CONFIDENTIAL
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND
BETWEEN
FLUSHING FINANCIAL CORPORATION
AND
ATLANTIC LIBERTY FINANCIAL CORP.
DECEMBER 20, 2005
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TABLE OF CONTENTS
ARTICLE I CERTAIN
DEFINITIONS.................................................1
1.1 Certain
Definitions..........................................1
ARTICLE II THE
MERGER.........................................................7
2.1
Merger.......................................................7
2.2 Closing;
Effective Time......................................8
2.3
Certificate of Incorporation and Bylaws......................8
2.4 Directors
and Officers of Surviving Corporation..............8
2.5 Effects of
the Merger........................................8
2.6 Tax
Consequences.............................................8
2.7 Possible
Alternative Structures..............................9
2.8 Additional
Actions...........................................9
ARTICLE III CONVERSION OF
SHARES..............................................9
3.1 Conversion
of ALFC Common Stock; Merger Consideration........9
3.2 Election
Procedures.........................................10
3.3 Procedures
for Exchange of ALFC Common Stock................13
3.4 Treatment
of ALFC Options...................................14
3.5 Bank
Merger.................................................16
3.6
Reservation of Shares.......................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
ALFC............................16
4.1
Standard....................................................16
4.2
Organization................................................16
4.3
Capitalization..............................................17
4.4 Authority;
No Violation.....................................18
4.5
Consents....................................................18
4.6 Financial
Statements........................................19
4.7
Taxes.......................................................19
4.8 No
Material Adverse Effect..................................21
4.9 Material
Contracts; Leases; Defaults........................21
4.10
Ownership of Property; Insurance Coverage...................22
4.11
Legal Proceedings...........................................22
4.12
Compliance With Applicable Law..............................23
4.13
Employee Benefit Plans......................................23
4.14
Brokers, Finders and Financial Advisors.....................26
4.15
Environmental Matters.......................................26
4.16 Loan
Portfolio..............................................27
4.17
Securities Documents........................................28
4.18
Related Party Transactions..................................28
4.19
Deposits....................................................29
4.20
Antitakeover Provisions Inapplicable; Required Vote.........29
4.21
Registration Obligations....................................29
4.22
Risk Management Instruments.................................29
4.23
Fairness Opinion............................................29
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4.24
Intellectual Property.......................................30
4.25
ALFC Information............................................30
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
FFC..............................30
5.1
Standard....................................................30
5.2
Organization................................................31
5.3
Capitalization..............................................31
5.4 Authority;
No Violation.....................................32
5.5
Consents....................................................32
5.6 Financial
Statements........................................32
5.7 No
Material Adverse Effect..................................33
5.8 Legal
Proceedings...........................................33
5.9 Compliance
With Applicable Law..............................33
5.10
Securities Documents........................................34
5.11
Brokers, Finders and Financial Advisors.....................34
5.12
FFC Information.............................................34
5.13
FFC Common Stock............................................35
5.14
Deposits....................................................35
5.15
Risk Management Instruments.................................35
5.16
Material Contracts..........................................35
5.17
Employee Benefit Plans......................................35
5.18
Environmental Matters.......................................36
5.19
Loan Portfolio..............................................36
5.20
Taxes.......................................................37
ARTICLE VI COVENANTS OF
ALFC.................................................38
6.1 Conduct of
Business.........................................38
6.2 Current
Information.........................................42
6.3
Access to
Properties and Records............................43
6.4 Financial
and Other Statements..............................43
6.5
Maintenance of Insurance....................................43
6.6 Disclosure
Supplements......................................44
6.7 Consents
and Approvals of Third Parties.....................44
6.8 All
Reasonable Efforts......................................44
6.9 Failure to
Fulfill Conditions...............................44
6.10
No Solicitation.............................................44
6.11
Employee Benefits...........................................45
6.12
Reserves and Merger-Related Costs...........................46
ARTICLE VII COVENANTS OF
FFC.................................................46
7.1 Conduct of
Business.........................................46
7.2 Current
Information and Consultation........................46
7.3 Disclosure
Supplements......................................47
7.4 Consents
and Approvals of Third Parties.....................47
7.5 All
Reasonable Efforts......................................47
7.6 Failure to
Fulfill Conditions...............................47
7.7 Employee
Benefits; Advisory Board...........................47
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7.8 Directors
and Officers Indemnification and Insurance........49
7.9 Stock
Listing...............................................50
7.10
Stock and Cash Reserve......................................50
7.11
Section 16(b) Exemption.....................................50
ARTICLE VIII REGULATORY AND OTHER
MATTERS....................................51
8.1 Meetings
of Stockholders....................................51
8.2 Proxy
Statement-Prospectus; Merger Registration Statement...51
8.3 Regulatory
Approvals........................................52
8.4
Affiliates..................................................52
ARTICLE IX CLOSING
CONDITIONS................................................53
9.1 Conditions
to Each Party's Obligations under this Agreement.53
9.2 Conditions
to the Obligations of FFC under this Agreement...54
9.3 Conditions
to the Obligations of ALFC under this Agreement..54
ARTICLE X THE
CLOSING........................................................55
10.1
Time and Place..............................................55
10.2
Deliveries at the Pre-Closing and the Closing...............55
ARTICLE XI TERMINATION, AMENDMENT AND
WAIVER.................................55
11.1
Termination.................................................55
11.2
Effect of Termination.......................................59
11.3
Amendment, Extension and Waiver.............................60
ARTICLE XII
MISCELLANEOUS....................................................61
12.1
Confidentiality.............................................61
12.2
Public Announcements........................................61
12.3
Survival....................................................61
12.4
Notices.....................................................61
12.5
Parties in Interest.........................................62
12.6
Complete Agreement..........................................62
12.7
Counterparts................................................62
12.8
Severability................................................62
12.9
Governing Law...............................................63
12.10
Interpretation..............................................63
12.11
Specific Performance........................................63
Exhibit A
Form of Plan of Bank Merger
Exhibit B
Form of Voting Agreement
Exhibit C
Affiliates Agreement
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AGREEMENT AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
December 20, 2005, by and between
Flushing Financial Corporation, a Delaware
corporation ("FFC"), and Atlantic Liberty Financial Corp., a Delaware
corporation ("ALFC ").
WHEREAS,
the Board of Directors
of each of FFC and ALFC has (i) determined
that this Agreement and the business combination and related transactions
contemplated hereby are in the best
interests of their respective companies and
stockholders, (ii) has determined that this Agreement and the transactions
contemplated hereby are consistent with and in
furtherance of their
respective
business strategies, and (iii) has approved this
Agreement at meetings of each
of such Boards of Directors; and
WHEREAS,
in accordance with the
terms of this
Agreement, ALFC will
merge
with and into FFC (the "Merger") and
immediately
thereafter
Atlantic Liberty
Savings, F.A., a wholly owned subsidiary of ALFC, will be merged
with and into
Flushing Savings Bank, FSB a wholly owned
subsidiary of FFC (the "Bank Merger");
and
WHEREAS,
as a condition to the willingness of FFC to enter into this
Agreement, each of the directors and executive officers of ALFC have entered
into a Voting Agreement, substantially in
the form of Exhibit B hereto, dated as
of the date hereof, with FFC (the "Voting Agreement"), pursuant to which each
such director or executive officer has agreed among other
things, to vote all
shares of common stock of ALFC owned by such person
in favor of the approval of
this Agreement and the transactions contemplated hereby, upon the terms and
subject to the conditions set forth in such
Voting Agreement; and
WHEREAS,
the parties intend the Merger to qualify as a reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code of 1986,
as
amended (the "Code"); and
WHEREAS, the
parties desire to make certain representations, warranties and
agreements in connection with the business transactions described in this
Agreement and to prescribe certain
conditions thereto.
NOW,
THEREFORE in
consideration of the mutual covenants, representations,
warranties and agreements herein contained and of other good and valuable
consideration, the receipt and sufficiency
of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions.
As used in this
Agreement the following terms have the following
meanings
(unless the context otherwise requires, references to Articles and Sections
refer to Articles and Sections of this
Agreement).
"Affiliate"
means any Person who
directly, or
indirectly
through one or
more intermediaries, controls, or is controlled by, or is under
common control
with, such Person and, without limiting the generality of the foregoing,
includes any executive officer or director of such Person
and any Affiliate of
such executive officer or director.
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"Agreement"
means this agreement, and any amendment hereto.
"ALFC" shall
mean Atlantic Liberty Financial Corp., a Delaware corporation,
with its principal offices located at 186 Montague
Street, Brooklyn,
New York
11201.
"ALFC Common
Stock" shall mean the common stock, par value $0.10 per share,
of ALFC.
"ALFC
Disclosure
Schedule" shall mean a written disclosure schedule
delivered by ALFC to FFC specifically referring to the appropriate
section of
this Agreement.
"ALFC ESOP"
shall mean the Atlantic Liberty Savings, F.A. Employee Stock
Ownership Plan.
"ALFC
Financial Statements" shall mean (i) the audited consolidated
statements of financial condition (including related notes and schedules,
if
any) of ALFC as of March 31, 2005 and 2004
and the consolidated
statements
of
income, changes in stockholders' equity
and cash flows (including related notes
and schedules, if any) of ALFC for each of the
two years ended March
31, 2005
and 2004, as set forth in ALFC's annual
report for the year ended March 31, 2005
and (ii) the unaudited interim consolidated financial statements of ALFC as
of
the end of each calendar quarter following March 31, 2005 and for the
periods
then ended, as filed by ALFC in its
Securities Documents.
"ALFC Group"
means any combined, unitary, consolidated or other
affiliated
group within the meaning of Section 1504 of
the Code or otherwise, of which ALFC
or any ALFC Subsidiary is or has been a
member for Tax purposes.
"ALFC Stock
Benefit Plan" shall mean the ALFC 2003 Incentive Stock Benefit
Plan, and any and all amendments
thereto.
"ALFC Option"
shall mean an option to purchase shares of ALFC Common Stock
granted pursuant to the ALFC Stock Benefit
Plan and outstanding
as of the date
hereof, as set forth in ALFC Disclosure
Schedule 4.3.1.
"ALFC
Stockholders
Meeting" shall have the meaning set forth in Section
8.1.1.
"ALFC
Subsidiary" means any
corporation, 50% or
more of the capital stock
of which is owned, either directly or indirectly,
by ALFC or Atlantic
Liberty
Savings, F.A., except any corporation the
stock of which is held in the ordinary
course of the lending activities of
Atlantic Liberty Savings, F.A.
"Atlantic
Liberty Savings, F.A." shall mean Atlantic Liberty Savings,
F.A.,
a federally chartered savings association,
with its principal offices located at
186 Montague Street, Brooklyn, New York 11201, which is a wholly owned
subsidiary of ALFC.
"Bank Merger"
shall mean the merger of Atlantic Liberty Savings, F.A. with
and into Flushing Savings Bank, FSB, with Flushing Savings Bank, FSB as the
surviving institution, which merger shall occur immediately following the
Merger.
"Bank
Regulator"
shall mean any Federal or state banking regulator,
including but not limited to the OTS and the FDIC,
which regulates Flushing
Savings Bank, FSB or Atlantic Liberty
Savings, F.A., or any
of their respective
holding companies or subsidiaries, as the
case may be.
"Cash
Consideration" shall have the meaning set forth in Section
3.1.3.
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"Cash Election"
shall have the meaning set forth in Section 3.2.2.
"Cash Election
Shares" shall have the meaning set forth in Section 3.2.1.
"Cash/Stock
Consideration"
shall have the meaning set forth in Section
3.1.3.
"Certificate"
shall mean a
certificate
evidencing
shares of ALFC
Common
Stock.
"COBRA" shall
mean the Consolidated
Omnibus Budget
Reconciliation Act
of
1985, as amended.
"Code" shall
mean the Internal Revenue Code of 1986, as amended.
"Confidentiality
Agreements"
shall mean the confidentiality agreements
referred to in Section 12.1 of this
Agreement.
"DGCL" shall
mean the Delaware General Corporation Law.
"Dissenting
Shares" shall have the meaning set forth in Section 3.1.4.
"Dissenting
Stockholder" shall have the meaning set forth in Section 3.1.4.
"Effective Time"
shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the
Merger.
"Election
Deadline" shall have the meaning set forth in Section 3.2.3.
"Election Form" shall have the
meaning set forth in Section 3.2.2.
"Election
Form Record Date" shall have the meaning set forth
in Section
3.2.2.
"Environmental
Laws" means any applicable Federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with
any
governmental entity relating to (1) the
protection,
preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface
soil, subsurface soil, plant
and animal life or any other natural
resource),
and/or (2) the
exposure to, or
the use, storage, recycling, treatment,
generation, transportation, processing,
handling, labeling, production, release or disposal of Materials of
Environmental Concern. The term Environmental Law includes without
limitation
(a) the Comprehensive Environmental
Response, Compensation and Liability Act, as
amended, 42 U.S.C. ss.9601, et seq; the Resource
Conservation and Recovery Act,
as amended, 42 U.S.C. ss.6901, et seq; the Clean Air
Act, as amended, 42 U.S.C.
ss.7401, et seq; the Federal Water
Pollution Control Act, as amended, 33 U.S.C.
ss.1251, et seq; the Toxic Substances Control Act, as amended, 15 U.S.C.
ss.2601, et seq; the Emergency Planning and Community Right to Know Act, 42
U.S.C. ss.11001, et seq; the Safe Drinking
Water Act, 42 U.S.C. ss.300f, et seq;
and all comparable state and local laws, and (b) any common law (including
without limitation common law that may
impose strict liability) that may impose
liability or obligations for injuries or damages due to the presence of or
exposure to any Materials of Environmental
Concern.
"ERISA" shall
mean the Employee
Retirement Income Security Act of 1974, as
amended.
"Exchange Act"
shall mean the Securities Exchange Act of 1934, as amended.
3
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"Exchange
Agent" shall mean
EquiServe Trust Company NA, or such other bank
or trust company or other agent designated
by FFC, and reasonably
acceptable to
ALFC, which shall act as agent for FFC in connection with the exchange
procedures for exchanging Certificates for
the Merger Consideration.
"Exchange Fund"
shall have the meaning set forth in Section 3.3.1.
"Exchange Ratio"
shall have the meaning set forth in Section 3.1.3.
"FDIC"
shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FFC" shall mean
Flushing Financial
Corporation, a
Delaware
corporation,
with its principal executive offices
located at 1979 Marcus Avenue, Suite E140,
Lake Success, New York 11042.
"FFC Common
Stock" shall mean the common stock, par value $0.01 per share,
of FFC.
"FFC
Disclosure
Schedule"
shall mean a written disclosure schedule
delivered by FFC to ALFC specifically referring to the appropriate
section of
this Agreement.
"FFC
Financial Statements" shall mean the (i) the
audited consolidated
statements of financial condition
(including related notes and schedules) of FFC
as of December 31, 2004 and 2003 and the consolidated statements of income,
changes in stockholders' equity and cash flows (including related notes and
schedules, if any) of FFC for each of the
three years ended
December 31, 2004,
2003 and 2002, as set forth in FFC's annual
report for the year
ended December
31, 2004, and (ii) the unaudited interim
consolidated
financial statements of
FFC as of the end of each calendar quarter
following December 31, 2004 and for
the periods then ended, as filed by FFC in
its Securities Documents.
"FFC Group"
means any combined,
unitary, consolidated
or other affiliated
group within the meaning of Section 1504 of
the Code or otherwise,
of which FFC
or any FFC Subsidiary is or has been a
member for Tax purposes.
"FFC
Rights Agreement" shall mean the Rights Agreement, dated as of
September 17, 1996, between FFC and State Street Bank
and Trust Company,
as
rights agent, relating to FFC's Series A
Junior Participating Preferred Stock.
"FFC Stock
Benefit Plans" shall mean the FFC 2005 Omnibus Incentive Plan,
the FFC 1996 Stock Option Incentive Plan and the FFC 1996 Restricted Stock
Incentive Plan.
"FFC Stock
Purchase Rights" shall mean the Rights to
purchase units of
FFC's Series A Junior Participating
Preferred Stock in accordance with the terms
of the FFC Rights Agreement.
"FFC
Subsidiary"
means any substantial
corporation or limited
liability
company, 50% or more of the capital stock
of which is owned, either directly or
indirectly, by FFC or Flushing Savings Bank, FSB, except any corporation the
stock of which is held in the ordinary course of the lending activities of
Flushing Savings Bank, FSB.
"FHLB" shall
mean the Federal Home Loan Bank of New York.
"Flushing
Savings Bank, FSB" shall mean Flushing
Savings Bank, FSB, a
federally chartered savings bank, with its principal offices located at 1979
Marcus Avenue, Suite E140, Lake Success,
New York 11042, which is a wholly owned
subsidiary of FFC.
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"GAAP" shall
mean accounting
principles generally
accepted in the
United
States of America.
"Governmental
Entity" shall mean any Federal or state court, administrative
agency or commission or other governmental
authority or instrumentality.
"HOLA" shall
mean the Home Owners' Loan Act, as amended.
"Intellectual
Property" shall have the meaning set forth in section 4.24.
"IRS" shall mean
the United States Internal Revenue Service.
"Knowledge" as
used with respect to a Person (including references to such
Person being aware of a particular
matter) means those facts that are known
by
the executive officers and directors of such Person,
and includes any
facts,
matters or circumstances set forth in any
written notice from any Bank Regulator
or any other material written notice received by an executive officer or
director of that Person.
"Mailing Date"
shall having the meaning set forth in Section 3.2.2.
"Material
Adverse Effect" shall mean, with respect to FFC or ALFC,
respectively, any effect that (i) is material and adverse to the financial
condition, results of operations or business of FFC and the FFC
Subsidiaries
taken as a whole, or ALFC and the ALFC Subsidiaries taken as a whole,
respectively, or (ii) does or would materially impair the ability of either
ALFC, on the one hand, or FFC, on the other hand,
to perform its
obligations
under this Agreement or otherwise
materially
threaten or materially
impede the
consummation of the transactions
contemplated by this
Agreement; provided
that
"Material Adverse Effect" shall not be deemed to
include the impact of (a)
changes in laws and regulations affecting banks or thrift institutions
generally, or interpretations thereof by Courts or governmental
agencies, (b)
changes in GAAP or regulatory accounting principles generally applicable to
financial institutions and their holding
companies, (c) actions and omissions of
a party hereto (or any of its Subsidiaries)
taken with the prior written consent
of the other party, (d) the announcement of this
Agreement and the transactions
contemplated hereby, and compliance with this Agreement on the business,
financial condition or results of
operations of the parties and their respective
Subsidiaries, including the expenses incurred by the parties hereto in
consummating the transactions contemplated by this Agreement
(consistent with
the information included in the Disclosure
Schedules), and (e) any change in the
value of the securities or loan portfolio
of FFC or ALFC, respectively, whether
held as available for sale or held to maturity, resulting from a change in
interest rates generally.
"Materials
of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products, and any other
materials regulated under Environmental
Laws, including, but not limited to,
radon, radioactive material, asbestos, asbestos-containing
material, urea
formaldehyde foam insulation, lead, polychlorinated biphenyl, flammables and
explosives.
"Merger"
shall mean the merger
of ALFC with and into FFC pursuant to the
terms hereof.
"Merger
Consideration"
shall mean the cash or FFC Common Stock, or
combination thereof, in an aggregate per
share amount to be paid by FFC for each
share of ALFC Common Stock, as set forth in
Section 3.1.
"Merger
Registration
Statement"
shall mean the
registration
statement,
together with all amendments, filed with the SEC under the
Securities Act for
the purpose of registering shares of FFC Common Stock to be
offered to holders
of ALFC Common Stock in connection with the
Merger.
5
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"Mixed Election"
shall have the meaning set forth in Section 3.2.2.
"NASD" shall
mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall
mean the Nasdaq National Market.
"Non-Election"
shall have the meaning set forth in Section 3.2.2.
"Non-Election
Shares" shall having the meaning set forth in Section 3.2.1.
"OTS" shall mean
the Office of Thrift Supervision or any successor thereto.
"PBGC" shall
mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Pension Plan"
shall have the meaning set forth in Section 4.13.2.
"Person"
shall mean any individual, corporation, partnership, joint
venture, association, trust or "group" (as that term is defined under the
Exchange Act).
"Pre-Effective
Time Tax Period" means
any taxable period (or the allocable
portion of a Straddle Period) ending on or before the close of
business on the
date the Effective Time occurs.
"Proxy
Statement-Prospectus"
shall have the
meaning set forth in
Section
8.2.1.
"Regulatory
Agreement" shall have the meaning set forth in Section 4.12.3.
"Regulatory
Approvals"
means the approval of
any Bank Regulator
that is
necessary in connection with the
consummation of the Merger, the Bank Merger and
the related transactions contemplated by
this Agreement.
"Representative"
shall have the meaning set forth in Section 3.2.2.
"Rights"
shall mean warrants,
options, rights, convertible securities,
stock appreciation rights and other arrangements or
commitments which obligate
an entity to issue or dispose of any of its capital stock or other ownership
interests or which provide for compensation
based on the equity
appreciation of
its capital stock.
"SBA"
shall mean the Small Business Administration or any successor
thereto.
"SEC" shall mean
the Securities
and Exchange
Commission or any
successor
thereto.
"Securities Act"
shall mean the Securities Act of 1933, as amended.
"Securities
Documents" shall mean
all reports, offering
circulars, proxy
statements, registration statements and all
similar documents filed pursuant to
the Securities Laws.
"Securities
Laws" shall mean the
Securities
Act; the Exchange Act; the
Investment Company Act of 1940, as amended;
the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the SEC promulgated
thereunder.
"Shortfall
Number" shall have the meaning set forth in Section 3.2.5.
6
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"Significant
Subsidiary"
shall have the meaning
set forth in Rule 1-02 of
Regulation S-X of the SEC.
"Stock
Consideration" shall have the meaning set forth in Section
3.1.3.
"Stock
Conversion
Number" shall have the meaning set forth in Section
3.2.1.
"Stock Election"
shall have the meaning set forth in Section 3.2.2.
"Stock Election
Number" shall have the meaning set forth in Section 3.2.1.
"Stock Election
Shares" shall have the meaning set forth in Section 3.2.1.
"Straddle
Period" means any
taxable period that includes (but does not end
on) the date of the Effective Time.
"Surviving
Corporation" shall have the meaning set forth in Section 2.1.
"Tax" means any
and all (a) Federal,
state, local or foreign tax, fee or
other like assessment or charge of any
kind, including,
without limitation, any
net income, alternative or add-on minimum tax,
gross income,
gross receipts,
sales, use, ad valorem, value-added, transfer, franchise, profits, license,
withholding on amounts paid to or by the
taxpayer, payroll, employment, excise,
severance, stamp, capital stock,
occupation, property, environmental or windfall
tax, premium, customs duty or other tax,
together with any
interest, penalty
additions to tax; (b) liability for the payment of Tax as the result of
membership in the ALFC Group and (c) transferee or secondary liability in
respect of any Tax (whether imposed by law
or contractual arrangement).
"Tax Return"
means any return (including estimated returns), declaration,
report, claim for refund, or information
return or statement relating to Taxes,
including any such document prepared on an
affiliated, consolidated, combined or
unitary group basis and any schedule or
attachment thereto.
"Taxing
Authority" means any governmental or regulatory authority,
body or
instrumentality exercising any authority to
impose, regulate or
administer the
imposition of Taxes.
"Termination
Date" shall mean July 15, 2006.
"Treasury Stock"
shall have the meaning set forth in Section 3.1.2.
Other terms used
herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
THE MERGER
2.1 Merger.
Subject to the
terms and conditions
of this Agreement, at the Effective
Time: (a) ALFC shall merge with and into FFC, with FFC as the resulting or
surviving corporation (the "Surviving Corporation"); and (b) the separate
existence of ALFC shall cease and all of the rights, privileges, powers,
franchises, properties, assets, liabilities and obligations of ALFC shall
be
vested in and assumed by FFC. As part of the Merger,
each share of ALFC
Common
7
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Stock will be converted into the right to receive
the Merger Consideration
pursuant to the terms of Article
III hereof. Immediately after the Merger,
Atlantic Liberty Savings, F.A. shall merge with and into
Flushing Savings Bank,
FSB, with Flushing Savings Bank, FSB as the
resulting institution.
2.2 Closing; Effective Time.
Subject
to the satisfaction or waiver of all conditions to closing
contained in Article IX hereof, the Closing shall occur no later than five
business days following the latest to occur of
(i) the receipt of all required
Regulatory Approvals, and the expiration of
any applicable waiting periods, (ii)
the approval of the Merger by the
stockholders
of ALFC, or (iii) at
such other
date or time upon which FFC and ALFC
mutually agree (the "Closing"). The Merger
shall be effected by the filing of a certificate of merger with the Delaware
Office of the Secretary of State on the day
of the Closing (the "Closing Date"),
in accordance with the DGCL. The "Effective
Time" means the date
and time upon
which the certificate of merger is filed with the Delaware Office of the
Secretary of State, or as otherwise stated in the certificate of merger, in
accordance with the DGCL.
2.3 Certificate of Incorporation and
Bylaws.
The Certificate
of Incorporation and Bylaws of FFC as in effect immediately
prior to the Effective Time shall be the
Certificate of Incorporation and Bylaws
of the Surviving Corporation, until thereafter amended as
provided therein and
by applicable law.
2.4 Directors and Officers of
Surviving Corporation.
The directors of
FFC immediately
prior to the Effective
Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation. Until changed in accordance with
the Certificate of
Incorporation
and Bylaws of the Surviving Corporation, the officers of FFC immediately
prior
to the Effective Time shall be the initial
officers of Surviving Corporation, in
each case until their respective successors are duly elected or appointed
and
qualified.
2.5 Effects of the Merger.
At and after the
Effective Time,
the Merger shall have
the effects as set
forth in the DGCL.
2.6 Tax Consequences.
It is intended
that the Merger shall constitute a reorganization within the
meaning of Section 368(a) of the Code, and
that this Agreement shall constitute
a "plan of reorganization" as that term is used in Sections
354 and 361 of the
Code. From and after the date of this
Agreement and until the Closing, each
party hereto shall use its reasonable best efforts to cause the Merger to
qualify, and will not knowingly take any
action, cause any
action to be taken,
fail to take any action or cause any action
to fail to be taken which action or
failure to act could prevent the Merger from qualifying as a reorganization
under Section 368(a) of the Code.
Following the Closing,
neither FFC, ALFC
nor
any of their Affiliates shall knowingly
take any action, cause
any action to be
taken, fail to take any action or cause
any action to fail to
be taken, which
action or failure to act could cause the Merger to fail to qualify as a
reorganization under Section 368(a) of the
Code. FFC and ALFC each hereby agrees
to deliver certificates substantially in compliance with
IRS published advance
ruling guidelines, with customary exceptions and modifications thereto, to
enable counsel to deliver the legal
opinions contemplated by Section 9.1.6,
which certificates shall be effective as of
the date of such opinions.
8
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2.7 Possible Alternative
Structures.
Notwithstanding
anything to the
contrary contained in
this Agreement and
subject to the satisfaction of the conditions set
forth in Article IX, prior to
the Effective Time FFC shall be entitled to
revise the structure of the Merger
described in Section 2.1 hereof,
provided that (i) FFC shall have
received an
opinion of counsel to FFC that there are no
adverse Federal or
state income tax
consequences to ALFC stockholders as a result of the modification; (ii) the
consideration to be paid to the holders of ALFC Common Stock under this
Agreement is not thereby changed in kind or value or
reduced in amount;
and
(iii) such modification will not delay
materially, or
jeopardize receipt of any
required regulatory approvals or other consents and
approvals relating to
the
consummation of the Merger or otherwise
cause any condition to closing not to be
capable of being fulfilled. The parties
hereto agree to appropriately amend this
Agreement and any related documents in order to reflect any such revised
structure.
2.8 Additional Actions.
If, at any time
after the Effective
Time, FFC shall consider or be advised
that any further deeds, assignments or assurances in law
or any other acts are
necessary or desirable to (i) vest, perfect
or confirm, of record
or otherwise,
in FFC its right, title or interest in, to or under any of the rights,
properties or assets of ALFC or Atlantic Liberty Savings, F.A., or (ii)
otherwise carry out the purposes of this
Agreement,
ALFC and its officers
and
directors shall be deemed to have granted to FFC an irrevocable power of
attorney to execute and deliver all such
deeds, assignments or assurances in law
or take any other acts as are necessary or desirable to (a) vest, perfect or
confirm, of record or otherwise,
in FFC its right,
title or interest in, to or
under any of the rights, properties or assets of ALFC or Atlantic Liberty
Savings, F.A. or (b) otherwise carry out
the purposes of this Agreement, and the
officers and directors of FFC are authorized in the name of ALFC or
Atlantic
Liberty Savings, F.A. or otherwise to take
any and all such action.
ARTICLE III
CONVERSION OF SHARES
3.1 Conversion of ALFC Common Stock;
Merger Consideration.
At the
Effective Time, by virtue of the Merger and
without any action on
the part of FFC, ALFC or the holders of any of the
shares of ALFC Common Stock,
the Merger shall be effected in accordance
with the following terms:
3.1.1
Each share of FFC Common Stock that is issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
following the Effective Time and shall be
unchanged by the Merger.
3.1.2 All shares
of ALFC Common Stock held in the treasury of ALFC and each
share of ALFC Common Stock owned by FFC or any direct
or indirect wholly
owned
subsidiary of FFC or of ALFC immediately
prior to the Effective Time (other than
shares held in a fiduciary capacity or in connection with debts previously
contracted) ("Treasury Stock") shall, at
the Effective Time, cease to exist, and
the certificates for such shares shall be canceled
as promptly as
practicable
thereafter, and no payment or distribution shall be made in consideration
therefor.
3.1.3 Each share
of ALFC Common Stock
issued and outstanding
immediately
prior to the Effective Time (other than
Treasury Stock and
Dissenting
Shares)
shall become and be converted into, as provided in and subject to the
9
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limitations set forth in this Agreement,
the right to receive at the election of
the holder thereof as provided in Section 3.2 either (i) $24.00 in cash
(the
"Cash Consideration"); (ii) 1.4300 shares (the "Exchange
Ratio") of FFC Common
Stock (the "Stock Consideration"); or (iii) a combination of the Cash
Consideration and the Stock Consideration, as provided in Section 3.2 (the
"Cash/Stock Consideration"). The Cash Consideration and the
Stock Consideration
are sometimes referred to herein
collectively as the "Merger Consideration."
3.1.4 Each
outstanding
share of ALFC Common
Stock the holder of which has
perfected his right to dissent under the
DGCL and has not effectively withdrawn
or lost such right as of the Effective Time
(the "Dissenting
Shares") shall not
be converted into or represent a right to receive the Merger Consideration
hereunder, and the holder thereof shall be entitled only to
such rights as are
granted by the DGCL. ALFC shall give FFC prompt
notice upon receipt by
ALFC of
any such demands for payment of the fair value of such
shares of ALFC
Common
Stock and of withdrawals of such notice and any other instruments provided
pursuant to applicable law (any stockholder duly making such demand being
hereinafter called a "Dissenting
Stockholder"), and FFC
shall have the right to
participate in all negotiations and proceedings with respect to any such
demands. ALFC shall not, except with the prior written consent of FFC,
voluntarily make any payment with respect
to, or settle or offer to settle, any
such demand for payment, or waive any
failure to timely deliver a written demand
for appraisal or the taking of any other
action by such
Dissenting
Stockholder
as may be necessary to perfect appraisal rights under the DGCL.
Any payments
made in respect of Dissenting Shares shall
be made by the Surviving Company.
3.1.5 If any
Dissenting
Stockholder
shall effectively withdraw or lose
(through failure to perfect or otherwise)
his right to such payment at or prior
to the Effective Time, such holder's shares of ALFC Common Stock shall be
converted into a right to receive the
Merger Consideration
in accordance
with
the applicable provisions of this Agreement.
If such holder shall
effectively
withdraw or lose (through failure to perfect or otherwise) his right to such
payment after the Effective Time (or the
Election Deadline,
as defined below),
each share of ALFC Common Stock of such holder shall be treated as a
Non-Election Share.
3.1.6 After the
Effective Time, shares of ALFC Common Stock shall no longer
be outstanding and shall automatically be
canceled and shall cease to exist, and
shall thereafter by operation of this
section be the right to receive the Merger
Consideration.
3.1.7 In the
event FFC changes (or
establishes a record date for changing)
the number of, or provides for the exchange of, shares of FFC Common Stock
issued and outstanding prior to the
Effective Time as a result of a stock split,
stock dividend, recapitalization,
reclassification, or
similar transaction with
respect to the outstanding FFC Common Stock and the record
date therefor shall
be prior to the Effective Time, the
Exchange Ratio shall be proportionately and
appropriately adjusted; provided, that no such adjustment
shall be made with
regard to FFC Common Stock if FFC issues
additional
shares of FFC Common
Stock
and receives fair market value
consideration for such shares.
3.2 Election Procedures.
3.2.1
Holders of ALFC Common Stock may elect to receive shares of FFC
Common Stock or cash (in either case
without interest) in exchange for their
shares of ALFC Common Stock in accordance with the following procedures,
provided that, in the aggregate, and
subject to the provisions of Section 3.2.6,
65% of the total number of shares of ALFC
Common Stock issued and outstanding at
the Effective Time, including any Dissenting
Shares but excluding
any Treasury
Stock (the "Stock Conversion Number"), shall be converted into the Stock
Consideration and the remaining outstanding
shares of ALFC Common Stock shall be
10
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converted into the Cash Consideration.
Shares of ALFC Common Stock as to which a
Cash Election (including, pursuant to a Mixed Election) has been made are
referred to herein as "Cash Election
Shares." Shares of
ALFC Common Stock as to
which a Stock Election has been made
(including,
pursuant to a Mixed
Election)
are referred to as "Stock Election Shares." Shares of ALFC Common Stock as
to
which no election has been made (or as to
which an Election Form is not returned
properly completed) are referred to herein as "Non-Election Shares." The
aggregate number of shares of ALFC Common
Stock with
respect to which a
Stock
Election has been made is referred to
herein as the "Stock Election Number." Any
Dissenting Shares shall be deemed to be Cash
Election Shares,
and the holders
thereof shall in no event receive
consideration
comprised of FFC
Common Stock
with respect to such shares.
3.2.2 An
election form and
other appropriate
and customary transmittal
materials (which shall specify that
delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper delivery of such
Certificates to the Exchange Agent), in
such form as ALFC and FFC shall mutually
agree ("Election Form"), shall be mailed 40 days prior to the anticipated
Effective Time or on such earlier date as
FFC and ALFC shall mutually agree (the
"Mailing Date") to each holder of record of ALFC Common Stock as of five
business days prior to the Mailing Date
(the "Election Form Record Date"). Each
Election Form shall permit such holder,
subject to the
allocation and
election
procedures set forth in this Section 3.2, (i) to elect to receive the Cash
Consideration for all of the shares of ALFC
Common Stock held by such holder (a
"Cash Election"), in accordance with
Section 3.1.3, (ii) to elect to receive the
Stock Consideration for all of such
shares (a "Stock Election"), in accordance
with Section 3.1.3, (iii) to elect to
receive the Stock Consideration for a part
of such holder's ALFC Common Stock and the
Cash Consideration for
the remaining
part of such holder's ALFC Common Stock (a "Mixed Election"), or (iv) to
indicate that such record holder has no
preference as to the receipt of cash or
FFC Common Stock for such shares (a "Non-Election"). A holder of record of
shares of ALFC Common Stock who holds such shares as nominee, trustee or in
another representative capacity (a "Representative") may submit multiple
Election Forms, provided that each such Election
Form covers all the shares of
ALFC Common Stock held by such
Representative for a particular beneficial owner.
Any shares of ALFC Common Stock with
respect to which the holder thereof shall
not, as of the Election Deadline, have made an election by
submission
to the
Exchange Agent of an effective, properly
completed Election Form shall be deemed
Non-Election Shares. All Dissenting Shares shall be
deemed shares subject to a
Cash Election, and with respect to such shares
the holders thereof
shall in no
event receive consideration comprised of FFC Common Stock,
subject to Section
3.1.5 hereof.
3.2.3
To be effective, a properly completed Election Form shall be
submitted to the Exchange Agent on or before 5:00 p.m.,
New York City time,
on
the 20th day following the Mailing Date (or
such other time and date as FFC and
ALFC may mutually agree) (the "Election
Deadline"); provided,
however, that the
Election Deadline may not occur on or after the
Closing Date; and provided
further that the Election Deadline may not occur prior to
the seventh
business
day after receipt of all Regulatory
Approvals (excluding the expiration of
any
applicable waiting periods). ALFC shall make available up to two separate
Election Forms, or such additional Election Forms as FFC may permit,
to all
persons who become holders (or beneficial owners) of ALFC Common Stock
between
the Election Form Record Date and the close of
business on the
business day
prior to the Election Deadline. ALFC shall provide to the Exchange
Agent all
information reasonably necessary for it to perform as specified herein. An
election shall have been properly made only if the Exchange
Agent shall have
actually received a properly completed Election Form by the Election
Deadline.
An Election Form shall be deemed
properly completed only if accompanied by
one
or more Certificates (or customary
affidavits and indemnification regarding the
loss or destruction of such Certificates or the guaranteed delivery of such
Certificates) representing all shares of ALFC Common Stock covered by such
Election Form, together with duly executed
transmittal
materials included
with
the Election Form. If an ALFC stockholder
either (i) does not
submit a properly
completed Election Form in a timely fashion or (ii) revokes its
Election Form
prior to the Election Deadline, the shares of ALFC Common
Stock held by such
stockholder shall be designated as
Non-Election Shares. Any Election Form may be
revoked or changed by the person
submitting
such Election Form to
the Exchange
Agent by written notice to the Exchange Agent only
if such notice of revocation
or change is actually received by the
Exchange Agent at or prior to the Election
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Deadline. FFC shall cause the Certificate or Certificates relating to any
revoked Election Form to be promptly returned without charge to the person
submitting the Election Form to the
Exchange Agent. Subject to the terms of this
Agreement and of the Election Form, the
Exchange Agent shall have discretion to
determine when any election, modification or revocation is
received and whether
any such election, modification or
revocation has been properly made.
3.2.4 If the Stock Election Number exceeds the Stock
Conversion
Number,
then all Cash Election Shares and all Non-Election Shares shall be converted
into the right to receive the Cash
Consideration, and,
subject to Section 3.2.7
hereof, each holder of Stock Election Shares will be entitled to receive
the
Stock Consideration only with respect to that number
of Stock Election
Shares
held by such holder equal to the product
obtained by
multiplying (x) the number
of Stock Election Shares held by such
holder by (y) a fraction, the numerator of
which is the Stock Conversion Number and the denominator of
which is the Stock
Election Number, with the remaining number of such holder's
Stock Election
Shares being converted into the right to
receive the Cash Consideration.
3.2.5 If the
Stock Election Number is less than the Stock Conversion Number
(the amount by which the Stock Conversion Number exceeds the Stock Election
Number being referred to herein as the "Shortfall Number"), then all Stock
Election Shares shall be converted into the right to receive the Stock
Consideration and the Non-Election Shares and Cash Election Shares shall be
treated in the following manner:
(A)if
the Shortfall Number is less than or equal to the number of
Non-Election Shares, then all Cash Election Shares
shall be converted into the
right to receive the Cash Consideration and, subject to Section 3.2.7
hereof,
each holder of Non-Election Shares shall receive the Stock Consideration in
respect of that number of Non-Election Shares held by such holder equal
to the
product obtained by multiplying (x) the
number of Non-Election
Shares held by
such holder by (y) a fraction, the numerator of which is the
Shortfall Number
and the denominator of which is the total
number of Non-Election
Shares, with
the remaining number of such holder's
Non-Election
Shares being converted
into
the right to receive the Cash
Consideration; or
(B)if the
Shortfall Number exceeds the number of Non-Election Shares, then
all Non- Election Shares shall be converted into the
right to receive the Stock
Consideration, and, subject to Section 3.2.7 hereof, each holder of Cash
Election Shares shall receive the Stock
Consideration in
respect of that number
of Cash Election Shares held by such holder
equal to the product
obtained by
multiplying (x) the number of Cash Election
Shares held by such holder by (y) a
fraction, the numerator of which is the
amount by which (1) the Shortfall Number
exceeds (2) the total number of
Non-Election Shares and the denominator of which
is the total number of Cash Election
Shares, with the remaining number of
such
holder's Cash Election Shares being
converted into the right to receive the Cash
Consideration.
3.2.6
No Fractional Shares. Notwithstanding anything to the contrary
contained herein, no certificates or scrip
representing fractional shares of FFC
Common Stock shall be issued upon the
surrender for exchange of Certificates, no
dividend or distribution with respect to
FFC Common Stock shall be payable on or
with respect to any fractional share interest, and such fractional share
interests shall not entitle the owner
thereof to vote or to any other rights of
a stockholder of FFC. In lieu of the
issuance of any such fractional share, FFC
shall pay to each former holder of ALFC Common Stock who otherwise would be
entitled to receive a fractional
share of FFC Common
Stock, an amount in
cash,
rounded to the nearest cent and without interest, equal to the product of (i)
the fraction of a share to which such
holder would otherwise
have been entitled
and (ii) the average of the daily
closing sales prices
of a share of FFC Common
Stock as reported on the NASDAQ for the five consecutive trading days
immediately preceding the Closing Date. For purposes of determining any
12
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fractional share interest, all shares of ALFC Common Stock owned by a ALFC
stockholder shall be combined so as to
calculate the maximum number of whole
shares of FFC Common Stock issuable to such
ALFC stockholder.
3.3 Procedures for Exchange of ALFC
Common Stock.
3.3.1
FFC to Make
Merger Consideration Available. After the Election
Deadline and no later than the day prior to
the Closing Date, FFC shall deposit,
or shall cause to be deposited,
with the Exchange
Agent for the benefit
of the
holders of ALFC Common Stock, for exchange in accordance with
this Section 3.3,
certificates representing the shares of FFC
Common Stock and an aggregate amount
of cash sufficient to pay the aggregate
amount of cash payable
pursuant to this
Article III (including the estimated amount of cash to be paid in lieu of
fractional shares of ALFC Common Stock) (such
cash and certificates
for shares
of FFC Common Stock, together with any dividends or
distributions with
respect
thereto (without any interest thereon) being hereinafter referred to as the
"Exchange Fund").
3.3.2 Exchange
of Certificates. FFC shall take all steps necessary to cause
the Exchange Agent to mail, within five business days after
the Effective Time,
to each holder of a Certificate or Certificates who has not previously
surrendered such Certificates with an Election Form, a form letter of
transmittal (which shall be subject to the
reasonable
approval of ALFC) for
return to the Exchange Agent and
instructions for use in effecting the surrender
of the Certificates in exchange for the
Merger Consideration and cash in lieu of
fractional shares into which the ALFC Common Stock represented by such
Certificates shall have been converted as a result of the
Merger, if any.
The
letter of transmittal shall specify that
delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent.
Upon proper
surrender of a
Certificate for
exchange and cancellation to the Exchange Agent, together with a properly
completed letter of transmittal,
duly executed,
the holder of such
Certificate
shall be entitled to receive in exchange
therefor the Merger
Consideration
to
which such holder of ALFC Common
Stock shall have
become entitled
pursuant to
Section 3.1.3 hereof, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or
accrued on any Cash Consideration or any
cash payable in lieu of fractional shares or any unpaid dividends and
distributions, if any, payable to holders
of Certificates.
3.3.3 Rights of
Certificate Holders after the Effective Time. The holder of
a Certificate that prior to the Merger
represented
issued and outstanding
ALFC
Common Stock shall have no rights,
after the Effective Time, with respect to
such ALFC Common Stock except to surrender
the Certificate
in exchange for
the
Merger Consideration as provided in this Agreement. No dividends or other
distributions declared after the Effective
Time with respect to FFC Common Stock
shall be paid to the holder of any
unsurrendered
Certificate
until the holder
thereof shall surrender such Certificate in accordance
with this Section
3.3.
After the surrender of a Certificate
in accordance
with this Section 3.3,
the
record holder thereof shall be entitled to
receive any such
dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of FFC Common Stock represented by such
Certificate.
3.3.4
Surrender by Persons Other than Record Holders. If the Person
surrendering a Certificate and signing the
accompanying letter of transmittal is
not the record holder thereof, then it shall be a condition of
the payment of
the Merger Consideration that: (i) such
Certificate is properly endorsed to such
Person or is accompanied by appropriate stock powers, in either case signed
exactly as the name of the record
holder appears on such Certificate, and is
otherwise in proper form for transfer, or
is accompanied by appropriate evidence
of the authority of the Person surrendering such Certificate and signing the
letter of transmittal to do so on behalf of the
record holder; and (ii) the
person requesting such exchange shall pay to the
Exchange Agent in advance any
transfer or other taxes required by reason
of the payment to a Person other than
the registered holder of the Certificate
surrendered, or
required for any other
reason, or shall establish to the
satisfaction of the
Exchange Agent that such
tax has been paid or is not payable.
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3.3.5 Closing of
Transfer Books. From
and after the Effective Time, there
shall be no transfers on the stock transfer books of ALFC of the ALFC
Common
Stock that was outstanding immediately prior to the Effective Time. If,
after
the Effective Time, Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be exchanged for the Merger
Consideration and canceled as provided in
this Section 3.3.
3.3.6 Return of
Exchange Fund. At any
time following the six
month period
after the Effective Time, FFC shall be
entitled to require the Exchange Agent to
deliver to it any portions of the Exchange
Fund which had been made available to
the Exchange Agent and not disbursed to holders of
Certificates
(including,
without limitation, all interest and other
income received by the Exchange Agent
in respect of all funds made available to
it), and thereafter such holders shall
be entitled to look to FFC (subject to abandoned property, escheat and other
similar laws) with respect to any Merger
Consideration that may
be payable upon
due surrender of the Certificates held by
them. Notwithstanding
the foregoing,
neither FFC nor the Exchange Agent shall be liable to any holder of a
Certificate for any Merger Consideration delivered in respect of such
Certificate to a public official pursuant
to any abandoned property, escheat or
other similar law.
3.3.7 Lost,
Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit
of
that fact by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by FFC, the
posting by such person of a bond in such
amount as FFC may reasonably direct as indemnity against any claim that may be
made against it with respect to such
Certificate, the
Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect
thereof.
3.3.8
Withholding. FFC or the Exchange Agent will be entitled to deduct
and
withhold from the consideration
otherwise payable
pursuant to this Agreement or
the transactions contemplated hereby to any holder of ALFC
Common Stock such
amounts as FFC (or any Affiliate
thereof) or the
Exchange Agent are required to
deduct and withhold with respect to the making of such
payment under the
Code,
or any applicable provision of U.S. federal,
state, local or
non-U.S. tax law.
To the extent that such amounts are properly withheld by FFC or the
Exchange
Agent, such withheld amounts will be
treated for all purposes of this Agreement
as having been paid to the holder of the
ALFC Common
Stock in respect of
whom
such deduction and withholding were made by
FFC or the Exchange Agent.
3.4 Treatment of ALFC Options.
3.4.1 At the Effective
Time, each option to purchase a share of ALFC Common
Stock that has been granted pursuant to the ALFC Stock
Benefit Plan (the
"ALFC
Option Plan") and that is outstanding and unexercised at the Effective Time
(whether or not such option is otherwise vested or exercisable) (each, an
"Outstanding ALFC Option") shall be treated
as follows:
(i) Option Cashout.
To the extent
that the option
holder does not
elect to convert
the options pursuant
to Section 3.4.1(ii),
such options
shall be
cancelled and shall cease to be exercisable. In consideration for
such
cancellation, FFC shall, with respect to each Outstanding ALFC
Option,
pay to the
holder thereof an amount equal to the excess (if any) of (a)
the
Cash
Consideration
over (b) the price at
which the holder may
acquire a
share of ALFC
Common Stock upon
exercise of such
Outstanding ALFC
Option
(the
"Option Cashout Payment"). FFC shall make such payment as soon as
practicable
following the
Effective Time or, if later in the case of
any
holder
of an Outstanding ALFC Option, the date on which such holder
delivers to FFC
his written acceptance of an Option Cashout Payment as full
and complete
consideration
for the cancellation of each Outstanding
ALFC
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Option
held by him.
ALFC shall take such action as is necessary or
appropriate
under the terms of ALFC's Option Plan to convert each
Outstanding
ALFC Option, as of the Effective Time, into the right to
receive an
Option Cashout
Payment upon the terms
and conditions set forth
herein.
Payment hereunder shall be subject to withholding
for applicable
federal, state
and local taxes; or
(ii) Option
Conversion. Each
option holder may, by written notice to
FFC received by FFC not less than at
least 10 business
days prior to the
Effective Time,
elect to have all or a portion of such holder's outstanding
ALFC Options
converted into options
("FFC Options") to
purchase shares of
FFC Common
Stock. Any such
election shall
identify the
Outstanding ALFC
Options to be
converted into FFC Options and shall become irrevocable upon
receipt by FFC
of the notice of
election. The
Outstanding
ALFC Options
identified
in each such
election shall be converted automatically into
options
to purchase shares of FFC Common Stock in an amount and at an
exercise
price determined as provided
below, and each ALFC Option shall
otherwise
remain subject to the ALFC Option Plan and the agreements
evidencing
grants thereunder, and
any other agreements between ALFC and an
optionee
regarding ALFC
Options. The number of
shares of FFC Common Stock
(rounded
down to the nearest
whole share) to be
subject to the new option
shall be equal
to the product of (i)
the number of shares
of ALFC Common
Stock subject to
the Outstanding ALFC Options being converted, and (ii) the
Exchange Ratio.
The exercise price per
share of FFC Common Stock under the
new option shall
be equal to the quotient of the per share exercise price
of the
Outstanding
ALFC Option
being converted divided by the Exchange
Ratio,
rounded up to the next
whole cent. The
duration and other terms of
the new option
shall be the same as the original Outstanding ALFC Options
being
converted.
(iii) No payment shall
be made pursuant
to subsection (i) of this
Section
3.4.1 with
respect to any portion
of an Outstanding
ALFC Option
that is
converted into an FFC Option under subsection (ii) of this
Section
3.4.1.
ALFC shall use its
reasonable
best efforts to obtain the written
acknowledgement
of each holder of a then Outstanding ALFC Option with
regard to the
treatment of such
Outstanding
ALFC Option
hereunder.
FFC
shall have the
right to change the
manner of payment
under this
Section
3.4.1
provided that the consideration to be paid to the holders of
Outstanding ALFC
Options pursuant thereto is not reduced in amount.
3.4.2 As of the
Effective Time, FFC shall assume the obligations and
succeed to the rights of ALFC under the
ALFC Option
Plan. ALFC and FFC agree
that prior to the Effective Time the ALFC Option Plan shall be
amended, to the
extent possible without requiring
stockholder approval
of such amendments,
(i)
if and to the extent necessary and practicable, to reflect the transactions
contemplated by this Agreement, including
the conversion of the Outstanding ALFC
Options pursuant to Section 3.4.1 and the substitution of FFC for ALFC
thereunder to the extent appropriate to effectuate the assumption of
such ALFC
Option Plan by FFC and (ii) to preclude
any automatic or formulaic grant of
options thereunder on or after the date hereof.
From and after the
Effective
Time, all references to ALFC (other than
references to a
"Change in Control" of
ALFC) in the ALFC Option Plan and in each
agreement evidencing any award of ALFC
Options shall be deemed to refer to FFC,
unless FFC determines otherwise.
3.4.3 FFC shall
take all action
necessary or appropriate to have available
for issuance or transfer a sufficient number of shares of FFC Common
Stock for
delivery upon exercise of the Outstanding
ALFC Options being converted pursuant
to Section 3.4.1(ii). Promptly after the Effective Time,
FFC shall prepare and
file with the SEC a post-effective
amendment converting the Form S-4 to a
Form
S-8 (or file such other appropriate form) registering a
number of shares of FFC
Common Stock necessary to fulfill FFC's
obligations under this Section 3.4.3.
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3.5 Bank Merger.
ALFC and FFC
shall use their best efforts to cause Atlantic Liberty
Savings, F.A. to merge with and into
Flushing Savings Bank,
FSB, with Flushing
Savings Bank, FSB as the surviving
institution, concurrently with, or as soon as
practicable after, the Effective Time.
Following the
execution and delivery of
this Agreement, FFC will cause Flushing
Savings Bank, FSB, and
ALFC will cause
Atlantic Liberty Savings, F.A., to execute and deliver a Plan of
Bank Merger
substantially in the form attached to this
Agreement as Exhibit A.
3.6 Reservation of Shares.
FFC shall
reserve for
issuance a
sufficient
number of shares of
the FFC
Common Stock for the purpose of issuing
shares of FFC Common
Stock to the ALFC
stockholders in accordance with this
Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALFC
ALFC
represents and
warrants to FFC that the statements contained in this
Article IV are correct as of the date of
this Agreement
and will be correct
as
of the Closing Date (as though made then and as though the
Closing Date were
substituted for the date of this Agreement
throughout this
Article IV), except
as set forth in the ALFC Disclosure Schedule delivered by ALFC to FFC on the
date hereof, and except as to any
representation or warranty which specifically
relates to an earlier date. ALFC has made a
good faith effort to ensure that the
disclosure on each schedule of the ALFC
Disclosure Schedule
corresponds to the
section referenced herein. However, for purposes of the ALFC Disclosure
Schedule, any item disclosed on any schedule therein is deemed to be fully
disclosed with respect to all schedules
under which such item may be relevant as
and to the extent that it is reasonably
clear on the face of
such schedule that
such item applies to such other
schedule. References to the Knowledge of ALFC
shall include the Knowledge of Atlantic
Liberty Savings, F.A.
4.1 Standard.
No
representation or warranty of ALFC contained in this Article IV
shall be
deemed untrue or incorrect, and ALFC shall not be deemed to have
breached a
representation or warranty, as a consequence of the existence of any fact,
circumstance or event unless such fact,
circumstance or event,
individually or
taken together with all other facts,
circumstances or
events inconsistent
with
any paragraph of Article IV, has had or is reasonably expected to have a
Material Adverse Effect; provided, however, that the foregoing standard
shall
not apply to representations and warranties contained in Sections 4.2, 4.3
and
4.4, which shall be deemed untrue, incorrect and breached if they are
not true
and correct in all material respects.
4.2 Organization.
4.2.1 ALFC is a
corporation duly
organized, validly
existing and in
good
standing under the laws of the State of
Delaware, and is duly
registered as a
savings and loan holding company under the HOLA.
ALFC has full
corporate power
and authority to carry on its business as
now conducted.
ALFC is duly
licensed
or qualified to do business in the states of the United
States and
foreign
jurisdictions where its ownership or leasing of property
or the conduct of its
business requires such qualification.
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4.2.2 Atlantic
Liberty Savings, F.A. is a federally chartered stock savings
association duly organized, validly existing and in good
standing. The deposits
of Atlantic Liberty Savings, F.A. are insured by the FDIC to
the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid by
Atlantic Liberty Savings, F.A. when due.
Atlantic Liberty Savings, F.A. is a member
in good standing of the FHLB and owns
the requisite amount of stock therein.
4.2.3 ALFC
Disclosure Schedule 4.2.3 sets forth each ALFC Subsidiary.
Each
ALFC Subsidiary is a corporation, limited liability company or other legal
entity duly organized, validly existing and in good standing
under the laws of
its jurisdiction of incorporation or
organization.
4.2.4 The
respective minute books of ALFC, Atlantic Liberty Savings,
F.A.
and each other ALFC Subsidiary accurately
records, in all material respects, all
material corporate actions of their respective stockholders and boards of
directors (including committees).
4.2.5 Prior to
the date of this
Agreement, ALFC has
made available to FFC
true and correct copies of the certificate of incorporation or charter and
bylaws of ALFC, Atlantic Liberty Savings,
F.A. and each other ALFC Subsidiary.
4.3 Capitalization.
4.3.1 The
authorized capital
stock of ALFC consists of 6,000,000 shares of
ALFC Common Stock, of which 1,682,347
shares are
outstanding,
validly issued,
fully paid and nonassessable and free of
preemptive rights,
and 500,000 shares
of preferred stock, $0.10 par value ("ALFC
Preferred Stock"),
none of which are
outstanding. There are 28,637 shares of ALFC Common Stock held by ALFC as
treasury stock. Neither ALFC nor any ALFC Subsidiary has or is bound by any
Rights of any character relating to the
purchase, sale or issuance or voting of,
or right to receive dividends or other distributions on any shares of ALFC
Common Stock or any other security of ALFC or any securities
representing
the
right to vote, purchase or otherwise receive any
shares of ALFC Common Stock or
any other security of ALFC other than as set forth in Disclosure Schedule
4.3.1(a). Disclosure Schedule 4.3.1(a) sets
forth: the name of each holder of an
award granted under any ALFC Stock Benefit
Plan, identifying
the nature of the
award; as to options to purchase ALFC
Common Stock,
the number of shares
each
such individual may acquire pursuant to the
exercise of such options, the grant,
vesting and expiration dates, and the exercise price relating to the options
held; and the names of each holder of an
outstanding restricted stock award, the
number of shares subject to each award, and
the grant and vesting dates.
4.3.2 ALFC owns
all of the capital stock of Atlantic Liberty Savings, F.A.,
free and clear of any lien or encumbrance.
Except for the ALFC
Subsidiaries and
as set forth in ALFC Disclosure Schedule
4.3.2, ALFC does not possess, directly
or indirectly, any material equity interest in
any corporate entity, except for
equity interests held in the investment portfolios of ALFC or any ALFC
Subsidiary, equity interests held by ALFC
Subsidiaries in a fiduciary capacity,
and equity interests held in connection with the lending activities of ALFC
Subsidiaries, including stock in the FHLB. Either ALFC or Atlantic Liberty
Savings, F.A. owns all of the outstanding
shares of capital
stock of each ALFC
Subsidiary free and clear of all liens,
security interests,
pledges, charges,
encumbrances, agreements and restrictions
of any kind or nature.
4.3.3 To ALFC's
Knowledge, other than the ALFC ESOP and except as set forth
on ALFC Disclosure Schedule 4.3.3, no
Person is the beneficial owner (as defined
in Section 13(d) of the Exchange Act) of 5%
or more of the outstanding shares of
ALFC Common Stock.
17
<Page>
4.3.4 No bonds, debentures, notes or other
indebtedness having the right to vote
on any matters on which ALFC's stockholders
may vote has been issued by ALFC and
are outstanding.
4.4 Authority; No Violation.
4.4.1 ALFC has
full corporate
power and authority to execute and
deliver
this Agreement and, subject to the receipt
of the Regulatory Approvals described
in Section 8.3, the approval of this
Agreement by ALFC's
stockholders
and the
amendment of Section 9 of the Federal Stock
Charter of Atlantic Liberty Savings,
F.A. (it being understood that Atlantic
Liberty Savings, F.A. will take such
action to amend Section 9 of its Federal Stock Charter prior to the Closing
Date), to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by ALFC and the completion by ALFC of the
transactions contemplated hereby, up to and
including the Merger, have been duly
and validly approved by the Board of Directors
of ALFC. This Agreement has been
duly and validly executed and delivered by ALFC,
and subject to approval by the
stockholders of ALFC and receipt of the
Regulatory Approvals,
constitutes the
valid and binding obligation of ALFC, enforceable against ALFC in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally,
and subject,
as to enforceability,
to
general principles of equity.
4.4.2 Subject to
compliance
by FFC with the terms
and conditions of
this
Agreement, (A) the execution and delivery
of this Agreement by ALFC, (B) subject
to receipt of Regulatory Approvals, and ALFC's and FFC's compliance with any
conditions contained therein, and subject to
the receipt of the approval of the
stockholders of ALFC, the consummation of
the transactions
contemplated hereby,
and (C) compliance by ALFC with any of the
terms or provisions
hereof will not
(i) conflict with or result in a breach of
any provision of the
Certificate of
Incorporation or Bylaws of ALFC or any ALFC
Subsidiary
or the Federal Stock
Charter and Bylaws of Atlantic Liberty Savings, F.A., subject to amendment of
Section 9 of the Federal Stock Charter of Atlantic Liberty Savings, F.A. (it
being understood that Atlantic Liberty Savings, F.A. will take such action to
amend Section 9 of its Federal Stock
Charter prior to the
Closing Date);
(ii)
violate any statute, code, ordinance,
rule, regulation,
judgment, order,
writ,
decree or injunction applicable to ALFC or any ALFC
Subsidiary or any of
their
respective properties or assets; or (iii) violate, conflict with, result in a
breach of any provisions of, constitute a default (or an event
which, with
notice or lapse of time, or both, would
constitute a default)
under, result in
the termination of, accelerate the
performance required by, or result in a right
of termination or acceleration or the
creation of any lien,
security interest,
charge or other encumbrance upon any of the properties or assets of ALFC or
Atlantic Liberty Savings, F.A. under any of
the terms, conditions
or provisions
of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement
or other investment or obligation
to which ALFC or
Atlantic Liberty
Savings,
F.A. is a party (but not with respect to
any benefit plan), or
by which they or
any of their respective properties or assets may be bound
or affected,
except
for such violations, conflicts, breaches or defaults
under clause (ii) or (iii)
hereof which, either individually or in the
aggregate, will not
have a Material
Adverse Effect on ALFC and the ALFC
Subsidiaries taken as a whole.
4.5 Consents.
Except for the
Regulatory Approvals
referred to in Section
8.3 hereof and
compliance with any conditions contained
therein, the approval of this Agreement
by the requisite vote of the stockholders of ALFC, and with respect to the
amendment of Section 9 of the Federal Stock
Charter of Atlantic Liberty Savings,
F.A., no consents, waivers or approvals of, or
filings or
registrations
with,
any Governmental Entity or Bank Regulator are necessary, and, to ALFC's
Knowledge, no consents, waivers or approvals of, or filings or registrations
with, any other third parties are necessary, in connection with (a) the
execution and delivery of this Agreement by ALFC, and the
completion by ALFC of
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the Merger or (b) the execution and delivery of the Plan of Bank Merger by
Atlantic Liberty Savings, F.A. and the completion by
Atlantic Liberty Savings,
F.A. of the Bank Merger. ALFC has no reason to believe
that (i) any
required
Regulatory Approvals or other required consents or approvals will not be
received, or that (ii) any public body or
authority, the consent
or approval of
which is not required or to which a filing
is not required,
will object to the
completion of the transactions contemplated
by this Agreement.
4.6 Financial Statements.
4.6.1
ALFC has previously made available to FFC the ALFC Financial
Statements. The ALFC Financial Statements have
been prepared in accordance with
GAAP, and (including the related notes
where applicable)
fairly present in each
case in all material respects (subject in the case of the
unaudited interim
statements to normal year-end adjustments)
the consolidated
financial position,
results of operations and cash flows of ALFC and the
ALFC Subsidiaries
on a
consolidated basis as of and for the
respective
periods ending on the dates
thereof, in accordance with GAAP during the periods involved, except as
indicated in the notes thereto, or in the case of unaudited statements, as
permitted by Form 10-QSB.
4.6.2 At the
date of each balance
sheet included in the ALFC Financial
Statements, ALFC did not have any
liabilities, obligations or loss contingencies
of any nature (whether absolute, accrued, contingent or otherwise) of a
type
required to be reflected in such ALFC
Financial Statements or in the footnotes
thereto which are not fully reflected or reserved against therein or fully
disclosed in a footnote thereto, except for liabilities,
obligations and
loss
contingencies which are not material
individually or in the
aggregate or which
are incurred in the ordinary course of
business, consistent
with past practice,
and except for liabilities, obligations and loss contingencies
which are within
the subject matter of a specific
representation and warranty herein and subject,
in the case of any unaudited statements,
to normal, recurring
audit adjustments
and the absence of footnotes.
4.7 Taxes.
4.7.1 (i) ALFC,
each ALFC Subsidiary and the ALFC Group has filed or caused
to be filed, and with respect to Tax Returns due between the date of this
Agreement and the date the Effective
Time occurs,
will timely file
(including
any applicable extensions) all Tax Returns
required to be filed
by the Code or
by applicable state, local or foreign Tax laws and all
such Tax Returns are, or
in the case of such Tax Returns not yet filed, will be, true, complete and
correct in all material respects, and (ii) all Taxes of ALFC, the ALFC
Subsidiaries and the ALFC Group (whether or not reflected on any such Tax
Returns) attributable to a Pre-Effective Time Tax Period have been, or in
the
case of Taxes the due date for payment of which is between the date of this
Agreement and the date the Effective Time
occurs, timely paid in full.
4.7.2 The most
recent audited
financial statements for ALFC reflect an
adequate reserve for all Taxes payable by
ALFC and the ALFC Subsidiaries for all
taxable periods and portions thereof through the date of such financial
statements, and, in the case of Taxes owed as
of the date hereof,
an adequate
reserve is (and until the date the
Effective Time occurs will continue to be)
reflected in the accruals for Taxes
payable on the Balance
Sheet, other than
accruals established to reflect timing
differences and
accruals reflected only
in the notes thereto.
4.7.3
There are no liens for
Taxes with
respect to any of the assets or
properties of ALFC or any ALFC
Subsidiary.
4.7.4 No
material Tax Return of ALFC, any ALFC Subsidiary or the ALFC
Group
is under audit or examination by any other Taxing
Authority,
and no notice of
such an audit or examination has been
received by ALFC or any ALFC Subsidiary.
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<page>
4.7.5 Each
deficiency,
if any, resulting from any audit or examination
relating to Taxes by any Taxing Authority has been timely paid. No issues
relating to Taxes were raised by the
relevant Taxing
Authority in any completed
audit or examination that can reasonably be
expected to recur in a later taxable
period. The relevant statute of limitations is closed with respect to the
Federal, foreign and material state and local Tax Returns of
ALFC, each ALFC
Subsidiary and the ALFC Group for all years
through 2001.
4.7.6 None of
ALFC, any ALFC
Subsidiary or the ALFC Group is a party to or
is bound by any Tax sharing agreement, Tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes
(including,
without
limitation, any advance pricing agreement,
closing agreement or
other agreement
relating to Taxes with any Taxing
Authority), other than
as required by the OTS
in connection with Atlantic Liberty
Savings, F.A.'s mutual to stock conversion.
4.7.7 Neither
ALFC nor any ALFC Subsidiary will be required to include in a
taxable period ending after the date of
the Effective Time any
taxable income
attributable to income that accrued, but
was not recognized, in
a Pre-Effective
Time Tax Period (or the portion of a Straddle Period allocable to the
Pre-Effective Time Tax Period) as a result
of an adjustment under Section 481 of
the Code, the installment method of
accounting, the long-term contract method of
accounting, the cash method of accounting,
any comparable
provision of
state,
local, or foreign Tax law, or for any other
reason.
4.7.8 There are
no outstanding
agreements or waivers extending, or having
the effect of extending, the statutory period of limitation applicable to any
Tax Returns required to be filed with
respect to ALFC or any
ALFC Subsidiary,
and none of ALFC, any ALFC Subsidiary or the ALFC Group has requested any
extension of time within which to file any
Tax Return, which
return has not yet
been filed. No power of attorney with respect
to any Taxes has been executed or
filed with any Taxing Authority by or on behalf of ALFC,
any ALFC Subsidiary or
the ALFC Group.
4.7.9 ALFC and
each of the ALFC
Subsidiaries have complied in all respects
with all applicable laws relating to the payment and withholding of Taxes
(including withholding of Taxes pursuant to
Sections 1441, 1442,
3121 and 3402
of the Code or any comparable provision of
any state, local or foreign laws) and
have, within the time and in the manner
prescribed by
applicable law, withheld
from and paid over to the proper Taxing
Authorities all
amounts required to
be
so withheld and paid over under such
laws.
4.7.10
Neither ALFC nor any ALFC Subsidiary has been a party to any
distribution occurring during the last three
years in which the parties to such
distribution treated the distribution as one to which Section 355 of the
Code
applied.
4.7.11
Neither ALFC nor any ALFC Subsidiary is a party to any "listed
transaction" as defined in Treasury
Regulation Section 1.6011-4(b)(2).
4.7.12 The
applicable Tax Returns of ALFC, the ALFC Subsidiaries and the
ALFC Group have disclosed any Tax positions of
ALFC, the ALFC
Subsidiaries or
the ALFC Group that, if not disclosed, could give rise to penalties under
Section 6662 of the Code.
4.7.13 ALFC has
not been, at any time during the applicable time period set
forth in Section 897(c)(1) of the Code, a United
States real property
holding
company within the meaning of Section
897(c)(2) of the Code.
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4.8 No Material Adverse Effect.
Except as
disclosed in ALFC's Securities Documents filed on or prior to
the
date hereof, ALFC and the ALFC
Subsidiaries, taken as a whole, have not suffered
any Material Adverse Effect since March 31, 2005 and no
event has occurred or
circumstance arisen since that date which, in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on ALFC and the ALFC
Subsidiaries, taken as a whole.
4.9 Material Contracts; Leases;
Defaults.
4.9.1 Except as
set forth in ALFC Disclosure Schedule 4.9.1, neither ALFC
nor any ALFC Subsidiary is a party to or subject to: (i) any employment,
consulting or severance contract with any past or present
officer, director
or
employee of ALFC or any ALFC Subsidiary,
except for "at will" arrangements; (ii)
any plan or contract providing for bonuses, pensions, options, deferred
compensation, retirement payments, profit sharing or similar material
arrangements for or with any past or
present officers, directors or employees of
ALFC or any ALFC Subsidiary; (iii) any collective bargaining
agreement with any
labor union relating to employees of ALFC or any ALFC Subsidiary; (iv) any
agreement which by its terms limits the
payment of dividends by ALFC or any ALFC
Subsidiary; (v) any instrument evidencing or related to material
indebtedness
for borrowed money whether directly or indirectly, by way of purchase money
obligation, conditional sale, lease purchase,
guaranty or otherwise, in respect
of which ALFC or any ALFC Subsidiary is an obligor to any person, which
instrument evidences or relates to indebtedness other than deposits, FHLB
advances, repurchase agreements, bankers' acceptances, and "treasury tax and
loan" accounts established in the ordinary course
of business and
transactions
in "federal funds" or which contains
financial covenants or other
restrictions
(other than those relating to the payment of
principal and interest
when due)
which would be applicable on or after the Closing Date to FFC or any FFC
Subsidiary; (vi) any other agreement, written or oral, not terminable on 60
days' notice, that obligates ALFC or any
ALFC Subsidiary for the payment of more
than $25,000 annually; or (vii) any agreement (other than this Agreement),
contract, arrangement, commitment or understanding (whether written or oral)
that restricts or limits in any
material way the conduct of business by ALFC or
any ALFC Subsidiary (it being understood that any non-compete or similar
provision shall be deemed material).
4.9.2 Each real
estate lease that will require the consent of the lessor or
its agent as a result of the Merger or the
Bank Merger by virtue of the terms of
any such lease is listed in ALFC
Disclosure
Schedule 4.9.2 identifying the
section of the lease that contains such
prohibition or
restriction. Subject
to
any consents that may be required as a
result of the
transactions
contemplated
by this Agreement, to its Knowledge,
neither ALFC nor any
ALFC Subsidiary is in
default in any material respect under any material contract, agreement,
commitment, arrangement, lease, insurance
policy or other instrument to which it
is a party, by which its assets, business, or operations may be bound or
affected, or under which it or its assets,
business, or operations receive
benefits, and there has not occurred any
event that, with the
lapse of time or
the giving of notice or both, would
constitute such a default.
4.9.3 True and
correct copies of agreements, contracts, arrangements and
instruments referred to in Section 4.9.1 and
4.9.2 have been made
available to
FFC on or before the date hereof,
are listed on ALFC
Disclosure Schedule
4.9.1
and are in full force and effect on the
date hereof. Except as set forth in ALFC
Disclosure Schedule 4.9.3, no plan,
contract, employment agreement, termination
agreement, or similar agreement or arrangement to which ALFC or any ALFC
Subsidiary is a party or under which ALFC
or any ALFC Subsidiary
may be liable
contains provisions which permit an employee or independent contractor to
terminate it without cause and continue to accrue
future benefits
thereunder.
Except as set forth in ALFC Disclosure
Schedule 4.9.3, no such agreement, plan,
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contract, or arrangement (x) provides for acceleration in the vesting of
benefits or payments due thereunder upon
the occurrence of a change in ownership
or control of ALFC or any ALFC Subsidiary
or upon the occurrence of a subsequent
event; or (y) requires ALFC or any ALFC
Subsidiary to provide
a benefit in the
form of ALFC Common Stock or determined by
reference to the value of ALFC Common
Stock.
4.10 Ownership
of Property; Insurance Coverage.
4.10.1 Except as
set forth in ALFC Disclosure Schedule 4.10, ALFC and each
ALFC Subsidiary has good and, as to real property, marketable title to all
material assets and properties owned by ALFC or each ALFC
Subsidiary
in the
conduct of its businesses, whether such assets and properties are real or
personal, tangible or intangible, including
assets and property reflected in the
balance sheet contained in the most recent
ALFC Financial Statements or acquired
subsequent thereto (except to the extent that such
assets and properties
have
been disposed of in the ordinary course of business, since the date of such
balance sheet), subject to no material
encumbrances, liens,
mortgages, security
interests or pledges, except (i) those
items which secure liabilities for public
or statutory obligations or any discount with, borrowing from or other
obligations to FHLB, inter-bank credit
facilities, reverse repurchase agreements
or any transaction by an ALFC Subsidiary acting in a fiduciary capacity, and
(ii) statutory liens for amounts not yet
delinquent or which are being contested
in good faith. ALFC and the ALFC
Subsidiaries, as
lessee, have the right
under
valid and existing leases of real and personal
properties used by
ALFC and the
ALFC Subsidiaries in the conduct of
their businesses to
occupy or use all such
properties as presently occupied and used by each of them.
Such existing leases
and commitments to lease constitute or will
constitute operating leases for both
tax and financial accounting purposes and the lease expense and
minimum rental
commitments with respect to such leases and
lease commitments are
as disclosed
in all material respects in the notes to
the ALFC Financial Statements.
4.10.2 With
respect to all
material agreements
pursuant to which ALFC
or
any ALFC Subsidiary has purchased
securities subject to
an agreement to resell,
if any, ALFC or such ALFC Subsidiary, as
the case may be, has a lien or security
interest (which to ALFC's Knowledge is a valid, perfected first lien) in the
securities or other collateral securing the
repurchase agreement,
and the value
of such collateral equals or exceeds the
amount of the debt secured thereby.
4.10.3 ALFC and
each Significant
Subsidiary
of ALFC currently maintain
insurance considered by each of them to be reasonable for their respective
operations. Neither ALFC nor any Significant Subsidiary of ALFC has received
notice from any insurance carrier that (i) such insurance will be canceled or
that coverage thereunder will be reduced or eliminated,
or (ii) premium
costs
with respect to such policies of insurance will be substantially increased.
There are presently no material
claims pending under
such policies of insurance
and no notices have been given by ALFC or any
Significant
Subsidiary
of ALFC
under such policies. All such insurance is valid and
enforceable
and in full
force and effect, and within the last three years ALFC and each Significant
Subsidiary of ALFC has received each type
of insurance coverage for which it has
applied and during such periods has not been denied indemnification for any
material claims submitted under any of its
insurance policies.
ALFC Disclosure
Schedule 4.10.3 identifies all policies of
insurance maintained by ALFC and each
Significant Subsidiary of ALFC as well as the
other matters required to be
disclosed under this Section.
4.11 Legal
Proceedings.
Except as set
forth in ALFC Disclosure Schedule 4.11, neither ALFC nor
any
ALFC Subsidiary is a party to any, and there are no pending or, to ALFC's
Knowledge, threatened legal, administrative,
arbitration or other
proceedings,
claims (whether asserted or unasserted),
actions or
governmental investigations
or inquiries of any nature, (i) against ALFC or any ALFC Subsidiary, (ii) to
which ALFC or any ALFC Subsidiary's assets are or may be subject, (iii)
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challenging the validity or propriety of
any of the transactions contemplated by
this Agreement, or (iv) which could adversely affect the ability of ALFC to
perform under this Agreement, except for any proceeding, claim, action,
investigation or inquiry referred to in
clauses (i) and (ii) which, if adversely
determined, individually or in the aggregate,
could not be
reasonably expected
to have a Material Adverse Effect.
4.12 Compliance
With Applicable Law.
4.12.1 To ALFC's
Knowledge,
each of ALFC and each
ALFC Subsidiary
is in
compliance in all material respects with
all applicable
federal, state,
local
and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or
decrees applicable to it, its properties,
assets and deposits, its business, and
its conduct of business and its relationship with its employees, including,
without limitation, the Sarbanes-Oxley Act of 2002, the USA Patriot Act,
the
Bank Secrecy Act, the Equal Credit Opportunity Act, the Fair Housing Act, the
Community Reinvestment Act of 1977 ("CRA"),
the Home Mortgage
Disclosure Act,
and all other applicable fair lending laws and other laws relating to
discriminatory business practices,
and neither ALFC nor
any ALFC Subsidiary has
received any written notice to the
contrary.
4.12.2
Each of ALFC and each
ALFC Subsidiary
has all material permits,
licenses, authorizations, orders and approvals of, and has made all filings,
applications and registrations with, all Bank Regulators that are
required in
order to permit it to own or lease its
properties and to conduct its business as
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and
effect and, to the Knowledge of ALFC,
no suspension or cancellation of any such
permit, license, certificate, order or
approval is threatened or will result from
the consummation of
the transactions
contemplated by this Agreement,
subject to obtaining
the approvals set forth in
Section 8.3.
4.12.3 For the
period beginning January 1, 2003, neither ALFC nor any ALFC
Subsidiary has received any written
notification or, to
ALFC's Knowledge,
any
other communication from any Bank
Regulator (i) asserting that ALFC or any ALFC
Subsidiary is not in material compliance with any of the
statutes,
regulations
or ordinances which such Bank Regulator
enforces; (ii) threatening to revoke any
license, franchise, permit or governmental
authorization which is
material to
ALFC or any ALFC Subsidiary; (iii) requiring or threatening to
require ALFC or
any ALFC Subsidiary, or indicating that ALFC or any ALFC Subsidiary may be
required, to enter into a cease and desist
order, agreement or memorandum of
understanding or any other agreement with any federal or state governmental
agency or authority which is charged with
the supervision or regulation of banks
or engages in the insurance of bank deposits restricting or limiting, or
purporting to restrict or limit, in any
material respect the
operations of ALFC
or any ALFC Subsidiary, including without limitation any restriction on the
payment of dividends; or (iv) directing,
restricting or
limiting, or purporting
to direct, restrict or limit, in any material manner the
operations of ALFC or
any ALFC Subsidiary (any such notice,
communication,
memorandum,
agreement or
order described in this sentence is hereinafter referred to as a "Regulatory
Agreement"). Neither ALFC nor any ALFC
Subsidiary
has consented to or
entered
into any Regulatory Agreement that is currently in effect. The most recent
regulatory rating given to Atlantic Liberty
Savings, F.A. as to
compliance with
the CRA is satisfactory or better.
4.13 Employee
Benefit Plans.
4.13.1 ALFC
Disclosure Schedule
4.13.1 includes a descriptive list of all
existing bonus, incentive, deferred compensation, pension, retirement,
profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock
purchase, restricted stock, stock option,
stock appreciation, phantom stock,
severance, welfare benefit plans, fringe
benefit plans,
employment,
severance
and change in control agreements and all other material benefit practices,
policies and arrangements maintained by
ALFC or any ALFC Subsidiary in which any
employee or former employee, consultant or former consultant or director or
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former director of ALFC or any ALFC
Subsidiary participates or to which any such
employee, consultant or director is a party
or is otherwise entitled to receive
benefits (the "Compensation and Benefit Plans"). Except as set forth in ALFC
Disclosure Schedule 4.13.1, neither ALFC nor any of its
Subsidiaries has
any
commitment to create any additional Compensation and Benefit Plan or to
materially modify, change or renew any existing
Compensation and
Benefit Plan
(any modification or change that increases the cost of such plans
would be
deemed material), except as required to maintain the
qualified status thereof.
ALFC has made available to FFC true and
correct copies of the
Compensation and
Benefit Plans and amendments thereto.
4.13.2
Except as disclosed in ALFC Disclosure Schedule 4.13.2, each
Compensation and Benefit Plan has been
operated and administered in all material
respects in accordance with its terms and
with applicable law,
including,
but
not limited to, ERISA, the Code, the Securities
Act, the Exchange Act,
the Age
Discrimination in Employment Act, COBRA, the
Health Insurance
Portability and
Accountability Act and any regulations or
rules promulgated thereunder, and all
material filings, disclosures and notices required by ERISA, the Code, the
Securities Act, the Exchange Act, the Age
Discrimination
in Employment Act
and
any other applicable law have been timely
made or any interest, fines, penalties
or other impositions for late filings have
been paid in full. Each Compensation
and Benefit Plan which is an "employee
pension benefit plan"
within the meaning
of Section 3(2) of ERISA (a "Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the IRS, and ALFC is not aware of any
circumstances
which are reasonably likely to result in revocation of any such favorable
determination letter. There is no material
pending or, to the Knowledge of ALFC,
threatened action, suit or claim relating
to any of the Compensation and Benefit
Plans (other than routine claims for benefits). Neither ALFC nor any ALFC
Subsidiary has engaged in a transaction, or omitted to take any action,
with
respect to any Compensation and Benefit Plan that would
reasonably be expected
to subject ALFC or any ALFC Subsidiary to an unpaid tax or penalty
imposed by
either Section 4975 of the Code or Section
502 of ERISA.
4.13.3
Except as set forth in ALFC Disclosu
