THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND
MAY BE SUBJECT TO TRANSFER RESTRICTIONS
UNDER FEDERAL AND STATE BANKING LAW
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 3, 1997 (the
"Agreement"), by and between CONTINENTAL BANK, a New York chartered stock
commercial bank ("Issuer"), and RELIANCE BANCORP, INC., a Delaware corporation
("Grantee").
RECITALS
A. The Plan. Grantee and Issuer have entered into an Agreement and Plan of
Merger, dated as of May 3, 1997 (the "Plan"), providing for, among other things,
the merger of Issuer with and into a wholly-owned subsidiary of Grantee, with
such subsidiary being the surviving corporation.
B. Condition to Plan. As a condition and an inducement to Grantee's
execution and delivery of the Plan, Grantee has required that Issuer agree, and
Issuer has agreed, to grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 183,425 shares of common stock, par value $5.00 per share ("Issuer Common
Stock"), of Issuer (as adjusted as set forth herein, the "Option Shares," which
shall include the Option Shares before and after any transfer of such Option
Shares, but in no event shall the number of Option Shares for which this Option
is exercisable exceed 19.9% of the issued and outstanding shares of Issuer
Common Stock), at a purchase price per Option Share (as adjusted as set forth
herein, the "Purchase Price") equal to $22.00.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter
defined), as applicable, shall not be in material breach of the agreements or
covenants contained in this Agreement or the Plan, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, the Holder may exercise the Option, in whole or in part, at
any time and from time to time, following the occurrence of a Purchase Event (as
hereinafter defined); provided, that the
Option shall terminate and be of no further force or effect upon the earliest to
occur of (A) the Effective Time, (B) termination of the Plan in accordance with
the terms thereof prior to the occurrence of a Purchase Event or a Preliminary
Purchase Event other than a termination thereof by Grantee pursuant to Section
6.01(b)(ii) of the Plan (a termination of the Plan by Grantee pursuant to
Section 6.01(b)(ii) of the Plan, being referred to herein as a "Default
Termination"), (C) 12 months after a Default Termination or (D) 12 months after
termination of the Plan (other than a Default Termination) following the
occurrence of a Purchase Event or a Preliminary Purchase Event; provided,
however, that any purchase of shares upon exercise of the Option shall be
subject to compliance with applicable law. The term "Holder" shall mean the
holder or holders of the Option from time to time, and which initially is
Grantee. The rights set forth in Section 8 of this Agreement shall terminate
when the right to exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer
shall have recommended, publicly proposed or publicly announced an
intention to authorize, recommend or propose, or Issuer shall have
entered into an agreement with any person (other than Grantee or any
subsidiary of Grantee) to effect (A) a merger, consolidation or similar
transaction involving Issuer or any of its significant subsidiaries,
(B) the disposition, by sale, lease, exchange or otherwise, of assets
or deposits of Issuer or any of its significant subsidiaries
representing in either case 20% or more of the consolidated assets or
deposits of Issuer and its subsidiaries or (C) the issuance, sale or
other disposition by Issuer of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 20% or more of the voting power of Issuer or any of its
significant subsidiaries, other than, in the case of (A) or (C), any
transaction involving Issuer or any of its significant subsidiaries in
which the voting securities of Issuer outstanding immediately prior
thereto continue to represent (by either remaining outstanding or being
converted into the voting securities of the surviving entity of any
such transaction) at least 65% of the combined voting power of the
voting securities of the Issuer or the surviving entity outstanding
immediately after the consummation of such transaction (provided, any
such transaction is not violative of the Plan) (each of (A), (B) or
(C), an "Acquisition Transaction"); or
(ii) Any person (other than Grantee or any subsidiary
of Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3, promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of, or the right to acquire
beneficial ownership of, or any "group" (as such term is defined in
Section 13(d)(3) of the Exchange Act), other than a group of which
Grantee or any subsidiary of Grantee is a member, shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the voting power of Issuer or any of its
significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
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(i) Any person (other than Grantee or any subsidiary
of Grantee) shall have commenced (as such term is defined in Rule
14d-2, promulgated under the Exchange Act) or shall have filed a
registration statement under the Securities Act of 1933 as amended,
(the "Securities Act"), with respect to, a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 20% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(ii) The stockholders of Issuer shall not have
approved the Plan by the requisite vote at the meeting of the
stockholders of the Issuer required to be called to approve the Plan
(the "Issuer Meeting"), the Issuer Meeting shall not have been held or
shall have been canceled prior to termination of the Plan or Issuer's
Board of Directors shall have withdrawn or modified in a manner adverse
to Grantee the recommendation of Issuer's Board of Directors with
respect to the Plan, in each case after it shall have been publicly
announced that any person (other than Grantee or any subsidiary of
Grantee) shall have (A) made, or disclosed an intention to make, a bona
fide proposal to engage in an Acquisition Transaction, (B) commenced a
Tender Offer or filed a registration statement under the Securities Act
with respect to an Exchange Offer or (C) filed an application (or given
a notice), whether in draft or final form, under the Home Owners' Loan
Act of 1933, as amended ("HOLA"), the Bank Holding Company Act, as
amended (the "BHC Act"), the Bank Merger Act, as amended (the"BMA") or
the Change in Bank Control Act of 1978, as amended ("CBCA"), for
approval to engage in an Acquisition Transaction; or
(iii) Any person (other than Grantee or any
subsidiary of Grantee) shall have made a bona fide proposal to Issuer
or its stockholders by public announcement, or written communication
that is or becomes the subject of public disclosure, to engage in an
Acquisition Transaction; or
(iv) After a proposal is made by a third party to
Issuer or its stockholders to engage in an Acquisition Transaction, or
such third party states its intention to the Issuer to make such a
proposal if the Plan terminates, and thereafter Issuer shall have
willfully breached any representation, warranty, covenant or agreement
contained in the Plan and such breach would entitle Grantee to
terminate the Plan under Section 6.01(b) thereof (without regard to the
cure period provided for therein unless such cure is promptly effected
without jeopardizing consummation of the Merger pursuant to the terms
of the Plan).
As used in this Agreement, the term "person" shall have the
meaning specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event, it being
understood that the giving of such notice by Issuer shall not be a condition to
the right of Holder to exercise the Option.
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(e) In the event Holder wishes to exercise the Option, it
shall send to Issuer a written notice (the date of which being herein referred
to as the "Notice Date") specifying (i) the total number of Option Shares it
intends to purchase pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 15 business days from the Notice
Date for the closing (the "Closing") of such purchase (the "Closing Date");
provided, that the first notice of exercise shall be sent to Issuer within 180
days after the first Purchase Event of which Grantee has been notified. If prior
notification to or approval of any Regulatory Authority is required in
connection with any such purchase, Issuer shall cooperate with the Holder in the
filing of the required notice of application for approval and the obtaining of
such approval, and the Closing shall occur immediately following such regulatory
approvals and any mandatory waiting periods. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 12(f)
of this Agreement.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided in
Section 4(a) of this Agreement, (i) Issuer shall deliver to Holder (A) a
certificate or certificates representing the Option Shares to be purchased at
such Closing, which Option Shares shall be free and clear of all liens and
encumbrances and subject to no preemptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by
applicable law, certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT
TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF MAY 3, 1997. A COPY OF SUCH
AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY
THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the portion of the above legend relating to the
Securities Act shall be removed by delivery of substitute certificate(s) without
such legend if Holder shall have delivered to Issuer a copy of a letter from the
staff of the Securities Exchange Commission (the
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"SEC"), or an opinion of counsel in form and substance reasonably satisfactory
to Issuer and its counsel, to the effect that such legend is not required for
purposes of the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice
of exercise of the Option provided for under Section 3(e) of this Agreement, the
tender of the applicable purchase price in immediately available funds and the
tender of this Agreement to Issuer, Holder shall be deemed to be the holder of
record of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Issuer Common Stock shall not then
be actually delivered to Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 4 in the name of Holder or its assignee,
transferee or designee.
(e) Issuer agrees (i) that it shall at all times maintain,
free from preemptive rights, sufficient authorized but unissued or treasury
shares of Issuer Common Stock so that the Option may be exercised without
additional authorization of Issuer Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase Issuer
Common Stock, (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer, (iii) promptly to take all action as may from time to time
be required (including (A) complying with all premerger notification, reporting
and waiting period requirements and (B) in the event prior approval of or notice
to any Regulatory Authority is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to such Regulatory Authority as it may require) in
order to permit Holder to exercise the Option and Issuer duly and effectively to
issue shares of the Issuer Common Stock pursuant hereto and (iv) promptly to
take all action provided herein to protect the rights of Holder against
dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Corporate Authority. Issuer has full corporate power and
authority to execute and deliver this Agreement and to consummate
the transactions contemplated hereby; the execution and delivery
of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer, and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions contemplated by this Agreement.
This Agreement has been duly and validly executed and delivered
by Issuer.
(b) Beneficial Ownership. To the best knowledge of Issuer,
as of the date of this Agreement, no person or group has
beneficial ownership of more than 18.48% of the issued and
outstanding shares of Issuer Common Stock.
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(c) Shares Reserved for Issuance; Capital Stock. Issuer has
taken all necessary corporate action to authorize and reserve and
permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms,
will have reserved for issuance upon the exercise of the Option,
that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time
to time purchasable upon exercise of the Option, and all such
shares, upon issuance pursuant to the Option, will be duly
authorized, validly issued, fully paid and nonassessable, and
will be delivered free and clear of all claims, liens,
encumbrances and security interests (other than those created by
this Agreement) and not subject to any preemptive rights.
(d) No Violations. The execution, delivery and performance of
this Agreement does not and will not, and the consummation by Issuer of
any of the transactions contemplated hereby will not, constitute or
result in (i) a breach or violation of, or a default under, its
certificate of incorporation or bylaws, or the comparable governing
instruments of any of its subsidiaries, or (ii) a breach or violation
of, or a default under, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation of it or any of its
subsidiaries (with or without the giving of notice, the lapse of time
or both) or under any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit or
license to which it or any of its subsidiaries is subject, that would,
in any case, give any other person the ability to prevent or enjoin
Issuer's performance under this Agreement in any material respect.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has full corporate power and
authority to enter into this Agreement and, subject to obtaining the approvals
referred to in this Agreement, to consummate the transactions contemplated by
this Agreement; the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Grantee; and this Agreement has
been duly executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, Etc.
(a) In the event of any change in Issuer Common Stock by
reason of a stock dividend, stock split, split-up, recapitalization,
combination, exchange of shares, or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing any such transaction so that Holder shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that Holder would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event, or the record
date therefor, as applicable. If any additional shares of Issuer Common Stock
are issued after the date of this Agreement (other than pursuant to an event
described in the first sentence of this Section 7(a), upon exercise of any
option to purchase Issuer Common Stock outstanding on the date hereof or upon
conversion into Issuer Common Stock of any convertible security of Issuer
outstanding on the date hereof), the number of shares of Issuer
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Common Stock subject to the Option shall be adjusted so that, after such
issuance, it, together with any shares of Issuer Common Stock previously issued
pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock
then issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option. No provision of this Section 7 shall be deemed to
affect or change, or constitute authorization for any violation of, any of the
covenants or representations in the Plan.
(b) In the event that Issuer shall enter into an agreement (i)
to consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property, or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall after such merger represent less than 50% of the outstanding
shares and share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets or deposits to any
person, other than Grantee or one of its subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provisions so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged for,
an option (the "Substitute Option"), at the election of Holder, of either (A)
the Acquiring Corporation (as hereinafter defined), (B) any person that controls
the Acquiring Corporation or (C) in the case of a merger described in clause
(ii), Issuer (such person being referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the
Option, provided, that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Holder. Substitute Option Issuer shall also
enter into an agreement with Holder in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number
of shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of Substitute Common Stock (the "Substitute Option Price")
shall then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of Issuer Common Stock for which the Option
was theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (B) Issuer in a
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merger in which Issuer is the continuing or surviving person, or (C)
the transferee of all or substantially all of Issuer's assets (or a
substantial part of the assets of its subsidiaries taken as a whole).
(ii) "Substitute Common Stock" shall mean the shares
of capital stock (or similar equity interest) with the greatest voting
power in respect of the election of directors (or persons similarly
responsible for the direction of the business and affairs) of the
Substitute Option Issuer.
(iii) "Assigned Value" shall mean the highest of (A)
the price per share of Issuer Common Stock at which a Tender Offer or
an Exchange Offer therefor has been made, (B) the price per share of
Issuer Common Stock to be paid by any third party pursuant to an
agreement with Issuer, (C) the highest closing price for shares of
Issuer Common Stock within the six-month period immediately preceding
the consolidation, merger or sale in question and (D) in the event of a
sale of all or substantially all of Issuer's assets or deposits, an
amount equal to (x) the sum of the price paid in such sale for such
assets (and/or deposits) and the current market value of the remaining
assets of Issuer, as determined by a nationally recognized investment
banking firm selected by Holder, divided by (y) the number of shares of
Issuer Common Stock outstanding at such time. In the event that a
Tender Offer or an Exchange Offer is made for Issuer Common Stock or an
agreement is entered into for a merger or consolidation involving
consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for Issuer Common Stock
shall be determined by a nationally recognized investment banking firm
selected by Holder.
(iv) "Average Price" shall mean the average closing
price of a share of Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in question,
but in no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation, merger
or sale; provided, that, if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to a share of
common stock issued by Issuer, the person merging into Issuer or by any
company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% of the aggregate
of the shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for the limitation in the first sentence of this Section 7(f), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this Section
7(f). This difference in value shall be determined by a nationally recognized
investment banking firm selected by Holder.
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(g) Issuer shall not enter into any transaction described in
Section 7(b) of this Agreement unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the holders of the other
shares of common stock issued by Substitute Option Issuer are not entitled to
exercise any rights by reason of the issuance or exercise of the Substitute
Option and the shares of Substitute Common Stock are otherwise in no way
distinguishable from or have lesser economic value (other than any diminution in
value resulting from the fact that the shares Substitute Common Stock are
restricted securities, as defined in Rule 144, promulgated under the Securities
Act ("Rule 144"), or any successor provision) than other shares of common stock
issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a) of this
Agreement, at the request of Holder at any time commencing upon the first
occurrence of a Repurchase Event (as defined in Section 8(d) hereof) and ending
12 months immediately thereafter, Issuer shall repurchase from Holder (i) the
Option and (ii) all shares of Issuer Common Stock purchased by Holder pursuant
hereto with respect to which Holder then has beneficial ownership. The date on
which Holder exercises its rights under this Section 8 is referred to as the
"Request Date." Such repurchase shall be at an aggregate price (the "Section 8
Repurchase Consideration") equal to the sum of:
(i) The aggregate Purchase Price paid by Holder for
any shares of Issuer Common Stock acquired pursuant to the Option with
respect to which Holder then has beneficial ownership;
(ii) The excess, if any, of (A) the Applicable Price
(as defined below) for each share of Issuer Common Stock over (B) the
Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement), multiplied by the number of shares of Issuer Common Stock
with respect to which the Option has not been exercised; and
(iii) The excess, if any, of the Applicable Price
over the Purchase Price (subject to adjustment pursuant to Section 7 of
this Agreement) paid (or, in the case of Option Shares with respect to
which the Option has been exercised but the Closing Date has not
occurred, payable) by Holder for each share of Issuer Common Stock with
respect to which the Option has been exercised and with respect to
which Holder then has beneficial ownership, multiplied by the number of
such shares.
(b) If Holder exercises its rights under this Section 8,
Issuer shall, within 10 business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all Liens. Notwithstanding
the foregoing, to the extent that prior notification to or
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approval of any Regulatory Authority is required in connection with the payment
of all or any portion of the Section 8 Repurchase Consideration, Holder shall
have the ongoing option to revoke its request for repurchase pursuant to this
Section 8, in whole or in part, or to require that Issuer deliver from time to
time that portion of the Section 8 Repurchase Consideration that it is not then
so prohibited from paying and promptly file the required notice or application
for approval and expeditiously process the same (and each party shall cooperate
with the other in the filing of any such notice or application and the obtaining
of any such approval). If any Regulatory Authority disapproves of any part of
Issuer's proposed repurchase pursuant to this Section 8, Issuer shall promptly
give notice of such fact to Holder. If any Regulatory Authority prohibits the
repurchase in part but not in whole, then Holder shall have the right (i) to
revoke the repurchase request or (ii) to the extent permitted by such Regulatory
Authority, determine whether the repurchase should apply to the Option and/or
Option Shares and to what extent to each, and Holder shall thereupon have the
right to exercise the Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the number of shares covered by
the Option in respect of which payment has been made pursuant to Section
8(a)(ii) of this Agreement. Holder shall notify Issuer of its determination
under the preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a) of this Agreement.
(c) For purposes of this Agreement, the "Applicable Price"
means the highest of (i) the highest price per share of Issuer Common Stock paid
for any such share by the person or groups described in Section 8(d)(i) hereof,
(ii) the price per share of Issuer Common Stock received by holders of Issuer
Common Stock in connection with any merger, sale or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement, or (iii) the highest closing sales price per share of Issuer Common
Stock quoted on the Nasdaq (or if Issuer Common Stock is not quoted on the
Nasdaq, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded as reported by a
recognized source chosen by Holder) during the 40 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally recognized investment banking firm selected
by Holder, divided by the number of shares of the Issuer Common Stock
outstanding at the time of such sale. If the consideration to be offered, paid
or received pursuant to either of the foregoing clauses (i) or (ii) shall be
other than in cash, the value of such consideration shall be determined in good
faith by an independent nationally recognized investment banking firm selected
by Holder and reasonably acceptable to Issuer, which determination shall be
conclusive for all purposes of this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any subsidiary of Grantee) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3, promulgated
under the Exchange Act), or the right to acquire beneficial ownership of, or any
"group" (as such term is defined under the Exchange Act) shall have been
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formed which beneficially owns or has the right to acquire beneficial ownership
of, 50% or more of the then outstanding shares of Issuer Common Stock, or (ii)
any of the transactions described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of
this Agreement shall be consummated.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the
conditions of Section 9(c) of this Agreement, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Shareholder"), as
expeditiously as possible, prepare and file a registration statement under the
Securities Act if such registration is necessary in order to permit the sale or
other disposition of any or all shares of Issuer Common Stock or other
securities that have been acquired by or are issuable to the Selling Shareholder
upon exercise of the Option in accordance with the intended method of sale or
other disposition stated by the Selling Shareholder in such request, including
without limitation a "shelf" registration statement under Rule 415, promulgated
under the Securities Act, or any successor provision, and Issuer shall use its
best efforts to qualify such shares or other securities for sale under any
applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time
after the exercise of the Option proposes to register any shares of Issuer
Common Stock under the Securities Act in connection with an underwritten public
offering of such Issuer Common Stock, Issuer will promptly give written notice
to the Selling Shareholders of its intention to do so and, upon the written
request of any Selling Shareholder given within 30 days after receipt of any
such notice (which request shall specify the number of shares of Issuer Common
Stock intended to be included in such underwritten public offering by the
Selling Shareholder), Issuer will cause all such shares for which a Selling
Shareholder requests participation in such registration, to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause some or all of such shares to be so registered (i) if the
underwriters in the Public Offering in good faith object for valid business
reasons, or (ii) in the case of a registration solely to implement an employee
benefit plan or a registration filed on Form S-4 of the Securities Act or any
successor Form; provided, further, however, that such election pursuant to (i)
may only be made once. If some, but not all the shares of Issuer Common Stock,
with respect to which Issuer shall have received requests for registration
pursuant to this Section 9(b), shall be excluded from such registration, Issuer
shall make appropriate allocation of shares to be registered among the Selling
Shareholders desiring to register their shares pro rata in the proportion that
the number of shares requested to be registered by each such Selling Shareholder
bears to the total number of shares requested to be registered by all such
Selling Shareholders then desiring to have Issuer Common Stock registered for
sale.
(c) Conditions to Required Registration. Issuer shall use all
reasonable efforts to cause each registration statement referred to in Section
9(a) of this Agreement to become effective and to obtain all consents or waivers
of other parties which are required therefor and to keep such registration
statement effective, provided, however, that Issuer may delay any registration
of Option Shares required pursuant to Section 9(a) of this Agreement for a
period not exceeding 90 days provided Issuer shall in good faith determine that
any such registration would
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adversely affect an offering or contemplated offering of other securities by
Issuer, and Issuer shall not be required to register Option Shares under the
Securities Act pursuant to Section 9(a) hereof:
(i) Prior to the earliest of (A) termination of the
Plan pursuant to Article VI thereof, (B) failure to obtain the
requisite stockholder approval pursuant to Section 6.01(b) of the Plan,
and (C) a Purchase Event or a Preliminary Purchase Event;
(ii) On more than one occasion during any calendar year;
(iii) Within 90 days after the effective date of a
registration referred to in Section 9(b) of this Agreement pursuant to
which the Selling Shareholder or Selling Shareholders concerned were
afforded the opportunity to register such shares under the Securities
Act and such shares were registered as requested; and
(iv) Unless a request therefor is made to Issuer by
Selling Shareholders that hold at least 25% or more of the aggregate
number of Option Shares (including shares of Issuer Common Stock
issuable upon exercise of the Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to
maintain the effectiveness of any registration statement after the expiration of
nine months from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares; provided, however, that Issuer
shall not be required to consent to general jurisdiction or qualify to do
business in any state where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.
(d) Expenses. Except where applicable state law prohibits such
payments, Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses (including the
fees and expenses of counsel), legal expenses, including the reasonable fees and
expenses of one counsel to the holders whose Option Shares are being registered,
printing expenses and the costs of special audits or "cold comfort" letters,
expenses of underwriters, excluding discounts and commissions but including
liability insurance if Issuer so desires or the underwriters so require, and the
reasonable fees and expenses of any necessary special experts) in connection
with each registration pursuant to Section 9(a) or 9(b) of this Agreement
(including the related offerings and sales by holders of Option Shares) and all
other qualifications, notifications or exemptions pursuant to Section 9(a) or
9(b) of this Agreement.
(e) Indemnification. In connection with any registration under
Section 9(a) or 9(b) of this Agreement, Issuer hereby indemnifies the Selling
Shareholders, and each underwriter thereof, including each person, if any, who
controls such holder or underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement of a material fact contained
in any registration statement or prospectus or notification or offering circular
(including any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission, or alleged
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omission, to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
expenses, losses, claims, damages or liabilities of such indemnified party are
caused by any untrue statement or alleged untrue statement that was included by
Issuer in any such registration statement or prospectus or notification or
offering circular (including any amendments or supplements thereto) in reliance
upon and in conformity with, information furnished in writing to Issuer by such
indemnified party expressly for use therein, and Issuer and each officer,
director and controlling person of Issuer shall be indemnified by such Selling
Shareholders, or by such underwriter, as the case may be, for all such expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement, that was included by Issuer in any such registration statement or
prospectus or notification or offering circular (including any amendments or
supplements thereto) in reliance upon, and in conformity with, information
furnished in writing to Issuer by such holder or such underwriter, as the case
may be, expressly for such use.
Promptly upon receipt by a party indemnified under this
Section 9(e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this Section 9(e), such indemnified party
shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (i) the indemnifying party either
agrees to pay the same, (ii) the indemnifying party fails to assume the defense
of such action with counsel satisfactory to the indemnified party, or (iii) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this Section 9(e) is
unavailable to a party otherwise entitled to be indemnified in respect of any
expenses, losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to be
indemnified, shall contribute to the amount paid or payable by such party to be
indemnified as a result of such expenses, losses, claims, damages or liabilities
in such proportion as is appropriate to reflect the relative benefits received
by Issuer, the Selling Shareholders and the underwriters from the offering of
the securities and also the relative fault of Issuer, the Selling Shareholders
and the underwriters in connection with the statements or omissions which
resulted in such expenses, losses, claims, damages or liabilities, as well as
any other relevant equitable considerations. The amount paid or payable by a
party as a result of the
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expenses, losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or claim;
provided, however, that in no case shall any Selling Shareholder be responsible,
in the aggregate, for any amount in excess of the net offering proceeds
attributable to its Option Shares included in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any obligation by any holder to
indemnify shall be several and not joint with other holders.
In connection with any registration pursuant to Section 9(a)
or 9(b) of this Agreement, Issuer and each Selling Shareholder (other than
Grantee) shall enter into an agreement containing the indemnification provisions
of Section 9(e) of this Agreement.
(f) Miscellaneous Reporting. Issuer shall comply with all
reporting requirements and will do all such other things as may be necessary to
permit the expeditious sale at any time of any Option Shares by the Selling
Shareholders thereof in accordance with and to the extent permitted by any rule
or regulation promulgated by the SEC from time to time, including, without
limitation, Rule 144. Issuer shall at its expense provide the Selling
Shareholders with any information necessary in connection with the completion
and filing of any reports or forms required to be filed by them under the
Securities Act or the Exchange Act, or required pursuant to any state securities
laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection
with the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all such
taxes.
10. Quotation; Listing. If Issuer Common Stock or any other
securities to be acquired in connection with the exercise of the Option are then
authorized for quotation or trading or listing on the Nasdaq or any securities
exchange, Issuer, upon the request of Holder, will promptly file an application,
if required, to authorize for quotation or trading or listing the shares of
Issuer Common Stock or other securities to be acquired upon exercise of the
Option on the Nasdaq or such other securities exchange and will use its best
efforts to obtain approval, if required, of such quotation or listing as soon as
practicable.
11. Division of Option. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of
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like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
12. Miscellaneous.
(a) Expenses. 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) Waiver and Amendment. Any provision of this Agreement may
be waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(c) Entire Agreement: No Third-Party Beneficiaries;
Severability. This Agreement, together with the Plan and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto (other than the indemnified parties under Section 9(e)
of this Agreement and any transferees of the Option Shares or any permitted
transferee of this Agreement pursuant to Section 12(h) of this Agreement) any
rights or remedies hereunder. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or Regulatory
Authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this 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 Authority determines that the Option
does not permit Holder to acquire, or does not require Issuer to repurchase, the
full number of shares of Issuer Common Stock as provided in Section 3 of this
Agreement (as may be adjusted herein), it is the express intention of Issuer to
allow Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by
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registered or certified mail (return receipt requested) to the parties at the
addresses set forth in the Plan (or at such other address for a party as shall
be specified by like notice).
(g) Counterparts. This Agreement and any amendments hereto may
be executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Further Assurances. In the event of any exercise of the
Option by the Holder, Issuer, and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the day and year first written above.
CONTINENTAL BANK
By:/s/ Xxxx X. Xxxxxxxx
-----------------------
Xxxx X. Xxxxxxxx
President and Chief Executive Officer
RELIANCE BANCORP, INC.
By:/s/ Xxxxxxx X. Xxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
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