EXHIBIT 2.1
------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
PROSPERITY BANCSHARES, INC.,
AND
SOUTH TEXAS BANCSHARES, INC.
DATED AS OF JUNE 17, 1999
------------------------------------------------
TABLE OF CONTENTS
Page
INTRODUCTION...................................................................1
I. THE MERGER.................................................................2
Section 1.1. Initial Merger............................................2
Section 1.2. Articles of Incorporation, Bylaws and Facilities of
First Surviving Company...................................2
Section 1.3. Effect of Initial Merger..................................2
Section 1.4. Liabilities of the First Surviving Company................3
Section 1.5. Final Merger..............................................3
Section 1.6. Articles of Incorporation, Bylaws and Facilities of
Continuing Company........................................3
Section 1.7. Effect of Final Merger....................................4
Section 1.8. Liabilities of Continuing Company.........................4
Section 1.9. Per Share Merger Consideration............................4
Section 1.10. Adjustment to Merger Consideration........................5
Section 1.11. Dissenting Shares.........................................5
Section 1.12. Exchange of Shares and Options............................5
Section 1.13. Ratification by Shareholders..............................7
II. REPRESENTATIONS AND WARRANTIES OF SOUTH TEXAS............................7
Section 2.1. Organization..............................................7
Section 2.2. Capitalization............................................8
Section 2.3. Approvals; Authority......................................9
Section 2.4. Investments...............................................9
Section 2.5. Financial Statements......................................9
Section 2.6. Title....................................................10
Section 2.7. Environmental Laws.......................................10
Section 2.8. Litigation and Other Proceedings.........................11
Section 2.9. Taxes....................................................12
Section 2.10. Contracts................................................12
Section 2.11. Insurance................................................13
Section 2.12. No Conflict With Other Instruments.......................13
Section 2.13. Laws.....................................................14
Section 2.14. Conduct..................................................14
Section 2.15. Allowance for Credit Losses..............................15
Section 2.16. Employment Relations.....................................15
Section 2.17. ERISA....................................................15
-i-
Section 2.18. Deferred Compensation Arrangements.......................16
Section 2.19. List of Loans............................................16
Section 2.20. Absence of Changes.......................................17
Section 2.21. Brokers and Finders......................................17
Section 2.22. Absence of Property Taxes and Liens......................17
Section 2.23. Community Reinvestment Act...............................17
Section 2.24. Fair Housing Act, Home Mortgage Disclosure Act and
Equal Credit Opportunity Act.............................17
Section 2.25. Usury Laws and Other Consumer Compliance Laws............18
Section 2.26. Bank Secrecy Act.........................................18
Section 2.27. Zoning and Related Laws..................................18
Section 2.28. Year 2000 Compliance.....................................18
Section 2.29. Securities Laws..........................................19
Section 2.30. Regulatory Approvals.....................................19
Section 2.31. Shareholders' List.......................................19
III. REPRESENTATIONS AND WARRANTIES OF BANCSHARES.............................19
Section 3.1. Organization.............................................19
Section 3.2. Approvals; Authority.....................................20
Section 3.3. No Conflict With Other Instruments.......................20
Section 3.4. Litigation and Other Proceedings.........................20
Section 3.5. Ability to Pay Merger Consideration......................21
Section 3.6. Regulatory Approvals.....................................21
Section 3.7. Year 2000 Compliance.....................................21
Section 3.8. Community Reinvestment Act...............................21
IV. COVENANTS OF SOUTH TEXAS.................................................21
Section 4.1. Shareholder Approval and Best Efforts....................21
Section 4.2. Operations...............................................22
Section 4.3. Access to Properties and Records.........................23
Section 4.4. Information for Regulatory Applications..................23
Section 4.5. Attendance at Certain South Texas Meetings...............24
Section 4.6. Standstill Provision.....................................25
Section 4.7. Proxies..................................................25
Section 4.8. Dividends................................................25
Section 4.9. Environmental Investigation; Rights to Terminate
Agreement................................................25
Section 4.10. Termination of Data Processing Contracts.................27
Section 4.11. Termination of Qualified Plan............................27
Section 4.12. Notification of Bond Sales...............................27
-ii-
V. COVENANTS OF BANCSHARES..................................................27
Section 5.1. Best Efforts.............................................27
Section 5.2. Information for Applications and Proxy Solicitation......27
Section 5.3. Employee Benefit Plans...................................28
Section 5.4. Confidentiality..........................................29
Section 5.5. Applications.............................................29
Section 5.6. Additional Capital.......................................29
Section 5.7. Indemnification; Insurance...............................29
VI. CLOSING..................................................................31
Section 6.1. Closing..................................................31
Section 6.2. Effective Time...........................................31
VII. TERMINATION..............................................................32
Section 7.1. Termination..............................................32
Section 7.2. Effect of Termination....................................34
VIII.CONDITIONS TO OBLIGATIONS OF BANCSHARES..................................34
Section 8.1. Compliance with Representations and Covenants............34
Section 8.2. Material Adverse Change..................................34
Section 8.3. Legal Opinion............................................34
Section 8.4. Releases.................................................35
Section 8.5. Dissenters' Rights.......................................35
Section 8.6. Employment Agreements....................................35
Section 8.7. Nonrenewal of Participation in Loan......................35
IX. CONDITIONS TO OBLIGATIONS OF SOUTH TEXAS.................................35
Section 9.1. Compliance with Representations and Covenants............35
Section 9.2. Material Adverse Change..................................35
Section 9.3. Legal Opinion............................................36
Section 9.4. Releases.................................................36
X. CONDITIONS TO RESPECTIVE OBLIGATIONS OF
BANCSHARES AND SOUTH TEXAS..............................................36
Section 10.1. Government Approvals.....................................36
Section 10.2. Shareholder Approval.....................................37
XI. MISCELLANEOUS............................................................37
Section 11.1. Non-Survival of Representations and Warranties...........37
Section 11.2. Amendments...............................................37
Section 11.3. Expenses.................................................37
Section 11.4. Notices..................................................37
-iii-
Section 11.5. Definition of Knowledge..................................39
Section 11.6. Controlling Law..........................................39
Section 11.7. Headings.................................................39
Section 11.8. Modifications or Waiver..................................39
Section 11.9. Severability.............................................39
Section 11.10. Assignment...............................................40
Section 11.11. Consolidation of Agreements..............................40
Section 11.12. Counterparts.............................................40
Section 11.13. Binding on Successors....................................40
Section 11.14. Gender...................................................40
Section 11.15. Disclosures..............................................40
Section 11.16. Publicity................................................40
Section 11.17. Entire Agreement.........................................40
Section 11.18. Delivery of Schedules....................................41
SCHEDULE 1.9 TO THE AGREEMENT:
South Texas Stock Option Termination Agreement....................43
SCHEDULE 2.1 TO THE AGREEMENT:
Organization - South Texas........................................44
SCHEDULE 2.2 TO THE AGREEMENT:
Capitalization - South Texas......................................45
SCHEDULE 2.4 TO THE AGREEMENT:
Investments - South Texas.........................................46
SCHEDULE 2.5 TO THE AGREEMENT:
Financial Statements - South Texas................................47
SCHEDULE 2.6 TO THE AGREEMENT:
Title - South Texas...............................................48
SCHEDULE 2.7 TO THE AGREEMENT:
Environmental Laws - South Texas..................................49
SCHEDULE 2.8 TO THE AGREEMENT:
Litigation and Other Proceedings - South Texas....................50
SCHEDULE 2.9 TO THE AGREEMENT:
Taxes - South Texas...............................................51
-iv-
SCHEDULE 2.10 TO THE AGREEMENT:
Contracts - South Texas...........................................52
SCHEDULE 2.11 TO THE AGREEMENT:
Insurance Policies - South Texas..................................53
SCHEDULE 2.13 TO THE AGREEMENT:
Compliance with Laws - South Texas................................54
SCHEDULE 2.14 TO THE AGREEMENT:
Conduct - South Texas.............................................55
SCHEDULE 2.16 TO THE AGREEMENT:
Employment Relations - South Texas................................56
SCHEDULE 2.18 TO THE AGREEMENT:
Deferred Compensation Arrangements - South Texas..................57
SCHEDULE 2.19 TO THE AGREEMENT:
List of Loans - South Texas.......................................58
SCHEDULE 2.20 TO THE AGREEMENT:
Absence of Changes - South Texas..................................59
SCHEDULE 2.21 TO THE AGREEMENT:
Brokers' and Finders' Fees - South Texas..........................60
SCHEDULE 2.22 TO THE AGREEMENT:
Absence of Property Taxes and Liens - South Texas.................61
SCHEDULE 2.28 TO THE AGREEMENT
Year 2000 Compliance - South Texas................................62
SCHEDULE 3.4 TO THE AGREEMENT:
Litigation - Bancshares...........................................63
SCHEDULE 4.7 TO THE AGREEMENT:
Proxies...........................................................64
SCHEDULE 5.3 TO THE AGREEMENT:
Severance Benefits................................................65
-v-
SCHEDULE 8.3 TO THE AGREEMENT:
Legal Opinion to be Delivered by South Texas.......................1
SCHEDULE 9.3 TO THE AGREEMENT:
Legal Opinion to be Delivered by Bancshares........................1
-vi-
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") dated as of June
17, 1999, is by and between Prosperity Bancshares, Inc., a Texas corporation
("Bancshares"), and South Texas Bancshares, Inc., a Texas corporation ("South
Texas").
WHEREAS, South Texas desires to affiliate with Bancshares, and Bancshares
desires to affiliate with South Texas in the manner provided in this Agreement;
and
WHEREAS, Bancshares and South Texas believe that the acquisition of South
Texas by Bancshares in the manner provided by, and subject to the terms and
conditions set forth in, this Agreement and all exhibits, schedules and
supplements hereto is desirable and in the best interests of their respective
shareholders; and
WHEREAS, the respective Boards of Directors of Bancshares and South Texas
have approved this Agreement and the transactions proposed herein substantially
on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of such premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties agree as set forth below.
INTRODUCTION
Following the execution of this Agreement by Bancshares and South Texas,
Bancshares will organize as a wholly-owned subsidiary a Texas corporation ("New
Corp") solely for the purpose of consummating the merger transactions described
herein. This Agreement provides for (i) the merger of New Corp with and into
South Texas with South Texas as the survivor (the "Initial Merger"), all
pursuant to this Agreement and a Plan of Merger by and between New Corp and
South Texas, a copy of which is attached hereto as Exhibit "A" and all of the
terms of which are incorporated by reference for all purposes and, immediately
thereafter, (ii) the merger of South Texas with and into Bancshares with
Bancshares as the survivor (the "Final Merger"), all pursuant to this Agreement
and a Plan of Merger by and between South Texas and Bancshares, a copy of which
is attached hereto as Exhibit "B" and all of the terms of which are incorporated
by reference for all purposes. The Initial Merger and the Final Merger shall
sometimes be referred to collectively as the "Mergers." In connection with the
Initial Merger, Bancshares will acquire all of the issued and outstanding shares
of common stock, $.50 par value, of South Texas ("South Texas Common Stock") for
an aggregate consideration as set forth in this Agreement. Immediately after the
effective time of the Mergers, The Commercial National Bank of Beeville ("CNB")
shall be merged with and into First Prosperity Bank ("FPB"), all pursuant to a
Plan of Merger by and between CNB and FPB, a copy of which is attached hereto as
Exhibit "C".
I. THE MERGER
Section 1.1.INITIAL MERGER. New Corp shall be merged into South Texas (the
resulting company being herein referred to as the "First Surviving Company") as
of the effective time of the Initial Merger under the Articles of Incorporation
of South Texas, as determined by the Secretary of State of Texas, and each of
the outstanding shares of common stock of New Corp shall and without any action
on the part of Bancshares be canceled and be converted into shares of common
stock of the First Surviving Company. The shares of common stock of the First
Surviving Company into which such New Corp common stock is converted shall
represent ownership of 100% of the issued and outstanding capital stock of the
First Surviving Company, all of which shall be owned by Bancshares.
Section 1.2.ARTICLES OF INCORPORATION, BYLAWS AND FACILITIES OF FIRST
SURVIVING COMPANY. At the effective time of the Initial Merger and until
thereafter amended in accordance with applicable law, the Articles of
Incorporation of the First Surviving Company shall be the Articles of
Incorporation of South Texas as in effect at the effective time of the Initial
Merger. Until altered, amended or repealed as provided therein and in the
Articles of Incorporation of the First Surviving Company, the Bylaws of the
First Surviving Company shall be the Bylaws of South Texas as in effect at the
effective time of the Initial Merger. The main office of the First Surviving
Company shall be the main office of South Texas as of the effective time of the
Initial Merger, and all corporate acts, plans, policies, contracts, approvals
and authorizations of South Texas and New Corp and their respective
shareholders, boards of directors, committees elected or appointed thereby,
officers and agents, which were valid and effective immediately prior to the
effective time of the Initial Merger, shall be taken for all purposes as the
acts, plans, policies, contracts, approvals and authorization of the First
Surviving Company and shall be as effective and binding thereon as the same were
with respect to South Texas and New Corp respectively, as of the effective time
of the Initial Merger.
Section 1.3.EFFECT OF INITIAL MERGER. At the effective time of the Initial
Merger, the corporate existence of South Texas and New Corp shall be merged and
continued in the First Surviving Company, and the First Surviving Company shall
be deemed to be a continuation in entity and identity of South Texas and New
Corp. All rights, franchises and interests of South Texas and New Corp,
respectively, in and to any type of property and choses in action shall be
transferred to and vested in the First Surviving Company by virtue of the
Initial Merger without any deed or other transfer. First Surviving Company,
without any order or other action on the part of any court or otherwise, shall
hold and enjoy all rights of property, franchises and interest, including
appointments, designations and nominations, and all other rights and interests
as trustee, executor, administrator, transfer agent or registrar of stocks and
bonds, guardian of estates, assignee, receiver and committee of estates and
lunatics, and in every other fiduciary capacity, in the same manner and to the
same extent as such rights, franchises and interests were held or enjoyed by
South Texas and New Corp,
-2-
respectively, as of the effective time of the Initial Merger. As of the
effective time of the Initial Merger, the directors and officers of New Corp
shall become the directors and officers of First Surviving Company.
Section 1.4.LIABILITIES OF THE FIRST SURVIVING COMPANY. At the effective
time of the Initial Merger, the First Surviving Company shall be liable for all
liabilities of South Texas and New Corp. All debts, liabilities and obligations
of South Texas and of New Corp, respectively, accrued, absolute, contingent or
otherwise, and whether or not reflected or reserved against on balance sheets,
books of account or records of South Texas or New Corp, as the case may be,
shall be those of the First Surviving Company and shall not be released or
impaired by the Initial Merger. All rights of creditors and other obligees and
all liens on property of either South Texas or New Corp shall be preserved
unimpaired.
Section ▇.▇.▇▇▇▇▇ MERGER. Immediately after the effective time of the
Initial Merger, the First Surviving Company shall be merged with and into
Bancshares (which, as the receiving association, is hereinafter referred to as
"Continuing Company" whenever reference is made to it at or after the Effective
Time (as defined in Section 6.2 of this Agreement)) under the charter and
Articles of Incorporation of Bancshares pursuant to the provisions of, and with
the effect provided in Article 5 of the Texas Business Corporation Act ("TBCA").
Section 1.6.ARTICLES OF INCORPORATION, BYLAWS AND FACILITIES OF CONTINUING
COMPANY. At the Effective Time and until thereafter amended in accordance with
applicable law, the Articles of Incorporation of Continuing Company shall be the
Articles of Incorporation of Bancshares as in effect at the Effective Time.
Until altered, amended or repealed as therein provided and in the Articles of
Incorporation of Continuing Company, the Bylaws of Continuing Company shall be
the Bylaws of Bancshares as in effect at the Effective Time. Unless and until
changed by the Board of Directors of Continuing Company, the main office of
Continuing Company shall be the main office of Bancshares as of the Effective
Time. The established offices and facilities of the First Surviving Company
immediately prior to the Final Merger shall become established offices and
facilities of the Continuing Company. Until thereafter changed in accordance
with law or the Articles of Incorporation or Bylaws of Continuing Company, all
corporate acts, plans, policies, contracts, approvals and authorizations of the
First Surviving Company and Bancshares and their respective shareholders, boards
of directors, committees elected or appointed thereby, officers and agents,
which were valid and effective immediately prior to the Effective Time, shall be
taken for all purposes as the acts, plans, policies, contracts, approvals and
authorizations of Continuing Company and shall be as effective and binding
thereon as the same were with respect to the First Surviving Company and
Bancshares, respectively, as of the Effective Time.
-3-
Section 1.7.EFFECT OF FINAL MERGER. At the Effective Time, the corporate
existence of the First Surviving Company and Bancshares shall, as provided in
the provisions of law heretofore mentioned, be merged and continued in
Continuing Company, and Continuing Company shall be deemed to be a continuation
in entity and identity of the First Surviving Company and Bancshares. All
rights, franchises and interests of the First Surviving Company and Bancshares,
respectively, in and to any type of property and choses in action shall be
transferred to and vested in Continuing Company by virtue of such Final Merger
without any deed or other transfer. Continuing Company, without any order or
other action on the part of any court or otherwise, shall hold and enjoy all
rights of property, franchises and interest, including appointments,
designations and nominations, and all other rights and interests as trustee,
executor, administrator, transfer agent or registrar of stocks and bonds,
guardian of estates, assignee, receiver and committee of estates and lunatics,
and in every other fiduciary capacity, in the same manner and to the same extent
as such rights, franchises, and interests were held or enjoyed by First
Surviving Company and Bancshares, respectively, as of the Effective Time. At the
Effective Time, the directors and officers of Bancshares shall become the
directors and officers of the Continuing Company.
Section 1.8.LIABILITIES OF CONTINUING COMPANY. At the Effective Time of
the Final Merger, Continuing Company shall be liable for all liabilities of the
First Surviving Company and Bancshares. All debts, liabilities, obligations and
contracts of the First Surviving Company and of Bancshares, respectively,
matured or unmatured, whether accrued, absolute, contingent or otherwise, and
whether or not reflected or reserved against on balance sheets, books of
account, or records of the First Surviving Company or Bancshares, as the case
may be, shall be those of Continuing Company and shall not be released or
impaired by the Mergers. All rights of creditors and other obligees and all
liens on property of either the First Surviving Company or Bancshares shall be
preserved unimpaired subsequent to the Mergers.
Section 1.9. PER SHARE MERGER CONSIDERATION. Shares of South Texas Common
Stock issued and outstanding immediately prior to the effective time of the
Initial Merger, other than Dissenting Shares (as defined in Section 1.11 of this
Agreement) shall, by virtue of the Initial Merger and without any action on the
part of the holder thereof, be converted into and represent the right to receive
consideration in the form of cash equal to $93.40 per share of South Texas
Common Stock (the "Per Share Merger Consideration") payable to the holders of
record of shares of South Texas Common Stock, without interest thereon, upon the
proper surrender of the certificate representing such shares. By virtue of the
Initial Merger, each Option (as defined in Section 2.2 of this Agreement)
representing a right to acquire a share of South Texas Common Stock shall be
converted into and represent the right to receive cash equal to $93.40 for each
Option less the exercise price to acquire a share of South Texas Common Stock
pursuant to the Option (the "Option Consideration") payable upon the proper
presentment of an agreement in the form of Schedule 1.9 to this Agreement
terminating the Option. The Per Share Merger Consideration and Option
Consideration shall sometimes be referred to collectively as the "Merger
Consideration". Under no circumstances
-4-
shall the sum of (i) the aggregate Per Share Merger Consideration and (ii) the
aggregate Option Consideration exceed $23,350,000.00.
Section 1.10. ADJUSTMENT TO MERGER CONSIDERATION. In the event the Closing
(as defined in Section 6.1) does not occur on or before one hundred fifty (150)
calendar days from the date this Agreement is executed and South Texas' failure
to fulfill any material obligation under this Agreement has not been the cause
of, or resulted in, the failure of the Mergers to become effective on or before
such date, then the Merger Consideration will increase by $3,000.00 per day for
each day between the end of such one hundred fifty (150) day period and the
Closing Date (as defined in Section 6.2).
Section 1.11. DISSENTING SHARES. Each share of South Texas Common Stock
issued and outstanding immediately prior to the effective time of the Initial
Merger, the holder of which has not voted in favor of the Mergers and who has
delivered a written demand for payment of the fair value of such shares within
the time and in the manner provided in Article 5.12 of the TBCA, is referred to
herein as a "Dissenting Share." Dissenting Shares shall not be converted into or
represent the right to receive the Per Share Merger Consideration pursuant to
Section 1.9 of this Agreement unless and until such holder shall have failed to
perfect or shall have effectively withdrawn or lost his right to appraisal and
payment under the TBCA. If any such holder shall have so failed to perfect or
shall have effectively withdrawn or lost such right, such holder's Dissenting
Shares shall thereupon be deemed to have been converted into and to have become
exchangeable for, at the effective time of the Initial Merger, the right to
receive the Per Share Merger Consideration without any interest thereon. As set
forth in Section 8.5 of this Agreement, if the holders of more than 15% of the
South Texas Common Stock shall have exercised their dissenters' rights,
Bancshares shall have no obligation to consummate the Mergers.
Section 1.12. EXCHANGE OF SHARES AND OPTIONS.
(a) Bancshares shall deposit or cause to be deposited in trust with
FPB (the "Exchange Agent") prior to the Effective Time cash in an aggregate
amount sufficient to make the cash payments pursuant to Section 1.9 hereof and
to make the appropriate cash payments, if any, to holders of Dissenting Shares
pursuant to Section 1.11 hereof (such amounts being hereinafter referred to as
the "Exchange Fund"). The Exchange Agent shall promptly make payments out of the
Exchange Fund of the Per Share Merger Consideration upon surrender of
certificates representing such shares and of the Option Consideration upon
presentment of agreements (in form and substance satisfactory to Bancshares)
terminating such Options. Payments to holders of Dissenting Shares shall be made
as required by the TBCA. The Exchange Fund shall not be used for any other
purpose, except as provided in this Agreement.
-5-
(b) At least 20 days prior to the Effective Time or on such other
date as the parties may agree, the Exchange Agent shall mail to each record
holder of an outstanding certificate or certificates which represent shares of
South Texas Common Stock (the "Certificates") and to each holder of an agreement
evidencing Options representing a right to acquire shares of South Texas Common
Stock ("Option Agreements"), a form letter of transmittal which will specify
that delivery shall be effected, and risk of loss and title to the Certificates
and Option Agreements shall pass, only upon proper delivery of the Certificates
and Option Agreements to the Exchange Agent and contain instructions for use in
effecting the surrender of the Certificates and Option Agreements for payment
therefor. At and after the Closing (as defined herein) and upon surrender to the
Exchange Agent of a Certificate or Option Agreement, together with such letter
of transmittal duly executed, the holder of such Certificate or Option Agreement
shall be entitled to receive in exchange therefor the amount of cash provided in
Section 1.9 hereof in the manner described herein, and such Certificate or
Option Agreement shall forthwith be canceled. Payment will be made at Closing
for shares of South Texas Common Stock if Certificates and Option Agreements and
a properly completed letter of transmittal with respect to such shares are
received by the Exchange Agent at least five days prior to Closing. Payment will
be made for all other shares of South Texas Common Stock within five days after
the Exchange Agent's receipt of the Certificates and Option Agreements and a
properly completed letter of transmittal. A holder of South Texas Common Stock
or an Option representing a right to acquire South Texas Common Stock may elect
on the letter of transmittal to receive payment by (i) deposit into an account
at FPB; (ii) wire transfer, (iii) check to be received at FPB or (iv) check sent
by U.S. mail. Unless an alternative election for method of payment is made on
the letter of transmittal, payment will be made by check sent by U.S. mail. No
interest will be paid or accrued on the cash payable upon surrender of the
Certificates and Option Agreements. If payment of cash is to be made to a person
other than the person in whose name the Certificate surrendered is registered or
to whom the Option Agreement presented relates, it shall be a condition of
payment that the Certificate or Option Agreement so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the Certificate
surrendered or the listed person on the Option Agreement presented or
established to the satisfaction of Bancshares that such tax has been paid or is
not applicable. Until surrendered in accordance with the provisions of this
Section 1.12, each Certificate (other than Certificates representing Dissenting
Shares) shall represent for all purposes the right to receive the Per Share
Merger Consideration without any interest thereon and each Option Agreement
shall represent for all purposes the right to receive the Option Consideration
without any interest thereon.
(c) After the Effective Time, the stock transfer ledger of South
Texas shall be closed and there shall be no transfers on the stock transfer
books of South Texas of the shares of South Texas Common Stock which were
outstanding immediately prior to such time of filing. If, after the Effective
Time, Certificates or Option Agreements are presented
-6-
to Bancshares, they shall be promptly presented to the Exchange Agent and
exchanged as provided in this Section 1.12.
(d) Any portion of the Exchange Fund (including the proceeds of any
investments thereof) that remains unclaimed by the shareholders or optionholders
of South Texas for six months after the Effective Time shall be paid to
Bancshares, and the holders of shares or Options to acquire shares of South
Texas Common Stock not theretofore presented to the Exchange Agent shall look to
Bancshares only, and not the Exchange Agent, for the payment of any Per Share
Merger Consideration in respect of such shares or any Option Consideration in
respect of such Options.
Section 1.13. RATIFICATION BY SHAREHOLDERS. This Agreement shall be
submitted to the shareholders of South Texas in accordance with applicable
provisions of law and the respective Articles of Incorporation and Bylaws of
South Texas. South Texas and Bancshares shall proceed expeditiously and
cooperate fully in the procurement of any other consents and approvals and the
taking of any other actions in satisfaction of all other requirements prescribed
by law or otherwise necessary for consummation of the Mergers on the terms
herein provided, including, without limitation, the preparation and submission
of all necessary filings, requests for waivers and certificates with the Board
of Governors of the Federal Reserve System ("Federal Reserve Board"), the
Federal Deposit Insurance Corporation ("FDIC") and the Texas Department of
Banking ("Banking Department").
II. REPRESENTATIONS AND WARRANTIES OF SOUTH TEXAS
South Texas represents and warrants to Bancshares that each of the
statements made in this Article II are true and correct in all material
respects. South Texas agrees that, at the Closing, it shall provide Bancshares
with supplemental Schedules reflecting any material changes in the information
contained in the Schedules which have occurred in the period from the date of
delivery of such Schedules to the date of Closing.
Section 2.1. ORGANIZATION. South Texas, a Texas corporation and a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended ("BHC Act"), is duly organized, validly existing and in good standing
under the laws of the State of Texas. South Texas owns 100% of the issued and
outstanding shares of common stock, $1.00 par value ("CNB Delaware Stock"), of
CNB Delaware Company ("CNB Delaware"). CNB Delaware, a Delaware corporation and
a bank holding company registered under the BHC Act, is duly organized, validly
existing and in good standing under the laws of the State of Delaware. CNB
Delaware owns 100% of the issued and outstanding shares of common stock, $10.00
par value ("CNB Stock"), of The Commercial National Bank of Beeville ("CNB").
CNB is a national banking association duly organized, validly existing and in
good standing under the laws of the United States of America. South Texas, CNB
Delaware and CNB have full power and authority (including all licenses,
franchises, permits and other
-7-
governmental authorizations which are legally required) to own, lease and
operate their properties, to engage in the business and activities now conducted
by them and to enter into this Agreement. CNB (i) is duly authorized to conduct
a general banking business, embracing all usual deposit functions of commercial
banks as well as commercial, industrial and real estate loans, installment
credits, collections and safe deposit facilities subject to the supervision of
the Office of the Comptroller of the Currency ("OCC"), and (ii) is an insured
bank as defined in the Federal Deposit Insurance Act. CNB conducts trust
activities. True and complete copies of the Articles of Incorporation and Bylaws
of South Texas, the Certificate of Incorporation and Bylaws of CNB Delaware and
the Articles of Association and Bylaws of CNB, as amended to date (collectively,
"South Texas Constituent Documents"), have been delivered or made available to
Bancshares and FPB. Except as otherwise disclosed in Schedule 2.1 to this
Agreement neither South Texas, CNB Delaware nor CNB, (a) has any subsidiaries or
affiliates, (b) is a general partner or material owner in any joint venture,
general partnership, limited partnership, trust or other non-corporate entity,
and (c) knows of any arrangement pursuant to which the stock of any corporation
is or has been held in trust (whether express, constructive, resulting or
otherwise) for the benefit of all shareholders of South Texas.
Section 2.2. CAPITALIZATION. The authorized capital stock of South Texas
consists of 1,000,000 shares of South Texas Common Stock, 241,423 of which are
issued and outstanding and 1,000,000 shares of preferred stock, $1.00 par value,
none of which is issued and outstanding. The authorized capital stock of CNB
Delaware consists of 1,000 shares of CNB Delaware Stock, all of which are issued
and outstanding. The authorized capital stock of CNB consists of 1,000,000
shares of CNB Stock, 120,100 of which are issued and outstanding. All of the
issued and outstanding shares of South Texas Common Stock, CNB Delaware Stock
and CNB Stock are validly issued, fully paid and nonassessable, and have not
been issued in violation of the preemptive rights of any person or in violation
of any applicable federal or state laws. Except for currently outstanding
options to acquire 13,225 shares of South Texas Common Stock (the "Options") and
other than as disclosed in Schedule 2.2, there are no existing options,
warrants, calls, convertible securities or commitments of any kind obligating
South Texas, CNB Delaware or CNB to issue any authorized and unissued South
Texas Common Stock, CNB Delaware Stock or CNB Stock nor does South Texas, CNB
Delaware or CNB have any outstanding commitment or obliga tion to repurchase,
reacquire or redeem any of their outstanding capital stock. A schedule of the
Options, including name of option holder, number of shares of South Texas Common
Stock represented by the Option and exercise price, is included in Schedule 2.2.
Except as disclosed in Schedule 2.2 to this Agreement, there are no voting
trusts, voting agreements, buy-sell agreements or other similar arrangements
affecting the South Texas Common Stock, CNB Delaware Stock or the CNB Stock.
Section 2.3. APPROVALS; AUTHORITY. The Board of Directors of South Texas
has approved this Agreement and the transactions contemplated herein subject to
the approval
-8-
thereof by the shareholders of South Texas as required by law, and, other than
shareholder approval, no further corporate proceedings of South Texas are needed
to execute and deliver this Agreement and consummate the Mergers. This Agreement
has been duly executed and delivered by South Texas and, is a duly authorized,
valid, legally binding agreement of South Texas enforceable against South Texas
in accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and general equitable principles.
Section 2.4. INVESTMENTS. South Texas has furnished to Bancshares a
complete list, as of March 31, 1999, of all securities, including municipal
bonds, owned by either South Texas, CNB Delaware or CNB (the "Securities
Portfolio"). Except as set forth on Schedule 2.4 all such securities are owned
by South Texas, CNB Delaware or CNB (i) of record, except those held in bearer
form, and (ii) beneficially, free and clear of all mortgages, liens, pledges and
encumbrances, except as noted in Schedule 2.4. Schedule 2.4 also discloses any
entities in which the ownership interest of South Texas, CNB Delaware or CNB
equals 5% or more of the issued and outstanding voting securities of the issuer
thereof. There are no voting trusts or other agreements or understandings with
respect to the voting of any of the securities.
Section 2.5. FINANCIAL STATEMENTS. South Texas has furnished or made
available to Bancshares true and complete copies of South Texas's audited
balance sheets as of December 31, 1998, 1997 and 1996, and the related
statements of income and statements of cash flow for the years then ended,
together with the notes thereto. South Texas has also delivered to Bancshares a
true and correct copy of the Consolidated Reports of Condition and Income ("Call
Reports") filed by CNB as of and for the three months ended March 31, 1999 and
the year ended December 31, 1998. The audited financial information and Call
Reports referred to in this Section 2.5 are collectively referred to as the
"South Texas Financial Statements." The South Texas Financial Statements fairly
present the financial position of South Texas, CNB Delaware and CNB and the
results of their operations at the dates and for the periods indicated in
conformity with generally accepted accounting practices ("GAAP") applied on a
consistent basis, except for the Call Reports which are in compliance with
regulatory accounting principles. Except as set forth on Schedule 2.5 to this
Agreement, as of the dates of the South Texas Financial Statements referred to
above, neither South Texas, CNB Delaware nor CNB had any liabilities, fixed or
contingent, which are material and are not fully shown or provided for in such
South Texas Financial Statements or otherwise disclosed in this Agreement, or in
any of the documents delivered to Bancshares. Except as set forth in Schedule
2.20 to this Agreement and except for any changes in the bond portfolio which
occurred from December 31, 1998 to March 31, 1999, since December 31, 1998,
there have been no material changes in the financial condition, assets,
liabilities or business of South Texas, CNB Delaware or CNB, other than changes
in the ordinary course of business, which individually or in the aggregate have
not materially and adversely affected the
-9-
financial condition, results of operations or business of South Texas, CNB
Delaware and CNB considered as a consolidated whole.
Section 2.6. TITLE. True and complete copies of all deeds and leases and
title insurance policies, if any, for all real property owned or leased by South
Texas, CNB Delaware or CNB and all mortgages, deeds of trust and security
agreements to which such property is subject have been furnished or made
available to Bancshares. Except as set forth in Schedule 2.6, South Texas, CNB
Delaware and CNB have good and indefeasible title to all of their assets and
properties including, without limitation, land and improvements thereon, and all
personal and intangible properties reflected in the South Texas Financial
Statements or acquired subsequent thereto, subject to no liens, mortgages,
security interests, encumbrances or charges of any kind except (a) defects,
irregularities in title and encumbrances set forth in the public record of the
applicable county, (b) as noted in the South Texas Financial Statements or as
set forth in Schedule 2.6, (c) statutory liens not yet delinquent, (d) 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 (e) those
assets and properties disposed of for fair value in the ordinary course of
business since the dates of the South Texas Financial Statements. Except as set
forth in Schedule 2.6, neither South Texas, CNB Delaware nor CNB owns securities
of or other interest in any other commercial bank.
Section 2.7. ENVIRONMENTAL LAWS. South Texas, CNB Delaware and CNB are in
material compliance with all terms and conditions of all applicable federal and
state Environmental Laws (as defined below) and permits thereunder. Except as
set forth on Schedule 2.7 of this Agreement, (a) neither South Texas, CNB
Delaware nor CNB has received notice of any violation of any Environmental Laws
or generated, stored, or disposed of any materials designated as Hazardous
Materials (as defined below) under the Environmental Laws, and they are not
subject to any claim or lien under any Environmental Laws; (b) during the term
of ownership by South Texas, CNB Delaware or CNB no real estate currently owned,
operated, or leased (including any property acquired by foreclosure or deeded in
lieu thereof) by South Texas, CNB Delaware or CNB, or owned, operated or leased
by South Texas, CNB Delaware or CNB within the ten years preceding the date of
this Agreement, has been designated as requiring any environmental cleanup or
response action to comply with Environmental Laws, or has been the site of
release of any Hazardous Materials; (c) to the knowledge of South Texas, CNB
Delaware and CNB, no asbestos was used in the construction of any portion of
South Texas', CNB Delaware's or CNB's facilities; and (d) to the knowledge of
South Texas, CNB Delaware and CNB, no real property currently owned by South
Texas, CNB Delaware or CNB is, or has been, an industrial site or landfill.
Bancshares and its consultants, agents and representatives shall have the right
to inspect South Texas' assets for the purpose of conducting asbestos and other
environmental surveys.
-10-
"Environmental Laws," for purposes of this Section 2.7, includes, but is
not limited to, any federal, state or local statute, law, rule, regulation,
ordinance, code, policy or rule of common law now in effect and in each case as
amended to date and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree, or judgment,
relating to the environment, human health or safety, or Hazardous Materials,
including without limitation the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. ▇▇.▇▇. 9601, ET
SEQ.; The Hazardous Materials Transaction Act, as amended, 49 U.S.C. ▇▇.▇▇.
1801, ET SEQ.; the Resource Conservation and Recovery Act of 1976, as amended,
42 U.S.C. ▇▇.▇▇. 6901, ET SEQ.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. ▇▇.▇▇. 1201, ET SEQ.; the Toxic Substances Control Act, 15
U.S.C. ▇▇.▇▇. 2601, ET SEQ.; the Clean Air Act, 42 U.S.C. ▇▇.▇▇. 7401, ET SEQ.;
and the Safe Drinking Water Act, 42 U.S.C. ▇▇.▇▇. 3808, ET SEQ.
"Hazardous Materials," for purposes of this Section 2.7, includes, but is
not limited to, (a) any petroleum or petroleum products, natural gas, or natural
gas products, radioactive materials, asbestos, urea formaldehyde foam
insulation, transformers or other equipment that contains dielectric fluid
containing levels of polychlorinated biphenyls (PCBs), and radon gas; (b) any
chemicals, materials, waste or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," toxic substances,"
"toxic pollutants," "contaminants," or "pollutants," or words of similar import,
under any Environmental Laws; and (c) any other chemical, material, waste or
substance which is in any way regulated by any federal, state or local
government authority, agency or instrumentality, including mixtures thereof with
other materials, and including any regulated building materials such as asbestos
and lead.
Section 2.8. LITIGATION AND OTHER PROCEEDINGS. Except as otherwise noted
on Schedule 2.8 hereto, there are no legal, quasi-judicial, regulatory or
administrative proceedings of any kind or nature now pending or, to the
knowledge of South Texas, CNB Delaware or CNB, threatened before any court or
administrative body in any manner against South Texas, CNB Delaware or CNB, or
any of their properties or capital stock, which might have a material adverse
effect on South Texas, CNB Delaware or CNB, their financial condition, assets,
operations or earnings or the transactions proposed by this Agreement. Neither
South Texas, CNB Delaware nor CNB knows of any basis on which any litigation or
proceeding could be brought which is reasonably likely to have a materially
adverse effect on the financial condition of South Texas, CNB Delaware or CNB or
which could question the validity of any action taken or to be taken in
connection with this Agreement and the transactions contemplated hereby. Neither
South Texas, CNB Delaware nor CNB is in default with respect to any judgment,
order, writ, injunction, decree, award, rule or regulation of any court,
arbitrator or governmental agency or instrumentality.
Section 2.9. TAXES. Except as otherwise noted in Schedule 2.9 hereto,
South Texas, CNB Delaware and CNB have filed with the appropriate federal, state
and local
-11-
governmental agencies all tax returns and reports required to be filed, and have
paid all taxes and assessments shown or claimed to be due. Neither South Texas,
CNB Delaware nor CNB has executed or filed with the Internal Revenue Service any
agreement extending the period for assessment and collection of any federal tax,
nor is South Texas, CNB Delaware nor CNB 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 South Texas,
CNB Delaware or CNB. Neither South Texas, CNB Delaware nor CNB has waived any
statute of limitations with respect to any tax or other assessment or levy, and
all such taxes and other assessments and levies which South Texas, CNB Delaware
or CNB is required by law to withhold or to collect have been duly withheld and
collected and have been paid over to the proper governmental agency, domestic
and foreign, or segre gated and set aside for such payment and, if so segregated
and set aside will be so paid by South Texas, CNB Delaware or CNB, as required
by law.
True and complete copies of the federal income tax returns of South Texas
as filed with the Internal Revenue Service for the years ended December 31,
1998, December 31, 1997, and December 31, 1996, have been delivered or made
available to Bancshares.
Section 2.10. CONTRACTS. Except as otherwise noted on Schedule 2.10
hereto, neither South Texas, CNB Delaware nor CNB is a party to or bound by any
(a) employment contract or severance arrangement (including without limitation
any collective bargaining contract or union agreement or agreement with an
independent consultant) which is not terminable by South Texas, CNB Delaware or
CNB on less than sixty (60) days' notice without payment of any amount on
account of such termination; (b) bonus, stock option, deferred compensation or
profit-sharing, pension or retirement plan or other employee benefit
arrangement; (c) material lease or license with respect to any property, real or
personal, whether as landlord, tenant, licensor or licensee; (d) contract or
commitment for capital expenditures; (e) material contract or commitment made in
the ordinary course of business for the purchase of materials or supplies or for
the performance of services over a period of more than one hundred twenty (120)
days from the date of this Agreement; (f) contract or option to purchase or sell
any real or personal property other than in the ordinary course of business; (g)
contract, agreement or letter with respect to the management or operations of
South Texas, CNB Delaware or CNB imposed by any bank regulatory authority having
supervisory jurisdiction over South Texas, CNB Delaware or CNB; (h) agreement,
contract or indenture related to the borrowing by South Texas, CNB Delaware or
CNB of money other than those entered into in the ordinary course of business;
(i) guaranty of any obligation for the borrowing of money, excluding
endorsements made for collection, repurchase or resell agreements, letters of
credit and guaranties made in the ordinary course of business; (j) agreement
with or extension of credit to any executive officer or director of South Texas,
CNB Delaware or CNB or holder of more than ten percent (10%) of the issued and
outstanding South Texas Common Stock, or any affiliate of such person, which is
not on substantially the same terms (including, without limitation, in the case
of lending
-12-
transactions, interest rates and collateral) as, and following credit
underwriting practices that are not less stringent than, those prevailing at the
time for comparable transactions with unrelated parties or which involve more
than the normal risk of collectibility or other unfavorable features; or (k)
material contracts, other than the foregoing, not made in the ordinary course of
business and not otherwise disclosed in this Agreement, in any schedule attached
hereto or in any document delivered or referred to or described in writing by
South Texas, CNB Delaware or CNB to Bancshares. South Texas, CNB Delaware and
CNB have in all material respects performed all material obligations required to
be performed by them to date and are not in default under, and no event has
occurred which, with the lapse of time or action by a third party could result
in default under, any material indenture, mortgage, contract, lease or other
agreement to which South Texas, CNB Delaware or CNB is a party or by which South
Texas, CNB Delaware or CNB is bound or under any provision of the South Texas
Constituent Documents.
Section 2.11. INSURANCE. A true and complete list of all insurance
policies owned or held by or on behalf of either South Texas, CNB Delaware or
CNB (other than credit-life policies), including policy numbers, retention
levels, insurance carriers, and effective and termination dates, is set forth in
Schedule 2.11 to this Agreement. In the judgment of the Board of Directors of
South Texas, such insurance policies are adequate for the business conducted by
South Texas, CNB Delaware and CNB in respect of amounts, types and risks
insured.
Section 2.12. NO CONFLICT WITH OTHER INSTRUMENTS. Neither the execution
and delivery of this Agreement nor the consummation of the Mergers contemplated
hereby, subject to obtaining all required shareholder consents, will conflict
with or result in a breach of any provision of the South Texas Constituent
Documents. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, subject to obtaining all required
shareholder and regulatory approvals, will not violate any provision of, or
constitute a default under, any law, or any order, writ, injunction or decree of
any court or other governmental agency, or any material contract, agreement or
instrument to which South Texas, CNB Delaware or CNB is a party or by which
either is bound or constitute an event which, with the lapse of time or action
by a third party, could result in any default under any of the foregoing or
result in the creation of any lien, charge or encumbrance upon the assets or
properties of South Texas, CNB Delaware or CNB.
Section 2.13. LAWS. Except as otherwise noted in Schedule 2.13 hereto,
South Texas, CNB Delaware and CNB are in material compliance with all applicable
federal, state and local laws, rules, regulations and orders applicable to them.
Except for approvals by regulatory authorities having jurisdiction over South
Texas, CNB Delaware and CNB, no prior consent, approval or authorization of, or
declaration, filing or registrations with, any person or regulatory authority is
required of South Texas, CNB Delaware or CNB in connection with the execution,
delivery and performance by South Texas of this Agreement
-13-
and the transactions contemplated hereby or the resulting change of control of
CNB except for certain instruments necessary to consummate the Mergers
contemplated hereby. South Texas, CNB Delaware and CNB have filed all reports,
registrations and statements, together with any amendments required to be made
thereto, that are required to be filed with the Federal Reserve Board, OCC or
any other regulatory authority having jurisdiction over South Texas, CNB
Delaware or CNB, and such reports, registrations and statements are, to the
knowledge of South Texas, CNB Delaware and CNB, true and correct in all material
respects.
Section 2.14. CONDUCT. Except as otherwise noted in Schedule 2.14 hereto,
since December 31, ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, CNB Delaware and CNB have not (a) issued
or sold any of their capital stock or corporate debt obligations; (b) declared
or set aside or paid any dividend (except dividends from CNB to CNB Delaware and
from CNB Delaware to South Texas) or made any other distribution in respect of
or, directly or indirectly, purchased, redeemed or otherwise acquired any shares
of South Texas Common Stock; (c) incurred any obligations or liabilities (fixed
or contingent), except obligations or liabilities incurred in the ordinary
course of business, or mortgaged, pledged or subjected any of their assets to a
lien or encumbrance (other than in the ordinary course of business and other
than statutory liens not yet delinquent); (d) discharged or satisfied any lien
or encumbrance or paid any obligation or liability (fixed or contingent), other
than accruals, accounts and notes payable included in the South Texas Financial
Statements, accruals, accounts and notes payable incurred since December 31,
1998 in the ordinary course of business and accruals, accounts and notes payable
incurred in connection with the transactions contemplated by this Agreement; (e)
sold, exchanged or otherwise disposed of any of their capital assets other than
in the ordinary course of business; (f) made any general or individual wage or
salary increase (including increases in directors' or consultants' fees) other
than in accordance with past practices, paid any bonus, granted or paid any
perquisites such as automobile allowance, club membership or dues or other
similar benefits, or instituted any employee welfare, retirement or similar plan
or arrangement; (g) suffered any physical damage, destruction or casualty loss,
whether or not covered by insurance, materially and adversely affecting their
business, property or assets; (h) made any or acquiesced with any change in
accounting methods, principles and practices except as may be required by GAAP;
(i) excluding loan commitments made and certificates of deposit issued, entered
into any contract, agreement or commitment which obligates South Texas, CNB
Delaware or CNB for an amount in excess of $20,000 over the term of any such
contract, agreement or commitment; or (j) except in the ordinary course of
business, entered or agreed to enter into any agreement or arrangement granting
any preferential rights to purchase any of their assets, properties or rights or
requiring the consent of any party to the transfer and assignment of any such
assets, properties or rights.
Section 2.15. ALLOWANCE FOR CREDIT LOSSES. The allowance for credit losses
of South Texas, CNB Delaware and CNB has been calculated in accordance with
generally accepted
-14-
accounting principles as applied to banking institutions and in accordance with
all applicable rules and regulations. To the knowledge of South Texas, CNB
Delaware and CNB, the allowance for credit losses shown on the South Texas
Financial Statements is substantially adequate in all material respects to
provide for all losses, net of recoveries relating to loans previously charged
off, on loans outstanding as of December 31, 1998. At the Effective Time, no
material facts relevant to the adequacy of the allowance for credit losses as of
that date shall have been withheld from Bancshares. Except as disclosed in
writing to Bancshares by South Texas on or before the date of the Agreement,
there are no loans of South Texas, CNB Delaware or CNB that have been classified
by bank examiners on South Texas', CNB Delaware's or CNB's most recent
examination report as "Other Assets Especially Mentioned," "Substandard,"
"Doubtful" or "Loss."
Section 2.16. EMPLOYMENT RELATIONS. The relations of South Texas and CNB
with their employees are satisfactory, and neither South Texas, CNB Delaware nor
CNB has received any notice of any controversies with, or organizational efforts
or other pending actions by, representatives of its employees. South Texas, CNB
Delaware and CNB have materially complied with all laws relating to the
employment of labor with respect to their employees, including any provisions
thereof relating to wages, hours, collective bargaining and the payment of
▇▇▇▇▇▇▇'▇ compensation insurance and social security and similar taxes, and,
except as disclosed in Schedule 2.16 hereto, no person has asserted that South
Texas, CNB Delaware or CNB is liable for any arrearages of wages, ▇▇▇▇▇▇▇'▇
compensation insurance premiums or any taxes or penalties for failure to comply
with any of the foregoing.
Section 2.17. ERISA. The employee pension benefits plans and welfare
benefit plans (referred to collectively herein as the "Plans") in effect at
South Texas, CNB Delaware and CNB (all of which are included in Schedule 2.10
hereto) have all been operated in all material respects in compliance with ERISA
since ERISA became applicable with respect thereto. None of the Plans nor any of
their respective related trusts have been terminated (except the termination of
any Plan which is in compliance with the requirements of ERISA and which will
not result in any additional liability to South Texas, CNB Delaware or CNB), and
there has been no "reportable event," as that term is defined in Section 4043 of
ERISA, required to be reported since the effective date of ERISA which has not
been reported, and none of such Plans nor their respective related trusts have
incurred any "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA (whether or not waived), since the effective date of ERISA.
The Plans are the only employee pension benefit plans covering employees of
South Texas, CNB Delaware and CNB. South Texas, CNB Delaware and CNB will not
have any material liabilities with respect to employee pension benefits, whether
vested or unvested as of the Closing, for any of their employees other than
under the Plans, and as of the date hereof the actuarial present value of Plan
assets of each Plan is not less (and as of the Closing of the Mergers such
present value will not be less) than the present value of all benefits payable
or to be payable thereunder.
-15-
Section 2.18. DEFERRED COMPENSATION ARRANGEMENTS. The schedule attached as
Schedule 2.18 contains a full description of all deferred compensation
arrangements of South Texas, CNB Delaware and CNB, if any, including the terms
under which the cash value of any life insurance purchased in connection with
any such arrangement can be realized.
Section 2.19. LIST OF LOANS. A true and complete list, as of March 31,
1999, of all loans (individually, a "Loan" and collectively, the "Loans") of
South Texas, CNB Delaware and CNB, showing for each such Loan the outstanding
principal balance due, before reduction for any discount has been furnished or
made available to Bancshares. Except as set forth in Schedule 2.19, all
currently outstanding Loans, including any current extensions of any Loan, were
solicited, originated and currently exist in material compliance with all
applicable requirements of federal and state law and regulations promulgated
thereunder. To the knowledge of South Texas, CNB Delaware and CNB, the Loans are
adequately documented and each note evidencing a Loan or credit agreement or
security instrument related to a Loan constitutes a valid and binding obligation
of the obligor thereunder, enforceable in accordance with the terms thereof,
except where the failure thereof, individually or in the aggregate, would not
have a material adverse effect on the condition (financial or otherwise),
operations or prospects of South Texas, CNB Delaware or CNB. There are no oral
modifications or amendments or additional agreements related to the Loans that
are not reflected in South Texas's records, and no claim of defense as to the
enforcement of any Loan has been asserted, and neither South Texas, CNB Delaware
nor CNB is aware of any acts or omissions that would give rise to any claim or
right of rescission, set off, counterclaim or defense, except where such claim
would not have, either individually or in the aggregate, a material adverse
effect on the condition (financial or otherwise), operations or prospects of
South Texas, CNB Delaware or CNB.
Section 2.20. ABSENCE OF CHANGES. Since December 31, 1998, except as
disclosed in Schedule 2.20 to this Agreement, there has not been any material
adverse change in the financial condition, business or operations of South
Texas, CNB Delaware and CNB considered as a consolidated whole; provided,
however, that a material adverse change will not include a change with respect
to, or effect on, South Texas, CNB Delaware and CNB considered as a consolidated
whole resulting from a change in law, rule, regulations or GAAP or from any
other matter affecting federally-insured depository institutions generally
(including without limitation, their holding companies), including, without
limitation, changes in general economic conditions and changes in prevailing
interest or deposit rates; provided, any such change does not impact South
Texas, CNB Delaware and CNB considered as a consolidated whole more adversely
than other similarly situated financial institutions. Since December 31, 1998,
the business of South Texas, CNB Delaware and CNB has been conducted only in the
ordinary course consistent with prior practices.
Section 2.21. BROKERS AND FINDERS. Except for the engagement of The Bank
Advisory Group, Inc., Austin, Texas ("BAGI") and other than as set forth on
Schedule 2.21
-16-
of this Agreement, neither South Texas, CNB Delaware, CNB nor any of their
officers, directors or employees have employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the Merger contemplated herein.
Section 2.22. ABSENCE OF PROPERTY TAXES AND LIENS. All property taxes due
under the applicable provisions of the Texas Tax Code have been paid by either
South Texas, CNB Delaware, CNB or the shareholders of South Texas, and no liens
imposed or authorized by the Texas Tax Code exist on the shares of South Texas
Common Stock, CNB Delaware Stock or CNB Stock, except as otherwise disclosed in
Schedule 2.22 to this Agreement.
Section 2.23. COMMUNITY REINVESTMENT ACT. CNB is in material compliance
with the Community Reinvestment Act (12 U.S.C. ss. 2901 eT SEq.) and all
regulations promulgated thereunder, and South Texas has supplied Bancshares and
FPB with copies of CNB's current CRA Statement, all support papers therefor, all
letters and written comments received by South Texas, CNB Delaware or CNB since
January 1, 1996 pertaining thereto and any responses by South Texas or CNB to
such comments. CNB has a rating of "satisfactory" as of its most recent CRA
compliance examination and knows of no reason why it would not receive a rating
of "satisfactory" or better pursuant to its next CRA compliance examination or
why the OCC or any other governmental entity may seek to restrain, delay or
prohibit the transactions contemplated hereby as a result of any act or omission
of CNB under the CRA.
Section 2.24. FAIR HOUSING ACT, HOME MORTGAGE DISCLOSURE ACT AND EQUAL
CREDIT OPPORTUNITY ACT. CNB is in material compliance with the Fair Housing Act
(42 U.S.C. ss. 3601 ET SEQ.), the Home Mortgage Disclosure Act (12 U.S.C. ss.
2801 ET SEQ. and the Equal Credit Opportunity Act (15 U.S.C. ss. 1691 ET SEQ.)
and all regulations promulgated thereunder. Neither South Texas, CNB Delaware
nor CNB has received any notices of any violation of said acts or any of the
regulations promulgated thereunder, and neither South Texas, CNB Delaware nor
CNB has any notice of, or knowledge of, any threatened administrative inquiry,
proceeding or investigation with respect to CNB's compliance with said acts.
Section 2.25. USURY LAWS AND OTHER CONSUMER COMPLIANCE LAWS. All loans of
South Texas, CNB Delaware and CNB have been made substantially in accordance
with all applicable statutes and regulatory requirements at the time of such
loan or any renewal thereof, including without limitation, the Texas usury
statutes as they are currently interpreted, Regulation Z (12 C.F.R. ss. 226 eT
SEq.) issued by the Board of Governors of the Federal Reserve System, the
Federal Consumer Credit Protection Act (15 U.S.C. ss. 1601 ET SEQ.), the Texas
Consumer Credit Code (Tex. Rev. Civ. Stat. ▇▇▇. art. 5069-2.01, ET SEQ.) and all
statutes governing the operation of national banks located in Texas. Each loan
on the books of South Texas, CNB Delaware and CNB was made in the ordinary
course of business of South Texas or CNB.
-17-
Section 2.26. BANK SECRECY ACT. CNB is in material compliance with the
Bank Secrecy Act (12 U.S.C. ▇▇.▇▇. 1730(d) and 1829(b)) and all regulations
promulgated thereunder, and CNB has properly certified all foreign deposit
accounts and has made all necessary tax withholdings on all of its deposit
accounts; furthermore, CNB has timely and properly filed and maintained all
requisite Currency Transaction Reports and other related forms, including, but
not limited to, any requisite Custom Reports required by any agency of the
United States Treasury Department, including but not limited to the Internal
Revenue Service.
Section 2.27. ZONING AND RELATED LAWS. All real property owned by either
South Texas, CNB Delaware or CNB and the use thereof materially complies with
all applicable laws, ordinances, regulations, orders or requirements, including
without limitation, building, zoning and other laws.
Section 2.28. YEAR 2000 COMPLIANCE. Neither South Texas, CNB Delaware nor
CNB has received a regulatory rating of less than satisfactory from any Year
2000 compliance examination and knows of no reason why any of them would receive
a rating of less than satisfactory on any Year 2000 compliance examination of
any regulatory authority. South Texas, CNB Delaware and CNB have no reason to
believe the FDIC or any other governmental entity may seek to restrain, delay or
prohibit the transactions contemplated hereby as a result of any act or omission
of South Texas, CNB Delaware and CNB regarding Year 2000 compliance.
Section 2.29. SECURITIES LAWS. South Texas, CNB Delaware and CNB and their
officers, employees and agents are now, and at all times in the past have been,
in full compliance with all applicable federal and state securities laws and any
regulations promulgated thereunder. South Texas, CNB Delaware and CNB and their
officers, employees and agents have complied with, and currently hold, all
necessary licenses and permits required under any federal or state securities
law or regulation to conduct any securities activities in which South Texas, CNB
Delaware, CNB or their officers, employees, or agents are now engaged or have
been engaged in the past.
Section 2.30. REGULATORY APPROVALS. South Texas has no reason to believe
that it will not be able to obtain all requisite regulatory approvals on the
part of South Texas necessary to consummate the Mergers as set forth in this
Agreement.
Section 2.31. SHAREHOLDERS' LIST. At least ten (10) days prior to Closing,
South Texas will provide Bancshares with a list of the holders of shares of
South Texas Common Stock containing for South Texas's shareholders the names,
addresses and number of shares held of record, which shareholders' list shall be
in all respects accurate as of such date and will be updated prior to Closing.
-18-
III. REPRESENTATIONS AND WARRANTIES OF BANCSHARES
Bancshares represents and warrants to South Texas that the statements
contained in this Article III are true and correct in all material respects.
Bancshares agrees that, at the Closing, it shall provide South Texas with
supplemental schedules reflecting any material changes in the information
contained in the Schedules which have occurred in the period from the date of
delivery of such Schedules to the date of Closing.
Section 3.1. ORGANIZATION. Bancshares is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas and a
bank holding company duly registered under the BHC Act subject to all laws,
rules and regulations applicable to bank holding companies. Prosperity
Bancshares of Delaware, Inc. ("Delaware-Company") is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and a bank holding company duly registered under the BHC Act subject to
all laws, rules and regulations applicable to bank holding companies. Bancshares
owns 100% of the issued and outstanding common stock of Delaware-Company and,
indirectly through Delaware-Company, 100% of the issued and outstanding capital
stock of FPB. FPB is a Texas banking association duly organized, validly
existing and in good standing under the laws of the State of Texas. FPB is an
insured bank as defined in the Federal Deposit Insurance Act. Bancshares has
full power and authority (including all licenses, franchises, permits and other
governmental authorizations which are legally required) to own its properties,
to engage in the business and activities now conducted by it and to enter into
this Agreement. True and complete copies of the Articles of Incorporation and
Bylaws of Bancshares, as amended to date, have been delivered and made available
to South Texas.
Section 3.2. APPROVALS; AUTHORITY. The Board of Directors of Bancshares
has approved this Agreement and the transactions contemplated herein and no
further corporate proceedings of Bancshares are needed to execute and deliver
this Agreement and consummate the Merger. This Agreement has been duly executed
and delivered by Bancshares and is a duly authorized, valid, legally binding
agreement of Bancshares enforceable against Bancshares in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally and
general equitable principles.
Section 3.3. NO CONFLICT WITH OTHER INSTRUMENTS. Neither the execution and
delivery of this Agreement nor the consummation of the Mergers contemplated
thereby will conflict with or result in a breach of any provision of any
Articles of Incorporation of Bancshares or its Bylaws. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, subject to obtaining all required shareholder and regulatory approvals,
will not violate any provision of, or constitute a default under, any law, or
any order, writ, injunction or decree of any court or other governmental
-19-
agency, or any contract, agreement or instrument to which Bancshares is a party
or by which it is bound or constitute an event which, with the lapse of time or
action by a third party, could result in any default under any of the foregoing
or result in the creation of any lien, charge or encumbrance upon the assets or
properties of Bancshares, or upon the stock of Bancshares.
Section 3.4. LITIGATION AND OTHER PROCEEDINGS. Except as otherwise noted
on Schedule 3.4 hereto, there are no legal, quasi-judicial or administrative
proceedings of any kind or nature now pending or, to the knowledge of
Bancshares, threatened before any court or administrative body in any manner
against Bancshares, or any of its properties or capital stock, which might have
a material adverse effect on Bancshares, its financial condition, assets,
operations or earnings or the transactions proposed by this Agreement.
Bancshares knows of no basis on which any litigation or proceeding could be
brought which could have a materially adverse effect on the financial condition
of Bancshares or which could question the validity of any action taken or to be
taken in connection with this Agreement and the transactions contemplated
hereby. Bancshares is not in default with respect to any judgment, order, writ,
injunction, decree, award, rule or regulation of any court, arbitrator or govern
mental agency or instrumentality.
Section 3.5. ABILITY TO PAY MERGER CONSIDERATION. Bancshares has available
through loan commitments or internal funds cash in the amount of the Per Share
Merger Consideration and the Option Consideration to be paid in cash to
shareholders and optionholders of South Texas as set forth in Section 1.9
hereof.
Section 3.6. REGULATORY APPROVALS. Bancshares has no reason to believe
that it will not be able to obtain all requisite regulatory approvals on the
part of Bancshares and FPB necessary to consummate the transactions set forth in
this Agreement.
Section 3.7. YEAR 2000 COMPLIANCE. FPB has not received a regulatory
rating of less than satisfactory from any Year 2000 compliance examination and
knows of no reason why it would receive a rating of less than satisfactory on
any Year 2000 compliance examination of any regulatory authority. FPB has no
reason to believe the FDIC or any other governmental entity may seek to
restrain, delay or prohibit the transactions contemplated hereby as a result of
any act or omission of FPB regarding Year 2000 compliance.
Section 3.8. COMMUNITY REINVESTMENT ACT. FPB is in material compliance
with the Community Reinvestment Act (12 U.S.C. ss. 2901 ET SEQ.) and all
regulations promulgated thereunder. FPB has a rating of "satisfactory" as of its
most recent CRA compliance examination and knows of no reason why it would not
receive a rating of "satisfactory" or better pursuant to its next CRA compliance
examination or why the FDIC or any other governmental entity may seek to
restrain, delay or prohibit the transactions contemplated hereby as a result of
any act or omission of FPB under the CRA.
-20-
IV. COVENANTS OF SOUTH TEXAS
South Texas covenants and agrees with Bancshares as follows:
Section 4.1. SHAREHOLDER APPROVAL AND BEST EFFORTS. South Texas will, as
soon as practicable but not later than 45 days following acceptance of
Bancshares' regulatory applications for processing, present at a meeting for the
approval of its shareholders this Agreement and the transactions contemplated
hereby. South Texas will take all reasonable action to arrange for a meeting of
its shareholders for the purpose of considering the Agreement and, if the
transaction is approved by such shareholders, to aid and assist in the
consummation of the Mergers, and will use its best efforts to take or cause to
be taken all other actions necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including such actions as
Bancshares reasonably considers necessary, proper or advisable in connection
with filing applications and registration statements with, or obtaining
approvals from, all regulatory authorities having jurisdiction over the
transactions contemplated by this Agreement.
Section 4.2. OPERATIONS. From and after the date of this Agreement to the
Effective Time, South Texas shall, and shall cause CNB Delaware and CNB to (a)
conduct their business in substantially the same manner as it has been conducted
since December 31, 1998 and in accordance with prudent business and banking
practices, (b) maintain and keep their properties in as good repair and
condition as at present, except for deterioration due to ordinary wear and tear
and damage due to casualty, (c) maintain in full force and effect insurance
comparable in amount and scope of coverage to that currently maintained for
South Texas, CNB Delaware and CNB, (d) make no alteration in the manner of
maintaining their books, accounts or records, or in the accounting practices
relating to their business, properties or assets except as required by GAAP, (e)
perform all of their material obligations under contracts, leases and documents
relating to or affecting their assets, properties and business, except such
obligations as South Texas, CNB Delaware and CNB may in good faith reasonably
dispute, (f) maintain and preserve their corporate existence, business
organization, assets, licenses, permits, authorizations and business
opportunities intact, use their best efforts to retain their present employees
and maintain all relationships with depositors and customers of South Texas, CNB
Delaware and CNB, (g) comply with and perform all obligations and duties imposed
upon South Texas, CNB Delaware and CNB by all federal, state and local laws, and
all rules, regulations and orders imposed by federal, state or local
governmental authorities, (h) notify Bancshares promptly upon commencement of
any compliance, safety and soundness or other type of examination conducted by
the Federal Reserve Board, OCC or any other agency having supervisory authority
over South Texas, CNB Delaware or CNB or in the event of any actual or
threatened litigation, (i) promptly give written notice to Bancshares upon
obtaining knowledge of any event or fact that would cause any of the
representations or warranties of South Texas contained in this Agreement to be
untrue or misleading in any material respect, and (j) use CNB's best efforts to
continue
-21-
to solicit deposits, maintain deposits and operate CNB's deposit gathering
procedures consistent with existing practices.
Neither South Texas, CNB Delaware nor CNB will, without the prior written
consent of Bancshares, (i) permit any amendment or change to be made in the
South Texas Constituent Documents except as directed by Bancshares, (ii) take
any action described or do any of the things listed in Section 2.14 hereof
except with respect to (a) Section 2.14(g), (b) the continued accrual of the
1999 incentive bonuses through July 30, 1999 at the same rate which such bonuses
are being accrued as of the date of this Agreement and (c) the payment of the
accrued portion of the 1999 incentive bonuses at Closing, (iii) enter into or
amend any contract, agreement or other instrument of any of the types listed in
Section 2.10 hereof, (iv) make any capital expenditure which would exceed an
aggregate of $20,000, (v) excluding deposits and certificates of deposit,
undertake any additional borrowings in excess of ninety (90) days, (vi) sell or
purchase any investment securities, (vii) modify any outstanding loan, make any
new loan, or acquire any loan participation, unless such modification, new loan
or participation is made in the ordinary course of business, consistent with
existing practice, (viii) commit to or make any extension of credit to any
borrower or his or its related interests in an amount which, when combined with
all other loans to such borrower and his or its related interests, would exceed
an aggregate of $500,000 if such borrower is an existing borrower of South
Texas, CNB Delaware or CNB, or $250,000 if such borrower is a new borrower of
South Texas, CNB Delaware or CNB, or (ix) agree to settle all or part of any
litigation matters, provided that with respect to sections (v), (vi), (vii),
(viii) and (ix) written consent of Bancshares and FPB shall not be unreasonably
withheld and shall be provided within five business days of submission.
Section 4.3. ACCESS TO PROPERTIES AND RECORDS. To the extent permitted by
applicable law, South Texas will afford the executive officers and authorized
representatives (including legal counsel, accountants and consultants) of
Bancshares full access to the properties, books and records of South Texas, CNB
Delaware and CNB in order that Bancshares may have full opportunity to make such
reasonable investigation as it shall desire to make of the affairs of South
Texas, CNB Delaware and CNB, and the officers of South Texas, CNB Delaware and
CNB will furnish Bancshares with such additional financial and operating data
and other information as to the business and properties of South Texas, CNB
Delaware and CNB as Bancshares shall, from time to time, reasonably request. As
soon as practicable after they become available, South Texas, CNB Delaware and
CNB will deliver or make available to Bancshares all unaudited quarterly
financial statements prepared for the internal use of management of South Texas,
CNB Delaware and CNB and all Call Reports filed by CNB with the appropriate
federal regulatory authority after the date of this Agreement. All such
financial statements shall be prepared in accordance with generally accepted
accounting principles applied on a consistent basis with previous accounting
periods. In the event of the termination of this Agreement, Bancshares will
return to South
-22-
Texas all documents and other information obtained pursuant hereto and will keep
confidential any information obtained pursuant to this Agreement.
Section 4.4. INFORMATION FOR REGULATORY APPLICATIONS. To the extent
permitted by law, South Texas will furnish Bancshares with all information
concerning South Texas, CNB Delaware and CNB required for inclusion in any
application, filing, statement or document to be made or filed by Bancshares,
South Texas, CNB Delaware or CNB with any federal or state regulatory or
supervisory authority in connection with the transactions contemplated by this
Agreement during the pendency of this Agreement. South Texas represents and
warrants that all information so furnished for such applications and filings
shall, to the best of its knowledge, be true and correct in all material
respects without omission of any material fact required to be stated to make the
information not misleading. South Texas will indemnify and hold harmless
Bancshares from and against any and all losses, claims, damages, expenses or
liabilities to which Bancshares may become subject under applicable laws, rules
and regulations and will reimburse Bancshares for any legal or other expenses
reasonably incurred by Bancshares in connection with investigating or defending
any actions whether or not resulting in liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based on
any untrue statement or alleged untrue statement of a material fact contained in
any such application or proxy materials or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary in order to make the statements therein not
misleading, but only insofar as such statement or omission was made in reliance
upon and in conformity with information expressly furnished by South Texas
expressly for use therein. South Texas agrees at any time, upon the request of
Bancshares, to furnish to Bancshares a written letter or statement confirming
the accuracy of the information with respect to South Texas, CNB Delaware and
CNB contained in any report or other application or statement referred to in
Sections 4.1 or 4.4 of this Agreement, and confirming that the information with
respect to South Texas, CNB Delaware and CNB contained in such document or draft
was furnished by South Texas expressly for use therein or, if such is not the
case, indicating the inaccuracies contained in such document or indicating the
information not furnished by South Texas expressly for use therein.
Section 4.5. ATTENDANCE AT CERTAIN SOUTH TEXAS MEETINGS. In order to
facilitate the continuing interaction of Bancshares with South Texas, and in
order to keep Bancshares fully advised of all ongoing activities of South Texas,
South Texas agrees to allow Bancshares to designate two representatives (who
shall be officers of Bancshares), each of whom will be allowed to attend as an
invited guest and fully monitor all regular and called meetings of the board of
directors and loan and discount and asset liability management committees of
South Texas, CNB Delaware and CNB (including, but not limited to, meetings of
the officers' loan committee of CNB). South Texas shall promptly give Bancshares
prior notice by telephone of all called meetings. Such representative shall have
no right to vote and may be excluded from sessions of the board of directors or
loan or investment committee during which there
-23-
is being discussed (a) matters involving this Agreement, (b) information or
material which South Texas, CNB Delaware or CNB is required or obligated to
maintain as confidential under applicable laws or regulations, or (c) pending or
threatened litigation or investigations if, in the opinion of counsel to South
Texas, the presence of such representative would or might adversely affect the
confidential nature of or any privilege relating to any matters to be discussed.
No attendance by representatives of Bancshares at board meetings under this
Section 4.5 or knowledge gained or deemed to have been gained by virtue of such
attendance will affect any of the representations and warranties of South Texas
made in this Agreement. Bancshares agrees that, until the Closing, it and its
representatives will hold in strict confidence all information so obtained from
South Texas, CNB Delaware and CNB and, if the transactions provided for herein
are not consummated, Bancshares will, within five (5) days after a request of
South Texas, return or cause to be returned to South Texas all written
information and documents obtained from South Texas, CNB Delaware and CNB
concerning South Texas, CNB Delaware and CNB then in its possession.
Furthermore, if the transactions contemplated by this Agreement are disapproved
by any regulatory authority whose approval is required, then Bancshares'
designees will no longer be entitled to notice of and permission to attend such
meetings.
Section 4.6. STANDSTILL PROVISION. So long as this Agreement is in effect,
neither South Texas, CNB Delaware, CNB nor any of their directors or officers
shall solicit or encourage any inquiries, or provide any information to or
negotiate with any other party any proposal which could reasonably be expected
to lead to the merger, consolidation, acquisition, or sale of all or
substantially all of the assets or any shares of capital stock of South Texas.
South Texas agrees to notify Bancshares immediately of any such unsolicited
acquisition proposals and provide reasonable detail as to the identity of the
proposed acquiror and the nature of the proposed transaction.
Section 4.7. PROXIES. South Texas acknowledges that the persons listed in
Schedule 4.7 have agreed to vote their shares of South Texas Common Stock in
favor of this Agreement and the transactions contemplated hereby and that such
persons have granted to Bancshares or its designee an irrevocable proxy to vote
such shares at the meeting of South Texas shareholders called to approve the
Mergers pursuant to a Voting Agreement and Irrevocable Proxy substantially in
the form of Exhibit "D" to this Agreement which has been executed as of the date
of this Agreement.
Section 4.8. DIVIDENDS. South Texas acknowledges that it has not declared
or paid a dividend on the South Texas Common Stock since December 31, 1998 and
agrees not to declare or pay a dividend on the South Texas Common Stock from the
date of this Agreement through the Closing Date.
Section 4.9. ENVIRONMENTAL INVESTIGATION; RIGHTS TO TERMINATE AGREEMENT.
-24-
(a) Bancshares and its consultants, agents and representatives shall have
the right to the same extent that South Texas, CNB Delaware or CNB has such
right, but not the obligation or responsibility, to inspect any property,
including, without limitation, conducting asbestos surveys and sampling,
environmental assessments and investigation, and other environmental surveys and
analyses including soil and ground sampling ("Environmental Inspections") at any
time on or prior to thirty (30) days after the date of this Agreement. If, as a
result of any such Environmental Inspection, further investigation ("secondary
investigation") including, without limitation, test borings, soil, water,
asbestos or other sampling, is deemed desirable by Bancshares, Bancshares shall
(i) notify South Texas of any property for which it intends to conduct such a
secondary investigation and the reasons for such secondary investigation, and
(ii) conclude such secondary investigation, on or prior to sixty (60) days after
the date of this Agreement Bancshares shall give reasonable notice to South
Texas of such secondary investigations, and South Texas may place reasonable
time and place restrictions on such secondary investigations.
(b) South Texas agrees to indemnify and hold harmless Bancshares for any
claims for damage to property, or injury or death to persons, made as a result
of any Environmental Inspection or secondary investigation conducted by
Bancshares or its agents, which damage or injury is attributable to the
negligent actions or negligent omissions of South Texas of their respective
agents. Bancshares agrees to indemnify and hold harmless South Texas for any
claims for damage to property, or injury or death to persons, attributable to
the negligent actions or omissions of Bancshares or its agents in performing any
Environmental Inspection or secondary investigation except to the extent caused
in whole or in part by the negligence of South Texas, CNB Delaware or CNB.
Bancshares shall not have any liability or responsibility of any nature
whatsoever for the results, conclusions or other findings related to any
Environmental Inspection, secondary investigation or other environmental survey.
If this Agreement is terminated, then except as otherwise required by law,
reports to any governmental authority of the results of any Environmental
Inspection, secondary investigation or other environmental survey shall be made
by South Texas and not by Bancshares. Bancshares shall make no such report prior
to Closing unless required to do so by law, and in such case will give South
Texas reasonable notice of Bancshares' intentions.
(c) Bancshares shall have the right to terminate this Agreement if (i) the
factual substance of any warranty or representation set forth in Section 2.27 is
not true and accurate; (ii) the results of such Environmental Inspection,
secondary investigation or other environmental survey are disapproved by
Bancshares because the Environmental Inspection, secondary investigation or
other environmental survey identifies violations or potential violations of
Environmental Laws; (iii) South Texas, CNB Delaware or CNB has refused to allow
Bancshares to conduct an Environmental Inspection or secondary investigation in
a manner that Bancshares reasonably considers necessary; (iv) the Environmental
Inspection, secondary investigation or other environmental survey identifies any
past or present event, condition or circumstance that would be potentially would
require remedial or cleanup action
-25-
involving an expenditure in excess of $200,000 or result in a Material Adverse
Change; (v) the Environmental Inspection, secondary investigation or other
environmental survey identifies the presence of any underground or above ground
storage tank in, on or under any property that is not shown to be in compliance
with all Environmental Laws applicable to the tank either now or at a future
time certain, or that has had a release of petroleum or some other Hazardous
Material that has not been cleaned up to the satisfaction of the relevant
governmental authority or any other party with a legal right to compel cleanup;
or (vi) the Environmental Inspection, secondary investigation or other
environmental survey identifies the presence of any asbestos-containing material
in, on or under any property, the removal of which would result in a Material
Adverse Change.
(d) South Texas agrees to make available to Bancshares and its
consultants, agents and representatives all documents and other material
relating to environmental conditions of any property including, without
limitation, the results of other environmental inspections and surveys. South
Texas also agrees that all engineers and consultants who prepared or furnished
such reports may discuss such reports and information with Bancshares and shall
be entitled to certify the same in favor of Bancshares and its consultants,
agents and representatives and make all other data available to Bancshares and
its consultants, agents and representatives.
Section 4.10. TERMINATION OF DATA PROCESSING CONTRACTS. South Texas will
timely take any and all actions necessary, including but not limited to
notifying appropriate parties to ensure that its current data processing
contracts will not renew.
Section 4.11. TERMINATION OF QUALIFIED PLAN. South Texas will furnish
Bancshares with certified copies of resolutions duly adopted by the Board of
Directors of South Texas terminating the South Texas Bancshares, Inc. Savings
and Investment Plan effective as of the first business day immediately preceding
the Closing, in a form reasonably acceptable to Bancshares, and prior to
Closing, South Texas shall prepare the documentation required to be filed with
the Internal Revenue Service to secure a determination letter that states that
termination of such plan does not affect the qualified status of such plan.
Section 4.12. NOTIFICATION OF BOND SALES. By the first business day of
each month from the date of this Agreement to Closing, South Texas will provide
in writing to Bancshares the following information on each bond which was held
in the South Texas bond portfolio as of April 30, 1999 and sold after April 30,
1999: (i) CUSIP number, (ii) description; (iii) sales price; (iv) market value;
(v) coupon; (vi) yield; (vii) book value; (viii) gain or loss on the sale; and
(ix) a copy of the general ledger entries made pursuant to such sale.
-26-
V. COVENANTS OF BANCSHARES
Bancshares covenants and agrees with South Texas as follows:
Section 5.1. BEST EFFORTS. Bancshares will take all reasonable action to
aid and assist in the consummation of the Mergers and the transactions
contemplated hereby, and will use its best efforts to take or cause to be taken
all other actions necessary, proper or advisable to consummate the transactions
contemplated by this Agreement, including such actions which are necessary,
proper or advisable in connection with filing applications with, or obtaining
approvals from, all regulatory authorities having jurisdiction over the transac
tions contemplated by this Agreement.
Section 5.2. INFORMATION FOR APPLICATIONS AND PROXY SOLICITATION. To the
extent permitted by law, Bancshares will furnish South Texas with all
information concerning Bancshares required for inclusion in (a) any application,
statement or document to be made or filed by South Texas with any federal or
state regulatory or supervisory authority in connection with the transactions
contemplated by this Agreement during the pendency of this Agreement and (b) any
proxy materials to be furnished to the shareholders of South Texas in connection
with their consideration of the Mergers. Bancshares represents and warrants that
all information so furnished for such statements and applications shall, to the
best of its knowledge, be true and correct in all material respects without
omission of any material fact required to be stated to make the information not
misleading. Bancshares will indemnify and hold harmless South Texas from and
against any and all losses, claims, damages, expenses or liabilities to which
South Texas may become subject under applicable laws, rules and regulations and
will reimburse South Texas for any legal or other expenses reasonably incurred
by South Texas in connection with investigating or defending any actions whether
or not resulting in liability, insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of or are based on any untrue
statement or alleged untrue statement of a material fact contained in any such
application or proxy materials or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary in order to make the statements therein not misleading, but only
insofar as such statement or omission was made in reliance upon and in
conformity with information expressly furnished by Bancshares expressly for use
therein. Bancshares agrees, upon the request of South Texas, to furnish to South
Texas a written letter or statement confirming to the best of its knowledge the
accuracy of the information with respect to Bancshares contained in any report
or other application or statement referred to in Sections 5.1 or 5.2 of this
Agreement, and confirming that the information with respect to Bancshares
contained in such document or draft was furnished expressly for use therein or,
if such is not the case, indicating the inaccuracies contained in such document
or indicating the information not furnished by Bancshares expressly for use
therein.
-27-
Section 5.3. EMPLOYEE BENEFIT PLANS. Bancshares agrees that the employees
of South Texas, CNB Delaware or CNB who are bona fide participants in any of
South Texas, CNB Delaware or CNB's health and welfare plans will be entitled to
participate in all employee health and welfare plans maintained for employees of
Bancshares in accordance with the terms of such plans. The employees of South
Texas, CNB Delaware and CNB listed on Schedule 5.3 who are terminated within six
(6) months after Closing will receive the severance benefits set forth thereon.
All employees of South Texas, CNB Delaware or CNB retained by Bancshares will
receive credit for their prior service with South Texas, CNB Delaware or CNB
with respect to such plans and severance. Bancshares agrees that South Texas,
CNB Delaware or CNB may agree to pay a bonus to employees/officers of South
Texas, CNB Delaware or CNB at Closing if such employee/officer stays until the
Closing ("Retention Bonus"); provided, however, that the aggregate amount of
such Retention Bonuses may not exceed $25,000, and provided that Bancshares
shall approve all Retention Bonus agreements when the aggregate value of all
Retention Bonus agreements exceeds $10,000. Bancshares shall not unreasonably
withhold approval of the Retention Bonus agreements. South Texas, CNB Delaware
or CNB shall promptly notify Bancshares by telephone of all offers of a
Retention Bonus. If South Texas, CNB Delaware or CNB becomes aware that an
officer at the Vice President level or above is considering terminating
employment with South Texas, CNB Delaware or CNB, South Texas, CNB Delaware or
CNB shall promptly notify Bancshares.
Section 5.4. CONFIDENTIALITY. Bancshares shall not, before or after the
consummation or termination of this Agreement, directly or indirectly disclose
any confidential information ("Subject Information") acquired from South Texas
to any person, firm, corporation, association or other entity for any reason or
purpose whatsoever, other than in connection with the regulatory notice and
application process or, after termination of this Agreement pursuant to Section
7.1 hereof, use such Subject Information for its own purposes or for the benefit
of any person, firm, corporation, association, or other entity under any
circumstances. The term "Subject Information" does not include any information
that (i) at the time of disclosure or thereafter is generally available to and
known to the public, other than by a breach of this Agreement by Bancshares,
(ii) was available on a nonconfidential basis from a source other than South
Texas or (iii) was independently acquired or developed without violating any
obligations of this Agreement.
Section 5.5. APPLICATIONS. Bancshares will file all necessary regulatory
notices and applications not later than the 30th day after the execution of this
Agreement and will provide South Texas with a copy of the non-confidential
portions of notices, applications, statements or correspondence submitted to or
received from regulatory authorities in connection with the Mergers.
Section 5.6. ADDITIONAL CAPITAL. If the Federal Reserve Board refuses to
approve the Mergers on the basis that Bancshares will not have a 5% leverage
ratio, 6% Tier 1 capital
-28-
to risk-weighted assets ratio and a 10% total capital to risk-weighted assets
ratio ("Capital Conditions"), then Bancshares shall raise additional capital
such that it would satisfy the Capital Conditions on a pro forma basis. If
Bancshares does not raise sufficient capital to satisfy the Capital Conditions
and cannot otherwise obtain approval from the Federal Reserve Board, then
Bancshares will pay South Texas cash in an amount equal to $250,000.00 ("Fee").
The payment of the Fee shall be in lieu of South Texas seeking any other relief
or damages to which it is otherwise entitled pursuant to this Agreement.
Section 5.7. INDEMNIFICATION; INSURANCE.
(a) For a period of six (6) years from and after the Effective Time,
Bancshares (the "Indemnifying Party") shall indemnify and hold harmless each
present and former director, officer and employee of South Texas, CNB Delaware
and CNB determined as of the Effective Time (the "Indemnified Parties") against
any costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in
connection with any claim, action, suit, proceeding or investigation whether
civil or criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time to the fullest extent to which
such Indemnified Parties were entitled under the Articles of Incorporation,
Certificate of Incorporation, Articles of Association and Bylaws of South Texas,
CNB Delaware and CNB. The indemnification provisions currently contained in the
Articles of Incorporation, Certificate of Incorporation, Articles of Association
and Bylaws of South Texas, CNB Delaware and CNB shall not be amended after the
date of this Agreement.
(b) Any Indemnified Party wishing to claim indemnification under
this section, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Party and the Indemnified Parties, the Indemnified Parties may
retain counsel which is reasonably satisfactory to the Indemnifying Party, and
the Indemnifying Party shall pay, promptly as statements therefor are received,
the reasonable fees and expenses of such counsel for the Indemnified Parties
(which may not exceed one firm in any jurisdiction unless the use of one counsel
for such Indemnified Parties would present such counsel with a conflict of
interest), (ii) the Indemnified Parties will cooperate
-29-
in the defense of any such matter and (iii) the Indemnifying Party shall not be
liable for any settlement effected without its prior written consent.
(c) Bancshares shall maintain its existing policy of directors and
officers liability insurance (or comparable coverage) for a period of not less
than three (3) years after the Effective Time; which policy shall be amended,
however, to include the directors and officers of South Texas, CNB Delaware and
CNB currently covered under the policy held by South Texas, CNB Delaware and
CNB, and which shall be a "claims made" policy providing coverage for (among
other things) acts or omissions occurring prior to the Effective Time.
(d) In the event that Bancshares or any of its respective successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case, the successors and assigns of such
entity shall assume the obligations set forth in this Agreement, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
VI. CLOSING
Section 6.1. CLOSING. Subject to the other provisions of this Article VI,
on a mutually acceptable date ("Closing Date") as soon as practicable within a
thirty (30) day period commencing with the latest of the following dates:
(a) the receipt of shareholder approval and the last approval from
any requisite regulatory or supervisory authority and the expiration of any
statutory or regulatory waiting period which is necessary to effect the Mergers;
or
(b) if the transactions contemplated by this Agreement are being
contested in any legal proceeding and Bancshares or South Texas, pursuant to
Section 10.1 herein, have elected to contest the same, then the date that such
proceeding has been brought to a conclusion favorable, in the judgment of each
of Bancshares and South Texas, to the consummation of the transactions
contemplated herein, or such prior date as each of Bancshares and South Texas
shall elect whether or not such proceeding has been brought to a conclusion.
A meeting ("Closing") will take place at which the parties to this
Agreement will exchange certificates, opinions, letters and other documents in
order to determine whether any condition exists which would permit the parties
hereto to terminate this Agreement. If no such condition then exists or if no
party elects to exercise any right it may have to terminate this Agreement, then
and thereupon the appropriate parties shall execute such
-30-
documents and instruments as may be necessary or appropriate to effect the
transactions contemplated by this Agreement.
The Closing shall take place at the offices of Bracewell & ▇▇▇▇▇▇▇▇▇,
L.L.P. in Houston, Texas, or at such other place to which the parties hereto may
mutually agree.
Section 6.2. EFFECTIVE TIME. Subject to the terms and upon satisfaction of
all requirements of law and the conditions specified in this Agreement
including, among other conditions, the receipt of any requisite approvals of the
shareholders of South Texas and the regulatory approvals of the Federal Reserve
Board, FDIC and any other federal or state regu latory agency whose approval
must be received in order to consummate the Mergers, the Initial Merger shall
become effective, and the effective time of the Initial Merger shall occur, at
the date and time specified in the certificate approving the Initial Merger to
be issued by the Secretary of State of Texas, and the Final Merger shall become
effective, and the effective time of the Final Merger shall occur, at the date
and time specified in the certificate approving the Final Merger to be issued by
the Secretary of State of Texas ("Effective Time"). It is anticipated by
Bancshares and South Texas that the effective time of the Initial Merger will
occur immediately prior to the Effective Time and that the Closing and the
Effective Time will occur on the same day.
VII. TERMINATION
Section 7.1. TERMINATION.
(a) This Agreement may be terminated by action of the Board of
Directors of Bancshares or South Texas at any time prior to the Effective Time
if:
(i) any court of competent jurisdiction in the United States
or other United States (federal or state) governmental body shall
have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Mergers and such
order, decree, ruling or other action shall have been final and
non-appealable;
(ii) any of the transactions contemplated by this Agreement
are disapproved by any regulatory authority or other person whose
approval is re quired to consummate any of such transactions; or
(iii) the Mergers shall not have become effective on or before
December 15, 1999, the one hundred and eightieth (180) day following
the date of this Agreement, or such later date as shall have been
approved in writing by the Boards of Directors of Bancshares and
South Texas; provided, however, that the right to terminate under
this Section 7.1(a)(iv) shall not be
-31-
available to any party whose failure to fulfill any material
obligation under this Agreement has been the cause of, or has
resulted in, the failure of the Mergers to become effective on or
before such date.
(b) This Agreement may be terminated at any time prior to the
Effective Time by the Board of Directors of South Texas if (i) Bancshares shall
fail to comply in any material respect with any of its covenants or agreements
contained in this Agreement, or if any of the representations or warranties of
Bancshares contained herein shall be inaccurate in any material respect or (ii)
there shall have been any change after December 31, 1998 in the assets,
properties, business or financial condition of Bancshares which individually or
in the aggregate have materially and adversely affected the ability of
Bancshares to pay the Per Share Merger Consideration and the Option
Consideration set forth in Section 1.9 hereof. In the event the Board of
Directors of South Texas desires to terminate this Agreement as provided above,
such Board of Directors must notify Bancshares in writing of its intent to
terminate stating the reason therefor. Bancshares shall have fifteen days from
the receipt of such notice to cure the alleged breach or inaccuracy, subject to
the approval of South Texas (which approval shall not be unreasonably delayed or
withheld).
(c) This Agreement may be terminated any time prior to the Effective
Time by action of the Board of Directors of Bancshares if (i) South Texas shall
fail to comply in any material respect with any of its covenants or agreements
contained in this Agreement, or if any of the representations or warranties of
South Texas contained herein shall be inaccurate in any material respect, (ii)
there shall have been any change after December 31, 1998, in the assets,
properties, business or financial condition of South Texas, CNB Delaware or CNB
which individually or in the aggregate have materially and adversely affected
the financial condition, results of operation or business of South Texas, CNB
Delaware and CNB considered as a consolidated whole; provided, however, that a
material adverse change will not include a change with respect to, or effect on,
South Texas, CNB Delaware or CNB considered as a consolidated whole resulting
from a change in law, rule, regulation or GAAP or from any other matter
affecting federally-insured depository institutions generally (including without
limitation, their holding companies), including, without limitation, changes in
general economic conditions and changes in prevailing interest or deposit rates;
provided, any such change does not impact South Texas, CNB Delaware or CNB
considered as a consolidated whole more adversely than other similarly situated
financial institutions, or (iii) the Board of Directors of Bancshares reasonably
concludes, after consulting with counsel, that Bancshares will be unable to
obtain any regulatory approval required in order to consummate the Merger or any
such approval is accompanied by terms or conditions which materially and
adversely impact the financial consequences of the Mergers to Bancshares. In the
event the Board of Directors of Bancshares desires to terminate this Agreement
because of an alleged breach, inaccuracy or change as provided in (i) or (ii)
above, the Board of Directors must notify South Texas in writing of its intent
to terminate stating the cause therefor. South Texas shall have fifteen days
from the receipt of
-32-
such notice to cure the alleged breach, inaccuracy or change, subject to the
approval of Bancshares (which approval shall not be unreasonably delayed or
withheld).
(d) This Agreement shall automatically terminate if the Closing
shall not have occurred on or before December 31, 1999.
(e) This Agreement may be terminated at any time prior to the
Effective Time with the mutual written consent of Bancshares and South Texas and
the approval of such action by their respective Boards of Directors.
Section 7.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement and the abandonment of the Mergers without breach by any party hereto,
this Agreement (other than Sections 5.3, 5.4, 5.5, 11.3 and 11.5) shall become
void and have no effect, without any liability on the part of any party or its
directors, officers or shareholders. Nothing contained in this Section 7.2 shall
relieve any party hereto of any liability for a breach of this Agreement.
VIII. CONDITIONS TO OBLIGATIONS OF BANCSHARES
The obligations of Bancshares under this Agreement are subject to the
satisfaction, at or prior to the Closing Date of the following conditions, which
may be waived by Bancshares in its sole discretion:
Section 8.1. COMPLIANCE WITH REPRESENTATIONS AND COVENANTS. The
representations and warranties made by South Texas in this Agreement must have
been true in all material respects when made and shall be true in all material
respects 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
South Texas shall have performed or complied with all covenants and conditions
required by this Agreement to be performed and complied with prior to or at the
Closing. Bancshares shall have been furnished with a certificate, executed by an
appropriate representative of South Texas and dated as of the Closing Date, to
the foregoing effect.
Section 8.2. MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial condition,
business or operations of South Texas, CNB Delaware and CNB considered as a
consolidated whole, nor shall any event have occurred which, with the lapse of
time, will cause or create any material adverse change in the financial
condition, business or operations of South Texas, CNB Delaware and CNB
considered as a consolidated whole; provided, however, that a material adverse
change will not include a change with respect to, or effect on, South Texas, CNB
Delaware or CNB considered as a consolidated whole resulting from a change in
law, rule, regulation or GAAP or from any other matter affecting
federally-insured depository institutions generally (including without
limitation, their holding companies), including, without limitation,
-33-
changes in general economic conditions and changes in prevailing interest or
deposit rates; provided, any such change does not impact South Texas, CNB
Delaware or CNB considered as a consolidated whole more adversely than other
similarly situated financial institutions. Bancshares shall have received a
certificate to the foregoing effect executed by an appropriate representative of
South Texas and dated as of the Closing Date.
Section 8.3. LEGAL OPINION. Bancshares shall have received an opinion of
counsel to South Texas, dated as of the Closing Date, in form and substance
satisfactory to counsel for Bancshares, to the effect set forth in Schedule 8.3
hereof.
Section 8.4. RELEASES. ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ and each of the directors of South Texas, CNB Delaware and CNB shall
deliver to Bancshares an instrument in the form of Exhibit "E" attached hereto
dated as of the Effective Time releasing South Texas, CNB Delaware and CNB from
any and all claims of such directors and officers (except as described in such
instrument). Furthermore, South Texas, CNB Delaware and CNB shall have used
their best efforts to cause the other executive officers of South Texas, CNB
Delaware and CNB to deliver to Bancshares an instrument in the form of Exhibit
"E" attached hereto and dated as of the Effective Time. The directors of South
Texas shall have delivered to Bancshares their respective resignations.
Section 8.5. DISSENTERS' RIGHTS. The holders of no more than 15% of the
issued and outstanding South Texas Common Stock shall have demanded or shall be
entitled to demand payment of the fair value of their shares as dissenting
shareholders.
Section 8.6. EMPLOYMENT AGREEMENTS. ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ shall have entered into an employment agreement substantially in the
form of Exhibit "F" with FPB.
Section 8.7. NONRENEWAL OF PARTICIPATION IN LOAN. South Texas agrees not
to renew its participation in a loan in the amount of $1,000,000 from American
Bank, N.A., Corpus Christi, Texas to Maxima Resources, Inc. upon the loan's
maturity in August 1999.
IX. CONDITIONS TO OBLIGATIONS OF SOUTH TEXAS
The obligations of South Texas under this Agreement are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions,
which may be waived by South Texas in its sole discretion:
Section 9.1. COMPLIANCE WITH REPRESENTATIONS AND COVENANTS. The
representations and warranties made by Bancshares in this Agreement must have
been true in all materials respects when made and shall be true in all material
respects as of the Closing Date with the same force and effect as if such
representations and warranties were made at and as of the
-34-
Closing Date, and Bancshares shall have performed and complied in all material
respects with all covenants and conditions required by this Agreement to be
performed or complied with by Bancshares prior to or at the Closing. South Texas
shall be furnished with a certificate, executed by appropriate representatives
of Bancshares and dated as of the Closing Date, to the foregoing effect.
Section 9.2. MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial condition,
business or operations of Bancshares, nor shall any event have occurred which,
with the lapse of time, will cause or create any material adverse change in the
financial condition, business or operations of Bancshares, which would
materially and adversely affect the ability of Bancshares to pay the Per Share
Merger Consideration set forth in Section 1.9 hereof; provided, however, that a
material adverse change will not include a change with respect to, or effect on,
Bancshares resulting from a change in law, rule, regulation or GAAP or from any
other matter affecting federally-insured depository institutions generally
(including without limitation, their holding companies), including, without
limitation, changes in general economic conditions and changes in prevailing
interest or deposit rates; provided, any such change does not impact Bancshares
more adversely than other similarly situated financial institution.
Section 9.3. LEGAL OPINION. South Texas shall have received an opinion of
counsel to Bancshares, dated as of the Closing Date and in form and substance
satisfactory to counsel for South Texas, to the effect set forth in Schedule 9.3
hereof.
Section 9.4. RELEASES. South Texas shall have delivered to the directors
and executive officers of South Texas, CNB Delaware and CNB who delivered
releases to South Texas pursuant to Section 8.4. an instrument in the form of
Exhibit "G" attached hereto dated the Effective Time releasing the directors and
officers from any and all claims of South Texas, CNB Delaware and CNB (except as
described in such instrument); provided, however, that such releases shall not
release an action against such directors by Bancshares in connection with the
transactions contemplated by this Agreement.
X. CONDITIONS TO RESPECTIVE OBLIGATIONS OF
BANCSHARES AND SOUTH TEXAS
The respective obligations of Bancshares and South Texas under this
Agreement are subject to the satisfaction of the following conditions which may
be waived by Bancshares and South Texas, respectively, in their sole discretion:
Section 10.1. GOVERNMENT APPROVALS. Bancshares and South Texas shall have
received the approval, or waiver of approval, of the transactions contemplated
by this Agreement from all necessary governmental agencies and authorities,
including the Federal Reserve Board, FDIC, Banking Department and any other
regulatory agency whose approval
-35-
must be received in order to consummate the Mergers, which approvals shall not
impose any restrictions on the operations of the Continuing Company which
materially and adversely impact the financial consequences of the Mergers to
Bancshares, and such approvals and the transactions contemplated hereby shall
not have been contested by any federal or state governmental authority or any
third party (except shareholders asserting dissenters' rights) by formal
proceeding. It is understood that, if any such contest is brought by formal
proceeding, Bancshares or South Texas may, but shall not be obligated to, answer
and defend such contest or otherwise pursue the Mergers over such objection.
Section 10.2. SHAREHOLDER APPROVAL. The shareholders of South Texas shall
have approved this Agreement and the transactions contemplated by this Agreement
and the holders of no more than 15% of the South Texas Common Stock shall have
exercised their dissenters' rights in accordance with applicable laws, rules and
regulations as provided in Section 1.11 of this Agreement.
XI. MISCELLANEOUS
Section 11.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Bancshares and South Texas contained in this
Agreement shall terminate at the Closing Time.
Section 11.2. AMENDMENTS. This Agreement may be amended only by a writing
signed by Bancshares and South Texas at any time prior to the Closing Time with
respect to any of the terms contained herein; provided, however, that the Per
Share Merger Consideration to be received by the shareholders of South Texas
pursuant to this Agreement shall not be decreased subsequent to the approval of
the transactions contemplated by the Agreement without the further approval by
such shareholders.
Section 11.3. EXPENSES. Whether or not the transactions provided for
herein are consummated, each party to this Agreement will pay its respective
expenses incurred in connection with the preparation and performance of its
obligations under this Agreement. Similarly, each party agrees to indemnify the
other parties against any cost, expense or liability (including reasonable
attorneys' fees) in respect of any claim made by any party for a broker's or
finder's fee in connection with this transaction. Except for the engagement of
BAGI by South Texas, Bancshares and South Texas represent and warrant to each
other that neither of them, nor any of their agents, employees or
representatives, has incurred any liability for any commissions or brokerage
fees in connection with this transaction. South Texas shall be responsible for
all fees to BAGI in connection with the Mergers, and South Texas will indemnify
and hold harmless Bancshares for any fees and expenses to BAGI that are incurred
in connection with the Mergers.
-36-
Section 11.4. NOTICES. Except as explicitly provided herein, any notice
given hereunder shall be in writing and shall be delivered in person or mailed
by first class mail, postage prepaid or sent by facsimile, courier or personal
delivery to the parties at the following addresses unless by such notice a
different address shall have been designated:
If to Bancshares:
Prosperity Bancshares, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇
If to South Texas:
South Texas Bancshares, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to:
Jenkens & ▇▇▇▇▇▇▇▇▇, A Professional Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-37-
All notices sent by mail as provided above shall be deemed delivered five (5)
days after deposit in the mail. All notices sent by facsimile or courier as
provided above shall be deemed delivered one day after being sent. All other
notices shall be deemed delivered when actually received. Any party to this
Agreement may change its address for the giving of notice specified above by
giving notice as herein provided.
Section 11.5. DEFINITION OF KNOWLEDGE.
(a) While a representation and warranty contained in Article II of
this Agreement states that it is made to the knowledge of South Texas, CNB
Delaware and CNB, it shall be deemed to be made to the actual knowledge of (i)
any executive officer, (ii) any officer at a level of Vice President or above or
(iii) any director of South Texas, CNB Delaware or CNB.
(b) Where a representation and warranty contained in Article III of
this Agreement states that it is made to the knowledge of Bancshares or FPB, it
shall be deemed to be made to the actual knowledge of (i) any executive officer,
(ii) any officer at a level of Vice President or above or (iii) any director of
Bancshares or FPB.
Section 11.6. CONTROLLING LAW. All questions concerning the validity,
operation and interpretation of this Agreement and the performance of the
obligations imposed upon the parties hereunder shall be governed by the laws of
the State of Texas and, to the extent applicable, by the laws of the United
States of America.
Section 11.7. HEADINGS. The headings and titles to the sections of this
Agreement are inserted for convenience only and shall not be deemed a part
hereof or affect the construction or interpretation of any provision hereof.
Section 11.8. MODIFICATIONS OR WAIVER. No termination, cancellation,
modification, amendment, deletion, addition or other change in this Agreement,
or any provision hereof, or waiver of any right or remedy herein provided, shall
be effective for any purpose unless specifically set forth in a writing signed
by the party or parties to be bound thereby. The waiver of any right or remedy
in respect to any occurrence or event on one occasion shall not be deemed a
waiver of such right or remedy in respect to such occurrence or event on any
other occasion.
Section 11.9. SEVERABILITY. Any provision hereof prohibited by or unlawful
or unenforceable under any applicable law or any jurisdiction shall as to such
jurisdiction be ineffective, without affecting any other provision of this
Agreement, or shall be deemed to be severed or modified to conform with such
law, and the remaining provisions of this Agreement shall remain in force,
provided that the purpose of the Agreement can be effected. To the fullest
extent, however, that the provisions of such applicable law may be waived,
-38-
they are hereby waived, to the end that this Agreement be deemed to be a valid
and binding agreement enforceable in accordance with its terms.
Section 11.10. ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, but shall not be assigned by any party without the prior written
consent of the other parties.
Section 11.11. CONSOLIDATION OF AGREEMENTS. All understandings and
agreements heretofore made between the parties hereto are merged in this
Agreement which (together with any agreements executed by the parties hereto
contemporaneously with or subsequent to the execution of this Agreement) shall
be the sole expression of the agreement of the parties respecting the Mergers.
Section 11.12. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
be deemed to constitute one and the same instrument.
Section 11.13. BINDING ON SUCCESSORS. Except as otherwise provided herein,
this Agreement shall be binding upon, and shall inure to the benefit of, the
parties and their respective heirs, executors, trustees, administrators,
guardians, successors and assigns.
Section 11.14. GENDER. Any pronoun used herein shall refer to any gender,
either masculine, feminine or neuter, as the context requires.
Section 11.15. DISCLOSURES. Any disclosure made in any document delivered
pursuant to this Agreement or referred to or described in writing in any section
of this Agreement or any schedule attached hereto shall be deemed to be
disclosure for purposes of any section herein or schedule hereto.
Section 11.16. PUBLICITY. Subject to written advice of counsel with
respect to legal requirements relating to public disclosure of matters related
to the transactions contemplated by this Agreement, the timing and content of
any announcements, press releases or other public statements (whether written or
oral) concerning this Agreement or the Mergers will occur upon, and be
determined by, the mutual consent of Bancshares and South Texas; provided,
however, that this shall not include notices required to be published pursuant
to the regulatory application process.
Section 11.17. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between Bancshares and South Texas with respect to the Mergers.
-39-
Section 11.18. DELIVERY OF SCHEDULES. In order to provide for the prompt
execution of this Agreement, the parties hereto agree that with respect to the
schedules to this Agreement:
(a) Full and complete originals of all of the schedules to this
Agreement described in Article III of this Agreement shall be delivered to
Bancshares pursuant to Section 11.4, within five (5) business days after the
date of this Agreement.
(b) Bancshares will have five (5) business days after receipt of the
schedules to this Agreement to review such schedules to determine whether they
are in form and substance satisfactory to Bancshares in its sole discretion. If
such schedules are satisfactory, then this Agreement shall remain in full force
and effect and the parties shall proceed in accordance with their respective
rights and obligations hereunder. If such schedules are not satisfactory to
Bancshares, in its sole discretion, Bancshares shall have the unconditional
right to terminate this Agreement and all of its obligations hereunder by
providing South Texas notice of such termination in accordance with the terms of
Section 11.4 of the Agreement no later than 6:00 p.m., El Campo, Texas time on
the fifth business day after receipt of the schedules to this Agreement.
[SIGNATURE PAGE FOLLOWS]
-40-
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
PROSPERITY BANCSHARES, INC.
By: __________________________________
ATTEST:
By: _________________________________
SOUTH TEXAS BANCSHARES, INC.
By: __________________________________
ATTEST:
By: _________________________________
-41-
EXHIBIT A
PLAN OF MERGER
BETWEEN PROSPERITY ACQUISITION CORPORATION
AND SOUTH TEXAS BANCSHARES, INC.
This PLAN OF MERGER (the "Plan") is dated as of the ____ day of ________,
1999, by and between South Texas Bancshares, Inc., a Texas corporation located
in Beeville, Texas ("South Texas") and Prosperity Acquisition Corporation ("New
Corp"), a Texas corporation formed as a wholly-owned subsidiary of Prosperity
Bancshares, Inc. ("Prosperity") solely to facilitate the transactions
contemplated by the Agreement and Plan of Reorganization, defined below. South
Texas and New Corp are hereinafter sometimes collectively referred to as the
"Merging Institutions."
This Plan of Merger is being entered into pursuant to the Agreement and
Plan of Reorganization dated as of June __, 1999 (the "Agreement") by and
between Prosperity and South Texas.
In consideration of the premises, and the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth below
shall have the following meanings:
Section 1.1. "Effective Date" shall mean the date at which the merger
contemplated by this Plan of Merger becomes effective as determined by the
certificate approving the merger to be issued by the Secretary of State of Texas
("SOS").
Section 1.2. "New Corp Common Stock" shall mean the common stock, par
value $1.00 per share, of New Corp owned by Prosperity.
Section 1.3. "South Texas Common Stock" shall mean the common stock, par
value $.50 per share, of South Texas.
Section 1.4. "Initial Merger" shall refer to the merger of New Corp with
and into South Texas as provided in Section 2.1 of this Plan.
Section 1.5."First Surviving Corp" shall refer to South Texas as the
institution surviving the Initial Merger.
ARTICLE 2.
TERMS OF THE MERGER
Section 2.1. INITIAL MERGER. Subject to the terms and conditions set forth
in the Agreement, on the Effective Date, New Corp shall be merged with and into
South Texas, with South Texas as the First Surviving Corp, under the charter and
Articles of Incorporation of South Texas, as determined by the SOS, and each of
the outstanding shares of common stock of New Corp shall and without any action
on the part of Prosperity be canceled and be converted into shares of common
stock of the First Surviving Corp. The shares of common stock of the First
Surviving Corp into which such New Corp Common Stock is converted shall
represent ownership of 100% of the issued and outstanding capital stock of the
First Surviving Corp, all of which shall be owned by Prosperity.
Section 2.2. ARTICLES OF INCORPORATION, BYLAWS AND FACILITIES OF FIRST
SURVIVING CORP. On the Effective Date and until thereafter amended in accordance
with law, the Articles of Incorporation of the First Surviving Corp shall be the
Articles of Incorporation of South Texas as in effect on the Effective Date.
Until altered, amended or repealed as provided therein and in the Articles of
Incorporation of the First Surviving Corp, the Bylaws of the First Surviving
Corp shall be the Bylaws of South Texas as in effect on the Effective Date. The
main office of the First Surviving Corp shall be the main office of South Texas
as of the Effective Date, and all corporate acts, plans, policies, contracts,
approvals and authorizations of South Texas and New Corp and their respective
shareholders, boards of directors, committees elected or appointed thereby,
officers and agents, which were valid and effective immediately prior to the
Effective Date, shall be taken for all purposes as the acts, plans, policies,
contracts, approvals and authorization of the First Surviving Corp and shall be
as effective and binding thereon as the same were with respect to South Texas
and New Corp respectively, as of the Effective Date.
Section 2.3. EFFECT OF INITIAL MERGER. On the Effective Date, the
corporate existence of South Texas and New Corp shall be merged into and
continued in the First Surviving Corp, and the First Surviving Corp shall be
deemed to be a continuation in entity and identity of South Texas and New Corp.
All rights, franchises and interests of South Texas and New Corp, respectively,
in and to any type of property and choses in action shall be transferred to and
vested in the First Surviving Corp by virtue of the Initial Merger without any
deed or other transfer. First Surviving Corp, without any order or other action
on the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises and interest, including appointments, designations and
nominations, and all other rights and interests as trustee, executor,
administrator, transfer agent or registrar of stocks and bonds, guardian of
estates, assignee, receiver and committee of estates and lunatics, and in every
-2-
other fiduciary capacity, in the same manner and to the same extent as such
rights, franchises and interests were held or enjoyed by South Texas and New
Corp, respectively, as of the Effective Date.
Section 2.4. LIABILITIES OF THE FIRST SURVIVING CORP. On the Effective
Date, the First Surviving Corp shall be liable for all liabilities of South
Texas and New Corp. All debts, liabilities and obligations of South Texas and of
New Corp, respectively, accrued, absolute, contingent or otherwise, and whether
or not reflected or reserved against on balance sheets, books of account or
records of South Texas or New Corp, as the case may be, shall be those of the
First Surviving Corp and shall not be released or impaired by the Initial
Merger. All rights of creditors and other obligees and all liens on property of
either South Texas or New Corp shall be preserved unimpaired.
ARTICLE 3.
CONVERSION OF SHARES AND OPTIONS
Section 3.1. CONVERSION OF SOUTH TEXAS COMMON STOCK. Shares of South Texas
Common Stock issued and outstanding immediately prior to the Effective Date,
other than Dissenting Shares (as defined in Section 3.2 of the Plan), and the
Options (as defined in Section 2.2 of the Agreement) shall, by virtue of the
Initial Merger and without any action on the part of the holder thereof, be
converted into and represent the right to receive aggregate consideration in the
form of cash equal to $23,350,000 (the "Merger Consideration") payable, in the
aggregate, to the holders of record of shares of South Texas Common Stock and
the holders of the Options, without interest thereon, upon the proper surrender
of either the certificate representing such shares or an agreement terminating
the Options. The portion of the Merger Consideration to be paid for each share
of South Texas Common Stock shall be the quotient of (i) the Merger
Consideration plus the aggregate exercise price of the Options divided by (ii)
the sum of (a) the number of issued and outstanding shares of South Texas Common
Stock immediately prior to the Effective Date PLUS (b) the number of shares of
South Texas Common Stock that may be acquired pursuant to the Options
immediately prior to the Effective Date ("Per Share Merger Consideration"). The
portion of the Merger Consideration to be paid for each Option representing a
right to acquire a share of South Texas Common Stock shall be the Per Share
Merger Consideration less the exercise price to acquire a share of South Texas
Common Stock pursuant to the Option. The allocation of the Merger Consideration
as discussed in the two prior sentences shall not under any circumstances
increase the Merger Consideration
Section 3.2. DISSENTING SHARES. Each share of South Texas Common Stock
issued and outstanding immediately prior to the Effective Time, the holder of
which has not voted in favor of the Initial Merger and who has delivered a
written demand for payment of the fair value of such shares within the time and
in the manner provided in Article 5.12 of the Texas Business Corporation Act
("TBCA"), is referred to herein as a "Dissenting Share." Dissenting Shares shall
not be converted into or represent the right to receive the Merger Consideration
pursuant to Section 3.2 of the Plan unless and until such holder shall have
failed to perfect or shall have effectively withdrawn or lost his right to
appraisal and payment under the TBCA. If any such holder shall have so failed
-3-
to perfect or shall have effectively withdrawn or lost such right, such holder's
Dissenting Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, the right to receive the Merger Consideration
without any interest thereon.
Section 3.3. EXCHANGE OF SHARES AND OPTIONS. The exchange of South Texas
Common Stock for the Merger Consideration shall take place as set forth in
Section 1.12 of the Agreement. Each shareholder of South Texas shall be entitled
to receive payment for his shares only upon surrender of the certificates
representing his shares of South Texas Common Stock or after providing an
appropriate Affidavit of Lost Certificate and Indemnity Agreement and/or a bond
as may be required in each case by Prosperity. Each holder of Options shall be
entitled to receive payment for his Options only upon surrender of an option
agreement representing his right to acquire shares of South Texas Common Stock.
Until so surrendered, each South Texas Common Stock certificate and each option
agreement will be deemed for all corporate purposes to represent and evidence
solely the right to receive the amount of the Merger Consideration to be paid
therefor pursuant to the Agreement without interest thereon.
Section 3.4. NEW CORP COMMON STOCK. On the Effective Date, the shares of
New Corp Common Stock issued and outstanding immediately prior to the Effective
Date shall be converted automatically and without any action on the part of the
holder thereof into shares of common stock of the First Surviving Corp. The
shares of common stock of the First Surviving Corp into which such New Corp
Common Stock are converted shall represent ownership of 100% of the issued and
outstanding capital stock of the First Surviving Corp, all of which shall be
owned by Prosperity.
ARTICLE 4.
MISCELLANEOUS
Section 4.1. CONDITIONS PRECEDENT. The respective obligations of each
party under this Plan shall be subject to the satisfaction, or waiver by the
party permitted to do so, of the conditions set forth in Articles VIII, IX and X
of the Agreement.
Section 4.2. TERMINATION. This Plan shall be terminated upon the
termination of the Agreement in accordance with Article VII thereof; provided,
that any such termination of this Plan shall not relieve any party hereto from
liability on account of a breach by such party of any of the terms hereof or
thereof.
Section 4.3. AMENDMENTS. To the extent permitted by law, this Plan may be
amended by a subsequent writing signed by all of the parties hereto upon the
approval of the Board of Directors of each of the parties hereto.
Section 4.4. SUCCESSORS. This Plan shall be binding on the successors of
New Corp and South Texas.
-4-
IN WITNESS WHEREOF, New Corp and South Texas have caused this Plan to be
executed by their duly authorized officers and their corporate seals to be
hereunto affixed as of the date first above written.
PROSPERITY ACQUISITION CORPORATION
By: __________________________________
SOUTH TEXAS BANCSHARES, INC.
By: __________________________________
-5-
EXHIBIT B
PLAN OF MERGER
BETWEEN
SOUTH TEXAS BANCSHARES, INC.
AND
PROSPERITY BANCSHARES, INC.
THIS PLAN OF MERGER (the "Plan") is dated as of the ____ day of _________,
1999, by and between South Texas Bancshares, Inc., a Texas corporation ("South
Texas") and Prosperity Bancshares, Inc. ("Prosperity").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement and Plan of Reorganization (the
"Agreement") dated as of June ___, 1999, by and between Prosperity and South
Texas and the Plan of Merger, dated as of __________, 1999, by and between South
Texas and Prosperity Acquisition Corporation ("New Corp"), New Corp will merge
with and into South Texas (the "Initial Merger"), with the result that South
Texas will become a wholly-owned subsidiary of Prosperity;
WHEREAS, the Agreement provides that simultaneously with or as soon as
practicable after the Initial Merger, South Texas will be merged with and into
Prosperity;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, South Texas and Prosperity hereby
agree that, subject to the terms and conditions hereinafter set forth, and in
accordance with all applicable laws and regulations, South Texas shall be merged
with and into Prosperity on the Effective Date (as hereinafter defined) (the
"Final Merger"). The parties hereto do hereby agree and covenant as follows:
1. CONDITIONS OF APPROVAL. The Final Merger shall not become effective
unless and until all terms and conditions to such effectiveness contained in the
Agreement, which conditions are incorporated herein by reference, shall have
been satisfied or waived.
2. IDENTITY OF RESULTING CORPORATION. The resulting corporation as a
result of the Final Merger (the "Continuing Corp") shall be Prosperity.
3. ARTICLES OF INCORPORATION, BYLAWS AND FACILITIES OF CONTINUING CORP. On
the Effective Date (as defined herein) and until thereafter amended in
accordance with law, the Articles of Incorporation of Continuing Corp shall be
the Articles of Incorporation of Prosperity as in effect on the Effective Date.
Until altered, amended or repealed as therein provided and in the Articles of
Incorporation of Continuing Corp, the Bylaws of Continuing Corp shall be the
Bylaws of Prosperity
as in effect on the Effective Date. Unless and until changed by the Board of
Directors of Continuing Corp, the main office of Continuing Corp shall be the
main office of Prosperity as of the Effective Date. The established offices and
facilities of South Texas immediately prior to the Final Merger shall become
established offices and facilities of the Continuing Corp. Until thereafter
changed in accordance with the law or the Articles of Incorporation or Bylaws of
Continuing Corp, all corporate acts, plans, policies, contracts, approvals and
authorizations of South Texas and Prosperity and their respective shareholders,
boards of directors, committees elected or appointed thereby, officers and
agents, which were valid and effective immediately prior to the Effective Date,
shall be taken for all purposes as the acts, plans, policies, contracts,
approvals and authorizations of Continuing Corp and shall be as effective and
binding thereon as the same were with respect to South Texas and Prosperity,
respectively, as of the Effective Date.
4. EFFECT OF FINAL MERGER. On the Effective Date, the corporate existence
of the South Texas and Prosperity shall, as provided by law, be merged into and
continued in Continuing Corp, and Continuing Corp shall be deemed to be a
continuation in entity and identity of South Texas and Prosperity. All rights,
franchises and interests of South Texas and Prosperity, respectively, in and to
any type of property and choses in action shall be transferred to and vested in
Continuing Corp by virtue of such Final Merger without any deed or other
transfer. Continuing Corp, without any order or other action on the part of any
court or otherwise, shall hold and enjoy all rights of property, franchises and
interest, including appointments, designations and nominations, and all other
rights and interests as trustee, executor, administrator, transfer agent or
registrar of stocks and bonds, guardian of estates, assignee, receiver and
committee of estates and lunatics, and in every other fiduciary capacity, in the
same manner and to the same extent as such rights, franchises, and interests
were held or enjoyed by South Texas and Prosperity, respectively, as of the
Effective Date.
5. LIABILITIES OF CONTINUING CORP. On the Effective Date, Continuing Corp
shall be liable for all liabilities of South Texas and Prosperity. All debts,
liabilities, obligations and contracts of South Texas and of Prosperity,
respectively, matured or unmatured, whether accrued, absolute, contingent or
otherwise, and whether or not reflected or reversed against on balance sheets,
books of account, or records of the South Texas or Prosperity shall be those of
Continuing Corp and shall not be released or impaired by the Final Merger. All
rights of creditors and other obligees and all liens on property of either South
Texas or Prosperity shall be preserved unimpaired subsequent to the Final
Merger.
6. EFFECTIVE DATE. The Final Merger shall become effective at the date and
time at which the Final Merger becomes effective as determined by the
certificate approving the Final Merger to be issued by the Secretary of State of
Texas ("Effective Date"). A closing shall take place on or prior to the
Effective Date following the receipt of all necessary regulatory and
governmental approvals and consents and the expiration of all statutory waiting
periods in respect thereof and the satisfaction or waiver of the conditions to
the consummation of the Final Merger specified in Articles VIII, IX and X of the
Agreement.
-2-
7. CANCELLATION OF STOCK. On the Effective Date, all of the outstanding
shares of capital stock of South Texas, all of which shares shall be owned by
Bancshares, shall be canceled and shall not be deemed to be authorized, issued
or outstanding for any purpose, and no cash, property, rights or securities
shall be delivered with respect to said shares.
8. CONDITIONS PRECEDENT. The respective obligations of each party under
this Plan shall be subject to the satisfaction, or waiver by the party permitted
to do so, of the conditions set forth in Articles VIII, IX and X of the
Agreement.
9. TERMINATION. This Plan shall be terminated upon the termination of the
Agreement in accordance with Article VII thereof; provided, that any such
termination of this Plan shall not relieve any party hereto from liability on
account of a breach of such party of any of the terms hereof or thereof.
10. AMENDMENTS. To the extent permitted by law, this Plan may be amended
by a subsequent writing signed by all of the parties hereto upon the approval of
the Board of Directors of each of the parties.
11. SUCCESSORS. This Plan shall be binding on the successors of South
Texas and Prosperity.
IN WITNESS WHEREOF, South Texas and Prosperity have caused this Plan to be
executed by their duly authorized officers as of the date first above written.
SOUTH TEXAS BANCSHARES, INC.
By: ____________________________________
PROSPERITY BANCSHARES, INC.
By: ____________________________________
-3-
EXHIBIT C
PLAN OF MERGER
BETWEEN
THE COMMERCIAL NATIONAL BANK OF BEEVILLE
AND
FIRST PROSPERITY BANK
THIS PLAN OF MERGER (the "Plan") is dated as of the ____ day of _________,
1999, by and between The Commercial National of Beeville, a national banking
association ("CNB") and First Prosperity Bank, a Texas banking association
("FPB").
W I T N E S S E T H:
WHEREAS, pursuant to the Agreement and Plan of Reorganization (the
"Agreement") dated as of June ___, 1999, by and between Prosperity Bancshares,
Inc. ("Bancshares") and South Texas Bancshares, Inc. ("South Texas"), a
wholly-owned subsidiary of Bancshares ("New Corp") will merge with and into
South Texas with South Texas as the survivor (the "Initial Merger) and
thereafter, South Texas will merge with and into Bancshares with Bancshares as
the survivor (the "Final Merger") (collectively, the "Mergers"), with the result
that CNB will become a wholly-owned subsidiary of Bancshares;
WHEREAS, the Agreement provides that immediately after the effective time
of the Mergers, CNB will be merged with and into FPB;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, CNB and FPB hereby agree that,
subject to the terms and conditions hereinafter set forth, and in accordance
with all applicable laws and regulations, CNB shall be merged with and into FPB
on the Effective Date (as hereinafter defined) (the "Bank Merger"). The parties
hereto do hereby agree and covenant as follows:
1. CONDITIONS OF APPROVAL. The Bank Merger shall not become effective
unless and until all terms and conditions to the effectiveness of the Mergers
contained in the Agreement, which conditions are incorporated herein by
reference, shall have been satisfied or waived.
2. IDENTITY OF RESULTING BANK. The resulting bank as a result of the Bank
Merger (the "Continuing Bank") shall be FPB.
3. ARTICLES OF ASSOCIATION, BYLAWS AND FACILITIES OF CONTINUING BANK. On
the Effective Date and until thereafter amended in accordance with law, the
Articles of Association of Continuing Bank shall be the Articles of Association
of FPB as in effect on the Effective Date. Until altered, amended or repealed as
therein provided and in the Articles of Association of Continuing Bank, the
Bylaws of Continuing Bank shall be the Bylaws of FPB as in effect on the
Effective Date. Unless and until changed by the Board of Directors of Continuing
Bank, the main office of Continuing Bank shall be the main office of FPB as of
the Effective Date. The established offices and facilities of CNB immediately
prior to the Bank Merger shall become established offices and facilities of the
Continuing Bank. Until thereafter changed in accordance with the law or the
Articles of Association or Bylaws of Continuing Bank, all corporate acts, plans,
policies, contracts, approvals and authorizations of CNB and FPB and their
respective shareholders, boards of directors, committees elected or appointed
thereby, officers and agents, which were valid and effective immediately prior
to the Effective Date, shall be taken for all purposes as the acts, plans,
policies, contracts, approvals and authorizations of Continuing Bank and shall
be as effective and binding thereon as the same were with respect to CNB and
FPB, respectively, as of the Effective Date.
4. EFFECT OF BANK MERGER. On the Effective Date, the corporate existence
of CNB and FPB shall, as provided by law, be consolidated into and continued in
Continuing Bank, and Continuing Bank shall be deemed to be a continuation in
entity and identity of CNB and FPB. All rights, franchises and interests of CNB
and FPB, respectively, in and to any type of property and choses in action shall
be transferred to and vested in Continuing Bank by virtue of such Bank Merger
without any deed or other transfer. Continuing Bank, without any order or other
action on the part of any court or otherwise, shall hold and enjoy all rights of
property, franchises and interest, including appointments, designations and
nominations, and all other rights and interests as trustee, executor,
administrator, transfer agent or registrar of stocks and bonds, guardian of
estates, assignee, receiver and committee of estates and lunatics, and in every
other fiduciary capacity, in the same manner and to the same extent as such
rights, franchises, and interests were held or enjoyed by CNB and FPB,
respectively, as of the Effective Date.
5. LIABILITIES OF CONTINUING BANK. On the Effective Date of the Bank
Merger, Continuing Bank shall be liable for all liabilities of CNB and FPB. All
deposits, debts, liabilities, obligations and contracts of CNB and of FPB,
respectively, matured or unmatured, whether accrued, absolute, contingent or
otherwise, and whether or not reflected or reversed against on balance sheets,
books of account, or records of CNB or FPB shall be those of Continuing Bank and
shall not be released or impaired by the Bank Merger. All rights of creditors
and other obligees and all liens on property of either CNB or FPB shall be
preserved unimpaired subsequent to the Bank Merger.
6. EFFECTIVE DATE. The Bank Merger shall become effective upon the
approval of the Articles of Merger regarding the Bank Merger by Texas Department
of Banking. The term
-2-
"Effective Date" shall mean the date and time provided for in the Articles of
Merger regarding the Bank Merger. A closing shall take place on or prior to the
Effective Date following the receipt of all necessary regulatory and
governmental approvals and consents and the expiration of all statutory waiting
periods in respect thereof and the satisfaction or waiver of the conditions to
the consummation of the Mergers specified in Articles VIII, IX and X of the
Agreement.
7. CANCELLATION OF STOCK. On the Effective Date, all of the outstanding
shares of capital stock of CNB, all of which shares shall be owned by
Bancshares, shall be canceled and shall not be deemed to be authorized, issued
or outstanding for any purpose, and no cash, property, rights or securities
shall be delivered with respect to said shares.
8. CONDITIONS PRECEDENT. The respective obligations of each party under
this Plan shall be subject to the satisfaction, or waiver by the party permitted
to do so, of the conditions set forth in Articles VIII, IX and X of the
Agreement.
9. TERMINATION. This Plan shall be terminated upon the termination of the
Agreement in accordance with Article VII thereof; provided, that any such
termination of this Plan shall not relieve any party hereto from liability on
account of a breach of such party of any of the terms hereof or thereof.
10. AMENDMENTS. To the extent permitted by law, this Plan may be amended
by a subsequent writing signed by all of the parties hereto upon the approval of
the Board of Directors of each of the parties.
11. SUCCESSORS. This Plan shall be binding on the successors of CNB and
FPB.
-3-
IN WITNESS WHEREOF, CNB and FPB have caused this Plan to be executed by
their duly authorized officers as of the date first above written.
THE COMMERCIAL NATIONAL BANK OF
BEEVILLE
ATTEST:
_____________________________ By:____________________________
Printed Name:__________________
Title:_________________________
FIRST PROSPERITY BANK
ATTEST:
_____________________________ By:____________________________
Printed Name:__________________
Title:_________________________
-4-
EXHIBIT D
VOTING AGREEMENT
AND IRREVOCABLE PROXY
This Voting Agreement and Irrevocable Proxy (the "Voting Agreement") dated
as of __________, 1999 is executed by and among Prosperity Bancshares, Inc., a
Texas corporation ("Prosperity"), South Texas Bancshares, Inc., a Texas
corporation ("South Texas"), and the other persons who are signatories hereto
(referred to herein individually as a "Shareholder" and collectively as the
"Shareholders").
WHEREAS, Prosperity and South Texas have executed that certain Agreement
and Plan of Reorganization dated as June __, 1999 (the "Agreement") whereby a
Texas corporation formed as a subsidiary of Prosperity solely to facilitate the
transactions contemplated by the Agreement will merge into South Texas, and
immediately thereafter, South Texas will merge into Prosperity (collectively,
the "Mergers"); and
WHEREAS, the Agreement provides that all of issued and outstanding stock
of South Texas will be converted into the right to receive cash; and
WHEREAS, Section 4.7 of the Agreement requires that South Texas deliver to
Prosperity the irrevocable proxies of the Shareholders; and
WHEREAS, South Texas and Prosperity are relying on the irrevocable proxies
in incurring expenses in reviewing South Texas's business, in preparing a proxy
statement, in proceeding with the filing of applications for regulatory
approvals, and in undertaking other actions necessary for the consummation of
the Mergers;
NOW, THEREFORE, the parties hereto agree as follows:
1. Each of the Shareholders hereby represents and warrants to Prosperity
and South Texas that they are the registered owners of and have full voting
power with respect to the number of the shares of common stock, $.50 par value,
of South Texas set forth beside their name on Appendix "A" of this Voting
Agreement (the "Shares"), and that in the aggregate such Shares constitute
approximately____ % of the total number of issued and outstanding shares of
South Texas common stock. The Shareholders hereby agree to vote the Shares at
the shareholders' meeting referred to in Section 1.13 of the Agreement (the
"Meeting") in favor of the authorization and approval of the Agreement, and the
other agreements and transactions contemplated thereby.
2. In order better to effect the provisions of Section 1, each Shareholder
individually and the Shareholders collectively hereby revoke any previously
executed proxies and hereby constitute and appoint ____________________ (the
"Proxy Holder"), with full power of substitution, his and their true and lawful
proxy and attorney-in-fact to vote at the Meeting all of the Shares in favor of
the authorization and approval of the Agreement and the other agreements and
transactions contemplated thereby, with such modifications to the Agreement and
the other agreements and transactions contemplated thereby as the parties
thereto may make, in the event the Shareholders do not vote in favor of the
authorization and approval of the Agreement and the other agreements and
transactions contemplated thereby; provided, however, that this Section 2 shall
be inapplicable if there has been a modification or amendment to the Agreement
which reduces the Merger Consideration (as defined in the Agreement).
3. The Shareholders hereby covenant and agree that until this Voting
Agreement is terminated in accordance with its terms, the Shareholders will use
their best efforts to ensure that in the event of any sale, transfer,
assignment, pledge, hypothecation, or other disposition of any of the Shares
subject to the Voting Agreement, any such transferee or other holder will become
bound by the terms of the Voting Agreement.
4. This proxy shall be limited strictly and solely to the power to vote
the Shares in the manner and for the purpose set forth in Section 2 and shall
not extend to any other matters.
5. Each Shareholder acknowledges that Prosperity and South Texas are
relying on this Voting Agreement in incurring expenses in reviewing South
Texas's business, in preparing a proxy statement, in proceeding with the filing
of applications for regulatory approvals, and in undertaking other actions
necessary for the consummation of the Mergers and that the proxy granted hereby
is coupled with an interest and is irrevocable to the full extent permitted by
applicable law, including Article 2.29C of the Texas Business Corporation Act.
Each Shareholder and South Texas acknowledge that the performance of this Voting
Agreement is intended to benefit Prosperity.
6. The irrevocable proxy granted pursuant hereto shall continue in effect
until the earlier to occur of (i) the termination of the Agreement, as it may be
amended or extended from time to time, or (ii) the consummation of the Mergers.
7. The vote of the Proxy Holder shall control in any conflict between its
vote of the Shares and a vote by the Shareholders of the Shares and South Texas
agrees to recognize the vote of the Proxy Holder instead of the vote of the
Shareholders in the event the Shareholders do not vote in favor of the approval
of the Agreement as set forth in Section 1 hereof.
-2-
8. This Voting Agreement may not be modified, amended, altered or
supplemented with respect to a particular Shareholder except upon the execution
and delivery of a written agreement executed by South Texas, Prosperity and the
Shareholders.
9. This Voting Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
10. This Voting Agreement, together with the Agreement and the agreements
contemplated thereby, embody the entire agreement and understanding of the
parties hereto in respect to the subject matter contained herein. This Voting
Agreement supersedes all prior agreements and understandings among the parties
with respect to such subject matter contained herein.
11. All notices, requests, demands and other communications required or
permitted hereby shall be in writing and shall be deemed to have been duly given
if delivered by hand or mail, certified or registered mail (return receipt
requested) with postage prepaid to the addresses of the parties hereto set forth
below their signature on the signature pages hereof or to such other address as
any party may have furnished to the others in writing in accordance herewith.
12. This Voting Agreement and the relations among the parties hereto
arising from this Voting Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date above written.
PROSPERITY BANCSHARES, INC.
By:_______________________
Address:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
-3-
SOUTH TEXAS BANCSHARES, INC.
By:_______________________
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
SHAREHOLDERS:
__________________________
__________________________
__________________________
__________________________
__________________________
-4-
APPENDIX A
NAME AND ADDRESS NUMBER OF SHARES
________________ ________________
-5-
EXHIBIT E
RELEASE OF CLAIMS
THIS RELEASE OF CLAIMS ("Release") dated the __ day of ________, 1999, is
executed and delivered by the undersigned individual to South Texas Bancshares,
Inc. ("South Texas"), CNB Delaware Company ("CNB Delaware") and The Commercial
National Bank of Beeville ("CNB").
WHEREAS, Prosperity Bancshares, Inc. ("Prosperity") will acquire South
Texas pursuant to that certain Agreement and Plan of Reorganization dated as of
June __, 1999 by and between Prosperity and South Texas (the "Agreement"); and
WHEREAS, Prosperity has required as a condition of the acquisition that
the undersigned execute and deliver this Release to confirm the absence of any
claims by the undersigned against South Texas, CNB Delaware or CNB;
NOW THEREFORE, in consideration of the premises contained herein and ten
dollars and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the undersigned hereby agrees as follows:
Section 1. RELEASE. The undersigned hereby RELEASES and FOREVER DISCHARGES
South Texas, CNB Delaware and CNB and their successors, assigns, representatives
and attorneys from all manners of action, causes of action, suits, debts, sums
of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts,
controversies, agreements, premises, variances, trespasses, damages, judgments,
executions, claims and demands whatsoever in law or in equity which the
undersigned ever had, now has, or hereafter can, shall or may have against South
Texas, CNB Delaware or CNB, in respect of any and all agreements and obligations
incurred on or prior to the date hereof, or in respect of any event occurring or
circumstances existing on or prior to the date hereof; provided, however, that
South Texas, CNB Delaware and CNB shall not be released from any of its
obligations or liabilities to the undersigned (i) pursuant to the provisions of
the certificate or articles of incorporation or association or bylaws of South
Texas, CNB Delaware and CNB regarding the indemnification of directors and
officers; and (ii) in connection with any indebtedness or contractual obligation
or liability to the undersigned existing on the date hereof.
Section 2. SUCCESSORS. This Release shall be binding upon the undersigned
and his or her heirs, devisees, administrators, executors, personal
representatives, successors and assigns and shall inure to the benefit of South
Texas, CNB Delaware and CNB and its successors and assigns.
Section 3. GOVERNING LAW. This Release shall be governed by and construed
in accordance with the laws of the State of Texas, without giving effect to
Texas principles of conflicts of law.
Section 4. MODIFICATION. This Release may be modified only by a written
instrument executed by the undersigned, South Texas, CNB Delaware and CNB.
IN WITNESS WHEREOF, the undersigned has executed this Release effective as
of the date first above written.
_________________________________
Signature
_________________________________
Printed Name
EXHIBIT G
RELEASE OF CLAIMS
THIS RELEASE OF CLAIMS ("Release") dated the _____ day of _____________
1999, is executed and delivered by South Texas Bancshares, Inc. ("South Texas"),
CNB Delaware Company ("CNB Delaware") and The Commercial National Bank of
Beeville ("CNB") to ______________________________ ("Person").
WHEREAS, Prosperity Bancshares, Inc. ("Prosperity") will acquire South
Texas, CNB Delaware and CNB pursuant to that certain Agreement and Plan of
Reorganization dated as of June ___, 1999 by and between Prosperity and South
Texas (the "Agreement"); and
NOW THEREFORE, in consideration of the premises contained herein and ten
dollars and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the undersigned hereby agrees as follows:
Section 1. RELEASE. The undersigned hereby RELEASE and FOREVER DISCHARGE
Person and his successors, assigns, representatives and attorneys from all
manners of action, causes of action, suits, debts, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, premises, variances, trespasses, damages, judgments, executions,
claims and demands whatsoever in law or in equity which the undersigned ever
had, now has, or hereafter can, shall or may have against Person in respect of
any and all agreements and obligations incurred on or prior to the date hereof,
or in respect of any event occurring or circumstances existing on or prior to
the date hereof; provided, however, that Person shall not be released from any
of his obligations or liabilities to the undersigned in connection with any
indebtedness or contractual obligation or liability related to deposits,
accounts and loans which the undersigned may have with existing on the date
hereof and that Person shall not be released by Prosperity in connection with
the transactions contemplated by the Agreement.
Section 2. SUCCESSORS. This Release shall be binding upon the undersigned
and his or her heirs, devisees, administrators, executors, personal
representatives, successors and assigns and shall inure to the benefit of the
Person and his successors and assigns.
Section 3. GOVERNING LAW. This Release shall be governed by and construed
in accordance with the laws of the State of Texas, without giving effect to
Texas principles of conflicts of law.
Section 4. MODIFICATION. This Release may be modified only by a written
instrument executed by South Texas, CNB Delaware, CNB and Person.
IN WITNESS WHEREOF, the undersigned has executed this Release effective as
of the date first above written.
THE COMMERCIAL NATIONAL BANK OF
BEEVILLE
By:______________________________
Name:____________________________
Title:___________________________
SOUTH TEXAS BANCSHARES, INC.
By:______________________________
Name:____________________________
Title:___________________________
CNB DELAWARE COMPANY
By:______________________________
Name:____________________________
Title:___________________________
-2-
