AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 3rd DAY OF MAY, 1997
BY AND AMONG
RELIANCE BANCORP, INC.
RELIANCE FEDERAL SAVINGS BANK
AND
CONTINENTAL BANK
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TABLE OF CONTENTS
INTRODUCTORY STATEMENT...............................................-1-
ARTICLE I
THE MERGER........................................................-1-
Section 1.01 Structure of the Merger......................................-1-
Section 1.02 Effect on Outstanding Shares of Continental Common Stock.....-2-
Section 1.03 [Intentionally omitted]......................................-2-
Section 1.04 Exchange Procedures..........................................-3-
Section 1.05 Dissenters' Rights...........................................-5-
Section 1.06 Option Plans and Phantom Stock...............................-5-
Section 1.07 Directors and Officers of Reliance Bank after
Effective Time...............................................-5-
Section 1.08 Alternative Structure........................................-6-
ARTICLE II
REPRESENTATIONS AND WARRANTIES.........................................-6-
Section 2.01 Disclosure Letters...........................................-6-
Section 2.02 Standards....................................................-6-
Section 2.03 Representations and Warranties of Continental................-7-
Section 2.04 Representations and Warranties of Reliance...................-21-
ARTICLE III
CONDUCT PENDING THE MERGER............................................-31-
Section 3.01 Conduct of Continental's Business Prior to the
Effective Time...............................................-31-
Section 3.02 Forbearance by Continental...................................-32-
Section 3.03 Conduct of Reliance's Business Prior to the
Effective Time...............................................-35-
ARTICLE IV
COVENANTS.........................................................-35-
Section 4.01 Acquisition Proposals........................................-35-
Section 4.02 Certain Policies of Continental..............................-36-
Section 4.03 Employees; Benefit Plans and Programs........................-36-
Section 4.04 Access and Information.......................................-39-
Section 4.05 Certain Filings, Consents and Arrangements...................-40-
Section 4.06 Antitakeover Provisions......................................-40-
Section 4.07 Additional Agreements........................................-40-
Section 4.08 Publicity....................................................-41-
Section 4.09 Stockholders' Meeting........................................-41-
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Section 4.10 Proxy; Registration Statement................................-41-
Section 4.11 Registration of Reliance Common Stock........................-41-
Section 4.12 Affiliate Letters............................................-42-
Section 4.13 Notification of Certain Matters..............................-42-
Section 4.14 Indemnification; Directors' and
Officers' Insurance..........................................-42-
ARTICLE V
CONDITIONS TO CONSUMMATION........................................-44-
Section 5.01 Conditions to Each Party's Obligations.......................-44-
Section 5.02 Conditions to the Obligations of Reliance
and Reliance Bank Under this Agreement.......................-45-
Section 5.03 Conditions to the Obligations of Continental.................-46-
ARTICLE VI
TERMINATION.......................................................-48-
Section 6.01 Termination..................................................-48-
Section 6.02 Effect of Termination........................................-51-
Section 6.03 Third Party Termination Fee..................................-51-
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME.......................-52-
Section 7.01 Effective Date and Effective Time...........................-52-
Section 7.02 Deliveries at the Closing...................................-52-
ARTICLE VIII
CERTAIN OTHER MATTERS............................................-52-
Section 8.01 Certain Definitions; Interpretation.........................-52-
Section 8.02 Survival....................................................-53-
Section 8.03 Waiver; Amendment...........................................-53-
Section 8.04 Counterparts................................................-53-
Section 8.05 Governing Law...............................................-53-
Section 8.06 Expenses....................................................-53-
Section 8.07 Notices.....................................................-53-
Section 8.08 Entire Agreement; etc.......................................-54-
Section 8.09 Assignment..................................................-54-
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EXHIBITS
Exhibit A Form of Directors and Officers Letter
Exhibit B Form of Letter for Certain Affiliates of Continental
Exhibit C Form of Joint Release
Exhibit D Form of Rule 145 Affiliate Letter
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This is an AGREEMENT AND PLAN OF MERGER, dated as of the 3rd day of
May, 1997 (this "Agreement"), by and among RELIANCE BANCORP, INC., a Delaware
corporation ("Reliance"), RELIANCE FEDERAL SAVINGS BANK, a federally chartered
stock savings bank and a wholly owned subsidiary of Reliance ("Reliance Bank"),
and CONTINENTAL BANK, a New York chartered stock commercial bank
("Continental").
INTRODUCTORY STATEMENT
The Board of Directors of each of Reliance, Reliance Bank and
Continental (i) has determined that this Agreement and the transactions
contemplated hereby are in the best interests of Reliance, Reliance Bank and
Continental, respectively, and in the best long-term interests of their
respective stockholders, (ii) has determined that this Agreement and the
transactions contemplated hereby are consistent with, and in furtherance of, its
respective business strategies and (iii) has approved, at meetings of each of
such Boards of Directors, this Agreement.
Concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to Reliance's willingness to enter into this
Agreement, Reliance and Continental have entered into a Stock Option Agreement
(the "Option Agreement") pursuant to which Continental has granted to Reliance
an option to purchase shares of Continental's common stock, par value $5.00 per
share (the "Continental Common Stock"), upon the terms and conditions therein
contained; and certain officers and directors of Continental will each, within
five business days of the date of this Agreement, execute in favor of Reliance a
Letter Agreement in the form annexed as Exhibit A and certain affiliates of
Continental will each, within five business days of the date of this Agreement,
execute in favor of Reliance a Letter Agreement in the form annexed as Exhibit
B.
Reliance and Continental desire to make certain representations,
warranties and agreements in connection with the business combination
transaction provided for herein and to prescribe various conditions to the
transaction.
In consideration of their mutual promises and obligations hereunder,
the parties hereto adopt and make this Agreement and prescribe the terms and
conditions hereof and the manner and basis of carrying it into effect, which
shall be as follows:
ARTICLE I
THE MERGER
Section 1.01 Structure of the Merger. On the Effective Date (as
defined in Section 7.01), Continental will merge with and into Reliance Bank
(the "Merger"), with Reliance Bank being the surviving entity, pursuant to the
provisions of, and with the effect provided in, the rules and regulations of the
Office of Thrift Supervision (the "OTS") and the Banking Law of the State of New
York (the "NYBL") and pursuant to the terms and conditions of an agreement and
plan of merger to be entered into between Reliance Bank and Continental
consistent with the terms of
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this Agreement and in a form to be mutually agreed upon. The separate corporate
existence of Continental shall thereupon cease. Reliance Bank shall continue to
be governed by the laws of the United States and its name and separate corporate
existence with all of its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger.
Section 1.02 Effect on Outstanding Shares of Continental Common Stock.
(a) By virtue of the Merger, automatically and without any action on
the part of the holder thereof, each share of Continental Common Stock issued
and outstanding at the Effective Time (as defined in Section 7.01) (other than
(i) shares the holder of which (the "Dissenting Stockholder"), pursuant to any
applicable law providing for dissenters' or appraisal rights is entitled to
receive payment in accordance with the provisions of any such law, such holder
to have only the rights provided in any such law (the "Dissenters' Shares"),
(ii) shares held directly or indirectly by Reliance (other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted), and
(iii) shares held as treasury stock of Continental (the "Excluded Shares") shall
become and be converted into the right to receive 1.1 shares of common stock,
par value $.01 per share, of Reliance ("Reliance Common Stock"), together with
the related preferred share purchase right issued pursuant to the Stockholder
Protection Rights Agreement (the "Rights Agreement"), dated as of September 18,
1996, between Reliance and Registrar and Transfer Co., as Rights Agent (the
"Preferred Share Purchase Right"); provided, however, that, notwithstanding any
other provision hereof, no fraction of a whole share of Reliance Common Stock
and no certificates or scrip therefor will be issued in the Merger; instead,
Reliance shall pay to each holder of Continental Common Stock who would
otherwise be entitled to a fractional share an amount in cash, rounded to the
nearest cent, determined by multiplying such fraction by the Reliance Market
Value (as defined below) (collectively, the "Merger Consideration").
(b) If between the date of this Agreement and the Effective Time the
outstanding shares of Reliance Common Stock shall have been changed into a
different number of shares or into a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares (each, a "Stock Adjustment"), the Merger Consideration shall
be adjusted correspondingly to the extent appropriate to reflect the Stock
Adjustment.
(c) As used herein, "Reliance Market Value" shall be the average of the
mean between the closing high bid and low asked prices of a share of Reliance
Common Stock, as reported on the National Association of Securities Dealers
Automated Quotation System National Market System (the "Nasdaq National
Market"), for the 15 consecutive trading days immediately preceding the day on
which the last of the required regulatory approvals, as contemplated by Section
5.01(b), is obtained (the "Valuation Date").
(d) As of the Effective Time, each Excluded Share, other than
Dissenters' Shares, shall be cancelled and retired and cease to exist, and no
exchange or payment shall be made with respect thereto.
Section 1.03 [Intentionally omitted.]
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Section 1.04 Exchange Procedures.
(a) Appropriate transmittal materials (the "Letter of Transmittal")
will be mailed within five business days after the Effective Date to each holder
of record of Continental Common Stock as of the Effective Time. A Letter of
Transmittal will be properly completed only if accompanied by certificates
representing all shares of Continental Common Stock converted thereby.
(b) At and after the Effective Time, each certificate previously
representing shares of Continental Common Stock (except as specifically set
forth in Section 1.02) shall represent only the right to receive the Merger
Consideration (the "Continental Certificates").
(c) Prior to the Effective Time, Reliance shall deposit, or shall cause
to be deposited, with the Exchange Agent, for the benefit of the holders of
shares of Continental Common Stock, for exchange in accordance with this Section
1.04, an estimated amount of cash sufficient to pay the aggregate amount of cash
paid in lieu of fractional shares to be paid pursuant to Section 1.02, and
Reliance shall reserve for issuance with its Transfer Agent and Registrar the
aggregate Merger Consideration to be issued.
(d) The Letter of Transmittal (i) shall specify that delivery shall be
effected, and risk of loss and title to Continental Certificates shall pass,
only upon delivery of Continental Certificates to the Exchange Agent, (ii) shall
be in a form and contain any other provisions as Reliance may reasonably
determine, and (iii) shall include instructions for use in effecting the
surrender of Continental Certificates in exchange for the Merger Consideration.
Upon the proper surrender of Continental Certificates to the Exchange Agent,
together with a properly completed and duly executed Letter of Transmittal, the
holder of such Continental Certificate(s) shall be entitled to receive in
exchange therefor (i) a certificate representing that number of whole shares of
Reliance Common Stock that such holder has the right to receive pursuant to
Article I of this Agreement, and (ii) a check in the amount equal to the cash,
if any, which such holder has the right to receive pursuant to Article I of this
Agreement (for any fractional shares of Reliance Common Stock to which such
holder is entitled to pursuant to Section 1.02 and any dividend or other
distributions to which such holder of Reliance Common Stock is entitled to
pursuant to this Section 1.04). Continental Certificates so surrendered shall
forthwith be cancelled. As soon as practicable, but no later than 10 business
days following receipt of the properly completed Letter of Transmittal and any
necessary accompanying documentation, the Exchange Agent shall distribute
Reliance Common Stock and cash as provided herein. The Exchange Agent shall not
be entitled to vote or exercise any rights of ownership with respect to the
shares of Reliance Common Stock held by it from time to time hereunder, except
that it shall receive and hold all dividends or other distributions paid or
distributed with respect to such shares for the account of the persons entitled
thereto. In the event of a transfer of ownership of any shares of Continental
Common Stock not registered in the transfer records of Continental, the Merger
Consideration shall be issued to the transferee if Continental Certificate(s)
representing such Continental Common Stock are presented to the Exchange Agent,
accompanied by documents sufficient, in the reasonable judgment of Reliance and
the Exchange Agent, (x) to evidence and effect such transfer and (y) to evidence
that any applicable stock transfer taxes have been paid.
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(e) No dividend or other distributions declared or made after the
Effective Time with respect to Reliance Common Stock shall be remitted to any
person entitled to receive shares of Reliance Common Stock hereunder until such
person surrenders Continental Certificate(s), at which time such dividends shall
be remitted to such persons without interest.
(f) From and after the Effective Time, there shall be no transfers on
the stock transfer records of Continental of any shares of Continental Common
Stock. If, after the Effective Time, Continental Certificates are presented to
Reliance, they shall be cancelled and exchanged for the Merger Consideration
deliverable in respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Section 1.04.
(g) Any portion of the aggregate amount of cash to be paid in lieu of
fractional shares pursuant to Section 1.02, or the proceeds of any investments
thereof, that remains unclaimed by the stockholders of Continental for six (6)
months after the Effective Time shall be repaid by the Exchange Agent to
Reliance upon the written request of Reliance. After such request is made, any
stockholders of Continental who have not theretofore complied with this Section
1.04 shall look only to Reliance for issuance of their Merger Consideration
deliverable in respect of each share of Continental Common Stock such
stockholder holds as determined pursuant to this Agreement without any interest
thereon. If outstanding certificates for shares of Continental Common Stock are
not surrendered prior to the date on which such payments would otherwise escheat
to or become the property of any governmental unit or agency, the unclaimed
items shall, to the extent permitted by abandoned property and any other
applicable law, become the property of Reliance (and to the extent not in its
possession shall be paid over to it), free and clear of all claims or interest
of any person previously entitled to such claims. Notwithstanding the foregoing,
none of Reliance, Reliance Bank, the Exchange Agent or any other person shall be
liable to any former holder of Continental Common Stock for any amount delivered
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(h) Reliance and the Exchange Agent shall be entitled to rely upon
Continental's stock transfer books to establish the identity of those persons
entitled to receive the Merger Consideration, which books shall be conclusive
with respect thereto. In the event of a dispute with respect to ownership of
stock represented by any Continental Certificate, Reliance and the Exchange
Agent shall be entitled to deposit any consideration represented thereby in
escrow with an independent third party and thereafter be relieved with respect
to any claims thereto.
(i) In the event any Continental Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Continental Certificate to be lost, stolen or destroyed and, if
required by the Exchange Agent, the posting by such person of a bond in such
amount as the Exchange Agent may direct as indemnity against any claim that may
be made against it with respect to such Continental Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Continental
Certificate the Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
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Section 1.05 Dissenters' Rights.
(a) Any Dissenting Stockholder who shall be entitled to dissenters'
rights with respect to his or her Dissenters' Shares, as provided in Sections
604 and 6022 of the NYBL, shall not be entitled to the Merger Consideration,
unless and until the holder thereof shall have failed to perfect or shall have
effectively withdrawn or lost such holder's right to dissent from the Merger
under such law, and shall be entitled to receive only the payment to the extent
provided for therein with respect to such Dissenters' Shares.
(b) Continental shall (i) give Reliance prompt written notice of the
receipt of any notice from a stockholder purporting to exercise any dissenters'
rights, (ii) not settle nor offer to settle any demand for payment without the
prior written consent of Reliance and (iii) not waive any failure to comply
strictly with any procedural requirements of Section 6022 of the NYBL.
Section 1.06 Option Plans and Phantom Stock.
(a) Continental shall not seek final approval from the Banking
Department of the State of New York (the "NYBD") for either the Continental Bank
1997 Incentive Stock Option Plan or the Continental Bank 1997 Directors Stock
Option Plan (collectively, the "Continental Option Plans"), or if such
Continental Option Plans have already been submitted to the NYBD for approval,
shall withdraw its request to the NYBD for approval of such plans. In addition,
Continental shall agree that any grants of options to purchase Continental
Common Stock, automatic or otherwise, made under the Continental Option Plans
shall be null and void ab initio.
(b) Each of the "phantom stock units" of Continental Common Stock (the
"Continental Phantom Stock") granted to Xx. Xxxx X. Xxxxxxxx pursuant to Section
4(c) of the employment agreement by and between Continental and Xx. Xxxxxxxx
dated October 11, 1996 (the "Xxxxxxxx Employment Agreement"), including those
regranted to Xx. Xxxxxx Xxxxxxx and Mr. Xxxxx XxXxxxxx pursuant to the First
Amendment to the Xxxxxxxx Employment Agreement, dated March 14, 1997, shall be
cancelled and replaced with a right to receive an amount per share of
Continental Phantom Stock equal to the Reliance Market Value without adjustment
for interest or otherwise if such amount is paid on a date other than the date
which includes the Effective Time. Prior to the Effective Time, Reliance shall
take all actions necessary to effect such cancellation or replacement. In
consideration for such cancellation, Continental shall pay to Xx. Xxxxxxxx, Xx.
Xxxxxxx and Xx. XxXxxxxx an amount (subject to applicable federal, state and
local tax withholding) equal to (i) the Reliance Market Value, multiplied by
(ii) the number of shares of Continental Phantom Stock specified for such
individual in the Continental Disclosure Letter (as defined in Section 2.01).
Continental shall make such payment at the Effective Time to each individual
provided that the individual delivers to Continental his written acceptance of
such payment as full and complete consideration for the cancellation of each
share of Continental Phantom Stock held by him.
Section 1.07 Directors and Officers of Reliance Bank after Effective
Time. At the Effective Time, the directors and officers of Reliance Bank shall
consist of the Directors and Officers of Reliance Bank serving immediately prior
to the Effective Time.
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Section 1.08 Alternative Structure. Notwithstanding anything to the
contrary contained in this Agreement, prior to the Effective Time, Reliance may
specify that the structure of the transactions contemplated hereby be revised
and Continental, Reliance and Reliance Bank shall enter into such alternative
transactions as Reliance may determine to effect the purposes of this Agreement;
provided, however, that such revised structure shall not adversely affect the
tax effects or economic benefits of the transactions contemplated hereby to the
holders of Continental Common Stock and shall not materially delay the closing
of the merger (the "Closing"). This Agreement and any related documents shall be
appropriately amended in order to reflect any such revised structure.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01 Disclosure Letters. On or prior to the execution hereof,
Continental and Reliance have delivered to each other a letter (its "Disclosure
Letter") setting forth, among other items, matters, the disclosure of which is
required or appropriate in relation to any or all of its representations and
warranties (and making specific reference to the Section of this Agreement to
which they relate), other than Section 2.03(h); provided, that (a) no such fact,
circumstance or event is required to be set forth in the Disclosure Letter as an
exception to a representation or warranty if its absence is not reasonably
likely to result in the related representation or warranty being deemed untrue
or incorrect under the standards established by Section 2.02, and (b) the mere
inclusion of an item in the Disclosure Letter shall not be deemed an admission
by a party that such item represents a material exception or that such item is
reasonably likely to result in a Material Adverse Effect (as defined in Section
2.02(b)).
Section 2.02 Standards.
(a) No representation or warranty of Continental or Reliance contained
in Section 2.03 or 2.04, respectively, shall be deemed untrue or incorrect, and
no party hereto shall be deemed to have breached a representation or warranty,
on account of the existence of any fact, circumstance or event unless, as a
consequence of such fact, circumstance or event, individually or taken together
with all other facts, circumstances or events inconsistent with any paragraph of
Section 2.03 or 2.04, as applicable, there is reasonably likely to exist a
Material Adverse Effect. Continental's representations, warranties and covenants
contained in this Agreement shall not be deemed to be untrue or breached as a
result of effects arising solely from actions taken in compliance with a written
request of Reliance.
(b) As used in this Agreement, the term "Material Adverse Effect" means
either (i) an effect which is material and adverse to the business, financial
condition or results of operations of Continental or Reliance, as the context
may dictate, and its subsidiaries taken as a whole; provided, however, that any
such effects resulting from any changes (A) in law, rule or regulation or
generally accepted accounting principles or interpretations thereof that applies
to both Reliance and Reliance Bank or Continental, as the case may be, or (B)
changes in interest rates shall not
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be considered in determining if a Material Adverse Effect has occurred; or (ii)
the failure of (x) a representation or warranty contained in Section
2.03(a)(iv), 2.03(d), 2.03(h)(iii), 2.04(a)(iv), 2.04(i)(iii) or 2.04(l) to be
true and correct or (y) a representation or warranty contained in the last
sentence of each of Section 2.03(f) or 2.04(f), the second sentence of each of
2.03(g)(i) or 2.04(h)(i) and the first two sentences of each of Section 2.03(b)
or 2.04(b) to be true and correct in all material respects.
(c) For purposes of this Agreement, "knowledge" shall mean, with
respect to a party hereto, actual knowledge of the members of the Board of
Directors of that party, its counsel and any officer of that party with the
title ranking not less than senior vice president.
Section 2.03 Representations and Warranties of Continental. Subject to
Sections 2.01 and 2.02, Continental represents and warrants to Reliance that,
except as specifically disclosed in the Disclosure Letter of Continental:
(a) Organization. (i) Continental is a stock commercial bank duly
organized, validly existing and in good standing under the laws of the State of
New York. Each Subsidiary of Continental is a corporation, limited liability
company or partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization. Each of
Continental and its Subsidiaries has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. As used in this Agreement, unless the context requires otherwise, the
term "Subsidiary" when used with respect to any party means any corporation or
other organization, whether incorporated or unincorporated, which is
consolidated with such party for financial reporting purposes or which is
controlled, directly or indirectly, by such party.
(ii) Continental and each Subsidiary of Continental is duly
qualified and is in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification necessary.
(iii) The Continental Disclosure Letter sets forth all of the
Subsidiaries of Continental and all entities (whether corporations,
partnerships, or similar organizations), including the corresponding percentage
ownership in which Continental owns, directly or indirectly, 5% or more of the
ownership interests as of the date of this Agreement and indicates for each
Subsidiary, as of such date, its jurisdiction of organization and the
jurisdiction wherein it is qualified to do business. All such Subsidiaries and
ownership interests are in compliance with all applicable laws, rules and
regulations relating to direct investments in equity ownership interests.
Continental owns, either directly or indirectly, all of the outstanding capital
stock of each of its Subsidiaries. No Subsidiary of Continental is an "insured
depositary institution" as defined in the Federal Deposit Insurance Act, as
amended (the "FDIA"), and applicable regulations thereunder. All of the shares
of capital stock of each of the Subsidiaries held by Continental or by another
Subsidiary of Continental are fully paid, nonassessable and not subject to any
preemptive rights and are owned by Continental or a Subsidiary of Continental
free and clear of any claims, liens, encumbrances or restrictions (other than
those imposed by applicable
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federal and state securities laws) and there are no agreements or understandings
with respect to the voting or disposition of any such shares.
(iv) The deposits of Continental are insured by the Bank
Insurance Fund of the Federal Deposit Insurance Corporation (the "FDIC") to the
extent provided in the FDIA.
(b) Capital Structure. (i) The authorized capital stock of Continental
consists of 3,000,000 shares of Continental Common Stock. As of the date of this
Agreement: (A) 921,735 shares of Continental Common Stock were issued and
outstanding, (B) no shares of Continental Common Stock were reserved for
issuance and (C) no shares of Continental Common Stock were held by Continental
in its treasury or by its Subsidiaries. All outstanding shares of Continental
Common Stock are validly issued, fully paid and nonassessable and not subject to
any preemptive rights and, with respect to shares held by Continental in its
treasury or by its Subsidiaries, are free and clear of all liens, claims,
encumbrances or restrictions (other than those imposed by applicable federal and
state securities laws) and there are no agreements or understandings with
respect to the voting or disposition of any such shares. The Continental
Disclosure Letter sets forth a complete and accurate list of all Continental
Phantom Stock units that have been issued.
(ii) As of the date of this Agreement, except for this
Agreement, the Option Agreement and as set forth in the Continental Disclosure
Letter, neither Continental nor any of its Subsidiaries has or is bound by any
outstanding options, warrants, calls, rights, convertible securities,
commitments or agreements of any character obligating Continental or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, any additional shares of capital stock of Continental or any of its
Subsidiaries or obligating Continental or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right, convertible
security, commitment or agreement. As of the date hereof, there are no
outstanding contractual obligations of Continental or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of
Continental or any of its Subsidiaries.
(c) Authority. Continental has all requisite corporate power and
authority to enter into this Agreement and, subject to approval of this
Agreement by the requisite vote of the stockholders of Continental and receipt
of all required regulatory or governmental approvals as contemplated by Section
5.01(b) of this Agreement, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement, and, subject to the approval of
this Agreement by the stockholders of Continental, the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate actions on the part of Continental. This Agreement has been duly
executed and delivered by Continental and constitutes a valid and binding
obligation of Continental, enforceable in accordance with its terms subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to general principles
of equity, whether applied in a court of law or a court of equity.
(d) Fairness Opinion. Continental has received the opinion of Sandler
X'Xxxxx & Partners, L.P. to the effect that, as of the date hereof, the Merger
Consideration to be received by the stockholders of Continental is fair, from a
financial point of view, to such stockholders.
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(e) No Violations. Subject to approval of this Agreement by
Continental's stockholders, the execution, delivery and performance of this
Agreement by Continental do not, the execution, delivery and performance of the
Option Agreement by Continental will not and the consummation of the
transactions contemplated hereby or thereby by Continental will not, constitute
(i) a breach or violation of, or a default under, any law, including any
Environmental Law (as defined in Section 2.03(s)), rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement, indenture
or instrument of Continental or any Subsidiary of Continental or to which
Continental or any of its Subsidiaries (or any of their respective properties)
is subject, (ii) a breach or violation of, or a default under, the organization
certificate or articles of incorporation or bylaws of Continental or any
Subsidiary of Continental or (iii) a breach or violation of, or a default under
(or an event which with due notice or lapse of time or both would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets of Continental
or any Subsidiary of Continental under, any of the terms, conditions or
provisions of any note, bond, indenture, deed of trust, loan agreement or other
agreement, instrument or obligation to which Continental or any Subsidiary of
Continental is a party, or to which any of their respective properties or assets
may be bound or affected; and the consummation of the transactions contemplated
hereby by Continental or, upon its execution and delivery, by the Option
Agreement will not require any approval, consent or waiver under any such law,
rule, regulation, judgment, decree, order, governmental permit or license or the
approval, consent or waiver of any other party to any such agreement, indenture
or instrument, other than (i) the required approvals, consents and waivers
referred to in Section 5.01(b), (ii) the approval of the stockholders of
Continental referred to in Section 2.03(f) (ii), and (iii) such approvals,
consents or waivers as are required under the federal and state securities or
"blue sky" laws in connection with the transactions contemplated by this
Agreement or the Option Agreement.
(f) Consents and Approvals. (i) Except as referred to herein or in
connection, or in compliance, with the provisions of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 0000 (xxx "XXX Xxx"), the Securities Act of 1933,
as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Home Owners' Loan Act of 1933, as amended (the
"HOLA"), the Bank Merger Act, as amended (the "BMA"), the FDIA, the NYBL, the
rules and regulations of the OTS, and the environmental, corporation, securities
or "blue sky" laws or regulations of the various states, no filing or
registration with, or authorization, consent or approval of, any other party is
necessary for the consummation by Continental of the Merger or the other
transactions contemplated by this Agreement. As of the date hereof, Continental
knows of no reason why the approvals, consents and waivers of governmental
authorities referred to in this Section 2.03(f) that are required to be obtained
should not be obtained without the imposition of any condition or restriction
referred to in the last sentence in Section 5.01(b).
(ii) The affirmative vote of the holders of two thirds of the
outstanding shares of Continental entitled to vote on the approval of this
Agreement is the only stockholder vote required for approval of this plan and
confirmation of the Merger and the other transactions contemplated hereby.
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(g) Reports. (i) As of their respective dates, neither Continental's
Annual Report on Form F-2 for the fiscal year ended December 31, 1996, nor any
other document filed subsequent to December 31, 1996 under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act, each in the form (including exhibits and any
documents specifically incorporated by reference therein) filed with the FDIC or
the Securities and Exchange Commission (the "SEC") (collectively, "Continental's
Reports"), contained or will contain any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. Each of the balance sheets contained
or incorporated by reference in Continental's Reports (including in each case
any related notes and schedules) fairly presented the financial position of the
entity or entities to which it relates as of its date and each of the statements
of income and of changes in stockholders' equity and of cash flows, contained or
incorporated by reference in Continental's Reports (including in each case any
related notes and schedules), fairly presented the results of operations,
stockholders' equity and cash flows, as the case may be, of the entity or
entities to which it relates for the periods set forth therein (subject, in the
case of unaudited interim statements, to normal year-end audit adjustments that
are not material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein.
(ii) Continental and each of its Subsidiaries have each timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since December 31, 1992 with (A) the NYBD, (B) the FDIC, (C) the National
Association of Securities Dealers, Inc. (the "NASD"), and (D) any other
self-regulatory organization ("SRO"), and have paid all fees and assessments due
and payable in connection therewith.
(h) Absence of Certain Changes or Events. Except as disclosed in
Continental's Reports filed on or prior to the date of this Agreement, true and
complete copies of which have been provided by Continental to Reliance, since
December 31, 1996 (i) Continental and its Subsidiaries have not incurred any
liability, except in the ordinary course of their business consistent with past
practice, (ii) Continental and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course of such businesses and (iii)
there has not been any condition, event, change or occurrence that, individually
or in the aggregate, has had, or is reasonably likely to have, a Material
Adverse Effect on Continental.
(i) Taxes. All federal, state, local and foreign tax returns required
to be filed by or on behalf of Continental or any of its Subsidiaries have been
timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all material respects. All taxes shown on
such returns, all taxes required to be shown on returns for which extensions
have been granted, and all other taxes required to be paid by Continental or any
of its Subsidiaries, have been paid in full or adequate provision has been made
for any such taxes on Continental's balance sheet (in accordance with generally
accepted accounting principles). For purposes of this Section 2.03(i), the term
"taxes" shall include all income, franchise, gross receipts, real and personal
property, real property transfer and gains, wage and employment taxes. As of the
date of this Agreement, there
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is no audit examination, deficiency, or refund litigation with respect to any
taxes of Continental or any of its Subsidiaries, and no claim has been made by
any authority in a jurisdiction where Continental or any of its Subsidiaries do
not file tax returns that Continental or any such Subsidiary is subject to
taxation in that jurisdiction. All taxes, interest, additions, and penalties due
with respect to completed and settled examinations or concluded litigation
relating to Continental or any of its Subsidiaries have been paid in full or
adequate provision has been made for any such taxes on Continental's balance
sheet (in accordance with generally accepted accounting principles). Continental
and its Subsidiaries have not executed an extension or waiver of any statute of
limitations on the assessment or collection of any material tax due that is
currently in effect. Continental and each of its Subsidiaries has withheld and
paid all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party, and Continental and each of its Subsidiaries
has timely complied with all applicable information reporting requirements under
Part III, Subchapter A of Chapter 61 of the Internal Revenue Code of 1986, as
amended (the "Code") and similar applicable state and local information
reporting requirements.
(j) Absence of Claims. Except as set forth in the Continental
Disclosure Letter, no litigation, proceeding, controversy, claim or action
before any court or governmental agency is pending, against Continental or any
of its Subsidiaries and, to the best of Continental's knowledge, no such
litigation, proceeding, controversy, claim or action has been threatened.
(k) Absence of Regulatory Actions. Neither Continental nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any action, proceeding, order or directive by,
or is a recipient of any extraordinary supervisory letter from, federal or state
governmental authorities charged with the supervision or regulation of
depository institutions or depository institution holding companies or engaged
in the insurance of bank and/or savings and loan deposits (the "Government
Regulators") nor has it been advised by any Government Regulator that it is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such action, proceeding, order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter or similar undertaking.
(l) Agreements. (i) Except as set forth in the Continental Disclosure
Letter and except for the Option Agreement and arrangements made in the ordinary
course of business, Continental and its Subsidiaries are not bound by any
material contract (as defined in Section 335.312 of the rules and regulations of
the FDIC) to be performed after the date hereof that has not been filed with or
incorporated by reference in Continental's Reports. Except as disclosed in
Continental's Reports filed prior to the date of this Agreement, neither
Continental nor any of its Subsidiaries is a party to an oral or written (A)
consulting agreement (other than data processing, software programming and
licensing contracts entered into in the ordinary course of business) not
terminable on thirty (30) days' or less notice, (B) agreement with any executive
officer or other key employee of Continental or any of its Subsidiaries the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving Continental or any of its
Subsidiaries of the nature contemplated by this Agreement or the Option
Agreement,
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(C) agreement with respect to any employee or director of Continental or any of
its Subsidiaries providing any term of employment or compensation guarantee
extending for a period longer than sixty (60) days or for the payment of in
excess of $30,000 per annum, (D) agreement or plan, including any stock option
plan, stock appreciation rights plan, phantom stock awards or plans, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
Option Agreement or the value of any of the benefits of which will be calculated
on the basis of any of the transactions contemplated by this Agreement or the
Option Agreement or (E) agreement containing covenants that limit the ability of
Continental or any of its Subsidiaries to compete in any line of business or
with any person, or that involve any restriction on the geographic area in
which, or method by which, Continental (including any successor thereof) or any
of its Subsidiaries may carry on its business (other than as may be required by
law or any regulatory agency).
(ii) Neither Continental nor any of its Subsidiaries is in
default under or in violation of any provision, and is not aware of any fact or
circumstance that would constitute a default or violation, of any note, bond,
indenture, mortgage, deed of trust, loan agreement or other agreement to which
it is a party or by which it is bound or to which any of its respective
properties or assets is subject.
(iii) Continental and each of its Subsidiaries owns or
possesses valid and binding license and other rights to use without payment all
patents, copyrights, trade secrets, trade names, servicemarks and trademarks
used in its businesses and neither Continental nor any of its Subsidiaries has
received any notice of conflict with respect thereto that asserts the right of
others. Each of Continental and its Subsidiaries has performed all the
obligations required to be performed by it and are not in default under any
contact, agreement, arrangement or commitment relating to any of the foregoing.
(m) Labor Matters. Except as set forth in the Continental Disclosure
Letter, neither Continental nor any of its Subsidiaries is or has ever been a
party to, or is or has ever been bound by, any collective bargaining agreement,
contract, or other agreement or understanding with a labor union or labor
organization with respect to its employees, nor is Continental or any of its
Subsidiaries the subject of any proceeding asserting that it has committed an
unfair labor practice or seeking to compel it or any such Subsidiary to bargain
with any labor organization as to wages and conditions of employment, nor is the
management of Continental aware of any strike, other labor dispute or
organizational effort involving Continental or any of its Subsidiaries pending
or threatened. Continental and its Subsidiaries are in compliance with
applicable laws regarding employment of employees and retention of independent
contractors and are in compliance with all applicable employment tax laws.
(n) Employee Benefit Plans. The Continental Disclosure Letter contains
a complete and accurate list of all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance, severance and other
benefit plans, contracts, agreements, arrangements, including, but not limited
to, "employee benefit plans," as defined in Section 3(3) of the Employee
Retirement
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Income Security Act of 1974, as amended ("ERISA"), incentive and welfare
policies, contracts, plans and arrangements and all trust agreements related
thereto with respect to any present or former directors, officers, or other
employees of Continental or any of its Subsidiaries (hereinafter referred to
collectively as the "Employee Plans"), except for plans, contracts, agreements
or arrangements involving liability or expenses not exceeding $10,000
individually or in the aggregate. All of the Employee Plans comply in all
material respects with all applicable requirements of ERISA, the Code and other
applicable laws; there has occurred no "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) which is likely to result in
the imposition of any penalties or taxes under Section 502(i) of ERISA or
Section 4975 of the Code upon Continental or any of its Subsidiaries. No
liability to the Pension Benefit Guaranty Corporation has been or is expected by
Continental or any of its Subsidiaries to be incurred with respect to any
Employee Plan which is subject to Title IV of ERISA ("Pension Plan"), or with
respect to any "single-employer plan" (as defined in Section 4001(a) of ERISA)
currently or formerly maintained by Continental or any entity which is
considered one employer with Continental under Section 4001(b)(1) of ERISA or
Section 414 of the Code (an "ERISA Affiliate"). No Pension Plan had an
"accumulated funding deficiency" (as defined in Section 302 of ERISA (whether or
not waived)) as of the last day of the end of the most recent plan year ending
prior to the date hereof; the fair market value of the assets of each Pension
Plan exceeds the present value of the "benefit liabilities" (as defined in
Section 4001(a)(16) of ERISA) under such Pension Plan as of the end of the most
recent plan year with respect to the respective Pension Plan ending prior to the
date hereof, calculated on the basis of the actuarial assumptions used in the
most recent actuarial valuation for such Pension Plan as of the date hereof; and
no notice of a "reportable event" (as defined in Section 4043 of ERISA) for
which the 30-day reporting requirement has not been waived has been required to
be filed for any Pension Plan within the 12-month period ending on the date
hereof. Neither Continental nor any Subsidiary of Continental has provided, or
is required to provide, security to any Pension Plan or to any single-employer
plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code. Neither
Continental, its Subsidiaries, nor any ERISA Affiliate has contributed to any
"multiemployer plan," as defined in Section 3(37) of ERISA, on or after
September 26, 1980. Except for the Continental Bank 401(k) Plan, each Employee
Plan of Continental or of any of its Subsidiaries which is an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) and which is intended to be
qualified under Section 401(a) of the Code (a "Qualified Plan") has received a
favorable determination letter from the Internal Revenue Service (the "IRS") and
Continental and its Subsidiaries are not aware of any circumstances likely to
result in revocation of any such favorable determination letter. Each Qualified
Plan which is an "employee stock ownership plan" (as defined in Section
4975(e)(7) of the Code) has satisfied all of the applicable requirements of
Sections 409 and 4975(e)(7) of the Code and the regulations thereunder in all
material respects and any assets of any such Qualified Plan that are not
allocated to participants' individual accounts are pledged as security for, and
may be applied to satisfy, any securities acquisition indebtedness. There is no
pending or, to the knowledge of Continental, threatened litigation,
administrative action or proceeding relating to any Employee Plan. There has
been no announcement or commitment by Continental or any Subsidiary of
Continental to create an additional Employee Plan, or to amend an Employee Plan
except for amendments required by applicable law which do not materially
increase the cost of such Employee Plan; and except as specifically identified
in the Continental Disclosure Letter, Continental and its Subsidiaries do not
have any obligations for post-retirement or
-14-
post-employment benefits under any Employee Plan that cannot be amended or
terminated upon no more than sixty (60) days' notice without incurring any
liability thereunder, except for coverage required by Part 6 of Title I of ERISA
or Section 4980B of the Code. With respect to Continental or any of its
Subsidiaries, except as specifically identified in the Continental Disclosure
Letter, the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment or series of
payments by Continental or any Subsidiary of Continental to any person which is
an "excess parachute payment" (as defined in Section 280G of the Code), increase
or secure (by way of a trust or other vehicle) any benefits payable under any
Employee Plan other than a Qualified Plan, or except to the extent contemplated
by Sections 1.06 and 4.03 accelerate the time of payment or vesting of any such
benefit. With respect to each Employee Plan, Continental has supplied to
Reliance a true and correct copy of (A) the annual report on the applicable form
of the Form 5500 series filed with the IRS for the most recent three plan years,
(B) such Employee Plan, including amendments thereto, (C) each trust agreement,
insurance contract or other funding arrangement relating to such Employee Plan,
including amendments thereto, (D) the most recent summary plan description and
summary of material modifications thereto for such Employee Plan, including
amendments thereto, if the Employee Plan is subject to Title I of ERISA, (E) the
most recent actuarial report or valuation if such Employee Plan is a Pension
Plan and any subsequent changes to the actuarial assumptions contained therein
and (F) the most recent determination letter issued by the IRS if such Employee
Plan is a Qualified Plan.
(o) Termination Benefits. The Continental Disclosure Letter contains a
complete and accurate schedule showing as of the date of this Agreement the
monetary amounts payable, subject to a determination of the Reliance Market
Value, as applicable, and identifying the in-kind benefits due under the
Specified Compensation and Benefit Programs (as defined herein) for each Named
Individual (as defined herein) individually. For purposes hereof, "Specified
Compensation and Benefit Programs" shall include all employment agreements,
change in control agreements, severance or special termination agreements,
severance plans, pension, retirement or deferred compensation plans for
non-employee directors, supplemental executive retirement programs, tax
indemnification agreements, outplacement programs, cash bonus programs, stock
appreciation right, phantom stock or stock unit plan, and health, life,
disability and other insurance or welfare plans, but shall not include any
tax-qualified pension, profit-sharing or employee stock ownership plan. For
purposes hereof, "Named Individual" shall include each non-employee director of
Continental or any of its subsidiaries and each executive officer of
Continental.
(p) Title to Assets. Continental and each of its Subsidiaries has good
and marketable title to its properties and assets other than property as to
which it is lessee, in which case the related lease is valid and in full force
and effect. Each lease pursuant to which Continental or any of its Subsidiaries
is lessor is valid and in full force and effect and no lessee under any such
lease is in default or in violation of any provisions of any such lease. All
material tangible properties of Continental and each of its Subsidiaries are in
a good state of maintenance and repair, conform with all applicable ordinances,
regulations and zoning laws and are considered by Continental to be adequate for
the current business of Continental and its Subsidiaries.
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(q) Compliance with Laws. Continental and each of its Subsidiaries has
all permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, federal, state, local
and foreign governmental or regulatory bodies that are required in order to
permit it to carry on its business as it is presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect, and, to the best knowledge of Continental, no suspension or
cancellation of any of them is threatened. Since the date of its incorporation,
the corporate affairs of Continental have not been conducted in violation of any
law, ordinance, regulation, order, writ, rule, decree or approval of any federal
or state regulatory authority having jurisdiction over insured depositary
institutions check cashing services or their holding companies, the SEC, the
NASD, or any other SRO (each, a "Governmental Entity"). The business of
Continental and its Subsidiaries are not being conducted in violation of any
law, ordinance, regulation, order, writ, rule, decree or condition to approval
of any Governmental Entity.
(r) Fees. Other than financial advisory services performed for
Continental by Sandler X'Xxxxx & Partners, L.P., pursuant to an agreement, a
true and complete copy of which has been previously delivered to Reliance,
neither Continental nor any of its Subsidiaries, nor any of their respective
officers, directors, employees or agents, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions, or finder's fees, and no broker or finder has acted directly or
indirectly for Continental or any Subsidiary of Continental, in connection with
the Agreement or the transactions contemplated hereby.
(s) Environmental Matters. (i) With respect to Continental and each of its
Subsidiaries:
(A) Each of Continental and its Subsidiaries, the
Participation Facilities, and, to Continental's knowledge, the Loan
Properties (each as defined herein) are, and have been, in substantial
compliance with all Environmental Laws (as defined herein);
(B) There is no suit, claim, action, demand,
executive or administrative order, directive, investigation or
proceeding pending or, to Continental's knowledge, threatened, before
any court, governmental agency or board or other forum against it or
any of its Subsidiaries or any current or, to Continental's knowledge,
former Participation Facility (x) for alleged noncompliance (including
by any predecessor) with, or liability under, any Environmental Law or
(y) relating to the Release (as defined herein) into the environment of
any Hazardous Material (as defined herein), whether or not occurring at
or on a site owned, leased or operated by it or any of its Subsidiaries
or any Participation Facility;
(C) To Continental's knowledge, there is no suit,
claim, action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened, before any court,
governmental agency or board or other forum relating to or against any
Loan Property (or Continental or any of its Subsidiaries in respect of
such Loan Property) (x) relating to alleged noncompliance (including by
any predecessor) with, or liability under, any Environmental Law or (y)
relating to the Release into the
-16-
environment of any Hazardous Material whether or not occurring at or
on a site owned, leased or operated by a Loan Property;
(D) To Continental's knowledge, the properties currently or
formerly owned or operated by Continental or any of its Subsidiaries
(including, without limitation, soil, groundwater or surface water on,
under or adjacent to the properties, and buildings thereon) do not
contain any Hazardous Material other than in compliance with
applicable Environmental Law (provided, however, that with respect to
properties formerly owned or operated by Continental or any of its
Subsidiaries, such representation is limited to the period Continental
or any such Subsidiary owned or operated such properties);
(E) None of Continental or any of its Subsidiaries has received
any notice, demand letter, executive or administrative order,
directive or request for information from any federal, state, local or
foreign governmental entity or any third party relating to Hazardous
Materials or Remediation (as defined herein) thereof or indicating
that it may be in violation of, or liable under, any Environmental
Law, or any actual or, to Continental's knowledge, potential
administrative or judicial proceedings in connection with any of the
foregoing;
(F) To Continental's knowledge, there are no
underground storage tanks on, in or under any properties currently or
formerly owned or operated by Continental or any of its Subsidiaries,
any Participation Facility or any Loan Property and no underground
storage tanks have been closed or removed from any properties currently
or formerly owned or operated by Continental or any of its
Subsidiaries, any Participation Facility or any Loan Property which are
or have been in the ownership of Continental or any of its
Subsidiaries; and
(G) To Continental's knowledge, during the period of
(l) Continental or any of its Subsidiaries' ownership or operation of
any of their respective current or formerly owned properties, (m)
Continental's or any of its Subsidiaries' participation in the
management of any Participation Facility, or (n) its or any of its
Subsidiaries' holding of a security interest in a Loan Property, there
has been no Release and there is currently no threatened Release of
Hazardous Material in, on, under, affecting or migrating to such
properties. To Continental's knowledge, prior to the period of (x)
Continental's or any of its Subsidiaries' ownership or operation of any
of their respective current properties, (y) Continental's or any of its
Subsidiaries' participation in the management of any Participation
Facility, or (z) Continental's or any of its Subsidiaries' holding of a
security interest in a Loan Property, there was no Release of Hazardous
Material in, on, under, affecting or migrating to any such property,
Participation Facility or Loan Property.
(ii) The following definitions apply for purposes of this
Section 2.03(s): (u) "Loan Property" means any property in which the applicable
party (or a Subsidiary of it) holds a security interest, and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property; (v) "Participation Facility" means any facility in
which the applicable party (or a Subsidiary of it) participates in the
management (including all
-17-
property held as trustee or in any other fiduciary capacity) and, where required
by the context, includes the owner or operator of such property, but only with
respect to such property; (w) "Environmental Law" means (i) any federal, state
or local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, directive, executive or
administrative order, judgment, decree, injunction, legal requirement or
agreement with any governmental entity, (A) relating to the protection,
preservation or restoration of the environment (which includes, without
limitation, air, water vapor, surface water, groundwater, drinking water supply,
structures, soil, surface land, subsurface land, plant and animal life or any
other natural resource), or to human health or safety as it relates to Hazardous
Materials, or (B) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of, Hazardous Materials, in each case as amended and as now in
effect. The term Environmental Law includes, without limitation, (i) the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976 (including, but not
limited to, the Hazardous and Solid Waste Amendments thereto and Subtitle I
relating to underground storage tanks), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970 as it
relates to Hazardous Materials, the Federal Hazardous Substances Transportation
Act, the Emergency Planning and Community Right-To-Know Act, the Safe Drinking
Water Act, the Endangered Species Act, the National Environmental Policy Act,
the Rivers and Harbors Appropriation Act or any so-called "Superfund" or
"Superlien" law, each as amended and as now or hereafter in effect, (ii) any
common law or equitable doctrine (including, without limitation, injunctive
relief and tort doctrines such as negligence, nuisance, trespass and strict
liability) that may impose liability or obligations for injuries or damages due
to, or threatened as a result of, the presence of or exposure to any Hazardous
Material and (iii) any state and local laws, statutes, ordinances, rules,
regulations and the like, as well as common law: conditioning transfer of
property upon a negative declaration or other approval of a governmental
authority of the environmental condition of the property; requiring notification
or disclosure of Releases of "Hazardous Substances" or other environmental
condition of the Loan Property to any governmental authority or other person or
entity, whether or not in connection with transfer of title to or interest in
property; imposing conditions or requirements in connection with permits or
other authorization for lawful activity; relating to nuisance, trespass or other
causes of action related to the Loan Property; and relating to wrongful death,
personal injury, or property or other damage in connection with any physical
condition or use of the Loan Property; (x) "Hazardous Material" means any
substance (whether solid, liquid or gas) which is listed, defined, designated or
classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, under any Environmental Law, whether by type or by quantity,
including any substance containing any such substance as a component. Hazardous
Material includes, without limitation, any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste, extremely
hazardous wastes, or words of similar meanings or regulatory effect under any
Environmental Laws, including, but not limited to, oil or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl, flammables and explosives; (y) "Release" of any
Hazardous Material includes, but is
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not limited to, any release, deposit, discharge, emission, leaking, spilling,
seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping,
disposing or other movement of Hazardous Materials in violation of or requiring
action under any applicable Environmental Law; and (z) "Remediation" includes,
but is not limited to, any response, remedial, removal, or corrective action,
any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate
any Hazardous Material, any actions to prevent, cure or mitigate any Release of
Hazardous Materials, any action to comply with any Environmental Laws or with
any permits issued pursuant thereto, any inspection, investigation, study,
monitoring, assessment, audit, sampling and testing, laboratory or other
analysis, or evaluation relating to any Hazardous Materials.
(t) Loan Portfolio; Allowance; Asset Quality. (i) With respect to each loan
owned by Continental or its Subsidiaries in whole or in part (each, a "Loan"),
to the best knowledge of Continental:
(A) the note and the related security documents are
each legal, valid and binding obligations of the maker or obligor
thereof, enforceable against such maker or obligor in accordance with
their terms;
(B) neither Continental nor any of its Subsidiaries
nor any prior holder of a Loan has modified the note or any of the
related security documents in any material respect or satisfied,
cancelled or subordinated the note or any of the related security
documents except as otherwise disclosed by documents in the applicable
Loan file;
(C) Continental or a Subsidiary is the sole holder of
legal and beneficial title to each Loan (or Continental's applicable
participation interest, as applicable), except as otherwise referenced
on the books and records of Continental;
(D) the note and the related security documents,
copies of which are included in the Loan files, are true and correct
copies of the documents they purport to be and have not been suspended,
amended, modified, cancelled or otherwise changed except as otherwise
disclosed by documents in the applicable Loan file;
(E) there is no pending, threatened condemnation
proceeding or similar proceeding affecting the property which serves as
security for a Loan, except as otherwise referenced on the books and
records of Continental;
(F) there is no litigation or proceeding pending,
threatened, relating to the property which serves as security for a
Loan that would have a Material Adverse Effect upon the related Loan;
and
(G) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid, binding
and enforceable.
(ii) The allowance for possible losses reflected in
Continental's audited statement of condition at December 31, 1996 was, and the
allowance for possible losses shown
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on the balance sheets in Continental's Reports for periods ending after December
31, 1996 will be, adequate, as of the dates thereof, under generally accepted
accounting principles applicable to commercial banks consistently applied, and
since December 31, 1996 no regulatory agency has requested or required that
Continental increase any of such amounts.
(iii) The Continental Disclosure Letter sets forth by category
the amounts of all loans, leases, advances, credit enhancements, other
extensions of credit, commitments and interest-bearing assets of Continental and
its Subsidiaries that have been classified by any bank examiner (whether
regulatory or internal) as "Other Loans Specially Mentioned," "Special Mention,"
"Substandard," "Doubtful," "Loss," "Classified," "Criticized," "Credit Risk
Assets," "Concerned Loans" (in the latter two cases, to the extent available) or
words of similar import, and Continental and its Subsidiaries shall promptly
after the end of any month inform Reliance of any such classification arrived at
any time after the date hereof. The Other Real Estate Owned ("OREO") included in
any non-performing assets of Continental or any of its Subsidiaries is carried
net of reserves at the lower of cost or fair value, less estimated selling
costs, based on current independent appraisals or evaluations or current
management appraisals or evaluations; provided, however, that "current" shall
mean within the past 12 months.
(u) Deposits. None of the deposits of Continental or any of its
Subsidiaries is a "brokered" deposit.
(v) Antitakeover Provisions Inapplicable. Continental and its
Subsidiaries have taken all actions required to exempt Continental, the
Agreement and the Merger and the Option Agreement from any provisions of an
antitakeover nature in their organization certificate and bylaws and the
provisions of any federal or state "antitakeover," "fair price," "moratorium,"
"control share acquisition" or similar laws or regulations.
(w) Material Interests of Certain Persons. Except as disclosed in
Continental's Proxy Statement for its 1997 Annual Meeting of Stockholders, no
officer or director of Continental, or any "associate" (as such term is defined
in Rule 12b-2 under the Exchange Act) of any such officer or director, has any
material interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of Continental or
any of its Subsidiaries. No such interest has been created or modified since the
date of the last regulatory examination of Continental.
(x) Insurance. Continental and its Subsidiaries are presently insured,
and since December 31, 1994, have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by Continental and its Subsidiaries are in full force and effect,
Continental and its Subsidiaries are not in default thereunder and all material
claims thereunder have been filed in due and timely fashion.
(y) Investment Securities; Borrowings. (i) Except for investments in
Federal Home Loan Bank ("FHLB") Stock and pledges to secure FHLB borrowings and
reverse repurchase
-20-
agreements entered into in arms-length transactions pursuant to normal
commercial terms and conditions and entered into in the ordinary course of
business and restrictions that exist for securities to be classified as "held to
maturity," none of the investments reflected in the consolidated balance sheet
of Continental included in Continental's Report on Form F-2 for the year ended
December 31, 1996, and none of the investment securities held by it or any of
its Subsidiaries since December 31, 1996, is subject to any restriction
(contractual or statutory) that would materially impair the ability of the
entity holding such investment freely to dispose of such investment at any time.
(ii) Except as set forth in the Continental Disclosure Letter,
neither Continental nor any Subsidiary is a party to or has agreed to enter into
an exchange-traded or over-the-counter equity, interest rate, foreign exchange
or other swap, forward, future, option, cap, floor or collar or any other
contract that is not included on the consolidated statements of condition and is
a derivative contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that (A) are referred to generically
as "structured notes," "high risk mortgage derivatives," "capped floating rate
notes" or "capped floating rate mortgage derivatives" or (B) are likely to have
changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes, except for those Derivatives Contracts and other
instruments legally purchased or entered into in the ordinary course of
business, consistent with safe and sound banking practices and regulatory
guidance, and listed (as of the date hereof) in the Continental Disclosure
Letter or disclosed in Continental's Reports filed on or prior to the date
hereof.
(iii) Set forth in the Continental Disclosure Letter is a true
and correct list of Continental's borrowed funds (excluding deposit accounts) as
of the date hereof.
(z) Indemnification. Except as provided in Continental's employment
agreements or the organization certificate or bylaws of Continental, neither
Continental nor any Continental Subsidiary is a party to any indemnification
agreement with any of its present or future directors, officers, employees,
agents or other persons who serve or served in any other capacity with any other
enterprise at the request of Continental (a "Covered Person"), and, except as
set forth in the Continental Disclosure Letter, to the best knowledge of
Continental, there are no claims for which any Covered Person would be entitled
to indemnification under the organization certificate or bylaws of Continental
or any Subsidiary of Continental, applicable law regulation or any
indemnification agreement.
(aa) Books and Records. The books and records of Continental and its
Subsidiaries have been, and are being, maintained in accordance with applicable
legal and accounting requirements (including generally accepted accounting
principles ("GAAP")), and reflect in all material respects the substance of
events and transactions that should be included therein.
(bb) Corporate Documents. Continental has delivered to Reliance true and
complete copies of its organization certificate and bylaws. The minute books of
Continental constitute a complete and correct record of all actions taken by the
board of directors of Continental (and each committee thereof) and the
stockholders of Continental. The minute books of each of
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Continental's Subsidiaries constitutes a complete and correct record of all
actions taken by the respective boards of directors (and each committee thereof)
and the stockholders of each such Subsidiary.
(cc) Tax Treatment of the Merger. As of the date hereof, Continental
has no knowledge of any fact or circumstance that would prevent the transactions
contemplated by this Agreement from qualifying as a tax-free reorganization
under the Code.
Section 2.04 Representations and Warranties of Reliance. Subject to
Sections 2.01 and 2.02, Reliance represents and warrants to Continental that,
except as specifically disclosed in the Disclosure Letter of Reliance:
(a) Organization. (i) Reliance is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware
and is a savings association holding company duly registered with the OTS under
the HOLA. Reliance Bank is a savings bank duly incorporated, validly existing
and in good standing under the laws of the United States of America. Each
Subsidiary of Reliance Bank is a corporation, limited liability company or
partnership duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization. Each of Reliance, Reliance
Bank and Reliance Bank's Subsidiaries has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. The only Subsidiary of Reliance is Reliance Bank.
(ii) Reliance, Reliance Bank and each Subsidiary of Reliance
Bank is duly qualified and is in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary.
(iii) The Reliance Disclosure Letter sets forth all of the
Subsidiaries of Reliance Bank and all entities (whether corporations,
partnerships, or similar organizations), including the corresponding percentage
ownership in which Reliance Bank owns, directly or indirectly, 5% or more of the
ownership interests as of the date of this Agreement and indicates for each
Subsidiary, as of the such date, its jurisdiction of organization and the
jurisdiction wherein it is qualified to do business. All such Subsidiaries and
ownership interests are in compliance with all applicable laws, rules and
regulations relating to direct investments in equity ownership interests.
Reliance Bank owns, either directly or indirectly, all of the outstanding
capital stock of each of its Subsidiaries. No Subsidiary of Reliance Bank is an
"insured depositary institution" as defined in the FDIA, and applicable
regulations thereunder. All of the shares of capital stock of each of the
Subsidiaries held by Reliance Bank or by another Subsidiary of Reliance Bank are
fully paid, nonassessable and not subject to any preemptive rights and are owned
by Reliance Bank or a Subsidiary of Reliance Bank free and clear of any claims,
liens, encumbrances or restrictions (other than those imposed by applicable
federal and state securities laws) and there are no agreements or understandings
with respect to the voting or disposition of any such shares.
(iv) The deposits of Reliance Bank are insured by the Savings
Association Insurance Fund of the FDIC to the extent provided in the FDIA.
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(b) Capital Structure. (i) The authorized capital stock of Reliance
consists of 20,000,000 shares of Reliance Common Stock and 4,000,000 shares of
preferred stock, par value $.01 per share (the "Reliance Preferred Stock"). As
of the date of this Agreement, (A) 10,750,820 shares of Reliance Common Stock
were issued and 8,763,369 were outstanding, (B) no shares of Reliance Preferred
Stock were outstanding; (C) no shares of Reliance Preferred Stock were reserved
for issuance and (D) 1,987,451 shares of Reliance Common Stock were held by
Reliance in its treasury or by its subsidiaries. The authorized capital stock of
Reliance Bank consists of 20,000,000 shares of common stock, par value $1.00 per
share and 4,000,000 shares of preferred stock, par value $1.00 per share. As of
the date of this Agreement, 1,000 shares of such common stock were outstanding,
no shares of such preferred stock were outstanding and all outstanding shares of
such common stock were, and as of the Effective Time will be, owned by Reliance.
All outstanding shares of capital stock of Reliance and Reliance Bank are,
validly issued, fully paid and nonassessable and not subject to any preemptive
rights and, with respect to shares held by Reliance in its treasury or by its
Subsidiaries, are free and clear of all liens, encumbrances or restrictions
(other than those imposed by applicable federal or state securities laws) and
there are no agreements or understandings with respect to the voting or
disposition of such shares.
(ii) As of the date of this Agreement, except for this
Agreement, and as set forth in Reliance's Reports (as defined in Section
2.04(h)), neither Reliance nor any of its Subsidiaries has or is bound by any
outstanding options, warrants, calls, rights, convertible securities,
commitments or agreements of any character obligating Reliance or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, any additional shares of capital stock of Reliance or any of its
Subsidiaries or obligating Reliance or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, right, convertible security,
commitment or agreement. As of the date hereof, there are no outstanding
contractual obligations of Reliance or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of Reliance or any of
its Subsidiaries.
(c) Authority. Each of Reliance and Reliance Bank has the requisite
corporate power and authority and subject to receipt of all required regulatory
or governmental approvals as contemplated by Section 5.01(b) of this Agreement,
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement, and the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate actions on the part of
Reliance and Reliance Bank. This Agreement has been duly executed and delivered
by Reliance and Reliance Bank and constitutes a valid and binding obligation of
Reliance and Reliance Bank, enforceable in accordance with its terms subject to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to general principles
of equity, whether applied in a court of law or a court of equity.
(d) [Intentionally Omitted.]
(e) No Violations. The execution, delivery and performance of this
Agreement by Reliance or Reliance Bank do not, and the consummation of the
transactions contemplated hereby will not, constitute (i) a breach or violation
of, or a default under, any law, including any
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Environmental Law rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument of
Reliance or Reliance Bank or to which Reliance or Reliance Bank (or any of their
respective properties) is subject, or enable any person to enjoin the Merger or
the other transactions contemplated hereby, (ii) a breach or violation of, or a
default under, the certificate or articles of incorporation or bylaws of
Reliance or Reliance Bank or (iii) a breach or violation of, or a default under
(or an event which with due notice or lapse of time or both would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets of Reliance or
Reliance Bank under, any of the terms, conditions or provisions of any note,
bond, indenture, deed of trust, loan agreement or other agreement, instrument or
obligation to which Reliance or Reliance Bank is a party, or to which any of its
respective properties or assets may be bound or affected; and the consummation
of the transactions contemplated hereby will not require any approval, consent
or waiver under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or waiver of any other
party to any such agreement, indenture or instrument, other than the required
approvals, consents and waivers of governmental authorities referred to in
Section 5.01(b). Reliance and Reliance Bank know of no reason why the approvals,
consents and waivers of governmental authorities referred to in Section 5.01(b)
should not be obtained without the imposition of any material conditions or
restrictions.
(f) Consents. Except as referred to herein or in connection, or in
compliance, with the provisions of the HSR Act, the Securities Act, the Exchange
Act, the HOLA, the BMA, the FDIA, the NYBL the rules and regulations of the OTS,
and the environmental, corporation, securities or blue sky laws or regulations
of the various states, no filing or registration with, or authorization, consent
or approval of, any other party is necessary for the consummation by Reliance or
Reliance Bank of the Merger or the other transactions contemplated by this
Agreement. As of the date hereof, Reliance knows of no reason why the approvals,
consents and waivers of governmental authorities referred to in this Section
2.04(f) that are required to be obtained should not be obtained without the
imposition of any material condition or restriction referred to in the last
sentence of Section 5.01(b).
(g) [Intentionally Omitted.]
(h) Reports. (i) As of their respective dates, neither Reliance's
Annual Report on Form 10-K for the fiscal year ended June 30, 1996, nor any
other document filed subsequent to June 30, 1996 under Section 13(a), 13(c), 14
or 15(d) of the Exchange Act, each in the form (including exhibits and any
documents specifically incorporated by reference therein) filed with the SEC
(collectively, "Reliance's Reports"), contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. Each
of the balance sheets contained or incorporated by reference in Reliance's
Reports (including in each case any related notes and schedules) fairly
presented the financial position of the entity or entities to which it relates
as of its date and each of the statements of income and of changes in
stockholders' equity and of cash flows, contained or incorporated by reference
in Reliance's Reports (including in each case any related notes and schedules),
fairly
-24-
presented the results of operations, stockholders' equity and cash flows, as the
case may be, of the entity or entities to which it relates for the periods set
forth therein (subject, in the case of unaudited interim statements, to normal
year-end audit adjustments that are not material in amount or effect), in each
case in accordance with generally accepted accounting principles consistently
applied during the periods involved, except as may be noted therein.
(ii) Reliance and each of its Subsidiaries have each timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since December 31, 1992 with (A) the OTS, (B) the SEC, (C) the NASD and (D)
any other self-regulatory organization, and have paid all fees and assessments
due and payable in connection therewith.
(i) Absence of Certain Changes or Events. Except as disclosed in
Reliance's Reports filed on or prior to the date of this Agreement, true and
complete copies of which have been provided by Reliance to Continental, since
June 30, 1996, (i) Reliance and its Subsidiaries have not incurred any
liability, except in the ordinary course of their business consistent with past
practice, (ii) Reliance and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course of such businesses and (iii)
there has not been any condition, event, change or occurrence that, individually
or in the aggregate, has had, or is reasonably likely to have, a Material
Adverse Effect on Reliance.
(j) Absence of Claims. Except as set forth in Reliance's Reports, no
litigation, proceeding or controversy claim or action before any court or
governmental agency is pending against Reliance, Reliance Bank or any of its
Subsidiaries, and, to the best of Reliance's knowledge, no such litigation,
proceeding, controversy, claim or action has been threatened.
(k) Absence of Regulatory Actions. Neither Reliance, Reliance Bank nor
any of its Subsidiaries is a party to any cease and desist order, written
agreement or memorandum of understanding with, or a party to any commitment
letter or similar written undertaking to, or is subject to any action,
proceeding order or directive by, or is a recipient of any extraordinary
supervisory letter from any Government Regulator, nor has it been advised by any
Government Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar written undertaking.
(l) Reliance Common Stock. The shares of Reliance Common Stock to be
issued pursuant to this Agreement, when issued in accordance with the terms of
this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and subject to no preemptive rights.
(m) Labor Matters. Neither Reliance, Reliance Bank nor any of its
Subsidiaries is or has ever been a party to, or is or has ever been bound by,
any collective bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization with respect to its
employees, nor is Reliance, Reliance Bank or any of its Subsidiaries the subject
of any proceeding asserting that it has committed an unfair labor practice or
seeking to compel Reliance, Reliance Bank or any of its Subsidiaries to bargain
with any labor organization as to
-25-
wages and conditions of employment, nor is the management of Reliance aware of
any strike, other labor dispute or organizational effort involving Reliance,
Reliance Bank or any of its Subsidiaries pending or threatened. Reliance,
Reliance Bank and its Subsidiaries are in compliance with applicable laws
regarding employment of employees and retention of independent contractors, and
are in compliance with applicable employment tax laws.
(n) Employee Benefit Plans. All pension, retirement, stock option,
stock purchase, stock ownership, savings, stock appreciation right, profit
sharing, deferred compensation, consulting, bonus, group insurance, severance
and other benefit plans, contracts, agreements, arrangements, including, but not
limited to, "employee benefit plans," as defined in Section 3(3) of ERISA,
incentive and welfare policies, contracts, plans and arrangements and all trust
agreements related thereto with respect to any present or former directors,
officers, or other employees of Reliance or any of its Subsidiaries are
hereinafter referred to collectively as the "Reliance Employee Plans". All of
Reliance Employee Plans comply in all material respects with all applicable
requirements of ERISA, the Code and other applicable laws; there has occurred no
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) which is likely to result in the imposition of any penalties or taxes
under Section 502(i) of ERISA or Section 4975 of the Code upon Reliance or any
of its subsidiaries. No liability, to the Pension Benefit Guaranty Corporation,
has been or is expected by Reliance or any of its Subsidiaries to be incurred
with respect to any Reliance Employee Plan which is subject to Title IV of ERISA
("Reliance Pension Plan"), or with respect to any "single-employer plan" (as
defined in Section 4001(a) of ERISA) currently or formerly maintained by
Reliance or any entity which is considered one employer with Reliance under
Section 4001(b)(1) of ERISA or Section 414 of the Code (an "ERISA Affiliate").
No Reliance Pension Plan had an "accumulated funding deficiency" (as defined in
Section 302 of ERISA (whether or not waived)) as of the last day of the end of
the most recent plan year ending prior to the date hereof; the fair market value
of the assets of each Reliance Pension Plan exceeds the present value of the
"benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under such
Reliance Pension Plan as of the end of the most recent plan year with respect to
the respective Reliance Pension Plan ending prior to the date hereof, calculated
on the basis of the actuarial assumptions used in the most recent actuarial
valuation for such Reliance Pension Plan as of the date hereof; and no notice of
a "reportable event" (as defined in Section 4043 of ERISA) for which the 30-day
reporting requirement has not been waived has been required to be filed for any
Reliance Pension Plan within the 12-month period ending on the date hereof.
Neither Reliance nor any Subsidiary of Reliance has provided, or is required to
provide, security to any Reliance Pension Plan or to any single-employer plan of
an ERISA Affiliate pursuant to Section 401(a)(29) of the Code. Neither Reliance,
its Subsidiaries, nor any ERISA Affiliate has contributed to any "multiemployer
plan", as defined in Section 3(37) of ERISA, on or after September 26, 1980.
Each Reliance Employee Plan of Reliance or of any of its Subsidiaries which is
an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) and
which is intended to be qualified under Section 401(a) of the Code (a "Reliance
Qualified Plan") has received a favorable determination letter from the IRS and
Reliance and its Subsidiaries are not aware of any circumstances likely to
result in revocation of any such favorable determination letter. There is no
pending or, to the knowledge of Reliance, threatened litigation, administrative
action or proceeding relating to any Reliance Employee Plan.
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(o) Compliance with Laws. Reliance, Reliance Bank and each of its
Subsidiaries has all permits, licenses, certificates of authority, orders and
approvals of, and has made all filings, applications and registrations with,
federal, state, local and foreign governmental or regulatory bodies that are
required in order to permit it to carry on its business as it is presently
conducted; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect, and, to the best knowledge of Reliance,
no suspension or cancellation of any of them is threatened. Since the date of
its incorporation, the corporate affairs of Reliance have not been conducted in
violation of any law, ordinance, regulation, order, writ, rule, decree or
approval of any Governmental Entity. The business of Reliance and its
Subsidiaries are not being conducted in violation of any law, ordinance,
regulation, order, writ, rule or decree approval of any Governmental Entity.
(p) Fees. Other than the financial advisory services performed for
Reliance by Xxxxx, Xxxxxxxx & Xxxxx, Inc., pursuant to an agreement, a true and
complete copy of which will be delivered to Continental, neither Reliance,
Reliance Bank nor any of its Subsidiaries, nor any of their respective officers,
directors, employees or agents, has employed any broker or finder or incurred
any liability for any financial advisory fees, brokage fees, commissions, or
finder's fee, and no broker or finder has acted directly or indirectly for the
purchase of any Subsidiary of Reliance, in connection with the Agreement or the
transactions contemplated hereby.
(q) Environmental Matters. (i) With respect to Reliance and each of
its Subsidiaries:
(A) Each of Reliance and its Subsidiaries, the
Participation Facilities, and, to Reliance's knowledge, the Loan
Properties (each as defined herein) are, and have been, in substantial
compliance with all Environmental Laws (as defined herein);
(B) There is no suit, claim, action, demand,
executive or administrative order, directive, investigation or
proceeding pending or, to Reliance's knowledge, threatened, before any
court, governmental agency or board or other forum against it or any of
its Subsidiaries or any current or, to Reliance's knowledge, former
Participation Facility (x) for alleged noncompliance (including by any
predecessor) with, or liability under, any Environmental Law or (y)
relating to the Release (as defined herein) into the environment of any
Hazardous Material (as defined herein), whether or not occurring at or
on a site owned, leased or operated by it or any of its Subsidiaries or
any Participation Facility;
(C) To Reliance's knowledge, there is no suit, claim,
action, demand, executive or administrative order, directive,
investigation or proceeding pending or threatened, before any court,
governmental agency or board or other forum relating to or against any
Loan Property (or Reliance or any of its Subsidiaries in respect of
such Loan Property) (x) relating to alleged noncompliance (including by
any predecessor) with, or liability under, any Environmental Law or (y)
relating to the Release into the environment of any Hazardous Material
whether or not occurring at or on a site owned, leased or operated by a
Loan Property;
-27-
(D) To Reliance's knowledge, the properties currently
or formerly owned or operated by Reliance or any of its Subsidiaries
(including, without limitation, soil, groundwater or surface water on,
under or adjacent to the properties, and buildings thereon) do not
contain any Hazardous Material other than in compliance with applicable
Environmental Law (provided, however, that with respect to properties
formerly owned or operated by Reliance or any of its Subsidiaries, such
representation is limited to the period Reliance or any such Subsidiary
owned or operated such properties);
(E) None of Reliance or any of its Subsidiaries has
received any notice, demand letter, executive or administrative order,
directive or request for information from any federal, state, local or
foreign governmental entity or any third party relating to Hazardous
Materials or Remediation (as defined herein) thereof or indicating that
it may be in violation of, or liable under, any Environmental Law, or
any actual or, to Reliance's knowledge, potential administrative or
judicial proceedings in connection with any of the foregoing;
(F) To Reliance's knowledge, there are no underground
storage tanks on, in or under any properties currently or formerly
owned or operated by Reliance or any of its Subsidiaries, any
Participation Facility or any Loan Property and no underground storage
tanks have been closed or removed from any properties currently or
formerly owned or operated by Reliance or any of its Subsidiaries, any
Participation Facility or any Loan Property which are or have been in
the ownership of Reliance or any of its Subsidiaries; and
(G) To Reliance's knowledge, during the period of (l)
Reliance or any of its Subsidiaries' ownership or operation of any of
their respective current or formerly owned properties, (m) Reliance's
or any of its Subsidiaries' participation in the management of any
Participation Facility, or (n) its or any of its Subsidiaries' holding
of a security interest in a Loan Property, there has been no Release
and there is currently no threatened Release of Hazardous Material in,
on, under, affecting or migrating to such properties. To Reliance's
knowledge, prior to the period of (x) Reliance's or any of its
Subsidiaries' ownership or operation of any of their respective current
properties, (y) Reliance's or any of its Subsidiaries' participation in
the management of any Participation Facility, or (z) Reliance's or any
of its Subsidiaries' holding of a security interest in a Loan Property,
there was no Release of Hazardous Material in, on, under, affecting or
migrating to any such property, Participation Facility or Loan
Property.
(ii) The following definitions apply for purposes of this
Section 2.04(q): (u) "Loan Property" means any property in which the applicable
party (or a Subsidiary of it) holds a security interest, and, where required by
the context, includes the owner or operator of such property, but only with
respect to such property; (v) "Participation Facility" means any facility in
which the applicable party (or a Subsidiary of it) participates in the
management (including all property held as trustee or in any other fiduciary
capacity) and, where required by the context, includes the owner or operator of
such property, but only with respect to such property; (w) "Environmental Law"
means (i) any federal, state or local law, statute, ordinance, rule, regulation,
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code, license, permit, authorization, approval, consent, legal doctrine, order,
directive, executive or administrative order, judgment, decree, injunction,
legal requirement or agreement with any governmental entity, (A) relating to the
protection, preservation or restoration of the environment (which includes,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, structures, soil, surface land, subsurface land, plant and animal life
or any other natural resource), or to human health or safety as it relates to
Hazardous Materials, or (B) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of, Hazardous Materials, in each case as amended
and as now in effect. The term Environmental Law includes, without limitation,
(i) the Federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976
(including, but not limited to, the Hazardous and Solid Waste Amendments thereto
and Subtitle I relating to underground storage tanks), the Federal Solid Waste
Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of
1970 as it relates to Hazardous Materials, the Federal Hazardous Substances
Transportation Act, the Emergency Planning and Community Right-To-Know Act, the
Safe Drinking Water Act, the Endangered Species Act, the National Environmental
Policy Act, the Rivers and Harbors Appropriation Act or any so-called
"Superfund" or "Superlien" law, each as amended and as now or hereafter in
effect, (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Material and (iii) any state and local laws, statutes,
ordinances, rules, regulations and the like, as well as common law: conditioning
transfer of property upon a negative declaration or other approval of a
governmental authority of the environmental condition of the property; requiring
notification or disclosure of Releases of Hazardous Substances or other
environmental condition of the Loan Property to any governmental authority or
other person or entity, whether or not in connection with transfer of title to
or interest in property; imposing conditions or requirements in connection with
permits or other authorization for lawful activity; relating to nuisance,
trespass or other causes of action related to the Loan Property; and relating to
wrongful death, personal injury, or property or other damage in connection with
any physical condition or use of the Loan Property; (x) "Hazardous Material"
means any substance (whether solid, liquid or gas) which is listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or by
quantity, including any substance containing any such substance as a component.
Hazardous Material includes, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, extremely hazardous wastes, or words of similar meanings or regulatory
effect under any Environmental Laws, including, but not limited to, oil or
petroleum or any derivative or by-product thereof, radon, radioactive material,
asbestos, asbestos-containing material, urea formaldehyde foam insulation, lead
and polychlorinated biphenyl, flammables and explosives; (y) "Release" of any
Hazardous Material includes, but is not limited to, any release, deposit,
discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping,
pouring, emptying, escaping, dumping, disposing or other movement of Hazardous
Materials in violation of or requiring action under any applicable Environmental
Law;
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and (z) "Remediation" includes, but is not limited to, any response, remedial,
removal, or corrective action, any activity to cleanup, detoxify, decontaminate,
contain or otherwise remediate any Hazardous Material, any actions to prevent,
cure or mitigate any Release of Hazardous Materials, any action to comply with
any Environmental Laws or with any permits issued pursuant thereto, any
inspection, investigation, study, monitoring, assessment, audit, sampling and
testing, laboratory or other analysis, or evaluation relating to any Hazardous
Materials.
(r) Loan Portfolio; Allowance; Asset Quality. (i) With respect to each loan
owned by Reliance, Reliance Bank or its Subsidiaries in whole or in part (each,
a "Loan"), to the best knowledge of Reliance:
(A) the note and the related security documents are
each legal, valid and binding obligations of the maker or obligor
thereof, enforceable against such maker or obligor in accordance with
their terms;
(B) neither Reliance, Reliance Bank nor any of its
Subsidiaries nor any prior holder of a Loan has modified the note or
any of the related security documents in any material respect or
satisfied, cancelled or subordinated the note or any of the related
security documents except as otherwise disclosed by documents in the
applicable Loan file;
(C) Reliance, Reliance Bank or a Subsidiary is the
sole holder of legal and beneficial title to each Loan (or Reliance
Bank's applicable participation interest, as applicable); except as
otherwise referenced on the books and records of Reliance Bank;
(D) the note and the related security documents,
copies of which are included in the Loan files, are true and correct
copies of the documents they purport to be and have not been suspended,
amended, modified, cancelled or otherwise changed except as otherwise
disclosed by documents in the applicable Loan file;
(E) there is no pending, threatened condemnation
proceeding or similar proceeding affecting the property which serves as
security for a Loan; except as otherwise referenced on the books and
records of Reliance Bank;
(F) there is no litigation or proceeding pending,
threatened, relating to the property which serves as security for a
Loan that would have a Material Adverse Effect upon the related Loan;
and
(G) with respect to a Loan held in the form of a
participation, the participation documentation is legal, valid, binding
and enforceable.
(ii) The allowance for possible losses reflected in Reliance's
audited statement of condition at June 30, 1996 was, and the allowance for
possible losses shown on the balance sheets in Reliance's Reports for periods
ending after June 30, 1996 will be, adequate, as of the dates thereof, under
generally accepted accounting principles applicable to federal savings banks
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consistently applied, and since June 30, 1996, no regulatory agency has
requested or required that Reliance increase any of such amounts.
(iii) The Reliance Disclosure Letter sets forth by type of
loan and category the amounts of all loans, leases, advances, credit
enhancements, other extensions of credit, commitments and interest-bearing
assets of Reliance Bank and its Subsidiaries that have been classified by any
bank examiner (whether regulatory or internal) as "Other Loans Specially
Mentioned," "Special Mention," "Substandard," "Doubtful," "Loss," "Classified,"
"Criticized," "Credit Risk Assets," "Concerned Loans" (in the latter two cases,
to the extent available) or words of similar import, and Reliance Bank and its
Subsidiaries shall promptly after the end of any month inform Continental of any
such classification arrived at any time after the date hereof. The OREO included
in any non-performing assets of Reliance Bank or any of its Subsidiaries is
carried net of reserves at the lower of cost or fair value, less estimated
selling costs, based on current independent or management appraisals or
evaluations; provided, however, that "current" shall mean within the past 12
months.
(s) Investment Securities. (i) Except for investments in FHLB Stock and
pledges to secure FHLB borrowings and reverse repurchase agreements entered into
in arms-length transactions pursuant to normal commercial terms and conditions
and entered into in the ordinary course of business and restrictions that exist
for securities to be classified as "held to maturity," none of the investments
reflected in the consolidated balance sheet of Reliance included in Reliance's
Report on Form 10-K for the year ended June 30, 1996, and none of the investment
securities held by it or any of its Subsidiaries since June 30, 1996, is subject
to any restriction (contractual or statutory) that would materially impair the
ability of the entity holding such investment freely to dispose of such
investment at any time.
(ii) Except as set forth in the Reliance Disclosure Letter,
neither Reliance nor any Subsidiary is a party to or has agreed to enter into an
exchange-traded or over-the-counter equity, interest rate, foreign exchange or
other swap, forward, future, option, cap, floor or collar or any other contract
that is not included on the consolidated statements of condition and is a
derivative contract (including various combinations thereof) (each, a
"Derivatives Contract") or owns securities that (A) are referred to generically
as "structured notes," "high risk mortgage derivatives," "capped floating rate
notes" or "capped floating rate mortgage derivatives" or (B) are likely to have
changes in value as a result of interest or exchange rate changes that
significantly exceed normal changes in value attributable to interest or
exchange rate changes, except for those Derivatives Contracts and other
instruments legally purchased or entered into in the ordinary course of
business, consistent with safe and sound banking practices and regulatory
guidance, and listed (as of the date hereof) in the Reliance Disclosure Letter
or disclosed in Reliance's Reports filed on or prior to the date hereof.
(t) Registration Statement. The information to be supplied by it for
inclusion in (i) the Registration Statement on Form S-4 and/or such other
form(s) as may be appropriate to be filed under the Securities Act, with the SEC
by Reliance for the purpose of, among other things, registering Reliance Common
Stock to be issued to the Stockholders of Continental in the Merger (the
"Registration Statement"), or (ii) the proxy statement to be filed with the FDIC
by Continental
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under the Exchange Act and distributed in connection with Continental's meeting
of its Stockholders to vote upon this Agreement (as amended or supplemented from
time to time, the "Proxy Statement", and together with the prospectus included
in the Registration Statement, as amended or supplemented from time to time, the
"Proxy Statement-Prospectus") will not, at the time such Registration Statement
becomes effective, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
(u) Books and Records. The books and records of Reliance and its
Subsidiaries have been, and are being, maintained in accordance with applicable
legal and accounting requirements (including GAAP) and reflect in all material
respects the substance of events and transactions that should be included
therein.
(v) Corporate Documents. Reliance will deliver to Continental true and
complete copies of its certificate of incorporation and bylaws and of Reliance
Bank's charter and bylaws. The minute books of Reliance and Reliance Bank
constitute a complete and correct record of all actions taken by the respective
boards of directors (and each committee thereof) and the stockholders of
Reliance and Reliance Bank. The minute books of each of Reliance's Subsidiaries
constitutes a complete and correct record of all actions taken by the respective
boards of directors (and each committee thereof) and the stockholders of each
Subsidiary.
(w) Beneficial Ownership of Continental Common Stock. As of the date
hereof, Reliance does not beneficially own any shares of Continental Common
Stock and, other than as contemplated by the Option Agreement, does not have any
option, warrant or right of any kind to acquire the beneficial ownership of any
shares of Continental Common Stock.
(x) Tax Treatment of the Merger. As of the date hereof, Reliance has no
knowledge of any fact or circumstance that would prevent the transactions
contemplated by this Agreement from qualifying as a tax-free reorganization
under the Code.
ARTICLE III
CONDUCT PENDING THE MERGER
Section 3.01 Conduct of Continental's Business Prior to the Effective
Time. Except as expressly provided in this Agreement, during the period from the
date of this Agreement to the Effective Time, Continental shall use commercially
reasonable efforts to, and shall cause its Subsidiaries to use commercially
reasonable efforts to, (i) conduct its business in the ordinary and usual course
consistent with prudent banking practice; (ii) maintain and preserve intact its
business organization, properties, leases, employees and advantageous business
relationships and retain the services of its officers and key employees, (iii)
take no action which would adversely affect or delay the ability of Continental,
Reliance or Reliance Bank to perform its covenants and agreements on a timely
basis under this Agreement, (iv) take no action which would adversely affect or
delay the ability of Continental, Reliance or Reliance Bank to obtain any
necessary
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approvals, consents or waivers of any governmental authority required for the
transactions contemplated hereby or which would reasonably be expected to result
in any such approvals, consents or waivers containing any material condition or
restriction, and (v) take no action that results in or is reasonably likely to
have a Material Adverse Effect on Continental.
Section 3.02 Forbearance by Continental. Without limiting the
covenants set forth in Section 3.01 hereof, during the period from the date of
this Agreement to the Effective Time Continental shall not, and shall not permit
any of its Subsidiaries, without the prior written consent of Reliance, which
consent shall not be unreasonably withheld, to:
(a) change its corporate structure from that in effect on the date
hereof, or put into effect any change in any provisions of the organization
certificate or bylaws of Continental, or any similar governing documents of
Continental's Subsidiaries;
(b) issue any shares of capital stock or change the terms of any
outstanding warrants or issue, grant or sell any warrant, call, commitment,
right to purchase or agreement of any character relating to the authorized or
issued capital stock of Continental except pursuant to the Option Agreement;
adjust, split, combine or reclassify any capital stock; make, declare or pay any
dividend or make any other distribution on, or directly or indirectly redeem,
purchase or otherwise acquire, any shares of its capital stock or any securities
or obligations convertible into or exchangeable for any shares of its capital
stock; except that, if all of the conditions to the obligation of Continental,
Reliance and Reliance Bank set forth in Article V hereof have been satisfied
prior to September 30, 1997, but for the delivery of the certificates, opinion
or conditions required by Sections 5.02(c), (d), (e) and (f) (for Reliance and
Reliance Bank) and Section 5.03(c), (d), (e) and (f) (for Continental) and the
Effective Time shall not have occurred, Continental may pay a dividend with
respect to the quarter ended September 30, 1997 of Continental, in an amount
equal to no more than $0.18 per share of Continental Common Stock, subject to
Continental's normal procedures on declaration and payment of dividends, but no
shareholder of Continental shall be entitled to receive dividends on any shares
of Reliance Common Stock received as Merger Consideration with respect to that
quarter.
(c) other than in the ordinary course of business consistent with past
practice and pursuant to policies currently in effect, sell, transfer, mortgage,
encumber or otherwise dispose of any of its material properties, leases or
assets to any individual, corporation or other entity other than a direct or
indirect wholly owned Subsidiary of Continental or cancel, release or assign any
indebtedness of any such person, except pursuant to contracts or agreements in
force at the date of this Agreement and which have been described to Reliance;
(d) except to the extent required by law or specifically provided for
elsewhere herein or in the Continental Disclosure Letter, increase in any manner
the compensation or fringe benefits of any of its employees or directors other
than general increases in compensation for non-officer employees in the ordinary
course of business consistent with past practice that do not cause the
annualized compensation of any of Continental's non-officer employees following
such increase, to exceed by more than 5% the total annual compensation expense
of Continental with respect to such person for the twelve month period ended
March 31, 1997 and that do not cause the annual
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rate of base salary of any of Continental's non-officer employees to increase by
more than 5% over such person's base salary at March 31, 1997, or pay any
pension or retirement allowance not required by any existing plan or agreement
to any such employees or directors, or become a party to, amend or commit itself
to or fund or otherwise establish any trust or account related to any Employee
Plan (as defined in Section 2.03(n)) with or for the benefit of any employee or
director; voluntarily accelerate the vesting of any stock options or other
compensation or benefit; terminate or increase the costs to Continental or any
Subsidiary or any Employee Plan; hire any employee with an annual compensation
in excess of $35,000 or enter into any employment contract; or make any
discretionary contributions to any Employee Plan;
(e) except as contemplated by Section 4.02, change its method of
accounting as in effect at December 31, 1996, except as required by changes in
generally accepted accounting principles as concurred in writing by
Continental's independent auditors;
(f) other than in the ordinary course of business consistent with past
practice in individual amounts not to exceed $50,000 and other than investments
for Continental's portfolio made in accordance with Section 3.02(g), make any
investment either by purchase of stock or securities, contributions to capital,
property transfers, or purchase of any property or assets of any other
individual, corporation or other entity;
(g) make any investment in any debt security, including mortgage-backed
and mortgage related securities, other than US government and US government
agency securities with final maturities not greater than five years,
mortgage-backed or mortgage related securities which would not be considered
"high risk" securities pursuant to Thrift Bulletin Number 52 issued by the OTS
or securities of the FHLB, in each case that are purchased in the ordinary
course of business consistent with past practice;
(h) enter into or terminate any contract or agreement, or make any
change in any of its leases or contracts, other than with respect to those
involving aggregate payments of less than, or the provision of goods or services
with a market value of less than, $20,000 per annum and other than contracts or
agreements covered by Section 3.02(k);
(i) settle any claim, action or proceeding involving any liability of
Continental or any of its Subsidiaries for money damages in excess of $25,000 or
material restrictions upon the operations of Continental or any of its
Subsidiaries;
(j) except in the ordinary course of business and in amounts less than
$50,000, waive or release any material right or collateral or cancel or
compromise any extension of credit or other debt or claim;
(k) make, renegotiate, renew, increase, extend or purchase any (i)
loan, lease (credit equivalent), advance, credit enhancement or other extension
of credit, or make any commitment in respect of any of the foregoing, except (A)
in conformity with existing lending practices in amounts not to exceed $500,000
to any individual borrower or (B) loans or advances as to which Continental has
a legally binding obligation to make such loan or advances as of the date hereof
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and a description of which has been provided by Continental in the Continental
Disclosure Letter; provided, however, that Continental may not make,
renegotiate, renew, increase, extend or purchase any loan that is underwritten
based on either no or limited verification of income or otherwise without full
documentation customary for such a loan; or (ii) loans, advances or commitments
to directors, officers or other affiliated parties of Continental or any of its
Subsidiaries except for renewals of any such loans referred to in this clause
(ii) or set forth in the Continental Disclosure Letter;
(l) acquire or agree to acquire, by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets, in each case which are material,
individually or in the aggregate, to Continental except in satisfaction of debts
previously contracted;
(m) incur any additional borrowings beyond those set forth in the
Continental Disclosure Letter other than short-term (six months or less) FHLB
borrowings and reverse repurchase agreements consistent with past practice, or
pledge any of its assets to secure any borrowings other than as required
pursuant to the terms of borrowings of Continental or any Subsidiary in effect
at the date hereof or in connection with borrowings or reverse repurchase
agreements permitted hereunder. Deposits shall not be deemed to be borrowings
within the meaning of this paragraph;
(n) make any capital expenditures in excess of $20,000 per expenditure
from the date of this Agreement until the Effective Date other than pursuant to
binding commitments existing on the date hereof disclosed in the Continental
Disclosure Letter, other than expenditures necessary to maintain existing assets
in good repair or to make payment of necessary taxes;
(o) make any investment or commitment to invest in real estate or in
any real estate development project, other than Small Business Administration 7A
Program guaranteed loans or real estate acquired in satisfaction of defaulted
mortgage loans and investments or commitments approved by the Board of Directors
of Continental prior to the date of this Agreement and disclosed in writing to
Reliance;
(p) except pursuant to commitments existing at the date hereof which
are disclosed in the Continental Disclosure Letter, and except for Small
Business Administration 7A Program guaranteed loans make any real estate loans
secured by undeveloped land or real estate located outside the State of New York
or make any construction loan;
(q) establish or make any commitment relating to the
establishment of any new branch or other office facilities;
(r) organize, capitalize, lend to or otherwise invest in any
Subsidiary, or invest in or acquire any equity or voting interest in any firm,
corporation or business enterprise (other than securities of the FHLB that are
purchased in the ordinary course of business consistent with past practice);
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(s) elect to the Board of Directors of Continental or to any office any
person who is not a member of the Board of Directors of Continental or an
officer of Continental as of the date of this Agreement; or
(t) agree or make any commitment to take any action that is prohibited by
this Section 3.02.
In the event that Reliance does not respond in writing to Continental
within three business days of receipt by Reliance of a written request for
Continental to engage in any of the actions for which Reliance's prior written
consent is required pursuant to this Section 3.02, Reliance shall be deemed to
have consented to such action. Any request by Continental or response thereto by
Reliance shall be made in accordance with the notice provisions of Section 8.07.
The representations, warranties and covenants of Continental shall not
be deemed untrue or incorrect or breached for any purpose as a consequence of
Continental's compliance with this Section 3.02.
Section 3.03 Conduct of Reliance's Business Prior to the Effective
Time. Except as provided in this Agreement, during the period from the date of
this Agreement to the Effective Time, Reliance shall use commercially reasonable
efforts to, and shall cause its Subsidiaries to use commercially reasonable
efforts to, (i) conduct its business in the ordinary and usual course consistent
with prudent banking practice; (ii) maintain and preserve intact its business
organization, properties, leases, employees and advantageous business
relationships and retain the services of its officers and key employees, (iii)
take no action which would adversely affect or delay the ability of Continental,
Reliance or Reliance Bank to perform its covenants and agreements on a timely
basis under this Agreement, (iv) take no action which would adversely affect or
delay the ability of Continental, Reliance or Reliance Bank to obtain any
necessary approvals, consents or waivers of any governmental authority required
for the transactions contemplated hereby or which would reasonably be expected
to result in any such approvals, consents or waivers containing any material
condition or restriction, and (v) take no action that results in or is
reasonably likely to have a Material Adverse Effect on Reliance.
ARTICLE IV
COVENANTS
Section 4.01 Acquisition Proposals. Continental agrees that neither it
nor any of its Subsidiaries nor any of the respective officers and directors of
Continental or its Subsidiaries shall, and Continental shall direct and use its
best efforts to cause its employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by it
or any of its Subsidiaries) not to, (a) initiate, solicit or encourage, directly
or indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to stockholders of Continental) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or more than 10% of the assets or any equity
-36-
securities of, Continental or any of its material Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal")
or, (b) except to the extent legally required for the discharge by the board of
directors of its fiduciary duties as advised in writing by such board's counsel,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. Continental will notify Reliance immediately if any such
inquiries, proposals or offers are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with Continental after the date hereof, and the identity
of the person making such inquiry, proposal or offer and the substance thereof.
Subject to the foregoing, Continental will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing. Continental will take
the necessary steps to inform the appropriate individuals or entities referred
to in the first sentence hereof of the obligations undertaken in this Section
4.01. Continental will promptly request each person (other than Reliance) that
has executed a confidentiality agreement prior to the date hereof in connection
with its consideration of a business combination with Continental or any
Subsidiary of Continental to return or destroy all confidential information
previously furnished to such person by or on behalf of Continental or any of its
Subsidiaries.
Section 4.02 Certain Policies of Continental.
(a) At the request of Reliance, Continental shall modify and change its
loan, litigation, real estate valuation policies and practices (including loan
classifications and levels of reserves) and investment and asset/liability
management policies and practices after the date on which all required
regulatory approval and shareholder approvals are received and after receipt of
written confirmation from Reliance that it is not aware of any fact or
circumstance that would prevent completion of the Merger and prior to the
Effective Time so as to be consistent on a mutually satisfactory basis with
those of Reliance Bank; provided, that such policies and procedures are not
prohibited by generally accepted accounting principles or all applicable laws
and regulations.
(b) Continental's representations, warranties and covenants contained
in this Agreement shall not be deemed to be untrue or breached in any respect
for any purpose as a consequence of any modifications or changes undertaken
solely on account of this Section 4.02.
Section 4.03 Employees; Benefit Plans and Programs.
(a) Each person who is employed by Continental immediately prior to the
Effective Time (a "Continental Employee") and whose employment is not
specifically terminated at or prior to the Effective Time (a "Continuing
Employee") shall (except as set forth in Schedule 4.03(a) of the Continental
Disclosure Letter), at the Effective Time, become an employee (but not an
officer) of Reliance Bank. Beginning at the Effective Time, except as otherwise
determined by Reliance Bank, each of the Continuing Employees shall serve
Reliance Bank upon the same terms and conditions generally applicable to other
employees of Reliance Bank with comparable positions, with the following special
provisions (including, without limitation, their status as at-will employees
whose terms and conditions of employment are subject to change at any time):
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(i) If it is not practical to enroll Continuing Employees as
of the Effective Time in a particular employee benefit plan or program
maintained by Reliance Bank for its employees (the "Reliance Bank
Plans"), Reliance Bank shall continue any comparable plan or program of
Continental in effect immediately prior to the Effective Time (the
"Continental Plans") for a transition period. During the transition
period, Continuing Employees shall continue to participate in
Continental Plans which are continued, and all other employees of
Reliance Bank will participate only in the comparable Reliance Bank
Plans.
(ii) Reliance and Reliance Bank will amend each of their
respective employee benefit plans and programs, other than any
tax-qualified defined benefit or employee stock ownership plan, to
recognize the service of each Continental Employee with Continental as
service with Reliance and Reliance Bank for purposes of eligibility.
Each of Continental's tax-qualified plans will be amended to provide
that all benefits accrued by Continuing Employees through the Effective
Time will be fully vested without regard to their length of service.
(iii) If Continental Employees become eligible to participate
in a medical, dental or health plan of Reliance or Reliance Bank,
Reliance shall cause, to the extent reasonably practicable without
incurring additional premium costs, such plan to (A) waive any
preexisting condition limitations for conditions covered under the
applicable medical, health or dental plans of Continental and (B) honor
any deductible and out of pocket expenses incurred by the Continental
Employees and their beneficiaries under such plans during the portion
of the calendar year prior to such participation. If Continuing
Continental Employees become eligible to participate in a life
insurance plan maintained by Reliance or Reliance Bank, Reliance shall
cause, to the extent reasonably practicable without incurring
additional premium costs, such plan to waive any medical certification
for the Continental Employees up to the amount of coverage the
Continental Employees had under the life insurance plan of Continental
(but subject to any limits on the maximum amount of coverage under the
life insurance plan of Reliance or Reliance Bank).
(b) Reliance agrees (i) to honor the Specified Compensation and Benefit
Programs, including the change in control provisions of such Programs, between
Continental and each Named Individual as set forth on Schedule 4.03(b) of the
Continental Disclosure Letter and (ii) to the payment of amounts and benefits to
Named Individuals by Continental as of the Effective Time (or such earlier time
as may be agreed to by Continental and Reliance) under the Specified
Compensation and Benefit Programs in such amounts as calculated and disclosed on
Schedule 4.03(b) of the Continental Disclosure Letter.
Notwithstanding any provision in the Xxxxxxxx Employment Agreement to
the contrary, payments made pursuant to the Xxxxxxxx Employment Agreement as set
forth on Schedule 4.03(b) of the Continental Disclosure Letter shall be final.
There will be no further adjustment to such payments for potential future tax
liabilities or otherwise. In addition, in the event of the death or disability
of Xx. Xxxxxxxx on or after the date of this Agreement and prior to the
Effective Time, payments to be made pursuant to the Xxxxxxxx Employment
Agreement shall be made either to Mr.
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Xxxxxxxx'x estate or to Xx. Xxxxxxxx at the Effective Time. Continental and each
Named Individual receiving payment under any of the Specified Compensation and
Benefit Programs listed on Schedule 4.03(b) of the Continental Disclosure Letter
shall execute a Joint Release, in the form annexed as Exhibit C (the "Release").
Reliance agrees to the issuance of such releases by Continental.
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Section 4.04 Access and Information.
(a) Upon reasonable notice, Continental and Reliance shall (and shall
cause its respective Subsidiaries to) afford to each other and their respective
representatives (including, without limitation, directors, officers and
employees of such party and its affiliates, and counsel, accountants and other
professionals retained) such reasonable access during normal business hours
throughout the period prior to the Effective Time to the books, records
(including, without limitation, tax returns and work papers of independent
auditors), properties, personnel and to such other information as either party
may reasonably request except materials legally privileged or which either party
is prohibited by law from disclosing; provided, however, that no investigation
pursuant to this Section 4.04 shall affect or be deemed to modify any
representation or warranty made herein. Reliance, Reliance Bank and Continental
will not, and will cause its respective representatives not to, use any
information obtained pursuant to this Section 4.04 for any purpose unrelated to
the consummation of the transactions contemplated by this Agreement. Subject to
the requirements of law, each of Reliance, Reliance Bank and Continental will
keep confidential, and will cause its respective representatives to keep
confidential, all information and documents obtained pursuant to this Section
4.04 unless such information (i) was already known to such party or an affiliate
of such party, other than pursuant to a confidentiality agreement or other
confidential relationship, (ii) becomes available to such party or an affiliate
of such party from other sources not known by such party to be bound by a
confidentiality obligation or agreement, (iii) is disclosed with the prior
written approval of the other party or (iv) is or becomes readily ascertainable
from published information or trade sources. In the event that this Agreement is
terminated or the transactions contemplated by this Agreement shall otherwise
fail to be consummated, each party shall promptly cause all copies of documents
or extracts thereof containing information and data as to another party hereto
(or an affiliate of any party hereto) to be returned to the party which
furnished the same.
(b) During the period of time beginning on the day the last approval of
a governmental authority is obtained and continuing to the Effective Time,
including weekends and holidays, Continental shall provide Reliance Bank and its
authorized agents and representatives full access to Continental's offices after
normal business hours for the purpose of installing necessary wiring and
equipment to be utilized by Reliance Bank after the Effective Time; provided,
that:
(i) reasonable advance notice of each entry shall be given to
Continental, and Continental approves of each entry, which approval
shall not be unreasonably withheld;
(ii) Continental shall have the right to have its employees
or contractors present to inspect the work being done;
(iii) to the extent practicable, such work shall be done in a
manner that will not interfere with Continental's business conducted at
the branch;
(iv) all such work shall be done in compliance with all
applicable laws and government regulation, and Reliance Bank shall be
responsible for the procurement, at
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Reliance Bank's expense, of all required governmental or
administrative permits and approvals;
(v) Reliance Bank shall maintain appropriate insurance
satisfactory to Continental in connection with any work done by
Reliance Bank's agents and representatives pursuant to this Section
4.04;
(vi) Reliance Bank shall reimburse Continental for any material
out-of-pocket costs or expenses incurred by Continental in connection
with this undertaking; and
(vii) if this Agreement is terminated in accordance with
Article VI hereof, Reliance Bank, within a reasonable time period and
at its sole cost and expense, will restore such offices to their
condition prior to the commencement of any such installation.
Section 4.05 Certain Filings, Consents and Arrangements. Reliance,
Reliance Bank and Continental shall (a) as soon as practicable (and in any event
within 45 days after the date hereof) make (or cause to be made) any filings and
applications and provide any notices, required to be filed or provided in order
to obtain all approvals, consents and waivers of governmental authorities and
third parties necessary or appropriate for the consummation of the transactions
contemplated hereby or by the Option Agreement, (b) cooperate with one another
(i) in promptly determining what filings and notices are required to be made or
approvals, consents or waivers are required to be obtained under any relevant
federal, state or foreign law or regulation or under any relevant agreement or
other document and (ii) in promptly making any such filings and notices,
furnishing information required in connection therewith and seeking timely to
obtain any such approvals, consents or waivers and (c) deliver to the other
copies of the publicly available portions of all such filings, notices and
applications promptly after they are filed.
Section 4.06 Antitakeover Provisions. Continental and its Subsidiaries
shall take all steps (i) to exempt or continue to exempt Continental, the
Agreement, the Merger and the Option Agreement from any provisions of an
antitakeover nature in Continental's or its Subsidiaries' organization
certificates and bylaws and the provisions of any federal or state antitakeover
laws, and (ii) upon the request of Reliance, to assist in any challenge by
Reliance to the applicability to the Agreement, the Merger or the Option
Agreement of any state antitakeover law.
Section 4.07 Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement as expeditiously as
possible, including using efforts to obtain all necessary actions or
non-actions, extensions, waivers, consents and approvals from all applicable
governmental entities, effecting all necessary registrations, applications and
filings (including, without limitation, filings under any applicable state
securities laws) and obtaining any required contractual consents and regulatory
approvals.
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Section 4.08 Publicity. The initial press release announcing this
Agreement shall be a joint press release and thereafter Continental and Reliance
shall consult with each other in issuing any press releases or otherwise making
public statements with respect to the acquisition contemplated hereby and in
making any filings with any governmental entity or with any national securities
exchange with respect thereto.
Section 4.09 Stockholders' Meeting. Continental shall take all action
necessary, in accordance with applicable law and its corporate documents, to
convene a meeting of its stockholders (the "Stockholder Meeting") as promptly as
practicable for the purpose of considering and voting on approval and adoption
of the transactions provided for in this Agreement. Except to the extent legally
required for the discharge by the board of directors of its fiduciary duties as
advised in writing by such board's counsel, the board of directors of
Continental shall (a) recommend at the Stockholder Meeting that the stockholders
vote in favor of and approve the transactions provided for in this Agreement,
and (b) use its best efforts to solicit such approvals. In exercising its
fiduciary duties, the board of directors of Continental may take into account
the fairness opinion to be rendered by Sandler X'Xxxxx & Partners, L.P.
Section 4.10 Proxy; Registration Statement. As soon as practicable
after the date hereof, Reliance and Continental shall cooperate with respect to
the preparation of a Proxy Statement- Prospectus for the purpose of taking
stockholder action on the Merger and this Agreement, file the Proxy
Statement-Prospectus with the SEC and the FDIC, respond to comments of the staff
of the SEC and the FDIC and promptly thereafter mail the Proxy
Statement-Prospectus to all holders of record (as of the applicable record date)
of shares of voting stock. Reliance and Continental each represents and
covenants to the other party that the Proxy Statement-Prospectus and any
amendment or supplement thereto, with respect to the information pertaining to
it or its subsidiaries at the date of mailing to its stockholders and the date
of its meeting of its stockholders to be held in connection with the Merger,
will be in compliance with the Exchange Act and all relevant rules and
regulations of the SEC and the FDIC and will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Continental, in consultation with
Reliance, shall employ professional proxy solicitors to assist it in contacting
stockholders in connection with soliciting votes on the Merger.
Section 4.11 Registration of Reliance Common Stock.
(a) Reliance shall, as promptly as practicable following the
preparation thereof (and in any event within 60 days hereof), file a
Registration Statement on Form S-4 (including any pre-effective or
post-effective amendments or supplements thereto) with the SEC under the
Securities Act in connection with the transactions contemplated by this
Agreement, and Reliance and Continental shall use all reasonable efforts to have
the Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing. Reliance will advise Continental
promptly after Reliance receives notice of the time when the Registration
Statement has become effective or any supplement or amendment has been filed, of
the issuance of any stop order or the suspension of the qualification of the
shares of capital stock issuable pursuant to the Registration Statement, or the
initiation or threat of any proceeding for any such purpose, or of
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any request by the SEC for the amendment or supplement of the Registration
Statement or for additional information. Reliance will provide Continental with
as many copies of such Registration Statement and all amendments thereto
promptly upon the filing thereof as Continental may reasonably request.
(b) Reliance shall use its best efforts to obtain, prior to the
effective date of the Registration Statement, all necessary state securities
laws or "blue sky" permits and approvals required to carry out the transactions
contemplated by this Agreement.
(c) Reliance shall use its best efforts to list, prior to the Effective
Time, on the Nasdaq National Market, or such other market on which shares of
Reliance shall then be trading, subject only to official notice of issuance, the
shares of Reliance Common Stock to be issued by Reliance in exchange for the
shares of Continental Common Stock.
Section 4.12 Affiliate Letters. No later than the tenth business day
following the mailing of the Proxy Statement-Prospectus referred to in Section
4.10, Continental shall deliver to Reliance, after consultation with legal
counsel, a list of the names and addresses of those persons it deems to be
"Affiliates" of Continental within the meaning of Rule 145 promulgated under the
Securities Act and a letter in the form attached hereto as Exhibit D restricting
the disposition of shares of Reliance Common Stock to be received by such
Affiliate in exchange for such Affiliate's shares of Continental Common Stock.
Section 4.13 Notification of Certain Matters. Each party shall give
prompt notice to the others of: (a) any event or notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by it or any of its Subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time, under
any contract material to the financial condition, properties, businesses or
results of operations of Continental and its Subsidiaries taken as a whole to
which Continental or any Subsidiary is a party or is subject; and (b) any event,
condition, change or occurrence which individually or in the aggregate has, or
which, so far as reasonably can be foreseen at the time of its occurrence, is
reasonably likely to result in a Material Adverse Event. Each of Continental and
Reliance shall give prompt notice to the other party of any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement.
Section 4.14 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time through the sixth anniversary of
the Effective Date, Reliance agrees to indemnify and hold harmless each present
and former director and officer of Continental or its Subsidiaries and each
officer or employee of Continental or its Subsidiaries that is serving or has
served as a director or trustee of another entity expressly at Continental's
request or direction (each, an "Indemnified Party"), against any costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of matters existing or
occurring at or
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prior to the Effective Time (including the transactions contemplated by this
Agreement, including the entering into of the Option Agreement), whether
asserted or claimed prior to, at or after the Effective Time, and to advance any
such Costs to each Indemnified Party as they are from time to time incurred, in
each case to the fullest extent then permitted under applicable law.
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.14(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Reliance thereof, but the failure to so
notify shall not relieve Reliance of any liability it may have hereunder to such
Indemnified Party if such failure does not materially and substantially
prejudice the indemnifying party. In the event of any such claim, action, suit,
proceeding or investigation, (i) Reliance shall have the right to assume the
defense thereof with counsel reasonably acceptable to the Indemnified Party and
Reliance shall not be liable to such Indemnified Party for any legal expenses of
other counsel subsequently incurred by such Indemnified Party in connection with
the defense thereof, except that if Reliance does not elect to assume such
defense within a reasonable time or counsel for the Indemnified Party at any
time advises that there are issues that raise conflicts of interest between
Reliance and the Indemnified Party, the Indemnified Party may retain counsel
satisfactory to such Indemnified Party, and Reliance shall remain responsible
for the reasonable fees and expenses of such counsel as set forth above, to be
paid promptly as statements therefor are received; provided, however, that
Reliance shall be obligated pursuant to this paragraph (b) to pay for only one
firm of counsel for all Indemnified Parties in any one jurisdiction with respect
to any given claim, action, suit, proceeding or investigation unless the use of
one counsel for such Indemnified Parties would present such counsel with a
conflict of interest; (ii) the Indemnified Party will reasonably cooperate in
the defense of any such matter; and (iii) Reliance shall not be liable for any
settlement effected by an Indemnified Party without its prior written consent,
which consent may not be withheld unless such settlement is unreasonable in
light of such claims, actions, suits, proceedings or investigations against, or
defenses available to, such Indemnified Party.
(c) Reliance shall pay all reasonable Costs, including attorneys' fees,
that may be incurred by any Indemnified Party in successfully enforcing the
indemnity and other obligations provided for in this Section 4.14 to the fullest
extent permitted under applicable law. The rights of each Indemnified Party
hereunder shall be in addition to any other rights such Indemnified Party may
have under applicable law.
(d) For a period of six years after the Effective Time, Reliance shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by Continental (provided that Reliance
may substitute therefor policies with reputable and financially sound carriers
of at least the same coverage and amount containing terms which are no less
advantageous to the beneficiaries thereof); provided, however, that in no event
shall Reliance be obligated to expend, in order to maintain or provide insurance
coverage pursuant to this Section 4.14(d), any premiums, in the aggregate for
such six year period, in excess of $180,000 (the "Maximum Amount"); provided,
further, that if the amount of the annual premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, Reliance shall
maintain the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Amount; and provided,
further, that officers and directors
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of Continental may be required to make application and provide customary
representations and warranties to Reliance's insurance carrier for the purpose
of obtaining such insurance.
ARTICLE V
CONDITIONS TO CONSUMMATION
Section 5.01 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment of the following conditions:
(a) this Agreement shall have been approved by the requisite vote
of Continental's stockholders in accordance with applicable law;
(b) all necessary regulatory or governmental approvals, consents or
waivers required to consummate the transactions contemplated hereby shall have
been obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired; and all other consents,
waivers and approvals of any third parties which are necessary to permit the
consummation of the Merger and the other transactions contemplated hereby shall
have been obtained or made except for those the failure to obtain would not have
a Material Adverse Effect (i) on Continental and its subsidiaries taken as a
whole or (ii) on Reliance and its Subsidiaries taken as a whole. None of the
approvals or waivers referred to herein shall contain any term or condition
which would have a Material Adverse Effect on (x) Continental and its
Subsidiaries taken as a whole or (y) Reliance and its Subsidiaries taken as a
whole;
(c) no party hereto 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 Merger;
(d) no statute, rule or regulation, shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any governmental authority
which prohibits, restricts or makes illegal consummation of the Merger;
(e) the Registration Statement shall have been declared effective by
the SEC and no proceedings shall be pending or threatened by the SEC to suspend
the effectiveness of the Registration Statement; all required approvals by state
securities or "blue sky" authorities with respect to the transactions
contemplated by this Agreement shall have been obtained;
(f) Reliance shall have received the agreement referred to in Section 4.12
from each affiliate of Continental; and
(g) Reliance shall have received all state securities laws and "blue
sky" permits and other authorizations necessary to consummate the transactions
contemplated hereby.
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Section 5.02 Conditions to the Obligations of Reliance and Reliance
Bank Under this Agreement. The obligations of Reliance and Reliance Bank to
effect the Merger shall be further subject to the satisfaction of the following
additional conditions, any one or more of which may be waived by Reliance:
(a) each of the obligations of Continental required to be performed by
it at or prior to the Closing pursuant to the terms of this Agreement shall have
been duly performed and complied with in all material respects and the
representations and warranties of Continental contained in this Agreement shall
be true and correct, subject to Sections 2.01 and 2.02, as of the date of this
Agreement and as of the Effective Time as though made at and as of the Effective
Time (except as to any representation or warranty which specifically relates to
an earlier date). Reliance shall have received a certificate to the foregoing
effect signed by the president and the chief financial or principal accounting
officer of Continental;
(b) all action required to be taken by, or on the part of, Continental
to authorize the execution, delivery and performance of this Agreement and the
consummation by Continental of the transactions contemplated hereby shall have
been duly and validly taken by the Board of Directors and stockholders of
Continental, and Reliance shall have received certified copies of the
resolutions evidencing such authorization;
(c) Reliance shall have received certificates (such certificates to be
dated as of a day as close as practicable to the date of the Closing) from
appropriate authorities as to the good standing of Continental;
(d) Reliance shall have received an opinion of Xxxxxxx Xxxxxxxx & Xxxx,
counsel to Reliance, dated as of the Effective Date in form and substance
customary in transactions of the type contemplated hereby, and reasonably
satisfactory to Reliance, substantially to the effect that on the basis of the
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code and that accordingly:
(i) No gain or loss will be recognized by Reliance, Reliance
Bank or Continental as a result of the Merger;
(ii) Except to the extent of any cash received in lieu of a
fractional share interest in Reliance Common Stock, no gain or loss
will be recognized by the stockholders of Continental who exchange
their Continental Stock for Reliance Common Stock pursuant to the
Merger;
(iii) The tax basis of Reliance Common Stock received by
stockholders who exchange their Continental Common Stock for Reliance
Common Stock in the Merger will be the same as the tax basis of
Continental Common Stock surrendered pursuant to the Merger, reduced by
any amount allocable to a fractional share interest for which cash is
received and increased by any gain recognized on the exchange; and
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(iv) The holding period of Reliance Stock received by each
stockholder in the Merger will include the holding period of
Continental Common Stock exchanged therefor, provided that such
stockholder held such Continental Common Stock as a capital asset on
the date of the Merger.
Such opinion may be based on, in addition to the review of such matters
of fact and law as Xxxxxxx Xxxxxxxx & Wood considers appropriate, (i)
representations made at the request of Xxxxxxx Xxxxxxxx & Xxxx by Reliance,
Reliance Bank, Continental, stockholders of Reliance or Continental, or any
combination of such persons and (ii) certificates provided at the request of
Xxxxxxx Xxxxxxxx & Wood by officers of Reliance, Reliance Bank, Continental and
other appropriate persons;
(e) Continental shall have caused to be delivered to Reliance "cold
comfort" letters or letters of procedures from Continental's independent
certified public accountants, dated (i) the date of the mailing of the Proxy
Statement to Continental's stockholders and (ii) a date not earlier than five
business days preceding the date of the Closing and addressed to Reliance,
concerning such matters as are customarily covered in transactions of the type
contemplated hereby; and
(f) Each Named Individual receiving payment under any of the Specified
Compensation and Benefit Programs referred to in Section 4.03(b) shall have
executed and delivered to Reliance a Release.
Section 5.03 Conditions to the Obligations of Continental. The
obligations of Continental to effect the Merger shall be further subject to the
satisfaction of the following additional conditions, any one or more of which
may be waived by Continental:
(a) each of the obligations of Reliance and Reliance Bank,
respectively, required to be performed by it at or prior to the Closing pursuant
to the terms of this Agreement shall have been duly performed and complied with
in all material respects and the representations and warranties of Reliance and
Reliance Bank contained in this Agreement shall be true and correct, subject to
Sections 2.01 and 2.02, as of the date of this Agreement and as of the Effective
Time as though made at and as of the Effective Time (except as to any
representation or warranty which specifically relates to an earlier date).
Continental shall have received a certificate to the foregoing effect signed by
the president and the chief financial officer of Reliance;
(b) all action required to be taken by, or on the part of, Reliance and
Reliance Bank to authorize the execution, delivery and performance of this
Agreement and the consummation by Reliance and Reliance Bank of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors of Reliance, and Continental shall have received certified copies of
the resolutions evidencing such authorization;
(c) Continental shall have received certificates (such certificates to
be dated as of a day as close as practicable to the date of the Closing) from
appropriate authorities as to the good standing of Reliance and corporate
existence of Reliance Bank;
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(d) Continental shall have received an opinion of Xxxxxxx, Xxxxxx &
Xxxxxxxx, counsel to Continental, dated as of the Effective Date, in form and
substance customary in transactions of the type contemplated hereby, and
reasonably satisfactory to Continental, substantially to the effect that on the
basis of the facts, representations and assumptions set forth in such opinion
which are consistent with the state of facts existing at the Effective Time, the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code and that accordingly:
(i) No gain or loss will be recognized by Reliance,
Reliance Bank or Continental as a result of the Merger;
(ii) Except to the extent of any cash received in
lieu of a fractional share interest in Reliance Common Stock,
no gain or loss will be recognized by the stockholders of
Continental who exchange their Continental Common Stock for
Reliance Common Stock pursuant to the Merger;
(iii) The tax basis of Reliance Stock received by
stockholders who exchange their Continental Common Stock for
Reliance Common Stock in the Merger will be the same as the
tax basis of Continental Common Stock surrendered pursuant to
the Merger, reduced by any amount allocable to a fractional
share interest for which cash is received and increased by any
gain recognized on the exchange;
(iv) The holding period of Reliance Stock received by
each stockholder in the Merger will include the holding period
of Continental Common Stock exchanged therefor, provided that
such stockholder held such Continental Common Stock as a
capital asset on the date of the Merger;
Such opinion may be based on, in addition to the review of such matters
of fact and law as Xxxxxxx, Xxxxxx & Xxxxxxxx considers appropriate, (i)
representations made at the request of Xxxxxxx, Xxxxxx & Xxxxxxxx by Reliance,
Reliance Bank, Continental, stockholders of Reliance or Continental, or any
combination of such persons and (ii) certificates provided at the request of
Xxxxxxx, Xxxxxx & Xxxxxxxx by officers of Reliance, Reliance Bank, Continental
and other appropriate persons;
(e) Reliance shall have caused to be delivered to Continental "cold
comfort" letters or letters of procedures from Reliance's independent certified
public accountants, dated (i) the date of the mailing of the Proxy
Statement-Prospectus to Continental's stockholders and (ii) a date not earlier
than five business days preceding the date of the Closing and addressed to
Continental, concerning such matters as are the customarily covered in
transactions of the type contemplated hereby; and
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(f) Reliance shall have caused to be listed on the Nasdaq National
Market, or on such other market on which shares of Reliance Common Stock shall
then be trading, subject only to official notice of issuance, the shares of
Reliance Common Stock to be issued by Reliance in exchange for the shares of
Continental Common Stock.
ARTICLE VI
TERMINATION
Section 6.01 Termination. This Agreement may be terminated, and the
Merger abandoned, at or prior to the Effective Date, either before or after its
approval by the stockholders of Continental and Reliance:
(a) by the mutual consent of Reliance and Continental, if the board of
directors of each so determines by vote of a majority of the members of its
entire board;
(b) by Reliance or Continental, if its board of directors so determines
by vote of a majority of the members of its entire board, in the event of (i)
the failure of the stockholders of Continental to approve the Agreement at its
meeting called to consider such approval; provided, however, that Continental or
Reliance, as the case may be, shall only be entitled to terminate the Agreement
pursuant to this clause (i) if it has complied in all material respects with its
obligations under Sections 4.09 and 4.10, or (ii) a material breach by the other
party hereto of any representation, warranty, covenant or agreement contained
herein which causes the conditions set forth in Section 5.02(a) (in the case of
termination by Reliance) and Section 5.03(a) (in the case of the termination by
Continental) not to be satisfied and such breach is not cured within 25 business
days after written notice of such breach is given to the party committing such
breach by the other party; or which breach is not capable of being cured by the
date set forth in Section 6.01(d) or any extension thereof;
(c) by Reliance or Continental by written notice to the other party if
either (i) any approval, consent or waiver of a governmental agency required to
permit consummation of the transactions contemplated hereby shall have been
denied or (ii) any governmental authority of competent jurisdiction shall have
issued a final, unappealable order enjoining or otherwise prohibiting
consummation of the transactions contemplated by this Agreement;
(d) by Reliance or Continental, if its board of directors so determines
by vote of a majority of the members of its entire board, in the event that the
Merger is not consummated by March 31, 1998, unless the failure to so consummate
by such time is due to the breach of any representation, warranty or covenant
contained in this Agreement by the party seeking to terminate.
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(e) by Continental, if its board of directors so determines by a
majority vote of members of its entire board, at any time during the five-day
period commencing with the Valuation Date, if both of the following conditions
are satisfied:
(i) Reliance Market Value is less than $19.20,
adjusted as indicated in the last sentence of this Section
6.01(e) (the "Initial Reliance Market Value"); and
(ii) (A) the number obtained by dividing Reliance
Market Value on such Valuation Date by the Initial Reliance
Market Value (the "Reliance Ratio") is less than (B) the
number obtained by dividing the Final Index Price by the
Initial Index Price and subtracting 0.15 from the quotient in
this clause (ii)(B) (the "Index Ratio");
subject, however, to the following three sentences: (1) if Continental elects to
exercise its termination right pursuant to this Section 6.01(e), it shall give
prompt written notice to Reliance (provided, further, that such notice of
election to terminate may be withdrawn at any time during the five-day period);
(2) for a period of seven days commencing with its receipt of such notice,
Reliance shall have the option to increase the consideration to be received by
the holders of Continental Common Stock hereunder, by adjusting the Merger
Consideration to equal the lesser of (x) a number equal to a fraction, the
numerator of which is $19.20 and the denominator of which is the Reliance Market
Value, and (y) a number equal to a fraction, the numerator of which is the Index
Ratio multiplied by 1.1 and the denominator of which is Reliance Ratio; and (3)
if Reliance so elects it shall give prompt written notice to Continental of such
election and the adjusted Merger Consideration, whereupon no termination shall
have occurred pursuant to this Section 6.01(e) and this Agreement shall remain
in effect in accordance with its terms (except as the Merger Consideration shall
have been so adjusted).
For purposes of this Section 6.01(e), the following terms shall have
the meanings indicated below:
"Final Index Price" means the sum of the Final Prices for each
company comprising the Index Group multiplied by the applicable
weighting.
"Final Price," with respect to any company being a member of
the Index Group, means the average of the daily closing sales prices of
a share of common stock of such company, as reported on the
consolidated transaction reporting system for the market or exchange on
which such common stock is principally traded, during the period of 15
trading days ending on the Valuation Date, adjusted as indicated in the
last sentence of this Section 6.01(e).
"Index Group" means the 19 financial institution holding
companies listed below, the common stock of all of which are publicly
traded and as to which there have not been any publicly announced
proposal at any time during the period beginning on the date of
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this Agreement and ending on the Valuation Date for any such company to
be acquired. In the event that the common stock of any such company
ceases to be publicly traded or a proposal to acquire any such company
is announced at any time during the period beginning on the date of
this Agreement and ending on the Valuation Date, such company shall be
removed from the Index Group, and the weights attributed to the
remaining companies shall be adjusted proportionately for purposes of
determining the Final Index Price and the Initial Index Price. The 19
financial institution holding companies and the weights attributed to
them are as follows:
Holding Company Weighting
Commonwealth Bancorp, Inc. 6.56%
Dime Community Bancorp, Inc. 6.09%
Eagle Financial Corp. 3.24%
First Essex Bancorp, Inc. 3.30%
First Indiana Corporation 5.12%
Flushing Financial Corp. 4.02%
Haven Bancorp, Inc. 3.65%
InterWest Bancorp, Inc. 6.25%
Jefferson Savings Bancorp 3.25%
JSB Financial, Inc. 11.00%
Life Bancorp, Inc. 4.89%
Magna Bancorp, Inc. 6.56%
ML Bancorp, Inc. 4.59%
Ocean Financial Corp. 7.18%
PennFed Financial Services Inc. 3.14%
Queens County Bancorp, Inc. 11.07%
SIS Bancorp, Inc. 2.22%
Vermont Financial Services Corp. 4.88%
York Financial Corp. 3.26%
"Initial Index Price" means the sum of each per share closing
price of the common stock of each company comprising the Index Group
multiplied by the applicable weighting, as such prices are reported on
the consolidated transactions reporting system for the market or
exchange on which such common stock is principally traded on the
trading day immediately preceding the public announcement of this
Agreement.
"Reliance Market Value" shall have the meaning set forth in
Section 1.02(c) hereof.
"Valuation Date" means the Valuation Date, as defined in Section
1.02(c) hereof.
If Reliance or any company belonging to the Index Group declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of shares or similar transaction between the date of this Agreement and
the Valuation Date, the prices for the common stock of
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such company shall be appropriately adjusted, in the manner specified in Section
1.02(b) of this Agreement, for the purposes of applying this Section 6.01(e).
Section 6.02 Effect of Termination. In the event of the termination of
this Agreement by either Reliance or Continental, as provided above, this
Agreement shall thereafter become void and, subject to the provisions of Section
8.02, there shall be no liability on the part of any party hereto or their
respective officers or directors, except that any such termination shall be
without prejudice to the rights of any party hereto arising out of the willful
breach by any other party of any covenant or willful misrepresentation contained
in this Agreement.
Section 6.03 Third Party Termination Fee. In recognition of the
efforts, expenses and other opportunities foregone by Reliance while structuring
the Merger, the parties agree that Continental shall pay to Reliance the
termination fee of three hundred fifty thousand dollars ($350,000) in cash on
demand if, during a period of eighteen (18) months after the date hereof but
prior to the termination of this Agreement in accordance with its terms
(provided the Agreement is not terminated by Reliance pursuant to Section
6.01(b)), any of the following occurs:
(a) the acquisition by any person other than Reliance or an affiliate of
Reliance of beneficial ownership of 20% or more of the then outstanding voting
power of Continental;
(b) Continental or any of its Subsidiaries, without having received
Reliance's prior written consent, shall have entered into an agreement to engage
in an Acquisition Transaction (as defined herein) with any person (the term
"person" for purposes of this Section 6.03 having the meaning assigned thereto
in Sections 3(a)(9) and 13(d)(3) of the Exchange Act and the rules and
regulations thereunder) other than Reliance or any of its Subsidiaries or the
Board of Directors of Continental shall have recommended that the stockholders
of Continental approve or accept any Acquisition Transaction with any person
other than Reliance or any of its Subsidiaries. For purposes of this Agreement,
"Acquisition Transaction" shall mean (x) a merger or consolidation, or any
similar transaction, involving Continental, (y) a purchase, lease or other
acquisition of all or substantially all of the assets of Continental or (z) a
purchase or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 20% or more of the voting
power of Continental; provided, that the term "Acquisition Transaction" does not
include any internal merger or consolidation involving only Continental and/or
its Subsidiaries; or
(c) after a bona fide proposal is made by a third party to Continental
or its stockholders to engage in an Acquisition Transaction, (i) Continental
shall have willfully breached any covenant or obligation contained in the
Agreement and such breach would entitle Reliance to terminate the Agreement or
(ii) the holders of Continental Common Stock shall not have approved the
Agreement at the meeting of such stockholders held for the purpose of voting on
the Agreement, or such meeting shall not have been held or shall have been
canceled prior to termination of the Agreement or (iii) Continental's board of
directors shall have withdrawn or modified in a manner adverse to Reliance the
recommendation of Continental's board of directors with respect to the
Agreement.
-52-
Notwithstanding the foregoing, Continental shall not be obligated to
pay to Reliance such termination fees in the event that (i) Continental or
Reliance validly terminates this Agreement pursuant to Section 6.01(a) or
6.01(c) or (ii) Continental terminates this Agreement pursuant to Section
6.01(b)(ii) or 6.01(e).
ARTICLE VII
CLOSING, EFFECTIVE DATE AND EFFECTIVE TIME
Section 7.01 Effective Date and Effective Time. The closing of the
transactions contemplated hereby shall take place at the offices of Reliance,
000 Xxxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxx 00000, on such date (the "Closing
Date") and at such time as Reliance reasonably selects that is not earlier than
the later of (a) October 12, 1997 or (b) the last business day of the month in
which the expiration of the last applicable waiting period in connection with
approvals of governmental authorities shall occur and all conditions to the
consummation of this Agreement are satisfied or waived, or on such earlier, or
such other date as may be agreed by the parties. On the Closing Date, Reliance
Bank and Continental shall execute articles of merger in accordance with all
appropriate legal requirements and shall be filed as required by law, and the
Merger provided for herein shall become effective upon such filing or on such
date as may be specified in such articles of merger. The date of such filing or
such later effective date is herein called the "Effective Date." The "Effective
Time" of the Merger shall be as set forth in such articles of merger.
Section 7.02 Deliveries at the Closing. Subject to the provisions of
Articles V and VI, on the Closing Date there shall be delivered to Reliance and
Continental the documents and instruments required to be delivered under Article
V.
ARTICLE VIII
CERTAIN OTHER MATTERS
Section 8.01 Certain Definitions; Interpretation. As used in this
Agreement, the following terms shall have the meanings indicated:
"material" means material to Reliance or Continental (as the case may
be) and its respective subsidiaries, taken as a whole.
"person" includes an individual, corporation, limited liability
company, partnership, association, trust or unincorporated organization.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of, Exhibit or Schedule to, this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for ease of
-53-
reference only and shall not affect the meaning or interpretation of this
Agreement. Whenever the words "include", "includes", or "including" are used in
this Agreement, they shall be deemed followed by the words "without limitation."
Any singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular. Any reference to gender in this Agreement shall be
deemed to any other gender.
Section 8.02 Survival. Only those agreements and covenants of the
parties that are by their terms applicable in whole or in part after the
Effective Time, including Sections 4.03, 4.04(a), 4.14 and 8.06 of this
Agreement, shall survive the Effective Time. All other representations,
warranties, agreements and covenants shall be deemed to be conditions of the
Agreement and shall not survive the Effective Time. If the Agreement shall be
terminated, the agreements of the parties in the last three sentences of Section
4.04, Section 6.03 and Section 8.06 shall survive such termination.
Section 8.03 Waiver; Amendment. Prior to the Effective Time, any
provision of this Agreement may be: (i) waived in writing by the party
benefitted by the provision; or (ii) amended or modified at any time (including
the structure of the transaction) by an agreement in writing between the parties
hereto except that, after the vote by the stockholders of Continental or
Reliance, no amendment may be made that would reduce the Merger Consideration or
contravene applicable New York or federal banking laws, rules and regulations.
Section 8.04 Counterparts. This Agreement may be executed in
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
Section 8.05 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of New York, without
regard to conflicts of laws principles.
Section 8.06 Expenses. Each party hereto will bear all expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby.
Section 8.07 Notices. All notices, requests, acknowledgements and
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, overnight courier or
facsimile transmission (confirmed in writing) to such party at its address or
facsimile number set forth below or such other address or facsimile transmission
as such party may specify by notice to the other party hereto.
-54-
If to Continental, to:
Continental Bank
000 0xx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
President and Chief Executive Officer
With copies to:
Xxxxxxx, Xxxxxx & Xxxxxxxx
0000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
If to Reliance or Reliance Bank, to:
Reliance Bancorp, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
With copies to:
Xxxxxxx Xxxxxxxx & Xxxx
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Omer X. X. Xxxxxxxx, Esq.
Section 8.08 Entire Agreement; etc. This Agreement, together with the
Option Agreement and the Disclosure Letters represents the entire understanding
of the parties hereto with reference to the transactions contemplated hereby and
supersedes any and all other oral or written agreements heretofore made. All
terms and provisions of the Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Except for Section 4.14, nothing in this Agreement is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 8.09 Assignment. This Agreement may not be assigned by any
party hereto without the written consent of the other parties.
-55-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
RELIANCE BANCORP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
RELIANCE FEDERAL SAVINGS BANK
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
CONTINENTAL BANK
By: /s/ Xxxx X. Xxxxxxxx
------------------------
Xxxx X. Xxxxxxxx
President and Chief Executive Officer
Exhibit A
[FORM OF LETTER FOR DIRECTORS AND CERTAIN OFFICERS]
May ___, 1997
Reliance Bancorp, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
Ladies and Gentlemen:
The undersigned understands that Reliance Bancorp, Inc. ("Reliance")
and its subsidiary, Reliance Federal Savings Bank ("Reliance Bank"), are
considering entering into an Agreement and Plan of Merger, to be dated as of the
date hereof (the "Merger Agreement"), with Continental Bank ("Continental")
providing for the merger of Continental with and into Reliance Bank (the
"Merger") and that Reliance has required, as a condition to entering into the
Merger Agreement, that each of the Directors and certain Officers of Continental
enter into this Letter Agreement. In consideration of the substantial expenses
and other obligations Reliance will incur in connection with the transactions
contemplated by the Merger Agreement and in order to induce Reliance to execute
the Merger Agreement and to proceed to incur such expenses, the undersigned
agrees and undertakes as follows:
1. The undersigned represents and warrants that he or she is the
beneficial and record owner of ______ shares of common stock, par value $5.00
per share, of Continental (the "Common Stock") and has voting authority over
_________ shares of Common Stock.
2. The undersigned will be present in person or by proxy at all
meetings of Stockholders of Continental called to vote for approval of the
Merger so that all shares of Common Stock shall be counted for purposes of a
quorum at each such meeting and vote, or cause to be voted, for approval of the
Merger all shares of Common Stock that, on the record date therefor, are
beneficially owned by the undersigned or with respect to which the undersigned
has the power to vote, and vote against any other proposal of a similar nature
not involving Reliance.
3. The undersigned agrees not to, directly or indirectly, sell,
transfer, pledge, assign or otherwise dispose of, or enter into any contract,
option, commitment or other arrangement or understanding with respect to the
sale, transfer, pledge, assignment or other disposition of, any shares of Common
Stock now or hereafter beneficially owned by the undersigned (including as part
of a transaction involving the sale of Continental); provided, however, that
nothing contained herein shall prohibit the undersigned from pledging any of
such shares pursuant to a standard margin
Page 2.
Reliance Bancorp, Inc.,
May __, 1997
contract or arrangement. In the case of any transfer by operation of law, this
letter agreement shall be binding upon and inure to the transferee. Any transfer
or other disposition in violation of the terms of this paragraph 3 shall be null
and void.
4. This letter agreement shall terminate at the time of the termination
of the Merger Agreement, except that any such termination shall be without
prejudice to the rights of the undersigned arising out of any breach of any
agreement or representation contained herein.
This Letter Agreement may be executed in two or more counterparts, each
of which shall be deemed to constitute an original, but all of which together
shall constitute one document. This Letter Agreement constitutes the complete
understanding between the undersigned and Reliance concerning the subject matter
hereof. This Letter Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to agreements made and to be
performed entirely within such state.
Very truly yours,
Accepted:
RELIANCE BANCORP, INC.
By:
----------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
Exhibit B
[FORM OF LETTER FOR CERTAIN MAJOR STOCKHOLDERS]
May __, 1997
Reliance Bancorp, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xx. Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
Ladies and Gentlemen:
The undersigned understands that Reliance Bancorp, Inc.
("Reliance") and its subsidiary, Reliance Federal Savings Bank ("Reliance
Bank"), are considering entering into an Agreement and Plan of Merger, to be
dated as of the date hereof (the "Merger Agreement"), with Continental Bank
("Continental") providing for the merger of Continental with and into Reliance
Bank (the "Merger") and that Reliance has required, as a condition of entering
into the Merger Agreement, that certain major stockholders of Continental enter
into this Letter Agreement. In consideration of the substantial expenses and
other obligations Reliance will incur in connection with the transactions
contemplated by the Merger Agreement and in order to induce Reliance to execute
the Merger Agreement and to proceed to incur such expenses, the undersigned
agrees and undertake as follows:
1. The undersigned represents and warrants that he or she is the
beneficial owner of _______ shares of common stock, par value $5.00 per share,
of Continental (the "Common Stock") and has voting authority over _________
shares of Common Stock.
2. The undersigned will be present in person or by proxy at all
meetings of Stockholders of Continental called to vote for approval of the
Merger so that all shares of Common Stock shall be counted for purposes of a
quorum at each such meeting and vote, or cause to be voted, for approval of the
Merger all shares of Common Stock that, on the record date therefor, are
beneficially owned by the undersigned or with respect to which the undersigned
has the power to vote, and vote against any other proposal of a similar nature
not involving Reliance.
3. The undersigned agrees not to, directly or indirectly, sell,
transfer, pledge, assign or otherwise dispose of, or enter into any contract,
option, commitment or other arrangement or understanding with respect to the
sale, transfer, pledge, assignment or other disposition of, any shares of Common
Stock (including as part of a transaction involving the sale of Continental);
provided, however, that nothing contained herein shall prohibit the undersigned
from pledging any of such shares pursuant to a standard margin contract or
arrangement. In the case of any transfer by
Page 2.
Reliance Bancorp, Inc.,
May __, 1997
operation of law, this letter agreement shall be binding upon and inure to the
transferee. Any transfer or other disposition in violation of the terms of this
paragraph 3 shall be null and void.
4. The undersigned agrees that he or she shall not, and shall
direct and use all reasonable efforts to cause his or her respective employees,
agents and representatives (including, without limitation, any investment
banker, attorney or accountant retained by them) not to, wilfully take, or cause
to be taken, any action that could impair the prospects of completing the Merger
in accordance with the Merger Agreement.
5. This Letter Agreement shall terminate at the time of the
termination of the Merger Agreement, except that any such termination shall be
without prejudice to the rights of the undersigned arising out of any breach of
any agreement or representation contained herein.
This Letter Agreement may be executed in two or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one document. This letter agreement
constitutes the complete understanding between the undersigned and Reliance
concerning the subject matter hereof. This Letter Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York
applicable to agreements made and to be performed entirely within such state.
Very truly yours,
Accepted:
RELIANCE BANCORP, INC.
By:
-----------------
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
Exhibit C
FORM OF JOINT RELEASE
1. In consideration of the payment of the following amounts of
compensation and benefits due to me under the compensation and benefit plans
specified below (collectively, the "Specified Compensation and Benefit Plans"):
Specified Compensation Gross Amount
and Benefit Plan (before tax withholding)
------------------------------------ ------------------------
Employment Agreement dated
___________, as amended
------------------------------------
Phantom Stock Units (_____ units
multiplied by Reliance Market Value)
------------------------------------
Severance Pay
------------------------------------
Payment in lieu of Accrued Vacation
------------------------------------
Performance Bonus Program
------------------------------------
Retention Bonus Program
================================================================================
the receipt of which is hereby acknowledged, [NAME], for himself and his heirs,
executors, administrators, successors and assigns, hereby irrevocably and
unconditionally release and forever discharge Continental Bank ("Continental"),
the stockholders, subsidiaries, affiliates, officers, directors, employees and
agents of Continental, and their respective heirs, executors, administrators,
successors and assigns, including, but not limited to Reliance Federal Savings
Bank and Reliance Bancorp, Inc. (all of the foregoing, collectively, the
"Releasee") of and from all known or unknown actions, causes of action, suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, extents, executions, claims, and demands
whatsoever, in law, admiralty or equity, which against the Releasee, he or his
heirs, executors, administrators, successors or assigns ever had, now have or
hereafter can, shall or may, have by reason of any matter, cause or thing
whatsoever for payment or provision of any benefit or amount owed pursuant to
any Specified Compensation and Benefit Plan, other than the welfare benefits to
be provided after the Effective Time (including group life, medical and dental
benefits).
2. Continental Bank ("Continental"), for itself and for its successors
and assigns, hereby irrevocably and unconditionally release and forever
discharge [NAME] and his heirs, executors, administrators, successors and
assigns of and from all known or unknown actions, causes of action, suits,
debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, extents, executions, claims, and demands
whatsoever, in law, admiralty or equity, which, against him, Continental or its
successors and assigns ever had, now have or hereafter can, shall or may, have
by reason of any matter, cause or thing whatsoever for payment or provision of
any benefit or amount owed pursuant to any Specified Compensation and Benefit
Plan.
Page 2.
3. This instrument may not be modified otherwise than by written
instrument signed, and acknowledged before a notary public, by the party against
whom enforcement of the modification is sought.
IN WITNESS WHEREOF, I have executed this Instrument this ____
day of ________, 1997.
[NAME]
----------------------------
CONTINENTAL BANK
By
Name:
--------------
Title:
[SEAL]
Attest:
--------------------
Secretary
STATE OF NEW YORK )
: ss.
COUNTY OF NASSAU )
On ___________, 19____, before me personally came [NAME], to
me known, and known to me to be the person named in the above instrument, who
did depose and say that he is the person referred to as the undersigned in the
above instrument and that he signed his name thereto as his free act and deed.
--------------------------
Notary Public
STATE OF NEW YORK )
: ss.
COUNTY OF NASSAU )
On ___________, 19____, before me personally came
____________________________, to me known, who did depose and say that he
resides at _______________________________________; that he is
_______________________ of Continental Bank, the corporation named in the
foregoing instrument; that he knows the seal of such corporation; that the seal
affixed to the foregoing instrument is such seal; such seal was affixed to such
instrument by order or the Board of Directors of such corporation; and that he
signed his name thereto by like order.
--------------------------
Notary Public
Exhibit D
[FORM OF AFFILIATE LETTER]
________ __, 1997
Reliance Bancorp, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger, dated as of May
__, 1997 (the "Merger Agreement"), by and among Reliance Bancorp, Inc., a
Delaware corporation ("Reliance"), Reliance Federal Savings Bank, a federally
chartered stock savings bank and a wholly owned subsidiary of Reliance
("Reliance Bank"), and Continental Bank, a New York chartered stock commercial
bank ("Continental"). The Merger Agreement provides, among other things, for the
merger of Continental with and into Reliance Bank, with Reliance Bank being the
surviving entity (the "Merger"). Upon consummation of the Merger, each share of
Continental common stock, par value $5.00 per share ("Continental Common Stock")
other than Excluded Shares (as defined in the Merger Agreement) will become and
be converted into the right to receive 1.1 shares of common stock, par value
$0.01 per share, of Reliance ("Reliance Common Stock") as determined pursuant to
Section 1.02 of the Merger Agreement. This Letter Agreement is being entered
into pursuant to Section 4.12 of the Merger Agreement.
I have been advised that (i) the Merger constitutes a transaction
covered by Rule 145 of the Rules and Regulations (the "Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"), and (ii) I may be deemed to be an affiliate of
Continental, as the term "affiliate" is defined for purposes of Rule 145 under
the Act; and that, accordingly, the shares of Reliance Common Stock that I may
acquire in connection with the Merger may be disposed of only in conformity with
the provisions hereof.
I hereby represent and warrant to, and covenant with, Reliance as
follows:
1. I have full power to execute this Letter Agreement, to make the
representations, warranties and agreements herein and to perform my obligations
hereunder.
2. I have carefully read this Letter Agreement and, to the extent I
felt necessary, discussed its requirements and other applicable limitations upon
my ability to sell, transfer or otherwise dispose of shares of Reliance Common
Stock with my counsel or counsel for Continental.
Page 2
Reliance Bancorp, Inc.,
May __, 1997
3. In the event I receive any shares of Reliance Common Stock in
exchange for shares of Continental Common Stock as a result of the consummation
of the Merger, or any securities which may be paid as a dividend or otherwise
distributed thereon or with respect thereto or issued or delivered in exchange
or substitution therefor, or any option, right or other interest (all such
shares and securities being referred to herein as "Restricted Securities"), and
with respect to any such Restricted Securities:
(A) I will not make any sale, transfer or other disposition of
Restricted Securities in violation of the Act or the Regulations.
(B) I have been advised that the shares of Reliance Common
Stock to be issued in the Merger have been registered under the Act by
a Registration Statement of Reliance on Form S-4. However, I have also
been advised that because (i) at the time of the submission of the
Merger Agreement to a vote of the stockholders of Continental, I may be
deemed an affiliate of Continental, and (ii) the distribution by me of
Reliance Common Stock has not been registered under the Act, that I may
not sell, transfer or otherwise dispose of Reliance Common Stock issued
to me in the Merger or other Restricted Securities unless (a) such
sale, transfer or other disposition has been registered under the Act,
(b) such sale, transfer or other disposition is made in conformity with
the volume and other limitations imposed by Rule 145 under the Act, or
(c) in the opinion of counsel reasonably acceptable to Reliance, such
sale, transfer or other disposition is otherwise exempt from
registration under the Act.
(C) I understand that Reliance is under no obligation to
register the sale, transfer or other disposition of shares of Reliance
Common Stock or other Restricted Securities by me or on my behalf under
the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
(D) I also understand that stop transfer instructions will be
given to Reliance's transfer agent with respect to my Restricted
Securities and that there will be placed on the certificates for
Restricted Securities issued to me, or any substitutions therefor, a
legend stating in substance:
The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act of
1933, as amended, applies. The shares represented by this
certificate may only be transferred in accordance with the
terms of an agreement between the registered holder hereof and
Reliance Bancorp, Inc. ("Reliance"), a copy of which agreement
is on file at the principal office of Reliance. A copy of such
agreement shall be provided, without charge, upon receipt by
Reliance of a written request.
(E) Unless a transfer of Restricted Securities is a sale made
in conformity with the provisions of Rule 145(d), or made pursuant to
any effective registration statement
Page 3
Reliance Bancorp, Inc.,
May __, 1997
under the Act, Reliance reserves the right to put an appropriate legend
on the certificate issued to my transferee.
(F) It is understood and agreed that the legends set forth in
paragraphs D and E above shall be removed by delivery of substitute
certificates without such legend, and/or the issuance of a letter to
Reliance's transfer agent removing such stop transfer instructions, if
I shall have delivered to Reliance (i) a copy of a letter from the
staff of the Commission, or an opinion of counsel in form and substance
reasonably satisfactory to Reliance, or other evidence reasonably
satisfactory to Reliance, to the effect that such legend and/or stop
transfer instructions are not required for purposes of the Act or (ii)
reasonably satisfactory evidence or representations that the securities
represented by such certificates are being or have been transferred in
a transaction made in conformity with the provisions of Rule 145 under
the Act.
4. I recognize and agree that the foregoing provisions also apply to
(A) my spouse, (B) any relative of mine or my spouse occupying my home, (C) any
trust or estate in which I, my spouse or any such relative owns at least 10%
beneficial interest or of which any of us serves as trustee, executor or in any
similar capacity and (D) any corporation or other organization in which I, my
spouse or any such relative owns at least 10% of any class of equity securities
or of the equity interest. It is understood that this Letter Agreement shall be
binding upon and enforceable against my administrators, executors,
representatives, heirs, legatees and devisees, and any pledgee holding
securities restricted pursuant to this Letter Agreement.
Page 4
Reliance Bancorp, Inc.,
May __, 1997
5. This Letter Agreement shall terminate and be of no further force and
effect if the Merger Agreement is terminated pursuant to the terms thereof.
Very truly yours,
----------------------
Name:
Acknowledged this ____ day of
________, 1997, by
Reliance Bancorp, Inc.
By:
---------------------
Name:
Title:
