EXHIBIT 2.01
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") entered into as of
October ___, 1997, by and among SURETY BANK, NATIONAL ASSOCIATION, a national
banking association located in Hurst, Texas ("Surety Bank"), TEXSTAR NATIONAL
BANK, a national banking association located in Universal City, Texas
("TexStar"), SURETY CAPITAL CORPORATION, a Delaware corporation located in
Hurst, Texas ("Surety"), and the shareholders of TexStar listed on Schedule A
attached hereto who are entering into this Agreement for certain limited
purposes (individually a "Shareholder" and collectively, the "Shareholders").
WITNESSETH:
WHEREAS, Surety is the record and beneficial owner of one hundred percent
(100%) of the issued and outstanding shares of common stock of Surety Bank; and
WHEREAS, the parties hereto desire to effect a reorganization whereby
TexStar will merge with and into Surety Bank (the "Merger") pursuant to an
agreement to merge (the "Merger Agreement") in substantially the form attached
hereto as Exhibit A, which provides, among other things, for the conversion and
exchange of the outstanding common stock, $5.00 par value, of TexStar (the
"TexStar Common Stock") immediately prior to the time the Merger becomes
effective in accordance with the provisions of the Merger Agreement into the
right to receive (1) cash and (2) certain performance payments, all as more
fully set forth in the Merger Agreement.
NOW, THEREFORE, to effect such reorganization and in consideration of the
premises and the mutual warranties, representations, covenants and agreements
contained herein, the parties hereto do hereby represent, warrant, covenant and
agree as follows:
1. Representations and Warranties of TexStar. TexStar represents and
warrants to Surety Bank and Surety as follows:
(a) Organization. TexStar is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States of America. TexStar (i) is duly authorized to conduct a general banking
business, in accordance with its charter, subject to the supervision of the
United States Office of the Comptroller of the Currency (the "Comptroller");
(ii) is an insured bank as defined in the Federal Deposit Insurance Act; and
(iii) has full power and authority (including all licenses, franchises, permits
and other governmental authorizations which are legally required) to engage in
the business and activities now conducted by it.
(b) Capital Stock. The authorized capital stock of TexStar consists of
575,000 shares of common stock, par value $5.00 per share, of which as of the
close of business on August 31, 1997,
485,000 shares were outstanding and no shares were held in the treasury. All of
the outstanding shares of TexStar Common Stock have been duly and validly
authorized and issued, are fully paid and nonassessable and have not been issued
or disposed of in violation of the preemptive rights of any shareholder. Except
as set forth in Schedule 1(b), there are no outstanding subscriptions,
contracts, conversion privileges, options, warrants, calls, preemptive rights or
other rights obligating TexStar to issue, sell or otherwise dispose of, or to
purchase, redeem or otherwise acquire, any shares of TexStar Common Stock.
Since August 31, 1997, no shares of TexStar Common Stock have been purchased,
redeemed or otherwise acquired, directly or indirectly, by TexStar, except as
set forth on Schedule 1(b), and no dividends or other distributions have been
declared, set aside, made or paid to the shareholders of TexStar.
(c) Subsidiaries. TexStar has no subsidiaries and there is no
association, corporation or other entity in which TexStar owns an equity or
voting interest or with respect of which TexStar has an obligation to acquire an
equity or voting interest.
(d) Community Reinvestment Act. TexStar has not received any notice of
non-compliance with the Community Reinvestment Act ("CRA") from any regulatory
agency, and TexStar has supplied Surety Bank with copies of the CRA Statement
for TexStar, all supporting papers relating thereto, all letters and comments
received by TexStar pertaining thereto, and any responses by TexStar to such
comments.
(e) TexStar Financial Statements. TexStar has furnished Surety Bank
with the following financial statements (collectively, the "TexStar Financial
Statements"): (i) the Reports of Income and Condition filed by TexStar with the
Comptroller as of December 31, 1996, 1995 and 1994; and (ii) the unaudited
balance sheet and income statement of TexStar as of June 30, 1997 and for the
six (6) month period then ended. The TexStar Financial Statements fairly present
the financial position, results of operations and changes in financial position
of TexStar as of the dates and for the periods indicated in conformity with
generally accepted accounting principles, consistently applied during such
periods, except as otherwise stated in the TexStar Financial Statements and
subject, in the case of the interim TexStar Financial Statements, to normal and
recurring adjustments.
(f) Liabilities and Obligations. At June 30, 1997 TexStar had no
obligation or liability which was material or which, when combined with all
similar obligations or liabilities, would have been material, except as
disclosed in the TexStar Financial Statements or as set forth in any of the
schedules referred to herein, and there does not exist a set of circumstances
resulting from transactions effected or events occurring on or prior to June 30,
1997, or from any action omitted to be taken during such period, which could
reasonably be expected to result in any such
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material obligation or liability, except as disclosed or provided for in the
TexStar Financial Statements or except as disclosed in one or more of the
schedules referred to herein. Since June 30, 1997 TexStar has not incurred or
paid any obligation or liability, except for obligations incurred or paid by
TexStar in the ordinary course of its banking business consistent with its past
practice. Except for endorsements made in connection with the deposit of items
for collection made by TexStar in the ordinary course of its banking business
consistent with its past practice and except as set forth in the TexStar
Financial Statements, in Schedule 1(f) attached hereto, or in any of the
schedules referred to herein, TexStar is not obligated (by discount, loan
participation agreement, repurchase agreement or letter of credit) to provide
funds in respect of or to guarantee or assume any debt or obligation which is
either material or which, when combined with all similar debts or obligations,
would be material.
(g) Reports. Since December 31, 1992, TexStar has filed all reports,
registrations and statements, together with any required amendments thereto,
that it was required to file, if any, with (i) the Federal Reserve Board, (ii)
the Federal Deposit Insurance Corporation (the "FDIC"), (iii) the Comptroller
and (iv) any applicable state securities or banking authorities. All such
reports and statements filed with any such regulatory body or authority are
collectively referred to herein as the "TexStar Reports." As of their
respective dates, the TexStar Reports complied in all material respects with all
the rules and regulations promulgated by the Federal Reserve Board, the FDIC,
the Comptroller and applicable state securities or banking authorities, as the
case may be. Copies of all the TexStar Reports have been made available to
Surety Bank by TexStar.
(h) Loans. All loans of TexStar reflected in the TexStar Financial
Statements and all loans originated since June 30, 1997 were made in the
ordinary course of business. A true, complete and accurate list of all (i)
loans classified by examiners as "Other Loans Especially Mentioned,"
"Substandard," "Doubtful," or "Loss," (ii) past due loans, (iii) loans to the
officers of TexStar and the Shareholders, or any of them, and (iv) loans to
other parties which have been guaranteed by the officers of TexStar and the
Shareholders, or any of them, or for which the officers of TexStar and the
Shareholders, or any of them, are otherwise responsible at June 30, 1997 is
attached hereto as Schedule 1(h) and by reference made a part hereof.
(i) Reserve for Possible Loan Losses. The reserve for possible loan
losses as shown on the TexStar Financial Statements is adequate in all material
respects to provide for all losses, net of recoveries relating to loans
previously charged-off, on loans outstanding.
(j) Investment Securities. Except for pledges to secure public and
trust deposits, or except as set forth on Schedule 1(j)
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attached hereto, none of the investments reflected in the TexStar Financial
Statements as of June 30, 1997 under the heading "Investment Securities" and
none of the investments made since said date by TexStar is subject to any
"investment" or other restriction, whether contractual or statutory, which
materially impairs the ability of the holder thereof freely to dispose of such
investment at any time, to the extent permitted by applicable regulations, for a
fair market price as determined at the time of such disposition.
(k) Evidences of Indebtedness. Each evidence of indebtedness reflected
as an asset in the TexStar Financial Statements as of June 30, 1997, or acquired
since that date, is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms (subject, as to enforcement of
remedies, to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws from time to time in effect). No evidence of indebtedness having an
unpaid balance (principal and accrued interest) in excess of $25,000 is subject
to any defense, offset or counterclaim.
(l) Physical Properties. TexStar has furnished to Surety Bank a
schedule, designated Schedule 1(l), describing all physical properties, real and
personal (showing the gross book values, accumulated depreciation and net book
values), owned or leased by TexStar as of June 30, 1997, having an original cost
in excess of $25,000 (exclusive of supplies consumable in the ordinary course of
business, which need not be scheduled). TexStar has good and indefeasible fee
simple title to all material real estate owned by it, has a valid leasehold
interest in each of the leased properties and owns outright all other assets and
properties, whether real, personal or mixed, tangible or intangible, described
in Schedule 1(l) or reflected in the TexStar Financial Statements as of June 30,
1997, or acquired after said date (other than properties sold, and supplies
consumed, by TexStar in the ordinary course of its banking business consistent
with its past practice), free and clear of all liens, pledges, mortgages,
security interests, charges, burdens, encumbrances, options and adverse claims
("Burdens"), except in each case as set forth in Schedule 1(l) and except for
liens for current taxes not yet due and payable and such imperfections of title,
covenants and easements as do not materially detract from or interfere with the
present use of the asset or property subject thereto or affected thereby. Since
June 30, 1997 TexStar has not satisfied or discharged, or become obligated to
satisfy or discharge, any Burden affecting TexStar or any asset of TexStar,
except in the ordinary course of TexStar's banking business consistent with its
past practice. The operation of the properties of TexStar and the business of
TexStar in the manner in which they are now operated does not violate any zoning
ordinances or municipal regulations in such a way as could, if such ordinances
or regulations were enforced, result in any material impairment of the uses of
the respective properties for the purposes for which
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they are now operated, and no covenants, easements, rights-of-way or regulations
of record materially impair such uses.
(m) Compliance with Environmental Laws. Except as set forth on Schedule
1(m) or described in the environmental assessments prepared pursuant to Section
3(q) hereof, there is no legal, administrative, or other proceeding, claim, or
action of any nature seeking to impose on TexStar, or that could result in the
imposition on TexStar of, any liability relating to the release of hazardous
substances as defined under any local, state or federal environmental statute,
regulation or ordinance including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), pending or threatened against TexStar the result of which has had or
could reasonably be expected to have a material adverse effect upon the
financial condition of TexStar; there is no reasonable basis for any such
proceeding, claim or action; and TexStar is not subject to any agreement, order,
judgment, or decree by or with any court, governmental authority or third party
imposing any such environmental liability. TexStar has provided Surety Bank with
copies of all environmental assessments, reports, studies and other related
information in its possession with respect to each bank facility and each non-
residential OREO property.
(n) Condition of Personal Properties. All personal properties owned or
leased by TexStar are used by TexStar in the ordinary course of its business and
are in good condition and repair, normal wear and tear excepted.
(o) Patents, Trademarks, Etc. Except as set forth on Schedule 1(o),
there are no
(i) patents, trademarks, trade names or copyrights or
applications therefor owned by or registered in the name of TexStar or
in which TexStar has rights,
(ii) license agreements to which TexStar is a party, either as
licensor or licensee, with respect to any patents, trademarks, trade
names or copyrights, or
(iii) claims, to the knowledge of TexStar or the Shareholders,
that in the conduct of TexStar's business as now conducted TexStar is
infringing any patents, trademarks, trade names or copyrights of
others.
(p) Compliance with Laws. Except as would not have a material adverse
effect on the financial condition of TexStar, TexStar
(i) has complied with all laws and governmental regulations
pertaining to consumer credit in all material respects,
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(ii) has complied with all other laws, regulations, licensing
requirements and orders applicable to its business, the breach or
violation of which could have a material adverse effect on said
business (including without limitation licensing requirements with
respect to personnel),
(iii) has filed with the proper authorities all statements and
reports required by the laws, regulations, licensing requirements and
orders to which it or any of its employees (because of his activities
on behalf of his employer) are subject, and
(iv) possesses all necessary licenses, franchises, permits and
governmental authorizations to conduct its business in all material
respects in the manner in which and in the jurisdictions and places
where such business is now conducted.
(q) Insurance. TexStar has furnished to Surety Bank a schedule,
designated Schedule 1(q), containing a brief description of all policies of
fire, liability and other forms of insurance and all fidelity bonds held by
TexStar.
(r) Material Contracts. Except as set forth in Schedule 1(r), neither
TexStar nor its assets, business or operations are a party to or are bound or
affected by or receive benefits under any written or oral agreement, arrangement
or commitment relating to
(i) the employment of any person other than personnel employed
at the pleasure of TexStar in the ordinary course of its business at
rates of compensation and on terms consistent with its past practice,
(ii) the election or retention in office of any director or
officer,
(iii) collective bargaining with, or any representation of any
employees by, any labor union or association,
(iv) the acquisition of services, supplies, equipment or other
personal property involving, in any particular case, more than $25,000
or for a quantity in excess of its requirements for normal operating
purposes,
(v) the purchase or sale of real property,
(vi) distribution, agency, public relations, advertising,
printing, construction, accounting or legal services, except for
agreements, arrangements and commitments subject to cancellation
without liability on notice of thirty (30) days or less and involving
a liability for
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each such agreement, arrangement or commitment of less than $25,000,
(vii) lease of real or personal property as lessor or lessee, or
sublessor or sublessee, providing for annual payments in the aggregate
in excess of $2,500,
(viii) bonuses, pensions, profit-sharing, retirement, stock
options, stock purchases, employee discounts or other employee
benefits,
(ix) lending or advancing of funds, other than in the ordinary
course of TexStar's banking business consistent with its past
practice,
(x) borrowing of funds or receipt of credit other than in the
ordinary course of TexStar's banking business consistent with its past
practice,
(xi) incurring of any material obligation or liability except
for transactions engaged in by TexStar in the ordinary course of its
banking business consistent with its past practice,
(xii) the sale of personal property or services under which
payments due after the date of this Agreement exceed $25,000,
(xiii) any transaction or series of transactions, including loans,
in which any "affiliate" of TexStar, as that term is used in the Rules
and Regulations of the Securities and Exchange Commission under the
Securities Act of 1933 (the "1933 Act"), any officer or director of
TexStar, any officer or director of any "affiliate" of TexStar, or any
"associate" of any such officer or director, as that term is defined in
Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934 (the "1934 Act"), has an interest if
such transaction or series of transactions would be required to be
disclosed in a proxy statement filed by a non-banking corporation under
the 1934 Act, or
(xiv) any material transaction not in the ordinary course of
TexStar's banking business consistent with its past practice.
Except as set forth in Schedule 1(r), since June 30, 1997 TexStar has not made
or permitted, or agreed to make or permit, any material modification or
termination of any material agreement, commitment or arrangement, except in the
ordinary course of its banking business consistent with its past practice.
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(s) Absence of Adverse Agreements. TexStar is not a party to any
agreement or instrument or any judgment, order or decree or any rule or
regulation of any court or other governmental agency or authority which
materially and adversely affects or in the future may materially and adversely
affect the assets, properties, business, financial condition, operations or
prospects of TexStar.
(t) Employee Benefits.
(i) Schedule 1(t) lists each Employee Benefit Plan that TexStar
maintains or to which it contributes. For these purposes, "Employee
Benefit Plan" means any (i) nonqualified deferred compensation or
retirement plan or arrangement which is an employee pension benefit
plan (as defined in (S)3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), (ii) qualified defined contribution
retirement plan or arrangement which is an employee pension benefit
plan, (iii) qualified defined benefit retirement plan or arrangement
which is an employee pension benefit plan (including any multiemployer
plan), or (iv) employee welfare benefit plan (as defined in ERISA
(S)3(1)) or material fringe benefit plan or program. With regard to
each such plan:
(1) the plan (and each related trust, insurance contract, or
fund) complies in form and in operation in all respects with the
applicable requirements of ERISA, the Internal Revenue Code of
1986, as amended (the "Code"), and other applicable laws;
(2) all required reports and descriptions have been filed or
distributed appropriately, and the requirements of Part 6 of
Subtitle B of Title I of ERISA and of Code (S)4980B have been met;
(3) all contributions (including all employer contributions
and employee salary reduction contributions) which are due have
been paid and all contributions for any period which are not yet
due have been accrued on the TexStar Financial Statements in
accordance with the past custom and practice of TexStar; and
(4) TexStar is currently complying, and has in the past
complied, with all requirements related to the formation and
operation of the Employee Benefit Plan, and the TexStar Financial
Statements properly reflect all unpaid expenses and obligations in
any way related to the Employee Benefit Plan.
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(ii) TexStar has delivered or made available to Surety
Bank correct and complete copies of the plan documents and summary
plan descriptions, the most recent determination letter received from
the Internal Revenue Service, the most recent Form 5500 Annual Report,
and all related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit Plan.
(iii) TexStar does not maintain or contribute to, and has
not in the past maintained or contributed to, any Employee Benefit
Plan providing medical, health, or life insurance or other welfare-
type benefits for current or future retired or terminated employees,
their spouses, or their dependents (other than in accordance with Code
(S)4980B).
(u) Material Contract Defaults. Except as set forth in Schedule 1(u),
TexStar is not in default in any material respect under any of the agreements,
commitments, arrangements, leases, insurance policies or other instruments set
forth or described herein or in the schedules referred to herein or otherwise
disclosed in writing to Surety Bank by TexStar; such agreements, commitments,
arrangements, leases, insurance policies and other instruments are legal, valid
and binding obligations of the respective parties thereto in accordance with
their terms; and there are no defenses, offsets or counterclaims thereto which
may be made by any party thereto other than TexStar, nor has TexStar waived any
substantial rights thereunder, except as set forth in the schedules referred to
herein or otherwise disclosed in writing to Surety Bank by TexStar on or before
the date of this Agreement.
(v) Litigation and Other Proceedings. Except to the extent indicated
in Schedule 1(v), there is not pending or threat ened against TexStar, or
affecting or which would affect the assets of TexStar, any action, suit,
proceeding or investigation which
(i) involves a claim for an amount exceeding the amount
recoverable by TexStar from insurance companies under policies
described in Schedule 1(q), subject to the deductible amounts under
said policies as set forth in said schedule,
(ii) has resulted or might result in any adverse change in the
business, operations or assets or the condition, financial or
otherwise (including without limitation changes in the value of
investments), or results of operations of TexStar,
(iii) has affected or might affect the right or ability of
TexStar to carry on its business as now conducted, or
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(iv) has affected or might affect the consummation of the
transactions contemplated by this Agreement or the Merger Agreement,
or any circumstances which would give rise to any such action, suit, proceeding
or investigation. The materiality threshold under Section 16 does not apply for
purposes of the foregoing. Except as set forth in Schedule 1(v), TexStar is not
(x) subject to any continuing court or other order, writ, injunction or decree
applicable specifically to it or to its business, property or employees, or (y)
in default with respect to any order, writ, injunction or decree of any nature.
(w) Taxes. TexStar has filed with the appropriate governmental
agencies all federal, state and local income, franchise, excise, real and
personal property and other tax returns and reports which are required to be
filed, and has paid all taxes shown thereon to be due and payable. There are no
unpaid taxes of TexStar which are or may become a lien on the properties or
assets of TexStar, except liens for taxes not yet due and payable. The reserves
and liabilities for taxes reflected in the TexStar Financial Statements have
been accrued in accordance with generally accepted accounting principles
consistent with the past practice of TexStar and are sufficient for the payment
of all interest, taxes, and penalties relating to periods ending with or prior
to the Closing. There is no pending or proposed assessment by any taxing
authority against TexStar for additional taxes for which TexStar does not have
adequate reserves and which is not reflected on the TexStar Financial
Statements. No income tax liability of TexStar has been asserted by the
Internal Revenue Service for taxes in excess of those already paid. TexStar is
not a party to any agreement currently in effect which extends the period for
assessment and collection of any tax, nor is TexStar a party to any action or
proceeding by any governmental authority for assessment or collection of taxes,
nor has any claim for assessment or collection of taxes been asserted against
TexStar. The materiality threshold under Section 16 does not apply for purposes
of the foregoing.
(x) Absence of Certain Changes or Events. Except as set forth in
Schedule 1(x), since June 30, 1997 TexStar has not:
(i) issued or sold any of its capital stock or any corporate
debt obligations (except certificates of deposit, letters of credit,
cashier's checks and other documents and instruments issued in the
ordinary course of the banking business of TexStar);
(ii) granted any option for the purchase of any shares of its
capital stock;
(iii) declared or set aside any dividend or other distribution
in respect of its capital stock, or directly
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or indirectly, purchased, redeemed or otherwise acquired any such
capital stock;
(iv) made or authorized any change in its outstanding capital
stock or in its Articles of Association or bylaws;
(v) made any material change in its mode of management or
operation or method of accounting;
(vi) incurred any obligations or liabilities (absolute or
contingent) (other than any obligations or liabilities incurred in the
ordinary course of business and any obligations or liabilities less
than $2,500 but not exceeding $10,000 in the aggregate) or mortgaged,
pledged or subjected to lien or encumbrance (other than statutory
liens not yet delinquent) any of its assets or properties;
(vii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than
current liabilities included in the TexStar Financial Statements and
current liabilities incurred since the date thereof in the ordinary
course of business;
(viii) sold, exchanged or otherwise disposed of any of its assets
other than in the ordinary course of business;
(ix) made or become obligated to make any capital expenditures
other than such expenditures or commitments which do not aggregate
more than $10,000;
(x) engaged in any transaction affecting its business or
properties not in the ordinary course of business or suffered any
extraordinary loss;
(xi) paid or become obligated to pay any general wage or salary
increase, bonus, severance or termination pay to any officer or
employee, entered into any employment contract with any officer or
employee, instituted any employee welfare, bonus, stock option,
profit-sharing, retirement or similar plan or arrangement, or granted
or agreed to grant any increase in compensation to any director;
(xii) made any investment except investments in the ordinary
course of business, in accordance with past practice;
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(xiii) suffered any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting its
properties;
(xiv) waived any rights of value which in the aggregate are
material;
(xv) experienced any material adverse change in its assets,
properties, business, financial condition, operations, or prospects;
(xvi) suffered the occurrence of any event or condition of any
character which may materially and adversely affect its assets,
properties, business, financial condition, operations, or prospects;
or
(xvii) entered into any material transactions outside the
ordinary course of business except as expressly contemplated by this
Agreement.
(y) Corporate Power and Authority. The Board of Directors of TexStar
has duly approved this Agreement, the Merger Agreement and the transactions
contemplated hereby and thereby, and has authorized the execution and delivery
of this Agreement and, subject to the approval of the shareholders of TexStar,
the Merger Agreement by TexStar. TexStar has full power, authority and legal
right to enter into such agreements and, upon approval of such agreements by
regulatory authorities having jurisdiction in the premises and by the TexStar
shareholders, to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Merger
Agreement and the consummation of the transactions contemplated hereby and
thereby in accordance with said agreements will not:
(i) conflict with the Articles of Association or the bylaws of
TexStar,
(ii) result in any breach or termination of, or constitute a
default under, or constitute an event which with notice or lapse of
time, or both, would become a default, or result in the creation of
any Burden upon any asset of TexStar, under any agreement, arrangement
or commitment, or violate any order, writ, injunction or decree to
which TexStar is a party or by or under which TexStar or its assets,
business or operations may be bound or affected or receive benefits,
or
(iii) result in the loss or adverse modification of any license,
franchise, permit or other authorization granted to or otherwise held
by TexStar.
(z) Compensation. TexStar has furnished to Surety Bank a schedule,
designated Schedule 1(z), containing the name and
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position of each person employed by TexStar whose aggregate annual compensation
from TexStar (including bonuses and similar remuneration) exceeds $25,000 and
setting forth his total annual compensation. Except as designated on Schedule
1(z), TexStar has no knowledge of any facts which would indicate that employees
of TexStar will not continue in TexStar's employment on an acceptable basis,
subject to normal turnover. Since June 30, 1997, except as set forth in Schedule
1(z), TexStar has not granted or become obligated to grant any increases in the
wages or salary of, or paid or become obligated to pay any bonus or made or
become obligated to make any similar payment to, any officer or employee
(including, without limitation, any increase in the rate of compensation payable
to any of the personnel listed in Schedule 1(z) over the rate shown in Schedule
1(z)) in an aggregate amount that, computed on an annual basis, would exceed ten
percent (10%) of such officer's or employee's annual rate of compensation prior
to all such increases, bonuses or similar payments. In addition, since June 30,
1997, except as set forth in Schedule 1(z), TexStar has not, directly or
indirectly, paid or become obligated to pay any severance or termination pay to
any officer or employee.
(aa) Availability of Documents. TexStar has heretofore made available
for inspection by Surety Bank at the offices of TexStar true, correct and
complete copies of its Articles of Association and bylaws and all agreements,
arrangements, commitments and documents referred to herein or in the schedules
referred to herein, in each case together with all amendments and supplements
thereto.
(bb) Claims and Deposits. Neither TexStar nor any of the Shareholders
have any claims against TexStar except as otherwise disclosed in Schedule 1(ab).
All sums on deposit with TexStar by the Shareholders and the officers of TexStar
in excess of $100,000 are disclosed on Schedule 1(ab).
(cc) Schedules. All schedules referred to herein furnished or to be
furnished by TexStar to Surety Bank are (or will be when furnished) true,
correct and complete in all material respects, as supplemented on the Closing
Date.
(dd) Stock Ownership. The Shareholders are as of the date of this
Agreement the record owners, and on the Closing Date will be the beneficial and
record owners, of over seventy-four percent (74%) of the issued and outstanding
shares of TexStar Common Stock.
2. Representations and Warranties of Surety Bank. Surety Bank hereby
represents and warrants to TexStar and the Shareholders as follows:
(a) Organization. Surety Bank is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States of America and has all
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requisite corporate power and authority and is entitled to own or lease its
properties and to carry on its business as and in the places where such
properties are owned or leased and such business is conducted.
(b) Corporate Power and Authority. The Board of Directors of Surety
Bank has duly approved this Agreement, the Merger Agreement and the transactions
contemplated hereby and thereby and has authorized the execution and delivery of
this Agreement and the Merger Agreement by Surety Bank. Surety Bank has full
power, authority and legal right to enter into such agreements and, upon
approval of such agreements by regulatory authorities having jurisdiction in the
premises, to consummate the transactions contemplated hereby and thereby. The
making and performance of this Agreement and the Merger Agreement and the
consummation of the transactions contemplated hereby and thereby in accordance
with such agreements will not conflict with the Articles of Association or
bylaws of Surety Bank.
3. Covenants of TexStar and the Shareholders. TexStar and the
Shareholders each hereby covenant and agree with Surety Bank that, unless the
prior written consent of Surety Bank is obtained:
(a) Conduct of Business. Prior to the Effective Time, TexStar will
operate its business only in the usual, regular and ordinary course, and TexStar
will use its best efforts to
(i) maintain its corporate existence in good standing,
(ii) maintain the general character of its business and conduct
its business in its ordinary and usual manner,
(iii) preserve intact its business organization and assets,
(iv) except as provided in Schedule 1(z), keep available the
services of its present officers and employees,
(v) maintain and keep its properties in as good repair and
condition as at present, except for depreciation due to ordinary wear
and tear and damage due to casualty,
(vi) maintain in full force and effect insurance comparable in
amount and scope of coverage to that now maintained by it,
(vii) preserve its goodwill and the goodwill of its suppliers,
depositors, customers and others having business dealings with it,
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(viii) extend credit in accordance with its existing lending
policies,
(ix) maintain proper business and accounting records in
accordance with generally accepted principles,
(x) comply in all material respects with and perform all
duties imposed on it by all federal and other applicable laws, rules,
regulations, ordinances, codes, orders, licenses and permits imposed
by federal and other governmental authorities or otherwise applicable
to TexStar's properties and business operations,
(xi) perform all of its obligations under contracts, leases
and documents relating to or affecting its assets, properties and
business and use its best efforts to obtain any approvals or consents
required to maintain existing leases and other contracts in effect
following the Merger,
(xii) cause TexStar not to take any action described in Section
1(x), other than the payment of a bonus to Xxxxx X. Bexley ("Bexley")
in the amount of the Net Earnings of TexStar (as defined in Section
5(b) of the Merger Agreement), subject to a maximum of $100,000,
payable by TexStar to Bexley on the Closing Date, if, and only if, the
transactions contemplated by this Agreement are consummated, and
(xiii) prevent the occurrence of any change or event which would
render any of the representations and warranties of TexStar contained
herein and in the Merger Agreement untrue in any material respect at
and as of the Effective Time with the same effect as though such
representations and warranties (in the exact language contained in
this Agreement or in the Merger Agreement with appropriate
modifications of tense in the case of representations and warranties
relating to statements of fact as of specific dates) had been made at
and as of the Effective Time, except as otherwise contemplated by this
Agreement.
(b) Access to Properties and Records. TexStar will keep Surety Bank
closely advised of all material developments relevant to the operations of
TexStar and the consummation of the Merger and will cooperate fully in
permitting Surety Bank to make a full investigation of the business, properties,
financial condition and investments of TexStar and in bringing about the
consummation of the Merger. Prior to the Closing Date, TexStar will update by
amendment or supplement any of the schedules referred to herein and any other
disclosure in writing from TexStar to Surety Bank, including, but not limited
to, the disclosures of TexStar pursuant to Section 1(h). In addition, TexStar
hereby represents and
-15-
warrants that such schedules and such written disclosures, as so amended or
supplemented, shall be true, correct and complete in all material respects as of
the Closing Date; provided, however, that the inclusion of any information in
any such amendment or supplement, not included in the original schedule or
written disclosure at or prior to the date of this Agreement, will not (except
to the extent such information was not required to be included in the original
schedule or written disclosure) limit or impair any right which Surety Bank
might otherwise have respecting the representations or warranties of TexStar
contained in this Agreement.
(c) Further Assurances. Upon request of Surety Bank, TexStar,
subject to approval by TexStar's counsel, and the Shareholders, and each of
them, will at any time, whether before or after the Closing Date, and from time
to time, duly execute and deliver to Surety Bank all such further instruments
and documents as may be necessary or advisable, in the opinion of Surety Bank's
counsel, to obtain the full benefit of this Agreement and the Merger Agreement
and the transactions contemplated hereby and thereby.
(d) Changed Circumstances. TexStar shall promptly notify Surety Bank
if TexStar discovers that any of the representations or warranties contained in
this Agreement or the Merger Agreement were not true and correct as of the date
hereof, or by reason of changed circumstances, or otherwise, are no longer true
and correct.
(e) Reports. From the date hereof to the Closing Date, TexStar and
the Shareholders, and each of them, will deliver to Surety Bank promptly after
they become available, all TexStar Reports filed by TexStar with any regulatory
body or authority, any report of TexStar to its shareholders, all proxy
statements and other written materials furnished to the shareholders of TexStar,
and all press releases issued by TexStar.
(f) Restatement of TexStar Financial Statements. On or before the
Closing Date, TexStar will cause the following TexStar Financial Statements to
be restated in accordance with Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC") and will cause same, together with any and all
consents from its independent accountants to the inclusion of such TexStar
financial statements in all necessary registration statements and reports to be
filed by Surety in connection with the consummation of the transactions
contemplated by this Agreement, to be delivered to Surety Bank: statements of
condition at December 31, 1997, 1996 and 1995, and statements of income,
statements of cash flows and of shareholders' equity for the three (3) years
ended as of December 31, 1997, 1996 and 1995, together with the notes thereto,
as certified by the independent accountants of TexStar.
(g) Personnel Changes. From the date of this Agreement and until the
Closing, TexStar shall not cause any changes to be
-16-
made in the officers or directors of TexStar, except with the prior written
approval of Surety Bank, which approval shall not be unreasonably withheld.
(h) Officers' Certificate. At the Closing Date, TexStar will furnish
to Surety Bank a certificate executed in its corporate name by the chief
executive officer of TexStar dated the Closing Date, which shall state whether
(i) TexStar has complied in all material respects with its agreements contained
herein and in the Merger Agreement to be performed at or prior to the Closing
Date, and (ii) the representations and warranties of TexStar contained herein
and in the Merger Agreement are true in all material respects at and as of the
Closing Date with the same effect as though such representations and warranties
(in the exact language contained in this Agreement or in the Merger Agreement
with appropriate modification of tense in the case of representations and
warranties relating to statements of fact as of specified dates) had been made
at and as of the Closing Date.
(i) Escrow Agreement. At the Closing Date, the Shareholders shall
each execute and deliver the escrow agreement (the "Escrow Agreement") in the
form attached hereto as Exhibit B.
(j) Approvals of Third Parties. As soon as practicable after the
date of this Agreement, TexStar will use its best efforts to provide Surety Bank
with such information concerning TexStar as Surety Bank may request in order to
secure the approval of the Merger by regulatory authorities having jurisdiction
over banks and bank holding companies, and will otherwise use its best efforts
to cause the consummation of the Merger in accordance with the terms and
conditions of this Agreement and the Merger Agreement.
(k) Financial Information. TexStar will deliver, or will cause to be
delivered, to Surety Bank, as soon as available, but in any event within thirty
(30) days after the end of each month commencing with the month of August 1997,
the monthly information furnished to the Board of Directors of TexStar,
including, but not limited to, the following financial statements of TexStar:
(i) a statement of condition of TexStar as of the end of such month and the
related statement of income for such month and for the portion of the fiscal
year of TexStar ended at the end of such month, and (ii) such additional
information regarding the financial position, business or prospects of TexStar
as Surety Bank may reasonably require in connection with any filings by Surety
Bank or Surety with the SEC and the Comptroller. Such additional financial
statements will also be included in the term "TexStar Financial Statements" for
purposes of this Agreement. Additionally, TexStar will deliver, or will cause
to be delivered, at its expense, to Surety Bank, as soon as available, but in
any event by January 31, 1998, a statement of condition of TexStar as of the end
of such fiscal year and the related statement of income and statements of cash
flow and changes in stockholders equity of TexStar for such fiscal year, all in
reasonable detail, in
-17-
compliance with Regulation S-X promulgated by the SEC, stating in comparative
form the respective figures for the corresponding date and period in the prior
fiscal year and prepared in accordance with generally accepted accounting
principles and accompanied by an opinion thereon by TexStar's independent
accountants.
(l) Proxy Material and Meeting of Shareholders. As soon as
practicable after the receipt of regulatory approval of the transactions
contemplated hereby, TexStar will: (i) prepare a proxy statement, notice of
meeting and form of proxy to be used in connection with a meeting of its
shareholders to consider and vote upon the transactions contemplated in this
Agreement and the Merger Agreement, and (ii) furnish proxy materials to its
shareholders, and duly call and hold a meeting of its shareholders to submit and
recommend to its shareholders the approval of the transactions contemplated in
this Agreement and the Merger Agreement, including the appointment of W. Xxxxxx
Xxxx or another shareholder of TexStar as the attorney-in-fact of the
shareholders of TexStar who will act on behalf of such shareholders as the
"Representative" pursuant to the Escrow Agreement, and cause to be furnished to
each such shareholder a copy of such proxy material.
(m) Voting. The Shareholders agree to vote all of their shares of
TexStar Common Stock in favor of the Merger at the meeting of the shareholders
of TexStar called to consider and vote upon the transactions contemplated by
this Agreement and the Merger Agreement.
(n) Material Contracts. From the date of this Agreement until the
Closing the Shareholders shall not, without prior consultation with Surety,
permit TexStar to enter into any agreement, contract or commitment to sell or
otherwise dispose of any real property or any material amount of any tangible or
intangible personal property to, make any investment in, or loan or otherwise
extend credit to a third party other than in the ordinary course of TexStar's
business.
(o) Attendance at Meetings of the Board of Directors. From the date
of this Agreement until the Closing, TexStar shall give Surety and Surety Bank
at least three (3) days' prior written notice of any regular or special meeting
of the Board of Directors of TexStar (or of any committee thereof) and permit a
representative of Surety and Surety Bank to attend each of such meetings.
(p) Additional Accruals and Reserves. Immediately prior to the
Closing, TexStar shall establish such additional accruals and reserves as may be
necessary: (i) to conform TexStar's accounting and credit loss reserve
practices and methods to those of Surety Bank and Surety Bank's plans with
respect to the conduct of TexStar's business following the Merger and, (ii) to
the extent permitted by generally accepted accounting principles, to provide for
the costs and expenses relating to the consummation by TexStar
-18-
of the Merger and the other transactions contemplated by this Agreement.
(q) Environmental Reports. TexStar shall obtain, at its sole
expense, Phase I environmental assessments, or updates to those previously
obtained, for each bank facility and each non-residential OREO property. Oral
reports of such environmental assessments shall be delivered to Surety Bank no
later than four (4) weeks, and written reports shall be delivered to Surety Bank
no later than eight (8) weeks, from the date of this Agreement. TexStar shall
obtain a survey and assessment of all potential asbestos containing material in
owned or leased properties (other than OREO property) and a written report of
the results shall be delivered to Surety Bank within four (4) weeks from the
date of this Agreement.
(r) Title Insurance and Surveys. TexStar shall provide copies of
all existing policies of title insurance and boundary surveys for each bank
facility, which shall be delivered to Surety Bank no later than four (4) weeks
from the date of this Agreement.
(s) Press Releases. TexStar shall consult with Surety Bank as to
the form and substance of any proposed press releases or other proposed public
disclosure of matters related to this Agreement or any of the transactions
contemplated thereby.
(t) Final Tax Returns. The Shareholders agree to cause to be
prepared, signed and filed with the Internal Revenue Service and with any other
appropriate taxing authorities all tax returns for TexStar for all periods
ending prior to or with the Effective Date. This covenant shall survive the
consummation of the transactions contemplated in this Agreement.
(u) TexStar shall have terminated its discretionary incentive
compensation program for its employees (more fully described on Schedule 1(r),
Item (viii)), effective as of the commencement of business January 1, 1998.
4. Covenants of Surety Bank. Surety Bank hereby covenants and agrees
with TexStar and the Shareholders as follows:
(a) Approvals of Third Parties. As soon as practicable after the
date of this Agreement, Surety Bank will use its best efforts to secure all
necessary approvals of third parties, including without limitation regulatory
authorities, having jurisdiction over banks and bank holding companies that are
required in order to effect the Merger and will otherwise use its reasonable
efforts to cause the consummation of the Merger in accordance with the terms and
conditions of this Agreement and the Merger Agreement.
(b) Payment. As and when required by the provisions of the Merger
Agreement, Surety Bank shall pay to the shareholders of
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TexStar such sums to which such shareholders are entitled under Section 5(a) of
the Merger Agreement.
5. Mutual Representations and Covenants. Surety Bank and TexStar
mutually represent and covenant as follows:
(a) Furnishing Information and Indemnification. Surety Bank and
TexStar have furnished, or will furnish as soon as practicable after the date of
this Agreement, to each other such information as the other has requested or may
request concerning itself required for inclusion in
(i) applications to be filed on behalf of TexStar and Surety
Bank with the Comptroller for authority to consummate the Merger, and
(ii) any other request, application, statement, report or
material to be made or filed by Surety Bank or TexStar to or with any
governmental agency, department or instrumentality in connection with
the transactions contemplated in this Agreement, in the Merger
Agreement or otherwise.
(b) No Agent's Fee. Surety Bank and Surety, on the one hand, and
TexStar, on the other hand, represent to and covenant with each other that there
is no agent's, broker's or finder's fee or commission payable or that will be
payable in connection with the transactions contemplated in this Agreement or
the Merger Agreement by virtue of or resulting from any action or agreement on
the part of such indemnifying party other than a fee payable to Xxxxxxx X. Xxxxx
of Austin, Texas ("Agent") upon the consummation of the Merger, pursuant to a
letter agreement dated August 26, 1997 by and between TexStar and Agent. If, but
only if, the Merger is consummated pursuant to this Agreement and the Merger
Agreement, Surety Bank shall pay Agent such fee and such payment shall reduce
the amount payable by Surety Bank pursuant to Section 5(a) of the Merger
Agreement. Except as provided in the foregoing, Surety Bank and Surety, on the
one hand, and TexStar, on the other hand, hereby agree to indemnify and hold
harmless each other from and against any claim, demand, liability, loss, cost or
expense (including court costs and attorneys' fees) on account of or in
connection with any agent's, broker's or finder's fees or commissions payable or
alleged to be payable in connection with this Agreement or the Merger Agreement
or the transactions contemplated hereby or thereby by virtue of or resulting
from any action or agreement on the part of such indemnifying party. This
indemnification provision shall survive the Closing of the transactions
contemplated by this Agreement.
6. Conditions to Obligations of Parties. The obligations of Surety Bank
and TexStar to cause the Merger to be consummated are subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions, unless such condition shall, on or
-20-
prior to the Closing Date, have been waived in writing by TexStar and Surety
Bank:
(a) Approvals of Third Parties. All orders, consents and approvals
necessary in order for the transactions contemplated hereby to be lawfully
accomplished shall have been entered by each regulatory authority having
jurisdiction in the premises, including the Comptroller, upon terms and
conditions satisfactory to TexStar and Surety Bank; all applicable statutory
waiting periods shall have expired; and all necessary orders, consents and
approvals referred to in Section 3(j) and Section 4(a) hereof shall have been
given by third parties, upon terms and conditions satisfactory to TexStar and
Surety Bank.
(b) Litigation. At the Closing Date, there shall not be pending or
threatened any litigation in any court or any proceeding before or by any
governmental department, agency or instrumentality,
(i) in which it is sought to restrain or prohibit or obtain
damages in respect of the consummation of the Merger, or
(ii) as a result of which, in the reasonable judgment of
Surety Bank or TexStar, either Surety Bank or TexStar or their
respective shareholders could be deprived of any of the material
benefits of the Merger.
7. Conditions to Surety Bank's Obligations. The obligations of Surety
Bank to cause the Merger to be consummated are subject to the satisfaction on or
prior to the Closing Date of each of the following conditions, unless Surety
Bank shall have waived such condition in writing:
(a) Representations, Warranties and Covenants of TexStar and the
Shareholders. TexStar and the Shareholders shall have complied in all material
respects with each agreement or covenant made by it or them in this Agreement or
in the Merger Agreement and to be performed by it or them at or prior to the
Closing Date, and each representation or warranty of TexStar contained in this
Agreement or the Merger Agreement shall be accurate in all material respects at
and as of the Closing Date with the same effect as though such representation or
warranty (in the exact language contained in this Agreement or in the Merger
Agreement with appropriate modification of tense in the case of representations
and warranties relating to statements of fact as of specified dates) had been
made at and as of the Closing Date.
(b) Further Action. Each and every action required of TexStar and
the Shareholders by this Agreement to effect the Merger will have been taken,
including the execution and delivery by TexStar and the attorney-in-fact of the
shareholders of TexStar
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(appointed at the meeting of the shareholders of TexStar pursuant to Section
3(l) hereof) of the Escrow Agreement.
(c) Other Certificates. TexStar shall have furnished to Surety
Bank
(i) a certificate from the Comptroller dated not more than
thirty (30) days prior to the Closing Date attesting to TexStar's
existence as a national banking association and certifying as to all
charter documents on file with respect to TexStar,
(ii) a certificate from the Comptroller dated not more than
thirty (30) days prior to the Closing Date attesting to TexStar's
good standing as a national banking association,
(iii) copies, certified by the Comptroller as of a date not
more than thirty (30) days prior to the Closing Date, of the Articles
of Association and all amendments thereto of TexStar,
(iv) copies, certified by the Cashier of TexStar as of the
Closing Date, of the bylaws of TexStar as amended at the Closing
Date, and
(v) a certificate of the Cashier of TexStar dated as of the
Closing Date attesting to the adoption of all resolutions by its
directors and shareholders and the taking of all such other corporate
action by TexStar as required for consummation of the Merger.
(d) Shareholder Approval. At a meeting of the shareholders of
TexStar duly called and held for such purpose, the transactions contemplated in
this Agreement and the Merger Agreement shall have been duly approved by the
requisite vote of such shareholders.
(e) Financial Resources. Surety Bank will have sufficient
financial resources available, in the sole opinion of Surety Bank, to consummate
the transactions contemplated by this Agreement and the Merger Agreement.
(f) Material Adverse Change. TexStar will not, in the reasonable
opinion of Surety and Surety Bank, have suffered any material adverse change in
its financial condition, business, operations, prospects, properties or assets.
(g) Due Diligence. Surety and Surety Bank shall, in the sole
opinion of Surety and Surety Bank, be completely satisfied with the results of
the due diligence review of TexStar conducted by Surety and Surety Bank.
-22-
(h) Exercise of Dissenters' Rights. At the Closing Date, there
shall not exist any reason for Surety Bank to believe that statutory rights, if
any, of appraisal and payment for stock will be exercised upon consummation of
the Merger by holders of more than twelve percent (12%) of the outstanding
shares of TexStar Common Stock pursuant to 12 U.S.C. 215(a).
(i) Employee Benefit Plans. Immediately prior to the Closing,
TexStar shall have terminated the Employee Benefit Plans in compliance with all
applicable statutes, rules, and regulations.
(j) Loan Loss Reserve. TexStar shall have maintained and the
TexStar Financial Statements shall reflect as of the Closing Date a reserve for
loan losses, excluding cash-secured and the guaranteed portion of SBA loans, at
least equal to the greater of: (i) $463,000, as reflected in the TexStar
Financial Statements at June 30, 1997, or (ii) an amount equal to 1.5% of
TexStar's total outstanding loans as of the Closing Date.
8. Conditions to TexStar's Obligations. The obligations of TexStar to
cause the Merger to be consummated are subject to the satisfaction on or prior
to the Closing Date of each of the following conditions, unless TexStar shall
have waived such condition in writing:
(a) Representations, Warranties and Covenants of Surety Bank.
Surety Bank shall have complied in all material respects with each agreement or
covenant made by it in this Agreement or in the Merger Agreement and to be
performed by it at or prior to the Closing Date, and each representation or
warranty of Surety Bank contained in this Agreement or the Merger Agreement
shall be accurate in all material respects at and as of the Closing Date with
the same effect as though such representation or warranty (in the exact language
contained in this Agreement or in the Merger Agreement with appropriate
modification of tense in the case of representations and warranties relating to
statements of fact as of specified dates) had been made at and as of the Closing
Date.
(b) Further Action. Each and every action required of Surety Bank
to effect the Merger will have been taken.
(c) Other Certificates. Surety Bank shall have furnished to
TexStar a certificate of the Cashier of Surety Bank, dated as of the Closing
Date, attesting to the adoption of all resolutions by the directors and sole
shareholder and the taking of all other corporate action by Surety Bank as
required for consummation of the Merger.
9. Expenses. TexStar, the Shareholders, Surety Bank and Surety shall
each bear and pay all costs and expenses incurred by it or on its behalf in
connection with the proceedings relating to this Agreement and the Merger,
including, without limiting the generality of the foregoing, fees and expenses
of its own financial consultants, accountants and counsel. Surety Bank shall pay
all reasonable expenses and costs incurred by Surety Bank in connection
-23-
with its efforts to obtain any necessary approvals of any governmental
regulatory authority having control or jurisdiction over any transactions
contemplated by this Agreement. TexStar shall pay all expenses and costs related
to the restatement of the TexStar Financial Statements provided for in Section
3(f) hereof. The Agent's fee provided for in Section 5(b) hereof shall be paid
on a pro rata basis by all of the shareholders of TexStar who do not exercise
their dissenters' rights (collectively, the "Non-Dissenting Shareholders").
Each Non-Dissenting Shareholder shall bear that portion of the Agent's fee that
such Non-Dissenting Shareholder's number of shares of TexStar Common Stock
bears to the total number of shares of TexStar Common Stock held by the Non-
Dissenting Shareholders.
10. Survival of Representations and Warranties. None of the warranties,
representations, covenants and agreements made by TexStar in this Agreement or
in any schedule, exhibit, list or other instrument delivered pursuant to or in
connection with this Agreement shall survive the Closing hereof, except for the
representations of TexStar contained in Section 1(v) and (w) and Section 5(b)
hereof, which shall survive for two (2) years following the Closing and remain
operative and in full force and effect during such period of time regardless of
any investigation at any time made by or on behalf of the party to whom or with
whom the warranty, representation, covenant or agreement is made and shall not
be deemed merged into any document or instrument executed or delivered at
Closing.
11. Indemnification.
(a) Escrow Agreement. TexStar and the Shareholders hereby agree,
and by the approval of this Agreement and the Merger Agreement by the
shareholders of TexStar, the shareholders of TexStar hereby agree, that Surety
and Surety Bank, and their respective officers, directors, employees, agents,
successors and assigns, shall be indemnified and held harmless from any and all
Claims (as defined in the Escrow Agreement); provided, however, that Surety and
Surety Bank agree that the escrow established pursuant to the Escrow Agreement
shall be the exclusive source of funds from which they are entitled to be paid
for a Claim.
(b) Other Indemnification Provisions. Each of the Shareholders
hereby agrees that he or it will not make any claim for indemnification against
TexStar (or any successor) by reason of the fact that he or it was a director,
officer, employee, or agent of such entity or was serving at the request of such
entity as a partner, trustee, director, officer, employee, or agent of another
entity (whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether such
claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or
demand against such Shareholder (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable law, or
otherwise). Notwithstanding anything herein to the contrary, this
-24-
Agreement shall not limit, restrict, bar or void any claim, benefit, coverage or
other right the Shareholders may have under any liability policy of insurance
which currently exists or will be obtained for the benefit of TexStar or its
officers, directors, employees or agents.
12. Notices. Any notice, request, instruction or other document to be
given hereunder or under the Merger Agreement by or to any party hereto shall be
in writing and delivered personally or sent by certified mail, postage prepaid,
if to Surety Bank or Surety to:
0000 Xxxxxxxx Xxxx Xxxx
Xxxxx 000
Xxxxx, Xxxxx 00000
Attention: Mr. C. Xxxx Xxxx
with a copy to:
Xx. Xxxxxxxx X. Xxxxxxx
Xxxxx & Xxxxxxx, L.L.P.
000 X. 0xx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000-0000
and if to TexStar:
000 Xxx Xxxxxx Xxxx
Xxxxxxxxx Xxxx, Xxxxx 00000
Attention: Xx. Xxxxx X. Bexley
with a copy to:
Xx. Xxxxxxx X. Xxxxx
Xxxxxxx Xxxxxx, L.L.P.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000-0000
and if to Shareholders:
Mr. W. Xxxxxx Xxxx
Rush Peterbilt Truck Center
0000 Xxxxxxxxxx 00 Xxxx
Xxx Xxxxxxx, Xxxxx 00000
with a copy to:
Xx. Xxxxxxx X. Xxxxx
Xxxxxxx Xxxxxx, L.L.P.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000-0000
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or at such other address for a party as shall be specified by like notice.
13. Specific Performance. The parties hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto,
his heirs, executors, administrators, legal representatives, successors or
assigns, by reason of the failure of another party to perform any of the
obligations hereunder. Therefore, if a party hereto, his heirs, executors,
administrators, legal representatives, successors or assigns, shall institute
any action or proceeding to enforce the provisions hereof, any party against
whom such action or proceeding is brought hereby agrees that specific
performance may be sought and obtained for any breach of this Agreement or the
Merger Agreement without the necessity of proving actual damages; provided,
however, that any party hereto may, at its option, waive its right to specific
performance and collect damages resulting from any breach or failure to perform
hereunder.
14. Confidentiality. Except as necessary or appropriate in connection
with any statement, application or other document filed with applicable
governmental authorities in connection with the transactions contemplated by
this Agreement and the Merger Agreement or as otherwise required by law, each
party hereto will, and will cause its respective officers and authorized
representatives to, hold in confidence all, and not to disclose to others for
any reason whatsoever any, information of the other parties, including, but not
limited to, non-public information as identified in the Right to Financial
Privacy Act 12 U.S.C. (S)(S)3401-3422, which information is received by such
party from the other parties hereto, or any of them, in connection with the
transactions contemplated by this Agreement and the Merger Agreement. If the
transactions contemplated by this Agreement shall not be consummated, such
confidence shall be maintained and such information shall not be used (except to
the extent such information can be shown to be previously known to such party,
in the public domain, or later acquired by such party from other legitimate
sources) and, upon request, all such documents, any copies thereof and extracts
therefrom shall immediately be returned.
15. Attorneys' Fees. If any action at law or in equity, including any
action for declaratory relief, is brought to enforce or interpret the provisions
of this Agreement or the Merger Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and related expenses from the
other party or parties, which fees and expenses may be set by the court in the
trial of such action or may be enforced in a separate action brought for that
purpose.
16. Materiality. For purposes of the provisions of this Agreement that
refer to matters or facts with the modification that same are "material," the
parties agree that the threshold for materiality is $25,000.
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17. Miscellaneous. This Agreement and the Merger Agreement constitute
the entire contract and supersede all prior agreements and understandings, both
written and oral, between the parties hereto and thereto with respect to the
subject matter hereof and thereof, and no party shall be liable or bound to the
other in any manner by any warranties or representations except as specifically
set forth herein or in the Merger Agreement or expressly required to be made or
delivered pursuant hereto or thereto. Each of the attachments, schedules, lists
and exhibits called for by this Agreement and the Merger Agreement is made a
part of this Agreement and the Merger Agreement the same as if set out verbatim
at each point where reference is made to it. The terms and conditions of this
Agreement and of the Merger Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto and
thereto, but nothing contained herein shall be construed as a consent to any
assignment of this Agreement or the Merger Agreement by the parties hereto or
thereto, or any of them. Nothing in this Agreement or in the Merger Agreement,
express or implied, is intended to confer upon any party, other than the parties
hereto and thereto, and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of such agreements,
except as expressly provided herein or therein. The provisions of Sections 9,
10, 11 and 12 of the Merger Agreement are hereby incorporated into this
Agreement for all purposes notwithstanding whether the Merger Agreement or
Merger Plan have been approved by the shareholders of TexStar. This Agreement
may be executed in one or more counterparts, each of which shall for all
purposes be deemed to be an original and all of which shall constitute the same
instrument, but only one of which need be produced. The headings of the sections
and subsections of this Agreement are inserted for convenience only and shall
not be deemed to constitute part of this Agreement or to affect the construction
hereof. As used in this Agreement, the words "herein", "hereof", and "hereunder"
and other words of similar import refer to this Agreement as a whole and not to
any particular section, subsection or other subdivision. Unless context
otherwise requires,
(i) words in the singular number include the plural and the
plural include the singular, and
(ii) words of the masculine gender include the feminine and
neuter genders and words of the neuter gender referred to any gender.
In case any one or more of the provisions contained in this Agreement or the
Merger Agreement is for any reason held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provisions hereof or thereof, and this Agreement and the Merger
Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been contained herein and therein. This Agreement shall be
construed in accordance with the laws of the
-27-
State of Texas. No term or condition of this Agreement or the Merger Agreement
shall be deemed to have been waived, nor shall there be any estoppel to enforce
any provision of this Agreement or the Merger Agreement, except by written
instrument signed by the party charged with such waiver or estoppel.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be signed in counterparts all as of the date first above written.
SURETY BANK: SURETY BANK, NATIONAL ASSOCIATION
By:
------------------------------------
Xxxxx X. Xxxxxxx, Vice Chairman
of the Board, President and Chief
Executive Officer
ATTEST:
----------------------------------
Xxxxxx X. Xxxxx, Cashier
TEXSTAR: TEXSTAR NATIONAL BANK
By:
------------------------------------
Xxxxx X. Bexley, President
ATTEST:
----------------------------------
, Cashier
----------------
SURETY: SURETY CAPITAL CORPORATION
By:
------------------------------------
C. Xxxx Xxxx, Chairman of the
Board and Chief Executive Officer
ATTEST:
----------------------------------
X.X. Xxxxxx, Secretary
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SHAREHOLDERS:
--------------------------------------
W. Xxxxxx Xxxx
--------------------------------------
W. Xxxxxxx Xxxx
--------------------------------------
Xxxxx Xxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxx
--------------------------------------
Xxxxx Xxxxxxxxx
--------------------------------------
Xxxxx X. Bexley
-29-
EXHIBIT "A"
AGREEMENT TO MERGE TEXSTAR NATIONAL BANK
WITH AND INTO SURETY BANK, NATIONAL ASSOCIATION UNDER THE
CHARTER OF SURETY BANK, NATIONAL ASSOCIATION AND UNDER
THE TITLE OF SURETY BANK, NATIONAL ASSOCIATION
AGREEMENT TO MERGE ("Merger Agreement") dated as of October __, 1997,
between SURETY BANK, NATIONAL ASSOCIATION, a national banking association
located in Hurst, Texas ("Surety Bank"), and TEXSTAR NATIONAL BANK, a national
banking association located in Universal City, Texas ("TexStar"), and joined in
by SURETY CAPITAL CORPORATION, a Delaware corporation located in Hurst, Texas
("Surety") and _________________________________________ (individually, a
"Shareholder" and collectively, the "Shareholders").
WITNESSETH:
A. Surety Bank is a national banking association duly organized and
existing under the laws of the United States of America having its principal
offices in the City of Xxxxx, County of Tarrant, State of Texas.
B. TexStar is a national banking association duly organized and existing
under the laws of the United States having its principal offices in the City of
Xxxxxxxxx Xxxx, Xxxxxx xx Xxxxx, Xxxxx of Texas.
C. Surety Bank has, and will have as of the Effective Time, authorized
capital consisting of 6,000,000 shares of common stock, $0.91 par value, of
which 3,708,195 shares have been duly issued and are, and will be as of the
Effective Time, validly outstanding.
D. TexStar has, and will have as of the Effective Time, authorized
capital consisting of 575,000 shares of common stock, $5.00 par value ("TexStar
Common Stock"), of which 485,000 shares are, and will be as of the Effective
Time, issued and outstanding.
E. The Boards of Directors of TexStar and of Surety Bank have approved
this Merger Agreement under which TexStar will be merged into Surety Bank and
have authorized the execution hereof; the Board of Directors of Surety has
approved this Merger Agreement, authorized Surety to join in and be bound by
this Merger Agreement, and authorized the undertakings herein made by Surety.
F. Surety Bank, TexStar, Surety and the Shareholders have entered into an
Agreement and Plan of Reorganization dated October __, 1997 ("Reorganization
Agreement") which contemplates the merger provided for in this Merger Agreement.
All terms not defined in this Merger Agreement will have the meaning set forth
in the Reorganization Agreement.
G. As and when required by the provisions of this Merger Agreement or the
Reorganization Agreement (hereinafter referred to collectively as the "Merger
Plan"), all such action as may be
necessary or appropriate will be taken by Surety Bank, TexStar, Surety and the
Shareholders in order to consummate said merger. In this connection, Surety Bank
shall pay cash and, if applicable, certain performance payments to the
shareholders of TexStar, pursuant to the provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises, Surety Bank and TexStar,
joined by Surety and the Shareholders, hereby agree that TexStar shall be merged
into Surety Bank on the following terms and conditions:
1. At the Effective Time, TexStar will be merged into Surety Bank under
the Articles of Association and Charter of Surety Bank. Said merger will be
pursuant to the provisions of and with the effect provided in 12 U.S.C. Section
215(a).
2. At the Effective Time, the name of Surety Bank (herein after referred
to as "Continuing Bank" whenever reference is made to it as of the time of
merger or thereafter) will continue to be "Surety Bank, National Association."
The Articles of Association of Continuing Bank will be as set forth in Annex A
attached hereto and made a part hereof. The bylaws of Surety Bank in effect
immediately prior to the merger will become the bylaws of Continu ing Bank. The
established office and facilities of Surety Bank immediately prior to the merger
will become the established office and facilities of Continuing Bank. The
established office and facilities of TexStar immediately prior to the merger
will continue and be operated as a branch of Continuing Bank.
3. At the Effective Time, the corporate existence of Surety Bank and
TexStar will, as provided in 12 U.S.C. Section 215(a), be merged into and
continued in Continuing Bank; and Continuing Bank will be deemed to be the same
association as Surety Bank and TexStar. All rights, franchises and interests of
Surety Bank and TexStar, respectively, in and to every type of property (real,
personal and mixed) and choses in action shall be transferred to and vested in
Continuing Bank by virtue of such merger without any deed or other transfer.
Continuing Bank at the Effective Time and without any order or other action on
the part of any court or otherwise, will hold and enjoy all rights of property,
franchises and interests, including appointments, designations and nomina tions,
and all other rights and interests as trustee, executor, administrator, transfer
agent and registrar of stocks and bonds, guardian of estates, assignee,
receiver, and in every other fiduciary capacity, and in every agency capacity,
in the same manner and to the same extent as such rights, franchises and
interests were held or enjoyed by Surety Bank and TexStar, respectively, at the
Effective Time.
4. At the Effective Time, Continuing Bank shall be liable for all
liabilities of Surety Bank and of TexStar, respectively; and all deposits,
debts, liabilities, obligations and contracts of Surety Bank and of TexStar,
respectively, matured or unmatured,
-2-
whether accrued, absolute, contingent or otherwise, and whether or not reflected
or reserved against on balance sheets, books of account or records of Surety
Bank or TexStar, as the case may be, including all liabilities of Surety Bank
and TexStar for taxes, whether existing at the Effective Time or arising as a
result of or pursuant to the merger, will be those of Continuing Bank and will
not be released or impaired by the merger; and all rights of creditors and other
obligees and all liens on property of either Surety Bank or TexStar shall be
preserved unimpaired.
5. At the Effective Time:
(a) Each share of TexStar Common Stock outstanding at the Effective
Time held by the shareholders of TexStar, other than Dissenting Shares (as
hereinafter defined), will, without any action on the part of the shareholders
of TexStar, be converted into and exchanged for the right to receive cash equal
to the sum of (i) the quotient of $9,500,000 divided by the number of shares of
TexStar Common Stock issued and outstanding at the Effective Time and (ii) the
quotient of the Performance Payment (as herein defined) divided by the number of
shares of TexStar Common Stock issued and outstanding at the Effective Time.
The foregoing sum shall be subject to the adjustment set forth in Section 9 of
the Reorganization Agreement and the resulting amount shall be the "Exchange
Price".
(b) The Performance Payment will be equal to fifty percent (50%) of
the Net Earnings of TexStar in excess of $100,000. "Net Earnings of TexStar"
will be the net income of TexStar for the period September 1, 1997 to the
Closing Date before taxes but after all other charges of TexStar (including
normal year-end adjust ments) as reflected by TexStar's financial statements and
mutually agreed upon by Surety Bank and TexStar. In the event of a dispute,
Surety Bank's independent public accountants, Coopers & Xxxxxxx L.L.P., will
ascertain "Net Earnings of TexStar" for the applicable period and such
determination will be conclusive and binding on all the parties to this
Agreement. All determinations by the parties in this regard will be made in
accordance with generally accepted accounting principles.
(c) All shares of capital stock of Surety Bank issued and outstanding
at the Effective Time will continue to be issued and outstanding shares of
capital stock of Continuing Bank.
(d) For purposes of this Merger Agreement, "Dissenting Shares" of a
shareholder of TexStar will refer to those shares of TexStar Common Stock owned
by a shareholder of TexStar who, pursuant to 12 U.S.C. Section 215(a), (i)
gives notice in writing at or prior to the meeting of TexStar's shareholders
referred to in Section 3(l) of the Reorganization Agreement to the presiding
officer that he dissents from the Merger Plan or votes against such Merger Plan
at such meeting and (ii) is thereby entitled to receive the value of his shares
of TexStar Common Stock upon approval of
-3-
the Merger Plan by the Comptroller of the Currency and written request made by
such shareholder to the Continuing Bank at any time before thirty (30) days
after the Effective Time, accompanied by the surrender of his stock
certificates.
The value of the shares of TexStar Common Stock of any dissenting
shareholder will be ascertained, as of the Effective Time, by an appraisal made
by a committee of three persons, composed of (i) one selected by the vote of the
holders of a majority of the TexStar Common Stock, the owners of which are
entitled to payment in cash; (ii) one selected by the directors of the
Continuing Bank; and (iii) one selected by the two so selected. The valuation
agreed upon by any two of the three appraisers shall govern. If the value so
fixed will not be satisfactory to any dissenting shareholder who has requested
payment, that shareholder may, within five (5) days after being notified of the
appraised value of his shares, appeal to the Comptroller of the Currency, which
shall cause a reappraisal to be made which will be final and binding as to the
value of the shares of the appellant.
If, within ninety (90) days from the Effective Time, for any reason one or
more of the appraisers is not selected as herein provided, or the appraisers
fail to determine the value of such shares, the Comptroller of the Currency
shall upon written request of any interested party cause an appraisal to be made
which will be final and binding on all parties. The expenses of the Comptroller
of the Currency in making the reappraisal or the appraisal, as the case may be,
shall be paid by the Continuing Bank. The value of the shares ascertained shall
be promptly paid to the dissenting shareholders by the Continuing Bank.
6. After the Effective Time:
(a) The shareholders of TexStar, as the sole holders of the
outstanding certificates which prior thereto represented shares of TexStar
Common Stock, may surrender same to Continuing Bank, and the shareholders of
TexStar shall be entitled upon such surrender to receive from Continuing Bank in
exchange therefor, without cost to such holder, the Exchange Price for each
share of TexStar Common Stock represented by such outstanding certificates
surrendered, as adjusted for the required $400,000 contribution into the escrow
established by the Escrow Agreement provided for in the Reorganization
Agreement.
(b) Until so surrendered, each such outstanding certificate which,
prior to the Effective Time, represented shares of TexStar Common Stock shall be
deemed for all purposes to evidence solely the right to receive the amount of
cash into and for which such shares of TexStar Common Stock shall have been
converted pursuant to Section 5(a) hereof. No interest will be payable with
respect to any such cash payments. If a shareholder of TexStar is unable to
locate any of his certificates which prior to the Effective Time represented
shares of TexStar Common Stock, Continu-
-4-
ing Bank will issue a check to such shareholder in the amount which such
shareholder would otherwise be entitled to receive hereunder without
surrendering such certificate, upon receipt by Continuing Bank of an indemnity
bond in favor of Continuing Bank and satisfactory in all respects to Continuing
Bank.
(c) The stock transfer books of TexStar will be closed as of the close
of business on the Closing Date (hereinafter defined), and no transfer of record
of any of the shares of TexStar Common Stock will take place thereafter. From
and after the close of business on the Closing Date, shares of TexStar Common
Stock will cease to be shares of TexStar, irrespective of whether such shares
are ultimately surrendered.
7. The directors, advisory directors and officers, respectively, of
Continuing Bank at the Effective Time will be those persons who are directors,
advisory directors and officers, respectively, of Surety Bank immediately before
the Effective Time. The committees of the Board of Directors of Continuing Bank
at the Effective Time will be the same as, and will be composed of the same
persons who are serving on, committees of the Board of Directors of Surety Bank
as they exist immediately before the Effective Time.
8. This Merger Agreement will be submitted to the sole shareholder of
Surety Bank and to the shareholders of TexStar at meetings called to be held as
promptly as practicable in accordance with the Reorganization Agreement. Upon
approval of the sole shareholder of Surety Bank and the shareholders of TexStar,
and the satisfaction of all the other conditions set forth in Sections 6, 7 and
8 of the Reorganization Agreement, this Merger Agreement will be made effective
as soon as practicable thereafter in the manner provided in Section 12 hereof.
9. The Merger Plan may be terminated and abandoned at any time prior to
or on the Closing Date, whether before or after action thereon by the sole
shareholder of Surety Bank or the shareholders of TexStar:
(a) By the mutual consent in writing of Surety Bank and the
Shareholders;
(b) By the Shareholders in writing if any of the conditions to the
obligations of the Shareholders or TexStar contained herein or in the
Reorganization Agreement shall not have been satisfied or, if unsatisfied,
waived as of the Closing Date;
(c) By Surety Bank in writing if any of the conditions to the
obligations of Surety or Surety Bank contained herein or in the Reorganization
Agreement shall not have been satisfied or, if unsatisfied, waived as of the
Closing Date;
-5-
(d) By either the Shareholders or Surety Bank in writing if any of the
conditions to the obligations of such parties contained in Section 6 of the
Reorganization Agreement shall not have been satisfied or, if unsatisfied,
waived as of the Closing Date; or
(e) By either the Shareholders or Surety Bank in writing if the
Closing Date shall not have occurred by March 31, 1998, unless the date is
extended by mutual agreement of the Shareholders and Surety Bank.
10. Except as provided in the next succeeding sentence, in the event of
the termination and abandonment of the Merger Plan pursuant to the provisions of
Section 9 hereof, the same shall be of no further force or effect except that
the indemnification provisions set forth in Section 11 of the Reorganization
Agreement and the provisions relating to expenses set forth in Section 9 of the
Reorganization Agreement shall survive any such termination and abandonment.
Additionally, in the event Surety elects to abandon the Merger Plan by written
notice to such effect to TexStar (the "Election") as a result of the failure of
the conditions to Closing set forth in Section 7(e) or 7(g) of the
Reorganization Agreement, the failure of which shall be determined in the sole
and unfettered discretion of Surety, and such Election is made by Surety after
December 31, 1997, Surety shall pay to TexStar a break-up fee in the amount of
$25,000, and upon payment thereof, none of the parties to the Reorganization
Agreement nor the Merger Agreements shall have any further obligations to each
other, except as expressly set forth in this Section 10.
11. Any of the terms or conditions of the Merger Plan may be waived at any
time, whether before or after action thereon by the shareholders of Surety Bank
or TexStar, by the party which is entitled to the benefits thereof; and this
Merger Agreement or the Reorganization Agreement may be modified or amended at
any time, whether before or after action thereon by the shareholders of Surety
Bank or TexStar; provided, however, that such action shall be taken only if, in
the judgment of Surety Bank and TexStar, such waiver, modification or amendment
will not have a materially adverse effect on Surety Bank, TexStar or their
respective shareholders. Any waiver, modification or amendment must be in
writing.
12. The closing date (the "Closing Date") shall be a date to be selected
by mutual agreement of the parties immediately following the date thirty (30)
days after the date of the order of the Comptroller of the Currency approving
the merger pursuant to 12 U.S.C. Section 1828(c) (or if such date is not a
business day, then the next business day following) and the satisfaction of all
other conditions to the obligations of the parties to the Reorganization
Agreement. The closing (the "Closing") shall be held at the offices of TexStar,
Universal City, Texas on the Closing Date. At the Closing, Surety Bank shall
deliver to the shareholders of TexStar, other than the dissenting shareholders,
cash in the amount
-6-
of the Exchange Price and the shareholders of TexStar shall deliver to Surety
Bank all of the stock certificates evidencing issued and outstanding shares of
TexStar Common Stock. Subject to the terms, and upon satisfaction on or before
the Closing Date of all requirements of law and the conditions specified in the
Merger Plan, including receipt of the approval of the Comptroller of the
Currency specified in 12 U.S.C. Section 215(a), the merger will become effective
at the time specified in the certificate to be issued by the Comptroller of the
Currency under the seal of his office approving the merger, such time being
herein called the "Effective Time."
13. For the convenience of the parties hereto and to facilitate the
filing and recording of this Merger Agreement, any number of counterparts
thereof may be executed, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
IN WITNESS WHEREOF, Surety Bank has caused this Merger Agreement to be
executed in counterparts by its duly authorized officers and its corporate seal
to be hereunto affixed as of the date first above written, and the directors
constituting all of the Board of Directors of such national banking association
have hereunto subscribed their names.
SURETY BANK: SURETY BANK, NATIONAL ASSOCIATION
By:
------------------------------------
Xxxxx X. Xxxxxxx, Vice Chairman of
the Board, President and Chief
Executive Officer
ATTEST:
---------------------------
Xxxxxx X. Xxxxx, Cashier
ALL OF THE DIRECTORS OF
SURETY BANK, NATIONAL ASSOCIATION
---------------------------------------
C. Xxxx Xxxx
-7-
---------------------------------------
Xxxxxxx X. Xxxx
---------------------------------------
Xxxxx X. Xxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxx
---------------------------------------
X. X. Xxxxxxxxxxx, III
---------------------------------------
Xxxxxxx X. Xxxxx
---------------------------------------
Xxxxxxx Xxxxxx
---------------------------------------
Xxxxxx X. Xxxxxx
THE STATE OF TEXAS )
)
COUNTY OF TARRANT )
On this _______ day of ______________, 1997, before me, a Notary Public for
the State and County aforesaid, personally came Xxxxx X. Xxxxxxx as President
and Xxxxxx X. Xxxxx as Cashier, of SURETY BANK, NATIONAL ASSOCIATION, and each
in his said capacity acknowledged the foregoing instrument to be the act and
deed of said association and the seal affixed thereto to be its seal; and came
also C. Xxxx Xxxx, Xxxxxxx X. Xxxx, Xxxxx X. Xxxxxxx, Xxxxxx X. Xxxxxx, X. X.
Xxxxxxxxxxx, III, Xxxxxxx X. Xxxxx, Xxxxxxx Xxxxxx and Xxxxxx X. Xxxxxx, being
all of the Board of Directors of said association and each of them acknowledged
said instrument to be the act and deed of said association and of himself as
director thereof.
WITNESS my official seal and signature this day and year aforesaid.
-8-
---------------------------------------
NOTARY PUBLIC IN AND FOR THE STATE
OF TEXAS
---------------------------------------
My Commission Expires
IN WITNESS WHEREOF, TexStar has caused this Merger Agreement to be executed
in counterparts by its duly authorized officers and its corporate seal to be
hereunto affixed as of the date first above written, and the directors
constituting all of the Board of Directors of such national banking association
have hereunto subscribed their names.
TEXSTAR: TEXSTAR NATIONAL BANK
By:
------------------------------------
Xxxxx X. Bexley, President
ATTEST:
-------------------------------
_________________, Cashier
ALL OF THE DIRECTORS OF
TEXSTAR NATIONAL BANK
---------------------------------------
W. Xxxxxx Xxxx
---------------------------------------
W. Xxxxxxx Xxxx
---------------------------------------
Xxxxx Xxxxx
---------------------------------------
Xxxxxx X. Xxxxxxxx
---------------------------------------
-9-
Xxxxx Xxxxxxxxx
---------------------------------------
Xxxxx X. Bexley
THE STATE OF TEXAS )
)
COUNTY OF _________ )
On this _______ day of ______________, 1997, before me, a Notary Public for
the State and County aforesaid, personally came Xxxxx X. Bexley, as President
and ______________ as Cashier, of TEXSTAR NATIONAL BANK, and each in his or her
said capacity acknowledged the foregoing instrument to be the act and deed of
said association and the seal affixed thereto to be its seal; and came also W.
Xxxxxx Xxxx, W. Xxxxxxx Xxxx, Xxxxx Xxxxx, Xxxxxx X. Xxxxxxxx, Xxxxx Xxxxxxxxx
and Xxxxx X. Bexley, being all of the Board of Directors of said association and
each of them acknowledged said instrument to be the act and deed of said
association and of himself or herself as director thereof.
WITNESS my official seal and signature this day and year aforesaid.
---------------------------------------
NOTARY PUBLIC IN AND FOR THE STATE
OF TEXAS
---------------------------------------
My Commission Expires
Surety hereby joins in the foregoing Merger Agreement, and undertakes that
it will be bound thereby and will do and perform all acts and things therein
referred to or provided to be done by it.
IN WITNESS WHEREOF, Surety has caused this undertaking to be made in
counterparts by its duly authorized officers and its corporate seal to be
hereunto affixed as of the date first above written.
SURETY: SURETY CAPITAL CORPORATION
By:
-------------------------------------
C. Xxxx Xxxx, Chairman of the
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Board and Chief Executive Officer
ATTEST:
------------------------------
X. X. Xxxxxx, Secretary
The Shareholders hereby join in the foregoing Merger Agreement, and
undertake that they will be bound thereby and will do and perform all acts and
things therein referred to or provided to be done by them.
IN WITNESS WHEREOF, the Shareholders have caused this undertaking to be
made as of the date first above written.
THE SHAREHOLDERS:
---------------------------------------
W. Xxxxxx Xxxx
---------------------------------------
W. Xxxxxxx Xxxx
---------------------------------------
Xxxxx Xxxxx
---------------------------------------
Xxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxx Xxxxxxxxx
---------------------------------------
Xxxxx X. Xxxxxx
-00-
XXXXXXX "X"
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made as of ____________, 199__ by and among SURETY
BANK, NATIONAL ASSOCIATION, a national banking association located in Hurst,
Texas ("Surety Bank"), TEXSTAR NATIONAL BANK, a national banking association
located in Universal City, Texas ("TexStar"), SURETY CAPITAL CORPORATION, a
Delaware corporation located in Hurst, Texas ("Surety"), W. Xxxxxx Xxxx, as the
representative of the shareholders of TexStar (the "Representative"), and
______________________ ("Escrow Agent"). All terms not otherwise defined in this
Escrow Agreement shall have the meanings set forth in the Agreement and Plan of
Reorganization dated __________, 1997 by and among Surety Bank, TexStar, Surety
and the Indemnifying Parties (the "Reorganization Agreement") and in the
Agreement to Merge TexStar National Bank with and into Surety Bank, National
Association Under the Charter of Surety Bank, National Association and Under the
Title of Surety Bank, National Association dated ___________, 1997 between
Surety Bank and TexStar and joined in by Surety and the Indemnifying Parties
(the "Merger Agreement"). The Reorganization Agreement and the Merger Agreement
are hereinafter referred to collectively as the "Agreements."
RECITALS
A. Pursuant to the Agreements, TexStar is to be merged into Surety Bank
(the "Merger") under the Articles of Association and Charter of Surety Bank; and
B. In connection with the Merger, a certain portion of the Exchange
Price to be received by the Indemnifying Parties in exchange for their Shares of
TexStar Common Stock (as herein defined) is to be deposited directly by Surety
in the escrow created hereby and disbursed in accordance herewith; and
C. Representative is executing this Escrow Agreement individually and as
attorney-in-fact (as authorized in the Reorganization Agreement) for certain of
the shareholders of TexStar who are identified on Schedule A attached hereto. W.
Xxxxxx Xxxx and the other shareholders of TexStar identified on Schedule A are
individually referred to as an "Indemnifying Party" and collectively referred
to as the "Indemnifying Parties." Schedule A further sets forth each
Indemnifying Party's Escrow Proportion (as herein defined) and total
contribution to the Escrowed Principal Funds (as herein defined).
Now, therefore, in consideration of the premises and the mutual warranties,
representations covenants and agreements contained herein, the parties hereto
represent, warrant, covenant and agree as follows:
1. DEFINITIONS.
The following terms shall have the meanings specified:
"Claim Certificate" shall have the meaning specified in Section 4.b.i
hereof.
"Claims" shall have the meaning specified in Section 4.a hereof.
"Effective Time" shall mean the time specified in the certificate to be
issued by the Comptroller of the Currency under the seal of his office approving
the Merger under the Agreements.
"Escrow Agreement" shall mean this escrow agreement (including all
attachments hereto), as same may from time to time be amended.
"Escrowed Funds" shall have the meaning specified in Section 2.b hereof.
"Escrowed Interest Funds" shall have the meaning specified in Section 2.b
hereof.
"Escrowed Principal Funds" shall have the meaning specified in Section 2.a
hereof.
"Escrow Proportion" as to any Indemnifying Party shall mean the percentage
obtained by dividing (i) the number of Shares of TexStar Common Stock held of
record by such Indemnifying Party as of the Effective Time by (ii) the total
number of Shares of TexStar Common Stock held of record by all of the
Indemnifying Parties at the Effective Time. The Escrow Proportion for each
Indemnifying Party is set forth on Schedule A hereto.
"Final Determination" shall mean the final decision of any court of
competent jurisdiction from which no appeal has been allowed because of lapse of
time or otherwise.
"First Release Date" shall mean the first anniversary date of the Effective
Time.
"Indemnified Party" shall mean Surety Bank and Surety, and their respective
officers, directors, employees, agents, successors and assigns.
"Representative" shall mean W. Xxxxxx Xxxx who is authorized to act on
behalf of the Indemnifying Parties for all purposes of this Escrow Agreement and
who shall serve in such capacity until his resignation or death, in which event
a majority of the shareholders who were members of the Board of Directors of
TexStar immediately before the Effective Time shall appoint a successor
Representative.
"Second Release Date" shall mean the second anniversary date of the
Effective Time.
-2-
"Shares of TexStar Common Stock" shall mean the outstanding shares of
common stock, $5.00 par value, of TexStar.
Capitalized terms not defined in this Agreement shall have the meaning set
forth in the Agreements.
2. CREATION OF ESCROW; INVESTMENT OF ESCROWED FUNDS.
a. Creation of Escrow Account. At the Effective Time Surety shall
deposit the amount of $400,000 in cash in escrow with the Escrow Agent (the
"Escrowed Principal Funds"). The Representative, on behalf of the Indemnifying
Parties, hereby authorizes and directs Surety to withhold out of each
Indemnifying Party's Exchange Price that amount set forth next to such
Indemnifying Party's name on Schedule A under the heading "Contribution to
Escrowed Principal Funds" and to deposit such amount in escrow with the Escrow
Agent. Escrow Agent hereby agrees to hold and disburse the Escrowed Funds (as
herein defined) in accordance with the terms of this Agreement.
b. Investment of Escrowed Principal Funds and Escrowed Interest Funds.
Escrow Agent shall, to the extent practicable, invest and reinvest the Escrowed
Principal Funds and Escrowed Interest Funds in readily marketable direct
obligations of or obligations guaranteed by the United States of America
maturing within six months from their respective dates of issuance or such other
investments as may be specified in writing by the Representative and Surety
acting jointly. The term "Escrowed Interest Funds" shall mean any interest
received on investments of Escrowed Principal Funds and any interest received on
investments of such interest or dividends. The term "Escrowed Funds" shall mean
the Escrowed Principal Funds and the Escrowed Interest Funds.
3. RELEASE FROM ESCROW.
Escrow Agent will distribute and deliver the Escrowed Funds upon the
occurrence of any of the following events and in the manner hereinafter
provided:
a. Upon the receipt from Surety of a written notice that a specified
amount of Escrowed Funds held by Escrow Agent are to be delivered to the
Indemnifying Parties, such amount of Escrowed Funds shall be delivered to the
Indemnifying Parties.
b. Upon the receipt from time to time of a Claim Certificate signed by
the President or a Vice President of Surety that Surety is entitled to offset in
a stated amount on account of a Claim made by an Indemnified Party, which is not
contested by the Representative in accordance with Section 4.b or, if
contested, which is subsequently resolved in accordance with Section 4.b, by
either the delivery of a written consent of the Representative to Escrow Agent
or entry of a Final Determination with respect to the dispute, Escrow Agent
shall deliver to Surety, in satisfaction of such
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Claim, that amount of the Escrowed Funds which shall equal the amount stated in
the Claim Certificate or otherwise determined under Section 4.b.
c. On the First Release Date, if Escrow Agent shall hold Escrowed Funds
in excess of the sum of (i) one hundred fifty percent (150%) of the aggregate
amount of all pending Claims, if any, of the Indemnified Parties filed with
Escrow Agent in accordance with Section 4.b below, and (ii) $200,000, Escrow
Agent shall deliver to the Indemnifying Parties the excess of such Escrowed
Funds.
d. On the Second Release Date, if Escrow Agent shall hold Escrowed Funds
in excess of one hundred fifty percent (150%) of the aggregate amount of all
pending Claims, if any, of the Indemnified Parties filed with Escrow Agent in
accordance with Section 4.b below, Escrow Agent shall deliver to the
Indemnifying Parties the excess of such Escrowed Funds.
e. If on the Second Release Date there shall be no outstanding Claims,
Escrow Agent shall on the Second Release Date deliver all then remaining
Escrowed Funds to the Indemnifying Parties.
f. Escrow Agent shall retain any Escrowed Funds not distributed
hereunder to the Indemnifying Parties on the Second Release Date until the
Claims relating to such Escrowed Funds have been fully satisfied or resolved or
a Final Determination has been rendered with respect thereto.
g. Each delivery of Escrowed Funds to the Indemnifying Parties pursuant
to Sections 3.a through 3.f above shall be allocated to each Indemnifying Party
in accordance with such Indemnifying Party's Escrow Proportion; provided,
however, that each Indemnifying Party shall be entitled to receive distributions
hereunder only to the extent that Escrowed Funds shall have been deposited
hereunder on behalf of such Indemnifying Party.
4. INDEMNIFICATION RIGHTS.
a. Reimbursement and Indemnification. The Indemnified Parties shall be
entitled to recover from the Escrowed Funds the amount of any and all
liabilities, damages, losses, claims, demands, costs or expenses (including
interest, penalties, reasonable attorneys' and accountants' fees and expenses,
court costs and fees of expert witnesses) (all of the foregoing hereinafter
collectively referred to as the "Claims") which an Indemnified Party shall
suffer or incur, whether liquidated or unliquidated, accrued or contingent,
connected with or arising out of (i) a breach of warranty or misrepresentation
by TexStar under Section 1(v) or Section 1(w) of the Reorganization Agreement,
or (ii) a misrepresentation or breach of covenant by TexStar under Section 5(b)
of the Reorganization Agreement; provided, however, no Claim may be made against
the Indemnifying Parties until such time as all
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Claims aggregate $25,000 ("Minimum Claim") after which time the Indemnified
Parties are entitled to indemnification for all Claims in excess of the Minimum
Claim made to the extent of the Escrowed Funds.
b. Procedure for Claims.
i. If, prior to the Second Release Date, Surety shall discover,
incur or receive notice of the existence of any Claim, whether liquidated or
unliquidated, accrued or contingent, asserted or unasserted, for which an
Indemnified Party claims reimbursement or indemnity hereunder, Surety shall
promptly give written notice thereof to the Representative and Escrow Agent by
delivering a certificate (a "Claim Certificate") which shall be signed by the
President or a Vice President of Surety to the effect that an Indemnified Party
has a Claim in the amount specified in such Claim Certificate and setting forth
the basis for such Claim. Upon receipt of any such Claim Certificate, Escrow
Agent shall, as soon as practicable (but not earlier than fourteen (14) business
days after the delivery to Escrow Agent of such Claim Certificate) deliver to
the Indemnified Party Escrowed Funds equal to the amount of the Claim as set
forth in the Claim Certificate. Unless, within ten (10) business days after
delivery to the Representative of any Claim Certificate, the Representative
gives written notice to Surety and Escrow Agent that the Representative
questions the accuracy of, or matters included in, such Claim Certificate, such
Claim Certificate shall constitute full authority to Escrow Agent to take the
action provided for in this Section 4.b and shall be conclusive on all parties
hereto.
ii. If the Representative gives notice questioning the accuracy of,
or matters included in, a Claim Certificate, Escrow Agent shall not distribute
to an Indemnified Party any Escrowed Funds or make any indemnification payment
to an Indemnified Party pursuant to this Section 4.b until Escrow Agent receives
(i) the written consent of the Representative to such indemnifying payment or
(ii) a Final Determination with respect to the dispute. After notice by the
Representative of disagreement with the accuracy of, or matters included in, a
Claim Certificate, either Surety or any other Indemnified Party (on the one
hand) or the Representative (on the other hand), may submit and settle such
disagreement by arbitration in accordance with the Commercial Arbitration Rules,
existing at the date thereof, of the American Arbitration Association (the
"Rules"). The dispute shall be submitted to one arbitrator agreed to by Surety
and the Representative or, if Surety and the Representative cannot agree on one
arbitrator, by three arbitrators selected in accordance with said Rules, and
shall be heard in Fort Worth, Texas. Each arbitrator must be experienced in the
subject matter in dispute. The costs and expenses of the arbitration shall be
paid by the non-prevailing party in such arbitration. If an Indemnified Party is
the prevailing party, a Claim may be made against the Escrowed Funds for such
costs and expenses.
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iii. In the event of any Claim asserted against an Indemnified Party
by a third party, the Indemnified Party shall immediately notify the
Representative thereof, and permit the Representative, on behalf of the
Indemnifying Parties, to assume the defense of any such Claim or any litigation
resulting therefrom; provided, however, that counsel for the Representative, on
behalf of the Indemnifying Parties, who shall conduct the defense of such Claim
or any litigation resulting therefrom, shall be approved by the Indemnified
Party or Parties against whom the Claim for which indemnification is sought is
made (whose approval shall not be unreasonably withheld), and the Indemnified
Party or Parties may participate in such defense at such party's expense. The
failure of any Indemnified Party to give notice to the Representative as
provided herein shall not relieve the Indemnifying Parties of their obligations
under this Escrow Agreement unless such failure to give notice results in the
forfeiture of substantive rights or defenses of the Indemnifying Parties. The
Representative, in the defense of any such Claim or litigation, shall not,
except with the consent of the relevant Indemnified Party or Parties, which
consent shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement with regard to such Claim or litigation. The
Indemnified Parties shall furnish such information regarding themselves or the
Claim in question as the Representative may reasonably request in writing and as
shall be reasonably required in connection with the defense of such Claim and
litigation resulting therefrom. The Representative shall advise the Indemnified
Parties from time to time of the status of such defense. The attorney fees,
costs, and other expenses related to Representative's defending or litigating a
Claim shall be paid from the Escrowed Funds from time to time as approved in
writing by the Representative and Surety. Notwithstanding the above rights of
Representative to defend and litigate a Claim, Surety may, by written notice to
the Representative and Escrow Agent, with the prior written consent of
Representative, which consent shall not be unreasonably withheld, terminate such
defense and litigation and direct that the Claim be paid in full if Surety
reasonably determines, after consultation with its counsel, that the sum of (A)
the estimated costs of defending and litigating such Claim, (B) the estimated
costs of paying such Claim if the defense and litigation is unsuccessful, and
(C) the total of all other Claims for which the requisite notice has been given,
exceeds seventy-five percent (75%) of the total of the Escrowed Funds then held
by Escrow Agent.
iv. If the Representative does not assume the defense of any such
Claim or commence settlement negotiations within thirty (30) days of receiving
the notice provided in Section 4.b.iii above, or such shorter period of time if
applicable because of procedural requirements, and pursue such defense or
settlement proceedings with reasonable diligence, the Indemnified Party may
assume such defense or commence such settlement negotiations and may further
consent to entry of a judgement or enter into a settlement of such Claim or
litigation on behalf of the Indemnifying Parties. In such event, the Indemnified
Party may submit a
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Claim Certificate to Escrow Agent from time to time for the costs and expenses
(including attorney fees and expenses) incurred by the Indemnified Party in
defending and settling the Claim.
5. GENERAL.
a. Notices. Any notice required or permitted by any party must be in
writing and must be delivered either personally to the other parties or by
certified mail, return receipt requested, at the parties' addresses indicated
below. Any notice will be effective upon delivery in the case of personal
delivery and, in the case of delivery by certified mail, three (3) business days
after the date of deposit in the United States mail, postage prepaid. The
addresses of the parties are as follows:
if to Escrow Agent:
----------------------------
----------------------------
----------------------------
----------------------------
if to Surety Bank or Surety:
0000 Xxxxxxxx Xxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxx 00000
Attention: Mr. C. Xxxx Xxxx
with a copy to:
Xx. Xxxxxxxx X. Xxxxxxx
Xxxxx & Xxxxxxx, L.L.P.
000 X. 0xx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxx 00000-0000
if to TexStar:
000 Xxx Xxxxxx Xxxx
Xxxxxxxxx Xxxx, Xxxxx 00000
Attention: Xx. Xxxxx X. Bexley
with a copy to:
Xx. Xxxxxxx X. Xxxxx
Xxxxxxx Xxxxxx, L.L.P.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000-0000
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if to the Indemnifying Parties:
Mr. W. Xxxxxx Xxxx
Rush Peterbilt Truck Center
0000 Xxxxxxxxxx 00 Xxxx
Xxx Xxxxxxx, Xxxxx 00000
with a copy to:
Xx. Xxxxxxx X. Xxxxx
Xxxxxxx Xxxxxx, L.L.P.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000-0000
The names and address of the parties to receive notice as stated in this section
may be changed at any time by notice given in accordance with this section. As
used in this Escrow Agreement, the term "business day" means any day of the
week, Monday through Friday, that is not recognized by the United States Postal
Service as a national holiday and on which the national banks are open for
business.
b. Successors and Assigns; No Assignment by Indemnifying Parties.
This Escrow Agreement is binding upon and shall inure to the benefit of the
respective parties hereto and their respective heirs, executors, administrators,
successors and assigns. Notwithstanding anything herein to the contrary, no
interest herein may be assigned by any Indemnifying Party other than (a)
executors, administrators, legatees or heirs of the Indemnifying Party or (b) in
a transaction involving no change in beneficial ownership. Notice of any
transfers permitted hereunder shall be given to Surety and Escrow Agent and no
such permitted transfer shall be valid until such notice is given.
c. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without giving
effect to the conflict of law rules thereof.
d. Cumulative Rights. The rights of the parties hereunder are
cumulative and are not exclusive of any other rights they may have under the
Agreements or otherwise.
e. Waivers. Waiver by any party of any breach of or failure to comply
with any provision of this Escrow Agreement by any other party shall not be
construed as, or constitute, a continuing waiver of any such provision, or a
waiver of any other breach of, or failure to comply with, any other provision of
this Escrow Agreement.
f. Integration; Amendment and Termination. This Escrow Agreement
(including the attachments hereto) together with the Agreements (including the
attachments thereto) constitutes, except as to Escrow Agent which shall only be
bound by the terms of this
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Escrow Agreement, the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings
between the parties with respect to the subject matter hereof. This Escrow
Agreement may not be amended or terminated, nor may any condition or term hereof
be waived, orally, but only by an instrument in writing duly executed by the
parties hereto, or, in the case of a waiver, by the party otherwise entitled to
performance.
g. Section and Other Headings. The section and other headings contained
in this Escrow Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Escrow Agreement.
h. Counterparts. This Escrow Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
i. No Impairment. If any provision of this Escrow Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect
without being impaired or invalidated in any way.
6. Escrow Agent Rights and Duties; Limitation of Liability and Indemnity.
a. Appointment. Surety Bank, Surety, TexStar and the Representative on
behalf of the Indemnifying Parties hereby select Escrow Agent as the escrow
agent for the purposes set forth in this Agreement. Escrow Agent hereby accepts
this appointment and designation.
b. Resignation and Replacement.
i. Escrow Agent may resign by giving at least thirty (30) days
written notice to Surety and the Representative. Upon the dissolution or
resignation of Escrow Agent, Surety and the Representative shall select a
successor escrow agent by mutual agreement. If Escrow Agent has not been
notified of the successor on or before the 30th day, Escrow Agent may pay the
Escrowed Funds and deliver any documents in its possession into the registry or
custody of a court as provided for in Section 6.e below. Escrow Agent shall be
entitled to any compensation accrued prior to the date of its payment and
delivery of the Escrowed Funds and any such documents.
ii. Surety and the Representative may replace the Escrow Agent by
the mutual agreement of Surety and the Representative and written notice to
Escrow Agent, but in such event Escrow Agent shall be entitled to any
compensation accrued prior to the date of its replacement.
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iii. On the resignation, dissolution, or removal of Escrow Agent,
Escrow Agent shall deliver any Escrowed Funds and documents held pursuant to
this Agreement to its successor, or if there is no successor, to such person as
jointly directed in writing by Surety and the Representative. Failing to receive
such writing, Escrow Agent is authorized to deposit all of same into the
registry of a court of competent jurisdiction. On the completion of such
delivery to its successor or into the registry of the court, Escrow Agent shall
be deemed to be removed as of such date.
c. Fees and Expenses of Escrow Agent. All fees and expenses of Escrow
Agent (including the reasonable fees of any counsel retained by it) in
connection herewith shall be paid from the Escrowed Funds. If the Escrowed Funds
are insufficient for payment in full, one-half of the remaining amount owed to
Escrow Agent will be paid by Surety and one-half will be paid by the
Indemnifying Parties.
d. Liability of the Escrow Agent; Indemnification.
i. Escrow Agent, as part of the consideration for the acceptance
of this escrow, shall not be liable for any acts or omissions, for any claims,
demands or losses, or for any damages made or suffered by any party to this
Agreement, excepting such as may arise through or be caused by its bad faith,
willful misconduct, gross negligence, or breach of fiduciary duty. Furthermore,
it shall not be liable by reason of any act taken in good faith upon advice of
its counsel.
ii. Escrow Agent undertakes to perform only such duties as are
specifically set forth herein and may conclusively rely and shall be protected
in acting or restraining from acting on any written notice, instrument or
signature reasonable believed by it to be genuine and to have been signed or
presented by the proper party or parties duly authorized to do so. Escrow Agent
shall have no responsibility for the contents of any writing contemplated herein
and may rely, without any liability, upon the contents thereof. Attached hereto
as Schedule B are the names, titles and specimen signatures of each of the
persons who are authorized to execute and deliver written notices and directions
to Escrow Agent. Each party may change its authorized persons during the term of
this Escrow Agreement.
iii. Surety, Surety Bank, and the Indemnifying Parties severally
agree to indemnify and hold harmless Escrow Agent against any and all losses,
claims, damages, liabilities and expenses, including, without limitation,
reasonable costs of investigation and counsel fees and disbursements which may
be imposed upon the Escrow Agent or incurred in connection with the acceptance
of the appointment as Escrow Agent or by its performance as Escrow Agent. This
specifically includes any litigation arising from this Escrow Agreement or
involving the subject matter thereof. Notwithstanding this indemnification
provision, or any other term to the contrary,
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Xxxxxx Xxxxx is responsible for all losses, damages, liabilities, and expenses
caused by its bad faith, willful misconduct, gross negligence, or breach of
fiduciary duty.
e. Tender to the Registry of the Court. In the event of a dispute
concerning the Escrowed Funds, Escrow Agent shall be entitled to tender the
remaining Escrowed Funds and any related documents in its possession to the
registry or custody of a court of competent jurisdiction and may file such
pleadings or motions as it deems appropriate and thereupon be discharged from
all further responsibilities as Escrow Agent. This action shall not deprive
Escrow Agent of any right to reimbursement granted or fees accrued under other
provisions of this Escrow Agreement.
IN WITNESS WHEREOF, Surety, Surety Bank, TexStar, Representative on behalf
of the Indemnifying Parties and Escrow Agent have caused this Escrow Agreement
to be duly executed as of the day and year first above written.
SURETY: SURETY CAPITAL CORPORATION
By:
------------------------------------
C. Xxxx Xxxx, Chairman of the
Board and Chief Executive Officer
SURETY BANK: SURETY BANK, NATIONAL ASSOCIATION
By:
------------------------------------
Xxxxx X. Xxxxxxx, Vice Chairman of
the Board, President and Chief
Executive Officer
TEXSTAR: TEXSTAR NATIONAL BANK
By:
------------------------------------
Xxxxx X. Bexley, President
REPRESENTATIVE:
---------------------------------------
W. Xxxxxx Xxxx
INDEMNIFYING PARTIES:
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