[PROGRESSIVE LETTERHEAD]
April 14, 1998
Dear Stockholder:
We are pleased to enclose your Notice of Annual Meeting and Proxy
Statement/Prospectus for the Annual Meeting of Stockholders of Progressive
Bank, Inc. ("Progressive") to be held on May 21, 1998, at 6:00 p.m., Eastern
Time, at the main office of its subsidiary, Pawling Savings Bank, on Route 22,
Pawling, New York.
The accompanying Notice of Annual Meeting and Proxy Statement/
Prospectus describe the formal business expected to be transacted at the Annual
Meeting, which will include the election of three directors and the ratification
of our auditors. During the Annual Meeting, we will report on our operations,
and afterward our directors and officers, as well as a representative of our
independent auditors, KPMG Peat Marwick LLP, will be available to respond to
questions our stockholders may have.
At the Annual Meeting you will be asked to consider and vote on a
proposal to approve an Agreement and Plan of Reorganization, including a related
Plan of Merger (together, the "Agreement"), pursuant to which Progressive will
be merged (the "Merger") with and into Hudson Chartered Bancorp, Inc. ("Hudson
Chartered"), a corporation organized under the laws of New York and a registered
bank holding company, under the name of "Premier National Bancorp, Inc." (the
"Continuing Corporation"). Simultaneously with the Merger, Pawling Savings Bank,
Progressive's sole subsidiary, will be merged with and into First National Bank
of the Hudson Valley ("Hudson Valley"), Hudson Chartered's principal subsidiary,
under the name of "Premier National Bank."
Upon consummation of the Merger, you would receive 1.82 shares of
common stock of the Continuing Corporation for each share of common stock of
Progressive held by you and cash in lieu of any fractional share. Continuing
Corporation common stock is expected to be traded on the American Stock Exchange
under the symbol "PNB." Progressive stockholders generally will not recognize
gain or loss for federal income tax purposes to the extent Continuing
Corporation common stock is received in the Merger in exchange for Progressive
common stock, although the receipt of cash in lieu of fractional shares will be
taxable. The closing price of Hudson Chartered's common stock on the American
Stock Exchange on April 6, 1998 was $23.75 per share.
Progressive and Hudson Chartered are similar in size, and your Board
of Directors believes that this strategic merger-of-equals transaction is in
the best interests of Progressive's stockholders. The Merger will result in a
combined institution with a greater market share and a wider range of products
and services. Management believes the Merger will also present substantial
opportunities for savings through achievement of various economies of scale.
ACCORDINGLY, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED
MERGER AND RECOMMENDS A VOTE "FOR" APPROVAL OF THE AGREEMENT.
The enclosed Proxy Statement/Prospectus contains more detailed
information concerning the Board's decision and the proposed Merger. We urge you
to consider it carefully. It is very important that your shares be represented
at the Annual Meeting, whether or not you plan to attend in person. The
affirmative vote of the holders of two-thirds of all outstanding shares of
Progressive's common stock is required for approval of the Agreement. A failure
to vote for approval of the Agreement would have the same effect as a vote
against the Agreement.
We urge you to take the time to consider this important matter and
vote now. In order to make sure that your vote is represented, indicate your
vote on the enclosed proxy form, date and sign it, and return it in the enclosed
envelope. If you attend the meeting in person, you may revoke your proxy at the
meeting and vote in person.
ON BEHALF OF THE BOARD OF DIRECTORS, WE THANK YOU FOR YOUR SUPPORT
AND URGE YOU TO VOTE FOR THE AGREEMENT.
Sincerely,
/s/ Peter Van Kleeck
-------------------------------------
Peter Van Kleeck
President and Chief Executive Officer
<PAGE>
Progressive Bank, Inc.
1301 Route 52
Fishkill, New York 12524
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1998
Notice is hereby given that the Annual Meeting (the "Annual Meeting")
of the Stockholders of Progressive Bank, Inc. ("Progressive") will be held at
the main office of its subsidiary, Pawling Savings Bank, on Route 22, Pawling,
New York, on May 21, 1998 at 6:00 p.m. Eastern Time, for the following purposes:
1. Election of Directors. The election of three directors of
Progressive;
2. Ratification of Auditors. The ratification of the appointment of
KPMG Peat Marwick LLP, independent certified public accountants, as independent
auditors of Progressive for the fiscal year ending December 31, 1998;
3. Merger. To consider and vote upon a proposal to approve and adopt
an Agreement and Plan of Reorganization among Progressive, Pawling Savings Bank,
a wholly owned subsidiary of Progressive, Hudson Chartered Bancorp, Inc., a bank
holding company organized under the laws of New York ("Hudson Chartered"), and
First National Bank of the Hudson Valley, a wholly owned subsidiary of Hudson
Chartered, and a related Plan of Merger between Progressive and Hudson
Chartered, a copy of each of which is included in Appendix A to the accompanying
Proxy Statement / Prospectus (collectively, the "Agreement"), pursuant to which
(i) Progressive will be merged (the "Merger") with and into Hudson Chartered
under the name "Premier National Bancorp, Inc."; (ii) each share of
Progressive's common stock, par value $1.00 per share, outstanding at the
effective time of the Merger (except as otherwise provided in the Plan of
Merger) will be converted into 1.82 shares of the common stock of Premier
National Bancorp, Inc. and cash in lieu of any fractional share; (iii) Hudson
Chartered's Certificate of Incorporation will be restated and amended (x) to
change Hudson Chartered's name to "Premier National Bancorp, Inc.," (y) to
increase the authorized common stock from 20,000,000 to 50,000,000 shares and
(z) to make other significant changes described in the Proxy Statement /
Prospectus; and (iv) ten persons designated by Hudson Chartered and ten persons
designated by Progressive will become directors of Premier National Bancorp,
Inc. for the terms proposed; and
4. Other Business. To transact such other business as may properly
come before the meeting or any adjournments or postponements thereof, including
proposals to adjourn the Annual Meeting to permit further solicitation of
proxies by the Board of Directors in the event that there are not sufficient
votes to approve any proposal at the time of the Annual Meeting, provided that
no proxies voted against the Merger will be voted in favor of adjournment to
solicit additional proxies in favor of the Merger.
Pursuant to Progressive's Bylaws, the Board of Directors has set March
26, 1998 as the record date for the determination of the holders of
Progressive's common stock entitled to notice of and to vote at the Annual
Meeting and any adjournments or postponements thereof.
The affirmative vote of the holders of at least two-thirds of the
outstanding Progressive common stock is required for approval of the Agreement.
Your vote is therefore important regardless of the number of shares you own.
Each stockholder, even though he or she may plan to attend the Annual Meeting,
is urged to sign, date and return the enclosed proxy without delay in the
enclosed postage-paid envelope. You may revoke your proxy at any time prior to
the Annual Meeting. Any stockholder present at the Annual Meeting or at any
adjournments or postponements thereof may revoke his or her proxy and vote
personally on each matter brought before the Annual Meeting.
If you have any questions or require assistance, please call us or
Corporate Investor Communications, which is assisting us in the solicitation of
proxies, at 1-800-346-7885.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Beatrice D. Parent
---------------------
Beatrice D. Parent
Corporate Secretary
IMPORTANT
YOUR VOTE IS IMPORTANT. IN ORDER TO ASSURE YOUR REPRESENTATION AT THE ANNUAL
MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED
STATES. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE AGREEMENT.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
INTRODUCTION.................................................................................................................... 1
AVAILABLE INFORMATION........................................................................................................... 3
FORWARD-LOOKING STATEMENTS...................................................................................................... 4
SUMMARY......................................................................................................................... 5
COMPARATIVE PER SHARE DATA......................................................................................................12
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA................................................................................13
MAP.............................................................................................................................16
ANNUAL MEETING INFORMATION......................................................................................................17
General...............................................................................................................17
Voting and Revocability of Proxies....................................................................................17
Voting Securities and Principal Holders Thereof.......................................................................17
Section 16(a) Beneficial Ownership Reporting Compliance...............................................................18
Other Matters.........................................................................................................19
Miscellaneous.........................................................................................................19
PROPOSAL I - ELECTION OF DIRECTORS..............................................................................................19
General...............................................................................................................19
Committees of the Board of Directors..................................................................................21
Compensation Committee Report on Executive Compensation...............................................................21
Comparative Stock Performance Graph...................................................................................24
Executive Compensation................................................................................................25
Director Compensation.................................................................................................28
Transactions with Management..........................................................................................28
Security Ownership of Management......................................................................................29
PROPOSAL II - RATIFICATION OF AUDITORS..........................................................................................30
PROPOSAL III - APPROVAL OF MERGER...............................................................................................30
The Companies.........................................................................................................30
Background of the Merger..............................................................................................32
Reasons for the Merger and Recommendation of the Board of Directors...................................................35
Opinions of Financial Advisors........................................................................................38
Terms of the Merger...................................................................................................48
Surrender of Certificates.............................................................................................49
Representations and Warranties; Conditions to the Merger; Waiver......................................................49
Regulatory Approvals..................................................................................................50
Business Pending the Merger...........................................................................................51
Effective Date of the Merger; Termination.............................................................................51
Management and Operations After the Merger............................................................................52
Effect of the Merger on Employees and Management......................................................................59
Amendments to Certificate of Incorporation............................................................................62
Certain Differences in Rights of Stockholders.........................................................................69
No Dissenters' Rights.................................................................................................74
Federal Income Tax Consequences.......................................................................................74
Resale of Continuing Corporation Common Stock.........................................................................75
Expenses............................................................................................................. 76
Accounting Treatment..................................................................................................76
Stock Option Agreements...............................................................................................76
MARKET PRICES AND DIVIDENDS.....................................................................................................77
Hudson Chartered......................................................................................................77
Progressive...........................................................................................................78
Continuing Corporation................................................................................................78
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS.....................................................................79
INDEPENDENT AUDITORS............................................................................................................86
EXPERTS.........................................................................................................................86
LEGAL OPINION...................................................................................................................86
STOCKHOLDER PROPOSALS...........................................................................................................86
APPENDIX A -- AGREEMENT AND PLAN OF REORGANIZATION AND SELECTED ATTACHMENTS
APPENDIX B -- OPINION OF SANDLER O'NEILL & PARTNERS, L.P.
APPENDIX C -- OPINION OF KEEFE BRUYETTE & WOODS, INC.
APPENDIX D -- HUDSON CHARTERED STOCK OPTION AGREEMENT
APPENDIX E -- PROGRESSIVE STOCK OPTION AGREEMENT
</TABLE>
<PAGE>
PROSPECTUS OF HUDSON CHARTERED BANCORP, INC.
(to be renamed "Premier National Bancorp, Inc."
upon the Effective Date of the Merger to
which this document relates)
PROXY STATEMENT OF
PROGRESSIVE BANK, INC.
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
INTRODUCTION
This Proxy Statement / Prospectus is being furnished to stockholders
of Progressive Bank, Inc. ("Progressive") in connection with the solicitation of
proxies by the Board of Directors of Progressive for use at its annual meeting
of stockholders (including any adjournment or postponement thereof) (the "Annual
Meeting"), to be held on May 21, 1998, at the time and place set forth in the
accompanying notice. It is anticipated that the mailing of this Proxy Statement
/ Prospectus and the enclosed proxy card will commence on or about April 14,
1998.
The accompanying Notice of Annual Meeting and this Proxy Statement /
Prospectus describe the formal business expected to be transacted at the Annual
Meeting, which will include the election of three directors and the ratification
of Progressive's auditors. During the Annual Meeting, management will report on
Progressive's operations, and afterward directors and officers, as well as a
representative of the independent auditors, KPMG Peat Marwick LLP, will be
available to respond to questions stockholders may have.
At the Annual Meeting, stockholders of Progressive will be asked to
approve an Agreement and Plan of Reorganization and related Plan of Merger, each
dated as of December 16, 1997, providing for the merger (the "Merger") of
Progressive with and into Hudson Chartered Bancorp, Inc. ("Hudson Chartered")
under the name of "Premier National Bancorp, Inc." (the "Continuing
Corporation"). The Agreement and Plan of Reorganization and the Plan of Merger
are attached to this Proxy Statement / Prospectus as Appendix A and are
hereinafter collectively referred to as the "Agreement." Hudson Chartered and
Progressive are New York corporations and registered bank holding companies.
Simultaneously with the Merger, Pawling Savings Bank ("Pawling"), a wholly owned
subsidiary of Progressive, will be merged (the "Bank Merger") with and into
First National Bank of the Hudson Valley ("Hudson Valley"), a wholly owned
subsidiary of Hudson Chartered, under the charter of Hudson Valley and the name
of "Premier National Bank" (the "Continuing Bank"), pursuant to an Agreement and
Plan of Merger dated as of December 16, 1997 (the "Bank Merger Agreement"). Upon
the Effective Date (as defined in the Agreement), each share of common stock,
par value $1.00 per share, of Progressive ("Progressive Common Stock") issued
and outstanding immediately prior to the Effective Date will be converted into
1.82 shares of the common stock, par value $0.80 per share, of the Continuing
Corporation ("Continuing Corporation Common Stock") and cash in lieu of any
fractional share of Continuing Corporation Common Stock, and each share of
common stock, par value $0.80 per share, of Hudson Chartered ("Hudson Chartered
Common Stock") issued and outstanding immediately prior to the Effective Date
will continue to be a share of Continuing Corporation Common Stock. Based on the
shares outstanding at April 6 and March 26, 1998, respectively, upon
consummation of the Merger, the stockholders of Hudson Chartered and Progressive
would hold approximately 50.5% and 49.5% of the outstanding shares of Continuing
Corporation, respectively. For a more complete description of the Agreement and
the terms of the Merger, see "PROPOSAL III - APPROVAL OF MERGER."
The outstanding shares of Hudson Chartered Common Stock are, and the
shares of Continuing Corporation Common Stock offered hereby are expected to be,
listed on the American Stock Exchange. The outstanding shares of Progressive
Common Stock are quoted on the National Association of Securities Dealers
Automated Quotations National Market System (the "Nasdaq National Market"). The
last reported sale prices of Hudson Chartered and Progressive Common Stock on
April 6, 1998 were $23.75 and $42.375 per share, respectively. See "MARKET
PRICES AND DIVIDENDS" for additional information regarding the market for Hudson
Chartered and Progressive Common Stock.
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Consummation of the Merger is subject to satisfaction of a number of
conditions, including the receipt of all regulatory approvals, consents or
waivers required or mutually deemed necessary in connection with the Merger and
the Bank Merger and the approval of the Agreement by the stockholders of each of
Hudson Chartered and Progressive. The Office of the Comptroller of the Currency
approved the Bank Merger on March 24, 1998, and the Federal Reserve Bank of New
York granted Hudson Chartered's request for a waiver of prior approval
requirements for the Merger on February 5, 1998. Stockholder approval of the
Agreement requires the affirmative vote of the holders of at least two-thirds of
the outstanding Progressive Common Stock and at least two-thirds of the
outstanding Hudson Chartered Common Stock. Because the Agreement provides for
certain amendments to Hudson Chartered's Certificate of Incorporation, which
will become the Certificate of Incorporation of the Continuing Corporation,
approval of the Agreement will constitute approval of such amendments. The
precise amendments effected by the Merger will depend on whether the Agreement
is approved by the holders of at least 80% of the outstanding Hudson Chartered
Common Stock. Stockholders of Progressive will not be able to vote with respect
to these amendments; rather the content of the Certificate of Incorporation of
the Continuing Corporation will depend on the vote of the Hudson Chartered
stockholders. Hudson Chartered has proposed that its stockholders approve the
Agreement at Hudson Chartered's annual meeting of stockholders to be held on May
21, 1998. See "PROPOSAL III - APPROVAL OF MERGER -- Representations and
Warranties; Conditions to the Merger; Waiver" and "-- Amendments to Certificate
of Incorporation."
This Proxy Statement / Prospectus also constitutes a prospectus of the
Continuing Corporation for up to 7,700,000 shares of Continuing Corporation
Common Stock issuable in connection with the Merger.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AUTHORITY OR ANY
OTHER GOVERNMENTAL AGENCY NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES AUTHORITY OR ANY OTHER GOVERNMENTAL AGENCY PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT / PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF CONTINUING CORPORATION COMMON STOCK OFFERED HEREBY ARE
NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION ("FDIC") OR ANY OTHER
GOVERNMENTAL AGENCY.
All information contained in this Proxy Statement / Prospectus with
respect to Hudson Chartered and its subsidiaries has been supplied by Hudson
Chartered, and all information with respect to Progressive and its subsidiaries
has been supplied by Progressive.
No person is authorized to give any information or to make any
representation not contained or incorporated by reference in this Proxy
Statement / Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized. This Proxy Statement /
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to purchase, the securities offered by this Proxy Statement / Prospectus in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation of an offer in such jurisdiction. Neither the delivery of this
Proxy Statement / Prospectus nor any distribution of securities made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of Hudson Chartered or Progressive or any of their
respective subsidiaries, or in the information set forth herein, since the date
of this Proxy Statement / Prospectus. This Proxy Statement / Prospectus does not
cover any resales of Continuing Corporation Common Stock received by
stockholders who are affiliates of Hudson Chartered or Progressive, within the
meaning of applicable securities laws, upon the consummation of the Merger, and
no person is authorized to use this Proxy Statement / Prospectus in connection
with any such resale.
The date of this Proxy Statement / Prospectus is April 10, 1998.
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<PAGE>
AVAILABLE INFORMATION
Hudson Chartered and Progressive are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, Hudson Chartered and Progressive file
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed by
Hudson Chartered and Progressive can be inspected and copied (upon payment of
prescribed fees) at the Commission's public reference facilities located at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and the Commission's
regional offices located at 7 World Trade Center, Suite 1300, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained at prescribed rates
by writing to the Public Reference Section of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549. Reports, proxy statements and other
information that have been filed electronically with the Commission may also be
obtained from the Commission's Website, the address of which is
http://www.sec.gov. Such materials, with respect to Hudson Chartered only, are
available for inspection at the office of the American Stock Exchange, 86
Trinity Place, New York, N.Y. 10006. Such materials, with respect to Progressive
only, are available for inspection at the office of the Nasdaq Stock Market,
Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
Hudson Chartered has filed with the Commission a registration
statement on Form S-4 (together with all amendments and exhibits thereto) under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
shares of Continuing Corporation Common Stock to be issued pursuant to, and as
contemplated by, the Agreement (the "Registration Statement"). This Proxy
Statement / Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. The Registration Statement may
be inspected and copied as set forth above.
A COPY OF PROGRESSIVE'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1997 (WITHOUT EXHIBITS) ACCOMPANIES
THIS PROXY STATEMENT / PROSPECTUS. THIS PROXY STATEMENT / PROSPECTUS
INCORPORATES BY REFERENCE THE DOCUMENTS SET FORTH BELOW, SOME OF WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS RELATING TO HUDSON CHARTERED
(OTHER THAN EXHIBITS NOT INCORPORATED BY REFERENCE IN SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST TO PAUL MAISCH, CHIEF
FINANCIAL OFFICER, HUDSON CHARTERED BANCORP, INC., ROUTE 55, P.O. BOX 310,
LAGRANGEVILLE, NEW YORK 12540, OR BY TELEPHONE REQUEST TO (914) 471-8204.
DOCUMENTS RELATING TO PROGRESSIVE (OTHER THAN EXHIBITS NOT INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL
REQUEST TO ROBERT APPLE, VICE PRESIDENT, PROGRESSIVE BANK, INC., 1301 ROUTE 52,
FISHKILL, NEW YORK 12524, OR BY TELEPHONE REQUEST TO (914) 897-7412. PERSONS
REQUESTING COPIES OF EXHIBITS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE IN SUCH DOCUMENTS MAY BE CHARGED THE COST OF REPRODUCTION AND MAILING.
IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE
BY MAY 14, 1998.
The following documents previously filed with the Commission by Hudson
Chartered (File No. 1-13213) pursuant to the Exchange Act are incorporated
herein by reference:
(i) Annual Report on Form 10-K for the year ended December 31,
1997, as amended by Amendment No. 1 on Form 10-K/A filed on
April 9, 1998; and
(ii) The description of Hudson Chartered Common Stock in Hudson
Chartered's Registration Statement on Form 8-A dated July 24,
1997 (and any amendment or report filed for the purpose of
updating such description).
The following documents previously filed with the Commission by
Progressive (File No. 0-15025) pursuant to the Exchange Act are incorporated
herein by reference:
(i) Annual Report on Form 10-K for the year ended December 31,
1997; and
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<PAGE>
(ii) The description of the Shareholder Rights Agreement dated as
of October 15, 1997 between Progressive and Registrar and
Transfer Company, as rights agent, in Progressive's
Registration Statement on Form 8-A dated October 28, 1997
(and any amendment or report filed for the purpose of
updating such description).
All documents filed by Hudson Chartered or Progressive, respectively,
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Proxy Statement / Prospectus and prior to
the date of the Annual Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing such documents.
Statements contained in this Proxy Statement / Prospectus or any
document incorporated by reference herein as to the contents of any contract or
other document are not necessarily complete, and in each instance reference is
hereby made to the copy of such contract or other document filed as an exhibit
to the Registration Statement, each such statement being hereby qualified in all
respects by such reference.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement / Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement / Prospectus.
FORWARD-LOOKING STATEMENTS
This Proxy Statement / Prospectus contains, or incorporates by
reference other documents that contain, forward-looking statements with respect
to the financial condition, results of operations and business of the Continuing
Corporation upon consummation of the Merger, the Bank Merger and the other
transactions contemplated by the Agreement, including statements relating to:
(a) cost savings and accretions to reported earnings that may be realized from
the Merger; (b) impacts on revenues that may result from the Merger; and (c)
restructuring charges that may be incurred in connection with the Merger. These
forward-looking statements involve certain risks and uncertainties. For example,
see "AVAILABLE INFORMATION," "COMPARATIVE PER SHARE DATA," "SELECTED HISTORICAL
AND PRO FORMA FINANCIAL DATA," "PROPOSAL III - APPROVAL OF MERGER," and
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS." Factors that may
cause actual results to differ materially from those contemplated by such
forward-looking statements include, among others, the following possibilities:
(1) contemplated cost savings from the Merger cannot be timely or fully
realized; (2) revenues following the Merger are lower than contemplated; (3)
competitive pressure among depository institutions increases significantly; (4)
costs or difficulties related to the integration of the businesses of Hudson
Chartered and Progressive are greater than contemplated; (5) changes in the
interest rate environment reduce interest margins; (6) general economic
conditions, either nationally or in the markets in which the Continuing
Corporation will be doing business, are less favorable than contemplated; or (7)
legislation or changes in regulatory requirements adversely affect the
businesses in which the Continuing Corporation would be engaged. The
forward-looking statements contained in this Proxy Statement / Prospectus or
incorporated herein by reference speak only as of the date as of which such
statements are made, and Hudson Chartered, Progressive and the Continuing
Corporation assume no duty to update these forward-looking statements to reflect
new, changing or unanticipated events or circumstances. Neither Deloitte &
Touche LLP nor KPMG Peat Marwick LLP has compiled, examined or performed any
procedures with respect to any forward-looking statements, nor have they
expressed any opinion or any form of assurance on such information or its
achievability, and they assume no responsibility for, and disclaim any
association with, the forward-looking statements.
4
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SUMMARY
The following is a brief summary of certain information contained
elsewhere herein or incorporated by reference in this Proxy Statement /
Prospectus. This summary is necessarily general and abbreviated and has been
prepared to assist stockholders in their review of this Proxy Statement /
Prospectus. This summary is not intended to be a complete explanation of the
matters covered in this Proxy Statement / Prospectus and is qualified in all
respects by reference to the more detailed information contained elsewhere in
this Proxy Statement / Prospectus, the accompanying Appendices and the documents
incorporated herein by reference, which stockholders are urged to read
carefully.
The Annual Meeting
The Annual Meeting will be held on May 21, 1998, at 6:00 p.m. Eastern
Time, at the main office of its subsidiary, Pawling Savings Bank, on Route 22,
Pawling, New York. Only holders of record of Progressive Common Stock at the
close of business on March 26, 1998 will be entitled to vote at the Annual
Meeting. At that date, 3,855,781 shares of Progressive Common Stock were
outstanding and entitled to vote.
The accompanying Notice of Annual Meeting and this Proxy Statement /
Prospectus describe the formal business expected to be transacted at the Annual
Meeting, which will include the election of three directors and the ratification
of Progressive's auditors. During the Annual Meeting, management will report on
Progressive's operations, and afterward directors and officers, as well as a
representative of the independent auditors, KPMG Peat Marwick LLP, will be
available to respond to questions stockholders may have.
The stockholders of Progressive will be asked at the Annual Meeting to
consider and vote upon approval of the Agreement. Approval of the Agreement by
Progressive's stockholders at the Annual Meeting is a condition to and required
for consummation of the Merger. The stockholders of Progressive also may
consider and vote upon such other matters as are properly brought before the
Annual Meeting, including proposals to adjourn the Annual Meeting to permit
further solicitation of proxies by the Board of Directors in the event that
there are not sufficient votes to approve any proposal at the time of the Annual
Meeting provided that no proxies voted against the Merger will be voted in favor
of adjournment to solicit additional proxies in favor of the Merger.
For additional information with respect to the Annual Meeting and the
voting rights of stockholders, see "MEETING INFORMATION."
Votes Required
Under New York law, directors are elected by a plurality of the votes
cast at the Annual Meeting, i.e., the nominees receiving the highest number of
votes will be elected regardless of whether such votes constitute a majority of
the shares represented at the Annual Meeting. The ratification of the
appointment of the auditors must be approved by a majority of the votes cast at
the Annual Meeting.
Approval of the Agreement requires the affirmative vote of the holders
of at least two-thirds of the outstanding Progressive Common Stock. Directors
and executive officers of Progressive and affiliates of such persons had voting
power with respect to 122,559 shares (excluding shares for which ownership is
disclaimed and excluding shares subject to options) of Progressive Common Stock,
representing 3.2% of the Progressive Common Stock outstanding, as of March 26,
1998. Hudson Chartered has entered into agreements ("Progressive Voting
Agreements") with each member of the Board of Directors of Progressive, whereby
each Board member has agreed to vote all shares of Progressive Common Stock that
he or she is entitled to vote in favor of the Agreement. In the aggregate,
113,626 of such shares were subject to Progressive Voting Agreements at that
date. In addition, directors and executive officers of Hudson Chartered and
affiliates of such persons had voting power with respect to 57,750 shares of
Progressive Common Stock
5
<PAGE>
as of March 2, 1998. It is expected that such persons will vote such shares in
favor of the Agreement. Accordingly, in the aggregate, it is expected that at
least 180,309 shares of Progressive Common Stock (representing 4.7% of the
outstanding shares) will be voted in favor of the Agreement.
The Proposed Merger
The following summary is qualified in its entirety by reference to the
more detailed information contained elsewhere in this Proxy Statement /
Prospectus, as well as the full text of the Agreement, which is attached hereto
as Appendix A and incorporated herein by reference.
In accordance with the terms of the Agreement, Progressive will be
merged with and into Hudson Chartered under the name of "Premier National
Bancorp, Inc.," whereupon the separate existence of Progressive will cease.
Simultaneously with the consummation of the Merger, Pawling will be merged with
and into Hudson Valley under the name of "Premier National Bank." On the
Effective Date, each outstanding share of Progressive Common Stock will be
converted into 1.82 shares of Continuing Corporation Common Stock and cash in
lieu of any fractional share. See "PROPOSAL III - APPROVAL OF MERGER -- Terms of
the Merger."
After the Merger, the Board of Directors of the Continuing Corporation
will consist of 10 persons designated by Hudson Chartered and 10 persons
designated by Progressive. It is anticipated that T. Jefferson Cunningham III
will serve as Chairman of the Board of Directors and its executive committee,
Peter Van Kleeck will serve as President and Chief Executive Officer and John C.
VanWormer will serve as Executive Vice President of the Continuing Corporation.
The management of the Continuing Corporation will be drawn from the present
management of Hudson Chartered and Progressive. After the Bank Merger, the Board
of Directors of the Continuing Bank will consist of the 20 persons serving as
directors of the Continuing Corporation. See "PROPOSAL III - APPROVAL OF MERGER
- -- Management and Operations After the Merger."
The Agreement also contains provisions relating to, among other
things, employee benefits and indemnification and liability coverage of
directors and officers after the Merger. See "PROPOSAL III - APPROVAL OF MERGER
- -- Effect of the Merger on Employees and Management."
Reasons for the Merger and Recommendation of Board of Directors
The Boards of Directors of Progressive and Hudson Chartered approved
the terms of the Merger on the basis of a combination of the two companies
rather than as an acquisition of one by the other. The terms of the Agreement
were reached in arms-length negotiations and have been designed to provide
Progressive and Hudson Chartered stockholders with a continuing investment in
the combined entity. The Boards of Directors believe that the Merger will
provide expanded product and service capabilities to the customers of Pawling
and Hudson Valley and will enable the combined entity to compete more
effectively with other banks and financial institutions in the markets served by
them. The Boards of Directors believe that the terms of the Merger are fair to
their respective stockholders and, among other things, will afford their
respective stockholders the opportunity to continue as equity participants with
a more liquid investment in a larger independent community banking organization.
See "PROPOSAL III - APPROVAL OF MERGER -- Reasons for the Merger and
Recommendation of the Board of Directors."
PROGRESSIVE'S BOARD OF DIRECTORS HAS DETERMINED THE MERGER TO BE FAIR
TO AND IN THE BEST INTERESTS OF PROGRESSIVE AND PROGRESSIVE'S STOCKHOLDERS,
CUSTOMERS AND COMMUNITIES SERVED. ACCORDINGLY, PROGRESSIVE'S BOARD HAS
UNANIMOUSLY APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT PROGRESSIVE'S STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE AGREEMENT.
6
<PAGE>
Opinions of Financial Advisors
Progressive retained Sandler O'Neill & Partners, L.P. ("Sandler
O'Neill") to provide a written opinion dated December 16, 1997 to Progressive's
Board of Directors that, as of such date, the Exchange Ratio was fair, from a
financial point of view, to the holders of Progressive Common Stock. A copy of
Sandler O'Neill's written confirmation of that opinion as of the date hereof is
attached hereto as Appendix B. Hudson Chartered retained Keefe, Bruyette &
Woods, Inc. ("Keefe Bruyette") to provide a written opinion dated December 16,
1997 to Hudson Chartered's Board of Directors that, as of such date, the
Exchange Ratio was fair, from a financial point of view, to the holders of
Hudson Chartered Common Stock. A copy of Keefe Bruyette's written confirmation
of that opinion as of the date hereof is attached hereto as Appendix C. The
copies of such opinions attached hereto should be read in their entirety with
respect to the assumptions made, limitations on the review undertaken and other
matters. See "PROPOSAL III - APPROVAL OF MERGER -- Opinions of Financial
Advisors" for information regarding, among other things, the selections of
Sandler O'Neill and Keefe Bruyette and their compensation for services rendered
in connection with the Merger and their rendering of such opinions.
Effective Time and Closing Date
The Merger shall become effective at the time and on the date
specified in the certificate of merger to be filed with the New York Department
of State (the "Effective Date"). Such filing will occur only after the receipt
of all requisite regulatory approvals, approval of the Agreement by the
requisite vote of Hudson Chartered's and Progressive's respective stockholders
and the satisfaction or waiver of all other conditions to the Merger. The
closing of the Merger shall occur on the date that is the fifth business day
following satisfaction of the conditions to the Merger and the Bank Merger or
such other date as may be agreed by the parties to the Agreement.
Conditions to the Merger; Waiver and Amendment; Termination
Consummation of the Merger is subject to satisfaction of a number of
conditions, including the receipt of all regulatory approvals, consents or
waivers required or mutually deemed necessary in connection with the Merger and
the Bank Merger and the approval of the Agreement by the stockholders of each of
Hudson Chartered and Progressive. The Office of the Comptroller of the Currency
approved the Bank Merger on March 24, 1998, and the Federal Reserve Bank of New
York granted Hudson Chartered's request for a waiver of prior approval
requirements for the Merger on February 5, 1998. Stockholder approval of the
Agreement requires the affirmative vote of the holders of at least two-thirds of
the outstanding Progressive Common Stock and at least two-thirds of the
outstanding Hudson Chartered Common Stock. Because the Agreement provides for
certain amendments to Hudson Chartered's Certificate of Incorporation, which
will become the Certificate of Incorporation of the Continuing Corporation,
approval of the Agreement will constitute approval of such amendments. The
precise amendments effected by the Merger will depend on whether the Agreement
is approved by the holders of at least 80% of the outstanding Hudson Chartered
Common Stock. Hudson Chartered has proposed that its stockholders approve the
Agreement at Hudson Chartered's annual meeting of stockholders to be held on May
21, 1998. See "-- Amendments to Certificate of Incorporation."
Substantially all of the conditions to consummation of the Merger and
Bank Merger (except for required stockholder and regulatory approvals) may be
waived at any time, by the party for whose benefit they were created, and the
Agreement may be amended or supplemented at any time, by written agreement of
the parties, except that no such waiver, amendment or supplement executed after
approval of the Agreement by stockholders of Hudson Chartered and/or Progressive
shall alter the Exchange Ratio. In addition, the Agreement may be terminated,
either before or after stockholder approval, under certain circumstances. See
"PROPOSAL III - APPROVAL OF MERGER -- Representations and Warranties; Conditions
to the Merger; Waiver" and "-- Effective Date of the Merger; Termination."
7
<PAGE>
Federal Income Tax Consequences of the Merger
Arnold & Porter, special counsel to Hudson Chartered, has delivered
its opinion to Hudson Chartered and Progressive that the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), provided the Merger is consummated in
accordance with the Agreement and certain related agreements. Arnold & Porter
has further opined that, for federal income tax purposes, no gain or loss will
be recognized by the stockholders of Progressive who exchange all of their
Progressive Common Stock solely for Continuing Corporation Common Stock pursuant
to the Merger (except to the extent that cash is received in lieu of the
issuance of fractional shares of Continuing Corporation Common Stock). Arnold &
Porter's opinion is based on facts, representations and assumptions that were
provided to Arnold & Porter by Hudson Chartered and Progressive and that are
consistent with the state of facts that Hudson Chartered and Progressive believe
will be existing as of the Effective Date.
The foregoing is a summary of material federal income tax consequences
of the Merger to stockholders of Progressive. A more extensive summary is set
forth under the heading "PROPOSAL III - APPROVAL OF MERGER -- Federal Income Tax
Consequences," which discusses additional federal income tax consequences of the
Merger, including the federal income tax consequences of receiving cash in lieu
of a fractional share interest in Continuing Corporation Common Stock. Each of
Progressive's stockholders should read in full the detailed description of the
material federal income tax consequences under that heading.
Management After the Merger and Effects of the Merger on Management
After the Merger, the Board of Directors of the Continuing Corporation
will consist of 10 persons designated by Hudson Chartered and 10 persons
designated by Progressive. It is anticipated that T. Jefferson Cunningham III
will serve as Chairman of the Board of Directors and its executive committee,
Peter Van Kleeck will serve as President and Chief Executive Officer and John C.
VanWormer will serve as Executive Vice President of the Continuing Corporation.
The management of the Continuing Corporation will be drawn from the present
management of Hudson Chartered and Progressive. After the Bank Merger, the Board
of Directors of the Continuing Bank will consist of the 20 persons serving as
directors of the Continuing Corporation. The Agreement also contains provisions
relating to, among other things, compensation and other financial matters
affecting directors and executive officers of Hudson Chartered and Progressive.
For example, persons who become directors of the Continuing Corporation will
receive fees and other compensation for their service, as well as liability
insurance and indemnification rights, Messrs. Cunningham and Van Kleeck will
enter into employment agreements with the Continuing Corporation, and other
executive officers of Hudson Chartered and Progressive may be employed by the
Continuing Corporation or receive severance benefits in the event of termination
of their employment in connection with the Merger. While Messrs. Cunningham's
and Van Kleeck's salaries are not expected to increase in any significant
respect upon the consummation of the Merger, it is expected that the Continuing
Corporation will, consistent with past practices, review the compensation levels
of its executive officers, including Messrs. Cunningham and Van Kleeck,
following the Merger and make any appropriate adjustments, including increases,
based on the executives' positions and responsibilities and a comparison of
compensation levels for comparable executives at comparable institutions.
Excluding compensation and benefits either previously earned but not yet paid or
to be earned and paid in the future, no director or executive officer of Hudson
Chartered or Progressive is expected to receive any substantial payment or other
financial benefit as a result of the Merger, except as summarized in the
paragraphs below.
Under Hudson Valley's directors' severance plan, the following
directors of Hudson Valley who also are directors of Hudson Chartered but have
not been designated as directors of the Continuing Corporation or the Continuing
Bank will be entitled to receive severance payments in the indicated amounts
upon consummation of the Merger: Mr. Fraleigh ($25,000); Mr. Marvin ($25,000);
Mr. Patrick ($10,000); and Mr. R. Williams ($10,000).
Under the Progressive Stock Option Plans, based on the closing price
of Progressive Common Stock immediately before the execution and announcement of
the Agreement ($36.625 on December 15, 1997) and the recent
8
<PAGE>
closing price of Hudson Chartered Common Stock ($23.75 on April 6, 1998),
Progressive estimates that the aggregate increase in the total value (market
price less exercise price of all option shares) of the Progressive Options held
by each director or executive officer of Progressive since the time the
Agreement was executed, excluding the value of all such options immediately
before the execution of the Agreement, is approximately as follows: Mr. Van
Kleeck, $483,120; Messrs. Page, Hazzard, Novik, Smith, R., Allen, Coulter and
Smith, A., $71,280 each; Mr. Swinden, $66,330; Mr. Aposporos, $59,400; Mr.
Gabrielsen, $240,900 and Mr. Apple, $36,927. In January 1998, Progressive
granted additional Progressive Options under the Progressive Stock Option Plans
consistent with its past practice with respect to periodic grants of stock
options, including options for 15,000, 8,500 and 1,750 shares to Peter Van
Kleeck, Robert Gabrielsen and Robert Apple, respectively, at an exercise price
equal to the market price of Progressive Common Stock at that time ($35.25 per
share); based on that exercise price and the recent closing price of Hudson
Chartered Common Stock ($23.75 on April 6, 1998), Progressive estimates that the
total value (market price less exercise price of all option shares) of these
Progressive Options held by each director or executive officer of Progressive is
approximately as follows: Mr. Van Kleeck, $119,625; Mr. Gabrielsen, $67,788; and
Mr. Apple, $13,956. In addition, under Progressive's defined contribution
savings plan, Progressive estimates that at December 31, 1997 the aggregate
amount of matching contributions subject to vesting upon the consummation of the
Merger with respect to each executive officer was approximately as follows: Mr.
Van Kleeck, $15,215; Mr. Gabrielsen, $16,010; and Mr. Apple, $9,540.
Under Hudson Chartered's severance agreements, if events related to
the Merger were interpreted to trigger benefits under these agreements, each of
these executive officers would be entitled to a maximum severance payment upon
termination of employment following the Merger in the following estimated
amounts (plus continued insurance benefits in certain cases): Mr. Van Wormer
($620,000); Mr. Maisch ($115,500); and Mr. MacFarland ($115,000). Under
Progressive's severance agreement with Robert A. Gabrielsen, in the event of Mr.
Gabrielsen's termination of employment in connection with a change of control of
Progressive, Progressive estimates that the aggregate amount payable to Mr.
Gabrielsen would have been approximately $421,000 at December 31, 1997.
Under Progressive's executive severance plan (which the parties have
agreed also will generally apply to executives of Hudson Chartered displaced as
a result of the Merger), each of the five executive officers of Hudson Chartered
named below would be entitled to a severance payment of less than $100,000 plus
benefits if his or her employment terminates as a result of the Merger: Nancy C.
Behanna; Kim Dillinger-Sprossel; George Elferink; Paul Mack; and Donald H.
Weber. In addition, under this plan, in the event Robert Apple is terminated in
connection with a change of control (including the Merger), Progressive
estimates that the aggregate amount payable to Mr. Apple would have been
approximately $74,475 at December 31, 1997.
For additional information, see "PROPOSED MERGER -- Management and
Operations After the Merger" and "-- Effect of the Merger on Employees and
Management."
Accounting Treatment
It is a condition to the consummation of the Merger that the Merger be
accounted for as a pooling of interests and that Hudson Chartered and
Progressive shall have received from their respective independent accountants a
letter to the effect that the accountants are not aware of any reason that would
preclude the Merger from being accounted for as a pooling of interests. See
"PROPOSAL III - APPROVAL OF MERGER -- Accounting Treatment."
Amendments to Certificate of Incorporation
From and after the Effective Date, the Continuing Corporation will
operate under the Certificate of Incorporation of Hudson Chartered, as amended
and restated pursuant to the Agreement. The proposed Certificate of
Incorporation of the Continuing Corporation included in the Agreement
incorporates certain proposed amendments to Hudson Chartered's Certificate of
Incorporation. All of the proposed amendments to Hudson Chartered's Certificate
of Incorporation require the approval of Hudson Chartered's stockholders, and
Hudson Chartered stockholders who vote for approval of the Agreement will be
deemed to be voting for approval of the proposed amendments. So long as the
9
<PAGE>
Agreement receives the approval of the holders of at least 80% of the
outstanding Hudson Chartered Common Stock, all proposed amendments will be made.
If the Agreement receives the approval of the holders of less than 80% but at
least two-thirds of the outstanding Hudson Chartered Common Stock, then only the
proposed amendments requiring only a two-thirds (or lesser) vote will be made.
Stockholders of Progressive will not be able to vote with respect to these
amendments; rather the content of the Certificate of Incorporation of the
Continuing Corporation will depend on the vote of the Hudson Chartered
stockholders. If the Agreement does not receive the approval of the holders of
at least two-thirds of the outstanding Hudson Chartered Common Stock or the
Merger otherwise does not occur, none of the proposed amendments will be made.
For information regarding the proposed amendments, see "PROPOSAL III APPROVAL OF
MERGER -- Amendments to Certificate of Incorporation."
Certain Differences in Rights of Stockholders
Upon completion of the Merger, stockholders of Progressive will become
stockholders of the Continuing Corporation, and their rights as such will be
governed by Hudson Chartered's Certificate of Incorporation and Bylaws, as
amended, which will be the Continuing Corporation's Certificate of Incorporation
and Bylaws, as well as by New York law. The rights of stockholders of the
Continuing Corporation will be different in certain respects from the rights of
stockholders of Progressive. See "PROPOSAL III - APPROVAL OF MERGER -- Certain
Differences in Rights of Stockholders."
Surrender of Certificates
As soon as practicable after the Effective Date, holders of
Progressive Common Stock will be notified in writing regarding the manner in
which their share certificates will be exchanged for share certificates of the
Continuing Corporation. Progressive stockholders should not send in their
certificates until so notified. See "PROPOSAL III - APPROVAL OF MERGER --
Surrender of Certificates."
Stock Option Agreements
Hudson Chartered Stock Option Agreement. In connection with execution
of the Agreement, Hudson Chartered and Progressive executed a Stock Option
Agreement ("Hudson Chartered Stock Option Agreement") pursuant to which Hudson
Chartered granted Progressive an option ("Hudson Chartered Option") to purchase
up to 1,415,250 authorized but unissued shares of Hudson Chartered Common Stock
at a price of $21.75 per share, such number of shares and exercise price being
subject to adjustment under certain circumstances. The Hudson Chartered Option
is exercisable only upon the occurrence of certain events that could jeopardize
consummation of the Merger. Progressive may request that Hudson Chartered
repurchase the Hudson Chartered Option together with any shares of Hudson
Chartered Common Stock purchased by Progressive pursuant to the Hudson Chartered
Option, under certain circumstances and at a price set forth in the Hudson
Chartered Stock Option Agreement and described in greater detail elsewhere
herein. See "PROPOSAL III - APPROVAL OF MERGER -- Stock Option Agreements" and
the text of the Hudson Chartered Stock Option Agreement attached hereto as
Appendix D.
Progressive Stock Option Agreement. In connection with execution of
the Agreement, Progressive and Hudson Chartered executed a Stock Option
Agreement ("Progressive Stock Option Agreement") pursuant to which Progressive
granted Hudson Chartered an option ("Progressive Option") to purchase up to
766,300 authorized but unissued shares of Progressive Common Stock at a price of
$36.63 per share, such number of shares and exercise price being subject to
adjustment under certain circumstances. The Progressive Option is exercisable
only upon the occurrence of certain events that could jeopardize consummation of
the Merger. Hudson Chartered may request that Progressive repurchase the
Progressive Option together with any shares of Progressive Common Stock
purchased by Hudson Chartered pursuant to the Progressive Option, under certain
circumstances and at a price set forth in the Progressive Stock Option Agreement
and described in greater detail elsewhere herein. See "PROPOSAL III - APPROVAL
OF MERGER -- Stock Option Agreements" and the text of the Progressive Stock
Option Agreement attached hereto as Appendix E.
10
<PAGE>
Markets and Market Prices
Hudson Chartered Common Stock is listed on the American Stock Exchange
under the symbol "HCK." Hudson Chartered will apply for shares of Continuing
Corporation Common Stock to be listed on the American Stock Exchange under the
symbol "PNB". Progressive Common Stock is traded on the Nasdaq National Market
under the symbol "PSBK." The following tables set forth the closing or last
reported sale prices per share of Hudson Chartered Common Stock and Progressive
Common Stock and the Progressive Common Stock equivalent per share basis,
calculated by multiplying the closing price of Hudson Chartered Common Stock on
such date by the Exchange Ratio, on (i) December 15, 1997, the last business day
preceding public announcement of the signing of the Agreement, and (ii) April 6,
1998, the latest practicable date prior to the mailing of this Proxy Statement /
Prospectus. Stock price data on the Nasdaq National Market reflect interdealer
prices, without retail mark-up, mark-down or commission, and may not necessarily
represent actual transactions. No assurance can be given as to what the market
price of Continuing Corporation Common Stock will be if and when the Merger is
consummated.
<TABLE>
<CAPTION>
Progressive Hudson Chartered Equivalent Price
Common Stock Common Stock per Progressive Share
------------ ------------ ---------------------
<S> <C> <C> <C>
December 15, 1997 $ 36.625 $ 21.750 $ 39.585
April 6, 1998 $ 42.375 $ 23.750 $ 43.225
</TABLE>
11
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents at the dates and for the periods
indicated (i) historical consolidated per share data for Hudson Chartered and
Progressive Common Stock, (ii) pro forma per share data for the Continuing
Corporation and (iii) equivalent pro forma per share data for Progressive Common
Stock. The Continuing Corporation pro forma data represents the effect of the
Merger on a share of Hudson Chartered Common Stock. The Progressive pro forma
equivalent data represents the Continuing Corporation pro forma data before
rounding, multiplied by the Exchange Ratio, and thereby reflects the effect of
the Merger on a share of Progressive Common Stock. The information presented is
based upon the historical financial statements of Hudson Chartered and
Progressive included in and incorporated by reference in this Proxy Statement /
Prospectus. See "AVAILABLE INFORMATION," "SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA" and "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS."
<TABLE>
<CAPTION>
Pro Forma
Historical ----------------------------------
---------------------------------- Continuing Progressive
Per Common Share Hudson Chartered Progressive Corporation Equivalent (1)
- ---------------- ---------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
BASIC EARNINGS: (2)
- -------------------
Year-Ended:
December 31, 1997 $ 1.28 $ 2.26 $ 1.26 $ 2.29
December 31, 1996 1.24 2.38 1.27 2.31
December 31, 1995 1.04 1.67 .98 1.78
DILUTED EARNINGS: (2)
- ----------------------
Year Ended:
December 31, 1997 $ 1.24 $ 2.20 $ 1.22 $ 2.22
December 31, 1996 1.19 2.35 1.25 2.28
December 31, 1995 0.98 1.65 0.94 1.71
CASH DIVIDENDS DECLARED: (3)
- -----------------------------
Year Ended:
December 31, 1997 $ 0.50 $ 0.68 $ 0.50 $ 0.91
December 31, 1996 0.41 0.53 0.41 0.75
December 31, 1995 0.34 0.43 0.34 0.62
BOOK VALUE: (4)
- ----------------
As of:
December 31, 1997 $ 9.94 $ 20.48 $ 10.59 $ 19.27
TANGIBLE BOOK VALUE: (5)
- -------------------------
As of:
December 31, 1997 $ 9.91 $ 18.56 $ 10.06 $ 18.31
</TABLE>
- ---------------
(1) Progressive's pro forma equivalent amounts are computed by multiplying
the pro forma Continuing Corporation amounts, after rounding, by the
Exchange Ratio of 1.82.
(2) Historical basic and diluted earnings per common share is based on
weighted average diluted shares of the respective companies. The pro
forma information presented does not reflect anticipated merger and
integration costs, nor does it reflect potential cost savings or
revenue enhancements resulting from the Merger. See "PROPOSAL III -
APPROVAL OF MERGER -- Operations after the Merger."
(3) The Continuing Corporation will pay dividends at a rate to be
determined by its Board of Directors, but it is anticipated that the
initial dividend rate will be equal to the current dividend rate of
Hudson Chartered. Accordingly, pro forma cash dividends represent the
historical cash dividends declared by Hudson Chartered on its common
stock. See "MARKET PRICES AND DIVIDENDS -- Continuing Corporation."
(4) Book value per common share is based on period-end Common
Stockholders' Equity.
(5) Tangible book value per share is based on period-end Common
Stockholders' Equity less goodwill.
12
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables present selected historical and pro forma
combined financial information for Hudson Chartered, Progressive and the
Continuing Corporation which has been derived from audited consolidated
financial statements of Hudson Chartered and Progressive through December 31,
1997. This summary should be read in connection with the financial statements,
including the respective notes thereto, and other financial information included
in documents incorporated herein by reference. See "AVAILABLE INFORMATION."
The data in the financial tables and statements in this Proxy
Statement / Prospectus does not reflect possible adjustments for expenses
related to the Merger, or any potential cost savings or revenue enhancements
resulting from the Merger. Accordingly, the pro forma combined financial
condition and results of operations of the Continuing Corporation as of the
Effective Date and thereafter may be materially different from that reflected in
the pro forma information below. See "AVAILABLE INFORMATION," "UNAUDITED PRO
FORMA CONDENSED COMBINED FINANCIAL STATEMENTS" and "PROPOSAL II - APPROVAL OF
MERGER -- Operations after the Merger."
Hudson Chartered
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Summary of Income:
Total interest income ............................... $ 52,736 $ 51,028 $ 50,715 $ 42,615 $ 40,281
Total interest expense .............................. 20,748 20,174 21,259 14,520 13,474
---------- ---------- ---------- ---------- ----------
Net interest income ................................. 31,988 30,854 29,456 28,095 26,807
Provision for loan losses ........................... 2,500 2,850 2,300 2,400 3,266
Noninterest income .................................. 6,267 6,798 5,779 3,463 5,605
Other expense ....................................... 22,345 21,585 22,456 23,958 21,560
---------- ---------- ---------- ---------- ----------
Income before income taxes .......................... 13,410 13,217 10,479 5,200 7,586
Income taxes ........................................ 4,402 4,551 3,514 1,936 2,600
---------- ---------- ---------- ---------- ----------
Net income .......................................... 9,008 8,666 6,965 3,264 4,986
Less preferred dividends ............................ -- 89 414 415 497
---------- ---------- ---------- ---------- ----------
Net income applicable to common stock ............... $ 9,008 $ 8,577 $ 6,551 $ 2,849 $ 4,489
========== ========== ========== ========== ==========
Per Common Share:
Basic earnings ...................................... $ 1.28 $ 1.24 $ 1.04 $ 0.46 $ 0.74
Diluted earnings .................................... 1.24 1.19 0.98 0.46 0.73
Cash dividends ...................................... 0.50 0.41 0.34 0.33 0.32
Period-End Balance Sheet Amounts:
Total assets ........................................ $ 731,524 $ 696,875 $ 696,483 $ 645,977 $ 595,706
Total net loans ..................................... 457,491 442,449 413,313 432,062 363,514
Total securities .................................... 198,579 179,238 183,906 147,725 161,236
Total deposits ...................................... 654,105 625,826 631,060 580,070 536,530
Long-term debt ...................................... 1,725 1,854 1,896 1,939 1,212
Common stockholders' equity ......................... 70,358 65,165 54,216 46,824 47,565
Total stockholders' equity .......................... 70,358 65,165 59,929 52,538 54,120
Book value per share ................................ 9.94 9.17 8.46 7.56 7.83
Weighted Average Common Shares:
Basic ............................................... 7,059,000 6,932,000 6,274,000 6,133,000 6,042,000
Diluted ............................................. 7,263,000 7,228,000 7,089,000 6,963,000 6,827,000
Selected Ratios:
Return on average assets ............................ 1.26% 1.25% 1.04% 0.52% 0.85%
Return on average common stockholders' equity ....... 13.56 13.96 13.99 6.95 11.04
Return on average total stockholders' equity ........ 13.56 13.98 12.56 6.20 9.64
Net interest margin ................................. 5.08 4.98 4.92 5.01 5.12
Common dividend payout ratio ........................ 37.32 30.56 31.20 69.99 42.70
Average loans to deposits ........................... 71.23 69.63 69.83 69.42 67.66
Average securities to deposits ...................... 29.30 29.39 25.35 28.85 29.51
Average equity to average assets (1) ................ 9.29 8.87 8.25 8.40 8.82
Period-end:
Allowance for loan losses to:
Total loans ....................................... 2.04 2.06 2.08 1.93 2.01
Nonperforming loans ............................... 305 169 166 163 123
Nonperforming assets to total loans and
other real estate owned ........................... 0.83 1.36 1.53 1.45 1.92
</TABLE>
- --------------
(1) Tangible Tier 1 capital to average assets (leverage ratio) was 9.64%
as of December 31, 1997.
13
<PAGE>
Progressive
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Summary of Income:
Total interest income ...................... $ 68,755 $ 65,848 $ 55,501 $ 50,247 $ 50,281
Total interest expense ..................... 34,743 33,849 27,692 21,177 21,237
----------- ----------- ----------- ----------- -----------
Net interest income ........................ 34,012 31,999 27,809 29,070 29,044
Provision for loan losses .................. 1,975 2,300 600 1,500 2,000
Noninterest income ......................... 3,646 3,349 3,306 156 3,110
Other expense .............................. 21,456 21,374 19,279 20,684 21,819
----------- ----------- ----------- ----------- -----------
Income before income taxes ................. 14,227 11,674 11,236 7,042 8,335
Income taxes (benefit) (4) ................. 5,595 2,353 4,450 (628) 911
----------- ----------- ----------- ----------- -----------
Net income (3) ............................. 8,632 9,321 6,786 7,670 7,061
Net income applicable to
common stock (3) ......................... $ 8,632 $ 9,321 $ 6,786 $ 7,670 $ 7,061
=========== =========== =========== =========== ===========
Per Common Share:
Basic earnings ............................. $ 2.26 $ 2.38 $ 1.67 $ 1.78 $ 1.61
Diluted earnings ........................... 2.20 2.35 1.65 1.76 1.59
Cash dividends ............................. 0.68 0.53 0.43 0.25 0.10
Period-End Balance Sheet Amounts:
Total assets ............................... $ 883,494 $ 875,180 $ 743,214 $ 696,292 $ 633,917
Total net loans ............................ 564,513 583,554 531,714 473,079 431,072
Total securities (1) ....................... 241,363 210,406 147,049 127,680 152,431
Total deposits ............................. 798,593 794,201 657,012 624,329 562,093
Long-term debt ............................. 0 0 0 0 0
Common stockholders' equity (1) ............ 78,479 72,542 68,658 65,940 63,821
Total stockholders' equity (1) ............. 78,479 72,542 68,658 65,940 63,821
Book value per common share ................ 20.48 18.97 17.42 16.00 14.48
Weighted Average Common Shares:
Basic ...................................... 3,824,000 3,916,000 4,070,000 4,319,000 4,399,000
Diluted .................................... 3,923,000 3,967,000 4,116,000 4,365,000 4,439,000
Selected Ratios:
Return on average assets ................... 0.98% 1.09% 0.95% 1.15% 1.12%
Return on average common
stockholders'
equity .................................. 11.46 13.11 10.04 11.65 11.63
Return on average total stockholders' equity 11.46 13.11 10.04 11.65 11.63
Net interest margin ........................ 4.05 3.95 4.09 4.51 4.77
Common dividend payout ratio ............... 30.13 22.40 26.02 14.15 6.23
Average loans to deposits .................. 74.12 73.03 80.87 78.46 72.86
Average securities to deposits ............. 27.90 28.72 20.90 26.21 31.87
Average equity to average assets (2) ....... 8.52 8.32 9.49 9.87 9.66
Period-end:
Allowance for loan losses to:
Total loans .............................. 1.71 1.56 1.49 1.95 3.11
Nonperforming loans ...................... 166 192 139 127 120
Nonperforming assets to total loans and
other real estate owned ................. 1.14 1.19 1.14 1.99 4.22
</TABLE>
- ---------------
(1) 1993 does not reflect unrealized gain/losses on available for sale
securities prior to adoption of SFAS No. 115.
(2) Tangible Tier 1 Capital to average assets (leverage ratio) was 7.98%
as of December 31, 1997.
(3) In 1993, includes the net cumulative effect of changes in accounting
principles relating to income taxes and post-retirement benefits
effective January 1, 1993, which reduced net income by $363,000 or
$0.08 per share.
(4) The 1996 amount reflects a benefit of $2.4 million related to the
settlement of audits of certain prior years' tax returns. The 1994 and
1993 amounts reflect benefits of $3.5 million and $2.6 million,
respectively, for reductions in the valuation allowances for deferred
tax assets.
14
<PAGE>
Continuing Corporation (Pro Forma)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Summary of Income:
Total interest income ............................... $ 121,491 $ 116,876 $ 106,216 $ 92,862 $ 90,562
Total interest expense .............................. 55,491 54,023 48,951 35,697 34,711
----------- ----------- ----------- ----------- -----------
Net interest income ................................. 66,000 62,853 57,265 57,165 55,851
Provision for loan losses ........................... 4,475 5,150 2,900 3,900 5,266
Noninterest income .................................. 9,913 10,147 9,085 3,619 8,715
Other expense ....................................... 43,801 42,959 41,735 44,642 43,379
----------- ----------- ----------- ----------- -----------
Income before income taxes .......................... 27,637 24,891 21,715 12,242 15,921
Income taxes (4) .................................... 9,997 6,904 7,964 1,308 3,511
----------- ----------- ----------- ----------- -----------
Net income (3) ...................................... 17,640 17,987 13,751 10,934 12,047
Less preferred dividends ............................ 0 89 414 415 497
----------- ----------- ----------- ----------- -----------
Net income applicable to common stock (3) ........... $ 17,640 $ 17,898 $ 13,337 $ 10,519 $ 11,550
=========== =========== =========== =========== ===========
Per Common Share:
Basic earnings ...................................... $ 1.26 $ 1.27 $ 0.98 $ 0.75 $ 0.82
Diluted earnings .................................... 1.22 1.25 0.94 0.73 0.81
Cash dividends ...................................... 0.50 0.41 0.34 0.33 0.32
Period-End Balance Sheet Amounts:
Total assets ........................................ $ 1,615,018 $ 1,572,055 $ 1,439,697 $ 1,342,269 $ 1,229,623
Total net loans ..................................... 1,022,004 1,026,003 945,027 905,141 794,586
Total securities (1) ................................ 439,942 389,644 330,955 275,405 313,667
Total deposits ...................................... 1,452,678 1,420,027 1,288,072 1,204,399 1,098,623
Long-term debt ...................................... 1,725 1,854 1,896 1,939 1,212
Common stockholders' equity (1) ..................... 148,837 137,707 122,874 112,764 111,386
Total stockholders' equity (1) ...................... 148,837 137,707 128,587 118,478 117,941
Book value per common share ......................... 10.59 9.79 9.04 8.22 7.90
Weighted Average Common Shares:
Basic ............................................... 14,019,000 14,059,000 13,681,000 13,994,000 14,048,000
Diluted ............................................. 14,403,000 14,448,000 14,580,000 14,907,000 14,906,000
Selected Ratios:
Return on average assets ............................ 1.10% 1.16% 0.99% 0.84% 0.99%
Return on average common stockholders'
equity ............................................ 12.44 13.52 11.72 9.69 11.39
Return on average total stockholders' equity ........ 12.44 13.45 10.84 8.87 10.29
Net interest margin ................................. 4.51 4.41 4.49 4.75 4.94
Common dividend payout ratio ........................ 33.80 32.80 35.10 44.67 39.06
Average loans to deposits ........................... 72.83 71.50 75.56 74.05 70.35
Average securities to deposits ...................... 28.53 29.02 23.13 27.50 30.73
Average equity to average assets (2) ................ 8.86 8.57 8.89 9.16 9.26
Period-end:
Allowance for loan losses to:
Total loans ....................................... 1.86 1.81 1.78 1.96 2.67
Nonperforming loans ............................... 214 180 152 142 121
Nonperforming assets to total loans and
other real estate owned ........................... 1.00 1.26 1.31 1.73 3.17
</TABLE>
- ----------
(1) Progressive 1993 data does not reflect unrealized gains/losses on
available for sale securities prior to adoption of SFAS No. 115.
(2) Tangible Tier 1 Capital to average assets (leverage ratio) on a pro
forma combined basis would be 8.73% as of December 31, 1997.
(3) In 1993, includes the net cumulative effect of changes in accounting
principles (Progressive) relating to income taxes and post-retirement
benefits effective January 1, 1993, which reduced pro forma net income
by $363,000 or $0.04 per share.
(4) The 1996 amount reflects a benefit of $2.4 million related to
Progressive's settlement of audits of certain prior years' tax
returns. The 1994 and 1993 amounts reflect benefits of $3.5 million
and $2.6 million, respectively, for reductions in Progressive's
valuation allowance for deferred tax assets.
15
<PAGE>
[MAP OF HUDSON CHARTERED AND PROGRESSIVE
BRANCH LOCATIONS AND MARKET AREAS]
16
<PAGE>
ANNUAL MEETING INFORMATION
General
The Annual Meeting will be held at Pawling Savings Bank, on Route 22,
Pawling, New York on May 21, 1998, at 6:00 p.m. Eastern Time. At the Annual
Meeting, holders of record of shares of Progressive Common Stock as of March 26,
1998 (the "Record Date"), will consider and act upon (i) the election of three
directors of Progressive; (ii) the ratification of the appointment of KPMG Peat
Marwick LLP, independent certified public accountants, as independent auditors
of Progressive for the fiscal year ending December 31, 1998; (iii) the approval
of the Agreement; and (iv) the transaction of such other business as may
properly come before the Annual Meeting or any adjournments or postponements
thereof, including any proposals to adjourn the Annual Meeting to permit further
solicitation of proxies by the Board of Directors in the event that there are
not sufficient votes to approve any proposal at the time of the Annual Meeting,
provided that no proxies voted against the Merger will be voted in favor of
adjournment to solicit additional proxies in favor of the Merger. Approval of
the Agreement by Progressive's stockholders at the Annual Meeting is a condition
to consummation of the Merger.
Voting and Revocability of Proxies
Stockholders who execute proxies retain the right to revoke them at
any time. Unless so revoked, the shares represented by properly executed proxies
will be voted at the Annual Meeting and all adjournments thereof. Proxies may be
revoked by written notice to Beatrice D. Parent, Corporate Secretary of
Progressive, at 1301 Route 52, P.O. Box 7000, Fishkill, New York 12524-7000, by
filing a later dated proxy prior to a vote being taken on a particular proposal
at the Annual Meeting or by attending the Annual Meeting and voting in person.
The presence of a stockholder at the Annual Meeting will not in itself revoke
such stockholder's proxy.
Proxies solicited by the Board of Directors of Progressive will be
voted in accordance with the directions given therein. WHERE NO INSTRUCTIONS ARE
INDICATED, PROXIES WILL BE VOTED FOR THE NOMINEES FOR DIRECTORS SET FORTH HEREIN
AND FOR THE OTHER PROPOSALS, INCLUDING THE APPROVAL OF THE AGREEMENT, SET FORTH
IN THIS PROXY STATEMENT / PROSPECTUS FOR CONSIDERATION AT THE ANNUAL MEETING.
The proxy confers discretionary authority on the persons named therein to vote
with respect to the election of any person as a director where the nominee is
unable to serve or for good cause will not serve, and matters incident to the
conduct of the Annual Meeting. If any other business is presented at the Annual
Meeting, proxies will be voted by those named therein in accordance with the
determination of a majority of the Board of Directors. Proxies marked as
abstentions will not be counted as votes cast. In addition, shares held in
street name which have been designated by brokers on proxies as not voted will
not be counted as votes cast. Proxies marked as abstentions or as broker
non-votes, however, will be treated as shares present for purposes of
determining whether a quorum is present.
Voting Securities and Principal Holders Thereof
The securities entitled to vote at the Annual Meeting consist of
Progressive's common stock, par value $1.00 per share (the "Progressive Common
Stock"). Stockholders of record as of the close of business on the Record Date,
March 26, 1998, are entitled to one vote for each share of Progressive Common
Stock then held. As of March 26, 1998, there were 3,855,781 shares of
Progressive Common Stock issued and outstanding. The presence, in person or by
proxy, of at least one-third of the total number of shares of Progressive Common
Stock outstanding and entitled to vote will be necessary to constitute a quorum
at the Annual Meeting.
Persons and groups beneficially owning more than 5% of the Progressive
Common Stock are required to file certain reports with respect to such ownership
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"). The
following table sets forth information regarding the shares of Progressive
Common Stock beneficially owned as of December 31, 1997 by persons believed by
Progressive to beneficially own more than 5% of the Progressive Common Stock.
17
<PAGE>
<TABLE>
<CAPTION>
Percent of
Name and Address Amount and Nature of Shares of Progressive Common
of Beneficial Owner Beneficial Ownership (1) Stock Outstanding (2)
- ------------------- ------------------------ ---------------------
<S> <C> <C>
Builtland Partners 362,439 9.5%
1271 Avenue of the Americas
New York, New York 10020
Peter B. Cannell & Co., Inc. (3) 344,987 9.0
919 Third Avenue
New York, New York 10022
Dimensional Fund Advisors, Inc. (4) 299,400 7.8
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
The Guardian Life Insurance
Company of America (5) 280,743 7.3
201 Park Avenue South
New York, New York 10003
</TABLE>
- ----------
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is
deemed to be the beneficial owner, for purposes of this table, of any
shares of Progressive Common Stock if he or she has or shares voting
or investment power with respect to such Progressive Common Stock or
has a right to acquire beneficial ownership at any time within 60 days
from December 31, 1997. As used herein, "voting power" is the power to
vote or direct the voting of shares and "investment power" is the
power to dispose or direct the disposition of shares. Except as
otherwise noted, ownership is direct, and the named beneficial owners
exercise sole voting and investment power over the shares of the
Progressive Common Stock. Information is based on reports filed by the
beneficial owner pursuant to the Exchange Act, except that information
regarding Builtland Partners and The Guardian Life Insurance Company
of America is based on information otherwise provided to Progressive
by those beneficial owners.
(2) Based on 3,831,809 shares of Progressive Common Stock outstanding as
of December 31, 1997.
(3) A registered investment advisor.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 299,400
shares of the Progressive Common Stock as of December 31, 1997, all of
which shares are held in portfolios of DFA Investment Dimensions
Group, Inc., a registered open-end investment company, or in series of
the DFA Investment Trust Company, a Delaware business trust, or the
DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, of all of which Dimensional Fund
Advisors Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares. (5) Includes affiliates
Guardian Investors Services Corporation, The Guardian Park Avenue
Fund, Inc., The Guardian Stock Fund, Inc. and The Guardian Employees'
Incentive Savings Plan.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to regulations promulgated under the Exchange Act,
Progressive's officers and directors and all persons who own more than 10% of
Progressive's Common Stock ("Reporting Persons") are required to file reports
detailing their ownership and changes of ownership in the Progressive Common
Stock and to furnish Progressive with copies of all such ownership reports that
are filed. Based solely on Progressive's review of copies of such ownership
reports which it has received in the past fiscal year or with respect to the
past fiscal year, or written representations from the Reporting Persons that no
annual report of changes in beneficial ownership were required, Progressive
believes that during fiscal year 1997 all Reporting Persons have complied with
these reporting requirements.
18
<PAGE>
Other Matters
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described in this Proxy Statement /
Prospectus and matters incident to the conduct of the Annual Meeting. However,
if any other matters should properly come before the Annual Meeting or any
adjournments or postponements thereof, including any proper proposals to adjourn
the Annual Meeting to permit further solicitation of proxies by the Board of
Directors in the event that there are not sufficient votes to approve any
proposal at the time of the Annual Meeting, it is intended that proxies in the
accompanying form will be voted in respect thereof in accordance with the
determination of a majority of the Board of Directors, provided that no proxies
voted against the Merger will be voted in favor of adjournment to solicit
additional proxies in favor of the Merger.
Miscellaneous
The cost of soliciting proxies will be borne by Progressive, except
Progressive and Hudson Chartered have agreed to share the expenses associated
with the printing of this Proxy Statement / Prospectus and the Proxy Statement
for Hudson Chartered's Annual Meeting of Stockholders. Progressive will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Progressive Common Stock. In addition to solicitations by
mail, directors, officers and regular employees of Progressive may solicit
proxies personally or by telegraph or telephone without additional compensation
therefor. Progressive has retained Corporate Investor Communications, Inc., a
proxy soliciting firm, to assist in the solicitation of proxies, for which
Corporate Investor Communications, Inc. will receive a base fee of $5,000 plus
certain additional charges based on the extent of services performed and
reimbursement of certain out-of-pocket expenses.
PROPOSAL I - ELECTION OF DIRECTORS
General
Progressive's Board of Directors currently consists of 10 members.
Progressive's Certificate of Incorporation requires that directors be divided
into three classes, as nearly equal in number as possible, with approximately
one-third of the directors elected each year. At the Annual Meeting, three
directors will be elected for a term expiring at the 2001 Annual Meeting and
until their respective successors are elected and shall qualify. The Board of
Directors has nominated Richard T. Hazzard, Richard Novik and Roger W. Smith to
serve as directors for a three-year period. All nominees are currently members
of the Board. Under New York law, directors are elected by a plurality of the
votes cast at the Annual Meeting, i.e., the nominees receiving the highest
number of votes will be elected regardless of whether such votes constitute a
majority of the shares represented at the Annual Meeting.
It is intended that the persons named in the proxies solicited by the
Board of Directors will vote for the election of the named nominees. If any
nominee is unable to serve, the shares represented by all valid proxies will be
voted for the election of such substitute as the Board of Directors may
recommend or the size of the Board may be reduced to eliminate the vacancy. At
this time, the Board knows of no reason why any nominee might be unavailable to
serve.
The following table sets forth, for each nominee for director and
continuing director of Progressive, his or her age, the year he or she first
became a director of Progressive and the expiration of his or her term as a
director. There are no arrangements or understandings between Progressive and
any director pursuant to which such person has been elected a director of
Progressive, and no director is related to any other director or executive
officer by blood, marriage or adoption. Each director of Progressive also is a
member of the Board of Directors of Pawling.
19
<PAGE>
<TABLE>
<CAPTION>
Principal Year First
Age at Occupation Elected as Current
December 31, for Past Director of Term
Name 1997 Five Years Progressive to Expire
---- ------------------ ---------- ----------- ---------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2001
<S> <C> <C> <C> <C>
Richard T. Hazzard 54 President of Lyman A. Beecher, Inc., 1986 1998
d/b/a Beecher Funeral Home and
Dwyer Funeral Home
Richard Novik 57 President of Clear Channel 1986 1998
Communications, International;
Owner and President of WKIP Broad-
casting and Dutchess Communications
Corp. from 1987 to March 1997
Roger W. Smith 58 President of Pawling Corporation, a 1992 1998
manufacturer of rubber and plastic
products
DIRECTORS CONTINUING IN OFFICE
Elizabeth P. Allen 55 Chairman of the Board of Pawling; 1986 1999
Director of Guideposts, Inc., a
not-for-profit church corporation
George M. Coulter 69 Private practice of dentistry 1986 1999
Archibald A. Smith, III 48 Headmaster at the Trinity Pawling 1995 1999
School, an independent boys college
preparatory school
Peter Van Kleeck 63 President and Chief Executive Officer 1990 1999
of Progressive and Pawling
Thomas C. Aposporos 45 Principal at Aposporos and Son, 1988 2000
licensed real estate brokers; Chairman
of the Board of Progressive
John J. Page 59 President of H.G. Page and Sons, a 1986 2000
building material supplier; Owner of
John Page Development Co., a property
management development company
David A. Swinden 65 Executive Vice President of Imperial 1994 2000
Schrade Corp., a manufacturing company
</TABLE>
20
<PAGE>
Committees of the Board of Directors
During the year ended December 31, 1997, the Board of Directors of
Progressive met 12 times. No director attended fewer than 75% in the aggregate
of the total number of Progressive Board of Directors meetings held during the
year ended December 31, 1997 and the total number of meetings held by committees
on which he or she served during such fiscal year. Progressive's Board of
Directors has standing Audit, Compensation and Nominating Committees.
The Audit Committee reviews examinations of Progressive and Pawling
that are conducted by regulatory agencies and oversees and reviews audits of
Progressive and Pawling by internal audit staff and independent auditors. The
Audit Committee also recommends to the Board of Directors, on an annual basis, a
firm to serve as Progressive's independent auditors and an individual to serve
as the chief internal auditor of Progressive and Pawling. The Audit Committee
met six times during the year ended December 31, 1997. To qualify for service on
the Audit Committee, directors must meet certain specified criteria designed to
establish independence from management. The present members of the Audit
Committee are David A. Swinden (Chairman), John J. Page, Archibald A. Smith, III
and Roger W. Smith.
The Compensation Committee determines the personnel, salary, employee
benefits policies and related matters for the officers and employees of
Progressive and Pawling. The Compensation Committee met six times during the
year ended December 31, 1997. The present members of the Committee are Roger W.
Smith (Chairman), Elizabeth P. Allen, Thomas C. Aposporos, Richard T. Hazzard
and David A. Swinden.
The Nominating Committee meets for the purpose of considering
potential nominees to the Board of Directors. During the year ended December 31,
1997, the Nominating Committee met two times. The members of the Nominating
Committee are Archibald A. Smith, III (Chairman), George M. Coulter, Richard
Novik and John J. Page.
Any stockholder wishing to suggest nominees to the Board of Directors
may forward their suggestions along with nominating information to: Beatrice D.
Parent, Corporate Secretary, Progressive Bank, Inc., 1301 Route 52, P.O. Box
7000, Fishkill, New York 12524-7000. Progressive's Certificate of Incorporation
sets forth procedures that must be followed by stockholders seeking to make
nominations for directors. In order for a stockholder of Progressive to make any
nominations, he or she must give written notice thereof to the Corporate
Secretary of Progressive not less than thirty days nor more than sixty days
prior to the date of any such meeting; provided, however, that if less than
forty days' notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Corporate Secretary of
Progressive not later than the close of business on the tenth day following the
day on which notice of the meeting was mailed to stockholders. Each such notice
given by a stockholder with respect to nominations for the election of directors
must set forth (i) the name, age, business address and, if known, residence
address of each nominee proposed in such notice; (ii) the principal occupation
or employment of each such nominee; and (iii) the number of shares of stock of
Progressive which are beneficially owned by each such nominee. In addition, the
stockholder making such nomination must promptly provide any other information
reasonably requested by Progressive.
Compensation Committee Report on Executive Compensation
Overview and Philosophy. Progressive's executive compensation policies
are established by the Compensation Committee of the Board of Directors (the
"Committee") composed of five outside directors. The Committee is responsible
for developing Progressive's executive compensation policies. Progressive's
Chief Executive Officer, under the direction of the Committee, implements
Progressive's executive compensation policies. The Committee retained an outside
consultant to provide assistance in designing Progressive's executive
compensation policies. The Committee's objectives in designing and administering
the specific elements of Progressive's executive compensation program are as
follows:
21
<PAGE>
o To link executive compensation rewards to increases in
stockholder value, as measured by favorable long-term
operating results and continued strengthening of
Progressive's financial condition.
o To provide incentives for executive officers to work towards
achieving successful annual results as a step in achieving
Progressive's long-term operating results and strategic
objectives.
o To correlate, as closely as possible, executive officers'
receipt of compensation with the attainment of specified
performance objectives.
o To maintain a competitive mix of total executive
compensation, with particular emphasis on awards related to
increases in long-term stockholder value.
o To attract and retain top performing executive officers for
the long-term success of Progressive.
o To facilitate stock ownership through the granting of stock
options.
In furtherance of these objectives, the Committee has determined that
there should be three specific components of executive compensation: base
salary, a cash incentive plan and a stock option plan designed to provide
long-term incentives through the facilitation of stock ownership in Progressive.
Base Salary. The Committee makes recommendations to the Board
concerning executive compensation on the basis of surveys of salaries paid to
executive officers of other savings bank holding companies, non-diversified
banks and other financial institutions similar in size, market capitalization
and other characteristics. The Committee's objective is to provide for base
salaries that are competitive with the average salary paid by Progressive's
peers.
Executive Incentive Compensation Plan. Progressive maintains a
formula-based incentive plan (the "Executive Incentive Compensation Plan"),
which provides for annual cash incentive compensation based on achievement of a
combination of individual and Progressive performance objectives. Under the
Executive Incentive Compensation Plan, at the beginning of the year, the
Committee established a minimum "Threshold" target net income and a maximum
"Best Expected" target net income. The range of possible incentives that could
be paid to each employee is determined following the end of the year based on
where the actual net income for 1997 was within the range of Threshold to Best
Expected net income. No incentives are paid unless actual net income exceeds
threshold net income. Within the range of possible bonuses for each employee,
the actual bonus awarded is determined based on a rating given to each employee
reflecting the employee's success in achieving specific individual performance
goals established at the beginning of the year.
Stock Options. The Committee believes that stock options are an
important element of compensation because they provide executives with
incentives linked to the performance of the Common Stock. Progressive awards
stock options as a means of providing employees the opportunity to acquire a
proprietary interest in Progressive and to link their interests with those of
Progressive's stockholders. Options are granted at the market value of the
Common Stock on the date of grant, and thus acquire value only if Progressive's
stock price increases.
Compensation of the Chief Executive Officer. Mr. Van Kleeck's base
salary is established in accordance with the terms of the employment agreement
entered into between Progressive and Mr. Van Kleeck. See "-- Executive
Compensation -- Employment Agreement." The Committee determines the Chief
Executive Officer's compensation on the basis of several factors. In determining
Mr. Van Kleeck's base salary, the Committee conducted surveys of compensation
paid to chief executive officers of similarly situated savings banks and
non-diversified banks and other financial institutions of similar size. The
Committee believes that Mr. Van Kleeck's base salary is generally competitive
22
<PAGE>
with the average salary paid to executives of similar rank and expertise at
banking institutions which the Committee considered to be comparable.
Mr. Van Kleeck received incentive compensation under the Executive
Incentive Compensation Plan in fiscal year 1997 based on Progressive's net
income and Mr. Van Kleeck's achievement of individual performance goals based on
the formula set forth above. Mr. Van Kleeck's incentive compensation was $87,801
for performance during fiscal year 1997 and $80,942 for performance during
fiscal year 1996. The increase reflected improvement in Progressive's
performance during 1997. Progressive's net income before income taxes increased
from $11.7 million for fiscal 1996 to $14.2 million for fiscal 1997.
The Committee believes that Progressive's executive compensation
program serves Progressive and its stockholders by providing a direct link
between the interests of executive officers and those of stockholders generally
and by helping to attract and retain qualified executive officers who are
dedicated to the long-term success of Progressive.
Members of the Compensation Committee
Roger W. Smith (Chairman)
Elizabeth P. Allen
Thomas C. Aposporos
Richard T. Hazzard
David A. Swinden
23
<PAGE>
Comparative Stock Performance Graph
The graph and table which follow show the cumulative total return on
Progressive Common Stock during the five fiscal years ended December 31, 1997
with (1) the total cumulative return of all companies whose equity securities
are traded on the Nasdaq National Market and (2) the total cumulative return of
banking companies traded on the Nasdaq National Market. The comparison assumes
$100 was invested on January 1, 1993 in Progressive Common Stock and in each of
the foregoing indices and assumes reinvestment of dividends. The stockholder
returns shown on the performance graph are not necessarily indicative of the
future performance of Progressive Common Stock or of any particular index.
CUMULATIVE TOTAL STOCKHOLDER RETURN
COMPARED WITH PERFORMANCE OF SELECTED INDICES
December 31, 1992 through December 31, 1997
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PROGRESSIVE $ 100 151.43 214.87 274.22 317.60 531.11
NASDAQ NATIONAL MARKET 100 114.80 112.21 158.70 195.19 239.53
NASDAQ BANKS 100 114.04 113.63 169.22 223.41 377.44
</TABLE>
24
<PAGE>
Executive Compensation
Summary Compensation Table. The following table sets forth cash and
noncash compensation for each of the last three fiscal years awarded to or
earned by Progressive's Chief Executive Officer and each other executive officer
whose salary and bonus earned in fiscal 1997 exceeded $100,000 for services
rendered in all capacities to Progressive and its subsidiaries.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation ------------
------------------------------------------ Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus (1) Compensation (2) Options Compensation (3)
- ------------------ ---- ------ --------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Peter Van Kleeck 1997 $273,355 $87,801 $ -- 15,000 $ 2,544
President and Chief 1996 262,073 80,942 -- 15,000 2,558
Executive Officer of 1995 241,687 86,677 -- 46,500 2,440
Progressive and Pawling
Robert A. Gabrielsen 1997 148,221 40,391 -- 7,500 1,866
Executive Vice President, 1996 134,934 37,299 -- 6,000 1,891
Chief Financial Officer 1995 120,934 35,987 -- 20,000 1,912
of Pawling and Treasurer
of Progressive
John A. Eickman (4) 1997 126,761 -- -- 3,000 556
Former Executive Vice
President and Chief
Lending Officer of
Pawling
Robert Apple 1997 96,219 12,814 -- 1,500 1,754
General Counsel of
Progressive and Pawling
and Vice President of
Progressive
</TABLE>
- -------------
(1) Bonuses are paid in January of the following year based on Company and
individual performance during the year in which the bonus is included.
(2) Executive officers of Progressive receive indirect compensation in the
form of certain perquisites and other personal benefits. The amount of
such benefits received by the named executive officers in fiscal 1997
did not exceed 10% of the executive officer's salary and bonus.
(3) For fiscal 1997, consists of life insurance premium payments of $702,
$66, $0 and $102 and contributions pursuant to Progressive's Retirement
Plan of $1,842, $1,800, $556 and $1,652 made by Progressive in fiscal
1997 for the benefit of Messrs. Van Kleeck, Gabrielsen, Eickman and
Apple, respectively. In the case of Mr. Eickman, does not include
$240,000 that was paid in 1998 in connection with the end of his service
with Progressive.
(4) Mr. Eickman's employment with Pawling ended in November 1997.
25
<PAGE>
Option Grants in Last Fiscal Year. The following table contains
information concerning grants of stock options to Progressive's Chief Executive
Officer and the other named executive officers during fiscal year 1997.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Number of Securities Percent of Total Options Grant Date
Underlying Options Granted to Employees Exercise Expiration Present
Name Granted(1) in Fiscal Year Price Date Value(2)
- ---- ---------- -------------- ----- ---- --------
<S> <C> <C> <C> <C> <C>
Peter Van Kleeck 15,000 26% $ 23.25 02/11/07 $ 87,750
Robert A. Gabrielsen 7,500 13 23.25 02/11/07 43,875
John A. Eickman 3,000 5 23.25 02/11/07 17,550
Robert Apple 1,500 3 23.25 02/11/07 8,775
</TABLE>
- ----------
(1) All options granted became exercisable immediately upon grant.
(2) Represents the present value of the grant at the date of grant, as
determined using the Black-Scholes option pricing model. In calculating
the present value of the option grant, the following assumptions were
utilized: (i) the current market price of the underlying stock at the
date of grant was $23.25; (ii) the continuously compounded risk-free rate
of return expressed on an annual basis was 6.46%; (iii) the annual
dividend on the Common Stock was 3.0%; (iv) the expected volatility rate
of the underlying Common Stock, measured by the standard deviation of the
continuously compounded annual rate of return of the Common Stock, was
23.6%; and (v) the options were assumed to be exercised 5.4 years after
the grant date. The foregoing assumptions are used for illustrative
purposes only. No assurance can be given that actual experience will
correspond to the assumptions utilized.
Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values. The following table sets forth information concerning the exercise of
options by Progressive's Chief Executive Officer and the other named executive
officers during fiscal year 1997 and the value of options held by such
individuals at December 31, 1997.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Acquired Value Options at In-the-Money Options at
Name on Exercise Realized December 31, 1997(1) December 31, 1997(1)(2)
- ---- ----------- -------- -------------------- -----------------------
<S> <C> <C> <C> <C>
Peter Van Kleeck 3,300 $42,900 73,200 $1,451,250
Robert A. Gabrielsen -- -- 38,933 805,730
John A. Eickman -- -- 15,000 272,040
Robert Apple -- -- 5,595 113,266
</TABLE>
- -------------
(1) All outstanding options were exercisable at December 31, 1997.
(2) Calculated based on the product of: (a) the number of shares subject
to options and (b) the difference between the fair market value of the
underlying Progressive Common Stock at December 31, 1997, based on the
closing sale price of Progressive Common Stock on December 31, 1997 as
reported on the Nasdaq National Market ($38.25 per share), and the
weighted average exercise price of the options.
Employment Agreement. Progressive has entered into an employment
agreement (the "Employment Agreement") with Peter Van Kleeck, the President and
Chief Executive Officer of Progressive and Pawling. The Employment Agreement,
which expires on December 31, 1999, provides that Mr. Van Kleeck will receive a
base salary,
26
<PAGE>
subject to increases and bonuses as may be granted by the Board of Directors
from year to year. Mr. Van Kleeck's base salary for 1998 is $272,160. Under the
Employment Agreement, Mr. Van Kleeck may defer a portion of his salary. In the
event of termination without cause, Mr. Van Kleeck would receive his current
salary for the remainder of the term of the Employment Agreement plus an amount
equal to his bonus for the prior calendar year for each year, including the year
of termination, through the end of the term of the Employment Agreement. In the
event of a change in control, he would, upon termination, as defined, receive
the following: (1) his salary for the remainder of the term plus if such
termination occurs during the last three years of the term, an amount equal to
36 months salary less the salary for the number of months to the end of the
term, (2) an amount equal to his bonus for the prior calendar year for each
year, including the year of termination, through the end of the term of the
Employment Agreement, (3) 36 months of medical insurance benefits paid by
Progressive or its successor, (4) 36 months of life insurance coverage for Mr.
Van Kleeck and his family paid for by Progressive or its successors, (5) a
contribution to Progressive's pension plan for the remainder of the term of the
Employment Agreement, with the salary in effect in the calendar year before his
termination, and (6) a payment which will hold Mr. Van Kleeck harmless from any
excise taxes imposed under Section 4999 of the Internal Revenue Code (the
"Code"), along with any income tax which results from this additional payment.
The aggregate payments that would be made to Mr. Van Kleeck assuming termination
of his employment under the foregoing circumstances at December 31, 1997 would
be approximately $1,523,472.
Supplemental Executive Retirement Plan. In order to secure the
continuing services of Mr. Van Kleeck (the "Participant"), Pawling entered into
an agreement with him that established a supplemental executive retirement plan
(the "SERP") effective October 1, 1994.
Pursuant to the SERP, upon the Participant's normal, early or
postponed retirement, the Participant will be entitled to a life annuity from
Pawling in an amount equal to the difference between (i) the monthly amount of
retirement income that he would have received under Pawling's tax-qualified
pension plan (as in effect prior to its conversion to a cash balance plan on
October 1, 1997) if his benefits were calculated without giving effect to the
limitations and restrictions imposed by application of Sections 401(a)(17) and
415 of the Code, and (ii) the monthly amount actually payable to him under the
pension plan after application of the limitations and restrictions imposed by
those code sections.
The following table indicates annual benefits payable upon retirement
for various levels of compensation and periods of service under the SERP. The
benefit amounts listed in the table are not subject to any deduction for Social
Security or other offsets.
Years of Credited Service
Average --------------------------------------------
Annual Salary 10 15 20 25 30
------------- -- -- -- -- --
$ 200,000 21,071 37,760 60,625 91,952 134,872
225,000 23,705 42,480 68,203 103,446 151,732
250,000 26,339 47,200 75,781 114,940 168,591
275,000 28,973 51,920 83,359 126,434 185,450
300,000 31,607 56,640 90,937 137,928 202,309
Annuity payments from the SERP are paid at the same time benefits are
paid under the pension plan, except as otherwise determined by Pawling. In the
event that the Participant dies, Pawling must pay his surviving spouse or
eligible children survivorship benefits over their respective lifetimes.
Termination of employment of a Participant for illegal appropriation of Bank
funds would result, as determined by Pawling, in forfeiture of all benefits
under the SERP.
The Plan is intended to be an unfunded, non-qualified deferred
compensation plan. Neither Pawling, the committee that administers the SERP (the
"Committee"), nor the individual members of the Committee are permitted
27
<PAGE>
to segregate or otherwise identify specific assets to be applied to the purposes
of the SERP. The liability of Pawling to the Participant with respect to
benefits payable under the SERP are unsecured contractual obligations.
Severance Agreement. Pawling has entered into a severance agreement
with Mr. Gabrielsen. The severance agreement provides that in the event of a
change in control of Progressive or Pawling and Mr. Gabrielsen's termination
within two years thereafter, either by Progressive for reasons other than cause
or by Mr. Gabrielsen following the occurrence of certain specified events
generally amounting to a reduction of salary, bonus, benefits or
responsibilities: (i) he would be entitled to a severance payment equal to 2.99
times his average annual compensation for his employment period but not averaged
over more than five years; and (ii) all his options would become immediately
exercisable. The aggregate payments that would be made to Mr. Gabrielsen
assuming termination of employment under the foregoing circumstances at December
31, 1997 would be approximately $421,000.
Director Compensation
Directors of Progressive and Pawling receive annual retainer fees of
$5,000 from each of Progressive and Pawling. Further, in 1997, Mr. Aposporos,
the Chairman of the Board of Progressive, and Ms. Allen, the Chairman of the
Board of Pawling, were paid monthly stipends by Progressive and Pawling of
$2,500 and $1,500, respectively. In 1997, each director also received fees of
$400 for attendance at meetings of the Board of Directors of each of Progressive
and Pawling. Directors are not paid for attendance at committee meetings. Mr.
Van Kleeck does not receive any fees for service as a director of Progressive or
Pawling. Board members who are not employees also may receive non-qualified
stock options. No other options were awarded to directors during 1997. Directors
of Progressive, but not Pawling, who have been a director at least five years,
are entitled to retirement or severance benefits upon leaving the Board in an
amount equal to the amount of the annual retainer fee multiplied by the number
of years of service as a Director, but not more than 15 years.
On November 13, 1997, Pawling's Board of Directors merged the Pawling
Savings Bank Deferred Compensation Plan and the Pawling Savings Bank Board of
Directors Deferred Compensation Plan with and into the Progressive Bank, Inc.
Deferred Compensation Plan ( the "Deferred Compensation Plan"). The Deferred
Compensation Plan is for the benefit of Pawling's and the Company's directors
and specific employees or class of employees who are either members of
management or highly compensated employees that are designated by resolution of
the Board of Directors. Pursuant to the terms of the Deferred Compensation Plan,
a director may elect to defer all or a portion of his or her director's fees,
and other plan participants may elect to defer a portion of their annual
compensation and incentive compensation, if any. Deferred amounts will be
credited to a bookkeeping account in the participant's name. Participants may
determine by written request the time and form of benefit payments and whether
to revoke, modify, or suspend future deferrals at any time. Changes in
participant's investment elections generally become effective in the following
calendar year, provided that the revised investment request was filed prior to
the beginning of the calendar year. Participants are permitted by written
request no more than four times per year to transfer in multiples of 25% of the
value of the participant's account balance from an investment fund into any
available investment fund. The Deferred Compensation Plan is administered by a
Plan Administrator, who is an officer or employee of Pawling. The Administrator
is responsible for all functions related to the management of the Deferred
Compensation Plan accounts and their distribution. The liability of Progressive
and Pawling to the participant with respect to benefits payable under the
Deferred Compensation Plan are unsecured contractual obligations. Progressive
and Pawling have, however, established grantor trusts that segregate assets for
the payment of benefits. No payments have been made, as of this date, under this
Plan, and Progressive has incurred no expenses under this Plan.
Transactions with Management
As a savings bank, Pawling is authorized under the New York Banking
Law and regulations to make loans to its executive officers and directors and to
the executive officers and directors of Progressive and Pawling. All such loans
must be approved by the Board of Directors of Pawling or an authorized
committee. If such loan is secured by a first lien on a residence of such
executive officer or director, or if the principal amount of the loan, when
aggregated with
28
<PAGE>
the unpaid principal amount of all other loans by Pawling to the executive
officer or director, exceeds $25,000 or 5% of its capital stock, surplus funds
and undivided profits, whichever is higher, the approval of Pawling's Board of
Directors is required. Also, loans to an executive officer or director in excess
of $500,000 in the aggregate may be made only if the approval of the Board of
Directors of Progressive has been obtained. At December 31, 1997, Progressive
and Pawling had no loans to directors or executive officers in excess of
$500,000.
At December 31, 1997, all of Pawling's loans to officers and directors
and employees were in the ordinary course of business, on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons. These loans do not involve more
than the normal risk of collectibility or present other unfavorable features.
Security Ownership of Management
The following table sets forth, as of March 26, 1998, the beneficial
ownership of Progressive's Common Stock by each of Progressive's directors and
the executive officers named in the Summary Compensation Table and by all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Percent of
Shares of
Amount and Nature of Common Stock
Beneficial Ownership (1) Outstanding
------------------------ -----------
Name Shares Options (2)
- ---- ------ -----------
<S> <C> <C> <C>
Elizabeth P. Allen 7,434 10,800 *
Thomas C. Aposporos 5,700 9,000 *
George M. Coulter 29,200 10,800 1.0
Richard T. Hazzard 8,112 10,800 *
Richard Novik 6,207 10,800 *
John J. Page 19,180 (3) 10,800 *
Archibald A. Smith, III 750 10,800 *
Roger W. Smith 1,500 10,800 *
David A. Swinden 1,182 10,050 *
Peter Van Kleeck 34,361 88,200 3.2
Robert A. Gabrielsen 8,433 45,000 1.4
John A. Eickman -- -- *
Robert Apple 500 7,345 *
All directors and executive officers of 122,559 235,195 9.3
Progressive as a group (13 persons)
</TABLE>
- ----------
* Less than 1%.
(1) For the definition of beneficial ownership, see footnote 1 to the
table in "-- Voting Securities and Principal Holders Thereof." Unless
otherwise indicated, ownership is direct and the named individual
exercises sole voting and investment power over the shares listed as
beneficially owned by such person.
(2) Consists of shares which may be acquired pursuant to options
exercisable within 60 days after March 26, 1998.
(3) Includes 9,497 shares held by spouse and by children living at home.
29
<PAGE>
PROPOSAL II - RATIFICATION OF AUDITORS
The Board of Directors of Progressive has appointed the firm of KPMG
Peat Marwick LLP, independent certified public accountants, to be Progressive's
auditors for the 1998 fiscal year, subject to ratification by Progressive's
stockholders. A representative of KPMG Peat Marwick LLP will be present at the
Annual Meeting to respond to stockholders' questions and will have the
opportunity to make a statement if he or she so desires.
The appointment of the auditors must be approved by a majority of the
votes cast by the stockholders of Progressive at the Annual Meeting. The Board
of Directors recommends that stockholders vote "FOR" the approval of the
ratification of the appointment of auditors.
PROPOSAL III - APPROVAL OF MERGER
This section of this Proxy Statement / Prospectus describes certain
aspects of the Merger. The following description does not purport to be complete
and is qualified in its entirety by reference to the Agreement, which is
attached as Appendix A to this Proxy Statement / Prospectus and is incorporated
herein by reference. All stockholders are urged to read the Agreement in its
entirety.
The Companies
Hudson Chartered and Hudson Valley. Hudson Chartered is a New York
corporation with headquarters at 20 Mill Street, Rhinebeck, New York 12572.
Hudson Chartered is registered with the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") as a bank holding company within
the meaning of the Bank Holding Company Act of 1956, as amended (the "BHCA").
Hudson Chartered's principal subsidiary is Hudson Valley.
At December 31, 1997, Hudson Chartered, on a consolidated basis, had
total assets of approximately $732 million, total deposits of $654 million and
stockholders' equity of $70 million. At that date, Hudson Chartered and Hudson
Valley employed 319 full-time equivalent employees.
Hudson Valley was chartered under the national banking laws in 1863
and is a member of the Federal Reserve System. It operates its main office at
289-291 Main Mall, Poughkeepsie, New York, and twenty other branch offices and
six offsite automated teller machines in Dutchess, Ulster, Putnam, and Orange
Counties. Hudson Valley is a member of the Federal Home Loan Bank of New York
(the "FHLBNY") and its deposits are insured up to the prescribed limits by the
FDIC. Hudson Valley is subject to comprehensive regulation, supervision and
examination by the Office of the Comptroller of the Currency ("Comptroller"),
the Federal Reserve Board and the FDIC.
Hudson Valley conducts a general commercial banking and trust
business. It offers retail and wholesale banking services including demand,
savings and time deposits, commercial, mortgage and installment loans, consumer
banking and trust services. Services offered by Hudson Valley's trust department
include trust administration, investment management, and custody services.
The executive offices of Hudson Chartered and Hudson Valley are
located at Route 55, LaGrangeville, New York 12540. The telephone number is
(914) 471-1711.
Before the announcement of the proposed Merger, Hudson Chartered had
adopted a stock repurchase program, pursuant to which Hudson Chartered was
authorized to repurchase outstanding shares of Hudson Chartered Common Stock
from time to time. Since then, Hudson Chartered has rescinded its authorization
for further open market treasury stock purchases.
30
<PAGE>
For additional information, see "SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA -- HUDSON CHARTERED" and "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS." Additional information about Hudson Chartered and Hudson
Valley also is included in the Hudson Chartered documents incorporated by
reference herein. See "AVAILABLE INFORMATION."
Progressive and Pawling. Progressive is a New York corporation with
headquarters at 1301 Route 52, Fishkill, New York 12524. Progressive is
registered with the Federal Reserve Board as a bank holding company within the
meaning of the BHCA. Progressive's sole subsidiary is Pawling.
At December 31, 1997, Progressive, on a consolidated basis, had total
assets of approximately $883 million, total deposits of $799 million and
stockholders' equity of $78 million. At that date, Progressive and Pawling
employed 265 people on a full-time equivalent basis.
Pawling, a New York state-chartered stock savings bank, was organized
in 1870 as a mutual savings bank and converted to stock form in 1984. Pawling
currently conducts business through a network of 17 full service branch
locations in seven southern tier counties of New York State: Dutchess, Sullivan,
Orange, Putnam, Ulster, Rockland and Westchester. In 1993, Pawling began
originating loans in the Connecticut counties of Fairfield, Hartford, New Haven
and Litchfield. In addition, originations of one-to-four family mortgage loans
were expanded in 1995 to include the New York counties of Nassau and Suffolk.
Pawling provides a full range of community banking services to meet the needs of
the communities it serves. Pawling is engaged principally in the business of
attracting retail deposits from the general public and the business community
and investing those funds in residential and commercial mortgages, consumer
loans and securities. Pawling is a member of the FHLBNY, and its deposits are
insured up to the prescribed limits by the FDIC. Pawling is subject to
comprehensive examination, supervision and regulation by the FDIC and the State
of New York.
The executive offices of Progressive and Pawling are located at 1301
Route 52, Fishkill, New York 12524. The telephone number is (914) 897-7400.
Before the announcement of the proposed Merger, Progressive had
adopted a stock repurchase program, pursuant to which Progressive was authorized
to repurchase outstanding shares of Progressive Common Stock from time to time.
Since then, Progressive has rescinded its authorization for further open market
treasury stock purchases.
For additional information, see "SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA -- PROGRESSIVE" and "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS." Additional information about Progressive and Pawling also
is included in the Progressive documents incorporated by reference herein. See
"AVAILABLE INFORMATION."
The Continuing Corporation and Continuing Bank. The Continuing
Corporation will be a New York corporation and will result from a change in the
name of Hudson Chartered. The Continuing Corporation will own all of the capital
stock of the Continuing Bank and will engage, through the Continuing Bank, in
the business of banking and banking related activities. The Continuing
Corporation's principal executive offices will be located at Route 55, P.O. Box
310, LaGrangeville, New York 12540 and its telephone number will be (914)
471-1711.
As of December 31, 1997, on a pro forma basis, the Continuing
Corporation would have had total assets of approximately $1.6 billion, total
deposits of approximately $1.5 billion and total stockholders' equity of
approximately $149 million.
The Continuing Bank will serve approximately 91,000 households through
a network of full service branch offices located in Dutchess, Orange, Putnam,
Rockland, Sullivan, Ulster and Westchester Counties in New York. The Bank Merger
will expand the products and services that are currently offered individually by
Hudson Valley and
31
<PAGE>
Pawling. Following the Bank Merger, all branch offices of the Continuing Bank
will offer the full array of loan, deposit and other financial products and
services of the combined entity.
See "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA" and "UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS." A map showing the expected
banking locations of the Continuing Bank following consummation of the Merger
appears on page 16.
Background of the Merger
Hudson Chartered and Progressive have traditionally concentrated their
respective business activities on providing community banking services in the
Mid-Hudson Valley area of New York State. Hudson Chartered has been principally
focused on commercial and small business banking, and Progressive has emphasized
consumer and personal banking. Over the past several years, the environment for
independent community banks in general, and specifically in the market areas
served by Hudson Chartered and Progressive, has become increasingly competitive.
This is due principally to the marketing and business development strategies of
certain regional and so-called super-regional banking organizations that are
active in their market areas. The resulting pressures on both margins and loan
growth have been compounded by the high cost of maintaining skilled staff while
simultaneously introducing competitive technology and products.
At the same time, the economies of the traditional market areas of
Hudson Chartered (Dutchess and Ulster Counties) and Progressive (Dutchess,
Ulster and Sullivan Counties) have suffered from both downsizing by the area's
principal private sector employer (IBM) and declines in the tourism industry in
the Southern Catskills region. Accordingly, both Hudson Chartered and
Progressive have individually faced the high cost of achieving income and risk
diversification by entering more attractive geographic markets (Hudson Chartered
into Orange County and Progressive into Westchester and Rockland Counties).
Thus, Hudson Chartered and Progressive both recognized the need to
grow and diversify. In the current environment, however, they also recognized
that it would be difficult to make any material acquisition without substantial
capital dilution. Moreover, Hudson Chartered and Progressive each believed that
providing an independently managed, service-focused, community banking
alternative to the super-regional banking organizations remained an attractive,
long-term strategy for building stockholder value. Accordingly, they separately
concluded that it would be in the best interests of their respective
stockholders and other constituents to remain independent community banks and to
seek competitive strength through strategic mergers that would provide
opportunities for both cost consolidation as well as geographic and product
expansion.
Toward this end, Hudson Chartered's management had approached two
smaller financial institutions in adjoining markets late in 1996 and early in
1997 to discuss their interest in a business combination with Hudson Chartered.
Neither of these approaches elicited any definitive interest. Similarly, over
the past few years, Progressive's management also had approached selected
financial institutions in its market area to discuss a possible business
combination. These conversations did not result in any substantive agreement.
Peter Van Kleeck, President of Progressive, and T. Jefferson
Cunningham III, Chairman of Hudson Chartered, who were both raised in Dutchess
County and are members of families who have lived in the Hudson Valley for
generations, were well known to each other. In the normal conduct of their
business affairs, these two local bankers served together on many area
organizations, particularly those focused on economic development. They have met
regularly, both socially and professionally, for many years.
During late 1996 and early 1997, Mr. Van Kleeck and Mr. Cunningham met
several times and exchanged views on the evolving nature of the banking industry
in their marketplace, involving possible effects of a combination of Progressive
and Hudson Chartered, and Progressive consulted with its financial advisor with
respect to various financial matters, including analyses of a possible business
combination of Progressive with Hudson Chartered. Given the
32
<PAGE>
different business focus of their respective institutions, customer competition
between them was modest. They discussed the respective challenges they faced
(Hudson Chartered in commercial banking and Progressive in consumer banking) and
the different strategies they might each pursue to meet their respective
objectives. During these conversations, it became apparent that, despite the
wave of consolidations taking place in the banking industry, each of the banking
institutions which they represented shared a commitment to continue as a
service-based independent bank.
During the summer of 1997, Messrs. Van Kleeck and Cunningham met
several more times, and it became apparent that there might be considerable
benefit in examining a strategic combination between Hudson Chartered and
Progressive. Such a combination could significantly contribute to the strategic
objectives which each institution had previously identified: the potential for
branch consolidation (with seven overlapping branches), new market opportunities
(in Orange, Putnam, Eastern Ulster and Eastern Dutchess Counties for
Progressive, and in Sullivan, Rockland and Westchester Counties for Hudson
Chartered), cost reductions (integration of data processing, information
technology and corporate overhead), product enhancement (commercial credit and
trust services to Progressive's customers, and residential mortgage, investment
products and automated retail services to Hudson Chartered's customers), and a
shared commitment to independent, service-based banking by their respective
managements and Boards of Directors. The resulting institution would be strongly
capitalized and well balanced between personal and commercial banking, enjoy
strong market shares in three geographically diversified counties (covering all
counties in Southeastern New York) and be well positioned for future growth in
attractive markets by consolidating its position in Orange, Rockland and
Westchester Counties as well as expanding into adjoining markets. Its franchise
value and its earnings potential also should be very attractive. In addition, it
was agreed that, given the two organizations' respective sizes, earnings
performance, cultures and business objectives, such a combination would be
implemented most effectively as a strategic merger of the two organizations,
with neither organization being effectively acquired by the other, in a "merger
of equals."
Mr. Van Kleeck and Mr. Cunningham discussed the possibility of a
merger of Hudson Chartered and Progressive with several of their respective
Board members, who agreed it was worthy of further consideration. Early in the
fall of 1997, representatives of the parties met to consider the financial basis
upon which a "merger of equals" could be achieved. It appeared, based on a broad
analysis, that the proposed merger could be of substantial potential future
value to both companies' stockholders and that an exchange ratio appropriate to
such a "merger of equals" should be negotiable without significant difficulty.
Conversations continued in October 1997, at which time estimates of
potential cost savings were prepared by Hudson Chartered and Progressive and
certain pro forma financial information was developed to highlight estimated
impacts of the merger on the financial condition and future performance of the
combined companies. Various issues were also discussed including Board of
Directors, management and organizational structure.
The Boards of Directors of Hudson Chartered and Progressive each
received reports from their respective managements on a potential merger at
Board meetings held in mid-October 1997. Based on the management reports, each
Board authorized its respective management to engage in detailed discussions to
evaluate such an opportunity and authorized the signing of a confidentiality
letter agreement between the two parties.
From that time through early December, representatives of Hudson
Chartered and Progressive continued to meet to discuss the potential merger and
to exchange information regarding each company's financial condition, loan
portfolio and employee compensation and benefit programs. A meeting among senior
officers of Hudson Chartered and Progressive and the respective special legal
counsel for each company was held on October 31, 1997, and a meeting among the
parties and their respective independent accountants was held on November 3,
1997. The Boards of Directors of Hudson Chartered and Progressive again received
reports from their respective managements at Board meetings in mid-November as
to the status of the merger discussions. Hudson Chartered's special legal
counsel and its financial advisor, Keefe Bruyette, attended Hudson Chartered's
Board Meeting, and Keefe Bruyette reviewed certain historical financial
information relating to Hudson Chartered and Progressive and certain projected
financial information with respect to the combined company. Progressive's
special legal counsel and its financial advisor, Sandler O'Neill,
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attended Progressive's Board Meeting, and Sandler O'Neill reviewed certain
historical financial information relating to Hudson Chartered and Progressive
and certain projected financial information with respect to the combined
company. At this time, Progressive's Board also formed a special committee,
consisting of three outside directors and the Chief Executive Officer, to
consult with and provide guidance to Progressive's management and financial and
legal advisors regarding matters related to the possible merger as appropriate
between Board meetings. The committee consisted of directors Allen, Aposporos,
R. Smith and Van Kleeck and was formed for the purpose of assisting management
with issues that arose during the negotiation process. This committee held three
meetings which were held on November 20, 1997, December 15, 1997 and December
16, 1997. During these meetings, the Committee discussed and made
recommendations with respect to the name of the new company, board committee
assignments for the new company and management positions with the new company.
On November 24, 1997, the two companies' respective counsel began
negotiation of a draft merger agreement and various related agreements and other
documents. On December 3, 1997, the companies' respective independent
accountants made a joint presentation to selected members of the senior
management of both institutions on the progress of their financial review
efforts, including harmonization of loan provisioning policies, employee
compensation plans and obligations, tax implications of the proposed merger,
merger accounting issues, and other related matters. On December 4, 1997,
Sandler O'Neill, representing Progressive, and Keefe Bruyette, representing
Hudson Chartered, met with members of the senior managements of both
institutions to discuss and analyze the issue of an appropriate exchange ratio
between the parties. No agreement as to an exchange ratio was reached at this
meeting, due largely to inconsistencies in the pricing and valuation models.
During this period, representatives of the parties met regularly to further
refine the proposed organizational structure and plans for consolidating the two
companies.
On December 10, 1997, Mr. Cunningham and Mr. Van Kleeck met to
discuss, among other things, an exchange ratio. The ranges under consideration
by that time were close, and it was acknowledged that, in light of the
comparable contributions of the respective companies to the combined company's
total loans, deposits, equity, income and market capitalization, an exchange
ratio should be calculated so that, following the consummation of the Merger,
the stockholders of Hudson Chartered and the stockholders of Progressive, each
as a group, would own approximately half of the outstanding shares of Continuing
Corporation Common Stock, after giving effect to all existing and anticipated
future stock options and other stock issuances. Between December 10 and 16,
1997, an exchange ratio was tentatively set, various other issues were resolved,
and each institution's due diligence investigation of the other institution was
completed.
On December 16, 1997, Hudson Chartered's and Progressive's Boards of
Directors met separately to consider the Agreement as well as the financial
terms and other proposed terms and conditions of the Merger, including the
Exchange Ratio of 1.82 shares of Hudson Chartered Common Stock for each share of
Progressive Common Stock. At Progressive's Board meeting, Sandler O'Neill
reviewed certain historical information relating to Hudson Chartered and
Progressive and certain projected financial information with respect to the
combined company and gave its opinion that the Exchange Ratio was fair to
Progressive's stockholders from a financial point of view. Progressive's special
legal counsel, Housley Kantarian & Bronstein, P.C., discussed with Progressive's
Board the proposed structure of the Merger, the proposed terms of the Agreement,
the proposed Stock Option Agreements and the proposed letter agreements to be
executed by the directors and executive officers of Progressive and Hudson
Chartered with respect to the Merger. Progressive's independent accountants,
KPMG Peat Marwick LLP, discussed the results of their financial review efforts
and discussed merger accounting issues and related matters. At Hudson
Chartered's Board meeting, Keefe Bruyette reviewed certain historical
information relating to Hudson Chartered and Progressive and certain projected
financial information with respect to the combined company and gave its opinion
that the Exchange Ratio was fair to Hudson Chartered's stockholders from a
financial point of view. Hudson Chartered's special legal counsel, Arnold &
Porter, discussed with Hudson Chartered's Board the proposed structure of the
Merger, the proposed terms of the Agreement, the proposed Stock Option
Agreements and the proposed letter agreements to be executed by the directors
and executive officers of Hudson Chartered and Progressive with respect to the
Merger, and Hudson Chartered's local legal counsel, Van DeWater and Van DeWater,
discussed with Hudson Chartered's Board certain related matters with respect to
the
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Merger. Hudson Chartered's independent accountants, Deloitte & Touche LLP,
discussed the results of their financial review efforts and discussed merger
accounting issues and related matters.
After consideration and discussion of the proposed transaction and
consultation with their respective managements and financial advisors and
special legal counsel, Hudson Chartered's and Progressive's Boards of Directors
both concluded that the Merger would advance their respective business
strategies and objectives, for the reasons described below. Accordingly, the
respective Boards of Directors of the two companies each approved the Merger,
the Agreement and the proposed Stock Option Agreements as being in the best
interests of their respective stockholders and other constituencies and directed
that the Merger and each of the foregoing agreements be submitted for approval
by their respective stockholders at meetings thereof. Following Progressive's
Board meeting, Progressive received by telecopy a letter from an out of area
banking organization, which previously had indicated an interest in meeting to
discuss the possibility of a sale of Progressive to that organization,
expressing a possible interest in acquiring Progressive in exchange for stock of
the other organization at a fixed exchange rate which the letter indicated would
equate to a value of approximately $45 per share of Progressive Common Stock.
The letter was not a legally binding offer and was expressly subject to various
conditions. In light of this letter, Progressive's management immediately
canvassed its directors to assess their views as to whether the Merger continued
to be in the best interests of Progressive and its stockholders, and
Progressive's directors confirmed their continued approval of the unique
opportunity to achieve a strategic merger with Hudson Chartered. Promptly
thereafter, the parties executed the Agreement and the Stock Option Agreements
and issued press releases announcing the proposed Merger.
In January 1998, Progressive and Sandler O'Neill reviewed the terms of
the Merger in light of analyses of historical information relating to the other
banking organization which had expressed an interest in acquiring Progressive
and projected financial information with respect to a hypothetical combined
company. Progressive's Board of Directors considered the $45 per share indicated
value of the expression of interest from the other banking organization and the
approximately $39 per share value of the Agreement with Hudson Chartered at that
time, in light of the fundamental difference between achieving a strategic
merger with Hudson Chartered versus simply being acquired, as well as historical
and pro forma financial information regarding the two companies and the two
transactions and the fact that one transaction was the fully negotiated subject
of the executed Agreement while the other transaction was only proposed in an
expression of interest that would be subject to thorough due diligence
investigations and extensive negotiation of key provisions, including final
pricing terms and mechanisms, before any agreement could be reached. In light of
the unique opportunities presented by a merger of equals with Hudson Chartered,
including the compatibility of Progressive's and Hudson Chartered's
complementary customer bases, business strategies, management philosophies,
branch networks and back offices, as described above and in the section below,
Progressive's Board of Directors confirmed and ratified its approval of the
Merger and its conclusion that the Merger is in the best interests of
Progressive, its stockholders, employees and the communities Progressive serves.
Reasons for the Merger and Recommendation of the Board of Directors
Progressive. In reaching its decision to approve the Merger,
Progressive's Board of Directors considered a number of factors, including the
factors described under "-- Background of the Merger" and:
(i) the respective business, operations, asset quality, financial
condition, earnings, strategic business plans, competitive positions and stock
price performance of Hudson Chartered and Progressive (see "-- Background of the
Merger" and "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA");
(ii) the ability to pursue new market opportunities, benefit from new
products and product enhancements and expand its mortgage lending business;
(iii) the similar community banking cultures and business philosophies
of the two companies, particularly with respect to customer satisfaction,
efficiency and credit quality and serving the banking needs of their respective
communities, and the companies' compatible management teams;
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(iv) the projected market capitalization and market position of the
combined entity (Pawling's 17 branch network would expand on a consolidated
basis to 35 branches, and management estimates that the combined company would
enjoy either the first or second position in market share ranking in its
principal market area of Dutchess, Ulster and Putnam counties), the
diversification of the companies' asset and deposit bases, and the ability of
the combined company to compete more effectively in the Hudson Valley region of
New York (see "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA" and "UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS");
(v) the pro forma financial effects of the proposed transactions,
including the aggregate cost savings (resulting from back office efficiencies,
branch closures, position eliminations, consolidations and other cost savings),
which are estimated by management to approximate $1.3 million, $2.7 million and
$2.9 million in 1998, 1999 and 2000, respectively, and enhanced revenue
anticipated to result from the Merger and the Bank Merger, and the effects of
the Merger and the Bank Merger on the risk-based and leverage capital ratios of
the Continuing Corporation and the Continuing Bank (see "SELECTED HISTORICAL AND
PRO FORMA FINANCIAL DATA," "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS" and "-- Management and Operations After the Merger");
(vi) the likely impact of the proposed Merger on the employees and
customers of Progressive and its subsidiaries, on the communities in which
Progressive presently conducts its business, and on Progressive's other
constituencies;
(vii) the current and prospective economic, regulatory and competitive
climate facing independent community banking organizations, including the
consolidation currently underway in the banking industry and competition from
larger institutions and from nonbank providers of financial services (see
"-- Background of the Merger");
(viii) the Exchange Ratio in the Merger from a number of valuation
perspectives, as presented to Progressive by Sandler O'Neill, and the current
market value of the Merger to Progressive's stockholders (see "-- Opinions of
Financial Advisors");
(ix) the December 16, 1997 opinion of Sandler O'Neill that the
Exchange Ratio is fair to Progressive's stockholders from a financial point of
view (see "-- Opinions of Financial Advisors");
(x) the terms of the Agreement, including the proposed Board
representation and management structure of the combined company (see
"-- Management and Operations After the Merger");
(xi) the terms of the Stock Option Agreements (see "-- Stock Option
Agreements");
(xii) the regulatory and stockholder approvals required for the
consummation of the Merger and the Bank Merger (see "-- Regulatory Approvals");
(xiii) the treatment of the Merger as a pooling-of-interests for
financial accounting purposes and as a tax-free reorganization for federal
income tax purposes (see "-- Federal Income Tax Consequences" and "-- Accounting
Treatment");
(xiv) the restructuring charges of approximately $5.6 million on an
after-tax basis that the Continuing Corporation is expected to take in
connection with the Merger and the impact of these charges on the combined
company's earnings (see "-- Management and Operations After the Merger");
(xv) the fact that the Merger is expected to be accretive to the
combined company's earnings during the first full year of operations -- based on
estimated cost savings alone, the Merger would be accretive to analysts'
estimates
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of Progressive's 1998 and 1999 earnings per share by approximately 6.9% and
13.1%, respectively, and similarly accretive to analysts' estimates of Hudson
Chartered's 1998 and 1999 earnings per share by approximately 5.8% and 12.2%,
respectively (see "-- Management and Operations After the Merger"); and
(xvi) the likelihood that the Merger will result in increased
liquidity and trading volumes for shares of Continuing Corporation Common Stock.
The foregoing discussion of information and factors considered by
Progressive's Board of Directors is not intended to be exhaustive but includes
all material factors considered by the Board. In reaching its determination to
approve and recommend the Merger, Progressive's Board did not assign relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors.
IN LIGHT OF THE REASONS DESCRIBED ABOVE, PROGRESSIVE'S BOARD OF
DIRECTORS HAS DETERMINED THE MERGER TO BE FAIR TO AND IN THE BEST INTERESTS OF
PROGRESSIVE AND PROGRESSIVE'S STOCKHOLDERS, CUSTOMERS AND COMMUNITIES SERVED.
ACCORDINGLY, PROGRESSIVE'S BOARD HAS UNANIMOUSLY APPROVED THE AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
Hudson Chartered. In reaching the decision to approve the Merger,
Hudson Chartered's Board of Directors considered a number of factors, including
the factors described under "-- Background of the Merger" and:
(i) the respective business, operations, asset quality, financial
condition, earnings, strategic business plans, competitive positions and stock
price performance of Progressive and Hudson Chartered (see "-- Background of the
Merger" and "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA");
(ii) the ability to pursue new market opportunities in three
additional counties, benefit from new products and product enhancements, and
expand its residential mortgage lending business;
(iii) the similar community banking cultures and business philosophies
of the two companies, particularly with respect to customer satisfaction,
efficiency and credit quality and serving the banking needs of their respective
communities, and the companies' compatible management teams;
(iv) the projected market capitalization and market position of the
combined entity (Hudson Valley's 23 branch network in four counties would expand
on a consolidated basis to 35 branches in seven counties, and management
estimates that the combined company would enjoy either the first or second
position in market share ranking in its principal market area of Dutchess,
Ulster and Putnam counties), the diversification of Hudson Chartered's asset and
deposit bases, and the ability of the combined company to compete more
effectively in the Hudson Valley region of New York (see "SELECTED HISTORICAL
AND PRO FORMA FINANCIAL DATA" and "UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS");
(v) the pro forma financial effects of the proposed transactions,
including the aggregate cost savings (resulting from back office efficiencies,
branch closures, position eliminations, consolidations and other cost savings),
which are estimated by management to approximate $1.3 million, $2.7 million and
$2.9 million in 1998, 1999 and 2000, respectively, and enhanced revenue
anticipated to result from the Merger and the Bank Merger, and the effects of
the Merger and the Bank Merger on the risk-based and leverage capital ratios of
the Continuing Corporation and the Continuing Bank (see "SELECTED HISTORICAL AND
PRO FORMA FINANCIAL DATA," "UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS" and "-- Management and Operations After the Merger");
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(vi) the likely impact of the proposed Merger on the employees and
customers of Hudson Chartered and its subsidiaries, on the communities in which
Hudson Chartered presently conducts its business, and on Hudson Chartered's
other constituencies;
(vii) the current and prospective economic, regulatory and competitive
climate facing independent community banking organizations, including the
consolidation currently underway in the banking industry and competition from
larger institutions and from nonbank providers of financial services (see "--
Background of the Merger");
(viii) the Exchange Ratio in the Merger from a number of valuation
perspectives, as presented to Hudson Chartered by Keefe Bruyette, and the
current market value of the Merger to Hudson Chartered's stockholders (see "--
Opinions of Financial Advisors");
(ix) the December 16, 1997 opinion of Keefe Bruyette that the Exchange
Ratio is fair to Hudson Chartered's stockholders from a financial point of view
(see "-- Opinions of Financial Advisors");
(x) the terms of the Agreement, including the proposed Board
representation and management structure of the combined company (see "--
Management and Operations After the Merger");
(xi) the terms of the Stock Option Agreements (see "-- Stock Option
Agreements");
(xii) the regulatory and stockholder approvals required for the
consummation of the Merger and the Bank Merger (see "-- Regulatory Approvals");
(xiii) the treatment of the Merger as a pooling-of-interests for
financial accounting purposes and as a tax-free reorganization for federal
income tax purposes (see "-- Federal Income Tax Consequences" and "-- Accounting
Treatment");
(xiv) the restructuring charges of approximately $5.6 million on an
after-tax basis that the Continuing Corporation is expected to take in
connection with the Merger and the impact of these charges on the combined
company's earnings (see "-- Management and Operations After the Merger");
(xv) the fact that the Merger is expected to be accretive to the
combined company's earnings during the first full year of operations -- based on
estimated cost savings alone, the Merger would be accretive to analysts'
estimates of Hudson Chartered's 1998 and 1999 earnings per share by
approximately 5.8% and 12.2%, respectively, and similarly accretive to analysts'
estimates of Progressive's 1998 and 1999 earnings per share by approximately
6.9% and 13.1%, respectively (see "-- Management and Operations After the
Merger"); and
(xvi) the likelihood that the Merger will result in increased
liquidity and trading volumes for shares of Continuing Corporation Common Stock.
The foregoing discussion of information and factors considered by
Hudson Chartered's Board of Directors is not intended to be exhaustive but
includes all material factors considered by the Board. In reaching its
determination to approve and recommend the Merger, Hudson Chartered's Board did
not assign relative or specific weights to the foregoing factors, and individual
directors may have given differing weights to different factors.
Opinions of Financial Advisors
Sandler O'Neill & Partners, L.P. Pursuant to an engagement letter
dated as of November 4, 1997 (the "Sandler O'Neill Agreement"), Progressive
retained Sandler O'Neill as an independent financial advisor in connection with
Progressive's consideration of a possible business combination with a second
party. Sandler O'Neill is a nationally
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recognized investment banking firm whose principal business specialty is banks
and savings institutions. In the ordinary course of its investment banking
business, Sandler O'Neill is regularly engaged in the valuation of such
businesses and their securities in connection with mergers and acquisitions and
other corporate transactions.
Pursuant to the terms of the Sandler O'Neill Agreement, Sandler
O'Neill acted as financial advisor to Progressive in connection with the Merger.
In connection therewith, Progressive's Board of Directors asked Sandler O'Neill
to render its opinion as to the fairness, from a financial point of view, of the
Exchange Ratio to the holders of Progressive Common Stock. At the December 16,
1997 meeting at which Progressive's Board approved and adopted the Agreement,
Sandler O'Neill delivered to Progressive's Board its written opinion that, as of
such date, the Exchange Ratio was fair, from a financial point of view, to the
holders of shares of Progressive Common Stock. Sandler O'Neill has also
delivered to Progressive's Board a written opinion dated as of the date of this
Proxy Statement / Prospectus (the "Sandler O'Neill Fairness Opinion") which is
substantially identical to its December 16, 1997 opinion.
The full text of the Sandler O'Neill Fairness Opinion, which sets
forth procedures followed, assumptions made, matters considered and
qualifications and limitations on the review undertaken in connection with such
opinion, is attached as Appendix B to this Proxy Statement / Prospectus and is
incorporated herein by reference. The descriptions of the opinions set forth
herein are qualified in their entirety by reference to Appendix B. Holders of
shares of Progressive Common Stock are urged to read the Sandler O'Neill
Fairness Opinion in its entirety in connection with their consideration of the
Merger.
Sandler O'Neill's opinions were provided to Progressive's Board of
Directors for its information and are directed only to the fairness, from a
financial point of view, of the Exchange Ratio to holders of shares of
Progressive Common Stock. They do not address the underlying business decision
of Progressive to engage in the Merger or any other aspect of the Merger and do
not constitute a recommendation to any holder of shares of Progressive Common
Stock as to how such stockholder should vote at the Annual Meeting with respect
to the Agreement or any other matter related thereto.
In connection with rendering its opinions, Sandler O'Neill performed a
variety of financial analyses. The following is a summary of analyses performed
by Sandler O'Neill, but does not purport to be a complete description of all the
analyses underlying Sandler O'Neill's opinions. The preparation of a fairness
opinion is a complex process involving subjective judgments and is not
necessarily susceptible to a partial analysis or summary description. Sandler
O'Neill believes that its analyses must be considered as a whole and that
selecting portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view of the
analyses and processes underlying its opinions. In performing its analyses,
Sandler O'Neill made numerous assumptions with respect to industry performance,
business and economic conditions and various other matters, many of which cannot
be predicted and are beyond the control of Progressive, Hudson Chartered and
Sandler O'Neill. Any estimates contained in Sandler O'Neill's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates. Estimates on the values of companies
do not purport to be appraisals or necessarily reflect the prices at which
companies or their securities may actually be sold. Because such estimates are
inherently subject to uncertainty, neither Progressive, Hudson Chartered nor
Sandler O'Neill assumes responsibility for their accuracy.
Summary of Proposal. Sandler reviewed the financial terms of
the proposed transaction. Sandler O'Neill noted that the negotiated
Exchange Ratio of 1.82 was designed to approximate the relative
contribution by each institution to the earnings of the combined
company. Based on the closing price of Hudson Chartered Common Stock
on December 12, 1997 of $21.88, Sandler calculated an implied
transaction value per share of Progressive Common Stock of $39.82.
Based upon Progressive's September 30, 1997 financial information,
Sandler calculated the price to tangible book value, price to last
twelve months' earnings and core deposit premium. This analysis
yielded a price to tangible book value multiple of 219%, a price to
last twelve months' earnings multiple of 18.1x and a core deposit
premium of 9.5%.
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Stock Trading History. Sandler O'Neill reviewed the history
of the reported trading prices and volume of the Progressive Common
Stock and the Hudson Chartered Common Stock, and the relationship
between the movements in the prices of the Progressive Common Stock
and the Hudson Chartered Common Stock, respectively, to movements in
certain stock indices, including the Standard & Poor's 500 Index, the
NASDAQ Bank Index and composite groups of publicly traded savings
institutions (in the case of Progressive) and publicly traded
commercial banks (in the case of Hudson Chartered) in geographic
proximity and of similar asset size to Progressive and Hudson
Chartered, respectively. During the one-year period ended December 12,
1997, the Progressive Common Stock outperformed the S&P 500 Index and
its peer group index, and performed on par with the Nasdaq Banking
Index. During the one-year period ended December 12, 1997, the Hudson
Chartered Common Stock outperformed the S&P 500 Index, was on par with
its peer group index, and lagged the Nasdaq Bank Index.
Analysis of Selected Publicly Traded Companies. Sandler
O'Neill used publicly available information to compare selected
financial and market trading information, including balance sheet
composition, asset quality ratios, loan loss reserve levels,
profitability, capital adequacy, dividends and trading multiples for
Progressive and two different groups of savings institutions. The
first group consisted of Progressive and the following 11 publicly
traded regional savings institutions (the "Regional Group"): Ocean
Financial Corp., Dime Community Bancorp Inc., PennFed Financial
Services Inc., Maryland Federal Bancorp, York Financial Corp.,
Parkvale Financial Corporation, Flushing Financial Corp., PennFirst
Bancorp Inc., GA Financial Inc., MSB Bancorp, Inc. and IBS Financial
Corp. Sandler O'Neill also compared Progressive to a group of 8
publicly traded savings institutions which had a return on average
equity (based on last quarter annualized earnings) of greater than
14.8% and a price to tangible book value of greater than 188% (the
"Highly Valued Group"). The Highly Valued Group included the following
institutions: WSFS Financial Corp., Wilshire Financial Services,
Parkvale Financial Corporation, Dime Financial Corp., Metropolitan
Financial Corp., CFSB Bancorp Inc., North American Savings Bank and
Great Southern Bancorp Inc. The analysis compared publicly available
financial information for Progressive and each of the groups as of and
for each of the years ended December 31, 1992 through December 31,
1996 and as of and for the twelve months (and, in certain cases, the
three months) ended September 30, 1997.
Sandler O'Neill also used publicly available information to
perform a similar comparison of selected financial and market trading
information for Hudson Chartered and two different groups of
commercial banks. The first group consisted of Hudson Chartered and
the following 12 publicly traded commercial banks (the "Peer Group"):
Prime Bancorp Inc., FCNB Corp., Sterling Bancorp, Suffolk Bancorp,
Arrow Financial Corp., Southwest National Corp., Sun Bancorp Inc.,
State Bancorp Inc., CNB Financial Corp., Tompkins County Trustco Inc.,
Broad National Bancorp. and Vista Bancorp Inc. Sandler O'Neill also
compared Hudson Chartered to a group of 13 publicly traded commercial
banks which had a return on average equity (based on last twelve
months' earnings) of greater than 16% and a price to tangible book
value of greater than 241% (the "Commercial Highly Valued Group"). The
Commercial Highly Valued Group institutions included: CVB Financial
Corp., Harleysville National Corp., Sterling Bancshares Inc., Citizens
Bancshares, Cape Cod Bank & Trust Co., U.S.B. Holding Co., Suffolk
Bancorp, West Coast Bancorp, Lakeland Financial Corp., Tompkins County
Trustco Inc., Premier Bancshares Inc., Merchants Bancshares Inc. and
Anchor Financial Corp. The analysis compared publicly available
financial information for Hudson Chartered and each of the groups as
of and for each of the years ended December 31, 1992 through December
31, 1996 and as of and for the twelve months ended September 30, 1997.
Discounted Dividend Stream and Terminal Value Analysis.
Sandler O'Neill also performed an analysis which estimated the future
stream of after-tax dividend flows of Progressive through 2002 under
various circumstances, assuming Progressive performed in accordance
with information
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regarding potential future earnings provided by its management. To
approximate the terminal value of the Progressive Common Stock at the
end of the five-year period, Sandler O'Neill applied price to earnings
multiples ranging from 12x to 20x and applied multiples of tangible
book value ranging from 150% to 250% chosen to reflect difficult
assumptions regarding valuation multiples of the Progressive Common
Stock. The dividend income streams and terminal values were then
discounted to present values using different discount rates (ranging
from 6% to 16%) chosen to reflect different assumptions regarding
required rates of return of holders or prospective buyers of
Progressive Common Stock. This analysis, assuming the current dividend
payout ratio, indicated an imputed range of values per share of
Progressive Common Stock of between $25.67 and $61.38 when applying
the price to earnings multiples, and an imputed range of values per
share of the Progressive Common Stock of between $24.03 and $57.08
when applying multiples of tangible book value. Based on then recent
trading prices of shares of Hudson Chartered Common Stock (the last
sale price on December 15, 1997 was $21.75), and the Exchange Ratio
(1.82), the value of the Continuing Corporation Common Stock to be
issued in exchange for each share of Progressive Common Stock
(approximately $39.59) was near the middle of the valuation ranges
suggested by this analyses. In connection with its analysis, Sandler
O'Neill extensively used sensitivity analyses to illustrate the
effects changes in the underlying assumptions (including variations
with respect to the levels of assets, net interest spread,
non-interest income, non-interest expense and dividend payout ratio)
and changes in price to earnings and price to tangible book value
multiples would have on the resulting present value, and discussed
these changes with Progressive's Board of Directors.
Sandler O'Neill also performed a similar analysis which
estimated the future stream of after-tax dividend flows of Hudson
Chartered through 2002 under various circumstances, assuming Hudson
Chartered performed in accordance with information regarding potential
future earnings provided by its management. To approximate the
terminal value of Hudson Chartered Common Stock at the end of the
five-year period, Sandler O'Neill applied price to earnings multiples
ranging from 12x to 22x and applied multiples of tangible book value
ranging from 175% to 300%. The dividend income streams and terminal
values were then discounted to present values using different discount
rates (ranging from 9% to 14%) chosen to reflect different assumptions
regarding required rates of return of holders or prospective buyers of
Hudson Chartered Common Stock. This analysis, assuming the current
dividend payout ratio, indicated an imputed range of values per share
of Hudson Chartered Common Stock of between $14.98 and $31.74 when
applying the price to earnings multiples, and an imputed range of
values per share of Hudson Chartered Common Stock of between $15.58
and $31.13 when applying multiples of tangible book value. Based on
then recent trading prices of shares of Hudson Chartered Common Stock
(the last sale price on December 15, 1997 was $21.75), the value of
the Continuing Corporation Common Stock to be issued in lieu of each
share of Hudson Chartered Common Stock (approximately $21.75) was near
the middle of the valuation ranges suggested by this analyses. In
connection with its analysis, Sandler O'Neill extensively used
sensitivity analyses to illustrate the effects changes in the
underlying assumptions (including variations with respect to the
levels of assets, net interest spread, non-interest income,
non-interest expense and dividend payout ratio) would have on the
resulting present value, and discussed these changes with
Progressive's Board of Directors.
Pro Forma Merger Analysis. Based upon earnings forecasts of
Progressive and Hudson Chartered, expected one-time merger related
charges, projected cost savings and certain other assumptions
discussed with Progressive's and Hudson Chartered's respective
managements, Sandler O'Neill analyzed certain potential pro forma
effects of the Merger on the combined company. This analysis indicated
that the Merger would be accretive to Hudson Chartered's earnings per
share for all periods analyzed, and minimally dilutive to tangible
book value per share in 1998, then accretive in subsequent periods.
This analysis also indicated that, from a Progressive stockholder's
perspective, the Merger would be accretive to earnings per share for
all periods analyzed, and dilutive to tangible
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book value per share for the first three periods analyzed, then
accretive in the subsequent periods. The actual results achieved by
the combined company may vary from projected results and the
variations may be material.
Contribution Analysis. Sandler O'Neill reviewed the relative
contributions to, among other things, total assets, total loans, total
deposits, total tangible equity, last twelve months' net income, 1997
year-to-date net income and market capitalization to be made by
Progressive and Hudson Chartered to the combined institution based on
data at and for the twelve months ended September 30, 1997. This
analysis indicated that Progressive's implied contribution was 55.0%
of total assets, 56.2% of total loans, 55.2% of total deposits, 50.5%
of total tangible equity, 47.9% of last twelve months' net income,
49.1% of year-to-date net income and 47.2% of market capitalization.
Based upon an Exchange Ratio of 1.82, holders of the Progressive
Common Stock would own approximately 50% of the outstanding shares of
the combined institution.
In connection with rendering its December 16, 1997 opinion, Sandler
O'Neill reviewed, among other things: (i) the Agreement and exhibits thereto;
(ii) the Voting Agreements; (iii) the Stock Option Agreements; (iv)
Progressive's audited consolidated financial statements and management's
discussion and analysis of financial condition and results of operations as
contained in its annual reports to stockholders for the years ended December 31,
1994, 1995 and 1996, respectively; (v) Hudson Chartered's audited consolidated
financial statements and management's discussion and analysis of financial
condition and results of operations as contained in its annual reports to
stockholders for the years ended December 31, 1994, 1995 and 1996, respectively;
(vi) Progressive's unaudited consolidated financial statements and management's
discussion and analysis of financial condition and results of operations
contained in its Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30 and September 30, 1997, respectively; (vii) Hudson Chartered's unaudited
consolidated financial statements and management's discussion and analysis of
financial condition and results of operations contained in its Quarterly Reports
on Form 10-Q for the quarters ended March 31, June 30 and September 30, 1997,
respectively; (viii) certain financial analyses, including estimates of future
financial performance, of Progressive prepared by and reviewed with management
of Progressive and the views of senior management of Progressive regarding
Progressive's past and current business operations, results thereof, financial
condition and future prospects; (ix) certain financial analyses, including
estimates of future financial performance, of Hudson Chartered prepared by and
reviewed with management of Hudson Chartered and the views of senior management
of Hudson Chartered regarding Hudson Chartered's past and current business
operations, results thereof, financial condition and future prospects; (x)
estimated pro forma impacts of the Merger; (xi) the publicly reported historical
price and trading activity for Progressive Common Stock and Hudson Chartered
Common Stock, respectively, including a comparison of certain financial and
stock market information for Progressive and Hudson Chartered with similar
publicly available information for certain other companies the securities of
which are publicly traded; (xii) the financial terms of recent business
combinations in the savings and banking institution industries, to the extent
publicly available; (xiii) the current market environment generally and the
banking environment in particular; and (xiv) such other information, financial
studies, analyses and investigations and financial, economic and market criteria
as Sandler O'Neill considered relevant.
In connection with rendering the Sandler O'Neill Fairness Opinion,
Sandler O'Neill confirmed the appropriateness of its reliance on the analyses
used to render the December 16, 1997 opinion by performing procedures to update
certain of such analyses and by reviewing assumptions upon which such analyses
were based and factors considered in connection therewith.
In performing its reviews and analyses, Sandler O'Neill assumed and
relied upon, without independent verification, the accuracy and completeness of
all financial information, analyses and other information that was publicly
available or otherwise furnished to, reviewed by or discussed with it, and
Sandler O'Neill does not assume any responsibility or liability therefor.
Sandler O'Neill did not make an independent evaluation or appraisal of the
specific assets, the collateral securing assets or the liabilities of
Progressive or Hudson Chartered or any of their respective subsidiaries, or the
collectibility of any such assets, nor was it furnished with any such
evaluations or appraisals (relying, where relevant, on the analyses and
estimates of Progressive and Hudson Chartered). With respect to the information
regarding potential future financial performance provided by each company's
management, Sandler O'Neill assumed
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that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of the
respective future financial performances of Progressive and Hudson Chartered and
that such performances will be achieved. Sandler O'Neill also assumed that there
has been no material change in Progressive's or Hudson Chartered's assets,
financial condition, results of operations, business or prospects since the date
of the last financial statements provided to them by the respective companies,
that Progressive and Hudson Chartered will remain as going concerns for all
periods relevant to its analyses, that the Merger will be accounted for as a
pooling of interests and that the conditions precedent in the Agreement are not
waived.
The estimates of future financial performance furnished to Sandler
O'Neill and used by it in certain of its analyses were prepared by the senior
management of Hudson Chartered and Progressive. Hudson Chartered and Progressive
do not publicly disclose internal management projections of the type provided to
Sandler O'Neill in connection with its review of the Merger, and as a result,
such projections were not prepared with a view towards public disclosure. These
estimates were based on numerous variables and assumptions which are inherently
uncertain, including, without limitation, factors related to general economic
and competitive conditions, and accordingly, actual results could vary
significantly from those set forth in such projections.
Under the Sandler O'Neill Agreement, Progressive has agreed to pay
Sandler O'Neill a transaction fee in connection with the Merger, substantially
all of which is contingent upon the consummation of the Merger. Under the terms
of the Sandler O'Neill Agreement, Progressive has agreed to pay Sandler O'Neill
a transaction fee equal to 0.50% of the aggregate transaction price, subject to
a maximum of $700,000. Such transaction fee becomes due and payable upon
consummation of the Merger. Under the Sandler O'Neill Agreement, Progressive has
agreed to pay consulting fees to Sandler O'Neill in the aggregate amount of
$200,000, of which $150,000 has been paid to date. Such consulting fees shall be
credited against any transaction fees payable upon consummation of the Merger.
Progressive has also agreed to reimburse Sandler O'Neill for its reasonable
out-of-pocket expenses incurred in connection with its engagement and to
indemnify Sandler O'Neill and its affiliates and their respective partners,
directors, officers, employees, agents, and controlling persons against certain
expenses and liabilities, including liabilities under securities laws.
Sandler O'Neill has in the past provided certain other investment
banking services to Progressive and has received compensation for such services.
In the ordinary course of its business, Sandler O'Neill may actively trade the
equity securities of Progressive and Hudson Chartered for its own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
Keefe Bruyette & Woods, Inc. Hudson Chartered engaged Keefe Bruyette
to act as its financial advisor in connection with the Merger. Pursuant to the
terms of the formal engagement signed on December 16, 1997, Keefe Bruyette
agreed to assist Hudson Chartered in analyzing the proposed merger with
Progressive. Hudson Chartered selected Keefe Bruyette because Keefe Bruyette is
a nationally recognized investment banking firm with substantial experience in
transactions similar to the Merger. As part of its investment banking business,
Keefe Bruyette is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions.
As part of its engagement, representatives of Keefe Bruyette attended
the meeting of Hudson Chartered's Board held on December 16, 1997 at which the
Hudson Chartered's Board considered and approved the Merger. At the December 16,
1997 meeting, Keefe Bruyette rendered written and oral opinions that, as of such
date, the Exchange Ratio was fair to Hudson Chartered and its stockholders from
a financial point of view. Such opinion was reconfirmed in writing as of the
date of this Proxy Statement / Prospectus.
The full text of Keefe Bruyette's written opinion dated as of the date
of this Proxy Statement / Prospectus is attached as Appendix C to this Proxy
Statement / Prospectus and is incorporated herein by reference. The descriptions
of the opinions and analyses set forth herein are qualified in their entirety by
reference to Appendix C. Stockholders are urged to read the attached opinion in
its entirety for a description of procedures followed, assumptions made, matters
considered, and qualifications and limitations on the review undertaken by Keefe
Bruyette in connection therewith.
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KEEFE BRUYETTE'S OPINIONS ARE DIRECTED TO HUDSON CHARTERED'S BOARD AND
ADDRESS ONLY THE EXCHANGE RATIO. THEY DO NOT ADDRESS THE UNDERLYING BUSINESS
DECISION TO PROCEED WITH THE MERGER AND DO NOT CONSTITUTE A RECOMMENDATION TO
ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE WITH RESPECT TO THE
MERGER OR ANY OTHER MATTER RELATED THERETO.
Keefe Bruyette has informed Hudson Chartered that in arriving at its
opinions, Keefe Bruyette, among other things: (1) reviewed Hudson Chartered's
Annual Reports on Form 10-K and related audited financial information for the
three fiscal years ended December 31, 1996 and Hudson Chartered's quarterly
reports on Form 10-Q and related unaudited financial information for the
quarterly periods ended September 30, 1997, June 30, 1997 and March 31, 1997;
(2) reviewed Progressive's Annual Reports on Form 10-K and related audited
financial information for the three fiscal years ended December 31, 1996 and
Progressive's quarterly reports on Form 10-Q and related unaudited financial
information for the quarterly periods ended September 30, 1997, June 30, 1997
and March 31, 1997; (3) reviewed certain limited financial information,
including estimates of future financial performance, relating to the respective
businesses, earnings, assets and prospects of Hudson Chartered and Progressive
furnished to Keefe Bruyette by senior management of Hudson Chartered and
Progressive as well as estimates of cost savings and related expenses which may
result from the Merger (the "estimated savings") furnished to it by senior
management of Hudson Chartered and Progressive; (4) conducted certain limited
discussions with members of senior management of Hudson Chartered and
Progressive concerning the respective businesses, financial condition, earnings,
assets, liabilities, operations, regulatory condition, financial forecasts,
contingencies and prospects of Hudson Chartered and Progressive and their
respective views as to the future financial performance of Hudson Chartered,
Progressive, and the combined entity, as the case may be, following the Merger;
(5) reviewed the historical market prices for Hudson Chartered Common Stock and
Progressive Common Stock and compared them with that of certain publicly traded
companies which Keefe Bruyette deemed to be relevant; (6) compared the
respective results of operations of Hudson Chartered and Progressive with those
of certain companies which Keefe Bruyette deemed to be relevant; (7) reviewed
the amount and timing of the estimated savings following the Merger as prepared,
and discussed with it, by senior management of Hudson Chartered; (8) considered,
based upon information provided by Hudson Chartered and Progressive's senior
management, the pro forma impact of the Merger on the earnings and book value
per share, consolidated capitalization and certain balance sheet and
profitability ratios of Hudson Chartered and Progressive; (9) reviewed the
Merger; and (10) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
Keefe Bruyette deemed necessary.
In preparing its opinions, Keefe Bruyette, with Hudson Chartered's
consent, assumed and relied on the accuracy and completeness of all financial
and other information supplied or otherwise made available to it by Hudson
Chartered and Progressive, including that contemplated in the numbered items
above, and Keefe Bruyette has not assumed responsibility for independently
verifying such information or undertaken an independent evaluation or appraisal
of the assets or liabilities, contingent or otherwise, of Hudson Chartered,
Progressive or any of their subsidiaries, nor has it been furnished any such
evaluation or appraisal. Keefe Bruyette is not an expert in the evaluation of
allowances for loan losses, and, with Hudson Chartered's consent, it has not
made an independent evaluation of the adequacy of the allowance for loan losses
of Hudson Chartered or Progressive, nor has it reviewed any individual credit
files relating to Hudson Chartered or Progressive, and, with Hudson Chartered's
consent, it assumed that the respective aggregate allowances for loan losses for
both Hudson Chartered and Progressive are adequate to cover such losses and will
be adequate on a pro forma basis for the combined entity. In addition, it has
not conducted any physical inspection of the properties or facilities of Hudson
Chartered or Progressive. With Hudson Chartered's consent, Keefe Bruyette also
assumed and relied upon the senior management of Hudson Chartered and
Progressive as to the reasonableness and achievability of the estimates of
future financial performance (and the assumptions and bases therefore) provided
to, and discussed with, Keefe Bruyette. In that regard, Keefe Bruyette has
assumed with Hudson Chartered's consent that such estimates, including without
limitation, evaluations of contingencies, estimated savings and operating
synergies resulting from the Merger and estimates regarding underperforming and
non-performing assets, net charge-offs, adequacy of reserves, future economic
conditions and results of operations reflect the best currently available
estimates and judgments of the senior management of Hudson Chartered and
Progressive and/or the combined entity, as the case
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may be. Keefe Bruyette's opinion is predicated on the Merger receiving the tax
and accounting treatment contemplated in the Merger. Keefe Bruyette's opinion
was necessarily based on economic, market and other conditions as in effect on,
and the information made available to it as of, the date of its opinion.
Keefe Bruyette's opinions were rendered without regard to the
necessity for, or level of, any restrictions, obligations, undertakings or
divestitures which may be imposed or required in the course of obtaining
regulatory approval for the Merger.
In connection with rendering its opinion dated December 16, 1997,
Keefe Bruyette performed a variety of financial analyses, including those
summarized below. The summary set forth below does not purport to be a complete
description of the analyses performed by Keefe Bruyette in this regard. The
preparation of a fairness opinion involves various determinations and judgments
as to the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to a partial analysis or summary
description. Accordingly, notwithstanding the separate factors summarized below,
Keefe Bruyette believes that its analyses must be considered as a whole and that
selecting portions of its analyses and factors considered by it, without
considering all analyses and factors, or attempting to ascribe relative weights
to some or all such analyses and factors, could create an incomplete view of the
evaluation process underlying Keefe Bruyette's opinions.
In performing its analyses, Keefe Bruyette made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Progressive, Hudson
Chartered and Keefe Bruyette. The analyses performed by Keefe Bruyette are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Keefe Bruyette's analysis of the
fairness of the Exchange Ratio to Hudson Chartered and its stockholders, and
were provided to Hudson Chartered's Board in connection with the delivery of
Keefe Bruyette's opinions. Keefe Bruyette did not draw any specific conclusions
from or with regard to any one method of analysis. With respect to the
comparison of selected companies analysis and the analysis of selected merger
transactions summarized below, no company utilized as a comparison is identical
to Hudson Chartered or Progressive. Accordingly, an analysis of comparable
companies is not mathematical; rather it involves complex considerations and
judgements concerning the differences in financial and operating characteristics
of the companies and other factors that could affect the public trading values,
as the case may be, of the companies concerned. The analyses do not purport to
be appraisals or to reflect the process at which Hudson Chartered and
Progressive might actually be sold or the prices at which any securities may
trade at the present time or at any time in the future. In addition, as
described above, Keefe Bruyette's opinions are just a part of many factors taken
into consideration by Hudson Chartered's Board.
The estimates of future financial performance furnished to Keefe
Bruyette and used by it in certain of its analyses were prepared by the senior
management of Hudson Chartered and Progressive. Hudson Chartered and Progressive
do not publicly disclose internal management projections of the type provided to
Keefe Bruyette in connection with its review of the Merger, and as a result,
such projections were not prepared with a view towards public disclosure. These
estimates were based on numerous variables and assumptions which are inherently
uncertain, including, without limitation, factors related to general economic
and competitive conditions, and accordingly, actual results could vary
significantly from those set forth in such projections.
The following is a summary of analyses presented by Keefe Bruyette to
Hudson Chartered's Board on December 16, 1997 in connection with its December
16, 1997 opinion.
Relative Contribution Analysis. Keefe Bruyette analyzed
certain balance sheet and income statement data for Hudson Chartered
and Progressive for the twelve month period ending December 31, 1997,
based on the estimates of future financial performance provided by
senior management of Hudson Chartered and Progressive. The analysis
showed that, among other things, at and for the twelve month period
ending December 31, 1997, Hudson Chartered and Progressive would
contribute
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45.0% and 55.0%, respectively, to total assets of the combined entity,
47.0% and 53.0% to total stockholders' equity and 51.1% and 48.9% to
net income available to common equity. The analysis further showed
that, based on 1998 estimated earnings, Hudson Chartered and
Progressive would contribute 50.4% and 49.6%, respectively. Keefe
Bruyette also reviewed and analyzed recent stock market trading market
data for Hudson Chartered and Progressive. This analysis showed that,
using closing stock market prices for Hudson Chartered Common Stock
and Progressive Common Stock on December 15, 1997, Hudson Chartered
and Progressive would contribute 52.3% and 47.7%, respectively, to the
market capitalization of the combined entity.
At the Exchange Ratio of 1.82 shares of Hudson Chartered
Common Stock for each share of Progressive Common Stock, the holders
of Hudson Chartered Common Stock would own 49.93% of the common equity
of the combined entity on a fully diluted basis, and the holders of
Progressive Common Stock would own 50.07% of the common equity of the
combined entity on a fully diluted basis.
Historical Stock Data Analysis. Keefe Bruyette reviewed
monthly stock price data for Hudson Chartered Common Stock and
Progressive Common Stock compared to the Keefe Bank Index for the
period from January 1995 through October 1997. This analysis showed
that on a relative performance basis, Hudson Chartered's and
Progressive's stock prices appreciated 119% and 119%, respectively,
compared with an appreciation of 168% for the Keefe Bank Index.
Selected Peer Groups Analyses. Keefe Bruyette compared the
financial performance and market performance of Hudson Chartered and
Progressive based on various financial measures of earnings
performance, operating efficiency, capital adequacy and asset quality
and various measures of market performance, including market/book
values, price to earnings and dividend yields to those of selected
bank holding companies. For purposes of such analysis, the financial
information used by Keefe Bruyette was as of and for the quarter ended
September 30, 1997. Market price information was as of December 15,
1997. The companies in the Hudson Chartered and Progressive peer group
were Park National Corporation, Vermont Financial Services, Trans
Financial, Inc., Chittenden Corp., S&T Bancorp, Inc., BT Financial
Corp., Independent Bank Corp., United National Bancorp, NBT Bancorp,
Inc., F&M Bancorp, and Suffolk Bancorp.
Keefe Bruyette's analysis showed the following concerning
Hudson Chartered's financial performance: return on assets on an
annualized basis was 1.27%, compared with an average of 1.36% and
median of 1.24%; return on equity on an annualized basis was 13.72%,
compared with an average of 15.27% and median of 14.84%; net interest
margin on an annualized basis was 5.03%, compared with an average of
4.80% and median of 4.68%; efficiency ratio on an annualized basis was
55.04%, compared with an average of 57.52% and median of 59.91%; ratio
of equity to total assets was 9.45%, compared with an average of 9.03%
and median of 9.24%; ratio of tangible equity to total assets was
9.42%, compared with an average of 8.13% and median of 7.65%; ratio of
loan loss reserve to nonperforming loans was 180%, compared to an
average of 269% and median of 190%.
Keefe Bruyette's analysis further showed the following
concerning Hudson Chartered's market performance: that Hudson
Chartered's price to earnings per share multiple based on 1997
estimated earnings was 17.68 times, compared to an average of 18.14
and median of 17.56; that its price to earnings per share multiple
based on 1998 estimated earnings was 15.88 times, compared to an
average of 15.96 and median of 15.77; that its price to book value per
share was 2.24 times, compared to an average of 2.52 times and median
of 2.32 times; and that its dividend yield was 2.39%, compared to an
average of 2.33% and median of 2.30%.
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Keefe Bruyette's analysis showed the following concerning
Progressive's financial performance: return on assets on an annualized
basis was 0.98%, compared with an average of 1.36% and median of
1.24%; return on equity on an annualized basis was 11.66%, compared
with an average of 15.27% and median of 14.84%; net interest margin on
an annualized basis was 4.07%, compared with an average of 4.80% and
median of 4.68%; efficiency ratio on an annualized basis was 52.38%,
compared with an average of 57.52% and median of 59.91%; ratio of
equity to total assets was 8.73%, compared with an average of 9.03%
and median of 9.24%; ratio of tangible equity to total assets was
7.93%, compared with an average of 8.13% and median of 7.65%; ratio of
loan loss reserve to nonperforming loans was 126%, compared to an
average of 269% and median of 190%.
Keefe Bruyette's analysis further showed the following
concerning Progressive's market performance: that Progressive's price
to earnings per share multiple based on 1997 estimated earnings was
16.50 times, compared to an average of 18.14 and median of 17.56; that
its price to earnings per share multiple based on 1998 estimated
earnings was 14.77 times, compared to an average of 15.96 and median
of 15.77; that its price to book value per share was 1.81 times,
compared to an average of 2.52 times and median of 2.32 times; and
that its dividend yield was 1.86%, compared to an average of 2.33% and
median of 2.30%. For purposes of the above calculations, all earnings
estimates were based upon the published estimates of a nationally
recognized composite earnings estimate service.
Financial Impact Analysis. Keefe Bruyette performed pro forma
merger analysis that combined estimated future income statement and
balance sheet information. Assumptions regarding the accounting
treatment, acquisition adjustments, cost savings, and revenue
enhancements were used to calculate the financial impact that the
Merger could have on certain estimated future financial results. This
analysis was based on analysts' and the respective managements'
estimates of Hudson Chartered's and Progressive's 1998 earnings per
share and on the respective managements' estimates of future cost
savings, revenue enhancements and a non-recurring merger and
restructuring charge to be realized or incurred in connection with the
Merger. These estimates were discussed with the management of each of
Hudson Chartered and Progressive. The actual results achieved by the
Continuing Corporation following the Merger may vary from the
estimated results, and the variations may be material.
Keefe Bruyette calculated the impact of the Merger on Hudson
Chartered's and Progressive's earnings per share. These computations
assumed the composite 1998 and 1999 earnings per share estimates.
Earnings growth rates of 8.00% in 1999 were assumed. Estimated pre-tax
reductions in the combined Hudson Chartered and Progressive
non-interest expenses of 11.10% in 1998 and 22.75% in 1999 were
assumed. The combined estimated earnings stream including cost savings
resulted in indicated increases of 6.74% and 13.30% in Hudson
Chartered's 1998 and 1999 earnings per share, respectively, and
indicated increases of 7.32% and 13.91% in Progressive's 1998 and 1999
earnings per share, respectively.
In connection with its opinion dated as of the date of this Proxy
Statement / Prospectus, Keefe Bruyette performed procedures to update, as
necessary, certain of the analyses described above and reviewed the assumptions
on which such analyses described above were based and the factors considered in
connection therewith.
Keefe Bruyette has been retained by Hudson Chartered's Board of
Directors as an independent contractor to act as financial adviser to Hudson
Chartered with respect to the Merger. Keefe Bruyette as part of its investment
banking business, is continually engaged in the valuation of banking businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. As specialists in the securities of banking companies, Keefe
Bruyette has experience in, and knowledge of, the valuation of banking
enterprises. In
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the ordinary course of its business as a broker-dealer, Keefe Bruyette may, from
time to time, purchase securities from, and sell securities to, Hudson Chartered
and Progressive and as a market maker in securities Keefe Bruyette may from time
to time have a long or short position in, and buy or sell, debt or equity
securities of Hudson Chartered and Progressive for Keefe Bruyette's own account
and for the accounts of its customers.
Hudson Chartered and Keefe Bruyette have entered into an agreement
dated December 16, 1997 relating to the services provided by Keefe Bruyette in
connection with the Merger. Hudson Chartered has agreed to pay Keefe Bruyette,
fees for the services described above, an aggregate cash fee of $200,000. The
fee is payable in two installments -- $100,000 upon mailing of this Proxy
Statement / Prospectus to Hudson Chartered's stockholders and the balance, which
is contingent on closure of the Merger, at the closing of the Merger. Pursuant
to Keefe Bruyette's engagement agreement, Hudson Chartered also agreed to
reimburse Keefe Bruyette for reasonable out-of-pocket expenses and disbursements
incurred in connection with its retention and to indemnify Keefe Bruyette
against certain liabilities, including liabilities under the federal securities
laws.
Terms of the Merger
On the Effective Date, Progressive will be merged with and into Hudson
Chartered, pursuant to applicable New York State law, and the name of the
Continuing Corporation will be changed to "Premier National Bancorp, Inc." It is
also intended that on the Effective Date and simultaneously with consummation of
the Merger, Pawling will be merged with and into Hudson Valley and the name of
the resulting national bank will be "Premier National Bank."
On the Effective Date, each outstanding share of Progressive Common
Stock will be converted into Continuing Corporation Common Stock, at the
Exchange Ratio of 1.82 shares of Continuing Corporation Common Stock for each
share of Progressive Common Stock, and cash in lieu of any fractional share of
Continuing Corporation Common Stock that such Progressive stockholder otherwise
would receive. Any such cash payment shall be in an amount equal to such
fraction multiplied by the closing price of Hudson Chartered Common Stock on the
American Stock Exchange (as reported by The Wall Street Journal) on the last
business day immediately preceding the Effective Date. Upon the consummation of
the Merger, all rights under Progressive's stockholder rights plan will be
extinguished (see "-- Certain Differences in Rights of Stockholders"). Each
outstanding share of Hudson Chartered Common Stock before the Merger shall
continue to be an outstanding share of common stock of the Continuing
Corporation following the Merger.
Progressive has previously adopted stock option plans ("Progressive
Stock Option Plans"), pursuant to which employees and directors of Progressive
have been granted options to purchase Progressive Common Stock ("Progressive
Options"). From and after the Effective Date, each Progressive Option which is
then outstanding, whether or not exercisable, shall cease to represent a right
to acquire shares of Progressive Common Stock and shall be converted
automatically into an option to purchase shares of Continuing Corporation Common
Stock, with the number of shares and exercise price per share adjusted to
reflect the Exchange Ratio, and the Continuing Corporation shall assume each
Progressive Option in accordance with the terms of the applicable Progressive
Stock Option Plan and stock option agreement and the Agreement. No Progressive
Options will be granted under the Progressive Stock Option Plans after the
Effective Date. As of March 26, 1998, there were outstanding under the
Progressive Stock Option Plans options held by directors, officers and other
employees of Progressive or Pawling to acquire an aggregate of 328,622 shares of
Progressive Common Stock at exercise prices ranging from $7.00 per share to
$35.25 per share.
In the event that, prior to the Effective Date, the outstanding shares
of Hudson Chartered Common Stock shall have been increased, decreased or changed
into or exchanged for a different number or kind of shares or securities by
reorganization, recapitalization, reclassification, stock dividend, stock split
or other like changes in Hudson Chartered's capitalization, all without Hudson
Chartered receiving consideration therefor, then an appropriate and
proportionate adjustment shall be made in the number and kind of shares of
Continuing Corporation Common Stock to be thereafter delivered pursuant to the
Agreement.
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Surrender of Certificates
As soon as practicable after the Effective Date, the Continuing
Corporation or its stock transfer agent, acting in the capacity of exchange
agent, will mail to all holders of Progressive Common Stock a letter of
transmittal, together with instructions for the exchange of their Progressive
Common Stock certificates for certificates representing Continuing Corporation
Common Stock and a check representing the amount paid in lieu of issuing any
fractional share. Until so exchanged, each certificate representing Progressive
Common Stock outstanding immediately after the Effective Date shall be deemed
for all purposes to evidence ownership of the number of shares of Continuing
Corporation Common Stock into which such shares have been converted. If any
certificate representing Progressive Common Stock surrendered for exchange is to
be issued in a name other than that in which a certificate for exchange is
issued, the certificate so surrendered shall be properly endorsed and otherwise
in proper form for transfer and the person requesting such exchange shall affix
any requisite stock transfer tax stamps to the certificate surrendered or
provide funds for their purchase or establish to the satisfaction of the
Continuing Corporation or its agent that such taxes are not payable. PROGRESSIVE
STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE FURTHER
INSTRUCTIONS.
Representations and Warranties; Conditions to the Merger; Waiver
The Agreement contains representations and warranties by Hudson
Chartered and Progressive regarding, among other things, their capitalization,
organization, ownership and capitalization of their subsidiaries, qualification
to do business, authority to enter into the Agreement and the Progressive Stock
Option Agreement and the Hudson Chartered Stock Option Agreement, filings with
the Commission, reliability of financial statements, compliance with applicable
laws and regulations, taxes, employee benefit plans, undisclosed liabilities,
the truth and accuracy of information prepared and provided by them in
connection with the Merger, the absence of certain legal proceedings and other
events, including material adverse changes in the parties' respective
businesses, financial condition or results of operations and compliance with
applicable laws and regulations. Except as otherwise provided in the Agreement,
these representations and warranties will not survive the Effective Date.
The respective obligations of Hudson Chartered, Progressive, Hudson
Valley and Pawling to consummate the Merger and the Bank Merger are subject to
the satisfaction or waiver at or prior to the Effective Date, of the following
conditions: (i) the taking of all corporate action necessary to consummate the
Merger and the Bank Merger; (ii) approval of the Agreement by the stockholders
of Hudson Chartered and Progressive; (iii) receipt of regulatory approvals for
the Merger and the Bank Merger without any condition which materially and
adversely affects the anticipated benefits of the transactions; (iv) the receipt
of the opinion described under "-- Federal Income Tax Consequences"; (v)
qualification of the Merger for pooling of interests accounting treatment; (vi)
the effectiveness of the Registration Statement under the Securities Act; (vii)
the receipt of all necessary state securities or "Blue Sky" permits,
authorizations or exemptions; (viii) the receipt of requisite third party
consents; (ix) the absence of any order, decree or injunction enjoining or
prohibiting the consummation of the Merger or the Bank Merger; (x) the shares of
Continuing Corporation Common Stock to be issued in the Merger shall have been
approved for listing on the American Stock Exchange; (xi) the continuing
accuracy of the representation and warranties of each party in the Agreement;
(xii) each party shall have complied with its covenants in the Agreement; (xiii)
delivery of customary closing documents; and (xiv) the absence of any material
adverse change affecting the party subject to exceptions set forth in the
Agreement.
Stockholder approval of the Agreement requires the affirmative vote of
the holders of at least two-thirds of the outstanding Progressive Common Stock
and at least two-thirds of the outstanding Hudson Chartered Common Stock.
Because the Agreement provides for certain amendments to Hudson Chartered's
Certificate of Incorporation, which will become the Certificate of Incorporation
of the Continuing Corporation, approval of the Agreement will constitute
approval of such amendments. The precise amendments effected by the Merger will
depend on whether the Agreement is approved by the holders of at least 80% of
the outstanding Hudson Chartered Common Stock. See "-- Amendments to Certificate
of Incorporation." Hudson Chartered has proposed that its stockholders approve
the Agreement at Hudson Chartered's annual meeting of stockholders to be held on
May 21, 1998. Directors and executive officers of Hudson
49
<PAGE>
Chartered and affiliates of such persons had voting power with respect to
2,350,784 shares (excluding shares for which ownership is disclaimed and
excluding shares subject to options) of Hudson Chartered Common Stock,
representing 33.1% of the Hudson Chartered Common Stock outstanding, as of March
2, 1998. Progressive has entered into agreements ("Hudson Chartered Voting
Agreements") with each member of the Board of Directors of Hudson Chartered or
Hudson Valley, whereby each Board member has agreed to vote all shares of Hudson
Chartered Common Stock that he or she is entitled to vote in favor of the
Agreement. In the aggregate, 2,490,094 shares were subject to Hudson Chartered
Voting Agreements at that date. In addition, directors and executive officers of
Progressive and affiliates of such persons had voting power with respect to
3,930 shares of Hudson Chartered Common Stock as of March 26, 1998. It is
expected that such persons will vote such shares in favor of the Agreement.
Accordingly, in the aggregate, it is expected that at least 2,510,668 shares of
Hudson Chartered Common Stock (representing 35.4% of the outstanding shares)
will be voted in favor of the Agreement at Hudson Chartered's annual stockholder
meeting. On March 2, 1998, the trust department of Hudson Valley held an
aggregate of 16,434 shares of Hudson Chartered Common Stock, with voting power
over such shares, in fiduciary or custodial accounts for the benefit of other
persons. The trustees will determine whether to vote the shares of Hudson
Chartered Common Stock held in trust in favor of the Agreement following receipt
of this Proxy Statement / Prospectus.
Except with respect to any required stockholder or regulatory
approvals, substantially all of the conditions to consummation of the Merger and
the Bank Merger may be waived at any time by the party for whose benefit they
were created, and the Agreement may be amended or supplemented at any time by
written agreement of the parties, except that no such waiver, amendment or
supplement executed after approval of the Agreement by Hudson Chartered's
stockholders and/or Progressive's stockholders shall alter the Exchange Ratio.
Certain conditions to consummation of the Merger cannot be waived as a matter of
law, including the existence of an effective registration statement, the absence
of a government order enjoining or prohibiting consummation of the Merger or any
other transaction contemplated by the Agreement, and the receipt of all required
"Blue Sky" permits or other authorizations.
Regulatory Approvals
General. Hudson Chartered and Progressive are not aware of any other
governmental approvals or actions that are required for consummation of the
Merger or the Bank Merger except as described below. Should any such ap proval
or action be required, it is presently contemplated that such approval or action
would be sought. There can be no assurance that any such approval or action, if
needed, could be obtained, would not delay consummation of the Merger and would
not be conditioned in a manner that would cause Hudson Chartered or Progressive
to abandon the Merger and the Bank Merger. To the extent that the following
information describes or refers to statutes and regulations, it is qualified in
its entirety by reference to them.
Merger. The Merger is subject to the prior approval of the Federal
Reserve Board under the BHCA, unless waived by the Federal Reserve Board in
accordance with the Federal Reserve Board's Regulation Y. Hudson Chartered has
filed a notice with the Federal Reserve Bank of New York pursuant to 12 C.F.R.
ss.223.12(d)(2)(v), acting under delegated authority from the Federal Reserve
Board, requesting a waiver of the prior approval requirements under the BHCA.
The waiver was granted by the Federal Reserve Bank of New York on February 9,
1998.
Bank Merger. On March 24, 1998, the OCC approved the Bank Merger under
Section 18(c) of the Federal Deposit Insurance Act and under Section 215a of the
National Bank Act. The Bank Merger may not be consummated until the 30th day
after such approval (or such shorter period as the OCC may prescribe with the
concurrence of the United States Attorney General, but not less than 15 days),
during which time the United States Department of Justice may challenge the Bank
Merger on antitrust grounds.
50
<PAGE>
Business Pending the Merger
Under the terms of the Agreement, each of Hudson Chartered, Hudson
Valley, Progressive and Pawling generally is required to carry on its respective
business in the usual, regular and ordinary course in substantially the same
manner as in past practice and generally is prohibited from taking any action
that would adversely affect the ability of the parties to consummate the Merger
or the other transactions contemplated by the Agreement. In addition, each party
generally may not, without the prior written consent of Progressive or Hudson
Chartered, as the case may be, or as otherwise provided in the Agreement,
increase compensation or fringe benefits of directors or their designated
executive officers under any circumstances or other officers or employees beyond
customary limits; declare or pay any dividends or other distributions on capital
stock other than pursuant to certain specified limits; issue shares of capital
stock or permit any treasury shares to become outstanding other than pursuant to
issuances pursuant to stock options authorized by the Agreement; issue, grant or
authorize any stock options, except as otherwise agreed to, or effect any
recapitalization, reclassification, stock dividend, stock split or like change
in capitalization or redeem, repurchase or otherwise acquire any shares of its
capital stock; change its lending, investment, asset/liability management or
other material banking policies in any material respect except as required by
law; or take other actions, other than in the ordinary course of business, that
might impact the financial condition or business of the entity.
In addition, Hudson Chartered, Hudson Valley, Progressive and Pawling
have also agreed that neither they nor any of their officers, directors, agents
or affiliates will solicit or encourage any inquiries or proposals with respect
to an acquisition, business combination or similar transaction involving, or any
purchase of all or any substantial portion of the assets or equity securities
of, Hudson Chartered, Hudson Valley, Progressive or Pawling; provided that if an
unsolicited inquiry or proposal is received by either party and the directors of
that party determine (in good faith after consultation with financial advisors
and legal counsel) that their fiduciary duties require them to consider such
inquiry or proposal, that party shall be free to deal with any such proposal or
inquiry in any matter that is deemed by its directors as being in the best
interests of that party's stockholders and that is not contrary to the terms of
the Agreement or the applicable Stock Option Agreement. Each party has also
agreed to notify the other party immediately if it receives any inquiries or
proposals with respect to the foregoing types of transactions.
Effective Date of the Merger; Termination
It is anticipated that the Merger, the Bank Merger and the other
transactions contemplated by the Agreement will be consummated early in the
third quarter of 1998, following satisfaction or waiver of all conditions to
closing.
The Agreement may be terminated by any party, whether before or after
stockholder approval: (i) in the event of a material breach by the other party
of any covenant, agreement, representation or warranty in the Agreement or in
the Bank Merger Agreement which has not been cured within the period allowed by
the Agreement; (ii) on the Closing Date (as defined in the Agreement), if any of
the conditions precedent to the obligations of such party to consummate the
Merger have not been satisfied or fulfilled; (iii) if any application for any
required regulatory approval has been denied, and the time for all appeals and
requests for reconsideration of such denial has run; (iv) if the stockholders of
Hudson Chartered or Progressive fail to approve the Agreement at the Annual
Meeting; or (v) in the event that the Merger is not consummated by November 15,
1998. The Agreement also may be terminated at any time by the mutual written
consent of the parties. In the event of termination, the Agreement shall become
null and void, except that certain provisions thereof relating to expenses and
confidentiality of information exchanged between the parties shall survive any
such termination and any termination resulting from a material breach of a
representation, warranty, covenant or agreement in the Agreement shall not
relieve any breaching party from liability for any uncured willful breach of any
such representation, warranty, covenant or agreement giving rise to such
termination.
51
<PAGE>
Management and Operations After the Merger
On the Effective Date, Progressive will merge with and into Hudson
Chartered under the name "Premier National Bancorp, Inc." and, simultaneously,
Pawling will merge with and into Hudson Valley under the name "Premier National
Bank." Following consummation of the Merger and the Bank Merger, the separate
existence of Progressive and Pawling shall cease. The Board of Directors and
management of the Continuing Corporation and the Continuing Bank will be drawn
from Hudson Chartered, Progressive, Hudson Valley and Pawling. Following is a
discussion of the anticipated management and operations of the Continuing
Corporation and the Continuing Bank after the Effective Date.
Board of Directors of the Continuing Corporation. The Agreement
provides that the Board of Directors of the Continuing Corporation following the
Merger shall consist of twenty persons, ten of whom shall be persons named by
the Board of Directors of Hudson Chartered and ten of whom shall be persons
named by the Board of Directors of Progressive. Approval of the Agreement by the
stockholders of Hudson Chartered and Progressive will be deemed to constitute
the election of the respective designees of Hudson Chartered and Progressive as
directors of the Continuing Corporation.
The Board of Directors of the Continuing Corporation will be divided
into three classes, with the terms of office of the classes ending in successive
years. The terms of the directors of the Continuing Corporation after the
Effective Date have been allocated so that, as nearly as practicable, the terms
of the same number of persons designated as directors by each party will expire
in each applicable year.
If, prior to the Effective Date of the Merger, any of the individuals
named by such Boards of Directors becomes unable or unwilling to serve as a
director of the Continuing Corporation, or either Hudson Chartered or
Progressive determines to replace the individual, the party that designated the
individual may name a replacement to become a director of the Continuing
Corporation following the Effective Date of the Merger.
52
<PAGE>
Set forth below is a table showing each person currently named by
Hudson Chartered and Progressive to serve on the Board of Directors of the
Continuing Corporation following the Effective Date, his or her current position
with Hudson Chartered, Hudson Valley, Progressive or Pawling, as the case may
be, and/or his or her current principal occupation, the year in which his or her
term of office is set to expire and his or her pro forma ownership of the
Continuing Corporation. Each of Hudson Chartered's designees currently serves as
a director of Hudson Chartered or Hudson Valley, and each of Progressive's
designees currently serves as a director of Progressive and Pawling.
<TABLE>
<CAPTION>
Pro Forma Beneficial
Ownership of Continuing
Corporation Stock
Term to --------------------------
Expire Number of Percent of
Name Principal Occupation In Year Shares (1)(2) Ownership
---- -------------------- ------- ------------- ---------
<S> <C> <C> <C> <C>
Hudson Chartered Designees
- --------------------------
Robert M. Bowman (3) Retired Regional Manager, H.P. Hood, 2001 50,234 0.36%
Inc. (dairy products)
H. Todd Brinckerhoff (4) President, Brinckerhoff & Neuville, 2001 79,780 0.57%
Inc. (insurance agency)
Edward vK. Cunningham, Jr. (5) Vice Chairman of Hudson Chartered; 1999 833,304 5.91%
Chairman of the Board and President,
George Gale Foster Corporation
(holding company); Partner (until
January 1, 1995) and Counsel, Van
DeWater and Van DeWater (Attorneys)
T. Jefferson Cunningham III (6) Chairman and Chief Executive Officer 2001 1,009,921 7.12%
of Hudson Chartered
Tyler Dann (7) President, Wesfair Agency Inc. 2000 368,495 2.57%
(insurance agency)
Thomas C. DeBenedictus (8) Partner, Vanacore DeBenedictus 2000 1,409 0.01%
DiGovanni & Weddell, LLP
(certified public accountants)
R. Abel Garraghan (9) President, R.W. Garraghan, Inc. (real 2001 18,191 0.13%
estate holding company); Chairman
of the Board, Heritagenergy (home
heating oil distributor)
Warren R. Marcus (10) President, Warren Marcus Associates, 1999 296,371 2.11%
Inc. and WRM Equity Management,
Inc. (registered investment advisor)
Lewis J. Ruge (11) Chairman of Hudson Valley; 2000 82,289 0.58%
Chairman and President, Ruge's
Oldsmobile, Inc.
John C. VanWormer (12) President of Hudson Chartered; 1999 175,650 1.23%
President and Chief Executive
Officer of Hudson Valley
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Beneficial
Ownership of Continuing
Corporation Stock
Term to --------------------------
Expire Number of Percent of
Name Principal Occupation In Year Shares (1)(2) Ownership
---- -------------------- ------- ------------- ---------
<S> <C> <C> <C> <C>
Progressive Designees
- ---------------------
Elizabeth P. Allen Chairman of the Board of Pawling; 2000 33,186 0.23%
Director of Guideposts, Inc., a
not-for-profit church corporation
Thomas C. Aposporos Principal at Aposporos and Son, 2000 26,754 0.19%
licensed real estate brokers; Chairman
of the Board of Progressive
George M. Coulter (13) Private practice of dentistry 1999 72,800 0.51%
Richard T. Hazzard President of Lyman A. Beecher, Inc., 2001 34,420 0.24%
d/b/a Beecher Funeral Home and
Dwyer Funeral Home
Peter Van Kleeck (14) President and Chief Executive Officer 2000 223,061 1.57%
of Progressive and Pawling
Richard Novik President of Clear Channel 2001 30,953 0.22%
Communications, International;
Owner and President of WKIP Broad-
casting and Dutchess Communications
from 1987 to March 1997
John J. Page (15) President of H.G. Page and Sons, a 1999 54,564 0.38%
building material supplier; Owner of
John Page Development Co., a property
management development company
Archibald A. Smith, III Headmaster at the Trinity Pawling 2001 21,021 0.15%
School, an independent boys college
preparatory school
Roger W. Smith President of Pawling Corporation, a 2001 22,386 0.16%
manufacturer of rubber and plastic
products
David A. Swinden Executive Vice President of Imperial 1999 20,442 0.14%
Schrade Corp., a manufacturing
company
</TABLE>
(footnotes on following page)
54
<PAGE>
- --------------
(1) Information regarding Hudson Chartered designees is as reported to
Hudson Chartered as of March 2, 1998. Information regarding
Progressive designees is as reported to Progressive as of March 26,
1998, multiplied by the Exchange Ratio ("equivalent shares"). In
accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
a person is deemed to be a beneficial owner, for purposes of this
table, of any shares of Hudson Chartered's or Progressive's common
stock (1) over which he or she has or shares voting or investment
power or (2) of which he or she has the right to acquire beneficial
ownership at any time within 60 days of the reporting date. All
persons shown in the table above have sole voting and investment power
except as otherwise indicated.
(2) For Hudson Chartered's designees, includes shares that could be
acquired within 60 days pursuant to the exercise of stock options in
the following amounts: Mr. Bowman, 10,147 shares; Mr. T.J. Cunningham
III, 75,499 shares; Mr. Ruge, 11,162 shares; and Mr. VanWormer,
114,105 shares. For Progressive's designees, includes shares that
could be acquired within 60 days of March 26, 1998 pursuant to the
exercise of stock options in the following amounts: Mr. Van Kleeck,
88,200 shares; Messrs. Page, Hazzard, Novik, Smith, R., Allen, Coulter
and Smith, A., 10,800 shares each; Mr. Swinden, 10,050 shares; and Mr.
Aposporos, 9,000 shares.
(3) Includes 49,649 shares of Hudson Chartered Common Stock held by
companies owned by Mr. Brinckerhoff.
(4) Includes 6,287 shares of Hudson Chartered Common Stock owned by Mr.
Bowman's spouse and 5,686 shares owned by his daughter, as to which
beneficial ownership is disclaimed. Also includes 1,527 shares held by
a company owned by Mr. Bowman and 4,517 shares for which he is
custodian for his grandchildren.
(5) Includes 25,268 shares of Hudson Chartered Common Stock held in family
trusts of which Mr. E. vK. Cunningham, Jr. is trustee (which shares
are also reflected as being beneficially owned by T. J. Cunningham III
- see Note 6 below); 778,498 shares held by the George Gale Foster
Corporation ("GGF"), a personal holding company of which Mr. E. vK.
Cunningham, Jr. is chairman of the board of directors and president
(which shares are also reflected as being beneficially owned by T.J.
Cunningham III - see Note 6 below); 15,308 shares held in retirement
accounts; and 2,503 shares held by Mr. E. vK. Cunningham, Jr.'s
spouse, as to which beneficial ownership is disclaimed.
(6) Includes 25,268 shares of Hudson Chartered Common Stock held in family
trusts of which Mr. T.J. Cunningham III has the right to qualify as
trustee (which shares are also reflected as being beneficially owned
by Mr. E. vK. Cunningham, Jr. - see Note 5 above); 778,498 shares held
by GGF (which shares are also reflected as being beneficially owned by
Mr. E. vK. Cunningham, Jr. - see Note 5 above); 18,893 shares held in
the name of Mr. T.J. Cunningham III's spouse and children; 41,292
shares held in retirement accounts; and 566 shares allocated to Mr.
T.J. Cunningham III under Hudson Chartered's ESOP. Also includes 3,000
shares of Progressive Common Stock over which Mr. T.J. Cunningham III
has direct voting power.
(7) Includes 340,097 shares of Hudson Chartered Common Stock held in the
names of several businesses with which Mr. Dann is affiliated and
1,519 shares held by Mr. Dann's spouse. Also includes 3,300 shares of
Progressive Common Stock over which Mr. Dann has direct voting power
and 500 shares which are held in the name of a business affiliate.
(8) Includes 250 shares owned by Mr. DeBenedictus' spouse.
(9) Includes 1,273 shares of Hudson Chartered Common Stock owned by Mr.
Garraghan's spouse as custodian for a child; 2,547 shares owned by Mr.
Garraghan's spouse; 2,546 shares owned by two children; and 2,547
shares held in a profit sharing plan trust.
(10) Mr. Marcus is President of WRM Equity Management, Inc., a registered
investment advisor, and reports sole voting and investment power as to
187,722 shares of Hudson Chartered Common Stock held on behalf of
Boston Safe Deposit & Trust Co. as Trustee for Kodak Retirement Income
Plan (the "Kodak Plan") by Warren Marcus Associates, Inc., a
registered investment advisor. Also includes 5,094 shares owned by
Warren Marcus Associates, Inc. Pension Trust; and 3,764 shares owned
by Mr. Marcus' spouse, as to which beneficial ownership is disclaimed.
As a trustee for the Kodak Plan, Mr. Marcus also has power to direct
the vote with respect to 50,950 shares of Progressive Common Stock.
(11) Includes 13,472 shares of Hudson Chartered Common Stock owned by Mr.
Ruge's spouse.
(12) Includes 486 shares of Hudson Chartered Common Stock held in trust for
the benefit of Mr. VanWormer and 8,764 shares of Common Stock
allocated to Mr. VanWormer under Hudson Chartered's ESOP.
(13) Includes 3,630 shares of Hudson Chartered Common Stock over which Mr.
George M. Coulter has direct voting power.
(14) Includes 300 shares of Hudson Chartered Common Stock over which Mr.
Peter Van Kleeck has direct voting power.
(15) Includes 13,177 shares of Progressive Common Stock held by spouse and
by minor children living at home.
Additional information regarding each of the individuals named by Progressive as
a director of the Continuing Corporation following the Effective Date is
contained in this Proxy Statement / Prospectus. See "PROPOSAL I -- ELECTION OF
DIRECTORS." Additional information regarding each of the individuals named by
Hudson Chartered as a director of the Continuing Corporation following the
Effective Date is contained in Hudson Chartered's Annual
55
<PAGE>
Report on Form 10-K, as incorporated by reference into this Proxy Statement /
Prospectus. See "AVAILABLE INFORMATION."
The Agreement provides that it is the intention of the parties thereto
that T. Jefferson Cunningham III shall be elected Chairman of the Board and
Chairman of the Executive Committee of the Board of the Continuing Corporation.
In addition, the parties have agreed that the following persons shall serve on
the Executive Committee of the Board of Directors of the Continuing Corporation:
Ms. Allen and Messrs. Aposporos, Brinckerhoff, Coulter, E. vK. Cunningham, Jr.,
T.J. Cunningham III, Ruge, R. Smith, Van Kleeck and VanWormer. In addition, it
is anticipated that the Board of Directors of the Continuing Corporation will
have an Audit Committee (initially to be composed of Messrs. DeBenedictus,
Garraghan, Ruge, A. Smith, III, R. Smith and Swinden), a Personnel Committee
(initially to be composed of Messrs. Aposporos, Bowman, Brinckerhoff, Hazzard,
Ruge and R. Smith), a Nominating Committee (initially to be composed of Messrs.
Brinckerhoff, E. vK. Cunningham, Jr., T. J. Cunningham, III, Dann, Novik, Page,
Swinden and Van Kleeck), a Trust Committee (initially to be composed of Ms.
Allen and Messrs. E vK. Cunningham, Jr., T. J. Cunningham, III, Dann, Novik,
Hazzard, Van Kleeck and VanWormer), an Asset and Liability Committee (initially
to be composed of Messrs. T.J. Cunningham, III, DeBenedictus, Marcus, A. Smith,
III, Swinden and Van Kleeck) and a CRA Committee (initially to be composed of
Ms. Allen and Messrs. Bowman, Coulter, Garraghan, Page, A. Smith, III and
VanWormer).
Executive Management of the Continuing Corporation. The Agreement
provides that from and after the Effective Date, T.J. Cunningham, Chairman and
Chief Executive Officer of Hudson Chartered, shall serve as Chairman of the
Board of Directors and Chairman of the Executive Committee of the Board of
Directors of the Continuing Corporation, Peter Van Kleeck, President and Chief
Executive Officer of Progressive, shall serve as President and Chief Executive
Officer of the Continuing Corporation and John C. VanWormer, President of Hudson
Chartered, shall serve as Executive Vice President of the Continuing
Corporation.
Board of Directors and Management of the Continuing Bank. The Bank
Merger Agreement provides that the Board of Directors of the Continuing Bank
shall consist of twenty persons, ten of whom shall be named by the Board of
Directors of Hudson Chartered and ten of whom shall be named by the Board of
Directors of Progressive. The Bank Merger Agreement provides for substitution of
such designees in the same manner as for directors of the Continuing
Corporation. The 20 persons designated by Hudson Chartered and Progressive to
serve on the Board of Directors of the Continuing Corporation also have been
designated to serve on the Board of Directors of the Continuing Bank. See "--
Board of Directors of the Continuing Corporation." The Bank Merger Agreement
provides that it is the intention of the parties that T. Jefferson Cunningham,
III shall serve as the Chairman of the Board and Chairman of the Executive
Committee of the Continuing Bank, Peter Van Kleeck shall serve as the President
and Chief Executive Officer of the Continuing Bank and John C. VanWormer shall
serve as Vice Chairman of the Continuing Bank. It is expected that additional
officers of the Continuing Bank will include Robert Gabrielsen, who will be an
Executive Vice President and who will lead the Retail Division, David
MacFarland, who will be an Executive Vice President and who will lead the
Commercial Division, and Paul A. Maisch, who will be Chief Financial Officer.
All officers of the Continuing Bank shall be appointed by its Board of
Directors.
Board and Committee Fees. It currently is anticipated that each member
of the Board of Directors of the Continuing Corporation and the Continuing Bank
will receive an annual retainer fee of $15,000 for service on one or both
Boards. Members of committees of the Board of Directors of the Continuing
Corporation and the Continuing Bank, except directors who are employees, each
will receive fees for each meeting attended of $500, and the Chairman of each
such committee will receive fees of $750 for each such meeting attended.
Progressive has a deferred compensation plan for directors under which
directors of Progressive who have been a director for at least five years are
entitled to retirement or severance benefits upon leaving Progressive's Board in
an amount equal to the amount of Progressive's annual retainer fee ($5,000)
multiplied by their number of years of service as a director, but not more than
fifteen years. The Continuing Corporation will honor Progressive's accrued and
vested obligations under this plan, and further will permit former directors of
Progressive who are not vested under this plan
56
<PAGE>
but who become directors of the Continuing Corporation to continue accruing
benefits and vesting under the plan until they reach five years of combined
service as directors of Progressive and the Continuing Corporation and become
vested. It is expected that Archibald A. Smith, III and David A. Swinden will be
eligible to continue accruing benefits and vesting under this plan for
approximately two and three more years after the Merger, respectively, at a cost
to the Continuing Corporation of approximately $10,000 and $15,000,
respectively.
Indemnification. Pursuant to the Agreement, the Continuing Corporation
shall, from and after the Effective Date, indemnify, defend and hold harmless,
each person who is, has been or becomes prior to the Effective Date, an officer
or director of Hudson Chartered or Progressive or any of their respective
subsidiaries (the "Indemnified Parties") against all losses, claims, damages,
liabilities, costs, expenses (including attorney's fees and expenses in advance
of the full disposition of any such claim to each Indemnified Party to the
fullest extent permitted by applicable law upon receipt of any undertaking
required by applicable law), judgments and amounts that are paid in settlement
of or in connection with any threatened or actual claim, action, suit,
proceeding or investigation (each a "Claim"), based in whole or in part on, or
arising in whole or in part out of, or pertaining to the fact that such person
is or was a director or officer of Hudson Chartered or Progressive or any of
their subsidiaries, if such Claim pertains to any matter or fact arising,
existing or occurring before the Effective Date (including without limitation
the Merger), regardless of whether such Claim is asserted or arises before or
after the Effective Date to the fullest extent permitted under applicable law in
effect as of the date of the Agreement or as amended prior to the Effective Date
and under, respectively, Hudson Chartered's and Progressive's governing
corporate documents. In addition, from and after the Effective Date, the
Indemnified Parties who become directors or officers of the Continuing
Corporation shall have indemnification rights on a prospective basis. The
Continuing Corporation shall also honor the existing Indemnification Agreements
between Hudson Chartered and Progressive and their respective directors.
The parties have also agreed, for a period of six years after the
Effective Date, that the Continuing Corporation shall cause to be maintained the
current directors' and officers' liability insurance policy of Progressive for
the benefit of the Progressive directors and officers (provided that the
Continuing Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are substantially no
less advantageous) with respect to claims arising from facts or events occurring
prior to the Effective Date. Following consummation of the Merger, directors and
officers of the Continuing Corporation will be covered by liability insurance
maintained by the Continuing Corporation.
Headquarters. The Agreement provides that, at the Effective Date, the
headquarters of the Continuing Corporation and of the Continuing Bank shall be
located at the headquarters of Hudson Chartered and Hudson Valley, respectively.
Dividend Investment and Stock Purchase Plan. Hudson Chartered
currently maintains the Hudson Chartered Dividend Investment and Stock Purchase
Plan ("Hudson Chartered DRP") for its stockholders. The Hudson Chartered DRP
provides, for those stockholders who elect to participate, that dividends on
Hudson Chartered Common Stock may be invested in newly issued shares of Hudson
Chartered Common Stock. The Hudson Chartered DRP also permits participants to
invest voluntary cash payments, within certain dollar limitations, in additional
shares of Hudson Chartered Common Stock at the then current market price. It is
anticipated that, after the Merger, the Continuing Corporation will continue to
offer such a Dividend Investment and Stock Purchase Plan to all of its
stockholders.
Operations after the Merger. Following the Bank Merger, the Continuing
Bank will continue to serve approximately 91,000 households through a network of
full service branch offices located in Dutchess, Orange, Putnam, Rockland,
Sullivan, Ulster and Westchester Counties in New York. The Bank Merger will
expand the products and services that are currently offered by Hudson Valley and
Pawling. While both banks currently serve both consumer and commercial market
segments, Pawling's product and marketing emphasis is more consumer or retail
oriented while Hudson Valley's is more business or commercial oriented.
Following the Bank Merger, all full service branch offices of the Continuing
Bank will offer the full array of loan, deposit and other financial products and
services of the combined entity, including time and demand deposit accounts,
certificates of deposit, accounts receivable financing,
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home mortgages, construction loans, leasing, cash management services,
commercial lines of credit, business money manager deposit accounts, and trust,
fiduciary, custodial and investment services. The Continuing Bank also intends
to expand its indirect lending program into new geographic markets and offer
Pawling's Infolink24 service (a 24-hour telephone banking service that allows
customers to access their account information and conduct banking transactions,
including opening deposit accounts and applying for loans) and debit card
product to all customers of both merging banks.
The Continuing Bank expects to offer depository services to
municipalities, including school districts, in certain communities where
Pawling, but not Hudson Valley, currently operates branch offices. In addition
to providing depository services, the Continuing Bank will purchase debt
instruments issued by these entities and provide them with other financial
products and services, including cash management and account reconciliation
services.
As a result of the combined entity's higher capital levels, the
Continuing Bank's legal lending limit will be approximately double that of
either Hudson Valley or Pawling prior to the Bank Merger. The increased lending
limit will permit the Continuing Bank to compete for larger lending
relationships.
It is not presently expected that the Continuing Bank will discontinue
any products or services that are material to either Hudson Valley or Pawling.
However, the combined institution will seek to integrate the two banks'
respective products and services with a view towards creating a consistent
product line with standardized rates, fees and service charges, subject to
variations arising due to competition or other business or marketing
considerations.
Management of the Continuing Corporation expects to achieve
significant cost savings and operating synergies subsequent to the Merger and
Bank Merger. The cost savings and operating synergies are expected to be derived
from reductions in personnel, the consolidation of certain branch locations in
overlapping markets in Dutchess County and Newburgh and the integration of other
facilities and back office operations. In addition, because Progressive will be
merged into Hudson Chartered, the costs associated with Progressive operating as
a publicly held entity also will be eliminated.
Aggregate after-tax cost savings are estimated by management to
approximate $1.3 million, $2.7 million and $2.9 million in 1998, 1999 and 2000,
respectively. Because of the uncertainties inherent in merging two financial
institutions, changes in the regulatory environment and changes in economic
conditions, no assurance can be given that any particular level of cost savings
will be realized, that any such cost savings will be realized over the time
period currently anticipated or that such cost savings will not be offset to
some degree by increases in other expenses, including expenses related to
integrating the two companies.
In addition to expected cost savings and operating synergies,
management of the Continuing Corporation believes, based on its previous
experience in acquiring or merging with other financial institutions, that
revenue enhancement opportunities exist with the offering of more commercial and
retail bank products to the respective predecessor banks' customers, and through
the harmonization of service charges, fees and rates schedules. The following
analysis does not give effect to such potential revenue enhancements.
Based upon projected cost savings and operating synergies expected to
be achieved subsequent to consummation of the Merger, management believes that
the Merger will be accretive to earnings per share in both 1998 and 1999. Based
on the average consensus Wall Street estimates (made prior to announcement of
the proposed Merger, as computed by IBES, Inc. and Nelson Information, Inc.
(public suppliers of such information) for 1998 and utilizing an 8% growth
factor to predict an average consensus Wall Street estimate for 1999 of each
separate company), the Merger would be accretive to Hudson Chartered's estimated
earnings per share in 1998 by approximately $0.08 per share or 5.8% relative to
the above Wall Street estimates of $1.37 per share and in 1999 by $0.18 per
share or 12.2% over 1999 estimated earnings of $1.48 per share. The Merger would
also be accretive to current stockholders of Progressive because estimated
earnings per share are expected to increase by approximately $0.17 per share or
6.9% as compared to Progressive's current Wall Street estimated earnings per
share of $2.48 and in 1999 by $0.35 per share or 13.1% over
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1999 estimated earnings of $2.68 (without giving effect to the Exchange Ratio of
1.82). Both of these estimates are exclusive of the one-time reorganization and
restructuring charge to be incurred in connection with the Merger, as discussed
below.
The companies anticipate that the Continuing Corporation will take a
one-time, after-tax charge of approximately $5.6 million relating to Merger
reorganization and restructuring costs, which will be incurred in connection
with the Merger. The one-time charge relates primarily to change-in-control
contracts and severance obligations ($1.8 million), professional fees ($1.6
million), abandonments ($1.3 million), New York State tax on recapture of
Pawling's thrift excess bad debt deductions ($1.5 million), and other expenses
incurred that are required to be recognized in accordance with generally
accepted accounting principles ($1.2 million), less estimated tax benefits of
$1.8 million.
See "AVAILABLE INFORMATION" and "FORWARD-LOOKING STATEMENTS."
Effect of the Merger on Employees and Management
Employees. Except as described below, on the Effective Date of the
Merger, all employees of Hudson Chartered, Progressive and their respective
subsidiaries on that date shall be employed by the Continuing Corporation and/or
the Continuing Bank. In anticipation of the Merger, however, the parties have
identified operational efficiencies that may be obtained through the
consolidation of the entities in the Merger and the Bank Merger and, in that
regard, some positions at each entity have been or will be eliminated at or
prior to the Effective Date. The parties expect that the Continuing Corporation
will realize cost savings with regard to employees and other matters in periods
following the Effective Date. See "-- Management and Operations After the
Merger" for information regarding certain related expenses expected to be
incurred in connection with the Merger.
Employee Benefit Plans. The Agreement provides that, after the
Effective Date, all directors, officers and employees of the Continuing
Corporation and its subsidiaries will be entitled to participate in
compensation, benefit, welfare and related plans, programs or arrangements made
available to similarly situated persons under the same terms and conditions,
notwithstanding such individuals' prior affiliation with Hudson Chartered or
Progressive, and that the parties will work together to develop, design and
prepare for the implementation of such plans, programs or arrangements. The
parties have agreed that all of such plans, programs and arrangements described
above shall provide that, for purposes of determining eligibility for and
vesting of rights under such plans only (and not for benefit accrual purposes,
except to the extent that an employee was covered by the applicable plan prior
to the Effective Date and had accrued benefits thereunder), service with
Progressive, Pawling, Hudson Chartered or Hudson Valley to the Effective Date
shall be treated as service with an "employer" for purposes of such plans. The
Agreement also provides that no new pre-existing condition exclusions shall be
applicable to their employees and/or covered dependents with respect to the
continuation of health insurance coverage with the Continuing Corporation.
Progressive Options. The Agreement provides that, on the Effective
Date, Progressive's obligations under the Progressive Stock Option Plans will be
assumed by the Continuing Corporation. See "-- Terms of the Merger." Based on
the closing price of Progressive Common Stock immediately before the execution
and announcement of the Agreement ($36.625 on December 15, 1997) and the recent
closing recent price of Hudson Chartered Common Stock ($23.75 on April 6, 1998),
Progressive estimates that the aggregate increase in the total value (market
price less exercise price of all option shares) of the Progressive Options held
by each director or executive officer of Progressive since the time the
Agreement was executed, excluding the value of all such options immediately
before the execution of the Agreement, is approximately as follows: Mr. Van
Kleeck, $483,120; Messrs. Page, Hazzard, Novik, Smith, R., Allen, Coulter and
Smith, A., $71,280 each; Mr. Swinden, $66,330; Mr. Aposporos, $59,400; Mr.
Gabrielsen, $240,900; and Mr. Apple, $36,927. In January 1998, Progressive
granted additional Progressive Options under the Progressive Stock Option Plans
consistent with its past practice with respect to periodic grants of stock
options, including options for 15,000, 8,500 and 1,750 shares to Peter Van
Kleeck, Robert Gabrielsen and Robert Apple, respectively, at an exercise price
equal to the market price of Progressive Common Stock at that time ($35.25 per
share); based on that exercise
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price and the recent closing price of Hudson Chartered Common Stock ($23.75 on
April 6, 1998), Progressive estimates that the total value (market price less
exercise price of all option shares) of these Progressive Options held by each
director or executive officer of Progressive is approximately as follows: Mr.
Van Kleeck, $119,625; Mr. Gabrielsen, $67,788; and Mr. Apple, $13,956. All
Progressive Options held by directors or executive officers of Progressive are
fully vested without regard to the Merger.
Employment Agreements and Other Arrangements -- Hudson Chartered.
Hudson Chartered has an employment agreement with T. Jefferson Cunningham III,
its Chairman and Chief Executive Officer. The agreement provides that if Hudson
Chartered were to engage in a merger, acquisition or "change in control" to
which Mr. Cunningham did not consent, Mr. Cunningham would be entitled to
receive a severance payment equal to two times his highest total compensation
paid in any of the previous three years. However, in connection with the
termination of his existing employment agreement and the execution of his
planned new employment agreement described below, Mr. Cunningham is expected to
consent to the Merger pursuant to the terms of his existing agreement, so no
payment will be made to Mr. Cunningham under his existing agreement in
connection with the Merger.
Upon the consummation of the Merger, T. Jefferson Cunningham's
existing employment agreement with Hudson Chartered will be terminated and
replaced by a new employment agreement with the Continuing Corporation, which
will become effective at the Effective Time. Under the new agreement, Mr.
Cunningham will be employed as Chairman of the Board of Directors and Chairman
of the Executive Committee of the Board of Directors of the Continuing
Corporation for a salary to be determined by that time. While Mr. Cunningham's
salary is not expected to increase in any significant respect upon the
consummation of the Merger, it is expected that the Continuing Corporation will,
consistent with past practices, review the compensation levels of its executive
officers, including Mr. Cunningham, following the Merger and make any
appropriate adjustments, including increases, based on the executives' positions
and responsibilities and a comparison of compensation levels for comparable
executives at comparable institutions. For additional information regarding
anticipated terms of Mr. Cunningham's new employment agreement, see the summary
of material terms attached as an exhibit to the Agreement, which is attached
hereto as Appendix A.
Hudson Chartered or Hudson Valley also has entered into employment
agreements with John C. VanWormer, President of Hudson Chartered and President
and Chief Executive Officer of Hudson Valley; Paul A. Maisch, Chief Financial
Officer of Hudson Chartered and Hudson Valley; and David S. MacFarland, Regional
Executive Vice President of Hudson Valley. Each of these agreements is described
in documents incorporated herein by reference. See "AVAILABLE INFORMATION." If
events related to the Merger were interpreted to trigger benefits under these
agreements, each of these executive officers would be entitled to a maximum
severance payment upon termination of employment following the Merger in the
following estimated amounts (plus continued insurance benefits in certain
cases): Mr. Van Wormer ($620,000); Mr. Maisch ($115,500); and Mr. MacFarland
($115,000).
Under Progressive's executive severance plan (which the parties have
agreed will generally apply to executives of Hudson Chartered displaced as a
result of the Merger (see below)), each of the five other executive officers of
Hudson Chartered named below would be entitled to a severance payment of less
than $100,000 plus benefits if his or her employment terminates as a result of
the Merger: Nancy C. Behanna, Secretary of Hudson Chartered and Senior Vice
President of Hudson Valley; Kim Dillinger-Sprossel, Controller of Hudson Valley;
George Elferink, Senior Vice President and Senior Trust Officer of Hudson
Valley; Paul Mack, Chief Credit Officer of Hudson Valley; and Donald H. Weber,
Vice President of Hudson Chartered and Executive Vice President of Hudson
Valley.
The Board of Directors of Hudson Valley has adopted a directors'
severance plan pursuant to which directors whose service is terminated as a
result of a change-in-control are entitled to a severance payment equal to
1/12th of the annual retainer for Hudson Valley directors times the number of
years (not less than 12) on which the director served on the Board of Directors
of Hudson Valley or a predecessor. Such directors also are eligible to serve as
directors emeriti of the bank for up to five years after the change-in-control,
subject to annual appointment by the Board, and to receive an annual retainer
for such service. The Merger will constitute a change-in-control for purposes of
this plan. The following directors of Hudson Valley who also are directors of
Hudson Chartered but have not been designated as
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directors of the Continuing Corporation or the Continuing Bank will be entitled
to serve as directors emeriti at an annual retainer of $5,000 and to receive
severance payments in the indicated amounts upon consummation of the Merger: Mr.
Fraleigh ($25,000); Mr. Marvin ($25,000); Mr. Patrick ($10,000); and Mr. R.
Williams ($10,000). An additional seven directors of Hudson Valley who have not
been designated as directors of the Continuing Corporation or the Continuing
Bank also will be entitled to benefits under this plan.
Employment Agreement and Other Arrangements -- Progressive.
Progressive has an employment agreement with Peter Van Kleeck, its President and
Chief Executive Officer. The agreement provides that in the event of Mr. Van
Kleeck's termination of employment in connection with a change of control of
Progressive, he could become entitled to receive certain severance benefits,
including approximately three years' salary. However, in connection with the
termination of his existing employment agreement and the execution of his
planned new employment agreement described below, Mr. Van Kleeck is expected to
waive any severance benefits to which he could otherwise become entitled under
his existing agreement, so no severance benefits will be made to Mr. Van Kleeck
under his existing agreement in connection with the Merger.
Upon the consummation of the Merger, Peter Van Kleeck's existing
employment agreement with Progressive will be terminated and replaced by a new
employment agreement with the Continuing Corporation, which will become
effective at the Effective Time. Under the new agreement, Mr. Van Kleeck will be
employed as President and Chief Executive Officer of the Continuing Corporation
for a salary to be determined by that time. While Mr. Van Kleeck's salary is not
expected to increase in any significant respect upon the consummation of the
Merger, it is expected that the Continuing Corporation will, consistent with
past practices, review the compensation levels of its executive officers,
including Mr. Van Kleeck, following the Merger and make any appropriate
adjustments, including increases, based on the executives' positions and
responsibilities and a comparison of compensation levels for comparable
executives at comparable institutions. For additional information regarding
anticipated terms of Mr. Van Kleeck's new employment agreement, see the summary
of material terms attached as an exhibit to the Agreement, which is attached
hereto as Appendix A.
Progressive has a severance agreement with Robert A. Gabrielsen, its
Executive Vice President and Chief Financial Officer. The agreement provides
that in the event of Mr. Gabrielsen's termination of employment in connection
with a change of control of Progressive, he could become entitled to receive
certain severance benefits, including approximately three times his five-year
average annual compensation. Progressive estimates that the aggregate amount
payable to Mr. Gabrielsen in the event he becomes entitled to such benefits
would have been approximately $421,000 at December 31, 1997.
Progressive has two severance plans, one for vice presidents and other
designated executives (who do not have a separate employment or severance
agreement) and one for other employees. Under the employee severance plan,
employees who are terminated after a change of control (including the Merger)
may become entitled to receive eight weeks' salary, six months' continuation of
employer-paid medical insurance and nine months to exercise any stock options.
Under the executive severance plan, eligible persons who are terminated in
connection with a change of control (including the Merger) may become entitled
to receive nine months' salary, a prorated incentive bonus for the year in which
they are terminated, nine months' continuation of employer-paid medical
insurance and nine months to exercise any stock options. Progressive estimates
that the aggregate amount payable to Mr. Apple in the event he becomes entitled
to benefits under Progressive's executive severance plan would have been
approximately $74,475 at December 31, 1997.
Progressive has a supplemental executive retirement plan, in which its
President and Chief Executive Officer, Peter Van Kleeck, is the sole
participant. Upon his retirement, Mr. Van Kleeck would receive benefits under
this plan to offset any loss of retirement benefits under Progressive's
retirement plan due to certain restrictions under the federal income tax laws.
Mr. Van Kleeck is fully vested in this plan, and this plan will be assumed by
the Continuing Corporation.
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Progressive has a defined contribution savings plan, under which
Progressive makes matching contributions, which are subject to vesting over a
period of six years, based on elective contributions made by participating
employees, including executive officers. Any unvested matching contributions
will become fully vested upon the consummation of the Merger. Progressive
estimates that at December 31, 1997 the aggregate amount of matching
contributions subject to vesting with respect to each executive officer was
approximately as follows: Mr. Van Kleeck, $15,215; Mr. Gabrielsen, $16,010; and
Mr. Apple, $9,540.
Amendments to Certificate of Incorporation
The information in this Proxy Statement / Prospectus concerning the
terms of the Hudson Chartered Certificate of Incorporation, and the proposed
amendments thereto, is qualified in its entirety by reference to the full text
of the proposed Certificate of Incorporation which is attached as Annex A to the
Plan of Merger attached as Annex A to the Agreement attached as Appendix A
hereto. Stockholders are urged to read carefully the full text of the proposed
Certificate of Incorporation.
From and after the Effective Date, Hudson Chartered's Certificate of
Incorporation, as amended and restated to reflect the terms of the Agreement,
will constitute the Continuing Corporation's Certificate of Incorporation. The
amendments to be made to Hudson Chartered's Certificate of Incorporation are
integral to the structure of the proposed Merger, and were negotiated by
Progressive and Hudson Chartered and set forth in the Agreement. Stockholders of
Progressive are not being asked to vote separately on the content or provisions
of the Continuing Corporation's Certificate of Incorporation taken as a whole,
or on any individual charter amendment. That approval or disapproval is subsumed
within the Hudson Chartered stockholders' approval or disapproval of the Merger
and the Agreement. In this regard, the Merger must be approved by holders of at
least two-thirds of the outstanding shares of Hudson Chartered common stock and
by the holders of at least two-thirds of the outstanding shares of Progressive
common stock. Certain of the proposed charter amendments will be adopted if the
Merger is approved by holders of at least two-thirds of the outstanding shares
of Hudson Chartered Common Stock, and the other proposed charter amendments will
be adopted if the Merger is approved by holders of at least 80% of the
outstanding shares of Hudson Chartered Common Stock (these latter amendments
will be adopted upon approval of the Merger by holders of at least 80% of the
outstanding shares of Hudson Chartered Common Stock even if the Merger is
approved by holders of at least two-thirds but less than 80% of the outstanding
shares of Progressive Common Stock). Progressive's stockholders will not be able
to vote to approve or disapprove the charter amendments, and their vote to
approve or disapprove the Merger and the Agreement will not affect which charter
amendments will be adopted if the Merger is approved. None of the proposed
charter amendments will be adopted if the Merger is disapproved by the
stockholders of either Hudson Chartered or Progressive, or if the Merger is not
consummated for any other reason.
General Amendment to the Certificate of Incorporation. The following
general amendment is proposed to be made to the Continuing Corporation's
Certificate of Incorporation. This amendment will be adopted if the Merger is
approved by holders of at least two-thirds of the outstanding shares of Hudson
Chartered Common Stock.
1. Corporate Name Change. Article 1 will be amended to change the name of
the Continuing Corporation from "Hudson Chartered Bancorp, Inc." to "Premier
National Bancorp, Inc." This change in corporate name is essential to the
proposed structure of the Merger, which contemplates the combination of
Progressive and Hudson Chartered into a much larger company, the principal
subsidiary of which is a national banking association. The new name also
reflects the parties' belief that the Continuing Corporation will be one of the
leading financial services providers in the markets in which it conducts
business. The Premier National Bancorp, Inc. name will also closely associate
the Continuing Corporation with its principal subsidiary, which will be named
Premier National Bank. This amendment will have no material effect on the rights
of the Continuing Corporation's stockholders.
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Amendments Relating to the Capital Stock of the Continuing Corporation.
The following amendments are related to the capital stock of the Continuing
Corporation. Each of these amendments will be adopted if the Merger is approved
by holders of at least two-thirds of the outstanding shares of Hudson Chartered
Common Stock.
2. Increase in Authorized Stock. Article 4 will be amended to increase the
authorized common stock of the Continuing Corporation from 20,000,000 shares to
50,000,000 shares, and to make a corresponding increase in the authorized
capital stock of the Continuing Corporation from 25,000,000 shares to 55,000,000
shares. Following this amendment, the Continuing Corporation would continue to
have the authority to issue up to 5,000,000 shares of preferred stock; there are
no proposed changes to the authorized number of shares of preferred stock.
At April 6, 1998, in the aggregate, there are approximately 7,152,256
shares of Hudson Chartered common stock outstanding, 1,401,234 shares allocated
to Hudson Chartered's dividend reinvestment plan, outstanding stock options and
employee stock purchase plan, and 7,615,613 shares anticipated to be issued or
issuable in connection with the Merger. Although there is a sufficient number of
authorized shares of Continuing Corporation common stock available to consummate
the Merger and meet the foregoing obligations of the Continuing Corporation,
Progressive and Hudson Chartered believe that the proposed increase in the
authorized shares of such stock is needed to provide additional shares that
could be used for general corporate purposes of the Continuing Corporation,
including making future acquisitions, issuing stock dividends, raising
additional capital, and granting stock options and other stock-based
compensation and incentives.
The issuance of additional shares of common stock may, among other things,
have a dilutive effect on the earnings per share and on the equity and voting
power of existing stockholders, and may adversely affect the market price for
Continuing Corporation common stock. Although it is not currently anticipated
that the board of directors of the Continuing Corporation would issue additional
shares of Continuing Corporation common stock for such purposes, the proposed
increase in the number of authorized shares of such stock could enable the board
of directors to render more difficult or discourage an attempt by another person
or entity to obtain control of the Continuing Corporation, even if such a change
in control were favored by a majority of the Continuing Corporation's
stockholders who are not affiliates of the Continuing Corporation. Such
additional shares could be issued, for example, by the board of directors of the
Continuing Corporation in a public or private sale, merger or similar
transaction, thereby increasing the number of outstanding shares of Continuing
Corporation common stock and diluting the equity interest and voting power of a
party attempting to obtain control of the Continuing Corporation. Neither Hudson
Chartered nor Progressive has any knowledge of any current efforts to obtain
control in such manner of either party to the Merger or the Continuing
Corporation. Moreover, in many such cases, the issuance of additional shares of
voting stock would be subject to the further approval of the Continuing
Corporation's stockholders. For example, the rules and regulations of the AMEX
require that the issuance of shares in connection with certain merger and
similar transactions be approved by the affirmative vote of holders of a
majority of the shares cast by stockholders entitled to vote thereon.
3. Eliminate Designation of Preferred Stock. Article 4 also will be
amended to eliminate the provisions regarding the former Series A and Series B
serial preferred stock of Hudson Chartered. As noted above in the description of
the amendment increasing the number of shares of Continuing Corporation common
and capital stock, Hudson Chartered has 5,000,000 shares of authorized preferred
stock, none of which is currently issued or outstanding. This amendment would
remove from the Continuing Corporation's Certificate of Incorporation those
provisions, no longer required, designating two series of preferred stock that
Hudson Chartered had previously issued and has subsequently reacquired or
redeemed and retired. This amendment would not change the number of authorized
shares of preferred stock, and the Continuing Corporation would be able to issue
up to 5,000,000 shares of preferred stock in the future. In the event the
Continuing Corporation determines to issue any new shares of preferred stock, it
would be required to adopt new designations of rights for such shares. Neither
Hudson Chartered nor Progressive has any present intent to cause the Continuing
Corporation to issue any shares of preferred stock. This amendment will have no
material effect on the rights of the Continuing Corporation's stockholders.
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4. Decrease Stockholder Vote For Amendments to Capital Stock Provisions.
Article 4 will be amended to eliminate the 66 2/3% stockholder voting
requirement to amend the provisions of Article 4 of the Continuing Corporation's
Certificate of Incorporation relating to its capital stock. Following this
amendment, the stockholder approval required for any future amendments to
Article 4 of the Continuing Corporation's Certificate of Incorporation will be
determined by the NYBCL and any other applicable law, such as any stockholder
approval requirements imposed by the securities exchange or market on which the
Continuing Corporation's securities are listed or quoted. Under the NYBCL, and
the rules of the AMEX in certain circumstances, the approval of the holders of a
majority of a corporation's outstanding capital stock entitled to vote, or
entitled to vote and voting, is required for the approval of any charter
amendment changing the authorized number of shares of capital stock or the
rights associated with such stock, absent any higher approval requirement
specified in the charter. Thus, the immediate effect of this amendment will be
to reduce the required stockholder approval requirement for future amendments to
Article 4 of the Continuing Corporation's Certificate of Incorporation from a
two-thirds vote to a majority vote.
5. Conform Capital Stock Provisions to Applicable Law. Article 4 also will
be amended to conform certain provisions relating to the Continuing
Corporation's capital stock to the NYBCL. These changes include:
Permitting any person to pay for capital stock of the Continuing
Corporation with a binding obligation to pay cash or property or to perform
services. Under Hudson Chartered's current charter, shares of its capital stock
must be paid for in cash, services rendered, personal property, real property or
any combination of the foregoing. The purpose of this amendment is to provide
the Continuing Corporation with maximum flexibility, to the extent permitted
under the NYBCL, in issuing stock.
Clarifying that there are no preemptive, preferential or other rights with
respect to new issuances of Continuing Corporation capital stock. Hudson
Chartered's Certificate of Incorporation currently provides that there are no
preemptive rights with respect to its capital stock and this change updates and
clarifies those provisions. This amendment will have no material effect on the
rights of the Continuing Corporation's stockholders.
Permitting the Continuing Corporation to make pro rata stock dividends and
other stock distributions of one class of the Continuing Corporation's stock to
holders of another class of the Continuing Corporation's stock. Hudson
Chartered's current Certificate of Incorporation does not expressly authorize
such stock distributions. The purpose of this amendment is to provide the
Continuing Corporation with maximum flexibility, to the extent permitted under
the NYBCL, in returning earnings and other accretions in the value of the
company to its stockholders.
Amendments Relating to the Continuing Corporation's Officers and
Directors. The following amendments are related to the Continuing Corporation's
Officers and Directors. Each of these amendments, other than Amendment 9 which
relates to the factors the board of directors of the Continuing Corporation may
consider when taking any corporate action, will be adopted if the Merger is
approved by holders of at least two-thirds of the outstanding shares of Hudson
Chartered Common Stock. Amendment 9 will be adopted if the Merger is approved by
holders of at least 80% of the outstanding shares of Hudson Chartered Common
Stock.
6. Removal of Directors. Article 15 of the Hudson Chartered Certificate of
Incorporation, relating to the removal of directors of the company, will be
redesignated Article 13 of the Continuing Corporation Certificate of
Incorporation and will be amended in a number of respects. Hudson Chartered's
Certificate of Incorporation currently provides that any director may be removed
from office at any time for cause by holders of at least 80% of the outstanding
voting stock of Hudson Chartered. As amended, any director of the Continuing
Corporation may be removed from office at any time for cause by either (i)
holders of 66 2/3% of all the outstanding voting stock of the company, or (ii)
66 2/3% of the entire board of directors of the company, other than the director
to be removed. Directors may not be removed from office for reasons other than
cause under either Hudson Chartered's existing Certificate of Incorporation or
as proposed to be amended for the Continuing Corporation's Certificate of
Incorporation. The effect of this amendment will be to reduce from 80% to 66
2/3% the stockholder vote required to remove a director
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for cause, and to enable two-thirds of the board of directors of the Continuing
Corporation (other than the director to be removed) to remove a director for
cause, thus making it easier for directors to be removed in appropriate cases.
The definition of "cause" also will be expanded. Under Hudson Chartered's
existing Certificate of Incorporation, cause is generally defined to include
violations of law or a final cease and desist order, engaging in unsafe or
unsound practices, and breaching a fiduciary duty owed to the company. Under the
Continuing Corporation's Certificate of Incorporation, the definition of cause
will be expanded to also include personal dishonesty, willful or continuing
disregard for the best interests of the Corporation, adjudication that a
director is of unsound mind or is bankrupt, intentional destruction of the
company's property, breach of agreements between the director and the company or
its subsidiaries, engaging in dishonorable or disruptive behavior, and practices
or acts that would have certain negative effects on the company. This more
expansive definition of cause will permit the Continuing Corporation to remove
directors in appropriate situations that do not necessarily involve illegal or
unsafe conduct or constitute a breach of fiduciary duty. Both Progressive and
Hudson Chartered believe that, as representatives of the company and its
stockholders, the directors of the Continuing Corporation should be held to the
highest standards of personal and professional conduct, and that the company
should be able to take responsible and effective action in situations where
there is a significant deviation from such standards that has adverse
consequences for the company.
7. Board Vacancies. Article 10 will be amended to clarify that the
Continuing Corporation's board of directors may fill any vacancy on the board
between annual stockholders' meetings, regardless of how the vacancy was
created. Hudson Chartered's Certificate of Incorporation presently provides that
Hudson Chartered's board of directors may fill any vacancy created by the
resignation, removal or death of a director or for any other reason, and may
fill any vacancy created by an increase in the number of directors, if such an
increase is permitted by Hudson Chartered's Bylaws. Neither Hudson Chartered nor
Progressive believes that this amendment will significantly change the ability
of the Continuing Corporation's board of directors to fill vacancies on the
board of directors.
8. Authorize Board to Amend Bylaws. A new Article 17 will be added to the
Continuing Corporation's Certificate of Incorporation to expressly authorize the
Board of Directors to amend, repeal or replace the Continuing Corporation's
Bylaws. The NYBCL provides that the bylaws of a New York corporation may be
adopted, amended or repealed by the corporation's board of directors if so
provided in the corporation's certificate of incorporation or a bylaw adopted by
the stockholders. Although Hudson Chartered's Bylaws expressly permits the board
of directors to amend the company's Bylaws, Hudson Chartered's Certificate of
Incorporation does not. The purpose of this amendment is to clarify in the
Continuing Corporation's Certificate of Incorporation that the board of
directors may amend the company's bylaws. This amendment assures that the board
of directors of the Continuing Corporation will have the flexibility to revise
the company's bylaws from time to time as the board deems necessary or
desirable. This amendment does not divest the power of the Continuing
Corporation's stockholders to amend the Bylaws.
A company's bylaws typically provide rules and procedures for managing the
business and affairs of the corporation, such as calling and providing notice of
meetings of stockholders, quorum and voting requirements, voting and inspection
procedures, number and term of directors, nomination procedures for the election
of directors, filling vacancies in the board, the appointment of officers, and
the description of officers' duties. From time to time, it may be desirable or
necessary to add to or change a bylaw provision to reflect changes in the
company's practices or to reflect changes in applicable law. With the power to
amend the Continuing Corporation's Bylaws, the board of directors will be able
to effect changes in the Bylaws in an efficient and cost-effective manner
without the necessity of incurring the expense and time delay of a stockholder
meeting.
9. Broaden Board Considerations in Taking Corporate Actions. Article 8
will be amended to expressly authorize the Continuing Corporation's board of
directors to consider, when taking any corporate action (including any action
relating to a merger, business combination or change in control), the effects of
such action on all of the company's constituencies (including its stockholders,
employees, customers, creditors and the communities in which the Continuing
Corporation conducts business). The company's existing Certificate of
Incorporation permits Hudson Chartered's board of directors to consider certain
factors in cases where the board is opposed to a merger, consolidation,
substantial sale
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of assets, proposed change in control or similar transaction. These factors
include, but are not limited to, the impact the proposed transaction would have
on the company's employees, depositors and customers. The purpose of this
amendment is to clarify that the board of directors of the Continuing
Corporation may consider a broad range of factors whenever it takes any
corporate action.
10. Permit Loans to Directors. A new Article 14 will be added to the
Continuing Corporation's Certificate of Incorporation that would permit the
Continuing Corporation to make loans to directors of the company if approved by
the company's stockholders pursuant to the NYBCL, or if approved by the board of
directors after the board determines that the loan benefits the Continuing
Corporation and either approves the particular loan or a general plan
authorizing such loans. The NYBCL permits New York corporations to make such
loans. The purpose of this new provision is to provide the Continuing
Corporation, to the fullest extent permitted by applicable law, with sufficient
flexibility to transact business that is mutually beneficial to both the company
and a director. Hudson Chartered and Progressive do not have any such loans, and
no such loans are presently contemplated.
11. Modernize Indemnification Provisions. Article 12 of the Hudson
Chartered Certificate of Incorporation, relating to the indemnification of
officers and directors of the company, will be redesignated Article 11 of the
Continuing Corporation Certificate of Incorporation and will be amended to (i)
require indemnification for officers and directors to the maximum extent
permitted under applicable law, (ii) authorize the indemnification of employees
and agents of the Continuing Corporation, its subsidiaries, predecessors or
affiliates to the extent permitted by applicable law, (iii) authorize the
advancement of expenses subject to indemnification without specific approval of
the board of directors or the company's stockholders, and (iv) clarify that
indemnification pursuant to the Certificate of Incorporation or Bylaws is
subject to applicable banking laws and regulations.
Hudson Chartered's Certificate of Incorporation currently authorizes the
company to indemnify its officers and directors to the extent required by
applicable law (for example, when an indemnified person has been successful on
the merits in the defense of an action). The amendment will require the
Continuing Corporation to indemnify its officers and directors to the maximum
extent permitted under applicable law, even if such indemnification is not
required (for example, when an action is threatened to be brought against a
person for actions taken as an officer or a director of the company, and the
indemnified person has not acted in bad faith or breached any duty to the
company). This amendment also will specifically authorize (but not require) the
Continuing Corporation to indemnify its non-officer employees and agents, as is
permitted under the NYBCL. Hudson Chartered's Certificate of Incorporation does
not currently provide for such indemnification. In addition, this amendment will
remove the current requirement in Hudson Chartered's Certificate of
Incorporation that the board of directors approve all advances of expenses to
persons who are entitled to indemnification. The NYBCL permits a New York
corporation to advance expenses to indemnified persons without board or
stockholder approval if such action is permitted by the corporation's
Certificate of Incorporation. Finally, the amendment clarifies that any
indemnification by the Continuing Corporation may be subject to the applicable
rules and regulations of state and federal banking agencies.
Amendments Relating to the Stockholders of the Continuing Corporation and
to the Approval of Mergers and Other Extraordinary Transactions. The following
provisions are related to the stockholders of the Continuing Corporation and to
director and stockholder approvals of mergers, consolidations and other
extraordinary transactions. Amendment 12 will be adopted if the Merger is
approved by holders of at least two-thirds of the outstanding shares of Hudson
Chartered Common Stock. Amendments 13 and 14 will be adopted if the Merger is
approved by holders of at least 80% of the outstanding shares of Hudson
Chartered Common Stock.
12. Stockholder Actions by Meeting. A new Article 15 will be added to the
Continuing Corporation's Certificate of Incorporation that would require
stockholder action to be taken at a duly called meeting and would prohibit,
except as otherwise required by applicable law, stockholder action to be taken
by written consent without a meeting. The purpose of this new provision is to
assure that all matters to be voted or acted upon by the Continuing
Corporation's stockholders are properly presented to and considered by them at
properly noticed and convened meetings. Both Progressive and Hudson Chartered
believe that it is in the best interests of the Continuing Corporation and its
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stockholders that all stockholders be advised in advance of any significant
corporate action that requires stockholder approval and be given the opportunity
to discuss the matter with the management and board of directors of the company
and vote on the matter. Advance notification to stockholders of proposed
corporate actions provides all stockholders the opportunity to express their
views on the proposed action and to persuade other stockholders and management
of their support or opposition. The parties to the Merger believe that
stockholder decisions reached after all stockholders have received notice and an
opportunity to express their views will be informed decisions and more
consistent with the notion of corporate democracy. In addition, stockholder
actions at meetings represent an effective method of avoiding the
disenfranchisement of minority stockholders through the use of written consent
solicitation.
Action by written consent may, in certain circumstances, permit
stockholders to take action opposed by the Board of Directors more rapidly than
would be possible if a meeting were required. Thus, the requirement of
stockholders acting only at meetings may have the effect of making more
difficult stockholder actions that do not have the support of the Continuing
Corporation's board of directors. The requirement for stockholder meetings also
could have the effect of discouraging a person from making a tender offer or
otherwise attempting to gain control of the company if such person were
unwilling to submit his, her or its proposals to a vote of the stockholders at a
meeting. The parties to the Merger nonetheless believe that it is important that
stockholders be given advance notice of proposed stockholder actions, and be
provided an opportunity to discuss, consider and vote upon such proposals. The
respective boards of directors of Progressive and Hudson Chartered have
considered the potential adverse effects of this amendment and have
independently concluded that any such potential adverse effects are outweighed
by the benefits this amendment would afford the Continuing Corporation and its
stockholders.
13. Repeal of Supermajority Stockholder Approvals for Certain
Transactions. Article 13 of Hudson Chartered's Certificate of Incorporation,
which requires the holders of at least 80% of the outstanding voting stock of
Hudson Chartered to approve any merger or similar transaction that is not
approved by at least 80% of Hudson Chartered's Board of Directors, will be
repealed. This provision generally makes it more difficult for persons to
acquire or enter into a business combination with Hudson Chartered by requiring
such transactions to be approved either (i) by at least 80% of the company's
directors and by holders of at least 66 2/3% of the company's outstanding voting
stock, or (ii) by at least a majority of the company's directors and by holders
of at least 80% of the company's outstanding voting stock. Following the repeal
of Article 13, approvals of such transactions will be governed by applicable
state law. Under the NYBCL, the approval of at least a majority of a
corporation's board of directors and the approval of holders of at least
two-thirds of all outstanding voting stock is required for any New York
corporation to adopt a plan of merger or consolidation (the corporation's
certificate of incorporation may reduce the stockholder voting requirement for
such transactions to a majority of all outstanding shares entitled to vote
thereon, but the Continuing Corporation's Certificate of Incorporation will not
be amended in that respect). The effect of this amendment is to reduce the board
of director and stockholder approval requirements for merger and similar
transactions that are undertaken by the Continuing Corporation.
14. Repeal of Certain Fair Price Provisions. Article 14 of Hudson
Chartered's Certificate of Incorporation will be repealed. This provision
requires the approval of holders of at least 80% of the company's outstanding
voting stock and the approval of holders of at least 67% of the company's
outstanding voting stock held by stockholders other than a "Controlling Party"
(generally, a stockholder who owns or controls 20% or more of the company's
outstanding voting stock) to approve a merger or similar transaction involving a
Controlling Party, unless certain fair price criteria are met or the transaction
is approved by at least 60% of the company's directors. This provision is
inconsistent with and provides less protection from "interested stockholder" and
other similar transactions than the applicable provisions of the NYBCL. The
NYBCL provides that no domestic corporation shall engage in any business
combination with an "interested stockholder" (generally, a stockholder who owns
or controls 20% or more of the outstanding voting stock) of such corporation
unless (i) the business combination is approved by the board of directors prior
to the interested stockholder's stock acquisition date, (ii) the interested
stockholder's stock purchase is approved by the board of directors prior to the
acquisition date, (iii) the business combination is approved by holders of a
majority of the company's outstanding voting stock not beneficially owned by the
interested stockholder, or any affiliate or associate of such interested
stockholder, at a meeting called for such purpose no earlier than five years
after the interested stockholder's
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stock acquisition date, or (iv) the business combination meets all of the fair
price benchmarks and conditions provided in Section 912 of the NYBCL.
Progressive and Hudson Chartered believe that the extensive fair price
provisions of the NYBCL will sufficiently protect the stockholders of the
Continuing Corporation against any potentially adverse interested stockholder
transactions.
Amendments Relating to Future Amendments to the Certificate of
Incorporation. The following amendments affect the ability of the Continuing
Corporation to amend its Certificate of Incorporation after the consummation of
the Merger. Each of these amendments will be adopted if the Merger is approved
by holders of at least 80% of the outstanding shares of Hudson Chartered Common
Stock.
15. Reduce Approvals Required to Amend Articles 8, 10 and 13. Article 8,
which relates to the Board's ability to consider all of the Continuing
Corporation's constituencies when taking or approving any corporate action,
Article 10, which relates to the Board's ability to fill vacancies on the
Continuing Corporation board of directors between annual stockholders' meetings,
and Article 13, which relates to the removal of directors of the Continuing
Corporation for cause, will be amended to eliminate the requirement that holders
of at least 80% of the outstanding voting stock of the Continuing Corporation
approve any amendment to or the repeal of Article 8, 10 or 13. At the same time,
Article 16 will be amended to require that two-thirds of the combined voting
power of all outstanding capital stock entitled to vote for the election of
directors approve any amendment to or the repeal of Article 8, 10 or 13. The
effect of these changes is to reduce from 80% to 66 2/3% the stockholder voting
requirement for changes to the provisions of Article 8, 10 or 13. The purpose of
this amendment is to make the supermajority stockholder approval requirements of
various sections of the Continuing Corporation's Certificate of Incorporation
more uniform, and to make it easier for the Continuing Corporation's
stockholders to amend this provision in the future.
16. Amendments to the Certificate of Incorporation. Existing Article 16,
which governs amendments to the Hudson Chartered Certificate of Incorporation,
will be redesignated Article 16(a) and will be amended to require that, unless a
larger vote is specifically required by another provision of the Continuing
Corporation's Certificate of Incorporation or applicable law, all amendments
thereto must be approved by a majority of the company's board of directors and
by a majority of the voting stock of the company entitled to vote generally in
the election of directors. The purpose of these amendments is to conform the
Continuing Corporation's Certificate of Incorporation to the general
requirements of the NYBCL. Hudson Chartered's existing Certificate of
Incorporation requires the approval of holders of a majority of the outstanding
stock of the company, and does not specifically require the approval of the
company's board of directors, for amendments to the company's Certificate of
Incorporation not subject to a supermajority voting requirement.
As discussed above in connection with amendment 15, a new Article 16(b)
will be added to (i) reduce from 80% to 66 2/3% the stockholder voting
requirement for changes to the provisions of Article 8 relating to the Board's
ability to consider all of the Continuing Corporation's constituencies when
taking or approving any corporate actions, (ii) reduce from 80% to 66 2/3% the
stockholder voting requirement for changes to the provisions of Article 10
relating to the Board's ability to fill vacancies on the Continuing
Corporation's board of directors between annual stockholders' meetings, (iii)
reduce from 80% to 66 2/3% the stockholder voting requirement for changes to the
provisions of Article 13 relating to the removal of directors of the Continuing
Corporation for cause, (iv) impose a two-thirds stockholder voting requirement
to amend or repeal Article 9, which provides for the division of the Continuing
Corporation's board of directors into three classes (majority stockholder
approval is currently required for any such amendment), and (v) impose a
two-thirds stockholder voting requirement to amend or repeal Article 16(b),
which imposes these supermajority stockholder voting requirements. The purpose
of this amendment is to make uniform the supermajority stockholder approval
requirements for amendments of various sections of the Continuing Corporation's
Certificate of Incorporation. The effect of the amendment would be to reduce the
stockholder approval requirement for amendments to Articles 8, 10 and 13, and
increase the stockholder approval requirement for amendments to Article 9.
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With respect to decreasing the stockholder approval required to amend
Articles 8, 10 and 13, Progressive and Hudson Chartered believe that this change
will make it easier for the Continuing Corporation's to obtain stockholder
approval to amend these provisions in the future. The parties to the Merger are
not aware of any potential adverse effects of these changes to the Continuing
Corporation's stockholders.
With respect to increasing the stockholder approval required to amend
Article 9 from a majority vote to a two-thirds vote, Progressive and Hudson
Chartered believe that this change will help to assure continuity in the
management, affairs and business strategies of the company, and will protect
stockholder interests in a classified board of directors. The purpose of this
amendment is to inhibit a third party from eliminating the Continuing
Corporation's classified board or removing incumbent directors with a simple
majority vote, and filling the newly created vacancies in an attempt to gain
control of the board of directors and the company. This change may be
characterized by some as an anti-takeover measure which, if adopted, may tend to
insulate management and make the accomplishment of certain transactions
involving a potential change of control of the company more difficult. However,
the parties to the Merger believe that, in many such circumstances, this
amendment would restrict the ability of a potential acquiror of the company to
replace the existing board of directors as the principal means of facilitating
such a transaction when the duly elected board has declined to do so, and would
require the purchaser to negotiate directly with the board of directors, who
will be in a better position to negotiate effectively on behalf of all the
stockholders and other constituencies of the company. This amendment is not
being recommended in response to any specific effort to which either Progressive
or Hudson Chartered is aware of to accumulate the stock of, obtain control of or
acquire either party to the Merger or the Continuing Corporation following the
Merger. The respective boards of directors of Progressive and Hudson Chartered
have considered the potential adverse effects of this amendment and have
independently concluded that any such potential adverse effects are outweighed
by the benefits this amendment would afford the Continuing Corporation and its
stockholders.
For a comparison of Hudson Chartered and Progressive stockholder
rights before and after the Merger, see "-- Certain Differences in Rights of
Stockholders" below.
Certain Differences in Rights of Stockholders
The Certificate of Incorporation of the Continuing Corporation will be
substantially similar to Hudson Chartered's existing Certificate of
Incorporation, except for certain amendments to Hudson Chartered's Certificate
of Incorporation that were agreed upon by Progressive and Hudson Chartered. For
complete discussion of the proposed Certificate of Incorporation of the
Continuing Corporation, see "-- Amendments to Certificate of Incorporation"
above. Both Hudson Chartered and Progressive are New York corporations, and the
holders of voting common stock of the respective corporations are subject to the
same privileges and restrictions under the New York Business Corporation Law
(NYBCL), as will be the stockholders of the Continuing Corporation, but the
stockholders of Hudson Chartered, Progressive and the Continuing Corporation are
or will be subject to certain different corporate governance requirements under
their respective Certificates of Incorporation and Bylaws. The following
paragraphs briefly summarize material differences that will exist between the
rights of stockholders of Progressive, Hudson Chartered and the Continuing
Corporation. The description does not purport to be a complete statement of all
the differences between the rights of stockholders of Hudson Chartered,
Progressive and the Continuing Corporation, and the identification of certain
differences is not meant to indicate that other differences do not exist. The
following summary is qualified in its entirety by reference to the NYBCL, the
proposed Certificate of Incorporation and Bylaws of the Continuing Corporation
(which are included as Annexes A and B, respectively, to the Plan of Merger
included as Annex A to the Agreement, which is attached hereto as Appendix A)
and Hudson Chartered's and Progressive's existing Certificates of Incorporation
and Bylaws.
Authorized Common Stock. Under its Certificate of Incorporation,
Hudson Chartered is authorized to issue 20,000,000 shares of Hudson Chartered
Common Stock, par value $0.80 per share, 7,152,256 shares of which were issued
and outstanding as of April 6, 1998. Progressive is authorized by its
Certificate of Incorporation to issue 15,000,000 shares of Progressive Common
Stock, par value $1.00 per share, 3,855,781 shares of which were issued and
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outstanding as of March 26, 1998. Both Hudson Chartered's and Progressive's
Board of Directors may, subject to applicable law and rules of their respective
exchanges, authorize the issuance of additional common stock at such times, for
such purposes and for such consideration as they may deem advisable without
further stockholder approval. Under its Certificate of Incorporation as it will
be amended and restated in the Merger, the Continuing Corporation will be
authorized to issue 50,000,000 shares of common stock, par value $0.80 per
share, of which up to 16,169,103 shares are expected to be outstanding or
reserved for issuance upon consummation of the Merger, based on the Hudson
Chartered and Progressive Common Stock outstanding or reserved for issuance at
April 6 and March 26, 1998, respectively.
Issuance of Authorized Preferred Stock. Hudson Chartered is authorized
to issue, without stockholder approval, up to 5,000,000 shares of serial
preferred stock, par value $0.01 per share, none of which is issued and
outstanding. Progressive is authorized to issue 5,000,000 shares of serial
preferred stock, par value $1.00 per share, under its Certificate of
Incorporation. Both Hudson Chartered's and Progressive's Board of Directors may,
subject to applicable law and rules of their respective exchanges, authorize the
issuance of preferred stock at such times, for such purposes and for such
consideration as they may deem advisable without further stockholder approval.
The ability of Hudson Chartered and Progressive to issue shares of preferred
stock up to the prescribed amounts in their respective Certificates of
Incorporation could have a possible anti-takeover effect. Under its Certificate
of Incorporation as it will be amended and restated in connection with the
Merger, the Continuing Corporation will be authorized to issue, without
stockholder approval, up to 5,000,000 shares of serial preferred stock par value
$0.01 per share.
Preemptive Rights. Holders of common stock in both Hudson Chartered
and Progressive do not have preemptive rights for the purchase of additional
shares of any class of stock and are not subject to any liability for further
calls or assessments. The Certificate of Incorporation of the Continuing
Corporation does not provide stockholders with any preemptive rights with
respect to new issuances that may affect stockholder's voting or dividend
rights.
Amendment of Certificate of Incorporation. Hudson Chartered's
Certificate of Incorporation provides that the Certificate of Incorporation may
be amended or repealed at any regular or special meeting of stockholders by the
affirmative vote of the holders of a majority of Hudson Chartered Common Stock,
unless a greater vote is required by law or otherwise required in the
Certificate of Incorporation. However, certain provisions of Hudson Chartered's
Certificate of Incorporation, including those related to anti-takeover
protections, the consideration of noneconomic factors by the Board of Directors,
removal of directors and filling of director vacancies, may not be repealed or
amended unless approved by the affirmative vote of holders of eighty-percent
(80%) of the outstanding voting stock thereof. In addition, except for
stockholder approval to increase the number of authorized shares of common
stock, the affirmative vote of not less than two-thirds of the outstanding
voting stock is required to amend or repeal the provisions regarding capital
stock in the Certificate of Incorporation. Progressive's Certificate of
Incorporation can be amended, altered, changed or repealed, provided that any
such amendment, alteration, change or repeal is approved first by a majority
vote of the Board of Directors and then by the stockholders by the affirmative
vote of a majority of the total votes eligible to be cast. The requirements for
amending the Continuing Corporation's Certificate of Incorporation differs from
that of Hudson Chartered's and Progressive's provisions relating to amending
their respective Certificates of Incorporation. Amending, altering or repealing
the Continuing Corporation's Certificate of Incorporation will require the
approval of a majority of the Board of Directors and, unless otherwise required
by law or the Certificate of Incorporation, a majority of the holders of the
Continuing Corporation's Common Stock. Amending certain provisions of the
Continuing Corporation's Certificate of Incorporation will require stockholder
votes in excess of a majority. Subject to the approval of eighty-percent (80%)
of Hudson Chartered's stockholders at the Annual Meeting, the amendment,
alteration or repeal of additional provisions of the Continuing Corporation's
Certificate of Incorporation will require a two-thirds stockholder vote instead
of the current eighty-percent (80%) stockholder vote requirement. If at least
eighty-percent (80%) of Hudson Chartered's stockholders do not approve the
proposed Merger then the existing sections will remain in effect following the
Merger. For a description of the sections of the Continuing Corporation's
Certificate of Incorporation that will change from an eighty-percent (80%) to a
two-thirds stockholder vote requirement to amend, repeal or alter the
Certificate of Incorporation, see "-- Amendments to Certificate of
Incorporation."
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Amendment of Bylaws. Hudson Chartered's Bylaws generally may be
amended or repealed, in whole or in part, by a majority vote of the Board of
Directors. Progressive's Certificate of Incorporation provides that the Bylaws
may be amended by the affirmative vote of a majority of the Board of Directors.
Also, Progressive's Bylaws may be amended, repealed or adopted by the
affirmative vote of three-quarters of all of the votes eligible to be cast at a
meeting of stockholders held to consider such matter, and new Bylaws may also be
adopted provided that the notice of any such meeting at which Bylaws are to be
adopted, amended or repealed shall include notice of such proposed action.
Progressive's Bylaws further provide that any Bylaw adopted by the Board of
Directors may be amended or repealed by stockholder vote. The Continuing
Corporation's Bylaws may be amended or repealed, in whole or in part, by a
majority vote of the Board of Directors or a by a majority vote of the holders
of the Continuing Corporation's voting capital stock.
Annual Meetings of Stockholders. Hudson Chartered's Bylaws provide
that the Chairman, the Chief Executive Officer, the President or a majority of
the Board of Directors may call special meetings. Progressive's Certificate of
Incorporation provides that only the Board of Directors may call special
meetings. The Bylaws of the Continuing Corporation will follow the same
procedure as Hudson Chartered for calling a special meeting.
The Board of Directors. The Bylaws of Hudson Chartered provide that
the Board of Directors shall consist of not less than five (5) nor more than
twenty-five (25) directors, as fixed by the Board. The Bylaws of Progressive
provide that there shall be at least ten (10) but no more than fifteen (15)
directors. The number of directors at any time within such maximum and minimum
shall be either the number fixed by resolution of the Board of Directors or, in
the absence of such a resolution, the number of directors elected at the
preceding annual meeting of stockholders; provided, however, that such number
may be increased or decreased at any time by a vote of the directors. The Bylaws
of the Continuing Corporation will provide that the Board will not consist of
less than five (5) nor more than twenty-five (25) directors. Hudson Chartered
and Progressive have agreed that the Board of the Continuing Corporation will
consist of twenty (20) persons to serve as directors, 10 of whom shall be
persons named by Hudson Chartered's Board, and ten of whom will be named by
Progressive's Board.
Vacancies on the Board of Directors. Hudson Chartered's Certificate of
Incorporation provides that any directorship to be filled by the resignation,
removal or death of a director or for any other reason shall be filled by the
majority vote of the then remaining directors. Any director so elected by the
Board holds office only until the next annual meeting of stockholders,
regardless of whether the term of office of such director will expire at such
annual meeting. Progressive's Bylaws provide that vacancies in the Board of
Directors not exceeding one-third of the entire Board shall be filled for the
unexpired portion of the term by vote of the directors. All other vacancies
shall be filled by election by the stockholders. The Certificate of
Incorporation of the Continuing Corporation provides that only the Board of
Directors may fill vacancies on the Board for any reason, including, but not
limited to, removal from the Board or a newly created directorship. The section
of the Continuing Corporation's Certificate of Incorporation for filling
vacancies on the Board differs from Progressive's provision, but it is
substantially similar to Hudson Chartered, except for eliminating the
eighty-percent (80%) stockholder vote required to amend or repeal the provision
to only require a two-thirds stockholder vote. The approval of the Agreement by
an eighty-percent (80%) of Hudson Chartered stockholder vote is required to
amend this section of Hudson Chartered's Certificate of Incorporation to lower
the stockholder vote from eighty-percent (80%) to two-thirds to amend or repeal
this section. If at least eighty-percent (80%) of Hudson Chartered's
stockholders do not approve the proposed Merger then the existing section in
Hudson Chartered's Certificate of Incorporation will remain in effect following
the Merger.
Removal of Directors. Hudson Chartered's Certificate of Incorporation
requires the vote of eighty-percent (80%) of the outstanding voting stock to
remove directors for cause and provides that stockholders do not have the right
to remove directors without cause. Progressive's Bylaws provide that directors
may be removed by the stockholders at any time at any annual or special
stockholders' meeting with cause upon the affirmative vote of two-thirds of the
votes eligible to be cast at such meeting. In addition, Progressive's Bylaws
provide that any director may be removed by the Board of Directors at any time
at any regular or special meeting of the Board of Directors if the Information
Security Committee of the Board of Directors has determined by a majority vote
that such director has breached the corporation's
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policy on confidential information in a manner which justifies his or her
removal from the Board of Directors, and not less than two-thirds of all of the
directors, other than the director in question, vote to so remove the director.
Subject to approval by eighty-percent (80%) of Hudson Chartered's stockholders
of the proposed Merger, the Continuing Corporation's Certificate of
Incorporation will provide for the removal of directors for cause by a
two-thirds vote of the Board of Directors, other than the director to be
removed, or by the affirmative vote of two-thirds of the combined voting power
of all shares of capital stock entitled to vote generally in the election of
directors, with no power of the Board of Directors or stockholders to remove
directors without cause. If at least eighty-percent (80%) of Hudson Chartered's
stockholders do not approve the proposed Merger then the existing section under
Hudson Chartered's Certificate of Incorporation for removal of directors will
remain in effect following the Merger.
Stockholder Nominations for Directors and Proposals for New Business.
Hudson Chartered's Bylaws set forth procedures to be followed by stockholders
seeking to make nominations for directors. Hudson Chartered's Bylaws provide
that nominations by stockholders of individuals for election to the Board of
Directors shall be made by delivering written notice to the Secretary not less
than 20 days before the meeting at which directors will be elected. Such notice
must set forth certain background information about the persons to be nominated.
The presiding officer of the stockholders' meeting may disregard any nomination
not made in accordance with these procedures and may instruct the vote tellers
to disregard all votes cast for such nominee. Hudson Chartered's Certificate of
Incorporation and Bylaws do not set forth procedures to be followed by
stockholders seeking to propose new business for consideration at an annual or
special meeting of stockholders.
Procedures to be followed by stockholders of Progressive seeking to
make nominations for directors and proposals for new business are contained in
Progressive's Certificate of Incorporation and Bylaws. In order for a
stockholder of Progressive to make any such nominations and/or proposals, he or
she shall give written notice to the Corporate Secretary not less than 30 days
nor more than 60 days prior to the date of any such meeting; provided, however,
that if less than 40 days' notice of the meeting is given to stockholders, such
written notice shall be delivered or mailed not later than the close of business
on the tenth day following the day on which notice of the meeting was mailed to
stockholders. Each such notice given by a stockholder with respect to
nominations for the election of directors must set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice, (ii) the principal occupation or employment of each such nominee,
and (iii) the number of shares of Progressive stock which are beneficially owned
by each such nominee. In addition, the stockholder making such nomination shall
promptly provide any other information reasonably requested by Progressive. Each
such notice given by a stockholder to the Corporate Secretary with respect to
proposals to be brought before a meeting must set forth in writing as to each
matter: (i) a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting; (ii) the
name and address of the stockholder proposing such business; (iii) the class and
number of shares of Progressive which are beneficially owned by the stockholder;
and (iv) any material interest of the stockholder in such business.
The Bylaws of the Continuing Corporation will provide analogous
requirements for notifying and submitting stockholder proposals to the
Continuing Corporation to that of Progressive's requirements for stockholder
proposals, except the written notice for the stockholder proposal must be
delivered to the Secretary of the Continuing Corporation for an annual meeting
proposal within the time periods prior to the date of such meeting as required
and specified in as pursuant to federal rules regarding proxy solicitations, and
for special meeting stockholder proposals, written notice must be received on
the tenth (10th) day following the day on which notice of the date of the
special meeting was given to stockholders. The requirements for stockholder
nominations under the Continuing Corporation's Bylaws differ from that of Hudson
Chartered and Progressive. Under the Continuing Corporation's Bylaws,
stockholder nominations for the election of the Board of Directors at an annual
or special meeting of stockholders must contain the information specified in the
Bylaws and must be submitted in writing to the Secretary of the Continuing
Corporation no later than the time periods prior to the date of such meeting as
required and specified in as pursuant to federal rules regarding proxy
solicitations, and for a special meeting, nominations must be received on the
tenth (10th) day following the day on which notice of the date of the special
meeting was given to stockholders.
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<PAGE>
Business Combinations/Fair Price Provisions. Both Progressive and
Hudson Chartered are subject to provisions of the NYBCL governing "business
combinations" with "interested stockholders," which provides that a New York
corporation may not engage in a business combination with an interested
stockholder for a period of five years after such interested stockholder became
an interested stockholder unless the business combination or the purchase of
stock by the interested stockholder causing him to become such was approved in
advance by the Board of Directors. Other business combinations with an
interested stockholder are prohibited at any time unless certain requirements
are met. The Continuing Corporation will also be subject to these provisions.
In addition, Hudson Chartered's Certificate of Incorporation contains
a fair price provision that provides that the affirmative vote of not less than
eighty-percent (80%) of the outstanding shares of all voting stock and the
affirmative vote of the holders of not less than 67% of the outstanding shares
of voting stock held by stockholders other than a Controlling Party for certain
business combinations with a Controlling Party. However, these voting
requirements are not applicable in transactions in which: (a) the cash or fair
market value of the consideration to be received by holders of the common stock
in such transaction is not less than the highest per share price (with
appropriate adjustments for recapitalizations, stock splits, stock dividends and
distributions) paid by the Controlling Party in the acquisition of any of its
holdings of the common stock in the three years preceding the announcement of a
proposed transaction; or (b) the transaction is approved by at least 60% of the
entire Board of Directors. Progressive's Certificate of Incorporation contains
no such provision. The Certificate of Incorporation of the Continuing
Corporation, like Progressive's, will not have a fair pricing provision,
provided that eighty percent (80%) of Hudson Chartered's stockholders approve
the proposed Merger. If less than eighty-percent (80%) approve the proposed
Merger, the fair pricing section in the Hudson Chartered Certificate of
Incorporation will remain in effect following the Merger.
Stockholder Action. Hudson Chartered's Certificate of Incorporation
provides that the affirmative vote of the holders of not less than
eighty-percent (80%) of the outstanding voting stock is required in the event
that eighty-percent (80%) of the entire Board of Directors does not recommend to
the stockholders a vote in favor of (i) a merger or consolidation of Hudson
Chartered with or (ii) a sale, exchange or lease of at least 20% of Hudson
Chartered's assets to, any person or entity. Progressive's Certificate of
Incorporation has no comparable provision, so any merger or consolidation of
Progressive with another entity or sale of all or substantially all of
Progressive's assets would be governed by the NYBCL, which generally requires a
two-thirds vote. Provided that the proposed Merger is approved by eighty-percent
(80%) of stockholders at the Hudson Chartered Annual Meeting, the Continuing
Corporation's Certificate of Incorporation will not set forth voting
requirements for stockholders, and the Continuing Corporation will be subject to
the requirements under the NYBCL for a merger or similar transaction. If Hudson
Chartered's stockholders do not approve the proposed Merger by eighty percent
(80%) then the existing section will remain in effect following the Merger.
Consideration of Noneconomic Factors. Hudson Chartered's Certificate
of Incorporation provides that, in considering whether to oppose a tender offer,
other exchange offer, merger, consolidation, or sale, lease or exchange of at
least 20% of assets, the Board of Directors may consider any pertinent issues
including, but not limited to: (i) whether the offer price is acceptable, based
on historical and present operating results and the financial condition of the
corporation; (ii) whether a more favorable price could be obtained for the
corporation's securities or assets, whichever the case may be, in the future;
(iii) the impact of such transaction on employees, depositors and customers of
the corporation and its subsidiaries; (iv) the reputation and business practices
of the offeror or merger partner and its management and affiliates as they would
affect the employees, depositors and customers of the corporation and its
subsidiaries and the future value of the corporation's stock; (v) the value of
any securities offered in exchange for the corporation's securities, based on an
analysis of the worth of the corporation as compared to the entity whose
securities are being offered; and (vi) any antitrust or other legal or
regulatory issues raised by the offer. If the Board of Directors of Hudson
Chartered determines that an offer or proposal should not be recommended to the
stockholders, it is permitted to take any lawful action to accomplish its
purpose of opposing or not recommending such offer or proposal, including, but
not limited to, advising stockholders not to accept the offer; soliciting
proxies against the transaction or proposal; initiating, in good faith,
litigation against the offer or merger or consolidation partner; filing
complaints with governmental and regulatory authorities; issuing authorized but
unissued securities or treasury stock of Hudson
73
<PAGE>
Chartered or granting options with respect thereto; acquiring a company to
create an antitrust or other regulatory problem for the offeror; and obtaining a
more favorable offer from other entities or individuals, or obtaining a more
favorable entity to merge into or consolidate with Hudson Chartered.
Progressive's Certificate of Incorporation has no comparable provision. However,
both Progressive and Hudson Chartered are governed by provisions of the NYBCL
relating to the duty of directors. Under the NYBCL, directors are permitted to
consider the effects of a corporation's actions on various constituencies which
include employees, customers, creditors and communities in which the corporation
does business. Provided that the proposed Merger is approved at the Hudson
Chartered Annual Meeting by eighty-percent (80%) of Hudson Chartered's
stockholders, the Continuing Corporation's Certificate of Incorporation will
have similar requirements to that of Hudson Chartered, except for certain
changes which expand and clarify that the existing provisions in Hudson
Chartered's Certificate of Incorporation are permissive and are not limiting of
the Board's authority. If Hudson Chartered's stockholders do not approve the
Merger by a vote of at least eighty-percent (80%), the existing section in
Hudson Chartered's Certificate of Incorporation will remain in effect following
the Merger.
Stockholder Rights Plan and the Rights Agreement. Hudson Chartered
does not have a stockholder rights plan, or "poison pill." However, Progressive
has adopted such a plan, and entered into a related stockholder rights agreement
(collectively, the "Rights Plan"), pursuant to which Progressive has issued one
"Right" for each outstanding share of Progressive Common Stock. Under the Rights
Plan, in the event of certain events generally associated with an acquisition or
potential acquisition of Progressive, the Rights would become exercisable and
transferable, and the holders of the rights would become entitled to purchase
stock of either Progressive or the acquiror at, in effect, a bargain price. The
Rights would not become exercisable in an acquisition approved by Progressive's
Board of Directors, such as the Merger, and the Rights will extinguish upon the
consummation of the Merger and the conversion of Progressive Common Stock into
Continuing Corporation Common Stock. For additional information regarding
Progressive's Rights Plan, see "AVAILABLE INFORMATION," which includes
descriptions and copies of the Rights Plan. The Continuing Corporation initially
will not have any similar stockholder rights plan. As a result, stockholders of
Progressive whose shares of Progressive Common Stock convert into shares of
Continuing Corporation Common Stock upon the consummation of the Merger will no
longer hold shares with similar contingent rights, and the Continuing
Corporation will not have this anti-takeover device which might have protected
the stockholders from certain coercive takeover techniques in the future but
also might have prevented a future takeover on terms attractive to stockholders;
however, the Continuing Corporation may decide to adopt such a plan at a later
date.
No Dissenters' Rights
In accordance with Section 910 of the NYBCL, dissenters' rights are
not available to stockholders of any class of shares that, at the record date
for determining stockholders entitled to vote on the plan of merger or
consolidation, was listed on a national securities exchange or designated as a
Nasdaq National Market security. Because the Hudson Chartered Common Stock is
listed on the American Stock Exchange, a national securities exchange, and the
Progressive Common Stock is listed on the Nasdaq National Market, neither Hudson
Chartered's nor Progressive's stockholders will have dissenters' rights in
connection with the transactions contemplated by the Agreement.
Federal Income Tax Consequences
The following is a summary of the material federal income tax
consequences of the Merger to stockholders of Progressive. The federal income
tax laws are complex and the tax consequences of the Merger may vary depending
upon each stockholder's individual circumstances or tax status. Moreover, some
stockholders such as foreign persons, financial institutions, tax-exempt
organizations, insurance companies and persons who acquired shares of
Progressive Common Stock pursuant to the exercise of employee stock options or
rights or otherwise as compensation may be subject to special rules. Therefore,
each stockholder is urged to consult a tax advisor regarding the federal, state,
local, foreign and other tax consequences of the Merger in light of the
particular circumstances of such stockholder.
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<PAGE>
Arnold & Porter, special counsel to Hudson Chartered, has rendered an
opinion to Hudson Chartered and Progressive regarding the material federal
income tax consequences of the Merger, which opinion is described below. That
opinion is based on laws, regulations, rulings and judicial decisions as they
now exist. These authorities are all subject to change and such change may be
made with retroactive effect. Arnold & Porter cannot give any assurance that,
after any such change, its opinion would not be different, and does not
undertake any responsibility to update or supplement its opinion. Moreover,
Arnold & Porter's opinion does not address the consequences of the Merger under
state, local or foreign tax laws, to the extent such laws may apply.
Hudson Chartered and Progressive have provided Arnold & Porter with
the facts, representations, and assumptions on which Arnold & Porter has relied
in rendering its opinion, which information is consistent with the state of
facts that Hudson Chartered and Progressive believe will be existing as of the
Effective Date. Based on such facts, representations and assumptions, Arnold &
Porter has opined that, for federal income tax purposes: (i) the Merger, when
consummated in accordance with the Agreement and certain related agreements,
will constitute a reorganization within the meaning of Section 368(a) of the
Code; (ii) no gain or loss will be recognized by a stockholder of Progressive
who exchanges all of the stockholder's Progressive Common Stock solely for
Continuing Corporation Common Stock pursuant to the Merger (except as described
below with respect to cash received in lieu of a fractional share interest in
Continuing Corporation Common Stock); (iii) the aggregate adjusted tax basis of
the Continuing Corporation Common Stock received by a stockholder who exchanges
all of the stockholder's Progressive Common Stock solely for Continuing
Corporation Common Stock in the Merger will be the same as the aggregate
adjusted tax basis of the Progressive Common Stock surrendered in exchange
therefor, reduced by any amount allocable to a fractional share interest for
which cash is received; and (iv) the holding period for Continuing Corporation
Common Stock received in exchange for Progressive Common Stock will include the
period during which the stockholder held the Progressive Common Stock
surrendered in the exchange, provided that the Progressive Common Stock was held
as a capital asset at the Effective Date.
For federal income tax purposes, a stockholder of Progressive who
receives cash in lieu of a fractional share interest in Continuing Corporation
Common Stock will be treated as having received such fractional share interest
from the Continuing Corporation in the Merger. The cash received by such
stockholder in lieu of a fractional share interest in Continuing Corporation
Common Stock will be treated as received in exchange for such fractional share
interest, and gain or loss generally will be recognized for federal income tax
purposes measured by the difference between the amount of cash received and the
portion of the basis of the share of Progressive Common Stock allocable to such
fractional share interest. Such gain or loss should be long term capital gain or
loss if the stockholder's shares of Progressive Common Stock are held as capital
assets and have been held for more than one year at the Effective Date. If,
however, the cash received has the effect of the distribution of a dividend with
respect to a stockholder, part or all of the cash received may be treated as a
dividend.
Resale of Continuing Corporation Common Stock
The shares of the Continuing Corporation Common Stock issuable upon
consummation of the Merger have been registered under the Securities Act. Such
shares may be traded freely by those stockholders not deemed to be affiliates of
Hudson Chartered or Progressive and/or the Continuing Corporation as that term
is defined under the Securities Act. The term "affiliate" generally means each
person who, or is a member of a group that, controls, is controlled by or is
under common control with the respective company, and for purposes hereof could
be deemed to include all executive officers, directors and 10% stockholders of
Hudson Chartered or Progressive and/or the Continuing Corporation.
Continuing Corporation Common Stock received and beneficially owned by
those stockholders who are deemed to have been affiliates of Hudson Chartered or
Progressive and/or are deemed to be affiliates of the Continuing Corporation may
be resold without registration as provided by Rule 145 or 144, respectively, or
as otherwise permitted, under the Securities Act. Such affiliates may publicly
resell Continuing Corporation Common Stock received by them in the Merger
subject to certain limitations, principally as to the number of shares and the
manner of sale. Such affiliates
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<PAGE>
who do not become affiliates of the Continuing Corporation will be subject to
these limitations for a period of one year following the Effective Date and
thereafter generally may resell their shares without restriction. In addition,
shares of Continuing Corporation Common Stock issued to affiliates of Hudson
Chartered or Progressive in the Merger will not be transferable until financial
results covering at least 30 days of post-Merger combined operations of Hudson
Chartered and Progressive have been published, in order to satisfy certain
requirements of the Commission applicable to transactions, such as the Merger,
to be accounted for using pooling-of-interests accounting treatment.
The Agreement provides that Hudson Chartered and Progressive each
shall cooperate and use its best efforts to identify those persons who may be
deemed to be affiliates of Hudson Chartered or Progressive under Rule 144 or 145
promulgated by the Commission under the Securities Act, and shall use its best
efforts to cause each person so identified to deliver to Hudson Chartered or
Progressive, no later than 30 days prior to the Effective Date, a written
agreement providing that such person will not dispose of any Hudson Chartered
Common Stock, Progressive Common Stock or Continuing Corporation Common Stock
except in compliance with the Securities Act, the rules and regulations
promulgated thereunder and the Commission's rules relating to
pooling-of-interests accounting treatment. Receipt of such a written agreement
shall not affect the restriction on transfer, as discussed in the preceding
paragraph, which exists prior to the publication of certain post-Merger
financial results.
Expenses
Each party to the Agreement has agreed to bear and pay all costs and
expenses incurred by it in connection with the transactions contemplated
thereby, including fees and expenses of its own financial consultants,
accountants and counsel, except that Hudson Chartered and Progressive each has
agreed to bear and pay half of all printing costs relating to the Registration
Statement and this Proxy Statement / Prospectus.
Accounting Treatment
It is a condition precedent to Hudson Chartered's and Progressive's
obligations to consummate the Merger that no event shall have occurred that will
preclude the Merger from being accounted for as a "pooling-of-interests" and
that each party shall have received a letter from its independent accountants to
the effect that they are not aware of any reason that would preclude the Merger
from being accounted for as a pooling of interests. See "-- Representations and
Warranties; Conditions to the Merger; Waiver." Under the pooling-of-interests
method of accounting, the historical basis of the assets and liabilities of
Hudson Chartered and Progressive will be combined and carried forward at their
previously recorded amounts, and revenue and expenses of Hudson Chartered and
Progressive will be combined at their historically recorded amounts. See
"UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS." Hudson Chartered,
Progressive, Hudson Valley and Pawling have agreed that they will not take,
cause or to the best of their respective abilities permit to be taken or caused,
any action that would adversely affect the qualification of the Merger for
pooling-of-interests accounting treatment.
Stock Option Agreements
The information in this Proxy Statement / Prospectus concerning the
terms of the Hudson Chartered Stock Option Agreement and the Progressive Stock
Option Agreement is qualified in its entirety by reference to the full text of
such agreements which are attached hereto as Appendices D and E, respectively.
The Hudson Chartered Stock Option Agreement provides for the grant to
Progressive by Hudson Chartered of an option to purchase up to 1,415,250 shares
of Hudson Chartered Common Stock at an exercise price of $21.75 per share upon
the occurrence of certain events (each, a "Purchase Event"), provided, however,
that, in the event Hudson Chartered issues or agrees to issue any shares of
Hudson Chartered Common Stock (other than as permitted under the Agreement) at a
price less than $21.75 per share (adjusted as described below), the exercise
price shall be equal to such lesser price (the "Hudson Chartered Option"). The
Progressive Stock Option Agreement provides for the grant to Hudson Chartered by
Progressive of an option to purchase up to 766,300 shares of Progressive Common
Stock at an
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<PAGE>
exercise price of $36.63 per share, upon the occurrence of a Purchase Event,
provided, however, that in the event Progressive issues or agrees to issue any
shares of Progressive Common Stock (other than as permitted under the Agreement)
at a price less than $36.63 per share (adjusted as described below), the
exercise price shall be equal to such lesser price (the "Progressive Option").
The purpose of the options is to increase the likelihood that the
Merger will be consummated by making it more difficult and more expensive for a
third party to acquire control of Hudson Chartered or Progressive. Accordingly,
the options are exercisable only upon the occurrence of certain events that
might jeopardize consummation of the Merger pursuant to the terms of the
Agreement. Although the shares issuable upon exercise of the Hudson Chartered
Option and the Progressive Option represent approximately 16.7% of the Hudson
Chartered Common Stock and Progressive Common Stock, respectively, that would be
outstanding after such exercise, Progressive and Hudson Chartered may not
acquire more than 5% of the stock of Hudson Chartered and Progressive,
respectively, pursuant to the exercise of the options or otherwise, without
prior approval of the Federal Reserve Board and the New York Banking Department.
For additional information, see Appendices D and E and "AVAILABLE INFORMATION."
MARKET PRICES AND DIVIDENDS
Hudson Chartered
Since August 4, 1997, Hudson Chartered Common Stock has been listed on
the American Stock Exchange under the symbol "HCK." Previously, Hudson Chartered
Common Stock was traded on the Nasdaq National Market. On April 6, 1998, there
were approximately 1,300 record holders of Hudson Chartered Common Stock and
7,152,256 shares of Hudson Chartered Common Stock issued and outstanding.
The following table sets forth the cash dividends declared by Hudson
Chartered on the Hudson Chartered Common Stock and the range of high and low
prices of the Hudson Chartered Common Stock, as quoted by the American Stock
Exchange or Nasdaq National Market, as applicable, during the two most recent
fiscal years and through April 6, 1998. Stock price data on the Nasdaq National
Market reflect interdealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual transactions. The
information in this table has been adjusted retroactively to reflect the 10%
stock dividends paid in January 1996 and 1997 and a 3-for-2 stock split in the
form of a 50% stock dividend paid in October 1997.
<TABLE>
<CAPTION>
Price
Cash Dividends ------------------
Per Share High Low
--------- ---- ---
1996
----
<S> <C> <C> <C>
First Quarter $0.097 $13 1/32 $10 39/64
Second Quarter $0.097 $13 1/32 $12 1/8
Third Quarter $0.1091 $13 21/64 $12 27/64
Fourth Quarter $0.1091 $17 1/2 $12 37/64
1997
First Quarter $0.12 $18 43/64 $17 11/64
Second Quarter $0.12 $19 $17 21/64
Third Quarter $0.1267 $22 21/64 $18 37/64
Fourth Quarter $0.13 $23 $20
1998
First Quarter $0.13 $25 $19 7/8
Second Quarter (through April 6, 1998) $ -- * $23 3/4 $23 1/2
</TABLE>
---------------
* Hudson Chartered's Board of Directors has not yet held the
meeting at which it will consider the declaration of a dividend
during the quarter ending June 30, 1998.
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<PAGE>
Progressive
Progressive Common Stock is traded on the Nasdaq National Market under
the symbol "PSBK." On March 26, 1998, there were approximately 1,000 record
holders of Progressive Common Stock and 3,855,781 shares of Progressive Common
Stock issued and outstanding.
The following table sets forth the cash dividends declared by
Progressive on the Progressive Common Stock and the range of high and low prices
of the Progressive Common Stock as quoted by the Nasdaq National Market during
the two most recent fiscal years and through April 6, 1998. Stock price data on
the Nasdaq National Market reflect interdealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
The information in this table has been adjusted retroactively to reflect the
3-for-2 stock split in the form of a 50% stock dividend paid in December 1996.
<TABLE>
<CAPTION>
Price
Cash Dividends ------------------------
Per Share High Low
--------- ---- ---
1996
----
<S> <C> <C> <C>
First Quarter $0.1333 $19 43/64 $17 11/64
Second Quarter $0.1333 $20 11/64 $17 1/2
Third Quarter $0.1333 $21 21/64 $18 1/2
Fourth Quarter $0.1333 $24 $20 43/64
1997
----
First Quarter $0.17 $25 1/4 $22 3/4
Second Quarter $0.17 $311/2 $23 3/8
Third Quarter $0.17 $38 $27
Fourth Quarter $0.17 $39 3/4 $32 5/8
1998
----
First Quarter $0.20 $45 $35 1/4
Second Quarter (through April 6, 1998) $ -- * $42 3/8 $42 3/8
</TABLE>
---------------
* Progressive's Board of Directors has not yet held the meeting at
which it will consider the declaration of a dividend during the
quarter ending June 30, 1998.
Continuing Corporation
The Continuing Corporation Common Stock is expected to be listed on
the American Stock Exchange under the symbol "PNB". The Continuing Corporation
will pay dividends at a rate to be determined by its Board of Directors. There
can be no assurance that the dividend policy of the Continuing Corporation will
continue that of either Hudson Chartered or Progressive. The declaration and
payment of dividends by the Continuing Corporation will depend upon business
conditions, operating results of the Continuing Corporation and the Continuing
Bank, capital and reserve requirements and the consideration by the Board of
Directors of other relevant factors. It is anticipated that the initial dividend
rate will be equal to the current quarterly dividend rate of Hudson Chartered
($0.13 per share). After adjustment to give effect to the Exchange Ratio, the
quarterly dividend rate equates to approximately $0.237 per share of Progressive
Common Stock. See "COMPARATIVE PER SHARE DATA."
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial
statements present the condensed financial position of Hudson Chartered and
Progressive as of December 31, 1997 assuming that the Merger had occurred as of
December 31, 1997 and giving effect to the Merger by combining the results of
operations of Hudson Chartered and Progressive for the years ended December 31,
1997, 1996 and 1995. Pro forma earnings per common share and weighted average
common shares are based on the Exchange Ratio.
The unaudited pro forma condensed combined financial statements were
prepared giving effect to the Merger on the pooling-of-interests accounting
method. For a description of the pooling-of-interests accounting method with
respect to the Merger and the related effects on the historical financial
statements of Hudson Chartered and Progressive, see "PROPOSAL III - APPROVAL OF
MERGER -- Accounting Treatment." All adjustments necessary to arrive at a fair
presentation of the combined financial condition and results of operations of
Hudson Chartered and Progressive, in the opinion of the managements of the
respective companies, have been included and are of a normal recurring nature.
The data in the financial tables and statements in this Proxy Statement /
Prospectus do not reflect possible adjustments for expenses related to the
Merger, or any potential cost savings or revenue enhancements resulting from the
Merger. Accordingly, the financial condition and results of operations of the
Continuing Corporation as of the Effective Date and thereafter may be materially
different from that reflected in the pro forma information below. See "AVAILABLE
INFORMATION," "COMPARATIVE PER SHARE DATA," "SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA" and "PROPOSAL III - APPROVAL OF MERGER -- Management and
Operations after the Merger."
The unaudited pro forma condensed combined financial statements should
be read in conjunction with the historical financial statements and notes
thereto of Hudson Chartered and Progressive. See "AVAILABLE INFORMATION." The
unaudited pro forma condensed combined financial statements are presented for
informational purposes only. These statements are not necessarily indicative of
the combined financial position and results of operations that would have
occurred if the Merger had been consummated on December 31, 1997 or at the
beginning of the periods or that may be attained in the future.
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<PAGE>
PREMIER NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Hudson Pro Forma
Chartered Progressive Adjustments Total
--------- ----------- ----------- -----
(In thousands, except share amounts)
<S> <C> <C> <C> <C>
Assets:
Cash and due from banks $ 29,075 $ 13,886 $ $ 42,961
Federal funds sold 17,400 32,900 50,300
Securities 198,579 241,363 439,942
Loans, net of unearned income 467,021 574,314 1,041,335
Less: Allowance for loan losses (9,530) (9,801) (19,331)
------------- ------------ ------------
Net loans 457,491 564,513 1,022,004
Premises and equipment 15,592 9,726 25,318
Goodwill 223 7,375 7,598
Other assets 13,164 13,731 26,895
------------- ------------ ------------
TOTAL ASSETS $ 731,524 $ 883,494 $ 1,615,018
============= ============ ============
Liabilities:
Non interest bearing deposits $ 151,002 $ 67,778 $ 218,780
Interest bearing deposits 503,103 730,815 1,233,918
------------- ------------ ------------
Total deposits 654,105 798,593 1,452,698
Notes payable 1,725 0 1,725
Other liabilities 5,336 6,422 11,758
------------- ------------ ------------
TOTAL LIABILITIES 661,166 805,015 1,466,181
------------- ------------ ------------
Preferred Stock 0 0 0
Common stock 5,729 4,428 1,151 (6) 11,308
Additional paid-in capital 38,979 25,879 (5,230) (6) 59,628
Retained earnings 27,042 57,883 (6,313) (6) 78,612
Net unrealized securities gains 966 681 1,647
Treasury stock (2,358) (10,392) 10,392 (6) (2,358)
------------- ------------ ------------- ------------
TOTAL STOCKHOLDERS' EQUITY 70,358 78,479 148,837
------------- ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 731,524 $ 883,494 $ 1,615,018
============= ============ ============
Book value per share $ 9.94 $ 20.48 $ 10.59
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
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<PAGE>
PREMIER NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Hudson Pro Forma
Chartered Progressive Adjustments Total
--------- ----------- ----------- -----
(In thousands, except share amounts)
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 41,083 $ 52,712 $ 93,795
Federal funds sold and other 1,062 1,551 2,613
Securities 10,591 14,492 25,083
------------- ------------ ------------
Total interest income 52,736 68,755 121,491
------------- ------------ ------------
Interest expense:
Deposits 20,641 34,743 55,384
Other 107 0 107
------------- ------------ ------------
Total interest expense 20,748 34,743 55,491
------------- ------------ ------------
Net interest income 31,988 34,012 66,000
Provision for loan losses 2,500 1,975 4,475
------------- ------------ ------------
Net interest income after
provision for loan losses 29,488 32,037 61,525
Noninterest income 6,267 3,646 9,913
Other expense 22,345 21,456 43,801
------------- ------------ ------------
Income before income taxes 13,410 14,227 27,637
Income taxes (benefit) 4,402 5,595 9,997
------------- ------------ ------------
Net income 9,008 8,632 17,640
Dividend requirements of preferred stock 0 0 0
------------- ------------ ------------
Net income applicable to common shares $ 9,008 $ 8,632 $ 17,640
============= ============ ============
Weighted average common shares:
Basic 7,059,000 3,824,000 14,019,000
Diluted 7,263,000 3,923,000 14,403,000
Per common share:
Basic earnings $ 1.28 $ 2.26 $ 1.26
Diluted earnings 1.24 2.20 1.22
Dividends declared 0.50 0.68 0.50
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
81
<PAGE>
PREMIER NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Hudson Pro Forma
Chartered Progressive Adjustments Total
--------- ----------- ----------- -----
(In thousands, except share amounts)
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 39,373 $ 49,405 $ 88,778
Federal funds sold and other 1,213 1,942 3,155
Securities 10,442 14,501 24,943
------------- ------------ ------------
Total interest income 51,028 65,848 116,876
------------- ------------ ------------
Interest expense:
Deposits 20,064 33,798 53,862
Other 110 51 161
------------- ------------ ------------
Total interest expense 20,174 33,849 54,023
------------- ------------ ------------
Net interest income 30,854 31,999 62,853
Provision for loan losses 2,850 2,300 5,150
------------- ------------ ------------
Net interest income after
provision for loan losses 28,004 29,699 57,703
Noninterest income 6,798 3,349 10,147
Other expense 21,585 21,374 42,959
------------- ------------ ------------
Income before income taxes 13,217 11,674 24,891
Income taxes (benefit) 4,551 2,353 6,904
------------- ------------ ------------
Net income 8,666 9,321 17,987
Dividend requirements of preferred stock 89 0 89
------------- ------------ ------------
Net income applicable to common shares $ 8,577 $ 9,321 $ 17,898
============= ============ ============
Weighted average common shares:
Basic 6,932,000 3,916,000 14,059,000
Diluted 7,228,000 3,967,000 14,448,000
Per common share:
Basic earnings $ 1.24 $ 2.38 $ 1.27
Diluted earnings 1.19 2.35 1.25
Dividends declared 0.41 0.53 0.41
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
82
<PAGE>
PREMIER NATIONAL BANCORP, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Hudson Pro Forma
Chartered Progressive Adjustments Total
--------- ----------- ----------- -----
(In thousands, except share amounts)
<S> <C> <C> <C> <C>
Interest income
Loans, including fees $ 39,413 $ 44,806 $ 84,219
Federal funds sold and other 2,028 2,058 4,086
Securities 9,274 8,637 17,911
------------- ------------ ------------
Total interest income 50,715 55,501 106,216
------------- ------------ ------------
Interest expense:
Deposits 21,129 27,692 48,821
Other 130 0 130
------------- ------------ ------------
Total interest expense 21,259 27,692 48,951
------------- ------------ ------------
Net interest income 29,456 27,809 57,265
Provision for loan losses 2,300 600 2,900
------------- ------------ ------------
Net interest income after
provision for loan losses 27,156 27,209 54,365
Noninterest income 5,779 3,306 9,085
Other expense 22,456 19,279 41,735
------------- ------------ ------------
Income before income taxes 10,479 11,236 21,715
Income taxes (benefit) 3,514 4,450 7,964
------------- ------------ ------------
Net income 6,965 6,786 13,751
Dividend requirements of preferred stock 414 0 414
------------- ------------ -----------
Net income applicable to common shares $ 6,551 $ 6,786 $ 13,337
============= ============ ===========
Weighted average common shares:
Basic 6,274,000 4,070,000 13,681,000
Diluted 7,089,000 4,116,000 14,580,000
Per common share:
Basic earnings $ 1.04 $ 1.67 $ 0.98
Diluted earnings 0.98 1.65 0.94
Dividends declared 0.34 0.43 0.34
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
83
<PAGE>
PREMIER NATIONAL BANCORP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) The accompanying unaudited pro forma condensed combined financial
statements were prepared assuming that the Merger had been consummated
as of December 31, 1997, and the pooling-of-interests method had been
applied in accounting for the Merger. See "PROPOSAL III - APPROVAL OF
MERGER -- Accounting Treatment."
(2) Pro forma earnings per common share (EPS) have been calculated based
on the applicable average number of Hudson Chartered common shares
actually outstanding, plus additional common shares assumed to be
issued in the Merger in exchange for outstanding Progressive common
shares based on the Exchange Ratio of 1.82.
Per common share amounts (Basic EPS) were computed after deducting the
dividend requirements of Hudson Chartered Series A and Series B
Preferred Stock for the applicable periods. The Series A Preferred
Stock was issued in April 1992 in the amount of $805,000. The Series B
Convertible Preferred Stock was issued in December 1992 in the amount
of $5,750,000. The entire Hudson Chartered Preferred Series B Stock
was converted/redeemed as of April 1996. The Series A Preferred Stock
was redeemed in its entirety in January 1994. Per common share amounts
assuming dilution (Diluted EPS) were computed assuming that all of the
outstanding Hudson Chartered Series B Preferred Stock was converted
into Common Stock at the beginning of the period on the basis of a
conversion price of $8.64, with the elimination of dividends on such
Hudson Chartered Series B Preferred Stock. Diluted EPS also includes
additional dilution computed on stock options using the average market
price of Hudson Chartered's Common Stock for the applicable period.
To the extent cash is paid to Progressive stockholders in lieu of
fractional shares, common shares outstanding and common stockholders'
equity would be reduced. The respective managements expect that cash
will be paid to stockholders in lieu of issuing fractional shares for
less than 1/4 of 1% of the shares held by Progressive stockholders
and, accordingly, such shares have not been excluded from the pro
forma data.
(3) The pro forma information presented does not reflect anticipated
merger (legal, accounting, tax, regulatory and severance) and
integration costs (conversion, abandonments, relocation, promotional
material and forms), which are presently estimated to total $7.4
million before taxes and $5.6 million after taxes. The pro forma
information also does not reflect potential cost savings or revenue
enhancements expected to be realized subsequent to consummation of the
Merger. See "PROPOSED MERGER -- Management and Operations after the
Merger."
(4) Pro forma entry to retire Treasury stock held by Progressive
(approximately 596,000 shares having a par value of $1.00 per share):
Common Stock $ 596,000
Additional paid-in capital (A) 3,483,000
Retained earnings 6,313,000
Treasury stock -- at cost $10,392,000
- ----------
(A) Represents the pro rata portion of Progressive's total paid-in
capital applicable to the Treasury shares.
84
<PAGE>
(5) Pro forma entry to issue 1.82 Premier National Bancorp common shares
in exchange for each Progressive common share. The par value of
Premier National Bancorp common shares to be issued as of December 31,
1997, is determined as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Hudson Chartered common shares 7,161,278
Progressive common shares (3,831,809 common
shares times exchange ratio of 1.82) 6,973,892
--------------
Total common shares 14,135,170
Par value per common share $ 0.80
--------------
Total par value $ 11,308,000
Actual par value of common stock at December 31, 1997:
Hudson Chartered $ 5,729,000
Progressive (after retirement of Treasury shares) 3,832,000 9,561,000
-------------- --------------
Required increase in par value $ 1,747,000
==============
Entry to record increase in par value:
Additional paid-in capital $ 1,747,000
Common stock $ 1,747,000
</TABLE>
(6) Summary of the pro forma entries in Notes (4) and (5) above:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Additional paid-in capital $ 5,230,000
Retained earnings 6,313,000
Common stock $ 1,151,000
Treasury stock 10,392,000
</TABLE>
(7) Authorized, issued and outstanding share information is as follows at
December 31, 1997
<TABLE>
<CAPTION>
Hudson Premier
Preferred Chartered Progressive Pro Forma
--------- --------- ----------- ---------
<S> <C> <C> <C>
Authorized 5,000,000 5,000,000 5,000,000
Issued and outstanding 0 0 0
Common
Par value $ .80 $ 1.00 $ .80
Authorized 20,000,000 15,000,000 50,000,000 (A)
Issued 7,161,278 4,427,999 14,135,170
Outstanding 7,076,263 3,831,809 14,050,155 (B)
</TABLE>
- ---------------
(A) Reflects the increase in authorized shares from 20,000,000 to
50,000,000 assuming the Merger is consummated.
(B) Does not reflect Progressive shares held in Treasury, which will
be retired upon consummation of the Merger.
85
<PAGE>
INDEPENDENT AUDITORS
The firm of KPMG Peat Marwick LLP serves as independent auditors to
Progressive. A representative of KPMG Peat Marwick LLP is expected to be present
at the Annual Meeting and will have an opportunity to make a statement should he
or she so desire. The representative is expected to be available to respond to
appropriate questions.
EXPERTS
The consolidated financial statements of Hudson Chartered at December
31, 1997 and 1996 and for each of the three years in the period ended December
31, 1997 incorporated herein by reference from Hudson Chartered's Annual Report
on Form 10-K, as amended by Amendment No. 1 on Form 10-K/A filed on April 9,
1998, for the year ended December 31, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Progressive as of December
31, 1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997, have been incorporated by reference herein from Progressive's
Annual Report on Form 10-K for the year ended December 31, 1997 in reliance upon
the report of KPMG Peat Marwick LLP, independent auditors, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
Documents incorporated herein by reference in the future may include
financial statements, related schedules (if required) and auditors' reports,
which financial statements and schedules will have been audited to the extent
and for the periods set forth in such reports by the firm or firms rendering
such reports, and, to the extent so audited and consent to incorporation by
reference is given, will be incorporated herein by reference in reliance upon
such reports given upon the authority of such firms as experts in accounting and
auditing.
LEGAL OPINION
A legal opinion to the effect that the issuance of the shares of
Continuing Corporation Common Stock offered hereby, when issued in accordance
with the terms of the Agreement, will be validly issued, fully paid and
nonassessable has been rendered by Van DeWater and Van DeWater. Partners of Van
DeWater and Van DeWater beneficially owned in the aggregate 8,642 shares of
Hudson Chartered Common Stock at April 6, 1998, the record date of the Hudson
Chartered's annual stockholder meeting, and 150 shares of Progressive Common
Stock at March 26, 1998, the record date for Progressive's annual stockholder
meeting. Edward vK. Cunningham, Jr., a director of Hudson Chartered, is a former
partner in and is currently counsel to Van DeWater and Van DeWater.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the proxy materials of
Progressive for the Annual Meeting of Stockholders for the year ending December
31, 1998, if any, stockholder proposals to take action at such meeting must be
received at Progressive's executive offices at 1301 Route 52, P.O. Box 7000,
Fishkill, New York 12524 by no later than December 15, 1998. Any such proposals
shall be subject to the requirements of the proxy rules adopted under the
Exchange Act.
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<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
AND SELECTED ATTACHMENTS
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Reorganization
Agreement"), dated as of December 16, 1997, is by and among HUDSON CHARTERED
BANCORP, INC., a New York corporation ("Hudson Chartered"), FIRST NATIONAL BANK
OF THE HUDSON VALLEY, a national banking association ("Hudson Valley"),
PROGRESSIVE BANK, INC., a New York corporation ("Progressive"), and PAWLING
SAVINGS BANK, a New York state-chartered stock savings bank ("Pawling").
WITNESSETH
WHEREAS, the parties hereto desire to combine their respective
businesses; and
WHEREAS, the Board of Directors of Progressive and Hudson Chartered
have determined that the combination of the respective businesses and operations
of Progressive and Hudson Chartered through a merger of equals would be in the
best long term interests of the respective shareholders of Progressive and
Hudson Chartered; and
WHEREAS, in furtherance of the combination of their respective
businesses, the parties hereto desire that Progressive shall be merged (the
"Merger") with and into Hudson Chartered under the name of "Premier National
Bancorp, Inc." (the corporation surviving the Merger is referred to herein as
the "Continuing Corporation"), all the issued and outstanding shares of common
stock of Progressive (other than shares held by dissenting shareholders, to the
extent applicable) shall be converted into and exchanged for shares of common
stock of the Continuing Corporation, and all the issued and outstanding shares
of capital stock of Hudson Chartered shall continue to be issued and outstanding
shares of capital stock of the Continuing Corporation, all pursuant to a Plan of
Merger (the "Plan of Merger"), substantially in the form attached as Annex A
hereto and the provisions of which are herein incorporated by reference; and
WHEREAS, in furtherance of the combination of their respective
businesses, the parties hereto desire that, contemporaneously with the Merger,
Pawling, a wholly owned subsidiary of Progressive, shall be merged (the "Bank
Merger") with and into Hudson Valley, a wholly owned subsidiary of Hudson
Chartered, under the charter of Hudson Valley and the name of "Premier National
Bank" (the bank surviving the Bank Merger is referred to herein as the
"Continuing Bank"), pursuant to an Agreement and Plan of Merger (the "Bank
Merger Agreement"), substantially in the form attached as Annex B hereto; and
WHEREAS, the parties hereto desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained and intending to be
legally bound hereby, the parties hereto do hereby agree as follows:
ARTICLE 1
CERTAIN DEFINED TERMS
1.1 "Bank Holding Company Act" shall mean the Bank Holding Company Act
of 1956, as amended.
1.2 "Banking Department" shall mean the New York State Banking
Department.
1.3 "Closing Date" shall have the meaning specified in Section 4.9
hereof.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
A-1
<PAGE>
1.5 "Commission" shall mean the Securities and Exchange Commission.
1.6 "Continuing Corporation Common Stock" shall mean Hudson Chartered
Common Stock from and after the Effective Date.
1.7 "Effective Date" shall have the meaning specified in Section 4.9
hereof.
1.8 "Environmental Laws" shall mean all applicable federal, state and
local laws and regulations, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, that relate to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata).
This definition includes, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
1.9 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
1.10 "ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that, together with Progressive or Hudson Chartered, as the case
may be, would be deemed a "single employer" under Section 414 of the Code.
1.11 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.12 "FDIA" shall mean the Federal Deposit Insurance Act, as amended.
1.13 "FDIC" shall mean the Federal Deposit Insurance Corporation.
1.14 "Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System.
1.15 "FRBNY" shall mean the Federal Reserve Bank of New York.
1.16 "Hudson Chartered Common Stock" shall have the meaning set forth
in Section 3.1 hereof.
1.17 "Hudson Chartered DRP" shall mean Hudson Chartered's Dividend
Reinvestment and Stock Purchase Plan.
1.18 "Hudson Chartered Financial Statements" shall mean (i) the
consolidated balance sheets of Hudson Chartered as of September 30, 1997 and as
of December 31, 1996 and 1995 and the related consolidated statements of income,
cash flows and changes in stockholders' equity (including related notes, if any)
for the nine months ended September 30, 1997 and for each of the three years
ended December 31, 1996, 1995 and 1994 as filed by Hudson Chartered in SEC
Documents and (ii) the consolidated balance sheets of Hudson Chartered and
related consolidated statements of income, cash flows and changes in
shareholders' equity (including related notes, if any) as filed by Hudson
Chartered in SEC Documents with respect to periods ended subsequent to September
30, 1997.
1.19 "Hudson Chartered Option Agreement" shall mean the Stock Option
Agreement dated of even date herewith between Hudson Chartered, as issuer, and
Progressive, as grantee, with regard to Hudson Chartered Common Stock.
1.20 "Hudson Chartered Plan" shall mean each bonus, deferred
compensation, incentive compensation, stock purchase, stock option, severance
pay, medical, life or other insurance, profit-sharing, or pension plan, program,
agreement or arrangement, and each other employee benefit plan, program,
agreement or arrangement, sponsored,
A-2
<PAGE>
maintained or contributed to or required to be contributed to by Hudson
Chartered or by an ERISA Affiliate for the benefit of any employee or director
or former employee or former director of Hudson Chartered or any ERISA Affiliate
of Hudson Chartered.
1.21 "Hudson Chartered Preferred Stock" shall have the meaning set
forth in Section 3.1 hereof.
1.22 "Hudson Chartered Stock-Based Compensation Plans" shall mean the
Hudson Chartered Bancorp, Inc. 1995 Incentive Stock Plan (and its predecessors,
the Community Bancorp, Inc. 1988 Non-Qualified Stock Option Plan and the
Community Bancorp, Inc. Incentive Stock Option Plan), the Fishkill National
Corporation Incentive Stock Option Plan, and such other stock-based compensation
plans as may be Previously Disclosed.
1.23 "Hudson Chartered Subsidiary" shall have the meaning set forth in
Section 3.3 hereof.
1.24 "Intellectual Property" means domestic and foreign letters patent,
patents, patent applications, patent licenses, software licensed or owned,
know-how, know-how licenses, trade names, common law and other trademarks,
service marks, licenses of trademarks, trade names and/or service marks,
trademark registrations and applications, service mark registrations and
applications and copyright registrations and applications.
1.25 "Materials of Environmental Concern" shall mean pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other materials regulated under Environmental Laws.
1.26 "OCC" shall mean the Office of the Comptroller of the Currency.
1.27 "Previously Disclosed" shall mean disclosed prior to the execution
hereof in (i) an SEC Document filed with the Commission after December 31, 1996
and before the date hereof, or (ii) a letter dated as of the date hereof from
the party making such disclosure and delivered to the other party. Any
information disclosed by one party to the other hereunder for any purpose
hereunder shall be deemed to be disclosed for all purposes hereunder. The
inclusion of any matter in information Previously Disclosed shall not be deemed
an admission or otherwise to imply that any such matter is material for purposes
of this Agreement.
1.28 "Progressive Common Stock" shall have the meaning set forth in
Section 2.1 hereof.
1.29 "Progressive Financial Statements" shall mean (i) the consolidated
balance sheets of Progressive as of September 30, 1997 and as of December 31,
1996 and 1995 and the related consolidated statements of income, cash flows and
changes in stockholders' equity (including related notes, if any) for the nine
months ended September 30, 1997 and for each of the three years ended December
31, 1996, 1995 and 1994 as filed by Progressive in SEC Documents and (ii) the
consolidated balance sheets of Progressive and related consolidated statements
of income, cash flows and changes in stockholders' equity (including related
notes, if any) as filed by Progressive in SEC Documents with respect to periods
ended subsequent to September 30, 1997.
1.30 "Progressive Option Agreement" shall mean the Stock Option
Agreement dated as of even date herewith between Progressive, as issuer, and
Hudson Chartered, as grantee, with regard to Progressive Common Stock.
1.31 "Progressive Plan" shall mean each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance pay, medical,
life or other insurance, profit-sharing, or pension plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by Progressive or by an ERISA Affiliate for the benefit of any
employee or director or former employee or former director of Progressive or any
ERISA Affiliate of Progressive.
A-3
<PAGE>
1.32 "Progressive Rights Agreement" shall mean the Shareholder Rights
Agreement dated as of October 15, 1997 by and between Progressive and Registrar
and Transfer Company, as rights agent, which provides that each share of
Progressive Common Stock outstanding on October 15, 1997, and each share of
Progressive Common Stock subsequently issued, has associated with it such rights
to acquire such shares of Progressive Series A Preferred Stock and such rights
to acquire such shares of Progressive Common Stock as are specified therein.
1.33 "Progressive Series A Preferred Stock" shall mean the Series A
Junior Participating Preferred Stock, par value $1.00 per share, of Progressive.
1.34 "Progressive Stock-Based Compensation Plans" shall mean the
Progressive Bank, Inc. 1997 Employee Stock Option Plan, the Progressive Bank,
Inc. 1993 Non-Qualified Stock Option Plan--Directors, the Progressive Bank, Inc.
Amended and Restated Incentive Stock Option Plan, the Progressive Bank, Inc.
Non-Qualified Stock Option Plan for Directors, and such other stock-based
compensation plans as may be Previously Disclosed.
1.35 "Proxy Statement" shall mean the joint proxy statement/prospectus
(or similar documents) together with any supplements thereto sent to the
shareholders of Progressive and Hudson Chartered to solicit their votes in
connection with this Reorganization Agreement, the Plan of Merger and related
matters.
1.36 "Registration Statement" shall mean the registration statement
with respect to the Continuing Corporation Common Stock to be issued in
connection with the Merger as declared effective by the Commission under the
Securities Act.
1.37 "REO" shall mean real property assets acquired as a result of
foreclosure, deed in lieu of foreclosure, or any other method in satisfaction of
indebtedness.
1.38 "Rights" shall mean warrants, options, rights, convertible
securities and other arrangements or commitments which obligate an entity to
issue or dispose of any of its capital stock.
1.39 "SEC Documents" shall mean all reports and registration statements
filed, or required to be filed, by a party hereto pursuant to the Securities
Laws.
1.40 "Securities Act" shall mean the Securities Act of 1933, as
amended.
1.41 "Securities Laws" shall mean the Securities Act; the Exchange Act;
the Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the Commission promulgated thereunder.
Other terms used herein are defined in the preamble, recitals or other
sections of this Reorganization Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PROGRESSIVE AND PAWLING
Progressive and Pawling hereby represent and warrant to Hudson
Chartered and Hudson Valley as follows:
2.1. Capital Structure of Progressive
(a) The authorized capital stock of Progressive consists of (i)
15,000,000 shares of common stock, par value $1.00 per share ("Progressive
Common Stock"), of which 3,831,809 shares are issued and outstanding and 596,190
shares are held in treasury; and (ii) 5,000,000 shares of Preferred Stock, $1.00
par value per share, none
A-4
<PAGE>
of which have been issued or are outstanding. All outstanding shares of
Progressive Common Stock have been duly authorized and validly issued, and are
fully paid and nonassessable. None of the shares of Progressive's capital stock
has been issued in violation of the preemptive rights of any person.
(b) Except for options granted under the Progressive
Stock-Based Compensation Plans with respect to 299,255 shares of Progressive
Common Stock, the Progressive Option Agreement, and Rights outstanding under the
Progressive Rights Agreement, there are no Rights authorized, issued or
outstanding with respect to the capital stock of Progressive and no written or
oral plans, understandings, commitments or contracts to which Progressive or, to
Progressive's knowledge, any of its affiliates is subject with respect to the
issuance, voting or sale of issued or unissued shares of Progressive's capital
stock.
2.2. Organization, Standing and Authority of Progressive
Progressive is a duly organized corporation, validly existing
and in good standing under the laws of the State of New York. Progressive (i)
has full corporate power and authority to carry on its business as now conducted
and (ii) is duly qualified to do business in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or the conduct
of its business requires such qualification and where failure to so qualify
would have a material adverse effect on the financial condition, results of
operations or business of Progressive on a consolidated basis. Progressive has
all federal, state, local and foreign governmental authorizations and licenses
necessary for it to own and lease its properties and assets and to carry on its
business as it is now being conducted. Progressive has delivered to Hudson
Chartered true, complete and correct copies of its certificate of incorporation
and by-laws, each as in effect on the date of this Agreement. Progressive is
registered as a bank holding company under the Bank Holding Company Act.
2.3. Pawling
Progressive does not own, directly or indirectly, 5% or more
of the outstanding capital stock or other voting securities of any corporation,
bank or other organization except Pawling. The outstanding shares of capital
stock of Pawling have been duly authorized and are validly issued, and are fully
paid and nonassessable and all such shares are directly owned by Progressive
free and clear of all liens, claims and encumbrances, subject to the liquidation
account established and maintained by Pawling in connection with its conversion
from mutual to stock form (the "Liquidation Account"). No Rights are authorized,
issued or outstanding with respect to the capital stock of Pawling and there are
no agreements, understandings or commitments relating to the right of
Progressive to vote or to dispose of said shares. None of the shares of capital
stock of Pawling has been issued in violation of the preemptive rights of any
person. The Liquidation Account has been established and maintained in
accordance with all applicable laws and regulations.
2.4. Organization, Standing and Authority of Pawling
Pawling is a duly organized New York state-chartered stock
savings bank, validly existing and in good standing under applicable laws. There
are no other Progressive subsidiaries. Pawling (i) has full corporate power and
authority to own, lease and operate its properties and to carry on its business
as now conducted, and (ii) is duly qualified to do business in the states of the
United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such qualification and where
failure to so qualify would have a material adverse effect on the financial
condition, results of operations or business of Progressive on a consolidated
basis. Pawling has all federal, state, local and foreign governmental
authorizations and licenses necessary for it to own or lease its properties and
assets and to carry on its business as it is now being conducted. Pawling has
delivered to Hudson Chartered true, complete and correct copies of its articles
of association and by-laws, each as in effect on the date of this Agreement.
A-5
<PAGE>
2.5. Authorized and Effective Agreement
(a) Progressive has all requisite corporate power and
authority to enter into, adopt and perform all of its obligations under this
Reorganization Agreement, the Plan of Merger and the Progressive Option
Agreement. The execution, adoption and delivery of this Reorganization
Agreement, the Plan of Merger and the Progressive Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of Progressive (including the unanimous approval of its Board of
Directors), except that the affirmative vote of the holders of the outstanding
shares of Progressive Common Stock entitled to vote thereon is required to adopt
the Plan of Merger pursuant to the New York Business Corporation Law, as
amended, and Progressive's Certificate of Incorporation and Bylaws.
(b) Pawling has all requisite corporate power and authority to
enter into and perform all of its obligations under this Reorganization
Agreement and the Bank Merger Agreement, and the execution and delivery of this
Reorganization Agreement and the Bank Merger Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
Pawling.
(c) This Reorganization Agreement and the Plan of Merger
constitute legal, valid and binding obligations of Progressive and this
Reorganization Agreement and the Bank Merger Agreement constitute legal, valid
and binding obligations of Pawling, in each case enforceable against it in
accordance with their respective terms, subject as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(d) Except as Previously Disclosed, neither the execution,
adoption and delivery of this Reorganization Agreement, the Plan of Merger or
the Progressive Option Agreement, in the case of Progressive, or this
Reorganization Agreement or the Bank Merger Agreement, in the case of Pawling,
nor consummation of the transactions contemplated hereby or thereby, nor
compliance by Progressive or Pawling with any of the provisions hereof or
thereof shall (i) conflict with or result in a breach of any provision of the
certificate of incorporation, articles of association or by-laws of Progressive
or Pawling, (ii) constitute or result in a breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of
Progressive or Pawling pursuant to, any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation, in each case in an amount
greater than $100,000 or requiring an annual payment greater than $100,000, or
(iii) subject to the receipt of all required regulatory approvals, violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Progressive or Pawling.
(e) Except for consents and approvals of or filings with the
Federal Reserve Board, the OCC, the FDIC, the Commission, the Banking Department
and the New York Department of State, and except as Previously Disclosed, no
consents or approvals of or filings or registrations with any public body or
authority are necessary, and no consents or approvals of any third parties are
necessary, in connection with the execution and delivery of this Agreement and
the Bank Merger Agreement by Progressive and Pawling or the consummation by
Progressive or Pawling of the transactions contemplated hereby, thereby or by
the Plan of Merger.
2.6. SEC Documents; Regulatory Filings
Progressive has filed all SEC Documents required by the
Securities Laws and such SEC Documents complied in all material respects with
the Securities Laws. Each of Progressive and Pawling has filed all reports
required by statute or regulation to be filed with any federal or state bank
regulatory agency, and such reports were prepared in accordance with the
applicable statutes, regulations and instructions in all material respects.
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2.7. Financial Statements; Books and Records; Minute Books
The Progressive Financial Statements fairly present the
consolidated financial position of Progressive as of the dates indicated and the
consolidated results of operations, changes in stockholders' equity and cash
flows of Progressive for the periods then ended in conformity with generally
accepted accounting principles applicable to financial institutions applied on a
consistent basis except (i) as disclosed therein, (ii) for the omission of notes
to unaudited statements, (iii) for normally recurring year-end adjustments in
the case of interim financial statements, and (iv) as Previously Disclosed. The
books and records of Progressive and Pawling fairly reflect the transactions to
which it is a party or by which its properties are subject or bound. Such books
and records have been properly kept and maintained and are in compliance in all
material respects with all applicable legal and accounting requirements. The
minute books of Progressive and Pawling contain accurate records of all
corporate actions of their respective shareholders and Boards of Directors
(including committees of their Boards of Directors).
2.8. Material Adverse Change
Progressive has not, on a consolidated basis, suffered any
material adverse change in its business, financial condition or results of
operations since December 31, 1996 to the date hereof.
2.9. Absence of Undisclosed Liabilities
Neither Progressive nor Pawling has any liability (contingent
or otherwise) that is material to Progressive on a consolidated basis, or that,
when combined with all similar liabilities, would be material to Progressive on
a consolidated basis, except as disclosed in the Progressive Financial
Statements and except for liabilities incurred in the ordinary course of
business consistent with past practice since the date of the most recent
Progressive Financial Statements.
2.10. Properties
Except as Previously Disclosed, Progressive and Pawling have
good title free and clear of all liens, encumbrances, charges, defaults or
equitable interests to all of the properties and assets, real and personal,
reflected on the Progressive Financial Statements as of September 30, 1997 or
acquired after such date, except (i) liens for current taxes not yet due and
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are customary under local practice or are
not material in character, amount or extent and (iv) dispositions and
encumbrances for adequate consideration in the ordinary course of business.
Progressive or Pawling, as lessee, has the right under valid and subsisting
leases of properties used by Progressive and Pawling in the conduct of their
banking business to occupy and use all such properties as presently occupied and
used by them. Each of the real properties used by Progressive and Pawling has
been maintained in all material respects in good condition and is suitable for
its current use by Progressive and Pawling. Each of such properties conforms in
all material respects to currently applicable ordinances, regulations and zoning
requirements and, if required, is occupied pursuant to a certificate of
occupancy authorizing its current use. Except as Previously Disclosed, since
September 30, 1997, none of such properties which are material to the operation
of Progressive and Pawling has been damaged by fire, storm or other identifiable
event or other act of God, except to the extent that any property owned or
leased by Progressive or Pawling, if so damaged, is insured to the extent
necessary to satisfactorily repair the damaged premises.
2.11. Loans
(a) Except as Previously Disclosed, to the best knowledge of
Progressive and Pawling, each loan reflected as an asset in the Progressive
Financial Statements (i) is evidenced by notes, agreements or other evidences of
indebtedness which are true, genuine and what they purport to be, (ii) to the
extent secured, has been secured by valid liens and security interests which
have been perfected, and (iii) is the legal, valid and binding obligation of the
obligor
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named therein, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles. All
loans and extensions of credit made by Pawling that are subject to Regulation O
of the Federal Reserve Board comply therewith.
(b) The classification on the books and records of Progressive
and Pawling of loans as nonaccrual, troubled debt restructuring, in-substance
foreclosure or other real estate owned, or other similar classification,
complies in all material respects with generally accepted accounting principles
and applicable regulatory accounting policy.
2.12. Allowance for Loan Losses
The allowance for loan losses reflected on the Progressive
Financial Statements as of September 30, 1997 and any Progressive Financial
Statements referred to in Section 1.29(ii) hereof, as of their respective dates,
is adequate in all material respects under the requirements of generally
accepted and regulatory accounting principles to provide for reasonably
anticipated losses on outstanding loans.
2.13. Tax Matters
(a) Progressive and Pawling, and each of their respective
predecessors, have timely filed federal income tax returns for each year through
December 31, 1996 and have timely filed, or caused to be filed, all other
federal, state, local and foreign tax returns (including, without limitation,
estimated tax returns, withholding tax returns and FICA and FUTA returns)
required to be filed with respect to Progressive or Pawling. Progressive has
made available to Hudson Chartered true and complete copies of its federal and
state income tax returns for the past five years, and true and complete copies
of all correspondence from governmental authorities, and responses of
Progressive or Pawling thereto, relating to such federal and state income tax
returns or any other federal, state, local or other tax filings within the past
five years. All taxes due in respect of the periods covered by such tax returns
have been paid or adequate reserves have been established for the payment of
such taxes and, as of the Closing Date, all taxes due in respect of any
subsequent periods ending on or prior to the Closing Date will have been paid or
adequate reserves will have been established for the payment thereof. Except as
Previously Disclosed, no audit examination or deficiency or refund litigation
with respect to such returns is pending. Neither Progressive nor Pawling will
have any material liability for any such taxes in excess of the amounts so paid
or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign)
tax returns filed by Progressive and Pawling are complete and accurate in all
material respects. Neither Progressive nor Pawling is delinquent in the payment
of any tax, assessment or governmental charge, and none of them has requested
any extension of time within which to file any tax returns in respect of any
fiscal year or portion thereof which have not since been filed. No deficiencies
for any tax, assessment or governmental charge have been proposed, asserted or
assessed (tentatively or otherwise) against Progressive or Pawling which have
not been settled and paid. Except as Previously Disclosed, there are currently
no agreements in effect with respect to Progressive or Pawling to extend the
period of limitations for the assessment or collection of any tax.
(c) Progressive and Pawling have timely filed all information
returns required under Sections 6041-6050N of the Code and any comparable state
and local laws, and have timely complied in all respects with the requirements
of Section 3406 of the Code and the regulations thereunder and any comparable
state and local laws and regulations.
(d) Except as Previously Disclosed, termination of the
employment of any employees of Progressive or Pawling following consummation of
the transactions contemplated hereby will not cause Progressive or Pawling to
make or to be required to make any "excess parachute payment" as that term is
defined in Section 280G of the Code.
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2.14. Employee Benefit Plans; ERISA
(a) Progressive has Previously Disclosed each material
Progressive Plan.
(b) With respect to each material Progressive Plan,
Progressive has made available to Hudson Chartered true and complete copies of
each of the following documents: (1) the Progressive Plan and related documents
(including all amendments thereto); (2) the most recent annual reports,
financial statements, and actuarial reports, if any; (3) the most recent summary
plan description, together with each summary of material modifications, required
under ERISA with respect to such Progressive Plan; and (4) the most recent
determination letter received from the Internal Revenue Service with respect to
each Progressive Plan that is intended to be qualified under the Code.
(c) Except as Previously Disclosed, no liability under Title
IV of ERISA has been incurred by Progressive or any ERISA Affiliate of
Progressive since the effective date of ERISA that has not been satisfied in
full, and no condition exists that presents a material risk to Progressive or
any ERISA Affiliate of Progressive of incurring a liability under such Title,
other than liability for premium payments to the Pension Benefit Guaranty
Corporation, which premiums have been or will be paid when due.
(d) Neither Progressive nor any ERISA Affiliate of
Progressive, nor any of the Progressive Plans, nor any trust created thereunder,
nor, to the best knowledge of Progressive, any trustee or administrator thereof
has engaged in a prohibited transaction (within the meaning of Section 406 of
ERISA and Section 4975 of the Code) in connection with which Progressive or any
ERISA Affiliate of Progressive could, either directly or indirectly, incur a
material liability or cost.
(e) Except as Previously Disclosed, full payment has been
made, or will be made in accordance with Section 404(a)(6) of the Code, of all
amounts that Progressive or any ERISA Affiliate of Progressive is required to
pay under Section 412 of the Code or under the terms of the Progressive Plans.
(f) Except as Previously Disclosed, as of the Closing Date,
the then fair market value of the assets held under each Progressive Plan that
is subject to Title IV of ERISA will be sufficient so as to permit a "standard
termination" of each such Progressive Plan under Section 4042(b) of ERISA
without the need to make any additional contributions to such Progressive Plans.
No reportable event under Section 4043 of ERISA has occurred with respect to any
Progressive Plan on or before the Closing Date other than any reportable event
occurring by reason of the transactions contemplated by this Agreement or a
reportable event for which the requirement of notice to the Pension Benefit
Guaranty Corporation has been waived.
(g) Except as Previously Disclosed, none of the Progressive
Plans is a "multiemployer pension plan," as such term is defined in Section
3(37) of ERISA, a "multiple employer welfare arrangement," as such term is
defined in Section 3(40) of ERISA, or a single employer plan that has two or
more contributing sponsors, at least two of whom are not under common control,
within the meaning of Section 4063(a) of ERISA.
(h) Except as Previously Disclosed, a favorable determination
letter has been issued by the Internal Revenue Service with respect to each
Progressive Plan that is intended to be "qualified" within the meaning of
Section 401(a) of the Code to the effect that such plan is so qualified and each
such Progressive Plan satisfies the requirements of Section 401(a) of the Code
in all material respects. Each Progressive Plan that is intended to satisfy the
requirements of Section 125 or 501(c)(9) of the Code satisfies such requirements
in all material respects. Each Progressive Plan has been operated and
administered in all material respects in accordance with its terms and
applicable laws, including but not limited to ERISA and the Code.
(i) Except as Previously Disclosed, there are no actions,
suits or claims pending, or, to the knowledge of Progressive, threatened or
anticipated (other than routine claims for benefits) against any Progressive
Plan, the assets of any Progressive Plan or against Progressive or any ERISA
Affiliate of Progressive with respect to any
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Progressive Plan. There is no judgment, decree, injunction, rule or order of any
court, governmental body, commission, agency or arbitrator outstanding against
or in favor of any Progressive Plan or any fiduciary thereof (other than rules
of general applicability). There are no pending or threatened audits,
examinations or investigations by any governmental body, commission or agency
involving any Progressive Plan.
(j) Except as Previously Disclosed, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or director of Progressive or any ERISA Affiliate of Progressive
to severance pay, unemployment compensation or any similar payment, or (ii)
accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such current or former employee or director, or (iii)
renew or extend the term of any agreement regarding compensation for any such
current or former employee or director.
2.15. Labor Matters
With respect to their employees, neither Progressive nor
Pawling is a party to any labor agreement with any labor organization, group or
association and each of Progressive and Pawling is in material compliance with
all applicable laws respecting employment practices, terms and conditions of
employment and wages and hours and has not engaged in any unfair labor practice.
Progressive and Pawling have not experienced any attempt by organized labor or
its representatives to make Progressive or Pawling conform to demands of
organized labor relating to their employees or to enter into a binding agreement
with organized labor that would cover the employees of Progressive or Pawling.
To the knowledge of Progressive and Pawling, there is no unfair labor practice
charge or other complaint by any employee or former employee of Progressive or
Pawling against any of them pending before any governmental agency arising out
of Progressive's or Pawling's activities; there is no labor strike or labor
disturbance pending or, to the knowledge of Progressive and Pawling, threatened
against any of them; and neither Progressive nor Pawling has experienced a work
stoppage or other labor difficulty since January 1, 1997.
2.16. Certain Contracts
(a) Except as Previously Disclosed, neither Progressive nor
Pawling is a party to, or is bound by, (i) any material agreement, arrangement
or commitment involving annual payments in excess of $100,000, whether or not
made in the ordinary course of business, (ii) any agreement, indenture or other
instrument relating to the borrowing of money by Progressive or Pawling or the
guarantee by Progressive or Pawling of any such obligation, (iii) any agreement,
arrangement or commitment relating to the employment of a consultant or the
employment, election, retention in office or severance of any present or former
director or officer, (iv) any agreement to make loans or for the provision,
purchase or sale of goods, services or property between Progressive or Pawling
and any director or executive officer of Progressive or Pawling, or any member
of the immediate family or affiliate of any of the foregoing, or (v) any
agreement between Progressive or Pawling and any five percent or more
shareholder of Progressive, in each case other than transactions entered into in
the ordinary course of the banking business of Pawling consistent with past
practice.
(b) Neither Progressive nor Pawling, nor to the knowledge of
Progressive or Pawling, the other party thereto, is in default under any
material agreement, commitment, arrangement, lease, insurance policy or other
instrument whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that, with the
lapse of time or giving of notice or both, would constitute such a default,
other than defaults of loan agreements by borrowers from Pawling in the ordinary
course of its banking business.
(c) Since September 30, 1997, neither Progressive nor Pawling
has incurred or paid any obligation or liability that would be material to
Progressive, except obligations incurred or paid in connection with transactions
in the ordinary course of business of Pawling consistent with its past practice
and except as Previously Disclosed. Except as Previously Disclosed, from
September 30, 1997 to the date hereof, neither Progressive nor Pawling has taken
any action that, if taken after the date hereof, would breach any of the
covenants contained in Section 4.7(b) hereof.
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(d) Except as Previously Disclosed, neither Progressive nor
Pawling has, during the period since December 31, 1995, controlled expenses
through elimination of employee benefits, deferral of routine maintenance of
real property or leased premises, elimination of reserves where the liability
related to such reserve has remained, reduction of capital improvements from
previous levels, failure to depreciate capital assets in accordance with past
practice or eliminate capital assets which are no longer used in the business of
either Progressive or Pawling, capitalized loan production expenses other than
in accordance with FAS 91 or extraordinary reduction or deferral of ordinary or
necessary expenses.
2.17. Real Estate Owned
(a) Except for liens, security interests, claims, charges, or
such other encumbrances as have been appropriately reserved for in the
Progressive Financial Statements or are not material and are in the process of
being cleared, title to the REO is good and marketable, and there are no adverse
claims or encumbrances on the REO.
(b) All title, hazard and other insurance claims and mortgage
guaranty claims with respect to the REO have been timely filed and neither
Progressive nor Pawling has received any notice of denial of any such claim.
(c) Progressive and Pawling are in possession of all of the
REO or, if any of the REO remains occupied by the mortgagor, eviction or summary
proceedings have been commenced or rental arrangements providing for market
rental rates have been agreed upon and Progressive and/or Pawling are diligently
pursuing such eviction or summary proceedings or such rental arrangements.
(d) Except as Previously Disclosed, no legal proceeding or
quasi-legal proceeding is pending or, to the knowledge of Progressive and
Pawling, threatened concerning any REO or any servicing activity or omission to
provide a servicing activity with respect to any of the REO.
2.18. Legal Proceedings
Except as Previously Disclosed, there are no actions, suits or
proceedings instituted, pending or, to the knowledge of Progressive, threatened
against Progressive or Pawling or against any asset, interest or right of
Progressive or Pawling that might have a material adverse effect on the
financial condition, results of operations or business of Progressive on a
consolidated basis. To the knowledge of Progressive, there are no actual or
threatened actions, suits or proceedings which present a claim to restrain or
prohibit the transactions contemplated herein. There are no actions, suits or
proceedings instituted, pending or, to the knowledge of Progressive, threatened
against any present or former director or officer of Progressive that might give
rise to a claim for indemnification, and, to the knowledge of Progressive, there
is no reasonable basis for any such action, suit or proceeding.
2.19. Compliance with Laws
Progressive and Pawling are in compliance in all material
respects with all statutes and regulations applicable to the conduct of their
business, and neither Progressive nor Pawling has received notification from any
agency or department of federal, state or local government (i) asserting a
material violation of any such statute or regulation, (ii) threatening to revoke
any license, franchise, permit or government authorization or (iii) restricting
or in any way limiting its operations. Neither Progressive nor Pawling is
subject to any regulatory or supervisory cease and desist order, agreement,
directive, memorandum of understanding or commitment, and neither of them has
received any communication requesting that they enter into any of the foregoing.
Without limiting the generality of the foregoing, Pawling has timely filed all
currency transaction reports required to be filed and taken all other actions
required under the Currency and Foreign Transactions Reporting Act, codified at
31 U.S.C. ss. 5301 et seq., and its implementing regulations.
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2.20. Brokers and Finders
Except for Progressive's engagement of and agreement to pay
Sandler O'Neill & Partners, L.P. a fee or commission as Previously Disclosed,
neither Progressive nor Pawling, nor any of their respective officers, directors
or employees, has employed any broker, finder or financial advisor or incurred
any liability for any fees or commissions in connection with the transactions
contemplated herein, the Bank Merger Agreement or the Plan of Merger.
2.21. Insurance
Progressive and Pawling currently maintain insurance in
amounts reasonably necessary for their operations and, to the best knowledge of
Progressive, similar in scope and coverage to that maintained by other entities
similarly situated. Neither Progressive nor Pawling has received any advance
notice of a material premium increase or cancellation with respect to any of its
insurance policies or bonds, and within the last three years, neither
Progressive nor Pawling has been refused any insurance coverage sought or
applied for, and Progressive has no reason to believe that existing insurance
coverage cannot be renewed as and when the same shall expire, upon terms and
conditions as favorable as those presently in effect, other than possible
increases in premiums or unavailability in coverage that have not resulted from
any extraordinary loss experience of Progressive or Pawling.
2.22. Repurchase Agreements
With respect to all agreements pursuant to which Progressive
or Pawling has purchased securities subject to an agreement to resell, if any,
Progressive or Pawling, as the case may be, has a valid, perfected first lien or
security interest in the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
2.23. Deposit Insurance
The deposits of Pawling are insured by the FDIC in accordance
with the FDIA, and Pawling has paid all assessments and filed all reports
required by the FDIA.
2.24. Environmental Matters
(a) Except for any violation, liability or noncompliance which
does not have a material adverse effect on Progressive or Pawling: (i) neither
Progressive nor Pawling has violated during the last five years or is in
violation of or is liable under any federal, state or local environmental law;
(ii) none of the properties owned or leased by either Progressive or Pawling
(including, without limitation, soils and surface and ground waters) are
contaminated with any hazardous substance; (iii) neither Progressive nor Pawling
is liable for any off-site contamination; and (iv) each of Progressive and
Pawling is, and during the last five years has been, in compliance with, all of
its respective permits, licenses and other authorizations issued under any
environmental laws. For purposes of the foregoing, all references to
"properties" include, without limitation, any owned real property or leased real
property.
(b) Neither Progressive nor Pawling has received any written
notice of any legal, administrative, arbitral or other proceeding, claim or
action and, to the knowledge of Progressive and Pawling, there is no
governmental investigation of any nature ongoing, in each case that could
reasonably be expected to result in the imposition, on Progressive or Pawling of
any liability arising under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
which liability would have a material adverse effect on Progressive or Pawling;
to the best knowledge of Progressive and Pawling, there are no facts or
circumstances which could reasonably be expected to form the basis for any such
proceeding, claim, action or governmental investigation that would impose any
such liability; and neither Progressive nor Pawling is subject to any agreement,
order, judgment, decree or memorandum by or with any court, governmental
authority, regulatory agency or third party imposing any such liability.
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2.25. Certain Information
When the Registration Statement or any post-effective
amendment thereto shall become effective, and at all times subsequent to such
effectiveness up to and including the time of the later of the Progressive and
Hudson Chartered shareholders' meetings to vote upon the Merger, such
Registration Statement and all amendments or supplements thereto, with respect
to all information set forth therein furnished by Progressive relating to
Progressive and Pawling, (i) shall comply in all material respects with the
applicable provisions of the Securities Laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements contained therein not
misleading.
2.26. Administration of Trust Accounts
Pawling has properly administered, in all respects material
and which could reasonably be expected to be material to the business,
operations or financial condition of Progressive and Pawling, taken as a whole,
all accounts for which it acts as a fiduciary, including but not limited to
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law. Neither Progressive, Pawling, nor any director,
officer or employee of Progressive or Pawling has committed any breach of trust
with respect to any such fiduciary account which is material to or could
reasonably be expected to be material to the business, operations or financial
condition of Progressive and Pawling, taken as a whole, and the accountings for
each such fiduciary account are true and correct in all material respects and
accurately reflect the assets of such fiduciary account in all material
respects.
2.27. Information in Applications
All information concerning Progressive and Pawling, and their
respective officers, directors and shareholders, included (or submitted for
inclusion) in the applications described in Section 4.3 hereof shall be true,
correct and complete in all material respects.
2.28. Pooling of Interests
Progressive knows of no reason (after consultation with its
independent accountants) which would reasonably cause it to believe that the
Merger will not qualify as a pooling of interests for financial accounting
purposes.
2.29. Derivative Transactions
Except as Previously Disclosed, as of the date hereof, neither
Progressive nor Pawling has engaged in transactions in or involving forwards,
futures, options on futures, swaps or other derivative instruments since
December 31, 1996.
2.30. Intellectual Property
Progressive and Pawling own the entire right, title and
interest in and to, or have valid licenses with respect to, all the Intellectual
Property necessary in all material respects to conduct their business and
operations as presently conducted, except where the failure to do so would not,
individually or in the aggregate, have a material adverse effect on the
financial condition, results of operations or business of Progressive on a
consolidated basis. None of such Intellectual Property is subject to any
outstanding order, decree, judgment, stipulation, settlement, lien, charge,
encumbrance or attachment, which order, decree, judgment, stipulation,
settlement, lien, charge, encumbrance or attachment would have a material
adverse effect on the financial condition, results of operations or business of
Progressive on a consolidated basis.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF HUDSON CHARTERED
AND HUDSON VALLEY
Hudson Chartered and Hudson Valley hereby represent and warrant to
Progressive and Pawling as follows:
3.1. Capital Structure of Hudson Chartered
(a) The authorized capital stock of Hudson Chartered consists
of (i) 20,000,000 shares of common stock, par value $0.80 per share ("Hudson
Chartered Common Stock"), of which 7,076,263 shares are issued and outstanding
and 85,015 shares are held in treasury; and (ii) 5,000,000 shares of preferred
stock, par value $0.01 per share ("Hudson Chartered Preferred Stock"), none of
which are currently outstanding. All outstanding shares of Hudson Chartered
Common Stock have been duly authorized and validly issued, and are fully paid
and nonassessable. None of the shares of Hudson Chartered's capital stock has
been issued in violation of the preemptive rights of any person.
(b) Except for options granted under the Hudson Chartered
Stock-Based Compensation Plans with respect to 462,247 shares of Hudson
Chartered Common Stock, and the Hudson Chartered Option Agreement, there are no
Rights authorized, issued or outstanding with respect to the capital stock of
Hudson Chartered and no written or oral plans, understandings, commitments or
contracts to which Hudson Chartered or, to Hudson Chartered's knowledge, any of
its affiliates is subject with respect to the issuance, voting or sale of issued
or unissued shares of Hudson Chartered's capital stock.
3.2. Organization, Standing and Authority of Hudson Chartered
Hudson Chartered is a duly organized corporation, validly
existing and in good standing under the laws of the State of New York. Hudson
Chartered (i) has full corporate power and authority to carry on its business as
now conducted and (ii) is duly qualified to do business in the states of the
United States and foreign jurisdictions where its ownership or leasing of
property or the conduct of its business requires such qualification and where
failure to so qualify would have a material adverse effect on the financial
condition, results of operations or business of Hudson Chartered on a
consolidated basis. Hudson Chartered has all federal, state, local and foreign
governmental authorizations and licenses necessary for it to own and lease its
properties and assets and to carry on its business as it is now being conducted.
Hudson Chartered has delivered to Progressive true, complete and correct copies
of its certificate of incorporation and by-laws, each as in effect on the date
of this Agreement. Hudson Chartered is registered as a bank holding company
under the Bank Holding Company Act.
3.3. Ownership of the Hudson Chartered Subsidiaries; Capital
Structure of the Hudson Chartered Subsidiaries
Hudson Chartered does not own, directly or indirectly, 5% or
more of the outstanding capital stock or other voting securities of any
corporation, bank or other organization except Hudson Valley, Hudson Chartered
Realty Corporation (collectively the "Hudson Chartered Subsidiaries" and each
individually a "Hudson Chartered Subsidiary"). The outstanding shares of capital
stock of each Hudson Chartered Subsidiary have been duly authorized and are
validly issued, and are fully paid and (subject to 12 U.S.C. ss. 55)
nonassessable and, except as Previously Disclosed, all such shares are directly
or indirectly owned by Hudson Chartered free and clear of all liens, claims and
encumbrances. No Rights are authorized, issued or outstanding with respect to
the capital stock of any Hudson Chartered Subsidiary and there are no
agreements, understandings or commitments relating to the right of Hudson
Chartered to vote or to dispose of said shares. None of the shares of capital
stock of any Hudson Chartered Subsidiary has been issued in violation of the
preemptive rights of any person.
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3.4. Organization, Standing and Authority of the Hudson Chartered
Subsidiaries
Hudson Valley is a duly organized national banking
association, validly existing and in good standing under applicable laws. Each
other Hudson Chartered Subsidiary is a duly organized corporation, validly
existing and in good standing under applicable laws. Each Hudson Chartered
Subsidiary (i) has full corporate power and authority to own, lease and operate
its properties and to carry on its business as now conducted, and (ii) is duly
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification and where failure to so qualify would have
a material adverse effect on the financial condition, results of operations or
business of Hudson Chartered on a consolidated basis. Each Hudson Chartered
Subsidiary has all federal, state, local and foreign governmental authorizations
and licenses necessary for it to own or lease its properties and assets and to
carry on its business as it is now being conducted. Hudson Valley has delivered
to Progressive true, complete and correct copies of its articles of association
and by-laws, each as in effect on the date of this Agreement.
3.5. Authorized and Effective Agreement
(a) Hudson Chartered has all requisite corporate power and
authority to enter into, adopt and perform all of its obligations under this
Reorganization Agreement, the Plan of Merger and the Hudson Chartered Option
Agreement. The execution, adoption and delivery of this Reorganization
Agreement, the Plan of Merger and the Hudson Chartered Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of Hudson Chartered (including the unanimous approval of its Board of
Directors), except that the affirmative vote of the holders of the outstanding
shares of Hudson Chartered Common Stock entitled to vote thereon is required to
adopt the Plan of Merger pursuant to the New York Business Corporation Law, as
amended, and Hudson Chartered's Certificate of Incorporation and Bylaws.
(b) Hudson Valley has all requisite corporate power and
authority to enter into and perform all of its obligations under this
Reorganization Agreement and the Bank Merger Agreement and the execution and
delivery of this Reorganization Agreement and the Bank Merger Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action in respect thereof on
the part of Hudson Valley.
(c) This Reorganization Agreement and the Plan of Merger
constitute legal, valid and binding obligations of Hudson Chartered and this
Reorganization Agreement and the Bank Merger Agreement constitute legal, valid
and binding obligations of Hudson Valley, in each case enforceable against it in
accordance with their respective terms, subject as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(d) Except as Previously Disclosed, neither the execution,
adoption and delivery of this Reorganization Agreement, the Plan of Merger or
the Hudson Chartered Option Agreement, in the case of Hudson Chartered, or this
Reorganization Agreement or the Bank Merger Agreement, in the case of Hudson
Valley, nor consummation of the transactions contemplated hereby or thereby, nor
compliance by Hudson Chartered or Hudson Valley with any of the provisions
hereof or thereof shall (i) conflict with or result in a breach of any provision
of the certificate of incorporation, articles of association or by-laws of
Hudson Chartered or any Hudson Chartered Subsidiary, (ii) constitute or result
in a breach of any term, condition or provision of, or constitute a default
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of Hudson Chartered or any Hudson Chartered
Subsidiary pursuant to, any note, bond, mortgage, indenture, license, agreement
or other instrument or obligation, in each case in an amount greater than
$100,000 or requiring an annual payment greater than $100,000, or (iii) subject
to the receipt of all required regulatory approvals, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Hudson Chartered
or any Hudson Chartered Subsidiary.
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(e) Except for consents and approvals of or filings with the
Federal Reserve Board, the OCC, the FDIC, the Commission, the Banking
Department, the New York Department of State and any appropriate state
securities authorities, and except as Previously Disclosed, no consents or
approvals of or filings or registrations with any public body or authority are
necessary, and no consents or approvals of any third parties are necessary, in
connection with the execution and delivery of this Agreement and the Bank Merger
Agreement by Hudson Chartered and Hudson Valley or the consummation by Hudson
Chartered or Hudson Valley of the transactions contemplated hereby, thereby or
by the Plan of Merger.
3.6. SEC Documents; Regulatory Filings
Hudson Chartered has filed all SEC Documents required by the
Securities Laws and such SEC Documents complied in all material respects with
the Securities Laws. Each of Hudson Chartered and Hudson Valley has filed all
reports required by statute or regulation to be filed with any federal or state
bank regulatory agency, and such reports were prepared in accordance with the
applicable statutes, regulations and instructions in all material respects.
3.7. Financial Statements; Books and Records; Minute Books
The Hudson Chartered Financial Statements fairly present the
consolidated financial position of Hudson Chartered as of the dates indicated
and the consolidated results of operations, changes in stockholders' equity and
cash flows of Hudson Chartered for the periods then ended in conformity with
generally accepted accounting principles applicable to financial institutions
applied on a consistent basis except (i) as disclosed therein, (ii) for the
omission of notes to unaudited statements, and (iii) for normally recurring
year-end adjustments in the case of interim financial statements. The books and
records of Hudson Chartered and each Hudson Chartered Subsidiary fairly reflect
the transactions to which it is a party or by which its properties are subject
or bound. Such books and records have been properly kept and maintained and are
in compliance in all material respects with all applicable legal and accounting
requirements. The minute books of Hudson Chartered and each Hudson Chartered
Subsidiary contain accurate records of all corporate actions of their respective
shareholders and Boards of Directors (including committees of their Boards of
Directors).
3.8. Material Adverse Change
Hudson Chartered has not, on a consolidated basis, suffered
any material adverse change in its business, financial condition or results of
operations since December 31, 1996 to the date hereof.
3.9. Absence of Undisclosed Liabilities
Neither Hudson Chartered nor any Hudson Chartered Subsidiary
has any liability (contingent or otherwise) that is material to Hudson Chartered
on a consolidated basis, or that, when combined with all similar liabilities,
would be material to Hudson Chartered on a consolidated basis, except as
disclosed in the Hudson Chartered Financial Statements and except for
liabilities incurred in the ordinary course of business consistent with past
practice since the date of the most recent Hudson Chartered Financial
Statements.
3.10. Properties
Hudson Chartered and the Hudson Chartered Subsidiaries have
good title free and clear of all liens, encumbrances, charges, defaults or
equitable interests to all of the properties and assets, real and personal,
reflected on the Hudson Chartered Financial Statements as of September 30, 1997
or acquired after such date, except (i) liens for current taxes not yet due and
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of banking business, (iii) such imperfections of title,
easements and encumbrances, if any, as are customary under local practice or are
not material in character, amount or extent and (iv) dispositions and
encumbrances for adequate
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consideration in the ordinary course of business. Hudson Chartered or one of the
Hudson Chartered Subsidiaries, as lessee, has the right under valid and
subsisting leases of properties used by Hudson Chartered and the Hudson
Chartered Subsidiaries in the conduct of its banking business to occupy and use
all such properties as presently occupied and used by it. Each of the real
properties used by Hudson Chartered and the Hudson Chartered Subsidiaries has
been maintained in all material respects in good condition and is suitable for
its current use by Hudson Chartered and the Hudson Chartered Subsidiaries. Each
of such properties conforms in all material respects to currently applicable
ordinances, regulations and zoning requirements and, if required, is occupied
pursuant to a certificate of occupancy authorizing its current use. Since
September 30, 1997, none of such properties which are material to the operation
of Hudson Chartered and the Hudson Chartered Subsidiaries has been damaged by
fire, storm or other identifiable event or other act of God, except to the
extent that any property owned or leased by Hudson Chartered or one of the
Hudson Chartered Subsidiaries, if so damaged, is insured to the extent necessary
to satisfactorily repair the damaged premises.
3.11. Loans
(a) Except as Previously Disclosed, to the best knowledge of
Hudson Chartered and Hudson Valley, each loan reflected as an asset in the
Hudson Chartered Financial Statements (i) is evidenced by notes, agreements or
other evidences of indebtedness which are true, genuine and what they purport to
be, (ii) to the extent secured, has been secured by valid liens and security
interests which have been perfected, and (iii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws
of general applicability relating to or affecting creditors' rights and to
general equity principles. All loans and extensions of credit made by Hudson
Valley that are subject to Regulation O of the Federal Reserve Board comply
therewith.
(b) The classification on the books and records of Hudson
Chartered and each Hudson Chartered Subsidiary of loans as nonaccrual, troubled
debt restructuring, in-substance foreclosure or other real estate owned, or
other similar classification, complies in all material respects with generally
accepted accounting principles and applicable regulatory accounting policy.
3.12. Allowance for Loan Losses
The allowance for loan losses reflected on the Hudson
Chartered Financial Statements as of September 30, 1997 and any Hudson Chartered
Financial Statements referred to in Section 1.18(ii) hereof, as of their
respective dates, is adequate in all material respects under the requirements of
generally accepted and regulatory accounting principles to provide for
reasonably anticipated losses on outstanding loans.
3.13. Tax Matters
(a) Hudson Chartered and each Hudson Chartered Subsidiary, and
each of their respective predecessors, have timely filed federal income tax
returns for each year through December 31, 1996 and have timely filed, or caused
to be filed, all other federal, state, local and foreign tax returns (including,
without limitation, estimated tax returns, withholding tax returns and FICA and
FUTA returns) required to be filed with respect to Hudson Chartered or such
Hudson Chartered Subsidiary. Hudson Chartered has made available to Progressive
true and complete copies of its federal and state income tax returns for the
past five years, and true and complete copies of all correspondence from
governmental authorities, and responses of Hudson Chartered or any Hudson
Chartered Subsidiary thereto, relating to such federal and state income tax
returns or any other federal, state, local or other tax filings within the past
five years. All taxes due in respect of the periods covered by such tax returns
have been paid or adequate reserves have been established for the payment of
such taxes and, as of the Closing Date, all taxes due in respect of any
subsequent periods ending on or prior to the Closing Date will have been paid or
adequate reserves will have been established for the payment thereof. Except as
Previously Disclosed, no audit examination or deficiency or refund litigation
with respect to such returns is pending. Neither Hudson Chartered nor any Hudson
Chartered Subsidiary will have any material liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established.
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(b) All federal, state and local (and, if applicable, foreign)
tax returns filed by Hudson Chartered and each Hudson Chartered Subsidiary are
complete and accurate in all material respects. Neither Hudson Chartered nor any
Hudson Chartered Subsidiary is delinquent in the payment of any tax, assessment
or governmental charge, and, except as Previously Disclosed, none of them has
requested any extension of time within which to file any tax returns in respect
of any fiscal year or portion thereof which have not since been filed. No
deficiencies for any tax, assessment or governmental charge have been proposed,
asserted or assessed (tentatively or otherwise) against Hudson Chartered or any
Hudson Chartered Subsidiary which have not been settled and paid. Except as
Previously Disclosed, there are currently no agreements in effect with respect
to Hudson Chartered or any Hudson Chartered Subsidiary to extend the period of
limitations for the assessment or collection of any tax.
(c) Hudson Chartered and each Hudson Chartered Subsidiary have
timely filed all information returns required under Sections 6041-6050N of the
Code and any comparable state and local laws, and have timely complied in all
respects with the requirements of Section 3406 of the Code and the regulations
thereunder and any comparable state and local laws and regulations.
(d) Termination of the employment of any employees of Hudson
Chartered or any Hudson Chartered Subsidiary following consummation of the
transactions contemplated hereby will not cause Hudson Chartered or any Hudson
Chartered Subsidiary to make or to be required to make any "excess parachute
payment" as that term is defined in Section 280G of the Code.
3.14. Employee Benefit Plans; ERISA
(a) Hudson Chartered has Previously Disclosed each material
Hudson Chartered Plan.
(b) With respect to each material Hudson Chartered Plan,
Hudson Chartered has made available to Progressive true and complete copies of
each of the following documents: (1) the Hudson Chartered Plan and related
documents (including all amendments thereto); (2) the most recent annual
reports, financial statements, and actuarial reports, if any; (3) the most
recent summary plan description, together with each summary of material
modifications, required under ERISA with respect to such Hudson Chartered Plan;
and (4) the most recent determination letter received from the Internal Revenue
Service with respect to each Hudson Chartered Plan that is intended to be
qualified under the Code.
(c) No liability under Title IV of ERISA has been incurred by
Hudson Chartered or any ERISA Affiliate of Hudson Chartered since the effective
date of ERISA that has not been satisfied in full, and no condition exists that
presents a material risk to Hudson Chartered or any ERISA Affiliate of Hudson
Chartered of incurring a liability under such Title. None of the Hudson
Chartered Plans is subject to Title IV of ERISA.
(d) Neither Hudson Chartered nor any ERISA Affiliate of Hudson
Chartered, nor any of the Hudson Chartered Plans, nor any trust created
thereunder, nor, to the best knowledge of Hudson Chartered, any trustee or
administrator thereof has engaged in a prohibited transaction (within the
meaning of Section 406 of ERISA and Section 4975 of the Code) in connection with
which Hudson Chartered or any ERISA Affiliate of Hudson Chartered could, either
directly or indirectly, incur a material liability or cost.
(e) Full payment has been made, or will be made in accordance
with Section 404(a)(6) of the Code, of all amounts that Hudson Chartered or any
ERISA Affiliate of Hudson Chartered is required to pay under Section 412 of the
Code or under the terms of the Hudson Chartered Plans.
(f) Except as Previously Disclosed, none of the Hudson
Chartered Plans is a "multiemployer pension plan," as such term is defined in
Section 3(37) of ERISA, a "multiple employer welfare arrangement," as such term
is defined in Section 3(40) of ERISA, or a single employer plan that has two or
more contributing sponsors, at least two of whom are not under common control,
within the meaning of Section 4063(a) of ERISA.
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(g) A favorable determination letter has been issued by the
Internal Revenue Service with respect to each Hudson Chartered Plan that is
intended to be "qualified" within the meaning of Section 401(a) of the Code to
the effect that such plan is so qualified and each such Hudson Chartered Plan
satisfies the requirements of Section 401(a) of the Code in all material
respects. Each Hudson Chartered Plan that is intended to satisfy the
requirements of Section 125 or 501(c)(9) of the Code satisfies such requirements
in all material respects. Each Hudson Chartered Plan has been operated and
administered in all material respects in accordance with its terms and
applicable laws, including but not limited to ERISA and the Code.
(h) There are no actions, suits or claims pending, or, to the
knowledge of Hudson Chartered, threatened or anticipated (other than routine
claims for benefits) against any Hudson Chartered Plan, the assets of any Hudson
Chartered Plan or against Hudson Chartered or any ERISA Affiliate of Hudson
Chartered with respect to any Hudson Chartered Plan. There is no judgment,
decree, injunction, rule or order of any court, governmental body, commission,
agency or arbitrator outstanding against or in favor of any Hudson Chartered
Plan or any fiduciary thereof (other than rules of general applicability). There
are no pending or threatened audits, examinations or investigations by any
governmental body, commission or agency involving any Hudson Chartered Plan.
(i) Except as Previously Disclosed, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any current or
former employee or director of Hudson Chartered or any ERISA Affiliate of Hudson
Chartered to severance pay, unemployment compensation or any similar payment, or
(ii) accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such current or former employee or director, or (iii)
renew or extend the term of any agreement regarding compensation for any such
current or former employee or director.
3.15. Labor Matters
With respect to their employees, neither Hudson Chartered nor
any Hudson Chartered Subsidiary is a party to any labor agreement with any labor
organization, group or association, and each of Hudson Chartered and the Hudson
Chartered Subsidiaries is in material compliance with all applicable laws
respecting employment practices, terms and conditions of employment and wages
and hours and has not engaged in any unfair labor practice. Hudson Chartered and
the Hudson Chartered Subsidiaries have not experienced any attempt by organized
labor or its representatives to make Hudson Chartered or any Hudson Chartered
Subsidiary conform to demands of organized labor relating to their employees or
to enter into a binding agreement with organized labor that would cover the
employees of Hudson Chartered or any Hudson Chartered Subsidiary. To the
knowledge of Hudson Chartered and the Hudson Chartered Subsidiaries, there is no
unfair labor practice charge or other complaint by any employee or former
employee of Hudson Chartered or any Hudson Chartered Subsidiary against any of
them pending before any governmental agency arising out of Hudson Chartered's or
such Hudson Chartered Subsidiary's activities; there is no labor strike or labor
disturbance pending or, to the knowledge of Hudson Chartered and the Hudson
Chartered Subsidiaries, threatened against any of them; and neither Hudson
Chartered nor any Hudson Chartered Subsidiary has experienced a work stoppage or
other labor difficulty since January 1, 1997.
3.16. Certain Contracts
(a) Except as Previously Disclosed, neither Hudson Chartered
nor any Hudson Chartered Subsidiary is a party to, or is bound by, (i) any
material agreement, arrangement or commitment involving annual payments in
excess of $100,000, whether or not made in the ordinary course of business, (ii)
any agreement, indenture or other instrument relating to the borrowing of money
by Hudson Chartered or any Hudson Chartered Subsidiary or the guarantee by
Hudson Chartered or any Hudson Chartered Subsidiary of any such obligation,
(iii) any agreement, arrangement or commitment relating to the employment of a
consultant or the employment, election, retention in office or severance of any
present or former director or officer, (iv) any agreement to make loans or for
the provision, purchase or sale of goods, services or property between Hudson
Chartered or any Hudson Chartered Subsidiary and any director or executive
officer of Hudson Chartered or any Hudson Chartered Subsidiary, or any member of
the immediate family
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or affiliate of any of the foregoing, or (v) any agreement between Hudson
Chartered or any Hudson Chartered Subsidiary and any five percent or more
shareholder of Hudson Chartered, in each case other than transactions entered
into in the ordinary course of the banking business of Hudson Valley consistent
with past practice.
(b) Neither Hudson Chartered nor any Hudson Chartered
Subsidiary, nor to the knowledge of Hudson Chartered or such Hudson Chartered
Subsidiary, the other party thereto, is in default under any material agreement,
commitment, arrangement, lease, insurance policy or other instrument whether
entered into in the ordinary course of business or otherwise and whether written
or oral, and there has not occurred any event that, with the lapse of time or
giving of notice or both, would constitute such a default, other than defaults
of loan agreements by borrowers from Hudson Valley in the ordinary course of its
banking business.
(c) Since September 30, 1997, neither Hudson Chartered nor any
Hudson Chartered Subsidiary has incurred or paid any obligation or liability
that would be material to Hudson Chartered, except obligations incurred or paid
in connection with transactions in the ordinary course of business of Hudson
Valley consistent with its past practice and except as Previously Disclosed.
Except as Previously Disclosed, from September 30, 1997 to the date hereof,
neither Hudson Chartered nor any Hudson Chartered Subsidiary has taken any
action that, if taken after the date hereof, would breach any of the covenants
contained in Section 4.8(b) hereof.
(d) Except as Previously Disclosed, neither Hudson Chartered
nor any Hudson Chartered Subsidiary has, during the period since December 31,
1995, controlled expenses through elimination of employee benefits, deferral of
routine maintenance of real property or leased premises, elimination of reserves
where the liability related to such reserve has remained, reduction of capital
improvements from previous levels, failure to depreciate capital assets in
accordance with past practice or eliminate capital assets which are no longer
used in the business of either of Hudson Chartered or any Hudson Chartered
Subsidiary, capitalized loan production expenses other than in accordance with
FAS 91 or extraordinary reduction or deferral of ordinary or necessary expenses.
3.17. Real Estate Owned
(a) Except for liens, security interests, claims, charges, or
such other encumbrances as have been appropriately reserved for in the Hudson
Chartered Financial Statements or are not material and are in the process of
being cleared, title to the REO is good and marketable, and there are no adverse
claims or encumbrances on the REO.
(b) All title, hazard and other insurance claims and mortgage
guaranty claims with respect to the REO have been timely filed and neither
Hudson Chartered nor any Hudson Chartered Subsidiary has received any notice of
denial of any such claim.
(c) Except as Previously Disclosed, Hudson Chartered and each
Hudson Chartered Subsidiary are in possession of all of the REO or, if any of
the REO remains occupied by the mortgagor, eviction or summary proceedings have
been commenced or rental arrangements providing for market rental rates have
been agreed upon and Hudson Chartered and/or each Hudson Chartered Subsidiary
are diligently pursuing such eviction or summary proceedings or such rental
arrangements.
(d) Except as Previously Disclosed, no legal proceeding or
quasi-legal proceeding is pending or, to the knowledge of Hudson Chartered and
each Hudson Chartered Subsidiary, threatened concerning any REO or any servicing
activity or omission to provide a servicing activity with respect to any of the
REO.
3.18. Legal Proceedings
Except as Previously Disclosed, there are no actions, suits or
proceedings instituted, pending or, to the knowledge of Hudson Chartered,
threatened against Hudson Chartered or any Hudson Chartered Subsidiary or
against any asset, interest or right of Hudson Chartered or any Hudson Chartered
Subsidiary that might have a material
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adverse effect on the financial condition, results of operations or business of
Hudson Chartered on a consolidated basis. To the knowledge of Hudson Chartered,
there are no actual or threatened actions, suits or proceedings which present a
claim to restrain or prohibit the transactions contemplated herein. There are no
actions, suits or proceedings instituted, pending or, to the knowledge of Hudson
Chartered, threatened against any present or former director or officer of
Hudson Chartered that might give rise to a claim for indemnification, and, to
the knowledge of Hudson Chartered, there is no reasonable basis for any such
action, suit or proceeding.
3.19. Compliance with Laws
Hudson Chartered and the Hudson Chartered Subsidiaries are in
compliance in all material respects with all statutes and regulations applicable
to the conduct of their business, and except as Previously Disclosed, neither
Hudson Chartered nor any Hudson Chartered Subsidiary has received notification
from any agency or department of federal, state or local government (i)
asserting a material violation of any such statute or regulation, (ii)
threatening to revoke any license, franchise, permit or government authorization
or (iii) restricting or in any way limiting its operations. Except as Previously
Disclosed, neither Hudson Chartered nor any Hudson Chartered Subsidiary is
subject to any regulatory or supervisory cease and desist order, agreement,
directive, memorandum of understanding or commitment, and neither of them has
received any communication requesting that they enter into any of the foregoing.
Without limiting the generality of the foregoing, Hudson Valley has timely filed
all currency transaction reports required to be filed and taken all other
actions required under the Currency and Foreign Transactions Reporting Act,
codified at 31 U.S.C. ss. 5301 et seq., and its implementing regulations.
3.20. Brokers and Finders
Except for Hudson Chartered's engagement of and agreement to
pay Keefe Bruyette & Woods, Inc. a fee or commission as Previously Disclosed,
neither Hudson Chartered nor any Hudson Chartered Subsidiary, nor any of their
respective officers, directors or employees, has employed any broker, finder or
financial advisor or incurred any liability for any fees or commissions in
connection with the transactions contemplated herein, the Bank Merger Agreement
or the Plan of Merger.
3.21. Insurance
Hudson Chartered and each Hudson Chartered Subsidiary
currently maintain insurance in amounts reasonably necessary for their
operations and, to the best knowledge of Hudson Chartered, similar in scope and
coverage to that maintained by other entities similarly situated. Neither Hudson
Chartered nor any Hudson Chartered Subsidiary has received any advance notice of
a material premium increase or cancellation with respect to any of its insurance
policies or bonds, and within the last three years, neither Hudson Chartered nor
any Hudson Chartered Subsidiary has been refused any insurance coverage sought
or applied for, and Hudson Chartered has no reason to believe that existing
insurance coverage cannot be renewed as and when the same shall expire, upon
terms and conditions as favorable as those presently in effect, other than
possible increases in premiums or unavailability in coverage that have not
resulted from any extraordinary loss experience of Hudson Chartered or any
Hudson Chartered Subsidiary.
3.22. Repurchase Agreements
With respect to all agreements pursuant to which Hudson
Chartered or any Hudson Chartered Subsidiary has purchased securities subject to
an agreement to resell, if any, Hudson Chartered or such Hudson Chartered
Subsidiary, as the case may be, has a valid, perfected first lien or security
interest in the government securities or other collateral securing the
repurchase agreement, and the value of such collateral equals or exceeds the
amount of the debt secured thereby.
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3.23. Deposit Insurance; Federal Reserve Membership
The deposits of Hudson Valley are insured by the FDIC in
accordance with the FDIA, and Hudson Valley has paid all assessments and filed
all reports required by the FDIA. Hudson Valley is a member of the Federal
Reserve System and has subscribed and paid for the requisite number of shares of
capital stock of the FRBNY.
3.24. Environmental Matters
(a) Except for any violation, liability or noncompliance which
does not have a material adverse effect on Hudson Chartered or any Hudson
Chartered Subsidiary: (i) neither Hudson Chartered nor any Hudson Chartered
Subsidiary has violated during the last five years or is in violation of or is
liable under any federal, state or local environmental law; (ii) none of the
properties owned or leased by either Hudson Chartered or any Hudson Chartered
Subsidiary (including, without limitation, soils and surface and ground waters)
are contaminated with any hazardous substance; (iii) neither Hudson Chartered
nor any Hudson Chartered Subsidiary is liable for any off-site contamination;
and (iv) each of Hudson Chartered and the Hudson Chartered Subsidiaries is, and
during the last five years has been, in compliance with, all of its respective
permits, licenses and other authorizations issued under any environmental laws.
For purposes of the foregoing, all references to "properties" include, without
limitation, any owned real property or leased real property.
(b) Neither Hudson Chartered nor any Hudson Chartered
Subsidiary has received any written notice of any legal, administrative,
arbitral or other proceeding, claim or action and, to the knowledge of Hudson
Chartered and the Hudson Chartered Subsidiaries, there is no governmental
investigation of any nature ongoing, in each case that could reasonably be
expected to result in the imposition, on Hudson Chartered or any Hudson
Chartered Subsidiary of any liability arising under any local, state or federal
environmental statute, regulation or ordinance including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, which liability would have a material adverse effect on Hudson
Chartered or any Hudson Chartered Subsidiary; to the best knowledge of Hudson
Chartered and the Hudson Chartered Subsidiaries, there are no facts or
circumstances which could reasonably be expected to form the basis for any such
proceeding, claim, action or governmental investigation that would impose any
such liability; and neither Hudson Chartered nor any Hudson Chartered Subsidiary
is subject to any agreement, order, judgment, decree or memorandum by or with
any court, governmental authority, regulatory agency or third party imposing any
such liability.
3.25. Certain Information
When the Registration Statement or any post-effective
amendment thereto shall become effective, and at all times subsequent to such
effectiveness up to and including the time of the later of the Progressive and
Hudson Chartered shareholders' meetings to vote upon the Merger, such
Registration Statement and all amendments or supplements thereto, with respect
to all information set forth therein furnished by Hudson Chartered relating to
Hudson Chartered and the Hudson Chartered Subsidiaries, (i) shall comply in all
material respects with the applicable provisions of the Securities Laws, and
(ii) shall not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements contained therein not misleading.
3.26. Administration of Trust Accounts
Hudson Valley has properly administered, in all respects
material and which could reasonably be expected to be material to the business,
operations or financial condition of Hudson Chartered and Hudson Valley, taken
as a whole, all accounts for which it acts as a fiduciary, including but not
limited to accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law. Neither Hudson Chartered, Hudson Valley, nor any
director, officer or employee of Hudson Chartered or Hudson Valley has committed
any breach of trust with respect to any such fiduciary account which is material
to or could reasonably be expected to
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be material to the business, operations or financial condition of Hudson
Chartered and Hudson Valley, taken as a whole, and the accountings for each such
fiduciary account are true and correct in all material respects and accurately
reflect the assets of such fiduciary account in all material respects.
3.27. Information in Applications
All information concerning Hudson Chartered and the Hudson
Chartered Subsidiaries, and their respective officers, directors and
shareholders, included (or submitted for inclusion) in the applications
described in Section 4.3 hereof shall be true, correct and complete in all
material respects.
3.28. Pooling of Interests
Hudson Chartered knows of no reason (after consultation with
its independent accountants) which would reasonably cause it to believe that the
Merger will not qualify as a pooling of interests for financial accounting
purposes.
3.29. Derivative Transactions
Except as Previously Disclosed, as of the date hereof, neither
Hudson Chartered nor any Hudson Chartered Subsidiary has engaged in transactions
in or involving forwards, futures, options on futures, swaps or other derivative
instruments since December 31, 1996.
3.30. Intellectual Property
Hudson Chartered and the Hudson Chartered Subsidiaries own the
entire right, title and interest in and to, or have valid licenses with respect
to, all the Intellectual Property necessary in all material respects to conduct
their business and operations as presently conducted, except where the failure
to do so would not, individually or in the aggregate, have a material adverse
effect on the financial condition, results of operations or business of Hudson
Chartered on a consolidated basis. None of such Intellectual Property is subject
to any outstanding order, decree, judgment, stipulation, settlement, lien,
charge, encumbrance or attachment, which order, decree, judgment, stipulation,
settlement, lien, charge, encumbrance or attachment would have a material
adverse effect on the financial condition, results of operations or business of
Hudson Chartered on a consolidated basis.
ARTICLE 4
COVENANTS
4.1. Shareholders' Meetings
Hudson Chartered and Progressive shall submit this
Reorganization Agreement, the Plan of Merger and such related matters as the
parties shall reasonably and in good faith agree (including amendments to their
respective certificates of incorporation) to their respective shareholders for
approval at an annual or a special meeting to be held as soon as practicable.
Except to the extent legally required for the discharge by the boards of
directors of their fiduciary duties as determined by such boards of directors
after consultation with such board's counsel, the boards of directors of
Progressive and Hudson Chartered shall recommend at the respective shareholders'
meetings that the shareholders vote in favor of and approve the Merger and adopt
the Plan of Merger.
4.2. Proxy Statement; Registration Statement
As promptly as practicable after the date hereof, Hudson
Chartered and Progressive shall cooperate in the preparation of the Registration
Statement, which shall include the Proxy Statement to be mailed to the
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shareholders of Hudson Chartered and Progressive in connection with the Merger.
Hudson Chartered will advise Progressive, promptly after it receives notice
thereof, of the time when the Registration Statement or any post-effective
amendment thereto has become effective or any supplement or amendment has been
filed, of the issuance of any stop order, of the suspension of qualification of
the Continuing Corporation Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or the initiation or threat of any
proceeding for any such purpose, or of any request by the Commission for the
amendment or supplement of the Registration Statement or for additional
information. The parties hereto shall exercise reasonable efforts in good faith
to file or cause to be filed, on or before the Effective Date, a post-effective
amendment to the Registration Statement either with respect to the sale of the
shares of Continuing Corporation Common Stock provided for in paragraph 8 of
Article V of the Plan of Merger to the holders of stock options issued by
Progressive or for the resale of such shares by such optionees, and the
Continuing Corporation shall continue to make applicable filings thereafter as
may be necessary to permit the continued exercise of options and the sale of
such shares. The Continuing Corporation shall take all actions necessary to
register or qualify the shares of Continuing Corporation Common Stock to be
issued in the Merger and pursuant to such options pursuant to all applicable
state "blue sky" or securities laws and shall maintain such registrations or
qualifications in effect for all purposes hereof for so long as such options
remain outstanding.
4.3. Applications
The parties hereto shall use their best efforts to submit or
cause to be submitted, as promptly as practicable after the date hereof, any
requisite applications or notices for prior approval of the transactions
contemplated herein and in the Plan of Merger, or requests for waivers thereof,
to any state or federal government agency, department or body the approval of
which is required for consummation of the Merger and the Bank Merger. At a
reasonable time prior to the making of any such filings with any regulatory
authority or any third persons, Hudson Chartered and Progressive shall submit to
each other the materials to be filed, mailed or released. Any such materials
must be acceptable to both Hudson Chartered and Progressive prior to the filings
with any regulatory authorities or any third persons, except to the extent that
Hudson Chartered or Progressive is legally required to proceed prior to
obtaining the acceptance of the other. Each party agrees to consult with the
other with respect to obtaining all necessary approvals and consents and each
will keep the other apprised of the status of matters relating to such approvals
and consents.
4.4. Best Efforts
Hudson Chartered, Hudson Valley, Progressive and Pawling each
shall use its best efforts in good faith to (i) furnish such information as may
be necessary or desirable in connection with the preparation of the documents
referred to in Sections 4.2 and 4.3 above, and (ii) take or cause to be taken
all action necessary or desirable on its part so as to permit consummation of
the Merger and the Bank Merger at the earliest possible date, including, without
limitation, (1) obtaining the consent or approval of each individual,
partnership, corporation, association or other business or professional entity
whose consent or approval is necessary or desirable for consummation of the
transactions contemplated hereby, and (2) requesting the delivery of appropriate
opinions, consents and letters from its counsel and independent auditors. No
party hereto shall take, or cause or to the best of its ability permit to be
taken, any action that would adversely affect the qualification of the Merger
for pooling of interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Code; provided that nothing herein contained
shall preclude Hudson Chartered from exercising its rights under the Progressive
Option Agreement or Progressive from exercising its rights under the Hudson
Chartered Option Agreement. In the event that any party hereto has taken any
action, whether before, on or after the date hereof, that would adversely affect
such qualification, each party shall take such action as any other party may
reasonably request to cure such effect to the extent curable without a material
adverse effect on the financial condition, results of operations or business of
either Hudson Chartered or Progressive on a consolidated basis.
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4.5. Investigation and Confidentiality
(a) Hudson Chartered and Progressive each will keep the other
advised of all material developments relevant to its business and to
consummation of the transactions contemplated herein. Hudson Chartered and
Progressive each may make or cause to be made such investigation of the
financial and legal condition of the other as such party reasonably deems
necessary or advisable in connection with the transactions contemplated herein
and in the Plan of Merger and the Bank Merger Agreement, provided, however, that
such investigation shall be reasonably related to such transactions and shall
not interfere unnecessarily with normal operations. Hudson Chartered and
Progressive agree to furnish the other and the other's advisors with such
financial data and other information with respect to its business and properties
as such other party shall from time to time reasonably request. No investigation
pursuant to this Section 4.5 shall affect or be deemed to modify any
representation or warranty made by, or the conditions to the obligations to
consummate the Merger and the Bank Merger of, any party hereto.
(b) Each party hereto shall, and shall cause its directors,
officers, attorneys and advisors to, maintain the confidentiality of all
information obtained in such investigation which is not otherwise publicly
disclosed by the other parties, said undertaking with respect to confidentiality
to survive any termination of this Agreement pursuant to Section 6.1 hereof.
Each party hereto shall hold all information furnished by any other party or
such other party's subsidiaries or representatives pursuant hereto in confidence
to the extent required by, and in accordance with, the provisions of the
confidentiality agreement dated October 23, 1997 by and between Hudson Chartered
and Progressive (the "Confidentiality Agreement"). In the event of termination
of this Agreement each party shall return to the furnishing party or destroy and
certify the destruction of all information previously furnished in connection
with the transactions contemplated by this Agreement.
(c) Progressive shall give prompt notice to Hudson Chartered,
and Hudson Chartered shall give prompt notice to Progressive, of (i) the
occurrence, or failure to occur, of any material event which occurrence or
failure would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect any time from
the date hereof to the Closing Date and (ii) any material failure of Progressive
or Hudson Chartered, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder, and
each party shall use all reasonable efforts to remedy such failure.
4.6. Press Releases
The parties hereto shall agree with each other as to the form
and substance of any press release related to this Reorganization Agreement, the
Plan of Merger and the Bank Merger Agreement or the transactions contemplated
hereby or thereby, and shall consult each other as to the form and substance of
other public disclosures related thereto, provided, however, that nothing
contained herein shall prohibit any party, following notification to the other
parties, from making any disclosure which its counsel deems necessary.
4.7. Covenants of Progressive and Pawling
(a) Prior to the Closing Date, and except as otherwise
provided for by this Reorganization Agreement or consented to or approved by
Hudson Chartered, Progressive and Pawling each shall use its best efforts to
preserve its properties, business and relationships with customers, employees
and other persons.
(b) Except with the prior written consent of Hudson Chartered
or except as Previously Disclosed, between the date hereof and the Effective
Date, Progressive and Pawling each shall not:
(1) carry on its business other than in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted;
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(2) in the case of Progressive only, declare, set
aside, make or pay any dividend or other distribution in respect of its capital
stock other than quarterly cash dividends in respective amounts not in excess
of $0.20 per share, in a manner consistent with past practice and in
accordance with applicable law, regulation and contractual and regulatory
commitments;
(3) issue any shares of its capital stock or permit
any treasury shares to become outstanding other than pursuant to the Progressive
Option Agreement or pursuant to Rights outstanding at the date hereof or Rights
issued subsequent to the date hereof as Previously Disclosed, or incur any
additional debt obligation or other obligation for borrowed money other than in
the ordinary course of business of Pawling consistent with past practice;
(4) issue, grant or authorize any Rights other than
pursuant to the Progressive Option Agreement or as Previously Disclosed or
effect any recapitalization, reclassification, stock dividend, stock split or
like change in capitalization or redeem, repurchase or otherwise acquire any
shares of its capital stock;
(5) amend its certificate of incorporation, articles
of association or by-laws except as contemplated herein or as agreed to by the
parties hereto (and, to the extent required, disclosed in the Proxy Statement)
to facilitate the consummation of the transactions contemplated hereby; impose,
or suffer the imposition, on any share of stock held by Progressive in Pawling
of any lien, charge or encumbrance, or permit any such lien, charge or
encumbrance to exist;
(6) merge or consolidate with any other entity; sell,
lease, liquidate or dispose of all or any material portion of its assets or
business or any material asset; make any acquisition of all or any substantial
portion of the business or assets of any other person, firm, association,
corporation or business organization other than in connection with the
collection of any loan or credit arrangement between it and any other person;
enter into or consummate a purchase and assumption transaction with respect to
deposits and liabilities; revoke or surrender its certificate of authority to
maintain, or apply for the relocation of, any existing branch office or apply
for a certificate of authority to establish a new branch office, except as
Previously Disclosed;
(7) fail to comply in any material respect with any
laws, regulations, ordinances or governmental actions applicable to it and to
the conduct of its business;
(8) acquire any material assets; make any capital
expenditures in excess of $250,000 in the aggregate; or modify any leases or
other contracts relating thereto that involve annual payments that exceed
$250,000 in the aggregate, except as Previously Disclosed;
(9) increase the rate of compensation of, pay or
agree to pay any bonus to, or provide any additional employee benefit or
incentive to (i) any director or any executive officer Previously Disclosed
under any circumstances, or (ii) any other officer or employee except in the
ordinary course of business in a manner consistent with the company's
established salary and bonus policies and procedures and past practice,
provided, however, that such payments may not increase severance amounts payable
under employment or severance agreements (except for any payments made or paid
pursuant to any change in control provisions contained therein); enter into,
modify or extend any employment or severance contracts with any of its present
or former directors, officers or employees, except as Previously Disclosed; or
enter into or modify (except as may be required by applicable law) any pension,
retirement, stock option, stock purchase, stock appreciation right, savings,
profit sharing, deferred compensation, consulting, bonus, group insurance or
other employee benefit, incentive or welfare contract, plan or arrangement, or
any trust agreement related thereto, in respect of any of its directors,
officers or other employees;
(10) change its lending, investment, asset/liability
management or other material banking policies in any material respect except as
may be required by changes in applicable law; except as Previously Disclosed,
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make any loan or extend any credit in an amount greater than $250,000, except in
the ordinary course of business consistent with its lending policies and past
practice;
(11) change its methods of accounting in effect at
December 31, 1996, except as required by changes in generally accepted
accounting principles concurred in by its independent certified public
accountants, or change any of its methods of reporting income and deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax returns for the year ended December 31, 1996, except as
required by changes in law;
(12) solicit or encourage inquiries or proposals with
respect to any acquisition or purchase of all or a substantial portion of the
assets of, or a substantial equity interest in, Progressive or Pawling or any
business combination with Progressive or Pawling other than as contemplated by
this Reorganization Agreement; or authorize or permit any officer, director,
agent or affiliate of it to do any of the above; or fail to notify Hudson
Chartered immediately if any such inquiries or proposals are received by
Progressive or Pawling; provided, however, that if following the execution
hereof and prior to the Closing Date any unsolicited inquiry or proposal is
received by any Progressive officer, director, agent or affiliate and the
Progressive directors determine (in good faith after consultation with financial
advisors and legal counsel) that their fiduciary duties require them to consider
such inquiry or proposal, Progressive shall be free to deal with any such
inquiry or proposal in any manner that is deemed by Progressive's directors as
being in the best interests of Progressive's shareholders and that is not
contrary to the terms of this Agreement, the Plan of Merger or the Hudson
Chartered Option Agreement;
(13) foreclose on any commercial loan secured by real
property (other than those commercial loans in which it already has commenced
action seeking foreclosure) unless it first has obtained an environmental audit,
analysis or survey that indicates that it will not incur material potential
liability under Environmental Laws as a result of such foreclosure;
(14) purchase or acquire any of the outstanding
shares of capital stock of Hudson Chartered or any of the Hudson Chartered
Subsidiaries other than as contemplated by the Hudson Chartered Option
Agreement; or
(15) agree to do any of the foregoing.
4.8. Covenants of Hudson Chartered and Hudson Valley
(a) Prior to the Closing Date, and except as otherwise
provided for by this Reorganization Agreement or consented to or approved by
Progressive, Hudson Chartered and Hudson Valley each shall use its best efforts
to preserve its properties, business and relationships with customers, employees
and other persons.
(b) Except with the prior written consent of Progressive or
except as Previously Disclosed, between the date hereof and the Effective Date,
Hudson Chartered and Hudson Valley each shall not:
(1) carry on its business other than in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted;
(2) in the case of Hudson Chartered only, declare,
set aside, make or pay any dividend
or other distribution in respect of its capital stock other than quarterly cash
dividends in respective amounts not in excess of $0.13 per share, in a manner
consistent with past practice and in accordance with applicable law, regulation
and contractual and regulatory commitments;
(3) issue any shares of its capital stock or permit
any treasury shares to become outstanding other than pursuant to the Hudson
Chartered Option Agreement, pursuant to the Hudson Chartered DRP,
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or pursuant to Rights outstanding at the date hereof or Rights issued subsequent
to the date hereof as Previously Disclosed, or incur any additional debt
obligation or other obligation for borrowed money other than in the ordinary
course of business of Hudson Valley consistent with past practice;
(4) issue, grant or authorize any Rights other than
pursuant to the Hudson Chartered Option Agreement or as Previously Disclosed, or
effect any recapitalization, reclassification, stock dividend (other than
pursuant to the Hudson Chartered DRP), stock split or like change in
capitalization, or redeem, repurchase or otherwise acquire any shares of its
capital stock;
(5) amend its certificate of incorporation, articles
of association or by-laws except as contemplated herein or as agreed to by the
parties hereto (and, to the extent required, disclosed in the Proxy Statement)
to facilitate the consummation of the transactions contemplated hereby; impose,
or suffer the imposition, on any share of stock held by Hudson Chartered in
Hudson Valley of any lien, charge or encumbrance, or permit any such lien,
charge or encumbrance to exist;
(6) merge or consolidate with any other entity; sell,
lease, liquidate or dispose of all or any material portion of its assets or
business or any material asset; make any acquisition of all or any substantial
portion of the business or assets of any other person, firm, association,
corporation or business organization other than in connection with the
collection of any loan or credit arrangement between it and any other person;
enter into or consummate a purchase and assumption transaction with respect to
deposits and liabilities; revoke or surrender its certificate of authority to
maintain, or apply for the relocation of, any existing branch office or apply
for a certificate of authority to establish a new branch office;
(7) fail to comply in any material respect with any
laws, regulations, ordinances or governmental actions applicable to it and to
the conduct of its business;
(8) acquire any material assets; except as Previously
Disclosed, make any capital expenditures in excess of $250,000 in the aggregate;
modify any leases or other contracts relating thereto that involve annual
payments that exceed $250,000 in the aggregate, except as Previously Disclosed;
(9) increase the rate of compensation of, pay or
agree to pay any bonus to, or provide any additional employee benefit or
incentive to (i) any director or any executive officer Previously Disclosed
under any circumstances, or (ii) any other officer or employee except in the
ordinary course of business in a manner consistent with the company's
established salary and bonus policies and procedures and past practice provided,
however, that such payments may not increase severance amounts payable under
employment or severance agreements (except for any payments made or paid
pursuant to any change in control provisions contained therein); enter into,
modify or extend, or permit to be renewed, any employment or severance contracts
with any of its present or former directors, officers or employees, except as
Previously Disclosed; or enter into or modify (except as may be required by
applicable law) any pension, retirement, stock option, stock purchase, stock
appreciation right, savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or welfare contract,
plan or arrangement, or any trust agreement related thereto, in respect of any
of its directors, officers or other employees;
(10) change its lending, investment, asset/liability
management or other material banking policies in any material respect except as
may be required by changes in applicable law; make any loan or extend any credit
in an amount greater than $250,000, except in the ordinary course of business
consistent with its lending policies and past practice;
(11) change its methods of accounting in effect at
December 31, 1996, except as required by changes in generally accepted
accounting principles concurred in by its independent certified public
accountants, or change any of its methods of reporting income and deductions for
federal income tax purposes from those employed
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in the preparation of its federal income tax returns for the year ended December
31, 1996, except as required by changes in law;
(12) solicit or encourage inquiries or proposals with
respect to any acquisition or purchase of all or a substantial portion of the
assets of, or a substantial equity interest in, Hudson Chartered or Hudson
Valley or any business combination with Hudson Chartered or Hudson Valley other
than as contemplated by this Reorganization Agreement; or authorize or permit
any officer, director, agent or affiliate of it to do any of the above; or fail
to notify Progressive immediately if any such inquiries or proposals are
received by Hudson Chartered or Hudson Valley; provided, however, that if
following the execution hereof and prior to the Closing Date any unsolicited
inquiry or proposal is received by any Hudson Chartered officer, director, agent
or affiliate and the Hudson Chartered directors determine (in good faith after
consultation with financial advisors and legal counsel) that their fiduciary
duties require them to consider such inquiry or proposal, Hudson Chartered shall
be free to deal with any such inquiry or proposal in any manner that is deemed
by Hudson Chartered's directors as being in the best interests of Hudson
Chartered's shareholders and that is not contrary to the terms of this
Agreement, the Plan of Merger or the Progressive Option Agreement;
(13) foreclose on any commercial loan secured by real
property (other than those commercial loans in which it already has commenced
action seeking foreclosure) unless it first has obtained an environmental audit,
analysis or survey that indicates that it will not incur material potential
liability under Environmental Laws as a result of such foreclosure;
(14) purchase or acquire any of the outstanding
shares of capital stock of Progressive or Pawling other than as contemplated by
the Progressive Option Agreement; or
(15) agree to do any of the foregoing.
4.9. Closing; Certificate of Merger; Headquarters
The transactions contemplated by this Reorganization
Agreement, the Plan of Merger and the Bank Merger Agreement shall be consummated
at a closing to be held at such location as the parties shall agree on the fifth
business day following satisfaction of the conditions to consummation of the
Merger and the Bank Merger set forth in Article 5 hereof or such other date as
may be agreed upon by the parties hereto (the "Closing Date"). In connection
with such Closing, Hudson Chartered and Progressive shall execute a certificate
of merger and shall cause such certificate to be delivered to the New York
Department of State in accordance with Section 904 of the New York Business
Corporation Law. The Merger shall be effective at the time and on the date
specified in such certificate of merger (the "Effective Date"). The Bank Merger
shall be effective as provided in the Bank Merger Agreement. At the Effective
Date, the headquarters of the Continuing Corporation and of the Continuing Bank
shall be located at the headquarters of Hudson Chartered and Hudson Valley,
respectively.
4.10. Affiliates
Hudson Chartered and Progressive shall cooperate and use their
best efforts to identify those persons who may be deemed to be "affiliates" of
Hudson Chartered or Progressive within the meaning of Rule 144 or 145
promulgated by the Commission under the Securities Act, as appropriate, or by
whom the transfer of Continuing Corporation Common Stock following consummation
of the Merger may adversely affect the accounting for the Merger as a pooling of
interests. Progressive and Hudson Chartered shall use their best efforts to
cause each person so identified to deliver to Hudson Chartered or Progressive,
no later than 30 days prior to the Effective Date, a written agreement providing
that such person will not dispose of any Progressive Common Stock, Hudson
Chartered Common Stock or Continuing Corporation Common Stock except in
compliance with the Securities Act, the rules and regulations promulgated
thereunder and the Commission's rules relating to pooling of interests
accounting treatment. Shares of Continuing Corporation Common Stock issued to
such affiliates in exchange for Progressive Common Stock shall not
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be transferable until such time as financial results covering at least 30 days
of combined operations of Progressive and Hudson Chartered have been published,
regardless of whether each such affiliate has provided the written agreement
referred to in this section.
4.11. Board of Directors
(a) From and after the Effective Date, the Board of Directors
of the Continuing Corporation shall consist of 20 persons, 10 of whom shall be
persons named by the Board of Directors of Hudson Chartered as Previously
Disclosed and 10 of whom shall be persons named by the Board of Directors of
Progressive as Previously Disclosed. It is the intention of the parties that T.
Jefferson Cunningham III shall be elected Chairman of the Board and Chairman of
the Executive Committee of the Board of the Continuing Corporation. The terms of
the directors of the Continuing Corporation after the Effective Date shall be
allocated, prior to the mailing of the Proxy Statement, so that, as nearly as
practicable, the terms of the same number of persons designated as directors by
Hudson Chartered and by Progressive, respectively, will expire in each
applicable year. If prior to the Effective Date (i) any of the individuals named
by either Hudson Chartered or Progressive to serve on the Board of Directors of
the Continuing Corporation following the Effective Date becomes unable or
unwilling to serve as a director of the Continuing Corporation, or (ii) either
Hudson Chartered or Progressive determines to replace an individual named by
such party to serve on the Board of Directors of the Continuing Corporation, the
party that designated such individual may name a replacement to become a
director of the Continuing Corporation after the Effective Date. The Board of
Directors of the Continuing Bank following the Bank Merger shall be determined
in accordance with the Bank Merger Agreement.
(b) The members of the Executive Committees of the Boards of
Directors of the Continuing Corporation and of the Continuing Bank following the
Effective Date shall be as Previously Disclosed.
(c) The persons named by Hudson Chartered and Progressive as
members of the Board of Directors of the Continuing Corporation after the
Effective Date shall be named in the Proxy Statement and the Registration
Statement, subject to receipt of the consent of such individuals to be so named.
4.12. Management; Employees; Employee Benefits
(a) From and after the Effective Date, Peter Van Kleeck shall
be the President and Chief Executive Officer of the Continuing Corporation and
John C. VanWormer shall be Executive Vice President of the Continuing
Corporation. The principal officers of the Continuing Bank from and after the
Effective Date shall be as provided in the Bank Merger Agreement. As of the
Effective Date, the Continuing Corporation shall enter into an employment
agreement with each of T. Jefferson Cunningham III and Peter Van Kleeck, on
substantially the terms Previously Disclosed or as the parties may otherwise
agree. The Surviving Corporation shall honor all Previously Disclosed employment
and severance agreements of Hudson Chartered and Progressive in accordance with
their terms. The parties hereto recognize and acknowledge that the Merger will
constitute a change in control for purposes of Progressive's severance
agreements and other benefit plans.
(b) It is the intention of the parties hereto that, as soon as
practicable after the Effective Date, all directors, officers and employees of
the Continuing Corporation and its subsidiaries will be entitled to participate
in compensation, benefit, welfare and related plans, programs or arrangements
made available to similarly situated directors, officers and employees under the
same terms and conditions, notwithstanding whether such individual was employed
by, or provided services to, Hudson Chartered and its subsidiaries or
Progressive and its subsidiaries prior to the Effective Date. The parties agree
to work together prior to the Effective Date to develop and design such plans,
programs and arrangements, and to prepare for the implementation of such plans,
programs and arrangements as soon as practicable following the Effective Date.
It is also anticipated that any such plans, programs or arrangements that are
effective after the Effective Date shall provide that, for purposes of
determining eligibility for and vesting of such employee benefits only (and not
for pension benefit or other accrual purposes except to the extent that an
individual was covered by the applicable plan prior to the Effective Date and
accrued benefits thereunder), service with Progressive
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or Pawling, on the one hand, or Hudson Chartered or Hudson Valley, on the other
hand, prior to the Effective Date shall be treated as service with an "employer"
to the same extent as if such persons had been employees of Hudson Chartered or
Hudson Valley or of Progressive or Pawling, as appropriate. The parties hereto
agree that no previously inapplicable pre-existing condition exclusions shall be
applicable to their employees and/or covered dependents with respect to the
continuation of health insurance coverage with the Continuing Corporation.
(c) After the Effective Date, as provided in the Plan of
Merger, the obligations of Progressive under the Progressive Stock-Based
Compensation Plans shall be assumed by the Continuing Corporation and
administered by the Compensation Committee of the Continuing Corporation, no
further options shall be granted under such plans, and all officers and
employees of the Continuing Corporation shall be eligible to participate in the
applicable Hudson Chartered Stock-Based Compensation Plans notwithstanding such
individuals' prior affiliation with Hudson Chartered or Progressive. For the
purposes of determining eligibility for and vesting of rights under such plans
only (and not for pension benefit or accrual purposes), service with Progressive
or Pawling prior to the Effective Date shall be treated as service with an
"employer" to the same extent as if such persons had been employees of Hudson
Chartered or Hudson Valley, as appropriate.
(d) Except as provided under Section 4.12(a) hereof, nothing
herein shall be construed as giving any employee of Hudson Chartered,
Progressive or their respective subsidiaries a right to continuing employment
with the Continuing Corporation at any of its subsidiaries after the Effective
Date.
(e) The Continuing Corporation shall honor Progressive's
obligations through the Effective Date under its deferred compensation plan for
directors (as restated in November of 1997) and under its noncontributory
retirement and severance plan for directors (the "Progressive Director
Retirement Plan"), to the extent that such obligations have been properly
recorded and accrued for on Progressive's books. Service as a director of the
Continuing Corporation from and after the Effective Date by any person who was a
director of Progressive immediately prior to the Effective Date shall be treated
as service with Progressive for purposes of determining eligibility under
Section 3 of the Progressive Director Retirement Plan and calculating benefits
under Section 4 of the Progressive Director Retirement Plan. The Continuing
Corporation shall also honor Progressive's supplemental executive retirement
agreement with Peter Van Kleeck and Hudson Chartered's supplemental executive
retirement agreement with T. Jefferson Cunningham III, and each such executive's
benefits shall accrue under the applicable agreement or under alternative
arrangements agreed to by Mr. Van Kleeck and Mr. Cunningham, respectively, until
his employment with the Continuing Corporation terminates for any reason.
(f) The parties recognize and acknowledge that the Merger
constitutes a change in control for purposes of Progressive's Executive
Severance Plan and 1992 Severance Pay Plan (together, the "Severance Plans").
The parties agree that any of their employees who are employed as of the date
hereof and who incur a qualifying termination of employment under the Severance
Plans between the date hereof and the date two years after the Effective Date
shall (i) receive severance benefits in accordance with the terms of the
Severance Plans (or at such greater severance benefit levels as the Continuing
Corporation may offer), and (ii) be entitled to exercise stock options in
accordance with the terms of the Severance Plans, subject to the terms of the
plans and stock option agreements under which the stock options were granted,
including without limitation the specified termination date of the option.
(g) After the Effective Date, the post-retirement health
insurance that is currently provided for Progressive's and Pawling's employees
who are retired as of the Effective Date shall continue for their benefit under
the terms and conditions in effect as of the date hereof.
(h) The parties hereto agree that their respective vacation,
leave and sick day policies shall continue in effect through the Effective Date,
and that the Continuing Corporation shall honor all accruals under these
policies for which a liability has been recorded on the respective books of
Progressive and Hudson Chartered through the Effective Date.
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4.13. Indemnification
(a) From and after the Effective Date, the Continuing
Corporation shall indemnify, defend and hold harmless each person who is now, or
who has been at any time before the date hereof or who becomes before the
Effective Date, an officer or director of either Progressive or Hudson Chartered
or any of their respective subsidiaries (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses (including attorneys' fees),
liabilities or judgments or amounts that are paid in settlement (which
settlement shall require the prior written consent of the Continuing
Corporation, which consent shall not be unreasonably withheld) of or in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, or administrative (each, a "Claim"), in which an Indemnified
Party is, or is threatened to be made, a party or witness in whole or in part on
or arising in whole or in part out of the fact that such person is or was a
director or officer of either Progressive or Hudson Chartered or any of their
respective subsidiaries if such Claim pertains to any matter or fact arising,
existing or occurring before the Effective Date (including without limitation
the Merger and the other transactions contemplated hereby), regardless of
whether such Claim is asserted or claimed before, or at or after, the Effective
Date (the "Indemnified Liabilities"), to the fullest extent permitted under
applicable state or federal law in effect as of the date hereof or as amended
applicable to a time before the Effective Date and under Progressive's or Hudson
Chartered's governing corporate documents, and the Continuing Corporation shall
pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by applicable
state or federal law in effect as of the date hereof or as amended applicable to
a time before the Effective Date upon receipt of any undertaking required by
applicable law. Any Indemnified Party wishing to claim indemnification under
this Section 4.13(a), upon learning of any Claim, shall notify the Continuing
Corporation (but the failure so to notify the Continuing Corporation shall not
relieve it from any liability which it may have under this Section 4.13(a),
except to the extent such failure materially prejudices the Continuing
Corporation) and shall deliver to the Continuing Corporation the undertaking, if
any, required by applicable law. The Continuing Corporation shall ensure, to the
extent permitted under applicable law, that all limitations of liability
existing in favor of the Indemnified Parties as provided in Progressive's or
Hudson Chartered's governing corporation documents, as in effect as of the date
hereof, or allowed under applicable state or federal law as in effect as of the
date hereof or as amended applicable to a time before the Effective Date, with
respect to claims or liabilities arising from facts or events existing or
occurring before the Effective Date (including without limitation, the
transactions contemplated hereby), shall survive the Merger. In the event of any
such Claim (whether arising before or after the Effective Date), (1) the
Continuing Corporation shall have the right to assume the defense thereof (in
which event the Indemnified Parties will cooperate in the defense of any such
matter) and upon such assumption the Continuing Corporation shall not be liable
to any Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by any Indemnified Party in connection with the
defense thereof, except that if the Continuing Corporation elects not to assume
such defense, or counsel for the Indemnified Parties reasonably advises the
Indemnified Parties that there are or may be (whether or not any have yet
actually arisen) issues which raise conflicts of interest between the Continuing
Corporation and the Indemnified Parties, the Indemnified Parties may retain
counsel reasonably satisfactory to them, and the Continuing Corporation shall
pay the reasonable fees and expenses of such counsel for the Indemnified
Parties, (2) the Continuing Corporation shall be obligated pursuant to this
paragraph to pay for only one firm of counsel for all Indemnified Parties whose
reasonable fees and expenses shall be paid promptly as statements are received,
(3) the Continuing Corporation shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld) and (4) the Continuing Corporation shall have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
nonappealable, that indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(b) From and after the Effective Date, the directors, officers
and employees of Progressive and Hudson Chartered hereto or any of their
respective subsidiaries who become directors or officers of the Continuing
Corporation or any of its subsidiaries, except for the indemnification rights
provided pursuant to the Indemnification Agreements between Hudson Chartered and
Progressive and their respective directors and as set forth in paragraph (a) of
this Section 4.13, shall have indemnification rights having prospective
application only. The prospective indemnification rights shall consist of such
rights to which directors and officers of the Continuing Corporation and its
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subsidiaries are entitled under the provisions of the governing corporation
documents of the Continuing Corporation and its subsidiaries, as in effect from
time to time after the Effective Date, as applicable, and provisions of
applicable state and federal law as in effect from time to time after the
Effective Date.
(c) For a period of six years from and after the Effective
Date, the Continuing Corporation shall cause to be maintained in effect the
current policies of directors' and officers' liability insurance maintained by
Progressive (provided that the Continuing Corporation may substitute therefor
policies from financially capable insurers of at least the same coverage and
amounts containing terms and conditions which are substantially no less
advantageous) with respect to Claims arising from facts or events which occurred
before the Effective Date. Following consummation of the Merger, the directors
and officers of the Continuing Corporation shall be covered by the directors'
and officers' liability insurance maintained by the Continuing Corporation.
(d) The obligations of the Continuing Corporation provided
under paragraphs (a), (b) and (c) of this Section 4.13 are intended to be
enforceable against the Continuing Corporation directly by the Indemnified
Parties and shall be binding on all respective successors and permitted assigns
of the Continuing Corporation.
(e) In the event the Continuing Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
of its properties and assets to any person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of the Continuing Corporation shall assume the obligations set forth in
this Section 4.13.
(f) As a condition to receiving indemnification under this
Section 4.13, the party claiming indemnification shall assign, by separate
writing, to the Continuing Corporation all right, title and interest to and in
proceeds of any insurance maintained or provided by Progressive or Hudson
Chartered or any of their respective affiliates for the benefits of the claiming
party, to the extent of indemnification actually received from the Continuing
Corporation hereunder and shall send such notices as the Continuing Corporation
may reasonably request under any applicable directors' and officers' liability
or blanket bond insurance coverage to preserve claims of which the claiming
party is aware.
(g) No person shall be entitled to indemnification under this
Section 4.13 if such person is seeking indemnification based on a claim (other
than a claim arising as a supplier to, customer of or borrower from Hudson
Chartered, Hudson Valley, Progressive or Pawling) brought by such person or by
an entity of which such person is a general partner, executive officer,
director, trustee, beneficiary or controlling person unless such person has
waived any right to participate in any damage or other award to such claiming
party or other entity in any such action, suit or proceeding.
4.14. Shares Listed
The parties hereto shall use their best efforts to cause the
shares of Continuing Corporation Common Stock to be issued in the Merger to be
listed on the American Stock Exchange, Inc., subject to official notice of
issuance.
4.15. Reservation of Right to Revise Transaction
The parties hereto may hereafter agree in writing to change
the method of effecting the Merger to the extent permitted by applicable law and
to the extent they deem any such change to be desirable; provided, however, that
no such change shall materially alter the benefits of the Merger as is presently
contemplated in this Agreement and in the Plan of Merger to any of the parties
hereto or to their respective shareholders.
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4.16. Dividends
After the date of this Agreement, each of the parties hereto
shall coordinate with the other the declaration of any dividends in respect of
Hudson Chartered Common Stock or Progressive Common Stock and the record dates
and payment dates relating thereto, it being the intention of the parties hereto
that holders of Hudson Chartered Common Stock and Progressive Common Stock shall
not receive two dividends, or fail to receive one dividend, for any single
calendar quarter with respect to their shares of Hudson Chartered Common Stock
and/or Progressive Common Stock and any shares of Continuing Corporation Common
Stock any such holder receives in exchange therefor in the Merger.
ARTICLE 5
CONDITIONS PRECEDENT
5.1. Conditions Precedent - Mutual
The respective obligations of Hudson Chartered and Progressive
to effect the Merger and of Hudson Valley and Pawling to effect the Bank Merger
shall be subject to satisfaction or waiver of the following conditions at or
prior to the Closing Date:
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Reorganization Agreement, the Plan of Merger
and the Bank Merger Agreement and consummation of the transactions contemplated
hereby and thereby shall have been duly and validly taken, and all required
shareholder approvals shall have been duly received.
(b) The parties hereto shall have received all regulatory
approvals required or mutually deemed necessary in connection with the
transactions contemplated by this Reorganization Agreement, the Plan of Merger
and the Bank Merger Agreement, all notice periods and waiting periods required
after the granting of any such approvals shall have passed and all conditions
contained in any such approval required to have been satisfied prior to
consummation of such transactions shall have been satisfied, provided, however,
that no such approval shall have imposed any condition or requirement which, in
the reasonable good faith opinion of the Boards of Directors of Hudson Chartered
and Progressive (as they shall so agree) so materially and adversely affects the
anticipated economic and business benefits to such parties of the transactions
contemplated by this Agreement as to render consummation of such transactions
inadvisable.
(c) The parties hereto shall have received an opinion of
Arnold & Porter dated as of the Closing Date, satisfactory in form and substance
to Hudson Chartered and Progressive, to the effect that the Merger when
consummated in accordance with the terms hereof and the Plan of Merger, and the
Bank Merger when consummated in accordance with the terms of the Bank Merger
Agreement, will constitute reorganizations within the meaning of Section 368(a)
of the Code, and that the exchange of Progressive Common Stock to the extent
exchanged for Hudson Chartered Common Stock will not give rise to recognition of
gain or loss for federal income tax purposes to the shareholders of Progressive,
except to the extent that cash is received in lieu of fractional share interests
of Hudson Chartered Common Stock, and neither the Merger nor the Bank Merger
will give rise to recognition of gain or loss for federal income tax purposes to
the Continuing Corporation. Hudson Chartered, Hudson Valley, Progressive and
Pawling shall provide Arnold & Porter with the facts, representations and
assumptions (including without limitation the standard representations set forth
in Revenue Procedure 86-42, 1986-2 C.B. 772) on which Arnold & Porter will rely
in rendering its opinion, which facts, representations and assumptions will be
consistent with the state of facts Hudson Chartered, Hudson Valley, Progressive
and Pawling believe will exist on the Effective Date.
(d) No event shall have occurred that shall preclude the
Merger from being accounted for as a pooling of interests, and the parties shall
have received from each of their respective independent accountants a letter
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to the effect that they are not aware of any reason that would preclude the
Merger from being accounted for as a pooling of interests.
(e) The Registration Statement (including any post-effective
amendment thereto) shall be effective under the Securities Act, and no
proceeding shall be pending or threatened by the Commission to suspend the
effectiveness of such Registration Statement, and Hudson Chartered shall have
received all state securities or "Blue Sky" permits or other authorizations, or
confirmations as to the availability of an exemption from registration
requirements as may be necessary, and no proceedings shall be pending or
threatened by any state "Blue Sky" securities administrator to suspend the
effectiveness of such Registration Statement.
(f) To the extent that any lease, license, loan, financing
agreement or other contract or agreement to which any party hereto of any of its
subsidiaries, as the case may be, is a party requires the consent of or waiver
from the other party thereto as a result of the transactions contemplated by
this Agreement, such consent or waiver shall have been obtained, unless the
failure to obtain such consent or waiver would not have a material adverse
effect on the Continuing Corporation as the parties hereto shall reasonably and
in good faith agree.
(g) None of the parties hereto or to the Bank Merger Agreement
shall be subject to any order, decree or injunction of a court or agency of
competent jurisdiction, which enjoins or prohibits the consummation of the
transactions contemplated by this Reorganization Agreement, the Plan of Merger
and the Bank Merger Agreement and there shall be no action or proceeding by or
before any such court or agency that, in the judgment of Progressive or Hudson
Chartered, with the advice of its respective counsel, shall present a bona fide
claim to restrain, prohibit or invalidate the transactions contemplated hereby.
(h) The shares of Hudson Chartered Common Stock to be issued
in the Merger shall have been approved for listing on the American Stock
Exchange, Inc., subject to official notice of issuance.
(i) The Rights issued pursuant to the Progressive Rights
Agreement shall not have become nonredeemable, exercisable, distributed or
triggered pursuant to the terms of such agreement (unless, in the case of a
distribution or trigger, the effects can be cured by Progressive).
5.2. Conditions Precedent - Hudson Chartered and Hudson Valley
The obligations of Hudson Chartered to effect the Merger and
of Hudson Valley to effect the Bank Merger shall be subject to satisfaction of
the following additional conditions at or prior to the Closing Date unless
waived by Hudson Chartered pursuant to Section 6.4 hereof:
(a) The representations and warranties of Progressive and
Pawling set forth in Article 2 hereof shall be true and correct in all material
respects as of the date of this Reorganization Agreement and as of the Closing
Date as though made on and as of the Closing Date (or on the date when made in
the case of any representation and warranty which specifically relates to an
earlier date), except as otherwise contemplated by this Reorganization Agreement
or consented to in writing by Hudson Chartered or where the failure to be true
and correct would not have, or would not reasonably be expected to have, a
material adverse effect on Progressive and Pawling, taken as a whole;
(b) Progressive and Pawling shall have in all material
respects performed all obligations and complied with all covenants required by
this Reorganization Agreement, the Plan of Merger and the Bank Merger Agreement,
except where the failure to perform or comply would not have, or would not
reasonably be expected to have, a material adverse effect on Progressive and
Pawling, taken as a whole;
(c) Hudson Chartered shall have received from KPMG Peat
Marwick LLP a letter dated not more than five days prior to (i) the effective
date of the Registration Statement and (ii) the Closing Date, with respect to
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certain financial information regarding Progressive, each in form and substance
which is customary in transactions of the nature contemplated by this Agreement;
(d) Each of Progressive and Pawling shall have delivered to
Hudson Chartered a certificate, dated the Closing Date and signed by its
President and Chief Executive Officer and by its Chief Financial Officer to the
effect that the conditions set forth in paragraphs (a), (b) and (f) of this
section have been satisfied;
(e) Hudson Chartered shall have received an opinion or
opinions of Housley Kantarian & Bronstein, P.C. and/or in-house counsel to
Progressive, dated as of the Closing Date, in the form attached as Annex 5.2(e)
hereto; and
(f) Neither Progressive nor Pawling shall have experienced or
suffered any material adverse change in its business, operations, assets or
condition (financial or other) since the date hereof; provided, however, that a
material adverse change shall not be deemed to include the impact of (i) changes
in banking and similar laws of general applicability to all depository
institutions or interpretations thereof by courts or other governmental
authorities, (ii) changes in generally accepted accounting principles or
regulatory accounting requirements generally applicable to financial
institutions and their holding companies, (iii) actions or omissions of a party
hereto taken with the prior written consent of the other party, and (iv) the
transaction costs associated with the Merger and compliance by either party with
the provisions of this Agreement.
5.3. Conditions Precedent - Progressive and Pawling
The obligations of Progressive to effect the Merger and of
Pawling to effect the Bank Merger shall be subject to satisfaction of the
following additional conditions at or prior to the Closing Date unless waived by
Progressive pursuant to Section 6.4 hereof:
(a) The representations and warranties of Hudson Chartered and
Hudson Valley set forth in Article 3 hereof shall be true and correct in all
material respects as of the date of this Reorganization Agreement and as of the
Closing Date as though made on and as of the Closing Date (or on the date when
made in the case of any representation and warranty which specifically relates
to an earlier date), except as otherwise contemplated by this Reorganization
Agreement or consented to in writing by Progressive or where the failure to be
true and correct would not have, or would not reasonably be expected to have, a
material adverse effect on Hudson Chartered and the Hudson Chartered
Subsidiaries, taken as a whole;
(b) Hudson Chartered and Hudson Valley shall have in all
material respects performed all obligations and complied with all covenants
required by this Reorganization Agreement, the Plan of Merger and the Bank
Merger Agreement, except where the failure to perform or comply would not have,
or would not reasonably be expected to have, a material adverse effect on Hudson
Chartered and the Hudson Chartered Subsidiaries, taken as a whole;
(c) Progressive shall have received from Deloitte & Touche LLP
a letter dated not more than five days prior to (i) the effective date of the
Registration Statement and (ii) the Closing Date, with respect to certain
financial information regarding Hudson Chartered, each in form and substance
which is customary in transactions of the nature contemplated by this Agreement;
(d) Each of Hudson Chartered and Hudson Valley shall have
delivered to Progressive a certificate, dated the Closing Date and signed by its
President and Chief Executive Officer and by its Chief Financial Officer to the
effect that the conditions set forth in paragraphs (a), (b) and (f) of this
section have been satisfied;
(e) Progressive shall have received an opinion or opinions of
Van DeWater & Van DeWater and/or Arnold & Porter, dated as of the Closing Date,
in the form attached as Annex 5.3(e) hereto; and
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(f) Neither Hudson Chartered nor Hudson Valley shall have
experienced or suffered any material adverse change in its business, operations,
assets or condition (financial or other) since the date hereof; provided,
however, that a material adverse change shall not be deemed to include the
impact of (i) changes in banking and similar laws of general applicability to
all depository institutions or interpretations thereof by courts or other
governmental authorities, (ii) changes in generally accepted accounting
principles or regulatory accounting requirements generally applicable to
financial institutions and their holding companies, (iii) actions or omissions
of a party hereto taken with the prior written consent of the other party, and
(iv) the transaction costs associated with the Merger and compliance by either
party with the provisions of this Agreement.
ARTICLE 6
TERMINATION, WAIVER AND AMENDMENT
6.1. Termination
This Reorganization Agreement, the Plan of Merger and the Bank
Merger Agreement may be terminated, either before or after approval by the
shareholders of Hudson Chartered or Progressive:
(a) At any time on or prior to the Effective Date, by the
mutual consent in writing of the parties hereto;
(b) At any time on or prior to the Closing Date, by Hudson
Chartered in writing, if Progressive or Pawling has, or by Progressive in
writing, if Hudson Chartered or Hudson Valley has, in any material respect,
breached (i) any covenant or agreement contained herein, in the Plan of Merger
or in the Bank Merger Agreement or (ii) any representation or warranty contained
herein, and in either case if such breach has not been cured by the earlier of
30 days after the date on which written notice of such breach is given to the
party committing such breach or the Closing Date, and which breach would, in the
reasonable opinion of the non-breaching party, individually or in the aggregate,
have, or reasonably likely to have, a material adverse effect on the breaching
party or upon consummation of the transactions contemplated by this Agreement;
(c) On the Closing Date, by any party hereto in writing, if
any of the conditions precedent set forth in Article 5 hereof with respect to
such party have not been satisfied or fulfilled;
(d) At any time, by any party hereto in writing, if the
governmental applications for prior approval referred to in Section 4.3 hereof
have been denied, and the time period for appeals and requests for
reconsideration has run;
(e) At any time, by any party hereto in writing, if the
shareholders of Progressive or Hudson Chartered do not approve the transactions
contemplated herein at the annual or special meeting duly called for that
purpose; or
(f) By any party hereto in writing if the Closing Date has not
occurred by the close of business on November 15, 1998.
6.2. Effect of Termination
In the event this Reorganization Agreement, the Plan of Merger
or the Bank Merger Agreement are terminated pursuant to Section 6.1 hereof, this
Agreement, the Plan of Merger and the Bank Merger Agreement shall become void
and have no effect, except that (i) the provisions relating to confidentiality
and expenses set forth in Sections 4.5, 4.6, 4.7(b)(14), 4.8(b)(14) and 7.1
hereof, respectively, shall survive any such termination and (ii) a termination
pursuant to Section 6.1(b) shall not relieve the breaching party from liability
for an uncured, intentional and willful breach of such representation, warranty,
covenant or agreement giving rise to such termination.
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6.3. Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Reorganization
Agreement, the Plan of Merger and the Bank Merger Agreement or in any instrument
delivered pursuant hereto or thereto shall expire on, and be terminated and
extinguished at, the Effective Date and from and after the Effective Date, none
of the parties hereto shall have any liability to the other on account of any
breach or failure of any of these representations, warranties or covenants;
provided, however, that the foregoing clause (i) shall not apply to agreements
or covenants of the parties that by their terms are to survive or be performed
after the Effective Date, and (ii) no such representations, warranties or
covenants shall be deemed to be terminated or extinguished so as to deprive
Hudson Chartered, Hudson Valley, Progressive or Pawling (or any director,
officer or controlling person thereof) of any defense in law or equity which
otherwise would be available against the claims of any person, including,
without limitation, any shareholder or former shareholder of either Hudson
Chartered or Progressive, the aforesaid representations, warranties and
covenants being material inducements to the consummation by Hudson Chartered,
Progressive, Hudson Valley and Pawling of the transactions contemplated herein
and in the Bank Merger Agreement.
6.4. Waiver
Except with respect to any required shareholder or regulatory
approval, Hudson Chartered and Progressive respectively, by written instrument
signed by an executive officer of such party, may at any time (whether before or
after approval of this Reorganization Agreement and the Plan of Merger by the
shareholders of Hudson Chartered and Progressive) extend the time for the
performance of any of the obligations or other acts of Hudson Chartered or
Hudson Valley, on the one hand, or Progressive or Pawling, on the other hand,
and may waive (i) any inaccuracies of such parties in the representations or
warranties contained in this Agreement, the Plan of Merger, the Bank Merger
Agreement or any document delivered pursuant hereto or thereto, (ii) compliance
with any of the covenants, undertakings or agreements of such parties, or
satisfaction of any of the conditions precedent to its obligations, contained
herein, in the Plan of Merger or in the Bank Merger Agreement or (iii) the
performance by such parties of any of its obligations set out herein or therein;
provided, however, that no such waiver executed after approval of this
Reorganization Agreement and the Plan of Merger by the shareholders of Hudson
Chartered and/or Progressive shall alter the number of shares of Hudson
Chartered Common Stock into which each share of Progressive Common Stock shall
be converted pursuant to the Merger.
6.5. Amendment or Supplement
This Reorganization Agreement, the Plan of Merger and the Bank
Merger Agreement may be amended or supplemented at any time by mutual agreement
of the parties hereto, in the case of this Reorganization Agreement, or thereto,
in the case of the Plan of Merger and the Bank Merger Agreement, respectively.
Any such amendment or supplement must be in writing and approved by their
respective boards of directors and/or officers authorized thereby and shall be
subject to the proviso in Section 6.4 hereof.
ARTICLE 7
MISCELLANEOUS
7.1. Expenses
Except as provided in Section 7.1(b) below, each party hereto
shall bear and pay all costs and expenses incurred by it in connection with the
transactions contemplated in this Reorganization Agreement, including fees and
expenses of its own financial consultants, accountants and counsel, except that
Hudson Chartered and Progressive each shall bear and pay 50% of all printing
costs relating to the Registration Statement and the Proxy Statement.
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7.2. Entire Agreement
This Reorganization Agreement, the Plan of Merger, the Bank
Merger Agreement, the Hudson Chartered Option Agreement, the Progressive Option
Agreement and the Confidentiality Agreement contain the entire agreement between
the parties with respect to the transactions contemplated hereunder and
thereunder and supersede all prior arrangements or understandings with respect
thereto, written or oral, other than documents referred to herein or therein.
The terms and conditions of this Reorganization Agreement, the Plan of Merger
and the Bank Merger Agreement shall inure to the benefit of and be binding upon
the parties hereto and thereto and their respective successors. Nothing in this
Reorganization Agreement, the Plan of Merger or the Bank Merger Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto and thereto, and their respective successors, any rights,
remedies, obligations or liabilities.
7.3. No Assignment
No party hereto may assign any of its rights or obligations
under this Reorganization Agreement to any other person.
7.4. Notices
All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by facsimile transmission or overnight express or by registered or
certified mail, postage prepaid, addressed as follows:
If to Hudson Chartered or Hudson Valley:
Hudson Chartered Bancorp, Inc.
Route 55
LaGrangeville, New York 12540
Attention: T. Jefferson Cunningham III,
Chairman and Chief Executive Officer
Facsimile No.: (914) 471-1114
With a required copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004
Attention: Steven Kaplan, Esq.
Facsimile No.: (202) 942-5999
If to Progressive or Pawling:
Progressive Bank, Inc.
1301 Route 52
Fishkill, New York 12524
Attention: Peter Van Kleeck,
President and Chief Executive Officer
Facsimile No.: (914) 897-7410
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With a required copy to:
Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Attention: Gary R. Bronstein, Esq.
Facsimile No.: (202) 822-0140
7.5. Captions
The captions contained in this Reorganization Agreement are
for reference purposes only and are not part of this Reorganization Agreement.
7.6. Counterparts
This Reorganization 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.
7.7. Governing Law
THIS REORGANIZATION 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 JURISDICTION, EXCEPT TO
THE EXTENT FEDERAL LAW MAY BE APPLICABLE.
7.8. Construction and Interpretation
Except as the context otherwise requires, all references
herein to any state or federal regulatory agency shall also be deemed to refer
to any predecessor or successor agency, and all references to state and federal
statutes or regulations also shall be deemed to refer to any successor statute
or regulation.
7.9. Severability
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, then such provision will be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or other remaining provisions of the Agreement.
7.10. No Employment Solicitation
If this Agreement is terminated, the parties hereto agree
that, for a period of two years subsequent to such termination (i) none of the
parties shall, without first obtaining the prior written consent of the other,
directly or indirectly, actively solicit the employment of any current director,
officer or employee of the other party and (ii) none of the parties will
actively solicit business relationships with clients of the other party solely
as a result of review of the information contemplated in Section 4.5 herein or
otherwise.
[Remainder of page left intentionally blank; signatures appear on following
page.]
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Reorganization Agreement to be executed in counterparts
by their duly authorized officers and their corporate seal to be hereunto
affixed and attested by their officers thereunto duly authorized, all as of the
day and year first above written.
Attest HUDSON CHARTERED BANCORP, INC.
/s/ Kathy D. Seaboldt By /s/ T. Jefferson Cunningham III
- ----------------------------- -------------------------------------
Kathy D. Seaboldt T. Jefferson Cunningham III
Assistant Secretary Officer Chairman and Chief Executive Officer
(SEAL)
Attest FIRST NATIONAL BANK OF HUDSON VALLEY
/s/ Kathy D. Seaboldt By /s/ John C. VanWormer
- ----------------------------- -------------------------------------
Kathy D. Seaboldt John C. VanWormer
Assistant Secretary Officer President and Chief Executive Officer
(SEAL)
Attest PROGRESSIVE BANK, INC.
/s/ Beatrice D. Parent By /s/ Peter Van Kleeck
- ----------------------------- -------------------------------------
Beatrice D. Parent Peter Van Kleeck
Corporate Secretary Officer President and Chief Executive Officer
(SEAL)
Attest PAWLING SAVINGS BANK
/s/ Beatrice D. Parent By /s/ Peter Van Kleeck
- ----------------------------- -------------------------------------
Beatrice D. Parent Peter Van Kleeck
Corporate Secretary Officer President and Chief Executive Officer
(SEAL)
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PLAN OF MERGER OF PROGRESSIVE BANK, INC.
WITH AND INTO HUDSON CHARTERED BANCORP, INC.
THIS PLAN OF MERGER (this "Plan of Merger"), dated as of December 16,
1997, is by and between PROGRESSIVE BANK, INC. ("Progressive"), a New York
corporation, and HUDSON CHARTERED BANCORP, INC. ("Hudson Chartered"), a New York
corporation.
WITNESSETH
WHEREAS, the respective Boards of Directors of Progressive and Hudson
Chartered deem the merger of Progressive with and into Hudson Chartered, under
and pursuant to the terms and conditions herein set forth or referred to,
desirable and in the best interests of the respective corporations and their
respective shareholders, and the respective Boards of Directors of Progressive
and Hudson Chartered have adopted resolutions approving this Plan of Merger and
an Agreement and Plan of Reorganization dated of even date herewith (the
"Reorganization Agreement");
WHEREAS, the Board of Directors of Progressive has directed that this
Plan of Merger be submitted to the shareholders of Progressive; and
WHEREAS, the Board of Directors of Hudson Chartered has directed that
this Plan of Merger be submitted to the shareholders of Hudson Chartered;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto do hereby agree that the Plan of
Merger shall be as follows:
ARTICLE I.
MERGER
Subject to the terms and conditions of this Plan of Merger and the
Reorganization Agreement, on the Effective Date (as hereinafter defined),
Progressive shall be merged with and into Hudson Chartered, pursuant to the
provisions of, and with the effect provided in Article 9 of the New York
Business Corporation Law (said transaction being hereinafter referred to as the
"Merger"). On the Effective Date, the separate existence of Progressive shall
cease and Hudson Chartered, as the surviving entity, shall continue unaffected
and unimpaired by the Merger and shall operate under the name "Premier National
Bancorp, Inc." (Hudson Chartered as existing on and after the Effective Date
being hereinafter sometimes referred to as the "Surviving Corporation.")
ARTICLE II.
CERTIFICATE OF INCORPORATION AND BY-LAWS
Upon the Effective Date, the Certificate of Incorporation of the
Surviving Corporation shall be restated in the form to be agreed to by the
parties hereto in good faith and attached hereto as Annex A prior to submission
of this Plan of Merger to the respective shareholders of Progressive and Hudson
Chartered (the "Submission"), and the By-Laws of the Surviving Corporation shall
be restated in the form to be agreed to by the parties hereto in good faith and
attached hereto as Annex B prior to the Submission, in each case until amended
in accordance with applicable law.
ARTICLE III.
BOARD OF DIRECTORS AND OFFICERS
1. From and after the Effective Date, the directors of the Surviving
Corporation, who shall hold office until the expiration of their respective
terms or until their successors are duly elected and qualified, shall be the ten
persons designated by Hudson Chartered and the ten persons designated by
Progressive pursuant to the Reorganization
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Agreement, or any persons chosen to replace such designated persons pursuant to
the Reorganization Agreement and the Certificate of Incorporation and By-Laws of
the Surviving Corporation. The directors of the Surviving Corporation shall be
divided into three classes as nearly equal in number as possible, as provided in
the Reorganization Agreement. It is intended by the parties hereto that,
following the Effective Date, T. Jefferson Cunningham III shall serve as
Chairman of the Board and Chairman of the Executive Committee of the Board of
the Surviving Corporation, Peter Van Kleeck shall serve as President and Chief
Executive Officer of the Surviving Corporation, and John C. VanWormer shall
serve as an Executive Vice President of the Surviving Corporation, each to serve
until their successors are duly elected and qualified. All other officers of the
Surviving Corporation shall be appointed by resolution of the directors in
accordance with the By-Laws of the Surviving Corporation.
ARTICLE IV.
CAPITAL
1. The designation and number of outstanding shares of capital stock of
Progressive is as follows: (a) 3,831,809 shares of common stock, par value $1.00
per share ("Progressive Common Stock"), and (b) no shares of preferred stock,
par value $1.00 per share ("Progressive Preferred Stock"). Each share of
Progressive Common Stock is entitled to vote with respect to the Merger. Such
number of outstanding shares of Progressive Common Stock may be changed prior to
the Effective Date as a result of the exercise of stock options or other rights
or upon the repurchase by Progressive of such shares.
2. The designation and number of outstanding shares of capital stock of
Hudson Chartered is as follows: (a) 7,076,263 shares of common stock, par value
$0.80 per share ("Hudson Chartered Common Stock" until the Effective Date and
"Surviving Corporation Common Stock" from and after the Effective Date); and (b)
no shares of preferred stock, par value $0.01 per share ("Hudson Chartered
Preferred Stock"). Each share of Hudson Chartered Common Stock is entitled to
vote with respect to the Merger. Such number of outstanding shares of Hudson
Chartered Common Stock may be changed prior to the Effective Date as a result of
the exercise of stock options or other rights, the sale of such shares by Hudson
Chartered pursuant to its Dividend Reinvestment and Stock Purchase Plan or upon
the repurchase by Hudson Chartered of such shares.
3. The shares of capital stock of Hudson Chartered issued and
outstanding immediately prior to the Effective Date shall, on the Effective
Date, continue to be issued and outstanding capital stock of the Surviving
Corporation.
ARTICLE V.
CONVERSION AND EXCHANGE OF PROGRESSIVE
SHARES; FRACTIONAL SHARE INTERESTS
1. On the Effective Date, each share of Progressive Common Stock
outstanding immediately prior to the Effective Date (except as provided in
Paragraphs 2, 5, 6 and 7 of this Article) shall, by virtue of the Merger, be
converted into 1.82 shares of Surviving Corporation Common Stock (the "Exchange
Ratio") and shall no longer be shares of common stock of Progressive. Each share
of Hudson Chartered Common Stock issued and outstanding immediately before the
Effective Date shall remain an outstanding share of Surviving Corporation Common
Stock after the Effective Date.
2. On the Effective Date, all shares of Progressive Common Stock held
in the treasury of Progressive or owned beneficially by any subsidiary of
Progressive other than in a fiduciary capacity or in connection with a debt
previously contracted and all shares of Progressive Common Stock owned by the
Surviving Corporation or owned beneficially by any subsidiary of the Surviving
Corporation other than in a fiduciary capacity or in connection with a debt
previously contracted shall be canceled and no cash, stock or other property
shall be delivered in exchange therefor.
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3. On and after the Effective Date, each holder of a certificate or
certificates theretofore representing outstanding shares of Progressive Common
Stock (any such certificate being hereinafter referred to as a "Certificate")
may surrender the same to the Surviving Corporation or its agent for
cancellation and each such holder shall be entitled upon such surrender to
receive in exchange therefor certificate(s) representing the number of whole
shares of Surviving Corporation Common Stock to which such holder is entitled as
provided herein and a check in an amount equal to the amount of cash, without
interest, to which such holder is entitled for fractional shares. As soon as
practicable after the Effective Date, the Surviving Corporation or its agent
will send a notice and transmittal form to each Progressive stockholder of
record at the Effective Date whose Progressive Common Stock shall have been
converted into Surviving Corporation Common Stock advising such stockholder of
the effectiveness of the Merger and the procedure for surrendering to the
Surviving Corporation or its agent outstanding certificates formerly
representing Progressive Common Stock in exchange for new certificates for
Surviving Corporation Common Stock. Until so surrendered, each Certificate shall
be deemed for all purposes to evidence ownership of the number of whole shares
of Surviving Corporation Common Stock into which the shares represented by such
Certificates have been changed or converted as aforesaid and the right to
receive cash for fractional shares. Certificates surrendered for exchange by any
person who is an "affiliate" of Progressive for purposes of Rule 145(c) under
the Securities Act of 1933, as amended, shall not be exchanged for certificates
representing shares of Surviving Corporation Common Stock until the Surviving
Corporation has received the written agreement of such person contemplated by
Section 4.10 of the Reorganization Agreement. If any certificate surrendered for
exchange is to be issued in a name other than that in which a certificate
surrendered for exchange is issued, the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and the person
requesting such exchange shall affix any requisite stock transfer tax stamps to
the certificate surrendered or provide funds for their purchase or establish to
the satisfaction of the Surviving Corporation or its agent that such taxes are
not payable.
4. Upon the Effective Date, the stock transfer books of Progressive
shall be closed and no transfer of Progressive Common Stock shall thereafter be
made or recognized. Any other provision of this Plan of Merger notwithstanding,
neither the Surviving Corporation or its agent nor any party to the Merger shall
be liable to a holder of Progressive Common Stock for any amount properly paid
or property delivered in good faith to a public official pursuant to any
applicable abandoned property, escheat or similar law.
5. To the extent dissenters' rights apply under New York law, no
conversion under Paragraph 1 of this Article V shall be made in respect of any
share of Progressive Common Stock as to which a Progressive shareholder has
elected to exercise dissenters' rights pursuant to Section 910 of the New York
Business Corporation Law, as amended, if any, until such time as such
shareholder shall have effectively lost dissenters' rights.
6. In the event that during the period commencing on the date hereof
and ending on the Effective Date, the outstanding shares of Hudson Chartered
Common Stock shall have been increased, decreased or changed into or exchanged
for a different number or kind of shares or securities by reorganization,
recapitalization, reclassification, stock dividend, stock split or other like
changes in Hudson Chartered's capitalization, all without Hudson Chartered's
receiving consideration therefor, then an appropriate and proportionate
adjustment shall be made in the number and kind of shares of Surviving
Corporation Common Stock to be thereafter delivered pursuant to this Plan of
Merger.
7. Notwithstanding any other provision hereof, each holder of shares of
Progressive Common Stock who would otherwise have been entitled to receive a
fraction of a share of Surviving Corporation Common Stock (after taking into
account all Certificates delivered by such holder) shall receive, in lieu
thereof, upon presentation of such Certificates, cash in an amount equal to such
fractional part of a share of Surviving Corporation Common Stock multiplied by
the market value of such Surviving Corporation Common Stock. The market value of
one share of Surviving Corporation Common Stock on the Effective Date shall be
the closing price of Hudson Chartered Common Stock on the American Stock
Exchange (as reported by The Wall Street Journal) on the last business day
preceding such date. No such holder shall be entitled to dividends, voting
rights or any other shareholder right in respect of any fractional share.
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8. On the Effective Date, Progressive's obligations with respect to
stock options granted under the Progressive Stock-Based Compensation Plans (as
that term is defined in the Reorganization Agreement) shall be assumed by the
Surviving Corporation. At the Effective Date, each option to purchase or other
right with respect to shares of Progressive Common Stock pursuant to stock
options, stock appreciation rights or other rights, including stock awards
("Progressive Options") granted by Progressive under the Progressive stock
option plans, which are outstanding at the Effective Date whether or not
exercisable, shall be converted into and become rights with respect to Surviving
Corporation Common Stock, and the Surviving Corporation shall assume each
Progressive Option, in accordance with the terms of the applicable Progressive
stock plan and stock option or other agreement by which it is evidenced, except
that, from and after the Effective Date, (i) the number of shares of Surviving
Corporation Common Stock subject to each Progressive Option shall be equal to
the number of shares of Progressive Common Stock subject to such Progressive
Option immediately prior to the Effective Date multiplied by the Exchange Ratio,
and (ii) the per share exercise price under each such Progressive Option shall
be adjusted by dividing the per share exercise price under each such Progressive
Option by the Exchange Ratio, rounded up to the nearest cent. Notwithstanding
the provisions of clause (i) of the preceding sentence, the Surviving
Corporation shall not be obligated to issue any fraction of a share of Surviving
Corporation Common Stock upon exercise of Progressive Options and any fraction
of a share of Surviving Corporation Common Stock that otherwise would be subject
to a converted Progressive Option shall represent the right to receive a cash
payment upon exercise of such converted Progressive Option equal to the product
of such fraction and the market value of one share of the Surviving Corporation
Common Stock, as determined in the manner set forth in next succeeding sentence,
less the exercise price attributable to such fractional share, rounded down to
the nearest cent. The market value of one share of the Surviving Corporation
Common Stock at the time of exercise of an Option shall be the closing price of
such common stock on the national exchange on which such stock is traded (as
reported by The Wall Street Journal) on the last trading day preceding the
exercise date. In addition, notwithstanding clauses (i) and (ii) of this
paragraph 8, in respect of any stock option which is an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended ("Code"), the conversion hereinabove provided for shall comply with the
requirements of Section 424(a) of the Code, including the requirement that such
converted options shall not give to the holder thereof any benefits additional
to those which such holder had prior to such conversion under the option as
originally granted.
9. As soon as practicable after the Effective Date, the Surviving
Corporation shall deliver to the participants in each Progressive stock plan an
appropriate notice setting forth such participant's rights pursuant thereto and
the grants subject to such Progressive stock plan shall continue in effect on
the same terms and conditions (subject to the adjustments required by Paragraph
8 of this Article V after giving effect to the Merger), and the Surviving
Corporation shall comply with the terms of each Progressive stock plan to
ensure, to the extent required by, and subject to the provisions of, such
Progressive stock plan, that Progressive Options which qualified as incentive
stock options prior to the Effective Date continue to qualify as incentive stock
options after the Effective Date.
10. Hudson Chartered shall reserve for issuance a sufficient number of
shares of Hudson Chartered Common Stock for the purpose of issuing its shares to
Progressive's shareholders in accordance with this Article V. At all times after
the Effective Date, the Surviving Corporation shall reserve for issuance such
number of shares of Surviving Corporation Common Stock as necessary so as to
permit exercise of options granted under the Progressive option plans in the
manner contemplated in Paragraph 8 of this Article V of this Plan of Merger and
the instruments pursuant to which such options are granted.
ARTICLE VI.
EFFECTIVE DATE OF THE MERGER
A certificate of merger evidencing the transactions contemplated herein
shall be delivered to the New York Department of State for filing as provided in
the Reorganization Agreement. The Merger shall be effective at the time and on
the date specified in such certificate of merger (such date and time being
herein referred to as the "Effective Date").
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ARTICLE VII.
FURTHER ASSURANCES
If at any time the Surviving Corporation shall consider or be advised
that any further assignments, conveyances or assurances are necessary or
desirable to vest, perfect or confirm in the Surviving Corporation title to any
property or rights of Progressive, or otherwise carry out the provisions hereof,
the proper officers and directors of Progressive, as of the Effective Date, and
thereafter the officers of the Surviving Corporation acting on behalf of
Progressive, shall execute and deliver any and all proper assignments,
conveyances and assurances, and do all things necessary or desirable to vest,
perfect or confirm title to such property or rights in the Surviving Corporation
and otherwise carry out the provisions hereof.
ARTICLE VIII.
CONDITIONS PRECEDENT
The obligations of Hudson Chartered and Progressive to effect the
Merger as herein provided shall be subject to satisfaction, unless duly waived,
of the conditions set forth in the Reorganization Agreement.
ARTICLE XI.
TERMINATION
Anything contained in this Plan of Merger to the contrary
notwithstanding, and notwithstanding adoption hereof by the shareholders of
Progressive and Hudson Chartered, this Plan of Merger may be terminated and the
Merger abandoned as provided in the Reorganization Agreement. If the
Reorganization Agreement is terminated, then this Plan of Merger shall terminate
automatically, without further action of the parties.
ARTICLE X.
MISCELLANEOUS
1. This Plan of Merger may be amended or supplemented at any time prior
to its Effective Date by mutual agreement of Hudson Chartered and Progressive.
Any such amendment or supplement must be in writing and approved by their
respective Boards of Directors and/or by officers authorized thereby and shall
be subject to the proviso in Section 6.4 of the Reorganization Agreement.
2. Any notice or other communication required or permitted under this
Plan of Merger shall be given, and shall be effective, in accordance with the
provisions of the Reorganization Agreement.
3. The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Plan of Merger.
4. This Plan of Merger 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 in such jurisdiction, except to the extent Federal law
may be applicable.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Plan of Merger to be executed in counterparts by their
duly authorized officers and their corporate seal to be hereunto affixed and
attested by their officers thereunto duly authorized, all as of the day and year
first above written.
Attest HUDSON CHARTERED BANCORP, INC.
/s/ Kathy D. Seaboldt By /s/ T. Jefferson Cunningham III
- ----------------------------- -------------------------------
Kathy D. Seaboldt T. Jefferson Cunningham III
Assistant Secretary Officer Chairman and Chief Executive Officer
(SEAL)
Attest PROGRESSIVE BANK, INC.
/s/ Beatrice D. Parent By /s/ Peter Van Kleeck
- ----------------------------- -------------------------------
Beatrice D. Parent Peter Van Kleeck
Corporate Secretary President and Chief Executive Officer
(SEAL)
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SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PREMIER NATIONAL BANCORP, INC.1
(Under Section 807 of the Business Corporation Law)
1. Name. The name of the Corporation is Premier National Bancorp, Inc.
(hereinafter called the "Corporation").
2. Purposes. Subject to any limitation provided in the Business
Corporation Law of the State of New York (the "Business Corporation Law") or any
other statute of the State of New York, and except as otherwise specifically
provided in this Certificate of Incorporation, the purposes for which the
Corporation is formed are:
2.1 To act as a bank holding company, with all of the rights,
powers and privileges, and subject to all of the limitations, specified
in any applicable state or federal legislation from time to time in
effect; and
2.2 To engage in any other lawful act or activity for which
corporations may be organized under the Business Corporation Law,
provided that the Corporation shall not engage in any act or activity
requiring the consent or approval of any state official, department,
board, agency or other body without such consent or approval first
being obtained.
3. Office. The office of the Corporation is to be located in the County
of Dutchess, State of New York.
4. Capital Stock. The aggregated number of shares of all classes of
capital stock which the Corporation has authority to issue is 55,000,000 shares,
of which 50,000,000 are to be shares of common stock, $.80 par value per share
(the "Common Stock"), and 5,000,000 are to be shares of serial preferred stock,
$.01 par value per share (the "Preferred Stock"). The shares of capital stock
may be issued by the Corporation from time to time as approved by the Board of
Directors of the Corporation without the approval of the shareholders, except as
otherwise provided in this Article 4, the Business Corporation Law or, if
applicable, the rules of a national securities exchange on which the
Corporation's capital stock is listed. The consideration for the issuance of the
shares of capital stock shall be paid to or received by the Corporation in the
form and manner permitted by the Business Corporation Law and shall not be less
than the par value per share of such shares.
Notwithstanding any other provision of this Certificate of
Incorporation, no holder of any shares of the Corporation's capital
stock shall have or be entitled to any preemptive, preferential or
other right, under Section 622 of the Business Corporation Law or
otherwise, to subscribe for, purchase or otherwise acquire any shares
of any class of the Corporation's capital stock or any series thereof,
whether now or hereafter authorized, or other obligations or securities
of the Corporation convertible into or exchangeable for such shares, or
carrying rights or options to purchase shares of any class of the
Corporation's capital stock or any series thereof, including without
limitation warrants, subscription rights or options to subscribe for,
purchase or otherwise acquire such shares or securities, or any other
instruments evidencing such rights or options.
- --------
1 The Second Amended and Restated Certificate of Incorporation of Hudson
Chartered Bancorp, Inc. shall be effective in the form set forth herein
only if the proposed merger between Hudson Chartered Bancorp, Inc.
("Hudson") and Progressive Bank, Inc. ("Progressive") pursuant to the
Plan of Merger by and between Hudson and Progressive, dated December
16, 1997, is approved by the holders of at least eighty percent (80%)
of the outstanding shares of common stock of Hudson. If the proposed
merger is approved by the holders of less than eighty percent (80%) of
the outstanding shares of common stock of Hudson, the Second Amended
and Restated Certificate of Incorporation of Hudson will be revised as
set forth in Attachment A hereto.
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Subject to the provisions of the Business Corporation Law, the
Corporation is authorized to make pro rata distributions of its authorized but
unissued shares of capital stock to holders of shares of the same or any other
class of the Corporation's capital stock or series thereof.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. Common Stock. Subject to all of the powers, rights and
preferences of the holders of Preferred Stock provided by resolution or
resolutions of the Board of Directors pursuant to this Article 4 or by
the Business Corporation Law, holders of shares of Common Stock shall
exclusively possess all voting power and shall be entitled to one vote
for each share held by such holders with respect to all matters voted
on by the shareholders of the Corporation.
Whenever there shall have been paid, or declared and
set aside for payment, to the holders of the outstanding shares of any
class of capital stock having preference over the Common Stock as to
the payment of dividends or other distributions the full amount of
dividends or such other distributions, and sinking fund or retirement
fund or other retirement payments, if any, to which such holders are
respectively entitled in preference to holders of the Common Stock,
then dividends or such other distributions, as the case may be, may be
paid on the Common Stock, and on any class or series of capital stock
entitled to participate therewith as to dividends or such other
dividends, as the case may be, to the holders thereof out of any assets
legally available for the payment of dividends or such other
distributions, but only when and as declared by the Board of Directors
of the Corporation.
In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation (none of
which for purposes of any provision of this Certificate of
Incorporation shall be deemed to include a consolidation or merger of
the Corporation, or the sale of all or substantially all of the
Corporation's assets), after there shall have been paid, or declared
and set aside for payment, to the holders of the outstanding shares of
any class of capital stock having preference over the Common Stock as
to distribution of assets of the Corporation in any such event the full
preferential amounts to which the holders of such shares are
respectively entitled, the holders of the Common Stock and of any class
or series of capital stock entitled to participate therewith, in whole
or in part, as to distribution of the Corporation's assets, shall be
entitled, after payment or provision for payment of all debts and
liabilities of the Corporation, to receive the remaining assets of the
Corporation available for distribution, in cash or in kind, ratably in
proportion to the number of shares of Common Stock held by them.
Each share of Common Stock shall have the same
relative powers, preferences and rights as, and shall be identical in
all respects with, all the other shares of Common Stock.
B. Preferred Stock. Subject to limitations prescribed by the
Business Corporation Law and the provisions of this Certificate of
Incorporation, the Board of Directors of the Corporation is authorized
to provide from time to time by resolution or resolutions for the
issuance of one or more series of Preferred Stock, and, by filing a
certificate pursuant to the Business Corporation Law, to establish from
time to time the number of shares of Preferred Stock to be included in
each such series, and to fix and state the powers, designations,
preferences and relative, participating, optional or other special
rights of the shares of each such series, and the qualifications,
limitations or restrictions thereof, including, but not limited to
determination of any of the following:
(1) the distinctive serial designation and the number
of shares constituting such series, which number the Board
of Directors may thereafter (except where otherwise
provided in a resolution designating a particular series)
increase (but not above the total number of
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authorized shares of the series) or decrease (but not
below the number of shares of such series then
outstanding);
(2) the dividend rates or the amount of dividends to
be paid on the shares of such series, the record and
payment date or dates for dividends, whether dividends
shall be cumulative and, if so, from which date or dates,
and the participating or other special rights, if any,
including any relative rights of priority of payment, with
respect to dividends to be paid on shares of such series;
(3) whether the shares of such series shall have
voting rights in addition to the voting rights provided by
law, and, if so, the terms and conditions of such voting
rights, including, but not limited to, the right of the
holders of such shares to vote as a separate class either
alone or with the holders of shares of one or more other
series of Preferred Stock and the right to have more than
one vote per share;
(4) whether the shares of such series shall be
redeemable and, if so, the times, prices and other terms
and conditions upon which such shares may be redeemed,
including, but not limited to, the amount per share which
shall be payable upon such redemption, which amount may
vary under different conditions and at different
redemption dates;
(5) the amount or amounts payable upon the shares of
such series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation,
and the relative rights of priority, if any, of payment
upon shares of such series;
(6) whether the shares of such series shall be
entitled to the benefits of a sinking or retirement fund
to be applied to the purchase or redemption of such
shares, and, if so entitled, the terms and conditions of
such fund, including, but not limited to, the amount of
such fund and the manner of its application, including the
price or prices at which such shares may be redeemed or
purchased through the application of such funds;
(7) whether the shares of such series shall be
convertible into, or exchangeable for, shares of any other
class or classes of the Corporation's capital stock or any
series thereof and, if so convertible or exchangeable, the
conversion price or prices or the rate or rates of
exchange, and the adjustments thereof, if any, at which
such conversion or exchange may be made, and any other
terms and conditions of such conversion or exchange;
(8) the subscription or purchase price and form of
consideration for which the shares of such series shall be
issued;
(9) whether the shares of such series which are
redeemed, converted or exchanged shall have the status of
authorized but unissued shares of Preferred Stock and
whether such shares may be reissued as shares of the same
or any other series of Preferred Stock; and
(10) any other relative rights, preferences and
limitations of the shares of such series.
Each share of each series of Preferred Stock shall
have the same relative powers, preferences and rights as, and shall
be identical in all respects with, all the other shares of the same
series of Preferred Stock. Except as required by the Business
Corporation Law, the Board of Directors of the Corporation is
authorized to amend this Certificate of Incorporation to provide for
one or more series of Preferred Stock without obtaining the approval
of the holders of any class of capital stock of the Corporation.
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5. Designation of Secretary of State; Mailing Address; Registered
Agent. The Secretary of State of the State of New York is designated as the
agent of the Corporation upon whom process in any action or proceeding against
the Corporation may be served, and the address to which the Secretary of State
shall mail a copy of process in any action or proceeding against the Corporation
which may be served upon him is:
Premier National Bancorp, Inc.
Route 55
LaGrangeville, New York 12540
Attention: Secretary.
In addition, [ ], Secretary of the Corporation, whose business address is
Premier National Bancorp, Inc., Route 55, LaGrangeville, New York 12540, is
designated as the Corporation's registered agent in New York upon whom process
in any action or proceeding against the Corporation may be served at such
address.
6. Duration. The duration of the Corporation is to be perpetual.
7. Cumulative Voting Rights. Cumulative voting rights shall not exist
with respect to the election of directors.
8. Factors to be Considered by the Directors. In connection with taking
any action, including, without limitation, action which may involve or relate to
any business combination or transaction, including, without limitation, any
merger, consolidation or sale of the Corporation's assets, or a proposal by
another Person or Persons to make a business combination or transaction or a
tender or other exchange offer (whether in cash or securities, or both) or any
other proposal relating to a change or potential change in the control of the
Corporation, and the exercise of its or their judgment in determining what is in
the best interest of the Corporation and its shareholders, the Board of
Directors, any Committee of the Board of Directors or any individual director
may, but shall not be required to, in addition to considering the long-term and
short-term interests of the Corporation and its shareholders, consider all of
the following factors and any other factors which it deems relevant: (i) the
social, legal, economic and other effects of the action or matter being or to be
considered on the Corporation and its subsidiaries, its and their employees,
depositors, customers and creditors and the communities in which the Corporation
and its subsidiaries operate or are located; and (ii) when evaluating a business
combination or transaction or a proposal by another Person or Persons to make a
business combination or transaction or a tender or other exchange offer or any
other proposal relating to a change or potential change in control of the
Corporation, (v) the business, reputation and financial condition and earnings
prospects of the acquiring Person or Persons and the possible effects of such
factors on the Corporation and its subsidiaries, its and their employees,
depositors, customers and creditors, the future value of the Corporation's
capital stock, and the communities in which the Corporation and its subsidiaries
operate or are located; (w) the reputation, business practices, competence,
experience and integrity of the acquiring Person or Persons and its or their
management and affiliates; (x) the prospects for successful conclusion of the
business combination, transaction, offer or proposal; (y) whether the price or
value of the securities being offered in the business combination, transaction
or offer is acceptable based on the historical and present operating results and
financial condition of the Corporation and whether a more favorable price could
be obtained for the Corporation's securities or assets, whichever the case may
be, in the future; and (z) any antitrust or other legal or regulatory issues
that are raised by the business combination, transaction, offer or proposal. As
used in this Article 8, the term "Person" means any individual, partnership,
firm, corporation, association, trust, unincorporated organization or other
entity; when two or more Persons act as a partnership, limited partnership,
syndicate, or other group acting in concert for the purpose of acquiring,
holding, voting or disposing of securities of the Corporation, such partnership,
limited partnership, syndicate or group shall also be deemed a "Person" for
purposes of this Article 8.
If the Board of Directors determines that a business combination,
transaction, offer or proposal should not be recommended to the shareholders, it
may take any lawful action to accomplish its purpose of opposing or not
recommending such business combination, transaction, offer or proposal,
including, without limitation, any or all of
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the following: advising shareholders not to accept the business combination,
transaction, offer or proposal; soliciting proxies against the business
combination, transaction, offer or proposal; initiating or filing, in good
faith, litigation or complaints with governmental or regulatory authorities
against the business combination, transaction, offer or proposal; issuing the
authorized but unissued securities or treasury stock of the Corporation or
granting options (either statutory or nonstatutory, or both) with respect
thereto in accordance with applicable law; acquiring another entity or entities
to create an antitrust or other regulatory problem for the business combination,
transaction, offer or proposal; and obtaining a more favorable offer or
proposal.
The provisions of this Article 8 shall be deemed solely to grant
discretionary authority to the directors and shall not be deemed to provide to
any constituency the right to be considered. In addition, the provisions of this
Articles 8 shall be supplemental to and in no way limiting of the powers and
authority granted to the directors by applicable law.
9. Classification of Directors. The Board of Directors of the
Corporation shall be divided into three classes. The respective terms of office
of the members of each such class shall end in successive years. The number of
directors in each class shall be as specified in, or as determined pursuant to,
the Bylaws and shall be nearly as equal as possible. Except as provided in
Article 10 of this Certificate of Incorporation, the directors in each class
shall be elected to hold office until the third successive annual meeting of
shareholders after their election and until their successors shall have been
elected and qualified. At each annual meeting of shareholders the directors of
only one class shall be elected, except directors who may be elected to fill
vacancies. If the number of directors comprising the Board of Directors, is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain or attain the number of directors in each class as nearly equal as
reasonably possible, but in no case shall a decrease in the number of directors
shorten the term of any incumbent director.
10. Filling of Vacancies in the Board of Directors. Any vacancies in
the Board of Directors for any reason, including, but not limited to, any
vacancy resulting by reason of the removal of a director with or, if permitted
by this Certificate of Incorporation, without cause, and any newly created
directorships resulting by reason of any increase in the number of directors may
be filled only by the Board of Directors, acting by a majority of the remaining
directors then in office, although less than a quorum, or by a sole remaining
director. Any director so elected by the Board of Directors to fill a vacancy
shall hold office only until the next annual meeting of shareholders and until
his or her successor shall have been elected and qualified, notwithstanding that
the term of office of other directors in the class of which he or she is a
member does not expire at the time of such meeting. The successor to any
director elected by the Board to fill a vacancy shall be elected by the
shareholders to a term of office which shall expire at the same time as the term
of office of the other directors in the class to which he or she is elected and
until his or her successor is elected and qualified. Notwithstanding any other
provision of this Certificate of Incorporation, if the holders of any class or
classes of shares of the Corporation's capital stock, other than the Common
Stock, or any series thereof shall be entitled to elect one or more directors
pursuant to this Certificate of Incorporation, any vacancy in the directors
elected by such class or classes or series may be filled by a majority of the
directors elected by such class or classes or series then in office, or, if no
such director is then in office, by the Board of Directors as otherwise provided
in this Article 10.
11. Indemnification.
11.1 Right to Indemnification. Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved
in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason
of the fact:
(a) that he or she is or was a director or officer of
the Corporation, or
(b) that he or she, being at the time a director or
officer of the Corporation, is or was serving at the request
of the Corporation as a director, trustee, officer, employee
or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect
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to an employee benefit plan (collectively, "another
enterprise" or "other enterprise"), whether either in case (a)
or in case (b) the basis of such proceeding is alleged action
or inaction (x) in an official capacity as a director or
officer of the Corporation, or as a director, trustee,
officer, employee or agent of such other enterprise, or (y) in
any other capacity related to the Corporation or such other
enterprise while so serving as a director, trustee, officer,
employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the
Business Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, with
respect to actions taken prior to such amendment, only to the
extent that such amendment does not prohibit the Corporation
from providing broader indemnification rights than permitted
prior thereto), against all expense, liability and loss
(including, without limitation, attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such person in
connection therewith. The persons indemnified by this Article
11 are hereinafter referred to as "indemnitees." Such
indemnification as to such alleged action or inaction shall
continue as to an indemnitee who has after such alleged action
or inaction ceased to be a director or officer of the
Corporation, or director, officer, employee or agent of
another enterprise; and shall inure to the benefit of the
indemnitee's heirs, executors and administrators. The right to
indemnification conferred in this Article 11: (i) shall be a
contract right; (ii) shall not be affected adversely as to any
indemnitee by any amendment of this Certificate of
Incorporation with respect to any action or inaction occurring
prior to such amendment; and (iii) shall, subject to any
requirements imposed by law and the Bylaws, include the right
to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final
disposition.
11.2 Relationship to Other Rights and Provisions Concerning
Indemnification. The rights to indemnification and to the advancement
of expenses conferred in this Article 11 shall not be exclusive of any
other right which any person may have or hereafter acquire under any
statute, this Certificate of Incorporation, Bylaws, agreement
(including any agreement between such person and any of the
Corporation's affiliates, predecessor or subsidiary corporations or any
constituent corporation absorbed by the Corporation in a consolidation
or merger), vote of shareholders or disinterested directors or
otherwise. The Bylaws may contain such other provisions concerning
indemnification, including provisions specifying reasonable procedures
relating to and conditions to the receipt by indemnitees of
indemnification, provided that such provisions are not inconsistent
with the provisions of this Article 11.
11.3 Agents and Employees. The Corporation may, to the extent
authorized from time to time by the Board of Directors and to the
fullest extent authorized by the Business Corporation Law, as the same
exists or may hereafter be amended, grant rights to indemnification,
and to the advancement of expenses, to any employee or agent of the
Corporation (or any person, other than a director or officer of the
Corporation, serving at the Corporation's request as a director,
trustee, officer, employee or agent of another enterprise) or to
persons who are or were a director, officer, employee or agent of any
of the Corporation's affiliates, predecessor or subsidiary corporations
or of a constituent corporation absorbed by the Corporation in a
consolidation or merger or who is or was serving at the request of such
affiliate, predecessor or subsidiary corporation or of such constituent
corporation as a director, officer, employee or agent of another
enterprise, in each case as determined by the Board of Directors to the
fullest extent of the provisions of this Article 11 in cases of the
indemnification and advancement of expenses of directors and officers
of the Corporation, or to any lesser extent (or greater extent, if
permitted by law) determined by the Board of Directors. Nothing in this
Article 11.3 shall limit the indemnification provided in Article 11.1
hereof to any officer or director of the Corporation who was or is made
a party or is threatened to be made a party to or is otherwise involved
in any proceeding by reason of the fact that he or she is or was
serving at the request of the Corporation as a director, officer,
trustee, employee or agent of any subsidiary of the Corporation or any
other enterprise.
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11.4 Limitations on Indemnification. Notwithstanding any other
provision of this Certificate of Incorporation or the Corporation's
Bylaws, (i) indemnification of any indemnitee or any person under any
provision of this Article 11 or any provision of the Corporation's
Bylaws shall be subject to the applicable rules, regulations and
interpretations of the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System, as the same exist or may hereafter be amended
(but, in the case of any such amendment, with respect to actions taken
prior to such amendment, only to the extent that such amendment does
not prohibit the Corporation from providing broader indemnification
rights than permitted prior thereto), and (ii) indemnification of any
director, officer, employee or agent of any national bank subsidiary of
the Corporation under any provision of this Article 11 or any provision
of the Corporation's Bylaws shall be subject to the limitations, if
any, contained in such subsidiary's Articles of Association.
12. Limitation on Liability of Directors. No director of the
Corporation shall be personally liable to the Corporation or its shareholders
for monetary damages for any breach of fiduciary duty by such director as a
director, except to the extent such exculpation is prohibited by the Business
Corporation Law. No amendment to or repeal of this Article 12 shall apply to or
have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
13. Removal of Directors. Any director may be removed from office at
any time for cause by (i) the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the combined voting power of all
of the shares of capital stock of the Corporation then entitled to vote
generally in the election of directors or (ii) the affirmative vote of sixty-six
and two-thirds percent (66 2/3%) of the entire Board of Directors, other than
the director to be removed. Notwithstanding the immediately preceding sentence,
when the holders of any series of Preferred Stock are entitled to elect one or
more directors pursuant to a resolution or resolutions providing for any series
of Preferred Stock under Article 4 hereof, any director so elected by the
holders of such series may be removed only by the applicable vote of the holders
of the shares of such series as set forth in such resolution or resolutions.
Directors shall not be removed without cause. Cause is defined as any one or
more of the following: the commission of any violation of law, rule or
regulation or of a cease and desist order which has become final; engaging or
participating in any unsafe or unsound practice in connection with the
Corporation or any of its subsidiaries regardless of whether actual harm or
damages result to the Corporation; the commission or omission of or engaging in
any act, or practice which constitutes a material breach of a director's
fiduciary duty as director, involves personal dishonesty on the part of the
director or demonstrates a willful or continuing disregard for the best
interests of the Corporation; the adjudication that a director is of an unsound
mind; the adjudication that a director is bankrupt; the intentional destruction
of the Corporation's property; the breach or violation of any agreements with
the Corporation or any of its subsidiaries signed by the director, including,
but not limited to, confidentiality and nondisclosure agreements; or engaging in
dishonorable or disruptive behavior, practices or acts which would be reasonably
expected to harm or bring into disrepute the Corporation, its business or its
employees. The phrase "the entire Board of Directors" or "the entire Board," as
used in this Certificate of Incorporation shall refer to the total number of
directors which the Corporation would have if there were no vacancies.
14. Loans to Directors. The Corporation may lend money to or guarantee
the obligation of any director of the Corporation if the particular loan or
guarantee is approved by the shareholders of the Corporation pursuant to the
provisions of the Business Corporation Law or if the Board of Directors
determines that the particular loan or guarantee benefits the Corporation and
either approves the particular loan or guarantee or a general plan authorizing
such loans and guarantees.
15. Consent of Shareholders. Subject to applicable law and except as
otherwise expressly required by this Certificate of Incorporation, any action
required or permitted to be taken by the shareholders of the Corporation must be
effected or taken at a duly called annual or special meeting of such
shareholders and may not be effected or taken by any consent in writing by any
such shareholders.
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16. Amendment of Certificate of Incorporation. (a) The Corporation
hereby reserves the right to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation, and all rights conferred upon
shareholders are granted subject to this reservation. Except as may be required
by applicable law or any other provision of this Certificate of Incorporation,
any such amendment, alteration, change or repeal of any provision of this
Certificate of Incorporation shall require the affirmative vote of both (a) a
majority of the Board of Directors and (b) a majority of the combined voting
power of all of the shares of capital stock of the Corporation then entitled to
vote generally in the election of directors.
(b) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of a majority of the Board
of Directors and the holders of at least sixty-six and two-thirds percent (66
2/3%) of the combined voting power of all of the shares of capital stock of the
Corporation then entitled to vote generally in the election of directors shall
be required to amend, repeal, alter, change or adopt any provision inconsistent
with Articles 8, 9, 10 and 13 hereof and this Section 16(b).
17. Amendment of Bylaws. In furtherance and not in limitation of the
powers conferred by statute, the Board of Directors is expressly authorized to
adopt, make, amend, change, alter or repeal the Bylaws of the Corporation.
IN WITNESS WHEREOF, each the undersigned subscribes this Certificate
and affirms it as true under the penalties of perjury on this day of
, 1998.
John C. VanWormer, President
[ ], Secretary
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ATTACHMENT A
If the proposed merger between Hudson and Progressive is approved by
the holders of less than eighty percent (80%) of the outstanding shares of
common stock of Hudson, the following Articles of the Second Amended and
Restated Certificate of Incorporation of Hudson will be modified to read as
follows:
8. Special Considerations for Directors; Opposition of Certain
Business Combinations and Tenders (or Other Offers). The Board of
Directors may, if it deems it advisable in the best interest of the
Corporation, oppose: (1) any proposed tender offer or other exchange
offer, (whether in cash or securities, or both), (2) any proposed
merger or consolidation of the Corporation with, or (3) a sale,
exchange or lease of all or substantially all of the assets of the
Corporation to, any person or entity. For purposes of this provision,
substantially all of the assets of the Corporation shall mean assets
having a fair market value or book value, whichever is greater, of
twenty percent (20%) or more of the total assets as reflected on a
balance sheet of the Corporation as of a date no earlier than 45 days
prior to any acquisition of such assets. When considering whether to
oppose any offer, merger, consolidation, or sale, lease or exchange of
assets, the Board of Directors may, but shall not be legally obligated
to, consider any and all pertinent issues. These issues that the
Directors may consider shall include, without limitation, the
following:
8.1 Whether the price being offered in the tender or
other exchange offer is acceptable based on the historical and
present operating results and financial condition of the
Corporation.
8.2 Whether a more favorable price could be obtained
for the Corporation's securities or assets, whichever the case
may be, in the future.
8.3 The impact that the merger or consolidation of
the Corporation with or into any other entity, or the sale,
lease or exchange of all or substantially all of the assets of
the Corporation would have on the employees, depositors, and
customers of the Corporation and its subsidiaries. In
evaluating this impact resulting from a merger, consolidation
or sale, lease or exchange of assets, the Board of Directors
may consider all factors it deems relevant including, but
without limitation, the social, legal and economic effects
that such a proposal would have on the employees, depositors
and customers of the Corporation and its subsidiaries.
8.4 The reputation and business practices of the
offeror or merger partner and its management and affiliates as
they would effect the employees, depositors and customers of
the Corporation and its subsidiaries and the future value of
the Corporation stock.
8.5 The value of the securities, if any, which the
offeror is offering in exchange for the Corporation's
securities, based on an analysis of the worth of the
Corporation as compared to the corporation or other entity
whose securities are being offered.
8.6 Any antitrust or other legal and regulatory
issues that are raised by the offer.
If the Board of Directors determines that a tender or
other offer should be rejected, or that a proposal for merger,
consolidation, or sale, lease or exchange of all or substantially all
of the assets of the Corporation should not be recommended to the
shareholders, it may take any lawful action to accomplish its purpose
of opposing or not recommending such offer or proposal including, but
without limitation to, any or all of the following: advising
shareholders not to accept this offer; soliciting proxies against a
merger, consolidation, or
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sale, lease or exchange proposal; initiating, in good faith, litigation
against the offer or merger or consolidation partner; filing complaints
with all governmental and regulatory authorities; issuing the
authorized but unissued securities or treasury stock of the Corporation
or granting options (either statutory or nonstatutory, or both) with
respect thereto in accordance with applicable law; acquiring a company
to create an antitrust or other regulatory problem for the offeror; and
obtaining a more favorable offer from other entities or individuals, or
obtaining a more favorable entity to merge into or consolidate with the
entity than attempting to merger or consolidate with or into the
Corporation.
The affirmative vote of the holders of not less than
eighty percent (80%) of the outstanding voting stock of the Corporation
shall be required to amend or repeal the provisions of this Article 8.
10. Filling of Vacancies in the Board of Directors.
Any directorship to be filled by the resignation, removal or death of a
director or for any other reason shall be filled by the majority vote
of the then remaining directors, even though less than a quorum. Any
director so elected by the Board of Directors shall hold office only
until the next annual meeting of shareholders and until his or her
successor shall have been elected and qualified, notwithstanding that
the term of office of other directors in the class of which he or she
is a member does not expire at the time of such meeting. The successor
to the director elected by the Board to fill the vacancy shall be
elected by the shareholders to a term of office which shall expire at
the same time as the term of office of the other directors in the class
to which he or she is elected. The provisions of this Article 10 shall
apply to any directorship to be filled by reason of an increase in the
number of directors, if the Bylaws of the Corporation permit the
directors to increase the number of members on the Board of Directors.
The affirmative vote of not less than eighty percent (80%) of the
outstanding Corporation's stock is required to amend or repeal this
Article 10.
15. Removal of Directors for Cause. The affirmative
vote of the holders of at least eighty percent (80%) of the outstanding
voting stock of the Corporation shall be required to remove directors
for cause. Shareholders shall not have the right to remove directors
without cause. Cause is defined as "commission of any violation of law,
rule or regulation or of a cease and desist order which has become
final, or engaging or participating in any unsafe or unsound practice
in connection with the Corporation or any of its subsidiaries, or
commission of or engaging in any act, omission or practice which
constitutes a breach of a director's fiduciary duty as director and it
is determined the Corporation or any of its subsidiaries will probably
suffer or has suffered substantial loss or damage or the interests of
the shareholders of the Corporation or the depositors of any of the
Corporation's subsidiaries could be seriously prejudiced by reason of
such violation or practice or breach of fiduciary duty or the director
has received financial gain by reason of such violations or practice or
breach of fiduciary duty and such violation or practice or breach of
fiduciary duty is one involving personal dishonesty of the director or
demonstrates a willful or continuing disregard for the best interest of
the Corporation." Provided, however, that if a director is convicted of
a felony, is adjudicated to be of unsound mind, is adjudicated a
bankrupt, or fails to accept his or her directorship, then the holders
of at least a majority of the Corporation's outstanding stock or a
majority of the entire Board of Directors shall be entitled to remove
such director. The affirmative vote of the holders of not less than
eighty percent (80%) of the Corporation's outstanding voting stock
shall be required to amend or repeal the provisions of this Article 15.
16. Amendment of Certificate of Incorporation. (a)
The Corporation hereby reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation,
and all rights conferred upon shareholders are granted subject to this
reservation. Except as may be required by applicable law or any other
provision of this Certificate of Incorporation, any such amendment,
alteration, change or repeal of any provision of this Certificate of
Incorporation shall require the affirmative vote of both (a) a majority
of the Board of Directors and (b) a majority of the combined voting
power of all of the shares of capital stock of the Corporation then
entitled to vote generally in the election of directors.
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(b) Notwithstanding anything contained
in this Certificate of Incorporation to the contrary, the affirmative
vote of a majority of the Board of Directors and the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the combined voting
power of all of the shares of capital stock of the Corporation then
entitled to vote generally in the election of directors shall be
required to amend, repeal, alter, change or adopt any provision
inconsistent with Article 9 and this Section 16(b).
In addition, if the proposed merger between Hudson and Progressive is
approved by the holders of less than eighty percent (80%) of the outstanding
shares of common stock of Hudson, the following Articles 13 and 14 will be
retained in the Second Amended and Restated Certificate of Incorporation of
Hudson and the other Articles of the Second Amended and Restated Certificate of
Incorporation will be renumbered accordingly:
13. Shareholder Action. The affirmative vote of the
holders of not less than eighty percent (80%) of the outstanding voting
stock of the Corporation is required in the event that eighty percent
(80%) of the entire Board of Directors of the Corporation does not
recommend to the stockholders of the Corporation a vote in favor of (1)
a merger or consolidation of the Corporation with, or (2) a sale,
exchange or lease of all or substantially all of the assets of the
Corporation to, any person or entity. For the purpose of this
provision, substantially all of the assets shall mean assets having a
fair market value or book value, whichever is greater, of twenty
percent (20%) or more of the total assets as reflected on a balance
sheet of the Corporation as of a date no earlier than forty-five (45)
days prior to any acquisition of such assets.
The affirmative vote of the holders of not less than
eighty percent (80%) of the outstanding stock of the Corporation shall
be required at any meeting to amend or repeal the provisions of this
Article 13.
14. Fair Price Provisions. The affirmative vote of
the holders of not less than eighty percent (80%) of the outstanding
shares of all voting stock of the Corporation and the affirmative vote
of the holders of not less than sixty-seven percent (67%) of the
outstanding shares of voting stock held by stockholders other than a
Controlling Party, as defined below, shall be required for the approval
or authorization of any merger, consolidation, sale, exchange or lease
of all or substantially all of the assets of the Corporation (as
defined in Article 13 of this Certificate of Incorporation) if such
transaction involves any shareholder owning or controlling, either
directly or indirectly, twenty percent (20%) or more of the
Corporation's voting stock at the time of the proposed transaction
("Controlling Party"); provided however, that these voting requirements
shall not be applicable in such transactions in which: (a) the cash or
fair market value of the property, securities or other consideration to
be received (which includes common stock of the Corporation retained by
its existing shareholders in such a transaction in which the
Corporation is the surviving entity) per share by holders of common
stock of the Corporation, in such transaction is not less than the
highest per share price (with appropriate adjustments for
recapitalizations, stock splits, stock dividends and distributions)
paid by the Controlling Party in the acquisition of any of its holdings
of the Corporation's common stock in the three years preceding the
announcement of a proposed transaction or (b) the transaction is
approved by at least sixty percent (60%) of the entire Board of
Directors.
The requirements of this Article 14 are in addition
to and separate from any consent or approval that may be required by
other Articles in this Certificate of Incorporation to authorize any
merger, consolidation or sale, exchange or lease of all or
substantially all of the assets of the Corporation.
The affirmative vote of the holders of not less than
eighty percent (80%) of the outstanding voting stock of the Corporation
shall be required to amend or repeal the provisions of this Article 14.
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<PAGE>
BYLAWS
OF
PREMIER NATIONAL BANCORP, INC.
AS AMENDED AND RESTATED ON , 1998
These Bylaws of Premier National Bancorp, Inc. (the "Corporation") are
supplemental to the New York Business Corporation Law (the "BCL") and other
applicable provisions of law, as the same shall from time to time be in effect.
ARTICLE I. MEETINGS OF SHAREHOLDERS.
------------------------------------
Section 101. Place of Meetings. All meetings of the shareholders shall
be held at such place or places, within or without the State of New York, as
shall be determined by the Board of Directors from time to time.
Section 102. Annual Meetings. The annual meeting of the shareholders
for the election of Directors and the transaction of such other business as may
properly come before the meeting shall be held on such date and at such time as
may be fixed by the Board of Directors. Only such business may be conducted at
the annual meeting as has been brought before the annual meeting by, or at the
direction of, the Board of Directors or by a shareholder who has given timely
written notice to the Secretary of the Corporation of such shareholder's
intention to bring such business before the meeting pursuant to these Bylaws.
Prior to the annual meeting, the Corporation shall furnish or caused to be
furnished to its shareholders an annual report pursuant to applicable law and
the rules of any national securities exchange on which the Corporation's capital
stock is listed.
Section 103. Special Meetings. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by law, may be called
at any time by the Chairman of the Board of Directors, the Chief Executive
Officer, the President or by the majority vote of the entire Board of Directors.
The only business which may be conducted at such a meeting, other than
procedural matters and matters relating to the conduct of the meeting, shall be
the matter or matters described in the notice of the meeting.
Section 104. Notice of Meetings. Notice of meetings of shareholder
shall be given as required by applicable law not less than ten days nor more
than sixty days before such meeting (unless a different time is specified by
law) to every shareholder entitled by law to notice of such meeting. Notice of
any such meeting need not be given to any shareholder who shall, either before
or after the meeting, submit a signed waiver of notice or who shall attend such
meeting, except when he/she shall attend for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
Section 105. List of Stockholders. A complete list of the shareholders
entitled to vote at any meeting of shareholders, certified by the Secretary or
by the transfer agent, showing the address of each shareholder and the number of
shares registered in the name of each shareholder, shall be prepared by the
Secretary and shall be open to the examination of any shareholder upon request,
for any purpose germane to the meeting, at the place of the meeting during the
whole time of the meeting.
Section 106. Quorum. One-third (33 1/3%) of the voting power of the
outstanding shares of the Corporation entitled to vote on the matters at issue,
present in person or represented by proxy, shall constitute a quorum, except as
otherwise required by the BCL. When a quorum is once present to organize a
meeting of shareholders, it is not broken by the subsequent withdrawal of any
shareholder. The holders of a majority of the voting power of the outstanding
shares present in person or represented in proxy and entitled to vote at any
meeting of shareholders may adjourn such meeting from time to time without
notice other than an announcement at the meeting, whether or not a quorum is
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present. At any such adjourned meeting at which there is a quorum, any business
may be transacted that might have been transacted at the meeting originally
called.
Section 107. Conduct of Shareholders' Meetings. The Chairman of the
Board of Directors shall preside at all shareholders' meetings. In the absence
of the Chairman of the Board of Directors, the Deputy Chairman of the Board of
Directors shall preside or, in his/her absence, the Chief Executive Officer
shall preside, or, in his/her absence, any other Officer designated by the Board
of Directors shall preside. The Secretary or, in his/her absence or inability to
act, the person appointed secretary of the meeting by the person presiding over
the meeting, shall act as secretary of the meeting and keep the minutes thereof.
The person presiding over the shareholders' meeting may establish such rules and
regulations for the conduct of the meeting as he/she may deem to be reasonably
necessary or desirable for the orderly and expeditious conduct of the meeting.
Section 108. Shareholder Nominations and Proposals.
(a) No proposal for a shareholder vote shall be submitted by a
shareholder (a "Shareholder Proposal") to the Corporation's shareholders unless
the shareholder submitting such proposal (the "Proponent") shall have filed a
written notice setting forth with particularity (i) the names and business
addresses of the Proponent and all Persons (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of 1934, as amended through the date of
adoption of these Bylaws) acting in concert with the Proponent; (ii) the names
and addresses of the Proponent and the Persons identified in clause (i), as they
appear on the Corporation's books (if they so appear); (iii) the class and
number of shares of the Corporation beneficially owned by the Proponent and the
Persons identified in clause (i); (iv) a description of the Shareholder Proposal
containing all material information relating thereto; and (v) such other
information as the Board of Directors reasonably determines is necessary or
appropriate to enable the Board of Directors and shareholders of the Corporation
to consider the Shareholder Proposal. Upon receipt of the Shareholder Proposal
and prior to the shareholder meeting at which such Shareholder Proposal will be
considered, if the Board of Directors or a designated committee or the Officer
who will preside at the shareholder meeting determines that the information
provided in a Shareholder Proposal does not satisfy the informational
requirements of these Bylaws or is otherwise not in accordance with law, the
Secretary of the Corporation shall promptly notify such Proponent of the
deficiency in the notice. Such Proponent shall have an opportunity to cure the
deficiency by providing additional information to the Secretary within the
period of time, not to exceed five days from the date such deficiency notice is
given to the Proponent, determined by the Board of Directors, such committee or
such Officer. If the deficiency is not cured within such period, or if the Board
of Directors, such committee or such Officer determines that the additional
information provided by the Proponent, together with the information previously
provided, does not satisfy the requirements of this Section 108, then such
proposal shall not be presented for action at the meeting in question.
(b) Only persons who are selected and recommended by the Board
of Directors or the Nominating Committee thereof, or who are nominated by
shareholders in accordance with the procedures set forth in this Section 108,
shall be eligible for election, or qualified to serve, as directors. Nominations
of individuals for election to the Board of Directors of the Corporation at any
annual meeting or any special meeting of shareholders at which directors are to
be elected may be made by any shareholder of the Corporation entitled to vote
for the election of directors at that meeting by compliance with the procedures
set forth in this Section 108. Nominations by shareholder shall be made by
written notice (a "Nomination Notice"), which shall set forth (i) as to each
individual nominated, (A) the name, date of birth, business address and
residence address of such individual; (B) the business experience during the
past five years of such nominee, including his/her principal occupations and
employment during such period, the name and principal business of any
corporation or other organization in which such occupations and employment were
carried on and such other information as to the nature of his/her
responsibilities and level of professional competence as may be sufficient to
permit assessment of his/her prior business experience; (C) whether the nominee
is or has ever been at any time a director, officer or owner of 5% or more of
any class of capital stock, partnership interests or other equity interest of
any corporation, partnership or other entity; (D) any directorships held by such
nominee in any company with a class of securities registered pursuant to Section
12 of the Securities Exchange Act of 1934, as amended, or subject to the
requirements of Section 15(d) of such Act or any company registered as an
investment company under the Investment Company Act of 1940, as amended; and (E)
whether, in the last five years,
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such nominee has been convicted in a criminal proceeding or has been subject to
a judgment, order, finding or decree of any federal, state or other governmental
entity, concerning any violation of federal, state or other law, or any
proceeding in bankruptcy; and (ii) as to the Person submitting the Nomination
Notice and any Person acting in concert with such Person, (x) the name and
business address of such Persons, (y) the name and address of such Persons and
as they appear on the Corporation's books (if they so appear) and (z) the class
and number of shares of the Corporation which are beneficially owned by such
Persons. A written consent to being named in a proxy statement as a nominee, and
to serve as a Director if elected, signed by the nominee, shall be filed with
any Nomination Notice. If the presiding Officer at any shareholder meeting
determines that a nomination was not made in accordance with the procedures
prescribed by these Bylaws, he/she shall so declare to the meeting and the
defective nomination shall be disregarded.
(c) Nomination Notices and Shareholder Proposals shall be
delivered to the Secretary at the principal executive office of the Corporation
during the time periods prior to the date of the meeting of shareholders if such
Nomination Notice or Shareholder Proposal is to be submitted at an annual
shareholder meeting as required and specified in or pursuant to Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as amended. Nomination
Notices and Shareholder Proposals shall be delivered to the Secretary at the
principal executive office of the Corporation no later than the close of
business on the tenth day following the day on which notice of the date of a
special meeting of shareholders was given if the Nomination Notice or
Shareholder Proposal is to be submitted at a special shareholder meeting.
Section 109. Voting. Unless otherwise provided in the Corporation's
Certificate of Incorporation (the "Certificate of Incorporation") or the BCL,
every shareholder shall be entitled to one vote, in person or by written proxy,
for each share of capital stock held of record by such shareholder which is
entitled to vote generally in the election of Directors. If the Certificate of
Incorporation provides for more or less than one vote for any share, on any
matter, every reference in these Bylaws or the BCL to a majority or other
proportion of stock shall refer to such majority or other proportion of the
votes of such stock. The provisions of Sections 609 and 612 of the BCL shall
apply in determining whether any shares of capital stock may be voted and the
persons, if any, entitled to vote such shares, but the Corporation shall be
protected in treating the persons in whose names shares of capital stock stand
on the record of shareholder as owners thereof for all purposes. All elections
for the Board of Directors shall be decided by a plurality of the votes cast by
the holders of shares entitled to vote in the election of Directors and, except
as otherwise required by law, by the Certificate of Incorporation, or by a
provision of these Bylaws adopted by the shareholders, all other questions shall
be decided by a majority of the votes cast by the holders of shares entitled to
vote thereon. Abstentions shall not be considered to be votes cast. In voting on
any question on which a vote by ballot is required by law, by the Certificate of
Incorporation or by the Officer presiding over the meeting, or is demanded by
any shareholder entitled to vote, the voting shall be by written ballot. Each
ballot shall be signed by the shareholder voting or by his/her proxy, and shall
state the number of shares voted. On all other questions, the voting may be viva
voce. Every shareholder entitled to vote at a meeting of shareholders may
authorize another person or persons to act for him by proxy. The validity and
enforceability of any proxy shall be determined in accordance with applicable
law.
Section 110. Inspectors. The Board of Directors, in advance of any
meeting of shareholders, shall appoint one or more inspectors to act at such
meeting or any adjournment thereof and to make a written report thereof. The
Board of Directors may designate one or more alternate inspectors to replace any
inspector who fails to appear or act. If no inspectors or alternate inspectors
shall have been appointed or if the inspectors and alternate inspectors are
unable to act the person presiding over the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his/her duties, shall take and sign an oath faithfully to execute
the duties of inspector at such meeting with strict impartiality and according
to the best of his/her ability. The inspectors shall determine the number of
shares of capital stock of the Corporation outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the results, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding over
the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of
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any fact found by them. No Director or candidate for the office of Director
shall act as an inspector of an election of Directors. Inspectors need not be
shareholders.
ARTICLE II. DIRECTORS AND BOARD MEETINGS.
-----------------------------------------
Section 201. Management by Board of Directors. The business and affairs
of the Corporation shall be managed by, or under the direction of, its Board of
Directors. The Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute,
regulation, the Certificate of Incorporation or these Bylaws directed or
required to be exercised or done by the shareholders.
Section 202. Eligibility and Mandatory Retirement. Each Director shall
be at least eighteen years of age. Each Director must be a shareholder of the
Corporation and shall own in his/her own right the number of shares (if any)
required by law in order to qualify as such Director. Any Director shall
forthwith cease to be a Director when he/she no longer holds such shares, which
fact shall be reported to the Board of Directors by the Secretary, whereupon the
Board of Directors shall declare the seat of such Director vacated. Directors
need not be residents of the State of New York. No person shall be eligible to
be newly elected or appointed as a Director if he/she shall have attained the
age of seventy (70) years on or prior to the date of his/her election. Any
Director of this Corporation who attains the age of seventy (70) years shall
cease to be a Director (without any action on his/her part) at the close of
business on the day prior to the date of the next shareholders' meeting at which
Directors are to be elected regardless of whether or not his/her term as a
Director would otherwise expire at such shareholders' meeting.
Section 203. Number of Directors. The Board of Directors shall consist
of not less than five (5) nor more than twenty-five (25) persons, as fixed by a
majority of the entire Board of Directors; provided, however, that the number of
Directors shall not be increased by fifty percent (50%) or more in any
twelve-month period without the approval by at least sixty-six and two-thirds
percent (66 2/3%) of the entire Board of Directors. No reduction in the number
of Directors shall have the effect of shortening the term of any Director in
office at the time such reduction becomes effective.
Section 204. Classification of Directors. The Directors shall be
divided into three (3) classes, as nearly equal in number as possible, known as
Class 1, Class 2 and Class 3. At each annual meeting of the shareholders the
members of one class of Directors shall be elected to serve until the third
succeeding annual meeting of the shareholders following their election and until
their successors shall be elected and shall qualify or until their earlier
death, removal or resignation in the manner provided in the Certificate of
Incorporation or herein.
Section 205. Compensation of Directors. Directors, and members of any
committee of the Board of Directors, shall be entitled to receive such
reasonable compensation, including fees and reimbursement of expenses, for their
services as the Board of Directors may determine. Any Director may serve the
Corporation in any other capacity and receive compensation therefor.
Section 206. Place of Meetings. Meetings of the Board of Directors
shall be held at such place or places, within or without the State of New York,
as the Board of Directors may from time to time determine or as shall be
specified in the notice of any such meeting.
Section 207. Regular Meetings. Regular meetings of the Board of
Directors shall be held on such day, at such hour, and at such place, consistent
with applicable law, as the Board shall from time to time designate or as may be
designated in any notice from the Secretary calling the meeting. Notice need not
be given of regular meetings of the Board of Directors except as otherwise
required by applicable law or these Bylaws. If a regular meeting is not to be
held at the time and place designated by the Board of Directors, notice of such
meeting, which need not specify the business to be transacted thereat, shall be
given pursuant to Section 209 of these Bylaws.
Section 208. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of shareholders, on
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the same day and at the same place where such annual meeting of shareholders
shall be held. Notice of such Board meeting need not be given. In the event such
annual meeting of shareholders is not so held, the annual meeting of the Board
of Directors may be held at such other time or place (within or without the
State of New York) as shall be specified in a notice thereof given as
hereinafter provided in Section 209 hereof.
Section 209. Notice of Meetings. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 209, in which notice shall be stated the time and place of the meeting.
Notice of a special meeting shall state the general purpose of the meeting, but
other routine business may be conducted at a special meeting without such matter
being stated in the notice. Notice of each such meeting shall be (i) mailed,
postage prepaid, to each Director at his/her designated address at least seven
days before the day on which such meeting is to be held, (ii) sent by overnight
courier to each Director at his/her designated address at least two days before
the day on which such meeting is to be held (with delivery scheduled to occur no
later than the day before the meeting), or (iii) given orally by telephone or
other means, or by facsimile, telegraph, cable, telex, telecopier or other
similar means, to each Director at his/her designated address at least
twenty-four hours before the time at which such meeting is to be held. Notice of
any such meeting need not be given to any Director who shall, either before or
after the meeting, submit a signed waiver of notice or who shall attend such
meeting, except when he/she shall attend for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
Section 210. Organization. The Board of Directors, at the annual
meeting (or at a special meeting called for that purpose), shall elect, by the
affirmative vote of a majority of the Directors present, one Director as
Chairman of the Board of Directors and, may elect, by the same percentage vote,
one Director as Deputy Chairman of the Board of Directors, each to serve at the
pleasure of the Board of Directors. The Chairman of the Board of Directors shall
preside at all meetings of the Board of Directors at which he/she is present,
shall be an ex-officio member of all Committees of the Board of Directors (other
than the Audit Committee) and shall perform such other duties and possess such
powers as are usually vested in the office of the Chairman of the Board and as
may be determined and required of him/her by the Board of Directors or these
Bylaws. The Chairman of the Board of Directors is authorized to execute on
behalf of the Corporation all documents and instruments requiring such execution
and to affix or cause to be affixed a seal to such documents and instruments,
except to the extent that execution thereof shall have been delegated to some
other Officer or agent of the Corporation by the Board of Directors. In the
absence of the Chairman of the Board of Directors, the Deputy Chairman of the
Board of Directors, and in his/her absence the Chief Executive Officer, shall
preside at meetings of the Board of Directors, and in his/her absence, such
other Director as selected by the Directors present at such meeting shall
preside at the meeting. The Deputy Chairman of the Board of Directors, and in
his/her absence the Chief Executive Officer, shall, in the absence or disability
of the Chairman of the Board of Directors, perform the duties and exercise the
powers of the Chairman of the Board of Directors and shall perform such other
duties as may be determined and required of him/her by the Board of Directors.
At each meeting of the Board of Directors, the Secretary, or in his/her absence,
any person appointed by the Director presiding over the meeting, shall act as
secretary of the meeting and keep the minutes thereof.
Section 211. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board of Directors, the Deputy
Chairman of the Board of Directors, the Chief Executive Officer, the President
or at the request of a majority of the Directors. A special meeting of the Board
of Directors shall be deemed to be any meeting other than a regular meeting of
the Board of Directors. Notice of the time and place of every special meeting
shall be given pursuant to Section 209 of these Bylaws.
Section 212. Quorum. A majority of the entire Board of Directors shall
constitute a quorum for the transaction of business. If at any meeting of the
Board of Directors a quorum is not present, a majority of the Directors in
attendance may adjourn the meeting from time to time until a quorum is obtained.
Notice of the time and place of any such adjourned meeting shall be given to all
of the Directors unless such time and place were announced at the meeting at
which the adjournment was taken, in which case such notice shall only be given
to the Directors who were not present thereat. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called.
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Section 213. Voting Requirements. Except as otherwise required by the
BCL, the Certificate of Incorporation or these Bylaws, a majority of those
Directors present at any meeting of the Board of Directors shall decide each
matter considered. A Director cannot vote by proxy, or otherwise act by proxy,
at a meeting of the Board of Directors.
Section 214. Reports and Records. The reports of Officers and
Committees and the records of the proceedings of all Committees shall be filed
with the Secretary of the Corporation and presented to the Board of Directors,
if practicable, at its next regular meeting. The Board of Directors shall keep
complete records of its proceedings in a minute book kept for that purpose. When
a Director shall request it, the vote of each Director upon a particular
question shall be recorded in the minutes.
Section 215. Resignations. Any Director of the Corporation may resign
at any time by giving written notice of his/her resignation to the Chairman of
the Board, the Deputy Chairman of the Board, the Chief Executive Officer or the
Secretary. Any such resignation shall take effect at the time specified therein
or, if the time when it shall become effective shall not be specified therein,
immediately upon its receipt. Unless otherwise specified therein or required by
applicable law, the acceptance of such resignation shall not be necessary to
make it effective.
Section 216. Action by Consent. Unless restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken by
the Board of Directors or any committee thereof may be taken without a meeting
if all members of the Board of Directors or of such committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Directors or such committee, as the
case may be.
Section 217. Telephonic Meeting. Unless restricted by the Certificate
of Incorporation or these Bylaws, any one or more members of the Board of
Directors or any committee thereof may participate in a meeting of the Board of
Directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation by such means shall constitute
presence in person at a meeting.
ARTICLE III. COMMITTEES.
------------------------
Section 301. Committees.
(a) Subject to the provisions of Section 712 of the BCL, the
Board of Directors may, by resolutions passed by a majority of the entire Board
of Directors, designate members of the Board of Directors to constitute
committees of the Board of Directors, which shall in each case consist of such
number of directors and have and may execute such powers and authority as may be
determined and specified by these Bylaws or in the respective resolutions
appointing them. Each such committee shall serve at the pleasure of the Board of
Directors.
(b) The following Committees of the Board of Directors shall
be established by the Board of Directors in addition to any other Committee the
Board of Directors may in its discretion establish: Executive Committee, Audit
Committee, Investment Committee, Personnel and Compensation Committee and
Nominating Committee.
Section 302. Executive Committee. The Executive Committee shall consist
of the Chairman of the Board of Directors, the Deputy Chairman of the Board of
Directors, the Chief Executive Officer and, if he/she is also a Director, the
President, and at least four (4) other Directors who are not also Officers of
the Corporation as may be elected by the Board of Directors to serve on the
Executive Committee. The Executive Committee shall be chaired by the Chairman of
the Board of Directors and, in his/her absence, the Deputy Chairman of the Board
of Directors or the Chief Executive Officer. A majority of the members of the
Executive Committee shall constitute a quorum, and actions of a majority of
those members present at a meeting at which a quorum is present shall be actions
of the Executive Committee. Meetings of the Executive Committee may be called at
any time by the Chairman of the Executive Committee, and shall be called
whenever two (2) or more members of the Executive Committee so request in
writing. The Executive
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Committee shall have and exercise the authority of the Board of Directors in the
management of the business of the Corporation between the dates of regular
meetings of the Board.
Section 303. Audit Committee.
(a) There shall be a standing committee of the Corporation
known as the Audit Committee, the members of which shall be appointed annually
by the Board of Directors. Each member of the Audit Committee shall serve until
his/her successor is appointed. The Audit Committee shall consist of not less
than four (4) members of the Board of Directors, none of whom shall be an
Officer or employee of the Corporation or of any subsidiary of the Corporation,
and one of whom shall be appointed chairman of the Audit Committee. The duties
of this Committee shall be (i) to review the systems of internal control and the
internal and external audit functions to ensure the integrity of all financial
statements and other audit-related public disclosures, (ii) to monitor
compliance with legal and regulatory requirements, and (iii) perform such other
duties as shall be delegated to the Audit Committee by the Board of Directors
from time to time.
(b) The Corporation's internal auditor shall serve as the
principal staff for the Audit Committee. The Audit Committee shall review,
evaluate, and discuss the findings and performance of the internal auditor;
approve the scope and reporting mechanisms of the annual internal audit program;
review, adopt, and ensure appropriate follow-up on all audit reports; and
monitor the audit department in complying with its audit program and reporting
schedule.
(c) The Audit Committee, upon its own recommendation and with
the approval of the Board of Directors, shall employ a qualified firm of
Certified Public Accountants to make an examination and audit of the Corporation
at least once a year. The Audit Committee shall annually approve the scope of
the external audit engagement after assuring itself that the engagement
addresses the applicable requirements of 12 CFR Part 363 and other audit-related
regulations; review with the external auditor significant accounting policies
and generally accepted accounting principles and their effect on the
Corporation; review, evaluate, and discuss the findings and performance of the
external auditor; review any reports issued under 12 CFR Part 363 and the basis
for these reports; review with management and the external auditor the
Corporation's compliance with laws and regulations and their assessments of the
adequacy of internal controls; and oversee and evaluate management's
effectiveness at implementing policies with respect to internal controls.
(d) All meetings of the Audit Committee shall be recorded in
writing and reported to the Board of Directors for ratification at the next
meeting of the Board of Directors. At the conclusion of each meeting of the
Audit Committee, management may be excused to provide the opportunity for the
Audit Committee to discuss issues privately with the internal auditor and/or the
external auditors.
Section 304. Investment Committee. There shall be a standing committee
known as the Investment Committee of the Board of Directors, the members of
which shall be appointed annually by the Board of Directors and shall serve
until their successors are appointed. The Investment Committee shall consist of
at least three (3) Directors, a majority of whom are not active officers or
employees of the Corporation or of any subsidiary of the Corporation, and one of
whom shall be appointed Chairman of the Investment Committee. The Investment
Committee shall be empowered to act with regard to asset and liability
management policies of the Corporation, capital structure, planning and
financing for the Corporation and mergers, acquisitions and similar transactions
involving the Corporation. All meetings of the Investment Committee shall be
recorded in writing and reported to the Board of Directors for ratification at
the next meeting of the Board of Directors.
Section 305. Personnel and Compensation Committee. There shall be a
standing committee known as the Personnel and Compensation Committee, the
members of which shall be elected annually by the Board of Directors and shall
serve until their successors are appointed. The Personnel and Compensation
Committee shall consist of at least three (3) members of the Board of Directors,
none of whom shall be an active Officer or employee of the Corporation or of any
subsidiary of the Corporation. The Personnel and Compensation Committee is
empowered to set and maintain
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employment policies and procedures, a performance appraisal system, to fix
compensation levels for all executive or similar senior officers of the
Corporation and to perform such other duties with respect to compensation and
compensation plans as shall be delegated to the Personnel and Compensation
Committee by the Board of Directors from time to time. All meetings of the
Personnel and Compensation Committee shall be recorded in writing and reported
to the Board of Directors for ratification at the next meeting of the Board of
Directors.
Section 306. Nominating Committee. There shall be a standing committee
known as the Nominating Committee, the members of which shall be appointed
annually by the Board of Directors and shall serve until their successors are
appointed. The Nominating Committee shall consist of at least five (5)
Directors. The Nominating Committee shall select nominees for election as
Directors and perform such other duties in connection with the nomination of
persons for election as Directors and the election of Directors as shall be
delegated to the Nominating Committee by the Board of Directors from time to
time.
Section 307. Appointment of Committee Members. The Board of Directors
shall elect the members of the Committees and, except as otherwise provided
herein, the chairman and vice chairman of each such Committee, if any, to serve
at the pleasure of the Board until the next annual meeting of shareholders. The
Board of Directors shall have the power to change the membership of any
Committee, fill vacancies in any Committee or remove any members of any
Committee, either with or without cause, at any time.
Section 308. Organization and Proceedings. Each Committee of the Board
of Directors shall effect its own organization by the appointment of a secretary
and such other officers, except the chairman and vice chairman of such Committee
if appointed by the Board, as it may deem necessary. A record of proceedings of
all Committees shall be kept by the secretary of such Committee and filed and
presented as provided in Section 214 of these Bylaws. Except as otherwise set
forth in this Section 308 and unless the Board of Directors shall otherwise by
resolution provide, each Committee may fix its rules of procedure, determine its
manner of acting and fix the time and place, whether within or without the State
of New York, of its meetings and specify what notice thereof, if any, shall be
given. Unless otherwise provided by the Board of Directors or a Committee,
quorum, voting and other procedures shall be the same as those applicable to
actions taken by the Board of Directors.
ARTICLE IV. OFFICERS.
---------------------
Section 401. Officers. The Officers of the Corporation shall be elected
by the Board of Directors and shall include the Chairman of the Board, whose
duties and powers are as set forth in Section 210 of these Bylaws, Chief
Executive Officer, President, one (1) or more Vice Presidents, Secretary,
Treasurer, and such other Officers and Assistant Officers as the Board of
Directors may from time to time deem advisable. The same individual may hold any
two (2) or more offices. Officers and Assistant Officers of the Corporation may,
but need not, also be members of the Board. At its first meeting after each
annual meeting of the shareholders, the Board of Directors shall elect the
Officers. The election or appointment of an Officer shall not of itself create
contract rights. Any Officer may be removed at any time, with or without cause,
and regardless of the term for which such Officer was elected, but without
prejudice to any contract right of such Officer. Each Officer shall hold his/her
office for the period for which he/she was elected or appointed by the Board and
until his/her successor has been elected or appointed and qualified, unless
he/she shall resign, become disqualified, die, or be removed at the pleasure of
the Board of Directors. Any Officer of the Corporation may resign at any time by
giving written notice of his/her resignation to the Chairman of the Board, the
Chief Executive Officer, or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. Should any vacancy occur among the Officers, the
position shall be filled for the unexpired portion of the term by appointment
made by the Board. The duties of the Officers of the Corporation shall be such
as are set forth in these Bylaws and, from time to time, prescribed by the Board
of Directors.
Section 402. Chief Executive Officer. The Chief Executive Officer shall
be the chief executive officer of the Corporation and, subject to the control of
the Board of Directors, shall have and exercise general supervision and control
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of the business of the Corporation and shall be responsible for carrying out the
policies adopted by the Board of Directors and having all orders and resolutions
of the Board of Directors carried into effect, and shall report directly to the
Chairman of the Board of Directors or, if the Chief Executive Officer is the
Chairman of the Board, to the Board of Directors. The Chief Executive Officer
shall be an ex-officio member of all Committees of the Board of Directors except
for the Audit Committee. All Officers and Assistant Officers of the Corporation,
other than those directed by these Bylaws or the Board of Directors to report to
the Chairman of the Board, shall report directly or indirectly to the Chief
Executive Officer. The Chief Executive Officer shall execute on behalf of the
Corporation and may affix or cause to be affixed a seal to all authorized
documents and instruments requiring such execution, except to the extent that
signing and execution thereof shall have been delegated to some other Officer or
agent of the Corporation by the Board of Directors or by the Chairman of the
Board of Directors, the Chief Executive Officer or the President. In the event
of the death, incapacity, resignation or extended absence of the Chief Executive
Officer, the Chairman of the Board of Directors shall perform the duties of the
Chief Executive Officer.
Section 403. President. The President shall have such powers and
perform such duties as may be provided for herein and as may be assigned from
time to time by the Board of Directors, the Chairman of the Board of Directors,
or the Chief Executive Officer. The President shall execute on behalf of the
Corporation and may affix or cause to be affixed a seal to all authorized
documents and instruments requiring such execution, except to the extent that
signing and execution thereof shall have been delegated to some other Officer or
agent of the Corporation by the Board of Directors, the Chairman of the Board of
Directors or the Chief Executive Officer.
Section 404. Executive and Other Vice Presidents. The Vice Presidents,
if any, in such gradations as the Board of Directors may determine, shall
perform such duties, do such acts and be subject to such supervision as may be
prescribed by the Board of Directors, the Chairman of the Board of Directors,
the Chief Executive Officer or the President. In the event of the absence or
disability of the President or his/her refusal to act, the Vice Presidents, in
the order of their rank, and within the same rank in the order of their
authority, shall perform the duties and have the powers and authorities of the
President, except to the extent inconsistent with applicable law.
Section 405. Secretary. The Secretary shall act under the supervision
of the Chairman of the Board of Directors or such other Officers as the Board of
Directors may designate. Unless a designation to the contrary is made at a
meeting, the Secretary shall attend all meetings of the Board of Directors and
all meetings of the shareholders, and record all of the proceedings of such
meetings in a book to be kept for that purpose, and shall perform like duties
for the Committees when required by these Bylaws or otherwise. The Secretary
shall give, or cause to be given, notice of all meetings of the shareholders and
of the Board of Directors. The Secretary shall keep a seal of the Corporation,
and, when authorized by the Board of Directors, the Chairman of the Board of
Directors, or the Chief Executive Officer, cause it to be affixed to any
documents and instruments requiring it. The Secretary shall perform such other
duties as may be prescribed by the Board of Directors, the Chairman of the Board
of Directors, or such other Officer as the Chairman of the Board of Directors
may designate.
Section 406. Treasurer. The Treasurer shall act under the supervision
of the Chairman of the Board of Directors or such other Officer as the Board of
Directors may designate. The Treasurer shall have custody of the Corporation's
funds, keep the fiscal accounts of the Corporation, deposit all moneys and other
valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board or any Officer authorized to so
designate, disburse the funds of the Corporation as may be ordered by the Board
or any Officer authorized to so order, render, when so requested, accounts of
the financial transactions and condition of the Corporation to the Chairman of
the Board, the Chief Executive Officer and the Board of Directors, and perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board of Directors or such other Officer as the Chairman of the Board of
Directors may designate.
Section 407. Assistant Officers. Unless otherwise provided by the Board
of Directors, each Assistant Officer shall perform such duties as shall be
prescribed by the Board of Directors, the Chairman, the Chief Executive Officer,
the President or the Officer to whom he/she is an Assistant. In the event of the
absence or disability of an Officer or
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his/her refusal to act, his/her Assistant Officers shall, in the order of their
rank, and within the same rank in the order of their seniority, have the powers
and authorities of such Officer.
Section 408. Compensation. The salaries and compensation of all
Officers appointed or elected by the Board of Directors shall be fixed by or in
the manner designated by the Board of Directors.
Section 409. Execution of Instruments; Mechanical Endorsements. Checks,
notes, drafts, other commercial instruments, assignments, guarantees of
signatures and contracts (except as otherwise provided herein or by law) shall
be executed by the Chairman, the Chief Executive Officer, the President, any
Vice President or such Officers or employees or agents of the Corporation as the
Board of Directors or any of such designated officers may direct. Such
designated Officers or the Secretary may authorize any endorsement on behalf of
the Corporation to be made by such mechanical means or stamps as any of such
Officers may deem appropriate.
Section 410. General Powers. The Officers are authorized to do and
perform such corporate acts as are necessary in the carrying on of the business
of the Corporation, subject always to the direction of the Board of Directors.
ARTICLE V. INDEMNIFICATION.
---------------------------
Section 501. Indemnification Provisions in Certificate of
Incorporation. The provisions of this Article V are intended to supplement
Article 11 of the Certificate of Incorporation pursuant to Section 11.2 of the
Certificate of Incorporation. To the extent that this Article V contains any
provisions inconsistent with said Article 11, the provisions of the Certificate
of Incorporation shall govern. Terms defined in such Article 11 shall have the
same meaning in this Article V.
Section 502. Undertakings for Advances of Expenses. If and to the
extent the BCL or the Board of Directors requires, an advancement by the
Corporation of expenses incurred by an indemnitee pursuant to clause (iii) of
the last sentence of Section 11.1 of the Certificate of Incorporation
(hereinafter an "advancement of expenses") shall be made only upon delivery to
the Corporation of an undertaking (hereinafter an "undertaking"), by or on
behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under Article 11
of the Certificate of Incorporation or otherwise.
Section 503. Claims for Indemnification. If a claim for indemnification
under this Article V is not paid in full by the Corporation within sixty (60)
days after it has been received in writing by the Corporation, except in the
case of a claim for an advancement of expenses in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In any suit brought by the indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and in any suit by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the Corporation shall be
entitled to recover such expenses only upon a final adjudication that, the
indemnitee has not met the applicable standard of conduct set forth in the BCL.
Neither the failure of the Corporation (including the Board of Directors,
independent legal counsel or its shareholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the BCL, nor an actual determination by the
Corporation (including the Board of Directors, independent legal counsel, or its
shareholder) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be
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indemnified, or to have or retain such advancement of expenses, under Article 11
of the Certificate of Incorporation or this Article V or otherwise, shall be on
the Corporation.
Section 504. Insurance. The Board of Directors in its discretion shall
have the power to purchase and maintain insurance in accordance with, and
subject to, the provisions of Section 726 of the BCL or any successor provision
thereto.
Section 505. Relationship to Other Rights and Provisions Concerning
Indemnification. The provisions of this Article V regarding claims for
indemnification and the advancement of expenses shall govern claims for
indemnification and the advancement of expenses which any person may have a
right to or may hereafter acquire a right to pursuant to (i) the Certificate of
Incorporation or these Bylaws and (ii) any statute, agreement (including any
agreement between such person and any of the Corporation's affiliates,
predecessor or subsidiary corporations or any constituent corporation absorbed
by the Corporation in a consolidation or merger), vote of shareholders or
disinterested directors or otherwise, except with respect to any provisions of
any such statute, agreement or vote of shareholders of disinterested directors
regarding any matter set forth in Sections 502 or 503 of these Bylaws, in which
case the terms of such provisions of any such statute, agreement or vote of
shareholders or disinterested directors shall govern in lieu of Sections 502 or
503 hereof, as the case may be.
Section 506. Severability. In the event that any of the provisions of
this Article V (including any provision within a single section, paragraph or
sentence) is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions are severable and shall remain
enforceable to the full extent permitted by law.
ARTICLE VI. SHARES OF CAPITAL STOCK.
------------------------------------
Section 601. Stock Certificates. Every share certificate of the
Corporation shall be in such form (consistent with applicable law and, if
applicable, the rules of a national securities exchange on which the
Corporation's capital stock is listed) as shall be determined by the Board,
signed by the Chairman of the Board or the President and the Secretary or
Assistant Secretary or the Treasurer or Assistant Treasurer. Certificates may be
signed by a facsimile signature if the certificate is countersigned by a
transfer agent or registered by a registrar other than the Corporation or its
employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled. Notwithstanding any
other provision of these Bylaws and subject to the requirements of the BCL, the
shares of the Corporation's capital stock may be uncertificated shares.
Section 602. Registered Stockholders. A record of the name and address
of the holder of each certificate, the number of shares represented thereby and
the date of issue thereof shall be made on the Corporation's books. The
Corporation shall be entitled to recognize the exclusive right of a person
registered on its records as the owner of shares of stock to receive dividends
and to vote as such owner, shall be entitled to hold liable for calls and
assessments a person registered on its records as the owner of shares of stock,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares of stock on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of the State of New York.
Section 603. Transfers of Stock. Transfer of shares of stock of the
Corporation shall be made in accordance with the BCL. Transfers of stock shall
be made on the books of the Corporation only by direction of the person named in
the stock certificate or such person's attorney, lawfully constituted in
writing, and only upon the surrender of the certificate therefor accompanied by
a written assignment of the shares evidenced thereby, which certificate shall be
canceled before any new certificate is issued.
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Section 604. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any Officer or Officers to appoint, one or more transfer
agents and one or more registrars. In case any Officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such Officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such Officer, transfer agent or registrar at
the date of issue.
Section 605. Regulations. The Board of Directors may make such
additional rules and regulations, not inconsistent with the Certificate of
Incorporation, these Bylaws or the BCL, as it may deem expedient concerning the
issue, transfer and registration of certificates for shares of stock of the
Corporation or pertaining to uncertificated shares of stock of the Corporation.
Section 606. Lost or Destroyed Certificates. Any person claiming a
share certificate to be lost, destroyed or wrongfully taken shall receive a
replacement certificate if such person shall have: (a) requested such
replacement certificate before the Corporation has notice that the shares have
been acquired by a bona fide purchaser; (b) provided the Corporation, the
Chairman of the Board of Directors or the Secretary with an indemnity agreement
satisfactory in form and substance to the Board of Directors; and (c) satisfied
any other reasonable requirements (including providing an affidavit and a surety
bond) fixed by the Board of Directors, the Chairman of the Board of Directors or
the Secretary.
ARTICLE VII. GENERAL.
---------------------
Section 701. Fiscal Year. The fiscal year of the Corporation shall
begin on the first (1st) day of January in each year and end on the thirty-first
(31st) day of December in each year.
Section 702. Record Date. The Board of Directors may fix a record date
for the determination of the shareholders entitled to notice of, or to vote at
any meeting of shareholders or any adjournment thereof, or to express consent to
or dissent from any proposal without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any dividend,
distribution or the allotment of any rights, or to exercise rights in respect to
any change, conversion or exchange of shares, or for the purpose of any other
action; provided, that such date shall be a permitted record date under the BCL
and the rules of any national securities exchange on which the Corporation's
capital stock is listed.
Section 703. Emergency Bylaws. In the event of any emergency resulting
from a nuclear or other attack or any similar disaster or catastrophe or other
similar emergency condition as a result of which a quorum of the Board of
Directors or a standing Committee thereof cannot readily be convened for action,
and during the continuance of such emergency, the following Emergency Bylaw
provisions shall be in effect, notwithstanding any other provisions of the
Bylaws:
(a) A meeting of the Board of Directors or of any Committee
thereof may be called by any Officer or Director upon one (1) hour's notice to
all persons entitled to notice whom, in the sole judgment of the notifier, it is
feasible to notify;
(b) The Directors in attendance at the meeting of the Board of
Directors or of any Committee thereof shall constitute a quorum, but in no event
shall there be a quorum unless at least two (2) Directors are present; and
(c) These Bylaws may be amended or repealed, in whole or in
part, by a majority vote of the Directors attending any meeting of the Board of
Directors, provided such amendment or repeal shall only be effective for the
duration of such emergency.
Section 704. Severability. If any provision of these Bylaws is illegal
or unenforceable as such, such illegality or unenforceability shall not affect
any other provision of these Bylaws and such other provisions shall continue in
full force and effect.
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Section 705. Voting of Stock Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name or
and on behalf of the Corporation by the Chairman of the Board or, in the absence
of the Chairman of the Board, the Chief Executive Officer or such other officers
or employees or agents as the Board of Directors or any of such designated
officers may direct. Any such Officer may, in the name of and on behalf of the
Corporation, take all such action as any such Officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and powers incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may from time to time confer
like powers upon any other person or persons.
Section 706. Seal. The seal of the Corporation shall be in such form as
shall be approved by the Board of Directors.
Section 707. Dividends. Subject to the provisions of the Certificate of
Incorporation and the BCL, dividends may be declared by the Board of Directors
at any regular or special meeting and may be paid in cash, in shares of the
Corporation's capital stock or its bonds or other property. Before payment of
any dividend, there may be set aside out of any funds of the Corporation legally
available for the payment of dividends such sums or sums as the Board of
Directors from time to time, in its absolute discretion, determines are proper
as a reserve fund to meet contingencies, or for equalizing dividends, or for
such other purpose as the Board of Directors shall determine conducive to the
interests of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
Section 708. Loans. No loans and no renewals of loans shall be
contracted on behalf of the Corporation except as authorized by the Board of
Directors. Such authority may be general or confined to specific instances, or
otherwise limited, and if the Board so provides may be delegated by the person
so authorized. When authorized, any Officer or agent of the Corporation may
obtain loans and advances for the Corporation from any firm, corporation or
individual, and for such loans and advances, may make, execute and deliver
promissory notes, bonds or other evidences of indebtedness of the Corporation.
Section 709. Offices and Records. The Corporation may have offices at
such places both within or without the State of New York as the Board of
Directors may from time to time determine or the business of the Corporation may
require. Subject to applicable law, the books and records of the Corporation may
be kept outside the State of New York at such place or places as may be
designated from time to time by the Board of Directors. The Corporation shall
keep correct and complete books and records of account, minutes of the
proceedings of the shareholders, Board of Directors and any committees thereof,
a current list of the Directors and Officers and any other records required
pursuant to applicable law.
ARTICLE VIII. AMENDMENT OR REPEAL.
----------------------------------
Section 801. Amendment or Repeal by the Board of Directors. These
Bylaws may be amended or repealed, in whole or in part, by a majority vote of
the entire Board of Directors, at any regular or special meeting of the Board
duly convened. Notice need not be given of the purpose of the meeting of the
Board of Directors at which the amendment or repeal is to be considered. The
phrase "the entire Board of Directors" or "the entire Board," as used in these
Bylaws shall refer to the total number of Directors which the Corporation would
have if there were no vacancies.
Section 802. Recording Amendments and Repeals. The text of all
amendments and repeals to these Bylaws shall be attached to the Bylaws with a
notation of the date and vote of such amendment or repeal.
Section Involved Date Amended or Repealed Approved By
---------------- ------------------------ -----------
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Exhibit
MERGER OF HUDSON CHARTERED BANCORP, INC.
AND PROGRESSIVE BANK, INC.
SURVIVING CORPORATION EMPLOYMENT AGREEMENTS
T. JEFFERSON CUNNINGHAM III AND PETER VAN KLEECK
SUMMARY OF MATERIAL TERMS
December 16, 1997
Positions in the Mr. Cunningham: Chairman of the Board
Surviving Corporation Mr. Van Kleeck: President and Chief
Executive Officer
Subject to applicable fiduciary duties, the
Executive will be nominated for membership on
the Company's Board and the Board of the
Company's bank subsidiary and shall be
entitled to receive applicable Board retainer
fees for such service.
Initial Term of Employment Three years.
Automatic Term Extensions The term is automatically extended at the end
of each year for an additional year unless the
Company or the Executive gives the other party
a written Non-Renewal Notice at least three
months before the end of the year.
Compensation and Benefits The Executive will receive the base annual
salary specified in the Agreement, which may
be increased (but not decreased) from time to
time.
The Executive also is eligible to receive
discretionary bonuses on the same basis as
other executive employees, is entitled to a
minimum of four weeks of vacation, and may
participate in the Company's pension, profit
sharing, stock option, medical and other
employee benefit plans and programs subject to
the terms of those plans and programs.
The Company shall provide the Executive with
the full-time use of an automobile, which the
Company shall bear the cost of maintaining.
The Company shall pay additional amounts to
Mr. Van Kleeck from time-to-time that are
sufficient, on an after-tax basis to pay the
premiums on a long-term disability policy
previously transferred to him. The Company
will make corresponding payments of equal
amount to Mr. Cunningham.
The Company shall maintain a deferred
compensation plan or arrangement that will
allow the Executive to defer such portion of
his base salary as he shall elect, with
deferred amounts being contributed to a "rabbi
trust." In the event the Executive incurs a
period of long-term disability, the Company
shall continue to contribute to the trust, for
the benefit of the Executive, an amount equal
to the amount deferred by the
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Executive during the one-year period preceding
the period of his long-term disability. Such
contributions shall continue for a period of
two calendar years, except that if the
Executive's period of long-term disability
ends before the start of the second calendar
year following the start of his period of
disability, no additional contributions shall
be required in connection with such
disability.
The Executive shall be entitled to earn and
accrue, for the term of employment, benefits
under a supplemental retirement benefit plan
that provides benefits that are at least equal
to those provided under the plan or
arrangement that covered the Executive prior
to the merger.
The Company shall the pay dues, assessments
and bond obligations for the Executive's and
his wife's membership in one country club.
Termination The Executive's employment by the Company may
be terminated under the Agreement for any of
the following reasons and with the following
consequences:
1. Termination by mutual consent of the
Company and the Executive upon such
terms and conditions that are mutually
acceptable to the parties.
2. Termination by the Executive for any
reason (other than by mutual consent
with the Company or due to the
occurrence of a Triggering Event),
after which the Executive would be
entitled to receive only such pay or
benefits available under the Company's
severance policies or bonus or benefit
plans.
3. Termination by the Company due to the
Executive's physical or mental
disability for six consecutive months.
During any period of disability, the
Executive would be entitled to receive
his normal salary, less any amounts
payable under any Company disability
benefit plan. After termination due to
disability, the Executive would be
entitled to receive only such pay or
benefits available under the Company's
severance policies or bonus or benefit
plans.
4. Termination by the Company for Cause,
after which the Executive would be
entitled to receive only such pay or
benefits available under the Company's
severance policies or bonus or benefit
plans.
Cause includes any of the following:
(a) the Executive's willful and
continued failure to substantially
perform his duties after a demand for
performance; (b) illegal conduct
(excluding traffic violations,
misdemeanors or similar offenses) or
gross misconduct by the Executive that,
in the Board's reasonable opinion,
reflects adversely on the business
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or reputation of the Company; (c)
issuance of a removal or prohibition
order against the Executive under the
Federal Deposit Insurance Act; (d)
issuance of a prohibition order against
the Executive under the Securities
Exchange Act of 1934; and (e) the
Executive's conviction for the
commission of a felony.
5. Termination by the Company or the
Executive upon the occurrence of or
within 90 days after a Triggering Event
during the term of employment, in which
case (a) the Company would pay to the
Executive a lump sum cash payment of
299% of the Executive's base annual
salary in effect on the date of the
Triggering Event plus the amount of any
discretionary bonuses paid within 12
months thereof; (b) the Company would
provide the Executive with three years
of continued health, dental and life
insurance coverage; (c) any restricted
stock and performance shares held by
the Executive would vest immediately;
(d) any stock options and stock
appreciation rights held by the
Executive would vest immediately and
could be exercised until the later of
the expiration of their original term
or one year after the Executive's
termination date, to the extent
permissible under the terms of the
applicable stock option plan and
subject to certain other limitations;
and (e) a gross-up payment to reimburse
the Executive for any golden parachute
excise taxes incurred on payments and
benefits that are treated as "excess
parachute payments."
Triggering Events include: (a) the
Executive's termination by the Company
for reasons other than Cause; (b) the
assignment to the Executive without his
consent of any duties or
responsibilities that are materially
inconsistent with the Executive's
position or any action that results in
a material diminution of the
Executive's authority, position,
responsibilities or duties; (c) the
Company requiring the Executive to be
based more than 50 miles from his
Designated Office in anticipation of or
following a Change in Control; (d) the
Company's failure to continue in effect
any Company bonus plan or benefit plan
(or provide substantially similar
benefits at substantially similar
participation costs), except for
changes implemented for bona fide
business purposes and not in
anticipation of or following a Change
in Control that similarly affect all
executive employees or all employees of
the Company; (e) in the case of Mr.
Cunningham, the Company's issuance of a
Non-Renewal Notice; (f) the Company's
material and uncured breach of the
Agreement; and (g) a reduction in the
Executive's base annual salary.
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Termination Procedures Certain procedures must be followed if the
Executive's employment is terminated by either
the Executive or the Company for any reason
(other than by reason of death or as a result
of a consensual termination). Such procedures
shall include the provision of a written
Termination Notice specifying the date of
termination and the basis for the termination.
No Raid If the Executive ceases to be employed by the
Company and receives payments or benefits
under the Agreement or the Company's severance
policies that equal or exceed 100% of the
Executive's base annual salary at the time of
termination plus the amount of any
discretionary bonuses paid within the 12
months immediately preceding the termination,
the Executive may not for a period of one year
(or such lesser period as may be prescribed by
the Board) solicit any officer of the Company
or actively interfere with the Company's
relationship with any officer of the Company.
Nondisclosure The Executive may not, without the consent of
the Company, disclose or use, while employed
or thereafter, except as required in the
course of such employment, any confidential
business information or trade secret acquired
in the course of such employment, other than
information which is generally known in the
industry or acquired from public sources.
Legal Expenses Following the occurrence of a Triggering
Event, if the Company or the Executive brings
any action, suit or proceeding for the
enforcement, performance or construction of
this Agreement, the Company is required to
reimburse the Executive for all reasonable
costs and expenses incurred by the Executive
in such action, suit or proceeding, including
reasonable attorneys' and accountants' fees
and expenses.
Termination of Employment Mr. Van Kleeck may voluntarily resign as
President and Chief Executive Officer of the
Company only after serving in such capacity
for a period of at least one year. If Mr. Van
Kleeck receives a Non-Renewal Notice, he may
voluntarily resign as President and Chief
Executive Officer and continue to receive his
base annual salary (as in effect as of the
date of his resignation) for the remaining
term of his employment period under the
Agreement. Unless Mr. Van Kleeck's employment
is terminated under circumstances such that he
is entitled to the payment described above in
paragraph 5 under the heading "Termination,"
upon termination of Mr. Van Kleeck's service
as President and Chief Executive Officer
(other than for cause), the Agreement will
provide for Mr. Van Kleeck to serve as a
consultant to the Company for a five-year
period. In consideration for such consulting
services, the Agreement shall provide for Mr.
Van Kleeck to be paid an annual consulting fee
equal to $75,000, reduced by the amount of
Board fees paid to Mr. Van Kleeck for service
on the Company's Board other than fees paid to
all directors. If, after a change in control
of the Company, Mr. Van Kleeck's consulting
services are involuntarily terminated prior to
the expiration of the 5-year term of the
consulting agreement, Mr. Van Kleeck would be
entitled to receive a lump sum payment of
$225,000.
Relationship to the The Agreement will supersede the Executive's
existing employment agreement,
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Executive's Existing and will expressly provide that the Merger
will not constitute a change in control
Employment Agreement for purposes of such existing
agreement and that all change in control
benefits under the agreement that are
associated with the Merger are waived.
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APPENDIX B
OPINION OF SANDLER O'NEILL & PARTNERS, L.P.
<PAGE>
[LETTERHEAD OF SANDLER O'NEILL & PARTNERS, L.P.]
April 10, 1998
Board of Directors
Progressive Bank, Inc.
1301 Route 52
Fishkill, NY 12524
Ladies and Gentlemen:
Progressive Bank, Inc. ("Progressive Bank") and Hudson Chartered
Bancorp, Inc. ("Hudson Chartered") and their respective banking subsidiaries
have entered into an Agreement and Plan of Reorganization and related Plan of
Merger, each dated as of December 16, 1997 (collectively, the "Agreement"),
pursuant to which Progressive Bank and Hudson Chartered will be merged (the
"Merger"). Under the terms of the Agreement, upon consummation of the Merger,
each share of Progressive Bank common stock, par value $1.00 per share, issued
and outstanding immediately prior to the effective time of the Merger (the
"Progressive Bank Shares"), other than certain shares specified in the
Agreement, will be converted into the right to receive 1.82 shares (the
"Exchange Ratio") of Hudson Chartered common stock, par value $.80 per share.
The terms and conditions of the Merger are more fully set forth in the
Agreement. You have requested our opinion as to the fairness, from a financial
point of view, of the Exchange Ratio to the holders of Progressive Bank Shares.
Sandler O'Neill & Partners, L.P., as part of its investment banking
business, is regularly engaged in the valuation of financial institutions and
their securities in connection with mergers and acquisitions and other corporate
transactions. In connection with this opinion, we have reviewed, among other
things: (i) the Agreement and exhibits thereto; (ii) the Director Voting
Agreements; (iii) the Stock Option Agreements, dated as of December 16, 1997, by
and between Progressive Bank and Hudson Chartered; (iv) Progressive Bank's
audited consolidated financial statements and management's discussion and
analysis of financial condition and results of operations as contained in its
annual reports to shareholders for the years ended December 31, 1994, 1995, 1996
and 1997, respectively; (v) Hudson Chartered's audited consolidated financial
statements and management's discussion and analysis of financial condition and
results of operations as contained in its annual reports to shareholders for the
years ended December 31, 1994, 1995, 1996 and 1997, respectively; (vi) certain
financial analyses and forecasts of Progressive Bank prepared by and reviewed
with management of Progressive Bank and the views of senior management of
Progressive Bank regarding
B-1
<PAGE>
Board of Directors
Progressive Bank, Inc.
April 10, 1998
Page 2
Progressive Bank's past and current business operations, results thereof,
financial condition and future prospects; (vii) certain financial analyses and
forecasts of Hudson Chartered prepared by and reviewed with management of Hudson
Chartered and the views of senior management of Hudson Chartered regarding
Hudson Chartered's past and current business operations, results thereof,
financial condition and future prospects; (viii) the pro forma impact of the
Merger; (ix) the publicly reported historical price and trading activity for
Progressive Bank's and Hudson Chartered's common stock, including a comparison
of certain financial and stock market information for Progressive Bank and
Hudson Chartered with similar publicly available information for certain other
companies the securities of which are publicly traded; (x) the financial terms
of recent business combinations in the savings and banking institution
industries, to the extent available; (xi) the current market environment
generally and the banking environment in particular; and (xii) such other
information, financial studies, analyses and investigations and financial,
economic and market criteria as we considered relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information that was publicly available or
otherwise furnished to, reviewed by or discussed with us, and we do not assume
any responsibility or liability therefor. We did not make an independent
evaluation or appraisal of the specific assets, the collateral securing assets
or the liabilities of Progressive Bank or Hudson Chartered or any of their
subsidiaries, or the collectibility of any such assets (relying, where relevant,
on the analyses and estimates of Progressive Bank and Hudson Chartered). With
respect to the financial projections reviewed with management, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of the
respective future financial performances of Progressive Bank and Hudson
Chartered and that such performances will be achieved. We have also assumed that
there has been no material change in Progressive Bank's or Hudson Chartered's
assets, financial condition, results of operations, business or prospects since
December 31, 1997, the date of the last financial statements noted above. We
have assumed that Progressive Bank and Hudson Chartered will remain as going
concerns for all periods relevant to our analyses, that the Merger will be
accounted for as a pooling of interests and that the conditions precedent in the
Agreement are not waived.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof. Events occurring after the date hereof could materially affect this
opinion. We have not undertaken to update, revise or reaffirm this opinion or
otherwise comment upon events occurring after the date hereof. We are expressing
no opinion herein as to what the value of Hudson Chartered common stock will be
when issued to Progressive Bank's shareholders pursuant to the Agreement or the
prices at which Progressive Bank's or Hudson Chartered's common stock will trade
at any time.
B-2
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Board of Directors
Progressive Bank, Inc.
April 10, 1998
Page 3
We have acted as Progressive Bank's financial advisor in connection
with the Merger and will receive a fee for our services, a significant portion
of which is contingent upon consummation of the Merger. In the past, we have
also provided certain investment banking services for Progressive Bank and have
received compensation for such services. We may also provide certain investment
banking services to Progressive Bank and the combined company in the future and
will receive compensation for such services.
In the ordinary course of our business, we may actively trade the
equity securities of Progressive Bank and Hudson Chartered for our own account
and for the accounts of our customers and, accordingly, may at any time hold a
long or short position in such securities.
Our opinion is directed to the Board of Directors of Progressive Bank
in connection with its consideration of the Merger and is directed only to the
fairness, from a financial point of view, of the Exchange Ratio to the holders
of Progressive Bank Shares. We have not been asked to, and do not, express any
opinion as to the fairness of the Exchange Ratio to the shareholders of Hudson
Chartered or any other aspect of the Merger, and this opinion does not
constitute a recommendation to any stockholder of Progressive Bank or Hudson
Chartered as to how such stockholder should vote at any meeting of stockholders
called to consider and vote upon the Merger. Our opinion is not to be quoted or
referred to, in whole or in part, in a registration statement, prospectus, proxy
statement or in any other document, nor shall this opinion be used for any other
purposes, without Sandler O'Neill's prior written consent; provided, however,
that we hereby consent to the inclusion of this opinion as an exhibit to the
Proxy Statement/Prospectus of Progressive Bank and Hudson Chartered and the
Proxy Statement of Hudson Chartered, each dated the date hereof.
Based upon and subject to the foregoing, it is our opinion, as of the
date hereof, that the Exchange Ratio is fair, from a financial point of view, to
the holders of Progressive Bank Shares.
Very truly yours,
/s/ Sandler O'Neill & Partners, L.P.
-------------------------------------
Sandler O'Neill & Partners, L.P.
B-3
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APPENDIX C
OPINION OF KEEFE BRUYETTE & WOODS, INC.
<PAGE>
[LETTERHEAD OF KEEFE, BRUYETTE & WOODS, INC.]
April 10, 1998
The Board of Directors
Hudson Chartered Bancorp, Inc.
Route 55
Lagrangeville, NY 12540
Members of the Board:
You have requested our opinion as investment bankers as to the
fairness, from a financial point of view, to the common stockholders of Hudson
Chartered Bancorp, Inc. ("HCK") of the exchange ratio in the agreement and plan
of reorganization ("the Merger") of Progressive Bank, Inc.("PSBK") with HCK
pursuant to the Agreement and Plan of Reorganization (the "Merger Agreement")
dated December 16, between HCK and PSBK. It is our understanding that the Merger
will be structured as a purchase accounting transaction under generally accepted
accounting principles.
As is more specifically set forth in the Agreement, upon consummation
of the Merger, each outstanding share of the common stock of PSBK, par value
$1.00 per share ("PSBK Common Stock"), except for any dissenting shares and
certain other shares held by PSBK and HCK, will be converted into and exchanged
for 1.82 (the "Exchange Ratio") shares of HCK ("HCK Common Stock"), $.80 par
value per share.
Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette"), as part of its
investment banking business, is continually engaged in the valuation of bank
holding companies and banks, thrift holding companies and thrifts and their
securities in connection with mergers and acquisitions, underwriting, private
placements, competitive bidding processes, market making as a NASD market maker,
and valuations for various other purposes. As specialists in the securities of
banking companies we have experience in, and knowledge of, the valuation of
banking enterprises. In the ordinary course of our business as a broker-dealer,
we may, from time to time, trade the securities of PSBK or HCK, for our own
account, and for the accounts of our customers and, accordingly, may at any time
hold a long or short position in such securities. To the extent we have any such
positions as of the date of this opinion it has been disclosed to HCK. KBW has
served as financial advisor to HCK in the negotiation of the Merger Agreement
and in rendering this fairness opinion and will receive a fee from FES for those
services.
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In arriving at our opinion, we have reviewed, analyzed and relied upon
material bearing upon the financial and operating condition of PSBK and HCK and
the Merger, including among other things, the following:
i. Reviewed the Merger Agreement;
ii. Reviewed certain historical financial and other information concerning
HCK for the four years ending December 31, 1996 and the quarter ending
September 30, 1997, including HCK's Annual Report to Stockholders and
Annual Reports on Forms 10-K, and interim quarterly reports on Form
10-Q;
iii. Reviewed certain historical financial and other information concerning
PSBK for the four years ending December 31, 1996 and the quarter ending
September 30, 1997, including PSBK's Annual Report to Stockholders and
Annual Reports on Forms 10-K, and interim quarterly reports on Form
10-Q;
iv. Reviewed and studied the historical stock prices and trading volumes of
the common stock of both HCK and PSBK;
v. Held discussions with senior management of HCK and PSBK with respect to
their past and current financial performance, financial condition and
future prospects;
vi. Reviewed certain internal financial data, projections and other
information of HCK and PSBK, including financial projections prepared
by management;
vii. Analyzed certain publicly available information of other financial
institutions that we deemed comparable or otherwise relevant to our
inquiry, and compared HCK and PSBK from a financial point of view with
certain of these institutions;
viii. Reviewed the financial terms of certain recent business combinations in
the banking industry that we deemed comparable or otherwise relevant to
our inquiry; and
ix. Conducted such other financial studies, analyses and investigations and
reviewed such other information as we deemed appropriate to enable us
to render our opinion.
In conducting our review and arriving at our opinion, we have relied
upon the accuracy and completeness of all of the financial and other information
provided to us or publicly available and we have not assumed any responsibility
for independently verifying the accuracy or completeness of any such
information. We have relied upon the management of HCK and PSBK as to the
reasonableness and achievability of the financial and operating forecasts and
projections (and the assumptions and bases therefor)
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provided to us, and we have assumed that such forecasts and projections reflect
the best currently available estimates and judgments of such managements and
that such forecasts and projections will be realized in the amounts and in the
time periods currently estimated by such managements. We are not experts in the
independent verification of the adequacy of allowances for loan and lease losses
and we have assumed that the current and projected aggregate reserves for loan
and lease losses for HCK and PSBK are adequate to cover such losses. We did not
make or obtain any independent evaluations or appraisals of any assets or
liabilities of HCK, PSBK, or any of their respective subsidiaries nor did we
verify any of HCK's or PSBK's books or records or review any individual loan or
credit files.
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including, among others, the following: (i)
the historical and financial position and results of operations of HCK and PSBK;
(ii) the assets and liabilities of HCK and PSBK; and (iii) the nature and terms
of certain other merger transactions involving banks and bank holding companies.
We have also taken into account our assessment of general economic, market and
financial conditions and our experience in other transactions, as well as our
experience in securities valuation and knowledge of the banking industry
generally. Our opinion is necessarily based upon conditions as they exist and
can be evaluated on the date hereof and the information made available to us
through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Merger Consideration is fair, from a financial point of
view, to HCK and its stockholders.
Very truly yours,
/s/ Keefe, Bruyette & Woods, Inc.
---------------------------------
Keefe, Bruyette & Woods, Inc.
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APPENDIX D
HUDSON CHARTERED STOCK OPTION AGREEMENT
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Option Agreement"), dated as of
December 16, 1997, is by and between HUDSON CHARTERED BANCORP, INC. ("Hudson
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 Hudson 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 Hudson Chartered; and
WHEREAS, as a condition to and as consideration for Progressive's entry
into the Merger Agreements and to induce such entry, Hudson 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 Hudson Chartered
("Hudson 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, Hudson Chartered
hereby grants to Progressive an option ("Option") to purchase up to 1,415,250
shares of Hudson 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
Hudson Chartered issues or agrees to issue any shares of Hudson 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 Hudson 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 Hudson Chartered of
any Specified Covenant (as defined below) following receipt of a bona fide
proposal by Hudson Chartered or Hudson Valley to acquire Hudson Chartered or
Hudson 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 Hudson Chartered's shareholders to approve the Merger
Agreements by the vote required under applicable law or under Hudson Chartered's
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<PAGE>
Certificate of Incorporation), or (iii) twelve months after termination of the
Merger Agreements due to a willful breach by Hudson Chartered of any Specified
Covenant following receipt of a bona fide proposal by Hudson Chartered or Hudson
Valley to acquire Hudson Chartered or Hudson 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 Hudson
Chartered's shareholders to approve the Merger Agreements by the vote required
under applicable law or under Hudson 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) Hudson Chartered or its wholly owned subsidiary, First
National Bank of the Hudson Valley, a national banking association ("Hudson
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 Hudson Chartered or Hudson Valley, (y) purchase, lease or
otherwise acquire all or substantially all of the assets of Hudson Chartered or
Hudson 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 Hudson Chartered or Hudson
Valley;
(ii) any person (other than Hudson Chartered, Hudson Valley,
Hudson 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 Hudson
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 Hudson Chartered by public announcement or
written communication that is or becomes the subject of public disclosure to
acquire Hudson Chartered or Hudson 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 Hudson Chartered vote not
to adopt the Plan of Merger; or
(iv) Hudson Chartered shall have willfully and intentionally
breached any Specified Covenant following receipt of a bona fide proposal to
Hudson Valley or Hudson Chartered to acquire Hudson Chartered or Hudson 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 Hudson 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
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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 Hudson Chartered the aggregate purchase price for the shares of Hudson
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
Hudson Chartered.
(b) At such closing, simultaneously with the delivery of funds as
provided in subsection (a), Hudson Chartered shall deliver to Progressive a
certificate or certificates representing the number of shares of Hudson
Chartered Common Stock purchased by Progressive, and Progressive shall deliver
to Hudson 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 Hudson 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 Hudson 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 Hudson Chartered
Bancorp, Inc. A copy of such agreement will be provided to the holder
hereof without charge upon receipt by Hudson 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 Hudson Chartered a copy of a letter from the staff of the
Commission, or an opinion of counsel, in form and substance satisfactory to
Hudson Chartered, to the effect that such legend is not required for purposes of
the Securities Act.
5. Representations.
----------------
Hudson Chartered hereby represents, warrants and covenants to
Progressive as follows:
(a) Hudson Chartered shall at all times maintain sufficient authorized
but unissued shares of Hudson Chartered Common Stock so that the Option may be
exercised without authorization of additional shares of Hudson 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 Hudson 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 Hudson 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 Hudson Chartered Common
D-3
<PAGE>
Stock subject to the Option shall be adjusted so that, after such issuance, it
equals 19.99% of the number of shares of Hudson 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 Hudson 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"), Hudson Chartered shall repurchase the Option from Progressive together
with any shares of Hudson 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 Hudson
Chartered Common Stock acquired pursuant to the Option;
(b) The difference between the "market/tender offer" price for shares
of Hudson 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 Hudson Chartered Common Stock to be paid by any third
party pursuant to an agreement with Hudson Chartered, or (iii) the highest
reported sale price for shares of Hudson 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
Hudson 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 Hudson 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, Hudson Chartered shall, within ten business days thereafter, pay
the required amount to Progressive in immediately available funds and
Progressive shall surrender the Option to Hudson Chartered and the certificates
evidencing the shares of Hudson 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, Hudson
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.
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8. Registration Rights.
--------------------
Hudson 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 Hudson 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 Hudson Chartered for inclusion in any registration
statement to be filed hereunder. Hudson 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 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 Hudson Chartered's expense except for underwriting
commissions and the fees and disbursements of Progressive's counsel attributable
to the registration of such Hudson Chartered Common Stock. A second registration
may be requested hereunder at Progressive's expense. In no event shall Hudson
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
Hudson Chartered of Hudson Chartered Common Stock. If requested by Progressive,
in connection with any such registration, Hudson 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, Hudson Chartered agrees to send a copy thereof to
Progressive and to any assignee thereof known to Hudson 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
Hudson Chartered to repurchase pursuant to Section 7 hereof the full number of
shares of Hudson Chartered Common Stock provided in Section 2 hereof (as
adjusted pursuant to Section 6 hereof), it is the express intention of Hudson
Chartered to allow the holder to acquire or to require Hudson 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 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
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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 Hudson 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.
(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.
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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.
HUDSON CHARTERED BANCORP, INC.
By /s/ T. Jefferson Cunningham III
----------------------------------
T. Jefferson Cunningham III
Chairman and Chief Executive Officer
PROGRESSIVE BANK, INC.
By /s/ Peter Van Kleeck
----------------------------------
Peter Van Kleeck
President and Chief Executive Officer
D-7
<PAGE>
APPENDIX E
PROGRESSIVE STOCK OPTION AGREEMENT
<PAGE>
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 HUDSON CHARTERED BANCORP, INC. ("Hudson
Chartered"), a New York corporation, as grantee.
WITNESSETH
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WHEREAS, the respective Boards of Directors of Progressive and Hudson
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 Hudson Chartered; and
WHEREAS, as a condition to and as consideration for Hudson Chartered's
entry into the Merger Agreements and to induce such entry, Progressive has
agreed to grant to Hudson 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 Hudson 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 Hudson 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 Hudson 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, Hudson 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
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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 Hudson Chartered's prior written consent, shall have entered
into an agreement with any person (other than Hudson 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;
(ii) any person (other than Progressive, Pawling, Pawling in a
fiduciary capacity, Hudson Chartered, its wholly owned subsidiary, First
National Bank of the Hudson Valley, a national banking association ("Hudson
Valley") or Hudson 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 Hudson 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 Hudson 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 Hudson 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, Hudson Chartered shall promptly file the required
notice or application for approval and shall expeditiously process the same and
the
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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.
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(a) At the closing referred to in Section 3 hereof, Hudson 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 Hudson Chartered a
certificate or certificates representing the number of shares of Progressive
Common Stock purchased by Hudson Chartered, and Hudson Chartered shall deliver
to Progressive a letter agreeing that Hudson 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 Hudson 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.
----------------
Progressive hereby represents, warrants and covenants to Hudson
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.
(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
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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 Hudson 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 Hudson Chartered together
with any shares of Progressive Common Stock purchased by Hudson Chartered
pursuant thereto, at a price equal to the sum of:
(a) The exercise price paid by Hudson 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 Hudson 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 Hudson Chartered for any
shares of 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) Hudson 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 Hudson Chartered exercises its right to require the
repurchase of the Option, Progressive shall, within ten business days
thereafter, pay the required amount to Hudson Chartered in immediately available
funds and Hudson 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.
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8. Registration Rights.
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Progressive shall, if requested by Hudson 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 Hudson Chartered. Hudson 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 Hudson Chartered's counsel attributable to the
registration of such Progressive Common Stock. A second registration may be
requested hereunder at Hudson 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 Hudson 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 Hudson Chartered or assignee thereof under this
Section 8, Progressive agrees to send a copy thereof to Hudson 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 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, Hudson Chartered may assign, in whole or in part, its rights and
obligations hereunder; provided, however, that to the extent required by
applicable
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regulatory authorities, Hudson 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 dispersed
public distribution on Hudson Chartered'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.
(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.
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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/ Peter Van Kleeck
--------------------------------
Peter Van Kleeck
President and Chief Executive
Officer
HUDSON CHARTERED BANCORP, INC.
By /s/ T. Jefferson Cunningham III
--------------------------------
T. Jefferson Cunningham III
Chairman and Chief Executive
Officer
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