Exhibit 2.2
________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
PROSPERITY BANCSHARES, INC.,
PROSPERITY BANK
AND
THE FIRST STATE BANK
DATED AS OF APRIL 26, 2002
________________________________________________
TABLE OF CONTENTS
PAGE
I. THE MERGERS................................................................................. 1
Section 1.1. Initial Merger............................................................... 1
Section 1.2. Articles of Association, Bylaws and Facilities of First Surviving Bank....... 2
Section 1.3. Effect of Initial Merger..................................................... 2
Section 1.4. Liabilities of the First Surviving Bank...................................... 2
Section 1.5. Final Merger................................................................. 3
Section 1.6. Articles of Association, Bylaws and Facilities of Continuing Bank............ 3
Section 1.7. Effect of Final Merger....................................................... 3
Section 1.8. Liabilities of Continuing Bank............................................... 3
Section 1.9. Merger Consideration......................................................... 4
Section 1.10. Dissenting Shares............................................................ 4
Section 1.11. Exchange of Shares........................................................... 4
Section 1.12. Ratification by Shareholders................................................. 5
II. REPRESENTATIONS AND WARRANTIES OF STATE BANK................................................ 5
Section 2.1. Organization................................................................. 6
Section 2.2. Capitalization............................................................... 6
Section 2.3. Approvals; Authority......................................................... 6
Section 2.4. Investments.................................................................. 7
Section 2.5. Financial Statements......................................................... 7
Section 2.6. Loan Portfolio............................................................... 7
Section 2.7. Certain Loans and Related Matters............................................ 8
Section 2.8. Real Property Owned or Leased................................................ 8
Section 2.9. Personal Property............................................................ 9
Section 2.10. Environmental Laws........................................................... 9
Section 2.11. Litigation and Other Proceedings............................................. 10
Section 2.12. Taxes........................................................................ 11
Section 2.13. Contracts and Commitments.................................................... 11
Section 2.14. Insurance.................................................................... 13
Section 2.15. No Conflict With Other Instruments........................................... 13
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TABLE OF CONTENTS
(continued)
PAGE
Section 2.16. Laws and Regulatory Filings.................................................. 13
Section 2.17. Absence of Certain Changes................................................... 13
Section 2.18. Employment Relations......................................................... 14
Section 2.19. Employee Benefit Plans....................................................... 14
Section 2.20. Deferred Compensation Arrangements........................................... 15
Section 2.21. Brokers and Finders.......................................................... 15
Section 2.22. Absence of Property Taxes and Liens.......................................... 15
Section 2.23. Derivative Contracts......................................................... 16
Section 2.24. Deposits..................................................................... 16
Section 2.25. Accounting Controls.......................................................... 16
Section 2.26. Community Reinvestment Act................................................... 16
Section 2.27. Securities Laws.............................................................. 16
Section 2.28. Shareholders' List........................................................... 16
III. REPRESENTATIONS AND WARRANTIES OF BANCSHARES AND PROSPERITY................................. 17
Section 3.1. Organization................................................................. 17
Section 3.2. Approvals; Authority......................................................... 17
Section 3.3. No Conflict With Other Instruments........................................... 17
Section 3.4. Litigation and Other Proceedings............................................. 18
Section 3.5. Ability to Pay Merger Consideration.......................................... 18
Section 3.6. Brokers and Finders.......................................................... 00
XX. XXXXXXXXX XX XXXXX BANK..................................................................... 18
Section 4.1. Shareholder Approval and Best Efforts........................................ 18
Section 4.2. Activities of State Bank Pending Closing..................................... 19
Section 4.3. Access to Properties and Records............................................. 21
Section 4.4. Information for Regulatory Applications...................................... 21
Section 4.5. Attendance at Certain State Bank Meetings.................................... 21
Section 4.6. Standstill Provision......................................................... 22
Section 4.7. Voting Agreement............................................................. 22
Section 4.8. Termination of Data Processing Contracts..................................... 22
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TABLE OF CONTENTS
(continued)
PAGE
Section 4.9. Environmental Investigation; Rights to Terminate Agreement................... 22
V. COVENANTS OF BANCSHARES AND PROSPERITY...................................................... 23
Section 5.1. Best Efforts................................................................. 24
Section 5.2. Information for Regulatory Applications and Proxy Solicitation............... 24
Section 5.3. Employee Benefit Plans....................................................... 24
Section 5.4. Applications................................................................. 25
VI. MUTUAL COVENANTS OF BANCSHARES, PROSPERITY AND STATE BANK................................... 25
Section 6.1. Notification; Updated Disclosure Schedules................................... 25
Section 6.2. Confidentiality.............................................................. 25
VII. CLOSING..................................................................................... 26
Section 7.1. Closing...................................................................... 26
Section 7.2. Effective Time............................................................... 26
VIII. TERMINATION................................................................................ 27
Section 8.1. Termination.................................................................. 27
Section 8.2. Effect of Termination........................................................ 28
IX. CONDITIONS TO OBLIGATIONS OF BANCSHARES AND PROSPERITY...................................... 28
Section 9.1. Compliance with Representations and Covenants................................ 28
Section 9.2. Absence of Material Adverse Change........................................... 28
Section 9.3. Legal Opinion................................................................ 28
Section 9.4. Releases and Resignations.................................................... 29
Section 9.5. Equity Capital of State Bank................................................. 29
X. CONDITIONS TO OBLIGATIONS OF STATE BANK..................................................... 29
Section 10.1. Compliance with Representations and Covenants................................ 29
Section 10.2. Absence of Material Adverse Change........................................... 29
Section 10.3. Legal Opinion................................................................ 29
Section 10.4. Releases..................................................................... 30
XI. CONDITIONS TO RESPECTIVE OBLIGATIONS OF BANCSHARES, PROSPERITY AND STATE BANK............... 30
Section 11.1. Government Approvals.......................................................... 30
Section 11.2. Shareholder Approval.......................................................... 30
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TABLE OF CONTENTS
(continued)
PAGE
XII. MISCELLANEOUS............................................................................... 30
Section 12.1. Definitions.................................................................. 30
Section 12.2. Non-Survival of Representations and Warranties............................... 30
Section 12.3. Amendments................................................................... 31
Section 12.4. Expenses..................................................................... 31
Section 12.5. Notices...................................................................... 31
Section 12.6. Controlling Law.............................................................. 32
Section 12.7. Headings..................................................................... 32
Section 12.8. Modifications or Waiver...................................................... 32
Section 12.9. Severability................................................................. 32
Section 12.10. Assignment................................................................... 33
Section 12.11. Consolidation of Agreements.................................................. 33
Section 12.12. Counterparts................................................................. 33
Section 12.13. Binding on Successors........................................................ 33
Section 12.14. Gender....................................................................... 33
Section 12.15. Disclosures.................................................................. 33
Section 12.16. Publicity.................................................................... 33
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") dated as of April
26, 2002 is by and among Prosperity Bancshares, Inc., a Texas corporation
("Bancshares"), Prosperity Bank, a Texas banking association ("Prosperity") and
The First State Bank, Needville, Texas, a Texas banking association ("State
Bank").
WHEREAS, State Bank desires to affiliate with Bancshares and Prosperity,
and Bancshares and Prosperity desire to affiliate with State Bank in the manner
provided in this Agreement; and
WHEREAS, Bancshares, Prosperity and State Bank believe that the acquisition
of State Bank by Bancshares in the manner provided by, and subject to the terms
and conditions set forth in, this Agreement and all exhibits, schedules and
supplements hereto is desirable and in the best interests of their respective
shareholders; and
WHEREAS, the respective Boards of Directors of Bancshares, Prosperity and
State Bank have approved this Agreement and the transactions proposed herein
substantially on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of such premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties agree as set forth below.
INTRODUCTION
Following the execution of this Agreement by Bancshares, Prosperity and
State Bank, Bancshares will charter and organize as a wholly-owned subsidiary an
interim Texas banking association ("New Bank") solely for the purpose of
consummating the merger transactions described herein. This Agreement provides
for (i) the merger of New Bank with and into State Bank with State Bank as the
survivor (the "Initial Merger"), all pursuant to this Agreement and a Plan of
Merger by and between New Bank and State Bank, a copy of which is attached
hereto as Exhibit A and all of the terms of which are incorporated herein by
reference for all purposes and, immediately thereafter, (ii) the merger of State
Bank with and into Prosperity with Prosperity as the survivor (the "Final
Merger"), all pursuant to this Agreement and a Plan of Merger by and between
State Bank and Prosperity, a copy of which is attached hereto as Exhibit B and
all of the terms of which are incorporated herein by reference for all purposes.
The Initial Merger and the Final Merger shall sometimes be referred to
collectively as the "Mergers." In connection with the Initial Merger,
Bancshares will acquire all of the issued and outstanding shares of common
stock, $100.00 par value, of State Bank ("State Bank Common Stock") for an
aggregate consideration as set forth in this Agreement.
I. THE MERGERS
Section 1.1. Initial Merger. New Bank shall be merged into State Bank
(the resulting bank being herein referred to as the "First Surviving Bank") as
of the effective time of the Initial Merger under the charter and Articles of
Association of State Bank, as determined by the Texas Department of Banking
("Banking Department"), and each of the outstanding shares of common
stock of New Bank shall and without any action on the part of Bancshares be
canceled and be converted into shares of common stock of the First Surviving
Bank. The shares of common stock of the First Surviving Bank into which such New
Bank common stock is converted shall represent ownership of 100% of the issued
and outstanding capital stock of the First Surviving Bank, all of which shall be
owned by Bancshares.
Section 1.2. Articles of Association, Bylaws and Facilities of First
Surviving Bank. At the effective time of the Initial Merger and until thereafter
amended in accordance with applicable law, the Articles of Association of the
First Surviving Bank shall be the Articles of Association of State Bank as in
effect at the effective time of the Initial Merger. Until altered, amended or
repealed as provided therein and in the Articles of Association of the First
Surviving Bank, the Bylaws of the First Surviving Bank shall be the Bylaws of
State Bank as in effect at the effective time of the Initial Merger. The main
office of the First Surviving Bank shall be the main office of State Bank as of
the effective time of the Initial Merger, and all corporate acts, plans,
policies, contracts, approvals and authorizations of State Bank and New Bank and
their respective shareholders, boards of directors, committees elected or
appointed thereby, officers and agents, which were valid and effective
immediately prior to the effective time of the Initial Merger, shall be taken
for all purposes as the acts, plans, policies, contracts, approvals and
authorization of the First Surviving Bank and shall be as effective and binding
thereon as the same were with respect to State Bank and New Bank respectively,
as of the effective time of the Initial Merger.
Section 1.3. Effect of Initial Merger. At the effective time of the Initial
Merger, the corporate existence of State Bank and New Bank shall be consolidated
and continued in the First Surviving Bank, and the First Surviving Bank shall be
deemed to be a continuation in entity and identity of State Bank and New Bank.
All rights, franchises and interests of State Bank and New Bank, respectively,
in and to any type of property and choses in action shall be transferred to and
vested in the First Surviving Bank by virtue of the Initial Merger without any
deed or other transfer. First Surviving Bank, without any order or other action
on the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises and interest, including appointments, designations and
nominations, and all other rights and interests as trustee, executor,
administrator, transfer agent or registrar of stocks and bonds, guardian of
estates, assignee, receiver and committee of estates and lunatics, and in every
other fiduciary capacity, in the same manner and to the same extent as such
rights, franchises and interests were held or enjoyed by State Bank and New
Bank, respectively, as of the effective time of the Initial Merger. As of the
effective time of the Initial Merger, the directors and officers of New Bank
shall become the directors and officers of First Surviving Bank.
Section 1.4. Liabilities of the First Surviving Bank. At the effective time
of the Initial Merger, the First Surviving Bank shall be liable for all
liabilities of State Bank and New Bank. All deposits, debts, liabilities and
obligations of State Bank and of New Bank, respectively, accrued, absolute,
contingent or otherwise, and whether or not reflected or reserved against on
balance sheets, books of account or records of State Bank or New Bank, as the
case may be, shall be those of the First Surviving Bank and shall not be
released or impaired by the Initial Merger. All rights of creditors and other
obligees and all liens on property of either State Bank or New Bank shall be
preserved unimpaired.
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Section 1.5. Final Merger. Immediately after the effective time of the
Initial Merger, the First Surviving Bank shall be merged with and into
Prosperity (which, as the receiving association, is hereinafter referred to as
"Continuing Bank" whenever reference is made to it at or after the Effective
Time (as defined in Section 7.2 of this Agreement)) under the charter and
Articles of Association of Prosperity pursuant to the provisions of, and with
the effect provided in the Section 32.301 of the Texas Finance Code.
Section 1.6. Articles of Association, Bylaws and Facilities of Continuing
Bank. At the Effective Time and until thereafter amended in accordance with
applicable law, the Articles of Association of Continuing Bank shall be the
Articles of Association of Prosperity as in effect at the Effective Time. Until
altered, amended or repealed as therein provided and in the Articles of
Association of Continuing Bank, the Bylaws of Continuing Bank shall be the
Bylaws of Prosperity as in effect at the Effective Time. Unless and until
changed by the Board of Directors of Continuing Bank, the main office of
Continuing Bank shall be the main office of Prosperity as of the Effective Time.
The established offices and facilities of the First Surviving Bank immediately
prior to the Final Merger shall become established offices and facilities of the
Continuing Bank. Until thereafter changed in accordance with law or the Articles
of Association or Bylaws of Continuing Bank, all corporate acts, plans,
policies, contracts, approvals and authorizations of the First Surviving Bank
and Prosperity and their respective shareholders, boards of directors,
committees elected or appointed thereby, officers and agents, which were valid
and effective immediately prior to the Effective Time, shall be taken for all
purposes as the acts, plans, policies, contracts, approvals and authorizations
of Continuing Bank and shall be as effective and binding thereon as the same
were with respect to the First Surviving Bank and Prosperity, respectively, as
of the Effective Time.
Section 1.7. Effect of Final Merger. At the Effective Time, the corporate
existence of the First Surviving Bank and Prosperity shall, as provided in the
provisions of law heretofore mentioned, be consolidated and continued in
Continuing Bank, and Continuing Bank shall be deemed to be a continuation in
entity and identity of the First Surviving Bank and Prosperity. All rights,
franchises and interests of the First Surviving Bank and Prosperity,
respectively, in and to any type of property and choses in action shall be
transferred to and vested in Continuing Bank by virtue of such Final Merger
without any deed or other transfer. Continuing Bank, without any order or other
action on the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises and interest, including appointments, designations and
nominations, and all other rights and interests as trustee, executor,
administrator, transfer agent or registrar of stocks and bonds, guardian of
estates, assignee, receiver and committee of estates and lunatics, and in every
other fiduciary capacity, in the same manner and to the same extent as such
rights, franchises, and interests were held or enjoyed by First Surviving Bank
and Prosperity, respectively, as of the Effective Time. At the Effective Time,
the directors and officers of Prosperity shall become the directors and officers
of the Continuing Bank.
Section 1.8. Liabilities of Continuing Bank. At the Effective Time of the
Final Merger, Continuing Bank shall be liable for all liabilities of the First
Surviving Bank and Prosperity. All deposits, debts, liabilities, obligations
and contracts of the First Surviving Bank and of Prosperity, respectively,
matured or unmatured, whether accrued, absolute, contingent or otherwise, and
whether or not reflected or reserved against on balance sheets, books of
account, or records of the First Surviving Bank or Prosperity, as the case may
be, shall be those of
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Continuing Bank and shall not be released or impaired by the Mergers. All rights
of creditors and other obligees and all liens on property of either the First
Surviving Bank or Prosperity shall be preserved unimpaired subsequent to the
Mergers.
Section 1.9. Merger Consideration. Shares of State Bank Common Stock issued
and outstanding immediately prior to the Effective Time, other than Dissenting
Shares (as defined in Section 1.10 of the Agreement), shall, by virtue of the
Initial Merger and without any action on the part of the holder thereof, be
converted into and represent the right to receive aggregate consideration in the
form of cash equal to $3,725,000.00 (the "Merger Consideration") or
approximately $1,876.00 for each of the 2,000 shares of State Bank Common Stock
issued and outstanding at the Effective Time, payable to the holders of record
such shares of State Bank Common Stock, without interest thereon, upon surrender
of the certificate representing such shares.
Section 1.10. Dissenting Shares. Each share of State Bank Common Stock
issued and outstanding immediately prior to the Effective Time, the holder of
which has not voted in favor of the Mergers and who has delivered a written
demand for payment of the fair value of such shares within the time and in the
manner provided in Article 5.12 of the Texas Business Corporation Act ("TBCA"),
is referred to herein as a "Dissenting Share." Dissenting Shares shall not be
converted into or represent the right to receive the Merger Consideration
pursuant to Section 1.9 of this Agreement unless and until such holder shall
have failed to perfect or shall have effectively withdrawn or lost his right to
appraisal and payment under the TBCA. If any such holder shall have so failed to
perfect or shall have effectively withdrawn or lost such right, such holder's
Dissenting Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, at the Effective Time, the right to receive the
Merger Consideration without any interest thereon.
Section 1.11. Exchange of Shares.
(a) Bancshares shall deposit or cause to be deposited in trust with
Prosperity (the "Exchange Agent") prior to the Effective Time cash in an
aggregate amount sufficient to make the cash payments pursuant to Section 1.9
hereof and to make the appropriate cash payments, if any, to holders of
Dissenting Shares pursuant to Section 1.10 hereof (such amounts being
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall
promptly make the payments of the Merger Consideration out of the Exchange Fund
upon surrender of such shares. Payments to holders of Dissenting Shares shall be
made as required by the TBCA. The Exchange Fund shall not be used for any other
purpose, except as provided in this Agreement.
(b) At least 10 business days prior to the Effective Time, the Exchange
Agent shall mail to each record holder of an outstanding certificate or
certificates which represent shares of State Bank Common Stock (the
"Certificates"), a form letter of transmittal which will specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and contain
instructions for use in effecting the surrender of the Certificates for payment
therefor. At and after the Closing (as defined herein) and upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal duly
executed, the holder of such Certificate shall be entitled to receive in
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exchange therefor the amount of cash provided in Section 1.9 hereof in the
manner described herein, and such Certificate shall forthwith be canceled.
Payment will be made at Closing for shares of State Bank Common Stock if
Certificates and a properly completed letter of transmittal with respect to such
shares are received by the Exchange Agent at least five days prior to Closing.
Payment will be made for all other shares of State Bank Common Stock within five
days after the Exchange Agent's receipt of the Certificates and a properly
completed letter of transmittal. No interest will be paid or accrued on the cash
payable upon surrender of the Certificates. If payment of cash is to be made to
a person other than the person in whose name the Certificate surrendered is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the Certificate surrendered or established to the satisfaction of
Bancshares that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 1.11, each Certificate (other
than Certificates representing Dissenting Shares) shall represent for all
purposes the right to receive the Merger Consideration without any interest
thereon.
(c) After the Effective Time, the stock transfer ledger of State Bank shall
be closed and there shall be no transfers on the stock transfer books of State
Bank of the shares of State Bank Common Stock which were outstanding immediately
prior to such time of filing. If, after the Effective Time, Certificates are
presented to Bancshares, they shall be promptly presented to the Exchange Agent
and exchanged as provided in this Section 1.11.
(d) Any portion of the Exchange Fund (including the proceeds of any
investments thereof) that remains unclaimed by the shareholders of State Bank
for six months after the Effective Time shall be paid to Bancshares, and the
holders of shares of State Bank Common Stock not theretofore presented to the
Exchange Agent shall look to Bancshares only, and not the Exchange Agent, for
the payment of any Merger Consideration in respect of such shares.
Section 1.12. Ratification by Shareholders. This Agreement shall be
submitted to the shareholders of State Bank in accordance with applicable
provisions of law and the respective Articles of Association and Bylaws of State
Bank. State Bank and Bancshares shall proceed expeditiously and cooperate fully
in the procurement of any other consents and approvals and the taking of any
other actions in satisfaction of all other requirements prescribed by law or
otherwise necessary for consummation of the Mergers on the terms herein
provided, including, without limitation, the preparation and submission of all
necessary filings, requests for waivers and certificates with the Board of
Governors of the Federal Reserve System ("Federal Reserve Board"), the Federal
Deposit Insurance Corporation ("FDIC") and the Banking Department.
II. REPRESENTATIONS AND WARRANTIES OF STATE BANK
State Bank represents and warrants to Bancshares and Prosperity that each
of the statements made in this Article II are true and correct in all material
respects. State Bank agrees that, at the Closing, it shall provide Bancshares
with supplemental Schedules reflecting any changes in the information contained
in the Schedules which have occurred in the period from the date of delivery of
such Schedules to the date of Closing.
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Section 2.1. Organization.
(a) State Bank is a Texas banking association duly organized, validly
existing and in good standing under the laws of the State of Texas. State Bank
has full power and authority (including all licenses, franchises, permits and
other governmental authorizations which are legally required) to own, lease and
operate its properties, to engage in the business and activities now conducted
by it and to enter into this Agreement, except where the failure to be so
licensed or qualified would not have a Material Adverse Effect (as hereinafter
defined) on the business, assets, operations, financial condition or results of
operations (such business, assets, operations, financial condition or results of
operations hereinafter collectively referred to as the "Condition") of State
Bank.
(b) State Bank is duly authorized to conduct a general banking business,
embracing all usual deposit functions of commercial banks as well as commercial,
industrial and real estate loans, installment credits, collections and safe
deposit facilities subject to the supervision of the FDIC and Banking
Department. State Bank does not conduct any trust activities. True and complete
copies of the Articles of Association and Bylaws of State Bank, as amended to
date, have been delivered or made available to Bancshares.
(c) State Bank (i) does not have any subsidiaries or affiliates, (ii) is
not a general partner or material owner in any joint venture, general
partnership, limited partnership, trust or other non-corporate entity, and (iii)
does not know of any arrangement pursuant to which the stock of any corporation
is or has been held in trust (whether express, constructive, resulting or
otherwise) for the benefit of all shareholders of State Bank.
(d) The deposit accounts of State Bank are insured by the Federal Deposit
Insurance Corporation ("FDIC") through the Bank Insurance Fund to the fullest
extent permitted by law, and all premiums and assessments due and owning as of
the date hereof required in connection therewith have been paid by State Bank.
Section 2.2. Capitalization. The authorized capital stock of State Bank
consists of 2,000 shares of State Bank Common Stock, all of which are issued and
outstanding. All of the issued and outstanding shares of State Bank Common
Stock are validly issued, fully paid and nonassessable, and have not been issued
in violation of the preemptive rights of any person or in violation of any
applicable federal or state laws. There are no existing options, warrants,
calls, convertible securities or commitments of any kind obligating State Bank
to issue any authorized and unissued State Bank Common Stock nor does State Bank
have any outstanding commitment or obligation to repurchase, reacquire or redeem
any of its outstanding capital stock. There are no voting trusts, voting
agreements, buy-sell agreements or other similar arrangements affecting the
State Bank Common Stock.
Section 2.3. Approvals; Authority.
(a) State Bank has full corporate power and authority to execute and
deliver this Agreement (and any related documents), and State Bank has full
legal capacity, power and authority to perform its obligations hereunder and
thereunder and to consummate the contemplated transactions.
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(b) The Board of Directors of State Bank has approved this Agreement and
the transactions contemplated herein subject to the approval thereof by the
shareholders of State Bank as required by law, and, other than shareholder
approval, no further corporate proceedings of State Bank are needed to execute
and deliver this Agreement and consummate the Mergers. This Agreement has been
duly executed and delivered by State Bank and, is a duly authorized, valid,
legally binding agreement of State Bank enforceable against State Bank in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and general equitable principles.
Section 2.4. Investments. State Bank has furnished to Bancshares a complete
list, as of March 31, 2002, of all securities, including municipal bonds, owned
by State Bank (the "Securities Portfolio"). Except as set forth in Schedule 2.4,
all such securities are owned by State Bank (i) of record, except those held in
bearer form, and (ii) beneficially, free and clear of all mortgages, liens,
pledges and encumbrances. Schedule 2.4 also discloses any entities in which the
ownership interest of State Bank equals 5% or more of the issued and outstanding
voting securities of the issuer thereof. There are no voting trusts or other
agreements or understandings with respect to the voting of any of the securities
in the Securities Portfolio.
Section 2.5. Financial Statements.
(a) State Bank has furnished or made available to Bancshares true and
complete copies of the Consolidated Reports of Condition and Income ("Call
Reports") filed by State Bank as of December 31, 2001, 2000 and 1999, and for
the years then ended, and any unaudited balance sheets as of December 31, 2001,
2000 and 1999 and the related statements of income and statements of cash flow
for the years then ended together with the notes thereto. The Call Reports and
the unaudited financial statements, if any, referred to in this Section 2.5 are
collectively referred to in this Agreement as the "State Bank Financial
Statements."
(b) Each of the State Bank Financial Statements fairly present the
financial position of State Bank and the results of its operations at the dates
and for the periods indicated in conformity with regulatory accounting
principles ("RAP") applied on a consistent basis.
(c) As of the dates of the State Bank Financial Statements referred to
above, State Bank did not have any liabilities, fixed or contingent, which are
material and are not fully shown or provided for in such State Bank Financial
Statements or otherwise disclosed in this Agreement, or in any of the documents
delivered to Bancshares. Since December 31, 2001, there have been no material
changes in the financial condition, assets, liabilities or business of State
Bank, other than changes in the ordinary course of business, which individually
or in the aggregate have not had a Material Adverse Effect on the Condition of
State Bank.
Section 2.6. Loan Portfolio. (i) All evidences of indebtedness in
original principal amount in excess of $10,000 reflected as assets in the Bank
Financial Statements as of and for the year ended December 31, 2001, were as of
such dates in all material respects the binding obligations of the respective
obligors named therein in accordance with their respective terms, (ii) the
allowance for loan losses shown on the Bank Financial Statements as of and for
the year ended December 31, 2001, was, and the allowance for loan losses to be
shown on the Bank Financial Statements as of any date subsequent to the
execution of this Agreement will be, as of
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such dates, in the reasonable judgment of management of State Bank, adequate to
provide for possible losses, net of recoveries relating to loans previously
charged off, in respect of loans outstanding (including accrued interest
receivable) of State Bank and other extensions of credit (including letters of
credit or commitments to make loans or extend credit), and (iii) the allowance
for loan losses described in clause (ii) above has been established in
accordance with generally accepted accounting principles ("GAAP") as applied to
banking institutions and all applicable rules and regulations; provided,
however, that no representation or warranty is made as to the sufficiency of
collateral securing or the collectibility of such loans.
Section 2.7. Certain Loans and Related Matters.
(a) Except as set forth in Schedule 2.7(a), State Bank is not a party to
any written or oral: (i) loan agreement, note or borrowing arrangement, other
than credit card loans and other loans the unpaid balance of which does not
exceed $15,000 per loan, under the terms of which the obligor is sixty (60) days
delinquent in payment of principal or interest or in default of any other
material provisions as of the date hereof; (ii) loan agreement, note or
borrowing arrangement which has been classified or, in the exercise of
reasonable diligence by State Bank or any regulatory agency with supervisory
jurisdiction over State Bank, should have been classified as "substandard,"
"doubtful," "loss," "other loans especially mentioned," "other assets especially
mentioned" or any comparable classifications by such persons; (iii) loan
agreement, note or borrowing arrangement, including any loan guaranty, with any
director or executive officer of State Bank, or any 10% or more shareholder of
State Bank, or any person, corporation or enterprise controlling, controlled by
or under common control with any of the foregoing; or (iv) loan agreement, note
or borrowing arrangement in violation of any law, regulation or rule applicable
to State Bank including, but not limited to, those promulgated, interpreted or
enforced by any regulatory agency with supervisory jurisdiction over State Bank
and which violation could have a Material Adverse Effect on the Condition of
State Bank.
(b) Schedule 2.7(b) contains the "watch list of loans" of State Bank
("Watch List") as of March 31, 2002. Except as set forth in Schedule 2.7(b), to
the knowledge of State Bank, there is no loan agreement, note or borrowing
arrangement which should be included on the Watch List in accordance with State
Bank's past practices and prudent banking principles.
Section 2.8. Real Property Owned or Leased.
(a) Other than real property acquired through foreclosure or deed in lieu
of foreclosure, Schedule 2.8(a) contains a true, correct and complete list of
all real property owned or leased by State Bank (the "Bank Real Property"). True
and complete copies of all deeds, leases and title insurance policies for, or
other documentation evidencing ownership of, the properties referred to in
Schedule 2.8(a) and all mortgages, deeds of trust and security agreements to
which such property is subject have been furnished or made available to
Bancshares.
(b) No lease with respect to any Bank Real Property and no deed with
respect to any Bank Real Property contains any restrictive covenant that
materially restricts the use, transferability or value of such Bank Real
Property. Each of such leases is a legal, valid and binding obligation
enforceable in accordance with its terms (except as may be limited by
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bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
rights of creditors generally and the availability of equitable remedies), and
is in full force and effect; there are no existing defaults by the Bank or the
other party thereunder and there are no allegations or assertions of such by any
party under such agreement or any events that with notice lapse of time or the
happening or occurrence of any other event would constitute a default
thereunder.
(c) To the knowledge of State Bank, none of the buildings and structures
located on any Bank Real Property, nor any appurtenances thereto or equipment
therein, nor the operation or maintenance thereof, violates in any material
manner any restrictive covenants or encroaches on any property owned by others,
nor does any building or structure of third parties encroach upon any Bank Real
Property, except for those violations and encroachments which in the aggregate
could not reasonably be expected to cause a Material Adverse Effect on the
Condition of State Bank. No condemnation proceeding is pending or, to State
Bank's knowledge, threatened, which would preclude or materially impair the use
of any Bank Real Property in the manner in which it is currently being used.
(d) State Bank has good and indefeasible title to, or a valid and
enforceable leasehold interest in, or a contract vendee's interest in, all Bank
Real Property, and such interest is free and clear of all liens, charges or
other encumbrances, except (i) statutory liens for amounts not yet delinquent or
which are being contested in good faith through proper proceedings and (ii)
those liens related to real property taxes, local improvement district
assessments, easements, covenants, restrictions and other matters of record
which do not individually or in the aggregate materially adversely affect the
use and enjoyment of the relevant real property.
(e) Except as set forth in Schedule 2.8(e), all buildings and other
facilities used in the business of State Bank are adequately maintained and, to
State Bank's knowledge, are free from defects which could materially interfere
with the current or future use of such facilities.
Section 2.9. Personal Property. State Bank has good title to, or a valid
leasehold interest in, all personal property, whether tangible or intangible,
used in the conduct of its business (the "Bank Personalty"), free and clear of
all liens, charges or other encumbrances, except (i) statutory liens for amounts
not yet delinquent or which are being contested in good faith through proper
proceedings and (ii) such other liens, charges, encumbrances and imperfections
of title as do not individually or in the aggregate materially adversely affect
the use and enjoyment of the relevant Bank Personalty. Subject to ordinary wear
and tear, the Bank Personalty is in good operating condition and repair and is
adequate for the uses to which it is being put.
Section 2.10. Environmental Laws. To the knowledge of State Bank, State
Bank and any properties or business owned or operated by State Bank, whether or
not held in a fiduciary or representative capacity, are in material compliance
with all terms and conditions of all applicable federal and state Environmental
Laws (as defined below) and permits thereunder. State Bank has not received
notice of any violation of any Environmental Laws or generated, stored, or
disposed of any materials designated as Hazardous Materials (as defined below)
under the Environmental Laws, and they are not subject to any claim or lien
under any Environmental Laws. During the term of ownership by State Bank no real
estate currently owned, operated, or
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leased (including any property acquired by foreclosure or deeded in lieu
thereof) by State Bank, or owned, operated or leased by State Bank within the
ten years preceding the date of this Agreement, has been designated by
applicable governmental authorities as requiring any environmental cleanup or
response action to comply with Environmental Laws, or has been the site of
release of any Hazardous Materials. To the knowledge of State Bank, (i) no
asbestos was used in the construction of any portion of State Bank's facilities
and (ii) no real property currently owned by it is, or has been, an industrial
site or landfill. Bancshares and its consultants, agents and representatives
shall have the right to inspect State Bank's assets for the purpose of
conducting asbestos and other environmental surveys, provided that such
inspection shall be at the expense of Bancshares and at such time as may be
mutually agreed upon between State Bank and Bancshares.
"Environmental Laws," as used in this Agreement, means any applicable
federal, state or local statute, law, rule, regulation, ordinance, code, policy
or rule of common law now in effect and in each case as amended to date and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree, or judgment, relating to the environment,
human health or safety, or Hazardous Materials, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. (S) 9601, et seq.; The Hazardous Materials Transportation
Authorization Act, as amended, 49 U.S.C. (S) 5101, et seq.; the Resource
Conservation and Recovery Act of 1976, as amended, 42 U.S.C. (S) 6901, et seq.;
the Federal Water Pollution Control Act, as amended, 33 U.S.C. (S) 1201, et
seq.; the Toxic Substances Control Act, 15 U.S.C. (S) 2601, et seq.; the Clean
Air Act, 42 U.S.C. (S) 7401, et seq.; and the Safe Drinking Water Act, 42 U.S.C.
(S) 300f, et seq.
"Hazardous Materials," as used in this Agreement, includes, but is not
limited to, (a) any petroleum or petroleum products, natural gas, or natural gas
products, radioactive materials, asbestos, urea formaldehyde foam insulation,
transformers or other equipment that contains dielectric fluid containing levels
of polychlorinated biphenyls (PCBs), and radon gas; (b) any chemicals,
materials, waste or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," toxic substances," "toxic
pollutants," "contaminants," or "pollutants," or words of similar import, under
any Environmental Laws; and (c) any other chemical, material, waste or substance
which is in any way regulated as hazardous or toxic by any federal, state or
local government authority, agency or instrumentality, including mixtures
thereof with other materials, and including any regulated building materials
such as asbestos and lead.
Section 2.11. Litigation and Other Proceedings. There are no legal,
quasi-judicial, regulatory or administrative proceedings of any kind or nature
now pending or, to the knowledge of State Bank, threatened before any court or
administrative body in any manner against State Bank, or any of its properties
or capital stock, which might have a Material Adverse Effect on the Condition of
State Bank or the transactions proposed by this Agreement. State Bank does not
know of any basis on which any litigation or proceeding could be brought which
could have a Materially Adverse Effect on the Condition of State Bank or which
could question the validity of any action taken or to be taken in connection
with this Agreement and the transactions contemplated hereby. State Bank is not
in default with respect to any judgment, order, writ,
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injunction, decree, award, rule or regulation of any court, arbitrator or
governmental agency or instrumentality.
Section 2.12. Taxes. State Bank has filed with the appropriate federal,
state and local governmental agencies all Tax Returns and reports required to be
filed, and has paid all Taxes and assessments shown or claimed to be due. The
Tax Returns as filed were correct in all respects. State Bank has not executed
or filed with the Internal Revenue Service any agreement extending the period
for assessment and collection of any federal income Tax. State Bank is not a
party to any action or proceeding by any governmental authority for assessment
or collection of Taxes, nor has any claim for assessment or collection of Taxes
been asserted against State Bank. State Bank has not waived any statute of
limitations with respect to any Tax or other assessment or levy, and all such
Taxes and other assessments and levies which State Bank is required by law to
withhold or to collect have been duly withheld and collected and have been paid
over to the proper governmental authorities to the extent due and payable, or
segregated and set aside for such payment and, if so segregated and set aside
will be so paid by State Bank, as required by law.
True and complete copies of the federal income tax returns of State Bank as
filed with the Internal Revenue Service for the years ended December 31, 2001,
2000 and 1999 have been delivered or made available to Bancshares.
For purposes of this Agreement, "Taxes" shall mean any and all taxes,
charges, fees, levies or other assessments, including, without limitation, all
net income, gross income, gross receipts, excise, stamp, real or personal
property, ad valorem, withholding, social security (or similar), unemployment,
occupation, use, production, service, service use, license, net worth, payroll,
franchise, severance, transfer, recording, employment, premium, windfall
profits, environmental (including taxes under Section 59A of the Internal
Revenue Code), customs duties, capital stock, profits, disability, sales,
registration, value added, alternative or add-on minimum, estimated or other
taxes, assessments or charges imposed by any federal, state, local or foreign
governmental entity and any interest, penalties, or additions to tax
attributable thereto. For purposes of this Agreement, "Tax Return" shall mean
any return, declaration, report, form or similar statement required to be filed
with respect to any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
Section 2.13. Contracts and Commitments.
(a) Except as set forth in Schedule 2.13, State Bank is not a party to or
bound by any of the following (whether written or oral, express or implied):
(i) employment contract or severance arrangement (including without
limitation any collective bargaining contract or union agreement or
agreement with an independent consultant) which is not terminable by State
Bank on less than sixty (60) days' notice without payment of any amount on
account of such termination;
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(ii) bonus, stock option or other employee benefit arrangement, other
than any deferred compensation arrangement disclosed in Schedule 2.20 or
any profit-sharing, pension or retirement plan or welfare plan disclosed in
Schedule 2.19(a);
(iii) material lease or license with respect to any property, real or
personal, whether as landlord, tenant, licensor or licensee;
(iv) contract or commitment for capital expenditures;
(v) material contract or commitment made in the ordinary course of
business for the purchase of materials or supplies or for the performance
of services over a period of more than one hundred twenty (120) days' from
the date of this Agreement;
(vi) contract or option to purchase or sell any real or personal
property other than in the ordinary course of business;
(vii) contract, agreement or letter with respect to the management or
operations of State Bank imposed by any bank regulatory authority having
supervisory jurisdiction over State Bank;
(viii) agreement, contract or indenture related to the borrowing by
State Bank of money other than those entered into in the ordinary course of
business;
(ix) guaranty of any obligation for the borrowing of money, excluding
endorsements made for collection, repurchase or resell agreements, letters
of credit and guaranties made in the ordinary course of business;
(x) agreement with or extension of credit to any executive officer or
director of State Bank or holder of more than ten percent (10%) of the
issued and outstanding State Bank Common Stock, or any affiliate of such
person, which is not on substantially the same terms (including, without
limitation, in the case of lending transactions, interest rates and
collateral) as, and following credit underwriting practices that are not
less stringent than, those prevailing at the time for comparable
transactions with unrelated parties or which involve more than the normal
risk of collectibility or other unfavorable features; or
(xi) contracts, other than the foregoing, with annual payments
aggregating $10,000 or more not made in the ordinary course of business and
not otherwise disclosed in this Agreement, in any schedule attached hereto
or in any document delivered or referred to or described in writing by
State Bank to Bancshares.
(b) State Bank has in all material respects performed all material
obligations required to be performed by it to date and is not in default under,
and no event has occurred which, with the lapse of time or action by a third
party could result in default under, any material indenture, mortgage, contract,
lease or other agreement to which State Bank is a party or by which State Bank
bound or under any provision of its Articles of Association or Bylaws.
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Section 2.14. Insurance. A true and complete list of all insurance
policies owned or held by or on behalf of State Bank (other than credit-life
policies), including policy numbers, retention levels, insurance carriers, and
effective and termination dates, is set forth in Schedule 2.14. Such policies
are in full force and effect and contain only standard cancellation or
termination clauses. In the judgment of the Board of Directors of State Bank,
such insurance policies in respect of amounts, types and risks insured are
adequate to insure against risks to which State Bank and its assets are normally
exposed in the operation of its business, subject to customary deductibles and
policy limits.
Section 2.15. No Conflict With Other Instruments. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not (i) conflict with or violate any
provision of State Bank's Articles of Association or Bylaws or (ii) assuming all
required shareholder and regulatory approvals and consents are duly obtained,
will not (A) violate any statute, code, ordinance, rule, regulation, judgment,
order, writ, decree or injunction applicable to State Bank or any of its
properties or assets, or (B) violate, conflict with, result in a breach of any
provision of or constitute a default (or an event which, with or without notice
or lapse of time, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, cause Bancshares or State Bank to become subject to or liable for
the payment of any tax, or result in the creation of any lien, charge or
encumbrance upon any of the properties or assets of State Bank under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease agreement, instrument or obligation to which State Bank is
a party, or by which any of its properties or assets may be bound or affected,
except for such violations, conflicts, breaches or defaults which either
individually or in the aggregate will not have a Material Adverse Effect on the
Condition of State Bank.
Section 2.16. Laws and Regulatory Filings. State Bank is in material
compliance with all applicable federal, state and local laws, rules, regulations
and orders applicable to them. Except for approvals by regulatory authorities
having jurisdiction over State Bank, no prior consent, approval or authorization
of, or declaration, filing or registrations with, any person or regulatory
authority is required of State Bank in connection with the execution, delivery
and performance by State Bank of this Agreement and the transactions
contemplated hereby or the resulting change of control of State Bank except for
certain instruments necessary to consummate the Mergers contemplated hereby.
State Bank has filed all reports, registrations and statements, together with
any amendments required to be made thereto, that are required to be filed with
the FDIC, the Banking Department or any other regulatory authority having
jurisdiction over State Bank, and such reports, registrations and statements
are, to the knowledge of State Bank, true and correct in all material respects.
Section 2.17. Absence of Certain Changes. Since December 31, 2001, State
Bank has not (a) issued or sold any of its capital stock or corporate debt
obligations; (b) declared or set aside or paid any dividend or made any other
distribution (whether in cash, stock or property) in respect of or, directly or
indirectly, purchased, redeemed or otherwise acquired any shares of State Bank
Common Stock; (c) incurred any obligations or liabilities (fixed or contingent),
except obligations or liabilities incurred in the ordinary course of business,
or mortgaged, pledged or subjected any of its assets to a lien or encumbrance
(other than in the ordinary course of business and other than statutory liens
not yet delinquent); (d) discharged or satisfied any lien
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or encumbrance or paid any obligation or liability (fixed or contingent), other
than accruals, accounts and notes payable included in the State Bank Financial
Statements, accruals, accounts and notes payable incurred since December 31,
2001 in the ordinary course of business and accruals, accounts and notes payable
incurred in connection with the transactions contemplated by this Agreement; (e)
sold, exchanged or otherwise disposed of any of its capital assets other than in
the ordinary course of business; (f) made any general or individual wage or
salary increase (including increases in directors' or consultants' fees) other
than in accordance with past practices, paid any bonus, granted or paid any
perquisites such as automobile allowance, club membership or dues or other
similar benefits, entered into any employment contract or made any accrual or
arrangement for or payment of bonuses or special compensation of any kind or
severance or termination pay to any present or former officer or salaried
employee, or instituted any employee welfare, retirement or similar plan or
arrangement; (g) suffered any physical damage, destruction or casualty loss,
whether or not covered by insurance; (h) made any or acquiesced with any change
in accounting methods, principles and practices except as may be required by
GAAP; (i) excluding loan commitments made and certificates of deposit issued,
entered into any contract, agreement or commitment which obligates State Bank
for an amount in excess of $10,000 over the term of any such contract, agreement
or commitment; or (j) except in the ordinary course of business, entered or
agreed to enter into any agreement or arrangement granting any preferential
rights to purchase any of its assets, properties or rights or requiring the
consent of any party to the transfer and assignment of any such assets,
properties or rights; or (k) incurred any change or any event involving a
prospective change in the Condition of State Bank which has had, or is
reasonably likely to have, a Material Adverse Effect on the Condition of State
Bank generally, including, without limitation any change in the administrative
or supervisory standing or rating of State Bank with any regulatory agency
having jurisdiction over State Bank, and no fact or condition exists as of the
date hereof which might reasonably be expected to cause any such event or change
in the future.
Section 2.18. Employment Relations. The relations of State Bank with its
employees are satisfactory, and State Bank has not received any notice of any
controversies with, or organizational efforts or other pending actions by,
representatives of its employees. State Bank has materially complied with all
laws relating to the employment of labor with respect to its employees,
including any provisions thereof relating to wages, hours, collective bargaining
and the payment of xxxxxxx'x compensation insurance and social security and
similar taxes, and no person has asserted that State Bank is liable for any
arrearages of wages, xxxxxxx'x compensation insurance premiums or any taxes or
penalties for failure to comply with any of the foregoing.
Section 2.19. Employee Benefit Plans.
(a) Schedule 2.19(a) lists all employee benefit plans or agreements
providing benefits to any employees or former employees of State Bank that are
sponsored or maintained by State Bank to which State Bank contributes or is
obligated to contribute on behalf of employees or former employees of State
Bank, including without limitation any employee welfare benefit plan within the
meaning of Section 3(1) of the Employment Retirement Income Security Act of
1974, as amended ("ERISA"), any employee pension benefit plan within the meaning
of Section 3(2) of ERISA or any collective bargaining, bonus, incentive,
deferred compensation, stock purchase, stock option, severance, change of
control or fringe benefit plan.
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(b) No employee benefit plans of State Bank or its ERISA Affiliates (as
defined below) (the "State Bank Plans") are "multiemployer plans" within the
meaning of Section 4001(a)(3) of ERISA ("Multiemployer Plans"). None of State
Bank or any of its respective ERISA Affiliates has, at any time during the last
six years, contributed to or been obligated to contribute to any Multiemployer
Plan, and none of State Bank, or any of its respective ERISA Affiliates has
incurred any withdrawal liability under Part I of Subtitle E of Title IV of
ERISA that has not been satisfied in full.
(c) There does not now exist, nor, to the best knowledge State Bank, do any
circumstances exist that could result in, any Controlled Group Liability that
would be a material liability of State Bank now or following the Closing.
"Controlled Group Liability" means (i) any and all liabilities (A) under Title
IV of ERISA, (B) under Section 302 of ERISA, (C) under Sections 412 and 4971 of
the Code, or (D) as a result of a failure to comply with the continuation
coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the
Code, and (E) under corresponding or similar provisions of foreign laws or
regulations; (ii) with respect to any State Bank Plan any other material
liability under Title I of ERISA or Chapter 43 or 68 of the Code, and (iii)
material unfunded liabilities under any non-qualified deferred compensation plan
for the benefit of any employee or former employee of State Bank.
(d) There is no contract, agreement, plan or arrangement covering any
employee or former employee of State Bank that, individually or in the
aggregate, could give rise to the payment by State Bank of any amount that would
not be deductible pursuant to the terms of Section 162(m) or Section 280G of the
Code. Except as required by the continuation coverage requirements of Section
601 et seq. of ERISA and Section 4980B of the Code, State Bank has no liability
to provide post-retirement health or life benefits to any employee or former
employee of State Bank.
(e) "ERISA Affiliates" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same "controlled group" as the first entity, trade or business pursuant
to Section 4001(a)(14) of ERISA.
Section 2.20. Deferred Compensation Arrangements. Schedule 2.20 contains a
list of all deferred compensation arrangements of State Bank, if any, including
the terms under which the cash value of any life insurance purchased in
connection with any such arrangement can be realized.
Section 2.21. Brokers and Finders. Neither State Bank nor any of its
officers, directors or employees have employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with this Agreement and the transactions contemplated herein.
Section 2.22. Absence of Property Taxes and Liens. All property taxes due
under the applicable provisions of the Texas Tax Code have been paid by either
State Bank or the shareholders of State Bank.
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Section 2.23. Derivative Contracts. State Bank is not a party to nor has it
agreed to enter into an exchange-traded or over-the-counter swap, forward,
future, option, cap, floor or collar financial contract or agreement, or any
other contract or agreement not included in the Bank Financial Statements which
is a financial derivative contract (including various combinations thereof)
("Derivative Contracts").
Section 2.24. Deposits. To the knowledge of State Bank, none of the
deposits of State Bank is a "brokered" deposit (as such term is defined in 12
CFR 337.6(a)(2)) or is subject to any encumbrance, legal restraint or other
legal process (other than garnishments, pledges, set off rights, escrow
limitations and similar actions taken in the ordinary course of business).
Section 2.25. Accounting Controls. State Bank has devised and maintained
a system of internal accounting controls sufficient to provide reasonable
assurances that: (i) all material transactions are executed in accordance with
general or specific authorization of the Board of Directors and the duly
authorized executive officers of State Bank; (ii) all material transactions are
recorded as necessary to permit the preparation of financial statements in
conformity with RAP consistently applied with respect to institutions such as
State Bank or other criteria applicable to such financial statements, and to
maintain proper accountability for items therein; (iii) access to the material
properties and assets of State Bank is permitted only in accordance with general
or specific authorization of the Board of Directors and the duly authorized
executive officers of State Bank; and (iv) the recorded accountability for items
is compared with the actual levels at reasonable intervals and appropriate
actions taken with respect to any differences.
Section 2.26. Community Reinvestment Act. State Bank is in material
compliance with the Community Reinvestment Act (12 U.S.C. (S) 2901 et seq.) and
all regulations promulgated thereunder, and State Bank has supplied Bancshares
with copies of State Bank's current CRA Statement, all support papers therefor,
all letters and written comments received by State Bank since January 1, 1998
pertaining thereto and any responses by State Bank to such comments. State Bank
has a rating of "satisfactory" as of its most recent CRA compliance examination
and knows of no reason why it would not receive a rating of "satisfactory" or
better pursuant to its next CRA compliance examination or why the FDIC or any
other governmental entity may seek to restrain, delay or prohibit the
transactions contemplated hereby as a result of any act or omission of State
Bank under the CRA.
Section 2.27. Securities Laws. State Bank and its officers, employees and
agents are now, and at all times in the past have been, in full compliance with
all applicable federal and state securities laws and any regulations promulgated
thereunder. State Bank and its officers, employees and agents have complied
with, and currently hold, all necessary licenses and permits required under any
federal or state securities law or regulation to conduct any securities
activities in which State Bank or its officers, employees, or agents are now
engaged or have been engaged in the past.
Section 2.28. Shareholders' List. State Bank has provided or made available
to Bancshares as of a date within ten (10) days of the date of this Agreement a
list of the holders of shares of State Bank Common Stock containing for State
Bank's shareholders the names, addresses and number of shares held of record,
which shareholders' list is in all respects accurate as of such date and will be
updated prior to Closing.
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III. REPRESENTATIONS AND WARRANTIES OF BANCSHARES AND PROSPERITY
Bancshares and Prosperity represent and warrant to State Bank that the
statements contained in this Article III are true and correct in all material
respects as follows:
Section 3.1. Organization. Bancshares is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas and a
financial holding company duly registered under the Bank Holding Company Act of
1956, as amended ("BHC Act") and the Xxxxx-Xxxxx-Xxxxxx Act, subject to all
laws, rules and regulations applicable to bank holding companies and financial
holding companies. Prosperity Holdings, Inc. ("Delaware Company") is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and a bank holding company duly registered under the
BHC Act subject to all laws, rules and regulations applicable to bank holding
companies. Bancshares owns 100% of the issued and outstanding common stock of
Delaware Company and, indirectly through Delaware Company, 100% of the issued
and outstanding capital stock of Prosperity. Prosperity is a Texas banking
association duly organized, validly existing and in good standing under the laws
of the State of Texas. Prosperity is an insured bank as defined in the Federal
Deposit Insurance Act. Bancshares and Prosperity have full power and authority
(including all licenses, franchises, permits and other governmental
authorizations which are legally required) to own their properties, to engage in
the business and activities now conducted by them and to enter into this
Agreement, except where the failure to be so licensed or qualified would not
have a Material Adverse Effect on the Condition of Bancshares and Prosperity,
considered as a consolidated whole.
Section 3.2. Approvals; Authority.
(a) Bancshares and Prosperity each have full corporate power and authority
to execute and deliver this Agreement, to perform their respective obligations
hereunder and to consummate the transactions contemplated hereby.
(b) The Boards of Directors of Bancshares and Prosperity have approved this
Agreement and the transactions contemplated herein subject to the approval
thereof by the shareholders of Prosperity and New Bank as required by law, and,
other than such shareholder approvals, no further corporate proceedings of
Bancshares or Prosperity are needed to execute and deliver this Agreement and
consummate the Mergers. This Agreement has been duly executed and delivered by
Bancshares and Prosperity and is a duly authorized, valid, legally binding
agreement of Bancshares and Prosperity enforceable against Bancshares and
Prosperity in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally and general equitable principles.
Section 3.3. No Conflict With Other Instruments. The execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby will not (i) violate any provision of the respective
Articles of Incorporation or Association or Bylaws of Bancshares and Prosperity
or (ii) assuming all required shareholder and regulatory consents and approvals
are duly obtained, (A) violate any statute, code, ordinance, rule,
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regulation, judgment, order, writ, decree or injunction applicable to Bancshares
or Prosperity or any of their respective properties or assets, or (B) violate,
conflict with, result in a breach of any provision of or constitute a default
(or an event which, with or without notice or lapse of time, would constitute a
default) under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, cause Bancshares to
become subject to or liable for the payment of any tax, or result in the
creation of any lien, charge or encumbrance upon any of the properties or assets
of Bancshares under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease agreement, instrument
or obligation to which Bancshares is a party, or by which any of its properties
or assets may be bound or affected, except for such violations, conflicts,
breaches or defaults which either individually or in the aggregate will not have
a Material Adverse Effect on the Condition of Bancshares.
Section 3.4. Litigation and Other Proceedings. There are no legal, quasi-
judicial or administrative proceedings of any kind or nature now pending or, to
the knowledge of Bancshares, threatened before any court or administrative body
in any manner against Bancshares, or any of its properties or capital stock,
which might have a Material Adverse Effect on the Condition of Bancshares or the
transactions proposed by this Agreement. Bancshares knows of no basis on which
any litigation or proceeding could be brought which could have a Material
Adverse Effect on the Condition of Bancshares or which could question the
validity of any action taken or to be taken in connection with this Agreement
and the transactions contemplated hereby. Bancshares is not in default with
respect to any judgment, order, writ, injunction, decree, award, rule or
regulation of any court, arbitrator or governmental agency or instrumentality.
Section 3.5. Ability to Pay Merger Consideration. Bancshares has
available through loan commitments or internal funds cash in the amount of the
Merger Consideration to be paid in cash to shareholders of State Bank as set
forth in Section 1.9 hereof.
Section 3.6. Brokers and Finders. Neither Bancshares nor any of its
officers, directors or employees have employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with this Agreement.
IV. COVENANTS OF STATE BANK
State Bank covenants and agrees with Bancshares and Prosperity as follows:
Section 4.1. Shareholder Approval and Best Efforts. State Bank will, as
soon as practicable following acceptance of Bancshares' regulatory applications
for processing, take all steps under applicable laws to call, give notice of,
convene and hold a meeting of its shareholders at such time as may be mutually
agreed to by the parties for the purpose of approving this Agreement and the
transactions contemplated hereby and for such other purposes consistent with the
complete performance of this Agreement as may be necessary and desirable. The
Board of Directors of State Bank will recommend to its shareholders the approval
of this Agreement and the transactions contemplated hereby, unless otherwise
required by their fiduciary duties under applicable law, and State Bank will use
its best efforts to obtain the necessary approvals by its shareholders of this
Agreement and the transactions contemplated hereby. State Bank shall
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provide the Proxy Statement, which shall be prepared at State Bank's expense, to
Bancshares and Bancshares shall have the right to review and comment upon the
Proxy Statement prior to its mailing to State Bank shareholders. If the
transaction is approved by such shareholders, State Bank will take all
reasonable action to aid and assist in the consummation of the Mergers, and will
use its best efforts to take or cause to be taken all other actions necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement, including such actions as Bancshares reasonably considers necessary,
proper or advisable in connection with filing applications and registration
statements with, or obtaining approvals from, all governmental entities having
jurisdiction over the transactions contemplated by this Agreement.
Section 4.2. Activities of State Bank Pending Closing.
(a) From the date hereof to and including the Closing Date, as long as this
Agreement remains in effect State Bank shall (i) conduct its affairs (including,
without limitation, the making of or agreeing to make any loans or other
extensions of credit) only in the ordinary course of business consistent with
past practices and prudent banking principles; (ii) use its best efforts to
preserve intact its present business organizations, keep available the services
of its present officers, directors, key employees and agents and preserve its
relationships and goodwill with customers and advantageous business
relationships; and (iii) except as required by law or regulation, take no action
which would adversely affect or delay the ability of State Bank, Bancshares or
Prosperity Bank to obtain any approvals from any regulatory agencies or other
approvals required for consummation of the transactions contemplated hereby or
to perform its obligations and agreements under this Agreement.
(b) From the date hereof to and including the Closing Date, except as
required by law or regulation, as long as this Agreement remains in effect or
unless Bancshares otherwise consents in writing (which consent shall not be
unreasonably withheld), State Bank shall not:
(i) make or agree to make or renew any loans or other extensions of
credit to any borrower in excess of $50,000 (except (A) pursuant to
commitments made prior to the date of this Agreement, (B) loans fully
secured by a certificate of deposit at State Bank and (C) renewals,
extensions and consolidations of any loans other than those loans listed in
Schedule 2.7); provided, however, that State Bank shall consult and advise
Bancshares in writing prior to making or renewing any loans or extensions
of credit to any borrower in excess of $50,000. Bancshares shall notify
State Bank in writing within three (3) business days of receipt of such
notice whether Bancshares consents to such loan or extension of credit,
provided that if Bancshares fails to notify State Bank with such time
frame, Bancshares shall be deemed to have consented to such loan or
extension of credit;
(ii) issue or sell or obligate itself to issue or sell any shares of its
capital stock or any warrants, rights or options to acquire, or any
securities convertible into, any shares of its capital stock;
(iii) open or close any branch office, or acquire or sell or agree to
acquire or sell, any branch office or any deposit liabilities, and shall
otherwise consult
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with and seek the advice of Bancshares with respect to basic policies
relating to branching, site location and relocation;
(iv) enter into, amend or terminate any agreement of the type that would
be required to be disclosed in Schedule 2.13, or any other material
agreement, or acquire or dispose of any material amount of assets or
liabilities, except in the ordinary course of business consistent with
prudent banking practices;
(v) grant any severance or termination pay (other than pursuant to State
Bank's policies in effect on the date hereof) to, or enter into any
employment, consulting, noncompetition, retirement, parachute, severance or
indemnification agreement with, any officer, director, employee or agent of
State Bank, either individually or as part of a class of similarly situated
persons;
(vi) cause or allow any of the things listed in Section 2.17 to occur
(except with respect to Section 2.17(g), State Bank shall use its best
efforts to not cause or allow any of the things listed therein to occur);
(vii) sell, transfer, convey or otherwise dispose of any real property
(including "other real estate owned") or interest therein;
(viii) foreclose upon or otherwise acquire any commercial real property
prior to receipt and approval by Bancshares of a Phase I environmental
review thereof;
(ix) increase or decrease the rate of interest paid on deposit accounts,
except in a manner and pursuant to policies consistent with State Bank's
past practices;
(x) establish any new subsidiary;
(xi) voluntarily make any material change in the interest rate risk
profile of State Bank from that as of December 31, 2001;
(xii) materially deviate from policies and procedures existing as of the
date of this Agreement with respect to (A) classification of assets, (B)
the allowance for loan losses and (C) accrual of interest on assets, except
as otherwise required by the provisions of this Agreement;
(xiii) amend or change any provision of State Bank's Articles of
Association or Bylaws;
(xiv) make any capital expenditure which would exceed an aggregate of
$10,000;
(xv) excluding deposits, certificates of deposit, FHLB advances and
borrowings consistent with past practices, undertake any additional
borrowings in excess of ninety (90) days; or
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(xvi) modify any outstanding loan or acquire any loan participation,
unless such modification is made in the ordinary course of business,
consistent with past practice.
Section 4.3. Access to Properties and Records. To the extent permitted by
applicable law, State Bank shall (i) afford the executive officers and
authorized representatives (including legal counsel, accountants and
consultants) of Bancshares and Prosperity full access to the properties, books
and records of State Bank in order that Bancshares may have full opportunity to
make such reasonable investigation as it shall desire to make of the affairs of
State Bank, and (ii) to furnish Bancshares with such additional financial and
operating data and other information as to the business and properties of State
Bank as Bancshares shall, from time to time, reasonably request. As soon as
practicable after they become available, State Bank will deliver or make
available to Bancshares all unaudited quarterly financial statements prepared
for the internal use of management of State Bank and all Call Reports filed by
State Bank with the appropriate federal regulatory authority after the date of
this Agreement. All such financial statements shall be prepared in accordance
with RAP applied on a consistent basis with previous accounting periods. In the
event of the termination of this Agreement, Bancshares will return to State Bank
all documents and other information obtained pursuant hereto and will keep
confidential any information obtained pursuant to this Agreement.
Section 4.4. Information for Regulatory Applications. To the extent
permitted by law, State Bank will furnish Bancshares with all information
concerning State Bank required for inclusion in any application, filing,
statement or document to be made or filed by Bancshares or State Bank with any
federal or state regulatory or supervisory authority in connection with the
transactions contemplated by this Agreement during the pendency of this
Agreement. State Bank represents and warrants that all information so furnished
for such applications and filings shall, to the best of its knowledge, be true
and correct in all material respects without omission of any material fact
required to be stated to make the information not misleading. State Bank agrees
at any time, upon the request of Bancshares, to furnish to Bancshares a written
letter or statement confirming the accuracy of the information with respect to
State Bank contained in any report or other application or statement referred to
in this Agreement, and confirming that the information with respect to State
Bank contained in such document or draft was furnished by State Bank expressly
for use therein or, if such is not the case, indicating the inaccuracies
contained in such document or indicating the information not furnished by State
Bank expressly for use therein.
Section 4.5. Attendance at Certain State Bank Meetings. In order to
facilitate the continuing interaction of Bancshares with State Bank, and in
order to keep Bancshares fully advised of all ongoing activities of State Bank,
State Bank agrees to allow Bancshares to designate two representatives (who
shall be officers of Prosperity), each of whom will be allowed to attend as an
invited guest and fully monitor all regular and called meetings of the board of
directors and loan and discount and asset liability management committees of
State Bank (including, but not limited to, meetings of the officers' loan
committee of State Bank). State Bank shall promptly give Bancshares prior notice
by telephone of all called meetings. Such representative shall have no right to
vote and may be excluded from sessions of the board of directors or loan or
investment committee during which there is being discussed (i) matters involving
this Agreement, (ii) information or material which State Bank is required or
obligated
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to maintain as confidential under applicable laws or regulations or policies or
procedures of State Bank, or (iii) pending or threatened litigation or
investigations if, in the opinion of counsel to State Bank, the presence of such
representative would or might adversely affect the confidential nature of or any
privilege relating to any matters to be discussed. No attendance by
representatives of Bancshares at board meetings under this Section 4.5 or
knowledge gained or deemed to have been gained by virtue of such attendance will
affect any of the representations and warranties of State Bank made in this
Agreement. If the transactions contemplated by this Agreement are disapproved by
any regulatory authority whose approval is required or the Agreement is
otherwise terminated prior to Closing, then Bancshares' designees will no longer
be entitled to notice of and permission to attend such meetings.
Section 4.6. Standstill Provision. So long as this Agreement is in
effect, neither State Bank nor any of its directors or officers shall entertain,
solicit or encourage any inquiries, or provide any information to or negotiate
with any other party any proposal which could reasonably be expected to lead to
the merger, consolidation, acquisition, or sale of all or substantially all of
the assets or any shares of capital stock of State Bank. State Bank agrees to
notify Bancshares immediately of any such unsolicited acquisition proposals and
provide reasonable detail as to the identity of the proposed acquiror and the
nature of the proposed transaction.
Section 4.7. Voting Agreement. State Bank acknowledges that the directors
and 10% or more shareholders of State Bank as of the date hereof have agreed to
vote their shares of State Bank Common Stock in favor of this Agreement and the
transactions contemplated hereby, subject to required regulatory approvals,
pursuant to a Voting Agreement substantially in the form of Exhibit C to this
Agreement which has been executed as of the date of this Agreement.
Section 4.8. Termination of Data Processing Contracts. State Bank will
timely take any and all actions necessary, including but not limited to
notifying appropriate parties, to ensure that its current data processing
contracts will not renew.
Section 4.9. Environmental Investigation; Rights to Terminate Agreement.
(a) Bancshares and its consultants, agents and representatives shall have
the right to the same extent that State Bank has such right, but not the
obligation or responsibility, to inspect any property, including, without
limitation, conducting asbestos surveys and sampling, environmental assessments
and investigation, and other environmental surveys and analyses including soil
and ground sampling ("Environmental Inspections") at any time on or prior to
thirty (30) days after the date of this Agreement. If, as a result of any such
Environmental Inspection, further investigation ("secondary investigation")
including, without limitation, test borings, soil, water, asbestos or other
sampling, is deemed desirable by Bancshares, Bancshares shall (i) notify State
Bank of any property for which it intends to conduct such a secondary
investigation and the reasons for such secondary investigation, and (ii)
conclude such secondary investigation, on or prior to sixty (60) days after the
date of this Agreement. Bancshares shall give reasonable notice to State Bank of
such secondary investigations, and State Bank may place reasonable time and
place restrictions on such secondary investigations.
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(b) State Bank agrees to indemnify and hold harmless Bancshares for any
claims for damage to property, or injury or death to persons, made as a result
of any Environmental Inspection or secondary investigation conducted by
Bancshares or its agents, to the extent such damage or injury is attributable to
the negligent actions or negligent omissions of State Bank or its agents.
Bancshares agrees to indemnify and hold harmless State Bank for any claims for
damage to property, or injury or death to persons, to the extent attributable to
the negligent actions or omissions of Bancshares or its agents in performing any
Environmental Inspection or secondary investigation. Bancshares shall not have
any liability or responsibility of any nature whatsoever for the results,
conclusions or other findings related to any Environmental Inspection, secondary
investigation or other environmental survey. If this Agreement is terminated,
then except as otherwise required by law, reports to any governmental authority
of the results of any Environmental Inspection, secondary investigation or other
environmental survey shall be made by State Bank and not by Bancshares.
Bancshares shall make no such report prior to Closing unless required to do so
by law, and in such case will give State Bank reasonable prior notice of
Bancshares' intentions.
(c) Bancshares shall have the right to terminate this Agreement within
ninety (90) days after the date of this Agreement if (i) the results of such
Environmental Inspection, secondary investigation or other environmental survey
are disapproved by Bancshares because the Environmental Inspection, secondary
investigation or other environmental survey identifies violations or potential
violations of Environmental Laws that would have or are reasonably likely to
have a Material Adverse Effect on the Condition of State Bank; (ii) any past or
present event, condition or circumstance that would require remedial or cleanup
action under Environmental Laws involving an expenditure in excess of $200,000
or having a Material Adverse Effect on the Condition of State Bank; (iii) the
Environmental Inspection, secondary investigation or other environmental survey
identifies the presence of any underground or above ground storage tank in, on
or under any property that is not shown to be in compliance with all
Environmental Laws applicable to the tank either now or at a future time
certain, or that has had a release of petroleum or some other Hazardous Material
that has not been cleaned up to the satisfaction of the relevant governmental
authority or any other party with a legal right to compel cleanup; or (iv) the
Environmental Inspection, secondary investigation or other environmental survey
identifies the presence of any asbestos-containing material in, on or under any
property, the removal of which would have a Material Adverse Effect on the
Condition of State Bank.
(d) State Bank agrees to make available upon request to Bancshares and its
consultants, agents and representatives all documents and other material
relating to environmental conditions of any property including, without
limitation, the results of other environmental inspections and surveys. State
Bank also agrees that all engineers and consultants who prepared or furnished
such reports may discuss such reports and information with Bancshares and shall
be entitled to certify the same in favor of Bancshares and its consultants,
agents and representatives and make all other data available to Bancshares and
its consultants, agents and representatives.
V. COVENANTS OF BANCSHARES AND PROSPERITY
Bancshares and Prosperity covenant and agree with State Bank as follows:
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Section 5.1. Best Efforts. Bancshares and Prosperity will take all
reasonable action to aid and assist in the consummation of the Mergers and the
transactions contemplated hereby, and will use their best efforts to take or
cause to be taken all other actions necessary, proper or advisable to consummate
the transactions contemplated by this Agreement, including such actions which
are necessary, proper or advisable in connection with filing applications with,
or obtaining approvals from, all regulatory authorities having jurisdiction over
the transactions contemplated by this Agreement.
Section 5.2. Information for Regulatory Applications and Proxy
Solicitation. To the extent permitted by law, Bancshares and Prosperity will
furnish State Bank with all information concerning Bancshares and Prosperity
required for inclusion in (a) any application, statement or document to be made
or filed by State Bank with any federal or state regulatory or supervisory
authority in connection with the transactions contemplated by this Agreement
during the pendency of this Agreement and (b) any proxy materials to be
furnished to the shareholders of State Bank in connection with their
consideration of the Mergers. Bancshares and Prosperity represent and warrant
that all information so furnished for such statements and applications shall, to
the best of their knowledge, be true and correct in all material respects
without omission of any material fact required to be stated to make the
information not misleading. Bancshares and Prosperity will indemnify and hold
harmless State Bank from and against any and all losses, claims, damages,
expenses or liabilities to which State Bank may become subject under applicable
laws, rules and regulations and will reimburse State Bank for any legal or other
expenses reasonably incurred by State Bank in connection with investigating or
defending any actions whether or not resulting in liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of or are
based on any untrue statement or alleged untrue statement of a material fact
contained in any such application or proxy materials or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary in order to make the statements
therein not misleading, but only insofar as such statement or omission was made
in reliance upon and in conformity with information expressly furnished by
Bancshares in writing expressly for use therein. Bancshares and Prosperity
agree, upon the request of State Bank, to furnish to State Bank a written letter
or statement confirming to the best of its knowledge the accuracy of the
information with respect to Bancshares and Prosperity contained in any report or
other application or statement referred to in Sections 5.1 or 5.2 of this
Agreement, and confirming that the information with respect to Bancshares and
Prosperity contained in such document or draft was furnished expressly for use
therein or, if such is not the case, indicating the inaccuracies contained in
such document or indicating the information not furnished by Bancshares or
Prosperity expressly for use therein.
Section 5.3. Employee Benefit Plans. State Bank shall execute and
deliver such instruments and take such other actions as Bancshares may
reasonably require in order to cause the amendment or termination of any of its
employee benefit plans on terms satisfactory to Bancshares and in accordance
with applicable law and effective as of the Closing Date. Bancshares agrees that
the employees of State Bank who continue their employment after the Closing Date
(the "FSB Employees") will be entitled to participate as newly hired employees
in the employee benefit plans and programs maintained for employees of
Bancshares and Prosperity, in accordance with the respective terms of such plans
and programs, and Bancshares shall take all actions necessary or appropriate to
facilitate coverage of the FSB Employees in such plans and programs from and
after the Closing Date, subject to the following:
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(a) Each FSB Employee will be entitled to credit for prior service with
State Bank for all purposes under the employee welfare benefit plans and other
employee benefit plans and programs (other than stock option plans), sponsored
by Bancshares and Prosperity to the extent State Bank sponsored a similar type
of plan in which the FSB Employees participated immediately prior to the Closing
Date. Any eligibility waiting period and pre-existing condition exclusion
applicable to such plans and programs shall be waived with respect to each FSB
Employee and their eligible dependents. For purposes of determining FSB
Employee's benefit for the calendar year in which the Mergers occur under
Bancshares' vacation program, any vacation taken by the FSB Employee immediately
preceding the Closing Date for the calendar year in which the Mergers occur will
be deducted from the total Bancshares vacation benefit available to such FSB
Employee for such calendar year. Bancshares further agrees to credit each FSB
Employee and their eligible dependents for the year during which coverage under
Bancshares' group health plan begins, with any deductibles already incurred
during such year, under State Bank's group health plan.
(b) Each FSB Employee shall be entitled to credit for past service with
State Bank for the purpose of satisfying any eligibility or vesting periods
applicable to Bancshares' employee benefit plans which are subject to Sections
401(a) and 501(a) of the Code (including, without limitation, Bancshares' 401(k)
Profit Sharing Plan).
Section 5.4. Applications. Bancshares and Prosperity will file all
necessary regulatory notices and applications not later than the 30th day after
the execution of this Agreement and will provide State Bank with a copy of the
non-confidential portions of notices, applications, statements or correspondence
submitted to or received from regulatory authorities in connection with the
Mergers.
VI. MUTUAL COVENANTS OF BANCSHARES, PROSPERITY AND STATE BANK
Section 6.1. Notification; Updated Disclosure Schedules. State Bank
shall give prompt notice to Bancshares, and Bancshares shall give prompt notice
to State Bank, of (i) any representation or warranty made by it in this
Agreement becoming untrue or inaccurate in any respect, including, without
limitation, as a result of any change in a Schedule, or (ii) the failure by it
to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
Section 6.2. Confidentiality. Neither Bancshares nor State Bank will,
directly or indirectly, before or after the consummation or termination of this
Agreement, disclose any confidential information, whether written or oral
("Subject Information") acquired from the other party to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever,
other than in connection with the regulatory notice and application process or,
after termination of this Agreement pursuant to Section 8.1 hereof, use such
Subject Information for its own purposes or for the benefit of any person, firm,
corporation, association, or other entity under any circumstances. The term
"Subject Information" does not include any information that (i) at the time of
disclosure or thereafter is generally available to and known to the public,
other
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than by a breach of this Agreement by the disclosing party, (ii) was available
to the disclosing party on a nonconfidential basis from a source other than the
nondisclosing party or (iii) was independently acquired or developed without
violating any obligations of this Agreement.
VII. CLOSING
Section 7.1. Closing. Subject to the other provisions of this Article
VII, on a mutually acceptable date ("Closing Date") as soon as practicable
within a thirty (30) day period commencing with the latest of the following
dates:
(a) the receipt of shareholder approval and the last approval from any
requisite regulatory or supervisory authority and the expiration of any
statutory or regulatory waiting period which is necessary to effect the Mergers;
or
(b) if the transactions contemplated by this Agreement are being contested
in any legal proceeding and Bancshares or State Bank, pursuant to Section 11.1
herein, have elected to contest the same, then the date that such proceeding has
been brought to a conclusion favorable, in the judgment of each of Bancshares
and State Bank, to the consummation of the transactions contemplated herein, or
such prior date as each of Bancshares and State Bank shall elect whether or not
such proceeding has been brought to a conclusion.
A meeting ("Closing") will take place at which the parties to this
Agreement will exchange certificates, opinions, letters and other documents in
order to determine whether any condition exists which would permit the parties
hereto to terminate this Agreement. If no such condition then exists or if no
party elects to exercise any right it may have to terminate this Agreement, then
and thereupon the appropriate parties shall execute such documents and
instruments as may be necessary or appropriate to effect the transactions
contemplated by this Agreement.
The Closing shall take place at the offices of Bracewell & Xxxxxxxxx,
L.L.P. in Houston, Texas, or at such other place to which the parties hereto may
mutually agree.
Section 7.2. Effective Time. Subject to the terms and upon satisfaction
of all requirements of law and the conditions specified in this Agreement
including, among other conditions, the receipt of any requisite approvals of the
shareholders of State Bank and the regulatory approvals of the Federal Reserve
Board, FDIC, Banking Department and any other federal or state regulatory agency
whose approval must be received in order to consummate the Mergers, the Initial
Merger shall become effective, and the effective time of the Initial Merger
shall occur, at the date and time specified in the certificate approving the
Initial Merger to be issued by the Banking Department, and the Final Merger
shall become effective, and the effective time of the Final Merger shall occur,
at the date and time specified in the certificate approving the Merger to be
issued by the Banking Department ("Effective Time"). It is anticipated by
Bancshares and State Bank that the effective time of the Initial Merger will
occur immediately prior to the Effective Time and that the Closing and the
Effective Time will occur on the same day.
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VIII. TERMINATION
Section 8.1. Termination.
(a) This Agreement may be terminated by action of the Board of Directors of
Bancshares or State Bank at any time prior to the Effective Time if:
(i) any court of competent jurisdiction in the United States or other
United States (federal or state) governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Mergers and such order, decree, ruling or other
action shall have been final and non-appealable;
(ii) any of the transactions contemplated by this Agreement are
disapproved by any regulatory authority or other person whose approval is
required to consummate any of such transactions; or
(iii) the Mergers shall not have become effective on or before October
8, 2002, the one hundred and sixty-fifth (165th) day following the date of
this Agreement, or such later date as shall have been approved in writing
by the Boards of Directors of Bancshares and State Bank; provided, however,
that the right to terminate under this Section 8.1(a)(iii) shall not be
available to any party whose failure to fulfill any material obligation
under this Agreement has been the cause of, or has resulted in, the failure
of the Mergers to become effective on or before such date.
(b) This Agreement may be terminated at any time prior to the Closing by
the Board of Directors of State Bank if (i) Bancshares shall fail to comply in
any material respect with any of its covenants or agreements contained in this
Agreement, or if any of the representations or warranties of Bancshares
contained herein shall be inaccurate in any material respect or (ii) if the
conditions set forth in Article X have not been met or waived by State Bank. In
the event the Board of Directors of State Bank desires to terminate this
Agreement because of an alleged breach or inaccuracy or change as provided in
(i) above, such Board of Directors must notify Bancshares in writing of its
intent to terminate stating the reason therefor. Bancshares shall have fifteen
(15) days from the receipt of such notice to cure the alleged breach or
inaccuracy, subject to the approval of State Bank (which approval shall not be
unreasonably withheld).
(c) This Agreement may be terminated at any time prior to the Closing by
action of the Board of Directors of Bancshares if (i) State Bank shall fail to
comply in any material respect with any of its covenants or agreements contained
in this Agreement, or if any of the representations or warranties of State Bank
contained herein shall be inaccurate in any material respect, (ii) if the
conditions set forth in Article IX have not been met or waived by Bancshares or
(iii) the Board of Directors of Bancshares reasonably concludes, after
consulting with counsel, that Bancshares will be unable to obtain any regulatory
approval required in order to consummate the Mergers or any such approval is
accompanied by terms or conditions which materially and adversely impact the
financial consequences of the Mergers to Bancshares. In the event the Board of
Directors of Bancshares desires to terminate this Agreement because of an
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alleged breach or inaccuracy or change as provided in (i) above, the Board of
Directors must notify State Bank in writing of its intent to terminate stating
the cause therefor. State Bank shall have fifteen (15) days from the receipt of
such notice to cure the alleged breach or inaccuracy, subject to the approval of
Bancshares (which approval shall not be unreasonably withheld).
(d) This Agreement may be terminated at any time prior to the Effective
Time with the mutual written consent of Bancshares and State Bank and the
approval of such action by their respective Boards of Directors.
Section 8.2. Effect of Termination. In the event of termination of this
Agreement by either Bancshares or State Bank as provided in Section 8.1 or the
abandonment of the Mergers without breach by any party hereto, this Agreement
(other than Section 6.2) shall become void and have no effect, without any
liability on the part of any party or its directors, officers or shareholders.
Nothing contained in this Section 8.2 shall relieve any party hereto of any
liability for a breach of this Agreement.
IX. CONDITIONS TO OBLIGATIONS OF BANCSHARES AND PROSPERITY
The obligations of Bancshares and Prosperity under this Agreement are
subject to the satisfaction, at or prior to the Closing Date of the following
conditions, which may be waived by Bancshares in its sole discretion:
Section 9.1. Compliance with Representations and Covenants. The
representations and warranties made by State Bank in this Agreement must have
been true in all material respects when made and shall be true in all material
respects as of the Closing Date with the same force and effect as if such
representations and warranties were made at and as of the Closing Date, and
State Bank shall have performed or complied with all covenants and conditions
required by this Agreement to be performed and complied with prior to or at the
Closing. Bancshares shall have been furnished with a certificate, executed by
an appropriate representative of State Bank and dated as of the Closing Date, to
the foregoing effect.
Section 9.2. Absence of Material Adverse Change. There shall have been no
change after the date hereof in the assets, properties, business or financial
condition of State Bank which have, or which may be foreseen to have a Material
Adverse Effect on the Condition of State Bank or the transactions contemplated
hereby ("Bank Material Adverse Change"), nor shall any event have occurred
which, with the lapse of time, will cause or result in a Bank Material Adverse
Change; provided, however, that a Bank Material Adverse Change does not include
a change with respect to, or effect on, State Bank resulting from (i) a change
in law, rule, regulation or GAAP or (ii) from any other matter affecting
federally-insured depository institutions generally (including without
limitation, their holding companies), including, without limitation, changes in
general economic conditions and changes in prevailing interest or deposit rates;
provided, any such change does not impact State Bank more adversely than other
similarly situated financial institutions.
Section 9.3. Legal Opinion. Bancshares shall have received an opinion of
Xxxxx Liddell & Xxxx LLP, counsel to State Bank, dated as of the Closing Date,
addressed to Bancshares and in form and substance satisfactory to counsel for
Bancshares.
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Section 9.4. Releases and Resignations. State Bank shall have used its
best efforts to have each of the directors and officers (with a title of Vice
President or above as of the date hereof) of State Bank deliver to Bancshares an
instrument in the form of Exhibit D dated as of the Closing Date releasing
Bancshares and Prosperity from any and all claims of such directors and officers
(except as described in such instrument). The directors of State Bank shall
have delivered to Bancshares their respective resignations.
Section 9.5. Equity Capital of State Bank. The Equity Capital of State
Bank shall be equal to or greater than $2,100,000.00 on the last day of the
calendar month immediately preceding the Closing Date. For purposes of this
Agreement, "Equity Capital" shall equal the sum of the common stock, capital
surplus, reserve for loan losses and retained earnings of State Bank, excluding
securities gains or losses or extraordinary items, all as determined by
Bancshares pursuant to GAAP.
X. CONDITIONS TO OBLIGATIONS OF STATE BANK
The obligations of State Bank under this Agreement are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions,
which may be waived by State Bank in its sole discretion:
Section 10.1. Compliance with Representations and Covenants. The
representations and warranties made by Bancshares and Prosperity in this
Agreement must have been true in all materials respects when made and shall be
true in all material respects as of the Closing Date with the same force and
effect as if such representations and warranties were made at and as of the
Closing Date, and Bancshares and Prosperity shall have performed and complied in
all material respects with all covenants and conditions required by this
Agreement to be performed or complied with by Bancshares and Prosperity prior to
or at the Closing. State Bank shall be furnished with a certificate, executed
by appropriate representatives of Bancshares and Prosperity and dated as of the
Closing Date, to the foregoing effect.
Section 10.2. Absence of Material Adverse Change. There shall have been
no change after the date hereof in the assets, properties, business or financial
condition of Bancshares or Prosperity which have, or which may be foreseen to
have a Material Adverse Effect on the Condition of Bancshares or Prosperity
considered as a consolidated whole or the transactions contemplated hereby;
provided, however, that for purposes of this Section 10.2, a Material Adverse
Effect will not include a change with respect to, or effect on, Bancshares or
Prosperity resulting (i) from a change in law, rule, regulation or GAAP or (ii)
from any other matter affecting federally-insured depository institutions
generally (including without limitation, their holding companies), including,
without limitation, changes in general economic conditions and changes in
prevailing interest or deposit rates; provided, any such change does not impact
Bancshares or Prosperity more adversely than other similarly situated financial
institutions.
Section 10.3. Legal Opinion. State Bank shall have received an opinion of
Xxxxxxxxx & Xxxxxxxxx, L.L.P., counsel to Bancshares, dated as of the Closing
Date, addressed to State Bank and in form and substance satisfactory to counsel
for State Bank.
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Section 10.4. Releases. Each of the directors and officers of State Bank
who delivered a release agreement to Bancshares pursuant to Section 9.4, shall
have received an instrument in the form of Exhibit E dated as of the Closing
Date releasing such persons from any and all claims of State Bank (except as
described in such instrument).
XI. CONDITIONS TO RESPECTIVE OBLIGATIONS OF BANCSHARES,
PROSPERITY AND STATE BANK
The respective obligations of Bancshares, Prosperity and State Bank under
this Agreement are subject to the satisfaction of the following conditions which
may be waived by Bancshares, Prosperity and State Bank, respectively, in their
sole discretion:
Section 11.1. Government Approvals. Bancshares and Prosperity shall have
received the approval, or waiver of approval, of the transactions contemplated
by this Agreement from all necessary governmental agencies and authorities,
including the Federal Reserve Board and any other regulatory agency whose
approval must be received in order to consummate the Mergers, which approvals
shall not impose any restrictions on the operations of the Continuing Bank which
are unacceptable to Bancshares, and such approvals and the transactions
contemplated hereby shall not have been contested by any federal or state
governmental authority or any third party (except shareholders asserting
dissenters' rights) by formal proceeding. It is understood that, if any such
contest is brought by formal proceeding, Bancshares or State Bank may, but shall
not be obligated to, answer and defend such contest or otherwise pursue the
Mergers over such objection.
Section 11.2. Shareholder Approval. The shareholders of State Bank shall
have approved this Agreement and the transactions contemplated by this
Agreement.
XII. MISCELLANEOUS
Section 12.1. Definitions. Except as otherwise provided herein, the
capitalized terms set forth below shall have the following meanings:
(a) "Affiliate" means any natural person, corporation, general partnership,
limited partnership proprietorship, other business organization, trust, union,
association or governmental authority that directly, or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with the person specified.
(b) "Material Adverse Effect," with respect to any party shall mean an
event, change, or occurrence which, individually or together with any other
event, change or occurrence, has or is reasonably likely to have a material
adverse impact on (i) the financial position, business or results of operations
or financial performance of such party and their respective subsidiaries, taken
as a whole, or (ii) the ability of such party to perform its obligations under
this Agreement or to consummate the Mergers.
Section 12.2. Non-Survival of Representations and Warranties. The
representations, warranties, covenants and agreements of Bancshares, Prosperity
and State Bank contained in this Agreement shall terminate at the Closing,
except that Sections 5.3 and 6.2 shall survive the Closing.
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Section 12.3. Amendments. This Agreement may be amended only by a writing
signed by Bancshares, Prosperity and State Bank at any time prior to the
Effective Time with respect to any of the terms contained herein; provided,
however, that the Merger Consideration to be received by the shareholders of
State Bank pursuant to this Agreement shall not be decreased subsequent to the
approval of the transactions contemplated by the Agreement without the further
approval by such shareholders.
Section 12.4. Expenses. Whether or not the transactions provided for
herein are consummated, each party to this Agreement will pay its respective
expenses incurred in connection with the preparation and performance of its
obligations under this Agreement. Similarly, each party agrees to indemnify the
other parties against any cost, expense or liability (including reasonable
attorneys' fees) in respect of any claim made by any party for a broker's or
finder's fee in connection with this transaction other than one based on
communications between the party and the claimant seeking indemnification.
Except as disclosed herein, Bancshares and State Bank represent and warrant to
each other that neither of them, nor any of their agents, employees or
representatives, has incurred any liability for any commissions or brokerage
fees in connection with this transaction.
Section 12.5. Notices. Except as explicitly provided herein, any notice
given hereunder shall be in writing and shall be delivered in person or mailed
by first class mail, postage prepaid or sent by facsimile, courier or personal
delivery to the parties at the following addresses unless by such notice a
different address shall have been designated:
If to Bancshares and Prosperity:
Prosperity Bancshares, Inc
0000 Xxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxx
With a copy to:
Bracewell & Xxxxxxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Fax No.: (000) 000-0000
Attention: Xx. Xxxxxxx X. Xxxxxx XX
If to State Bank:
The First State Bank
0000 Xxxx Xxxxxx
Xxxxxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
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Attention: Xx. X. X. Xxxxxx, Xx.
With a copy to:
Xxxxx Liddell & Xxxx LLP
0000 Xxxxx Xxxxx
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
Attention: Xx. Xxxxxx X. Xxxx
All notices sent by mail as provided above shall be deemed delivered three (3)
days after deposit in the mail. All notices sent by courier as provided above
shall be deemed delivered one day after being sent and all notices sent by
facsimile shall be deemed delivered upon confirmation of receipt. All other
notices shall be deemed delivered when actually received. Any party to this
Agreement may change its address for the giving of notice specified above by
giving notice as herein provided.
Section 12.6. Controlling Law. All questions concerning the validity,
operation and interpretation of this Agreement and the performance of the
obligations imposed upon the parties hereunder shall be governed by the laws of
the State of Texas and, to the extent applicable, by the laws of the United
States of America.
Section 12.7. Headings. The headings and titles to the sections of this
Agreement are inserted for convenience only and shall not be deemed a part
hereof or affect the construction or interpretation of any provision hereof.
Section 12.8. Modifications or Waiver. No termination, cancellation,
modification, amendment, deletion, addition or other change in this Agreement,
or any provision hereof, or waiver of any right or remedy herein provided, shall
be effective for any purpose unless specifically set forth in a writing signed
by the party or parties to be bound thereby. The waiver of any right or remedy
in respect to any occurrence or event on one occasion shall not be deemed a
waiver of such right or remedy in respect to such occurrence or event on any
other occasion.
Section 12.9. Severability. Any provision hereof prohibited by or
unlawful or unenforceable under any applicable law or any jurisdiction shall as
to such jurisdiction be ineffective, without affecting any other provision of
this Agreement, or shall be deemed to be severed or modified to conform with
such law, and the remaining provisions of this Agreement shall remain in force,
provided that the purpose of the Agreement can be effected. To the fullest
extent, however, that the provisions of such applicable law may be waived, they
are hereby waived, to the end that this Agreement be deemed to be a valid and
binding agreement enforceable in accordance with its terms.
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Section 12.10. Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assigned by any party without the prior written
consent of the other parties.
Section 12.11. Consolidation of Agreements. All understandings and
agreements heretofore made between the parties hereto are merged in this
Agreement which (together with any agreements executed by the parties hereto
contemporaneously with or subsequent to the execution of this Agreement) shall
be the sole expression of the agreement of the parties respecting the Mergers.
Section 12.12. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
be deemed to constitute one and the same instrument.
Section 12.13. Binding on Successors. Except as otherwise provided
herein, this Agreement shall be binding upon, and shall inure to the benefit of,
the parties and their respective heirs, executors, trustees, administrators,
guardians, successors and assigns.
Section 12.14. Gender. Any pronoun used herein shall refer to any gender,
either masculine, feminine or neuter, as the context requires.
Section 12.15. Disclosures. Any disclosure made in any document delivered
pursuant to this Agreement or referred to or described in writing in any section
of this Agreement or any schedule attached hereto shall be deemed to be
disclosure for purposes of any section herein or schedule hereto.
Section 12.16. Publicity. Subject to written advice of counsel with
respect to legal requirements relating to public disclosure of matters related
to the transactions contemplated by this Agreement, the timing and content of
any announcements, press releases or other public statements (whether written or
oral) concerning this Agreement or the Mergers will occur upon, and be
determined by, the mutual consent of Bancshares and State Bank; provided,
however, that this shall not include notices required to be published pursuant
to the regulatory application process.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
PROSPERITY BANCSHARES, INC.
By: /s/ Xxxxx Xxxxxx
-------------------------------------------
Xxxxx Xxxxxx
President and Chief Executive Officer
ATTEST:
By: /s/ H. E. Xxxxxxx, Jr.
------------------------
H. E. Xxxxxxx, Jr.
PROSPERITY BANK
By: /s/ Xxxxx Xxxxxx
-------------------------------------------
Xxxxx Xxxxxx
Chairman of the Board
ATTEST:
By: /s/ H. E. Xxxxxxx, Jr.
--------------------------
H. E. Xxxxxxx, Jr.
THE FIRST STATE BANK
By: /s/ X. X. Xxxxxx, Xx.
-------------------------------------------
X. X. Xxxxxx, Xx.
President
[Signature Page to Agreement and Plan of Reorganization]
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