EXHIBIT 2.1
STOCK EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
THIS AGREEMENT is made and effective as of this 4th day of September, 1998,
between (1) FIRST FINANCIAL BANKSHARES, INC. (hereinafter referred to as "FIRST
FINANCIAL"), a Texas corporation with its principal office in the City of
Abilene, Taylor County, Texas; and (2) CLEBURNE STATE BANK (hereinafter referred
to as "CSB"), a state bank having its principal office in the City of Cleburne,
Johnson County, Texas.
RECITALS:
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First Financial is a registered bank holding company. First Financial owns
all of the issued and outstanding capital stock of First Financial Bankshares of
Delaware, Inc. ("FFB DELAWARE") which, in turn, owns all of the issued and
outstanding capital stock of First National Bank of Abilene; First National
Bank, Sweetwater; Eastland National Bank; Hereford State Bank; First National
Bank in Cleburne; Stephenville Bank & Trust Co.; San Angelo National Bank; Texas
National Bank, Southlake; and Weatherford National Bank.
As of the date of this Agreement, CSB has 195,740 authorized shares of
Common Stock (the "CSB STOCK") having a par value of Four Dollars ($4.00) each,
with 195,740 shares being issued and outstanding. According to the records of
CSB, the CSB Stock is presently held by those individuals, trusts, estates,
corporations and other entities (the "SHAREHOLDERS") identified in the List of
Shareholders attached hereto as EXHIBIT A.
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Pursuant to, and subject to, the provisions hereinafter set forth, First
Financial desires to acquire from the Shareholders all of the issued and
outstanding shares of CSB Stock in exchange for shares of the voting Common
Stock of First Financial ("FIRST FINANCIAL STOCK") which shall be issued and
registered by First Financial under the Securities Act of 1933, as amended (the
"ACT").
NOW, THEREFORE, in consideration of the premises, and in further
consideration of the mutual covenants and on the basis of the representations
and warranties set forth herein, First Financial and CSB have agreed, and by
these presents do hereby agree, as follows:
ARTICLE 1
EXCHANGE OF STOCK
1.1. MEANS OF EXCHANGE. The offer (the "EXCHANGE OFFER") to acquire all
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of the shares of CSB Stock in exchange for shares of First Financial Stock shall
be made by means of an Offering Prospectus ("PROSPECTUS") to be delivered by
First Financial to each of the Shareholders upon or following the effective date
of a Registration Statement to be filed by First Financial in accordance with
the Act (the "REGISTRATION STATEMENT").
1.2. RATIO OF EXCHANGE. Subject to all terms and conditions of this
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Agreement, First Financial shall be obligated to issue and exchange 1.75 shares
of First Financial Stock for each share of CSB Stock tendered by the
Shareholders who accept the Exchange Offer during the time period the Exchange
Offer is in effect; PROVIDED, HOWEVER, that if, prior to consummation of the
proposed Exchange Offer, a share of First Financial Stock shall be changed into
a different number of shares of First Financial Stock or a different class of
shares by reason of reclassification, recapitalization, split up, exchange of
shares or adjustments, or if a stock dividend thereon shall be declared with a
record date within such period, then the number of shares of First Financial
Stock into which a share of CSB Stock shall be exchanged will be appropriately
and proportionately adjusted so that each Shareholder of CSB Stock shall be
entitled to receive such number of shares of First Financial Stock as such
Shareholder would have received pursuant to such reclassification,
recapitalization, split up, exchange of shares or adjustments, or as a result of
such stock dividend, had the record date thereof been immediately following
consummation of the exchange; FURTHER PROVIDED, if, the Market Value (as herein
defined) of First Financial Stock is less than $40.00 per share, or greater than
$44.00 per share, the exchange ratio shall be adjusted by multiplying the
exchange ratio by a fraction, the numerator of which is $42.00 and the
denominator of which is the Market Value of First Financial Stock. PROVIDED,
HOWEVER, either First Financial or CSB may terminate this Agreement in the event
any adjustments to the exchange ratio contemplated herein would result in the
required issuance of more than 375,000 shares of First Financial Stock (as
adjusted in the event a share of First Financial Stock shall be changed into a
different number of shares by reason of reclassification, recapitalization,
split up, exchange of shares or adjustments, or if a stock dividend thereon
shall be declared with a record date prior to consummation of the proposed
Exchange Offer).
As used herein, the "MARKET VALUE" of First Financial Stock shall mean the
average of the daily last sales prices of First Financial Stock reported on the
NASDAQ national market system ("NASDAQ NMS")(as reported by The Wall Street
Journal or, if not reported thereby, another authoritative source) for the ten
(10) consecutive full trading days in which such shares are traded on the NASDAQ
NMS ending at the close of trading on the tenth (10th) business day prior to
the mailing of the Prospectus.
1.3. MEANS OF ACCEPTANCE OF EXCHANGE OFFER. A form of certificate and
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acceptance of the Exchange Offer (the "EXCHANGE FORM") in substantially the same
form as EXHIBIT B, shall accompany the Prospectus to be delivered to each
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Shareholder of CSB. The Exchange Form shall require that each Shareholder
certify that the subject CSB Stock held by the Shareholder will be transferred
to First Financial free and clear of all liens, restrictions, charges and
encumbrances and not be subject to any adverse claim. Once the Exchange Form
has been signed by a Shareholder and delivered to the Transfer Agent (as defined
in Section 1.5), the same shall be deemed to constitute an acceptance of the
Exchange Offer to the extent of the number of shares of CSB Stock accompanying
such Exchange Form. Shares of CSB Stock delivered by the Shareholders to the
Transfer Agent pursuant to the Exchange Offer may not be withdrawn, except as
provided by the Williams Act. If, for any reason, the Exchange Offer is
terminated and the exchange of CSB Stock for First Financial Stock is not
consummated, then all shares tendered by the Shareholders for exchange shall be
promptly returned by the Transfer Agent.
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1.4. MEANS OF CONSUMMATING THE EXCHANGE. The Transfer Agent, during the
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pendency of the Exchange Offer, shall notify First Financial and CSB, in
writing, daily of the number of shares of CSB Stock tendered for exchange under
properly executed Exchange Forms. If First Financial receives written notice
from the Transfer Agent that the Required Amount of CSB Stock (as defined in
Section 2.2) has been tendered and assigned to First Financial, then, within ten
(10) days after the Closing Date, First Financial shall issue and mail to those
Shareholders who have tendered their shares of CSB Stock, by registered mail,
certificates for the First Financial Stock representing the number of whole
shares of First Financial's stock as required under Section 1.2 above for each
share of CSB Stock received by the Transfer Agent. For purposes of this
Agreement, the "CLOSING DATE" shall be the later of (i) the date First Financial
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receives notice from the Transfer Agent that the Required Amount of CSB Stock
has been tendered, (ii) the expiration date of the Exchange Offer, or (iii) the
date when all conditions precedent to consummation of the exchange have been
satisfied (or, if not satisfied, have been waived in writing by First Financial
or CSB, as the case may be, in accordance with Section 1.9). Subject to the
terms and conditions of this Agreement, the exchanges called for by this
Agreement will be effective as of the Closing Date.
Notwithstanding the foregoing provisions of this Section and of
Section 1.3, First Financial shall not issue any fractional shares of its Common
Stock. Shareholders of CSB who would otherwise be entitled to receive
fractional shares of First Financial Stock shall be paid in cash for such
fractional shares based upon the Market Value per share of First Financial Stock
. Any cash payment to which a Shareholder of CSB may be entitled shall be
included with such Shareholder's certificate for First Financial Stock when such
certificate is mailed to such Shareholder.
1.5. TRANSFER AGENT. The Transfer Agent (herein so called) for purposes
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of this transaction shall be First National Bank of Abilene - Trust Department,
Third Floor, 400 Pine Street, Abilene, Texas 79601.
1.6. EFFECTIVE DATE OF EXCHANGE OFFER. The effective date for
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commencement of the Exchange Offer (the "EFFECTIVE DATE") contemplated by this
Agreement shall be the later of:
(a) The date upon which the Prospectus is mailed by First Financial
to the Shareholders of CSB pursuant to the Registration Statement (not
before but on or following the effective date thereof) filed by First
Financial with the Securities and Exchange Commission ("SEC") with respect
to the First Financial Stock to be issued hereunder; or
(b) Such other date as may be mutually agreed upon by First Financial
and CSB.
1.7. OFFER EXPIRATION DATE. Unless otherwise extended by First Financial,
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the Exchange Offer shall expire twenty-one (21) business days after the
Effective Date.
1.8. MERGER. If the Required Amount of CSB Stock (as defined in Section
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2.2) is tendered in exchange for First Financial Stock, and if all other
conditions precedent to
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consummation of the exchange are satisfied (or, if not satisfied, are waived in
writing by First Financial or CSB, as the case may be, in accordance with
Section 1.9) and First Financial shall deliver to the tendering Shareholders the
shares of First Financial Stock (and, with regard to any fractional shares, the
cash payments) to which such Shareholders are entitled hereunder, it is the
intent of First Financial to as soon as practicable merge CSB with and into
First National Bank in Cleburne pursuant to the requisites of applicable law. If
the Exchange Offer is consummated, but less than all of the CSB Stock is
tendered in exchange for First Financial Stock, then as part of the proposed
merger of CSB into First National Bank in Cleburne, those Shareholders of CSB
who did not tender their shares pursuant to the Exchange Offer made under this
Agreement will be required to accept cash payment for their shares determined
upon the same basis as the exchange of CSB Stock for First Financial Stock,
subject only to the rights, if any, afforded by applicable law to any
Shareholders of CSB who dissent from the merger and refuse to accept the cash
payment tendered in return for their CSB Stock.
1.9. WAIVER OF CONDITIONS. If not satisfied, any condition for the
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benefit of First Financial may be waived by First Financial in writing and any
condition for the benefit of CSB or the Shareholders may be waived by CSB in
writing.
ARTICLE 2
CONDITIONS PRECEDENT TO EXCHANGE OFFER
AND CONSUMMATION OF TRANSACTION
Unless otherwise agreed in writing by First Financial and CSB, the
obligations of First Financial to offer First Financial Stock to the
Shareholders pursuant to this Agreement and, thereafter, the obligations of
First Financial and CSB and the tendering Shareholders to consummate the
exchange of stock contemplated by this Agreement shall be expressly subject to
the satisfaction of the following conditions:
2.1. REGULATORY APPROVALS. (1) The Board of Governors of the Federal
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Reserve System shall have approved, in writing, the acquisition by First
Financial of all of the issued and outstanding capital stock of CSB; (2) all
other approvals and authorizations of, filings and registrations with, and
notifications to, all federal, state and local authorities required for the
consummation of the transaction contemplated hereby shall have been obtained or
made and shall be in full force and effect; and (3) all mandatory waiting
periods shall have elapsed.
2.2. TAX RULINGS. (1) CSB shall have received a written opinion from its
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independent accountants and/or tax counsel to the effect that, for federal
income tax purposes, the transaction called for by this Agreement will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and that, accordingly, for federal tax purposes (i) no gain or loss
will be recognized by each Shareholder who receives First Financial Stock in
exchange for his or her CSB Stock, (ii) the aggregate tax basis of First
Financial Stock received by a Shareholder will be the same as the aggregate
basis of the CSB Stock surrendered in exchange therefor, and (iii) the holding
period for the purpose of determining the recognition of long-term capital gain
or loss resulting from a subsequent sale of the First Financial Stock to be
received by each Shareholder
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will include, in each instance, the period in which the Shareholder held the CSB
Stock surrendered and exchanged therefor; and (2) First Financial shall have
received a written opinion from its independent accountants, Arthur Andersen
LLP, in form and substance satisfactory to First Financial, stating that the
acquisition by First Financial of the Required Amount of CSB Stock will be
treated for accounting purposes as a "pooling-of-interests." For purposes of
this Agreement, the term "REQUIRED AMOUNT OF CSB STOCK" shall mean that number
of shares of CSB Stock (as determined by First Financial's independent
accountants) which must be tendered by the Shareholders in exchange for First
Financial Stock in order for the acquisition by First Financial to be treated
for accounting purposes as a "pooling-of-interests," and which number of shares,
for purposes of this transaction, shall be at least 90% of the issued and
outstanding shares of CSB Stock.
2.3. ACCURACY OF REPRESENTATIONS AND WARRANTIES. Except as otherwise
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expressly provided herein, all of the representations and warranties of First
Financial and CSB contained in this Agreement shall be true and correct as of
the Effective Date and as of the Closing Date, with the same force and effect as
though made on the Effective Date and Closing Date, respectively, and there
shall be delivered on the Effective Date and the Closing Date appropriate
certificates of authorized officers of First Financial and CSB.
2.4. PERFORMANCE OF AGREEMENTS. First Financial and CSB shall have
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performed all obligations and agreements, and shall have complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed and complied with by it or them on or prior to the Closing Date.
2.5. NO GOVERNMENTAL PROCEEDING OR LITIGATION. No order, judgment or
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decree of any competent court, governmental body or regulatory authority shall
be outstanding which declares or seeks a declaration that this Agreement is
invalid or which restrains, or seeks to restrain, the consummation of the
Exchange Offer; and no action or proceeding shall be pending which questions the
validity or legality of, or seeks to restrain the consummation of, the exchange
contemplated by this Agreement.
2.6. SECURITIES LAWS. (1) The declaration by the SEC that the
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Registration Statement filed by First Financial pursuant to the Act covering the
shares of First Financial Stock to be issued pursuant to this Agreement is
effective and the furnishing of a Prospectus to the Shareholders of CSB; (2) all
approvals and authorization of, filings and registrations with, and
notifications to, all regulatory authorities under state securities or Blue Sky
laws required for the offer, sale, exchange or qualification of the First
Financial Stock in connection with the Exchange Offer shall have been obtained
or made and shall be in full force and effect; (3) First Financial and CSB
shall have complied with all federal and state securities laws, statutes, rules
and regulations applicable to the Exchange Offer contemplated by this Agreement;
(4) no stop order has been issued or threatened by any federal or state
securities authority with respect to the offer, sale, issuance or exchange of
stock contemplated hereby; and (5) First Financial shall have taken such action
as may be necessary for the shares of First Financial Stock to be issued
pursuant to this Agreement to be qualified for trading on the NASDAQ NMS.
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2.7. TENDER OF SHARES. The delivery by Shareholders owning the Required
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Amount of CSB Stock of duly and properly executed Exchange Forms effectively
transferring and assigning their shares of CSB Stock to First Financial free and
clear of all liens, options and claims of any sort.
2.8. NO MATERIAL CHANGES. The absence of any material adverse change in
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the financial conditions of First Financial and CSB between July 31, 1998, and
the Closing Date as determined in good faith by First Financial and CSB.
2.9. OPINION OF CSB'S COUNSEL. First Financial shall have received the
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written opinion of counsel for CSB dated at or as of the Closing Date, and in
form and substance satisfactory to First Financial and its counsel, that (1) CSB
is duly organized, validly existing and in good standing under the laws of the
State of Texas; (2) CSB has all requisite power and has been duly authorized to
execute and deliver this Agreement and to consummate the transaction
contemplated thereby; (3) the execution and delivery of this Agreement by CSB
does not, and the consummation of the transaction contemplated thereby, will, to
the knowledge of such counsel, not contravene or violate any provisions of or
constitute a default under (a) the Articles of Association or Bylaws of CSB, (b)
any agreement or instrument to which CSB is a party or by which CSB is bound or
to which any property of CSB is subject, or (c) any law, regulation, rule,
decree, order or judgment of any court, governmental agency or public body
applicable to CSB or any of their respective assets or property; (4) all
consents, approvals, authorizations, actions or filings with any court,
governmental agency or public body required in connection with the execution,
delivery and performance by CSB of this Agreement have been obtained and, to the
best of counsel's knowledge, have not been withdrawn or qualified; (5) all of
the outstanding shares of CSB Stock have been validly issued and are non-
assessable and fully paid; (6) except as reflected in an applicable Disclosure
Schedule, to the best of counsel's knowledge, there are no known liabilities,
claims or lawsuits pending against CSB or any of their respective properties or
assets; and (7) between the date of this Agreement and the Closing Date, the
number of issued and outstanding shares of CSB Stock have not increased.
2.10. ENVIRONMENTAL REPORT. Within 30 business days from the date of this
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Agreement, First Financial shall have received, at First Financial's expense, a
Phase I Environmental Assessment report covering all real property of CSB, which
report shall be satisfactory to First Financial in its sole discretion, whether
such real property is used by CSB in its corporate or banking business, held for
resale or otherwise owned or held by CSB. First Financial shall promptly, but
within no event more than five (5) business days after receipt of such Phase I
Environmental Assessment, provide a copy of such assessment to CSB.
2.11. TERMINATION OF ESOP AND FREEZE OF 401(K) PROFIT SHARING PLAN. The
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Board of Directors of CSB shall, prior to the Closing Date, adopt such
resolutions, and take such other action, as may be reasonable and necessary (as
judged by First Financial and its counsel), to terminate the existing CSB ESOP
(the "ESOP") and to freeze the existing CSB 401(k) Profit Sharing Plan (the
"401(K)"). Such resolutions may condition termination of the ESOP and freeze of
the 401(k), including any transfer, exchange or disposition of the assets of the
ESOP, upon consummation of the stock exchange transaction contemplated by this
Agreement.
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In addition, First Financial and its counsel shall be reasonably
satisfied, in their opinion, that (1) the ESOP and the 401(k) are qualified
plans under, and as of the effective date of termination or freezing (as the
case may be), in substantial compliance with the Employee Retirement Income
Security Act of 1974 ("ERISA"), as amended, the Internal Revenue Code of 1986,
as amended, and all other applicable laws, rules and regulations; and (2) no
facts or circumstances known to CSB exist which, in the opinion of First
Financial and its counsel, may result in liability to First Financial, CSB
or any of its or their directors, officers or employees arising out of, or in
connection with, administration of the ESOP or the 401(k), or freezing of the
401(k) if the transaction contemplated by this Agreement is consummated.
2.12. "RUN-OFF" LIABILITY INSURANCE COVERAGE. CSB shall acquire for the
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benefit of its officers and directors "run-off" liability insurance coverage to
survive the Closing Date, which coverage shall be satisfactory to First
Financial and CSB.
2.13. REDEMPTION OF PREFERRED STOCK. CSB shall, prior to the Closing
-----------------------------
Date, adopt such resolutions and take such other action as may be necessary or
appropriate under the circumstances to redeem and cancel all of the issued and
outstanding shares of CSB Preferred Stock.
2.14. OPINION OF FIRST FINANCIAL'S COUNSEL. CSB shall have received the
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written opinion of counsel for First Financial, dated at or as of the Closing
Date and in form and substance satisfactory to CSB and its counsel, that (1)
First Financial is duly organized, validly existing and in good standing under
the laws of the State of Texas; (2) First Financial has all requisite power and
has been duly authorized to execute and deliver the Agreement and to consummate
the transaction contemplated thereby; (3) the execution and delivery by First
Financial of the Agreement does not, and the consummation of the transaction
contemplated thereby will, to the knowledge of such counsel, not, contravene or
violate any provision of or constitute a default under the (a) Articles of
Incorporation or Bylaws of First Financial, or (b) any law, regulation, rule,
decree, order or judgment of any court, governmental agency or public body
applicable to First Financial or its assets or properties; (4) all consents,
approvals, authorizations, actions or filings with any court, governmental
agency or public body required in connection with the execution, delivery and
performance by First Financial of the Agreement have been obtained and, to the
best of counsel's knowledge, have not been withdrawn or qualified; (5) when
issued pursuant to this Agreement, the shares of First Financial Stock issued in
exchange for shares of CSB Stock shall be duly authorized and issued and fully
paid and non-assessable; (6) a Registration Statement on Form S-4 with respect
to the First Financial Stock to be issued pursuant to the Exchange Offer has
been declared effective by the SEC and, to the best of counsel's knowledge, no
stop order suspending the effectiveness of the Registration Statement has been
issued.
2.15. UNDERTAKING OF AFFILIATE. CSB shall identify and set forth in
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Disclosure Schedule 2.15 all possible "affiliates" of CSB within the meaning of
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Rules 144 and 145, as amended, of the General Rules and Regulations under the
Act. CSB shall have received from each such affiliate, and thereafter, shall
have delivered to First Financial, an Undertaking of Affiliate statement in the
form of Exhibit C.
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ARTICLE 3
WARRANTIES AND REPRESENTATIONS
OF CSB
CSB hereby makes the following warranties and representations to First
Financial:
3.1. ORGANIZATION AND STANDING OF CSB. CSB is a state bank duly organized,
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validly existing and in good standing under banking laws of the State of Texas,
with corporate power to own property and carry on its business as it is now
being conducted. CSB is an insured bank under the Federal Deposit Insurance Act.
All of the banking business and all of the banking offices and facilities of
CSB are located within the State of Texas. True, correct and complete copies of
the Articles of Association and Bylaws of CSB, including all amendments thereto,
have been delivered to First Financial, or are delivered herewith by CSB to
First Financial. The corporate minutes of Bank contain a true and substantially
complete record of all meetings and consents in lieu of meetings of the Board of
Directors and Shareholders since the incorporation of CSB, which accurately
reflect in all material respects all transactions referred to in such minutes
and consents in lieu of meeting.
3.2. SUBSIDIARIES AND AFFILIATES. CSB does not have any subsidiaries.
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Except as set forth in Disclosure Schedule 3.2, CSB does not hold any interest
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in any other corporation, firm, joint venture or partnership, except (1) as
security for repayment of loans to customers of CSB, (2) as acquired by CSB
through foreclosure or otherwise by reason of debt previously contracted, or (3)
for authorized investment securities purchased by CSB for its own account (but,
as a result of which investments, CSB is not considered to be an affiliate of
the issuer of such securities or otherwise controls, is not controlled by or is
not under common control with, the issuer of any such investment securities).
3.3. CAPITALIZATION. As of the date of this Agreement, the authorized
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capital stock of CSB consists of 195,740 shares of CSB Stock of a par value of
$4.00 each, of which 195,740 are presently issued and outstanding, and 48,690
shares of $15.00 par value, 7.5% nonvoting, cumulative Preferred Stock, of which
48,690 are presently issued and outstanding. CSB holds no stock as treasury
stock. All rights, privileges, restrictions (if any), terms and provisions
governing any of the shares of capital stock of CSB is described in Disclosure
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Schedule 3.3. As of the Closing Date there shall not be any of the shares of
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capital stock of CSB held as treasury stock; additionally, there shall be no
outstanding or authorized subscriptions, options, warrants, calls, rights or
commitments or any kind restricting the transfer of, requiring the issuance or
sale of, or otherwise relating to, any of the capital stock of CSB.
3.4. AUTHORITY OF CSB. This Agreement has been duly authorized, executed
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and delivered by CSB, and, subject to the conditions precedent to the
consummation of the transactions set forth herein, is a valid, legally binding
and enforceable obligation of CSB. Neither the execution, delivery or
performance of this Agreement in its entirety, nor the consummation of all of
the transactions contemplated hereby, will violate (with or without the giving
of notice or the passage of time), be in conflict with, result in a breach of
any provision of, or constitute a
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default under, any provision in the Articles of Association or Bylaws of, or any
provision of law applicable to, CSB or any agreement or understanding, order,
judgment, award, decree, statute, ordinance, regulation or other restriction of
any kind or character to which CSB is a party or by which any of the respective
assets or properties of CSB are subject or bound.
3.5. Licenses, Permits and Contracts. None of the licenses, permits,
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franchises, authorizations or contracts of CSB will be violated, breached,
terminated or otherwise impaired by reason of execution, delivery or performance
of this Agreement by CSB, or consummation of the transactions contemplated
hereby.
3.6. Claims, Suits and Proceedings. Except as reflected in Disclosure
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Schedule 3.6, there are no legal, administrative, arbitration or other action,
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suit, proceeding or claim pending, under investigation, or, to its knowledge,
threatened against CSB, at law or in equity, or before any federal, state,
municipal or other governmental court, department, commission, board, bureau,
agency, instrumentality or other person. In particular, and without in any way
limiting the foregoing, CSB is not subject to, or a party to, any cease-and-
desist, supervisory or other agreement with any banking or other regulatory
authority which requires the consent or approval of such authority or which is
otherwise applicable to the transaction contemplated by this Agreement.
3.7. Consents and Approvals. No consent, approval or authorization of, or
----------------------
declaration, filing or registration with, any person or governmental authority
is required in connection with the execution and delivery of this Agreement by
CSB, and consummation of the transaction contemplated hereby, except for such
regulatory approvals as may be required for First Financial to acquire the CSB
Stock under Section 2.1 and for such approvals by the Board of Directors of CSB
as have been given prior to execution of this Agreement.
3.8. Regulatory Reports. CSB has filed all reports, registrations and
------------------
statements, together with any amendments required to be made thereto, that are
required to be filed with the Board of Governors of the Federal Reserve System
(the "FRB"), the Federal Deposit Insurance Corporation (the "FDIC"), and any
other applicable authorities, and all of such reports, registrations and
statements are true, complete and correct in all material respects.
3.9. Financial Statements. CSB has provided, or caused to be provided, to
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First Financial the Financial Statements and Reports described in Disclosure
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Schedule 3.9 attached hereto and the notes thereto (collectively, the "FINANCIAL
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STATEMENTS"), all of which have been prepared in accordance with Generally
Accepted Accounting Principles ("GAAP") or regulatory accounting principles
("RAP"); and the Financial Statements, as of their respective dates, conformed
in all material respects with all applicable material rules and regulations
promulgated by the FRB and the FDIC (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments and the fact that
they do not contain all of the footnote disclosures required by GAAP).
3.10. Undisclosed Liabilities. Except to the extent reflected in the
-----------------------
Financial Statements or as reflected in Disclosure Schedule 3.10, CSB has no
------------------------
debt, liability or obligation of any nature
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(whether liquidated, unliquidated, absolute, accrued, contingent or otherwise
and whether due or to become due) which may result in a material adverse effect
upon its financial condition or its ability to perform this Agreement.
3.11. ABSENCE OF CERTAIN CHANGES. Except as and to the extent reflected
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in Disclosure Schedule 3.11, CSB from July 31, 1998, until the date of this
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Agreement, has not:
(a) made any amendment to its Articles of Association or Bylaws, or
changed the character of its business in any material manner;
(b) suffered any material adverse change in its financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise) or
business;
(c) incurred, assumed or become subject to, whether directly or by
way of any guarantee or otherwise, any debt, obligation or liability
(whether liquidated, unliquidated, absolute, accrued, contingent or
otherwise) except in the ordinary course of business;
(d) permitted or allowed any of its property or assets to be subject
to any mortgage, pledge, lien, security interest, encumbrance, or
restriction;
(e) canceled any debts in excess of $25,000, waived any claims or
rights of material value, or sold, transferred, or otherwise disposed of
any of its properties or assets, except in the ordinary course of business;
(f) disposed of or permitted to lapse any rights to the use of any
trademark, trade name, copyright or other intangible property right or
franchise, or disposed of or disclosed to any person other than its
employees any trade secret not theretofore a matter of public knowledge;
(g) granted any increase in compensation, or pay or agreed to pay or
accrue any bonus or like benefit, to or for the credit of any director or
executive officer except for those annual bonuses normally accrued and paid
to CSB's officers and employees in an aggregate amount not to exceed
$100,000, or entered into any employment or consulting contract or other
agreement for personal services with any director, officer or employee, or
adopted, amended or terminated any Employee Benefit Plan (as defined in
Section 3.15);
(h) declared, paid or set aside for payment any dividend or other
distribution or payment in respect of its capital stock other than normal,
regular dividends;
(i) organized or acquired, except through foreclosure, the exercise
of creditors remedies or in a fiduciary capacity, any capital stock or
other equity securities of any corporation or acquired any equity or
ownership interest in any partnership or business enterprise;
10
(j) issued, reserved for issuance, granted or authorized the issuance
of any shares of its capital stock or subscriptions, options, warrants,
calls, rights or commitments of any kind relating to the issuance of or
conversion into shares of its capital stock;
(k) made any change in any method of accounting or accounting
practice, except as required by applicable law, regulation, GAAP or RAP;
(l) except for the transactions contemplated by this Agreement, or as
otherwise permitted hereunder, entered into any transaction, or entered
into, modified or amended any contract or commitment, other than in the
ordinary course of business; or
(m) agreed, whether in writing or otherwise, to take any action the
performance of which would be prohibited under the terms and provisions of
this Agreement.
Since July 31, 1998, CSB has conducted business only in the ordinary course
and in a manner consistent with past practices.
3.12. Title to Properties; Encumbrances; Access. Except for the liens and
-----------------------------------------
security interests disclosed in Disclosure Schedule 3.12, CSB has, or will have
------------------------
upon the Closing Date, unencumbered, good and indefeasible title to all its
properties and assets, real and personal, including, without limitation, all
properties and assets reflected in the Financial Statements, subject to (i)
easements, reservations, restrictions, rights-of-way, and other encumbrances of
record, other than liens and conveyances, and (ii) those properties and assets
disposed of in the ordinary course of business consistent with reasonably
prudent banking practices; and, to their knowledge, all uses made of, and
activities conducted upon, any real property owned, leased or used by CSB comply
in all material respects with applicable state, local or municipal zoning laws
and other laws, rules, regulations and ordinances. In addition, all
improvements situated upon real property assets of CSB is within surveyed
boundaries (to the extent CSB possesses such survey(s)) and have unrestricted
right of access to and from an adjacent public thoroughfare.
3.13. Material Pending or Threatened Proceedings. Except as reflected in
------------------------------------------
Disclosure Schedule 3.13, there is no legal, administrative, arbitration or
- ------------------------
other action, suit, proceeding or claim pending, to CSB's knowledge, under
investigation, or, to CSB's knowledge, threatened against CSB, or involving any
of its properties or assets, at law or in equity, or before or by any foreign,
federal, state, municipal or other governmental court, department, commission,
board, bureau, agency, instrumentality or other person, which may result in a
material adverse effect upon its financial condition or its ability to perform
this Agreement.
3.14. Tax Matters. CSB has:
-----------
(a) timely filed all tax returns (the "FILED RETURNS") and timely paid
all tax liability reasonably determined thereunder;
(b) established reasonable accruals for the payment of, all federal
income taxes and all state and local income taxes and all franchise,
property, sales, employment or other
11
taxes with respect to the periods prior to the date of this Agreement and
subsequent to the last Filed Return; and
(c) properly and timely withheld, remitted and/or paid all withholding
taxes, social security taxes, unemployment taxes and other employment-
related taxes which CSB is, by law, required to withhold, remit or pay.
In addition to the foregoing, CSB (1) is not the subject of, nor is there
pending or, to CSB's knowledge, threatened, any audit with respect to or arising
out of any Filed Return; (2) has not previously requested, or has filed a
request for, any extension of time to pay any tax; or (3) has not agreed or
consented to the extension of any statute of limitations respecting the
assessment of taxes, additional taxes, penalty or interest in connection with
any tax liability or Filed Return. No tax liens have been filed or, to CSB's
knowledge, threatened against CSB. All Filed Returns are true, correct and
complete in all material aspects.
For the purposes of this Agreement, the term "TAX" shall include all
federal, state and local taxes and related governmental charges and any
interest, penalties or assessments payable in connection with the payment of
taxes.
3.15. Employment Benefit Plans. (1) Except as reflected in Disclosure
------------------------ ----------
Schedule 3.15, CSB does not maintain or contribute to, nor is CSB required to
- -------------
maintain or contribute to, (i) any "employee welfare benefit plan" [as defined
in Section 3(1) of the Employee Retirement Income Security Act ("ERISA")] or
(ii) any "employee pension benefit plan" [as defined in Section 3(2) of ERISA].
Except as reflected in Disclosure Schedule 3.15, CSB does not maintain or
contribute to, nor has CSB adopted or entered into, any deferred compensation
plan, bonus plan, stock option plan, employee stock option plan or any other
Employee Benefit Plan, agreement, arrangement or commitment (other than normal
policies concerning holidays, vacations, accumulated sick leave, and annual
budgeted incentive bonuses previously disclosed to First Financial).
Each Employee Benefit Plan that is required or intended to be qualified
under applicable law or registered or approved by a governmental agency or
authority, has been so qualified, registered or approved by the appropriate
governmental agency or authority and nothing has occurred since the date of the
last qualification, registration or approval to adversely affect, or cause, the
appropriate governmental agency or authority to revoke such qualification,
registration or approval. All contributions (including premiums) required by
law or contract to have been made or approved by CSB, as the case may be, under
or with respect to an Employee Benefit Plan have been paid or accrued by CSB, as
appropriate, without limiting the foregoing, there are no unfunded liabilities
under any Employee Benefit Plan. CSB has not received notice of any
investigations, litigation or other enforcement actions against it with respect
to any of the Employee Benefit Plans. There are no pending actions, suits or
claims by former or present employees of CSB (or their beneficiaries) with
respect to the Employee Benefit Plans or the assets or fiduciaries thereof
(other than routine claims for benefits).
12
3.16. Leases, Contracts and Agreements. Disclosure Schedule 3.16 reflects
-------------------------------- ------------------------
all leases, contracts and agreements to which CSB is a party and which obligate
or may obligate CSB to pay any amount in excess of $25,000 over the entire term
of any such lease, contract or agreement (the "CONTRACTS"), true and correct
copies of which have been or shall be furnished to First Financial. For the
purposes of this Agreement, the Contracts shall not be deemed to include loan
commitments of, loans made by, repurchase agreements made by, bankers
acceptances of, or deposits taken by CSB in the ordinary course of its banking
business. Each and all of the Contracts are legal, valid, binding and
enforceable in accordance with their terms and are in full force and effect.
There are no existing defaults by any party to the Contracts and no event has
occurred which (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute such default.
3.17. Transactions with Affiliates. Except as reflected in Disclosure
---------------------------- ----------
Schedule 3.17, CSB (1) has no loans outstanding to any of its Affiliates (as
- -------------
defined in Section 8.11), executive officers, or directors, or to any
Shareholder owning ten percent (10%) or more of its outstanding shares or (2) is
a party to, or otherwise bound by, any contractual agreement with any of its
Affiliates, executive officers, or directors, or with any Shareholder owning ten
percent (10%) or more of its outstanding shares.
3.18. Compliance with Laws. Except as reflected in Disclosure Schedule
-------------------- -------------------
3.18, CSB is not in violation of, or default under, any laws, ordinances,
- ----
regulations, judgements, injunctions, orders, or decrees (including without
limitation, any immigration laws or regulations) of any court, governmental
department, commission, agency, instrumentality or arbitrator applicable to its
business which would have a material adverse effect on CSB.
3.19. Accuracy of Information. The factual information relating to CSB
-----------------------
contained in this Agreement and the Disclosure Statements hereto is true,
correct and complete in all respects. The information relating to CSB supplied
for inclusion in the application of First Financial to the FRB, the Registration
Statement filed by First Financial with the SEC and the Prospectus to be
delivered by First Financial to each of the Shareholders of CSB, as of the
date supplied by CSB, will be true, correct and complete in all respects.
3.20. Insurance. Disclosure Schedule 3.20 sets forth a list and brief
--------- ------------------------
description of all existing insurance policies maintained by CSB pertaining to
its business properties, personnel or assets. CSB is not in default with
respect to any provision contained in any insurance policy, and has not failed
to give any notice or present any claim under any insurance policy in a due and
timely fashion. All such policies shall have been delivered to First Financial,
or are delivered herewith, and at all times prior to the Closing Date shall be
in full force and effect. All payments with respect to such policies are
current and no notice threatening a suspension, revocation, modification or
cancellation of any such policy has been received.
3.21. Loans. To CSB's knowledge, each loan reflected as an asset in the
-----
Financial Statements, as well as all other extensions of credit, guarantees,
security agreements, deeds of trust and other documents and instruments executed
in connection therewith (whether intended as security or otherwise) is the
legal, valid and binding obligation of the obligor named therein and
13
is enforceable in accordance with its terms. CSB has made available to First
Financial all material information and documentation in possession of CSB
concerning all outstanding loans of CSB.
3.22. Regulatory Actions. Except as disclosed in Disclosure Schedule
------------------ -------------------
3.22, there are no actions or proceedings pending or threatened against CSB by
or before the FRB, the FDIC, the SEC or any other governmental agency or
authority.
3.23. Broker's Fees. Except as set forth in Disclosure Schedule 3.23, no
------------- ------------------------
person or entity acting on behalf of CSB is or shall be entitled, directly or
indirectly, to any brokerage fee, commission or finder's fee in connection with
the transaction contemplated by this Agreement.
3.24. Environmental Matters. Except as disclosed in Disclosure Schedule
--------------------- -------------------
3.24, there are no known environmental problems or known conditions affecting
- ----
any of the properties of CSB. In particular, and without in any way limiting
the foregoing, CSB warrants and represents that to the best of its knowledge all
hazardous and toxic chemicals, substances and materials located or used upon any
of their respective properties have been and are being stored, used, transported
and disposed of in compliance with applicable state and federal environmental
laws; that there are no prior waste disposal site(s) or underground storage
tanks located upon any of its properties; and that no action or investigation is
pending or threatened by any governmental or regulatory authority, or by any
person, firm or corporation, arising out of any failure, or alleged failure, to
comply with applicable environmental laws, statutes, rules or regulations.
3.25. Deferred Directors Compensation. Except as disclosed in Disclosure
------------------------------- ----------
Schedule 3.25, CSB does not maintain, contribute to or is otherwise obligated
- -------------
under any Deferred Directors Compensation Plan.
ARTICLE 4
CONDUCT OF BUSINESS OF CSB
PENDING CLOSING DATE
4.1. Affirmative Covenants. From and after the date of this Agreement and
---------------------
until the Closing Date, CSB shall:
(a) operate and conduct its business in the ordinary course and
consistent with its prior practices;
(b) preserve intact its corporate existence, business organization,
assets, licenses, permits, franchises, authorizations, contracts and
business opportunities, except to the extent CSB believes in good faith
that it is prudent to terminate or forfeit any of the foregoing;
(c) maintain its books, accounts and records in accordance with GAAP
or RAP, and comply with all of its contractual obligations;
14
(d) maintain all of its properties in good repair, order and
condition, reasonable wear and tear excepted, and maintain adequate and
appropriate insurance coverage upon all such properties;
(e) in good faith and in a timely manner (i) cooperate with First
Financial in satisfying the conditions in this Agreement; (ii) diligently
assist First Financial, to the extent it may reasonably require, in
obtaining as promptly as possible all consents, approvals, authorizations
and rulings, whether regulatory or corporate, as are necessary for First
Financial to carry out and consummate the transaction contemplated by this
Agreement; (iii) furnish, or cause to be furnished, to First Financial such
information as First Financial may reasonably require for inclusion in any
filings or applications that may be necessary in that regard; and (iv)
perform all acts and execute and deliver all documents reasonably necessary
to cause the transaction contemplated by this Agreement to be consummated
at the earliest possible date;
(f) timely file with the FRB, FDIC and other regulatory authorities
all financial statements and other reports to be filed by it and promptly
thereafter deliver to First Financial copies of all financial statements
and other reports required to be so filed;
(g) comply with all applicable laws and regulations, noncompliance
with which would have a material adverse effect upon its financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise)
or business;
(h) promptly give written notice to First Financial upon obtaining
knowledge of any event or fact that would cause any of the representations
or warranties of CSB contained in or referred to in this Agreement to be
untrue in any material respect, and use its best efforts to prevent or
promptly remedy the same;
(i) provide to First Financial, or provide First Financial access to,
all books, records, reports, financial statements and other documents and
information as First Financial may from time to time request; and,
(j) immediately or prior to the date of closing of this contemplated
transaction, and after receipt of a written request from First Financial,
establish such additional accruals and reserves as may be necessary to
conform CSB's accounting and credit loss reserve practices and methods to
those of First Financial; provided, however, that such requested conforming
adjustment shall not be taken into account as having a material adverse
effect on CSB. In addition, the parties to this Agreement acknowledge that
such conforming accounting adjustments do not in any way reflect that the
Financial Statements of CSB are inaccurate in any respect.
4.2. Negative Covenants. Except with the prior written consent of First
------------------
Financial, CSB shall not, from the date of this Agreement and until the Closing
Date (or the earlier rightful termination of this Agreement):
15
(a) make or permit any amendment to its Articles of Association or
Bylaws;
(b) make or permit any changes in allocating or charging costs which
in the aggregate would cause a material detriment, except as may be
required by applicable regulation, GAAP or RAP, and after written notice to
First Financial;
(c) directly or indirectly, permit any of its officers, directors,
employees, representatives or agents to, directly or indirectly: (i)
encourage, solicit or initiate discussions or negotiations with, or (ii)
except upon advice of counsel to the extent required to fulfill the
fiduciary duties owed to the Shareholders of CSB, entertain, discuss or
negotiate with, or provide any information to, or cooperate with, any
association, corporation, partnership, person or other entity or group
(other than First Financial or its Affiliates or associates or officers,
partners, employees or other authorized representatives of First Financial
or such Affiliates or associates) concerning any merger, tender offer or
other takeover offer, sale of substantial assets, sale or exchange of
shares of CSB Stock or similar transaction involving CSB (unless any such
transaction is expressly conditioned upon the performance by CSB of all of
CSB's obligations under this Agreement). As soon as practicable following
receipt of any written proposal, CSB will communicate to First Financial
the terms of any such proposal or request for information and the identity
of the parties involved.
(d) make any change in the number of shares of its capital stock
issued and outstanding, reserve for issuance, grant, or authorize the
issuance of any shares of their capital stock or subscriptions, options,
warrants, calls, rights or commitments of any kind relating to the issuance
or conversion into shares of its capital stock;
(e) incur, assume or become subject to, whether directly or by way of
any guarantee or otherwise, any debt obligation or liability (whether
liquidated, unliquidated, absolute, accrued, contingent or otherwise),
except in the ordinary course of business;
(f) permit or allow any of its property or assets to become subject to
any pledge, lien, security interest or encumbrance or restrictions except
for liens for taxes, non-delinquent or which are being contested in good
faith or other liens arising by operation of law to secure obligations
which are not delinquent or which are being contested in good faith;
(g) cancel any debts in excess of $25,000, waive any claims or rights
of material value or sell, transfer, or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
16
(h) dispose of or permit to lapse any of its rights to the use of any
trademark, trade name, copyright or other intangible property right or
franchise, or dispose of or disclose to any person any trade secret not
theretofore a matter of public knowledge;
(i) except as otherwise authorized in this Agreement, grant or permit
any increase in compensation, or pay or agree to pay or accrue any bonus or
like benefit, to or for the credit of any of its directors or executive
officers, or enter into, or permit, any employment or consulting agreement
or other agreement for personal services with any of its directors,
officers or employees, or adopt, amend or terminate any Employee Benefit
Plan or change or modify the period of vesting or retirement age for any
participant of any such plan (except as required by or to comply with any
applicable law or regulation);
(j) declare, pay or set aside for payment any dividend or other
distribution or payment in respect of shares of its capital stock, except
for normal, regular dividends;
(k) acquire the capital stock or other equity securities of any
corporation or any equity or ownership interest in any partnership or other
business enterprise, except through foreclosure, the exercise of creditors'
remedies or in a fiduciary capacity;
(l) make aggregate capital expenditures and commitments in excess of
$35,000 for additions to its premises or equipment; or
(m) modify any outstanding loans, make any new loans or acquire
any loan participations, unless such modifications, new loans, or
participations are made in the ordinary course of business.
ARTICLE 5
WARRANTIES, REPRESENTATIONS
AND COVENANTS OF FIRST FINANCIAL
First Financial warrants and represents to, and covenants and agrees with,
CSB as follows:
5.1. Organization and Standing of First Financial. First Financial is a
--------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Texas, with corporate power to own property and carry on
its business as it is now being conducted.
5.2. Capitalization. First Financial has an authorized capitalization of
--------------
20,000,000 shares of Common Stock of the par value of $10.00 per share, of which
8,663,368 shares are issued, outstanding, and fully paid as of the date of this
Agreement. First Financial has available for issuance, from treasury or
otherwise, a sufficient number of authorized shares of First Financial Stock to
make exchange as contemplated by this Agreement for all of the issued and
outstanding shares of CSB Stock.
17
5.3. Authority of First Financial. This Agreement has been duly
----------------------------
authorized, executed and delivered by First Financial and, subject to the
conditions precedent to consummation of the transaction set forth herein, is a
valid, legally binding and enforceable obligation of First Financial. Neither
the execution, delivery or performance of this Agreement in its entirety, nor
the consummation of all of the transactions contemplated hereby, will violate
(with or without the giving of notice or the passage of time), be in conflict
with, result in a breach of any provision of, or constitute a default under, any
provision of law applicable to First Financial, or any agreement or
understanding, order, judgment, award, decree, statute, ordinance, regulation or
other restriction of any kind or character to which First Financial is a party
or by which any of its or their assets or properties is subject or bound. There
are no actions, suits, proceedings or claims pending or, to its knowledge,
threatened against First Financial, at law or in equity, or before or by any
foreign, federal, state, municipal or other government court, department,
commission, board, bureau, agency, instrumentality or other person which may
result in liability to or of First Financial upon the consummation of the
transactions contemplated hereby or which would prevent or delay such
consummation.
5.4. No Adverse Change. From the date of this Agreement until the Closing
-----------------
Date, First Financial shall not have suffered any material adverse change in its
financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise) or business.
5.5. Covenants. First Financial covenants and agrees that it shall:
---------
(a) use its best efforts in good faith and in a timely manner to (i)
cooperate with CSB in satisfying the conditions in this Agreement, (ii)
obtain as promptly as possible all consents, approvals, authorizations and
rulings, whether regulatory or corporate, as are necessary for First
Financial to carry out and consummate the transactions contemplated by this
Agreement, including specifically (but without limitation) the approval
called for by Sections 5.6 and 5.7, and (iii) furnish information
concerning First Financial and its subsidiaries not previously provided to
CSB required for inclusion in any filing or applications that may be
necessary in that regard;
(b) perform all acts and execute and deliver all documents necessary
to cause the transactions contemplated by this Agreement to be consummated
at the earliest possible date;
(c) promptly give written notice to CSB upon obtaining knowledge of
any event or fact that would cause any of the representations or warranties
of First Financial contained in or referred to in this Agreement to be
untrue in any material respect, and use its best efforts to prevent or
promptly remedy the same;
(d) cause its officers, directors and representatives to treat as
confidential any and all documentation and information concerning CSB which
is furnished to First Financial, its directors, officers, employees,
shareholders, agents, representatives or advisors, in connection with this
Agreement, or which was furnished prior to the execution of this Agreement
for the purpose of First Financial reviewing and evaluating the
18
transaction contemplated by this Agreement, except insofar as disclosure to
certain parties is necessary to meet the conditions of this Agreement;
further, in the event the exchange of stock contemplated under this
Agreement is not consummated, this confidentiality obligation shall
continue to be binding on First Financial and its officers, directors,
employees and agents and, in such event, First Financial will return all
documentation furnished concerning CSB, including copies thereof;
(e) extend to all officers and employees of CSB, who continue as
officers or employees after closing, the same benefits as accorded other
employees of First Financial or its subsidiaries and on the same basis as
those other employees, with employees and officers of CSB who continue as
employees or officers after closing to be eligible to participate
immediately in group health insurance without the application of any
waiting period or pre-existing condition exclusion or limitation which
might otherwise apply.
5.6. Federal Reserve Approval. Specifically, but without limiting the
------------------------
effect of Section 5.5, promptly upon execution of this Agreement, First
Financial shall make application to the FRB for prior approval to acquire the
CSB Stock in accordance with this Agreement as required by the Bank Holding
Company Act of 1956, as amended, and applicable regulations. First Financial
shall provide CSB with copies of the nonconfidential sections of all such
applications prior to filing such applications with any regulatory authorities,
including without limitation, the FRB and the SEC, and shall provide CSB
promptly, but in no event more than three (3) business days after receipt or
submission, as the case might be, copies of the nonconfidential section of any
correspondences received from or sent to any regulatory authorities, including
without limitation, the FRB, the Texas Department of Banking and the SEC.
5.7. SEC Registration. Without limiting the effect of Section 5.5, upon
----------------
execution of this Agreement, First Financial shall proceed to file a
Registration Statement with the SEC pursuant to the Act covering the shares of
First Financial Stock to be issued pursuant to this Agreement. Promptly upon
receipt of such declaration of the effectiveness of such Registration
Statement from the SEC, First Financial shall furnish CSB with a copy of the
approval or disapproval of the effectiveness of such Registration Statement.
Upon the approval of the effectiveness of such Registration Statement from the
SEC, First Financial shall cause the shares of First Financial Stock to be
issued pursuant to this Agreement to be qualified for trading on the NASDAQ NMS.
5.8. Indemnification and Liability Insurance Coverage. On and after the
------------------------------------------------
Closing Date, First Financial shall provide those former directors and officers
of CSB who continue their respective service or employment with CSB and First
National Bank in Cleburne, the same indemnity (under the appropriate Articles of
Association) and the same directors' and officers' liability insurance coverage
that First Financial provides to its directors and officers and the directors
and officers of its subsidiaries generally.
ARTICLE 6[Reserved]
19
ARTICLE 7
TERMINATION
7.1. Circumstances Authorizing Termination. Notwithstanding anything
-------------------------------------
herein to the contrary, this Agreement may be terminated and the Exchange Offer
contemplated hereby may be abandoned at any time, but prior to the Closing Date:
(a) by mutual written consent duly authorized by the Boards of
Directors of First Financial and CSB;
(b) by First Financial or CSB if the exchange ratio following
adjustments provided for in Section 1.2 would require First Financial to
issue more than 375,000 shares of First Financial Stock (as adjusted in the
event a share of First Financial Stock shall be changed into a different
number of shares by reason of reclassification, recapitalization, split up,
exchange of shares or adjustments, or if a stock dividend thereon shall be
declared with a record date prior to consummation of the proposed Exchange
Offer;
(c) by First Financial (i) if First Financial learns or becomes aware
of a state of facts or breach or inaccuracy of any representation or
warranty or covenant of CSB contained in this Agreement which in the
reasonable judgement of First Financial constitutes a material adverse
change from that represented in this Agreement, or (ii) if any of the
conditions to Closing contained in Article 2 are not satisfied for reasons
other than lack of diligence by First Financial, or, if not satisfied,
waived in writing by First Financial;
(d) by CSB (i) if CSB learns or becomes aware of a state of facts or
breach of inaccuracy of any representation or warranty or covenant of First
Financial contained in this Agreement which in the reasonable judgement of
CSB constitutes a material adverse change from that represented in this
Agreement, or (ii) if any of the conditions to Closing contained in Article
2 are not satisfied for reasons other than lack of diligence by CSB, or, if
not satisfied, waived in writing by CSB;
(e) by First Financial or CSB if the Closing Date shall not have
occurred on or before January 31, 1999, or such later date agreed to in
writing by First Financial and CSB; or
(f) by First Financial or CSB if any court of competent jurisdiction
in the United States (federal or state) or other governmental body shall
have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the exchange of shares or
the merger, and such order, decree, ruling or other action shall have been
final and nonappealable.
20
ARTICLE 8
MISCELLANEOUS PROVISIONS
8.1. Public Announcements. Following the date of this Agreement, and
--------------------
prior to the Closing Date, neither CSB nor First Financial, nor any person
affiliated with any of them, shall, without the prior approval of the other
parties, make any written public announcement, or make any written statement or
release to the press with respect to this Agreement or the transactions
contemplated hereby except for a Form 8-K Current Report to the SEC by First
Financial. First Financial shall provide CSB with a copy of the Form 8K prior
to submission of such report to the SEC.
8.2. Applicable Law. This Agreement and the legal relations between the
--------------
parties hereto shall be governed by and construed in accordance with the laws of
the State of Texas and of the United States of America.
8.3. Paragraph and Other Headings. Article and Section headings contained
----------------------------
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
8.4. Waivers and Amendments. This Agreement may be amended, modified or
----------------------
supplemented only by a written instrument executed by the parties hereto. The
waiver by any party hereto of a breach of this Agreement shall not operate or be
construed as a waiver of any subsequent breach.
8.5. Expenses. Whether or not the transactions contemplated by this
--------
Agreement are consummated, and except as otherwise expressly provided in this
Agreement, each of the parties shall be responsible for their respective
attorneys' fees and expenses incident to the negotiation, preparation, execution
and consummation of the transaction contemplated by this Agreement including
attorneys' and accountants' fees and expenses.
8.6. Entire Agreement. This Agreement, including the Exhibits and
----------------
Disclosure Schedules referred to herein and now or hereafter attached hereto,
embodies the entire agreement and understanding of the parties with respect to
the subject matter contained herein. There are no restrictions, conditions,
promises, representations, warranties, covenants or undertaking other than those
expressly set forth or referred to herein.
8.7. Notices. All notices, requests, demands or other communications
-------
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid:
21
(a) In the case of First Financial, to:
Mr. Kenneth T. Murphy
Chairman of the Board, President and Chief Executive Officer
First Financial Bankshares, Inc.
Post Office Box 701
Abilene, Texas 79604
(b) In the case of CSB to:
Mr. H. Sandy Ledbetter
President and Chief Executive Officer
Cleburne State Bank
200 N Ridgeway Dr
Cleburne, Texas 76031
or to such other addresses as any party shall specify by notice to the
others.
8.8. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same.
8.9. ATTACHMENT OF DISCLOSURE SCHEDULES. CSB and First Financial
----------------------------------
acknowledge that the Disclosure Schedules referenced herein may not be attached
hereto at the time of execution of this Agreement. It is the intent of all
parties hereto that the form and content of all such Disclosure Schedules will
be prepared in form reasonably acceptable to First Financial and that such
Disclosure Schedules shall then be attached to this Agreement no later than
thirty (30) days following the effective date of this Agreement, and that
such Disclosure Schedules shall then become a part of this Agreement for all
purposes. In the event that the contents in the Disclosure Schedules are not
acceptable to First Financial, this Agreement may be terminated by First
Financial by written notice to CSB within thirty (30) days following delivery
for attachment to this Agreement of a complete set of the Disclosure Schedules;
thereafter, this Agreement shall be of no further force and effect.
Notwithstanding the fact that any such Disclosure Schedules may not be attached
hereto at the time of execution, the date of this Agreement or date of execution
of this Agreement shall for all purposes be the date first written above.
8.10. BINDING EFFECT - ASSIGNMENT. This Agreement is binding upon the
---------------------------
undersigned parties, their heirs, personal representatives, successors and
assigns. The rights of First Financial under this Agreement may not be assigned
without the prior written consent of CSB, except that, at Closing, FFB Delaware
or another subsidiary of First Financial may acquire the Shares so long as First
Financial remains liable for its obligations under this Agreement.
8.11. DEFINITIONS. In addition to other definitions contained elsewhere
-----------
in this Agreement, as used in this Agreement:
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(a) an "AFFILIATE" means any bank, corporation, partnership or other
entity which, directly or indirectly, controls, is controlled by, or is
under common control with, CSB or First Financial, as the context may
require;
(b) references to a particular "ARTICLE" or "SECTION" are to the given
article or section of this Agreement;
(c) the term "knowledge" or "known" -- an individual shall be deemed
to have "knowledge" or to have "known" a particular fact or other matter if
such individual is actually aware (or should reasonably have been aware) of
such fact or other matter. CSB shall be deemed to have "knowledge" of or
to have "known" a particular fact or matter if any individual who is now
serving in the position of Cashier, Vice President, Senior Vice President,
Executive Vice President or President, or as a director of CSB is actually
aware (or should reasonably have been aware) of such fact or other matter;
(d) the term "material" shall mean any fact, event or condition which
could be reasonably expected to result in a material adverse effect on
CSB's condition (financial or otherwise), business, properties, net worth,
results of operations or prospects; and
(e) unless context otherwise requires, words of the singular number
include the plural and of the plural include the singular and words of the
masculine gender include the feminine and neuter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
multiple originals, as of the day and year first above written.
ATTEST: FIRST FINANCIAL BANKSHARES, INC.
By: By:
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Curtis R. Harvey Kenneth T. Murphy,
Executive Vice President Chairman of the Board, President
and Chief Financial Officer and Chief Executive Officer
ATTEST: CLEBURNE STATE BANK
By: By:
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H. Sandy Ledbetter,
President and Chief Executive Officer
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