EXHIBIT 2.5
AGREEMENT AND PLAN OF MERGER
AMONG
STERLING BANCSHARES, INC.
STERLING BANCORPORATION, INC.
AND
CAMINOREAL BANCSHARES OF TEXAS, INC.
Dated as of October 23, 2000
TABLE OF CONTENTS
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................................................ 8
Section 2.03 Effective Time........................................................... 8
Section 2.04 Reservation of Right to Revise Transaction; Further Actions.............. 8
ARTICLE III MERGER CONSIDERATION; EXCHANGE PROCEDURES...................................... 9
Section 3.01 Merger Consideration..................................................... 9
Section 3.02 Rights Under Convertible Securities...................................... 10
Section 3.03 Stockholder's Meeting.................................................... 11
Section 3.04 Accounting Treatment for Options and Warrants............................ 11
ARTICLE IV EXCHANGE OF SHARES.............................................................. 12
Section 4.01 Exchange Agent........................................................... 12
Section 4.02 Exchange Procedures...................................................... 12
Section 4.03 No Further Ownership Rights in Company Common Stock...................... 13
Section 4.04 Termination of Exchange Fund............................................. 13
Section 4.05 Escheat of Exchange Fund................................................. 13
Section 4.06 Investment of Exchange Fund.............................................. 13
Section 4.07 Lost Certificates........................................................ 13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................... 13
Section 5.01 Organization, Standing and Authority..................................... 13
Section 5.02 Company Capital Stock.................................................... 14
Section 5.03 Subsidiaries............................................................. 15
Section 5.04 Authorization of Merger and Related Transactions......................... 16
Section 5.05 Financial Statements and Regulatory Reports.............................. 17
Section 5.06 Absence of Undisclosed Liabilities....................................... 17
Section 5.07 Tax Matters.............................................................. 18
Section 5.08 Allowance for Credit Losses.............................................. 19
Section 5.09 Other Regulatory Matters................................................. 19
Section 5.10 Properties............................................................... 19
Section 5.11 Compliance with Laws..................................................... 19
Section 5.12 Employee Benefit Plans................................................... 20
Section 5.13 Commitments and Contracts................................................ 22
Section 5.14 Material Contract Defaults............................................... 23
Section 5.15 Legal Proceedings........................................................ 23
Section 5.16 Absence of Certain Changes or Events..................................... 23
Section 5.17 Reports.................................................................. 24
Section 5.18 Insurance................................................................ 25
Section 5.19 Labor.................................................................... 25
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Section 5.20 Material Interests of Certain Persons.................................... 25
Section 5.21 Registration Obligations................................................. 25
Section 5.22 Brokers and Finders...................................................... 25
Section 5.23 State Takeover Laws...................................................... 25
Section 5.24 Environmental Matters.................................................... 26
Section 5.25 Loans.................................................................... 27
Section 5.26 Fiduciary Responsibilities............................................... 27
Section 5.27 Patents, Trademarks and Copyrights....................................... 27
Section 5.28 Company Action........................................................... 27
Section 5.29 Dissenting Stockholders.................................................. 28
Section 5.30 Representations Not Misleading........................................... 28
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF STERLING...................................... 28
Section 6.01 Organization, Standing and Authority..................................... 28
Section 6.02 Authorization of Merger and Related Transactions......................... 28
Section 6.03 Regulatory Matters....................................................... 29
Section 6.04 Legal Proceedings........................................................ 29
Section 6.05 Brokers and Finders...................................................... 29
ARTICLE VII CONDUCT OF THE COMPANY'S BUSINESS.............................................. 30
Section 7.01 Conduct of Business Prior to the Effective Time.......................... 30
Section 7.02 Forbearances............................................................. 31
ARTICLE VIII ADDITIONAL AGREEMENTS......................................................... 33
Section 8.01 Access and Information................................................... 33
Section 8.02 Filing of Regulatory Approvals........................................... 33
Section 8.03 Press Releases........................................................... 34
Section 8.04 Company Convertible Securities........................................... 34
Section 8.05 Miscellaneous Agreements and Consents.................................... 34
Section 8.06 Indemnification.......................................................... 35
Section 8.07 Certain Change of Control Matters........................................ 36
Section 8.08 Employee Benefits; Severance............................................. 36
Section 8.09 Certain Actions.......................................................... 37
Section 8.10 No Solicitation.......................................................... 37
Section 8.11 Termination Fees......................................................... 38
Section 8.12 Accruals................................................................. 39
Section 8.13 Certain Agreements....................................................... 40
Section 8.14 Release Agreements....................................................... 40
Section 8.15 Sterling Financing....................................................... 40
Section 8.16 Notification; Updated Disclosure Schedules............................... 40
ARTICLE IX CONDITIONS TO MERGER............................................................ 41
Section 9.01 Conditions to Each Party's Obligation to Effect the Merger............... 41
Section 9.02 Conditions to Obligations of The Company to Effect the Merger............ 41
Section 9.03 Conditions to Obligations of Sterling and Merger Sub to Effect the Merger 42
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ARTICLE X TERMINATION..................................................................... 43
Section 10.01 Termination............................................................ 43
Section 10.02 Effect of Termination.................................................. 44
Section 10.03 Non-Survival of Representations, Warranties and Covenants.............. 44
ARTICLE XI GENERAL PROVISIONS............................................................. 45
Section 11.01 Expenses............................................................... 45
Section 11.02 Entire Agreement; Parties in Interest.................................. 45
Section 11.03 Amendments............................................................. 45
Section 11.04 Waivers................................................................ 45
Section 11.05 No Assignment.......................................................... 45
Section 11.06 Notices................................................................ 46
Section 11.07 Specific Performance................................................... 46
Section 11.08 Governing Law.......................................................... 47
Section 11.09 Counterparts........................................................... 47
Section 11.10 Captions............................................................... 47
Section 11.11 Severability........................................................... 47
Attachments:
Annex A. Form of Agreement and Irrevocable Proxy.
Annex B. Form of Release Agreement.
Annex C. Form of Opinion of Xxxxxxxx Xxxx Xxxxxxxxxx Xxxxxx Xxxxxxx Xxxxxx & Xxxxxx.
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
October 23, 2000, 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 CAMINOREAL BANCSHARES OF
TEXAS, 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 a to-be-formed subsidiary ("Merger Sub") of Bancorporation to be added as a
party to this Agreement after the date hereof, or by such other means as
provided for herein (the "Merger"); and
WHEREAS, pursuant to the Merger, and upon the terms and subject to the
conditions of this Agreement, each issued and outstanding share of Company
Common Stock (other than the Dissenting Shares) will be converted into the right
to receive in cash $776.18 per share of Company Common Stock, subject to
adjustment as herein provided, without interest except as otherwise provided in
Section 10.01(b); 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 are in the best interests of
their respective companies and stockholders and have approved this Agreement,
the Merger and the other transactions contemplated hereby, (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 and holders of other securities 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
WHEREAS, to induce Sterling to enter into this Agreement, the Company
Specified Stockholder has agreed to execute and deliver to Sterling an Agreement
and Irrevocable Proxy in substantially 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 CaminoReal Bank National Association, an indirect wholly owned
subsidiary of the Company (the "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, 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 1.01 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.
"Aggregate Merger Consideration" shall have the meaning set forth in
Section 3.01.
"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.
"BHCA" shall have the meaning set forth in the introduction to this
Agreement.
"Bancorporation" shall have the meaning set forth in the introduction
to this Agreement.
"Bank" shall have the meaning set forth in the recitals to this
Agreement.
"Bank Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Business Day" shall mean any day that is not a Saturday, Sunday or
other day on which commercial banks in Houston, Texas are authorized or required
by law to remain closed.
"Cause" shall mean, with respect to any employee, that such employee
(i) is convicted of a felony, (ii) commits a willful act intending to enrich
himself at the expense of the Company, CaminoReal Bank, Sterling or Sterling
Bank or (iii) in carrying out his employment, (x) is grossly negligent or (y)
voluntarily engages in conduct that results in material harm to the Company,
CaminoReal Bank, Sterling or Sterling Bank unless such conduct was reasonably
believed by such
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employee in good faith to be in the best interests of the Company, CaminoReal
Bank, Sterling or Sterling Bank.
"Certificate" shall have the meaning set forth in Section 3.01(a).
"Certificates" shall mean all such Certificates.
"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.
"Company Board" shall mean the Board of Directors of the Company.
"Company Common Stock" shall mean the common stock, par value $0.10
per share, of the Company.
"Company Debenture" shall mean the issued and outstanding 8%
Subordinated, Convertible Debenture of the Company dated December 31, 1999, in
the original principal amount of $6,927,500.
"Company Disclosure Schedule" shall mean that document containing the
written detailed information required to be furnished pursuant to the terms of
this Agreement 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.
"Company Expenses" shall have the meaning set forth in Section
8.11(b).
"Company Financial Statements" shall have the meaning set forth in
Section 5.05.
"Company Material Adverse Effect" shall have the meaning set forth in
Section 5.01.
"Company Options" shall have the meaning set forth in Section 3.03.
"Company Preferred Stock" shall mean the Series A Preferred Stock, par
value of $1.00 per share, of the Company.
"Company Specified Stockholder" shall mean Xxxxx X. Xxxxx, Xx.
"Company Stock Plan" shall have the meaning set forth in Section 5.12.
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"Company Stockholders' Meeting" shall have the meaning set forth in
Section 3.03.
"Company Termination Fee" shall have the meaning set forth in Section
8.11(a).
"Company Warrants" shall have the meaning set forth in Section 3.02.
"Comparable Job Offer" shall mean an offer for a position with
CaminoReal Bank, Sterling or Sterling Bank (i) with job duties that are
comparable to those performed by the employee as of the Effective Date, (ii) for
which the employee will be paid the same or better total compensation as that to
which he was entitled from the Company or CaminoReal Bank as of the Effective
Time, and (iii) which does not involve relocation by the employee to another
metropolitan area.
"Condition" shall have the meaning set forth in Section 5.01.
"Dissenting Share" shall have the meaning set forth in Section 3.01.
"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" 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 a Hazardous Substance, or otherwise
regulated, whether by type or by quantity, including any material containing any
such substance as a component.
"ERISA" shall have the meaning set forth in Section 5.12.
"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(b).
"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.
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"Hazardous Substances" shall mean those substances included within the
statutory or regulatory definitions, listings or descriptions of "pollutant,"
"hazardous material," "contaminant," "toxic waste," "hazardous substance,"
"hazardous waste," "solid waste," or "regulated substance" pursuant to
applicable Environmental Laws and shall include, without limitation, any
material, waste or substance which is or contains explosives, radioactive
materials, oil or any fraction thereof, asbestos, or formaldehyde.
"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.
"Maximum Amount" shall have the meaning set forth in Section 8.06.
"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.
"Merger Sub" shall have the meaning set forth in the recitals to this
Agreement.
"OCC" shall mean the Office of the Comptroller of the Currency.
"Order" shall mean any decree, judgment, injunction, ruling, writ or
other order (whether temporary, preliminary or permanent);
"Permitted Liens" shall mean (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 mean a proxy or information statement relating
to the Company Stockholders' Meeting which may be required of, or otherwise
provided by, the Company.
"Regulatory Agreement" shall have the meaning set forth in Section
5.11.
"Regulatory Authorities" shall have the meaning set forth in Section
5.11.
"Regulatory Reporting Document" shall have the meaning set forth in
Section 5.05.
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"Remedies Exception" shall mean any bankruptcy, reorganization,
insolvency, fraudulent conveyance or transfer, moratorium or similar law
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.
"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 Change of Control" shall mean (i) any acquisition or
purchase of all or substantially all of the assets of Sterling and its
Subsidiaries on a consolidated basis, (ii) any person (as such term is defined
in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) becomes, subsequent
to the date of this Agreement, the beneficial owner (as such term is defined
under Rule 13d-3 or any successor rule promulgated under the Exchange Act) of
securities representing fifty-one percent (51%) or more of the combined voting
power of the then outstanding securities entitled to vote generally in the
election of Sterling's directors ("Voting Stock"), or (iii) any merger,
consolidation, reorganization or business combination with another corporation
or other legal entity, and as a result thereof less than a majority of the
combined voting power of the then outstanding securities of Sterling or such
other surviving entity are held by the holders of Voting Stock of Sterling
immediately prior to such transaction.
"Sterling Expenses" shall have the meaning set forth in Section
8.11(a).
"Sterling Material Adverse Effect" shall have the meaning set forth in
Section 6.01.
"Sterling Termination Fee" shall have the meaning set forth in Section
8.11(a).
"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.
"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
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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.
"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(b).
"Transition Period End" shall mean the later of (i) the date 30 days
after the completion of the legal merger of CaminoReal Bank into Sterling Bank
or (ii) the date 120 days after the Effective Time.
"Warrant Consideration" shall have the meaning set forth in Section
9.03(e).
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
Section 2.01 Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the TBCA, at the Effective Time, the Merger Sub
shall be merged with and into the Company. As a result of the Merger, the
separate existence of the Merger Sub shall thereupon cease, and the Company
shall continue as the surviving corporation of the Merger (the "Surviving
Corporation") and as a subsidiary of Bancorporation.
(b) The articles of incorporation of the Company as in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Surviving Corporation.
(c) The bylaws of the Company as in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation.
(d) The directors of the Merger Sub immediately prior to the Effective
Time shall become the directors of the Surviving Corporation and the officers of
the Merger Sub immediately
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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.
(e) The Merger shall have the effects set forth in the TBCA.
Section 2.02 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 on the date (the "Closing Date")
that the Effective Time occurs, or at such other time, and at such place, as may
be agreed to in writing by the parties hereto.
Section 2.03 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 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 shall be executed and filed in accordance with 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 2.04 Reservation of Right to Revise Transaction; Further
Actions.
(a) 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, (iii)
extend the date as set forth in Section 10.01(a)(ii)(B) or the date set forth in
Section 10.01(b) upon which interest may begin to accrue as provided therein,
(iv) amend any of the representations or warranties of the Company as set forth
in Article V hereof or include any additional representations and warranties on
behalf of the Company, or (v) adversely affect the tax treatment of the
transaction described herein.
(b) 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.
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ARTICLE III
MERGER CONSIDERATION
Section 3.01 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:
(a) Notwithstanding anything in this Agreement to the contrary, the
maximum consideration payable by Sterling with respect to the Company Common
Stock outstanding immediately prior to the Effective Time (inclusive of the
shares of Company Common Stock issuable upon exercise of the Company Options and
conversion of the Company Preferred Stock and Company Debenture) shall be
$47,492,901.84 (the "Aggregate Merger Consideration"), plus interest, if any,
payable pursuant to Section 10.01(b). Each share of Company Common Stock
outstanding immediately prior to the Effective Time shall (except as otherwise
provided in Sections 3.01(b) and (c)) be converted into the right to receive
$776.18 in cash, without interest except as otherwise provided in Section
10.01(b); provided, however, that if any Company Option shall be forfeited or
otherwise terminated and not exercised prior to the Effective Time, each share
of Company Common Stock outstanding immediately prior to the Effective Time
shall (except as otherwise provided in Sections 3.01(b) and (c)) be converted
into the right to receive in cash, without interest except as otherwise provided
in Section 10.01(b), an amount equal to (i) the Aggregate Merger Consideration,
divided by (ii) the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time less the shares of Company Common Stock,
if any, described in Section 3.01(b). (The cash consideration payable to each
share of Company Common Stock outstanding immediately prior to the Effective
Time determined in accordance with the immediately preceding sentence is
referred to as the "Merger Consideration"). As of the Effective Time, all such
shares of Company Common Stock outstanding immediately prior to the Effective
Time shall no longer be outstanding and shall automatically be canceled and
shall cease to exist, and each holder of a certificate that immediately prior to
the Effective Time represented any such outstanding shares of Company Common
Stock (a "Certificate") shall cease to have any rights with respect thereto,
except the right to receive the amount of cash per share of Company Common Stock
specified herein upon surrender of such Certificate in accordance with Article
IV, or, in the case of Dissenting Shares, if any, the rights, specified in
Section 3.01(d) below.
(b) 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.
(c) Each issued and outstanding share of capital stock of Merger Sub
shall be converted into and become one fully paid and non-assessable share of
common stock of the Surviving Corporation with the same rights, powers and
privileges as the share so converted and shall constitute the only outstanding
shares of capital stock of the Surviving Corporation.
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(d) 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.
Section 3.02 Rights Under Convertible Securities.
(a) Prior to the Effective Time, the Company shall cause each
unexpired and unexercised option to purchase shares of Company Common Stock as
set forth in Section 5.02 of the Company Disclosure Schedule ("Company Options")
to either be (i) exercised and converted into Company Common Stock, or (ii)
terminated. The Company shall use its best efforts to encourage each holder of
a Company Option to exercise such Company Option on a cashless basis, and the
Company agrees to join in an amendment to the Company's 1997 Stock Option Plan
and any agreements evidencing outstanding Company Options to the extent
necessary to permit a cashless exercise thereof. For purposes of a cashless
exercise of each Company Option, (i) shares of the Company Common Stock shall be
valued in an amount per share equal to the Merger Consideration, and (ii)
assuming the Company Options are fully exercised on a cashless basis, the
maximum aggregate number of shares of the Company Common Stock issuable by the
Company following such exercise of the Company Options shall be 6,539 shares of
Company Common Stock.
(b) The Company shall use its best efforts to encourage the Company
Specified Stockholder to sell to the Merger Sub, immediately prior to the
Effective Time and in accordance with the conditions set forth in Section
9.03(e) hereof, the warrants to acquire shares of Company Common Stock as
described in Section 5.02 of the Company Disclosure Schedule (the "Company
Warrants").
10
(c) Prior to the Effective Time, the Company shall cause the
outstanding shares of Company Preferred Stock as set forth in Section 5.02 of
the Company Disclosure Schedule to be converted into an aggregate of 5,230
shares of Company Common Stock.
(d) Prior to the Effective Time, the Company shall cause the issued
and outstanding Company Debenture as set forth in Section 5.02 of the Company
Disclosure Schedule to be converted into a maximum of 20,128 shares of Company
Common Stock.
(e) The Company shall take all actions necessary or reasonably
requested by Sterling to ensure that following the Effective Time, no holder of
any Company Option, Company Preferred Stock or Company Debenture will have any
right thereunder to acquire any equity securities of the Company, Sterling or
any of their respective Subsidiaries or any right to payment in respect of any
such securities of the Company except for payment of the Merger Consideration
with respect to the shares of Company Common Stock into which such securities
are converted prior to the Effective Time. The Company shall also use its best
efforts to ensure that following the Effective Time, no holder of the Company
Warrants will have any right thereunder to acquire any equity securities of the
Company, Sterling or their respective Subsidiaries or any right to payment in
respect of any such security except for the payment of the Warrant
Consideration.
Section 3.03 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, the Company
shall include in the Proxy Statement 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, this Agreement and the consummation of the transactions contemplated
hereby. 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 and to obtain the approval and adoption
of the Merger and this Agreement by the Company stockholders.
Section 3.04 Accounting Treatment for Options and Warrants.
The Company and Sterling shall agree upon the accounting treatment of the
cashless exercise of the Company Options prior to the Company's entry and
recordation thereof in the general ledger system and accounting records of the
Company. The Company shall make the agreed upon accounting entries relating to
the cashless exercise of the Company Options prior to the Effective Time. Any
tax benefits resulting from the cashless exercise of the Company Options shall
inure to the benefit of the Surviving Corporation and/or Sterling and the
Company stockholders shall retain no rights to, or receive any benefits arising
from, any such tax benefits.
11
ARTICLE IV
EXCHANGE OF SHARES; PAYMENT OF MERGER CONSIDERATION
Section 4.01 Exchange Agent. As of the Effective Time, Sterling
shall deposit with Sterling Bank, as exchange agent (the "Exchange Agent"), for
the benefit of the holders of shares of Company Common Stock, for exchange in
accordance with this Article IV, funds sufficient in amount to make payment of
the Aggregate Merger Consideration (the "Exchange Fund") pursuant to Section
3.01(a) in exchange for outstanding shares of Company Common Stock. The
Exchange Agent shall, pursuant to irrevocable instructions from Sterling,
deliver the Aggregate 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 4.02 Exchange Procedures. To facilitate payment of the
Merger Consideration promptly following the Effective Time at the Closing,
Sterling or the Exchange Agent shall, within a reasonable time before the
Closing Date, mail to each holder of record of a Certificate, 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 (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, duly endorsed (or accompanied by duly executed stock
powers), with signatures guaranteed by a commercial bank (other than CaminoReal
Bank) or by a member firm of The New York Stock Exchange, 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 (are)
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. The Company stockholders may deliver the
Certificate(s), letter of transmittal and other required documentation to the
Exchange Agent as hereinabove set forth at the Closing whereupon promptly
following the Effective Time at the Closing, the Merger Consideration which any
such holder has the right to receive pursuant to Section 3.01(a) shall be paid
to such holder by wire transfer of immediately available funds to one or more
accounts specified by such Company stockholder in a written notice of wire
instructions provided to the Exchange Agent within a reasonable time before the
Closing Date. 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 surrender the Merger Consideration with
respect to such Company Common Stock. The Exchange Agent 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. No interest will be paid or will accrue on any
cash payable to the holders of the Certificates pursuant to this Agreement
except as provided in Section 10.01(b).
12
Section 4.03 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, 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 4.04 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 4.05 Escheat of Exchange Fund. None of Sterling,
Bancorporation, the Merger Sub, the Company or the Exchange Agent shall be
liable to any person in respect of any Merger Consideration 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, at 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 4.06 Investment of Exchange Fund. The Exchange Agent shall
invest the Exchange Fund, as directed by Sterling, on a daily basis. Any
interest and other income resulting from such investment shall be paid to
Sterling.
Section 4.07 Lost Certificates. If any Certificates shall have
been lost, stolen or destroyed, then upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by Sterling, the posting by such Person of a bond in such
reasonable amount as Sterling may direct as indemnity against any claim that may
be made against the Surviving Corporation with respect to such Certificate, the
Exchange Agent will pay in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration to be paid in respect of the shares of
Company Common Stock represented by such Certificate, as contemplated by this
Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Sterling, Bancorporation and
the Merger Sub as follows:
Section 5.01 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
13
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) to own, lease and operate its assets, properties and business
and (iii) to 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. The Company
has heretofore furnished to Sterling a complete and correct copy of its Articles
of Incorporation and bylaws, as amended or restated to the date hereof. Such
articles of incorporation and bylaws, as amended, are in full force and effect
and the Company is not in violation of any of the provisions of its Articles of
Incorporation or bylaws.
Section 5.02 Company Capital Stock.
(a) The authorized capital stock of the Company consists of 500,000
shares of Company Common Stock, par value $0.10 per share, and 500,000 shares of
Company Preferred Stock, par value $1.00 per share, of which 7,200 shares have
been designated as Series A Preferred Stock and 6,950 shares have been
designated as Series B Preferred Stock. As of the date hereof, (i) 29,291
shares of Company Common Stock were issued and outstanding, (ii) no shares of
Company Common Stock were held by the Company in its treasury, (iii) 11,686
shares of Company Common Stock were reserved for issuance pursuant to stock
options granted and outstanding under the Company's 1997 Stock Option Plan and
options issued outside of any plan, (iv) 20,128 shares of Company Common Stock
were reserved for issuance pursuant to the Company's Debenture, (v) 10,000
shares of Company Common Stock were reserved for issuance pursuant to the
Company Warrants, and (vi) 3,600 shares of Company Preferred Stock were issued
and outstanding for which 5,230 shares of Company Common Stock were reserved for
issuance upon the conversion thereof. All of the issued and outstanding shares
of Company Common Stock and Company Preferred Stock are, and all shares of the
Company Common Stock which may be issued upon the exercise or conversion of the
Company Options, Company Warrants, Company Debenture and Company Preferred Stock
will be, when issued, duly authorized, validly issued and fully paid and
nonassessable. None of the outstanding shares of Company Common Stock or
Company Preferred Stock has been, nor will any shares of the Company Common
Stock which may be issued upon the exercise or conversion of the Company
Options, Company Warrants, Company Debenture or Company Preferred Stock be
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 above or in Section 5.02 of the Company Disclosure Schedule.
(b) Except as set forth in Section 5.02 of the Company Disclosure
Schedule, there are no (i) equity securities of the Company outstanding (other
than the shares of Company Common Stock and Company Preferred Stock described in
Section 5.02(a)), (ii) outstanding options,
14
warrants, 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, (iii)
outstanding notes, bonds, debentures or other indebtedness of the Company having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company have the
right to vote, or (iv) outstanding stock appreciation rights or other rights to
redeem for cash any options, warrants or other securities of the Company. 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.
(c) 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.
(d) There are no voting trusts, proxies or other agreements,
commitments or understandings of any character to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound with respect to the voting of any shares of capital stock of the
Company or any of its Subsidiaries. There are no agreements, arrangements or
commitments with any character pursuant to which any Person is or may be
entitled to cause the Company or any of its Subsidiaries to file a registration
statement under the Securities Act or which otherwise relate to the registration
of any securities of the Company or any of its Subsidiaries.
(e) There are no restrictions applicable to the payment of dividends
on any shares of the Company Common Stock except pursuant to the TBCA and
applicable banking laws and regulations and all dividends and distributions
declared prior to the date hereof have been fully paid.
Section 5.03 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 be required to be issued by reason of any options,
warrants, 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 duly authorized, validly issued,
fully paid and nonassessable and are owned by the Company 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
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
15
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. The Company has heretofore furnished to
Sterling a complete and correct copy of each of its Subsidiaries' certificates
or articles of incorporation and bylaws, or equivalent organizational documents,
as amended or restated to the date hereof. Such certificates or articles or
incorporation and bylaws, as amended, and equivalent organizational documents of
Subsidiary are in full force and effect. None of the Subsidiaries is in
violation of any provision of its certificate or articles of incorporation or
bylaws or equivalent organizational documents. Except for the capital stock of
its Subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other ownership interests in any corporation, limited liability
company, partnership, joint venture or other entity.
Section 5.04 Authorization of Merger and Related Transactions.
(a) 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, 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 and Company Preferred Stock, voting as a single class. As of the
date of this Agreement, the Company Specified Stockholder beneficially owns, and
has the right to vote, 77.153% of the total issued and outstanding shares of the
Company Common Stock and 100% of the total issued and outstanding shares of the
Company Preferred Stock. 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.
(b) Neither the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
nor compliance by the Company with any of the provisions hereof will (i)
conflict with or result in a breach of any provision of the certificate or
articles of incorporation or bylaws of the Company or the comparable documents
of any of its Subsidiaries, (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 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.
(c) Other than consents, authorizations, approvals or exemptions
required from the Commissioner, the OCC, the FDIC, or the Federal Reserve Board
and the filing of articles of merger in accordance with the TBCA, no notice to,
filing with, authorization of, exemption by, or
16
consent or approval of any governmental body, authority or other Person is
necessary for the consummation by the Company of the Merger, the resulting
change of control of its Subsidiaries, and the other transactions contemplated
by this Agreement.
Section 5.05 Financial Statements and Regulatory Reports.
(a) 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
fiscal years ended December 31, 1998 and December 31, 1999, together with the
report thereof of KPMG Peat Marwick, L.L.P. for the fiscal year ended December
31, 1998 and Xxxxxxx, Xxxxxxxxxx & Co., L.L.P. for the fiscal year ended
December 31, 1999, and of the unaudited balance sheet and the related unaudited
statement of income, as of and for the six (6) months ended June 30, 2000 (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, 1997 (each a "Regulatory Reporting Document"), which are
all the material documents that the Company or any of its Subsidiaries 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.
(b) 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 for the six (6) months ended June 30, 2000 to
normal recurring year-end adjustments and except for the absence of certain
footnote information in such unaudited interim financial statements. Neither
KPMG Peat Marwick, L.L.P., Xxxxxxx, Xxxxxxxxxx & Co., L.L.P., nor any other firm
of independent certified public accountants has prepared or delivered to the
Company any management letters that express any material concerns or issues
regarding the Company's internal controls, accounting practices or financial
conditions since January 1, 1997.
Section 5.06. Absence of Undisclosed Liabilities. Except as set forth
in Section 5.06 of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries has any obligations or liabilities (contingent or otherwise)
in an amount equal to, or in excess 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 June
30, 2000, included in the Company Financial Statements or reflected in the notes
thereto, or (ii) which were incurred after June 30, 2000, in the ordinary course
of business consistent with past practice and have been fully accrued and
reserved for on the books of the Company as of the date hereof. Since June 30,
2000, neither the Company nor any of its Subsidiaries has incurred or paid any
obligation or liability which would have a Company Material Adverse Effect.
17
Section 5.07 Tax Matters. Except as set forth in Section 5.07 of the
Company Disclosure Schedule:
(a) 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
payable by or with respect to the Company and its Subsidiaries for the periods
covered by such Tax Returns have been paid or are adequately reserved for in
accordance with GAAP on the June 30, 2000 financial statements included in the
Company Financial Statements. With respect to the periods for which returns
have not been filed, the Company and its Subsidiaries have established adequate
reserves determined in accordance with GAAP for the payment of all Taxes.
(b) No deficiencies for any Taxes have been proposed, asserted or
assessed against the Company or any of its Subsidiaries that are not adequately
provided for on the Company Financial Statements and no request for waivers of
the time to assess any such Taxes has been granted or are pending. Neither the
Company nor any Subsidiary is 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.
(c) 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.
(d) 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 June 30, 2000, has been made, in accordance with GAAP, and is
reflected on the June 30, 2000 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.
None of the assets or properties of the Company or any of its Subsidiaries is
subject to any material Tax lien, other than such liens for Taxes which are not
due and payable, which may thereafter be paid without penalty or the validity of
which are being contested in good faith by appropriate proceedings and for which
adequate provisions are being maintained in accordance with GAAP.
(e) 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.
(f) 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.
(g) 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
18
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 its 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 its 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 its 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 5.08 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, 1999 and as of June 30, 2000, and included in
the Company Financial Statements, complies in all material respects with GAAP
and, to the knowledge of the Company's management, OCC Bank Circular 201.
Section 5.09 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 5.10 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, including, without limitation, all the properties and assets reflected in
the Financial Statements except for those properties and assets disposed of for
fair market value in the ordinary course of business and consistent with prudent
banking practices since the date of the Financial Statements. 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 its 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 5.11 Compliance with Laws. Except as set forth in Section 5.11
of the Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries is in substantial
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.
19
(b) 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, 1997, the Company or any of
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 being herein referred to as a "Regulatory
Agreement"). Neither the Company nor any Subsidiary has received or been made
aware of any complaints or inquiries under the Community Reinvestment Act, the
Fair Housing Act, the Equal Credit Opportunity Act or any other state or federal
anti-discrimination fair lending law and, to the knowledge of the Company and
its Subsidiaries, there is no fact or circumstance that would form the basis of
any such complaint or inquiry.
(c) Since January 1, 1997, neither the Company nor any of its
Subsidiaries has been a party to any effective Regulatory Agreement.
(d) 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 5.12 Employee Benefit Plans. Except as set forth in Section
5.12 of the Company Disclosure Schedule:
(a) 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
20
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.
(b) From their inception, all the Company Benefit Plans have been and
are in 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.
(c) 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.
(d) 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 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.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby 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.
(f) Neither the Company, any Subsidiary, nor any plan fiduciary of any
Company Benefit Plan has engaged in any transaction in violation of Section 406
of ERISA (for which transaction no exemption exists under Section 408 of ERISA)
or in any "prohibited transaction" as defined in Section 4975(c)(1) of the Code
(for which no exemption exists under Section 4975(c)(2) or 4975(d) of the Code).
(g) All Company Benefit Plans, related trust agreements or annuity
contracts (or any other funding instruments), are legally valid and binding and
in full force and effect and there are no written agreements or, to the
Company's knowledge, any oral agreements, regarding increases in benefits
(whether expressed or implied) under any of these plans, nor, to the Company's
knowledge, any obligations, commitments, or understanding to continue any of
these plans
21
(whether expressed or implied) except as required by Section 4980B of the Code
and Sections 601-608 of ERISA.
(h) There are no claims pending with respect to, or under, any Company
Benefit Plan other than routine claims for plan benefits, and there is no
litigation pending, or to the knowledge of the Company or any Subsidiary, any
disputes or litigation threatened with respect to any such plans.
Section 5.13 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):
(a) 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 without requiring any
payment by the Company 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) which payments may be made
at the election or with the consent or concurrence of the Company;
(b) any labor contract or agreement with any labor union;
(c) 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 any of
its Subsidiaries may carry on its business (other than as may be required by law
or applicable Regulatory Authorities);
(d) 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;
(e) any lease, sublease, license, contract and agreement which
obligates or may obligate the Company or any Subsidiary for an amount in excess
of $5,000 annually or which have a current term of one year or longer; provided,
however, that the foregoing shall not include (i) loans made by, repurchase
agreements made by, bankers acceptances of, agreements with Bank customers for
trust services, or deposits by the Company and any of its Subsidiaries, and (ii)
any lease, sublease, license, contract or agreement which may be terminated by
the Company, without penalty, upon thirty (30) day's or less prior written
notice;
(f) 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;
22
(g) any agreement with respect to (i) the acquisition of any bank,
bank branch or other assets or stock of another financial institution or any
other Person or (ii) the sale of one or more bank branches;
(h) any outstanding interest rate exchange or other derivative
contracts; or
(i) any buy back, recourse or guaranty obligation with respect to
participation loans sold by the Company or any Subsidiary which create
contingent or direct liabilities of the Company or any of its Subsidiaries.
Section 5.14 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 or both would constitute such a default.
Section 5.15 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 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 Law or Order 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 5.16 Absence of Certain Changes or Events.
(a) Since January 1, 1997, except (i) as disclosed in any Regulatory
Reporting Document filed since January 1, 1997 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, in all material respects, in the ordinary course consistent with
past practice and prudent banking practices or (D) changed any accounting
practices.
(b) Except as set forth in Section 5.16 of the Company Disclosure
Schedule, since June 30, 2000, neither the Company nor any of its Subsidiaries
has:
23
(i) entered into any agreement, commitment or transaction other
than in the ordinary course of business consistent with prudent banking
practices;
(ii) incurred, assumed or become subject to, whether directly or by
way of any guaranty or otherwise, any obligations or liabilities (absolute,
accrued, contingent or otherwise) other than in the ordinary course of
business and consistent with prudent banking practices;
(iii) permitted or allowed any of its property or assets to become
subject to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind (other than Permitted Liens) other than
in the ordinary course of business and consistent with prudent banking
practices;
(iv) except in the ordinary course of business consistent with
prudent banking practices, canceled any debts, waived any claims or rights,
or sold, transferred or otherwise disposed of any its properties or assets;
(v) except for regular salary increases granted in the ordinary
course of business consistent with prior practice, granted any increase in
compensation or paid or agreed to pay or accrue any bonus, percentage
compensation, service award, severance payment or like benefit to or for
the credit of any director, officer, employee or agent, or entered into any
employment or consulting contract or other agreement with any director,
officer or employee or adopted, amended or terminated any Company Benefit
Plan;
(vi) directly or indirectly declared, set aside or paid any
dividend or made any distribution in respect with capital stock, or
redeemed, purchased or otherwise acquired any shares of its capital stock
or other of its securities, except for dividends paid to the Company by its
Subsidiaries;
(vii) organized or acquired any capital stock or any other equity
securities or acquired any equity or ownership interest in any Person
(except for settlement of indebtedness, foreclosure or the exercise of
creditors' remedies or in a fiduciary capacity, the ownership of which does
not expose the Company or its Subsidiaries to any liability from the
business, operations or liabilities of such Person);
(viii) except for the transactions contemplated by this Agreement
or as otherwise permitted hereunder, entered into any transaction, or
entered into, modified or amended any contract or commitment, other than in
the ordinary course of business and consistent with prudent banking
practices; or
(ix) agreed, whether in writing or otherwise, to take any action
the performance of which would change the representations contained in this
Section 5.16(b) in the future so that any such representation would not be
true in all material respects as of the Closing.
Section 5.17 Reports. Since January 1, 1997, 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 any Regulatory Authority. No
Regulatory Reporting Document with respect to periods beginning on
24
or after January 1, 1997, 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 5.18 Insurance. The Company and each of its Subsidiaries are
presently insured, and during each of the past four 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. To the knowledge of the Company's management, 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. Except as set
forth in Section 5.18 of the Company Disclosure Schedule, there have been no
claims under such fidelity bonds within the last four calendar years and neither
the Company nor its Subsidiaries have knowledge of any facts which would form
the basis of a claim under such bonds.
Section 5.19 Labor. No material work stoppage involving the Company or
its Subsidiaries is pending or, to the knowledge of the Company's management,
threatened. Neither the Company nor any of its Subsidiaries is involved in, or,
to the 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 knowledge of the Company's
management, no labor union is attempting to organize employees of the Company or
any of its Subsidiaries.
Section 5.20 Material Interests of Certain Persons. Except as set forth
in Section 5.20 of the Company Disclosure Schedule, no 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 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 5.21 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 5.22 Brokers and Finders. Except as set forth in Section 5.22
of the Company Disclosure Schedule (which shall identify the broker or finder
and amount of compensation payable), 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 other 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 5.23 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.
25
Section 5.24 Environmental Matters. Except as set forth in Section 5.24
of the Company Disclosure Schedule:
(a) The Company, its Subsidiaries and any Property (as herein defined)
owned or operated by any of them have been and are in compliance with all
applicable Environmental Laws. There is no present event, condition or
circumstance, or to the knowledge of the Company or any Subsidiary, any past
event, condition or circumstance (i) that could interfere with the conduct of
the business of the Company or its Subsidiaries in any manner now conducted
relating to such entities' compliance with Environmental Laws, (ii) that could
constitute a violation of, or serve as the basis of liability pursuant to, any
Environmental Law, or (iii) relating to the compliance with any Environmental
Law which would have a Company Material Adverse Effect.
(b) The Company, its Subsidiaries and its Properties have not been, and are
not now subject to any actual or, to the knowledge of the Company or any
Subsidiary, potential or threatened claim or proceeding pursuant to any
Environmental Law and neither the Company nor any Subsidiary have received any
notice from any Person of any actual or alleged violation, or liability pursuant
to, any Environmental Law.
(c) There is no Controlled Property (as herein defined) for which the
Company or any Subsidiary is, or to its knowledge was, required to obtain any
permit, license or authorization under any Environmental Law.
(d) Neither the Company nor any Subsidiary has generated any Hazardous
Substances for which it was required under any Environmental Law to execute any
Hazardous Disposal Manifest.
(e) There are no underground or above ground storage tanks on or under any
Property nor any Hazardous Substances (at, in, on, under or emanating from any
Property) in any quantity or concentration exceeding any standard or limit
established pursuant to applicable Environmental Law.
(f) To the knowledge of the Company or any Subsidiary, there is no asbestos
containing material ("ACM") present in any Controlled Property except non-
friable ACM which can be managed in place in compliance with Environmental Law
without air monitoring, removal or encapsulation which is managed under and in
compliance with an operations and maintenance program.
(g) For purposes of this Section 5.24, "Property" includes (i) any property
(whether real or personal) which the Company or any of its Subsidiaries
currently or in the past has leased, operated, owned or managed in any manner
including, without limitation, any property acquired by foreclosure or deed in
lieu thereof (a "Controlled Property") and (ii) property now held as security
for a loan or other indebtedness by the Company or any of its Subsidiaries or
property currently proposed as security for loans or other credit the Company or
any of its Subsidiaries is currently evaluating to extend or has committed to
extend ("Collateral Property"). With respect to any Collateral Property, the
representations of this Section 5.24 shall be limited to the knowledge of the
Company and its Subsidiaries. With respect to any past conditions, events,
facts or circumstances concerning any Controlled Property which conditions,
events, facts or
26
circumstances existed or occurred prior to the earliest date of any leasehold
interest, operation, ownership or management of such Controlled Property by the
Company or any of its Subsidiaries, the representations of this Section 5.24
shall be limited to the knowledge of the Company and its Subsidiaries.
Section 5.25 Loans. Each loan reflected as an asset in the Financial
Statements is the legal, valid and binding obligation of the obligor of each
loan, enforceable in accordance with its terms, subject to the Remedies
Exception; provided, however, that no representation or warranty is made as to
the collectability of such loans. The Company's Subsidiaries do not have in
their portfolios any loan exceeding their legal lending limit, and except as
disclosed in Section 5.25 of the Company Disclosure Schedule, to the knowledge
of the Company and its Subsidiaries, there are no significant delinquent,
substandard, doubtful, loss, nonperforming or problem loans.
Section 5.26 Fiduciary Responsibilities. The Company and its
Subsidiaries have performed in all material respects all of their respective
duties as a trustee, custodian, guardian or as an escrow agent in a manner which
complies in all respects with all applicable laws, regulations, orders,
agreements, instruments and common law standards.
Section 5.27 Patents, Trademarks and Copyrights.
(a) Except as set forth in Section 5.27 of the Company Disclosure Schedule,
neither the Company nor any of its Subsidiaries require the use of any material
patent, patent application, trademark (whether registered or unregistered),
trademark application, trade name, service xxxx, copyright, or material trade
secret for the business or operations of the Company or its Subsidiaries. The
Company and/or its Subsidiaries own or are licensed or otherwise have the right
to use the items listed in Section 5.27 of the Company Disclosure Schedule.
(b) The Company and/or its Subsidiaries own all right, title and interest
in and to, or hold valid licenses or sub-licenses to use, all of the computer
software used by the Company and/or its Subsidiaries in their respective
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 and/or its Subsidiaries from others).
Except as specified on in Section 5.27 of the Company Disclosure Schedule, all
computer software owned by the Company or its Subsidiaries was developed by the
Company or the respective Subsidiary entirely through its own efforts and for
its own account. The use by the Company and/or its Subsidiaries of computer
software licensed to the Company from third parties (including the sublicensing
of such licensed software to customers) does not violate the terms of the
respective license agreements with respect to such licensed software.
(c) No director, officer or employee of the Company or any Subsidiary
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 or any Subsidiary as now conducted.
Section 5.28 Company Action. The Company Board, at a meeting duly
called and held on October 17, 2000, unanimously (i) determined that the Merger
is fair to and in the best interests of the Company and its stockholders, (ii)
approved this Agreement and the Merger in accordance
27
with the TBCA, (iii) resolved to recommend approval and adoption of this
Agreement and the Merger and the other transactions contemplated hereby by the
Company's stockholders and (iv) directed that this Agreement and the Merger be
submitted to the Company's stockholders for approval.
Section 5.29 Dissenting Stockholders. The Company and its Subsidiaries
have no knowledge of any plan or intention on the part of any Company
stockholder to exercise any appraisal rights under the TBCA or otherwise make
written demand for payment of the fair value of any Company Common Stock in the
manner provided in the TBCA.
Section 5.30 Representations Not Misleading. No representation or
warranty by the Company in this Agreement, nor any statement, summary, exhibit
or schedule furnished to Sterling or Bancorporation by the Company or any of its
Subsidiaries under and pursuant to this Agreement contains or will contain any
untrue statement or material fact or omit to state a material fact necessary to
make the statements contained herein or therein, in light of the circumstances
in which they are made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF STERLING
Each of Sterling and Bancorporation represent and warrant to the Company as
follows:
Section 6.01 Organization, Standing and Authority.
(a) 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.
Section 6.02 Authorization of Merger and Related Transactions.
(a) 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
28
Sterling and Bancorporation, enforceable against Sterling and Bancorporation in
accordance with its terms except as such enforcement may be limited by the
Remedies Exception.
(b) Neither the execution and delivery of this Agreement by Sterling or
Bancorporation, the consummation by Sterling or Bancorporation of the
transactions contemplated hereby nor compliance by Sterling or Bancorporation
with any of the provisions hereof 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 Sterling or Bancorporation pursuant to any
note, bond, mortgage, indenture, license, agreement, lease or other instrument
or obligation to which it is a party or by which it or any of its 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(b) 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 6.03 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 6.04 Legal Proceedings. 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 knowledge of Sterling's management,
threatened against Sterling or any of its Subsidiaries, or against any property,
asset, interest or right of any of them, that might reasonably be expected to
threaten or impede the consummation of the transactions contemplated by this
Agreement. Neither Sterling 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 Law or Order that, individually or in the aggregate, might
reasonably be expected to have a Sterling Material Adverse Effect or might
reasonably be expected to threaten or impede the consummation of the
transactions contemplated by this Agreement.
Section 6.05 Brokers and Finders. Neither Sterling, Bancorporation 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 Bancorporation in connection with this Agreement or
the transactions contemplated hereby.
29
ARTICLE VII
CONDUCT OF THE COMPANY'S BUSINESS
Section 7.01 Conduct of Business Prior to the Effective Time. During
the period from the date of this Agreement to the Effective Time and except as
otherwise contemplated by this Agreement, the Company shall, and shall cause
each of its Subsidiaries to:
(i) operate and conduct its business in the usual, regular and ordinary
course, consistent with past practice and prudent banking practices;
(ii) preserve intact the Company's and each of its Subsidiaries' corporate
existence, business organization, assets, licenses, permits, authorizations, and
business opportunities;
(iii) comply with all material contractual obligations applicable to
business operations of the Company and/or its Subsidiaries;
(iv) maintain all of its properties and assets in good repair, order and
condition, reasonable wear and tear excepted, and maintain the insurance
coverages described in Section 5.18 or obtain comparable insurance coverages
from reputable insurers, which, in respect to amounts, types and risks insured,
are adequate for the business conducted by the Company and its Subsidiaries and
consistent with the existing insurance coverages;
(v) in good faith and in a reasonable manner (a) cooperate with Sterling
and Bancorporation in satisfying the conditions in this Agreement, (b) assist
Sterling and Bancorporation in obtaining as promptly as possible all consents,
approval, authorizations and rulings, whether regulatory, corporate or
otherwise, as are necessary to carry out and consummate the transactions
contemplated by this Agreement, (c) upon the written request of Sterling,
furnish information concerning the Company and its Subsidiaries not previously
provided to Sterling required for inclusion in any filings or applications that
may be necessary in that regard, and (d) perform all acts and execute and
deliver all documents necessary to cause the transactions contemplated by this
Agreement to be consummated at the earliest date that is reasonably possible;
(vi) timely filing of all Reports required to be so filed by the Company or
any of its Subsidiaries with any Regulatory Authority and to the extent
permitted by applicable law, promptly thereafter deliver to Sterling copies of
all such Reports required to be so filed;
(vii) comply in all material respects with all applicable laws and
regulations, domestic and foreign;
(viii) promptly give written notice to Sterling upon the Company's
obtaining knowledge of any event or fact that would cause any of the
representations or warranties of the Company contained in this Agreement to be
untrue or misleading in any material respect or which would otherwise cause a
Company Material Adverse Effect;
30
(ix) use its best efforts to maintain current customer relationship and
preserve intact its business organization, employees, advantageous business
relationships and retain the services of its officers and Employees.
Section 7.02 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 and Sterling shall respond to
any such notice within three (3) Business Days of its receipt of any such
notice):
(a) 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 and
prudent banking practices;
(b) adjust, split, combine or reclassify any capital stock; make, declare
or pay any dividend or make any other distribution on (other than the payment of
dividends with respect to the Company Preferred Stock and interest with respect
to the Company Debenture in accordance with their respective terms and
provisions), 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 (except upon
exercise and conversion of Company Options, Company Preferred Stock and Company
Debenture as provided in Sections 3.02 and 8.04), or any securities or
obligations convertible into or exchangeable for any shares of its capital
stock;
(c) 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 and prudent banking
practices or pursuant to contracts or agreements in force at the date of this
Agreement;
(d) 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;
(e) enter into, terminate or fail to exercise any material right under, any
contract or agreement involving annual payments in excess of $25,000 and which
cannot be terminated without penalty upon 30 days' notice, or make any change
in, or extension of (other than automatic extensions) any of its leases or
contracts involving annual payments in excess of $25,000 and which cannot be
terminated without penalty upon 30 days' notice;
31
(f) 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 (i) routine adjustments in compensation and
fringe benefits in the ordinary course of business consistent with past
practice, (ii) accelerating the vesting of any stock options or other stock-
based compensation, and (iii) the payment of incentive compensation and bonuses
accruing during the 2000 fiscal year to the extent (A) any such incentive
compensation and/or bonus is fully accrued and reflected in the Company
Financial Statements or otherwise fully accrued and reflected in the Company's
books and records and disclosed in Section 7.02(f) of the Company Disclosure
Schedule, and (B) paid in accordance with the terms and conditions of the
Company's incentive compensation and/or bonus policies or in the absence of such
policies, in accordance with past practices;
(g) settle any claim, action or proceeding involving the payment of money
damages in excess of $25,000;
(h) amend its Articles of Incorporation or its bylaws;
(i) fail to maintain its Regulatory Agreements, material Authorizations or
to file in a timely fashion all federal, state, local and foreign Tax Returns;
(j) make any capital expenditures of more than $25,000 individually or
$100,000 in the aggregate;
(k) fail to maintain or administer each Company Benefit Plan in accordance
with applicable Law or timely make all contributions or accruals required
thereunder in accordance with GAAP;
(l) 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;
(m) change any methods or policies of accounting from those used in the
Company Financial Statements;
(n) agree, or make any commitment, to take, in writing or otherwise, any of
the actions described in clauses (a) through (m) of this Section 7.02.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.01 Access and Information.
(a) During the period from the date of this Agreement through the Effective
Time, 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.
(b) During the period from the date of this Agreement through the Effective
Time, the Company 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 shall notify Sterling promptly of any material
change in the Condition of the Company or any of its Subsidiaries.
(c) Notwithstanding the foregoing provisions of this Section 8.01, no
investigation by any party hereto made heretofore or hereafter shall affect the
representations and warranties of the other parties which are contained herein
and each such representation and warranty shall survive such investigation.
(d) Sterling agrees that it will keep confidential any information
furnished to it by the Company 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 any
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 return to the Company or will destroy all documents furnished
Sterling for its review and all copies of such documents made by Sterling.
Section 8.02 Filing of Regulatory Approvals. As soon as reasonably
practicable, Sterling and the Company shall file all notices and applications to
the applicable Regulatory Authorities which Xxxxxxxx xxxxx necessary or
appropriate to complete the transaction contemplated herein, including the Bank
Merger. Sterling and the Company each agree to deliver to the other copies of
all such applications and correspondence between each such party and the
Regulatory Authorities relating to such applications. The Company shall
cooperate, and shall cause its Subsidiaries,
33
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 regulatory applications.
Section 8.03 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 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 Stock Market.
Section 8.04 Company Convertible Securities.
(a) As soon as practicable after the execution of this Agreement, the
Company shall notify each holder of a Company Option, Company Preferred Stock or
Company Debenture of the execution of this Agreement and the terms and
conditions contained herein regarding the exercise or conversion of such
securities. The Company shall use its best efforts to cause each Company
Option, Company Preferred Stock and Company Debenture to either be (i) exercised
and/or converted into shares of Company Common Stock, or (ii) terminated prior
to the Effective Time as more specifically provided in Section 3.02.
(b) With respect to any Company Options, the Company shall not permit any
holder thereof to exercise such Company Option by any means other than a
cashless exercise thereof, unless the Company is contractually obligated to do
so. With respect to any such holder, Company shall use its best efforts to
encourage such holder to exercise the Company Option on a cashless basis rather
than the payment of the exercise price thereof in cash.
Section 8.05 Miscellaneous Agreements and Consents. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees to use its
respective commercially reasonable efforts to satisfy, or cause to be satisfied,
all conditions to their respective obligations under this Agreement and 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 best 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. 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. 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.
34
Section 8.06 Indemnification.
(a) 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, 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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
35
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 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 8.07 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 will increase any
benefits otherwise payable under any Company Benefit Plan.
Section 8.08 Employee Benefits; Severance.
(a) As soon as practicable following the Effective Time, Sterling shall, at
its option, either (i) continue to provide, for such time as Sterling may elect
in its sole discretion, generally the employee benefits currently maintained by
the Company, including without limitation, health and welfare benefits, life
insurance and incentive compensation programs, or (ii) 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 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.
(b) Upon and subject to the terms set forth in this Section 8.08(b),
Sterling is willing and agrees to extend severance pay benefits to employees of
the Company and CaminoReal Bank who are involuntarily terminated, other than for
Cause, within one year after the Transition Period End. Any employee of the
Company or CaminoReal Bank who is employed as of the Effective Time and is
involuntarily terminated, other than for Cause, prior to one year after the
Transition Period End will be entitled to receive severance pay in an amount
equal to two week's regular base or straight-time pay, plus one week's regular
base or straight-time pay for each year of continuous
36
service to the Company or CaminoReal Bank as of the Transition Period End. Any
employee of the Company or CaminoReal Bank who voluntarily terminates employment
will not be eligible for severance benefits. In addition, any employee of the
Company or CaminoReal Bank whose job function or position is eliminated and who
receives but declines a Comparable Job Offer shall be deemed to have voluntarily
terminated his employment for purposes of this Section 8.08(b) and shall not be
eligible to receive severance benefits. To be eligible to receive any severance
benefits, Sterling, the Company or CaminoReal Bank may require the employee to
remain through the Transition Period End (or any earlier specified date).
Notwithstanding the foregoing severance benefits, in no event shall Sterling be
required to pay severance benefits to any individual to the extent that such
benefits (when aggregated with all other amounts paid to such individual in
connection with the Merger) would not be deductible under Section 280G of the
Code.
Section 8.09 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 8.10 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 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 September
20, 2000), (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
37
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 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(a) sets forth the rights of the Company
to terminate this Agreement.
(b) 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 8.11 Termination Fees. To compensate the parties 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 such
parties, the Company and Sterling agree as follows:
(a) 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 $2,500,000 (the "Company Termination Fee"), plus reasonable
out-of-pocket expenses, not in excess of $500,000 (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 "Sterling Expenses") incurred by Sterling or any of its
Affiliates in connection with or arising out of the transactions
38
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(a)(v), (ii) by either Sterling or the Company under the provisions
of Section 10.01(a)(vi) 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(a)(vii).
Sterling shall provide the Company with an itemization of Expenses.
(b) Provided that the Company shall not be in material breach of its
obligations under this Agreement (which breach has not been cured promptly
following receipt of written notice thereof by Sterling specifying in reasonable
detail the basis of such alleged breach), (i) Sterling shall pay to the Company
the sum of $2,500,000 plus reasonable out-of-pocket expenses, not in excess of
$250,000 (including, without limitation, amounts paid or payable to brokers and
finders, fees and expenses of counsel) (such expenses are hereinafter referred
to as the "Company Expenses"; the Company Expenses and the Sterling Expenses may
be referred to, either separately or collectively, as the "Expenses") incurred
by the Company in connection with or arising out of the transactions
contemplated by this Agreement, regardless of when those expenses are incurred,
if following any Sterling Change of Control, Sterling or its successor
terminates this Agreement pursuant to Section 10.01(a)(ix), and (ii) Sterling
shall pay to the Company the sum of $500,000 plus Company Expenses if Sterling
terminates this Agreement under the provisions of Section 10.01(a)(viii). The
$2,500,000 and $500,000 sums payable by Sterling pursuant to clauses (i) and
(ii) above, respectively, are referred to as the "Sterling Termination Fee;" the
Sterling Termination Fee and the Company Termination Fee may be referred to
either separately or collectively, as the "Termination Fee." The Company will
provide Sterling with an Itemization of the Company Expenses.
(c) Any payment required by either paragraph (a) or (b) of this Section
8.11 shall become payable within two Business Days after termination of this
Agreement or, in the case of reimbursement of any Expenses, promptly after (but
in no event later than three Business Days following) delivery to the other
party of the itemization of Expenses.
(d) The Company and Sterling acknowledge 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, neither the Company nor Sterling
would enter into this Agreement; accordingly, if either the Company or Sterling
fails to promptly pay the applicable Termination Fee or Expenses when due, the
Company and Sterling, as appropriate, shall in addition thereto pay to the other
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 at the prime rate as reported in The Wall Street Journal as
in effect from time to time during such period.
Section 8.12 Accruals. Commencing at such time after November 1, 2000
that Sterling and the Company may mutually agree, the Company shall make the
following adjustments to the Company's general ledger system and accounting
records: (i) writedown and expense any and all
39
fixed assets identified in writing by Sterling to such amount as Sterling so
indicates; (ii) writedown and expense any and all prepaid expenses identified in
writing by Sterling to such amount as Sterling so indicates; (iii) expense the
cost of terminating any contract or agreement identified in writing by Sterling;
and (iv) expense the advisory and brokerage fees payable to Xxxx Xxxxxxxx
Xxxxxxx with respect to the Merger; provided, however, that any such accruals
shall be excluded for purposes of calculating incentive compensation to be paid
to employees of the Company and/or the Bank including any such calculations to
be made by Sterling, following the Effective Time, for the purpose of
determining the incentive compensation payable for 2001.
Section 8.13 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 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 8.14 Release Agreements. The Company shall use its best
efforts, on behalf of Sterling and pursuant to the request of Sterling, to cause
each Person identified in Section 8.14 of the Company Disclosure Schedule to
execute and deliver to Sterling a written release and waiver satisfactory in
form and substance to Sterling in its sole discretion and in substantially the
form attached hereto as Annex B (the "Release Agreements") prior to the
Effective Time, providing for, among other things, the release of the Company,
Bank, Sterling and the Surviving Corporation and their respective affiliates
from any and all claims, known and unknown, that such Person has or may have
against any of the foregoing through the Effective Time.
Section 8.15 Sterling Financing. As soon as reasonably practicable
following the execution of this Agreement, Sterling shall prepare the
documentation and agreements necessary for the placement and sale of trust
preferred securities intended to provide funding to facilitate Sterling's
consummation of the transactions contemplated hereby. Sterling shall use its
best efforts to secure such financing including, without limitation, the
preparation and filing with the SEC of a registration statement on Form S-3
relating to such financing.
Section 8.16 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, any inaccuracy contained in, or amendment required to, the
Company Disclosure Schedule, or (ii) the failure by it to comply with or satisfy
in any material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. Neither party shall be permitted to amend or revise its
respective Disclosure Schedule following the date hereof without the written
consent of the other party hereto.
40
ARTICLE IX
CONDITIONS TO MERGER
Section 9.01 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:
(a) The Company stockholders shall have approved and adopted all matters
relating to this Agreement, the Merger and the transactions contemplated hereby
and as required under the TBCA and the Company's Articles of Incorporation at
the Company Stockholders' Meeting.
(b) This Agreement, the Merger, the Bank Merger and the other transactions
contemplated hereby shall have been approved by the Federal Reserve Board, the
Commissioner, the FDIC 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.
(c) Neither Sterling, Bancorporation, the Merger Sub nor the Company shall
be subject to any 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.
Section 9.02 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:
(a) 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 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.
(b) Performance of Obligations. Sterling and Merger Sub 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).
41
Section 9.03 Conditions to Obligations of Sterling and Merger Sub to
Effect the Merger. The obligations of Sterling and Merger Sub to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following additional conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in Article V hereof shall be true and correct in all
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 Merger Sub shall have received a certificate
signed by the chairman, chief executive officer, president or other duly
authorized officer of the Company to that effect.
(b) 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 Merger Sub shall have
received a certificate signed by the chairman and 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).
(c) 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, chief executive officer, president or other duly authorized officer of
the Company to that effect.
(d) Financing. Sterling shall have completed, on terms and conditions
acceptable to Sterling in its sole discretion, the placement and sale of trust
preferred securities resulting in the receipt by Sterling of funds in amount
deemed sufficient, in Sterling's sole discretion, for the consummation of the
transactions contemplated hereby.
(e) Company Warrants. The holders of the Company Warrants shall have sold,
assigned and transferred good, valid, complete and marketable title to the
Company Warrants to the Merger Sub, free and clear of all liens for an aggregate
consideration not to exceed $4,320,217.88 (the "Warrant Consideration").
(f) Opinion of Counsel. Sterling shall have received an opinion of
Xxxxxxxx Xxxx Xxxxxxxxxx Xxxxxx Xxxxxxx Xxxxxx & Xxxxxx, counsel for the
Company, substantially in the form of Annex C.
(g) Dissenting Shares. The number of Dissenting Shares shall not exceed
five percent (5%) of the total issued and outstanding shares (as of the
Effective Time) of Company Common Stock.
(h) Release Agreements. Sterling shall have received Release Agreements,
substantially in the form of Annex B, executed and delivered by each Person
identified in Section 8.14 of the Company Disclosure Schedule.
42
ARTICLE X
TERMINATION
Section 10.01 Termination.
(a) Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of this Agreement, the Merger and the transactions
contemplated hereby 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:
(i) by mutual consent of the Board of Directors of Sterling and the
Company; or
(ii) by the Company Board or the Board of Directors of Sterling if (A) the
Federal Reserve, the FDIC 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 (B) the Effective
Time does not occur by June 30, 2001, provided, however, that the right to
terminate this Agreement under clause (B) of this Section 10.01(a)(ii) 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
(iii) 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 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
(iv) 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
(v) by the Company if (A) there shall not have been a breach of any
covenant or agreement on the part of the Company under this Agreement and (B)
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 Acquisition Proposal (if consummated pursuant to its terms) would
result in an alternative Acquisition 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 Section 10.01(a)(v) shall not be
deemed effective until payment of the Company Termination Fee and Sterling
Expenses required by Section 8.11(a); or
43
(vi) 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; or
(vii) 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 Acquisition Proposal, or shall have resolved to do the foregoing;
(viii) by Sterling if Sterling (A) shall not have completed, on or before
June 30,2001, the placement and sale of trust preferred securities as more
particularly set forth in Section 9.03(d) above, or (B) at any time prior to
June 30, 2001, Sterling determines not to proceed with the placement and sale of
the trust preferred securities and related financing and elects to abandon the
proposed Merger; provided, however, that termination under this Section
10.01(a)(viii) shall not be deemed effective until the payment of the Sterling
Termination Fee and Company Expenses required by clause (ii) of Section 8.11(b).
(ix) by Sterling or its successor if, following any Sterling Change of
Control, Sterling or its successor elects to terminate this Agreement and
abandon the proposed Merger; provided, however, that termination under this
Section 10.01(a)(ix) shall not be deemed effective until payment of the Sterling
Termination Fee and Company Expenses required by clause (i) of Section 8.11(b).
(b) In the event the parties have not received the necessary approvals and
consents of the Federal Reserve Board, the Commissioner, the FDIC and other
Regulatory Authorities as contemplated by Section 9.01(b) on or before April 30,
2001, Sterling agrees to pay interest on that portion of the Merger
Consideration allocable to the shares of the Company Common Stock then
outstanding and issuable upon the exercise of the Company Options as herein
provided at a rate per annum equal to the "Prime Rate" as published and quoted
in the Southwest Edition of the Wall Street Journal for the period commencing on
May 1, 2001 through and including the Closing Date; provided, however, that
Sterling shall not be required to pay any such interest unless the Merger is
consummated. Any such interest shall be payable to the Company's stockholders
entitled to receive such interest on a pro rata basis.
Section 10.02 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 10.01(a), 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 10.03 Non-Survival of Representations, Warranties and Covenants.
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.
44
ARTICLE XI
GENERAL PROVISIONS
Section 11.01 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 any Proxy Statement or other notice of the Company
Stockholders' Meeting.
Section 11.02 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 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 employee or
stockholder of the Company), other than Sterling, Bancorporation, Merger Sub and
the Company or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
Section 11.03 Amendments.
(a) 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.
(b) The parties hereto agree to enter into an amendment of this Agreement
for the purpose of adding Merger Sub as a party hereto, which amendment shall be
made prior to any submission of this Agreement to the stockholders of the
Company for their approval. As a condition to the Company's entry into any such
amendment, Merger Sub shall deliver to the Company a certificate setting forth
representations and warranties similar to those set forth in Sections 6.01, 6.02
and 6.04 insofar as they relate to Merger Sub.
Section 11.04 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 11.05 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; provided, however, that
Sterling may assign its rights and obligations or those of Merger Sub to
45
any direct or indirect, wholly-owned subsidiary of Sterling, but no such
assignment shall relieve Sterling of its obligations hereunder if such assignee
does not perform such obligations.
Section 11.06 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:
Company: CaminoReal Bancshares of Texas, Inc.
00000 Xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attention: R. Xxx Xxxxx, Chairman
Xxxxxxx X. Xxxxxxx, President
Telecopy: (000) 000-0000
With a copy to: Xxxxxxxx Xxxx Xxxxxxxxxx Xxxxxx Xxxxxxx Xxxxxx & Xxxxxx
One Riverwalk Place, Suite 600
000 X. Xx. Xxxx'x Xxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxxx
Telecopy: (000) 000-0000
Xxxx & Flume
0000 XX Xxxx 000, Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attn: O'Xxxx Xxxx
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.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. XxXxxxxx
Telecopy: (000) 000-0000
Section 11.07 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
46
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.
Section 11.08 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.
Section 11.09 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 11.10 Captions. The captions contained in this Agreement are
for reference purposes only and are not part of this Agreement.
Section 11.11 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, Bancorporation 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/ XXXXXX XXXXXXXX
--------------------------------
Xxxxxx Xxxxxxxx, Chairman
STERLING BANCORPORATION, INC.
By: /s/ XXXXXXX X. XXX
--------------------------------
Xxxxxxx X. Xxx, Vice President
CAMINOREAL BANCSHARES OF TEXAS, INC.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------
Xxxxxxx X. Xxxxxxx, President
47
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This Amendment to Agreement and Plan of Merger (this "Amendment") dated as
of March 22, 2001 is entered into 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"), CRB MERGER
CORP., a Texas corporation and a wholly owned subsidiary of Sterling ("Merger
Sub") and CAMINOREAL BANCSHARES OF TEXAS, INC., a Texas corporation and a
registered bank holding company under the BHCA (the "Company").
WHEREAS, Sterling, Bancorporation and the Company entered into an Agreement
and Plan of Merger dated as of October 23, 2000 (the "Merger Agreement");
WHEREAS, the Merger Agreement required that an existing or new subsidiary
of Sterling shall be merged with the Company with the Company being the
surviving entity;
WHEREAS, Merger Sub is such existing or new subsidiary; and
WHEREAS, Section 11.03(b) of the Merger Agreement requires Sterling,
Bancorporation and the Company to amend the Merger Agreement for the purpose of
making Merger Sub a party thereto;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in the Merger Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Capitalized terms used herein and not defined herein shall have the
meanings set forth in the Merger Agreement.
2. Upon execution of this Amendment, Merger Sub shall become a party to the
Merger Agreement, shall be deemed to be Merger Sub as defined in the Merger
Agreement, and shall succeed to the rights and become subject to the obligations
of Merger Sub as provided in the Merger Agreement.
3. The execution of this Amendment shall not relieve Sterling or
Bancorporation of its obligations under the Merger Agreement.
4. Except as herein provided, the terms of the Merger Agreement shall
remain in full force and effect.
5. This Amendment may be executed in several counterparts, and all such
counterparts, when so executed and delivered, shall constitute but one and the
same agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
STERLING BANCSHARES, INC.
By: /s/ XXXXXX XXXXXXXX
--------------------------------
Xxxxxx Xxxxxxxx, Chairman
CRB MERGER CORP.
By: /s/ XXXXXX XXXXXXXX
--------------------------------
Xxxxxx Xxxxxxxx, President
STERLING BANCORPORATION, INC.
By: /s/ XXXXXX XXXXXXXX
--------------------------------
Name: Xxxxxx Xxxxxxxx
------------------------------
Title: Chairman and CFO
-----------------------------
CAMINOREAL BANCSHARES OF TEXAS, INC.
By: /s/ XXXXXXX X. XXXXXXX
---------------------------------
Xxxxxxx X. Xxxxxxx, President
2
