Exhibit 99.1
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
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.
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.
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.
(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:
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(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;
(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
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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.
(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.
(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.
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(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.
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
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.
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
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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.
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 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
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(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.
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
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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 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.
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.
(a) Expenses. Except as otherwise provided herein, each of the parties
hereto shall bear and pay all costs and
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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,
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 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.
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(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.
XXXXXX CHARTERED BANCORP, INC.
By
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T. Xxxxxxxxx Xxxxxxxxxx III
Chairman and Chief Executive Officer
PROGRESSIVE BANK, INC.
By
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Xxxxx Xxx Xxxxxx
President and Chief Executive Officer
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