EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (hereinafter called the
"Agreement") dated as of January 9, 1996, is executed by and between Texas State
Bank, McAllen, Texas, a Texas banking association ("Texas State Bank") and First
State Bank and Trust Company, Mission, Texas, a Texas banking association
("First State Bank"). Texas State Bank is a wholly owned subsidiary of Texas
Regional Bancshares, Inc., a Texas corporation ("Texas Regional"), and Texas
Regional joins into the execution hereof for the purposes herein expressed.
Subject to the fulfillment of the terms and conditions of this Agreement,
the undersigned shareholders of First State Bank (sometimes individually called
a "Shareholder" or collectively the "Shareholders") join into the execution
hereof for the purposes set forth in section 9.11 herein.
W I T N E S S E T H:
This Agreement provides for the merger of First State Bank with and into
Texas State Bank, pursuant to the terms of this Agreement and Plan of
Reorganization. As a result of the merger, the shareholders of First State
Bank, will receive an aggregate of $79,000,000.00 in cash (subject to adjustment
and calculated and payable as herein provided). The aggregate consideration
shall be exchanged by Texas State Bank for all of the outstanding shares of
First State Bank capital stock, and, upon the closing of the transaction, First
State Bank will be merged with and into Texas State Bank and First State Bank
will cease its separate existence.
As a result of the merger transaction, all rights, privileges, immunities,
powers and franchises of each of Texas State Bank and First State Bank shall be
merged into Texas State Bank as the surviving banking association. Without any
other action, at the Effective Time, Texas State Bank shall be vested with all
property, real, personal and mixed, of the merging associations and shall
thereafter possess all of the interests, both public and private, of each of the
merging associations, and all claims of creditors of each of First State Bank
and Texas State Bank shall survive and any liens shall be preserved unimpaired
in Texas State Bank as the surviving association. All of the foregoing shall be
effected pursuant to and as set forth in this Agreement and in an Agreement of
Merger (the "Merger Agreement") to be executed by and among the Corporation,
First State Bank and Texas State Bank, the form of which is attached hereto as
SCHEDULE 1.1.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
ARTICLE 1
PLAN OF MERGER
A. THE MERGER. Upon and subject to the terms and provisions hereof, at
the Effective Time, as hereafter defined, First State Bank shall be merged with
and into Texas State Bank (the "Merger"), with the effect that the separate
existence of First State Bank shall cease. Texas State Bank and First State
Bank, shall each execute and deliver the Merger Agreement in the form attached
hereto as SCHEDULE 1.1 (the "Merger Agreement") as soon as reasonably
practicable following the execution and delivery hereof. The Merger Agreement
shall provide for the conversion, on the Effective Date (as hereinafter
defined), of all of the outstanding shares of First State Bank capital stock
into the right to receive the Total Consideration, as hereafter defined. At the
Effective Time of the Merger, the rights of the shareholders of First State Bank
shall, without the requirement of further action on the part of the
shareholders, immediately be converted into the right to receive cash
consideration, as herein provided, for each share of First State Bank held by
such shareholder of record as of the Effective Time and such shareholder shall
cease to be a shareholder of First State Bank and such share certificate shall
for all purposes be deemed only to represent a right to receive cash pursuant to
this Agreement and the Merger Agreement.
B. CONSIDERATION. Upon consummation of the merger, each share of First
State Bank outstanding shall be converted into the right to receive cash
consideration as herein provided. The consideration to be paid by Texas State
Bank shall be $395 per share (the "Per Share Consideration") which consideration
shall be exchanged for each of the 200,000 outstanding shares of First State
Bank, for an aggregate consideration of $79,000,000.00 (the "Total
Consideration"), adjusted as herein provided for amounts attributable to
shareholders exercising dissenters' rights of appraisal.
1. An amount equal to the Per Share Consideration (adjusted as
herein provided for amounts attributable to shareholders exercising
dissenters' rights of appraisal) shall be paid by Texas State Bank to
each First State Bank shareholder who has not exercised his, her or
its dissenters' rights of appraisal upon surrender of such
shareholder's share certificate or certificates evidencing shares of
First State Bank stock. Such amount shall be payable at the time of
Closing to shareholders who have surrendered such share certificates
at or prior to the date of Closing, by check made payable to each
shareholder and mailed to such shareholder at the shareholder's
address as stated on the stock transfer records of First State Bank,
or (if an account is designated by such shareholder not less than
twenty days prior to the date of Closing) by direct deposit or wire
transfer into such account on the date of Closing. Amounts payable to
shareholders who surrender their share certificates following the date
of Closing shall be paid within ten days following receipt of the
shareholder's share certificate. The stock transfer records of First
State Bank shall for all purposes be closed as of the Effective Time,
and no transfer of record of any of the shares of First State Bank
capital stock shall take place thereafter.
2. Any amounts that would otherwise have been payable pursuant
to section 1.2.1 or 1.2.2 to any shareholder of First State Bank who
has exercised his, her or its dissenters' rights of appraisal pursuant
to applicable provisions of
law shall be retained by Texas State Bank until such shareholder
relinquishes his, her or its right of dissent, at which time the provisions
of section 1.2.1 and 1.2.2 shall apply, except that the date of payment for
such shares shall be extended to not less than ten days following the date
of relinquishment of such dissenters' rights. In the event that a
shareholder of First State Bank exercises his, her or its dissenters'
rights, if such shareholder receives as consideration for his or her shares
an amount per share in excess of the Per Share Consideration, the amount
payable to other shareholders in consideration of the merger shall be
adjusted as follows: the Total Consideration shall be reduced by the full
amount payable to the dissenting shareholder and such adjusted Total
Consideration shall be divided by the number of shares held by shareholders
not exercising dissenters' rights to determine the amount of Per Share
Consideration to be paid to all such other shareholders.
3. Any amounts payable to shareholders who surrender their
share certificates after the date of Closing shall not bear interest
attributable to periods either before or after the date of Closing.
C. CLOSING. The closing ("Closing") of the transactions contemplated by
this Agreement shall be effected on the latest of the following dates, or as
promptly thereafter as reasonably practicable (the "Closing Date"):
1. March 31, 1996;
2. The thirtieth calendar day after the date of approval by the
Federal Reserve Board as required by Section 7.02 herein; or
3. Such date as may be prescribed by the Federal Reserve Board,
the Texas Banking Department or by any other federal or state agency
or authority pursuant to an applicable federal or state law, order,
rule or regulation, prior to which consummation of the transactions
provided herein may not be effected; or
4. If the transactions contemplated by this Agreement are being
contested in any legal proceeding and Texas State Bank, pursuant to
Section 7.02 hereof, has elected to contest the same, then the date
that such legal proceeding has been brought to a conclusion favorable,
in the judgment of Texas State Bank, to the consummation of the
transactions contemplated hereby; or
5. Such other date as the parties may select by mutual
agreement.
The Closing shall take place at the offices of Texas State Bank, Kerria Plaza,
Suite 301, 3700 N. Tenth Street, McAllen, Texas, on the Closing Date, or at such
other place as shall be mutually agreeable. If such Closing shall not have been
accomplished on or before June 30, 1996, this Agreement, and the Merger
Agreement if executed and delivered prior thereto, shall, at the election of
either party hereto by written notice, terminate and be of no further force or
effect. In addition, First State Bank may terminate this Agreement and the
Merger Agreement if Texas Regional fails to file a registration statement with
the Securities and Exchange Commission, pursuant to which Texas Regional
proposes to offer for sale shares of Texas Regional capital stock with an
estimated price that will yield an aggregate of $40,000,000.00 in proceeds to
Texas Regional, within forty-five days following the date of Texas Regional's
receipt
of audited financial statements for both First State Bank and The Border Bank,
Hidalgo, Texas in each case accompanied by the unqualified report of KPMG Peat
Marwick, for fiscal years ended December 31, 1995, 1994 and 1993; PROVIDED THAT
First State Bank may exercise the right of termination in this sentence only if
such right is exercised by written notice to Texas State Bank within ten days
following expiration of such forty-five day period. Any termination which
occurs through no fault of any of the parties to this Agreement or the Merger
Agreement shall be without liability to any of the parties hereto or to the
Merger Agreement, except for the obligation of Texas State Bank to make certain
payments required pursuant to section 5.7 hereof. This Agreement and the Merger
Agreement may be terminated at any time prior to the Effective Date by the
mutual action of the respective Boards of Directors of First State Bank and
Texas State Bank.
D. EFFECTIVE DATE. The parties hereto agree to take, on or prior to the
Closing Date, all such action, and to execute and deliver all such instruments
and documents, as may be necessary or advisable, on the advice of counsel, to
cause the Merger Agreement, subject to consummation of the Closing, to become
effective as soon as practicable after the Closing Date. The merger shall
become effective at the time specified for consummation of the merger (herein
referred to as the "Effective Time") in the order to be issued by the Texas
Banking Department.
E. EFFECT OF MERGER. As a result of the merger, First State Bank's
assets and business shall be acquired by Texas State Bank, free and clear of any
and all liens, claims or encumbrances.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF FIRST STATE BANK
First State Bank hereby represents and warrants to Texas State Bank as
follows:
A. ORGANIZATION OF FIRST STATE BANK. First State Bank is a Texas state
banking association, duly organized and existing under the laws of the state of
Texas, and has full power and authority (including all licenses, franchises,
permits and other governmental authorizations which are legally required) to own
its properties and to engage in the business and activities now conducted by it,
including both its commercial banking business and its trust business. First
State Bank has branch licenses and all other authority necessary to own and
operate branch bank facilities operated by First State Bank. A list of the
branches presently operated by First State Bank, together with a list of
licenses pending for operation of additional branch facilities are included on
SCHEDULE 2.1. True and complete copies of the Articles of Association and
Bylaws of First State Bank, as amended to date, have been delivered to Texas
State Bank, or (to the extent not previously delivered) First State Bank
covenants to deliver the same to Texas State Bank within 15 days following the
date hereof. First State Bank (i) is duly authorized to conduct a general
banking business, in accordance with its charter, subject to the supervision of
the Texas Banking Department, the Federal Deposit Insurance Corporation and
other applicable regulatory authorities; (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. Except as disclosed in SCHEDULE 2.1, and except
for trust assets held in the ordinary course of business of acting as trustee
for third parties, First State Bank has no subsidiaries or affiliates, owns no
voting securities of any other corporation, and is not a
member of any joint venture or partnership. First State Bank is not a reporting
company under the Securities Exchange Act of 1934, as amended (the "1934 Act").
B. CAPITALIZATION AND OWNERSHIP. The authorized capital stock of First
State Bank consists of 200,000 shares (the "Shares") of capital stock, par value
$20.00 per share, all of which are duly authorized, validly issued and
outstanding, fully paid, nonassessable, and are owned beneficially and of record
by the persons named in the shareholder list previously delivered by First State
Bank to Texas State Bank. The Shares have not been issued in violation of the
preemptive rights of any stockholder. There are no outstanding options,
warrants, conversion rights, calls or commitments of any kind obligating First
State Bank to issue, directly or indirectly, additional shares of its capital
stock, and no authorization therefor has been given. First State Bank does not
have any outstanding commitment or obligation to repurchase, reacquire or redeem
any of its outstanding capital stock. The undersigned common shareholders of
First State Bank have joined into the execution hereof to evidence their consent
to and written approval of the transaction on the conditions herein described,
and to evidence their agreement to vote for and support the approval of the
transaction (on the conditions herein described) at the special shareholders'
meeting to be called to consider the merger. The undersigned own beneficially
and of record not less than 75% of the outstanding common stock of First State
Bank, and the holders of common stock of First State Bank are the only
shareholders who have the right to vote on the proposed merger of First State
Bank with and into Texas State Bank.
C. FINANCIAL STATEMENTS AND RECORDS.
1. First State Bank has delivered to Texas State Bank (i) the
audited balance sheet of First State Bank as of December 31, 1994 (the "December
31, 1994 Balance Sheet"), and the related audited statements of income, changes
in stockholders' equity and changes in financial position for the year then
ended, together with the notes thereto, accompanied by the report thereon of the
independent certified public accountant who examined such statements; and (ii)
the unaudited regulatory reports of condition of First State Bank as of December
31, 1993, 1992 and 1991, and the related unaudited statements of income and
changes in equity capital for each of the years then ended. Except to the
extent qualified by the report of the independent accountant thereon, these
financial statements fairly present the financial position of First State Bank
as of the dates thereof and the results of its operations for the periods
indicated. The December 31, 1994 Balance Sheet and audited financial statements
for the fiscal year then ended, have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis. To the best
knowledge of First State Bank, audits of First State Bank have been conducted in
accordance with generally accepted auditing standards. In addition, First State
Bank has delivered to Texas State Bank its unaudited balance sheet and
regulatory report of condition as of September 30, 1995 (collectively, the
"September 30, 1995 Balance Sheet") and the related unaudited statements of
income, changes in stockholders' equity and changes in financial position for
the twelve-month period then ended. In the opinion of the management of First
State Bank, these financial statements also fairly present the financial
position of First State Bank as of the date thereof and the results of its
operations for the period indicated and the financial records upon which such
financial statements are based have been kept in accordance with prudent banking
practices and the past practices of First State Bank. Except as disclosed in
SCHEDULE 2.3.1, the September 30, 1995 Balance Sheet and related financial
statements for the nine-month period then ended, have been prepared in
accordance with generally accepted accounting principles, consistently applied.
The December 31, 1994 Balance Sheet and the September 30, 1995 Balance Sheet,
and the financial statements for the twelve and nine-month periods then ended,
described above are collectively referred to hereinafter as the "First State
Bank Financial Statements." Except as set forth in SCHEDULE 2.3.1, the First
State Bank Financial Statements do not, as of the dates thereof, include any
material assets or omit to state any material liability, absolute or contingent,
the inclusion or omission of which renders such financial statements, in light
of the circumstances under which they were made, materially misleading. Without
limiting the generality of the foregoing, First State Bank specifically
represents to Texas State Bank that, except as set forth in SCHEDULE 2.3.1,
First State Bank has no liabilities, either accrued, contingent or otherwise,
which, individually or in the aggregate, are material, which have not been
reflected in the First State Bank financial statements (including the September
30, 1995 Balance Sheet) or which have been incurred in the ordinary course of
business since the date of the September 30, 1995 Balance Sheet.
2. Except as set forth in SCHEDULE 2.3.2, since December 31, 1994,
there have not been any material changes in the financial condition, results of
operations, business or prospects of First State Bank, other than changes in the
ordinary course of business, none of which individually or in the aggregate has
been materially adverse, nor have there been any other events or conditions of
any character which have individually or in the aggregate materially and
adversely affected the financial condition, results of operations, business or
prospects of First State Bank.
3. The books and records of First State Bank reflect the
transactions to which it is or was a party or by which its properties are or
were bound, and, to the extent applicable, such books and records are and have
been properly kept and maintained in accordance with the law and prudent banking
principles except as otherwise disclosed in SCHEDULE 2.3.3. As of the date
hereof and as of the Closing, all of the minute books of First State Bank are
and will be complete, accurate and current in all material respects.
4. Total trust assets under management by First State Bank as of
September 30, 1995, are as set forth in the September 30, 1995 Balance Sheet.
All books and records related to the trust business of First State Bank are
true, correct and complete, and all such trust business is operated in full
compliance with sound banking practices, applicable fiduciary requirements and
applicable provisions of law, including applicable provisions of the Texas
Banking Act and applicable provisions of the Texas Probate Code. Except as set
forth in SCHEDULE 2.3.4, during the three years prior to the date hereof, First
State Bank has not experienced any material change, whether or not deemed
adverse, in the operation of its trust business.
D. LOANS.
1. All Loans included in the assets of First State Bank, and all
commitments to make Loans by First State Bank (including leasing transactions
and off balance sheet lending transactions such as letters of credit), have been
made in the ordinary course of business of First State Bank and do not present
more than the normal risk of uncollectibility or other unfavorable features,
except as disclosed in Schedule 2.4.1.
2. All Loans to directors, officers and beneficial owners of 5% or
more of the outstanding capital stock of First State Bank, and loans to any
person or company related to or affiliated with any such person, are listed on
Schedule 2.4.2. The Loans listed on Schedule 2.4.2 do not present more than the
normal risk of uncollectibility or other unfavorable features.
3. First State Bank's reserves for loan losses have been calculated
in
accordance with all applicable rules and regulations. In the reasonable opinion
of the management, officers and directors of First State Bank, the reserve for
loan losses shown on the September 30, 1995 Balance Sheet is adequate in all
respects to provide for all losses on loans outstanding as of the date of
September 30, 1995 Balance Sheet.
E. PROPERTIES. First State Bank has good and indefeasible title to all
assets and properties, whether real or personal, tangible or intangible, which
it purports to own, including without limitation, all assets and properties
reflected on the September 30, 1995 Balance Sheet or acquired subsequent thereto
(except to the extent such assets and properties have been disposed of for fair
value in the ordinary course of business since the date of the September 30,
1995 Balance Sheet), subject to no liens, mortgages, security interests,
encumbrances, easements, title imperfections, or charges of any kind except (i)
as noted in the September 30, 1995 Balance Sheet or the notes to the First State
Bank Financial Statements, (ii) statutory liens not yet delinquent, (iii)
security interests granted incident to borrowings by First State Bank from
Federal Reserve Banks or to secure deposits of funds by federal, state or other
governmental agencies, (iv) assets held for third party trust customers in the
ordinary course of the trust business of First State Bank; and (v) minor defects
and irregularities in title and encumbrances which do not materially impair the
use thereof for the purposes for which they are held and such liens, mortgages,
security interests, encumbrances and charges as are not, in the aggregate,
material to the assets and properties of First State Bank. Except as disclosed
on SCHEDULE 2.5, all improvements, buildings and structures located on real
estate owned by First State Bank, and the use by First State Bank of such real
estate, together with such improvements, buildings and structures, in the manner
heretofore and currently used by First State Bank, conform in all material
respects to applicable federal, state and local laws and regulations (including
applicable environmental laws and regulations), zoning and building ordinances
and health and safety ordinances, and such real estate is zoned for the various
purposes for which such real estate is currently being used. Except as
disclosed on SCHEDULE 2.5, all such improvements, buildings and structures
located on real estate owned by First State Bank, and all of the material,
tangible personal property owned by First State Bank, are in good operating
condition and repair, reasonable wear and tear excepted. Listed on SCHEDULE 2.5
are all policies of title insurance covering such properties.
F. ENVIRONMENTAL MATTERS. Neither any Environmental Hazards nor any
Hazardous Materials Contamination exist on any real property owned by First
State Bank (including any owned by and used in connection with the business of
First State Bank and any foreclosed properties owned by First State Bank), or on
any real property used by the Bank in connection with the business of First
State Bank or on any adjacent property, as a result of any Environmental Hazards
on or emanating from the Real Property. The real properties described in the
preceding sentence are sometimes collectively referred to as the "Real
Property." Included on SCHEDULE 2.6 is a list of any environmental survey or
report related to any of the Real Property, true, correct and complete copies of
which have been provided to Texas State Bank. As used in this Agreement, the
term "Environmental Hazards" shall mean (i) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et
seq.), as amended from time to time, and regulations promulgated thereunder;
(ii) any "hazardous substance" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et
seq.) ("CERCLA"), as amended from time to time, and regulations promulgated
thereunder; (iii) any toxic substance regulated by the Toxic Substances Control
Act (15 U.S.C. Section 2601 et seq.), as amended from time to time, and
regulations promulgated thereunder; (iv) gasoline, diesel fuel or other
petroleum hydrocarbons; (v) asbestos and asbestos containing materials, in any
form,
whether friable or non-friable; (vi) polychlorinated biphenyls; (vii) radon gas;
(viii) any solid waste or petroleum waste; and (ix) any other substance which
any governmental authority requires special handling or notification of any
federal, state or local governmental entity in its collection, storage,
treatment, or disposal or which is identified or classified to be hazardous or
toxic under applicable state or federal law or regulation or the common law, or
any other applicable laws. As used in this Agreement, the term "Hazardous
Materials Contamination" shall mean the contamination of the improvements,
facilities, soil, groundwater, air or other elements on or of the Real Property
by Hazardous Materials, or the contamination of the buildings, facilities, soil,
groundwater, air or other elements on or of any other property as a result of
Hazardous Materials at any time before the date of this Agreement emanating from
the Real Property.
G. LITIGATION. Except as set forth in SCHEDULE 2.7, no claims have been
asserted and no relief has been sought against First State Bank in any pending
litigation or governmental proceedings or otherwise which might result in a
judgment, decree or order having a material adverse effect on the financial
condition, results of operations, business or prospects of First State Bank.
First State Bank has complied with, and is presently in compliance with, all
laws and regulations pertaining to consumer credit and truth in lending. The
management of First State Bank is not aware of any material violation by First
State Bank of any of the foregoing. Except as set forth in SCHEDULE 2.7, First
State Bank is in substantial compliance with all other laws, all rules and
regulations of governmental agencies and authorities and any judgments, orders
or decrees which by their terms apply to any of them. All permits, concessions,
grants, franchises, licenses and other governmental authorizations and approvals
necessary for the conduct of the business of First State Bank have been duly
obtained and are in full force and effect, and there are no proceedings pending
or, to First State Bank's knowledge, threatened which may result in the
revocation, cancellation, suspension or adverse modification of any thereof.
The consummation of the transactions contemplated hereby will not result in any
such revocation, cancellation, suspension or modification.
H. TAXES. First State Bank 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 First State Bank is not delinquent in the payment of any taxes shown
on such returns or reports. Except as disclosed on SCHEDULE 2.8, First State
Bank has no examination pending by the Internal Revenue Service, the Texas
Comptroller of Public Accounts, or any other taxing authority, nor has First
State Bank been notified of any proposed examination. Except as noted in
SCHEDULE 2.8, there are included in the September 30, 1995 Balance Sheet, or
reflected in the Notes to the First State Bank Financial Statements, reserves
adequate in the reasonable opinion of management for the payment of all accrued
but unpaid federal, state and local taxes of First State Bank, including all
income, franchise, ad valorem and other taxes, and all interest and penalties,
whether or not disputed, for the ten-month period ended October 31, 1995, for
the year ended December 31, 1994, and for all fiscal years prior thereto. First
State Bank has not executed or filed with the Internal Revenue Service, the
Comptroller of Public Accounts of the State of Texas or any other taxing
authority any agreement extending the period for assessment and collection or
any federal tax, nor is First State Bank 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 First State
Bank. First State Bank has not filed a consent pursuant to Section 341(f) of
the Internal Revenue Code or otherwise.
I. CONTRACTS. Except as set forth in SCHEDULE 2.9, First State Bank is
not a party to
or bound by any written or oral (i) employment contracts (including without
limitation any collective bargaining contracts or union agreements); (ii)
commission, bonus, deferred compensation, profit-sharing, life insurance, health
insurance, salary continuation, severance pay, pension or retirement plans or
arrangements whether or not legally binding and whether or not funded; (iii)
material leases or licenses with respect to any property, real or personal,
whether as landlord, tenant, licensor or licensee; (iv) contracts or commitments
for capital expenditures in excess of $100,000 for any one project; (v)
contracts or options to purchase or sell any real or personal property otherwise
than in the ordinary course of business or pursuant to this Agreement; (vi)
agreements or instruments relating to any commitments to loan money or to extend
credit, except for commitments to extend credit in the ordinary course of
business in amounts of less than $500,000 in any one transaction and $2,000,000
in the aggregate; (vii) agreements to which any director, officer or holder of
5% or more of the outstanding capital stock of First State Bank, or any person
or company related to or affiliated with any such person, is a party; (viii)
contracts relating to the purchase or sale of financial or other futures, or put
or call options relating to cash, securities or any commodities whatsoever; or
(ix) material contracts, other than the foregoing, not made in the ordinary
course of business. Except as set forth on SCHEDULE 2.9, First State Bank is
not in default, and no event has occurred which, with notice or the lapse of
time or action by a third party, could result in a default by First State Bank,
(a) under any outstanding indenture, mortgage, contract, lease or other
agreement to which First State Bank is a party or by which First State Bank is
bound; (b) under any provision of the Articles of Incorporation or Bylaws of
First State Bank which might result in a material adverse effect on the
financial condition, results of operations, business or prospects of First State
Bank; or (c) under any agreement with federal or state regulatory authorities.
First State Bank does not have outstanding any power of attorney, except routine
powers of attorney relating to representation before governmental agencies or
given in connection with qualification to conduct business in another
jurisdiction.
J. APPROVALS; VALIDITY OF AGREEMENT. The Board of Directors of First
State Bank has approved the form, terms and provisions of this Agreement and the
transactions contemplated hereby. Holders of voting Common Stock of First State
Bank are the only persons with the power to consider and vote upon the
transactions herein described. Shareholders of First State Bank joining into
the execution hereof as provided below in the aggregate hold beneficially and of
record not less than 75% of the outstanding shares of First State Bank voting
Common Stock, and all such Shareholders have approved this Agreement and the
transactions contemplated hereby on the conditions herein described. Provided
required approval is obtained (as and to the extent required) from applicable
regulatory authorities, including the Federal Reserve Board and the Texas
Banking Department, the execution, delivery and performance of this Agreement
and the Merger Agreement and the consummation of the merger contemplated herein
and therein, will not conflict with, result in the breach of, constitute a
default under or accelerate the performance provided by, (i) the terms of any
law, order, rule or regulation of any governmental agency or authority or any
judgment, order or decree of any court or other governmental agency to which
First State Bank may be subject; (ii) any contract, agreement or instrument to
which First State Bank is a party or pursuant to which First State Bank is
bound; or (iii) the Articles of Incorporation or Bylaws of First State Bank.
Provided required approval is obtained (as and to the extent required) from
applicable regulatory authorities, including the Federal Reserve Board and the
Texas Banking Department, no consent or approval or other action by any party
under any contract to which First State Bank is subject is required for the
execution, delivery and performance of this Agreement and consummation of the
transactions herein described, except where the failure to obtain such consent
would not have a material adverse effect on First State Bank. The execution,
delivery and performance of this Agreement
and the Merger Agreement and the consummation of the transactions herein and
therein described will not constitute an event which with the lapse of time or
action by a third party could result in a default under any of the foregoing or
result in the creation of any lien, charge or encumbrance upon any of the assets
or properties of First State Bank or upon any of the stock of First State Bank.
This Agreement constitutes the legal, valid and binding obligation of First
State Bank, enforceable against First State Bank in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
K. INSURANCE. First State Bank has insurance coverage with reputable
insurers in amounts, types and risks insured as set forth in SCHEDULE 2.11.
First State Bank's accounts are insured by the Federal Deposit Insurance
Corporation ("FDIC") to the extent permitted by law, and First State Bank has
paid all premiums required to be paid and is in compliance with the applicable
regulations of the FDIC.
L. ABSENCE OF ADVERSE AGREEMENTS. Except as set forth in SCHEDULE 2.12,
First State Bank is not a party to any agreement or instrument, nor is First
State Bank subject to any judgment, order, decree, 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 financial
condition, results of operations, business or prospects of First State Bank.
M. ABSENCE OF CERTAIN CHANGES. Except as set forth in SCHEDULE 2.13,
since December 31, 1994, First State Bank 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, acknowledgments of indebtedness incident to
borrowings from the Federal Reserve Bank and other documents and instruments
issued in the ordinary course of banking business of First State Bank);
(ii) granted any options for the purchase of its capital stock; (iii) declared
or set aside or paid any dividend or other distribution in respect of its
capital stock, or directly or indirectly, purchased, redeemed or otherwise
acquired any shares of such stock; (iv) incurred or assumed any obligations or
liabilities (absolute or contingent), except obligations or liabilities incurred
in the ordinary course of business, or mortgaged, pledged or subjected to lien
or encumbrances (other than statutory liens not yet delinquent) any of its
assets or properties; (v) discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute or contingent), other than current
liabilities included in the September 30, 1995 Balance Sheet, current
liabilities incurred since the date thereof in the ordinary course of business
and liabilities incurred in carrying out the transactions contemplated by this
Agreement; (vi) sold, exchanged or otherwise disposed of any of its capital
assets other than in the ordinary course of business; (vii) forgiven or
cancelled any debts or claims, or waived any rights; (viii) except for salary
increases to employees in the ordinary course of business not exceeding 5% of
prior year's compensation, made any general wage or salary increase, entered
into any employment contract with any officer or salaried employee or instituted
any employee welfare, bonus, stock option, profit-sharing, retirement or similar
plan or arrangement; (ix) suffered any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting its business,
property or assets or waived any rights of value which in the aggregate are
material; (x) except in the ordinary course of business, entered into or agreed
to enter into any agreement or arrangement granting any preferential rights to
purchase any of its assets, properties or rights or requiring the consent of any
party to the transfer and assignment of any such assets, properties or rights;
(xi) made any material change in the conduct of its business, whether entered
into or made in the ordinary course of business or otherwise; (xii) except for
salary
increases to employees in the ordinary course of business not exceeding 5% of
prior year's compensation, granted to any director or officer, or any employee,
any increase in compensation in any form in excess of the amount thereof in
effect as of December 31, 1994 or any severance or termination pay, or entered
into any written employment agreement, trust, fund or other arrangement for the
benefit of any such director, officer or employee, whether or not legally
binding; (xiii) suffered any loss of officers, employees, suppliers or customers
that materially and adversely affects the business, operations or prospects of
First State Bank; or (xiv) entered into any transaction outside the ordinary
course of business except as expressly contemplated by this Agreement. Since
June 30, 1995, there has been no material adverse change in First State Bank.
N. AGREEMENTS WITH DIRECTORS, OFFICERS AND STOCKHOLDERS. The name of
each director and executive officer of First State Bank, and the name of each
holder of five percent (5%) or more of the outstanding capital stock of First
State Bank, together with the name of each "affiliate" of each of such persons,
as such term is defined in the rules and regulations under the Securities Act of
1933, as amended (the "1933 Act"), is listed in SCHEDULE 2.14. Except as set
forth in SCHEDULE 2.14, no such director, executive officer, stockholder or
associate has during the period from January 1, 1994 to the date of this
Agreement been a party to any transaction with First State Bank. Other than
loan transactions, which are scheduled on SCHEDULE 2.4.2, all transactions with
directors, executive officers, 5% stockholders and affiliates are fully and
appropriately summarized in SCHEDULE 2.14. Except as described in SCHEDULE
2.14, none of the transactions have been outside of the ordinary course of
business, and, except as set forth in SCHEDULE 2.14, First State Bank now has no
commitments, written or oral, to lend any funds to any such person.
O. AFFILIATED CORPORATIONS. Except as set forth in SCHEDULE 2.15, First
State Bank knows of no arrangement whereby the stock of any corporation is or
has been held in trust (whether express, constructive, resulting or otherwise)
for the benefit of First State Bank or for the shareholders of First State Bank.
P. REGULATORY MATTERS AND EXAMINATION REPORTS. Except as disclosed on
SCHEDULE 2.16, First State Bank has no formal or informal agreements,
arrangements or understandings with the Federal Reserve Board, the Federal
Deposit Insurance Corporation, the Texas Department of Banking, or any other
regulatory authority (collectively, the "Regulatory Authorities"), nor does
First State Bank have any examination pending by any applicable Regulatory
Authorities nor has First State Bank been notified of any proposed examination
by any Regulatory Authorities. To the extent permitted by law, First State Bank
has provided to Texas State Bank (or, to the extent not previously delivered,
First State Bank covenants to deliver within 15 days to Texas State Bank)
complete and correct copies of (i) all examination reports by Regulatory
Authorities forwarded to First State Bank during the calendar years 1993, 1994,
1995 and to date 1996; (ii) any correspondence between First State Bank and such
agencies during such periods, and (iii) any agreements, arrangements or
understandings between First State Bank and such agencies, including any
agreements, arrangements or understandings arising out of or related to any such
examinations.
Q. COMPLIANCE WITH APPLICABLE LAW. Except as disclosed on SCHEDULE 2.17,
First State Bank and the conduct of its business (including the conduct of its
trust business) are not in violation of any applicable law, statute, order, rule
or regulation promulgated by, or judgment entered by, any federal, state, or
local court or governmental authority relating to the operation, conduct or
ownership of the business and property of First State Bank, which violation
might
result in any material adverse change in the condition, business, prospects,
properties or assets of First State Bank.
R. DISCLOSURE. Except to the extent qualified by one of the Schedules to
this Agreement, neither the financial statements nor any representation or
warranty contained herein, nor any information delivered or to be delivered by
First State Bank pursuant to this Agreement, contains or shall contain an untrue
statement of a material fact, nor do the financial statements, representations,
warranties and other information omit to state, nor will they omit to state, any
material fact necessary in order to make the statements made not misleading.
S. FINDERS. First State Bank has not engaged and is not directly or
indirectly obligated to anyone acting as a broker, finder, or in any other
similar capacity in connection with the transactions contemplated by this
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TEXAS STATE BANK
Texas State Bank and Texas Regional each, jointly and severally, represent
and warrant to First State Bank as follows:
A. ORGANIZATION. Texas State Bank is a banking association duly
organized, validly existing and in good standing under the laws of the State of
Texas with all necessary power to carry on its business as it is now being
conducted. Texas State Bank is wholly owned by Texas Regional Bancshares, Inc.
("Texas Regional"), a Texas business corporation duly registered with the
Federal Reserve Board as a bank holding company under the Bank Holding Company
Act of 1956, as amended.
B. APPROVALS; VALIDITY OF AGREEMENT. The Board of Directors of Texas
State Bank has approved the form, terms and provisions of this Agreement and the
transactions contemplated hereby. Texas Regional is the only shareholder of
Texas State Bank with the power to consider and vote upon the transactions
herein described, and Texas Regional has approved this Agreement and the
transactions contemplated hereby on the conditions herein described. Provided
required approval is obtained (as and to the extent required) from applicable
regulatory authorities, including the Federal Reserve Board and the Texas
Banking Department, the execution, delivery and performance of this Agreement
and the Merger Agreement and the consummation of the merger contemplated herein
and therein, will not conflict with, result in the breach of, constitute a
default under or accelerate the performance provided by, (i) the terms of any
law, order, rule or regulation of any governmental agency or authority or any
judgment, order or decree of any court or other governmental agency to which
Texas State Bank may be subject; (ii) any contract, agreement or instrument to
which Texas State Bank is a party or pursuant to which Texas State Bank is
bound; or (iii) the Articles of Incorporation or Bylaws of Texas State Bank.
Provided required approval is obtained (as and to the extent required) from
applicable regulatory authorities, including the Federal Reserve Board and the
Texas Banking Department, no consent or approval or other action by any party
under any contract to which Texas State Bank is subject is required for the
execution, delivery and performance of this Agreement and consummation of the
transactions herein described, except where the failure to obtain such consent
would not have a material adverse effect on Texas State Bank. The execution,
delivery and performance of this Agreement and the Merger
Agreement and the consummation of the transactions herein and therein described
will not constitute an event which with the lapse of time or action by a third
party could result in a default under any of the foregoing or result in the
creation of any lien, charge or encumbrance upon any of the assets or properties
of Texas State Bank or upon any of the stock of Texas State Bank. This
Agreement constitutes the legal, valid and binding obligation of Texas State
Bank, enforceable against Texas State Bank in accordance with its terms, except
as the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity. Texas
Regional is a reporting company under the Securities and Exchange Act of 1934,
as amended (the "1934 Act"), and the rules and regulations promulgated
thereunder.
C. ORDERS AND DECREES. Provided required approval is obtained from
applicable regulatory authorities, including the Federal Reserve Board and the
Texas Department of Banking, the execution, delivery and performance by Texas
State Bank of this Agreement and of the obligations imposed upon it hereunder
will not violate any provision of, or result in any breach of, (i) any law,
order, rule or regulation of any governmental agency or authority or any
judgment, order or decree of any court or governmental agency to which Texas
State Bank may be subject, (ii) the Articles of Incorporation or Bylaws of Texas
State Bank, or (iii) any contract or agreement to which Texas State Bank is a
party or by which it is bound.
D. FINDERS. Texas State Bank has not engaged and is not directly or
indirectly obligated to anyone acting as a broker, finder, or in any other
similar capacity in connection with the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, Texas State Bank
specifically represents that it has not been approached by (nor does it have any
agreements with) Service Asset Management Company of Dallas, or any person that
has asserted to Texas State Bank that he or she is acting on behalf of Service
Asset Management Company of Dallas.
E. SEC REPORTS AND NASDAQ COMPLIANCE. Since January 1, 1995, Texas
Regional has made all filings (the "SEC Reports") required to be made by it
under the Securities Act of 1933 (the "Securities Act"), the Securities Exchange
Act of 1934 (the "Exchange Act") and the securities laws of any state, and any
rules and regulations promulgated thereunder. The SEC Reports, when filed,
complied in all material respects with all applicable requirements of the
Securities Act, the Exchange Act and other requirements of law. None of the SEC
Reports, at the time of filing, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading in light of the
circumstances in which they were made. Texas Regional will deliver or make
accessible to the First State Bank true, accurate and complete copies of the SEC
Reports, as amended, which were filed with the SEC since January 1, 1995, and as
in effect as of the date hereof. Texas Regional has taken all necessary actions
to ensure its continued inclusion in, and the continued eligibility of the Texas
Regional Class A Voting Common Stock for trading on the NASDAQ Stock Market
under all currently effective and currently proposed inclusion requirements.
F. FINANCIAL STATEMENTS. Each of the balance sheets included in the SEC
Reports (including any related notes and schedules) fairly presents in all
material respects the consolidated financial position of Texas Regional as of
its date, and each of the other financial statements included in the SEC Reports
(including any related notes and schedules) fairly presents in all material
respects the consolidated results of operations or other information
therein of Texas Regional for the periods or as of the dates therein set forth
in accordance with generally accepted accounting principles, consistently
applied during the periods involved.
G. CHANGES SINCE JUNE 30, 1995. Since June 30, 1995, there has been no
material adverse change in Texas State Bank.
ARTICLE 4
INDEMNIFICATION
A. INDEMNIFICATION.
1. First State Bank hereby agrees to indemnify, defend and hold
harmless Texas State Bank and Texas Regional, and their respective officers,
directors, employees, agents and attorneys from and against any and all losses,
claims, damages, expenses or liabilities to which Texas State Bank may become
subject (including any arising as a result of the consummation of the
transaction described in this Agreement and any arising under the Securities Act
of 1933 or the Securities Exchange Act of 1934, or any rule, order or regulation
pursuant thereto), arising out of or based upon (i) breach of a representation,
warranty, covenant or agreement of First State Bank in this Agreement or in the
performance hereof; (ii) any misleading or untrue statement of a material fact
by or on behalf of First State Bank, or any omission of a material fact
necessary in order to make any statements made, in light of the circumstances
under which they were not misleading, including any such statement as is made in
the context of solicitation by First State Bank of proxies for approval of the
transactions described in this Agreement by the shareholders of First State
Bank; and (iii) any irregularity or improper procedure in connection with the
solicitation of proxies and obtaining shareholder approval for the transaction
described in this Agreement.
2. Texas State Bank and Texas Regional hereby agree, jointly and
severally, to indemnify, defend and hold harmless First State Bank and its
officers, directors, employees, agents and attorneys from and against any and
all losses, claims, damages, expenses or liabilities to which First State Bank
may become subject (including any arising as a result of the consummation of the
transaction described in this Agreement and any arising under the Securities Act
of 1933 or the Securities Exchange Act of 1934, or any rule, order or regulation
pursuant thereto), arising out of or based upon (i) breach of a representation,
warranty, covenant or agreement of Texas State Bank in this Agreement or in the
performance hereof; and (ii) any misleading or untrue statement of a material
fact by or on behalf of Texas State Bank, or any omission of a material fact
necessary in order to make any statements made, in light of the circumstances
under which they were not misleading, including any such statement as is made in
the context of the sale by Texas Regional of common stock, the proceeds of which
are in part expected to be used to fund the payment of the Total Consideration
by Texas State Bank.
3. Each of Texas State Bank and First State Bank (to the extent of
an indemnification obligation hereunder, herein referred to as the "Indemnifying
Party") will indemnify the other parties hereto and each of such other party's
directors, officers and each person who "controls" such other party within the
meaning of such term as used in Section 15 of the 1933 Act (such persons being
herein called the "Indemnified Parties") and will defend and hold the
Indemnified Parties harmless from and against any and all losses, claims,
damages, expenses, or liabilities to which the Indemnified Parties may become
subject under the common
law or otherwise insofar as:
a. such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any communications to
shareholders, or any application or statement filed pursuant to this
Agreement or arising out of or based upon the omission or alleged
omission to state therein a material fact necessary in order to make
the statement therein, in the light of the circumstances in which they
were made, not misleading, but only insofar as any such statement or
omission was made in reliance upon and in conformity with information
furnished by the party against whom indemnification is sought
hereunder for use therein; and
b. such losses, claims, damages, expenses, or liabilities
are incurred by the Indemnified Parties (or are losses, claims,
damages, expenses or liabilities with respect to which the Indemnified
Parties become subject), under the common law or otherwise, arising
out of or in any way attributable to the breach of any warranty or
representation made by such party herein or pursuant to the terms
hereof, or the failure of such party to perform any covenant or
obligation contained in this Agreement.
4. The indemnification obligations contained herein shall expressly
include the obligation of the Indemnifying Party to reimburse the Indemnified
Party for any legal or other expenses (including counsel fees) reasonably
incurred by them in connection with investigating or defending against any and
all such losses, claims, damages, expenses, liabilities or actions whether or
not resulting in any liability.
5. The Indemnified Parties shall, within twenty (20) days after the
receipt by them of any notice of any claim or of the commencement of any
litigation in respect of which indemnity may be sought hereunder, notify the
Indemnifying Party thereof. The omission to notify the Indemnifying Party of
any such claim or litigation shall relieve the Indemnifying Party from any
liability which it may have under the indemnity agreement contained herein, but
shall not relieve the Indemnifying Party from any other liability which it may
have to the Indemnified Parties, other than that raised in any such claim or
litigation explicitly or by reasonable implication or that which may estop the
Indemnifying Party from raising and effecting some defense it might otherwise
have raised had such notice been properly given. If any such litigation shall
be brought against the Indemnified Parties and if the Indemnified Parties shall
notify the Indemnifying Party of the commencement thereof, the Indemnifying
Party shall be entitled, unless in the opinion of counsel to the Indemnified
Party there exist issues as to which the interests of the Indemnified and
Indemnifying Parties are adverse, to participate in (and, to the extent that it
shall wish, to direct) the defense thereof at its own expense, but such defense
shall be conducted by counsel satisfactory to the Indemnified Parties.
6. The indemnity agreement contained in this Article shall survive
any investigation made by or on behalf of any Indemnified Party.
ARTICLE 5
SPECIAL COVENANTS
A. STOCKHOLDER APPROVAL BY FIRST STATE BANK. Subsequent to the execution
and delivery of this Agreement, (i) the Board of Directors of First State Bank
has agreed to cause First State Bank to submit this Agreement and the Merger
Agreement to the stockholders of First State Bank, for their authorization and
approval, by written consent or otherwise, in accordance with applicable
provisions of law. Subject to the terms and conditions of this Agreement, the
Board of Directors of First State Bank has agreed to recommend this Agreement,
the Merger Agreement and the transactions contemplated thereby to the First
State Bank stockholders.
B. FINANCING ARRANGEMENTS BY TEXAS REGIONAL. Subsequent to the execution
and delivery of this Agreement, Texas Regional agrees to commence the
preparation of a registration statement to be filed pursuant to the Securities
Act of 1933, to effect the registration of the public offering of shares of the
Class A Common Stock of Texas Regional, with the expectation that the proceeds
of such offering would be used in part to fund the Total Consideration. Texas
State Bank shall provide First State Bank with copies of any registration
statement and any amendment thereto. Texas Regional and Texas State Bank shall
not be under any obligation to take any action that would cause such
registration statement to be declared effective, or to accept the proposed terms
of any underwriters in connection with the sale of such shares, that are not
acceptable to Texas Regional and Texas State Bank, it being acknowledged and
agreed by First State Bank that any determination as to the acceptability of the
pricing and other terms of any such financing arrangements are in the sole
discretion of Texas Regional and Texas State Bank.
C. PROSPECTUS AND PROXY STATEMENT INFORMATION.
1. First State Bank agrees to provide any and all information as may
be reasonably required by Texas Regional for purposes of preparation of any
prospectus to be included in any registration statement to effect the
registration of the offering of Texas Regional shares, for purposes of
communications with shareholders of Texas Regional pending the Closing and for
purposes of the proxy statement related to obtaining the approval by First State
Bank shareholders of the transaction herein described (collectively, the "First
State Information"). Without limiting the generality of the foregoing, First
State Bank specifically covenants (i) to cause its financial statements as of
December 31, 1995 and 1993, and the related statements of income, changes in
stockholders' equity and changes in financial position for the year then ended,
together with the notes thereto, to be prepared in accordance with generally
accepted accounting principles and examined by a firm of independent certified
public accountants reasonably acceptable to Texas State Bank and Texas Regional
and (ii) to deliver such financial statements (together with the unqualified
opinion of the auditors with respect thereto and accompanied by such
accountant's consent to use of such financial statements in the registrations
statement herein described) to Texas State Bank and Texas Regional. First State
Bank hereby agrees that, upon delivery to Texas State Bank, the First State
Information shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
2. Texas State Bank agrees to provide any and all information as may
be reasonably required by First State Bank for purposes of communications with
shareholders of First State Bank pending the Closing and for purposes of the
proxy statement related to obtaining
the approval by First State Bank shareholders of the transaction herein
described (collectively, the "Texas State Information"). Texas State Bank
hereby agrees that, upon delivery to First State Bank, the Texas State
Information shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
D. ACCESS. From and after the date of this Agreement, First State Bank
shall afford to the officers, attorneys, accountants and other authorized
representatives of Texas State Bank full and free access to the properties,
books, contracts, commitments and records of First State Bank at all reasonable
times during business hours, and such representatives of Texas State Bank shall
be furnished with true and complete copies of the same and with all other
information concerning the affairs of First State Bank as such representatives
may reasonably request. Any such information treated as confidential by First
State Bank shall be kept confidential by the representatives of Texas State Bank
(and shall be used by them only in connection with this Agreement and the
transactions contemplated hereby) except to the extent that (i) it was already
known to such representatives when received, (ii) it hereafter becomes lawfully
obtainable from other sources, or (iii) it is disclosed by Texas State Bank in
any document filed with the Securities and Exchange Commission, the Federal
Reserve Board or any other governmental agency or authority. In the event the
transactions contemplated by this Agreement and the Merger Agreement are not
consummated, Texas State Bank agrees to return to First State Bank any
confidential information delivered by First State Bank to Texas State Bank
pursuant to this Section.
E. ENVIRONMENTAL INSPECTION. First State Bank expressly agrees to supply
Texas State Bank with historical and operational information regarding the real
properties owned or operated by, or used in connection with the operation of the
business of, First State Bank, and any premises heretofore used in connection
with the operation of the business of First State Bank, and any other properties
included in the Real Property, including (but not limited to) any environmental
tests or surveys made of such properties. First State Bank agrees to cooperate
with any reasonable request of Texas State Bank related to site assessment or
site review related to any environmental matter or investigation, including the
making available of such personnel of First State Bank as Texas State Bank may
reasonably request. At Texas State Bank's discretion, Texas State Bank may
arrange for one or more independent contractors to conduct tests of the Real
Property and any other premises now or heretofore used in connection with the
business of First State Bank in order to identify any presence of, or present or
past release or threatened release of, any waste materials or any chemical
substances, including, without limitation, any Environmental Hazards. Any such
test may be done at any time, or from time to time, upon reasonable notice and
under reasonable conditions, which do not impede the performance of the tests.
Such tests may include both above and below ground testing for environmental
damages or the presence of Environmental Hazards or Hazardous Material
Contamination or such other tests as Texas State Bank may deem reasonably
necessary. Any and all costs of third parties associated with obtaining such
information shall be borne equally by Texas State Bank and First State Bank. In
the event such tests indicate the presence of Hazardous Material Contamination,
the parties shall endeavor to obtain a reasonably reliable estimate of the cost
of remediating or removing such Hazardous Material Contamination prior to the
Closing. In the event that such estimated cost is less than $25,000, First
State Bank shall accrue the cost thereof as an expense prior to Closing for
purposes of calculating the minimum net worth required at Closing, in which
event the parties shall proceed to Closing on the terms and conditions described
in this Agreement. In the event that such estimated cost exceeds an aggregate
of $25,000, Texas State Bank may elect to either (i) proceed with the
transaction on
the terms and conditions herein provided, without modification, in which event
the parties shall perform their respective obligations as herein provided,
without modification; or (ii) proceed with the Closing on the terms and
conditions herein provided, on the further condition that First State Bank
either fully remediate and remove the Hazardous Material Contamination prior to
Closing or (at Texas State Bank's option) accrue the full cost thereof as an
expense prior to Closing for purpose of calculating the minimum net worth
required at Closing, and in either of such events First State Bank shall be
entitled to acquiesce in such remediation and removal (or if Texas State Bank
has so elected, the accrual of the cost thereof), or First State Bank shall be
entitled to unilaterally terminate this Agreement. In the event that the cost
of remediation exceeds $25,000, or if the parties are unable to obtain a
reasonably reliable estimate of the remediation and removal cost prior to
Closing, Texas State Bank shall be entitled to exercise the options set forth in
the preceding sentence, or to terminate this Agreement without further
liability.
F. ACTION BY FIRST STATE BANK PRIOR TO CLOSING.
1. From and after the date of this Agreement until the Closing Date,
except as may be specifically provided for in Schedule 5.6, First State Bank
will:
(i) carry on its business in accordance with reasonably prudent
banking practices and in substantially the same manner as it is
presently conducted;
(ii) 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, and not make or commit to make
any capital expenditure outside of the ordinary course of business of
First State Bank and not make or commit to make any capital
expenditure (whether or not in the ordinary course of business of
First State Bank) in excess of $200,000 individually or $400,000 in
the aggregate;
(iii) maintain in full force and effect insurance comparable in
amount and in scope of coverage to that now maintained by it;
(iv) perform all its obligations under contracts, leases and
documents relating to or affecting its assets, properties and
business;
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its present employees and to maintain
its relationships with customers;
(vi) use its best efforts to fully comply with and perform all
obligations and duties imposed upon it by all federal and state laws
and all rules, regulations and orders imposed by federal or state
governmental authorities;
(vii) maintain its books of account and records in the usual,
regular and orderly manner consistent with accounting practices during
prior periods;
(viii) not issue or sell any additional shares of its stock or
securities convertible into shares of such stock or options or other
commitments for the issuance of shares of such stock or securities;
(ix) except for salary increases to employees in the ordinary
course of business not exceeding 5% of prior year's compensation, not
increase in any manner the compensation of any of its directors,
officers or employees, except in accordance with customary practices,
or pay or agree to pay any pension or retirement allowance not
required by an existing plan or agreement, to any such persons, or
commit itself to any pension, retirement or profit-sharing plan or
arrangement or employment agreement for the benefit of any officer,
employee or other person;
(x) not declare or pay any dividend or make any stock split or
purchase or otherwise acquire for value any of its shares;
(xi) not issue commitments for the future funding of loans at a
fixed rate other than the then prevailing market at the date of
funding; and
(xii) not engage in any business practice which deviates in any
material respect from its customary practices during the last eighteen
months immediately preceding the date hereof.
2. Without limiting the foregoing, except for expenses reasonably
incurred in connection with the Closing of the transaction herein described (all
of which will be incurred or fully accrued by First State Bank prior to
Closing), between the date hereof and the date of Closing, First State Bank
specifically covenants and agrees that First State Bank will not incur any
indebtedness (other than deposit liabilities owed to deposit customers in the
ordinary course of business and trade accounts payable incurred in the ordinary
course of business) or significant expenses outside of the ordinary course of
business of First State Bank, nor will First State Bank increase expenses in any
material way (either individually or in the aggregate), nor will First State
Bank make any changes in its capital structure, in each case without the prior
written consent of Texas State Bank.
3. Provided that seeking such approvals is in accordance with
applicable banking law and regulations, First State Bank will not make a fully
collateralized loan, nor will First State Bank commit to make a fully
collateralized loan, in excess of $1,000,000 to any one borrower or in any one
transaction without the prior approval of Texas State Bank, and First State Bank
shall not make any other loan, nor shall First State Bank commit to make any
other loan, in excess of $200,000 to any one borrower or in any one transaction
without the prior consent of Texas State Bank.
4. Without limiting the generality of the foregoing, from and after
the date of this Agreement until the Closing Date, First State Bank will not
sell or otherwise dispose of any of the Bank's real or personal property with a
fair market value in excess of $100,000 without the prior written consent of
Texas State Bank.
5. Without limiting the generality of the foregoing, from and after
the date of this Agreement until the Closing Date, First State Bank specifically
covenants and agrees not to acquire any United States Treasury or government
agency bonds, or municipal securities, or make other investments in securities,
with fixed rates or with maturities of greater than three years from the date of
investment. In addition, First State Bank shall not enter into any forward
commitment to acquire any such securities.
6. From and after the date of this Agreement until the Closing Date,
without the prior written consent of Texas State Bank, First State Bank (i) will
not permit any change to be made in its charter or Bylaws; (ii) will not take
any action following the date hereof that would have required that the action,
or any document, instrument or other information related thereto, be included on
SCHEDULE 2.9 had such action been taken prior to the date hereof; (iii) will in
all material respects perform all obligations required to be performed by it;
(iv) will not default, or allow any event to occur which, with notice or lapse
of time or action by a third party could result in a default, under any
outstanding indenture, mortgage, contract, lease or other agreement to which
First State Bank is a party or by which it is bound, or under any provision of
the Articles of Association or Bylaws of First State Bank which might have a
material adverse effect, or under any agreement with federal or state regulatory
authorities; or (v) will not grant any power of attorney.
7. As of the time of Closing, any material liabilities, accrued,
contingent or otherwise, which have been incurred since the date of the
September 30, 1995 Balance Sheet will have been fully disclosed to Texas State
Bank, except that First State Bank shall not be required to disclose, pursuant
to this section, (i) deposit liabilities and (ii) other liabilities of less than
$50,000 incurred in the ordinary course of business.
G. TERMINATION FEE. As part of the consideration to First State Bank,
Texas State Bank hereby agrees that, if the transaction described in this
Agreement shall fail to close as a result of Texas State Bank exercising its
right to terminate for failure of a condition specified in section 6.4
(Regulatory Approvals), section 6.7 (Due Diligence Review; No Material Adverse
Change), section 6.11 (Fairness Opinion), or section 6.14 (Financing) hereof, or
as a result of a breach by Texas State Bank of its obligations hereunder, or if
either party exercises its right to terminate as a result of the transaction
failing to close prior to June 30, 1996 (as herein provided), in each case for
any reason other than an intentional misrepresentation or other default by First
State Bank hereunder, Texas State Bank shall pay to First State Bank a
termination fee in the amount of $65,000.00.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF TEXAS STATE BANK
In addition to any other condition herein described as a condition to the
obligations of Texas State Bank under this Agreement, the obligations of Texas
State Bank under this Agreement and the Merger Agreement are subject, in the
discretion of Texas State Bank, to the satisfaction at or prior to the Closing
Date of each of the following conditions:
A. COMPLIANCE WITH REPRESENTATIONS. The representations and warranties
made by First State Bank in this Agreement shall have been true when made and,
except for changes as contemplated herein, shall be true at the Closing Date
with the same force and effect as if such representations and warranties were
made at and as of the Closing Date, and First State Bank shall have performed or
complied with all covenants and conditions required by this Agreement or the
Merger Agreement to be performed or complied with by it prior to or at the
Closing. Texas State Bank shall have been furnished with a certificate, signed
by the President of First State Bank in his capacity as such and dated the
Closing Date, and a certificate, signed by the Cashier of First State Bank in
his capacity as such and dated the Closing Date, to the foregoing effect.
B. STOCKHOLDER APPROVAL. First State Bank shall have delivered to Texas
State Bank a certificate signed by the Cashier of First State Bank in his
capacity as such, confirming the approval of this transaction by the requisite
vote of First State Bank's shareholders.
C. DISSENTERS. Holders of an aggregate of not greater than 2.5% of the
issued and outstanding shares of First State Bank shall have exercised
dissenters' rights of appraisal with respect to the transactions, excluding for
these purposes holders of shares who have subsequently abandoned (including
abandonment as a result of a failure to comply with applicable procedures) their
dissenters' rights of appraisal. Texas State Bank shall have been furnished
with a certificate, dated the Closing Date and signed by the President of First
State Bank, in his capacity as such, to the effect that no dissenters' rights
action or proceeding is pending, or, to the best of his knowledge, threatened,
or (if any such proceeding or action is pending or threatened) stating the
relevant details of each such action or proceeding.
D. REGULATORY APPROVALS. The parties hereto and to the Merger Agreement
shall have received approval of the transactions contemplated by this Agreement
and the Merger Agreement from all necessary governmental agencies and
authorities, including the Texas Department of Banking and the Federal Reserve
Board, and such approvals and transactions contemplated hereby shall not have
been contested by any federal or state governmental authority nor by any other
third party by formal proceeding. It is understood that, if any contest as
aforesaid is brought by formal proceedings, Texas State Bank may, but shall not
be obligated to, answer and defend such contest.
E. LITIGATION. On the Closing Date, there shall not be any litigation,
investigation, inquiry or proceeding pending or threatened in or by any court or
governmental agency or authority which might result in action to restrain,
enjoin or prohibit consummation of the transaction contemplated by this
Agreement or the Merger Agreement or which might result in divestiture,
rescission or damages in connection with such transactions or involving any of
the assets, properties, business or operations of First State Bank which might
result in any material adverse change in the financial condition, results of
operations, business or prospects of First State Bank. Texas State Bank shall
have been furnished with a certificate, dated the Closing Date and signed by the
President of First State Bank, in his capacity as such, to the effect that no
such litigation, investigation, inquiry or proceeding is pending, or, to the
best of his knowledge, threatened.
F. OPINION OF COUNSEL. Prior to closing, First State Bank shall deliver
to Texas State Bank the opinion of First State Bank's counsel, in form and
content satisfactory to Texas State Bank, to the effect that (i) First State
Bank is duly organized, validly existing and in good standing as a banking
association under the laws of the state of Texas, and First State Bank has full
power and authority to carry on its business as presently conducted; (ii) the
authorized capital stock of First State Bank consists of 200,000 shares of
capital stock, par value of $20.00 per share, of which all 200,000 shares are
validly issued, fully paid and nonassessable, and no options, warrants,
conversion or other rights, agreements or commitments of any kind obligating
First State Bank to issue or sell any shares of its capital stock of any class,
or securities convertible into or exchangeable for any such shares, are
outstanding, and no authorization therefor has been given; (iii) this Agreement
and Plan of Reorganization and the Merger Agreement have been duly authorized by
all necessary corporate action on the part of First State Bank, its directors
and shareholders, and this Agreement and the Merger Agreement constitute valid
and binding obligations of First State Bank enforceable in accordance with their
respective terms except as the same may be limited by applicable bankruptcy,
insolvency, reorganization,
moratorium, or other similar laws affecting the rights of creditors generally;
and (iv) this Agreement and the consummation of the transaction herein described
do not and will not violate, conflict with or constitute a breach of any term,
condition, or provision of the Articles of Association or Bylaws of First State
Bank, or, to the best knowledge and belief of such counsel, any agreement or
instrument to which First State Bank is a party or is bound, or, to the best
knowledge and belief of such counsel, any law, regulation, judgment or order
binding on First State Bank.
G. DUE DILIGENCE REVIEW; NO MATERIAL ADVERSE CHANGE. Texas State Bank
and its employees, agents, attorneys, accountants and other representatives
shall be entitled to review and monitor the assets, liabilities, business and
prospects of First State Bank during the period from the date hereof to the time
of Closing. Texas State Bank shall be entitled to terminate this transaction at
its sole option (i) at any time within ninety (90) days following the date
hereof if the results of such review are not satisfactory in all respects to
Texas State Bank; or (ii) at any time prior to closing if any material adverse
change shall have occurred in the condition, financial position or business
prospects of First State Bank.
H. CONSENTS, APPROVALS AND ESTOPPEL CERTIFICATES. Texas State Bank shall
have received all such consents, approvals, estoppel certificates and other
assurances, in each case in form and content reasonably satisfactory to Texas
State Bank, from any party to an agreement with First State Bank or by which
First State Bank is bound as a result of an order of any authority, or pursuant
to any other legal requirement, which agreement, order or other requirement
requires consent, approval or other assurance in order that the Closing of the
transaction herein described will not constitute an event of default or create a
right of termination or result in any other material adverse event thereunder.
Without limiting the generality of the foregoing, Texas State Bank shall have
received consents and estoppel certificates from each landlord of First State
Bank and from each tenant of First State Bank, consenting (if Texas State Bank
deems such consent necessary) to the transfer by operation of law of any
outstanding lease or rental agreement, attesting to the validity of each lease
to which First State Bank is a party, the fact that no default exists (or which
with the passage of time or notice could exist) under the lease, and providing
for such other matters as may be deemed advisable to Texas State Bank.
I. NET WORTH OF FIRST STATE BANK. The net worth of First State Bank,
calculated in accordance with regulatory requirements of the Texas Department of
Banking, shall be not less than the sum of $62,000,000, increased by $700,000
per month for each month elapsed during the period from March 31, 1996, until
the date of closing. In the event that the Closing is not consummated prior to
April 1, 1996, and provided that the net worth of First State Bank (calculated
in accordance with regulatory requirements of the Texas Department of Banking)
is not less than $62,000,000 as of March 31, 1996, First State Bank shall be
permitted to pay dividends to its shareholders prior to Closing in an amount up
to an aggregate of 60% of the net income of First State Bank from April 1, 1996,
to the end of the month next preceding the date of Closing.
J. CONTEMPORANEOUS TRANSACTION. Contemporaneously with the closing of
the transaction herein described, The Border Bank of Hidalgo, Texas, shall be
merged with and into Texas State Bank pursuant to the terms and conditions of,
and as described in, the Agreement and Plan of Reorganization by and between
Texas State Bank and The Border Bank dated of even date herewith.
K. FAIRNESS OPINION. Texas State Bank shall have received a fairness
opinion, in
form and content acceptable to Texas State Bank and Texas Regional in their sole
discretion, and rendered by a firm acceptable to Texas State Bank and Texas
Regional in their sole discretion, as to the fairness of the transaction to
Texas State Bank, Texas Regional and the shareholders of Texas Regional, and
such opinion shall not have been withdrawn prior to Closing.
L. TERMINATION OF DATA PROCESSING ARRANGEMENTS. First State Bank shall
have exercised its right to terminate its data processing services contract with
Electronic Data Systems, Inc., on terms and upon conditions reasonably
acceptable to Texas State Bank.
M. COVENANT NOT TO COMPETE. Xxxxxxx Bottom shall have entered into a
covenant not to compete with Texas State Bank on terms and conditions acceptable
to Texas State Bank, which shall provide that Xxxxxxx Bottom shall not engage,
directly or indirectly, in the commercial banking business in Hidalgo, Cameron,
Starr or Willacy Counties, Texas for a period of three (3) years following the
date of Closing, provided that such obligation not to compete with Texas State
Bank shall terminate immediately in the event of a change of control of a
majority of the outstanding capital stock of Texas State Bank or Texas Regional
Bancshares, Inc.
N. FINANCING. Texas Regional shall have successfully completed and
closed a duly registered public offering of shares of its Class A Voting Common
stock, at prices and on terms and conditions acceptable to Texas Regional in its
sole discretion, which has yielded cash proceeds to Texas Regional of not less
than $40,000,000.00.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF FIRST STATE BANK
The obligations of First State Bank under this Agreement and the Merger
Agreement are subject, in the discretion of First State Bank, to the
satisfaction at or prior to the Closing Date, of each of the following
conditions:
A. COMPLIANCE WITH REPRESENTATIONS. The representations and warranties
made by Texas State Bank and Texas Regional in this Agreement shall have been
true when made and, except as may otherwise be contemplated or permitted herein,
shall be true as of the Closing Date with the same force and effect as if such
representations and warranties were made at and as of the Closing Date, and
Texas State Bank and Texas Regional shall have performed or complied with all
covenants and conditions required by this Agreement or the Merger Agreement to
be performed or complied with by them prior to or at the Closing. First State
Bank shall have been furnished with a certificate dated the Closing Date, signed
by the Chairman of Texas Regional and by the President of Texas State Bank, in
each case in his capacity as such, to the foregoing effect.
B. DISSENTERS. Holders of an aggregate of not greater than 2.5% of the
issued and outstanding shares of First State Bank shall have exercised
dissenters' rights of appraisal with respect to the transactions, excluding for
these purposes holders of shares who have subsequently abandoned (including
abandonment as a result of a failure to comply with applicable procedures) their
dissenters' rights of appraisal.
C. REGULATORY APPROVALS. The parties hereto and to the Merger Agreement
shall have received approval of the transactions contemplated by this Agreement
and the Merger Agreement from all necessary governmental agencies and
authorities, including the Texas Department of
Banking and the Federal Reserve Board, and such approvals and transactions
contemplated hereby shall not have been contested by any federal or state
governmental authority nor by any other third party by formal proceeding. It is
understood that, if any contest as aforesaid is brought by formal proceedings,
First State Bank may, but shall not be obligated to, answer and defend such
contest.
D. LITIGATION. On the Closing Date, there shall not be any litigation,
investigation, inquiry or proceeding pending or threatened in or by any court or
governmental agency or authority which might result in action to restrain,
enjoin or prohibit consummation of the transactions contemplated by this
Agreement or the Merger Agreement or which might result in divestiture,
rescission or damages in connection with such transactions and First State Bank
shall have been furnished with a certificate, dated the Closing Date and signed
by the President of Texas State Bank, in his capacity as such, to the effect
that no litigation, investigation, inquiry or proceeding is pending, or, to the
best of his knowledge, threatened.
E. FAIRNESS OPINION. First State Bank shall have received a fairness
opinion, in form and content acceptable to First State Bank in its sole
discretion, and rendered by a firm acceptable to First State Bank in its sole
discretion, as to the fairness of the transaction to First State Bank and the
shareholders of First State Bank.
F. OPINION OF COUNSEL. Prior to closing, Texas State Bank shall deliver
to First State Bank the opinion of Texas State Bank's counsel, in form and
content satisfactory to First State Bank, to the effect that (i) Texas State
Bank is duly organized, validly existing and in good standing as a banking
association under the laws of the state of Texas, and Texas State Bank has full
power and authority to carry on its business as presently conducted; (ii) this
Agreement and Plan of Reorganization and the Merger Agreement have been duly
authorized by all necessary corporate action on the part of Texas State Bank,
its directors and shareholders, and this Agreement and the Merger Agreement
constitute valid and binding obligations of Texas State Bank enforceable in
accordance with their respective terms except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar
laws affecting the rights of creditors generally; and (iii) this Agreement and
the consummation of the transaction herein described do not and will not
violate, conflict with or constitute a breach of any term, condition, or
provision of the Articles of Association or Bylaws of Texas State Bank, or, to
the best knowledge and belief of such counsel, any agreement or instrument to
which Texas State Bank is a party or is bound, or, to the best knowledge and
belief of such counsel, any law, regulation, judgment or order binding on Texas
State Bank.
ARTICLE 8
CLOSING OBLIGATIONS
A. TEXAS STATE BANK OBLIGATIONS. At the Closing, Texas State Bank shall
deliver the following:
1. Certificate of Merger, in the form required to be delivered
pursuant to applicable provisions of the Texas Banking Act and rules
of the Texas Department of Banking.
2. Officer's Certificate, including an incumbency certification
and further certifying as to the existence and good standing of Texas
State Bank, the
accuracy of all representations and warranties of Texas State Bank, the
approval by the Board of Directors of Texas State Bank, and Texas Regional
as the sole shareholder of Texas State Bank, of resolutions authorizing and
approving the transaction.
3. Wire transfer or delivery of checks to shareholders of First
State Bank, as required by section 1.2.1.
4. An opinion of Texas State Bank's counsel in form and
substance required by this Agreement and otherwise acceptable to First
State Bank.
5. Such other documents, certificates, and other items as may
be required to be delivered by Texas State Bank pursuant to the terms
of this Agreement or as may be reasonably requested by First State
Bank to effectuate the transaction herein described.
B. FIRST STATE BANK OBLIGATIONS. At the Closing, First State Bank shall
deliver the following to Texas State Bank:
1. Certificate of Merger, in the form required to be delivered
pursuant to applicable provisions of the Texas Banking Act and rules
of the Texas Department of Banking.
2. Officer's Certificate, including an incumbency certification
and further certifying as to the existence and good standing of First
State Bank, the accuracy of all representations and warranties of
First State Bank, the approval by the Board of Directors of First
State Bank, and the shareholders of First State Bank, of resolutions
authorizing and approving the transaction.
3. Certificate of Existence of First State Bank issued by the
Texas Department of Banking and Certificate of Good Standing issued by
the Texas Comptroller of Public Accounts, in each case dated as of a
date not more than three days prior to the Closing.
4. An opinion of First State Bank's counsel in form and
substance required by this Agreement and otherwise acceptable to Texas
State Bank.
5. Such other documents, certificates, and other items as may
be required to be delivered by First State Bank pursuant to the terms
of this Agreement or as may be reasonably requested by Texas State
Bank to effectuate the transaction herein described.
ARTICLE 9
MISCELLANEOUS
A. SURVIVAL OF REPRESENTATION AND WARRANTIES. All representations,
warranties and covenants in this Agreement shall survive any investigation of
the parties hereto, but shall not survive the Closing of the transaction
contemplated hereby.
B. BROKERS. Texas State Bank and First State Bank agree that no third
party has in any way brought the parties together or been instrumental in the
making of this Agreement. Each such party agrees to indemnify the other against
any claim by any third person for any commission, brokerage or finder's fee, or
other payment with respect to this Agreement, the Merger Agreement or the
transactions contemplated hereby and thereby based on any alleged agreement or
understanding between such party and such third person, whether express or
implied from the actions of such party.
C. EXPENSES. Whether or not the transactions provided for herein are
consummated, each party to this Agreement and the Merger Agreement will pay its
respective expenses incurred in connection with the preparation and performance
of this Agreement and Merger Agreement.
D. NOTICES. Any notice given hereunder shall be in writing and shall be
deemed delivered on the earlier of actual receipt or the time of deposit in the
United States mail, by registered or certified mail, return receipt requested,
postage prepaid, addressed to the party to whom such notice is to be sent at the
following addresses:
If to Texas State Bank, then to:
Texas State Bank
0000 X. 00xx Xxxxxx
XxXxxxx, Xxxxx 00000
Attention: Xx. Xxxx X. Xxxxx
Chairman of the Board
with a copy to:
Xxxxxxx X. Xxxxxx, Xx.
XxXxxxxx, Xxxxxxxxx & Xxxxxxx, L.L.P.
0000 Xxxxxxx Xxxxxx
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
If to First State Bank, then to:
First State Bank and Trust Company
X.X. Xxx 000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xx. Xxxxxxx Bottom
Chairman of the Board
with a copy to:
Mr. Xxxxx Xxxx
Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P.
0000 XxxxxxxXxxx Xxxxx
000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
E. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective successors and assigns, and, to
the extent required by Section 4.03, the directors, officers and controlling
persons thereof, but shall not be assigned by either party without the prior
written consent of the other party.
F. ARTICLE AND OTHER HEADINGS. Article and other headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
G. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the parties and supersedes all prior arrangements, understandings,
agreements or covenants between the parties. This Agreement may only be
modified by an instrument in writing executed by the party against whom
enforcement is sought.
H. WAIVERS. Texas State Bank or First State Bank, may, by an instrument
in writing, extend the time for or waive the performance of any of the
obligations of the other or waive compliance with any of the covenants or
conditions contained in this Agreement.
I. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas applicable to contracts made and to be performed therein.
J. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute but one and the same instrument.
K. JOINDER BY SHAREHOLDERS OF FIRST STATE BANK. Subject to the terms and
conditions hereof, each of the undersigned which executes this Agreement as a
Shareholder of First State Bank (i) acknowledges his, her or its consent to and
approval of the transaction herein described; (ii) represents that he, she or it
owns the number of shares of First State Bank as indicated below his, her or its
name below; (iii) agrees to recommend this transaction to other shareholders of
First State Bank and to vote to approve of the transaction at the shareholder
meeting called to consider and vote upon the merger transaction herein
described; (iv) agrees to perform and comply with the covenants and agreements
of the Shareholders of First State Bank as described in this Section 9.11; and
(v) acknowledge that Texas State Bank and Texas Regional are relying upon the
agreements of the Shareholders as contained in this section 9.11 in executing
and entering into this Agreement.
L. SCHEDULES. First State Bank reserves the right, for a period of 15
days from the date hereof, to amend any Schedule to this Agreement, and First
State Bank covenants to deliver any amended Schedules to Texas State Bank, in
form suitable for attachment to this Agreement, within such 15 day period.
Texas State Bank shall have the right to review any amended Schedules as to
form, content or both, and shall have the right to object to any amendments to
Schedules or any information contained therein at any time within ten (10) days
thereafter. Any amendments to Schedules not objected to by Texas State Bank, or
to which Texas State Bank indicates that it has no objection, shall become a
part of this Agreement fully as if attached hereto as of the date of execution
hereof. Any amendments to Schedules to which Texas State Bank objects shall be
modified by First State Bank in a manner acceptable to Texas State Bank, or, if
First State Bank fails to make such modification, Texas State Bank shall be
entitled to terminate this Agreement, in which event neither party shall have
any further rights or obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
TEXAS STATE BANK
ATTEST: BY: /s/ X. X. XXXXX
___________________________________
XXXX X. XXXXX,
CHAIRMAN OF THE BOARD
/s/ XXXX X. XXXXXXXXXX
_____________________________
Cashier
TEXAS REGIONAL BANCSHARES, INC.
ATTEST: BY: /s/ X. X. XXXXX
___________________________________
XXXX X. XXXXX,
CHAIRMAN OF THE BOARD
/s/ XXX XXXXXX
_____________________________
Secretary
FIRST STATE BANK AND TRUST COMPANY
ATTEST: BY: /s/ XXXXXXX X. BOTTOM
__________________________________
XXXXXXX BOTTOM,
CHAIRMAN OF THE BOARD
/s/ XXXXX BOTTOM
__________________________
Cashier
SHAREHOLDERS OF FIRST STATE BANK:
/s/ XXXXXXX X. BOTTOM /s/ XXXXX XXXXXX
__________________________________ _________________________________
Xxxxxxx Bottom Xxxxx Bottom
Number of shares: 110,777 Number of shares: 650
Estate of Xxxxxx X. Xxxxx H. Xxxxxxx Xxxxx
/s/ H. XXXXXXX XXXXX /s/ H. XXXXXXX XXXXX
__________________________________ _________________________________
Printed Name: H. Xxxxxxx Xxxxx Printed Name: H. Xxxxxxx Xxxxx
Number of shares: 6,008.17 Number of shares: 9,008.17
/s/ XXX XXXXXXXX /s/ XXXXX XXXXXX, JR.
__________________________________ _________________________________
Printed Name: Xxx Xxxxxxxx Printed Name: Xxxxx Xxxxxx, Jr.
Number of shares: 2,700 Number of shares: 1583.333
/s/ LONGORIA CATTLE, INC.
BY XXX XXXXXXXX /s/ XXXXXX X. XXXXXXX
__________________________________ _________________________________
Printed Name: Xxx Xxxxxxxx Printed Name: Xxxxxx X. Xxxxxxx
Number of shares: 600 Number of shares: 500
Xxxxxxxxx Xxxxx Xxxxxxx Xxxxxxxxx X. Xxxxxxx Marital Trust
/s/ XXXXXXXXX XXXXX XXXXXXX
BY XXXXXX X. XXXXXXX, AGENT /s/ XXXXXX X. XXXXXXX, TRUSTEE
__________________________________ _________________________________
Printed Name: Xxxxxx X. Xxxxxxx Printed Name: Xxxxxx X. Xxxxxxx
Number of shares: 13,360 Number of shares: 13,360
/s/ XXXXXX X. XXXXXXXX /s/ XXXXXXX XXXXX
__________________________________ _________________________________
Printed Name: Xxxxxx X. Xxxxxxxx Printed Name: Xxxxxxx Xxxxx
Number of shares: 100 Number of shares: 345.4545
SCHEDULE 1.1
AGREEMENT OF MERGER
BETWEEN
FIRST STATE BANK AND TRUST COMPANY
AND
TEXAS STATE BANK
Under the charter of
TEXAS STATE BANK
under the title of
"TEXAS STATE BANK"
This AGREEMENT is made between FIRST STATE BANK AND TRUST COMPANY of
Mission, Texas (hereinafter referred to as "First State Bank"), a banking
association organized under the laws of the State of Texas, located at 000
Xxxxxx, Xxxxxxx, Xxxxxxx Xxxxxx, Xxxxx, with a Stated Capital of $4,000,000,
divided into 200,000 shares of common stock, each of $20.00 par value, Surplus
of $___________, and Undivided Profits, including Capital Reserves, of
$_______________, as of ________________, 1995; TEXAS STATE BANK of McAllen,
Texas (hereinafter referred to as "Texas State Bank") a banking association
organized under the laws of the State of Texas, located at 0000 Xxxxx Xxxxx
Xxxxxx, XxXxxxx, Xxxxxxx Xxxxxx, Xxxxx, with a Stated Capital of
$________________, divided into _______ shares of common stock, each of $_______
par value, Surplus of $_____________, and Undivided Profits, including Capital
Reserves, of $________________, as of ____________________, 1995; and TEXAS
REGIONAL BANCSHARES, INC. (hereinafter referred to as the "Company"), a
corporation organized under the laws of the State of Texas, being located at
Xxxxxx Xxxxx, Xxxxx 000, 3700 N. 10th Street, McAllen, Xxxxxxx County, Texas.
Each is acting pursuant to a resolution of this board of directors, adopted by
the vote of a majority of its directors, pursuant to the authority given by and
in accordance with the provision of the Texas Banking Act, as amended, and other
applicable provisions of law, witnesseth as follows:
Section 1.
First State Bank and Texas State Bank (hereinafter referred to as the
"Merging Banks") shall be merged, and the surviving bank following the merger
shall be Texas State Bank. For purposes hereof, Texas State Bank following the
merger is sometimes herein referred to as the "Surviving Bank."
Section 2.
Following the merger, the name of the Surviving Bank shall be "Texas State
Bank."
Section 3.
The business of the Surviving Bank shall be that of a Texas banking
association. Until thereafter changed by appropriate action taken by the Board
of Directors of the Surviving Bank, this business shall be conducted by the
Surviving Bank using the established facilities of and at the established
offices of the former Texas State Bank and the former First State Bank, and the
main office shall be located at 0000 X. 00xx Xxxxxx, XxXxxxx, Xxxxxxx Xxxxxx,
Xxxxx. In addition, contemporaneously with the consummation of the transactions
herein described, it is anticipated that The Border Bank of Hidalgo, Texas will
be merged with and into Texas State Bank so that with the consummation of that
transaction the existing locations of Texas State Bank of McAllen, the former
First State Bank and the former The Border Bank shall all become facilities of a
single Texas banking association.
Section 4.
The amount of capital stock of the Surviving Bank shall be
$_________________, divided into _______ shares of common stock, each of
$_______ par value, and at the time the merger shall become effective, the
Surviving Bank shall have a Surplus of $_____________________. The Capital,
Surplus and Undivided Profits (including Capital Reserves) of the Surviving Bank
will be equal to the combined capital and surplus of the merging banks as stated
in the preamble of this Agreement, adjusted for earnings and expenses between
_________________, 1995, and the effective date of the merger. It is
acknowledged by the parties hereto that the merger of First State Bank with and
into Texas State Bank shall be treated as a purchase for financial accounting
purposes.
Section 5.
At the Effective Time, the corporate existence of First State Bank and
Texas State Bank shall be merged into and continued in the Surviving Bank. All
assets and all contract and other rights, franchises, interests, every type of
property (real, personal and mixed), choses in action, appointments,
designations and nominations (including all rights and interests as trustee,
executor, administrator, transfer agent, registrar of stocks and bonds,
guardian, assignee, receiver, and in every other fiduciary and agency capacity),
of each of the merging banks, as they exist at the Effective Time of the merger,
shall pass to and vest in the Surviving Bank without any conveyance or other
transfer. After consummation of the merger, the Surviving Bank shall be liable
for all of the deposits, debts, liabilities, obligations and contracts of every
kind and description, including liabilities arising out of the operation of a
Trust Department, of each of the merging banks existing as of the Effective Time
of the merger, notwithstanding whether such liabilities are matured or
unmatured, contingent or certain, reflected on the balance sheets and books and
records of the Merging Banks or not.
As its contribution to the capital structure of the Surviving Bank, First
State Bank shall contribute acceptable assets having a book value, over and
above its liability to its creditors, of at least $_________________________,
and having an estimated fair value, over and above its liability to its
creditors, of at least equal to that sum.
As its contribution to the capital structure of the Surviving Bank, Texas
State Bank shall
contribute acceptable assets having a book value, over and above its liability
to its creditors, of at least $_________________________, and having an
estimated fair value, over and above its liability to its creditors, of at least
equal to that sum.
Section 6.
At the Effective Time, as hereinafter defined:
(a) Each share of First State Bank common stock owned
beneficially and of record immediately prior to the Effective Time by
the First State Bank shareholders, shall, without any action on the
part of the holder thereof, be converted into and exchanged for the
right to receive cash as calculated pursuant to that certain Agreement
and Plan of Reorganization by and among the Company, Texas State Bank
and First State Bank dated as of __________________, 1995 (the
"Reorganization Agreement").
(b) No distribution of cash or other consideration as herein
provided shall be made to any person or entity otherwise entitled
thereto until surrender by such person of all certificates
representing shares of First State Bank capital stock held by them of
record. The outstanding certificates representing such shares of
First State Bank common stock as held by such shareholders, to the
extent they are to receive shares of Company stock, shall, after the
Effective Time, be deemed to be exchanged for new certificates for the
appropriate number of shares of the Company stock. Unless and until
his or her certificate or certificates representing shares of First
State Bank capital stock have been delivered to the Company, the
Company shall not be obligated to make any distribution payable to
holders of the Company common or preferred stock to such holder of
First State Bank share certificates. However, upon the holder's
delivery of his or her First State Bank share certificates to the
Company, the Company shall pay to the holder the amount (without
interest thereon) of any and all consideration that is payable to such
shareholder under this Agreement and the Agreement and Plan of
Reorganization.
(c) The shares of the Texas State Bank common stock outstanding
at the Effective Time, all of which shall be held by the Company,
shall be converted into a like number of shares of the Surviving Bank,
and the par value thereof shall be the par value per share of Texas
State Bank common stock immediately prior to the Effective Time, and
all such shares shall be owned and held by the Company. The existing
shares of First State Bank shall be cancelled.
(d) The capital of First State Bank and Texas State Bank
immediately prior to the merger shall be combined as the capital of
the Surviving Bank, subject to such adjustment as may be necessary to
properly account for the transaction as a purchase for financial
accounting purposes.
(e) All rights of the holders of outstanding certificates of
First State Bank common stock under the plan of merger described in
this Agreement shall be determined from the stock transfer records of
First State Bank as of the close of business on the date specified in
the approval letter to be issued by the Federal Reserve Board, or the
Texas Department of Banking, or other applicable regulatory authority,
and no transfer of record of any of the shares of First State
Bank common stock shall take place thereafter.
Section 7.
First State Bank shall not declare or pay any dividend to its shareholders
between the date of this Agreement and the time at which the merger shall become
effective, nor shall First State Bank take any action prohibited by the
Reorganization Agreement, without the prior written consent of Texas State Bank.
Section 8.
The officers of the Surviving Bank at the Effective Time shall be those
persons who are officers of Texas State Bank immediately before the Effective
Time. Until replacement or additional directors are elected by the Company, the
Board of Directors and the committees of the Board of Directors of the Surviving
Bank at the Effective Time shall be the same as, and shall be composed of the
same persons who are serving on, the Board of Directors and the committees of
the Board of Directors of Texas State Bank as they exist immediately before the
Effective Time.
Section 9.
Effective as of the Effective Time and until amended by an appropriate
action taken by or on behalf of the Surviving Bank, the Articles of Association
of the Surviving Bank shall be the Articles of Association of Texas State bank
as in effect as of the Effective Time. The Bylaws of the Surviving Bank shall
be the Bylaws of Texas State Bank in effect as of the Effective Time.
Section 10.
This Agreement may be terminated by the mutual action of the Boards of
Directors of each party hereto. Since time is of the essence of this Agreement,
if for any reason the transaction shall not have been consummated by June 30,
1996, this Agreement shall, at the election of either party hereto, terminate
and be of no further force or effect.
Section 11.
This Agreement shall be ratified and confirmed by the affirmative vote of
the shareholders of each of the Merging Banks owning at least two-thirds of its
capital stock outstanding, at a meeting to be held on the call of the directors,
or as may be otherwise prescribed by law. The merger shall become effective at
the time (herein called the "Effective Time") of issuance of a Certificate of
Merger or other evidence of consummation of the merger by the Texas Department
of Banking, or other applicable regulatory authority.
Any shareholder of First State Bank shall be entitled to assert statutory
dissenters' appraisal rights by following the procedures set forth in Article
5.11, et seq., of the Texas Business Corporation Act, as amended, and other
applicable provisions of law. If holders of more than two and one-half percent
(2.5%) of the outstanding shares of First State Bank common stock assert their
statutory dissenters' appraisal rights, Texas State Bank shall be
entitled, but shall not be obligated, to elect to terminate this Agreement, in
which case the merger herein described shall not be consummated.
Section 12.
Consummation of the merger as provided for herein is conditioned upon
fulfillment of certain conditions precedent described in the Reorganization
Agreement between the parties hereto, which contemplates the merger provided for
by this Merger Agreement. Among other things, the consummation of the merger as
provided for herein shall be conditioned upon the receipt of all consents,
orders and approvals, and satisfaction of all other requirements prescribed by
law which are necessary for the consummation of the merger herein described,
including, without limitation, (i) receipt of an order issued by the Texas
Department of Banking approving the merger of First State Bank and Texas State
Bank; and (ii) receipt of an order issued by the Board of Governors of the
Federal Reserve System approving the application of the Company to consummate
the transactions herein described. If any transaction contemplated hereby shall
have been contested by any federal or state governmental authority, or by any
third party, and such contest is brought by formal proceedings, Texas State Bank
shall have the right to, but shall not be obligated to, (i) answer and defend
such contest; or (ii) terminate this Agreement whereupon the merger herein
described shall not be consummated.
In the event of the termination and abandonment of this Agreement pursuant
to the provisions of this Section 12 or any other provision of this Agreement,
this Agreement shall be of no further force or effect and there shall be no
liability by reason of this Agreement or the termination hereof on the part of
either First State Bank or Texas State Bank or the Company, or the directors,
officers, employees, agents or shareholders of any of them.
Section 13.
First State Bank or Texas State Bank may, by an instrument in writing,
extend the time for or waive the performance of any obligations of the other or
waive the performance by the other of any of the covenants or conditions
contained herein. This Agreement may be modified or amended at any time,
whether before or after action thereon by the shareholders of First State Bank
and Texas State Bank, by an instrument in writing signed by First State Bank,
Texas State Bank and the Company.
WITNESS the signatures on behalf of each of the Merging Banks, each
signature hereunto set by its President and attested by its Cashier, and the
signature of the Company, hereunto set by the President of the Company, each
acting pursuant to a resolution of its Board of Directors, acting by a majority
thereof, and witness the signatures hereto of a majority of each of said Boards
of Directors.
DATED to be effective _______________________, 1996.
FIRST STATE BANK AND TRUST COMPANY
Attest:
______________________________ By: ________________________________________
Cashier Xxxxxxx X. Bottom, President
and Director
________________________________________
(Seal of Bank)
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
Directors of First State Bank
TEXAS STATE BANK
Attest:
By:
______________________________ ___________________________________
Cashier Xxxx X. Xxxxx,
Chairman of the Board
and Director
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
Directors of Texas State Bank
TEXAS REGIONAL BANCSHARES, INC.
By: ___________________________________
Xxxx X. Xxxxx,
Chairman of the Board
STATE OF TEXAS Section
Section
COUNTY OF XXXXXXX Section
On this _____ day of _____________, 19____, before me, a Notary Public for
the State and County aforesaid, personally came Xxxxxxx X. Bottom, as President,
and ___________________, as Cashier, of First State Bank and Trust Company, and
each in his said capacity acknowledged the foregoing instrument to be the act
and deed of said banking corporation and the seal affixed thereto to be its
seal; and came also_____________________________________________________________
________________________________________________________________________________
___________________________________, and _______________________________________
________________________________________ being a majority of the Board of
Directors of said banking corporation, and each of them acknowledged said
instrument to be the act and deed of said banking corporation and of himself as
a director thereof.
WITNESS my official seal and signature this day and year aforesaid.
________________________________________
Notary Public, State of Texas
________________________________________
(Printed or Stamped Name of Notary)
My Commission Expires: _________________
STATE OF TEXAS Section
Section
COUNTY OF XXXXXXX Section
On this _____ day of _______________, 19____, before me, a Notary Public
for the State and County aforesaid, personally came Xxxx X. Xxxxx, as Chairman
of the Board, and ________________________________________, as Cashier, of Texas
State Bank, and each in his said capacity acknowledged the foregoing instrument
to be the act and deed of said banking corporation; and came also
________________________________________________________________________________
________________________________________________________________________________
___________________________________________________________________________, and
______________________________ , being a majority of the Board of Directors of
said banking corporation, and each of them acknowledged said instrument to be
the act and deed of said banking corporation and of himself as a director
thereof.
WITNESS my official seal and signature this day and year aforesaid.
_____________________________________________
Notary Public, State of Texas
_____________________________________________
(Printed or Stamped Name of Notary)
My Commission Expires: ______________________
STATE OF TEXAS Section
Section
COUNTY OF XXXXXXX Section
On this _____ day of _____________, 19____, before me, a Notary Public for
the State and County aforesaid, personally came Xxxx X. Xxxxx, as Chairman of
the Board, of Texas Regional Bancshares. Inc., and in his said capacity
acknowledged the foregoing instrument to be the act and deed of said corporation
and the seal affixed thereto to be its seal.
WITNESS my official seal and signature this day and year aforesaid.
_____________________________________________
Notary Public, State of Texas
_____________________________________________
(Printed or Stamped Name of Notary)
My Commission Expires: ______________________
FIRST STATE BANK & TRUST CO.
SCHEDULES TO AGREEMENT AND
PLAN OF REORGANIZATION
Schedule 2.1 - Organization
Schedule 2.3 - Financial Statements, Records
Schedule 2.4 - Loans
Schedule 2.5 - Properties
Schedule 2.6 - Environmental Matters
Schedule 2.7 - Litigation
Schedule 2.8 - Taxes
Schedule 2.9 - Contracts
Schedule 2.11 - Insurance
Schedule 2.12 - Adverse Agreements
Schedule 2.13 - Absence of Certain Charges
Schedule 2.14 - Agreements with Directors,
Officers and Stockholders
Schedule 2.15 - Affiliated Corporations
Schedule 2.16 - Regulatory Matters, Exam
Reports
Schedule 2.17 - Compliance with Applicable Law
Schedule 5.6 - Permitted Transfers of Assets and Certain Other Matters
DISCLOSURE SCHEDULES
The following Disclosure Schedules are delivered in accordance with the
provisions of that certain Agreement and Plan of Reorganization dated January 9,
1996. Among other things, the Disclosure Schedules contain lists, descriptions,
exceptions and other limitations to the language of the representations and
warranties contained in Article 2 of the Agreement. All capitalized terms used
herein have the meanings ascribed to such terms in the Agreement.
Matters disclosed in any section of the Disclosure Schedules shall be
deemed to be incorporated into each of the other sections of the Disclosure
Schedules with respect to which such disclosure clearly applies.
................................................................................
SCHEDULE 2.1
ORGANIZATION
1. Locations.
FIRST STATE BANK AND TRUST COMPANY
PHYSICAL DESCRIPTIONS OF BANK LOCATIONS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(a) (b) (c)
LOCATION LEGAL DESCRIPTION FACILITIES/SERVICES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MAIN BANK MISSION ORIGINAL TOWNSITE: MAIN BANK:
900 XXXXXX 77 X 224.2 XXXXX XX XXXX 00 XXXXXXX
XXXXXXX, XXXXX XXX 0 & 0 XXXXX 000, XXX., 2 COLLECTION TELLERS
W10'; E 140' XXXX 00, 00, 00 & 0 XXXXX XXXXXXXXXX
14, BLOCK 160; XXXX 00-00,
XXXXX 000; XXXX 00-00, XXXXX XXXXX XXXXX XX:
160; XXXX 0 & 00, XXXXX 000 0 XXXXXXX
0 XXXXX-XX XXXXX
0 XXXXX XXXXXXXXXX
XXXXX XXXXX XX:
2 TELLERS
4 DRIVE-IN LANES
1 NIGHT DEPOSITORY
--------------------------------------------------------------------------------
EAST BRANCH XXXXXX, XXXX 0 & 0, XXXXX X 0 XXXXX-XX XXXXX
E. 10TH ST. AT 2 LOBBY TELLERS
XXXXXXXX ST., 2 DRIVE-IN TELLERS
MISSION, TEXAS 1 ATM
1 NIGHT DEPOSITORY
--------------------------------------------------------------------------------
WEST BRANCH HOMEVILLE D, XXX 0, XXXXX 0 0 XXXXX-XX XXXXX
X.X. XXX. 83 AT W 375' - S 375' N 681.50' 2 LOBBY TELLERS
XXX XXXX ROAD 3.22 ACRES 2 DRIVE-IN TELLERS
PENITAS, TEXAS 1 ATM
1 NIGHT DEPOSITORY
1 NEW ACCOUNTS REP.
--------------------------------------------------------------------------------
SHARYLAND NORTHEAST JUNCTION, XXX 0 0 XXXXX-XX XXXXX
XXXXXX CHATEAU VILLE RE-SUBD. 2 LOBBY TELLERS
SHARYLAND 2 DRIVE-IN TELLERS
BLVD. AT XXXXXXX 1 ATM
PARKWAY 1 NIGHT DEPOSITORY
MISSION, TEXAS 2 NEW ACCOUNTS REPS.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(a) (b) (c)
LOCATION LEGAL DESCRIPTION FACILITIES/SERVICES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
MCALLEN FAIRWAY NORTH XXX 0, 0 XXXXX-XX XXXXX
XXXXXX XXXXX 1 2 LOBBY TELLERS
0000 X. 00XX XXXXXXXXXX XXX 0, XXXX 0 XXXXX-XX XXXXXXX
XXXXXX X 0/0 0 XXX
XXXXXXX, XX XXXXXXXXXX XXX X 0/0 XX 0 0 XXXXX XXXXXXXXXX
0 XXX XXXXX./XXXX DEP.
BOX REP.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE 2.3
FINANCIAL STATEMENTS, RECORDS
SCHEDULE 2.3.1
1. The unaudited call reports for the periods ending December 31, 1993,
1992 and 1991 and September 30, 1995 do not contain the footnote disclosures
required by generally accepted accounting principals.
2. The audited financial statements for the period ending December 31,
1994 included a liability for "deferred compensation payable" in the amount of
$506,389. This was an adjusting entry required by the Bank's auditors in
connection with the audit of the Bank's December 31, 1994 financials. This
adjusting entry was not carried over to the Bank's general ledger and is
therefore not shown as a liability on the Bank's unaudited September 30, 1995
call report.
3. The First State Bank Financial Statements and the September 30, 1995
Balance Sheet do not disclose liabilities for loan commitments, letters of
credit, unasserted claims or for pending or overtly threatened litigation.
4. In the past, the Bank has elected not to amortize loan costs over the
life of the loan as contemplated by FASB 91; therefore, the unaudited reports of
regulatory condition for the periods ending December 31, 1993, 1992, and 1991
and September 30, 1995, as well as the audited financial statements for the
period ending December 31, 1994, do not show deferred loan costs.
5. The Bank does not book on a current month end basis changes in fair
market value on "available for sale securities" as contemplated by FASB 115.
These adjustments have typically been made only on a quarterly basis, although
such adjustments are reflected on the Bank's general ledger for the period
ending November 30, 1995. The FASB 115 adjustment is reflected on each
quarterly regulatory report of condition filed by the Bank.
6. See Schedule 2.8 for description of treatment by Bank of accruals for
deferred taxes.
7. The Bank records interest income on loans "greater than or equal to 90
days past due and still accruing" on the general ledger; however, in order to
comply with regulatory reporting requirements, this income is reversed quarterly
and not reported on the Bank's regulatory reports of conditions.
SCHEDULE 2.3.2
1. See Schedule 2.3.1 above and Schedules 2.13 and 2.16.
SCHEDULE 2.3.3
1. See Schedule 2.3.3 above.
SCHEDULE 2.3.4
1. See Schedule 2.16 below and provisions of MOU and examination reports
dealing with trust asset management
SCHEDULE 2.4
LOANS
SCHEDULE 2.4.1
1. See Schedule 2.16 and examination reports with regard to certain
criticized lending practices and for a summary of specifically criticized loans
and related matters disclosed in examination reports and correspondence with
regulatory authorities.
2. The Bank has previously furnished Texas State Bank with copies of its
(i) loan watch list as of January 4, 1996; (ii) list of loans on non-accrual as
of December 31, 1995; and (iii) past due loan report as of December 31, 1995
(collectively the "Loan Reports"). Each of the loans described in the Loan
Reports and each loan specifically criticized in the examination reports
described in Section 2.16, presents more than the normal risk of
uncollectibility or other unfavorable features.
SCHEDULE 2.4.2
1. The Bank has previously furnished Texas State Bank with a listing of
all loans to directors, officers, affiliates, and certain other related parties
dated December 31, 1995.
SCHEDULE 2.5
PROPERTIES
No disclosures
SCHEDULE 2.6
ENVIRONMENTAL MATTERS
No disclosures
SCHEDULE 2.7
LITIGATION
1. XXXXXXXX XXXXXX V. FIRST STATE BANK & TRUST CO. OF MISSION; XXXXXXX X.
BOTTOM; XXXXX XXXXX; XXXX X. XXXX AND WIFE, XXXXXX X. XXXX A/D/A
XXXXXX XXXXX; AND XXXX XXXXX, Cause No. C-3089-92-B, in the District
Court of Xxxxxxx County, Texas, 93rd Judicial District - This case
involves claims under the Texas Deceptive Trade Practices Act and
allegations of fraud, breach of fiduciary duty, breach of duty of good
faith and fair dealing, intentional infliction of emotional distress,
negligent infliction of emotional distress, negligent supervision,
gross negligence and negligence. The plaintiff has requested actual,
treble and exemplary damages in unspecified amounts, together with
attorneys' fees, costs and pre- and post- judgment interest.
Discovery is ongoing. A trial date has not yet been set.
2. XXXXXXXX (XXXXX) XXXXX, ET UX, XXXXX X. XXXXX V. XXXXX XXXXX, XXXX
XXXXXX, XXXXX ALEAR, HAPPY YEARS, INC. AND FIRST STATE BANK OF
MISSION, Cause No. C-4000-91-C, in the District Court of Xxxxxxx
County, Texas, 139th Judicial District - This case involves claims
against the Bank of negligence and violations of the Texas Deceptive
Trade Practices Act and Section 17.41 et seq. of the Texas Business
and Commerce Code. The plaintiffs request actual damages in the
amount of $255,000.00, damages for loss of consortium in an amount not
less than $25,000.00, and punitive damages of not less than
$500,000.00, together with attorneys' fees and pre- and post-judgment
interest. A hearing on the Bank's motion for summary judgment was
held on April 10, 1995. The court has taken the motion under
advisement. Discovery is ongoing. A trial date has not yet been set.
3. XXXXX XXXXXXX AND XXXXXX XXXXXXX V. FIRST STATE BANK & TRUST COMPANY
OF MISSION, Cause No. C-6591-95-D, in the 206th Judicial District
Court, Xxxxxxx County, Texas. This is a cause of action against the
Bank for fraud, breach of contract, intentional infliction of
emotional distress and negligence arising out of the foreclosure and
subsequent sale of various properties of the Plaintiffs' on which the
Bank had obtained lien positions in order to secure loans made to the
Plaintiffs. The suit was only recently filed and even more recently
served on the Bank. The Bank has referred the matter to its counsel.
An answer has not yet been
filed.
4. Except as set forth in Schedule 2.16 and the examination reports
furnished to Texas State Bank under Section 2.16 of the Agreement,
Border Bank knows of no violations of the kind described in the fourth
sentence of Section 2.7 of the Agreement.
SCHEDULE 2.8
TAXES
1. The Bank is not under examination, nor has it been notified of any
examination or any proposed examination by any taxing authority.
2. The Bank computes appropriate reserves for deferred taxes only on a
quarterly basis; therefore, the statements referred to in Section 2.8 for the
period ended October 31, 1995 and the Bank's general ledger would not reflect
accruals for deferred taxes.
SCHEDULE 2.9
CONTRACTS
(i) EMPLOYMENT CONTRACTS. The Bank does not have written employment
contracts with any employees. The Bank has previously furnished Texas
State Bank with a list of current employees together with their
salaries. In addition to their respective salaries, the Bank has had
a policy for many years of paying a bonus in an amount equal to 10% of
each employee's salary. This bonus is accrued on the books of the
Bank and paid on December 15 of each year. The Bank also participates
in a cafeteria plan for the benefit of its employees. This plan
allows employees to set aside funds for medical expenses on a tax free
basis. The plan is a "control group" plan that also includes
employees of an affiliate, The Border Bank, Hidalgo, Texas and
Citizens State Bank, Roma, Texas. The cafeteria plan covers life,
accidental death and dismemberment, medical and dental. A policy
maintained through Jefferson Pilot Insurance Company covers certain
employee life, accidental death, dismemberment, and health claims.
The Bank pays 100% of the premiums for officers and their dependents.
The Bank pays one-half of the premiums for other employees and their
dependents. There is an additional disability policy covering
officers, X. Xxxxx Bottom and Xxxxxx Xxxxxxx. The premiums for this
policy ($1500/each) are paid by the Bank. Officers of the Bank are
reimbursed for personal automobile usage and certain officers are
allowed to use Bank credit cards for expenses related to the business
of the Bank. The Bank also pays club membership fees, dues and
expenses for Xxxxxxx Bottom (Cimarron Country Club and McAllen Country
Club), Xxxxx Bottom (Cimarron Country Club, McAllen Country Club and
The Tower Club) and for Xxxxx Xxxxxxx (Cimarron Country Club).
Certain athletic club dues and related expenses are also paid on
behalf of certain officers. Xxxxxxx Bottom is also furnished with
three Bank owned vehicles for his use. Employees with over 15 years
employment are afforded a three week paid vacation. Other employees
are afforded a two week paid vacation.
(ii) OTHER EMPLOYEE BENEFITS. The Bank has three separate deferred
compensation plans for the benefit of certain Bank employees. The
plans provide for retirement benefits to be paid to the specific
employee or a designated beneficiary or estate if death occurs prior
to payment of the full amount of deferred compensation on
reaching age 65. One plan entered into on December 10, 1963,
commenced payments to a retired employee of approximately $13,000 per
year on January 4, 1988, continuing annually thereafter through June
2003. A second plan, entered into on September 1, 1979, provides for
payments of approximately $13,300 per year which was scheduled to
commence on April 1, 1990, continuing annually thereafter through June
2005; however, the employee elected to receive an amount less than
that provided for in the plan over a longer period of time. The third
plan, covering Chairman Xxxxxxx Bottom, provides for a retirement
benefit payment of $50,000 per year commencing in March, 1999 and
continuing annually thereafter for 20 years. The Bank owns and is the
beneficiary of four life insurance policies on the three employees
covered by the deferred compensation plans. The life insurance policy
face values are in amounts approximately equal to the total benefits
paid under the plans. The Bank owns two policies on the life of
retired employee L. Xxxx Xxxx and one each on the lives of X. Xxxxxx
Xxxxx and Xxxxxxx Bottom.
(iii) MATERIAL LEASES OR LICENSES.
None
(iv) CONTRACTS OR COMMITMENTS FOR CAPITAL EXPENDITURES IN EXCESS OF
$100,000.
a) EDS CONTRACT. - On September 13, 1994, the Bank and Electronic
Data Systems Corporation ("EDS") entered into that certain
Agreement for Information Technology Services (the "EDS
Agreement"). The EDS Agreement provides for EDS to render
various specified data processing services to the Bank for a
fixed monthly rate of $18,563 per month for designated "basic"
services plus additional charges for certain "optional" services
that the Bank may call upon EDS to perform. The initial term of
the EDS Agreement is for a period of five years from September
13, 1994. Under Section 7.2 of the EDS Agreement, if 50% or more
of the stock or assets of the Bank change hands, the EDS
Agreement may be terminated "upon the consummation of such
acquisition or on a mutually agreeable date thereafter."
However, in the event
of such termination, EDS is entitled to receive liquidated
damages, as described in Section 7.6. Under Section 7.6, EDS is
entitled to receive the SUM of (a) all actual disengagement costs
and expenses reasonably incurred by EDS in connection with
termination PLUS a 25% "management fee" on such costs; AND (b) an
amount equal to 80% of the total compensation "which would have
been paid to EDS" under this the EDS Agreement during the
remainder of its term. (The EDS Agreement provides that EDS'
total expected compensation is to be determined by multiplying
the number of months remaining in the initial term by the average
monthly charge to the Bank for the 12 months preceding the month
in which notice of termination was given.) On September 13,
1994, the Bank and EDS entered into a Addendum to the EDS
Agreement ("the Addendum"). The Addendum provides that the
liquidated damages provisions of Section 7.6 of the EDS Agreement
DO NOT APPLY if: (a) the Bank changes ownership prior to
September 13, 1996; AND (b) the Bank gives EDS 180 days prior
written notice of the termination. In such event, EDS'
liquidated damages under the EDS Agreement are limited to the
actual expenses incurred by EDS as a part of the deconversion
process.
(v) CONTRACTS OR OPTIONS TO BUY OR SELL PROPERTY OUTSIDE ORDINARY COURSE
OF BUSINESS.
None
(vi) LOAN COMMITMENTS OR CREDIT EXTENSIONS IN EXCESS OF $500,000.
The Bank has previously furnished Texas State Bank with a
copy of Loan Commitments and Credit Extensions in excess of
$500,000.
(vii) AGREEMENTS WITH DIRECTORS OR AFFILIATES.
a) Bottom & Bottom - Partnership comprised of Xxxxxxx Bottom and
Xxxxx Bottom - sells certain types of insurance to Bank customers
and receives commissions associated with such sales - no written
agreement.
b) See Schedule 2.4.2 for a description of loans to insiders.
(viii) CONTRACTS RELATING TO THE PURCHASE OR SALE OF CERTAIN SECURITIES.
None
(ix) OTHER MATERIAL CONTRACTS OUTSIDE THE ORDINARY COURSE OF BUSINESS.
None
SCHEDULE 2.11
INSURANCE
(a)
FIRST STATE BANK AND TRUST CO.
CASUALTY INSURANCE SUMMARY
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
INSURANCE TYPE COMPANY EXPIRES AMOUNT OF COVERAGE
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Commercial Fidelity and Deposit 1-June-96 $10,000,000.00
Catastrophe Liab.
Workers Compensation Tx. Workers Comp. 1-June-96 500,000.00
Ins. Fund
Fine Arts Fidelity and Deposit 1-June-96 31,400.00
Transit Cash Letter Fidelity and Deposit 6-Dec.-96 100,000.00
Data Processing Transit Fidelity and Deposit 6-Dec.-96 500,000.00
Business Auto Fidelity and Deposit 1-June-96 1,000,000.00
Commercial General Fidelity and Deposit 1-June-96 2,000,000.00
Liability
Building/Contents Fidelity and Deposit 1-June-96 5,841,419.00
Financial Institution BancInsure, Inc. 1-June-96 3,000,000.00
Bond
Combination Safe BancInsure, Inc. 1-Jan.-97 300,000.00
Deposit
Blanket Extortion BancInsure, Inc. 1-Jan.-97 1,000,000.00
Registered Mail Registered Mail Ins. 30-Nov.-96 CV of property
Assoc.
Stamp Bond Old Republic Ins. Co. Continuous 100,000.00
Armored Car Service American Home Continuous 225,000.00
Boiler and Machinery The Hartford 20-Sept.-96 2,500,000.00
Flood Insurance Omaha Property and 31-Oct.-96 231,300.00
Casualty
Blanket Fire Mount Xxxxxx Fire 20-Dec.-96 500,000.00
Ins. Co.
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
(B)
LIFE, DISABILITY, MEDICAL AND DENTAL
POLICY SUMMARIES
LIFE POLICIES OWNED BY BANK
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
INSURED POLICY NO. FACE VALUE PREMIUM DATE ISSUED APPROXIMATE CASH VALUE
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Xxxxxxx Bottom UL0705270 $1,000,000 None - 2/85 $167,605
Paid up
L. Xxxx Xxxx UL0708718 $174,684 $3,500 7/85 $27,850
L. Xxxx Xxxx UL0739432 $50,000 5,002 10/89 $18,650
X. X. Xxxxx UL0707757 $250,000 None - 6/86 $110,451
Paid Up
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
DISABILITY POLICIES PROVIDED TO BANK EMPLOYEES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INSURED POLICY NO. COMPANY APPROXIMATE ANNUAL PREMIUM
--------------------------------------------------------------------------------
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Xxxxx Bottom H00632095 Jefferson - Pilot $1,500
Xxxxxx Xxxxxxx H00632097 Jefferson - Pilot $1,500
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LIFE, ACCIDENTAL DEATH, DISMEMBERMENT & HEALTH POLICES
MAINTAINED BY BANK FOR BENEFIT OF EMPLOYEES
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INSURED POLICY NO. COMPANY
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Employees as a Group 47,878 Jefferson - Pilot Life Insurance
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SCHEDULE 2.12
ADVERSE AGREEMENTS
1. See 2.16 for description of Memorandum of Understanding with banking
regulators.
SCHEDULE 2.13
ABSENCE OF CERTAIN CHANGES
1. LOSSES CAUSED BY XXXXX XXXXXXX XXXX. Xxx. Xxxx was an employee of the
Bank from 1991 to August 1995 when she was terminated for acts of embezzlement
involving both loans and deposits. The Bank has documented to date
approximately $143,000 in such losses, $108,000 of which have already been
reimbursed to the Bank under its blanket bond insurance policy. A further
$15,000 in claims are currently being processed by the insurance company. Since
the Bank's embezzlement coverage carries a $25,000 deductible, it appears that
net losses to the Bank will be limited to approximately the amount of this
deductible. Xxx. Xxxx pleaded guilty to criminal charges brought against her by
the U.S. Attorney in U.S. District Court. Sentencing is scheduled for
January 11, 1996. The extent of Xx. Xxxx'x suspected criminal activity is more
fully described in that certain letter dated September 7, 1995 from Xxxxxx X.
Xxxxxxx, Vice President of the Bank, to Assistant U.S. Attorney Xxxx Xxxxxxxx.
A copy of this letter and the FDIC incident report have been delivered to Texas
State Bank. A further description of the status of the Bank's insurance claim
is contained in a letter dated December 21, 1995 from BancInsure, Inc. to Xx.
Xxxxxxx, a copy of which has also been furnished to Texas State Bank.
SCHEDULE 2.14
AGREEMENTS WITH DIRECTORS, OFFICERS AND STOCKHOLDERS
1. LIST OF EACH DIRECTOR, EXECUTIVE OFFICER, AFFILIATE AND HOLDER OF 5%
OR MORE OF BANK CAPITAL STOCK.
(a) Xxxxxxx X. Bottom - Executive Officer, Director
and owner of more than 5% of capital
Stock of Bank
(b) X. Xxxxx Bottom - Executive Officer
(c) Xxxxxx X. Xxxxxxx - Director
(d) Xxxxx Xxxxxx, Jr. - Director
(e) Xxxxxx X. Xxxxxxxx - Director
(f) Xxxxx Xxxxx, Jr. - Director
(g) Xxx Xxxxxxxx - Director
(h) Xxxxxxx X. Xxxxx - Director
(i) Xxxxx X. Xxxxxxx - Executive Officer
(j) Xxxxxxx Xxxxxxx - Executive Officer
(k) Xxxxx Xxxxxx - Executive Officer
(l) Xxxxxxxx Xxxxxx Xxxxxxxx - Executive Officer
(m) Xxxxxx X. Xxxxxxx - Executive Officer
(n) Xxxxxx X. Xxxxxx - Executive Officer
(o) Bottom & Bottom - Affiliate
(p) Bottom Interests, Inc. - Affiliate
(q) The Border Bank - Affiliate
(r) E & R Company - Affiliate
(s) Xxxxx II, a Texas General Partnership - Affiliate
(t) X. X. Xxxxxxx (X.X. Xxxxxxx Marital Trust) - Affiliate and owner
of more than 5% of capital stock
2. TRANSACTIONS INVOLVING THE BANK AND ANY OFFICER, DIRECTOR OR
AFFILIATE.
(a) Bottom & Bottom - Receives commissions from certain insurance
sales to Bank customers.
(b) See Schedule 2.9 for a description of employment benefits to
certain officers, directors and affiliates.
(c) See Schedule 2.4.2 for a description of lending transactions
involving officers, directors and affiliates.
SCHEDULE 2.15
AFFILIATED CORPORATIONS
1. The Bank knows of no arrangement whereby the stock of any corporation
is or has been held in trust (whether express, constructive, resulting or
otherwise) for the benefit of the Bank or the shareholders of the Bank.
SCHEDULE 2.16
REGULATORY MATTERS AND EXAM REPORTS
1. The Board of Directors of the Bank and the Banking Commissioner of
Texas entered into a Memorandum of Understanding ("MOU") on December 14, 1993.
The MOU was issued as a result of specific criticisms and alleged deficiencies
reflected in the October 4, 1993, Report of Examination issued by the Texas
Department of Banking. The MOU documents an agreement reached between the
Commissioner and the Board of Directors concerning ten management goals and
corrective actions with respect to the Bank and sets forth time frames within
which these goals and corrective actions were to be accomplished. The Board of
Directors, individually and collectively, agreed to cause management of the Bank
to take corrective actions and to use its best efforts to accomplish the goals
which were set forth in the MOU. In subsequent examination reports and in a
letter dated September 26, 1995, the Texas Department of Banking has criticized
the Board's compliance with certain provisions of the MOU. In the letter dated
September 26, 0000, Xxxxxxx X. Xxxxx, Xxxxxx Commissioner, advised the Board of
Directors that the Texas Department of Banking's examination of July 11, 1994,
found that the Bank and Board were in compliance with only four of the ten
provisions contained in the MOU. The Texas Department of Banking's examination
conducted on July 17, 1995, found partial compliance with one provision of the
MOU and nine provisions of the MOU were found to be in noncompliance. The
examination report dated July 7, 1995, as well as Deputy Commissioner Xxxxx'
letter of September 26, 1995 identifies other violations of law and banking
regulations. Finally, Xx. Xxxxx solicited a further response from the Board
concerning compliance with the provisions of the MOU and indicated that after
such response was reviewed, the Board would be advised what additional action,
if any, would be taken by the Texas Department of Banking to effect compliance.
The Bank was also advised that the Texas Department of Banking would schedule an
examination no later than the first quarter of 1996 to monitor the progress of
compliance with the MOU. Other than the matters described in this Schedule 2.16
and the deficiencies and violations of law and regulations outlined in the
examination reports and correspondence described in Section 2.16, the Bank is
unaware of any other violations, or possible violations of banking statutes or
regulations. The Board has retained Xxxxx Xxxxxx, Austin, Texas, a former Texas
Banking Commissioner, to assist the Board as an outside consultant with regard
to compliance with the MOU and certain other matters raised in the September 26,
1995 letter from Deputy Commissioner Xxxxx.
2. See Schedule 2.3.1 for description of liability for "deferred
compensation payable" which was not reflected on certain quarterly regulatory
call reports filed during 1995.
SCHEDULE 2.17
COMPLIANCE WITH APPLICABLE LAW
1. See Schedule 2.16 for a description of matters which bear upon the
Bank's regulatory compliance.
SCHEDULE 5.6
PERMITTED TRANSFERS OF ASSETS AND CERTAIN OTHER MATTERS
1. At Closing, Xxxxxxx Bottom shall have the right, but not the
obligation, to purchase the following vehicles at the book value of such
vehicles as of the date of Closing:
1989 Range Rover
1996 Range Rover
1993 Mercedes Benz
2. The Bank and Xxxxxxx Bottom have agreed to clarify Mr. Bottom's
deferred compensation agreement to make it clear that, in the event Mr. Bottom
ceases to be an employee of the Bank for any reason prior to his 65th birthday,
he will still be entitled to receive full benefits under his deferred
compensation agreement commencing upon the 65th anniversary of his birth.
