EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
STERLING BANCSHARES, INC.
STERLING BANCORPORATION, INC.
AND
ENB BANKSHARES, INC.
Dated as of May 22, 2002
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............................................................... 7
Section 2.03 Effective Time.......................................................................... 8
Section 2.04 Reservation of Right to Revise Transaction; Further Actions............................. 8
ARTICLE III MERGER CONSIDERATION; EXCHANGE PROCEDURES............................................................ 8
Section 3.01 Merger Consideration.................................................................... 8
Section 3.02 Rights Under Convertible Securities..................................................... 10
Section 3.03 Stockholder's Meeting................................................................... 10
ARTICLE IV EXCHANGE OF SHARES.................................................................................... 11
Section 4.01 Exchange and Payment Procedures......................................................... 11
Section 4.02 No Further Ownership Rights in Company Common Stock..................................... 12
Section 4.03 Escheat of Exchange Fund................................................................ 12
Section 4.04 Lost Certificates....................................................................... 12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................... 12
Section 5.01 Organization, Standing and Authority.................................................... 12
Section 5.02 Company Capital Stock................................................................... 13
Section 5.03 Subsidiaries............................................................................ 14
Section 5.04 Authorization of Merger and Related Transactions........................................ 15
Section 5.05 Financial Statements and Regulatory Reports............................................. 15
Section 5.06 Absence of Undisclosed Liabilities...................................................... 16
Section 5.07 Tax Matters............................................................................. 16
Section 5.08 Allowance for Credit Losses............................................................. 18
Section 5.09 Other Regulatory Matters................................................................ 18
Section 5.10 Properties.............................................................................. 18
Section 5.11 Compliance with Laws.................................................................... 18
Section 5.12 Employee Benefit Plans.................................................................. 19
Section 5.13 Commitments and Contracts............................................................... 21
Section 5.14 Material Contract Defaults.............................................................. 22
Section 5.15 Legal Proceedings....................................................................... 22
Section 5.16 Absence of Certain Changes or Events.................................................... 22
Section 5.17 Reports................................................................................. 23
Section 5.18 Insurance............................................................................... 24
Section 5.19 Labor................................................................................... 24
Section 5.20 Material Interests of Certain Persons................................................... 24
Section 5.21 Registration Obligations................................................................ 24
-i-
Section 5.22 Brokers and Finders..................................................................... 24
Section 5.23 State Takeover Laws..................................................................... 24
Section 5.24 Environmental Matters................................................................... 25
Section 5.25 Loans................................................................................... 26
Section 5.26 Fiduciary Responsibilities.............................................................. 26
Section 5.27 Patents, Trademarks and Copyrights...................................................... 26
Section 5.28 Company Action.......................................................................... 27
Section 5.29 Dissenting stockholders................................................................. 27
Section 5.30 Representations Not Misleading.......................................................... 27
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF STERLING........................................................... 27
Section 6.01 Organization, Standing and Authority.................................................... 27
Section 6.02 Authorization of Merger and Related Transactions........................................ 28
Section 6.03 Regulatory Matters...................................................................... 28
Section 6.04 Legal Proceedings....................................................................... 28
Section 6.05 Brokers and Finders..................................................................... 29
ARTICLE VII CONDUCT OF THE COMPANY'S BUSINESS................................................................... 29
Section 7.01 Conduct of Business Prior to the Effective Time......................................... 29
Section 7.02 Forbearances............................................................................ 30
ARTICLE VIII ADDITIONAL AGREEMENTS.............................................................................. 32
Section 8.01 Access and Information.................................................................. 32
Section 8.02 Filing of Regulatory Approvals.......................................................... 32
Section 8.03 Press Releases.......................................................................... 33
Section 8.04 Company Convertible Securities.......................................................... 33
Section 8.05 Miscellaneous Agreements and Consents................................................... 33
Section 8.06 Indemnification......................................................................... 33
Section 8.07 Certain Change of Control Matters....................................................... 35
Section 8.08 Employee Benefits; Severance............................................................ 35
Section 8.09 Certain Actions......................................................................... 36
Section 8.10 No Solicitation......................................................................... 36
Section 8.11 Termination Fees........................................................................ 37
Section 8.12 Accruals................................................................................ 38
Section 8.13 Certain Agreements...................................................................... 39
Section 8.14 Release Agreements...................................................................... 39
Section 8.15 Notification; Updated Disclosure Schedules.............................................. 39
Section 8.16 Retention Bonuses....................................................................... 39
Section 8.17 Management Payments..................................................................... 40
Section 8.18 Option Holder Agreements................................................................ 40
Section 8.19 Establishment of Merger Sub............................................................. 40
ARTICLE IX CONDITIONS TO MERGER................................................................................. 40
Section 9.01 Conditions to Each Party's Obligation to Effect the Merger.............................. 40
-ii-
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............... 41
ARTICLE X TERMINATION........................................................................................... 42
Section 10.01 Termination............................................................................. 42
Section 10.02 Effect of Termination................................................................... 44
Section 10.03 Non-Survival of Representations, Warranties and Covenants............................... 44
ARTICLE XI GENERAL PROVISIONS................................................................................... 44
Section 11.01 Expenses................................................................................ 44
Section 11.02 Entire Agreement; Parties in Interest................................................... 44
Section 11.03 Amendments.............................................................................. 44
Section 11.04 Waivers................................................................................. 45
Section 11.05 No Assignment........................................................................... 45
Section 11.06 Notices................................................................................. 45
Section 11.07 Specific Performance.................................................................... 46
Section 11.08 Governing Law........................................................................... 46
Section 11.09 Counterparts............................................................................ 46
Section 11.10 Captions................................................................................ 46
Section 11.11 Severability............................................................................ 46
Section 11.12 Delayed Delivery of Company Disclosure Schedule......................................... 46
Attachments:
Annex A. Form of Agreement and Irrevocable Proxy.
Annex B. Form of Release Agreement - Bank.
Annex C. Form of Release Agreement - Persons.
-iii-
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of May 22,
2002, 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 ENB BANKSHARES, 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 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 the Merger Consideration, without interest; 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 Stockholders have 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 Eagle National Bank, 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.
"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, Eagle National 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,
Eagle National Bank, Sterling or Sterling Bank unless such conduct was
reasonably believed by such employee in good faith to be in the best interests
of the Company, Eagle National 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.
-2-
"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 $5.00 per
share, of the Company.
"Company Debenture" shall mean the issued and outstanding 9.5% Subordinated
Convertible Debentures of the Company dated December 4, 2002, in the original
principal amount of $1,350,000.
"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 5.02.
"Company Specified Stockholders" shall mean each of the directors of the
Company or the Bank who are also shareholders of the Company.
"Company Stock Plan" shall have the meaning set forth in Section 5.12.
"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).
"Comparable Job Offer" shall mean an offer for a position with Eagle
National 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 total compensation at least equal to that which the
employee was entitled from the Company or Eagle National Bank as of the
Effective Time, and (iii) which does not involve relocation by the employee to
another metropolitan area.
-3-
"Condition" shall have the meaning set forth in Section 5.01.
"Conversion Date" shall have the meaning set forth in Section 3.02(b).
"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.
"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.
"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;
-4-
"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.
"Net Income Per Share" shall have the meaning set forth in Section 3.01(a).
"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 of
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.
"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.
"Retention Bonuses" shall have the meaning set forth in Section 8.16.
"SEC" shall mean the Securities and Exchange Commission.
-5-
"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 action or event, pursuant to which 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"), (iii) any
merger, consolidation, reorganization or business combination with another
corporation or other legal entity, pursuant to which 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, or (iv) any change in the board of
directors of Sterling pursuant to which the directors of Sterling at the time of
this Agreement no longer constitute a majority of the board of directors of
Sterling.
"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).
"Stockholder Consideration" shall have the meaning set forth in Section
4.01.
"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 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
-6-
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 earlier of (i) the date 30 days
after the completion of the legal merger of Eagle National Bank into Sterling
Bank or (ii) the date 120 days after the Effective Time.
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, Merger Sub
shall be merged with and into the Company. As a result of the Merger, the
separate existence of 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 Merger Sub immediately prior to the Effective Time
shall become the directors of the Surviving Corporation and the officers of
Merger Sub immediately prior to the Effective Time shall become the officers of
the Surviving Corporation, in each case until their respective successors are
duly elected and qualified.
(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 Xxxxx
Xxxxxxx & Xxxx LLP in Houston,
-7-
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 mutually selected by
Sterling and the Company occurring within ten (10) calendar days after the end
of the calendar month in which 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 and
reasonable amendment or restatement of this Agreement to reflect such reasonable
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 reasonably
necessary or appropriate to facilitate the Merger, the Bank Merger, and the
acquisition of the Company by Sterling, including, without limitation, entering
into agreements to facilitate the Bank Merger.
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) 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 cash, without interest, in
amount equal to $22.00, plus the Company's Net Income Per Share from January 1,
2002 to and including the last day of the month in the month immediately before
the Closing Date, (the "Merger Consideration"). "Net Income Per Share" shall
mean the Company's net income per share as derived from the Company's unaudited
-8-
statement of operations prepared in accordance with GAAP for the applicable
period; provided, however, that notwithstanding GAAP, the following items shall
not be deemed to be an expense for purposes of calculating Net Income Per Share:
payments made to terminate the Company Options pursuant to Section 3.02 (a),
payments made to employees of the Bank as Retention Bonuses pursuant to Section
8.16, payments made to management of the Bank pursuant to Section 8.17, and
payments made to Xxxxxx & Xxxxxx, Incorporated and Haynie, Rake, Xxxxxx, PC for
their services rendered in completing the Merger pursuant to Section 11.01.
Under no circumstances shall the foregoing items reduce Net Income Per Share or
the resulting Merger Consideration. Further, the Company's indebtedness,
including without limitation, the outstanding indebtedness owed by the Company
to Xxxxx Fargo Bank shall be retained by the Surviving Company and the Merger
Consideration shall not be reduced as a result of the existence of such
indebtedness. 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 Merger Consideration 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) Any share of Company Common Stock held in the treasury of the
Company and any 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.
(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
-9-
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 use its commercially
reasonable efforts to 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 be terminated by payment to the
holder of any Company Option of an amount of cash equal to the product of (i)
the number of shares subject to a Company Option, multiplied by (ii) the
difference between (x) the Merger Consideration, less (y) the exercise price of
the Company Option. The Company shall join in an amendment to the Company's
Eagle National Bank Incentive Stock Option Plan and any agreements evidencing
outstanding Company Options to the extent necessary to permit such termination.
Assuming the Company Options are fully terminated as provided herein, the
maximum expenditure by the Company in connection therewith is estimated to be
approximately $150,000. Payments made by the Company to holders of Company
Options will not be deemed an expense for purposes of determining Net Income Per
Share and shall not otherwise reduce the amount of the Merger Consideration.
(b) Prior to the Effective Time, the Company shall use commercially
reasonable efforts to cause the issued and outstanding Company Debentures as set
forth in Section 5.02 of the Company Disclosure Schedule to be converted into a
maximum of 90,000 shares of Company Common Stock. The date of conversion shall
be the end of the month immediately prior to the Closing Date ("the Conversion
Date"). Notwithstanding any other provision of this Agreement, the Company shall
pay, and Sterling and Bancorporation shall not object to or prohibit the payment
of, interest on the Company Debenture up to and including the Conversion Date.
(c) The Company shall take all reasonable actions necessary or
reasonably requested by Sterling to ensure that following the Effective Time, no
holder of any Company Option 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.
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
-10-
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.
ARTICLE IV
EXCHANGE OF SHARES; PAYMENT OF MERGER CONSIDERATION
Section 4.01. Exchange and Payment Procedures. Subject to the provisions
of this Section 4.01 and except with respect to the holders of any Dissenting
Shares as more specifically provided in Section 3.01(d) above, an amount equal
to the product of (i) the Merger Consideration, multiplied by (ii) the number of
shares of Company Common Stock owned by a Company Stockholder as of the
Effective Time (the "Stockholder Consideration") shall be paid on the Closing
Date to each of the Company's stockholders by wire transfer of immediately
available funds to one or more accounts specified by the Company's stockholders
in a written notice of wire instructions provided to Sterling within a
reasonable time before the Closing Date. To facilitate the payment of the
Stockholder Consideration promptly following the Effective Time at the Closing,
Sterling shall, within a reasonable time before the Closing Date, deliver 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 the shares of Company Common Stock shall pass, only
upon proper delivery of such Certificates to Sterling), and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration. Upon surrender to Sterling of a Certificate for
cancellation, duly endorsed (or accompanied by duly executed stock powers), with
signatures guaranteed by a commercial bank or by a member firm of The New York
Stock Exchange, together with such letter of transmittal, duly executed, and any
other documentation reasonably required by Sterling, the holder of such
Certificate(s) shall be entitled to receive in exchange therefor the Stockholder
Consideration which such holder has the right to receive pursuant to Section
3.01(a), and the Certificate(s) so surrendered shall forthwith be cancelled. In
the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, the Stockholder Consideration
with respect to such Company Common Stock may be issued to a transferee if the
Certificate(s) (i) representing such Company Common Stock is (are) presented to
Sterling 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 as hereinabove set forth at the
Closing whereupon promptly following the Effective Time at the Closing, the
Stockholder 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 as
hereinabove provided. Sterling shall not be obligated to deliver, or effect any
payment of, the Stockholder 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), letter of transmittal and other required documentation as
hereinabove set forth for exchange as
-11-
provided in this Section 4.01. Until surrendered as contemplated by this Section
4.01, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Stockholder
Consideration with respect to such Company Common Stock. No interest will be
paid or will accrue on any cash payable to the holders of the Certificates
pursuant to this Agreement.
Section 4.02 No Further Ownership Rights in Company Common Stock. The
Stockholder 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 4.03 Escheat of Exchange Fund. None of Sterling, Bancorporation,
the Merger Sub, or the Company shall be liable to any person in respect of any
Stockholder Consideration 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 Stockholder Consideration in respect
of such Certificate would otherwise escheat to or become the property of any
government authority, any such Stockholder 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 4.04 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, Sterling
will pay in exchange for such lost, stolen or destroyed Certificate the
Stockholder 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 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
-12-
"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 1,000,000
shares of Company Common Stock, par value 5.00 per share. As of the date hereof,
(i) 369,000 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)
12,200 shares of Company Common Stock were reserved for issuance pursuant to
stock options granted and outstanding under the Eagle National Bank Incentive
Stock Option Plan (the "Company Options") and any options issued outside of any
plan, and (iv) 90,000 shares of Company Common Stock were reserved for issuance
pursuant to the Company's Debentures. All of the issued and outstanding shares
of Company Common Stock are, and all shares of the Company Common Stock which
may be issued upon the conversion of the Company Debentures will be, when
issued, duly authorized, validly issued and fully paid and nonassessable. None
of the outstanding shares of Company Common Stock or any shares of the Company
Common Stock which may be issued upon the conversion of the Company Debentures
will 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 as described in Section 5.02(a)), (ii) outstanding 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 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, debenture 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
-13-
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. Except as set
forth in Section 5.03 of the Company Disclosure Schedule, 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
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
-14-
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. The Company Specified Stockholders beneficially own, and have the
right to vote, 32.64% of the total issued and outstanding shares of the Company
Common 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) Except as set forth in Section 5.04 of the Company Disclosure
Schedule, 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, all of which
must be obtained by Sterling, no notice to, filing with, authorization of,
exemption by, or 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
-15-
Subsidiaries as of and for the fiscal years ended December 31, 2000 and December
31, 2001, together with the report thereof of McGladrey & Xxxxxx, LLP for the
fiscal year ended December 31, 2001 and of the unaudited balance sheet and the
related unaudited statement of income, as of and for the three (3) months ended
March 31, 2002 (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, 1999 (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 three (3) months ended March 31, 2002 to
normal recurring year-end adjustments and except for the absence of certain
footnote information in such unaudited interim financial statements. Except as
set forth in Section 5.05 of the Company Disclosure Schedule, neither McGladrey
& Xxxxxx, LLP 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, 1999.
Section 5.06 Absence of Undisclosed Liabilities. Except as disclosed 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, $20,000, in the aggregate, except
obligations and liabilities (i) which are fully accrued or reserved against in
the consolidated balance sheet of the Company and its Subsidiaries as of March
31, 2002, included in the Company Financial Statements or reflected in the notes
thereto, or (ii) which were incurred after March 31, 2002, 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 March 31,
2002, neither the Company nor any of its Subsidiaries has incurred or paid any
obligation or liability which would have a Company Material Adverse Effect.
Section 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 March 31, 2002 financial statements included in the
Company Financial Statements. With
-16-
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 March 31, 2002, has been made, in accordance with GAAP, and is
reflected on the March 31, 2002 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 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
-17-
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, 2001 and as of March 31, 2002, 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.
(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 materially applicable to its business or
to its employees conducting its business, and with its internal policies and
procedures.
(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, 1999, 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,
-18-
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"). Except as set
forth in Section 5.11 of the Company Disclosure Schedule, 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 or 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, 1999, 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.
(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 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
-19-
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 substantial compliance with the applicable terms of ERISA and the Code
and any other applicable laws, rules and regulations, including the terms of
such plans, the breach or violation of which, individually or in the aggregate,
could reasonably be expected to result in a Company Material Adverse Effect.
(c) Except as set forth in Section 5.12 of the Company Disclosure
Schedule, 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) Except as set forth in Section 5.12 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby 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 (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
-20-
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 $5,000 individually or $20,000 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;
(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;
-21-
(h) any outstanding interest rate exchange or other derivative
contracts; or
(i) any buy back, recourse or guaranty obligation with respect to loans
or loan participations 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, 1999, except (i) as disclosed in any Regulatory
Reporting Document filed since January 1, 1999 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 March 31, 2002, neither the Company nor any of its Subsidiaries
has:
(i) entered into any agreement, commitment or transaction other
than in the ordinary course of business consistent with prudent banking
practices;
-22-
(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, 1999, 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 or after
January 1, 1999, contained any information that was false or misleading with
respect to
-23-
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 since inception, 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 since January 1, 1999 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.
-24-
Section 5.24 Environmental Matters.
(a) Except as set forth in Section 5.24 of the Company Disclosure
Schedule, the Company, its Subsidiaries and any Property (as herein defined)
owned or operated by any of them have been and are in substantial 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) Except as set forth in Section 5.24 of the Company Disclosure
Schedule, 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,
-25-
facts or 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. The Company
Disclosure Schedule lists all effective loan commitments and outstanding letters
of credit made or issued by the Company or any of its Subsidiaries.
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.
-26-
Section 5.28 Company Action. The Company Board, at a meeting duly called
and held on May 21, 2002, 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 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.
-27-
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 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.
(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 consent or approval of any
governmental body, authority or other Person is necessary for the consummation
by Sterling, Bancorporation or the Merger Sub of the Merger and the other
transactions contemplated by this Agreement.
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.
-28-
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.
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 (including those
related to payment obligations for borrowed money) 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 file 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;
-29-
(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;
(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):
(a) 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 this Section 7.02(a) shall not
prevent the incurrence of indebtedness by the creation of deposit liabilities,
purchase of federal funds, Federal Home Loan Bank advances, and sale 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 by the Bank to enable the Company to satisfy its
obligations and interest with respect to the Company Debentures in accordance
with their respective terms and provisions), or directly or indirectly redeem,
purchase or otherwise acquire, any shares of its capital stock or, except as
specifically provided herein, 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 conversion
of Company Debentures 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 $15,000
and which cannot be terminated without penalty upon 30 days' notice, or make or
allow any change in, or extension of any of its
-30-
leases or contracts involving annual payments in excess of $15,000 and which
cannot be terminated without penalty upon 30 days' notice;
(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 routine adjustments in
compensation and fringe benefits in the ordinary course of business consistent
with past practice or accelerate the vesting of any stock options or other
stock-based compensation; provided, however, that the Company and/or the Bank
may pay at or immediately prior to Closing the Retention Bonuses (defined in
Section 8.16) and the payment due under the agreement with Xxxxxxx Xxxxx as
provided for in Section 8.17.
(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 $15,000 individually or
$50,000 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 including those policies relating to deferral
of expenses, recognition of income and similar actions;
(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.
-31-
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 and not disclose to
any third party any information furnished to it by the Company in connection
with the transactions contemplated by this Agreement, 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
-32-
and the Regulatory Authorities relating to such applications. The Company shall
cooperate, and shall cause its Subsidiaries, accountants, counsel and other
representatives to cooperate, with Sterling and its accountants, counsel and
other representatives, in connection with the preparation by Sterling of any
applications and documents required to obtain the Approvals which cooperation
shall include providing all information, documents and appropriate
representations as may be reasonably 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. As soon as practicable after
the execution of this Agreement, the Company shall notify each holder of a
Company Option or Company Debenture of the execution of this Agreement and the
terms and conditions contained herein regarding the termination or conversion of
such instruments. The Company shall use commercially reasonable efforts to cause
each Company Option and Company Debenture to be (i) as to the Company Debentures
converted into shares of Company Common Stock, on the Conversion Date, and (ii)
as to the Company Options, terminated prior to the Effective Time, as more
specifically provided in Section 3.02.
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 commercially reasonable efforts to obtain consents of all third parties
and Regulatory Authorities necessary or, in the reasonable opinion of Sterling
or the Company, desirable for the consummation of the transactions contemplated
by this Agreement including the Merger and the Bank Merger. 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.
Section 8.06 Indemnification.
(a) Sterling shall indemnify, defend and hold harmless the directors,
officers, of the Company and its Subsidiaries (each, an "Indemnified Party")
against all losses, expenses
-33-
(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 and any
Subsidiary's Articles of Association 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.
(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 three 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 three-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 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.
-34-
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 Eagle National Bank who are involuntarily terminated, other than
for Cause, within one year after the Transition Period End. Any employee of the
Company or Eagle National 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 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 service to the Company or Eagle
National Bank as of the Transition Period End. Any employee of the Company or
Eagle National Bank who voluntarily terminates employment will not be eligible
for severance benefits. In addition, any employee of the Company or Eagle
National Bank whose job function or position is eliminated and who receives but
declines a
-35-
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 Eagle National 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. Except as may be required by statute,
regulation or prudent banking practices, 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 April 5,
2002), (ii) following the execution of such a confidentiality agreement, the
Company may engage in discussions or negotiations with a third party executing
such an agreement, (iii) following receipt of an Acquisition Proposal, the
Company may take and disclose to its stockholders a position with respect to
such Acquisition Proposal, including, if such Acquisition Proposal is a tender
offer, the Company's Board may take and disclose to the Company's stockholders a
position contemplated by Rule 14e-2 under the Exchange Act, and/or (iv)
following receipt of an Acquisition Proposal, the Company's Board may withdraw
or modify its recommendation referred to in Section 5.25, but in each case
referred to in the foregoing clauses (i) through (iv) only to the extent that
the Company's Board shall conclude in good faith (on the basis of advice from
outside counsel) that such action is required in order for the Company's Board
to satisfy its fiduciary obligations under applicable law; provided, further,
that the Company's Board shall not take any of the foregoing actions referred to
in clauses (i) through (iv) until after reasonable notice to and consultation
with Sterling with respect to such action and that the Company's Board shall
continue to consult with Sterling after taking such action and, in addition, if
the Company Board receives an Acquisition Proposal or any request for
confidential and non-public information or for access to the properties, books
or records of the Company or any Subsidiary for the purpose of making, or in
connection with, an Acquisition Proposal, then
-36-
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.
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.
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.
"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 $500,000 (the "Company Termination Fee"), plus
reasonable out-of-pocket expenses, not in excess of $100,000 (including, without
limitation, amounts paid or payable to banks and investment bankers, fees and
expenses of counsel and printing expenses) (such expenses are hereinafter
referred to as the "Sterling Expenses") incurred by Sterling or any of its
Affiliates in connection with or arising
-37-
out of the transactions contemplated by this Agreement, regardless of when those
expenses are incurred, if this Agreement is terminated (i) by the Company under
the provisions of Section 10.01(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 $500,000 plus reasonable out-of-pocket expenses, not in excess of
$100,000 (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)(viii). The $500,000 and
$100,000 sums payable by Sterling pursuant to clause (i) 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. At the written request of Sterling given within
fifteen calendar days of Closing, the Company shall, consistent with GAAP, make
the following adjustments to the Company's general ledger system and accounting
records: (i) writedown and expense any and all fixed assets identified in
writing by Sterling to such amount as Sterling so indicates; (ii)
-38-
writedown and expense any and all prepaid expenses identified in writing by
Sterling to such amount as Sterling so indicates; (iii) other adjustments as may
be appropriate to comply with GAAP or any other applicable accounting rules or
standards; and (iv) expense the cost of terminating any contract or agreement
identified in writing by Sterling; provided, however, that the Company shall not
be required to take any action that is not consistent with GAAP, that any such
adjustment shall not reduce the Net Income Per Share or the resulting Merger
Consideration, and that any such adjustment shall not constitute a Company
Material Adverse Change or be deemed to have a material adverse effect upon the
Condition of the Company..
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 commercially
reasonable efforts, on behalf of Sterling and pursuant to the request of
Sterling, to cause each director and officer of the Company and the Bank 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. Sterling shall execute
and deliver to each person from which it receives a Release Agreement a similar
release agreement in the form attached hereto as Annex C.
Section 8.15 Notification; Updated Disclosure Schedules. The Company
shall give prompt notice to Sterling, and Sterling or Bancorporation shall give
prompt notice to the Company, of (i) any representation or warranty made by it
in this Agreement becoming untrue or inaccurate in any respect, including,
without limitation, as a result of any change in the Company Disclosure
Schedule, or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
Section 8.16 Retention Bonuses. In order to induce certain employees of
the Bank as of the date of this Agreement to remain employed with the Bank from
the date of this Agreement to the Effective Time, the Bank will make cash
payments to all employees (the "Retention Bonuses") in an aggregate amount not
to exceed $145,000, with the amounts to be paid to such employees determined by
a process or formula mutually satisfactory to the Company and Sterling. The Bank
will pay the Retention Bonuses at or immediately prior to the Effective Time.
The payment of the Retention Bonuses shall not be deemed an expense for purposes
of
-39-
computing Net Income Per Share and such payments shall not otherwise reduce the
Merger Consideration.
Section 8.17 Management Payments. The Bank is a party to agreements with
certain of its officers. Specifically, in order to induce Xxxxxxx Xxxxx to
become the Bank's President, the Bank agreed to pay Xxxxxxx Xxxxx a cash bonus
upon a change in control of the Bank (such as the Bank Merger) to be calculated
based upon the purchase price, which calculation is estimated to result in a
payment of approximately $130,000. The Bank has also agreed to pay an additional
$50,000 to Xxxxxxx Xxxxx if his employment is not continued following the change
in control transaction. In order to induce Xxxxx Newtown to become an executive
officer of the Bank, the Bank agreed to pay Xxxxx Newtown six months salary if
he is not retained as an officer following a change in control transaction.
Prior to the Effective Time, the Bank shall make any payments required by such
agreements. Following the Effective Time, Sterling shall make all payments
required by such agreements. Any payments made pursuant to such agreements shall
not be deemed an expense for purposes of computing Net Income Per Share and such
payments shall not otherwise reduce the Merger Consideration.
Section 8.18 Option Holder Agreements. Simultaneously with the execution
of this Agreement, the Company will provide to Sterling written agreements from
all holders of Company Options pursuant to which such holders agree (i) not to
exercise any of the Company Options, (ii) to accept the payment for the Company
Options provided for in Section 3.02(a) as of the Effective Time, and (iii) upon
receipt of such payment, such Company Options shall be cancelled and shall
terminate at the Effective Time.
Section 8.19 Establishment of Merger Sub. Sterling and Bancorporation
will cause the incorporation and organization of the Merger Sub, the execution
of this Agreement by the Merger Sub, the approval of this Agreement by the sole
shareholder of the Merger Sub, and the performance by the Merger Sub of all
covenants and obligations required of it by this Agreement.
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
-40-
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).
(c) Opinion of Counsel. The Company shall have received an opinion of
Xxxxx Liddell & Xxxx LLP, counsel for Sterling and Bancorporation, in form
mutually acceptable to Xxxxx Liddell & Xxxx LLP and counsel to the Company.
(d) Release Agreements. Persons who execute and deliver Release
Agreements to Sterling pursuant to Section 8.14 shall have received a release
from Sterling and the Bank in the form of Annex C.
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.
-41-
(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) Opinion of Counsel. Sterling shall have received an opinion of
Haynie Rake & Xxxxxx, P.C., counsel for the Company, in form mutually acceptable
to such firm and counsel for Sterling.
(e) 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.
(f) 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.
(g) Conversion of Company Debentures. The Company Debentures shall have
been converted into 90,000 shares of Company Common Stock.
(h) Termination of Company Options. All Company Options shall have been
terminated.
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
-42-
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 November 11, 2002, 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
(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 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)(viii) shall not be deemed effective until payment of the
Sterling Termination Fee and Company Expenses required by Section 8.11(b).
-43-
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, 8.08, 8.17 and 11.01, none of
the respective representations, warranties, obligations, covenants and
agreements of the parties shall survive the Effective Time.
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. Sterling expressly acknowledges that the Company has
engaged Xxxxxx & Xxxxxx, Incorporated ("HAI") to render financial advice and
issue a fairness opinion and Haynie Rake & Xxxxxx, PC ("HRR") as legal counsel
in connection with the transactions contemplated by this Agreement. The Bank
shall pay the fees of HAI and HRR prior to the Effective Time; provided,
however, that the payment of such fees shall not be deemed an expense for
purposes of computing the Net Income Per Share and shall not otherwise reduce
the Merger Consideration.
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 Sections 3.01(a), 4.01, 8.06, 8.08, and 8.17, 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 and the Company
or their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
Section 11.03 Amendments. To the extent permitted by law, this Agreement
may be amended by a subsequent writing signed by each of Sterling,
Bancorporation, and the Company; provided however, that the provisions hereof
relating to the amount of the Merger Consideration shall not be amended after
the Company Stockholders' Meeting without any requisite approval of the holders
of the issued and outstanding shares of Company Common Stock entitled to vote
thereon.
-44-
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. 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 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: ENB Bankshares, Inc.
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopy: (000) 000-0000
With a copy to: Haynie Rake & Xxxxxx, P.C.
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxx
Telecopy: (000) 000-0000
Sterling and
Bancorporation: Sterling Bancshares, Inc.
0000 Xxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: X. Xxxxxx Bridgwater, Chief Executive Officer
Xxxxx X. Xxxxxxx, Xx., General Counsel
Telecopy: (000) 000-0000
-45-
With a copy to: Xxxxx Xxxxxxx & Xxxx LLP
3400 JPMorgan Chase Tower
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxx
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 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.
Section 11.12 Delayed Delivery of Company Disclosure Schedule. At the
election of the Company, the Company Disclosure Schedule may be delivered to
Sterling within three (3) business days of the date hereof. In such event,
Sterling may terminate this Agreement if it notifies the Company within three
(3) business days of its receipt of such schedule that it is not wholly
satisfied, in its sole discretion, with the information set forth in such
Company Disclosure Schedule.
[Remainder of Page Intentionally Left Blank]
-46-
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/ X. Xxxxxx Bridgwater
------------------------------------------
X. Xxxxxx Bridgwater
President and Chief Executive Officer
STERLING BANCORPORATION, INC.
By: /s/ X. Xxxxxx Bridgwater
------------------------------------------
X. Xxxxxx Bridgwater
President
ENB BANKSHARES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------------
Xxxxxx X. Xxxxxxxx
Chairman and Chief Executive Officer
-47-
ANNEX A
AGREEMENT AND IRREVOCABLE PROXY
This Agreement and Irrevocable Proxy, dated as of May ____, 2002 (the
"Agreement"), is by and between Sterling Bancshares, Inc., a Texas corporation
("Sterling"), and __________________________________________ (the
"Stockholder").
R E C I T A L S:
WHEREAS, Sterling and ENB Bankshares, Inc., a Texas corporation (the
"Company"), propose to enter into an Agreement and Plan of Merger, dated as of
the date hereof (the "Merger Agreement"), providing, among other things, for
Sterling's acquisition of the Company through the merger of the Company with
Merger Sub in accordance with the terms and provisions of, and subject to the
conditions set forth in, the Merger Agreement (the "Merger"); and
WHEREAS, the Stockholder is the (i) owner, beneficially and of record, of
(a) ______ shares of the common stock, $5.00 par value per share, of the Company
(the "Common Shares"); and
WHEREAS, the Stockholder has agreed to vote all shares of the Company's
capital stock owned, beneficially and of record, by the Stockholder in favor of
the Merger at a special meeting of the stockholders of the Company for the
purpose of approving and adopting the Merger Agreement and approving the Merger
(the "Company Stockholders' Meeting").
NOW, THEREFORE, to induce Sterling to enter into the Merger Agreement and
in consideration of the aforesaid and the representations, warranties, covenants
and agreements set forth herein and in the Merger Agreement, including the
benefits that the parties hereto expect to derive from the Merger, the receipt
and sufficiency of all of which are hereby acknowledged by the parties, the
parties hereto agree as follows:
1. Revocation of Prior Proxies. The Stockholder hereby revokes
all previous proxies granted with respect to any of the Common Shares owned
by the Stockholder that would conflict with the terms of the Proxy granted
hereby.
2. Grant of Irrevocable Proxy. The Stockholder hereby
irrevocably constitutes and appoints Sterling, X. Xxxxxx Bridgwater and
Xxxxx. X. Xxxxxxx, Xx. in their respective capacities as officers of
Sterling, and any individual, who shall hereafter succeed to their
respective offices with Sterling, and each of them individually, as its
true and lawful proxy and attorney-in-fact, with full power of
substitution, for and in the name, place and stead of the Stockholder, to
call and attend any and all meetings of the Company's stockholders,
including the Company Stockholders' Meeting, at which the Merger is to be
considered and voted upon by the Company's stockholders, and any
adjournments thereof, to execute any and all written consents of
stockholders of the Company and to vote all of the Common Shares presently
or at any future time owned beneficially or of record by the Stockholder
and any and all other securities having voting
rights issued or issuable in respect thereof, which the Stockholder is
entitled to vote (all of the foregoing being collectively referred to as
the "Subject Stock"), and to represent and otherwise act as the Stockholder
could act, in the same manner and with the same effect as if the
Stockholder were personally present, at any such annual, special or other
meeting of the stockholders of the Company (including the Company
Stockholders' Meeting), and at any adjournment thereof (a "Meeting"), or
pursuant to any written consent in lieu of meeting or otherwise; provided,
however, that any such vote or consent in lieu thereof or any other action
so taken shall be solely for the purposes of voting in favor of the Merger,
the Merger Agreement and any transactions contemplated thereby. Such
attorneys and proxies are hereby authorized to vote the Subject Stock in
accordance with the terms of the Proxy granted hereby.
3. Vote in Favor of Merger. If Sterling is unable or declines
to exercise the power and authority granted by the Proxy for any reason,
the Stockholder covenants and agrees to vote all the Subject Stock in favor
of approval of the Merger and the Merger Agreement at any Meeting
(including the Company Stockholders' Meeting) and, upon request of
Sterling, to provide the Stockholder's written consent thereto.
4. No Action Without Sterling's Consent. The Stockholder hereby
covenants and agrees that it will not vote or take any action by written
consent of stockholders in lieu of meeting on any matter that is subject to
the Proxy without Sterling's prior written consent.
5. Negative Covenants of the Stockholder. Except to the extent
contemplated herein or in the Merger Agreement, the Stockholder hereby
covenants and agrees that the Stockholder will not, and will not agree to,
directly or indirectly, (a) sell, transfer, assign, cause to be redeemed or
otherwise dispose of any of the Subject Stock or enter into any contract,
option or other agreement or understanding with respect to the sale,
transfer, assignment, redemption or other disposition of any Subject Stock;
(b) grant any proxy, power-of-attorney or other authorization or interest
in or with respect to such Subject Stock pertaining or relating to the
Merger, the Merger Agreement or any of the transactions contemplated
thereby; or (c) deposit such Subject Stock into a voting trust or enter
into a voting agreement or arrangement with respect to such Subject Stock,
unless and until, in the case of (a), (b) or (c) above, the Stockholder
shall have taken all actions (including, without limitation, the
endorsement of a legend on the certificates evidencing such Subject Stock)
reasonably necessary to ensure that such Subject Stock shall at all times
be subject to all the rights, powers and privileges granted or conferred,
and subject to all the restrictions, covenants and limitations imposed, by
this Agreement, and shall have caused any transferee of any of the Subject
Stock to execute and deliver to Sterling an Agreement and Irrevocable
Proxy, in substantially the form of this Agreement, with respect to the
Subject Stock.
6. Negative Covenants of Sterling. Sterling covenants and
agrees that it will not (a) amend in any material respect the Merger
Agreement so as to adversely affect the Stockholder, unless it obtains the
Stockholder's prior written consent to, or (b) modify the terms of any
other Agreement and Irrevocable Proxy between Sterling and any other
stockholder of the Company, dated as of even date herewith, unless Sterling
shall have
A-2
offered to modify the terms of this Agreement and Irrevocable Proxy in the
same manner and the Stockholder has elected not to accept such offer. If
Sterling shall have notified the Stockholder of any such amendment or
modification, Sterling and the Stockholder hereby agree that the sole
remedy of the Stockholder for a breach by Sterling of the foregoing
covenant shall be to elect to terminate this Agreement and Irrevocable
Proxy by notice to Sterling.
7. Stockholder's Representations and Warranties. The
Stockholder represents and warrants to Sterling that (a) the Stockholder
has duly authorized, executed and delivered this Agreement and this
Agreement constitutes a valid and binding agreement, enforceable in
accordance with its terms and neither the execution and delivery of this
Agreement nor the consummation by the Stockholder of the transactions
contemplated hereby will constitute a violation of, a default under, or
conflict with any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which the Stockholder is a party
or by which the Stockholder is bound; (b) consummation by the Stockholder
of the transactions contemplated hereby will not violate, or require any
consent, approval, or notice under, any provision of law; (c) except to the
extent provided herein, the Subject Stock and the certificates and
instruments representing same are now and at all times during the term of
this Agreement will be held by the Stockholder, or by a nominee or
custodian for the benefit of the Stockholder, free and clear of all liens,
claims, security interests, proxies, voting trusts or agreement or any
other encumbrances whatsoever ("Encumbrances") with respect to the
ownership or voting of the Subject Stock or otherwise, other than
Encumbrances created by or arising pursuant to this Agreement, and there
are no outstanding options, warrants or rights to purchase or acquire, or
proxies, powers-of-attorney, voting agreements, trust agreements or other
agreements relating to, the Subject Stock other than this Agreement; (d)
the Subject Stock constitutes all of the securities of the Company owned
beneficially or of record by the Stockholder on the date hereof; and (e)
the Stockholder has the present power and right to vote all of the Subject
Stock as applicable, as contemplated herein.
8. Certain Defined Terms. Unless otherwise expressly provided
herein, all capitalized terms used herein without definition shall have the
meanings assigned to them in the Merger Agreement.
9. Choice of Law. The terms and provisions of this Agreement
shall be governed by and construed in accordance with the laws of the State
of Texas without giving effect to the provisions thereof relating to
conflicts of law.
10. Binding Effect; Assignability. The terms and provisions of
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the successors and permitted assigns of the parties hereto.
This Agreement and the rights hereunder may not be assigned or transferred
by Sterling, except with the prior written consent of the Stockholder.
A-3
11. Term. This Agreement shall terminate at the earlier of (i)
the Effective Time, (ii) the termination of the Merger Agreement in
accordance with its terms, (iii) the revocation by the Company Board of the
recommendation to its stockholders to approve the Merger, the Merger
Agreement and the transactions contemplated thereby, or (iv) termination of
this Agreement in accordance with Section 7 hereof.
12. Irrevocable Proxy Coupled with an Interest. The Stockholder
acknowledges that Sterling will enter into the Merger Agreement in reliance
upon this Agreement, including the Proxy, and that the Proxy is granted in
consideration for the execution and delivery of the Merger Agreement by
Sterling. THE STOCKHOLDER AGREES THAT THE PROXY AND ALL OTHER POWER AND
AUTHORITY INTENDED TO BE CONFERRED HEREBY IS COUPLED WITH AN INTEREST
SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE POWER AND, EXCEPT AS PROVIDED
IN SECTION 12 HEREOF, SHALL NOT BE TERMINATED BY ANY ACT OF THE
STOCKHOLDER, BY LACK OF APPROPRIATE POWER OR AUTHORITY OR BY THE OCCURRENCE
OF ANY OTHER EVENT OR EVENTS.
13. Specific Performance. The parties acknowledge and agree that
performance of their respective obligations hereunder will confer a unique
benefit on Sterling and that a failure of performance will result in
irreparable harm to Sterling and will not be compensable by money damages.
The parties therefore agree that this Agreement, including the Proxy, shall
be specifically enforceable and that specific enforcement and injunctive
relief shall be a remedy properly available to Sterling for any breach of
any agreement, covenant or representation of the Stockholder hereunder.
14. Further Assurance. The Stockholder will, upon request,
execute and deliver any additional documents and take such further actions
as may reasonably be deemed by Sterling or its counsel to be necessary or
desirable to carry out the provisions of this Agreement.
15. Severability. If any term, provision, covenant or
restriction of this Agreement, or the application thereof to any
circumstance shall, to any extent, be held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement or the
application thereof to any other circumstance, shall remain in full force
and effect, shall not in any way be affected, impaired or invalidated and
shall be enforced to the fullest extent permitted by law.
16. Counterparts. This Agreement and Irrevocable Proxy may be
executed in counterparts, each of which shall be deemed to be an original
but all of which together shall constitute one and the same document.
17. Notice. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof
of delivery) to the parties at the following addresses (or such other
address for a party as shall be specified by like notice): (i) if to
Sterling, to the address set forth in Section 11.06 of the Merger
Agreement; and
A-4
(ii) if to a Stockholder, to the address set forth on the signature page
hereof, or such other address as may be specified in writing by such
Stockholder.
[Remainder of Page Intentionally Left Blank]
A-5
IN WITNESS WHEREOF, Sterling and the Stockholder have duly executed
this Agreement or caused this Agreement to be duly executed as of the date first
set forth hereinabove.
STOCKHOLDER:
---------------------------
Address:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
STERLING BANCSHARES, INC.
By:
------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
A-6
ANNEX B
FORM OF
RELEASE AGREEMENT - BANK
THIS RELEASE AGREEMENT ("Release") dated the _____ day of ___________,
2002, is executed by the undersigned (the "Releasor") and delivered to ENB
Bankshares, Inc., a Texas corporation (the "Company"), ENB Delaware Bankshares,
Inc., a Delaware corporation (the "Intermediate Company"), Eagle National Bank
(the "Bank") and Sterling Bancshares, Inc., a Texas corporation, ("Sterling").
WHEREAS, Sterling, Sterling Bancorporation, Inc. and the Company have
entered into that certain Agreement and Plan of Merger dated as of May ___, 2002
(the "Merger Agreement") pursuant to which Sterling shall acquire the Company
through the merger of the Company with Merger Sub;
WHEREAS, Sterling has required as a condition to such acquisition and the
consummation of the merger (the "Merger") that the undersigned execute and
deliver this Release to confirm the absence of any claims by the undersigned
against the Company or its subsidiaries, including the Intermediate Company and
the Bank.
NOW, THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned Releasor hereby agrees as follows:
Section 1. RELEASE. The Releasor, on his own behalf and on behalf of
his heirs, executors, administrators, agents, successors and assigns
(collectively, the "Releasor Persons") hereby irrevocably and unconditionally
releases, waives and forever discharges the Company, the Intermediate Company,
the Bank, Sterling and Bancorporation and their respective predecessors,
parents, subsidiaries, affiliates and other related entities, and all of their
respective past, present and future officers, directors, stockholders,
affiliates, agents, representatives, successors and assigns, other than the
Releasor and any Releasor Persons (collectively, the "Released Parties") from
any and all actions, causes of action, suits, debts, dues, sums of money,
accounts, bonds, bills, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, executions, claims and
demands of every type and nature whatsoever, known or unknown, in law or equity
(each a "Claim" and collectively, the "Claims") relating to, arising out of or
in connection with the Company, the Intermediate Company, the Bank, their
respective business and/or assets, including any Claims arising of or resulting
from the Releasor's status, relationship, affiliation, rights, obligations
and/or duties as a director, officer, employee or security holder of the
Company, the Intermediate Company, and/or the Bank, for all periods through the
time immediately prior to the Effective Time; provided, however, that neither
the Company, Intermediate Company, the Bank, Sterling, Bancorporation nor
Sterling Bank shall be released from any of their respective obligations or
liabilities to the undersigned Releasor (i) in respect of accrued and deferred
compensation permitted by any agreement with the Company, the Intermediate
Company, the Bank or any other subsidiaries which have been expressly scheduled
and made a part of the Merger Agreement, (ii) as to rights of indemnification
pursuant to Section 8.06 of the Merger Agreement and the Articles of
Incorporation and Bylaws of the Company, the Intermediate Company, the Bank and
their
respective subsidiaries, (iii) in respect of any deposits of Releasor at the
Bank existing on the date of this Release, and (iv) arising in connection with
the transactions contemplated by the Merger Agreement.
The Releasor hereby represents and warrants that in his capacity as a
director, officer, employee or security holder of the Company, the Intermediate
Company, the Bank and/or their respective subsidiaries, as applicable, the
Releasor has no knowledge of any claims that the Releasor may have against the
Released Parties.
This Release shall be effective only upon the consummation of the Merger
Agreement pursuant to the terms thereof.
Section. 2. SUCCESSORS. This Release shall be binding upon the
undersigned Releasor, the Releasor Persons and their respective predecessors,
parents, subsidiaries, affiliates and other related parties and shall inure to
the benefit of the Released Parties and their respective successors and assigns.
Section 3. GOVERNING LAW. This Release shall be governed by and
construed in accordance with the laws of Texas, without giving effect to any
principles of contract of law.
Section 4. COUNTERPARTS. This Release may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
Section 5. MODIFICATION. This Release may be modified only by written
instrument executed by the undersigned, the Company, the Bank and Sterling.
IN WITNESS WHEREOF, the undersigned Releasor has executed this Release
effective as of the date first above written.
---------------------------------
Signature
---------------------------------
Printed Name
B-2
ANNEX C
FORM OF
RELEASE AGREEMENT - PERSONS
THIS RELEASE OF CLAIMS ("Release") dated the _____ day of _________, 2002,
is executed and delivered by the Releasing Parties, as hereinafter defined.
WHEREAS, the persons listed on Schedule A attached hereto and made a part
hereof have each executed a Release Agreement in favor of Sterling, ENB
Bankshares, Inc. (the "Company"), ENB Delaware Bankshares, Inc. (the
"Intermediate Company"), Eagle National Bank (the "Bank") and Sterling
Bancorporation, Inc. ("Bancorporation") in accordance to the Section 8.14 of the
Agreement and Plan of Merger among Sterling, Bancorporation, the Bank and the
Company (the "Agreement");
WHEREAS, Sterling will acquire the Company pursuant to the Agreement and
the Bank shall merge into Sterling Bank, an indirect wholly-owned subsidiary of
Sterling; and
NOW THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Sterling, the Company, the Intermediate Company, Sterling Bank,
the Company, Bancorporation and the Bank (together, the "Releasing Parties")
hereby agree as follows:
Section 1. Release. The Releasing Parties hereby RELEASE and FOREVER
DISCHARGE each of the persons listed on Schedule A from any and all manners of
action, causes of action, suits, debts, sums of money, accounts, reckonings,
bonds, bills, specialties, covenants, contracts, controversies, agreements,
premises, variances, trespasses, damages, judgments, executions, claims and
demands whatsoever in law or in equity which the Releasing Parties ever had, now
have, or hereafter can, shall or may have against such person in respect of any
and all agreements and obligations incurred on or prior to the date hereof, or
in respect of any event occurring or circumstances existing on or prior to the
date hereof; provided, however, that no such person shall be released from (i)
any action arising from intentional fraud, deceit or willful misconduct, (ii)
any of such persons' obligations or liabilities to the Releasing Parties in
connection with any indebtedness or contractual obligation or liability related
to deposits, accounts or loans of such persons existing on the date hereof and
(iii) any action arising in connection with the transactions contemplated by the
Agreement.
This Release is effective only upon consummation of the Agreement pursuant
to the terms thereof.
Section 2. Successors. This Release shall be binding upon the Releasing
Parties and their successors and assigns and shall inure to the benefit of the
persons listed on Scheduled A and their respective heirs, devisees,
administrators, executors, personal representatives, successors and assigns.
Section 3. Governing Law. This Release shall be governed by and
construed in accordance with the laws of the state of Texas, without giving
effect to any principles of conflicts of law.
Section 4. Counterparts. This Release may be executed in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
Section 5. Modification. This Release may be modified as to any person
listed on Schedule A only by a written instrument executed by such person and
the Releasing Parties, or their successors and assigns.
IN WITNESS WHEREOF, this Release is executed by the Releasing Parties
effective as of the date first above written.
Sterling Bancshares, Inc.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
ENB Bankshares, Inc.
By:
------------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
ENB Delaware Bankshares, Inc.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Eagle National Bank
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Sterling Bancorporation, Inc.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
C-2
Sterling Bank
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
C-3
