STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement") dated as of
September 5, 2000, is by and between Valley National Bancorp, a New Jersey
corporation and registered bank holding company ("Valley"), and Merchants New
York Bancorp, Inc., a Delaware corporation and registered bank holding company
("Merchants").
BACKGROUND
WHEREAS, Valley and Merchants, as of the date hereof, are
prepared to execute a definitive agreement and plan of merger (the "Merger
Agreement") pursuant to which Merchants will be merged with and into Valley (the
"Merger"); and
WHEREAS, Valley has advised Merchants that it will not execute
the Merger Agreement unless Merchants executes this Agreement; and
WHEREAS, the Board of Directors of Merchants has determined
that the Merger Agreement provides substantial benefits to the shareholders of
Merchants; and
WHEREAS, as an inducement to Valley to enter into the Merger
Agreement and in consideration for such entry, Merchants desires to grant to
Valley an option to purchase authorized but unissued shares of common stock of
Merchants in an amount and on the terms and conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements set forth herein and in the Merger Agreement, Valley and Merchants,
intending to be legally bound hereby, agree:
1. Grant of Option. Merchants hereby grants to Valley an option to purchase
4,663,741 shares of common stock, $0.001 par value per share, of Merchants (the
"Common Stock") at a price of $16.98 per share (as the same may be reduced in
accordance with Section 5b hereof, the "Option Price"), on the terms and
conditions set forth herein (the "Option").
2. Exercise of Option. This Option shall not be exercisable until the occurrence
of a Triggering Event (as such term is hereinafter defined). Upon or after the
occurrence of a Triggering Event (as such term is hereinafter defined), Valley
may exercise the Option, in whole or in part, at any time or from time to time,
subject to the terms and conditions set forth herein and the termination
provisions of Section 19 of this Agreement.
The term "Triggering Event" means the occurrence of any of the
following events:
a. A person or group (as such terms are defined in the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder) other than Valley or an affiliate of Valley (a "third party")
acquires beneficial ownership (as such term is defined in Rule 13d-3 as
promulgated under the Exchange Act) of at least 10% of the then outstanding
shares of Common Stock, provided, however, that the continuing ownership by a
person or group which as of the date hereof owns more than 10% of the
outstanding Common Stock shall not constitute a Triggering Event; or
b. A third party enters into a letter of intent or an agreement, whether oral or
written, with Merchants pursuant to which such third party or any affiliate of
such third party would (i) merge or consolidate, or enter into any similar
transaction, with Merchants, (ii) acquire all or a significant portion of the
assets or liabilities of Merchants, or (iii) acquire beneficial ownership of
securities representing, or the right to acquire beneficial ownership or to vote
securities representing, 10% or more of the then outstanding shares of Common
Stock; or
c. A third party makes a filing with any bank, thrift or financial holding
company regulatory authorities with respect to or publicly announces a bona fide
proposal (a "Proposal") for (i) any merger with, consolidation with or
acquisition of all or a significant portion of all the assets or liabilities of,
Merchants or any other business combination involving Merchants, or (ii) a
transaction involving the transfer of beneficial ownership of securities
representing, or the right to acquire beneficial ownership or to vote securities
representing, 10% or more of the outstanding shares of Common Stock, and in
either case thereafter, if such Proposal has not been Publicly Withdrawn (as
such term is hereinafter defined) at least 15 days prior to the meeting of
stockholders of Merchants called to vote on the Merger and Merchants'
stockholders fail to approve the Merger by the vote required by applicable law
at the meeting of stockholders called for such purpose; or
d. A third party makes a bona fide Proposal and thereafter, but before such
Proposal has been Publicly Withdrawn, Merchants willfully or intentionally takes
any action in any manner which would materially interfere with its ability to
consummate the Merger or materially reduce the value of the transaction to
Valley; or
e. After the execution of this Agreement, Merchants or any of its directors,
senior executive officers, investment bankers or other person with actual or
apparent authority to speak for the Board of Directors, willfully or
intentionally takes any material direct or indirect action inviting, encouraging
or soliciting any proposal (other than from Valley or an affiliate of Valley)
which has as its purpose a tender offer for the shares of Common Stock, a
merger, consolidation, plan of exchange, plan of acquisition or reorganization
of Merchants, or a sale of a significant number of shares of Common Stock or any
significant portion of its assets or liabilities.
The term "significant portion" means 10% of the assets or
liabilities of Merchants. The term "significant number" means 10% of the
outstanding shares of Common Stock.
Solely for purposes of Section 5b hereof, the date of a
"Triggering Event" under clause (a) above is the date the third party first
acquires beneficial ownership of at least 10% of the then outstanding shares of
Common Stock; the date of a "Triggering Event" under clause (b) above is the
date of entry into the letter of intent or agreement; the date of a "Triggering
Event" under clause (c) above is the earlier of the date of the filing (if any)
with a bank, thrift or financial holding company regulatory authority with
respect to the Proposal or the date of public announcement of the Proposal; the
date of a "Triggering Event" under clause (d) above is the date the third party
first makes the Proposal; and the date of a "Triggering Event" under clause (e)
above is the first date on which a material direct or indirect action referred
to therein is taken.
"Publicly Withdrawn", for purposes of clauses (c) and (d)
above, shall mean an unconditional bona fide withdrawal of the Proposal coupled
with a public announcement of no further interest in pursuing such Proposal or
in acquiring any controlling influence over Merchants or in soliciting or
inducing any other person (other than Valley or any affiliate) to do so.
Notwithstanding the foregoing, the Option may not be exercised
at any time (i) in the absence of any required governmental or regulatory
approval or consent (including any filing, approval or consent required under
the rules and regulations of any securities exchange or the National Association
of Securities Dealers, Inc.) necessary for Merchants to issue the shares of
Common Stock covered by the Option (the "Option Shares") or Valley to exercise
the Option or prior to the expiration or termination of any waiting period
required by law, or (ii) so long as any injunction or other order, decree or
ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares.
Merchants shall notify Valley promptly in writing of the
occurrence of any Triggering Event known to it, it being understood that the
giving of such notice by Merchants shall not be a condition to the right of
Valley to exercise the Option. Merchants will not take any action which would
have the effect of preventing or disabling Merchants from delivering the Option
Shares to Valley upon exercise of the Option or otherwise performing its
obligations under this Agreement, except to the extent required by applicable
securities and banking laws and regulations.
In the event Valley wishes to exercise the Option, Valley
shall send a written notice to Merchants (the date of which is hereinafter
referred to as the "Notice Date") specifying the total number of Option Shares
it wishes to purchase and a place and date between two and ten business days
inclusive from the Notice Date for the closing of such a purchase (a "Closing");
provided, however, that a Closing shall not occur prior to two days after the
later of receipt of any necessary regulatory approvals and the expiration of any
legally required notice or waiting period, if any.
3. Payment and Delivery of Certificates. At any Closing hereunder (a) Valley
will make payment to Merchants of the aggregate price for the Option Shares so
purchased by wire transfer of immediately available funds to an account
designated by Merchants; (b) Merchants will deliver to Valley a stock
certificate or certificates representing the number of Option Shares so
purchased, free and clear of all liens, claims, charges and encumbrances of any
kind or nature whatsoever created by or through Merchants, registered in the
name of Valley or its designee, in such denominations as were specified by
Valley in its notice of exercise and, if necessary, bearing a legend as set
forth below; and (c) Valley shall pay any transfer or other taxes required by
reason of the issuance of the Option Shares so purchased.
If required under applicable federal securities laws as
determined by Merchants' counsel, a legend will be placed on each stock
certificate evidencing Option Shares issued pursuant to this Agreement, which
legend will read substantially as follows:
The shares of stock evidenced by this certificate have not been
registered for sale under the Securities Act of 1933 (the "1933 Act").
These shares may not be sold, transferred or otherwise disposed of
unless a registration statement with respect to the sale of such shares
has been filed under the 1933 Act and declared effective or, in the
opinion of counsel reasonably acceptable to Merchants, said transfer
would be exempt from registration under the provisions of the 1933 Act
and the regulations promulgated thereunder.
No such legend shall be required if a registration statement is filed and
declared effective under Section 4 hereof.
4. Registration Rights. Upon or after the occurrence of a Triggering Event and
upon receipt of a written request from Valley, Merchants shall, if necessary for
the resale of the Option or the Option Shares by Valley, prepare and file a
registration statement with the Securities and Exchange Commission and any state
securities bureau covering the Option and such number of Option Shares as Valley
shall specify in its request, and Merchants shall use its best efforts to cause
such registration statement to be declared effective in order to permit the sale
or other disposition of the Option and the Option Shares, provided that Valley
shall in no event have the right to have more than one such registration
statement become effective, and provided further that Merchants shall not be
required to prepare and file any such registration statement in connection with
any proposed sale with respect to which counsel to Merchants delivers to
Merchants and to Valley (which is reasonably acceptable to Valley) its opinion
to the effect that no such filing is required under applicable laws and
regulations with respect to such sale or disposition or any subsequent sale or
disposition; provided further, however, that Merchants may delay any
registration of Option Shares above for a period not exceeding 90 days in the
event that Merchants shall in good faith determine that any such registration
would adversely effect an on-going offering of securities by Merchants for cash.
Valley shall provide all information reasonable requested by Merchants for
inclusion in any registration statement to be filed hereunder.
In connection with such filing, Merchants shall use its best
efforts to cause to be delivered to Valley such certificates, opinions,
accountant's letters and other documents as Valley shall reasonably request and
as are customarily provided in connection with registrations of securities under
the Securities Act of 1933, as amended. All expenses incurred by Merchants in
complying with the provisions of this Section 4, including without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for Merchants and blue sky fees and expenses shall be paid by Merchants.
Underwriting discounts and commissions to brokers and dealers relating to the
Option or Option Shares, fees and disbursements of counsel to Valley and any
other expenses incurred by Valley in connection with such registration shall be
borne by Valley. In connection with such filing, Merchants shall indemnify and
hold harmless Valley against any losses, claims, damages or liabilities, joint
or several, to which Valley may become subject, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any preliminary or final registration statement or any amendment or
supplement thereto, or arise out of a material fact required to be stated
therein or necessary to make the statements therein not misleading; and
Merchants will reimburse Valley for any legal or other expense reasonably
incurred by Valley in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that Merchants will not
be liable in any case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such preliminary or final
registration statement or such amendment or supplement thereto in reliance upon
and in conformity with written information furnished by or on behalf of Valley
specifically for use in the preparation thereof with respect to information
about the selling stockholders or the plan of distribution. Valley will
indemnify and hold harmless Merchants to the same extent as set forth in the
immediately preceding sentence but only with reference to written information
specifically furnished by or on behalf of Valley for use in the preparation of
such preliminary or final registration statement or such amendment or supplement
thereto with respect to information about the selling stockholders or the plan
of distribution; and Valley will reimburse Merchants for any legal or other
expense reasonably incurred by Merchants in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding
anything to the contrary herein, no indemnifying party shall be liable for any
settlement effected without its prior written consent.
5. Adjustments.
a. Adjustments Upon Changes in Capitalization. In the event of
any change in the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
then the number and kind of Option Shares and the Option Price shall be
appropriately adjusted.
In the event any capital reorganization or reclassification of
the Common Stock, or any consolidation, merger or similar transaction of
Merchants with another entity, or any sale of all or substantially all of the
assets of Merchants, shall be effected in such a way that the holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
(in form reasonably satisfactory to the holder hereof) shall be made whereby the
holder hereof shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified herein and in lieu of the
Common Stock immediately theretofore purchasable and receivable upon exercise of
the rights represented by this Option, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore purchasable and receivable
upon exercise of the rights represented by this Option had such reorganization,
reclassification, consolidation, merger or sale not taken place; provided,
however, that if such transaction results in the holders of Common Stock
receiving only cash, the holder hereof shall be paid the difference between the
Option Price and such cash consideration without the need to exercise the
Option.
b. Adjustments Based Upon Changes in Market Price. If, on the
date of the first occurrence of any Triggering Event under Section 2, the
Average Merger Consideration Equivalent is less than the Option Price, then the
Option Price automatically shall be reduced to the amount of the Discounted
Average Merger Consideration Equivalent. As used herein, the "Merger
Consideration Equivalent" on any trading day means the Closing Price of Valley
Common Stock on such day multiplied by the Exchange Ratio (with "Closing Price,"
"Valley Common Stock" and "Exchange Ratio" all having the meanings assigned to
them in the Merger Agreement). The "Average Merger Consideration Equivalent"
means the average of the Merger Consideration Equivalents during the Measurement
Period. The "Discounted Average Merger Consideration Equivalent" means the
Average Merger Consideration Equivalent minus $3.06. The "Measurement Period"
shall be determined as follows: (a) If there is at least one but less than ten
trading days between the date of the Merger Agreement and the date of the
Triggering Event (calculated in this paragraph by excluding both the date of the
Merger Agreement and the date of the Triggering Event), then the "Measurement
Period" is the entire period between the date of the Merger Agreement and the
date of the Triggering Event. (b) If there are at least ten but not more than 60
trading days between the date of the Merger Agreement and the date of the
Triggering Event, then the "Measurement Period" is the ten consecutive trading
day period falling between the date of the Merger Agreement and the date of the
Triggering Event which produces the lowest Average Merger Consideration
Equivalent. (c) If there are more than 60 trading days between the date of the
Merger Agreement and the date of the Triggering Event, then the "Measurement
Period" is the ten consecutive trading day period falling during the 60 trading
day period ending with the last trading day prior to the date of the Triggering
Event which produces the lowest Average Merger Consideration Equivalent. If the
Exchange Ratio is adjusted during or after the Measurement Period, the Average
Merger Consideration Equivalent shall be calculated or adjusted appropriately to
reflect the adjustment in the Exchange Ratio.
6. Filings and Consents. Each of Valley and Merchants will use its reasonable
efforts to make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement.
Exercise of the Option herein provided shall be subject to
compliance with all applicable laws including, but not limited to, in the event
Valley is the holder hereof, approval of the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, the New York
Department of Banking or the Securities and Exchange Commission, and Merchants
agrees to cooperate with and furnish to the holder hereof such information and
documents as may be reasonably required to secure such approvals.
7. Representations and Warranties of Merchants. Merchants hereby represents and
warrants to Valley as follows:
a. Due Authorization. Merchants has full corporate power and authority to
execute, deliver and perform this Agreement and all corporate action necessary
for execution, delivery and performance of this Agreement has been duly taken by
Merchants.
b. Authorized Shares. Merchants has taken and, as long as the Option is
outstanding, will take all necessary corporate action to authorize and reserve
for issuance all shares of Common Stock that may be issued pursuant to any
exercise of the Option.
c. No Conflicts. Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all appropriate
regulatory approvals) will violate or result in any violation or default of or
be in conflict with or constitute a default under any term of the Certificate of
Incorporation or Bylaws of Merchants or any agreement, instrument, judgment,
decree or order applicable to Merchants.
8. Specific Performance. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement and that the obligations of the
parties hereto shall be specifically enforceable. Notwithstanding the foregoing,
Valley shall have the right to seek money damages against Merchants for a breach
of this Agreement.
9. Entire Agreement. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof.
10. Assignment or Transfer. Valley may not sell, assign or otherwise transfer
its rights and obligations hereunder, in whole or in part, to any person or
group of persons other than to an affiliate of Valley, until the occurrence of a
Triggering Event. Valley represents that it is acquiring the Option for Valley's
own account and not with a view to or for sale in connection with any
distribution of the Option or the Option Shares. Valley is aware that neither
the Option nor the Option Shares is the subject of a registration statement
filed with, and declared effective by, the Securities and Exchange Commission
pursuant to Section 5 of the Securities Act, but instead each is being offered
in reliance upon the exemption from the registration requirement provided by
Section 4(2) thereof and the representations and warranties made by Valley in
connection therewith. After the occurrence of a Triggering Event, Valley may
sell, assign, pledge, or otherwise transfer its rights and obligations
hereunder, in whole or in part, to any person, subject to compliance with
applicable law.
11. Amendment of Agreement. Upon mutual consent of the parties hereto, this
Agreement may be amended in writing at any time, for the purpose of facilitating
performance hereunder or to comply with any applicable regulation of any
governmental authority or any applicable order of any court or for any other
purpose.
12. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
13. Notices. All notices, requests, consents and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered personally, or delivered by overnight delivery service, or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
If to Valley:
Valley National Bancorp
1455 Valley Road
Wayne, New Jersey 07470
Attention: Gerald H. Lipkin
Chairman, President and Chief
Executive Officer
With a copy to:
Pitney, Hardin, Kipp & Szuch LLP
200 Campus Drive
Florham Park, New Jersey 07932-0950
Attention: Ronald H. Janis, Esq.
Michael W. Zelenty, Esq.
If to Merchants:
Merchants New York Bancorp, Inc.
275 Madison Avenue
New York, New York 10022
Attention: William J. Cardew
Vice Chairman and Chief Financial Officer
With a copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022-2585
Attention: Robinson Markel, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.
15. Captions. The captions in the Agreement are inserted for convenience and
reference purposes, and shall not limit or otherwise affect any of the terms or
provisions hereof.
16. Waivers and Extensions. The parties hereto may, by mutual consent, extend
the time for performance of any of the obligations or acts of either party
hereto. Each party may waive (a) compliance with any of the covenants of the
other party contained in this Agreement and/or (b) the other party's performance
of any of its obligations set forth in this Agreement.
17. Parties in Interest. This Agreement shall be binding upon and inure solely
to the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
18. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
19. Termination. This Agreement shall terminate upon either the termination of
the Merger Agreement as provided therein or the consummation of the transactions
contemplated by the Merger Agreement; provided, however, that if termination of
the Merger Agreement occurs after the occurrence of a Triggering Event (as
defined in Section 2 hereof), this Agreement shall not terminate until the later
of 18 months following the date of the termination of the Merger Agreement or
the consummation of any proposed transactions which constitute the Triggering
Event; provided further, that if the holder has given notice of exercise of the
option and the exercise is awaiting any necessary regulatory approval after the
holder has acted reasonably to obtain such approval this Agreement shall not
terminate until the approvals have been granted and reasonable time to
consummate has elapsed, or the approvals are denied.
IN WITNESS WHEREOF, each of the parties hereto, pursuant to
resolutions adopted by its Board of Directors, has caused this Stock Option
Agreement to be executed by its duly authorized officer, all as of the day and
year first above written.
VALLEY NATIONAL BANCORP
GERALD H. LIPKIN
By:--------------------------------------------
Gerald H. Lipkin, Chairman, President
Chief Executive Officer
MERCHANTS NEW YORK BANCORP, INC.
JAMES G. LAWRENCE
By:--------------------------------------------
James G. Lawrence, President and
Chief Executive Officer