EXHIBIT 10H
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of February
____, 1995 is entered into by and among STONE OAK NATIONAL BANK, San Antonio,
Texas, a national banking association organized under the laws of the United
States ("SONB"), STONE OAK BANKSHARES, INC., a Texas corporation, which is a
registered bank holding company and the sole shareholder of SONB ("HOLDING
COMPANY"), INTERNATIONAL BANCSHARES CORPORATION, a Delaware corporation
("BANCSHARES") and INTERNATIONAL BANK OF COMMERCE, Laredo, Texas, a state bank
organized under the laws of the State of Texas ("IBC"), all of the capital stock
of which is owned by IBC SUBSIDIARY CORPORATION, a Delaware corporation
("BANCSHARES SUBSIDIARY CORPORATION") which is a wholly owned subsidiary of
BANCSHARES. SONB and IBC are hereinafter sometimes collectively referred to as
the "Merging Banks."
R E C I T A L S:
WHEREAS, SONB is a national banking association duly organized and
existing under the laws of the United States with an authorized capital of
600,000 shares of common stock, $5.00 par value ("SONB Common Stock"), of which
344,056 shares are issued and outstanding and all of which issued and
outstanding shares are held by HOLDING COMPANY;
WHEREAS, IBC is an association duly organized and existing under the
laws of the State of Texas with an authorized capital of 1,393,492 shares of
capital stock, $5.00 par value ("IBC Common Stock") of which 1,393,492 shares
are issued and outstanding and all of which issued and outstanding shares are
held by BANCSHARES SUBSIDIARY CORPORATION;
WHEREAS, the respective Boards of Directors of each of SONB, HOLDING
COMPANY, IBC and BANCSHARES (i) deem it advisable for BANCSHARES to form an
interim Texas state chartered bank ("NEWBANK") and merge NEWBANK into SONB (the
"Initial Merger") and immediately thereafter merge SONB (being the survivor of
the merger of NEWBANK and SONB) into IBC (the "Mergers") pursuant to this
Agreement, (ii) have approved this Agreement, pursuant to the terms of and
subject to the conditions to which SONB will be merged with and into IBC (the
"Final Merger"), and (iii) have authorized the execution hereof;
1
WHEREAS, the Board of Directors of BANCSHARES SUBSIDIARY CORPORATION,
as sole shareholder of IBC, has approved the Mergers and this Agreement subject
to requisite regulatory approvals; and
WHEREAS, the Board of Directors of HOLDING COMPANY, as the sole
shareholder of SONB, has approved the Mergers and this Agreement, subject to
requisite shareholder and regulatory approvals.
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived from this Agreement and of the representations, warranties, conditions,
and promises hereinafter contained, the parties hereto covenant and agree as
follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF SONB
1. In order to induce IBC and BANCSHARES to enter into, execute,
deliver and perform this Agreement, SONB represents and warrants to IBC and
BANCSHARES as follows:
1.1 ORGANIZATION, STANDING AND POWER. SONB is a national
banking association duly organized, validly existing and in good standing under
federal banking laws. SONB (i) has all requisite power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted; (ii) 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, and collections and safe
deposit facilities, and trust powers, all subject to the primary supervision of
the Office of the Comptroller of the Currency ("OCC"); and (iii) is an insured
bank as defined in the Federal Deposit Insurance Act. SONB has delivered to IBC
complete and correct copies as of a date not more than 30 days prior to the date
hereof, of (i) the Articles of Association of SONB and all amendments thereto to
the date hereof, and (ii) the By-laws of SONB as amended to the date hereof.
1.2 CAPITAL STRUCTURE. The authorized capital stock of SONB
consists of 600,000 shares of Common Stock, par value $5.00 per share. As of the
date of this Agreement, 344,056 shares of SONB Common Stock were outstanding,
validly issued and fully paid and were not issued in violation of the preemptive
rights of any shareholder, and all of such issued and outstanding shares of SONB
Common Stock are held of record by HOLDING COMPANY. SONB does not have any
outstanding commitment or obligation to repurchase, reacquire or redeem any of
the outstanding SONB Common Stock.
1.3 AUTHORITY. Subject to the approval of this Agreement by
HOLDING COMPANY as the sole shareholder of SONB and the shareholders of HOLDING
COMPANY as contemplated by Section 4.8 hereof, the execution and delivery of
this
2
Agreement and the consummation of the Mergers contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
SONB. Neither the execution and delivery of this Agreement nor the consummation
of the Mergers contemplated hereby nor compliance by SONB with any of the
provisions hereof will (i) conflict with or result in a breach of any provision
of its Articles of Association or By-laws or constitute a default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which SONB is a party, or by
which it or any of its properties or assets may be bound, except for such
conflict, breach or default as to which requisite waivers or consents either
shall have been obtained by SONB by the Effective Date (as hereinafter defined)
of the Mergers or the obtaining of which shall have been waived by IBC, or (ii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to SONB or any of its properties or assets. No consent or approval by
any governmental authority, other than compliance with applicable federal and
state securities and banking laws and regulations of the OCC, is required in
connection with the execution and delivery by SONB of this Agreement or the
consummation by SONB of the Mergers contemplated hereby.
1.4 INVESTMENTS. SONB has furnished to IBC SCHEDULE A, a
complete list, as of September 30, 1994, and January 31, 1995, of all
securities, including municipal bonds, owned by SONB (the "Securities
Portfolio"). All securities listed on SCHEDULE A as of January 31, 1995 are
owned by SONB of record, except those held in bearer form, and beneficially,
free and clear of all mortgages, liens, pledges and encumbrances, except as
noted in SCHEDULE A. SCHEDULE A also discloses the entities in which SONB's
ownership interest 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 the securities listed in
SCHEDULE A.
1.5 FINANCIAL STATEMENTS. SONB has delivered to IBC true and
correct copies of the Reports of Condition and Income ("Call Reports") of SONB
for September 30, 1994 and will provide the same for the period ended December
31, 1994.
Information set forth in the Call Reports submitted to IBC present
fairly the financial position of SONB as of the dates thereof and the results of
its operations and the changes in its financial position for the periods
indicated in conformity with generally accepted accounting principles applied on
a consistent basis. Such Call Reports do not, as of the dates thereof, include
any material assets or omit to state any material liability, absolute or
contingent, or other facts, the inclusion or omission of which renders such Call
Reports, in light of the circumstances under which they were made, misleading in
any material respect.
1.6 ABSENCE OF UNDISCLOSED LIABILITIES. As of September 30,
1994, SONB had no material liabilities of any nature which were not reflected in
the SONB Call Reports
3
as of September 30 (the "SONB Balance Sheet") except as disclosed in Schedules
specifically referred to herein.
1.7 TAX MATTERS.
(a) HOLDING COMPANY has filed or caused SONB to file, or will
at the Effective Date have duly and timely filed or will have caused to be
filed, taking into account all extensions of time relating to any filing, (and
with respect to all periods prior to the Effective Date, but which are not
required to be filed prior to the Effective Date, will duly and timely file the
same), all Federal, state, local, foreign and other tax returns, reports and
declarations of estimated tax (collectively, "Tax Returns") required to be filed
by or for SONB for all periods up to and including the Effective Date (all such
Tax Returns being accurate and complete in all material respects) and has paid
or established adequate reserves for the payments of all Federal, state, local
and foreign taxes, assessments, deficiencies, levies, imposts, duties, license
fees, registration fees, withholdings, and other similar governmental charges,
and all interest, penalties and additions to tax imposed thereon (collectively,
the "Taxes"), shown on the Tax Returns as owing, except where the failure to
file the Tax Returns or pay the Taxes would not have a material adverse effect
on the financial condition of SONB. All Tax Returns required to be filed after
the date hereof pursuant to this Section 1.7 shall, in each case, be prepared
and filed in a manner consistent in all material respects (including elections
and accounting methods and conventions) with such Tax Return most recently filed
in the relevant jurisdiction prior to the date hereof, except where the failure
to file in a consistent manner would not have a material adverse effect or
except as otherwise required by law or regulation or agreed to by IBC. If any
such Tax Return required to be filed after the date hereof shall reflect any new
elections or the adoption of any new accounting methods or conventions or other
similar items, the reflection or adoption of any such items shall, except where
the new elections or accounting methods would not have a material adverse effect
or except to the extent such particular reflection or adoption is required to
comply with any law or regulation, be subject to the prior written approval of
IBC. For the purpose of providing assurance to IBC as to compliance with the
preceding sentence, HOLDING COMPANY will provide to IBC, at least ten (10)
business days before filing, a copy of each pro forma for SONB proposed to be
included in any consolidated federal income tax return, covering any period
beginning before the Effective Date; and IBC will be deemed to have not objected
under the preceding sentence to the filing of any such Tax Return unless it
shall have given written notice of objection not later than five (5) business
days before the due date for the filing thereof. The amounts set up as reserves
for Taxes on the SONB Balance Sheet were established in accordance with GAAP and
are sufficient for the payment of all unpaid Taxes for the periods ended on the
date thereof, and for every year or period prior thereto, and for which SONB may
be liable in its own right or as a transferee of the assets of a successor to
any corporation, person, association, partnership, joint venture or other
entity. HOLDING COMPANY shall cause SONB to pay, or establish adequate reserves
for the payment of, all Taxes payable for the period from the date of the SONB
Balance Sheet, up to and including the Effective Date.
4
(b) SONB will not have any liability, either in its own right
or as a transferee for Taxes in excess of the amount paid or reserved for any
period prior to the Effective Date. All amounts required to be withheld or
collected by SONB for income taxes, social security taxes, unemployment
insurance and other employee withholding taxes have been so withheld or
collected, and either paid to the respective governmental authority, or set
aside for such purpose, or accrued and reserved against in the SONB Balance
Sheet.
(c) There is no action, suit, proceeding, audit, investigation
or claim pending or threatened, in respect of any Taxes for which SONB may
become liable, nor has any deficiency, assessment of, or claim for any Taxes
been proposed or asserted, nor has HOLDING COMPANY or SONB received any written
notice of any nature whatsoever that any Taxes or additional Taxes are due which
have not been paid or otherwise finally settled or satisfied, and no such
notice, assessment or claim is outstanding on the date of this Agreement, nor
will any of the same be outstanding at the Effective Date except where the same
would not have a material adverse effect on the financial condition of SONB or
except with respect to such Taxes as are contested in good faith, for which an
adequate reserve has been established and as disclosed on SCHEDULE B attached
hereto. No waiver of any statute of limitations with respect to any taxable year
has been executed by HOLDING COMPANY on behalf of SONB or by SONB on its behalf;
there is no agreement, waiver or consent providing for an extension of time with
respect to the assessment of any Taxes against SONB, and no power of attorney
granted by SONB with respect to any tax matters is currently in force.
(d) SONB has not ever been a member of any affiliated group of
corporations filing a consolidated Federal or state income tax return, except
for the affiliated group with HOLDING COMPANY as the common parent. SONB has not
agreed, nor is it required, to make any adjustment under Section 481(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), by reason of a change in
accounting method or otherwise. SONB has not consented to the application to it
of Section 341(f)(2) of the Code. SONB has not consented to NOT be included in a
consolidated group for 5 consecutive years under Rev. Proc. 91-11, IRB 1991-6;
modified and clarified by Rev. Proc. 91-39, IB 1991-27. Except as described on
SCHEDULE B, no property of SONB is "tax-exempt use property" within the meaning
of Section 168(h) of the Code, nor property that IBC or SONB will be required to
treat as being owned by another person pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and applicable to property placed in
service before 1987. Except as described on SCHEDULE B, (A) there are no tax
rulings, requests for rulings, or closing agreements relating to the SONB which
could materially affect its liability for Taxes for any period after the
Effective Date, (B) all material federal, state and local Tax Returns of, or
with respect to SONB with respect to taxable periods through the year ended
December 31, 1993 that have been examined by the Internal Revenue Service have
been closed or are Tax Returns with respect to which the applicable statute of
limitations has expired without extension or waiver, (C) no power of attorney
has been granted by SONB with respect to any matter relating to Taxes of SONB
which is currently in force, (D)
5
no excess loss account (as referred to in Treasury Regulation Section 1.1502-19)
exists with respect to any subsidiary of SONB, (E) SONB has no deferred gain or
loss (i) arising from deferred intercompany transactions (as referred to in
Treasury Regulation Section 1.1502-13 and 1.1502-13T, or (ii) with respect to
the stock or obligations of any other member of SONB's affiliated group (as
described in Treasury Regulation Sections 1.1502-14 and 1.502-14T.
(e) SONB has paid (and as to any of the following which are
payable after the Effective Date, SONB shall have established an adequate
reserve for payment of the same) all sales and use Taxes required to be paid by
SONB, in its own right or as a transferee, for all periods prior to the
Effective Date, except where the same would not have a material adverse effect
on the financial condition of SONB or except with respect to such sales and use
Taxes as are being contested in good faith, and for which an adequate reserve
has been established and as disclosed on SCHEDULE B. There are no outstanding
notices of any deficiencies, adjustments, changes in assessments or increases in
tax rates with respect to any such taxes. SONB has duly filed or caused to be
filed all reports and returns relating to or covering all such taxes and other
charges, which are due or required to be filed at or prior to the date hereof.
(f) A schedule and aging of net operating loss carryforwards
properly allocable to SONB as of the Effective Date and available to SONB and
HOLDING COMPANY after the Effective Date for Federal income tax purposes is set
forth on SCHEDULE B.
1.8 OPTIONS, WARRANTS AND RELATED MATTERS. There are no
options, warrants, calls, commitments or agreements of any character to which
SONB is a party or by which SONB is bound, calling for the issuance of shares of
SONB Common Stock or any security representing the right to purchase or
otherwise receive any such SONB Common Stock.
1.9 PROPERTY. SONB owns all property reflected on the SONB
Balance Sheet (except personal property sold or otherwise disposed of since
September 30, 1994 in the ordinary course of business), free and clear of all
mortgages, liens, pledges, charges or encumbrances of any nature whatsoever,
except those referred to in the SONB Balance Sheet, Schedule A, liens for
current taxes not yet due and payable and such encumbrances and imperfections of
title, if any, as are not substantial in character or amount or do not otherwise
materially impair business operations. All property and assets material to the
business or operations of SONB are in substantially good operating condition and
repair, normal wear and tear excepted.
1.10 ADDITIONAL SCHEDULES FURNISHED TO IBC. In addition to the
Schedules previously furnished to IBC pursuant to other provisions of this
Agreement, SONB has furnished to IBC the following Schedules which are correct
and complete as of the date hereof:
6
(a) SCHEDULE C lists the names of and the number of shares of
HOLDING COMPANY Common Stock held of record by (i) all present employees of SONB
who received, respectively, salary in excess of $25,000 during the year ended
December 31, 1993 or are scheduled to receive salary in excess of $25,000 during
the year ending December 31, 1994, and (ii) all directors and officers of SONB;
(b) SCHEDULE D lists and contains copies of all notes, bonds,
mortgages, indentures, material licenses, material lease agreements and other
material contracts and material obligations to which SONB is a party, except for
those entered into by SONB in the ordinary course of its lending business
consistent with its prior business practices (materiality only for the purpose
of SCHEDULE D shall mean a document involving the annual payment by SONB or
annual payment to SONB of at least $25,000 pursuant to the terms of the
document);
(c) Except as specifically disclosed to IBC in SCHEDULE E,
SONB is not a party to (i) any employment contract not terminable at the option
of SONB without liability, (ii) any retirement, stock option, profit sharing or
pension plan or thrift plan or agreement, (iii) any management or consultation
agreement not terminable at the option of SONB without liability, or (iv) any
union or labor agreement. SONB has complied with all applicable minimum funding
requirements and all other applicable and material requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and there are no
existing conditions that would give rise to liability thereunder. No Reportable
Event (as defined in Section 4043 of ERISA) has occurred in connection with any
employee benefit plan that might constitute grounds for the termination thereof
by the Pension Guaranty Corporation or for the appointment by the appropriate
United States District Court of a trustee to administer such plan;
(d) SCHEDULE F describes all interests in real property owned,
leased or otherwise claimed by SONB, other than interests securing loans made in
the ordinary course of business; and
(e) SCHEDULE G sets forth an accurate and complete list of the
(i) insurance coverage, by amounts, types, risks covered and insurer, of SONB
and (ii) indemnity bonds held by SONB. SONB is not in default with respect to
any provisions of any such policy or indemnity bond and has not failed to give
any notice or present any claim thereunder in due and timely fashion.
1.11 RESERVE FOR POSSIBLE LOAN LOSSES. The reserve for
possible loan losses shown on the SONB Balance Sheet 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 September 30, 1994.
From the date hereof through and including the Effective Date of the Mergers,
SONB will make available to IBC all information pertaining to the adequacy of
the reserve for possible loan losses of SONB and no material fact related
7
thereto shall be withheld from IBC by SONB. Except as disclosed on SCHEDULE H or
as otherwise disclosed in writing to IBC by SONB on or before the date of the
Agreement, there are no loans of SONB that have been classified by the bank
examiners on SONB's most recent examination report as "Substandard," "Probable
Loss" or "Loss."
1.12 AGREEMENTS IN FORCE AND EFFECT. All material contracts,
agreements, plans, leases, policies and licenses referred to in any Schedule of
SONB referred to herein are valid and in full force and effect, and SONB has not
breached any material provision of, nor is in default in any material respect
under the terms of, any such contract, agreement, plan, lease, policy or
license.
1.13 LEGAL PROCEEDINGS. Except as set forth in SCHEDULE I,
there is no material legal, administrative, arbitration or other proceeding or
governmental investigation pending or, to SONB's knowledge, threatened which
might reasonably be expected to result in material money damages payable by SONB
in excess of insurance coverage or in a permanent injunction against SONB or
which might result in a change in the zoning or building ordinances materially
affecting the property or leasehold interests of SONB. To SONB's best knowledge,
SONB has complied with, and is not in default in any material respect under, any
laws, ordinances, requirements, regulations or orders applicable to its
business. SONB is not a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree, rule, regulation, code or ordinance which materially and adversely
affects, or might reasonably be expected materially and adversely to affect, the
business operations, prospects, properties, assets or condition, financial or
otherwise, of SONB.
1.14 ABSENCE OF CHANGES. Since September 30, 1994, except as
disclosed in SCHEDULE J, there has not been any material adverse change in the
condition (financial or otherwise), of the assets, liabilities, earnings or
business of SONB. Since such date, the business of SONB has been conducted only
in the ordinary course consistent with prior practices.
1.15 BROKERS AND FINDERS. Neither SONB nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the Mergers contemplated herein.
1.16 ABSENCE OF PROPERTY TAXES AND LIENS. All property taxes
due under the applicable provisions of the Texas Tax Code have been paid by
either SONB or HOLDING COMPANY, and no liens imposed or authorized by the Texas
Tax Code exist on the shares of SONB Common Stock, except as otherwise disclosed
in SCHEDULE K.
1.17 EVIDENCES OF INDEBTEDNESS. Each evidence of indebtedness
reflected as an asset of SONB on the SONB Balance Sheet, or acquired since that
date, is the legal, valid and binding obligation of the obligor named therein,
enforceable in accordance with
8
its terms (subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws from time to time in
effect), and no evidence of indebtedness having an unpaid balance (principal and
accrued interest) is subject to any defense, offset or counterclaim known to
SONB. With respect to indebtedness owed to SONB, SCHEDULE L sets forth:
(a) with respect to each evidence of indebtedness charged off
by SONB during the period between December 30, 1993 and September 30, 1994, the
identity of the borrower and the amount of indebtedness (principal and interest
accrued to date of charge-off) charged off by SONB and the aggregate amount of
such indebtedness charged off, reduced by the aggregate amount of recoveries on
indebtedness previously charged off, during such period, all in accordance with
generally accepted accounting principles consistently applied by SONB; and
(b) with respect to each evidence of indebtedness not charged
off under which a Material Default, as hereinafter defined, has occurred and is
continuing, the identity of the borrower, the nature of the default and the
unpaid amount (principal and interest accrued to September 30, 1994) of such
evidence of indebtedness on September 30, 1994. Except as so disclosed in
writing to IBC by SONB, to the knowledge of SONB, no Material Default has
occurred and is continuing under any evidences of indebtedness not charged off.
For purposes of this Section 1.17 and Section 4.1 hereof, "Material
Default" shall be defined as (i) the failure by the obligor to pay indebtedness
or any installment thereof within 60 days after it becomes due and payable, (ii)
the occurrence of any other event, of which SONB has knowledge, which could
reasonably be expected to result in the obligor being unable to repay the
indebtedness in accordance with its terms, or (iii) SONB's cancelling or
agreeing or becoming obligated to cancel any indebtedness.
1.18 COMMUNITY REINVESTMENT ACT. To SONB's best knowledge,
SONB is in full compliance with the Community Reinvestment Act (12 U.S.C. 2901
ET SEQ.) ("CRA") and all regulations promulgated thereunder, except as described
in the CRA Performance Evaluation dated June 15, 1993. SONB has supplied IBC
with copies of SONB's CRA Performance Evaluation dated June 15, 1993, all
support papers therefor, all letters and written comments received by SONB since
June 15, 1993 pertaining thereto and any responses by SONB to such comments.
1.19 FAIR HOUSING ACT, THE HOME MORTGAGE DISCLOSURE ACT AND
EQUAL CREDIT OPPORTUNITY ACT. To SONB's best knowledge, SONB is in full
compliance with the Fair Housing Act (42 U.S.C. 3601 ET SEQ.), the Home Mortgage
Disclosure Act (12 U.S.C. 2801 ET SEQ.) and the Equal Credit Opportunity Act (15
U.S.C. 1691 ET SEQ.) and all regulations promulgated thereunder. SONB has not
received any notices of any violation of said Acts or any of the regulations
promulgated thereunder, or any notice of any, nor does SONB have any knowledge
of any threatened administrative inquiry, proceeding or investigation with
respect to SONB's compliance with said Acts.
9
1.20 USURY LAWS AND OTHER CONSUMER COMPLIANCE LAWS. To SONB's
best knowledge, all loans of SONB have been made substantially in accordance
with all applicable statutes and regulatory requirements, including without
limitation, the Texas usury statutes as they are currently interpreted,
Regulation Z (12 C.F.R. 226 ET SEQ.) issued by the Board of Governors of the
Federal Reserve System, the Federal Consumer Credit Protection Act (15 U.S.C.
1601 ET SEQ.), the Texas Consumer Credit Code (Tex.Rev.Civ.Stat.Ann. art.
5069-2.01, ET SEQ.) and all statutes governing the operation of national banks
located in Texas. Each loan on the books of SONB was made in the ordinary course
of SONB's business, consistent with prudent banking practices.
1.21 BANK SECRECY ACT. Except as otherwise disclosed on
SCHEDULE M attached hereto, to SONB's best knowledge, SONB is in full compliance
with the Bank Secrecy Act (12 U.S.C. 1730(d) and 1829 (b)) and all regulations
promulgated thereunder and SONB has properly certified all foreign deposit
accounts and has made all necessary tax withholdings on all of its deposit
accounts; furthermore, SONB 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.
1.22 ENVIRONMENTAL. To SONB's best knowledge, except as set
forth in SCHEDULE N, the ownership, location, construction, use and operation of
all real property owned or leased by SONB (fixed asset or OREO) is, and has at
all times been, in full compliance with applicable Environmental Law, as
hereinafter defined. To SONB's best knowledge, SONB is the owner of, and has in
its possession, all permits, licenses and approvals under Environmental Laws
that are necessary or required to fully and completely conduct all of its
business and operations; including, without limitation, ownership, location,
construction, use and operation of its facilities, and is in full compliance
with such permits, licenses, and approvals. To SONB's best knowledge, there are
no pending or threatened, and there have been no administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
noncompliance or violation, investigations or proceedings relating in any way to
any Environmental Law relating to the real property owned by SONB. To SONB's
best knowledge, (i) no asbestos was used in the construction of any portion of
SONB's facilities; (ii) no real property owned by SONB has at any time been used
by SONB, or by any person, as a landfill or for the storage or disposal, or as a
site of spilling, dumping, depositing or otherwise disposing of, any hazardous
or toxic substances or waste; and (iii) no real property owned by SONB is, or
has been, an industrial site or landfill. For the purposes hereof,
"Environmental Law" means 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 and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or judgment,
relating to the environment, health, safety or "hazardous materials," "hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants," or words or
terms of similar import (including under any
10
Environmental Law), 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 Transportation Act, as amended, 49 U.S.C. 1801 ET
SEQ., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 ET
SEQ., the Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251 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., the Safe Drinking Water Act, 42 U.S.C. 3808 ET
seq., the Texas Solid Waste Disposal Act, Tex. Health & Safety Code Ann. Ch.
361, the Texas Clean Air Act, Tex. Health & Safety Code Ann. Ch. 382, the Texas
Water Code, Tex. Water Code Ann., and the Texas Hazardous Substances Spill
Prevention and Control Act, Tex. Water Code Ann.
1.23 ZONING AND RELATED LAWS. To SONB's best knowledge, all
real property owned or leased by SONB and the use thereof complies with all
applicable laws, ordinances, regulations, orders or requirements, including
without limitation, building, zoning and other laws.
1.24 SECURITIES LAWS. To SONB's best knowledge, SONB and its
officers, directors, 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, and SONB and its officers,
directors, 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 SONB or its
officers, employees directors or agents are now engaged or have been engaged in
the past.
1.25 REGULATORY APPROVALS. SONB has no reason to believe that
it will not be able to obtain all requisite regulatory approvals necessary to
consummate the Mergers as set forth in this Agreement.
1.26 DIVIDENDS. SONB has not declared or paid any dividends
during the period from September 30, 1994 to the date hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HOLDING COMPANY
2. In order to induce BANCSHARES and IBC to enter into,
execute, deliver and perform this Agreement, HOLDING COMPANY represents and
warrants to BANCSHARES and IBC as follows:
2.1 ORGANIZATION, STANDING AND POWER. HOLDING COMPANY is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. HOLDING COMPANY (i) has all requisite power and authority
to own, lease and operate its properties and to carry on its business as now
being conducted; and
11
(ii) is a registered bank holding company under the Bank Holding Act of 1956,
as amended.
2.2 OWNERSHIP OF SONB. HOLDING COMPANY owns 100% of the issued
and outstanding shares of SONB Common Stock, which shares are not subject to any
liens or encumbrances of any kind.
2.3 AUTHORITY. The execution and delivery of this Agreement
and the consummation of the Mergers contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of HOLDING
COMPANY. Neither the execution and delivery of this Agreement, the consummation
of the Mergers contemplated hereby nor the compliance by HOLDING COMPANY with
any of the provisions hereof will (i) conflict with or result in a breach of any
provision of its Articles of Association or By-laws or constitute a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation to which HOLDING COMPANY is
a party, or by which it or any of its properties or assets may be bound except
for such conflict, breach or default as to which requisite waivers or consents
either shall have been obtained by HOLDING COMPANY by the Effective Date, as
hereinafter defined, or the obtaining of which shall have been waived by HOLDING
COMPANY, or (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to HOLDING COMPANY or any of its properties or assets. No
consent or approval by any governmental authority, other than those required by
applicable federal and state securities and banking laws and regulations is
required in connection with the execution and delivery by HOLDING COMPANY of
this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IBC
3. In order to induce SONB and HOLDING COMPANY to enter into,
execute, deliver and perform this Agreement, IBC represents and warrants to SONB
and HOLDING COMPANY as follows:
3.1 ORGANIZATION, STANDING AND POWER. IBC is a state banking
association duly organized, validly existing and in good standing under the
banking laws of the State of Texas. IBC (i) has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder, and to own, lease and operate its properties and to carry on its
business as now being conducted; (ii) 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, and trust powers, all subject to the
supervision of the Texas Department of
12
Banking and the FDIC; and (iii) is an insured bank as defined in the Federal
Deposit Insurance Act.
3.2 CAPITAL STRUCTURE. The authorized capital stock of IBC
consists of 1,393,492 shares of Common Stock, par value $5.00 per share. At the
close of business on the business day next preceding the date hereof, 1,393,492
shares of IBC Common Stock were outstanding, validly issued, fully paid and
non-assessable. IBC does not have any outstanding commitment or obligation to
repurchase, reacquire or redeem any of the outstanding IBC Common Stock. All of
the issued and outstanding shares of IBC Common Stock are owned by BANCSHARES.
3.3 AUTHORITY. The execution and delivery of this Agreement
and the consummation of the Mergers contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of IBC. Neither
the execution and delivery of this Agreement nor the consummation of the Mergers
contemplated hereby nor compliance by IBC with any of the provisions hereof will
(i) conflict with or result in a breach of any provision of its Articles of
Association or By-laws or constitute a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which IBC is a party, or by which it or any of its
properties or assets may be bound except for such conflict, breach or default as
to which requisite waivers or consents either shall have been obtained by IBC by
the Effective Date, as hereinafter defined, of the Mergers or the obtaining of
which shall have been waived by IBC, or (ii) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to IBC or any of its
properties or assets. No consent or approval by any governmental authority,
other than compliance with applicable federal and state securities and banking
laws and regulations of the Texas Department of Banking and the FDIC is required
in connection with the execution and delivery by IBC of this Agreement or the
consummation by IBC of the Mergers contemplated hereby.
3.4 ABILITY TO PAY PURCHASE PRICE. IBC has available either
through internal funds or funds available from BANCSHARES cash in the amount of
the purchase price to be paid to the shareholders of SONB as set forth in
Section 11.3 hereof.
3.5 REGULATORY APPROVALS. IBC has no reason to believe that it will not be
able to obtain all requisite regulatory approvals necessary to consummate the
Mergers as set forth in this Agreement.
3.6 INVESTMENT. IBC is not acquiring the SONB Common Stock
with a view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act of 1933, as amended.
13
ARTICLE IV
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE DATE OF THE MERGERS
4.1 ACCESS TO RECORDS AND PROPERTIES OF SONB. Between the date
of this Agreement and the Effective Date, SONB agrees to give IBC full access to
all of its premises, books, records (including tax returns filed and those in
preparation) financial information and other information pertinent to its
operations, including, without limitation, access to HOLDING COMPANY's
Independent Auditors with respect to the preparation of the financial statements
and tax planning of HOLDING COMPANY; provided, however, that any such
investigation shall be conducted in such manner as not to interfere unreasonably
with the operation of the business of SONB. SONB will keep IBC closely advised
of all material developments relevant to the consummation of the Mergers and
will cooperate fully in permitting IBC to make a full investigation of the
business, properties, financial condition and investments of SONB, in the
preparation of all applications, reports and other documents necessary or
advisable for the successful consummation of the Mergers, and in bringing about
the consummation of the Mergers. Prior to the Effective Date, SONB shall
disclose in writing to IBC:
(a) the same kind of information previously disclosed in
writing by it to IBC pursuant to Section 1.17(a), except that such new
disclosure shall relate to the period between September 30, 1994, and the last
day of the last month preceding the Effective Date of the Mergers; and
(b) the same kind of information previously disclosed in
writing by it to IBC pursuant to Section 1.17(b), except that such new
disclosure shall relate to evidences of indebtedness not charged off under which
a Material Default has occurred and is continuing as of the last day of the last
month preceding the Effective Date of the Mergers.
IBC will treat and hold confidential any information
concerning the business and affairs of SONB or HOLDING COMPANY that is not
generally available to the public ("Confidential Information") it receives from
any of SONB, HOLDING COMPANY, its shareholders, officers, directors or agents,
in the course of its review of SONB or HOLDING COMPANY. IBC will not use any of
the Confidential Information except in connection with this Agreement, and, if
this Agreement is terminated for any reason whatsoever, will return to SONB or
HOLDING COMPANY, as the case may be, all tangible embodiments (and all copies)
of the Confidential Information which are in its possession.
SONB acknowledges that IBC is in the same business as SONB and
may already have knowledge or possession of all or part of the Confidential
Information. Therefore, any information provided to IBC by SONB shall not be
deemed to be Confidential Information if:
14
(i) it was in IBC's lawful possession or within IBC's
knowledge at the time of disclosure;
(ii) at the time of disclosure, it was in the public domain;
(iii) after IBC's disclosure, it becomes, through no act or
omission on our part, in the public domain;
(iv) it was lawfully and independently obtained by IBC from a
third party who was not under an obligation of
confidentiality.
4.2 OPERATION OF THE BUSINESS OF SONB. SONB agrees that from
the date hereof to the Effective Date, except to the extent that IBC shall
otherwise consent, SONB will operate its business substantially as presently
operated and only in the ordinary course, and, consistent with such operation,
it will use its best efforts to preserve intact its present business
organization and its relationships with persons having business dealings with
it.
SONB acknowledges that it executed a contract with Electronic Data Systems, Inc.
dated April 27, 1989 and, with respect to any renewal, termination or extension
provision in such EDS Contract, SONB has taken all action necessary to prevent
the EDS contract from being automatically renewed in any manner.
SONB will maintain and keep its properties in as good repair
and condition as at present, except for depreciation due to ordinary wear and
tear and damage due to casualty, maintain in full force and effect insurance
comparable in amount and scope of coverage to that now maintained, perform all
its obligations under contracts, leases and documents relating to or affecting
its assets, properties and business, and fully comply with and perform all
obligations and duties imposed upon it by all applicable laws and governmental
rules, regulations and orders imposed by governmental authorities.
Without limiting the generality of the foregoing, SONB agrees
that it will not from the date hereof to the Effective Date, except to the
extent IBC should otherwise consent, other than in the ordinary course of
business and consistent with SONB's prior practices, (i) grant any material
salary increase to any officer or employee or enter into any new bonus,
incentive compensation, deferred compensation, profit sharing, retirement,
pension, group insurance or other benefit plan or any new employment or
consulting agreement; (ii) create or otherwise become liable with respect to any
indebtedness for money borrowed or purchase money indebtedness; (iii) make or
allow any amendment of its Articles of Association or By-laws; (iv) issue or
contract to issue any shares of SONB Common Stock or securities exchangeable for
or convertible into SONB Common Stock; (v) purchase any shares of SONB Common
Stock; (vi) enter into or assume any contract or obligation; (vii) incur or
suffer to exist a lien on any of its properties either real or personal; (viii)
make any substantial renovation of any of its properties or enter into any lease
or agreement involving any substantial obligation; or (ix) waive any right of
substantial value.
15
4.3 CONSENTS. IBC, SONB, HOLDING COMPANY and BANCSHARES shall
each use their best efforts to obtain the consent or approval of each state or
federal agency where consent or approval shall be required to permit IBC and
SONB to consummate the Mergers, including the consent or approval of the Federal
Reserve Bank of Dallas, the OCC, the Federal Deposit Insurance Corporation (the
"FDIC") and the Texas Department of Banking and IBC, SONB and BANCSHARES shall
file any necessary regulatory applications related to the Mergers with the
appropriate bank regulators within sixty (60) days after the date on which this
Agreement is executed, unless all parties hereto mutually agree to extend such
deadline.
4.4 DIVIDENDS. SONB agrees that it will not pay any dividends,
stock or cash, to its shareholders from the date hereof through the Effective
Date.
4.5 BEST EFFORTS. IBC, BANCSHARES, HOLDING COMPANY and SONB
each will use its best reasonable efforts to bring about the Mergers
contemplated by this Agreement as soon as practicable, unless this Agreement is
terminated as provided herein.
4.6 PUBLIC DISCLOSURE. Neither IBC, SONB, HOLDING COMPANY,
BANCSHARES nor any representative of said parties, will make any public
disclosure concerning this Agreement or the Mergers contemplated herein without
the mutual consent of each of the other parties hereto to the timing and content
of the disclosure; provided, however, the parties hereto may make any disclosure
necessary to maintain compliance with applicable federal or state laws or
regulations or required in connection with the making of any application
necessary to effect the Mergers.
4.7 SECURITIES PORTFOLIO. SONB agrees that it will not
materially alter the size or mix of its Securities Portfolio between the date of
this Agreement and the Effective Date, except in the ordinary course of its
business, without the prior written consent of IBC.
4.8 SHAREHOLDER APPROVAL. HOLDING COMPANY agrees to submit
this Agreement to its shareholders for approval as soon as reasonably practical
after execution of this Agreement, and in no event more than forty-five (45)
days after acceptance for filing as informationally complete of the last of the
applications to be filed with any federal regulatory authority necessary in
order to consummate the Mergers, and the Board of Directors of HOLDING COMPANY
will recommend approval of the Agreement and the transactions contemplated
hereby to the shareholders of HOLDING COMPANY. In addition, if the shareholders
of the HOLDING COMPANY approve the Mergers then the Board of Directors of
HOLDING COMPANY shall direct the proper officers of HOLDING COMPANY to execute
and deliver to SONB a written consent of sole shareholder approving the Mergers.
4.9 FORMATION OF NEWBANK. BANCSHARES agrees to use its best
efforts to organize NEWBANK as soon as possible after the execution of this
Agreement,
16
which organization will be subject to receipt of the requisite regulatory
approvals. NEWBANK shall not engage in any business activity and its sole
purpose and function shall be to effect the Initial Merger with SONB. After
formation of NEWBANK, BANCSHARES shall cause NEWBANK to ratify this Agreement
and agree to perform all of the obligations of NEWBANK hereunder.
4.10 NO SOLICITATION. Prior to the Effective Date of the
Mergers, unless this Agreement is sooner terminated, neither SONB nor HOLDING
COMPANY shall directly or indirectly (i) solicit or encourage inquiries or
proposals with respect to the Merger of SONB or the sale of any of the shares of
SONB Common Stock or other material asset(s) of SONB from any party other than
IBC, or (ii) merge with any party or sell any of the shares of SONB Common Stock
or material asset(s) of SONB to any party except as set forth in this Agreement.
4.11 SONB EARNINGS. All earnings net of ordinary expenses of
SONB since September 30, 1994, shall be retained by SONB through the Effective
Date and shall be transferred to IBC upon consummation of the Mergers.
4.12 SONB AND HOLDING COMPANY EXPENSES. HOLDING COMPANY shall
pay all of its and SONB's reasonable and necessary costs and expenses incurred
by it or SONB or HOLDING COMPANY or on its or SONB's behalf which are incurred
directly in connection with the Mergers, including respective fees and expenses
of financial consultants, accountants and counsel provided, however, this shall
not limit SONB from incurring or paying ordinary expenses of SONB.
4.13 SECURITIES PORTFOLIO. Between the date hereof and the
Effective Date, upon the sale or sales of all or any portion of the Securities
Portfolio of SONB, the proceeds of such sale(s) shall be invested in U.S.
Treasury obligations with a maturity date, no longer than six months or as
otherwise mutually agreed upon by IBC and SONB.
ARTICLE V
CONDITIONS OF MERGERS - IBC
5. The obligations of IBC to perform this Agreement are
subject to the satisfaction of the following conditions unless waived by IBC:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of SONB and HOLDING COMPANY set forth in Articles I and II,
respectively, hereof shall be true and correct in all material respects as of
the date of this Agreement and as of the Effective Date as though made on and as
of the Effective Date, except as otherwise permitted by this Agreement, and IBC
shall have received a certificate, executed by the Presidents of SONB and
HOLDING COMPANY, respectively, to that effect.
17
5.2 PERFORMANCE OF OBLIGATIONS OF SONB AND HOLDING COMPANY.
SONB and HOLDING COMPANY shall have performed all obligations required to be
performed by it under this Agreement prior to the Effective Date.
5.3 AUTHORIZATION OF MERGERS. All action necessary to
authorize the execution, delivery and performance of this Agreement by SONB and
HOLDING COMPANY and the consummation of the transactions contemplated hereby
shall have been duly and validly taken by the Boards of Directors of SONB and
HOLDING COMPANY, respectively, and the shareholders of HOLDING COMPANY, and IBC
and SONB shall have full power and right to merge on the terms provided herein.
5.4 MATERIAL ADVERSE CHANGE. Prior to the Effective Date,
there shall not have occurred any material adverse change in the assets,
properties, operations, or financial condition of SONB, nor shall any event have
occurred which with the lapse of time should cause or create any material
adverse change in SONB's assets, properties, operations or financial condition.
5.5 INJURIOUS BEHAVIOR. To the extent any employee of SONB
acts in a manner which is inconsistent with Section 4.2 hereof or is otherwise
inconsistent which the spirit and intent of this Agreement, the Board of
Directors of SONB, after consultation with legal counsel, shall take whatever
actions are appropriate and necessary to immediately terminate such conduct and
to otherwise protect the goodwill and business relationships of SONB.
5.6 VANDER ZEE LITIGATION. SONB is a party in a lawsuit styled
HARLAN D. VANDER ZEE V. THE HONORABLE JANET RENO, ET AL, in the United States
District Court for the Western District of Texas (Austin Division), cause number
A 94 CA 020 SS (the lawsuit and any refiling, appeal, or other proceeding
arising from the same facts is herein referred to as the "Vander Zee
Litigation"). In IBC's sole judgment, IBC shall have determined that the Vander
Zee Litigation does not pose a significant risk to the acquisition of SONB by
IBC.
ARTICLE VI
CONDITIONS OF MERGERS - SONB
6. The obligation of SONB to perform this Agreement is subject
to the satisfaction of the following conditions unless waived by SONB:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of IBC set forth in Article III hereof shall be true and correct in
all material respects as of the date of this Agreement and as of the Effective
Date as though made on and as of the Effective Date, except as otherwise
permitted by this Agreement, and SONB shall have received a certificate,
executed by the President of IBC to that effect.
18
6.2 PERFORMANCE OF OBLIGATIONS OF IBC. IBC shall have
performed all obligations required to be performed by it under this Agreement
prior to the Effective Date.
6.3 AUTHORIZATION OF MERGERS. All action necessary to
authorize the execution, delivery and performance of this Agreement by IBC and
the consummation of the Mergers contemplated hereby shall have been duly and
validly taken by the Boards of Directors of IBC and BANCSHARES, respectively,
and the shareholders of HOLDING COMPANY, and IBC and SONB shall have full power
and right to merge on the terms provided herein.
6.4 IBC EXPENSES. IBC shall pay all costs and expenses
incurred by, or on its behalf, in
connection with the Mergers.
ARTICLE VII
CONDITIONS TO RESPECTIVE OBLIGATIONS OF IBC AND SONB
7. The respective obligations of IBC and SONB under this
Agreement are, at their respective options, subject to the further condition
that:
7.1 GOVERNMENTAL APPROVALS. The parties hereto shall have
received approval of the Mergers contemplated by this Agreement from all
necessary governmental agencies and authorities, including the Federal Reserve
Bank of Dallas, the Texas Department of Banking, the OCC and the FDIC, and such
approvals and the Mergers contemplated hereby shall not have been contested by
any Federal or state governmental authority nor by any other third party by
formal proceeding, and none of such approvals or consents shall be subject to
any terms or conditions that are unreasonable or unduly burdensome in the
opinion of the party hereto which is obliged to discharge or comply with such
term or condition. It is understood that if any contest as aforesaid is brought
by formal proceedings, IBC may, but shall not be obligated to, answer and defend
such contest.
ARTICLE VIII
CLOSING DATE AND AGREEMENT
8.1 CLOSING DATE. The closing ("Closing") for the consummation
of the transactions contemplated by this Agreement shall be effected as of the
close of business on the last day of the month in which the latest of the
following dates occurs and, unless another date or place is agreed to in writing
by the parties hereto, shall take place at the offices of IBC in San Antonio,
Texas on the first business day of the following month:
(a) the thirtieth calendar day after all the governmental
approvals as described in Section 6.1 hereof have been obtained; or
19
(b) such date as may be prescribed by any Federal or state
agency or authority pursuant to an applicable Federal or state law, rule or
regulation, prior to which consummation of the transactions provided herein may
not be effected.
8.2 EFFECTIVE DATE OF THE MERGERS. Subject to the terms and
conditions set forth herein, including receipt of all required regulatory
approvals, the Final Merger shall become effective at the time on which the
Texas Department of Banking delivers to IBC a certified copy of the Certificate
of Merger issued under the seal of the Texas Department of Banking (the
"Effective Date") or at the time specified therein. It is anticipated that the
date of the Closing and the Effective Date of the Final Merger shall be either
the same date or as contemporaneous as possible and it is further contemplated
that the Mergers will be effected on the same date.
ARTICLE IX
POST CLOSING COVENANTS OF HOLDING COMPANY
9.1 AGREEMENT NOT TO COMPETE BY HOLDING COMPANY. It is hereby
expressly agreed that upon consummation of the Mergers, neither HOLDING COMPANY
nor any principal shareholder (being a shareholder with 5% or more of the stock)
or affiliate of HOLDING COMPANY shall conduct the business of banking within the
territory circumscribed by a fifty (50) mile radius of any former banking
premise of SONB for a period of two (2) years; provided, however, that no owner
of 5% or less of the outstanding stock of any corporation shall be deemed to
conduct the business of banking solely by reason of such ownership. Upon
consummation of the Mergers, neither HOLDING COMPANY nor any of its principal
shareholders or affiliates shall use the name "Stone Oak" or any derivation
thereof, or any name similar thereto, in connection with any banking or other
similar financial institution or any insurance or securities company. Upon
consummation of the Mergers, HOLDING COMPANY shall not have any rights to any
trademarks or other intellectual property rights of SONB. It is acknowledged
that damages for breach of the provisions of this paragraph would be difficult
or impossible to ascertain, and that BANCSHARES and/or IBC shall have the right
to seek specific performance of such provisions, which right shall not be
exclusive of such parties' right to seek damages.
9.2 PAYMENT OF TAXES; ADDITIONAL TAX COVENANTS.
(a) HOLDING COMPANY shall be liable for and shall hold IBC,
BANCSHARES and SONB harmless against, any and all Taxes due or payable by SONB,
or by IBC or BANCSHARES with respect to SONB, for any taxable year or tax period
ending on or before the Closing; including, without limitation (i) any liability
of SONB by reason of its being liable (pursuant to Treasury Regulations Section
1.1502-6, any analogous state, local or foreign provision, or otherwise), in
whole or in part, for any tax of any affiliated group (as defined in Section
1504(a) of the Code or any analogous state, local or foreign provision) with
respect to which SONB may be or have been an includable
20
corporation (as defined in Sections 1504(b) and (c) of the Code or such
analogous state, local or foreign provision) (an "Affiliated Group"); and (ii)
any liability that arises because SONB ceases on the Effective Date to be a
member of an Affiliated Group filing consolidated or combined returns; and (iii)
any and all Taxes due or payable by SONB resulting from or arising out of the
transactions contemplated by the Agreement.
(b) IBC and BANCSHARES shall be liable for, and shall hold
HOLDING COMPANY harmless from and against, any and all Taxes due or payable with
respect to (1) the business, activities, transactions and assets of SONB for any
taxable year or tax period beginning after the Closing; or (2) except as
otherwise provided herein, any action taken by or on behalf of IBC, BANCSHARES,
or their Affiliates or SONB after the Closing, whether or not contemplated by
this Agreement.
(c) Any Taxes with respect to the business, activities and
assets of SONB that relate to a tax period beginning before the Closing and
ending after the Effective Date shall be apportioned between HOLDING COMPANY and
IBC (in the case of real and personal property Taxes, on a per diem basis, and
in the case of other Taxes, as determined from the books and records of SONB
consistent with the Code, regulations thereunder and other applicable law, based
on the actual operations of SONB during the portion of such period ending on the
Closing and the portion of such period beginning on the day following the
Closing, and each such portion of such period shall be deemed to be a tax period
subject to the provisions of this subsection 9.2(c)).
(d) Any refunds or credits of taxes that are attributable to a
taxable year or tax period (including a period deemed to be a tax period under
subsection 9.2(c) above) ending after the Closing, including, without
limitation, any refunds or credits that arise from the carryback of any
deduction, loss or credit from a tax period (including a period deemed to be a
tax period under subsection 9.2(c) above) ending subsequent to the Closing, to a
tax period ending on or before the Closing, shall be for the account of IBC.
HOLDING COMPANY shall promptly forward to IBC or BANCSHARES, or reimburse them
for, any refunds or credits due IBC or BANCSHARES after receipt by HOLDING
COMPANY thereof. HOLDING COMPANY shall forward to IBC or BANCSHARES any refunds
or credits due to IBC or BANCSHARES , pursuant to this subsection 9.2(d), within
thirty (30) days of the receipt of same. HOLDING COMPANY shall submit to IBC, on
the first anniversary of the Closing, written statements regarding the status of
any refunds or credits pursuant to this subsection 9.2(d).
(e) HOLDING COMPANY shall have the right to exercise, at its
own expense, control at any time over the handling, disposition and/or
settlement of any issue raised in any official inquiry, examination or
proceeding regarding any Tax Return with respect to which HOLDING COMPANY may be
liable for Taxes pursuant to this Section 9.2 or otherwise hereunder and any Tax
Return other than as described in Subsection 9.2(f) below (including the right
to settle or terminate any contest with respect thereto); provided, however,
that (1) HOLDING COMPANY shall permit IBC to participate, at its own
21
expense, in such settlement or defense through counsel chosen by IBC; (2) in
the case of any such inquiry, examination or proceeding with respect to which
IBC or SONB could be liable or could suffer a loss of any material tax benefit,
HOLDING COMPANY shall not enter into a settlement (at the administrative level
or during the course of judicial proceedings) without the prior written approval
of IBC, which shall not be unreasonably withheld; and (3) IBC and BANCSHARES
shall cooperate with HOLDING COMPANY, as HOLDING COMPANY may reasonably request,
in any such inquiry, examination or proceeding.
(f) (i) IBC or BANCSHARES shall have the right to exercise, at
their own expense, control at any time over the handling, disposition and/or
settlement of any issue raised in any official inquiry, examination or
proceeding involving any Tax Return for a tax period beginning after the
Effective Date (including the right to settle or terminate any contest with
respect thereto); provided, however, that (1) IBC shall permit HOLDING COMPANY,
at its own expense, to participate in such settlement or defense through counsel
chosen by HOLDING COMPANY; (2) in the case of any such inquiry, examination or
proceeding with respect to which HOLDING COMPANY could be liable or could suffer
the loss of any tax benefit, IBC or BANCSHARES shall not enter into a settlement
(at the administrative level or during the course of judicial proceedings)
without the prior written approval of HOLDING COMPANY, which shall not be
unreasonably withheld; and (3) HOLDING COMPANY shall cooperate with IBC or
BANCSHARES, as IBC or BANCSHARES may reasonably request, in any such inquiry,
examination or proceeding.
(ii) IBC or BANCSHARES shall have the right to exercise, at
their own expense, control at any time over the handling, disposition and/or
settlement of any issue raised in any official inquiry, examination or
proceeding regarding any Tax Return other than as described in subsection 9.2(e)
and 9.2(f)(i) above (including the right to settle or otherwise terminate any
contest with respect thereto); and HOLDING COMPANY shall cooperate with IBC or
BANCSHARES, as IBC or BANCSHARES may reasonably request, in any such inquiry,
examination or proceeding.
(g) If, with respect to any official inquiry, examination or
proceeding with respect to Taxes for which indemnity may be sought pursuant to
this Section 9.2, HOLDING COMPANY, in the case of a Tax Return described in
subsection 9.2(e) above, or IBC and BANCSHARES, in the case of a Tax Return
described in Subsection 9.2(f) above, elects not to exercise control over the
handling, disposition and/or settlement of the issues raised in such inquiry,
examination or proceeding, IBC and BANCSHARES or HOLDING COMPANY as the case may
be, shall so notify HOLDING COMPANY or IBC and BANCSHARES, respectively, and the
party so notified shall be entitled, but shall not be obligated, to exercise
control over the handling, disposition and/or settlement; subject, in the case
of HOLDING COMPANY, to the provisions of subsection 9.2(e) and, in the case of
the IBC and BANCSHARES, to the provisions of subsection 9.2(f).
22
(h) Subsequent to the Closing, the parties hereto shall
provide each other, and IBC and BANCSHARES shall cause SONB to provide HOLDING
COMPANY with such cooperation and information relating to a company as any party
reasonably may request in (i) filing any Tax Return, amended return or claim for
refund, (ii) determining any liability for Taxes or a right to refund of Taxes
or (iii) conducting or defending any audit or other proceeding in respect to
Taxes. Such cooperation and information shall include providing copies of all
relevant Tax Returns, together with accompanying schedules and related work
papers, documents relating to rulings or other determinations by taxing
authorities and records concerning the ownership and tax basis of property which
any party or an of their Affiliates may possess. IBC and BANCSHARES shall make,
and shall cause SONB to make, and HOLDING COMPANY shall make, its employees,
accountants and other advisors available on a mutually convenient basis to
provide explanations of any documents or information required to be provided
hereunder. The parties shall retain, and IBC and BANCSHARES shall cause SONB to
retain, all returns, schedules and work papers, and all materials, records and
other documents relating thereto, until the expiration of the statute of
limitations (and, to the extent notified by any party, any extensions thereof)
of the taxable years to which such return and other documents relate and, unless
such returns and other documents are offered and delivered to HOLDING COMPANY or
IBC and BANCSHARES, as applicable, until the final determination of any Tax in
respect of such years. In addition, the parties shall comply and IBC and
BANCSHARES shall cause SONB to comply, with all applicable governmental record
retention agreements entered into with any taxing authority with respect to
SONB.
(i) Subsequent to the Closing, and within thirty (30) days
after HOLDING COMPANY has filed its consolidated Tax Return for the taxable
period in which SONB ceases to be a member of the consolidated group filing said
Tax Return, HOLDING COMPANY shall deliver to SONB, IBC and BANCSHARES a written
statement itemizing all loss and credit carryforwards pursuant to Treasury
regulation 1.1502-79(a)-(e), that have been apportioned and/or attributed to
SONB and thereafter all of said loss and credit carryforwards, if any, shall be
and remain the sole property of SONB.
9.3 INDEMNITY BY HOLDING COMPANY. HOLDING COMPANY shall
unconditionally and absolutely indemnify and hold IBC and BANCSHARES, their
officers, directors, and employees (hereinafter collectively called the
"Indemnified Parties"), harmless from and against any and all damages, losses,
liabilities, claims, litigation, demands, judgments, suits, proceedings, and
expenses (including, without limitation, attorneys' fees and court costs), of
any kind or nature whatsoever (hereinafter collectively called the "Losses")
which may at any time be imposed upon, incurred by or asserted against any of
the Indemnified Parties and related to or arising out of any dissent or
objection by any shareholder of HOLDING COMPANY against the Mergers or the
Vander Zee Litigation; provided however, with respect to Losses arising from the
Vander Zee Litigation, the Indemnified Parties shall look for reimbursement
solely out of, and the HOLDING COMPANY's indemnification obligation shall be
strictly limited to, the $100,000 being held in escrow pursuant to Section 9.5
below.
23
HOLDING COMPANY shall assume the burden and expense of defending the
Indemnified Parties, with counsel reasonably satisfactory to IBC, against all
legal proceedings related to or arising out of any matter set out herein.
Subject to the special conditions and limitations set forth herein as to the
Vander Zee Litigation, HOLDING COMPANY shall pay when due any judgments against
any of the Indemnified Parties which have been indemnified under this Agreement
and which are rendered by a final order or decree of a court of competent
jurisdiction from which no further appeal may be taken or has been taken within
the applicable appeal period. In the event that such payment is not made, the
Indemnified Party at its sole discretion, may pay any such judgments, in whole
or in part, and look to HOLDING COMPANY for reimbursement, or may proceed to
file suit against HOLDING COMPANY to compel such payment.
9.4 INDEMNITY BY IBC. IBC and BANCSHARES shall unconditionally
and absolutely indemnify and hold HOLDING COMPANY, its officers, directors, and
employees (hereinafter collectively called the "HC Indemnified Parties"),
harmless from and against any and all Losses which may at any time be imposed
upon, incurred by or asserted against any of the HC Indemnified Parties and
related to or arising out of the Vander Zee Litigation, except as paid or
incurred pursuant to Section 9.5 below from the $100,000.00 escrow.
Subject to the provisions of 9.3 and 9.5, IBC and BANCSHARES
shall assume the burden and expense of defending the HC Indemnified Parties,
with counsel reasonably satisfactory to HOLDING COMPANY, against all legal
proceedings related to or arising out of any matter set out herein. IBC and
BANCSHARES shall pay when due any judgments against any of the HC Indemnified
Parties which have been indemnified under this Agreement and which are rendered
by a final order or decree of a court of competent jurisdiction from which no
further appeal may be taken or has been taken within the applicable appeal
period. In the event that such payment is not made, the HC Indemnified Party at
its sole discretion, may pay any such judgments, in whole or in part, and look
to IBC and BANCSHARES for reimbursement, or may proceed to file suit against IBC
and BANCSHARES to compel such payment.
9.5 ESCROW. The sum of $100,000 out of the Purchase Price (the
"Escrow Amount") shall be deposited on the effective date of the Initial Merger
(as hereinafter defined) into an interest bearing escrow account at a financial
institution acceptable to HOLDING COMPANY and IBC, to be held in the name of the
escrow agent ("Escrow Agent") for the benefit of HOLDING COMPANY and the
Indemnified Parties. The Escrow Amount shall be disbursed by Escrow Agent (a) to
secure the payment of any Loss which may arise in favor of the Indemnified
Parties arising from the Vander Zee Litigation, and (b) as an agreed maximum
limitation on the amount of HOLDING COMPANY's liability to the Indemnified
Parties for any Losses arising from the Vander Zee Litigation.
Upon the payment of the Escrow Amount, IBC and Bancshares
shall release HOLDING COMPANY for any Losses arising out of the Vander Zee
Litigation. In addition to satisfying the terms and conditions of the Escrow
Agent, the Indemnified Parties
24
may not make any claim against the Escrow Amount until and unless the
Indemnified Parties shall have given HOLDING COMPANY written notice of any such
claim by the Indemnified Parties and not less than a period of thirty (30) days
to remedy any such claim and/or mitigate the Loss incurred by the Indemnified
Parties by virtue thereof. To the extent that no claim by the Indemnified
Parties has been made or is pending against the Escrow Amount, the balance of
the Escrow Amount, including all accrued interest thereon, shall be disbursed to
HOLDING COMPANY or its designee immediately after the date a final order or
decree is entered by the court in the Vander Zee Litigation from which no
further appeal may be taken or has been taken within the applicable appeal
period.
ARTICLE X
TERMINATION; EXPIRATION OF REPRESENTATIONS,
WARRANTIES AND COVENANTS; WAIVER AND AMENDMENT
10.1 TERMINATION. This Agreement may be terminated at any time
prior to the effective date of the Initial Merger by:
(a) The mutual consent of the respective Boards of Directors
of IBC and SONB;
(b) IBC if the conditions set forth in Article V hereof shall
not have been met;
(c) SONB if the conditions set forth in Article VI hereof
shall not have been met;
(d) IBC if the conditions set forth in Article VII shall not
have been met;
(e) The Board of Directors of either IBC or SONB, if
consummation of the Final Merger shall not have become effective by
5:00 P.M. on August 31, 1995, unless otherwise extended by mutual
agreement of the parties hereto; or
(f) IBC if the holders of more than fifteen percent ( 15%) of
the issued and outstanding shares of Common Stock of HOLDING COMPANY
either (i) file with SONB prior to the Shareholders Meeting a notice of
their intent to exercise their right to dissent to the Mergers, which
constitutes a sale of substantially all the assets of HOLDING COMPANY,
or (ii) vote against the Mergers at the Shareholders Meeting of HOLDING
COMPANY called in accordance with Section 4.8 hereof.
10.2 EFFECT OF TERMINATION. In the event of the termination
and abandonment of this Agreement and the Mergers, pursuant to Section 10.1,
this Agreement shall become void and have no effect, except for breaches or
actions occurring prior to termination; provided, however, that the
confidentiality provisions of Section 4.1, above,
25
shall survive termination. Any such termination which occurs through no fault of
any of the parties to this Agreement shall be without liability to any of the
parties hereto.
10.3 WAIVER AND AMENDMENT. Any term or provision of this
Agreement, except statutory requirements, and requisite approvals of regulatory
authorities, may be waived at any time by the party which is entitled to the
benefits thereof and this Agreement may be amended or supplemented at any time
by the mutual agreement of IBC and SONB through action taken by their respective
Boards of Directors.
ARTICLE XI
MERGERS
11.1 INITIAL MERGER. NEWBANK shall be merged with and into
SONB (the resulting bank being herein referred to as the "First Surviving Bank")
as of the effective time of the Initial Merger under the Charter and Articles of
Association of SONB. Each of the outstanding shares of common stock of NEWBANK
shall, IPSO FACTO, and without any action on the part of BANCSHARES, be
cancelled and be converted into shares of common stock of the First Surviving
Bank. The shares of common stock of the First Surviving Bank into which such
NEWBANK common stock is converted shall represent ownership of 100% of the
issued and outstanding capital stock of the First Surviving Bank, all of which
shall be owned by BANCSHARES upon the consummation of the Initial Merger.
On the effective date of the Initial Merger and until
thereafter amended in accordance with law, the Articles of Association of First
Surviving Bank shall be the Articles of Association of SONB as in effect on the
effective date of the Initial Merger.
Until altered, amended or repealed as therein and in the
Articles of Association of First Surviving Bank provided, the Bylaws of First
Surviving Bank shall be the Bylaws of SONB as in effect on the effective date of
the Initial Merger.
The main office of First Surviving Bank shall be the main
office of SONB as of the effective date of the Initial Merger, and all corporate
acts, plans, policies, contracts, approvals and authorizations of SONB and
NEWBANK 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 of the Initial Merger, shall
be taken for all purposes as the acts, plans, policies, contracts, approvals and
authorizations of First Surviving Bank and shall be as effective and binding
thereon as the same were with respect to SONB and NEWBANK respectively, as of
the effective date of the Initial Merger.
On the effective date of the Initial Merger, the corporate
existence of SONB and NEWBANK shall be merged into and continued in First
Surviving Bank, and First Surviving Bank shall be deemed to be the same
corporation as SONB and NEWBANK. All rights, franchises and interests of SONB
and NEWBANK, respectively, in and to any type
26
of property and choses in action shall be transferred to and vested in First
Surviving Bank by virtue of such Merger without any deed or other transfer.
First Surviving 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 SONB and NEWBANK, respectively, as of the effective date of
the Initial Merger.
On the effective date of the Initial Merger, First Surviving
Bank shall be liable for all liabilities of SONB and NEWBANK. All deposits,
debts, liabilities and obligations of SONB and of NEWBANK, respectively,
accrued, absolute, contingent or otherwise, and whether or not reflected or
reserved against on balance sheets, books of account, or records of SONB or
NEWBANK as the case may be, shall be those of First Surviving Bank and shall not
be released or impaired by the Merger. All rights of creditors and other
obligees and all liens on property of either SONB or NEWBANK shall be preserved
unimpaired.
Directors of the First Surviving Bank after the merger of
NEWBANK with and into SONB shall be the same as the Directors of SONB as of the
effective date of the Initial Merger.
Advisory Directors of the First Surviving Bank shall be the
same as the Advisory Directors of SONB as of the effective date of the Initial
Merger.
The name of the First Surviving Bank shall be "STONE OAK
NATIONAL BANK."
11.2 EFFECT OF FINAL MERGER. Immediately after the effective
time of the Initial Merger, the First Surviving Bank shall be merged with and
into IBC (which, as the receiving association, is hereinafter referred to as
"Continuing Bank" whenever reference is made to it at or after the Effective
Date) under the charter and Articles of Association of IBC pursuant to the
provisions of, and with the effect provided in Texas Banking Code Article
342-305 and the Bank Merger Act (12 U.S.C. 1828(c)).
On the Effective Date of the Final Merger and until thereafter
amended in accordance with law, the Articles of Association of Continuing Bank
shall be the Articles of Association of IBC as in effect on the Effective Date.
Until altered, amended or repealed as therein and in the
Articles of Association of Continuing Bank provided, the Bylaws of Continuing
Bank shall be the Bylaws of IBC as in effect on the Effective Date.
27
Unless and until changed by the Board of Directors of
Continuing Bank, the main office of Continuing Bank shall be the main office of
IBC as of the Effective Date, and until thereafter changed in accordance with
law or the Articles of Association or Bylaws of Continuing Bank, all corporate
acts, plans, policies, contracts, approvals and authorizations of SONB and IBC
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 SONB and IBC respectively, as of the Effective Date.
On the Effective Date of the Final Merger, the corporate
existence of SONB and IBC shall, as provided in the provisions of law heretofore
mentioned, be merged into and continued in Continuing Bank, and Continuing Bank
shall be deemed to be the same corporation as SONB and IBC. All rights,
franchises and interests of SONB and IBC, 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 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
SONB and IBC, respectively, as of the Effective Date.
On the Effective Date of the Final Merger, Continuing Bank
shall be liable for all liabilities of SONB and IBC. All deposits, debts,
liabilities and obligations of SONB and of IBC, respectively, accrued, absolute,
contingent or otherwise, and whether or not reflected or reserved against on
balance sheets, books of account, or records of SONB or IBC as the case may be,
shall be those of Continuing Bank and shall not be released or impaired by the
Merger. All rights of creditors and other obligees and all liens on property of
either SONB or IBC shall be preserved unimpaired.
Upon the consummation of the Final Merger, the par value and
number of issued and outstanding shares of capital stock of the Continuing Bank
shall be the same as the par value and number of issued and outstanding shares
of capital stock of IBC as of the Effective Date.
Directors of the Continuing Bank after the merger of SONB with
and into IBC shall be the same as the Directors of IBC as of the Effective Date.
Advisory Directors of the Continuing Bank shall be the same as
the Advisory Directors of IBC as of the Effective Date.
28
The name of the Continuing Bank shall be "International Bank
of Commerce".
11.3. CONSIDERATION. In consideration of the Initial Merger of
NEWBANK with and into SONB and the resulting ownership by BANCSHARES of all of
the issued and outstanding capital stock of the First Surviving Bank, NEWBANK
shall pay cash in the amount of the Purchase Price, as hereinafter defined, to
HOLDING COMPANY upon the consummation of the Initial Merger. The Purchase Price
shall be $2,212,000, subject to the following adjustments:
(i) In the event the Market Value, as hereinafter defined, of
the Securities Portfolio on the Effective Date is less than $6,051,993,
then the Purchase Price shall be reduced by the amount by which the
Market Value of the Securities Portfolio on such date is less than
$6,051,993; provided, however, in no event shall the Purchase Price be
reduced by more than $100,000 pursuant to this paragraph, for a minimum
Purchase Price of $2,112,000;
(ii) In the event the Market Value of the Securities Portfolio
on the Effective Date is greater than $6,051,993, then the Purchase
Price shall be increased by the amount by which the Market Value of the
Securities Portfolio on such date is greater than $6,051,993; provided,
however, in no event shall the Purchase Price be increased by more than
$100,000 pursuant to this paragraph, for a maximum Purchase Price of
$2,312,000.
As used in this Agreement, the term "Purchase Price" shall mean the amount which
is the result of the above described calculation. The term "Market Value" as
used in this section shall mean market value as determined by IBC in its sole
discretion.
11.4 PAYMENT OF PURCHASE PRICE. On the effective date of the
Initial Merger, IBC or BANCSHARES shall pay, or cause NEWBANK to pay, the
Purchase Price to the HOLDING COMPANY, as follows:
(a) $100,000 in cash out of the Purchase Price shall be
deposited in an escrow account pursuant to the terms of Section 9.4, hereof; and
(b) the balance of the Purchase Price shall be paid by
cashier's check or wire transfer to HOLDING COMPANY.
11.5 USE OF NAME. At the Closing, HOLDING COMPANY shall
transfer all of its right, title and interest to the name "Stone Oak" to IBC and
HOLDING COMPANY, and all subsidiaries and affiliates of HOLDING COMPANY shall
agree not to use the name "Stone Oak" thereafter in connection with any banking
or other similar financial institution or any insurance or securities company.
29
11.6 BENEFIT PLANS. The Continuing Bank will maintain all
employee benefit plans of IBC in effect as of the Effective Date; however, all
employee benefit plans of SONB shall be terminated by SONB prior to the
consummation of the Final Merger. All employees of SONB retained by Continuing
Bank shall be deemed to be and shall be treated as new employees of IBC.
ARTICLE XII
MISCELLANEOUS
12.1 ENTIRE AGREEMENT. This Agreement contains the entire
agreement among IBC, BANCSHARES and SONB with respect to the Mergers.
12.2 NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by registered or certified mail, postage prepaid, addressed
as follows:
If to IBC or BANCSHARES:
International Bank of Commerce; or
International BANCSHARES Corporation
1200 San Bernardo
Laredo, Texas 78040
Attn: Mr. Dennis E. Nixon, President
and
International Bank of Commerce
130 East Travis
San Antonio, Texas 78205
Attn: Mr. Thomas L. Travis, President
With a Copy To:
Martin, Drought & Torres, Inc.
300 Convent, Suite 2500
San Antonio, TX 78205
Attention: Frank B. Burney
30
If to SONB:
Mr. Harold F. McDonald
Chairman of the Board and President
STONE OAK NATIONSBANK
723 Morning Hill
San Antonio, Texas 78232
With A Copy To:
Jackson & Walker, L.L.P.
112 E. Pecan St., #2100
San Antonio, Texas 78205-1521
Attention: Patrick B. Tobin
12.3 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and each such counterpart hereof shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
12.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
12.5 ADDITIONAL DOCUMENTATION. As soon as practicable after
the Effective Date, the Merging Banks shall execute and file such documents and
take such other actions as may be necessary or appropriate to effect the
transactions contemplated by this Agreement.
12.6 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, and the application
of such provision to persons or circumstances other than those to which it is
held invalid and unenforceable, shall not be affected thereby and each provision
of this Agreement shall be valid and enforced to the fullest extent permitted by
law.
12.7 ARBITRATION. The parties hereto shall submit to binding
arbitration by a board of three arbitrators any disputed question or controversy
arising under this Agreement or arising out of or relating to the transaction
contemplated by the Agreement. Any such arbitration shall be conducted at San
Antonio, Texas. Any party may initiate the arbitration, by notice in writing to
the other party, setting forth the nature of the dispute, the amount involved,
if any, and the remedy sought. Any party desiring to initiate arbitration shall
serve a written notice of intention to arbitrate to the other party and to the
American Arbitration Association office in or closest to San Antonio, Texas
within 180 days after a dispute has arisen. A dispute is deemed to have arisen
upon receipt of written demand or service of judicial process. Failure to serve
a notice of intention to arbitrate
31
within the time specified above shall be deemed a waiver of the notifying
party's right to compel arbitration of such claim. Such notice of intention to
arbitrate may be informal and need not comply with Rule 6 of the American
Arbitration Association. Legal action regarding this Agreement and any
liabilities hereunder shall either be brought by arbitration, as described
herein, or by judicial proceedings but shall not be pursued in different or
alternative forums. The issue of waiver pursuant to this paragraph is an
arbitrable issue.
The board of three arbitrators shall be appointed promptly
upon written application of the initiating party, and shall be selected in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. All of the arbitrators shall be members of the American Arbitration
Association. Depositions may be taken and other discovery obtained in any
arbitration under this Agreement. The board of arbitrators appointed hereunder
shall conduct the arbitration pursuant to the Commercial Arbitration Rules of
the American Arbitration Association then in effect, except as such rules may be
modified for the purpose of the arbitration proceeding by action of a majority
vote or the arbitrators or by mutual written agreement of the parties to this
Agreement.
In any arbitration proceeding subject to these provisions the
arbitrators, or a majority of them, are specifically empowered to decide (by
documents only, or with a hearing, at the arbitrators sole discretion)
pre-hearing motions which are substantially similar to preheating motions to
dismiss and motions for summary adjudication.
The award of the arbitrators, or a majority of them, shall be
final and binding upon the parties hereto and judgment thereon may be entered in
any court having jurisdiction.
All statutes of limitations which would otherwise be
applicable shall apply to any arbitration proceeding hereunder.
The provisions of this section shall survive any termination,
amendment, or expiration of this Agreement unless all the parties hereto
otherwise expressly agree in writing.
The parties hereto acknowledge that this Agreement evidences a
transaction involving interstate commerce in that the funds which may be
advanced or committed under this Agreement are derived from interstate financial
markets. The Federal Arbitration Act shall govern the interpretation,
enforcement, and proceedings pursuant to the arbitration clause in this
Agreement.
The arbitrators, or a majority of them, shall award attorney's
fees and costs to the prevailing party pursuant to the terms of this Agreement.
Venue of any arbitration proceeding hereunder will be in Bexar
County, Texas.
32
Except as set forth above concerning awards to the prevailing
party, each party shall bear its own expenses in connection with preparation for
the presentation of its case at the arbitration proceedings and the fees and
expenses of the arbitrators and all other expenses of the arbitration (except
those referred to in the preceding sentence) shall be borne equally by the
parties to such arbitration.
12.8 SURVIVAL. All of the representations, covenants,
warranties and agreements contained in this Agreement shall survive the Closing
and the Effective Date, for a period of two (2) years from the date of this
Agreement except for any representation or warranty relating to tax matters, for
which tax matters representations shall have no time limitation except as may be
provided by law, and performance or execution in whole or in part of this
Agreement shall not constitute a waiver thereof. Without limiting the generality
of the foregoing, this Agreement shall continue and remain in full force and
effect between HOLDING COMPANY, IBC and BANCSHARES regarding the Post Closing
Covenants of HOLDING COMPANY set forth in Article IX hereof for the periods
therein contemplated notwithstanding the consummation of the Mergers.
IN WITNESS WHEREOF, SONB and IBC have each caused this Agreement to be
executed by its Chief Executive Officer, and HOLDING COMPANY and BANCSHARES have
caused this Agreement to be executed by their respective Chief Executive
Officers, all as of the date and year first above written.
33
STONE OAK NATIONAL BANK
SAN ANTONIO, TEXAS
By:/S/ HAROLD F. MCDONALD
Harold F. McDonald, Chairman
of the Board
STONE OAK BANKSHARES, INC.
By:/S/ HAROLD F. MCDONALD
Harold F. McDonald
Its: CHAIRMAN OF THE BOARD
INTERNATIONAL BANK OF COMMERCE
By:/S/ DENNIS E. NIXON
Dennis E. Nixon, President
INTERNATIONAL BANCSHARES CORPORATION
By:/S/ DENNIS E. NIXON
Dennis E. Nixon, President
34
THE STATE OF TEXAS
COUNTY OF BEXAR
I, Karen Kravcov , a Notary Public, do hereby certify that on this 26th
day of February, 1995, personally appeared before me Harold F. McDonald, who
declared he is the Chairman of STONE OAK NATIONAL BANK and STONE OAK BANKSHARES,
INC., acknowledged that he signed the foregoing document in the capacities
therein set forth and declared that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the date and
year before written.
Karen L. Kravcov KAREN L. KRAVCOV
Notary Seal Notary Public Notary Public, State of Texas
State of Texas STATE OF TEXAS 10-18-95
My Comm. Exp. 10/18/95 (Printed or stamped name of
Notary) My commission expires:
THE STATE OF TEXAS
COUNTY OF WEBB
I,_______________________ , a Notary Public, do hereby certify that on
this ___ day of _______________, 1994, personally appeared before me Dennis E.
Nixon, who declared he is the President of INTERNATIONAL BANK OF COMMERCE and
INTERNATIONAL BANCSHARES CORPORATION, acknowledged that he signed the foregoing
document in the capacities therein set forth and declared that the statements
therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the date and
year before written.
_____________________________
Notary Public, State of Texas
_____________________________
(Printed or stamped name of
Notary) My commission expires:
35
EXHIBITS:
Schedule A - Securities Portfolio
Schedule B - Tax Matters and Available Carry Forward
Schedule C - Capital Stock
Schedule D - Material Obligations
Schedule E - Employment Contracts
Schedule F - Real Property Interests
Schedule G - Insurance Agreements
Schedule H - Reserve for Possible Loan Losses
Schedule I - Legal Proceedings
Schedule J - Material Changes
Schedule K - Property Taxes and Liens
Schedule L - Evidences of Indebtedness
Schedule M - Bank Secrecy Act
Schedule N - Environmental Liabilities
36
DIRECTORS OF STONE OAK NATIONAL BANK
SAN ANTONIO, TEXAS
By:/S/ CHARLES W. CURRY, JR. By: _________________________
Charles W. Curry, Jr., President Samuel Peck, Director
By:/S/ CHARLES R. SHADDOX By:/S/ CHRIS WAPLES
Charles R. Shaddox, Director Chris Waples, Director
By:/S/ LLOYD A. DENTON, JR. By:/S/ MARK MCCOY
Lloyd A. Denton, Jr., Director Mark McCoy, Director
By:/S/ LAVERNE M. JAPHET By: _________________________
Laverne M. Japhet, Director Charles W. Curry, Jr.,
Director
By:/S/ DONALD N. JORDAN By: _________________________
Donald N. Jordan, Director David Garrett, Director
37
STONE OAK BANKSHARES, INC.
By:/S/ CHARLES W. CURRY, JR.
Charles W. Curry, Jr., President
By: __________________________________ By: ____________________________
Charles W. Curry, Jr., Director Samuel Peck, Director
By:/S/ CHARLES R. SHADDOX By:/S/ CHRIS WAPLES
Charles R. Shaddox, Director Chris Waples, Director
By:/S/ LLOYD A. DENTON, JR. By:/S/ MARK MCCOY
Lloyd A. Denton, Jr., Director Mark McCoy, Director
By:/S/ LAVERNE M. JAPHET By: ____________________________
Laverne M. Japhet, Director Charles W. Curry, Jr.,
Director
By:/S/ DONALD N. JORDAN By: ____________________________
Donald N. Jordan, Director David Garrett, Director
38
INTERNATIONAL BANK OF COMMERCE
By:/S/ LEONARDO SALINAS By:/S/ ROY JENNINGS, JR.
Leonardo Salinas, Director Roy Jennings, Jr.,
Director
By:/S/ DENNIS E. NIXON By:/S/ LESTER AVIGAEL
Dennis E. Nixon, Director Lester Avigael, Director
By: __________________________________ By:/S/ RICHARD E. HAYNES
Alberto A. Santos, Director Richard E. Haynes,
Director
By: __________________________________ By:/S/ ANTONIO R. SANCHEZ, JR.
R. David Guerra, Director Antonio R. Sanchez, Jr.,
Director
INTERNATIONAL BANCSHARES CORPORATION
By:/S/ DENNIS E. NIXON
Dennis E. Nixon, President
39