Declaration of Jonathan A. Shiffman in Support of The Motion of Defendantwashington Mutual, Inc. For Summary Judgment

UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
x
In re Chapter 11
WASHINGTON MUTUAL, INC., et al., Case No. 08-12229 (MFW)
Debtors. (Jointly Administered)
x
Adversary Proceeding
BROADBILL INVESTMENT CORP.,
Case No. 10-50911 (MFW)
Plaintiff,
v.
WASHINGTON MUTUAL, INC.,
Defendant.
- - - - - - - - - - - - - - - - - - - - - - - - - - - -x
NANTAHALA CAPITAL PARTNERS, LP, and :
BLACKWELL CAPITAL PARTNERS, LLC, :
Intervenor-Plaintiffs,
v.
WASHINGTON MUTUAL, INC.,
Defendant-in-Intervention.
x
DECLARATION OF JONATHAN A. SHIFFMAN

IN SUPPORT OF THE MOTION OF DEFENDANT
WASHINGTON MUTUAL, INC. FOR SUMMARY JUDGMENT
I, Jonathan A. Shiffman, pursuant to 28 U.S.C. § 1746, hereby declare under
penalty of perjury that the following is true and correct to the best of my knowledge,
information and belief:
1. I am an associate of the firm of Weil, Gotshal and Manges, L.L.P.,
attorneys for defendant Washington Mutual, Inc. ("WMI"), and attach herewith true and
correct copies of documents in support of WMI's motion, dated October 29, 2010, for an
US ACTIVE:143542 I CO \ 05179831.0003
order, pursuant to Rule 56 of the Federal Rules of Civil Procedure, as incorporated herein
pursuant to Rule 7056 of the Federal Rules of Bankruptcy Procedure, granting summary
judgment against Named Plaintiffs Broadbill Investment Corp., Nantahala Capital
Partners, LP, and Blackwell Capital Partners, LLC, on behalf of themselves and all others
similarly situated.
2. Attached hereto as Exhibit A is a true and correct copy of that certain
article by Leonard Bierman et al., On the Wealth Effects of the Supervisory Goodwill
Controversy, 22 J. FIN. RES. 69 (1999).
3. Attached hereto as Exhibit B is a true and correct copy of that certain
article by Patrick McGeehan, Market Place; The Savings and Loan Debacle May Be
Long Gone, But the Market Consequences Refuse to Die, N.Y. Times, April 2,
2002.
4. Attached hereto as Exhibit C is a true and correct copy of that certain
working paper by Benjamin C. Esty, The Information Content of Litigation Participation
Securities: The Gase of CalFed Bancorp, August 4, 2000.
5. Attached hereto as Exhibit D is a true and correct copy of that certain
article by Deborah Adamson, GlenFed Parent Announces Earnings Up, Trading Plan,
Daily News of Los Angeles, October 29, 1997.
6. Attached hereto as Exhibit E is a true and correct copy of that certain
Current Report (Fomi 8-K), filed by WMI on March 12, 2003.
7. Attached hereto as Exhibit F is a true and correct copy of that certain
article by Elizabeth Rourke, Anchor Bancorp, Inc., 10 INTERNATIONAL DIRECTORY OF
COMPANY HISTORIES (St. James Press, 1995).

US ACTIVE:143542100105179831.0003 2
8. Attached hereto as Exhibit G is a true and correct copy of that certain
Complaint, dated January 13, 1995, filed by Anchor Savings Bank, FSB, in the United
States Court of Federal Claims.
9. Attached hereto as Exhibit H is a true and correct copy of that certain

Registration Statement (Form S-3), filed by Dirne Bancorp, Inc. on October 20, 2000.
10. Attached hereto as Exhibit I is a true and correct copy of that certain
Agreement and Plan of Merger, dated July 6, 1994, by and between Anchor Bancorp, Inc.
and Dirne Bancorp, Inc., without annexes.
11. Attached hereto as Exhibit J, and filed under seal, is a true and correct
copy of that certain presentation by Salomon Smith Barney, titled Project: Holy Graul:
Goodwill Lawsuit Claim Structuring Alternatives in the Context of a Merger, dated
February 10, 1998.
12. Attached hereto as Exhibit K, and filed under seal, is a true and correct
copy of that certain presentation by Salomon Brothers, titled Goodwill Claim
Allocation: A Solution to Unlocking Value for Target Management, dated October 28,
1997.
13. Attached hereto as Exhibit L is a true and correct copy of that certain
Agreement and Plan of Merger, dated July 27, 1996, by and among First Nationwide
Holdings Inc., CalFed Bancorp, Inc., and California Federal Bank, F.S.B.
14. Attached hereto as Exhibit M is a true and correct copy of that certain
Registration Statement (Form S-4), filed by Coast Federal Litigation Contingent Payment
Rights Trust on January 13, 1998.
15. Attached hereto as Exhibit N is a true and correct copy of that certain
report by Charlotte A. Chamberlain & Donald D. Destino, Jefferies & Co. Inc., Equity
US_ACTIVE:143542100105179831.0003 3
Research Report an Golden State Bancorp Litigation Tracking Warrants, dated May 5,
1998.
16. Attached hereto as Exhibit 0 is a true and correct copy of that certain
Warrant Agreement, dated May 4, 1998, between Golden State Bancorp, Inc. and
ChaseMellon Shareholder Services L.L.C.
17. Attached hereto as Exhibit P is a true and correct copy of that certain
Warrant Agreement, dated December 21, 2000, between Dirne Bancorp, Inc., EquiServe
Trust Company, N.A., and EquiServe Limited Partnership.
18. Attached hereto as Exhibit Q is a true and correct copy of that certain
Agreement and Plan of Merger, dated June 25, 2001, by and between Washington
Mutual, Inc. and Dirne Bancorp, Inc.
19. Attached hereto as Exhibit R is a true and correct copy of that certain
Amended and Restated Warrant Agreement, dated March 11, 2003, between Washington
Mutual, Inc. and Mellon Investor Services LLC.
20. Attached hereto as Exhibit S is a true and correct copy of that certain
Amended Judgment of the United States Court of Federal Claims granting recovery to
Plaintiff Anchor Savings Bank, FSB, dated July 17, 2008.
21. Attached hereto as Exhibit T is a true and correct copy of that certain
Notice of Appeal filed by Defendant United States in the United States Court of Federal
Claims, dated September 8, 2008.
22. Attached hereto as Exhibit U is a true and correct copy of that certain
Notice of Cross-Appeal filed by Plaintiff Anchor Savings Bank, FSB in the United States
Court of Federal Claims, dated September 22, 2008.
US_ACTIVE:143542100105179831.0003 4
23. Attached hereto as Exhibit V is a true and correct copy of that certain
Purchase and Assumption Agreement, Whole Bank, dated September 25, 2008, between
the Federal Deposit Insurance Corporation and JP Morgan Chase Bank, N.A.
24. Attached hereto as Exhibit W is a true and correct copy of that certain
Motion to Dismiss filed by the Defendant United States in the United States Court of
Federal Claims, dated August 2, 2010.
25. Attached hereto as Exhibit X is a true and correct copy of that certain
Response to Defendant United States' Motion to Dismiss, filed by Plaintiff Anchor
Savings Bank, FSB in the United States Court of Federal Claims, dated September 2,
2010.
26. Attached hereto as Exhibit Y is a true and correct copy of that certain
Reply to Plaintiff Anchor Savings Bank, FSB's Response, filed by Defendant United
States in the United States Court of Federal Claims, dated October 4, 2010.
27. Attached hereto as Exhibit Z is a true and correct copy of that certain
Motion for Leave to file a Sur-reply to Defendant United States' Reply, filed by Plaintiff
Anchor Savings Bank, FSB in the United States Court of Federal Claims, dated
October 14, 2010.
US ACTIVE:143542100\05179831.0003 5
28. Attached hereto as Exhibit AA, and filed under seal, is a true and correct
copy of that certain fetter frorn Dirne Bancorp, Inc. to the Securities and Exchange
Commission, containing responses to questions regarding Warburg, Pincus Equity
Partners, L.P.'s investment in Dirne Bancorp, Inc., dated August 7, 2000.
Dated: October 29, 2010
US ACTIVE:43542100\05 179831.0003 6
3/1/99 J. Fin. Res. (abstract) 69
1999 WLNR 2777371
Journal of Financial Research

Copyright ? 2005 The H.W.Wilson Company. All rights reserved.
March 1999
Volume 22; Issue 1
On the wealth effects of the supervisory goodwill controversy.

FIRREA-mandated change in accounting regulations
Bierman, Leonard
Fraser, Donald R
Zardkoohi, Asghar
We provide evidence on the potential wealth effects of the 1996 U.S. Supreme Court decision that the U.S. govern-
ment had violated contractual obligations when, in 1989, it passed legislation prohibiting savings and loan associa-
tions from counting "supervisory goodwill" as capital. The Supreme Court decision produced large wealth gains
for the savings and loan plaintiffs, as did prior court decisions in favor of these savings and loans. However, little
evidence exists to suggest negative market responses to important events surrounding the 1989 legislation.
Reprinted by permission of the publisher.
I. INTRODUCTION
On July 1, 1996, the U.S. Supreme Court in a 7-2 decision (U.S. v. Winstar) ruled that the U.S. government had vio-
lated contractual obligations through the 1989 passage of the Financial Institutions Reform, Recovery, and En-
forcement Act (FIRREA). FIRREA mandated new regulatory capital accounting for depository institutions (espe-
cially relevant to savings and loans (SLAs)) and provided for the rapid phase-out of "supervisory goodwill" as a
component of capital. As a result, numerous thrifts became undercapitalized. Many of these thrifts were closed,
while others resorted to massive portfolio changes designed to shrink their balance sheets and to restore adequate
capital.(FN1)
The Supreme Court decision culminated a series of lawsuits involving both surviving and defunct institutions. Esti-
mates of the damages due from the U.S. government to the harmed institutions range from $10 billion to $20 billion (
Wall St. Journal (WSJ), July 2, 1996, pp. A3, A4), though the exact determination of the magnitude of these dam-
ages is to be established in separate court decisions. The ultimate settlement of these cases creates the situation in
which the Federal Deposit Insurance Corporation (FDIC) as successor to the failed institutions becomes a plaintiff
against the U.S. government, itself represented by attorneys from the FDIC. Indeed, the American Banker (
August 19, 1996) reports that "at the FDIC, the situation is so sensitive that the agency has segregated the attorneys
working at opposite ends of the litigation to avoid any conflicts of interest" (p. 3).
We document that the U.S. Supreme Court ruling had substantial, positive effects on the market value of the SLAs
involved in the case. In contrast, we observe no negative market value effects of the FIRREA-mandated change in
accounting regulations. The Supreme Court decision, thus, may have produced a windfall for the plaintiffs.
II. ECONOMIC AND LEGAL BACKGROUND

ECONOMIC BACKGROUND
The origins of the controversy that culminated in the July 1, 1996, U.S. Supreme Court decision go back to the earl
y
1980s. In this period, many SLAs became insolvent almost entirely because of the effects of high interest rate
s
(credit risk issues did not usually play an important role in these insolvencies). The spike in interest rates
sharply
3/1/99 JFINRESAB 69 Page 2
reduced the market value of the SLAs' principal asset--fixed-rate, single family mortgage loans--and thus created
negative spreads in their borrowing and lending activities. In an attempt to avoid payouts from the deposit insurance
fund, the Federal Home Loan Bank Board engaged in questionable practices that eventually contributed to even
greater losses to the deposit insurance fund. These included the creation of supervisory goodwill as well as lower
capital requirements and reduced liquidity requirements.
Supervisory goodwill arose when an acquiring firm (in this case, a strong SLA) bought another firm (in this case, a
failing or failed SLA) and paid more than the value of the assets of the seller. The creation of goodwill is common in
mergers and acquisitions, which are accounted for as a purchase rather than a pooling (usually cash rather than stock
transactions). In these cases, the difference between what the strong SLA paid for the failed SLA and the value of
the assets of the weak SLA is called "supervisory goodwill." Goodwill is thus an intangible asset and is often re-
ferred to as a "paper" asset. When the transaction was consummated, the healthy SLAs were allowed to count the
regulatorily created (supervisory) goodwill as capital. The term supervisory goodwill could just as well be
referred to as "supervisory capital."(FN2) In the case of Glendale Federal Bank, for example, over $700 million
in supervisory goodwill was created in 1981 when it acquired an ailing Florida SLA.
Merger transactions creating supervisory goodwill were attractive to strong SLAs for several reasons. Expansionary-
minded SLAs could not generally make interstate acquisitions of healthy SLAs. Thus, for example, Glendale, a Cali-
fornia-based thrift, could only expand into the rapidly growing Florida market through acquisition of a failing or
failed institution. In the expansion process, the acquiring SLAs were also potentially able to capture the value of
underpriced deposit insurance. In addition, accounting rules in effect at the time under "regulatory accounting prin-
ciples" (RAP) generally resulted in the acquisitions' increasing the reported profit of the acquirer. The increment to
reported profit stemmed from the longer period permitted for the amortization of the goodwill (generally forty
years) than was used to accrete into income (generally eight years) the difference between the purchase price of the
mortgages acquired and their (higher) maturity value. As a result, acquiring thrifts were able to reduce the
government's burden in dealing with insolvent institutions and at the same time increase their own reported profits.
While supervisory goodwill was attractive to acquiring thrifts and to the thrift regulators, its economic (i.e., cash-
flow) significance was limited. Indeed, there were no direct cash-flow consequences of supervisory goodwill acqui-
sitions. Publicly reported profits were higher, but profits as reported under tax accounting, and therefore cash
flow, did not necessarily change.
More than 100 transactions were consummated during the 1980s in which supervisory goodwill was created.
But late in the decade the interest rate risk problem for thrifts became a credit risk problem, with thousands of
failing institutions. As a result, the then insuring agency for SLAs, the Federal Savings and Loan Insurance
Corporation, itself became insolvent and the thrift crisis could be ignored no longer.
Angered by the cost of dealing with the problem (over $500 billion by some estimates),(FN3) Congress in 1989
passed FIRREA. This legislation provided the initial funding ($50 billion) to deal with the thrift problem, abolished
the existing regulatory structure, and mandated the adoption of Generally Accepted Accounting Principles (
GAAP) to replace the RAP (Spong (1994)). Most important for the 1996 Supreme Court decision, FIRREA
required that existing goodwill be written off within a short transition period (and that new goodwill created could
not count as capital). As a result, numerous SLAs that were solvent before FIRREA became insolvent shortly after
the legislation was passed.(FN4)
LEGAL BACKGROUND
After the enactment of FIRREA in 1989, various financial institutions brought legal actions against the federal gov-
ernment for breach of contract. These parties argued that FIRREA's provisions (which prescribed strict new mini-
mum capital requirements for SLAs and severely restricted the use of supervisory goodwill) abrogated their agree-
ments with the Federal Home Loan Bank Board. As discussed above, the agreement had permitted the acquiring (
healthy) SLAs to use supervisory goodwill in meeting their capital requirements. The supervisory goodwill SLAs
© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

sought monetary damages for the government's alleged contractual breach.
In two consolidated cases, the U.S. Court of Claims in 1992 held the government liable for breach of contract.(
FN5) The cases were appealed, however, to a panel of judges of the U.S. Court of Appeals for the Federal
Circuit, which in 1993 reversed the holding of the Court of Claims.(FN6) The aggrieved parties, though, then
sought a rehearing of the case before all the judges of the appeals court sitting "en banc." In 1995 the full Federal
Appeals Court reversed the panel decision and affirmed the decisions of the Court of Claims regarding
government liability.(FN7) Because of the importance of the issue and the controversy surrounding it, the U.S.
Supreme Court agreed to hear the federal government's appeal of the Federal Circuit's decisions, and on July 1, 1996,
issued its opinion in the case.
The U.S. Supreme Court in U.S. v. Winstar Corp.,(FN8) upheld the 1995 ruling of the full Federal Appeals Court.
Writing for the court, Justice David Souter upheld the Federal Circuit's conclusion that the federal government had
expressly contracted to permit the thrifts to use supervisory goodwill in computing their regulatory capital. Indeed,
Justice Souter asserted that it would have been "madness" for healthy thrifts to enter into mergers of the kind involv-
ing the aggrieved parties without securing such a clear promise. Since express contractual agreements existed, the
federal government was held liable for breaches of contract since it could not successfully advance any meaningful
defenses for its actions. Thus, the U.S. Supreme Court held that it would not view attempts by the U.S.
government to abrogate its contracts with private business lightly.
III. SAMPLE AND METHODOLOGY

SAMPLE
We develop two samples to examine the effects of the U.S. Supreme Court decision.(FN9) The first sample includes
SLAs that were directly involved in the case as a plaintiff and were publicly traded. We began with a list of all the
plaintiffs in the case. We then screened that list to find plaintiffs that were publicly traded (many of these were the
subject of articles in the financial press). In some cases, the publicly traded firms were not the original SLAs but
were successor firms following mergers. For example, First Union became a plaintiff following its acquisition of the
failed Meritor Savings Bank. This process yielded twelve publicly traded SLAs. Table 1, Panel A provides a list of
these supervisory goodwill SLAs.
A separate set of SLAs was selected as a control group. This group consisted of SLAs that were similar in size to
those in the supervisory goodwill sample but were not involved in the court case. Given the relatively small
number of publicly traded SLAs, a firm-by-firm match was not possible. Nevertheless, our expectation is that these
control group SLAs would not have experienced any response to the events involving the supervisory goodwill
case. Table 1, Panel B provides a list of the control group.
METHODOLOGY
We study the market response to a series of announcements pertaining to the progress of the supervisory goodwill
court cases and to the earlier passage of FIRREA. We use the WSJ to determine our event dates. Given the uncer-
tainty of the timing of the release of the relevant information, we establish a two-day event window: day 0 is the
date of the newspaper article (i.e., the event day), while day -1 is the prior day. In each case, a search of the
WSJ was conducted to determine whether there were contaminating news events for each firm in the sample for a
period of [plus or minus] 5 business days from the event date. No contaminants were found for the two samples.
We estimate the two-day abnormal returns with a single-index market model methodology as originally proposed by
Fama, Fisher, Jenser, and Roll (1969), with the S&P 500 as the market index. The sample period used for estimating
the parameters of the market model is 255 trading days, spanning from day -280 through day -26. Therefore, the
estimation period excludes the two-day event windows, (-1,0). The estimated parameters from the market model are
used to calculate the abnormal returns during the two-day event windows.
In addition, we address two potential biases in statistical tests of abnormal returns: (1) event-induced variance and

heteroskedasticity in the firm return residuals; and (2) event date and industry clustering, which may produce de-
pendence (correlation) between the return residuals of different firms when conditioned on the same event. We
control for the existence of event-induced variance and heteroskedasticity with the approach suggested by
Boehmer, Musumeci, and Poulsen (1991). We address event date and industry clustering by using a control group of
SLAs not directly affected by the various court decisions.(FN10) Finally, we conduct nonparametric sign tests.
Following Lummer and McConnell (1989), the sign tests for sample returns are conditioned on the events.
IV. EMPIRICAL RESULTS

SLAS AND THE U.S. SUPREME COURT DECISION
Table 2 summarizes the empircal results for each of the important events in the evolution of the controversy over
supervisory goodwill. Events 1 through 7 explore the market reaction from the initial filing of a suit by Glendale
Federal on July 27, 1990 (event 7) through the July 1, 1996, decision by the U.S. Supreme Court in favor of the
SLAs (event 1).
Focusing initially on market reactions to judicial decisions, we note a large and statistically significant 5.69 percent
two-day mean abnormal return (2.55 percent median) for the SLA plaintiffs in response to the U.S. Supreme Court
decision. However, we observe no statistically significant abnormal return for the control group. The abnormal re-
turns for the supervisory goodwill SLAs are statistically significant at the 1 percent level, with 83 percent of the
sample experiencing positive abnormal returns (also significant at the 1 percent level). We also observe large
positive abnormal returns for the August 30, 1995 (event 4) reversal by the U.S. Appeals court of a lower court
decision against the plaintiff SLAs. The supervisory goodwill SLAs experienced a 9.08 percent mean (8.51 percent
median) abnormal two-day return in response to the appeals court decision, while the nonsupervisory goodwill
SLAs experienced a statistically significant, though much smaller (2.12 percent mean), positive abnormal return.
However, much of the positive abnormal return experienced by the supervisory goodwill SLAs was reversed in
response to the January 19, 1996 (event 3) announcement that the U.S. Supreme Court had agreed to hear the case.
The supervisory goodwill SLAs experienced a negative (5.07 percent mean) two-day abnormal return, as contrasted
with no market response for the nonsupervisory goodwill SLAs. Market participants on January 19, 1996, were
apparently weighing the possibility that the Supreme Court would rule in favor of the government, a possibility that
proved groundless on July 1, 1996.
We seek further insight into the magnitudes of the abnormal returns for each of the supervisory goodwill SLAs in
our sample by examining the 10-K's the organizations filed with the Securities and Exchange Commission. How-
ever, the search did not provide information useful for statistical analysis. Many of the SLAs involved in the court
case did not provide any information about the case in the footnotes to their 10-K's. Moreover, much of the informa-
tion provided was incomplete. For example, Glendale Federal reported in its 1995 10-K (Item 3. Legal Proceedings)
that it filed a claim on January 18, 1993, for $1.38 billion in damages. It did not, however, indicate the original
amount of the supervisory goodwill.
We also estimate the total dollar wealth change for the supervisory goodwill SLAs to compare the market's
perception of the ultimate wealth transfer from the U.S. government to the supervisory goodwill SLAs with the
$10 billion to $20 billion estimate reported in the financial press. We make such estimates by taking the abnormal
returns for each supervisory goodwill SLA and multiplying that number by the market value of equity for each
SLA as of May 31, 1996. The base date is chosen to minimize the possible stock price run-up in anticipation of a
favorable Supreme Court decision. Dollar wealth changes are estimated for three event periods: (-1,0), (0,+1), and (
0,+2). In each case, the estimated dollar wealth changes were substantially less than those reported in the press.
The aggregate dollar wealth changes estimated through multiplying the abnormal returns by the base equity capitali-
zation range from $533 million for the (-1,0) event period (the same period reported in Tables 2 and 3) to $420
million for the (0,+1) event period and to $482 million for the (0,+2) event period. There are several possible
explanations for these much lower amounts than those reported in the financial press.(FN11) One possible
explanation, of course, is that some, perhaps a large amount, of the anticipated benefits to the SLAs was captured
before these event

periods. To the extent that the price movements were associated with the event dates in Table 2, it appears there was
some market adjustment before the Supreme Court decision. However, none of the abnormal returns reported in
Table 2 suggest dollar wealth changes that even approach those reported in the press. Even if the dollar wealth
changes associated with the Supreme Court decision are tripled or quadrupled, they would not approach the $10
billion to $20 billion estimated by the press.
The small amount of the dollar wealth gains may also reflect factors associated with the judicial process. While the
Supreme Court ruled the U.S. government was liable for breach of contract, it left it up to the lower courts on a case-
by-case basis to determine the dollar amount of the monetary damages. Thus, there remained considerable uncer-
tainty as to the magnitude and the timing of any damage awards received by the SLAs. In addition, the SLAs would
have to incur litigation costs to press their cases to fruition, costs that would reduce the net benefits from the
favorable Supreme Court decision.
The control group of nonsupervisory goodwill SLAs, as expected, experienced no reaction to the July 1, 1996, Su-
preme Court decision. This group experienced a statistically insignificant 0.29 percent two-day mean abnormal
return (-0.35 percent median), with only 43 percent of the sample having positive abnormal returns. No statistically
significant abnormal returns were observed for this group for the other event dates, except for event 4 on August 30,
1995. On that date, the nonsupervisory goodwill SLAs experienced a statistically significant mean abnormal
return of 2.12 percent (1.27 percent median), with 71 percent of the SLAs having positive abnormal returns.
Although a review of the financial press did not reveal any events around that date that might have affected the
entire industry, this 2.12 percent positive excess return suggests the 9.08 percent positive excess return for that date
for the supervisory goodwill SLAs may be overstated.
SLAS AND FIRREA

We explore the adverse effects of FIRREA on the supervisory goodwill SLAs by examining the wealth effects of
events during the debate over FIRREA that relate to capital standards. We document the market response to three
FIRREA-related events: the April 6, 1989, indication by the Treasury Secretary that he would recommend a veto if
Congress loosened the tough capital standard; the April 28, 1989, vote by the House banking committee to toughen
capital standards; and the May 25, 1989, rejection by the House judicial panel of attempts to ease the proposed
capital standards. Sundaram, Rangan, and Davidson (1992) show that the FIRREA produced positive wealth
effects for the stocks of both SLAs and commercial banks. Cornett and Tehranian (1994) find that security issues
by commercial banks that were made in response to the FIRREA's regulatory capital requirements had a positive
wealth effect on the stocks of the issuing banks.
We explore the effects of each of the FIRREA events using three samples. The first sample consists of SLAs that
were plaintiffs in the U.S. Supreme Court case, that were publicly traded at the time of FIRREA, and that failed after
FIRREA. We refer to this group as failed supervisory goodwill SLAs. This set is not included in Table 1 since these
SLAs were not publicly traded at the time of the Supreme Court decision. This sample consists of City Federal Sav-
ings, Far West Financial, North Carolina Federal, Perpetual Financial, and Philadelphia Savings. The second sample
consists of SLAs that also were plaintiffs in the U.S. Supreme Court case but did not fail. We refer to this group as
surviving supervisory goodwill SLAs. They include Ahmanson, Ambase, California Fed, Charter One, Coast Sav-
ings, Dime Bancorp, First Union, Glendale Federal, Standard Federal, and Sterling Financial. The third group con-
sists of publicly traded SLAs that were not involved in the supervisory goodwill controversy. These include
Collective Bancorp, Commercial Federal, First Federal, First Hawaiian, Golden West, Peoples Bank of
Bridgeport, St. Paul Bancorp, TCF Corp., Washington Federal, and Washington Mutual.
These events are of particular interest since they provide evidence on whether (and to what degree) the capital re-
quirements associated with FIRREA did in fact harm the supervisory goodwill SLAs. The evidence reported in
Table 3 provides little support for a negative market response to the two events relevant to the capital
requirements change. Indication by the Treasury Secretary on April 6, 1989, that he would recommend a
presidential veto if Congress weakened the tough capital standards in the proposed legislation produced no
statistically significant market

reaction (event 3) for the failed supervisory goodwill SLAs, it did produce a positive response for the surviving su-
pervisory goodwill SLAs. This event provides no evidence of a negative market response to FIRREA for the super-
visory goodwill SLAs. The vote by the House banking committee on April 28, 1989 (event 2) to toughen capital
standards also did not produce any negative response for either of the supervisory goodwill SLAs sample. This
event did, however, produce positive abnormal returns for the control SLAs, a result consistent with the prior
research evidence. Rejection on May 25, 1989 (event 1) by the House judicial panel of an attempt to ease capital
standards produced no market response for the supervisory goodwill SLAs or for the control SLAs, but it did
produce a positive market response for the failed supervisory goodwill SLAs.
We also explore the market reaction to other FIRREA events that did not specifically relate to the change in capital
requirements. These additional event date cumulative abnormal returns (CARs) produced no evidence of a negative
market response for the supervisory goodwill SLAs. In fact, the CARs were generally statistically insignificant
and in some cases were positive. These market responses are consistent with the evidence provided by Sundaram,
Rangan, and Davidson (1992), who not only find positive market responses, but find responses that were more
positive for low-capital SLAs.
The lack of a negative response to FIRREA for any of the supervisory goodwill SLAs has important implications for
understanding the weath effects of the 1996 Supreme Court decision. In short, we cannot document any statistically
significant negative effect on the supervisory goodwill SLAs due to the provisions of FIRREA. This finding may
stem from the overall positive effects of FIRREA on the industry that may dwarf the potentially negative effects of
the supervisory goodwill component of the legislation. Indeed, to the extent that supervisory goodwill was a paper
transaction without significant cash-flow consequence, its removal may have limited implications for shareholder
wealth. This may be particularly true since FIRREA did not eliminate the market expansion benefits to the acquirer
that came with these mergers. In any case, these findings make it difficult to argue that FIRREA produced monetary
harm to these institutions.
V. SUMMARY AND CONCLUSIONS

We document a strong positive response to the U.S. Supreme Court ruling that the federal government could not
void its contracts without paying damages to the companies involved. Our estimates of the dollar amount of the
monetary gains to the plaintiff SLAs, however, are much less than the $10 billion to $20 billion reported at the
time in the financial press. Large, positive returns are also observed in response to an earlier U.S. appeals court
decision favoring the plaintiffs. We observe a negative market response to the decision by the Supreme Court to
review the appeals court decision, a response apparently based upon the uncertainty created and the possibility
that the high court would rule in favor of the government.
In contrast to this substantial positive market reaction to the U.S. Supreme Court's decision, we fail to find any nega-
tive effect on the supervisory goodwill SLAs of the events leading to passage of FIRREA. It may be that the marked
did not perceive any harm inflicted on the supervisory goodwill SLAs caused by the passing of FIRREA. Our find-
ings also may reflect the nature of our sample or the combined influences of FIRREA on the entire industry as
well as the specific SLAs.
Added material
Leonard Bierman, Donald R. Fraser, and Asghar Zardkoohi Texas A&M Univer-
sity
We appreciate the insightful comments of the reviewer, which contributed to significant improvements in the
paper. We also appreciate the helpful comments of Darius Miller. Naturally, all remaining errors are the
responsibility of the authors. Asghar Zardkoohi would like to thank the Private Enterprise Research Center at Texas
A&M University for providing financial support for this proj ect.

TABLE 1. Savings and Loans Included in the Sample.
Panel A. Supervisory Goodwill Savings and Loans

Ambase
Ahmanson (H.F.)
Astoria Financial
California Federal
Charter One Financial
Coast Savings
Dime Bancorp.
First Union
Glendale Federal
Long Island Savings Bank
Standard Federal
Sterling Financial
Panel B. Nonsupervisory Goodwill Savings and Loans
Collective Bancorporation
Commercial Federal
First Financial Corporation
First Hawaiian Inc.
Golden West Financial
Leader Financial Corporation
People's Bank Bridgeport
Roosevelt Financial Group
Security Capital Corporation
St. Paul Bancorp Inc.
TCF Corp.
Washington Federal
Washington Mutual
TABLE 2. Court Case Analysis.
Notes: This table gives mean and median abnormal returns and percent positive for the savings and loans (SLAs)
directly involved in the July 1, 1996, U.S. Supreme Court decision (referred to as the supervisory goodwill SLAs)
and for a control group of SLAs not involved in the decision (referred to as the nonsupervisory goodwill SLAs). The
returns are given for a (0,-1) event period. The event dates reflect the events relevant to the evolution of the U.S.
Supreme Court case.
FOOTNOTE
*** Significant at the 1 percent level.
TABLE 3. FIRREA Analysis.
Notes: This table gives the mean and median abnormal returns and percent positive for three groups of savings and
loans (SLAs) for event dates associated with the 1989 passage of the Financial Institutions Reform, Recovery, and
Enforcement Act (FIRREA). The groups include the SLAs that were plaintiffs in the U.S. Supreme Court
decision but that failed after FIRREA, the SLAs that were plaintiffs in the U.S. Supreme Court decision and that
survived after FIRREA, and a control group of SLAs that were not involved in the U.S. Supreme Court case.

FOOTNOTE
* Significant at the 10 percent level.
FOOTNOTES
1 The U.S. General Accounting Office reported that 300 SLAs (of 2,285) held supervisory goodwill as of March
1991. These institutions, which composed 50.1 percent of the industry's assets, reported $4.7 billion in supervisory
goodwill (General Accounting Office, October 15, 1991).
2 In an analysis of supervisory goodwill provided to the House Banking, Finance, and Urban Affairs Committee, the
General Accounting Office offered the following definition of supervisory goodwill:
The Office of Thrift Supervision (OTS) defines supervisory goodwill as goodwill resulting from the acquisition,
merger, consolidation, purchase of assets, or other business combination that occurred on or before April 12,
1989 of: 1) A thirft where the fair market value of assets was less than the fair market value of liabilities at the
acquisition date; or 2) A problem institution (OTS Regulation 567.1 (ee)). The supervisory goodwill that OTS
allows a thrift to count toward its capital adequacy is called qualifying supervisory goodwill. Qualifying
supervisory goodwill is of interest to regulators because it is a component of an institution's core capital. It
should be noted that the total amount of supervisory goodwill in the industry exceeds the amount of qualifying
supervisory goodwill. However, we cannot determine what this excess amount is because supervisory goodwill is
not reported in the industry's quarterly financial report separately from other intangible assets. (U.S. General
Accounting Office, May 26, 1992)
3 A 1996 report by the U.S. General Accounting Office placed the cost of the SLA debacle at $480.9 billion. This
does not include the potential $10 billion to $20 billion cost as the result of the Supreme Court decision on supervi-
sory goodwill (Dow Jones News, July 12, 1996).
4 Over 30 percent of SLAs that closed in 1991 held supervisory goodwill (GAO, May 21, 1992).
5 Winstar Corp. v. U.S., 25 Cl. Ct. 541 (1992); Statesman Sav. Holding Corp. v. U.S., 26 Cl. Ct. 904 (1992).
6 Winstar Corp. v. U.S., 994 F.2d 797 (Fed. Cir. 1993).
7 Winstar Corp. v. U.S., 64 F.3d 1531 (Fed. Cir. 1995) (en banc).
8 U.S. v. Winstar Corp., 116 U.S. 2432 (1996).
9 A third sample was also developed that consisted of firms who were federal contractors and/or members of trade
associations that entered the case as "friends of the court." These firms were composed primarily of defense and
other large federal contractors. Preliminary empirical analysis revealed no evidence of a market response for these
firms. While these results are not reported in the paper, they are available upon request.
10 We also performed tests using Brown and Warner's (1985) portfolio time series standard errors methodology and
Zellner's (1962) seemingly unrelated regression model. These results are not materially different from those
reported in the paper and are available upon request.
11 Potential benefits from the claims settlements would, of course, be shared with all claimants and would not ac-
crue solely to shareholders.
REFERENCES
Boehmer, E., J. Musumeci, and A. Poulsen, 1991, Event study methodology under conditions of event-induced vari-

ance, Journal of Financial Economics 30, 253-72.
Brown, S. and J. Warner, 1985, Using daily stock returns: The case of event studies, Journal of Financial Economics
14, 3-31.
Cornett, M. and H. Tehranian, 1994, An examination of voluntary versus involuntary security issuances by commer-
cial banks, Journal of Financial Economics 35, 99-122.
Fama, E., L. Fisher, M. Jensen, and R. Roll, 1969, The adjustment of stock prices to new information, International
Economic Review 10, 1-21.
Lummer, S. and J. McConnell, 1989, Further evidence on the bank lending process and the capital-market
response to bank loan agreements, Journal of Financial Economics 25, 99-122.
Spong, K., 1994, Banking Regulation: Its Purposes, Implementation, and Effects, 4th ed. (Federal Reserve Bank,
Kansas City).
Sundaram, S., N. Rangan, and W. Davidson III, 1992, The market valuation effects of the Financial Institutions Re-
form, Recovery, and Enforcement Act of 1989, Journal of Banking and Finance 16, 1097-1122.
Zellner, A., 1962, An efficient method of estimating seemingly unrelated regressions and tests for aggregation bias,
Journal of the American Statistical Association 298, 348-368.
---- INDEX REFERENCES ---
COMPANY: MERITOR SAVINGS BANK ; WASHINGTON MUTUAL INC; COMMERCIAL FEDERAL CORP;
~ ~ ~ H
DIME BANCORP INC; WINSTAR COMMUNICATIONS INC; FEDERAL DEPOSIT INSURANCE CORP;
~ ~ ~ ~
GLENDALE FEDERAL BANK FEDERAL SAVINGS BK

~ ~
NEWS SUBJECT: (Corporate Financial Data (1XO59); Legal (1LE33); Business Lawsuits & Settlements (1BU19);
Judicial (1JU36); Liability (1LI55); Financially Distressed Companies (1FI85); Banking Risk (1BA09);
Economics & Trade (1EC26); Economic Indicators (1EC19))
INDUSTRY: (Insurance Regulatory (1IN40); Mortgage Banking (1MO85); Retail Banking Services (1RE38);
Banking (1BA20); Aerospace & Defense (1AE96); Bank Operations (1BA31); Financial Services (1FI37); Defense (
1DE43); Financial Services Regulatory (1FI03); Insurance Liability (1IN26); Insurance Industry Legal Issues (
1IN64); Military Forces (1MI37); Financial Services Convergence (1FI45); Aerospace & Defense Regulatory (
1AE25); Insurance Losses (1IN47); Insurance (1IN97); Consumer Finance (1CO55))
REGION: (North America (1NO39); Texas (1TE14); Hawaii (1HA58); California (1CA98); Americas (1AM92);
USA (1US73); Florida (1FL79))
Language: EN
OTHER INDEXING: (ACCOUNTING OFFICE; AMERICAN BANKER; AMERICAN STATISTICAL ASSO-

CIATION; ASTORIA FINANCIAL CALIFORNIA FEDERAL CHARTER; BANK BRIDGEPORT ROOSEVELT
FINANCIAL; BANKING; BANKING REGULATION; COAST SAVINGS; COLLECTIVE BANCORP; COM-
MERCIAL FEDERAL; CONGRESS; CORP; CORP WASHINGTON; COURT; COURT OF CLAIMS; DARIUS
MILLER; DAVIDSON III; DIME BANCORP; EMPIRICAL; EVENT; FDIC; FEDERAL APPEALS COURT;

FEDERAL CIRCUIT; FEDERAL CIRCUIT WHICH; FEDERAL DEPOSIT INSURANCE CORP; FEDERAL
HOME LOAN BANK BOARD; FEDERAL RESERVE BANK; FEDERAL SAVINGS; FEDERAL SAVINGS
AND LOAN INSURANCE CORP; FINANCE; FINANCIAL COAST SAVINGS DIME BANCORP; FINANCIAL
INSTITUTIONS REFORM; FIRREA; FOOTNOTE* SIGNIFICANT; FOOTNOTE*** SIGNIFICANT; GAAP;
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES; GLENDALE; GLENDALE FEDERAL; GLENDALE
FEDERAL BANK; GOLDEN WEST FINANCIAL LEADER FINANCIAL CORP; GROUP SECURITY CAPI-
TAL CORP; HAWAIIAN INC; HOLDING CORP; HOUSE; HOUSE BANKING FINANCE; HOUSE JUDICIAL;
II; III; IV; LOANS COLLECTIVE BANCORPORATION COMMERCIAL FEDERAL; LUMMER; MCCON-
NELL; MERITOR SAVINGS BANK; METHODOLOGYSAMPLEWE; NONSUPERVISORY GOODWILL
SAVINGS; OFFICE OF THRIFT SUPERVISION; OTS; PANEL A SUPERVISORY GOODWILL SAVINGS;
PAUL BANCORP; PAUL BANCORP INC; PEOPLES BANK OF BRIDGEPORT; PRIVATE ENTERPRISE RE-
SEARCH CENTER; SAMPLE; SAVINGS BANK STANDARD FEDERAL STERLING FINANCIALPANEL;
SECURITIES AND EXCHANGE COMMISSION; SLA; SLAS; STANDARD FEDERAL; SUPREME COURT;
TABLE; US APPEALS; US COURT OF APPEALS; US COURT OF CLAIMS; US SUPREME COURT; UNION;
UNION GLENDALE FEDERAL LONG ISLAND; URBAN AFFAIRS COMMITTEE; WASHINGTON FED-
ERAL WASHINGTON MUTUAL; WASHINGTON MUTUAL; WINSTAR CORP; WSJ) (Added; and A.
Poulsen; and H. Tehranian; and J. McConnell; and J. Warner; and R. Roll; Asghar Zardkoohi; Asghar Zardkoohi
Texas; Brown; Charter; Cornett; David Souter; Donald R. Fraser; Expansionary; Fama; Fisher, M. Jensen; Focusing;
Journal; LEGAL BACKGROUNDAfter; LEGAL BACKGROUNDECONOMIC; Leonard Bierman; METHOD-
OLOGYWe; Rangan; REFERENCESBoehmer, E., J. Musumeci; Souter; Spong; Sundaram, S., N. Rangan; Tehra-
nian; Texas; V. SUMMARY; Winstar; Zellner) (Goodwill in business (Accounting); Savings and loan associations (
Accounting); Accounting (Laws and regulations)) (Feature Article)
COMPANY TERMS: UNITED STATES SUPREME COURT (Decisions)
SIC: 6030; 8721; 9211
Word Count: 6600

3/1/99 JFINRESAB 69
END OF DOCUMENT

4/2/02 N.Y. Times C12
2002 WLNR 4031203
New York Times (NY)

Copyright (c) 2002 The New York Times. All rights reserved.
April 2, 2002
Section: C
THE MARKETS: Market Place; The savings and loan debacle may be long gone, but the market consequences re-
fuse to die.
Patrick McGeehan
Shares of long-gone savings banks have sprung to life as investors speculate that federal government will have
to pay dearly for mishandling savings and loan crisis of 1980's; investors have bid up stocks of savings banks that were
acquired years ago; shares of one, formerly known as Benjamin Franklin Savings and Loan Association of Portland,
Ore, jumped more than 40 percent in last week to close at $12.10; shares of savings and loan based in
Philadelphia and known as Meritor Savings Bank sat at about $1.60 all year, until they jumped as high as $2.52
last week on hopes favorable ruling was imminent; US Court of Federal Claims disappoints Franklin shareholders
when it releases long-awaited decision and denies their claims of lost profit and restitution (M)
IN a stock-market remake of "Night of the Living Dead," shares of long-gone savings banks have sprung to life as
investors speculate that the federal government will have to pay dearly for mishandling the savings and loan crisis of
the 1980's.
Thrilled by a recent federal court award of $132 million to the owner of one savings and loan and perched on the
edges of their seats waiting for more, investors have bid up stocks of savings banks that were acquired years ago.
Shares of one, formerly known as the Benj. Franklin Savings and Loan Association of Portland, Ore., jumped more
than 40 percent in the last week to close yesterday at $12.10 in electronic trading.
Shares of a savings and loan based in Philadelphia and known as Meritor Savings Bank had sat at about $1.60 all
year, until they jumped as high as $2.52 last week on hopes a favorable ruling was imminent. Yesterday, they
closed at $2.35 a share in electronic trading.
But the moral of this story may be that investors should not play with dead things. The United States Court of
Federal Claims disappointed Franklin shareholders late yesterday when it released a long-awaited decision and
denied their claims of lost profit and restitution.
The judge, Loren A. Smith, said that the shareholders were entitled to recover the lost value of the Franklin fran-
chise. That amount, the judge said, was $30 million to $47 million -- a fraction of the $944 million the plaintiffs
sought.
When the government seized the Franklin S.& L. in 1990, it had about 7.7 million shares outstanding. A $47 million
C:\DOCUMENTS AND SETTINGS\MILLSMAR\LOCAL SETTINGS\TEMPORARY INTERNET FILES\CONTENT.OUTLOOK\86LE0W65\MCGEEHAN - EX 2.

RTF
4/2/02 NYT C12 Page 2
award, if it were received today, would amount to only about $6 a share, well short of the prices of recent trades.
But out of any award would come litigation costs of $3.5 million, legal fees and, possibly a large tax payment to the
Internal Revenue Service.
"It's hard to know what shareholders will get," said Don S. Willner, a Portland lawyer for the Franklin plaintiffs. "It's
possible they will get nothing. It's very disappointing to us."
Mr. Willner said he would recommend to his clients that they appeal the decision, but he estimated that would drag
the 12-year-old matter out for another 18 months.
If the plaintiffs do not appeal, the government might. It has appealed other decisions in a large group of lawsuits
over what was known as "supervisory good will." The cases, about 120 in all, stem from the handling by federal
bank regulators of the savings and loan crisis.
When soaring interest rates pushed the industry to the brink of bankruptcy in the early 1980's, regulators encouraged
healthier institutions to buy failing ones. To make the purchases palatable, the regulators allowed the buyers to book
some of the purchase price as "supervisory good will," a balance sheet asset that could be paid down gradually.
But in 1989, Congress passed a law, the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
known as Firrea, that wiped away the supervisory good will and left some savings and loans like Franklin
insolvent. The government sold the assets of Franklin to Bank of America, leaving shareholders with apparently
worthless stock certificates.
Managers and owners of many institutions, whether seized or surviving, sued over what they decried as an unfair
rewriting of the rules. Through most of the 1990's, those suits produced little more than legal briefs and bills as gov-
ernment lawyers argued that no damage had been done to the savings and loans.
But lately, the tide appeared to be turning as judges started to favor the institutions' arguments. The big shift came in
April 1999, when Judge Smith ruled that Glendale Federal Bank, which was a large California savings and loan was
entitled to $909 million in restitution and damages from the federal government.
On March 22, another judge in the Court of Federal Claims, Bohdan A. Futey, decided that James Fail, the owner of
Bluebonnet Savings Bank, a Dallas-based savings and loan, was entitled to $132 million. That ruling ignited
buying last week of shares of nonexistent institutions, including Franklin and Meritor.
Whether and how the buyers of those shares, which are not listed and trade only electronically through a few
dealers, would ever recover any value is not clear to analysts who follow S.& L. stocks.
"Those are kind of ghost securities," said Charlotte A. Chamberlain, an analyst at Jefferies & Company in Los An-
geles. "That's a very, very tenuous piece of equity to hold."
Some big savings and loans, including Glendale and a New York institution, the Dime Savings Bank, sold warrants
that hold a claim on any awards they might receive from litigation over supervisory good will. Ms. Chamberlain
once recommended buying some of them, but she no longer does. She said yesterday's decision was not good news
for the litigation-tracking warrants.
"Ultimately though, I just think that the preponderance of sentiment is in favor of the government, and the likelihood
of any of these thrifts ever getting anything is de minimis," said Ms. Chamberlain, a former savings and loan
execu-

4/2/02 NYT C12 Page 3
tive and former regulator. "For better odds, try Lotto."
In any of these cases, a victory can seem Pyrrhic. Judge Smith said the Franklin shareholders should recover the
market value of its stock the day before the Firrea legislation was enacted. By then, the stocks of many
institutions had already sunk.
Even Mr. Willner, the lawyer for Franklin shareholders, wondered why people had been buying the shares in recent
years.
"Normally speaking, people determine the value of a stock by the company's earnings and prospects," he said. "Here
we had no earnings and no prospects, except for this lawsuit. All the people who were buying and selling the stock
were trying to guess what the judge would do, which is an unusual way to determine value."
COMPANY: MERITOR SAVINGS BANK; MELLON BANK N A; DIMESAVINGS BANK NEW

YORKFEDERAL SAVINGS BANK RIGHTS; GLENFED; GLENDALE FEDERAL BANK FEDERAL SAV-
INGS BK
NEWS SUBJECT: (Legal (1LE33); Business Management (1BU42); Government Litigation (1GO18); Sales &
Marketing (1 MA51); Market Data (1 MA 11); Economics & Trade (1 EC26))
INDUSTRY: (U.S. Thrift Industry (1US02); Investment Management (1IN34); Securities Investment (1SE57); Sav-
ings (1SA62); Banking (1BA20); Financial Services (1FI37); Financial Services Regulatory (1FI03); Stocks
(1 EQ09))
REGION: (Pennsylvania (1PE71); Americas (1AM92); North America (1NO39); USA (1US73); Oregon (1OR01))
Language: EN
OTHER INDEXING: (Mcgeehan, Patrick) (BENJ; BENJAMIN FRANKLIN SAVINGS; BLUEBONNET SAV-
INGS BANK; CONGRESS; COURT OF FEDERAL CLAIMS; DIME SAVINGS BANK; FEDERAL CLAIMS;
FRANKLIN; FRANKLIN SAVINGS; GLENDALE; GLENDALE FEDERAL BANK; INTERNAL REVENUE;
JEFFERIES CO; LOAN ASSOCIATION; MERITOR; MERITOR SAVINGS BANK) (Bohdan A. Futey; Chamber-
lain; Charlotte A. Chamberlain; James Fail; Loren A. Smith; S. Willner; Smith; Ultimately; Willner) (Banks and
Banking; Suits and Litigation; Decisions and Verdicts; Market Place (Times Column); Prices (Fares, Fees and
Rates); Savings and Loan Associations; Stocks and Bonds; Banks and Banking)
COMPANY TERMS: MERITOR SAVINGS BANK; BENJAMIN FRANKLIN SAVINGS AND LOAN ASSN
EDITION: Late Edition - Final
Word Count: 1158

4/2/02 NYT C 12
END OF DOCUMENT

10/29/97 Daily News (Los Angeles, CA) B1
1997 WLNR 1581419
Daily News (Los Angeles, CA)

Copyright (c) 1997, Daily News of Los Angeles
October 29, 1997
Section: BUSINESS
GLENFED PARENT ANNOUNCES EARNINGS UP, TRADING PLAN
Deborah Adamson Daily News Staff Writer
The parent company of Glendale Federal Bank reported a sharp rise in quarterly earnings Tuesday and a plan for the
distribution of separately traded warrants, making it easier for investors to ascertain the market value of the thrift.
Golden State Bancorp reported a net income of $28.5 million, or 40 cents a share, for the first fiscal quarter of
1998 compared with a net loss of $20 million (50 cents) for the like period a year ago.
GSB's results include several one-time charges such as litigation fees. Without them, Golden State's operating
income was $31.2 million (44 cents), a 121 percent increase from a year ago.
That beat the average estimate of six analysts surveyed by IBES International Inc. of 37 cents a share.The com-
pany's stock price closed at 33-5/8 on Tuesday, up 1-7/8.
O
̏ ver the past several years, Glendale Federal Bank has made significant progress," said Stephen J. Trafton,
chairman and CEO of Golden State Bancorp.
For example, he said the thrift's interest rate spread - the difference between what it pays to depositors and
charges on loans - is now the second highest among the largest thrifts in the West. In 1995, it was the second worst.
The company also announced Tuesday that it would distribute ̏ litigation tracking warrants," which give
shareholders the right to receive Golden State common stock equal in value to 85 percent of any net-after-tax pro-
ceeds from the thrift's pending goodwill lawsuit against the government.
The warrants will be separately traded. The goodwill litigation is worth about $4 to $7 a share, Trafton said in a
conference call with reporters.
He said separating the trading of the warrants from the thrift's stock makes it easier to value the company.
Analysts said that also could help any potential buyer of the Glendale thrift; Trafton said it would help whether
Glendale Federal is a buyer or seller, declining to say whether Glendale Federal Bank is either.
Caren Mayer, an analyst at NationsBanc Montgomery Securities in San Francisco, said the warrants make it
easier for the thrift to be taken over since it separates the company's legal claims against the government from the
company's core business.
Ȉ t certainly removes a major stumbling block" in the event of an acquisition, said Charlotte Chamberlain, vice
president in equity research at Jefferies & Co. in Los Angeles. N̏ ow we can value it on its earnings and franchise."
10/29/97 DAILYNEWCA B1 Page 2
Chamberlain said current shareholders are benefiting from Trafton's leadership, since he's good at maximizing
shareholder value. First-quarter earnings show the firm hit a h
̏ ome run," she said
First quarter 1998, which ended Sept. 30, shows an increase in net interest income of 19 percent to $106.2 million
while the provision for loan losses - funds set aside for bad loans - dropped 58 percent to $3.1 million.
Nonperforming assets dropped 25 percent to $190 million Sept. 30 from a year ago.
Checking-account deposits rose 52 percent.
The distribution of warrants stems from a $1.5 billion lawsuit filed by Glendale Federal Bank against the U.S.
government for changing accounting rules affecting a paper asset called supervisory goodwill.
In 1981, Glendale Federal agreed to take over a failed Florida thrift. It was allowed to offset bad loans with an
equal amount of supervisory goodwill, then write them off over the next 40 years. But in 1989, Congress ruled that
the write-offs had to be taken in the next five years.
In 1989, Glendale Federal had $565 million in supervisory goodwill. It said it was forced to decrease its assets by
more than $10 billion to comply with capital requirements. After laying off 2,500 people in 1991, the thrift sold non-
essential businesses, dropped problem assets and raised $451 million from private investors to stay in business.
The thrift is suing to get the $565 million, plus an additional $1 billion it claims it could have earned in lost assets.
COMPANY: GOLDEN STATE BANCORP INC; GLENDALE FEDERAL BANK FEDERAL SAVINGS BK
NEWS SUBJECT: (Corporate Financial Data (1XO59))
INDUSTRY: (Banking (1BA20); U.S. Thrift Industry (1US02); Financial Services (1FI37))
REGION: (USA (1US73); Americas (1AM92); North America (1NO39))
Language: EN
OTIIER INDEXING: (CONGRESS; FEDERAL BANK; GLENDALE; GLENDALE FEDERAL; GLENDALE

FEDERAL BANK; GOLDEN STATE; GOLDEN STATE BANCORP; GSB; IBES INTERNATIONAL INC; JEF-
FERIES CO; NATIONSBANC MONTGOMERY SECURITIES) (Caren Mayer; Chamberlain; Charlotte Chamber-
lain; Checking; GLENFED PARENT ANNOUNCES EARNINGS; Stephen J. Trafton; Trafton) (GLENFED;
GLENDALE FEDERAL BANK; FIRST QUARTER 1ST; EARNINGS; FINANCE; STATISTIC; SAVINGS AND
LOAN INDUSTRY; GOLDEN STATE BANCORP< )
EDITION: Valley
Word Count: 788

10/29/97 DAILYNEWCA B1
END OF DOCUMENT

EXHIBIT E
Morningstar 9 Document Research
FORM 8-K
WASHINGTON MUTUAL, INC - WAMUQ
Filed: March 12, 2003 (period: March 12, 2003)
Report of unscheduled material events or corporate changes.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Ear(iest Event Reported) March 12, 2003
WASHINGTON MUTUAL, INC.

(Exact name of registrant as specified in its charter)
Washington 1-14667 91-1653725

(State or other jurisdiction (Commission Fi(e No.) (I.R.S. Emp(oyer
of incorporation) Identification No.)
1201 Third Avenue

Seatt(e, Washington 98101
(Address of principa( executive offices and zip code)
Registrant's te(ephone number, inc(uding area code: (206) 461-2000
We are filing this Current Report on Form 8-K to provide updates to (i) the status of our litigation against the government arising from contracts entered into by Anchor
Savings FSB and the government and (ii) the description of the Litigation Tracking Warrants tm that are exercisable for shares of our common stock in the event that we recover
damages from the government as a result of this litigation. The warrants were originally issued by Dime Bancorp, Inc., which had acquired Anchor Savings' holding
company, to its stockholders in December 2000. As a result of our acquisition ofDime Bancorp in January 2002, we assumed Dime's rights under the litigation and obligations
under thewarrants.
Item 5. Other Events
STATUS OF THE LITIGATION
Our litigation against the United States government involves complex factual and legal issues over which the parties disagree. The following summary is not a full
description of those issues and addresses only developments through the date of this report. The record ofproceedings before the Claims Court consists of hundreds ofpages of
procedural filings, which may be examined at the Office of the Clerk of the Court located at 717 Madison Place, N.W. in Washington, D. C. In addition, thousands ofpages of
depositions have been taken and thousands more documents have been made available through discovery by us, the government, and thirdparties.
In this section, references to 'we', 'us', 'our' and 'ours'also refer to Anchor Savings and Dime in addition to Washington Mutual, since they are our predecessors in this
litigation whose rights Washington Mutual has assumed.
Introduction
On January 13, 1995, Anchor Savings Bank FSB fi(ed a (awsuit in the United States Court of Federa( C(aims captioned Anchor Savings Bank FSB v. United States,
No. 95-39C, a((eging breach of contract and taking of property without compensation by the government in contravention of the Fifth Amendment to the United States
Constitution. The Dime Savings Bank of New York, FSB assumed Anchor Savings' (awsuit upon the consummation of the merger ofAnchor Savings and its ho(ding
company, Anchor Bancorp, Inc., with Dime Savings and Dime Bancorp, respective(y, on January 13, 1995.
In January 2002, Dime Savings and Dime Bancorp merged into Washington Mutua( Bank, FA and Washington Mutua(, Inc., respective(y. As a resu(t of these mergers, we
assumed Dime's rights under the (itigation against the government.
Our c(aims arose from Anchor Savings' acquisition between 1982 and 1985 of eight fai(ing savings and (oan institutions, the deposits of which were insured by the Federa(
Savings and Loan Insurance Corporation, a government agency that provided deposit insurance to savings and (oans ("FSLIC"). Anchor acquired four institutions with some direct
financia( assistance from the FSLIC (co((ective(y the "assisted mergers"), and acquired the other four institutions without direct financia( assistance (co((ective(y the "unassisted
mergers"). A(( of
1
Source: WASHINGTON MUTUAL, INC, 84, March 12, 2003 Powered by Morningstar®Document Researchs"'
the acquisitions were considered "supervisory" cases by the FSLIC, which means that they were arranged by the FSLIC. In acquiring the institutions, Anchor Savings assumed (
iabi(ities determined to exceed the assets it acquired by over $650 mi((ion in the aggregate at the dates of the respective acquisitions. The difference between the fair va(ues of
the assets acquired and the (iabi(ities assumed in the transactions were recorded on Anchor Savings' books as an intangib(e asset ca((ed goodwi((.
At the time of these acquisitions, the FSLIC had agreed that Anchor Savings cou(d inc(ude in its regu(atory capita( this goodwi((, amortizab(e over a number of years, as we(
( as certain FSLIC contributions and certain capita( instruments. Without those agreements, Anchor Savings wou(d not have made the acquisitions.
When the Financia( Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA") was enacted, Anchor sti(( had over $500 mi((ion of regu(atory capita( from
supervisory acquisitions on its books, inc(uding the supervisory goodwi(( and other capita( enhancements described above. A(so, Anchor Savings had more than 20 years to
amortize the remaining supervisory goodwi(( under its agreements with the FSLIC. FIRREA required the remaining supervisory goodwi(( to be e(iminated immediate(y for
purposes of ca(cu(ating tangib(e capita( and to be phased out through December 31, 1994 for other regu(atory capita( purposes. In addition, unti( the formation of Anchor
Bancorp as the ho(ding company for Anchor Savings in 1991, FIRREA-mandated capita( requirements impacted the $157 mi((ion associated with preferred stock that Anchor
Savings issued to the FSLIC as a resu(t of one of the acquisitions. The e(imination of the supervisory goodwi(( and other components of regu(atory capita( damaged Anchor
Savings by creating severe (imitations on its activities and requiring the sa(e of va(uab(e assets under (iquidation-(ike circumstances.
Proceedings in the C/aims Court
Our (awsuit is one of approximate(y 115 (awsuits brought in the C(aims Court with contractua( fact patterns simi(ar to that of a 1996 decision by the United States
Supreme Court, known as the Winstar case, in which the Supreme Court he(d that the government was (iab(e for breach of contract. Fo((owing the Supreme Court's decision, a(
( of the Winstar-re(ated cases, inc(uding our case, were assigned to Judge Smith of the C(aims Court. Judge Smith issued an omnibus case management order that has
contro((ed the
proceedings in all of these cases. On October 16, 2002, our case was re-assigned to Judge Block.
Under the omnibus order, we moved for partia( summary judgment as to the existence of contracts between Anchor Savings and the government with respect to the eight
supervisory acquisitions and the inconsistency of the government's actions with respect to those contracts. The government disputed the existence of these contracts and
cross-moved for summary judgment. The government a(so submitted a fi(ing acknow(edging that it is not aware of any affirmative defenses it has against us. Initia( briefing on
these motions was comp(eted onAugust 1, 1997.
2
Source: WASHINGTON MUTUAL, INC, 84, March 12, 2003 Powered by Morningstar®Document Researchs"
We conducted discovery between Apri( 1, 1998 and Ju(y 31, 1999. In September 1999, the government fi(ed supp(ementa( papers in supportof its pending summary
judgment motion, at which time the government again requested entryof summary judgment on (iabi(ity in its favor. We responded to these fi(ings in ear(y November 1999. On
October 29, 1999, we fi(ed our experts' reports re(ating to our damage c(aims with the government. On March 16, 2000, the government fi(ed the reports of its experts. On
December 21, 2001, we submitted supp(ements to some of our expert reports.
In a series of ru(ings issued between Apri( 30, 2002 and September 10, 2002, the C(aims Court found that a contract existed between Anchor Savings and the government
with respect to the assisted mergers, and that the government had breached those contracts by the imp(ementation of FIRREA. The C(aims Court a(so found, however, that no
contract had been formed with respect to the unassisted mergers, and dismissed our c(aims with respect to the unassisted mergers. In addition, the C(aims Court dismissed our c(
aims for taking of property without just compensation. At this time, we have decided not to appea( the C(aims Court's orders dismissing the c(aims re(ated to the unassisted
mergers and dismissing the takings c(aims. However, we maintain the right to appea( those orders after the C(aims Court enters a fina( judgment disposing of a(( the c(aims in the
case.
On September 25, 2002, the C(aims Court issued an order setting a schedu(e for supp(ementa( expert discovery. Pursuant to this order, on October 10, 2002, we submitted
supp(ementa( expert reports that revised Anchor Savings' damages c(aims in (ight of the C(aims Court's order dismissing the c(aims re(ated to the unassisted mergers. The
government fi(ed its own supp(ementa( expert reports on January 23, 2003. We comp(eted depositions of the government's experts on March 10, 2003. The parties wi(( next
propose to the C(aims Court a schedu(e for briefing the summary judgment motion regarding our damages c(aims that the government expects to fi(e. The court has not yet
schedu(ed a tria( date.
Damages Theories Set Forth in Our Expert Reports
Damage Theories We Intend to Continue to Pursue
We expect to present evidence on two a(ternative damage theories at tria( to determine the amount of our damages.
The first theory, known as "expectancy" damages, is intended to p(ace the injured party in as good a position as it wou(d have been in had the breaching party fu((y
performed the contract. Expectancy damages may inc(ude the amount of any monetary benefits that the injured party is ab(e to prove it (ost, but wou(d have received in the
absence of the breach, p(us any other (osses caused by the breach of the contract, (ess any costs or (osses avoided by the injured party as a direct resu(t of the breach.
The second theory, known as "re(iance" damages, is intended to restore the injured party to the position it wou(d have been in if the contract had not been made. Re(iance
damages are genera((y measured by the injured party's investment (ess the net benefit rea(ized from the cost of performance of the contract, p(us additiona( expenses incurred as
a resu(t of the breach.
3
Source: WASHINGTON MUTUAL, INC, &K, March 12, 2003 Powered by Morningstar®Document Researchs"'
We have the burden of proving the amount of our expectancy damages, or the cost of our performance as a basis for re(iance damages, by a preponderance of the evidence.
Damages are usua((y (imited to those that area foreseeab(e resu(t of the breach and require proof of the fact of damage with reasonab(e certainty. Since neither the contracts
between Anchor Savings and the government nor any statute provides for payment of prejudgment interest, prejudgment interest is not recoverab(e, either for the period from
the date of the breach through the date of entry of judgment by the C(aims Court or upon a judgment of the C(aims Court pending appea(. If the Federa( Circuit affirms a
judgment by the C(aims Court, we cou(d receive interest at a statutori(y specified rate on the judgment from the time of the Federa( Circuit decision through any subsequent
appea(s to the date of payment.
Damages Theories We No Longer Intend to Pursue
In the expert reports submitted in October 1999, we advanced an additiona(, a(ternate c(aim for $782 mi((ion, under a restitution theory of damages. "Restitution" is intended
to restore to the injured party any benefits conferred on the breaching party. The injured party's restitution interest is ordinari(y measured by the reasonab(e va(ue of the benefits
conferred by its performance of the contract on the breaching party, (ess any benefits received by the injured party through the breaching party's partia( performance up to the
date of the breach. Anchor Savings' restitution c(aim was based on a contention that the (iquidation costs avoided by the FSLIC as a resu(t ofAnchor Savings' acquisitions of fai(
ing federa((y insured thrifts were a benefit that Anchor Savings had conferred on the government. However, in its decision in G(enda(e Federa( Bank, FSB v. United States,
Docket Nos. 99-5103, 99-5113, the United States Court of Appea(s for the Federa( Circuit rejected the type of restitution c(aim that Anchor Savings intended to pursue. As a
consequence, we have determined to withdraw Anchor Savings' c(aim for damages under the restitution theory.
Our Damages Case
Expectancy Damages
Our principa( expectancy damages c(aim is for (ost profits by Anchor Savings. Fo((owing the adoption of FIRREA in 1989 and the resu(ting reductions ofAnchor Savings'
regu(atory capita( due to the e(imination of the contractua( supervisory goodwi((, FSLIC contribution, and preferred stock from its supervisory acquisitions, Anchor Savings was
transformed from an institution that substantia((y exceeded its regu(atory capita( requirements to one that was significant(y undercapita(ized. Because Anchor Savings was unab(
e to obtain any materia( infusion of externa( capita(, it had no choice but to restructure and divest itse(f of significant va(uab(e assets. Whi(e these strategies were required to
remedy the noncomp(iance with regu(atory capita( requirements caused by FIRREA and avoid c(osure of Anchor Savings, they
a(so had the effect of significant(y reducing Anchor Savings' (ong-term earnings. We c(aim that the government's breach forced the sa(e ofAnchor Savings' mortgage conduit
subsidiary, Residentia( Funding Corporation, and the curtai(ment ofAnchor Savings' remaining mortgage banking business, and forced the sa(e of (arge portions ofAnchor
Savings' branch franchise. We have c(aimed expectancy damages tota(ing approximate(y $969 mi((ion. The (ost profits c(aim is not affected by the C(aims Court's ru(ings against
Anchor Savings regarding the unassisted mergers.
In December 2001 we submitted a supp(ementa( expert report asserting an a(ternative expectancy c(aim for $220 mi((ion, based on the cash va(ue to Anchor Savings of the
supervisory goodwi(( it (ost as regu(atory capita( as a resu(t of the government's breach. This ana(ysis, which represents the amount of cash the government wou(d have had to
pay to enab(e Anchor Savings to return to its pre-breach regu(atory capita( position, and thereby restore its abi(ity to (everage that capita( and earn profits from it, is simi(ar to
the ana(ysis that was adopted by Judge Margo(is of the C(aims Courtin G(ass v. United States, Docket No. 92-428C. (The C(aims Court's decision in G(ass was overturned on
other grounds by the Federa( Circuit, which did not ru(e on the va(idity of the damages ca(cu(ation in that case one way or another.) As a resu(t of the C(aims Court's (iabi(ity ru(
ings in our case, we have adjusted this ca(cu(ation to e(iminate the supervisory goodwi(( created by the unassisted mergers, resu(ting in a revised c(aim under the G(ass mode( of
$200 mi((ion.
These expectancy c(aims are presented in the a(ternative, meaning that we may recover damages under one of the theories but not both of them. We have a(so c(aimed an
additiona( $11 mi((ion in "wounded bank" damages or costs, which, if awarded by the C(aims Court, wou(d be added to an award based on either of the theories described above.
Reliance Damages
As an a(ternative to the expectancy c(aims, we have submitted a c(aim for re(iance damages. We cou(d recover either expectancy or re(iance damages, but not both. The
initia( re(iance c(aim of $541 mi((ion that we submitted in October 1999 was simi(ar to the restitution c(aim, in that it asserted that Anchor's investment in the thrifts that it acquired
pursuant to contracts with the government cou(d be measured by the excess (iabi(ities Anchor assumed as a resu(t of the acquisitions. A simi(ar c(aim was rejected by the C(
aims Court in the G(enda(e remand proceedings, based on the ana(ysis of the Federa( Circuit in that case. According(y, in October 2002 we submitted a revised re(iance c(aim in
the amount of $329 mi((ion (inc(uding $11 mi((ion in "wounded bank" damages).
The Government's Damages Case
The government contends that we were not damaged by the government's breach because FIRREA did not cause Anchor Savings to shrink or otherwise se(( assets. The
government contends that the (ost profits we are c(aiming are specu(ative and therefore not a((owab(e.
5
The government a(so contends that FIRREA did not constrain Anchor Savings' abi(ity to (everage capita( or a(ternative(y that the abi(ity to (everage capita( had no va(ue.
The government has argued that the breach benefited Anchor Savings in prompting it to exit from high-risk (ending activities in which it was engaged prior to the breach. The
government further contends that the breach forced Anchor Savings to address core business prob(ems.
The government has a(so argued that the principa( assumptions under(ying our c(aim for past and future (ost profits, which are that Anchor Savings wou(d not have so(d
Residentia( Funding or portions of its branch franchise absent the government's breach, are inva(id because, among other things:
• retention of Residentia( Funding imp(ied a degree of interest rate risk that wou(d have been unacceptab(e to Anchor Savings' management, board of directors and
regu(ators,
• Anchor Savings wou(d not have been ab(e to provide Residentia( Funding with sufficient (ow interest funds to ensure the successfu( operation of Residentia( Funding's
business,
• Anchor Savings (acked a business and cu(tura( fit with Residentia( Funding, and
• the poor strategic fit of the so(d branches warranted the sa(es even absent the breach.
The government has further argued that Anchor Savings cou(d have avoided the sa(e of Residentia( Funding, for examp(e, by forming a ho(ding company or a(tering the
mix of (oans Residentia( Funding purchased. A(ternative(y, the government has argued that Anchor Savings wou(d have had to se(( Residentia( Funding due to non-breaching
provisions of FIRREA and that the sa(es of Residentia( Funding and the Anchor Savings branches were at fair market va(ue, thus prec(uding any damage c(aim.
In addition, the government has argued that we are not entit(ed to damages based on our re(iance c(aim because the benefits Anchor Savings derived exceeded any cost that
Anchor Savings incurred. We a(so anticipate that the government wi(( assert that the re(iance damages sought by Anchor Savings are too specu(ative and that they do not ref(
ect actua( (osses incurred by Anchor Savings as a resu(t of the assisted mergers.
We continue to be(ieve that our c(aims are meritorious, that it is one of the more significant cases before the C(aims Court and that we are entit(ed to nonover(apping
damages under any of the theories asserted. However, we are unable to predict the ultimate outcome of our lawsuit and can give no assurance of whether we will receive a
damage award,or as to the amount or timing if any award is ultimately received.
After entry of judgment, either party may appea( a portion or a(( of the decision to the United States Court ofAppea(s for the Federa( Circuit. Fo((owing the decision of
the Federa( Circuit, the unsuccessfu( party may petition for a rehearing en banc by the entire Federa(
Circuit. Assuming such a request for rehearing is denied, any proceedings in the Federa( Circuit wou(d be expected to take approximate(y one year. Appea( from the fina( decision
of the Federa( Circuit cou(d be made to the Supreme Court, a(though the Supreme Court cou(d decide not to hear the case. We cannotpredict the amount or the timing of receipt
of a damage award, if any is received, or the timing or success of any appeal that may be made by either party following an entry ofjudgment.
DESCRIPTION OF THE LTWS
Introduction
Dime distributed a Litigation Tracking Warrant (an "LTW" ) for each share of its common stock outstanding on December 22, 2000 to each of its stockho(ders on that date.
The LTWs trade on the Nasdaq Nationa( Market under the symbo( "DIMEZ." As origina((y issued by Dime, the LTWs entit(ed LTW ho(ders to purchase shares of Dime
common stock at a price adjusted according to the adjusted amount, if any, actua((y recovered in the (itigation against the government. In January 2002, Dime Savings and Dime
Bancorp merged into Washington Mutua( Bank and Washington Mutua(, Inc., respective(y. As a resu(t of these mergers, we assumed the rights under the (itigation against the
government, and the LTWs are now exercisab(e for shares of our common stock.
The fo((owing is a summary of some of the provisions of a warrant agreement, origina((y entered into by Dime with EquiServe Trust Company, N.A. and EquiServe Limited
Partnership, as warrant agent, as amended and restated by Washington Mutua( and Me((on Investor Services, as the current warrant agent. This summary does not purport to be
comp(ete and is qua(ified in its entirety by reference to the amended and restated warrant agreement and the form of warrant certificate, which are fi(ed as an exhibit to this
report.
Under the terms of the origina( warrant agreement entered into by Dime and the Equiserve entities, some of the terms of the LTWs were automatica((y amended as a resu(t
of our merger with Dime. Among other things, the manner in which the origina( "adjusted stock price" is ca(cu(ated has changed and there is no (onger an exercise price for the
LTWs. The changes brought about by our merger with Dime are ref(ected in the description be(ow and in the amended and restated warrant agreement between Washington Mutua(
and Me((on Investor Services.
Determination of the Number of Shares of Our Common Stock Issuab/e Upon Exercise of an LTW
The LTWs entit(e LTW ho(ders to purchase shares of our common stock having an aggregate merger adjusted stock price equa( to a portion of the proceeds, if any, we
recover as a resu(t of our (itigation against the government. We exp(ain these terms be(ow.
7
Once we receive a(( of our damages (if any) payab(e by the government from our (itigation against them, determine the "adjusted (itigation recovery" and receive a((
regu(atory approva(s to issue shares of our common stock to the LTW ho(ders, LTW ho(ders wi(( be entit(ed to purchase shares of our common stock according to the fo((owing
formu(a:
One LTW = adjusted litigation recovery X 1

merger adjustedstockprice 112,975,597 (the number
ofLTWs originally issued or
reservedfor issuance)
Determination of the Amount of the Adjusted Litigation Recovery
To determine the amount of the adjusted (itigation recovery, we wi(( app(y the fo((owing formu(a:
Adjusted = 85% !
l
Amount Litigation Taxes
Litigation Recovered and LTW
Recovery Expenses
where:
• "Amount Recovered" equa(s the tota( amount of any cash payment and the fair market va(ue of any property we actua((y receive as damages pursuant to a fina(,
nonappea(ab(e judgment in or fina( sett(ement of our (itigation against the government, inc(uding any postjudgment interest we actua((y receive on any
payment,
• "Litigation and LTW Expenses" equa( the tota( expenses we incur, both before and after the date of this document, in pursuing our (itigation and obtaining a(( damages
payments, p(us our tota( expenses incurred in connection with the creation, issuance and trading of the LTWs inc(uding (ega(, financia( advisory and accounting fees,
printing and registration costs and the fees and expenses of the warrant agent, and
• "Taxes" equa(, regard(ess of the actua( amount of taxes imposed with respect to the damages recovery, the product of (i) the amount of damages recovered (ess the
expenses in the (itigation and LTW issuance described in the preceding c(auses and (ii) the combined highest federa(, New York State and New York City income
tax rates app(icab(e to financia( institutions in the year (or years) in which the amount of the damages (in who(e or in part) is fixed or determinab(e (after taking into
account the effect of the deductibi(ity of such taxes for federa( and state income tax purposes); for 2003, this combined rate is 46.05%.
8
For examp(e, if we recover $200 mi((ion in damages in our (itigation and the expenses in the (itigation and LTWs are $26 mi((ion, then taxes (using 2003's effective tax
rate) are approximate(y $80 mi((ion, and the resu(ting adjusted (itigation recovery wou(d equa( approximate(y $80 mi((ion.
Adjusted
Litigation = 85% X ($200,000,000 - $26,000,000 - $80,127,000) = $79,792,500
Recovery
Our determination of the amounts to be deducted from the amount of damages recovered and the amount of the adjusted (itigation recovery wi(( be fina(, conc(usive and
binding on the LTW ho(ders.
Determination of the Merger Adjusted Stock Price
When we receive a recovery of damages, we wi(( determine the merger adjusted stock price of a share of our common stock on the 30th ca(endar day before the date on
which we receive the tota( amount of the recovery. For purposes of ca(cu(ating the merger adjusted stock price, the 30th ca(endar day before the tota( amount of recovery has
been received is the "determination date." If the 30 th ca(endar day before the tota( amount of recovery has been received is a day on which the NYSE is c(osed for business, then
the determination date wi(( be the next succeeding day on which the NYSE is open for business.
The "merger adjusted stock price" of a share of our common stock on this determination date wi(( equa(:
Merger Adjusted = l 30-day Running X Dime Exchange

Stock Price Average Price Ratio
where:
• "30-day Running Average Price" equa(s the average of the dai(y c(osing prices of our common stock for the thirty consecutive trading days ending on and inc(uding the
determination date, and
• "Dime Exchange Ratio" equa(s 1.1232, which is the "Exchange Ratio" as defined in the merger agreement entered into by Washington Mutua( and Dime when we
acquired Dime in January 2002.
For examp(e, if the 30-day Running Average Price of our common stock were $40.00, then the Merger Adjusted Stock Price wou(d equa( $44.928.
Samp/e Ca/cu/ation
In this examp(e, the adjusted (itigation recovery is $80 mi((ion and the 30-day running average price is $40.00. The merger adjusted stock price of our common stock on the
occurrence of the trigger is therefore $44.928. As a resu(t, in this examp(e, the number of shares of our common stock issuab(e upon exercise of each LTW wou(d be 0.0158:
OneLTW = $80,000,000 X 1 = 0.0158 shares

$44.928 (112,975,597)
If you own 100 LTWs, you wou(d mu(tip(y the number of shares of our common stock issuab(e upon exercise of an LTW (0.0158) by the number of LTWs you own (100),
which tota(s 1.58 shares (0.0158 x 100 = 1.58). As a resu(t, upon the occurrence of the trigger, you cou(d receive one share of our common stock, and receive cash instead of the
fractiona( share. The amount of cash you wou(d receive instead of a fractiona( share is ca(cu(ated by mu(tip(ying the fractiona( share (0.58) by the 30-day running average price (
$40.00), which tota(s $23.20 (0.58 x $40.00 = 23.20). So, if you owned 100 LTWs, upon their exercise you wou(d receive one shareof our common stock and $23.20 in cash.
To determine an approximate tota( va(ue of the LTWs upon exercise, you wou(d mu(tip(y the number of shares you receive (one) by the 30-day running average price
($40.00) and add the amount of cash you receive ($23.20), which tota(s $63.20 (1 x $40.00 + $23.20 = $63.20). As a resu(t, the approximate va(ue of 100 LTWs wou(d be $63.20,
or approximate(y $0.63 per LTW. The actua( va(ue of the LTWs upon exercise wi(( depend on the market price of our common stock on the day the LTWs are exercised, which
wi(( (ike(y be different than the 30-day running average price and the price on the date (if any) that the shares acquired upon exercise of the LTWs are so(d, if not so(d on the date
of exercise. You should keep in mind that the LTWs may not trade at prices reflecting the eventual amount we recover in our litigation or the eventual value per LTW.
However, if the adjusted (itigation recovery was zero, you wou(d not be entit(ed to purchase any shares of our common stock and the LTWs wou(d expire without va(ue.
The amounts used in the examples in this section are for illustration purposes only, and we do not make any representations regarding the outcome of our litigation against
the government, the expenses and taxes that we will incur as a result of the litigation or its resolution, or our future stock price.
10
Item 7. Financia( Statements and Exhibits (
c) Eahibits
Eahibit
Number Descriution
.1 2003 Amended and Restated Warrant Agreement, dated March 11, 2003, by and between Washington Mutua(, Inc.
and Me((on Investor Services LLC
11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has du(y caused this report to be signed on its beha(f by the undersigned, thereto du(y
authorized.
By: /s/ Fay L. Chapman

Fay L. Chapman
Senior Executive Vice President
Date: March 12, 2003
EXHIBIT INDEX
Exhibit
Number Descriution
.1 2003 Amended and Restated Warrant Agreement, dated March 11, 2003, by and between Washington Mutua(, Inc.
and Me((on Investor Services LLC
Exhibit 4.1
2003 AMENDED AND RESTATED
WARRANT AGREEMENT
Dated as of
March 11, 2003
between
and
MELLON INVESTOR SERVICES LLC
as the Warrant Agent
TABLE OF CONTENTS
Page
ARTICLE I Defined Terms...................................................... ..............................1
........
..............................1
ARTICLE 1.1 Definitions ....................................................... ..............................9
.
1.2 Other Definitions...................................
..............................5
...............
2.1 Issuance of Warrant Certificates..................................
..............................5
.
2.2
II Warrant Form Cera tndicate
if Da
sti.n.g..
..
..
.......
..
..
..
..
.....
..
..
..
..
.......
..
..
..
.......
..
..
..
..
.....
..
..
..
..
.......
..
..
..
.......
.
..............................5
2.3
....... Execution and Countersignature....................................
..............................6
2.9
. Certificate Register..............................................
..............................6
.
2.5 Transfer and Exchange.............................................. ..............................7
2.6 ReplacementCertificates...........................................
..............................9
2.7
. Cancellation......................................................
..............................9
.
2.8 Purchase of Warrants by the Company ............................... ..............................9
.
III Exercise Terms..........................................................
ARTICLE ..............................9
.
Price ..........................
3.1 Number of Warrant Shares; Exercise ..............................9
3.2 Exercise Period.................................................... .
.............................10
3.3
. Expiration.........................................................
.............................10
.
3.9 Manner of Exercise.................................................. .............................11
3.5 Issuance of Warrant Shares........................................
.............................11
3.6
.. Fractional Warrant Shares.........................................
.............................12
3.7
.. Reservation of Warrant Shares.....................................
.............................12
3.8
.. Compliance with Law................................................
.............................12
.
3.9 Holders Not Entitled to Interest................................. ............................... 13
.
IV Adjustments ............................................................
ARTICLE ............................... 13
.
9.1 Reclassifications, Redesignations or Reorganizations of Common Stock ............................. 13

9.2 Combination ......................................................... ............................. 13
9.3 Exercise Price Adjustment ........................................... ............................. 19
9.9 Other Events ........................................................ ............................. 19
9.5 Notice of Certain Transactions ...................................... ............................ 19
9.6 Adjustment to Warrant Certificate ................................... ............................ 15
ARTICLE V Warrant Agent ............................................................. ............................... 15
5.1 Nature of Duties and Responsibilities Assumed ....................... ............................ 15

5.2 Right to Consult Counsel ............................................ ............................. 17
5.3 Compensation and Reimbursement ......................................
5.9 Indemnification ....................................................
. .............................17 .
5.5 Warrant Agent May Hold Company Securities .......................... ............................17 ..
. ...........................17 ...
5.6 Change of Warrant Agent ......................................... ..........................18 ....
.... .........................18
5.7 Merger or Consolidation or Change of Name of Warrant Agent .........
ARTICLE VI Rights of Holders ....................................................... .
............................... 19
.
6.1 Holders not Stockholders ............................................ .............................19
6.2 Claims by Holders ..................................................
.............................19
.
6.3 Control of Litigation ............................................... .............................19
6.9 Determination of Values ............................................. .............................20
ARTICLE VII Miscellaneous ........................................................... ............................... 20

7.1 Information ........................................................
.............................20
7.2 .
Amendment ..........................................................
.............................20
7.3 Notices ............................................................
.
.............................20
7.9 Governing Law ......................................................
.
.............................21
.
7.5 Waiver of Jury Trial ................................................ .............................21
7.6 Entire Agreement, Etc ............................................. ............................... 21
7.7 Counterparts and Facsimile .......................................... .............................22
7.8 Captions ...........................................................
.............................22
7.9 Severability .......................................................
.
.............................22
.
7.10 No Third-Party Beneficiaries ........................................ .............................22
7.11 Successors .........................................................
.............................22
.
EXHIBIT A Form of Warrant Certificate

EXHIBIT B Form of Election to Purchase Warrant Shares
EXHIBIT C Certificate for Exchange of Global Warrant Certificate
EXHIBIT D Fee Schedule (not included with this exhibit)
ii
THIS 2003 AMENDED AND RESTATED WARRANT AGREEMENT, dated as of
March 11, 2003 (this "Agreement"), between Washington Mutual, Inc (the "
Company"), successor by merger to DIME BANCORP, INC., a Delaware corporation ("
Dime") and Mellon Investor Services LLC, a New Jersey limited liability
company (the "Warrant Agent"), successor to EQUISERVE TRUST COMPANY, N.A. and
EQUISERVE LIMITED PARTNERSHIP, as Warrant Agent ("Equiserve"), amends and
restates the Warrant Agreement, dated as of December 21, 2000, between Dime and
Equiserve, as previously amended and restated by the parties hereto.
RECITALS
A. The Board of Directors of Dime authorized a

distribution of one Litigation Tracking Warrant(TM) (a "Warrant") for each share
of Dime's common stock, par value $0.01 per share (the "Dime Common Stock"),
outstanding as of the Close of Business (as defined below) on the Record Date (
as defined below). Each Warrant represents the right to purchase shares or a
portion of a share of Dime's common stock (subject to adjustment as provided
herein), upon the terms and subject to the conditions herein set forth.
B. The Board of Directors of Dime also authorized the
issuance of Warrants to holders of outstanding Dime Convertible Securities (as
defined herein) who exercise or convert such Dime Convertible Securities at any
time and from time to time before the occurrence of the Trigger (as defined
herein).
C. On January 4, 2002, Dime merged with and into the

Company (the "Merger") and the Company succeeded to Dime's rights and
obligations with respect to the Warrants. As a result of the Merger, Warrant
holders will be entitled to receive, if and when the Warrants are exercised and
in accordance with the terms of this Agreement, for each Warrant they hold,
shares of Washington Mutual common stock (the "Common Stock").
D. In order to issue Warrants to holders of options to

purchase Common Stock, which options were previously Dime Convertible Securities
prior to the Merger, who exercise or convert such options at any time and from
time to time before the occurrence of the Trigger, and to set forth the terms of
the Warrants following the Merger, the Company has determined to enter into this
Agreement with the Warrant Agent.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties agree as follows:
ARTICLE I
Defined Terms
1.1 Definitions. As used in this Agreement, except as

otherwise expressly provided or unless the context otherwise requires:
"Adjusted Litigation Recovery" means an amount equal to 85% of

the amount obtained from the following equation: (a) the Amount Recovered minus (
b) the sum of the following: (i) the total of all expenses incurred by or on
behalf of the Bank and the Company in pursuing the Litigation and obtaining the
Amount Recovered (whether incurred before or after the date hereof), including,
without limitation, fees and expenses of counsel, witnesses, experts and
consultants, (ii) the total of all expenses incurred by the Company in
connection with the creation, issuance and trading of the Warrants, including,
without limitation, legal, financial advisory and accounting fees, the fees and
expenses of the Warrant Agent and printing and registration costs (whether
incurred before or after the date hereof) and (iii) an amount equal to the
Amount Recovered, less the expenses described in the preceding clauses (i) and (
ii), multiplied by the combined highest federal, New York State and New York
City income tax rates applicable to financial institutions in the year (or
years) in which the amount of the damages (in whole or in part) is fixed or
determinable (after taking into account the effect of the deductibility of such
taxes for federal and state income tax purposes).
"Adjusted Stock Price" means the average of the daily Closing
Prices of a share of Common Stock for the thirty consecutive Trading Days ending
on and including the Determination Date; provided, that if the context in which
this defined term is used is with respect to securities other than shares of
Common Stock, then "Adjusted Stock Price" means the average of the daily Closing
Prices of a unit of such securities for the thirty consecutive Trading Days
ending on and including the Determination Date minus the Exercise Price
determined for such securities in the manner described in Section 9.3; and
provided, further that if the context in which this defined term is used is with
respect to property other than publicly traded securities, then "Adjusted Stock
Price" means the Fair Market Value of the amount of such property distributable
in respect of one share of Common Stock.
"Amount Recovered" means the aggregate amount of any cash
payment and the Fair Market Value of any property or assets actually received by
the Bank pursuant to a final, nonappealable judgment in or final settlement of
the Litigation (including any post-judgment interest actually received by the
Bank on any Amount Recovered).
"Assistant Secretary" means any assistant secretary or person

of similar title of the Company.
"Bank" means Washington Mutual Bank, FA, a federal association

or any successor thereto.
"Board" means the Board of Directors of the Company or any

committee thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means a day other than a Saturday, Sunday or

other day on which commercial banks in the State of New York or the State of
Washington are authorized or required by law to close.
"Close of Business" on any given date means 5:00 P.M., Western

time, on such date; provided, however, that if such date is not a Business Day
it will mean 5:00 P.M., Western time, on the next succeeding Business Day.
"Closing Price" on any day means the closing sale price

regular way (with any relevant due bills attached) of a share of Common Stock on
such day, or in case no such sale takes place on such day, the average of the
reported closing bid and asked prices regular way (with any relevant due bills
attached) of a share of Common Stock, in each case on the NYSE Composite Tape (
or any successor composite tape reporting transactions on national securities
exchanges), or, if the Common Stock is not listed or admitted to trading on the
NYSE, on the principal national securities exchange on which the Common Stock is
listed or admitted to trading (which will be the national securities exchange on
which the greatest number of shares of Common Stock has been traded during the
five consecutive Trading Days ending on and including the Determination Date),
or, if not listed or admitted to trading on any national securities exchange,
the average of the closing bid and asked prices regular way (with any relevant
due bills attached) of a share of Common Stock on the over-the-counter market on
the day in question as reported by NASDAQ, or a similar generally accepted
reporting service, or if not so available as determined in good faith by the
Board, on the basis of such relevant factors as it in good faith considers
appropriate.
"Combination" means an event in which the Company consolidates
with, merges with or into, or sells all or substantially all its property and
assets to another Person.
"Determination Date" means the 30th calendar day before the

date on which the Bank receives the total amount of the Amount Recovered unless
such date is not a Trading Day, in which case the Determination Date will be the
next succeeding Trading Day. If the Amount Recovered is payable by the United
States Government in installments, the Determination Date will be the 30th
calendar day before the date on which the Bank receives the last installment of
the Amount Recovered unless such date is not a Trading Day, in which case the
Determination Date will be the next succeeding Trading Day.
"Dime Exchange Ratio" means 1.1232, which is the "Exchange
Ratio" as defined and calculated in accordance with Section 2.5(b) of the
Agreement and Plan of Merger, dated as of June 25, 2001, by and between the
Company and Dime.
"Exchange Act" means the Securities Exchange Act of 1939, as

amended.
"Fair Market Value" means the fair market value of the

relevant property on the Determination Date as determined in good faith by the
Board, on the basis of such factors as it in good faith considers appropriate.
"Holder" means the duly registered holder of a Warrant under

the terms of this Agreement.
"Litigation" means the Bank's case against the United States

Government in the United States Court of Federal Claims entitled Anchor Savings
Bank, FSB v. United States, No. 95-39C, filed on January 13, 1995.
"NASDAQ" means the stock market and automated quotation system

operated by the National Association of Securities Dealers, Inc.
"NYSE" means the stock exchange operated by The New York Stock
Exchange, Inc.
3
"Officer" means the Chief Executive Officer, the President
any Senior Executive Vice President or any Executive Vice President of the
Company.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Record Date" means December 22, 2000.
"SEC" means the Securities and Exchange Commission.
"Secretary" means the secretary of the Company.
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means a date on which the NYSE or NASDAQ (or any
successor thereto) is open for the transaction of business.
"Trigger" means the occurrence of all of the following events: (

a) receipt by the Bank of the Amount Recovered in full, (b) determination by
the Bank of the amount of the Adjusted Litigation Recovery and (c) receipt of
all regulatory approvals necessary to issue the shares of Common Stock to be
issued upon the exercise of the Warrants, including without limitation, the
effectiveness of a registration statement relating to the issuance of the
Warrant Shares under the Securities Act.
"Warrant Shares" means the shares of Common Stock of the

Company issued and received upon exercise of the Warrants.
1.2 Other Definitions.
Defined in
Term Section
"Agent Members "................................................. 2.2(c)

"Certificate Register" .......................................... 2.9
"Certificated Warrants" ........................................ 2.2(a)
"Common Stock" ............................ ........................ Recitals
"Company "................................. ........................ Recitals
"Dime" .................................... ........................ Recitals
"Dime Common Stock" ....................... ........................ Recitals
"Dime Convertible Securities" ................................... 2.1(a)
"DTC ".......................................................... 2.2(b)
"Exercise Notice "................................................ 3.2
"Exercise Price "................................................ 3.1
"Global Warrant" ................................................2.2(b)
"Maximum Number of Warrants" .................................... 2.1(b)
"Merger " ....................................................... Recitals
"Number of Shortfall Shares" .................................... 3.7(b)
"Registrar "...................................................... 3.7(a)
"Successor Company "............................................... 9.2(b)
"Successor Warrant Agent" ......................................... 5.6
"Termination Date" ................................................ 3.3
"Termination Notice "............................................... 3.3
"Transfer Agent" .................................................. 3.5
"Warrant" ................................. ........................ Recitals
"Warrant Agent" ........................... ........................ Recitals
"Warrant Certificate "............................................. 2.1(a)
"Warrant Exercise Period "......................................... 3.2(b)
ARTICLE II
Warrant Certificates
2.1 Issuance of Warrant Certificates. (a) At any time and from

time to time before the Trigger occurs, the Company may instruct the Warrant
Agent in writing to issue, in accordance with its instructions and the
provisions of this Article 2, one or more Warrant Certificates, in substantially
the form of Exhibit A hereto (a "Warrant Certificate"), evidencing Warrants to
holders of stock options of the Company that were outstanding on the Record Date
as options to purchase Dime Common Stock (all options to purchase Dime Common
Stock outstanding as of the Record Date, the "Dime Convertible Securities") to
such holders who exercise or convert such Dime Convertible Securities into
shares of Common Stock and Warrants in accordance with the terms and conditions
of such Dime Convertible Securities.
(b) The maximum number of Warrants (the "Maximum Number

of Warrants") that may be issued hereunder is equal to 112,975,597 (the sum of
(i) the number of shares of Dime Common Stock that were outstanding on the
Record Date plus (ii) the number of Warrants issuable to holders of Dime
Convertible Securities had all Dime Convertible Securities been exercised
immediately before the Record Date).
2.2 Form and Dating. The Warrant Certificates will be
substantially in the form of Exhibit A, hereto. The Warrants may have such
notations, legends or endorsements as the Company may deem appropriate, which do
not affect the rights, duties or responsibilities of the Warrant Agent, and as
are not inconsistent with the provisions hereof or as may be required by law,
stock exchange or stock market rule, agreements to which the Company is subject,
if any, or usage (provided that any such notation, legend or endorsement is in a
form acceptable to the Company). Each Warrant will be dated the date of its
countersignature.
(a) Certificated Warrants. The Warrants may be issued in
definitive form represented by a physical Warrant Certificate (such certificate
and all other certificates representing physical delivery of Warrants in
definitive form being called "Certificated Warrants").
(b) Global Warrant. The Warrants may be issued in the

form of one or more fully registered global certificates with the global
securities legend set forth in Exhibit A hereto (the "Global Warrant"), which
will be registered on the records of the Warrant Agent on behalf of beneficial
owners of Warrants and in the name of the Depository Trust Company ("DTC") or a
nominee of DTC, duly executed by the Company and countersigned by the Warrant
Agent as hereinafter provided. The number of Warrants represented by Global
Warrants may from time to time be increased or decreased by adjustments made on
the records of the Warrant Agent and DTC or its nominee as hereinafter provided.
Except as provided in Section 2.5, owners of beneficial interests in a Global
Warrant will not be entitled to receive physical delivery of Certificated
Warrants.
(c) Book-Entry Provisions. Members of, or participants
in, DTC ("Agent Members") will have no rights under this Agreement with respect
to any Global Warrant held on their behalf with DTC or by the Warrant Agent or
under such Global Warrant, and DTC may be treated by the Company, the Warrant
Agent and any agent of the Company or the Warrant Agent as the absolute owner of
such Global Warrant for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein will prevent the Company, the Warrant Agent or any agent of the
Company or the Warrant Agent from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Agent Members, the operation of customary practices of DTC governing the
exercise of the rights of a holder of a beneficial interest in any Global
Warrant.
2.3 Execution and Countersignature. (a) With respect to any

Global Warrant to be issued hereunder, one Officer will sign, and the Secretary
or any Assistant Secretary will attest, such Global Warrant. The Warrant Agent,
upon the written instruction of the Company signed by an Officer, will
countersign any Global Warrant certificate by manual or facsimile signature, and
such Global Warrant will be registered in accordance with Section 2.2(b) hereof.
(b) With respect to all other Warrants, an Officer will
sign, and the Company's Secretary or any of its Assistant Secretaries will
attest, the Warrant Certificates for the Company by manual or facsimile
signature. The Warrant Agent will countersign and deliver the Warrant
Certificates for original issue, in each case upon a written instruction of the
Company signed by an Officer of the Company. Such instruction will specify (in
addition to the number of Warrants) the date on which the original issue of
Warrants is to be countersigned.
(c) If an Officer whose signature is on a Warrant

Certificate no longer holds that office at the time the Warrant Agent
countersigns the Warrant Certificate, the Warrant will be valid nevertheless. A
Warrant will not be valid until an authorized signatory of the Warrant Agent
manually countersigns the Warrant Certificate. The signature will be conclusive
evidence that the Warrant Certificate has been countersigned under this
Agreement.
(d) The Warrant Agent may appoint an agent reasonably
acceptable to the Company to countersign the Warrant Certificates. Unless
limited by the terms of such appointment, such agent may countersign Warrant
Certificates whenever the Warrant Agent may do so. Each reference in this
Agreement to countersignature by the Warrant Agent includes countersignature by
such agent. Such agent will have the same rights as the Warrant Agent for
service of notices and demands.
2.4 Certificate Register. The Warrant Agent will keep a

register (the "Certificate Register") of the Warrant Certificates and of their
transfer and exchange which the Company may examine upon reasonable written
notice. The Certificate Register will show the names and addresses of the
respective Holders and the date and number of Warrants evidenced on the face of
each of the Warrant Certificates. The Company and the Warrant Agent may deem and
treat the Person in whose name a Warrant Certificate is registered as the
absolute owner of such Warrant Certificate and neither the Company nor the
Warrant Agent will be affected by any notice to the contrary.
2.5 Transfer and Exchange.
(a) Transfer and Exchange of Certificated Warrants. When

Certificated Warrants are presented to the Warrant Agent with a request to
register the transfer or exchange of such Certificated Warrants, the Warrant
Agent will register the transfer or make the exchange as requested; provided,
that the Certificated Warrants surrendered for transfer or exchange have been
duly endorsed or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Company and the Warrant Agent, duly executed by
the Holder thereof or its attorney duly authorized in writing.
(b) Restrictions on Transfer of Certificated Warrants for a
Beneficial Interest in a Global Warrant. Certificated Warrants may not be
exchanged for a beneficial interest in a Global Warrant except upon satisfaction
of the requirements set forth below. Upon receipt by the Warrant Agent of
Certificated Warrants, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Warrant Agent, together with written
instructions directing the Warrant Agent to make, or to direct DTC to make, an
adjustment on its books and records with respect to such Global Warrants to
reflect an increase in the number of Warrants represented by the Global Warrant,
then the Warrant Agent will, and is hereby instructed to, cancel such
Certificated Warrants and cause, or direct DTC to cause, the number of Warrants
represented by the Global Warrant to be increased accordingly.
(c) Transfer and Exchange of Global Warrants. The

transfer and exchange of beneficial interests in a Global Warrant will be
effected through DTC, in accordance with this Agreement and the procedures of
DTC.
(d) Restrictions on Transfer and Exchange of the Global

Warrant. Notwithstanding any other provisions of this Agreement, Global Warrants
may not be transferred as a whole except by DTC to a nominee of DTC or by a
nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee
to a successor depositary or a nominee of such successor depositary.
(e) Authentication and Distribution of Certificated Warrants.

If at any time:
(i) DTC notifies the Company that DTC is unwilling or

unable to continue as depositary for Global Warrants
and a successor depositary for Global Warrants is not
appointed by the Company within 90 calendar days
after delivery of such notice;
(ii) DTC ceases to be a clearing agency registered

under the Exchange Act; or
7
(iii) the Company, in its sole discretion, notifies
the Warrant Agent in writing that it elects to cause
the issuance of Certificated Warrants under this
Agreement;
then, the Company will execute, and the Warrant Agent, upon receipt of a written
order of the Company signed by an Officer requesting the delivery of
Certificated Warrants to the holders of beneficial interests in the Global
Warrant, will countersign and deliver Certificated Warrants equal to the number
of Warrants represented by Global Warrants, in exchange for such Global
Warrants. Certificated Warrants issued in exchange for a beneficial interest in
a Global Warrant will be registered in such names and in such authorized
denominations as DTC, pursuant to instructions from its direct or indirect
participants or otherwise, will instruct the Warrant Agent in writing. The
Warrant Agent is hereby instructed to deliver such Certificated Warrants to the
Persons in whose names such Warrants are so registered in accordance with the
written instructions of DTC.
(f) Cancellation or Adjustment of Global Warrants. At

such time as all beneficial interests in Global Warrants have either been
exchanged for Certificated Warrants, redeemed, repurchased or canceled, such
Global Warrant will be returned to DTC for cancellation or retained and canceled
by the Warrant Agent. At any time before such cancellation, if any beneficial
interest in a Global Warrant is exchanged for Certificated Warrants, redeemed,
repurchased or canceled, the number of Warrants represented by such Global
Warrant will be reduced and an adjustment will be made on the books and records
of the Warrant Agent with respect to such Global Warrant, by the Warrant Agent
or DTC, to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges
of Warrants.
(i) To permit registrations of transfers and

exchanges, the Company will execute and the Warrant
Agent will countersign Certificated Warrants and
Global Warrants as required pursuant to the
provisions of this Section 2.5.
(ii) All Certificated Warrants and Global Warrants

issued upon any registration of transfer or exchange
of Certificated Warrants will be the valid
obligations of the Company, entitled to the same
benefits under this Agreement as the Certificated
Warrants or Global Warrants surrendered upon such
registration of transfer or exchange.
(iii) Before due presentment for registration of

transfer of any Warrant, the Warrant Agent and the
Company may deem and treat the Person in whose name
any Warrant is registered as the absolute owner of
such Warrant and neither the Warrant Agent nor the
Company will be affected by any notice to the
contrary.
(iv) No service charge will be made to a Holder for

any registration of transfer or exchange upon
surrender of any Warrant Certificate at the office of
the Warrant Agent maintained for that purpose. The
Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may
be imposed in connection with any registration of
transfer or exchange of Warrant Certificates. The
Warrant Agent shall have no duty or obligation under
this Section 25 unless and until it is satisfied tat
all such taxes and/or changes have been paid in full.
2.6 Replacement Certificates. If a mutilated Warrant
Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant
Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company will issue and the Warrant Agent will countersign
a replacement Warrant Certificate. If required by the Warrant Agent or the
Company, such Holder will furnish an indemnity bond or other instrument
sufficient in the judgment of the Company and the Warrant Agent to protect the
Company and the Warrant Agent from any loss which either of them may suffer if a
Warrant Certificate is replaced. The Company and the Warrant Agent may charge
the Holder for their expenses in replacing a Warrant Certificate.
2.7 Cancellation. (a) In the event the Company will purchase
or otherwise acquire Certificated Warrants, the same will thereupon be delivered
to the Warrant Agent for cancellation.
(b) The Warrant Agent and no one else will cancel and destroy
all Warrant Certificates surrendered for transfer, exchange, replacement,
exercise or cancellation and deliver a certificate of such destruction to the
Company unless the Company directs the Warrant Agent to deliver canceled Warrant
Certificates to the Company. The Company may not issue new Warrant Certificates
to replace Warrant Certificates to the extent they evidence Warrants that have
been exercised or Warrants that the Company has purchased or otherwise acquired.
2.8 Purchase of Warrants by the Company. The Company will have

the right, except as limited by law or other agreement, to purchase or otherwise
acquire Warrants at such times, in such manner and for such consideration as it
may deem appropriate.
ARTICLE III
Exercise Terms
3.1 Number of Warrant Shares; Exercise Price. Each Warrant

will, upon exercise thereof and subject to adjustment as provided herein,
entitle the Holder thereof to purchase the number of shares of Common Stock
equal to the quotient of (a) the quotient of (i) the Adjusted Litigation
Recovery divided by (ii) the Maximum Number of Warrants (112,975,597), divided
by (b) the product of (x) the Adjusted Stock Price, and (y) the Dime Exchange
Ratio (1.1232), upon surrender or cancellation of the Warrant and payment of an
exercise price per Warrant equal to the number of shares of Common Stock for
which the Warrant is exercisable multiplied by the Exercise Price (as defined
below). All calculations made pursuant to this Section 3.1 will be performed by
the Company (with written notice of any such calculation to the Warrant Agent)
and shall be rounded to the nearest ten-thousandth. As of the date of this
Agreement, the "Exercise Price" is zero dollars and zero cents ($0.00) per each
whole share of Common Stock, but shall be subject to adjustment as provided in
this Agreement. The Warrant Agent shall not be deemed to have knowledge of any
such calculations made pursuant to this Section 3.1 unless and until it has
received written notice thereof, and the Warrant Agent shall have no duty or
obligation to inquire as to whether any such calculation is accurate.
3.2 Exercise Period. (a) The Company will provide written
notice, as described below (the "Exercise Notice") to each Holder and the
Warrant Agent, of the occurrence of the Trigger not more than 15 calendar days
after the occurrence thereof. If the Amount Recovered is payable by the United
States government in installments, the Trigger will not be deemed to have
occurred until the Bank receives the last installment of the Amount Recovered.
The Exercise Notice will be dated the date it is first sent to Holders and the
Warrant Agent and will be provided by means of a press release to one or more
national news services and by mailing such notice first class, postage prepaid,
to each Holder at such Holder's address as it appears on the Certificate
Register; provided, however, that neither the failure to give such notice by
mail to any particular Holder or the Warrant Agent nor any defect therein will
affect the validity of the Exercise Notice or the expiration of all Warrants on
the Close of Business on the last day of the Warrant Exercise Period with
respect to the other Holders. The Exercise Notice will contain the following
information:
(i) that the Trigger has occurred

(ii) the total number of shares for which the Warrants are
exercisable
(iii) the number of shares of Common Stock for which one

Warrant is exercisable,
(iv) the Exercise Price (if any) per Warrant,
(v) the manner in which the Warrants are exercisable, and
(vi) the date on which the Warrants will no longer be

exercisable.
(b) Subject to the terms and conditions set forth herein, each
Warrant will be exercisable at any time or from time to time during the 60-day
period commencing on the date on which the Exercise Notice is first sent to
Holders and the Warrant Agent pursuant to Section 3.2(a) (the "Warrant Exercise
Period").
(c) No Warrant will be exercisable after the Close of

Business on the last day of the Warrant Exercise Period.
3.3 Expiration. A Warrant will terminate and become void as of

the earlier of (a) the Close of Business on the last day of the Warrant Exercise
Period, (b) the Close of Business on the date the Litigation has been disposed
of in a manner such that no shares of Common Stock or other securities or
property will be issuable under the terms of the Warrants (and the Agent shall
receive prompt written notice thereof)(the "Termination Date") or (c) the time
and date such Warrant is exercised. The Company will provide notice, as
described below (the "Termination Notice"), of the occurrence of the Termination
Date or the expiration of the Warrant Exercise Period not more than 60 calendar
days after the occurrence thereof to the Holders and the Warrant Agent. The
Termination Notice will be dated the date it is first sent to Holders and the
Warrant Agent and will be provided by means of a press release to one or more
10
national news services and by mailing such notice first class, postage prepaid
to each Holder at such Holder's address as it appears on the Certificate
Register. The Termination Notice will state the following:
(i) that the Termination Date has occurred or the Warrant
Exercise Period has expired, as the case may be, and
(ii) that all outstanding Warrants have terminated and become

void.
The Warrants will terminate and become void as provided herein notwithstanding
the Company's failure to give the Termination Notice. The Warrant Agent shall
not be deemed to have knowledge the Termination Date has occurred , the Warrant
Exercise Period has expired or the outstanding Warrants have terminated unless
and until it shall have received written notice thereof.
3.4 Manner of Exercise. Warrants may be exercised upon (i)

surrender to the Warrant Agent of the Warrant Certificates, together with the
form of election to purchase Common Stock on the reverse thereof properly
completed and validly executed by the Holder thereof and (ii) payment to the
Warrant Agent, for the account of the Company, of the total Exercise Price (if
any) for the number of Warrants being exercised. Such payment will be made by
certified or official bank check or personal check payable to the order of the
Company. Subject to Sections 3.2 and 3.3, the Warrants will be exercisable at
the election of the Holders thereof either in full at any time or from time to
time in part. In the event that a Warrant Certificate is surrendered for
exercise in respect of less than all the Warrant Shares purchasable on such
exercise at any time before the expiration of the Warrant Exercise Period a new
Warrant Certificate exercisable for the remaining Warrant Shares will be issued
and its exercise will also be subject to Sections 3.2 and 3.3. The Warrant Agent
will countersign and deliver the required new Warrant Certificates, and the
Company, at the Warrant Agent's request, will supply the Warrant Agent with
Warrant Certificates duly signed on behalf of the Company for such purpose. The
Warrant Agent will account promptly to the Company with respect to all Warrants
exercised and concurrently pay to the Company all moneys received by the Warrant
Agent for the purchase of shares of Common Stock through the exercise of such
Warrants.
3.5 Issuance of Warrant Shares. Subject to Section 3.6, upon

the surrender of Warrant Certificates and payment of the Exercise Price in
accordance with Section 3.4, the Company will issue and cause the Warrant Agent
or, if appointed, a transfer agent for the Common Stock ("Transfer Agent") to
countersign and deliver to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate or certificates for the
number of full Warrant Shares so purchased upon the exercise of such Warrants or
such other securities or property to which it is entitled, to the Person or
Persons entitled to receive the same, together with the payment of cash by the
Company as provided in Section 3.6 in respect of any fractional Warrant Shares.
Such certificate or certificates will be deemed to have been issued and any
Person so designated to be named therein will be deemed to have become a holder
of record of such Warrant Shares as of the date of the surrender of such Warrant
Certificates and payment of the Exercise Price.
11
3.6 Fractional Warrant Shares. The Company will not issue
fractional Warrant Shares. If any fraction of a Warrant Share would, except for
this Section 3.6, be issuable, the Company will pay an amount in cash equal to
(a) the sum of (i) the Adjusted Stock Price and (ii) the Exercise Price (if any)
per whole Warrant Share that would have been received), multiplied by (b) such
fraction. Such cash amount will be rounded to the nearest whole cent.
3.7 Reservation of Warrant Shares. (a) The Company will use
its best efforts to at all times keep reserved and available out of its
authorized and unissued shares of Common Stock or shares of Common Stock held in
its treasury a number of shares of Common Stock sufficient to provide for the
exercise in full of all Warrants then outstanding or reserved for issuance
pursuant to Section 2.1. The registrar for the Common Stock (the "Registrar")
will at all times until the Termination Date, or the time at which all Warrants
have been exercised or canceled, reserve such number of authorized shares as
will be required for such purpose. The Company will keep a copy of this
Agreement on file with the Registrar. The Company will supply such Registrar
with duly executed stock certificates for such purpose and will itself provide
or otherwise make available any cash which may be payable as provided in Section
3.6. The Company will furnish to such Registrar a copy of all notices of
adjustments and certificates related thereto transmitted to each Holder.
(b) If, upon the Trigger, the number of shares of Common

Stock authorized but not issued plus the number of shares of Common Stock held
in the Company's treasury is less than the number of shares of Common Stock
necessary to permit the exercise in full of the Warrants then outstanding or
reserved for issuance pursuant to Section 2.1 (the number of shares of Common
Stock comprising such deficiency being the "Number of Shortfall Shares"), then
the Company will either (i) to the extent permitted by applicable law and any
material agreements then in effect to which the Company is a party, commence a
tender offer or buyback for the aggregate number of shares of Common Stock at
least equal to the Number of Shortfall Shares or (ii) call a special meeting of
the holders of Common Stock for the purpose of increasing the number of
authorized shares of Common Stock in an amount at least equal to the Number of
Shortfall Shares. In such an event, the Warrant Exercise Period will be
automatically extended to 60 calendar days after (A) the date on which the
tender offer or buyback referred to in clause (i) above is successfully
completed or (B) the effective date of the increase in the number of authorized
shares of Common Stock referred to in clause (ii) above.
(c) The Company covenants that all shares of Common Stock
that may be issued upon exercise of Warrants will, upon issue, be fully paid,
nonassessable, free of preemptive rights, free from all taxes, liens, charges
and security interests, created by or through the Company, with respect to the
issue thereof.
3.8 Compliance with Law. (a) Notwithstanding anything in this

Agreement to the contrary, in no event will a Holder be entitled to exercise a
Warrant unless (i) a registration statement filed under the Securities Act in
respect of the issuance of the Warrant Shares is then effective or (ii) an
exemption from such registration requirements is available to all Holders under
the Securities Act at the time of such exercise.
(b) If any shares of Common Stock required to be reserved

for purposes of exercise of Warrants require, under any other Federal or state
12
law or applicable governing rule or regulation of any national securities
exchange or stock market, registration with or approval of any governmental
authority, or listing on any such national securities exchange or stock market
before such shares may be issued upon exercise, the Company will cause such
shares to be duly registered or approved by such governmental authority or
listed on the relevant national securities exchange or stock market.
3.9 Holders Not Entitled to Interest. Notwithstanding anything
to the contrary, Holders will not be entitled to receive any interest or
additional shares of our common stock for any period, including, without
limitation, the period of time between the date on which the Bank receives the
Amount Recovered (in full or in part) and the date on which the Warrants become
exercisable.
ARTICLE IV
Adjustments
9.1 Reclassifications, Redesignations or Reorganizations of

Common Stock. (a) In the event that at any time or from time to time after the
date hereof the Company will issue by reclassification, redesignation or
reorganization of the shares of Common Stock any shares of capital stock of the
Company then, in any such event, the Holders will have the right to receive upon
exercise of each Warrant the number of shares of such capital stock of the
Company equal to the Adjusted Litigation Recovery divided by the Maximum Number
of Warrants divided by the aggregate Adjusted Stock Price of the capital stock
of the Company that 1.1232 shares of Common Stock were exchanged for or
converted into as a result of such reclassification, redesignation or
reorganization.
(b) The proportion and type of capital stock of the

Company that the Holders will have the right to receive in the circumstance set
forth in Section 9.1(a) will be in the same proportion and type as one share of
Common Stock was exchanged for or converted into as a result of such
reclassification, redesignation or reorganization. Such adjustment will become
effective immediately after the effective date of such reclassification,
redesignation or reorganization. In the event of the occurrence of more than one
of the foregoing, such adjustments will be made successively.
9.2 Combination. (a) Except as provided in Section 9.2(c), in
the event of a Combination, the Holders will have the right to receive upon
exercise of each Warrant the number of shares of capital stock or other
securities or an amount of property equal to the Adjusted Litigation Recovery
divided by the Maximum Number of Warrants divided by the aggregate Adjusted
Stock Price of the capital stock, other securities or property that 1.1232
shares of Common Stock were exchanged for or converted into as a result of such
Combination.
(b) The proportion and type of capital stock, other

securities or property that the Holders will have the right to receive in the
circumstance set forth in Section 9.2(a) will be in the same proportion and type
as one share of Common Stock was exchanged for or converted into as a result of
such Combination. The provisions of this Section 9.2 will similarly apply to
successive Combinations involving the surviving or acquiring Person (the "
Successor Company") in any Combination.
13
(c) In the event of a Combination where consideration is
payable to holders of Common Stock in exchange for their shares solely in cash,
the Holders will have the right to receive upon exercise of each Warrant cash in
an amount equal to the Adjusted Litigation Recovery divided by the Maximum
Number of Warrants, less the Exercise Price (if any). In case of any Combination
described in this Section 4.2(c), the surviving or acquiring Person will
promptly after the occurrence of the Trigger deposit with the Warrant Agent the
funds necessary to pay to the Holders of the Warrants the amounts to which they
are entitled as described above. After such funds and the surrendered Warrant
Certificates are received, the Warrant Agent is hereby instructed to make
payment to the Holders by delivering a check in such amount as is appropriate to
such Person or Persons as it may be directed in writing by the Holders
surrendering such Warrants. No interest will accrue to the Holders or the
surviving or acquiring Person on such funds.
(d) The Company hereby represents and warrants that any
Successor Company will enter into, and the Company will provide, an agreement
with the Warrant Agent confirming the Holders' rights pursuant to this Section
4.2 and providing for adjustments, which will be as nearly equivalent as may be
practicable to the adjustments provided for in this Article IV.
4.3 Exercise Price Adjustment. In case of any
reclassification, redesignation or reorganization described in Section 4.1 or
any Combination described in Section 4.2, the Exercise Price of one Warrant
after such reclassification, redesignation, reorganization or Combination will
equal (i) if the Warrants are exercisable into stock only or stock and any cash
or property other than cash which is received instead of any fractional share of
stock, the per share par value (if any) of such stock multiplied by the number
of shares of such stock into which one Warrant is exercisable and (ii) if the
Warrants are exercisable for cash or property only, $0.01. The Exercise Price
may be adjusted, to the extent permitted by law, in such manner, if any, and at
such time, as the Board may determine in good faith to be equitable in the
circumstances. The Warrant Agent shall not be deemed to have knowledge of any
such adjustment of the Exercise Price unless and until it has received written
notice thereof.
4.4 Other Events. If any event occurs as to which the

foregoing provisions of this Article IV are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board, fairly
and adequately protect the purchase rights of the Holders of the Warrants in
accordance with the essential intent and principles of such provisions, then the
Board may make, without the consent of the Holders, such adjustments to the
terms of this Article IV, in accordance with such essential intent and
principles, as will be reasonably necessary, in the good faith opinion of such
Board, to protect such purchase rights as aforesaid.
4.5 Notice of Certain Transactions. In the event that the

Company will publicly announce a plan (a) to effect any reclassification,
redesignation or reorganization of its shares of Common Stock, (b) to effect any
capital reorganization, consolidation or merger or (c) to effect the voluntary
or involuntary dissolution, liquidation or winding-up of the Company, the
Company will within 5 calendar days after such public announcement send to the
Warrant Agent and the Warrant Agent will within 5 Business Days after receipt of
such notice thereof and the form of notice of action, send the Holders a notice
(in such form as will be furnished to the Warrant Agent by the Company) of such
proposed action, such notice to be mailed by the Warrant Agent to the Holders at
their addresses as they appear in the Certificate Register, which notice will
14
specify the expected date that such issuance or event is to take place and the
expected date of participation therein by the holders of Common Stock and will
briefly indicate the effect of such action on the Common Stock and on the number
and kind of any other shares of stock and on other securities or property, if
any, and the number of shares of Common Stock and other securities or property,
if any, purchasable upon exercise of each Warrant and the Exercise Price after
giving effect to any adjustment which will be required as a result of such
action.
4.6 Adjustment to Warrant Certificate. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article IV, and Warrant Certificates issued after such adjustment may have the
same terms and conditions as are stated in any Warrant Certificates issued prior
to the adjustment. The Company, however, may at any time in its sole discretion
make any change in the form of Warrant Certificate that it may deem appropriate
to give effect to such adjustments, which do not affect the rights, duties or
responsibilities of the Warrant Agent and that does not affect the substance of
the Warrant Certificate, and any Warrant Certificate thereafter issued or
countersigned, whether in exchange or substitution for an outstanding Warrant
Certificate or otherwise, may be in the form as so changed.
ARTICLE V
Warrant Agent
5.1 Nature of Duties and Responsibilities Assumed.
(a) Appointment. The Company hereby appoints the Warrant

Agent to act as agent of the Company as expressly set forth in this Agreement.
The Warrant Agent hereby accepts the appointment as agent of the Company and
agrees to perform that agency upon the express terms and conditions herein set
forth (and no implied duties or obligations), by all of which the Company and
the Warrant Holders, by their acceptance thereof, will be bound.
(b) Authorization. Whenever in the performance of its

duties under this Agreement, the Warrant Agent will deem it necessary or
desirable that any fact or matter be proved or established by the Company prior
to taking, suffering or omitting any action hereunder, such fact or matter (
unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
an Officer and delivered to the Warrant Agent; and such certificate will be full
authorization to the Warrant Agent and the Warrant Agent shall incur no
liability for or in respect of any action taken, suffered or omitted in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) Liability of Warrant Agent. The Warrant Agent will be

liable hereunder only for its own gross negligence, bad faith or willful
misconduct, as each is finally determined by a court of competent jurisdiction.
The Warrant Agent will not be liable for or by reason of any of the statements
of fact or recitals contained in this Agreement or in the Warrant Certificates
or be required to verify the same, but all such statements and recitals are and
will be deemed to have been made by the Company only. The Warrant Agent will not
15
have any liability or responsibility in respect of the legality, validity or
enforceability of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Warrant Agent) or in respect of the validity or
execution of any Warrant Certificate (except its countersignature thereof); nor
will it be responsible or liable for any breach by the Company of any covenant
or condition contained in this Agreement or in any Warrant Certificate; nor will
it be responsible or liable for the making of any change in the number of shares
of Common Stock required under the provisions of Article IV or responsible for
the manner, method or amount of any such change or the ascertaining of the
existence of any facts that would require any such adjustment or change; nor
will it by any act hereunder be deemed to make any representation or warranty as
to the authorization or reservation of any shares of Common Stock to be issued
pursuant to this Agreement or any Warrant Certificate or as to whether any
shares of Common Stock will, when issued, be validly issued, fully paid and
nonassessable. The Warrant Agent will not be responsible or liable for any
failure of the Company to comply with any of the covenants contained in this
Agreement or in the Warrant Certificates to be complied with by the Company. The
Warrant Agent will not incur any liability or responsibility to the Company or
to any Warrant Holder for any action taken, suffered or omitted, in reliance on
any notice, resolution, waiver, consent, order, instruction, certificate, or
other paper, document or instrument reasonably believed by the Warrant Agent to
be genuine and to have been signed, sent or presented by the proper party or
parties. Anything to the contrary notwithstanding, in no event shall the Warrant
Agent be liable for special, punitive, indirect, consequential or incidental
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Warrant Agent has been advised of the likelihood of such
loss or damage. Any liability of the Warrant Agent under this Agreement will be
limited to the amount of fees paid by the Company to the Warrant Agent. The
provisions provided in this Section shall survive to termination of this
Agreement and the resignation or removal of the Warrant Agent hereunder.
(d) Litigation. The Warrant Agent will be under no
obligation to institute any action, suit or legal proceeding or take any other
action likely to involve expense unless the Company or one or more Holders of
Warrants will furnish the Warrant Agent with security and indemnity satisfactory
to the Warrant Agent for any costs and expenses which may be incurred. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrants or
the production thereof at any trial or other proceeding relative thereto, and
any such action, suit or proceeding instituted by the Warrant Agent will be
brought in its name as Warrant Agent and any recovery of judgment, except for
judgments relating to claims of indemnification and compensation due the Warrant
Agent hereunder, will be for the ratable benefit of the Holders of the Warrants,
as their respective rights or interests may appear. The Warrant Agent will
promptly notify the Company in writing of any claim made or action, suit or
proceeding instituted against it arising out of or in connection with this
Agreement.
(e) Instructions from the Company. The Warrant Agent is
hereby authorized and directed to accept written instructions, orders or other
communications, with respect to the performance of its duties hereunder from an
Officer, and to apply to any such Officer for advice or instructions in
connection with the Warrant Agent's duties, and it will not be liable for or in
respect of any action taken, suffered or omitted by it in good faith in
accordance with the instructions of any such Officer.
16
(f) Agents. The Warrant Agent may execute and exercise
any of the rights and powers hereby vested in it or perform any of its duty or
obligation hereunder either itself or by or through its attorneys or agents and
the Warrant Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agent or for any loss to the
Company, any Holder, or any other Person, resulting from such act, default,
neglect or misconduct, absent gross negligence or willful misconduct, as each is
finally determined b a court of competent jurisdiction, in the selection and in
the continued employment of any such attorney or agent.
(g) Other Acts. The Company will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further acts, instruments and assurances as may reasonably be
required by the Warrant Agent in order to enable it to carry out or perform its
duties under this Agreement.
(h) Agreement as Source of Duties. The Warrant Agent will
act hereunder solely as agent of the Company in a ministerial capacity, and its
duties will be determined solely by the expressed provisions hereof.
5.2 Right to Consult Counsel. The Warrant Agent may at any

time consult with legal counsel satisfactory to it (who may be legal counsel for
the Company) and the advice or opinion of such counsel will be full and complete
authorization and protection to the Warrant Agent as to any action taken,
suffered or omitted by it in good faith in accordance with such advice or
opinion.
5.3 Compensation and Reimbursement. The Company agrees to pay

to the Warrant Agent from time to time compensation for all services rendered by
it hereunder as set forth in the attached Exhibit D, and to reimburse the
Warrant Agent for reasonable expenses and disbursements incurred in connection
with the preparation, delivery, execution, amendment and administration of this
Agreement (including the reasonable compensation and expenses of its counsel).
The provisions of this Section 5.3 shall survive the termination of this
Agreement and the resignation or removal of the Warrant Agent. The costs and
expenses incurred in enforcing this right of compensation shall be paid by the
Company.
5.4 Indemnification. The Company agrees to indemnify the
Warrant Agent for, and to hold it harmless against, any loss, liability, damage
judgment, fine, penalty, claim, demand, settlement, cost or expenses incurred
without gross negligence, bad faith or willful misconduct on its part (as each
is finally determined by a court of competent jurisdiction) for any action
taken, suffered or omitted by the Warrant Agent in connection with the
acceptance and administration of this Agreement or the exercise or performance
of its duties hereunder, including, without limitation, the costs and expenses
of defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The indemnity
provided herein shall survive the termination of this Agreement and the
resignation or removal of the Warrant Agent. The costs and expenses incurred in
enforcing this right of indemnification shall be paid by the Company.
5.5 Warrant Agent May Hold Company Securities. The Warrant
Agent and any stockholder, director, officer affiliate or employee of the
17
Warrant Agent may buy, sell or deal in any of the Warrants or other securities
of the Company or its affiliates or have a pecuniary interest in any transaction
in which the Company or its affiliates may be interested, or contract with or
lend money to the Company or its affiliates or otherwise act as fully and freely
as though it were not the Warrant Agent under this Agreement. Nothing herein
will preclude the Company and its affiliates from engaging the Warrant Agent in
any other capacity.
5.6 Change of Warrant Agent. The Warrant Agent may resign and
be discharged from its duties under this Agreement upon 30 calendar days' prior
notice in writing mailed, by registered or certified mail, to the Company. The
Company may remove the Warrant Agent or any successor warrant agent upon 60
calendar days' prior notice in writing, mailed to the Warrant Agent or successor
warrant agent, as the case may be, by registered or certified mail.
Notwithstanding the foregoing, if the Warrant Agent becomes incapable of acting
or is adjudged a bankrupt or insolvent or a receiver of the Warrant Agent or its
property is appointed or any public officer takes control of the Warrant Agent
or its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Company may remove the Warrant Agent immediately. If the
Warrant Agent resigns or is removed or otherwise becomes incapable of acting,
the Company will appoint a successor to the Warrant Agent (the "Successor
Warrant Agent") and will, within 30 calendar days following such appointment,
give notice thereof in writing to each registered Holder of the Warrant
Certificates. If the Company fails to make such appointment within a period of
30 calendar days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent, then the Company agrees to perform the duties of
the Warrant Agent hereunder until a Successor Warrant Agent is appointed. After
appointment, the Successor Warrant Agent will be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the former Warrant Agent will
deliver and transfer to the Successor Warrant Agent any property at the time
held by it hereunder, and execute and deliver any further assurance, conveyance,
act or deed necessary for this purpose. Failure to give any notice provided for
in this Section, however, or any defect therein will not affect the legality or
validity of the resignation or removal of the Warrant Agent or the appointment
of the Successor Warrant Agent, as the case may be.
5.7 Merger or Consolidation or Change of Name of Warrant
Agent. Any Person into which the Warrant Agent or any Successor Warrant Agent
may be merged or with which it may be consolidated, or any Person resulting from
any merger or consolidation to which the Warrant Agent or any Successor Warrant
Agent shall be a party, or any Person succeeding to the business of the Warrant
Agent or any Successor Warrant Agent, shall be the successor to the Warrant
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case at the time such
Successor Warrant Agent shall succeed to the agency created by this Agreement,
any of the Warrant Certificates shall have been countersigned but not delivered,
any such Successor Warrant Agent may adopt the countersignature of the
predecessor Warrant Agent and deliver such Warrant Certificates so
countersigned; and in case at that time any of the Warrant Certificates shall
not have been countersigned, any Successor Warrant Agent may countersign such
Warrant Certificates either in the name of the predecessor Warrant Agent or in
the name of the Successor Warrant Agent; and in all such cases such Warrant
Certificates shall have the full force provided in the Warrant Certificates and
in this Agreement.
18
ARTICLE VI
Rights of Holders
6.1 Holders not Stockholders. No Holder, as such, will be
entitled to vote or to receive dividends or otherwise will be deemed to be the
holder of shares of Common Stock for any purpose, nor will anything contained
herein or in any Warrant Certificate be construed to confer upon any Holder, as
such, any of the rights of a stockholder of the Company or any right to vote
upon or give or withhold consent to any action of the Company (whether upon any
reorganization, issuance of securities, reclassification or conversion of Common
Stock, consolidation, merger, sale, lease, conveyance or otherwise), receive
notice of meetings or other action affecting stockholders (except for notices
expressly provided for in this Agreement) or receive dividends or subscription
rights, unless and until such Warrant Certificate will have been surrendered for
exercise as provided in this Agreement, payment in respect of such exercise will
have been received by the Warrant Agent, and shares of Common Stock will have
become issuable thereunder and such person will have been deemed to have become
a holder of record of such shares. No Holder will, upon the exercise of
Warrants, be entitled to any dividends if the record date with respect to
payment of such dividends will be a date prior to the date such shares of Common
Stock became issuable upon the exercise of such Warrants.
6.2 Claims by Holders. All rights of action in respect of the
Warrants will be vested in the respective Holders; provided, however, that no
Holder will have the right to enforce, institute or maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, the
Warrants, unless (a) such Holder has previously given written notice to the
Company of the substance of such dispute, and the Holders of at least 25% of the
issued and outstanding Warrants have given written notice to the Company of
their support for the institution of such proceeding to resolve such dispute,
(b) such Holder has previously given written notice to the Warrant Agent of the
substance of such dispute and of the support for the institution of such
proceeding and (c) the Warrant Agent has not instituted appropriate proceedings
with respect to such dispute within 30 days following the date of such written
notice to the Warrant Agent, it being understood and intended that the Warrant
Agent has no obligation to institute proceedings and that no one or more Holders
will have the right in any manner whatsoever to affect, disturb or prejudice the
rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any rights of the Holders,
except in the manner described in this Section 6.2 for the equal and ratable
benefit of all Holders. Except as described above, no Holder will have the right
to enforce, institute or maintain any suit, action or proceeding to enforce, or
otherwise act in respect of, the Warrants.
6.3 Control of Litigation. The Bank will retain sole and

exclusive control of the Litigation and will retain 100% of any recovery from
the Litigation. The Holders will not have any right to control or manage the
course or disposition of the Litigation or the proceeds of any recovery
therefrom or any rights against the Company for any decision regarding the
conduct of the Litigation or disposition of the Litigation for an amount less
than the amount claimed in damages in the Litigation, regardless of the effect
on the value of the Warrants.
19
6.4 Determination of Values. The determination of the Board of
the Adjusted Litigation Recovery, the number of shares of Common Stock issuable
upon exercise of a Warrant and the Exercise Price will be final, conclusive and
binding upon the Holders.
ARTICLE VII
Miscellaneous
7.1 Information. So long as any Warrant remains outstanding,

the Company will deliver to the Warrant Agent and the Holders its annual report
to stockholders and any other documents that the Company, in its discretion,
deems appropriate.
7.2 Amendment. This Agreement may be amended by the parties
hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or making any other provisions with respect to matters or
questions arising under this Agreement as the Company and the Warrant Agent may
deem necessary or desirable; provided, however, that such action will not affect
adversely the rights of the Holders. Any amendment or supplement to this
Agreement that has an adverse effect on the interests of the Holders will
require the written consent of the Holders of a majority of the then outstanding
Warrants. The consent of each Holder affected will be required for any amendment
pursuant to which the Exercise Price would be increased or the number of Warrant
Shares purchasable upon exercise of Warrants would be decreased (other than
pursuant to adjustments provided for herein). In determining whether the Holders
of the required number of Warrants have concurred in any direction, waiver or
consent, Warrants owned by the Company or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company will be disregarded and deemed not to be outstanding, except that, for
the purpose of determining whether the Warrant Agent will be protected in
relying on any such direction, waiver or consent, only Warrants which the
Warrant Agent knows are so owned will be so disregarded. Also, subject to the
foregoing, only Warrants outstanding at the time will be considered in any such
determination. Prior to executing any amendment or supplement to this Agreement,
an Officer of the Company shall deliver to the Warrant Agent a certificate that
states that the proposed supplement or amendment is in compliance with the terms
of this Section 7.2.
7.3 Notices. Any notice, request, instruction or other

document to be given hereunder by any party to the other will be in writing and
will be deemed to have been duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the third Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder will be delivered as set forth
below, or pursuant to such other instructions as may be designated in writing by
the party to receive such notice.
20
(a) If to the Company:
Fay L. Chapman
Senior Executive Vice President
Washington Mutual, Inc.
1201 Third Avenue, WMT 1601
Seattle, WA 98101
Telecopy: (206) 961-5739
with a copy to:

David R. Wilson, Esq.
Heller Ehrman White & McAuliffe
701 Fifth Avenue
Seattle, WA 98109
Telecopy: (206) 997-0899
(b) If to Warrant Agent:
Mellon Investor Services LLC

520 Pike Street, Suite 1220
Seattle, WA 98101
Attn: U. Julie Roh
Any notice or communication mailed to a Holder will be mailed to the Holder at

the Holder's address as it appears on the Certificate Register and will be
sufficiently given if so mailed within the time prescribed. Failure to mail a
notice or communication to a Holder or any defect in it will not affect its
sufficiency with respect to other Holders. If a notice or communication is
mailed in the manner provided above, it is duly given, whether or not the
addressee receives it.
7.9 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND

CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
7.5 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY

IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
7.6 Entire Agreement, Etc. (a) This Agreement constitutes the

entire agreement, and supersedes all other prior agreements, understandings,
representations and warranties, both written and oral, between the parties, with
respect to the subject matter hereof, and (b) this Agreement will not be
assignable by operation of law or otherwise, except as provided herein with
respect to any Successor Company or Successor Warrant Agent (any such other
attempted assignment in contravention hereof being null and void).
21
7.7 Counterparts and Facsimile. For the convenience of the
parties hereto, this Agreement may be executed in any number of separate
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts will together constitute the same agreement. Executed
signature pages to this Agreement may be delivered by facsimile and such
facsimiles will be deemed as sufficient as if actual signature pages had been
delivered.
7.8 Captions. The Article, Section and paragraph captions
herein are for convenience of reference only, do not constitute part of this
Agreement and will not be deemed to limit or otherwise affect any of the
provisions hereof.
7.9 Severability. If any provision of this Agreement or the

application thereof to any person (including, without limitation, the officers
and directors of the Warrant Agent and the Company) or circumstance is
determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions hereof, or the application of such
provision to persons or circumstances other than those as to which it has been
held invalid or unenforceable, will remain in full force and effect and will in
no way be affected, impaired or invalidated thereby, so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination, the parties
will negotiate in good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.
7.10 No Third-Party Beneficiaries. Nothing contained in this
Agreement, expressed or implied, is intended to confer upon any Person other
than the parties hereto, any benefit, right or remedies.
7.11 Successors. All agreements of the Company in this

Agreement and the Warrant Certificates will bind its successors. All
agreements of the Warrant Agent in this Agreement will bind its successors.
[Remainder of Page intentionally left blank]
22
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
By: /s/ Fay L. Chapman
Name: Fay L. Chapman

Title: Senior Executive Vice President
MELLON INVESTOR SERVICES LLC

as Warrant Agent,
By: /s/ U. Julie Roh
Name: U. Julie Roh

Title: Assistant Vice President
23
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]

[Unless and until it is exchanged in whole or in part for Warrants in definitive
form, this Warrant may not be transferred except as a whole by the depositary to
a nominee of the depositary or by a nominee of the depositary to the depositary
or another nominee of the depositary or by the depositary or any such nominee to
a successor depositary or a nominee of such successor depositary. The Depository
Trust Company ("DTC") (55 Water Street, New York, New York) will act as the
depositary until a successor will be appointed by the Company and the Warrant
Agent. Unless this certificate is presented by an authorized representative of
DTC to the issuer or its agent for registration of transfer, exchange or Amount
Recovered, and any certificate issued is registered in the name of Cede & Co. or
such other name as requested by an authorized representative of DTC (and any
Amount Recovered is made to Cede & Co. or such other entity as is requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]*

LITIGATION TRACKING WARRANT
No.
~~~~~
Certificate for ~~~~~~~~Litigation Tracking Warrants to
Purchase Shares of Common Stock
of Washington Mutual, Inc.
THIS CERTIFIES THAT, ~~~~~~~~~, or registered assigns, is the registered holder
of the number of Litigation Tracking Warrants set forth above (the "Warrants").
Each Warrant entitles the holder thereof (the "Holder"), at its option and
subject to the provisions contained herein and in the Warrant Agreement referred
to below, to purchase from Washington Mutual, Inc. (the "Company"), successor by
merger to DIME BANCORP, INC., a Delaware corporation ("Dime"), the number of
shares of Common Stock ("Warrant Shares"), no par value per share, of the
Company (the "Common Stock") equal to the Adjusted Litigation Recovery divided
by the product of (1) the Adjusted Stock Price, multiplied by (2) the Maximum
Number of Warrants, multiplied by (3) the Dime Exchange Ratio (1.1232), at an
exercise price per Warrant equal to the number of shares of Common Stock for
which one Warrant is exercisable multiplied by the Exercise Price, if any. This
Warrant Certificate will terminate and become void on the earliest of (i) the
Close of Business on the last day of the Warrant Exercise Period, (ii) the Close
of Business on the date the Litigation has been disposed of in a manner such
that no shares of Common Stock or other securities or property will be issuable
under the terms of the Warrants and (iii) the time and date such Warrant is
exercised.
* To be included only if the Warrant is in global form.

A-1
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions
contained in a 2003 Amended and Restated Warrant Agreement dated as of March 11,
2003 as such agreement may be amended from time to time (the "Warrant
Agreement"), between the Company, as successor to Dime, and Mellon Investor
Services LLC, as successor to EquiServe Trust Company, N.A. and EquiServe
Limited Partnership, as warrant agent (in such capacity, the "Warrant Agent",
which term includes any successor Warrant Agent under the Warrant Agreement), to
all of which terms and provisions the Holder of this Warrant Certificate
consents by acceptance hereof. The Warrant Agreement is hereby incorporated
herein by reference and made a part hereof. Reference is hereby made to the
Warrant Agreement for a full statement of the respective rights, limitations of
rights, duties and obligations of the Company, the Warrant Agent and the Holders
of the Warrants. Capitalized terms used but not defined herein will have the
meanings ascribed thereto in the Warrant Agreement. A copy of the Warrant
Agreement may be obtained for inspection by the Holder hereof upon written
request to the Warrant Agent.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part by surrender of this Warrant Certificate with the
form of election to purchase Warrant Shares attached hereto duly executed and
with the simultaneous payment of the Exercise Price in cash (subject to
adjustment) to the Warrant Agent for the account of the Company at the office of
the Warrant Agent. Payment of the Exercise Price will be made by certified or
official bank check or personal check payable to the order of the Company or by
wire transfer of funds to an account designated by the Company for such purpose.
No fractional Warrant Shares will be issued upon the exercise of any Warrant,
but the Company will pay cash in lieu of a fractional share as provided in the
Warrant Agreement.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, each Warrant will be exercisable at any time from
and from time to time during the Warrant Exercise Period only and will not be
exercisable after the expiration of the Warrant Exercise Period.
The Warrant Agreement provides that upon the occurrence of certain

events the number of Warrant Shares may be, subject to certain conditions,
adjusted.
The Company may require payment of a sum sufficient to pay all taxes
and other governmental charges in connection with the transfer or exchange of
the Warrant Certificates.
The holder in whose name the Warrant Certificate is registered may be

deemed and treated by the Company and the Warrant Agent as the absolute owner of
the Warrant Certificate for all purposes whatsoever and neither the Company nor
the Warrant Agent will be affected by any notice to the contrary.
The Warrants represent a contingent right to purchase shares of Common

Stock with an aggregate value based on a portion of any proceeds that may be
received by the Bank from the Litigation. There can be no assurance as to when
the Litigation will be resolved or the amount of proceeds, if any, the Bank or
the Company will receive therefrom. The Holders will not have any right to
control or manage the course or disposition of the Litigation or the proceeds of
any recovery therefrom.
A-2
The Warrants do not entitle any holder hereof to any of the rights of a
holder of any Common Stock or Preferred Stock of the Company.
This Warrant Certificate will not be valid or obligatory for any
purpose until it will have been countersigned by the Warrant Agent.
By
[SEALI
Attest:
Secretary
DATED:
Countersigned:
[~~~~~~~~~~~~~~~l
as Warrant Agent,
by~~~~~~~~~~~~~~~~~
Authorized Signatory
A-3
EXHIBIT B
FORM OF ELECTION TO PURCHASE WARRANT SHARES

(to be executed only upon exercise of Warrants)
The undersigned hereby irrevocably elects to exercise [ ] Warrants at an

exercise price per Warrant of $[ ] to acquire [ ] shares of Common Stock, no par
value per share, of Washington Mutual, Inc. (the "Company"), on the terms and
conditions specified in the within Warrant Certificate and the Warrant Agreement
therein referred to, surrenders this Warrant Certificate and all right, title
and interest therein to the Company, and directs that the shares of Common Stock
deliverable upon the exercise of such Warrants be registered and delivered in
the name and at the address specified below and delivered thereto.
Date:
(Signature of Owner)*
(Street Address)
(City) (State) (Zip Code)
Signature Guaranteed by:
* The signature must correspond with the name as written upon the face
of the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national bank or
trust company or by a member firm of any national securities exchange.
B-1
Securities and/or check to be issued to:
Name:
Social security or Federal tax identification number:
S t r e e t A d d r e s s :
City State and Zip Code:
Any unexercised Warrants evidenced by the within Warrant Certificate to be

issued to:
Name:
Social security or Federal tax identification number:
S t r e e t A d d r e s s :
City State and Zip Code:
B-2
EXHIBIT C
The following exchanges of a part of this Global Warrant for definitive Warrants
have been made:
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Washington

Mutual, Inc. (the "Company")
This Certificate relates to ~~~~~~~~~~~~Warrants held in definitive

form by (the "Transferor").
The Transferor has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants. The Warrant Agent and the
Company are entitled to rely upon this Certificate and are irrevocably
authorized to produce this Certificate or a copy hereof to any interested party
in any administrative or legal proceedings or official inquiry with respect to
the matters covered hereby.
[INSERT NAME OF TRANSFEROR]
by
Date:
C-1
Created by Morningstar® Document Research

http://documentresearch.morningstar.com
ASAP / Rush
Order ID: 1331938
Group ID: 94454
Group #: 1 / 1
www.researchsolutions.com Ordered: 10.19.2010
1.866.WE.FIND.IT
Client Reference
99980.2100-5183
Citation
International directory of company histories, 1995; 10: 91-95 +Cover+Copyright

[No Title Given]
Kepos, P
0912289104
Notes
We're in the office: 6am-6pm (PT) | 7am-7pm (MT) | 8am-8pm (CT) | 9am-9pm (ET)
NOTICE: This material MAY BE PROTECTED by title 17 of the U.S. Copyright Code. For
additional information please visit the Copyright Clearance Center (www.copyright.com) and
Research Solutions (www.researchsolutions.com/copyright-policy.php).
IN THE ,UNITED STATES COURT OF FEDERAL CLAIMS
ANCHOR SAVINGS BANK, FSB

1420 Broadway
Hewlett, N.Y. 11557
CiviL Action No.
Plaintiff,
v.
THE UNITED STATES,
Defendant.
COMPLAINT
Plaintiff Anchor Savings Bank, FSB ("Anchor"), through

its undersigned counsel, files this Complaint against defendant
the United States, and states as follows:
NATURE AND SUMMARY OF THIS ACTION

1. This is an action for breach of contract,
restitution and deprivation of property without just compensation
or due process of law. Plaintiff Anchor's claims are based upon
(1) its written contracts with the Federal Savings and Loan
Insurance Corporation ("FSLIC"), an agency of the United States;
tne breach, frustration and abrogation of those contracts by
the United States ("United States" or "government"), acting
through various agencies and officials; and (3) other government

conduct resulting from or related to the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989 (Act of August 9,
1989, Public Law 101 -73, 103 Stat 183; "FIRREA"), regulations
promulgated under FIRREA (particularly 12 C.F.R. Part 567), and
WAMAIN Doc: 106447.7

acts and omissions of government agencies and officials relating
to FIRREA and the FIRREA regulations.
2. For relief, Anchor seeks (a) restitution of the

amount of the benefit it bestowed upon FSLIC pursuant to and in
accordance with Anchor's contracts with FSLIC; (b) restitution of
other benefits conferred upon the United States pursuant to the
contracts, which constitute unjust enrichment of the United

States at Anchor's expense; (c) damages to compensate Anchor for
the government's breach, frustration and abrogation of the
contracts, the unconstitutional taking of Anchor's property, and
the other unlawful government conduct described below; and (d)
other appropriate relief.
3. In summary, this case involves deliberate conduct

oy tne government in reneging on specific fundamental contractual
commitments made to Anchor in connection with Anchor's
acquisition of eight failed or failing FSLIC insured savings
institutions. Four of the acquisitions were effected with direct
financial assistance provided by the FSLIC (the "Assisted
Acquisitions"). Anchor acquired the other four of the failing
institutions without FSLIC financial assistance in transactions
arranged by the FSLIC to prevent losses to the FSLIC insurance
fund (the "Supervisory Acquisitions").
4. In the Assisted Acquisitions, Anchor acquired four

failing savings institutions between December 17, 1982 and
December 31, 1985 pursuant to explicit written agreements with
the FSLIC. The four Assisted Acquisitions involved First Federal

Savings and Loan Association of Crisp County, Georgia ("First
WAMA1N Doc: 106447.7 2

Federal"); Peachtree Federal Savings and Loan Association ("
Peachtree"); Suburban Savings and Loan Association ("
Suburban"); and Sun Federal Savings and Loan Association ("
Sun").
5. Each Assisted Acquisition was the subject of an

express contract composed of a series of documents:
assistance agreement, a forbearance letter, resolutions of the

Federal Home Loan Bank Board ("FHLBB") as operating head of the
FSLIC, and related contemporaneous documents exchanged by Anchor
and the FSLIC.
6. In the assistance agreements, the FSLIC agreed to

provide cash, notes, and/or other financial assistance (or
various combinations thereof). In each of the Assisted
Acquisitions, Anchor agreed to assume liabilities for FSLIC
insured deposits far in excess of the value of the assets
received.
7. As a condition of incurring the excess liabilities

in the Assisted Acquisitions, Anchor insisted that such excess be
treated as "goodwill" and amortized over terms of 35, 40, and 40
years in the Suburban, First Federal, and Peachtree deals,
respectively, and, in the case of Sun, on an asset-by-asset basis
under Statement of Financial Standards ("FAS") No. 72 for periods
of from five to 19 years, respectively for the purpose of
determining Anchor's regulatory capital. In each case, the FSLIC
agreed to and, indeed, required such accounting treatment.
Anchor relied on the government's contractual commitment in
deciding to proceed with each Assisted Acquisition.
WANLMNDoc106447.7 3
8. In the case of the four Supervisory Acquisitions
effected by Anchor between March 31, 1983 and August 15, 1984,
the FSLIC provided no financial assistance but, again, Anchor, in
reliance on the contractual commitment of the government, agreed
to assume liabilities far in excess of the assets it received.
In each acquisition, the government and Anchor agreed that the
goodwill created from Anchor's acquisition would be included in

determining Anchor's regulatory capital for periods determined in
accordance with GAAP, up to 40 years in the case of Standard.
9. The government, in 1989, abrogated those
commitments, among others. The government's conduct is

particularly unconscionable because the contractual promises at
issue were intended by the government, and, in fact, operated as
inducements to Anchor, a strong and healthy federaily insured
savings association ("thrift institution"), to make the
acquisition of other FSLIC insured institutions that were weak
and failing.
10. Anchor's Assisted and Supervisory Acquisitions

relieved the government of the financial and administrative
burden of resolving the failures of eight FSLIC-insured
institutions. In each of the Assisted Acquisitions, the FSLIC
was required to and did determine that the cost of the resolution
was less than the cost that would have been incurred by the FSLIC
had it liquidated the failing institution (12 U.S.C.
1729(f)(4), (1982)). Further, the FSLIC was required "in

considering authorizations [for emergency interstate transactions
such as the Assisted Acquisitions to] give consideration to the
WAMAIN Doc: 106447.7 4

need to minimize the cost of financial assistance . . . ." (12
U.S.C. § 1730a(m)(3)(B) (1982)).
11. Not only did the Assisted Acquisitions save the

FSLIC money when compared to the cost of liquidating the failing
thrifts, they saved money when compared to resolutions effected
by the FSLIC before mid-1982. In resolutions effected prior to
that date, the FSLIC assistance more nearly equalled the deficit
in the failing institution's assets. For example, in 1981,

Anchor had acquired two other failing thrifts [Guardian and New
York & Suburban] with FSLIC assistance. In those two
transactions, the FSLIC discharged its obligations, although the
relative cost to the FSLIC was higher than in the Assisted
Acquisitions. The cost of the Assisted Acquisitions was lower by
comparison because Anchor, not the FSLIC, absorbed the losses
from the failing institutions.
12. In the case of Suburban, the largest of the

Assisted Acquisitions, Anchor took on liabilities that exceeded
Suburban's assets by over $400 million. The FSLIC provided cash
of $50,875,000 at closing and, according to an FHLBB Press
Release dated August 30, 1983, projected no further costs related
to Suburban.
13. By comparison, the total of the insured deposits

held by the four failing institutions taken over by Anchor in the
Assisted Acquisitions by Anchor after 1981, at the respective
dates of acquisition, was $2.292 billion. Similarly, the total
of the insured deposits of the four failing institutions acquired
by Anchor in the Supervisory Acquisitions was $582.0 million.

14. In each case, an explicit condition of Anchor's
willingness to burden itself with the assets and liabilities of a
failing institution was that the transaction have a specific,
agreed effect on Anchor's regulatory capital through the
application of certain mutually agreed and accepted accounting
procedures. Anchor's contracts with FSLIC set forth the terms
and conditions pursuant to which the government could and did
induce Anchor to acquire the failing thrifts and they became
conditions in the required FSLIC approvals of the acquisitions.
The contracts expressly incorporated the government's commitment
that Anchor could count the goodwill created in the acquisitions
as an asset in its books and records for regulatory capital
purposes and amortize the goodwill over agreed-upon periods.
15. In addition to promising that Anchor could

amortize goodwill over 35 years, in the Suburban acquisition, the
FSLIC required Anchor to issue a security, the Income Capital
Certificate ("ICC"), to the FSLIC in exchange for a promissory
note of the same principal amount issued by the FSLIC. lt was

agreed that the ICC, which was a new type of security created to
be issued to the FSLIC in assisted acquisitions specifically to
bolster the acquirer's regulatory capital, would be included in
computing Anchor's regulatory capital. Indeed, the United States
expressly required and agreed that Anchor count the goodwill and
the ICC as acceptable regulatory capital.
16. The inclusion of goodwill in computing capital was

consistent with generally accepted accounting principles ("GAAP")
then in effect, and neither Anchor nor FSLIC would have or could

have approved the contracts or Anchor's acquisition of the
failing thrifts unless the goodwill resulting from each
acquisition and the ICC would be included by Anchor in
calculating its regulatory capital. Without including the
goodwill and the ICC, Anchor's own regulatory capital levels
would have fallen below the required minimum level and, indeed,
Anchor would have become insolvent, for regulatory purposes. The
government's contractual promises thus were the sine aua non of
the Assisted Acquisitions and the Supervisory Acquisitions by
which the government sought to, and did, dramatically reduce its
financial obligations.
17. Pursuant to the contracts, Anchor conferred

benefits upon the United States in an aggregate amount at least
equal to losses and expenses that would otherwise have been
incurred by the FSLIC.
18. Anchor would not have agreed to acquire the failed

thrifts unless the government had agreed to permit the goodwill
and the ICC (or preferred stock) to be included in its capital
and permitted the goodwill to be amortized over periods of up to
40 years. FSLIC would not have approved the acquisitions if the
effect would have been to render Anchor insolvent. The
government agreed that, for regulatory capital purposes, Anchor
could continue to amortize the goodwill over periods of up to 40
years respectively.
19. Anchor has fully and faithfully performed all its

obligations under the contracts.
WANIAINDocAk447.7
20. The United States, however, has repudiated and
breached its fundamental contractual commitments concerning the
approval of and requirement to include Anchor's goodwill for
extended periods and the ICC in calculating its regulatory
capital. As a result of FIRREA, the FIRREA regulations, and
government conduct following FIRREA, tho United StatAg now
requires contrary to the contractual commitments lt made to
Anchor, and contrary to GAAP -- that the goodwill created from
Anchor acquisitions not be counted as an asset for regulatory
capital purposes. In addition, the Cumulative Preferred Stock,
into which the ICC was ultimately converted when Anchor became a
stock-type savings bank in 1987, was not eligible for inclusion
in either core or tangible capital for regulatory purposes after
FIRREA.
21. The effect of the government's repudiation of its

commitments and directives to Anchor was to cause Anchor's
regulatory capital position to be radically altered from that of
an institution that significantly exceeded its regulatory capital
requirements to one with a significant regulatory capital
deficit. On December 5, 1989, before implementation of the
Office of Thrift Supervision's ("OTS") FIRREA Capital Regulation
(12 C.F.R. Part 567), Anchor's regulatory capital requirement was
approximately $306 million. Anchor's capital, computed in
accordance with its agreements with the government, exceeded $492
million. At that time, Anchor's regulatory capital was, thus,

approximately $186 million in excess of the requirement.

22. After giving effect to the OTS FIRREA Capital
Regulation, Anchor was subjected to three new requirements which
did not allow it to include all the goodwill created in the
acquisitions (or the ICC) in determining its regulatory capital.
Its new tangible capital requirement was approximately $124
million and it had a negative tangible capital of approximately
$205 million, producing a tangible capital deficit of over $329
million. Anchor's new leverage capital requirement was
approximately $251 million. Deprived of the assets agreed to by
the government, Anchor's total leverage capital was a negative
$81.1 million, producing a deficit of over $332 million.
Anchor's new risk-based capital requirement was $281 million and
Anchor's risk-based capital was a negative $81 million, producing
a deficit of over $361 million.
23. If Anchor had been able to include all of its

supervisory goodwill and the ICC in computing its regulatory
capital as it has been promised, Anchor's capital would have
exceeded each of the new regulatory capital requirements.
24. Even though the government repudiated its promises

to Anchor, GAAP still permits Anchor to include goodwill in
determining its shareholders' equity. At June 30, 1994, Anchor
still had over $94 million in goodwill on its GAAP books, despite
having sold many of the acquired assets in its effort to reduce
its regulatory capital requirements and increase its regulatory
capital.
25. Anchor was seriously harmed by the government's

breaches. Prior to the enactment of FIRREA, Anchor exceeded its
WANIAINDoc1064417.7 9
regulatory capital requirements, while as a direct result of
appiicable provisions immediately after its passage and the
promulgation of regulations thereunder which repudiated the
government's promises to Anchor, Anchor was at least $329 million
below its minimum regulatory capital requirements. In order to
avoid being closed by the government and to achieve capital
compliance, Anchor was forced, among other things, to seil

branches and earning assets, to reduce its size, to exchange its
loan portfolio for a lower yielding but lass risky portfolio of
mortgage-backed securities, immediately to seil a valuable

subsidiary under distress-sale conditions, and to go through the
expensive and otherwise unnecessary formation of a holding
company.
26. In addition, as a direct and foreseeable result of

the government's repudiation of its contractual promises to
Anchor which caused Anchor to be undercapitalized, Anchor was
subjected to substantially increased costs of doing business and
precluded from accessing the capital markets. Anchor was
prevented from engaging in existing profitable lines of business
and from taking advantage of significant opportunities which were
consistent with Anchor's pre-FIRREA plans. These improperly

imposed constraints, costs and lost opportunities have placed
Anchor in a financially weaker position than it would have
occupied had the government not repudiated its promises.
27. The government's conduct represents a fundamental

breach, frustration and abrogation of the contracts, and
constitutes a deprivation of Anchor's valuable property in
WAMAIN Doc: 106447.7 10

violation of applicable constitutional requirements. For that
unlawful government conduct, Anchor seeks relief in this action
in the form of compensation for the damages Anchor suffered as a
proximate result of the government's repudiation, restitution of
the benefit Anchor bestowed upon the government, and such other
relief as is warranted by the proof adduced.
JURISDICTION
28. This court has jurisdiction over the subject
matter of this action under 28 U.S.C. § 1491(a).
THE PARTIES
29. Anchor is a federally-chartered savings bank, with
its home office in Hewlett, New York. Anchor commenced
operations in 1868 as a New York state-chartered mutual savings
bank, and converted in 1980 to a federally-chartered mutual
savings bank. Pursuant to the approval of the Federal Home Loan
Bank Board ("FHLBB"), Anchor converted from mutual to stock form
on or about April 1, 1987. Anchor's business is, and at all
times relevant to this action has been, primarily devoted to the
financing of single-family residential housing. As of March 31,
1989, Anchor held approximately $5.8 billion in mortgage loans
and mortgage-backed securities secured by residential loans, and
had provided approximately $7 billion in residential mortgage
loans since 1983.
30. Suburban Savings and Loan Association ("Suburban")

was, until its merger into Anchor effective August 31, 1983, a
state-chartered savings and loan association based in New Jersey.
Suburban's deposit accounts were insured by the FSLIC.
WAMAIN Doc: 106447.7 11

31. Guardian Federal Savings & Loan Association (
"Guardian") was, until its merger into Anchor effective April
30, 1981, a federally-chartered savings and loan association
based in New York. Guardian's deposit accounts were insured by
the FSLIC.
32. New York and Suburban Federal Savings and Loan (

"New York & Suburban") was, until its merger into Anchor
effective May 29, 1981, a federally-chartered savings and loan
association based in New York. New York & Suburban's deposit
accounts were insured by the FSLIC.
33. First Federal Savings and Loan Association of

Crisp County ("First Federal") was, until its merger into Anchor
effective December 17, 1982, a federally-chartered savings and
loan association based in New York. First Federal's deposit
34. Peachtree Federal Savings and Loan Association ("

Peachtree") was, until its merger into Anchor effective
December 17, 1982, a federally-chartered savings and loan
association based in Georgia. Peachtree's deposit accounts were
insured by the FSLIC.
35. Standard Federal Savings and Loan Association (

"Standard Federal") was, until its merger into Anchor effective
March 21, 1983, a federally-chartered savings and loan
association based in Georgia. Standard Federal's deposit
36. Tri-City Federal Savings and Loan Association (

"Tri-City") was, until its merger into Anchor effective July 1,
WAMAINDoc106447.7 12
1983, a federally-chartered savings and loan association based in
Georgia. Tri-City's deposit accounts were insured by the FSLIC.
37. Heritage Federal Savings and Loan Association (

"Heritage") was, until its merger into Anchor effective
September 30, 1983, a federally-chartered savings and loan
association based in New York. Heritage's deposit accounts were
38. United Federal Savings and Loan Association of

Waycross ("United") was, until its merger into Anchor effective
August 15, 1984, a federally-chartered savings and loan
association based in Georgia. United's deposit accounts were
39. • Sun Federal Savings and Loan Association ("Sun

Federal") was, until its merger into Anchor effective December
31, 1984, a federally-chartered savings and loan association
based in Florida. Sun Federal's deposit accounts were insured by
the FSLIC.
40. The FSLIC was an agency of the United States until

abolished by FIRREA in 1989. FSLIC insured the accounts of
depositors up to $100,000 in certain savings institutions,
including Suburban, Guardian, New York & Suburban, First Federal,
Peachtree, Standard Federal, Tri-City, Suburban Federal,
Heritage, United, Sun Federal and Anchor, and the FSLIC also
enforced compliance by such institutions with various regulatory
requirements designed to safeguard FSLIC's deposit insurance
fund.
WAMA1N Doc: 106447.7 13

41. The FHLBB was an agency of the United States until
abolished by FIRREA. FHLBB was charged with, among other things,
chartering, regulating, and supervising federally-chartered
savings and loan associations and savings banks, acting as the "
operating head of FSLIC", enforcing compliance by such
institutions with various regulatory requirements, and approving
merger agreements and applications for failing thrifts.
42. The Federal Deposit Insurance Corporation ("FDIC") is

an agency of the United States. Under FIRREA, FDIC is
designated as the successor to FSLIC for certain purposes
relevant to this action.
43. The OTS is an agency and the Director of OTS is an
officer and agent of the United States. Under FIRREA, OTS and
its Director are designated as the successor to FHLBB for
purposes relevant to this action and the OTS and its Director are
designated as the successor to the FSLIC for certain purposes
relevant to this action.
FIRREA
44. FIRREA required the Director of the OTS to "
promulgate final regulations" within 90 days after FIRREA's
enactment to establish three new capital requirements. (FIRREA
Section 301, Section 5(t)(1) of the Home Owners' Loan Act of
1933, as amended ("HOLA"), 12 U.S.C. § 1464(t)(1)). The new
capital requirements were to be "no less stringent than the

capital standards applicable to national banks." (Id.)
45. The OTS regulations were to require the exclusion

of all "unidentifiable intangible assets", including goodwill,
WAMAIN Doc: 106447.7 14

from capital. (HOLA S 5(t)(9), 12 U.S.C. S 1464(t)(9)). A
transitional rule, recognizing the effect of the exclusion on the
government's promises concerning goodwill in supervisory cases,
permitted very limited amounts of supervisory goodwill (initially
not more than 1.5% of assets) to be included in regulatory
capital for a limited period but required total elimination of
all supervisory goodwill from regulatory capital after December

31, 1994. (HOLA S 5(t)(3), 12 U.S.C. S 1464(4)(3)).
46. FIRREA provides that it "shall not affect the

validity of any right, duty, or obligation of the United States,
the [FSLIC, the FHLBB,] or any other person" which arose under
the FSLIC's authorizing statute prior to FIRREA (FIRREA § 401(
f)(1)). FIRREA further provides that "all orders, resolutions,
determinations, and regulations [of the FSLIC and the FHLBB
issued prior to FIRREA] shall continue in effect according to [
their terms] and shall be enforceable by or against" the FDIC or
the Director of OTS, as the case may be, until terminated or

superseded "in accordance with law." (FIRREA § 401(h)).
STATEMENT OF FACTS
Factual Background
The Thrift Industry and the Thrift Crisis
47. The thrift industry (composed of savings and loan
associations and savings banks) in the United States has, since
the Great Depression, been a subsidized legislative creation to
facilitate home ownership. The thrift industry has been subject
to comprehensive regulatory control.
WAMAIN Doc: 106447.7 15

48. In order to provide finance for residential
housing, Congress enacted three primary statutes that have
controlled the thrift industry. In 1932, Congress enacted the
Federal Home Loan Bank Act ("FHLBA") which created the Federal
Home Loan Bank System to provide subsidized sources of funding to
home mortgage lenders. (Act of July 22, 1932, 47 Stat. 725, 12
U.S.C. SS 1421, et. seq.) In 1933, Congress enacted the HOLA

which authorized the FHLBB to charter federal savings and loan
associations to provide a uniformly regulated national system of
housing lenders. (Act of June 13, 1933, 48 Stat. 128, 12 U.S.C.
SS 1461 t sea.) In 1934, Congress enacted Title IV of the
National Housing Act which created the FSLIC to insure accounts
and authorized the FSLIC to examine state-chartered, federally
insured savings associations. (Act of June 27, 1934, 48 Stat.
1255, 12 U.S.C. SS 1724 et. seq).
49. The industry remained largely unchanged until the late

1970s. In 1977, federal savings and loan associations had very
limited powers. They were allowed to make loans secured by
savings accounts, to make loans secured by first liens on
residential property located within 100 miles of their home
office or in the state where the home office was located up to
$55,000 per dwelling, and, subject to percentage limitations and
other conditions to invest in certain conservative investments.

Their funding was heavily dependent on passbook savings with
limited certificate of deposit funding. The interest rates which
thrifts could pay were limited by Regulation Q of the Federal
Reserve Board ("FRB").
WAMAIN Doc: 106447.7 16

50. On June 1, 1978, banks and thrifts were allowed to
offer money market deposits to compete with money market mutual
funds, however, thrifts were limited in the amount of interest
that could be paid to one quarter of one percent over the
Treasury bill rate. At December 31, 1978, pursuant to Regulation
Q, thrifts were limited to 8 percent as a maximum interest rate
on certificates of deposit of eight years or more with lower

rates for shorter term instruments (and up to 9.66 percent on the
then newly authorized money-market time deposits). At December
31, 1978, over 82 percent of the assets of federally insured
savings and loan associations were in mortgage loans that, on
average, yielded 8.47 percent in interest according to the FHLBB.
Starting in 1978, the upward pressure on interest rates led to

significant changes in government policy that had a disastrous
effect on the thrift industry.
51. At the October 1979 meeting of the Open Market

Committee of the Board of Governors of the Federal Reserve
System, a decision was taken to change monetary policy to combat
inflation rather than attempting to restrict interest rates. As
a result, the FRB permitted interest rates to rise dramatically
over the next several months so that the prime rate on May 22,
1981 reached 20.5 percent.
52. On January 1, 1979, there were 4,048 FSLIC-insured
institutions of which 10 were insolvent and 194, while solvent,

had less than 3 percent net worth. On January 1, 1983, the
number of institutions was down to 3,287 of which 222 were
insolvent and another 916 had less than 3 percent net worth.
WAMAIN Doc: 106447.7 17

This massive list of failures was produced because the thrifts
had to pay more to attract funds as deposits than they could earn
on their mortgage loans. The decline in capital occurred without
marking-to-market the heavily underwater mortgage loans that
comprised 80 percent of their portfolio.
53. The FSLIC was obligated to insure any losses

incurred by depositors (up to the maximum amount which was raised
in 1980 to $100,000 per insured depositor). At December 31,
1979, the FSLIC had aggregate reserves of approximately $5.8
billion representing approximately 1.269 percent of insured
liabilities. The FSLIC could not deal with the impending
failures with its available cash reserves.
54. During 1981, the FSLIC provided financial

assistance in the cases of 30 failed savings and loan
associations that were resolved in 23 separate transactions. In
the 7 cases resolved during the first five months of the year,
the FSLIC provided assistance equal to the shortfall in the
failed institutions' assets so that, on acquisition, the assets
acquired were roughly equal to the liabilities assumed by the
acquiring institution. During the first five months of 1981, the
FSLIC incurred a total cash outlay of approximately $932.8
million in resolving 7 problem cases with total assets of $1.538

billion. Thus, the total outlay amounted to 60.6 percent of
total assets and, according to the FSLIC's own computations, the
total net cost was $344 million or 22.4 percent of assets.
WAMAIN Doc: 106447.7 18

The FSLIC Action Plan
55. Intthe middle of 1981, the FSLIC embarked on a new
method of resolving failures which included the use of income
capital certificates, interstate mergers, and a dramatic
reduction in the infusion of FSLIC cash. The 23 cases resolved
during the last seven months of 1981 held over $12.3 billion in
assets and involved a total outlay of less than $64 million or

0.5 percent of assets, with a total present value estimated cost
of $633 million or 5.1 percent of total assets.
56. The reduction in cost, which was necessary for the

survival of the FSLIC, was accomplished by inducing institutions
like Anchor to participate in acquisitions in which they received
a small amount of cash in relation to the liabilities assumed.
The financial assistance provided by the FSLIC did not make up
for the significant deficiency in the assets the acquirors
received when compared with the liabilities they assumed.
Rather, the difference was made up on the acquiror's balance
sheets by the creation of goodwill in an amount equal to the
J I l i e r e n c e b e t w e e n t h e fair market value of the liabilities
assumed and the assets acquired on the date of the acquisition (

which is the minimum amount saved by the FSLIC under its action
plan) and, on occasion, by the issuance of securities such as the
ICC.
57. The FSLIC-sponsored acquisitions were to be

accounted for under the "purchase method" of accounting. Under
purchase accounting (which, under GAAP, is applied to all
corporate mergers in all industries, except those which meet a
WAMAIN Ilke: 10E447.7 19

series of tests to qualify for pooling-of-interests accounting
treatment), the book values of the tangible assets and
liabilities of an acquired entity are adjusted to fair value ("
marked to market") on the date of the acquisition. Any excess in
the cost of the acquisition over the market value of assets
acquired is recorded as "goodwill" an the books of the acquiring
institution.
58. FSLIC had two primary goals in structuring its

supervisory and assisted acquisitions from mid-1982 through 1985:
the early and permanent resolution of as many insolvent
institutions as possible and the preservation of FSLIC's already
scarce assets. Delay in resolving failing institutions simply
increased the ultimate cost of resolution. The failure of one of
the two major deposit insurance funds would have had a
deleterious effect on the entire economy, not just the thrift
industry.
59. Anchor's acceptance of the government's

inducements and reliance on the government's promises in
acquiring the eight failing institutions were reasonable.
Although slow to react to the plight of the FSLIC, all involved
elements of the government were aware, and supportive of the
FSLIC's action plan in the mid-1980's. The National Commission
on Financial Institution Reform, Recovery and Enforcement (the "
Commission") was established by the Comprehensive Crime Control
Act of 1990 (Public Law 101-647) to examine the causes of the
savings and loan crisis that led to the enactment of FIRREA. In
WAMAIN Doc: 106447.7 20

its report to the President and Congress of the United States
dated July 27, 1993 (the "Report"), the Commission stated:
In a series of steps, beginning with

continuing forbearance in 1982, the federal
government sought to avoid the costs of
widespread S&L failures. But with each step,
the costs grew larger and the problems more
intractable.
Report at 3.
60. The FHLBB and the FSLIC published numerous rules
and guidelines addressing the treatment of supervisory (including
assisted) mergers, the treatment of capital instruments like the
ICC, and the accounting methods to be employed. For example:
• From 1973, the FHLBB's regulations have required

that FSLIC-insured institutions prepare reports to
the FSLIC on the basis of GAAP, except to the
extent that the FSLIC explicitly requires
otherwise. (12 C.F.R. § 563.23-3)
• The FSLIC regulation controlling mergers,
consolidations, and purchases of assets and
assumption of liabilities exempted transactions "
instituted for supervisory reasons" from
significant requirements. (12 C.F.R. § 563.22(d),
43 Fed. Reg. 47159, 47162, October 12, 1978)
• On December 15, 1980, the FHLBB promulgated final
regulations authorizing the inclusion of Mutual
Capital Certificates in the regulatory capital of
certain savings institutions, as mandated by
Congress in the Depository Institutions
Deregulation and Monetary Control Act of 1980 (
Pub. L. No. 96-221, 94 Stat. 132 "DIDMCA"). (45
Fed. Reg. 82154, Dec. 15, 1980)
• On June 9, 1981, the FHLBB promulgated regulations
that authorized the FHLBB to waive the provisions
of its regulations governing the merger of
federally chartered savings associations in the
case of transactions "deemed necessary to avert
insolvency or imminent failure of an
association . . . ." (12 C.F.R. § 552.15, 46 Fed.
Reg. 30488, June 9, 1981)
• On August 13, 1981, the FHLBB adopted Resolution
No. 81-463 which withdrew previously promulgated
WAMAIN Doc: 106447.7 21

proposed regulations that would have had the
effect of precluding the use of GAAP in connection
with mergers of savings institutions. The FHLBB
indicated that it would consider the capital
effect of purchase accounting on a case-by-case
basis rather than through the adoption of
regulations more restrictive than GAAP. (A copy
of Resolution 81-463 is appended hereto as Exhibit
A and incorporated herein by this reference as
though set forth in full.)
• On September 1, 1981, the FHLBB issued R
Memorandum 31b to the professional staff of its
Office of Examinations and Supervision confirming
that "accounting for goodwill in accordance with
GAAP is acceptable." R Memorandum 31b indicated
that ft]he period of amortization should not,
however, exceed forty years." (A copy of R
Memorandum 31b is appended hereto as Exhibit B and
incorporated herein by this reference as though
set forth in full.)
• On September 14, 1981, the FHLBB promulgated a
final rule confirming that any securities that "
constitute peimanent equity capital in accordance
with generaily accepted accounting principles"
would, if approved by the FSLIC be included in an
institution's regulatory capital (12 C.F.R. §
561.13, 46 Fed. Reg. 45593, September 14, 1981)
• The FHLBB's "merger policy statement" addressed
such matters as legal considerations, antitrust
considerations, managerial and financial aspects,
fairness, disclosure, accounting for goodwill, and
tax liabilities and was "a statement of the
FHLBB's] general policy on merger and transfer
proposals. lt [did] not ordinarily apply to
mergers and transfers instituted for supervisory
reasons." (12 C.F.R. § 571.5, 46 Fed. Reg. 54724,
54725, November 4, 1981)
• On January 28, 1982, the FHLBB promulgated
additional regulations addressing the issuance of
Mutual Capital Certificates and their inclusion in
regulatory capital. (47 Fed. Reg. 4048 and 4049,
January 2, 1982)
• On January 17, 1983, the FHLBB issued R Memorandum
55 specifying the circumstances under which "push
down accounting," a variant of purchase
accounting, was appropriate. (A copy of R
Memorandum 55 is appended hereto as Exhibit C and
incorporated herein by this reference as though
set forth in full.)
WAMAIN Doc i06447.7 22

• On April 12, 1983, the FHLBB promulgated rules
allowing institutions in danger of failing to
convert from mutual to stock (and thereby raise
capital) under abbreviated procedures. (12 C.F.R.
SS 563b.20 et. sen., 48 Fed. Reg. 15591, 15611,
April 12, 1983)
• On June 15, 1983, the FHLBB promulgated rules
allowing certain failing institutions to
participate, with an appropriate merger partner,
in fihm Voluntary Assisted Merger Program. (12
C.F.R. Part 572a, 48 Fed. Reg. 27394, June 15,
1983)
61. The Congress was aware of the problems of the
FSLIC and sought to facilitate FSLIC's efforts to resolve failing
institutions through the use of supervisory mergers and newly
created capital instruments, such as the ICC.
In 1980, the Congress, in DIDMCA, authorized the

use of the Mutual Capital Certificate to increase
the capital of deserving institutions.
On October 15, 1982, the Garn-St Germain
Depository Institutions Act of 1982 (Pub. L. 97-
320, 96 Stat. 1469, the "Garn-St Germain Act"),
was enacted. In addition to significantly
expanding the investment powers of savings
institutions, the Garn-St Germain Act endorsed
three aspects of the FSLIC supervisory merger plan
here at issue.
62. First, it authorized the provision of financial
assistance to facilitate the inducement of parties to merge with
or acguire failing savings associations.
"(2)(A) In order to facilitate a

merger or consolidation of an
insured institution described in
subparagraph (B) with another
insured institution or the sale of
assets of such insured institution
and the assumption of such insured
institution's liabilities by
another insured institution, the
Corporation is authorized, in its
sole discretion and upon such terms
WAMAIN Doc: 106447.7 23

and conditions as the Corporation
may prescribe
"(i) to purchase any such
assets or assume any such
liabilities;
"(ii) to make loans or
contributions to, or deposits in,
or purchase the securities of, such
other insured institution (which,
for the purposes of this
subparagraph, shall include a
Federal savings bank insured by the
Federal Deposit Insurance
Corporation);
"(iii) to guarantee such other

insured institution (which, for the
purposes of this subparagraph,
shall include a Federal savings
bank insured by the Federal Deposit
Insurance Corporation) against loss
by reason of such other insured
institution's merging or
consolidating with or assuming the
liabilities and purchase the assets
of such insured institution; or
"(iv) to take any combination
of the actions referred to in
clauses (i) through (iii).
(B) An insured institution

described in this subparagraph
"(i) is an insured institution
which is in default;
"(ii) is an insured
institution which, in the judgment
of the Corporation is in danger of
default; or
"(iii) is an insured
institution which, when severe
financial conditions exist which
threaten the stability of a
significant number of insured
institutions, or of insured
institutions possessing significant
financial resources, is determined
by the Corporation, in its sole
discretion, to require assistance
WAMAIN Doc: 106447.7 24

under subparagraph (A) in order to
lessen the risk to the Corporation
posed by such insured institution
under such threat of instability."
(12 U.S.C. S 1729(f) (Added by
Section 122 of the Garn-St Germain
Act)
63. Second, the Garn-St Germain Act, authorized the
FSLIC to override Federal laws and state laws and constitutions
in approving interstate acquisitions of failing savings
associations when in-state acquisitions could not be arranged
within applicable guidelines. (12 U.S.C. S 1730a(m), added by
Section 123 of the Garn-St Germain Act)
64. Third, the Garn-St Germain Act, in Title II,

reaffirmed Congress' support for the use of specially created
securities by authorizing the use of the Net Worth Certificate to
bolster the capital of mutual institutions under appropriate
circumstances. (12 U.S.C. S 1729(f), added by Section 201 of the
Garn-St Germain Act)
Supervisory and Assisted Acquisitions

65. From the early 1980's, the FHLBB had procedures
for resolving failing savings institutions. In the first
instance, examination and supervision personnel of the FHLBB
monitored the performance and financial condition of FSLIC-
insured institutions. The processes described in the 1982
Federal Home Loan Bank Board Annual Report:
As in 1981, supervision activities

during 1982 focused on active monitoring of
those associations experiencing severe
depletion of capital and on timely resolution
in instances of threatened insolvency,
principally through mergers. In coordination
with supervisory agents in the Federal Home
Loan Banks and state supervisory authorities,
Li. ut,4-I 7 7 25
supervision staff efforts were successful in
resolving a large proportion of cases of
projected insolvency without FSLIC
assistance. In rough terms, for every
problem institution merged in 1982 with FSLIC
assistance, Live more problem institutions
disappeared through supervisory mergers
without the need for FSLIC assistance.
In order to facilitate the significant
pace of industry consolidation and
restructuring and the timely resolution of
individual supervisory problems, a number of
merger and other approval authorities were
delegated to the Federal Home Loan Banks
during 1982. While increasing fiexibility in
the supervisory process, there delegations
added new responsibilities for coordination
of national supervisory activities.
1982 FHLBB Annual Report, 30.
66. When it became apparent that an institution was
likely to fail in the absence of supervisory intervention, FHLBB
personnel would contact representatives of stronger savings
institutions in the proximity of the failing institution to
explore the possibility of an unassisted supervisory merger. In
order to induce would-be acquirors to assume the liabilities (and
problem assets) of the failing institution, the FHLBB often
entered into agreements as to the future application of
regulatory provisions which would operate to the detriment of the
acquiror unless adjustments were made. These arrangements were
so central to the supervisory acquisition process that the FHLBB,
on April 24, 1984, promulgated regulatory Memorandum SP 37 -
addressing "Requests for Forbearances and Exception to Filing

Requirements Regarding Supervisory Institutions." (A copy of SP-
37 is attached hereto as Exhibit D and incorporated herein by
this referenced as though set forth in full.)
WAMAIN Doc: 106447.7 26

67. SP-37 is a directive from the FHLBB to its
professional staff which, on page 8, provides:
For purposes of reporting to the Board, the

value of any intangible assets resulting from
accounting for the merger in accordance with
the purchase method may be amortized by
(resulting institution) over a period of not
to exceed ( ) years by the straight line
method.
This forbearance generally will be
granted upon the request of the
resulting institution in a
supervisory merger.
68. In general, the process of effecting supervisory
mergers was an informal one, in which the FHLBB's supervisory
agent, responsible for the failing institution, would deal one-
on-one with the potential acquiror, negotiate the terms of the
transaction and approve the acquisition. The negotiations were
between the acquiror and the FHLBB rather than the failing
institution, since the owners of the failing institutions were
unlikely to receive compensation in the acquisition due to the
institution's financial condition.
69. When the FHLBB was unsuccessful in attempting to

arrange a supervisory merger, which generally occurred because
the financial condition of the failing institution was such that
na potential acquiror was willing to effect an acquisition
without financial assistance from the FSLIC, the case was
administratively transferred from the FHLBB to the FSLIC for
resolution.
70. The FSLIC typically would assemble a bidder's

package containing material with respect to the financial
condition of the failing institution and instructions to
WAMAIN Doc: 106447.7 27

potential bidders. The FSLIC would then schedule a bidders'
conference to which representatives of potential acquirors were
invited.
71. At the bidders' conference, representatives of the

FSLIC would describe the institution in question, the bidding
process, and the legal requirements for participation in the
transaction. Representatives of the FSLIC would also respond to
questions from the audience. Bidders were asked to submit
proposals by a specific time. The bids were required to state
the nature and extent of financial assistance required, any
forbearances that were required by the bidder and any other terms
that were considered important in the transaction. Bidders were
allowed to specify various transaction structures (for example,
mergers, purchases of assets and assumption of liabilities, and
stock purchases).
72. Once the bids were received, the FSLIC would

determine the present value cost associated with each of the bids
and determine the identity of the bidder requesting the
assistance involving the least present value cost.
73. Following the passage of the Garn-St Germain Act,

acquirors from outside the home state of the failing institution
were allowed to participate in the bidding process, however, if
the bid of an in-state Institution was within $15 million or 15%
of the low bid, a rebidding was required in order to give the in-
state institution an opportunity to prevail.
74. After the low bidder was identified, the precise
terms of the transaction would be negotiated between the winning
WAMAIN Doc: 106447.7 28

bidder and the FSLIC. After the transaction was negotiated, the
FHLBB would adopt one or more resolutions approving the
transaction, the FSLIC would enter into the related agreements (
for example, an assistance agreement or a master agreement
providing for the issuance of securities) with the winning bidder
and the transaction would be closed.
75. Anchor participated in two of the early

transactions, before the FSLIC stopped funding the entire
deficit. Effective April 30, 1981, Anchor acquired Guardian
located in New York. Because Guardian's liabilities exceeded its
assets, FSLIC contributed cash or cash equivalents to Anchor to
cover the excess liabilities. Effective May 29, 1981, Anchor
acquired New York & Suburban located in New York. Because New
York & Suburban's liabilities exceeded its assets, FSLIC
contributed financial assistance in the form of yield maintenance
commitments to make Anchor whole.
76. Beginning in mid-1981, in order to avoid making

financial contributions to acquiring institutions to make up for
the negative net worth of the failing thrifts, FSLIC promised
favorable accounting and regulatory treatment to the acquiring
institutions. Specifically, FSLIC agreed that the goodwill
acquired by the acquiring institution would be recognized and

accepted as an asset not only for GAAP accounting purposes but
also for regulatory capital purposes and amortized on a straight-
line basis over a specific period of up to 40 years.
77. In response to the inducements offered by the

FSLIC and in reliance on the promise of being able to use these
WAMAIN Doc: 106447.7 29

favorable accounting and regulatory treatments, Anchor did
acquire eight failing thrifts between 1982 and 1985. In four of
the acquisitions, First Federal, Peachtree, Suburban and Sun (the "
Assisted Acquisitions"), the FSLIC provided financial assistance
and "forbearances". Forbearances were agreements to allow
special regulatory treatment in certain specific respects.
78. In all four Assisted Acquisitions and in four

others, Standard, Tri-City, Heritage and United (the "Supervisory
Acquisitions"), the FSLIC required the use of purchase accounting
and the creation of goodwill to be amortized over specific
periods of up to 40 years. Without these assurances, Anchor,
following the acquisitions, would have been made insolvent and
Anchor would either have required FSLIC to contribute additional
cash or other tangible assets in the acquisitions to offset the
liabilities, as it did in the early transactions, or would not
have entered into the transactions.
79. Anchor's Assisted Acquisitions and Supervisory

Acquisitions represent the ideal outcome for the FSLIC plans
created in 1982. Anchor, responding to the needs of the FSLIC
acquired ten failing financial institutions (two of which are not
here involved) with assets, at the date of acquisition,
aggregating $3.4 billion. As determined by the FSLIC, the
assistance provided to Anchor was less costly to the FSLIC than
any available alternative and resulted in a very substantial
savings to the FSLIC. Anchor managed its assets carefully and
has survived despite the economic hardships of the 1980's and the
government's repudiation of the FSLIC's promises. Anchor
WAMAIN Doc: 106447.7 30

demonstrates that, with prudent management, the FSLIC action plan
could have workedihad the government not repudiated its
commitments.
80. The government even has had a return on its

investment in Anchor. In exchange for issuing the ICC to the
FSLIC, Anchor received a FSLIC note in the principal amount of
$150 million and, eventually, actually received the cash. The
ICC was eventually converted into cumulative preferred stock of
Anchor Bancorp. Anchor, in 1993, delivered to the FDIC Senior
Notes with a face amount of $71 million together with warrants to
acquire 4,750,000 shares of the common stock of Anchor Bancorp.
On October 18, 1993, the FDIC sold its $71 million of Anchor
Senior Notes and received proceeds of $72,778,825, because the
notes sold at a premium. Moreover, the FDIC received its
warrants to acquire the common stock of Anchor for 1 cent per
share, the stock has been valued as high as $17.50 per share
representing an additional return to the FDIC of approximately
$83,155,000. Thus, exclusive of dividends on the preferred stock
and interest on the Senior Notes, the FDIC has received more than
full value for the $150 million investment it made in Anchor.
81. The return of the government's investment in

Anchor is, however, trivial when compared with the potential
losses to the FSLIC which were averted by virtue of Anchor's
acquisition of ten failing institutions at very limited costs to
the FSLIC. lt is unlawful, unfair, and unseemly for the
government to benefit significantly while imposing significant
losses and costs on Anchor (which have had the effect of
WAMAIN Doc: 106447.7 31

substantially diminishing the financial condition, earnings, and
structure of Anchor), when Anchor epitomizes the potential
success of the FSLIC's original idea for quickly resolving
failing institutions at a minimum cost to the federal government.
The Assisted Acquisitions
The Suburban Acauisition

82. By letter of June 7, 1982, Anchor informed the
FHLBB of its willingness to acquire Suburban with FSLIC
assistance. Anchor's proposal noted the "extremely poor asset
structure of Suburban" and requested the provision of ICC's and
stated that "another key assumption reflected in the proposal is
that the amount of goodwill resulting from this acquisition would
be amortized to earnings over a 40-year period." (Emphasis
added.) Anchor's proposal opens with the following sentence:
As requested, enclosed is Anchor

Savings Bank FSB's proposal to
acquire by merger, utilizinq
purchase accountinq, Suburban
Federal Savings and Loan
Association of Wayne, New Jersey.
(Emphasis added)
Anchor's proposal includes a comparison of the cost of the Anchor
transaction with a "Phoenix arrangement" which was an alternative
soiution possib lity under consideration by the FSLIC together
with financial assumptions prepared in conjunction with Peat
Marwick Mitchell & Company. (A copy of Anchor's initial proposal
is appended hereto as Exhibit E and incorporated herein by
reference as though set forth in full.)
83. By the end of 1982, Suburban was losing money and

had reported negative net worth to the FSLIC. To avoid the
WAMAIN Doc: 106447.7 32

substantial costs associated with liquidating Suburban, FSLIC
determined to arrange for the sale of Suburban to a financially
stable savings institution.
84. By letter of March 17, 1983, Anchor's counsel was

solicited with respect to Anchor's interest in acquiring Suburban
and invited to attend a bidder's conference in New York City in
March, 1983. (A copy of that letter is appended hereto as
Exhibit F and incorporated herein by this reference as though set
forth in full.)
85. By letter of March 23, 1983, the FHLBB confirmed

that the Suburban bidder's conference would be held at 10:00 a.m.
an Wednesday, March 30, 1983 at One World Trade Center, New York.
(A copy of the FHLBB letter is appended hereto as Exhibit G and
incorporated herein by reference as though set forth in full.)
86. The FSLIC held the bidders' conference for

Suburban on March 30, 1983. At that conference, the FSLIC
distributed bidding instructions outlining possibilities for the
submission of bids by qualified institutions to acquire Suburban.
(A copy of the bidding instructions with respect to Suburban is
appended hereto as Exhibit H and incorporated herein by this
87. On April 18, 1983, Anchor's counsel submitted its

bid to acquire Suburban (the "Bid"). The Bid called for a FSLIC
contribution of $50 million in cash and $150 million in FSLIC
notes. The Bid called for the issuance of ICC's, required that
the amount of the note given to Anchor constitute net worth for
statutory and regulatory purposes and the provision of
WAMAIN Doc: 106447.7 33

forbearances. (A copy of the Anchor Bid is appended hereto as
Exhibit 1 and incorporated herein by this reference as though set
forth in full.)
88. In a section of its Bid captioned "Accounting"

Anchor specifies that "the Board [FHLBB] shall approve the
adjustment of assets of Anchor II [Suburban] in accordance with
the purchase method of accounting pursuant to the method
generaily accepted in the savings and loan industry on August 9,
1982. Such method shall include the straight line amortization
of any goodwill created by such adiustment for a 40-vear period
and the accretion of any loan discount for a term of 12 years.
Notwithstanding any change in generaily accepted accounting
principles or interpretation thereof, pursuant to its authority
under Sections 407(1) and (q) of the National Housing Act and
12(i) of the Securities Exchange Act of 1934 (if such section
shall be applicable to Anchor I or Anchor II), the Board shall
permit Anchor 1 and Anchor II to report for any and all
regulatory purposes, as well as any reports published to its
customers, creditors, depositors, security holders or the public,
its financial condition and operations in accordance with the
results of the adjustments described above." (Emphasis added)
Similarly, Anchor's assumptions appended to its Bid called for
amortization of the goodwill created over a 40-year period.
89. The FHLBB responded to the Anchor Bid to acquire

Suburban in a letter signed by Lawrence W. Hayes, Senior
Associate General Counsel of the FHLBB. (A copy of the FHLBB
response to Anchor's Bid is appended hereto as Exhibit J and
WAMAIN Doc: 106447.7 34

incorporated herein by this reference as though set forth in
full). The FHLBB staff agreed to Anchor's purchase accounting
requirements, however, the FHLBB staff agreed to recommend that
Anchor "for purposes of reporting to the Board and the FSLIC be
permitted to adjust its assets to fair market value upon
acquisition, to amortize the value of intangibles created to such
adjustment over 35 years by the straight line method, and to

amortize to income any discount arising from such adjustment over
15 years, using the level yield method, regardless of actual
retainment experience." The FHLBB did not agree that Anchor

could use the accounting treatment which was to be used in
determining its regulatory capital for disclosure to shareholders
(in the event Anchor were to become a stock institution) or
reporting to other persons. The FHLBB response to Anchor's Bid
substantially outlined the terms of acquisitions as ultimately
effected.
90. As of June 30, 1983, Anchor reported to the FHLBB

that its net worth was approximately $135 million on total assets
of $3.3 billion, or approximately 4.1 percent. Thus, Anchor was
on solid financial footing prior to the Suburban acquisition.
Anchor was among the institutions invited to attend the bidder's
conference conducted by the FSLIC regarding the potential
Suburban acquisition.
91. On August 29, 1983, the Commissioner of the New

Jersey Department of Banking approved the supervisory merger of
Suburban into a newly created subsidiary of Anchor that had been
organized for the purpose of effecting the acquisition. The
WAMAINDoc:10f447.7 35
Commissioner's Order noted that Suburban had, as of June 30, a
negative net worth and deposits of $1.746 billion. The
Commissioner's Order, at page 2, further noted that the FHLBB had
held "two separate rounds of bidding in an effort to find a
viable and cost effective solution." Despite an effort to
fashion a solution involving institutions within the state of New
Jersey, the Commissioner became "convinced that the solution
proposed by the Federal Home Loan Bank Board must be implemented
to safeguard the depositors of this institution and to assure
continued public trust in the thrift industry in New Jersey as a
whole." (A copy of the New Jersey Commissioner's order is
appended as Exhibit IC and incorporated herein by this reference
as though set forth in full.)
92. On August 29, 1983, the FHLBB adopted a 15-page

resolution approving Anchor's acquisition of Suburban. FHLBB
Resolution No. 83-470 addresses each aspect of the supervisory
acquisition. (A copy of the FHLBB Resolution No. 83-470 is
appended hereto as Exhibit L and incorporated herein by this
93. In Resolution No. 83-470, the FHLBB found that "

severe financial conditions exist which threaten the stability
of Suburban, which is now irreversibly insolvent . . . ." (page
3). At page 9, the FHLBB noted that "severe financial conditions
exist which threaten the stability of a significant number of

institutions, the accounts of which are insured by the FSLIC . .
. and of insured institutions possessing significant financial
resources . . . ." The Bank Board noted that "Suburban is a
WAMAIN Doc: 106447.7 36

failing institution that is eligible for assistance" and that the
Merger and the Acquisition of control of [Suburban] by Anchor
would lessen the risk to the FSLIC . . ." The FHLBB noted that
despite efforts used "to solicit practicable offers from
prospective purchasers or merger partners" and considering "the
need to minimize the cost of financial assistance . . . no in-
state insured thrift institution or in-state savings and loan
holding company made an offer to acquire Suburban, the estimated

cost of which was within 5% or $15 million, whichever is lower,
of the offer of Anchor to acquire Suburban; and the offer of
Anchor to acquire Suburban presents the lowest expense and least
risk to the FSLIC of any offer submitted for Suburban . . (
Emphasis added) On page 14, the FHLBB required an opinion that
the acquisition will be accounted for in accordance with GAAP,
except that for purposes of reporting to the Bank Board "push-
down" accounting is used to reflect the acquisition and the cash
contribution by the FSLIC is deemed a contribution to net worth
and booked as direct credit to capital.
94. On August 30, 1983, the FHLBB issued to Anchor a

certification that Suburban was insolvent and a letter confirming
the forbearances requested by Anchor. (A copy of the FHLBB's
letter of August 30 is appended hereto as Exhibit M and
full.)
95. On August 30, 1983, Anchor and the FSLIC entered

into a Master Agreement providing for the issuance of $150
million principal amount of ICC, a copy of the Master Agreement
WAMAIN Doc: 106447.7 37

is appended hereto as Exhibit N and incorporated herein by this
96. On August 30, 1983 Anchor and the FSLIC (and

Anchor's subsidiary created to acquire Suburban) entered into an
assistance agreement (the "Suburban Assistance Agreement"). (A
copy of the Suburban Assistance Agreement is appended hereto as
Exhibit 0 and incorporated herein by this reference as though set
forth in full.)
97. Section 10 of the assistance agreement addresses

accounting principles. Section 10 of the assistance agreement
provides as follows:
Except as otherwise provided in this

Agreement, any computations made for the
purposes of this Agreement shall be governed
by generally accepted accounting principles
as applied in the savings and loan industry,
including the accounting principles in effect
for mergers and acquisitions prior to the
issuance of FASB #12, permitting the use of "
push-down accounting" as noted in R
Memorandum #55 and those accounting
principles used by ANCHOR prior to this
Agreement, except that where such principles
conflict with the terms of this Agreement,
applicable federal regulations, or other
resolution or action of the Bank Board
approving, or adopted concurrently with, this
Agreement, then this Agreement, such
regulations, or such resolution or action
shall govern. In case of any ambiguity in
the interpretation or construction of any
provision of this Agreement, such ambiguity
shall be resolved by a third party
independent accounting firm selected by the
CORPORATION and not previously used by ANCHOR
or the Bank Board for purposes of auditing
ANCHOR or the MERGING ASSOCIATION. For the
purposes of this section, the accounting
principles and governing regulations shall be
those in effect on the Effective Date or as
subsequently clarified or interpreted by the
Bank Board or the Financial Accounting
Standards Board or any successor organization
WAMAIN Dec: 106447.7 38

of the American Institute of Certified Public
Accountants respectively.
98. lt is significant to note that the agreement

expressly provides that the accounting principles that are to
govern Anchor's regulatory capital determinations were "those in
effect on the Effective Date or as subsequently clarified or
interpreted . . . . " (Emphasis added) Subsequent changes in
regulation, accounting practice, or statute were not to have an
effect except for clarifications or interpretations of the
principles in existence on the Effective Date of the acquisition,
August 30, 1983.
First Federal and Peachtree

99. Similarly, on or about December 17, 1982, via a
single transaction, Anchor acquired First Federal and Peachtree,

two failing thrifts, with the assistance of FSLIC.
100. Prior to the acquisition of First Federal and

Peachtree, Anchor was on solid financial footing.
101. On or about December 17, 1982, Anchor executed an

Assistance Agreement with FSLIC which provided that for
regulatory purposes, Anchor would account for the acquisition of
First Federal using GAAP accounting as "in effect on the
Effective Dates or as subsequently clarified or interpreted by
the [FHLBB]." (S 8, p 11). (A copy of the Peachtree/First
Federal Assistance Agreement is appended hereto as Exhibit P and

full.) These GAAP accounting principles included adjusting the
asset and liability values of First Federal and Peachtree to fair
market value, recording as an intangible asset the goodwill
WAMAIN Doc: 106447.7 39

resulting from the excess liabilities over fair market value of
assets, and amortizing the goodwill over a period of 40 years on
a straight line basis.
102. Anchor was permitted and required to record $10

million of goodwill as regulatory capital to be amortized over 40
years upon the acquisition of First Federal-
103. Anchor was permitted and required to record $26

million of goodwill as regulatory capital to be amortized over 40
years upon the acquisition of Peachtree.
Sun Federal
104. Similarly, on or about December 31, 1985 Anchor
acquired Sun Federal, another failing thrift, with the assistance
of FSLIC.
105. Prior to the acquisition of Sun Federal, Anchor

was on solid financial footing.
106. On or about December 17, 1985, Anchor executed an

Assistance Agreement with FSLIC which provided that for
regulatory purposes, Anchor would account for the acquisition of
Sun Federal using GAAP accounting as applied in the savings and
loan industry. These GAAP accounting principles included
adjusting the asset and liability values of Sun Federal to fair
market value, recording as an intangible asset the goodwill
resulting from the excess liabilities over fair market value of
assets, and amortizing the goodwill over a period of years
determined in accordance with GAAP. (A copy of the Sun
Assistance Agreement is appended hereto as Exhibit Q and
incorporated herein by this reference as though set forth in full.)
WAMAIN Doc: 106447.7 40

107. Anchor was required to record $44 million of
goodwill as regulatory capital upon the acquisition of Sun
Federal and was promised that it could include the resulting
goodwill in its regulatory capital.
Standard Federal
108. On or about March 21, 1983 Anchor acquired.
Standard Federal, another failing thrift.
109. Prior to the acquisition of Standard Federal,

Anchor was on solid financial footing.
110. Standard was a supervisory acquisition effected to

prevent the failure of Standard, but without financial assistance
from the FSLIC.

goodwill as regulatory capital upon the acquisition of Standard
Federal and was permitted to include the resulting goodwill in
its regulatory capital and to amortize it over a term of 40 years
for regulatory capital purposes.
Tri-City
112. On or about July 1, 1983, Anchor acquired Tri-
City, another failing thrift, in a Supervisory Acquisition
without financial assistance from the FSLIC.
113. Prior to the acquisition of Tri-City, Anchor was

on solid financial footing.
114. On or about July 1, 1983, the FHLBB approved

Anchor's supervisory acquisition of Tri-City. Tri-City was a
supervisory acquisition effected to prevent the failure of Tri-
City, but without financial assistance from the FSLIC. For
WAMAIN Doc: 106447.7 41

regulatory purposes, Anchor was permitted and required to account
for the acquisition of Tri-City using GAAP accounting as applied
in the savings and loan industry. These GAAP accounting
principles included adjusting the asset and liability values of
Tri-City to fair market value, recording as an intangible asset
the goodwill resulting fran the exregs liahilities over fair
market value of assets, and amortizing the goodwill over a period
of years determined in accordance with GAAP.

goodwill as regulatory capital upon the acquisition of Tri-City
and was allowed to include the resulting goodwill in its
regulatory capital.
Heritage
116. Similarly, on or about September 30, 1983 Anchor
acquired Heritage, another failing thrift, in a supervisory
acquisition without financial assistance from the FSLIC.
117. Prior to the acquisition of Heritage, Anchor was

on solid financial footing.
118. On or about September 30, 1985, the FHLBB approved

Anchor's supervisory acquisition of Heritage. Heritage was a
supervisory acquisition effected to prevent the failure of
Heritage, but without financial assistance from the FSLIC. For
for the acquisition of Heritage using GAAP accounting as applied
in the savings and loan industry. These GAAP accounting
principles included adjusting the asset and liability values of
Heritage to fair market value, recording as an intangible asset

the goodwill resulting from the excess liabilities over fair
market value of assets, and amortizing the goodwill over a period
of years determined in accordance with GAAP.

goodwill as regulatory capital upon the acquisition of Heritage
and was allowed to include the resulting goodwill in its
regulatory capital.
United
120. Similarly, on or about August 15, 1984 Anchor
acquired United, another failing thrift in a Supervisory
Acquisition, without financial assistance from the FSLIC.
121. Prior to the acquisition of United, Anchor was on

solid financial footing.
122. On or about August 15, 1984, the FHLBB approved

Anchor's supervisory acquisition of United. United was a
supervisory acquisition effected to prevent the failure of
United, but without financial assistance from the FSLIC. For
for the acquisition of United using GAAP accounting as applied in
the savings and loan industry. These GAAP accounting principles
included adjusting the asset and liability values of United to
fair market value, recording as an intangible asset the goodwill
resulting form the excess liabilities over fair market value of
assets, and amortizing the goodwill over a period of years
dete/wined in accordance with GAAP.

goodwill as regulatory capital upon the acquisition of United and
WAMAIN Doc: 106447.7 43

was allowed to include the resulting goodwill in its regulatory
capital.
The Effect of FIRREA on Goodwill

124. FIRREA was enacted on August 9, 1989. FIRREA
deliberately and intentionally changed the government's approach
to the fundamental assumptions and the terms and conditions
previously agreed to by Anchor and the FSLIC in entering into the
assistance agreements and Supervisory Acquisitions described
above. FIRREA provides, in relevant part, that goodwill, such as
Anchor acquired in each of the transactions described above, and
which the FHLBB and FSLIC required Anchor to book and amortize
over fixed periods of up to 40 years, generally must be deducted
for purposes of determining compliance with OTS minimum

capital requirements -- from Anchor's capital as shown on
Anchor's certified financial statements. (FIRREA § 301; HOLA
§ 5(t), 12 U.S.C. § 1464(t) (3))
125. Effective on December 6, 1989, OTS promulgated

implementing regulations related to FIRREA's requirements
regarding goodwill such as Anchor acquired in the acquisitions
described above. (12 U.S.C. Part 567, 54 Fed. Reg. 49411, Nov.
30, 1989) In some respects those regulations exceed even
FIRREA's requirements, and thus constitute agency action
independently giving rise to Anchor's causes of action here.
126. FIRREA and the OTS Capital Regulations immediately

required Anchor to exclude a significant portion of its
supervisory goodwill from its regulatory capital computation. As
a result, Anchor failed all of its regulatory capital
WAMAIN Doc: 106447.7 44

requirements and had stringent restrictions imposed on its
operations. In addition, even the portion of supervisory
goodwill that Anchor was allowed to include was effectively
required to be amortized over five years rather than the periods
expressly agreed to by the FSLIC.
The Effect of FIRREA On The ICC

127. During late 1986, Anchor decided to convert from
mutual to stock form, and began obtaining necessary regulatory
approvals for the transition.
128. In September 1986, in order that the instrument

continue to be treated as an asset in computing regulatory
capital, the FSLIC and Anchor exchanged the ICC for a Permanent
Income Capital Certificate ("PICC").
129. In conjunction with this conversion, the ICC was

first converted into a PICC with terms economically more
attractive to FSLIC. The essential purpose of this exchange, and
the reason for Anchor to agree to terms more favorable to FSLIC,
was to ensure that the instrument could continue to be fully
included in Anchor's capital under both GAAP and regulatory
requirements.
130. As the first step of this process, on or about

September 30, 1986, Anchor and FSLIC entered into an Exchange
Agreement pursuant to which the ICC issued by Anchor to FSLIC in
connection with the Suburban acquisition in the face amount of
$150 million was exchanged for the PICC with the face amount of
$157 million. The terms of the PICCs provided, among other
things, for quarterly payments of dividends to FSLIC when and as
WAMAIN Doc: 106447.7 45

declared by Anchor. In accordance with those terms, Anchor paid
FSLIC a total of $5.9 million in cash dividends from September

1986 through March 1987.
131. Pursuant to the terms of the Exchange Agreement,

and upon Anchor's conversion from mutual to stock form on or
about April 1, 1987, FSLIC further exchanged the foregoing PICCs
for 3.14 million shares of Anchor cumulative preferred stock,
which shares also provide for quarterly dividend payments when
and as declared by Anchor. In accordance with the terms of the
cumulative preferred stock, Anchor has paid to FSLIC with respect
to such stock an additional $2.9 million in cash dividends for

the fiscal year ended June 30, 1987, an additional $14.1 million
in cash dividends for the fiscal year ended June 30, 1988, and an
additional $14.3 million in cash dividends for the fiscal year
ended June 30, 1989.
132. Both Anchor and FSLIC, as parties to the Exchange

Agreement, intended to guarantee the continued treatment of
FSLIC's investment in Anchor as regulatory capital following the
contemplated conversion of Anchor from mutual to stock form, in
accordance with the terms of the Assistance Agreement, the Master
Agreement, and related documents. As discussed in Paragraph 60
above, the FHLBB, at 12 C.F.R. S 563.13, had stated clearly that
any security that counted as permanent equity capital under GAAP
would, if approved by the FSLIC, be included in regulatory
capital. (See FHLBB Resolution No. 86-1070, approving the
exchange which explicitly "approves the inclusion of PICC's
issued to the FSLIC as net worth." (Resolution 86-1070 is
WAMAIN Doc: 106447.7 46

appended hereto as Exhibit R and incorporated herein by this
133. In early 1987, in order to secure the required

approval of FHLBB of its conversion to stock form, Anchor agreed
to reduce from 35 to 34 years the period of amortization for the
goodwill associated with Anchor's acquisition of Suburban. The
FHLBB and the FSLIC once again approved and agreed to this
amortization period, and to the description thereof set forth in
Anchor's March 1987 Offering Circular, issued in connection with
its offering of stock. (Pages 22 and F-1 through F-34 of
Anchor's Subscription Offering Circular dated February 12, 1987
set forth Anchor's financial statements and the report thereon of
Peat, Marwick, Mitchell & Co. and are appended hereto as Exhibit
8 and incorporated herein by this reference as though set forth
in full.)
134. In November 1989 pursuant to FIRREA, the OTS

published minimum capital regulations which disqualified the
cumulative preferred stock issued by Anchor to FSLIC entirely
from inclusion in regulatory tangible or core capital. (See 12
C.F.R. SS 567.5(a) and .9) In addition, the cumulative preferred
stock could only be counted for supplementary capital to the
extent of Anchor's core capital. (12 C.F.R. § 567.5(6))
135. Due to FIRREA and the OTS regulations' exclusion

of the goodwill and the cumulative preferred stock from
regulatory capital, Anchor had no core capital and, furthermore,
none of such cumulative preferred stock could be counted even as
supplementary capital.
WAMAIN Doc: 106447.7 47

Anchor's Claims For Restitution and Unlust Enrichment
136. By repudiating and abrogating the contractual
commitments of the FSLIC indeed, its contractual mandate
that the goodwill Anchor acquired through its acquisitions of the
eight thrifts described above and that the ICC (cumulative
preferred stock) be considered assets for regulatory capital
purposes and that the goodwill be amortized over extended
periods, the government has retroactively so altered the benefits
and burdens of the bargains it struck with Anchor as to render
the agreements a nullity. With a wave of its legislative wand,
the United States has transformed FSLIC's potential insurance

liability owed to Anchor's depositors into a massive writedown -
for regulatory capital purposes on Anchor's books.
137. Having rid itseif of a potentially massive
insurance obligation to Anchor's depositors by virtue of its

contractual commitments that Anchor could include goodwill and
the ICC as an asset for regulatory purposes and amortize the
goodwill over a period of up to 40 years, the government has now,
after the fact, abrogated its commitment to Anchor. The United
States today would require Anchor to retain essentially similar
liabilities to those FSLIC avoided in the early 1980s, but
without offsetting the goodwill that the government originally
agreed and required that Anchor book as an asset with a life of
up to 40 years and without which neither party would have
consummated any of the eight thrift mergers.
138. These actions of the United States render each of

the Assistance Agreements, the Suburban Master Agreement and the
WAMAIN Doc: 106447.7 48
agreements between the FSLIC and Anchor in the four Supervisory
Acquisitions nullities. The fundamental prerequisite of the
parties as to the regulatory capital treatment to be accorded
Anchor's supervisory goodwill and its ICC have been eliminated,
the contracts have been breached and their basic purposes
frustrated. For these reasons -- and because Anchor would never
have acquired these eight failing thrifts but for the

government's explicit commitments -- Anchor is entitled to
restitution of the benefits it bestowed on the government as part
of the mutually agreed exchange of promises and consideration.
Anchor also is entitled to damages as explained further below.
Anchor's Claims For Damages
139. In contrast to the government, Anchor has duly

honored and performed each of its contractual obligations
regarding the acquired thrifts.
140. The government, for its part, has breached its

contracts with Anchor in ways that exceed the specific
requirements of FIRREA. In addition to the effect of the OTS
regulatory requirements on the ICC as described above, the OTS
regulatory requirements also impacted the treatment of goodwill.
141. The OTS has expressly acknowledged in the Federal

Register that
• . .FIRREA arguably provides the

Office with the Flexibility to
grandfather certain goodwill as a
component of supplementary capital,
and such grandfathering would be
consistent with the current OCC
rules . . . .
54 Fed. Reg. 46845, 468858, November 8, 1989.
WAMAIN Doc: 106447.7 49

The OTS further acknowledged that
Section 5(t) does not require the
Office's risk-based capital
regulation to be identical to the
OCC's final capital guidelines. lt
specifically permits the Office to
address different risks and to
resolve certain issues differently
from the OCC, provided that the
Office's regulations are materially
equivalent to the OCC's final
guidelines and, thus, the capital
standards applied to the thrift
industry are no less stringent 'in
the aggregate' than those applied
to national banks.
54 Fed. Reg. 46845, 46847, November 8, 1989.
Section 401 of FIRREA, however, purports to preserve the
obligations of the FHLBB and the FSLIC and the rights of others
in their dealings with the FHLBB and the FSLIC. Nevertheless,
the OTS regulations go beyond the requirements of FIRREA and the
capital requirements applicable to national banks to disallow the
counting of goodwill as an asset in computing regulatory capital.
Such action, in circumstances where OTS acknowledges it has "
flexibility" -- i.e., discretion -- and in which national banks
may count goodwill as part of regulatory capital, shows that the
repudiation was deliberate and intentional.
142. The action of the OTS in deliberately excluding

the supervisory goodwill in order to comply with the "legislative
intent" is particularly egregious since the Comptroller of the
Currency, at the time, specifically reserved the right, on a
case-by-case basis to "find that a particular type of purchased
intangible asset or a newly developed or modified capital
instrument constitutes or may constitute "primary capital" or
,
1\1 A I Doc n64-4 7 50
"secondary capital . . . ." (12 C.F.R. S 3.4 (1990)) The OTS
made no such determination and reserved no such authority.
143. Failure to meet the new regulatory capital

requirements imposed by OTS pursuant to FIRREA subjects a thrift
institution to an extensive range of supervisory and regulatory
sanctions available to the regulators of financial institutions.
The threat of such regulatory action has consequences far beyond
technical questions of legal compliance or non-compliance, and
can harm a thrift's business operations in significant and
palpable ways.
144. For example, prior to the enactment of FIRREA, as

of June 30, 1989 Anchor had approximately $472 million worth of
goodwill recorded on its books and included in computing its
regulatory capital. At that time it also had capital of $157
million attributable to its cumulative preferred stock (formerly
the ICC) recorded on its books and included in regulatory
capital. At that time Anchor exceeded its regulatory capital
requirements.
145. After the passage of FIRREA, Anchor, as a result

of the impact of FIRREA provisions, was approximately $329
million below its regulatory tangible capital requirements. AcL:
ordIngly, Anchor was required to file a Capital Plan with the OTS
explaining how Anchor proposed to achieve capital compliance.
146. The Capital Plan required draconian measures by

Anchor which included the sale of branches, the sale of earning
assets, a reduction in the size of Anchor and the formation of a
holding company (to restore the amount attributable to the
WAMAIN Doc: 106447.7 51

cumulative preferred stock to eligibility for inclusion in
regulatory capital). The costs of compliance with Capital Plan
constitute contract damages that are recoverable in this action.
147. Anchor's claim for damages also rests upon the

government's unconstitutional taking of its valuable property
rights without just compensation and upon the government's
unconstitutional abrogation and retroactive deprivation of those

rights without due process. The government's contractual
promises, and the now-worthless goodwill and ICC, were of
significant value to Anchor, and represented settled, justified,
investment-backed expectations constituting property rights.
Those rights cannot be taken without just compensation and
without due process of law.
148. Anchor's present financial condition reflects the

effects of the improperly imposed constraints imposed on its
structure, capital, operations, income and assets as a result of
being deemed not to meet its regulatory capital requirements from
1989 until March 31, 1993. The differences in those respective
positions constitute damages for the government's breach of its
promise or its uncompensated taking of Anchor's property.
WAMAIN Doc: 106447.7 52

COUNT I
Restitution for Breach of Contract
149. Plaintiff Anchor repeats and realleges here all

allegations set forth in paragraphs 1 through 148 above.
150. As a result of the passage of FIRREA and the

promulgation of the OTS regulatory capital regulations, and other
conduct abrogating the United States' contractual obligations and
promises under the eight agreements described above, the United
States breached fundamental and material terms of its contracts
with Anchor.
151. Because of this breach, Anchor is entitled to

restitution of all benefits it has conferred upon the United
States pursuant to the contracts, including but not limited to
the supervisory goodwill and $157 million ICC which benefitted
the government, but which was taken away from Anchor by FIRREA
and the OTS regulations. Anchor is also entitled to recover the
amount by which the United States has been unjustly enriched by
cther benefits its received from Anchor under the contracts.
COUNT II
Restitution for Frustration of Purpose
153. The United States' agreements and requirements

that purchase accounting would govern the mergers, and that the
ICC and goodwill Anchor acquired could be used to satisfy
regulatory capital standards and that the goodwill could be
amortized over specified periods of up to 40 years, were
WAMA1N Doc: 106447.7 53

fundamental elements of Anchor's agreements with the government.
Anchor would not have acquired the eight failed thrifts, and
would never have entered into the agreements in the absence of
those elements. Similarly, the United States would not have
approved the mergers or entered into the agreements without those
elements.
154. The parties to the transaction could not

reasonably have foreseen government conduct that would abrogate
those fundamental elements of the contracts.
155. The abrogation of goodwill and the ICC as assets

for regulatory capital purposes by FIRREA, by the OTS regulatory
capital regulation, and by other government conduct, overturns
the basis of the bargains struck by the parties and frustrates
their purpose.
156. As a result of this frustration of the purpose of

the contracts, Anchor is entitled to restitution of all benefits
it has conferred upon the United States, including but not
limited to the capital based an the more than $600 million of
supervisory goodwill and which benefitted the United States, but
which was taken away by FIRREA and the OTS regulations and the
value of all other benefits by which the United States has been
unjustly enriched.
COUNT III
Damages for Breach of Contract
WAMAIN Doc: 106447.7 54

158. By repudiating and breaking its promise to allow
Anchor to count the goodwill and ICC it acquired through the
mergers as part of its capital for regulatory purposes and to
amortize the goodwill specified periods of up to 40 years, the
United States breached material terms of the contracts.
159. As a result of those breaches, Anchor has suffered

damages including, but not limited to, resulting costs.
160. Because of the United States' breach of a material

terms of its contracts with Anchor, Anchor is entitled to damages
according to proof for that breach.
COUNT IV
Compensation for Taking of Property Rights
diiegat ons set forth in paragraphs 1 through 160 above.
162. The regulatory capital attributable to the

goodwill and ICC that Anchor acquired through its mergers with
the eight failed thrifts constitute valuable property under
applicable law, for which Anchor paid substantial consideration.
163. By its conduct, the United States has taken this

property from Anchor without providing just compensation in
return, in violation of the Fifth Amendment to the United States
Constitution.
164. Anchor accordingly is entitled to recover just

compensation for the property that the government has
unconstitutionally taken.
WAMAIN Doc: 106447.7 55

COUNT V
Compensation for Takinq Contract Rights
166. The rights the United States conferred upon Anchor

pursuant to the contracts between the parties -- including rights
arising from the government's promise and requirement that the
goodwill and ICC Anchor acquired could be counted as regulatory
capital and to amortize the goodwill for periods of up to 40
years constitute valuable property.
167. The United States has taken those contractual

property rights from Anchor, by enacting FIRREA, by promulgating
the OTS regulations and by other conduct, but the government has
provided Anchor no just compensation in return.
168. Accordingly, the Fifth Amendment to the United

States Constitution requires the United States to pay just
compensation to Anchor.
COUNT VI
Damaltes for Deprivation of Property Without Due Process
170. The regulatory capital that Anchor acquired in

connection with the Assisted Acquisitions and the Supervisory
Acquisitions constitutes valuable property based upon, among
other things, its effect on Anchor's operations, results of
operation, and financial condition.
WAMAIN Doc: 106447.7 56

171. The United States' actions, in FIRREA and the OTS
capital regulations (and related regulations) has deprived Anchor
of this property in violation of the Due Process Clause of the
Fifth Amendment to the United States Constitution and Anchor is
entitled to recover all damages required to restore it to the
condition it would have attained but for the unlawful taking.
172. The Unites States, in FIRREA, in the OTS

regulatory capital regulations, and in other ways, has taken this
property from Anchor in violation of the Due Process Clause of
the Fifth Amendment to the United States Constitution, and Anchor
is entitled to recover all damage incurred as a result of this
conduct.
COUNT VII
Damages for Retroactive Application of
Law in Violation of Due Process
174. Anchor consummated the mergers, and entered into

its contracts with the Unites States, in specific reliance upon
the government's promises and requirements set forth in the
contracts and in prevailing statutes, regulations, and published
policies having the full force and effect of law.
175. Application of FIRREA and the OTS capital

regulations to deprive Anchor, retroactively, of the right it
obtained in 1981 to count goodwill and the ICC as capital for
regulatory purposes and to amortize the goodwill for up to 40
years represents unduly harsh and oppressive government conduct
that is arbitrary and capricious, and thus violates the Due
WAMAIN Doc: 106447.7 57

Process Clause of the Fifth Amendment to the United States
Constitution.
176. Anchor is entitled to recover all damages it has

incurred as a result of this unconstitutional retroactive
application of the law.
PRAYER AND RELIEF

WHEREFORE, Plaintiff Anchor Savings Bank, FSB demands
judgment against the United States:
On Count I, for restitution in the amount to be proved

by Anchor but not less than $400 million, plus interest thereon;
On Count II, for restitution in the amount to be proved

by Anchor, plus interest thereon;
On Count III, for restitution in the amount to be

proved by Anchor, plus interest thereon;
On Count IV, for damages in the amount to be proved by
Anchor;
On Count V, for damages in the amount to be proved by
Anchor;
On Count VI, for damages in the amount to be proved by

Anchor;
Anchor; by On Count VII, for damages in the amount to be proved by
Anchor; On Count VIII, for damages in the amount to be proved
WANtAlN Doc: 106447.7 58

On all Counts, for interest, costs and expenses,
including attorneys' fees, and such other relief as this Court
may deem just and proper.
Respectfully submitted,
P er . in, II
JONES, DAY, REAVIS & POGUE
Metropolitan Square
1450 G Street, N.W.
(202) 879-3939
Counsel of Record for Plaintiff
Anchor Savings Bank, FSB
Of Counsel:
C. Thomas Long
George T. Manning
JONES, DAY, REAVIS & POGUE
Metropolitan Square
1450 G Street, N.W.
(202) 879-3939
Dated: January J.3, 1995
WAMAIN Doc: 106447.6 59

Conformed Copy
AGREEMENT AND PLAN OF MERGER
dated as of the 6th day of July, 1994
by and between
ANCHOR BANCORP, INC.
and
DIME BANCORP, INC.
1
•
TABLB OF CONTENTS
RECITALS .............................................. 1
A. Dirne ..............................................1
B . A n c h o r ......................................... 1
C. The Merger ...................................... 1
D. The Alternative Merger .......................... 1
E. The Surviving Parent 2
F. The Bank Merger ................................ 2
G. The Stock Option Agreements .................... 2
H. Intention of the Parties ........................ 2
I. Approvals ........................................3
ARTICLE I
The Merger; The Alternative Merger;
Consent Solicitation; Effective Time; Closing
1.1 The Merger ........................................ 3
1.2 The Alternative Merger; Consent Solicitation 3
1.3 Effective Time .................................... 5
1.4 Closing ........................................... 6
ARTICLE II
Governing Documents of the
Surviving Parent, the Surviving Subsidiary
and the Surviving Bank
2.1 Certificate of Incorporation of the Surviving

Parent 6
2.2 By-laws of the Surviving Parent 6
2.3 Certificate of Incorporation of the
Surviving Subsidiary 6
2.4 By-laws of the Surviving Subsidiary 6
2.5 Charter and By-laws of Dime Bank, Anchor Bank
and the Surviving Bank 7
ARTICLE III
Directors and Officers of the
Surviving Parent, the Surviving Subsidiary
3.1 Directors of the Surviving Parent 7
3.2 Officers of the Surviving Parent and
the Surviving Bank ............................. 9
3.3 Directors of the Surviving Subsidiary
and the Surviving Bank ......................... 10
3.4 Survival of Article III ................................................................................... 10
ARTICLE IV
Conversion or Cancellation of Shares
4.1 Conversion or Cancellation of Shares ............ 10

4.2 Exchange of Old Certificates for New Certificates .. 12
(a) Appointment of Exchange Agent ........ 12
(b) Exchange Procedures ................... 12
(c) Fractional Shares .................... 13
(d) Distributions with Respect to
Unexchanged Shares .................... 13
( e ) T r a n s f e r s ........................... 13
( f ) N o L i a b i l i t y ........................ 13
ARTICLE V
Representations and Warranties
5.1 Representations and Warranties of Dime and Anchor 14

(a) Recitals True ........................ 14
(b) Corporate Organization and Qualification 14
( c ) S u b s i d i a r i e s ........................ 14
(d) Capital Stock ........................ 15
(e) Corporate Authority .................. 17
(f) Governmental Filings; No Violations . a . .......................... 18
(g) Reports and Financial Statements ........ 18
(h) Asset Classification ................ 20
(i) Absence of Certain Events and Changes . 21
( j ) P r o p e r t i e s ......................... 21
(k) Compliance with Lawe ................ 21
(1) Litigation .............................. 22
( m ) T a x e s ............................... 23
( n ) I n s u r a n c e ........................... 24
(0) Labor Matters ............................ 24
(p) Employee Benefits ........................ 24
(q) Environmental Mattere .................... 27
(r) Material Agreements .................. 29
(s) Knowledge as to Conditions ......... 30
(t) Brokers and Finders .................. 30
(u) Lincoln Agreement .................... 30
Page
5.2 Additional Representations and Warranties in the
Event of the Alternative Merger 31

5.3 Exceptions to Representations and Warranties . 32
ARTICLE VI
Covenants
6.1 Conduct of Business Pending the Effective Time 33
6.2 Dividende 36
6.3 Acquisition Proposals 36
6.4 Stockholder Approvals; Election of Directors 37
6.5 Filings; Other Actions 38
6.6 Information Supplied 39
6.7 Accountants' Letters 40
6.8 Access 40
6.9 Notification of Certain Matters 41
6.10 Publicity 41
6.11 Options, Warrants and Benefit Plans 41
(a) Options 41
(b) Benefit Plans 42
(c) Qualification of Benefit Plans 43
6.12 Expenses 43
6.13 Indemnification; Directors' and Officers
Insurance 44
6.14 Antitakeover Provisions 45
6.15 Affiliate Agreements 45
6.16 Stock Exchange Listing 46
6.17 Efforts to Consummate 46
6.18 Reports 46
6.19 Accounting and Tax Treatment 46
6.20 Bank Merger 46
6.21 Lincoln Acquisition 47
ARTICLE VII
Conditions
7.1 Conditions to Each Party's Obligation to Effect
the Merger 47
(a) Stockholder Approval 47
(b) Governmental and Regulatory Consents • . • 47
(c) Third Party Consents 48
(d) Litigation 48
(e) Registration Statement 48
(f) Blue Sky Approvals 48
(g) Listing 48
.27
Page
(h) Accountants' Pooling Letter 48

(i) Employment Agreements 49
7.2 Conditions to Obligation of Anchor 49
(a) Representations and Warranties 49
(b) Performance of Obligations of Dime 49
(c) Opinion of Counsel 49
(d) Opinion of Tax Counsel 50
(e) Accountants' Letters 50
7.3 Conditions to Obligation of Dime
(a) Representations and Warranties 50
(b) Performance of Obligations of Anchor 51
(c) Opinion of Tax Counsel 51
(d) Accountants' Letters ...... . 51
(e) Lincoln Acquisition 52
52
ARTICLE VIII
Termination
8.1 Termination by Mutual Consent ..... . •• 52

8.2 Termination by Either Dime or Anchor .............. 52
8.3 Termination by Anchor ............................ 52
8.4 Termination by Dirne 53
8.5 Effect of Termination and Abandonment ............. 53
ARTICLE IX
Miscellaneous
9.1 Survival ......................................... 54
9.2 Modification or Amendment ........................ 54
9.3 Waiver of Conditions ............................. 54
9.4 Counterparts ..................................... 54
9.5 Governing Law .................................... 55
9.6 Notices ........... . . . . .. ......... 55
9.7 Satire Agreement, Etc. . . . ...... . . . .. 56
9.8 Definition of nsubsidiaryn; Covenants with Respect
to Subsidiaries ............................... 56
9.9 Captions ......................................... 57
9.10 Severabiiity .................................... 57
9.11 Na Third Party Beneficiaries ..................... 57
ANNEXES
Form of Agreement and Plan of Merger
1. by and between Dime Bank and Anchor Bank
2. Form of Stock Option Agreement

3. Form of Supplement
4. Form of Certificate of Incorporation
5. Form of By-laws
6. Form of Employment Agreement for Mr. Parsons
7. Form of Employment Agreement for Mr. Large
8. Form of Affiliate Agreement
•
-
v-
•
1
INDEX OF DEFINED TERMS
Location of
Term Definition
Acquisition Proposal 6 3
Affiliates 6 15
Agreement ........................................ Preamble
Alternative Merger ............................... Recital D
Anchor ........................................... Preamble
A n c h o r B a n k . . . . . . . . . . . . . . . ........... Recital F
Anchor Common Stock ............................... Recital B
Anchor Exchange Ratio 4 1(b)
Anchor Indenture . . . ..... . ........ . 1.2
Anchor Meeting 6 4
Anchor Option 6 11(a)
Anchor Preferred Stock ........................... Recital B
• Anchor Stock Option Agreement ..................... Recital G

Anchor Stock Plans
Anchor-Related Director
5 1(d)
3 1(a)
Anchor-Sub ....................................... Recital D
Anchor-Sub Common Stock 4 1(d)
Antitakeover Provisione 6 14
Asset Classification 5 1(h)
Bank Merger ...................................... Recital F
Bank Merger Approvals ............................. Recital F
Business 5 1(q)
By-laws 2 2
Certificate of Incorporation 2 1
Certificate of Merger 1 3(a)
$ Closing 1 4
Closing Date 1 4
Compensation Plans 5 1(p)
Confidentiality Agreements 6 8
Contracts 5 1(f)
Coats 6 13
DGCL 11
Dirne ............................................ Preamble
Dirne Bank ........................................ Recital F
Dirne Bank Preferred Stock 5 1(d)
Dirne Common Stock ................................ Recital A
Dirne Meeting 6 4
Dirne Option 6 11(a)
Dirne Preferred Stock ............................. Recital A
Dirne Stock Option Agreement ....................... Recital G
Dirne Stock Plans 5 1 (d)
Dirne-Related Director 3 1(a)
Dirne-Sub ........................................ Recital D
D i r n e - S u b C o m m o n S t o c k 4 1(d)
Disclosure Letter 5 3(a)
Effective Time 1 3(a)
-vi-
Employees 5 1(p)
Employment Agreement 3 2(d)
Environmental Law 5 1(q)
ERISA 5 1(p)
ERISA Affiliate 5 1(p)
Exception Shares 4 1(a)
Exchange Agent 4 2(a)
Exchange Act 5 1(f)
FDIA .............................................. Recital F
FDIC 5 1(c)
FDIC Warrant 5 1(d)
FHLB 5 1(g)
Financial Statements 5 1(g)
Former Anchor Employees 6 11(b)
Former Dime Employees 6 11(b)
Governmental Entity 5 1(f)
Hazardous Substances 5 1(q)
HOLA .............................................. Recital A
Indemnified Parties 6 13
Internal Revenue Code ............................. Recital H
Joint Proxy Statement 6 5
Liens 5 1(d)
Lincoln .......................................... Recital F
Lincoln Acquisition ............................... Recital F
Lincoln Agreement ................................. Recital F
Material Adverse Effect 5 3(b)
Merger ........................................... Recital C
NASD 5 1(f)
New Certificate 4 1(c)
New Conimon Stock 4 1(a)
NYSE 4 2(c)
Old Certificate 4 1(c)
Old Shares 4 1(c)
OTS ............................................... Recital F
PCBs 5 1(q)
Pension Plan 5 1(p)
Person 6 1(c)
Plans 5 1(p)
Registration Statement 6 5
Regulatory Approvals ............................. Recital I
Reports 5 1(g)
Representatives 6 8
SEC 5 1(g)
Securities Act 5 1 (f)
Securities Laws 5 1(g)
Stock Option Agreements ........................... Recital G
Subject Property 5 1(q)
subsidiary 9 8(a)
Surviving Bank ................................... Recital F
Surviving Parent ................................. Recital E
Surviving Subsidiary ............................. Recital D
Tax 5 1(m)
-vii-
AGREEMENT AND PLAN OF MERGER, dated as of the 6th
day of July, 1994 (this "Agreement"), by and between Anchor
Bancorp, Inc. ("Anchor") and Dirne Bancorp, Inc. ("Dime").
RECITALS
A. Dime. Dime 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 New York, New York. As of the date hereof, Dime
has 200,000,000 authorized shares of common stock, par value
$0.01 per share ("Dirne Common Stock"), of which not more
than 56,585,002 shares are outstanding as of the date
hereof, and 40,000,000 authorized shares of preferred stock,
par value $0.01 per share (Mime Preferred Stock"), none of
which is outstanding as of the date hereof (no other class
or series of capital stock being authorized). Dime is a
savings and loan holding company registered under the Home
Owners' Loan Act of 1933, as amended ("HOLAn).
B. Anchor. Anchor 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 Hewlett, New York. As of the date
hereof, Anchor has 75,000,000 authorized shares of common
stock, par value $0.01 per share ("Anchor Common Stock"), of
which not more than 23,473,329 shares are outstanding as of
the date hereof, and 3,140,000 authorized shares of pre-
ferred stock, par value $1.00 per share ("Anchor Preferred
Stock"), none of which is outstanding as of the date hereof
(no other class or series of capital stock being
authorized). Anchor is a savings and loan holding company
registered under HOLA.
C. The Merger. At the Effective Time (as defined
in Section 1.3), the parties to this Agreement intend to
effect the merger (the "Merger") of Anchor with and into
Dime, with Dime the surviving corporation of the Merger.
D. The Alternative Merger. Under the circum-
stances set forth in Section 1.2 and as an alternative to
the Merger, at the Effective Time the parties to this
Agreement intend to effect the business combination trans-
action contemplated hereby through the simultaneous merger
(collectively, the "Alternative Merger") of (a) Anchor with
and into a Delaware corporation that would be organized as a
wholly owned subsidiary of Dime ("Dime-Sub"), with Dime-Sub
the surviving corporation (the "Surviving Subsidiary") of
euch merger and (b) a Delaware corporation that would be
organized as a wholly owned subsidiary of Anchor ("
Anchor-Sub") with and into Dime, with Dime the surviving
corporation of such merger.
E. The eurviving Parent. At and after the
Effective Time, Dirne, as the surviving parent corporation in
the Merger or the Alternative Merger (in the event that it
is consummated in lieu of the Merger) is referred to herein
as the "Surviving Parent".
F. The Bank Merger. Anchor Savings Bank FSB, a
federal savings bank and a wholly owned subsidiary of Anchor
("Anchor Bank"), has entered into a Stock Purchase Agree-
ment, dated March 4, 1994 (the "Lincoln Agreement"), among
Anchor Bank, Anthony M. Frank, as trustee, and Lincoln
Savings Bank, FSB ("Lincoln"), pursuant to which Anchor Bank
will acquire all of the outstanding capital stock of Lincoln
and Lincoln will merge with and into Anchor Bank (the
Lincoln Acquisition").
At or after the Effective Time, Dirne and Anchor
intend that the Surviving Parent will cause Anchor Bank to
merge or consolidate with The Dirne Savings Bank of New York,
FSB, a wholly owned federal savings bank subsidiary of Dirne
("Dirne Bank"). Such merger or consolidation is referred to
herein as the "Bank Merger". The Bank Merger shall be
effected pursuant to an agreement and plan of merger in
substantially the form of Annex 1 to this Agreement and is
subject, among other conditions set forth therein, to the
prior approval (including any requisite waiting periods, the
"Bank Merger Approvals") of the Office of Thrift Supervision
(the "OTS") under Sections 5(d)(3) and 18(c) of the Federal
Deposit Insurance Act, as amended (the "FDIA"). The surviv-
ing federal savings bank in the Bank Merger is referred to
herein as the "Surviving Bank".
G. The Stock Option Agreements. As an inducement

to and condition of Anchor's willingness to enter into this
Agreement and the Anchor Stock Option Agreement (as defined
in the following sentence), Dirne will grant to Anchor an
option pursuant to a Stock Option Agreement, in substan-
tially the form of Annex 2 to this Agreement (the "Dirne
Stock Option Agreement"). As an inducement to and condition
of Dime's willingness to enter into this Agreement and the
Dirne Stock Option Agreement, Anchor will grant to Dirne an
option pursuant to a Stock Option Agreement, in substan-
tially the form of Annex 2 to this Agreement (the "Anchor
Stock Option Agreement" and, together with the Dirne Stock
Option Agreement, the "Stock Option Agreements"). The Stock
Option Agreements will be entered into immediately following
the execution and delivery hereof.
H. Intention of the Parties. It is the Intention
of the parties to this Agreement that the Merger or the
Alternative Merger (in the event it is consummated in lieu
of the Merger) (i) shall be accounted for as a "pooling of
-2-
interests" under generally accepted accounting principles
and (ii) (a) in the case of the Merger and the portion of
the Alternative Merger involving the Merger of Anchor into
Dirne-Sub, shall qualify as a tax free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code") and (b) in the case of
the portion of the Alternative Merger involving the merger
0 of Anchor-Sub into Dirne, shall not result in recognition of
gain or lose by holders of Dirne Common Stock.
I. Approvals. The Boards of Directors of Dirne
and Anchor (at meetings duly called and held) have deter-
mined that this Agreement and the transactions contemplated
hereby are in the best interests of Dirne and Anchor,
respectively, and their respective stockholders and have
approved this Agreement and the Stock Option Agreements.
Consummation of the Merger or the Alternative Merger is
subject to (i) the prior approval of the stockholders of
each of Dirne and Anchor, (ii) the prior approval of the OTS
under Section 10(e) of HOLA and (iii) the Bank Merger
Approvals (items (ii) and (iii), collectively, the "Regula-
tory Approvals"), among other conditions specified herein.
NOW, TEEREFORE, in consideration of the premises,
and of the representations, warranties, covenants and agree-
ments set forth herein, the parties hereto agree as follows:
ARTICLE I
The Merger; The Alternative Werger;

Consent Solicitation; Effective Time; Cloaing
1.1 The Merger. Subject to the terms and condi-
tions of this Agreement, at the Effective Time (unless the
Alternative Merger is consummated in lieu of the Merger),
Dirne and Anchor shall consummate the Merger, in which Anchor
shall be merged with and into Dirne, and the separate
corporate existence of Anchor shall thereupon cease. The
Surviving Parent shall continue to be governed by the laws
of the State of Delaware. The Merger shall have the effects
specified in the Delaware General Corporation Law (the "
DGCL").
1.2 The Alternative Merger: Consent Solicitation.
(a) In the event that the requisite consent of noteholders
to effect the actions referred to in Section 1.2(b) shall
not be received and the Boards of Directors of Dirne and
Anchor determine that the Merger and the Bank Merger cannot
reasonably be consummated without resulting in a default or
Event of Default under the terms of the Indenture, dated as
of July 9, 1993 las supplemented, amended or modified from
-3-
time to time, the Anchor Indenture"), between Anchor and
Chemical Bank, as trustee, subject to the terms and condi-
tions of this Agreement and in lieu of the Merger, at the
Effective Time, Dime and Anchor-Sub and Anchor and Dime-Sub
each shall consummate the mergers constituting the Alterna-
tive Merger. As a result, the Surviving Subsidiary shall
become a wholly owned subsidiary of the Surviving Parent,
and the Surviving Parent and the Surviving Subsidiary each
ehall continue to be governed by the laws of the State of
Delaware; the separate corporate existence of each of Anchor
and Anchor-Sub shall cease. The mergers constituting the
Alternative Merger each shall have the effects specified in
the DGCL.
(b) In addition to its other covenants and agree-
ments herein, Anchor agrees that promptly after the date of
this Agreement it ehall solicit and use reasonable efforts
to obtain consents from the holdere of its 8.9375% Senior
Notes due 2003 outstanding under the Anchor Indenture, seek-
ing a modification of its covenants in Sections 1008 and
1013(a)(2) of the Anchor Indenture that would permit consum-
mation of the Merger and the Bank Merger without resulting
in a Default or Event of Default (each as defined) there-
under. The terms of such solicitation, including the form
of the modification solicited and any consideration offered
therefor, shall be as agreed upon between Dime and Anchor,
the agreement of each not to be unreasonably withheld.
(c) As sonn as practicable following a determina-
tion pursuant to Section 1.2(a) to pursue the Alternative
Merger, but in any event prior to the Effective Time if the
Alternative Merger is to be consummated in lieu of the
Merger, (i) Dime agrees to take any and all action necessary
duly to organize Dime-Sub and to cause Dime-Sub to become a
party to this Agreement, to be evidenced by the execution by
Dime-Sub of a supplement to this Agreement, in substantially
the form of Annex 3, and delivery thereof to each of Dime
and Anchor and (ii) Anchor agrees to take any and all action
necessary duly to organize Anchor-Sub and to cause
Anchor-Sub to become a Party to this Agreement, to be
evidenced by the execution by Anchor-Sub of a supplement to
this Agreement, in substantially the form of Annex 3, and
• delivery thereof to each of Dime and Anchor. In the event

the Alternative Merger is to be consummated in lieu of the
Merger, (1) Dirne agrees to cause Dime-Sub to take all
actions necessary or proper to comply with obligations of
Dime and Dime-Sub to consummate the transactions contem-
plated hereby and otherwise as parties to this Agreement and
(ii) Anchor agrees to cause Anchor-Sub to take all actions
necessary or proper to comply with obligations of Anchor and
Anchor-Sub to consummate the transactions contemplated
hereby and otherwise as parties to this Agreement.
-4-
•
(d) If (i) the parties shall have determined that
the Alternative Merger is to be consummated but that the
structure of the Alternative Merger involving a merger of
Anchor with and into Dime-Sub would result in the failure of
one or more conditions set forth in Article VII,
(ii) restructuring the Alternative Merger so that lt instead
would involve the merger of Dime-Sub with and into Anchor
would result in the satisfaction of such condition or condi-
tions and (iii) either party so requests, then the parties
shall enter into an amendment to this Agreement (as contem-
plated by Section 9.2(b)) providing for consummation of the
Alternative Merger by way of (x) the merger of Dime-Sub with
and into Anchor and (y) the merger of Anchor-Sub with and
into Dime.
1.3 Effective Time. (a) Subject to the terms
and conditions of this Agreement, the parties to this Agree-
ment will cause a certificate or certificates of merger to
be executed, acknowledged and filed with the Secretary of
State of the State of Delaware as provided in Section 251 of
the DGCL (collectively, the "Certificate of Merger"). The
Merger (or, in the event the Alternative Merger is to be
consummated in lieu of the Merger, the Alternative Merger)
shall become effective at such time as the Certificate of
Merger has been filed with the Secretary of State of the
State of Delaware in accordance with the provisions of
Section 251 of the DGCL, or at such other time as may be
specified in the Certificate of Merger in accordance with
applicable law. The date and time when the Merger or the
Alternative Merger, as the case may be, shall become
• effective is herein referred to as the "Effective Time".

(b) Dime and Anchor each will use reasonable
efforts to cause the Effective Time to occur at or prior to
the opening of business on the first business day of the
month next commencing after the date of satisfaction or
waiver of the last of the conditions specified in Sections
7.1(a) and (b) of this Agreement has occurred; provided,
that if such first business day is to occur fewer than
15 days after such date of satisfaction or waiver, the
Effective Time shall be the first business day of the next
succeeding month. Notwithstanding anything to the contrary
in this Section 1.3, Dime and Anchor may cause the Effective
Time to occur on auch earlier or later day following the
satisfaction or waiver of such conditions as they may agree
in writing, consistent with the provisions of the DGCL.
•
-5-
11)
1.4 Closinq. The closing of the Merger or the

Alternative Merger (the "Closing") shall take place at such
place within The City of New York as Dirne and Anchor shall
agree, at 8:00 a.m. an the date when the Effective Time is
to occur. The date upon which the Closing shall occur is
herein referred to as the "Closing Date".
ARTICZB II
Governing Documents of the
Surviving Parent, the Surviving
Subsidiary and the Surviving Bank
2.1 Certificate of Incorporation of the Burviving
Parent. At the Effective Time, the certificate of incorpo-
ration of Dime, as then in effect, shall by virtue of the
Merger or the Alternative Merger, as the case may be, be
amended and restated to read as oet f orth in Annex 4; such
certificate of incorporation, as so amended and restated,
shall be the certificate of incorporation of the Surviving
Parent (the "Certificate of Incorporation"), until duly
amended in accordance with the terms thereof and the DGCL.
2.2 1y-laws of the Survivine Parent. At the

Effective Time, the by-laws of Dime, as then in effect, shall
be amended and restated to read as set forth in Anneic 5,
and such by-laws, as so amended, shall be the by-laws of the
Surviving Parent (the "By-laws"), until duly amended in
accordance with the terms thereof, the Certificate of
Incorporation and the DGCL.
2.3 ivin
Subsidiary. In the event he Alternative Merger is consum-
mated in lieu of the Merger, at the Effective Time, the
certificate of incorporation of Anchor, as then in effect,
shall be amended by virtue of the Alternative Merger to
contain provisions substantially identical in all relevant
respects to those of the Certificate of Incorporation, and
the certificate of incorporation of Anchor, as so amended,
shall be the certificate of incorporation of the Surviving
Subsidiary, until duly amended in accordance with the terms
thereof and the DGCL.
2.4 py-laws of the Surviving Subeidiary. In the
event the Alternative Merger is consummated in lieu of the
Merger, at the Effective Time, the by-laws of Anchor, as then
in effect, shall be amended to contain provisions
substantially identical in all relevant respects to those of
the By-laws, and the by-laws of Anchor, as so amended, shall
be the by-laws of the Surviving Subsidiary, until duly
amended in accordance with the terms thereof, the
-6-
certificate of incorporation of the Surviving Subsidiary and
1 the DGCL.
2.5 Charter and By-laws of Dime Bank, Anchor Bank
and the Surviving Bank. In the event Dime and Anchor elect
not, or are unable, to cause the Bank Merger to occur at or
promptly after the Effective Time, prior to the Effective
Time, Dirne and Anchor shall consult as to what amendments,
if any, should be made in the federal stock charter or by-
laws of Dime Bank or Anchor Bank and shall cause such
amendments therein as Dime and Anchor shall mutually agree
upon to becoxne effective by not later than the Effective
Time; provided, however, that the section of each of Dime
Bank's and Anchor Bank's by-laws dealing with the duties of
officers shall in any event be amended to read as set forth
in Exhibit A to Annex 1 hereto at or prior to the Effective
Time. Irrespective of whether Dirne and Anchor elect to
cause the Bank Merger to occur at or promptly after the
Effective Time, prior to the Effective Time Dime and Anchor
shall consult concerning, and agree upon, the terms and
provisions of the charter and by-laws for the Surviving
Bank; provided, however, that the section in the by-laws of
the Surviving Bank describing the duties of officers of the
Surviving Bank at the Effective Time shall in any event be
as set forth in Exhibit A to änkmäl hereto.
ARTICLE III
Directors and ()Moers
of the Surviving Parent, the
Surviving Subsidiary
3.1 Directors of the Surviving Parent. It is the
intention of Dirne and Anchor and their reapective Boards of
Directors that, until the third anniversary of the Closing
Date, the Board of Directors of the Surviving Parent (and
each of the committees thereof) shall consist of an equal
number of persons serving an the Boards of Directors of Dime
and Anchor, respectively, immediately prior to the Effective
Time, and that the size of the Board of Directors of the
Surviving Parent shall be reduced over time during euch
period to no more than sixteen directors. In order to
effectuate this intention, the following provisions shall,
to the greatest extent practicable, apply with respect to
the Board of Directors of the Surviving Parent:
(a) At the Effective Time, but subject to the
following sentence, the Board of Directors of the
Surviving Parent shall consist of an even number of
directors, not exceeding 24, who shall consist of an
-7-
equal number of (i) persons serving as directors of
Dirne (each, a *Dirne-Related Director") and (ii) persons
serving as directors of Anchor (each, an "Anchor-
Related Director"), in each case immediately prior to
the Effective Time. Each of Dirne and Anchor shall take
such steps as are necessary to assure that they have an
identical number of directors (but not more than 12
each) immediately prior to the Effective Time. If at
any time during the three year period following the
Effective Time any of the persons who becomes a
director of the Surviving Parent at the Effective Time
shall for any reason cease to serve as a director or
shall not stand for reelection as a director, it is the
intention of Dirne and Anchor and their respective
Boards of Directors that another director will volun-
tarily resign or not stand for reelection (as the case
may be) so as to assure that at all times one-half of
the persons serving as directors of the Surviving
Parent are Dirne-Related Directors and one-half are
Anchor-Related Directors. To the extent practicable,
each class of directors shall contain an equal number
of Dirne-Related Directors and Anchor-Related Directors.
(b) If, notwithstanding the foregoing, the number

of Dime-Related Directors and Anchor-Related Directors
serving, or that would be serving following the next
annual meeting of shareholders, as directors of the
Surviving Parent, would not be equal, then the Board of
Directors and the Executive Cammittee of the Surviving
Parent described in Section 3.1(c) shall take such
steps as may reasonably be requested by Mr. Richard D.
Parsons (if the number of Anchor-Related Directors is,
or would otherwise become, greater) or Mr. James M.
Large, Jr. (if the number of Dirne-Related Directors is,
or would otherwise become, greater) to assure that
(i) the number of directors shall be an even number and
(ii) subject to the fiduciary duties of directors
established under the DGCL and to the vote of stock-
holdere if required, there shall be an equal number of
Dirne-Related Directors and Anchor-Related Directors,
including by nominating and/or electing a person or
persons designated by Mr. Parsons or Mr. Large, as
applicable. Any person who becomes a director pursuant
to this Section 3.1(b) shall be deemed for purposes of
this Agreement to be a Dirne-Related Director if desig-
nated by Mr. Parsons or an Anchor-Related Director if
designated by Mr. Large.
(c) The Board of Directors of the Surviving
Parent shall have an Executive Committee and such other
committees as the Board shall establish in accordance
with Section 141 of the DGCL, the Certificate of
-8-
Incorporation and the By-law . Prior to the Effective
Time, Messre. Parsons and Large shall reasonably agree
as to the initial members of each committee (including
the Executive Committee) of the Board of Directors of
the Surviving Parent. Bach of such committees
(including the Executive Committee) shall have an even
number of members, and at the Effective Time and for
three years thereafter, unless otherwise agreed by both
Mr. Parsons and Mr. Large, one-half of the members of
each such committee shall consist of Dime-Related
Directors and the other half shall consist of Anchor-
Related Directors. After the Effective Time,
Messrs. Parsons and Large shall consult with each other
with respect to any vacancies on, or members to be
added to, such committees.
(d) The provisione of this Section 3.1, insofar
•
as they assign particular duties or responsibilities to
Mr. Parsons or Mt. Large, shall continue in effect only
for so long as Miesere. Parsons and Large both shall
nerve in the capacities referred to in Sections 3.2(a)
and (b) with respect to the Surviving Parent.
3.2 Officers of the Surviving Parent and the
$urvivirlg Bank. (a) Mr. Parsons ahall be Chairman of the
Board and Chief Executive Officer of the Surviving Parent
and shall have the non-executive office of Chairman of the
Board of the Surviving Bank.
•
(b) Mt. Large shall be the President and Chief
Operating Officer of the Surviving Parent and President and
Chief Executive Officer of the Surviving Bank.
(c) Mr. Parsons and Mr. Large will be Co-Chairmen
of the Executive Committee of the Boards of Directors of the
Surviving Parent and the Surviving Bank. In addition, if
the Board of Directors of the Surviving Parent shall have a
Nominating Committee, then neither Mr. Parsons nor Mr. Large
ahall be a member thereof unless both of them are members,
in which case they shall act as Co-Chairmen of the Nominat-
ing Coninittee.
(d) Concurrently with, or immediately prior to,
execution of this Agreement, (i) Dime entered into an
employment agreement with Mx. Parsons in substantially the
form of änneäfi and (ii) Anchor Bank entered into an
employment agreement with Mr. Large (guaranteed by Anchor)
in substantially the form of Annex 7 (each of the agreements
in (i) and (ii), an "Employment Agreementn).
(e) During the terms of their respective Employ-
ment Agreements, Mr. Parsons and Mr. Large shall have the
•
-9-
respective powers, and perform the respective duties, set
forth in each of their respective Employment Agreements,
with the duties of their offices as described in the By-laws
or in Exhibit A to Annex 1, as the case may be. Any modifi-
cation or amendment of either of such Employment Agreements
at any time during their respective terms from and alter the
Effective Time shall require the affirmative vote of three-
quarters of the Board of Directors of the Surviving Parent.
3.3 rvivin an• he
Surviving Bank. At the Lffective Time, it is the Intention
of the parties that the rnembership of the Board of Directors
of each of the Surviving Subsidiary (in the event that the
Alternative Merger is consummated) and the Surviving Bank,
to the extent lawful, shall be identical to the membership
of the Board of Directors of the Surviving Parent. There-
after, unless otherwise approved by the Board of Directors
of the Surviving Parent at a meeting where there are an
equal number of Dime-Related Directors and Anchor-Related
Directors present, the Board of Directors of the Surviving
Subsidiary, if any, and the Surviving Bank shall include an
equal number of Dime-Related Directors and Anchor-Related
Directors.
3.4 Survival of` Article III. The provisions of
this Article III shall survive the Effective Time and remain
in effect until the third anniversary of the Closing Date
terminating thereafter. This Section 3.4 shall not affect
the term of either Employment Agreement.
ARTICLE IV
Convereion or Cancellation of Sharee
4.1 ponverslon or Cancellation of Shares. At the

Effective Time, by virtue of the Merger or the Alternative
Merger, as the case may be, and without any action an the
part of any stockholder:
(a) Each share of Dime Common Stock issued and
outstanding immediately prior to the Effective Time,
other than Exception Shares (as defined below), shall
at the Effective Time be converted into one newly
issued, fully paid and nonassessable share of common
stock, par value $0.01 per share ("New Common Stock")
of the Surviving Parent. "Exception Shares" means
(i) with respect to Dirne Common Stock, shares of Dime
Common Stock owned, other than in a bona fide fiduciary
capacity or in satisfaction of a debt previously con-
tracted in good faith, by Anchor or a subsidiary (as
defined in Section 9.8) of Anchor or held by Dirne or a
-10-
subsidiary of Dirne in treasury or (ii) with respect to
Anchor Common Stock, shares of Anchor Common Stock
owned, other than in a bona fide fiduciary capacity or
in satisfaction of a debt previously contracted in good
faith, by Dirne or a subsidiary of Dirne or held by
Anchor or a subsidiary of Anchor in treasury.
(b) Subject to Section 4.2(c), each share of
Anchor Common Stock issued and outstanding immediately
prior to the Effective Time, other than Exception
Shares, shall be converted at the Effective Time into
1.77 (the "Anchor Exchange Ratio") newly issued, fully
paid and nonassesaable shares of New Common Stock. In
the event that, subsequent to the date of this
Agreement but prior to the Effective Time, the shares
of Dirne Common Stock or Anchor Common Stock issued and
outstanding shall, through a reorganization, recapital-
ization, reclassification, stock dividend, stock Split,
reverse stock Split or other similar change in the
capitalization of Dirne or Anchor, as the case may be,
increase or decrease in number or be changed into or
exchanged for a different kind or number of securities,
then an appropriate and proportionate adjustment shall
be made to the Anchor Exchange Ratio.
• (c) All shares of Dirne Common Stock issued and

outstanding immediately prior to the Effective Time and
referred to in Section 4.1(a) and all shares of Anchor
Common Stock referred to in Section 4.1(b) (collective-
ly, the "Old Shares") shall cease to be outstanding,
•
shall be cancelled and retired and shall cease to
exist, and each holder of a certificate (an "Old Cer-
tificate') formerly representing the Old Shares shall
thereafter cease to have any rights with respect to
Buch shares, except the right to receive, without
interest, upon exchange of such Old Certificate in
accordance with Section 4.2, a certificate representing
the shares of New Common Stock (a "New Certificate")
and any payment to which euch holder is entitled
pursuant to this Article IV.
(d) If the Alternative Merger is consummated in
lieu of the Merger, then, in addition to the foregoing
(i) each issued and outstanding share of common stock,
par value $0.01 per share (the "Dime-Sub Common
Stock"), of Dirne-Sub shall remain outstanding and
unchanged and (ii) each issued and outstanding share of
common stock, par value $0.01 ("Anchor-Sub Common
Stock"), of Anchor-Sub shall be converted at the
• Effective Time into the right to receive $0.01 in cash.
4.2 N C
cates. (a) Appoin iCent qf Exchange Agent. From and a er
the Effective Time until the end of the six-month period
following the Effective Time, the Surviving Parent shall make
available or cause to be made available to an exchange agent (
which may be the Surviving Bank) appointed prior to the
Effective Time by Dime.and Anchor jointly on behalf of the
Surviving Parent (the "Exchange Agent") New Certificates and
cash in amounts sufficient to allow the Exchange Agent to
make all deliveries of New Certificates and payments that may
be required in exchange for Old Certificates pursuant to this
Article iV. At the end of such six-month period, any such New
Certificates and cash remaining in the possession of the
Exchange Agent (together with any dividends or earnings in
respect thereof) shall be returned to the Surviving Parent.
Any former holdere of Old Shares who have not theretofore
exchanged their Old Certificates for New Certificates and cash
pursuant to this Article IV shall thereafter be entitled to
look exclusively to the Surviving Parent and only ae general
creditors thereof for the shares of New Common Stock and any
cash to which they become entitled upon exchange of their Old
Certificates pursuant to this Article IV. Notwithatanding the
foregoing, neither the Exchange Agent nor any party hereto
shall be liable to any former holder of Old Shares for any
amount property delivered to a public official pursuant to
applicable abandoned property, escheat or eimilar laws.
(b) Exchange Pro res. Promptly after the

Effective Time, the Surviving Parent shall cause the Exchange
Agent to mail or deliver to each person who was, at the
Effective Time, a holder of record of Old Shares (other than
Exception Shares) a form (mutually agreed upon by Dime and
Anchor) of letter of transmittal containing instructions for
use in effecting the surrender of Old Certificates in exchange
for New Certificates and any payments pursuant to this Article
IV. Upon surrender to the Exchange Agent of an Old
Certificate for cancellation together with such letter of
tranemittal, duly executed and completed in accordance with the
instructions thereto, the holder of such Old Certificate
shall be entitled to receive in exchange therefor a New
Certificate representing the shares of New Common Stock, and a
check in the amount, if any, to which euch holder is entitled
pursuant to this Article IV, and the Old Certificate so
surrendered shall forthwith be cancelled. No intereat will be
paid or will accrue on any amount payable upon surrender of
Old Certificates. If any New Certificate or cash payment is
to be issued or made in a narre other than that in which the
Old Certificate eurrendered in exchange therefor iß registered,
it shall be a condition of such exchange that the person
requesting euch exchange shall pay any transfer or other
taxes required by reason of the
-12-
issuance of such New Certificate or the making of such cash
payment in a narre other than that of the registered holder
of the Old Certificate surrendered, or shall establish to
the satisfaction of the Surviving Parent that any such taxes
have been paid or are not applicable. An Affiliate (as
defined in Section 6.15) of Dime or Anchor shall not be
entitled to receive any New Certificate or payment pursuant
to this Article IV until such Affiliate shall have duly
executed and delivered an appropriate agreement described in
Section 6.15.
(c) Fractional Shares. Notwithstanding Sec-
tion 4.1 or any other provision of this Section 4.2, no
fractional shares of New Common Stock will be issued in
exchange for shares of Anchor Common Stock hereunder and any
holder of Anchor Common Stock entitled hereunder to receive
fractional shares of New Common Stock but for this Section
4.2(c) will be entitled hereunder to receive instead a cash
payment in lieu thereof, without interest, in an amount
equal to the product of the fraction of a share to which
such holder would otherwise have been entitled and the
average of the per share closing prices of Dime Common Stock
for the ten trading days most recently preceding the Closing
Date as reported on the New York Stock Exchange, Inc. (the
•NYSE") Composite Transactions reporting system. Pursuant
to Section 4.1(a), each fractional share interest in Dime
Common Stock issued and outstanding immediately prior to the
Effective Time, other than fractional interests in Exception
Shares, will be exchanged for an equal fractional share
interest in New Common Stock.
(d) Distributions with Respect to Unexchanged
Shares. Notwithstanding any other provisions of this Agree-
ment, no dividends or other distributions with a record date
after the Effective Time shall be paid to any person holding
an Old Certificate until such Old Certificate has been
surrendered for exchange as provided herein. Subject to the
effect of applicable lawe, following surrender of any such
Old Certificate, there shall be paid to the holder of the
New Certificate issued in exchange therefor, without
interest, at the time of euch surrender, the amount of
dividends or other distributions with a record date after
the leffective Time theretofore payable with respect to the
shares of New Common Stock represented thereby.
(e) Transfers. At or after the Effective Time,
there shall be no transfers on the stock transfer books of
the Surviving Parent of the shares of Anchor Common Stock or
Dirne Common Stock which were outstanding immediately prior
to the Effective Time.
-13-
(f) No Liability. In the event that any Old
Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claim-
ing such Old Certificate to be lost, stolen or destroyed
and, if required by the Surviving Parent, the posting by
such person of a bond in euch reasonable amount as the Sur-
viving Parent may direct as indemnity against any Claim that
may be made against it with respect to such Old Certificate,
the Surviving Parent shall, in exchange for such lost,
stolen or destroyed Old Certificate, issue or cause to be
issued the shares of New Common Stock and pay or cause to be
paid the amounts, if any, deliverable in respect thereof
pursuant to this Article IV.
ARTICLE V
Representationa and warranties
5.1 Renrenntations and Warranties of Dime ana.

Anchor. Subject to Section 5.3 and except as set forth in
the relevant Disclosure Letter referred to therein, Dime
hereby represents and warrants to Anchor, and Anchor hereby
represents and warrants to Dirne, that:
(a) Recitals True. The statements of fact set
forth in Recitals A, B and 1 of this Agreement with
respect to it are true.
(b) Corporate Organization and Oualification. It
is a corporation duly organized, validly existing and
in good standing under the laws of the State of
Delaware and is in good standing as a foreign corpora-
tion in each jurisdiction where the properties owned,
leaaed or operated or the business conducted by it
require such qualification. It has the requisite
corporate power and authority to own or lease its
properties and assets and to carry an its businesses as
they are now being conducted. It has made available to
the other party hereto a complete and correct copy of
its certificate of incorporation and by-laws, each as
amended to date and currently in full Force and effect.
(c) Bubsidiariee. Paragraph 5.1(c) of its Disclo-
sure Letter (as defined in Section 5.3(a)) liste all of
its subsidiaries as of the date of this Agreement and
the amount and percent of its stock-ownership thereof.
Bach of its subaidiaries that is a depository institu-
tion is an "insured depository institution" as defined
in the FDIA, and applicable regulations thereunder,
having its deposits insured by the Federal Deposit
Insurance Corporation (the wFDIC'), subject to
-14-
applicable FDIC coverage limitations. Each of its sub-
sidiaries is either a federal savings bank or a corpo-
ration, and is duly organized, and to the extent
applicable validly existing, and in good standing under
the laws of the jurisdiction in which such subsidiary
is incorporated or organized, and is duly qualified to
do business and in good standing in each jurisdiction
where the property owned, leased or operated, or the
business conducted, by such subsidiary requires such
qualification. Each of its subsidiaries has the requi-
site corporate power and authority to own or lease its
properties and assets and to carry on its business as
it is now being conducted.
(d) Capital Stock. (i) In the case of the
representations and warranties made by Dirne: As of the
date of this Agreement, there were outstanding under
the stock option and other plans identified in para-
graph 5.1(d) of Dime's Disclosure Letter (the "Dirne
Stock Plans"), options or rights to acquire not more
than an aggregate of 3,158,384 shares of Dirne Common
Stock (subject to adjustment on the terms set forth in
the Dirne Stock Plans). As of the date of this Agree-
ment, Dirne has no shares of Dirne Common Stock reserved
for issuance, other than 18,098,686 shares for issuance
under the Dirne Stock Plans and the Dirne Stock Option,
and has no shares of Dirne Preferred Stock reserved for
issuance. All the outstanding shares of Dirne Common
Stock have been duly authorized and validly issued and
are fully paid and nonassessable. All the outstanding
shares of capital stock of each of Dime's subsidiaries
owned by Dirne or a subsidiary of Dirne have been duly
authorized and validly issued and are fully paid and
nonassessable, and, except in the case of 100,000
issued and outstanding shares of 1034% Noncumulative
Preferred Stock of Dirne Bank ("Dirne Bank Preferred
Stock"), owned by Dirne or a subsidiary of Dirne free and
clear of all liens, pledges, security interests,
claims, proxies, preemptive or subscriptive rights or
other encumbrances or restrictions of any kind (
collectively, "Liens"). Except as set forth above (
including in Recital or in the Dirne Stock Option
Agreement and except for Dirne Common Stock issued after
the date hereof pursuant to the terms of options or
plans referred to above and the issuance of notes in
exchange for outstanding shares of Dirne Bank Preferred
Stock as described in Section 6.1(e), there are no
shares of capital stock of Dirne authorized, issued or
outstanding and there are no preemptive rights or any
outstanding subscriptions, options, warrants, rights,
convertible securities or other agreernents or commit-
ments of Dirne or any of its subsidiaries of any
-15-
11) character relating to the issued or unissued capital
stock or other securities of Dime or any of its
subsidiaries (including, without limitation, those
relating to the issuance, aale, purchase, redemption,
conversion, exchange, redemption, voting or transfer
thereof). The shares of New Common Stock to be issued
in the Merger or the Alternative Merger, when so issued
in accordance with this Agreement, will be duly author-
ized, validly issued, fully paid and nonassessable and
not subject to any preemptive rights or other Liens
(other than restrictions on certain transfers to be set
forth in the Certificate of Incorporation). Other than
pursuant to the Anchor Stock Option Agreement, as of
the date hereof, neither Dime nor any of its subsidi-
aries beneficially owns, directly or indirectly, or is
party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or
disposing of, any shares of Anchor Common Stock that
are, or if owned would be, Exception Shares.
(ii) In the case of the representations and
warranties made by Anchor: As of the date of this
Agreement, there were outstanding (A) under the stock
option and other plans listed in Section 5.1(d) of
• Anchor's Disclosure Letter (the 'Anchor Stock Plans"),
options or rights'to acquire not more than an aggregate
of 1,077,668 shares of Anchor Common Stock (subject to
adjustment on the terms set forth in the Anchor Stock
Plans) and (B) a warrant, held by the FDIC, to acquire
an aggregate of 4,750,000 shares of Anchor Common Stock
(subject to adjustment as provided therein) (the "FDIC
Warrant"). As of the date of this Agreement, Anchor
has no shares of Anchor Common Stock reserved for
issuance, other than 6,694,110 shares for issuance
under the Anchor Stock Plans and the Anchor Stock
Option and 4,750,000 shares for issuance upon the
exercise of the FDIC Warrant, and has no shares of
Anchor Preferred Stock reserved for issuance. All the
outstanding shares of Anchor Common Stock have been
duly authorized and validly issued and are fully paid
and nonassessable. All the outstanding shares of
capital stock of each of Anchor's subsidiaries owned by
Anchor or a subsidiary of Anchor have been duly
authorized and validly issued and are fully paid and
nonassessable and owned by Anchor or a subsidiary of
Anchor free and clear of all Liens. Except as set
forth above (including in Recital B) or in the Anchor
Stock Option Agreement and except for Anchor Common
Stock issued after the date hereof pursuant to the
terms of the FDIC Warrant or the options, securities or
piano referred to above, there are no shares of capital
stock of Anchor authorized, issued or outstanding, and
-16-
•
there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of Anchor
or any of its subsidiaries of any character relating to
the issued or unissued capital stock or other securi-
ties of Anchor or any of its subsidiaries (including,
without limitation, those relating to the issuance,
aale, purchase, redemption, conversion, exchange,
registration, voting or transfer thereof). Other than
pursuant to the Dirne Stock Option Agreement, as of the
date hereof, neither Anchor nor any of its subsidiaries
beneficially owns, directly or indirectly, or is party
to any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of,
any shares of Dirne Common Stock that are, or if owned
would be, Exception Shares.
(e) Vorparate Authority. (i) It has the requi-
site corporate power and authority and has taken all
corporate action neceesary in order to execute and
deliver this Agreement and, subject only to the
adoption by the holders of the outstanding shares of
Dirne Common Stock or Anchor Common Stock, as the case
may be, of the agreement of merger contained in this
Agreement insofar as required by Section 251 of the
DGCL, to consummate the transactions contemplated
hereby. This Agreement is a valid and legally binding
agreement of it enforceable in accordance with the
terms hereof.
(ii) Its Board of Directors (at a meeting duly
called and held) has by requisite vote (A) authorized
and approved this Agreement, the Stock Option Agree-
ments and the transactions, including the Merger and
the Alternative Merger, contemplated hereby and
thereby, (B) directed that the agreement of merger (as
auch term is used in Section 251 of the DGCL) contained
in this Agreement be submitted for consideration to,
and adoption by, its stockholders in accordance with
Section 251 of the DGCL and (C) (x) in the case of the
representations and warranties of Dirne, approved the
execution of the Dirne Stock Option Agreement and
authorized and approved the Merger and the Alternative
Merger (prior to the execution by Dirne of this Agree-
ment and prior to the date of execution of the Dirne
Stock Option Agreement) in accordance with Section 203
of the DGCL or (y) in the case of the representations
and warranties of Anchor, duly opted-out of coverage of
Section 203 of the DGCL in its certificate of
incorporation.
-17-
1
(f) F N. Vio ti•ns
(i) Other than the Regulatory Approvals and as provided
in Section 1.3, and other than as required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, the Securities Exchange Act of 1934, as
amended (including the rules and regulations there-
under, the "Exchange Act"), the Securities Act of 1933,
1 as amended (including the rules and regulations there-
under, the "Securities Act"), state securities and "
Blue Sky" laws and the rules of the NYSE or the
National Association of Securities Dealers, Inc. (the
"NASD"), no notices, reports or other filings are
required to be made by it with, nor are any consents,
registrations, approvals, permits or authorizations
required to be obtained by it from, any governmental or
regulatory authority, agency, court, commission or
other entity, domestic or foreign ("Governmental
Entity"), in connection with the execution, delivery or
• performance of this Agreement by it and the consumma-
tion by it of the transactions contemplated hereby and
thereby.
(ii) The execution, delivery and performance of
this Agreement does not and will not, and the consumma-
• tion by it of any of the transactions contemplated
hereby will not, constitute or result in (A) a breach
or violation of, or a default under, its certificate of
incorporation or by-laws, or the comparable governing
instruments of any of its subsidiaries, or (B) a breach
or violation of, or a default under, or the accelera-
• tion of or the creation of a Lien (with or without the

giving of notice, the lapse of time or both) pursuant
to, any provision of any agreement, lease, contract,
note, mortgage, indenture, arrangement or other obli-
gation ("Contracts") of it or any of its subsidiaries
or any law, rule, ordinance or regulation or judgment,
• decree, order, award or governmental or non-governmen-

tal permit or license to which it or any of its sub-
sidiaries is subject, or any change in the rights or
obligations of any party under any of the Contracts.
Paragraph 5.1(f) of its Disclosure Letter contains a
list of all consents of third parties required under
any Contracts to be obtained by it or its subsidiaries
prior to consummation of the Merger or the Alternative
Merger and the Bank Merger.
(g) Reporte and Financial Statements. (i) With
respect to periods since January 1, 1992, each of it
and its subsidiaries has filed all reports and state-
ments, together with any amendments required to be made
with respect thereto, that it was required to fite with
(A) the Securities and Exchange Commission (the "SEC"),
•
-18-
(B) the OTS, (C) the FDIC, (D) the Federal Home Loan
Bank of New York (the "FHLB"), (E) any other applicable
federal or state banking, insurance, securities, or
other regulatory authorities or (F) the NYSE or the
NASD, as the case may be, and, as of their respective
dates (and, in the case of reports or statements filed
prior to the date hereof, without giving effect to any
amendments or modifications filed after the date of
this Agreement), each such report or statement, includ-
ing the financial statements and exhibits thereto,
complied (or will comply, in the case of reports or
statemente filed after the date of this Agreement) as
to form in all material respects with all applicable
statutes, rules and regulations.
(ii) It has delivered to the other of Dime or
Anchor each registration statement, offering circular,
report, definitive proxy statement or information
statement under the Securities Act, the Exchange Act,
12 C.F.R. Parts 563b, 563d and 563g and state securi-
ties and "Blue Sky" lawe (collectively, the "Securities
Laws") filed, used or circulated by it (and in the case
of Dime for periods prior to May 25, 1994, by Dime
Bank) with respect to periods since January 1, 1992
through the date of this Agreement and will promptly
deliver each such registration statement, offering
circular, report, definitive proxy statement or
information statement filed, used or circulated after
the date hereof (collectively, its "Reports"), each in
the form (including exhibits and any amendments
thereto) filed with the SEC or the OTS (or if not so
filed, in the form used or circulated), including,
without limitation, (A) with respect to Dirne, Düne
Eank's Annual Report on Form 10-K for the year ended
December 31, 1993 and ite Quarterly Report on Form 10-Q
for the period ended March 31, 1994 and (B) with
respect to Anchor, its Annual Report on Form 10-X for
the year ended June 30, 1993 and its Quarterly Reports
an Form 10-0 for the periods ended September 30, 1993,
December 31, 1993 and March 31, 1994.
(iii) As of their respective dates (and without
giving effect to any amendments er modifications filed
after the date of this Agreement), each of the Reports,
including the financial statements, exhibits and sched-
ulee thereto, filed, used or circulated prior to the
date hereof complied (and each of the Reports filed
after the date of this Agreement, will comply) in all
material respects with the applicable Securities Laws
and did not (or in the case of reports, statements, or
circulars filed after the date of this Agreement, will
not) contain any untrue statement of a material fact er
-19-
omit to state a material fact requ red to be stated
therein or necessary to make the statements made
therein, in the light of the circumstances under which
they were made, not misleading.
(iv) Each of its (and in the case of Dime for
periods prior to May 25, 1994, Dime Bank's) consoli-
dated balance sheets included in or incorporated by
reference into its Reports, including the related notes
and schedules, fairly presents (or, in the case of
Reports prepared after the date of this Agreement, will
fairly present) the consolidated financial position of
it and its subsidiaries as of the date of euch balance
sheet and each of the consolidated statements of
income, cash flows and stockholders' equity included in
or incorporated by reference into its Reports, includ-
ing any related notes and schedules, fairly presents (
or, in the case of Reports prepared after the date of
this Agreement, will fairly present) the consolidated
results of operations, retained earnings and cash
flows, as the case may be, of it and its subsidiaries
for the periods set forth therein (subject, in the case
of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with generally
accepted accounting principles consistently applied
during the periods involved, except as may be noted
therein. Collectively, its foregoing consolidated
balance sheets, statements of income, cash flows and
stockholders' equity are referred to as its "Financial
Statements".
(v) Its executive officers know of no reason why

the allowance for loan and lease losses shown in its
consolidated balance sheet dated March 31, 1994
included in its Financial Statements was not adequate
as of such date to provide for estimable and probable
losses, net of recoveries relating to loans previously
charged off, inherent in its loan portfolio.
(h) Asset Classificaion. Paragraph 5.1(h) of
its Oisclosure Letter sete forth a list, accurate and
complete in all material respects, of the aggregate
amounts of loans, extensions of credit and other aesets
of it and its subeidiaries that have been criticized or
classified ae of Märch 31, 1994 by it, separated by
category of classification or criticism (the "Aaset
Classification"); and no amounts of loans, extensions
of credit or other assets that have been classified or
criticized as of the date hereof by any representative
of any Governmental Entity as "Other Loans Especially
Mentioned", "Substandard", "Doubtful", "Loss" or words
of similar import are excluded from the amounts
-20-
disclosed in the Aaset Classification, other than
amounts of loans, extensions of credit or other assets
that were charged off by it or its subsidiaries prior
to the date hereof.
(i) Absence of Certain Events and Changes.
Except as disclosed in its Reports filed by it with the
SEC or the OTS prior to the date of this Agreement,
since December 31, 1993, it and its subsidiaries have
conducted their respective businesses only in the ordi-
nary and usual course of such businesses and, without
giving effect to the second proviso of Section 5.3(a)
or to Section 5.3(b), there has not been any change or
development or combination of changes or developments
which, individually or in the aggregate, is reasonably
likely to result in a Material Adverse Effect (as
defined in Section 5.3(b)).
(j) Properties. Except as disclosed or reserved
against in its Reports, it and its subsidiaries have
good and marketable title, free and clear of all Liens
(other than Liens for current taxes not yet delinquent
or pledges to secure deposits) to all of the material
properties and assets, tangible or intangible,
reflected in its Reports as being owned by it or its
subsidiaries as of the dates thereof. To the knowledge
of its executive officers, all buildings and all
fixtures, equipment and other property and assets that
are material to its business an a consolidated basis
and are held under leasen or subleaees by it or its
subsidiaries are held under valid leases or subleases
enforceable in accordance with their respective terms (
except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally or by general
equity principles).
(k) Compliance with Laws. It and each of its
subsidiaries:
(i) is in compliance, in the conduct of its
business, with all applicable federal, state,
local and foreign statutes, laws, regulations,
ordinances, rules, judgments, ordere 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 and all other applicable
fair lending laws or other laws relating to dis-
crimination;
-21-
(ii) has all permits, licenses, certificates
of authority, orders, and approvals of, and has
made all filings, applications, and registrations
with, federal, state, local, and foreign govern-
mental or regulatory bodies that are required in
order to permit it or such subsidiary to carry an
its business as it is presently conducted;
(iii) has received since January 1, 1993 no

notification or communication from any
Governmental Entity (including the OTS and any
other bank, insurance and securities regulatory
authorities) or the staff thereof (A) asserting
that it or any of its subsidiaries is not in
compliance with any of the statutes, regulations
or ordinances that euch Governmental Entity
enforces; (B) threatening to revoke any license,
franchise, permit or governrnental authorization;
or (C) threatening or contemplating revocation or
limitation of, or which would have the effect of
revoking or limiting, FDIC deposit insurance (nor,
to the knowledge of its executive officers, do any
grounds for any of the foregoing exist); and
(iv) is not required to give prior notice to
any federal banking or thrift agency of the
proposed addition of an individual to its board of
directors or the employment of an individual as a
senior executive.
(1) Litigation. Except as disclosed in its
Reports filed with the SEC or OTS prior to the date
hereof, there are no criminal or administrative inves-
tigations or hearings of, before or by any Governmental
Entity, or civil, criminal or administrative actions,
suits, claime or proceedings of, before or by any
person (including any Governmental Entity) pending or,
to the knowledge of its executive officers, threatened,
against it or any of its subsidiaries (including, with-
out limitation, under the Equal Credit Opportunity Act,
the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act or any other fair
lending law or other law relating to discrimination);
and neither it nor any of its subsidiaries (nor any
officer, director, controlling person or property of it
or any of its subsidiaries) is a party to or is subject
to any order, decree, agreement, memorandum of under-
standing or similar arrangement with, or a commitment
letter or similar submission to, any Governmental
Entity charged with the supervision or regulation of
depository institutions or engaged in the insurance of
deposits (including, without limitation, the OTS, the
-22-
FHLB and the FDIC) or the supervision or regulation of
it or any of its subsidiaries and neither it nor any of
its subsidiaries has been advised by any such Govern-
mental Entity that such Governmental Entity is contem-
plating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such
order, decree, agreement, memorandum of understanding,
commitment letter or similar submission.
(m) Taxes. (i) The term "Tax" includes any tax
or similar governmental charge, impost or levy (includ-
ing, without limitation, income taxes, Franchise taxes,
transfer taxes or fees, stamp taxes, sales taxes, use
taxes, excise taxes, ad valorem taxes, withholding
taxes, employee withholding taxes, worker's compensa-
tion, payroll taxes, unemployment insurance, social
security, minimum taxes or windfall profits taxes),
together with any related liabilities, penalties,
fines, additions to tax or interest, irnposed by the
United States or any state, county, provincial, local
or foreign government or subdivision or agency thereof.
(ii) All federal, state and local Tax returns,

including all information returns, required to be filed
by or on behalf of it or any of its subsidiaries have
been timely filed or requests for extensions have been
timely filed and any such extension ehall have been
granted and not have_expired, and all such filed
returns are complete and accurate in all material
respects. Except as disclosed in its Reports, all
taxes attributable to it or any of its subsidiaries
that are or were due or payable (without regard to
whether such Taxes have been assessed) have been paid
in full or have been adequately provided for on its
consolidated balance sheet and consolidated statement
of earnings or income (in accordance with generally
accepted accounting principles). Adequate provision in
accordance with generaily accepted accounting princi-
ples appropriately and consistently applied has been
made in the Reports relating to all Taxes for the
periods covered thereby that were not yet due and
payable as of the dates thereof, regardless of whether
the liability for such Taxes is disputed. As of the
date of this Agreement and except as disclosed in its
Reports, there is no outstanding audit examination,
deficiency, refund litigation or outstanding waivers or
agreements extending the applicable statute of
limitations for the assessment or collection of any
Taxes for any period with respect to any Taxes of it or
its subsidiaries. All Taxes, interest, additions and
penalties due with respect to completed and settled
examinations or concluded litigation relating to it or
-23-
•
any of its subsidiaries have been paid in Full or have
been recorded an its or such subsidiary's balance sheet
and consolidated statement of earnings or income (in
accordance with generally accepted accounting princi-
ples). Neither it nor any of its subsidiaries is a
party to a tax sharing or similar agreement or any
agreement pursuant to which it or any of its subsidi-
aries has indemnified any party (other than it or one
of its subsidiaries) with respect to Taxes. The proper
and accurate amounts have been withheld from all
employees (and timely paid to the appropriate Govern-
mental Entity or set aside in an account for such
purposes) for all periods through the Closing Date in
compliance with all Tax withholding provisions of
applicable federal, state, local and foreign laws (
including, without limitation, income, social security
and employment tax withholding for all types of compen-
sation).
(n) Insurance. Bach of it and its subsidiaries
has taken all requisite action (including without limi-
tation the making of claims and the giving of notices)
pursuant to its directors' and officers' liability
insurance policy or policies in order to preserve all
righte thereunder with respect to all mattere (other
than mattere arising in connection with this Agreement
and the transactions contemplated hereby) that are
known to it. Paragraph 5.1(n) of its Disclosure Letter
contains a list of all directors' and officers' liabil-
ity insurance policies maintained by it or its subsidi-
aries.
(0) Labor Mattere. Neither it nor any of its
subsidiaries is a party to, or is bound by, any collec-
tive bargaining agreement, contract or other agreement
or understanding with a labor union or labor organiza-
tion, nor is it or any of its subsidiaries the subject
of any material proceeding asserting that it or any
such subeidiary has committed an unfair labor practice
or seeking to campe' it or auch subeidiary to bargain
with any labor organization as to wages or conditions
of employment, nor is there any strike involving it or
any of its subsidiaries pending or, to the knowledge of
its executive officers, threatened, nor are its execu-
tive officers aware of any activity involving its or
any of ite subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in any other
organizational activity.
(p) goployee Beugnto. (i) As of the date of
this Agreement, paragraph 5.1(p) of its Disclosure
Letter sets forth a list of all bonus, deferred
-24-
compensation, pension, reti ement, profit-sharing,
thrift, savings, employee stock ownership, stock bonus,
stock purchase, restricted stock and stock option
plans, all material employment or severance contracts
and all other material employee benefit plans that
covers employees or former employees of it and its sub-
sidiaries (its "Compensation Plans"). True and com-
plete copies of the Compensation Plans (and, as appli-
cable, copies of summary plan descriptions, govern-
mental filings (on Form 5500 series or otherwise),
actuarial reports and reports under Financial Account-
ing Standards Board Statement No. 106 relating thereto)
and all other benefit plans, contracts or arrangements
(regardless of whether they are funded or unfunded or
foreign or domestic) covering current or former
employees or directors of it or its subsidiaries (its
"Employees"), inclüding, but not limited to, "employee
benefit plane" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and all amendments thereto, have
been made available to the other party.
(ii) All of its and its subsidiaries' employee

benefit plane, within the meaning of Section 3(3) of
ERISA, other than "multiemployer plane" within the
meaning of Section 3(37) or 4001(a)(3) of ERISA, cover-
ing Bmployees (collectively, its "Plans"), to the
extent subject to ERISA, are in substantial compliance
with ERISA. Bach of its Plans which is an "employee
pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended
to be qualified under Section 401(a) of the Internal
Revenue Code has received a favorable determination
letter from the Internal Revenue Service, and it is
not aware of any circumstances likely to result in
revocation of any such favorable determination letter.
There is no pending or, to the knowledge of its
executive officers, threatened litigation relating to
its Plans. Neither it nor any of its subsidiaries has
engaged in a transaction with respect to any Plan
that, assuming the taxable period of such transaction
expired as of the date hereof, could subject it or any
of its subsidiaries to a tax or penalty imposed by
either Section 4975 of the Internal Revenue Code or
Section 502(i) of BRISA.
(iii) No liability under Subtitle C or D of
Title IV of ERISA (other than payment of applicable
premiums) has been or is expected to be incurred by it
or any of its subsidiaries with respect to any ongoing,
frozen or terminated 'single-employer plan", within the
meaning of Section 4001(a)(15) of BRISA, currently or
-25-
formerly maintained by any of them, or the single-
employer plan of any entity which is coneidered one
employer with it under Section 4001 of ERISA or Sec-
tion 414 of the Internal Revenue Code (an "ERISA Affil-
iate"). It and its subsidiaries and ERISA Affiliates
have not incurred and do not expect to incur any
material withdrawal liability with respect to a multi-
employer plan under Subtitle E of Title IV of ERISA (
regardless of whether based an contributions of an
ERISA Affiliate), nor has it or any of its subsidiaries
or ERISA Affiliates been notified by any multiemployer
plan to which it or any of its subsidiaries or ERISA
Affiliates is contributing, or may be obligated to
contribute, that euch multiemployer plan is currently
in reorganization or insolvency under and within the
meaning of Section 4241 or 4245 of ERISA or that such
multiemployer plan intends to terminate or has been
terminated under Section 4041A of ERISA. No notice of
a "reportable event", within the meaning of Sec-
tion 4043 of ERISA, for which the 30-day reporting
requirement has not been waived, has been required to
be filed for any of its Pension Plans or by any of its
ERISA Affiliates within the 12-month period ending an
the date hereof. Neither it, its subsidiaries nor any
of their reepective ERISA Affiliates has incurred or is
aware of any facts that are reasonably likely to result
in any liability pursuant to Sectione 4069 or 4204 of
ERISA.
(iv) All material contributions required to be
made by it and its subsidiaries under the terms of any
of its Plans have been timely made or have been
reflected an its balance sheet. Neither any of its
Pension Plans nor any single-employer plan of any of
its ERISA Affiliates has an "accumulated funding
deficiencyw (whether or not waived) within the meaning
of Section 412 of the Internal Revenue Code or Sec-
tion 302 of ERISA. None of it, its subsidiaries or its
ERISA Affiliates has provided, or is required to pro-
vide, security to any Pension Plan or to any single-
employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Internal Revenue Code,
Section 412(f)(3) of the Code or Sectione 306, 307 or
4204 of ERISA.
(v) Under each of its and its ERISA Affiliates'
Pension Plans which is a single-employer plan, as of
the last day of the most recent plan year ended prior
to the date of this Agreement, the actuarially deter-
mined present value of all "benefit liabilitiesw,
within the meaning of Section 4001(a)(16) of ERISA (as
determined an the basis of the actuarial assumptions
-26-
contained in the Pension Plan's most recent actuarial
valuation), did not exceed the then current value of
the assets of such Pension Plan, and to the knowledge
of its executive officers, there has been no change in
the financial condition of such Pension Plan since the
last day of the most recent plan year which reasonably
could be expected to change such conclusion. There
would be no withdrawal liability of it and its
subsidiaries under each Benefit Plan which is a multi-
employer plan to which lt, its subsidiaries or its
ERISA Affiliates has contributed during the preceding
12 months, if such withdrawal liability were determined
as if a "complete withdrawal", within the meaning of
Section 4203 of ERISA, had occurred as of the date
hereof.
(vi) Except as disclosed in its Reports, neither it
nor its subsidiaries have any obligations for
retiree health and life benefits.
(vii) There are no restrictions an the rights of it
or its subsidiaries to amend or terminate any Plan
without incurring any liability thereunder in addition
to normal liabilities for benefits.
(viii) Except as disclosed in its Reports or as pro-
vided in this Agreement, the transactions contemplated
by this Agreement and the Stock Option Agreements will
not result in the vesting or acceleration of any
amounts under any Compensation Plan, any material
increase in benefits under any Compensation Plan or
payment of any severance or eimilar compensation under
any Compensation Plan.
(q) Environmental Mattere. (i) For purposes of
this Section 5.1(q), the following terms shall have the
indicated meaning:
"Business" ans the business conducted by it
and its subsidiaries.
"Environmental Law" meane any federal, state,
local or foreign law, regulation, agency policy,
order, decree, judgment or judicial opinion or any
agreement with any Government Entity, presently in
effect or hereinafter adopted relating to (A) the
manufacture, generation, transport, use, treat-
ment, storage, recycling, disposal, release,
threatened release or presence of Hazardous Sub-
stances or (B) the preservation, restoration or
protection of the environment, natural resources
or human health.
-27-
"Hazardous Substances" means substances which
0 are: (A) listed, classified or regulated pursuant
to any Environmental Law; (B) any petroleum prod-
ucts or by-products, asbestos containing material,
polychlorinated biphenyls ("PCBs"), radioactive
materials or radon gas; or (C) any other matter to
which exposure is prohibited, limited or regulated
0 by any government authority or Environmental Law.
"Subject Property" means (A) all real
property at which the businesses of it or any of
its subsidiaries have been conducted, all property
in which it or any of its subsidiaries holde a
0 security or other interest (including, without
limitation, a fiduciary interest), and, where
required by the context, includes any such
property where under any Environmental Law it or
any of its subsidiaries constitutes the owner or
Operator of such property, but only with respect
to such property, (B) any facility in which it or
any of its subsidiaries participates in the manage-
ment, including, where required by the context,
participating in the management of the owner or
operator of such property, and (C) all other real
property which for purposes of any Environmental
Law it or any of its subsidiaries otherwise could
be deemed to be an owner or operator or otherwise
control.
(ii) To the knowledge of its executive
officers, it and each of its subsidiaries and the
Subject Property are, and have been, in compliance with
all Environmental Laws and there are no circumstances
that with the passage of time or the giving of notice
would be reasonably likely to result in noncompliance.
(iii) To the knowledge of its executive
officers, there are no pending or threatened
actions, investigations, notices of non-compliance,
information requests or notices of potential responsi-
bility or proceedings involving it or any of its
subsidiaries or any Subject Property relating to:
(A) an asserted liability of it or any of
its subsidiaries or any prior owner, occupier or
user of Subject Property under any Environmental
Law or the terms and conditions of any permit,
license, authority, settlement, agreement, decree
or other obligation arising under any Environmen-
tal Law;
-28-
(B) the handling, storage, use, transporta-
tion, removal or disposal Of Hazardous Substances;
(C) the actual or threatened discharge,
release or emission of Hazardous Substances from,
on or under or within Subject Property into the
air, water, surface water, ground water, land
surface or subsurface strata; or
(D) personal injuries or damage to property

related to or arising out of exposure to Hazardous
Substances;
and, to the knowledge of its executive officers, there
is no reasonable basis for any of the foregoing.
(iv) To the knowledge of its executive
officers, there are no storage tanks underground or
otherwise present on the Subject Property or, if
present, all such tanks are not leaking and are in full
compliance with any Environmental Law. To the knowl-
edge of its executive officers, with respect to any
Subject Property: it and its subsidiaries do not own,
possess or control any PCBs, PCB-contaminated fluids,
wastee or equipment; it and its subsidiaries do not
own, possess or control any asbestos or asbestos-
containing material. To the knowledge of its executive
officers, no Hazardous Substances have been used,
handled, stored, discharged, released or emitted, or
are threatened to be discharged, released or emitted,
at or on any Subject Property; except for those types
and quantities of Hazardous Substances typically used
in an office environment and which have not created
conditions requiring rernediation under any Environ-
mental Law.
(v) To the knowledge of its executive officers
and except for investigation or monitoring by the
Environmental Protection Agency or similar state
agencies in the ordinary course, no gart of the Subject
Property has been or is scheduled for investigation or
monitoring pursuant to any Environmental Law.
(r) Material Agreements. (i) As of the date of
this Agreement, without giving effect to the second
proviso of Section 5.3(a) and to Section 5.3(b), except
for (A) the Stock Option Agreements, (H) with respect
to Anchor, the Lincoln Agreement and (C) arrangements
made after the date and in accordance with the terms of
this Agreement, it and its subsidiaries are not bound
by any material contract (as defined in Item 601(b)(10)
of Regulation S-K under the Securities Act) to be
-29-
performed after the date hereof that has not been filed
with or incorporated by reference in its Reports.
(ii) None of it nor any of its subsidiaries is
in default under any contract, agreement, commitment,
arrangement, lease, insurance policy or other Instru-
ment.
(s) Knowledge as to Conditions. As of the date
of this Agreement, its executive officers know of no
reason why the Regu atory Approvals and, to the extent
necessary, any other approvals, authorizations, fil-
ings, registrations, and notices should not be obtained
without the imposition of any condition or restriction
deecribed in the proviso to Section 7.1(b), or why the
accountants' letters referred to in Section 7.1(h) or
the opinions of tax counsel referred to in Sections
7.2(d) and 7.3(c) cannot be obtained.
•
(t) Brokers and Finders. None of it, its subsid-
iaries or any of their officers, directors or employees
has employed any broker or finder or incurred any
lia-
bility for any brokerage fees, commissions or finder's
fees in connection with the transactions conternplated
herein, except that Anchor has retained Salomon
Brothers Inc as its financial advisor and Dime has
retained Bankers Trust Company and Merrill Lynch & Co.
as its financial advisors, the arrangements with which
have been disclosed in writing to the other party prior
to the date hereof.
(u) Pincoln Agreement . In the case of the
,
representations and warranties made by Anchor: as of

the date hereof, to the knowledge of Anchor after
reasonable inquiry, (i) the representations and
warranties of Lincoln set forth in Sections 2.01(a)-(k)
and 2.01(o)-(u) of the Lincoln Agreement are true and
correct as if made an the date hereof and (ii) there
has been no breach or violation of, or default under,
the Lincoln Agreement by Lincoln or by Anchor. Anchor
has delivered to Dime a true and complete copy of the
Lincoln Agreement, including the Schedule referred to
therein, and has made available to Dime copies of the
Reports, as defined in Section 2.01(d) of the Lincoln
Agreement, filed by Lincoln prior to the date hereof in
the form supplied to Anchor by Lincoln. As of the date
hereof, the Lincoln Agreement has not been amended,
modified or supplemented, and there have been no
waivers of any conditions granted by either party
thereto.
-30-
5.2 Additional Representations and Warranties in
the Event of the Alternative Merger. (a) In the event that
the Alternative Merger is consummated in lieu of the Merger
pursuant to Section 1.2 and subject to Section 5.3, upon the
execution and delivery by Dime-Sub of the supplement to this
Agreement referred to in Section 1.2, Dirne and Dime-Sub
shall be deemed hereby to represent and warrant to Anchor
that:
(i) Corporate Organization and Oualification.
Dime-Sub is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Delaware and a wholly owned subsidiary of
Dirne. Dirne-Sub has made available to Anchor a complete
and correct copy of its certificate of incorporation
and by-laws, each as amended to date and in full force
and effect.
Capital Stock of Dime-Sub. Dime-Sub has 1,
000 authorized shares of Dime-Sub Common Stock, of
which 100 shares are outstanding (there being no other
class of capital stock authorized). All such outstand-
ing shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(iii) Corporate Authority. Dirne-Sub has the requi-
site corporate power and authority and has taken all
corporate action necessary (including the receipt of
any requisite vote by Dirne as the sole stockholder of
Dirne-Sub) in order to execute, deliver and perform this
Agreement and to consummate the transactions contem-
plated hereby. This Agreement is a valid and legally
binding agreement of Dirne-Sub enforceable in accordance
with its terms.
(b) In the event that the Alternative Merger is
consummated in lieu of the Merger pursuant to Section 1.2
and subject to Section 5.3, upon the execution and delivery
by Anchor-Sub of the supplement to this Agreement referred
to in Section 1.2, Anchor and Anchor-Sub shall be deemed
hereby to represent and warrant to Dirne that:
(i) Corporate Organization and Oualification.
Anchor-Sub is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Delaware and a wholly owned subsidiary of
Anchor. Anchor-Sub has made available to Anchor a
complete and correct copy of its certificate of
incorporation and by-laws, each as amended to date and
in full force and effect.
-31-
(ii) Capital Stock of Anchor-Sub. Anchor-Sub has
1,000 authorized shares of Anchor-Sub Common Stock, of
which 100 shares are outstanding (there being no other
class of capital stock authorized). All euch outstand-
ing shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(iii) Corporate Authority. Anchor-Sub has the
requisite corporate power and authority and has taken
all corporate action necessary (including the receipt
of any requisite vote by Anchor as the sole stockholder
of Anchor-Sub) in order to execute, deliver and perform
this Agreement and to consummate the transactions
contemplated hereby. This Agreement is a valid and
legally binding agreement of Anchor-Sub enforceable in
accordance with its teere.
5.3 Exceptions to Representatiqps and warranties.
(a) On or prior to the date hereof, Dime has delivered to
Anchor and Anchor has delivered to Dime a letter (as the
case may be, its "Disclosure Letter") setting forth, among
other things, exceptions to any or all of its representa-
tions and warranties in Section 5.1; providej, that each
exception set forth in a Disclosure Letter shall be deemed
discloaed for purposes of all representations and warranties
if euch exception is contained in a section of the Disclo-
Bure Letter corresponding to a paragraph in Section 5.1 of
any such representation and warranty; and provided furjher,
that (i) no such exception is required to be set forth in a
Disclosure Letter if its absence would not result in the
related representation or warranty being deemed untrue or
incorrect under the standard established by Section 5.3(b)
and (ii) the mere inclusion of an exception in a Disclosure
Letter shall not be deemed an admission by a party that euch
exception represents a material fact, event or circumstance
or would result in a Material Adverse Effect. In the case
of Anchor, the paragraphs of its Disclosure Letter shall be
deemed to include the Lincoln Agreement and the correspond-
ing paragraphs of the related Schedule of Lincoln delivered
by Anchor to Dirne pursuant to Section 5.1(u).
(b) No representation or warranty of Dime or

Anchor contained in Section 5.1 shall be deemed untrue or
incorrect, and no party hereto shall be deemed to have
breached a representation or warranty, as a consequence of
the existence of any fact, circumstance or event if such
fact, circumatance er event, individually or taken together
with all similar facts, circumstances or events, would not,
or, in the case of Section 5.1(1), is not reasonably likely
to, have a Material Adverse Effect.
-32-
As used in this Agreement, the term "Material
Adverse Effect" means an effect which (i) is materially
adverse to the business, financial condition, results of
operations or prospects of Dime or Anchor (after giving pro
forma effect to the Lincoln Acquisition as if it had been
consumrnated prior to the date on or as of which a
representation or warranty is made or deemed made) or on the
Surviving Parent, as the context may dictate, and its sub-
sidiaries taken as a whole, (ii) significantly and adversely
affects the ability of Dime or Anchor, as the context may
dictate, to consummate the transactions contemplated hereby
by May 31, 1995 or to perform its material obligations
hereunder or (iii) enables any person to prevent the consum-
mation by May 31, 1995 of the transactions contemplated
hereby; provided, however, that any effect resulting from
(A) actions or omissions of Dime or Anchor taken with the
prior consent of the other party in contemplation of the
transactions provided for herein or (B) circumstances
affecting the thrift industry in the Greater New York
metropolitan area generally shall be deemed not to be a
Material Adverse Effect.
ARTICLE VI
Covenants
6.1 Conect of Business Pendinq the Effective

Time. Each of Dime and Anchor agrees as to itself and its
subsidiaries that, from and alter the date hereof until the
Effective Time, except insofar as the other party shall
otherwise consent in writing (such consent not to be
unreasonably withheld) or except as otherwise expressly
contemplated by this Agreement or the Stock Option
Agreements or as set forth in Section 6.1 of its Disclosure
Letter:
(a) The business of it and its subsidiaries will
be conducted only in the ordinary and usual course and,
to the extent consistent therewith, it and its subsidi-
aries will use all reasonable efforts to preserve
intact their business organizations and assets and
maintain their rights, franchises and existing rela-
tions with customers, suppliers, employees and business
associates and to take no action that would (i) adver-
sely affect the ability of any of them to obtain any
necessary approvals of Governmental Entities required
for the transactions contemplated hereby without
imposition of a condition or restriction of the type
referred to in the proviso to Section 7.1(b) or (ii)
adversely affect its ability to perform its obligations
under this Agreement or the Stock Option Agreements.
-33-
(b) It will not seil or pledge or agree to
seil or pledge or permit any Lien to exist an any stock
owned by it of any of its material subsidiaries;
(ii) arnend its certificate of incorporation or by-laws;
(iii) eplit, combine or reclassify any outstanding
capital stock; (iv) other than as permitted by
Section 6.2, declare, set aride or pay any dividend
payable in cash, stock or other property with respect
to any of its capital stock; or (v) repurchase, redeem
or otherwise acquire, or permit any subsidiary to
purchase or otherwise acquire, directly or indirectly,
any shares of its capital stock or any securities
convertible into or exercisable for any shares of its
capital stock (other than such capital stock repur-
chased pursuant to the Dime Stock Plane and the Anchor
Stock Plans, as the case may be, and, in the case of
Dirne, in connection with the exchange of notes for
shares of Dirne Bank Preferred Stock in accordance with
Section 6.1(e)(iii)).
(c) Notwithstanding anything to the contrary
contained in Section 6.3, neither it nor any of its
subsidiaries will (i) issue, seil, pledge, dispose of
or encumber, or authorize or propose the issuance,
aale, pledge, disposition or encumbrance of, any shares
of, or securities convertible or exchangeable for, or
options, warrants, calls, commitments or rights of any
kind to acquire, any shares of its capital stock of any
class, with the exception of Dime Common Stock or
Anchor Common Stock issuable as of the date hereof
pursuant to the Dime Stock Plans or Anchor Stock Plans,
respectively, the Stock Option Agreements or the FDIC
Warrant and, in the case of Dirne, in connection with
the exchange of notes for shares of Dime Bank Preferred
Stock in accordance with Section 6.1(e)(iii);
(ii) transfer, lease, license, guarantee, seil, rnort-
gage, pledge or dispose of any other material property
or assets or encumber any property or assets other than
to a direct or indirect wholly owned subsidiary of it;
(iii) cancel, release, assign or modify any material
amount of indebtedness of any other individual, corpo-
ration or other entity (collectively, a "Person") other
than in the ordinary and usual course of business; or
(iv) authorize capital expenditures other than in the
ordinary and usual course of business.
(d) Except as expressly contemplated in this
Agreement, and except for the Lincoln Acquisition or
internal reorganizations involving existing subsidi-
aries, neither it nor any of its subsidiaries will make
any material acquisition of, or investment in, assets
-34-
or stock of any other Person not in the ordinary and
usual course of business.
(e) Other than (i) in the ordinary course of
business consistent with past practice, (ii) with
respect to Anchor, indebtedness, assumptions, guaran-
tees, endorsements or accommodations of Lincoln
acquired as a result of the consummation of the Lincoln
Acquisition (which shall not include debt incurred to
finance the Lincoln Acquisition) or (iii) with respect
to Dime, the issuance of notes pursuant to the terms of
the Indenture to be entered into (in substantially the
form contained in Dime's Reports and provided to Anchor
prior to the date hereof) between Dime and a trustee
thereunder, in exchange for outstanding shares of Dirne
Bank Preferred Stock in accordance with the terms and
conditions thereof (which exchange Anchor understands
Dime intends to effect in connection with its recent
corporate reorganization as soon as practicable and, in
any event, regardless of whether the Merger or the
Alternative Merger shall be consummated), it will not
incur or permit any of its subsidiaries to incur any
indebtedness for borrowed money or assume, guarantee,
endorse or otherwise as an accommodation become respon-
•
sible for the obligations of any other Person or make
any loan or advance.
(f) Except as required by agreements or arrange-

ments disclosed in Paragraph 6.1(f) of its Disclosure
Letter or as provided in Section 6.1(j), neither it nor
• any of its subsidiaries will (i) grant any increase in

compensation or benefits to its Employees or to its
officers, except for normal increases consistent with
past practice or as required by law; (ii) pay any bonus
except as consistent with past practice; (iii) grant
any severance or termination pay to any director, offi-
cer or other of its Employees except as consistent with
past practice; (iv) enter into or amend any employment
or severance agreement with any director, officer or
other of its Employees (provided, that this clause (iv)
shall not prohibit either party from approving a
renewal or other extension of an existing employment or
severance agreement in accordance with its terms and in
the ordinary course of business); (v) grant any
increase in fees or other increases in compensation or
other benefits to any of its present or former direc-
tors; or (v1) effect any change in retirement benefits
for any class of its Employees or officers (unless such
change is required by applicable law or, in the written
opinion of counsel, is necessary or advisable to main-
tain the tax qualification of any plan under which the
retirement benefits are provided).
-35--
•
(g) Except as provided in Section 6.1(j) and as
may be required to satisfy contractual obligations
existing as of the date hereof and the requirements of
applicable law, neither it nor any of its subsidiaries
will establish, adopt, enter into or make any new, or
amend any existing, collective bargaining, bonus,
• profit sharing, thrift, compensation, stock option,

restricted stock, pension, retirement, employee stock
ownership, deferred compensation, employment, termi-
nation, severance or other plan, agreement, trust,
fand, policy or arrangement for the benefit of any
directors, officers or employees.
• (h) Neither it nor any of its subsidiaries will

implement or adopt any change in its accounting princi-
ples, practices or methods, other than as may be
required by generally accepted accounting principles.
(i) Neither it nor any of its subsidiaries will
authorize or enter into an agreement to take any of the
actions referred to in paragraphs (a) through (h)
above.
(j) Notwithstanding the provisions of Sections
6.1(f) and (g) herein, each party hereto shall be
permitted to take, or authorize or agree to take, any
of the actions contemplated in such Sections without
the consent of the other party, if such action (i) is
reasonably necessary to qualify for, or preserve, an
exemption of certain transactions from the operation of
•
Section 16(b) of the Exchange Act in accordance with
the provisions of SEC Rule 16b-3, as amended, (ii) with
respect to Dirne, is intended to reflect the reorganiza-
tion of Dirne Bank an May 25, 1994 or (iii) as set forth
in paragraph 6.1 of its Disolosure Letter.
6.2 Dividende. Bach of Dime and Anchor agrees
• that, from and after the date hereof until the Effective
Time, (a) direct and indirect wholly owned subsidiaries of
each of Dime and Anchor may (to the extent legally and
contractually permitted to do so), but shall not be obli-
gated to, declare and pay dividends in cash, stock or other
property and (b) Dime Bank will pay such cash dividends in
respect of the Dime Bank Preferred Stock as are provided for
by the express terms of the Dime Bank Preferred Stock as in
effect on the date hereof. Unless Dime and Anchor otherwise
agree in writing, none of Dirne, Anchor or their respective
subsidiaries will declare or pay any dividend or distribu-
tion on shares of their capital stock, whether payable in
cash, stock or other property, other than those dividends
expressly permitted by the immediately preceding sentence.
-36-
•
6.3 Acquisition Proposals. Each of Dirne and
Anchor agrees that neither it nor any of its subsidiaries
nor any of its respective officers and directors or the
officers and directors of its subsidiaries shall, and it
shall direct and use all reasonable efforts to cause its
employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries
or the making or implementation of any proposal or offer
with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of all or any
substantial part of the assets or any equity securities of, *
it or any of its subsidiaries (other than (but without in
any manner limiting the covenants contained in Sec-
tione 6.1(c)(i) and (ii)), (i) non-performing assets or
(ii) securities of a subsidiary formed for the sole purpose
of holding for sale such assets, in either case which are
otherwise permitted to be sold hereunder) (any such proposal
or offer being hereinafter referred to as an "Acquisition
Proposal') or engage in any negotiations concerning, or
provide any confidential information or data to, or have any
discussions with, any such person relating to an Acquisition
Proposal; provided, however, that the Board of Directors of
Dirne or Anchor, an behalf of Dirne or Anchor, respectively,
may furnish or cause to be furnished information and may
participate in such discussions and negotiations directly or
through its representatives if such Board of Directors,
after having consulted with and considered the written
advice of outside counsel, has determined that the failure
to provide such information or participate in such negotia-
tions and discussions would cause the members of such Board
of Directors to breach their fiduciary duties established
under the DGCL. Anchor will notify Dirne, and Dirne will
notify Anchor, immediately if any such inquiries or pro-
posale are received by, any such information is requested
fromm, or any such negotiations or discussions are sought to
be initiated or continued with, it.
6.4 Stockholder Approvals: Election of Directors.
Each of Dirne and Anchor agrees to take, in accordance with
applicable law and its respective certificate of incorpora-
tion and by-laws, all action necessary to convene a meeting
of holdere of Dirne Common Stock (the 'Dirne Meeting") and
Anchor Common Stock (the "Anchor Meeting"), respectively, as
promptly as practicable after the Registration Statement (as
defined in Section 6.5) is declared effective to consider
and vote upon the adoption of the agreement of merger (
within the meaning of Section 251 of the DGCL) contained in
this Agreement. Subject to the next succeeding sentence,
(i) the Board of Directors of each of Dirne and Anchor will
recommend such adoption, and each of Dirne and Anchor will
-37-
take all reasonable lawful action to solicit such adoption
by its respective stockholdere and (ii) the Nominating
Committee of the Board of Directors of Dime will nominate
the members of Anchor's Board of Directors for, and Dime's
Board of Directors will take all reasonable and lawful
action necessary for, the election of such persons as
directors of Surviving Parent prior to or at the Effective
Time. The Board of Directors of Dime or Anchor, acting on
behalf of Dime or Anchor, respectively, may fail to make
such a recommendation, or withdraw, modify or change any
such recommendation if and only if such Board of Directors,
after having consulted with and considered the written
advice of outside counsel, has determined that the making of
such recommendation, or the failure so to withdraw, modify
or change its recommendation, would constitute a breach of
the fiduciary duties of such directors established under the
DGCL.
6.5 Filiggsl OthQr Actipns. (a) Bach of Dirne
and Anchor agrees to cooperate in the preparation of a
registration statement on Form S-4 to be filed by Dime with
the SEC in connection with the issuance of New Common Stock
in the Merger or the Alternative Merger (including the joint
proxy etatement and prospectus and other proxy solicitation
materiale of Dime and Anchor constituting a part thereof
(the "Joint Proxy Statement"), the "Registration Statement"
). Dime agrees to use all reasonable efforts to cause the
Registration Statement to be declared effective under the
Securities Act as promptly as practicable after filing
thereof. Dime also agrees to use all reasonable efforts to
obtain all necessary state securities law or "Blue Sky"
permits and approvals required to carry out the transactions
contemplated by this Agreement, and Anchor agrees to furnish
all information concerning Anchor and the holdere of Anchor
capital stock as may be reasonably requested in connection
with any such action.
(b) Bach of Dirne and Anchor agrees to cooperate
with the other and, subject to the terms and conditions set
forth in this Agreement, use reasonable efforts to prepare
and file all necessary documentation, to effect all neces-
sary applications, notices, petitions, filings and other
documents, and to obtain all necessary permits, consents,
ordere, approvals and authorizations of, or any exemption
by, all third parties and Governmental Entities necessary or
advisable to consunmate the transactions contemplated by
this Agreement, including without limitation the Regulatory
Approvals. Bach of Dime and Anchor ehall have the right to
review in advance, and to the extent practicable each will
consult with the other, in each case subject to applicable
laws relating to the exchange of information, with respect
to all the information relating to the other party, and any
-38-
of their respective subsidiaries, which appear in any filing
made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the
transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto agrees to
act reasonably and as promptly as practicable. Each party
hereto agrees that it will consult with the other party
hereto with respect to the obtaining of all permits, con-
sente, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to consummate
the transactions contemplated by this Agreement and each
party will keep the other party apprised of the status of
matters relating to completion of the transactions contem-
plated hereby.
(c) Bach party agrees, upon request, to furnish
the other parties with all information concerning itself,
its subsidiaries, directors, officers and stockholdere and
such other mattere as may be reasonably necessary or advis-
able in connection with the Registration Statement or Joint
Proxy Statement or any other statement, filing, notice or
application made by or an behalf of such other party or any
of its subsidiaries to any Governmental Entity in connection
with the Merger, the Alternative Merger, the Bank Merger and
the other transactions contemplated by this Agreement.
(d) Each of Dime and Anchor agrees to consult and
cooperate with the other in effecting actions and measures
for the purpose of ensuring the orderly consummation of the
transactions contemplated hereby and the efficient conduct
of the combined businesses of Dime and Anchor following the
Merger or the Alternative Merger, as the case may be.
Without limiting the foregoing, each of Dime and Anchor
agrees, to the extent consistent with applicable law, to
consult and cooperate with the other in (i) developing a
joint business plan for periods beginning at the Effective
Time and (ii) taking reasonable steps in an effort to enable
the Surviving Parent to achieve the objectives stated in
such joint business plan.
6.6 Information Supplied. Bach of Anchor and
Dirne agrees, as to itself and its subsidiaries, that none of
the information supplied or to be supplied by it for inclu-
sion or incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement and
each amendment and supplement thereto, if any, become effec-
tive under the Securities Act, contain any untrue statement
of a material fact or mit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Joint Proxy
Statement and any amendment or supplement thereto will, at
the date of mailing to stockholdere and at the times of the
-39-
•
meetings of stockholders of Dime and Anchor to be held in
connection with this Agreement, contain any statement which,
in the light of the circumstances under which such statement
is made, will be false or misleading with respect to any
material fact, or which will omit to state any material fact
necessary in order to make the statements therein not false
or misleading or necessary to correct any statement in any
earlier statement in the Joint Proxy Statement or any
amendment or supplement thereto. Neither the Joint Proxy
Statement nor the Registration Statement shall be filed,
and, prior to the termination of this Agreement, no amend-
ment or supplement to the Joint Proxy Statement or the
Registration Statement shall be filed, by Dime or Anchor
without consultation with the other party and its counsel.
6.7 Accountants' Retters. Bach of Dime and
Anchor agrees to use all reasonable efforts to cause to be
delivered to the other party, and auch other party's
directors and officers who sign the Registration Statement,
a letter of KPMG Peat Marwick, independent auditors, dated
(i) the date an which the Registration Statement shall
become effective and (ii) a date shortly prior to the
Closing Date, and addressed to euch other party, and such
directors and officers, in form and substance customary for "
camfort" letters delivered by independent accountants in
connection with registration statements similar to the
Registration Statement.
6.8 Access. Upon reasonable notice, each party
agrees to (and shall cause each of its subsidiaries to)
afford the other party's officers, employees, counsel,
accountants and other authorized representatives ("Represen-
tatives") access, during normal business hours throughout
the period until the Closing Date, to its properties, books,
contracts and records and, during such period, shall (and
shall cause each of its subsidiaries to) furnish promptly to
the other party all information concerning its business,
properties and personnel as may reasonably be requested;
provided, that no investigation pursuant to this Section 6.8
shall affect or be deemed to modify any representation or
warranty made by the party furnishing such information.
Bach party will not, and will cause its respective Repre-
sentatives not to, use any information obtained pursuant to
this Section 6.8 for any purpose unrelated to the consumma-
tion of the transactions contemplated by this Agreement.
Subject to the requirements of applicable law, pending
consummation of the transactions herein contemplated, each
party conducting an investigation hereunder will keep
confidential, and will cause its Representatives to keep
confidential, all information and documents obtained from
the other party pursuant to this Section 6.8 or during the
investigation leading up to the execution of this Agreement.
-40-
The agreements between Dime Bank and Anchor regarding the
confidentiality of euch information in effect at the date
hereof (the "Confidentiality Agreements") shall continue and
survive in full force and effect until the Effective Time
or, in the event this Agreement is terminated, shall
continue in accordance with the terme thereof. Upon any
termination of this Agreement, each party will collect and
deliver to the other party all nonpublic documents obtained
by it or any of its Representatives and then in their
possession and any copies thereof and destroy or cause to be
destroyed all notes, memoranda or other documents in the
possession of it or of its Representatives containing or
reflecting any nonpublic information obtained from the other
party, except to the extent that any euch information may be
embodied in minutes of the meetings of such party's Board of
Directors or in filings, reports or submissions to or with
any Governmental Entity.
6.9 Notification of Certain Matters. Each of
Dime and Anchor will give prompt notice to the other of any
fact, event or circumstance known to its executive officers
that (i) is reasonably likely to result in any Material
Adverse Effect, would cause or constitute a material
breach of any of the representations, warranties, covenants
or agreements of euch party contained herein or (iii) is
reasonably likely to result in the failure of a condition to
consummation set forth in Article VII to be satisfied on or
prior to May 31, 1995.
6.10 Publicity. The initial press release relat-
ing hereto will be a joint press release and thereafter
Anchor and Dime shall consult with each other prior to
issuing any press releases or otherwise making public state-
ments with respect to the transactions contemplated hereby
and prior to making any filings with any Governmental Entity
or with the NYSE or the NASD with respect thereto.
6.11 Optione. Warrants and Benefit Plans.
(a) Opt,ions. At the Effective Time, by virtue of the
Merger or the Alternative Merger, as the case may be, and
without any action on the part of any holder of an option or
warrant, each option or warrant granted by Dime or Anchor
to purchase shares of Dime Common Stock (any such option or
warrant to purchase shares of Dime Common Stock being
referred to as a "Dirne Option') or Anchor Common Stock (any
auch option or warrant to purchase shares of Anchor Coxnmon
Stock being referred to as an "Anchor Option"), respec-
tively, that is outstanding and unexercised immediately
prior thereto (excluding any auch option or warrant the
holder of which is then entitled to receive cash in satis-
faction thereof under the terme of such option or warrant)
shall be converted into an option or warrant, as the case
-41-
may be, to purchase shares of New Conunon Stock an the same
terms and conditions as are in effect immediately prior to
the Effective Time, adjusted as set forth below in the case
of each Anchor Option. }Zach such Anchor Option that is
converted shall be converted into an option or warrant, as
the case may be, to purchase such number of shares of New
Common Stock at an exercise price determined as provided
below (and otherwise having the same duration and other
terms as the original Anchor Option):
(i) the number of shares of New Conunon Stock
to be subject to the new option or warrant shall be
equal to the product of (A) the number of shares of
Anchor Common Stock purchasable upon exercise of the
original Anchor Option and (B) the Exchange Ratio, the
product being rounded, if necessary, up or down, to the
nearest whole share; and
(ii) the exercise price per share of New
Conunon Stock under the new option or warrant shall be
equal to (1) the exercise price per share of Anchor
Common Stock under the original Anchor Option divided
by (B) the Exchange Ratio, rounded, if necessary, up or
down to the nearest cent.
With respect to any Anchor Options that are "incentive stock
options" (as defined in Section 422 of the Internal Revenue
Code), the foregoing adjustments shall be effected in a
manner consistent with Section 424(a) of the Internal
Revenue Code.
(b) ßenefit Plans. At or as promptly as practi-
cable following the Effective Time, the Surviving Parent and
its subsidiaries will adopt employee benefit plane
without limitation, severance plane) covering persons
who become and remain employees of the Surviving Parent or
its subsidiaries and who were immediately prior to the
Effective Time employees of Dirne or its subsidiaries (the "
Former Dime Employees") or employees of Anchor or its
subsidiaries (the "Former Anchor Employees") or will amend
exieting plane to provide coverage for Former Dime Employees
and Former Anchor Employees. It is the intention of the
parties that, to the extent practicable and except as other-
wise determined by Dime and Anchor prior to the Effective
Time or by the Surviving Parent to be in the best interests
of the Surviving Parent and its subsidiaries: (i) the
employee benefit plans of the Surviving Parent and its
subsidiaries shall be structured to result in similarly
eituated Former Dirne Employees and Farmer Anchor Employees
having substantially equivalent benefits, in the aggregate,
and (ii) until such plane as are intended to be adopted or
amended in light of the preceding provision are so adopted
-42-
or amended, Former Dime Employees and Former Anchor
Employees shall continue to be provided with employee
benefits that, in the aggregate, provide a similar level of
benefits to that provided to Former Dime Employees as a
group or Former Anchor Employees as a group, respectively,
prior to the Effective Time. Each of Dime and Anchor agrees
that if the Surviving Parent establishes or continues
employee benefit plane (including severance plane) under
which an employee's benefit depends, in whole or in part, on
length of service with Dime or Anchor prior to the Effective
Time, credit will be given, to the extent reasonably
practicable, for service credited under similar plans of
Dime or Anchor or any subsidiary of either, provided that
such crediting of service does not result in duplication of
benefits. It is the express understanding and Intention of
the parties that no Former Dime Employee or Former Anchor
Employee or other person ehall be deemed to be a third party
beneficiary, or have or acquire any right to enforce the
provisions, of this Section 6.11(b), and that nothing in
this Agreement ehall be deemed to constitute a Plan or an
amendment to a Plan.
(c) Oualification of Benefit Plans. Each of Dime
and Anchor agrees, with respect to any Pension Plans main-
tained by them or any of their subsidiaries (deeming, for
this purpose, Lincoln to be a subsidiary of Anchor) with
respect to which the "remedial amendment period" described
in Section 1.401(b)-1(c) of the regulations under the
Internal Revenue Code (relating to amendments to reflect,
among other things, the provisions of the Tax Reform Act of
1986 that became effective after 1988) ende prior to the
Closing Date, that to the extent a determination letter with
respect to the qualification of such Pension Plan or Plans
under the Internal Revenue Code reflecting such amendments
has not been obtained, an application for such a letter
shall be filed with the Internal Revenue Service an or
before the last day of such remedial amendment period.
6.12 Exnenses. Each of the parties 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
or other consultante, investment bankers, accountants and
counsel, except that Dime and Anchor each shall bear and pay
one-half of the following expenses: (i) the costs (
excluding the fees and disbursements of counsel, financial
advisors and accountants) incurred in connection with the
preparation (including copying and printing) of the Regis-
tration Statement and applications to Governmental Entities
for the approval of the Merger and/or the Alternative Merger
and (ii) all listing, filing or registration fees,
including, without limitation, fees paid for filing the
-43-
•
Registration Statement with the SEC and fees paid for
filings with Governmental Entities.
6.13 Indemnification: Directors' and Officers'
Insi1rance. (a) Bach of Dime and Anchor agrees that from
and after the Effective Time, the Surviving Parent will
indemnify and hold harmless each present and former director
and officer of Dime, Anchor and their respective subsidi-
aries, determined as of the Effective Time (the "Indemnified
Parties"), against any costs or expenses (including reason-
able attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costa") incurred in
connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the
Effective Tinte, to the fullest extent that Dime, Anchor or
such subsidiary would have been permitted under Delaware law
and the certificate of incorporation or by-laws of Dirne,
Anchor or such subsidiary in effect an the date hereof to
indemnify such person (and the Surviving Parent shall also
advance expenses as incurred to the fullest extent permitted
under applicable law; provided, that the person to whom
expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is
not entitled to indemnification).
(b) To the extent that paragraph (a) shall not
serve to indemnify and hold harmless an Indemnified Party,
for a period of six years after the Effective Time, each of
Dirne and Anchor agrees that the Surviving Parent shall,
subject to the terms set forth herein, indemnify and hold
harmless, to the fullest extent permitted under applicable
law (and the Surviving Parent shall also advance expenses as
incurred to the fullest extent permitted under applicable
law, provide, that the person to whom expenses are advanced
provides an undertaking to repay such advances if lt is
ultimately determined that such person Je not entitled to
indemnification), each Indemnified Party against any Costa
incurred in connection with any claim, action, suit, pro-
ceeding or investigation, whether civil, criminal, adminis-
trative or investigative, arising out of or pertaining to
the transactions contemplated by this Agreement. In the
event any claim or claims are asserted or made within euch
six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until final disposi-
tion of any and all such claims.
(c) Any Indemnified Party wishing to claim indem-
nification under Section 6.13(a) or (b), upon learning of
any such claim, action, suit, proceeding or investigation,
-44-
shall promptly notify the Surviving Parent thereof, but the
failure to so notify shall not relieve the Surviving Parent
of any liability it may have to such Indemnified Party if
such failure does not materially prejudice the Surviving
Parent. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after
• the Effective Time), the Surviving Parent shall have the

right to assume the defense thereof and the Surviving Parent
shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subse-
quently incurred by such Indemnified Parties in connection
with the defense thereof, except that, if the Surviving
Parent elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which
raise conflicts of interest between the Surviving Parent and
the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to thern, and the Surviving Parent shall
pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are
received. If such indemnity is not available with respect
to any Indemnified Party, then the Surviving Parent and the
Indemnified Party shall contribute to the amount payable in
euch proportion as is appropriate to reflect relative faults
and benefits.
6.14 Antitakeover Provisions. If any "business
combination", "moratorium0, "control share" or other state
antitakeover statute or regulation (collectively, "Antitake-
over Provisions") may become applicable to the transactions
contemplated hereby, each of Dirne and Anchor and the members
of their respective Boards of Directors will grant such
approvals and take such actions as are necessary so that the
transactions contemplated by this Agreement may be consum-
mated as promptly as practicable on the terms contemplated
hereby and thereby and otherwise act to eliminate or mini-
mize the effects of any Antitakeover Provision on any of the
transactions contemplated by this Agreement.
6.15 Affiliate Agreements. (a) As soon as prac-
ticable after the date hereof, Dirne shall identify to Anchor
and Anchor shall identify to Dirne all persons who are at the
date hereof (or at another reasonably proximate date)
possible "affiliates" of Dirne or Anchor, respectively, as
that term is used in paragraphs (c) and (d) of Rule 145
under the Securities Act and/or Accounting Series Releases
130 and 135, as amended, of the SEC ("Affiliates"). Rach of
Dirne and Anchor shall use all reasonable efforts to obtain a
written agreement in the form of Annex 8 from each person
who is so identified as a possible Affiliate and shall
deliver copies of such written agreements to the other party
as soon as practicable.
-45-
•
(b) As soon as practicable after the date of the
Dirne Meeting or Anchor Meeting, as applicable, Dirne shall
identify to Anchor and Anchor shall identify to Dirne all
persona who were, at the time of the Dirne Meeting or the
Anchor Meeting, possible Affiliates of Dirne and Anchor,
respectively, and who were not previously identified in
accordance with Section 6.15(a). Bach of Dirne and Anchor
shall use all reasonable efforts to obtain a written
agreement in the form of Annex 8 from each person who is so
identified and shall deliver copies of euch written agree-
mente to the other party as soon as practicable.
6.16 Stock Exchange Listinq. Dirne agrees to use
all reasonable efforts to cause to be listed an the NYSE,
subject to official notice of issuance, the shares of New
Common Stock to be issued in the Merger or the Alternative
Merger.
6.17 Dfforts to Consummate. Subject to the terms
and conditions of this Agreement, each of Dirne and Anchor
agrees to use reasonable efforts to take, or cause to be
taken, all actione, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make
effective, as soon as practicable after the date of this
Agreement, the transactions contemplated hereby, including,
without limitation, using reasonable efforts to lift or
rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate
the transactions contemplated hereby.
6.18 Reports. Each of Dirne and Anchor agrees to
file, and to cause its respective subsidiaries to file, all
reports required to be filed with all Governmental Entities
pursuant to the Securities Laws or Federal or state banking
laws between the date of this Agreement and the Effective
Time, and to deliver to the other party copies of all such
reports promptly after the same are filed.
6.19 Accounting and Tax Treatment. Neither Dirne
nor Anchor will take, cause or to the best of its ability
permit to be taken any action that would adversely affect
the qualification of the Merger or the Alternative Merger
for pooling-of-interests accounting treatment or the quali-
fication of the Merger and the portion of the Alternative
Merger involving the merger of Anchor into Dime-Sub as a
nreorganization" within the meaning of Section 368 of the
Internat Revenue Code; provided, that nothing in this
Section 6.19 shall preclude either party from exercising its
respective rights under the Stock Option Agreements.
6.20 Dank Merger. Unless otherwise agreed by the
parties, Dirne and Anchor will take all action necessary and
-46-
•
appropriate to cause the Bank Merger to occur simultaneously
with er, if the Bank Merger cannot be effected simultane-
ously, as promptly as practicable after the Effective Time.
Notwithstanding anything to the contrary in this Section 6.
20, Dirne and Anchor may cause the Bank Merger to occur an
such later date as may be agreed in writing.
6.21 Lincoln Acguisition. Anchor shall not, and
shall cause Anchor Bank not to, agree to any amendment,
modification or supplement of the Lincoln Agreement, or
waive any condition to its obligations thereunder, which
amendment, modification, supplement er waiver would be
adverse to the interests of the Surviving Parent without the
prior consent of Dime (which consent shall not be unreason-
ably withheld).
ARTICLE VII
• Conditions
7.1 Conditions to gach Party's Obligation to

$ffect the Mergel. The respective obligation of each of
Dirne, Dime-Sub, Anchor and Anchor-Sub to consummate the
Merger or the Alternative Merger, as the case may be, is
subject to the fulfillment or written waiver by Dirne and
Anchor prior to the Effective Time of each of the following
conditions:
(a) 5tockholderjipproval. The agreement of
merger contained in this Agreement shall have been duly
adopted by the affirmative vote of the holders of at
least a majority of the outstanding shares of Dime
Common Stock and of the holdere of at least two-thirds
of the outstanding shares of Anchor Common Stock, in
each case in accordance with Section 251 of the DGCL,
other applicable law and the certificate of incorpora-
tion and by-laws of Dirne and Anchor, respectively.
(b) Governmental and Regulatory ConsentB. The
Regulatory Approvals shall have been obtained and shall
be in full force and effect and all related waiting
periods shall have expired; and all other material
approvala and authorizations of, filings and registra-
tions with, and notifications to, all Governmental
Entities required for the consummation of the Merger (
or, in the event the Alternative Merger is to be
consummated in lieu of the Merger, the Alternative
Merger) and for the prevention of any termination of
any material right, privilege, license or agreement of
either Dime or Anchor or their respective subsidiaries
shall have been obtained or made and shall be in full
-47-
force and effect and all waiting periods required by
law ehall have expired; provided, however, that none of
the preceding shall be deemed obtained or made if it
shall be conditioned or restricted in a manner that
would result in a Material Adverse Effect on the
Surviving Parent.
(c) Third Party Consenta. All consents or appro-
vals of all persons (other than Governmental Entities)
required for or in connection with the execution,
delivery and performance of this Agreement and the
consummation of the Merger or the Alternative Merger,
as the case may be, shall have been obtained and ehall
be in full force and effect, unless the failure to
obtain any auch consent or approval is not reasonably
likely to have, individually or in the aggregate, a
Material Adverse Effect on the Surviving Parent.
(d) Litigation. No United States or state court
or other Governmental Entity of competent jurisdiction
shall have enacted, issued, promulgated, enforced or
entered any statute, rufe, regulation, judgment,
decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and pro-
hibits consummation of the transactions contemplated by
this Agreement.
(e) Registration Statement. The Registration
Statement shall have become effective under the Securi-
ties Act and no stop order suspending the effectiveness
of the Registration Statement shall have been issued
and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(f) Blue_Sky Approvals. All permits and other
authorizations under the Securities Laws (other than
that referred to in Section 7.1(e)) and other authori-
zations necessary to consummate the transactions con-
templated hereby and to issue the shares of New Common
Stock to be issued in the Merger (or the Alternative
Merger in the event it is to be consummated in lieu of
the Merger) shall have been received and be in full
force and effect.
(g) Listing. The shares of New Common Stock to
be issued in the Merger or the Alternative Merger shall
have been approved for listing on the NYSE, subject to
official notice of issuance.
(h) Accountants' Pooling Letter. Bach of Dirne
and Anchor ehall have received a letter, dated as of
the Effective Time, fror KPMG Peat Marwick, independent
-98-
auditors, to the effect that the Merger (or the
Alternative Merger in the event it is to be consummated
in lieu of the Merger) will qualify for pooling-of-
interests accounting treatment under Accounting Princi-
ples Board Opinion No. 16 and SEC Accounting Series
Releases 130 and 135, as amended, if consummated in
accordance with this Agreement.
(i) Employment Agreements. Unless Mr. Parsons or
Mr. Large is unable or unwilling to serve in the capa-
city or capacities described therein, the Employment
Agreement for Mr. Parsons and Mr. Large, respectively,
shall be in full force and effect and, in the rase of
the Employment Agreement for Mr. Large, such Employment
Agreement or the related guarantee by Anchor shall have
been assumed by the Surviving Parent.
7.2 Conditions to Obligation of Anchor. The
obligation of Anchor to consummate the Merger (or the Alter-
native Merger in the event it is to be consummated in lieu
of the Merger) is also subject to the fulfillment or written
waiver by Anchor prior to the Effective Time of each of the
following conditions:
(a) Representations and Warranties. The repre-
,
sentations and warranties of Dime (and Dime-Sub, if

applicable) set forth in this Agreement shall be true
and correct (subject to Section 5.3) as of the date of
this Agreement and as of the Closing Date as though
made an and as of the Closing Date (except that
representations and warranties that by their terms
speak as of the date of this Agreement or some other
date shall be true and correct as of such date), and
Anchor shall have received a certificate, dated the
Closing Date, signed on behalf of Dirne by the Chief
Executive Officer and the Chief Financial Officer of
Dime to euch effect.
(b) Performance of Obligations of Dime. Dime (
and Dime-Sub, if applicable) shall have performed in
all material respects all obligations required to be
performed by it under this Agreement at or prior to the
Closing Date, and Anchor shall have received a cer-
tificate, dated the Closing Date, signed on behalf of
Dime by the Chief Executive Officer and the Chief
Financial Officer of Dime to such effect.
(c) Urinion of Counsel. Anchor shall have
received an opinion, dated the Closing Date, of counsel
to Dime, reasonably satiefactory to Anchor, to the
effect that the shares of New Common Stock to be issued
in the Merger (or the Alternative Merger in the event
-49-
•
it is to be consummated in lieu of the Merger), when
issued in accordance with the terms hereof, will be
duly authorized, validly issued, fully paid and
nonassessable.
(d) Opinion of Tax Counsel. Anchor shall have
received an opinion of Sullivan & Cromwell, special
counsel to Anchor, dated the Closing Date, to the
effect that (i) the Merger (or the portion of the
Alternative Merger involving the merger of Anchor into
Dime-Sub in the event the Alternative Merger is to be
consummated in lieu of the Merger) is a "reorganiza-
tion" within the meaning of Section 368(a) of the
Internal Revenue Code, (ii) the exchange in the Merger
(or the portion of the Alternative Merger involving the
merger of Anchor into Dime-Sub) of Old Shares for
shares of New Common Stock will not result in the
recognition of income, gain or loss to Dime, Anchor or
the stockholdere of Anchor (except to the extent of any
cash paid in lieu of fractional shares or any state and
local transfer taxes paid an behalf of a stockholder),
(iii) the adjusted tax basis of whole shares of New
Common Stock received by holders of Anchor Common Stock
who exchange shares of Anchor Common Stock in the
Merger (or the portion of the Alternative Merger
involving the merger of Anchor into Dime-Sub) will be
the same as the adjusted tax basis of the shares of
Anchor Common Stock surrendered therefor (reduced by
any amount allocable to a fractional ehare interest for
which cash is received), (iv) the holding period of the
shares of the New Common Stock received in the Merger
merger of Anchor into Dime-Sub) will include the period
during which the shares of Anchor Common Stock
exchanged therefor were held, provided such shares of
Anchor Common Stock were held as capital assets at the
Effective Time and (v) the Bank Merger is a "reorgani-
zation" within the meaning of Section 368(a) of the
Internal Revenue Code and no income, gain or lass will
be recognized in the Bank Merger by Dime Bank, Anchor
Bank, Dime or Anchor.
(e) Accountants' Letters. Anchor and its
directors and officers who sign the Registration
Statement shall have received the letters referred to
in Section 6.7 frorn KPMG Peat Marwick, as Dirneis
independent auditors.
7.3 Conditions to Obligation of Dime. The obli-
gation of Dime to consummate the Merger (or the Alternative
Merger in the event it is to be consummated in lieu of the
Merger) is also subject to the fulfillment or written waiver
-50-
by Dime prior to the Effective Time of each of the following
conditions:
(a) Representations and Warranties. The repre-
sentations and warranties of Anchor (and Anchor-Sub, if
applicable) set forth in this Agreement shall be true
and correct (subject to Section 5.3) as of the date of
this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except that
representations and warranties that by their terms
speak as of the date of this Agreement or some other
date shall be true and correct as of such date) and
Dime shall have received a certificate, dated the
Closing Date, signed on behalf of Anchor by the Chief
Executive Officer and the Chief Financial Officer of
Anchor to such effect.
(b) Performance of Obligations of Anchor. Anchor (

and Anchor-Sub, if applicable) shall have perfotmed in
all material respects all obligations required to be
Closing Date, and Dirne shall have received a certi-
ficate, dated the Closing Date, signed on behalf of
Anchor by the Chief Executive Officer and the Chief
Financial Officer of Anchor to such effect.
(c) Opinion of Tax Counsel. Dime shall have
received an opinion of Cleary, Gottlieb, Steen &
Hamilton, special counsel to Dime, dated the Closing
Date, to the effect that (i) the exchange in the Merger
merger of Anchor into Dime-Sub) of Old Shares for
shares of New Common Stock will not result in the
recognition of income, gain or lose to Dime or the
stockholders of Dime (except to the extent of any state
and local transfer taxes paid on behalf of a stock-
holder), (ii) the adjusted tax basis of whole shares of
New Common Stock received by holders of Dime Common
Stock who exchange shares of Dime Common Stock in the
Merger (or the portion of the Alternative Merger
involving the merger of Anchor into Dime-Sub) will be
the same as the adjusted tax basis of the shares of
Dirne Common Stock surrendered therefor, (iii) the
holding period of the shares of the New Common Stock
received in the Merger (or the portion of the
Alternative Merger involving the merger of Anchor into
Dime-Sub) will include the period during which the
shares of Dime Common Stock exchanged therefor were
held, provided such shares of Dime Common Stock were
held as capital assets at the Effective Time, (iv) the
portion of the Alternative Merger involving the merger
of Anchor-Sub into Dime (in the event the Alternative
-51-
Merger is consummated) will not result in recognition
of gain or lose by the holders of Dime Common Stock and
(v) no income, gain or loss will be recognized in the
Bank Merger by Dime or Dime Bank.
(d) Accountants' Letters. Dime and its directors
and officers who sign the Registration Statement shall
have received the letters referred to in Section 6.7
frorn KPMG Peat Marwick, as Anchor's independent
auditors.
(e) Lincoln Acauisition. The Lincoln Acquisition
shall have been consummated.
ARTICLE VIII
Termination
8.1 Termination by Mutual Consent. This Agree-

ment may be terminated and the Merger (or the Alternative
Merger) may be abandoned at any time prior to the Effective
Time, before or after the approval by the stockholders of
Dime and Anchor, respectively, by the mutual consent of Dime
and Anchor, by action of their respective Boards of
Directors.
8.2 Termination by Either Dime or Anchor. This
Agreement may be terminated and the Merger (or the Alterna-
tive Merger) may be abandoned by action of the Board of
Directors of either Dime or Anchor if (i) neither the Merger
nor the Alternative Merger shall have been consummated by
Mäy 31, 1995, (ii) any approval or authorization of any
Governmental Entity, the lack of which would result in the
failure to satisfy the closing condition set forth in
Section 7.1(b), shall have been denied by such Governmental
Entity or such Governmental Entity shall have requested the
withdrawal of any application therefor or indicated an
intention to deny, or impose a condition of a type referred
to in the proviso to Section 7.1(b) with respect to, such
approval or authorization, or (iii) the approval of the
stockholdere of Dime or Anchor referred to in Section 7.1(a)
shall not have been obtained at the Dime Meeting or the
Anchor Meeting or at any adjournment thereof (provided, that
the terminating party is not then in material breach of its
obligations under Section 6.4).
8.3 Termination by Anchor. This Agreement may be
terminated and the Merger and the Alternative Merger may be
abandoned at any time prior to the Effective Time by action
of the Board of Directors of Anchor (a) before or after the
adoption by stockholders of Anchor referred to in Sec-
- 52 -
tion 7.1(a), if (i) Dirne shall have breached any representa-
tion, warranty, covenant or agreement contained herein that
would result in the failure to satisfy the closing condition
set forth in Section 7.2(a) or 7.2(b) and such breach cannot
be or has not been cured within 30 days after the giving of
a written notice to Dirne of such breach, (ii) the Board of
Directors of Dirne shall have withdrawn, modified or changed
in a manner adverse to Anchor its approval or recommendation
of this Agreement or (iii) the Board of Directors of Dirne
shall have authorized or engaged in any negotiations as
permitted by the proviso to the first sentence of Sec-
tion 6.3, or (b) before the adoption and approval by stock-
holders of Anchor referred to in Section 7.1(a), if the
Board of Directors of Anchor shall have failed to recommend
to its stockholders the adoption of the agreement of merger
contained in this Agreement, or shall have withdrawn, modi-
fied or changed euch recommendation, in a manner permitted
by the last sentence of Section 6.4.
8.4 Termination by Dirne. This Agreement may be
terrninated and the Merger and the Alternative Merger may be
abandoned at any time prior to the Effective Time by action
of the Board of Directors of Dirne (a) before or after the
approval by the stockholders of Dirne referred to in Sec-
tion 7.1(a), if (i) Anchor shall have breached any
representation, warranty, covenant or agreement contained
herein that would result in the failure to satisfy the
closing condition set forth in Section 7.3(a) or 7.3(b) and
such breach cannot be or has not been cured within 30 days
after the giving of a written notice to Anchor of such
breach, (ii) the Board of Directors of Anchor shall have
withdrawn, modified or changed in a manner adverse to Dirne
its approval or recommendation of this Agreement er
(iii) the Board of Directors of Anchor shall have authorized
or engaged in any negotiations as permitted by the proviso
to the first sentence of Section 6.3, or (b) before the
adoption by stockholders of Dirne referred to in Section 7.1(
a), if the Board of Directors of Dirne shall have failed to
recommend to its stockholders the adoption of the agreement
of merger contained in this Agreement, or shall have
withdrawn, modified or changed such recommendation, in a
manner permitted by the last sentence of Section 6.4.
8.5 Effect of Termination and Abandonment. In
the event of termination of this Agreement and the abandon-
ment of the Merger and the Alternative Merger pursuant to
this Article VIII, no party to this Agreement shall have any
liability or further obligation to any other party hereunder
except (i) as set forth in Section 9.1, (ii) each of the
Stock Option Agreements shall be governed by its own terms
as to termination and (iii) termination will not relieve a
-53-
•
breaching party from liability for any breach directly or
indirectly giving rise to such termination.
ARTICLE IX
Mio cellaneoun
9.1 Survival. Only those agreements and cove-

nants of the parties that by their express terms apply in
whole or in part after the Effective Time shall survive the
Effective Time. All other representations, warranties,
agreements and covenants shall be deemed only to be condi-
tions of the Merger (or the Alternative Merger) and shall
not survive the Effective Time. If the Merger (and the
Alternative Merger) shall be abandoned and this Agreement
terminated, the provisions of Section 8.5 shall apply and
the agreements of the parties in Sections 6.8 (excluding the
first sentence thereof), 6.10 and 6.12 shall survive such
abandonment.
9.2 Modification or Amendment. (a) Subject to
the applicable provisions of the DGCL, at any time prior to
the Closing Date, the parties hereto may modify or amend
this Agreement, by written agreement executed and delivered
by duly authorized officers of the respective parties.
(b) At any time prior to the Effective Time, Dime
and Anchor may enter into an amendment to this Agreement in
accordance with Section 9.2(a) in order to modify the struc-
ture of the Merger, the Alternative Merger or the other
transactions contemplated hereby, or the manner of effecting
such transactions; provided, that after the adoption of the
agreement of merger contained in this Agreement by the
stockholders of Dime and Anchor referred to in Sec-
tion 7.1(a), no such amendment shall adversely affect the
consideration to be received by the stockholders of Dime or
Anchor, respectively, unless such amendment is approved by
such stockholders of Dime or Anchor, respectively, prior to
the Effective Time.
9.3 waiver of Conßitimp. The conditions to each
party's obligation to consummate the Merger (or the Alterna-
tive Merger) are for the sole benefit of such party and may
be waived by such party in whole or in part to the extent
permitted by applicable law. No waiver shall be effective
unless it is in a writing signed by a duly authorized
officer of the waiving party that makes express reference to
the provision or provisions subject to such waiver.
9.4 Counterparts. For the convenience of the
parties hereto, this Agreement may be executed in any number
-54-
of separate counterparts, each such counterpart being deemed
to be an original Instrument, and all such counterparts
shall together constitute the same agreement.
9.5 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware applicable to contracts made and to be
performed within auch State.
9.6 Notices. Any notice, request, instruction or
other document to be given hereunder by any party to the
other shall be in writing and shall be deemed to have been
duly given (i) on the date of delivery if delivered person-
ally, or by telecopy or telefacsimile, upon confirmation of
receipt, (ii) on the first business day following the date
of dispatch if delivered by a recognized next-day courier
service, or (iii) on the third business day following the
date of mailing if delivered by registered or certified
mail, return receipt requested, postage prepaid. All
notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in
writing by the party to receive such notice.
(a) If to Anchor:
Anchor Bancorp, Inc.
1420 Broadway
Hewlett, New York 11557
Attention: James M. Large, Jr.
Chairman & Chief Executive
Officer
Telecopy: (516) 295-1292
with copies to:
Gene C. Brooks, Esq.
Anchor Bancorp, Inc.
1420 Broadway
Hewlett, New York 11557
Telecopy: (516) 295-1292
and
H. Rodgin Cohen, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopy: (212) 558-3588
-55-
(b) If to Dime:
Dime Bancorp, Inc.

589 Fifth Avenue
Attention: Richard D. Parsons
Chairman & Chief Executive
Officer
Telecopy: (212) 326-6194
with copies to:

Douglas E. Barzelay, Esq.
Dime Bancorp, Inc.
589 Fifth Avenue
Telecopy: (212) 326-6194
and
Michael L. Ryan, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
Telecopy: (212) 225-3999
9.7 gntire Agreement. Etc. (a) This Agreement

(including the Annexes hereto and the Disclosure Letters),
the Stock Option Agreements and the Confidentiality Agree-
ments constitute the entire agreement, and supersede all
other prior agreements, understandings, representations and
warranties, both written and oral, between the parties, with
respect to the subject matter hereof, and (b) this Agreement
shall not be assignable by operation of law or otherwise (
any attempted assignment in contravention hereof being null
and void).
9.8 Definition of "subsidiary": Covenants with
Respect to Subsidiaries. (a) When a reference is made in
this Agreement to a subsidiary of a person, the term "sub-
sidiary" means those corporations, banks, savings banka,
associations and other entities of which such person owns or
controls 251 or more of the outstanding equity securities
either directly or through an unbroken chain of entities as
to each of which 25% or more of the outstanding equity
securities is owned directly or indirectly by its parent;
provided, however, that, except for purposes of Sec-
tion 3.1(q), there shall not be included any euch entity to
the extent that the equity securities of such entity were
acquired in satisfaction of a debt previously contracted in
good faith or are owned or controlled in a bona fide fidu-
ciary capacity.
-56-
(b) Insofar as any provision of this Agreement
shall require a subsidiary to take or omit to take any
action, such provision shall be deemed a covenant by Dime or
Anchor, as the case may be, to cause such action or omission
to occur.
9.9 Captions. The Article, Section and paragraph
captions herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions
hereof.
9.10 Severability. If any provision of this
Agreement or the application thereof to any person or
circumstance is determined by a court of competent juris-
diction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to
persons or circumstances other than those as to which it has
been held invalid or unenforceable, shall remain in full
force and effect and shall in no way be affected, impaired
or invalidated thereby, so lang as the economic or legal
substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party.
Upon such determination, the parties shall negotiate in good
faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the
parties. Prior to the termination of this Agreement in
accordance with its terms, the absence of adoption by the
stockholders of a party hereto shall not render invalid or
inoperative any provision hereof not required to be con-
tained in the agreement of merger to be adopted by such
stockholders pursuant to Section 251 of the DGCL and the
certificate of incorporation and by-laws of such party.
9.11 No Third Party Beneficiaries. Nothing con-
tained in this Agreement, expressed or implied, is intended
to confer upon any person or entity other than the parties
hereto, any benefit right or remedies except that the provi-
sions of Section 6.11(a) shall inure to the benefit of the
holders of stock options and Section 3.2 (subject to the
limitations set forth in Section 3.4) and Section 6.13 shall
inure to the benefit of the persons referred to therein.
IN WITNESS WHEREOF, this Agreement has been duly
executed and delivered by the duly authorized officers of
the parties hereto as of the date first hereinabove written.
ANCHOR BANCORP, INC.
By: /s/ James M. Large, Jr.

Name: James M. Large, Jr.
Title: Chairman & Chief
Executive Officer
DIME BANCORP, INC.
By: ig/ Richard D. Parsons

• Name: Richard D. Parsons
Title: Chairman & Chief
Executive Officer
-58-
EXHIBIT L
AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 27TH DAY OF JULY, 1996
BY AND AMONG
FIRST NATIONWIDE HOLDINGS INC
CAL FED BANCORP INC
AND
CALIFORNIA FEDERAL BANK, F.S.B
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"), 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. CFB Holdings, Inc. ("Merger Sub"),

after the receipt of any necessary governmental or
regulatory approvals in connection with its organization,
will be duly incorporated prior to the Effective Time (as
defined in Section 7.1) and, when so incorporated, will
be a corporation in good standing under the laws of the
State of Delaware and will become a party to this Plan
pursuant to the provisions of Section 4.14 hereof. All
the shares of the capital stock of Merger Sub, when
issued, will be 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
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.
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), (collectively, the "Merger
Consideration"), provided, however, that no fractional
Secondary Participation Interests shall be issued. 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.
(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 such
bank, savings and loan association or trust company as
the Acquiror shall elect (which may be a subsidiary of
the Acquiror) (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, for exchange in accordance with
this Section 1.3, certificates representing the Secondary
Participation Interests to be paid pursuant to
Section 1.2.
(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. 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 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 Option 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, 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. 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.
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;
(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;
(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 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
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 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,
(vii) any state banking commission or other
regulatory authority ("State Regulator"), and (vii)
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.
(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).
(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.
(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;
(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.
(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, 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.
(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.
(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. Merger Sub, when duly

incorporated after the receipt of any necessary
governmental or regulatory approvals in connection with
its organization, will be, and the Acquiror 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. The Acquiror
has, and when duly incorporated Merger Sub will have, the
requisite corporate power and authority (including all
federal, state, local and foreign government
authorizations) to carry on its respective businesses as,
in the case of the Acquiror, they are now being conducted
and, in the case of Merger Sub when duly incorporated,
they will be conducted and to own their 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) Upon its formation, Merger Sub will have
the requisite corporate power and authority to
execute and deliver this Plan and, subject to the
receipt of all stockholder and 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
will be duly and validly authorized by all necessary
corporation action of Merger Sub and of the Acquiror
as sole stockholder of Merger Sub. This Plan will
be duly and validly executed and delivered by Merger
Sub and (assuming due authorization, execution and
delivery by the Company) will constitute 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 the Acquiror do not, and the
execution, delivery and performance of this Plan by
Merger Sub upon its formation will 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 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 as a result of the
formation of Merger Sub, (E) the filings required in
connection with the Bank Merger, and (F) 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) Company Action. The Board of Directors of the

Acquiror (at a meeting duly called and held) has by the
requisite vote of all directors present (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.
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 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.
(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 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. Merger Sub. The Acquiror shall,
after the receipt of any necessary governmental or
regulatory approvals in connection with the organization
of the Merger Sub and prior to the Effective Time, cause
Merger Sub to be duly incorporated and, thereafter but in
any event prior to the Effective Time, cause the Merger
Sub to become a party to this Plan, such action to be
evidenced by the execution by the Merger Sub of a
supplement to this Plan, substantially in the form of
Annex 2 hereto, and delivery thereof to each of the
Acquiror and the Company; provided, however, that the
incorporation of Merger Sub pursuant to this Section 4.14
shall not be required in the event that Acquiror
exercises its rights under Section 1.6 hereof to revise
the structure of the transactions contemplated by this
Plan.
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 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.
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
Litigation Recovery (as defined in the Participation
Certificates) 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 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
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 3 and Annex 4, 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 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) (i) 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 5 and Annex 6, 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;
(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 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
(2 13) 932 -2 900
(213) 932-2869 (Fax)
Attention:
Edward G. Harshfield
President and Chief Executive Officer
With copies to:
Douglas J. Wallis, Esq.
Executive Vice President, General Counsel and
Secretary
Cal Fed Bancorp Inc.
5700 Wilshire Boulevard
(2 13) 932 -2 900
(213) 932-2869 (Fax)
Kenneth Heitz, Esq.
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
(3 10) 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, 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.
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 or 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
CAL FED BANCORP INC.,

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,
General Counsel and
Secretary
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,
General Counsel and
Secretary
Annex 1
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 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));
(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.
(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. SECTION 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
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, 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 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)).
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 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.
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.
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.
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.,
By:
Name:
Title:
CAL FED BANCORP INC.,
By:
Name:
Title:
By:
Name:
Title:
Annex 2
[Form of Supplement to the Plan]
SUPPLEMENT, dated as of the ____ day of ,
199__ (this "Supplement"), to the Agreement and Plan of
Merger, dated as of the 27th day of July, 1996 (the "
Plan"), by and among First Nationwide Holdings Inc., a
Delaware corporation (the "Acquiror") Cal Fed Bancorp
Inc., a Delaware corporation (the "Company") and
California Federal Bank, a Federal Savings Bank.
WHEREAS, pursuant to Section 4.14 of the Plan, the

undersigned (the "Merger Sub") is required to become a
party to the Plan.
NOW, THEREFORE, by its execution of this Supplement,

as of the date hereof the Merger Sub (i) adopts and
becomes a party to the Plan, as required by Section 4.14
thereof, (ii) represents and warrants to the Acquiror
that (A) it has been duly incorporated and is in good
standing under the laws of the State of Delaware, (B) all
of the representations made and warranties given by the
Acquiror with respect to the Merger Sub in Section 3.4 of
the Plan are true and correct in all material respects
and (C) it has the requisite corporate or other power and
authority and has taken all corporate or other action
necessary in order to execute and deliver this Supplement
and to consummate the transactions contemplated hereby
and this Supplement is a valid and binding agreement of
the Merger Sub enforceable against the Merger Sub in
accordance with its terms, and (iii) agrees to perform
all its obligations and agreements set forth in the Plan.
IN WITNESS WHEREOF, the Merger Sub has caused this

Supplement to be executed by its duly authorized officer
as of the day and year first written above.
CFB HOLDINGS, INC.
By:
Name:
Title:
Annex 3
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 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.
Annex 4

Vedder, Price, Kaufman & Kammholz
(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.
Annex 5

Skadden Arps Slate Meagher & Flom
(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.
Annex 6
In-house Counsel to Acquiror
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.
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 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,
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 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:
A Federal Savings Bank
By:
Its:
ATTEST
Countersigned
Interest Agent
By:
Authorized Signature
[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.
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.](1) 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") eleven millionths of one percent (0.000011%) 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
1 If applicable.
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 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 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 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 Litigat
ion 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 Chemical Bank,
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 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 eleven millionths of one percent (
0.000011%) 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
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 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 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:
A Federal Savings Bank
By:
Its:
ATTEST
Countersigned
Interest Agent
By:
Authorized Signature
[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.
Financial Services
EQUITY RESEARCH
Charlotte A. Chamberlain, Ph.D. (310) 575-5194 cchamber@jefco.com Initiating Coverage
Donald D. Destino (310) 575-5184 ddestino@jefco.com May 5, 1998
Golden State Bancorp Litigation Tracking Warrants tm

NASDAQ: GSBZV (When Issued, May 5)
GSBNZ (Regular Way, June 1)
Goodwill Jackpot Tickets For Sale

We are initiating coverage on the Litigation Tracking Warrant securities being issued by Golden State
Bancorp (GSB- $40 3/16, Accumulate). GSB’s subsidiary, Glendale Federal Bank, has the strongest and
farthest advanced “breach of contract” case against the US Government. Although a favorable decision for
GSBNZ shareholders is expected by late fall, the trial has progressed with glacial speed and is likely to be
appealed by the Department of Justice in the probable event that the US Court of Claims awards the $1.9
billion Glendale seeks. Timing is the critical unknown in determining the value of the securities.
Further, unlike the CalFed and Coast goodwill litigation securities, GSBNZ’s are a tax free
distribution which eventually payoff in common shares rather than cash. We think the GSBZV’s are
fairly valued at $7.00.
♦ Grand Prize -- $1.9 Billion GSB’s damage claims originate from its charge that the US Government
breached a contract with Glendale Federal Bank through regulatory actions prescribed by FIRREA, the
Financial Institutions Reform Recovery and Enforcement Act of 1989. A recent ruling in a similar case
suggests that damages stemming from lost profit claims continue to accumulate until a final decision is
reached. Applying that ruling could increase Glendale’s ultimate payoff beyond their current $1.9 billion
claim.
♦ So Far, So Good Last September, Chief US Court of Claims Judge Loren Smith unsealed a transcript of a
meeting attended by attorneys for both plaintiff, Glendale, and defense, the US Department of Justice.
During that meeting Judge Smith told both sides that Glendale had an exceedingly strong and convincing
case. Further, he said that he was inclined to grant plaintiffs the full $1.9 billion they sought. A similar meeting
is scheduled for early this month, but public disclosure of the proceedings is unlikely.
♦ When Issued May 5 The GSBZV’s will start trading on a when issued basis on May 5 and the GSBNZ’s
will trade regular way on June 1, 1998. Shares of GSB common will continue to trade on the NYSE with due
bills (reflecting the sellers’ obligation to deliver the GSBNZ’s ), from May 7 until June 1.
♦ $7 Current Value; $11 Terminal Value Based on the trading prices of the CalFed litigation securities (
CALGZ- $21, NR); (CALGL- $24 7/8, NR) and Coast litigation securities (CCPRZ– $16 5/8,NR) the
GSBZV’s should start trading around $7. We have based our valuation of the GSBZV’s on a probability
adjusted net present value calculation. Based on our assumption of $1.9 billion in ultimate damages payable
two years from now, we arrive at a $11 per share nominal value, payable in GSB common shares.
Table 1: Expected Terminal Value of GSBNZs ($MM except per share amounts)
Gross Proceeds $1,200 $1,500 $1,900
Less: Deductible Expenses (50) (50) (50)
Proceeds After Expenses 1150 1450 1850

Less: Taxes @ 40% (460) (580) (740)
Proceeds After Tax 690 870 1110

Less 15% Retained by GSB (104) (131) (167)
Litigation Recovery Allocated to GSBNZ 587 740 944
Fully Diluted GSBNZs 85.8 85.8 85.8

Per Share Value GSBNZs $6.84 $8.62 $11.00
Source: Company Documents, Jefferies Research
Table 2: Alternative Valuation of GSB Goodwill via CALGZ

($Millions except per share) CalFed GSB
CALGZ Current Market Price and Implied GSB Goodwill Per Share $21.00 $6.00
Unamortized Amount of Supervisory Goodwill at FIRREA $485.0 $550.0

Fully diluted Shares (000) 5,075.5 85,800.0
Percent of Recovery Allocated to Litigation Security 25.38% 85.00%
Implied Risk Adjusted Present Value of Goodwill Case (MM) $420.0 $605.6
Discount Rate 25% 25%

Years to US Court of Appeals Damage Affirmation 3 2
Expenses (MM) $30.0 $50.0
Implied Non-Risk Adjusted Value of CalFed's Award - PreTax (MM) $1,317.2 $1,493.9
Implied Award Multiple on Each Dollar of Supervisory Goodwill $2.72 $2.72
Source: Company documents and Jefferies Research
Table 3: Alternative Valuation of GSB Goodwill via CCPRZ

($Millions except per share) Coast Savings GSB
CCPRZ Current Market Price and Implied GSB Goodwill Per Share $16.63 $7.94
Unamortized Amount of Supervisory Goodwill at FIRREA $298.3 $550.0

Fully diluted Shares (000) 20,703.8 85,800.0
Percent of Recovery Allocated to Litigation Security 100.00% 85.00%
Implied Risk Adjusted Present Value of Goodwill Case (MM) $344.2 $801.5
Discount Rate 25% 25%
Years to US Court of Appeals Damage Affirmation 3 2
Expenses (MM) $20.0 $50.0
Implied Non-Risk Adjusted Value of CalFed's Award - PreTax (MM) $1,087.1 $2,003.8
Implied Award Multiple on Each Dollar of Supervisory Goodwill $3.64 $3.64

Source: Company documents and Jefferies
Research
2 Jefferies & Company, Inc.

Investment Thesis
Glendale has the strongest and farthest advanced supervisory goodwill litigation case against the US Government
claiming $1.9 billion in goodwill, lost profits and direct costs stemming from their re-capitalization. The
GSBNZ’s should be the most liquid of the securities reflecting expected damage awards from “supervisory
goodwill” lawsuits.
GSB’s claim comes from Glendale’s purchase of Broward Federal in 1981. The Supreme Court has upheld
Glendale’s complaint that the US Government breached its promise that goodwill created in the purchase
would not be deducted from capital for the computation of minimum acceptable regulatory net worth. In 1989,
Congress passed the Financial Institutions Reform Recovery and Enforcement Act (FIRREA) which abolished
supervisory goodwill. Subsequently 120 other groups of investors sued, also claiming similar beach of contract.
Although we expect Judge Loren Smith to award the full amount, the ultimate payment to GSB could be much
higher, or zero, depending on whether the ruling is appealed and the legal theory of damages that the court
ultimately accepts. The earliest pay out is probably close to year end. However, if the case is appealed there
could be up to a two year delay and the Appellate Court could totally reverse the Court of Claims award.
Security Description - Underlying Value
Golden State’s GSBNZ’s represent the right to receive Golden State Bancorp common stock equal in value to
85% of the after-tax, after expense proceeds (if any) from the Company’s pending goodwill lawsuit against the
Federal Government. The number of common shares for which GSBNZ’s will be exercisable will be determined
by the average closing price of GSB stock over the 30 days prior to the receipt of final judgment in the
lawsuit. The distribution of the GSBNZ’s will be tax free to both Golden State Bancorp and its security holders.
Table 1 outlines the possible terminal values of the GSBNZ’s given different final judgment scenarios.
Valuing GSB’s Goodwill Using Publicly Traded Securities
While still publicly traded companies, California Federal and Cost Savings issued securities granting owners a
claim on any cash damage award from their breach of contract goodwill suits against the US Government. The
analysis presented in Tables 2 and 3 estimate market valuations for CalFed’s damages of $2.72 for every dollar of
supervisory goodwill the thrift possessed when FIRREA was passed. Similarly, the analysis suggests that the
market values Coast Savings’ case at $3.64 for each dollar of supervisory goodwill.
The analysis is based on two critical assumptions. First, cash will be distributed or will start to accrue interest in
three years for both CalFed and Coast, following a damage award by the US Court of Claims and affirmation in
the US Court of Appeals. Second, the market applies a 25% discount rate to the potential award. Applying
CalFed’s $2.72 multiplier to GSB’s $550 million in supervisory goodwill and assuming that Glendale receives a
final favorable ruling in two years, we arrive at the per share market value of $6.00 for the GSBNZ’s.
Applying Coast’s $3.64 multiplier to GSB’s supervisory goodwill implies a current per share market value of
$7.94 for GSB’s case. The inflated value may be a consequence of market perception that the Government will
settle with Coast well before our estimate of three years. We think a Coast settlement prior to a final decision for
Glendale is unlikely.
We estimate that the GSBNZ’s have a current discounted value of $7 and should be purchased below this level.
Jefferies & Company, Inc. 3

Similar in Concept, Different in Pay Out
The $11 terminal pay-out on the GSBNZ’s is substantially different from the CALGZ’s, CALGL’s and CCPRZ’
s. If an award is made, the CalFed and Coast securities pay in cash while the GSBNZ’s are exercisable ultimately
in GSB common shares. Although a tax liability accrues when the CalFed and Coast securities are
distributed, tax on GSBNZ’s is deferred. Conceptually, exercise of GSBNZ’s is an above-book-value,
secondary offering that should significantly increase GSB’s equity base. Further, unlike a merger in which the
acquisition is made in shares, there is no identified earning asset associated with the GSBNZ’s. Therefore, the
accretiveness of the litigation proceeds depends on the investment alternatives available to management at the
time the damage award is paid.
We think a partial share buy back is possible giving investors a cash option that incurs a tax liability or
alternatively retaining shares and deferring taxes. However, by issuing GSB shares rather than distributing cash,
management increases tangible book value and can buy additional banks, thrifts or mortgage banks.
Goodwill Good News
At the time FIRREA was passed, Glendale had about $550 million of supervisory goodwill on its balance
sheet. In September 1997, Chief Judge Loren Smith unsealed a transcript of a meeting attended by attorneys for
both plaintiff, Glendale, and defense, the US Department of Justice. During that meeting Judge Smith told both
sides that Glendale had an exceedingly strong and convincing case. Further he said that he was inclined to
grant plaintiffs the full $1.9 billion they sought. Since that meeting, lawyers for the defense have been in the process
of presenting their case. We understand from discussions with consultants attending the trial, that experts for the
defense have not been persuasive in their arguments that Glendale was not damaged by the breach.
The ultimate payment could be higher than the $1.9 billion claimed according to a recent ruling from Judge
Christine Miller. In her opinion, damages resulting from lost profits in an ongoing firm, continue to build from
the event of the breach until a final decision is reached. The $1.9 billion was calculated from the passage of
FIRREA until the start of the damages trial in February 1997. Under Judge Miller’s theory, we think GSB could
be awarded another $200 to $300 million. On the other hand, the award could be zero if the Federal Court of
Appeals chooses to reverse the award of the US Court of Claims. The Supreme Court has already ruled in
Glendale’s favor on liability and appeal at that level on the damage portion of the case is very unlikely.
All that remains in arguing the case before Judge Smith are written briefs and final arguments, scheduled for early
July. Previously Judge Smith said that he expects to take three months to deliver a ruling. Assuming August is
used for vacation, the ruling could come out by late fall. Again, however, an appeal by the defense could end
up in a reversal of the award or delay the ultimate payment by up to two years.
4 Jefferies & Company, Inc.

EXHIBIT 4 -1
WARRANT AGREEMENT
Dated as of
, 1)98
between
GOLDEN STATE BANCORP INC.

and
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
as the Warrant Agent
Warrants Eor
Common Stock of
Golden State Bancorp Inc.
TABLE OF CONTENTS
Page
ARTICLE 1.
Defined Terms
SECTION 1.1 1
Definitions
SECTION 1.2 4
Other Definitions
ARTICLE 2.
. suance of Warrant Certificates .............. 5

2.2 Tm and Dating
,
6
'RCTION 2.3 Execution and Countersignature 6
ON 2.4 iirtificate Register 7
:':CTION 2.5 Transfer and Exchange 7
idCTION 2.6 Rep1acement Certificates 9
SECTION 2.7 Temporary Certificates
SECTION 2.8 Cancellation '0
ARTICLE 3.
Exercise Terms
SECTION 3.1 Number of Warrant Shares; Exercise Price 10

SECTION 3.2 Exercise Perlod . 10
SECTION 3.3 Expiration 11
SECTION 3.4 Manner of Exercise 11
SECTION 3.5 Issuance of Warrant Shares 12
.DICTION 3.6 Fractional Warrant Shares 12
1CTION 3.7 Reservation of Warrant Shares 12
:ECTION 3.8 Compliance with Lau 13
:•ddrION 3.9 Cancellation of Warrants 13
ARTICLE 4.
Adjustments
SECTION 4.1 Reclassifications, Redesignations or
Reorganizations of Common Stock 14
SECTION 4.2 Combination 14
SECTION 4.3 Exercise Price Adjustment 15
PACE
s.STTION 4.4 Examples 15

4.5 Other Events 16
2,:TIoN 4.6 of Certain Transactions 16
SEST110N 4.7 A tRent to Warrant Certificate 16
ARTICLE 5.
Warrant Agent
Section 5.1 Nature of Duties and Responsibilities Assumed 17

Section 5.2 Right to Consult Counsel 18
Section 5.3 Compensation and Reimbursement 19
Section 5.4 Warrant Agent May Hold Company Securities 19
Section 5.5 Change of Warrant Agent 19
ARTICLE 6.
Miscellaneous
SECTION 6.1 Information 20

SECTION 6.2 Persons Benefitting 20
SECTION 6.3 Rights of Holders 20
SECTION 6.4 Purchase of Warrants by the Company 20
SECTION 6.5 Amendment 20
SECTION 6.6 Notices 21
SECTION 6.7 Governing Law 21
SECTION 6.8 Successors 22
SECTION 6.9 Counterparts 22
SECTION 6.10 Table of Contents 22
SECTION 6.11 Severability 22
EXHIBIT A - Form of Warrant Certificate

EXHIBIT - Form of Election to Purchase
EXHIBIT 0 - Information Memorandum
r .s of , 1998 (this t"),
NC„ a 1!,J ! rporation lt 'e " ly"), and
CHAi:DM•(A.JN SHAREHJLEER t.L.C., !iq York limited lin! ity Company,
AS aarrant Agent (in !ich ( i c : f y , the " V 1! rant Agent").
W tTNNSSETH:
WHEREAS, the Roard of Directors of the Company has authorized a

JUstributton (the "Distribution") of one warrant (a "Warrant") for each share of
the Company's common stock, par value 91.00 per share ("Common Stock"),
outstanding as of the Close of Business (as defined below) on , 1998
(the "Record Date"), each Warrant representing the right to purchase shares or a
Portion of a share of Common Stock (subject to adjustment as provided herein),
lpon the terms and subject to the conditions herein set forth; and
WHEREAS, in order to issue Warrants in the Distribution and to issue

Warrants to holders of outstandinq Convertible Securities (as defined herein)
who exercise or convert such Convertible Securities at any time and from time to
time prior to the occurrence of the Truggering Event las defined herein), the
Company has determined to enter into this Agreement with the Warrant Agent.
NOW, THEREFORE, in consideration of the premises and mutual covenants

contained herein, the parties hereto hereby agree as follows:
ARTICLE 1.
Defined Terms
SECTION 1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Adjusted Litigation Recovery" means an amount equal to 85% of the amount

obtained frcm the following equation: (a) the Payment, minus (b) the sum of the
following: (i) the aggregate of all expenses incurred by or on behalf of the
Sank in prosecuting the Litigation and obtaining the Payment (whether incurred
prior to or after the date hereof), (ii) the aggregate of all expenses incurred
by the Company in connection with the creatfon, issuance and trading of the
Warrants, including, without limitation, legal and accounting fees and the fees
and expenses of the Warrant Agent (whether incurred prior to or alter the date
hereof) and (iii) an amount equal to the Payment liess the expenses described in
the preceding clauses (i) and (ii)) multiplied by the highest, combined
statutory rate of federal, state and Local income taxes applicable to the
Company during the tax year in which the toll Payment is received.
Market Value" meias the average daily Closing Prices of share
ar the thirty ctive Trading Days ending on and nc: n:_ng
1 Date, minus ..,; provided that if the Bontext in which this
ined .; used is with ;G:•ract to cecurities other than Common Stuck, then
"Adjustad Value" means t) werana daily Closing Prices of a unit of such
securities ..r the thirty mHva • ;.-2ag Days ending on and including the
Daterminat _n Date, minus -I Eurther that if the context in
which this defined term is unad is with respect to property other than
securities, then "Adjusted Market Value" means the Fair Market Value of such
pröperty, minus $1.00.
"Bank" means Glendale Federal Bank, Federal Savings Bank, a federally

chartered stock savings bank.
"2oard" means the Board of Directors or the Company er any somittee

thereof duly authorized to act on behalf er such Board of Directors.
"Dusiness Day" a day other than a Saturday, Sunday or other day on which
commercial banks in New York City arm authorized or required by law to dose.
lose of Business" on any given date shall mean 5:00 P.M., New York City
time, on such date; provided, however, that if such date is not a Business Day
lt shall mean 5:00 P.M., New York City tire, on the next succeeding Business
Day.
"Clos(ng Price" on any day shall mean the closing sale price regular way (
with any relevant due bills attached) of a share of Common Stocken such day, or
in case no such sale takes place an such day, the average of the reported
closing bid and asked prices regular way (with any relevant due bilis attached)
of a share of Common Stock, in mach esse on the New York Stock Exchange
Consolidated Tape (er any successor composite tape reporting transactions on
national securities exchanges), er, if the Common Stock is not listed or
admitted to trading on the NYSE, an the priacipal national securities exchange
on which the Common Stock is listed or admitted to trading (which shall be the
national securities exchange on which the greatest number of shares of Common
Stock has been traded durinq the live consecutive Trading Dates ending un and
includinq the Determination Date), er, if not listed or admitted to trading an
any national securities exchange, the average of the closing bid and asked
prices reqular way (with any relevant due bilis attached) of a share of Common
Stock on the over-the-counter market on the day in guestion as reported by
Nasdag, or a similar generally accepted reporting service, or if not so
available as determined in good faith by the Board of Directors of the Company,
en the basis oE such relevant factors as lt in good faith considers appropriate.
"Combination" means an event in which the Company consolidates with, merges

with or inta, or sells all or substantlally all its property and assets to
another Person.
"Determination Date" means the 30th calendar day prior to the date on which
the Bank receives the total amount of the Payment. lt the Payment is payable by
the United
es tment in , ,—nts, the :. e will be (
prior to tii .ite on which the s t ne last ,t.
r,ment.
"Exchange Act" means the Securities E hatEle w. t of 1934, as amended.
"Fair Market Value" dt,ans the fair r'.; -r value of the relevant r(Tet(y on
the Determination Date tatermined in (ro. (aith by the Board of ( .A's of
the Company, on the bass.; of such factors •3 lt in good faith considers
appropriate.
means the duly registered holder of a Warrant under the terms of
this A eement.
"1.(t .gation" means the Sank's °rase against the United Stetes Government in
the United Stetes Court af Federal Claims entitied Glendale Federal Bank, F.S.B.
v. United Stetes, No. 90-772C, tiled on August 15, 1990.
"Nasdag" shall mean the stock market operated by the National Association
of Securities Dealers, Inc.
"NYSE" shall mean the stock exchange operated by New York Stock Exchange,
Inc.
"Officer" means the Chairman, the Vice Chairman, the Chief Executive
Officer, the President, the Chief Financial Officer, the Secretary or any Vice
President of the Company.
"Payment" means the aggregate amount of any cash payment and the Fair
Market Julie of any property or assets actually rE.o-ived by the Bank pursuant to
a Einal, nonappealable judgment in er final sett.-ment of the Litigation (
including any post-judgment interest actually received by the Banken any
payment).
"Person" means any individual, corporation, partnership, joint venture,
iimited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"SEC" means the Securities and Exchange Commission. "
Securities Act" means the Securities Act of 1933.
"Trading Date" means a date on which the NYSE or Nasdaq (er any successor
thereto) is open tor the transaction of business.
"Triggering Event" means, the occurrence of all of the following events: (

a) receipt by the Bank of the Payment, (b) determination by the Bank of the
amount of the Adjusted Litigation Recovery and (0) receipt of all requiatory
approvals necessary to issue the shares of Gommon Stock to be issued upon the
exercise of the Warrants, including without
th- :o_veness of a a .tatement relating to the
irJaanEe ff. the -,(r>:_int Shures under _ irilies Act.
"Warrant Share," means the shares Oommon Stock of the Company received,
or issued and received, as the case may be, upon exercise of the Warrants.
SECTION 1.2 Other Definitions.
Defined in
Term Section
"Agent Members" .............................2.2(c)

cm ificate Register ....................... 2.4
"Ce!tificated Warrants" .................... 2.2(a)
kve,tible Securities" ................... 2.11c)
c :con Stock" .............................. Recitals
"c mpany" ................................... Recitals
"r..T.ribution" ............................... Recitals
"DTC" ...................................... 2.2(b)
"Exercise Notice ............................ 3.2
"Exercise Price" ............................ 3.1
"Sive-Year Warrants" ....................... 2.1(c)
"Global Warrants" ........................... 2.2(b)
"Number of Shortfall Shares" ............... 3.7(b)
"Preferred Stock" ........................... 2.1(c)
"Record Date" ................................ Recitals
"Aegistrar" ................................. 3.7(a)
"Seven-Year Warrants" ...................... 2.1(c)
"Stock Options" ............................ 2.1(c)
"Successor Company" ......................... 4.2(d)
"Termination Date" ......................... 3.3(a)
"Termination Notice" ....................... 3.3(a)
"Transfer Agent" ............................ 3.5
"Warrant" .................................... Recitals
"Warrant Agent" .............................. Recitals
"Warrant Certificate" ...................... 2.1
"Warrant Exercise Period" ................... 3.2(b)
SECTION 1.3 Pules of Construction. Unless the text otherwise requires
(i) a term has the meaning assigned to it herein;

(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with U.S. generally accepted accounting
principies as in effect from time to time;
5
"or" is not exclusive;

(tv) "including" means including, without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
ARTICLE 2.
SECTION 2.1 Essuance of Warrant Certificates. (a) As soon es
practicable atter the Record Pate, the Company will prepare and execute, the
Warrant Agent will countersign, and the Company will send or sause to be sent (
and the Warrant Agent will, if requested, send) by Eirst-class, insured,
poste-prepaid mail, Co each record holder of Common Stock es of the bluse of
Business an the Record Date, at the address of such holder shown an the records
oE the Company, one or more Warrant Certificates, in substantially the form of
Exhibit A hereto (a "Warrant Certificate"), evidencing one Warrant (subject Co
adjustment es provided herein) for each share of Common Stock so held.
(b) On the Record Date, or as soon as practicable thereafter, the

Company will send a copy of an Information Memorandum, in substantially the form
of Exhibit C hereto, by first-class, postage-prepaid mail, Co each record holder
of Common Stock as of the Close of Business an the Record Date, at the address
of such holder shown an the records of the Company.
(c) At any time and from time to time pricr to the occurrence ot the
Triggering Event, the Company may cause the Warrant Agent to issue, in
accordance with the provisions of this Article 2, Warrants to hoiders of (i)
shares of the Company's Noncumulative Convertible Preferred Stock, Series A (the "
Preferred Stock"); (ii) common stock purchase warrants (the "Five-Year
Warrants") issued under the Warrant Agreement, dated February 23, 1993, by and
between the Company and ChaseMellon Shareholder Services L.L.C. (es successor Co
Chemical Trust Company of California), es Warrant Agent; (iii) common stock
purchase warrants (the "Seven-Year Warrants") issued under the Warrant
Agreement, dated August 15, 1993, by and between the Company and ChaseMellon
Shareholder Services L.L.C. (as successor Co Chemical Trust Company of
California), es Warrant Agent; and (iv) stock options of the Company and its
subsidiaries (the "Stock Options", and together with the Preferred Stock, the
Five-Year Warrants, the Seven-Year Warrants and the Stock Options, the "
Convertible Securities") that were outstanding on the Record Date, who in any
such Oase exercise or convert such Convertible Securities into shares of Common
Stock and Warrants in accordance with the terms and conditions ot such
Convertible Securities.
(d) The maximum number of Warrants that may be issued hereunder is
, of which are available for issuance under Section 2.1(e)
hereof and are available for issuance under Section 2.1(c) hereof.
The Company will not
ssue any Warrants or securities substantially similar to the Warrants other
than in accordance with this Section 2.1.
JECTION 2.2 Form and Dating. The Warrant Certificates shall be
.ntEally in the form of Exhibit A, which is hereby incorporated in and

iv made a Part of this Agreement. The Warrants may have such notations,
or endorsements as the Company may deem appropriate and as are not
inconpistent with the provisions hereof, or as may be reguired by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage (
provided that any such notation, legend or endorsement is in a form acceptable
to the Company). 'ach Warrant shall be dated the date of its countersignature.
(a) Certificated Warrants. The Warrants may be issued in definitive
form represented by a physical Warrant Certificate (such certificate and all

other certificates representing physical delivery of Warrants in definitive form
being called "Certificated Warrants").
(b) Global Warrant. The Warrants may be issued in the form oe one or
more fully registered global certificates with the global securities legend set
forth in Exhibit A hereto (the "Global Warrant"), which shall be deposited on
behalf of beneficial owners of Warrants with the Warrant Agent, as custodian for
the Depository Trust Corporation ("DTC") (or with such other custodian as DTC
may direct), and registered in the name of DTC or a nominee of DTC, duly
executed by the Company and countersigned by the Warrant Agent as hereinafter
provided. The number of Warrants represented by Global Warrants may from time
to time be increased or decreased by adjustments made on the records of the
Warrant Agent and DTC or its nominee as hereinafter provided. Except as
provided in Section 2.5, owners of beneficial interests in a Global Warrant will
not be entitled to receive physical delivery of Certificated Warrants.
(c) Book-Entry Provisions. Members of, or participants in, DTC
("Agent Members") shall have no rights under this Agreement with respect to any
Global Warrant held on their behalf by DTC or by the Warrant Agent as the
custodian of DTC or under such Global Warrant, and DTC may be treated by the
Company, the Warrant Agent and any agent of the Company or the Warrant Agent as
the absolute owner of such Global Warrant for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Warrant Agent or any agent of the Company or the Warrant Agent from giving
effect to any written certification, proxy or other authorization furnished by
DTC or impair, as between DTC and its Agent Members, the Operation of customary
practices of DTC governing the exercise of the rights of a holder of a
beneficial interest in any Global Warrant.
SECTION 2.3 Execution and Countersignature. (a) With respect to any
Global Warrant to be issued hereunder, one Officer shall sign, and the Company's S'
ecretary or any of its Assistant Secretaries shall attest, such Global Warrant. The
Warrant Agent, upon the written order of the Company signed by an Officer, shall
countersign any Global Warrant certificate by manual or facsimile signature,
and such Global Warrant shall be deposited in accordance with Section 2.2 hereof.
(b) 4ith to all other Warrants, an Officer shall sign, and
Company's :' ary iny of its Assistant Secretaries shall attest, the
fant Cert : ..r the Company by manual or facsimile signature. I.e an
aer ah se t ire is on a Warrint Certificate na langer holds that office
ft the t sle the Warrant Agent conters,gns the Warrant Certificate, the Warrant
te ca..1 heve)the:ess. A 4arrant shall not be valid until an authorized
signatory o the Warrant Agent manually countersigns the Warrant Certificate.
The Sig::,1.L.9 shall be conclusive eviience that the Warrant Certificate has been
countersigned under this Agreement.
The Warrant Agent shall countersign and deliver the Warrants

tittficates for original issue, in each case upon a written order of the
ny signed by an Officer of the Company. Such order shall specify (in ,
aditian to the number of Warrants) the date on which the original issue of -
trrants is to be countersigned.
(c) The Warrant Agent may appoint an agent reasonably acceptable to

the Company to countersign Ehe Warrant Certificates. Unless limited by the
terms of such appointment, such agent may countersign Warrant Certificates
whenever the Warrant Agent may du so. fach reference in this Agreement to
countersignatitre by the Warrant Agent includes by such agent. Such agent will
have the same rights as the Warrant Agent for service of notices and demands.
SECTION 2.4 Certificate Register. The Warrant Agent shall keep a
register ("Certificate Register") of the Warrant Certificates and of their

transfer and exchange. The Certificate Register shall show the names and
addresses of the respective Holders and the date and number of Warrants
evidenced on the face of each of the Warrant Certificates. The Company and the
Warrant Agent may deem and treat the Person in whose name a Warrant Certificate
is registered es the absolute owner of such Warrant Certificate for all purposes
whatsoever and neither the Company nur the Warrant Agent shall be affected by
notice to the contrary.
SECTION 2.5 Transfer and Exchange. (a) Transfer and Exchange of
Certificated Warrants. When Certificated Warrants are presented to the Warrant

Agent with a request to register the transfer of such Certificated Warrants or
to exchange such Certificated Warrants for an equal number of Certificated
Warrants of other authorized denominations, the Warrant Agent shall register the
transfer or make the exchange es requested if its reasonable requirements for
auch transaction are met; provided, however, that the Certificated Warrants
surrendered for transfer or exchange shall be duly endorsed or accompanied by a

written instrument of transfer in form reasonably satisfactory to the Company
and the Warrant Agent, duly executed by the Holder thereof or its attorney duly
authorized in writing.
(b) Restrictions on Transfer of Certificated Warrants for a

Beneficial Interest in a Global Warrant. Certificated Warrants may not be
exchanged for a beneficial interest in a Global Warrant except upon satisfaction
of the requirements set forth below. Upon receipt by the Warrant Agent of
Certificated Warrants, duly endorsed or accompanied by appropriate instruments
of transfer, in form satisfactory to the Warrant Agent, together with written
i n n ' ) ( c t i o n s d i r e c t i n g t h e W a r r a n t A g e n t t o m a k e , o r t o d i r e c t DTC ) make, an
ad'nulment in its books and records with respect to such Global Wnrrints to
an increase in the number of Warrants represented by the ha. a r r a n t ,
Warrant Agent shall cancel such Certificated Warrants and nanne, ar
; • , , • n accordance with the standing instructions cd procedures
e x i s t i e , e t w e e n C( a n d t h e W a r r a n t A i e n t , t h e n u m b e r o f W a r r a n t s r e p r e s e n t e d
by the " :bei War, ant to be inoreade: cc nringly.
(c) Transfer and Exchance .f Global Warrants. The transfer and

e x c h a n g e o f b e n e f i c i a l i n t e m - s t s .0 Global Warrant shall be effected through
D T C , i n a c c o r d a n c e w i t h t h i s A m e e m e n t a n d t h e p r o c e d u r e s o f DTC t h e r e f o r .
(EM Restrictions on T:insfer and Exchange of the Global Warrant.

Notwithstanding any other provisions of this Agreement (other than the
provisions set torth in Section 2.5(q)), Global Warrants may not be transferred
as a whole except by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any such nominee to a successor depository
or a nominee of such successor depository.
(e) Authentication and Distribution of Certificated Warrants. If at

any time:
11) DTC n o t i f i e s t h e C o m p a n y t h a t D T C i s u n w i l l i n g o r u n a b l e t o
continue as depository for Global Warrants and a successor depository for
Global Warrants is not appointed by the Company within 90 calendar days
alter delivery of such notice;
(ii) DTC ceases to be a clearinq agency registered under the

Exchange Act; or
(iii) the Company, in its sole discretion, notifies the

Warrant Agent in writing that it elects to cause the issuance of
Certificated Warrants under this Agreement;
then, the Company will execute, and the Warrant Agent, upon receipt of a written
order of the Company signed by an Officer requesting the delivery of
Certificated Warrants to the holders of beneficial interests in the Global
Warrant, will countersign and deliver Certificated Warrants equal to the number
of Warrants represented by Global Warrants, in exchange for such Global
Warrants. Certificated Warrants issued in exchange for a beneficial interest in
a Global Warrant shall be registered in such names and in such authorized
dehominations as DTC, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Warrant Agent. The Warrant Agent
shall deliver such Certificated Warrants to the Persons in whose names such
W a r r a n t s a r e s o r e g i s t e r e d i n a c c o r d a n c e w i t h t h e i n s t r u c t i o n s o f DTC.
(f) Cancellation or Adjustment of Global Warrants. At such time as

all beneficial interests in Global Warrants have either been exchanged for
Certificated Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to DTC for cancellation or retained and canceled by the
Warrant Agent. At any time prior to such cancellation, if any beneficial
interest in a Global Warrant is exchanged for Certificated
9
a 1, • :hased er canceled, the number of Warrants ,-n uted
. Ich ei
ein .
h
a
l
b
e
r
d
u
ce
a
n
d
a
j
u
s
t
m
e
ns
h
a
l
b
e
f
:
a
d
,
n
t
h
e
Warrant Agent with respect to such Global Warrant, by
•r USS, to reflect such reduction.
(g) tbligations with Pespect tu Tranofe-s and 0xchanges of Warrants.

( . 0 To permit registrations of transfers and exchanges, the Company shall
execute and the Warrant Agent shall countersign Warrants and Global
Warrants as required pursuant to the provisions cu t s Section 2.5.
(ii) All Certificated Warrants and Global Warrants issued upon any
registration of trancfer or exchange of Certificated Warrants shall be the valid
obligations ut the Company, entitled to the same benefits under this Agreement
as the Certificated WI:rants or Global Warrants surrendered upon such
regintration of t xriof.r.r exchange.
:iii) Prior ,o due presentment for registration of transfer of any

Warrant, the Warrant Agent and the Company may deem and treat the Person in
whose name any Warrant is registered as the absolute owner of such Warrant and
seither the Warrant Agent nor the Company shall be affected by notice to the
contrary.
(iv) No service charge shall be made to a Holder for any

istration of transfer or exchange upon surrender of any Warrant Certificate
(t the office of the Warrant Agent maintained for that purpose. The Company may
us.re payment of a sum sufficient to cover any tax or other governmental
er te that may he imposed in connection with any registration of transfer or
exchange of Warrant Certificates.
SECTION 2.6 Replacement Certificates. If a mutilated Warrant
Certificate is surrendered to the Warrant Agent or if the Holder of a Warrant

Certificate claims that the Warrant Certificate has been lost, destroyed or
wrongfully taken, the Company shall issue and the Warrant Agent shall
countersign a replacement Warrant Certificate if the reasonable requirements of
the Warrant Agent and of Section 8-405 of the Uniform Commercial Code as in
effect in the State of California are met. 1f required by the Warrant Agent or
the Company, such Holder shall furnish an indemnity bond er other instrument
sufficient in the judgment of the Company and the Warrant Agent to protect the
Company and the Warrant Agent from any lois which either of them may suffer if a
Warrant Certificate is replaced.the Company and the Warrant Agent may charge
the Holder for their expenses in replacing a Warrant Certificate. Every
replacement Warrant Certificate is an additional obligation of the Company.
SECTION 2.7 Temporary Certificates. Until definitive Warrant
Certificates are ready for delivery, the Company may prepare and the Warrant
Agent shall countersign temporary Warrant Certificates. Temporary Warrant
Certificates shall be substantially in the form of definitive Warrant
Certificates bot may have variations that the Company considers appropriate for
temporary Warrant Certificates. Without unreasonable delay, the Company shall
prepare and the Warrant Agent shall countersign definitive Warrant Certificates
and deliver them in exchange for temporary Warrant Certificates.
2 CTION 2.3 Cancellation. (a) in the event the Cumpany shall
purchase or otherwise acquire Certificated Warrants, the same shall the]edpon be
delivered to the Warrant Agent for cancellation.
(b) The Warrant Agent and no one else shall cancel and destroy all
Warrant Certificates surrendered for transfer, exchange, replacement, exercise
r ncellation and deliver a certificate of such destruction to the Company
Jn:ess the Company directs the Warrant Agent to deliver canceled Warrant ert:
'icates to the Company. The Company may not issue new Warrant Certificates to
replace Warrant Certificates to the extent they evidence Warrants which have been
exercised or Warrants which the Company has purchased or otherwise acguired.
ARTICLE 3.
Exercise Terms
SECTION 3.1 Number of Warrant Shares; Exercise Price. Each Warrant
shall, upon exercise thereof as provided herein, Initially entitle the

reqistered Holder thereof to purchase the number of shares of Common Stock
having an Adjusted Market Value egual to the Adjusted Litiqation Recovery
divaded by [86,000,000] [the number of Warrants issued or reserved for issuance
on the Record Date] at an exercise price per Warrant egual to the number of
shares of Common Stock for which the Warrant is exercisable multiplied by 11.00 (
the "Exercise Price").
SECTION 3.2 Exercise Period. (a) The Company will provide notice,
as described below (the "Exercise Notice"), of the occurrence of the Triggering

Event not more than 15 calendar days alter the occurrence thereof. Lt the
Payment is payable by the United States Government in instaliments, the
Triggering Event will nut be deemed to have occurred until the Bank receives the
last installment of the Payment. The Exercise Notice shall be dated the date it
is first sent to Holders and shall be provided by means of a press release to
the one or more national news services and by mailinq such notice first class,
postage prepaid, to nach Holder at such Holder's address as it appears on the
Certificate Register; provided, however, that no failure to give such notice by
mail nur any defect therein shall affect the validity of the Exercise Notice or
the expiration of all Warrants on the Close of Business on the last day of the
Warrant Exercise Period, except as to the Holder to whom the Company has failed
to give such notice by mail or except as to the Holder whose notice was
defective. The Exercise Notice shall state the following:
(i) that the Triggering Event has occurred,
(ii) the aggregate number of shares for which the Warrants

are exercisable,
(iii) the number of shares of Common Stock for which one
Warrant is exercisable,
(iv) the Lrice per Warrant,
(v) the manner in which the Warrants are exercisable and
(vi) the date an which the Warrants will no langer be

exercisable.
(b) Subject to the terms and conditions set forth herein, each
Warrant shall be exercisable at any time or from time to time during the sixty-
lov persd commencing an the date an which the Exercise Notice is first sent to
:jeEs porsuant to Section 3.2(a) (the "Warrant Exercise Period").
(c) Na Warrant shall be exercisable after the dose of Business an

the last day of the Warrant Exercise Period.
SECTION 3.3 Expiration. (a) A Warrant shall terminate and become
void es of the earlier of (i) the Bluse of Business an the last day of the
Warrant Exercise Period, (ii) the Close of Business an the date the Litiqation
has been disposed of in a manner such that no shares of Common Stock or other
cecurities or property will be issuable under the term of the Warrants (the "
Termination Date") or (iii) the time and date such Warrant is exercised. The
Company will provide notice, as described below (the "Termination Notice"), of
the occurrence of the Termination Date or the expiration of the Warrant Exercise
Eeriod rat more than 60 calendar days after the occurrence thereof. The .•,
rminnt:on Notice shall be dated the date it is first sent to Holders and shall
ved by means of e press release to a national news service and by
auch notice first class, postage prepaid, to each Holder at such
:ler's address es it appears an the Certificate Register. The Termination
shall state the followingo
(i) that the Termination Date has occurred or the Warrant

Exercise Period has expired, as the case may be, and
(ii) that all outstanding Warrants have terminated and

become void.
The Warrants shall terminate and become void as provided herein notwithstanding
the Company's failure to give the Termination Notice.
SECTION 3.4 Manner of Exercise. Warrants may be exercised upan (i)
surrender to the Warrant Agent of the Warrant Certificates, together with the
form of election to purchase Common Stock an the reverse thereof properly
completed and validly executed by the Holder thereof and (ii) payment to the
Warrant Agent, for the account of the Company, of the Exercise Price. Such
payment shall be made by certified or official bank check or personal check
payable to the order of the Company. Subject to Section 3.2, the Warrants shall
be exercisable at the election of the Holders thereof either in fall at any time
or from time to time in part and in the event that a Warrant Certificate is
surrendered for exercise in respect of less than all the Warrant Shares
purchasable an such exercise at any time prior to the Expiration Date a new
Warrant Certificate exercisable for the remaining Warrant Shares will be issued.
The Warrant Agent shall countersign and deliver the required
12
dew Warrant Certificates, and the Company, at the Warrant Agent', request, shall
supply the Warrant Agent with Warrant Certificates duly signed on behalf of the
Company for such purpose. The Warrant Agent shall account promptly to the
Company with respect to all Warrants exercised and concurrently pay to the
Company all moneys received by the Warrant Agent for the purchase of shares of
Common Stock through the exercise of such Warrants.
SECTION 3.5 Issuance of Warrant Shares. Subject to Section 3.6, upon
the surrender oE Warrant Certificates and payment of the Exercise Price, as set
rorth in Section 3.4, the Company shall issue and cause the Warrant Agent or, if
appointed, a transfer agent for the Common Stock ("Transfer Agent") to
countersign and deliver to or upon the written arder of the Holder and in such
name or names as the Holder may designate, a certificate or certificates for the
number oE fall Warrant Shares so purchased upon the exercise of such Warrants or
dther securities or property to which it is entitled, registered or otherwise to
the Person or Persons entitled to receive the same, together with cash as
provided in Section 3.6 in respect of any fractional Warrant Shares otherwise
issuable upon such exercise. uch certificate or certificates shall be deemed
to have been issued and any Person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrant Certificates and payment of the Exercise Price.
SECTION 3.6 Fractional Warrant Shares. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If

more than one Warrant shall be exercised in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable upon such
exercise shall be computed on the basis oE the aggregate number of Warrant
Shares purchasable pursuant thereto. If any fraction of a Warrant Share would,
except for the provisions of this Section 3.6, be issuable on the exercise of
any Warrant (or specified portion thereof), the Company shall pay an amount in
cash equal to the sum of (i) the Adjusted Market Value for one Warrant Share and (
ii) $1.00, multiplied by such fraction, rounded upwards or downwards, as the
case may be, to the nearest whole cent.
SECTION 3.7 Reservation of Warrant Shares. (a) The Company shall
use its best efforts to at all times keep reserved out of its authorized shares
of Common Stock or shares of Common Stock held in its treasury and unissued a
number of shares of Common Stock sufficient to provide for the exercise in full
of all Warrants then outstanding or reserved for issuance pursuant to Section
2.1. The registrar for the Common Stock (the "Registrar") shall at all times
until the Termination Date, or the time at which all Warrants have been
exercised or cancelled, reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
Eile with the Transfer Agent. The Company will supply such Transfer Agent with
duly executed stock certificates for such purpose and will itself provide or
otherwise make available any cash which may be payable as provided in Section
3.6. The Company will furnish to such Transfer Agent a copy of all notices of
adjustments and certificates related thereto transmitted to each Holder.
(b) If, upon the Triggering Event, the number of shares of Common
Stock authorized but not issued plus the number of shares of Common Stock held
in the Company's
13
g1 he "Number
)•;reeme7a...)
, . )
EI ff7.•:.:2mon .lack •1 he mber of
rs for
q the nunber of aut,6 g..(res ot k in an
-
• the,. Number of Shortf ,) n auch a .,t, the
)»call be automatic,. 60 cileh r days
e-,ther (a) the ten.:er -eiled to i.( .e (i)
or (b) the 1.,te of the • :e in the
number hares of Common Stock to in olause (. )bove.
:•ripany covenants that all of Common Stock whccn may

eo.ec:.5e of Warrants will, upon 15 fully paid,
cee ot preemptive rights, Eree rrom all taxes and free Erom all
and .:ecurity interests, created by or through the Company, with
issue thereof.
SEETICN 3.8 Compliance with Law. (a) Notwithstanding anythinq in

th:, Agreement to the contrary, in na event shall a Holder be entitled to
earcise a Warrant unless (i) a registration statement filed under the
in respect of the issuance of the Warrant Shares is then
(ii) an exemption from such registration requirements is available
)1 ers under the Securities Act at [Ale time of such exercise.
(b) If any shares of Common Stock required to be reserved for

purposes of exercise of Warrants require, under any other Federal or state law
or applicable governing rufe or regulation of any national securities exchange,
registration with or approval of any governmental authority, or listing an any
such national securities exchange before such shares may be issued upon
exercise, the Company will cause such shares to be duly registered or approved
by such governmental authority or listed on the relevant national securities
exchange.
SECTION 3.9 Cancellation of Warrants In the event the Company shall
purchase or otherwise acquire Warrants, the same shall thereupon be delivered to

the Warrant Agent and be cancelled by it and retired. The Warrant Agent shall
oancel any Warrant surrendered for exchange, substitution, transfer or exercise
in whole or in part.
14
ARTICLE 4,
Adjustments
SECTION 4.1 Peclassifications, Redesignations ur Reorganizations of
Cummdn Stock. (a) ihe event that at any time or from time to time after
the tde hereof the ,ny shall issue by reciassification, redesignation or

:tion of the i-S of its class of Common Stock any shares of capital
2K of the Company then, in any such event, the Holders shall have the right
reeeive upon exercd.o of the Warrants the number of shares of such capital
the Company equal to the Adjusted Litigation Recovery divided by
6, .0,000] [the number of Warrants issued or reserved for issuance on the
cord Date] divided by the aggregate Adjusted Market Value of the capital stock
the Company that one share of Common Stock was exchanged for or converted
into es a result of such reclassification, redesignation or reorganization.
(b) The proportion and type of capital stock of the Company that the
Holders shall have the right to receive in the circumstance set forth in the
preceding sentence will be in the same proportion and type es one share of
Common Stock was exchanged for or converted into as a result of such
reclassification, redesignation or reorganization. Such adjustment shall become
effective immedlately after the effective date of such reclassification,
redesignation or reorganization. In the event of the occurrence of more than
one of the foregoing, such adjustments shall be made successively.
SECTION 4.2 Combination. (a) Except es provided in Section 4.2(c),
in the event of a Combination, the Holders shall have the right to receive upon
exercise of the Warrants the number of shares of capital stock or other
securities or an amount of property equal to the Adjusted Litigation Recovery
divided by [86,000,000] [the number of Warrants issued or reserved for issuance
on the Record Date] divided by the aggregate Adjusted Market Value of the
capital stock, other securities or property that one share of Common Stock was
exchanged for or converted into as a result of such Combination.
(b) The proportion and type of capital stock, other securities or

property that the Holders shall have the right to receive in the circumstance
set forth in the preceding sentence will be in the same proportion and type es
one share of Common Stock was exchanged for or converted into as a result of
such Combination. The provisions of this Section 4.2 shall similarly apply to
successive Combinations involving any Successor Company.
(c) In the event of- a Combination where consideration is payable to

holders cf Common Stock in exchange for their shares solely in cash, each
Warrant will upon exercise thereof be entitled to receive cash in an amount
equal to the Adjusted Litigation Recovery divided by [86,000,000] [the number of
Warrants issued or reserved for issuance on the Record Date], less the Exercise
Price.
In case of any Combination described in this Section 4.2(c), the
surviving or acguiring Person shall promptly after the occurrence of the
Triggering Event deposit with the
15
. ;ent the Funds eeJary to pay to the Holders of the Warrants the
• which they ire ( AJled an oon.ribed above. After such Funds and the
es WIrrant Cert: sel, the Warrant Agent shall make
. the Holders by ie. Fring d gegk in such amount as js a :cpriate to
E
1 . 'in or (ersons as it .y be dio.ecied in writing by the .•
.1riendeting such Warrants.
(d) Th- npany shall provide that the surviving or aequiiing Person
(the "Successcr 'hany") in such Combination will enter into an agreement with
the Warrant Siest .im rming the Holders rights pursuant to this Section 4.2
and provicLng • :r EiJustments, which shall be as neariy equivalent as may be
practicable to tue adjustments provided for in this Article 4.
2EC1. .N 4. i Exercise Price Adjustment. In case of any
reclassificati :2, .edesignation or reorganization described in Section 4.1 or

any Combination ;eseried in Section 4.2, the Exercise Price of one Warrant after
such reclassification, redesignation, reorganization or Combination will equal (
i) if the Warrants are exercisable into stock only, the per share par value of
such stock multiplied by the number of shares of stock into which one Warrant is
exercisable, (ii) if the Warrants are exercisable for cash or property only, an
amount equal to a fraction the numerator of which is the product of $1.00 and
the Fair Market Value of amount of cash or property into which one Warrant is
exercisable and the denominator of which is the amount of cash or property one
share of Common Stock was exchanged for in such Combination and (iii) if the
Warrants are exercisable for cash or property and stock, an amount equal to the
Exercise Price determined by clause (i) above with respect to the stock portion
and the Exercise Price determined by clause (mm) with respect to the cash or
property portion.
SECTION 4.4 Examples. (a) lt the Company effects a reclassification,
redesignation or reorganization such that one share of its class of Common Stock
was converted into a one share of class A common stock and two shares of class B
common stock, then, alter giving effect to such event, the Holders shall have
the right to receive upon exercise of one Warrant shares of class A common stock
and class 9 common stock equal to the Adjusted Litigation Recovery divided by [
26,100,000) [the number of Warrants issued or reserved for issuance on the '-
cord Date) divided by the sogregste Adjusted Market Value of one share of
class A common stock and two shares of class B common stock. Accordingly,
pursuant to Section 4.1(b), if the Adjusted Litigation Recovery were $500
million and the Adjusted Market Value of 0ne share of class A common stock and
two shares oE class 3 common stock were 530, then one Warrant would be
exercisable for 0.0646 of a share of class A common stock and 0.1292 of a share
of class 9 common stock. The Exercise Price of one Warrant would be the par
value of the dass A common stock multiplied by 0.0646, plus the par value of
the class 9 common stock muitiplied by 0.1292.
(b) In the case of a Combination described in Section 4.2(a), if as a

result of such Combination one share of Common Stock is exchanged for one share
of Surviving Company common stock and $15, then, after giving effect to such
event, the Holders shall have the right to receive upon exercise of one Warrant
shares of Eurviving Company common stock and cash equal to the Adjusted
Litigation Recovery divided by [86,000,000] [the
16
AUUL.fr Warrants i.:su,d or reserved for issuance on li.n . Pate] divided

,•y :Ne cim of" the Adjm.:-i Market Vatue of one share of Surv:ving Company common
stock plus $15. A•::.rd..:1_y, pursuant to Section 1.2(b), if ihm Adjusted
Liti:gation Recovery ,-:e s13 million and the Adjusted Market Value of one share
of Burviving Company '• mon Stock were $15, then one Warrant would be
exercisable for 0.19J8 of a share oE Class A Common Stock and $2.907 ($15
multiplied by 0.1938). The Exercise Price of one Warrant would be the par value
of Ihm Surviving Company Common Stock multip1ied by .1292, plus $.1938.
(0) Ln the case of a Combination described in Section 4.2(c), if as a

result of such Combination one share of Common Stock is exchanged for $30, then,
atter giving effect to such event, the Holders shall have the right to receive
upon exercise of one Warrant cash equal to the Adjusted Litigation Recovery
divided by [86,000,000] [the number of Warrants issued or reserved for issuance
03 the Record Date], 1ess the Exercise Price of the Warrant. Accordingly, if
the Adjusted Litigation Recovery were $500 million, then one Warrant would be
exercisable for $5.620. The Exercise Price of one Warrant would be $.1938.
SECTION 4.5 Other Events. 11 any event occurs as to which the
foregoing provisions of this Article 4 are not strictly applicable or, if

strictly applicable, would not, in the good faith judgment of the Board, fairly
and adeqbately protect the purchase rights of the Warrants in accordance with
fhe essential intent and principles of such provisions, then such Board shall
make such adjustments to the terms of this Article 4, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the good
$aith opinion of auch Board, to protect such purchase rights es aforesaid.
SECTION 4.6 Notice of Certain Transactions. In the event that the
Company shall publicly announce a plan (a) to effect any reclassification,

redesignation or reorganization of its shares of its class of Common Stock, (b)
to effect any capital reorganization, consolidation or merger or (c) to effect
the voluntary or involuntary dissolution, liquidation or winding-up of the
Company, the Company shall within 5 calendar days alter such public announcement
send to the Warrant Agent and the Warrant Agent shall within 5 calendar days
send the Holders a notice (in such form as shall be furnished to the Warrant
Agent by the Company) of such proposed action, such notice to be mailed by the
Warrant Agent to the Holders at their addresses as they appear in the
Certificate Register, which notice shall specify the expected date that such
issuance or event is to take place and the expected date of participation
herein by the holders of Common Stock and shall briefly indicate the effect of
such action on the Common Stock and on the number and kind of any other shares
DE stock and on other securities or property, if any, and the number of shares
of Common Stock and other securities or property, if any, purchasable upon
exercise of each Warrant and the Exercise Price after giving effect to any
adjustment which will be required as a result of such action.
SECTION 4.7 Adjustment to Warrant Certificate. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article 4, and Warrant Certificates issued after such adjustment may have the
same terms and conditions as are stated in any Warrant Certificates issued prior
to the adjustment. The Company, however, may at any time in its sole discretion
make any change in the form oE
17
Warrant Certificate t3)t. it may doem appropriate 3) •ci eflect to such

adjustments and that not afh-ot the substanco of •e wirrant Certificate,
and any Warrant Cot' sr issued or (ned, whether in
exchange or nuret.A.:. 13.-r 3s Usi3uding Warrant L 'icate or otherwise,
may be in the • ,m (3 so ohanged.
ARTICLE 5.
Warrant Agent
Dection 5.1 Nature of Duties and Responsibilities Assumed. The
Company hereby appoints the Warrant Agent to act as agent of the Company as set
forth in this Agreement. The Warrant Agent hereby accepts the appointment as
agent of the Company and agrees to perform that agency upon the terms and
conditions herein set Eorth, by all of which the Company and the Warrant
Holders, by their acceptance thereof, shall be bound.
Whenever in the performance of its duties under this Agreement, the

Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact matter (unless other evidente in respect thereof be
herein specifically prscr:Led) may be deemed to be conclusively proved and
established by a cert.:;.'ate signed by an Officer and delivered to the Warrant
Agent; and such cett.:ior3e shall be toll authorlzation to the Warrant Agent for
any action taken cr in good feith by lt under the provisions of this
Agreement in reliance Ton such certificate.
The Warrant Agent shall be liebte hereunder only for its own
negligence, bad faith or willful misconduct. The Warrant Agent shall not be
liable for or by reason of any of the statements of fact or recitals contained
in this Agreement or in the Warrant Certificates (except its countersignature on
the Warrant Certificates and such statements or recitals as described the
Warrant Agent or action taken or to be taken by It) or be required to verify the
same, bot all such statements and recitals are and shall be deemed to have been
made by the Company only. The Warrant Agent shall not have any liability or
responsibillty in respect of the legality, validity or enforceability of this
Agreement or the execution and delivery hereof (except the die execution hereof
bv the Warrant Agent) or in respect of the validi.ty or execution of any Warrant
Certificate (except its countersignature thereof); nor shall it be responsible
or nable for any breach by the Company of any covenant or condition contained
tn this Agreement or in any Warrant Certificate; nor shall it be responsible or
liable for the making of any change in the number of shares of Common Stock
required under the provisions of Article IV or responsible for the manner,
nethod or amount of any such change or the ascertaining of the existente of any
tacts that would require any such adjustment or change; nor shall it by any act
hereunder be deemed to make any representation or warranty es to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or any Warrant Certificate or as to whether any shares of
Common Stock will, when issued, by validly issued, fully paid and nonassessable.
The Warrant Agent shall be under no Obligation to Institute any

action, suit or legal proceeding or take any other action likely to involve
expense unless the Company or
18
A c,: r ut.i ,:g);::11 the Warrant Agent with

-xpenset wh:oh may be
..Jruem. nt under any of the
the w.(r •[tict.:. il • [her proceeglpi

proceed( dstilited t v ( . h e W a r r a n t edt
Aiedt :-ecovery tigment .
dlts, •ecective
'., pr•-
• -
T-(ny zu; .iJt:lited
•:;.st lt i with this Agreemet
The War bv ,ALh,ACL,A,A and directel accept written

instructions with tt ett s the perormarce ei its duties hereunder from an
Officer, and to arpiv :y such oi::cer for advice or instructions in
connection with the Wirrant Agent's duties, and it shall not be liable for any
action taken or be taken er omitted by it in good faith in
accordance with the vtructions of any such d [Leer.
The Warrant Agent will not be responsible or liable for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be ccmplied with by the Company. The Warrant Agent
will not incur any liability or responsibility to the Company or to any Warrant
Holder for any action taken, or any failure to teke action, in reliance en any
notice, resolution, waiver, consent, order, certificate, er other paper,
document er instrument reasonably believed by the Warrant Agent to be genuine
and to have been signed, sent or presented by the proper party or parties.
The Warrant Agent may execute and exercise any of the rights and
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees, provided reasonable care has been
exercised in the selection and in the continued employment of any such attorney,
agent or employee.
The Company will perform, execute, acknowledge and deliver or cause to

be performed, executed, acknowiedged and delivered all such further ects,
instruments and assurances es may reasonably be required by the Warrant Agent in
Order to enable it to carry out or perform its duties under this Agreement.
The Warrant Agent will act hereunder solely es agent of the Company in
a ministerial capacity, and its duties will be determined solely by the
provisions hereof. The Warrant Agent will not be liable for anything which it
may du or refrain from so doing in connection with this Agreement except for its
own negligence, bad faith or willful conduct.
Jection 5.2 Right to Consult Counsel. The Warrant Agent may at any
time consult with legal counsel satisfactory to it (who may be Legal counsel for
the Company) and the opinion of such counsel shall be full and complete
authorization and protection to the Warrant Agent es to any action taken,
suffered or omitted by it in good faith in accordance with such opinion;
provided, however, that the Warrant Agent shall have exercised reasonable care
in the selection of such counsel.

19
Bettion 5.3 C,ar.en, di and Reimbursement. The Company igrees Co
, 'ne Warrant Agent' compensation for all i

by it hereunuer .,hy i.R.( the Warrant Agent miy ince rem
a c) time, and to reiri)arsA :iirrant Agent for reasonable exrenses and
Lirsements incurred in us' n with the execution and administration of
A(reement (including the . •ion•ble compensation and the expenses of its
in.:'.), and further agrees maiemnify the Warrant Agent for, and Co hold it
against, any lose, liability or expenses incurred without negligence,
Mth er willful misconduct en its part, arising out of or in connection
w. th the acceptance and administration of this Agreement, including the costs
and expenses of defending itself against any claim er liability in connection
with the exercise er performance of any of its powers or duties hereunder.
Bettion 5.4 Warrant Agent May Hold Company Securities. The Warrant
Agent and any stockholder, director, officer or empioyee of the Warrant Agent
may buy, seit or deal in any of the Warrants or other securities of the Company
or its affiliates or have a pecuniary interest in any transaction in which the
Company or its affiliates may be interested, or contract with or lend money Co
the Company cr its affiliates er otherwise ect as fully and freely es though it
viere not the Warrant Agent under this Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or for any
ether legal entity.
Bettion 5.5 Chande of Warrant Agent. The Warrant Agent may resign
and be discharged from its duties under this Agreement upon 90 calendar days'
prior notice in writing mailed, by registered or certified mail, Co the Company.
The Company may remove the Warrant Agent or any successor warrant agent upon 60
calendar days' prior notice in writing, mailed to the Warrant Agent or successor
warrant agent, es the Oase may be, by registered or certified mail. If the
Warrant Agent shall resign or be removed or shall otherwise become incapable of
aeting, the Company shall appoint e successor to the Warrant Agent and shall,
within 30 calendar days following such appointment, give notice thereof in
writing Co each registered holder of the Warrant Certificates. If the Company
shall feil to make such appointment within e period of 30 calendar days after
giving notice of such removal or after it has been notified in writing of such
resignation or Incapacity by the resigning or incapacitated Warrant Agent, then
the Company agrees to perform the duties of the Warrant Agent hereunder until a
successor warrant agent is appointed. After appointment the successor warrant
agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named es Warrant Agent without further ect or deed;
tut the former Warrant Agent shall deliver and transfer to the successor Warrant
Agent any property et the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for this purpose. Failure
to give any notice provided for in this lection, however, of any defect therein
shall not affect the legality or validity of the resignation of removal of the
Warrant Agent or the appointment of the successor warrant agent, as the rase may
be.
20
ARTICLE 6.
Miscellaneous
SECTION 6.1 Information. As soon as any Warrant becomes outstanding,
the Company shall promptly deliver to the Warrant Agent and the Holders its
annual o-port to stockholders and such other information as is provided to any
hdlierd •' eluity securities of the Company in their capacity as holders of such•
sei "-
SECTION 6.2 Persons ltenefitting. Nothing in this Agreement is
(ntended or 2hall be construed to confer upon any Person other than the •Company,
the Warrant Agent and the Holders any right, remedy or Claim under or by reason
of this agreement or any part hereof.
SECTION 6.3 Rights of Holders. (a) No Holder, es such, shell be
entitied to vote or to receive dividends or shell otherwise be deemed to be the

to,s.er of shares of Common Stock for any purpose, nur shell anything contained
or in any Warrant Certificate be construed to confer upon any Holder, es
such, any of the rights of a stockholder of the Company or any right to vote
upon give or withhold consent to any action of the Company (whether upon any
reorganization, issuance uf securities, reclassification or conversion of Common
Stock, consolidation, merger, sele, lease, conveyance or otherwise), receive
notice of meetings or other action affecting stockholders (except for nutices
expressly provided for in this Agreement) or receive dividends or subscription
rights, unless and until such Warrant Certificate shell have been surrendered
for exercise es provided in this Agreement, payment in respect of sich exercise
shell have been received by the Warrant Agent, and shares of Common Stock
thereunder shell have become issuable and such person shell have been deemed to
have become a holder of record of such shares. No Holder shell, upon the
exercise of Warrants, be entitled to any dividends if the record date with
respect to payment of such dividends shell be e date prior to the date such
shares of Ccmmon Stock became issuable upon the exercise of such Warrants.
(b) The Bank will retain sole and exclusive control of the Litigation
and will retain 1006 of any recovery from the Litigation. The Holders will not
have any right to control or manage the course or disposition of the Litigation
ar the proceeds of any recovery therefrom.
SECTION 6.4 Purchase of Warrants by the Company. The Company shell
have the right, except as limited by law or other agreement, to purehase or

otherwise acquire Warrants at such times, in such manner and for such
consideration as it may deem appropriate.
SECTION 6.5 Amendment. This Agreement may be amended by the parties
hereto without the consent of any Holder for the purpose of curing any ambiguity, or
of curing, correcting or supplementing any defective provision contained herein or
making any other provisions with respect to matters or questions arising under this
Agreement es the Company and the Warrant Agent may deem necessary or desirable;
provided, however, that
rE ?ANWCF::) Mr;
21
1
• t versely rights Eiders. Any riet. lt
-rent mott that han .n adverng Dn the -st.;
-
(ne writt nnod of the ders of a majot.:-/ of
ne ( r7 .nts. The n ng:t cf each r . ier atfected sha.
1 n:ernt pursuant to wh ch the Exercise Pr.e would be
mer T 4arrant Shatgi purchasable upön exercine of Warrants
W o U r de mtcoe (nther than pursuant t adjustments pr v:r6d s 1-rein). In
.minind wnener Cor Holders of the .-nitred number co aarriaaa Lave
• ncurred in anv direction, waiver dr c Warrants owned by the Company or
any Person oirectly or indirectly aontt ling or controlaed by dr under
moect or indirect common control with the ndany shall be disregarded and
Eeemed not to be outstanding, except that,
,
:r the purpose of determining
whether the Warrant Agent shall be protected in relying on any such direction,
waiver or consent, only Warrants which the Warrant Agent knows are so owned
shall be so dlsregarded. Also, subject to the foregoing, only Warrants
outstanding at the time shell be cönsidered in any such determination.
SECTION 6.6 Nctices. Any notice or communication shell be in writing
and delivered in Person or mailed by first-class mail addressed es follows:
if to the Company: Golden State Bancorp Inc.

414 North Central Avenue
Glendale, CA 91203
Attention: Chief Einancial Officer
Telecopy: (918) 409-3151
if to the Warrant Agent: ChaseMellon Shareholder Services L.L.C.
Reorganization Department
450 West 33rd Street, 15th Floor
Attention:
Teleccpy:
The Cdmpany or the Warrant Agent by notice to the other may designate
additional or different addresses for subsequent notices or cemmunications.
Any notice or communication mailed to e Holder shall be mailed to the
Holder at the Holder's address es it appears on the Certificate Register and
shallbe sufficiently givenif so mailed within the time prescribed.
Fallure to mail a notice or communication to a Holder or any defect in

it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above, it is duly given,
whether or not the addressee receives it.
SECTION 6.7 Governing Law. This Agreement and the Warrant
Certificates shall be governed by, and construed and interpreted in accordance

with, the laws of the Stete of California.
SECTION 6.9 Successors. All agreements of the Company in this
Agreement and the Warrant Certificates shall bind its successors. All
agreements of the Warrant Agent in this Agreement shall bind its successors.
IECTION 6.9 Counterparts. The parties may sign any number of copies
of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. Une signed copy is enough to prove this
Agreement.
SECTION 6.10 gable of Contents. The table of contents and headings
of the Articles and Sections of this Agreement have been inserted for
convenience of reference only, are not intended to be considered a part hereof
and shall not modify or restrict any of the terms or provisions hereof.
SECTION 6.11 Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be hold invalid, illegal or

unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
IN WITNESS WHEREOE, the parties have caused this Agreement to be duly

executed as of the date first written above.
By:
Name:
Title:
CHASEMELLON SHAREHOLDER
SERVICES L.L.C., as Warrant
Agent,
By:
Name:
Title:
T A TO
WARRALT .l.ASE. MENT
[FORM OF FACE OF WARRANT CERTIFICATE]
[Uniess and until it is exchanged in whoie or in part for Warrants in

definitive form, this Warrant may not be transferred except as a whole by the
depository to a nominee of the depository or by a nominee of the depository Co
the depository or another n[minee of the depository or by the depository or any
such nominee to a successor , opos,tory or a nominee of such successor
depository. The Depository »dst 1 mpany ("DTC") (55 Water Street, New York,
New u.rk) shall act as the c•pository until a successor shall te appointed by
the rpany and the Warrant Agent. Unless this certificate is Pr-sented by an
representative of DTC Co the issuer or its agent : :e(istration of
trads:er, exchange or payment, and any certificate issued is rer.itered in the
narre Cede & So. or such other name as requested by an authorized
rep,enentative of DTC (and any payment is made Co Cede & Co. or such other
ent:ry as is requested by an authorized representative of DTC), ANY TRANSFER,
,•ND OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
--
inasmuch as the registered owner hereof, Cede & Co., has an interest
herein. )/1/
Wo. Certificate for Warrants

,
WA ANTS TO DURCHASE CCEMON STOCK OF
D,N STATE BANCORP INC.
THIS CERTIFIES THAT, , or its registered assigns, is the

registered holder of the number of Warrants set forth above (the "Warrants").
ach Warrant entitles the holder thereof (the "Holder"), at its option and
subject to the provisions contained herein and in the Warrant Agreement referred
to below, Co purchase from GOLDEN STATE BANCORP INC., a Celaware corporation ("
the Company"), the number of shares of Common Stock, par value of 51.00 per
share, of the Company (the "Common Stock") having an Adjusted Market Value equal
to the Adjusted Litigation Recovery divided by [86,000,000] [the number of
Warrants issued or reserved for issuance on the Record Date] at an exercise
price per Warrant equal to the number of shares of Common Stock for which one
Warrant is exercisable multiplied by 51.00 (the "Exercise Price"). This Warrant
Certificate shall terminate and become void on the earliest of (i) the Close of
Business on the last day of the Warrant Exercise Period, (ii) the Close of
Business on the date the Litigation has been disposed of in a manner such that
no shares of Common Stock or other securities or property will be issuable under
the terms of the Warrants and (iii) the time and date such Warrant is exercised.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of , 1998 (the "Warrant Agreement"),
between the Company and ChaseMellon Shareholder Services L.L.C. (the "Warrant
Agent", which term includes any successor Warrant Agent under the Warrant
Agreement), and is subject to the terms and provisions contained in the Warrant
Agreement, to all of which terms and
/1/ To be included only it the Warrant is in global form.

provisions 'ie Holder of this Warrant Cer)::cate consents by acceptance hereof.
The Warrant '\greement is hereby incorporat•n herein by reference and um a oart
hereof. is hereby made to ih-' laa-r Int Agreement for a fill clit•ment
of the re:•vtive rights, limitations :tgnts, duties and oblliiiTtas ct the
Company, tie Warrant Agent and the Holders dE the Warrants. 0 1 terms
used but not defined herein shall have the meanings ascribed theretd in the
Warrant Agreement. A copy of the 'iarr,nt Agreement may be obtained rar
inspection by the Holder hereof upon written request to the Warrant Agent at
aubject to the terms of the Warrant Agreement, the Warrants may be

exercised in whole or in part by surrender of this Warrant Certificate with the
form of election to purchase Warrant Shares attached hereto duly executed and
with the simultaneous payment of the Exercise Price in cash (subject to
adjustment) to the Warrant Agent for the account of the Company at the Office of
the Warrant Agent. Payment of the Exercise Price shall be made by certified or
erficial bank check or personal check payable to the order of the Company or by
wire transfer of funds to an account designated by the Company for such
purpose.
As provided in the Warrant Agreement and subject to the terms and

conditions therein set forth, each Warrant shall be exercisable at any time from
and from time to time during the Warrant Exercise Period only and shall not be
exercisable after the expiration of the Warrant Exercise Period.
In the event the Company enters into a Combination, the Holder hereof
will be entitled to receive upon exercise of the Warrants the shares of capital
stock or other securities or other property such that each Warrant may be
exercisable for a nsmber of shares of capital stock or other securities or an
amount of property equal to the Adjusted Litigation Recovery divided by [86,
000,000] [the number of Warrants issued or reserved for issuance on the Record
Date] divided by the aggregate Adjusted Market Value of the capital
stock, other securities or property that one share of Common Stock was exchanged
for or converted into es a result of such Combination; provided, however, that
in the event that, in connection with such Combination, consideration to holders

of Summen Stock in exchange for their shares is payable solely in cash, the
Holder hereof will be entitled to receive cash in an amount equal to the
Adjusted Litigation Recovery divided by f86,000,000] [the namber of Warrants
issued or reserved for issuance en the Record Date], less the Exercise Price
The amount and type of capital stock, other securities or property that the
Holders shall have the right to receive in the circumstance set forth in the
preceding sentence wodld be the same amount and type es one share of Common
Stock was exchanged for or converted into es e result of such Combination.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 2.5 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect tu temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
1 •pcy r •xercise of the Warrants, there shall be
bleu and o od 1_3 the Holder hereof a new Warrant Certificate in ,
he sh• of Common Stock as to which the Warrants shall iot have

n icid. Warrant Certificate may be exchanged ab the ■dl•ce of the
Agent by ,Rsenting this Warrant Certificate prcperly en.:07..ad w:th a
at to exchange this Warrant Certificate for other Warrant Ce.t .i:cates
.encing an equal number of Warrants. No frabtional Warrant Shares will be
c:ief upon the exercise of the Warrants, bit the Company shall pay an amount in
dual to the Adjusted Market Value for one Warrant Share on the
mination Date, multiplied by such fraction, computed to the nearest whole
All shares of Common Stock issuable by the Company upon the exercise
of the Warrants shall, upon such issue, be duly and validly issued and fully
paid and non-assessable.
Tha holder in whose name the Warrant Certificate is registered may be

deemed and treated by the Company and the Warrant Agent es the absolute owner of
the Warrant Certificate for all purposes whatsoever and seither the Company nor
the Warrant Agent shall be affected by notice to the contrary.
THE WARRANTS PEPRESENT A CONTINGENT RICHT TO PURCHASE SHARES OF COMMON

STOCK WITH AN AGGREGATE VALUE 3ASED ON A PORTION OF ANY PROCEEDS THAT MAY HE
RECEIVED HY THE BANK EROM THE LITIGATION. THE WARRANTS DO NOT PROVIDE TO THEIR
HOLDERS ANY RIGHTS IN THE LITIGATION INCLUDING ANY RIGHTS TO RECEIVE ANY CASH OR
PROPERTY RECEIVED BY THE BANK IN CONNECTION THEREWITH, OR TO CONTROL THE
LITICATION. THERE CAN BE NO ASSURANCE AS TO WHEN THE LITIGATION WILL HE
RESOLVED OR THE AMOUNT OF PROCEEDS, IF ANY, THE BANK WILL RECEIVE TIEREFROM.
THE BANK WILL RETAIN SOLE AND EXCLUSIVE CONTROL OF THE LITIGATION AND WILL
RETAIN 100% OF ANY RECOVERY FROM THE LITIGATION. THE HOLDERS WILL NOT HAVE ANY
-EICHT TO CONTROL OR MANAGE THE COURSE OR DISPOSITION OF THE LITIGATION OR THE
PROCEEDS OF ANY RECOVERY THEREFROM.
The Warrants du not entitle any holder hereof to any of the rights of
a shareholder of the Company.
This Warrant Certificate shall not be valid or obligatory for any

purpose until it shall have been countersigned by the Warrant Agent.
By
[SEAL]
Attest:
Secretary
PATED:
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
as Warrant Agent,
by
Authorized Signatory
] TO
A YENT
EOPM MD 1,ECTION TO PURCHASE WARRANT SHARES

(So)o e :uted only upon exercise of Warrants)
;OLDEN SPATE HANCORP INC.
Ined teteby irrevocably elects to exercise 1 Warrants

at tc: se p: . .e per Warrant of $ ] to acquire 1 1 shares of Common
Stock, . ,r r !er share, f ui !en State Bancorp Inc. (the "Company"),
on the :-tms !:.] ;. .mns spec:: ]:1 the within Warrant Certificate and the
e• .rant Agreement there:n referred surrenders this Warrant Certificate and
!Il right, title and .nrerest therein to the Company, and directs that the
rares of Common Stock deliverable upon the exercise of such Warrants be
.1. ared or placed in the name and at the address specified below and ]]
ivered thereto.
Pate:
/I/
(Signature of Owner)
!Street Address)
(City) (State) (Zip Code)
Signature Guaranteed by:
/1/ The signature must correspond with the name as written upon the face of the
within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever, and must be guaranteed by a national
bank or trust company or by a member firm of any national securities
exchange.
2
Securities and/or check to be issued to:
Please insert social security or identifying nurnber:
Name:
Street Address:
City, State and Zip Code:

Any unexercised Warrants evidenced by the within Warrant Certaficate to be
tssued to:
Please insert social security or identifying number:

Name:
Street Address:
City, State and Zip Code:

WARRANT A
Je folldw exehanges of a part of this Global Warrant for definitive Warrants

have be.,n
ICATE TO HE DELEMERED UPON EXCHANGE OR

P.ATION OF TRANSFER OF WARRANTS
Re: Warrants to Rurc,(.:e Ccmmon Stock (the "Warrants") of Golden State Bancorp
Inc. rhe "Company")
cate relates Lo Warrants held in definitive form by

(the "Transieror").
Tld Trinsferor has requested the Warrant Agent by written order to ekchange
or register the transfer of a Warrant or Warrants. The Warrant Agent and the
Company are entitled to rely upon this Certificate and are irrevocably
authorized to produce this Certificate or a copy hereof to any interested party
in any administrative or legal proceedings or official inquiry with respect to
the matters covered hereby.
{INSERT NAME OF TRANSFERORT
by
Date:
EXHIBIT 5.1
AD OF MAYER, BROWN & PLATTi
APRIL 3, 1997
len State Bancorp Inc.

Po-th Central Avenue
Ida e, California 91203
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
You have requested this opinion in connection with the offering (the "
Offering") by Golden State Bancorp Inc., a Delaware corporation (the "
Company"), of shares of its common stock, par value $1.00 per share (the "
Ccmmon Stock"). Capitalized terms used bot not otherwise defined herein shell
have the meanings ascribed to them in the Registration Statement (es defined
below).
In connection with your request, you have provided us with and we have
reviewed: (1) the Company's Certificate of Incorporation, as amended through
the date hereof, (ii) the Company's Bylaws, es amended through the date
hereof, (iii) the Registration Statement on Form 3-4, es filed with the
lecurities and Exchange Commission on April 3, 1997 (the "Registration
Statement"), including the form of proxy statement/prospectus to be used in
•
:nnection with the Offering (the "Prospectus") and (iv) resolutions of the
of Directors of the Company concerning the Offering.
libject to (i) the effectiveness of the Registration Statement under the
Securities Act of 1933, (ii) the due execution, registration and deliverv of
the certificates evidencing the Common Stock and (iii) the Board of Directors
having taken all necessary action to approve the specific Germs of the Common
Stock to be issued, we are of the opinion that the Common Stock to be issued
by the Company will, when issued and paid for in the manner provided in the
Registration Statement, be legally issued, fully paid and non-assessable.
Re hereby consent to the use of this opinion es an exhibit to the

Registration Statement, and we further consent to the use of our name under
the caption "Legal matters" in the Prospectus.
Our opinions expressed herein are limited to the Delaware General

Corporation Law as in effect on the date hereof, and we do not express any
opinion herein concerning or arising under any other law.
ifery truly yours,

MAYER, BRCWN & PLATT
,, '
9.1
[nr , 5 CRUTCHER ii
Ar:- 3, 1999
_no.
ist StaEe Street
• iands, ,Ialifornia 92373
Re: Pederal (ncome Tax Canseguences of Merger
With Golden State Hancurp Inc.
Gentlemen:
Ne have served es special tax counsel to RedFed Bancorp Inc., a Delaware

corporation (the "RedFed") in connection with e merger (the "Merger") of RedFed
into a newly Eormed and wholly-owned subsidiary ("Merger Sub") of Golden State
Bancorp Inc., e Delaware corporatron ("Golden State"). The Merger is being
undertaken pursuant to the terms of that certain Agreement and Plan of Merger,
dated es of November 30, 1997 (the "Merger 1. by and between RedFed
and Golden State. This opinion in issued purilant to Section 6.3(b) of the
Merger Agreement which conditions the obliiation of RedFed to effect the Merger
among other things, the receipt of our opJn..n that the Merger will be
eated for federal income tax purposes es ianization within the meaning of
• • •oE:in 363(e) of the in-mal Revenue C. 2-86, es amended (the "Code"). (
Gens otherwise indi(iaei, -ach capitalized term used herein has the meaning ib:
ribed to it in the Air•-npnt.
1f the Merger is concssmated on the terms and subject to the conditions set
forth in the Merger Agreement, then (i) the RedFed will merge into Merger Sub
with Merger Sub beinq the Surviving Corporation ende wholly-cwned subsidiary of
Golden State and (ii) each share of outstanding RedFed Common Stock will be
converted into shares of Golden State Common Stock in an amount celcuiated
pursuant to Article II of the Merger Agreement. Cash will be paid to each holder
of RedFed Common Stock in lieu of the issuance of fractional shares.
GIHSON, (MANN & CRDTCHER LLP
PedFed Bancorp Inc.

April 3, 1998
Page 2
in rendering nur opinion we have examined (i) the Agreement, inciuding all
oxhibits thereto; (ii) the description of the Merger and reiated transactions
set forth in the OTS Application an Form H-(e)3 filed in connection with the
Merger; (iii) the description of the Merger and related transactions set forth
in the Proxy Statement-Prospectus an Form S-4 filed with the Securities and
Exchange Commission in connection with the Merger (the "Registration
Statement"); and (iv) written representations provided by the management oE
RedFed and of Golden State concerninq certain facts underlying and relating to
the Merger transaction (the "Representations"). The opinions expressed herein
are conditioned an the initial and continuing accuracy of the facts, information
and representations set forth in the foregoing documents. We have assumed that
any representation or statement made "to the best of knowledge" or similarly ,
m):Jed is correct without such gualification. As to all matters in which a
or entity making a representation has represented that such person or
entity either does not have or is not aware of any plan or intention, we have
assumed that there is in fact no such plan or intention.
in our examination we have assumed the genuineness of all signatures, the

authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as copies and the
authenticity of the originals of such documents. We are assuming that the
Merger will gualify as a statutory merger in accordance with applicable Delaware
law and that the Merger will be carried out in conformance with the terms and
conditions as set forth in the Merger Agreement.
In formulating our opinion, we have considered the applicable provisions of

the Code, the Treasury Regulations promulgated thereunder and pertinent Internal
Revenue Service rulings and judicial authorities, all as they exist as of the
date of this Letter. We caution that such authorities are subject to change in
the Euture, possibly with retroactive effect, and any such change could affect
the conclusions set forth below.
Based an the foregoing and an the continuing accuracy of the

Representations and provided that the Merger is consummated in a manner
oontemplated by the Merger Agreement, we are of the opinion that:
1. The Merger will constitute a reorganization within the meaning of

Section 368(a) of the Code, and Golden State, Merger Sub and the RedFed will
each be a party to the reorganization within the meaning of Section 368(b) of
the Code;
2. No gain or lass will be recognized for purposes of federal income

taxation by Golden State, RedFed or Merger Sub as a result of the Merger;
3. No gain or lass will be recognized by the RedFed shareholders upon the
receipt of shares of Golden State Common Stock in exchange for shares of RedFed
Common Stock pursuant to the Merger, except that a shareholder who receives cash
in lieu of fractional shares
DUNN CRUTCHER LLP
:•:;))st •an.-
• .;e. 3
will re An: Iiin of lass egual to the difference between such cash and the
hasis such fractional shares;
4 aggregate basis of the shares of Golden State Common Stock received

a• O.areholder (including any :: )cl.)nal share interest treated as
he same as the shareholdef'.1 ...(gregate basis in his shares of
•-lFej .Fmon Stock immediately prior t) the Merger; and
5. The holding period of the shares of Golden State Common Stock received
Ly a Redbed shareholder (including any fractional share 'nterest treated as
aceived) will include the shareholder's holdinq period in his shares of RedFed
Aon Stock exchanged for Golden State Common Stock, prov:ed the shares of
ed Common Stock were held as capital assets on the Efectiye Date.
The foregoing opinions represent our best legal judgment, but you should be
aware of the fact that opinions of counsel have no binding effect an ur official
status of any 'Kind with respect to the Internal Revenue Service or any court
considering the issues. Dxcept as to matters set torth expressly herein, we are
giving no opinion as to any other tax cunseguences related to the Merger,
whether under federal, state, local or foreiqn law. Se hereby scnsent to the
filing of this opinion as an exhibit to the OTS Application on Form H-(e)3 filed
in connection with the Merger. We further sonsent to the filing of this opinion
as an exhibit to the Registration Statement and to all references to this Firm
Ander the headinq "Sertain Federal Income Fax Conseguences" in the Registration
Statement.
Very truly yours,
SIMON, DUNN & CRUTCHER LLP

1XHIB1T 3.2
[hETTERHEAD OF MAYER, BROWN & PLATT]
April 3, 1998
Golden State Bancorp Inc.

414 North Central Avenue
Glendale, California 91203
Re: Merger of RedFed Bancorp, Inc. with and into a

Wholly-Owned Subsidiary of Golden State Bancorp Inc.
Ladies and Gentlemen:
We have acted es special counsel to Golden State Bancorp Inc. ("Golden

State") in connection with e proposed merger pursuant to which RedFed Bancorp,
Inc. ("RedFed") will be merged with and into Golden State Financial Corporation ("
Merger Sub"), a wholly owned direct subsidiary of Golden State, es provided for
in the Agreement and Plan of Merger dated es of November 30, 1997 (the "
Merger Agreement"). Upon consummation of this transaction (the "Merger"), wach
insued and outstanding share oE RedFed common stock (other than shares of RedFed
common stock held in treasury), will be converted into the right to receive
shares of State common stock es provided in the Merger Agreement. Cash
will be (•1i to wach holder of RedFed common stock in lieu of the issuance of
fractional Yfires. You have renuested that we provide opinions, es reguired by
section 6.2(b) of the Merger Agreement, regerding gualification of the Merger es
e tax-free reorganization under Section 368(e) oE the Internal Revenue Code of
1986, as amended (the "Code") and certain related matters.
The opinions set Eorth below are based upon the Code, the legislative
history with respect thereto, rules and regulations promulgated thereunder,
published rulings and court decisions, all es in effect and existing on the date
hereof, and all of which are subject to change at any time, possibly on a
retroactive basis. There can be no assurance that our conclusions will not be
rendered invalid as e result of subseguent changes in the law, including changes
to the Code, the regulations thereunder, or the interpretation thereof by the
courts or the Internal Revenue Service.
[iSTTERHEAD OF MAYER, BROWN & PLATT]
Golden State 9ancorp [nc.
April 3, 1998
Page 2
in addition, in providing these opinions, we have relied upon (l) the

Agreement; (2) the description of the Merger and related transactions set
Ln the OTS Application on Form H-(e(3 filed in connection with the Merger;
the descrii:I:on of the Merger and related transactions set forth in the
::y 3tatement-Prospectus on Form S-4 filed in connection with the Merger (the
0.-ment"); and (4) written representations provided by the
-
.■nagenent and of Golden State concerning certain facts underlying and
iiai.ig to the propcsed transactions (the "Representations"). This dpinion is
1:t.oned on the Representations remaining true, correct and complete at the
tective Time las defined in the Merger Agreement). In the Representations,
the signatories thereof have undertaken to inform as if any prior statement made
therein becornes untrue prior to the Effective Time. In addition, we have
assumed that any representation or statement made "to the best knowledge" or
similarly qualified is correct without such qualification.
Based on the foregoing, we offer the following opinions:

1. The Merger will be treated for purposes of the Federal income tax as a "
reorganization" within the meaning of Section 368(a) of the Code.
2. Golden State, RedFed and Merger Sub will each be e "party" to that
reorganization within the meaning of Section 36f(b) of the Code.
3. No gain or loss will be recognized for purposes of the Federal income
tax by Golden State, RedFed or Merger Sub as a result of the Merger.
The opinions herein are rendered to you soleiy in connection with the
contemplated Merger and may not be relied upon by any other person or entity or
used for any other purpose without our prior written consent. We hereby consent
to the filing of this opinion as an exhibit to the OTS Application on Form H-(
e)3 filed in connection with the Merger. We further consent to the filing of
this opinion as an exhibit to the Registration Statement and to all references
1, this firm under the heading "Certain Federal income Tax Consequences" in the
elistration Statement.
Very truly yours,

/s/ Mayer, Brown & Platt
Mayer, Brown & Platt
NNHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors

Golden State Bancorp !nc.:
We consent to the ffv:,7-poration by reference in the Registration Statement
on Form S-4 of GolJen j'J'a Bancorp Inc. of cur report dated July 23, 1997,
except for Note 24 of n.,,es to the consolidated financial statements which i3
as of August 18, 1997, with respect to the consolidated balance sheets of
Glendale Federal Bank, rederal Savings 8ank, and subsidiaries as of June 30,
1997 and 1996, and the related consolidated statements of operations, changes
in stockholders' equity and cash floss for euch of the years in the three-year
period ended June 30, 1997, which report appears in the Form 8-K of Golden
State Bancorp Inc. dated September 23, 1997, and to the reference to our firm
under the heading "Experts" tn the Proxy Statement-Prospectus.
/5/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Los Angeles, California

April 2, 1998
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors ,
••iFed Bancorp Inc.:

consent to the incorporation by reference in the registration statement on
of Golden State Bancorp Inc. of our report dated January 28, 1999, -
xcept es to note 19 to the consolidated financial statements, which is es of . 1
Uuruary 4, 1998, with respect to the consolidated statements of financial

condition of RedFed Bancorp Inc. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1997, which report appears in the Form 10-K of RedFed Bancorp
Inc. for the year ended December 31, 1997, and to the references to our firm
under the headings "The Merger--Background of the Merger" and "Experts" in the
prospectus.
/si KPMG Peat Marwick LLP
Orange County, California

April 1, 1998
1IXHEBIT 23.5
INDEPENDENT AUDITOR'S CONSENT
ard 05 0: :rs
Financial rporation:
consent to inGoiporation by reference in the Registration Statement (in
ii l-4 of Golden State Bancorp Inc. (Registration Statement) of nur report
a, arh 17, 1998, with respect to the consolidated statements of financial
om : ,n of CENFED Financial Corporation and subsidiaries es of December 31,
(.A 1996, and ihe related consolidated statements of cperations,
5ocko1 ,,ers equity and cash flows for the years then ended, and to the
,
ren5e to :Jur srm under the heading "Experts" in the Proxy Statement-
:
otis with•ct to CENFED Financial Corporation and subsidiaries.
/s/ KPMG Peat Marwick LLP

RPMG Peat Marwick LLP
Los Angeles, California

April 2, 1998
EXHIBIT 23.6
T OF INDEPENDENT AUDITORS
The Board of Directors

First Nationwide (Parent) Holdings Inc.:
We consent to the incorporation by reference in the Registration Statement

of Farm S-4 of Golden State Bancorp Inc. of aur report dated 2ebruary 23, 1998
with respect to the consolidated balance sheets of First Nationwide (Parent)
Holdings Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of inccme, comprehensive income, stockholder's
equity and cash Elows for each of the years in the three-year period ended
December 31, 1997, which report appears in the Form 10-8 of First Nationwide (
Parent) Holdings Inc., and to the reference to our firm under the heading "
Fxperts" in the Registration Statement.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
April 2, 1998
1:Xii1BIT 99.1
P=7ED BANCORP INC.
THIS PROXY IS SOLICT—HD BEHALF C7 THE TOARD OF DIRECTORS

ANNUAL MEETING jTOCKdOlUERS TO 1 MAY 26, 1998
.:ng all prior proxies, the undersigned, e stockholder of REDFED BANCORP '
INC. (the "Company"), hereby appoints Stanley C. Weisser, Robert G. Wiens,
Dosdl,s R. McAdem, and William T. Hardy, jr., and euch of them, attorneys and
agents of the undersigned, with full power of substitution, to vote all shares
of the Common Stock, per value 6.01 per share ("Common Stock"), of the
undersigned of the Company et the Annual Meeting of Stockholders of the
Company to he held at the Company' s offices located et 300 East State Street,
Redlands, California 92373 im May 26, 1998 at 10:00 a.m., local time, and et
any adjournment thereof, es fuily and effectively es the undersigned could do
if personally present and voting, hereby approving, ratifying and confirming
all that seid attorneys and agents or their substitutes may lawfully do in
place of the undersigned es indicated on the reverse. The undersigned
acknowledges receipt of the Notice of Annual Meeting of Stockholders of the
Company called for the date indicated herein and the Proxy
Statement/Prospectus (the "Proxy Statement/Prospectus") relating to such
meeting prior to the signing of this Proxy.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS WHICH MAY PROPERLY COME 3EFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
THIS PROXY, WIEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO

DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
LISTED NOMINEES AS DIRECTORS AND FOR APPROVAL OF THE MERGER AGREEMENT AND
CONSUMMATION OF THE MERGER.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE
PLEASE DATE, SIGN AND MAIL TOUR

PROXY CARD BACK AS SOON AS POSSIBLE!
1Z] P'DA.1E MARK YOUR
.1 IN THIS
FOR all SITHHOLD

nominees AUTHORITY
_1 _1
WDMINEES: Ma. Anne Bacon and

Messrs. John D. McAlearney
and William C. Huster Jr.
INSTP.UCTICNS: For all nominees listed, except votes withheld from the tollowing
nominees:
GTE: If the Merger Agreement (as defined below) and the transactions
templated thereby shall be approved by the stockholders of the Company, the
:pany's Board of Directors will serve until the consummation of the
:nsactions contemplated by the Merger Agreement (as described in the
gpany's Proxy Statement/Prospectus dated April 21, 1999), at which time the
,arate corporate existence of the Company will cease to exist and
cansequently the Company's Board of Directors will be simultaneously dissolved
by Operation of Iaw.
2. To approve the Agreement and Plan of FOR AGANIST ABSTAIN

M e r g e r , d a t e d a s o f N o v e m b e r 3 0 , 1 9 9 7
by and between the Company and Golden
State Bancorp Inc. (Ehe "Merger
Agreement"), and the consummation of
the transactions contemplated thereby,
all as described in the Company's Proxy
Statement/Prospectus dated April 21,
1999.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED ENVELOPE.
Signature
Date
Signature
Date
Signature if held jointly

NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, ALL SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR TUARDIAN PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. EE A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
Gentlemen:
We herebv ent t, lcluE• dated November 30,
1997 to the f Dir- tors o,rp e "Company")
ng the ,co, ,
.incorp Inc. by Golden State Bancorp Inc.,
Solden State .,,nc :1 Statement an Form S-4 (the
ation Statement") 99d 60 the references therein to our firm and to our
n: under the headings "SUMMARY—Opinion of RedFed Financial Advisor",
UE MERGER--3ackground of the Merger", "THE MERGER--Reasons for the Merger
--
and Recommendation of RedFed Board of Directors" and "TUE MERGER--Opinion of

RedFed Financial Advisor". In giving the foregoing consent, we do not admit
(i) that we come within the category of persons whose consent is reguired
under Section 7 of the Securities Act of the 1933, es amended (the "Securities
Act"), or the rules and reguiations of the Securities and Exchange Commission
promulqated thereunder, and (ii) that we are experts with respect to any part
of the Registration Statement within the meaning of the term "experts" es used
the Securities Act and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Very truly yours,
NATIONSBANG MONTGOMERY SECURITIES LLC
Created by Mornings are Document Research

htto://clocumentresearch.morningstancom
IN THE UNITED STATES COURT OF FEDERAL CLAIMS
ANCHOR SAVINGS BANK, FSB,
Plaintiff,
v. No. 95-39C
(Judge Block)
UNITED STATES,
Defendant.
DEFENDANT'S NOTICE OF APPEAL
Notice is hereby given that defendant, the United States, appeals to the United States
Court of Appeals for the Federal Circuit from the amended judgment in No. 95-39C, entered on
July 17, 2008, including (but not Iimited to): (1) the amended judgment in No. 95-39C, entered
on July 17, 2008; (2) the judgment in No. 95-39C, entered on June 27, 2008; (3) the order in No.
95-39C, entered on July 16, 2008; (4) the unpublished opinion and order in No. 95-39C, entered
on June 27, 2008; and (5) the opinion and order in No. 95-39C, entered on March 14, 2008.
Respectfully submitted,
MICHAEL F. HERTZ
Deputy Assistant Attorney General
JEA DAVIDSON
KENNETH M. DINTZ
Assistant Director
ODOR
A orney
Of Counsel: o mercial Litigation Branch
SCOTT D. AUSTIN Civil Division
BRIAN A. MIZOGUCHI U.S. Department of Justice
Senior Trial Counsels Classification Unit, 8th Floor
DELISA M. SANCHEZ Washington, D.C. 20530
Trial Attorney Telephone: (202) 616-2382
Facsimile: (202) 514-8640
September 8, 2008 Attorneys for Defendant

CERTIFICATE OF SERVICE
I hereby certify under penalty of perjury that on this th day of September 2008, I caused
to be served by United States mail, first-class, and facsimile a copy of this "DEFENDANT'S
NOTICE OF APPEAL," to the following:
Edwin L. Fountain, Esq.

Jones Day
51 Louisiana Avenue, N.W.
Counsel for Plaintiff

Anchor Savings Bank, F.S.B.

Declaration of Jonathan A. Shiffman in Support of The Motion of Defendantwashington Mutual, Inc. For Summary Judgment

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Declaration of Jonathan A. Shiffman in Support of The Motion of Defendantwashington Mutual, Inc. For Summary Judgment

Uploaded by

Copyright:

Available Formats

UNITED STATES BANKRUPTCY COURT

WASHINGTON MUTUAL, INC.,

WASHINGTON MUTUAL, INC.,

DECLARATION OF JONATHAN A. SHIFFMAN

I, Jonathan A. Shiffman, pursuant to 28 U.S.C. § 1746, hereby declare under

information and belief:

1. I am an associate of the firm of Weil, Gotshal and Manges, L.L.P.,

judgment against Named Plaintiffs Broadbill Investment Corp., Nantahala Capital

2. Attached hereto as Exhibit A is a true and correct copy of that certain

Controversy, 22 J. FIN. RES. 69 (1999).

3. Attached hereto as Exhibit B is a true and correct copy of that certain

4. Attached hereto as Exhibit C is a true and correct copy of that certain

working paper by Benjamin C. Esty, The Information Content of Litigation Participation

Securities: The Gase of CalFed Bancorp, August 4, 2000.

5. Attached hereto as Exhibit D is a true and correct copy of that certain

Daily News of Los Angeles, October 29, 1997.

6. Attached hereto as Exhibit E is a true and correct copy of that certain

Current Report (Fomi 8-K), filed by WMI on March 12, 2003.

7. Attached hereto as Exhibit F is a true and correct copy of that certain

article by Elizabeth Rourke, Anchor Bancorp, Inc., 10 INTERNATIONAL DIRECTORY OF

COMPANY HISTORIES (St. James Press, 1995).

9. Attached hereto as Exhibit H is a true and correct copy of that certain

February 10, 1998.

Federal Claims, dated August 2, 2010.

Response to Defendant United States' Motion to Dismiss, filed by Plaintiff Anchor

October 14, 2010.

Commission, containing responses to questions regarding Warburg, Pincus Equity

Partners, L.P.'s investment in Dirne Bancorp, Inc., dated August 7, 2000.

Dated: October 29, 2010

Journal of Financial Research

Volume 22; Issue 1

On the wealth effects of the supervisory goodwill controversy.

II. ECONOMIC AND LEGAL BACKGROUND

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

sought monetary damages for the government's alleged contractual breach.

III. SAMPLE AND METHODOLOGY

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

IV. EMPIRICAL RESULTS

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

SLAS AND FIRREA

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

V. SUMMARY AND CONCLUSIONS

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

TABLE 1. Savings and Loans Included in the Sample.

Panel A. Supervisory Goodwill Savings and Loans

TABLE 2. Court Case Analysis.

TABLE 3. FIRREA Analysis.

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

6 Winstar Corp. v. U.S., 994 F.2d 797 (Fed. Cir. 1993).

8 U.S. v. Winstar Corp., 116 U.S. 2432 (1996).

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

ance, Journal of Financial Economics 30, 253-72.

---- INDEX REFERENCES ---

GLENDALE FEDERAL BANK FEDERAL SAVINGS BK

OTHER INDEXING: (ACCOUNTING OFFICE; AMERICAN BANKER; AMERICAN STATISTICAL ASSO-

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

COMPANY TERMS: UNITED STATES SUPREME COURT (Decisions)

SIC: 6030; 8721; 9211

Word Count: 6600

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

New York Times (NY)

C:\DOCUMENTS AND SETTINGS\MILLSMAR\LOCAL SETTINGS\TEMPORARY INTERNET FILES\CONTENT.OUTLOOK\86LE0W65\MCGEEHAN - EX 2.

© 2010 Thomson Reuters. No Claim to Orig. US Gov. Works.