OVB STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Option Agreement"), dated as of July 10,
1998, is by and between ONEIDA VALLEY BANCSHARES, INC. ("OVB"), a New York
corporation, as issuer, and CORTLAND FIRST FINANCIAL CORPORATION ("CFF"), a New
York corporation, as grantee.
WITNESSETH
WHEREAS, the respective Boards of Directors of OVB and CFF 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 OVB would be merged with and into
CFF; and
WHEREAS, as a condition to and as consideration for CFF's entry into the
Merger Agreements and to induce such entry, OVB has agreed to grant to CFF the
option set forth herein to purchase authorized but unissued shares of common
stock, par value $2.50 per share, of OVB ("OVB Common Stock");
NOW, THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. DEFINITIONS.
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 TO CFF.
Subject to the terms and conditions set forth herein, OVB hereby grants to
CFF an option ("Option") to purchase up to 180,150 shares of OVB Common Stock,
at a price of $52.50 per share, payable in cash as provided in Section 4 hereof;
provided, however, that, in the event OVB issues or agrees to issue any shares
of OVB Common Stock (other than as permitted under the Merger Agreements) at a
price less than $52.50 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 OVB 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 CFF 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.
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3. EXERCISE OF OPTION.
(a) Unless CFF shall have breached in any material respect any material
covenant or representation contained in the Reorganization Agreement and such
breach has not been cured, CFF 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 OVB of any Specified Covenant (as defined
below) following receipt of a bona fide proposal by OVB or Oneida Valley to
acquire OVB or Oneida 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 OVB's shareholders to approve the
Merger Agreements by the vote required under applicable law or under OVB's
Certificate of Incorporation), or (iii) twelve months after termination of the
Merger Agreements due to a willful breach by OVB of any Specified Covenant
following receipt of a bona fide proposal by OVB or Oneida Valley to acquire OVB
or Oneida 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 OVB's shareholders to approve the Merger Agreements
by the vote required under applicable law or under OVB'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) OVB or its wholly owned subsidiary, Oneida Valley, without
having received CFF's prior written consent, shall have entered into an
agreement with any person (other than CFF or any of its subsidiaries) to (x)
merge or consolidate, or enter into any similar transaction, with OVB or Oneida
Valley, (y) purchase, lease or otherwise acquire all or substantially all of the
assets of OVB or Oneida 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 OVB or Oneida Valley;
(ii) any person (other than OVB, Oneida Valley, Oneida Valley in a
fiduciary capacity, CFF, its wholly owned subsidiary, Cortland National or
Cortland National 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 OVB 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);
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(iii) any person (other than CFF or Cortland National) shall have
made a bona fide proposal to OVB by public announcement or written communication
that is or becomes the subject of public disclosure to acquire OVB or Oneida
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 OVB vote not to adopt the Plan of Merger; or
(iv) OVB shall have willfully and intentionally breached any
Specified Covenant following receipt of a bona fide proposal to Oneida Valley or
OVB to acquire OVB or Oneida Valley by merger, consolidation, purchase of all or
substantially all of its assets or any other similar transaction, which breach
would entitle CFF 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 CFF wishes to exercise the Option, it shall send to OVB 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, CFF 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.
(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.
(a) At the closing referred to in Section 3 hereof, CFF shall pay to OVB
the aggregate purchase price for the shares of OVB Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by OVB.
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(b) At such closing, simultaneously with the delivery of funds as provided
in subsection (a), OVB shall deliver to CFF a certificate or certificates
representing the number of shares of OVB Common Stock purchased by CFF, and CFF
shall deliver to OVB a letter agreeing that CFF 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 OVB 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 Oneida Valley Bancshares, 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 Oneida
Valley Bancshares, Inc. A copy of such agreement will be provided to
the holder hereof without charge upon receipt by Oneida Valley
Bancshares, 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 CFF shall have delivered to
OVB a copy of a letter from the staff of the Commission, or an opinion of
counsel, in form and substance satisfactory to OVB, to the effect that such
legend is not required for purposes of the Securities Act.
5. REPRESENTATIONS.
OVB hereby represents, warrants and covenants to CFF as follows:
(a) OVB shall at all times maintain sufficient authorized but unissued
shares of OVB Common Stock so that the Option may be exercised without
authorization of additional shares of OVB 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.
In the event of any change in OVB 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 OVB Common Stock are issued or
otherwise become outstanding after the date of this Option Agreement
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(other than pursuant to this Option Agreement), the number of shares of OVB
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of OVB 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 OVB to breach any provision of the Merger Agreements.
7. REPURCHASE.
At the request of CFF 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"), OVB shall
repurchase the Option from CFF together with any shares of OVB Common Stock
purchased by CFF pursuant thereto, at a price equal to the sum of:
(a) The exercise price paid by CFF for any shares of OVB Common Stock
acquired pursuant to the Option;
(b) The difference between the "market/tender offer" price for shares of
OVB 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 OVB Common Stock to be paid by any third party pursuant to an
agreement with OVB, or (iii) the highest reported sale price for shares of OVB
Common Stock within that portion of the Repurchase Period preceding the date CFF
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 OVB 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 CFF for any shares of OVB
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) CFF'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, except to the extent that such expenses have already been paid pursuant to
Section 6.3 of the Reorganization Agreement.
In the event CFF exercises its right to require the repurchase of the
Option, OVB shall, within ten business days thereafter, pay the required amount
to CFF in immediately available funds and CFF shall surrender the Option to OVB
and the certificates evidencing the shares of OVB Common Stock purchased
thereunder; provided that if prior notification to or approval
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of the Federal Reserve Board or other regulatory agency is required in
connection with such purchase, OVB 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.
OVB shall, if requested by CFF, 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 OVB
Common Stock that have been acquired upon exercise of the Option in accordance
with the intended method of sale or other disposition requested by CFF. CFF
shall provide all information reasonably requested by OVB for inclusion in any
registration statement to be filed hereunder. OVB 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 OVB's expense except for underwriting commissions and
the fees and disbursements of CFF's counsel attributable to the registration of
such OVB Common Stock. A second registration may be requested hereunder at CFF's
expense. In no event shall OVB 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 OVB of OVB Common Stock. If requested by CFF, in connection with
any such registration, OVB 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 CFF or assignee thereof under this Section 8, OVB agrees to send a copy
thereof to CFF and to any assignee thereof known to OVB, in each case by
promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
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9. SEVERABILITY.
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 OVB
to repurchase pursuant to Section 7 hereof the full number of shares of OVB
Common Stock provided in Section 2 hereof (as adjusted pursuant to Section 6
hereof), it is the express intention of OVB to allow the holder to acquire or to
require OVB 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.
(a) Expenses. Except as otherwise 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.
(b) Entire Agreement. Except as otherwise expressly provided herein, 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.
(c) Assignment. Neither of the parties hereto may assign any of its 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, CFF
may assign, in whole or in part, its rights and obligations hereunder; provided,
however, that to the extent required by applicable regulatory authorities, CFF
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 OVB, (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 CFF's behalf, or (iv) any
other manner approved by applicable regulatory authorities.
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(d) Notices. All notices or other communications which are required 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 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
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
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.
ONEIDA VALLEY BANCSHARES, INC.
By: /s/ XXXX X. XXXX
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Xxxx X. Xxxx
President
CORTLAND FIRST FINANCIAL CORPORATION
By: /s/ XXXXX X. XXXXXX
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Xxxxx X. Xxxxxx
President and Chief Executive Officer
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