STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Option Agreement"), dated as of
December 16, 1997, is by and between PROGRESSIVE BANK, INC. ("Progressive"), a
New York corporation, as issuer, and XXXXXX CHARTERED BANCORP, INC. ("Xxxxxx
Chartered"), a New York corporation, as grantee.
WITNESSETH
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WHEREAS, the respective Boards of Directors of Progressive and Xxxxxx
Chartered 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 Xxxxxx Chartered's
entry into the Merger Agreements and to induce such entry, Progressive has
agreed to grant to Xxxxxx Chartered the option set forth herein to purchase
authorized but unissued shares of common stock, par value $1.00 per share, of
Progressive ("Progressive 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, Progressive
hereby grants to Xxxxxx Chartered an option ("Option") to purchase up to 766,300
shares of Progressive Common Stock, at a price of $36.63 per share, payable in
cash as provided in Section 4 hereof; provided, however, that, in the event
Progressive issues or agrees to issue any shares of Progressive Common Stock
(other than as permitted under the Merger Agreements) at a price less than
$36.63 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 Progressive 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 Xxxxxx Chartered 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. Each
share of Progressive Common Stock issued upon exercise of the Option shall be
accompanied by such rights as provided in the Shareholder Rights Agreement dated
as of October 15, 1997 by and between Progressive and Registrar and Transfer
Company, as rights agent.
3. Exercise of Option.
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(a) Unless Xxxxxx Chartered shall have breached in any material
respect any material covenant or representation contained in the Reorganization
Agreement and such breach has not been cured, Xxxxxx Chartered 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 Progressive of any
Specified Covenant (as defined below) following receipt of a bona fide proposal
by Progressive or Pawling to acquire Progressive or Pawling 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 Progressive's shareholders to approve the Merger Agreements by the vote
required under applicable law or under Progressive's Certificate of
Incorporation), or (iii) twelve months after termination of the Merger
Agreements due to a willful breach by Progressive of any Specified Covenant
following receipt of a bona fide proposal by Progressive or Pawling to acquire
Progressive or Pawling 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 Progressive's shareholders to
approve the Merger Agreements by the vote required under applicable law or under
Progressive'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) Progressive or its wholly owned subsidiary, Pawling
Savings Bank, a New York state-chartered stock savings bank ("Pawling"), without
having received Xxxxxx Chartered's prior written consent, shall have entered
into an agreement with any person (other than Xxxxxx Chartered or any of its
subsidiaries) to (x) merge or consolidate, or enter into any similar
transaction, with Progressive or Pawling, (y) purchase, lease or otherwise
acquire all or substantially all of the assets of Progressive or Pawling 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 Progressive or Pawling;
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(ii) any person (other than Progressive, Pawling, Pawling in
a fiduciary capacity, Xxxxxx Chartered, its wholly owned subsidiary, First
National Bank of the Xxxxxx Valley, a national banking association ("Xxxxxx
Valley") or Xxxxxx Valley 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 Progressive 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 Xxxxxx Chartered or any of its
subsidiaries) shall have made a bona fide proposal to Progressive by public
announcement or written communication that is or becomes the subject of public
disclosure to acquire Progressive or Pawling 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 Progressive vote not to
adopt the Plan of Merger; or
(iv) Progressive shall have willfully and intentionally
breached any Specified Covenant following receipt of a bona fide proposal to
Pawling or Progressive to acquire Progressive or Pawling by merger,
consolidation, purchase of all or substantially all of its assets or any other
similar transaction, which breach would entitle Xxxxxx Chartered 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 Xxxxxx Chartered wishes to exercise the Option, it
shall send to Progressive 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, 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 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
4.7(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, Xxxxxx Chartered
shall pay to Progressive the aggregate purchase price for the shares of
Progressive Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by a wire transfer to a bank account designated by
Progressive.
(b) At such closing, simultaneously with the delivery of funds as
provided in subsection (a), Progressive shall deliver to Xxxxxx Chartered a
certificate or certificates representing the number of shares of Progressive
Common Stock purchased by Xxxxxx Chartered, and Xxxxxx Chartered shall deliver
to Progressive a letter agreeing that Xxxxxx Chartered 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 Progressive 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 Progressive Bank, 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 Progressive Bank, Inc.
A copy of such agreement will be provided to the holder hereof without
charge upon receipt by Progressive Bank, 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 Xxxxxx Chartered shall have
delivered to Progressive a copy of a letter from the staff of the Commission, or
an opinion of counsel, in form and substance satisfactory to Progressive, to the
effect that such legend is not required for purposes of the Securities Act.
5. Representations.
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Progressive hereby represents, warrants and covenants to Xxxxxx
Chartered as follows:
(a) Progressive shall at all times maintain sufficient authorized but
unissued shares of Progressive Common Stock so that the Option may be exercised
without authorization of additional shares of Progressive Common Stock.
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(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 Progressive 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 Progressive 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 Progressive Common Stock subject to the Option shall be adjusted so that,
after such issuance, it equals 19.99% of the number of shares of Progressive
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 Progressive to breach any provision of the Merger
Agreements.
7. Repurchase.
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At the request of Xxxxxx Chartered at any time commencing immediately
following the occurrence of a Repurchase Event (as defined below) and ending
upon termination of this Agreement pursuant to the terms hereof ("Repurchase
Period"), Progressive shall repurchase the Option from Xxxxxx Chartered together
with any shares of Progressive Common Stock purchased by Xxxxxx Chartered
pursuant thereto, at a price equal to the sum of:
(a) The exercise price paid by Xxxxxx Chartered for any shares of
Progressive Common Stock acquired pursuant to the Option;
(b) The difference between the "market/tender offer" price for shares
of Progressive 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 Progressive Common Stock to be paid by any third party
pursuant to an agreement with Progressive, or (iii) the highest reported sale
price for shares of Progressive Common Stock within that portion of the
Repurchase Period preceding the date Xxxxxx Chartered 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 Progressive
Common Stock with respect to which the 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 Xxxxxx Chartered for any
shares of
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Progressive 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) Xxxxxx Chartered'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 Xxxxxx Chartered exercises its right to require the
repurchase of the Option, Progressive shall, within ten business days
thereafter, pay the required amount to Xxxxxx Chartered in immediately available
funds and Xxxxxx Chartered shall surrender the Option to Progressive and the
certificates evidencing the shares of Progressive 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, 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.
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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Progressive shall, if requested by Xxxxxx Chartered, 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 Progressive Common Stock that have been acquired upon exercise of
the Option in accordance with the intended method of sale or other disposition
requested by Xxxxxx Chartered. Xxxxxx Chartered shall provide all information
reasonably requested by Progressive for inclusion in any registration statement
to be filed hereunder. Progressive 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 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 Progressive's expense except for underwriting commissions and the
fees and disbursements of Xxxxxx Chartered's counsel attributable to the
registration of such Progressive Common Stock. A
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second registration may be requested hereunder at Xxxxxx Chartered's expense. In
no event shall Progressive 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 Progressive of Progressive Common Stock. If requested by Xxxxxx
Chartered, in connection with any such registration, Progressive 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 Xxxxxx Chartered or
assignee thereof under this Section 8, Progressive agrees to send a copy thereof
to Xxxxxx Chartered and to any assignee thereof known to Progressive, 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
Progressive to repurchase pursuant to Section 7 hereof the full number of shares
of Progressive Common Stock provided in Section 2 hereof (as adjusted pursuant
to Section 6 hereof), it is the express intention of Progressive to allow the
holder to acquire or to require Progressive 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 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.
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(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, Xxxxxx Chartered may assign, in whole or in part, its rights and
obligations hereunder; provided, however, that to the extent required by
applicable regulatory authorities, Xxxxxx Chartered 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 Progressive, (iii) an assignment to a single party
(e.g., a broker or investment banker) for the purpose of conducting a widely
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dispersed public distribution on Xxxxxx Chartered'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.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Option Agreement as of the day and year first written above.
PROGRESSIVE BANK, INC.
By /s/ Xxxxx Xxx Xxxxxx
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Xxxxx Xxx Xxxxxx
President and Chief Executive
Officer
XXXXXX CHARTERED BANCORP, INC.
By /s/ T. Xxxxxxxxx Xxxxxxxxxx III
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T. Xxxxxxxxx Xxxxxxxxxx III
Chairman and Chief Executive
Officer
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