================================================================================
AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 2nd DAY OF APRIL, 1998
BY AND BETWEEN
ASTORIA FINANCIAL CORPORATION
AND
LONG ISLAND BANCORP, INC.
================================================================================
TABLE OF CONTENTS
INTRODUCTORY STATEMENT......................... 1
ARTICLE I
THE MERGER
Section 1.01 Structure of the Merger....................................... 2
Section 1.02 Effect on Outstanding Shares of LISB Common Stock............. 2
Section 1.03 Exchange Procedures........................................... 3
Section 1.04 Stock Options................................................. 5
Section 1.05 Bank Merger................................................... 6
Section 1.06 Directors of AFC after Effective Time......................... 7
Section 1.07 Alternative Structure......................................... 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 Disclosure Letters............................................ 7
Section 2.02 Standards..................................................... 7
Section 2.03 Representations and Warranties of LISB........................ 8
Section 2.04 Representations and Warranties of AFC......................... 24
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.01 Conduct of LISB's Business Prior to the
Effective Time............................................................. 36
Section 3.02 Forbearance by LISB........................................... 36
Section 3.03 Conduct of AFC's Business Prior
to the Effective Time...................................................... 40
Section 3.04 Forbearance by AFC............................................ 41
ARTICLE IV
COVENANTS
Section 4.01 Acquisition Proposals....................................... 41
Section 4.02 Certain Policies of LISB.................................... 42
Section 4.03 Access and Information...................................... 43
Section 4.04 Certain Filings, Consents and Arrangements.................. 44
i
Section 4.05 Antitakeover Provisions..................................... 44
Section 4.06 Additional Agreements....................................... 45
Section 4.07 Publicity................................................... 45
Section 4.08 Stockholders' Meeting....................................... 45
Section 4.09 Joint Proxy Statement-Prospectus; Comfort Letters........... 46
Section 4.10 Registration of AFC Common Stock............................ 46
Section 4.11 Affiliate Letters........................................... 47
Section 4.12 Notification of Certain Matters............................. 47
Section 4.13 Directors and Officers; Advisory Board;
Litigation Committee........................................ 47
Section 4.14 Indemnification; Directors' and Officers' Insurance......... 49
Section 4.15 Pooling and Tax-Free Reorganization Treatment............... 51
Section 4.16 Employees; Benefit Plans and Programs....................... 51
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.01 Conditions to Each Party's Obligations........................ 53
Section 5.02 Conditions to the Obligations of AFC and
the Association under this Agreement.......................... 54
Section 5.03 Conditions to the Obligations of LISB......................... 55
ARTICLE VI
TERMINATION
Section 6.01 Termination................................................... 57
Section 6.02 Effect of Termination......................................... 61
Section 6.03 Third Party Termination Fee to AFC............................ 61
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.01 Effective Date and Effective Time............................. 62
Section 7.02 Deliveries at the Closing..................................... 63
ARTICLE VIII
CERTAIN OTHER MATTERS
Section 8.01 Certain Definitions; Interpretation........................... 63
Section 8.02 Survival...................................................... 63
ii
Section 8.03 Waiver; Amendment............................................. 63
Section 8.04 Counterparts.................................................. 64
Section 8.05 Governing Law................................................. 64
Section 8.06 Expenses...................................................... 64
Section 8.07 Notices....................................................... 64
Section 8.08 Entire Agreement, etc......................................... 65
Section 8.09 Assignment.................................................... 65
EXHIBITS
Exhibit 1.05 Plan of Bank Merger
Exhibit 4.11(a) Form of Affiliate Letter for LISB Affiliates
Exhibit 4.11(b) Form of Affiliate Letter for AFC Affiliates
iii
This is an AGREEMENT AND PLAN OF MERGER, dated as of the 2nd day of
April, 1998 (the "Agreement"), by and between Astoria Financial Corporation, a
Delaware corporation ("AFC"), and Long Island Bancorp, Inc., a Delaware
corporation ("LISB").
INTRODUCTORY STATEMENT
The Board of Directors of each of AFC and LISB (i) has determined
that this Agreement and the business combination and related transactions
contemplated hereby are in the best interests of AFC and LISB, respectively, and
in the best long-term interests of their respective stockholders, (ii) has
determined that this Agreement and the transactions contemplated hereby are
consistent with, and in furtherance of, its respective business strategies and
(iii) has approved, at meetings of each of such Boards of Directors, this
Agreement.
Concurrently with the execution and delivery of this Agreement, and
as a condition and inducement to AFC's willingness to enter into this Agreement,
AFC and LISB have entered into a stock option agreement (the "LISB Option
Agreement"), pursuant to which LISB has granted to AFC an option to purchase
shares of LISB's common stock, par value $0.01 per share (the "LISB Common
Stock"), upon the terms and conditions therein contained and, as a condition and
inducement to LISB's willingness to enter into this Agreement, LISB and AFC have
entered into a stock option agreement (the "AFC Option Agreement") pursuant to
which AFC has granted LISB an option to purchase shares of AFC common stock, par
value $0.01 per share (the "AFC Common Stock") upon the terms and conditions
therein contained.
The parties hereto intend that the Merger shall qualify as a
reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), for federal income tax purposes, and that
the Merger shall be treated as a "pooling-of-interests" for accounting purposes.
Promptly following the consummation of the Merger, the parties hereto
intend that The Long Island Savings Bank, FSB, a wholly owned subsidiary of LISB
("LISB Bank"), and Astoria Federal Savings and Loan Association, a wholly owned
subsidiary of Astoria (the "Association") shall be merged (the "Bank Merger").
AFC and LISB desire to make certain representations, warranties and
agreements in connection with the business combination transactions provided for
herein and to prescribe various conditions to the transactions.
In consideration of their mutual promises and obligations hereunder,
the parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
-2-
ARTICLE I
THE MERGER
SECTION 1.01 STRUCTURE OF THE MERGER. On the Effective Date (as
defined in Section 7.01), LISB will merge with and into AFC (the "Merger"), with
AFC being the surviving entity, pursuant to the provisions of, and with the
effect provided in the Delaware General Corporation Law (the "DGCL"). Upon
consummation of the Merger, the separate corporate existence of LISB shall
cease. The certificate of incorporation and bylaws of AFC, as in effect
immediately prior to the Effective Time (as defined in Section 7.01), shall be
the certificate of incorporation and bylaws of the surviving corporation, until
altered, amended or repealed in accordance with their terms and applicable law.
The authorized capital stock of the surviving corporation shall be as stated in
the certificate of incorporation of AFC immediately prior to the Effective Time.
Each share of AFC Common Stock and AFC Preferred Stock (as defined herein)
issued and outstanding immediately prior to the Effective Time shall be
unchanged and shall remain issued and outstanding.
SECTION 1.02 EFFECT ON OUTSTANDING SHARES OF LISB COMMON STOCK.
(a) By virtue of the Merger, automatically and without any action on
the part of the holders of LISB Common Stock, each share of LISB Common Stock
issued and outstanding at the Effective Time (other than (i) shares held
directly or indirectly by AFC (other than shares held in a fiduciary capacity or
in satisfaction of a debt previously contracted), (ii) shares held as treasury
stock and (iii) unallocated shares held in LISB's Management Recognition and
Retention Plan for the Executive Officers or LISB's Management Recognition and
Retention Plan for Non-Employee Directors (together, the "MRPs") (the shares
referred to in clauses (i), (ii) and (iii) are hereinafter collectively referred
to as the "Excluded Shares")) together with the related preferred share purchase
right issued pursuant to the Rights Agreement (the "LISB Rights Agreement"),
dated as of April 22, 1997, between LISB and ChaseMellon Shareholder Services,
L.L.C. as Rights Agent (the "LISB Preferred Share Purchase Right") shall become
and be converted into the right to receive 1.15 shares of AFC Common Stock (the
"Exchange Ratio"), together with the related preferred share purchase right
issued pursuant to the Rights Agreement (the "AFC Rights Agreement"), dated as
of July 17, 1996 between AFC and ChaseMellon Shareholder Services, L.L.C. as
Rights Agent (the "AFC Preferred Share Purchase Right"); provided, however,
that, notwithstanding any other provision hereof, no fraction of a share of AFC
Common Stock and no certificates or scrip therefor will be issued in the Merger;
instead, AFC shall pay to each holder of LISB Common Stock who would otherwise
be entitled to a fractional share an amount in cash, rounded to the nearest
cent, determined by multiplying such fraction by the AFC Market Value (as
defined below) (collectively, the "Merger Consideration").
-3-
(b) If, between the date of this Agreement and the Effective Time,
the outstanding shares of AFC Common Stock shall have been changed into a
different number of shares or into a different class (or a record date for such
a change shall have been determined), by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares (each, a "Stock Adjustment"), the Merger Consideration shall be
adjusted correspondingly to the extent appropriate to reflect the Stock
Adjustment.
(c) As used herein, "AFC Market Value" shall be the average of the
mean between the closing high bid and low asked prices of a share of AFC Common
Stock, as reported on the Nasdaq National Market System (the "Nasdaq National
Market"), for the five (5) consecutive Nasdaq trading days immediately preceding
the Effective Date.
(d) As of the Effective Time, each Excluded Share shall be cancelled
and retired and cease to exist, and no exchange or payment shall be made with
respect thereto. All shares of AFC Common Stock and AFC Preferred Stock (as
defined in Section 2.04(b)) that are held by LISB, if any, other than shares
held in a fiduciary capacity or in satisfaction of a debt previously contracted,
shall become treasury stock of AFC.
SECTION 1.03 EXCHANGE PROCEDURES.
(a) At and after the Effective Time, each certificate ("LISB
Certificate") previously representing shares of LISB Common Stock (except as
specifically set forth in Section 1.02) shall represent only the right to
receive the Merger Consideration.
(b) Prior to the Effective Time, AFC shall deposit, or shall cause to
be deposited, with such bank or trust company as shall be selected by AFC and
reasonably acceptable to LISB to act as exchange agent (the "Exchange Agent"),
for the benefit of the holders of shares of LISB Common Stock, for exchange in
accordance with this Section 1.03, certificates representing the shares of AFC
Common Stock to which the holders of LISB Certificates are entitled pursuant to
this Agreement and an estimated amount of cash sufficient to pay the aggregate
amount of cash in lieu of fractional shares to be issued and paid pursuant to
Section 1.02. AFC agrees to provide such additional cash as may be necessary to
pay the aggregate amount of cash in lieu of fractional shares promptly upon
requisition therefor by the Exchange Agent.
(c) Appropriate transmittal materials (the "Letter of Transmittal")
shall be mailed as soon as reasonably practicable after the Effective Time, and
in no event later than 10 business days thereafter, to each holder of record of
LISB Common Stock as of the Effective Time. A Letter of Transmittal will be
deemed properly completed only if accompanied by certificates representing all
shares of LISB Common Stock to be converted thereby.
-3-
(d) The Letter of Transmittal shall (i) specify that delivery shall
be effected, and risk of loss and title to LISB Certificates shall pass, only
upon delivery of LISB Certificates to the Exchange Agent, (ii) be in a form and
contain any other provisions as AFC may reasonably determine and (iii) include
instructions for use in effecting the surrender of LISB Certificates in exchange
for the Merger Consideration. Upon the proper surrender of LISB Certificates to
the Exchange Agent, together with a properly completed and duly executed Letter
of Transmittal, the holder of such LISB Certificate(s) shall be entitled to
receive in exchange therefor (i) a certificate representing that number of whole
shares of AFC Common Stock that such holder has the right to receive pursuant to
Section 1.02 of this Agreement, and (ii) a check in the amount equal to the cash
in lieu of fractional shares, if any, which such holder has the right to receive
pursuant to Section 1.02 of this Agreement. LISB Certificates so surrendered
shall forthwith be cancelled. As soon as practicable, but no later than 10
business days following receipt of the properly completed Letter of Transmittal
and any necessary accompanying documentation, the Exchange Agent shall
distribute AFC Common Stock and cash as provided herein. The Exchange Agent
shall not be entitled to vote or exercise any rights of ownership with respect
to the shares of AFC Common Stock held by it from time to time hereunder, except
that it shall receive and hold all dividends or other distributions paid or
distributed with respect to such shares for the account of the persons entitled
thereto. If there is a transfer of ownership of any shares of LISB Common Stock
not registered in the transfer records of LISB, the Merger Consideration shall
be issued to the transferee thereof if LISB Certificate(s) representing such
LISB Common Stock are presented to the Exchange Agent, accompanied by all
documents required, in the reasonable judgment of AFC and the Exchange Agent,
(x) to evidence and effect such transfer and (y) to evidence that any applicable
stock transfer taxes have been paid.
(e) Whenever a dividend or other distribution is declared by AFC on
AFC Common Stock, the record date for which is at or after the Effective Time,
the declaration shall include dividends or other distributions on all shares
issuable pursuant to this Agreement, but no dividends or other distributions
declared or made after the Effective Time with respect to AFC Common Stock shall
be remitted to any person entitled to receive shares of AFC Common Stock
hereunder until such person surrenders LISB Certificate(s) in accordance with
this Article I. Upon the surrender of such person's LISB Certificates in
accordance with this Article I, such person shall be entitled to receive any
dividends or other distributions, without interest thereon, which theretofore
had become payable with respect to shares of AFC Common Stock represented by
such person's LISB Certificates.
(f) From and after the Effective Time, there shall be no transfers on
the stock transfer records of LISB of any shares of LISB Common Stock. If, after
the Effective Time, LISB Certificates are presented to AFC or LISB for transfer,
they shall be cancelled and exchanged for the Merger Consideration deliverable
in respect thereof pursuant to this Agreement in accordance with the procedures
set forth in this Section 1.03.
(g) Any portion of the aggregate amount of cash to be paid in lieu of
fractional shares pursuant to Section 1.02, any dividends or other distributions
to be paid pursuant to Section 1.03 or
-5-
the proceeds of any investments thereof, that remains unclaimed by the
stockholders of LISB for six (6) months after the Effective Time shall be repaid
by the Exchange Agent to AFC upon the written request of AFC. After such request
is made, any stockholders of LISB who have not theretofore complied with this
Section 1.03 shall look only to AFC for the Merger Consideration deliverable in
respect of each share of LISB Common Stock such stockholder holds as determined
pursuant to this Agreement, without any interest thereon. If outstanding
certificates for shares of LISB Common Stock are not surrendered 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 AFC (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 AFC, the Association, the
Exchange Agent or any other person shall be liable to any former holder of LISB
Common Stock for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(h) AFC and the Exchange Agent shall be entitled to rely upon LISB's
stock transfer books to establish the identity of those persons entitled to
receive the Merger Consideration, which books shall be conclusive with respect
thereto. In the event of a dispute with respect to ownership of stock
represented by any LISB Certificate, AFC and the Exchange Agent shall be
entitled to deposit any Merger Consideration or dividends or distributions
thereon represented thereby in escrow with an independent third party and
thereafter be relieved with respect to any claims thereto.
(i) If any LISB Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such LISB 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 direct as indemnity against any claim that may be made
against it with respect to such LISB Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed LISB Certificate, the Merger
Consideration deliverable in respect thereof pursuant to this Agreement, subject
to such other requirements that the Exchange Agent shall reasonably require.
SECTION 1.04 STOCK OPTIONS.
(a) Options to purchase shares of LISB Common Stock that have been
issued by LISB and are outstanding at the Effective Time (each, a "LISB
Option"), pursuant to the XXXX 0000 Stock Incentive Plan and the XXXX 0000
Non-Employee Directors Stock Option Program (the "LISB Option Plan") shall be
converted into options to purchase shares of AFC Common Stock as follows:
(i) in the case of each holder of LISB Options at the
Effective Time, the aggregate number of shares of AFC Common Stock issuable upon
the exercise of converted LISB Options after the Effective Time shall be equal
to the product of the Exchange Ratio multiplied by the number of shares of LISB
Common Stock issuable upon exercise of the LISB Options
-6-
immediately prior to the Effective Time, such product to be rounded up
to the nearest whole share of AFC Common Stock; and
(ii) the exercise price per share of each converted LISB
Option shall be equal to the quotient of the
exercise price of such LISB Option at the Effective Time divided by the Exchange
Ratio, such quotient to be rounded to the nearest whole cent;
PROVIDED, however, that, in the case of any LISB Option that is intended to
qualify as an incentive stock option under Section 422 of the Code, the number
of shares of AFC Common Stock issuable upon exercise of and the exercise price
per share for such converted LISB Option determined in the manner provided above
shall be further adjusted as necessary to conform to the requirements of Section
424(b) of the Code. Options to purchase shares of AFC Common Stock that arise
from the operation of this Section 1.04 shall be referred to as the "Converted
Options." All Converted Options shall be exercisable for the same period and
otherwise have the same terms and conditions applicable to the LISB Options
which they replace, including any post-termination extended exercise periods as
a result of the transaction contemplated by this Agreement as provided under the
current terms of the LISB Options; PROVIDED, however, that such exercise
periods, terms and conditions shall be further modified if and to the extent
necessary to enable the Merger to qualify for pooling-of-interests accounting
treatment. Prior to the Effective Time, AFC shall take, or cause to be taken,
all necessary action to effect the intent of the provisions set forth in this
Section 1.04.
(b) Prior to the date of the LISB stockholders meeting contemplated
by Section 4.08, LISB shall take, or cause to be taken, appropriate action under
the terms of any stock option plan, agreement or arrangement under which LISB
Options have been granted to convert LISB Options outstanding at the Effective
Time into Converted Options as contemplated by Section 1.04(a).
(c) Concurrently with the reservation of shares of AFC Common Stock
to provide for the payment of the Merger Consideration, AFC shall take all
corporate action necessary to reserve for future issuance a sufficient
additional number of shares of AFC Common Stock to provide for the satisfaction
of its obligations with respect to the Converted Options. As soon as practicable
following the Effective Time, AFC shall (i) cause to be executed and delivered
to each holder of a Converted Option an agreement, certificate or other
instrument evidencing such holder's rights with respect to the Converted
Options, which rights shall be as governed by and set forth under the LISB
Option Plans and (ii) file a registration statement on Form S-8 of the
Securities and Exchange Commission (the "SEC") (or any successor or other
appropriate form) with respect to the AFC Common Stock issuable upon exercise of
the Converted Options.
SECTION 1.05 BANK MERGER. Within 10 days of the execution of this
Agreement, the Association and LISB Bank shall enter into the Plan of Bank
Merger in the form annexed hereto as Exhibit 1.05 (which shall qualify as a
reorganization under Section 368(a) of the Code pursuant to which the Bank
Merger will be effected pursuant to and with the effect set forth in the rules
and regulations of the Office of Thrift Supervision ("OTS")). The parties hereto
intend that the Bank
-7-
Merger shall become effective on the Effective Date. The documentation relating
to the Bank Merger shall provide that the directors of the Association as the
surviving entity of the Bank Merger shall be (a) all of the respective directors
of the Association immediately prior to such merger and (b) such additional
persons who shall become directors of the Association pursuant to Section 4.13.
SECTION 1.06 DIRECTORS OF AFC AFTER EFFECTIVE TIME. At the Effective
Time, the directors of AFC shall consist of (a) the directors of AFC serving
immediately prior to the Effective Time and (b) such additional persons who
shall become directors of AFC in accordance with Section 4.13.
SECTION 1.07 ALTERNATIVE STRUCTURE. Notwithstanding anything to the
contrary contained in this Agreement, prior to the Effective Time, in the event
that the parties hereto mutually agree that it would be advantageous to
restructure the transactions contemplated hereby, the parties hereto will
cooperate in good faith in structuring an alternative transaction which
accomplishes the goals, effects and purposes of this Agreement; PROVIDED,
however, that such revised structure shall not adversely affect the tax
treatment of the transaction to the holders of LISB Common Stock or the effects
or economic benefits of the transactions contemplated hereby to the holders of
LISB Common Stock and shall not materially delay the closing of the merger (the
"Closing"). This Agreement and any related documents shall be appropriately
amended in order to reflect any such revised structure.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 DISCLOSURE LETTERS. On or prior to the execution
hereof, LISB and AFC each shall have delivered to the other a letter (its
"Disclosure Letter") setting forth, among other items, 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 Agreement to which they relate), other than Section 2.03(h) and
Section 2.04(h); PROVIDED, that (a) no such fact, circumstance or event is
required to be set forth in the Disclosure Letter as an exception to a
representation or warranty if its absence is not reasonably likely to result in
the related representation or warranty being deemed untrue or incorrect under
the standards established by Section 2.02, and (b) the mere inclusion of an item
in the 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 2.02(b)).
SECTION 2.02 STANDARDS.
(a) No representation or warranty of LISB or AFC contained in Section
2.03 or 2.04, respectively, shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached a representation or warranty, on account
of the existence of any fact, circumstance or event unless, as a consequence of
such fact, circumstance or event, individually or taken together with all other
facts, circumstances or events inconsistent with any paragraph of Section 2.03
or 2.04, as
-8-
applicable, there is reasonably likely to exist a Material Adverse Effect.
LISB's representations, warranties and covenants contained in this Agreement
shall not be deemed to be untrue or breached as a result of effects arising
solely from actions taken in compliance with a written request of AFC.
(b) As used in this Agreement, the term "Material Adverse Effect"
means either (i) an effect which is material and adverse to the business,
financial condition or results of operations of LISB or AFC, as the context may
dictate, and its respective subsidiaries taken as a whole; PROVIDED, however,
that any such effects resulting from any changes (A) in law, rule or regulation
or generally accepted accounting principles or interpretations thereof that
applies to both AFC and the Association and LISB and LISB Bank, as the case may
be, or (B) in the general level of market interest rates, shall not be
considered in determining if a Material Adverse Effect has occurred; or (ii) the
failure of (x) a representation or warranty contained in Sections 2.03(a)(i) and
(iv), 2.03(b), 2.03(c), 2.03(d), 2.03(g), 2.03(h)(iii), 2.04(a)(i) and (iv),
2.04(b), 2.04(c), 2.04(d), 2.04(h)(iii) or 2.04(l) to be true and correct or (y)
a representation or warranty contained in the last sentence of each of Section
2.03(f) or 2.04(f), and the first two sentences of each of Section 2.03(dd) or
2.04(w) to be true and correct in all material respects.
(c) For purposes of this Agreement, "knowledge" shall mean, with
respect to a party hereto, actual knowledge of the members of the Board of
Directors of that party, any officer of that party with the title ranking not
less than executive vice president or that party's corporate secretary.
SECTION 2.03 REPRESENTATIONS AND WARRANTIES OF LISB. Subject to
Sections 2.01 and 2.02, LISB represents and warrants to AFC that, except as
specifically disclosed in the Disclosure Letter of LISB:
(a) ORGANIZATION. (i) LISB is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is a
savings and loan holding company duly registered with the OTS under the Home
Owner's Loan Act of 1933, as amended (the "HOLA"). LISB Bank is a stock savings
bank, duly organized, validly existing and in good standing under the laws of
the United States of America. Each other Significant Subsidiary of LISB or LISB
Bank is a corporation, limited liability company or partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of LISB, LISB Bank and each of the other
Significant Subsidiaries of LISB has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. As used in this Agreement, unless the context requires otherwise, the
term "Subsidiary" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, which is
consolidated with such party for financial reporting purposes or which is
controlled, directly or indirectly, by such party, including without limitation,
LISB Bank. As used in this Agreement, the term "Significant Subsidiary" shall
mean each Subsidiary which is a "significant subsidiary" as defined in
Regulation S-X, promulgated by the SEC, as in effect as of the date hereof.
-9-
(ii) LISB and each Subsidiary of LISB is duly qualified
and is in good standing to do business in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification necessary.
(iii) The Disclosure Letter sets forth all of the
Subsidiaries of LISB and all entities (whether corporations, partnerships, or
similar organizations), including the corresponding percentage ownership in
which LISB owns, directly or indirectly, 5% or more of the ownership interests
as of the date of this Agreement and indicates for each Subsidiary, as of such
date, its jurisdiction of organization and the jurisdiction wherein it is
qualified to do business. All such Subsidiaries and ownership interests are in
compliance with all applicable laws, rules and regulations relating to direct
investments in equity ownership interests. LISB owns, either directly or
indirectly, all of the outstanding capital stock of each of its Subsidiaries.
Except for LISB Bank, no Subsidiary of LISB is an "insured depositary
institution" as defined in the Federal Deposit Insurance Act, as amended (the
"FDIA"), and applicable regulations thereunder. All of the shares of capital
stock of each of the Subsidiaries held by LISB or by another Subsidiary of LISB
are fully paid, nonassessable and not subject to any preemptive rights and are
owned by LISB or a Subsidiary of LISB free and clear of any claims, liens,
encumbrances or restrictions (other than those imposed by applicable federal and
state securities laws) and there are no agreements or understandings with
respect to the voting or disposition of any such shares.
(iv) The deposits of LISB Bank are insured by the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation (the
"FDIC") to the extent provided in the FDIA.
(b) CAPITAL STRUCTURE. (i) The authorized capital stock of LISB
consists of 130,000,000 shares of LISB Common Stock and 5,000,000 shares of
preferred stock of LISB, par value $0.01 per share, (the "LISB Preferred
Stock"). As of the date of this Agreement: (A) 23,935,242 shares of LISB Common
Stock were issued and outstanding, (B) no shares of LISB Preferred Stock were
issued and outstanding, (C) no shares of LISB Common Stock were reserved for
issuance except that 1,796,302 shares of LISB Common Stock were reserved for
issuance pursuant to the LISB Option Plans, (D) no shares of LISB Preferred
Stock were reserved for issuance except pursuant to the LISB Rights Agreement,
and (E) 2,881,222 shares of LISB Common Stock were held by LISB in its treasury
or by its Subsidiaries. The authorized capital stock of LISB Bank consists of
45,000,000 shares of common stock, par value $0.01 per share, and 5,000,000
shares of preferred stock, par value $0.01 per share. As of the date of the
Agreement, 1,000 shares of such common stock were outstanding, no shares of such
preferred stock were outstanding and all outstanding shares of such common stock
were, and as of the Effective Time will be, owned by LISB. All outstanding
shares of LISB Common Stock are validly issued, fully paid and nonassessable and
not subject to any preemptive rights and, with respect to shares held by LISB in
its treasury or by its Subsidiaries, are free and clear of all liens, claims,
encumbrances or restrictions (other than those imposed by applicable federal and
state securities laws) and there are no agreements or understandings to which
LISB or its Subsidiaries is a party or by which it is bound with respect to the
voting or disposition of any such shares. The Disclosure Letter sets forth a
complete and accurate list of all options to
-10-
purchase LISB Common Stock that have been granted and are outstanding pursuant
to LISB Option Plans and all restricted stock grants under the LISB MRPs
including the dates of grant, exercise prices, dates of vesting, dates of
termination and shares subject to each grant. LISB has not, since September 30,
1997 adopted or modified the terms of any stock option plan or restricted stock
or phantom stock plan or any grants under the Stock Option Plans.
(ii) No bonds, debentures, notes or other indebtedness
having the right to vote on any matters on which stockholders may vote ("Voting
Debt") of LISB are issued or outstanding.
(iii) As of the date of this Agreement, except for this
Agreement, and the LISB Option Agreement, neither LISB nor any of its
Subsidiaries has or is bound by any outstanding options, warrants, calls,
rights, convertible securities, commitments or agreements of any character
obligating LISB or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, any additional shares of capital stock of LISB
or any of its Subsidiaries or obligating LISB or any of its Subsidiaries to
grant, extend or enter into any such option, warrant, call, right, convertible
security, commitment or agreement. As of the date hereof, there are no
outstanding contractual obligations of LISB or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of LISB or
any of its Subsidiaries.
(c) AUTHORITY. Each of LISB and LISB Bank has all requisite corporate
power and authority to enter into this Agreement and the Plan of Bank Merger,
respectively, and, subject to approval of this Agreement by the requisite vote
of the stockholders of LISB and receipt of all required regulatory or
governmental approvals as contemplated by Section 5.01(b) of this Agreement, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement, and, subject to the approval of this Agreement by the
stockholders of LISB, the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate actions on the part of LISB
and LISB Bank. This Agreement has been duly executed and delivered by LISB and
constitutes a valid and binding obligation of LISB, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, whether applied in a court of
law or a court of equity.
(d) STOCKHOLDER APPROVAL; FAIRNESS OPINION. The affirmative vote of a
majority of the outstanding shares of LISB Common Stock entitled to vote on this
Agreement is the only vote of the stockholders of LISB required for approval of
this Agreement and the consummation of the Merger and the related transactions
contemplated hereby. LISB has received the written opinion of Xxxxxxx Xxxxx
Xxxxxx to the effect that, as of the date hereof, the Merger Consideration to be
received by the stockholders of LISB is fair, from a financial point of view, to
such stockholders.
(e) NO VIOLATIONS. Subject to approval of this Agreement by LISB's
stockholders and the obtaining of the approvals, consents and waivers referred
to in Section 2.03(f), the execution, delivery and performance of this Agreement
by LISB and the execution, delivery and performance
-11-
of the LISB Option Agreement by LISB will not, and the consummation of the
transactions contemplated hereby or thereby by LISB will not, constitute (i) a
breach or violation of, or a default under, any law, including any Environmental
Law (as defined in Section 2.03(s)), rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or instrument of
LISB or any Significant Subsidiary of LISB or to which LISB or any of its
Significant Subsidiaries (or any of their respective properties) is subject,
(ii) a breach or violation of, or a default under, the organization certificate
or articles of incorporation or bylaws of LISB or any Significant Subsidiary of
LISB or (iii) 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 LISB or any Subsidiary of
LISB 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 LISB or any Subsidiary of LISB is a party, or to which any
of their respective properties or assets may be bound or affected; and the
consummation of the transactions contemplated hereby by LISB or, upon its
execution and delivery, by the LISB Option Agreement will not require any
approval, consent or waiver under any such law, rule, regulation, judgment,
decree, order, governmental permit or license or the approval, consent or waiver
of any other party to any such agreement, indenture or instrument, other than
(i) the required approvals, consents and waivers referred to in Section 5.01(b),
(ii) the approval of the stockholders of LISB referred to in Section 2.03(d) and
(iii) such approvals, consents or waivers as are required under the federal and
state securities or "blue sky" laws in connection with the transactions
contemplated by this Agreement or the LISB Option Agreement.
(f) CONSENTS. Except as referred to herein or in connection, or in
compliance, with the provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 0000 (xxx "XXX Xxx"), the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the HOLA, the Bank Merger Act, as amended (the "B.A."), the
FDIA, the rules and regulations of the OTS, and the environmental, corporation,
securities or "blue sky" laws or regulations of the various states, no filing or
registration with, or authorization, consent or approval of, any other party is
necessary for the consummation by LISB or LISB Bank of the Merger or the other
transactions contemplated by this Agreement. As of the date hereof, LISB knows
of no reason why the approvals, consents and waivers of governmental authorities
referred to in this Section 2.03(f) that are required to be obtained should not
be obtained without the imposition of any condition or restriction referred to
in the last sentence in Section 5.01(b).
(g) REPORTS. (i) As of their respective dates, neither LISB's Annual
Report on Form 10-K of the SEC for the fiscal year ended September 30, 1997 nor
any other document filed subsequent to September 30, 1997, under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, each in the form (including exhibits and
any documents specifically incorporated by reference therein) filed with the SEC
(collectively, "LISB Reports"), contained or will contain any untrue statement
of a material fact or omitted or will omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not
-12-
misleading. Each of the financial statements of LISB included in the LISB
Reports complied as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto and have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited financial
statements, as permitted by Form 10-Q of the SEC.) Each of the balance sheets
contained or incorporated by reference in LISB's Reports (including in each case
any related notes and schedules) fairly presented the financial position of the
entity or entities to which it relates as of its date and each of the statements
of income and of changes in stockholders' equity and of cash flows, contained or
incorporated by reference in LISB's Reports (including in each case any related
notes and schedules), fairly presented the results of operations, stockholders'
equity and cash flows, as the case may be, of the entity or entities to which it
relates for the periods set forth therein (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments that are not material
in amount or effect), in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
as may be noted therein. LISB has made available to AFC a true and complete copy
of each LISB Report filed with the SEC since September 30, 1993.
(ii) LISB and each of its Subsidiaries have each timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since September 30, 1993 with (A) the OTS (B) the FDIC, (C) the SEC, (D)
the National Association of Securities Dealers, Inc. (the "NASD"), and (E) any
other self-regulatory organization ("SRO"), and have paid all fees and
assessments due and payable in connection therewith.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
LISB's Reports filed on or prior to the date of this Agreement, since September
30, 1997, (i) LISB and its Subsidiaries have not incurred any liability, except
in the ordinary course of their business consistent with past practice, (ii)
LISB and its Subsidiaries have conducted their respective businesses only in the
ordinary and usual course of such businesses other than the negotiation,
execution and delivery of this Agreement and ancillary matters related thereto,
and (iii) there has not been any condition, event, change or occurrence that,
individually or in the aggregate, has had, or is reasonably likely to have, a
Material Adverse Effect on LISB.
(i) TAXES. All federal, state, local and foreign tax returns required
to be filed by or on behalf of LISB 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. All taxes shown on such returns,
all taxes required to be shown on returns for which extensions have been
granted, and all other taxes required to be paid by LISB or any of its
Subsidiaries, have been paid in full or adequate provision has been made for any
such taxes on LISB's balance sheet (in accordance with generally accepted
accounting principles). For purposes of this Section 2.03(i), the term "taxes"
shall include all income, franchise,
-13-
gross receipts, real and personal property, real property transfer and gains,
wage and employment taxes. As of the date of this Agreement, there is no audit,
examination, deficiency, or refund litigation with respect to any taxes of LISB
or any of its Subsidiaries, and no claim has been made by any authority in a
jurisdiction where LISB or any of its Subsidiaries do not file tax returns that
LISB or any such Subsidiary is subject to taxation in that jurisdiction. All
taxes, interest, additions, and penalties due with respect to completed and
settled examinations or concluded litigation relating to LISB or any of its
Subsidiaries have been paid in full or adequate provision has been made for any
such taxes on LISB's balance sheet (in accordance with generally accepted
accounting principles). LISB and its Subsidiaries have not executed an extension
or waiver of any statute of limitations on the assessment or collection of any
material tax due that is currently in effect. LISB and each of its Subsidiaries
has withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party, and LISB and each of its
Subsidiaries has timely complied with all applicable information reporting
requirements under Part III, Subchapter A of Chapter 61 of the Code and similar
applicable state and local information reporting requirements. Neither LISB nor
any of its Subsidiaries (i) has made an election under Section 341(f) of the
Code, (ii) has made any payment, is obligated to make any payment, or is a party
to any agreement that could obligate it to make any payment that would not be
deductible under Section 280G of the Code, (iii) has issued or assumed any
obligation under Section 279 of the Code, any high yield discount obligation as
described in Section 163(i) of the Code or any registration-required obligation
within the meaning of Section 163(f)(2) of the Code that is not in registered
form, or (iv) is or has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code.
(j) ABSENCE OF CLAIMS. No litigation, proceeding, controversy, claim
or action before any court or governmental agency is pending, against LISB or
any of its Subsidiaries and, to the best of LISB's knowledge, no such
litigation, proceeding, controversy, claim or action has been threatened.
(k) ABSENCE OF REGULATORY ACTIONS. Neither LISB 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 action, proceeding, order or directive by,
or is a recipient of any extraordinary supervisory letter from, federal or state
governmental authorities charged with the supervision or regulation of
depository institutions or depository institution holding companies or engaged
in the insurance of bank and/or savings and loan deposits (the "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 action, proceeding, order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar undertaking.
(l) AGREEMENTS. (i) Except for the LISB Option Agreement and
arrangements made in the ordinary course of business, LISB and its Subsidiaries
are not bound by any material contract (as defined in (Item 601(b)(10) of
Regulation S-K of the SEC)) to be performed after the date hereof that has not
been filed with or incorporated by reference in LISB's Reports. Except as
disclosed in
-14-
LISB's Reports filed prior to the date of this Agreement, neither LISB nor any
of its Subsidiaries is a party to an oral or written (A) consulting agreement
not terminable on thirty (30) days' or less notice, (B) agreement with any
executive officer or other key employee of LISB or any of its Subsidiaries the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving LISB or any of its Subsidiaries
of the nature contemplated by this Agreement or the LISB Option Agreement, (C)
agreement with respect to any employee or director of LISB or any of its
Subsidiaries providing any term of employment or compensation guarantee
extending for a period longer than sixty (60) days and for the payment of in
excess of $30,000 per annum, (D) agreement or plan, including any stock option
plan, phantom stock or stock appreciation rights plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting or payment of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the LISB
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 Agreement or the
LISB Option Agreement or (E) agreement containing covenants that limit the
ability of LISB 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, LISB (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). Neither LISB nor any of its Subsidiaries has entered
into, adopted or modified the terms of any of the foregoing since September 30,
1997.
(ii) Neither LISB nor any of its Subsidiaries is in
default under or in violation of any provision, and is not aware of any fact or
circumstance that would constitute a default or violation, of any note, bond,
indenture, mortgage, deed of trust, loan agreement or other agreement to which
it is a party or by which it is bound or to which any of its respective
properties or assets is subject.
(iii) LISB and each of its Subsidiaries owns or possesses
valid and binding license and other rights to use without payment all patents,
copyrights, trade secrets, trade names, servicemarks and trademarks used in its
businesses and neither LISB nor any of its Subsidiaries has received any notice
of conflict with respect thereto that asserts the right of others. Each of LISB
and its Subsidiaries has performed all the obligations required to be performed
by it and are not in default under any contract, agreement, arrangement or
commitment relating to any of the foregoing.
(m) LABOR MATTERS. Neither LISB nor any of its Subsidiaries is or has
ever been a party to, or is or has ever been bound by, any collective bargaining
agreement, contract, or other agreement or understanding with a labor union or
labor organization with respect to its employees, nor is LISB 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 is the
management of LISB aware of any pending or threatened strike, other labor
dispute or organizational effort involving LISB or any of its Subsidiaries. LISB
and its Subsidiaries are in compliance with applicable laws regarding
-15-
employment of employees and retention of independent contractors, and are in
compliance with applicable employment tax laws.
(n) EMPLOYEE BENEFIT PLANS. The 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, severance 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 with
respect to any present or former directors, officers, or other employees of LISB
or any of its Subsidiaries (hereinafter referred to collectively as the
"Employee Plans"). All of the Employee Plans comply in all respects with all
applicable requirements of ERISA, the Code and other applicable laws and there
has occurred no non-exempt "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the Code) which is likely to result in the
imposition of any penalties or taxes under Section 502(i) of ERISA or Section
4975 of the Code upon LISB or any of its Subsidiaries. No liability, to the
Pension Benefit Guaranty Corporation, has been or is expected by LISB or any of
its Subsidiaries to be incurred 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) of ERISA) currently or
formerly maintained by LISB or any entity which is considered one employer with
LISB under Section 4001(b)(1) of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). No Pension 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 exceeds the present value of the
"benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under such
Pension Plan as of the end of the most recent plan year with respect to the
respective Pension Plan ending prior to the date hereof, calculated on an
accumulated benefit obligation basis using the actuarial assumptions used in the
most recent actuarial valuation for such Pension Plan as of the date hereof; 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 within the 12-month period ending on the date
hereof. Neither LISB nor any Subsidiary of LISB has provided, or is required to
provide, security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code. Neither LISB, its
Subsidiaries, nor any ERISA Affiliate has contributed to any "multi employer
plan", as defined in Section 3(37) of ERISA, on or after September 26, 1980.
Each Employee Plan of LISB or of any of its Subsidiaries 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 (a "Qualified Plan")
has received a favorable determination letter from the Internal Revenue Service
(the "IRS") and LISB and its Subsidiaries are not aware of any circumstances
likely to result in revocation of any such favorable determination letter. Each
Qualified Plan which is an "employee stock ownership plan" (as defined in
Section 4975(e)(7) of the Code) has satisfied all of the applicable requirements
of Sections 409 and 4975(e)(7) of the Code and the regulations thereunder in all
respects and any assets of any such
-16-
Qualified Plan that are not allocated to participants' individual accounts are
pledged as security for, and may be applied to satisfy, any securities
acquisition indebtedness. There is no pending or, to the knowledge of LISB,
threatened litigation, administrative action or proceeding relating to any
Employee Plan. There is not currently any announcement or commitment by LISB or
any Subsidiary of LISB to create an additional Employee Plan, or to amend an
Employee Plan except for amendments required by applicable law which do not
materially increase the cost of such Employee Plan; and, LISB and its
Subsidiaries do not have any obligations for post-retirement or post-employment
benefits (other than pensions) under any Employee Plan that cannot be amended or
terminated upon sixty (60) days' notice or less without incurring any liability
thereunder, except for coverage required by Part 6 of Title I of ERISA or
Section 4980B of the Code, the premium cost of which is borne (to the extent
permitted by law) by the insured individuals. With respect to LISB or any of its
Subsidiaries, the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not result in any payment or series
of payments by LISB or any Subsidiary of LISB to any person which is an "excess
parachute payment" (as defined in Section 280G of the Code), increase or secure
(by way of a trust or other vehicle) any benefits payable under any Employee
Plan or accelerate the time of payment or vesting of any such benefit. With
respect to each Employee Plan, LISB has supplied to AFC a true and correct copy
of (A) the annual report on the applicable form of the Form 5500 series filed
with the IRS for the most recent three plan years, (B) such Employee Plan,
including amendments thereto, (C) each trust agreement, insurance contract or
other funding arrangement relating to such Employee Plan, including amendments
thereto, (D) the most recent summary plan description and summary of material
modifications thereto for such Employee Plan, 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 and any subsequent changes to the actuarial
assumptions contained therein and (F) the most recent determination letter
issued by the IRS and any pending determination application if such Employee
Plan is a Qualified Plan. LISB has not, since September 30, 1997, adopted or
amended any of the Employee Plans. The cost of post-retirement benefits that
were deemed to be immaterial to be included in the LISB Reports under Statement
of Financial Accounting Standards No. 106 "Employers Accounting for
Postretirement Benefits Other than Pensions " are set forth in the Disclosure
Letter.
(o) TERMINATION BENEFITS. The Disclosure Letter contains a schedule
showing the good faith estimated present value as of September 30, 1998 of the
monetary amounts payable (including tax indemnification payments in respect of
income and/or excise taxes) and identifying the in-kind benefits due under the
Specified Compensation and Benefit Programs (as defined herein) for each Named
Individual (as defined herein) individually. For purposes hereof, "Specified
Compensation and Benefit Programs" shall include all employment agreements,
change in control agreements, severance or special termination agreements,
severance plans, pension, retirement or deferred compensation plans for
non-employee directors, supplemental executive retirement programs, tax
indemnification agreements, outplacement programs, cash bonus programs, stock
appreciation rights, phantom stock or stock unit plans, and health, life,
disability and other insurance or welfare plans or other arrangements, but shall
not include any tax-qualified pension, profit-sharing or employee
-17-
stock ownership plan or any LISB Option Plans or LISB MRPs. For purposes hereof,
"Named Individual" shall include each non-employee director of LISB or any of
its subsidiaries and each officer of LISB with the position of executive vice
president or higher. For purposes of preparing the Disclosure Letter, the
present value of the benefits payable under the Specified Compensation and
Benefit Programs shall be determined as follows: (i) it shall be assumed that a
change of control of LISB occurs on September 30, 1998 and that each person
entitled to benefits under the Specified Compensation and Benefit Programs is
discharged as of September 30, 1998; (ii) it shall be assumed that all
compensation levels remain constant; (iii) it shall be assumed that the present
value of any payment or benefit which would be due and payable before September
30, 1998 is equal to the amount of such payment or the cost of such benefit;
(iv) the present value of any payment or benefit that would be due and payable
after September 30, 1998 shall be computed using the interest rate specified by
the applicable plan for purposes of valuing lump sum payments or if no rate is
specified, an assumed interest rate of 6% per annum, compounded annually; and
(v) that all accrued benefits under all tax-qualified plans are 100% vested. The
entire present value of the benefits payable under the Specified Compensation
and Benefit Programs is set forth on the Disclosure Schedule, which specifies
the portion thereof that has been accrued as a liability on the financial
statements of LISB as of February 28, 1998.
(p) TITLE TO ASSETS. LISB and each of its Subsidiaries has good and
marketable title to its properties and assets other than property as to which it
is lessee, in which case the related lease is valid and in full force and
effect. Each lease pursuant to which LISB or any of its Subsidiaries is lessor
is valid and in full force and effect and no lessee under any such lease is in
default or in violation of any provisions of any such lease. All material
tangible properties of LISB and each of its Subsidiaries are in a good state of
maintenance and repair, conform with all applicable ordinances, regulations and
zoning laws and are considered by LISB to be adequate for the current business
of LISB and its Subsidiaries.
(q) COMPLIANCE WITH LAWS. LISB and each of its Subsidiaries 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 governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect, and, to the best knowledge of LISB, no suspension or cancellation of any
of them is threatened. Since the date of its incorporation, the corporate
affairs of LISB have not been conducted in violation of any law, ordinance,
regulation, order, writ, rule, decree or approval of any federal or state
regulatory authority having jurisdiction over insured depositary institutions or
their holding companies, the SEC, the NASD, or any other SRO (each, a
"Governmental Entity"). The businesses of LISB and its Subsidiaries are not
being conducted in violation of any law, ordinance, regulation, order, writ,
rule or decree approval of any Governmental Entity.
(r) FEES. Other than financial advisory services performed for LISB
by Xxxxxxx Xxxxx Xxxxxx pursuant to an agreement, a true and complete copy of
which has been previously delivered
to AFC, neither LISB 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 LISB or any Subsidiary of LISB, in connection with the Agreement
or the transactions contemplated hereby.
(s) ENVIRONMENTAL MATTERS. (i) With respect to LISB and each of its
Subsidiaries:
(A) Each of LISB and its Subsidiaries, the
Participation Facilities, and, to LISB's knowledge, the Loan
Properties (each as defined herein) are, and have been, in
substantial compliance with all Environmental Laws (as defined
herein);
(B) There is no suit, claim, action, demand,
executive or administrative order, directive, investigation or
proceeding pending or, to LISB's knowledge, threatened, before any
court, governmental agency or authority against it or any of its
Subsidiaries or any current or, to LISB's knowledge, former
Participation Facility (x) for alleged noncompliance (including by
any predecessor) with, or liability under, any Environmental Law or
(y) relating to the Release (as defined herein) into the environment
of any Hazardous Material (as defined herein), whether or not
occurring at or on a site owned, leased or operated by it or any of
its Subsidiaries or any Participation Facility;
(C) To LISB's knowledge, there is no suit, claim,
action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened, before any court,
governmental agency or authority relating to or against any Loan
Property (or LISB or any of its Subsidiaries in respect of such Loan
Property) (x) relating to alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y)
relating to the Release into the environment of any Hazardous
Material whether or not occurring at or on a site owned, leased or
operated by a Loan Property;
(D) To LISB's knowledge, the properties currently
or formerly owned or operated by LISB or any of its Subsidiaries
(including, without limitation, soil, groundwater or surface water
on, under or adjacent to the properties, and buildings thereon) do
not contain any Hazardous Material other than in compliance with
applicable Environmental Law; PROVIDED, however, that with respect to
properties formerly owned or operated by LISB or any of its
Subsidiaries, such representation is limited to the period LISB or
any such Subsidiary owned or operated such properties;
(E) None of LISB 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 relating to
Hazardous Materials or Remediation (as defined herein) thereof or
indicating that it may be
-19-
in violation of, or liable under, any Environmental Law, or any
actual or, to LISB's knowledge, potential administrative or judicial
proceedings in connection with any of the foregoing;
(F) To LISB's knowledge, there are no underground
storage tanks on, in or under any properties currently or formerly
owned or operated by LISB or any of its Subsidiaries, any
Participation Facility or any Loan Property and no underground
storage tanks have been closed or removed from any properties
currently or formerly owned or operated by LISB or any of its
Subsidiaries, any Participation Facility or any Loan Property which
are or have been in the ownership of LISB or any of its Subsidiaries;
and
(G) To LISB's knowledge, during the period of (l)
LISB or any of its Subsidiaries' ownership or operation of any of
their respective current or formerly owned properties, (m) LISB's or
any of its Subsidiaries' participation in the management of any
Participation Facility, or (n) its or any of its Subsidiaries'
holding of a security interest in a Loan Property, there has been no
Release and there is currently no threatened Release of Hazardous
Material in, on, under, affecting or migrating to such properties. To
LISB's knowledge, prior to the period of (x) LISB's or any of its
Subsidiaries' ownership or operation of any of their respective
current properties, (y) LISB's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (z)
LISB's or any of its Subsidiaries' holding of a security interest in
a Loan Property, there was no Release of Hazardous Material in, on,
under, affecting or migrating to any such property, Participation
Facility or Loan Property.
(ii) The following definitions apply for purposes of
this Section 2.03(s) and Section 2.04(q): (u) "Loan Property" means any property
in which the applicable party (or a Subsidiary of it) holds a security interest,
and, where required by the context, includes the owner or operator of such
property, but only with respect to such property; (v) "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, but only with respect to such property; (w)
"Environmental Law" means (i) any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, legal doctrine, order, directive, executive or administrative order,
judgment, decree, injunction, legal 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 as it relates to Hazardous Materials, 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 and as now in effect. The term
Environmental Law includes, without limitation, (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendments and
-20-
Reauthorization Act, 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, but not limited to, the
Hazardous and Solid Waste Amendments thereto and Subtitle IX relating to
underground storage tanks), the Federal Solid Waste Disposal and the Federal
Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide
Act, the Federal Occupational Safety and Health Act of 1970 as it relates to
Hazardous Materials, the Federal Hazardous Substances Transportation Act, the
Emergency Planning and Community Right-To-Know Act, the Safe Drinking Water Act,
the Endangered Species Act, the National Environmental Policy Act, the Rivers
and Harbors Appropriation Act or any so-called "Superfund" or "Superlien" law,
each as amended and as now or hereafter in effect, (ii) any common law or
equitable doctrine (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 (iii) any
state and local laws, statutes, ordinances, rules, regulations and the like, as
well as common law: conditioning transfer of property upon a negative
declaration or other approval of a governmental authority of the environmental
condition of the property; requiring notification or disclosure of Releases of
"Hazardous Substances" or other environmental condition of the Loan Property to
any governmental authority or other person or entity, whether or not in
connection with transfer of title to or interest in property; imposing
conditions or requirements in connection with permits or other authorization for
lawful activity; relating to nuisance, trespass or other causes of action
related to the Loan Property; (x) "Hazardous Material" means any substance
(whether solid, liquid or gas) which is 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, extremely
hazardous wastes, or words of similar meanings or regulatory effect under any
Environmental Laws, including, but not limited to, 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, flammables and explosives; (y) "Release" of any
Hazardous Material includes, but is not limited to, any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping, disposing or other movement of Hazardous
Materials in violation of or requiring action under any applicable Environmental
Law; and (z) "Remediation" includes, but is not limited to, any response,
remedial, removal, or corrective action, any activity to cleanup, detoxify,
decontaminate, contain or otherwise remediate any Hazardous Material, any
actions to prevent, cure or mitigate any Release of Hazardous Materials, any
action to comply with any Environmental Laws or with any permits issued pursuant
thereto, any inspection, investigation, study, monitoring, assessment, audit,
sampling and testing, laboratory or other analysis, or evaluation relating to
any Hazardous Materials.
(t) LOAN PORTFOLIO; ALLOWANCE; ASSET QUALITY. (i) With respect to
each loan owned by LISB or its Subsidiaries in whole or in part (each, a
"Loan"), to the best knowledge of LISB:
-21-
(A) the note and the related security documents
are each legal, valid and binding obligations of the maker or obligor
thereof, enforceable against such maker or obligor in accordance with
their terms;
(B) neither LISB nor any of its Subsidiaries nor
any prior holder of a Loan has modified the note or any of the
related security documents in any material respect or satisfied,
canceled or subordinated the note or any of the related security
documents except as otherwise disclosed by documents in the
applicable Loan file;
(C) LISB or a Subsidiary is the sole holder of
legal and beneficial title to each Loan (or LISB's applicable
participation interest, as applicable), except as otherwise
referenced on the books and records of LISB;
(D) the note and the related security documents,
copies of which are included in the Loan files, are true and correct
copies of the documents they purport to be and have not been
suspended, amended, modified, canceled or otherwise changed except as
otherwise disclosed by documents in the applicable Loan file;
(E) there is no pending or threatened
condemnation proceeding or similar proceeding affecting the property
which serves as security for a Loan, except as otherwise referenced
on the books and records of LISB;
(F) there is no pending or threatened litigation
or proceeding relating to the property which serves as security for a
Loan that would have a Material Adverse Effect upon the related Loan;
and
(G) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid,
binding and enforceable.
(ii) The allowance for possible losses reflected in
LISB's audited statement of condition at September 30, 1997 was, and the
allowance for possible losses shown on the balance sheets in its Reports for
periods ending after September 30, 1997, were and will be, adequate, as of the
dates thereof, under generally accepted accounting principles applicable to
savings banks consistently applied.
(iii) The Disclosure Letter sets forth by category the
amounts of all loans, leases, advances, credit enhancements, other extensions of
credit, commitments and interest-bearing assets of LISB and its Subsidiaries
that have been classified by any bank examiner (whether regulatory or internal)
as "Other Loans Specially Mentioned," "Special Mention," "Substandard,"
"Doubtful," "Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned
Loans" (in the latter two cases, to the extent available) or words of similar
import, and LISB and its Subsidiaries shall promptly after the end of any month
inform AFC of any such classification arrived at any time after the date hereof.
-22-
The Other Real Estate Owned ("OREO") included in any non-performing assets of
LISB or any of its Subsidiaries is carried net of reserves at the lower of cost
or fair value, less estimated selling costs, based on current independent
appraisals or evaluations or current management appraisals or evaluations;
PROVIDED, however, that "current" shall mean within the past 12 months.
(u) DEPOSITS. None of the deposits of LISB or any of its
Subsidiaries is a "brokered" deposit as defined in 12 U.S.C.ss.1831f.
(v) ACCOUNTING MATTERS. Neither LISB nor any of its Subsidiaries nor,
to the best of its knowledge, any of its other affiliates has, through the date
hereof, taken or agreed to take any action that would prevent AFC from
accounting for the business combination to be effected by the Merger as a
"pooling-of-interests," and LISB has no knowledge of any fact or circumstance
that would prevent such accounting treatment.
(w) LISB RIGHTS AGREEMENT. The LISB Rights Agreement has been amended
so as to provide that AFC will not become an "Acquiring Person" and that no
"Triggering Event," "Stock Acquisition Date" or "Distribution Date" (as such
terms are defined in the LISB Rights Agreement) will occur as a result of the
approval, execution or delivery of this Agreement or the LISB Option Agreement
or the consummation of the Merger pursuant to this Agreement or the acquisition
of shares of LISB Common Stock by AFC pursuant to the LISB Option Agreement.
(x) ANTITAKEOVER PROVISIONS INAPPLICABLE. LISB and its Subsidiaries
have taken all actions required to exempt LISB, this Agreement, the Merger and
the LISB Option Agreement from any provisions of an antitakeover nature in their
organization certificates and bylaws and the provisions of Section 203 of the
DGCL.
(y) MATERIAL INTERESTS OF CERTAIN PERSONS. Except as disclosed in
LISB's Proxy Statement for its 1998 Annual Meeting of Stockholders, no officer
or director of LISB, 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 (real or personal), tangible or
intangible, used in or pertaining to the business of LISB or any of its
Subsidiaries.
(z) INSURANCE. LISB 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 good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by LISB and its Subsidiaries are in full force and effect, LISB and
its Subsidiaries are not in default thereunder and all material claims
thereunder have been filed in due and timely fashion.
(aa) INVESTMENT SECURITIES; BORROWINGS. (i) Except for investments in
Federal Home Loan Bank Stock and pledges to secure Federal Home Loan Bank
borrowings and reverse repurchase agreements entered into in arms-length
transactions pursuant to normal commercial terms and
-23-
conditions and entered into in the ordinary course of business and restrictions
that exist for securities to be classified as "held to maturity," none of the
investments reflected in the consolidated balance sheet of LISB included in
LISB's Report on Form 10-Q for the quarter ended December 31, 1997 and none of
the investment securities held by it or any of its Subsidiaries since December
31, 1997 is subject to any restriction (contractual or statutory) that would
materially impair the ability of the entity holding such investment freely to
dispose of such investment at any time.
(ii) Neither LISB nor any Subsidiary 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 consolidated statements
of condition and is a derivative contract (including various combinations
thereof) (each, a "Derivatives Contract") or owns securities that (A) are
referred to generically as "structured notes," "high risk mortgage derivatives,"
"capped floating rate notes" or "capped floating rate mortgage derivatives" or
(B) 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 the Disclosure Letter or
disclosed in its Reports filed on or prior to the date hereof.
(iii) Set forth in the Disclosure Letter is a true and
correct list of LISB's borrowed funds (excluding deposit accounts) as of the
date hereof.
(bb) INDEMNIFICATION. Except as provided in LISB's Employment
Agreements or the organization certificate or bylaws of LISB, neither LISB nor
any Company Subsidiary 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 LISB (a "Covered Person"), and, to the best knowledge of LISB, there
are no claims for which any Covered Person would be entitled to indemnification
under the organization certificate or bylaws of LISB or any Subsidiary of LISB,
applicable law regulation or any indemnification agreement.
(cc) BOOKS AND RECORDS. The books and records of LISB and its
Subsidiaries have been, and are being, maintained in accordance with applicable
legal and accounting requirements and reflect in all material respects the
substance of events and transactions that should be included therein.
(dd) CORPORATE DOCUMENTS. LISB has delivered to AFC true and complete
copies of its certificate of incorporation and bylaws and of LISB Bank's charter
and bylaws. The minute books of LISB and LISB Bank constitute a complete and
correct record of all actions taken by the boards of directors of LISB and LISB
Bank (and each committee thereof) and the stockholders of LISB and LISB Bank.
The minute books of each of LISB's Significant Subsidiaries constitutes a
complete
-24-
and correct record of all actions taken by the respective boards of directors
(and each committee thereof) and the stockholders of each such Significant
Subsidiary.
(ee) LIQUIDATION ACCOUNT. Neither the Merger nor the Bank Merger will
result in any payment or distribution payable out of the liquidation account of
LISB Bank established pursuant to the rules and regulations of the OTS in
connection with the conversion of LISB Bank to stock form.
(ff) TAX TREATMENT OF THE MERGER. LISB has no knowledge of any fact
or circumstance that would prevent the transactions contemplated by this
Agreement from qualifying as a tax-free reorganization under the Code.
(gg) BENEFICIAL OWNERSHIP OF AFC COMMON STOCK. As of the date hereof,
LISB beneficially owns no shares of AFC Common Stock and, other than as
contemplated by the AFC Option Agreement, does not have any option, warrant or
right of any kind to acquire the beneficial ownership of any shares of AFC
Common Stock.
(hh) YEAR 2000 MATTERS. The Disclosure Letter contains a true and
correct copy of LISB's proposed plan for addressing year 2000 computer issues
(the "Year 2000 Plan"). LISB is in material compliance with the LISB Year 2000
Plan and agrees to take all actions required by the OTS to continue to be "Year
2000 Compliant." Neither LISB nor LISB Bank has received any written
communication from the OTS commenting adversely with respect to the ability of
LISB to become Year 2000 compliant and LISB is not aware of any reason why it
would not receive a "satisfactory" rating in connection with any OTS examination
of its Year 2000 compliance efforts.
(ii) ORDINARY COURSE OF BUSINESS. Except as set forth in the LISB
Reports, since December 31, 1997, LISB has made no material change in the
conduct of its business that would constitute a breach of its obligations under
Section 3.01(i) and (ii) hereof if that Section had been in effect for the
period from December 31, 1997 to the date of this Agreement. LISB has not
altered, amended or rescinded in any material manner any of its Board approved
written policies, practices or procedures since February 21, 1998, including its
lending, pricing or approval policies for making loans, its investment policies,
its deposit pricing policies, its asset/liability management policies, its
environmental policies or any other material banking policies.
SECTION 2.04 REPRESENTATIONS AND WARRANTIES OF AFC. Subject to
Sections 2.01 and 2.02, AFC represents and warrants to LISB that:
(a) ORGANIZATION. (i) AFC is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and is a
savings and loan holding company duly registered with the OTS under the HOLA.
The Association is a savings and loan association duly incorporated, validly
existing and in good standing under the laws of the United States of America.
Each Significant Subsidiary of the Association is a corporation, limited
liability company
-25-
or partnership duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization. Each of AFC, the
Association and the Association's Significant Subsidiaries has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The only Subsidiary of AFC is the Association.
(ii) AFC, the Association and each Subsidiary of the
Association is duly qualified and is in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary.
(iii) The Disclosure Letter sets forth all of the
Subsidiaries of the Association and all entities (whether corporations,
partnerships, or similar organizations), including the corresponding percentage
ownership in which the Association owns, directly or indirectly, 5% or more of
the ownership interests as of the date of this Agreement and indicates for each
Subsidiary, as of the such date, its jurisdiction of organization and the
jurisdiction wherein it is qualified to do business. All such Subsidiaries and
ownership interests are in compliance with all applicable laws, rules and
regulations relating to direct investments in equity ownership interests. Except
as set forth on the Disclosure Letters, the Association owns, either directly or
indirectly, all of the outstanding capital stock of each of its Subsidiaries. No
Subsidiary of the Association is an "insured depositary institution" as defined
in the FDIA, and applicable regulations thereunder. All of the shares of capital
stock of each of the Subsidiaries held by the Association or by another
Subsidiary of the Association are fully paid, nonassessable and not subject to
any preemptive rights and are owned by the Association or a Subsidiary of the
Association free and clear of any claims, liens, encumbrances or restrictions
(other than those imposed by applicable federal and state securities laws) and
there are no agreements or understandings with respect to the voting or
disposition of any such shares.
(iv) The deposits of the Association are insured by the
Savings Association Insurance Fund or the Bank Insurance Fund of the FDIC to the
extent provided in the FDIA.
(b) CAPITAL STRUCTURE. (i) The authorized capital stock of AFC
consists of 70,000,000 shares of AFC Common Stock and 5,000,000 shares of
preferred stock of AFC, par value $1.00 per share (the "AFC Preferred Stock").
As of the date of this Agreement, (A) 26,451,252 shares of AFC Common Stock were
issued and 26,364,760 were outstanding, (B) no shares of the AFC Series A
Preferred Stock were outstanding, (C) 2,000,000 shares of AFC Series B Preferred
Stock were outstanding; (D) no shares of AFC Common Stock were reserved for
issuance except that 3,531,043 of AFC Common Stock were reserved for issuance
pursuant to AFC's stock option plans and agreements and 300,000 shares of AFC
Common Stock were reserved for issuance pursuant to AFC's dividend reinvestment
plan, (E) no shares of AFC Series A Preferred Stock were reserved for issuance
except pursuant to the AFC Rights Agreement and (F) 86,492 shares of AFC Common
Stock were held by AFC in its treasury or by its Subsidiaries. The authorized
capital stock of the Association consists of 35,000,000 shares of common stock,
par value $1.00 per share, and 5,000,000 shares of preferred stock, par value
$1.00 per share. As of the date of this Agreement, 1,000 shares of such common
stock were outstanding, no shares of such preferred stock were
-26-
outstanding and all outstanding shares of such common stock were, and as of the
Effective Time will be, owned by AFC. All outstanding shares of capital stock of
AFC and the Association are, validly issued, fully paid and nonassessable and
not subject to any preemptive rights and, with respect to shares held by AFC in
its treasury or by its Significant Subsidiaries, are free and clear of all
liens, encumbrances or restrictions (other than those imposed by applicable
federal or state securities laws) and there are no agreements or understandings
with respect to the voting or disposition of such shares.
(ii) No Voting Debt of AFC is issued or outstanding.
(iii) As of the date of this Agreement, except for this
Agreement and the AFC Option Agreement, neither AFC nor any of its Subsidiaries
has or is bound by any outstanding options, warrants, calls, rights, convertible
securities, commitments or agreements of any character obligating AFC or any of
its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, any additional shares of capital stock of AFC or any of its Subsidiaries
or obligating AFC or any of its Subsidiaries to grant, extend or enter into any
such option, warrant, call, right, convertible security, commitment or
agreement. As of the date hereof, there are no outstanding contractual
obligations of AFC or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of AFC or any of its Subsidiaries.
(c) AUTHORITY. Each of AFC and the Association has the requisite
corporate power and authority to enter into this Agreement and the Plan of Bank
Merger, respectively and, subject to approval of this Agreement by the requisite
vote of the stockholders of AFC and receipt of all required regulatory or
governmental approvals as contemplated by Section 5.01(b) of this Agreement, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement, and, subject to the approval of this Agreement by the
stockholders of AFC, the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate actions on the part of AFC
and the Association. This Agreement has been duly executed and delivered by AFC
and constitutes a valid and binding obligation of AFC, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity, whether applied in a court of
law or a court of equity.
(d) STOCKHOLDER APPROVAL; FAIRNESS OPINION. The affirmative vote of a
majority of the outstanding shares of the AFC Common Stock entitled to vote on
this Agreement is the only vote of the stockholders of AFC required for approval
of this Agreement and the consummation of the Merger and the related
transactions contemplated hereby. AFC has received the opinion of Xxxxxx
Brothers Inc. to the effect that, as of the date hereof, the Exchange Ratio is
fair, from a financial point of view, to AFC.
(e) NO VIOLATIONS. Subject to approval of this Agreement by AFC's
stockholders and the obtaining of the approvals, consents and waivers referred
to in Section 2.04(f), the execution,
-27-
delivery and performance of this Agreement by AFC and the execution, delivery
and performance of the AFC Option Agreement by AFC will not, and the
consummation of the transactions contemplated hereby or thereby will not,
constitute (i) a breach or violation of, or a default under, any law, including
any Environmental Law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument of AFC or
any Significant Subsidiary of AFC or to which AFC or any Significant Subsidiary
of AFC (or any of their respective properties) is subject, or enable any person
to enjoin the Merger or the other transactions contemplated hereby, (ii) a
breach or violation of, or a default under, the certificate or articles of
incorporation or bylaws of AFC or any Significant Subsidiary of AFC or (iii) 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 AFC or any Subsidiary of AFC 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 AFC
or any Subsidiary of AFC is a party, or to which any of its respective
properties or assets may be bound or affected; and the consummation of the
transactions contemplated hereby and by the AFC Option Agreement, will not
require any approval, consent or waiver under any such law, rule, regulation,
judgment, decree, order, governmental permit or license or the approval, consent
or waiver of any other party to any such agreement, indenture or instrument,
other than (i) the required approvals, consents and waivers of governmental
authorities referred to in Section 5.01(b), (ii) the approval of the
stockholders of AFC referred to in Section 2.04(d) and (iii) such approvals,
consents or waivers as are required under the federal and state securities or
"blue sky" laws in connection with the transactions contemplated by this
Agreement or the AFC Option Agreement.
(f) CONSENTS. Except as referred to herein or in connection, or in
compliance, with the provisions of the HSR Act, the Securities Act, the Exchange
Act, the HOLA, the BMA, the FDIA, the rules and regulations of the OTS, and the
environmental, corporation, securities or "blue sky" laws or regulations of the
various states, no filing or registration with, or authorization, consent or
approval of, any other party is necessary for the consummation by AFC or the
Association of the Merger or the other transactions contemplated by this
Agreement. As of the date hereof, AFC knows of no reason why the approvals,
consents and waivers of governmental authorities referred to in this Section
2.04(f) that are required to be obtained should not be obtained without the
imposition of any material condition or restriction referred to in the last
sentence of 5.01(b).
(g) REPORTS. (i) As of their respective dates, neither AFC's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997, nor any other
document filed subsequent to December 31, 1997 under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, each in the form (including exhibits and any
documents specifically incorporated by reference therein) filed with the SEC
(collectively, the "AFC Reports"), contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
-28-
Each of the financial statements of AFC included in the AFC Reports complied as
to form, as of their respective dates, in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto, or in the case of
unaudited financial statements, as permitted by Form 10-Q of the SEC). Each of
the balance sheets contained or incorporated by reference in AFC's Reports
(including in each case any related notes and schedules) fairly presented the
financial position of the entity or entities to which it relates as of its date
and each of the statements of income and of changes in stockholders' equity and
of cash flows, contained or incorporated by reference in AFC's Reports
(including in each case any related notes and schedules), fairly presented the
results of operations, stockholders' equity and cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein. AFC has made
available to LISB a true and complete copy of each AFC Report filed with the SEC
since December 31, 1997.
(ii) AFC and each of its Subsidiaries have each timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since December 31, 1993 with (A) the OTS, (B) the FDIC, (C) the SEC, (D)
the NASD and (E) any other self-regulatory organization, and have paid all fees
and assessments due and payable in connection therewith.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
AFC's Reports filed on or prior to the date of this Agreement, since December
31, 1997, (i) AFC and its Subsidiaries have not incurred any liability, except
in the ordinary course of their business consistent with past practice, (ii) AFC
and its Subsidiaries have conducted their respective businesses only in the
ordinary and usual course of such businesses other than the negotiation,
execution and delivery of this Agreement and ancillary matters related thereto
and (iii) there has not been any condition, event, change or occurrence that,
individually or in the aggregate, has had, or is reasonably likely to have, a
Material Adverse Effect on AFC.
(i) TAXES. All federal, state, local and foreign tax returns required
to be filed by or on behalf of AFC 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. All taxes shown on such returns,
all taxes required to be shown on returns for which extensions have been
granted, and all other taxes required to be paid by AFC or any of its
Subsidiaries, have been paid in full or adequate provision has been made for any
such taxes on AFC's balance sheet (in accordance with generally accepted
accounting principles). For purposes of this Section 2.04(k), the term "taxes"
shall include all income, franchise, gross receipts, real and personal property,
real property transfer and gains, wage and employment
-29-
taxes. As of the date of this Agreement, there is no audit, examination,
deficiency, or refund litigation with respect to any taxes of AFC or any of its
Subsidiaries, and no claim has been made by any authority in a jurisdiction
where AFC or any of its Subsidiaries do not file tax returns that AFC or any
such Subsidiary is subject to taxation in that jurisdiction. All taxes,
interest, additions, and penalties due with respect to completed and settled
examinations or concluded litigation relating to AFC or any of its Subsidiaries
have been paid in full or adequate provision has been made for any such taxes on
AFC's balance sheet (in accordance with generally accepted accounting
principles). AFC and its Subsidiaries have not executed an extension or waiver
of any statute of limitations on the assessment or collection of any material
tax due that is currently in effect. AFC and each of its Subsidiaries has
withheld and paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party, and AFC and each of its Subsidiaries
has timely complied with all applicable information reporting requirements under
Part III, Subchapter A of Chapter 61 of the Code and similar applicable state
and local information reporting requirements. Neither AFC nor any of its
Subsidiaries (i) has made an election under Section 341(f) of the Code, (ii) has
made any payment, is obligated to make any payment, or is a party to any
agreement that could obligate it to make any payment that would not be
deductible under Section 280G of the Code, (iii) has issued or assumed any
obligation under Section 279 of the Code, any high yield discount obligation as
described in Section 163(i) of the Code or any registration-required obligation
within the meaning of Section 163(f)(2) of the Code that is not in registered
form, or (iv) is or has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code.
(j) ABSENCE OF CLAIMS. No litigation, proceeding, controversy, claim
or action before any court or governmental agency is pending against AFC, the
Association or any of its Subsidiaries, and, to the best of AFC's knowledge, no
such litigation, proceeding, controversy, claim or action has been threatened.
(k) ABSENCE OF REGULATORY ACTIONS. Neither AFC 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
written undertaking to, or is subject to any action, proceeding, order or
directive by, or is a recipient of any extraordinary supervisory letter from any
Government Regulator, 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
or similar written undertaking.
(l) AFC COMMON STOCK. The shares of AFC Common Stock to be issued
pursuant to this Agreement, when issued in accordance with the terms of this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and subject to no preemptive rights.
(m) LABOR MATTERS. Neither AFC nor any of its Subsidiaries is or has
ever been a party to, or is or has ever been bound by, any collective bargaining
agreement, contract, or other agreement
-30-
or understanding with a labor union or labor organization with respect to its
employees, nor is AFC or any of its Subsidiaries the subject of any proceeding
asserting that it has committed an unfair labor practice or seeking to compel
AFC or any of its Subsidiaries to bargain with any labor organization as to
wages and conditions of employment, nor is the management of AFC aware of any
pending or threatened strike, other labor dispute or organizational effort
involving AFC or any of its Subsidiaries AFC and its Subsidiaries are in
compliance with applicable laws regarding employment of employees and retention
of independent contractors, and are in compliance with applicable employment tax
laws.
(n) EMPLOYEE BENEFIT PLANS. The 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, severance and other benefit plans,
contracts, agreements, arrangements, including, but not limited to, "employee
benefit plans," as defined in Section 3(3) of ERISA, incentive and welfare
policies, contracts, plans and arrangements and all trust agreements related
thereto with respect to any present or former directors, officers, or other
employees of AFC or any of its Subsidiaries (hereinafter referred to
collectively as the "AFC Employee Plans"). All AFC Employee Plans comply in all
material respects with all applicable requirements of ERISA, the Code and other
applicable laws and there has occurred no non-exempt "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) which is likely
to result in the imposition of any penalties or taxes under Section 502(i) of
ERISA or Section 4975 of the Code upon AFC or any of its Subsidiaries. No
liability, to the Pension Benefit Guaranty Corporation, has been or is expected
by AFC or any of its Subsidiaries to be incurred with respect to any AFC
Employee Plan which is subject to Title IV of ERISA ("AFC Pension Plan"), or
with respect to any "single-employer plan" (as defined in Section 4001(a) of
ERISA) currently or formerly maintained by AFC or any entity which is considered
one employer with AFC under Section 4001(b)(1) of ERISA or Section 414 of the
Code (an "ERISA Affiliate"). No AFC Pension 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 AFC Pension Plan exceeds the
present value of the "benefit liabilities" (as defined in Section 4001(a)(16) of
ERISA) under such AFC Pension Plan as of the end of the most recent plan year
with respect to the respective AFC Pension Plan ending prior to the date hereof,
calculated on an accumulated benefit obligation basis using the actuarial
assumptions used in the most recent actuarial valuation for such AFC Pension
Plan as of the date hereof; 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 AFC Pension Plan within the
12-month period ending on the date hereof. Neither AFC nor any Subsidiary of AFC
has provided, or is required to provide, security to any AFC Pension Plan or to
any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of
the Code. Neither AFC, its Subsidiaries, nor any ERISA Affiliate has contributed
to any "multi employer plan," as defined in Section 3(37) of ERISA, on or after
September 26, 1980. Each AFC Employee Plan of AFC or of any of its Subsidiaries
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 (a
"AFC
-31-
Qualified Plan") has received a favorable determination letter from the IRS
and AFC and its Subsidiaries are 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 AFC, threatened litigation, administrative action or
proceeding relating to any AFC Employee Plan.
(o) COMPLIANCE WITH LAWS. AFC and each of its Subsidiaries 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 governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect, and, to the best knowledge of AFC, no suspension or cancellation of any
of them is threatened. Since the date of its incorporation, the corporate
affairs of AFC have not been conducted in violation of any law, ordinance,
regulation, order, writ, rule, decree or approval of any Governmental Entity.
The business of AFC and its Subsidiaries are not being conducted in violation of
any law, ordinance, regulation, order, writ, rule or decree approval of any
Governmental Entity.
(p) FEES. Other than the financial advisory services performed for
AFC by Xxxxxx Brothers Inc. pursuant to an agreement, a true and complete copy
of which has been previously delivered to LISB, neither AFC 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 fee, and no
broker or finder has acted directly or indirectly for the purchase of any
Subsidiary of AFC, in connection with the Agreement or the transactions
contemplated hereby.
(q) ENVIRONMENTAL MATTERS. With respect to AFC and each of its
Subsidiaries:
(i) Each of AFC and its Subsidiaries, the Participation
Facilities, and, to AFC's knowledge, the Loan Properties (each as defined
herein) are, and have been, in substantial compliance with all Environmental
Laws (as defined herein);
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or, to
AFC's knowledge, threatened, before any court, governmental agency or authority
or other forum against it or any of its Subsidiaries or any current or, to AFC's
knowledge, former Participation Facility (x) for alleged noncompliance
(including by any predecessor) with, or liability under, any Environmental Law
or (y) relating to the Release (as defined herein) into the environment of any
Hazardous Material (as defined herein), whether or not occurring at or on a site
owned, leased or operated by it or any of its Subsidiaries or any Participation
Facility;
(iii) To AFC's knowledge, there is no suit, claim, action,
demand, executive or administrative order, directive, investigation or
proceeding pending or threatened, before any court, governmental agency or
authority or other forum relating to or against any Loan Property (or AFC
-32-
or any of its Subsidiaries in respect of such Loan Property) (A) relating to
alleged noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or (B) relating to the Release into the environment of any
Hazardous Material whether or not occurring at or on a site owned, leased or
operated by a Loan Property;
(iv) To AFC's knowledge, the properties currently or
formerly owned or operated by AFC or any of its Subsidiaries (including, without
limitation, soil, groundwater or surface water on, under or adjacent to the
properties, and buildings thereon) do not contain any Hazardous Material other
than in compliance with applicable Environmental Law; PROVIDED, however, that
with respect to properties formerly owned or operated by AFC or any of its
Subsidiaries, such representation is limited to the period AFC or any such
Subsidiary owned or operated such properties;
(v) None of AFC 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 relating to Hazardous Materials or Remediation (as defined
herein) thereof or indicating that it may be in violation of, or liable under,
any Environmental Law, or any actual or, to AFC's knowledge, potential
administrative or judicial proceedings in connection with any of the foregoing;
(vi) To AFC's knowledge, there are no underground storage
tanks on, in or under any properties currently or formerly owned or operated by
AFC or any of its Subsidiaries, any Participation Facility or any Loan Property
and no underground storage tanks have been closed or removed from any properties
currently or formerly owned or operated by AFC or any of its Subsidiaries, any
Participation Facility or any Loan Property which are or have been in the
ownership of AFC or any of its Subsidiaries; and
(vii) To AFC's knowledge, during the period of (A) AFC or
any of its Subsidiaries' ownership or operation of any of their respective
current or formerly owned properties, (B) AFC's or any of its Subsidiaries'
participation in the management of any Participation Facility, or (C) its or any
of its Subsidiaries' holding of a security interest in a Loan Property, there
has been no Release and there is currently no threatened Release of Hazardous
Material in, on, under, affecting or migrating to such properties. To AFC's
knowledge, prior to the period of (X) AFC's or any of its Subsidiaries'
ownership or operation of any of their respective current properties, (Y) AFC's
or any of its Subsidiaries' participation in the management of any Participation
Facility, or (Z) AFC's or any of its Subsidiaries' holding of a security
interest in a Loan Property, there was no Release of Hazardous Material in, on,
under, affecting or migrating to any such property, Participation Facility or
Loan Property.
(r) LOAN PORTFOLIO; ALLOWANCE; ASSET QUALITY. (i) With respect to
each loan owned by AFC or its Subsidiaries in whole or in part (each, a "Loan"),
to the best knowledge of AFC:
-33-
(A) the note and the related security documents
are each legal, valid and binding obligations of the maker or obligor
thereof, enforceable against such maker or obligor in accordance with
their terms;
(B) neither AFC nor any of its Subsidiaries nor
any prior holder of a Loan has modified the note or any of the
related security documents in any material respect or satisfied,
canceled or subordinated the note or any of the related security
documents except as otherwise disclosed by documents in the
applicable Loan file;
(C) AFC or a Subsidiary is the sole holder of
legal and beneficial title to each Loan (or the Association's
applicable participation interest, as applicable); except as
otherwise referenced on the books and records of the Association;
(D) the note and the related security documents,
copies of which are included in the Loan files, are true and correct
copies of the documents they purport to be and have not been
suspended, amended, modified, canceled or otherwise changed, except
as otherwise disclosed by documents in the applicable Loan file;
(E) there is no pending or threatened
condemnation proceeding or similar proceeding affecting the property
which serves as security for a Loan; except as otherwise referenced
on the books and records of the Association;
(F) there is no pending or threatened litigation
or proceeding relating to the property which serves as security for a
Loan that would have a Material Adverse Effect upon the related Loan;
and
(G) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid,
binding and enforceable.
(ii) The allowance for possible losses reflected in AFC's
audited statement of condition at December 31, 1997 as, and the allowance for
possible losses shown on the balance sheets in its Reports for periods ending
after December 31, 1997 will be, adequate, as of the dates thereof, under
generally accepted accounting principles applicable to federal savings and loan
associations consistently applied.
(iii) The Disclosure Letter sets forth by category the
amounts of all loans, leases, advances, credit enhancements, other extensions of
credit, commitments and interest-bearing assets of the Subsidiaries that have
been classified by any bank examiner (whether regulatory or internal) as "Other
Loans Specially Mentioned," "Special Mention," "Substandard," "Doubtful,"
"Loss," "Classified," "Criticized," "Credit Risk Assets," "Concerned Loans" (in
the latter two cases, to the extent available) or words of similar import, and
the Association and its Subsidiaries shall promptly after the end of any month
inform LISB of any such classification arrived at any time after the date
-34-
hereof. The OREO included in any non-performing assets of the Subsidiaries is
carried net of reserves at the lower of cost or fair value, less estimated
selling costs, based on current independent appraisals or evaluations or current
management appraisals or evaluations; PROVIDED, however, that "current" shall
mean within the past 12 months.
(s) ACCOUNTING MATTERS. Neither AFC nor any of its Subsidiaries nor,
to the best of its knowledge, any of its other affiliates has, through the date
hereof, taken or agreed to take any action that would prevent AFC from
accounting for the business combination to be effected by the Merger as a
"pooling-of-interests," and AFC has no knowledge of any fact or circumstance
that would prevent such accounting treatment.
(t) AFC RIGHTS AGREEMENT. The AFC Rights Agreement has been amended
so as to provide that LISB will not become an "Acquiring Person" and that no
"Triggering Event," "Stock Acquisition Date" or "Distribution Date" (as such
terms are defined in the AFC Rights Agreement) will occur as a result of the
approval, execution or delivery of this Agreement or the AFC Option Agreement or
the consummation of the Merger pursuant to this Agreement or the acquisition of
shares of AFC Common Stock by LISB pursuant to the AFC Option Agreement.
(u) INVESTMENT SECURITIES; BORROWING. (i) Except for investments in
Federal Home Loan Bank Stock and pledges to secure Federal Home Loan Bank
borrowings and reverse repurchase agreements entered into in arms-length
transactions pursuant to normal commercial terms and conditions and entered into
in the ordinary course of business and restrictions that exist for securities to
be classified as "held to maturity," none of the investments reflected in the
consolidated balance sheet of AFC included in AFC's Report on Form 10-K for the
year ended December 31, 1997, and none of the investment securities held by it
or any of its Subsidiaries since December 31, 1997, is subject to any
restriction (contractual or statutory) that would materially impair the ability
of the entity holding such investment freely to dispose of such investment at
any time.
(ii) Neither AFC nor any Subsidiary 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 consolidated statements
of condition and is a derivative contract (including various combinations
thereof) (each, a "Derivatives Contract") or owns securities that (A) are
referred to generically as "structured notes," "high risk mortgage derivatives,"
"capped floating rate notes" or "capped floating rate mortgage derivatives" or
(B) 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 the Disclosure Letter or
disclosed in its Reports filed on or prior to the date hereof.
-35-
(iii) Set forth in the Disclosure Letter is a true and
correct list of AFC's borrowed funds (excluding deposit accounts) as of the date
hereof.
(v) BOOKS AND RECORDS. The books and records of AFC and its
Subsidiaries have been, and are being, maintained in accordance with applicable
legal and accounting requirements and reflect in all material respects the
substance of events and transactions that should be included therein.
(w) CORPORATE DOCUMENTS. AFC has delivered to LISB true and complete
copies of its certificate of incorporation and bylaws and of the Association's
charter and bylaws. The minute books of AFC and the Association constitute a
complete and correct record of all actions taken by the respective boards of
directors (and each committee thereof) and the stockholders of AFC and the
Association. The minute books of each of AFC's Subsidiaries constitutes a
complete and correct record of all actions taken by the respective boards of
directors (and each committee thereof) and the stockholders of each Subsidiary.
(x) BENEFICIAL OWNERSHIP OF LISB COMMON STOCK. As of the date hereof,
AFC beneficially owns no shares of LISB Common Stock and, other than as
contemplated by the LISB Option Agreement, does not have any option, warrant or
right of any kind to acquire the beneficial ownership of any shares of LISB
Common Stock.
(y) TAX TREATMENT OF THE MERGER. As of the date hereof, AFC has no
knowledge of any fact or circumstance that would prevent the transactions
contemplated by this Agreement from qualifying as a tax-free reorganization
under the Code.
(z) YEAR 2000 MATTERS. The Disclosure Letter contains a true and
correct copy of AFC's proposed plan for addressing year 2000 computer issues
(the "AFC Year 2000 Plan"). AFC is in material compliance with the AFC Year 2000
Plan and agrees to take all actions required by the OTS to continue to be "Year
2000 Compliant". Neither AFC nor AFC Bank has received any written communication
from the OTS commenting adversely with respect to the ability of AFC to become
Year 2000 compliant and AFC is not aware of any reason why it would not receive
a "satisfactory" rating in connection with any OTS examination of its Year 2000
compliance efforts.
-36-
ARTICLE III
CONDUCT PENDING THE MERGER
SECTION 3.01 CONDUCT OF LISB'S BUSINESS PRIOR TO THE EFFECTIVE TIME.
Except as expressly provided in this Agreement, during the period from the date
of this Agreement to the Effective Time, LISB shall use commercially reasonable
efforts to, and shall cause its Subsidiaries to use commercially reasonable
efforts to, (i) conduct its business in the ordinary and usual course consistent
with past practices and prudent banking practice; (ii) 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) take no action which would adversely affect or delay the
ability of LISB, LISB Bank, AFC or the Association to perform its covenants and
agreements on a timely basis under this Agreement, (iv) take no action which
would adversely affect or delay the ability of LISB, LISB Bank, AFC or the
Association to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions contemplated hereby or
which would reasonably be expected to result in any such approvals, consents or
waivers containing any material condition or restriction, and (v) take no action
that results in or is reasonably likely to have a Material Adverse Effect on
LISB. LISB will use reasonable good faith efforts to consult with (but shall not
have to obtain the approval of) AFC before engaging in any of the following
activities:
(a) the creation of any Xxxxxx Xxx or Xxxxxxx Mac securities with
limited recourse to reduce the amount of the guarantee fee payable; or
(b) entering into any agreements or commitments in connection with
LISB's Year 2000 compliance efforts.
SECTION 3.02 FORBEARANCE BY LISB. Without limiting the covenants set
forth in Section 3.01 hereof, during the period from the date of this Agreement
to the Effective Time LISB shall not, and shall not permit any of its
Subsidiaries, without the prior written consent of AFC which shall not be
unreasonably withheld, to:
(a) put into effect any change in any provisions of the organization
certificate or bylaws of LISB, or any similar governing documents of LISB's
Subsidiaries;
(b) issue any shares of capital stock or change the terms of any
outstanding stock options or warrants, issue, award or grant any stock bonus,
including any restricted stock award pursuant to the MRPs, or issue, grant or
sell any option, warrant, call, commitment, stock appreciation right, right to
purchase or agreement of any character relating to the authorized or issued
capital stock of LISB except pursuant to (i) the exercise of stock options or
warrants as set forth in the Disclosure Letter consistent with Section 1.04 of
this Agreement, (ii) the LISB Option Agreement or (iii) the terms of the LISB
Rights Agreement (provided that LISB shall take no action that would cause or
-37-
have the effect of causing AFC to become an "Acquiring Person" under the LISB
Rights Agreement); 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 or any securities or obligations convertible into or exchangeable for any
shares of its capital stock except for LISB's regular quarterly dividend of
$0.15 per share. As promptly as practicable following the date of this
Agreement, the Board of Directors of LISB shall cause its regular quarterly
dividend record dates and payment dates to be the same as AFC's regular
quarterly dividend record dates and payments dates for AFC Common Stock, and
LISB shall not thereafter change its regular dividend payment dates and record
dates. Nothing contained in this Section 3.02(b) or in any other Section of this
Agreement shall be construed to permit holders of shares of LISB to receive two
dividends either from LISB or from AFC or LISB and AFC in any one quarter or to
deny or prohibit such holders from receiving one dividend from LISB or AFC in
any quarter;
(c) other than in the ordinary course of business consistent with
past practice and pursuant to policies currently in effect (which includes sales
of mortgage and mortgage related securities as part of balance sheet
management), sell, transfer, mortgage, encumber or otherwise dispose of any of
its material properties, leases or assets to any individual, corporation or
other entity other than a direct or indirect wholly owned Subsidiary of LISB or
cancel, release or assign any indebtedness of any such person, except pursuant
to contracts or agreements in force at the date of this Agreement and which have
been described to AFC; PROVIDED, however, that no sales may be made with
recourse other than sales of Xxxxxx Xxx and Xxxxxxx Mac securities with limited
recourse to reduce the amount of the guarantee fee payable; PROVIDED, FURTHER,
that sales of such recourse loans shall be limited to $50 million per month,
unless AFC receives prior notification thereof;
(d) except to the extent required by law or as disclosed in Section
3.02(d) of LISB's Disclosure Letter or as specifically provided for elsewhere
herein, increase in any manner the compensation or fringe benefits of any of its
employees or directors other than general increases in compensation for
non-officer employees (and officers, provided that Section 3.02(d) of the
Disclosure Schedule sets forth a complete and accurate schedule of the expected
maximum salary increases for persons with a title of first vice president or
higher of LISB scheduled to occur prior to September 30, 1998) in the ordinary
course of business consistent with past practice that do not cause the aggregate
annualized compensation of all of LISB's non-officer employees and officers with
a title below first vice president participating in the increase being granted,
immediately following such increase, to exceed by more than 5% the aggregate
total annual compensation expense of LISB with respect to such persons for the
twelve month period ended September 30, 1997 and that do not cause the aggregate
annual rates of base salaries of all of LISB's non-officer employees
participating in the increase being granted to increase by more than 5% over
such aggregate base salaries at September 30, 1997, 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 fund
or otherwise establish any trust or account related to any Employee Plan (as
defined in Section 2.03(n)) with or for the benefit of any employee or director
-38-
(PROVIDED that the foregoing shall not restrict LISB from paying normal,
discretionary and/or contractual bonuses in the ordinary course of business due
as of September 30, 1998 in amount and scope of distributions consistent with
past practices not to exceed $4 million in the aggregate; and provided, further,
that the foregoing shall not restrict LISB Bank from offering an early
retirement incentive program consistent with past practices to eligible plan
participants who retire on a date selected by LISB Bank that is as close in time
as practicable to the Effective Time, at a total cost not materially different
from the estimated cost shown on Section 3.02(d) of the Disclosure Schedule.);
voluntarily accelerate the vesting of any stock options or other compensation or
benefit; terminate or increase the costs to LISB or any Subsidiary of any
Employee Plan; hire any employee with an annual compensation in excess of
$75,000 or enter into or amend any employment, commission or bonus contract;
except as otherwise specifically contemplated by this paragraph (d), alter,
amend or revise in any manner any compensation, arrangements, practices or
policies; make any discretionary contributions to any Employee Plan; make any
discretionary contributions to any Employee Plan; or taken any action other than
permitted by this Section 3.02(d) that would cause the Merger to fail to qualify
for pooling-of-interests account treatment;
(e) except as contemplated by Section 4.02, change its method of
accounting as in effect at September 30, 1997, except as required by changes in
generally accepted accounting principles as concurred in writing by LISB's
independent auditors;
(f) make any investment in any debt security, including
mortgage-backed and mortgage related securities, other than U.S. government and
U.S. government agency securities with final maturities not greater than five
years or mortgage-backed or mortgage related securities which would not be
considered "high risk" securities pursuant to Thrift Bulletin Number 52 issued
by the OTS, that are purchased in the ordinary course of business consistent
with past practice, in either case, with a purchase price no greater than 101.5%
of par value;
(g) other than in the ordinary course of business consistent with
past practice in individual amounts not to exceed $50,000 and other than
investments for LISB's portfolio made in accordance with Section 3.02(f), make
any investment either by purchase of stock or securities, contributions to
capital, property transfers, or purchase of any property or assets of any other
individual, corporation or other entity and other than the purchase of Federal
Home Loan Bank common stock necessary to maintain LISB's membership status with
the Federal Home Loan Bank of New York and other than pursuant to existing
commitments set forth in the Disclosure Letter;
(h) enter into any contract or agreement that is not terminable
within 30 days, or make any change in, or terminate, any of its leases or
contracts, other than with respect to those involving aggregate payments of less
than, or the provision of goods or services with a market value of less than
$100,000 per annum and other than contracts or agreements covered by Section
3.02(k) and other than agreements and commitments in connection with LISB's Year
2000 compliance efforts pursuant to its Year 2000 Plan;
-39-
(i) settle any claim, action or proceeding involving any liability of
LISB or any of its Subsidiaries for money damages in excess of $500,000 or
impose material restrictions upon the operations of LISB or any of its
Subsidiaries;
(j) except in the ordinary course of business and in amounts less
than $500,000, waive or release any material right or collateral or cancel or
compromise any extension of credit or other debt or claim;
(k) make, renegotiate, renew, increase, extend or purchase any (i)
loan, lease (credit equivalent), advance, credit enhancement or other extension
of credit, or make any commitment in respect of any of the foregoing, except in
conformity with existing lending practices in amounts not to exceed $2,000,000
to any individual borrower (except for commercial real estate loans which shall
be limited to $3.5 million to any individual borrower and except for small
business and commercial loans which shall be limited to $300,000 to any
individual borrower); PROVIDED, however, that LISB and its Subsidiaries may not
make, renegotiate, renew, increase, extend or purchase any loan that is
underwritten based on no verification of income or loans commonly known or
referred to as "no documentation loans;" however, LISB may originate no
documentation loans pursuant to a take-out commitment from an investor, but not
for the portfolio of LISB or (ii) loans, advances or commitments to directors,
officers or other affiliated parties of LISB or any of its Significant
Subsidiaries (other than loans on primary residences in accordance with existing
policies);
(l) except to the extent required by applicable law or regulation,
adopt or implement any new policy or practice or procedure with respect to its
loan origination activities, including without limitation, taking any action to
amend, renew or extend any contract, agreement or other arrangement with terms
greater than one year regarding the delegation of loan underwriting functions,
the delegation of loan processing functions, the provisions of tax-related
services or the provision of insurance-related services;
(m) purchase or sell servicing rights (other than loan sales with
servicing released) with respect to loans the principal balance of which, either
individually or in the aggregate, exceeds $500,000;
(n) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to LISB except in satisfaction of debts previously contracted;
(o) incur any additional borrowings beyond those set forth on the
Disclosure Letter other than short-term (two years or less) Federal Home Loan
Bank borrowings and reverse repurchase agreements consistent with past practice,
or pledge any of its assets to secure any borrowings other than as required
pursuant to the terms of borrowings of LISB or any Subsidiary in effect at the
date
-40-
hereof or in connection with borrowings or reverse repurchase agreements
permitted hereunder. Deposits shall not be deemed to be borrowings within the
meaning of this paragraph;
(p) make any capital expenditures in excess of $100,000 per
expenditure from the date of this Agreement until the Effective Date other than
pursuant to binding commitments existing on the date hereof, other than
expenditures necessary to maintain existing assets in good repair;
(q) make any investment or commitment to invest in real estate or in
any real estate development project, other than real estate acquired in
satisfaction of defaulted mortgage loans and investments or commitments approved
by the Board of Directors of LISB or LISB Bank prior to the date of this
Agreement and disclosed in writing to AFC;
(r) except pursuant to commitments existing at the date hereof which
have previously been disclosed in writing to AFC, make any real estate loans
secured by undeveloped land or real estate (other than real estate secured by
one-to four-family homes) located outside the State of New York or make any
construction loan (other than construction loans secured by one-to four-family
homes);
(s) establish or make any commitment relating to the establishment of
any new branch or other office facilities;
(t) organize, capitalize, lend to or otherwise invest in or invest in
any Subsidiary or acquire a 10% or greater equity or voting interest in any
firm, corporation or business enterprise;
(u) elect to the Board of Directors of LISB or any Subsidiary any
person who is not a member of the Board of Directors of LISB or such Subsidiary
as of the date of this Agreement; or
(v) agree or make any commitment to take any action that is
prohibited by this Section 3.02.
In the event that AFC does not respond in writing to LISB within five
business days of a written request for LISB to engage in any of the actions for
which AFC's prior written consent is required pursuant to this Section 3.02, AFC
shall be deemed to have consented to such action. Any request by LISB or
response thereto by AFC shall be made in accordance with the notice provisions
of Section 8.07, and any request by LISB shall also state that it is a request
pursuant to this Section 3.02 and that a failure to respond within five (5)
business days shall constitute consent.
SECTION 3.03 CONDUCT OF AFC'S BUSINESS PRIOR TO THE EFFECTIVE TIME.
Except as expressly provided in this Agreement, during the period from the date
of this Agreement to the Effective Time, AFC shall use commercially reasonable
efforts to, and shall cause its Subsidiaries to use commercially reasonable
efforts to, (i) conduct its business in the ordinary and usual course consistent
with past practices and prudent banking practice, (ii) maintain and preserve
intact its
-41-
business organization, properties, leases, employees and advantageous
business relationships and retain the services of its officers and key
employees, (iii) take no action which would adversely affect or delay the
ability of LISB or AFC to perform its covenants and agreements on a timely basis
under this Agreement, (iv) take no action which would adversely affect or delay
the ability of LISB, AFC, LISB Bank or the Association to obtain any necessary
approvals, consents or waivers of any governmental authority required for the
transactions contemplated hereby or which would reasonably be expected to result
in any such approvals, consents or waivers containing any material condition or
restriction, and (v) take no action that results in or is reasonably likely to
have a Material Adverse Effect on AFC.
SECTION 3.04 FORBEARANCE BY AFC. Without limiting the covenants set
forth in Section 3.02 hereof, during the period from the date of this Agreement
to the Effective Time AFC shall not, and shall not permit any of its
Subsidiaries, without the prior written consent of LISB which shall not be
unreasonably withheld, to:
(a) put into effect any change in any provisions of the organization
certificate or bylaws of AFC, or any similar governing documents of AFC's
Subsidiaries, other than an increase in the authorized capital stock of AFC;
(b) issue any shares of capital stock or change the terms of any
outstanding stock options or warrants or issue, grant or sell any option,
warrant, call, commitment, stock appreciation right, right to purchase or
agreement of any character relating to the authorized or issued capital stock of
AFC except pursuant to (i) the exercise of stock options or warrants as set
forth in the Disclosure Letter or consistent with Section 1.04 of this
Agreement; (ii) the AFC Option Agreement (iii) pursuant to the terms of the AFC
Rights Agreement; or (iii) pursuant to a stock split in the form of a stock
dividend for which a Stock Adjustment shall be made.
ARTICLE IV
COVENANTS
SECTION 4.01 ACQUISITION PROPOSALS. LISB agrees that neither it nor
any of its Subsidiaries nor any of the respective officers and directors of LISB
or its Subsidiaries shall, and LISB shall direct and use its best 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, (a) initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to stockholders of LISB) with respect
to a merger, consolidation or similar transaction involving, or any purchase of
all or more than 10% of the assets or any equity securities of LISB or any of
its material Subsidiaries (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal") or, (b) 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
-42-
make or implement an Acquisition Proposal; PROVIDED, however, that nothing
contained in this Agreement shall prevent LISB or its Board of Directors from
(i) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
an Acquisition Proposal or (ii) (A) providing information in response to a
request therefor by a person who has made an unsolicited BONA FIDE written
Acquisition Proposal if the Board of Directors receives from the person so
requesting such information an executed confidentiality agreement on terms
substantially equivalent to those contained in the confidentiality agreement
between AFC and LISB, dated as of January 16, 1998; or (B) engaging in any
negotiations or discussions with any person who has made an unsolicited BONA
FIDE written Acquisition Proposal, if and only to the extent that, in each such
case referred to in clause (A) or (B) above, (i) the Board of Directors of LISB,
after consultation with outside legal counsel, in good xxxxx xxxxx such action
to be legally necessary for the proper discharge of its fiduciary duties under
applicable law and (ii) the Board of Directors of LISB determines in good faith
(after consultation with its financial advisor) that such Acquisition Proposal,
if accepted, is reasonably likely to be consummated, taking into account all
legal, financial and regulatory aspects of the proposal and the person making
the proposal and would, if consummated, result in a more favorable transaction
than the transaction contemplated by this Agreement, taking into account the
long-term prospects and interests of LISB and its stockholders. LISB will notify
AFC immediately orally (within one day) and in writing (within 3 days) 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 LISB after the date hereof, and the identity of the
person making such inquiry, proposal or offer and the substance thereof and will
keep AFC informed of any developments with respect thereto immediately upon
occurrence thereof. If the Board of Directors of LISB shall determine in
accordance with the second preceding sentence to provide confidential
information or data to any other person, LISB shall do so only under the terms
of a confidentiality agreement no less stringent than that previously entered
into between the parties hereto and LISB shall enforce such agreement. Subject
to the foregoing, LISB will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. LISB will take the necessary
steps to inform the appropriate individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 4.01. LISB will
promptly request each person (other than AFC) that has executed a
confidentiality agreement prior to the date hereof in connection with its
consideration of a business combination with LISB or any Subsidiary of LISB to
return or destroy all confidential information previously furnished to such
person by or on behalf of LISB or any of its Subsidiaries.
SECTION 4.02 CERTAIN POLICIES OF LISB.
(a) After the date on which all required regulatory
approval and shareholder approvals for the consummation of the transactions
contemplated hereby are received and prior to the Effective Time, but no earlier
than five (5) days prior to the Closing Date and after receipt of written
confirmation from AFC that all conditions to closing set forth in Sections 5.01
and 5.02, except for the condition set forth in Section 5.01(f), have either
been satisfied or waived, at the request of AFC, LISB shall cause LISB Bank to
modify and change its loan, litigation or real estate valuation policies
-43-
and practices (including loan classifications and levels of reserves) and
investment and asset/liability management policies and practices so as to be
consistent on a mutually satisfactory basis with those of the Association;
PROVIDED, that such policies and procedures are not prohibited by generally
accepted accounting principles or any applicable laws and regulations.
(b) LISB's representations, warranties and covenants
contained in this Agreement 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 4.02.
SECTION 4.03 ACCESS AND INFORMATION. (a) Upon reasonable notice,
LISB and AFC shall (and shall cause its respective Subsidiaries to) afford to
each other and their respective representatives (including, without limitation,
directors, officers and employees of such party and its affiliates, and counsel,
accountants and other professionals retained) such reasonable access during
normal business hours throughout the period prior to the Effective Time to the
books, records (including, without limitation, tax returns and work papers of
independent auditors), properties, personnel and to such other information as
either party may reasonably request; PROVIDED, HOWEVER, that no investigation
pursuant to this Section 4.03 shall affect or be deemed to modify any
representation or warranty made herein. In furtherance, and not in limitation of
the foregoing, LISB shall make available to AFC all information necessary or
appropriate for the preparation and filing of all real property and real estate
transfer tax returns and reports required by reason of the Merger or the Bank
Merger. AFC and LISB will not, and will cause its respective representatives not
to, use any information obtained pursuant to this Section 4.03 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Subject to the requirements of law, each of AFC and LISB will keep
confidential, and will cause its respective representatives to keep
confidential, all information and documents obtained pursuant to this Section
4.03 unless such information (i) was already known to such party or an affiliate
of such party, other than pursuant to a confidentiality agreement or other
confidential relationship, (ii) becomes available to such party or an affiliate
of such party from other sources not known by such party to be bound by a
confidentiality obligation or agreement, (iii) is disclosed with the prior
written approval of the other party or (iv) is or becomes readily ascertainable
from published information or trade sources. In the event that this Agreement is
terminated or the transactions contemplated by this Agreement shall otherwise
fail to be consummated, each party shall promptly cause all copies of documents
or extracts thereof containing information and data as to another party hereto
(or an affiliate of any party hereto) to be returned to the party which
furnished the same.
(b) During the period of time beginning on the day application
materials for the Bank Merger are initially filed with the OTS and continuing to
the Effective Time, including weekends and holidays, LISB shall cause LISB Bank
to provide the Association and its authorized agents and representatives full
access to LISB Bank's offices for the purpose of installing any necessary wiring
and equipment to be utilized by the Association after the Effective Time;
PROVIDED, that:
-44-
(i) reasonable advance notice of each entry shall
be given to LISB Bank, and LISB Bank approves of each entry, which
approval shall not be unreasonably withheld;
(ii) LISB Bank shall have the right to have its
employees or contractors present to inspect the work being done;
(iii) to the extent practicable, such work shall
be done in a manner that will not interfere with LISB Bank's business
conducted at any affected branch offices;
(iv) all such work shall be done in compliance
with all applicable laws and government regulation, and the
Association shall be responsible for the procurement, at the
Association's expense, of all required governmental or administrative
permits and approvals;
(v) the Association shall maintain appropriate
insurance satisfactory to LISB Bank in connection with any work done
by the Association's agents and representatives pursuant to this
Section 4.03;
(vi) the Association shall reimburse LISB Bank
for any material out-of-pocket costs or expenses incurred by LISB
Bank in connection with this undertaking; and
(vii) in the event this Agreement is Terminated
in accordance with Article VI hereof, the Association, within a
reasonable time period and at its sole cost and expense, will restore
such offices to their condition prior to the commencement of any such
installation.
SECTION 4.04 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. AFC and
LISB shall (a) as soon as practicable (and in any event within 60 days after the
date hereof) make (or cause to be made) any filings and applications and provide
any notices, required to be filed or provided in order to obtain all approvals,
consents and waivers of governmental authorities and third parties necessary or
appropriate for the consummation of the transactions contemplated hereby or by
the LISB Option Agreement and the AFC Option Agreement, (b) cooperate with one
another (i) in promptly determining what filings and notices are required to be
made or approvals, consents or waivers are required to be obtained under any
relevant federal or state law or regulation or under any relevant agreement or
other document and (ii) in promptly making any such filings and notices,
furnishing information required in connection therewith and seeking timely to
obtain any such approvals, consents or waivers and (c) deliver to the other
copies of the publicly available portions of all such filings, notices and
applications promptly after they are filed.
SECTION 4.05 ANTITAKEOVER PROVISIONS.
(a) LISB shall (and shall cause its Subsidiaries to) take all steps
required by any relevant federal or state law or regulation or under any
relevant agreement or other document (i) to exempt or continue to exempt AFC,
this Agreement, the Merger, the Bank Merger and the LISB Option
-45-
Agreement from any provisions of an antitakeover nature in LISB's or its
Subsidiaries' certificates of incorporation or charters, as the case may be, and
bylaws and the provisions of Section 203 of the DGCL and (ii) upon the request
of AFC, to assist in any challenge by AFC to the applicability to this
Agreement, the Merger or the LISB Option Agreement of Section 203 of the DGCL.
(b) Except for the Amendment and amendments approved in writing by
AFC, LISB will not, following the date hereof, amend or waive any of the
provisions of or take any action to exempt any other persons from the provisions
of the LISB Rights Agreement in any manner that adversely affects the
consummation of the Merger or, except as provided in the next sentence, redeem
the rights thereunder. If requested by AFC, but not otherwise, LISB will redeem
all outstanding Rights at a redemption price of not more than $0.01 per Right
effective immediately prior to the Effective Time with respect to the
consummation of the Merger.
SECTION 4.06 ADDITIONAL AGREEMENTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
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 Agreement, including the Bank
Merger, as expeditiously as possible, 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 4.07 PUBLICITY. The initial press release announcing this
Agreement shall be a joint press release and thereafter LISB and AFC shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the acquisition contemplated hereby and in making any
filings with any governmental entity or with any national securities exchange
with respect thereto.
SECTION 4.08 STOCKHOLDERS' MEETING. Each of LISB and AFC shall take
all action necessary, in accordance with applicable law and its corporate
documents, to convene a meeting of its respective stockholders (each, a
"Stockholder Meeting") as promptly as practicable for the purpose of considering
and voting on approval and adoption of the transactions provided for in this
Agreement. Except to the extent the boards of directors of each of LISB or AFC,
as the case may be, after consultation with outside legal counsel, in good xxxxx
xxxxx that failure to do the following is legally necessary for the proper
discharge of its fiduciary duties under applicable law, the board of directors
of each of LISB and AFC shall (a) recommend at its Stockholder Meeting that the
stockholders vote in favor of and approve the transactions provided for in this
Agreement, and (b) use its best efforts to solicit such approvals. LISB and AFC,
in consultation with the other, shall each employ professional proxy solicitors
to assist in contacting stockholders in connection with soliciting favorable
votes on the Merger. LISB and AFC shall coordinate and cooperate with respect to
the timing of their respective Stockholder Meetings.
-46-
SECTION 4.09 JOINT PROXY STATEMENT-PROSPECTUS; COMFORT LETTERS. (i)
As soon as practicable after the date hereof, AFC and LISB shall cooperate with
respect to the preparation of a Joint Proxy Statement-Prospectus for the purpose
of taking stockholder action on the Merger and this Agreement and file the Joint
Proxy Statement-Prospectus with the SEC and respond to comments of the staff of
the SEC and promptly after the Form S-4 (as defined in Section 4.10) is declared
effective by the SEC mail the Joint Proxy Statement-Prospectus to the respective
holders of record (as of the applicable record date) of shares of voting stock
of each of LISB and AFC. AFC and LISB each represents and covenants to the other
that the Joint Proxy Statement-Prospectus and any amendment or supplement
thereto, with respect to the information pertaining to it or its Subsidiaries at
the date of mailing to its stockholders and the date of its meeting of its
stockholders to be held in connection with the Merger, will be in compliance
with the Exchange Act and 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.
(ii) AFC shall cause KPMG Peat Marwick, its independent
public accounting firm to deliver to LISB, and LISB shall cause KPMG Peat
Marwick, its independent public accounting firm, to deliver to AFC and to its
officers and directors who sign the Registration Statement for this transaction,
a "comfort letter" or "agreed upon procedures letter," in the form customarily
issued by such accountants at such time in transactions of this type, dated (a)
the date of the mailing of the Joint Proxy Statement-Prospectus for the
Stockholders Meeting of LISB and the date of mailing of the Joint Proxy
Statement for the Stockholders meeting of AFC, respectively, and (b) a date not
earlier than five business days preceding the date of the Closing.
SECTION 4.10 REGISTRATION OF AFC COMMON STOCK.
(a) AFC shall, as promptly as practicable following the preparation
thereof, file a Registration Statement on Form S-4 (including any pre-effective
or post-effective amendments or supplements thereto) with the SEC under the
Securities Act in connection with the transactions contemplated by this
Agreement, and AFC and LISB shall use all reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. AFC will advise LISB promptly after AFC
receives notice of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of the shares of capital stock issuable
pursuant to the Registration Statement, or the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information. AFC
will provide LISB with as many copies of such Registration Statement and all
amendments thereto promptly upon the filing thereof as LISB may reasonably
request.
-47-
(b) AFC shall use its best efforts to obtain, prior to the effective
date of the Registration Statement, all necessary state securities laws or "blue
sky" permits and approvals required to carry out the transactions contemplated
by this Agreement.
(c) AFC shall use its best efforts to list, prior to the Effective
Time, on the Nasdaq National Market or on such other exchange as AFC Common
Stock shall then be trading, subject only to official notice of issuance, the
shares of AFC Common Stock to be issued by AFC in exchange for the shares of
LISB Common Stock.
SECTION 4.11 AFFILIATE LETTERS. Promptly, but in any event within
two weeks after the execution and delivery of this Agreement, LISB shall deliver
to AFC a letter identifying all persons who, to the knowledge of LISB, may be
deemed to be "affiliates" of LISB under Rule 145 of the 1933 Act and the
pooling-of-interests accounting rules, including, without limitation, all
directors and executive officers of LISB, together with executed letter
agreements, each substantially in the form of Exhibit 4.11(a), executed by each
such person so identified as an affiliate of LISB agreeing (i) to comply with
Rule 145 and (ii) to refrain from transferring shares as required by the
"pooling-of-interests" accounting rules and (iii) to be present in person or by
proxy and vote in favor of the Merger at the Shareholders Meeting as provided in
Exhibit 4.11(a). Within two weeks after the date hereof, AFC shall cause its
directors and executive officers to enter into letter agreements in the form of
Exhibit 4.11(b) with AFC concerning the pooling-of-interests accounting rules.
AFC agrees to publish, or file a Form 8-K, Form 10-K or Form 10-Q containing
financial results covering at least 30 days of post-Merger combined operations
of AFC and LISB as soon as practicable (but in no event later than 30 days)
following the close of the first calendar month ending 30 days after the
Effective Time, in form and substance sufficient to remove the restrictions set
forth in paragraph "B" of each of Exhibit 4.11(a) and Exhibit 4.11(b).
SECTION 4.12 NOTIFICATION OF CERTAIN MATTERS. Each party shall give
prompt notice to the others of: (a) any event or 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 Agreement and prior to the Effective Time, under
any contract material to the financial condition, properties, businesses or
results of operations of each party and its Subsidiaries taken as a whole to
which each party or any Subsidiary is a party or is subject; and (b) any event,
condition, change or occurrence which individually or in the aggregate has, or
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in a Material Adverse Event. Each of LISB and AFC
shall 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 any of the transactions contemplated by this
Agreement.
SECTION 4.13 DIRECTORS AND OFFICERS; ADVISORY BOARD; LITIGATION
COMMITTEE. (a) AFC agrees to cause four persons who are mutually acceptable to
AFC and LISB, who are currently members of the LISB board of directors and who
are willing to so serve ("Former LISB Directors"), to be elected or appointed as
directors of AFC at, or as promptly as practicable after, the Effective Time
-48-
(such appointment or election of Former LISB Directors to be as evenly
distributed as possible among the classes of AFC directors). The directors of
the Association, following the Bank Merger, shall be the current directors of
the Association, plus the four individuals named above in the immediately
preceding sentence.
(b) At the Effective Time, AFC shall enter into an agreement with Xx.
Xxxx X. Xxxxxxx, Xx., Xx. Xxxxxxxx X. Xxxxxx and Xx. Xxxxx X. Xxxxxx
substantially in the forms attached as Exhibit 4.13(b), (c) and (d) to the AFC
Disclosure Letter.
(c) AFC shall, promptly following the Effective Time, cause all of
the members of the LISB's Board as of the date of this Agreement who do not
become directors of AFC and the Association pursuant to Section 4.13 hereof, and
who are willing to so serve, to be elected or appointed as members of an
advisory board (the "Advisory Board") established by AFC, the function of which
shall be to meet no less frequently than quarterly in order to advise AFC with
respect to general business as well as deposit and lending opportunities and
activities in LISB's former market area and to maintain and develop customer
relationships. The members of the Advisory Board who are willing to so serve
initially shall be elected or appointed for a term of one year. AFC agrees
annually to re-elect or re-appoint each of the initial members of the advisory
board to two successive one-year terms following the initial one-year term;
PROVIDED, however, that AFC shall have no obligation to re-elect or re-appoint
any member if AFC reasonably determines that such member has a conflict of
interest that compromises such member's ability to serve effectively as a member
of the advisory board or any cause exists that otherwise would allow for removal
of such person as a director of AFC if such person were a member of AFC's Board
of Directors. Each member of the Advisory Board who is not a director of AFC and
who is not an employee of AFC shall receive a retainer fee for such service at
an annual rate of $40,000.00, payable in monthly installments and shall be
afforded the opportunity, at his own expense, to purchase coverage under a group
health plan offered by the Association to its employees. Within 30 days after
the Effective Time, each member of the Advisory Board shall receive a grant of
options to purchase 4,000 shares of AFC Common Stock which, subject to the terms
of an option agreement to be provided by AFC and reasonably acceptable to LISB,
shall extend for a term of ten (10) years beginning at the Effective Time; shall
be exercisable at any time after the Effective Time at an exercise price per
share equal to the closing sales price for a share of AFC Common Stock on the
date of grant as reported in The Wall Street Journal and shall provide for
reasonable registration rights. At or prior to the Effective Time, AFC shall (i)
take all corporate action necessary to reserve for issuance a sufficient number
of shares of AFC Common Stock for delivery upon exercise of options granted in
accordance with this Section and (ii) file a registration statement on Form S-8
(or any successor or other appropriate form) with respect to the AFC Common
Stock subject to such options. AFC shall use its best efforts to maintain the
effectiveness of such registration statement (and maintain the current status of
the prospectus or prospectuses contained therein) for so long as such Options
remain outstanding. Service on the Advisory Board shall be treated in the same
manner historically accorded to service as an Emeritus Director of LISB or LISB
Bank for purposes of determining the exercise periods of Converted Options.
-49-
(d) LISB Bank is the plaintiff in a case resulting from a complaint
filed by LISB Bank in the United States Court of Federal Claims entitled THE
LONG ISLAND SAVINGS BANK FSB ET AL. VS. THE UNITED STATES (the "Case").
Notwithstanding anything to the contrary set forth elsewhere in the Agreement,
LISB shall not, without the prior written consent of AFC, cause or permit LISB
Bank to settle the Case or take any action having such effect. Promptly
following the Effective Time, AFC will designate a special litigation committee
consisting of Xx. Xxxx X. Xxxxxxx, Xx., as Chairman, Xx. Xxxx Xxxxxx, Xx. Xxxxx
Xxxxxx, Xx. Xxxxx Xxxxxx and Xx. Xxxxxxx Xxxxxx (the "Litigation Committee"),
provided such persons are willing to so serve for the purpose of preserving the
knowledge and experience of certain LISB officers in connection with the Case,
providing for the maximum recovery thereon, and assisting AFC in evaluating and
managing the progress thereof. The Litigation Committee shall be responsible for
advising AFC exclusively on the prosecution and settlement of the Case,
including the evaluation of any settlement proposals, the making of and
responses to motions to dismiss, proposals to terminate or cease prosecuting the
Case and the pursuit or abandonment of any appeals. Each member of the Committee
shall be available to assist AFC in developing oral and documentary testimony
and evidence at the request of AFC, and shall not, in the absence of legal
compulsion, assist any persons other than AFC in the prosecution of the Case.
Each member of the Litigation Committee who is not a director of AFC and who is
not an officer or employee of, or consultant to, AFC shall receive a retainer
fee for service on the Litigation Committee as set forth in a separate
consulting agreement to be entered into between each such person and AFC in the
form attached to the Disclosure Letter as Exhibit 4.13(d). AFC will cause to be
created a bonus pool in an amount equal to 1% of the amount by which the gross
proceeds of (1) a final, unappealable judgment in the Case or (2) the final
settlement of the Case, exceeds $500,000,000, which shall be available, in the
absolute discretion of the disinterested members of the Board of Directors of
AFC, for distribution, in whole or in part, to officers, directors and
consultants of AFC who have had involvement in the successful prosecution of the
Case.
SECTION 4.14 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time through the sixth anniversary of the
Effective Date, AFC agrees to indemnify and hold harmless each person who is now
or has been at any time prior to the date hereof or who becomes prior to the
Effective Date, a director or officer of LISB or its Subsidiaries or a director
or trustee of another entity expressly at LISB's request or direction (each, an
"Indemnified Party"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time (including the transactions contemplated by this Agreement,
including the entering into of the LISB Option Agreement), whether asserted or
claimed prior to, at or after the Effective Time, and to advance any such Costs
to each Indemnified Party as they are from time to time incurred, in each case
to the fullest extent such Indemnified Party would have been indemnified as a
director or officer of LISB or LISB Bank, as applicable, and as then permitted
under applicable law.
-50-
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.14(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify AFC thereof, but the failure to so notify
shall not relieve AFC of any liability it may have hereunder to such Indemnified
Party if such failure does not materially and substantially prejudice the
indemnifying party. In the event of any such claim, action, suit, proceeding or
investigation, (i) AFC shall have the right to assume the defense thereof with
counsel reasonably acceptable to the Indemnified Party and AFC shall not be
liable to such Indemnified Party for any legal expenses of other counsel
subsequently incurred by such Indemnified Party in connection with the defense
thereof, except that if AFC does not elect to assume such defense within a
reasonable time or counsel for the Indemnified Party at any time advises that
there are issues which raise conflicts of interest between AFC and the
Indemnified Party (and counsel for AFC does not disagree), the Indemnified Party
may retain counsel satisfactory to such Indemnified Party, and AFC shall remain
responsible for the reasonable fees and expenses of such counsel as set forth
above, to be paid promptly as statements therefor are received; PROVIDED,
however, that AFC shall be obligated pursuant to this paragraph (b) to pay for
only one firm of counsel for all Indemnified Parties in any one jurisdiction
with respect to any given claim, action, suit, proceeding or investigation
unless the use of one counsel for such Indemnified Parties would present such
counsel with a conflict of interest; (ii) the Indemnified Party will reasonably
cooperate in the defense of any such matter; and (iii) AFC shall not be liable
for any settlement effected by an Indemnified Party without its prior written
consent, which shall not be unreasonably withheld.
(c) AFC shall pay all reasonable Costs, including attorneys' fees,
that may be incurred by any Indemnified Party in successfully enforcing the
indemnity and other obligations provided for in this Section 4.14 to the fullest
extent permitted under applicable law. The rights of each Indemnified Party
hereunder shall be in addition to any other rights such Indemnified Party may
have under applicable law.
(d) For a period of six years after the Effective Time, AFC shall
cause to be maintained in effect for the former directors and officers of LISB
and LISB Bank coverage under AFC's policy of directors and officers liability
insurance no less advantageous to the beneficiaries thereof than the current
policies of directors' and officers' liability insurance maintained by LISB;
PROVIDED, however, that AFC, in its sole discretion, may substitute or, in its
sole discretion, may cause LISB to substitute therefor single premium tail
coverage with policy limits equal to LISB Bank's existing annual coverage
limits; PROVIDED, FURTHER, however, that in no event shall AFC be obligated to
expend, in order to maintain or provide insurance coverage pursuant to this
Subsection 4.14(d), an aggregate premium excess of 200% of the amount of the
annual premiums paid as of the date hereof by LISB in for such insurance (the
"Maximum Amount"); PROVIDED, FURTHER, that if the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, AFC shall obtain the most advantageous coverage of directors' and
officers' insurance obtainable for an annual premium equal to the Maximum
Amount; and PROVIDED, FURTHER, that officers and directors of LISB may be
required to make application and provide customary
-51-
representations and warranties to AFC's insurance carrier for the purpose of
obtaining such insurance.
SECTION 4.15 POOLING AND TAX-FREE REORGANIZATION TREATMENT. (a)
Prior to the Effective Time, neither AFC nor LISB shall take, fail to take, or
cause to be taken or not taken, or cause or permit any of their respective
Subsidiaries to take, fail to take, or cause to be taken or not taken, any
action within its control, which would disqualify the Merger as a
"pooling-of-interests" for accounting purposes or as a "reorganization" within
the meaning of Section 368(a) of the Code. Subsequent to the Effective Time, AFC
shall not take any action within its control that would disqualify the Merger as
such a "reorganization" under the Code, or as a pooling-of-interests for
accounting purposes.
(b) To the extent determined by AFC, in its reasonable
judgment, as necessary for the Merger to qualify as a pooling-of-interests for
accounting purposes, prior to the Effective Time, LISB shall conduct a sale of a
sufficient number of shares of LISB Common Stock currently held as treasury
shares by LISB to allow the Merger to so qualify.
SECTION 4.16 EMPLOYEES; BENEFIT PLANS AND PROGRAMS. (a) Each person
who is employed by LISB Bank immediately prior to the Effective Time (a "LISB
Employee") shall, at the effective time of the Bank Merger, become an employee
of the Association upon the same terms and conditions generally applicable to
other employees of the Association with comparable positions, with the following
special provisions:
(i) No LISB Employee shall be, or have or exercise the
authority of, an officer of the Association unless and until elected
or appointed an officer of the Association in accordance with the
Association's Bylaws which election or appointment shall be
determined and implemented as soon as practicable following the
Effective Time;
(ii) At or as soon as practicable following the Effective
Time, AFC and the Association shall establish and implement a program
of compensation and benefits designed to cover all similarly situated
employees on a uniform basis (the "New Compensation and Benefits
Program"). The New Compensation and Benefits Program may contain any
combination of new plans, continuations of plans maintained by AFC or
the Association immediately prior to the Effective Time and
continuations of plans maintained by LISB or LISB Bank immediately
prior to the Effective Time as AFC, in its discretion, may determine.
To the extent that it is not practicable to implement any constituent
part of the New Compensation and Benefits Program at the Effective
Time, AFC and the Association shall continue in effect any comparable
plan maintained immediately prior to the Effective Time for the
respective employees of AFC, LISB, the Association and LISB Bank for
a transition period. During the transition period, the persons who
were employees of LISB or
-00-
XXXX Xxxx immediately prior to the Effective Time who become
employees of AFC or the Association at the Effective Time shall
continue to participate in the plans of LISB and LISB Bank which are
continued for transitional purposes, and all other employees of AFC
or the Association will participate only in the comparable plans of
AFC and the Association which are continued for transitional
purposes;
(iii) Each constituent part of the New Compensation and
Benefits Program shall recognize, in the case of persons employed by
AFC, the Association, LISB or LISB Bank immediately prior to the
Effective Time who are also employed by the Association or AFC
immediately after the Effective Time, all service with or previously
recognized by AFC, the Association, LISB or LISB Bank as service with
AFC and the Association for eligibility and vesting purposes; and
(iv) In the case of any constituent part of the New
Compensation and Benefits Program which is a life, health or
long-term disability insurance plan: (A) such plan shall not apply
any preexisting condition limitations for conditions covered under
the applicable life, health or long-term disability insurance plans
maintained by AFC, the Association, LISB and LISB Bank as of the
Effective Time, (B) each such plan which is a health insurance plan
shall honor any deductible and co-payment or out of pocket expenses
incurred under the applicable health insurance plans maintained by
AFC, the Association, LISB and LISB Bank as of the Effective Time and
(C) each such plan which is a life or long-term disability insurance
plan shall waive any medical certification otherwise required in
order to assure the continuation of coverage at a level not less than
that in effect immediately prior to the implementation of such plan
(but subject to any overall limit on the maximum amount of coverage
under such plans).
(b) AFC shall assume the obligations of LISB and LISB Bank with
respect to the employment agreements, the Employee Plans and the Specified
Compensation and Benefits Programs identified on the Disclosure Schedule, as
they may be in effect at the Effective Time. LISB and LISB Bank shall obtain and
deliver to AFC within seven days of the execution of this Agreement an agreement
in form and substance reasonably satisfactory to AFC to the effect that the
Named Individual agrees (A) that the Specified Compensation and Benefit Programs
listed on the schedule attached to such agreement are the only Specified
Compensation and Benefit Programs and other benefits and compensation items to
which such Named Individual is entitled in connection with the transactions
contemplated hereby and that the amounts shown on such schedule should not be
less than 90% of the total maximum amounts to which such Named Individual shall
be entitled in connection with the transactions contemplated hereby and (B) to
deliver in exchange for such compensation and benefits a written release,
substantially in the form attached hereto as Exhibit 4.16(b)(a) (the "Release"),
of any further claim in, to and under the Specified Compensation and Benefit
Programs. Such Settlement Agreement shall be countersigned by AFC and shall
acknowledge that the consummation of the transactions contemplated by this
Agreement shall, upon
-53-
consummation, constitute a "change of control" and "good reason" event under the
existing terms of the Specified Compensation and Benefit Programs and that, with
respect to Named Individuals who are employees of LISB and/or LISB Bank as of
the Effective Time, AFC will provide to each such Named Individual the
termination payments and benefits to which such Named Individual is entitled
under the Special Compensation and Benefit Programs.
ARTICLE V
CONDITIONS TO CONSUMMATION
SECTION 5.01 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment of the following conditions:
(a) this Agreement shall have been approved by (i) the requisite vote
of LISB's stockholders in accordance with applicable law and regulations; and
(ii) the requisite vote of AFC's stockholders in accordance with applicable law
and regulations;
(b) all necessary regulatory or governmental approvals, consents or
waivers required to consummate the transactions contemplated hereby shall have
been obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired; and all other consents,
waivers and approvals of any third parties which are necessary to permit the
consummation of the Merger and the other transactions contemplated hereby shall
have been obtained or made except for those the failure to obtain of which would
not have a Material Adverse Effect (i) on LISB and its Subsidiaries taken as a
whole or (ii) on AFC and its Subsidiaries taken as a whole. None of the
approvals or waivers referred to herein shall contain any term or condition
which would have a Material Adverse Effect on (x) LISB and its Subsidiaries
taken as a whole or (y) AFC and its Subsidiaries taken as a whole;
(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;
(d) no statute, rule or regulation, shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any governmental authority
which prohibits, restricts or makes illegal consummation of the Merger;
(e) the Registration Statement shall have been declared effective by
the SEC and no proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; all required approvals by state
securities or "blue sky" authorities with respect to the transactions
contemplated by this Agreement shall have been obtained;
-53-
(f) AFC shall have received a letter, dated as of the Effective Date,
from its independent certified public accountants, reasonably satisfactory to
AFC and LISB, to the effect that the Merger shall be qualified to be treated as
a "pooling-of-interests" for accounting purposes by AFC;
(g) AFC shall have received the agreement referred to in Section 4.11
from each affiliate of LISB; and
(h) AFC shall have caused to be listed on the Nasdaq National Market,
or on such other market on which shares of AFC Common Stock shall then be
trading, subject only to official notice of issuance, the shares of AFC Common
Stock to be issued by AFC in exchange for the shares of LISB Common Stock.
SECTION 5.02 CONDITIONS TO THE OBLIGATIONS OF AFC AND THE ASSOCIATION
UNDER THIS AGREEMENT. The obligations of AFC to effect the Merger shall be
further subject to the satisfaction of the following additional conditions, any
one or more of which may be waived by AFC:
(a) each of the obligations of LISB required to be performed by it at
or prior to the Closing pursuant to the terms of this Agreement shall have been
duly performed and complied with in all material respects and the
representations and warranties of LISB contained in this Agreement shall be true
and correct, subject to Sections 2.01 and 2.02, as of the date of this Agreement
and as of the Effective Time as though made at and as of the Effective Time
(except as to any representation or warranty which specifically relates to an
earlier date). AFC shall have received a certificate to the foregoing effect
signed by the president and the chief financial or principal accounting officer
of LISB;
(b) all action required to be taken by, or on the part of, LISB to
authorize the execution, delivery and performance of this Agreement and the
consummation by LISB of the transactions contemplated hereby shall have been
duly and validly taken by the Board of Directors and stockholders of LISB, and
AFC shall have received certified copies of the resolutions evidencing such
authorization;
(c) AFC shall have received certificates (such certificates to be
dated as of a day as close as practicable to the date of the Closing) from
appropriate authorities as to the good standing of LISB and the corporate
existence of LISB Bank;
(d) LISB shall have obtained the consent or approval of each person
(other than the governmental approvals or consents referred to in Section
5.01(b)) whose consent or approval shall be required in order to permit the
succession by the surviving corporation pursuant to the Merger to any
obligation, right or interest of LISB or any Subsidiary of LISB under any loan
or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to obtain such consents
and approvals would not, individually or in the aggregate, have a Material
Adverse Effect on AFC (after giving effect to the consummation of the
transactions
-55-
contemplated hereby) or upon the consummation of the transactions contemplated
hereby;
(e) Neither a Distribution Date nor a Triggering Event, as such terms
are defined in the LISB Rights Agreement, shall have occurred, and the LISB
Rights shall not have become nonredeemable and shall not become nonredeemable
upon consummation of the Merger and the LISB Rights shall not become exercisable
for capital stock of AFC upon consummation of the Merger;
(f) AFC shall have received an opinion of Xxxxxxx Xxxxxxxx & Xxxx,
counsel to AFC, dated as of the Effective Date in form and substance customary
in transactions of the type contemplated hereby, and reasonably satisfactory to
AFC, substantially to the effect that on the basis of the facts, representations
and assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code and that accordingly:
(i) No gain or loss will be recognized by AFC, the
Association or LISB as a result of the Merger;
(ii) Except to the extent of any cash received in lieu of a
fractional share interest in AFC Common Stock, no gain or loss will
be recognized by the stockholders of LISB who exchange their LISB
Stock for AFC Common Stock pursuant to the Merger;
(iii) The tax basis of AFC Common Stock received by
stockholders who exchange their LISB Common Stock for AFC Common
Stock in the Merger will be the same as the tax basis of LISB Common
Stock surrendered pursuant to the Merger, reduced by any amount
allocable to a fractional share interest for which cash is received
and increased by any gain recognized on the exchange; and
(iv) The holding period of AFC Stock received by each
stockholder in the Merger will include the holding period of LISB
Common Stock exchanged therefor, provided that such stockholder held
such LISB Common Stock as a capital asset on the date of the Merger.
Such opinion may be based on, in addition to the review of such
matters of fact and law as Xxxxxxx Xxxxxxxx & Wood considers appropriate, (i)
representations made at the request of Xxxxxxx Xxxxxxxx & Xxxx by AFC, LISB,
stockholders of AFC or LISB, or any combination of such persons and (ii)
certificates provided at the request of Xxxxxxx Xxxxxxxx & Wood by officers of
AFC, LISB and other appropriate persons.
-56-
SECTION 5.03 CONDITIONS TO THE OBLIGATIONS OF LISB. The obligations
of LISB to effect the Merger shall be further subject to the satisfaction of the
following additional conditions, any one or more of which may be waived by LISB:
(a) each of the obligations of AFC and the Association, respectively,
required to be performed by it at or prior to the Closing pursuant to the terms
of this Agreement shall have been duly performed and complied with in all
material respects and the representations and warranties of AFC and the
Association contained in this Agreement shall be true and correct, subject to
Sections 2.01 and 2.02, as of the date of this Agreement and as of the Effective
Time as though made at and as of the Effective Time (except as to any
representation or warranty which specifically relates to an earlier date). LISB
shall have received a certificate to the foregoing effect signed by the
president and the chief financial officer of AFC;
(b) all action required to be taken by, or on the part of, AFC and
the Association to authorize the execution, delivery and performance of this
Agreement and the consummation by AFC and the Association of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors and stockholders of AFC, and LISB shall have received certified copies
of the resolutions evidencing such authorization;
(c) AFC shall have obtained the consent or approval of each person
(other than the governmental approvals or consents referred to in Section
5.01(b)) whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument to which
AFC or any of its Subsidiaries is a party or is otherwise bound, except those
for which failure to obtain such consents and approvals would not, individually
or in the aggregate, have a Material Adverse Effect on AFC (after giving effect
to the transactions contemplated hereby) or upon the consummation of the
transactions contemplated hereby;
(d) Neither a Distribution Date nor a Triggering Event, as such terms
are defined in the AFC Rights Agreement, shall have occurred, and the AFC Rights
shall not have become nonredeemable and shall not become nonredeemable upon
consummation of the Merger;
(e) LISB shall have received certificates (such certificates to be
dated as of a day as close as practicable to the date of the Closing) from
appropriate authorities as to the good standing of AFC and corporate existence
of the Association;
(f) LISB shall have received an opinion of Milbank Tweed Hadley &
XxXxxx, counsel to LISB, dated as of the Effective Date, in form and substance
customary in transactions of the type contemplated hereby, and reasonably
satisfactory to LISB, substantially to the effect that on the basis of the
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that accordingly:
-57-
(i) No gain or loss will be recognized by AFC, the
Association or LISB as a result of the Merger;
(ii) Except to the extent of any cash received in lieu of a
fractional share interest in AFC Common Stock, no gain or loss will be
recognized by the stockholders of LISB who exchange their LISB Common Stock for
AFC Common Stock pursuant to the Merger;
(iii) The tax basis of AFC Common Stock received by
stockholders who exchange their LISB Common Stock for AFC Common Stock in the
Merger will be the same as the tax basis of LISB Common Stock surrendered
pursuant to the Merger, reduced by any amount allocable to a fractional share
interest for which cash is received and increased by any gain recognized on the
exchange; and
(iv) The holding period of AFC Stock received by each
stockholder in the Merger will include the holding period of LISB Common Stock
exchanged therefor, provided that such stockholder held such LISB Common Stock
as a capital asset on the date of the Merger.
Such opinion may be based on, in addition to the review of such
matters of fact and law as Milbank Tweed Hadley & XxXxxx considers appropriate,
(i) representations made at the request of Milbank Tweed Hadley & XxXxxx by AFC,
the Association, LISB, stockholders of AFC or LISB, or any combination of such
persons and (ii) certificates provided at the request of Milbank Tweed Hadley &
XxXxxx by officers of AFC, the Association, LISB and other appropriate persons.
ARTICLE VI
TERMINATION
SECTION 6.01 TERMINATION. This Agreement may be terminated, and the
Merger abandoned, at or prior to the Effective Date, either before or after its
approval by the stockholders of LISB and AFC:
(a) by the mutual consent of AFC and LISB, if the board of
directors of each so determines by vote of a majority of the members of its
entire board;
(b) by AFC or LISB, if its board of directors so determines
by vote of a majority of the members of its entire board, in the event of (i)
the failure of the stockholders of LISB or AFC to approve the Agreement at its
meeting called to consider such approval; PROVIDED, however, that LISB or AFC,
as the case may be, shall only be entitled to terminate the Agreement pursuant
to this clause (i) if it has complied in all material respects with its
obligations under Sections 4.08 and 4.09, or (ii) a material breach by the other
party hereto of any representation, warranty, covenant or agreement contained
herein which causes the conditions set forth in Section 5.02(a) (in the case of
termination by AFC) and Section 5.03(a) (in the case of the termination by LISB)
not to be satisfied
-58-
and such breach is not cured within 25 business days after written notice of
such breach is given to the party committing such breach by the other party; or
which breach is not capable of being cured by the date set forth in Section
6.01(d) or any extension thereof;
(c) by AFC or LISB by written notice to the other party if
either (i) any approval, consent or waiver of a governmental agency required to
permit consummation of the transactions contemplated hereby shall have been
denied and such denial is final and non-appealable or (ii) any governmental
authority of competent jurisdiction shall have issued a final, unappealable
order enjoining or otherwise prohibiting consummation of the transactions
contemplated by this Agreement;
(d) by AFC or LISB, 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, 1999 (the "Initial Termination Date"); PROVIDED that if
as of such date all necessary regulatory or governmental approvals, consents or
waivers required to consummate the transactions contemplated hereby shall not
have been obtained but all other conditions to the consummation of the Merger
(other than the delivery of executed documents at the Closing) shall be
fulfilled, the Initial Termination Date shall be extended to June 30, 1999,
unless the failure to so consummate by such time is due to the breach of any
representation, warranty or covenant contained in this Agreement by the party
seeking to terminate; or
(e) by AFC, if its board of directors so determines by vote of a
majority of the members of its entire board, if one of the events set forth in
Section 6.03(a) or (b) occurs.
(f) This Agreement may be terminated, and the Merger abandoned, at or
prior to the Effective Time, either before or after its approval by the
stockholders of LISB and AFC, by LISB, if its board of directors so determines
by a majority vote of members of its entire board, at any time during the
five-day period commencing on the Valuation Date (the "Effective Termination
Date"), that both of the following conditions are satisfied:
(i) The AFC Market Value on the Valuation Date shall be
less than an amount equal to $49.76, adjusted as indicated in the
last sentence of this Section 6.01(f) (the "Initial AFC Market
Value"); and
(ii) (A) the number obtained by dividing the AFC Market
Value on the Valuation Date by the Initial AFC Market Value (the "AFC
Ratio") shall be less than (B) the number obtained by dividing the
Final Index Price by the Initial Index Price and subtracting.175
from the quotient in this clause (ii)(B) (the "Index Ratio");
SUBJECT, HOWEVER, to the following three sentences. If LISB elects to exercise
its termination right pursuant to this Section 6.01(f), it shall give prompt
written notice thereof to AFC; PROVIDED, that such notice of election to
terminate may be withdrawn at any time prior to the Effective Termination
-59-
Date. During the FIVE-DAY PERIOD commencing with its receipt of such notice, AFC
shall have the option to increase the consideration to be received by the
holders of AFC Common Stock hereunder, by adjusting the Exchange Ratio to equal
the lesser of (x) a number equal to a fraction, the numerator of which is 1.15
multiplied by the Initial AFC Market Value and the denominator of which is the
AFC Market Value, and (y) a number equal to a fraction, the numerator of which
is the Index Ratio multiplied by 1.15 and the denominator of which is the AFC
Ratio. If AFC so elects it shall give, within such five day period, written
notice to LISB of such election and the revised Exchange Ratio, whereupon no
termination shall be deemed to have occurred pursuant to this Section 6.01(f)
and this Agreement shall remain in full force and effect in accordance with its
terms (except as the Exchange Ratio shall have been so modified).
For purposes of this Section 6.01(f), the following terms shall have
the meanings indicated below:
"Final Index Price" means the sum of the Final Prices for each
company comprising the Index Group multiplied by the weighting set forth
opposite such company's name in the definition of Index Group below.
"Final Price," with respect to any company belonging to the Index
Group, means the average of the daily closing sales prices of a share of common
stock of such company, as reported on the consolidated transaction reporting
system for the market or exchange on which such common stock is principally
traded, during the period of 30 trading days ending on the Valuation Date.
"Index Group" means the 25 financial institution holding companies
listed below, the common stock of all of which shall be publicly traded and as
to which there shall not have been an Acquisition Transaction (as defined in
Section 6.03) involving such company publicly announced at any time during the
period beginning on the date of this Agreement and ending on the Valuation Date.
In the event that the common stock of any such company ceases to be publicly
traded or an Acquisition proposal involving any such company is announced at any
time during the period beginning on the date of this Agreement and ending on the
Valuation Date, such company will be removed from the Index Group, and the
weights attributed to the remaining companies will be adjusted proportionately
for purposes of determining the Final Index Price and the Initial Index Price.
The 25 financial institution holding companies and the weights attributed to
them are as follows:
HOLDING COMPANY WEIGHTING
--------------- ---------
ALBANK Financial 1.44%
Bank United Corp. 3.67%
Bay View Capital 0.93%
Charter One Financial 9.45%
-60-
HOLDING COMPANY WEIGHTING
--------------- ---------
Commercial Federal Corp. 2.67%
Dime Bancorp, Inc. 7.75%
Xxxxxx Financial 1.92%
First Empire State 7.15%
Golden West Financial 12.18%
GreenPoint Financial 6.96%
Xxxxxx Financial 2.02%
MAF Bancorp 1.31%
North Fork Bancorp 6.04%
Northwest Bancorp 1.76%
People's Bank (MHC) 5.33%
Peoples Heritage Financial 3.09%
Queens County Bancorp 1.49%
Xxxxxx Bancorp 2.34%
Sovereign Bancorp 4.74%
St. Xxxx Bancorp 1.96%
Staten Island Bancorp 2.06%
TCF Financial 7.02%
TR Financial 1.36%
Washington Federal Inc. 3.25%
Xxxxxxx Financial 2.11%
"Initial Index Price" means the sum of the per share closing price of
the common stock of each company comprising the Index Group multiplied by the
applicable weighting, as such prices are reported on the consolidated
transaction reporting system for the market or exchange on which such common
stock is principally traded on the trading day immediately preceding the public
announcement of this Agreement.
"AFC Market Value" shall mean the average of the mean between the
closing high bid and low asked price of a share of AFC Common Stock, as reported
on the Nasdaq Stock Market National Market System, for the 30 consecutive
trading days immediately preceding the Valuation Date.
"Valuation Date" means the day that is the latest of (i) the day of
expiration of the last waiting period with respect to any of the required
regulatory approvals, as defined in Section 5.01(b), (ii) the day on which the
last of the requested required approvals, as defined in Section 5.01(b), is
obtained and (iii) the day on which the last of the required stockholder
approvals have been received.
-61-
If AFC or any company belonging to the Index Group declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the date of this
Agreement and the Valuation Date, the prices for the common stock of such
company shall be appropriately adjusted for the purposes of applying this
Section 6.01(f).
SECTION 6.02 EFFECT OF TERMINATION. In the event of the termination
of this Agreement by either AFC or LISB, as provided above, this Agreement shall
thereafter become void and, subject to the provisions of Section 6.03, there
shall be no liability on the part of any party hereto or their respective
officers or directors, except that (a) any such termination shall be without
prejudice to the rights of any party hereto arising out of the breach by any
other party of any covenant, representation or obligation contained in this
Agreement and (b) the obligations of the parties under Section 6.03 and Section
8.06 shall survive.
SECTION 6.03 THIRD PARTY TERMINATION FEE TO AFC. In recognition of
the efforts, expenses and other opportunities foregone by AFC while structuring
the Merger, the parties agree that:
(a) LISB shall pay to AFC a termination fee of Thirty Million and
00/100 Dollars ($30,000,000.00) plus AFC's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) in cash on demand if, after a BONA FIDE proposal is made by a third
party to LISB or its stockholders to engage in an Acquisition Transaction, any
of the following occur:
(i) LISB shall have breached any covenant or obligation
contained in this Agreement and such breach would entitle AFC to terminate the
Agreement;
(ii) the holders of LISB stock shall not have approved the
Agreement at the meeting of such stockholders held for the purpose of voting on
the Agreement, such meeting shall not have been held or shall have been canceled
prior to termination of the Agreement; or
(iii) LISB's Board of Directors shall have withdrawn or
modified in a manner adverse to AFC the recommendation of LISB's Board of
Directors with respect to the Agreement; and
(b) LISB shall pay to AFC a termination fee of Sixty Million and
00/100 Dollars ($60,000,000.00) plus AFC's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) in cash on demand if, during a period of 18 months after the date
hereof either if the following occurs:
(i) the acquisition by any person other than AFC or an
affiliate of AFC of beneficial ownership of 10% or more of the then outstanding
voting power of LISB; or
-62-
(ii) LISB or any of its Subsidiaries, without having
received AFC's prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as defined herein) 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 Exchange Act and the rules and
regulations thereunder) other than AFC or any of its Subsidiaries or the Board
of Directors of LISB shall have recommended that the stockholders of LISB
approve or accept any Acquisition Transaction with any person other than AFC or
any of its Subsidiaries. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving LISB, (y) a purchase, lease or other acquisition of all
or substantially all of the assets of LISB 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 LISB;
PROVIDED, that the term "Acquisition Transaction" does not include any internal
merger or consolidation involving only LISB and/or its Subsidiaries.
Any fee payable to AFC pursuant to Section 6.03(b) shall be reduced
dollar for dollar to the extent that any fee is actually paid pursuant to
Section 6.03(a). Any fee payable to AFC pursuant to this Section 6.03 shall be
reduced dollar for dollar (but shall not be reduced to a negative number) to the
extent that the Total Profit (as defined in the LISB Option Agreement) exceeds
$60,000,000. Notwithstanding the foregoing, LISB shall not be obligated to pay
to AFC such termination fees in the event that (i) LISB or AFC validly terminate
this Agreement pursuant to Section 6.01(a) or 6.01(c) or (ii) LISB terminates
this Agreement pursuant to Section 6.01(b)(ii) or 6.01(d).
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 7.01 EFFECTIVE DATE AND EFFECTIVE TIME. The closing of the
transactions contemplated hereby shall take place at the offices of Xxxxxxx
Xxxxxxxx & Wood, Two World Trade Center, New York, New York 10048, on a date no
later than five (5) business day following the latest to occur of (i) the
expiration of the last applicable waiting period in connection with notices to
and approvals of governmental authorities shall occur (ii) the effective date of
the last order, approval or exemption of any other governmental authority
approving or exempting the Merger if such action is required, and (iii) all
conditions to the consummation of this Agreement are satisfied or waived, or on
such other date as may be agreed by the parties (the date of such closing being
referred to herein as the "Closing Date"). Prior to the Closing Date, AFC and
LISB shall execute a Certificate of Merger in accordance with all appropriate
legal requirements which shall be filed as required by law on the Closing Date,
and the Merger provided for therein shall become effective upon such filing or
on such date and time 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 as set forth in such
Certificate of Merger.
-63-
SECTION 7.02 DELIVERIES AT THE CLOSING. Subject to the provisions of
Articles V and VI, on the Closing Date there shall be delivered to AFC and LISB
the documents and instruments required to be delivered under Article V.
ARTICLE VIII
CERTAIN OTHER MATTERS
SECTION 8.01 CERTAIN DEFINITIONS; INTERPRETATION. As used in this
Agreement, the following terms shall have the meanings indicated:
"material" means material to AFC or LISB (as the case may be) and its
respective Subsidiaries, taken as a whole.
"person" includes an individual, corporation, limited liability
company, partnership, association, trust or unincorporated organization.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of, Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for ease of reference only and shall not affect
the meaning or interpretation of this Agreement. Whenever the words "include",
"includes", or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation." Any singular term in this Agreement
shall be deemed to include the plural, and any plural term the singular. Any
reference to gender in this Agreement shall be deemed to any other gender.
SECTION 8.02 SURVIVAL. Only those agreements and covenants of the
parties that are by their terms applicable in whole or in part after the
Effective Time, including Section 4.14 of this Agreement, shall survive the
Effective Time. All other representations, warranties, agreements and covenants
shall be deemed to be conditions of the Agreement and shall not survive the
Effective Time. If the Agreement shall be terminated, the agreements of the
parties in the last three sentences of Section 4.03(a) and Section 8.06 shall
survive such termination.
SECTION 8.03 WAIVER; AMENDMENT. Prior to the Effective Time, any
provision of this Agreement may be: (i) waived in writing by the party
benefitted by the provision; or (ii) amended or modified at any time (including
the structure of the transaction) by an agreement in writing between the parties
hereto except that, after the vote by the stockholders of LISB or AFC, no
amendment may be made that would reduce the Merger Consideration or contravene
any provision of the Delaware General Corporation Law or federal banking laws,
rules and regulations.
-64-
SECTION 8.04 COUNTERPARTS. This Agreement 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 8.05 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of New York, without
regard to conflicts of laws principles.
SECTION 8.06 EXPENSES. Each party hereto will bear all expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby, except that AFC shall pay all printing expenses and SEC
filing fees.
SECTION 8.07 NOTICES. All notices, requests, acknowledgments and
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, overnight courier or
facsimile transmission (confirmed in writing) to such party at its address or
facsimile number set forth below or such other address or facsimile transmission
as such party may specify by notice to the other party hereto.
If to LISB:
Long Island Bancorp, Inc.
000 Xxx Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Facsimile:
Attention: Xxxx X. Xxxxxxx, Xx.
Chairman and Chief Executive Officer
With copies to:
Milbank Tweed Hadley & XxXxxx
Xxx Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxx X. Xxxxxxxx, Esq.
If to AFC, to:
Astoria Financial Corporation
Xxx Xxxxxxx Xxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxx Xxxx 00000-0000
Facsimile:(000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Xx.
Chairman, President and Chief Executive Officer
-65-
With copies to:
Xxxxxxx Xxxxxxxx & Xxxx
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Omer X.X. Xxxxxxxx, Esq.
SECTION 8.08 ENTIRE AGREEMENT, ETC. This Agreement, together with the
Option Agreement and the Disclosure Letters, 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 Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Except for Section 4.14, nothing in this Agreement is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 8.09 ASSIGNMENT. This Agreement may not be assigned by
either party hereto without the written consent of the other party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers as of the 2nd day of April, 1998.
ASTORIA FINANCIAL CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
-----------------------------------------------
Xxxxxx X. Xxxxxxx, Xx.
Chairman, President and Chief Executive Officer
LONG ISLAND BANCORP, INC.
By: /s/ Xxxx X. Xxxxxxx, Xx.
-----------------------------------------------
Xxxx X. Xxxxxxx, Xx.
Chairman and Chief Executive Officer
Exhibit 1.05
================================================================================
PLAN OF BANK MERGER
DATED AS OF THE __th DAY OF _________, 1998
BY AND BETWEEN
THE LONG ISLAND SAVINGS BANK, FSB
AND
ASTORIA FEDERAL SAVINGS AND LOAN ASSOCIATION
================================================================================
THIS PLAN OF BANK MERGER ("Plan of Merger") dated
__________, 1998, is by and between Astoria Federal Savings and Loan Association
(the "Association"), a federally chartered savings bank and a wholly-owned
subsidiary of Astoria Financial Corporation, a Delaware corporation ("AFC"), and
The Long Island Savings Bank, FSB (the "LISB Bank") a federally chartered stock
savings bank and a wholly owned subsidiary of Long Island Bancorp, Inc., a
Delaware corporation ("LISB Bank"), pursuant to an Agreement and Plan of Merger
dated as of ____________, 1998 (the "Agreement"), by and between AFC and LISB.
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Agreement.
BACKGROUND
----------
1. The authorized capital stock of the Association consists
of __________ shares of common stock, par value $0.10 per share (the
"Association Common Stock"), of which 1,000 shares are issued and outstanding,
and __________ shares of preferred stock, par value $1.00 per share, of which
none are issued and outstanding.
2. The authorized capital stock of the LISB Bank consists
of _________ shares of common stock, par value $1.00 per share (the "LISB Bank
Common Stock"), of which _________ shares are issued and outstanding.
3. The respective Boards of Directors of the Association
and the LISB Bank deem the merger of the LISB Bank with and into the
Association, pursuant to the terms and conditions set forth or referred to
herein, to be desirable and in the best interests of the respective corporations
and their respective shareholders.
4. The respective Boards of Directors of the Association
and the LISB Bank have adopted resolutions approving this Plan of Merger. The
respective Boards of Directors of the AFC, the Association, the LISB and the
LISB Bank have adopted resolutions approving the Agreement, pursuant to which
this Plan of Merger is being executed by the Association and the LISB Bank.
AGREEMENT
---------
In consideration of the promises and of the mutual
covenants and agreements herein contained, and in accordance with the applicable
laws and regulations of the United States of America and the State of New York,
the Association and the LISB Bank, intending to be legally bound hereby, agree:
ARTICLE 1.121
MERGER
------
Subject to the terms and conditions of this Plan of Merger
and in accordance with the applicable laws and regulations of the United States
of America and the State of New York, on the
Effective Date (as that term is defined in Article V hereof) the LISB Bank shall
merge with and into the Association; the separate existence of the LISB Bank
shall cease; and the Association shall be the surviving corporation (such
transaction is referred to herein as the "Merger" and the Association, as the
surviving corporation in the Merger, is referred to herein as the "Surviving
Bank"). The Association, whose name will remain unaffected by the Merger, will
have its home office at ________________ and its branch offices at the locations
listed on Exhibit "A."
ARTICLE 1.122
CHARTER AND BYLAWS
------------------
On and after the Effective Date, the Federal Stock Charter
and Bylaws of the Association, as in effect immediately prior to the Effective
Date, shall automatically be and remain the Federal Stock Charter and Bylaws of
the Surviving Bank, until altered, amended, or repealed.
ARTICLE 1.123
BOARD OF DIRECTORS
------------------
3.(a) BOARD OF DIRECTORS. On and after the Effective Date,
the directors of the Surviving Bank shall consist of the directors of the
Association duly elected and holding office immediately prior to the Effective
Date and the directors of LISB named herein. The names and residence addresses
of the directors are:
NAME RESIDENCE ADDRESS
ARTICLE 1.124
CONVERSION OF SHARES
--------------------
4.(b) COMMON STOCK OF THE ASSOCIATION. Each share of the
Association Common Stock issued and outstanding immediately prior to the
Effective Date shall, on and after the Effective Date, continue to be issued and
outstanding as a share of common stock of the Surviving Bank.
4.(c) COMMON STOCK OF THE LISB BANK. Each share of the
LISB Bank Common Stock issued and outstanding immediately prior to the Effective
Date, and each share of the LISB Bank Common Stock issued and held in the
treasury of the LISB Bank as of the Effective Date, if any, shall, on the
Effective Date, be cancelled, and no cash, stock or other property shall be
delivered in exchange therefor.
ARTICLE 1.125
EFFECTIVE DATE OF THE MERGER
----------------------------
The Merger shall be effective on the date on which all
filings with government agencies, as may be required under applicable laws and
regulations for the Merger to become effective, are made and accepted by the
applicable agencies (the "Effective Date").
ARTICLE 1.126
EFFECT OF THE MERGER
--------------------
6.(d) SEPARATE EXISTENCE. On the Effective Date the
separate existence of the LISB Bank shall cease and all of the property (real,
personal and mixed), rights, powers, duties and obligations of the LISB Bank
shall be taken and deemed to be transferred to and vested in the Surviving Bank,
without further act or deed, as provided by applicable laws and regulations.
6.(e) SAVINGS ACCOUNTS. After the Effective Date, the
Association will continue to issue savings accounts on the same basis as
immediately prior to the Effective Date.
6.(f) LIQUIDATION ACCOUNT. After the Effective Date, the
Association will continue to maintain the Association's liquidation account for
the benefit of eligible account holders on the same basis as immediately prior
to the Effective Date, and the LISB Bank's liquidation account for the benefit
of eligible account holders shall automatically be expressly assumed by the
Association, as of the Effective Date, on the same basis as it existed
immediately prior to the Effective Date.
ARTICLE 1.127
CONDITIONS PRECEDENT
--------------------
The obligations of the Association and the LISB Bank to
effect the Merger shall be subject to satisfaction, unless duly waived by the
party permitted to do so, of the conditions precedent set forth in the
Agreement.
ARTICLE 1.128
TERMINATION
-----------
This Plan of Merger shall terminate upon any termination of
the Agreement in accordance with its terms; PROVIDED, HOWEVER, that any such
termination of this Plan of Merger shall not relieve any party hereto from
liability on account of a breach by such party of any of the terms hereof or
thereof.
ARTICLE 1.129
AMENDMENT
---------
Subject to applicable law, this Plan of Merger may be
amended at any time prior to consummation of the Merger, but only by an
instrument in writing signed by duly authorized officers on behalf of the
parties hereto.
ARTICLE 1.1210
MISCELLANEOUS
-------------
10.(g) EXTENSIONS; WAIVERS. Each party, by a written
instrument signed by a duly authorized officer, may extend the time for the
performance of any ------------------- of the obligations or other acts of the
other party hereto and may waive compliance with any of the covenants, or
performance of any of the obligations, of the other party contained in this Plan
of Merger.
10.(h) NOTICES. Any notice or other communication required
or permitted under this Plan of Merger shall be given, and shall be effective,
in accordance with the provisions of Section 8.07 of the Agreement.
10.(i) CAPTIONS. The headings of the several Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this Plan
of Merger.
10.(j) COUNTERPARTS. For the convenience of the parties
hereto, this Plan of Merger may be executed in several counterparts, each of
which shall be deemed the original, but all of which together shall constitute
one and the same instrument.
10.(k) GOVERNING LAW. This Plan of Merger shall be governed
by and construed in accordance with the laws of the United States of America
and, in the absence of controlling Federal law, in accordance with the laws of
the State of New York.
IN WITNESS WHEREOF, the Association and LISB Bank have
caused this Plan of Merger to be executed by their duly authorized officers and
their corporate seals to be hereunto affixed on the date first written above.
By________________________________
Xxxxxx X. Xxxxxxx, Xx.
Chairman, President and Chief Executive Officer
By________________________________
Xxxx X. Xxxxxxx, Xx.
Chairman and Chief Executive Officer
EXHIBIT "A"
TO PLAN OF MERGER
-----------------
Association
BRANCH LOCATIONS
----------------
Exhibit 4.11(a)
to Agreement and Plan of Merger
[Form of Affiliate Letter for Long Island Bancorp, Inc. Affiliates]
April ___, 1998
Astoria Financial Corporation
Xxx Xxxxxxx Xxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
I am delivering this letter to you in connection with the proposed
merger (the "Merger") of Long Island Bancorp, Inc. ("LISB") with and into
Astoria Financial Corporation, ("AFC"), pursuant to the Agreement and Plan of
Merger dated April ___, 1998 (the "Agreement") between LISB and AFC. Capitalized
terms used herein and not otherwise defined have the meanings assigned to them
in the Agreement. I currently own _______ shares of common stock, par value
$0.01 per share, of LISB ("LISB Common Stock"). As a result of the Merger, I
will receive shares of common stock of AFC, par value $0.01 per share ("AFC
Common Stock), in exchange for my LISB Common Stock.
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of LISB, as the term "affiliate" is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations
promulgated under the Securities Act of 1993, as amended (the "1933 Act") by the
Securities and Exchange Commission (the "Commission") and as the term
"affiliate" is used for purposes of the Commission's rules and regulations
applicable to the determination of whether a merger can be accounted for as a
"pooling-of-interests" as specified in the Commission's Accounting Series
Release 135, as amended by Staff Accounting Bulletins Nos. 65 and 76 ("ASR
135").
I represent to and agree with AFC:
A. TRANSFER REVIEW RESTRICTIONS. During the period beginning on the
date hereof and ending 30 days prior to the consummation of the Merger, I shall
not sell, transfer, reduce my risk with respect to or otherwise dispose of
("transfer") any LISB Common Stock owned by me, and I shall not permit any
relative who shares my home, or any person or entity who or which I control to
transfer any LISB Common Stock owned by such person or entity, without notifying
AFC in advance of the proposed transfer and giving AFC a reasonable opportunity
to review the transfer before it is consummated. AFC, if advised to do so by its
independent public accountants, may instruct me not to make or permit the
transfer because it may interfere with the "pooling-of-interests" treatment of
the Merger. I shall abide by any such instructions.
B. TRANSFER RESTRICTIONS DURING MERGER CONSUMMATION PERIOD. I shall
not transfer any LISB Common Stock owned by me, and I shall not permit any
relative who shares my home, or any person or entity who or which I control, to
transfer any LISB Common Stock owned by such person or entity during the period
beginning 30 days prior to the consummation of the Merger and ending immediately
after financial results covering at least 30 days of post-Merger combined
operations have been published by AFC by means of the filing of a Form 10-Q or
Form 8-K under the
Securities Xxxxxxxx Xxx 0000, as amended, the issuance of a quarterly earnings
report, or any other public issuance which satisfies the requirements of ASR
135.
C. COMPLIANCE WITH RULE 145. I have been advised that the issuance of
AFC Common Stock to me pursuant to the Merger will be registered with the
Commission under the 1933 Act on a Registration Statement on Form S-4. However,
I have also been advised that, since I may be deemed to be an affiliate of LISB
at the time the Merger is submitted for a vote of LISB's stockholders, any
transfer by me of AFC Common Stock is restricted under Rule 145 promulgated by
the Commission under the 1933 Act. I agree not to transfer any AFC Common Stock
received by me or any of my affiliates unless (i) such transfer is made in
conformity with the volume and other limitations of Rule 145 promulgated by the
Commission under the 1933 Act, (ii) in the opinion of AFC counsel or counsel
reasonably acceptable to AFC, such transfer is otherwise exempt from
registration under the 1933 Act or (iii) such transfer is registered under the
1933 Act.
D. STOP TRANSFER INSTRUCTIONS; LEGEND ON CERTIFICATES. I also
understand and agree that stop transfer instructions will be given to AFC
transfer agents with respect to the AFC Common Stock received by me and any of
my affiliates and that there will be placed on the certificates of the AFC
Common Stock issued to me and any of my affiliates, or any substitutions
therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN
A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, APPLIES. THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF
AN AGREEMENT DATED APRIL __, 1998 BETWEEN THE REGISTERED HOLDER
HEREOF AND ASTORIA FINANCIAL CORPORATION, A COPY OF WHICH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICES OF ASTORIA FINANCIAL CORPORATION.
E. CONSULTATION WITH COUNSEL. I have carefully read this letter and
the Agreement and discussed the requirements of such documents and other
applicable limitations upon my ability to transfer LISB Common Stock or AFC
Common Stock to the extent I felt necessary with my counsel or counsel for LISB.
F. VOTING OF SHARES. I will be present (in person or by proxy) at all
meetings of shareholders of LISB called to vote for approval of the Merger so
that all shares of LISB Common Stock I then own will be counted for the purpose
of determining the presence of a quorum at such meetings and I will vote all
such shares (i) in favor of approval and adoption of the Agreement and the
transactions contemplated thereby (including any amendments or modifications of
the terms thereof approved by the Board of Directors of LISB), and (ii) against
approval or adoption of any other merger, business combination,
recapitalization, partial liquidation or similar transaction involving LISB.
Execution of this letter is not an admission on my part that I am an
"affiliate" of LISB as described in the second paragraph of this letter, or a
waiver of any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter. This letter shall terminate
concurrently with any termination of the Agreement in accordance with its terms.
Very truly yours,
__________________________________
Name:
Title:
ACCEPTED THIS ____ DAY OF
APRIL, 1998 BY
ASTORIA FINANCIAL CORPORATION
By:______________________________________
Name:
Title:
Exhibit 4.11(b)
to Agreement and Plan of Merger
[Form of Affiliate Letter for Astoria Financial Corporation Affiliates]
April ___, 1998
Long Island Bancorp, Inc.
000 Xxx Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
I am delivering this letter to you in connection with the proposed
merger (the "Merger") of Long Island Bancorp, Inc. ("LISB") with and into
Astoria Financial Corporation, a Delaware corporation ("AFC"), pursuant to the
Agreement and Plan of Merger dated April ___, 1998 (the "Agreement"). I
currently own ________ shares of AFC common stock, par value of $0.01 per share
("AFC Common Stock").
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of AFC, as the term "affiliate" is used for purposes
of the rules and regulations of the Securities and Exchange Commission (the
"Commission") applicable to the determination of whether a merger can be
accounted for as a "pooling-of-interests" as specified in the Commission's
Accounting Series Release 135, as amended by Staff Accounting Bulletins Nos. 65
and 76 ("ASR 135").
I represent and covenant with AFC and LISB that:
A. TRANSFER REVIEW RESTRICTIONS. During the period beginning on the
date hereof and ending 30 days prior to the consummation of the Merger, I shall
not sell, transfer, reduce my risk with respect to or otherwise dispose of
("transfer") any AFC Common Stock owned by me, and I shall not permit any
relative who shares my home, or any person or entity who or which I control, to
transfer any AFC Common Stock owned by such person or entity, without notifying
AFC in advance of the proposed transfer and giving AFC a reasonable opportunity
to review the transfer before it is consummated. AFC, if advised to do so by its
independent public accountants, may instruct me not to make or permit the
transfer because it may interfere with the "pooling-of-interests" treatment of
the Merger. I shall abide by any such instructions.
B. TRANSFER RESTRICTIONS DURING MERGER CONSUMMATION PERIOD. During
the period beginning 30 days prior to the consummation of the Merger and ending
immediately after financial results covering at least 30 days of post-Merger
combined operations have been published by AFC by means of filing of a Form 10-Q
or Form 8-K under the Securities Exchange Act of 1934, as amended, the issuance
of a quarterly earnings report, or any other public issuance which satisfies the
requirements of ASR 135, I shall not transfer any AFC Common Stock owned by me,
and I shall not permit any relative who shares my home, or any person or entity
who or which I control, to transfer any AFC Common Stock owned by such person or
entity.
C. CONSULTATION WITH COUNSEL. I have carefully read this letter and
the Agreement and discussed the requirements of such documents and other
applicable limitations upon my ability to transfer AFC Common Stock to the
extent I felt necessary with my counsel or counsel for AFC.
D. VOTING OF SHARES. I will be present (in person or by proxy) at all
meetings of shareholders of AFC called to vote for approval of the Merger so
that all shares of AFC Common Stock I then own will be counted for the purpose
of determining the presence of a quorum at such meetings and I will vote all
such shares (i) in favor of approval and adoption of the Agreement and the
transactions contemplated thereby (including any amendments or modifications of
the terms thereof approved by the Board of Directors of AFC), and (ii) against
approval or adoption of any other merger, business combination,
recapitalization, partial liquidation or similar transaction involving AFC.
Execution of this letter is not an admission on my part that I am an
"affiliate" of AFC as described in the second paragraph of this letter, or a
waiver of any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter. This letter shall terminate
concurrently with any termination of the Agreement in accordance with its terms.
Very truly yours,
_______________________________________
Name:
Title:
ACCEPTED THIS ____ DAY OF
APRIL, 1998 BY
LONG ISLAND BANCORP, INC.
By:_______________________________
Name:
Title:
