delivery
by the Company of this Plan and the Option Agreement and the
consummation by the Company of the Merger and the other transactions
contemplated hereby, and the Company knows of no reason why the
Requisite Regulatory Approvals (as defined in Section 5.1(b)) should
not be obtained.
(g) Financial Statements. The Company has previously made available to
the Acquiror copies of (i) the consolidated statements of financial
condition of the Bank and its Subsidiaries as of December 31 for the fiscal
years 1994 and 1995, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1995, as reported in the Bank's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 filed with
the OTS under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in each case accompanied by the audit report of KPMG Peat
Marwick LLP, independent auditors with respect to the Bank, (ii) the
unaudited consolidated statements of financial condition of the Company and
its Subsidiaries as of March 31, 1995 and March 31, 1996 and the related
unaudited consolidated statements of operations and cash flows for each of
the three-month periods then ended, as reported in the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1996 filed with the SEC
under the Exchange Act, and (iii) the unaudited internal report to the
Company's Board setting forth financial results for the six months ended
June 30, 1996. The December 31, 1995 consolidated statement of financial
condition of the Bank (including the related notes, where applicable)
fairly presents the consolidated financial position of the Bank and its
Subsidiaries as of the date thereof, and the other financial statements
referred to in this Section 3.3(g) (including the related notes, where
applicable) fairly present, and the financial statements referred to in
Section 4.17 hereof will fairly present (subject, in the case of the
unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and changes in
shareholders' equity and consolidated financial position of the entity or
entities to which they relate for the respective fiscal periods or as of
the respective dates therein set forth. Each of such statements (including
the related notes, where applicable) complies, and the financial statements
referred to in Section 4.17 hereof
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will comply, in all material respects, with applicable accounting
requirements and with the published rules and regulations of the OTS or the
SEC, as applicable, with respect thereto, and each of such statements
(including the related notes, where applicable) has been, and the financial
statements referred to in Section 4.17 will be, prepared in accordance with
GAAP consistently applied during the periods involved, except in each case
as indicated in such statements or in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q.
(h) Company Reports.
(i) The Company has previously made available to the Acquiror an
accurate and complete copy of each (A) final registration statement,
prospectus, report, schedule and definitive proxy statement filed since
January 1, 1994 by the Company with the SEC, or filed by the Bank with
the OTS, as the case may be, pursuant to the Securities Act of 1933, as
amended (the "Securities Act") or the Exchange Act (the "Company
Reports") and (B) communications mailed by the Company or by the Bank,
as the case may be, to its stockholders since January 1, 1994, and no
such registration statement, prospectus, report, schedule, proxy
statement or communication contained any untrue statement of a material
fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading, except
that information as of a later date shall be deemed to modify
information as of an earlier date. Except as set forth in Section
3.3(h)(i) of the Company's Disclosure Letter, each of the Company and
the Bank has timely filed all Company Reports and other documents
required to be filed by it under the Securities Act and the Exchange
Act, and, as of their respective dates, all Company Reports complied in
all material respects with the published rules and regulations of the
SEC or the OTS, as applicable, with respect thereto.
(ii) The Company and each Company Subsidiary have each timely filed
all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that it was required to file
since December 31, 1993 with (i) the SEC, (ii) the OTS, (iii) the FDIC,
(iv) the SAIF, (v) the Federal Housing Finance Board ("FHFB"), (vi) the
Federal Home Loan Bank of San Francisco ("FHLBSF"), (vii) any state
banking commission or other regulatory authority ("State Regulator"),
and (viii) the National Association of Securities Dealers, Inc. and any
other self-regulatory organization ("SRO") (collectively, the
"Regulatory Agencies"), and all other material reports and statements
required to be filed by them since December 31, 1993, including,
without limitation, any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, the
OTS, the FDIC, SAIF, FHFB, FHLBSF, any State Regulator or any SRO, and
have paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a Regulatory
Agency in the regular course of the business of the Company and its
Subsidiaries, and except as set forth in Section 3.3(h)(ii) of the
Company's Disclosure Letter, no Regulatory Agency has initiated any
proceeding or, to the best knowledge of the Company, investigation into
the business or operations of the Company or any of its Subsidiaries
since December 31, 1993. Except as set forth on Section 3.3(h)(ii) of
the Company's Disclosure Letter, there is no unresolved material
violation, criticism, or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations of the
Company or any of its Subsidiaries.
(i) Absence of Certain Changes or Events. Except as disclosed in the
Company Disclosure Letter or the Company Reports filed prior to the date of
this Plan, true and complete copies of which have been provided by the
Company to the Acquiror, since December 31, 1995, (A) the Company and its
Subsidiaries have conducted their respective businesses only in the
ordinary and usual course of such businesses consistent with past practice,
and (B) there has not been any change in the assets, liabilities, financial
condition, properties, business, or results of operations of the Company or
its Subsidiaries, or any occurrence, development or event of any nature
(including without limitation any earthquake or other Act of God), which,
individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect on the Company.
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(j) Taxes.
(i) Except as set forth in Section 3.3(j) of the Company Disclosure
Letter: (A) all material Tax Returns required to be filed by or on
behalf of the Company or any of its Subsidiaries have been timely filed
or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such
filed returns are complete and accurate in all material respects; (B)
all Taxes shown on such Tax Returns have been paid in full or adequate
provision has been made for any such Taxes in the financial statements
of the Company and its Subsidiaries (in accordance with GAAP); (C)
there is no audit examination, deficiency assessment, or refund
litigation currently pending with respect to any Taxes of the Company
or any of its Subsidiaries; (D) all Taxes due with respect to completed
and settled examinations or concluded litigation relating to the
Company or any of its Subsidiaries have been paid in full or adequate
provision has been made for any such amounts in the financial
statements of the Company and its Subsidiaries (in accordance with
GAAP); (E) no extensions or waivers of statutes of limitations have
been given by or requested with respect to any Taxes of the Company or
any of its Subsidiaries; and (F) there are no material liens for Taxes
upon the assets or property of any of the Company or its Subsidiaries
except for statutory liens for current Taxes not yet due.
(ii) As used in this Plan, (A) the term "Tax" or "Taxes" means taxes
and other impost, levies, assessments, duties, fees or charges imposed
or required to be collected by any federal, state, county, local,
municipal, territorial or foreign governmental authority or subdivision
thereof, including, without limitation, income, excise, gross receipts,
ad valorem, profits, gains, property, sales, transfer, use, payroll,
employment, severance, withholding, duties, intangible, franchise,
personal property, and other taxes, charges, levies or like
assessments, together with all penalties and additions to tax and
interest thereon, and (B) the term "Tax Return" shall mean any return,
report, information return or other document (including elections,
declarations, disclosures, schedules, estimates, and other returns or
supporting documents) with respect to Taxes.
(k) Absence of Claims; Undisclosed Liabilities.
(i) No litigation, proceeding or controversy before any court or
governmental agency is pending, and there is no pending claim, action
or proceeding against the Company or any of its Subsidiaries, or
challenging the validity or propriety of the transactions contemplated
by this Plan or the Option Agreement, and, to the best knowledge of the
Company, except as set forth in Section 3.3 (k)(i) of the Company's
Disclosure Letter, no such litigation, proceeding, controversy, claim
or action has been threatened, in each case as to which there is a
reasonable possibility of an adverse determination and which, if
adversely determined, would, individually or in the aggregate have or
be reasonably expected to have a Material Adverse Effect on the
Company. There are no claims (statutory or otherwise), demands,
proceedings or other actions pending or, to the best knowledge of the
Company, threatened against the Company or any of its Subsidiaries by
(A) any of their present or former employees or (B) any person who
sought to become employed by the Company or any of its Subsidiaries.
(ii) Except as set forth in Section 3.3(k)(ii) of the Company
Disclosure Letter, there is no injunction, order, judgment, decree, or
regulatory restriction imposed upon the Company, any of its
Subsidiaries or the assets of the Company or any of its Subsidiaries
which has had, or could reasonably be expected to have, a Material
Adverse Effect on the Company.
(iii) Except (A) as set forth in Section 3.3(k)(iii) of the Company's
Disclosure Letter, (B) for those liabilities that are fully reflected
or reserved against on the consolidated statement of financial
condition of the Company as of March 31, 1996 and (C) for liabilities
incurred in the ordinary course of business consistent with past
practice since March 31, 1996 that, either alone or when combined with
all similar liabilities, have not had, and could not reasonably be
expected to have, a Material Adverse Effect on the Company, neither the
Company nor any of its Subsidiaries has incurred any liability of any
nature whatsoever (whether absolute, accrued, contingent or otherwise
and whether due or to become due).
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(l) Absence of Regulatory Actions. Except as set forth in Section 3.3(l)
of the Company's Disclosure Letter, neither the Company nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted any
board resolutions at the request of, federal or state governmental
authorities charged with the supervision or regulation of depository
institutions or depositary institution holding companies or engaged in the
insurance of bank and/or savings and loan deposits ("Government
Regulators") nor has it been advised by any Government Regulator that it is
contemplating issuing or requesting (or is considering the appropriateness
of issuing or requesting) any such order, directive, written agreement,
memorandum of understanding, extraordinary supervisory letter, commitment
letter, board resolutions or similar undertaking.
(m) Agreements.
(i) Except for the Option Agreement, the Company and its Subsidiaries
are not bound by any material contract (as defined in Item 601(b)(10)
of Regulation S-K) to be performed after the date hereof that has not
been filed with, or incorporated by reference in the Company Reports.
Except as disclosed in the Company Reports filed prior to the date of
this Plan or in Section 3.3(m)(i) of the Company's Disclosure Letter,
neither the Company nor any of its Subsidiaries is a party to an oral
or written (A) consulting agreement (including data processing,
software programming and licensing contracts) involving the payment of
more than $250,000 per annum, in the case of any such agreement with an
individual, or $250,000 per annum, in the case of any other such
agreement, (B) agreement with any executive officer or other key
employee of the Company or any of its Subsidiaries the benefits of
which are contingent, or the terms of which are materially altered or
any payments or rights are accelerated, upon the occurrence of a
transaction involving the Company or any of its Subsidiaries of the
nature contemplated by this Plan or the Option Agreement and which
provides for the payment of more than $150,000, (C) agreement with
respect to any executive officer of the Company or any of its
Subsidiaries providing any term of employment or compensation guarantee
extending for a period longer than one year and for the payment of more
than $100,000 per annum, (D) agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Plan or the
Option Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Plan or the Option Agreement or (E) except as set forth in Section
3.3(m)(i)(E) of the Company's Disclosure Letter, agreement containing
covenants that limit the ability of the Company or any of its
Subsidiaries to compete in any line of business or with any person, or
that involve any restriction on the geographic area in which, or method
by which, the Company (including any successor thereof) or any of its
Subsidiaries may carry on its business (other than as may be required
by law or any regulatory agency). Each contract, arrangement,
commitment or understanding with an aggregate annual payment by the
Company or the Bank of $250,000 or more, whether or not set forth in
Section 3.3(m)(i) of the Company's Disclosure Letter, is referred to
herein as a "Material Company Contract". The Company has previously
delivered to Acquiror true and correct copies of each Material Company
Contract.
(ii) Except as set forth in Section 3(m)(ii) of the Company's
Disclosure Letter, (A) each Material Company Contract is a valid and
binding obligation of the Company or one of its Subsidiaries and is in
full force and effect, (B) the Company and each of its Subsidiaries
have in all material respects performed all obligations required to be
performed by it to date under each Material Company Contract, (C) no
event or condition exists which constitutes or, after notice or lapse
of time or both, would constitute a material default on the part of the
Company or any of its Subsidiaries under any such Material Company
Contract, except where such default, individually or in the aggregate,
would not have or be reasonably likely to have a Material Adverse
Effect on the Company and (D) no other party to such Material Company
Contract is, to the best knowledge of the Company, in default in any
respect thereunder.
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(n) Labor Matters. Neither the Company or any of its Subsidiaries is a
party to, or is bound by, any collective bargaining agreement, contract, or
other agreement or understanding with a labor union or labor organization,
nor is the Company or any of its Subsidiaries the subject of any proceeding
asserting that it has committed an unfair labor practice or seeking to
compel it or any such Subsidiary to bargain with any labor organization as
to wages and conditions of employment, nor, to the best knowledge of the
Company, is there any strike, other labor dispute or organizational effort
involving the Company or any of its Subsidiaries pending or threatened.
(o) Employee Benefit Plans. Section 3.3(o) of the Company Disclosure
Letter contains a complete list of all pension, retirement, stock option,
stock purchase, stock ownership, savings, stock appreciation right, profit
sharing, deferred compensation, consulting, bonus, group insurance,
employment, termination, severance, medical, health and other benefit
plans, contracts, agreements, arrangements, including, but not limited to,
"employee benefit plans", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), incentive and
welfare policies, contracts, plans and arrangements and all trust
agreements related thereto in respect to any present or former directors,
officers, or other employees of the Company or any of its Subsidiaries
(hereinafter referred to collectively as the "Employee Plans"). (i) All of
the Employee Plans comply in all material respects with all applicable
requirements of ERISA, the Code and other applicable laws; neither the
Company nor any of its Subsidiaries has engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) with respect to any Employee Plan that, assuming the taxable period
of such transaction expired as of the date hereof, would subject the
Company to a material tax or penalty imposed by either Section 4975 or 4976
of the Code or Section 502 of ERISA; and all contributions required to be
made under the terms of any Employee Plan have been timely made or have
been reflected on the balance sheets contained or incorporated by reference
in the Reports; (ii) no liability to the Pension Benefit Guaranty
Corporation (the "PBGC") (except for payment of premiums) has been
incurred, and no condition exists that presents a material risk to the
Company or any ERISA Affiliate (as defined below) of incurring such a
liability, with respect to any Employee Plan which is subject to Title IV
of ERISA ("Pension Plan"), or with respect to any "single-employer plan"
(as defined in Section 4001(a)(15) of ERISA) currently or formerly
maintained by the Company or any entity (an "ERISA Affiliate") which is
considered one employer with the Company under Section 4001 of ERISA or
Section 414 of the Code (an "ERISA Affiliate Plan"); and no proceedings
have been instituted to terminate any Pension Plan or ERISA Affiliate Plan;
(iii) no Pension Plan or ERISA Affiliate Plan had an "accumulated funding
deficiency" (as defined in Section 302 of ERISA (whether or not waived)) as
of the last day of the end of the most recent plan year ending prior to the
date hereof; the fair market value of the assets of each Pension Plan and
ERISA Affiliate Plan exceeds the present value of the "benefit liabilities"
(as defined in Section 4001(a)(16) of ERISA) under such Pension Plan or
ERISA Affiliate Plan as of the end of the most recent plan year with
respect to the respective Pension Plan or ERISA Affiliate Plan ending prior
to the date hereof, calculated on the basis of the actuarial assumptions
used in the most recent actuarial valuation for such Pension Plan or ERISA
Affiliate Plan prior to the date hereof, and there has been no material
change in the financial condition of any such Pension Plan or ERISA
Affiliate Plan since the last day of the most recent plan year; and no
notice of a "reportable event" (as defined in Section 4043 of ERISA) for
which the 30-day reporting requirement has not been waived has been
required to be filed for any Pension Plan or ERISA Affiliate Plan within
the 12-month period ending on the date hereof; (iv) neither the Company nor
any ERISA Affiliate has provided or is required to provide security to any
Pension Plan or to any ERISA Affiliate Plan pursuant to Section 401(a)(29)
of the Code; (v) neither the Company nor any ERISA Affiliate has
contributed to any "multiemployer plan", as defined in Section 3(37) of
ERISA, on or after September 26, 1980; (vi) each Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA), and
which is intended to be qualified under Section 401(a) of the Code, has
received a favorable determination letter from the Internal Revenue Service
deeming such plan to be so qualified (a "Qualified Plan"); and no condition
exists that is likely to result in revocation of any such favorable
determination letter; (vii) all Employee Plans covering current or former
non-U.S. employees comply in all material respects with applicable local
law, and there are no material unfunded liabilities with respect to any
Employee Plan which covers such employees;
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<PAGE>
(viii) there is no pending or threatened material litigation,
administrative action or proceeding relating to any Employee Plan (other
than benefit claims made in the ordinary course); (ix) there has been no
announcement or commitment by the Company or any Subsidiary to create an
additional Employee Plan, or to amend an Employee Plan except for
amendments required by applicable law; (x) the Company and its Subsidiaries
do not have any obligations for retiree health and life benefits under any
Employee Plan except as set forth in Section 3.3(o) of the Company's
Disclosure Letter, and there are no such Employee Plans that cannot be
amended or terminated without incurring any liability thereunder; (xi)
except as set forth in Section 3.3(o) of the Company Disclosure Letter,
neither the execution and delivery of this Plan nor the consummation of the
transactions contemplated herein will automatically accelerate, or give the
Company or any Subsidiary the right to accelerate, the time of payment or
vesting, or increase the amount, of compensation due to any employee; (xii)
except as specifically identified in Section 3.3(o) of the Company
Disclosure Letter, and subject to the conditions, limitations and
assumptions specified therein, neither the execution and delivery of this
Plan nor the consummation of the transactions contemplated hereby will
result in any payment or series of payments by the Company or any
Subsidiary of the Company to any person which is an "excess parachute
payment" (as defined in Section 280G of the Code) under any Employee Plan,
increase or secure (by way of a trust or other vehicle) any benefits or
compensation payable under any Employee Plan, or accelerate the time of
payment or vesting of any such benefit or compensation, and (xiii) with
respect to each Employee Plan, the Company has supplied to the Acquiror a
true and correct copy, if applicable, of (A) the two most recent annual
reports on the applicable form of the Form 5500 series filed with the
Internal Revenue Service (the "IRS"), (B) such Employee Plan, including all
amendments thereto, (C) each trust agreement and insurance contract
relating to such Employee Plan, including all amendments thereto and the
most recent financial statements thereof, (D) the most recent summary plan
description for such Employee Plan, including all amendments thereto, if
the Employee Plan is subject to Title I of ERISA, (E) the most recent
actuarial report or valuation if such Employee Plan is a Pension Plan, (F)
the most recent determination letter issued by the IRS if such Employee
Plan is a Qualified Plan and (G) the most recent financial statements and
auditor's report relating to each Employee Plan, if applicable.
(p) Title to Assets. The Company and each of its Subsidiaries has good
and marketable title to its material properties and assets (including any
intellectual property asset such as, without limitation, any trademark,
service mark, trade name or copyright) other than (i) as reflected in the
Company Reports, (ii) property as to which it is lessee and (iii) real
estate owned as a result of foreclosure, transfer in lieu of foreclosure or
other transfer in satisfaction of a debtor's obligation previously
contracted.
(q) Compliance with Laws. The Company and each of its Subsidiaries:
(i) holds and has at all times held all permits, licenses,
certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently conducted, except
where the failure to hold or make any such permit, license, certificate
of authority, order, approval, filing, application or registration, as
applicable, individually or in the aggregate, would not have or be
reasonably likely to have a Material Adverse Effect on the Company; all
such permits, licenses, certificates of authority, orders and approvals
are in full force and effect, and, to the knowledge of the Company, no
suspension or cancellation of any of them is threatened; and
(ii) is in compliance, in the conduct of its business, with all
applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable
thereto or to the employees conducting such businesses, including,
without limitation, the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act,
the Americans With Disabilities Act, all other applicable fair lending
laws or other laws relating to discrimination and the Bank Secrecy Act,
except where the failure to be in compliance with any of the foregoing
would not, individually or in the aggregate, have or be reasonably
likely to have a Material Adverse Effect on the Company.
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<PAGE>
(r) Fees. Other than financial advisory services performed for the
Company by CS First Boston Corporation in an amount and pursuant to an
agreement both previously disclosed to the Acquiror, neither the Company
nor any of its Subsidiaries, nor any of their respective officers,
directors, employees or agents, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions, or finder's fees, and no broker or finder has acted directly
or indirectly for the Company, its directors or any Subsidiary of the
Company, in connection with the Plan or the Option Agreement or the
transactions contemplated hereby.
(s) Environmental Matters.
(i) Except as set forth in Section 3.3.(s) of the Company Disclosure
Letter, with respect to the Company and each of its Subsidiaries:
(A) Each of the Company and its Subsidiaries and, to the best
knowledge of the Company, the Participation Facilities (as defined
below), to the extent of the Company's or any of its Subsidiaries'
direct management of such Participation Facility, are, and have
been, in substantial compliance with all Environmental Laws (as
defined below);
(B) There is no suit, claim, action, demand, executive or
administrative order, directive or proceeding pending or, to the
best knowledge of the Company, threatened, before any court,
governmental agency or board or other forum against it or any of its
Subsidiaries or, to the best knowledge of the Company, any
Participation Facility relating to the Company's or any of its
Subsidiaries' direct management of such Participation Facility (x)
for alleged noncompliance with, or liability under, any
Environmental Law or (y) relating to the presence of or release into
the environment of any Hazardous Material (as defined below),
whether or not occurring at or on a site owned, leased or operated
by it or any of its Subsidiaries;
(C) To the best knowledge of the Company, the properties currently
or formerly owned or operated by the Company or any of its
Subsidiaries (including, without limitation, soil, groundwater or
surface water on or under the properties, and buildings thereon) are
not and were not contaminated with any Hazardous Material (as
defined below) that would reasonably be expected to give rise to a
Material Adverse Effect on the Company;
(D) None of it or any of its Subsidiaries has received any notice,
demand letter, executive or administrative order, directive or
request for information from any Federal, state, local or foreign
Governmental Entity or any third party indicating that it may be in
violation of, or liable under, any Environmental Law.
(ii) The following definitions apply for purposes of this Section
3.3(s): (x) "Participation Facility" means any facility in which the
applicable party (or a Subsidiary of it) participates in the management
(including all property held as trustee or in any other fiduciary
capacity) and, where required by the context, includes the owner or
operator of such property; (y) "Environmental Law" means (i) any
federal, state or local law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order,
directive, executive or administrative order, judgment, decree,
injunction, requirement or agreement with any Governmental Entity, (A)
relating to the protection, preservation or restoration of the
environment (which includes, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, structures, soil,
surface land, subsurface land, plant and animal life or any other
natural resource), or to human health or safety, or (B) the exposure
to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or
disposal of, Hazardous Materials, in each case as amended. The term
"Environmental Law" includes, without limitation, the federal
Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, the
federal Water Pollution Control Act of 1972, the federal Clean Air Act,
the federal Clean Water Act, the federal Resource Conservation and
Recovery Act of 1976 (including the Hazardous and Solid Waste Disposal
Amendments thereto), the federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, the Federal
Occupational Safety and Health Act of 1970, the Federal Hazardous
Materials Transportation Act (including, without limitation,
A-15
<PAGE>
injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations
for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Material; and (z) "Hazardous
Material" means any substance in any concentration which is or could be
detrimental to human health or safety or to the environment, currently
or hereafter listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any
Environmental Law, whether by type or by quantity, including any
substance containing any such substance as a component. Hazardous
Material includes, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste,
special waste, industrial substance, oil or petroleum or any derivative
or by-product thereof, radon, radioactive material, asbestos, asbestos-
containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
(t) Classified Loans. The Company has identified to Acquiror in writing
prior to the date hereof all non-residential loans, leases, advances,
credit enhancements, other extensions of credit, commitments and interest
bearing assets of the Company and its Subsidiaries with a current
contractual balance in excess of $500,000 (with respect to commercial
loans) and $750,000 (with respect to multi-family loans) that, as of June
30, 1996 have been criticized or classified by it or any bank examiner as
"Other Loans Specially Mentioned", "Special Mention", "Substandard",
"Doubtful", "Loss", "Classified", "Criticized", "Credit Risk Assets",
"Concerned Loans" or words of similar import. The Company and its
Subsidiaries shall, promptly after the end of any quarter following the
date of this Plan, inform the Acquiror of any commercial or multifamily
loan of the Company or any of its Subsidiaries with a current contractual
balance amount in excess of $500,000 or $750,000, respectively, that
becomes classified or criticized in a manner described in the previous
sentence or any non-residential loan disclosed to Acquiror pursuant to the
previous sentence the categorization of which shall have changed, and also
shall provide Acquiror with a quarterly schedule or report indicating, by
category, the aggregate amounts of all loans of the Company and its
Subsidiaries so classified or criticized.
(u) Delaware Takeover Laws Inapplicable. The Board of Directors of the
Company has taken all actions required to be taken by it to provide that
this Plan and any amendment or revision thereto, and the transactions
contemplated hereby or thereby, shall be exempt from the requirements of
Section 203 of the State Corporation Law.
(v) Material Interests of Certain Persons. Except as disclosed in the
Company's Proxy Statement for its 1996 Annual Meeting of Stockholders, no
officer or director of the Company or any Subsidiary of the Company, or any
"associate" (as such term is defined in Rule 12b-2 under the Exchange Act)
of any such officer or director, has any material interest in any material
contract or property (whether real or personal, tangible or intangible)
used in or pertaining to the business of the Company or any of its
Subsidiaries.
(w) Insurance. The Company and its Subsidiaries are presently insured,
and since December 31, 1993 have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with prudent
banking practice, customarily be insured. All of the insurance policies and
bonds maintained by the Company and its Subsidiaries are in full force and
effect, the Company and its Subsidiaries are not in default thereunder and
all material claims thereunder have been filed in due and timely fashion.
No claim by the Company or any of its Subsidiaries on or in respect of an
insurance policy or bond has been declined or refused by the relevant
insurer or insurers. Between the date hereof and the Effective Time, the
Company and its Subsidiaries will use commercially reasonable efforts to
maintain the levels of insurance coverage in effect on the date hereof.
(x) Books and Records. The books and records of the Company and its
Subsidiaries have been, and are being, maintained in accordance with GAAP
and all applicable legal and accounting requirements.
(y) Corporate Documents. The Company has delivered to the Acquiror true
and complete copies of (i) its certificate of incorporation and by-laws and
(ii) the charter, by-laws or other similar governing documents of each of
its Subsidiaries, as each of them is in effect on the date hereof.
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(z) Board Action. The Boards of Directors of each of the Company and the
Bank (at meetings duly called and held) have by the requisite vote of all
directors present (i) determined that the Merger is advisable and (ii)
approved this Plan, the Merger and (in the case of the Company's Board of
Directors) the Option Agreement and the transactions contemplated hereby
and thereby, and at its respective meeting, the Board of Directors of the
Company has further determined that the Merger is in the best interests of
the Company and its stockholders and has directed that, subject to the
provisions of applicable law, this Plan be submitted for consideration by
the Company's stockholders at a meeting of such stockholders.
(aa) Indemnification. Except as set forth in Section 3.3 (aa) of the
Disclosure Letter, neither the Company nor any of its Subsidiaries is a
party to any indemnification agreement with any of its present or future
directors, officers, employees, agents or other persons who serve or served
in any other capacity with any other enterprise at the request of the
Company (a "Covered Person"), and to the best knowledge of the Company,
there are no claims for which any Covered Person would be entitled to
indemnification under Section 4.7 if such provisions were deemed to be in
effect.
(bb) Loans. Each loan, other than any commercial or other loan the
principal amount of which does not exceed $500,000 or $750,000,
respectively, reflected as an asset on the consolidated statement of
financial condition of the Company and its Subsidiaries as of March 31,
1996, and as of each date subsequent thereto for which the Company shall
have delivered financial statements to the Acquiror pursuant to Section
4.17 hereof, (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true and genuine, except where the failure of any
such loan to be so evidenced, either individually or in the aggregate,
would not have or be reasonably likely to have a Material Adverse Effect on
the Company, and (ii) is the legal, valid and binding obligation of the
obligor named therein, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles. All such loans and extensions of credit that have been
made by the Bank and that are subject to Section 11 of HOLA comply
therewith. Section 3.3(bb) of the Company's Disclosure Letter includes (i)
a listing of all such loans referred to in the first sentence of this
Section 3.3(bb) the principal of which is past due or will become due
within six months or less of June 30, 1996 and (ii) a listing of each loan,
commitment or other borrowing arrangement with any director, executive
officer or ten percent stockholder of the Company or any of its
Subsidiaries, or any person, corporation or enterprise controlling,
controlled by or under common control with any of the foregoing.
(cc) Derivatives Contracts; Structured Notes; Etc. Except as set forth in
Section 3.3 (cc) of the Company's Disclosure Letter, neither the Company
nor any of its Subsidiaries is a party to or has agreed to enter into an
exchange traded or over-the-counter equity, interest rate, foreign exchange
or other swap, forward, future, option, cap, floor or collar or any other
contract that is not included on the balance sheet and is a derivative
contract (including various combinations thereof) (each a "Derivatives
Contract") or owns securities that (1) are referred to generically as
"structured notes," "high risk mortgage derivatives," "capped floating rate
notes" or "capped floating rate mortgage derivatives" or (2) are likely to
have changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes, except for those Derivatives Contracts and other
instruments legally purchased or entered into in the ordinary course of
business, consistent with safe and sound banking practices and regulatory
guidance, and listed (as of the date hereof) in paragraph 3.3(cc) of its
Disclosure Letter or disclosed in the Company Reports filed on or prior to
the date hereof. All of such Derivative Contracts or other instruments are
legal, valid and binding obligations of the Company or one of its
Subsidiaries enforceable in accordance with their terms (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), and are
in full force and effect. The Company and each of its Subsidiaries have
duly performed in all material respects all of their material obligations
thereunder to the extent that such obligations to perform have accrued;
and, to the Company's knowledge, there are no breaches, violations or
defaults or allegations or assertions of such by any party thereunder which
would have or would reasonably be expected to have a Material Adverse
Effect on the Company.
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(dd) Rights Agreement. The Company has taken all action (including, if
required, redeeming all of the outstanding Purchase Rights issued pursuant
to the Rights Agreement or amending or terminating the Rights Agreement)
necessary to ensure that (i) the execution and delivery of this Plan and
the Option Agreement and the consummation of the transactions contemplated
hereby and thereby do not and will not result in the grant of any rights to
any person under the Rights Agreement or enable or require the Purchase
Rights to be exercised, distributed or triggered, and (ii) except as
disclosed in Section 3.3(dd) of the Company's Disclosure Letter, the
consummation of the Merger will result in the expiration of the Purchase
Rights.
Section 3.4. Representations and Warranties of the Acquiror. The Acquiror
represents and warrants to the Company that:
(a) Recitals True. The facts set forth in the Recitals of this Plan with
respect to the Acquiror and Merger Sub are true and correct in all material
respects.
(b) Corporate Qualification. Each of the Acquiror and Merger Sub is in
good standing in its jurisdiction of organization and as a foreign
corporation in each jurisdiction where the properties owned, leased or
operated or the business conducted by it requires such qualification. Each
of the Acquiror and Merger Sub has the requisite corporate power and
authority (including all federal, state, local and foreign government
authorizations) to carry on its respective businesses as they are now being
conducted and to own its respective properties and assets.
(c) Corporate Authority.
(i) The Acquiror has the requisite corporate power and authority to
execute and deliver this Plan and, subject to the receipt of all
required regulatory approvals, consents or nonobjections, as the case
may be, to consummate the transactions contemplated hereby. The
execution and delivery of this Plan and consummation of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action of the Acquiror. This Plan has been
duly and validly executed and delivered by the Acquiror and (assuming
due authorization, execution and delivery by the Company) this Plan
constitutes a valid and binding agreement of the Acquiror, enforceable
against it in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(ii) Merger Sub has the requisite corporate power and authority to
execute and deliver this Plan and, subject to the receipt of all
required regulatory approvals, consents or nonobjections, as the case
may be, to consummate the transactions contemplated hereby. The
execution and delivery of this Plan and consummation of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporation action of Merger Sub and of the Acquiror
as sole stockholder of Merger Sub. This Plan has been duly and validly
executed and delivered by Merger Sub and (assuming due authorization,
execution and delivery by the Company) this Plan constitutes a valid
and binding agreement of Merger Sub, enforceable against it in
accordance with its terms, subject as to enforcement to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
(d) No Violations. The execution, delivery and performance of this Plan
by each of the Acquiror and Merger Sub do not, and the consummation of the
transactions contemplated hereby by the Acquiror and Merger Sub will not,
constitute (i) a breach or violation of, or a default under, any law, rule
or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of the Acquiror or any
Subsidiary of the Acquiror, or to which the Acquiror or any of its
Subsidiaries (or any of their respective properties) is subject, or enable
any person to enjoin the Merger, the Bank Merger or the other transactions
contemplated hereby and thereby, (ii) a breach or violation of, or a
default under, the certificate of incorporation or by-laws or similar
organizational documents of the Acquiror or any of its Subsidiaries or
(iii) a material breach or violation of, or a material default under (or an
event which with due notice or lapse of time or both would constitute a
material default under), or result in the termination
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of, accelerate the performance required by, or result in the creation of
any lien, pledge, security interest, charge or other encumbrance upon any
of the properties or assets of the Acquiror or any of its Subsidiaries
under, any of the terms, conditions or provisions of any note, bond,
indenture, deed of trust, loan agreement or other agreement, instrument or
obligation to which the Acquiror or any of its Subsidiaries is a party, or
to which any of their respective properties or assets may be bound or
affected.
(e) Consents and Approvals. Except for (A) the filing of an application
with the OTS and approval of such application, (B) the filing with the SEC
of the Proxy Statement, (C) the filing of the Certificate of Merger, (D)
the filings required in connection with the Bank Merger, and (E) the
consents and approvals set forth on Section 3.4(e) of the Acquiror's
Disclosure Letter, no consents or approvals of or filings or registrations
with any Governmental Entity or with any third party are necessary in
connection with the execution and delivery by the Acquiror and Merger Sub
of this Plan and the consummation by the Acquiror and Merger Sub of the
Merger and the other transactions contemplated hereby or the execution and
delivery by Acquiror of the Option Agreement and the consummation by the
Acquiror of the transactions contemplated thereby, and Acquiror knows of no
reason why the Requisite Regulatory Approvals (as defined in Section
5.1(b)) should not be obtained.
(f) Access to Funds. The Acquiror has, or on the Closing Date will have,
all funds necessary to consummate the Merger and pay the aggregate cash
portion of the Merger Consideration.
(g) Board Action. The Board of Directors of the Acquiror, by the
requisite vote, has (i) determined that the Merger is advisable and in the
best interests of the Acquiror and its stockholders and (ii) approved this
Plan, the Merger and the Option Agreement and the transactions contemplated
hereby and thereby.
ARTICLE IV. COVENANTS
Section 4.1. Acquisition Proposals. The Company agrees that neither it nor
any of its Subsidiaries shall authorize or permit any of its officers,
directors, employees, agents or representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or
any of its Subsidiaries) to directly or indirectly, initiate, solicit,
encourage or otherwise facilitate any inquiries or the making of any proposal
offer (including, without limitation, any proposal, tender offer or exchange
offer to stockholders of the Company) with respect to a merger, consolidation
or similar transaction involving, or any purchase of all or any significant
portion of the assets, deposits or any equity securities of, the Company or
any of its Subsidiaries (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal") or, except to the extent legally required for
the discharge by the Company's board of directors of its fiduciary duties as
advised by such board's counsel with respect to an unsolicited offer from a
third party, engage in any negotiations concerning or provide any confidential
information or data to, or have any discussions with, any person relating to
an Acquisition Proposal, or otherwise facilitate any effort or attempt to make
or implement an Acquisition Proposal. The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties (other than the Acquiror) conducted heretofore with respect
to any of the foregoing. The Company will take the necessary steps to inform
promptly the appropriate individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 4.1. The Company
agrees that it will notify the Acquiror immediately if any such inquiries,
proposals or offers are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or
continued with the Company or any of its Subsidiaries, and the Company shall
promptly thereafter provide the details of any such communication to the
Acquiror in writing. The Company also agrees that it promptly shall request
each other person (other than the Acquiror) that has heretofore executed a
confidentiality agreement in connection with its consideration of acquiring
the Company or any of its Subsidiaries to return all confidential information
heretofore furnished to such person by or on behalf of the Company or any of
its Subsidiaries and enforce any such confidentiality agreements.
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Section 4.2. Certain Policies of the Company. At the request of the
Acquiror, after the date on which all required federal depository institution
regulatory approvals are received and prior to the Effective Time, the Company
shall (i) to the extent consistent with GAAP and regulatory accounting
principles and requirements, in each case as applied to financial institutions
and not objected to by the Company's independent certified public accountants,
modify its loan, litigation and real estate valuation policies and practices
(including modifying its loan classifications and levels of reserves and
establishing specific reserves on loans and REO properties) and its other
accounting methods or periods so as to be consistent with those of the
Acquiror, (ii) pay or accrue certain expenses, (iii) dispose of certain
assets, and (iv) take any other action as Acquiror may reasonably request in
order to facilitate and effect the transfer of contractual and other rights to
Acquiror and the integration of the businesses and operations of the Company
and Acquiror; provided, however, that the Company shall not be required to
take such action unless (A) the Acquiror agrees in writing that all conditions
to the Acquiror's obligation to consummate the Merger set forth in Article V
hereof (other than the expiration of the 30-day statutory waiting period
following approval of the Merger by the OTS) have been satisfied or waived,
(B) the Company shall have received a written, irrevocable waiver by the
Acquiror of its rights to terminate this Agreement, (C) all of the conditions
to the Company's obligation to consummate the Merger (other than the statutory
waiting period described above) shall have been satisfied, and (D) Acquiror
shall have delivered to the Company documentary evidence reasonably
satisfactory to the Company certifying that Acquiror has sufficient cash to
pay the aggregate Merger Consideration. The Company's representations,
warranties and covenants contained in this Plan shall not be deemed to be
untrue or breached in any respect for any purpose as a consequence of any
modifications or changes undertaken solely on account of this Section 4.2.
Nothing contained herein shall be deemed to relieve the Company of its
obligation to deliver the documents referred to in Section 5.2 hereof on the
Effective Date.
Section 4.3. Employees. Incorporated herein by this reference are the terms
of that certain letter of even date herewith from Acquiror to the Company (the
"Benefits Letter"), and in the event of any conflict between the provisions of
this Agreement and the terms of the Benefits Letter, the terms of the Benefits
Letter shall be controlling.
Section 4.4. Access and Information. Upon reasonable notice and subject to
applicable laws relating to the exchange of information, the Company shall,
and shall cause each of its Subsidiaries to, afford to the officers,
employees, accountants, counsel and other representatives of the Acquiror
access, during normal business hours during the time period from the date of
this Agreement to the Effective Time, to all its properties, books, contracts,
commitments, records, officers, employees, accountants, counsel and other
representatives and, during such period, the Company shall, and shall cause
its Subsidiaries to, make available to the Acquiror (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws or
federal or state banking laws (other than reports or documents which the
Company is not permitted to disclose under applicable law), and (ii) all other
information concerning its business, properties and personnel as the Acquiror
may reasonably request. Neither the Company nor any of its Subsidiaries shall
be required to provide access to or to disclose information where such access
or disclosure would violate or prejudice the rights of the Company's
customers, jeopardize any attorney-client privilege or contravene any law,
rule, regulations, order, judgment, decree, fiduciary duty or binding
agreement entered into prior to the date of this Agreement. The parties hereto
will make appropriate substitute disclosure arrangements under circumstances
in which the restrictions of the preceding sentence apply. The Acquiror will
hold all such information in confidence in accordance with the provisions of
the confidentiality agreement, dated July 1, 1996, between the Acquiror and
the Company (the "Confidentiality Agreement"). No investigation by Acquiror or
its representatives shall affect the representations, warranties, covenants or
agreements of the Company set forth herein.
Section 4.5. Regulatory Matters. (a) The parties hereto shall cooperate with
each other and use their reasonable efforts to promptly prepare and file all
necessary documentation, to effect all applications, notices, petitions and
filings, and to obtain as promptly as practicable all permits, consents,
approvals and authorizations of all third parties and governmental authorities
which are necessary or advisable to consummate the transactions
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contemplated by this Plan. The Company and the Acquiror shall have the right
to review in advance, and to the extent practicable each will consult the
other on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to the Company or the Acquiror, as
the case may be, and any of their respective Subsidiaries, which appear in any
filing made with, or written materials submitted to, any third party or any
governmental authority in connection with the transactions contemplated by
this Plan. In exercising the foregoing right, each of the parties hereto shall
act reasonably and as promptly as practicable. The parties hereto agree that
they will consult with each other with respect to the obtaining of all
permits, consents, approvals and authorizations of all third parties and
governmental authorities necessary or advisable to consummate the transactions
contemplated by this Plan and each party will keep the other apprised of the
status of matters relating to completion of the transactions contemplated
herein.
(b) The Acquiror and the Company shall, upon request, furnish each other
with all information concerning themselves, their Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement or any other
statement, filing, notice or application made by or on behalf of the Acquiror,
the Company or any of their respective Subsidiaries to any governmental
authority in connection with the Merger and the other transactions
contemplated by this Plan.
(c) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as
the case may be, or any of their respective Subsidiaries, affiliates or
associates (as such terms are defined in Rule 12b-2 under the Exchange Act as
in effect on the date of this Plan) from, or delivered by any of the foregoing
to, any governmental authority in respect of the transactions contemplated
hereby.
Section 4.6. Antitakeover Statutes. The Company shall take all steps
necessary to exempt this Plan and the Option Agreement and the transactions
contemplated hereby and thereby from the requirements of any state
antitakeover law including, without limitation, Section 203 of the State
Corporation Law, by action of its board of directors or otherwise.
Section 4.7. Indemnification; Directors' and Officers' Insurance. (a) In the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date of this Plan, or who becomes prior to the Effective Time, a director
or officer of the Company or any of its Subsidiaries (the "Indemnified
Parties") is, or is threatened to be, made a party based in whole or in part
on, or arising in whole or in part out of, or pertaining to (i) the fact that
he is or was a director, officer, or employee of the Company, any of the
Subsidiaries of the Company or any of their respective predecessors or (ii)
this Plan, the Option Agreement, or any of the transactions contemplated
hereby or thereby, including, without limitation, any actions taken in
accordance with Sections 4.2 or 4.19, whether in any case asserted or arising
before or after the Effective Time (collectively, the "Matters"), the parties
hereto agree to cooperate and use their best efforts to defend against and
respond thereto. From and after the Effective Time, through the sixth
anniversary of the Effective Date, the Acquiror agrees to indemnify and hold
harmless each Indemnified Party, against any costs or expenses (including
reasonable attorneys' fees and expenses in advance of the final disposition of
any claim, action, suit, proceeding or investigation to each Indemnified Party
to the fullest extent permitted by law upon receipt of any undertaking
required by applicable law), judgments, fines, losses, claims, damages or
liabilities and amounts paid in settlement (collectively, "Costs") incurred in
connection with any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of any of the Matters, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent permitted by applicable law.
The Acquiror agrees that it will also indemnify for a period of six years from
the Effective Date in accordance with and subject to the terms and provisions
of this Section 4.7(a) and Section 4.7(b), the advisors of the Company solely
for Claims arising out of actions taken by them in accordance with Section 4.2
or 4.19 of this Plan. Notwithstanding anything to the contrary contained
herein, all rights to indemnification in respect of any claim (a "Claim")
asserted or made within such six year period shall continue until the final
disposition of such Claim.
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(b) Any Indemnified Party wishing to claim indemnification under Section
4.7(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Acquiror thereof, but the failure to
so notify shall not relieve the Acquiror of any liability it may have to such
Indemnified Party except to the extent such failure to notify materially
prejudices the indemnifying party. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the
Effective Time), the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with the Acquiror; provided, however,
that (i) the Acquiror shall have the right to assume the defense thereof and
upon such assumption the Acquiror shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the
defense thereof, except that if the Acquiror elects not to assume such defense
or counsel for the Indemnified Parties advises that there are issues which
raise conflicts of interest between the Acquiror and the Indemnified Parties,
the Indemnified Parties may retain counsel satisfactory to them, and the
Acquiror shall pay the reasonable fees and expenses of such counsel for the
Indemnified Parties in any jurisdiction, (ii) the Indemnified Parties will
cooperate in the defense of any such matter and (iii) the Acquiror shall not
be liable for any settlement effected without its prior written consent which
consent shall not be unreasonably withheld; and provided, further, that the
Acquiror shall not have any obligation hereunder to any Indemnified Party when
and if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) Prior to the Effective Time the Company shall purchase, and for a period
of six years after the Effective Time, Acquiror shall use its commercially
reasonable efforts to maintain, directors and officers liability insurance
"tail" or "runoff" coverage with respect to wrongful acts and/or omissions
committed or allegedly committed prior to the Effective Time. Such coverage
shall have an aggregate coverage limit over the term of such policy in an
amount no less than the annual aggregate coverage limit under the Company's
existing directors and officers liability policy, and in all other respects
shall be at least comparable to such existing policy.
(d) In the event Acquiror or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of the
Acquiror assume the obligations set forth in this Section 4.7.
(e) The provisions of this Section 4.7 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
Section 4.8. Actions. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its reasonable efforts to take
promptly, or cause to be taken promptly, all actions and to do promptly, or
cause to be done promptly, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Plan as soon as practicable, including using
efforts to obtain all necessary actions or non-actions, extensions, waivers,
consents and approvals from all applicable governmental entities, effecting
all necessary registrations, applications and filings (including, without
limitation, filings under any applicable state securities laws) and obtaining
any required contractual consents and regulatory approvals.
Section 4.9. Publicity. The initial press release announcing this Plan shall
be a joint press release, and thereafter, subject to the provisions of
applicable law and the rules of the New York Stock Exchange, the Company and
the Acquiror shall consult with each other prior to issuing any press releases
or otherwise making any statements, public or otherwise, with respect to the
other or the transactions contemplated hereby and in making any filings with
any governmental entity or with any national securities exchange with respect
thereto.
Section 4.10. Proxy Statement. Promptly, but in any event no later than 60
days following the date hereof, the Company shall prepare and file with the
SEC the Proxy Statement. Thereafter, the Company shall respond to the comments
of the staff of the SEC promptly following receipt thereof, and promptly
thereafter
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shall mail the Proxy Statement to all holders of record (as of the applicable
record date) of shares of Company Common Stock. The Company represents and
covenants that the Proxy Statement and any amendment or supplement thereto, at
the date of mailing to stockholders of the Company and the date of the meeting
of the Company's stockholders to be held in connection with the Merger, will
be in compliance with all relevant rules and regulations of the SEC and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Acquiror and the Company shall cooperate with each other
in the preparation of the Proxy Statement. If requested by the Acquiror, the
Company shall employ professional proxy solicitors to assist it in contacting
stockholders in connection with the vote on the Merger.
Section 4.11. Stockholders' Meeting. The Company shall take all action
necessary, in accordance with applicable law and its articles of incorporation
and by-laws, to convene a meeting of the holders of Company Common Stock as
promptly as practicable for the purpose of considering and taking action
required by this Plan. Except to the extent legally required for the discharge
by the board of directors of its fiduciary duties as advised by such board's
counsel, the board of directors of the Company shall recommend that the
holders of the Company Common Stock vote in favor of and approve the Merger
and adopt this Plan.
Section 4.12. Notification of Certain Matters. The Company shall give prompt
notice to the Acquiror of: (a) any notice of, or other communication relating
to, a default or event that, with notice or lapse of time or both, would
become a default, received by it or any of its Subsidiaries subsequent to the
date of this Plan and prior to the Effective Time, under any contract material
to the financial condition, properties, businesses or results of operations of
the Company and its Subsidiaries taken as a whole to which the Company or any
such Subsidiary is a party or is subject; and (b) any material adverse change
in the financial condition, properties, business or results of operations of
the Company and its Subsidiaries taken as a whole or the occurrence of any
event which, so far as reasonably can be foreseen at the time of its
occurrence, is reasonably likely to result in any such change. Each of the
Company and the Acquiror shall, and the Acquiror shall cause Merger Sub, when
duly incorporated, to, give prompt notice to the other party of any notice or
other communication from any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated by this Plan. Acquiror shall give prompt notice to the Company of
the occurrence or non-occurrence of any event which would or (so far as
reasonably can be foreseen at the time of such occurrence or non-occurrence)
is reasonably likely to, prevent Acquiror from obtaining the funds necessary
to consummate the Merger and pay the aggregate Merger Consideration; provided,
however, that the delivery of any notice pursuant to this sentence shall not
limit or otherwise affect the remedies available hereunder or otherwise to the
Company.
Section 4.13. Rights Agreement. The Company shall take all action necessary
to ensure that this Plan and the Option Agreement and the transactions
contemplated hereby and thereby do not and will not result in the grant of any
rights to any person under the Rights Agreement or enable or require the
Purchase Rights to be exercised, distributed or triggered.
Section 4.14. [INTENTIONALLY OMITTED]
Section 4.15. Advice of Changes. The Company shall promptly advise the
Acquiror of any change or event having a Material Adverse Effect on the
Company and each party shall promptly advise the other of any change or event
which such party believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein. From time to time prior to the Effective Time (and
on the date prior to the Effective Date), the Company will promptly supplement
or amend
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the Disclosure Letter delivered to the Acquiror in connection with the
execution of this Plan to reflect any matter which, if existing, occurring or
known at the date of this Plan, would have been required to be set forth or
described in such Disclosure Letter or which is necessary to correct any
information in such Disclosure Letter which has been rendered inaccurate
thereby. No supplement or amendment to such Disclosure Letter shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Section 5.2(b), hereof, or the compliance by the Company with the covenants
and agreements made by it herein.
Section 4.16. Current Information. During the period from the date of this
Plan to the Effective Time, the Company will make available one or more of its
designated representatives to confer on a regular and frequent basis (not less
than monthly) with representatives of the Acquiror and to report the general
status of the ongoing operations of the Company and its Subsidiaries. The
Company will promptly notify the Acquiror of any material change in the normal
course of business or in the operation of the properties of the Company or any
of its Subsidiaries and of any governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated), or
the institution or the credible threat of significant litigation involving the
Company or any of its Subsidiaries, and will keep the Acquiror fully informed
of such events.
Section 4.17. Subsequent Interim and Annual Financial Statements. As soon as
reasonably available, but in no event more than 45 days after the end of each
fiscal quarter ending after the date of this Plan, the Company will deliver to
the Acquiror its Quarterly Report on Form 10-Q as filed with the SEC under the
Exchange Act. As soon as reasonably available, but in no event later than
March 31, 1997, the Company will deliver to Acquiror its Annual Report on Form
10-K for the fiscal year ended December 31, 1996, as filed with the SEC under
the Exchange Act.
Section 4.18. Additional Agreements. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Plan, or to vest the Surviving Corporation or the Bank with full title to
all properties, assets, rights, approvals, immunities and franchises of any of
the parties to the Merger or the Bank Merger, respectively, the proper
officers and directors of each party to this Agreement and their respective
Subsidiaries shall take all such necessary action as may be reasonably
requested by, and at the sole expense of, the Acquiror.
Section 4.19. Cooperation in Financings. The Company agrees to cooperate
with, and provide reasonable assistance to, Acquiror, at Acquiror's expense,
in connection with any sale or distribution of securities (whether registered
or otherwise) made by Acquiror or any of its affiliates in connection with the
consummation of the transactions contemplated hereby including, without
limitation, using its reasonable best efforts to (i) making available on a
timely basis such financial information of the Company and its Subsidiaries as
may reasonably be required in connection with any such sale or distribution;
(ii) obtaining "cold comfort" letters and updates thereof from the Company's
independent certified public accountants and opinion letters from the
Company's attorneys, with such letter to be in customary form and to cover
matters of the type customarily covered by accountants and attorneys in such
transactions; and (iii) making available representatives of the Company and
its accountants and attorneys in connection with any such sale or
distribution, including for purposes of due diligence and marketing efforts
related thereto.
Section 4.20. Goodwill Litigation. Following the Effective Time, the
Acquiror shall and shall cause the Bank (and, subject to clause (iii) hereof,
any permitted successor to the Bank), as applicable, to (i) take all actions
necessary or desirable to pursue the Bank's claims in the Goodwill Litigation,
(ii) file with applicable regulatory agencies such periodic and other reports
as are necessary to furnish and update information to holders of the
Participation Interests or Secondary Participation Interests, (iii) refrain
from taking any action that would violate the requirements of 31 U.S.C.
Section 3727, including, without limitation, any action that would cause an
"assignment" (as defined therein) of the claims in the Goodwill Litigation,
and (iv) refrain from taking any action to dismiss, settle, compromise or
otherwise cease prosecution of the Goodwill Litigation on terms that do not
result solely in the payment of cash or other readily monetizable
consideration by or on behalf of the United States to the Bank.
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Section 4.21. Litigation Recovery. As soon as is practicable after the
receipt of any payment from the United States in settlement of or in
satisfaction of a final judgment obtained in the Goodwill Litigation, the
Acquiror shall cause the Bank to distribute the applicable portion of such
payment in a manner consistent with the terms of the certificates governing
the rights of the holders of Participation Interests (a copy of which is
attached hereto as Annex 4.21(a)) and the certificates governing the rights of
the holders of the Secondary Participation Interests (which will be issued
substantially in the form of the certificate attached hereto as Annex
4.21(b)).
Section 4.22. Registration Statement. Promptly, but in any event no later
than 60 days following the date hereof, the Bank shall prepare and file with
the OTS a registration statement covering the issuance and distribution of the
Secondary Participation Interests (the "Registration Statement"). Thereafter,
the Bank shall respond to the comments of the staff of the OTS promptly
following receipt thereof, and shall use its best efforts to have the
Registration Statement declared effective as soon as possible. The Bank
represents and covenants that the Registration Statement and any amendment or
supplement thereto, at the date of filing thereof, will be in compliance with
all relevant rules and regulations of the OTS and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Acquiror
shall cooperate with the Bank in the preparation of the Registration Statement
and shall have the right to review the Registration Statement and to provide
comments thereon prior to the Bank's filing of the Registration Statement or
any amendment thereto with the OTS.
Section 4.23. XCF Acceptance Corporation. Prior to the Effective Time, the
Company and the Bank shall, and shall cause XCF Acceptance Corporation ("XCF")
to use its best efforts to take all such actions as Acquiror may reasonably
request to ensure that after the Effective Date the 6 1/2% Subordinated Notes
are convertible solely into the Merger Consideration.
Section 4.24. First Citizens Bank Agreement. Promptly following the date of
this Plan, the Company shall, pursuant to its rights under the Agreement and
Plan of Merger, dated as of April 14, 1996, between the Company and First
Citizens Bank, restructure the acquisition by the Company of First Citizens
Bank as a branch purchase transaction, and take all other action necessary to
consummate such acquisition as restructured, including the amendment and/or
withdrawal, as applicable, of its pending applications with the Federal
Reserve Board and the Banking Department of the State of California with
respect to such transaction as previously structured.
ARTICLE V. CONDITIONS TO CONSUMMATION
Section 5.1. Conditions to Each Party's Obligations. The respective
obligations of the Acquiror, Merger Sub (when duly incorporated) and the
Company to effect the Merger shall be subject to the satisfaction prior to the
Effective Time of the following conditions:
(a) This Plan and the Merger shall have been approved by the requisite
vote of the stockholders of the Company in accordance with applicable law.
(b) All regulatory approvals, consents and waivers required to consummate
the transactions contemplated by this Plan (including without limitation
the Merger, the Bank Merger and the registration, issuance and distribution
of the Secondary Participation Interests) shall have been obtained and
shall remain in full force and effect, and all applicable statutory waiting
periods in respect thereof shall have expired (all such approvals and the
expirations of all such waiting periods being referred to herein as the
"Requisite Regulatory Approvals").
(c) No party hereto shall be subject to any order, decree or injunction
of a court or agency of competent jurisdiction which enjoins or prohibits
the consummation of the Merger, the Bank Merger or any other transaction
contemplated by this Plan, and no litigation or proceeding shall be pending
against the
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Acquiror or the Company or any of their Subsidiaries brought by any
Governmental Entity seeking to prevent consummation of the transactions
contemplated hereby.
(d) No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated, interpreted, applied or enforced by any
Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger, the Bank Merger or any other transaction
contemplated by this Plan.
Section 5.2. Conditions to the Obligations of the Acquiror. The obligations
of the Acquiror and, when duly incorporated, Merger Sub to effect the Merger
shall be subject to the satisfaction or waiver prior to the Effective Time of
the following additional conditions:
(a) The Acquiror shall have received from KPMG Peat Marwick LLP, the
Company's independent certified public accountants, "comfort" letters,
dated (i) the date of the mailing of the Proxy Statement to the Company's
stockholders and (ii) shortly prior to the Effective Date, with respect to
certain financial information regarding the Company in the form customarily
issued by such accountants at such time in connection with transactions of
this type.
(b) (i) The representations and warranties of the Company set forth in
Sections 3.3(a), 3.3(b), 3.3(e), 3.3(g), 3.3(l), 3.3(u), 3.3(x), 3.3(z) and
3.3(dd) of this Plan shall be true and correct in all respects as of the
date of this Plan and (except to the extent such representations and
warranties speak as of an earlier date and except to the extent modified by
actions taken in compliance with this Plan) as of the Effective Date as
though made on and as of the Effective Date and (ii) the representations
and warranties of the Company set forth in this Plan other than those
specifically enumerated in clause (i) hereof shall be true and correct in
all respects as of the date of this Plan and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Effective Date as though made on and as of the Effective Date; provided,
however, that for purposes of determining the satisfaction of the condition
contained in this clause (ii), no effect shall be given to any exception in
such representations and warranties relating to the best knowledge of the
Company, materiality or a Material Adverse Effect, and provided further,
however, that, for purposes of this clause (ii), such representations and
warranties shall be deemed to be true and correct in all material respects
unless the failure or failures of such representations and warranties to be
so true and correct, individually or in the aggregate, results or would
reasonably be expected to result in a Material Adverse Effect on the
Company. The Acquiror shall have received a certificate signed on behalf of
the Company by the Chief Executive Officer and the Chief Financial Officer
of the Company, dated the Effective Date, to the foregoing effect.
(c) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Effective Date, and the Acquiror shall have received a certificate
signed on behalf of the Company by the Chief Executive Officer and the co-
Principal Financial Officers of the Company, dated the Effective Date, to
the foregoing effect.
(d) The Acquiror shall have received an opinion, dated the Effective
Date, from each of Irell & Manella LLP, counsel to the Company, and Vedder,
Price, Kaufman & Kammholz, special counsel to the Company, covering the
matters set forth on Annex 2 and Annex 3, respectively, and containing in
each case, such customary assumptions, qualifications and limitations as
are reasonably acceptable to the Acquiror. As to any matter in such
opinions which involves matters of fact or matters relating to laws other
than the law of the State of California, the General Corporation Law of the
State of Delaware or federal securities or banking law, such counsel may
rely upon the certificates of officers and directors of the Company and of
public officials (as to matters of fact) and opinions of local counsel (as
to matters of law), reasonably acceptable to the Acquiror, provided a copy
of each such certificate and reliance opinion shall be attached as an
exhibit to the opinion of such counsel.
(e) Acquiror shall have received from the Company, to the extent
necessary under the relevant option or warrant agreements, the written
consent, in form and substance reasonably satisfactory to Acquiror, of all
holders of options or warrants to purchase Company Common Stock (as set
forth in the Company
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<PAGE>
Disclosure Letter) to the termination of such options (to the extent not
exercised prior to the Effective Time) in accordance with the provisions of
Section 1.5 hereof.
Section 5.3. Conditions to the Obligation of the Company. The obligation of
the Company to effect the Merger shall be subject to the satisfaction or
waiver prior to the Effective Time of the following additional conditions:
(a) The representations and warranties of the Acquiror set forth in this
Plan shall be true and correct in all material respects as of the date of
this Plan and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Date as though made on and
as of the Effective Date. The Company shall have received a certificate
signed on behalf of the Acquiror by the Chief Executive Officer and the
Chief Financial Officer of the Acquiror, dated the Effective Date, to the
foregoing effect.
(b) The Acquiror shall have performed, in all material respects, each of
its covenants and agreements contained in this Plan. The Company shall have
received a certificate signed by the Chief Executive Officer and the Chief
Financial Officer of the Acquiror, dated the Effective Date, to the
foregoing effect documentary evidence reasonably satisfactory to the
Company, dated the Effective Date, certifying that the Acquiror has
sufficient funds to pay the aggregate Merger Consideration.
(c) The Registration Statement shall have been declared effective by the
OTS; and the OTS shall not have issued any order preventing or suspending
the use of the Registration Statement or the delivery of the Secondary
Participation Interests to the Exchange Agent or the holders of Company
Common Stock.
(d) The Company shall have received an opinion, dated the Effective Date,
from each of Skadden Arps Slate Meagher & Flom, counsel to the Acquiror and
Merger Sub, and in-house counsel to the Acquiror, covering the matters set
forth on Annex 4 and Annex 5, respectively, and containing in each case
such customary assumptions, qualifications and limitations as are
reasonably acceptable to the Company. As to any matter in such opinions
which involves matters of fact or matters relating to laws other than the
General Corporation Law of the State of Delaware or federal securities or
banking law, such counsel may rely upon the certificates of officers and
directors of the Acquiror or Merger Sub and of public officials (as to
matters of fact) and opinions of local counsel (as to matters of law),
reasonably acceptable to the Company, provided a copy of each such reliance
certificate and opinion shall be attached as an exhibit to the opinion of
such counsel.
ARTICLE VI. TERMINATION
Section 6.1. Termination. This Plan may be terminated, and the Merger
abandoned, prior to the Effective Date, either before or after its approval by
the stockholders of the Company:
(a) by the mutual consent of the Acquiror and the Company in writing, if
the board of directors of each so determines by vote of a majority of the
members of its entire board;
(b) by the Acquiror or the Company by written notice to the other party
if either (i) any request or application for a Requisite Regulatory
Approval shall have been denied or (ii) any Governmental Entity of
competent jurisdiction shall have issued a final, unappealable order
enjoining or otherwise prohibiting consummation of the transactions
contemplated by this Plan;
(c) by the Acquiror or the Company, if its board of directors so
determines by vote of a majority of the members of its entire board, in the
event that the Merger is not consummated by March 31, 1997 unless the
failure to so consummate by such time is due to the breach of any material
representation, warranty or covenant contained in this Plan by the party
seeking to terminate; provided, however, that in the event the Merger is
not consummated by March 31, 1997, as a result of the failure to obtain
Requisite Regulatory Approval for reasons entirely unrelated to the
financing of the transaction, the capital structure of Acquiror or Merger
Sub, the adequacy of Acquiror or Merger Sub's financial condition and/or
the prospective effect of such financing, structure or condition on the
Bank, the Acquiror may extend the termination date set forth herein to June
30, 1997;
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<PAGE>
(d) by the Acquiror or the Company (provided that the Company shall not
be entitled to terminate this Plan pursuant to this paragraph (d) if it
shall be in material breach of any of its obligations under Section 4.11)
if any approval of the stockholders of the Company required for the
consummation of the Merger shall not have been obtained by reason of the
failure to obtain the required vote at a duly held meeting of such
stockholders or at any adjournment or postponement thereof;
(e) by the Acquiror or the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the representations or warranties set forth in this Plan
on the part of the other party, which breach is not cured within thirty
days following written notice to the party committing such breach, or which
breach, by its nature, cannot be cured prior to the Effective Time, unless
such breach is waived by the non-breaching party; provided, however, that
neither party shall have the right to terminate this Plan pursuant to this
Section 6.1(e) unless the breach of representation or warranty, together
with all other such breaches, would entitle the party receiving such
representation not to consummate the transactions contemplated hereby
pursuant to Section 5.2(b) (in the case of a breach of representation or
warranty by the Company) or Section 5.3(a) (in the case of a breach of
representation or warranty by the Acquiror);
(f) by the Acquiror or the Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material
breach of any of the covenants or agreements set forth in this Plan on the
part of the other party, which breach shall not have been cured or is
incapable of being cured within thirty days following receipt by the
breaching party of written notice of such breach from the other party
hereto; or
(g) by the Acquiror, if the Board of Directors of the Company does not
publicly recommend in the Proxy Statement that the Company's stockholders
approve and adopt this Plan or if, after recommending in the Proxy
Statement that stockholders approve and adopt this Plan, the Board of
Directors of the Company shall have withdrawn, modified or amended such
recommendation in any respect adverse to the Acquiror.
Section 6.2. Effect of Termination. In the event of the termination of this
Plan by either the Acquiror or the Company, as provided above, this Plan shall
thereafter become void and there shall be no liability on the part of any
party hereto or their respective officers or directors, except that (i) the
next to the last sentence of Section 4.4 and Sections 6.2, 8.2 and 8.6 shall
survive any termination of this Agreement and (ii) notwithstanding anything to
the contrary contained in this Agreement, no party shall be relieved or
released from any liabilities or damage arising out of its willful breach of
any provisions of this Plan.
ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.1. Effective Date and Effective Time. On such date as Acquiror
selects, which shall be within 30 days after the last to occur of the
expiration of all applicable waiting periods in connection with the Requisite
Regulatory Approvals and the satisfaction or waiver of all other conditions to
the consummation of this Plan (other than those conditions relating to the
receipt of officer's certificates or attorneys' opinions), or on such earlier
or later date as may be agreed in writing by the parties, the Certificate of
Merger shall be executed in accordance with all appropriate legal requirements
and shall be filed as required by law, and the Merger provided for herein
shall become effective upon such filing or on such date as may be specified in
such Certificate of Merger. The date of such filing or such later effective
date is herein called the "Effective Date". The "Effective Time" of the Merger
shall be the time of such filing or such other time as set forth in such
Certificate of Merger.
ARTICLE VIII. OTHER MATTERS
Section 8.1. Interpretation. When a reference is made in this Plan to
Sections or Annexes, such reference shall be to a Section of, or Annex to,
this Plan unless otherwise indicated. The table of contents, tie sheet and
headings contained in this Plan are for ease of reference only and shall not
affect the meaning or interpretation
A-28
<PAGE>
of this Plan. Whenever the words "include", "includes", or "including" are
used in this Plan, they shall be deemed followed by the words "without
limitation". Any singular term in this Plan shall be deemed to include the
plural, and any plural term the singular.
Section 8.2. Survival. Only those agreements and covenants of the parties
that are by their terms applicable in whole or in part after the Effective
Time shall survive the Effective Time. All other agreements and covenants and
all representations and warranties shall be deemed to be conditions of the
Plan and shall not survive the Effective Time.
Section 8.3. Waiver. Prior to the Effective Time, any provision of this Plan
may be: (i) waived by the party benefitted by the provision; or (ii) amended
or modified at any time by an agreement in writing between the parties hereto
approved by their respective boards of directors, except that, after the vote
by the stockholders of the Company, no amendment may be made that would
contravene any provision of the State Corporation Law.
Section 8.4. Counterparts. This Plan may be executed in counterparts each of
which shall be deemed to constitute an original, but all of which together
shall constitute one and the same instrument.
Section 8.5. Governing Law. This Plan shall be governed by, and interpreted
in accordance with, the laws of the State of Delaware without regard to the
conflict of law principles thereof. The parties hereby irrevocably submit to
the jurisdiction of the courts of the State of Delaware and the Federal courts
of the United States of America located in the State of Delaware solely in
respect of the interpretation and enforcement of the provisions of this Plan,
the Option Agreement and of the documents referred to in this Plan and the
Option Agreement and in respect of the transactions contemplated herein and
therein, and hereby waive, and agree not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof or of
any such document, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Plan and the Option
Agreement or any such document may not be enforced in or by such courts, and
the parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a Delaware State or
Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of
such dispute and agree that mailing of process or other papers in connection
with any such action or proceeding in the manner provided in Section 8.7 or in
such other manner as may be permitted by law, shall be valid and sufficient
service thereof.
Section 8.6. Expenses. Without limiting or affecting the remedies available
to the parties hereunder, each party hereto will bear all expenses incurred by
it in connection with this Plan and the transactions contemplated hereby.
Section 8.7. Notices. (All notices, requests, acknowledgements and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, telecopy, telegram or telex
(confirmed in writing) to such party at its address set forth below or such
other address as such party may specify by notice to the other party hereto.
If to the Company or the Bank, to:
Cal Fed Bancorp Inc.
5700 Wilshire Boulevard
Los Angeles, California 90036
(213) 932-2900
(213) 932-2869 (Fax)
Attention:
Edward G. Harshfield
President and Chief Executive Officer
A-29
<PAGE>
With copies to:
Douglas J. Wallis, Esq.
Executive Vice President, General Counsel and Secretary
Cal Fed Bancorp Inc.
5700 Wilshire Boulevard
Los Angeles, California 90036
(213) 932-2900
(213) 932-2869 (Fax)
Kenneth Heitz, Esq.
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
(310) 277-1010
(310) 203-7199 (Fax)
Robert Stucker, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
(312) 609-7500
(312) 609-5005 (Fax)
If to the Acquiror or Merger Sub, to:
First Nationwide Bank, A Federal Savings Bank
135 Main Street, 20th Floor
San Francisco, CA 94105
(415) 904-0167
(415) 904-0190 (Fax)
Attention:
Carl B. Webb
President and Chief Operating Officer
With a copy to:
Christie S. Flanagan, Esq.
Executive Vice President and General Counsel
First Nationwide Bank, A Federal Savings Bank
200 Crescent Court, Suite 1350
Dallas, TX 75201
(214) 871-5188
(214) 871-5199 (Fax)
Section 8.8. Entire Agreement; Binding Agreement; Third Parties. This Plan,
together with the Option Agreement, the Benefits Letter and the Disclosure
Letters and all agreements referred to herein, including the Confidentiality
Agreement, represents the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and supersedes any and all
other oral or written agreements heretofore made. All terms and provisions of
the Plan shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Except as to Section 4.7
and Section 4.20(iii), nothing in this Plan is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by
reason of this Plan.
A-30
<PAGE>
Section 8.9. Assignment. This Plan may not be assigned by any party hereto
without the written consent of the other parties.
Section 8.10. Severability. The provisions of this Plan shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Plan, or the application thereof to any person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may
be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Plan and the application
of such provision to other persons or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or
the application thereof, in any other jurisdiction.
Section 8.11. Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Plan and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be executed
by their duly authorized officers as of the day and year first above written.
First Nationwide Holdings Inc.,
a Delaware corporation
By: /s/ Glenn P. Dickes
--------------------------------
Name: Glenn P. Dickes
Title: Vice President
CFB Holdings, Inc.
By: /s/ Glenn P. Dickes
--------------------------------
Name: Glenn P. Dickes
Title: Vice President
Cal Fed Bancorp Inc.,
a Delaware corporation
By: /s/ Edward G. Harshfield
--------------------------------
Name: Edward G. Harshfield
Title: President and Chief
Executive Officer
By: /s/ Douglas J. Wallis
--------------------------------
Name: Douglas J. Wallis
Title: Executive Vice President,
Secretary and General
Counsel
California Federal Bank,
A Federal Savings Bank
By: /s/ Edward G. Harshfield
--------------------------------
Name: Edward G. Harshfield
Title: President and Chief
Executive Officer
By: /s/ Douglas J. Wallis
--------------------------------
Name: Douglas J. Wallis
Title: Executive Vice President,
Secretary and General
Counsel
A-31
<PAGE>
ANNEX 1
STOCK OPTION AGREEMENT
(INCLUDED AS APPENDIX B TO THIS PROXY STATEMENT)
A-32
<PAGE>
ANNEX 2
MATTERS TO BE COVERED IN OPINION OF
IRELL & MANELLA LLP
[SUBJECT TO STANDARD EXCEPTIONS AND QUALIFICATIONS]
(a) The Company has been duly incorporated and is existing and in good
standing as a corporation under the laws of the State of Delaware.
(b) To the best of our knowledge, (i) the shares of capital stock of each of
the Company's Subsidiaries are owned directly by the Company or the Bank, as
the case may be, and (ii) such shares of capital stock are free and clear of
all liens, claims, encumbrances and restrictions on transfer, and (iii) there
are no outstanding options, calls or commitments relating to shares of capital
stock of the Company or any of its Subsidiaries or any outstanding securities,
obligations or agreements convertible into or exchangeable for, or giving any
person any right (including, without limitation, preemptive rights) to
subscribe for or acquire from it, any shares of capital stock of the Company
or any of its Subsidiaries; provided, however, that we have assumed, without
independent investigation, that, in the case of each agreement entered into by
a holder of options or warrants to purchase shares of Company Common Stock
which agreement provides for the termination of such option or warrant
pursuant to Section 1.5 of the Plan, such agreement is a valid agreement of
such holder, binding on and enforceable against such holder in accordance with
its terms, and that the Company will comply with all of its obligations under
each such agreement that call for any action by the Company on or following
the date of this opinion.
(c) The execution and delivery of the Plan by the Company and the Bank and
the consummation by the Company and the Bank of the transactions provided for
therein have been duly authorized by all requisite corporate action on the
part of the Company and the Bank, respectively. The Company has the corporate
power and authority to execute and deliver the Plan and to consummate the
transactions contemplated thereby.
(d) The Plan has been executed and delivered by the Company and the Bank and
(assuming the Plan is a valid and binding obligation of the Acquiror and
Merger Sub) is a valid and binding obligation of the Company and the Bank,
enforceable against the Company and the Bank in accordance with its terms,
except as may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally including, without limitation,
preferences and fraudulent conveyances and distributions by a corporation to
its stockholders, and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(e) The execution, delivery and performance by the Company and the Bank of
the Plan and the consummation by the Company and the Bank of the transactions
contemplated thereby will not result in or constitute a violation of or a
default under (i) the Certificate of Incorporation or By-Laws or similar
organizational documents of the Company or any of its Subsidiaries, or (ii)
any judgment, decree or order to which the Company or any of its Subsidiaries
is subject, or any note, bond, indenture, loan agreement or other agreement or
instrument to which the Company or any of its Subsidiaries is a party, in each
case, of which we have knowledge and which the Company has advised us in
connection with this transaction is material to the business or financial
condition of the Company and its Subsidiaries taken as a whole.
(f) No consent or approval of, or other action by or filing with, any court
or administrative or governmental body which has not been obtained, taken or
made is required on the part of the Company or the Bank under the laws of the
United States of America or the laws of the State of Delaware or the State of
California, or any court order or judgment specifically applicable to the
Company or the Bank and of which we have knowledge, for the Company and the
Bank to execute and deliver the Plan and to consummate the transactions
provided for therein, other than any such consent, approval, action or filing
(i) which may be required as a result of the involvement of the Acquiror in
the transactions contemplated by the Agreement because of any other facts
specifically pertaining to the Acquiror, (ii) the absence of which is not
expected by us, based upon our knowledge of the relevant facts, to have any
material adverse effect on the Company or the Surviving Corporation or to
deprive the Acquiror of any material benefit under the Plan, or (iii) which
can be readily obtained without significant
A-33
<PAGE>
delay or expense to the Acquiror, without loss to the Acquiror of any material
benefit under the Plan and without any material adverse effect on the Acquiror
or the Company during the period such consent, approval, action or filing was
not obtained or effected; provided, however, that we express no opinion with
respect to any of the laws of the United States of America applicable to the
Bank by reason of it being a federal savings bank. The foregoing opinion
relates only to consents, approvals, actions and filings required under (i)
laws which are specifically referred to in this opinion, (ii) laws which, in
our experience, are normally applicable to transactions of the type provided
for in the Plan, and (iii) court orders and judgments disclosed to us by the
Acquiror in connection with this opinion.
(g) All corporate and stockholder actions required to be taken by the
Company to exempt Acquiror and its Subsidiaries and the transactions
contemplated by the Plan and the Option Agreement from the requirements of
Section 203 of the DGCL have been taken and are in full force and effect.
(h) Assuming due authorization of the Merger by the Acquiror and Merger Sub,
upon the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware in accordance with the Plan, the Merger will be
effective in accordance with the laws of the State of Delaware.
(i) The Proxy Statement, insofar as it constituted a proxy statement for the
Special Meeting, as of the date thereof, appeared on its face to be
appropriately responsive in all material respects to the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder, except that we express no opinion as to (i) the
financial statements, schedules and other financial, numerical and statistical
data included in or incorporated by reference into the Proxy Statement, (ii)
any document incorporated by reference into the Proxy Statement, (iii) the
exhibits to any document incorporated by reference into the Proxy Statement or
(iv) information relating to the Acquiror or any of its Subsidiaries which was
included in the Proxy Statement, and we do not assume any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Proxy Statement or any documents incorporated by reference therein except as
set forth in the paragraph immediately following this one.
In connection with the Merger, we participated in conferences with certain
officers and other representatives of the Company at which the contents of the
Proxy Statement and related matters were discussed and although we are not
passing upon and do not assume any responsibility for the accuracy, fairness
or completeness of the statements contained in the Proxy Statement or any
information on which they purport to be based and made no independent check or
verification thereof, on the basis of the foregoing, no facts have come to our
attention that lead us to believe that the Proxy Statement as of the date on
which it was mailed to the stockholders of the Company and on the date of the
Special Meeting contemplated thereby, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that we
express no belief with respect to (i) the financial statements, schedules and
other financial, numerical and statistical data included in or incorporated by
reference into the Proxy Statement, (ii) the exhibits thereto and the exhibits
to any document incorporated by reference into the Proxy Statement, (iii) the
documents incorporated by reference therein, (iv) any information relating to
the Acquiror or any of its Subsidiaries contained therein or (v) disclosures
with respect to matters of federal law or regulation applicable to federal
savings banks.
Whenever our opinion herein with respect to the existence or nonexistence of
facts is qualified by the phrase "to our knowledge," or any similar phrase
implying a limitation on the basis of knowledge, such phrase means only that
the individual attorneys in this firm who devoted substantive attention to the
transactions contemplated by the Plan and the Option Agreement do not have
actual knowledge that the facts as stated herein are untrue. Unless otherwise
expressly stated herein, such persons have not undertaken any investigation to
determine the existence or nonexistence of such facts, and no inference as to
the extent of their knowledge should be drawn from the fact of their
representation of the Company or any of its Subsidiaries in this or any other
instance.
We express no opinion as to the laws of any jurisdiction other than the laws
of the United States (other than the laws concerning federal savings banks, as
to which we express no opinion), the State of California and the General
Corporation Law of the State of Delaware.
A-34
<PAGE>
ANNEX 3
MATTERS TO BE COVERED IN OPINION OF
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
[SUBJECT TO STANDARD EXCEPTIONS AND QUALIFICATIONS]
(a) The Company is a savings and loan holding company duly registered under
the Home Owners' Loan Act of 1933, as amended.
(b) The Bank is an existing federal savings bank, organized under the Home
Owners Loan Act of 1933, as amended, and in good standing under the laws of
the United States of America.
(c) Under the laws of the United States of America applicable to the Company
or the Bank by reason of the Bank being a federal savings bank, no consent or
approval of, or other action by or filing with, any court or administrative or
governmental body which has not been obtained, taken or made is required on
the part of the Company or the Bank for the Company and the Bank to execute
and deliver the Plan and to consummate the transactions provided for therein,
other than any such consent, approval, action or filing (i) which may be
required as a result of the involvement of the Acquiror in the transactions
contemplated by the Agreement because of any other facts specifically
pertaining to the Acquiror, (ii) the absence of which is not expected by us,
based upon our knowledge of the relevant facts, to have any material adverse
effect on the Company or the Surviving Corporation or to deprive the Acquiror
of any material benefit under the Plan, or (iii) which can be readily obtained
without significant delay or expense to the Acquiror, without loss to the
Acquiror of any material benefit under the Plan and without any material
adverse effect on the Acquiror, the Company or the Bank during the period such
consent, approval, action or filing was not obtained or effected.
In connection with the Merger, we participated in conferences with certain
officers and other representatives of the Company at which certain contents of
the Proxy Statement and related matters were discussed and although we are not
passing upon and do not assume any responsibility for the accuracy, fairness
or completeness of the statements contained in the Proxy Statement or any
information on which they purport to be based and made no independent check or
verification thereof, on the basis of the foregoing, no facts have come to our
attention that lead us to believe that the Proxy Statement as of the date on
which it was mailed to the stockholders of the Company and on the date of the
Special Meeting contemplated thereby, contained an untrue statement of a
material fact with respect to, or omitted to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading with respect to,
matters of federal law or regulation applicable to federal savings banks.
Whenever our opinion herein with respect to the existence or nonexistence of
facts is qualified by the phrase "to our knowledge," or any similar phrase
implying a limitation on the basis of knowledge, such phrase means only that
the individual attorneys in this firm who devoted substantive attention to the
transactions contemplated by the Plan and the Option Agreement do not have
actual knowledge that the facts as stated herein are untrue. Unless otherwise
expressly stated herein, such persons have not undertaken any investigation to
determine the existence or nonexistence of such facts, and no inference as to
the extent of their knowledge should be drawn from the fact of their
representation of the Company or any of its Subsidiaries in this or any other
instance.
We express no opinion as to the laws of any jurisdiction other than the
federal laws of the United States of America concerning federal savings banks,
the offer and issuance of the Secondary Participation Interests under the
Securities Act of 1933 and the solicitation of proxies by the Company under
the Securities Act of 1934, as amended.
A-35
<PAGE>
ANNEX 4
MATTERS TO BE COVERED IN OPINION OF
SKADDEN ARPS SLATE MEAGHER & FLOM
[SUBJECT TO STANDARD EXCEPTIONS AND QUALIFICATIONS]
(a) The Acquiror has been organized and is existing and in good standing as
a corporation under the laws of the State of Delaware.
(b) FNB has been organized and is existing as a federal savings bank under
the laws of the United States of America.
(c) Merger Sub has been organized and is existing and in good standing as a
corporation under the laws of the State of Delaware.
(d) The execution and delivery of the Plan by each of the Acquiror and
Merger Sub and the consummation by each of the Acquiror and Merger Sub of the
transactions provided for therein have been duly authorized by all requisite
corporate action on the part of each of the Acquiror and Merger Sub,
respectively.
(e) Each of the Acquiror and Merger Sub has the corporate power and
authority to execute and deliver the Plan and to consummate the transactions
contemplated thereby.
(f) The Plan has been executed and delivered by each of the Acquiror and
Merger Sub and (assuming the Plan is a valid and binding obligation of the
Company) is a valid and binding obligation of each of the Acquiror and Merger
Sub, enforceable against each of the Acquiror and Merger Sub in accordance
with its terms, except as enforcement thereof may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting creditors' rights generally,
and (ii) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(g) No consent or approval of, or other action by or filing with, any court
or administrative or governmental body which has not been obtained, taken or
made is required under the laws of the United States of America or the laws of
the State of Delaware or any court order or judgment specifically applicable
to the Acquiror or Merger Sub and actually known to us, for the Acquiror and
Merger Sub to execute and deliver the Plan and to consummate the transactions
provided for therein, other than any such consent, approval, action or filing
(i) which may be required as a result of your involvement in the transactions
contemplated by the Plan because of any other facts specifically pertaining to
you, (ii) the absence of which is not expected by us, based upon our actual
knowledge of the relevant facts, to have any material adverse effect on the
Acquiror, the Company or the Surviving Corporation or to deprive you of any
material benefit under the Plan, or (iii) which can be readily obtained
without significant delay or expense to the Acquiror, without loss to the
Acquiror of any material benefit under the Plan and without any material
adverse effect on the Acquiror or the Company during the period such consent,
approval, action or filing was not obtained or effected. The foregoing opinion
relates only to consents, approvals, actions and filings required under (i)
laws which are specifically referred to in this opinion, (ii) laws which, in
our experience, are normally applicable to transactions of the type provided
for in the Plan, and (iii) court orders and judgments disclosed to us by the
Acquiror in connection with this opinion.
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<PAGE>
ANNEX 5
MATTERS TO BE COVERED IN OPINION OF
IN-HOUSE COUNSEL TO ACQUIROR
[SUBJECT TO STANDARD EXCEPTIONS AND QUALIFICATIONS]
The execution, delivery and performance by the Acquiror of the Plan and the
consummation by the Acquiror of the transactions contemplated thereby will not
result in or constitute a violation of or a default under (i) the Certificate
of Incorporation or By-Laws or similar organizational documents of the
Acquiror or any of its Subsidiaries, or (ii) any judgment, decree or order to
which the Acquiror or any of its Subsidiaries is subject, or any note, bond,
indenture, loan agreement or other agreement or instrument to which the
Acquiror or any of its Subsidiaries is a party, in each case, which is set
forth on the attached list as one of such documents which is material to the
business or financial condition of the Acquiror and its Subsidiaries taken as
a whole.
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<PAGE>
ANNEX 4.21(a)
CERTIFICATE GOVERNING THE RIGHTS OF HOLDERS OF THE
PARTICIPATION INTERESTS
THE CONTINGENT LITIGATION RECOVERY PARTICIPATION INTERESTS ARE NOT SAVINGS
ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THE PARTICIPATION
INTERESTS ARE BEING DISTRIBUTED PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
STATUTES, AND HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR APPLICABLE STATE SECURITIES AGENCIES. THE RECOVERY PAYMENT MAY
BE SUBJECT TO APPLICABLE CAPITAL DISTRIBUTION REGULATIONS.
[FORM OF CONTINGENT LITIGATION RECOVERY PARTICIPATION INTEREST]
No. PC- Participation Interests
CONTINGENT LITIGATION RECOVERY PARTICIPATION INTEREST
THIS CERTIFIES THAT , or registered assigns, is the registered owner of
the right to receive from California Federal Bank, A Federal Savings Bank (the
"Bank") five millionths of one percent (0.000005%) of the Litigation Recovery,
if any (as hereinafter defined) for each Contingent Litigation Recovery
Participation Interest set forth above. As used throughout this Contingent
Litigation Recovery Participation Interest (the "Participation Interest"),
"Litigation Recovery" means the cash payment, if any, actually received by the
Bank in respect of a final, nonappealable judgment in or final settlement of
California Federal Bank v. The United States of America, Civil Action No. 92-
138C, filed on February 28, 1992, in the United States Court of Federal Claims
(the "Litigation"), after deduction of (i) the aggregate expenses incurred
previously and hereafter by the Bank in prosecuting the Litigation and
obtaining such cash payment, (ii) any income tax liability of the Bank,
computed on a pro forma basis, as a result of the Bank's receipt of such cash
payment (net of any income tax benefit to the Bank from the payment of a
portion of the Litigation Recovery to the holders of Participation Interests
(the "Recovery Payment") and disregarding for purposes of this clause (ii) the
effect of any net operating loss carryforwards or other tax attributes held by
the Bank or any of its subsidiaries or affiliated entities) and (iii) the
expenses incurred by the Bank in connection with the creation, issuance and
trading of the Participation Interests, including, without limitation, legal
and accounting fees and the fees and expenses of the Interest Agent (as
hereinafter defined). Payment hereunder shall occur upon presentation and
surrender of this Participation Interest in the manner specified in the
Participation Agreement at or prior to 5:00 P.M. (New York time) on the Final
Payment Date (hereinafter defined) at the principal office of Chemical Trust
Company of California, a California trust corporation (the "Interest Agent"),
or at the Interest Agent's facility designated for such purpose at Chemical
Bank, Securities Window, Room 234, 55 Water Street, New York, New York 10041,
or Chemical Trust Company of California, 300 South Grand Avenue, Fourth Floor,
Los Angeles, California 90071, or its successor as Interest Agent.
Payment, if any, on this Participation Interest shall be made to the
registered holder hereof as of a date (the "Payment Record Date") that is not
less than fifteen days and not later than thirty days following the date of
the Payment Notice (as hereinafter defined). The "Payment Notice" shall be
notice of the amount of the Litigation Recovery and the Recovery Payment, as
well as the Payment Record Date, which notice shall be published or mailed to
registered holders of Participation Interests by the Bank. The "Final Payment
Date" will be the date that is six months following the date of the Payment
Record Date.
This Participation Interest is subject to all of the terms, provisions and
conditions of that certain Agreement Regarding Participation Interests, dated
as of June 30, 1995 (the "Participation Agreement"), by and between
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<PAGE>
the Bank and the Interest Agent, which Participation Agreement is hereby
incorporated herein by reference and made a part hereof and to which
Participation Agreement reference is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Interest Agent, the Bank and the holders of the Participation Interests.
Copies of the Participation Agreement are on file at the above-mentioned
principal office of the Interest Agent.
This Participation Interest, upon surrender at the principal office of the
Interest Agent or at its facility designated for such purpose at Chemical
Bank, Securities Window, Room 234, 55 Water Street, New York, New York 10041,
or Chemical Trust Company of California, 300 South Grand Avenue, Fourth Floor,
Los Angeles, California 90071, may be transferred, split up, combined or
exchanged for another Participation Interest or Participation Interests of
like tenor entitling the holder to receive a like aggregate percentage of the
Litigation Recovery as the Participation Interest or Participation Interests
surrendered shall have entitled such holder to receive; provided, however,
that the Bank and Interest Agent shall not be required to effect any such
transfer, split up, combination or exchange if any of the resulting
Participation Interest(s) would represent a right to receive any percentage of
the Litigation Recovery other than five millionths of one percent (0.000005%)
or a whole multiple thereof.
Following the Payment Record Date, the registered holder hereof may receive
payment in respect of this Participation Interest only by surrendering this
Participation Interest to the Interest Agent at its facility maintained for
such purpose at Chemical Bank, Securities Window, Room 234, 55 Water Street,
New York, New York 10041, or at the principal office of the Interest Agent, if
then different, at or prior to 5:00 P.M. (New York time) on the Final Payment
Date. No holder of a Participation Interest shall be entitled to receive any
payment with respect thereto until the Participation Interest shall have been
surrendered as provided in the preceding sentence and the Participation
Agreement. A holder of a Participation Interest shall not be entitled to any
interest for the period of time between the date on which the Bank receives
any cash payment in connection with the Litigation and the date on which
payment is made to such holder in respect of such Participation Interest in
accordance with the terms of the Participation Agreement. Any and all
Participation Interests not delivered in accordance with the Participation
Agreement shall be null and void, and following the Final Payment Date, the
Bank and Interest Agent shall have no obligation to make any payment thereon.
Each holder of a Participation Interest by acceptance of the same
acknowledges and agrees that (i) the Bank retains sole and exclusive control
of the Litigation and may, among other things, dismiss, settle or cease
prosecuting the Litigation at any time without obtaining any cash or other
recovery, and (ii) no holder of a Participation Interest shall have any rights
against the Bank for any decision regarding the conduct or disposition of the
Litigation, including, without limitation, any decision to dispose of the
Litigation without a cash recovery by the Bank. In addition, in the event that
applicable laws, rules or regulations limit or prevent the distribution of all
or any portion of the Litigation Recovery, the Bank shall have no obligation
whatsoever to make any payment in excess of the allowable amount, if any.
All rights of action in respect of the Participation Agreement are vested in
the respective registered holders of the Participation Interests; provided,
however, that no registered holder of any Participation Interest shall have
the right to enforce, institute or maintain any suit, action or proceeding
against the Bank to enforce, or otherwise act in respect of, the Participation
Interests, unless (a) such registered holder shall have previously given
written notice to the Bank of the substance of such dispute, and registered
holders of at least one-quarter in interest of the issued and outstanding
Participation Interests shall have given written notice to the Bank of their
support for the institution of such proceeding to resolve such dispute, (b)
written notice of the substance of such dispute and of the support for the
institution of such proceeding by such holders shall have been provided by the
Bank to the Interest Agent, and (c) the Interest Agent shall not have
instituted appropriate proceedings with respect to such dispute within 30 days
following the date of such written notice to the Interest Agent, it being
understood and intended that no one or more registered holders of
Participation Interests shall have the right in any manner whatever by virtue
of, or by availing of, any provision of the Participation Agreement to affect,
disturb or prejudice the rights of any other registered holders of
Participation Interests, or to obtain or to seek to obtain priority in
preference over any other holders or to enforce any right under the
Participation Agreement, except in
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<PAGE>
the manner herein provided for the equal and ratable benefit of all registered
holders of Participation Interests. Except as provided in this paragraph, no
holder of a Participation Interest shall have the right to enforce, institute
or maintain any suit, action or proceeding to enforce, or otherwise act in
respect of, the Participation Interests.
This Participation Interest shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Interest Agent.
WITNESS the facsimile signature of the proper officers of the Bank and its
corporate seal.
Dated:
California Federal Bank, a Federal
Savings Bank
By: _________________________________
Its: ________________________________
ATTEST
Countersigned
- -------------------------------------
Interest Agent
By: _________________________________
Authorized Signature
A-40
<PAGE>
[Form of Reverse Side of Contingent Litigation Recovery Participation
Interest]
ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH
HOLDER DESIRES TO TRANSFER THE PARTICIPATION INTEREST.)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Participation Interest, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint attorney,
to transfer the within Participation Interest on the books of the within-named
Bank, with full power of substitution.
Dated:
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of this Participation Interest in every particular,
without alteration or enlargement or any change whatsoever.
A-41
<PAGE>
ANNEX 4.21(b)
THE SECONDARY CONTINGENT LITIGATION RECOVERY PARTICIPATION INTERESTS (THE
"SECONDARY PARTICIPATION INTERESTS") ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY. THE SECONDARY PARTICIPATION INTERESTS ARE BEING
DISTRIBUTED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES STATUTES, AND HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR APPLICABLE
STATE SECURITIES AGENCIES. THE RECOVERY PAYMENT MAY BE SUBJECT TO APPLICABLE
CAPITAL DISTRIBUTION REGULATIONS.
[Form of Secondary Contingent Litigation Recovery Participation Interest]
No. PC- Secondary Participation Interests
Secondary Contingent Litigation Recovery Participation Interest
THIS CERTIFIES THAT , or registered assigns, is the registered owner of
the right, following the "Effective Date" (as hereinafter defined), to receive
from California Federal Bank, A Federal Savings Bank (the "Bank") twenty
millionths of one percent (0.00002%) of the Adjusted Litigation Recovery, if
any (as hereinafter defined) for each Secondary Contingent Litigation Recovery
Participation Interest set forth above. As used throughout this Secondary
Contingent Litigation Recovery Participation Interest (the "Secondary
Participation Interest"), (I) "Adjusted Litigation Recovery" means sixty
percent (60%) of the amount obtained from the following equation: (A) the cash
payment (the "Cash Payment"), if any, actually received by the Bank in respect
of a final, nonappealable judgment in or final settlement of California
Federal Bank v. The United States of America, Civil Action No. 92-138C, filed
on February 28, 1992, in the United States Court of Federal Claims (the
"Litigation"), minus (B) the sum of the following: (i) the aggregate expenses
incurred previously and hereafter by the Bank in prosecuting the Litigation
and obtaining such Cash Payment, (ii) any income tax liability of the Bank,
computed on a pro forma basis, as a result of the Bank's receipt of such Cash
Payment (net of any income tax benefit to the Bank, computed on a pro forma
basis, from the payment of a portion of the Adjusted Litigation Recovery to
the holders of Secondary Participation Interests), (iii) the expenses incurred
by the Bank in connection with the creation, issuance and trading of the
Bank's Participation Interests and these Secondary Participation Interests,
including, without limitation, legal and accounting fees and the fees and
expenses of the Interest Agent (as hereinafter defined), (iv) the payment due
to the holders of the Bank's Contingent Litigation Recovery Participation
Interests and (v) one-hundred twenty-five million dollars ($125,000,000); (II)
"Effective Date" means the effective date of the merger of CFB Holdings, Inc.,
a Delaware corporation and a wholly owned subsidiary of First Nationwide
Holdings Inc. ("FNH") with and into Cal Fed Bancorp, Inc., a Delaware
corporation and the holding company of the Bank ("Bancorp") in connection with
the transactions contemplated by that certain Agreement and Plan of Merger
dated as of July 27, 1996 by and among FNH, Bancorp and the Bank. (III)
"Income tax liability of the Bank computed on a pro forma basis" means the
aggregate amount of any and all relevant items of income, gain, loss or
deduction associated with the receipt by the Bank of the Cash Payment
multiplied by the highest, combined marginal rate of federal, state and local
income taxes in the relevant year and disregarding for purposes of such
computation the effect of any net operating loss carryforwards or other tax
attributes of the Bank or any of its subsidiaries or affiliated entities; and
(IV) "Income tax benefit to the Bank computed on a pro forma basis" means the
aggregate amount of any and all relevant items of income, gain, loss or
deduction associated with the payment by the Bank of the Adjusted Litigation
Recovery multiplied by the highest, combined marginal rate of federal, state
and local income taxes in the relevant year and disregarding for purposes of
such computation the effect of any net operating loss carryforwards or other
tax
A-42
<PAGE>
attributes of the Bank or any of its subsidiaries or affiliated entities.
Payment hereunder shall occur upon presentation and surrender of this
Secondary Participation Interest in the manner specified in the Secondary
Participation Agreement (hereinafter defined) at or prior to 5:00 P.M. (New
York time) on the Final Payment Date (hereinafter defined) at the principal
office of ChaseMellon Shareholder Services, L.L.C., a New Jersey limited
liability company (the "Interest Agent"), or at the Interest Agent's facility
designated for such purpose at Securities Window, 120 Broadway, 13th Floor,
New York, New York 10071, or at 15821 Ventura Blvd., Suite 670, Encino,
California 91436, or its successor as Interest Agent.
Payment, if any, on this Secondary Participation Interest shall be made to
the registered holder hereof as of a date (the "Payment Record Date") that is
not less than fifteen days and not later than thirty days following the date
of the Payment Notice (as hereinafter defined). The "Payment Notice" shall be
notice of the amount of the Adjusted Litigation Recovery, as well as the
Payment Record Date, which notice shall be published or mailed to registered
holders of Secondary Participation Interests by the Bank. The "Final Payment
Date" will be the date that is six months following the date of the Payment
Record Date.
This Secondary Participation Interest is subject to all of the terms,
provisions and conditions of that certain Agreement Regarding Secondary
Contingent Litigation Recovery Participation Interests, dated as of , 1996
(the "Secondary Participation Agreement"), by and between the Bank and the
Interest Agent, which Secondary Participation Agreement is hereby incorporated
herein by reference and made a part hereof and to which Secondary
Participation Agreement reference is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Interest Agent, the Bank and the holders of the Secondary Participation
Interests. Copies of the Secondary Participation Agreement are on file at the
above-mentioned principal office of the Interest Agent.
This Secondary Participation Interest, upon surrender at the principal
office of the Interest Agent or at its facility designated for such purpose at
Securities Window, 120 Broadway, 13th Floor, New York, New York 10071, or at
15821 Ventura Blvd., Suite 670, Encino, California 91436, may be transferred,
split up, combined or exchanged for another Secondary Participation
Interest(s) of like tenor entitling the holder to receive a like aggregate
percentage of the Adjusted Litigation Recovery as the Secondary Participation
Interest(s) surrendered shall have entitled such holder to receive; provided,
however, that the Bank and Interest Agent shall not be required to effect any
such transfer, split up, combination or exchange if any of the resulting
Secondary Participation Interest(s) would represent a right to receive any
percentage of the Adjusted Litigation Recovery other than twenty millionths of
one percent (0.00002%) or a whole multiple thereof.
Following the Payment Record Date, the registered holder hereof may receive
payment in respect of this Secondary Participation Interest only by
surrendering this Secondary Participation Interest to the Interest Agent at
its facility maintained for such purpose at Securities Window, 120 Broadway,
13th Floor, New York 10071, or at the principal office of the Interest Agent,
if then different, at or prior to 5:00 P.M. (New York time) on the Final
Payment Date. No holder of a Secondary Participation Interest shall be
entitled to receive any payment with respect thereto until the Secondary
Participation Interest shall have been surrendered as provided in the
preceding sentence and the Secondary Participation Agreement. A holder of a
Secondary Participation Interest shall not be entitled to any interest for the
period of time between the date on which the Bank receives any cash payment in
connection with the Litigation and the date on which payment is made to such
holder in respect of such Secondary Participation Interest in accordance with
the terms of the Secondary Participation Agreement. Any and all Secondary
Participation Interests not delivered in accordance with the Secondary
Participation Agreement shall be null and void, and following the Final
Payment Date, the Bank and Interest Agent shall have no obligation to make any
payment thereon.
Each holder of a Secondary Participation Interest by acceptance of the same
acknowledges and agrees that (i) the Bank retains sole and exclusive control
of the Litigation and may, among other things, dismiss, settle or cease
prosecuting the Litigation at any time without obtaining any cash or other
recovery, and (ii) no holder of a
A-43
<PAGE>
Secondary Participation Interest shall have any rights against the Bank for
any decision regarding the conduct or disposition of the Litigation,
including, without limitation, any decision to dispose of the Litigation
without a cash recovery by the Bank. In addition, in the event that applicable
laws, rules or regulations limit or prevent the distribution of all or any
portion of the Adjusted Litigation Recovery, the Bank shall have no obligation
whatsoever to make any payment in excess of the allowable amount, if any.
All rights of action in respect of the Secondary Participation Agreement are
vested in the respective registered holders of the Secondary Participation
Interests; provided, however, that no registered holder of any Secondary
Participation Interest shall have the right to enforce, institute or maintain
any suit, action or proceeding against the Bank to enforce, or otherwise act
in respect of, the Secondary Participation Interests, unless (a) such
registered holder shall have previously given written notice to the Bank of
the substance of such dispute, and registered holders of at least one-quarter
in interest of the issued and outstanding Secondary Participation Interests
shall have given written notice to the Bank of their support for the
institution of such proceeding to resolve such dispute, (b) written notice of
the substance of such dispute and of the support for the institution of such
proceeding by such holders shall have been provided by the Bank to the
Interest Agent, and (c) the Interest Agent shall not have instituted
appropriate proceedings with respect to such dispute within 30 days following
the date of such written notice to the Interest Agent, it being understood and
intended that no one or more registered holders of Secondary Participation
Interests shall have the right in any manner whatever by virtue of, or by
availing of, any provision of the Secondary Participation Agreement to affect,
disturb or prejudice the rights of any other registered holders of Secondary
Participation Interests, or to obtain or to seek to obtain priority in
preference over any other holders or to enforce any right under the Secondary
Participation Agreement, except in the manner herein provided for the equal
and ratable benefit of all registered holders of Secondary Participation
Interests. Except as provided in this paragraph, no holder of a Secondary
Participation Interest shall have the right to enforce, institute or maintain
any suit, action or proceeding to enforce, or otherwise act in respect of, the
Secondary Participation Interests.
This Secondary Participation Interest shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Interest Agent.
WITNESS the facsimile signature of the proper officers of the Bank and its
corporate seal.
Dated:
California Federal Bank, a Federal
Savings Bank
By: _________________________________
Its: ________________________________
ATTEST
Countersigned
- -------------------------------------
Interest Agent
By: _________________________________
Authorized Signature
A-44
<PAGE>
[Form of Reverse Side of Secondary Contingent Litigation Recovery
Participation Interest]
ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER DESIRES TO TRANSFER
THE SECONDARY PARTICIPATION INTEREST.)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Secondary Participation Interest, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
attorney, to transfer the within Secondary Participation Interest on the
books of the within-named Bank, with full power of substitution.
Dated:
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of this Secondary Participation Interest in every
particular, without alteration or enlargement or any change whatsoever.
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<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of the 27th day of July, 1996 (this
"Agreement"), between First Nationwide Holdings Inc., a Delaware corporation
("Grantee"), and Cal Fed Bancorp Inc., a Delaware corporation ("Issuer").
WITNESSETH:
WHEREAS, Grantee, Issuer and California Federal Bank, a Federal Savings
Bank, have entered into an Agreement and Plan of Merger, dated as of the 27th
day of July, 1996 (the "Plan"), which has been executed by the parties hereto
immediately prior to the execution and delivery of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering into the Plan
and in consideration therefor, Issuer has agreed to grant Grantee the Option
(as defined below);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Plan, the parties hereto agree as
follows:
Section 1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to
9,829,992 fully paid and nonassessable shares of Common Stock, par value $0.01
per share ("Common Stock"), of Issuer at a price per share equal to $21.375
per share (the "Initial Price"); provided, however, that in the event Issuer
issues or agrees to issue (other than as permitted by the Plan) any shares of
Common Stock at a price less than the Initial Price (as adjusted pursuant to
Section 5(b)), such price shall be equal to such lesser price (such price, as
adjusted as hereinafter provided, the "Option Price"), provided further,
however, that in no event shall the number of shares for which this Option is
exercisable exceed 19.9% of the issued and outstanding shares of Common Stock.
The number of shares of Common Stock that may be received upon the exercise of
the Option and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5(a) hereof), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, such number together
with any shares of Common Stock previously issued pursuant hereto, equals
19.9% of the number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer or Grantee to breach any provision of the Plan.
Section 2. (a) Grantee may exercise the Option, in whole or part, at any
time and from time to time following the occurrence of both a Preliminary
Purchase Event (as defined below) and a Purchase Event (as defined below);
provided, however, that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (i) the Effective Time of the Merger,
(ii) 12 months after the first occurrence of a Purchase Event, (iii) the
passage of 18 months (or such longer period as provided in Section 8) after
the termination of the Plan if such termination is concurrent with or follows
the occurrence of a Preliminary Purchase Event, (iv) termination of the Plan
in accordance with the terms thereof prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event (other than a termination of the Plan by
Grantee pursuant to Section 6.1(f) thereof), or (v) 18 months after the
termination of the Plan by Grantee pursuant to Section 6.1(f) thereof. The
events
B-1
<PAGE>
described in clauses (i) - (v) in the preceding sentence are hereinafter
collectively referred to as an "Exercise Termination Event." Notwithstanding
the termination of the Option, Grantee shall be entitled to purchase those
Option Shares with respect to which it has exercised the Option in accordance
with the terms hereof prior to the termination of the Option. The termination
of the Option shall not affect any rights hereunder which by their terms
extend beyond the date of such termination.
(b) The term "Preliminary Purchase Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its subsidiaries (each an "Issuer Subsidiary")
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as defined
below) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Securities Exchange
Act"), and the rules and regulations thereunder) other than Grantee or any
of its subsidiaries (each a "Grantee Subsidiary") or the Board of Directors
of Issuer shall have recommended that the shareholders of Issuer approve or
accept any Acquisition Transaction with any person other than Grantee or
any Grantee Subsidiary. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) of Issuer, (y) a purchase, lease or other
acquisition of all or substantially all of the assets or deposits of Issuer
or any Significant Subsidiary of Issuer or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting power of
Issuer or any Significant Subsidiary of Issuer; provided, however, that the
term "Acquisition Transaction" does not include any internal merger or
consolidation involving only Issuer and/or Issuer Subsidiaries;
(ii) Any person (other than Grantee or any Grantee Subsidiary) shall have
acquired beneficial ownership or the right to acquire beneficial ownership
of 10% or more of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Agreement having the meaning
assigned thereto in Section 13(d) of the Securities Exchange Act, and the
rules and regulations thereunder);
(iii) The shareholders of the Issuer shall have voted and failed to
approve the transactions contemplated by the Plan at a meeting which has
been held for that purpose or any adjournment or postponement thereof, or
such meeting shall not have been held in violation of the Plan or shall
have been cancelled prior to termination of the Plan if, prior to (x) such
meeting or (y) if such meeting shall not have been held or shall have been
cancelled, such termination, it shall have been publicly announced that any
person (other than Grantee or any Grantee Subsidiary) shall have made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction;
(iv) Issuer's Board of Directors shall have withdrawn or modified, or
publicly announced its intention to withdraw or modify, in a manner adverse
to Grantee, its recommendation that the shareholders of Issuer approve the
transactions contemplated by the Plan, or Issuer or any Issuer Subsidiary,
without having received Grantee's prior written consent, shall have
authorized, recommended, proposed (or publicly announced its intention to
authorize, recommend or propose) an agreement to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary shall have
made a proposal to Issuer or its shareholders, by public announcement or
written communication that is or becomes the subject of public disclosure,
to engage in an Acquisition Transaction (including, without limitation, any
situation in which any person other than Grantee or any Grantee Subsidiary
shall have commenced (as such term is defined in Rule 14d-2 under the
Securities Exchange Act) or shall have filed a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect
to, a tender offer or exchange offer to purchase any shares of Common Stock
such that, upon consummation of such offer, such person would own or
control 10% or more of the then outstanding shares of Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange Offer",
respectively));
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(vi) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, Issuer shall have
willfully breached any covenant or obligation contained in the Plan and
such breach would entitle Grantee to terminate the Plan; or
(vii) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Office
of Thrift Supervision ("OTS") or other governmental authority or regulatory
or administrative agency or commission (each, a "Governmental Authority")
for approval to engage in an Acquisition Transaction.
(c) The term "Purchase Event" shall mean either of the following events or
transactions occurring after the date hereof:
(i) The acquisition by any person other than Grantee or any Grantee
Subsidiary of beneficial ownership of 20% or more of the then outstanding
Common Stock; or
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i), except that the percentage referred to in clause (z) shall
be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Preliminary Purchase Event or Purchase Event; provided, however, that the
giving of such notice by Issuer shall not be a condition to the right of
Grantee to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the "Option Notice" and the
date of which being hereinafter referred to as the "Notice Date") specifying
(i) the total number of shares of Common Stock it will purchase pursuant to
such exercise and (ii) a date (the "Closing Date") (which, except as otherwise
provided in Section 7(e), shall not be less than three business days nor more
than thirty business days from the Notice Date) and a place at which the
closing of such purchase shall take place; provided, however, that, if prior
notification to or approval of the OTS or any other Governmental Authority is
required in connection with such purchase (each, a "Notification" or an
"Approval," as the case may be), (A) Grantee shall promptly file the required
notice or application for approval ("Notice/Application"), (B) Grantee shall
expeditiously process the Notice/Application and (C) for the purpose of
determining the Closing Date pursuant to clause (ii) of this sentence, the
period of time that otherwise would run from the Notice Date shall instead run
from the later of (A) in connection with any Notification, the date on which
any required notification periods have expired or been terminated and (B) in
connection with any Approval, the date on which such approval has been
obtained and any requisite waiting period or periods shall have expired. For
purposes of Section 2(a), any exercise of the Option shall be deemed to occur
on the Notice Date relating thereto. On or prior to the Closing Date, Grantee
shall have the right to revoke its exercise of the Option in the event that
the transaction constituting a Purchase Event that gives rise to such right to
exercise shall not have been consummated.
(f) At the closing referred to in Section 2(e), Grantee shall (i) pay to
Issuer the aggregate purchase price for the shares of Common Stock specified
in the Option Notice in immediately available funds by wire transfer to a bank
account designated by Issuer; provided, however, that failure or refusal of
Issuer to designate such a bank account shall not preclude Grantee from
exercising the Option, and (ii) present and surrender this Agreement to the
Issuer at its principal executive offices.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f), Issuer shall deliver to Grantee a
certificate or certificates representing the number of shares of Common Stock
specified in the Option Notice and, if the Option should be exercised in part
only, a new Option evidencing the rights of Grantee thereof to purchase the
balance of the shares of Common Stock purchasable hereunder.
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(h) Certificates for Common Stock delivered at a closing hereunder shall be
endorsed with a restrictive legend substantially as follows:
The transfer of the shares represented by this certificate is subject
to resale restrictions arising under the Securities Act of 1933, as
amended, and to certain provisions of an agreement between First
Nationwide Holdings Inc., a Delaware corporation, and Cal Fed Bancorp
Inc., a Delaware corporation ("Issuer"), dated as of the 27th day of
July, 1996. A copy of such agreement is on file at the principal office
of Issuer and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Grantee shall
have delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel, in form and substance reasonably satisfactory to Issuer,
to the effect that such legend is not required for purposes of the Securities
Act; (ii) the reference to the provisions of this Agreement in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law.
(i) Upon the giving by Grantee to Issuer of an Option Notice and the tender
of the applicable purchase price in immediately available funds on the Closing
Date, Grantee shall be deemed to be the holder of record of the number of
shares of Common Stock specified in the Option Notice, notwithstanding that
the stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then actually be delivered
to Grantee. Issuer shall pay all expenses and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 2 in the name of Grantee or its assignee, transferee or
designee.
Section 3. Issuer agrees: (i) that it shall at all times until the
termination of this Agreement maintain for issuance upon the exercise of the
Option that number of authorized but unissued or treasury shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and
from time to time issuable hereunder, all of which shares will, upon issuance
and payment pursuant hereto, be duly authorized, validly issued, fully paid,
nonassessable, and delivered free and clear of all claims, liens, encumbrances
and security interests and not subject to any preemptive rights; (ii) that it
will not, by amendment of its certificate of incorporation or through
reorganization, consolidation, merger, dissolution or sale of assets, or by
any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or
performed hereunder by Issuer; (iii) promptly to take all action as may from
time to time be required (including (x) complying with all pre-merger
notification, reporting and waiting period requirements specified in 15 U.S.C.
(S) 18a and regulations promulgated thereunder and (y) in the event, under the
Home Owners' Loan Act of 1933, as amended ("HOLA"), or any state banking law,
prior approval of or notice to the OTS or to any other Governmental Authority
is necessary before the Option may be exercised, cooperating with Grantee in
preparing such applications or notices and providing such information to each
such Governmental Authority as it may require) in order to permit Grantee to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of Grantee against dilution.
Section 4. This Agreement and the Option granted hereby are exchangeable,
without expense, at the option of Grantee, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other agreements
providing for Options of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any agreements and related options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this
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Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
Section 5. In addition to the adjustment in the number of Shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1
of this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
follows:
(a) In the event of any change in the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted and proper provision shall be made so that, in the
event that any additional shares of Common Stock are to be issued or
otherwise to become outstanding as a result of any such change (other than
pursuant to an exercise of the Option), the number of shares of Common
Stock that remain subject to the Option shall be increased so that, after
such issuance and together with shares of Common Stock previously issued
pursuant to the exercise of the Option (as adjusted on account of any of
the foregoing changes in the Common Stock), it equals 19.9% of the number
of shares of Common Stock then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
Section 6. (a) Upon the occurrence of a Purchase Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 12 months (or such later period as provided in Section 8) of
such Purchase Event (whether on its own behalf or on behalf of any subsequent
holder of the Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto) and, subject to Section 6(c), promptly prepare, file
and keep current a registration statement under the Securities Act covering
any shares issued or issuable pursuant to an Option Notice delivered
concurrently with or prior to the request made pursuant to this Section 6(a)
and shall use its best efforts to cause such registration statement to become
effective, and to remain current and effective for a period not in excess of
180 days from the day such registration statement first becomes effective, in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of the Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Grantee shall
have the right to demand two such registrations. The Issuer shall bear the
costs of such registrations (including, but not limited to, Issuer's
attorneys' fees, printing costs and filing fees, except for underwriting
discounts or commissions, brokers' fees and the fees and disbursements of
Grantee's counsel related thereto). The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of Option Shares as provided
above, Issuer is in the process of registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good
faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offering or
inclusion of the Option Shares would interfere materially with the successful
marketing of the shares of Common Stock offered by Issuer, the number of
Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of Grantee shall constitute at least 33 1/3% of the total
number of shares to be sold by Grantee and Issuer in the aggregate; provided
further, however, that if such reduction occurs, then Issuer shall file a
registration statement for the balance as promptly as practicable thereafter
as to which no reduction pursuant to this Section 6(a) shall be permitted or
occur and Grantee shall thereafter be entitled to one additional registration
statement. Grantee shall provide all information reasonably requested by
Issuer for inclusion in any registration statement to be filed hereunder. In
connection with any such registration, Issuer and Grantee shall provide each
other with representations, warranties, indemnities and other agreements
customarily given in connection with such registrations. If requested by any
Grantee in connection with such registration,
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<PAGE>
Issuer shall become a party to any underwriting agreement relating to the sale
of such shares, but only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements for Issuer. Notwithstanding the
foregoing, if Grantee revokes any exercise notice or fails to exercise any
Option with respect to any exercise notice pursuant to Section 2(e), Issuer
shall not be obligated to continue any registration process with respect to
the sale of Option Shares issuable upon the exercise of such Option and
Grantee shall not be deemed to have demanded registration of such Option
Shares. Upon receiving any request under this Section 6 from Grantee, Issuer
agrees to send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each case by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies. Notwithstanding anything to the contrary
contained herein, in no event shall Issuer be obligated to effect more than
two registrations pursuant to this Section 6 by reason of the fact that there
shall be more than one holder of the Option as a result of any assignment or
division of this Agreement.
(b) In the event that any approval required to exercise the Option as
described in Section 8 is conditioned on the closing of a sale or other
disposition, pursuant to a registration under this Section 6, of the Common
Stock or other securities issuable upon such exercise, the closing of the sale
or other disposition of such Common Stock pursuant to such registration
statement shall occur substantially simultaneously with such exercise.
(c) Issuer may delay, for a period not to exceed 90 days, the filing of a
registration statement following a request made by Grantee pursuant to Section
6(a) hereof if Issuer shall in good faith determine that (i) any such
registration would adversely affect an offering or contemplated offering of
securities by Issuer, (ii) the filing of such registration statement would, if
not so delayed, materially and adversely affect a then proposed or pending
acquisition, merger, corporate reorganization or other material financial
project or initiative involving Issuer or any subsidiary of Issuer, (iii)
there is material undisclosed information concerning Issuer or any subsidiary
of Issuer which has not been disclosed and Issuer reasonably concludes that
disclosure thereof would materially and adversely affect Issuer or (iv)
financial statements required to be included or incorporated in the
registration statement have not been prepared or are not otherwise available
at such time (provided that Issuer shall promptly and diligently prepare such
financial statements or cause such financial statements to be prepared). The
12-month period referred to in the first sentence of Section 6(a) hereof shall
be extended by the number of days, if any, by which Issuer shall delay any
registration pursuant to this Section 6(c).
Section 7. (a) Upon the occurrence of a Put Purchase Event (as defined
below), (i) at the request (the date of such request being the "Option
Repurchase Request Date") of Grantee delivered prior to an Exercise
Termination Event, Issuer shall repurchase the Option from Grantee at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which the Option may then be exercised, and (ii)
at the request (the date of such request being the "Option Share Repurchase
Request Date") of the owner of Option Shares from time to time (the "Owner")
delivered prior to an Exercise Termination Event, Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term
"market/offer price" shall mean, as of any date for the determination thereof,
the highest of (i) the price per share of Common Stock at which a tender offer
or exchange offer therefor has been made since the date of this Agreement and
on or prior to such determination date, (ii) the price per share of Common
Stock paid or to be paid by any third party pursuant to an agreement with
Issuer entered into since the date of this Agreement and on or prior to such
determination date (whether by way of a merger, consolidation or otherwise),
(iii) the highest last sale price for shares of Common Stock within the 360-
day period ending on the Option Repurchase Request Date or the Option Share
Repurchase Request Date, as the case may be, which is reported by The Wall
Street Journal or, if not reported thereby, another authoritative source, (iv)
in the event of a sale of all or substantially all of Issuer's assets or
deposits, the sum of the price paid in such sale for such assets or deposits
and the current market value of the remaining net assets of Issuer as
determined by a nationally recognized independent investment banking firm
selected by Grantee or the Owner, as the case may be, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be the value determined by a nationally recognized independent
investment
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<PAGE>
banking firm selected by Grantee or the Owner, as the case may be, whose
determination shall be conclusive and binding on all parties.
(b) Grantee and/or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by a written notice or notices stating that Grantee or the
Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7.
As promptly as practicable, and in any event within five business days, after
the surrender to it of this Agreement and/or Certificates for Option Shares,
as applicable, following receipt of a notice under this Section 7(b) and the
occurrence of a Put Purchase Event, Issuer shall deliver or cause to be
delivered to Grantee the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price and/or the portion thereof that Issuer is not
then prohibited from so delivering under applicable law and regulation.
(c) Issuer hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish any repurchase contemplated by this Section
7. Nonetheless, to the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or any Option Shares in full, Issuer shall immediately so
notify Grantee and/or the Owner and thereafter deliver or cause to be
delivered, from time to time, to Grantee and/or the Owner, as appropriate, the
portion of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five
business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to Section 7(b) is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to
Grantee and/or the Owner, as appropriate, the Option Repurchase Price or the
Option Share Repurchase Price, respectively, in full, Grantee or the Owner, as
appropriate, may revoke its notice of repurchase of the Option or the Option
Shares either in whole or in part whereupon, in the case of a revocation in
part, Issuer shall promptly (i) deliver to Grantee and/or the Owner, as
appropriate, that portion of the Option Purchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering after taking
into account any such revocation and (ii) deliver, as appropriate, either (A)
to Grantee, a new Agreement evidencing the right of Grantee to purchase that
number of shares of Common Stock equal to the number of shares of Common Stock
purchasable immediately prior to the delivery of the notice of repurchase less
the number of shares of Common Stock covered by the portion of the Option
repurchased or (B) to the Owner, a certificate for the number of Option Shares
covered by the revocation. If an Exercise Termination Event shall have
occurred prior to the date of the notice by Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
Grantee shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
(d) The term "Put Purchase Event" shall mean either of the following events
or transactions occurring after the date hereof:
(i) The acquisition by any person other than Grantee or any Grantee
Subsidiary of beneficial ownership of 50% or more of the then outstanding
Common Stock; or
(ii) The consummation of an Acquisition Transaction with any person other
than the Grantee or any Grantee Subsidiary.
(e) Notwithstanding anything to the contrary in Sections 2(a) and 2(e), the
delivery of a notice by Grantee under Section 7(b), specifying that such
notice relates to an anticipated Put Purchase Event under Section 7(d)(ii)
based on the Issuer's public announcement of the execution of an agreement
providing for an Acquisition Transaction, shall be deemed to constitute an
election to exercise the Option, as to the number of Option Shares not
theretofore purchased pursuant to one or more prior exercises of the Option,
on the fifth business day following the public announcement of the termination
of such agreement, in which event a closing shall occur with respect to such
unpurchased Option Shares in accordance with Section 2(f) on such fifth
business day (or such later date as determined pursuant to the proviso in the
first sentence of Section 2(e)).
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Section 8. The 30-day, 6-month, 12-month or 18-month periods for the
exercise of certain rights under Section 2, 6, 7 and 12 shall be extended (i)
to the extent necessary to obtain all regulatory approvals for the exercise of
such rights and for the expiration of all statutory waiting periods (for so
long, in each of the foregoing cases, as Grantee is using commercially
reasonable efforts to obtain such regulatory approvals); and (ii) to the
extent necessary to avoid liability under Section 16(b) of the Securities
Exchange Act by reason of such exercise; provided, however, that in no event
shall any Closing Date occur more than 18 months after the related Notice
Date, and, if the Closing Date shall not have occurred within such period due
to the failure to obtain any required approval by the OTS or any other
Governmental Authority despite the best efforts of Issuer and Grantee, as the
case may be, to obtain such approvals, the exercise of the Option shall be
deemed to have been rescinded as of the related Notice Date. In the event (a)
Grantee receives official notice that an approval of the OTS or any other
Governmental Authority required for the purchase and sale of the Option Shares
will not be issued or granted or (b) a Closing Date has not occurred within 18
months after the related Notice Date due to the failure to obtain any such
required approval, Grantee shall be entitled to exercise the Option in
connection with the resale of the Option Shares pursuant to a registration
statement as provided in Section 6.
Section 9. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly approved by the
Board of Directors of Issuer and no other corporate proceedings on the part
of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Issuer,
enforceable against Issuer in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement
of creditors' rights generally and except that the availability of the
equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought;
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant hereto, will be duly authorized, validly
issued, fully paid, non-assessable, and will be delivered free and clear of
all claims, liens, encumbrances and security interests and not subject to
any preemptive rights; and
(c) Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor compliance by
Issuer with any of the terms or provisions hereof, will (i) violate any
provision of the Certificate of Incorporation or ByLaws of Issuer or the
certificates of incorporation, by-laws or similar governing documents of
any of its Subsidiaries of (ii)(x) assuming that all of the consents and
approvals required under applicable law for the purchase of shares upon the
exercise of the Option are duly obtained, violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Issuer or any of its Subsidiaries, or any of their respective
properties or assets, or (y) violate, conflict with, result in a breach of
any provisions of or the loss of any benefit under, constitute a default
(or an event which, with notice or lapse of time, or both, would constitute
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 respective properties or assets of Issuer or
any of its Subsidiaries under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which issuer or any of its
Subsidiaries is a party, or by which they or any of their respective
properties or assets may be bound or affected.
Section 10. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person without the express written consent of the other party, except that
Grantee may assign this Agreement to a wholly owned subsidiary or existing
affiliate of Grantee, and in the
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event that a Purchase Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may
assign its rights and obligations hereunder in whole or in part within 12
months following such Purchase Event (or such later period as provided in
Section 10); provided, however, that until the date on which the OTS has
approved an application by Grantee under HOLA to acquire the shares of Common
Stock subject to the Option, Grantee may not assign its rights under the
Option except (i) in order to facilitate (x) a widely dispersed public
distribution of the Common Stock issuable upon exercise thereof, or (y) a
private placement of such shares in which no one party acquires the right to
purchase in excess of 2% of the voting shares of Issuer, (ii) an assignment to
a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution of such shares on Grantee's
behalf, or (iii) any other manner approved by the OTS. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective successors
and assigns. The term "Grantee" as used in this Agreement shall also be deemed
to refer to Grantee's permitted assigns.
Section 11. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and Governmental
Authorities necessary to the consummation of the transactions contemplated by
this Agreement, including, without limitation, if necessary, applying to the
OTS under HOLA and to state banking authorities for approval to acquire the
shares issuable hereunder.
Section 12. (a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed
$25,000,000, and, if it otherwise would exceed such amount, the Grantee, at
its sole election, shall either (a) reduce the number of shares of Common
Stock subject to this Option, (b) deliver to the Issuer for cancellation
Option Shares previously purchased by Grantee, (c) pay cash to the Issuer, or
(d) take a combination of any of the foregoing actions, so that Grantee's
actually realized Total Profit shall not exceed $25,000,000 after taking into
account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined below) of more than $25,000,000;
provided, however, that nothing in this sentence shall restrict any exercise
of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant
to Issuer's repurchase of the Option (or any portion thereof) pursuant to
Section 7, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares pursuant to Section 7, less (y) the Grantee's
purchase price for such Option Shares, (iii) (x) the net cash amounts received
by Grantee pursuant to the sale of Option Shares (or any other securities into
which such Option Shares are converted or exchanged) to any unaffiliated
party, less (y) the Grantee's purchase price of such Option Shares, (iv) any
amounts received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated party.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise this Option shall
be the Total Profit determined as of the date of such proposed exercise
assuming that this Option were exercised on such date for such number of
shares and assuming that such shares, together with all other Option Shares
held by Grantee and its affiliates as of such date, were sold for cash at the
closing market price for the Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
Section 13. If the Common Stock or any other securities to be acquired upon
exercise of the Option are then authorized for listing on the New York Stock
Exchange (the "NYSE") or any other securities exchange or automated quotation
system, Issuer, upon the request of Grantee, will promptly file an application
to authorize for listing the shares of Common Stock or other securities to be
acquired upon exercise of the Option on the NYSE or such other securities
exchange or automated quotation system, and will use its best efforts to
obtain approval of such listing as soon as practicable.
B-9
<PAGE>
Section 14. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief. Both parties
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such equitable relief and that this
provision is without prejudice to any other rights that the parties hereto may
have for any failure to perform this Agreement.
Section 15. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Grantee is not permitted to acquire, or Issuer is
not permitted to repurchase pursuant to Section 7, the full number of shares
of Common Stock provided in Section 1(a) (as adjusted pursuant hereto), it is
the express intention of Issuer to allow the Grantee to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible,
without any amendment or modification hereof.
Section 16. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Plan.
Section 17. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
Section 18. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement and shall be effective at the time of execution.
Section 19. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
Section 20. Except as otherwise expressly provided herein or in the Plan,
this Agreement contains the entire agreement between the parties with respect
to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors except as assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided herein.
Section 21. Capitalized terms used in this Agreement and not defined herein
but defined in the Plan shall have the meanings assigned thereto in the Plan.
Section 22. Nothing contained in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Plan.
Section 23. In the event that any selection or determination is to be made
by Grantee or the Owner pursuant to any provision contained herein, and at the
time of such selection or determination there is more than one Grantee or
Owner, such selection shall be made by a majority in interest of such Grantees
or Owners.
B-10
<PAGE>
Section 24. In the event of any exercise of the option by Grantee, Issuer
and such Grantee shall execute and deliver all other documents and instruments
and take all other action that may be reasonably necessary in order to
consummate the transactions provided for by such exercise.
Section 25. Except to the extent Grantee exercises the Option, Grantee shall
have no rights to vote or receive dividends or have any other rights as a
shareholder with respect to shares of Common Stock covered hereby.
B-11
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be executed on its behalf by its officer thereunto duly
authorized, all as of the date first above written.
First Nationwide Holdings Inc.,
a Delaware corporation
By: /s/ Glenn P. Dickes
-----------------------------------
Name: Glenn P. Dickes
Title: Vice President
Cal Fed Bancorp Inc.,
a Delaware corporation
By: /s/ Edward G. Harshfield
-----------------------------------
Name: Edward G. Harshfield
Title: President and Chief
Executive Officer
By: /s/ Douglas J. Wallis
-----------------------------------
Name: Douglas J. Wallis
Title: Executive Vice President,
Secretary and General
Counsel
B-12
<PAGE>
APPENDIX C
[LOGO OF CS FIRST BOSTON]
CS FIRST BOSTON CORPORATION 55 EAST 52ND STREET
NEW YORK, NY 10055-0186
TELEPHONE 212 909 2000
November 13, 1996
Board of Directors
Cal Fed Bancorp
5700 Wilshire Boulevard
Los Angeles, CA 90036
Dear Sirs:
You have asked us to advise you with respect to the fairness to the holders of
common stock of Cal Fed Bancorp Inc. (the "Company") from a financial point of
view of the consideration to be received by such holders pursuant to the
Agreement and Plan of Merger, dated as of July 27, 1996, between First
Nationwide Holdings Inc. ("FNH") and the Company and its subsidiary California
Federal Bank (the "Agreement"). Pursuant to and subject to the terms of the
Agreement, FNH will acquire the Company (the "Transaction") and the holders of
each share of the Company's common stock will receive $23.50 in cash (the
"Cash Consideration") and the right to receive 60% of any net distributable
proceeds in excess of $125 million (the "Participation Interests" and together
with the Cash Consideration, the "Consideration") received by the Company
(after paying its obligations to holders of the participation interests
trading under the symbol "CALGZ" previously distributed by the Company (the
"CALGZ Interests")) pursuant to any recovery on certain pending litigation by
the Company against the U.S. Government (the "Lawsuit").
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company and FNH. We have
also reviewed certain other information, including financial forecasts,
provided to us by the Company and FNH, and have met with the Company's
management to discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the Company
and FNH, including market data related to the CALGZ Interests, and we have
compared the data with similar data for other publicly held thrift companies
and we have considered the financial terms of certain other business
combinations in the thrift industry that have recently been effected. We have
also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
on its being complete and accurate in all material respects. With respect to
the financial forecasts, we have assumed, with your consent, that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the Company's management as to the future financial
performance of the Company. In addition, we have not made, nor have we assumed
responsibility for making, an independent evaluation or appraisal of any of
the assets or liabilities (contingent or otherwise) of the Company nor have we
examined any individual loan files or been furnished with any such appraisals.
We are not experts in legal matters and we are not expressing any view as to
the potential outcome of the Lawsuit. Nor are we expressing any view as to the
investment merits of the Participation Interests or the CALGZ Interests or the
prices at which they may trade before or after the Transaction.
C-1
<PAGE>
We have assumed, with your consent, that obtaining any necessary regulatory
approvals and third-party consents for the Transaction or otherwise will not
have an adverse effect on the Company or the Transaction. We were not
requested to, and did not, solicit any third-party indications of interest in
acquiring all or part of the Company or in engaging in a business combination
or other strategic transaction with the Company.
We have acted as financial advisor to the Company in connection with the
Transaction and will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Transaction. We have in the
past provided on various occasions investment banking services to the Company
and to FNH and have received fees for the rendering of such services and may
provide additional services to the Company and to FNH in the future.
In the ordinary course of business, we may have actively traded the securities
of both the Company and FNH for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is for the information of the Board of
Directors and is not to be quoted or referred to, in whole or in part, in any
registration statement, prospectus, or proxy statement, or in any other
document used in connection with the offering or sale of securities, nor shall
this letter be used for any other purposes, without CS First Boston
Corporation's prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be received by the holders of common stock
of the Company pursuant to the Agreement is fair to such holders from a
financial point of view.
Very truly yours,
CS First Boston Corporation
C-2
<PAGE>
APPENDIX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
(S) 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to (S) 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock
corporation and also a member of record of a nonstock corporation; the words
"stock" and "share" mean and include what is ordinarily meant by those words
and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S) 251 (other than a merger effected pursuant to
subsection (g) of (S) 251), (S) 252, (S) 254, (S) 257, (S) 258, (S) 263 or
(S) 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S) 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
D-1
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholder of
the effective date of the merger or consolidation. Any stockholder entitled
to appraisal rights may, within twenty days after the date of mailing of
such notice, demand in writing from the surviving or resulting corporation
the appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given; provided that, if the notice
is given on or after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is fixed and
the notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the notice
is given.
D-2
<PAGE>
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of
D-3
<PAGE>
Chancery may be enforced, whether such surviving or resulting corporation be a
corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
D-4
<PAGE>
CAL FED BANCORP INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please mark
This revocable proxy will be voted as directed [X] your choice
below. In the absence of any direction, this proxy like this
will be voted FOR Item 1 below.
Edward G. Harshfield, David Gilbert, Ph.D. and Douglas J. Wallis, and each of
them with full power of substitution, are hereby appointed Proxies, to vote the
shares of the undersigned in Cal Fed Bancorp Inc., at the Special Meeting of
Stockholders on December 16, 1996, and at any adjournments or postponements
thereof, to be held at the Park Hyatt Los Angeles at Century City, located at
2151 Avenue of the Stars, Los Angeles, California at 1:30 P.M., local time.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ITEM 1 BELOW.
1. Approval of the Merger Agreement and the
transactions contemplated thereby
(including, without limitation, the
Merger). Such approval will also
constitute a vote to approve, as exempt
from Section 16 of the Securities
Exchange Act of 1934, the disposition of
employee and director stock options as
provided for in the Merger Agreement.
FOR AGAINST ABSTAIN
[_] [_] [_]
2. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the Special Meeting of Stockholders or
any adjournments or postponements thereof.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE
- --------------------------------------------------------------------------------
Please sign exactly as name
appears here.
_________________________________
_________________________________
Date: ___________________________
Please mark, date and sign as
your name appears above and
return in the enclosed envelope.
If acting as executor, administrator, trustee, guardian, etc. you should so
indicate when signing. If the signer is a corporation, please sign the full
corporation name, by duly authorized officer. If shares are held jointly, each
stockholder named should sign.
<PAGE>
THIS REVOCABLE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CAL FED BANCORP INC.
PROXY SPECIAL MEETING OF STOCKHOLDERS--DECEMBER 16, 1996 PROXY
Edward G. Harshfield, David Gilbert, Ph.D. and Douglas J. Wallis, and each
of them, with full power of substitution, are hereby appointed Proxies to vote
the shares of the undersigned in Cal Fed Bancorp Inc. at the Special Meeting
of Stockholders on December 16, 1996 and at any adjournments or postponements
thereof, to be held at the Park Hyatt Los Angeles at Century City, located at
2151 Avenue of the Stars, Los Angeles, California at 1:30 P.M., local time.
THIS PROXY WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE. IN THE ABSENCE OF
ANY DIRECTION, THIS PROXY WILL BE VOTED FOR ITEM 1 ON THE REVERSE SIDE.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON THE REVERSE SIDE
(Continued on reverse side)
FOLD AND DETACH HERE
<PAGE>
THIS REVOCABLE PROXY WILL BE VOTED AS DIRECTED BELOW. IN THE ABSENCE OF ANY
DIRECTION, THIS PROXY WILL BE VOTED FOR ITEM 1 BELOW.
1. Approval of the Merger Agreement and the transactions contemplated thereby
(including, without limitation, the Merger). Such approval will also
constitute a vote to approve, as exempt from Section 16 of the Securities
Exchange Act of 1934, the disposition of employee and director stock options
as provided for in the Merger Agreement.
FOR AGAINST ABSTAIN
[_] [_] [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1 ABOVE.
------------------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the Special Meeting of Stockholders or
any adjournments or postponements thereof.
Signature(s) __________________________ Date _______________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
FOLD AND DETACH HERE
<PAGE>
CAL FED BANCORP INC.
CALIFORNIA FEDERAL BANK, FSB INVESTMENT PLUS PLAN
SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 16, 1996
VOTING INSTRUCTIONS TO TRUSTEE FOR SPECIAL MEETING
As a participant in the Investment Plus Plan, you have the right to give
written instructions to the Plan Trustee as to the voting of certain shares of
Cal Fed Bancorp Inc. Common Stock (the "Subject Shares") at the Cal Fed
Bancorp Inc. Special Meeting of Stockholders to be held on December 16, 1996
and at any adjournments or postponements thereof. Please indicate your voting
choices on the reverse side, sign and date it, and return the card promptly in
the postpaid envelope provided.
THE SUBJECT SHARES WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE. IN THE
ABSENCE OF ANY DIRECTION, THE SUBJECT SHARES WILL BE VOTED FOR ITEM 1 ON THE
REVERSE SIDE.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON THE REVERSE SIDE
(Continued on reverse side)
FOLD AND DETACH HERE
<PAGE>
THE SUBJECT SHARES WILL BE VOTED AS DIRECTED BELOW. IN THE ABSENCE OF ANY
DIRECTION, THE SUBJECT SHARES WILL BE VOTED FOR ITEM 1 BELOW.
1. Approval of the Merger Agreement and the transactions contemplated thereby
(including, without limitation, the Merger). Such approval will also
constitute a vote to approve, as exempt from Section 16 of the Securities
Exchange Act of 1934, the disposition of employee and director stock options
as provided for in the Merger Agreement.
FOR AGAINST ABSTAIN
[_] [_] [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1 ABOVE.
- ------------------------------------------------------------
2. In its discretion, the Plan Trustee or its proxy is authorized to vote upon
such other matters as may properly come before the Special Meeting of
Stockholders or any adjournments or postponements thereof.
Signature(s) __________________________ Date _______________________________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
FOLD AND DETACH HERE
