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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 2, 1998
LONG ISLAND BANCORP, INC.
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(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-23526 11-3198508
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(State or Other Juris- (Commission File (IRS Employer
diction of Incorporation) Number) Identification No.)
201 OLD COUNTRY ROAD, MELVILLE, NEW YORK 11747-2724
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 547-2000
NONE
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(Former Name or Former Address, if Changed Since Last Report)
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2
ITEMS 1 THROUGH 4, 6, 8&9. NOT APPLICABLE.
ITEM 5. OTHER EVENTS.
On April 2, 1998, Long Island Bancorp., Inc., a Delaware corporation (the
"Company"), entered into an Agreement and Plan of Merger (the "Merger
Agreement"), by and between Astoria Financial Corporation ("Astoria Financial")
and the Company. The Merger Agreement provides, among other things, that the
Company will be merged with and into Astoria Financial, with Astoria Financial
being the surviving corporation (the "Merger").
Pursuant to the Merger Agreement, each share of common stock of the Company
issued and outstanding at the Effective Time (as defined in the Merger
Agreement) will be converted into the right to receive 1.15 shares of Astoria
Financial common stock; provided, however, that no fraction of a share of
Astoria Financial common stock will be issued in the Merger.
Consummation of the Merger is subject to the satisfaction of certain
conditions, including approval of the stockholders of both Astoria Financial
and the Company and approval of the appropriate regulatory agencies.
The Company has the right to terminate the Merger Agreement if the market
value of Astoria Financial common stock (as defined in the Merger Agreement)
falls below $49.76 per share and such decline in value is 17.5% greater than the
percentage decline of a group of similar financial institutions, unless Astoria
Financial delivers to the Company's stockholders shares of Astoria Financial
common stock having a minimum value established pursuant to a formula set forth
in the Merger Agreement.
In connection with the Merger Agreement, Astoria Financial and the Company
each granted to the other a stock option pursuant to Stock Option Agreements,
dated as of April 2, 1998, pursuant to which each of Astoria Financial and the
Company may purchase up to 19.9% of the other's issued and outstanding shares of
common stock, upon the terms and conditions stated therein. The Merger
Agreement also includes a provision for a $60 million termination fee that is
payable to Astoria Financial if the transaction is not completed under certain
circumstances. Both the Merger Agreement and the Stock Option Agreement granted
to Astoria Financial provide that the total profit to Astoria Financial from the
value of the stock options and termination fee may not exceed $60 million plus
reasonable out-of-pocket expenses.
On April 2, 1998, the Company amended its Rights Agreement, dated as of
April 22, 1997, by and between the Company and Chase Mellon Shareholder
Services, L.L.C., as Rights Agent (the "Rights Agreement"), with the effect
of exempting the events and transactions contemplated by the Merger Agreement
from the Rights Agreement.
This Current Report on Form 8-K may contain certain forward-looking
statements regarding Astoria Financial's acquisition of the Company, including
cost savings to be realized,
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3
earnings accretion, transaction charges and other opportunities following the
acquisition which are based on management's current expectations regarding
economic, legislative and regulatory issues. The factors which may cause future
results to vary materially include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulations; and other economic,
competitive, governmental, regulatory and technological factors affecting each
company's operations, pricing, products and services.
Additional information with respect to the transaction is included in the
press release issued April 2, 1998 attached hereto as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits. The following Exhibits are filed as part of this report:
Exhibit No. Description
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2.1 Agreement and Plan of Merger, dated as of April 2,
1998, by and between Astoria Financial Corporation and
Long Island Bancorp., Inc.
4.1 Stock Option Agreement, dated as of April 2, 1998, by
and between Astoria Financial Corporation and Long
Island Bancorp, Inc.
4.2 Stock Option Agreement, dated as of April 2, 1998, by
and between Long Island Bancorp, Inc. and Astoria
Financial Corporation.
4.3 Amendment No. 1, dated April 2, 1998, to the Rights
Agreement, dated as of April 22, 1997, by and
between the Company and Chase Mellon Shareholder
Services, L.L.C.
99.1 Press Release issued on April 3, 1998.
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4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LONG ISLAND BANCORP, INC.
Date: April 8, 1998 By: /s/ Mark Fuster
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Name: Mark Fuster
Title: Chief Financial Officer
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5
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Exhibit No. Description
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2.1 Agreement and Plan of Merger, dated as of April 2,
1998, by and between Astoria Financial Corporation and
Long Island Bancorp., Inc.
4.1 Stock Option Agreement, dated as of April 2, 1998, by
and between Astoria Financial Corporation and Long
Island Bancorp, Inc.
4.2 Stock Option Agreement, dated as of April 2, 1998, by
and between Long Island Bancorp, Inc. and Astoria
Financial Corporation.
4.3 Amendment No. 1, dated April 2, 1998, to the Rights
Agreement, dated as of April 22, 1997, by and
between the Company and Chase Mellon Shareholder
Services, L.L.C.
99.1 Press Release issued on April 3, 1998.
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Exhibit 2.1
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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.
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TABLE OF CONTENTS
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
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
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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
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
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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
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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:
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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").
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(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.
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(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
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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 LISB 1994 Stock Incentive Plan and the LISB 1994 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
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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
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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
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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 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
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"significant subsidiary" as defined in Regulation S-X, promulgated by the SEC,
as in effect as of the date hereof.
(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
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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
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 Salomon Smith
Barney 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.
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(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 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 Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"), 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
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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 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
<PAGE>
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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, 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.
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(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 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
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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
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
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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 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
<PAGE>
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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 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
<PAGE>
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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
Salomon Smith Barney 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;
<PAGE>
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(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 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,
<PAGE>
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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
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.
<PAGE>
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(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:
(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,"
<PAGE>
-22-
"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. 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. Section 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.
<PAGE>
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(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 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
<PAGE>
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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 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
<PAGE>
-25-
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 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
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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 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 Lehman
Brothers Inc. to the effect that, as of the date hereof, the Exchange Ratio is
fair, from a financial point of view, to AFC.
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(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, 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
<PAGE>
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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. 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
<PAGE>
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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 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.
<PAGE>
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(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 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
<PAGE>
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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 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
Lehman 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;
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(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 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.
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(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:
(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,"
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"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
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
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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 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.
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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 Fannie Mae or Freddie 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
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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 Fannie Mae and Freddie 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
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(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;
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(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
<PAGE>
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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
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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
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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 faith deems 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
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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:
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(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
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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 faith deems 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.
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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.
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(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
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(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 Mr.
John J. Conefry, Jr., Mr. Lawrence W. Peters and Mr. Bruce M. Barnet
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.
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(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 Mr. John J. Conefry, Jr., as Chairman, Mr. Mark Fuster, Mr. Roger
Teurfs, Ms. Karen Cullen and Mr. Richard Herbst (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.
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(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
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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
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LISB Bank 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
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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;
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(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
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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 Thacher Proffitt & Wood, 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 Thacher Proffitt & Wood considers appropriate, (i)
representations made at the request of Thacher Proffitt & Wood by AFC, LISB,
stockholders of AFC or LISB, or any combination of such persons and (ii)
certificates provided at the request of Thacher Proffitt & Wood by officers of
AFC, LISB and other appropriate persons.
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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 & McCloy,
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:
<PAGE>
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(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 & McCloy considers appropriate, (i)
representations made at the request of Milbank Tweed Hadley & McCloy 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 &
McCloy 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
<PAGE>
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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
<PAGE>
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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%
<PAGE>
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Holding Company Weighting
--------------- ---------
Commercial Federal Corp. 2.67%
Dime Bancorp, Inc. 7.75%
Downey Financial 1.92%
First Empire State 7.15%
Golden West Financial 12.18%
GreenPoint Financial 6.96%
Harris 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%
Roslyn Bancorp 2.34%
Sovereign Bancorp 4.74%
St. Paul Bancorp 1.96%
Staten Island Bancorp 2.06%
TCF Financial 7.02%
TR Financial 1.36%
Washington Federal Inc. 3.25%
Webster 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.
<PAGE>
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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
<PAGE>
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(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 Thacher
Proffitt & 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.
<PAGE>
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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.
<PAGE>
-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.
201 Old Country Road
Melville, New York 11747
Facsimile:
Attention: John J. Conefry, Jr.
Chairman and Chief Executive Officer
With copies to:
Milbank Tweed Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Facsimile: (212) 530-5219
Attention: Mel M. Immergut, Esq.
If to AFC, to:
Astoria Financial Corporation
One Astoria Federal Plaza
Lake Success, New York 11042-1805
Facsimile: (516) 327-3000
Attention: George L. Engelke, Jr.
Chairman, President and Chief Executive Officer
<PAGE>
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With copies to:
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Facsimile: (212) 912-7751
Attention: Omer S.J. Williams, 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.
<PAGE>
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/ George L. Engelke, Jr.
---------------------------------------
George L. Engelke, Jr.
Chairman, President and Chief Executive
Officer
LONG ISLAND BANCORP, INC.
By: /s/ John J. Conefry, Jr.
---------------------------------------
John J. Conefry, Jr.
Chairman and Chief Executive Officer
<PAGE>
[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
==========================================================
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
-----------------------------------------------
George L. Engelke, Jr.
Chairman, President and Chief Executive Officer
By
-----------------------------------------------
John J. Conefry, Jr.
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT "A"
TO PLAN OF MERGER
Association
BRANCH LOCATIONS
<PAGE>
April ___, 1998
Astoria Financial Corporation
One Astoria Federal Plaza
Lake Success, New York 11042
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
<PAGE>
Securities Exchange Act 1934, 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.
<PAGE>
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:
<PAGE>
April ___, 1998
Long Island Bancorp, Inc.
201 Old Country Road
Melville, New York 11797
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.
<PAGE>
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:
<PAGE>
[FORM OF AMENDMENT TO LONG ISLAND BANCORP, INC.]
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 ("Amendment"), dated as of April 2, 1998, to the
Rights Agreement, dated as of April 22, 1997, (the "Rights Agreement"), by and
between Long Island Bancorp, Inc. a Delaware corporation (the "Corporation"),
and ChaseMellon Shareholder Services, L.L.C., a national banking organization
(the "Rights Agent"). Unless otherwise provided herein, all capitalized terms
shall have the meanings set forth in the Rights Agreement.
WHEREAS, no Person has become an Acquiring Person; and
WHEREAS, the Board of Directors of the Corporation, in connection with the
Agreement and Plan of Merger, dated April 2, 1998 (the "Merger Agreement"), by
and between the Corporation and AFC ("AFC"), has authorized the Corporation to
enter into a Stock Option Agreement (the "LISB Option Agreement") with the
Corporation, which provides for the Corporation's grant to AFC of an option (the
"Option") to purchase _______ shares of the Corporation's common stock, par
value $0.01 par share (the "Common Stock"), on the terms and conditions set
forth in the LISB Option Agreement; and
WHEREAS, the Board of Directors of the Corporation, subject to certain
conditions, desires to amend the Rights Agreement to exclude the acquisition of
the Option and the Common Stock by AFC pursuant to the LISB Option Agreement
from the operation of the Rights Agreement;
NOW, THEREFORE, in consideration of the premises and covenants set forth in
the Rights Agreement and in this Amendment No. 1 thereto, the parties hereby
agree as follows:
1. Section 1(a) of the Rights Agreement is hereby amended by inserting
the following phrase immediately following the phrase "but shall not include":
Astoria Financial Corporation ("AFC"), or any Affiliate of AFC,
as a result of the merger of the Corporation with and into AFC
pursuant to the Agreement and Plan of Merger, dated April 2, 1998
by and between the Corporation and AFC, AFC's right to acquire,
or AFC's acquisition of, Common Shares of the Corporation
pursuant to the Long Island Bancorp, Inc. Option Agreement dated
April 2, 1998 into by and between AFC and the Corporation, as the
same may be amended, from time to time,
2. On and after the date of this Amendment No. 1 any reference in the
Rights Agreement (including the Exhibits thereto) to "This Agreement,"
"hereunder," "hereof," or "herein" or words of like import shall mean and be a
reference to the Rights Agreement as amended by this Amendment No. 1.
<PAGE>
3. This Amendment No. 1 shall be effective as of the date and time of its
execution.
4. This Amendment No.1 may be executed in counterparts, and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed and attested, all as of the day and year first above written.
LONG ISLAND BANCORP, INC.
By:
---------------------------------------
John J. Conefry, Jr.
Chairman and Chief Executive Officer
Attest:
By:
------------------------------
Corporate Secretary
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Rights Agent
By:
---------------------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title:
<PAGE>
[FORM OF AMENDMENT TO ASTORIA FINANCIAL CORPORATION RIGHTS AGREEMENT]
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 ("Amendment"), dated as of July 17, 1996, to the
Rights Agreement, dated as of July 17, 1996, (the "Rights Agreement"), by and
between Astoria Financial Corporation, a Delaware corporation (the
"Corporation"), and ChaseMellon Shareholder Services, L.L.C., a national banking
organization (the "Rights Agent"). Unless otherwise provided herein, all
capitalized terms shall have the meanings set forth in the Rights Agreement.
WHEREAS, no Person has become an Acquiring Person; and
WHEREAS, the Board of Directors of the Corporation, in connection with the
Agreement and Plan of Merger, dated ___________ (the "Merger Agreement"), by and
between the Corporation and LISB ("LISB"), has authorized the Corporation to
enter into a Stock Option Agreement (the "AFC Option Agreement") with the
Corporation, which provides for the Corporation's grant to LISB of an option
(the "Option") to purchase _______ shares of the Corporation's common stock, par
value $0.01 par share (the "Common Stock"), on the terms and conditions set
forth in the AFC Option Agreement; and
WHEREAS, the Board of Directors of the Corporation, subject to certain
conditions, desires to amend the Rights Agreement to exclude the acquisition of
the Option and the Common Stock by LISB pursuant to the AFC Option Agreement
from the operation of the Rights Agreement;
NOW, THEREFORE, in consideration of the premises and covenants set forth in
the Rights Agreement and in this Amendment No. 1 thereto, the parties hereby
agree as follows:
1. Section 1(a) of the Rights Agreement is hereby amended by inserting
the following phrase immediately following the phrase "but shall not include":
Long Island Bancorp, Inc. ("LISB"), or any Affiliate of LISB as a
result of LISB's right to acquire, or LISB's acquisition of,
Common Shares of the Corporation pursuant to the related Astoria
Financial Corporation Option Agreement to be entered into by and
between LISB and the Corporation, as the same may be amended,
from time to time,
2. On and after the date of this Amendment No. 1 any reference in the
Rights Agreement (including the Exhibits thereto) to "This Agreement,"
"hereunder," "hereof," or "herein" or words of like import shall mean and be a
reference to the Rights Agreement as amended by this Amendment No. 1.
<PAGE>
3. This Amendment No. 1 shall be effective as of the date and time of its
execution.
4. This Amendment No.1 may be executed in counterparts, and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed and attested, all as of the day and year first above written.
ASTORIA FINANCIAL CORPORATION
By:
-----------------------------------
George L. Engelke, Jr.
Chairman, President and Chief
Executive Officer
Attest:
By:
--------------------------------
William K. Sheerin
Corporate Secretary
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Rights Agent
By:
-----------------------------------
Name:
Title:
Attest:
By:
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT 4.1
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND MAY BE SUBJECT TO TRANSFER
RESTRICTIONS UNDER
FEDERAL AND STATE LAW
LONG ISLAND BANCORP, INC. STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 2, 1998 (the "Agreement"),
by and between Astoria Financial Corporation, a Delaware corporation ("AFC"),
and Long Island Bancorp, Inc., a Delaware corporation ("LISB").
RECITALS
A. THE PLAN. AFC and LISB have entered into an Agreement and Plan
of Merger, dated as of April 2, 1998 (the "Plan"), providing for, among other
things, the merger of LISB with and into AFC, with AFC being the surviving
corporation.
B. CONDITION TO PLAN. As a condition and an inducement to AFC's
execution and delivery of the Plan, AFC has required that LISB agree, and LISB
has agreed, to grant AFC the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, LISB and AFC agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, LISB hereby grants to AFC an irrevocable option (the "Option") to
purchase up to 4,763,113 shares of common stock, par value $0.01 per share
("LISB Common Stock"), of LISB (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares, but in no event shall the number of Option Shares for which
this Option is exercisable exceed 19.9% of the issued and outstanding shares of
LISB Common Stock as of the date hereof ), at a purchase price per Option Share
(as adjusted as set forth herein, the "Purchase Price") equal to $63.25. Each
Option Share issued upon exercise of the Option shall be accompanied by the
related preferred share purchase right ("LISB Rights") issued pursuant to the
Rights Agreement between LISB and ChaseMellon Shareholder Services, L.L.C.,
dated as of April 22, 1997, as amended, as in effect on the date hereof ("LISB
Rights Agreement").
<PAGE>
3. EXERCISE OF OPTION.
(a) Provided that (i) AFC or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of Option Shares issued by any
court of competent jurisdiction in the United States shall be in effect, the
Holder may exercise the Option, in whole or in part, at any time and from time
to time, following the occurrence of a Purchase Event (as hereinafter defined);
provided, that the Option shall terminate and be of no further force or effect
upon the earliest to occur of (A) the Effective Time, (B) termination of the
Plan in accordance with the terms thereof prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event other than a termination thereof by AFC
pursuant to Section 6.01(b)(ii) of the Plan (a termination of the Plan by AFC
pursuant to such Section of the Plan, being referred to herein as a "Default
Termination") and other than termination by AFC pursuant to Section 6.01(e) of
the Plan (C) 18 months after a Default Termination or (D) 18 months after
termination of the Plan (other than a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; provided,
however, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable law; provided further, however, that if
the Option cannot be exercised on any day because of an injunction, order or
similar restraint issued by a court of competent jurisdiction, the period during
which the Option may be exercised shall be extended so that the Option shall
expire no earlier than the tenth business day after such injunction, order or
restraint shall have been dissolved or when such injunction, order or restraint
shall have become permanent and no longer subject to appeal, as the case may be.
The term "Holder" shall mean the holder or holders of the Option from time to
time, and which initially is AFC. The rights set forth in Sections 8 and 9 of
this Agreement shall terminate when the right to exercise the Option and
Substitute Option terminate (other than as a result of a complete exercise of
the Option or Substitute Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without AFC's prior written consent, LISB shall have
recommended, publicly proposed or publicly announced an intention to
authorize, recommend or propose, or LISB shall have entered into an
agreement with any person (other than AFC or any subsidiary of AFC) to
effect (A) a merger, consolidation or similar transaction involving LISB or
any of its significant subsidiaries, (B) the disposition, by sale, lease,
exchange or otherwise, of assets or deposits of LISB or any of its
significant subsidiaries representing in either case all or substantially
all of the consolidated assets or deposits of LISB and its subsidiaries or
(C) the issuance, sale or other disposition by LISB of (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 10% or more of the voting power of LISB or any of
its significant subsidiaries (each of (A), (B) or (C), an "Acquisition
Transaction"); or
(ii) Any person (other than AFC or any subsidiary of AFC)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3, promulgated under the Securities and Exchange Act of 1934 (the
"Exchange Act") of, or the right to acquire beneficial ownership of, or any
"group" (as such term is defined in Section 13(d)(3) of the
-2-
<PAGE>
Exchange Act), other than a group of which AFC or any subsidiary of AFC is
a member, shall have been formed which beneficially owns or has the right
to acquire beneficial ownership of, 10% or more of the voting power of LISB
or any of its significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) Any person (other than AFC or any subsidiary of AFC)
shall have commenced (as such term is defined in Rule 14d-2, promulgated
under the Exchange Act) or shall have filed a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect
to, a tender offer or exchange offer to purchase any shares of LISB Common
Stock such that, upon consummation of such offer, such person would own or
control 10% or more of the then outstanding shares of LISB Common Stock
(such an offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(ii) The stockholders shall not have approved the Plan by the
requisite vote at the stockholders meeting of LISB called for that purpose
("Company Meeting"), the Company Meeting shall not have been held or shall
have been canceled prior to termination of the Plan or 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 Plan, in
each case after it shall have been publicly announced that any person
(other than AFC or any subsidiary of AFC) shall have (A) made, or disclosed
an intention to make, a bona fide proposal to engage in an Acquisition
Transaction or (B) filed an application (or given a notice), whether in
draft or final form, under the Home Owners' Loan Act of 1933, as amended,
the Bank Holding Company Act, as amended, the Bank Merger Act, as amended
or the Change in Bank Control Act of 1978, as amended, for approval to
engage in an Acquisition Transaction; or
(iii) Any person (other than AFC or any subsidiary of AFC)
shall have made a bona fide proposal to LISB or its stockholders by public
announcement, or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction; or
(iv) After a proposal is made by a third party to LISB or its
stockholders to engage in an Acquisition Transaction, or such third party
states its intention to LISB to make such a proposal if the Plan
terminates, LISB shall have breached any representation, warranty, covenant
or agreement contained in the Plan and such breach would entitle AFC to
terminate the Plan under Section 6.01(b) thereof (without regard to the
cure period provided for therein unless such cure is promptly effected
without jeopardizing consummation of the Merger pursuant to the terms of
the Plan).
As used in this Agreement, the term "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
-3-
<PAGE>
(d) LISB shall notify AFC promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event of which it has knowledge, it
being understood that the giving of such notice by LISB shall not be a condition
to the right of Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall send
to LISB a written notice (the "Stock Exercise Notice," the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
Option Shares it intends to purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 15 business days
from the Notice Date for the closing (the "Closing") of such purchase (such date
as it may be extended pursuant to the next sentence, the "Closing Date");
provided that the first notice of exercise shall be sent to LISB within 180 days
after the first Purchase Event of which AFC has been notified. If prior
notification to or approval of any Regulatory Authority is required in
connection with any such purchase, LISB shall cooperate with the Holder in the
filing of the required notice of application for approval and the obtaining of
such approval, and the Closing shall occur promptly following such regulatory
approvals and any mandatory waiting periods. Any exercise of the Option shall
be deemed to occur on the Notice Date relating thereto.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to LISB, in
immediately available funds by wire transfer to a bank account designated by
LISB, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date and (ii) present and surrender this
Agreement to LISB at the address of LISB specified in Section 14(f) of this
Agreement.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a) of
this Agreement, (i) LISB shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all Liens (as defined in the
Plan) and subject to no preemptive rights, and (B) if the Option is exercised in
part only, an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the shares of LISB Common Stock
purchasable hereunder, and (ii) Holder shall deliver to LISB a letter agreeing
that Holder shall not offer to sell or otherwise dispose of such Option Shares
in violation of applicable federal and state law or of the provisions of this
Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF APRIL 2, 1998. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED
-4-
<PAGE>
TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY LONG ISLAND BANCORP, INC. OF
A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend relating to the
Securities Act shall be removed by delivery of substitute certificate(s) without
such legend if Holder shall have delivered to LISB a copy of a letter from the
staff of the Securities Exchange Commission (the "SEC"), or an opinion of
counsel in form and substance reasonably satisfactory to LISB and its counsel,
to the effect that such legend is not required for purposes of the Securities
Act.
(d) Upon the giving by Holder to LISB of the Stock Exercise Notice,
the tender of the applicable purchase price in immediately available funds and
the tender of this Agreement to LISB, Holder shall be deemed to be the holder of
record of the shares of LISB Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of LISB shall then be closed or
that certificates representing such shares of LISB Common Stock shall not then
be actually delivered to Holder. LISB shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 4 in the name of Holder or its assignee,
transferee or designee.
(e) LISB agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of LISB
Common Stock so that the Option may be exercised without additional
authorization of LISB Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase LISB Common Stock,
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
LISB, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Regulatory Authority is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Regulatory Authority as it may require) in
order to permit Holder to exercise the Option and LISB duly and effectively to
issue shares of LISB Common Stock pursuant hereto and (iv) promptly to take all
action provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF LISB. LISB hereby represents
and warrants to AFC (and Holder, if different than AFC) as follows:
(a) CORPORATE AUTHORITY. LISB has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of LISB, and no other
corporate proceedings on the part of LISB are necessary to authorize this
Agreement or to consummate the transactions so contemplated; this Agreement
has been duly and validly executed and delivered by LISB.
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(b) BENEFICIAL OWNERSHIP. To the best knowledge of LISB, as of the
date of this Agreement, no person or group has beneficial ownership of more
than 10% of the issued and outstanding shares of LISB Common Stock.
(c) SHARES RESERVED FOR ISSUANCE; CAPITAL STOCK. LISB has taken all
necessary corporate action to authorize and reserve and permit it to issue,
and at all times from the date hereof through the termination of the Option
in accordance with Section 3(a) of this Agreement, will have reserved for
issuance upon the exercise of the Option, that number of shares of LISB
Common Stock equal to the maximum number of Option Shares at any time and
from time to time purchasable upon exercise of the Option, and all such
Option Shares, upon issuance pursuant to the Option, will be duly
authorized, validly issued, fully paid and nonassessable, and will be
delivered free and clear of all claims, liens, encumbrances and security
interests (other than those created by this Agreement) and not subject to
any preemptive rights.
(d) NO VIOLATIONS. The execution, delivery and performance of this
Agreement does not and will not, and the consummation by LISB of any of the
transactions contemplated hereby will not, constitute or result in (i) a
breach or violation of, or a default under, its certificate of
incorporation or bylaws, or the comparable governing instruments of any of
its subsidiaries, or (ii) a breach or violation of, or a default under, any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without the giving of
notice, the lapse of time or both) or under any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or
non-governmental permit or license to which it or any of its subsidiaries
is subject, that would, in any case, give any other person the ability to
prevent or enjoin LISB's performance under this Agreement in any material
respect.
6. REPRESENTATIONS AND WARRANTIES OF AFC. AFC hereby represents and
warrants to LISB that AFC has full corporate power and authority to enter into
this Agreement and, subject to obtaining the approvals referred to in this
Agreement, to consummate the transactions contemplated by this Agreement; the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of AFC; and this Agreement has been duly executed
and delivered by AFC.
7. ADJUSTMENT UPON CHANGES IN LISB CAPITALIZATION, ETC.
(a) In the event of any change in LISB Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares, exercise of the Company Rights or similar transaction, the type and
number of shares or securities subject to the Option, and the Purchase Price
therefor, shall be adjusted appropriately, and proper provision shall be made in
the agreements governing any such transaction so that Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of LISB Common Stock if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional
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shares of LISB Common Stock are issued after the date of this Agreement (other
than pursuant to an event described in the first sentence of this Section 7(a),
upon exercise of any option to purchase LISB Common Stock outstanding on the
date hereof or upon conversion into LISB Common Stock of any convertible
security of LISB outstanding on the date hereof), the number of shares of LISB
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of LISB Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of LISB Common Stock then
issued and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option. No provision of this Section 7 shall be deemed to
affect or change, or constitute authorization for any violation of, any of the
covenants or representations in the Plan.
(b) In the event that LISB shall enter into an agreement (i) to
consolidate with or merge into any person, other than AFC or one of its
subsidiaries, and LISB shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than AFC or one
of its subsidiaries, to merge into LISB and LISB shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of LISB Common Stock shall be changed into or exchanged for stock or
other securities of LISB or any other person or cash or any other property, or
the outstanding shares of LISB Common Stock immediately prior to such merger
shall after such merger represent less than 50% of the outstanding shares and
share equivalents of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets or deposits to any person, other than AFC
or one of its subsidiaries, then, and in each such case, the agreement governing
such transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Holder, of either (A) the Acquiring Corporation (as
hereinafter defined), (B) any person that controls the Acquiring Corporation or
(C) in the case of a merger described in clause (ii), LISB (such person being
referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the option,
provided, that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer shall also enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of Option
Shares for which the Option was theretofore exercisable, divided by the Average
Price (as hereinafter defined). The exercise price of the Substitute Option per
share of Substitute Common Stock (the "Substitute Option Price") shall be equal
to the Purchase Price multiplied by a fraction in which the numerator is the
number of shares of LISB Common Stock for which the Option was theretofore
exercisable and the denominator is the number of shares of the Substitute Common
Stock for which the Substitute Option is exercisable.
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(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with LISB (if other than
LISB), (B) LISB in a merger in which LISB is the continuing or surviving
person, or (C) the transferee of all or substantially all of LISB's assets
(or a substantial part of the assets of its subsidiaries taken as a whole).
(ii) "Substitute Common Stock" shall mean the shares of
capital stock (or similar equity interest) with the greatest voting power
in respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(iii) "Assigned Value" shall mean the highest of (A) the price
per share of LISB Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (B) the price per share of LISB Common Stock to be
paid by any third party pursuant to an agreement with LISB, (C) the highest
closing price for shares of LISB Common Stock within the sixty-day period
immediately preceding the consolidation, merger or sale in question and (D)
in the event of a sale of all or substantially all of LISB's assets or
deposits, an amount equal to (x) the sum of the price paid in such sale for
such assets (and/or deposits) and the current market value of the remaining
assets of LISB, as determined by a nationally recognized investment banking
firm selected by Holder, divided by (y) the number of shares of LISB Common
Stock outstanding at such time. In the event that a Tender Offer or an
Exchange Offer is made for LISB Common Stock or an agreement is entered
into for a merger or consolidation involving consideration other than cash,
the value of the securities or other property issuable or deliverable in
exchange for LISB Common Stock shall be determined by a nationally
recognized investment banking firm selected by Holder.
(iv) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided, that, if LISB is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by LISB, the person merging into LISB or
by any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for the limitation in the first sentence of this Section 7(f), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This
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difference in value shall be determined by a nationally recognized investment
banking firm selected by Holder.
(g) LISB shall not enter into any transaction described in Section
7(b) of this Agreement unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of LISB
hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the holders of the other
shares of common stock issued by Substitute Option Issuer are not entitled to
exercise any rights by reason of the issuance or exercise of the Substitute
Option and the shares of Substitute Common Stock are otherwise in no way
distinguishable from or have lesser economic value (other than any diminution in
value resulting from the fact that the shares of Substitute Common Stock are
restricted securities, as defined in Rule 144, promulgated under the Securities
Act ("Rule 144"), or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
(h) Notwithstanding anything herein to the contrary, in the event
that LISB completes a reorganization involving the formation of a holding
company for LISB, the agreement governing such transaction shall make proper
provisions so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option of such holding company.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a) of this Agreement,
at the request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, LISB shall repurchase from Holder (i) the Option and
(ii) all shares of LISB Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 8 is referred to as the "Section 8
Request Date." Such repurchase shall be at an aggregate price (the "Section 8
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for any
shares of LISB Common Stock acquired pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Applicable Price (as
defined below) for each share of LISB Common Stock over (B) the Purchase
Price (subject to adjustment pursuant to Section 7 of this Agreement),
multiplied by the number of shares of LISB Common Stock with respect to
which the Option has not been exercised; and
(iii) The excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement) paid (or, in the case of Option Shares with respect to which the
Option has been exercised but the Closing Date has not occurred, payable)
by Holder for each share of LISB Common Stock with respect
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to which the Option has been exercised and with respect to which Holder
then has beneficial ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, LISB shall,
within 10 business days after the Section 8 Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to LISB the Option
and the certificates evidencing the Option Shares purchased thereunder with
respect to which Holder then has beneficial ownership, and Holder shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all Liens. Notwithstanding the foregoing, to
the extent that prior notification to or approval of any Regulatory Authority is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to this Section 8, in whole or in part, or to
require that LISB deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and expeditiously
process the same (and each party shall cooperate with the other in the filing of
any such notice or application and the obtaining of any such approval). If any
Regulatory Authority disapproves of any part of LISB's proposed repurchase
pursuant to this Section 8, LISB shall promptly give notice of such fact to
Holder and Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such Regulatory Authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Section 8
Request Date less the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) of this Agreement. Holder
shall notify LISB of its determination under the preceding sentence within five
business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, in the event that LISB delivers
to the Holder written notice accompanied by a certification of LISB's
independent auditor each stating that a requested repurchase of LISB Common
Stock would result in the recapture of LISB's bad debt reserves under the
Internal Revenue Code of 1986, as amended, Holder's repurchase request shall be
deemed to be automatically revoked.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of LISB Common Stock paid for any
such share by the person or groups described in Section 8(d)(i) hereof, (ii) the
price per share of LISB Common Stock received by holders of LISB Common Stock in
connection with any merger, sale or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this Agreement, or (iii)
the highest closing sales price per share of LISB Common Stock quoted on the
Nasdaq (or if LISB Common Stock is not quoted on the Nasdaq, the highest bid
price per share as quoted on the principal trading market or securities exchange
on which such shares are traded as reported by a recognized source chosen by
Holder) during the 40 business days preceding the Section 8 Request
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Date; provided, however, that in the event of a sale of less than all of LISB's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of LISB as
determined by a nationally recognized investment banking firm selected by
Holder, divided by the number of shares of the LISB Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Holder and
reasonably acceptable to LISB, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person
(other than AFC or any subsidiary of AFC) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3, promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 50% or
more of the then outstanding shares of LISB Common Stock, or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement shall be consummated.
9. REPURCHASE OF SUBSTITUTE OPTION.
(a) Subject to the last sentence of Section 3(a) of this Agreement,
at the request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, Substitute Option Issuer (or any successor entity
thereof) shall repurchase from Holder (i) the Substitute Option and (ii) all
shares of Substitute Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 9 is referred to as the "Section 9
Request Date." Such repurchase shall be at an aggregate price (the "Section 9
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for any
shares of Substitute Common Stock acquired pursuant to the Substitute
Option with respect to which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Highest Closing Price (as
defined below) for each share of Substitute Common Stock over (B) the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement), multiplied by the number of shares of Substitute Common Stock
with respect to which the Substitute Option has not been exercised; and
(iii) The excess, if any, of the Highest Closing Price over the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement) paid (or, in the case of Substitute Option Shares with respect
to which the Substitute Option has been exercised but the Closing Date has
not occurred, payable) by Holder for each share of Substitute Common Stock
with respect to which the Substitute Option has been exercised and with
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respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 9, Substitute
Option Issuer shall, within 10 business days after the Section 9 Request Date,
pay the Section 9 Repurchase Consideration to Holder in immediately available
funds, and contemporaneously with such payment, Holder shall surrender to
Substitute Option Issuer the Substitute Option and the certificates evidencing
the shares of Substitute Common Stock purchased thereunder with respect to which
Holder then has beneficial ownership, and Holder shall warrant that it has sole
record and beneficial ownership of such shares and that the same are then free
and clear of all Liens. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any Regulatory Authority is required in
connection with the payment of all or any portion of the Section 9 Repurchase
Consideration, Holder shall have the ongoing option to revoke its request for
repurchase pursuant to this Section 9, in whole or in part, or to require that
Substitute Option Issuer deliver from time to time that portion of the Section 9
Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and expeditiously
process the same (and each party shall cooperate with the other in the filing of
any such notice or application and the obtaining of any such approval). If any
Regulatory Authority disapproves of any part of Substitute Option Issuer's
proposed repurchase pursuant to this Section 9, Substitute Option Issuer shall
promptly give notice of such fact to Holder and Holder shall have the right (i)
to revoke the repurchase request or (ii) to the extent permitted by such
Regulatory Authority, determine whether the repurchase should apply to the
Substitute Option and/or Substitute Option Shares and to what extent to each,
and Holder shall thereupon have the right to exercise the Substitute Option as
to the number of Substitute Option Shares for which the Substitute Option was
exercisable at the Section 9 Request Date less the number of shares covered by
the Substitute Option in respect of which payment has been made pursuant to
Section 9(a)(ii) of this Agreement. Holder shall notify Substitute Option
Issuer of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase. Notwithstanding
anything herein to the contrary, in the event that Substitute Option Issuer
delivers to the Holder written notice accompanied by a certification of
Substitute Option Issuer's independent auditor each stating that a requested
repurchase of LISB Common Stock would result in the recapture of Substitute
Option Issuer's bad debt reserves under the Internal Revenue Code of 1986, as
amended, Holder's repurchase request shall be deemed to be automatically
revoked.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 9 shall terminate on the date of termination of this
Substitute Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Highest Closing Price" means
the highest of closing sales price for shares of Substitute Common Stock quoted
on the Nasdaq (or if the Substitute Common Stock is not quoted on the Nasdaq, on
the principal trading market on which such shares are traded as reported by a
recognized source) during the six-month period preceding the Section 9 Request
Date.
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10. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. LISB shall, subject to the
conditions of Section 10(c) of this Agreement, if requested by any Holder,
including AFC and any permitted transferee ("Selling Shareholder"), as
expeditiously as possible, prepare and file a registration statement under the
Securities Act, if such registration is necessary in order to permit the sale or
other disposition of any or all shares of LISB Common Stock or other securities
that have been acquired by or are issuable to the Selling Shareholder upon
exercise of the Option in accordance with the intended method of sale or other
disposition stated by the Selling Shareholder in such request, including without
limitation a "shelf" registration statement under Rule 415, promulgated under
the Securities Act, or any successor provision, and LISB shall use its best
efforts to qualify such shares or other securities for sale under any applicable
state securities laws.
(b) ADDITIONAL REGISTRATION RIGHTS. If LISB at any time after the
exercise of the Option proposes to register any shares of LISB Common Stock
under the Securities Act, in connection with an underwritten public offering of
such LISB Common Stock, LISB will promptly give written notice to the Selling
Shareholders of its intention to do so and, upon the written request of any
Selling Shareholder given within 30 days after receipt of any such notice (which
request shall specify the number of shares of LISB Common Stock intended to be
included in such underwritten public offering by the Selling Shareholder), LISB
will cause all such shares for which a Selling Shareholder requests
participation in such registration, to be so registered and included in such
underwritten public offering; provided, however, that LISB may elect to not
cause any such shares to be so registered (i) if the underwriters in good faith
object for valid business reasons, or (ii) in the case of a registration solely
to implement an employee benefit plan or a registration filed on Form S-4 of the
Securities Act or any equivalent or successor Form. If some, but not all the
shares of LISB Common Stock, with respect to which LISB shall have received
requests for registration pursuant to this Section 10(b), shall be excluded from
such registration, LISB shall make appropriate allocation of shares to be
registered among the Selling Shareholders desiring to register their shares PRO
RATA in the proportion that the number of shares requested to be registered by
each such Selling Shareholder bears to the total number of shares requested to
be registered by all such Selling Shareholders then desiring to have LISB Common
Stock registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. LISB shall use all
reasonable efforts to cause each registration statement referred to in Section
10(a) of this Agreement to become effective and to obtain all consents or
waivers of other parties which are required therefor and to keep such
registration statement effective, provided, however, that LISB may delay any
registration of Option Shares required pursuant to Section 10(a) of this
Agreement for a period not exceeding 90 days provided LISB shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of other securities by LISB, and LISB shall not be
required to register Option Shares under the Securities Act pursuant to Section
10(a) hereof:
(i) Prior to the earliest of (A) termination of the Plan
pursuant to Article VI thereof, (B) failure to obtain the requisite
stockholder approval pursuant to Section 6.01 of Article VI of the Plan,
and (C) a Purchase Event or a Preliminary Purchase Event;
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(ii) On more than one occasion during any calendar year;
(iii) Within 90 days after the effective date of a registration
referred to in Section 9(b) of this Agreement pursuant to which the Selling
Shareholder or Selling Shareholders concerned were afforded the opportunity
to register such shares under the Securities Act and such shares were
registered as requested; and
(iv) Unless a request therefor is made to LISB by Selling
Shareholders that hold at least 25% or more of the aggregate number of
Option Shares (including shares of LISB Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, LISB shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. LISB shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares; provided, however, that LISB
shall not be required to consent to general jurisdiction or qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) EXPENSES. Except where applicable state law prohibits such
payments, LISB will pay all expenses (including without limitation registration
fees, qualification fees, blue sky fees and expenses (including the fees and
expenses of counsel), legal expenses, including the reasonable fees and expenses
of one counsel to the holders whose Option Shares are being registered, printing
expenses and the costs of special audits or "cold comfort" letters, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if LISB so desires or the underwriters so require, and the reasonable
fees and expenses of any necessary special experts) in connection with each
registration pursuant to Section 10(a) or 10(b) of this Agreement (including the
related offerings and sales by holders of Option Shares) and all other
qualifications, notifications or exemptions pursuant to Section 10(a) or 10(b)
of this Agreement.
(e) INDEMNIFICATION. In connection with any registration under
Section 10(a) or 10(b) of this Agreement, LISB hereby indemnifies the Selling
Shareholders, and each underwriter thereof, including each person, if any, who
controls such holder or underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement of a material fact contained
in any registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by LISB in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon and in conformity with,
information furnished in writing to LISB by such indemnified party expressly for
use therein, and LISB and each officer, director and controlling person of LISB
shall be
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<PAGE>
indemnified by such Selling Shareholders, or by such underwriter, as the case
may be, for all such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement, that was included by LISB in any such
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to LISB by such Selling
Stockholder or such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 10(e)
of notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 10(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 10(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 10(e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by LISB, the Selling Shareholders and the underwriters from the offering of the
securities and also the relative fault of LISB, the Selling Shareholders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, however, that in no case shall any Selling Shareholder be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from
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any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with other
holders.
In connection with any registration pursuant to Section 10(a) or 10(b)
of this Agreement, LISB and each Selling Shareholder (other than AFC) shall
enter into an agreement containing the indemnification provisions of Section
10(e) of this Agreement.
(f) MISCELLANEOUS REPORTING. LISB shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Selling Shareholders
thereof in accordance with and to the extent permitted by any rule or regulation
promulgated by the SEC from time to time, including, without limitation, Rule
144. LISB shall at its expense provide the Selling Shareholders with any
information necessary in connection with the completion and filing of any
reports or forms required to be filed by them under the Securities Act or the
Exchange Act, or required pursuant to any state securities laws or the rules of
any stock exchange.
(g) ISSUE TAXES. LISB will pay all stamp taxes in connection with
the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all such
taxes.
11. QUOTATION; LISTING. If LISB Common Stock or any other securities
to be acquired in connection with the exercise of the Option are then authorized
for quotation or trading or listing on the Nasdaq or any securities exchange,
LISB, upon the request of Holder, will promptly file an application, if
required, to authorize for quotation or trading or listing the shares of LISB
Common Stock or other securities to be acquired upon exercise of the Option on
the Nasdaq or such other securities exchange and will use its best efforts to
obtain approval, if required, of such quotation or listing as soon as
practicable.
12. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of LISB for
other Agreements providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of LISB
Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used
herein include any other Agreements and related Options for which this Agreement
(and the Option granted hereby) may be exchanged. Upon receipt by LISB of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, if mutilated, LISB will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of LISB, whether or
not the Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
13. PROFIT LIMITATION. (a) Notwithstanding any other provision of
this agreement, in no event shall AFC's Total Profit (as hereinafter defined)
exceed $60 million, plus
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AFC's documented, reasonable out-of-pocket expenses (including fees and expenses
of legal, financial and accounting advisors) incurred in connection with the
transactions contemplated by the Merger Agreement, and, if it otherwise would
exceed such amount, AFC, at its sole election, shall either (a) deliver to LISB
for cancellation Shares previously purchased by AFC, (b) pay cash or other
consideration to LISB or (c) undertake any combination thereof, so that AFC's
total Profit shall not exceed $60 million, plus AFC's documented, reasonable
out-of-pocket expenses (including fees and expenses of legal, financial and
accounting advisors) incurred in connection with the transactions contemplated
by the Merger Agreement, after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of Shares as would, as of the Notice
Date, result in a Notional Total Profit (as defined below) of more than $60
million, plus AFC's documented, reasonable out-of-pocket expenses (including
fees and expenses of legal, financial and accounting advisors) incurred in
connection with the transactions contemplated by the Merger Agreement, and, if
exercise of the Option otherwise would exceed such amount, AFC, at its
discretion, may increase the Purchase Price for that number of Shares set forth
in the Stock Exercise Notice so that the Notional Total Profit shall not exceed
$60 million, plus AFC's documented, reasonable out-of-pocket expenses (including
fees and expenses of legal, financial and accounting advisors) incurred in
connection with the transactions contemplated by the Merger Agreement; provided,
that nothing in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date at the Purchase Price set forth in
Section 2 hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by AFC
pursuant to Section 6.03 of the Merger Agreement and Section 8(a)(ii) hereof,
(ii) (x) the amount received by AFC pursuant to the repurchase of Option Shares
pursuant to Section 8 or Section 9 hereof, less (y) AFC's purchase price for
such Option Shares, and (iii) (z) the net cash amounts received by AFC pursuant
to the sale of Option Shares (or any other securities into which such Option
Shares are converted or exchanged) to any unaffiliated party, less (y) AFC's
purchase price for such Option Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Option Shares as to which AFC may propose to exercise this Option
shall be the Total Profit determined as of the date of the Stock Exercise Notice
assuming that this Option were exercised on such date for such number of Shares
and assuming that such Option Shares, together with all other Option Shares held
by AFC and its affiliates as of such date, were sold for cash at the closing
market price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
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14. MISCELLANEOUS.
(a) EXPENSES. Except to the extent expressly provided for herein,
each of the parties hereto shall bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) ENTIRE AGREEMENT: NO THIRD-PARTY BENEFICIARIES; SEVERABILITY.
This Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between AFC and LISB (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and (ii)
is not intended to confer upon any person other than the parties hereto (other
than the indemnified parties under Section 9(e) of this Agreement and any
transferees of the Option Shares or any permitted transferee of this Agreement
pursuant to Section 11(h) of this Agreement) any rights or remedies hereunder.
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or Regulatory Authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
Regulatory Authority determines that the Option does not permit Holder to
acquire, or does not require LISB to repurchase, the full number of shares of
LISB Common Stock as provided in Section 3 of this Agreement (as may be adjusted
herein), it is the express intention of LISB to allow Holder to acquire or to
require LISB to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Plan (or at such
other address for a party as shall be specified by like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and
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shall become effective when both counterparts have been signed, it being
understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option
by the Holder, LISB, and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
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<PAGE>
IN WITNESS WHEREOF, LISB and AFC have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
LONG ISLAND BANCORP, INC.
By: /s/ John J. Conefry, Jr.
--------------------------------
John J. Conefry, Jr.
Chairman and Chief Executive Officer
ASTORIA FINANCIAL CORPORATION
By: /s/ George L. Engelke, Jr.
--------------------------------
George L. Engelke, Jr.
Chairman, President and Chief
Executive Officer
<PAGE>
EXHIBIT 4.2
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS CONTAINED
HEREIN AND MAY BE SUBJECT TO TRANSFER
RESTRICTIONS UNDER
FEDERAL AND STATE LAW
ASTORIA FINANCIAL CORPORATION STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 2, 1998 (the "Agreement"),
by and between Long Island Bancorp, Inc., a Delaware corporation ("LISB"), and
Astoria Financial Corporation, a Delaware corporation ("AFC").
RECITALS
A. THE PLAN. LISB and AFC have entered into an Agreement and Plan
of Merger, dated as of April 2, 1998 (the "Plan"), providing for, among other
things, the merger of LISB with and into AFC, with AFC being the surviving
corporation.
B. CONDITION TO PLAN. As a condition and an inducement to LISB's
execution and delivery of the Plan, LISB has required that AFC agree, and AFC
has agreed, to grant LISB the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, AFC and LISB agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION Subject. to the terms and conditions set forth
herein, AFC hereby grants to LISB an irrevocable option (the "Option") to
purchase up to 5,246,587 shares of common stock, par value $0.01 per share ("AFC
Common Stock"), of AFC (as adjusted as set forth herein, the "Option Shares,"
which shall include the Option Shares before and after any transfer of such
Option Shares, but in no event shall the number of Option Shares for which this
Option is exercisable exceed 19.9% of the issued and outstanding shares of AFC
Common Stock as of the date hereof ), at a purchase price per Option Share (as
adjusted as set forth herein, the "Purchase Price") equal to $61.8125. Each
Option Share issued upon exercise of the Option shall be accompanied by the
related preferred share purchase right ("AFC Rights") issued pursuant to the
Rights Agreement between AFC and ChaseMellon Shareholder Services, L.L.C., dated
as of July 17, 1996, as amended, as in effect on the date hereof ("AFC Rights
Agreement").
<PAGE>
3. EXERCISE OF OPTION.
(a) Provided that (i) LISB or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of Option Shares issued by any
court of competent jurisdiction in the United States shall be in effect, the
Holder may exercise the Option, in whole or in part, at any time and from time
to time, following the occurrence of a Purchase Event (as hereinafter defined);
provided, that the Option shall terminate and be of no further force or effect
upon the earliest to occur of (A) the Effective Time, (B) termination of the
Plan in accordance with the terms thereof prior to the occurrence of a Purchase
Event or a Preliminary Purchase Event other than a termination thereof by LISB
pursuant to Section 6.01(b)(ii) of the Plan (a termination of the Plan by LISB
pursuant to such Section of the Plan, being referred to herein as a "Default
Termination"), (C) 18 months after a Default Termination or (D) 18 months after
termination of the Plan (other than a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; provided,
however, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable law; provided further, however, that if
the Option cannot be exercised on any day because of an injunction, order or
similar restraint issued by a court of competent jurisdiction, the period during
which the Option may be exercised shall be extended so that the Option shall
expire no earlier than the tenth business day after such injunction, order or
restraint shall have been dissolved or when such injunction, order or restraint
shall have become permanent and no longer subject to appeal, as the case may be.
The term "Holder" shall mean the holder or holders of the Option from time to
time, and which initially is LISB. The rights set forth in Sections 8 and 9 of
this Agreement shall terminate when the right to exercise the Option and
Substitute Option terminate (other than as a result of a complete exercise of
the Option or Substitute Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without LISB's prior written consent, AFC shall have
recommended, publicly proposed or publicly announced an intention to
authorize, recommend or propose, or AFC shall have entered into an
agreement with any person (other than LISB or any subsidiary of LISB) to
effect (A) a merger, consolidation or similar transaction involving AFC or
any of its significant subsidiaries, (B) the disposition, by sale, lease,
exchange or otherwise, of assets or deposits of AFC or any of its
significant subsidiaries representing in either case all or substantially
all of the consolidated assets or deposits of AFC and its subsidiaries or
(C) the issuance, sale or other disposition by AFC of (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 10% or more of the voting power of AFC or any of
its significant subsidiaries (each of (A), (B) or (C), an "Acquisition
Transaction"); or
(ii) Any person (other than LISB or any subsidiary of LISB) shall
have acquired beneficial ownership (as such term is defined in Rule 13d-3,
promulgated under the Securities and Exchange Act of 1934 (the "Exchange
Act") of, or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the
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Exchange Act), other than a group of which LISB or any subsidiary of LISB
is a member, shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, 10% or more of the voting power
of AFC or any of its significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) Any person (other than LISB or any subsidiary of LISB)
shall have commenced (as such term is defined in Rule 14d-2, promulgated
under the Exchange Act) or shall have filed a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect
to, a tender offer or exchange offer to purchase any shares of AFC Common
Stock such that, upon consummation of such offer, such person would own or
control 10% or more of the then outstanding shares of AFC Common Stock
(such an offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(ii) The stockholders shall not have approved the Plan by the
requisite vote at the stockholders meeting of AFC called for that purpose
("Company Meeting"), the Company Meeting shall not have been held or shall
have been canceled prior to termination of the Plan or AFC's Board of
Directors shall have withdrawn or modified in a manner adverse to LISB the
recommendation of AFC's Board of Directors with respect to the Plan, in
each case after it shall have been publicly announced that any person
(other than LISB or any subsidiary of LISB) shall have (A) made, or
disclosed an intention to make, a bona fide proposal to engage in an
Acquisition Transaction or (B) filed an application (or given a notice),
whether in draft or final form, under the Home Owners' Loan Act of 1933, as
amended, the Bank Holding Company Act, as amended, the Bank Merger Act, as
amended or the Change in Bank Control Act of 1978, as amended, for approval
to engage in an Acquisition Transaction; or
(iii) Any person (other than LISB or any subsidiary of LISB)
shall have made a bona fide proposal to AFC or its stockholders by public
announcement, or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction; or
(iv) After a proposal is made by a third party to AFC or its
stockholders to engage in an Acquisition Transaction, or such third party
states its intention to AFC to make such a proposal if the Plan terminates,
AFC shall have breached any representation, warranty, covenant or agreement
contained in the Plan and such breach would entitle LISB to terminate the
Plan under Section 6.01(b) thereof (without regard to the cure period
provided for therein unless such cure is promptly effected without
jeopardizing consummation of the Merger pursuant to the terms of the Plan).
As used in this Agreement, the term "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
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(d) AFC shall notify LISB promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event of which it has knowledge, it
being understood that the giving of such notice by AFC shall not be a condition
to the right of Holder to exercise the Option.
(e) In the event Holder wishes to exercise the Option, it shall send
to AFC a written notice (the "Stock Exercise Notice," the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
Option Shares it intends to purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 15 business days
from the Notice Date for the closing (the "Closing") of such purchase (such date
as it may be extended pursuant to the next sentence, the "Closing Date");
provided that the first notice of exercise shall be sent to AFC within 180 days
after the first Purchase Event of which LISB has been notified. If prior
notification to or approval of any Regulatory Authority is required in
connection with any such purchase, AFC shall cooperate with the Holder in the
filing of the required notice of application for approval and the obtaining of
such approval, and the Closing shall occur promptly following such regulatory
approvals and any mandatory waiting periods. Any exercise of the Option shall
be deemed to occur on the Notice Date relating thereto.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to AFC, in immediately
available funds by wire transfer to a bank account designated by AFC, an amount
equal to the Purchase Price multiplied by the number of Option Shares to be
purchased on such Closing Date and (ii) present and surrender this Agreement to
AFC at the address of AFC specified in Section 14(f) of this Agreement.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a) of
this Agreement, (i) AFC shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all Liens (as defined in the
Plan) and subject to no preemptive rights, and (B) if the Option is exercised in
part only, an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the shares of AFC Common Stock
purchasable hereunder, and (ii) Holder shall deliver to AFC a letter agreeing
that Holder shall not offer to sell or otherwise dispose of such Option Shares
in violation of applicable federal and state law or of the provisions of this
Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF APRIL 2, 1998. A COPY OF
SUCH AGREEMENT WILL BE PROVIDED
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TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY ASTORIA FINANCIAL
CORPORATION OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend relating to the
Securities Act shall be removed by delivery of substitute certificate(s) without
such legend if Holder shall have delivered to AFC a copy of a letter from the
staff of the Securities Exchange Commission (the "SEC"), or an opinion of
counsel in form and substance reasonably satisfactory to AFC and its counsel, to
the effect that such legend is not required for purposes of the Securities Act.
(d) Upon the giving by Holder to AFC of the Stock Exercise Notice,
the tender of the applicable purchase price in immediately available funds and
the tender of this Agreement to AFC, Holder shall be deemed to be the holder of
record of the shares of AFC Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of AFC shall then be closed or
that certificates representing such shares of AFC Common Stock shall not then be
actually delivered to Holder. AFC shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 4 in the name of Holder or its assignee,
transferee or designee.
(e) AFC agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of AFC
Common Stock so that the Option may be exercised without additional
authorization of AFC Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase AFC Common Stock,
(ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
AFC, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Regulatory Authority is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Regulatory Authority as it may require) in
order to permit Holder to exercise the Option and AFC duly and effectively to
issue shares of AFC Common Stock pursuant hereto and (iv) promptly to take all
action provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF AFC. AFC hereby represents and
warrants to LISB (and Holder, if different than LISB) as follows:
(a) CORPORATE AUTHORITY. AFC has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of AFC, and no other corporate
proceedings on the part of AFC are necessary to authorize this Agreement or
to consummate the transactions so contemplated; this Agreement has been
duly and validly executed and delivered by AFC.
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<PAGE>
(b) BENEFICIAL OWNERSHIP. To the best knowledge of AFC, as of the
date of this Agreement, no person or group has beneficial ownership of more
than 10% of the issued and outstanding shares of AFC Common Stock.
(c) SHARES RESERVED FOR ISSUANCE; CAPITAL STOCK. AFC has taken all
necessary corporate action to authorize and reserve and permit it to issue,
and at all times from the date hereof through the termination of the Option
in accordance with Section 3(a) of this Agreement, will have reserved for
issuance upon the exercise of the Option, that number of shares of AFC
Common Stock equal to the maximum number of Option Shares at any time and
from time to time purchasable upon exercise of the Option, and all such
Shares, upon issuance pursuant to the Option, will be duly authorized,
validly issued, fully paid and nonassessable, and will be delivered free
and clear of all claims, liens, encumbrances and security interests (other
than those created by this Agreement) and not subject to any preemptive
rights.
(d) NO VIOLATIONS. The execution, delivery and performance of this
Agreement does not and will not, and the consummation by AFC of any of the
transactions contemplated hereby will not, constitute or result in (i) a
breach or violation of, or a default under, its certificate of
incorporation or bylaws, or the comparable governing instruments of any of
its subsidiaries, or (ii) a breach or violation of, or a default under, any
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation of it or any of its subsidiaries (with or without the giving of
notice, the lapse of time or both) or under any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or
non-governmental permit or license to which it or any of its subsidiaries
is subject, that would, in any case, give any other person the ability to
prevent or enjoin AFC's performance under this Agreement in any material
respect.
6. REPRESENTATIONS AND WARRANTIES OF LISB. LISB hereby represents
and warrants to AFC that LISB has full corporate power and authority to enter
into this Agreement and, subject to obtaining the approvals referred to in this
Agreement, to consummate the transactions contemplated by this Agreement; the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of LISB; and this Agreement has been duly executed
and delivered by LISB.
7. ADJUSTMENT UPON CHANGES IN AFC CAPITALIZATION, ETC.
(a) In the event of any change in AFC Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares, exercise of the Company Rights or similar transaction, the type and
number of shares or securities subject to the Option, and the Purchase Price
therefor, shall be adjusted appropriately, and proper provision shall be made in
the agreements governing any such transaction so that Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of AFC Common Stock if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable. If any additional
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shares of AFC Common Stock are issued after the date of this Agreement (other
than pursuant to an event described in the first sentence of this Section 7(a),
upon exercise of any option to purchase AFC Common Stock outstanding on the date
hereof or upon conversion into AFC Common Stock of any convertible security of
AFC outstanding on the date hereof), the number of shares of AFC Common Stock
subject to the Option shall be adjusted so that, after such issuance, it,
together with any shares of AFC Common Stock previously issued pursuant hereto,
equals 19.9% of the number of shares of AFC Common Stock then issued and
outstanding, without giving effect to any shares subject to or issued pursuant
to the Option. No provision of this Section 7 shall be deemed to affect or
change, or constitute authorization for any violation of, any of the covenants
or representations in the Plan.
(b) In the event that AFC shall enter into an agreement (i) to
consolidate with or merge into any person, other than LISB or one of its
subsidiaries, and AFC shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than LISB or one
of its subsidiaries, to merge into AFC and AFC shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of AFC Common Stock shall be changed into or exchanged for stock or other
securities of AFC or any other person or cash or any other property, or the
outstanding shares of AFC Common Stock immediately prior to such merger shall
after such merger represent less than 50% of the outstanding shares and share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets or deposits to any person, other than LISB or
one of its subsidiaries, then, and in each such case, the agreement governing
such transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Holder, of either (A) the Acquiring Corporation (as
hereinafter defined), (B) any person that controls the Acquiring Corporation or
(C) in the case of a merger described in clause (ii), AFC (such person being
referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided, that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer shall also enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of Option
Shares for which the Option was theretofore exercisable, divided by the Average
Price (as hereinafter defined). The exercise price of the Substitute Option per
share of Substitute Common Stock (the "Substitute Option Price") shall be equal
to the Purchase Price multiplied by a fraction in which the numerator is the
number of shares of AFC Common Stock for which the Option was theretofore
exercisable and the denominator is the number of shares of the Substitute Common
Stock for which the Substitute Option is exercisable.
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(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with AFC (if other than
AFC), (B) AFC in a merger in which AFC is the continuing or surviving
person, or (C) the transferee of all or substantially all of AFC's assets
(or a substantial part of the assets of its subsidiaries taken as a whole).
(ii) "Substitute Common Stock" shall mean the shares of
capital stock (or similar equity interest) with the greatest voting power
in respect of the election of directors (or persons similarly responsible
for the direction of the business and affairs) of the Substitute Option
Issuer.
(iii) "Assigned Value" shall mean the highest of (A) the price
per share of AFC Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (B) the price per share of AFC Common Stock to be
paid by any third party pursuant to an agreement with AFC, (C) the highest
closing price for shares of AFC Common Stock within the sixty-day period
immediately preceding the consolidation, merger or sale in question and (D)
in the event of a sale of all or substantially all of AFC's assets or
deposits, an amount equal to (x) the sum of the price paid in such sale for
such assets (and/or deposits) and the current market value of the remaining
assets of AFC, as determined by a nationally recognized investment banking
firm selected by Holder, divided by (y) the number of shares of AFC Common
Stock outstanding at such time. In the event that a Tender Offer or an
Exchange Offer is made for AFC Common Stock or an agreement is entered into
for a merger or consolidation involving consideration other than cash, the
value of the securities or other property issuable or deliverable in
exchange for AFC Common Stock shall be determined by a nationally
recognized investment banking firm selected by Holder.
(iv) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided, that, if AFC is the issuer of
the Substitute Option, the Average Price shall be computed with respect to
a share of common stock issued by AFC, the person merging into AFC or by
any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for the limitation in the first sentence of this Section 7(f), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This
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difference in value shall be determined by a nationally recognized investment
banking firm selected by Holder.
(g) AFC shall not enter into any transaction described in Section
7(b) of this Agreement unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of AFC
hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the holders of the other
shares of common stock issued by Substitute Option Issuer are not entitled to
exercise any rights by reason of the issuance or exercise of the Substitute
Option and the shares of Substitute Common Stock are otherwise in no way
distinguishable from or have lesser economic value (other than any diminution in
value resulting from the fact that the shares of Substitute Common Stock are
restricted securities, as defined in Rule 144, promulgated under the Securities
Act ("Rule 144"), or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
(h) Notwithstanding anything herein to the contrary, in the event
that AFC completes a reorganization involving the formation of a holding company
for AFC, the agreement governing such transaction shall make proper provisions
so that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option of such holding company.
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a) of this Agreement,
at the request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, AFC shall repurchase from Holder (i) the Option and (ii)
all shares of AFC Common Stock purchased by Holder pursuant hereto with respect
to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 8 is referred to as the "Section 8
Request Date." Such repurchase shall be at an aggregate price (the "Section 8
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for any
shares of AFC Common Stock acquired pursuant to the Option with respect to
which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Applicable Price (as
defined below) for each share of AFC Common Stock over (B) the Purchase
Price (subject to adjustment pursuant to Section 7 of this Agreement),
multiplied by the number of shares of AFC Common Stock with respect to
which the Option has not been exercised; and
(iii) The excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement) paid (or, in the case of Option Shares with respect to which the
Option has been exercised but the Closing Date has not occurred, payable)
by Holder for each share of AFC Common Stock with respect
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to which the Option has been exercised and with respect to which Holder
then has beneficial ownership, multiplied by the number of such shares.
(b) If Holder exercises its rights under this Section 8, AFC shall,
within 10 business days after the Section 8 Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to AFC the Option
and the certificates evidencing the Option Shares purchased thereunder with
respect to which Holder then has beneficial ownership, and Holder shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all Liens. Notwithstanding the foregoing, to
the extent that prior notification to or approval of any Regulatory Authority is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to this Section 8, in whole or in part, or to
require that AFC deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and expeditiously
process the same (and each party shall cooperate with the other in the filing of
any such notice or application and the obtaining of any such approval). If any
Regulatory Authority disapproves of any part of AFC's proposed repurchase
pursuant to this Section 8, AFC shall promptly give notice of such fact to
Holder and Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such Regulatory Authority, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Section 8
Request Date less the number of shares covered by the Option in respect of which
payment has been made pursuant to Section 8(a)(ii) of this Agreement. Holder
shall notify AFC of its determination under the preceding sentence within five
business days of receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, in the event that AFC delivers
to the Holder written notice accompanied by a certification of AFC's independent
auditor each stating that a requested repurchase of AFC Common Stock would
result in the recapture of AFC's bad debt reserves under the Internal Revenue
Code of 1986, as amended, Holder's repurchase request shall be deemed to be
automatically revoked.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 8 shall terminate on the date of termination of this
Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of AFC Common Stock paid for any such
share by the person or groups described in Section 8(d)(i) hereof, (ii) the
price per share of AFC Common Stock received by holders of AFC Common Stock in
connection with any merger, sale or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this Agreement, or (iii)
the highest closing sales price per share of AFC Common Stock quoted on the
Nasdaq (or if AFC Common Stock is not quoted on the Nasdaq, the highest bid
price per share as quoted on the principal trading market or securities exchange
on which such shares are traded as reported by a recognized source chosen by
Holder) during the 40 business days preceding the Section 8 Request
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Date; provided, however, that in the event of a sale of less than all of AFC's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of AFC as
determined by a nationally recognized investment banking firm selected by
Holder, divided by the number of shares of the AFC Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by Holder and
reasonably acceptable to AFC, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person
(other than LISB or any subsidiary of LISB) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3, promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 50% or
more of the then outstanding shares of AFC Common Stock, or (ii) any of the
transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement shall be consummated.
9. REPURCHASE OF SUBSTITUTE OPTION.
(a) Subject to the last sentence of Section 3(a) of this Agreement,
at the request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, Substitute Option Issuer (or any successor entity
thereof) shall repurchase from Holder (i) the Substitute Option and (ii) all
shares of Substitute Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 9 is referred to as the "Section 9
Request Date." Such repurchase shall be at an aggregate price (the "Section 9
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for any
shares of Substitute Common Stock acquired pursuant to the Substitute
Option with respect to which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Highest Closing Price (as
defined below) for each share of Substitute Common Stock over (B) the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement), multiplied by the number of shares of Substitute Common Stock
with respect to which the Substitute Option has not been exercised; and
(iii) The excess, if any, of the Highest Closing Price over the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement) paid (or, in the case of Substitute Option Shares with respect
to which the Substitute Option has been exercised but the Closing Date has
not occurred, payable) by Holder for each share of Substitute Common Stock
with respect to which the Substitute Option has been exercised and with
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respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 9, Substitute
Option Issuer shall, within 10 business days after the Section 9 Request Date,
pay the Section 9 Repurchase Consideration to Holder in immediately available
funds, and contemporaneously with such payment, Holder shall surrender to
Substitute Option Issuer the Substitute Option and the certificates evidencing
the shares of Substitute Common Stock purchased thereunder with respect to which
Holder then has beneficial ownership, and Holder shall warrant that it has sole
record and beneficial ownership of such shares and that the same are then free
and clear of all Liens. Notwithstanding the foregoing, to the extent that prior
notification to or approval of any Regulatory Authority is required in
connection with the payment of all or any portion of the Section 9 Repurchase
Consideration, Holder shall have the ongoing option to revoke its request for
repurchase pursuant to this Section 9, in whole or in part, or to require that
Substitute Option Issuer deliver from time to time that portion of the Section 9
Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and expeditiously
process the same (and each party shall cooperate with the other in the filing of
any such notice or application and the obtaining of any such approval). If any
Regulatory Authority disapproves of any part of Substitute Option Issuer's
proposed repurchase pursuant to this Section 9, Substitute Option Issuer shall
promptly give notice of such fact to Holder and Holder shall have the right (i)
to revoke the repurchase request or (ii) to the extent permitted by such
Regulatory Authority, determine whether the repurchase should apply to the
Substitute Option and/or Substitute Option Shares and to what extent to each,
and Holder shall thereupon have the right to exercise the Substitute Option as
to the number of Substitute Option Shares for which the Substitute Option was
exercisable at the Section 9 Request Date less the number of shares covered by
the Substitute Option in respect of which payment has been made pursuant to
Section 9(a)(ii) of this Agreement. Holder shall notify Substitute Option
Issuer of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase. Notwithstanding
anything herein to the contrary, in the event that Substitute Option Issuer
delivers to the Holder written notice accompanied by a certification of
Substitute Option Issuer's independent auditor each stating that a requested
repurchase of AFC Common Stock would result in the recapture of Substitute
Option Issuer's bad debt reserves under the Internal Revenue Code of 1986, as
amended, Holder's repurchase request shall be deemed to be automatically
revoked.
Notwithstanding anything herein to the contrary, all of Holder's
rights under this Section 9 shall terminate on the date of termination of this
Substitute Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Highest Closing Price" means
the highest of closing sales price for shares of Substitute Common Stock quoted
on the Nasdaq (or if the Substitute Common Stock is not quoted on the Nasdaq, on
the principal trading market on which such shares are traded as reported by a
recognized source) during the six-month period preceding the Section 9 Request
Date.
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10. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. AFC shall, subject to the conditions
of Section 10(c) of this Agreement, if requested by any Holder, including LISB
and any permitted transferee ("Selling Shareholder"), as expeditiously as
possible, prepare and file a registration statement under the Securities Act, if
such registration is necessary in order to permit the sale or other disposition
of any or all shares of AFC Common Stock or other securities that have been
acquired by or are issuable to the Selling Shareholder upon exercise of the
Option in accordance with the intended method of sale or other disposition
stated by the Selling Shareholder in such request, including without limitation
a "shelf" registration statement under Rule 415, promulgated under the
Securities Act, or any successor provision, and AFC shall use its best efforts
to qualify such shares or other securities for sale under any applicable state
securities laws.
(b) ADDITIONAL REGISTRATION RIGHTS. If AFC at any time after the
exercise of the Option proposes to register any shares of AFC Common Stock under
the Securities Act, in connection with an underwritten public offering of such
AFC Common Stock, AFC will promptly give written notice to the Selling
Shareholders of its intention to do so and, upon the written request of any
Selling Shareholder given within 30 days after receipt of any such notice (which
request shall specify the number of shares of AFC Common Stock intended to be
included in such underwritten public offering by the Selling Shareholder), AFC
will cause all such shares for which a Selling Shareholder requests
participation in such registration, to be so registered and included in such
underwritten public offering; provided, however, that AFC may elect to not cause
any such shares to be so registered (i) if the underwriters in good faith object
for valid business reasons, or (ii) in the case of a registration solely to
implement an employee benefit plan or a registration filed on Form S-4 of the
Securities Act or any equivalent or successor Form. If some, but not all the
shares of AFC Common Stock, with respect to which AFC shall have received
requests for registration pursuant to this Section 10(b), shall be excluded from
such registration, AFC shall make appropriate allocation of shares to be
registered among the Selling Shareholders desiring to register their shares PRO
RATA in the proportion that the number of shares requested to be registered by
each such Selling Shareholder bears to the total number of shares requested to
be registered by all such Selling Shareholders then desiring to have AFC Common
Stock registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. AFC shall use all
reasonable efforts to cause each registration statement referred to in Section
10(a) of this Agreement to become effective and to obtain all consents or
waivers of other parties which are required therefor and to keep such
registration statement effective, provided, however, that AFC may delay any
registration of Option Shares required pursuant to Section 10(a) of this
Agreement for a period not exceeding 90 days provided AFC shall in good faith
determine that any such registration would adversely affect an offering or
contemplated offering of other securities by AFC, and AFC shall not be required
to register Option Shares under the Securities Act pursuant to Section 10(a)
hereof:
(i) Prior to the earliest of (A) termination of the Plan
pursuant to Article VI thereof, (B) failure to obtain the requisite
stockholder approval pursuant to Section 6.01 of Article VI of the Plan,
and (C) a Purchase Event or a Preliminary Purchase Event;
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(ii) On more than one occasion during any calendar year;
(iii) Within 90 days after the effective date of a registration
referred to in Section 9(b) of this Agreement pursuant to which the Selling
Shareholder or Selling Shareholders concerned were afforded the opportunity
to register such shares under the Securities Act and such shares were
registered as requested; and
(iv) Unless a request therefor is made to AFC by Selling
Shareholders that hold at least 25% or more of the aggregate number of
Option Shares (including shares of AFC Common Stock issuable upon exercise
of the Option) then outstanding.
In addition to the foregoing, AFC shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. AFC shall use
all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares; provided, however, that AFC
shall not be required to consent to general jurisdiction or qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) EXPENSES. Except where applicable state law prohibits such
payments, AFC will pay all expenses (including without limitation registration
fees, qualification fees, blue sky fees and expenses (including the fees and
expenses of counsel), legal expenses, including the reasonable fees and expenses
of one counsel to the holders whose Option Shares are being registered, printing
expenses and the costs of special audits or "cold comfort" letters, expenses of
underwriters, excluding discounts and commissions but including liability
insurance if AFC so desires or the underwriters so require, and the reasonable
fees and expenses of any necessary special experts) in connection with each
registration pursuant to Section 10(a) or 10(b) of this Agreement (including the
related offerings and sales by holders of Option Shares) and all other
qualifications, notifications or exemptions pursuant to Section 10(a) or 10(b)
of this Agreement.
(e) INDEMNIFICATION. In connection with any registration under
Section 10(a) or 10(b) of this Agreement, AFC hereby indemnifies the Selling
Shareholders, and each underwriter thereof, including each person, if any, who
controls such holder or underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement of a material fact contained
in any registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by AFC in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon and in conformity with,
information furnished in writing to AFC by such indemnified party expressly for
use therein, and AFC and each officer, director and controlling person of AFC
shall be
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indemnified by such Selling Shareholders, or by such underwriter, as the case
may be, for all such expenses, losses, claims, damages and liabilities caused by
any untrue, or alleged untrue, statement, that was included by AFC in any such
registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) in reliance upon, and in
conformity with, information furnished in writing to AFC by such Selling
Shareholder or such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 10(e)
of notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 10(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 10(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party either agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 10(e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by AFC, the Selling Shareholders and the underwriters from the offering of the
securities and also the relative fault of AFC, the Selling Shareholders and the
underwriters in connection with the statements or omissions which resulted in
such expenses, losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The amount paid or payable by a party as a
result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, however, that in no case shall any Selling Shareholder be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from
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any person who was not guilty of such fraudulent misrepresentation. Any
obligation by any holder to indemnify shall be several and not joint with other
holders.
In connection with any registration pursuant to Section 10(a) or 10(b)
of this Agreement, AFC and each Selling Shareholder (other than LISB) shall
enter into an agreement containing the indemnification provisions of Section
10(e) of this Agreement.
(f) MISCELLANEOUS REPORTING. AFC shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Selling Shareholders
thereof in accordance with and to the extent permitted by any rule or regulation
promulgated by the SEC from time to time, including, without limitation, Rule
144. AFC shall at its expense provide the Selling Shareholders with any
information necessary in connection with the completion and filing of any
reports or forms required to be filed by them under the Securities Act or the
Exchange Act, or required pursuant to any state securities laws or the rules of
any stock exchange.
(g) ISSUE TAXES. AFC will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all such
taxes.
11. QUOTATION; LISTING. If AFC Common Stock or any other securities
to be acquired in connection with the exercise of the Option are then authorized
for quotation or trading or listing on the Nasdaq or any securities exchange,
AFC, upon the request of Holder, will promptly file an application, if required,
to authorize for quotation or trading or listing the shares of AFC Common Stock
or other securities to be acquired upon exercise of the Option on the Nasdaq or
such other securities exchange and will use its best efforts to obtain approval,
if required, of such quotation or listing as soon as practicable.
12. DIVISION OF OPTION. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of AFC for
other Agreements providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of AFC
Common Stock purchasable hereunder. The terms "Agreement" and "Option" as used
herein include any other Agreements and related Options for which this Agreement
(and the Option granted hereby) may be exchanged. Upon receipt by AFC of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, if mutilated, AFC will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of AFC, whether or
not the Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
13. PROFIT LIMITATION. (a) Notwithstanding any other provision of
this agreement, in no event shall LISB's Total Profit (as hereinafter defined)
exceed $60 million and,
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<PAGE>
if it otherwise would exceed such amount, LISB, at its sole election, shall
either (a) deliver to AFC for cancellation Shares previously purchased by LISB,
(b) pay cash or other consideration to AFC or (c) undertake any combination
thereof, so that LISB's total Profit shall not exceed $60 million after taking
into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of Shares as would, as of the Notice
Date, result in a Notional Total Profit (as defined below) of more than $60
million and, if exercise of the Option otherwise would exceed such amount, LISB,
at its discretion, may increase the Purchase Price for that number of Shares set
forth in the Stock Exercise Notice so that the Notional Total Profit shall not
exceed $60 million; provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date at the Purchase
Price set forth in Section 2 hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by LISB
pursuant to Section 6.03 of the Merger Agreement and Section 8(a)(ii) hereof,
(ii) (x) the amount received by LISB pursuant to the repurchase of Option Shares
pursuant to Section 8 or Section 9 hereof, less (y) LISB's purchase price for
such Option Shares, and (iii) (z) the net cash amounts received by LISB pursuant
to the sale of Option Shares (or any other securities into which such Option
Shares are converted or exchanged) to any unaffiliated party, less (y) LISB's
purchase price for such Option Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Option Shares as to which LISB may propose to exercise this Option
shall be the Total Profit determined as of the date of the Stock Exercise Notice
assuming that this Option were exercised on such date for such number of Shares
and assuming that such Option Shares, together with all other Option Shares held
by LISB and its affiliates as of such date, were sold for cash at the closing
market price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
14. MISCELLANEOUS.
(a) EXPENSES. Except to the extent expressly provided for herein,
each of the parties hereto shall bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) ENTIRE AGREEMENT: NO THIRD-PARTY BENEFICIARIES; SEVERABILITY.
This Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between LISB and AFC (i) constitutes the entire
agreement and supersedes all prior
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<PAGE>
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto (other than the indemnified parties under
Section 9(e) of this Agreement and any transferees of the Option Shares or any
permitted transferee of this Agreement pursuant to Section 11(h) of this
Agreement) any rights or remedies hereunder. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction or
Regulatory Authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or Regulatory Authority determines that the Option
does not permit Holder to acquire, or does not require AFC to repurchase, the
full number of shares of AFC Common Stock as provided in Section 3 of this
Agreement (as may be adjusted herein), it is the express intention of AFC to
allow Holder to acquire or to require AFC to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Plan (or at such
other address for a party as shall be specified by like notice).
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option
by the Holder, AFC, and the Holder shall execute and deliver all other documents
and instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
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<PAGE>
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
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<PAGE>
IN WITNESS WHEREOF, AFC and LISB have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
ASTORIA FINANCIAL CORPORATION
By: /s/ George L. Engelke, Jr.
------------------------------------
George L. Engelke, Jr.
Chairman, President and Chief
Executive Officer
LONG ISLAND BANCORP, INC.
By: /s/ John J. Conefry, Jr.
------------------------------------
John J. Conefry, Jr.
Chairman and Chief Executive Officer
<PAGE>
Exhibit 4.3
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 ("Amendment"), dated as of April 2, 1998, to the
Rights Agreement, dated as of April 22, 1997, (the "Rights Agreement"), by and
between Long Island Bancorp, Inc. a Delaware corporation (the "Corporation"),
and ChaseMellon Shareholder Services, L.L.C., a national banking organization
(the "Rights Agent"). Unless otherwise provided herein, all capitalized terms
shall have the meanings set forth in the Rights Agreement.
WHEREAS, no Person has become an Acquiring Person; and
WHEREAS, the Board of Directors of the Corporation, in connection with the
Agreement and Plan of Merger, dated April 2, 1998 (the "Merger Agreement"), by
and between the Corporation and AFC ("AFC"), has authorized the Corporation to
enter into a Stock Option Agreement (the "LISB Option Agreement") with the
Corporation, which provides for the Corporation's grant to AFC of an option (the
"Option") to purchase 4,763,113 shares of the Corporation's common stock, par
value $0.01 par share (the "Common Stock"), on the terms and conditions set
forth in the LISB Option Agreement; and
WHEREAS, the Board of Directors of the Corporation, subject to certain
conditions, desires to amend the Rights Agreement to exclude the acquisition of
the Option and the Common Stock by AFC pursuant to the LISB Option Agreement
from the operation of the Rights Agreement;
NOW, THEREFORE, in consideration of the premises and covenants set forth in
the Rights Agreement and in this Amendment No. 1 thereto, the parties hereby
agree as follows:
1. Section 1(a) of the Rights Agreement is hereby amended by inserting
the following phrase immediately following the phrase "but shall not include":
Astoria Financial Corporation ("AFC"), or any Affiliate of AFC,
as a result of the merger of the Corporation with and into AFC
pursuant to the Agreement and Plan of Merger, dated April 2, 1998
by and between the Corporation and AFC, AFC's right to acquire,
or AFC's acquisition of, Common Shares of the Corporation
pursuant to the Long Island Bancorp, Inc. Option Agreement dated
April 2, 1998 into by and between AFC and the Corporation, as the
same may be amended, from time to time,
2. On and after the date of this Amendment No. 1 any reference in the
Rights Agreement (including the Exhibits thereto) to "This Agreement,"
"hereunder," "hereof," or "herein" or words of like import shall mean and be a
reference to the Rights Agreement as amended by this Amendment No. 1.
<PAGE>
3. This Amendment No. 1 shall be effective as of the date and time of its
execution.
4. This Amendment No.1 may be executed in counterparts, and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be duly executed and attested, all as of the day and year first above written.
LONG ISLAND BANCORP, INC.
By: /s/ John J. Conefry, Jr.
---------------------------------------
John J. Conefry, Jr.
Chairman and Chief Executive Officer
Attest:
By:
------------------------------
Corporate Secretary
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
as Rights Agent
By: /s/ Beverly Verricco
---------------------------------------
Name: Beverly Verricco
Title:
Attest:
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT 99.1
For Immediate Release
Astoria Financial Corporation and Long Island Bancorp, Inc. to Merge
Strategic Alliance Creates $17 Billion Financial Institution; No. 2 Deposit
Market Share Ranking on Long Island
LAKE SUCCESS, N.Y., April 3, 1998 -- Astoria Financial Corporation
(Nasdaq: ASFC) ("Astoria"), and Long Island Bancorp, Inc. (Nasdaq: LISB)
("LISB") jointly announced today that they have signed a definitive
agreement for Astoria and LISB to merge in a tax-free exchange of common stock.
Astoria Financial Corporation, the holding company for Astoria Federal Savings
and Loan Association ("Astoria Federal"), with assets of $10.5 billion and
deposits of $6.2 billion at December 31, 1997, is the third largest thrift
institution in New York and tenth largest in the United States. Astoria Federal
operates 61 banking offices, of which 53 are located in Brooklyn, Queens, Nassau
and Suffolk Counties on Long Island, and eight are located in Westchester County
and upstate New York. LISB is the parent company of The Long Island Savings
Bank, FSB ("Long Island Savings"), a federally chartered thrift institution with
assets of $6.1 billion and deposits of $3.7 billion at December 31, 1997,
headquartered in Melville, Long Island. Long Island Savings operates 35 banking
offices throughout Queens, Nassau and Suffolk Counties and 22 loan production
offices located in 7 states. Upon completion of the transaction, LISB will merge
into Astoria and Long Island Savings will merge into Astoria Federal. The
transaction, which received the unanimous approval of the boards of directors of
Astoria and LISB, will be accounted for as a pooling of interests and will be
accretive to Astoria's earnings per common share in 1999. The transaction is
expected to close at the end of the third quarter of 1998.
Under the terms of the agreement, holders of LISB common stock will receive 1.15
shares of the common stock of Astoria for each share of LISB common stock. Using
Astoria's average closing stock price for the last five business days ending
April 2, 1998, of $61.78, the exchange represents a price of $71.04 for each
LISB share, approximately 3.09 times LISB's tangible book value at December 31,
1997. The total transaction value is estimated to be $1.8 billion based on
LISB's diluted shares including ESOP shares at Astoria's average stock price for
the last five business days. The pro forma combined company will receive the
proceeds, if any, from the supervisory goodwill lawsuits of LISB and Astoria. As
a result, in addition to the value of the Astoria common stock received, LISB
shareholders, as shareholders of Astoria, will retain an interest in the LISB
supervisory goodwill lawsuit, which if valued consistent with currently traded
market instruments, would approximate $9 - $12 per LISB share, and gain an
interest in the Astoria supervisory goodwill lawsuit. Astoria shareholders, in
addition to current market value, will gain an interest in the LISB supervisory
goodwill lawsuit valued, consistent with currently traded market instruments, at
$8 - $11 per share. Based upon the currently outstanding LISB shares of common
stock, it is expected that approximately 27.6 million new shares of Astoria
common stock will be issued in conjunction with the transaction, bringing the
pro forma
<PAGE>
market capitalization of the combined company to $3.25 billion, the sixth
largest thrift market capitalization nationally.
The pro forma combined company, as of December 31, 1997, reflects total assets
of $16.6 billion, ranking Astoria the second largest publicly traded thrift
institution in New York and sixth largest nationally. It also includes strong
mortgage origination capabilities in 7 states, deposits totaling $10.0 billion
and shareholders' equity of $1.5 billion. The pro forma company will operate 96
banking offices, including 88 in the New York City metropolitan area: 31 in
Nassau, 20 in Queens, 11 in Brooklyn, and 26 in Suffolk, as well as 3 in
Westchester County and 5 in the upstate counties of Chenango and Otsego.
Subsequent to the closing of the transaction, management anticipates that it
will consolidate six banking offices in communities in which both Astoria and
LISB have a presence.
Commenting on the transaction, George L. Engelke, Jr., Chairman, President and
Chief Executive Officer of Astoria said, "This strategic alliance between two
strong Long Island financial institutions forms the premier consumer- oriented
community bank on Long Island. The pro forma deposits of the 88 Long Island
banking offices total $9.4 billion, or an average of $107 million per banking
office, resulting in a pro forma #2 market share of deposits and a 8.7% market
share in a market larger in population than 39 states in the United States. We
are confident that the transaction will not only enhance shareholder value, but
also provide long-term benefits for our customers and, particularly, our
communities. We are also delighted that John J. Conefry, Jr., whose leadership
has successfully guided LISB to its current well- capitalized and prominent
position in the Long Island market, will be joining the Board of Directors of
both Astoria Financial Corporation and Astoria Federal Savings and Loan
Association as a Vice Chairman and will also join our executive management team.
His broad knowledge and experience will serve Astoria well as we continue to
implement strategies to build our franchise, strengthen efforts in our
communities, particularly in providing banking and home mortgage expertise to
better serve the financial needs of low-to-moderate income families and
individuals, and enhance shareholder value. We also look forward to adding many
other talented Long Island Savings officers and employees to the already strong
team at Astoria. Four other current directors of LISB will also join both boards
of Astoria."
Mr. Conefry commented, "We are very excited to be partnering with Astoria, a
premier community-oriented financial services institution. The combination of
our two strong companies will create a powerful retail banking franchise in Long
Island that will provide greater potential for its shareholders, customers and
communities than either institution would provide alone."
Astoria estimates that operational efficiencies generated as a result of the
transaction will produce cost savings equal to 50%, or approximately $52.0
million, pre-tax, of LISB's estimated 1998 general and administrative expense.
Mr. Engelke, commenting on the estimated cost savings said, "We have a proven
track record of rapidly consolidating back office systems and quickly
recognizing all anticipated cost savings, as evidenced by the speed with which
we successfully integrated The Greater New York Savings Bank (1997) and Fidelity
New York, FSB (1995) into Astoria, allowing us to recognize a substantial part
of all cost savings in the 90 days following the closing of those transactions.
We expect to approach this transaction in the same manner as our past successes
by effecting at least 75% of all anticipated cost savings by the
2
<PAGE>
end of the fourth quarter of 1998 and the balance during the first half of
1999." One-time charges in conjunction with this transaction, anticipated to be
recorded in the fourth quarter, are expected to approximate $75 million, after-
tax.
In connection with the transaction, there is a provision for a termination fee
of $60 million payable to Astoria if the transaction is not completed under
certain circumstances. In addition, LISB and Astoria have granted cross options
to purchase shares equal to 19.9% of each other's currently outstanding common
stock under certain conditions. Stock repurchase plans have been terminated by
both companies.
The transaction is subject to approval of the shareholders of both LISB and
Astoria, approval of the Office of Thrift Supervision and the satisfaction of
certain other conditions.
ASTORIA FINANCIAL CORPORATION/LONG ISLAND BANCORP, INC.
Selected Financial Information
Quarter Ended December 31, 1997
($ in millions, except per share data)
ASFC LISB Pro Forma (Combined)
Total assets $10,528.4 $6,072.5 $16,600.9
Total deposits 6,220.9 3,742.4 9,963.3
Total loans 4,345.0 3,520.7 7,865.7
Total Borrowings 3,272.8 1,614.0 4,886.8
Shareholders' Equity 899.4 557.3 1,456.7
Shareholders' Equity to Assets 8.54% 9.18% 8.77%
Net income (3 months ended) $20.9 $13.2 $34.1
Cash earnings (3 months ended) 30.8 14.5 48.9*
Non-performing assets 59.1 53.8 112.9
Non-performing assets
/total assets 0.56% 0.89% 0.68%
Reserves $40.0 $33.7 $73.7
Book value per share** 32.42 23.19 26.13
Tangible book value
per share** 22.57 22.98 21.24
* Adjusted for fully phased-in cost savings
** Before transaction related charges
NOTE: ASTORIA AND LISB PLAN TO HOST A JOINT CONFERENCE CALL ON FRIDAY
MORNING, APRIL 3, 1998, AT 11:00 AM (EST). INTERESTED INVESTORS
AND ANALYSTS MAY PARTICIPATE EITHER IN PERSON OR VIA CONFERENCE
CALL.
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<PAGE>
INVESTORS WISHING TO PARTICIPATE BY TELEPHONE SHOULD CALL:
DOMESTIC CALLERS: 1-888-282-0380
INTERNATIONAL CALLERS: 630-395-0200
THE CONFERENCE CALL WILL BE HOSTED AT THE ST. REGIS HOTEL, 2 EAST 55th STREET,
NEW YORK, IN THE VERSAILLES ROOM FOR THOSE INVESTORS/ANALYSTS WISHING TO ATTEND
IN PERSON.
A RECORDED PLAYBACK OF THE INVESTOR CALL WILL BE AVAILABLE THROUGH APRIL 7, 1998
AT 1-888-566-0686 (DOMESTIC CALLERS) AND 402-998-0107 (INTERNATIONAL CALLERS)
RESERVATION # 4823
This release may contain certain forward-looking statements regarding the merger
with Long Island Bancorp, Inc., including cost savings to be realized, earnings
accretion, transaction charges and other opportunities following the acquisition
which are based on management's current expectations regarding economic,
legislative, and regulatory issues. The factors which may cause future results
to vary materially include, but are not limited to general economic conditions,
changes in interest rates, deposit flows, loan demand, real estate values, and
competition; changes in accounting principles, policies, or guidelines; changes
in legislation or regulation; and other economic, competitive, governmental,
regulatory, and technological factors affecting each Company's operations,
pricing, products and services.
4
