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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
January 27, 1994
(Date of earliest event reported)
Continental Bank Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-5872 36-2664023
(Commission File Number) (IRS Employer Identification No.)
231 South LaSalle Street, Chicago, Illinois 60697
(Address of principal executive offices) (Zip Code)
(312) 828-1614
(Registrant's telephone number, including area code)
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Item 5. Other Events.
Continental Bank Corporation, a Delaware corporation
("Continental" or the "registrant"), and BankAmerica Corporation,
a Delaware corporation ("BankAmerica"), have entered into an
Agreement and Plan of Merger, dated as of January 27, 1994 (the
"Agreement"), pursuant to which Continental will be merged with and
into BankAmerica in a transaction in which BankAmerica will be the
surviving entity (such transaction, the "Merger").
As a result of the Merger, each outstanding share of
common stock of Continental (the "Common Stock") will be converted
either all into common stock of BankAmerica or all into cash. To
the extent BankAmerica stock is received, the Merger is expected to
be tax free to the Continental shareholders, although such receipt
of stock could become taxable under certain circumstances.
However, it is a condition to the Merger closing that counsel to
Continental renders an opinion for Continental that the Merger
qualifies as a tax free reorganization under the Internal Revenue
Code, except for cash payments. Some of the basic terms of the
Merger are summarized below and in the joint press release issued
January 28, 1994 and attached hereto as Exhibit 99. The Agreement
itself is attached hereto as Exhibit 2, and this summary is
qualified in its entirety by reference to the full Agreement.
The number of shares or fractions thereof of BankAmerica
common stock to be issued in the Merger is subject to adjustment,
pursuant to an exchange ratio contained in the Agreement. The
final exchange ratio will be based on the average of the closing
prices of BankAmerica common stock during the 10 consecutive days
on which shares of BankAmerica common stock are traded on the New
York Stock Exchange ending on the 10th calendar day immediately
prior to the anticipated effective time of the Merger (the "Final
BAC Stock Price"). Subject to the floor and ceiling on the Final
BAC Stock Price discussed below, each share of Common Stock is, at
the election of the holder, converted into either:
(i) BankAmerica common stock equal to .4158
plus the ratio of $18.375 to the Final
BAC Stock Price; or
(ii) cash equal to $18.375 plus the product
of .4158 and the Final BAC Stock Price;
except that, so long as the Final BAC Stock Price does not exceed
$55.84 per BankAmerica share and is not less than $36.16 per
BankAmerica share and so long as the number of outstanding shares
of Common Stock does not increase as a result of the exercise of
employee stock options outstanding at the date of the Agreement,
the amount of BankAmerica common shares to be issued in the Merger
will remain the same (approximately 21.25 million shares). Such
amount is herein referred to as the "Stock Amount." As of
January 26, 1994, there were 51,103,022 shares of Common Stock
outstanding, other than treasury shares.
If the Final BAC Stock Price is in excess of $55.84, then
the Stock Amount and the per share cash and stock consideration
will decline so that the amount to be received (whether all in
stock or all in cash) will be the same as if the Final BAC Stock
Price had been equal to $55.84. If the Final BAC Stock Price is
less than $36.16, Continental may terminate the Agreement unless:
(i) BankAmerica agrees to increase the number of common shares to
be issued and to increase the Stock Amount and to increase the per
share stock and cash consideration to be received in the Merger to
an amount equal to the amounts which would have been received by
the Continental common shareholders under the Agreement (whether
all in stock or all in cash) if the Final BAC Stock Price had been
equal to $36.16; and (ii) counsel to Continental renders an opinion
for Continental that the merger qualifies as a tax free
reorganization under the Internal Revenue Code, except for cash
payments.
Continental shareholders may elect, at their option, to
receive cash in the Merger, or to receive BankAmerica common stock
in the Merger or to make no election under the Agreement. The per
share stock and cash amounts received per share of Common Stock
will be equal in value to each other based on valuing the
BankAmerica common stock at the Final BAC Stock Price. The
aggregate amount of cash to be paid to Continental shareholders is
fixed at approximately $939 million so long as the number of
outstanding shares of Common Stock does not increase as a result of
the exercise of employee stock options outstanding at the date of
the Agreement. The Agreement provides for a random allocation
procedure (as determined by Continental and BankAmerica) in the
event of an oversubscription in respect of stock or cash.
Fractional shares will not be issued but the value of such shares
will be paid to the holders thereof in cash.
The Agreement also provides for the termination of the
Agreement by BankAmerica, in its sole discretion, during the 10
business day period beginning after the date of receipt by
BankAmerica of certain Continental disclosure schedules in form and
detail of presentation reasonably satisfactory to BankAmerica. In
addition, the disclosure schedule receipt date also begins a 30
calendar day period (10 business days of which overlap the sole
discretion termination period described in the preceding sentence)
during which period BankAmerica may terminate the Agreement if
BankAmerica identifies any circumstances which, in the reasonable
judgment of BankAmerica's Board of Directors (including a committee
thereof), acting in good faith and with due regard for principles
of fair dealing, could: (i) materially and adversely impact the
reasonably expected financial or business benefits to BankAmerica
of the Merger; (ii) be inconsistent in any material and adverse
respect with any of the representations and warranties of
Continental contained in the Agreement; (iii) materially and
adversely affect the business, operations, properties, financial
condition, results of operations or prospects of Continental and
its subsidiaries on a consolidated basis; or (iv) deviate
materially and adversely from Continental's financial statements
for the year or quarter ended December 31, 1993. The timing of
such dates cannot be determined with certainty since the point-in-
time that satisfactory disclosure schedules will be received by
BankAmerica cannot presently be determined. In addition, under
certain circumstances BankAmerica or Continental may terminate the
Agreement, as specified therein.
In addition, each share of the Continental's Adjustable
Rate Preferred Stock, Series 1 and 2 (collectively, "Continental
Preferred Stock") outstanding immediately prior to the effective
time of the Merger (excluding shares held by dissenting holders of
the Series 2 stock, if any, exercising appraisal rights) will be
converted, respectively, into one share of Adjustable Rate
Preferred Stock, Series 1 and 2, of BankAmerica the respective
terms of which will be essentially the same as the correlative
series of Continental Preferred Stock.
As a result of the Merger and upon effectiveness of the
Merger, all shares of Continental's Common Stock and Preferred
Stock will be delisted from the New York Stock Exchange, will not
be listed on any national securities exchange or quoted in any
inter-dealer quotation system, and will be eligible for termination
of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended, and the holders of Continental's
Common and Preferred Stock will become stockholders of BankAmerica
to the extent they receive BankAmerica stock in the Merger.
Concurrently with the execution and delivery of the
Merger Agreement, Continental has entered into a Stock Option
Agreement (the "Stock Option Agreement") with BankAmerica pursuant
to which Continental has granted to BankAmerica an option to
purchase up to 10,169,000 shares of the Common Stock at a price of
$37.50 per share. BankAmerica or any other holder or holders of
the stock option (collectively, the "Holder") may exercise the
stock option, in whole or in part, subject to regulatory approval,
at any time within 30 days (subject to extension as provided in the
Stock Option Agreement) after both an "Initial Triggering Event"
(as defined in the Stock Option Agreement) and a "Subsequent
Triggering Event" occurring prior to termination of the stock
option. "Subsequent Triggering Event" is defined as either: (A)
the acquisition by any person or group of beneficial ownership of
20% or more of the then outstanding Common Stock, or (B)
Continental or any Continental subsidiary, without BankAmerica's
prior written consent, entering into an agreement with any person
or group (other than BankAmerica or any BankAmerica subsidiary) to
engage in, or Continental's Board of Directors recommending that
Continental's stockholders approve or accept (other than as
contemplated by the Agreement), any (x) merger or consolidation, or
similar transaction, involving Continental or any significant
Continental subsidiary, (y) purchase, lease or other acquisition
representing 15% or more of the consolidated assets of Continental
or any significant Continental subsidiary, or (z) 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 or any significant Continental
subsidiary.
The Stock Option Agreement also provides that BankAmerica
has the right, in certain circumstances, to require Continental to
repurchase the option and any shares acquired by exercise of the
option, and that BankAmerica has the right to require Continental
to register the Common Stock acquired by or issuable upon exercise
of the option under the Securities Act of 1933, as amended. In
addition, if Continental enters into an alternative transaction
with a third party within 18 months after the termination of the
Agreement, it would be obligated under certain circumstances to pay
BankAmerica the greater of $60 million or 3% of the transaction's
value.
The closing of the Merger is subject to the satisfaction
of certain conditions, including the approval of the transaction by
the holders of a majority of the outstanding shares of Common Stock
and the obtaining of certain regulatory approvals. While the
precise time of the Merger closing cannot be determined with
certainty, the parties presently anticipate that (assuming the
normal approval process is not impeded) the closing will take place
in the third quarter of 1994.
In connection with the Agreement and the Stock Option
Agreement, Continental has amended its Rights Agreement, dated as
of July 22, 1991 (the "Rights Agreement"), between Continental and
Continental Bank, National Association, as Rights Agent (such
amendment, the "Rights Agreement Amendment"), to exempt the
Agreement and the Stock Option Agreement and the transactions
contemplated thereby from the application of the Rights Agreement.
The Agreement, the Stock Option Agreement, the Rights
Agreement Amendment and the joint press release of BankAmerica and
Continental are attached as exhibits to this report and are
incorporated herein by reference. The foregoing summaries of the
Merger Agreement, the Stock Option Agreement and the Rights
Agreement Amendment do not purport to be complete and are qualified
in their entirety by reference to such exhibits.
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Item 7. Financial Statements, Pro Forma Financial Statements and
Exhibits.
The following exhibits are filed with this report:
Exhibit Number Description
2 Agreement and Plan of Merger, dated as
of January 27, 1994, between the
registrant and BankAmerica
Corporation.
4 Amendment, dated as of January 27,
1994, to the Rights Agreement, dated
as of July 22, 1991, between the
registrant and Continental Bank,
National Association.
10 Stock Option Agreement, dated as of
January 27, 1994, between the
registrant and BankAmerica
Corporation, as Rights Agent.
99 Joint Press Release of the registrant
and BankAmerica Corporation issued
January 28, 1994, regarding the
Merger.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CONTINENTAL BANK CORPORATION
By: /s/ John J. Higgins
_________________________
Dated: February 7, 1994
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Exhibit 2.
----------
AGREEMENT AND PLAN OF MERGER
between
BANKAMERICA CORPORATION
and
CONTINENTAL BANK CORPORATION
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Dated as of January 27, 1994
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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<C> <S> <C>
ARTICLE I THE MERGER AND RELATED TRANSACTIONS.......................... 1
1.1 Effective Time of the Merger................................. 1
1.2 Closing...................................................... 2
1.3 Effects of the Merger........................................ 2
1.4 Absence of Control........................................... 2
ARTICLE II CERTAIN DEFINITIONS.......................................... 2
2.1 Certain Definitions.......................................... 2
ARTICLE III MANNER OF CONVERTING SHARES.................................. 7
3.1 Conversion................................................... 7
3.2 Conversion of Continental Common Stock....................... 9
3.3 Election Procedures.......................................... 9
3.4 Continental Termination Right; BAC Adjustment Right; Cap on
Final BAC Stock Price for Calculation of Per Share Stock and
Cash Consideration........................................... 11
3.5 Adjustments for Dilution and Other Matters................... 12
3.6 Illustrative Cases........................................... 13
3.7 Conversion of Dissenting Continental Stock................... 13
ARTICLE IV EXCHANGE OF SHARES........................................... 13
4.1 Exchange Procedures.......................................... 13
4.2 Voting and Dividends......................................... 14
4.3 No Liability................................................. 14
4.4 Withholding Rights........................................... 15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF CONTINENTAL................ 15
5.1 Organization, Standing and Authority......................... 15
5.2 Capital Structure............................................ 15
5.3 Authority.................................................... 17
5.4 SEC Documents................................................ 18
5.5 Information Supplied......................................... 19
5.6 Compliance with Applicable Laws.............................. 19
5.7 Other Activities of Continental and its Subsidiaries......... 20
5.8 Litigation................................................... 20
5.9 Taxes........................................................ 21
5.10 Tax Disclosure............................................... 21
5.11 Certain Agreements........................................... 21
5.12 Employee Benefit Plans; ERISA................................ 22
5.13 Subsidiaries................................................. 24
5.14 Agreements with Bank Regulators.............................. 24
5.15 Absence of Certain Changes or Events......................... 24
5.16 Section 203 of the DGCL and Other State Takeover Laws Not
Applicable................................................... 25
5.17 Continental Rights Agreement................................. 25
5.18 Properties................................................... 25
5.19 Allowance for Credit Losses.................................. 25
5.20 Tax and Certain Regulatory Matters........................... 25
5.21 Material Contract Defaults................................... 25
5.22 Insurance.................................................... 26
5.23 Labor and Employment Matters................................. 26
5.24 Material Interests of Certain Persons........................ 27
5.25 Registration Obligations..................................... 27
5.26 Brokers and Finders.......................................... 27
5.27 Environmental Matters........................................ 27
5.28 Accounting Records........................................... 28
5.29 Undisclosed Liabilities...................................... 28
5.30 Intellectual Property Rights................................. 28
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5.31 Investment Securities........................................ 28
5.32 Loans........................................................ 29
5.33 Interest Rate Risk Management Instruments.................... 29
5.34 Compliance with Policies..................................... 30
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BAC........................ 30
6.1 Organization, Standing, and Authority........................ 30
6.2 Authorization of Merger and Related Transactions............. 30
6.3 Financial Statements......................................... 30
6.4 Information Supplied......................................... 31
6.5 Capital Stock................................................ 31
6.6 Tax and Regulatory Matters................................... 31
6.7 Brokers and Finders.......................................... 31
6.8 Allowance for Credit Losses.................................. 31
6.9 Absence of Certain Changes or Events......................... 32
6.10 Litigation................................................... 32
ARTICLE VII CONDUCT OF CONTINENTAL'S BUSINESSES.......................... 32
7.1 Conduct of Business.......................................... 32
7.2 Forbearances................................................. 32
ARTICLE VIII ADDITIONAL AGREEMENTS....................................... 34
8.1 Access and Information....................................... 34
8.2 S-4; Regulatory Matters...................................... 35
8.3 Stockholders' Approval....................................... 35
8.4 Other Offers................................................. 35
8.5 Press Releases............................................... 35
8.6 Notice of Defaults........................................... 36
8.7 Miscellaneous Agreements and Consents........................ 36
8.8 Indemnification.............................................. 36
8.9 Conversion of Stock Options; Restricted Stock................ 37
8.10 Certain Change of Control Matters............................ 37
8.11 Termination Payment and Other Matters........................ 38
8.12 Letter of Continental's Accountants.......................... 38
8.13 Letter of BAC's Accountants.................................. 39
8.14 Advice of Changes; Government Filings........................ 39
8.15 Accounting Methods........................................... 39
8.16 Coordination of Dividends.................................... 39
8.17 Continental Accruals and Reserves............................ 39
8.18 Affiliates................................................... 39
8.19 Additional Agreements........................................ 40
8.20 Modification of Continental Options.......................... 40
8.21 BAC Severance Benefits....................................... 40
8.22 Continental Benefit Plans.................................... 40
8.23 Continental Internal Audit Function; Peer Review............. 40
8.24 Continental Dividend Reinvestment Plan....................... 40
8.25 Execution and Delivery of Stock Option Agreement............. 41
ARTICLE IX CONDITIONS................................................... 41
9.1 Conditions to Each Party's Obligation to Effect the Merger... 41
9.2 Conditions to Obligations of Continental to Effect the
Merger...................................................... 41
9.3 Conditions to Obligations of BAC to Effect the Merger........ 42
ARTICLE X TERMINATION AND AMENDMENT.................................... 44
10.1 Termination.................................................. 44
10.2 Special BAC Rights of Termination............................ 45
10.3 Effect of Termination........................................ 46
10.4 Non-Survival of Representations, Warranties and Covenants
Following the Effective Time................................. 46
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10.5 Termination Expenses........................................... 46
10.6 Amendment...................................................... 46
10.7 Extension; Waiver.............................................. 46
ARTICLE XI GENERAL PROVISIONS............................................. 46
11.1 Expenses....................................................... 46
11.2 Entire Agreement............................................... 46
11.3 Amendments..................................................... 47
11.4 Waivers........................................................ 47
11.5 No Assignment.................................................. 47
11.6 Notices........................................................ 47
11.7 Specific Performance........................................... 48
11.8 Governing Law.................................................. 48
11.9 Consent to Jurisdiction........................................ 48
11.10 Counterparts................................................... 48
11.11 Captions....................................................... 48
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January 27,
1994, between BANKAMERICA CORPORATION, a Delaware corporation ("BAC"), and
-----------------------
CONTINENTAL BANK CORPORATION, a Delaware corporation ("Continental").
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Capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in Article II.
W I T N E S S E T H:
WHEREAS, BAC and Continental are registered bank holding companies under
the Bank Holding Company Act of 1956, as amended (the "BHCA"); and
WHEREAS, the Boards of Directors of BAC and Continental have concluded that
there would be substantial long-term benefits to both organizations and their
respective stockholders arising from a business combination resulting in a
strategic alliance between the equity owners of BAC and Continental, including
without limitation, the opening of important new geographic markets for both BAC
and Continental; and
WHEREAS, BAC believes that it would be advantageous to the future
operations of BAC and Continental that the headquarters of the United States
corporate banking division of BAC be located in the City of Chicago, State of
Illinois, following the business combination so that substantially all of the
administrative operations of such division as now conducted would be
headquartered in Chicago in combination with the similar operations of
Continental, and BAC intends to so relocate such operations of BAC after the
business combination; and
WHEREAS, as a condition and inducement to BAC's willingness to enter into
this Agreement, Continental and BAC are entering into immediately after the
execution and delivery hereof a Stock Option Agreement dated as of the date
hereof (the "Stock Option Agreement") pursuant to which Continental shall grant
to BAC an option to purchase shares of the Common Stock, par value $4 per share,
of Continental (the "Continental Common Stock"); and
WHEREAS, BAC and Continental desire to make certain representations,
warranties, covenants and agreements in connection with the transactions hereby
contemplated and to prescribe various conditions thereto; and
WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, BAC shall have the option to effect a business combination with
Continental by way of a merger of Continental with and into BAC, or by such
other means as are provided for herein (the "Merger"); and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the respective Boards of Directors of BAC and Continental have
resolved that the transactions described herein are in the best interests of the
parties and their respective stockholders and have approved the transactions
described herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
ARTICLE I
THE MERGER AND RELATED TRANSACTIONS
1.1 Effective Time of the Merger. Subject to the provisions of this
----------------------------
Agreement, a certificate of merger (the "Certificate of Merger") shall be duly
prepared, executed and
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acknowledged by the Surviving Corporation and thereafter delivered to the
Secretary of State of the State of Delaware for filing, as provided in the
Delaware General Corporation Law (the "DGCL"), as soon as practicable on or
after the Closing Date. The Merger shall become effective upon the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
or at such time thereafter as is provided in the Certificate of Merger (the
"Effective Time").
1.2 Closing. The closing of the Merger (the "Closing") will take place at
-------
10:00 a.m. on the first day which is (a) the last business day of a month
(unless BAC agrees to waive this clause (a), in which case it shall not be
applicable), (b) after satisfaction (or waiver) of the condition set forth in
Section 9.1(b), and (c) at least two business days after satisfaction (or
waiver) of each of the other conditions set forth in Section 9.1, and the
conditions set forth in Sections 9.2(b) and 9.3(b) (other than the delivery of
the certificates referred to in Sections 9.2(b) and 9.3(b)) (the "Closing
Date"), at the offices of BAC in San Francisco, California, unless another time,
date or place is agreed to in writing by the parties hereto.
1.3 Effects of the Merger.
---------------------
(a) At the Effective Time, (i) the separate existence of Continental shall
cease, subject to Section 1.4, and Continental shall be merged with and into
BAC, (ii) the Certificate of Incorporation of BAC as in effect immediately prior
to the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation and (iii) the By-laws of BAC as in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation.
(b) As used in this Agreement, "Constituent Corporations" shall mean BAC
and Continental and "Surviving Corporation" shall mean BAC.
(c) At and after the Effective Time, the Merger will have the effects set
forth in section 259 of the DGCL.
1.4 Absence of Control. Subject to any specific provisions of this
------------------
Agreement, it is the intent of the parties that BAC by reason of this Agreement
shall not (until consummation of the transactions contemplated hereby) control,
and shall not be deemed to control, directly or indirectly, Continental or any
of its Subsidiaries and shall not exercise, or be deemed to exercise, directly
or indirectly, a controlling influence over the management or policies of
Continental or any of its Subsidiaries.
ARTICLE II
CERTAIN DEFINITIONS
2.1 Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the meanings set forth below:
(a) "Acquisition Event" shall have the meaning set forth in Section 8.11.
(b) "Acquisition Proposal" shall have the meaning set forth in Section
8.4.
(c) "Affiliate" shall mean, with respect to any person, any Person that,
directly or indirectly, controls or is controlled by or is under common control
with such Person.
(d) "Aggregate Value" shall have the meaning set forth in Section 8.11.
(e) "Agreement" shall have the meaning set forth in the introduction to
this Agreement.
(f) "Allowance" shall have the meaning set forth in Section 5.19.
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(g) "BAC" shall have the meaning set forth in the introduction to this
Agreement.
(h) "BAC Common Stock" shall mean the common stock, par value $1.5625 per
share, of BAC.
(i) "BAC Financial Statements" shall have the meaning set forth in Section
6.3.
(j) "BAC Mirror Preferred Stock" shall have the meaning set forth in
Section 3.1(a)(ii).
(k) "BAC Series 1 Preferred Stock" shall have the meaning set forth in
Section 3.1(a)(ii).
(l) "BAC Series 2 Preferred Stock" shall have the meaning set forth in
Section 3.1(a)(ii).
(m) "Bank Regulators" shall mean the Federal Reserve Board, the OCC, the
FDIC, the Office of Thrift Supervision and the Illinois Commissioner of Banks
and Trust Companies.
(n) "BHCA" shall have the meaning set forth in the recitals to this
Agreement.
(o) "BofA" shall have the meaning set forth in Section 8.14.
(p) "Call Reports" shall have the meaning set forth in Section 5.4.
(q) "Cash Designees" shall have the meaning set forth in Section 3.3.
(r) "Cash Election Shares" shall have the meaning set forth in Section
3.3.
(s) "CB" shall have the meaning set forth in Section 5.1.
(t) "Ceiling Price" shall have the meaning set forth in Section 3.4.
(u) "Certificate of Merger" shall have the meaning set forth in Section
1.1.
(v) "Closing" shall have the meaning set forth in Section 1.2.
(w) "Closing Date" shall have the meaning set forth in Section 1.2.
(x) "Closing Price" of a given class of stock for a given day shall mean
the closing price of a share of such class of stock as reported on the New York
Stock Exchange Composite Transaction Tape for such day.
(y) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
(z) "Condition" shall mean, with respect to BAC or Continental, the
financial condition, assets, businesses, results of operations or prospects of
such party.
(aa) "Constituent Corporations" shall have the meaning set forth in Section
1.3(b).
(ab) "Contaminant" shall have the meaning set forth in Section 5.27.
(ac) "Continental" shall have the meaning set forth in the introduction to
this Agreement.
(ad) "Continental Common Stock" shall mean the common stock, $4 par value
per share, of Continental.
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(ae) "Continental Disclosure Schedule" shall have the meaning set forth in
Article V.
(af) "Continental Financial Statements" shall have the meaning set forth in
Section 5.4.
(ag) "Continental 1991 Plan" shall have the meaning set forth in Section
8.9(a).
(ah) "Continental Options" shall have the meaning set forth in Section
5.2(a).
(ai) "Continental Permits" shall have the meaning set forth in Section 5.6.
(aj) "Continental Preferred Stock" shall have the meaning set forth in
Section 3.1(a)(ii).
(ak) "Continental Rights Agreement" shall mean the Stockholder Rights Plan
adopted by Continental on July 22, 1991.
(al) "Continental SEC Documents" shall have the meaning set forth in
Section 5.4.
(am) "Continental Series 1 Preferred Stock" shall have the meaning set
forth in Section 3.1(a)(ii).
(an) "Continental Series 2 Preferred Stock" shall have the meaning set
forth in Section 3.1(a)(ii).
(ao) "Continental Stock Plans" shall have the meaning set forth in Section
5.2(a).
(ap) "Determination Date" shall mean the last day of the Valuation Period.
(aq) "DGCL" shall have the meaning set forth in Section 1.1.
(ar) "Dissenting Continental Stock" shall have the meaning set forth in
Section 3.1(a)(vi).
(as) "Dissenting Series 2 Holders" shall have the meaning set forth in
Section 3.1(a)(ii).
(at) "Effective Time" shall have the meaning set forth in Section 1.1.
(au) "Election Deadline" shall have the meaning set forth in Section 3.3.
(av) "Election Form" shall have the meaning set forth in Section 3.3.
(aw) "Election Form Record Date" shall have the meaning set forth in
Section 3.3.
(ax) "Employee" shall mean any current or former employee, officer or
director, independent contractor, retiree and any dependent or spouse thereof,
and any other beneficiary under a Plan.
(ay) "Environmental Law" shall have the meaning set forth in Section 5.27.
(az) "ERISA" shall have the meaning set forth in Section 5.12(a).
(ba) "Exchange Act" shall have the meaning set forth in Section 5.3(c).
(bb) "Exchange Agent" shall have the meaning set forth in Section 3.1(e).
(bc) "FDIA" shall mean the Federal Deposit Insurance Act, as amended.
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(bd) "FDIC" shall mean the Federal Deposit Insurance Corporation.
(be) "Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System and any Federal Reserve Bank.
(bf) "Final BAC Stock Price" shall mean the average of the Closing Prices
of BAC Common Stock for the Valuation Period.
(bg) "Floor Price" shall have the meaning set forth in Section 3.4.
(bh) "FLSA" shall mean the Fair Labor Standards Act.
(bi) "GAAP" shall mean generally accepted accounting principles in the
United States.
(bj) "Governmental Entity" shall have the meaning set forth in Section
5.3(c).
(bk) "HSR Act" shall have the meaning set forth in Section 5.3(c).
(bl) "Indemnified Party" shall have the meaning set forth in Section
8.8(a).
(bm) "IRCA" shall have the meaning set forth in Section 5.23.
(bn) "IRS" shall have the meaning set forth in Section 5.9.
(bo) "Lien" shall mean any mortgage, lien, pledge, charge, assignment for
security purposes, security interest, or encumbrance of any kind with respect to
an asset, including any conditional sale agreement or capital lease or other
title retention agreement relating to such asset.
(bp) "Mailing Date" shall have the meaning set forth in Section 3.3.
(bq) "Market Price" shall mean with respect to any class of stock, the
closing price per share as reported by The Wall Street Journal under the heading
-----------------------
New York Stock Exchange Composite Transactions, or any comparable heading then
in use.
(br) "Material Adverse Effect" shall mean, with respect to BAC or
Continental, a material adverse effect (whether or not required to be accrued or
disclosed under SFAS No. 5) on the Condition of such party and its Subsidiaries,
taken as a whole, or on the ability of such party to consummate the transactions
contemplated hereby.
(bs) "Merger" shall have the meaning set forth in the recitals to this
Agreement.
(bt) "Merger Consideration" shall mean the combination of (i) BAC Common
Stock, (ii) BAC Mirror Preferred Stock, and (iii) cash to be issued by BAC in
the Merger.
(bu) "Merger Corporation" shall have the meaning set forth in Section 3.4.
(bv) "No Election Shares" shall have the meaning set forth in Section 3.3.
(bw) "NLRA" shall mean the National Labor Relations Act.
(bx) "NYSE" shall mean the New York Stock Exchange, Inc.
(by) "OCC" shall mean the Office of the Comptroller of the Currency.
(bz) "Person" or "person" shall mean any individual, corporation,
association, partnership, group (as defined in section 13(d)(3) of the Exchange
Act), joint venture, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
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(ca) "Per Share Cash Consideration" shall have the meaning set forth in
Section 3.2.
(cb) "Per Share Stock Consideration" shall have the meaning set forth in
Section 3.2.
(cc) "Plan" shall have the meaning set forth in Section 5.12(a).
(cd) "Proxy Statement" shall have the meaning set forth in Section 5.3(c).
(ce) "Regulatory Agreement" shall have the meaning set forth in Section
5.14.
(cf) "Release" shall have the meaning set forth in Section 5.27.
(cg) "Remedies Exception" shall mean bankruptcy, insolvency,
reorganization, moratorium and similar laws now or hereafter in effect relating
to creditors' rights generally or general equity principles (whether considered
in a proceeding at law or in equity) and the discretion of the courts.
(ch) "Requisite Regulatory Approvals" shall have the meaning set forth in
Section 9.1(b)
(ci) "Restricted Stock" shall have the meaning set forth in Section 8.9(b).
(cj) "SEC" shall mean the Securities and Exchange Commission.
(ck) "Securities Act" shall have the meaning set forth in Section 4.1.
(cl) "S-4" shall have the meaning set forth in Section 5.5.
(cm) "Significant Subsidiary" shall mean a Subsidiary that is defined as
"significant" under Rule 1-02 of Regulation S-X of the SEC.
(cn) "Special Termination Rights" shall have the meaning set forth in
Section 10.2.
(co) "State Banking Approvals" shall have the meaning set forth in Section
5.3(c).
(cp) "State Takeover Laws" shall have the meaning set forth in Section
5.3(c).
(cq) "Stock Amount" shall have the meaning set forth in Section 3.2.
(cr) "Stock Designees" shall have the meaning set forth in Section 3.3.
(cs) "Stock Election Shares" shall have the meaning set forth in Section
3.3.
(ct) "Stock Option Agreement" shall have the meaning set forth in the
recitals to this Agreement.
(cu) "Stockholders' Meeting" shall have the meaning set forth in Section
8.3.
(cv) "Subsidiary" shall mean, in the case of either BAC or Continental, any
corporation, association or other entity in which it owns or controls, directly
or indirectly, 25% or more of the outstanding voting securities or 25% or more
of the total equity interest; provided, however, that the term shall not include
-----------------
any such entity (i) in which such voting securities or equity interest is owned
or controlled in a fiduciary capacity, without sole voting power, or was
acquired in securing or collecting a debt previously contracted in good faith or
(ii) which is domiciled outside of the United States and which is not controlled
by such company (and which, in the case of Continental, is listed on the
Continental Disclosure Schedule and its business, operations, results of
operation and financial condition are described).
(cw) "Surviving Corporation" shall have the meaning set forth in Section
1.3(b).
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<PAGE>
(cx) "Tax" shall have the meaning set forth in Section 5.9.
(cy) "Trust Activities" shall have the meaning set forth in Section 5.7(d).
(cz) "Valuation Period" shall mean the 10 consecutive days on which shares
of BAC Common Stock are traded on the NYSE ending on the tenth calendar day
immediately prior to the anticipated Effective Time.
(da) "Violation" shall have the meaning set forth in Section 5.3(b).
(db) "Voting Debt" shall have the meaning set forth in Section 5.2(b).
(dc) "Voting Power" shall mean the right to vote generally in the election
of Directors of Continental through the beneficial ownership of Continental
Common Stock or other securities entitled to vote generally in the election of
Directors of Continental.
(dd) "WARN" shall have the meaning set forth in Section 5.23.
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 Conversion.
----------
(a) Subject to the provisions of this Article III and of Article I, at the
Effective Time, by virtue of the Merger and without any action on the part of
the holders thereof, the shares of the Constituent Corporations shall be
converted as follows:
(i) Each of the shares of capital stock of BAC issued and outstanding
immediately prior to the Effective Time shall remain outstanding as one
share of Common Stock of the Surviving Corporation;
(ii) Each share of Adjustable Rate Preferred Stock, Series 1, $50
stated value, of Continental ("Continental Series 1 Preferred Stock"),
outstanding immediately prior to the Effective Time shall be converted into
one share of Adjustable Rate Preferred Stock, Series 1, $50 stated value,
of BAC ("BAC Series 1 Preferred Stock"). Each share of the Adjustable Rate
Preferred Stock, Series 2, $100 stated value, of Continental ("Continental
Series 2 Preferred Stock" and, together with Continental Series 1 Preferred
Stock, the "Continental Preferred Stock") outstanding immediately prior to
the Effective Time (except shares held by persons who demand appraisal in
compliance with all provisions of the DGCL concerning the right of such
holders to dissent from the Merger and demand appraisal of their shares
("Dissenting Series 2 Holders") but only if holders of such shares are then
entitled to so dissent and demand appraisal pursuant to the DGCL) shall be
converted into one share of Adjustable Rate Preferred Stock, Series 2, $100
stated value, of BAC ("BAC Series 2 Preferred Stock" and, together with BAC
Series 1 Preferred Stock, the "BAC Mirror Preferred Stock"). The BAC Series
1 Preferred Stock and BAC Series 2 Preferred Stock shall have the terms
substantially as set forth in the forms of Certificate of Designation,
Preferences and Rights attached hereto as Exhibits 3.1(a)(ii)-1 and
3.1(a)(ii)-2, respectively. All such shares of Continental Preferred
Stock, other than shares held by Dissenting Series 2 Holders (if such
holders are then entitled to dissent and demand appraisal as set forth
above), shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each certificate previously
representing any such shares of Continental Preferred Stock shall
thereafter represent the shares of BAC Series 1 Preferred Stock or BAC
Series 2 Preferred Stock, as the case may be, into which such Continental
Preferred Stock has been converted. Certificates previously representing
shares
-7-
<PAGE>
of Continental Preferred Stock shall be exchanged for certificates
representing whole shares of BAC Series 1 Preferred Stock or BAC Series 2
Preferred Stock to be issued in consideration therefor upon the surrender
of such certificates in accordance with Section 4.1. If holders of shares
of Continental Series 2 Preferred Stock are entitled to dissent from the
Merger and demand appraisal of their shares under the DGCL, any issued and
outstanding shares of Continental Series 2 Preferred Stock held by a
Dissenting Series 2 Holder shall not be converted as described in this
Section 3.1(a)(ii) but shall from and after the Effective Time represent
only the right to receive such consideration as may be determined to be due
to such Dissenting Series 2 Holder pursuant to section 262 of the DGCL;
provided, however, that each share of Continental Series 2 Preferred Stock
-----------------
outstanding immediately prior to the Effective Time and held by a
Dissenting Series 2 Holder who shall, after the Effective Time, withdraw
his or her demand for appraisal or lose his or her right of appraisal, in
either case pursuant to the DGCL, shall be deemed to be converted, as of
the Effective Time, into one share of BAC Series 2 Preferred Stock;
(iii) Subject to the provisions of Section 3.5, each share of
Continental Common Stock (including the related rights issued under the
Continental Rights Agreement) issued and outstanding immediately prior to
the Effective Time which under the terms of Section 3.2 is to be converted
into cash shall be converted into the right to receive the Per Share Cash
Consideration (as defined in Section 3.2);
(iv) Subject to the provisions of Section 3.5, each share of
Continental Common Stock (including the related rights issued under the
Continental Rights Agreement) issued and outstanding immediately prior to
the Effective Time which under the terms of Section 3.2 is to be converted
into BAC Common Stock shall be converted into the right to receive the Per
Share Stock Consideration (as defined in Section 3.2);
(v) Each Continental Option outstanding as of the Effective Time
shall be treated in accordance with the provisions of Section 8.9; and
(vi) Each outstanding share of Continental Stock as to which a
written demand for appraisal is filed in accordance with section 262 of the
DGCL at or prior to the Stockholders' Meeting and not withdrawn at or prior
to the Stockholders' Meeting and which is not voted in favor of the Merger
shall not be converted into or represent a right to receive BAC Common
Stock or cash hereunder unless and until the holder shall have failed to
perfect, or shall have effectively withdrawn or lost his or her right to
appraisal of and payment for his or her Continental Common Stock under such
section 262, at which time his or her shares shall either be converted into
BAC Common Stock or cash as set forth in Section 3.1(a)(iii) or (iv) in
accordance with Section 3.7. All such shares of Continental Common Stock
as to which such a written demand for appraisal is so filed and not
withdrawn at or prior to the time of such vote and which are not voted in
favor of the Merger, except any such shares of Continental Common Stock the
holder of which, prior to the Effective Time, shall have effectively
withdrawn or lost his or her right to appraisal of payment for his or her
shares of Continental Common Stock under such section 262 are herein called
"Dissenting Continental Stock." Continental shall give BAC prompt notice
upon receipt by Continental of any written demands for appraisal rights,
withdrawal of such demands, and any other instruments served pursuant to
section 262 of the DGCL and Continental shall give BAC the opportunity to
direct all negotiations and proceedings with respect to such demands.
Continental shall not voluntarily make any payment with respect to any
demands for appraisal rights and shall not, except with the prior written
consent of BAC, settle or offer to settle any such demands. Each holder of
Continental Common Stock who becomes entitled, pursuant to provisions of
said section 262, to payment for his or her shares of Continental Common
Stock under the provisions of said section shall receive
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<PAGE>
payment therefor from the Surviving Corporation and such shares of
Continental Common Stock shall be canceled.
(b) The calculations of the computations required by this Article III
shall be prepared by BAC prior to the Closing Date and shall be set forth in a
statement furnished to Continental showing in reasonable detail the manner of
calculation.
(c) Each of the shares of Continental capital stock held by BAC or any of
its wholly owned Subsidiaries or Continental or any of its wholly owned
Subsidiaries, other than shares held by BAC or any of its wholly owned
Subsidiaries or Continental or any of its wholly owned Subsidiaries in a
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
(d) Notwithstanding any other provisions of this Agreement, each holder of
shares of Continental Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of BAC Common
Stock (after taking into account all certificates delivered by such holder)
shall receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of BAC Common Stock multiplied by the Market
Price of one share of BAC Common Stock at the close of business on the trading
day next preceding the Closing Date. No such holder will be entitled to
dividends, voting rights or any other rights as a stockholder in respect of any
fractional share.
(e) At the Effective Time, the stock transfer books of Continental shall
be closed as to holders of Continental capital stock immediately prior to the
Effective Time and no transfer of Continental capital stock by any such holder
shall thereafter be made or recognized. If, after the Effective Time,
certificates are properly presented in accordance with Article IV of this
Agreement to the exchange agent, Chemical Trust Company of California (the
"Exchange Agent"), such certificates shall be canceled and exchanged for
certificates representing the number of whole shares of BAC or BAC Mirror
Preferred Stock, as the case may be, and a check representing the amount of
cash, if any, into which the Continental capital stock represented thereby was
converted in the Merger. Any other provision of this Agreement notwithstanding,
neither BAC, Continental, the Surviving Corporation nor the Exchange Agent shall
be liable to a holder of Continental capital stock for any amount paid or
property delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat, or similar law.
3.2 Conversion of Continental Common Stock. Subject to Sections 3.4 and
--------------------------------------
3.5, each share of Continental Common Stock outstanding at the Effective Time
shall be converted into the right to receive, at the election of the holder
thereof as provided in Section 3.3, either:
(i) a number of shares of BAC Common Stock equal to the sum of (A)
.4158 and (B) the ratio of $18.375 to the Final BAC Stock Price (such sum,
the "Per Share Stock Consideration"), or
(ii) cash equal to the sum of (A) $18.375 and (B) the product of
.4158 and the Final BAC Stock Price (such sum, the "Per Share Cash
Consideration");
provided that, subject to Section 3.4, the aggregate number of shares of BAC
Common Stock that shall be issued in the Merger (the "Stock Amount") shall equal
the number obtained by multiplying (x) 0.8152 and (y) 51% of the total number of
shares of Continental Common Stock outstanding (other than treasury shares) at
the Determination Date.
3.3 Election Procedures. An election form and other appropriate and
-------------------
customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of Continental Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent) in such form as BAC and
Continental shall mutually agree ("Election Form") shall be mailed twenty-five
days prior to the anticipated Effective Date or on such other date as
Continental and BAC shall mutually agree
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<PAGE>
("Mailing Date") to each holder of record of Continental Common Stock as of five
business days prior to the Mailing Date ("Election Form Record Date").
Each Election Form shall permit the holder (or the beneficial owner through
appropriate and customary documentation and instructions) to elect to receive
only BAC Common Stock with respect to such holder's Continental Common Stock
("Stock Election Shares"), to elect to receive only cash with respect to such
holder's Continental Common Stock ("Cash Election Shares") or to indicate that
such holder makes no election ("No Election Shares").
Any Continental Common Stock with respect to which the holder (or the
beneficial owner, as the case may be) shall not have submitted to the Exchange
Agent, an effective, properly completed Election Form on or before 5:00 p.m., on
the 20th day following the Mailing Date (or such other time and date as BAC and
Continental may mutually agree) (the "Election Deadline") shall also be deemed
to be "No Election Shares."
BAC shall make available one or more Election Forms as may be reasonably
requested by all persons who become holders (or beneficial owners) of
Continental Common Stock between the Election Form Record Date and close of
business on the business day prior to the Election Deadline, and Continental
shall provide to the Exchange Agent all information reasonably necessary for it
to perform as specified herein.
Any such election shall have been properly made only if the Exchange Agent
shall have actually received a properly completed Election Form by the Election
Deadline. An Election Form shall be deemed properly completed only if
accompanied by one or more certificates (or customary affidavits and
indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of Continental
Common Stock covered by such Election Form, together with duly executed
transmittal materials included in the Election Form. Any Election Form may be
revoked or changed by the person submitting such Election Form at or prior to
the Election Deadline. In the event an Election Form is revoked prior to the
Election Deadline, the shares of Continental Common Stock represented by such
Election Form shall become No Election Shares and BAC shall cause the
certificates representing Continental Common Stock to be promptly returned
without charge to the Person submitting the Election Form upon written request
to that effect from the holder who submitted the Election Form. Subject to the
terms of this Agreement and of the Election Form, the Exchange Agent shall have
reasonable discretion to determine whether any election, revocation or change
has been properly or timely made and to disregard immaterial defects in the
Election Forms, and any good faith decisions of BAC regarding such matters shall
be binding and conclusive. Neither BAC nor the Exchange Agent shall be under
any obligation to notify any person of any defect in an Election Form.
Within five business days after the Election Deadline, unless the Effective
Time has not yet occurred, in which case as soon thereafter as practicable, BAC
shall cause the Exchange Agent to effect the allocation among the holders of
Continental Common Stock of rights to receive BAC Common Stock or cash in the
Merger in accordance with the Election Forms as follows:
(i) Stock Elections Less Than Stock Amount. If the number of shares
--------------------------------------
of BAC Common Stock that would be issued upon conversion in the Merger of
the Stock Election Shares is less than the Stock Amount, then:
(A) all Stock Election Shares shall be converted into the right
to receive BAC Common Stock,
(B) the Exchange Agent shall select first from among the holders
of No Election Shares and then (if necessary) from among holders of
Cash Election Shares, by random selection (as described below), a
sufficient number of such holders ("Stock Designees") such that the
number of shares of BAC Common Stock that will be issued in the Merger
equals as closely as practicable the Stock Amount, and all shares
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<PAGE>
held by the Stock Designees shall be converted into the right to
receive BAC Common Stock, provided that no particular holder of Cash
Election Shares shall be deemed to be a Stock Designee if such
designation would prevent the satisfaction of any of the conditions
set forth in Article IX, and
(C) the Cash Election Shares and the No Election Shares not held
by Stock Designees shall be converted into the right to receive cash;
or
(ii) Stock Elections More Than Stock Amount. If the number of shares
--------------------------------------
of BAC Common Stock that would be issued upon the conversion into BAC
Common Stock of the Stock Election Shares is greater than the Stock Amount,
then:
(A) all Cash Election Shares and No Election Shares shall be
converted into the right to receive cash,
(B) the Exchange Agent shall select from among the holders of
Stock Election Shares (other than restricted shares), by random
selection (as described below), a sufficient number of such holders
("Cash Designees") such that the number of shares of BAC Common Stock
that will be issued in the Merger equals as closely as practicable the
Stock Amount, and all shares held by the Cash Designees shall be
converted into the right to receive cash, provided that no particular
holder of Stock Election Shares shall be deemed to be a Cash Designee
if such designation would prevent the satisfaction of any of the
conditions set forth in Article IX, and
(C) the Stock Election shares not held by Cash Designees shall
be converted into the right to receive BAC Common Stock; or
(iii) Stock Elections Equal to Stock Amount. If the number of shares
-------------------------------------
of BAC Common Stock that would be issued upon conversion into BAC Common
Stock of the Stock Election Shares is equal or nearly equal (as determined
by the Exchange Agent) to the Stock Amount, then subparagraphs (i) and (ii)
above and subparagraph (iv) below shall not apply and all Stock Election
Shares shall be converted into the right to receive BAC Common Stock and
all Cash Election Shares and No Election Shares shall be converted into the
right to receive cash; or
(iv) Stock Elections and No Elections Equal to Stock Amount. If the
------------------------------------------------------
number of shares of BAC Common Stock that would be issued upon the
conversion into BAC Common Stock of the Stock Election Shares and No
Election Shares would equal or nearly equal (as determined by the Exchange
Agent) the Stock Amount, then subparagraphs (i), (ii) and (iii) above shall
not apply and all Cash Election Shares shall be converted into the right to
receive cash and all Stock Election Shares and No Election Shares shall be
converted into the right to receive BAC Common Stock.
The random selection process to be used by the Exchange Agent shall consist
of such processes as shall be mutually determined by BAC and Continental.
3.4 Continental Termination Right; BAC Adjustment Right; Cap on Final BAC
---------------------------------------------------------------------
Stock Price for Calculation of Per Share Stock and Cash Consideration.
- ---------------------------------------------------------------------
(a) Continental Termination Right. Continental shall have the right to
-----------------------------
elect to abandon the Merger and terminate this Agreement, if its Board of
Directors so determines, following the Determination Date but prior to the
Effective Time if the Final BAC Stock Price shall be less than $36.16 (the
"Floor Price") subject, however, to the following subparagraph (b).
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<PAGE>
(b) BAC Adjustment Right. If Continental makes an election to abandon the
--------------------
Merger under subparagraph (a) above, it shall give prompt written notice thereof
to BAC, provided that such notice may be withdrawn by Continental at any time
prior to the close of business on the second business day prior to the Effective
Time. If Continental shall have the right to terminate this Agreement pursuant
to subparagraph (a) above but shall not have done so, or at any time within five
days of Continental's having done so, BAC shall have the right but not the
obligation to elect to increase the Stock Amount and the per share value of the
cash and BAC Common Stock which would be delivered to the holders of the
Continental Common Stock such that (A) the per share value of the cash and BAC
Common Stock consideration (valued in the case of the BAC Common Stock at the
Final BAC Stock Price) is at least equal to the per share consideration that
would have been received if the Final BAC Stock Price had been equal to the
Floor Price and (B) in the opinion of Wachtell, Lipton, Rosen & Katz the Merger
qualifies as a reorganization under section 368 of the Code, except for cash
payments (including cash in lieu of fractional shares), no gain or loss will be
recognized by any holder of Continental Common Stock upon conversion of such
stock into BAC Common Stock in the Merger, and the basis of such BAC Common
Stock will be the same as such holder's basis in the Continental Common Stock
exchanged therefor. If BAC elects to make the above-described adjustment within
such period, it shall give prompt written notice to Continental thereof (and the
Effective Time shall in such case be the fifth day following such election by
BAC) and of the increase in the cash and BAC Common Stock which will be
delivered to holders of Continental Common Stock and the per-share values
thereof, whereupon no abandonment or termination shall be deemed to have
occurred and this Agreement shall remain in effect in accordance with its terms
(except as the Per Share Cash Consideration, the Per Share Stock Consideration
and the Stock Amount shall have been so increased). If Continental shall not
have made the election to abandon the Merger under subparagraph (a) above and if
BAC shall not have elected to increase the Stock Amount and make the other
adjustments contemplated by the foregoing provisions of this subparagraph (b),
then BAC, in its sole discretion, may elect to change the method of effecting
the business combination with Continental (including without limitation the
provisions as set forth in Article III and Article IV) if and to the extent that
it deems such a change to be desirable, including, without limitation, to
provide for (i) a merger of a wholly owned subsidiary of BAC ("Merger
Corporation") with and into Continental, in which Continental is the surviving
corporation, (ii) a merger of Continental with and into Merger Corporation in
which Merger Corporation is the surviving corporation, or (iii) a sale of all
the assets of Continental, BAC or any of its subsidiaries; provided, however,
-----------------
that no such change shall alter or change the amount or the kind of the Merger
Consideration to be received by the holders of Continental Common Stock or
Continental Preferred Stock, as provided for in this Agreement or shall
materially delay or impede satisfaction of the conditions (other than Section
9.2(e)) in Article IX.
(c) Cap on Final BAC Stock Price for Calculation of Per Share Stock and
-------------------------------------------------------------------
Cash Consideration. Notwithstanding any other provision of this Agreement, in
- ------------------
the event that the Final BAC Stock Price shall be more than $55.84 (the "Ceiling
Price"), the Per Share Cash Consideration, the Per Share Stock Consideration and
the Stock Amount which would otherwise result from the application of the
provisions of Section 3.2 shall be deemed to be decreased appropriately so that
the per-share cash and stock consideration that will be receivable by the
holders of the Continental Common Stock shall be the same as if the Final BAC
Stock Price were equal to the Ceiling Price.
3.5 Adjustments for Dilution and Other Matters. If prior to the Effective
------------------------------------------
Time, (i) Continental shall declare a stock dividend or distribution upon or
subdivide, split up, reclassify or combine the Continental Common Stock, or
declare a dividend, or make a distribution, on the Continental Common Stock in
any security convertible into Continental Common Stock (provided that no such
action may be taken by Continental without BAC's prior written consent as so
provided in Article VII), or (ii) BAC shall declare a stock dividend or
distribution upon or subdivide, split up, reclassify or combine the BAC Common
Stock or declare a dividend, or make a distribution, on the BAC Common Stock in
any security convertible into BAC Common Stock, appropriate adjustment or
adjustments will be made to the Per Share Cash Consideration, the Per Share
Stock Consideration and the Stock Amount. If at the Effective Time, Continental
shall have outstanding more shares of Continental Common
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<PAGE>
Stock than are contemplated to be outstanding or subject to option by the
representation and warranty in Section 5.2(a), then, at BAC's election and
notwithstanding other provisions hereof, and without limiting any of its other
rights hereunder, (i) the Stock Amount shall be adjusted so as to deduct from
the reference in the calculation of the Stock Amount to the total number of
shares of Continental Common Stock outstanding at the Determination Date that
number of additional shares of Continental Common Stock which are outstanding
over the amount contemplated by the representation and warranty in Section
5.2(a), and (ii) the Per Share Cash Consideration and the Per Share Stock
Consideration shall be adjusted downward to the number that would result in an
aggregate Merger Consideration equal to the aggregate Merger Consideration that
would have resulted if such representation and warranty had been strictly
complied with at the Effective Time.
3.6 Illustrative Cases. Appendix A hereto illustrates, among other
------------------
things, the value to be received per share of Continental Common Stock, whether
in cash or in BAC Common Stock, at varying Final BAC Stock Prices, as well as
the resulting exchange ratios (assuming that the adjustment contemplated by
Section 3.4(b) above is made in certain cases and assuming that the cap
contemplated by Section 3.4(c) above shall be operative in a given case).
3.7 Conversion of Dissenting Continental Stock. If prior to the Effective
------------------------------------------
Time any stockholder of Continental shall fail to perfect, or shall effectively
withdraw or lose, his or her right to appraisal of and payment for his or her
shares of Dissenting Continental Stock under section 262 of the DGCL, the
Dissenting Continental Stock of such holder shall be treated for purposes of
this Article III like any other shares of outstanding Continental Common Stock.
If, after the Effective Time, any holder of Continental Common Stock shall fail
to perfect, or shall effectively withdraw or lose, his or her right to appraisal
of and payment for his or her Dissenting Continental Stock under section 262 of
the DGCL, each share of Dissenting Continental Stock of such holder shall be
converted into cash or BAC Common Stock pursuant to the election procedures of
this Article III and in accordance with the procedures, and subject to the
conditions, set forth in Article IV.
ARTICLE IV
EXCHANGE OF SHARES
4.1 Exchange Procedures. Upon the latest to occur of the Effective Time
-------------------
and the completion of the allocation procedure set forth in Section 3.3, BAC
shall issue to the Exchange Agent the number of shares of BAC Common Stock and
the BAC Mirror Preferred Stock issuable in the Merger and the amount of cash
payable in the Merger; provided, however, that notwithstanding any other
-----------------
provision of this Agreement, BAC shall not issue to the Exchange Agent BAC
Common Stock, BAC Mirror Preferred Stock or cash payable with respect to shares
of Continental Common Stock or Continental Preferred Stock unless and until
share certificates and the required transmittal materials pursuant to Article
III and Article IV have been received in proper form by the Exchange Agent. The
Exchange Agent shall not be entitled to vote or exercise any rights of ownership
with respect to BAC Common Stock and BAC Mirror Preferred 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.
Promptly after the Effective Time, BAC and Continental shall cause the
Exchange Agent to mail appropriate and customary transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Continental Preferred Stock
shall pass, only upon proper delivery of such certificates to the Exchange
Agent) to the former holders of Continental Preferred Stock. After completion
of the allocation procedure set forth in Section 3.3, each holder of a
certificate formerly representing Continental Common Stock or Continental
Preferred Stock who surrenders or has surrendered such certificate (or customary
affidavits and indemnification regarding the loss or destruction of such
certificate), together with duly executed transmittal materials included in the
Election Form, to the Exchange Agent shall, upon acceptance thereof, be entitled
to a certificate
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representing the BAC Common Stock or BAC Mirror Preferred Stock or cash into
which the shares of Continental capital stock shall have been converted pursuant
hereto. BAC shall cause the Exchange Agent to accept such certificate upon
compliance with such reasonable and customary terms and conditions as the
Exchange Agent may impose to effect an orderly exchange thereof in accordance
with normal practices. Until surrendered as contemplated by this Section 4.1,
each certificate representing Continental capital stock shall be deemed at any
time after the Effective Time to evidence only the right to receive upon such
surrender the Merger Consideration.
To the extent provided by Section 3.1(d) of this Agreement, each holder of
shares of Continental Common Stock issued and outstanding at the Effective Time
also shall receive, upon surrender of the certificate or certificates
representing such shares, cash in lieu of any fractional shares of BAC Common
Stock to which such holder would otherwise be entitled. BAC shall not be
obligated to deliver the consideration to which any former holder of Continental
capital stock is entitled as a result of the Merger until such holder surrenders
his certificate or certificates representing shares of Continental capital stock
for exchange as provided in this Article IV. In addition, certificates
surrendered for exchange by any person constituting an "affiliate" of
Continental for purposes of Rule 144(c) under the Securities Act of 1933, as
amended (the "Securities Act"), shall not be exchanged for certificates
representing whole shares of BAC Common Stock or BAC Mirror Preferred Stock
until BAC has received a written agreement from such person as provided in
Section 8.18. If any certificate for shares of BAC Common Stock or BAC Mirror
Preferred Stock, or any check representing cash and/or declared but unpaid
dividends, is to be issued in a name other than that in which a certificate
surrendered for exchange is issued, the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and the person
requesting such exchange shall affix any requisite stock transfer tax stamps to
the certificate surrendered or provide funds for their purchase or establish to
the satisfaction of the Exchange Agent that such taxes are not payable.
4.2 Voting and Dividends. Former stockholders of record of Continental
--------------------
shall be entitled to vote after the Effective Time at any meeting of BAC
stockholders the number of whole shares of BAC Common Stock into which their
respective shares of Continental Common Stock are converted, regardless of
whether such holders have exchanged their certificates representing Continental
Common Stock for certificates representing BAC Common Stock in accordance with
the provisions of this Agreement. Until surrendered for exchange in accordance
with the provisions of Section 4.1 of this Agreement, each certificate
theretofore representing shares of Continental capital stock (other than shares
to be canceled pursuant to Section 3.1(c) of this Agreement) shall from and
after the Effective Time represent for all purposes only the right to receive
shares of BAC Common Stock and BAC Mirror Preferred Stock, and/or cash, as set
forth in this Agreement. No dividends or other distributions declared or made
after the Effective Time with respect to BAC Common Stock or BAC Mirror
Preferred Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered certificate of Continental capital stock with
respect to the shares of BAC Common Stock or BAC Mirror Preferred Stock
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 3.1(d) until the holder of such
certificate of Continental capital stock shall surrender such certificate.
Subject to the effect of applicable laws, following surrender of any such
certificate of Continental capital stock, there shall be paid to the holder of
the certificates representing whole shares of BAC Common Stock or BAC Mirror
Preferred Stock issued in exchange therefor, without interest, (i) the amount of
any cash payable with respect to a fractional share of BAC Common Stock to which
such holder is entitled pursuant to Section 3.1(d) and the amount of dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of BAC Common Stock or BAC Mirror
Preferred Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of BAC Common Stock or BAC Mirror Preferred Stock.
4.3 No Liability. Neither BAC nor Continental shall be liable to any
------------
holder of shares of Continental Common Stock or Continental Preferred Stock for
any such shares of BAC
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Common Stock or BAC Mirror Preferred Stock (or dividends or distributions with
respect thereto) or cash delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
4.4 Withholding Rights. BAC or the Exchange Agent shall be entitled to
------------------
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Continental Common Stock or Continental
Preferred Stock such amounts as BAC or the Exchange Agent is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by BAC or the Exchange Agent, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Continental Common Stock or Continental Preferred Stock in respect of
which such deduction and withholding was made by BAC or the Exchange Agent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CONTINENTAL
Continental will deliver to BAC a disclosure schedule with respect to the
representations and warranties set forth below (the "Continental Disclosure
Schedule") as soon as practicable but in any event no later than 13 business
days after the date hereof. The Continental Disclosure Schedule shall in each
case describe the nature of the exception in reasonable detail and shall
specifically refer to the Section or subsection of this Agreement to which an
exception set forth therein to a representation and warranty contained in this
Article V applies (disclosure in any Section or subsection of the Continental
Disclosure Schedule shall apply only to the corresponding Section or subsection
of this Agreement). Each portion of the Continental Disclosure Schedule shall
be deemed to speak as of the date of delivery thereof to BAC and shall be true
and correct as of such date. Any documents referred to in this Article V as
being deliverable to BAC by Continental, shall, to the extent not heretofore
delivered to BAC, be delivered to BAC within such 13-business day period or such
earlier date as the delivery of the Continental Disclosure Schedule is completed
for purposes of Section 10.2 and any material document described or referred to
in the Continental Disclosure Schedule shall be delivered to BAC by Continental
as promptly as practicable after a request therefor by BAC and in any event
within two days of such request.
Continental represents and warrants to BAC, subject only to such exceptions
and limitations as are set forth below or in the Continental Disclosure
Schedule, as follows:
5.1 Organization, Standing and Authority. Continental is a bank holding
------------------------------------
company registered under the BHCA. Continental Bank ("CB") is a national
banking association which is a direct wholly owned (other than directors'
qualifying shares) Subsidiary of Continental. Each of Continental and its
Significant Subsidiaries is a bank or corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite corporate power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted and is duly qualified and 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. The deposit
accounts of CB are insured by the Bank Insurance Fund of the FDIC.
5.2 Capital Structure.
-----------------
(a) The authorized capital stock of Continental consists of 100,000,000
shares of Continental Common Stock, and 4,788,000 shares of Continental
Preferred Stock, of which (A) 53,978,633 shares of Continental Common Stock are
outstanding (of which 2,876,611 shares of Continental Common Stock were held as
treasury stock as of January 26, 1994), no shares of Continental Common Stock
are reserved for issuance upon the exercise of outstanding stock options, no
shares of Continental Common Stock are reserved for issuance in connection with
outstanding stock appreciation rights of Continental, no shares of Continental
Common Stock
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are reserved for issuance pursuant to the Continental Stock Plans (as defined
below), and no shares of Continental Common Stock are reserved for issuance
pursuant to Continental's dividend reinvestment plan (such stock options, stock
appreciation rights, agreements and plans are listed and described in Exhibit
5.2(a) hereto and are herein referred to collectively as the "Continental Stock
Plans"), no shares of Continental Common Stock were held by Continental or by
its Subsidiaries (other than treasury shares or shares held in a fiduciary
capacity), and stock options in respect of 6,341,873 shares of Continental
Common Stock were outstanding on January 26, 1994, and (B) 4,788,000 shares of
Continental Preferred Stock, consisting of 1,788,000 shares of Adjustable Rate
Preferred Stock, Series 1, $50 stated value, and 3,000,000 shares of Adjustable
Rate Preferred Stock, Series 2, $100 stated value, are outstanding. Exhibit
5.2(a) hereto sets forth in the aggregate by plan the options outstanding, their
grant price and the date such options were granted. The Continental Disclosure
Schedule will set forth the name of each holder of an option or stock
appreciation right, outstanding under any of the Continental Stock Plans (such
options and rights being herein collectively referred to as the "Continental
Options"), a description of the exercise or purchase prices, vesting schedules,
expiration dates, and numbers of shares of Continental Common Stock subject to
each such Continental Option, together with a listing of all Continental Options
which shall vest at the Effective Time as a result of the Merger. Except for
the Continental Options listed on Exhibit 5.2(a) hereto, there will not be
outstanding at any time up to and including the Effective Time any stock
options, stock appreciation rights, restricted stock grants or any other such
right to acquire any shares of the Continental Common Stock. Except for shares
of Continental Common Stock which may be issued in connection with the exercise
of Continental Options, there will be no increase in the outstanding shares of
Common Stock after the date hereof except as permitted by Section 8.24 in
respect of the dividend reinvestment plan of Continental.
(b) No bonds, debentures, notes or other indebtedness having the right to
vote (or convertible into or exercisable for securities having the right to
vote) on any matters on which stockholders may vote ("Voting Debt") of
Continental are issued or outstanding. All outstanding shares of Continental
capital stock are, and any shares of Continental Common Stock which may be
issued pursuant to the Stock Option Agreement or the Continental Options will
be, validly issued, fully paid and nonassessable and not subject to preemptive
rights.
(c) Except for this Agreement, the Continental Options, the Continental
Rights Agreement and the Stock Option Agreement and the Continental dividend
reinvestment plan, there are no options, warrants, calls, rights, commitments or
agreements of any character to which Continental or any Subsidiary of
Continental is a party or by which it is bound obligating Continental or any
Subsidiary of Continental to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or any Voting Debt of
Continental or any Subsidiary of Continental or obligating Continental or any
Subsidiary of Continental to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. After the Effective Time, there
will be no option, warrant, call, right or agreement obligating Continental or
any Subsidiary of Continental to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock or any Voting Debt of Continental
or any Subsidiary of Continental, or obligating Continental or any Subsidiary of
Continental to grant, extend or enter into any such option, warrant, call, right
or agreement. 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, other than the Stock
Option Agreement.
(d) Since January 1, 1994, except as permitted or as would have been
permitted by this Agreement, Continental has not (A) issued or permitted to be
issued any shares of capital stock, or securities exercisable for or convertible
into shares of capital stock, of Continental or any of its Subsidiaries, other
than pursuant to and as required by the terms of any Continental Option; (B)
repurchased, redeemed or otherwise acquired, directly or indirectly through one
or more of its Subsidiaries, any shares of capital stock of Continental or any
of its Subsidiaries (other than shares held in a fiduciary capacity); or (C)
declared, set aside, made or paid to the stockholders of Continental dividends
or other distributions on the outstanding shares of capital stock of
Continental, other than regular quarterly cash dividends at a rate not in excess
of the
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<PAGE>
regular quarterly cash dividends most recently declared by Continental prior to
the date hereof or as required by the terms of the Continental Preferred Stock
as in effect on the date hereof.
(e) Set forth in the Continental Disclosure Schedule is, in each case as
of the date thereof, a true, correct and complete list of each Subsidiary of
Continental identifying the location of its chief executive office, and
jurisdiction of incorporation, and, with respect to Significant Subsidiaries,
the date of incorporation, capitalization (including a list of all record
holders of securities or other ownership interests in each Subsidiary if
maintained by or reasonably available to Continental), a summary of its line of
business (including, without limitation, whether such Subsidiary is active or
inactive) and its most recent balance sheet and income statement. Except as set
forth in the Continental Disclosure Schedule, Continental has no direct or
indirect equity interest in any association, firm, corporation, partnership or
other business enterprise involving more than $1,000,000 in aggregate book
value.
(f) Except as provided in section 55 of Title 12 of the United States Code
in the case of Subsidiaries that are national banks, and any comparable
provisions of applicable state law in the case of Subsidiaries of Continental
that are state-chartered banks, all of the outstanding shares of capital stock
of, and all other ownership interests in, each Subsidiary of Continental (i) are
validly issued, fully paid and nonassessable and free of any preemptive rights,
and (ii) are owned by Continental or a wholly owned Subsidiary of Continental,
free and clear of all liens, claims, pledges, agreements, voting or other
restrictions, charges or other encumbrances, with the result that Continental
directly or indirectly owns the entire equity interest in each of its
Subsidiaries.
(g) As of the date hereof, to Continental's knowledge, no Person nor any
of such Person's affiliates or associates (as such terms are defined in the
Exchange Act and the rules and regulations of the SEC thereunder), (i)
beneficially own, directly or indirectly, or (ii) are parties to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, shares of capital stock of Continental, which, in
the aggregate, represent 10% or more of the outstanding shares of capital stock
of Continental entitled to vote generally in the election of directors (other
than shares held in a fiduciary capacity).
5.3 Authority.
---------
(a) Continental has all requisite corporate power and authority to enter
into this Agreement and the Stock Option Agreement and, subject to the adoption
of this Agreement by the holders of the Continental Common Stock as required
under the DGCL, to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Stock Option Agreement and
the consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of Continental
(including without limitation the approval of this Agreement by the unanimous
vote of all members of Continental's Board of Directors, which approval includes
a resolution recommending that this Agreement and the Stock Option Agreement and
the transactions contemplated hereby and thereby be approved by the stockholders
of Continental), subject in the case of this Agreement only to such adoption of
this Agreement by the affirmative vote of the holders of a majority of the
outstanding shares of Continental Common Stock as required under the DGCL (no
approval or adoption being required by the holders of any other outstanding
securities of Continental). This Agreement and the Stock Option Agreement have
been duly executed and delivered by Continental and each constitutes a valid and
binding obligation of Continental, enforceable against Continental in accordance
with its terms.
(b) The execution and delivery of this Agreement and the Stock Option
Agreement do not, and the consummation of the transactions contemplated hereby
and thereby will not, (A) conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on assets (any such conflict, violation,
default, right of termination, cancellation or acceleration, loss or creation, a
"Violation") pursuant to any provision of the Certificate or Articles of
Incorporation, Articles of Association, or By-laws of
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<PAGE>
Continental, CB or any other Subsidiary of Continental or (B) result in any
Violation of any loan or credit agreement, note, mortgage, indenture, lease,
Plan or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Continental, CB or any other Subsidiary of Continental or their
respective properties or assets which Violation might reasonably be expected to
have individually or in the aggregate an adverse financial effect on Continental
or any Subsidiary thereof in an amount exceeding $5 million or to impair the
consummation of the transactions contemplated hereby.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental entity, authority or instrumentality, domestic or foreign
(each, a "Governmental Entity"), is required by or with respect to Continental,
CB or any other Subsidiary of Continental in connection with the execution and
delivery of this Agreement and the Stock Option Agreement by Continental, or the
consummation by Continental of the transactions contemplated hereby and thereby,
except for (A) the filing of applications with the Federal Reserve Board under
the BHCA and approval of same, (B) the filing with the SEC of (1) a proxy
statement in preliminary and definitive form relating to the meeting of
Continental's stockholders to be held in connection with the Merger (the "Proxy
Statement") and (2) such reports under sections 13(a), 13(d), 13(g) and 16(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be
required in connection with this Agreement, the Stock Option Agreement and the
transactions contemplated hereby and thereby and the obtaining from the SEC of
such orders as may be required in connection therewith, (C) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which
Continental is qualified to do business, (D) the filing of such applications,
filings, authorizations, orders and approvals as may be required under state
banking laws, and with and of state banking authorities and approval of same
(collectively, the "State Banking Approvals") and pursuant to state takeover or
change in control laws (collectively, "State Takeover Laws"), (E) consents,
authorizations, approvals, filings or exemptions in connection with compliance
with the applicable provisions of federal and state securities laws relating to
the regulation of broker-dealers or investment advisers, and federal commodities
laws relating to the regulation of futures commission merchants and the rules
and regulations thereunder and of any applicable industry self-regulatory
organization, and the rules of the NYSE, or which are required under consumer
finance, mortgage banking and other similar laws, (F) notices under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (G) such filings, authorizations, orders and approvals as may be required
under foreign laws, (H) such filings, notifications and approvals as are
required under the Small Business Investment Act of 1958, as amended, and the
rules and regulations thereunder and (I) filings, notifications and approvals
under state insurance laws and regulations.
5.4 SEC Documents. Continental has delivered or will deliver to BAC a
-------------
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Continental with the SEC under the
Securities Act and the Exchange Act (other than reports filed pursuant to
section 13(d) or 13(g) of the Exchange Act) since January 1, 1989 and will
deliver to BAC promptly upon the filing thereof with the SEC all such reports,
registration statements and proxy statements as may be filed after the date
hereof and prior to the Effective Time (as such documents have since the time of
their filing been amended, or may after their filing, if after the date hereof,
be amended, the "Continental SEC Documents"), which are or will be all the
documents (other than preliminary material and reports required pursuant to
section 13(d) or 13(g) of the Exchange Act) that Continental was or will be
required to file with the SEC since such date. Continental has delivered to BAC
true and complete copies of CB's most recent annual and quarterly Consolidated
Reports of Condition and Income filed with the OCC and will promptly deliver to
BAC true and complete copies of such reports after the filing thereof with the
OCC (as such reports have since the time of their filing been amended, or may
after their filing, if after the date hereof, be amended, the "Call Reports").
As of their respective dates, the Call Reports complied or will comply in all
material respects with the applicable regulatory requirements (including
regulatory accounting practices). As of their respective dates, the Continental
SEC Documents complied or will comply in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
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and the rules and regulations of the SEC thereunder applicable to such
Continental SEC Documents, and none of the Continental SEC Documents 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 therein, in light of the circumstances under which they were made or
will be made, not misleading. As of their respective dates, the financial
statements of Continental included or to be included in the Continental SEC
Documents (the "Continental Financial Statements") complied or will comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, are or will
be in accordance with the books and records of Continental and its Subsidiaries,
which are or will be complete and accurate in all material respects and which
have been or will have been maintained in accordance with good business
practices, and present or will present fairly the consolidated financial
position and the consolidated results of operations, changes in stockholders'
equity and cash flows of Continental and its Subsidiaries as of the dates and
for the periods indicated, in accordance with GAAP, subject in the case of
interim financial statements to normal recurring year-end adjustments and except
for the absence of certain footnote information in the unaudited statements.
Prior to the date hereof, Continental has delivered to BAC copies of the
following financial statements, each of which has been certified by Continental
to the effect (which Continental hereby represents and warrants), that such
statements fairly present the financial condition and results of operations for
the period covered, subject only to normal year-end adjustments necessary for
fair presentation, and have been prepared on a basis substantially consistent
with the Continental Financial Statements separate balance sheets and statements
of operations for Continental and CB as at December 31, 1993, and for the year
then ended.
5.5 Information Supplied. None of the information supplied or to be
--------------------
supplied by Continental for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by BAC in connection
with the issuance of shares of BAC Common Stock and BAC Mirror Preferred Stock
in the Merger (the "S-4") will, at the time the S-4 is filed with the SEC and at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading, and (ii)
the Proxy Statement will, at the date of mailing to Continental stockholders and
at the time of the Stockholders' Meeting, not 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 were made, not misleading. All documents that
Continental is responsible for filing with any Governmental Entity in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable law, including applicable provisions
of the Securities Act and the Exchange Act. Without limiting any of the
representations and warranties contained herein, no representation or warranty
to BAC by Continental herein and no statement by Continental or other
information contained in the Continental Disclosure Schedule or any document
incorporated by reference therein, as of the date of such document, contains or
contained or as to the Continental Disclosure Schedule shall contain, any untrue
statement of material fact, or, at the date thereof, omitted or shall omit to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which such statements are or will
be made, not misleading.
5.6 Compliance with Applicable Laws. Continental and its Subsidiaries
-------------------------------
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities which are material to the operation of the businesses of
Continental and its Subsidiaries, taken as a whole (the "Continental Permits").
Continental and its Subsidiaries are in compliance with the terms of the
Continental Permits. Except as disclosed in the Continental SEC Documents filed
prior to the date of this Agreement, the businesses of Continental and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity. Without limiting the generality of the
foregoing, each investment of each Subsidiary of Continental which is a small
business investment company complies in all material respects with the laws,
rules and regulations administered by the United States Small Business
Administration. Except for routine examinations by the Bank Regulators
(including examinations in connection with CB's application to convert to a
state bank), and except as set forth in the Continental
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Disclosure Schedule, to the knowledge of Continental, no investigation by any
Governmental Entity with respect to Continental or any of its Subsidiaries is
pending or threatened.
5.7 Other Activities of Continental and its Subsidiaries.
----------------------------------------------------
(a) Neither Continental nor any of its Subsidiaries that is not a bank
directly or indirectly engages in any activity prohibited by the Federal Reserve
Board. Without limiting the generality of the foregoing, any equity investment
of Continental and each Subsidiary that is not a bank is not prohibited by the
Federal Reserve Board. CB engages only in activities permissible for national
banks and permissible under applicable OCC and FDIC regulations.
(b) Except as set forth in the Continental Disclosure Schedule, neither
Continental nor any Subsidiary engages in any insurance activities other than
acting as a principal, agent or broker for insurance that is directly related to
an extension of credit by Continental or any Subsidiary and limited to assuring
the repayment of the balance due on the extension of credit in the event of the
death, disability or involuntary unemployment of the debtor. The Continental
Disclosure Statement describes all licenses and approvals held by Continental
and any Subsidiary (and any officer, director or employee of any of them) to
conduct any insurance activities, whether as principal, agent, broker or
otherwise.
(c) Except as set forth in the Continental Disclosure Schedule, neither
Continental nor any Subsidiary, in connection with its activities relating to
funds transfers, (i) is in default under any agreement to which it is a party
relating to the transfer of funds or settlement with respect to such transfers;
or (ii) has agreed to be or is liable for consequential damages for its error or
delay in acting on requests for the transfer of funds. Each of Continental and
its Subsidiaries, as applicable, has adopted and followed procedures reasonably
adapted to avoid such errors and delay, has adopted commercially reasonable
security procedures (as such term is defined in section 4A-202 of the Uniform
Commercial Code) for verifying the authenticity of requests received for the
transfer of funds, and, to Continental's knowledge, is in compliance with
applicable laws of Governmental Entities relating to the transfer of funds and
settlement with respect thereto with the applicable operating rules of each
funds transfer system of which it is a member or by which it is bound.
(d) Except as disclosed in the Continental Disclosure Schedule, to
Continental's knowledge, CB has performed all personal trust, corporate trust
and other fiduciary activities ("Trust Activities") with requisite authority
under applicable law of Governmental Entities and in accordance with the
agreed-upon terms of the agreements and instruments governing such Trust
Activities, sound fiduciary principles and applicable law and regulation
(specifically including but not limited to section 9 of Title 12 of the Code of
Federal Regulations); there is no investigation or inquiry by any Governmental
Entity pending, or to the knowledge of Continental, threatened, against or
affecting Continental or any Significant Subsidiary thereof relating to the
compliance by Continental or any such Subsidiary with sound fiduciary principles
and applicable regulations; and each employee of CB had the authority to act in
the capacity in which he or she acted with respect to Trust Activities in each
case in which such employee held himself or herself out as a representative of
CB; and CB has established policies and procedures for the purpose of complying
with applicable laws of Governmental Entities relating to Trust Activities, has
followed such policies and procedures in all material respects and has performed
appropriate internal audit reviews of, and has engaged independent accountants
to perform audits of, Trust Activities, which audits have disclosed no material
violations of applicable laws of Governmental Entities or such policies and
procedures. Neither Continental nor any Subsidiary thereof (other than CB and
its Subsidiaries) engages in Trust Activities in the United States.
5.8 Litigation.
----------
(a) The Continental Disclosure Schedule contains a true, correct and
complete list as of the delivery thereof of all suits, claims, actions,
investigations or proceedings of any nature by any Person that are pending or,
to Continental's knowledge, threatened (i) against or otherwise involving,
directly or indirectly, Continental, any of its Subsidiaries or any of their
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respective properties (including, without limitation, any such matter with
respect to Taxes), or (ii) against or otherwise involving, directly or
indirectly, any officer, director, employee or agent of Continental or any of
its Subsidiaries (in connection with such officer's, director's, employee's or
agent's activities on behalf of it or that otherwise relate, directly or
indirectly, to Continental or any of its Subsidiaries or properties or the
securities or activities of any of them), including, without limitation, any
derivative actions that have been requested, and any matters involving
Continental's securities, including, without limitation, matters involving
allegations of insider trading; provided that any matters involving claims of
less than $100,000 need not be included thereon.
(b) The Continental Disclosure Schedule contains a true, correct and
complete list as of the date of delivery thereof of all pending suits, claims,
actions, investigations or proceedings of any nature involving claims in the
amount of $100,000 or more or involving material claims for specific performance
or injunctive relief by or on behalf of Continental, any of its Subsidiaries or
any officer, director, employee or agent of any of them that relate, directly or
indirectly, to Continental or any of its Subsidiaries or any of their respective
properties, including without limitation, types of actions referred to in
Section 5.8(a), but excluding routine collection or foreclosure actions
involving single-family homes and consumer loans.
5.9 Taxes. Continental and each of its Subsidiaries have filed all tax
-----
returns required to be filed by any of them and have paid (or Continental has
paid on their behalf), or have set up an adequate tax reserve in accordance with
GAAP. No deficiencies for any taxes have been proposed, asserted or assessed
against Continental or any of its Subsidiaries that are not adequately reserved
for. Except with respect to claims for refund, the federal income tax returns
of Continental and each of its Subsidiaries consolidated in such returns have
been examined by and settled with the United States Internal Revenue Service
(the "IRS"), or the statute of limitations with respect to such years has
expired (and no waiver extending the statute of limitations has been requested
or granted), for all years through 1989. For the purpose of this Agreement, the
term "Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") shall include, except where the context otherwise requires, all
federal, state, local and foreign income, profits, franchise, gross receipts,
payroll, sales, employment, use, property, withholding, excise, occupancy and
other taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts.
5.10 Tax Disclosure. The Continental Disclosure Schedule will set forth as
--------------
of the date of delivery thereof as well as on an estimated basis as of the
Effective Time: (i) a complete schedule of the tax and book basis differences
of Continental and each of its Significant Subsidiaries in its respective
assets, including in the stock of the Subsidiaries; (ii) a complete listing of
the amount of any net operating loss, net capital loss, unused investment or
other credits, unused foreign tax credits, or excess charitable contributions
allocable to Continental or any of its Subsidiaries; and (iii) a complete
listing of the amount of any material deferred gain or loss allocable to
Continental or any of its Subsidiaries arising out of any deferred intercompany
transaction.
5.11 Certain Agreements. Except as disclosed in the Continental Disclosure
------------------
Schedule or the Continental SEC Documents filed prior to the date hereof and
except for this Agreement, as of the date of this Agreement, neither Continental
nor any of its Subsidiaries is a party to any written or, to Continental's
knowledge, oral (i) consulting or independent contractor agreement (other than
contracts entered into in the ordinary course of business) not terminable on 30
days' or less notice or involving the payment of more than $100,000 per annum,
in the case of any such agreement with an individual, or $250,000 per annum, in
the case of any other such agreement, or union, guild or collective bargaining
agreement, (ii) material joint venture, (iii) noncompetition or similar
agreement that restricts Continental or its Subsidiaries from engaging in a line
of business, (iv) agreement with any executive officer or other key employee of
Continental or any Subsidiary of Continental the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Continental or CB of the nature contemplated by this
Agreement or the Stock Option Agreement, (v) agreement with any executive
officer or other employee of Continental or any Subsidiary of Continental
providing for other than at-will employment, other than individuals
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who are treated as employed for purposes of vesting with respect to benefits
under any Plan and who (x) have such status for not more than three years and
(y) in respect to which Continental's obligation to make any payments do not
exceed $100,000 per annum, (vi) agreement or plan, including any stock option
plan, retirement or pension plan, stock appreciation rights plan, 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
Stock 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 Stock Option Agreement, (vii) any real property lease with
annual rental payments aggregating $1,000,000 or more, or (viii) any other
contract or agreement which would be required to be disclosed as an exhibit to
Continental's annual report on Form 10-K and which has not been so disclosed.
True and correct copies of all such agreements referred to above in this Section
5.11, as BAC shall request, will be delivered or furnished to BAC by
Continental.
5.12 Employee Benefit Plans; ERISA.
-----------------------------
(a) Continental will deliver to BAC true and complete copies of all Plans
(as defined below) to which Continental or any Subsidiary is a party and in
which any current or former officer, director, employee or agent of Continental
or any Subsidiary participates. All such Plans are set forth in the Continental
Disclosure Schedule. There are no plans of Continental or any Subsidiary which
are not evidenced by such written documents. The term "Plan" shall include (i)
any "employee benefit plan" within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) any profit
sharing, pension, deferred compensation, bonus, stock option, stock purchase,
severance, retainer, consulting, "cafeteria" benefits under section 125 of the
Code, health, welfare or incentive plan or agreement, whether legally binding or
not, including any post-employment benefits, (iii) any plan, agreement,
contract, program, arrangement, or policy providing for "fringe benefits" to its
employees, including but not limited to vacation, paid holidays, personal leave,
severance, employee discount, education benefit or similar programs, or (iv) any
employment agreement.
(b) Neither Continental nor any Subsidiary (i) has made any contributions
to, (ii) has ever been a member of a controlled group which contributed to, or
(iii) since 1987 has ever been under common control with an employer that
contributed to any "multiemployer plan" as that term is defined in section 3(37)
of ERISA.
(c) Except as set forth in the Continental Disclosure Schedule, all
reports, forms and other documents required to be filed with any Governmental
Entity or distributed to plan participants with respect to any Plan subject to
ERISA (including, without limitation, summary plan descriptions, Form 5500 and
summary annual reports) have been timely filed (if applicable) and distributed
(if applicable) and were accurate in all material respects. Continental will
deliver to BAC copies of all such reports, forms and documents required to have
been filed or distributed for 1991, 1992 and 1993.
(d) Except as set forth in the Continental Disclosure Schedule, each Plan
that is intended to qualify under sections 401(a) and 501(a) of the Code and its
related trust, if any, comply in form and in operation with sections 401(a) and
501(a) of the Code and have been determined by the IRS to qualify, and, to the
knowledge of Continental, nothing has since occurred to cause the loss of the
Plan's qualification.
(e) All contributions to each Plan for all periods ending prior to the
Effective Time (including periods from the first day of the current plan year to
the date immediately preceding the Effective Time) will be made prior to the
Effective Time by Continental in accordance with past practice and the
recommended contribution in any applicable actuarial report.
(f) All insurance premiums have been paid in full, subject only to normal
retrospective adjustments in the ordinary course, with regard to the Plans for
policy years or other applicable policy periods ending before the Effective
Time, and have been paid as required
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under the policies for policy years or other applicable policy periods beginning
on or before the Effective Time and ending on or after the Effective Time.
(g) As of the Effective Time, no Plan subject to Title IV of ERISA has
benefit liabilities (as defined in section 4001(a)(16) of ERISA) exceeding the
assets of such Plan or has been completely or partially terminated.
(h) With respect to each Plan:
(1) it has been administered in all material respects in accordance
with its terms and applicable laws and regulations, including ERISA and the
Code, and no event has occurred which, through the passage of time or the
giving of notice, or both, would constitute a default of a term or
condition thereunder or would cause the acceleration of any obligation of
any party thereto;
(2) no actions or claims (other than routine claims for benefits made
in the ordinary course of Plan administration for which Plan administrative
review procedures have not been exhausted) are pending, threatened or
imminent against or with respect to the Plan, any employer who is
participating (or who has participated) in any Plan or any fiduciary of the
Plan; and
(3) neither Continental nor any Subsidiary (other than Subsidiaries
not controlled by Continental) nor, to Continental's knowledge, any
fiduciary of the Plan has any knowledge of any facts which could give rise
to any such action or claim.
(i) With respect to each Plan which is an employee benefit plan, as
defined under section 3(3) of ERISA:
(1) to Continental's knowledge, no prohibited transactions (as
defined in section 406 of ERISA or section 4975 of the Code) have occurred;
(2) no accumulated funding deficiency (within the meaning of section
302 of ERISA or section 412 of the Code) has been incurred with respect to
any Plan, whether or not waived; and
(3) no reportable event (as defined in section 4043 of ERISA) has
occurred as to which a notice would be required to be filed with the
Pension Benefit Guaranty Corporation.
(j) Neither Continental nor any Subsidiary (other than Subsidiaries not
controlled by Continental) has liability or (to the knowledge of Continental) is
threatened with any liability (i) for the termination of any single employer
plan under section 4062 or 4064 of ERISA or any multiple employer plan under
section 4063 of ERISA, (ii) for any lien imposed under section 302(f) of ERISA
or section 412(m) of the Code, (iii) for any interest payments required under
section 302(e) of ERISA or section 412(m) of the Code, (iv) for any excise tax
imposed by section 4971, 4975, 4976, 4977 or 4979 of the Code, (v) for any
minimum funding contributions under section 302(c)(11) of ERISA or section
412(c)(11) of the Code, (vi) for a fine under section 502 of ERISA, or (vii) for
any transaction within the meaning of section 4069 of ERISA.
(k) Each health care plan, to the extent applicable, is in compliance with
the continuation of group health coverage provisions contained in the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
Medicare as secondary payor requirements for group health plans at section
1395(b)(1) of Title 42 of the United States Code.
(l) There are no negotiations or demands which, but for this Agreement
would have been reasonably likely to result in any material change to a material
Plan which are pending or
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<PAGE>
have been made which concern matters now covered, or that would be covered, by
the type of agreements that would be Plans.
(m) All expenses and liabilities relating to all of the Plans have been,
and will at the Effective Time be, fully and properly accrued on Continental's
or the Subsidiary's books and records and disclosed in accordance with GAAP and
in Plan financial statements.
(n) Neither Continental and its Subsidiaries, nor any current or former
officer, director, employee or agent of Continental has made any promises,
commitments or representations concerning post-employment health care or
insurance to any employee, former employee or retiree of Continental or any
Subsidiary which would affect the ability of Continental and its Subsidiaries in
any way to amend, modify or terminate such post-employment health care or
insurance.
(o) With respect to the Plans, individually and in the aggregate, no event
has occurred and, to the knowledge of Continental or any of its Subsidiaries,
there exists no condition or set of circumstances, in connection with which
Continental or any of its Subsidiaries is subject to any liability on the part
of Continental or such Subsidiary (except liability for benefits claims and
funding obligations payable in the ordinary course) under ERISA, the Code or any
other applicable law.
5.13 Subsidiaries. Exhibit 22 to Continental's Annual Report on Form 10-K
------------
for the fiscal year ended December 31, 1992, includes all the material
Subsidiaries of Continental as of the date hereof and indicates for each such
Subsidiary as of such date the jurisdiction of its incorporation. Each of
Continental's Subsidiaries that is a bank (as defined in the BHCA) is an
"insured bank" as defined in the FDIA and applicable regulations thereunder.
5.14 Agreements with Bank Regulators. Except as disclosed in the
-------------------------------
Continental Disclosure Schedule, neither Continental nor any of its Subsidiaries
is a party to any written agreement or memorandum of understanding with, or a
party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, or is a recipient of any extraordinary supervisory letter
from (collectively or individually, a "Regulatory Agreement"), any Bank
Regulator which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit policies or its management,
nor has Continental been advised by any Bank Regulator that it is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter or similar submission.
5.15 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Continental SEC Documents filed prior to the date hereof, since September 30,
1993, Continental and its Subsidiaries have not incurred any material liability,
except in the ordinary course of their business consistent with their past
practices, nor has there been any change, or any event involving a prospective
change, in the Condition of Continental or any of its Subsidiaries which has
had, or is reasonably likely to have, an adverse financial effect on Continental
exceeding individually or in the aggregate $5,000,000. Without limiting the
generality of the foregoing, since such date, except as set forth in the
Continental Disclosure Schedule, there has not been any change in any of the
licenses, permits or franchises of Continental or any Subsidiary thereof that
has had or can reasonably be expected to have an adverse financial effect on
Continental individually or in the aggregate exceeding $5,000,000, or any
damage, destruction or other casualty loss (whether or not covered by insurance)
that has had or can reasonably be expected to have such an adverse financial
effect on Continental, except in the ordinary course of business, any amendment,
modification or termination of any existing, or entering into any new, contract,
agreement, plan, lease, license, permit or franchise that is material to the
Condition of Continental, any disposition by Continental or a Subsidiary
thereof, of an asset that is material to Continental, except sales of properties
in the ordinary course of business, or entering into any new employment
agreement or Plan by Continental or any Subsidiary thereof, or any increase by
Continental or any Subsidiary in the rate of compensation or the benefits
payable or to become payable to any officer or other employee in excess of 10%
per annum or
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<PAGE>
to any agent or consultant in excess of the current customary practice of
Continental and its Subsidiaries (except as otherwise expressly contemplated by
the terms of this Agreement).
5.16 Section 203 of the DGCL and Other State Takeover Laws Not Applicable.
--------------------------------------------------------------------
The provisions of section 203 of the DGCL will not, prior to the termination of
this Agreement (assuming that neither BAC nor any of its affiliates or
associates (as such terms are defined in the Exchange Act) (i) beneficially
owns, directly or indirectly, or (ii) are parties to any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting or disposing of,
in each case, shares of capital stock of Continental, which in the aggregate,
represent 10% or more of the outstanding shares of capital stock of Continental
entitled to vote generally in the election of directors (other than shares held
in a fiduciary capacity)), apply to this Agreement, the Stock Option Agreement,
the Merger or the transactions contemplated hereby and thereby. Continental has
taken all steps necessary to irrevocably exempt the transactions contemplated by
this Agreement and by the Stock Option Agreement from any other applicable State
Takeover Law and from any applicable charter or contractual provision containing
change of control or anti-takeover provisions.
5.17 Continental Rights Agreement. The Continental Rights Agreement has
----------------------------
been amended so as to provide that BAC will not become an "Acquiring Person" and
that no "Stock Acquisition Date" or "Distribution Date" (as such terms are
defined in the Continental Rights Agreement) will occur as a result of the
approval, execution or delivery of this Agreement or the Stock Option Agreement
or the consummation of the Merger pursuant to this Agreement or the acquisition
of shares of Continental Common Stock by BAC pursuant to the Stock Option
Agreement.
5.18 Properties. Except for Liens arising in the ordinary course of
----------
business after the date hereof, Continental and its Subsidiaries have good and
marketable title, free and clear of all Liens that are material to the Condition
of Continental and its Subsidiaries on a consolidated basis, to all their
material properties and assets whether tangible or intangible, real, personal or
mixed, reflected in the Continental Financial Statements as being owned by
Continental and its Subsidiaries as of the date hereof. All buildings, and all
fixtures, equipment and other property and assets which are material to its
business on a consolidated basis, held under leases or subleases by any of
Continental or its Subsidiaries are held under valid instruments enforceable in
accordance with their respective terms, subject to the Remedies Exception.
Substantially all of Continental's and its Subsidiaries' equipment in regular
use has been well maintained and is in good and serviceable condition,
reasonable wear and tear excepted.
5.19 Allowance for Credit Losses. The allowance for credit losses (the
---------------------------
"Allowance") shown on the consolidated statements of condition of Continental
and its Subsidiaries as of December 31, 1993 furnished to BAC pursuant to
Section 5.4 was, and the Allowance shown on the consolidated statements of
condition of Continental and its Subsidiaries as of dates subsequent to the date
hereof included in the Continental Financial Statements will be, in each case as
of the dates thereof, adequate to provide for losses relating to or inherent in
the loan and lease portfolios (including accrued interest receivables) of
Continental and its Subsidiaries and other extensions of credit (including
letters of credit and commitments to make loans or extend credit) by Continental
and its Subsidiaries.
5.20 Tax and Certain Regulatory Matters. Neither Continental nor any of
----------------------------------
its Subsidiaries has taken or agreed to take any action or has any knowledge of
any fact or circumstance that would (i) prevent the transactions contemplated
hereby, including the Merger, from qualifying as a reorganization within the
meaning of section 368 of the Code, or (ii) materially impede or delay receipt
of any approval referred to in Section 9.1(b).
5.21 Material Contract Defaults. Except as set forth in the Continental
--------------------------
Disclosure Schedule, neither Continental nor any of its Subsidiaries is, or has
received any notice or has any knowledge that any other party is, in default in
any respect under any contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which Continental or any of its
Subsidiaries is a party or by which Continental or any of its Subsidiaries or
the assets, business or operations thereof may be bound or affected or under
which it or its respective
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<PAGE>
assets, business or operations receives benefits, except for those defaults
which have not had, or cannot reasonably be expected to have, individually or in
the aggregate, an adverse financial effect exceeding $5,000,000; and there has
not occurred any event that with the lapse of time or the giving of notice or
both would constitute such a default.
5.22 Insurance. Except as set forth in the Continental Disclosure
---------
Schedule, Continental and each of its Subsidiaries are presently insured, and
during each of the past five calendar years have been insured, for reasonable
amounts against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. Except as set
forth in the Continental Disclosure Schedule, the policies of fire, theft,
liability and other insurance maintained with respect to the assets or
businesses of Continental and its Subsidiaries provide adequate coverage against
loss, and the fidelity bonds and bankers' blanket bonds in effect as to which
any of Continental or its Subsidiaries is a named insured are sufficient for
their purpose.
5.23 Labor and Employment Matters. Except to the extent set forth in the
----------------------------
Continental Disclosure Schedule, to Continental's knowledge, (a) Continental and
its Subsidiaries are and have been in compliance in all respects with all
applicable laws of Governmental Entities respecting employment and employment
practices, terms and conditions of employment and wages and hours, including,
without limitation, the Immigration Reform and Control Act ("IRCA"), the Worker
Adjustment and Retraining Notification Act ("WARN"), any such laws respecting
employment discrimination, disability rights or benefits, equal opportunity,
plant closure issues, affirmative action, workers' compensation, employee
benefits, severance payments, labor relations, employee leave issues, wage and
hour standards, occupational safety and health requirements and unemployment
insurance and related matters, and are not engaged in and have not engaged in
any unfair labor practice; (b) no investigation or review by or before any
Governmental Entity concerning any possible conflicts with or violations of any
such applicable laws is pending, nor is any such investigation threatened, nor
has any such investigation occurred during the last three years, and no
Governmental Entity has provided any notice to Continental or any of its
Subsidiaries or otherwise asserted an intention to conduct any such
investigation or review, nor is there any basis for any such investigation or
review; (c) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or directly affecting Continental or any of its
Subsidiaries; (d) no union representation question or union organizational
activity exists respecting the employees of Continental or any of its
Subsidiaries; (e) no collective bargaining agreement exists which is binding on
Continental or any of its Subsidiaries; (f) neither Continental nor any of its
Subsidiaries has experienced any material work stoppage or other material labor
difficulty since December 31, 1990; (g) neither Continental nor any of its
Subsidiaries is delinquent in payments to any of its officers, directors,
employees or agents for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed by them or amounts required to be
reimbursed to such officers, directors, employees or agents; (h) in the event of
termination of the employment of any of said officers, directors, employees or
agents for any reason, neither Continental, any of its Subsidiaries, BAC, the
Merger Corporation, nor any other Subsidiaries of BAC, will, pursuant to any
agreement or by reason of anything done prior to the Effective Time by
Continental or any of its Subsidiaries or predecessors, be liable to any of said
officers, directors, employees or agents for so-called "severance pay" or any
other similar payments or benefits, including, without limitation,
post-employment health care (other than pursuant to COBRA) or insurance
benefits; (i) all benefits payable to current, terminated or retired employees,
including, without limitation, post-employment health care or insurance
benefits, may be modified or terminated by Continental at any time; (j) within
the three-year period prior to the date hereof there has not been any
termination of employment of any officer, director, employee or agent of
Continental or any of its Subsidiaries who receives salary or compensation in
excess of $100,000 per annum or any termination of any officer, director,
employee or agent of Continental or its Subsidiaries that could result in a
liability to BAC in excess of $100,000; and (k) all employees of Continental and
its Subsidiaries are employed at will. In furtherance and not in limitation of
the representations and warranties set forth in Sections 5.6 and 5.8, there are
no pending or, to Continental's knowledge, threatened suits, claims, actions,
charges, investigations or proceedings of any nature respecting employment and
employment practices, terms and conditions of employment and wages and hours,
including without limitation
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(A) under or alleging violation of IRCA, NLRA, FLSA, WARN or any applicable law
respecting employment discrimination, equal opportunity, labor relations,
affirmative action, disability rights or benefits, employee leave issues or wage
and hour standards, workers' compensation, plant closure issues, employee
benefits, severance payments, occupational safety and health requirements or
unemployment insurance and related matters, or (B) relating to alleged unfair
labor practices (or the equivalent thereof under any applicable law).
5.24 Material Interests of Certain Persons. Except as disclosed in
-------------------------------------
Continental's Proxy Statement for its 1993 Annual Meeting of Stockholders or as
set forth in the Continental Disclosure Schedule, no officer or director of
Continental, or any "associate" (as such term is defined in Rule 14a-1 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.
5.25 Registration Obligations. Except as set forth in the Continental
------------------------
Disclosure Schedule, neither Continental nor any of its Subsidiaries is under
any obligation, contingent or otherwise, which will survive the Merger by reason
of any agreement to register any of its securities under the Securities Act.
5.26 Brokers and Finders. Except as set forth in the Continental
-------------------
Disclosure Schedule, neither Continental nor any of its Subsidiaries nor any of
their respective officers, directors or employees 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 of its Subsidiaries in connection with this
Agreement or the transactions contemplated hereby.
5.27 Environmental Matters. Neither Continental, any of its Subsidiaries,
---------------------
nor any properties or businesses owned or operated by Continental or any of its
Subsidiaries, whether or not held in a fiduciary or representative capacity, has
been or is in violation of or liable under any Environmental Law (as hereinafter
defined), except for such violations or liabilities that, individually or in the
aggregate, that would not reasonably be expected to have an adverse financial
effect exceeding $5,000,000. There are no actions, suits or proceedings, or
demands, claims, notices or investigations (including without limitation
notices, demand letters or requests for information from any environmental
agency) instituted or pending, or to the best knowledge of Continental's
management, threatened relating to the liability of any properties or businesses
owned or operated by Continental or any of its Subsidiaries, whether or not held
in a fiduciary or representative capacity, under any Environmental Law, except
for liabilities or violations that would not reasonably be expected to have,
individually or in the aggregate, a financial exposure in excess of $5,000,000.
Neither Continental nor any of its Subsidiaries is responsible in any material
respect under any Environmental Law for any release by any person at or in the
vicinity of real property of any contaminant, pollutant, hazardous substance,
hazardous waste, hazardous pollutant, toxic pollutant, toxic waste or toxic
substance ("Contaminant"), including without limitation by spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of any such Contaminant into the environment
(collectively, "Release") nor is Continental or any of its Subsidiaries
responsible for any material costs of any response action required by virtue of
any Release of any Contaminant into the environment including, without
limitation, costs arising from investigation, removal or remediation of
Contaminants, security fencing, alternative water supplies, temporary evacuation
and housing and other emergency assistance undertaken by any environmental
regulatory body or any other person. "Environmental Law" means any federal,
state, local or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order, judgment, decree,
injunction or agreement with any Governmental Entity relating to (i) the
protection, preservation or restoration of the environment (including, without
limitation, air, water vapor, surface water, groundwater, drinking water supply,
surface soil, subsurface soil, plant and animal life or any other natural
resource), and/or (ii) the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release (or
threatened release) or disposal of any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous by any
Governmental Entity or otherwise regulated, whether by type or by quantity,
including any material containing any such
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<PAGE>
substance as a component. Continental has established policies and procedures
for the purpose of complying with applicable laws and regulations of
Governmental Entities relating to Environmental Laws, and has caused its
operations to be conducted in compliance therewith in all material respects.
5.28 Accounting Records.
------------------
(a) Each of Continental and its Subsidiaries maintains records that
accurately, validly and fairly reflect its transactions and dispositions of
assets and maintains a system of internal accounting controls, policies and
procedures sufficient to make it reasonable to expect that (i) such transactions
are executed in accordance with its management's general or specific
authorization, (ii) such transactions are recorded in conformity with GAAP and
in such a manner as to permit preparation of financial statements in accordance
with GAAP and any other criteria applicable to such statements and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences, and (v) records of such transactions are retained, protected and
duplicated in accordance with prudent banking practices and applicable
regulatory requirements.
(b) The data processing equipment, data transmission equipment, related
peripheral equipment and software used by Continental and its Subsidiaries in
the operation of their businesses (including any disaster recovery facility) to
generate and retrieve such records (whether owned or leased by Continental or
any Subsidiaries, or provided under any agreement or other arrangement with a
third party for data processing services) are adequate for the needs of
Continental and its Subsidiaries.
(c) Continental will deliver to BAC true, correct and complete copies of
all annual management letters and opinions, and has made available to BAC for
inspection all reviews, correspondence, and other documents in the files of
Continental and CB, prepared by any certified public accounting firm and
delivered to Continental or CB since January 1, 1989.
5.29 Undisclosed Liabilities. Except as disclosed in the Continental
-----------------------
Disclosure Schedule, neither Continental nor any of its Subsidiaries is subject
to any liabilities of any nature (whether or not required to be accrued or
disclosed under SFAS No. 5) which have had or can reasonably be expected to have
an adverse financial effect with respect to Continental exceeding $5,000,000,
except (i) to the extent set forth or provided for in the Continental Financial
Statements and (ii) such liabilities incurred since the date of the most recent
Continental Financial Statement in the ordinary course of business and none of
which has had or can reasonably be expected to have individually or in the
aggregate an adverse financial effect with respect to Continental exceeding
$5,000,000.
5.30 Intellectual Property Rights. To Continental's knowledge, the
----------------------------
Continental Disclosure Schedule contains a true, correct and complete list of
all trademarks, service marks and patents used by Continental and its
Subsidiaries in the conduct of their respective businesses. To Continental's
knowledge, Continental or one of its Subsidiaries owns, has the exclusive right
to use, sell, license or dispose of, has the exclusive right to bring actions
for the infringement of, and has taken all appropriate actions and made all
applicable applications and filings pursuant to any applicable laws of
Governmental Entities, as applicable, to perfect or protect its interest in, all
such trademarks, services marks and patents. Neither the execution, delivery
and performance of this Agreement nor the consummation of the Merger or any of
the other transactions contemplated hereby will in any way impair the right of
Continental or the Surviving Corporation to use, sell, license or dispose of or
to bring any action for the infringement of, any such trademarks, service marks
or patents. Continental and its Subsidiaries have taken all reasonable steps
necessary or appropriate to safeguard and maintain their respective proprietary
rights in all such trademarks, service marks and patents.
5.31 Investment Securities. Each of Continental and its Subsidiaries has
---------------------
good and marketable title to all securities held by it (except securities sold
under repurchase agreements
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or held in any fiduciary or agency capacity), free and clear of any mortgage,
lien, pledge or encumbrance, except to the extent such securities are pledged in
the ordinary course of business consistent with prudent banking practice to
secure obligations of Continental or any of its Subsidiaries. Such securities
are valued on the books of Continental in accordance with GAAP.
5.32 Loans.
-----
(a) Except as disclosed in the Continental Disclosure Schedule, to
Continental's knowledge, (i) each outstanding loan, lease or other extension of
credit or commitment to extend credit of Continental or any of its Subsidiaries
is a legal, valid and binding obligation, is in full force and effect and is
enforceable in accordance with its terms except as may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the rights of
creditors generally or equitable principles limiting the right to obtain
specific performance or other similar relief; (ii) each of Continental and its
Subsidiaries has duly performed in all material respects all of its respective
obligations thereunder to the extent that such obligations to perform have
accrued; (iii) all documents and agreements necessary for Continental or any
Subsidiary that is a party thereto to enforce such loan, lease or other
extension of credit are in existence; (iv) no claims, counterclaims, set-off
rights or other rights exist, nor do the grounds for any such claim,
counterclaim, set-off right or other right exist, with respect to any such
loans, leases or other extensions of credit which could impair the
collectibility thereof; and (v) each such loan, lease and extension of credit
has been, in all material respects, originated and serviced in accordance with
Continental's or a Subsidiary's then applicable underwriting guidelines, the
terms of the relevant credit documents and agreements and applicable laws of
Governmental Entities.
(b) The Continental Disclosure Schedule lists all loan commitments
exceeding $1,000,000 of Continental and its Subsidiaries (with single-family
loan commitments and consumer commitments listed in the aggregate only)
outstanding as of the date hereof. Except as set forth in the Continental
Disclosure Schedule (with single-family loan commitments and consumer
commitments viewed in the aggregate only), (i) there are no loans, leases, other
extensions of credit or commitments to extend credit of Continental or any of
its Subsidiaries that have been or, to Continental's knowledge, should have been
classified by Continental and its Subsidiaries as "Other Assets Especially
Mentioned," "Substandard," "Doubtful," "Loss" or any comparable classification,
and (ii) there are no loans due to Continental or its Subsidiaries as to which
any payment of principal, interest or any other amount is 30 days or more past
due. Continental has provided to BAC true, correct and complete information
concerning the loan portfolios of Continental and each of its Subsidiaries, and
no material information with respect to the loan portfolios has been withheld
from BAC.
5.33 Interest Rate Risk Management Instruments.
-----------------------------------------
(a) The Continental Disclosure Schedule contains a true, correct and
complete list of all interest rate swaps, caps, floors, and option agreements
and other interest rate risk management arrangements to which Continental or any
of its Subsidiaries is a party or by which any of their properties or assets may
be bound involving notional amounts exceeding $10,000,000. Continental will
deliver to BAC true, correct and complete copies of all such interest rate risk
management agreements and arrangements involving notional amounts exceeding
$10,000,000.
(b) All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements to which Continental or any of its
Subsidiaries is a party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business and, to Continental's
knowledge, in accordance with prudent banking practice and applicable rules,
regulations and policies of the Bank Regulators and with counterparties believed
to be financially responsible at the time and are legal, valid and binding
obligations enforceable in accordance with their terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of equitable remedies),
and are in full force and effect. Continental and each of its Subsidiaries has
duly performed in all material respects all of its obligations thereunder to
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the extent that such obligations to perform have accrued; and to Continental's
knowledge, there are no breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
5.34 Compliance with Policies. Since January 1, 1992, Continental has
------------------------
followed in all material respects its applicable internal credit, risk
management, trust, trading, equity investing and similar policies and procedures
in conducting the operations which are subject to such policies.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BAC
BAC represents and warrants to Continental as follows, subject only to such
limitations and exceptions as are set forth below:
6.1 Organization, Standing, and Authority. BAC is a corporation duly
-------------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and is a bank holding company registered under the BHCA. Merger
Corporation will at the Effective Time be a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. BAC is
duly qualified to do business and in good standing in all jurisdictions (whether
federal, state, local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified. BAC has all
requisite corporate power and authority to carry on its business as now
conducted and to own, lease and operate its assets, properties and business, and
to execute and deliver this Agreement and perform the terms of this Agreement.
BAC has in effect all authorizations necessary for it to own or lease its
properties and assets and to carry on its business as now conducted.
6.2 Authorization of Merger and Related Transactions.
------------------------------------------------
(a) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action in respect thereof on the part of BAC, to the
extent required by applicable law. This Agreement represents a valid and legally
binding obligation of BAC, enforceable against BAC in accordance with its terms.
(b) The execution and delivery of the Stock Option Agreement and the
consummation of the transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action on the part of BAC. The Stock
Option Agreement represents the valid and legally binding obligation of BAC,
enforceable against BAC in accordance with its terms.
(c) Neither the execution and delivery of this Agreement or the Stock
Option Agreement by BAC, nor the consummation by BAC of the transactions
contemplated hereby or thereby nor compliance by BAC with any of the provisions
hereof or thereof will (i) conflict with or result in a breach of any provision
of BAC's Certificate of Incorporation or by-laws or (ii) constitute or result in
a breach of any term, condition or provision of, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any Lien upon any property or assets of
BAC or any of its Subsidiaries pursuant to any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which any of them
is a party or by which any of them or any of their properties or assets may be
subject, or (iii) subject to receipt of the requisite approvals referred to in
Sections 9.1(a) and 9.1(b) of this Agreement, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to BAC or any of its
Subsidiaries or any of their properties or assets.
6.3 Financial Statements. BAC (i) has delivered to Continental copies of
--------------------
the consolidated balance sheets and the related consolidated statements of
income, consolidated
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statements of changes in stockholders' equity and consolidated statements of
cash flows (including related notes and schedules) of BAC and its consolidated
Subsidiaries as of and for the periods ended September 30, 1993, December 31,
1992, 1991 and 1990 included in a quarterly report filed on Form 10-Q or an
annual report filed on Form 10-K, as the case may be, filed by BAC or any of its
Subsidiaries pursuant to the Exchange Act, and (ii) will deliver to Continental
promptly upon the filing thereof with the SEC copies of the consolidated balance
sheets and related consolidated statements of income, consolidated statements of
changes in stockholders' equity and consolidated statements of cash flows
(including related notes and schedules) included in any SEC documents filed
subsequent to the execution of this Agreement (clauses (i) and (ii)
collectively, the "BAC Financial Statements"). The BAC Financial Statements (as
of the dates thereof and for the periods covered thereby) (A) are or will be in
accordance with the books and records of BAC and its Subsidiaries, which are or
will be complete and accurate in all material respects and which have been or
will have been maintained in accordance with good business practices, and (B)
present or will present fairly the consolidated financial position and the
consolidated results of operations, changes in stockholders' equity and cash
flows of BAC and its Subsidiaries as of the dates and for the periods indicated,
in accordance with GAAP, subject in the case of interim financial statements to
normal recurring year-end adjustments and except for the absence of certain
footnote information in the unaudited statements.
6.4 Information Supplied. None of the information supplied or to be
--------------------
supplied by BAC for inclusion or incorporation by reference in the Proxy
Statement will, at the date of mailing to Continental stockholders and at the
time of the Stockholders' Meeting, 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 were made, not misleading. All documents that BAC is
responsible for filing with any Governmental Entity in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable law, including applicable provisions of the
Securities Act and the Exchange Act. Without limiting any of the
representations and warranties contained herein, no representation or warranty
to Continental by BAC as of the date thereof contains any untrue statement of
material fact, or omits a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which such
statements are or will be made, not misleading.
6.5 Capital Stock. At the Effective Time, BAC Common Stock and the BAC
-------------
Mirror Preferred Stock, issued pursuant to the Merger, will be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
6.6 Tax and Regulatory Matters. Neither BAC nor any of its Subsidiaries
--------------------------
has taken or agreed to take any action or has any knowledge of any fact or
circumstance that would (i) prevent the transactions contemplated hereby,
including the Merger, from qualifying as a reorganization within the meaning of
section 368 of the Code, (ii) materially impede or delay receipt of any approval
referred to in Section 9.1(b), or (iii) as of the date hereof and as of the
Closing Date, result in any condition or restriction referred to in Section
9.3(j).
6.7 Brokers and Finders. Except as previously disclosed to Continental,
-------------------
neither BAC nor any of its Subsidiaries nor any of their respective officers,
directors or employees 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 BAC
or any of its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
6.8 Allowance for Credit Losses. The Allowance shown on the consolidated
---------------------------
statements of condition of BAC and its Subsidiaries as of December 31, 1993,
heretofore furnished to Continental was, and the Allowances shown on the
consolidated statements of condition of BAC and its Subsidiaries as of any date
subsequent to the date hereof included in the BAC Financial Statements will be,
in each case as of the dates thereof, adequate to provide for losses relating to
or inherent in the loan and lease portfolios (including accrued interest
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receivables) of BAC and its Subsidiaries and other extensions of credit
(including letters of credit and commitments to make loans or extend credit) by
BAC and its Subsidiaries.
6.9 Absence of Certain Changes or Events. Except as disclosed in BAC SEC
------------------------------------
Documents filed prior to the date of this Agreement, since September 30, 1993,
BAC and its Subsidiaries have not incurred any liability material to BAC and its
Subsidiaries taken as whole, except in the ordinary course of their business
consistent with their past practices, nor has there been any change, or any
event involving a prospective change in the Condition of BAC and its
Subsidiaries which has had, or is reasonably likely to have, a Material Adverse
Effect.
6.10 Litigation. As of the date of this Agreement, there is no suit,
----------
action or proceeding pending or, to the knowledge of BAC, threatened, against or
affecting BAC or any Subsidiary of BAC which is required to be disclosed in any
BAC SEC Document pursuant to Item 103 of Regulation S-K of the SEC, which has
not been so disclosed.
ARTICLE VII
CONDUCT OF CONTINENTAL'S BUSINESSES
7.1 Conduct of Business. From the date hereof to the Effective Time,
-------------------
Continental shall, and shall cause each of its Subsidiaries to, (i) conduct its
business in the usual, regular and ordinary course consistent with past practice
and (ii) use its best efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships and retain the
services of its officers and key employees.
7.2 Forbearances. Except as provided in this Agreement or as otherwise
------------
agreed by the parties in writing, from the date hereof to the Effective Time,
Continental shall not, and shall not permit any of its Subsidiaries that are
subject to its control to, without the prior written consent of BAC (and
Continental shall provide BAC with prompt notice of any events referred to in
this Section 7.2 occurring after the date hereof):
(a) other than in the ordinary course of business consistent with
past practice, incur any indebtedness for borrowed money (other than
short-term indebtedness incurred to refinance short-term indebtedness and
indebtedness of Continental or any of its Subsidiaries to Continental or
any of its Subsidiaries; it being understood and agreed that incurrence of
indebtedness in the ordinary course of business shall include, without
limitation, the creation of deposit liabilities, purchases of federal
funds, sales of certificates of deposit and entering into repurchase
agreements), assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other individual, corporation
or other entity, or make any loan or advance other than in the ordinary
course of business consistent with past practice;
(b) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend (other than cash dividends on the Continental
Common Stock not exceeding $0.15 per share per quarter payable out of the
dividendable earnings of Continental and other than dividends out of the
dividendable earnings of Continental's wholly owned Subsidiaries (other
than directors or other similar qualifying shares of less than 1%) or other
Subsidiaries which Continental does not control and other than regular
dividends on the Continental Preferred Stock) or make any other
distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock other than as necessary to satisfy
obligations under Continental's Dividend Reinvestment Plan or any
securities or obligations convertible into or exchangeable for any shares
of its capital stock, or grant any stock appreciation rights, or phantom
stock awards or grant any individual, corporation or other entity any right
to acquire any shares of its capital stock (whether by means of stock
options, restricted stock awards or otherwise); or issue any additional
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shares of capital stock, or any securities or obligations convertible into
or exchangeable for any shares of its capital stock except pursuant to the
exercise of the Continental Options;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any individual, corporation or other entity
other than a direct or indirect wholly owned Subsidiary, or cancel, release
or assign any indebtedness to any such person or any claims held by any
such person, except in the ordinary course of business consistent with past
practice or pursuant to contracts or agreements in force at the date of
this Agreement;
(d) except for transactions in the ordinary course of business, make
any material 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 other than a
wholly owned Subsidiary thereof, or discontinue or terminate any existing
lines of business of Continental or any Subsidiary;
(e) except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any material
contract or agreement, or make any change in any of its material leases or
contracts, other than renewals of contracts and leases without material
adverse changes of terms;
(f) increase in any manner the compensation, severance or fringe
benefits of any of its directors, officers or employees or pay any pension
or retirement allowance not required by any existing plan or agreement to
any such directors, officers or employees, or become a party to, amend or
commit itself to any pension, retirement, severance plan or program
(including but not limited to, so-called "golden parachute" agreements),
profit-sharing or welfare benefit plan or agreement or employment agreement
with or for the benefit of any director, officer or employee other than in
the ordinary course of business consistent with past practice or accelerate
the vesting of any stock options or other stock-based compensation provided
that Continental may make the changes described in Sections 8.20 and 8.21
in certain Continental Options and in the Continental Stock Plans under
which such Continental Options were granted;
(g) settle any claim, action or proceeding involving money damages,
except in the ordinary course of business consistent with past practice;
(h) amend or propose to amend its certificate of incorporation or its
by-laws or allow any Subsidiary to do so, nor amend or waive any provision
of, or redeem any rights outstanding under, the Continental Rights
Agreement in any way adverse to BAC or its ability to consummate the
transactions contemplated hereby or by the Stock Option Agreement;
(i) enter into any new employment arrangements or relationships with
new or existing employees which has the legal effect of any relationship
other than at-will employment;
(j) enter into any new consulting or independent contractor agreement
not terminable on 30 days' or less notice or involving payment of more than
$100,000 per annum, in the case of any such agreement with an individual,
or $250,000 per annum, in the case of any other such agreement, or union,
guild or collective bargaining agreement; or
(k) agree to, or make any commitment to, take any of the actions
prohibited by this Section 7.2.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 Access and Information.
----------------------
(a) During the period from the date hereof through the Effective Time,
Continental shall, and shall cause its Subsidiaries to, afford BAC, and its
accountants, counsel and other representatives, reasonable access from time to
time during normal business hours to the properties, books, contracts, tax
returns and other tax records, commitments and records of Continental and its
Subsidiaries, and shall also cause such of its officers, employees, accountants,
counsel and other agents or representatives to meet and confer with BAC and its
accountants, counsel and other representatives as BAC may reasonably request,
for the purpose of conducting any review or investigation reasonably related to
the Merger, and Continental and its Subsidiaries will cooperate fully with all
such reviews and investigations.
(b) During the period from the date hereof through the Effective Time,
Continental shall furnish to BAC (i) all reports filed by Continental or any
Subsidiary thereof with the SEC (other than reports filed pursuant to section
13(d) or 13(g) of the Exchange Act) or any Bank Regulator promptly upon the
filing thereof, (ii) a copy of each federal income tax return filed by
Continental or any Subsidiary with the IRS and each state income tax or
franchise tax return filed by Continental or any Subsidiary with any state
taxing authority and (iii) monthly and other interim financial statements in the
form prepared by Continental for its internal use. During this period,
Continental also shall notify BAC in writing promptly of any material change in
the Condition of Continental or any of its Subsidiaries, taken as a whole.
During the period from the date hereof through the Effective Time, BAC shall
furnish to Continental all reports filed by BAC with the SEC (other than reports
filed pursuant to section 13(d) or 13(g) of the Exchange Act) or any Bank
Regulator promptly upon the filing thereof. During this period BAC also shall
notify Continental in writing promptly of any material change in the Condition
of BAC or any of its Subsidiaries, taken as a whole.
(c) During the period from the date hereof to the Effective Time, BAC will
afford Continental, and its accountants, counsel and other representatives,
reasonable access during normal business hours, to the properties, books,
contracts, tax returns, commitments and records of BAC and its Subsidiaries and
will furnish to Continental such information with respect to the assets and
business of BAC and its Subsidiaries as Continental may from time to time
reasonably request in connection with this Agreement and the transactions
contemplated hereby.
(d) Notwithstanding the foregoing provisions of this Section 8.1, neither
party shall be required to grant access or furnish information to the other
party to the extent that such access or the furnishing of such information is
prohibited by law. No investigation by the parties hereto made heretofore or
hereafter shall affect the representations and warranties of the parties which
are contained herein and each such representation and warranty shall survive
such investigation.
(e) Each party shall cooperate, and shall cause each of its Subsidiaries
to cooperate, with the other party and its accountants, counsel and other
representatives, in connection with the preparation of any applications and
documents required to obtain the Requisite Regulatory Approvals which
cooperation shall include providing all information, documents and appropriate
representations as may be necessary in connection therewith.
(f) From and after the date hereof, each of BAC and Continental shall use
its commercially reasonable efforts to satisfy or cause to be satisfied all
conditions to their respective obligations under this Agreement. While this
Agreement is in effect, neither BAC nor Continental shall take any actions, or
omit to take any actions, which would cause this Agreement to become
unenforceable in accordance with its terms. While this Agreement is in effect,
Continental shall not effect any merger, consolidation or other business
combination (including without limitation the acquisition of a controlling
interest in all or substantially all of
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the assets of any Person), or any sale of all or substantially all of its
assets, or agree to do any of the foregoing.
8.2 S-4; Regulatory Matters.
-----------------------
(a) BAC and Continental shall promptly prepare and file with the SEC the
Proxy Statement and BAC shall prepare and file with the SEC the S-4, in which
the Proxy Statement will be included as a prospectus. Each of BAC and
Continental shall provide reasonable opportunity for the other to review and
comment upon the contents of the Proxy Statement and the S-4 and shall not
include therein or omit therefrom any information to which counsel to the other
shall reasonably object. After the date of the mailing of the Proxy Statement,
each of BAC and Continental agrees promptly to notify the other of and to
correct any information which either of them shall have furnished for inclusion
in the Proxy Statement that shall have become false or misleading in any
material respect. Each of BAC and Continental shall use all reasonable efforts
to have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing. BAC shall also take any action (other than
qualifying to do business in any jurisdiction in which it is now not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of BAC Common Stock and BAC Mirror Preferred Stock
in the Merger and BAC Common Stock upon the exercise of the Continental Options,
and Continental shall furnish all information concerning Continental and the
holders of Continental Common Stock and Continental Preferred Stock as may be
reasonably requested in connection with any such action.
(b) BAC and Continental shall cooperate and use their respective
commercially reasonable efforts (i) to prepare all documentation, to effect all
filings and to obtain the Requisite Regulatory Approvals and (ii) to cause the
Merger to be consummated as expeditiously as reasonably practicable following
the Stockholders' Meeting.
8.3 Stockholders' Approval. Continental shall promptly call a meeting of
----------------------
its stockholders to be held as soon as practicable for the purpose of voting
upon the Merger (the "Stockholders' Meeting"), provided that in no event shall
such meeting be held later than June 30, 1994 provided that the S-4 shall then
be effective. In connection with the Stockholders' Meeting, Continental shall
mail the Proxy Statement to its stockholders. The Board of Directors of
Continental shall submit for approval of its stockholders the matters to be
voted upon at the Stockholders' Meeting, and shall recommend approval of the
Merger and use its best efforts (including, without limitation, soliciting
proxies for such approvals) to obtain such stockholder approval.
8.4 Other Offers. Continental shall not, nor shall it permit any of its
------------
Subsidiaries, or authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or other
representative or agent retained by it or any of its Subsidiaries, to, directly
or indirectly, solicit, initiate, or encourage (including by way of furnishing
nonpublic information), or take any other action to facilitate, any inquiries or
the making of any proposal which constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal (as defined below), or agree to or endorse any
Acquisition Proposal, or participate in any discussions or negotiations, or
provide third parties with any nonpublic information, relating to any such
inquiry or proposal; provided, however, that this Section 8.4 shall not prohibit
-----------------
any public disclosure of the factual aspects of any Acquisition Proposal by
Continental that otherwise is required by applicable federal or state law.
Continental shall promptly advise BAC orally and in writing of any such
inquiries or proposals and the details thereof. As used in this Agreement,
"Acquisition Proposal" shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving Continental or any
Subsidiary of Continental or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of,
Continental or any Subsidiary of Continental other than the transactions
contemplated by this Agreement and the Stock Option Agreement.
8.5 Press Releases. Prior to the issuance thereof, BAC and Continental
--------------
shall consult with each other as to the form and substance of any press release
or other public disclosure
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(including any public disclosure permitted by Section 8.4) materially related to
this Agreement, the Merger or any other transaction contemplated hereby.
8.6 Notice of Defaults. Continental shall promptly notify BAC of (i) any
------------------
material change in its Condition, (ii) any complaints, investigations or
hearings (or communications indicating that the same may be contemplated) of any
Governmental Entity, (iii) the institution or the threat of material litigation
involving Continental or any Subsidiary or (iv) any event or condition that
might reasonably be expected to cause any of its representations, warranties or
covenants set forth herein not to be true and correct in all material respects
as of the Effective Time. As used in the preceding sentence, "material
litigation" shall mean any case, arbitration or other adversary proceeding or
other matter which would have been required to be disclosed on the Continental
Disclosure Schedule pursuant to Section 5.8 if in existence on the date hereof
or in respect of which the legal fees and other costs of Continental or any
Subsidiary might reasonably be expected to exceed $250,000 over the entire life
of such matter. Continental shall also promptly notify BAC of any adverse
development involving any matter disclosed on the Continental Disclosure
Schedule in response to Section 5.8 which shall occur after the date hereof and
which might reasonably be expected to increase the financial exposure of
Continental or any Subsidiary thereof in an amount exceeding $1,000,000, and in
any event Continental shall regularly advise BAC of significant changes in the
status of any such matters.
8.7 Miscellaneous Agreements and Consents. Subject to the terms and
-------------------------------------
conditions of this Agreement, each of the parties hereto agrees to use its
respective commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, 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 reasonably
practicable, including, without limitation, using their respective commercially
reasonable efforts to lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby and to cause any of the conditions to the
Closing hereunder which are to be satisfied by such party to be satisfied. BAC
and Continental shall, and shall cause each of their respective Subsidiaries to,
use their commercially reasonable efforts to obtain consents of all third
parties and Governmental Entities necessary or, in the reasonable opinion of
BAC, desirable for the consummation of the transactions contemplated by this
Agreement. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of BAC shall be deemed to have been granted authority in
the name of Continental to take all such necessary or desirable action.
Continental, upon request, shall deliver to BAC such appropriate certifications
or opinions by Continental's officers or counsel as BAC shall reasonably request
under the circumstances.
8.8 Indemnification.
---------------
(a) For six years after the Effective Time, BAC shall, and shall cause the
Surviving Corporation to, indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of Continental and its
Subsidiaries (each, an "Indemnified Party") after the Effective Time against all
losses, expenses, claims, damages or liabilities arising out of actions or
omissions occurring at or prior to the Effective Time to the full extent then
permitted under Delaware law and by Continental's charter and by-laws as in
effect on the date hereof. If the Surviving Corporation or any of its
successors or assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual, corporation or
other entity, then and in each such case, proper provision shall be made so that
the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 8.8.
(b) For a period of six years after the Effective Time, BAC shall maintain
in effect the current policies of directors' and officers' liability insurance
maintained by Continental (provided that BAC may substitute therefor policies of
at least the same coverage and amounts containing terms and conditions which are
no less advantageous to the beneficiaries thereof) with respect to claims
arising from facts or events which occurred before the Effective Time;
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provided, however, that BAC shall not be obligated to make annual premium
- -----------------
payments for such insurance to the extent such premiums exceed 200% of the
premiums paid as of the date hereof by Continental for such insurance.
Notwithstanding anything to the contrary contained elsewhere herein, BAC's
agreement set forth above shall be limited to cover claims only to the extent
that those claims are not covered under Continental's directors' and officers'
insurance policies (or any substitute policies permitted by this Section
8.8(b)).
(c) The provisions of this Section 8.8 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, and each Indemnified
Party's heirs and representatives.
8.9 Conversion of Stock Options; Restricted Stock.
---------------------------------------------
(a) At the Effective Time, all rights with respect to Continental Common
Stock pursuant to the Continental Options, except stock appreciation rights
granted under Continental's 1991 Performance Unit Plan (the "Continental 1991
Plan"), which are outstanding at the Effective Time, whether or not then
exercisable, shall be converted into and become rights with respect to BAC
Common Stock, and BAC shall assume each such Continental Option, in accordance
with the stock option agreement by which it is evidenced. From and after the
Effective Time, (i) each such Continental Option assumed by BAC may be exercised
solely for shares of BAC Common Stock, or cash to the extent permitted for stock
appreciation rights, (ii) the number of shares of BAC Common Stock subject to
each such Continental Option shall be equal to the number of shares of
Continental Common Stock subject to such Continental Option immediately prior to
the Effective Time multiplied by the Per Share Stock Consideration and (iii) the
per share exercise price under each such Continental Option shall be adjusted by
dividing the per share exercise price under each such option by the Per Share
Stock Consideration and rounding down to the nearest cent; provided, however,
that the terms of each such Continental Option shall, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other similar transaction subsequent
to the Effective Time. After the Effective Time, no Continental Option may be
exercised for fractional shares. It is intended that the foregoing assumption
shall be undertaken in a manner that will not constitute a "modification," as
defined in section 425 of the Code, as to any stock option which is an
"incentive stock option," as defined in section 422 of the Code. At the
Effective Time, all rights with respect to Continental Common Stock pursuant to
stock appreciation rights granted by Continental under the Continental 1991
Plan, which are outstanding at the Effective Time, whether or not then
exercisable, shall be settled for cash provided that the amount payable for each
stock appreciation right granted in March 1991 shall not exceed $2.62 and the
amount payable for each stock appreciation right granted in May 1991 shall not
exceed $0.435.
(b) All restrictions or limitations on transfer with respect to
Continental Common Stock awarded under a Continental Stock Plan or any other
plan, program or arrangement ("Restricted Stock"), to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in full
force and effect with respect to the BAC Common Stock into which such Restricted
Stock is converted pursuant to Article III.
(c) Except as provided herein or as otherwise agreed to by the parties,
(i) the provisions of the Continental Stock Plans and any other plan, program or
arrangement pursuant to which Continental may, or may be required to, issue
Continental Common Stock or compensation based on Continental Common Stock,
shall be amended or deleted as of the Effective Time, and (ii) Continental shall
ensure that following the Effective Time no holder of Continental Options or any
participant in any Continental Stock Plan shall have any right thereunder to
acquire any equity securities of Continental or any of its Subsidiaries.
8.10 Certain Change of Control Matters.
---------------------------------
(a) From and after the date hereof, as generally or specifically
designated in writing by BAC, Continental shall take all action necessary to the
extent permitted under any Plan so that the execution and delivery of this
Agreement and the Stock Option Agreement and the
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consummation of the transactions contemplated thereby will not (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any employees under any Plan or
otherwise, (ii) increase any benefits otherwise payable under any Plan or (iii)
result in any acceleration of the time of payment or vesting of any such
benefits; provided, however, that to the extent Continental has entered into
agreements with respect to stock option awards or stock appreciation rights
which provide for acceleration of vesting upon a change in control, or with
respect to the termination agreements referenced in Section 8.20 of this
Agreement, such agreements may remain in effect notwithstanding this section of
the Agreement. Any action taken by Continental pursuant to this Section 8.10
shall not constitute a failure of condition to the obligations of BAC hereunder
or give rise to any right of termination on the part of BAC hereunder.
(b) Each of BAC and Continental shall use all commercially reasonable
efforts to exempt the transactions contemplated by this Agreement and the Stock
Option Agreement from, or if necessary challenge the validity or applicability
of, any applicable State Takeover Law.
8.11 Termination Payment and Other Matters. If this Agreement is
-------------------------------------
terminated pursuant to its terms other than by BAC pursuant to Section 10.2, or
other than by either party pursuant to Section 10.1(b) or other than by
Continental pursuant to Section 10.1(d), and an Acquisition Event shall occur
after the date hereof and within 18 months after the date of such termination,
Continental shall pay promptly, but in no event later than two business days
after the occurrence of such Acquisition Event, by wire transfer of immediately
available Federal Funds to such account as BAC shall designate, the greater of
(i) $60 million and (ii) if applicable, an amount equal to the sum of (A) BAC's
out-of-pocket expenses (and the allocated cost of its in-house legal and
accounting departments) in connection with the transactions hereby contemplated
and (B) 3% of the Aggregate Value of the Acquisition Event (less, however, any
payments received by BAC as a result of section 2.1 of that certain Agreement
dated January 20, 1994 between BAC and Continental or as a result of this
Section 8.11). For purposes of this subsection, the "Aggregate Value" of the
Acquisition Event shall be the sum of (a) the product of (1) the average
consideration paid per share of Continental Common Stock and (2) the sum of (a)
the number of such shares outstanding plus (b) the number of such shares
issuable upon exercise of options, warrants or other rights for conversion or
exchange of securities at exercise, conversion or exchange prices per share
lower than the consideration described in (1) above; (b) the product of (1) the
average consideration paid (other than pursuant to clause (c) of this section)
per share of non-convertible preferred stock of Continental and (2) the number
of such shares outstanding; (c) the value of any preferred stock of Continental
assumed or any preferred or common stock redeemed or repurchased in the
transactions involving the Acquisition Event; and (d) the value of any
consideration received by Continental in exchange for any shares of its capital
stock or other securities. For purposes of this subsection, the term
"Acquisition Event" shall mean any of the following: (i) any Person (other than
BAC or any Subsidiary thereof) shall have acquired pursuant to a tender offer or
otherwise beneficial ownership of 20% or more of the outstanding shares of
Continental Common Stock; (ii) Continental or CB shall have authorized,
recommended, proposed or publicly announced an intention to authorize, recommend
or propose, or entered into, an agreement with any Person (other than BAC or a
Subsidiary thereof) to (A) effect a merger, consolidation or similar transaction
involving Continental or CB, (B) sell, lease or otherwise dispose of assets of
Continental or its Subsidiaries representing 15% or more of the consolidated
assets of Continental and its Subsidiaries, or (C) issue, sell or otherwise
dispose of (including by way of merger, consolidation, share exchange or any
similar transaction) securities representing 20% or more of the voting power of
Continental or any Subsidiaries thereof.
8.12 Letter of Continental's Accountants. Continental shall use all
-----------------------------------
reasonable efforts to cause to be delivered to BAC letters of Price Waterhouse,
Continental's independent auditors, dated a date within two business days before
the date on which the S-4 shall become effective and two business days before
the Closing Date and addressed to BAC, in form and substance reasonably
satisfactory to BAC, and in scope and substance consistent with applicable
professional standards for letters delivered by independent public accountants
in connection with registration statements similar to the S-4.
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8.13 Letter of BAC's Accountants. BAC shall use all reasonable efforts to
---------------------------
cause to be delivered to Continental letters of Ernst & Young, BAC's independent
auditors, dated a date within two business days before the date on which the S-4
shall become effective and two business days before the Closing Date and
addressed to Continental, in form and substance reasonably satisfactory to
Continental, and in scope and substance consistent with applicable professional
standards for letters delivered by independent public accountants in connection
with registration statements similar to the S-4.
8.14 Advice of Changes; Government Filings. Each party shall confer on a
-------------------------------------
regular and frequent basis with the other, report on operational matters and
promptly advise the other orally and in writing of any change or event
(including, without limitation, knowledge of any circumstance involving a
potential unasserted claim) having, or which, insofar as can reasonably be
foreseen, could have, a Material Adverse Effect on such party or which would
cause or constitute a material breach of any of the representations, warranties
or covenants of such party contained herein. BAC and Continental shall file all
reports required to be filed by each of them with the SEC between the date of
this Agreement and the Effective Time and shall deliver to the other party
copies of all such reports promptly after the same are filed (other than reports
filed under section 13(d) or 13(g) of the Exchange Act). BAC, Continental, each
Subsidiary of Continental that is a bank and Bank of America National Trust and
Savings Association ("BofA") shall file all Call Reports with the appropriate
Bank Regulators and all other reports required to be filed with the Federal
Reserve Board between the date hereof and the Effective Time and shall make
available to the other party copies of all such reports promptly after the same
are filed. Except where prohibited by applicable statutes and regulations, each
party shall promptly provide the other (or its counsel) with copies of all other
filings made by such party with any Governmental Entity in connection with this
Agreement, the Stock Option Agreement or the transactions contemplated hereby or
thereby.
8.15 Accounting Methods. Continental shall not change its methods of
------------------
accounting in effect at December 31, 1993, except as required by changes in GAAP
as concurred in by its independent auditors. Continental shall not change its
fiscal year.
8.16 Coordination of Dividends. Each of BAC and Continental shall
-------------------------
coordinate with the other the declaration of any dividends in respect of BAC
Common Stock and Continental Common Stock and the record dates and payment dates
relating thereto, it being the intention of the parties that holders of BAC
Common Stock or Continental Common Stock shall not receive two dividends, or
fail to receive one dividend, for any single calendar quarter with respect to
their shares of BAC Common Stock and/or Continental Common Stock and any shares
of BAC Common Stock any such holder received in exchange therefor in the Merger.
8.17 Continental Accruals and Reserves. Prior to the Closing Date,
---------------------------------
Continental shall review and, to the extent determined necessary or advisable,
consistent with GAAP and the accounting rules, regulations and interpretations
of the SEC and its staff, modify and change its loan, accrual and reserve
policies and practices (including loan classifications and levels of reserves
and accruals and reserves to (i) reflect the Surviving Corporation's plans with
respect to the conduct of Continental's business following the Merger and (ii)
make adequate provision for the costs and expenses relating thereto) so as to be
applied consistently on a mutually satisfactory basis with those of BAC. Prior
to the Closing, Continental also will adjust loan loss and OREO reserves as may
be appropriate, consistent with GAAP and the accounting rules, regulations and
interpretations of the SEC and its staff, in light of the then anticipated
post-Closing disposition of certain Continental assets. The parties agree to
cooperate in preparing for the implementation of the adjustments contemplated by
this Section 8.17. Notwithstanding the foregoing, Continental shall not be
obligated to take in any respect any such action pursuant to this Section 8.17
(other than pursuant to the preceding sentence) unless and until BAC
acknowledges that all conditions to its obligations to consummate the Merger
have been satisfied.
8.18 Affiliates. At least 40 days prior to the Closing Date, Continental
----------
shall deliver to BAC a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of Continental,
"affiliates" of Continental for purposes of Rule 145
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under the Securities Act. Continental shall use all reasonable efforts to cause
each person named in the letter delivered by it to deliver to BAC prior to the
Closing Date a written "Affiliates" agreement, in customary form, providing that
such person shall dispose of the BAC Common Stock and BAC Mirror Preferred Stock
to be received by such person in the Merger only in accordance with applicable
law and, in addition, in such agreement, such Affiliate shall represent that
they have no present plan or intention to dispose of any such shares of BAC
capital stock.
8.19 Additional Agreements. In case at any time after the Effective Time
---------------------
any further action is necessary or desirable to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either BAC
or Continental, the proper officers and directors of each party to this
Agreement shall take all such necessary or appropriate action.
8.20 Modification of Continental Options. BAC agrees that Continental
-----------------------------------
Options held by each Continental employee who is a party to a termination
agreement with Continental (not more than seven individuals) may be modified
before the Effective Time to provide that such employees may exercise such
Continental Options, to the extent vested as of the Effective Time, within one
year following a termination of employment entitling such employees to
termination benefits under such agreements.
8.21 BAC Severance Benefits. BAC shall adopt, effective as of the
----------------------
Effective Time, a severance program for Continental employees which is similar
in all material respects to BAC's Merger Transition Program and U.S. Senior
Management Transition Program (which are described in the previously used
brochures attached hereto as Exhibit 8.21) with respect to severance pay and
stock treatment and similar in all material respects to BAC's Employee
Transition Program (as described in the current brochure attached hereto as
Exhibit 8.21) with respect to all other benefits. BAC shall maintain such
severance program in effect for not less than 12 months following the Effective
Time; provided that benefits under such program may be modified or eliminated
earlier if they are of little financial consequence to recipients. Such
severance program shall not apply to Continental employees who are party to
termination agreements with Continental.
8.22 Continental Benefit Plans. Continental employee benefit plans will
-------------------------
remain in effect temporarily after the Effective Time. As soon as practicable
after the Effective Time, Continental employee benefit plans will be
discontinued or merged into BAC plans and employees of Continental shall become
eligible for the employee benefit plans of BAC on the same terms as such plans
and benefits are generally offered from time to time to employees of BofA in
comparable positions with BofA. Such employees shall be credited for the years
of service with Continental and its affiliates under the employee benefit plans
to be provided by BAC to such employees, to the same extent such service was
recognized for similar plans of Continental. However, with respect to any
pension benefit plan of BAC, such service will be counted only for purposes of
vesting, eligibility for participation and early retirement and the rate of
prospective benefit accrual. Following the Effective Time, BAC shall have the
same legal rights and legal obligations, which it shall honor, subject to the
terms thereof, as Continental arising under all employment, severance and other
compensation contracts disclosed in the Continental Disclosure Schedule,
including without limitation the obligations arising under the termination
agreements with the seven individuals referred to in Section 8.20.
8.23 Continental Internal Audit Function; Peer Review. As soon as
------------------------------------------------
practicable following the date of this Agreement, but in no event later than 90
days after such date, Continental shall cause to be completed (and a written
report thereon furnished to BAC) a peer review with respect to the internal
audit function of Continental (which function has been outsourced to
Continental's independent accounting firm). Such peer review shall be conducted
in accordance with the applicable requirements of the Institute of Internal
Auditors.
8.24 Continental Dividend Reinvestment Plan. As soon as practicable after
--------------------------------------
the date hereof, Continental shall terminate its dividend reinvestment plan.
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8.25 Execution and Delivery of Stock Option Agreement. The parties agree
------------------------------------------------
that the Stock Option Agreement shall be executed and delivered immediately
following the execution and delivery of this Agreement.
ARTICLE IX
CONDITIONS
9.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each of BAC and Continental to effect the Merger and
the other transactions contemplated hereby shall be subject to the fulfillment
or waiver at or prior to the Effective Time of the following conditions:
(a) The stockholders of Continental shall have approved all matters
relating to the Merger required to be approved by such stockholders by the
vote required under the DGCL at the Stockholders' Meeting.
(b) This Agreement, the Merger and the other transactions
contemplated hereby shall have been approved by each Bank Regulator and any
other Governmental Entity whose approval is required for consummation of
the transactions contemplated hereby, all such approvals shall remain in
full force and effect and all statutory waiting periods in respect thereof
shall have expired (all such approvals and the expiration of all such
waiting periods being referred to herein as the "Requisite Regulatory
Approvals").
(c) The S-4 shall have been declared effective and shall not be
subject to a stop order or any threatened stop order.
(d) Neither BAC nor Continental 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 and no proceeding shall have
been initiated by any Governmental Entity and be continuing seeking such an
injunction. There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger which makes the consummation thereof illegal.
(e) BAC shall have received all state securities and "blue sky"
permits and other authorizations necessary to consummate the transactions
contemplated hereby.
(f) The shares of BAC Common Stock and BAC Mirror Preferred Stock
which shall be issued to the holders of the capital stock of Continental
upon consummation of the Merger shall have been authorized for listing on
the NYSE, subject to official notice of issuance.
9.2 Conditions to Obligations of Continental to Effect the Merger. The
-------------------------------------------------------------
obligations of Continental to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of BAC set forth in Article VI shall as of the date hereof and
as of the Effective Time (as though made on and as of the Effective Time
except to the extent such representations and warranties are by their
express provisions made as of a specified date), not contain any
inaccuracies or omissions the circumstances as to which either individually
or in the aggregate have, or reasonably could be expected to have, a
Material Adverse Effect on BAC, and Continental shall have received a
certificate dated as of the Closing Date signed
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by the chief executive officer and the chief financial officer of BAC to
that effect.
(b) Performance of Obligations. BAC shall have performed in all
--------------------------
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and Continental shall have received
a certificate dated as of the Closing Date signed by the chairman and chief
executive officer or the vice chairman and chief financial officer of BAC
to that effect.
(c) Opinion of Counsel. Continental shall have received the opinions
------------------
of Michael J. Halloran, Executive Vice President and General Counsel of
BAC, and Pillsbury Madison & Sutro, counsel to BAC, both dated the Closing
Date, substantially in the form of Exhibits 9.2(c)-1 and 9.2(c)-2 hereto,
respectively.
(d) Comfort Letter of BAC's Auditors. Continental shall have
--------------------------------
received the letter of Ernst & Young, BAC's independent auditors, prepared
pursuant to the provisions of Section 8.13.
(e) Tax Opinion. Continental shall have received the opinion of
-----------
Wachtell, Lipton, Rosen & Katz, special counsel to Continental, dated the
Closing Date, in the form attached hereto as Exhibit 9.2(e) to the effect
that 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
BAC and Continental will each be a party to that reorganization within the
meaning of section 368(b) of the Code and that no gain or loss will be
recognized by the stockholders of Continental to the extent they receive
BAC Common Stock or BAC Mirror Preferred Stock solely in exchange for
shares of Continental Common Stock or Continental Preferred Stock.
9.3 Conditions to Obligations of BAC to Effect the Merger. The
-----------------------------------------------------
obligations of BAC to effect the Merger shall be subject to the fulfillment or
waiver at or prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Continental set forth in Article V shall as of the date
hereof (or, if subject to a portion of the Continental Disclosure Schedule,
as of the delivery date of such portion) and as of the Effective Time (as
though made on and as of the Effective Time except to the extent such
representations and warranties are by their express provisions made as of a
specified date), not contain any inaccuracies or omissions the
circumstances as to which either individually or in the aggregate have, or
reasonably could be expected to have, a Material Adverse Effect on
Continental, which in any event (and without limiting the meaning thereof)
shall be deemed to have occurred if involving losses, liabilities (which if
contingent could reasonably be expected to result in loss), costs or
expenses of more than $75 million; and BAC shall have received a
certificate dated as of the Closing Date signed by the chief executive
officer and the chief financial officer of Continental to that effect.
(b) Performance of Obligations. Continental shall have performed in
--------------------------
all material respects all obligations required to be performed by it under
this Agreement prior to the Effective Time, and BAC shall have received a
certificate dated as of the Closing Date signed by the chief executive
officer and the chief financial officer of Continental to that effect.
(c) Consents Under Agreements. The consent, approval or waiver of
-------------------------
each Person (other than Governmental Entities) whose consent or approval
shall be required in order to permit the succession by BAC as the Surviving
Corporation in the Merger to any material obligation, right or interest of
Continental or
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any Subsidiary of Continental under any material loan or credit agreement,
note, mortgage, indenture, lease, license or other agreement or instrument
shall have been obtained.
(d) Legal Opinion. BAC shall have received the opinion of Mayer,
-------------
Brown & Platt, counsel to Continental, dated the Closing Date,
substantially in the form attached hereto as Exhibit 9.3(d).
(e) Regulatory Agreements. As of the Effective Time, any Regulatory
---------------------
Agreements binding upon Continental or any of its Subsidiaries shall be
terminated and of no further force or effect and BAC shall have received
written confirmation thereof from the appropriate Bank Regulator and shall
have furnished a true and correct copy thereof to BAC.
(f) Litigation, etc. There shall be no pending or threatened
----------------
material actions or proceedings by any Person against BAC, Continental, or
any Subsidiary of either or any director, officer or employee thereof
challenging or in any way or in any manner seeking to restrict or prohibit
the transactions contemplated hereby or seeking to obtain any damages
against any Person as a result of the transactions contemplated hereby.
(g) Expense Reports; Payment of Expenses. At least three days prior
------------------------------------
to the Effective Time, all attorneys, accountants, investment bankers and
other advisors and agents for Continental and its Subsidiaries shall have
submitted to Continental (with a copy to BAC) estimates of their fees and
expenses for all services rendered in any respect in connection with the
transactions contemplated hereby to the extent not already paid, and based
on such estimates, Continental shall have prepared and submitted to BAC a
summary of such fees and expenses for the transaction. At the Effective
Time, (i) such advisors shall have submitted their final bills for such
fees and expenses to Continental and its Subsidiaries for services
rendered, with a copy to be delivered to BAC, and based on such summary,
Continental shall have prepared and submitted to BAC a final calculation of
such fees and expenses, (ii) Continental shall have accrued and paid, and
have caused its Subsidiaries to have accrued and paid, the amount of such
fees and expenses as calculated above after BAC has been given an
opportunity to review all such bills and calculation of such fees and
expenses, and (iii) such advisors shall have released BAC from liability
for any fees and expenses. BAC shall not be liable for any such fees and
expenses.
(h) Comfort Letter of Continental's Auditors. BAC shall have
----------------------------------------
received the letters from Price Waterhouse, as Continental's independent
auditors, prepared pursuant to the provisions of Section 8.12.
(i) Rights Agreement. None of the events described in section
----------------
11(a)(ii) or 13 of the Continental Rights Agreement shall have occurred,
and the rights thereunder shall not have become nonredeemable and such
rights shall not become exercisable for capital stock of BAC upon
consummation of the Merger.
(j) Absence of Regulatory Conditions. There shall not be any action
--------------------------------
taken, or any statute, rule, regulation or order enacted, entered, enforced
or deemed applicable to the Merger, by any Governmental Entity which, in
connection with the grant of a Requisite Regulatory Approval, imposes any
condition or restriction upon the Surviving Corporation or its
Subsidiaries, including, without limitation, requirements relating to the
raising of additional capital or the disposition of assets, which in the
reasonable business judgment of BAC would be burdensome in the context of
the transactions contemplated by this Agreement, other than such caused by
any share repurchase or plan or program therefor of BAC.
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(k) Contingent Liabilities. Except for matters described in the
----------------------
Continental Disclosure Schedule (and as to such matters only to the extent
of the facts made available to BAC on or before the expiration of the
Special Termination Rights), Continental, at the time of the Closing, shall
not be subject to any suit, action or proceeding, or any investigation or
inquiry by any Governmental Entity (collectively, "proceeding"), which
shall be pending or, to the knowledge of Continental, threatened, against
or affecting Continental or any Subsidiary of Continental, nor shall there
be any potential unasserted claim or liability not heretofore disclosed in
the Continental Disclosure Schedule (whether or not such claim or liability
is required to be accrued or disclosed under SFAS No. 5) unless BAC shall
have determined, in the exercise of its reasonable business judgment, that
each proceeding, claim or liability likely would not have either
individually or in the aggregate with all other such proceedings, claims or
liabilities, a Material Adverse Effect on Continental (which in any event
(and without limiting the meaning thereof) shall be deemed to have occurred
if involving losses, liabilities (which if contingent could reasonably be
expected to result in loss), costs or expenses of more than $75 million),
except in either case for proceedings, claims or liabilities incurred since
the date of this Agreement in the ordinary course of business.
(l) No Material Adverse Change. Since the date of this Agreement,
--------------------------
there shall have been no material adverse change in the Condition of
Continental.
(m) Stock Option Agreement. Immediately following the execution and
----------------------
delivery of this Agreement, Continental and BAC shall have executed and
delivered the Stock Option Agreement.
ARTICLE X
TERMINATION AND AMENDMENT
10.1 Termination. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement, the Merger and the other
transactions contemplated hereby by the stockholders of Continental, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) By mutual consent of the Board of Directors of BAC and the Board
of Directors of Continental; or
(b) By the Board of Directors of BAC or the Board of Directors of
Continental if (i) the Federal Reserve Board or the Illinois Commissioner
of Banks and Trust Companies has denied approval of the Merger and such
denial has become final and nonappealable or (ii) the Effective Time does
not occur within 12 months from the date of this Agreement unless the
failure of such occurrence shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe its covenants and
agreements set forth herein required to be performed or observed by such
party on or before the Effective Time; or
(c) By BAC (if it is not in material breach of any of its obligations
hereunder) (i) pursuant to notice in the event of (A) a breach or failure
by Continental that is material in the context of the transactions
contemplated hereby of any covenant or agreement by Continental contained
herein or (B) any inaccuracies or omissions in the representations or
warranties of Continental contained herein the circumstances as to which
either individually or in the aggregate have, or reasonably could be
expected to have, a Material Adverse Effect on Continental (which in any
event (and without limiting the meaning thereof) shall be deemed to have
occurred if involving losses, liabilities (which if
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contingent could reasonably be expected to result in loss), costs or
expenses of more than $75 million), in either case which has not been, or
cannot be, cured within 30 days after written notice thereof is given to
Continental, or (ii) in the event of any failure, or, prior to the Closing,
any prospective failure on the part of Continental to fulfill any condition
set forth in Section 9.1 or 9.3, provided that no termination based upon
such a prospective failure shall occur unless BAC has theretofore notified
Continental thereof and Continental has not, within 30 days after receipt
of such notice, remedied such prospective failure; or
(d) By Continental (if it is not in material breach of any of its
obligations hereunder) pursuant to notice in the event of (A) a breach or
failure by BAC that is material in the context of the transactions
contemplated hereby of any covenant or agreement by BAC contained herein or
(B) any inaccuracies or omissions in the representations or warranties of
BAC contained herein the circumstances as to which either individually or
in the aggregate have, or reasonably could be expected to have, a Material
Adverse Effect on BAC, in either case which has not been, or cannot be,
cured within 30 days after written notice thereof is given to BAC; or
(e) By BAC if, after the date hereof, there has occurred any Material
Adverse Effect (or any development or condition that might reasonably be
expected to result in a Material Adverse Effect) with respect to
Continental provided that BAC shall have given 30 days' written notice of
such termination to Continental and Continental shall not have remedied
such event by the end of such 30-day period; or
(f) By BAC if, after the date hereof, any Person (other than BAC or
any Subsidiary thereof) shall become the beneficial owner of 20% or more of
the then outstanding shares of Continental Common Stock or any Person
(other than BAC or a Subsidiary thereof) shall have commenced a bona fide
tender offer or exchange offer to acquire at least 20% of the then
outstanding shares of Continental Common Stock.
10.2 Special BAC Rights of Termination. Continental shall deliver to BAC
---------------------------------
all remaining portions of the Continental Disclosure Schedule not heretofore
delivered to BAC as promptly as practicable after the date hereof.
Notwithstanding any investigation made by or information known to BAC prior to
the date hereof and notwithstanding anything to the contrary herein, and in
recognition of the fact that BAC, as of the date hereof, has not had an
opportunity to complete its due diligence review of Continental and that
Continental has not, as of the date hereof, delivered to BAC all portions of the
Continental Disclosure Schedule, in addition to the termination rights set forth
in Section 10.1, BAC shall have the following rights (the "Special Termination
Rights"): (i) for 10 business days after the date of receipt by BAC of all such
remaining portions of the Continental Disclosure Schedule in form and detail of
presentation reasonably satisfactory to BAC, to terminate this Agreement in its
sole discretion; and (ii) at any time after the date of this Agreement through
and including the date that is 30 days after the date Continental delivers to
BAC all remaining portions of the Continental Disclosure Schedule in form and
detail of presentation reasonably satisfactory to BAC, to terminate this
Agreement if BAC shall identify any circumstance which, in the reasonable
business judgment of the Board of Directors (which includes a committee thereof)
of BAC, acting in good faith and with due regard for principles of fair dealing,
could (w) materially and adversely impact the reasonably expected financial or
business benefits to BAC of the transactions contemplated by this Agreement, (x)
be inconsistent in any material and adverse respect with any of the
representations and warranties of Continental contained in this Agreement, (y)
materially and adversely affect the business, operations, properties, financial
condition, results of operations or prospects of Continental and its
Subsidiaries on a consolidated basis or (z) deviate materially and adversely
from Continental's financial statements for the year or the quarter ended
December 31, 1993. BAC may exercise the Special Termination Rights by written
notice to Continental pursuant to Section 11.6.
-45-
<PAGE>
10.3 Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 10.1 or 10.2, this Agreement
shall become void and have no effect, except that (i) the provisions of Section
11.1 shall survive any such termination and abandonment, (ii) the Stock Option
Agreement shall be governed by its own terms as to termination and (iii) no
party shall be relieved or released from any liability arising out of an
intentional breach of any provision of this Agreement and Continental shall not
be relieved of any obligation it may have under Section 8.11.
10.4 Non-Survival of Representations, Warranties and Covenants Following
-------------------------------------------------------------------
the Effective Time. Except for Articles III and IV and Sections 8.8, 8.9, 8.11,
- ------------------
8.19, 8.20, 8.21, 8.22, Section 10.5(b) and Article XI, none of the respective
representations, warranties, obligations, covenants and agreements of the
parties shall survive the Effective Time.
10.5 Termination Expenses.
--------------------
(a) Subject to paragraph (b) below and except as otherwise provided in
this Agreement, whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger and all other terms and conditions of
this Agreement, and the transactions contemplated hereby, will be paid by the
party incurring such costs and expenses.
(b) In the event this Agreement is terminated pursuant to Section 10.1(c)
or (d), and without limiting any rights BAC may have under Section 8.11, the
terminating party and each of its Subsidiaries shall be entitled to
reimbursement from the non-terminating party and its Subsidiaries for all
reasonable internal and external costs, fees and expenses incurred by such
terminating party and any of its Subsidiaries in connection with the
transactions contemplated hereby, including the preparation, printing, filing,
shipping, and distribution of the S-4 and the Proxy Statement and the pursuit of
the Requisite Regulatory Approvals (such fees and expenses to include all legal,
consulting and accounting fees, disbursements and expenses). To the extent any
such expenses are reimbursed pursuant to this Section 10.5(b), such payments
shall be credited against any similar obligations of Continental under Section
8.11.
10.6 Amendment. This Agreement may be amended by the parties hereto, by
---------
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Continental or of BAC, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
10.7 Extension; Waiver. At any time prior to the Effective Time, the
-----------------
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
11.1 Expenses. Unless otherwise agreed by the parties in writing or as
--------
otherwise provided herein, each party hereto shall bear its own expenses
incident to preparing, entering into and carrying out this Agreement and to
consummating the Merger.
11.2 Entire Agreement. Except as otherwise expressly provided herein and
----------------
except for that certain Agreement dated January 20, 1994 between BAC and
Continental and except for that certain Confidentiality Agreement dated December
16, 1993, between BAC and
-46-
<PAGE>
Continental, this Agreement and the Stock Option Agreement contain the entire
agreement between the parties hereto with respect to the transactions
contemplated hereunder and thereunder, and such agreements supersede all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors. Other than Sections
8.8, 8.20, 8.21 and 8.22, nothing in this Agreement, expressed or implied, is
intended to confer upon any individual, corporation or other entity, other than
BAC, Continental, Merger Corporation or their respective successors, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
11.3 Amendments. To the extent permitted by law, this Agreement may be
----------
amended by a subsequent writing signed by each of BAC and Continental, provided,
---------
however, that the provisions hereof relating to the manner or basis in which
- -------
shares of Continental capital stock will be exchanged for the Merger
Consideration shall not be amended after the Stockholders' Meeting without any
requisite approval of the holders of the issued and outstanding shares of
Continental capital stock entitled to vote thereon.
11.4 Waivers. Prior to or at the Effective Time, each of BAC and
-------
Continental shall have the right to waive any default in the performance of any
term of this Agreement by the other, to waive or extend the time for the
compliance or fulfillment by the other of any and all of the other's obligations
under this Agreement and to waive any or all of the conditions precedent to its
obligations under this Agreement, except any condition which, if not satisfied,
would result in the violation of any law or applicable governmental regulation.
No failure to exercise and no delay in exercising any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy or power hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy or power provided
herein or by law or in equity. The waiver by any party of the time for
performance of any act or condition hereunder does not constitute a waiver of
the act or condition itself.
11.5 No Assignment. Neither of the parties hereto may assign any of its
-------------
rights or delegate any of its obligations (whether by operation of law or
otherwise) under this Agreement to any other person or entity. Any such
purported assignment or delegation that is made without the prior written
consent of the other parties to this Agreement shall be void and of no effect.
Subject to the foregoing provisions of this Section 11.5, this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
11.6 Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and shall be delivered by overnight
courier or by facsimile transmission (and confirmed by registered or certified
mail, postage prepaid) to the persons at the addresses or facsimile transmission
numbers set forth below (or at such other address or facsimile transaction
numbers as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
Continental: Continental Corporation
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Michael E. O'Neill
Fax: (312) 828-1839
Copy to: Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603-3441
Attn: Richard S. Brennan, Esq.
Fax: (312) 701-7711
-47-
<PAGE>
Additional copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Edward D. Herlihy, Esq.
Fax: (212) 403-2000
BAC: BankAmerica Corporation
555 California Street
San Francisco, California 94104
Attn: Doyle L. Arnold
Executive Vice President
Corporate Development
Fax: (415) 953-0390
Copy to: BankAmerica Corporation
555 California Street
San Francisco, California 94104
Attn: Michael J. Halloran, Esq.
Executive Vice President and
General Counsel
Fax: (415) 953-0944
Additional copy to: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, California 94104
Attn: Rodney R. Peck, Esq.
Fax: (415) 398-2096
11.7 Specific Performance. The parties hereby acknowledge and agree that
--------------------
the failure of Continental to fulfill any of its covenants and agreements
hereunder, including the failure to take all such actions as are necessary on
its part to cause the consummation of the Merger, will cause irreparable injury
to BAC for which damages, even if available, will not be an adequate remedy.
Accordingly, Continental hereby consents to the issuance of injunctive relief by
any court of competent jurisdiction to compel performance of Continental's
obligations and to the granting by any such court of the remedy of the specific
performance by Continental of its obligations hereunder.
11.8 Governing Law. This Agreement shall in all respects be governed by
-------------
and construed in accordance with the laws of the State of Delaware.
11.9 Consent to Jurisdiction. Each of the parties hereby submits to the
-----------------------
exclusive jurisdiction of the Chancery Court of the State of Delaware and the
Federal courts of the United States of America located in Delaware in respect of
the transactions contemplated by this Agreement and the Stock Option Agreement,
and hereby waives, and agrees not to assert, as a defense in any action, suit or
proceeding for the transactions contemplated by this Agreement or the Stock
Option Agreement, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that the
Agreement and the Stock Option Agreement may not be enforced in or by said
courts or that its property is exempt or immune from execution, that the suit,
action or proceeding is brought in an inconvenient forum, or that the venue of
the suit, action or proceeding is improper.
11.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
11.11 Captions. The captions contained in this Agreement are for
--------
reference purposes only and are not part of this Agreement.
-48-
<PAGE>
IN WITNESS WHEREOF, BAC and Continental have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
BANKAMERICA CORPORATION
By: /s/ Doyle L. Arnold
-------------------------------
Name: Doyle L. Arnold
-----------------------------
Attest: /s/ Cheryl A. Sorokin Title: Executive Vice President
------------------------------ ----------------------------
Name: Cheryl A. Sorokin
--------------------------------
Title: Executive Vice President and
-------------------------------
Secretary
CONTINENTAL BANK CORPORATION
By: /s/ Thomas C. Theobald
--------------------------------
Name: Thomas C. Theobald
------------------------------
Attest: /s/ Richard S. Brennan Title: Chairman and Chief Executive
------------------------------ -----------------------------
Officer
Name: Richard S. Brennan
--------------------------------
Title: Secretary
-------------------------------
-49-
<PAGE>
APPENDIX A
Illustration of Calculation of Per Share Stock Consideration, Per Share Cash
Consideration and Stock Amount at different Final BAC Stock Price figures
(as such terms are defined in the Agreement and Plan of Merger between
Continental and BAC)
(amounts in millions; except per share data)
<TABLE>
<S> <C>
Floor Price: $36.16
Ceiling Price: $55.84
</TABLE>
This Illustration Assumes That 51,110,000 Shares of Continental Common Stock
Will be Outstanding at the "Determination Date," Other Than Treasury Shares
<TABLE>
<CAPTION>
Implied Exchange
Ratio (Per Share
Adjusted Stock Consideration)
Total Value to Continental Per Share --------------------
---------------------------------------- Cash Assuming Assuming
Per Consid- Change in Adjusted Value Section Section
Share eration Shares to Continental Adjusted 3.4 3.4(b)
Final Stock Cash Pursuant Pursuant to BAC -------------------- Stock as Adjust- Adjust-
BAC Stock Value Per Consid- to Section Section Stock Per a % of ments ment is
Price Cash Stock Total Share eration 3.4 3.4 Amount Stock Total Share Total Are Made Not Made
- --------- ---- ----- ------ --------- ------- ---------- -------- ------ ----- ----- ----- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$30.00 $939 $637 $1,577 $30.85 $30.85 $33.41 4.364 25.613 $768 $1,708 $33.41 45.0% 1.1136 1.0283
30.50 939 648 1,587 31.06 31.06 33.41 3.944 25.193 768 1,708 33.41 45.0 1.0954 1.0182
31.00 939 659 1,598 31.26 31.26 33.41 3.537 24.787 768 1,708 33.41 45.0 1.0777 1.0085
31.50 939 669 1,609 31.47 31.47 33.41 3.144 24.393 768 1,708 33.41 45.0 1.0606 0.9991
32.00 939 680 1,619 31.68 31.68 33.41 2.763 24.012 768 1,708 33.41 45.0 1.0440 0.9900
32.50 939 691 1,630 31.89 31.89 33.41 2.393 23.643 768 1,708 33.41 45.0 1.0280 0.9811
33.00 939 701 1,640 32.10 32.10 33.41 2.035 23.285 768 1,708 33.41 45.0 1.0124 0.9726
33.50 939 712 1,651 32.30 32.30 33.41 1.688 22.937 768 1,708 33.41 45.0 0.9973 0.9643
34.00 939 722 1,662 32.51 32.51 33.41 1.350 22.600 768 1,708 33.41 45.0 0.9826 0.9562
34.50 939 733 1,672 32.72 32.72 33.41 1.023 22.272 768 1,708 33.41 45.0 0.9684 0.9484
35.00 939 744 1,683 32.93 32.93 33.41 0.705 21.954 768 1,708 33.41 45.0 0.9545 0.9408
35.50 939 754 1,694 33.13 33.13 33.41 0.395 21.645 768 1,708 33.41 45.0 0.9411 0.9334
36.00 939 765 1,704 33.34 33.34 33.41 0.095 21.344 768 1,708 33.41 45.0 0.9280 0.9262
- -----------------------------------------------------------------------------------------------------------------------------------
36.16 939 768 1,708 33.41 33.41 -- 0.000 21.250 768 1,708 33.41 45.0 0.9239 0.9239
- -----------------------------------------------------------------------------------------------------------------------------------
36.50 939 776 1,715 33.55 33.55 -- 0.000 21.250 776 1,715 33.55 45.2 0.9192 0.9192
37.00 939 786 1,725 33.76 33.76 -- 0.000 21.250 786 1,725 33.76 45.6 0.9124 0.9124
37.50 939 797 1,736 33.97 33.97 -- 0.000 21.250 797 1,736 33.97 45.9 0.9058 0.9058
38.00 939 807 1,747 34.17 34.17 -- 0.000 21.250 807 1,747 34.17 46.2 0.8993 0.8993
38.50 939 818 1,757 34.38 34.38 -- 0.000 21.250 818 1,757 34.38 46.6 0.8930 0.8930
39.00 939 829 1,768 34.59 34.59 -- 0.000 21.250 829 1,768 34.59 46.9 0.8869 0.8869
39.50 939 839 1,779 34.80 34.80 -- 0.000 21.250 839 1,779 34.80 47.2 0.8810 0.8810
40.00 939 850 1,789 35.01 35.01 -- 0.000 21.250 850 1,789 35.01 47.5 0.8751 0.8751
40.50 939 861 1,800 35.21 35.21 -- 0.000 21.250 861 1,800 35.21 47.8 0.8695 0.8695
41.00 939 871 1,810 35.42 35.42 -- 0.000 21.250 871 1,810 35.42 48.1 0.8639 0.8639
41.50 939 882 1,821 35.63 35.63 -- 0.000 21.250 882 1,821 35.63 48.4 0.8585 0.8585
42.00 939 892 1,832 35.84 35.84 -- 0.000 21.250 892 1,832 35.84 48.7 0.8533 0.8533
42.50 939 903 1,842 36.04 36.04 -- 0.000 21.250 903 1,842 36.04 49.0 0.8481 0.8481
43.00 939 914 1,853 36.25 36.25 -- 0.000 21.250 914 1,853 36.25 49.3 0.8431 0.8431
43.50 939 924 1,864 36.46 36.46 -- 0.000 21.250 924 1,864 36.46 49.6 0.8382 0.8382
44.00 939 935 1,874 36.67 36.67 -- 0.000 21.250 935 1,874 36.67 49.9 0.8334 0.8334
44.50 939 946 1,885 36.88 36.88 -- 0.000 21.250 946 1,885 36.88 50.2 0.8287 0.8287
</TABLE>
Page 1
<PAGE>
APPENDIX A
Illustration of Calculation of Per Share Stock Consideration, Per Share Cash
Consideration and Stock Amount at different Final BAC Stock Price figures
(as such terms are defined in the Agreement and Plan of Merger between
Continental and BAC)
(amounts in millions; except per share data)
<TABLE>
<S> <C>
Floor Price: $36.16
Ceiling Price: $55.84
</TABLE>
This Illustration Assumes That 51,110,000 Shares of Continental Common Stock
Will be Outstanding at the "Determination Date," Other Than Treasury Shares
<TABLE>
<CAPTION>
Implied Exchange
Ratio (Per Share
Adjusted Stock Consideration)
Total Value to Continental Per Share --------------------
---------------------------------------- Cash Assuming Assuming
Per Consid- Change Adjusted Value Section Section
Share eration in Shares to Continental Adjusted 3.4 3.4(b)
Final Stock Cash Pursuant Pursuant BAC -------------------- Stock as Adjust- Adjust-
BAC Stock Value Per Consid- to Section to Section Stock Per a % of ments ment is
Price Cash Stock Total Share eration 3.4 3.4 Amount Stock Total Share Total Are Made Not Made
- --------- ---- ----- ------ --------- ------- ---------- -------- ------ ----- ----- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45.00 939 956 1,895 37.08 37.08 -- 0.000 21.250 956 1,895 37.08 50.5 0.8241 0.8241
45.50 939 967 1,906 37.29 37.29 -- 0.000 21.250 967 1,906 37.29 50.7 0.8196 0.8196
46.00 939 977 1,917 37.50 37.50 -- 0.000 21.250 977 1,917 37.50 51.0 0.8152 0.8152
46.50 939 988 1,927 37.71 37.71 -- 0.000 21.250 988 1,927 37.71 51.3 0.8109 0.8109
47.00 939 999 1,938 37.92 37.92 -- 0.000 21.250 999 1,938 37.92 51.5 0.8067 0.8067
47.50 939 1,009 1,948 38.12 38.12 -- 0.000 21.250 1,009 1,948 38.12 51.8 0.8026 0.8026
48.00 939 1,020 1,959 38.33 38.33 -- 0.000 21.250 1,020 1,959 38.33 52.1 0.7986 0.7986
48.50 939 1,031 1,970 38.54 38.54 -- 0.000 21.250 1,031 1,970 38.54 52.3 0.7946 0.7946
49.00 939 1,041 1,980 38.75 38.75 -- 0.000 21.250 1,041 1,980 38.75 52.6 0.7908 0.7908
49.50 939 1,052 1,991 38.96 38.96 -- 0.000 21.250 1,052 1,991 38.96 52.8 0.7870 0.7870
50.00 939 1,062 2,002 39.16 39.16 -- 0.000 21.250 1,062 2,002 39.16 53.1 0.7833 0.7833
50.50 939 1,073 2,012 39.37 39.37 -- 0.000 21.250 1,073 2,012 39.37 53.3 0.7796 0.7796
51.00 939 1,084 2,023 39.58 39.58 -- 0.000 21.250 1,084 2,023 39.58 53.6 0.7761 0.7761
51.50 939 1,094 2,033 39.79 39.79 -- 0.000 21.250 1,094 2,033 39.79 53.8 0.7726 0.7726
52.00 939 1,105 2,044 39.99 39.99 -- 0.000 21.250 1,105 2,044 39.99 54.1 0.7691 0.7691
52.50 939 1,116 2,055 40.20 40.20 -- 0.000 21.250 1,116 2,055 40.20 54.3 0.7658 0.7658
53.00 939 1,126 2,065 40.41 40.41 -- 0.000 21.250 1,126 2,065 40.41 54.5 0.7625 0.7625
53.50 939 1,137 2,076 40.62 40.62 -- 0.000 21.250 1,137 2,076 40.62 54.8 0.7592 0.7592
54.00 939 1,147 2,087 40.83 40.83 -- 0.000 21.250 1,147 2,087 40.83 55.0 0.7560 0.7560
54.50 939 1,158 2,097 41.03 41.03 -- 0.000 21.250 1,158 2,097 41.03 55.2 0.7529 0.7529
55.00 939 1,169 2,108 41.24 41.24 -- 0.000 21.250 1,169 2,108 41.24 55.4 0.7499 0.7499
55.50 939 1,179 2,118 41.45 41.45 -- 0.000 21.250 1,179 2,118 41.45 55.7 0.7468 0.7468
- -----------------------------------------------------------------------------------------------------------------------------------
55.84 939 1,187 2,126 41.59 41.59 -- 0.000 21.250 1,187 2,126 41.59 55.8 0.7448 0.7448
- -----------------------------------------------------------------------------------------------------------------------------------
56.00 939 1,190 2,129 41.66 41.66 41.59 (0.061) 21.189 1,187 2,126 41.59 55.8 0.7427 0.7427
56.50 939 1,201 2,140 41.87 41.87 41.59 (0.248) 21.001 1,187 2,126 41.59 55.8 0.7361 0.7361
57.00 939 1,211 2,150 42.07 42.07 41.59 (0.433) 20.817 1,187 2,126 41.59 55.8 0.7297 0.7297
57.50 939 1,222 2,161 42.28 42.28 41.59 (0.614) 20.636 1,187 2,126 41.59 55.8 0.7233 0.7233
58.00 939 1,232 2,172 42.49 42.49 41.59 (0.792) 20.458 1,187 2,126 41.59 55.8 0.7171 0.7171
58.50 939 1,243 2,182 42.70 42.70 41.59 (0.966) 20.283 1,187 2,126 41.59 55.8 0.7110 0.7110
59.00 939 1,254 2,193 42.90 42.90 41.59 (1.138) 20.111 1,187 2,126 41.59 55.8 0.7049 0.7049
59.50 939 1,264 2,203 43.11 43.11 41.59 (1.307) 19.942 1,187 2,126 41.59 55.8 0.6990 0.6990
60.00 939 1,275 2,214 43.32 43.32 41.59 (1.473) 19.776 1,187 2,126 41.59 55.8 0.6932 0.6932
</TABLE>
Page 2
<PAGE>
EXHIBIT 4
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, dated as of January 27, 1994, to the Rights
Agreement, dated as of July 22, 1991 (the "Rights Agreement"),
between Continental Bank Corporation, a Delaware corporation (the
"Company"), and Continental Bank, National Association, a
national banking association, as Rights Agent (the "Rights
Agent").
WHEREAS, the Company and the Rights Agent have hereto-
fore executed and entered into the Rights Agreement; and
WHEREAS, pursuant to Section 27 of the Rights Agree-
ment, the Company may from time to time supplement or amend the
Rights Agreement in accordance with the provisions of Section 27
thereof; and
WHEREAS, it is proposed that the Company enter into an
Agreement and Plan of Merger (as it may be amended or sup-
plemented from time to time, the "Merger Agreement"), sub-
stantially in the form set forth in Exhibit A to this Amendment,
between the Company and BankAmerica Corporation ("BankAmerica"),
as the same may be amended from time to time (all capitalized
terms used in this Amendment and not otherwise defined herein
shall have the meaning ascribed thereto in the Merger Agreement);
and
WHEREAS, it is proposed that immediately after the
execution of the Merger Agreement the Company enter into the
Stock Option Agreement attached as an exhibit to the Merger
Agreement (the "Stock Option Agreement"); and
WHEREAS, the Board of Directors has determined that the
Merger and the other transactions contemplated by the Merger
Agreement are fair to and in the best interests of the Company
and its stockholders; and
WHEREAS, the Board of Directors has determined that it
is in the best interest of the Company and its stockholders to
amend the Rights Agreement to exempt the Merger Agreement and the
Stock Option Agreement and the transactions contemplated thereby
from the application of the Rights Agreement.
NOW, THEREFORE, the Company hereby amends the Rights
Agreement as follows:
1. Section 1(a) of the Rights Agreement is hereby
modified and amended by adding the following sentence at the end
thereof:
"Neither BankAmerica Corporation, a Delaware corpo-
ration ("BankAmerica") nor any other Person, shall be
deemed to be an Acquiring Person by virtue of the
Agreement and Plan of Merger (as it may be amended or
supplemented from time to time, the "Merger Agreement")
or the Stock Option Agreement, each to be entered into
as of January 27, 1994, between the Company and
BankAmerica or by virtue of any of the transactions
contemplated thereby."
2. Section 30 of the Rights Agreement is hereby modi-
fied and amended to add the following sentence at the end
thereof:
"Nothing in this Agreement shall be construed to give
any holder of Rights or any other Person any legal or
equitable rights, remedy or claim under this Agreement
in connection with any transactions contemplated by the
Merger Agreement or the Stock Option Agreement."
IN WITNESS WHEREOF, this Amendment has been duly
executed by the Company and the Rights Agent as of the day and
year first written above.
Continental Bank Corporation
By: /s/ John J. Higgins
____________________________
Continental Bank, N.A.
By: /s/ John J. Higgins
____________________________
<PAGE>
EXHIBIT 10.
-----------
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated January 27, 1994, between BANKAMERICA
CORPORATION, a Delaware corporation ("Grantee"), and CONTINENTAL BANK
CORPORATION, a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 10,169,000
fully paid and nonassessable shares of Issuer's Common Stock, par value $4 per
share ("Common Stock"), at a price of $37.50 per share; provided, however, that
-----------------
in the event Issuer issues or agrees to issue any shares of Common Stock (other
than as permitted under the Merger Agreement) at a price less than $37.50 per
share (as adjusted pursuant to subsection (b) of Section 5), such price shall be
equal to such lesser price (such price, as adjusted if applicable, the "Option
Price"); provided further that in no event shall the number of shares for which
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this Option is exercisable exceed 19.9% of the Issuer's issued and outstanding
common shares. The number of shares of Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth.
(b) In the event that any additional shares of Common Stock are issued
or otherwise become outstanding after the date hereof (or any treasury shares
held by Issuer have been or are sold after January 26, 1994) (other than
pursuant to this Agreement), the number of shares of Common Stock subject to the
Option shall be increased so that, after such issuance, its equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject to or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall have
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sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within 30 days following such Subsequent Triggering Event. Each of
the following shall be an Exercise Termination Event: (i) the Effective Time of
the Merger; (ii) termination of the Merger Agreement in accordance with the
provisions thereof if such termination occurs prior to the occurrence of an
Initial Triggering Event; or (iii) the passage of 12 months after termination of
the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event (provided that if an Initial Triggering Event continues or
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occurs beyond such termination, the Exercise Termination Event shall be 12
months from the expiration of the Last Triggering Event but in no event more
than 18 months after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to occur. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
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(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
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 Grantee
or any of its Subsidiaries (each a "Grantee Subsidiary") or the Board of
Directors of Issuer shall have recommended that the stockholders of Issuer
approve or accept any Acquisition Transaction other than as contemplated by
the Merger Agreement. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02 of Regulation S-X promulgated by the SEC) of Issuer, (y) a
purchase, lease or other acquisition representing 15% or more of the
consolidated assets of Issuer and its Subsidiaries, or (z) a purchase or
other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the voting
power of Issuer or any Significant Subsidiary of Issuer;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, an agreement to engage in an Acquisition Transaction with any
person other than Grantee or a Grantee Subsidiary, or the Board of
Directors of Issuer shall have publicly withdrawn or modified, or publicly
announced its interest to withdraw or modify, its recommendation that the
stockholders of Issuer approve the transactions contemplated by the Merger
Agreement;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity shall have acquired
beneficial ownership or the right to acquire beneficial ownership of 10% or
more of the outstanding shares of Common Stock (the term "beneficial
ownership" for purposes of this Agreement having the meaning assigned
thereto in Section 13(d) of the Exchange Act, and the rules and regulations
thereunder);
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After a proposal is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or
more of the then outstanding Common Stock; or
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(ii) The occurrence of the Initial Triggering Event described in
clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (z) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided, that if the
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closing of the purchase and sale pursuant to the Option (the "Closing") cannot
be consummated by reason of any applicable judgment, decree, order, law or
regulation, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided further, without
----------------
limiting the foregoing, that if prior notification to or approval of the Federal
Reserve Board or any other regulatory agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval and shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto. Notwithstanding this subsection (e), in no event shall
any Closing Date be more than 18 months after the related Notice Date, and if
the Closing Date shall not have occurred within 18 months after the related
Notice Date due to the failure to obtain any such required approval, the
exercise of the Option effected on the Notice Date shall be deemed to have
expired. In the event (i) Grantee receives official notice that an approval of
the Federal Reserve Board or any other regulatory authority required for the
purchase of Option Shares (as hereinafter defined) would not be issued or
granted, (ii) a Closing Date shall not have occurred within 18 months after the
related Notice Date due to the failure to obtain any such required approval or
(iii) Holder (or Substitute Holder) shall have the right pursuant to the last
sentence of Section 7 (or Section 9) to exercise the Option (or Substitute
Option), Grantee shall nevertheless be entitled to exercise its right as set
forth in Section 7 and Grantee or Holder (or Substitute Holder) shall be
entitled to exercise the Option (or Substitute Option) in connection with the
resale of Issuer Common Stock or other securities pursuant to a registration
statement as provided in Section 6.
(f) At the Closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
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failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such Closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement. If at the time of
issuance of any Option Shares pursuant to an exercise of all or part of the
Option hereunder, Issuer shall not have redeemed the Rights (as defined in the
Stockholders' Rights Plan adopted by Issuer on July 22, 1991, as amended (the
"Rights Agreement")), or shall have issued any similar securities, then each
Option Share issued pursuant to such exercise shall also represent rights or new
rights with terms substantially the same as and
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<PAGE>
at least as favorable to Grantee as are provided under the Rights Agreement or
any similar agreement then in effect.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
Issuer and to resale restrictions arising under the Securities Act of 1933,
as amended. A copy of such agreement is on file at the principal office of
Issuer and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder shall have
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel, in form and substance reasonably satisfactory to Issuer, to the
effect that such legend is not required for purposes of the Securities Act; (ii)
the reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder or the Issuer
shall have failed or refused to designate the bank account described in
subsection (f) of this Section 2. Issuer shall pay all expenses, and any and
all United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 2 in the name of the Holder or its assignee,
transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock (and other securities issuable pursuant to Section 5(a)) so that
the Option may be exercised without additional authorization of Common Stock (or
such other securities) after giving effect to all other options, warrants,
convertible securities and other rights to purchase Common Stock (or such other
securities); (ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to time
be required (including (x) complying with all premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. (S) 18a and regulations
promulgated thereunder and (y) in the event, under the Bank Holding Company Act
of 1956, as amended ("BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state banking law, prior approval of or notice to the Federal
Reserve Board or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board or such state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and the Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the
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principal office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase, on the same
terms and subject to the same conditions as are set forth herein, in the
aggregate the same number of shares of Common Stock purchasable hereunder. The
terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the number of shares of Common Stock purchasable upon the exercise of
the Option shall be subject to adjustment from time to time as provided in this
Section 5.
(a) In the event of any change in Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof shall be
appropriately adjusted so that Grantee shall receive upon exercise of the
Option and payment of the aggregate Option Price hereunder the number and
class of shares or other securities or property that Grantee would have
received in respect of Common Stock if the Option had been exercised in
full immediately prior to such event, or the record date therefor, as
applicable.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which shall be equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which shall be
equal to the number of shares of Common Stock purchasable after the
adjustment.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event (or as otherwise provided in the last sentence
of Section 2(e)), Issuer shall, at the request of Grantee delivered within 30
days after such Subsequent Triggering Event (or such trigger date as is provided
in the last sentence of Section 2(e)) (whether on its own behalf or on behalf of
any subsequent holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file and keep current a
shelf registration statement under the Securities Act covering any shares issued
and issuable pursuant to this Option and shall use its best efforts to cause
such registration statement to become effective and remain current in order to
permit the sale or other disposition of any shares of Common Stock issued upon
total or partial exercise of this Option ("Option Shares") in accordance with
any plan of disposition requested by Grantee. Issuer will use its best efforts
to cause such registration statement first to become effective and then to
remain effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee for a
period of 18 months following such first request shall have the right to demand
a second such registration if reasonably necessary to effect such sales or
dispositions. The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of shares of Common
Stock, and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the inclusion of the Holder's Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock offered by Issuer,
the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; and provided, however, that after
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any such required reduction the number of Option
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<PAGE>
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
----------------
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practical and no reduction shall thereafter occur (and
such registration shall not be charged against the Holder). Each such Holder
shall provide all information reasonably requested by Issuer for inclusion in
any registration statement to be filed hereunder. If requested by any such
Holder in connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating itself in respect of representations, warranties,
indemnities and other agreements customarily included in such underwriting
agreements for the Issuer. Upon receiving any request under this Section 6 from
any Holder, Issuer agrees to send a copy thereof to any other person known to
Issuer to be entitled to registration rights under this Section 6, in each case
by promptly mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies.
7. (a) Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, (i) at the request of the Holder,
delivered within 30 days after such occurrence (or such later period as provided
in Section 10 or the last sentence of Section 2(e)), Issuer (or any successor
thereto) shall repurchase the Option from the Holder at a price (the "Option
Repurchase Price") equal to (x) the amount by which (A) the market/offer price
(as defined below) exceeds (B) the Option Price, multiplied by the number of
shares for which this Option may then be exercised plus (y) Grantee's
Out-of-Pocket Expenses (as defined below) (to the extent not previously
reimbursed) and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered within 30 days after such occurrence (or such
later period as provided in Section 10), Issuer shall repurchase such number of
the Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to (x) the market/offer price multiplied
by the number of Option Shares so designated plus (y) Grantee's Out-of-Pocket
Expenses (to the extent not previously reimbursed). The term "Out-of-Pocket
Expenses" shall mean Grantee's reasonable out-of-pocket expenses incurred in
connection with the transactions contemplated by the Merger Agreement,
including, without limitation, legal, accounting and investment banking fees.
The term "market/offer price" shall mean the highest of (i) the highest price
per share of Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock quoted in the New York Stock Exchange (or if Common
Stock is not quoted in the New York Stock Exchange, the highest bid price per
share as quoted on the National Association of Securities Dealers Automated
Quotation Systems, or, if the shares of Common Stock are not quoted thereon, on
the principal trading market on which such shares are traded as reported by a
recognized source) within the six-month period immediately preceding the date
the Holder gives notice of the required repurchase of Option Shares, as the case
may be, or (iv) in the event of a sale of assets representing 15% or more of the
consolidated assets of Issuer and its Subsidiaries, the sum of the price paid in
such sale for such assets and the current market value of the remaining assets
of Issuer as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, divided by the number
of shares of Common Stock of Issuer outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm selected
by the Holder or Owner, as the case may be.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the
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portion thereof that Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
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Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing. If an Exercise
Termination Event shall have occurred prior to the date of the notice by Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Holder shall nonetheless have the right to exercise the
Option until the expiration of such 30 day period.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
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(3) "Assigned Value" shall mean the market/offer price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
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of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
- --------
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option
shall also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement (after giving
effect for such purpose to the provisions of Section 9), which agreement shall
be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
Substitute Option Holder"), the issuer of the Substitute Option (the "Substitute
Option Issuer") shall repurchase the Substitute Option from the Substitute
Option Holder at a price (the "Substitute Option Repurchase Price") equal to (x)
the amount by which (i) the Highest Closing Price (as hereinafter defined)
exceeds (ii) the exercise price of the Substitute Option, multiplied by the
number of shares of Substitute Common Stock for which the Substitute Option may
then be exercised plus (y) Grantee's Out-of-Pocket Expenses (to the extent not
previously reimbursed), and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to (x) the Highest Closing Price
multiplied by the number of Substitute Shares so designated plus (y) Grantee's
Out-of-Pocket Expenses (to the extent not previously reimbursed). The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required
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repurchase of the Substitute Option or the Substitute Share Owner gives notice
of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provision of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that if the
-----------------
Substitute Option Issuer is at any time after delivery of a notice of repurchase
pursuant to subsection (b) of this Section 9 prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
Substitute Option Repurchase Price and the Substitute Share Repurchase Price,
respectively, in full (and the Substitute Option Issuer shall use its best
efforts to receive all required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Option Shares it is then so prohibited
from repurchasing. If an Exercise Termination Event shall have occurred prior
to the date of the notice by the Substitute Option Issuer described in the first
sentence of this subsection (c), or shall be scheduled to occur at any time
before the expiration of a period ending on the thirtieth day after such date,
the Substitute Option Holder shall nevertheless have the right to exercise the
Substitute Option until the expiration of such 30 day period.
10. The 30-day period for exercise of certain rights under Sections 2, 6,
7, 9 and 12 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the Exchange Act by reason of such exercise.
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<PAGE>
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer. This Agreement is the valid and legally binding
obligation of Issuer, enforceable against Issuer in accordance with its terms.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming all of
the Rights or amending or terminating the Rights Agreement) so that the entering
into of this Option Agreement, the acquisition of shares of Common Stock
hereunder and the other transactions contemplated hereby do not and will not
result in the grant of any rights to any person under the Rights Agreement or
enable or require the Rights to be exercised, distributed or triggered.
(d) Except as disclosed pursuant to the Merger Agreement, the execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
Violation pursuant to any provisions of the Certificate of Incorporation or
by-laws of Issuer or any Subsidiary of Issuer or, subject to obtaining any
approvals or consents contemplated hereby, result in any Violation of any loan
or credit agreement, note, mortgage, indenture, lease, Plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Issuer or any
Subsidiary of Issuer or their respective properties or assets which Violation
would have a Material Adverse Effect on Issuer.
(e) Issuer reaffirms with respect to this Agreement and the transactions
contemplated hereby the representation and warranty contained in Section 5.16 of
the Merger Agreement.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 30
days following such Subsequent Triggering Event (or such later period as
provided in Section 10); provided, however, that until the date 30 days
-----------------
following the date on which the Federal Reserve Board approves an application by
Grantee under the BHCA to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve
Board.
13. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York
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<PAGE>
Stock Exchange upon official notice of issuance and applying to the Federal
Reserve Board under the BHCA for approval to acquire the shares issuable
hereunder, but Grantee shall not be obligated to apply to state banking
authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
14. Notwithstanding anything to the contrary herein, in the event that the
Holder or Owner or any Related Person thereof is a person making without the
prior written consent of Issuer an offer or proposal to engage in an Acquisition
Transaction (other than the transaction contemplated by the Merger Agreement),
then (i) in the case of a Holder or any Related Person thereof, the Option held
by it shall immediately terminate and be of no further force or effect, and (ii)
in the case of an Owner or any Related Person thereof, the Option Shares held by
it shall be immediately repurchasable by Issuer at the Option Price. A Related
Person of a Holder or Owner means any Affiliate (as defined in Rule 12b-2 of the
rules and regulations under the Exchange Act) of the Holder or Owner and any
person that is the beneficial owner of 20% or more of the voting power of the
Holder or Owner, as the case may be.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder or Substitute Option Holder is not permitted to acquire, or
Issuer or Substitute Option Issuer is not permitted to repurchase pursuant to
Section 7 or Section 9, as the case may be, the full number of shares of Common
Stock provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or
Section 5 hereof), it is the express intention of Issuer to allow the Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein or in the Merger
Agreement, each of the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein. Any provision of this
Agreement may be waived at any time by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended,
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<PAGE>
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
22. In the event of any exercise of the Option by Grantee, Issuer and
Grantee shall execute and deliver all other documents and instruments and take
all other action that may be reasonably necessary in order to consummate the
transactions provided for by such exercise.
23. Capitalized terms used in this Agreement and not defined herein shall
have the meanings assigned thereto in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, BAC and Continental have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
BANKAMERICA CORPORATION
By: /s/ Doyle L. Arnold
---------------------------------
Name: Doyle L. Arnold
-------------------------------
Attest: /s/ Cheryl A. Sorokin Title: Executive Vice President
------------------------------ ------------------------------
Name: Cheryl A. Sorokin
--------------------------------
Title: Executive Vice President and
-------------------------------
Secretary
CONTINENTAL BANK CORPORATION
By: /s/ Thomas C. Theobald
---------------------------------
Name: Thomas C. Theobald
-------------------------------
Attest: /s/ Richard S. Brennan Title: Chairman and Chief Executive
------------------------------ ------------------------------
Officer
Name: Richard S. Brennan
--------------------------------
Title: Secretary
-------------------------------
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Exhibit 99.
-----------
(LOGO OF BANKAMERICA (LOGO OF CONTINENTAL
CORPORATION APPEARS HERE) APPEARS HERE)
BANKAMERICA TO ACQUIRE CONTINENTAL FOR ABOUT $1.9 BILLION
BANKAMERICA WILL BUY BACK $500 MILLION OF OWN STOCK;
EXPECTS NO DILUTION IN EARNINGS PER SHARE IN FIRST YEAR
______________________________________________________________________
SAN FRANCISCO AND CHICAGO, JANUARY 28, 1994 -- BankAmerica Corporation
(NYSE: BAC) and Continental Bank Corporation (NYSE: CBK) today announced they
have signed a definitive agreement for BankAmerica to acquire Continental for
21.25 million shares of BankAmerica common stock and $939 million in cash,
subject to adjustment in certain circumstances. Based on BankAmerica's closing
price yesterday of $45.75 per share, the transaction is currently valued at
approximately $1.9 billion.
The combination with Continental will enable BankAmerica to solidify its
position as one of the nation's leading wholesale banks, while expanding its
relationships with both large and medium size companies in the midwestern United
States.
BankAmerica also said that before completing the acquisition it will buy
back approximately $500 million of its common stock, approximately half the
value of the shares to be issued in the merger. After giving effect to the
share repurchase, the transaction is expected to be non-dilutive to BankAmerica
shareholders from the first year of the merger.
The transaction will be structured as a cash-election merger, in which
Continental shareholders may elect to receive either cash or BankAmerica common
stock. It is expected to be tax-free to the extent stock is received, but may
become taxable in certain circumstances. The acquisition is expected to close
in the third quarter of 1994 and is subject to completion of due diligence and
approval by regulators and Continental shareholders.
BankAmerica Chairman Richard M. Rosenberg said, "There is a superb fit
between the two organizations. We complement each other remarkably well in
terms of business lines,
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balance sheets, and geographic presence. Continental is a strong, focused
wholesale bank which will enable us to achieve important strategic objectives --
increasing relationships with large corporations nationwide and especially
expanding our presence among both large and medium-size companies in the
Midwest. Continental has unusually strong customer relationships and we have
the size, financial strength, and management depth to make this combination work
without straining us or distracting from our other priorities. In addition, we
have an extensive global network and array of products that will become
available to Continental customers."
"Continental's customers, shareholders, and employees are all winners in
this combination," said Thomas C. Theobald, Continental Chairman. "Our customers
benefit from BankAmerica's far greater financial capacity, and it's clear that
better marketing opportunities brighten career prospects for Continental
bankers. With this transaction, our shareholders will realize substantial
appreciation in value, in addition to the gains of previous years. In the
circumstances, I have decided to move on, very proud of what our talented team
has accomplished, and very confident about the future of this business."
Rosenberg said: "In addition to its strong market position in the Chicago
area, Continental has deep relationships with corporations across the country,
especially among privately held companies. However, there is no significant
overlap with our customer base. This is true even though we both have strong
operations in many of the same locations, including Chicago, where we have run a
very successful corporate banking office since 1974."
The acquisition is also expected to result in modest cost savings, which
will come from consolidation of Continental domestic and foreign offices with
those of BankAmerica and the elimination of duplicative corporate and
administrative expenses. In addition to Chicago, Continental has corporate
banking offices in New York, Los Angeles, Miami, Atlanta and Dallas, as well as
operations in London, Tokyo, and five Latin American cities. These
consolidations are estimated to eliminate 500-800 full-time equivalent
positions, coming from both companies and from the U.S. and overseas, within two
years. At the end of 1993, Continental had approximately 4,200 employees and
BankAmerica had approximately 96,400 employees.
Following the merger, the headquarters of BankAmerica's U.S. Corporate
Group will be moved to Chicago and the combined domestic corporate banking
business will be headed by Continental Vice Chairman Michael J. Murray, who will
report to BankAmerica Vice
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Chairman David Coulter, head of its United States and International Group.
Continental will be renamed Bank of America Illinois and be headed by
Continental Vice Chairman William M. Goodyear, who will continue to be
responsible for middle-market and private banking businesses, reporting to
BankAmerica Vice Chairman Michael Rossi, head of its Commercial Business Group
and several other major investment and wholesale products units.
John Richman, a Continental outside director since 1980, will join
BankAmerica's Board of Directors upon completion of the transaction. Richman is
a former chairman and chief executive officer of Kraft General Foods, Inc.
The amount of BankAmerica stock to be issued in the merger is subject to
adjustment if its average stock price during a 10-day period ending 10 days
prior to closing is above $55.84 per share or below $36.16 per share.
Continental has granted BankAmerica an option to purchase shares of Continental
common stock representing 19.9% of its outstanding common shares, at a price of
$37.50 per share. The option is exercisable in certain circumstances, including
the purchase by a third party of more than 20% of Continental shares or
Continental's completion of an alternative transaction with a third party at a
higher price. In addition, if Continental enters into such an alternative
transaction, it would be obligated to pay BankAmerica the greater of $60 million
or 3% of the transaction's value.
Continental's Board of Directors has unanimously approved the merger
agreement and has agreed to recommend the transaction to Continental
shareholders at a meeting to be held following the clearance of a proxy
statement by the Securities and Exchange Commission.
Lazard Freres and Montgomery Securities are serving as financial advisors
to BankAmerica. Goldman Sachs is serving as financial advisor to Continental.
As reported, Continental's 1993 earnings were $258 million, or $4.12 per
share. The earnings were not taxed due to the utilization of tax benefits.
Continental's assets were $22.6 billion and loans were $11.7 billion at
year-end.
With assets of $187 billion at year-end 1993, BankAmerica is the second
largest banking company in the United States.
# # #
Note: A registration statement relating to the BankAmerica common stock to be
exchanged will be filed with the Securities and Exchange Commission (SEC). The
BankAmerica common stock may not be exchanged, nor may offers be accepted, prior
to the time the registration statement becomes effective. This announcement
shall not constitute an offer to exchange or the solicitation of an offer to
exchange nor shall there be any exchange of the BankAmerica common stock in any
state in which such offer, solicitation or exchange would be unlawful prior to
registration or qualification under the securities laws of such state. The
BankAmerica common stock to be exchanged will be offered only by means of a
prospectus filed with the SEC.
