EXHIBIT 10.4
LOAN AGREEMENT
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Between
FIRST FINANCIAL BANKSHARES, INC. THE FROST NATIONAL BANK
P.O. Box 701 100 W. Houston Street
Abilene, Texas 7 and San Antonio, Texas 78205
As of December 31, 2004
THIS LOAN AGREEMENT (the "Agreement") will serve to set forth the terms of
the financing transactions by and between FIRST FINANCIAL BANKSHARES, INC., a
Texas corporation ("Borrower"), and THE FROST NATIONAL BANK, a national banking
association (" Lender"):
WHEREAS, Borrower is desirous of obtaining a loan from Lender in the
aggregate principal amount of FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00)
which shall be for the sole purpose of financing bank acquisitions, working
capital needs and treasury stock repurchases; and
WHEREAS, Lender is desirous of making such loan to Borrower in the
principal amount of FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00) for the
purposes set forth above, but on the terms, conditions and covenants hereafter
contained;
NOW, THEREFORE, subject to all terms, conditions and covenants hereinafter
set forth and in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE I
Definitions
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1.01 Definitions. The terms defined in this Article I (except as otherwise
expressly provided in this Agreement) for all purposes shall have the following
meanings:
"Advance" shall mean the amounts requested by Borrower from time to time as
set forth in Section 2.01 of this Agreement.
"Average Assets" shall mean the average of the assets most recently
reported by a bank to its regulatory authorities calculated in accordance with
regulatory accounting principles consistently applied.
"Bank" shall mean any banks and financial institutions, whether chartered
by the federal government or any State, which are subsidiaries of the Borrower
and whose common stock is pledged as Collateral to the Loan in accordance with
Section 2.3 hereof.
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"Business Day" shall mean a day on which Lender is open for transaction of
its general banking business.
"Capital Ratio" shall mean the ratio of Equity Capital to total assets (as
determined by regulatory accounting principles consistently applied) of
Borrower.
"Cash Flow Coverage" shall mean the ratio of (i) the Borrower's
consolidated Net Income after dividends plus depreciation plus amortization plus
loan loss provisions, to (ii) the current maturities (inclusive of accrued
interest on unpaid principal) of long term debt, all as determined in accordance
with GAAP.
"Closing Date" shall mean the date this Agreement is executed by all
parties hereto which shall be the day and year first written above unless
otherwise indicated. The closing shall take place at such place as the parties
shall mutually agree.
"Collateral" shall have the meaning ascribed to it in Section 2.03.
"Equity Capital" shall mean the sum of (i) preferred stock, (ii) common
stock (iii) capital surplus, (iv) retained earnings, (v) accumulated other
comprehensive income, all as determined by regulatory accounting principles
consistently applied.
"Event of Default" means any event specified in Section 6.01 of this
Agreement, provided that any requirement in connection with such event for the
giving of notice or lapse of time or any other condition has been satisfied.
"FFBD" means First Financial Bankshares of Delaware, Inc., a Delaware
corporation and wholly owned subsidiary of Borrower.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
observed in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Highest Lawful Rate" shall mean the maximum rate of nonusurious interest
allowed from time to time by Law. Unless changed in accordance with Law, the
applicable rate ceiling under Texas law shall be the indicated (weekly) rate
ceiling from time to time in effect as provided in Chapter 303 of the Texas
Finance Code, as amended; but in no event shall Tex. Rev. Civ. Stat. Ann. Art.
5069 ch. 15 (which regulates certain revolving loan accounts and revolving
triparty accounts) apply to the Loan.
"LIBOR" shall mean the London Interbank Offered Rate (LIBOR) for three
months quoted on the first business day of each calendar quarter in The Wall
Street Journal (Central Edition) in the "Money Rates" column. If the Wall Street
Journal London Interbank Offered Rate ceases to be made available by the
publisher, or any successor to the publisher of The Wall Street Journal,
(Central Edition), the interest rate will be determined by using a comparable
index. If more than one Wall Street Journal London Interbank Offered Rate for
three months is quoted,
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the higher rate shall apply. The Wall Street Journal London Interbank Offered
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer.
"Laws" shall mean all statutes, laws, ordinances, regulations, orders,
writs, injunctions, or decrees of the United States, any state or commonwealth,
any municipality, or any Tribunal.
"Loan" shall mean the extension of credit to Borrower pursuant to Section
2.01 of this Agreement.
"Loan Documents" shall mean this Agreement, the Note, the Security
Instruments, and all instruments or documents executed and delivered pursuant to
or in connection with this Agreement and any future amendments hereto or
thereto, and all renewals and extensions thereof.
"Loan Loss Reserve Ratio" shall mean the ratio of reserves for loan losses
to total loans.
"Net Income" shall mean that amount of income remaining after deducting
expenses (including provision for loan and lease losses) and payments of all
taxes incurred on said income and after deducting securities transactions, all
as calculated in accordance with GAAP.
"Non-Performing Assets" means loans on nonaccrual, loans on which the
interest rate has been reduced other than to reflect the then prevailing market
interest rates, loans which have been past due for ninety (90) days or more
(specifically excluding all performing bankruptcy mortgages) and Other Real
Estate.
"Non-Performing Assets Ratio" means the ratio of loan loss reserve to
Non-Performing Assets.
"Note" shall mean the promissory note evidencing the Loan executed pursuant
to Section 2.02 of this Agreement and any promissory note issued in substitution
therefor or in renewal or extension or rearrangement thereof.
"Obligations" shall mean the outstanding principal amounts of the Note and
interest accrued thereon, and any and all other indebtedness, liabilities and
obligations whatsoever of Borrower to Lender under the Note and/or the Security
Instruments and all renewals, modifications and extensions thereof, plus
interest accruing on any foregoing and all attorney fees and costs incurred in
the enforcement of any foregoing.
"Other Real Estate" shall mean the real property owned by Bank as a result
of foreclosure, deeds in lieu of foreclosure, or judicial process, or received
as partial payment of a note, specifically excluding real estate occupied by
Bank in the conduct of its ordinary course of business.
"Person" shall mean any individual, firm, corporation, association,
partnership, joint venture, trust or other entity, or Tribunal.
"Return on Assets" shall mean the ratio of Net Income to the Average
Assets.
"Return on Equity," shall mean the ratio of Net Income to the Equity
Capital.
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"Revolving Credit Period" shall have the meaning ascribed to same in
Section 2.02 hereof.
"Security Instruments" shall mean the Pledge and Security Agreement
referred to in Section 2.03 of this Agreement and any other documents securing
the Obligations.
"Subsidiary" means any corporation or bank of which more than fifty (50%)
of the issued and outstanding securities having ordinary voting power for the
election of a majority of directors is owned or controlled, directly or
indirectly, by Borrower; by Borrower with one or more Subsidiaries; or by just
one or more Subsidiaries.
"Tangible Net Worth" means, at any particular time, all amounts which, in
conformity with GAAP, would be included as stockholders' equity on a balance
sheet; provided, however, there is excluded therefrom: (i) any amount at which
shares of capital stock of Borrower (treasury shares) appears as an asset on the
balance sheet, (ii) goodwill, including any amounts, however designated, that
represent the excess of the purchase price paid for assets or stock over the
value assigned thereto, (iii) patents, trademarks, trade names, and copyrights,
and (iv) all other assets which are properly classified as intangible assets.
"Taxes" shall mean all taxes, assessments, fees, or other charges from time
to time or at any time imposed by any Laws or by any Tribunal.
"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial, regulatory, or other court or governmental department, commission,
board, bureau, agency or instrumentality.
1.02 Other Definitional Provisions. All definitions contained in this
Agreement are equally applicable to the singular and plural forms of the terms
defined. The words "hereof," "herein," and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Unless otherwise specified, all
Article and Section references pertain to this Agreement. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP.
ARTICLE II
Loan, Security and Conditions Precedent
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2.01 The Loan. Subject to the terms and conditions of this Agreement,
Lender agrees to make the Loan to Borrower in the principal amount of FIFTY
MILLION AND NO/100 DOLLARS ($50,000,000.00) shall be for the sole purpose of
financing bank acquisitions, working capital needs and treasury stock
repurchases.
2.02 The Note. The obligation of Borrower to pay the Loan shall be
evidenced by a promissory note (the "Note") executed by Borrower and payable to
the order of Lender, in the principal amount of $50,000,000 bearing interest at
the variable rate set forth in the Note. The Borrower shall pay principal and
interest in accordance with the terms of the Note, with the maturity date being
as set forth in the Note.
(a) Advances. From Closing Date and continuing at all times through
December 31, 2005 (the "Revolving Credit Period") the Loan evidenced by the
Note shall be a revolving credit facility which will allow the Borrower to
request such amounts
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as Borrower may elect from time to time (each such amount being herein
called an "Advance") so long as the aggregate amount of Advances
outstanding at any time under the Acquisition Note does not exceed Fifty
Million and No/100 Dollars ($50,000,000.00) provided however, the minimum
Advance must be at least $500,000.00. The Borrower shall have the right to
borrow, repay, and borrow again during the Revolving Credit Period.
Interest shall be due and payable quarterly and shall accrue at LIBOR plus
100 basis points. The outstanding principal balance of the Note on December
31, 2005 shall convert to a term facility and shall be payable quarterly in
accordance with the terms of the Note, with all unpaid principal plus all
accrued and unpaid interest being due and payable on December 31, 2010.
(b) Revolving Principal Balance. It is contemplated that by reason of
payments or prepayments there may be times when no indebtedness is owing
under the Loan; but notwithstanding such occurrences, the Note shall remain
valid and shall be in full force and effect as to Advances made pursuant to
and under the terms of the Note subsequent to each such occurrence. All
loans or Advances and all payments or prepayments made on account of
principal or interest shall be endorsed by the holder of the Note on a
schedule attached thereto and made a part thereof for all purposes. In the
event that the unpaid principal amount at any time, for any reason, exceeds
the maximum amount specified in the Note, Borrower covenants and agrees to
immediately pay to the Lender the excess principal amount, such excess
principal amount shall in all respects be deemed to be included among the
loans or Advances made pursuant to the other terms of the Note and shall
bear interest at the rates therein stated.
(c) Interest Calculation. Adjustments in the interest rate shall be
made on the first day of each calendar quarter for any change in LIBOR and
adjustments due to changes in the Highest Lawful Rate to be made on the
effective date of any change in the Highest Lawful Rate. Interest shall be
computed on a per annum basis of a year of 360 days and for the actual
number of days (including the first but excluding the last day) elapsed
unless such calculation would result in a usurious rate, in which case
interest shall be calculated on a per annum basis of a year of 365 or 366
days, as the case may be. It is the intention of Borrower and Lender to
conform strictly to applicable usury laws. Accordingly, if the transactions
contemplated hereby would be usurious under applicable law, then, in that
event, notwithstanding anything to the contrary herein or in any agreement
entered into in connection with or as security for this Loan, it is agreed
as follows: (i) the aggregate of all consideration which constitutes
interest under applicable law that is taken, reserved, contracted for,
charged or received under this Loan or under any of the other Loan
Documents or otherwise in connection with this note shall under no
circumstances exceed the maximum amount of nonusurious interest allowed by
applicable law, and any excess shall be credited on this Loan by the holder
hereof (or, to the extent that this note shall have been or would thereby
be paid in full, then it shall be applied to any other indebtedness of
Borrower to Lender, or to the extent all other indebtedness has been or
would thereby be paid in full, refunded to Borrower); and (ii) in the event
that maturity of this Loan is accelerated by reason of an election by the
holder hereof resulting from any default hereunder or otherwise, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest may never include more than the maximum amount of
nonusurious interest allowed by applicable law, and excess interest, if
any, provided for in this note or otherwise shall be canceled automatically
as of the date of such acceleration or prepayment and, if
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theretofore prepaid, shall be credited on this Loan (or, to the extent that
this Loan shall have been or would thereby be paid in full, then it shall
be applied to any other indebtedness of Borrower to Lender, or to the
extent all other indebtedness has been or would thereby be paid in full,
refunded to Borrower).
2.03 Security for the Loan. To secure full and complete payment and
performance of the Obligations, Borrower shall execute and deliver the following
documents (which, together with all property which may hereafter be delivered to
secure the Obligations, being herein called "Collateral"):
(i) At such time as the Borrower requests an Advance under the
Note which, when aggregated with prior Advances, exceed an outstanding
principal balance of the Note of $25,000,000, then Borrower shall
execute a Pledge and Security Agreement (in form and content as
Exhibit A, attached hereto and incorporated herein by reference)
wherein the Borrower shall cause FFBD to pledge and grant to Lender a
first priority security interest in one hundred percent (100%) of the
outstanding shares of common stock of First National Bank of Abilene.
The Lender shall maintain its security interest in such common stock
until the Note is paid in full, regardless of the outstanding
principal balance of the Note. Lender shall retain possession of the
certificate(s) representing said common stock, together with stock
powers executed in blank by Borrower.
(ii) A Guaranty Agreement executed by FFBD.
2.04 Conditions Precedent to Closing. The obligation of Lender to make the
Loan shall be subject to the conditions precedent that Lender shall have
received on or before the day of the making of the Loan, the following
documents, in form and substance satisfactory to Lender:
(a) Note. The Note executed by Borrower.
(b) Security Instruments. The Security Instruments executed by
Borrower granting to Lender a security interest in the Collateral.
(c) Guaranty Agreement. The Guaranty Agreement executed by the FFBD.
(d) Stock Certificates, Powers, UCC-1. The original stock certificates
pledged as collateral, the executed stock powers and financing statements
(if requested by Lender) to evidence the security interest granted in the
Security Instruments.
(e) Resolutions. Corporate resolutions of the Board of Directors of
Borrower and FF13D, certified by the Secretary of such corporation, which
resolutions authorize the execution, delivery and performance by the
respective corporation of this Agreement and the other Loan Documents.
Included in said resolutions or by separate document, the Lender shall
receive a certificate of incumbency certified by the Secretary of
corporation certifying the names of each officer authorized to execute this
Agreement and the other Loan Documents, together with specimen signatures
of such officers.
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(f) Articles of Incorporation. Copies of the Articles of Incorporation
of Borrower and FFBD and the Articles of Association of Bank certified to
be true and correct by the Secretary of such corporations and cashier of
such Bank, respectively.
(g) Bylaws. The Bylaws of Borrower, FFBD and Bank certified to be true
and correct by the Secretary of such corporation and cashier of such Bank,
respectively.
(h) Government Certificates. Certificates of Good Standing and
Existence issued by the appropriate government entities for the Borrower,
FFBD and the Bank; and a copy of the Letter of Approval from the Board of
Governors of the Federal Reserve Bank approving Borrower's application as a
bank holding company (or such other documentation acceptable to Lender to
evidence the Borrower's status as a bank holding company).
(i) Opinion of Borrower's Counsel. Lender shall have received from
Borrower's counsel an opinion satisfactory inform and substance to Lender
and its counsel.
(j) Financial Statements. Borrower and its Subsidiaries shall have
each delivered to Lender such financial statements as shall have been
requested by Lender, in form and substance satisfactory to Lender in its
sole discretion.
(k) Fees. Borrower shall pay all fees incurred by Lender in connection
with the Loan, including without limitation, the Lender's attorney's fees.
(l) Additional Papers. Borrower shall have delivered to Lender such
other documents, records, instruments, papers, opinions, and reports, as
shall have been requested by Lender, to evidence the status or organization
or authority of Borrower or to evidence or secure payment of the
Obligations, all in form satisfactory to Lender and its counsel.
ARTICLE III
Representations and Warranties
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To induce Lender to enter into this Agreement and upon which Lender has
relied in entering into this Agreement and consummating the transactions herein
described, Borrower represents and warrants to Lender that:
3.01 Organization of Borrower. Borrower is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Texas;
Borrower is duly authorized, qualified under all applicable Laws to conduct its
businesses; and Borrower has full power, capacity, authority and legal right to
conduct the businesses in which it does now, and propose to, engage; and
Borrower has full power, capacity, authority and legal right to execute and
deliver and to perform and observe the provisions of this Agreement, and the
other Loan Documents, to which it is a party, all of which have been duly
authorized and approved by all necessary corporate action. FFBD is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware; FFBD is duly authorized and qualified under all applicable
Laws to conduct its businesses; and FFBD has full power, capacity, authority and
legal right to conduct the businesses in which it does now, and proposes to,
engage; and FFBD has full power, capacity, authority and
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legal right to execute and deliver and to perform and observe the provisions of
this Agreement and the other Loan Documents to which it is a party, all of which
have been duly authorized and approved by all necessary corporate action.
3.02 Litigation. No action, suit or proceeding against or affecting
Borrower or any Subsidiary is known to be pending, or to the knowledge of
Borrower threatened, in any court or before any governmental agency or
department, which, if adversely determined, could result in a final judgment or
liability of a material amount not fully covered by insurance, or which may
result in any material adverse change in the business, or in the condition,
financial or otherwise, of Borrower. There are no outstanding judgments against
Borrower or any Subsidiary.
3.03 Compliance With Other Instruments. To the knowledge of Borrower, (i)
there is no default in the performance of any material obligation, covenant, or
condition contained in any agreement to which Borrower is a party which has not
been waived, (ii) neither Borrower nor any Subsidiary is in material default
with respect to any Law of any Tribunal, and (iii) the execution, delivery and
performance of the terms of this Agreement, the Note and the other Loan
Documents by Borrower will not violate the provisions of any Law applicable to
Borrower. Borrower's By-laws or Articles of Incorporation, or any order or
regulation of any governmental authority to which the Borrower is subject will
not conflict with or result in a material breach of any of the terms of any
agreement or instrument to which Borrower is a party or by which Borrower is
bound, or constitute a default thereunder, or result in the creation of a lien,
charge, or incumbrance of any nature upon any of Borrower's properties or
assets.
3.04 No Default. No Event of Default specified in Article VI has occurred
and is continuing.
3.05 Corporate Authorization. Borrower's Board of Directors have duly
authorized the execution and delivery of this Agreement and the other Loan
Documents to which it is a party and the performance of their respective terms
and no consent of the stockholders of Borrower or any other Person is a
prerequisite thereto or if a prerequisite thereto, the same has been duly
obtained. This Agreement and all other Loan Documents are valid, binding, and
enforceable obligations of Borrower in accordance with their respective terms.
3.06 Disclosure. Neither this Agreement nor any other document,
certificate, Loan Document or statement furnished to Lender by or on behalf of
Borrower in connection herewith is known to contain any untrue statement of a
material fact or, to the knowledge of Borrower , omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading.
3.07 Federal Reserve Board Regulations. Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation G, T, U, or X of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of the Loan will be used to purchase
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock except as otherwise disclosed in writing
to Lender. Neither Borrower nor any agent acting on its behalf has taken or will
take any action which might cause Borrower's execution of this Agreement to
violate any regulation of the Boar d of Governors of the Federal Reserve System
or to violate the Securities Act of 1933 or the Securities Exchange Act of 1934,
as amended.
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3.08 Stock and Stock Agreements. Neither Borrower nor any Subsidiary has
any class of stock authorized other than common stock. Further, Borrower has
furnished to Lender copies of all buy-sell agreements, stock redemption
agreements, voting trust agreements and all other agreements and contracts
involving the stock of Borrower and/or each of its Subsidiaries to which
Borrower or any Subsidiary is a party and there are not now any agreements or
terms of any agreements to which Borrower or any Subsidiary is a party which
alter, impair, affect or abrogate the rights of Lender or the Obligations of
Borrower under this Agreement or any other Loan Document. Borrower has disclosed
to Lender that it has adopted a Stock Repurchase Plan for up to 500,000 shares
of its common stock and that it anticipates that there will be other stock
agreements or trust preferred agreements with new mergers and acquisitions,
copies of which the Borrower shall deliver to Lender within a reasonable time
following the acquisition.
3.09 Financial Statements. The consolidated financial statements of
Borrower, dated as of December 31, 2003, and furnished to Lender, were prepared
in accordance with regulatory accounting principles or GAAP, as indicated upon
such statements, and such statements fairly present, as appropriate, the
consolidated financial conditions and the results of operations of Borrower as
of, and for the portion of the fiscal year ending on, the date or dates thereof.
There were no material adverse events or liabilities, director indirect, fixed
or contingent, of Borrower as of the date or dates of such financial statements
and known to Borrower, which are not reflected therein or in the Note thereto.
Except for transactions directly related to, or specifically contemplated by,
the Loan Documents and transactions heretofore disclosed in writing to Lender,
there have been no material adverse changes in the respective financial
conditions of Borrower and/or its Subsidiaries from those shown in such
financial statements between such date or dates and the date hereof.
3.10 Taxes. All federal, state, foreign, and other Tax returns of Borrower
and each Subsidiary required to be filed have been filed, and all federal,
state, foreign, and Taxes are shown thereon as owing have been paid. Borrower
does not know of any pending audit or investigation of Borrower and/or any
Subsidiary with any taxing authority.
3.11 Title to Collateral. Borrower owns 100% of the stock of FFBD, free of
any lien or claim or any right or option on the part of any third person to
purchase or otherwise acquire the Collateral or any part thereof, except for the
first priority lien granted pursuant to the Loan Documents. FFBD owns 100% of
the stock of each Bank free of any lien or claim or any right or option on the
part of any third person to purchase or otherwise acquire the Bank or any part
thereof. With respect to Collateral delivered after the date hereof, the
Borrower or FFBD will own, legally and beneficially, 100% of the stock of such
Bank free of any lien or claim or any right or option on the part of any third
person to purchase or otherwise acquire the Collateral or any part thereof. The
Collateral is not subject to any restriction on transfer or assignment except
for compliance with applicable federal and state laws and regulations
promulgated thereunder. Borrower and FFBD have the unrestricted right to pledge
the Collateral as contemplated hereby. All of the Collateral has been, and with
respect to Collateral delivered after the date hereof, will be duly and validly
issued and fully paid and nonassessable.
3.12 Use of Loan Proceeds. All loan proceeds or funds furnished by Lender
to Borrower pursuant to this Agreement shall be used solely for the purpose
specified in Article II of this Agreement.
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ARTICLE IV
Affirmative Covenants
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While any part of the Obligations remains unpaid and unless otherwise
waived in writing by Lender.
4.01 Accounts. Reports and Other Information. Borrower shall maintain, and
cause each Subsidiary to maintain, a standard system of accounting in accordance
with regulatory accounting principles or GAAP, as applicable, and Borrower shall
furnish to Lender the following:
(a) Quarterly Information. As soon as available, but no more than
forty-five (45) days after the end of each of the first three quarters of
Borrower's fiscal year, (i) a copy of its Form 10Q; (ii) a copy of the
Federal Reserve Board Form Y-9C and Y-9LP; (iii) an officer's certificate
setting forth the information required to establish whether Borrower and
its Subsidiaries were in compliance with the financial covenants and ratios
set forth in Articles IV and V hereof during the period covered and that
signer or signers have reviewed the relevant terms in this Agreement and
have made, or caused to be made under their supervision, a review of the
transactions of Bank from the beginning of the accounting period covered by
the financial statements being delivered therewith to the date of the
officer's certificate and that such review has not disclosed any Event of
Default, or material violation or breach in the due observance of any
covenant, agreement or provision of this Agreement; (iv) as to those
Subsidiaries whose stock has been pledged hereunder as Collateral, copies
of all FFIEC Call Reports furnished by each such Subsidiary to the
appropriate Tribunal; (v) such other information as Lender shall reasonably
request.
(b) Annual Information. As soon as available, but no more than one
hundred twenty (120) days after the end of each fiscal year of Borrower.
(i) a copy of the Borrower's Form 10K; (ii) an opinion by an independent
certified public accountant selected by Borrower, which opinion shall state
that said consolidated financial statements have been prepared in
accordance with GAAP and that such accountant's audit of such financial
statements has been made in accordance with generally accepted auditing
standards and that said financial statements present fairly the
consolidated financial condition of Borrower, and FFBD and the results of
their operations; (iii) a copy of the Federal Reserve Board Form Y-6 Annual
Report of Borrower and FFBD, as filed with the Board of Governors of the
Federal Reserve System; and (iv) such other information as Lender may
reasonably request.
(c) Other Reports and Information. As soon as available, copies of all
other financial and other statements, reports, correspondence, notices and
information of Borrower, each Subsidiary as may be requested, in form and
substance reasonably satisfactory to Lender. The Borrower shall add Lender
to its shareholder mailing list which will allow it to receive copies of
correspondence with its shareholders.
4.02 Existence. Borrower and its Subsidiaries shall maintain their
respective existence as a corporation and all of its privileges, franchises,
agreements, qualifications and rights that are necessary or desirable in the
ordinary course of business; and Borrower shall cause each of its Subsidiaries
to maintain and preserve their respective good standing with all Tribunals.
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4.03 Observance of Terms. Borrower shall: (i) pay the principal and
interest on the Note in accordance with its terms; and (ii) observe, perform,
and comply with every covenant, term and condition herein expressed or implied
on the part of Borrower to be observed, performed or complied with.
4.04 Compliance With Applicable Laws. Borrower and each Subsidiary shall in
all material respects comply with the requirements of all applicable Laws of any
Tribunal.
4.05 Inspection. Upon prior reasonable notice and at the convenience of the
Borrower, the Borrower and each Subsidiary shall permit an officer in the
Correspondent Banking Department of Lender to visit, review and/or inspect any
of its properties and assets at any reasonable time and to examine all books of
account, records, reports, examinations and other papers (subject to applicable
confidentiality requirements), to make copies therefrom at the expense of
Borrower, and to discuss the affairs, finances and accounts of Borrower and each
Subsidiary with their respective employees and officers at all such reasonable
times and as often as may be reasonably requested.
4.06 Change. Borrower shall promptly notify Lender of: (i) all litigation
affecting Borrower or any Subsidiary which is not (in the reasonable judgement
of Borrower) adequately covered by insurance and which could have a material
adverse effect on the financial condition or operations of the Borrower, (ii)
any other matter which could have a material adverse effect on the financial
condition or operations of Borrower or any Subsidiary.
4.07 Payment of Taxes. Borrower and its Subsidiaries shall pay all lawful
Taxes imposed upon them or upon their income or profits or upon any of their
property before the same shall be delinquent; provided, however, that neither
Borrower nor any Subsidiary shall be required to pay and discharge any such
Taxes: (i) so long as the validity thereof shall be contested in good faith by
appropriate proceedings diligently pursued and such liable party shall set aside
on its books adequate reserves with respect thereto and shall pay any such Taxes
before any of its property shall be sold to satisfy any lien which has attached
as a security therefor; and (ii) if Lender has been notified of such
proceedings.
4.08 Insurance. Borrower and each Subsidiary shall keep all property of a
character usually insured by Persons engaged in the same or similar businesses,
adequately insured by financially sound and reputable insurers, and shall
furnish Lender evidence of such insurance immediately upon request in form
satisfactory to Lender.
4.09 Compliance With ERISA. Borrower and each Subsidiary shall comply, if
applicable, in all material respects, with the provisions of the Employee
Retirement Income Security Act of 1974, as amended, and furnish to Lender, upon
Lenders request, such information concerning any plan of Borrower or Bank
subject to said Act as maybe reasonably requested. Borrower and each Subsidiary
shall notify Lender immediately of any fact or action arising in connection with
any plan which might constitute grounds for the termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by the appropriate
United States district court of a trustee or administrator for such plan.
4.10 Financial Condition. Subject to the provisions of Article V, Borrower
shall cause each of its Subsidiaries to maintain the ratios of loans to
deposits, loan loss reserves and liquidity at percentages acceptable to all
Tribunals having jurisdiction over such Subsidiaries.
First Financial Bankshares, Inc.
Loan Agreement- Page 11
4.11 Maintenance of Priority of Liens. Borrower and each Subsidiary shall
each perform such acts and shall duly authorize, execute, acknowledge, deliver,
file, and record such additional assignments, security agreements, and other
agreements, documents, instruments, and certificates as Lender may deem
reasonably necessary or appropriate in order to perfect and maintain the
security interest created in favor of Lender in the Security Instruments.
4.12 FDIC Insurance. Borrower shall cause each Subsidiary which is a
depository bank to maintain federal deposit insurance and to be a member of the
Federal Deposit Insurance Corporation.
4.13 Notices. Borrower shall promptly notify, and shall cause each
Subsidiary to promptly notify, Lender of (i) the occurrence of an Event of
Default, or of any event that with notice or lapse of time or both would be an
Event of Default, (ii) the commencement of any action, suit, or proceeding
against Borrower or any Subsidiary that might in the reasonable judgment of
Borrower have a material adverse effect on the business, financial condition, or
operations of Borrower or any Subsidiary, and (iii) any other matter that might
in the reasonable judgment of Borrower have a material adverse effect on the
business, financial condition, or operations of Borrower or any Subsidiary.
ARTICLE V
Negative Covenants
------------------
While any part of the Obligations remains unpaid and unless waived in
writing by Lender.
5.01 Capital Ratio. The Borrower shall not permit the Capital Ratio of
Borrower to be less than eight and one-half percent (8.50%), calculated at the
end of each fiscal quarter.
5.02 Return on Equity. The Borrower shall not permit the Return on Equity
of Borrower to be less than ten percent (10.0%), calculated at the end of each
fiscal quarter.
5.03 Return on Assets. The Borrower shall not permit the Return on Assets
of Borrower to be less than one and two-tenths percent (1.20%), calculated at
the end of each fiscal quarter based on year-to-date information.
5.04 Non-Performing Assets Ratio. Borrower shall not permit the
Non-Performing Assets Ratio of Borrower to be less than 1.75 to 1.0, to be
calculated at the end of each fiscal quarter.
5.05 Loan Loss Reserve Ratio. Borrower shall not permit Loan Loss Reserve
Ratio of Borrower to be less than one percent (1.0%), to be calculated at the
end of each fiscal quarter.
5.06 Tangible Net Worth. The Borrower shall not permit its consolidated
Tangible Net Worth to at any time be less than One Hundred Fifty Million and
no/100 Dollars ( $150,000,000.00).
5.07 Cash Flow Coverage. The Borrower shall maintain at all times a Cash
Flow Coverage of not less than 1.3 to 1.0, calculated on a quarterly annualized
basis.
First Financial Bankshares, Inc.
Loan Agreement - Page 12
5.08 Dividends. Borrower shall not declare or pay any dividends, make any
payment on account of any class of the capital stock of Borrower now or
hereafter outstanding, or make any distribution of cash or property to holders
of any shares of such stock which exceeds fifty-five percent (55.0%) of the
annual Net Income.
5.09 Business. Borrower and each Subsidiary shall not engage, directly or
indirectly, in any business other than the businesses permitted by statute and
the regulations of the appropriate governmental and regulatory agencies or
Tribunals.
5.10 Disposition of Assets. Neither Borrower nor any Subsidiary shall sell,
lease, or otherwise dispose of any material part of their assets or investments,
except in the ordinary course of business.
5.11 Limitation on Debt. Borrower shall not, nor allow any Subsidiary to,
create, incur, assume, become liable in any manner in respect of, or suffer to
exist, any debt for borrowed money except:
(a) debt, excluding debt created under this Agreement, not in excess
of $2,000,000 (which amount shall not include any debt acquired by
acquisition of another entity) at any one time outstanding;
(b) debt created under this Agreement;
(c) debt secured by a purchase money security interest; and
(d) $100,000,000 of federal funds purchased and advances from the
Federal Home Loan Bank, calculated at the end of each fiscal quarter
5.12 Prepayment of Debt. Except for trust preferred stock or other debt
acquired by acquisition of another entity, Borrower shall not, and Borrower
shall not permit its Subsidiaries to prepay any of their respective material
debt, other than the debt created under this Agreement, or incurred in the
ordinary course of business before the same becomes due.
5.13 Acquisitions, Mergers, and Dissolutions. Borrower shall not, and
Borrower shall not permit any Subsidiary to, directly or indirectly, acquire all
or any substantial portion of the property, assets, or stock of, or interest in,
any Person, or merge or consolidate with any Person, or dissolve or liquidate
except in the ordinary course of business without notifying Lender within thirty
(30) days before the closing (provided such disclosure has been made public).
5.14 Issuance of Stock. No Subsidiary shall authorize or issue shares of
stock of any class, common or preferred, or any warrant, right or option
pertaining to its capital stock or issue any security convertible into capital
stock, except for any issued to Borrower by any Subsidiary.
First Financial Bankshares, Inc.
Loan Agreement - Page 13
ARTICLE VI
Default
-------
6.01 Events of Default. Each of the following shall be deemed an "Event of
Default":
(a) Failure by Borrower to pay or perform any part or component of the
Obligations, when due or declared due and continuation of such failure for
a period of seven (7) Business Days thereafter; or,
(b) Any representation or warranty made or deemed made by Borrower or
any other Person in any Loan Documents, or in any certificate or financial
or other statement furnished at any time to Lender by or on behalf of
Borrower shall be false, misleading or erroneous in any material respect as
of the date made, deemed made, or furnished and failure by Borrower to cure
the same within twenty (20) days after notice thereof is given by Lender to
Borrower, or,
(c) Failure to observe, perform or comply with any of the covenants,
terms, or agreements contained in this Agreement or any other Loan Document
and failure by Borrower to cure the same within twenty (20) days after
notice thereof is given by Lender to Borrower; or,
(d) Failure by Borrower or any Subsidiary to pay any of its material
indebtedness as the same becomes due or within any applicable grace period
(other than indebtedness being actively contested in good faith and for
which adequate reserves have been established in accordance with generally
accepted accounting principles); or,
(e) Borrower or any Subsidiary shall file a petition for bankruptcy,
liquidation or any answer seeking reorganization, rearrangement,
readjustment of its debts or for any other relief under any applicable
bankruptcy, insolvency, or similar act or law, now or hereafter existing,
or any action consenting to, approving of, or acquiescing in, any such
petition or proceeding; or the appointment by consent or acquiescence of, a
receiver, trustee, liquidator, or custodian for all or a substantial part
of its property; or the making of an assignment for the benefit of
creditors; or the inability to pay its debts as they mature; or take any
corporate action to authorize any of the foregoing; or,
(f) Filing of an involuntary petition against Borrower or any
Subsidiary seeking reorganization, rearrangement, readjustment or
liquidation of its debts or for any other relief under any applicable
bankruptcy, insolvency or other similar act or law, now or hereafter
existing, or the involuntary appointment of a receiver, trustee, liquidator
or custodian of all or a substantial part of its property, and such
involuntary proceeding or appointment remains unvacated, undismissed or
unstayed for a period of ninety (90) days; or the issuance of a writ of
attachment, execution, sequestration or similar process against any part of
its property and same remains unbonded, undischarged, or undismissed for a
period of thirty (30) days from the date of notice; or,
(g) Final judgment for the payment of money in an amount in excess of
$100,000 shall be rendered against Borrower or any Subsidiary and the same
shall remain
First Financial Bankshares, Inc.
Loan Agreement - Page 14
undischarged for a period of thirty (30) days during which execution shall
not be effectively stayed; or,
(h) An event occurs which has a material adverse affect on the
financial conditions or operation of Borrower or any Subsidiary; or,
(i) A change in control of any Subsidiary (as such or similar term is
used in the Financial Institutions Regulatory and Interest Rate Control
Act) shall occur, or action to change such control shall be commenced,
without the prior written consent of Lender (which consent may be given or
withheld in Lender's sole discretion); or,
(j) This Agreement or any other Loan Document shall be declared null
and void or the validity or enforceability thereof shall be contested or
challenged by Borrower or any Subsidiary or Borrower shall deny that it has
any further liability or obligation under any of the Loan Documents; or,
(k) Receipt by any Subsidiary of a notice from the Federal Deposit
Insurance Corporation of intent to terminate status as an insured bank; or,
(l) The filing by any Subsidiary of an application for relief pursuant
to section 13(c) of 13(i) of the Federal Deposit Insurance Act, as amended,
or similar relief from any Tribunal; or,
(m) The filing by any Subsidiary an application for capital
forbearance from any Tribunal.
6.02 Remedies Upon Default. Upon the occurrence of any Event of Default set
forth in Section 6.01, at the option of Lender, the obligation of Lender to
extend credit to Borrower pursuant hereto shall immediately terminate and the
principal of and interest accrued on the Note if not earlier demanded, shall be
immediately and automatically forthwith DEMANDED and due and payable without any
notice or demand of any kind, and the same shall be due and payable immediately
without any notice, presentment, acceleration, demand, protest, notice of
acceleration, notice of intent to accelerate, notice of intent to demand, notice
of protest or notice of any kind (except notice required by law which has not
been waived herein), all of which are hereby waived. Upon the occurrence of any
Event of Default, Lender may exercise all rights and remedies available to it in
law or in equity, under any Loan Document or otherwise.
ARTICLE VII
Miscellaneous
-------------
7.01 Notices. Unless otherwise provided herein, all notices, requests,
consents and demands shall be in writing and delivered in person or mailed,
postage prepaid, certified mail, return receipt requested, addressed as follows:
If intended for Borrower or its Subsidiaries, to:
FIRST FINANCIAL BANKSHARES, INC.
First Financial Bankshares, Inc.
Loan Agreement - Page 15
P. O. Box 701
Abilene, Texas 79604
Attn: F. Scott Dueser
If intended for Lender, to:
THE FROST NATIONAL BANK
100 West Houston Street
P.O. Box 1600
San Antonio, Texas 78296
Attn: Jerry L. Crutsinger
or to such other person or address as either party shall designate to the other
from time to time in writing forwarded in like manner. All such notices,
requests, consents and demands shall be deemed to have been given or made when
delivered in person, or if mailed, when deposited in the mails.
7.02 Place of Payment. All sums payable hereunder to Lender shall be paid
at Lender's banking office at 100 West Houston Street, P.O. Box 1600, San
Antonio, Texas 78296. If any payment falls due on other than a Business Day,
then such due date shall be extended to the next succeeding Business Day, and
such amount shall be payable in respect to such extension.
7.03 Survival of Agreement. All covenants, agreements, representations and
warranties made in this Agreement shall survive the execution and delivery of
this Agreement in the making of the Loan. All statements contained in any
certificate or other instrument delivered by Borrower hereunder shall be deemed
to constitute representations and warranties made by Borrower.
7.04 No Waiver. No waiver or consent by Lender with respect to any act or
omission of Borrower or any Subsidiary on one occasion shall constitute a waiver
or consent with respect to any other act or omission by Borrower or any
Subsidiary on the same or any other occasion, and no failure on the part of
Lender to exercise and no delay in exercising any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise by Lender of any
right hereunder preclude any other or further right of exercise thereof or the
exercise of any other right. The rights and remedies provided for in this
Agreement and the other Loan Documents are cumulative and not exclusive of any
rights and remedies provided by Law.
7.05 Accounting Terms. All accounting and financial terms used herein, and
the compliance with each covenant herein which relates to financial matters,
shall be determined in accordance with regulatory accounting principles or GAAP.
7.06 Lender Not In Control. None of the covenants or other provisions
contained in the Agreement shall, or shall be deemed to, give Lender the right
or power to exercise control over the affairs and/or management of Borrower or
any Subsidiary, the power of Lender being limited to those rights generally
given to Lenders; provided that, if Lender becomes the owner of any stock or
other equity interest in Borrower or any Subsidiary whether through foreclosure
or otherwise, Lender shall be entitled to exercise such legal rights as it may
have by being an owner of such stock, or other equity interest in Borrower or
any Subsidiary.
First Financial Bankshares, Inc.
Loan Agreement - Page 16
7.07 Joint Venture, Partnership, Etc. None of the covenants or other
provisions contained in this Agreement shall, or shall be deemed to, constitute
or create a joint venture, partnership or any other association, affiliation, or
entity between Borrower or any Subsidiary and Lender.
7.08 Successors and Assigns. All covenants and agreements contained in this
Agreement and all other Loan Documents shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto, except that neither
Borrower nor any Subsidiary may assign its rights herein, in whole or in part.
7.09 Expenses. Borrower agrees to reimburse Lender for its out-of-pocket
expenses, including reasonable attorneys' fees, in connection with the
negotiation, preparation, administration and enforcement of this Agreement or
any of the Loan Documents, making the Loan hereunder, and in connection with
amendments, consents and waivers hereunder.
7.10 Governing Law. THIS AGREEMENT, THE NOTE, AND ALL OTHER LOAN DOCUMENTS
SHALL BE DEEMED CONTRACTS UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE
OF TEXAS, EXCEPT TO THE EXTENT THAT FEDERAL LAWS MAY APPLY. THIS AGREEMENT, THE
NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMED IN SAN ANTONIO, BEXAR COUNTY, TEXAS.
7.11 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future Laws effective during
the term of this Agreement, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid and
unenforceable provision had never comprised a part of this Agreement; and
remaining provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
7.12 Modification or Waiver. No modification or waiver of any provision of
this Agreement, the Note, or any Loan Documents shall be effective unless such
modification or waiver shall be in writing and executed by a duly authorized
officer of Lender.
7.13 Right of Setoff. Nothing in this Agreement shall be deemed a waiver of
Lender's right of Lender's banker's lien or setoff.
7.14 Release. Lender will not be liable to Borrower for any claim arising
from or relating to any of the Loan Documents or any transactions contemplated
thereby except upon proof of Lender's gross negligence or wilful misconduct or
wilful breach of its agreements.
7.15 Waiver of DTPA. Neither the Borrower nor its Subsidiary is in a
significantly disparate bargaining position and they have both been represented
by legal counsel in this transaction. The Borrower and its Subsidiaries hereby
waive the applicability of the Texas Deceptive Trade Practices Act (other than
ss.17.555) to the transaction and any and all rights or remedies that may be
available to the Borrower or any Subsidiary in connection with this transaction.
First Financial Bankshares, Inc.
Loan Agreement - Page 17
7.16 Counterparts, Faxes. This Agreement maybe executed simultaneously in
multiple counterparts, all of which together shall constitute one and the same
instrument. If any Loan Document is transmitted by facsimile machine ("fax"), it
shall be treated for all purposes as an original document. Additionally, the
signature of any party on this document transmitted by way of fax shall be
considered for all purposes as an original document and shall have the same
binding effect as an original document.
7.17 Headings. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not affect the interpretation of
this Agreement.
7.18 Maximum Interest Rate. No provision of this Agreement or of the Note
shall require the payment or the collection of interest in excess of the maximum
amount permitted by applicable law. If any excess of interest in such respect is
hereby provided for, or shall be adjudicated to be so provided, in the Note or
otherwise in connection with this loan transaction, the provisions of this
Section 7.18 shall govern and prevail and Borrower shall not be obligated to pay
the excess amount of such interest or any other excess sum paid for use,
forbearance, or detention of sums loaned pursuant hereto. In the event Lender
ever receives, collects, or applies as interest any such sum, such amount which
would be in excess of the maximum amount permitted by applicable law shall be
applied as a payment and reduction of the principal of the indebtedness
evidenced by the Note; and, if the principal of the Note has been paid in full,
any remaining excess shall forthwith be paid to Borrower.
7.19 Assignment. Participation, or Pledge by Lender. Lender may from time
to time, without notice to Borrower. (i) pledge or encumber or assign to any one
or more Persons (including, but not limited to, one or more of Lender's
affiliates, subsidiaries, or subsidiaries of Lender's affiliates) all of
Lender's right, title and interest in and to this Agreement, the Loan Documents
and/or the collateral securing the Loan; or (ii) sell, to any one or more
Persons, a participation or joint venture interest in all or any part of
Lender's right, title, and interest in and to this Agreement, the Loan Documents
and/or such collateral; and Borrower hereby expressly consents to any such
future transaction. Each participant or joint venturer shall be entitled to
receive all information regarding the creditworthiness of Borrower, including,
without limitation, all information required to be disclosed to a participant or
joint venturer pursuant to any Law of any Tribunal.
7.20 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
CONSTITUTE THE ENTIRE AGREEMENT, UNDERSTANDING, REPRESENTATIONS AND WARRANTIES
OF THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS, ARRANGEMENTS AND
UNDERSTANDINGS BETWEEN THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE
PARTIES. SHOULD A CONFLICT IN ANY TERMS, CONDITIONS OR COVENANTS EXIST BETWEEN
THIS AGREEMENT AND ANY OF THE LOAN DOCUMENTS, THIS AGREEMENT SHALL BE
CONTROLLING.
First Financial Bankshares, Inc.
Loan Agreement - Page 18
IN WITNESS HEREOF, Borrower, Lender and Guarantor, by and through their
duly authorized officers, have caused this Agreement to be executed the day and
year first above written.
BORROWER: FIRST FINANCIAL BANKSHARES, INC.
By: /S/ F. Scott Dueser
--------------------------------------
Its: President
--------------------------------------
LENDER: THE FROST NATIONAL BANK
By: /S/ Jerry L. Crutsinger
--------------------------------------
Its: Senior Vice President
--------------------------------------
GUARANTOR: FIRST FINANCIAL BANKSHARES OF DELAWARE, INC.
By: /S/ Chuck A. Cowell
--------------------------------------
Its: President
--------------------------------------
First Financial Bankshares, Inc.
Loan Agreement - Page 19