PAGE
EXHIBIT 99
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 23, 1998, between Ambanc
Holding Co., Inc., a Delaware corporation ("Grantee"), and AFSALA Bancorp,
Inc., a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into a Reorganization and
Merger Agreement (the "Merger Agreement");
WHEREAS, as an inducement to the willingness of Grantee to continue
to pursue the transactions contemplated by the Merger Agreement, Issuer
has agreed to grant Grantee the Option (as hereinafter defined); and
WHEREAS, the Board of Directors of Issuer has approved the grant of
the Option and the Merger Agreement prior to the date hereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 344,500 fully paid and nonassessable shares of the common
stock, par value $.10 per share, of Issuer ("Common Stock") at a price per
share equal to the last reported sale price per share of Common Stock as
reported on the Nasdaq Stock Market on April 22, 1998; provided, however,
that in the event Issuer issues or agrees to issue any shares of Common
Stock (other than shares of Common Stock issued pursuant to stock options
granted prior to the date hereof) at a price less than such price per
share (as adjusted pursuant to subsection (b) of Section 5), such price
shall be equal to such lesser price (such price, as adjusted if
applicable, the "Option Price"); provided, further, that in no event shall
the number of shares for which this Option is exercisable exceed 19.9% of
the issued and outstanding shares of Common Stock. The number of shares
of Common Stock that may be received upon the exercise of the Option and
the Option Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement and other than pursuant to an event
described in Section 5(a) hereof), the number of shares of Common Stock
subject to the Option shall be increased so that, after such issuance,
such number together with any shares of Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares subject or
issued pursuant to the Option. Nothing contained in this Section l(b) or
elsewhere in this Agreement shall be deemed to authorize Issuer to issue
shares in breach of any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option,
in whole or part, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall
have sent the written notice of such exercise (as provided in subsection
(e) of this Section 2) within six (6) months following such Subsequent
Triggering Event (or such later period as provided in Section 10). Each
of the following shall be an Exercise Termination Event: (i) the Effective
Time of the Merger; (ii) termination of the Merger Agreement in accordance
with the provisions thereof if such termination occurs prior to the
occurrence of an Initial
Triggering Event except a termination by Grantee pursuant to Section
5.4(c) due to a breach of the Company's covenants at Sections 4.2, 4.3,
4.4, 4.6 or 4.9 or the condition at Section 5.2(e) of the Merger Agreement
(but only if the breach giving rise to the termination was willful) (each,
a "Listed Termination"); or (iii) the passage of eighteen (18) months (or
such longer period as provided in Section 10) after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a Listed Termination. The term "Holder" shall mean
the holder or holders of the Option. Notwithstanding anything to the
contrary contained herein, (i) the Option may not be exercised at any time
when Grantee shall be in material breach of any of its covenants or
agreements contained in the Merger Agreement such that Issuer shall be
entitled to terminate the Merger Agreement as a result of a material
breach.
(b) The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring on or after the date hereof:
(i) Issuer or any Significant Subsidiary (as defined in Rule 1-
02 of Regulation S-X promulgated by the Securities and Exchange Commission
(the "SEC")) (an "Issuer Subsidiary"), without having received Grantee's
prior written consent, shall have entered into an agreement to engage in
an Acquisition Transaction (as hereinafter defined) with any person (the
term "person" for purposes of this Agreement having the meaning assigned
thereto in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer (the "Issuer Board") shall
have recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction other than as contemplated by the Merger
Agreement. For purposes of this Agreement, (a) "Acquisition Transaction"
shall mean (x) a merger or consolidation, or any similar transaction,
involving Issuer or any Issuer Subsidiary (other than mergers,
consolidations or similar transactions involving solely Issuer and/or one
or more wholly-owned (except for directors' qualifying shares and a de
minimis number of other shares) Subsidiaries of the Issuer, provided, any
such transaction is not entered into in violation of the terms of the
Merger Agreement), (y) a purchase, lease or other acquisition of all or
any substantial part of the assets or deposits of Issuer or any Issuer
Subsidiary, or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer or any Issuer
Subsidiary and (b) "Subsidiary" shall have the meaning set forth in Rule
12b-2 under the 1934 Act;
(ii) Any person other than the Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for purposes of this Agree-
ment having the meaning assigned thereto in Section 13(d) of the 1934 Act,
and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed to
adopt the Merger Agreement at a meeting which has been held for that
purpose or any adjournment or postponement thereof, or such meeting shall
not have been held in violation of the Merger Agreement or shall have been
canceled prior to termination of the Merger Agreement if, prior to such
meeting (or if such meeting shall not have been held or shall have been
canceled, prior to such termination), it shall have been publicly
announced that any person (other than Grantee or any of its Subsidiaries)
shall have made, or publicly disclosed an intention to make, a proposal to
engage in an Acquisition Transaction;
(iv) The Issuer Board shall have withdrawn or modified (or
publicly announced its intention to withdraw or modify) in any manner
adverse in any respect to Grantee its recommendation that the shareholders
of Issuer approve
the transactions contemplated by the Merger Agreement, or Issuer or any
Issuer Subsidiary shall have authorized, recommended, proposed (or
publicly announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary
shall have filed with the SEC a registration statement or tender offer
materials with respect to a potential exchange or tender offer that would
constitute an Acquisition Transaction (or filed a preliminary proxy
statement with the SEC with respect to a potential vote by its
shareholders to approve the issuance of shares to be offered in such an
exchange offer);
(vi) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of engaging
in an Acquisition Transaction, and following such breach Grantee would be
entitled to terminate the Merger Agreement (whether immediately or after
the giving of notice or passage of time or both); or
(vii) Any person other than Grantee or any Grantee Subsidiary
shall have filed an application or notice with the Office of Thrift
Supervision (the "OTS") or other federal or state bank regulatory or
antitrust authority, which application or notice has been accepted for
processing, for approval to engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 25% or more of the then
outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described
in clause (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (z) of the second sentence thereof shall
be 25%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent Triggering Event
(together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder
to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise
the Option (or any portion thereof), it shall send to Issuer a written
notice (the date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase pursuant to
such exercise and (ii) a place and date not earlier than three business
days nor later than 60 business days from the Notice Date for the closing
of such purchase (the "Closing Date"); provided, that if prior notification
to or approval of the OTS or any other regulatory or antitrust agency is
required in connection with such purchase, the Holder shall promptly file
the required notice or application for approval, shall promptly notify
Issuer of such filing, and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall
run instead from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any exercise of
the Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2,
the Holder shall (i) pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by wire transfer to a bank account designated
by Issuer and (ii) present and surrender this Agreement to Issuer at its
principal executive
offices, provided that the failure or refusal of the Issuer to designate
such a bank account or accept surrender of this Agreement shall not
preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer
shall deliver to the Holder a certificate or certificates representing the
number of shares of Common Stock purchased by the Holder and, if the
Option should be exercised in part only, a new Option evidencing the
rights of the Holder thereof to purchase the balance of the shares
purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement, dated as of April 23, 1998,
between the registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer and will be
provided to the holder hereof without charge upon receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933 Act") in
the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to Issuer a copy
of a letter from the staff of the SEC, or an opinion of counsel, in form
and substance reasonably satisfactory to Issuer, to the effect that such
legend is not required for purposes of the 1933 Act; (ii) the reference to
the provisions of this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of
such reference in the opinion of counsel to the Holder; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates
shall bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section
2 and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed subject to the receipt of any necessary
regulatory approvals to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer
books of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered to the
Holder. Issuer shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issue and delivery of stock certificates
under this Section 2 in the name of the Holder or its assignee, transferee
or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares
of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common
Stock; (ii) that it will not, by amendment of its certificate of
incorporation or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be
required (including (x) complying with all applicable premerger
notification, reporting and waiting period requirements specified in
15 U.S.C. Section 18a and regulations promulgated thereunder and (y) in
the event, under the Savings and Loan Holding Company Act ("SLHCA"), or the
Change in Bank Control Act of 1978, as amended, or any state or other
federal banking law, prior approval of or notice to the OTS or to any
state or other federal regulatory authority is necessary before the Option
may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the OTS or such
state or other federal regulatory authority as they may require) in order
to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the
Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms "Agreement" and
"Option" as used herein include any Agreements and related Options for
which this Agreement (and the Option granted hereby) may be exchanged.
Upon receipt by Issuer of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor and date.
Any such new Agreement executed and delivered shall constitute an
additional contractual obligation on the part of Issuer, whether or not
the Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section
1 of this Agreement, the number of shares of Common Stock purchasable upon
the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of,
the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of
shares or the like, the type and number of shares of Common Stock
purchasable upon exercise hereof shall be appropriately adjusted and
proper provision shall be made so that, in the event that any additional
shares of Common Stock are to be issued or otherwise become outstanding as
a result of any such change (other than pursuant to an exercise of the
Option), the number of shares of Common Stock that remain subject to the
Option shall be increased so that, after such issuance and together with
shares of Common Stock previously issued pursuant to the exercise of the
Option (as adjusted on account of any of the foregoing changes in the
Common Stock), it equals 19.9% of the number of shares of Common Stock
then issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option
Price shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within twelve (12) months (or such later period as
provided in Section 10) of such Subsequent Triggering Event (whether on
its own behalf or on behalf of any subsequent holder of this Option (or
part thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a registration statement
under the 1933 Act covering any
shares issued and issuable pursuant to this Option and shall use its
reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of any shares of Common Stock issued upon total or partial
exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its reasonable best
efforts to cause such registration statement promptly to become effective
and then to remain effective for such period not in excess of 180 days
from the day such registration statement first becomes effective or such
shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such
registrations. The Issuer shall bear the costs of such registrations
(including, but not limited to, Issuer's attorneys' fees, printing costs
and filing fees, except for underwriting discounts or commissions,
brokers' fees and the fees and disbursements of Grantee's counsel related
thereto). The foregoing notwithstanding, if, at the time of any request
by Grantee for registration of Option Shares as provided above, Issuer is
in registration with respect to an underwritten public offering by Issuer
of shares of Common Stock, and if in the good faith judgment of the
managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the offer and sale of the
Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be
reduced; provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the account of
the Holder shall constitute at least 25% of the total number of shares to
be sold by the Holder and Issuer in the aggregate; and provided further,
however, that if such reduction occurs, then Issuer shall file a
registration statement for the balance as promptly as practicable
thereafter as to which no reduction pursuant to this Section 6 shall be
permitted or occur and the Holder shall thereafter be entitled to one
additional registration and the twelve (12) month period referred to in
the first sentence of this section shall be increased to twenty-four (24)
months. Each such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and other
agreements customarily included in such underwriting agreements for
Issuer. Upon receiving any request under this Section 6 from any Holder,
Issuer agrees to send a copy thereof to any other person known to Issuer
to be entitled to registration rights under this Section 6, in each case
by promptly mailing the same, postage prepaid, to the address of record of
the persons entitled to receive such copies. Notwithstanding anything to
the contrary contained herein, in no event shall the number of
registrations that Issuer is obligated to effect be increased by reason of
the fact that there shall be more than one Holder as a result of any
assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in Section
10), Issuer (or any successor thereto) shall repurchase the Option from
the Holder at a price (the "Option Repurchase Price") equal to the amount
by which (A) the market/offer price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which this Option may
then be exercised and (ii) at the request of the owner of Option Shares
from time to time (the "Owner"), delivered prior to an Exercise Termination
Event (or such later period as provided in Section 10), Issuer (or any
successor thereto) shall repurchase such number of the Option Shares from
the Owner as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to the market/offer price multiplied by the number
of Option Shares so designated. The term "market/offer price" shall mean
the highest of (i) the price per share of Common Stock at which a tender
or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of
this Option or the Owner gives notice of the required repurchase of Option
Shares, as the case may be, or (iv) in the event of a sale of all or any
substantial part of Issuer's assets or deposits, the sum of the net price
paid in such sale for such assets or deposits and the current market value
of the remaining net assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the Owner, as
the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the market/offer price, the value of consideration
other than cash shall be determined by a nationally recognized investment
banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at
its principal office, a copy of this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or notices stating
that the Holder or the Owner, as the case may be, elects to require Issuer
to repurchase this Option and/or the Option Shares in accordance with the
provisions of this Section 7. As promptly as practicable, and in any
event within five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer shall deliver or cause to be delivered to
the Holder the Option Repurchase Price and/or to the Owner the Option
Share Repurchase Price therefor or the portion thereof that Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer shall
immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the date on
which Issuer is no longer so prohibited; provided, however, that if Issuer
at any time after delivery of a notice of repurchase pursuant to paragraph
(b) of this Section 7 is prohibited under applicable law or regulation, or
as a consequence of administrative policy, from delivering to the Holder
and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), the
Holder or Owner may revoke its notice of repurchase of the Option and/or
the Option Shares whether in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the
Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price and/or the Option Share Repurchase Price that Issuer is
not prohibited from delivering; and (ii) deliver, as appropriate, either
(A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of
which is the Option Repurchase Price, and/or (B) to the Owner, a
certificate for the Option Shares it is then so prohibited from
repurchasing. If an Exercise Termination Event shall have occurred prior
to the date of the notice by Issuer described in the first sentence of
this subsection (c), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the
Holder
shall nonetheless have the right to exercise the Option until the
expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events
or transactions after the date hereof:
(i) the acquisition by any person (other than Grantee or any
Grantee Subsidiary) of beneficial ownership of 50% or more of the then
outstanding Common Stock; or
(ii) the consummation of any Acquisition Transaction described
in Section 2(b)(i) hereof, except that the percentage referred to in
clause (z) shall be 50%.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into
any person, other than Grantee or a Grantee Subsidiary, or engage in a
plan of exchange with any person, other than Grantee or a Grantee
Subsidiary and Issuer shall not be the continuing or surviving corporation
of such consolidation or merger or the acquirer in such plan of exchange,
(ii) to permit any person, other than Grantee or a Grantee Subsidiary, to
merge into Issuer or be acquired by Issuer in a plan of exchange and
Issuer shall be the continuing or surviving or acquiring corporation, but,
in connection with such merger or plan of exchange, the then outstanding
shares of Common Stock shall be changed into or exchanged for stock or
other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share
equivalents of the merged or acquiring company, or (iii) to sell or
otherwise transfer all or a substantial part of its or the Issuer
Subsidiary's assets or deposits to any person, other than Grantee or a
Grantee Subsidiary, then, and in each such case, the agreement governing
such transaction shall make proper provision so that the Option shall,
upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an
option (the "Substitute Option"), at the election of the Holder, of either
(x) the Acquiring Corporation (as hereinafter defined) or (y) any person
that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer
is acquired, (iii) the Issuer in a merger or plan of exchange in which
Issuer is the continuing or surviving or acquiring person, and (iv) the
transferee of all or a substantial part of Issuer's assets or deposits (or
the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one year immediately preceding
the consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person,
as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as
possible and in no event less advantageous to the Holder. The issuer of
the Substitute Option shall also enter into an agreement with the then
Holder or Holders of the Substitute Option in substantially the same form
as this Agreement (after giving effect for such purpose to the provisions
of Section 9), which agreement shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option
was exercisable immediately prior to the event described in the first
sentence of Section 8(a), divided by the Average Price. The exercise
price of the Substitute Option per share of Substitute Common Stock shall
then be equal to the Option Price multiplied by a fraction, the numerator
of which shall be the number of shares of Common Stock for which the
Option was exercisable immediately prior to the event described in the
first sentence of Section 8(a) and the denominator of which shall be the
number of shares of Substitute Common Stock for which the Substitute
Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option. In the event that the Substitute Option would be exercisable for
more than 19.9% of the shares of Substitute Common Stock outstanding prior
to exercise but for this clause (e), the issuer of the Substitute Option
(the "Substitute Option Issuer") shall make a cash payment to Holder equal
to the excess of (i) the value of the Substitute Option without giving
effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause
(e). This difference in value shall be determined by a nationally
recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase
Price") equal to the amount by which (i) the Highest Closing Price (as
hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for
which the Substitute Option may then be exercised, and at the request of
the owner (the "Substitute Share Owner") of shares of Substitute Common
Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to the Highest Closing Price multiplied by the
number of Substitute Shares so designated. The term "Highest Closing
Price" shall mean the highest closing price for shares of Substitute Common
Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the
required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as
the case may be, may exercise its respective rights to require the
Substitute Option Issuer to repurchase the Substitute Option and the
Substitute Shares pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and/or certificates for Substitute
Shares accompanied by a written notice or
notices stating that the Substitute Option Holder or the Substitute Share
Owner, as the case may be, elects to require the Substitute Option Issuer
to repurchase the Substitute Option and/or the Substitute Shares in
accordance with the provisions of this Section 9. As promptly as
practicable and in any event within five business days after the surrender
of the Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating thereto, the
Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to
the Substitute Share Owner the Substitute Share Repurchase Price therefor
or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from repurchasing the Substitute Option and/or the Substitute
Shares in part or in full, the Substitute Option Issuer shall immediately
so notify the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Option Repurchase Price and/or
the Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five (5) business days after the date
on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time
after delivery of a notice of repurchase pursuant to subsection (b) of
this Section 9 prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the Substitute
Option Holder and/or the Substitute Share Owner, as appropriate, the
Substitute Option Repurchase Price and the Substitute Share Repurchase
Price, respectively, in full (and the Substitute Option Issuer shall use
its reasonable best efforts to receive all required regulatory and legal
approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder and/or Substitute Share Owner
may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly
(i) deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A)
to the Substitute Option Holder, a new Substitute Option evidencing the
right of the Substitute Option Holder to purchase that number of shares of
the Substitute Common Stock obtained by multiplying the number of shares
of the Substitute Common Stock for which the surrendered Substitute Option
was exercisable at the time of delivery of the notice of repurchase by a
fraction, the numerator of which is the Substitute Option Repurchase Price
less the portion thereof theretofore delivered to the Substitute Option
Holder and the denominator of which is the Substitute Option Repurchase
Price, and/or (B) to the Substitute Share Owner, a certificate for the
Substitute Option Shares it is then so prohibited from repurchasing. If
an Exercise Termination Event shall have occurred prior to the date of the
notice by the Substitute Option Issuer described in the first sentence of
this subsection (c), or shall be scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the
Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7, 9, 12 and 14 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals
for the exercise of such rights (for so long as the Holder, Owner,
Substitute Option Holder or Substitute Share Owner, as the case may be, is
using commercially reasonable efforts to obtain such regulatory
approvals), and for
the expiration of all statutory waiting periods; and (ii) to the extent
necessary to avoid liability under Section 16(b) of the 1934 Act by reason
of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Issuer Board prior to the date hereof and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that
number of shares of Common Stock equal to the maximum number of shares of
Common Stock at any time and from time to time issuable hereunder, and all
such shares, upon issuance pursuant thereto, will be duly authorized,
validly issued, fully paid, nonassessable, and will be delivered free and
clear of all claims, liens, encumbrance and security interests and not
subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any
other person, without the express written consent of the other party,
except that in the event a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder; provided, however, that until the date 15 days
following the date on which the OTS has approved an application by Grantee
to acquire the shares of Common Stock subject to the Option, Grantee may
not assign its rights under the Option except in (i) a widely dispersed
public distribution, (ii) a private placement in which no one party
acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or
investment banker) for the purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
OTS.
13. Each of Grantee and Issuer will use its reasonable best efforts
to make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to
the OTS under the SLHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to applicable
banking authorities for approval to acquire the shares of Common Stock
issuable hereunder until such time, if ever, as it deems appropriate to do
so.
14. (a) Grantee may, at any time following a Repurchase Event and
prior to the occurrence of an Exercise Termination Event (or such later
period as provided in Section 10), relinquish the Option (together with
any Option Shares issued to and then owned by Grantee) to Issuer in
exchange for a cash fee equal to the Surrender Price; provided, however,
that Grantee may not exercise its rights pursuant to this Section 14 if
Issuer has repurchased the Option (or any portion thereof) or any Option
Shares pursuant to Section 7. The "Surrender Price" shall be equal to $1.4
million (i) plus, if applicable, Grantee's purchase price with respect to
any Option Shares and (ii) minus, if applicable, the excess of (B) the net
cash amounts, if any, received by Grantee pursuant to the arms' length
sale of Option Shares (or any other securities into which such Option
Shares were converted or exchanged) to any unaffiliated party, over (B)
Grantee's purchase price of such Option Shares.
(b) Grantee may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 14 by surrendering to Issuer, at
its principal office, a copy of this Agreement together with certificates
for Option Shares, if any, accompanied by a written notice stating (i)
that Grantee elects to relinquish the Option and Option Shares, if any, in
accordance with the provisions of this Section 14 and (ii) the Surrender
Price. The Surrender Price shall be payable in immediately available
funds on or before the second business day following receipt of such
notice by Issuer.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify
Grantee and thereafter deliver or cause to be delivered, from time to
time, to Grantee, the portion of the Surrender Price that it is no longer
prohibited from paying, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at
any time after delivery of a notice of surrender pursuant to paragraph (b)
of this Section 14 is prohibited under applicable law or regulation, or as
a consequence of administrative policy, from paying to Grantee the
Surrender Price in full, (i) Issuer shall (A) use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to make such
payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide
Grantee with copies of the same, and (c) keep Grantee advised of both the
status of any such request for regulatory and legal approvals, as well as
any discussions with any relevant regulatory or other third party
reasonably related to the same and (ii) Grantee may revoke such notice of
surrender by delivery of a notice of revocation to Issuer and, upon
delivery of such notice of revocation, the Exercise Termination Date shall
be extended to a date six months from the date on which the Exercise
Termination Date would have occurred if not for the provisions of this
Section 14(c) (during which period Grantee may exercise any of its rights
hereunder, including any and all rights pursuant to this Section 14).
15. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties hereto shall be enforceable by
either party hereto through injunctive or other equitable relief. In
connection therewith both parties waive the posting of any bond or similar
requirement.
16. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency
of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions
contained in this Agreement shall remain in full force and effect, and
shall in no way be affected, impaired or invalidated. If for any reason
such court or regulatory agency determines that the Holder is not
permitted to acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in Section
l(a) hereof (as adjusted pursuant to Section l(b) or Section 5 hereof), it
is the express intention of Issuer to allow the Holder to acquire or to
require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in
person, by fax, telecopy, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflict of
law
principles thereof (except to the extent that mandatory provisions of
Federal law are applicable).
19. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
20. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assignees. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors except as assignees, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all
as of the date first above written.
AMBANC HOLDING CO., INC. AFSALA BANCORP, INC.
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Liscki
------------------------ ----------------------
Name: Xxxxxx X. Xxxxxxxx Name: Xxxx X. Xxxxxxx
Title: President and Chief Title: President and
Chief
Executive Officer Executive
Officer
