EXHIBIT 4.1
SUBORDINATED
DEBENTURE PURCHASE AGREEMENT
between
WISCONSIN CAPITAL CORPORATION
and
SOUTHWEST BANCORPORATION OF TEXAS, INC.
Dated as of September 22, 2004
TABLE OF CONTENTS
PAGE
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1. DEFINITIONS................................................................................... 1
1.1. Defined Terms................................................................... 1
1.2. Certain UCC and Accounting Terms; Interpretations............................... 6
1.3. Exhibits and Schedules Incorporated............................................. 6
2. SUBORDINATED DEBT............................................................................. 6
2.1. General Matters................................................................. 6
2.2. The Subordinated Debenture...................................................... 7
2.3. Maturity Date................................................................... 7
2.4. Unsecured Debt.................................................................. 7
2.5. The Closing..................................................................... 7
2.6. Interest Rates.................................................................. 7
2.7. Certain Provisions Regarding LIBO Rate Tranches................................. 8
2.8. Payments........................................................................ 10
2.9. Capital Adequacy................................................................ 10
3. DISBURSEMENTS................................................................................. 11
3.1. Initial Disbursement............................................................ 11
3.2. Conditions Precedent to Initial Disbursement.................................... 11
3.3. Additional Conditions to Initial Disbursement................................... 11
4. GENERAL REPRESENTATIONS AND WARRANTIES........................................................ 12
4.1. Organization and Authority...................................................... 12
4.2. No Impediment to Transactions................................................... 13
4.3. Purposes of Debt; KBI Merger Agreement.......................................... 14
4.4. Financial Condition............................................................. 14
4.5. Title to Properties............................................................. 15
4.6. No Material Adverse Change...................................................... 15
4.7. Compliance with Law............................................................. 15
4.8. Borrower Status................................................................. 17
4.9. No Misstatement................................................................. 17
4.10. Representations and Warranties Generally........................................ 17
5. GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.................................................. 18
5.1. Compliance with Debt Documents.................................................. 18
5.2. Material Transactions........................................................... 18
5.3. Subsidiary Shares............................................................... 19
5.4. Business Operations............................................................. 19
5.5. Corporate Existence............................................................. 19
5.6. Lender Expenses................................................................. 19
5.7. Subordinated Debt Matters....................................................... 20
5.8. Inspection Rights............................................................... 20
6. REPORTING..................................................................................... 20
6.1. Annual.......................................................................... 20
6.2. Quarterly....................................................................... 21
6.3. Securities Filings.............................................................. 21
6.4. Compliance Certificate.......................................................... 21
6.5. Copies of Other Reports and Correspondence...................................... 21
6.6. Proceedings..................................................................... 21
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PAGE
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6.7. Event of Default; Material Adverse Change....................................... 21
6.8. Other Information Requested by Lender........................................... 21
7. FINANCIAL COVENANT............................................................................ 21
8. BORROWER'S DEFAULT............................................................................ 22
8.1. Borrower's Defaults and Lender's Remedies....................................... 22
8.2. Protective Advances............................................................. 24
8.3. Other Remedies.................................................................. 24
8.4. No Lender Liability............................................................. 24
8.5. Lender's Fees and Expenses...................................................... 24
8.6. Limitation on Remedies with Respect to Subordinated Debt........................ 24
9. MISCELLANEOUS................................................................................. 25
9.1. Release; Indemnification........................................................ 25
9.2. Assignment and Participation.................................................... 25
9.3. Prohibition on Assignment....................................................... 26
9.4. Time of the Essence............................................................. 26
9.5. No Waiver....................................................................... 26
9.6. Severability.................................................................... 26
9.7. Usury; Revival of Liabilities................................................... 26
9.8. Notices......................................................................... 27
9.9. Successors and Assigns.......................................................... 27
9.10. No Joint Venture................................................................ 27
9.11. Publicity....................................................................... 27
9.12. Documentation................................................................... 27
9.13. Additional Assurances; Right of Set-off......................................... 27
9.14. Entire Agreement................................................................ 28
9.15. Choice of Law................................................................... 28
9.16. Forum; Agent; Venue............................................................. 28
9.17. No Third Party Beneficiary...................................................... 28
9.18. Legal Tender of United States................................................... 28
9.19. Captions; Counterparts.......................................................... 28
9.20. Knowledge; Discretion........................................................... 28
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EXHIBITS:
A Form of Subordinated Debenture
B Form of Rate Election Notice
C Form of Opinion of Borrower's Counsel
D Form of Compliance Certificate
DISCLOSURE SCHEDULES:
4.1.2 Subsidiaries; Capital Stock of Borrower
4.1.3 Capital Stock of the Subsidiaries
4.7.2 Regulatory Enforcement Actions
4.7.3 Pending Litigation
4.7.5 ERISA
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SUBORDINATED DEBENTURE PURCHASE AGREEMENT
THIS SUBORDINATED DEBENTURE PURCHASE AGREEMENT (this "AGREEMENT") is dated
as of September 22, 2004 and is made by and between SOUTHWEST BANCORPORATION OF
TEXAS, INC., a Texas corporation ("BORROWER"), and WISCONSIN CAPITAL
CORPORATION, a Nevada corporation ("LENDER").
R E C I T A L S :
A. Borrower is a holding company that owns 100% of the issued and
outstanding capital stock of Southwest Holding Delaware, Inc., a Delaware
corporation ("SOUTHWEST HOLDING"), which owns 100% of the issued and outstanding
capital stock of Southwest Bank of Texas National Association, a national
banking association ("SUBSIDIARY BANK").
B. Borrower has requested that Lender provide it with a subordinated debt
credit facility (the "SUBORDINATED DEBT") in the principal amount of $75,000,000
(the "SUBORDINATED DEBT AMOUNT"). The Subordinated Debt may be referred to in
this Agreement as the "DEBT."
C. The proceeds from the Debt shall be used by Borrower to fund the
acquisition of ▇▇▇▇▇ Bancshares, Inc., a Texas corporation ("KBI"), in
accordance with that certain Agreement and Plan of Merger between Borrower, SWBT
Merger III, Inc., a Texas corporation, and KBI dated as of May 19, 2004 (the
"KBI MERGER AGREEMENT").
D. The Subordinated Debt is intended to qualify as Tier 2 capital under
applicable rules and regulations promulgated by the Board of Governors of the
Federal Reserve System (the "FRB").
E. Lender is willing to purchase from Borrower a subordinated debenture in
the amount of $75,000,000 in accordance with the terms, subject to the
conditions and in reliance on the recitals, representations, warranties,
covenants and agreements set forth herein and in the other Debt Documents (as
defined below).
THEREFORE, in consideration of the mutual covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
A G R E E M E N T:
1. DEFINITIONS.
1.1. DEFINED TERMS. The following capitalized terms generally used in this
Agreement and in the other Debt Documents shall have the meanings defined or
referenced below. Certain other capitalized terms used only in specific Sections
of this Agreement may be defined in such Sections.
"AFFILIATE(S)" shall mean, with respect to any Person, such Person's
immediate family members, partners, members or parent and subsidiary
corporations, and any other Person directly or indirectly controlling,
controlled by, or under common control with, said Person, and their respective
Affiliates, members, shareholders, directors, officers, employees, agents and
representatives.
"ASSIGNEE LENDER" shall have the meaning ascribed to such term in Section
9.2.
"BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of 1978, as amended
or recodified.
"BASE RATE" shall mean that rate of interest (expressed as a percent per
annum) equal to Lender's "base" or "prime" rate (which is not necessarily the
lowest or most favorable rate of interest charged by Lender on commercial loans
at any time) in effect from time to time, which means a base rate
of interest established by US Bank National Association from time to time that
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto. Any change in the rate of interest
hereunder due to a change in the base or prime rate shall become effective on
the date each change in the base or prime rate is announced by US Bank National
Association.
"BASE RATE TRANCHE" shall mean a Borrowing Tranche as to which the Base
Rate is applicable.
"BORROWER" shall have the meaning ascribed to such term in the preamble
hereto and shall include any successor to Southwest Bancorporation of Texas,
Inc. or such other Person that shall assume the obligations of the borrower
under the Debt Documents.
"BORROWER 2003 AUDITED FINANCIAL STATEMENTS" shall have the meaning
ascribed to such term in Section 4.4.
"BORROWER 2003 AUDITED FINANCIAL STATEMENTS DATE" shall have the meaning
ascribed to such term in Section 4.4.
"BORROWER FINANCIAL STATEMENTS" shall have the meaning ascribed to such
term in Section 4.4.
"BORROWER'S ACCOUNTANT" means PricewaterhouseCoopers LLP, or such other
nationally recognized firm of certified public accountants selected by Borrower
as shall from time to time audit Borrower.
"BORROWER'S LIABILITIES" means Borrower's obligations under this Agreement
and any other Debt Documents (other than the principal, interest and other
amounts payable under the Subordinated Debenture).
"BORROWING DATE" means the date any Borrowing Tranche is disbursed,
renewed or converted (from a LIBO Tranche to a Base Rate Tranche or from a Base
Rate Tranche to a LIBO Tranche).
"BORROWING TRANCHE" shall mean a disbursement of proceeds under the Debt
pursuant to this Agreement.
"BUSINESS DAY" shall mean (a) for all purposes other than as covered by
clause (b) hereof, a day of the week (but not a Saturday, Sunday or a legal
holiday under the laws of the State of Missouri or any other day on which
banking institutions located in Missouri are authorized or required by law or
other governmental action to close) on which the St. Louis, Missouri offices of
Lender are open to the public for carrying on substantially all of Lender's
business functions and (b) with respect to determinations in connection with,
and payments of principal and interest on any LIBO Rate Tranche, any day which
is a Business Day described in clause (a) and which is also a day for trading by
and between banks in U.S. dollar-denominated deposits in the London Interbank
Eurodollar Market. Unless specifically referenced in this Agreement as a
Business Day, all references to "days" shall be to calendar days.
"CLOSING" shall have the meaning ascribed to such term in Section 2.5.
"CLOSING DATE" means September 22, 2004.
"CODE" shall mean the Internal Revenue Code of 1986, as amended or
recodified.
"CODE PROVISIONS" shall have the meaning ascribed to such term in Section
8.1.1.12.
"DEBT" has the meaning ascribed to such term in the recitals hereto.
"DEBT DOCUMENTS" means this Agreement and those other documents and
instruments (including, without limitation, all agreements, instruments and
documents, including, without limitation,
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guaranties, mortgages, deeds of trust, pledges, powers of attorney, consents,
assignments, contracts, notices and all other written matter heretofore, now
and/or from time to time hereafter executed by and/or on behalf of Borrower in
connection with this Agreement and the Debt) entered into or delivered in
connection with or relating to the Debt, including any other documents listed on
the schedule of closing documents prepared in connection with the Closing. Debt
Documents shall also include any Interest Rate Protection Agreement between
Borrower and Lender.
"DEFAULT RATE" shall have the meaning ascribed to such term in Section
2.6.3.
"DISCLOSURE SCHEDULE" means, in aggregate, the disclosures contemplated
herein as included in the Disclosure Schedule, which has been delivered in
connection with the execution of this Agreement.
"EMPLOYEE BENEFIT PLAN" means an "employee benefit plan" within the
meaning of Section 3(3) of ERISA.
"EQUITY INTEREST" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person which is not a corporation
and any and all warrants, options or other rights to purchase any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended or recodified.
"ERISA AFFILIATE" means any person (as defined in Section 3(9) of ERISA)
which together with Borrower would be a member of the same "controlled group"
within the meaning of Sections 414(b), (m), (c) and (o) of the Code.
"EVENT OF DEFAULT" shall have the meaning ascribed to such term in Section
8.1.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended or
recodified.
"FDIC" means the Federal Deposit Insurance Corporation.
"FDI ACT" means the Federal Deposit Insurance Act, as amended or
recodified.
"FEDERAL RESERVE NOTICE" shall have the meaning ascribed to such term in
Section 8.6.
"FRB" shall have the meaning ascribed to such term in the recitals hereto
and shall include any other Governmental Agency that serves as the primary
federal regulator of Borrower from time to time while the Debt is outstanding.
"GAAP" means generally accepted accounting principles in effect from time
to time in the United States of America.
"GOVERNMENTAL AGENCY(IES)" means, individually or collectively, any
federal, state, county or local governmental department, commission, board,
regulatory authority or agency including, without limitation, the FRB, the OCC,
the OTS and the FDIC.
"HAZARDOUS MATERIALS" means oil, flammable explosives, asbestos, urea
formaldehyde insulation, polychlorinated biphenyls, radioactive materials,
hazardous wastes, toxic or contaminated substances or similar materials,
including, without limitation, any substances which are "hazardous substances,"
"hazardous wastes," "hazardous materials" or "toxic substances" under the
Hazardous Materials Laws and/or other applicable environmental laws, ordinances
or regulations.
"HAZARDOUS MATERIALS CLAIMS" shall have the meaning ascribed to such term
in Section 4.7.6.
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"HAZARDOUS MATERIALS LAWS" mean any laws, regulations, permits, licenses
or requirements pertaining to the protection, preservation, conservation or
regulation of the environment which relates to real property, including, without
limitation: the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.;
the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C.
Section 6901 et seq.; the Comprehensive Environment Response, Compensation and
Liability Act of 1980, as amended (including the Superfund Amendments and
Reauthorization Act of 1986), 42 U.S.C. Section 9601 et seq.; the Toxic
Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the
Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651, the
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section
11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C.
Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et
seq.; and all comparable state and local laws, laws of other jurisdictions or
orders and regulations.
"INDEBTEDNESS" means and includes: (a) all items arising from the
borrowing of money that, according to GAAP now in effect, would be included in
determining total liabilities as shown on the consolidated balance sheet of
Borrower or any Subsidiary; (b) all obligations secured by any lien in property
owned by Borrower whether or not such obligations shall have been assumed; (c)
all guaranties and similar contingent liabilities with respect to obligations of
others; and (d) all other obligations (including, without limitation, letters of
credit) evidencing obligations to others; provided, however, in the case of
Subsidiary Bank and any other depository institution Subsidiary, Indebtedness
shall not include deposits or other indebtedness incurred in the ordinary course
of business (including, without limitation, federal funds purchased, advances
from any Federal Home Loan Bank, secured deposits of municipalities, letters of
credit issued by Subsidiary Bank and any other depository institution Subsidiary
and repurchase arrangements) and in accordance with safe and sound banking
practices and applicable laws and regulations.
"INDENTURE" means that certain Indenture, dated as of October 7, 2003,
between Borrower and U.S. Bank National Association, as trustee, with respect to
the Junior Subordinated Debentures.
"INSTRUCTIONS" means disbursement instructions given by Borrower to Lender
specifying the manner in which proceeds of the Debt should be disbursed at
Closing.
"INTEREST RATE PROTECTION AGREEMENT" shall mean an interest rate swap,
cap, collar or other hedging or derivative agreement, to which Lender or any
Affiliate of Lender is the counterparty, intended to mitigate interest rate
risk, along with any other related agreement or instrument executed in
connection therewith.
"INITIAL DISBURSEMENT" shall have the meaning ascribed to such term in
Section 3.1.
"JUNIOR SUBORDINATED DEBENTURES" means the Floating Rate Junior
Subordinated Deferrable Interest Debenture, dated October 7, 2003, in the
principal amount of $51,547,000, issued pursuant to the Indenture, in the amount
outstanding from time to time.
"KBI" shall have the meaning ascribed to such term in the recitals hereto.
"KBI MERGER" shall have the meaning ascribed to such term in Section
4.3.3.
"KBI MERGER AGREEMENT" shall have the meaning ascribed to such term in the
recitals hereto.
"LEASES" shall mean all leases, licenses or other documents providing for
the use or occupancy of any portion of any Property, including all amendments,
extensions, renewals, supplements, modifications, sublets and assignments
thereof and all separate letters or separate agreements relating thereto.
"LENDER" shall have the meaning ascribed to such term in the preamble
hereto.
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"LIBO RATE" shall mean that rate of interest equal to (a) the quotient of
(i) the rate of interest, rounded upward, if necessary, to the nearest whole
multiple of .0625% (1/16 of 1%), quoted by Lender as the London Inter-Bank
Offered Rate for deposits in U.S. Dollars on the date, at approximately 11:00
a.m. London time, that is two Business Days prior to any applicable Borrowing
Date for purposes of calculating effective rates of interest for loans or
obligations making reference thereto for an amount approximately equal to a LIBO
Rate Tranche and for a period of time approximately equal to a LIBOR Period,
divided by (ii) 100% minus the Reserve Percentage.
"LIBO RATE TRANCHE" shall mean a Borrowing Tranche as to which the LIBO
Rate is applicable.
"LIBOR PERIOD" shall mean a period of 90 days, plus or minus one or two
days, with respect to a LIBO Rate Tranche; provided that no LIBOR Period shall
extend beyond the Maturity Date.
"MATURITY DATE" means September 22, 2014.
"OCC" means the Office of the Comptroller of the Currency or the successor
primary federal regulator of Subsidiary Bank.
"OTS" means the Office of Thrift Supervision.
"PERSON" means an individual, a corporation (whether or not for profit), a
partnership, a limited liability company, a joint venture, an association, a
trust, an unincorporated organization, a government or any department or agency
thereof (including a Governmental Agency) or any other entity or organization.
"PROPERTY" means any real property owned or leased by Borrower or any
Subsidiary.
"RATE ELECTION NOTICE" shall mean a properly completed notice in the form
attached as Exhibit B hereto or a verbal notice conveyed to Lender in accordance
with its disbursement procedures from time to time.
"RESERVE PERCENTAGE" shall mean the percentage announced within Lender as
the reserve percentage under Regulation D of the FRB for loans and obligations
making reference to a LIBO Rate for a LIBOR Period. The Reserve Percentage shall
be based on Regulation D or other regulations from time to time in effect
concerning reserves for Eurocurrency Liabilities as defined in Regulation D from
related institutions as though Lender were in a net borrowing position, as
promulgated by the FRB, or its successor.
"RICO RELATED LAW" shall mean the Racketeer Influenced and Corrupt
Organizations Act of 1970 or any other federal, state or local law for which
forfeiture of assets is a potential penalty.
"SEC" shall mean the Securities and Exchange Commission of the United
States of America.
"SOUTHWEST HOLDING" shall have the meaning ascribed to such term in the
recitals hereto.
"SUBORDINATED DEBT" shall have the meaning ascribed to such term in the
recitals hereto.
"SUBORDINATED DEBT AMOUNT" shall have the meaning ascribed to such term in
the recitals hereto.
"SUBORDINATED DEBENTURE" means a subordinated debenture in the form
attached as Exhibit A hereto in the principal amount of the Subordinated Debt
Amount, as amended, restated, supplemented or modified from time to time and
each debenture delivered in substitution or exchange for such subordinated
debenture.
"SUBSIDIARY" means Southwest Holding, Subsidiary Bank and any other
corporation or other
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entity of which any Equity Interest is directly or indirectly owned by Borrower.
"SUBSIDIARY BANK" shall have the meaning ascribed to such term in the
recitals hereto and shall include any successor to Southwest Bank of Texas, Inc.
or such other lead or principal depository institution of Borrower.
"SUBSIDIARY BANK SUBORDINATED INDEBTEDNESS" means any subordinated debt
issued by Subsidiary Bank from time to time that constitutes tier 2 regulatory
capital.
"SUBSIDIARY SHARES" shall have the meaning ascribed to such term in
Section 4.1.3.
"TIER 1 CAPITAL" shall have the definition provided in, and shall be
determined in accordance with, the rules and regulations of the FRB.
"TIER 2 CAPITAL" shall have the definition provided in, and shall be
determined in accordance with, the rules and regulations of the FRB.
"TRUST" means that certain Delaware statutory business trust known as
"SWBT STATUTORY TRUST I," which is maintained by Borrower in accordance with
that certain Amended and Restated Declaration of Trust, dated as of October 7,
2003, by and among U.S. Bank National Association, as institutional trustee,
Borrower, as sponsor, and the administrators identified therein.
"UCC" shall mean the Uniform Commercial Code as enacted in the State of
Missouri, as amended or recodified.
"UNAUDITED FINANCIAL STATEMENTS" shall have the meaning ascribed to such
term in Section 4.4.
1.2. CERTAIN UCC AND ACCOUNTING TERMS; INTERPRETATIONS. Except as
otherwise defined in this Agreement or the other Debt Documents, all words,
terms and/or phrases used herein and therein shall be defined by the applicable
definition therefore (if any) in the UCC. Notwithstanding the foregoing, any
accounting terms used in this Agreement which are not specifically defined
herein shall have the meaning customarily given to them in accordance with GAAP.
Where the character or amount of any asset or liability or item of income or
expense is required to be determined or any consolidation or other accounting
computation is required to be made for the purposes of this Agreement, it shall
be done in accordance with GAAP. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. The words
"hereof", "herein" and "hereunder" and words of like import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. The word "including" when used in this Agreement
without the phrase "without limitation," shall mean "including, without
limitation." All references to time of day herein are references to St. Louis,
Missouri time unless otherwise specifically provided. Any reference contained
herein to attorneys' fees and expenses shall be deemed to be reasonable fees and
expenses of Lender's outside counsel and of any other third-party experts or
consultants engaged by Lender's outside counsel on Lender's behalf. All
references to any Debt Document shall be deemed to be to such document as
amended, restated, supplemented or modified from time to time. With respect to
any reference in this Agreement to any defined term, (a) if such defined term
refers to a Person, then it shall also mean all heirs, legal representatives and
permitted successors and assigns of such Person, and (b) if such defined term
refers to a document, instrument or agreement, then it shall also include any
replacement, extension or other modification thereof.
1.3. EXHIBITS AND SCHEDULES INCORPORATED. All Exhibits and Schedules
attached hereto or referenced herein, are hereby incorporated into this
Agreement.
2. SUBORDINATED DEBT.
2.1. GENERAL MATTERS.
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2.1.1. CERTAIN TERMS. Lender agrees to extend the Subordinated Debt
to Borrower in accordance with the terms of, and subject to the conditions set
forth in, this Agreement, the Subordinated Debenture and the other Debt
Documents. An initial Borrowing Tranche in an amount equal to the entire
principal amount of the Subordinated Debt shall be borrowed on the Closing Date
and, thereafter, any such Borrowing Tranche may be converted or renewed from
time to time in accordance with the terms and subject to the conditions set
forth in this Agreement. Subject to Section 2.6 and any other conditions and
limitations set forth in this Agreement, any Borrowing Tranche under the
Subordinated Debt shall be treated as, at Borrower's election subject to and in
accordance with the terms in this Agreement: (a) a LIBO Rate Tranche and shall
bear interest per annum at a rate equal to 1.25% (125 basis points) plus the
LIBO Rate; or (b) a Base Rate Tranche and, except as provided in Section 2.7.2,
shall bear interest at a rate equal to the Base Rate minus 1.00% (100 basis
points). The unpaid principal balance plus all accrued but unpaid interest on
the Subordinated Debt shall be due and payable on the Maturity Date, or such
earlier date on which such amount shall become due and payable on account of
acceleration by Lender in accordance with the terms of the Subordinated
Debenture or this Agreement.
2.1.2. SUBORDINATION. The Subordinated Debenture shall be
subordinated in accordance with the subordination provisions set forth therein.
2.2. THE SUBORDINATED DEBENTURE. The Debt shall be evidenced by the
Subordinated Debenture.
2.3. MATURITY DATE. On the Maturity Date, all sums due and owing under
this Agreement and the other Debt Documents with respect to the Subordinated
Debenture shall be repaid in full. Borrower acknowledges and agrees that Lender
has not made any commitments, either express or implied, to extend the terms of
the Debt past its Maturity Date, unless Borrower and Lender hereafter
specifically otherwise agree in writing.
2.4. UNSECURED DEBT. The obligations of Borrower to Lender under the
Subordinated Debenture shall be unsecured.
2.5. THE CLOSING. The initial funding of the Debt (the "CLOSING") will
occur at the offices of Barack ▇▇▇▇▇▇▇▇▇▇, counsel to Lender, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ at 9:30 a.m. on the Closing Date, or at
such other place or time or on such other date as the parties hereto may agree,
by disbursing the proceeds of the Debt in accordance with any Instructions
received at least one Business Day prior to Closing.
2.6. INTEREST RATES. Borrower agrees that matters concerning the election,
payment, application, accrual and computation of interest and interest rates
shall be in accordance with Lender's practices set forth in this Agreement and
in the other Debt Documents.
2.6.1. INTEREST RATE ELECTION. The initial Borrowing Tranche shall
bear interest as a LIBOR Rate Tranche. For any subsequent Borrowing Tranche,
Borrower shall make a LIBO Rate or Base Rate election by delivering a Rate
Election Notice (a) not less than one Business Day prior to the Borrowing Date,
in the case of Base Rate Tranche, (b) not less than three Business Days prior to
the Borrowing Date, in the case of a LIBO Rate Tranche, and (c) in no event more
than five Business Days prior to a Borrowing Date, provided that no more than
one LIBO Rate Tranche for the Debt shall be outstanding at any one time. Each
Rate Election Notice shall specify the LIBOR Period to be applicable to any LIBO
Rate Tranche with respect to the Debt. The LIBO Rate shall remain fixed for all
disbursements made under a Debt that bear interest based on the LIBO Rate until
the next LIBOR Period commences. Any Rate Election Notice delivered by Borrower
shall be irrevocable and may not be modified in any way without the prior,
written approval of Lender. In addition to initially electing to designate a
Borrowing Tranche as a Base Rate Tranche or a LIBO Rate Tranche, Borrower may
further elect, by designation on a Rate Election Notice, (i) to convert a Base
Rate Tranche or any portion thereof to a LIBO Rate Tranche, (ii) to convert a
LIBO Rate Tranche or any portion thereof into a Base Rate Tranche, or (iii) to
continue any LIBO Rate Tranche or any portion thereof for an additional LIBOR
Period. In the event that Borrower fails to notify Lender that it desires to
continue any LIBO Rate Tranche or any
7
portion thereof by the last day of the applicable LIBOR Period, Borrower shall
be deemed to have elected to continue the LIBO Rate Tranche in question for an
additional LIBOR Period equal in length to the expiring LIBOR Period. The LIBOR
Period for the continuation of any LIBO Rate Tranche shall commence on the day
after the last day of the next preceding LIBOR Period. Notwithstanding anything
to the contrary contained herein and subject to the default interest provisions
contained herein, if an Event of Default occurs, all LIBO Rate Tranches will
convert to Base Rate Tranches upon the expiration of the LIBOR Periods therefor.
The conversion of a LIBO Rate Tranche to a Base Rate Tranche pursuant to a
description in a Rate Election Notice shall only occur on the last Business Day
of the LIBOR Period relating to such LIBO Rate Tranche. Lender is hereby
authorized to rely upon a Rate Election Notice delivered by any authorized
officer of Borrower, including the Chief Financial Officer, Controller and
Treasurer of Borrower from time to time, and such additional authorized agents
as any of the above-referenced officers of Borrower shall designate, in writing,
to Lender from time to time.
2.6.2. INTEREST PAYMENTS. Subject to Section 2.6.3 and except as
otherwise expressly provided in the Subordinated Debenture, interest accrued on
each Borrowing Tranche or any other outstanding amount of the Debt shall be
payable by Borrower in arrears on the last day of each December, March, June and
September, commencing December 31, 2004, and on the Maturity Date.
2.6.3. DEFAULT INTEREST. Notwithstanding the rates of interest and
the payment dates specified in this Section 2.6, effective immediately upon the
occurrence and during the continuance of any Event of Default, the principal
balance of the Debt then outstanding and, to the extent permitted by applicable
law, any interest payments not paid within 10 days after the same becomes due
shall bear interest payable upon demand at a rate which is 3% per annum in
excess of the rate of interest otherwise payable under this Agreement (the
"DEFAULT RATE"). Notwithstanding anything to the contrary set forth in this
Section 2.6.3 or elsewhere in this Agreement, the Default Rate of interest shall
only apply with respect to an Event of Default relating to the Subordinated Debt
if such Event of Default occurs pursuant to (a) Sections 8.1.1.12 or 8.1.1.13 or
(b) such Event of Default is one with respect to which Lender would be entitled
to declare the Subordinated Debenture immediately due and payable pursuant to
Section 8.6. In addition, all other amounts due Lender (whether directly or for
reimbursement) under this Agreement or any of the other Debt Documents, if not
paid when due or, in the event no time period is expressed, if not paid within
five days after written notice from Lender that the same has become due, shall
thereafter bear interest at the foregoing Default Rate. Finally, any amount due
on the Maturity Date which is not then paid shall also bear interest thereafter
at the Default Rate.
2.6.4. COMPUTATION OF INTEREST. Interest shall be computed on the
basis of the actual number of days elapsed in the period during which interest
accrues and a year of 360 days. In computing interest, the date of funding shall
be included and the date of payment shall be excluded; provided, however, that
if any funding is repaid on the same day on which it is made, one day's interest
shall be paid thereon. The parties hereto intend to conform strictly to
applicable usury laws as in effect from time to time during the terms of the
Debt. Accordingly, if the transaction contemplated hereby would be usurious
under applicable law (including the laws of the United States of America, or of
any other jurisdiction whose laws may be mandatorily applicable), then, in that
event, notwithstanding anything to the contrary in this Agreement or the
Subordinated Debenture, Borrower and Lender agree that the aggregate of all
consideration that constitutes interest under applicable law that is contracted
for, charged or received under or in connection with this Agreement shall under
no circumstances exceed the maximum amount of interest allowed by applicable
law, and any excess shall be credited to Borrower by Lender (or if such
consideration shall have been paid in full, such excess refunded to Borrower by
Lender).
2.7. CERTAIN PROVISIONS REGARDING LIBO RATE TRANCHES.
2.7.1. CHANGES; LEGAL RESTRICTIONS. In the event the adoption of or
any change in any law, treaty, rule, regulation, guideline or the interpretation
or application thereof by a governmental authority (whether or not having the
force of law and whether or not the failure to comply therewith would be
unlawful) either (a) subjects Lender to any tax (other than income taxes or
franchise taxes not specifically based on Debt transactions), duty or other
charge of any kind with respect to any
8
LIBO Rate Tranche or changes the basis of taxation of payments to Lender of
principal, fees, interest or any other amount payable in connection with a LIBO
Rate Tranche, or (b) imposes on Lender any other condition materially more
burdensome in nature, extent or consequence than those in existence as of the
date of this Agreement, and the result of any of the foregoing is to increase
the cost to Lender of making, renewing or maintaining any LIBO Rate Tranches or
to reduce any amount receivable thereunder; then, in any such case, Borrower
shall promptly pay to Lender, as applicable, upon demand, such amount or amounts
as may be necessary to compensate Lender for any such additional cost incurred
or reduced amounts received.
2.7.2. LIBO RATE LENDING UNLAWFUL. If Lender shall determine (which
determination shall, upon notice thereof to Borrower, be conclusive and binding
in the absence of readily demonstrable error) that the adoption of or any change
in any law, treaty, rule, regulation, guideline or in the interpretation or
application thereof by any governmental authority makes it unlawful for Lender
to make or maintain any LIBO Rate Tranche, (a) the obligation of Lender to make
or continue any LIBO Rate Tranche shall, upon such determination, forthwith be
suspended until Lender shall notify Borrower that the circumstances causing such
suspension no longer exist, and (b) if required by such law, interpretation or
application, all LIBO Rate Tranches shall automatically convert into Base Rate
Tranches and shall bear interest from time to time at a rate equal to the Base
Rate plus or minus such number of basis points as shall result in a rate of
interest equivalent to the rate of interest that would otherwise apply to a LIBO
Rate Tranche from time to time.
2.7.3. UNASCERTAINABLE INTEREST RATE. If Lender shall have
determined in good faith that adequate means do not exist for ascertaining the
interest rate applicable hereunder to LIBO Rate Tranches, then, upon notice from
Lender to Borrower, the LIBO Rate that was last ascertainable shall be deemed
the LIBO Rate for up to 30 days from the date of Lender's notice. If, after such
30 day period, the LIBO Rate remains unascertainable, the obligations of Lender
to make or continue LIBO Rate Tranches shall forthwith be suspended, and
thereafter the Debt shall continue at the Base Rate until Lender shall notify
Borrower that the circumstances causing such suspension no longer exist. Lender
will give such notice when it determines, in good faith, that such circumstances
no longer exist; provided, however, that Lender shall not have any liability
with respect to any delay in giving such notice.
2.7.4. FUNDING LOSSES. In the event Lender shall incur any loss or
expense (including, without limitation, any loss or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by Lender
to make or maintain any LIBO Rate Tranche) as a result of any continuance,
conversion, repayment or prepayment of the principal amount of, or failure to
make or termination of, any LIBO Rate Tranche on a date other than the scheduled
last day of the LIBOR Period applicable thereto, then, upon the written notice
of such from Lender to Borrower, Borrower shall reimburse such Lender for such
loss or expense within three Business Days after receipt of such notice. Such
written notice (which shall include calculations in reasonable detail) shall be
conclusive and binding in the absence of readily demonstrable error.
2.7.5. ADDITIONAL INTEREST ON LIBO RATE TRANCHES. So long as and to
the extent Lender shall be required under regulations of the FRB to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (as defined in the definition of Reserve Percentage),
and Lender's performance under this Agreement shall have given rise to
additional reserve requirements for Lender thereunder, Borrower shall pay to
Lender additional interest on the unpaid principal amount of each LIBO Rate
Tranche. Such additional interest shall accrue from the later of the date such
reserve requirement commences and the date of the first disbursement under such
LIBO Rate Tranche until the earlier of the date such reserve requirement ends
and the date the principal amount of such LIBO Rate Tranche is paid in full, at
an interest rate per annum equal at all times to the remainder obtained by
subtracting (a) the LIBO Rate for the LIBOR Period for such LIBO Rate Tranche
from (b) the rate obtained by dividing the LIBO Rate by a percentage equal to
100% minus the Reserve Percentage as in effect from time to time during such
LIBOR Period. Lender shall, as soon as practicable but not later than the last
day of the LIBOR Period, provide notice to Borrower of any such additional
interest arising in connection with such LIBO Rate Tranche and the certification
of Lender that the additional
9
amount is due and that the additional reserve requirement is applicable to such
LIBO Rate Tranche. Such additional interest shall be payable directly to Lender
on the dates specified herein for payment of interest.
2.7.6. NOTICE OF CHANGES OR INCREASED COSTS RELATING TO LIBO RATE
TRANCHES. Lender agrees that, as promptly as reasonably practicable after it
becomes aware of the occurrence of an event or the existence of a condition
which would cause it to be affected by any of the events or conditions described
in this Section 2.7, it will notify Borrower of such event and the possible
effects thereof, provided that the failure to provide such notice shall not
affect Lender's rights to reimbursement provided for herein.
2.8. PAYMENTS. Borrower agrees that matters concerning prepayments,
payments and application of payments shall be in accordance with Lender's
practices set forth in this Agreement and in the other Debt Documents.
2.8.1. PREPAYMENT. Subject to Section 2.7.4 hereof (a) if the Debt
no longer constitutes Tier 2 Capital of the Borrower or (b) at any time after
September 22, 2009, Borrower may, upon at least one Business Day's notice to
Lender, prepay, without penalty, all or a portion of the principal amount
outstanding under the Subordinated Debt in a minimum aggregate amount of $75,000
or any larger integral multiple of $75,000 by paying the principal amount to be
prepaid, together with unpaid accrued interest thereon to the date of
prepayment.
2.8.2. MANNER AND TIME OF PAYMENT. All payments of principal,
interest and fees hereunder payable to Lender shall be made, without condition
or reservation of right and free of set-off or counterclaim, in U.S. dollars and
by wire transfer (pursuant to Lender's written wire transfer instructions) of
immediately available funds delivered to Lender not later than 11:00 a.m.
(Central time) on the date due. Funds received by Lender after that time and
date shall be deemed to have been paid on the next succeeding Business Day.
2.8.3. PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be
made by Borrower hereunder shall be stated to be due on a day which is not a
Business Day, payments shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder.
2.8.4. APPLICATION OF PAYMENTS. All payments received by Lender from
or on behalf of Borrower shall first be applied to amounts due to Lender to
reimburse Lender's costs and expenses, including those pursuant to Section 5.6
or Section 8.5 and, second to accrued interest under the Subordinated Debenture,
and third to principal amounts outstanding under the Subordinated Debenture;
provided, however, subject to Section 8.6 of this Agreement, that after the date
on which the final payment of principal with respect to the Debt is due or
following and during any Event of Default, all payments received on account of
Borrower's Liabilities shall be applied in whatever order, combination and
amounts as Lender, in its sole and absolute discretion, decides, to principal
and accrued interest under the Subordinated Debenture and to all costs, expenses
and other indebtedness owing to Lender in connection with or relating to the
obligations of Borrower under this Agreement. No amount paid or prepaid under
the Subordinated Debenture may be reborrowed.
2.9. CAPITAL ADEQUACY. If Lender shall reasonably determine that the
application or adoption of any law, rule, regulation, directive, interpretation,
treaty or guideline regarding capital adequacy, or any change therein or in the
interpretation or administration thereof, whether or not having the force of law
(including, without limitation, application of changes to Regulation H and
Regulation Y of the FRB issued by the FRB on January 19, 1989 and regulations of
the Comptroller of the Currency, Department of Treasury, 12 CFR Part 3, Appendix
A, issued by the Comptroller of the Currency on January 27, 1989) increases the
capital required or expected to be maintained by Lender or any person or entity
controlling Lender, and such increase is based upon the existence of Lender's
obligations hereunder and under other commitments of this type, then, within 10
days after demand from Lender, Borrower shall pay to Lender, from time to time,
such amount or amounts as will compensate Lender or such controlling person
10
or entity, as the case may be, for such increased capital requirement. The
determination of any amount to be paid by Borrower under this Section 2.9 shall
take into consideration the policies of Lender or of any Person controlling
Lender with respect to capital adequacy and shall be based upon any reasonable
averaging, attribution and allocation methods. A certificate of Lender setting
forth the amount or amounts as shall be necessary to compensate Lender as
specified in this Section 2.9 shall be delivered to Borrower.
3. DISBURSEMENTS.
3.1. INITIAL DISBURSEMENT. At such time as all of the terms and conditions
set forth in Section 3.2 have been satisfied by Borrower and Borrower has
executed and delivered to Lender each of the Debt Documents and any other
related documents in form and substance satisfactory to Lender, in its sole and
absolute discretion, Lender shall disburse to Borrower an amount equal to
$75,000,000 (the "INITIAL DISBURSEMENT") under the Subordinated Debenture.
3.2. CONDITIONS PRECEDENT TO INITIAL DISBURSEMENT. In conjunction with and
as additional (but independent) supporting evidence for certain of the
covenants, representations and warranties made by Borrower herein, prior to and
as a condition of the Initial Disbursement, Borrower shall deliver or cause to
be delivered to Lender each of the following, each of which shall be in form and
substance satisfactory to Lender, in its sole and absolute discretion:
3.2.1. OPINIONS. An opinion of counsel of Borrower in substantially
the form attached as Exhibit C hereto and otherwise satisfactory to Lender,
dated on or about the date of the Initial Disbursement.
3.2.2. DEBT DOCUMENTS. The Debt Documents, including, without
limitation, the Subordinated Debenture.
3.2.3. AUTHORITY DOCUMENTS. Copies certified by the appropriate
secretary of state or Governmental Agency of (a) the certificate of
incorporation of Borrower and Southwest Holding and (b) the charter of
Subsidiary Bank. Good standing certificates for (i) Borrower and Southwest
Holding issued by the Secretary of State of the state in which it is organized
and (ii) Subsidiary Bank issued by the OCC. Copies certified by the Secretary or
an Assistant Secretary of Borrower of the Bylaws of Borrower, Southwest Holding
and Subsidiary Bank. Copies certified by the Secretary or an Assistant Secretary
of Borrower of resolutions of the board of directors of Borrower authorizing the
execution, delivery and performance of this Agreement, the Subordinated
Debenture and the other Debt Documents. An incumbency certificate of the
Secretary or an Assistant Secretary of Borrower certifying the names of the
officer or officers of Borrower authorized to sign this Agreement, the
Subordinated Debenture and the other documents provided for in this Agreement,
together with a sample of the true signature of each such officer (Lender may
conclusively rely on such certificate until formally advised by a like
certificate of any changes therein).
3.2.4. REGULATORY CONSENTS. Copies certified by the Secretary or an
Assistant Secretary of Borrower of all documents evidencing all necessary
consents, approvals and determinations of any Governmental Agency with respect
to the transactions contemplated in (a) the Debt Documents and any other
transactions between Lender and Borrower or Subsidiary Bank and (b) the
transactions contemplated in the KBI Merger Agreement.
3.2.5. INSTRUCTIONS. The Instructions.
3.2.6. CERTAIN COSTS OF LENDER. Payment of those costs and expenses
incurred by Lender to date in connection with the transactions contemplated
herein, such as Lender's attorneys' fees and expenses, that Borrower is
obligated to pay pursuant to Section 5.6.
3.3. ADDITIONAL CONDITIONS TO INITIAL DISBURSEMENT. Notwithstanding
anything to the
11
contrary contained herein, the continued performance, observance and compliance
by Borrower of and with all of the covenants, conditions and agreements of
Borrower contained herein (whether or not non-performance constitutes an Event
of Default) and in the other Debt Documents shall be further conditions
precedent to any disbursements of the proceeds under the Debt. In addition,
Lender shall not be required to disburse proceeds under the Debt at any time
that any of the following are true:
3.3.1. DEFAULT. There exists an Event of Default.
3.3.2. LEGISLATION OR PROCEEDINGS. Any legislation has been passed
or any suit or other proceeding has been instituted the effect of which is to
prohibit, enjoin (or to declare unlawful or improper) or otherwise adversely
affect, in Lender's sole and absolute judgment, Borrower's performance of its
obligations hereunder, or any litigation or governmental proceeding has been
instituted or threatened against Borrower or any Subsidiary or any of their
officers or shareholders which, in the sole discretion of Lender, may adversely
affect the financial condition or operations of Borrower or any Subsidiary.
3.3.3. MATERIAL ADVERSE CHANGE. There has occurred, in Lender's sole
and complete discretion, a material adverse change in the financial condition or
affairs of Borrower, Southwest Holding or Subsidiary Bank since the date of the
Borrower 2003 Audited Financial Statements, after giving effect to all financial
information with respect to any period ending after December 31, 2003 that
Borrower has made publicly available through a filing with the SEC.
3.3.4. APPROVALS. All necessary or appropriate actions and
proceedings have not been taken in connection with, or relating to, the
transactions contemplated hereby and all documents incident thereto have not
been completed and tendered for delivery, in substance and form satisfactory to
Lender, including, without limitation, if appropriate in the opinion of Lender,
Lender's failure to have received evidence of all necessary approvals from
Governmental Agencies.
4. GENERAL REPRESENTATIONS AND WARRANTIES. Borrower hereby covenants, represents
and warrants to Lender as follows:
4.1. ORGANIZATION AND AUTHORITY.
4.1.1. LEGAL MATTERS. Borrower (a) is a corporation duly organized
validly existing and in good standing under the laws of the State of Texas, (b)
is duly qualified as a foreign corporation and in good standing in all states in
which it is doing business except where the failure to so qualify would not have
a material adverse effect on the financial condition, business, operations or
prospects of Borrower and (c) has all requisite power and authority, corporate
or otherwise, to own, operate and lease its properties and to carry on its
business as now being conducted. Each Subsidiary is duly organized, validly
existing and chartered under the laws of the jurisdiction of its organization,
and has all requisite power and authority, corporate or otherwise, to own,
operate and lease its properties and to carry on its business as now being
conducted. The deposit accounts of Subsidiary Bank are insured by the FDIC.
Borrower and the Subsidiaries have made payment of all franchise and similar
taxes in all of the respective jurisdictions in which they are incorporated,
chartered or qualified, except for any such taxes (i) where the failure to pay
such taxes will not have a material adverse effect on the financial condition,
business or operations of Borrower or any Subsidiary, (ii) the validity of which
is being contested in good faith and (iii) for which proper reserves have been
set aside on the books of Borrower or any applicable Subsidiary, as the case may
be.
4.1.2. CAPITAL STOCK OF BORROWER. Section 4.1.2 of the Disclosure
Schedule correctly sets forth (a) the state or states in which Borrower conducts
its business, (b) a list of all Subsidiaries of Borrower, all of which are
directly or indirectly wholly owned by Borrower, and (c) a list of each class of
stock of Borrower and the number of authorized and issued and outstanding shares
of each class of stock of Borrower, and, except as otherwise stated in Section
4.1.2 of the Disclosure Schedule, there is no plan, agreement or understanding
providing for, or contemplating, the issuance of any additional shares of
capital stock of Borrower. All of the outstanding capital stock of Borrower has
been
12
duly authorized, legally and validly issued, fully paid and nonassessable.
Except (i) for common stock of Borrower to be issued in connection with the KBI
Merger, (ii) for capital stock of Borrower that may be issued in connection with
executive compensation plans, employee and director stock option plans, dividend
reinvestment plans, optional cash purchase plans and employee stock purchase
programs adopted by Borrower or Subsidiary Bank in the ordinary course of
business consistent with applicable laws and regulations, and (iii) as otherwise
stated in Section 4.1.2 of the Disclosure Schedule, there are no outstanding
options, rights, warrants or other agreements or instruments obligating Borrower
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of Borrower or obligating Borrower to grant, extend
or enter into any such agreement or commitment.
4.1.3. CAPITAL STOCK OF THE SUBSIDIARIES. Section 4.1.3 of the
Disclosure Schedule correctly sets forth (a) the state or states in which
Subsidiary Bank conducts its business. Borrower owns 100% of the outstanding
capital stock of Southwest Holding, and Southwest Holding owns 100% of the
outstanding capital stock of Subsidiary Bank. There is no plan, agreement or
understanding providing for, or contemplating, the issuance of any additional
shares of capital stock of Southwest Holding or Subsidiary Bank. All of the
outstanding shares of capital stock of Southwest Holding and Subsidiary Bank
(the "SUBSIDIARY SHARES") have been duly authorized, legally and validly issued,
fully paid and nonassessable, and the Subsidiary Shares issued by Subsidiary
Bank and Southwest Holding are owned by Southwest Holding and Borrower,
respectively, free and clear of all pledges, liens, security interests, charges
or encumbrances, and, following the Closing Date, Southwest Holding and
Borrower, respectively, will own such Subsidiary Shares free and clear of all
pledges, liens, security interests, charges or encumbrances. None of the
Subsidiary Shares have been issued in violation of any shareholder's preemptive
rights. Except as otherwise stated in Section 4.1.3 of the Disclosure Schedule,
there are no outstanding options, rights, warrants or other agreements or
instruments obligating Borrower to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock of Subsidiary
or obligating Borrower or Subsidiary to grant, extend or enter into any such
agreement or commitment.
4.2. NO IMPEDIMENT TO TRANSACTIONS.
4.2.1. TRANSACTION IS LEGAL AND AUTHORIZED. The borrowing of the
principal amount of the Debt, the execution of this Agreement and the other Debt
Documents and compliance by Borrower with all of the provisions of this
Agreement and of the other Debt Documents are within the corporate and other
powers of Borrower. This Agreement and the other Debt Documents have been duly
authorized, executed and delivered, and are the legal, valid and binding
obligations of Borrower or other signatory thereof (other than Lender), as
appropriate, enforceable in accordance with their terms.
4.2.2. NO DEFAULTS OR RESTRICTIONS. Neither the execution and
delivery of the Debt Documents nor compliance with their terms and conditions
will conflict with or result in a material breach of, or constitute a material
default under, any of the terms, obligations, covenants, conditions or
provisions of any corporate restriction or of any indenture, mortgage, deed of
trust, pledge, bank loan or credit agreement, corporate charter, bylaw or any
other agreement or instrument to which Borrower or any Subsidiary is now a party
or by which any of them or any of their properties may be bound or affected, or
any judgment, order, writ, injunction, decree or demand of any court,
arbitrator, grand jury, or Governmental Agency, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
property or asset of Borrower or any Subsidiary under the terms or provisions of
any of the foregoing. None of Borrower or any Subsidiary is in material default
in the performance, observance or fulfillment of any of the terms, obligations,
covenants, conditions or provisions contained in any indenture or other
agreement creating, evidencing or securing indebtedness of any kind or pursuant
to which any such indebtedness is issued, or other agreement or instrument to
which Borrower or any Subsidiary is a party or by which Borrower or any
Subsidiary or their properties may be bound or affected.
4.2.3. GOVERNMENTAL CONSENT. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained by Borrower
and no registrations or declarations are required to be filed by Borrower in
connection with, or contemplation of, the execution and delivery of,
13
and performance under, this Agreement and the other Debt Documents.
4.3. PURPOSES OF DEBT; KBI MERGER AGREEMENT.
4.3.1. USE OF PROCEEDS. Borrower shall use the proceeds of the Debt
to fund its acquisition of KBI, with any remaining proceeds to be used for
general corporate purposes including to support the growth of Subsidiary Bank.
The Debt is an exempt transaction under the Truth-in-Lending Act, as amended or
recodified. Borrower does not own any "margin security" as such term is defined
in Regulation G of the FRB. Borrower will not use any part of the proceeds of
the Debt (a) directly or indirectly to purchase or carry any margin security or
reduce or retire any indebtedness originally incurred to purchase any such
margin security within the meaning of Regulation U of the FRB, or (b) so as to
involve Borrower or Lender in a violation of Regulation U of the FRB. Borrower
agrees to execute, or cause to be executed, all instruments necessary to comply
with all of the requirements of Regulation U of the FRB.
4.3.2. USURY. The proceeds shall be used for business purposes and
none of the amounts to be received by Lender as interest under the Subordinated
Debenture is usurious or illegal under applicable law.
4.3.3. KBI MERGER AGREEMENT MATTERS. The KBI Merger Agreement
remains in full force and effect and is identical to the agreement included as
Annex A-1 to Amendment No. 1 to Form S-4 filed by Borrower with the SEC on
August 24, 2004. Neither Borrower nor SWBT Merger III have breached, and to the
best of Borrower's knowledge KBI has not breached, its obligations under the KBI
Merger Agreement. All approvals and consents from Governmental Agencies required
to be obtained in order for the transactions that are contemplated by the KBI
Merger Agreement (collectively, the "KBI MERGER") to be consummated have been
obtained. To the best of Borrower's knowledge, all conditions to the KBI Merger
have been satisfied, and the KBI Merger is scheduled to be consummated on or
before October 8, 2004.
4.4. FINANCIAL CONDITION.
4.4.1. BORROWER FINANCIAL STATEMENTS. Borrower has delivered to
Lender copies of the consolidated financial statements of Borrower as of and for
the year ending December 31, 2003 (the "BORROWER 2003 AUDITED FINANCIAL
STATEMENTS DATE"), audited by Borrower's Accountant (the "BORROWER 2003 AUDITED
FINANCIAL STATEMENTS"). The Borrower 2003 Audited Financial Statements are true
and correct, are prepared in accordance with the respective books of account and
records of Borrower and its Subsidiaries and have been prepared in accordance
with GAAP applied on a basis consistent with prior periods, and fairly and
accurately present in all material respects the financial condition of Borrower
and its Subsidiaries and their assets and liabilities and the results of their
operations as of such date. Since the Borrower 2003 Audited Financial Statements
Date, there has been no material and adverse change in the financial condition,
business, properties or operations of Borrower, Southwest Holding or Subsidiary
Bank. In addition, Borrower has delivered to Lender copies of call reports filed
by Subsidiary Bank for the period ending June 30, 2004 and copies of regulatory
filings (including Form FRY-9C filings) (such call reports and regulatory
filings, "UNAUDITED FINANCIAL STATEMENTS" and together with the Borrower 2003
Audited Financial Statements, the "BORROWER FINANCIAL STATEMENTS"). The
Unaudited Financial Statements are true and correct, are prepared in accordance
with the respective books of account and records of Borrower and its
Subsidiaries and have been prepared in accordance with applicable banking
regulations, rules and guidelines on a basis consistent with prior periods, and
fairly and accurately present in all material respects the financial condition
of Borrower and Subsidiary Bank and their respective assets and liabilities and
the results of their respective operations as of such date. The Borrower 2003
Audited Financial Statements and the Unaudited Financial Statements contain and
reflect provisions for taxes, reserves and other liabilities of Borrower in
accordance with GAAP and applicable banking regulations, rules and guidelines,
respectively. None of Borrower, Southwest Holding or Subsidiary Bank has any
material debt, liability or obligation of any nature (whether accrued,
contingent, absolute or otherwise) which is not provided for or disclosed in the
Borrower Financial Statements.
14
4.4.2. LOANS. Each loan having an outstanding balance of more than
$500,000 and reflected as an asset of Subsidiary Bank in the Borrower Financial
Statements is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms. To the best of Borrower's
knowledge, no obligor named therein is seeking to avoid the enforceability of
the terms of any loan, and no loan having an unpaid balance (principal and
accrued interest) in excess of $500,000 is subject to any defense, offset or
counterclaim.
4.4.3. ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses
shown in the Borrower Financial Statements is adequate to cover losses in the
loan portfolio as of the Borrower 2003 Audited Financial Statements Date.
4.4.4. SOLVENCY. After giving effect to the consummation of the
transactions contemplated by this Agreement, Borrower and the Subsidiaries have
capital sufficient to carry on their respective business and transactions and
all businesses and transactions in which they are about to engage and each is
solvent and able to pay its debts as they mature. No transfer of property is
being made and no indebtedness is being incurred in connection with the
transactions contemplated by this Agreement with the intent to hinder, delay or
defraud either present or future creditors of Borrower or any Subsidiary.
4.4.5. SUBORDINATION. The Junior Subordinated Debentures are
expressly subordinate and junior in all respects (including, without limitation,
with respect to the right of payment) to the Debt to the extent provided in
Article XV of the Indenture. The Debt constitutes "Senior Indebtedness" as
defined in the Indenture.
4.5. TITLE TO PROPERTIES.
4.5.1. OWNED PROPERTY. Except for real property and other assets
acquired and/or being acquired from debtors in full or partial satisfaction of
obligations owed to Subsidiary Bank and property or other assets leased by
Borrower, Southwest Holding or Subsidiary Bank, Borrower and the Subsidiaries
have, respectively, good and marketable fee title to all the Properties, and
good and marketable title to all other property and assets reflected in the
Borrower Financial Statements, excluding property and assets sold or otherwise
disposed of for their fair market value subsequent to the date of such Borrower
Financial Statements.
4.5.2. LEASED PROPERTY. For assets or property leased by Borrower or
any Subsidiary, Borrower and each such Subsidiary enjoy peaceful and undisturbed
possession under all of the Leases under which they are operating, all of which
permit the customary operations of Borrower and any Subsidiary, as applicable.
None of such Leases is in material default and no event has occurred which with
the passage of time or the giving of notice, or both, would constitute a
material default under any thereof.
4.6. NO MATERIAL ADVERSE CHANGE. Since the Borrower 2003 Audited Financial
Statements Date, neither the business, operations, properties nor assets of
Borrower or any Subsidiary have been materially and adversely affected in any
way, as the result of any act or event, including, without limitation, fire,
explosion, accident, act of God, strike, lockout, flood, drought, storm,
earthquake, combination of workmen or other labor disturbance, riot, activity of
armed forces or of the public enemy, embargo, or nationalization, condemnation,
requisition or taking of property, or cancellation or modification of contracts,
by any domestic or foreign government or any instrumentality or agency thereof.
Since the Borrower 2003 Audited Financial Statements Date, after giving effect
to all financial information with respect to any period ending after December
31, 2003 that Borrower has made publicly available through a filing with the
SEC, there have been no material changes in the assets, liabilities, or
condition, financial or otherwise, of Borrower or any Subsidiary other than
changes arising from transactions in the ordinary course of business, and none
of such changes has been materially adverse, whether in the ordinary course of
business or otherwise.
4.7. COMPLIANCE WITH LAW. Borrower and the Subsidiaries have complied with
all applicable
15
statutes, rules, regulations, orders and restrictions of any domestic or foreign
government, or any instrumentality or agency thereof, having jurisdiction over
the conduct of their respective businesses or the ownership of their respective
properties, except where any such failure to comply would not materially and
adversely affect the financial condition, business or operations of Borrower or
any Subsidiary.
4.7.1. TAXES. Borrower and each Subsidiary have filed all United
States income tax returns and all state and municipal tax returns which are
required to be filed, and have paid, or made adequate provision for the payment
of, all material taxes which have become due pursuant to said returns or
pursuant to any assessment received by Borrower or any Subsidiary, except such
taxes, if any, as are being contested in good faith and as to which adequate
reserves have been provided. Borrower is unaware of any audit, assessment or
other proposed action or inquiry of the Internal Revenue Service with respect to
the United States income tax liability of Borrower or any Subsidiary. To the
best of Borrower's knowledge, Borrower and each Subsidiary have withheld amounts
from their employees, shareholders or holders of public deposit accounts in full
and complete compliance with the tax withholding provisions of applicable
federal, state and local laws and each has filed all federal, state and local
returns and reports for all years for which any such return or report would be
due with respect to employee income tax withholding, social security,
unemployment taxes, income and other taxes and all payments or deposits with
respect to such taxes have been made within the time period required by law.
4.7.2. REGULATORY ENFORCEMENT ACTIONS. Except as set forth in
Section 4.7.2 of the Disclosure Schedule, none of Borrower, any Subsidiary or
any of their respective officers or directors is now operating under any
restrictions, agreements, memoranda, or commitments (other than restrictions of
general application) imposed by any Governmental Agency, nor are any such
restrictions threatened or agreements, memoranda or commitments being sought by
any Governmental Agency.
4.7.3. PENDING LITIGATION. Except as otherwise disclosed in Section
4.7.3 of the Disclosure Schedule, there are no actions, suits, proceedings or
written agreements pending, or, to the best of Borrower's knowledge, threatened
or proposed, against Borrower or any Subsidiary at law or in equity or before or
by any federal, state, municipal, or other governmental department, commission,
board, or other administrative agency, domestic or foreign, that, either
separately or in the aggregate, will materially and adversely affect the
financial condition, business, or operations of any of Borrower or any
Subsidiary; and none of Borrower or any Subsidiary is in default with respect to
any order, writ, injunction, or decree of, or any written agreement with, any
court, commission, board or agency, domestic or foreign, that, either separately
or in the aggregate, will materially and adversely affect the financial
condition, business, or operations of Borrower or any Subsidiary.
4.7.4. RICO. There are no suits, actions or proceedings pending or
threatened against Borrower or any Subsidiary, or any of the principals thereof,
under a RICO Related Law.
4.7.5. ERISA. All Employee Benefit Plans (as defined in Section 3(3)
of ERISA) established or maintained by Borrower or any ERISA Affiliate or to
which Borrower or any ERISA Affiliate contributes are in material compliance
with applicable requirements of ERISA, and are in material compliance with
applicable requirements (including qualification and non-discrimination
requirements) of the Code for obtaining the tax benefits the Code thereupon
permits with respect to such plans. Each Employee Benefit Plan which is a group
health plan (within the meaning of Section 5000(b)(1) of the Code) complies with
and has been maintained and operated in material compliance with each of the
requirements of Section 4980B of the Code. Neither Borrower nor any ERISA
Affiliate has failed to make any contributions or to pay any amounts with
respect to any Employee Benefit Plan or ERISA or any other applicable law. No
"reportable event" or "prohibited transaction," as defined in ERISA, has
occurred and is continuing as to any Employee Benefit Plan and no excise taxes
have been incurred or security is required with respect to any Employee Benefit
Plan. Except as set forth in Section 4.7.5 of the Disclosure Schedule, no
Employee Benefit Plan has, or as of the Closing Date will have, any amount of
unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA) for
which Borrower or any ERISA Affiliate could be liable to any Person under Title
IV of ERISA if any such plan were terminated. All Employee Benefit Plans are
funded in accordance with Section 412 of the Code (if applicable). There would
be no obligations under Title IV of ERISA relating to any Employee Benefit Plan
that is a multiemployer plan if
16
any such plan were terminated or if Borrower or any ERISA Affiliate withdrew
from any such plan. Except as required by Section 4980B of the Code or
applicable state insurance laws, neither Borrower nor any ERISA Affiliate has
promised any employee medical coverage after termination of employment, or
promised medical coverage to any former employee or other individual not
employed by Borrower or any ERISA Affiliate, and neither Borrower nor any ERISA
Affiliate maintains or contributes to any plan or arrangement providing medical
benefits to employees after their termination of employment or any other
individual not employed by Borrower or any ERISA Affiliate.
4.7.6. ENVIRONMENTAL. No Property is or, to the best of Borrower's
knowledge, has been a site for the use, generation, manufacture, storage,
treatment, release, threatened release, discharge, disposal, transportation or
presence of any Hazardous Materials and neither Borrower nor any Subsidiary has
engaged in such activities. Each Property, and Borrower and each Subsidiary, are
in compliance with all Hazardous Materials Laws. There are no claims or actions
("HAZARDOUS MATERIALS CLAIMS") pending or, to the best of Borrower's knowledge,
threatened, nor have there been any such claims or actions in the past, against
Borrower or any Subsidiary or any Property by any Governmental Agency or by any
other Person relating to any Hazardous Materials or pursuant to any Hazardous
Materials Law.
4.8. BORROWER STATUS.
4.8.1. RESTRICTIONS ON BORROWER. None of Borrower or any Subsidiary
is a party, nor is bound by, any contract or agreement or instrument, or subject
to any charter or other corporate restriction materially and adversely affecting
its financial condition, business or operations.
4.8.2. NON-FOREIGN STATUS. Borrower is not a nonresident alien for
purposes of U.S. income taxation and is not a foreign corporation, foreign
partnership, foreign trust or foreign estate (as said terms are defined in the
Internal Revenue Code and Income Tax Regulations).
4.8.3. INVESTMENT COMPANY ACT. Borrower is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
4.8.4. NO BURDENSOME AGREEMENTS. None of Borrower or any Subsidiary
is a party to any agreement, instrument or undertaking or subject to any other
restriction (a) which presently has a material adverse affect upon the property,
financial condition or business operations of Borrower or any Subsidiary, or (b)
under or pursuant to which Borrower or any Subsidiary is or will be required to
place (or under which any other Person may place) a lien upon any of its
properties securing indebtedness either upon demand or upon the happening of a
condition, with or without such demand.
4.9. NO MISSTATEMENT. No information, exhibit, report, schedule or
document furnished by the Borrower to Lender in connection with the negotiation,
execution or performance of this Agreement or the funding of the Debt contains
any untrue statement of a material fact, or omits to state a material fact or
any fact necessary to make the statements contained therein not misleading in
light of the circumstances when made or furnished to Lender.
4.10. REPRESENTATIONS AND WARRANTIES GENERALLY. Except as otherwise
provided in the compliance certificate delivered pursuant to Section 6.4, the
representations and warranties set forth in this Agreement or in any other Debt
Document will be true and correct on the date of this Agreement. All
representations, warranties, covenants and agreements made in this Agreement or
in any certificate or other document delivered to Lender by or on behalf of
Borrower pursuant to or in connection with this Agreement shall be deemed to
have been relied upon by Lender notwithstanding Lender's review of any documents
or materials delivered by Borrower to Lender pursuant to the terms hereof and
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf (and Borrower hereby acknowledges such reliance by Lender in making
the Debt and all disbursements thereunder) and, furthermore, shall survive the
making of any or all of the disbursements of proceeds under the Debt and
continue in full force and effect, but only as of the date made, as long as
there remains unperformed
17
any obligations to Lender hereunder or under any of the other Debt Documents.
5. GENERAL COVENANTS, CONDITIONS AND AGREEMENTS. Borrower hereby further
covenants and agrees with Lender as follows:
5.1. COMPLIANCE WITH DEBT DOCUMENTS. Borrower shall comply with, observe
and timely perform each and every one of the covenants, agreements and
obligations under each and every one of the Debt Documents and any other debt
document to which it is a party.
5.2. MATERIAL TRANSACTIONS.
5.2.1. STRUCTURAL CHANGES. The provisions of this Section 5.2.1
shall govern the assignment and assumption of Borrower's obligations hereunder
in the event of certain mergers, consolidations and sales involving Borrower.
5.2.1.1. Nothing contained in this Agreement shall prevent any
consolidation or merger of Borrower with or into any other Person (whether or
not affiliated with Borrower) or successive consolidations or mergers in which
Borrower or its successor or successors shall be a party or parties, or shall
prevent any sale, conveyance, transfer or other disposition of the property or
capital stock of Borrower or its successor or successors as an entirety, or
substantially as an entirety, to any other Person (whether or not affiliated
with Borrower, or its successor or successors) authorized to acquire and operate
the same; provided, however, that Borrower hereby covenants and agrees that,
upon any such consolidation, merger (where Borrower is not the surviving
corporation), sale, conveyance, transfer or other disposition, the due and
punctual payment of the principal of and interest on the Subordinated Debenture
in accordance with their terms, according to their tenor, and the due and
punctual performance and observance of all the covenants and conditions of this
Agreement to be kept or performed by Borrower, shall be expressly assumed by an
assignment and assumption agreement reasonably satisfactory in form and
substance to Lender executed and delivered to Lender by the entity formed by
such consolidation, or into which Borrower shall have been merged, or by the
entity which shall have acquired such property or capital stock.
5.2.1.2. In case of any such consolidation, merger, sale,
conveyance, transfer or other disposition and upon the assumption by the
successor entity, by an assignment and assumption agreement executed and
delivered to Lender and reasonably satisfactory in form and substance to Lender,
such successor entity shall succeed to and be substituted for Borrower, with the
same effect as if it had been named herein as Borrower, and thereupon the
predecessor entity shall be relieved of any further liability or obligation
hereunder or upon the Subordinated Debenture.
5.2.1.3. Borrower shall deliver to Lender an opinion of
counsel in form and substance satisfactory to Lender that any consolidation,
merger, sale, conveyance, transfer or other disposition, and any assignment and
assumption, permitted or required by the terms of this Section 5.2.1 complies
with the provisions of this Section 5.2.1.
5.2.2. DISTRIBUTIONS. Borrower shall not itself declare or pay, nor
shall it cause, permit or allow any Subsidiary to declare or pay, any cash
dividend or make (or otherwise become obligated to make) any other distribution
in respect of its capital stock or other outstanding equity securities if an
Event of Default has occurred and is continuing or if the declaration or payment
of the dividend or the making of any other distribution would result in the
occurrence of an Event of Default.
5.2.3. INCURRING DEBT. Borrower shall not itself, nor shall it
cause, permit or allow any Subsidiary to (a) create, assume, incur, have
outstanding, or in any manner become liable in respect of any Indebtedness,
other than Indebtedness representing (A) funded outstanding debt of Borrower
(which shall include the Indebtedness evidenced by the Junior Subordinated
Debentures) for money borrowed and (B) Subsidiary Bank Subordinated Indebtedness
in an aggregate amount (i.e., A plus B) which shall not exceed 50% of the sum of
Tier 1 Capital plus Tier 2 Capital of Borrower, or (b) except for
18
liens on real or personal property (other than the capital stock of any
Subsidiary) incurred in the ordinary course of business, create, assume, incur,
suffer or permit to exist any mortgage, pledge, deed of trust, encumbrance
(including the lien or retained security title of a conditional vendor),
security interest, assignment, lien or charge of any kind or character upon or
with respect to any of their real or personal property, including, without
limitation, any capital stock owned by Borrower of Southwest Holding or
Subsidiary Bank whether owned at the date hereof or hereafter acquired, or
assign or otherwise convey any right to receive income therefrom. The parties
acknowledge that Section 8.1.1.14 does not limit the ability of Borrower to
incur additional Indebtedness that may be junior and subordinate in all respects
to the Debt.
5.2.4. OTHER MATTERS. Notify Lender of any of the following at least
10 days prior to the effectiveness thereof: (a) any change in the name of
Borrower or any Subsidiary; (b) any change in the headquarters or principal
place of business of Borrower or any Subsidiary; (c) the issuance, execution or
adoption of any formal or informal (whether voluntary or involuntary) regulatory
action with respect to Borrower or any Subsidiary at the request of any
Governmental Agency.
5.3. SUBSIDIARY SHARES.
5.3.1. ENCUMBRANCE. Borrower shall not itself, nor shall it cause,
permit or allow any Subsidiary to directly or indirectly create, assume, incur,
suffer or permit to exist any pledge, encumbrance, security interest,
assignment, lien or charge of any kind or character on the Subsidiary Shares or
any other stock owned by Borrower or any Subsidiary. Borrower shall not itself,
nor shall it cause, permit or allow any Subsidiary to sell, transfer, issue,
reissue, exchange or grant any option with respect to Subsidiary Shares or other
outstanding capital stock of any Subsidiary.
5.3.2. DILUTION. Borrower shall not cause, permit or allow the
percentage of Subsidiary Shares or other outstanding capital stock of any
Subsidiary that Borrower owns, directly or indirectly, to represent an amount
that is less than 80% of each class of outstanding capital stock of any such
Subsidiary, including the Subsidiary Bank.
5.3.3. STRUCTURAL CHANGES. If an Event of Default has occurred and
is continuing or if the proposed action or transaction would result in the
occurrence of an Event of Default, Borrower shall not itself, nor shall it
cause, permit or allow any Subsidiary to, redeem any of Borrower's or any such
Subsidiary's capital stock or other outstanding securities, declare a dividend
(other than a stock dividend) or otherwise change the capital structure of
Borrower or any Subsidiary.
5.4. BUSINESS OPERATIONS.
5.4.1. COMPLIANCE WITH DEBT DOCUMENTS. Borrower shall not itself,
nor shall it cause, permit or allow any Subsidiary to breach or fail to perform
or observe any of the terms and conditions of the Subordinated Debenture or any
other Debt Document.
5.4.2. BANKING PRACTICES. Borrower shall not itself, nor shall it
cause, permit or allow any Subsidiary to engage in any unsafe or unsound banking
practices as determined by a Governmental Agency.
5.5. CORPORATE EXISTENCE. Borrower shall do or cause to be done all things
necessary to maintain, preserve and renew its corporate existence and that of
the Subsidiaries and its and their rights and franchises, and comply with all
related laws applicable to Borrower or the Subsidiaries.
5.6. LENDER EXPENSES. Whether or not the Initial Disbursement is made,
Borrower will (a) pay all reasonable costs and expenses of the Lender incident
to the transactions contemplated by this Agreement including, without
limitation, all costs and expenses incurred in connection with the preparation,
negotiation and execution of the Debt Documents, or in connection with any
modification, amendment, alteration, or the enforcement of this Agreement, the
Subordinated Debenture or the other
19
Debt Documents, including, without limitation, the Lender's out-of-pocket
expenses and the charges and disbursements to counsel retained by the Lender,
and (b) pay and save the Lender and all other holders of the Subordinated
Debenture harmless against any and all liability with respect to amounts payable
as a result of (i) any taxes which may be determined to be payable in connection
with the execution and delivery of this Agreement, the Subordinated Debenture or
the other Debt Documents or any modification, amendment or alteration of the
terms or provisions of this Agreement, the Subordinated Debenture or the other
Debt Documents, (ii) any interest or penalties resulting from nonpayment or
delay in payment of such expenses, charges, disbursements, liabilities or taxes,
and (iii) any income taxes in respect of any reimbursement by Borrower for any
of such violations, taxes, interests or penalties paid by the Lender. The
obligations of the Borrower under this Section 5.6 shall survive the repayment
in full of the Subordinated Debenture. Any of the foregoing amounts incurred by
the Lender and not paid by the Borrower upon demand shall bear interest from the
date incurred at the rate of interest in effect or announced by Lender from time
to time as its Base Rate plus 6% per annum and shall be deemed part of the
Borrower's Liabilities hereunder. Notwithstanding anything to the contrary set
forth in this Agreement, Borrower agrees to pay, or reimburse Lender for, a
maximum amount of $25,000 for legal fees (exclusive of costs and expenses)
incurred in connection with the negotiation, documentation and initial closing
of the transactions contemplated by this Agreement.
5.7. SUBORDINATED DEBT MATTERS. If the Subordinated Debt ceases to be
deemed to be Tier 2 Capital other than due to the limitation imposed by the
second sentence of 12 C.F.R. Section 250.166(e), which limits the capital
treatment of subordinated debt during the five years immediately preceding the
maturity date of the subordinated debt, Borrower shall: (a) immediately notify
Lender; and (b) immediately upon request of Lender engage in good faith
discussions concerning the restructuring (as a senior, unsecured obligation of
Borrower with the same interest rate and Maturity Date as is provided in this
Agreement for the Subordinated Debt) or repayment of the obligations evidenced
by the Subordinated Debt. No later than 180 days after the date of Lender's
request pursuant to the immediately preceding sentence, Borrower shall execute
and deliver all agreements (including, without limitation, replacement notes) as
Lender may reasonably request in connection with the restructuring contemplated
by clause (b) of the immediately preceding sentence, unless the obligations
evidenced by the Subordinated Debt have been repaid prior to the expiration of
such 180-day period. Borrower and Lender intend that the Subordinated Debt
qualify as Tier 2 Capital in accordance with the rules and regulations of the
FRB as in effect on the date hereof. Accordingly, each party agrees to amend or
modify the terms of the Subordinated Debt as may be reasonably required from
time to time to cause the Subordinated Debt to qualify as Tier 2 Capital in
accordance with the rules and regulations of the FRB as in effect on the date
hereof; provided, however, that in no event shall Lender be obligated to extend
the Maturity Date, reduce the interest rate applicable to the Debt, change the
principal amount of the Debt or otherwise amend or modify this Agreement or any
other Debt Document if Lender determines in its sole discretion that such
amendment or modification would increase the risks to Lender associated with the
Debt.
5.8. INSPECTION RIGHTS. Borrower shall permit and cause the Subsidiaries
to permit Lender, through Lender's employees, attorneys, accountants or other
agents, to inspect any of the properties, corporate books and financial books
and records of Borrower and any Subsidiary (excluding any customer lists and
non-public information relating to product development initiatives) at such
times as Lender reasonably may request; provided, however, this right shall not
be exercised more than once per year and only with 15 days' prior notice so long
as (a) the Borrower and each depository institution Subsidiary of Borrower shall
be "well capitalized" in accordance with applicable banking laws, rules and
regulations and (b) no Event of Default shall have occurred and be continuing.
6. REPORTING. Borrower shall furnish and deliver to Lender:
6.1. ANNUAL. As soon as available, but in any event not more than 90 days
after the close of each fiscal year of Borrower, or within such further time as
Lender may permit, consolidated audited financial statements for Borrower and
the Subsidiaries, including a balance sheet and related profit and loss
statement, prepared in accordance with GAAP consistently applied throughout the
periods reflected therein (excluding accounting changes applied on a prospective
basis in accordance with GAAP) by Borrower's Accountant or other independent
certified public accountants acceptable to Lender, who shall
20
give their unqualified opinion with respect thereto.
6.2. QUARTERLY. If an Event of Default shall have occurred and be
continuing, as soon as available, but in any event not more than 45 days after
the close of each quarterly period of each fiscal year of Borrower, or within
such further time as Lender may permit, (a) the call reports filed by Subsidiary
Bank with state or federal bank regulatory agencies, and (b) Forms FRY-9C filed
by Borrower with federal bank regulatory agencies.
6.3. SECURITIES FILINGS. If an Event of Default shall have occurred and be
continuing, as soon as practicable, but in any event not more than one day after
any such filings shall be made with the SEC or any exchange or market on which
the capital stock of Borrower may be traded, all reports or other filings made
by the Borrower, pursuant to the Exchange Act or otherwise.
6.4. COMPLIANCE CERTIFICATE. Borrower shall furnish Lender, annually at
the same time as the annual financial reports referred to in Section 6.1, and,
if applicable, quarterly at the same time as the quarterly financial reports
referred to in Section 6.2, a compliance certificate in the form attached as
Exhibit D hereto. Such annual or quarterly compliance certificate shall be
signed by the Chief Executive Officer, President or Chief Financial Officer of
Borrower.
6.5. COPIES OF OTHER REPORTS AND CORRESPONDENCE. If an Event of Default
shall have occurred and be continuing, as soon as practicable, to the extent not
prohibited by applicable laws or regulations, including without limitation
regulations of the FRB, promptly after same are available, copies of each of the
following: (a) each annual report, proxy or financial statement or other report
or communication sent by Borrower or any Subsidiary to the shareholders of
Borrower; (b) all annual, regular, periodic and special reports and registration
statements which Borrower or any Subsidiary may file or be required to file with
any federal or state banking regulatory agency or any other Governmental Agency
or with any securities exchange; (c) each call report and Uniform Bank (and Bank
Holding Company) Performance Report with respect to Borrower; (d) all written
reports presented to the board of directors of Borrower, as Lender may from time
to time reasonably request; and (e) promptly upon receipt thereof, one copy of
each written audit report submitted to Borrower by Borrower's Accountant.
6.6. PROCEEDINGS. If an Event of shall have occurred and be continuing,
immediately after receiving knowledge thereof, notice in writing of all charges,
assessments, actions, suits and proceedings (as well as notice of the outcome of
any such charges, assessments, actions, suits and proceedings) that are
initiated by, or brought before, any court or Governmental Agency, in connection
with Borrower or Subsidiary Bank, other than ordinary course of business
litigation not involving the FRB, the FDIC, the OTS or the OCC, which, if
adversely decided, would not have a material adverse effect on the financial
condition or operations of Borrower, Southwest Holding or Subsidiary Bank.
6.7. EVENT OF DEFAULT; MATERIAL ADVERSE CHANGE. Promptly after the
occurrence thereof, notice of any matter which has resulted in an Event of
Default, or which has resulted in or could reasonably be expected to result in a
materially adverse change in the financial condition of Borrower or Subsidiary
Bank, so long as delivery of such notice is not prohibited by applicable laws
and regulations.
6.8. OTHER INFORMATION REQUESTED BY LENDER. If an Event of Default shall
have occurred and be continuing, such other information concerning the business,
operations, financial condition and regulatory status of Borrower or any
Subsidiary as Lender may from time to time reasonably request, so long as such
information is not confidential and related to a customer of Borrower or any
Subsidiary.
7. FINANCIAL COVENANT. Borrower (on a consolidated basis) shall maintain and
cause Southwest Holding and Subsidiary Bank to maintain such capital as may be
necessary to cause (a) Borrower and Southwest Holding to be classified as
"adequately capitalized" as of the end of each calendar quarter and (b)
Subsidiary Bank and each other depository institution Subsidiary to be
classified as "well capitalized" as of the end of each calendar quarter, in each
case in accordance with the rules and regulations of its primary federal
regulator as in effect from time to time and consistent with the financial
information and reports contemplated in Section 6 hereof; provided, however,
that Borrower shall not be deemed to have
21
failed to comply with clause (b) of this Section 7 if Subsidiary Bank and each
other depository institution Subsidiary is classified as "adequately
capitalized" in accordance with the rules and regulations of its primary federal
regulator and the violation does not persist for more than 120 days.
8. BORROWER'S DEFAULT.
8.1. BORROWER'S DEFAULTS AND LENDER'S REMEDIES.
8.1.1. EVENTS OF DEFAULT. Each of the following shall constitute an
"Event of Default" under this Agreement:
8.1.1.1. Borrower fails to pay, within five days of its due
date, any principal of or installment of interest on the Subordinated Debenture;
or
8.1.1.2. Borrower fails to pay, when due, any amount payable
under this Agreement, the Subordinated Debenture (other than principal or
interest) or any other Debt Document, and such failure continues for a period of
five Business Days after notice thereof from Lender to Borrower; or
8.1.1.3. Borrower fails to keep or perform any of its
agreements, undertakings, obligations, covenants or conditions under this
Agreement not expressly referred to in another clause of this Section 8.1, or
any representation or warranty of Borrower proves to be false or misleading as
of the date made, and such failure or false or misleading representation or
warranty continues for a period of 30 days after notice thereof from Lender to
Borrower; or
8.1.1.4. Any "Event of Default" or "Default" as defined under,
or a default or breach in any respect by Borrower of any covenant or agreement
under, any Debt Document other than this Agreement occurs, after giving effect
to any applicable cure period set forth in any such Debt Document or, if no such
cure period is provided, such "Event of Default", "Default", default or breach
continues for a period of 30 days after notice thereof from Lender to Borrower;
or
8.1.1.5. Any certification made pursuant to this Agreement by
Borrower or otherwise made in writing in connection with or as contemplated by
this Agreement or any of the other Debt Documents by Borrower shall be as of the
delivery date of such certification materially incorrect or false, or any
representation to Lender by Borrower as to the financial condition or credit
standing of Borrower is or proves to be false or misleading, and such materially
incorrect or false certification or false or misleading representation continues
for a period of 30 days after notice thereof from Lender to Borrower; or
8.1.1.6. The dissolution of Borrower, or, if not cured within
30 days of notice thereof from Lender to Borrower, the occurrence of any
material organizational change in Borrower which Lender determines, in its
reasonable discretion, shall have a material adverse effect on the ability of
Borrower to perform its respective obligations under this Agreement or any of
the other Debt Documents; or
8.1.1.7. Any order or decree is entered by any court of
competent jurisdiction directly or indirectly enjoining or prohibiting Lender or
Borrower from performing any of their obligations under this Agreement or any of
the other Debt Documents, and such order or decree is not vacated, and the
proceedings out of which such order or decree arose are not dismissed, within 60
days after the granting of such decree or order; or
8.1.1.8. The FRB, the FDIC, the OCC or other Governmental
Agency charged with the regulation of bank holding companies or depository
institutions: (a) issues to Borrower, Southwest Holding or Subsidiary Bank, or
initiates any action, suit or proceeding to obtain against, impose on or require
from Borrower, Southwest Holding or Subsidiary Bank, a cease and desist order or
22
similar regulatory order, the assessment of civil monetary penalties, articles
of agreement, a memorandum of understanding, a capital directive, a capital
restoration plan, restrictions that prevent or as a practical matter impair the
payment of dividends by Southwest Holding or Subsidiary Bank or the payments of
any debt by Borrower, restrictions that make the payment of dividends by
Southwest Holding or Subsidiary Bank or the payment of debt by Borrower subject
to prior regulatory approval, a notice or finding under Section 8(a) of the FDI
Act, or any similar enforcement action, measure or proceeding; or (b) proposes
or issues to any executive officer or director of Borrower, Southwest Holding or
Subsidiary Bank, or initiates any action, suit or proceeding to obtain against,
impose on or require from any such officer or director, a cease and desist order
or similar regulatory order, a removal order or suspension order, or the
assessment of civil monetary penalties; or
8.1.1.9. Subsidiary Bank is notified that it is considered an
institution in "troubled condition" within the meaning of 12 U.S.C. Section
1831i and the regulations promulgated thereunder; or
8.1.1.10. Borrower or any Subsidiary becomes insolvent or is
unable to pay its debts as they mature; or makes an assignment for the benefit
of creditors or admits in writing its inability to pay its debts as they mature;
or suspends transaction of its usual business; or if a trustee of any
substantial part of the assets of Borrower or any Subsidiary is applied for or
appointed, and if appointed in a proceeding brought against Borrower, Borrower
by any action or failure to act indicates its approval of, consent to, or
acquiescence in such appointment, or within 30 days after such appointment, such
appointment is not vacated or stayed on appeal or otherwise, or shall not
otherwise have ceased to continue in effect; or
8.1.1.11. Any proceedings involving Borrower or any Subsidiary
are commenced by or against Borrower or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law or statute of the federal government or any state government
and, with respect to Borrower only, if such proceedings are instituted against
Borrower, Borrower by any action or failure to act indicates its approval of,
consent to or acquiescence therein, or an order shall be entered approving the
petition in such proceedings and within 30 days after the entry thereof such
order is not vacated or stayed on appeal or otherwise, or shall not otherwise
have ceased to continue in effect; or
8.1.1.12. Borrower or Subsidiary Bank applies for, consents to
or acquiesces in the appointment of a trustee, receiver, conservator or
liquidator for itself under Chapter 7 or Chapter 11 of the Bankruptcy Code (the
"CODE PROVISIONS"), or in the absence of such application, consent or
acquiescence, a trustee, conservator, receiver or liquidator is appointed for
Borrower or Subsidiary Bank under the Code Provisions, and is not discharged
within 30 days, or any bankruptcy, reorganization, debt arrangement or other
proceeding or any dissolution, liquidation, or conservatorship proceeding is
instituted by or against Borrower or Subsidiary Bank under the Code Provisions,
and if instituted against Borrower, is consented or acquiesced in by it or
remains for 30 days undismissed, or if Borrower or Subsidiary Bank is enjoined,
restrained or in any way prevented from conducting all or any material part of
its business under the Code Provisions; or
8.1.1.13. Subsidiary Bank applies for, consents to or
acquiesces in the appointment of a receiver or conservator for itself, or in the
absence of such application, consent or acquiescence, a receiver or conservator
is appointed for Subsidiary Bank; or
8.1.1.14. The Junior Subordinated Debentures are no longer (or
any other outstanding Indebtedness that was incurred in connection with, or
relating to, any trust preferred securities issued by a trust created directly
or indirectly by Borrower or any Subsidiary is not) junior and subordinate in
all respects to the Debt. The parties acknowledge that this Section 8.1.1.14
shall not limit the ability of Borrower to prepay the Junior Subordinated
Debentures or any other Indebtedness.
8.1.2. LENDER'S REMEDIES. Subject to Section 8.6, upon the
occurrence of any Event of Default, Lender shall have the right, if such Event
of Default shall then be continuing, in addition to all the remedies conferred
upon Lender by law or equity or the terms of any Debt Document, to do any
23
or all of the following, concurrently or successively, without notice to
Borrower:
8.1.2.1. Declare the Subordinated Debenture to be, and it
shall thereupon become, immediately due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Subordinated Debenture to the contrary
notwithstanding; or
8.1.2.2. Exercise all of its rights and remedies at law or in
equity.
8.2. PROTECTIVE ADVANCES. If an Event of Default occurs, Lender may (but
shall in no event be required to) cure any such Event of Default and any amounts
expended by Lender in so doing, as determined by Lender in its sole and absolute
discretion, shall (a) be deemed advanced by Lender under an obligation to do so
regardless of the identity of the person or persons to whom such funds are
furnished, (b) constitute additional advances hereunder, the payment of which is
additional indebtedness evidenced by the Subordinated Debenture, and (c) become
due and owing, at Lender's demand, with interest accruing from the date of
disbursement thereof until fully paid at the Default Rate.
8.3. OTHER REMEDIES. Nothing in this Article 8 is intended to restrict
Lender's rights under any of the other Debt Documents, other related documents,
or at law, and Lender may exercise such rights and remedies as and when they are
available.
8.4. NO LENDER LIABILITY. To the extent permitted by law, Lender shall
have no liability for any loss, damage, injury, cost or expense resulting from
any action or omission by it, or any of its representatives, which was taken,
omitted or made in good faith.
8.5. LENDER'S FEES AND EXPENSES. In case of any Event of Default
hereunder, Borrower shall pay Lender's reasonable fees and expenses including,
without limitation, attorneys' fees and expenses, in connection with the
enforcement of this Agreement or any of the other Debt Documents or other
related documents. Notwithstanding anything to the contrary set forth in this
Agreement, Borrower agrees to pay a maximum aggregate amount of $250,000 for
such reasonable fees and expenses of Lender incurred in connection with the
enforcement of this Agreement, any of the other Debt Documents or other related
documents.
8.6. LIMITATION ON REMEDIES WITH RESPECT TO SUBORDINATED DEBT. If an Event
of Default under Sections 8.1.1.12 or 8.1.1.13 shall occur, all amounts due
Lender hereunder shall be immediately due and payable, whereupon the
Subordinated Debenture and all such amounts payable hereunder shall immediately
become due and payable without presentment, demand, protest or notice of any
kind. If Borrower receives a written notification from the FRB that the
Subordinated Debenture no longer constitutes Tier 2 Capital of Borrower (the
"FEDERAL RESERVE NOTICE"), other than due to the limitation imposed by the
second sentence of 12 C.F.R. Section 250.166(e), which limits the capital
treatment of subordinated debt during the five years immediately preceding the
maturity date of the subordinated debt, and if thereafter any Event of Default
shall occur under Section 8.1, Lender may declare the Subordinated Debenture and
any other amounts due Lender hereunder immediately due and payable, whereupon
the Subordinated Debenture and such other amounts payable hereunder shall
immediately become due and payable, without presentment, demand, protest or
notice of any kind. Upon the occurrence of an Event of Default, it is
specifically understood and agreed that, notwithstanding the curing of such
Event of Default, Borrower shall not be released from any of its covenants
hereunder unless and until the Subordinated Debenture is paid in full. Upon the
occurrence of an Event of Default without notice by Lender to or demand by
Lender of Borrower, Lender shall have no further obligation to and may then
forthwith cease advancing monies or extending credit to or for the benefit of
Borrower under this Agreement and the other Debt Documents. The parties agree
that until the earlier of the Maturity Date or the delivery of a Federal Reserve
Notice, Lender may only enforce Borrower's obligations under the Subordinated
Debt (a) if Borrower fails to pay interest when due on the Subordinated
Debenture, in which case Lender may pursue Borrower for such interest, (b) if
Borrower fails to comply with any of the covenants set forth in Section 5 (other
than Sections 5.2.3(a) and 5.2.4), in which case Lender may pursue Borrower to
ensure that Borrower complies with such covenants, or (c) if an Event of Default
occurs under Sections 8.1.1.12
24
or 8.1.1.13, in which case the first sentence of this Section 8.6 shall govern.
9. MISCELLANEOUS.
9.1. RELEASE; INDEMNIFICATION. Borrower hereby releases Lender from any
and all causes of action, claims or rights which the Borrower may now or
hereafter have for, or which may arise from, any loss or damage caused by or
resulting from (a) any failure of Lender to protect, enforce or collect in whole
or in part any of the Debt and (b) any other act or omission to act on the part
of Lender, its officers, agents or employees, except in each instance for
willful misconduct and gross negligence. Borrower shall indemnify, defend and
hold Lender and its Affiliates harmless from and against any and all losses,
liabilities, obligations, penalties, claims, fines, demands, litigation,
defenses, costs, judgments, suits, proceedings, actual damages, disbursements or
expenses of any kind or nature whatsoever (including, without limitation,
attorneys' fees and expenses) which may at any time be either directly or
indirectly imposed upon, incurred by or asserted or awarded against Lender or
any of Lender's Affiliates in connection with, arising from or relating to
Lender's entering into or carrying out the terms of this Agreement or being the
holder of the Subordinated Debenture, other than any loss, liability, damage,
suit, claim, expense, fees or costs arising solely by reason of Lender's or any
of Lender's Affiliates' willful misconduct or gross negligence.
9.2. ASSIGNMENT AND PARTICIPATION. Lender may pledge or otherwise
hypothecate all or any portion of this Agreement or grant participations herein
(provided Lender acts as agent for any participants, except as provided below)
or in any of its rights and security hereunder. Lender may also assign all or
any part of the Debt and Lender's obligations in connection therewith to one or
more commercial banks or other financial institutions or investors (each an
"ASSIGNEE LENDER"). Lender shall notify Borrower in advance of the identity of
any proposed Assignee Lender. Upon delivery to Borrower of an executed copy of
the Assignee Lender's assignment and acceptance (a) each such Assignee Lender
shall be deemed to be a party hereto and, to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender,
such Assignee Lender shall have the rights and obligations of Lender hereunder
and under the other Debt Documents and other related documents (b) Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it, shall be released from its obligations hereunder and under the
other Debt Documents (including, without limitation, the obligation to fund the
Assignee Lender's share of the Debt) and other related documents. Within five
Business Days after receipt of a copy of the executed assignment and acceptance
document, Borrower shall execute and deliver to Lender a new subordinated
debenture, as applicable (for delivery to the relevant Assignee Lender),
evidencing such Assignee Lender's assigned portion of the Debt and a replacement
subordinated debenture, as applicable, in the principal amount of the Debt
retained by Lender (such subordinated debenture to be in exchange for, but not
in payment of, the subordinated debenture then held by Lender). Such
subordinated debenture shall be dated the date of the predecessor Subordinated
Debenture. Lender shall ▇▇▇▇ the predecessor Subordinated Debenture "exchanged"
and deliver it to Borrower. Accrued interest on that part of the predecessor
Subordinated Debenture evidenced by the new subordinated debenture, and accrued
fees, shall be paid as provided in the assignment agreement between Lender and
to the Assignee Lender. Accrued interest on that part of the predecessor
Subordinated Debenture evidenced by the replacement subordinated debenture shall
be paid to Lender. Accrued interest and accrued fees shall be so apportioned
between the subordinated debenture and paid at the same time or times provided
in the predecessor Subordinated Debenture and in this Agreement. Borrower
authorizes Lender to disclose to any prospective Assignee Lender any financial
or other information pertaining to Borrower or the Debt, provided that Lender
shall not disclose any customer list or information relating to product
development initiatives of Lender and, prior to disclosing other non-public
information regarding Borrower, any such prospective Assignee Lender shall have
executed a confidentiality agreement. Anything in this Agreement to the contrary
notwithstanding, and without the need to comply with any of the formal or
procedural requirements of this Agreement, including this Section 9.2, Lender
may at any time and from time to time pledge and assign all or any portion of
its rights under all or any of the Debt Documents and other related documents to
a Federal Reserve Bank; provided that no such pledge or assignment shall release
Lender from its obligations thereunder.
25
9.3. PROHIBITION ON ASSIGNMENT. Borrower shall not assign or attempt to
assign its rights under this Agreement, either voluntarily or by operation of
law.
9.4. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
9.5. NO WAIVER. No waiver of any term, provision, condition, covenant or
agreement herein contained shall be effective unless set forth in a writing
signed by Lender, and any such waiver shall be effective only to the extent set
forth in such writing. No failure to exercise or delay in exercising, by Lender
or any holder of the Subordinated Debenture, of any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
thereof, or the exercise of any other right or remedy provided by law. The
rights and remedies provided in this Agreement are cumulative and not exclusive
of any right or remedy provided by law or equity. No notice or demand on
Borrower in any case shall, in itself, entitle Borrower to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of Lender to any other or further action in any circumstances without
notice or demand. No consent or waiver, expressed or implied, by Lender to or of
any breach or default by Borrower in the performance of its obligations
hereunder shall be deemed or construed to be a consent or waiver to or of any
other breach or default in the performance of the same or any other obligations
of Borrower hereunder. Failure on the part of Lender to complain of any acts or
failure to act or to declare an Event of Default, irrespective of how long such
failure continues, shall not constitute a waiver by Lender of its rights
hereunder or impair any rights, powers or remedies on account of any breach or
default by Borrower.
9.6. SEVERABILITY. Any provision of this Agreement which is unenforceable
or invalid or contrary to law, or the inclusion of which would adversely affect
the validity, legality or enforcement of this Agreement, shall be of no effect
and, in such case, all the remaining terms and provisions of this Agreement
shall subsist and be fully effective according to the tenor of this Agreement
the same as though any such invalid portion had never been included herein.
Notwithstanding any of the foregoing to the contrary, if any provisions of this
Agreement or the application thereof are held invalid or unenforceable only as
to particular persons or situations, the remainder of this Agreement, and the
application of such provision to persons or situations other than those to which
it shall have been held invalid or unenforceable, shall not be affected thereby,
but shall continue valid and enforceable to the fullest extent permitted by law.
9.7. USURY; REVIVAL OF LIABILITIES. All agreements between Borrower and
Lender (including, without limitation, this Agreement and any other Debt
Documents) are expressly limited so that in no event whatsoever shall the amount
paid or agreed to be paid to Lender exceed the highest lawful rate of interest
permissible under the laws of the State of Missouri. If, from any circumstances
whatsoever, fulfillment of any provision hereof or of any other Debt Documents,
at the time performance of such provision shall be due, shall involve exceeding
the limit of validity prescribed by law which a court of competent jurisdiction
may deem applicable hereto, then, ipso facto, the obligation to be fulfilled
shall be reduced to the highest lawful rate of interest permissible under the
laws of the State of Missouri, and if for any reason whatsoever, Lender shall
ever receive as interest an amount which would be deemed unlawful, such interest
shall be applied to the payment of the last maturing installment or installments
of the indebtedness to Lender (whether or not then due and payable) and not to
the payment of interest. To the extent that the Lender received any payment on
account of the Borrower's Liabilities and any such payment(s) and/or proceeds or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, subordinated and/or required to be repaid to a trustee,
receiver or any other Person under any bankruptcy act, state or federal law,
common law or equitable cause, then to the extent of such payment(s) or proceeds
received, the Borrower's Liabilities or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment(s)
and/or proceeds had not been received by Lender and applied on account of the
Borrower's Liabilities; provided, however, if Lender successfully contests any
such invalidation, declaration, set aside, subordination or other order to pay
any such payment and/or proceeds to any third party, the revived Borrower's
Liabilities shall be deemed satisfied.
26
9.8. NOTICES. Any notice which either party hereto may be required or may
desire to give hereunder shall be deemed to have been given if in writing and if
delivered personally, or if mailed, postage prepaid, by United States registered
or certified mail, return receipt requested, or if delivered by a responsible
overnight courier, addressed:
if to Borrower: Southwest Bancorporation of Texas, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail Address: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
if to Lender: Wisconsin Capital Corporation
c/o U.S. Bank National Association
One U.S. Bank Plaza
7th Street and ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Correspondent Banking Division
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail Address: ▇▇▇▇▇▇▇.▇.▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
or to such other address or addresses as the party to be given notice may have
furnished in writing to the party seeking or desiring to give notice, as a place
for the giving of notice, provided that no change in address shall be effective
until seven days after being given to the other party in the manner provided for
above. Any notice given in accordance with the foregoing shall be deemed given
when delivered personally or, if mailed, five Business Days after it shall have
been deposited in the United States mails as aforesaid or, if sent by overnight
courier, the Business Day following the date of delivery to such courier.
9.9. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
the parties and their respective heirs, legal representatives, successors and
assigns except that, unless Lender consents in writing, no assignment made by
Borrower in violation of this Agreement shall confer any rights on any assignee
of Borrower.
9.10. NO JOINT VENTURE. Nothing contained herein or in any document
executed pursuant hereto and no action or inaction whatsoever on the part of
Lender, shall be deemed to make Lender a partner or joint venturer with
Borrower.
9.11. PUBLICITY. Unless otherwise required by applicable laws or
regulations, neither party shall publicize the Debt without the prior written
consent of the other party, which consent shall not be unreasonably withheld,
conditioned or delayed.
9.12. DOCUMENTATION. All documents and other matters required by any of
the provisions of this Agreement to be submitted or furnished to Lender shall be
in form and substance satisfactory to Lender.
9.13. ADDITIONAL ASSURANCES; RIGHT OF SET-OFF. Borrower agrees that, at
any time or from time to time, upon the written request of Lender, it will
execute all such further documents and do all such other acts and things as
Lender may reasonably request to effectuate the transaction herein contemplated.
If any Event of Default that permits the Lender to accelerate the obligations of
the Borrower pursuant to Section 8.6 shall have occurred and be continuing,
Lender is hereby authorized at any time and from time to time to set-off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and any and all other indebtedness at any time owing by
Lender to or for the credit or the account of Borrower against any and all of
Borrower's Liabilities
27
irrespective of whether or not Lender shall have made any demand hereunder or
thereunder. Lender agrees promptly to notify Borrower after any such set-off and
application made by Lender; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of Lender under this Section 9.13 are in addition to any other rights and
remedies (including, without limitation, other rights of set-off) which Lender
may have. Nothing contained in this Agreement or any other Debt Document shall
impair the right of Lender to exercise any right of set-off or counterclaim it
may have against Borrower and to apply the amount subject to such exercise to
the payment of indebtedness of Borrower unrelated to this Agreement or the other
Debt Documents.
9.14. ENTIRE AGREEMENT. This Agreement and the Disclosure Schedule and
Exhibits hereto constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and may not be modified or amended in any
manner other than by supplemental written agreement executed by the parties
hereto.
9.15. CHOICE OF LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Missouri. Nothing herein shall
be deemed to limit any rights, powers or privileges which Lender may have
pursuant to any law of the United States of America or any rule, regulation or
order of any department or agency thereof and nothing herein shall be deemed to
make unlawful any transaction or conduct by Lender which is lawful pursuant to,
or which is permitted by, any of the foregoing.
9.16. FORUM; AGENT; VENUE. To induce Lender to accept this Agreement and
the other Debt Documents, Borrower irrevocably agrees that all actions or
proceedings in any way, manner, or respect, arising out of or from or related to
this Agreement or the other Debt Documents shall be litigated only in courts
having situs within St. Louis, Missouri. Borrower hereby consents and submits to
the jurisdiction of any local, state, or federal court located within said city.
Borrower hereby waives any right it may have to transfer or change the venue of
any litigation brought against Borrower by Lender.
9.17. NO THIRD PARTY BENEFICIARY. This Agreement is made for the sole
benefit of Borrower and Lender, and no other person shall be deemed to have any
privity of contract hereunder nor any right to rely hereon to any extent or for
any purpose whatsoever, nor shall any other person have any right of action of
any kind hereon or be deemed to be a third party beneficiary hereunder.
9.18. LEGAL TENDER OF UNITED STATES. All payments hereunder shall be made
in coin or currency which at the time of payment is legal tender in the United
States of America for public and private debts.
9.19. CAPTIONS; COUNTERPARTS. Captions contained in this Agreement in no
way define, limit or extend the scope or intent of their respective provisions.
This Agreement may be executed by facsimile and in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
9.20. KNOWLEDGE; DISCRETION. All references herein to a party's best
knowledge shall be deemed to mean the best knowledge of such party based on
commercially reasonable inquiry. All references herein to Borrower's best
knowledge shall be deemed to refer to the best knowledge of Borrower and each
Subsidiary. Unless specified to the contrary herein, all references herein to an
exercise of discretion or judgment by Lender, to the making of a determination
or designation by Lender, to the application of Lender's discretion or opinion,
to the granting or withholding of Lender's consent or approval, to the
consideration of whether a matter or thing is satisfactory or acceptable to
Lender, or otherwise involving the decision making of Lender, shall be deemed to
mean that Lender shall decide unilaterally using its sole and absolute
discretion or judgment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
28
WAIVER OF RIGHT TO JURY TRIAL. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR
ANY OF THE OTHER DEBT DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF BORROWER
OR LENDER. BORROWER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF
THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL
SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS DISCUSSED THIS WAIVER WITH SUCH
LEGAL COUNSEL. BORROWER FURTHER ACKNOWLEDGES THAT (a) IT HAS READ AND
UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (b) THIS WAIVER HAS
BEEN REVIEWED BY BORROWER AND BORROWER'S COUNSEL AND IS A MATERIAL INDUCEMENT
FOR LENDER TO ENTER INTO THIS AGREEMENT AND THE OTHER DEBT DOCUMENTS (c) THIS
WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH OTHER DEBT DOCUMENTS AS IF FULLY
INCORPORATED THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
SOUTHWEST BANCORPORATION OF TEXAS, INC.
By:
_______________________________________
Name:
Title:
WISCONSIN CAPITAL CORPORATION
By:
_______________________________________
Name:
Title:
S-1
EXHIBIT A
FORM OF SUBORDINATED DEBENTURE
THIS SUBORDINATED DEBENTURE IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY FEDERAL AGENCY.
$75,000,000.00 St. Louis, Missouri
_____________, 2004
FOR VALUE RECEIVED, the undersigned, SOUTHWEST BANCORPORATION OF TEXAS,
INC., a Texas corporation ("BORROWER"), hereby promises to pay to the order of
WISCONSIN CAPITAL CORPORATION, a Nevada corporation, or any holder hereof from
time to time ("LENDER"), at such place as may be designated in writing by
Lender, the principal sum of SEVENTY-FIVE MILLION AND NO/100 DOLLARS
($75,000,000.00) (or so much thereof that has been advanced and remains
outstanding) with interest thereon as hereinafter provided. This Subordinated
Debenture (this "SUBORDINATED DEBENTURE") is issued pursuant to the terms of
that certain Subordinated Debenture Purchase Agreement of even date herewith by
and between Borrower and Lender (as may be amended, restated, supplemented or
modified from time to time, the "AGREEMENT"). All capitalized terms used but not
defined herein shall have the respective meanings ascribed to them in the
Agreement.
All accrued interest and unpaid principal due and payable under this
Subordinated Debenture shall be paid in full on or before the Maturity Date.
The unpaid principal amount outstanding under this Subordinated Debenture
from time to time shall bear interest before maturity in accordance with the
Agreement, computed on the basis of a 360-day year and charged for actual days
elapsed. Under certain circumstances as provided in the Agreement, overdue
interest payments under this Subordinated Debenture shall bear interest from the
due date thereof until paid at a daily rate equal to the Default Rate, computed
on the basis of a 360-day year and charged for actual days elapsed, except as
otherwise provided in the Agreement.
All accrued interest shall be payable at Lender's principal place of
business on a quarterly basis in arrears on the last day of each December,
March, June and September, commencing December 31, 2004. The outstanding unpaid
principal balance of this Subordinated Debenture shall be payable in one
installment on the Maturity Date. Whenever any payment to be made under this
Subordinated Debenture shall be due on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall be included in the computation of interest due upon this Subordinated
Debenture. There shall be no penalties or other charges payable by Borrower to
Lender hereunder other than those payments described in this Subordinated
Debenture or in the Agreement. Borrower may prepay all or, from time to time,
part of the outstanding unpaid principal balance under this Subordinated
Debenture in accordance with Section 2.8.1 of the Agreement.
This Subordinated Debenture is not secured by any assets of Borrower.
So long as any portion of the unpaid principal of this Subordinated
Debenture is deemed to be Tier 2 Capital of Borrower in accordance with the
rules and regulations of the FRB applicable to the capital status of the
subordinated debt of bank holding companies, the rights of Lender to the
principal sum hereunder or any part hereof and to any accrued interest thereon
shall remain subject and subordinate (in accordance with SR 92-37 issued by the
FRB on October 15, 1992) to the claims of creditors of Borrower with respect to
the following ("SENIOR CLAIMS"): (a) borrowed and purchased money; (b) similar
obligations arising from off-balance-sheet guaranties and direct-credit
substitutes; and (c) obligations associated with derivative products such as
interest-rate and foreign exchange-rate contracts, commodity contracts, and
similar arrangements (clauses (a), (b) and (c) expressly exclude Trust Preferred
Indebtedness, as defined below, with respect to which the rights of Lender are
not subordinate).
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Upon dissolution or liquidation of Borrower, no payment of principal, interest
or premium (including post-default interest) shall be due and payable under the
terms of this Subordinated Debenture until all Senior Claims (which expressly
exclude claims relating to the Trust Preferred Indebtedness) shall have been
paid in full. If this Subordinated Debenture ceases to be deemed to be Tier 2
Capital of Borrower in accordance with the rules and regulations of the FRB
applicable to the capital status of the subordinated debt of bank holding
companies, other than due to the limitations imposed by the second sentence of
12 C.F.R Section 250.166(e), which limits the capital treatment of subordinated
debt during the five years immediately preceding the maturity date of the
subordinated debt, Borrower shall: immediately notify Lender; and immediately
upon request of Lender execute and deliver all such agreements (including
without limitation pledge agreements and replacement notes) as Lender may
request in order to restructure the obligation evidenced hereby as a senior,
unsecured obligation of Borrower with the same interest rate and Maturity Date
as is provided in the Agreement with respect to this Subordinated Debenture. If
Borrower fails to execute such agreements as required by Lender within 180 days
of Lender's request, such failure shall be deemed to be an Event of Default
under Section 8.1.1 of the Agreement.
As used herein, "TRUST PREFERRED INDEBTEDNESS" shall mean indebtedness
incurred in connection with, or relating to, any trust preferred securities
caused to be issued by, or reflected in the consolidated financial statements
of, Borrower, including the subordinated indebtedness evidenced by the Junior
Subordinated Debentures.
If an Event of Default shall occur, Lender shall have the rights set forth
in Section 8.1.2 of the Agreement.
If any attorney is engaged by Lender to enforce or defend any provision of
this Subordinated Debenture or any of the other Debt Documents, or as a
consequence of any Event of Default, with or without the filing of any legal
action or proceeding, then Borrower shall pay to Lender immediately upon demand
all attorneys' fees and expenses, together with interest thereon from the date
of such demand until paid at the rate of interest applicable to the principal
balance owing hereunder as if such unpaid attorneys' fees and expenses had been
added to the principal.
No previous waiver and no failure or delay by Lender in acting with
respect to the terms of this Subordinated Debenture or any of the other Debt
Documents shall constitute a waiver of any breach, default or failure of
condition under this Subordinated Debenture, the Agreement or any of the other
Debt Documents or the obligations secured thereby. A waiver of any term of this
Subordinated Debenture or any of the other Debt Documents or of any of the
obligations secured thereby must be made in writing and shall be limited to the
express written terms of such waiver. In the event of any inconsistencies
between the terms of this Subordinated Debenture and the terms of any other
document related to the Debt evidenced by this Subordinated Debenture, the terms
of this Subordinated Debenture shall prevail.
Except as otherwise provided in the Agreement, Borrower expressly waives
presentment, demand, notice of dishonor, notice of default or delinquency,
notice of acceleration, notice of protest and nonpayment, notice of costs,
expenses or losses and interest thereon, notice of late charges, and diligence
in taking any action to collect any sums owing under this Subordinated
Debenture. In addition, Borrower expressly agrees that this Subordinated
Debenture and any payment coming due hereunder may be extended from time to time
without in any way affecting the liability of any such party hereunder.
Time is of the essence with respect to every provision hereof. This
Subordinated Debenture shall be construed and enforced in accordance with the
laws of the State of Missouri, except to the extent that federal laws preempt
the laws of the State of Missouri, and all persons and entities in any manner
obligated under this Subordinated Debenture consent to the jurisdiction of any
federal or State court within St. Louis, Missouri having proper venue and also
consent to service of process by any means authorized by Missouri or Federal
law. Any reference contained herein to attorneys' fees and expenses shall be
deemed to be to reasonable fees and expenses and to include all reasonable fees
and expenses of in-house or staff attorneys and the reasonable fees and expenses
of any other experts or consultants.
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All agreements between Borrower and Lender (including, without limitation,
this Subordinated Debenture and the Agreement, and any other documents securing
all or any part of the indebtedness evidenced hereby) are expressly limited so
that in no event whatsoever shall the amount paid or agreed to be paid to Lender
exceed the highest lawful rate of interest permissible under applicable law. If,
from any circumstances whatsoever, fulfillment of any provision hereof, the
Agreement or any other documents securing all or any part of the indebtedness
evidenced hereby at the time performance of such provisions shall be due, shall
involve exceeding the limit of validity prescribed by law which a court of
competent jurisdiction may deem applicable hereto, then, ipso facto, the
obligation to be fulfilled shall be reduced to the highest lawful rate of
interest permissible under such applicable laws, and if, for any reason
whatsoever, Lender shall ever receive as interest an amount which would be
deemed unlawful under such applicable law, such interest shall be automatically
applied to the payment of the principal of this Subordinated Debenture (whether
or not then due and payable) and not to the payment of interest or refunded to
Borrower if such principal has been paid in full.
Lender may sell, assign, pledge or otherwise transfer or encumber any or
all of its interest under this Subordinated Debenture at any time and from time
to time. In the event of a transfer, all terms and conditions of this
Subordinated Debenture shall be binding upon and inure to the benefit of the
transferee after such transfer.
Upon receipt of notice from Lender advising Borrower of the loss, theft,
destruction or mutilation of this Subordinated Debenture, Borrower shall,
execute and deliver in lieu thereof a new debenture in principal amount equal to
the unpaid principal amount of such lost, stolen, destroyed or mutilated
debenture, dated the date to which interest has been paid on such lost, stolen,
destroyed or mutilated Subordinated Debenture.
Unless otherwise provided in the Agreement, all payments on account of the
indebtedness evidenced by this Subordinated Debenture shall be first applied to
the payment of costs and expenses of Lender which are due and payable, then to
past-due interest on the unpaid principal balance and the remainder to
principal.
Any notice which either party hereto may be required or may desire to give
hereunder shall be governed by the notice provisions of the Agreement.
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BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN
CONNECTION WITH THIS Subordinated Debenture OR ANY OF THE OTHER DEBT DOCUMENTS,
OR ANY OTHER STATEMENTS OR ACTIONS OF BORROWER OR LENDER. BORROWER ACKNOWLEDGES
THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS SUBORDINATED DEBENTURE AND
IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN
FREE WILL, AND THAT IT HAS DISCUSSED THIS WAIVER WITH SUCH LEGAL COUNSEL.
BORROWER FURTHER ACKNOWLEDGES THAT (i) IT HAS READ AND UNDERSTANDS THE MEANING
AND RAMIFICATIONS OF THIS WAIVER, (ii) THIS WAIVER HAS BEEN REVIEWED BY BORROWER
AND BORROWER'S COUNSEL AND IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO THE
DEBT DOCUMENTS, AND (iii) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF THE DEBT
DOCUMENTS AS IF FULLY INCORPORATED THEREIN.
IN WITNESS WHEREOF, the undersigned has executed this Subordinated
Debenture or caused this Subordinated Debenture to be executed by its duly
authorized representative as of the date first above written.
SOUTHWEST BANCORPORATION OF TEXAS, INC.
By:____________________________________
Name:
Title:
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