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January 1, 1997
Xxxxxxxx Mortgage Company
The Woodlands Corporation
c/o Xxxxxxx Xxxxxxxx
The Woodlands Corporation
0000 Xxxxxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxx 00000
Dear Sirs:
In connection with the Agreement (the "Agreement") dated as of October
31, 1996 by and among The Woodlands Corporation ("The Woodlands"), Xxxxxxxx
Mortgage Company ("Xxxxxxxx Mortgage") and Fort Bend Federal Savings and Loan
Association of Rosenberg ("Fort Bend"), and the transactions contemplated
thereby, this Transaction Letter Agreement (the "Letter") is to set out various
agreements and clarifications regarding the matters discussed herein, and is
intended to be fully binding.
1. All capitalized terms used without definition in this Letter shall
have the meaning set forth in the Agreement.
2. Xxxxxxxx Mortgage agrees to provide to New Xxxxxxxx an amount equal
to $78,000 as transitional costs related to the new entity. This amount shall be
deemed to be a net adjustment to the purchase price set forth in the Agreement.
3. (a) Fort Bend and Xxxxxxxx Mortgage hereby agree that Xxxxxxxx
Mortgage's ownership interest in New Xxxxxxxx will be convertible in whole, but
not in part, (beginning on the second anniversary of its formation and ending on
the fifth anniversary of its formation into common stock of Fort Bend Holding
Corp. ("FBHC"), the parent of Fort Bend, at a conversion rate of 41.152 shares
of FBHC common stock for each $1,000 of ownership interest in New Xxxxxxxx
(equivalent to a conversion price of $24.30 per share), subject to adjustment in
certain events as set forth below. The right to convert will terminate at the
close of business on the fifth anniversary of New Xxxxxxxx'x formation and will
expire if not exercised prior to that time. In the event Xxxxxxxx Mortgage
elects to convert its ownership interest in New Xxxxxxxx into common stock of
FBHC, FBHC will issue shares of its common stock to Xxxxxxxx Mortgage, based on
the above stated conversion rate, in an amount up to 9.9% of the outstanding
common stock of FBHC. In the event that Xxxxxxxx Mortgage's ownership interest
in New Xxxxxxxx should convert to an amount of FBHC common stock which exceeds
9.9% of the outstanding common stock of FBHC (after taking into account the
shares being issued to Xxxxxxxx Mortgage), such excess will be paid to Xxxxxxxx
Mortgage in cash in an amount equal to the book value of such remaining
ownership interest in New Xxxxxxxx after taking into account the value of the
9.9% of the FBHC common stock being issued as a result of the conversion.
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Xxxxxxxx Mortgage Company
The Woodlands Corporation
January 1, 1997
Page 2
The conversion price will be subject to adjustment upon the occurrence
of certain events, including: (i) dividends (and other distributions) payable in
common stock on any class of capital stock of FBHC, (ii) the issuance to all
holders of FBHC common stock of rights, warrants or options entitling them to
subscribe for or purchase common stock at less than the market price at the time
of issuance, (iii) subdivisions, combinations or reclassifications of FBHC
common stock, (iv) distributions to all holders of FBHC common stock of
evidences of indebtedness or assets (including securities, but excluding those
dividends, rights, warrants, options and distributions referred to above and
dividends and distributions paid exclusively in cash) of FBHC, (v) distributions
consisting exclusively of cash (excluding any cash portion of distributions
referred to in (iv) above or cash distributed upon a merger or consolidation of
FBHC) to all holders of common stock in an aggregate amount that, combined
together with (x) all other such all-cash distributions made within the
preceding 12 months in respect of which no adjustment has been made and (y) the
aggregate of any cash and the fair market value of other consideration payable
in respect of any tender offer by FBHC or any of its subsidiaries for FBHC
common stock concluded within the preceding 12 months in respect of which no
adjustment has been made, exceeds 10% of FBHC's market capitalization (being the
product of the current market price of the FBHC common stock on the date of
determination of holders of shares of FBHC common stock entitled to receive such
distribution times the number of shares of FBHC common stock then outstanding)
on the record date for such distribution, and (vi) the purchase of FBHC common
stock pursuant to a tender offer made by FBHC or any of its subsidiaries which
involves an aggregate consideration that, together with (x) the aggregate of any
cash and the fair market value of consideration payable in any other tender
offer by FBHC or any of its subsidiaries for FBHC common stock expiring within
the 12 months preceding such tender offer in respect of which no adjustment had
been made and (y) the aggregate amount of any such all-cash distributions
referred to in (v) above to all holders of FBHC common stock within the 12
months preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 10% of FBHC's market capitalization on the
expiration of such tender offer. In no event will any adjustment of the
conversion price be required to be made until cumulative adjustments amount to
1% or more of the conversion price as last adjusted.
(b) Piggyback Rights.
(i) If FBHC at any time proposes to file on its
behalf and/or on behalf of nay other of its security holders a registration
statement under the Securities Act of 1933, as amended on Form X-0, X-0 or S-3
(or on any other form for the general registration of securities to be sold for
cash other than with respect to employee stock option plans, employee incentive
plan or other similar employee plans with respect to which a registration
statement or form is filed) with respect to its common stock or other securities
convertible into, or exchangeable for its common stock, FBHC shall give written
notice (the "FBHC Notice") to Xxxxxxxx Mortgage at least 30 days prior to the
filing with the SEC of such registration statement and such notice shall set
forth the intended method of disposition of the securities proposed to be
registered. Xxxxxxxx Mortgage shall have the right, upon giving written notice
to FBHC within 20 days of receipt of the FBHC Notice and subject to the
provisions of this Section 3, to request that FBHC include in such registration
the number of shares of FBHC common stock owned by Xxxxxxxx Mortgage indicated
in such notice to the extent required to permit the disposition of such shares
in accordance with the intended method of disposition set out in the FBHC
Notice.
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Xxxxxxxx Mortgage Company
The Woodlands Corporation
January 1, 1997
Page 3
(ii) With respect to any registration statement referred
to in subsection (i) of this Section 3(b), FBHC shall include in such
registration statement any shares of common stock so requested to be included by
Xxxxxxxx Mortgage, provided that if the underwriters (or any managing
underwriter) shall advise FBHC in writing that, in their reasonable opinion and
in good faith, the distribution of the FBHC shares requested to be included in
such registration statement together with all other shares of FBHC common stock
or other equity securities being registered would materially adversely affect
the distribution of the securities to be offered solely for the account of FBHC,
then Xxxxxxxx Mortgage shall be entitled to participate in the registration, on
a pro rata basis, up to an amount whereby the underwriters or managing
underwriter may advise in good faith that such registration will not materially
adversely affect the distribution of securities to be offered solely for the
account of FBHC.
With respect to all registrations referred to in this Section 3(b):
(A) If, at any time after giving written notice of its intention
to register common stock and prior to the effective date of such
registration statement filed in connection with such
registration, FBHC shall determine for any reason not to
register such securities, FBHC may, at its election, give
written notice of such determination to Xxxxxxxx Mortgage, and,
thereupon, shall be relieved of its obligation to register any
of its common stock in connection whit such registration; and
(B) if such registration involved an underwritten offering,
Xxxxxxxx Mortgage must sell its shares to the underwriter
selected by FBHC on the same terms and conditions as applied to
FBHC.
(C) The pro rata cost of registering and selling Xxxxxxxx
Mortgage's shares shall be borne by Xxxxxxxx Mortgage.
(c) Notwithstanding the time frame for Xxxxxxxx Mortgage's right to
convert its ownership interest in new Xxxxxxxx into common stock of FBHC set
forth in Section 3(a) hereof, such right shall accelerate immediately upon a
"change in control" of FBHC. A "change in control" means (i) a merger,
consolidation or sale of all or substantially all of the assets of FBHC, or (ii)
a change in control of a nature that would be required to be reported in
response to Item I of the current report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended. Under no circumstances, however, will the right to convert extend
beyond the fifth anniversary date of the formation of New Xxxxxxxx.
4. New Xxxxxxxx will reimburse Xxxxxxxx Mortgage for the interest
expense on the outstanding balance of the Bank One, Texas, National Association
line of credit for January 1, 1997.
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Xxxxxxxx Mortgage Company
The Woodlands Corporation
January 1, 1997
Page 4
5. The Woodlands agrees to participate in the outstanding principal
balance of that certain commercial loan made by Xxxxxxxx Mortgage to A.K.
Interests - Remington, L.P. on December 20, 1996 in the original principal
amount of $3,260,000 (which loan will be part of the Assets Transferred to New
Xxxxxxxx); provided, however, The Woodlands' participation shall be limited to
the amount that the balance of such commercial loan exceeds Fort Bend's, and
consequently New Xxxxxxxx'x, lending limit of $2,800,000 per loan.
6. The provisions of this Letter shall cease and terminate upon a
proper termination of the Agreement in accordance with its terms.
7. FBHC has executed this Letter for the purpose of agreeing to the
provisions of this document that relate to it.
8. This Letter is contemporaneously executed with the Operating
Agreement which is a part of the Agreement.
If the foregoing correctly states our agreements, please execute and
return a copy of this Letter acknowledging your acceptance and agreement to the
terms hereof.
FORT BEND FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ROSENBERG
By:
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Name:
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Title:
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FORT BEND HOLDING CORP.
By:
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Name:
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Title:
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THE WOODLANDS CORPORATION
By:
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Name:
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Title:
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XXXXXXXX MORTGAGE COMPANY
By:
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Name:
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Title:
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