LITIGATION MANAGEMENT AGREEMENT
THIS AGREEMENT (the "Management Agreement"), dated as of
February 4, 1998, is by and among Golden State Bancorp Inc., a Delaware
corporation ("GSB" and, as the surviving corporation in the merger contemplated
by the Agreement (as defined herein), the "Company"), Glendale Federal Bank,
Federal Savings Bank ("Glendale Federal"), California Federal Bank, A Federal
Savings Bank ("California Federal" and, together with Glendale Federal, the
"Banks")), and the other persons whose names are set forth on the signature
pages hereto.
WHEREAS, Glendale Federal is currently a plaintiff in an
action titled Glendale Federal Bank, F.S.B. v. United States of America, Civil
Action No. 90-772C, U.S. Court of Federal Claims (together with any appeal
thereof or other proceeding related thereto, the "Glendale Litigation"); and
WHEREAS, California Federal is currently a plaintiff in an
action titled California Federal Bank, A Federal Savings Bank v. United States
of America, Civil Action No. 92-138C, U.S. Court of Federal Claims (together
with any appeal thereof or other proceedings related thereto, the "CalFed
Litigation" and, together with the Glendale Litigation, the "Goodwill
Litigation"); and
WHEREAS, on July 28, 1995, California Federal distributed
Participation Interests representing the right to receive a pro rata portion of
approximately 25 percent of the net after-tax proceeds of the CalFed Litigation
(each, a "CALGZ") and on January 3, 1997, California Federal distributed
Secondary Participation Interests representing the right to receive a pro rata
portion of 60 percent of the net after-tax proceeds, in excess of certain
threshold recovery amounts and net of distributions to the holders of the
CALGZs, of the CalFed Litigation (each, a "CALGL" and, together with the
CALGZs, the "CalFed Securities"); and
WHEREAS, GSB has announced its intention to distribute
Litigation Tracking Warrants, each representing the right to receive a pro rata
distribution of shares of Golden State Common Stock with an aggregate value
equal to the a percentage, set forth in the Warrant Agreement relating to such
Warrants, of the net after-tax proceeds of the Glendale Litigation (each, a
"GSB LTW"), which distribution is expected to take place prior to consummation
of the Merger; and
WHEREAS, GSB, through its subsidiaries, will, after giving
effect to the distribution of the GSB LTWs and the CalFed Securities, retain an
interest in the proceeds of the Glendale Litigation and the CalFed litigation,
respectively; and
WHEREAS, the parties hereto intend that the Goodwill
Litigation be pursued, prosecuted, managed and conducted in a manner that is
consistent with the best interests of the holders of the GSB LTWs, the CalFed
Securities, the Banks and the Company; and
WHEREAS, the parties hereto have agreed to conduct the
Goodwill Litigation as provided in this Management Agreement in connection with
the execution of the Agreement and Plan of Reorganization, dated February,
1998, by and among First Nationwide (Parent) Holdings, a Delaware corporation,
First Nationwide Holdings, Inc. a Delaware corporation, First Gibraltar
Holdings, Inc., a Delaware corporation, Xxxxxx'x Xxxx/Ford, Ltd. and GSB (the
"Agreement") (capitalized terms used but not otherwise defined in this
Management Agreement shall have the meanings ascribed to them in the
Agreement);
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
Pursuit and Management of Goodwill Litigation
1.1 In order to assure that those parties with prior
knowledge of and experience regarding the Goodwill Litigation, including the
facts forming the basis for the claims underlying the Goodwill Litigation and
regarding the strategies developed to pursue those claims, remain involved in
the Goodwill Litigation, the parties hereto agree that the Company shall,
effective as of the Effective Time, employ and retain Xxxxxxx X. Xxxxxxx and
Xxxxxxx X. Xxxx (the "Litigation Managers") as Litigation Managers with respect
to the Glendale Litigation, and that the Company shall employ and retain
Messrs. Xxxxxxx and Xxxx as Litigation Managers with respect to the CalFed
Litigation.
1.2 The Litigation Managers, on behalf of the holders of the
GSB LTWs (the "GSB Holders"), Glendale Federal and the Company from and after
the Effective Time, shall be granted authority, subject to the terms of this
Management Agreement, to prosecute, appeal, negotiate, resolve, settle,
compromise, arbitrate or otherwise pursue the Glendale Litigation, in whole or
in part, and to oversee
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for Glendale Federal and the Company the matters related to the GSB LTWs and
the recovery, disposition or other handling of any proceeds of the Glendale
Litigation and any expenses thereof (except with respect to the tax treatment
of the receipt or payment of any recovery, proceeds or expenses), subject to
and in accordance with the provisions of this Management Agreement.
1.3 The Litigation Managers, on behalf of the holders of the
CalFed Securities (the "CalFed Holders" and, together with the GSB Holders, the
"Holders"), California Federal and the Company from and after the Effective
Time shall be granted authority, subject to the terms of this Management
Agreement, to prosecute, appeal, negotiate, resolve, settle, compromise,
arbitrate or otherwise pursue the CalFed Litigation, in whole or in part, and
to oversee for the Surviving Bank and the Company the matters related to the
CalFed Certificates and the recovery, disposition or other handling of any
proceeds of the CalFed Litigation and any expenses thereof (except with respect
to the tax treatment of the receipt or payment of any recovery, proceeds or
expenses), subject to and in accordance with the provisions of this Management
Agreement.
1.4 As of and following the Effective Time, the Board of
Directors of the Company will establish a Glendale Litigation committee (the
"Glendale Committee") and a CalFed Litigation committee (the "CalFed
Committee"). As of and following the Effective Time, the powers and rights of
the Board of Directors of the Company shall be vested in the Glendale Committee
with respect to all matters related to the Glendale Litigation and the GSB LTWs
and in the CalFed Committee with respect to all matters related to the CalFed
Litigation and the CalFed Certificates. The Litigation Managers will report
directly to the Glendale Committee with respect to matters related to the
Glendale Litigation and the GSB LTWs, and will report directly to the CalFed
Committee with respect to matters related to the CalFed Litigation and the
CalFed Certificates.
1.5 The CalFed Committee may at any time, or from time to
time, reduce or terminate any or all of the specific powers of one or both of
the Litigation Managers with respect to the CalFed Litigation and in such event
shall provide prior written notice thereof to such Litigation Manager or
Litigation Managers. The decision of the CalFed Committee in this respect shall
not be subject to arbitration, dispute or litigation. Any dimunition of the
powers of the Litigation Managers shall not reduce any compensation due to the
Litigation Managers under this Agreement.
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ARTICLE II
The Litigation Managers
2.1 (a) Subject to the terms of this Agreement, the
Litigation Managers shall have all power to carry out in their sole discretion
their responsibilities pursuant to Article 1 hereof, subject to (a) periodic
consultation with the Glendale Committee as to the Glendale Litigation and with
the CalFed Committee as to the CalFed Litigation and (b) the approval of the
Glendale Committee (with respect to the Glendale Litigation) or the CalFed
Committee (with respect to the CalFed Litigation) with respect to any final
settlement of the Glendale Litigation or the CalFed Litigation, any decision to
permanently abandon or otherwise cease to prosecute the Glendale Litigation or
the CalFed Litigation or any decision to expend funds of the Company or the
Surviving Bank. The powers and authority of the Litigation Managers shall
include, without limitation, the power and authority to, and the Litigation
Managers shall:
(i) without prior or further authorization, to control
and exercise authority over, subject to the terms of the GSB LTWs and
the CalFed Securities, the management and conduct of the Glendale
Litigation and the CalFed Litigation and matters relating to the GSB
LTWs and the CalFed Securities;
(ii) to coordinate and manage the application for any
regulatory, stock exchange, stock market or other approvals or the
making of any filings required to carry out the transactions
contemplated by the GSB LTWs or the CalFed Certificates, including
without limitation directing the Company to issue the shares of common
stock of the Company or any successor thereto upon exercise of the GSB
LTWs;
(iii) to authorize the payment by the Company or its
subsidiaries of expenses relating to the Glendale Litigation and the
GSB LTWs, or to the CalFed Litigation and the CalFed LTWs, as the case
may be;
(iv) to retain counsel and advisors, including
accountants, investment bankers, experts, transfer agents, escrow
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agents, consultants, and other assistances, in connection with the
Goodwill Litigation or the GSB LTWs or the CalFed Certificates (or any
other matters contemplated by this Management Agreement), or to retain
sub-managers or other agents, and to cause the same to be reasonably
compensated by the Company or its subsidiaries for services rendered;
(v) to enter into contracts, agreements, commitments
and other arrangements and to execute pleadings, affidavits and other
court documents, and to participate in, initiate or request settlement
or other conferences, hearings or discussions on behalf of the
Company, or Glendale Federal or California Federal or their
successors, necessary or appropriate to carry out their
responsibilities hereunder;
(vi) subject to Section 2.1(b), to make any
determinations or valuations contemplated by the terms of the GSB LTWs
or that are otherwise required to be made in order to fulfill the
intent of the terms of such securities;
(vii) with respect to any non-cash proceeds of the
Goodwill Litigation, to sell, convey, transfer, assign, pledge,
encumber or liquidate on behalf of the Company such non-cash proceeds
or any part thereof or any interest therein, upon such terms and for
such consideration as the Litigation Managers in their sole and
absolute discretion deem desirable, and to file on behalf of the
Company such documents as are customarily required to effect any of
the foregoing, including the filing of necessary UCC financing
statements; and
(viii) to publish or mail, or cause to be published or
mailed, any notices contemplated by the GSB LTWs or the CalFed
Securities or otherwise deemed advisable by the Litigation Managers in
connection with such securities.
Notwithstanding anything contained in this Management Agreement that may be
deemed to be to the contrary, the Board of Directors of the Company shall
(solely through the Glendale Committee in the case of the Glendale Litigation
and the GSB LTWs) have and maintain ultimate authority with respect to all
matters relating to the Goodwill Litigation, the GSB LTWs and the CalFed
Securities, and nothing
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contained herein shall be deemed to relieve the Board of Directors (or, with
respect to matters related to the Glendale Litigation and the GSB LTWs, the
Glendale Committee) of any of its rights, authorities or obligations under
applicable law or to create any obligations in conflict with or in derogation
of such rights, authorities or obligations.
(b) Any determinations or valuations contemplated by the
terms of the GSB LTWs or the CalFed Securities or that are otherwise required
to be made in order to fulfill the intent of the terms of such securities
(including without limitation determination of the "Adjusted Litigation
Recovery," as such term is used in the GSB LTWs and the CALGLs, or the
"Litigation Recovery," as such term is used in the CALGZs, or whether or when
any event triggering any obligations thereunder has occurred) shall be made in
the first instance by the Litigation Managers. Such determinations and
valuations of the Litigation Managers shall be subject to review by the
Glendale Committee (in the case of the GSB LTWs) or the CalFed Committee (in
the case of the CalFed Securities), the decision of which Committee in respect
of such matters shall be final and binding on the Company and the Holders,
absent manifest error. In making such determinations or valuations the
Litigation Managers shall be entitled to retain such accountants, investment
bankers, counsel or other advisers and experts as they deem appropriate, and
shall be fully protected in relying upon the foregoing in such connection.
(c) During his employment as Litigation Manager, each
Litigation Manager shall be an Executive Vice President of the Company and
shall be entitled to (i) receive from the Company an annual salary of $600,000,
payable monthly, in the case of Xx. Xxxxxxx, and an annual salary of $400,000,
payable monthly, in the case of Xx. Xxxx; (ii) participation in employee
welfare benefit plans, deferred compensation and other plans, policies and
perquisites, in each case on a basis no less beneficial than that made
available to any other Executive Vice President of the Company or its
successors (other than participation in any stock option plan, the Severance
Pay Plan for Executive Officers or in the Deferred Executive Compensation Plan
of the Company); and (iii) office space comparable to such space as is
presently provided to such individuals by GSB in such location as Messrs.
Xxxxxxx and Xxxx may reasonably specify, secretarial and clerical assistance,
travel allowance and expense reimbursement, in each case no less beneficial
than made available to any other Executive Vice President of the Company or its
successors. In addition, in consideration for their services hereunder and for
the restrictions imposed by the noncompetition and nonsolicitation provisions
set forth in Section 6.2 hereof, Xxxxxxx X. Xxxxxxx shall be entitled to the
benefits set forth with respect to
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him on Schedule 2.1(c)(i) hereto (the "Xxxxxxx Benefits") and Xxxxxxx X. Xxxx
shall be entitled to the benefits set forth with respect to him on Schedule
2.1(c)(ii) hereto (the "Xxxx Benefits"). The cost to the Company or any of its
subsidiaries of any of the compensation payable or benefits due to the
Litigation Managers contemplated by this Section 2.1(c) (including without
limitation Schedules 2.1(c)(i) and 2.1(c)(ii)) or Section 2.1(d) shall be
deemed to be expenses of the Glendale Litigation and the GSB LTWs (to the
extent related thereto) or the CalFed Litigation and the CalFed Securities (to
the extent related thereto) for purposes of determining the amount of any
proceeds payable or securities issuable to the Holders under the GSB LTWs or
the CalFed Securities, as the case may be.
(d) In addition to the compensation contemplated by Section
2.1(c), the Litigation Managers shall each be entitled (and shall be fully
vested in such entitlement) to receive out of any recovery pursuant to the
Goodwill Litigation an incentive fee in an amount equal to 0.25% of the
aggregate value of the pre-tax recovery including post-judgment interest
(whether paid in cash or noncash consideration, or in a lump sum or in
installments) in respect of each of the Glendale Litigation (the "Glendale
Incentive Fee") and the CalFed Litigation (the "CalFed Incentive Fee" and,
together with the Glendale Incentive Fee, the "Incentive Fees"). If any
recovery is paid, in whole or in part, in a form other than cash or other than
in a single lump sum, the Litigation Managers shall determine in the first
instance the value of such recovery, subject to review by the Glendale
Committee (in the case of the Glendale Litigation) or the CalFed Committee (in
the case of the CalFed Litigation). The Glendale Incentive Fee and the CalFed
Incentive Fee, as the case may be, shall be payable upon the receipt of a final
nonappealable judgment or in the event of a final settlement (a "Final
Resolution") of the Glendale Litigation or the CalFed Litigation, respectively
(whether or not any consideration in respect of such judgment or settlement has
been received as of such time). Notwithstanding the foregoing, a Litigation
Manager shall be divested of his right to receive such Litigation Manager's
share of the Glendale Incentive Fee or CalFed Incentive Fee if his employment
hereunder in respect of the Glendale Litigation or the CalFed Litigation,
respectively, is terminated prior to the date of a Final Resolution (1) by such
Litigation Manager other than for Good Reason (as defined herein), death or
incapacity, or (2) by the Company for Cause (as defined herein).
(e) Each of the Litigation Managers may be removed from his
position as such (including as an Executive Vice President of the Company) with
respect to the Glendale Litigation or the CalFed Litigation or both, but only
for Cause and only upon the unanimous vote of the Glendale Committee (with
respect to
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the Glendale Litigation) or the CalFed Committee (with respect to the CalFed
Litigation) as to such removal (provided that any Litigation Manager shall
cease to be an Executive Vice President of the Company upon removal as to both
the Glendale Litigation and the CalFed Litigation). The Company or a Committee
shall have "Cause" to terminate a Litigation Manager's employment hereunder
only upon (i) the conviction of the Litigation Manager for the commission of a
felony involving dishonesty with respect to the Company or the Holders or (ii)
gross and willful misconduct undertaken in bad faith by the Litigation Manager
that is demonstrably and materially injurious to the Company or to the economic
interests of the Holders as a group. Further, no breach, act or failure to act
on the Litigation Manager's part shall constitute "Cause" if such breach, act
or failure to act resulted from the Litigation Manager's incapacity due to
physical or mental illness or any such actual or anticipated breach, act or
failure to act resulted from a resignation by the Litigation Manager for Good
Reason.
(f) A Litigation Manager may terminate his employment
hereunder as to either or both of the Glendale Litigation and the CalFed
Litigation for "Good Reason." "Good Reason" shall mean (i) a material breach by
the Company of a material obligation of the Company under this Management
Agreement after the Litigation Manager has given the Company notice of the
breach within 90 days of the breach and the Company has not remedied the breach
in accordance with the next sentence or (ii) the existence of a conflict of
interest not due to any misconduct by the Litigation Manager which in the
reasonable judgment of the Litigation Manager renders inappropriate the
Litigation Manager's employment hereunder with respect to either the Glendale
Litigation or the CalFed Litigation. A breach described in this clause
includes, without limitation, (i) a detrimental alteration to the terms of the
Litigation Manager's employment as described herein, (ii) any reduction in the
Litigation Manager's annual salary or other fees, benefits or working
conditions described herein or the failure of the Company to pay when due to
the Litigation Manager any salary or fee or other benefits referred to in this
Management Agreement, (iii) the failure of the Company to obtain an agreement
reasonably satisfactory to the Litigation Manager from any successor to the
Company to assume and agree to perform this Management Agreement, or if the
business for which the Litigation Manager's services are principally performed
is sold or transferred, the failure of the Company to obtain such an agreement
from the purchaser or transferee of such business or (iv) any termination of
the Litigation Manager's employment which is not effected pursuant to the terms
of this Management Agreement and which is not remedied within 30 days after
receipt of written notice from the Litigation Manager delineating each such
claimed breach and setting forth the
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Litigation Manager's intention to terminate employment if such breach is not
remedied; provided, that if the specified breach cannot reasonably be remedied
within such 30-day period and the Company commences reasonable steps within
such 30-day period to remedy such breach and diligently continues such steps
thereafter until a remedy is effected, such breach shall not constitute "Good
Reason" provided that such breach is remedied within 60 days after receipt of
written notice.
(g) In the event of the removal, resignation, retirement,
death or incapacity of a Litigation Manager with respect to the Glendale
Litigation, the CalFed Litigation or both, such Litigation Manager shall not be
replaced and the remaining Litigation Manager shall continue to serve in such
capacity until such service is terminated pursuant hereto. Resignation or
removal as to one of the Goodwill Litigations shall not affect a Litigation
Manager's rights, powers, privileges, immunities or obligations hereunder with
respect to the Goodwill Litigation as to which such Litigation Manager has not
resigned or been removed. In the event that a Litigation Manager resigns or is
removed or ceases to serve in such capacity for any reason, the remaining
Litigation Manager shall be entitled to such former Litigation Manager's rights
hereunder in respect of compensation and otherwise, including salary and any
forfeited portion of the Incentive Fees, provided that only Xxxxxxx X. Xxxxxxx
shall be entitled to the Xxxxxxx Benefits, and only Xxxxxxx X. Xxxx shall be
entitled to the Xxxx Benefits.
(h) At such time as there are no Litigation Managers with
respect to the Glendale Litigation (or the remaining Litigation Manager has
informed the Company in writing that such Litigation Manager intends to retire,
resign or otherwise cease to serve in such capacity), the Glendale Committee,
by majority vote, shall be authorized to appoint a successor Litigation Manager
or Litigation Managers with respect to the Glendale Litigation and the GSB
LTWs. At such time as there are no Litigation Managers with respect to the
CalFed Litigation (or the remaining Litigation Manager has informed the Company
in writing that such Litigation Manager intends to retire, resign or otherwise
cease to serve in such capacity), the CalFed Committee, by majority vote, shall
be authorized to appoint a successor Litigation Manager or Litigation Managers
with respect to the CalFed Litigation and the CalFed Securities.
2.2 California Federal, GSB and Glendale Federal, and their
respective successors, shall cooperate with the Litigation Managers with
respect to the duties and responsibilities of the Litigation Managers hereunder
and, without limiting the generality of the foregoing, shall provide the
Litigation Managers with
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such access to their books, records, offices and other facilities and to their
employees, agents, attorneys and independent accountants as the Litigation
Managers shall reasonably require for the purpose of performing their
respective duties and exercising their powers hereunder. The Litigation
Managers shall have the authority on behalf of the Company and its
subsidiaries, as the case may be, to consult with and instruct attorneys of
California Federal and Glendale Federal in connection with the CalFed
Litigation and the Glendale Litigation, respectively. GSB agrees to use its
reasonable best efforts to cause the relevant officers, employees, agents and
representatives of the Surviving Bank and its successors to be available to
provide testimony and to execute documents, in each case required in the
reasonable judgment of the Litigation Managers, for the purpose of prosecuting
the Goodwill Litigation, including execution of any complaints, motions,
answers and other pleadings, affidavits, requests and notices, other than
pursuant to instructions that are determined to be unreasonable by the Glendale
Committee or the CalFed Committee, as applicable.
2.3 (a) The Company shall provide the Litigation Managers and
the Committees with drafts of any tax return, report, declaration or
certification (each, a "Tax Return") reporting, reflecting or relating to any
Final Resolution or receipt of proceeds in respect thereof at least 30 days
prior to the date such Tax Return is required to be filed. The Litigation
Managers shall provide comments upon such Tax Returns within 10 days of the
receipt thereof, and the Company shall give due consideration of such comments
of the Litigation Managers as are provided within such period.
(b) The Committees (as defined in the Agreement), in
consultation with the KPMG Peat Marwick LLP (or any successor thereto), shall
review (i) any Tax Return, audit, contest, claim, proceeding or inquiry with
respect to taxes arising from or relating to (A) any Final Resolution or
receipt of proceeds in respect thereof or (B) the distribution of the CalFed
Securities or the GSB LTWs or any payment in respect of the CalFed Securities
or (ii) matters related to any responsibility of KPMG Peat Marwick LLP (or any
successor thereto) under Section 1.6 of the Agreement.
(c) The Company shall use its best efforts not to take any
action that would or would be reasonably likely to have the effect of
increasing the tax benefits or decreasing the tax burden associated with (i)
any Final Resolution of the CalFed Litigation or the receipt of proceeds in
respect thereof or (ii) the distribution of the CalFed Securities or any
payment in respect of the CalFed Securities, at the
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cost of decreasing the tax benefits or increasing the tax burden associated
with (i) any Final Resolution of the Glendale Litigation or receipt of proceeds
in respect thereof or (ii) the distribution of the GSB LTWs.
ARTICLE III
The Committees
3.1 (a) The initial members of the Glendale Committee shall
be the GSB Directors. The initial members of the CalFed Committee shall be
[_________]. Each of the Glendale Committee and the CalFed Committee shall at
all times have at least two members, and all such members shall be members of
the Board of Directors of the Company and of the federal savings bank that is
the surviving corporation in the merger of Glendale Federal and California
Federal pursuant to the Agreement (the "Bank"); provided, however, that members
of the Committees shall not be required to be members of such Boards of
Directors after a Change of Control of the Company (it being understood that
any such Change of Control shall not diminish, to the extent permitted under
applicable law, the rights and powers of such Committee members hereunder). In
order to maintain continuity in respect of the prosecution of the Goodwill
Litigation, the Board of Directors of the Company shall, subject to Section 3.3
hereof, nominate the persons who are members of the Committees from time to
time to be elected to further terms as Directors of the Company or of the Bank,
as the case may be, it being the understanding of the parties hereto that
continuity of membership on such Committees is in the best interests of the
Company and the Holders.
For the purpose of this Management Agreement, a "Change of
Control" shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended) of beneficial ownership of 50% or
more of either (x) the then outstanding shares of common stock of the
Company (the "Outstanding Common Stock") or (y) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); provided, however, that such
acquisitions by any of First Gibraltar Holdings, Inc. or Hunter's
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Xxxx/Ford, Ltd., their respective successors or any affiliate or
associate of the foregoing (each, an "FGH Entity") shall not
constitute a "Change of Control" hereunder; or
(ii) Individuals who, as of the Effective Time,
constitute the Board of Directors of the Company (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board; or
(iii) Consummation by the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of
assets of another entity (a "Business Combination"), in each case,
unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Common Stock and Outstanding
Voting Securities, as the case may be, (ii) no Person (excluding the
Company, such corporation resulting from such Business Combination or
the FGH Entities) beneficially owns, directly or indirectly, 50% or
more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of
such corporation except to the extent
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that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of
the corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company. The Company agrees
not to effect or allow to be effected any Change of Control unless any
acquiror or successor in such Change of Control agrees to take such
actions as are necessary and appropriate to assure that the rights of
the Litigation Managers hereunder, as well as the rights of the
Holders, are honored and not affected in any adverse manner.
(b) Except as otherwise expressly provided herein, each
Committee may act only with the concurrence of a majority of its members;
provided, however, that a Committee may, in its discretion, designate a
Chairman to act as the administrative Committee member. A Committee may
delegate to its Chairman such authority as the Committee may determine.
3.2 Each member of the Committees shall be entitled to
receive reasonable fees for service thereon as determined by the Board of
Directors of the Company from time to time, but in no event less than the
highest fees received by members of other committees of the Board of Directors
of the Company.
3.3 If any member of a Committee shall resign, die or become
incapacitated, or shall otherwise become unable to act as a member of such
Committee, a majority of the remaining members of such Committee (or the
remaining member, if only one) shall have the sole authority to appoint a
successor. If such successor is required pursuant to Section 3.1(a) to be a
member of the Board of Directors of the Company, such Board of Directors shall
promptly appoint the individual chosen as successor to such Board of Directors
and shall cause such individual to be nominated for election to such Board of
Directors at the next meeting at which directors are to be elected (provided
that such individual is reasonably acceptable to the Board of Directors of the
Company). A majority of the members of a Committee may vote at any time to
remove a committee member and to appoint a new member to fill the vacancy so
created. A successor or a new Committee member appointed pursuant to this
Section 3.3 shall be entitled to all of
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the rights, powers, immunities and privileges of the other members of such
Committee, without the need of any further act or writing.
3.4 Subject to Section 2.1 hereof, each Committee may commit
to and shall pay its attorneys' compensation for services rendered and expenses
incurred and may enter into arrangements on such terms as may be approved by
such Committee with such counsel. A Committee may commit to and shall pay all
such persons or entities that it retains compensation for services rendered and
expenses incurred.
3.5 Any member of a Committee and any Litigation Manager may
also be a GSB Holder or a CalFed Holder or an officer, director, employee or
affiliate of a GSB Holder or of a CalFed Holder and will have all the rights of
such a Holder to the same extent as if he or she were not a member of the
Committee.
ARTICLE IV
Costs and Expenses
4.1 (a) The GSB Committee and the Litigation Managers shall
have the power to authorize the expenditure by the Company of all funds deemed
by the GSB Committee or the Litigation Managers to be reasonably necessary to
pursue the Glendale Litigation or in respect of the GSB LTWs (it being the
understanding of the parties that such funds are expected to amount to at least
$10 million), such expenditures including, without limitation, all legal and
other professional fees and costs incurred in connection with the Glendale
Litigation, the GSB LTWs, the compensation and expense reimbursements of the
Committee described in Sections 3.2 and 3.4, payment of any expenses incurred
by or on behalf of the Litigation Managers pursuant hereto and the compensation
of the Litigation Managers, costs and expenses of counsel and experts retained
by the GSB Committee pursuant to Section 3.4, and any amounts paid pursuant to
Article 5.
(b) The CalFed Committee and the Litigation Managers shall
have the power to authorize the expenditure by the Company of all funds deemed
by the CalFed Committee or the Litigation Managers to be reasonably necessary
to pursue the CalFed Litigation or in respect of the CalFed Securities (it
being the understanding of the parties that such funds are expected to amount
to at least $20 million), such expenditures including, without limitation, all
legal and other
14
professional fees and costs incurred in connection with the CalFed Litigation,
the CalFed Securities, the compensation and expense reimbursements of the
CalFed Committee described in Sections 3.2 and 3.4, payment of any expenses
incurred by or on behalf of the Litigation Managers pursuant hereto and the
compensation of such Litigation Managers, costs and expenses of counsel and
experts retained by the CalFed Committee pursuant to Section 3.4, and any
amounts paid pursuant to Article 5.
ARTICLE V
Indemnification; Limitation of Liability
5.1 In taking any action hereunder, or in refraining
therefrom, a Committee, the members thereof and the Litigation Managers shall
each be protected in relying upon any notice, paper or other document
reasonably believed by it or them to be genuine and signed by the proper
parties, or upon any evidence reasonably deemed by it or them to be sufficient.
A Committee, the members thereof and the Litigation Managers may each rely on
the statements contained in such writings. In no event shall the Committee, any
member thereof or the Litigation Managers be liable to the Company, any
subsidiary thereof or to the CalFed Holders or GSB Holders for any action,
omission, decision, determination or undertaking by such Committee, any of its
members or a Litigation Manager unless it has been shown by clear and
convincing evidence in a court of competent jurisdiction that such action,
omission, decision, determination or undertaking was undertaken with deliberate
intent to cause substantial injury to the Company or the CalFed Holders or GSB
Holders or with reckless disregard for the best interests of such persons. If a
Committee, any member thereof or a Litigation Manager consults with counsel or
other experts in connection with its or their duties hereunder, it and they
shall be fully protected by any action, omission, decision, determination or
undertaking taken, suffered or permitted by it or them in good faith and in
accordance with the advice of such counsel or other experts, including counsel
or experts who are affiliates of one or more of the members of a Committee or
of one or both Litigation Managers.
5.2 Each member of the Committees and each of the Litigation
Managers shall be indemnified and held harmless by the Company against all
claims, demands, obligations, liabilities and expenses, including amounts paid
in satisfaction of judgments, in compromise (so long as the Company has
approved such compromise, which approval shall not be unreasonably withheld),
or as fines or
15
penalties, and counsel fees, reasonably incurred by him or her in connection
with the defense or disposition of any action, suit or other proceeding by one
or more GSB Holders or CalFed Holders or by any other person, whether civil or
criminal, in which he or she may be involved, or with which he or she may be
threatened, by reason of the fact that he or she is or was a Committee Member
or a Litigation Manager, provided that such Committee member or Litigation
Manager shall not be entitled to have such indemnification in respect of any
matter as to which it shall have been shown in a court of competent
jurisdiction that an action, omission, decision, determination or undertaking
of a Committee member or Litigation Manager was undertaken by such person with
deliberate intent to cause substantial injury to the Company or the CalFed
Holders or GSB Holders or with reckless disregard for the best interests of
such persons.
5.3 Advance payments in connection with indemnification under
this Article 5 shall be made by the Company, if so requested by any person
entitled to indemnity pursuant to Section 5.2, provided that such indemnified
person shall have given a written undertaking to repay any amount advanced by
or on behalf of the Company in the event it is subsequently determined that he
or she is not entitled to indemnification under the standard set forth in
Section 5.2.
5.4 The Company shall use its reasonable best efforts to
cause an endorsement to its Directors and Officers insurance policy to
adequately insure that each of the members of such Committee and the Litigation
Managers shall be indemnified against any loss, liability or damage for which
such person is entitled to be indemnified pursuant to this Article 5 and that
is attributable to the Glendale Litigation or the GSB LTWs, in the case of the
GSB Committee, or the CalFed Litigation or the CalFed Securities, in the case
of the CalFed Committee.
5.5 The rights accruing to any Committee member or Litigation
Manager under this Article 5 shall not exclude any other right to which such
person may be entitled, and, notwithstanding the other provisions of this
Article 5, each Committee member and Litigation Manager shall be indemnified
and insured as a director and employee of the Company to the fullest extent
provided to directors and executive officers, respectively, of the Company,
provided that no such indemnification or insurance shall be less favorable than
that provided by GSB in favor of such persons as of the date hereof.
16
ARTICLE VI
Amendments; Miscellaneous
6.1 This Management Agreement may be amended from time to
time, but only by an instrument in writing executed by the parties hereto or
their successors and approved by resolution of a majority of the members of
each Committee; provided, however, that any amendment or other modification of
this Management Agreement that would result in any change to, or any provision
inconsistent with, a provision of this Management Agreement that contemplates
Committee action by more than a majority of the members thereof shall not be
amended except by an instrument in writing executed by the parties hereto or
their successors and approved by resolution of such higher number of the
members of each Committee.
6.2 (a) Subject to Section 6.2(b), nothing in this Management
Agreement shall be construed to prevent service by any Litigation Manager as a
director or employee of, or a consultant to, a financial institution or other
business, other than the Company.
(b) As of the Effective Time and for three years thereafter,
neither Litigation Manager will directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or control of,
or be connected as an officer, employee, partner, director or otherwise with,
or have any financial interest in, any business principally engaged in the
savings and loan or federally insured thrift business in California which is in
material competition with the business conducted by the Company. Ownership for
personal investment purposes only of less than 5% of the voting stock of any
publicly held corporation shall not constitute a violation hereof.
(c) As of the Effective Time and for three years thereafter,
neither Litigation Manager will, directly or indirectly, solicit for employment
by other than the Company any person employed by the Company at the Effective
Time, nor will either Litigation Manager, directly or indirectly, solicit for
employment by other than the Company any person known by such Litigation
Manager to be employed at the time by the Company.
17
(d) Each Litigation Manager shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company, which shall have been obtained by
the Litigation Manager during his employment by the Company and which shall not
be or become public knowledge (other than by acts by the Litigation Manager in
violation of this Management Agreement). After termination of the Litigation
Manager's employment with the Company, the Litigation Manager shall not,
without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of this Section 6.2
constitute a basis for deferring or withholding any amounts otherwise payable
to a Litigation Manager under this Management Agreement.
6.3 This Management Agreement and the Agreement constitute
the entire agreement among the parties and their affiliates with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties and their affiliates
or any of them with respect to the subject matter hereof, and nothing in this
Management Agreement shall be deemed to create any fiduciary or additional
obligations on the part of any person in favor of the Holders or to affect in
any manner the rights of the Holders under the GSB LTWs and the CalFed
Securities (and, without limiting the foregoing, no Litigation Manager shall be
deemed to owe a fiduciary duty to the Company or the Holders as a result of
their service as such hereunder).
6.4 This Management Agreement, and all of the provisions
hereof, shall be binding upon and inure to the benefit of the parties hereto
and their respective permitted successors (including without limitation any
transferee of all or substantially all of the assets of a party hereto or the
entity resulting from or surviving a Change of Control or succeeding to a party
hereto in such Change of Control) and assigns, but the obligations and
responsibilities of the Litigation Managers under this Management Agreement
with respect to the Glendale Litigation and the GSB LTWs, on the one hand, or
the CalFed Litigation and the CalFed Certificates, on the other hand, shall not
be assigned by such Litigation Managers without the prior consent of the
Company.
6.5 The parties hereto hereby agree to execute, acknowledge
and deliver such further agreements and instruments and to do such further
acts, or to cause their respective affiliates to execute, acknowledge and
deliver such further
18
agreements and instruments and to do such further acts, as may be necessary or
proper to effectively carry out the purposes and intents of this Management
Agreement.
6.6 Any provision of this Management Agreement that is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable any such
provision in any other jurisdiction.
6.7 This Management Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware and the
applicable laws of the United States of America, without reference to
principles of conflict of laws. The captions of this Management Agreement are
not part of the provisions hereof and shall have no force or effect.
6.8 All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Litigation Managers:
Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxx
c/o Golden State Bancorp Inc.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Company or the Surviving Bank:
MacAndrews & Forbes Holdings Inc.
00 Xxxx 00xx Xxxxxx
00
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxx, III, Esq.
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
6.9 The parties hereto agree that irreparable damage would
occur in the event that the provisions of this Management Agreement were not
performed by the Company in accordance with its specific terms or otherwise
breached. Accordingly, it is agreed that the parties hereto shall be entitled
to an injunction or injunctions to prevent breaches of this Management
Agreement and to enforce specifically the terms and provisions thereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
6.10 This Management Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
6.11 Any dispute or controversy arising under or in
connection with this Management Agreement (relating to any issue other than the
compensation, fees or benefits of the Litigation Managers hereunder, including
without limitation the matters contemplated by Sections 2.1(c) (and the
schedules referred to therein) and 2.1(d) hereunder) shall be settled
exclusively by arbitration, conducted before a panel of three arbitrators in
Los Angeles, California, in accordance with the rules of the American
Arbitration Association then in effect or of such similar organization as the
parties hereto may mutually agree. Judgment may be entered on the arbitrator's
award in any court having jurisdiction. The Company agrees to pay, as incurred,
all legal or arbitration fees and expenses which a Litigation Manager may
reasonably incur as a result of any proceeding with respect to such enforcement
hereunder, plus interest on any delayed payment at the rate set forth in
Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended.
20
6.12 This Agreement shall automatically terminate and be of
no further force or effect upon the earlier to occur of (a) the termination of
the Agreement in accordance with its terms or (b) the occurrence of all of the
following events: (i) a final nonappealable judgment or order in or a final
settlement of the Goodwill Litigation, (ii) fulfillment of all obligations to
the Holders under the terms of the GSB LTWs and the CalFed Securities and (iii)
the payment of all amounts owing hereunder to the Litigation Managers in
respect of the subject matter of this Management Agreement (except that, in the
case of a termination pursuant to clause (b), (A) the provisions of Sections
5.2 and 5.3 shall continue for a period of six years following such
termination; provided, however, that all rights to indemnification in respect
of any claim asserted or made within such period shall continue until the final
disposition of such claim, and (B) the obligations of the Company set forth in
Schedules 2.1(c)(i) and 2.1(c)(ii) to this Management Agreement shall survive
such termination.
IN WITNESS WHEREOF, the parties hereto have executed this
Management Agreement, or caused this Management Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.
GOLDEN STATE BANCORP INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman of the
Board, President and
Chief Executive Officer
GLENDALE FEDERAL BANK, FEDERAL
SAVINGS BANK
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman of the
Board, President and
Chief Executive Officer
CALIFORNIA FEDERAL BANK, A
FEDERAL SAVINGS BANK
By: /s/ Xxxx X. Xxxx
-------------------------------
Name: Xxxx X. Xxxx
Title: President and Chief
Operating Officer
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxx
-------------------------------
Xxxxxxx X. Xxxx
SCHEDULE 2.1(C)(I)
Notwithstanding any provision of the Management Agreement or
the Agreement to the contrary, Xxxxxxx X. Xxxxxxx ("Xxxxxxx") shall be provided
with the following benefits:
1. Retirement Benefit. Xxxxxxx shall be entitled to an annual
pension benefit of $1,000,000 (the "Pension Benefit"), payable, at Xxxxxxx'x
election, in one of the forms and commencing at the times described herein: (i)
the Pension Benefit payable monthly in advance commencing on Xxxxxxx'x 60th
birthday and for the rest of his life; (ii) the actuarial equivalent of the
Pension Benefit, payable in a lump sum on Xxxxxxx'x 60th birthday; or (iii) the
actuarial equivalent of the Pension Benefit payable upon Xxxxxxx'x termination
of employment as a Litigation Manager for any reason, either in a lump-sum or
on an annuity basis, and actuarially reduced to take into account commencement
prior to Xxxxxxx'x 60th birthday. In the event Xxxxxxx'x Pension Benefit is
payable in accordance with clauses (ii) or (iii) of the foregoing sentence, the
amount of such benefit shall be determined in good faith based on reasonable
assumptions by the Company's actuaries. Upon Xxxxxxx'x death and provided that
the Pension Benefit has not previously been paid as a lump-sum, his spouse,
should she survive him, shall be entitled to an annual pension benefit of 50%
of the Pension Benefit, payable monthly in advance. Xxxxxxx shall be fully
vested in the Pension Benefit at the Effective Time.
2. Medical Benefits. Notwithstanding anything to the contrary
contained in Section 2.1(c) of the Management Agreement, during Xxxxxxx'x
employment as Litigation Manager and thereafter, upon Xxxxxxx'x termination of
employment for any reason, for the remainder of Xxxxxxx'x life and the life of
his spouse, he and his spouse shall be provided with medical benefits at the
Company's expense pursuant to an indemnity plan reasonably acceptable to
Xxxxxxx (the "Medical Benefits"). Xxxxxxx shall be fully vested in the Medical
Benefits at the Effective Time.
3. Enforceability. The provisions of this Schedule 2.1(c)(i)
are for the benefit of Xxxxxxx and shall be enforceable by him against the
Company in a court of competent jurisdiction. The Company agrees to pay, as
incurred, all legal fees and expenses which Xxxxxxx may reasonably incur as a
result of any proceeding with respect to such enforcement hereunder, plus
interest on any delayed payment at the rate set forth in Section 7872(f)(2)(A)
of the Internal Revenue Code of 1986, as amended.
SCHEDULE 2.1(C)(II)
Notwithstanding any provision of the Management Agreement or
the Agreement to the contrary, Xxxxxxx X. Xxxx ("Xxxx") shall be provided with
the following benefits:
1. Retirement Benefit. Xxxx shall be entitled to an annual
pension benefit of $325,000 (the "Pension Benefit"), payable at Xxxx'x election
in one of the forms and commencing at the times described herein: (i) the
Pension Benefit payable monthly in advance commencing on Xxxx'x 65th birthday
and for the rest of his life; (ii) the actuarial equivalent of the Pension
Benefit, payable in a lump sum on Xxxx'x 65th birthday; or (iii) the actuarial
equivalent of the Pension Benefit payable upon Xxxx'x termination of employment
as a Litigation Manager for any reason, either in a lump-sum or on an annuity
basis, and actuarially reduced to take into account commencement prior to
Xxxx'x 65th birthday. In the event Xxxx'x Pension Benefit is payable in
accordance with clauses (ii) or (iii) of the foregoing sentence, the amount of
such benefit shall be determined in good faith based on reasonable assumptions
by the Company's actuaries. Upon Xxxx'x death and provided that the Pension
Benefit has not previously been paid as a lump-sum, his spouse, should she
survive him, shall be entitled to an annual pension benefit of 50% of the
Pension Benefit, payable monthly in advance. Xxxx'x Pension Benefit shall vest
in two equal installments on each of the first and second anniversaries of the
Effective Time and shall be fully vested on the second anniversary of the
Effective Time, provided that the Pension Benefit shall be immediately and
fully vested upon Xxxx'x termination of employment as a Litigation Manager for
Good Reason or without Cause or upon Xxxx'x disability. For purposes hereof,
"disability" shall have the meaning set forth in the change of control
employment agreement between Xxxx and Glendale Federal Bank, Federal Savings
Bank, dated as of December 31, 1997, as amended.
2. Medical Benefits. Notwithstanding anything to the contrary
contained in Section 2.1(c) of the Management Agreement, during Xxxx'x
employment as Litigation Manager and thereafter, upon Xxxx'x termination of
employment for any reason, for the remainder of Xxxx'x life and the life of his
spouse, he and his spouse shall be provided with medical benefits at the
Company's expense pursuant to an indemnity plan reasonably acceptable to Fink
(the "Medical Benefits"). Xxxx shall be fully vested in the Medical Benefits at
the Effective Time.
3. Enforceability. The provisions of this Schedule 2.1(c)(ii)
are for the benefit of Xxxx and shall be enforceable by him against the Company
in a court of competent jurisdiction. The Company agrees to pay, as incurred,
all legal fees and expenses which Xxxx may reasonably incur as a result of any
proceeding with respect to such enforcement hereunder, plus interest on any
delayed payment at the rate set forth in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended.
