Agreement and Plan of Merger By and Among Southside Bancshares, Inc., Southside Merger Sub, Inc. and Fort Worth Bancshares, Inc. Dated as of May 17, 2007
Exhibit
10(a)
LIST OF EXHIBITS
Agreement
and Plan of Merger
By
and
Among
Southside
Bancshares, Inc.,
Southside
Merger Sub, Inc.
and
Fort
Worth
Bancshares, Inc.
Dated
as of
May 17, 2007
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Table
of Contents
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Page
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Preamble
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1
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ARTICLE
1 -
TRANSACTIONS AND TERMS OF MERGER
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1
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1.1
Merger
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1
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1.2
Time and
Place of Closing
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1
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1.3
Effective
Time
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2
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1.4
Conversion of Company Common Stock
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2
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1.5
Merger
Sub Common Stock
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2
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1.6
Parent
Common Stock
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2
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1.7
Company
Options and Warrants
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3
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1.8
Organizational Documents and Directors and Officers of Surviving
Corporation
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3
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1.9
Purchase
Price Adjustment
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3
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ARTICLE
2 –
DELIVERY OF MERGER CONSIDERATION
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4
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2.1
Exchange
Procedures
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4
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2.2
Rights of
Former Company Shareholders
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5
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2.3
Dissenters’ Rights
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5
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ARTICLE
3 –
REPRESENTATIONS AND WARRANTIES
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6
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3.1
Company
Disclosure Letter
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6
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3.2
Standards
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6
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3.3
Representations and Warranties of the Company
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6
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3.4
Representations and Warranties of Parent
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21
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ARTICLE
4 –
COVENANTS AND ADDITIONAL AGREEMENTS OF THE PARTIES
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23
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4.1
Conduct
of Business Prior to Effective Time
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23
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4.2
Forbearances
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23
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4.3
State
Filings
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25
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4.4
Company
Shareholder Approval
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26
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4.5
Reasonable Best Efforts
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26
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4.6
Applications and Consents
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26
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4.7
Notification of Certain Matters
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27
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4.8
Investigation and Confidentiality
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27
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4.9
Press
Releases; Publicity
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27
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4.10
Acquisition Proposals
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28
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4.11
Takeover
Laws
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28
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4.12
Retention Bonuses; Change in Control Bonuses; Employee Benefits
and
Contracts
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28
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4.13
Indemnification
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29
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ARTICLE
5 –
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
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29
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5.1
Conditions to Obligations of Each Party
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29
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5.2
Conditions to Obligations of Parent
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30
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5.3
Conditions to Obligations of The Company
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31
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ARTICLE
6 –
TERMINATION
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32
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6.1
Termination
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32
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6.2
Effect of
Termination
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32
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6.3
Termination Fee
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33
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ARTICLE
7 –
MISCELLANEOUS
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33
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7.1
Definitions
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33
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7.2
Non-Survival of Representations and Covenants
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41
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7.3
Expenses
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41
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7.4
Entire
Agreement
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42
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7.5
Amendments
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42
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7.6
Waivers
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42
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7.7
Assignment
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42
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7.8
Notices
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42
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7.9
Governing
Law
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43
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7.10
Counterparts
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43
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7.11
Captions
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43
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7.12
Interpretations
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43
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7.13
Severability
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44
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7.14
Waiver
of Jury Trial
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44
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LIST OF EXHIBITS
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Exhibit
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Description
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A
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Form
of
Director Support Agreement
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B
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Form
of
Shareholder Support Agreement
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C
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Form
of
Retention Agreement
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D
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Form
of
Employment Agreement
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AGREEMENT
AND PLAN OF MERGER
Preamble
THIS
AGREEMENT AND PLAN OF
MERGER (this “Agreement”) is made and entered into as of May 17,
2007, by and among Southside Bancshares, Inc., a Texas
corporation (“Parent”), Southside Merger Sub, Inc., a
Texas corporation and wholly owned subsidiary of Parent (“Merger Sub”)
and Fort Worth Bancshares, Inc., a Texas corporation (the
“Company”).
The
Boards of Directors of Parent, Merger Sub
and the Company have approved this Agreement and the transactions described
herein. This Agreement provides for the acquisition of the Company by
Parent pursuant to the merger of Merger Sub with and into the Company (the
“Merger”), with the Company as the surviving corporation.
Concurrently
with
the execution and delivery of this Agreement, as a condition and inducement
to
Parent’s willingness to enter into this Agreement, each of the directors who are
not also officers has executed and delivered to Parent an agreement in
substantially the form attached as Exhibit A hereto (the “Director
Support Agreement”) and each of the beneficial holders of 5% or more of the
outstanding shares of Company Common Stock who are not also directors has
executed and delivered to Parent an agreement in substantially the form attached
as Exhibit B hereto (the “Shareholder Support Agreement”),
pursuant to which they have agreed, among other things, subject to the terms
of
such Shareholder Support Agreement, to vote the shares of Company Common
Stock
held of record by such Persons or as to which they otherwise have sole voting
power to approve and adopt this Agreement.
Certain
terms used and not otherwise defined in
this Agreement are defined in Section 7.1.
NOW,
THEREFORE, in
consideration of the above and the mutual warranties, representations, covenants
and agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending
to be
legally bound hereby, the Parties agree as follows:
ARTICLE
1
TRANSACTIONS
AND TERMS OF MERGER
1.1 Merger. Subject
to the terms and conditions of this Agreement, at the Effective Time, Merger
Sub
shall be merged with and into the Company in accordance with Sections 5.01
and
5.02 of the Texas Business Corporation Act (the “TBCA”) and with the
effect provided in Section 5.06 of the TBCA. The Company shall be the
surviving corporation (the “Surviving Corporation”) resulting from the
Merger and the separate corporate existence of Merger Sub shall thereupon
cease. The Company shall continue to be governed by the Laws of the
State of Texas and the separate corporate existence of the Company with all
of
its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger; provided that, by virtue of the Merger, the
Company shall become a wholly owned subsidiary of Parent.
1.2 Time
and
Place of Closing. Unless otherwise
mutually agreed to by Parent and the Company, the closing of the Merger (the
“Closing”) shall take place in the offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., Dallas
time, on the date when the Effective Time is to occur (the “Closing
Date”).
1.3 Effective
Time. Subject to the terms and
conditions of this Agreement, on the Closing Date, the Parties will cause
articles of merger to be filed with the Secretary of State of the State of
Texas
as provided in Section 5.04 of the TBCA (the “Articles of
Merger”). The Merger shall take effect when the Articles of
Merger becomes effective (the “Effective Time”). Subject to
the terms and conditions hereof, the Parties shall use their reasonable best
efforts to cause the Effective Time to occur on a mutually agreeable date
following the date on which satisfaction or waiver of the conditions set
forth
in Article 5 has occurred (other than those conditions that by their nature
are
to be satisfied at the Closing, but subject to the fulfillment or waiver
of
those conditions).
1.4 Conversion
of Company Common Stock.
(a) At
the Effective Time, in each case subject to Section 1.4(d), by virtue of
the
Merger and without any action on the part of the Parties or the holder thereof,
each share of Company Common Stock that is issued and outstanding immediately
prior to the Effective Time (other than the Excluded Shares) shall be converted
into the right to receive an amount in cash, without interest, equal to the
Per
Share Purchase Price.
(b) At
the Effective Time, all shares of Company Common Stock shall no longer be
outstanding and shall automatically be cancelled and retired and shall cease
to
exist as of the Effective Time, and each certificate or electronic book-entry
previously representing any such shares of Company Common Stock (the “Company
Certificates”) shall thereafter represent only the right to receive the Per
Share Purchase Price, and any Dissenting Shares shall thereafter represent
only
the right to receive applicable payments as set forth in Section
2.3.
(c) If,
prior to the Effective Time, the issued and outstanding shares of Company
Common
Stock shall have been increased, decreased, changed into or exchanged for
a
different number or kind of shares or securities as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock
split,
reverse stock split, or other similar change in capitalization (which the
parties agree does not include Company Common Stock issued upon the exercise
of
Company Options and Company Warrants), then an appropriate and proportionate
adjustment shall be made to the Per Share Purchase Price.
(d) Each
share of Company Common Stock issued and outstanding immediately prior to
the
Effective Time and owned by any of the Parties or their respective Subsidiaries
(in each case other than shares of Company Common Stock held on behalf of
third
parties) shall, by virtue of the Merger and without any action on the part
of
the holder thereof, cease to be outstanding, shall be cancelled and retired
without payment of any consideration therefor and shall cease to exist (together
with the Dissenting Shares, the “Excluded Shares”).
1.5 Merger
Sub Common Stock. At the
Effective Time, by virtue of the Merger and without any action on the part
of
the Parties of the holder thereof, each share of the common stock of Merger
Sub
that is issued and outstanding immediately prior to the Effective Time shall
be
converted into one share of Company Common Stock.
1.6 Parent
Common Stock. At and after the
Effective Time, each share of Parent Common Stock issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of Parent Common Stock and shall not be affected by the
Merger.
2
1.7 Company
Options and Warrants. No later than
five Business Days prior to the Effective Time, the Company shall take all
actions necessary to either (a) cause each outstanding Company Option or
Company
Warrant to be exercised in accordance with its terms; provided, that,
the exercise of Company Options or Company Warrants shall not cause an
adjustment to the Per Share Purchase Price pursuant to Section 1.4(c) hereof,
or
(b) terminate each outstanding Company Option and Company
Warrant. Each Company Option or Company Warrant that is not exercised
prior to five Business Days prior to the Effective Time shall be terminated
and
converted into the right to receive an amount in cash, without interest,
equal
to (i) the Per Share Purchase Price, minus (ii) the exercise price of such
Company Option or Company Warrant (the “Option Termination
Payment”). No later than five Business Days prior to the
Effective Time, the Company shall also take all actions necessary to terminate
the Company Stock Plans as of no less than five Business Days prior to the
Effective Time and to cause the provisions in any other Company Benefit Plan
providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company to
terminate and be of no further force and effect as of no less than five Business
Days prior to the Effective Time. The Company shall ensure that no
later than five Business Days prior to the Effective Time no holder of any
Company Option or Company Warrant or any participant in any Company Stock
Plan
or other Company Benefit Plan shall have any right thereunder to acquire
any
capital stock of the Parties.
1.8 Organizational
Documents and Directors and Officers of Surviving
Corporation.
(a) The
Organizational Documents of the Company in effect immediately prior to the
Effective Time shall be the Organizational Documents of the Surviving
Corporation after the Effective Time until otherwise amended or
repealed.
(b) The
directors and officers of Merger Sub immediately prior to the Effective Time
shall be the directors and officers, respectively, of the Surviving Corporation
as of the Effective Time, until the earlier of their resignation or removal
or
otherwise ceasing to be a director or officer or until their respective
successors are duly elected and qualified, as the case may be.
1.9 Purchase
Price Adjustment. At least eight
Business Days prior to the Closing Date, the Company shall deliver to Parent
and
Merger Sub a good faith estimate of the Company’s Net Shareholders’ Equity as of
the close of business on the Measurement Date (the “Estimated Net
Shareholders’ Equity”), together with supporting documentation for such
estimate and any additional information relating thereto reasonably requested
by
Parent or Merger Sub. Parent and its accountants and advisors shall be given
full access to all of the Company’s and its Subsidiaries’ books and records for
purposes of evaluating the accuracy and completeness of the Estimated Net
Shareholders’ Equity. If Parent believes, in good faith, that the
Estimated Net Shareholders’ Equity is in error, Parent may challenge the amount
of the Estimated Net Shareholders’ Equity within four Business Days following
delivery thereof by delivering a notice of disagreement to the
Company. If Parent does not timely deliver a notice of disagreement
to the Company, the Per Share Purchase Price shall be based on the Estimated
Net
Shareholders’ Equity as delivered to Parent. If Parent timely
delivers a notice of disagreement to the Company, Parent and the Company
shall
use their good faith efforts to resolve any disputes with respect to the
Estimated Net Shareholders’ Equity prior to the Closing Date, and the Per Share
Purchase Price shall be based on the Net Shareholders’ Equity amount as mutually
agreed to in writing by Parent and the Company. If Parent timely delivers
a
notice of disagreement to the Company but Parent and the Company are unable
to
resolve their dispute regarding the Estimated Net Shareholders’ Equity within
ten Business Days of the delivery by Parent to the
3
1.10 Company
of such
notice of disagreement, then this Agreement shall be deemed terminated pursuant
to Section 6.1(a) of this Agreement as of 11:59 p.m., Central time, on such
tenth Business Day.
ARTICLE
2
DELIVERY
OF MERGER CONSIDERATION
2.1 Exchange
Procedures.
(a) Delivery
of Transmittal Materials. At least 20 days prior to the Effective
Time, Southside Bank (the “Exchange Agent”) shall send to each holder of
record of shares of Company Common Stock (each, a “Holder”) (excluding
the holders, if any, of Excluded Shares) as of that date transmittal materials
for use in exchanging such holder’s Company Certificates for the Per Share
Purchase Price (which shall specify that delivery shall be effected, and
risk of
loss and title to the Company Certificates shall pass, only upon proper delivery
of such Company Certificates (or an effective affidavit of loss in lieu thereof
as provided in Section 2.1(e)) to the Exchange Agent). With respect
to holders of record of shares of Company Common Stock who have not delivered
the Company Certificate representing such shares by the Closing Date, the
Exchange Agent shall sent to each such holder (excluding the holders, if
any, of
Excluded Shares) transmittal materials transmittal materials for use in
exchanging such holder’s Company Certificates for the Per Share Purchase Price
(which shall specify that delivery shall be effected, and risk of loss and
title
to the Company Certificates shall pass, only upon proper delivery of such
Company Certificates (or an effective affidavit of loss in lieu thereof as
provided in Section 2.1(e)) to the Exchange Agent).
(b) Delivery
of Merger Consideration. After the Effective Time, following the
surrender to the Exchange Agent of a Company Certificate (or an effective
affidavit of loss in lieu thereof as provided in Section 2.1(e)) in accordance
with the terms of a letter of transmittal duly executed, the holder of such
Company Certificate shall be entitled to receive in exchange therefor the
Per
Share Purchase Price in respect of each of the shares of Company Common Stock
represented by his, her or its Company Certificate or Certificates (the
“Merger Consideration”). If any portion of the Merger
Consideration is to be paid to a Person other than the Person in whose name
a
Company Certificate so surrendered is registered, it shall be a condition
to
such payment that such Company Certificate shall be properly endorsed or
otherwise be in proper form for transfer, and the Person requesting such
payment
shall pay to the Exchange Agent any transfer or other similar Taxes required
as
a result of such payment to a Person other than the registered holder of
such
Company Certificate, or establish to the reasonable satisfaction of the Exchange
Agent that such Tax has been paid or is not payable. Payments to
holders of Dissenting Shares shall be made as required by the TBCA.
(c) Payment
of Taxes. The Exchange Agent (or, after the agreement with the
Exchange Agent is terminated, Parent) shall be entitled to deduct and withhold
from the Merger Consideration otherwise payable pursuant to this Agreement
to
any holder of Company Common Stock such amounts as the Exchange Agent or
Parent,
as the case may be, is required to deduct and withhold under the Internal
Revenue Code, or any provision of state, local or foreign Tax law, with respect
to the making of such payment. To the extent the amounts are so
withheld by the Exchange Agent or Parent, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid
to the holder of shares of Company Common Stock in respect of whom such
deduction and withholding was made by the Exchange Agent or Parent, as the
case
may be.
(d) Return
of Merger Consideration to Parent. At any time upon request by
Parent, Parent shall be entitled to require the Exchange Agent to deliver
to it
any remaining portion of the Merger
4
Consideration
not
distributed to holders of Company Certificates that was deposited with the
Exchange Agent (the “Exchange Fund”) (including any interest received
with respect thereto and other income resulting from investments by the Exchange
Agent, as directed by Parent), and holders shall be entitled to look only
to
Parent (subject to abandoned property, escheat or other similar laws) with
respect to the Merger Consideration payable upon due surrender of their Company
Certificates, without any interest thereon. Notwithstanding the foregoing,
neither Parent nor the Exchange Agent shall be liable to any holder of a
Company
Certificate for Merger Consideration or cash from the Exchange Fund in each
case
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(e) Lost
Company Certificates. In the event any Company Certificates shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Company Certificate(s) to be lost, stolen
or
destroyed and, if required by Parent or the Exchange Agent, the posting by
such
Person of a bond in such sum as Parent may reasonably direct as indemnity
against any claim that may be made against the Company or Parent with respect
to
such Company Certificate(s), the Exchange Agent will issue the Merger
Consideration deliverable in respect of the shares of Company Common Stock
represented by such lost, stolen or destroyed Company
Certificates. Prior to the Effective Time, upon receipt of notice
from any of its shareholders that a Company Certificate has been lost or
destroyed, and prior to issuing a new certificate, the Company shall require
such shareholder to post a bond in such sum as Parent may reasonably direct
as
indemnity against any claim that may be made against the Company or Parent
with
respect to such Company Certificate(s), unless Parent agrees to the waiver
of
the requirement that such bond be posted.
2.2 Rights
of Former Company Shareholders. At the
Effective Time, the stock transfer books of the Company shall be closed as
to
holders of Company Common Stock and no transfer of Company Common Stock by
any
such holder shall thereafter be made or recognized. Until surrendered
for exchange in accordance with the provisions of Section 2.1, each Company
Certificate (other than Company Certificates representing Excluded Shares)
shall
from and after the Effective Time represent for all purposes only the right
to
receive the Merger Consideration in exchange therefor.
2.3 Dissenters’
Rights. Any Person who otherwise would
be deemed a holder of Dissenting Shares (a “Dissenting Shareholder”)
shall not be entitled to receive the applicable Merger Consideration with
respect to the Dissenting Shares until such Person shall have failed to perfect
or shall have effectively withdrawn or lost such holder’s right to dissent from
the Merger under the TBCA. Each Dissenting Shareholder shall be
entitled to receive only the payment provided by Section 5.12 of the TBCA
with
respect to shares of Company Common Stock owned by such Dissenting Shareholder
for which the Dissenting Shareholder perfected such holder’s dissenter’s
rights. The Company shall give Parent (a) prompt notice of any
written demands for appraisal, attempted withdrawals of such demands, and
any
other instruments served pursuant to applicable Law received by the Company
relating to shareholders’ rights of appraisal and (b) the opportunity to direct
all negotiations and proceedings with respect to demand for appraisal under
the
TBCA. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for appraisals
of Dissenting Shares, offer to settle or settle any such demands or approve
any
withdrawal of any such demands.
5
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES
3.1 Company
Disclosure Letter. Prior to the
execution and delivery of this Agreement, the Company has delivered to Parent
a
letter (the “Company Disclosure Letter”) setting forth, among other
things, items the disclosure of which is necessary or appropriate either
in
response to an express disclosure requirement contained in a provision hereof
or
as an exception to one or more of the Company’s representations or warranties
contained in this Article 3 or to one or more of its covenants contained
in
Article 4. Any disclosures made with respect to a subsection of
Section 3.3 shall be deemed to qualify any subsections of Section 3.3
specifically referenced or cross-referenced with sufficient detail to enable
a
reasonable Person to recognize the relevance of such disclosure to such other
subsections.
3.2 Standards.
(a) No
representation or warranty of any Party hereto contained in this Article
3
(other than the representations and warranties in (i) Section 3.3(c), which
shall be true and correct in all respects (except for inaccuracies that are
de minimis in amount), and (ii) Sections 3.3(b)(i), 3.3(b)(ii), 3.3(d)
and 3.4(b)(i), which shall be true and correct in all material respects)
shall
be deemed untrue or incorrect, and no Party shall be deemed to have breached
any
of its representations or warranties, as a consequence of the existence or
absence of any fact, circumstance or event unless such fact, circumstance
or
event, individually or taken together in the aggregate with all other facts,
circumstances or events inconsistent with such Party’s representations or
warranties contained in this Article 3, has had or is reasonably likely to
have
a Material Adverse Effect on such Party; provided, that, for purposes
of Sections 5.2(a) and 5.3(a) only, the representations and warranties that
are
qualified by references to “material,” “Material Adverse Effect” or to the
“Knowledge” of any Party shall be deemed not to include such
qualifications.
(b) Unless
the context indicates specifically to the contrary, a “Material Adverse
Effect” on a Party shall mean any change, event, violation, inaccuracy or
circumstance the effect of which is a material adverse impact on (i) the
condition (financial or otherwise), property, business, executive management
team, assets (tangible or intangible) or results of operations or prospects
of
such Party and its subsidiaries taken as a whole or (ii) the ability of such
Party to perform its obligations under this Agreement or to consummate the
Merger or the other transactions contemplated by this
Agreement; provided, however, that “Material
Adverse Effect” shall not be deemed to include the impact of actions and
omissions of a Party (or any of its subsidiaries) taken with the prior informed
consent of the other Party in contemplation of the transactions contemplated
hereby; provided, further, that general changes in the economy, as well
as changes in laws or regulations affecting the banking industry, that do
not
have an effect on the Company or its subsidiaries that is disproportionate
to
the effect on similarly-situated financial institutions in Texas and contiguous
states, shall not be deemed to have a Material Adverse Effect on the
Company.
3.3 Representations
and Warranties of the Company. Subject
to and giving effect to Sections 3.1 and 3.2 and except as set forth in the
Company Disclosure Letter, the Company hereby represents and warrants to
Parent
as follows:
(a) Organization,
Standing, and Power. Each Subsidiary of the Company is listed in
Section 3.3(a) of the Company Disclosure Letter. The Company and each
of its Subsidiaries are duly
6
organized,
validly
existing, and, as applicable, are in good standing under the Laws of the
jurisdictions of their respective formation. The Company and each of
its Subsidiaries have the requisite corporate power and authority to own,
lease,
and operate their properties and assets and to carry on their businesses
as now
conducted. The Company and each of its Subsidiaries are duly
qualified or licensed to do business and are in good standing in the States
of
the United States and foreign jurisdictions where the character of their
assets
or the nature or conduct of their businesses requires them to be so qualified
or
licensed. Each of the Company and Fort Worth Bancorporation, Inc. is
a bank holding company within the meaning of the BHC Act and is currently
duly
registered as such with the Federal Reserve Bank of Dallas. Fort
Worth National Bank (the “Bank”) is a national banking association in
good standing with the OCC. The Bank is an “insured institution” as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder and its deposits are insured by the Deposit Insurance
Fund.
(b) Authority;
No Breach of Agreement.
(i) The Company
has the corporate power and authority necessary to execute, deliver, and
perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery, and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
have
been duly and validly authorized by all necessary corporate action (including
valid authorization and adoption of this Agreement by its duly constituted
Board
of Directors), subject only to the Company Shareholder Approval and such
regulatory approvals as are required by law. Subject to the Company
Shareholder Approval and assuming due authorization, execution, and delivery
of
this Agreement by each of Parent and Merger Sub, this Agreement represents
a
legal, valid, and binding obligation of the Company enforceable against the
Company in accordance with its terms (except in all cases as such enforceability
may be limited by (A) bankruptcy, insolvency, reorganization, moratorium,
receivership, conservatorship, and other laws now or hereafter in effect
relating to or affecting the enforcement of creditors’ rights generally or the
rights of creditors of insured depository institutions, (B) general equitable
principles and (C) laws relating to the safety and soundness of insured
depository institutions, and except that no representation is made as to
the
effect or availability of equitable remedies or injunctive relief (regardless
of
whether such enforceability is considered in a proceeding in equity or at
law)
and except that the availability of the equitable remedy of specific performance
or injunctive relief is subject to the discretion of the court before which
any
proceeding may be brought).
(ii) As of the
date hereof, the Company’s Board of Directors has (A) by the affirmative vote of
all directors voting, which constitute at least a majority of the entire
Board
of Directors of the Company, duly approved and declared advisable this Agreement
and the Merger and the other transactions contemplated hereby; (B) determined
that this Agreement and the transactions contemplated hereby are advisable
and
in the best interests of the Company and the holders of Company Common Stock;
(C) resolved to recommend adoption of this Agreement, the Merger and the
other
transactions contemplated hereby to the holders of shares of Company Common
Stock (such recommendations being the “Company Directors’
Recommendation”); and (D) directed that this Agreement be submitted to the
holders of shares of Company Common Stock for their adoption.
(iii) Neither
the execution and delivery of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby, nor compliance by
it
with any of the provisions hereof or thereof, will (A) violate, conflict
with or
result in a breach of any provision of the Company’s or its Subsidiaries’
Organizational Documents, (B) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on
any
material assets of the Company or its Subsidiaries under, any Contract
or
7
Permit,
or (C)
subject to receipt of the Regulatory Consents and the expiration of any waiting
period required by Law, violate any Law or Order applicable to the Company
or
its Subsidiaries or any of their respective material assets.
(iv) Other than
(A) the Regulatory Consents and (B) notices to or filings with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation or both with
respect
to any Benefit Plans, no notice to, filing with, or Consent of, any Governmental
Authority is necessary in connection with the execution, delivery or performance
of this Agreement and the consummation by the Company of the Merger and the
other transactions contemplated by this Agreement.
(c) Capital
Stock; Subsidiaries. The Company’s authorized capital stock
consists of (i) 1,500,000 shares of Company Common Stock,
of which, as of the date of this Agreement, 650,202 shares are issued and
outstanding, 35,599 shares are subject to Company Options, 19,866 are subject
to
Company Warrants and 11,998 shares are held in treasury, and (ii) 500,000
shares
of Company Preferred Stock, none of which are issued and
outstanding. Set forth in Section 3.3(c) of the Company Disclosure
Letter is a true and complete schedule of all outstanding Rights to acquire
shares of Company Common Stock, including grant date, vesting schedule, exercise
price, expiration date and the name of the holder of such
Rights. Except as set forth in this Section 3.3(c) or in Section
3.3(c) of the Company Disclosure Letter, there are no shares of Company Common
Stock or other equity securities of the Company outstanding and no outstanding
Rights relating to the Company Common Stock, and no Person has any Contract
or
any right or privilege (whether pre-emptive or contractual) capable of becoming
a Contract or Right for the purchase, subscription or issuance of any securities
of the Company. All of the outstanding shares of Company Common Stock
are duly and validly issued and outstanding and are fully paid and
nonassessable. None of the outstanding shares of Company Common Stock
has been issued in violation of any preemptive rights of the current or past
shareholders of the Company. There are no Contracts among the Company and
its
shareholders or by which the Company is bound with respect to the voting
or
transfer of Company Common Stock or the granting of registration rights to
any
holder thereof. All of the outstanding shares of Company Capital
Stock and all Rights to acquire shares of Company Capital Stock have been
issued
in compliance with all applicable federal and state Securities
Laws. All issued and outstanding shares of capital stock of its
Subsidiaries have been duly authorized and are validly issued, fully paid
and
(except as provided in 12 U.S.C. Section 55) nonassessable. All of
the outstanding shares of capital stock of the Company’s Subsidiaries are owned
by the Company or a wholly owned Subsidiary thereof, free and clear of all
Liens. None of the Company’s Subsidiaries has outstanding any Right
to acquire any shares of its capital stock or any security convertible into
such
shares, or has any obligation or commitment to issue, sell or deliver any
of the
foregoing or any shares of its capital stock. The outstanding capital
stock of each of the Company’s Subsidiaries has been issued in compliance with
all legal requirements and is not subject to any preemptive or similar
rights.
(d) Financial
Statements; Regulatory Reports; Proxy Statements.
(i) The Company
has delivered to Parent true and complete copies of (A) the Company Financial
Statements; (B) all monthly reports and financial statements of the Company
and
its Subsidiaries that were prepared for the Company’s or any of its
Subsidiaries’ Board of Directors since January 1, 2006; (C) the annual report of
Bank Holding Companies to the Federal Reserve Board for the year ended December
31, 2006, of the Company and its Subsidiaries required to file such reports;
(D)
all call reports and consolidated and parent company only financial statements,
including all amendments thereto, made to the Federal Reserve Board, the
OCC,
the FDIC and the Texas Department of Banking since January 1, 2006, of the
Company’s and its Subsidiaries required to file such reports; and (E) all annual
and quarterly reports and proxy or information statements (or similar materials)
disseminated to the
8
Company’s
shareholders or the shareholders of any of its Subsidiaries at any time since
January 1, 2005.
(ii) The
Company Financial Statements delivered prior to the date of this Agreement
have
been (and all Company Financial Statements to be delivered to Parent as required
by this Agreement will be) prepared in accordance with GAAP. The
Company Financial Statements fairly present the financial position, results
of
operations, changes in shareholders’ equity and cash flows of the Company and
its Subsidiaries as of the dates thereof and for the periods covered
thereby. All call and other regulatory reports referred to above have
been filed on the appropriate form and prepared in all material respects
in
accordance with such forms’ instructions and the applicable rules and
regulations of the regulating federal and/or state agency. As of the
date of the latest balance sheet forming part of the Company’s Financial
Statements (the “Company Latest Balance Sheet”), none of the Company or
its Subsidiaries has had, nor are any of such entities’ assets subject to, any
material liability, commitment, indebtedness or obligation (of any kind
whatsoever, whether absolute, accrued, contingent, known or unknown, matured
or
unmatured) that is not reflected and adequately provided for in accordance
with
GAAP. No report, including any report filed with the FDIC, the OCC,
the Texas Department of Banking, the Federal Reserve Board or other banking
regulatory agency, and no report, proxy statement, registration statement
or
offering materials made or given to shareholders of the Company since January
1,
2005, as of the respective dates thereof, contained any untrue statement
of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under
which they were made, not misleading. No report, including any report
filed with the FDIC, the OCC, the Texas Department of Banking, the Federal
Reserve Board, or other banking regulatory agency, and no report, proxy
statement, registration statement or offering materials made or given to
shareholders of the Company to be filed or disseminated after the date of
this
Agreement will contain any untrue statement of a material fact or will omit
to
state a material fact required to be stated therein or necessary to make
the
statements therein, in light of the circumstances under which they will be
made,
not misleading. The Company’s Financial Statements are supported by
and consistent with the general ledger and detailed trial balances of investment
securities, loans and commitments, depositors’ accounts and cash balances on
deposit with other institutions, copies of which have been made available
to
Parent. The Company and its Subsidiaries have timely filed all
reports and other documents required to be filed by them with the FDIC, the
OCC,
the Texas Department of Banking, and the Federal Reserve Board.
(iii) Each of
the Company and each of its Subsidiaries maintains accurate books and records
reflecting its assets and liabilities and maintains proper and adequate internal
accounting controls, which provide assurance that (A) transactions are executed
with management’s authorization; (B) transactions are recorded as necessary to
permit preparation of the consolidated financial statements of the Company
in
accordance with GAAP and to maintain accountability for the Company’s
consolidated assets; (C) access to the Company’s assets is permitted only in
accordance with management’s authorization; (D) the reporting of the Company’s
assets is compared with existing assets at regular intervals and (E) accounts,
notes and other receivables and assets are recorded accurately, and proper
and
adequate procedures are implemented to effect the collection thereof on a
current and timely basis.
(iv) Since
January 1, 2005, neither the Company nor any Subsidiary nor any of their
current
directors or officers, nor to the Company’s Knowledge, any former officer or
director or any current or former employee, auditor, accountant or
representative of the Company or any Subsidiary has received or otherwise
had or
obtained Knowledge of any complaint, allegation, assertion or claim, whether
written or oral, regarding a material weakness, significant
9
deficiency
or other
defect or failure in the accounting or auditing practices, procedures,
methodologies or methods of the Company or any Subsidiary or their respective
internal accounting controls.
(v) To the
Company’s Knowledge, since January 1, 2005, there has not been (A) any
significant deficiency in the design or operation of internal controls that
could adversely affect the Company’s ability to record, process, summarize and
report financial data or any material weaknesses in internal controls or
(B) any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the Company’s internal controls.
(vi) None of
the Company or any of its Subsidiaries has any Liabilities that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect
on
the Company and any of its Subsidiaries, taken as a whole, except Liabilities
that are accrued or reserved against in the accounts set forth in the Company
Latest Balance Sheet, included in the Company’s Financial Statements delivered
prior to the date of this Agreement or reflected in the notes
thereto. None of the Company or its Subsidiaries has incurred or paid
any Liability since December 31, 2006, except for such Liabilities incurred
or
paid (A) in the ordinary course of business consistent with past business
practice and that are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the Company and its Subsidiaries,
taken
as a whole, or (B) in connection with the transactions contemplated by this
Agreement.
(e) Absence
of Certain Changes or Events. Since December 31, 2006, except as
disclosed in Section 3.3(e) of the Company Disclosure Letter, (i) the Company
and each of its Subsidiaries have conducted their business only in the ordinary
course, (ii) neither the Company nor any of its Subsidiaries has taken action
that, if taken after the date of this Agreement, would constitute a breach
of
Section 4.1 or 4.2, and (iii) there have been no events, changes, or occurrences
that have had, or are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on the Company and its Subsidiaries,
taken
as a whole.
(f) Tax
Matters.
(i) All
Taxes of the Company and each of its Subsidiaries that are or were due or
payable (whether or not shown on any Tax Return) have been fully and timely
paid. The Company and each of its Subsidiaries have timely filed all
Tax Returns in all jurisdictions in which Tax Returns are required to have
been
filed by them or on their behalf, and each such Tax Return is complete and
accurate in all material respects. Neither the Company nor any of its
Subsidiaries is the beneficiary of any extension of time within which to
file
any Tax Return. There have been no examinations or audits of any Tax
Return by any Taxing Authority. The Company and each of its
Subsidiaries have made available to Parent true and correct copies of their
United States federal and state income Tax Returns for each of the three
most
recent fiscal years ended on or before December 31, 2006. No claim
has ever been made by a Taxing Authority in a jurisdiction where the Company
or
any of its Subsidiaries does not file a Tax Return that the Company or any
of
its Subsidiaries may be subject to Taxes by that jurisdiction, and to the
Company’s Knowledge, no basis for such a claim exists.
(ii) Neither
the Company nor any of its Subsidiaries has received any notice of assessment
or
proposed assessment in connection with any Tax, and there is no threatened
or
pending dispute, action, suit, proceeding, claim, investigation, audit,
examination, or other Litigation regarding any Tax of the Company, any of
its
Subsidiaries or the assets of the Company or any of its
Subsidiaries. No officer or employee responsible for Tax matters of
the Company or any of its Subsidiaries expects any Taxing Authority to assess
any additional Tax for
10
any
period for
which a Tax Return has been filed. There are no agreements, waivers
or other arrangements providing for an extension of time with respect to
the
assessment of any Tax or deficiency against the Company or any of its
Subsidiaries, and neither the Company nor any of its Subsidiaries has waived
or
extended the applicable statute of limitations for the assessment or collection
of any Tax or agreed to a Tax assessment or deficiency. Neither the
Company nor any of its Subsidiaries has received any notice of any contemplated
or actual reassessment of any real property or any portion thereof for general
real estate Tax purposes.
(iii) Neither
the Company nor any of its Subsidiaries is a party to a Tax allocation, sharing,
indemnification or similar agreement or any agreement pursuant to which it
has
any obligation to any Person with respect to Taxes, and neither the Company
nor
any of its Subsidiaries has been a member of an affiliated group filing a
consolidated federal or state income Tax Return or any combined, affiliated
or
unitary group for any Tax purpose (other than the group of which it is currently
a member), and neither the Company nor any of its Subsidiaries has any Tax
liability under Treasury Regulation Section 1.1502-6 or any similar provision
of
Law, or as a transferee or successor, by contract or otherwise.
(iv) The
proper and accurate amounts of Tax have been withheld by the Company and
each of
its Subsidiaries and timely paid to the appropriate Taxing Authority for
all
periods through the Effective Time in compliance with all Tax withholding
provisions of all applicable federal, state, local and foreign Laws, rules
and
regulations, including Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee or independent contractor,
and Taxes required to be withheld and paid pursuant to Sections 1441, 1442
and
3406 of the Internal Revenue Code or similar provisions under state, local
or
foreign Law.
(v) Neither
the Company nor any of its Subsidiaries has been a party to any distribution
occurring during the five-year period ending on the date hereof in which
the
parties to such distribution treated the distribution as one to which Section
355 of the Internal Revenue Code applied. No Liens for Taxes exist
with respect to any assets of the Company or any of its Subsidiaries, except
for
statutory Liens for Taxes not yet due and payable.
(vi) Neither
the Company nor any of its Subsidiaries is a controlled foreign corporation
within the meaning of the Internal Revenue Code. The Company and each
of its Subsidiaries has complied with all of the income inclusion and Tax
reporting provisions of the U.S. anti-deferral Tax regimes, including the
controlled foreign corporation, passive foreign investment company and foreign
personal holding company regimes.
(vii) Neither
the Company nor any of its Subsidiaries has made any payments, is obligated
to
make any payments, or is a party to any contract that could obligate it to
make
any payments that could be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code or any comparable provision of state
Tax
Law.
(viii) Neither
the Company nor any of its Subsidiaries is or has ever been a United States
real
property holding corporation within the meaning of Internal Revenue Code
Section
897(c) or any comparable provision of state Tax Law. Neither the
Company nor any of its Subsidiaries has been or will be required to include
any
adjustment in taxable income for any Tax period (or portion thereof) pursuant
to
Section 481 of the Internal Revenue Code or any comparable provision under
state
or foreign Tax Laws as a result of transactions or events occurring prior
to the
Effective Time.
11
(ix) The
Company and each of its Subsidiaries have disclosed on their respective Tax
Returns any position taken for which substantial authority (within the meaning
of Internal Revenue Code Section 6662(d)(2)(B)(i) or comparable provision
of
state Tax Law) did not exist at the time the return was
filed. Neither the Company nor any of its Subsidiaries has
participated in any reportable transaction, as defined in Treasury Regulation
Section 1.6011-4(b)(1) or any comparable provision of state Tax Law, or a
transaction substantially similar to a reportable
transaction. Neither the Company nor any of its Subsidiaries is a
party to any joint venture, partnership, or other arrangement or contract
that
could be treated as a partnership for federal income Tax purposes.
(g) Real
Property.
(i) Section
3.3(g)(i)
of the Company Disclosure Letter contains a true and correct legal description
of each parcel of Property owned by the Company or any of its Subsidiaries
(the
“Owned Property”) and a summary description of all Facilities located
thereon. The Company and its Subsidiaries have good and marketable
fee simple title to the Owned Property, free and clear of all Liens, other
than
Permitted Encumbrances. To the Company’s Knowledge, the transactions
contemplated herein will not cause a Default, or event of default under any
of
the Permitted Encumbrances.
(ii) Section
3.3(g)(ii)
of the Company Disclosure Letter describes all real property currently leased
by
the Company or any of its Subsidiaries (the “Leased Property”), the name
of the lessor or sublessor, the lease term, the lease commencement date,
the
lease expiration date and the base annual rent (as well as any agreed upon
prospective or other adjustments thereto). The Company has provided
to Parent a complete and accurate copy of each such lease, as
amended. All Leased Property, including the Facilities located
thereon, is in good condition and repair, and is suitable for its use by
the
Company. All leases of Leased Property are in good standing and are
valid, binding and enforceable against the Company or its Subsidiaries, as
the
case may be, and to the Company’s Knowledge against the respective lessors, in
accordance with their respective terms, and, there does not exist under any
such
lease of Leased Property any Default on the part of the Company or any of
its
Subsidiaries (or to the Company’s Knowledge, on the part of any lessor) or any
event that, with notice or lapse of time or both, would constitute a
Default. To the Company’s Knowledge, the transactions contemplated
herein will not cause a Default under any of the leases of Leased
Property.
(iii) The
Company and its
Subsidiaries own each Owned Property and lease each Leased Property, in each
case free and clear of any Liens, title defects,
covenants, reservations of interests in title, pending or threatened
condemnations, planned public improvements, annexation, special assessments,
zoning or subdivision changes, special assessments or fees or other material
adverse claims (collectively, “Property Restrictions”), except for (A)
Permitted Encumbrances, (ii) Property Restrictions imposed or promulgated
by Law
or by any Governmental Authority which are customary and typical for similar
properties and (iii) Property Restrictions which do not materially interfere
with the current use of the Property by the Company or its
Subsidiaries.
(iv) The
building
systems and facilities at or servicing the Facilities or the Property,
including, but not limited to, elevators, security systems, HVAC, utilities,
electrical systems, plumbing and water systems, roofing, storm drainage,
sewer
systems, and telephone service (including any cellular or digital facilities)
are, to the Company’s Knowledge, in good
12
(v) condition
and
working order. All Facilities on the Owned Property and the Leased
Property conform in all material respects to all applicable state and local
laws
or use restrictions.
(h) Environmental
Matters.
(i) The
Company has delivered, or caused to be delivered to Parent, or provided Parent
access to, true and complete copies of, all environmental site assessments,
test
results, analytical data, boring logs, and other environmental reports and
studies held by the Company and each of its Subsidiaries relating to their
respective Properties and Facilities.
(ii) The
Company and each of its Subsidiaries and their respective Facilities and
Properties are, and have been, in compliance with all Environmental Laws,
except
for violations that are not reasonably likely to have, individually or in
the
aggregate, a Material Adverse Effect, and there are no past or present events,
conditions, circumstances, activities or plans related to the Properties
or
Facilities that did or would violate or prevent compliance or continued
compliance with any of the Environmental Laws.
(iii) There
is no Litigation pending or threatened before any Governmental Authority
or
other forum in which the Company or its Subsidiaries or any of their respective
Properties or Facilities (including but not limited to properties and facilities
that secure or secured loans made by the Company or its Subsidiaries and
properties and facilities now or formerly held, directly or indirectly, in
a
fiduciary capacity by the Company or its Subsidiaries) has been or, with
respect
to threatened Litigation, may be named as a defendant (A) for alleged
noncompliance (including by any predecessor) with or Liability under any
Environmental Law or (B) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting)
any such Properties or Facilities.
(iv) During
or prior to the period of (A) the Company’s or any of its Subsidiaries’
ownership or operation (including but not limited to ownership or operation,
directly or indirectly, in a fiduciary capacity) of, or (B) the Company’s or any
of its Subsidiaries’ participation in the management (including but not limited
to such participation, directly or indirectly, in a fiduciary capacity) of
any
Property or Facility, there have been no releases, discharges, spillages,
or
disposals of Hazardous Material in, on, under, adjacent to, or affecting
(or
potentially affecting) such Properties or Facilities.
(i) Compliance
with Permits, Laws and Orders.
(i) Each of the
Company and its Subsidiaries has in effect all Permits and has made all filings,
applications, and registrations with Governmental Authorities that are required
for it to own, lease, or operate its material assets and to carry on its
business as now conducted and there has occurred no Default under any Permit
applicable to its business or employees conducting its respective
business.
(ii) Neither
the Company nor any of its Subsidiaries is in Default under any Laws or Orders
applicable to its business or employees conducting its business.
(iii) Neither
the Company nor any of its Subsidiaries has received any notification or
communication from any Governmental Authority, (A) asserting that the Company
or
any of its Subsidiaries is in Default under any of the Permits, Laws or Orders,
which such
13
Governmental
Authority enforces, (B) threatening to revoke any Permits, (C) requiring
or
advising that it may require the Company or any of its Subsidiaries (x) to
enter
into or consent to the issuance of a cease and desist order, formal agreement,
directive, commitment, or memorandum of understanding, or (y) to adopt any
resolution of its Board of Directors or similar undertaking that restricts
materially the conduct of its business or in any material manner relates
to its
management or (D) requiring or advising that it may prohibit or substantially
delay the consummation of transactions of the sort contemplated by this
Agreement.
(iv) There (A)
is no unresolved violation, criticism, or exception by any Governmental
Authority with respect to any report or statement relating to any examinations
or inspections of the Company or any of its Subsidiaries, (B) have been no
formal or informal inquiries by, or disagreements or disputes with, any
Governmental Authority with respect to the Company’s or any of its Subsidiaries’
businesses, operations, policies or procedures since January 1, 2005, and
(C) is
no pending or, to its Knowledge, threatened, nor has any Governmental Authority
indicated an intention to conduct any, investigation or review of the Company
or
any of its Subsidiaries.
(v) Neither the
Company, nor any of its subsidiaries, nor any of their directors, officers,
employees or Representatives acting on their behalf has offered, paid, or
agreed
to pay any Person, including any Government Authority, directly or indirectly,
anything of value for the purpose of, or with the intent of obtaining or
retaining any business in violation of applicable Laws, including (A) using
any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity, (B) making any direct or
indirect unlawful payment to any foreign or domestic government official
or
employee from corporate funds, (C) violating any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (D) making any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.
(vi) Except as
required by the Bank Secrecy Act, to the Company’s Knowledge, no employee of the
Company or any of its Subsidiaries has provided or is providing information
to
any law enforcement agency regarding the commission or possible commission
of
any crime or the violation or possible violation of any applicable Law by
the
Company or any of its Subsidiaries or any employee thereof acting in such
capacity. Neither the Company nor any Subsidiary nor any officer,
employee, contractor, subcontractor or agent of the Company or any Subsidiary
has discharged, demoted, suspended, threatened, harassed or in any other
manner
discriminated against any employee of the Company or any of its Subsidiaries
in
the terms and conditions of employment because of any act of such employee
described in 18 U.S.C. Section 1514A(a).
(vii) Since
January 1, 2005, the Company and each of its Subsidiaries have filed all
reports
and statements, together with any amendments required to be made with respect
thereto, that the Company and each of its Subsidiaries were required to file
with any Governmental Authority and all other reports and statements required
to
be filed by the Company and each of its Subsidiaries since January 1, 2005,
including any report or statement required to be filed pursuant to the Laws
of
the United States, any state or political subdivision, any foreign jurisdiction,
or any other Governmental Authority have been so filed, and the Company and
each
of its Subsidiaries have paid all fees and assessments due and payable in
connection therewith.
(j) Labor
Relations. Neither the Company nor any of its Subsidiaries is the
subject of any Litigation asserting that the Company or any of its Subsidiaries
has committed an unfair labor practice (within the meaning of the National
Labor
Relations Act or comparable state Law) or seeking to
14
compel
the Company
or any of its Subsidiaries to bargain with any labor organization as to wages
or
conditions of employment, nor is the Company or any of its Subsidiaries a
party
to or bound by any collective bargaining agreement, Contract, or other agreement
or understanding with a labor union or labor organization, nor is there any
strike or other labor dispute involving the Company or any of its Subsidiaries
pending or, to the Company’s Knowledge, threatened, nor, to the Company’s
Knowledge, is there any activity involving the Company or any of its
Subsidiaries’ employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
(k) Employee
Benefit Plans.
(i) The Company
has disclosed in Section 3.3(k)(i) of the Company Disclosure Letter, and
has
delivered or made available to Parent prior to the date of this Agreement,
with
respect to all of its Benefit Plans (including Benefit Plans maintained by
the
Bank), correct and complete copies of (A) the most recent plan documents
(including all amendments thereto) of all Benefit Plans and other writings
setting forth the terms of such Benefit Plans, (B) the most recent summary
plan
description, together with each summary of material modifications, and (C)
written descriptions of plans for which a plan document or other writing
is not
required or available. Neither the Company nor any of its
Subsidiaries, nor any ERISA Affiliate has, or has at any time had, any
“obligation to contribute” (as defined in ERISA Section 4212) to a
“multiemployer plan” (as defined in ERISA Sections 4001(a)(3) and
3(37)(A)). Each “employee pension benefit plan,” as defined in
Section 3(2) of ERISA, that was ever maintained by the Company or any of
its
Subsidiaries and that was intended to qualify under Section 401(a) of the
Internal Revenue Code, is disclosed as such in Section 3.3(k)(i) of the Company
Disclosure Letter.
(ii) The
Company has delivered or made available to Parent prior to the date of this
Agreement correct and complete copies of the following documents: (A)
all trust agreements or other funding arrangements for its Benefit Plans
(including insurance Contracts), and all amendments thereto, (B) with respect
to
any such Benefit Plans or amendments, the most recent determination letters,
and
all material rulings, material opinion letters, material information letters,
or
material advisory opinions issued by the Internal Revenue Service, the United
States Department of Labor, or the Pension Benefit Guaranty Corporation after
December 31, 1996, (C) annual reports or returns, audited or unaudited financial
statements, actuarial valuations and reports, and summary annual reports
prepared for any Benefit Plans with respect to the most recent plan year,
and
(D) with respect to each Pension Plan, the most recent statement, whether
or not
audited, showing the fair market value of assets of such Pension Plan, and
(E)
the most recent summary plan descriptions and any material modifications
thereto.
(iii) All of
the Company’s and its Subsidiaries’ Benefit Plans are, and have at all times
have been, in compliance with the applicable terms of ERISA, the Internal
Revenue Code, and any other applicable Laws. Each of the Company’s
and its Subsidiaries’ ERISA Plans has received a favorable determination letter
from the Internal Revenue Service and there are no circumstances that will
or
could reasonably result in revocation of any such favorable determination
letter. Each trust created under any of the Company’s or its
Subsidiaries’ ERISA Plans has been determined to be exempt from Tax under
Section 501(a) of the Internal Revenue Code and the Company is not aware
of any
circumstance that will or could reasonably result in revocation of such
exemption. With respect to each of the Company’s and its
Subsidiaries’ Benefit Plans, to the Company’s Knowledge, no event has occurred
that will or could reasonably give rise to a loss of any intended Tax
consequences under the Internal Revenue Code or to any Tax under Section
511 of
the Internal Revenue Code that is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a
15
whole. There
is no pending or, to the Company’s Knowledge, threatened Litigation relating to
any Benefit Plans; there are no pending, or, to the Company’s Knowledge,
threatened governmental audits or investigations with respect to any Benefit
Plan; and there are no pending, or to the Company’s Knowledge, threatened,
participant claims with respect to any Benefit Plan, other than claims for
benefits I n the normal course of business.
(iv) Neither
the Company nor any of its Subsidiaries has engaged in a transaction with
respect to any of its Benefit Plans that, assuming the Taxable Period of
such
transaction expired as of the date of this Agreement or the Effective Time,
would subject the Company or any of its Subsidiaries to a Tax or penalty
imposed
by either Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA. Neither the Company nor any administrator or fiduciary of any
of the Company’s or its Subsidiaries’ Benefit Plans (or any agent of any of the
foregoing) has engaged in any transaction, or acted or failed to act in any
manner with respect to any of the Company’s or its Subsidiaries’ Benefit Plans
that could subject the Company or any of its Subsidiaries to any direct or
indirect Liability (by indemnity or otherwise) for breach of any fiduciary,
co-fiduciary, or other duty under ERISA. No oral or written
representation or communication with respect to any aspect of any Benefit
Plans
of the Company or its Subsidiaries has been made to employees of the Company
or
any of its Subsidiaries that is not in conformity with the written or otherwise
preexisting terms and provisions of such plans.
(v) Each of the
Company’s and its Subsidiaries’ Pension Plans had, as of the date of its most
recent actuarial valuation, assets measured at fair market value at least
equal
to its “current liability,” as that term is defined in Section 302(d)(7) of
ERISA. Since the date of the most recent actuarial valuation, no
event has occurred that would be reasonably expected to adversely change
any
such funded status in a material way. None of the Company’s or its
Subsidiaries’ Pension Plans nor any “single-employer plan,” within the meaning
of Section 4001(a)(15) of ERISA, currently maintained by the Company or any
of
its Subsidiaries, or the single-employer plan of any ERISA Affiliate has
an
“accumulated funding deficiency” within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA. All required
contributions with respect to any of the Company or its Subsidiaries’ Pension
Plans or any single-employer plan of any of the Company’s or its Subsidiaries’
ERISA Affiliates have been timely made and there is no Lien, nor is there
expected to be a Lien, under Internal Revenue Code Section 412(n) or ERISA
Section 302(f) or Tax under Internal Revenue Code Section
4971. Neither the Company nor any of its Subsidiaries has provided,
or is required to provide, security to any of its Pension Plans or to any
single-employer plan of any of its ERISA Affiliates pursuant to Section
401(a)(29) of the Internal Revenue Code. All premiums required to be
paid under ERISA Section 4006 have been timely paid by the Company and its
Subsidiaries.
(vi) No
Liability under Title IV of ERISA has been or is expected to be incurred
by the
Company or any of its Subsidiaries with respect to any defined Benefit Plan
currently or formerly maintained by any of them or by any of their ERISA
Affiliates that has not been satisfied in full (other than Liability for
Pension
Benefit Guaranty Corporation premiums, which have been paid when
due).
(vii) Neither
the Company nor any of its Subsidiaries has any obligations for retiree health
and retiree life benefits under any of its Benefit Plans other than with
respect
to benefit coverage mandated by applicable Law.
(viii) Except
as set forth in Section 3.3(k)(viii) of the Company Disclosure Letter, no
written, or, to the Company’s Knowledge, oral representation or communication
with
16
respect
to any
aspect of a Benefit Plan has been made to any employee that is not in accordance
with the written or otherwise pre-existing terms and provisions of such
plans.
(ix) Except as
set forth in Section 3.3(k)(ix) of the Company Disclosure Letter, the
consummation of the transactions contemplated by this Agreement will not
(or
will not upon termination of employment within a fixed period of time following
such consummation) (A) entitle any employee, director or consultant to severance
pay, unemployment compensation or any other payment, or (B) accelerate the
time
of payment or vesting or increase the amount of payment with respect to any
compensation due to any employee, director or consultant.
(l) Material
Contracts.
(i) Except for
Contracts listed in Section 3.3(l)(i) of the Company Disclosure Letter, as
of
the date of this Agreement, neither the Company nor any of its Subsidiaries,
nor
any of their respective assets, businesses, or operations is a party to,
or is
bound or affected by, or receives benefits under, (A) any employment, severance,
termination, consulting, or retirement Contract, (B) any Contract relating
to
the borrowing of money by the Company or any of its Subsidiaries or the
guarantee by the Company or any of its Subsidiaries of any such obligation
(other than Contracts evidencing deposit liabilities, purchases of federal
funds, fully-secured repurchase agreements, and Federal Home Loan Bank advances
of the Bank or Contracts pertaining to trade payables incurred in the ordinary
course of business), (C) any Contract containing covenants that limit the
ability of the Company or any of its Subsidiaries to engage in any line of
business or to compete in any line of business or with any Person, or that
involve any restriction of the geographic area in which, or method by which,
the
Company or any of its Subsidiaries or Affiliates may carry on their respective
businesses (other than as may be required by Law or any Governmental Authority),
(D) any Contract or series of related Contracts for the purchase of materials,
supplies, goods, services, equipment or other assets that (x) provides for
or is
reasonably likely to require annual payments by the Company or any of its
Subsidiaries of $25,000 or more or (y) have a term exceeding 12 months in
duration (except those entered into in the ordinary course of business with
respect to loans, lines of credit, letters of credit, depositor agreements,
certificates of deposit and similar routine banking activities and equipment
maintenance agreements that are not material), (E) any Contract between or
among
the Company or any of its Subsidiaries, (F) any Contract involving Intellectual
Property (excluding generally commercially available “off the shelf” software
programs licensed pursuant to “shrink wrap” or “click and accept” licenses), (G)
any Contract relating to the provision of data processing, network
communications or other technical services to or by the Company or any of
its
Subsidiaries, (H) any Contract adversely affecting or otherwise restricting
the
Company’s use of, ownership of or leasehold interest in any of the Owned
Property or Leased Property or (I) any other Contract or amendment thereto
that
would be required to be filed as an exhibit to a Form 10-K or Form 10-Q report
under Items 601(b)(4) and 601(b)(10) of Regulation S-K of SEC Rules and
Regulations if the Company were a SEC reporting company. All
indebtedness for money borrowed of the Company or its Subsidiaries is prepayable
without penalty or premium.
(ii) All
interest rate swaps, caps, floors, option agreements, futures and forward
contracts, and other similar risk management arrangements, whether entered
into
for the Company’s own account or for the account of one or more of its
Subsidiaries or their respective customers, were entered into (A) in accordance
with prudent business practices and all applicable Laws and (B) with
counterparties believed to be financially responsible, and each of them is
enforceable in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors’ rights generally and except that
the
17
availability
of the
equitable remedy of specific performance or injunctive relief is subject
to the
discretion of the court before which any proceeding may be brought), and
is in
full force and effect. Neither the Company nor any of its
Subsidiaries, nor to the Company’s Knowledge, any other party thereto, is in
breach of any of its obligations under any such agreement or
arrangement. The Company’s Financial Statements disclose the value of
such agreements and arrangements on a ▇▇▇▇-to-market basis in accordance
with
GAAP and, since January 1, 2005, there has not been a change in such value
that,
individually or in the aggregate, has resulted in a Material Adverse Effect
on
the Company and its Subsidiaries, taken as a whole.
(m) Legal
Proceedings. There is no Litigation pending or, to the Company’s
Knowledge, threatened against the Company or any of its Subsidiaries or the
Company’s or any of its Subsidiaries’ assets, interests, or rights, nor are
there any Orders of any Governmental Authority or arbitrators outstanding
against the Company or any of its Subsidiaries, nor do any facts or
circumstances exist that would be likely to form the basis for any material
claim against the Company or its Subsidiaries. There is no
Litigation, pending or, to the Company’s Knowledge, threatened, against any
officer, director, advisory director or employee of the Company its
Subsidiaries, in each case by reason of any person being or having been an
officer, director, advisory director or employee of the Company or its
Subsidiaries.
(n) Intellectual
Property.
(i) The Company
and each of its Subsidiaries own, or are licensed or otherwise possess legally
enforceable and unencumbered rights to use, all Intellectual Property (including
the Technology Systems) that is used by the Company or its Subsidiaries in
the Company’s or its Subsidiaries’ businesses. Neither the Company
nor any of its Subsidiaries has (A) licensed to any Person in source code
form
any Intellectual Property owned by the Company or any of its Subsidiaries
or (B)
entered into any exclusive agreements relating to Intellectual Property owned
by
the Company or its Subsidiaries.
(ii) Section
3.3(n)(ii) of the Company Disclosure Letter lists all patents and patent
applications, all registered and unregistered trademarks and applications
therefor, trade names and service marks, registered copyrights and applications
therefor, domain names, web sites, and mask works owned by or exclusively
licensed to the Company or its Subsidiaries included in its Intellectual
Property, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed. No royalties or other
continuing payment obligations are due in respect of any third-party patents,
trademarks or copyrights, including software.
(iii) All
patents, registered trademarks, service marks and copyrights held by the
Company
and its Subsidiaries are valid and subsisting. Since January 1, 2005,
neither the Company nor any of its Subsidiaries (A) has, to the Company’s
Knowledge, been sued in any Litigation that involves a claim of infringement
of
any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party or (B) has brought any
Litigation for infringement of its Intellectual Property or breach of any
license or other Contract involving its Intellectual Property against any
third
party.
(o) Loan
and Investment Portfolios. All loans, discounts and financing
leases in which the Company or any of its Subsidiaries is a lessor reflected
on
the Company Latest Balance Sheet were as of the date hereof, and with respect
to
the consolidated balance sheets delivered as of the dates subsequent to the
execution of this Agreement will be as of the dates thereof, (i) at the time
and
under the circumstances in which made, made for good, valuable and adequate
consideration in the ordinary course
18
of
business of the
Company and its Subsidiaries and are the legal, valid and binding obligations
of
the obligors thereof, (ii) evidenced by genuine notes, agreements or other
evidences of indebtedness and (iii) to the extent secured, have been secured,
to
the Company’s Knowledge, by valid Liens that have been
perfected. Accurate lists of all loans, discounts and financing
leases as of December 31, 2006, and on a monthly basis thereafter, and of
the
investment portfolios of the Company and each of its Subsidiaries as of such
date, have been and will be delivered to Parent concurrently with the Company
Disclosure Letter. Except as specifically set forth on Section 3.3(n)
of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is a party to any written or oral loan agreement, note or borrowing
arrangement, including any loan guaranty, that was, as of the most recent
month-end prior to the date of this Agreement (i) delinquent by more than
30
days in the payment of principal or interest, (ii) to the Company’s Knowledge,
otherwise in material default for more than 30 days, (iii) classified as
“substandard,” “doubtful,” “loss,” “other assets especially mentioned” or any
comparable classification by the Company or any of its Subsidiaries or any
Regulatory Authority having jurisdiction over the Company or any of its
Subsidiaries, (iv) an obligation of any director, executive officer or 10%
shareholder of the Company or any of its Subsidiaries who is subject to
Regulation O of the Federal Reserve Board (12 C.F.R. Part 215), or any Person
controlling, controlled by or under common control with any of the foregoing,
or
(v) in violation of any Law.
(p) Adequacy
of Allowances for Losses. Each of the allowances for losses on
loans, financing leases and other real estate included on the Company Latest
Balance Sheet (along with any subsequent balance sheet required to be delivered
hereunder) is, and with respect to the consolidated balance sheets delivered
as
of the dates subsequent to the execution of this Agreement will be as of
the
dates thereof, adequate in accordance with the policies of the Company,
applicable regulatory guidelines, and GAAP, and, to the Company’s Knowledge,
there are no facts or circumstances that are likely to require in accordance
with applicable regulatory guidelines or GAAP a future material increase
in any
such provisions for losses or a material decrease in any of the allowances
therefor. Each of the allowances for losses on loans, financing
leases and other real estate reflected on the books of the Company and its
Subsidiaries at all times from and after the date of the Company Latest Balance
Sheet is, and will be, adequate in accordance with the policies of the Company,
applicable regulatory guidelines and GAAP, and, to the Company’s Knowledge,
there are no facts or circumstances that are likely to require, in accordance
with applicable regulatory guidelines or GAAP, a future material increase
in any
of such provisions for losses or a material decrease in any of the allowances
therefor.
(q) Bank
Secrecy Act; Money
Laundering. Neither
the Company nor any of its Subsidiaries has any reason to believe that any
facts
or circumstances exist, which would cause the Company or any of its Subsidiaries
to be deemed to be operating in violation in any material respect of the
Bank
Secrecy Act, the Uniting and Strengthening America by Providing Appropriate
Tools Required to Interrupt and Obstruct Terrorism (USA Patriot Act), the
Bank
Protection Act, Financial Crimes Enforcement Network, any order or requirement
issued with respect to anti-money laundering by the U.S. Department of the
Treasury’s Office of Foreign Assets Control or any other applicable anti-money
laundering Law.
(r) Community
Reinvestment Act. The Bank has complied in all material respects
with the provisions of the Community Reinvestment Act (“CRA”) and the
rules and regulations thereunder, has, and at all times has had, a CRA rating
of
not less than “satisfactory,” has received no material criticism from regulators
with respect to discriminatory lending practices, and the Company has no
Knowledge of any conditions or circumstances that are likely to result in
a CRA
rating of less than “satisfactory” or material criticism from regulators with
respect to discriminatory lending practices.
19
(s) Privacy
of Customer Information.
(i) The Company
and its Subsidiaries, as applicable, are the sole owners of all individually
identifiable personal information (“IIPI”) relating to customers, former
customers and prospective customers. For purposes of this Section
3.3(s), “IIPI” means any information relating to an identified or identifiable
natural person.
(ii) The
Company’s and its Subsidiaries’ collection and use of such IIPI, the transfer of
IIPI to the Company or any of its Subsidiaries, and the use of such IIPI
by
Parent or any of its Affiliates after the consummation of the Merger complies
or
will comply with all applicable privacy policies, the Fair Credit Reporting
Act,
the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act and all other applicable state, federal and foreign
privacy Laws, and any contract or industry standard relating to
privacy.
(t) Technology
Systems.
(i) No action
will be necessary as a result of the transactions contemplated by this Agreement
to enable use of the Technology Systems to continue by the Company and its
Subsidiaries to the same extent and in the same manner that it has been used
by
the Company and its Subsidiaries prior to the Effective Time.
(ii) The
Technology Systems (for a period of 18 months prior to the Effective Time)
have
not suffered any material unplanned disruption. Except for ongoing
payments due under Contracts with third parties, the Technology Systems are
free
from any Liens. Access to business-critical parts of the Technology
Systems is not shared with any third party.
(iii) Neither
the Company nor any of its Subsidiaries has received notice of or is aware
of
any circumstances, including the execution of this Agreement, that would
enable
any third party to terminate, or increase or accelerate payment of amounts
due
under any of the Company’s or any of its Subsidiaries’ agreements or
arrangements relating to the Technology Systems (including maintenance and
support).
(u) Insurance
Policies. Each of the Company and its Subsidiaries maintains in
full force and effect insurance policies and bonds in such amounts and against
such liabilities and hazards of the types and amounts as (i) it reasonably
believes to be adequate for its business and operations and the value of
its
properties and (ii) are comparable to those maintained by other banking
organizations of similar size and complexity. A complete and accurate
list of all such insurance policies is attached as Section 3.3(u) of the
Company
Disclosure Letter. Neither the Company nor any of its Subsidiaries is
now liable for, nor has any such member received notice of, any material
retroactive premium adjustment. All policies are valid and
enforceable and in full force and effect, and neither the Company nor any
of its
Subsidiaries has received any notice of a material premium increase or
cancellation with respect to any of its insurance policies or
bonds. Within the last three years, neither the Company nor any of
its Subsidiaries has been refused any basic insurance coverage sought or
applied
for (other than certain exclusions for coverage of certain events or
circumstances as stated in such policies), and the Company does not have
any
reason to believe that the Company’s and its Subsidiaries’ existing insurance
coverage cannot be renewed as and when the same shall expire, upon terms
and
conditions standard in the market at the time renewal is sought as favorable
as
those presently in effect.
20
(v) Corporate
Documents. The Company has delivered to Parent, with respect to
the Company and each of its Subsidiaries, true and correct copies of their
Organizational Documents, and the charters of each of the committees of their
respective Boards of Directors, all as amended and currently in effect, all
of
the corporate minutes and stock transfer records, all of which are listed
in
Section 3.3(v) of the Company Disclosure Letter. All of the
foregoing, and any such documents made available to Parent after the date
hereof, are current, complete and correct in all material respects.
(w) State
Takeover Laws. The Company has taken all action required to be
taken by it in order to exempt this Agreement and the transactions contemplated
hereby from, and this Agreement and the transactions contemplated hereby
are
exempt from, the requirements of any “moratorium,” “control share,” “fair
price,” “affiliate transaction,” “anti-greenmail,” “business combination” or
other anti-takeover Laws of any jurisdiction, including Part 13 of the TBCA
(collectively, “Takeover Laws”). The Company has taken all
action required to be taken by it in order to make this Agreement and the
transactions contemplated hereby comply with, and this Agreement and the
transactions contemplated hereby do comply with, the requirements of any
provisions of its Organizational Documents concerning “business combination,”
“fair price,” “voting requirement,” “constituency requirement” or other related
provisions.
(x) Certain
Actions. Neither the Company nor any of its Subsidiaries or
Affiliates has taken or agreed to take any action, and the Company has no
Knowledge of any fact or circumstance, that is reasonably likely to materially
impede or delay receipt of any required Regulatory Consents. To the
Company’s Knowledge, there exists no fact, circumstance or reason that would
cause any Regulatory Consent or other required Consent not to be received
in a
timely manner.
(y) Brokers
and Finders. Except for ▇▇▇▇▇ Financial, Inc., neither the
Company nor any of its Subsidiaries, nor any of their respective directors,
officers, employees or Representatives, has employed any broker or finder
or
incurred any Liability for any financial advisory fees, investment bankers’
fees, brokerage fees, commissions, or finders’ fees in connection with this
Agreement or the transactions contemplated hereby.
(z) Fairness
Opinion. Prior to the execution of this Agreement,
the Company has received an opinion of ▇▇▇▇▇ Financial, Inc. to the effect
that
as of the date thereof and based upon and subject to the matters set forth
therein, the Merger Consideration is fair, from a financial point of view,
to
the shareholders of the Company and a signed copy of the opinion has been
delivered to Parent. Such opinion has not been amended or rescinded
as of the date of this Agreement.
(aa) Accuracy
of Statements. No warranty or representation made or to be made
by the Company in this Agreement or in any document furnished or to be furnished
by the Company pursuant to this Agreement contains or will contain, as of
the
date of this Agreement and the Closing Date, an untrue statement of a material
fact or an omission of a material fact necessary to make the statements
contained herein and therein, in light of the circumstances in which they
are
made, not misleading.
3.4 Representations
and Warranties of Parent. Subject to
and giving effect to Section 3.2, Parent and Merger Sub, jointly and severally,
hereby represent and warrant to the Company as follows:
(a) Organization,
Standing, and Power. Each of Parent and Merger Sub is duly
organized, validly existing, and in good standing under the Laws of the State
of
Texas. Parent is a bank holding company within the meaning of the BHC
Act.
21
(b) Authority;
No Breach of Agreement.
(i) Parent and
Merger Sub each have the corporate power and authority necessary to execute,
deliver, and perform their obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement, and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action (including valid authorization and adoption of this Agreement
by the duly constituted Board of Directors of each of Parent and Merger
Sub). Assuming due authorization, execution, and delivery of this
Agreement by the Company, this Agreement represents a legal, valid, and binding
obligation of each of Parent and Merger Sub, enforceable against each of
Parent
and Merger Sub in accordance with its terms (except in all cases as such
enforceability may be limited by (A) bankruptcy, insolvency, reorganization,
moratorium, receivership, conservatorship, and other laws now or hereafter
in
effect relating to or affecting the enforcement of creditors’ rights generally
or the rights of creditors of insured depository institutions, (B) general
equitable principles and (C) laws relating to the safety and soundness of
insured depository institutions, and except that no representation is made
as to
the effect or availability of equitable remedies or injunctive relief
(regardless of whether such enforceability is considered in a proceeding
in
equity or at law) and except that the availability of the equitable remedy
of
specific performance or injunctive relief is subject to the discretion of
the
court before which any proceeding may be brought).
(ii) Neither
the execution and delivery of this Agreement by Parent or Merger Sub, nor
the
consummation by either of them of the transactions contemplated hereby, nor
compliance by them with any of the provisions hereof, will (A) conflict with
or
result in a breach of any provision of their respective Organizational
Documents, or (B) constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any material
asset
under, any Contract or Permit, or (C) subject to receipt of the Required
Consents and the expiration of any waiting period required by Law, violate
any
Law or Order applicable to Parent or Merger Sub or any of their respective
material assets.
(c) Legal
Proceedings. There is no Litigation that would be required to be
disclosed in a Form 10-K or Form 10-Q pursuant to Item 103 of Regulation
S-K of
SEC Rules and Regulations that are not so disclosed, pending or, to Parent’s
Knowledge, threatened against Parent, or against any asset, interest, or
right
of Parent, nor are there any Orders of any Governmental Authority or arbitrators
outstanding against Parent.
(d) Certain
Actions. Neither Parent nor any of its Subsidiaries or Affiliates
has taken or agreed to take any action, and Parent has no Knowledge of any
fact
or circumstance, that is reasonably likely to materially impede or delay
receipt
of any required Regulatory Consents. To Parent’s Knowledge, there
exists no fact, circumstance or reason that would cause any Regulatory Consent
or other required Consent not to be received in a timely manner.
(e) Brokers
and Finders. Neither Parent nor any of its Subsidiaries, nor any
of their respective directors, officers, employees or Representatives, has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers’ fees, brokerage fees, commissions, or
finders’ fees in connection with this Agreement or the transactions contemplated
hereby.
(f) Accuracy
of Statements. No warranty or representation made or to be made
by Parent in this Agreement or in any document furnished or to be furnished
by
Parent pursuant to this Agreement contains or will contain, as of the date
of
this Agreement and the Closing Date, an untrue
22
statement
of a
material fact or an omission of a material fact necessary to make the statements
contained herein and therein, in light of the circumstances in which they
are
made, not misleading.
ARTICLE
4
COVENANTS
AND ADDITIONAL AGREEMENTS OF THE PARTIES
4.1 Conduct
of Business Prior to Effective
Time. During the period from the date
of this Agreement until the earlier of the termination of this Agreement
pursuant to Article 6 or the Effective Time, except as expressly contemplated
or
permitted by this Agreement, the Company shall and shall cause each of its
Subsidiaries to (a) conduct its respective business in the ordinary course,
(b)
use reasonable best efforts to maintain and preserve intact its respective
business organization, employees and advantageous business relationships,
(c)
maintain its respective books, accounts and records in the usual manner on
a
basis consistent with that heretofore employed and (d) take no action that
would
adversely affect or delay the satisfaction of the conditions set forth in
Section 5.1(a) or 5.1(b) or the ability of either Party to perform its covenants
and agreements under this Agreement or to consummate the transactions
contemplated hereby.
4.2 Forbearances. During
the period from the date of this Agreement until the earlier of the termination
of this Agreement pursuant to Article 6 or the Effective Time, except as
expressly contemplated or permitted by this Agreement or as otherwise indicated
in this Section 4.2, the Company shall not, without the prior written consent
of
the chief executive officer or chief financial officer of Parent (which consent
shall not be unreasonably withheld or delayed):
(a) amend
the Company’s or its Subsidiaries’ Organizational Documents or any resolution or
agreement concerning indemnification of their respective directors or
officers;
(b) except
for Permitted Issuances and except as provided in Section 4.3, (i) adjust,
split, combine, subdivide or reclassify any capital stock, (ii) make, declare,
set aside or pay any dividend or make any other distribution on, or directly
or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible (whether currently
convertible or convertible only after the passage of time or the occurrence
of
certain events) into or exchangeable for any shares of Company Capital Stock
or
capital stock of any of its Subsidiaries, (iii) grant any Company Options
or
other Rights, (iv) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance of,
any
shares of Company Capital Stock or capital stock of any of Company’s
Subsidiaries, or (v) make any change in any instrument or Contract governing
the
terms of any of Company’s or its Subsidiaries’ securities;
(c) other
than in the ordinary course of business or pursuant to Contracts in force
at the
date of, or permitted by, this Agreement, make any investment (either by
purchase of stock or securities, contributions to capital, property transfers,
or purchase of any property or assets) in any other Person;
(d) charge
off (except as may otherwise be required by law or by regulatory authorities
or
by GAAP) or sell (except in the ordinary course of business consistent with
past
practices) any of its portfolio of loans, discounts or financing leases,
or sell
any asset held as other real estate or other foreclosed assets for an amount
materially less than 100% of its book value;
23
(e) terminate
or allow to be terminated any of the policies of insurance the Company and
its
Subsidiaries maintain on their respective businesses or Properties, cancel
any
material indebtedness owing to the Company or its Subsidiaries or any claims
that the Company or its Subsidiaries may have possessed, or waive any right
of
substantial value or discharge or satisfy any material noncurrent
liability;
(f) enter
into any new line of business, or change the Company’s or its Subsidiaries’
lending, investment, underwriting, risk and asset liability management, loan
loss reserve and other banking and operating policies, except as required
by
applicable Laws or any policies imposed on it by any Governmental
Authority;
(g) except
in the ordinary course of business consistent with past practices: (i) lend
any
money or pledge any of the Company’s or its Subsidiaries’ credit in connection
with any aspect of the Company’s or its Subsidiaries’ businesses whether as a
guarantor, surety, issuer of a letter of credit or otherwise, (ii) mortgage
or
otherwise subject to any lien, encumbrance or other liability any of the
Company’s or its Subsidiaries’ assets, (iii) sell, assign or transfer any of its
assets in excess of $25,000 in the aggregate or (iv) incur any material
liability, commitment, indebtedness or obligation (of any kind whatsoever,
whether absolute or contingent), or cancel, release or assign any indebtedness
of any Person or any claims against any Person, except (A) in the ordinary
course of business or (B) pursuant to Contracts in force as of the date of
this
Agreement and disclosed in Section 4.2(g) of the Company Disclosure Letter
or
transfer, agree to transfer or grant, or agree to grant a license to, any
of the
Company’s or its Subsidiaries’ material Intellectual Property;
(h) other
than in the ordinary course of business, incur any indebtedness for borrowed
money other than short-term indebtedness incurred to refinance short-term
indebtedness (it being understood that for purposes of this Section 4.2(h),
“short-term” shall mean maturities of six months or less); assume, guarantee,
endorse or otherwise as an accommodation become responsible for the obligations
of any Person;
(i) other
than in consultation with Parent, restructure or change its investment
securities portfolio or its gap position, through purchases, sales or otherwise,
or the manner in which the portfolio is classified or reported except in
the
ordinary course, consistent with past practices;
(j) enter
into any Contract other than renewals of Contracts of terms for less than
one
year and without any other materially adverse change in terms and, other
than in
the ordinary course of business, terminate or waive any material provision
of
any Contract other than normal nonrenewals of Contracts in accordance with
their
terms;
(k) other
than in the ordinary course of business or as required by Benefit Plans and
Contracts as in effect at the date of this Agreement, (i) increase in any
manner
the compensation or fringe benefits of any of the Company’s or its Subsidiaries’
officers, employees or directors, (ii) pay any pension or retirement allowance
not required by any existing Benefit Plan or Contract to any such officers,
employees or directors, (iii) become a party to, amend or commit to any Benefit
Plan or Contract (or any individual Contracts evidencing grants or awards
thereunder) or employment agreement with or for the benefit of any such officer,
employee or director, or (iv) accelerate the vesting of, or the lapsing of
restrictions with respect to, Rights pursuant to any Company Stock
Plan;
(l) settle
any material Litigation;
24
(m) revalue
any of the Company’s or any of its Subsidiaries’ assets or materially change any
method of accounting or accounting practice used by it or any of its
Subsidiaries, other than changes required by GAAP;
(n) file
or amend any Tax Return except in the ordinary course of business; settle
or
compromise any material Tax Liability; or make, change or revoke any material
Tax election or change any method of Tax accounting, except as required by
applicable Law;
(o) knowingly
take, or knowingly omit to take, any action that is reasonably likely to
result
in any of the conditions to the Merger set forth in Article 5 not being
satisfied, except as may be required by applicable Law;
(p) merge
or consolidate the Company or any of its Subsidiaries with, or sell or otherwise
transfer the issued and outstanding stock of the Company or any of its
Subsidiaries to, any Person;
(q) acquire
assets outside of the ordinary course of business not consistent with past
practices from any other Person with a value or purchase price in the aggregate
in excess of $50,000, other than purchase obligations pursuant to Contracts
to
the extent in effect immediately prior to the execution of this Agreement
and
described in Section 4.2(q) of the Company Disclosure Letter;
(r) make
any adverse changes in the mix, rates, terms or maturities of the Bank’s
deposits or other Liabilities;
(s) make
any extension of credit that, when added to all other extensions of credit
to a
borrower and its affiliates, would exceed applicable regulatory lending
limits;
(t) make
any loans, or enter into any commitments to make loans, which vary other
than in
immaterial respects from its written loan policies, a true and correct copy
of
which policies has been provided to Parent; provided, that this
covenant shall not prohibit the Bank from extending or renewing credit or
loans
in the ordinary course of business consistent with past lending practices
or in
connection with the workout or renegotiation of loans currently in its loan
portfolio; provided further, that the Company will allow a
representative of Parent to be present for informational purposes only at
all
meetings of the Board of Directors or any committee of the Bank at which
the
Board of Directors or any committee thereof will vote on proposed new or
renewal
loans or investments and such Parent representative shall not take part in
discussions or voting on any matters presented at such meetings (in furtherance
of which, the Company has, concurrently with the execution of this Agreement,
provided to Parent a calendar of such board or committee meetings of the
Bank,
and will promptly provide to Parent any updates to such calendar after the
date
hereof);
(u) take
any action that at the time of taking such action is reasonably likely to
prevent, or would be reasonably likely to interfere with, the consummation
of
the Merger; or
(v) enter
into any agreement or commitment to take any of the actions prohibited by
this
Section 4.2.
4.3 State
Filing. Upon the terms and subject to
the conditions of this Agreement and prior to or in connection with the Closing,
the Company and Merger Sub shall execute and cause to be filed the Articles
of
Merger with the Secretary of State of the State of Texas.
25
4.4 Company
Shareholder Approval. The Company shall
call a meeting of its shareholders to be held as soon as reasonably practicable
for the purpose of obtaining the Company Shareholder Approval and such other
matters as the Board of Directors of the Company may direct, and shall use
its
reasonable best efforts to cause such meeting to occur as soon as reasonably
practicable. Parent shall be entitled to have a representative attend
such meeting of shareholders. The Board of Directors of the Company
shall make the Company Directors’ Recommendation to its shareholders and the
Company Directors’ Recommendation shall be included in any proxy statement or
other communication delivered to the Company’s shareholders in connection with
such meeting.
4.5 Reasonable
Best Efforts.
(a) Subject
to the terms and conditions of this Agreement, the Parties will use all
reasonable best efforts to take, or cause to be taken, in good faith, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable Laws, including using its reasonable
best efforts to lift or rescind any Order adversely affecting its ability
to
consummate the transactions contemplated hereby and to cause to be satisfied
the
conditions in Article 5, to permit consummation of the Merger as promptly
as
practicable and otherwise to enable consummation of the transactions
contemplated hereby, and each will cooperate fully with and furnish information
to, the other Party to that end, and obtain all consents of, and give all
notices to and make all filings with, all Governmental Authorities and other
third parties that may be or become necessary for the performance of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby; provided, that nothing contained herein shall
preclude any Party from exercising its rights under this Agreement.
(b) The
Parties shall consult with respect to the character, amount and timing of
restructuring charges to be taken by each of them in connection with the
transactions contemplated hereby and shall take such charges in accordance
with
GAAP, as the Parties mutually agree upon.
4.6 Applications
and Consents.
(a) The
Parties shall cooperate in seeking all Consents of Governmental Authorities
and
other Persons necessary to consummate the transactions contemplated
hereby.
(b) Without
limiting the foregoing, the Parties shall cooperate in (i) the filing of
any
required applications and notices with the Texas Department of Banking and
the
Federal Reserve Board under the BHC Act, and obtaining approval of such
applications and notices, (ii) the filing of any required applications or
notices with any foreign or state banking, insurance or other Regulatory
Authorities and obtaining approval of such applications and notices, and
(iii)
making any filings with and obtaining any Consents in connection with compliance
with the applicable provisions of the rules and regulations of any applicable
industry self-regulatory organization, or that are required under consumer
finance, mortgage banking and other similar Laws (collectively, the
“Regulatory Consents”).
(c) Each
Party will promptly furnish to the other Party copies of applications filed
with
all Governmental Authorities and copies of written communications received
by
such Party from any Governmental Authorities with respect to the transactions
contemplated hereby. Each Party agrees that it will consult with the
other Party with respect to the obtaining of all Regulatory Consents and
other
material Consents advisable to consummate the transactions contemplated by
this
Agreement and each Party will keep the other Party apprised of the status
of
material matters relating to completion of the transactions contemplated
hereby. All documents that the Parties or their respective
Subsidiaries are
26
responsible
for
filing with any Governmental Authority in connection with the transactions
contemplated hereby (including to obtain Regulatory Consents) will comply
as to
form in all material respects with the provisions of applicable
Law.
4.7 Notification
of Certain Matters. The Company will
give prompt notice to Parent (and subsequently keep Parent informed on a
current
basis) upon its becoming aware of the occurrence or existence of any fact,
event
or circumstance that (a) is reasonably likely to result in any Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole, or (b) would
cause
or constitute a breach of any of its representations, warranties, covenants,
or
agreements contained herein; provided, that any failure
to give notice in accordance with the foregoing with respect to any breach
shall
not be deemed to constitute the failure of any condition set forth in Section
5.2(b) to be satisfied, or otherwise constitute a breach of this Agreement
by
the Company due to its failure to give such notice unless the underlying
breach
would independently result in a failure of the conditions set forth in Sections
5.2(a) or 5.2(b) or give rise to a termination right under Section
6.1. The Company shall deliver to Parent a copy of each written
opinion of its financial advisor, ▇▇▇▇▇ Financial, Inc., as soon as reasonably
practicable after the Company’s receipt thereof.
4.8 Investigation
and Confidentiality.
(a) The
Company shall permit Parent to make or cause to be made such investigation
of
the business and Properties of the Company and its Subsidiaries and of the
Company’s and its Subsidiaries’ financial and legal conditions as Parent
reasonably requests; provided, that such investigation
shall be reasonably related to the transactions contemplated hereby and shall
not interfere unnecessarily with normal operations; and provided
further, that neither the Company nor any of its Subsidiaries shall be
required to provide access to or to disclose information where such access
or
disclosure would jeopardize the attorney-client or other privilege with respect
to such information, contravene any Law, Order, or Contract, or result in
disclosure of any trade secrets of third parties, and the Parties will use
their
reasonable best efforts to make appropriate substitute disclosure arrangements,
to the extent practicable, in circumstances in which the restrictions of
the
preceding clause apply. No investigation by Parent shall affect the
representations and warranties of the Company or the right of Parent to rely
thereon. Between the date hereof and the Effective Time, the Company
shall permit Parent’s senior officers to meet with the financial officers of the
Company and its Subsidiaries, including officers responsible for the Company’s
Financial Statements, the internal controls of the Company its Subsidiaries
and
the disclosure controls and procedures of the Company and its Subsidiaries,
to
discuss such matters as Parent may deem reasonably necessary or appropriate
for
Parent to satisfy its obligations under Sections 302, 404 and 906 of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the “▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act”).
(b) Each
Party shall, and shall cause its directors, officers, employees and
Representatives to, maintain the confidentiality of all confidential information
furnished to it by the other Party concerning its and its Subsidiaries’
businesses, operations, and financial positions to the extent required by,
and
in accordance with, the Confidentiality Agreement, and shall not use such
information for any purpose except in furtherance of the transactions
contemplated by this Agreement. If this Agreement is terminated prior
to the Effective Time, each Party shall promptly return or certify the
destruction of all documents and copies thereof, and all work papers containing
confidential information received from the other Party.
4.9 Press
Releases; Publicity. Prior to the
Effective Time, the Company shall consult with Parent as to the form and
substance of any Company press release, other public statement or shareholder
communication related to or mentioning this Agreement and the transactions
contemplated hereby prior to issuing such press release, public statement
or
shareholder communication or making any other public or shareholder disclosure
related thereto; provided, that
27
4.10 nothing
in this
Section 4.9 shall be deemed to prohibit the Company from making any disclosure
that its counsel deems reasonably necessary or advisable in order to satisfy
the
Company’s disclosure obligations imposed by Law.
4.11 Acquisition
Proposals. The Company agrees that it
will not, and will cause its directors, officers, employees and Representatives
and Affiliates not to, (a) initiate, solicit, encourage or knowingly facilitate
inquiries or proposals with respect to, (b) engage or participate in any
negotiations concerning, or (c) provide any confidential or nonpublic
information or data to, or have or participate in any discussions with, any
Person relating to, any Acquisition Proposal. The Company will
immediately cease and cause to be terminated any activities, discussions
or
negotiations conducted before the date of this Agreement with any Persons
other
than Parent with respect to any Acquisition Proposal. The Company
shall promptly (and in any event within two Business Days) advise Parent
following receipt of any Acquisition Proposal and the substance thereof
(including the identity of the Person making such Acquisition Proposal),
and
will keep Parent apprised of any related developments, discussions and
negotiations on a current basis.
4.12 Takeover
Laws. If any Takeover Law may become,
or may purport to be, applicable to the transactions contemplated hereby,
the
Company and the members of its Board of Directors will grant such approvals
and
take such actions as are necessary (other than any action requiring the approval
of its shareholders (other than as contemplated by Section 4.4)) so that
the
transactions contemplated by this Agreement may be consummated as promptly
as
practicable on the terms contemplated hereby and otherwise act to eliminate
or
minimize the effects of any Takeover Law on any of the transactions contemplated
by this Agreement.
4.13 Retention
Bonuses; Change in Control Bonuses; Employee Benefits and
Contracts.
(a) Parent
shall cause
the Surviving Corporation to pay to the employees set forth on Section 4.12(a)
of the Company Disclosure Letter (the “Retention Bonus Eligible
Employees”) (i) all amounts owed under the Company Critical Employee Bonus
Plan in accordance with the terms thereof and as set forth in Section 4.12(a)
of
the Company Disclosure Letter, which amounts shall not, in the aggregate,
exceed
$190,000, and (ii) an aggregate amount of $40,000, 50% of which shall be
payable
on the date that is 18 months after the Closing Date and 50% of which shall
be
payable on the date that is 24 months after the Closing Date, in the same
respective proportions as the Retention Bonus Eligible Employees are entitled
to
be paid under the Company Retention Bonus Plan; provided that Parent
shall only be obligated to make payments to Retention Bonus Eligible Employees
who are employees of the Bank as of such dates.
(b) The
Company shall
pay all change in control bonuses arising under employment agreements set
forth
on Section 4.12(b) of the Company Disclosure Letter in accordance with the
terms
thereof.
(c) All
employees
of the Company or any of its Subsidiaries shall remain employees of the Company
and its Subsidiaries upon consummation of the Merger. Following the
Effective Time, any such employee may be terminated, and the job duties,
compensation and authority of any such employee may be modified, subject
to
payment of any severance pay or other termination benefits due under terms
of
employment contracts with the Company or the Bank and any Parent Severance
Payment to such employees who are terminated by the Company or by the Bank
within the 12 month period following the Closing Date.
28
(d) At
the Effective
Time, all retained employees shall remain on the existing Benefit Plans of
the
Company or its Subsidiaries. Thereafter, at a time determined by
Parent in its sole discretion, the retained employees shall be eligible for
such
employee benefits as are generally available to new employees, as of the
date
hereof, of Parent and its Subsidiaries having like tenure, officer status
and
compensation levels and such employees shall be given full credit for all
prior
service (including, but not limited to, credit towards satisfaction of any
waiting periods under Parent’s health and welfare plans) as employees of the
Company or any of its Subsidiaries. To the extent permitted under the
terms of such plans, Parent shall not make any exclusion of coverage for
any
pre-existing conditions under any of its healthcare plans, and Parent, through
its medical and dental plan underwriters, shall use commercially reasonable
efforts to provide retained employees and enrolled dependents credit for
all
eligible expenses incurred within the calendar year under plans maintained
by
the Company or any of its Subsidiaries for purposes of satisfying annual
deductibles and out-of-pocket maximums under Parent’s healthcare
plans. Such employees are solely responsible for supplying
satisfactory proof of previously incurred expenses to Parent’s plan
underwriters.
4.14 Indemnification.
(a) From
and after the Effective Time, subject to applicable Law, the Surviving
Corporation and its Subsidiaries shall, and Parent shall cause the Surviving
Corporation and its Subsidiaries to, honor the Company’s and the Bank’s existing
indemnification obligations, as reflected in their respective Organizational
Documents and any indemnification agreement with the Company or its Subsidiaries
in existence on the date of this Agreement and disclosed in Section 4.13(a)
of
the Company Disclosure Letter, for current or former directors, officers
and
employees, without time limitation, for matters arising out of the service
of
such persons with the Company or its Subsidiaries prior to the Effective
Time.
(b) The
Company, the Bank and Parent shall cooperate to obtain a directors’ and
officers’ liability insurance policy to provide coverage for a period of six
years from the Effective Time to all Persons who served as directors or officers
of the Company or its Subsidiaries at or prior to the Effective Time, with
respect to actions or omissions prior to the Effective Time. The
policy shall be purchased by the Party to whom the most favorable terms are
available. The total premium under such policy shall not exceed 150% of the
annual premium paid by the Company for its current directors’ and officers’
liability insurance policy (as set forth in Section 3.3(u) of the Company
Disclosure Letter).
(c) If
Surviving Corporation or any of its successors or assigns shall consolidate
with
or merge into any other Person and shall not be the continuing or surviving
Person of such consolidation or merger or shall transfer all or substantially
all of its assets to any Person, then and in each case, proper provision
shall
be made so that the successors and assigns of the Surviving Corporation as
the
surviving entities shall assume the obligations set forth in this Section
4.13.
(d) The
provisions of this Section 4.13 are intended to be for the benefit of and
shall
be enforceable by, each Indemnified Party and his or her heirs and
representatives.
ARTICLE
5
CONDITIONS
PRECEDENT TO OBLIGATIONS TO CONSUMMATE
5.1 Conditions
to Obligations of Each Party. The
respective obligations of each Party to perform this Agreement and to consummate
the
29
5.2 Merger
and the
other transactions contemplated hereby are subject to the satisfaction of
the
following conditions, unless waived by each Party pursuant to Section
7.6:
(a) Shareholder
Approval. The Company shall have obtained the Company Shareholder
Approval.
(b) Regulatory
Approvals. All Regulatory Consents required by law to consummate
the transactions contemplated by this Agreement (the “Required Consents”)
shall (i) have been obtained or made and be in full force and effect and
all
waiting periods required by Law shall have expired, and (ii) not be subject
to
any condition or consequence that would, after the Effective Time, have a
material adverse effect on the financial position, results of operations
or
prospects of Parent or any of its Subsidiaries.
(c) No
Orders or Restraints; Illegality. No Order issued by any
Governmental Authority (whether temporary, preliminary, or permanent) preventing
the consummation of the Merger shall be in effect and no Law or Order shall
have
been enacted, entered, promulgated or enforced by any Governmental Authority
that prohibits, restrains, or makes illegal the consummation of the
Merger.
5.3 Conditions
to Obligations of Parent. The
obligations of Parent to perform this Agreement and consummate the Merger
and
the other transactions contemplated hereby are subject to the satisfaction
of
the following conditions, unless waived by Parent pursuant to Section
7.6:
(a) Representations
and Warranties. The representations and warranties of the Company
set forth in this Agreement, after giving effect to Sections 3.1 and 3.2,
shall
be true and correct as of the date of this Agreement and as of the Closing
Date
as though made at and as of the Closing Date (except that representations
and
warranties that by their terms speak specifically as of the date of this
Agreement or some other date shall be true and correct as of such date),
and
Parent shall have received certificates, dated the Closing Date, signed on
behalf of the Company by the chief executive officer and the chief financial
officer of the Company, to such effect.
(b) Performance
of Agreements and Covenants. Each and all of the agreements and
covenants of the Company to be performed and complied with pursuant to this
Agreement prior to the Effective Time shall have been duly performed and
complied with in all material respects and Parent shall have received
certificates, dated the Closing Date, signed on behalf of the Company by
the
chief executive officer and the chief financial officer of the Company, to
such
effect.
(c) Corporate
Authorization and Good Standing. Parent shall have received from
the Company (i) certified resolutions of its Board of Directors and shareholders
authorizing the execution and delivery of this Agreement and the consummation
of
the transactions contemplated hereby; (ii) a certificate as to the incumbency
and signatures of officers authorized to execute this Agreement; (iii) a
certificate of good standing of the Company, dated not more than three Business
Days before the Closing Date, from the Secretary of State of the State of
Texas;
(iv) a certificate of good standing of Fort Worth Bancorporation, Inc. dated
not
more than three Business Days before the Closing Date, from the Secretary
of
State of the State of Delaware; (v) an insured status certificate with respect
to the Bank, dated not more than ten Business Days before the Closing Date,
from
the FDIC; (vi) a Certificate of Corporate Existence, dated not more than
ten
Business Days before the Closing Date, from the OCC; (vii) and a letter,
dated
not more than ten Business Days before the Closing Date, confirming the
registration of each of the
30
Company
and Fort
Worth Bancorporation, Inc. as bank holding companies under the Bank Holding
Company Act of 1956, from the Federal Reserve Bank of Dallas.
(d) Consents. The
Company shall have obtained all Consents required as a result of the
transactions contemplated by this Agreement pursuant to the Contracts set
forth
in Section 3.3(l)(i) of the Company Disclosure Letter.
(e) Material
Adverse Effect. Since the date hereof, there shall not have
occurred any fact, circumstance or event, individually or taken together
with
all other facts, circumstances or events that has had or is reasonably likely
to
have a Material Adverse Effect on the Company and its Subsidiaries, taken
as a
whole.
(f) Dissenting
Shareholders. The holders of no more than 5% of the outstanding shares of
Company Common Stock shall have given notice of their intent to exercise
dissenters’ rights under the TBCA.
(g) Director
Support Agreements. Each of the Directors of the Bank shall have
entered into a Director Support Agreement in substantially the form attached
as
Exhibit A hereto.
(h) Retention
Agreements. Each of the Retention Bonus Eligible Employees shall
have entered into a Retention Agreement in substantially the form attached
as
Exhibit C hereto.
(i) Employment
Agreements. The employment agreements between the Company and
each of the persons listed in Section 5.2(i) of the Company Disclosure Letter,
shall have been terminated and the Company shall have paid the change in
control
bonuses due thereunder in full, and each such person shall have entered into
an
Employment Agreement in substantially the form attached as Exhibit D
hereto.
(j) Payment
of Advisor’s Fees. All fees due to ▇▇▇▇▇ Financial, Inc. shall
have been paid in full.
(k) Exercise
or Termination of Company Options and Company Warrants. All
outstanding Company Options and Company Warrants shall have been exercised
or
terminated as provided in Section 1.6 and the Company’s Board of Directors and
shareholders shall have taken all action necessary to terminate the Company
Stock Plans effective prior to the Effective Time. No Company Options
or Company Warrants, whether vested or unvested, shall be outstanding as
of five
Business Days prior to the Effective Time.
(l) Net
Shareholders’ Equity. As of the Measurement Date, the Company’s
Final Net Shareholders’ Equity shall not be less than the Target Amount by more
than $100,000.
5.4 Conditions
to Obligations of the Company. The
obligations of the Company to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by the Company pursuant to Section
7.6:
(a) Representations
and Warranties. The representations and warranties of Parent set
forth in this Agreement, after giving effect to Section 3.2, shall be true
and
correct as of the date of this Agreement and as of the Closing Date as though
made at and as of the Closing Date (except that representations and warranties
that by their terms speak specifically as of the date of this Agreement or
some
other date shall be true and correct as of such date) and the
Company
31
shall
have received
a certificate, dated the Closing Date, signed on behalf of Parent by an
authorized officer of Parent, to such effect.
(b) Performance
of Agreements and Covenants. Each and all of the agreements and
covenants of Parent to be performed and complied with pursuant to this Agreement
prior to the Effective Time shall have been duly performed and complied with
in
all material respects and the Company shall have received a certificate,
dated
the Closing Date, signed on behalf of Parent by an authorized officer of
Parent,
to such effect.
ARTICLE
6
TERMINATION
6.1 Termination. Notwithstanding
any other provision of this Agreement, and notwithstanding Company Shareholder
Approval, this Agreement may be terminated and the Merger abandoned at any
time
prior to the Effective Time:
(a) By
mutual consent of the Board of Directors of the Company and the Board of
Directors of Parent;
(b) By
the Board of Directors of the Company or the Board of Directors of Parent
in the
event of a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of the other Party, which breach
would
result in, if occurring or continuing on the Closing Date, the failure of
the
conditions to the terminating Party’s obligations set forth in Sections 5.2 or
5.3, as the case dictates, and that cannot be or has not been cured within
30
days after the giving of notice to the breaching Party of such breach, provided
that the right to effect such cure shall not extend beyond the date set forth
in
subparagraph (d) below;
(c) By
the Board of Directors of the Company or the Board of Directors of Parent
in the
event that (i) any Regulatory Consent required to be obtained from any
Governmental Authority has been denied by final nonappealable action of such
Governmental Authority, or (ii) Company Shareholder Approval has not been
obtained by reason of the failure to obtain the required vote at the Company
shareholders’ meeting where this Agreement was presented to such shareholders
for approval and voted upon;
(d) By
the Board of Directors of the Company or the Board of Directors of Parent
in the
event that the Merger has not been consummated by November 17, 2007, if the
failure to consummate the transactions contemplated hereby on or before such
date is not caused by any breach of this Agreement by the Party electing
to
terminate pursuant to this Section 6.1(d); or
(e) By
the Board of Directors of Parent in the event that (i) the Company has
withdrawn, qualified or modified the Company Directors’ Recommendation in a
manner adverse to Parent or shall have resolved to do any of the foregoing,
(ii)
the Company has failed to substantially comply with its obligations under
Sections 4.4 or 4.10, or (iii) the Board of Directors of the Company has
recommended, endorsed, accepted or agreed to an Acquisition Proposal with
any
other Person.
6.2 Effect
of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 6.1, this
Agreement shall become void and have no effect, and neither Parent or its
subsidiaries nor the Company or its Subsidiaries, or any of the officers
or
directors of any of them, shall have any Liability of any nature whatsoever
hereunder or in conjunction with the transactions contemplated hereby, except
that (a) the provisions of Section 4.8(b), Article 6 and Article 7 shall
survive
any such termination and abandonment, and (b) a termination of
this
32
6.3 Agreement
shall not
relieve the breaching Party from Liability for an uncured willful breach
of a
representation, warranty, covenant, or agreement of such Party contained
in this
Agreement.
6.3 Termination
Fee.
(a) In
the event that Parent terminates this Agreement pursuant to Section 6.1(e),
the
Company shall pay to Parent $1,500,000 (the “Termination Fee”) within
five Business Days after the date this Agreement is terminated, by wire transfer
of immediately available funds.
(b) In
the event that either Parent or the Company terminates this Agreement pursuant
to Section 6.1(c)(ii) and within 12 months following such termination an
Acquisition Proposal is consummated or a definitive agreement or letter of
intent is entered into by the Company with respect to an Acquisition Proposal,
the Company shall pay Parent the Termination Fee within five Business Days
after
the date it becomes payable pursuant hereto, by wire transfer of immediately
available funds.
(c) The
Company hereby acknowledges that the agreements contained in this Section
6.3
are an integral part of the transactions contemplated by this Agreement and
that, without these agreements, Parent would not enter into this
Agreement. In the event that the Company fails to pay when due any
amount payable under this Section 6.3, then (i) the Company shall reimburse
Parent for all costs and expenses (including disbursements and reasonable
fees
of counsel) incurred in connection with the collection of such overdue amount,
and (ii) the Company shall pay to Parent interest on such overdue amount
(for
the period commencing as of the date such overdue amount was originally required
to be paid and ending on the date such overdue amount is actually paid in
full)
at a rate per annum equal to three percent (3%) over the “prime rate” (as
published in the “Money Rates” column in The Wall Street Journal or, if
not published therein, in another national financial publication selected
by
Parent) in effect on the date such overdue amount was originally required
to be
paid.
ARTICLE
7
MISCELLANEOUS
7.1 Definitions.
(a) Except
as otherwise provided herein, the capitalized terms set forth below shall
have
the following meanings:
“1933
Act” shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
“1934
Act” shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
“Acquisition
Proposal” shall mean, other than the transactions contemplated by this
Agreement, any offer, proposal or inquiry relating to, or any third party
indication of interest in, (a) any acquisition or purchase, direct or indirect,
of 15% or more of the consolidated assets of the Company and its Subsidiaries
or
15% or more of any class of equity or voting securities of the Company or
any of
its Subsidiaries whose assets, individually or in the aggregate, constitute
more
than 15% of the consolidated assets of the Company, (b) any tender offer
(including a self-tender offer) or exchange offer that, if consummated, would
result in such third party beneficially owning 15% or more of any class of
equity or voting securities of the Company or any of its Subsidiaries whose
assets, individually or in the aggregate, constitute more than 15% of the
consolidated assets of the Company, (c) a merger, consolidation, share exchange,
business
33
combination,
reorganization, recapitalization, liquidation, dissolution or other similar
transaction involving the Company or any of its Subsidiaries whose assets,
individually or in the aggregate, constitute more than 15% of the consolidated
assets of the Company, or (d) any other transaction the consummation of which
could reasonably be expected to impede, interfere with, prevent or materially
delay the Merger or that could reasonably be expected to dilute materially
the
benefits to Parent of the transactions contemplated hereby.
“Adjustment
Amount” shall mean the difference between the Target Amount and the
Final Net Shareholders’ Equity as of the Measurement Date.
“Affiliate” of
a Person shall mean (a) any other Person directly, or indirectly through
one or
more intermediaries, controlling, controlled by or under common control with
such Person or (b) any director, partner or officer of such Person or, for
any
Person that is a limited liability company, any manager or managing member
thereof. For purposes of this definition, “control” (and its
derivatives) shall mean the possession, directly or indirectly, of the power
to
direct or cause the direction of the management and policies of a Person,
whether through ownership of equity, voting or other interests, as trustee
or
executor, by contract or otherwise.
“Benefit
Plan” shall mean any pension, retirement, profit-sharing, deferred
compensation, thrift, savings, equity, employee stock ownership, retention,
severance pay, vacation, bonus, or other incentive plan, any other material
written employee program or agreement, any medical, vision, dental, or other
written health plan, any life insurance and any medical, vision, dental or
other
health plan, flexible spending account, cafeteria plan, holiday, disability,
and
any other employee benefit plan or fringe benefit plan, agreement, arrangement
or commitment, whether written or unwritten, including any written “employee
benefit plan” (as that term is defined in Section 3(3) of ERISA), maintained by,
sponsored in whole or in part by, or contributed to by a Party or any of
its
Subsidiaries for the benefit of its and its Subsidiaries’ employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
and under which such employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries are eligible to
participate.
“BHC
Act” shall mean the federal Bank Holding Company
Act of 1956, as amended, and rules and regulations promulgated
thereunder.
“Business
Day” shall mean any day that Nasdaq is normally open for
trading for a full day and that is not a Saturday, a Sunday or a day on which
banks in New York, New York or the State of Texas are authorized or required
to
close for regular banking business.
“Company
Capital Stock” shall mean the Company Common Stock and the Company
Preferred Stock.
“Company
Common Stock” shall mean the $5.00 par value per
share common stock of the Company.
“Company
Critical Employee Bonus Plan” shall mean that certain retention bonus
plan adopted by the Board of Directors of the Company on September 21,
2006.
“Company
Financial Statements” shall mean (i) the audited
consolidated balance sheets (including related notes and schedules, if any)
of
the Company and its Subsidiaries as of December 31, 2004, 2005 and 2006,
and the
reports of its independent public accountants
34
with
respect
thereto and (ii) the consolidated balance sheets of the Company and its
Subsidiaries (including related notes and schedules, if any), and related
statements of operations, cash flows, and shareholders’ equity and comprehensive
income (loss) (including related notes and schedules, if any) with respect
to
periods ended subsequent to December 31, 2006.
“Company Option” shall mean an option to purchase a share or
shares of Company Common Stock issued under a Company Stock Plan.
“Company
Preferred Stock” shall mean the $1.00 par value
per share preferred stock of the Company.
“Company
Shareholder Approval” shall
mean the approval of this Agreement by the holders of at
least two-thirds of the outstanding shares of Company Common Stock.
“Company
Stock Plan” shall mean any equity compensation plan of the Company
listed in Section 3.3(k)(i) of the Company Disclosure Letter.
“Company
Warrant” shall mean any warrant to purchase a share or shares of
Company Common Stock issued by the Company.
“Confidentiality
Agreement” shall mean that certain
Confidentiality Agreement, dated January 9, 2007, by and
between the Company and Parent.
“Consent” shall
mean any consent, approval, authorization, clearance, exemption, waiver,
or
similar affirmation by any Person pursuant to any Contract, Law, Order, or
Permit.
“Contract” shall
mean any written or oral agreement, arrangement, commitment, contract,
indenture, instrument, lease, understanding, note, bond, license, mortgage,
deed
of trust or undertaking of any kind or character to which any Person is a
party
or that is binding on any Person or its capital stock, assets or
business.
“Data
Processing Agreement” shall mean that certain Date Processing
Agreement, dated as of February 1, 1999, by and between the Bank and Community
Data Services.
“Default” shall
mean (a) any breach or violation of or default under any Contract, Law, Order,
or Permit, (b) any occurrence of any event that with the passage of time
or the
giving of notice or both would constitute a breach or violation of or default
under any Contract, Law, Order, or Permit, or (c) any occurrence of any event
that with or without the passage of time or the giving of notice would give
rise
to a right to terminate or revoke, change the current terms of, or renegotiate,
or to accelerate, increase, or impose any Liability under, any Contract,
Law,
Order, or Permit.
“Dissenting
Shares” shall mean shares of Company Common Stock that are owned by
shareholders properly exercising their appraisal rights pursuant to Section
5.12
of the TBCA.
“Environmental
Laws” shall mean all Laws relating to pollution
or protection of human health or the environment (including ambient air,
surface
water, ground water, land surface, or subsurface strata) and that are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over,
and
35
including
common
Law in respect of, pollution or protection of the environment, including
the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Resource Conservation and Recovery Act, as amended, and other
Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
any
Hazardous Material, including all requirements for permits, licenses and
other
authorizations that may be required.
“ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations promulgated thereunder.
“ERISA
Affiliate” of any Person means any entity that is, or at any relevant
time was, a member of (a) a controlled group of corporations (as defined
in
Section 414(b) of the Internal Revenue Code), (b) a group of trades or
businesses under common control (as defined in Section 414(c) of the Internal
Revenue Code) or (c) an affiliated service group (as defined under Section
414(m) of the Internal Revenue Code or the regulations under Section 414(o)
of
the Internal Revenue Code) with such Person.
“ERISA
Plan” shall mean any Benefit Plan that is an “employee welfare benefit
plan,” as that term is defined in Section 3(l) of ERISA, or an “employee pension
benefit plan,” as that term is defined in Section 3(2) of ERISA.
“Exhibits” A
through D, inclusive, shall mean the Exhibits so marked, copies of which
are
attached to this Agreement. Such Exhibits are hereby incorporated by
reference herein and made a part hereof, and may be referred to in this
Agreement and any other related instrument or document without being attached
hereto or thereto.
“Facilities”
shall
mean all
buildings and improvements on the Property of the Company or its
Subsidiaries.
“FDIC”
shall
mean the Federal
Deposit Insurance Corporation.
“Federal
Reserve
Board” shall mean the Board of Governors of the
Federal Reserve System.
“Final
Net
Shareholders’ Equity” shall mean the calculation of the Net
Shareholders’ Equity at the close of business on the Measurement Date as
determined in the manner provided in Section 1.9.
“GAAP” shall
mean accounting principles generally accepted in the United States of America,
consistently applied during the periods involved.
“Governmental
Authority” shall mean each Regulatory Authority and any other domestic
or foreign court, administrative agency, commission or other governmental
authority or instrumentality (including the staff thereof), or any industry
self-regulatory authority (including the staff thereof).
“Hazardous
Material” shall mean (a) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic substance
(as
those terms are defined by any applicable Environmental Laws), and (b) any
chemicals, pollutants, contaminants, petroleum, petroleum products that are
or
become regulated under any applicable local, state, or federal
36
Environmental
Law
(and specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of Governmental Authorities and
any
polychlorinated biphenyls).
“Intellectual
Property” shall mean (a) any patents, copyrights, trademarks, service
marks, maskworks or similar rights throughout the world, and applications
or
registrations for any of the foregoing, (b) any proprietary interest, whether
registered or unregistered, in know-how, copyrights, trade secrets, database
rights, data in databases, website content, inventions, invention disclosures
or
applications, software (including source and object code), operating and
manufacturing procedures, designs, specifications and the like, (c) any
proprietary interest in any similar intangible asset of a technical, scientific
or creative nature, including slogans, logos and the like and (d) any
proprietary interest in or to any documents or other tangible media containing
any of the foregoing.
“Internal
Revenue Code” shall mean the Internal Revenue
Code of 1986, as amended, any successor statute thereto, and the rules and
regulations promulgated thereunder.
“Knowledge”
of any Party or “known to” a Party and any other phrases of
similar import shall mean the actual knowledge of such Party’s Chairman of the
Board, Chief Executive Officer, President, Chief Operating Officer, Chief
Financial Officer or Chief Lending Officers (or persons performing comparable
functions) of such matter or the knowledge of such matter that such Person
would
have had after reasonable inquiry, including inquiries of their direct
subordinates who would be likely to have knowledge of such matter.
“Law” shall
mean any code, law (including any rule of common law), ordinance, regulation,
rule, or statute applicable to a Person or its assets, Liabilities, or business,
including those promulgated, interpreted or enforced by any Governmental
Authority.
“Liability” shall
mean any direct or indirect, primary or secondary, liability, indebtedness,
obligation, penalty, cost or expense (including costs of investigation,
collection and defense), claim, deficiency or guaranty of any type, whether
accrued, absolute or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
“Lien” shall
mean any mortgage, pledge, reservation, restriction (other than a restriction
on
transfers arising under the Securities Laws), security interest, lien or
encumbrance of any nature whatsoever of, on, or with respect to any Property
or
Property interest, other than Liens for property Taxes not yet due and
payable.
“Litigation” shall
mean any action, arbitration, cause of action, claim, complaint, criminal
prosecution, demand letter, governmental or other examination or investigation,
hearing, inquiry, administrative or other proceeding, or notice (written
or
oral) by any Person alleging potential Liability, but shall not include claims
of entitlement under any Benefit Plans that are made or received in the ordinary
course of business.
“Measurement
Date” shall mean the date that is 10 Business Days prior to the Closing
Date.
“NASD” shall
mean the National Association of Securities Dealers, Inc.
“Nasdaq”
shall mean The Nasdaq Stock Market, Inc.
37
“Net
Shareholders’ Equity” shall mean the consolidated shareholders’ equity
of the Company as of the Measurement Date, as calculated in accordance with
the
books and records of the Company and its Subsidiaries, consistent with past
practice, GAAP and all requirements of applicable Regulatory
Authorities. Net Shareholders Equity shall equal
(i) consolidated shareholders’ equity as of the Measurement Date, less (ii)
any unrealized net gain on available for sale securities as of the Measurement
Date, plus (iii) any unrealized net loss on available for sale securities
as of
the Measurement Date, less (iii) to the extent not reflected in
consolidated shareholders’ equity as of the Measurement Date, all costs, fees
and charges, including fees and charges of the Company’s accountants, counsel
and financial advisors, whether or not accrued or paid, that are related
to the
transactions contemplated by this Agreement, including an accrual in the
amount
of $324,000, before taking into account the tax effect thereof, for fees
related
to termination of the Data Processing Agreement, less (iv) any change in
consolidated shareholders’ equity after March 31, 2007, related to stock options
exercised or other stock transactions occurring after March 31,
2007.
“OCC”
shall mean the Office of the Comptroller of the Currency.
“Order” shall
mean any administrative decision or award, decree, injunction, judgment,
order,
quasi-judicial decision or award, ruling, or writ of any federal, state,
local,
or foreign or other court, arbitrator, mediator, tribunal, administrative
agency, Governmental Authority or Regulatory Authority.
“Organizational
Documents” shall mean the
articles of incorporation, association or organization, certificate of
incorporation, association or organization, charter, bylaws or other similar
governing instruments, in each case as amended as of the date specified,
of any
Person.
“Party”
shall mean Parent and Merger Sub, on the one hand, or the Company, on the
other
hand, and “Parties” shall mean Parent, Merger Sub and the
Company.
“Pension
Plan” shall mean any ERISA Plan that is also subject to Section 412 of
the Internal Revenue Code or Section 302 of ERISA.
“Per
Share
Purchase Price” shall mean an amount, rounded to the nearest whole
cent, equal to $52.00, less the quotient obtained by dividing (x) the Adjustment
Amount by (y) the sum of (i) the number of shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time (including
shares issued or issuable upon exercise of outstanding Company Options and
Company Warrants that are not terminated) and (ii) the number of shares
that would be issued upon exercise of Company Options and Company Warrants
that
are terminated in exchange for an Option Termination Payment.
“Permit” shall
mean any federal, state, local and foreign governmental approval, authorization,
certificate, easement, filing, franchise, license or permit from Governmental
Authorities that are required for the operation of the businesses of a Person
or
its Subsidiaries.
“Permitted
Encumbrances” shall mean all easements, covenants, restrictions, rights
of way and other matters of title which do not adversely affect the
marketability of title.
“Permitted
Issuances” shall mean issuances of Company Common Stock upon exercise
of outstanding Company Options or Company Warrants.
38
“Person” shall
mean any natural person or any legal, commercial, or governmental entity,
including, a corporation, general partnership, joint venture, limited
partnership, limited liability company, trust, business association, or person
acting in a representative capacity, as well as any syndicate or group that
would be deemed to be a person under Section 13(d)(3) of the 1934
Act.
“Property”
shall mean all real property leased or owned by the Company and its Subsidiaries
or by Parent, either currently or in the past.
“Regulatory
Authorities” shall mean, collectively, the
Federal Trade Commission, the United States Department of Justice, the Federal
Reserve Board, the OCC, the FDIC, the Office of Thrift Supervision, the
Texas Department of Banking, the Internal Revenue Service,
all federal and state regulatory agencies having jurisdiction over the Company
and its Subsidiaries and Parent, the NASD, Nasdaq and the SEC (including,
in
each case, the staff thereof).
“Representative” shall
mean any investment banker, financial advisor, attorney, accountant, consultant,
agent or other representative of a Party.
“Rights” shall
mean, with respect to any Person, securities, or obligations convertible
into or
exercisable for, or giving any other Person any right to subscribe for or
acquire, or any options, calls, restricted stock, deferred stock awards,
stock
units, phantom awards, dividend equivalents, or commitments relating to,
or any
stock appreciation right or other instrument the value of which is determined
in
whole or in part by reference to the market price or value of, shares of
capital
stock of such Person, whether vested or unvested or exercisable or
unexercisable, and shall, in the case of the Company include Company Options
and
Company Warrants.
“SEC” shall
mean the United States Securities and Exchange Commission or any successor
thereto.
“Securities
Laws” shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and
the
Trust Indenture Act of 1939, each as amended, state securities and “Blue Sky”
Laws, including in each case the rules and regulations promulgated
thereunder.
“Parent
Severance Payment” shall mean a severance payment to any person who was
an employee of the Company or any of its Subsidiaries immediately prior to
the
Closing and is terminated by the Bank or Parent within the 12 month period
following the Closing Date, which shall be in addition to any severance payments
described in Section 4.13 of the Company Disclosure Letter and shall be in
an
amount equal to the product of (i) the amount such terminated employee would
have received for two weeks’ pay at the time of his/her termination, multiplied
by (ii) the number of full years that such terminated employee was employed
by
the Company or any of its Subsidiaries.
“Subsidiary”
or “Subsidiaries” shall have the meaning
assigned in Rule 1-02(x) of Regulation S-X of the SEC.
“Target
Amount” shall mean $11,013,179; provided that if
the Measurement Date occurs prior to August 31, 2007, the Target Amount shall
be
reduced by $5,273 per day for
39
each
day in the
period commencing on the day following the Measurement Date and ending on
August
31, 2007, and if the Measurement Date occurs after August 31, 2007, the Target
Amount shall be increased by $5,273 per day for each day in the period
commencing on September 1, 2007, and ending on the Measurement
Date.
“Tax”
or “Taxes” shall mean, as the
context shall require, all federal, state, local, municipal and foreign taxes,
charges, fees, levies, imposts, duties, or other like assessments, including
assessments for unclaimed property, as well as income, gross receipts, excise,
employment, sales, use, transfer, intangible, recording, license, payroll,
franchise, severance, documentary, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration,
ad
valorem, value added, alternative or add-on minimum, estimated or other tax
or
governmental fee of any kind whatsoever, imposed or required to be withheld
by
the United States or any state, local, municipal or foreign government or
subdivision or agency thereof, whether disputed or not, including any related
interest, penalties, and additions imposed thereon or with respect thereto,
and
including any liability for Taxes of another Person pursuant to a contract,
as a
transferee or successor, under Treasury Regulation Section 1.1502-6 or analogous
provision of state, local or foreign Law or otherwise.
“Tax
Return” shall mean any report, return,
information return or other information provided or required to be provided
to a
Taxing Authority in connection with Taxes, including any return of an Affiliated
or combined or unitary group that includes a Party or its Subsidiaries and
including without limitation any estimated Tax return.
“Taxable Period” shall mean any period
prescribed by any Taxing Authority.
“Taxing
Authority” shall mean any federal, state, local, municipal, foreign, or
other Governmental Authority, instrumentality, commission, board or body
having
jurisdiction over the Parties to impose or collect any Tax.
“Technology
Systems” shall mean the electronic data processing, information, record
keeping, communications, telecommunications, hardware, third-party software,
networks, peripherals, portfolio trading and computer systems, including
any
outsourced systems and processes, and Intellectual Property used by the
Company.
(b) The
terms set forth below shall have the meanings ascribed thereto in the referenced
sections:
|
Agreement
|
Preamble
|
|
|
Articles
of
Merger
|
Section
1.3
|
|
|
Bank
|
3.3(a)
|
|
|
Closing
|
Section
1.2
|
|
|
Closing
Date
|
Section
1.2
|
|
|
Company
|
Preamble
|
|
|
Company
Certificates
|
Section
1.4(b)
|
|
|
Company
Directors’ Recommendation
|
Section
3.3(b)(ii)
|
|
|
Company
Disclosure Letter
|
Section
3.1
|
|
|
Company
Latest Balance Sheet
|
Section
3.3(d)(ii)
|
▇▇
|
▇▇▇
|
▇▇▇▇▇▇▇
3.3(r)
|
|
|
Dissenting
Shareholder
|
Section
2.3
|
|
|
Effective
Time
|
Section
1.3
|
|
|
Estimated
Net
Shareholders’ Equity
|
Section
1.9
|
|
|
Exchange
Agent
|
Section
2.1(a)
|
|
|
Exchange
Fund
|
Section
2.1(d)
|
|
|
Excluded
Shares
|
Section
1.4(d)
|
|
|
Holder
|
Section
2.1(a)
|
|
|
IIPI
|
Section
3.3(s)(i)
|
|
|
Leased
Property
|
Section
3.3(g)(ii)
|
|
|
Material
Adverse Effect
|
Section
3.2(b)
|
|
|
Merger
|
Preamble
|
|
|
Merger
Consideration
|
Section
2.1(b)
|
|
|
Merger
Sub
|
Preamble
|
|
|
Option
Termination Payment
|
Section
1.7
|
|
|
Owned
Property
|
Section
3.3(g)(i)
|
|
|
Parent
|
Preamble
|
|
|
Property
Restrictions
|
Section
3.3(g)(iii)
|
|
|
Regulatory
Consents
|
Section
4.6(b)
|
|
|
Required
Consents
|
Section
5.1(b)
|
|
|
Retention
Bonus Eligible Employees
|
Section
4.12(a)
|
|
|
▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act
|
Section
4.8(a)
|
|
|
Shareholder
Support Agreement
|
Preamble
|
|
|
Surviving
Corporation
|
Section
1.1
|
|
|
Takeover
Laws
|
Section
3.3(w)
|
|
|
TBCA
|
Section
1.1
|
|
|
Termination
Fee
|
Section
6.3
|
(c) Any
singular term in this Agreement shall be deemed to include the plural, and
any
plural term the singular. Whenever the words “include,” “includes,”
or “including” are used in this Agreement, they shall be deemed followed by the
words “without limitation.” The words “hereby,” “herein,” “hereof” or
“hereunder,” and similar terms are to be deemed to refer to this Agreement as a
whole and not to any specific section.
7.2 Non-Survival
of Representations and
Covenants. Except for Articles 1 and 2,
Sections 4.5(b), 4.8(b), 4.12 and 4.13 and this Article 7, the respective
representations, warranties, obligations, covenants, and agreements of the
Parties shall be deemed only to be conditions of the Merger and shall not
survive the Effective Time.
7.3 Expenses.
(a) Except
as otherwise provided in this Section 7.3, each of the Parties shall bear
and
pay all direct costs and expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including filing, registration,
and application fees, printing fees, and fees and expenses of its own financial
or other consultants, investment bankers, accountants, and
counsel. In addition, in any action at law or suit in equity to
enforce this Agreement of the rights of any of the Parties, the prevailing
Party
in such action or suit shall be entitled to receive its reasonable attorneys’
fees and costs and expenses incurred in such action or suit.
41
(b) Nothing
contained in Section 6.3 or this Section 7.3 shall constitute or shall be
deemed
to constitute liquidated damages for the willful breach by a Party of the
terms
of this Agreement
and
nothing
contained in this Section 7.3 shall be deemed to otherwise limit the rights
of
the non-breaching Party.
7.4 Entire
Agreement. Except as otherwise
expressly provided herein, this Agreement (including the Company Disclosure
Letter and the Exhibits) constitutes the entire agreement between the Parties
with respect to the transactions contemplated hereunder and supersedes all
prior
arrangements or understandings with respect thereto, written or oral, other
than
the Confidentiality Agreement, which shall remain in effect. Nothing
in this Agreement, expressed or implied, is intended to confer upon any Person,
other than the Parties or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly set forth in Section 4.13.
7.5 Amendments. Before
the Effective Time, this Agreement (including the Company Disclosure Letter
and
the Exhibits) may be amended by a subsequent writing signed by each of the
Parties, whether before or after the Company Shareholder Approval have been
obtained, except to the extent that any such amendment would require the
approval of the shareholders of the Company, unless such required approval
is
obtained.
7.6 Waivers.
(a) Prior
to or at the Effective Time, either Party shall have the right to waive any
Default in the performance of any term of this Agreement by the other Party,
to
waive or extend the time for the compliance or fulfillment by the other Party
of
any and all of such other Party’s obligations under this Agreement, and to waive
any or all of the conditions precedent to its obligations under this Agreement,
except any condition that, if not satisfied, would result in the violation
of
any Law. No waiver by a Party shall be effective unless in writing
signed by a duly authorized officer of such Party.
(b) The
failure of any Party at any time or times to require performance of any
provision hereof shall in no manner affect the right of such Party at a later
time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further
or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
7.7 Assignment. Except
as expressly contemplated hereby, neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any Party hereto
(whether by operation of Law or otherwise) without the prior written consent
of
each other Party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by the
Parties
and their respective successors and assigns.
7.8 Notices. All
notices or other communications that are required or permitted hereunder
shall
be in writing and sufficient if delivered by hand, by facsimile transmission,
by
registered or certified mail, postage pre-paid, or by courier or overnight
carrier, to the Persons at the addresses set forth below (or at such other
address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
42
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Parent
or
Merger Sub:
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Southside
Bancshares, Inc.
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▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇,
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Telecopy
Number: (▇▇▇)
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Attention: ▇.▇.
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Copy to Counsel (which
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shall not constitute notice):
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▇▇▇▇▇▇
&
Bird LLP
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The
Atlantic
Building
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▇ ▇▇▇▇▇▇,
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Telecopy
Number: (▇▇▇)
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Attention: ▇▇▇▇▇
▇. ▇▇▇▇▇, ▇▇.
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Company:
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Fort
Worth
Bancshares, Inc.
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Telecopy
Number: (▇▇▇)
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Attention: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
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Copy to Counsel (which
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shall not constitute notice):
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▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ LLP
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▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇,
▇▇▇▇▇
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Telecopy
Number: (▇▇▇)
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Attention: ▇▇▇▇▇▇▇
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7.9 Governing
Law. This Agreement shall be governed
by and construed in accordance with the Laws of the State of Texas, without
regard to any applicable principles of conflicts of Laws that would result
in
the application of the law of another jurisdiction.
7.10 Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed to be an original, but all of which together shall constitute one
and the
same instrument. The exchange of copies of this Agreement and of
signature pages by facsimile or electronic transmission shall constitute
effective execution and delivery of this Agreement as to the Parties and
may be
used in lieu of the original Agreement for all purposes. Signatures
of the Parties transmitted by facsimile or electronic transmission shall
be
deemed to be their original signatures for all purposes.
7.11 Captions. The
captions contained in this Agreement are for reference purposes only and
are not
part of this Agreement.
7.12 Interpretations. Neither
this Agreement nor any uncertainty or ambiguity herein shall be construed
or
resolved against any Party, whether under any rule of construction or
otherwise. No Party to this Agreement shall be considered the
draftsman. The Parties acknowledge and agree that this Agreement has
been reviewed, negotiated and accepted by all Parties and their attorneys
and
shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of the
Parties.
43
7.13 Severability. If
any term or provision of this Agreement is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
hereof, or the application of such provision to Persons or circumstances
other
than those as to which it has been held invalid or unenforceable, shall remain
in full force and effect and in no way be affected, impaired or invalidated
thereby, so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
Party. Upon such determination, the Parties shall negotiate in good
faith in an effort to agree upon a suitable and equitable substitute provision
to effect the original intent of the Parties. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
7.14 Waiver
of Jury Trial. THE PARTIES HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT ANY PARTY MAY
HAVE
TO TRIAL BY JURY IN RESPECT OF ANY PROCEEDING, LITIGATION OR COUNTERCLAIM
BASED
ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS
OF ANY PARTY. IF THE SUBJECT MATTER OF ANY LAWSUIT IS ONE IN WHICH
THE WAIVER OF JURY TRIAL IS PROHIBITED, NO PARTY TO THIS AGREEMENT SHALL
PRESENT
AS A NONCOMPULSORY COUNTERCLAIM IN ANY SUCH LAWSUIT ANY CLAIM BASED ON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT. FURTHERMORE, NO PARTY TO THIS AGREEMENT SHALL SEEK TO
CONSOLIDATE ANY SUCH ACTION IN WHICH A JURY TRIAL CANNOT BE
WAIVED.
44
IN
WITNESS WHEREOF, each of
the Parties has caused this Agreement to be executed by their respective
officers thereunto duly authorized as of the day and year first above
written.
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SOUTHSIDE
BANCSHARES, INC.
By: /s/ ▇.▇.
▇▇▇▇▇▇▇
▇.▇.
▇▇▇▇▇▇▇
Chief
Executive
Officer
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SOUTHSIDE
MERGER SUB, INC.
By: /s/ ▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇
President
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FORT
WORTH BANCSHARES, INC.
By: /s/ ▇▇▇▇▇
▇. ▇▇▇▇▇
▇▇▇▇▇
▇. ▇▇▇▇▇
President
and Chief Executive
Officer
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AMENDMENT
NO. 1 TO AGREEMENT AND PLAN OF MERGER
THIS
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF
MERGER (this “Amendment”), is made
and entered into as of September 28, 2007, by and among Southside
Bancshares, Inc., a Delaware corporation (“Parent”),
Southside Merger Sub, Inc., a Texas corporation and wholly
owned subsidiary of Parent (“Merger Sub”), and Fort Worth
Bancshares, Inc., a Texas corporation (the
“Company”).
RECITALS
WHEREAS,
Parent, Merger Sub and the Company are parties to that certain Agreement
and
Plan of Merger, dated as of May 17, 2007 (the “Merger Agreement”),
pursuant to which Parent agreed to acquire all of the outstanding stock of
the
Company by means of a merger of Merger Sub with and into the
Company;
WHEREAS,
Section 7.5 of the Merger Agreement provides that, before the Effective Time,
the Agreement may be amended by a subsequent writing signed by each of the
Parties, except to the extent any such amendment would require the approval
of
the shareholders of the Company;
WHEREAS,
the Parties desire to amend the Merger Agreement, the Effective
Time
has not occurred, and the Parties have determined that the amendments to
the
Merger Agreement contemplated by this Amendment do not require the approval
of
the shareholders of the Company;
NOW,
THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, and intending to be legally bound hereby,
the
Parties agree as follows:
Section
1. Amendments.
(a) Section
1.7 of the
Merger Agreement is hereby amended by striking out Section 1.7 in its entirety
and by substituting in lieu thereof the following:
“1.7 Company
Options and Warrants. No later than five Business Days prior to
the Effective Time, the Company shall take all actions necessary to either
(a)
cause each outstanding Company Option or Company Warrant to be exercised
in
accordance with its terms; provided, that, the exercise of Company Options
or
Company Warrants shall not cause an adjustment to the Per Share Purchase
Price
pursuant to Section 1.4(c) hereof, or (b) terminate each outstanding Company
Option and Company Warrant. Each Company Option and Company Warrant
that is not exercised prior to five Business Days prior to the Effective
Time
shall be terminated and converted into the right to receive an amount in
cash,
without interest, equal to the number of shares of Company Common Stock that
are
the subject of each such Company Option or Company Warrant multiplied by
the
difference between (i) the Per Share Purchase Price and (ii) the exercise
price
of such Company Option or Company Warrant (the “Option Termination
Payment”). No later than five Business Days prior to the Effective
Time, the Company shall also take all actions necessary to terminate the
Company
Stock Plans as of no less than five Business Days prior to the Effective
Time
and to cause the provisions in any other Company Benefit Plan providing for
the
issuance, transfer or grant of any capital stock of the Company or any interest
in respect of any capital stock of the Company to terminate and be of no
further
force and effect as of no less than five Business Days prior to the Effective
Time. The Company shall ensure that no later than five Business Days
prior to the Effective Time no holder of any Company Option or Company Warrant
or any participant in any Company Stock Plan or other Company Benefit Plan
shall
have any right thereunder to acquire any capital stock of the
Parties.
(b) Section
5.2(i) of
the Merger Agreement is hereby amended by striking out Section 5.2(i) in
its
entirety and by substituting in lieu thereof the following:
“(i) Employment
Agreements. (i) The employment agreements between the Company and
each of the persons listed in Section 5.2(i) of the Company Disclosure Letter
(other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇) shall have been terminated, (ii) the Company
shall
have paid the change in control bonuses due thereunder in full (to persons
other
than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇), and (iii) each such person (other than ▇▇▇▇▇▇▇ ▇.
▇▇▇▇)
shall have entered into an Employment Agreement in substantially the form
attached as Exhibit D hereto.”
(c) Section
5.2 of the
Merger Agreement is hereby amended by adding the following immediately following
Section 5.2(l):
“(m) Settlement
Agreement. Parent, Merger Sub, the Company, the Bank and ▇▇▇▇▇▇▇
▇. ▇▇▇▇ shall have entered into a settlement agreement with respect to the
complaint, styled ▇▇▇▇▇▇▇ ▇▇▇▇ v. Southside Bancshares, Inc., Southside
Merger Sub, Inc., Fort Worth National Bank and Fort Worth Bancshares, Inc.,
Cause No. ▇▇▇-▇▇▇▇▇▇-▇▇, filed in the District Court for Tarrant County,
Texas,
on August 14, 2007.
Section
2. ▇▇▇▇▇▇▇
▇. ▇▇▇▇
Settlement. The Parties acknowledge that Parent, Merger Sub, the
Company, the Bank and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (“Coke”), a former employee of the
Bank, have entered into a settlement agreement (the “Settlement
Agreement”) with respect to the complaint, styled ▇▇▇▇▇▇▇ ▇▇▇▇ v.
Southside Bancshares, Inc., Southside Merger Sub, Inc., Fort Worth National
Bank
and Fort Worth Bancshares, Inc., Cause No. ▇▇▇-▇▇▇▇▇▇-▇▇, filed in the
District Court for Tarrant County, Texas, on August 14, 2007 (the
“Complaint”). A signed copy of the Settlement Agreement is
attached hereto as Schedule 1. ’ With respect to
the Complaint and the Settlement Agreement, the Parties agree as
follows:
2
(a) The
Settlement
Agreement contains all of the agreements and understandings between the parties
thereto with respect to the Complaint, and the Parties have made, and hereby
make, no additional promises, representations or warranties whatsoever, express
or implied, not contained in this Amendment, with respect to the Complaint
or
the Settlement Agreement. ’
(b) The
formal
dismissal of the Complaint prior to the Closing shall not constitute a condition
to Closing, and the fact that the Complaint shall not have been formally
dismissed shall not constitute a breach of or default under the
Agreement; and
(c) The
termination of
Coke’s employment with the Bank does not constitute a failure to satisfy a
condition precedent to the Closing or a breach of or default under the
Agreement.
Section
3. Closing
Date. The Parties agree that the Closing shall be consummated not
earlier than the eighth (8th) day
following the
execution of the Settlement Agreement and not later than Tuesday, October
23,
2007, on any such date at 10:00 a.m., Texas time, at the offices of ▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇.
Section
4. Confirmation. Except
as specifically set forth herein, all other terms and conditions of the Merger
Agreement shall remain unmodified and in full force and effect, the same
being
confirmed, ratified, reaffirmed and republished hereby.
Section
5. Defined
Terms. Capitalized terms not defined herein shall have the
meanings assigned them in the Merger Agreement.
Section
6. Counterparts. This
Amendment may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument. The exchange of copies of this Amendment and of signature
pages by facsimile or electronic transmission shall constitute effective
execution and delivery of this Agreement as to the Parties and may be used
in
lieu of the original Amendment for all purposes. Signatures of the
Parties transmitted by facsimile or electronic transmission shall be deemed
to
be their original signatures for all purposes.
3
IN
WITNESS
WHEREOF, each of the Parties has caused this Amendment to be executed
by their respective officers thereunto duly authorized as of the day and
year
first above written.
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SOUTHSIDE
BANCSHARES, INC.
By: /s/ ▇.▇.
▇▇▇▇▇▇▇
▇.▇.
▇▇▇▇▇▇▇
Chief
Executive
Officer
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SOUTHSIDE
MERGER SUB, INC.
By:
/s/ ▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇
President
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FORT
WORTH BANCSHARES, INC.
By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇
▇. ▇▇▇▇▇
President
and Chief Executive
Officer
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SCHEDULE
1
Executed
Settlement
Agreement