STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Option Agreement"), dated as of
December 16, 1997, is by and between XXXXXX CHARTERED BANCORP, INC. ("Xxxxxx
Chartered"), a New York corporation, as issuer, and PROGRESSIVE BANK, INC.
("Progressive"), a New York corporation, as grantee.
WITNESSETH
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WHEREAS, the respective Boards of Directors of Xxxxxx Chartered and
Progressive have approved an Agreement and Plan of Reorganization (the
"Reorganization Agreement") and have adopted a related Agreement and Plan of
Merger dated as of the date hereof (together with the Reorganization Agreement,
the "Merger Agreements"), providing for certain transactions pursuant to which
Progressive would be merged with and into Xxxxxx Chartered; and
WHEREAS, as a condition to and as consideration for Progressive's
entry into the Merger Agreements and to induce such entry, Xxxxxx Chartered has
agreed to grant to Progressive the option set forth herein to purchase
authorized but unissued shares of common stock, par value $0.80 per share, of
Xxxxxx Chartered ("Xxxxxx Chartered Common Stock");
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions.
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Capitalized terms defined in the Merger Agreements and used herein
shall have the same meanings as set forth in the Merger Agreements.
2. Grant of Option.
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Subject to the terms and conditions set forth herein, Xxxxxx Chartered
hereby grants to Progressive an option ("Option") to purchase up to 1,415,250
shares of Xxxxxx Chartered Common Stock, at a price of $21.75 per share, payable
in cash as provided in Section 4 hereof; provided, however, that, in the event
Xxxxxx Chartered issues or agrees to issue any shares of Xxxxxx Chartered Common
Stock (other than as permitted under the Merger Agreements) at a price less than
$21.75 per share (as adjusted pursuant to Section 6 hereof), the exercise price
shall be equal to such lesser price. Notwithstanding anything else in this
Agreement to the contrary, the number of shares of Xxxxxx Chartered Common Stock
subject to the Option shall be reduced to such lesser number, if any, as may
from time-to-time be necessary, but only for so long as may be necessary, to
cause Progressive not to be deemed an "interested shareholder"
as such term is defined for purposes of Section 912 of the New York Business
Corporation Law, as amended.
3. Exercise of Option.
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(a) Unless Progressive shall have breached in any material respect
any material covenant or representation contained in the Reorganization
Agreement and such breach has not been cured, Progressive may exercise the
Option, in whole or part, at any time or from time to time if a Purchase Event
(as defined below) shall have occurred and be continuing; provided that, to the
extent the Option shall not have been exercised, it shall terminate and be of no
further force and effect (i) on the Effective Date of the Merger or (ii) upon
termination of the Merger Agreements in accordance with the provisions thereof
(other than a termination resulting from a willful breach by Xxxxxx Chartered of
any Specified Covenant (as defined below) following receipt of a bona fide
proposal by Xxxxxx Chartered or Xxxxxx Valley to acquire Xxxxxx Chartered or
Xxxxxx Valley by merger, consolidation, purchase of all or substantially all of
its assets or any other similar transaction, or, following the occurrence of a
Purchase Event, failure of Xxxxxx Chartered's shareholders to approve the Merger
Agreements by the vote required under applicable law or under Xxxxxx Chartered's
Certificate of Incorporation), or (iii) twelve months after termination of the
Merger Agreements due to a willful breach by Xxxxxx Chartered of any Specified
Covenant following receipt of a bona fide proposal by Xxxxxx Chartered or Xxxxxx
Valley to acquire Xxxxxx Chartered or Xxxxxx Valley by merger, consolidation,
purchase of all or substantially all of its assets or any other similar
transaction, or, following the occurrence of a Purchase Event, failure of Xxxxxx
Chartered's shareholders to approve the Merger Agreements by the vote required
under applicable law or under Xxxxxx Chartered's Certificate of Incorporation;
and provided further that any such exercise shall be subject to compliance with
applicable provisions of law.
(b) As used herein, a "Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) Xxxxxx Chartered or its wholly owned subsidiary, First
National Bank of the Xxxxxx Valley, a national banking association ("Xxxxxx
Valley"), without having received Progressive's prior written consent, shall
have entered into an agreement with any person (other than Progressive or its
wholly owned subsidiary, Pawling Savings Bank, a New York state-chartered stock
savings bank ("Pawling")) to (x) merge or consolidate, or enter into any similar
transaction, with Xxxxxx Chartered or Xxxxxx Valley, (y) purchase, lease or
otherwise acquire all or substantially all of the assets of Xxxxxx Chartered or
Xxxxxx Valley or (z) purchase or otherwise acquire (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 10% or more of the voting power of Xxxxxx Chartered or Xxxxxx
Valley;
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(ii) any person (other than Xxxxxx Chartered, Xxxxxx Valley,
Xxxxxx Valley in a fiduciary capacity, Progressive, Pawling or Pawling in a
fiduciary capacity) shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 20% or more of the outstanding shares of Xxxxxx
Chartered Common Stock after the date hereof (the term "beneficial ownership"
for purposes of this Option Agreement having the meaning assigned thereto in
Section 13(d) of the Exchange Act and the regulations promulgated thereunder);
(iii) any person (other than Progressive or Pawling) shall have
made a bona fide proposal to Xxxxxx Chartered by public announcement or written
communication that is or becomes the subject of public disclosure to acquire
Xxxxxx Chartered or Xxxxxx Valley by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction, and following
such bona fide proposal the shareholders of Xxxxxx Chartered vote not to adopt
the Plan of Merger; or
(iv) Xxxxxx Chartered shall have willfully and intentionally
breached any Specified Covenant following receipt of a bona fide proposal to
Xxxxxx Valley or Xxxxxx Chartered to acquire Xxxxxx Chartered or Xxxxxx Valley
by merger, consolidation, purchase of all or substantially all of its assets or
any other similar transaction, which breach would entitle Progressive to
terminate the Merger Agreements (without regard to the cure periods provided for
therein) and such breach shall not have been cured prior to the Notice Date (as
defined below).
If more than one of the transactions giving rise to a Purchase Event under this
Section 3(b) is undertaken or effected, then all such transactions shall give
rise only to one Purchase Event, which Purchase Event shall be deemed continuing
for all purposes hereunder until all such transactions are abandoned. As used
in this Option Agreement, "person" shall have the meanings specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
(c) In the event Progressive wishes to exercise the Option, it shall
send to Xxxxxx Chartered a written notice (the date of which being herein
referred to as "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 ("Closing Date"); provided that, if prior notification
to or approval of any federal or state regulatory agency is required in
connection with such purchase, Progressive shall promptly file the required
notice or application for approval 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 period has expired or
been terminated or such approval has been obtained and any requisite waiting
period shall have passed.
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(d) As used herein, "Specified Covenant" means any covenant contained
in Sections 4.1, 4.4 or 4.9, or subsections (2), (3), (4), (5), (6), (12), (14)
and, to the extent applicable to the foregoing subsections, (15) of Section
4.8(b) of the Reorganization Agreement.
4. Payment and Delivery of Certificates.
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(a) At the closing referred to in Section 3 hereof, Progressive shall
pay to Xxxxxx Chartered the aggregate purchase price for the shares of Xxxxxx
Chartered Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by a wire transfer to a bank account designated by
Xxxxxx Chartered.
(b) At such closing, simultaneously with the delivery of funds as
provided in subsection (a), Xxxxxx Chartered shall deliver to Progressive a
certificate or certificates representing the number of shares of Xxxxxx
Chartered Common Stock purchased by Progressive, and Progressive shall deliver
to Xxxxxx Chartered a letter agreeing that Progressive will not offer to sell or
otherwise dispose of such shares in violation of applicable law or the
provisions of this Option Agreement.
(c) Certificates for Xxxxxx Chartered Common Stock delivered at a
closing hereunder may be endorsed with a restrictive legend which shall read
substantially as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Xxxxxx Chartered Bancorp, Inc. and to resale restrictions
arising under the Securities Act of 1933, as amended, a copy of which
agreement is on file at the principal office of Xxxxxx Chartered
Bancorp, Inc. A copy of such agreement will be provided to the holder
hereof without charge upon receipt by Xxxxxx Chartered Bancorp, Inc.
of a written request."
It is understood and agreed that the above legend shall be removed by delivery
of substitute certificate(s) without such legend if Progressive shall have
delivered to Xxxxxx Chartered a copy of a letter from the staff of the
Commission, or an opinion of counsel, in form and substance satisfactory to
Xxxxxx Chartered, to the effect that such legend is not required for purposes of
the Securities Act.
5. Representations.
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Xxxxxx Chartered hereby represents, warrants and covenants to
Progressive as follows:
(a) Xxxxxx Chartered shall at all times maintain sufficient authorized
but unissued shares of Xxxxxx Chartered Common Stock so that the Option may be
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exercised without authorization of additional shares of Xxxxxx Chartered Common
Stock.
(b) The shares to be issued upon due exercise, in whole or in part, of
the Option, when paid for as provided herein, will be duly authorized, validly
issued, fully paid and nonassessable.
6. Adjustment Upon Changes in Capitalization.
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In the event of any change in Xxxxxx Chartered Common Stock by reason
of stock dividends, split-ups, mergers, recapitalizations, combinations,
exchanges of shares or the like, the type and number of shares subject to the
Option, and the purchase price per share, as the case may be, shall be adjusted
appropriately. In the event that any additional shares of Xxxxxx Chartered
Common Stock are issued or otherwise become outstanding after the date of this
Option Agreement (other than pursuant to this Option Agreement), the number of
shares of Xxxxxx Chartered Common Stock subject to the Option shall be adjusted
so that, after such issuance, it equals 19.99% of the number of shares of Xxxxxx
Chartered Common Stock then issued and outstanding without giving effect to any
shares subject or issued pursuant to the Option. Nothing contained in this
Section 6 shall be deemed to authorize Xxxxxx Chartered to breach any provision
of the Merger Agreements.
7. Repurchase.
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At the request of Progressive at any time commencing immediately
following the occurrence of a Repurchase Event (as defined below) and ending
upon the termination of this Agreement pursuant to the terms hereof ("Repurchase
Period"), Xxxxxx Chartered shall repurchase the Option from Progressive together
with any shares of Xxxxxx Chartered Common Stock purchased by Progressive
pursuant thereto, at a price equal to the sum of:
(a) The exercise price paid by Progressive for any shares of Xxxxxx
Chartered Common Stock acquired pursuant to the Option;
(b) The difference between the "market/tender offer" price for shares
of Xxxxxx Chartered Common Stock (defined as the highest of (i) the highest
price per share at which a tender or exchange offer has been made, (ii) the
price per share, whether in cash or the value of securities or other property or
a combination thereof, of Xxxxxx Chartered Common Stock to be paid by any third
party pursuant to an agreement with Xxxxxx Chartered, or (iii) the highest
reported sale price for shares of Xxxxxx Chartered Common Stock within that
portion of the Repurchase Period preceding the date Progressive gives notice of
the required repurchase under this Section 7) and the exercise price as
determined pursuant to Section 2 hereof, multiplied by the number of shares of
Xxxxxx Chartered Common Stock with respect to which the
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Option has not been exercised, but only if the market/tender offer price is
greater than such exercise price;
(c) The difference between the market/tender offer price (as defined
in Section 7(b) hereof) and the exercise price paid by Progressive for any
shares of Xxxxxx Chartered Common Stock purchased pursuant to the exercise of
the Option, multiplied by the number of shares so purchased, but only if the
market/tender offer price is greater than such exercise price; and
(d) Progressive's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by the Reorganization Agreement,
including, without limitation, legal, accounting, financial advisory and
investment banking fees.
In the event Progressive exercises its right to require the repurchase
of the Option, Xxxxxx Chartered shall, within ten business days thereafter, pay
the required amount to Progressive in immediately available funds and
Progressive shall surrender the Option to Xxxxxx Chartered and the certificates
evidencing the shares of Xxxxxx Chartered Common Stock purchased thereunder;
provided that if prior notification to or approval of the Federal Reserve Board
or other regulatory agency is required in connection with such purchase, Xxxxxx
Chartered shall promptly file the required notice or application for approval
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 period has expired or been terminated.
As used herein, a "Repurchase Event" shall mean any of the
transactions described in clauses (i), (ii), (iii) or (iv) of Section 3(b)
herein except, for this purpose, the percentage in clause (ii) shall be 50% and,
for purposes of clauses (iii) and (iv) for a Repurchase Event to occur, any
party shall, prior to the termination of this Agreement, engage in a transaction
contemplated by clauses (i) or (ii) (at the 50% level) of Section 3(b), provided
that, for all purposes herein, the payment required by this Section 7 shall be
due and payable only upon consummation of the events described in clauses (i)
and (ii) of Section 3(b) of this Agreement.
8. Registration Rights.
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Xxxxxx Chartered shall, if requested by Progressive, as expeditiously
as possible file a registration statement on a form of general use under the
Securities Act if necessary in order to permit the sale or other disposition of
the shares of Xxxxxx Chartered Common Stock that have been acquired upon
exercise of the Option in accordance with the intended method of sale or other
disposition requested by Progressive. Progressive shall provide all information
reasonably requested by Xxxxxx Chartered for inclusion in any registration
statement to be filed hereunder. Xxxxxx Chartered will use its best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 180 days from the
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day such registration statement first becomes effective as may be reasonably
necessary to effect such sales or other dispositions. The first registration
effected under this Section 7 shall be at Xxxxxx Chartered's expense except for
underwriting commissions and the fees and disbursements of Progressive's counsel
attributable to the registration of such Xxxxxx Chartered Common Stock. A
second registration may be requested hereunder at Progressive's expense. In no
event shall Xxxxxx Chartered be required to effect more than two registrations
hereunder. The filing of any registration statement hereunder may be delayed
for such period of time as may reasonably be required to facilitate any public
distribution by Xxxxxx Chartered of Xxxxxx Chartered Common Stock. If requested
by Progressive, in connection with any such registration, Xxxxxx Chartered will
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. Upon receiving any request from
Progressive or assignee thereof under this Section 8, Xxxxxx Chartered agrees to
send a copy thereof to Progressive and to any assignee thereof known to Xxxxxx
Chartered, in each case by promptly mailing the same, postage prepaid, to the
address of record of the persons entitled to receive such copies.
9. Severability.
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If any term, provision, covenant or restriction contained in this
Option 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 Option
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 Option will not permit the holder to acquire or
Xxxxxx Chartered to repurchase pursuant to Section 7 hereof the full number of
shares of Xxxxxx Chartered Common Stock provided in Section 2 hereof (as
adjusted pursuant to Section 6 hereof), it is the express intention of Xxxxxx
Chartered to allow the holder to acquire or to require Xxxxxx Chartered to
repurchase up to the maximum number of shares as may be permissible from time to
time, without any amendment or modification hereof.
10. Miscellaneous.
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(a) Expenses. Except as otherwise provided herein, each of the
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parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) Entire Agreement. Except as otherwise expressly provided herein,
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this Option Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or
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understandings with respect thereto, written or oral. The terms and conditions
of this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. Nothing in this
Option Agreement, expressed or implied, is intended to confer upon any party,
other than the parties hereto, and their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this Option
Agreement, except as expressly provided herein.
(c) Assignment. Neither of the parties hereto may assign any of its
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rights or obligations under this Option 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 Purchase Event shall have occurred and be
continuing, Progressive may assign, in whole or in part, its rights and
obligations hereunder; provided, however, that to the extent required by
applicable regulatory authorities, Progressive 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 2% or more of the
voting shares of Xxxxxx Chartered, (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 Progressive's behalf, or (iv) any other manner approved
by applicable regulatory authorities.
(d) Notices. All notices or other communications which are required
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or permitted hereunder shall be in writing and sufficient if delivered in the
manner and to the addresses provided for in or pursuant to Section 7.4 of the
Reorganization Agreement.
(e) Counterparts. This Option Agreement may be executed in any number
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of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(f) Specific Performance. The parties agree that damages would be an
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inadequate remedy for a breach of the provisions of this Option Agreement by
either party hereto and that this Option Agreement may be enforced by either
party hereto through injunctive or other equitable relief.
(g) Governing Law. This Option Agreement shall be governed by and
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construed in accordance with the laws of the State of New York applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Option Agreement as of the day and year first written above.
XXXXXX CHARTERED BANCORP, INC.
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By /s/ T. Xxxxxxxxx Xxxxxxxxxx III
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T. Xxxxxxxxx Xxxxxxxxxx III
Chairman and Chief Executive Officer
PROGRESSIVE BANK, INC.
By /s/ Xxxxx Xxx Xxxxxx
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Xxxxx Xxx Xxxxxx
President and Chief Executive Officer
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