EXHIBIT 2.6
AGREEMENT AND PLAN OF MERGER
AMONG
STERLING BANCSHARES, INC.
STERLING BANCORPORATION, INC.
AND
HOMETOWN BANCSHARES, INC.
DATED AS OF JUNE 12, 1998
TABLE OF CONTENTS
Page
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ARTICLE I CERTAIN DEFINITIONS.................................................... 2
Section 1.01 Certain Definitions........................................... 2
ARTICLE II THE MERGER AND RELATED TRANSACTIONS................................... 7
Section 2.01 Merger........................................................ 7
Section 2.02 Time and Place of Closing..................................... 7
Section 2.03 Effective Time................................................ 7
Section 2.04 Reservation of Right to Revise Transaction; Further Actions... 8
ARTICLE III MERGER CONSIDERATION; EXCHANGE PROCEDURES........................... 8
Section 3.01 Merger Consideration.......................................... 8
Section 3.02 Stockholder's Meeting......................................... 9
Section 3.03 Rights Under Stock Plans...................................... 10
ARTICLE IV EXCHANGE OF SHARES.................................................... 10
Section 4.01 Exchange Agent................................................ 10
Section 4.02 Exchange Procedures........................................... 10
Section 4.03 No Further Ownership Rights in Company Common Stock........... 11
Section 4.04 Termination of Exchange Fund.................................. 11
Section 4.05 Escheat of Exchange Fund...................................... 11
Section 4.06 No Fractional Shares.......................................... 11
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................... 12
Section 5.01 Organization, Standing and Authority.......................... 12
Section 5.02 Company Capital Stock......................................... 13
Section 5.03 Subsidiaries.................................................. 13
Section 5.04 Authorization of Merger and Related Transactions.............. 14
Section 5.05 Financial Statements and Regulatory Reports................... 15
Section 5.06 Absence of Undisclosed Liabilities............................ 15
Section 5.07 Tax Matters................................................... 15
Section 5.08 Allowance for Credit Losses................................... 16
Section 5.09 Other Regulatory Matters...................................... 17
Section 5.10 Properties.................................................... 17
Section 5.11 Compliance with Laws.......................................... 17
Section 5.12 Employee Benefit Plans........................................ 18
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Section 5.13 Commitments and Contracts..................................... 19
Section 5.14 Material Contract Defaults.................................... 20
Section 5.15 Legal Proceedings............................................. 20
Section 5.16 Absence of Certain Changes or Events.......................... 20
Section 5.17 Reports....................................................... 20
Section 5.18 Insurance..................................................... 21
Section 5.19 Labor......................................................... 21
Section 5.20 Material Interests of Certain Persons......................... 21
Section 5.21 Registration Obligations...................................... 21
Section 5.22 Brokers and Finders........................................... 21
Section 5.23 State Takeover Laws........................................... 21
Section 5.24 Environmental Matters......................................... 22
Section 5.25 The Company Action............................................ 22
Section 5.26 Software...................................................... 22
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF STERLING............................ 23
Section 6.01 Organization, Standing and Authority.......................... 23
Section 6.02 Sterling and Bancorporation Capital Stock..................... 24
Section 6.03 Authorization of Merger and Related Transactions.............. 24
Section 6.04 Financial Statements.......................................... 24
Section 6.05 Sterling SEC Reports.......................................... 25
Section 6.06 Regulatory Matters............................................ 25
Section 6.07 Litigation.................................................... 25
Section 6.08 Brokers and Finders........................................... 25
ARTICLE VII CONDUCT OF THE COMPANY'S BUSINESS.................................... 26
Section 7.01 Conduct of Business Prior to the Effective Time............... 26
Section 7.02 Forbearances.................................................. 26
ARTICLE VIII ADDITIONAL AGREEMENTS............................................... 28
Section 8.01 Access and Information........................................ 28
Section 8.02 Registration Statement; Proxy Statement....................... 29
Section 8.03 Press Releases................................................ 30
Section 8.04 Notice of Defaults............................................ 30
Section 8.05 Miscellaneous Agreements and Consents; Affiliates Agreements.. 30
Section 8.06 Indemnification............................................... 31
Section 8.07 Certain Change of Control Matters............................. 32
Section 8.08 Employee Benefits............................................. 32
Section 8.09 Certain Actions............................................... 32
Section 8.10 No Solicitation............................................... 33
Section 8.11 Termination Fee............................................... 34
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Section 8.12 Accruals...................................................... 35
Section 8.13 Certain Agreements............................................ 35
Section 8.14 Notification; Updated Disclosure Schedules.................... 35
Section 8.15 Nasdaq Listing................................................ 36
ARTICLE IX CONDITIONS TO MERGER.................................................. 36
Section 9.01 Conditions to Each Party's Obligation to Effect the Merger.... 36
Section 9.02 Conditions to Obligations of The Company to Effect the Merger. 37
Section 9.03 Conditions to Obligations of Sterling and Bancorporation
to Effect the Merger.......................................... 37
ARTICLE X TERMINATION............................................................ 38
Section 10.01 Termination................................................... 38
Section 10.02 Effect of Termination......................................... 40
Section 10.03 Non-Survival of Representations, Warranties and Covenants
Following the Effective Time.................................. 40
ARTICLE XI GENERAL PROVISIONS.................................................... 40
Section 11.01 Expenses...................................................... 40
Section 11.02 Entire Agreement; Parties in Interest......................... 40
Section 11.03 Amendments.................................................... 40
Section 11.04 Waivers....................................................... 40
Section 11.05 No Assignment................................................. 41
Section 11.06 Notices....................................................... 41
Section 11.07 Specific Performance.......................................... 42
Section 11.08 Governing Law................................................. 42
Section 11.09 Counterparts.................................................. 42
Section 11.10 Captions...................................................... 42
Section 11.11 Severability.................................................. 42
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of June 12,
1998, is by and among STERLING BANCSHARES, INC. ("Sterling"), a Texas
corporation and a registered bank holding company under the Bank Holding Company
Act of 1956, as amended (the "BHCA"), STERLING BANCORPORATION, INC., a Delaware
corporation which is a registered bank holding company and a wholly owned
subsidiary of Sterling ("Bancorporation") and HOMETOWN BANCSHARES, INC., a Texas
corporation and a registered bank holding company under the BHCA (the
"Company"). Capitalized terms not otherwise defined herein shall have the
meanings set forth in Article I.
WITNESSETH:
WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, Sterling will acquire the Company through the merger of the Company
with and into Bancorporation, or by such other means as provided for herein (the
"Merger"); and
WHEREAS, pursuant to the Merger, each issued and outstanding share of
Company Common Stock will be converted into shares of Sterling Common Stock upon
the terms and subject to the conditions of this Agreement; and
WHEREAS, (i) the respective Boards of Directors of Sterling, Bancorporation
and the Company have each determined that this Agreement, the Merger and the
transactions contemplated hereby and thereby are in the best interests of their
respective companies and stockholders and have approved this Agreement, the
Merger and the other transactions contemplated hereby and thereby, (ii) the
Board of Directors of the Company has unanimously (a) determined that the
consideration to be paid for the outstanding shares of Company Common Stock is
fair to the stockholders of the Company and (b) resolved to recommend to the
stockholders of the Company that they vote in favor of adoption of this
Agreement and (iii) Sterling, as the sole stockholder of Bancorporation, has
approved and adopted this Agreement, the Merger and the transactions
contemplated hereby and thereby; and
WHEREAS, to induce Sterling to enter into this Agreement, the Company
Specified Stockholders have agreed to execute and deliver to Sterling an
Agreement and Irrevocable Proxy in the form set forth as Annex A to this
Agreement; and
WHEREAS, after the Merger, Sterling intends to effect the merger (the "Bank
Merger") of Clear Lake National Bank, a wholly owned subsidiary of the Company
("Clear Lake Bank"), with and into Sterling Bank, a wholly owned subsidiary of
Bancorporation and an indirect wholly owned subsidiary of Sterling ("Sterling
Bank"), with Sterling Bank as the surviving bank; and
WHEREAS, for federal income tax purposes the Merger is intended to qualify
as a tax-free reorganization pursuant to Section 368 of the Code; and
WHEREAS, for accounting purposes it is intended that the Merger be
accounted for as a pooling of interests in accordance with APB Opinion 16; and
WHEREAS, Sterling, Bancorporation and the Company desire to provide for
certain undertakings, conditions, representations, warranties and covenants in
connection with the Merger and the related transactions contemplated by this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
benefits to be derived by each party hereunder and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section I.1 Certain Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
"Acquisition Proposal" shall have the meaning set forth in
Section 8.10.
"Acquisition Transaction" shall have the meaning set forth in
Section 8.10.
"Affiliate" shall mean, with respect to any Person, any Person that,
directly or indirectly, controls or is controlled by or is under common control
with such Person.
"Agreement" shall have the meaning set forth in the introduction to
this Agreement.
"APB Opinion 16" shall mean Accounting Principles Board Opinion
No. 16.
"Approvals" shall mean any and all filings, permits, consents,
authorizations and approvals of any governmental or regulatory authority or of
any other third person necessary to give effect to the arrangement contemplated
by this Agreement or necessary to consummate the Merger.
"Authorizations" shall have the meaning set forth in Section 5.01.
"Average Closing Price" shall have the meaning set forth in
Section 3.01.
"BHCA" shall have the meaning set forth in the introduction to this
Agreement.
"Bancorporation" shall have the meaning set forth in the recitals to
this Agreement.
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"Bank Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Certificates" shall have the meaning set forth in Section 4.02.
"Clear Lake Bank" shall have the meaning set forth in the recitals to
this Agreement.
"Closing" shall have the meaning set forth in Section 2.02.
"Closing Date" shall have the meaning set forth in Section 2.02.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Commissioner" shall mean the Texas Banking Commissioner.
"Company" shall have the meaning set forth in the introductory
paragraph to this Agreement.
"Company Benefit Plans" shall have the meaning set forth in
Section 5.12(a).
"Company Board" shall mean the Board of Directors of the Company.
"Company Common Stock" shall mean the common stock, par value $1.00
per share, of the Company.
"Company Disclosure Schedule" shall mean that document containing the
written detailed information prepared and delivered by the Company to Sterling
prior to the execution of this Agreement.
"Company ERISA Plan" shall have the meaning set forth in
Section 5.12(a).
"Company ESOP" shall have the meaning set forth in Section 8.15.
"Company Financial Statements" shall have the meaning set forth in
Section 5.05(a).
"Company" shall have the meaning set forth in the recitals to this
Agreement.
"Company Material Adverse Effect" shall have the meaning set forth in
Section 5.01.
"Company Specified Stockholders" shall mean Xxxxxxx X. Xxxxxx, Com/RE
Limited Partnership, Xxxxx Xxxxxx, Xxxxxxx X. Xxxxxxx, M.D., Xxxxxxxx X.
Xxxxxxx, Ph.D., Green Partner LTD, Xxxxxxxx Partners, Ltd., Xxxxx X. Xxxxxxxx,
Xxxxx X. Xxxxxx or Xxxxx Xxxxxx, Xxxxxx Xxxxx Xxxxxxxx, VHP DEVELOPMENT, LTD.,
and Xxxxxx Xxxxxxx, Xx.
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"Company Stock Plan" shall have the meaning set forth in
Section 5.12(a).
"Company Stockholders' Meeting" shall have the meaning set forth in
Section 3.02.
"Condition" shall have the meaning set forth in Section 5.01.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"Dissenting Share" shall have the meaning set forth in
Section 3.01(d).
"Effective Time" shall have the meaning set forth in Section 2.03.
"Employee" shall mean any current or former employee, officer or
director, independent contractor or retiree of the Company, its subsidiaries and
any dependent or spouse thereof.
"Environmental Law" shall have the meaning set forth in Section 5.24.
"ERISA" shall have the meaning set forth in Section 5.12(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall have the meaning set forth in Section 4.01.
"Exchange Fund" shall have the meaning set forth in Section 4.01.
"Expenses" shall have the meaning set forth in Section 8.11.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System and any Federal Reserve Bank.
"GAAP" shall mean generally accepted accounting principles in the
United States, applied on a consistent basis.
"Indemnified Party" shall have the meaning set forth in Section 8.06.
"Law" shall mean any United States (federal, state or local) or
foreign law, statute, ordinance, rule, regulation, order, judgment or decree;
"Liens" shall have the meaning set forth in Section 5.03.
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"Maximum Amount" shall have the meaning set forth in Section 8.06(b).
"Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Merger Consideration" shall have the meaning set forth in
Section 3.01(b).
"Bancorporation" shall have the meaning set forth in the introduction
this Agreement.
"Order" shall mean any decree, judgment, injunction, ruling, writ or
other order (whether temporary, preliminary or permanent);
"Permitted Liens" are (i) Liens for current taxes not yet due and
payable and incurred in the ordinary course of business, (ii) with respect to a
lease, the interest of the lessor thereunder, including any Liens on the
interest of such lessor, and (iii) such imperfections of title, Liens,
restrictions and easements that do not materially impair the use or value of the
properties or assets or otherwise materially impair the current operations
relating to the business of the Company or its Subsidiaries or the Company's
consolidated financial condition or consolidated results of operations.
"Person" or "person" shall mean any individual, corporation, limited
liability company, association, partnership, group (as defined in Section
13(d)(3) of the Exchange Act), joint venture, trust or unincorporated
organization, or a government or any agency or political subdivision thereof.
"Proxy Statement" shall have the meaning set forth in Section 8.02.
"Regulatory Agreement" shall have the meaning set forth in
Section 5.11(b).
"Regulatory Authorities" shall have the meaning set forth in
Section 5.11(b).
"Regulatory Reporting Document" shall have the meaning set forth in
Section 5.05(a).
"Remedies Exception" shall mean any bankruptcy, reorganization,
insolvency, fraudulent conveyance or transfer, moratorium or similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
"Reports" shall have the meaning set forth in Section 5.17.
"SEC" shall mean the Securities and Exchange Commission.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sterling" shall have the meaning set forth in the introduction to
this Agreement.
"Sterling Bank" shall have the meaning set forth in the recitals to
this Agreement.
"Sterling Common Stock" shall mean the common stock, par value $1.00
per share, of Sterling.
"Sterling Preferred Stock" shall have the meaning set forth in
Section 6.02.
"Sterling Financial Statements" shall have the meaning set forth in
Section 6.04.
"Sterling Material Adverse Effect" shall have the meaning set forth in
Section 6.01(a).
"Sterling SEC Reports" shall have the meaning set forth in
Section 6.05.
"Subsidiary" shall mean, in the case of either Sterling or the
Company, any corporation, association or other entity in which it owns or
controls, directly or indirectly, 25% or more of the outstanding voting
securities or 25% or more of the total equity interest; provided, however, that
the term shall not include any such entity in which such voting securities or
equity interest is owned or controlled in a fiduciary capacity, without sole
voting power, or was acquired in securing or collecting a debt previously
contracted in good faith.
"Superior Proposal" shall have the meaning set forth in
Section 10.01(f).
"Surviving Corporation" shall have the meaning set forth in
Section 2.01.
"Tax" or "Taxes" shall mean all federal, state, local and foreign
taxes, charges, fees, levies, imposts, duties or other assessments, including,
without limitation, income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs duties,
capital stock, paid up capital, profits, withholding, Social Security, single
business and unemployment, disability, real property, personal property,
registration, ad valorem, value added, alternative or add-on minimum, estimated,
or other tax or governmental fee of any kind whatsoever, imposed or required to
be withheld by the United States or any state, local, foreign government or
subdivision or agency thereof, including, without limitation, any interest,
penalties or additions thereto.
"Taxable Period" shall mean any period prescribed by any governmental
authority, including, but not limited to, the United States or any state, local,
foreign government or subdivision or agency thereof for which a Tax Return is
required to be filed or Tax is required to be paid.
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"Tax Return" shall mean any report, return, information return or
other information required to be supplied to a taxing authority in connection
with Taxes, including, without limitation, any return of an affiliated or
combined or unitary group that includes the Company or any of its Subsidiaries.
"TBCA" shall mean the Texas Business Corporation Act, as amended.
"Termination Fee" shall have the meaning set forth in Section 8.11.
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
Section II.1 Merger.
(1) Upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the DGCL and the TBCA, at the Effective Time,
the Company shall be merged with and into Bancorporation. As a result of the
Merger, the separate existence of the Company shall thereupon cease, and
Bancorporation shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
(2) The certificate of incorporation of the Surviving Corporation shall be
the certificate of incorporation of the Bancorporation as in effect immediately
prior to the Effective Time.
(3) The bylaws of the Surviving Corporation shall be the bylaws of
Bancorporation as in effect immediately prior to the Effective Time.
(4) The directors of Bancorporation immediately prior to the Effective Time
shall become the directors of the Surviving Corporation and the officers of
Bancorporation immediately prior to the Effective Time shall become the officers
of the Surviving Corporation, in each case until their respective successors are
duly elected and qualified.
(5) The Merger shall have the effects set forth in the DGCL and the TBCA.
Section II.2 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") will take place at the offices of Xxxxxxx &
Xxxxx L.L.P. in Houston, Texas at 10:00 a.m. on the date (the "Closing Date")
that the Effective Time occurs, or at such other time, and at such place, as may
be mutually agreed upon by Sterling and the Company.
Section II.3 Effective Time. On the business day selected by Sterling
occurring within ten (10) business days following the date on which the
expiration of all applicable waiting periods in connection with approvals of
governmental authorities necessary to effectuate the Merger occurs and
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all conditions to the consummation of this Agreement are satisfied or waived,
unless an earlier or later date has been agreed by the parties, appropriate
articles of merger or certificates of merger shall be executed and filed in
accordance with the DGCL and the TBCA, and the Merger provided for herein shall
become effective upon such filing or at such time as may be specified in such
articles or certificates of merger. The time of such filing or such later
effective time is herein called the "Effective Time."
Section II.4 Reservation of Right to Revise Transaction; Further
Actions.
(6) Notwithstanding anything to the contrary provided elsewhere in this
Agreement, if Sterling notifies the Company in writing prior to the Closing that
Sterling prefers to change the method of effecting the acquisition of the
Company by Sterling (including, without limitation, the provisions as set forth
in Article II) the parties hereto shall forthwith execute an appropriate
amendment or restatement of this Agreement to reflect such changes; provided,
however, that no such change shall (i) alter or change the amount or the kind of
the consideration to be received by the holders of Company Common Stock as
provided for in this Agreement; (ii) take the form of an asset purchase; or
(iii) adversely affect the timing or tax treatment of the transaction described
herein.
(7) In addition, the parties hereto agree that if Sterling so determines,
each of the parties will execute such additional agreements and documents and
take such other actions as Sterling determines necessary or appropriate to
facilitate the Merger and the acquisition of the Company by Sterling, including,
without limitation, entering into agreements to facilitate the Bank Merger.
ARTICLE III
MERGER CONSIDERATION;
EXCHANGE PROCEDURES
Section III.1 Merger Consideration. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any party or stockholder:
(8) Each share of Company Common Stock outstanding immediately prior to the
Effective Time shall (except as otherwise provided in Section 3.01(c)) be
converted into the right to receive that number of shares (the "Merger
Consideration") of Sterling Common Stock determined by dividing $21,000,000 by
the average closing price of Sterling Common Stock on the Nasdaq National Market
for the ten trading days ending on and including the fifth trading day prior to
the Effective Time (the "Average Closing Price"); provided that the total number
of shares of Sterling Common Stock into which such Company Common Stock shall be
converted shall not be less than 1,150,000 shares and not more than 1,375,000
shares of Sterling Common Stock.
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(9) Each share of Company Common Stock held in the treasury of the Company
and each share of Company Common Stock owned by Sterling, Bancorporation or any
direct or indirect wholly owned Subsidiary of Sterling or the Company
immediately prior to the Effective Time shall be canceled without any conversion
and no payment or distribution shall be made with respect thereto.
(10) Notwithstanding anything in this Agreement to the contrary, no share
of Company Common Stock, the holder of which shall have complied with the
provisions of Article 5.12 of the TBCA as to appraisal rights (a "Dissenting
Share"), shall be deemed converted into and to represent the right to receive
the Merger Consideration, and the holders of Dissenting Shares, if any, shall be
entitled to payment, solely from the Surviving Corporation, of the appraised
value of such Dissenting Shares to the extent permitted by and in accordance
with the provisions of Article 5.12 of the TBCA; provided, however, that (i) if
any holder of Dissenting Shares shall, under the circumstances permitted by the
TBCA, subsequently deliver a written withdrawal of his or her demand for
appraisal of such Dissenting Shares, (ii) if any holder fails to establish his
or her entitlement to rights to payment as provided in such Article 5.12, or
(iii) if neither any holder of Dissenting Shares nor the Surviving Corporation
has filed a petition demanding a determination of the value of all Dissenting
Shares within the time provided in such Article 5.12, such holder or holders (as
the case may be) shall forfeit such right to payment for such Dissenting Shares
pursuant to such Article 5.12 and each such Dissenting Share shall thereupon be
converted into and shall represent the right to receive the Merger
Consideration. The Company shall give Sterling (i) prompt notice of any written
objections to the Merger submitted to the Company in accordance with Article
5.12A, attempted withdrawals of such objections, and any other instruments
served pursuant to applicable law received by the Company relating to
stockholders' rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
TBCA. The Company shall not, except with the prior written consent of Sterling,
voluntarily make any payment with respect to any demands for appraisals of
Company Common Stock, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
(11) In the event Sterling changes (or establishes a record date for
changing) the number of shares of Sterling Common Stock issued and outstanding
prior to the Effective Date as a result of a stock split, stock dividend,
recapitalization or similar transaction with respect to the outstanding Sterling
Common Stock and the record date therefor shall be prior to the Effective Date,
the Merger Consideration shall be appropriately adjusted.
Section III.2 Stockholder's Meeting. Subject to applicable law, the
Company, acting through the Company Board, shall, in accordance with applicable
law, duly call, give notice of, convene and hold a special meeting (the "Company
Stockholders' Meetings") of its stockholders as soon as practicable for the
purpose of approving and adopting this Agreement and approving the Merger and,
subject to the fiduciary duties of the Company Board under applicable law as
determined by such directors in good faith after consultation with and based
upon the advice of outside counsel, include in the Proxy Statement (as defined
herein) of the Company for use in connection with the Company Stockholders'
Meeting, the recommendation of the Company Board that the Company stockholders
vote in favor of the approval and adoption of the Merger and this
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Agreement. The Company agrees to use commercially reasonable efforts to cause
the Company Stockholders' Meeting to occur within 30 days after the Proxy
Statement is mailed to the Company's stockholders.
Section III.3 Rights Under Stock Plans. Prior to the Effective Time,
each unexpired and unexercised option to purchase shares of Company Common
Stock, each of which is set forth in Section 3.03 of the Company Disclosure
Schedule, shall be canceled without the payment of any consideration other than
the Merger Consideration, and each holder of such an option shall so agree.
ARTICLE IV
EXCHANGE OF SHARES
Section IV.1 Exchange Agent. As of the Effective Time, Sterling shall
deposit with a bank or trust company designated by Sterling and reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the holders
of shares of Company Common Stock, for exchange in accordance with this Article
IV, the aggregate Merger Consideration (the "Exchange Fund") issuable pursuant
to Section 3.01(a) in exchange for outstanding shares of Company Common Stock.
The Exchange Agent shall, pursuant to irrevocable instructions, deliver the
Merger Consideration contemplated to be issued pursuant hereto out of the
Exchange Fund. The Exchange Fund shall not be used for any other purpose.
Section IV.2 Exchange Procedures. Promptly after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates which, immediately prior to the Effective Time, represented
outstanding shares of Company Common Stock (the "Certificates"), other than
shares canceled in accordance with Section 3.01(b): (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the certificates theretofore representing shares of Company Common Stock
shall pass, only upon proper delivery of such certificates to the Exchange
Agent, and shall be in such form and have such other provisions as Sterling
shall specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent (or to such other agent or
agents as may be appointed by Sterling), together with such letter of
transmittal, duly executed, and any other required documents, the holder of such
Certificate(s) shall be entitled to receive in exchange therefor the Merger
Consideration which such holder has the right to receive pursuant to Section
3.01(a), and the Certificate(s) so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, the Merger Consideration with
respect to such Company Common Stock may be issued to a transferee if the
Certificate(s) representing such Company Common Stock is presented to the
Exchange Agent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 4.02, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such
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surrender the Merger Consideration with respect to such Company Common Stock.
The Certificate(s) for Company Common Stock so surrendered shall be duly
endorsed as the Exchange Agent may require. Sterling shall not be obligated to
deliver the Merger Consideration to which any former holder of Company Common
Stock is entitled as a result of the Merger until such holder surrenders his
Certificate(s) formerly representing shares of Company Common Stock for exchange
as provided in this Article IV.
Section IV.3 No Further Ownership Rights in Company Common Stock. The
Merger Consideration shall be deemed to have been issued in full satisfaction of
all rights pertaining to shares of Company Common Stock, subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time that may have been
declared or made by the Company on such shares of Company Common Stock in
accordance with the terms of this Agreement or prior to the date hereof and
which remain unpaid at the Effective Time, and after the Effective Time there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation or its transfer agent of the shares of Company Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
its transfer agent for any reason, they shall be canceled and exchanged as
provided in this Article IV.
Section IV.4 Termination of Exchange Fund. Any portion of the Exchange
Fund that remains undistributed to the former stockholders of the Company for
six months after the Effective Time shall be delivered to Sterling, upon demand,
and any stockholders of the Company who have not theretofore complied with this
Article IV shall thereafter look only to Sterling for payment of their claim for
the Merger Consideration.
Section IV.5 Escheat of Exchange Fund. None of Bancorporation,
Sterling, the Company, or the Exchange Agent shall be liable to any person in
respect of any shares of Sterling Common Stock from the Exchange Fund delivered
to a public office pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates representing shares of Company Common Stock
shall not have been surrendered immediately prior to the date on which any
Merger Consideration in respect of such Certificate would otherwise escheat to
or become the property of any government authority, any such Merger
Consideration in respect of such Certificate shall, as such time and to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
Section IV.6 No Fractional Shares. No certificates or scrip
representing fractional shares of Sterling Common Stock shall be issued upon the
surrender for exchange of Certificates, and no dividend or other distribution,
stock split or interest shall relate to any such fractional security, and such
fractional interests shall not entitle the owner thereof to any voting or other
rights of a security holder of Sterling. In lieu of any fractional security,
each holder of shares of Company Common Stock who would otherwise have been
entitled to a fraction of a share of Sterling Common Stock upon surrender of the
Certificate(s) for such Company Common Stock for exchange will be paid an amount
in cash (without interest) equal to such holder's proportionate interest in the
amount of the
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net proceeds from the sale or sales by the Exchange Agent in accordance with the
provisions of this Section 3.04, on behalf of all such holders, of the aggregate
fractional shares of Sterling Common Stock issued pursuant to Article III. As
soon as practicable following the Effective Time, the Exchange Agent shall
determine the excess of (A) the number of whole shares of Sterling Common Stock
delivered to the Exchange Agent by Sterling pursuant to Section 4.01 over (B)
the aggregate number of whole shares of Sterling Common Stock to be distributed
to holders of Company Common Stock pursuant to Article III (such excess being
herein called the "Excess Securities") and the Exchange Agent, as agent for the
former holders of Company Common Stock, shall sell the Excess Securities at the
prevailing prices on the Nasdaq National Market. The sale of the Excess
Securities by the Exchange Agent shall be executed on the Nasdaq National Market
through one or more member firms of the Nasdaq National Market and shall be
executed in round lots to the extent practicable. Sterling shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation of the Exchange Agent, incurred in connection with
such sale of Excess Securities. Until the net proceeds of such sale of Excess
Securities have been distributed to the former stockholders of the Company, the
Exchange Agent will hold such proceeds and dividends in trust for such former
stockholders. As soon as practicable after the determination of the amount of
cash to be paid to former stockholders of the Company in lieu of any fractional
interests, the Exchange Agent shall make available in accordance with this
Agreement such amounts to such former stockholders.
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company represents and warrants to Sterling and Bancorporation as
follows:
Section V.1 Organization, Standing and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. The Company is duly qualified to do business and in good
standing in all jurisdictions (whether federal, state, local or foreign) where
its ownership or leasing of property or the conduct of its business requires it
to be so qualified and in which the failure to be duly qualified would have a
material adverse effect on the financial condition, results of operations,
business, properties (the "Condition") of the Company and any of its
Subsidiaries or on the ability of the Company or its Subsidiaries to consummate
the transactions contemplated hereby (a "Company Material Adverse Effect"). The
Company has all requisite corporate power and authority (i) to carry on its
business as now conducted, (ii) own, lease and operate its assets, properties
and business and (iii) execute and deliver this Agreement and perform the terms
of this Agreement. The Company is duly registered as a bank holding company
under the BHCA. The Company has in effect all federal, state, local and foreign
governmental, regulatory and other authorizations, franchises, permits and
licenses (collectively, "Authorizations") necessary for it to own or lease its
properties and assets and to carry on its business as now conducted.
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Section V.2 Company Capital Stock.
(12) The authorized capital stock of the Company consists of 4,000,000
shares of Company Common Stock and 1,000,000 shares of preferred stock, par
value $1.00 per share. At March 31, 1998, 3,262,168 shares of Company Common
Stock and no shares of the Company's preferred stock were issued and
outstanding. Since March 31, 1998, the Company has issued no additional capital
stock and has no commitments, options or agreements to issue any additional
shares. As of the date hereof, all of the issued and outstanding shares of
Company Common Stock are duly and validly issued and outstanding and are fully
paid and nonassessable. None of the outstanding shares of Company Common Stock
has been issued in violation of any preemptive rights or any provision of the
Company's Articles of Incorporation or bylaws. As of the date of this
Agreement, no shares of Company Common Stock have been reserved for any purpose
except as set forth in Section 5.02 of the Company Disclosure Schedule.
(13) Except as set forth in Section 5.02 of the Company Disclosure
Schedule, there are no equity securities of the Company (other than the shares
of Company Common Stock described in Section 5.02(a)) outstanding and no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of the Company
or contracts, commitments, understandings or arrangements by which the Company
is or may be bound to issue additional shares of its capital stock or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock. There are no contracts, commitments, understandings or arrangements by
which the Company or any of its Subsidiaries is or may be bound to transfer any
shares of the capital stock of any Subsidiary of the Company, and there are no
agreements, understandings or commitments relating to the right of the Company
or any of its Subsidiaries to vote or to dispose of any such shares.
(14) Except as set forth in Section 5.02 of the Company Disclosure
Schedule, there are no securities required to be issued by the Company under any
Company Stock Plan, dividend reinvestment or similar plan.
Section V.3 Subsidiaries. Section 5.03 of the Company Disclosure
Schedule contains a complete list of the Company's Subsidiaries. All of the
outstanding shares of each Subsidiary are owned by the Company and no equity
securities are or may become required to be issued by reason of any options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any Subsidiary is bound to issue
additional shares of its capital stock or options, warrants or rights to
purchase or acquire any additional shares of its capital stock. All of the
shares of capital stock of each Subsidiary are fully paid and nonassessable and
are owned free and clear of any claim, lien, pledge or encumbrance of whatsoever
kind ("Liens"). Each Subsidiary (i) is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated or
organized, (ii) is duly qualified to do business and in good standing in all
jurisdictions (whether
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federal, state, local or foreign) where its ownership or leasing of property or
the conduct of its business requires it to be so qualified and in which the
failure to be so qualified would have a Company Material Adverse Effect, (iii)
has all requisite corporate power and authority to own or lease its properties
and assets and to carry on its business as now conducted, and (iv) has in effect
all Authorizations necessary for it to own or lease its properties and assets
and to carry on its business as now conducted.
Section V.4 Authorization of Merger and Related Transactions.
(15) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby (including, without limitation, the
consummation of the Merger) have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of the Company,
including unanimous approval of the Merger by the Company Board, (conditioned
upon the receipt of the fairness opinion described in Section 9.02(f)), subject
to the approval of the Merger by the stockholders of the Company to the extent
required by applicable law. The only stockholder approval required for the
approval of the Merger is the approval of two-thirds of the outstanding shares
of Company Common Stock voting as a single class. This Agreement, subject to
any requisite stockholder approval hereof with respect to the Merger, represents
a valid and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforcement may be limited
by the Remedies Exception.
(16) Neither the execution and delivery of this Agreement by the Company,
the consummation by the Company of the transactions contemplated hereby or
thereby nor compliance by the Company with any of the provisions hereof or
thereof will (i) conflict with or result in a breach of any provision of the
Company's Articles of Incorporation or bylaws, (ii) constitute or result in a
breach or violation of any term, condition or provision of, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give rise to any right of termination, cancellation or
acceleration with respect to, or result in the creation of any Lien upon, any
property or assets of the Company or any of its Subsidiaries pursuant to any
note, bond, mortgage, indenture, license, agreement, lease or other instrument
or obligation to which any of them is a party or by which any of them or any of
their properties or assets may be subject and that would have, individually or
in the aggregate, a Company Material Adverse Effect or (iii) subject to receipt
of the requisite approvals referred to in Section 9.01 of this Agreement,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or its Subsidiaries or any of their properties or
assets.
(17) Other than consents, authorizations, approvals or exemptions required
from the Commissioner, the OCC, the FDIC, or the Federal Reserve Board and the
filing of certificates or articles of merger in accordance with the DGCL and the
TBCA, no notice to, filing with, authorization of, exemption by, or consent or
approval of any governmental body or authority is necessary for the consummation
by the Company of the Merger and the other transactions contemplated by this
Agreement.
Section V.5 Financial Statements and Regulatory Reports.
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(18) The Company (i) has delivered to Sterling copies of the audited
consolidated balance sheets and the related audited consolidated statements of
income, stockholders' equity and cash flows (including related notes and
schedules) of the Company and its consolidated Subsidiaries as of and for the
periods ended December 31, 1996 and December 31, 1997, together with the report
thereof of KPMG Peat Marwick LLP, and of the unaudited balance sheet and the
related unaudited statement of income, as of and for the three months ended
March 31, 1998 (the "Company Financial Statements"), and (ii has furnished
Sterling with a true and complete copy of each material report filed by the
Company with the Federal Reserve Board or by any of its Subsidiaries with any
Regulatory Authorities from and after January 1, 1993 (each a "Regulatory
Reporting Document"), which are all the material documents that the Company was
required to file with the Regulatory Authorities since such date and all of
which complied when filed in all material respects with all applicable laws and
regulations.
(19) The Company Financial Statements (as of the dates thereof and for the
periods covered thereby) (i) are in accordance with the books and records of the
Company and its Subsidiaries, which are complete and accurate in all material
respects and which have been maintained in accordance with good business
practices, and (ii) present fairly the consolidated financial position and the
consolidated results of operations, changes in stockholders' equity and cash
flows of the Company and its Subsidiaries as of the dates and for the periods
indicated, in accordance with GAAP, subject in the case of unaudited interim
financial statements to normal recurring year-end adjustments and except for the
absence of certain footnote information in the unaudited interim financial
statements. The Company has delivered to Sterling copies of all management
letters prepared by KPMG Peat Marwick LLP and delivered to the Company since
January 1, 1993.
Section V.6 Absence of Undisclosed Liabilities. Neither the Company
nor any of its Subsidiaries has any obligations or liabilities (contingent or
otherwise) in the amount of $50,000 in the aggregate, except obligations and
liabilities (i) which are fully accrued or reserved against in the consolidated
balance sheet of the Company and its Subsidiaries as of March 31, 1998, included
in the Company Financial Statements or reflected in the notes thereto, or (ii)
which were incurred after March 31, 1998, in the ordinary course of business
consistent with past practice. Since March 31, 1998, neither the Company nor
any of its Subsidiaries has incurred or paid any obligation or liability which
would have a Company Material Adverse Effect.
Section V.7 Tax Matters. Except as set forth in Section 5.07 of the
Company Disclosure Schedule:
(20) All Tax Returns required to be filed by or on behalf of the Company or
any of its Subsidiaries have been timely filed, or requests for extensions have
been timely filed, granted and have not expired, all such returns filed are
complete and accurate in all material respects and all Taxes shown as due on
those Tax Returns have been paid.
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(21) The Company is not involved in any audit examination, deficiency or
refund litigation or matter in controversy with respect to any Taxes. All Taxes
due with respect to completed and settled examinations or concluded litigation
have been paid or adequately reserved for.
(22) Neither the Company nor any of its Subsidiaries has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due that is currently in effect.
(23) Adequate provision for any Taxes due or to become due for the Company
and any of its Subsidiaries for any period or periods through and including
March 31, 1998, has been made and is reflected on the March 31, 1998 financial
statements included in the Company Financial Statements. Deferred Taxes of the
Company and its Subsidiaries have been provided for in the Company Financial
Statements in accordance with GAAP.
(24) The Company and its Subsidiaries have collected and withheld all Taxes
which they have been required to collect or withhold and have timely submitted
all such collected and withheld amounts to the appropriate authorities. The
Company and its Subsidiaries are in compliance with the back-up withholding and
information reporting requirements under (i) the Code, and (ii) any state, local
or foreign laws, and the rules and regulations, thereunder.
(25) Neither the Company nor any of its Subsidiaries has made any payments,
is obligated to make any payments, or is a party to any contract, agreement or
other arrangement that could obligate it to make any payments that would not be
deductible under Section 280G of the Code.
(26) No consent has been filed under Section 341(f) of the Code with
respect to the Company or any of its Subsidiaries; none of the Subsidiaries was
acquired in a "qualified stock purchase" under Section 338(d)(3) of the Code,
and no elections under Section 338(g) of the Code, protective carryover basis
elections or offset prohibition elections are applicable to the Company or any
of its Subsidiaries; neither the Company nor any of the Subsidiaries has
participated in, or cooperated with, an international boycott within the meaning
of Section 999 of the Code, nor has any such corporation had operations which
are or may hereafter become reportable under Section 999 of the Code; neither
the Company nor any of the Subsidiaries owns any interest in an entity or
arrangement characterized as a partnership for United States federal income tax
purposes; no election under Section 1504(d) of the Code has been made with
respect to the Company or any of its Subsidiaries; none of the assets of the
Company or any of its Subsidiaries is required to be treated as being owned by
some other person pursuant to Section 168(f)(8) of the Code, neither the Company
nor any of the Subsidiaries is a United States real property holding company
under Section 897 of the Code; and no debt of the Company or any of its
Subsidiaries is "corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code.
Section V.8 Allowance for Credit Losses. Each allowance for credit
losses shown in the consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1997 and as of March 31, 1998, and included in
the Company Financial Statements, complies in all material respects with GAAP
and OCC Bank Circular 201.
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Section V.9 Other Regulatory Matters. Neither the Company nor any of
its Subsidiaries has taken or agreed to take any action or has any knowledge of
any fact or circumstance that would materially impede or delay receipt of any
approval referred to in Section 9.01(b).
Section V.10 Properties. Except as set forth in Section 5.10 of the
Company's Disclosure Schedule the Company and its Subsidiaries have good and
indefeasible title, free and clear of all Liens except Permitted Liens, to all
their properties and assets whether tangible or intangible, real, personal or
mixed. All buildings, and all fixtures, equipment and other property and assets
which are material to its business on a consolidated basis, held under leases or
subleases by any of the Company or its Subsidiaries are held under valid
instruments enforceable in accordance with their respective terms, subject to
the Remedies Exception. All of the Company's and the Company's Subsidiaries'
equipment in regular use has been well maintained and is in good serviceable
condition, reasonable wear and tear excepted, except where a failure to so
maintain or to be in such condition would not have a Company Material Adverse
Effect.
Section V.11 Compliance with Laws.
(27) Each of the Company and its Subsidiaries is in compliance with all
laws, rules, regulations, policies, guidelines, reporting and licensing
requirements and orders applicable to its business or to its employees
conducting its business, and with its internal policies and procedures, except
for failures to comply which will not result in a Company Material Adverse
Effect.
(28) Neither the Company nor any of its Subsidiaries has received any
notification or communication from any agency or department of any federal,
state or local government, including the Federal Reserve Board, the OCC, the
FDIC, the SEC and the staffs thereof (collectively, the "Regulatory
Authorities") (i) asserting that since January 1, 1993, any of the Company or
its Subsidiaries is not in substantial compliance with any of the statutes,
regulations, or ordinances which such agency, department or Regulatory Authority
enforces, or the internal policies and procedures of the Company or its
Subsidiaries, (ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to the Condition of the Company or
any of its Subsidiaries, (iii) requiring or threatening to require the Company
or any of its Subsidiaries, or indicating that the Company or any of its
Subsidiaries may be required, to enter into a cease and desist order, agreement
or memorandum of understanding or any other agreement restricting or limiting or
purporting to restrict or limit in any manner the operations of the Company or
any of its Subsidiaries, including, without limitation, any restriction on the
payment of dividends, or (iv) directing, restricting or limiting, or purporting
to direct, restrict or limit in any manner the operations of the Company or any
of its Subsidiaries, including, without limitation, any restriction on the
payment of dividends (any such notice, communication, memorandum, agreement or
order described in this sentence herein referred to as a "Regulatory
Agreement").
(29) Since January 1, 1993, neither the Company nor any of its Subsidiaries
has been a party to any effective Regulatory Agreement or memorandum of
understanding.
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(30) Neither the Company nor any of its Subsidiaries is required by
Section 32 of the Federal Deposit Insurance Act to give prior notice to a
federal banking agency of the proposed addition of an individual to the Company
Board or the employment of an individual as a senior executive officer.
Section V.12 Employee Benefit Plans.
(31) The Company has delivered to Sterling prior to the execution of this
Agreement true and complete copies (and, in the case of each material plan,
financial data with respect thereto) of all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus or other incentive plans, all other employee programs,
arrangements or agreements, all material medical, vision, dental or other health
plans, all life insurance plans and all other material employee benefit plans or
fringe benefit plans, including, without limitation, all "employee benefit
plans" as that term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not terminated, and trust
agreements and insurance contracts under or with respect to which the Company or
any of its Subsidiaries has or could have any liability, contingent, secondary
or otherwise (collectively, the "Company Benefit Plans"). Any of the Company
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "Company ERISA
Plan". Any of the Company Benefit Plans pursuant to which the Company is or may
become obligated to, or obligated to cause any of its Subsidiaries or any other
Person to, issue, deliver or sell shares of capital stock of the Company or any
of its Subsidiaries, or grant, extend or enter into any option, warrant, call,
right, commitment or agreement to issue, deliver or sell shares, or any other
interest in respect of capital stock of the Company or any of its Subsidiaries,
is referred to herein as a "Company Stock Plan". No Company Benefit Plan is or
has been a multi-employer plan within the meaning of Section 3(37) of ERISA. The
Company has set forth in Section 5.12 of the Company Disclosure Schedule (i) a
list of all of the Company Benefit Plans, (ii) a list of the Company Benefit
Plans that are Company ERISA Plans, (iii) a list of the Company Benefit Plans
that are Company Stock Plans and (iv) a list of the number of shares covered by,
exercise prices for, and holders of, all stock options granted and available for
grant under Company Stock Plans.
(32) From their inception, all the Company Benefit Plans have been and are
in substantial compliance with the applicable terms of ERISA and the Code and
any other applicable laws, rules and regulations, including the terms of such
plans, the breach or violation of which, individually or in the aggregate, could
reasonably be expected to result in a Company Material Adverse Effect.
(33) All liabilities (contingent or otherwise) under any Company Benefit
Plan are fully accrued or reserved against in the Company Financial Statements
in accordance with GAAP. No Company ERISA Plan is or has ever been subject to
Title IV of ERISA or Section 412 of the Code.
(34) Neither the Company nor any of its Subsidiaries has any obligations
for retiree health or other welfare benefits under any Company Benefit Plan or
otherwise. There are no restrictions
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on the rights of the Company or its Subsidiaries to unilaterally amend or
terminate any such Company Benefit Plan at any time without incurring any
material liability thereunder.
(35) Except as set forth in Section 5.12 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby or thereby will (i) result
in any payment (including, without limitation, severance, golden parachute or
otherwise) becoming due to any person under any Company Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Company
Benefit Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits. No amounts payable under any Company Benefit Plan
will be nondeductible pursuant to either Section 280G or 162(m) of the Code.
Section V.13 Commitments and Contracts. Except as set forth in
Section 5.13 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is a party or subject to, or has amended or waived any rights
under, any of the following (whether written or oral, express or implied):
(36) any employment contract or understanding (including any understandings
or obligations with respect to severance or termination pay liabilities or
fringe benefits) with any Employee, including in any such person's capacity as a
consultant (other than those which either (i) are terminable at will by the
Company or such Subsidiary or (ii) do not involve payments with a present value
of more than $10,000 individually or $50,000 in the aggregate by the Company or
such Subsidiary during the remaining term thereof without giving effect to
extensions or renewals of the existing term thereof that may be made at the
election or with the consent or concurrence of the Company);
(37) any labor contract or agreement with any labor union;
(38) any contract not made in the usual, regular and ordinary course of
business containing non-competition covenants which limit the ability of the
Company or any of its Subsidiaries to compete in any line of business or which
involve any restriction of the geographical area in which the Company or its
Subsidiaries may carry on its business (other than as may be required by law or
applicable Regulatory Authorities);
(39) any other contract or agreement for which the Company or any
Subsidiary was or is required to obtain the approval of any Regulatory Authority
prior to becoming bound or to consummating the transactions contemplated
thereby;
(40) any real property lease with annual rental payments aggregating $5,000
or more;
(41) any contract requiring the payment of any penalty, termination or
other additional amounts as "change of control" payments or otherwise as a
result of the transactions contemplated by this Agreement, or providing for the
vesting or accrual of benefits or rights upon a "change of control" or otherwise
as a result of the transactions contemplated by this Agreement;
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(42) any agreement with respect to (i) the acquisition of any bank branches
or other assets or stock of another financial institution or any other Person or
(ii) the sale of one or more bank branches; or
(43) any outstanding interest rate exchange or other derivative contracts.
Section V.14 Material Contract Defaults. Except as set forth in
Section 5.14 of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries is, or has received any notice or has any knowledge that any
party is, in breach, violation or default in any respect under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or the assets, business or operations thereof
may be bound or affected or under which it or its respective assets, business or
operations receives benefits, except for those breaches, violations or defaults
which would not have, individually or in the aggregate, a Company Material
Adverse Effect; and there has not occurred any event that with the lapse of time
or the giving of notice of both would constitute such a default.
Section V.15 Legal Proceedings. Except as set forth in Section 5.15 of
the Company Disclosure Schedule, there are no claims or charges filed with, or
proceedings or investigations by, Regulatory Authorities or actions or suits
instituted or pending or, to the best knowledge of the Company's management,
threatened against the Company or any of its Subsidiaries, or against any
property, asset, interest or right of any of them, that might reasonably be
expected to result in a judgment in excess of $10,000 or that might reasonably
be expected to threaten or impede the consummation of the transactions
contemplated by this Agreement. Neither the Company nor any of its Subsidiaries
is a party to any agreement or instrument or is subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, statute,
rule, regulation, code or ordinance that, individually or in the aggregate,
might reasonably be expected to have a Company Material Adverse Effect or might
reasonably be expected to threaten or impede the consummation of the
transactions contemplated by this Agreement.
Section V.16 Absence of Certain Changes or Events. Since January 1,
1993, except (i) as disclosed in any Regulatory Reporting Document filed since
January 1, 1993 and prior to the date hereof or (ii as set forth in Section 5.16
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has (A) incurred any liability which has had a Company Material
Adverse Effect, (B) suffered any change in its Condition which would have a
Company Material Adverse Effect, other than changes after the date hereof which
affect the banking industry as a whole, (C) failed to operate its business
consistent in all material respects in the ordinary course in accordance with
past practice or (D) changed any accounting practices.
Section V.17 Reports. Since January 1, 1993, the Company and each of
its Subsidiaries have filed on a timely basis all reports and statements,
together with all amendments required to be made with respect thereto
(collectively "Reports"), that they were required to file with (i) the Federal
Reserve Board, (ii the OCC, (ii the FDIC, and (iv any other applicable federal,
state, municipal,
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local or foreign government, securities, banking, savings and loan or other
governmental or regulatory authority. No Regulatory Reporting Document with
respect to periods beginning on or after January 1, 1993, contained any
information that was false or misleading with respect to any material fact or
omitted to state any material fact necessary in order to make the statements
therein not misleading.
Section V.18 Insurance. The Company and each of its Subsidiaries are
presently insured, and during each of the past five calendar years have been
insured, for reasonable amounts against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured. The policies of fire, theft, liability (including directors and
officers liability insurance) and other insurance set forth in Section 5.18 of
the Company Disclosure Schedule and maintained with respect to the assets or
businesses of the Company and its Subsidiaries provide adequate coverage against
all pending or threatened claims, and the fidelity bonds in effect as to which
any of the Company or any of its Subsidiaries is a named insured are sufficient
for their purpose.
Section V.19 Labor. No material work stoppage involving the Company or
its Subsidiaries is pending or, to the best knowledge of the Company's
management, threatened. Neither the Company nor any of its Subsidiaries is
involved in, or, to the best knowledge of the Company's management, threatened
with or affected by, any labor or other employment-related dispute, arbitration,
lawsuit or administrative proceeding. Employees of the Company and its
Subsidiaries are not represented by any labor union, and, to the best knowledge
of the Company's management, no labor union is attempting to organize employees
of the Company or any of its Subsidiaries.
Section V.2O Material Interests of Certain Persons. Except as set forth
in Section 5.20 of the Company Disclosure Schedule, no executive officer or
director of the Company, or any "associate" (as such term is defined in Rule
14a-1 under the Exchange Act) of any such executive officer or director, has any
interest in any contract or property (real or personal), tangible or intangible,
used in or pertaining to the business of the Company or any of its Subsidiaries.
Section V.21 Registration Obligations. Neither the Company nor any of
its Subsidiaries is under any obligation, contingent or otherwise, presently in
effect or which will survive the Merger by reason of any agreement to register
any of its securities under the Securities Act.
Section V.22 Brokers and Finders. Neither the Company nor any of its
Subsidiaries nor any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for the Company or any of its
Subsidiaries in connection with this Agreement or the transactions contemplated
hereby.
Section V.23 State Takeover Laws. The transactions contemplated by this
Agreement are exempt from any applicable charter or contractual provision
containing change of control or anti-takeover provisions and, to the knowledge
of the Company, from any applicable state takeover law.
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Section V.24 Environmental Matters. To the knowledge of the Company,
neither the Company, any of its Subsidiaries, nor any properties owned or
operated by the Company or any of its Subsidiaries or held as collateral by any
of its Subsidiaries has been or is in violation of or liable under any
Environmental Law (as hereinafter defined), except for such violations or
liabilities that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect. Except as set forth in Section 5.24 of the
Company Disclosure Schedule, none of which could be reasonably expected to have,
individually or in the aggregate, a Company Material Adverse Effect, there are
no actions, suits or proceedings, or demands, claims, notices or investigations
(including without limitation notices, demand letters or requests for
information from any environmental agency) instituted or pending, or to the best
knowledge of the Company's management, threatened relating to the liability of
any properties owned or operated by the Company or any of its Subsidiaries under
any Environmental Law.
"Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
Regulatory Authority relating to (i) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic radioactive or dangerous,
or otherwise regulated, whether by type or by quantity, including any material
containing any such substance as a component.
Section V.25 The Company Action. The Company Board, (at a meeting duly
called and held on June 10, 1998), conditioned upon the receipt of the fairness
opinion described in Section 9.02(f), unanimously (a) determined that the Merger
is fair to and in the best interests of the Company and its stockholders, (b)
approved this Agreement and the Merger in accordance with the TBCA, (c) resolved
to recommend approval and adoption of this Agreement and the Merger and the
other transactions contemplated hereby by the Company's stockholders and (d)
directed that this Agreement and the Merger be submitted to the Company's
stockholders for approval.
Section V.26 Software.
(44) The Company owns all right, title and interest in and to, or holds
valid licenses or sub-licenses to use, all of the computer software used by the
Company in its operations, free and clear of any liens, claims or encumbrances
of any kind or nature (excluding the rights of the owner or licensor in the case
of software licensed or sub-licensed by the Company from others). Except as
specified on Schedule 5.26, all computer software owned by the Company was
developed by the Company entirely through its own efforts and for its own
account. The use by the Company of computer software licensed to the Company
from third parties (including the sublicensing of such
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licensed software to customers) does not violate the terms of the respective
license agreements with respect to such licensed software.
(45) No director, officer or employee of the Company owns, directly or
indirectly, in whole or in part, any computer software or other intellectual
property right which the Company is using or which is necessary for the business
of the Company as now conducted.
(46) The Company and its Subsidiaries have followed the procedures set
forth in, and have taken and will continue to take all actions required by, the
FFIEC Safety and Soundness Guidelines Concerning the Year 2000 Business Risk
(the "Year 2000 Guidelines") to ensure that all computer software owned by or
licensed to the Company is fully compliant with the Year 2000 Guidelines.
(47) Neither the Company nor any of its Subsidiaries has received a
regulatory rating of less than satisfactory from any Regulatory Authority with
respect to any review of its compliance with the Year 2000 Guidelines or the
adequacy of its Year 2000 planning efforts.
ARTICLE VI
REPRESENTATIONS AND
WARRANTIES OF STERLING
Each of Sterling and Bancorporation represent and warrant to the Company as
follows:
Section VI.1 Organization, Standing and Authority.
(48) Sterling is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Bancorporation is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of Sterling and Bancorporation is duly qualified to do
business and in good standing in all jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and in which the failure to be duly qualified would have a material
adverse effect on the Condition of Sterling and its Subsidiaries taken as a
whole or on the ability of Sterling or Bancorporation to consummate the
transactions contemplated hereby (a "Sterling Material Adverse Effect"). Each
of Sterling and Bancorporation has all requisite corporate power and authority
to carry on its business as now conducted and to own, lease and operate its
assets, properties and business, and to execute and deliver this Agreement and
perform the terms of this Agreement. Each of Sterling and Bancorporation is
duly registered as a bank holding company under the BHCA. Each of Sterling and
Bancorporation has in effect all Authorizations necessary for it to own or lease
its properties and assets and to carry on its business as now conducted, except
for those Authorizations the absence of which, either individually or in the
aggregate, would not have a Material Adverse Effect on the Condition of Sterling
and its Subsidiaries on a consolidated basis.
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Section VI.2 Sterling and Bancorporation Capital Stock.
(49) The authorized capital stock of Sterling consists of 50,000,000 shares
of Sterling Common Stock and 1,000,000 shares of preferred stock, par value
$1.00 per share (the "Sterling Preferred Stock"). As of March 31, 1998, there
were outstanding 20,859,748 shares of Sterling Common Stock and 177,113 shares
of Sterling Preferred Stock and no other shares of capital stock of any class.
The authorized capital stock of Bancorporation consists of 1,000 shares of
common stock, par value $0.01 per share, of which 1,000 shares are issued and
outstanding and owned by Sterling. All of the issued and outstanding shares of
Sterling Common Stock and Bancorporation capital stock are duly and validly
issued and outstanding and are fully paid and nonassessable.
(50) The shares of Sterling Common Stock to be issued in exchange for
shares of Company Common Stock in the Merger, when issued in accordance with the
terms of this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable.
Section VI.3 Authorization of Merger and Related Transactions.
(51) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action in respect thereof on the part of each of
Sterling and Bancorporation, to the extent required by applicable law. This
Agreement represents a valid and legally binding obligation of each of Sterling
and Bancorporation, enforceable against Sterling and Bancorporation in
accordance with its terms except as such enforcement may be limited by the
Remedies Exception.
(52) Neither the execution and delivery of this Agreement by Sterling or
Bancorporation, nor the consummation by Sterling or Bancorporation of the
transactions contemplated hereby or thereby nor compliance by Sterling or
Bancorporation with any of the provisions hereof or thereof will (i) conflict
with or result in a breach of any provision of Sterling's Articles of
Incorporation or bylaws or the Certificate of Incorporation or bylaws of
Bancorporation, (ii) constitute or result in a breach or violation of any term,
condition or provision of, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give rise to
any right of termination, cancellation or acceleration with respect to, or
result in the creation of any Lien upon any property or assets of any of
Sterling or its Subsidiaries pursuant to any note, bond, mortgage, indenture,
license, agreement, lease or other instrument or obligation to which any of them
is a party or by which any of them or any of their properties or assets may be
subject, and that would, individually or in the aggregate, have a Sterling
Material Adverse Effect or (iii) subject to receipt of the requisite approvals
referred to in Section 9.01 of this Agreement, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Sterling or
Bancorporation or any of its properties or assets.
Section VI.4 Financial Statements. Sterling has delivered to the
Company copies of the audited consolidated balance sheets and the related
audited consolidated statements of income, consolidated statements of
stockholders' equity and consolidated statements of cash flows (including
related notes and schedules) of Sterling and its consolidated Subsidiaries as of
and for the periods
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ended December 31, 1996 and December 31, 1997, and its unaudited consolidated
balance sheet at March 31, 1998, and the related unaudited consolidated
statements of income, stockholders' equity and cash flows for the three months
then ended and included in its annual report filed on Form 10-K for the year
ended December 31, 1996 and its quarterly report filed on Form 10-Q for the
quarter ended March 31, 1998, respectively, filed by Sterling pursuant to the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
(collectively, the "Sterling Financial Statements"). The Sterling Financial
Statements (as of the dates thereof and for the periods covered thereby) (A) are
in accordance with the books and records of Sterling and its consolidated
Subsidiaries, which are complete and accurate in all material respects and which
have been maintained in accordance with good business practices, and (B) present
fairly the consolidated financial position and the consolidated statements of
income, changes in shareholders' equity and cash flows of Sterling and its
Subsidiaries as of the dates and for the periods indicated, in accordance with
GAAP, subject in the case of unaudited interim financial statements to normal
recurring year-end adjustments and except for the absence of certain footnote
information in the unaudited interim financial statements.
Section VI.5 Sterling SEC Reports. Since January 1, 1993, Sterling has
filed on a timely basis all reports and statements, together with all amendments
required to be made with respect thereto and, that as an issuer it is required
to file with the SEC pursuant to the Exchange Act (the "Sterling SEC Reports").
No Sterling SEC Report with respect to periods beginning on or after January 1,
1993 and until the Closing contained or will contain any information that was
false or misleading with respect to any material fact or omitted or will omit to
state any material fact necessary in order to make the statements therein not
misleading.
Section VI.6 Regulatory Matters. Neither Sterling nor any of its
Subsidiaries has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would materially impede or delay receipt of any
approval referred to in Section 9.0l(b).
Section VI.7 Litigation. There are no judicial proceedings of any kind
or nature pending or, to the knowledge of Sterling, threatened against Sterling
before any court or administrative tribunal or before or by any governmental
department, agency or instrumentality involving the validity of the transactions
contemplated by this Agreement.
Section VI.8 Brokers and Finders. Neither Sterling nor any of its
Subsidiaries nor any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for Sterling or any of its Subsidiaries
in connection with this Agreement or the transactions contemplated hereby.
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ARTICLE VII
CONDUCT OF THE COMPANY'S
BUSINESS
Section VII.1 Conduct of Business Prior to the Effective Time. During
the period from the date of this Agreement to the Effective Time, the Company
shall, and shall cause each of its Subsidiaries to, (i) conduct its business in
the usual, regular and ordinary course consistent with past practice and (ii)
use its best efforts to maintain current customer relationships and preserve
intact its business organization, employees, advantageous business relationships
and retain the services of its officers and key Employees.
Section VII.2 Forbearances. During the period from the date of this
Agreement to the Effective Time, the Company shall not, and shall not permit any
of its Subsidiaries to, without the prior written consent of Sterling (and the
Company shall provide Sterling with prompt notice of any events referred to in
this Section 7.02 occurring after the date hereof):
(53) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness and indebtedness of
the Company or any of its Subsidiaries to the Company or any of its
Subsidiaries; it being understood and agreed that incurrence of indebtedness in
the ordinary course of business shall include, without limitation, the creation
of deposit liabilities, purchases of federal funds, and sales of certificates of
deposit), assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other Person, or make any loan or advance
other than in the ordinary course of business consistent with past practice;
(54) adjust, split, combine or reclassify any capital stock; make, declare
or pay any dividend or make any other distribution on, or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares of its
capital stock, grant any stock options or stock awards, or grant any Person any
right to acquire any shares of its capital stock; or issue any additional shares
of capital stock, or any securities or obligations convertible into or
exchangeable for any shares of its capital stock;
(55) sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties or assets to any Person, or cancel, release or assign any
indebtedness to such Person or any claims held by any such Person, except in the
ordinary course of business consistent with past practice or pursuant to
contracts or agreements in force at the date of this Agreement;
(56) make any material investment (other than trades in investment
securities in the ordinary course) either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other Person;
(57) enter into, terminate or fail to exercise any material right under,
any contract or agreement involving annual payments in excess of $10,000 and
which cannot be terminated without penalty upon 30 days' notice, or make any
change in, or extension of (other than automatic
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extensions) any of its leases or contracts involving annual payments in excess
of $10,000 and which cannot be terminated without penalty upon 30 days' notice;
(58) modify the terms of any Company Benefit Plan (including any severance
pay plan) or increase or modify in any manner the compensation or fringe
benefits of any of its Employees or pay any pension or retirement allowance not
required by any existing plan or agreement to any such Employees, or become a
party to, amend or commit itself to any pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any Employee other than routine adjustments in compensation and
fringe benefits in the ordinary course of business consistent with past practice
or accelerate the vesting of any stock options or other stock-based
compensation;
(59) settle any claim, action or proceeding involving the payment of money
damages in excess of $10,000;
(60) amend its Articles of Incorporation or its bylaws;
(61) fail to maintain its Regulatory Agreements, material Authorizations or
to file in a timely fashion all federal, state, local and foreign Tax Returns;
(62) make any capital expenditures of more than $10,000 individually or
$50,000 in the aggregate, other than the automated teller machine which will be
installed at or in the same general area as the main banking office of Clear
Lake Bank;
(63) fail to maintain or administer each Company Benefit Plan in accordance
with all applicable law or timely make all contributions or accruals required
thereunder in accordance with GAAP;
(64) issue any additional shares of the Company's capital stock;
(65) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue at any time prior to the Effective Time, or in any of
the conditions to the Merger set forth in Article IX not being satisfied or in a
violation of any provision of this Agreement, except, in every case, as may be
required by applicable law;
(66) change any methods of accounting from those used in the Company
Financial Statements;
(67) take any action which would prevent the Merger from being accounted
for as a pooling of interests in accordance with APB Opinion 16; or
(68) agree, or make any commitment, to take, in writing or otherwise, any
of the actions described in clauses (a) through (n) of this Section 7.02.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
Section VIII.1 Access and Information.
(69) During the period from the date of this Agreement through the
Effective Time, (i) the Company shall, and shall cause its Subsidiaries to,
afford Sterling, and its accountants, counsel and other representatives, full
access during normal business hours to the properties, books, contracts, Tax
Returns, Reports, commitments and records of the Company and its Subsidiaries at
any time, and from time to time, for the purpose of conducting any review or
investigation reasonably related to this Agreement or the Merger, and the
Company and its Subsidiaries will cooperate fully with all such reviews and
investigations provided that Sterling provides the Company with reasonable
notice of Sterling's on-site visits and that Sterling does not unreasonably
interfere with the business operations of the Company during the course of such
visits, and (ii) Sterling shall upon reasonable notice make personnel and copies
of its SEC reports and other information reasonably related to Sterling's
operations or financial performance available to the Company and its advisors
for purposes of any review or report to the Company Board in evaluating the
Merger.
(70) During the period from the date of this Agreement through the
Effective Time, the Company also shall furnish to Sterling (i) all Reports which
are filed after the date hereof promptly upon the filing thereof, (ii) a copy of
each Tax Return filed by it after the date hereof, and (iii) monthly and other
interim financial statements in the form prepared by the Company for its
internal use. During this period, the Company also shall notify Sterling
promptly of any material change in the Condition of the Company or any of its
Subsidiaries.
(71) Notwithstanding the foregoing provisions of this Section 8.01, no
investigation by the parties hereto made heretofore or hereafter shall affect
the representations and warranties of the parties which are contained herein and
each such representation and warranty shall survive such investigation.
(72) Sterling agrees that it will keep confidential any information
furnished to it in connection with the transactions contemplated by this
Agreement which is reasonably designated as confidential at the time of
delivery, except to the extent that such information (i) was already known to
Sterling and was received from a source other than the Company or any of its
Subsidiaries, directors, officers, employees or agents, (ii) thereafter was
lawfully obtained from another source or was publicly disclosed by the Company
or its agent or representative, or (iii) is required to be disclosed to the OCC,
the FDIC, the Federal Reserve Board, or any other Regulatory Authority, or is
otherwise required to be disclosed by law. Sterling agrees not to use such
confidential information, and to implement safeguards and procedures that are
reasonably designed to prevent such confidential information from being used,
for any purpose other than in connection with the transactions contemplated by
this Agreement. Upon any termination of this Agreement, Sterling will
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return to the Company or will destroy all documents furnished Sterling for its
review and all copies of such documents made by Sterling.
(73) The Company shall cooperate, and shall cause its Subsidiaries,
accountants, counsel and other representatives to cooperate, with Sterling and
its accountants, counsel and other representatives, in connection with the
preparation by Sterling of any applications and documents required to obtain the
Approvals which cooperation shall include providing all information, documents
and appropriate representations as may be necessary in connection therewith and,
when requested by Sterling, preparing and filing of regulatory applications.
(74) From and after the date of this Agreement, each of Sterling and the
Company shall use its reasonable commercial efforts to satisfy or cause to be
satisfied all conditions to their respective obligations under this Agreement.
While this Agreement is in effect, neither Sterling nor the Company shall take
any actions, or omit to take any actions, which would cause this Agreement to
become unenforceable in accordance with its terms.
Section VIII.2 Registration Statement; Proxy Statement.
(75) As promptly as practicable after the execution of this Agreement, the
Company shall (i) prepare and mail to its stockholders and (ii) if required by
applicable law file with the appropriate Regulatory Authorities a proxy or
information statement (the "Proxy Statement") relating to the Company
Stockholders' Meeting. Sterling shall furnish all information concerning
Sterling and its Affiliates as the Company may reasonably request in connection
with and the preparation of the Proxy Statement. The Company shall give
Sterling and its counsel the opportunity to review the Proxy Statement and each
document to be incorporated by reference therein.
(76) Unless otherwise required pursuant to the applicable fiduciary duties
of the Company Board (as determined in good faith by the Company Board based
upon the advice of its outside counsel), no amendment or supplement to the Proxy
Statement will be made by the Company without the approval of Sterling, which
approval shall not be unreasonably withheld.
(77) The information supplied by the Company for inclusion in the Proxy
Statement shall not, at (i) the time the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to the stockholders of the
Company and (ii) the time of the Company Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading.
(78) The information supplied or to be supplied by Sterling for inclusion
in the Proxy Statement will not, at the time it is supplied to the Company,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein not misleading.
Section VIII.3 Press Releases. Prior to the public dissemination of any
press release or other public disclosure of information about this Agreement,
the Merger or any other transaction
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contemplated hereby, the parties to this Agreement shall mutually agree as to
the form and substance of such release or disclosure, except as otherwise
provided by applicable law or by rules of the Nasdaq National Market.
Section VIII.4 Notice of Defaults. The Company shall promptly notify
Sterling of (i) any material change in its business, operations or prospects,
(ii) any complaints, investigations or hearings (or communications indicating
that the same may be contemplated) of any Regulatory Authority, (iii) the
institution or the threat of any material litigation against the Company, or
(iv) any event or condition that might be reasonably expected to cause any of
its representations, warranties or covenants set forth herein not to be true and
correct as of the Effective Time. For purposes of this Section 8.04, the term
material litigation shall mean any claim involving $10,000 or more.
Section VIII.5 Miscellaneous Agreements and Consents; Affiliates
Agreements. Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its respective commercially reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
expeditiously as reasonably practicable, including, without limitation, using
their respective commercially reasonable efforts to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby. Sterling and
the Company shall, and shall cause each of their respective Subsidiaries to, use
their commercially reasonable efforts to obtain consents of all third parties
and Regulatory Authorities necessary or, in the reasonable opinion of Sterling
or the Company, desirable for the consummation of the transactions contemplated
by this Agreement including the Merger and the Bank Merger. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of
Sterling shall be deemed to have been granted authority in the name of the
Company to take all such necessary or desirable action. Without limiting the
foregoing, the Company will take such actions as may be reasonably necessary to
identity each of its "affiliates" for purposes of Rule 145 under the Securities
Act and to cause each person so identified to deliver to Sterling prior to the
Effective Time a written agreement in form and substance satisfactory to
Sterling providing that such person shall not sell, pledge, transfer or
otherwise dispose of any Sterling Common Stock to be received by such person as
part of the Merger Consideration except in compliance with the applicable
provisions of the Securities Act and applicable SEC rules and regulations
regarding treatment of the Consolidation as a "pooling of interest" for
accounting purposes. For a period of not less than two years after the date
hereof (or such shorter period of time as may be applicable for such
"affiliates" to sell shares of Sterling Common Stock in accordance with Rule 144
under the Securities Act), Sterling will continue to file in a timely manner all
reports required to be filed by it pursuant to Section 13 and Section 15(d) of
the Exchange Act.
Section VIII.6 Indemnification.
(79) Sterling shall indemnify, defend and hold harmless the directors,
officers, employees, and agents of the Company and its Subsidiaries (each, an
"Indemnified Party") against all losses,
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expenses (including reasonable attorneys' fees), claims, damages or liabilities
and amounts paid in settlement arising out of actions or omissions or alleged
acts or omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) to the full extent permitted under
the TBCA and by the Company's Articles of Incorporation and bylaws as in effect
on the date hereof, including provisions relating to advances of expenses
incurred in the defense of any proceeding to the full extent permitted by the
TBCA upon receipt of any undertaking required by the TBCA, except that the right
to indemnification shall not arise in those instances in which the party seeking
indemnification has participated in the breach of any covenant or agreement
contained herein or knowingly caused any representation or warranty of the
Company contained herein to be false or inaccurate in any respect and the claim
arises principally from such breach or the falsity or inaccuracy of such
representation or warranty. Without limiting the foregoing, in any case in which
a determination by Sterling is required to effectuate any indemnification,
Sterling shall direct, at the election of the Indemnified Party, that the
determination shall be made by independent counsel mutually agreed upon between
Sterling and the Indemnified Party.
(80) Sterling shall use its commercially reasonable efforts (and the
Company shall cooperate prior to the Effective Time in these efforts) to
maintain in effect for a period of four years after the Effective Time the
Company's existing directors' and officers' liability insurance policy (provided
that Sterling may substitute therefor (i) policies of at least the same coverage
and amounts containing terms and conditions which are substantially no less
advantageous in the aggregate or (ii) with the consent of the Company given
prior to the Effective Time, any other policy) with respect to claims arising
from facts or events which occurred prior to the Effective Time and covering
persons who are currently covered by such insurance; provided, however, that
Sterling shall not be obligated to make premium payments for such four-year
period in respect of such policy (or coverage replacing such policy) which
exceed, for the portion related to the Company's directors and officers, 100% of
the annual premium payments on the Company's current policy in effect as of the
date of this Agreement (the "Maximum Amount"). If the amount of the premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, Sterling shall use its commercially reasonable efforts to maintain the
most advantageous policies of directors' and officers' liability insurance
obtainable for a premium equal to the Maximum Amount.
(81) If Sterling shall consolidate with or merge into any other person and
shall not be the continuing or surviving person of such consolidation or merger
or shall transfer all or substantially all of its assets to any person, then and
in each case, proper provision shall be made so that the successors and assigns
of Sterling shall assume the obligations set forth in this Section 8.06.
(82) The provisions of this Section 8.06 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, and his or her heirs
and representatives.
(83) Sterling shall pay all expenses, including reasonable attorneys' fees,
that may be incurred by any Indemnified Party in successfully enforcing the
indemnity and other obligations provided for in this Section 8.06 if Sterling
has been finally determined to have acted in bad faith in refusing such
indemnity. The Indemnified Party shall pay all expenses, including reasonable
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attorneys' fees, incurred by Sterling if the indemnification or other
obligations provided in this Section 8.06 are denied by a court of competent
jurisdiction by final and nonappealable order.
Section VIII.7 Certain Change of Control Matters. From and after the date
hereof, the Company shall take all action necessary so that none of the
execution and delivery of this Agreement, the consummation of the Merger or the
consummation of the other transactions contemplated hereby or thereby will
increase any benefits otherwise payable under any Company Benefit Plan except as
set forth in Sections 5.12 and 5.13 of the Company Disclosure Schedule.
Section VIII.8 Employee Benefits. As soon as practicable following the
Effective Time, Sterling shall provide generally to officers and employees of
the Company and its Subsidiaries employee benefits, including without limitation
health and welfare benefits, life insurance and vacation arrangements, on terms
and conditions which when taken as a whole, including, without limitation, any
benefits provided after the Effective Time under the Company's Employee Stock
Ownership Plan, are substantially similar, in the good faith opinion of
Sterling, to those provided from time to time by Sterling and its Subsidiaries
to their similarly situated officers and employees. In that regard, such
officers and employees of the Company shall be credited under the employee
benefit plans of Sterling for their years of "eligibility service" and "vesting
service" earned under the Company Benefit Plans as if such service had been
earned with Sterling. Such officers and employees of the Company shall be
credited with "benefit service" under the employee benefit plans of Sterling
only with respect to their period of employment with Sterling and its
Subsidiaries after the Effective Time in accordance with the terms and
conditions of such employee benefit plans. As of the Effective Time, the
employees and their dependents, if any, previously covered as of the Effective
Time under the Company's health insurance plan shall be covered under Sterling's
health insurance plan and, to the extent possible under the terms of Sterling's
then current health insurance plan, will not be subject to any pre-existing
condition limitations or exclusions, except those excluded under Sterling's
health insurance plan. The Company's employees shall not be required to satisfy
the deductible and employee payments required by Sterling's comprehensive
medical and/or dental plans for the calendar year of the Effective Time to the
extent of amounts previously credited during such calendar year under comparable
plans maintained by the Company. Nothing in this Agreement shall operate or be
construed as requiring Sterling or any of its Subsidiaries to continue to
maintain or to terminate any Company Benefit Plan or any employee benefit plan
of Sterling or to limit in any way Sterling's ability to amend any such plan.
Section VIII.9 Certain Actions. No party shall take any action which
would adversely affect or delay the ability of either Sterling or the Company to
obtain any necessary approvals of any Regulatory Authority or other governmental
authority required for the transactions contemplated hereby or to perform its
covenants and agreements under this Agreement.
Section VIII.10 No Solicitation. (a) Neither the Company nor any of its
Subsidiaries shall, nor shall it authorize or permit any of its officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its Subsidiaries to
initiate, solicit, encourage (including by way of furnishing information), or
take any other action
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to facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal (as defined
herein), or enter into or maintain or continue discussions or negotiate with any
person in furtherance of such inquiries or to obtain an Acquisition Proposal, or
agree to or endorse any Acquisition Proposal, and the Company shall notify
Sterling orally (within one business day) and in writing (as promptly as
practicable), in reasonable detail, as to any inquiries and proposals which it
or any of its Subsidiaries or any of their respective representatives or agents
may receive; provided, however, that (i) the Company may furnish or cause to be
furnished confidential and non-public information concerning the Company and its
businesses, properties or assets to a third party (subject to execution by such
third party of a confidentiality agreement containing confidentiality provisions
substantially similar to those of the letter agreement entered into between the
Company and Sterling dated April 17, 1998), (ii) following the execution of such
a confidentiality agreement, the Company may engage in discussions or
negotiations with a third party executing such an agreement, (iii) following
receipt of an Acquisition Proposal, the Company may take and disclose to its
stockholders a position with respect to such Acquisition Proposal, including, if
such Acquisition Proposal is a tender offer, the Company's Board may take and
disclose to the Company's stockholders a position contemplated by Rule 14e-2
under the Exchange Act, and/or (iv) following receipt of an Acquisition
Proposal, the Company's Board may withdraw or modify its recommendation referred
to in Section 5.25, but in each case referred to in the foregoing clauses (i)
through (iv) only to the extent that the Company's Board shall conclude in good
faith (on the basis of advice from outside counsel) that such action is required
in order for the Company's Board to satisfy its fiduciary obligations under
applicable law; provided, further, that the Company's Board shall not take any
of the foregoing actions referred to in clauses (i) through (iv) until after
reasonable notice to and consultation with Sterling with respect to such action
and that the Company's Board shall continue to consult with Sterling after
taking such action and, in addition, if the Company Board receives an
Acquisition Proposal or any request for confidential and non-public information
or for access to the properties, books or records of the Company or any
Subsidiary for the purpose of making, or in connection with, an Acquisition
Proposal, then the Company shall promptly inform Sterling as provided above of
the terms and conditions of such proposal or request and the identity of the
person making it. As used herein, the term "Acquisition Proposal" means: (x) any
acquisition or purchase of a significant amount of the assets of the Company and
its Subsidiaries on a consolidated basis, or any equity interest in the Company
or any of its Subsidiaries or any take-over bid or tender offer (including an
issuer bid or self-tender offer) or exchange offer, merger, plan of arrangement,
reorganization, consolidation, business combination, sale of substantially all
of the assets, sale of securities, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its Subsidiaries (other than
the transactions contemplated by this Agreement) or any other transaction the
consummation of which would or could reasonably be expected to impede, interfere
with, prevent or materially delay the consummation of the Merger or which would
or could reasonably be expected to materially dilute the benefits to Sterling
and Bancorporation of the transactions contemplated hereby or (y) any proposal,
plan or intention to do any of the foregoing either publicly announced or
communicated to the Company or any agreement to engage in any of the foregoing.
The Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. "Acquisition
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Transaction" means the transaction(s) by which an Acquisition Proposal is
consummated. Nothing in this Section 8.10 shall (A) permit the Company to
terminate this Agreement or (B) permit the Company or any of its Subsidiaries to
enter into any written agreement with respect to an Acquisition Proposal during
the term of this Agreement (it being agreed that during the term of this
Agreement neither the Company nor any of its Subsidiaries shall enter into any
written agreement with any person that provides for, or in any way facilitates,
an Acquisition Proposal, other than a confidentiality agreement in the form
referred to above), it being understood that Section 10.01 sets forth the rights
of the Company to terminate this Agreement.
(84) Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the first sentence of Section 8.10(a) by any
employee, officer or director or authorized employee, agent or representative of
the Company or any of its Subsidiaries (including, without limitation, any
investment banker, financial advisor, attorney or accountant or other
representative retained by the Company or any of its Subsidiaries) or otherwise
shall be deemed to be a breach of Section 8.10(a) by the Company.
Section VIII.11 Termination Fee. To compensate Sterling for entering into
this Agreement, taking actions to consummate the transactions contemplated
hereunder and incurring the costs and expenses related thereto and other losses
and expenses, including foregoing the pursuit of other opportunities by
Sterling, the Company and Sterling agree as follows:
(85) Provided that neither Sterling nor Bancorporation shall be in material
breach of its obligations under this Agreement (which breach has not been cured
promptly following receipt of written notice thereof by the Company specifying
in reasonable detail the basis of such alleged breach), the Company shall pay to
Sterling the sum of $500,000 (the "Termination Fee"), plus reasonable out-of-
pocket expenses, not in excess of $100,000 (including, without limitation,
amounts paid or payable to banks and investment bankers, fees and expenses of
counsel and printing expenses) (such expenses are hereinafter referred to as the
"Expenses") incurred by Sterling or any of its Affiliates in connection with or
arising out of the transactions contemplated by this Agreement, regardless of
when those expenses are incurred, if this Agreement is terminated (i) by the
Company under the provisions of Section 10.01(e), (ii) by either Sterling or the
Company under the provisions of Section 10.01(f) due to the failure of the
Company's stockholders to approve and adopt this Agreement and the Merger, if at
the time of such failure to so approve and adopt this Agreement and the Merger
there shall exist an Acquisition Proposal with respect to the Company and,
within nine months of the termination of this Agreement, the Company enters into
a definitive agreement with any third party with respect to any Acquisition
Proposal with respect to the Company or (iii) by Sterling under the provisions
of Section 10.01(g). Sterling shall provide the Company with an itemization of
Expenses.
(86) Any payment required by paragraph (a) of this Section 8.11 shall
become payable within two business days after termination of this Agreement or,
in the case of reimbursement to Sterling of the Expenses, promptly after (but in
no event later than three business days following) delivery to the Company of
the itemization of Expenses.
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(87) The Company acknowledges that the agreements contained in this Section
8.11 are an integral part of the transactions contemplated in this Agreement,
and that, without these agreements, Sterling would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the Termination Fee
or Expenses when due, the Company shall in addition thereto pay to Sterling all
costs and expenses (including fees and disbursements of counsel) incurred in
collecting such Termination Fee or Expenses, as the case may be, together with
interest on the amount of the Termination Fee or Expenses (or any unpaid portion
thereof) from the date such payment was required to be made until the date such
payment is received by Sterling at the prime rate as reported in The Wall Street
Journal as in effect from time to time during such period.
Section VIII.12 Accruals. Prior to the Effective Time and after
consultation with Sterling, the Company shall, consistent with GAAP, make such
changes and modifications to its loan, accrual and reserve policies and
practices (including loan classification and allowance for credit losses levels)
to bring such policies and practices into line with those presently followed by
Sterling, including appropriate increases in its allowance for credit losses.
Section VIII.13 Certain Agreements. Neither the Company nor any Subsidiary
(nor any of their agents or representatives) will waive any provision of any
confidentiality or standstill or similar agreement to which it is a party
without the prior written consent of Sterling, unless the Company's Board or the
board of directors of such Subsidiary concludes in good faith (based upon advice
from outside counsel) that waiving such provision is necessary or appropriate in
order for such board of directors to act in a manner which is consistent with
its fiduciary obligations under applicable law. The Company will immediately
advise Sterling of the termination or waiver of any confidentiality or
standstill or similar agreement to which it is a party by the other party or
parties to such agreement.
Section VIII.14 Notification; Updated Disclosure Schedules. The Company
shall give prompt notice to Sterling, and Sterling or Bancorporation shall give
prompt notice to the Company, 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 the Company Disclosure
Schedule or the Sterling Disclosure Schedule, as applicable, 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 VIII.15 Nasdaq Listing. Sterling shall use its best efforts to
have the shares of Sterling Common Stock to be issued to holders of Company
Common Stock in the Merger included for quotation on the Nasdaq National Market
prior to the Effective Time.
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ARTICLE IX
CONDITIONS TO MERGER
Section IX.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each of Sterling, Bancorporation and the Company
to effect the Merger and the other transactions contemplated hereby shall be
subject to the fulfillment or waiver at or prior to the Effective Time of the
following conditions:
(88) The Company stockholders shall have approved and adopted all matters
relating to this Agreement, the Merger and the transactions contemplated hereby
and thereby as required under the TBCA and the Company's Articles of
Incorporation at the Company Stockholders' Meeting.
(89) This Agreement, the Merger, the Bank Merger and the other transactions
contemplated hereby and thereby shall have been approved by the Federal Reserve
Board, the Commissioner, the FDIC, the OCC and any other Regulatory Authorities
whose approval is required for consummation of the transactions contemplated
hereby and all applicable waiting periods shall have expired. No such approval
or consent shall be conditioned or restricted in any manner (including
requirements relating to the disposition of assets) which in the good faith
judgment of Sterling would so adversely impact the economic or business benefits
of the transactions contemplated by this Agreement that, had such condition or
restriction been known, it would not have entered into this Agreement.
(90) Neither Sterling, Bancorporation nor the Company shall be subject to
any active litigation which seeks any order, decree or injunction of a court or
agency of competent jurisdiction to enjoin or prohibit the consummation of the
Merger or the other transactions contemplated by this Agreement.
(d) The shares of Sterling Common Stock issuable pursuant to the Merger
shall have been approved for quotation on the Nasdaq National Market.
(e) Deloitte & Touche LLP, independent public accountants for Sterling,
shall have delivered a letter, dated the Closing Date, addressed to Sterling, in
form and substance reasonably satisfactory to Sterling, to the effect that the
Merger will qualify for pooling-of-interests accounting treatment if consummated
in accordance with this Agreement.
(f) KPMG Peat Marwick LLP, independent public accountants for the Company,
shall have delivered a letter, dated the Closing Date, addressed to the Company,
in form and substance reasonably satisfactory to the Company, stating that the
Merger will qualify for pooling-of-interests accounting treatment if consummated
in accordance with this Agreement.
Section IX.2 Conditions to Obligations of The Company to Effect the
Merger. The obligations of the Company to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(91) Representations and Warranties. The representations and warranties of
Sterling set forth in Article VI hereof shall be true and correct in all
respects as of the date of this Agreement and
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as of the Effective Time (as though made on and as of the Effective Time except
to the extent such representations and warranties are by their express
provisions made as of a specified date) and the Company shall have received a
certificate signed by the chairman, president or other duly authorized officer
of Sterling to that effect.
(92) Performance of Obligations. Sterling shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and the Company shall have received a
certificate signed by the chairman, president or other duly authorized officer
of Sterling to that effect and as to the absence of litigation as described in
Section 9.01(c).
(93) Material Adverse Change. Prior to the Closing, there shall not have
occurred any material adverse change in the Condition of Sterling and its
Subsidiaries taken as a whole, nor shall any event have occurred which, with the
lapse of time, may cause or create any material adverse change in the Condition
of Sterling and its Subsidiaries taken as a whole in the reasonable and good
faith judgment of the Company Board. Humble shall have received a certificate
signed by the chairman and chief executive officer, president or other duly
authorized officer of Sterling to that effect.
(94) Tax Opinion. The Company shall have received an opinion of Cox &
Xxxxx, Incorporated, counsel to the Company, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code and no
gain or loss will be recognized by the stockholders of the Company to the extent
that they receive Sterling Common Stock in exchange for their Company Common
Stock in the Merger.
(95) Fairness Opinion. The Company Board shall have received an opinion
from its financial advisor to the effect that the Merger Consideration is fair
to the Company's stockholders from a financial point of view.
Section IX.3 Conditions to Obligations of Sterling and Bancorporation to
Effect the Merger. The obligations of Sterling and Bancorporation to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following additional conditions:
(96) Representations and Warranties. The representations and warranties of
the Company set forth in Article V hereof shall be true and correct in all
material respects as of the date of this Agreement and as of the Effective Time
(as though made on and as of the Effective Time except to the extent such
representations and warranties are by their express provisions made as of a
specified date) and Sterling and Bancorporation shall have received a
certificate signed by the chief executive officer, president or other duly
authorized officer of the Company to that effect.
(97) Performance of Obligations. The Company shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and Sterling and Bancorporation shall
have received a certificate signed by the chairman or
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the chief executive officer, president or other duly authorized officer of the
Company to that effect and as to the absence of litigation as described in
Section 9.01(c).
(98) Material Adverse Change. Prior to the Closing, there shall not have
occurred any material adverse change in the Condition of the Company and any of
its Subsidiaries, taken as a whole, nor shall any event have occurred which,
with the lapse of time, may cause or create any material adverse change in the
Condition of the Company and any of its Subsidiaries, taken as a whole, in the
reasonable and good faith judgment of the Board of Directors of Sterling, and
Sterling and Bancorporation shall have received a certificate signed by the
chairman or the chief executive officer, president or other duly authorized
officer of the Company to that effect.
(99) Opinion of Counsel. Sterling shall have received an opinion of Cox &
Xxxxx, Incorporated, counsel for the Company, addressed to Sterling and in form
reasonably satisfactory to it as to the validity of the approvals of the Merger
by the Company Board and the stockholders of the Company.
(100) Dissenting Shares. The number of Dissenting Shares shall not exceed
ten percent (10%) of the total issued and outstanding shares (as of the
Effective Time) of Company Common Stock.
ARTICLE X
TERMINATION
Section X.1 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement, the Merger and
the transactions contemplated hereby and thereby by the stockholders of the
Company, this Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time:
(101) by mutual consent of the Board of Directors of Sterling and the
Company; or
(102) by the Company Board or the Board of Directors of Sterling if (i) the
Federal Reserve, the FDIC, the OCC or the Commissioner has denied approval of
the Merger or the Bank Merger and such denial has become final and nonappealable
or has approved the Merger subject to conditions that in the judgment of
Sterling would restrict it or its Subsidiaries or affiliates in their respective
spheres of operations and business activities after the Effective Time or (ii)
the Effective Time does not occur by November 30, 1998, provided, however, that
the right to terminate this Agreement under clause (ii) of this Section 10.01(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of the
Effective Time to occur prior to such date; or
(103) by Sterling (if it is not in breach of any of its obligations
hereunder) pursuant to notice in the event of a breach or failure by the Company
that would cause a failure of the conditions
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in Section 9.03, which breach or failure has not been, or cannot be, cured
within 30 days after written notice of such breach is given to the Company; or
(104) by the Company (if it is not in breach of any of its obligations
hereunder) pursuant to notice in the event of a breach or failure by Sterling
that would cause a failure of the conditions in Section 9.02, which breach or
failure has not been, or cannot be, cured within 30 days after written notice of
such breach is given to Sterling; or
(105) by the Company if (i) there shall not have been a breach of any
covenant or agreement on the part of the Company under this Agreement and (ii)
prior to the Effective Time, the Company shall have received a bona fide
Acquisition Proposal and the Company Board determines in its good faith judgment
and in the exercise of its fiduciary duties, based as to legal matters on the
written opinion of independent legal counsel and as to financial matters on the
written opinion of an investment banking firm of national reputation, that such
Alternative Proposal (if consummated pursuant to its terms) would result in an
Alternative Transaction that is more favorable to the Company stockholders than
the Merger ("Superior Proposal") and that the failure to terminate this
Agreement and accept such alternative Acquisition Proposal would be inconsistent
with the proper exercise of such fiduciary duties; provided, however, that
termination under this clause (ii) shall not be deemed effective until payment
of the Termination Fee and Expenses required by Section 8.11; or
(106) by either Sterling or the Company, if the Merger and this Agreement
shall fail to receive the requisite vote for approval and adoption at the
Company Stockholders' Meeting;
(107) by Sterling if the Company Board shall have (A) resolved to accept a
Superior Proposal, or (B) recommended to the stockholders of the Company that
they tender their shares in a tender or exchange offer commenced by a third
party or (C) withdrawn or modified, in any manner that is adverse to Sterling or
Bancorporation, its recommendation or approval of this Agreement or the Merger
or recommended to the Company stockholders acceptance or approval of any
Alternative Proposal, or shall have resolved to do the foregoing.
(108) by the Company if the product of the Average Closing Price times the
number of shares constituting the Merger Consideration is less than $21,000,000.
Section X.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.01, this Agreement shall
become void and have no effect, except that (i) the provisions of this
Section 10.02 and Sections 8.01(d), 8.11 and 11.01 shall survive any such
termination and abandonment; and (ii) no party shall be relieved or released
from any liability arising out of an intentional breach of any provision of this
Agreement.
Section X.3 Non-Survival of Representations, Warranties and Covenants
Following the Effective Time. Except for Articles III and IV and Sections 8.06
and 11.01, none of the respective representations, warranties, obligations,
covenants and agreements of the parties shall survive the Effective Time.
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ARTICLE XI
GENERAL PROVISIONS
Section XI.1 Expenses. Except as provided in Section 8.11, each party
hereto shall bear its own expenses incident to preparing, entering into and
carrying out this Agreement and consummating the Merger, including without
limitation in the Company's case all expenses related to the preparation,
printing and mailing of all the Proxy Statement.
Section XI.2 Entire Agreement; Parties in Interest. Except as otherwise
expressly provided herein, this Agreement contains the entire agreement between
the parties hereto with respect to the transactions contemplated hereunder and
such supersedes all prior arrangements or understandings with respect thereto,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors. Other than Section 8.06, nothing in this Agreement, expressed or
implied, is intended to confer upon any individual, corporation or other entity
(including, without limitation, any stockholder of the Company), other than
Sterling, Bancorporation and the Company or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
Section XI.3 Amendments. To the extent permitted by law, this Agreement
may be amended by a subsequent writing signed by each of Sterling,
Bancorporation, and the Company; provided however, that the provisions hereof
relating to the amount of the Merger Consideration shall not be amended after
the Company Stockholders' Meeting without any requisite approval of the holders
of the issued and outstanding shares of Company Common Stock entitled to vote
thereon.
Section XI.4 Waivers. Prior to or at the Effective Time, each of
Sterling, Bancorporation, and the Company shall have the right to waive any
default in the performance of any term of this Agreement by the other, to waive
or extend the time for the compliance or fulfillment by any other party of any
and all of such other party's obligations under this Agreement and to waive any
or all of the conditions precedent to its obligations under this Agreement,
except any condition which, if not satisfied, would result in the violation of
any law or applicable governmental regulation.
Section XI.5 No Assignment. Except as provided in Section 2.04, none of
the parties hereto may assign any of its rights or delegate any of its
obligations under this Agreement to any other person or entity without the prior
written consent of the other parties to this Agreement.
Section XI.6 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by courier, by facsimile transmission, or by registered or certified mail,
postage prepaid to the persons at the addressees set forth below (or at such
other address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
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Company: Hometown Bancshares, Inc.
c/o Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx Mfg. Co., Inc.
0000 X. Xxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
With a copy to: Xxx & Xxxxx, Incorporated
000 Xxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx Kavy
Telecopy: (000) 000-0000
Sterling and
Bancorporation: Sterling Bancshares, Inc.
00000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx Xxxxxxxx, Chairman
Xxxxxxx X. Xxx, Senior Vice President
Telecopy: (000) 000-0000
With a copy to: Xxxxxxx & Xxxxx L.L.P.
Texas Commerce Tower
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxx X. Xxxxxxxx
Telecopy: (000) 000-0000
Section XI.7 Specific Performance. The parties hereby acknowledge and
agree that the failure of either party to fulfill any of its covenants and
agreements hereunder, including the failure to take all such actions as are
necessary on its part to cause the consummation of the Merger, will cause
irreparable injury for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of the other
party's obligations and to the granting by any such court of the remedy of the
specific performance hereunder.
Section XI.8 Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the state of Texas
applicable to contracts executed and to be performed in that state. All actions
and proceedings arising out of or relating to this Agreement shall be heard and
determined in any state or federal court sitting in Houston, Xxxxxx County,
Texas.
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Section XI.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to constitute an original but
all of which together shall constitute one and the same instrument.
Section XI.10 Captions. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
Section XI.11 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Merger be consummated as originally contemplated to the fullest extent possible.
IN WITNESS WHEREOF, Sterling and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
STERLING BANCSHARES, INC.
By:/s/ Xxxxxxx X. Xxx
--------------------------------------
Name: Xxxxxxx X. Xxx
Title: Senior Vice President
STERLING BANCORPORATION, INC.
By:/s/ Xxxxxxx X. Xxx
--------------------------------------
Name: Xxxxxxx X. Xxx
Title: Vice President
HOMETOWN BANCSHARES, INC.
By:/s/ Xxxxxxx X. Xxxxxx, Xx.
--------------------------------------
Name: Xxxxxxx X. Xxxxxx, Xx.
Title: Chairman
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