<PAGE>
As filed with the Securities and Exchange Commission on January 13, 1999.
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
SOUTHWEST BANCORPORATION OF TEXAS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TEXAS 6712 76-0519693
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
4400 POST OAK PARKWAY
HOUSTON, TEXAS 77027
(713) 235-8800
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
DAVID C. FARRIES
EXECUTIVE VICE PRESIDENT
SOUTHWEST BANCORPORATION OF TEXAS, INC.
4400 POST OAK PARKWAY
HOUSTON, TEXAS 77027
(713) 235-8800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
MICHAEL P. FINCH, ESQ. MARTIN L. MEYROWITZ, P.C.
VINSON & ELKINS L.L.P. SILVER, FREEDMAN & TAFF, L.L.P.
1001 FANNIN, SUITE 2300 1100 NEW YORK AVENUE, N.W.
HOUSTON, TEXAS 77002-6760 7TH FLOOR, EAST TOWER
(713) 758-2128 WASHINGTON, D.C. 20005
(202) 414-6127
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PRICE PER SHARE (2) OFFERING PRICE (2) FEE (3)
- ------------------------------- -------------------- -------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, par value 4,671,386 shares $17.75 $82,917,101 $23,051
$1.00 per share................
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the maximum number of shares that may be issued in the
transaction described herein.
(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(f)(1) under the Securities Act of 1933, based upon
the market value as of January 7, 1999 of all of the shares of Fort
Bend Holding Corp. that may be acquired by the Registrant in the
transaction described herein.
(3) $15,711 of the total fee of $23,051 was paid with the filing of the
preliminary proxy materials of Fort Bend Holding Corp. on November 12,
1998, pursuant to Exchange Act Rules 14a-6(i)(1) and 0-11. Accordingly,
the remaining amount of $7,340 is paid with this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FORT BEND HOLDING CORP.
3400 AVENUE H
ROSENBERG, TEXAS 77471
JANUARY ____, 1999
Dear Fellow Stockholder:
You are cordially invited to attend the special meeting of stockholders of
Fort Bend Holding Corp., to be held on February ___, 1999, at ________ __.m.,
local time, at the Fort Bend Country Club located at 2627 Farm to Market Road
762, Richmond, Texas.
On October 20, 1998, Fort Bend agreed to be merged with Southwest
Bancorporation of Texas, Inc. IF THE MERGER IS COMPLETED, YOU WILL RECEIVE 1.45
SHARES OF SOUTHWEST COMMON STOCK IN EXCHANGE FOR EACH SHARE OF FORT BEND COMMON
STOCK THAT YOU OWN. On January ___, 1999, the closing prices of Southwest common
stock and Fort Bend common stock, as reported in THE WALL STREET JOURNAL, were
$____ and $___, respectively, making 1.45 shares of Southwest common stock worth
$_______. All outstanding options to purchase shares of Fort Bend common stock
will be assumed by Southwest and converted into options to purchase Southwest
common stock. Up to 4,671,386 shares of Southwest common stock will be issued to
Fort Bend stockholders in the merger, representing approximately 17% of the
outstanding Southwest common stock after the merger.
At the special meeting, you will be asked to approve and adopt the Merger
Agreement. A majority of the votes entitled to be cast at the special meeting
must vote for approval and adoption of the Merger Agreement for the merger to be
completed. If the Merger Agreement is approved and all other conditions
described in the Merger Agreement have been met or, where permissible, waived,
the merger is expected to occur during the first quarter of 1999.
Your Board of Directors believes that the merger is fair to, and in the
best interests of, Fort Bend and its stockholders and unanimously recommends
that Fort Bend stockholders vote to approve and adopt the Merger Agreement. Your
Board of Directors has received the written opinion of Charles Webb & Company
that the consideration to be received by Fort Bend's stockholders in the merger
is fair from a financial point of view to such holders.
Under Delaware law, holders of Fort Bend common stock are not entitled to
appraisal rights in connection with the merger.
This Proxy Statement/Prospectus provides you with detailed information
about the proposed merger and includes, as Appendix A, a complete text of the
Merger Agreement. I urge you to read the enclosed materials carefully for a
complete description of the merger. Whether or not you plan to attend the
special meeting in person and regardless of the number of shares you own, please
complete, sign and return the enclosed proxy card as promptly as possible. We
look forward to seeing you at the special meeting.
Sincerely,
Robert W. Lindsey
CHAIRMAN OF THE BOARD
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE SHARES OF SOUTHWEST COMMON STOCK TO BE ISSUED IN THE
MERGER OR DETERMINED IF THE DISCLOSURES IN THIS PROXY STATEMENT/PROSPECTUS ARE
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY
BANK OR NON-BANK SUBSIDIARY OF ANY OF THE PARTIES, AND THEY ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
This Proxy Statement/Prospectus is dated January ____, 1999 and is first being
mailed to stockholders on or about January ____, 1999.
<PAGE>
FORT BEND HOLDING CORP.
3400 AVENUE H
ROSENBERG, TEXAS 77471
(281) 342-5571
------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY ___, 1999
------------------
Notice is hereby given that a special meeting (the "Special Meeting") of
stockholders of Fort Bend Holding Corp., a Delaware corporation ("Fort Bend"),
will be held at the Fort Bend Country Club located at 2627 Farm to Market Road
762, Richmond, Texas, at ____ __.m. on February ___, 1999, for the following
purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger dated October 20, 1998 (the "Merger Agreement") between Fort
Bend and Southwest Bancorporation of Texas, Inc., a Texas corporation
("Southwest"). The Merger Agreement provides that Fort Bend will merge (the
"Merger") with and into Southwest and stockholders of Fort Bend will
receive 1.45 shares of Southwest Common Stock in exchange for each of their
shares of Fort Bend Common Stock. A copy of the Merger Agreement is
attached as an appendix to the accompanying Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
Any action may be taken on the foregoing proposals at the Special Meeting
on the date specified above, or on any date or dates to which the Special
Meeting may be adjourned or postponed. Only stockholders of record on the books
of Fort Bend at the close of business on January ____, 1999 will be entitled to
vote at the Special Meeting or any adjournments or postponements thereof. A
complete list of stockholders entitled to vote at the Special Meeting will be
available at the main office of Fort Bend during the ten days prior to the
Special Meeting, as well as at the Special Meeting.
Your attention is directed to the Proxy Statement/Prospectus accompanying
this notice for a more complete statement regarding the matters to be acted upon
at the Special Meeting.
By Order of the Board of Directors,
Robert W. Lindsey
CHAIRMAN OF THE BOARD
January ____, 1999
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE FORT BEND THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE SPECIAL MEETING. PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND PROMPTLY MAIL IT IN THE ENCLOSED
ENVELOPE. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE PROXY
STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT IS EXERCISED.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
QUESTIONS AND ANSWERS
ABOUT THE SOUTHWEST/FORT BEND MERGER.........................................................................1
The Companies................................................................................................2
What You Will Receive in the Merger..........................................................................2
The Special Meeting..........................................................................................2
The Merger...................................................................................................2
Vote Required................................................................................................2
Recommendation to Fort Bend's Stockholders...................................................................3
Opinion of Fort Bend's Financial Advisor.....................................................................3
Fort Bend Stock Options......................................................................................3
Interests of Certain Persons in the Merger...................................................................3
No Dissenters' Rights........................................................................................3
Accounting Treatment.........................................................................................3
Comparison of Rights of Holders of Southwest Common Stock and Fort Bend Common Stock.........................3
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA...............................................................4
MARKET PRICE AND DIVIDEND DATA....................................................................................5
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
SOUTHWEST BANCORPORATION OF TEXAS, INC.......................................................................6
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
FORT BEND HOLDING CORP.......................................................................................7
RECENT DEVELOPMENT................................................................................................8
FORWARD-LOOKING STATEMENTS........................................................................................8
THE SPECIAL MEETING...............................................................................................8
General......................................................................................................8
Record Date; Voting Rights; Vote Required....................................................................8
Voting and Revocation of Proxies.............................................................................9
Solicitation of Proxies......................................................................................9
PRINCIPAL HOLDERS OF FORT BEND COMMON STOCK......................................................................10
PRINCIPAL HOLDERS OF SOUTHWEST COMMON STOCK......................................................................10
THE MERGER.......................................................................................................11
Closing and Effective Time of the Merger....................................................................11
Background of the Merger....................................................................................11
Reasons for the Merger; Recommendation of Fort Bend's Board of Directors....................................13
Opinion of Fort Bend's Financial Advisor....................................................................13
Merger Consideration........................................................................................16
Fort Bend Stock Options.....................................................................................16
Fort Bend Restricted Stock Awards...........................................................................17
Fort Bend Employee Stock Ownership Plan.....................................................................17
Mitchell Mortgage Company L.L.C.............................................................................17
No Dissenters' Rights.......................................................................................18
Surrender of Certificates...................................................................................18
Conditions to the Merger....................................................................................18
Regulatory Approvals........................................................................................19
Conduct of Business Pending the Merger......................................................................20
No Solicitation.............................................................................................20
Certain Additional Agreements...............................................................................21
Termination of the Merger Agreement.........................................................................21
Amendment of Merger Agreement...............................................................................22
Waiver of Performance of Obligations........................................................................22
Interests of Certain Persons in the Merger..................................................................22
Federal Income Tax Consequences.............................................................................23
Resale of Southwest Common Stock............................................................................24
NASDAQ Listing..............................................................................................24
Accounting Treatment........................................................................................24
Expenses....................................................................................................24
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C>
IMPACT OF THE YEAR 2000 ISSUE....................................................................................24
DIRECTORS AND OFFICERS OF SOUTHWEST FOLLOWING THE MERGER.........................................................26
DESCRIPTION OF SOUTHWEST CAPITAL STOCK...........................................................................26
General.....................................................................................................26
Southwest Common Stock......................................................................................26
Preferred Stock.............................................................................................27
Texas Law and Certain Provisions of the Articles of Incorporation and Bylaws................................27
COMPARATIVE RIGHTS OF HOLDERS OF SOUTHWEST COMMON
STOCK AND HOLDERS OF FORT BEND COMMON STOCK.................................................................29
General.....................................................................................................29
Directors...................................................................................................29
Voting of Shares............................................................................................29
Amendment of Articles or Certificate and Bylaws.............................................................30
Shareholder Approval of Mergers and Asset Sales.............................................................30
Business Combinations with Interested Stockholders..........................................................31
Special Meetings............................................................................................31
Limitation of Director Liability............................................................................32
Appraisal Rights............................................................................................32
Action Without a Meeting....................................................................................33
Indemnification of Officers and Directors...................................................................33
Dividends...................................................................................................34
Proposal of Business; Nomination of Directors...............................................................34
LEGAL MATTERS....................................................................................................35
EXPERTS..........................................................................................................35
STOCKHOLDER PROPOSALS............................................................................................35
OTHER MATTERS....................................................................................................36
WHERE YOU CAN FIND MORE INFORMATION..............................................................................36
INDEX OF DEFINED TERMS...........................................................................................38
</TABLE>
APPENDIX A AGREEMENT AND PLAN OF MERGER BETWEEN SOUTHWEST BANCORPORATION OF
TEXAS, INC. AND FORT BEND HOLDING CORP.
APPENDIX B OPINION OF CHARLES WEBB & COMPANY
- ii -
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE SOUTHWEST/FORT BEND MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO
MERGE? HOW WILL I BENEFIT?
A: We believe you will benefit from the merger because the potential for the
combined company exceeds, in our opinion, what Fort Bend could accomplish
individually. The merger provides us with the opportunity to become part of
the largest independent bank in Houston through a tax-free reorganization.
The complementary financial products and services offered by us, such as
our mortgage origination expertise and the locations of our branch offices,
should contribute significantly to the future performance of Southwest. In
addition, our customers will benefit from the broader range of products and
services and higher loan limits offered by Southwest. As a result, we
believe that the combined company will have a greater growth potential and
will be able to compete more effectively than Fort Bend as an independent
institution. This will benefit our stockholders in the long term.
Q: WHAT WILL FORT BEND STOCKHOLDERS RECEIVE FOR THEIR SHARES OF FORT BEND
COMMON STOCK?
A: Fort Bend stockholders will receive 1.45 shares of Southwest common stock
in exchange for each of their shares of Fort Bend common stock. This
exchange ratio will not change, even if the market price of Southwest's
common stock or Fort Bend's common stock increases or decreases between now
and the date that the merger is completed.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: The merger agreement permits Fort Bend to pay dividends on its common stock
with respect to its earnings for the three-month periods ending September
30, 1998 and December 31, 1998. Its Board currently intends to pay regular
cash dividends of $0.10 per share for each of those periods. No cash
dividends have ever been paid by Southwest on its common stock, because its
policy has been to retain all earnings to support growth of its capital and
assets. Southwest does not currently intend to change its dividend policy
following the merger; however, Southwest's Board of Directors will continue
to evaluate the financial condition and earnings of Southwest and the
continuing appropriateness of its policy.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER
TO FORT BEND'S STOCKHOLDERS?
A: The exchange of shares of Fort Bend common stock for shares of Southwest
common stock in the merger is designed to be tax-free to Fort Bend
stockholders for federal income tax purposes, except that Fort Bend
stockholders will recognize gain or loss in connection with any cash
received instead of fractional shares of Southwest common stock. Your tax
basis in the shares of Southwest common stock that you will receive in the
merger will equal your current tax basis in your Fort Bend common stock. To
review the tax consequences to Fort Bend stockholders in greater detail,
see page 23.
THE TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND ON YOUR OWN
SITUATION. YOU SHOULD CONSULT WITH YOUR TAX ADVISORS FOR A FULL
UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We hope to complete the merger in the first quarter of 1999.
Q: WHAT WILL HAPPEN TO FORT BEND'S SUBSIDIARY, FORT BEND FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ROSENBERG, IN THE MERGER?
A: The Association will be merged into Southwest's subsidiary, Southwest Bank
of Texas N.A., in a separate merger that will occur simultaneously with the
merger of the two parent companies. All Association offices will become
branch offices of Southwest Bank and will have access to all services
provided by Southwest Bank to its customers.
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your signed proxy card in the enclosed return envelope as soon as
possible so that your shares can be voted at the February ___, 1999 Fort
Bend special meeting.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the merger, you should contact:
Fort Bend Holding Corp.
3400 Avenue H
Rosenberg, Texas 77471
Attention: David D. Rinehart
Tel: (281) 342-5571
- 1 -
<PAGE>
SUMMARY
THIS BRIEF SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. WE URGE YOU TO CAREFULLY READ THE ENTIRE PROXY
STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH THIS DOCUMENT REFERS TO
FULLY UNDERSTAND THE MERGER. SEE "WHERE YOU CAN FIND MORE INFORMATION" (PAGES 36
AND 37). WE HAVE ATTACHED THE MERGER AGREEMENT TO THIS PROXY
STATEMENT/PROSPECTUS AS APPENDIX A. WE ENCOURAGE YOU TO READ THE MERGER
AGREEMENT. IT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER OF SOUTHWEST AND
FORT BEND.
THE COMPANIES
SOUTHWEST BANCORPORATION OF TEXAS, INC.
4400 POST OAK PARKWAY
HOUSTON, TEXAS 77027
(713) 235-8800
Southwest is a Texas corporation and bank holding company headquartered in
Houston, Texas. As of September 30, 1998, Southwest had assets of $1.98 billion,
net loans of $1.19 billion, deposits of $1.64 billion and shareholders' equity
of $137.5 million. Substantially all of Southwest's revenue and income is
derived from the operations of its subsidiary, Southwest Bank of Texas N.A., a
national bank with 17 full service banking facilities in the Houston area.
Southwest Bank provides a full range of commercial and private banking services,
including financial planning and investment management, to small and middle
market businesses and individuals in the Houston metropolitan area. Based on
total assets as of September 30, 1998, Southwest is the largest independent bank
holding company headquartered in the Houston metropolitan area.
FORT BEND HOLDING CORP.
3400 AVENUE H
ROSENBERG, TEXAS 77471
(281) 342-5571
Fort Bend is a Delaware corporation that was organized in 1993 for the purpose
of becoming the savings and loan holding company of Fort Bend Federal Savings
and Loan Association of Rosenberg. Fort Bend owns all of the outstanding stock
of the Association, which is a federal stock savings and loan association. Fort
Bend serves its primary market area, Fort Bend County, Texas, and portions of
Harris, Montgomery, Waller and Wharton Counties, Texas, through the
Association's six retail banking offices and the operations of Mitchell Mortgage
Company, L.L.C., a mortgage banking company in which the Association acquired a
majority interest in January 1997. At September 30, 1998, Fort Bend had assets
of $327 million, net loans of $166 million, deposits of $276 million and
stockholders' equity of $23.6 million.
WHAT YOU WILL RECEIVE IN THE MERGER (PAGE 16)
In the merger, Fort Bend stockholders will receive 1.45 shares of Southwest
common stock for each share of Fort Bend common stock that they own. Southwest
will pay cash to Fort Bend stockholders who would otherwise be entitled to
receive fractional shares of Southwest common stock. On January ___, 1999, the
closing prices of Southwest common stock and Fort Bend common stock, as reported
in THE WALL STREET JOURNAL, were $____ and $____, respectively, making 1.45
shares of Southwest common stock worth $____. You are urged to obtain current
market quotations of the stock prices from your broker between the date of this
Proxy Statement/Prospectus and the completion of the merger.
THE SPECIAL MEETING (PAGES 8 AND 9)
A special meeting will be held on February ___, 1999, at the Fort Bend Country
Club, located at 2627 Farm to Market Road 762, Richmond, Texas to vote on the
proposal to approve the merger agreement.
THE MERGER (PAGES 11 THROUGH 24)
If the merger agreement is approved and the merger becomes effective, Fort Bend
will be merged into Southwest, and Southwest will continue as the surviving
corporation in the merger. In addition, simultaneously with the merger, the
Association will be merged into Southwest Bank pursuant to a Plan of Merger that
is attached to the merger agreement as Exhibit A.
VOTE REQUIRED (PAGES 8 AND 9)
Approval of the merger agreement requires the affirmative vote of the holders of
at least a majority of the outstanding shares of Fort Bend common stock.
Directors and executive officers of Fort Bend and their affiliates beneficially
owned an aggregate of 230,192, or approximately 8.26%, of the shares of Fort
Bend common stock outstanding on the record date. If the holders of at least
1,393,409 of the outstanding shares of Fort Bend common stock do not vote for
the merger agreement, Fort Bend will continue to act as a separate entity and a
going concern. If the merger agreement is approved by Fort Bend's stockholders,
neither Fort Bend nor the
- 2 -
<PAGE>
Association will continue to exist as independent entities. A failure to vote,
either by not returning the enclosed proxy or by checking the "Abstain" box,
will have the same effect as a vote against approval of the merger agreement.
MEMBERS OF FORT BEND'S MANAGEMENT INTEND TO VOTE FOR THE MERGER AGREEMENT.
RECOMMENDATION TO FORT BEND'S STOCKHOLDERS
(PAGE 13)
The Board of Directors of Fort Bend believes that the merger is fair to you and
in your best interests and unanimously recommends that you vote "FOR" the merger
agreement.
OPINION OF FORT BEND'S FINANCIAL ADVISOR
(PAGES 13 THROUGH 16)
Charles Webb & Company has delivered its written opinion to the Fort Bend Board
of Directors dated as of October 20, 1998 and reaffirmed as of the date of this
Proxy Statement/Prospectus that the exchange ratio to be received by the
stockholders of Fort Bend in the merger is fair from a financial point of view.
We have attached this opinion as Appendix B to this Proxy Statement/Prospectus.
You should read it carefully for a description of the procedures followed,
matters considered and limitations on the reviews undertaken by Charles Webb in
providing its opinion.
FORT BEND STOCK OPTIONS (PAGE 16)
The currently outstanding options to purchase an aggregate of 221,313 shares of
Fort Bend common stock held by directors and certain employees of Fort Bend
will, in accordance with their terms, be converted into options, having the same
terms as such Fort Bend stock options, to purchase an aggregate of 320,903
shares of Southwest common stock, in each case, at an exercise price per share
equal to the exercise price per share for the Fort Bend stock option divided by
1.45.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
(PAGES 22 AND 23)
In the merger, Fort Bend's directors and executive officers will receive the
same consideration for each of their shares of Fort Bend common stock as that
received by the other Fort Bend stockholders.
Southwest has agreed to assume the obligations under the existing employment
agreement between Fort Bend and Lane Ward, Vice Chairman, President and Chief
Executive Officer of Fort Bend, upon completion of the merger, subject to the
following
changes:
1. The expiration date of the employment
agreement will be extended from March 31, 2001
to December 31, 2001;
2. His annual salary will increase from $140,000 to $150,000; and
3. He will receive an incentive stock option to purchase 12,000 shares of
Southwest common stock.
As soon as practicable following the effective time of the merger, Southwest and
Southwest Bank intend to increase the size of their respective Boards of
Directors by one member and elect Lane Ward to fill the vacancies created by
such increases.
Existing employment agreements between Fort Bend and two additional officers,
David D. Rinehart, Executive Vice President and Chief Financial Officer, and
Larry J. Dobrava, Senior Vice President, Lending, will remain effective
following the merger without any change, except that Mr. Rinehart will also
receive an incentive stock option to purchase 2,000 shares of Southwest common
stock. Each of the employment agreements provides for special payments to the
employee if his employment is terminated for any reason within 12 months
following a "change in control" of Fort Bend, such as the merger. The maximum
amount of the special payments that Messrs. Ward, Rinehart and Dobrava would be
eligible to receive would be $431,531, $333,925 and $192,550, respectively.
NO DISSENTERS' RIGHTS (PAGE 18)
Delaware law does not provide you with dissenters' or appraisal rights in
connection with the merger.
ACCOUNTING TREATMENT (PAGE 24)
We expect the merger to be accounted for as a "pooling of interests" under
generally accepted accounting principles.
COMPARISON OF RIGHTS OF HOLDERS OF SOUTHWEST COMMON STOCK AND FORT BEND COMMON
STOCK (PAGES 29 THROUGH 35)
The rights of Fort Bend stockholders are governed by Delaware law and the Fort
Bend Certificate of Incorporation and Bylaws. The rights of Southwest
shareholders are governed by Texas law and Southwest's Articles of Incorporation
and Bylaws. Upon completing the merger, Fort Bend stockholders will become
shareholders of Southwest, and their rights will be governed by Texas law and
Southwest's Articles and Bylaws.
- 3 -
<PAGE>
HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
The following tables show information about historical basic and diluted
earnings per common share, dividends per share and book value per share for
Southwest and Fort Bend, and similar information reflecting the merger, which we
refer to as "pro forma" information. The pro forma and equivalent pro forma data
are provided for informational purposes. In presenting the comparative pro forma
information for certain time periods, we assumed that Fort Bend and Southwest
had always been combined for accounting and financial reporting purposes, a
method known as "pooling of interests" accounting. The pro forma annual
information was obtained by combining the consolidated financial statements of
Southwest for the years ended December 31, 1997, 1996 and 1995 and the
consolidated financial statements of Fort Bend for the years ended March 31,
1998, 1997 and 1996. The pro forma interim information was obtained by combining
the consolidated financial statements of Southwest and Fort Bend for the nine
months ended September 30, 1998 and 1997. The information listed as "equivalent
pro forma" was obtained by multiplying the pro forma amounts by the exchange
ratio of 1.45. We present this information to reflect the fact that Fort Bend
stockholders will receive 1.45 shares of the combined company's common stock for
each share of Fort Bend common stock exchanged in the merger.
We expect that Fort Bend and Southwest will incur merger and integration
charges as a result of combining our companies of approximately $3.0 million. We
also anticipate that the merger will provide the combined company with financial
benefits that include reduced operating expenses and opportunity to earn more
revenue. The pro forma information, while helpful in illustrating the financial
characteristics of the combined company under one set of assumptions, does not
reflect these expenses or benefits and, accordingly, does not attempt to predict
or suggest future results. It also does not necessarily reflect what the
historical results of the combined company would have been had our companies
been combined.
The information in the following tables is based on, and should be read
together with, the historical financial information that Fort Bend and Southwest
have presented in prior Commission filings, some of which, regarding Fort Bend,
have been delivered to you with this Proxy Statement/Prospectus. We have
incorporated this material into this document by reference. See "Where You Can
Find More Information" on pages 36 and 37.
SOUTHWEST BANCORPORATION OF TEXAS, INC.
PER COMMON SHARE DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
HISTORICAL:
Basic earnings per share . $ 0.72 $ 0.54 $ 0.77 $ 0.62 $ 0.52
Diluted earnings per share 0.68 0.50 0.72 0.57 0.48
Cash dividends ........... -- -- -- -- --
Book value ............... 5.92 4.92 5.14 3.91 3.23
PRO FORMA:
Basic earnings per share . $ 0.71 $ 0.55 $ 0.77 $ 0.58 $ 0.53
Diluted earnings per share 0.65 0.50 0.71 0.54 0.50
Cash dividends ........... -- -- -- -- --
Book value ............... 6.22 5.24 5.48 4.33 3.71
</TABLE>
FORT BEND HOLDING CORP.
PER COMMON SHARE DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------- -----------------------
SEPTEMBER 30, YEAR ENDED MARCH 31,
1998 1997 1998 1997 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
HISTORICAL:
Basic earnings per share . $ 0.91 $ 0.94 $ 1.21 $ 0.47 $ 1.00
Diluted earnings per share 0.71 0.73 0.94 0.46 0.91
Cash dividends ........... 0.30 0.12 0.285 0.14 0.14
Book value ............... 12.65 11.88 12.42 11.20 10.75
EQUIVALENT PRO FORMA:
Basic earnings per share . $ 1.03 $ 0.80 $ 1.12 $ 0.84 $ 0.77
Diluted earnings per share 0.94 0.73 1.03 0.78 0.73
Cash dividends ........... -- -- -- -- --
Book value ............... 9.01 7.60 7.95 6.28 5.38
</TABLE>
- 4 -
<PAGE>
MARKET PRICE AND DIVIDEND DATA
MARKET PRICES. The Southwest common stock commenced trading on NASDAQ
under the symbol "SWBT" on January 28, 1997. The Fort Bend common stock is also
quoted on NASDAQ under the symbol "FBHC." Quotations of the sales volume and the
closing sales prices of the common stock of Southwest and Fort Bend are listed
daily in NASDAQ's national market listings.
The following table sets forth, for the periods indicated, the range of
high and low sale prices of the common stock of Southwest and Fort Bend, as
quoted by NASDAQ's monthly statistical report, and dividends paid per share for
the Fort Bend common stock. No dividends have been paid on the Southwest common
stock. Share prices and dividends are for calendar quarters. Southwest's fiscal
year ends on December 31, and Fort Bend's fiscal year ends on March 31. Share
prices for the Southwest common stock have been restated to adjust for the
two-for-one stock split effected on May 29, 1998. Share prices for the Fort Bend
common stock have been restated to adjust for the two-for-one stock split
effected on October 1, 1997. The exchange ratio for the merger is 1.45 shares of
Southwest common stock for each share of outstanding Fort Bend common stock.
<TABLE>
<CAPTION>
SOUTHWEST FORT BEND
---------------- -------------------------------
HIGH LOW HIGH LOW DIVIDEND
---- --- ---- --- --------
<S> <C> <C> <C> <C> <C>
1996
Second Quarter .......... $ -- $ -- $ 9 1/4 $ 8 3/4 $ 0.035
Third Quarter ........... -- -- 9 3/4 8 3/8 0.035
Fourth Quarter .......... -- -- 13 9 3/8 0.035
1997
First Quarter ........... $ 10 1/4 $ 8 15/16 $12 3/8 $ 11 $ 0.035
Second Quarter .......... 13 13/16 9 3/16 15 1/4 11 7/8 0.035
Third Quarter ........... 15 1/16 12 13/16 20 1/8 14 3/4 0.050
Fourth Quarter .......... 16 1/16 14 1/8 24 1/4 19 0.100
1998
First Quarter ........... $ 19 7/8 $15 $ 30 3/4 $ 20 1/2 $ 0.100
Second Quarter .......... 21 3/8 16 1/2 28 22 1/4 0.100
Third Quarter ........... 19 1/4 12 3/4 23 1/2 16 1/2 0.100
Fourth Quarter .......... 18 1/2 10 24 5/8 18 0.100
1999
First Quarter (through January 11) 18 3/16 17 5/8 24 3/4 22 5/8 --
</TABLE>
On October 20, 1998, the last trading day prior to the date of the
joint announcement by Southwest and Fort Bend that they had entered into the
merger agreement, the closing per share sales prices of Southwest common stock
and Fort Bend common stock, as reported in THE WALL STREET JOURNAL, were $15.00
and $19.00, respectively. The pro forma equivalent per share value of the Fort
Bend common stock on October 20, 1998 was $21.75 per share. This pro forma
equivalent per share value is calculated by multiplying the quoted Fort Bend
common stock price by the merger exchange ratio of 1.45. On January ____, 1999,
the closing prices of Southwest common stock and Fort Bend common stock, as
reported in THE WALL STREET JOURNAL, were $_____ and $_____, respectively. You
are urged to obtain current market quotations. As of September 30, 1998,
Southwest had approximately 756 shareholders of record, and Fort Bend had
approximately 524 stockholders of record.
Following the merger, Southwest common stock will continue to be quoted
by NASDAQ. Fort Bend common stock will cease to be quoted by NASDAQ, and there
will be no further market for the Fort Bend common stock.
DIVIDEND DATA. No cash dividends have ever been paid by Southwest on
its common stock, and Southwest does not anticipate paying any cash dividends on
its common stock in the foreseeable future.
If the merger is not consummated, the Board of Directors of Fort Bend
intends to continue to consider the payment of quarterly dividends on the
outstanding shares of Fort Bend common stock. The merger agreement prohibits
Fort Bend from declaring or paying any dividends on shares of Fort Bend common
stock other than regular quarterly cash dividends in amounts per share not to
exceed $0.10 for the quarters ending September 30, 1998 and December 31, 1998.
The declaration and payment of such dividends will be at the discretion of the
Board of Directors of Fort Bend and will depend upon, among other things, future
earnings of Fort Bend, its general financial condition, the success of its
business activities, its capital requirements and general business conditions.
For information regarding regulatory limitations on Southwest's and
Fort Bend's abilities to pay dividends, see "Comparative Rights of Holders of
Southwest Common Stock and Holders of Fort Bend Common Stock--Dividends."
- 5 -
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
SOUTHWEST BANCORPORATION OF TEXAS, INC.
These tables show financial results actually achieved by Southwest. The
annual historical financial amounts are derived from Southwest's consolidated
financial statements audited by PricewaterhouseCoopers LLP, independent
accountants. Financial amounts as of and for the nine months ended September 30,
1998 and 1997 are unaudited, but Southwest believes such amounts reflect all
normal recurring adjustments necessary for a fair presentation of the results of
operations and financial position for those periods. You should not assume the
nine-month results indicate results for any future period. The information below
should also be read in conjunction with Southwest's Annual Report on Form 10-K
and Quarterly Report on Form 10-Q, as applicable, each of which is incorporated
by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30. YEARS ENDED DECEMBER 31,
------------------ -------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income ....................... $ 102,203 $ 77,742 $ 108,932 $ 78,257 $ 61,695 $ 42,063 $ 30,903
Interest expense ...................... 43,562 32,374 45,729 32,275 25,509 13,848 9,970
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income ................ 58,641 45,368 63,203 45,982 36,186 28,215 20,933
Provision for loan losses ............. 2,700 2,736 3,886 2,090 1,121 1,349 1,037
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses ................... 55,941 42,632 59,317 43,892 35,065 26,866 19,896
Noninterest income .................... 11,269 7,733 10,573 6,847 4,867 3,986 3,352
Noninterest expenses .................. 41,623 32,263 44,013 32,210 25,684 20,903 17,366
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before taxes ................ 25,587 18,102 25,877 18,529 14,248 9,949 5,882
Provision for income taxes ............ 9,081 6,351 9,072 6,468 4,919 3,462 2,002
Cumulative effect of change in
accounting principle ................ -- -- -- -- -- -- 16
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income before preferred dividend .. 16,506 11,751 16,805 12,061 9,329 6,487 3,896
Preferred stock dividend .............. -- 36 36 457 50 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income available to common
shareholders ......................... $ 16,506 $ 11,715 $ 16,769 $ 11,604 $ 9,279 $ 6,487 $ 3,896
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Basic earnings per share .............. $ 0.72 $ 0.54 $ 0.77 $ 0.62 $ 0.52 $ 0.38 $ 0.23
Diluted earnings per share (1) ........ 0.68 0.50 0.72 0.57 0.48 0.35 2.22
Book value ............................ 5.92 4.92 5.14 3.91 3.23 2.61 2.22
Weighted average common shares
outstanding (2) ...................... 23,058 21,781 21,918 18,790 18,064 17,226 17,194
Average common share equivalents ...... 1,141 1,521 1,324 1,604 1,374 1,252 1,084
PERFORMANCE RATIOS:
Return on average assets .............. 1.20% 1.13% 1.15% 1.09% 1.15% 1.04% 0.77%
Return on average common equity ....... 17.63% 15.88% 16.46% 17.58% 17.50% 15.43% 10.65%
Net interest margin ................... 4.58% 4.71% 4.57% 4.69% 4.81% 4.86% 4.58%
Efficiency ratio (3) .................. 59.54% 60.76% 59.66% 60.97% 62.56% 64.91% 71.51%
BALANCE SHEET DATA (4):
Total assets .......................... $1,983,330 $1,638,231 $1,807,604 $1,272,141 $1,007,616 $ 703,497 $ 579,909
Securities ............................ 510,802 434,945 555,398 345,398 347,906 196,333 189,961
Loans ................................. 1,206,103 928,765 986,150 731,655 531,770 417,601 327,396
Allowance for loan losses ............. 12,142 9,389 10,335 7,400 6,024 4,991 3,802
Total deposits ........................ 1,637,044 1,392,203 1,512,341 1,041,447 840,174 603,481 516,164
Total shareholders' equity ............ 137,516 109,499 114,835 73,415 58,304 46,969 38,091
ASSET QUALITY RATIOS (4):
Nonperforming assets to loans and
other real estate ................... 0.19% 0.18% 0.37% 0.26% 0.19% 0.18% 0.25%
Net charge-offs (recoveries) to
average loans ....................... 0.11% 0.12% 0.11% 0.13% 0.09% 0.04% 0.00%
Allowance for loan losses to
total loans ......................... 1.01% 1.01% 1.05% 1.01% 1.13% 1.20% 1.16%
Allowance for loan losses to
nonperforming loans (5) ............. 697.42% 897.61% 332.64% 452.05% 675.34% 1250.88% 1604.22%
</TABLE>
- --------------------
(1) Diluted earnings per share is based upon the weighted average number of
common shares outstanding and common share equivalents during the period.
(2) Adjusted for the two-for-one stock split effected on May 29, 1998.
(3) Calculated by dividing total Noninterest expenses, excluding securities
losses, by net interest income plus Noninterest income.
(4) At period end except net charge-offs (recoveries) to average loans.
(5) Nonperforming loans consist of nonaccrual loans and loans contractually
past due 90 days or more.
- 6 -
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
FORT BEND HOLDING CORP.
These tables show financial results actually achieved by Fort Bend. The
annual historical financial amounts are derived from Fort Bend's consolidated
financial statements audited by PricewaterhouseCoopers LLP, independent
accountants. Financial amounts as of and for the six months ended September 30,
1998 and 1997 are unaudited, but Fort Bend believes such amounts reflect all
normal recurring adjustments necessary for a fair presentation of the results of
operations and financial position for those periods. You should not assume the
six-month results indicate results for any future period. The information below
should also be read in conjunction with Fort Bend's Annual Report on Form 10-KSB
and Quarterly Report on Form 10-QSB, as applicable, each of which is delivered
with and is incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEARS ENDED MARCH 31,
--------------- -----------------------------------------------
1998 1997 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income ................................... $ 11,332 $ 10,882 $ 21,714 $ 18,766 $ 16,417 $ 14,594 $ 13,824
Interest expense .................................. 6,116 6,116 12,326 11,398 10,024 7,708 7,609
-------- -------- -------- -------- -------- -------- --------
Net interest income ............................. 5,216 4,766 9,388 7,368 6,393 6,886 6,215
Provision for loan losses ......................... 90 78 96 324 123 258 2
-------- -------- -------- -------- -------- -------- --------
Net interest income after provision
for loan losses ................................ 5,126 4,688 9,292 7,044 6,270 6,628 6,213
Noninterest income ................................ 4,112 3,053 6,880 3,355 1,897 1,281 1,421
Noninterest expenses .............................. 7,179 5,992 12,686 9,203 5,567 5,168 5,198
-------- -------- -------- -------- -------- -------- --------
Income before taxes and minority interest ....... 2,059 1,749 3,486 1,196 2,600 2,741 2,436
Provision for income taxes ........................ 667 547 1,095 363 913 970 794
Minority interest ................................. 288 180 373 58 -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income ........................................ $ 1,104 $ 1,022 $ 2,018 $ 775 $ 1,687 $ 1,771 $ 1,642
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
PER SHARE DATA:
Basic earnings per share .......................... $ 0.62 $ 0.62 $ 1.21 $ 0.47 $ 1.00 $ 0.99 $ 0.92
Diluted earnings per share (1) .................... 0.48 0.48 0.94 0.46 0.91 0.97 0.91
Book value ........................................ 12.64 11.88 12.42 11.20 10.75 9.74 8.74
Dividends ......................................... 0.20 0.085 0.285 0.14 0.14 0.14 0.025
Average common shares outstanding (2) ............. 1,794 1,654 1,665 1,640 1,694 1,794 1,789
Average common share equivalents .................. 1,110 1,196 1,211 52 406 28 11
PERFORMANCE RATIOS:
Return on average assets .......................... 0.68% 0.66% 0.65% 0.28% 0.71% 0.80% 0.76%
Return on average equity .......................... 9.79% 10.73% 10.16% 4.33% 9.72% 10.71% 12.07%
Net interest margin ............................... 3.49% 3.36% 3.29% 2.95% 2.81% 3.24% 3.04%
Efficiency ratio .................................. 76.96% 76.63% 77.98% 85.83% 67.15% 63.29% 68.07%
BALANCE SHEET DATA (3):
At period end:
Total assets ...................................... $327,495 $319,414 $316,606 $295,080 $244,169 $229,701 $211,872
Securities ........................................ 78,167 104,000 95,303 111,650 123,281 137,230 121,372
Loans ............................................. 167,375 143,146 161,654 139,929 94,212 78,506 77,419
Allowance for loan losses ......................... 1,665 1,619 1,592 1,701 1,350 1,650 1,712
Total deposits .................................... 275,695 269,084 268,991 250,218 203,914 194,468 189,733
Total stockholders' equity ........................ 23,596 19,671 21,404 18,428 17,572 16,719 15,637
ASSET QUALITY RATIOS (3):
Non-performing loans to total loans receivable .... 0.88% 1.23% 0.67% 0.64% 3.22% 4.76% 5.40%
Net charge-offs to average loans .................. 0.01% 0.07% 0.13% 0.60% 0.49% 0.42% 0.04%
Allowance for loan losses to total loans receivable 0.99% 1.13% 0.99% 1.22% 1.43% 2.10% 2.21%
Allowance for loan losses to non-performing loans . 112.50% 91.73% 148.06% 190.20% 44.46% 44.17% 40.98%
</TABLE>
- ------------------
(1) Diluted earnings per share is based upon the weighted average number of
common shares outstanding and common share equivalents during the period.
(2) Adjusted for two-for-one stock split effected on October 1, 1997.
(3) At period end, except net charge-offs to average loans.
- 7 -
<PAGE>
RECENT DEVELOPMENT
On November 16, 1998, Fort Bend announced the intention to redeem on
December 23, 1998 all of its outstanding 8% Convertible Subordinated Debentures
due December 1, 2005. As a result, the entire $9,910,000 aggregate principal
amount of debentures outstanding as of September 30, 1998, was converted into
917,013 shares of Fort Bend Common Stock (as defined) and stockholders' equity
as of September 30, 1998, increased by approximately $9,910,000. Had this
redemption occurred as of September 30, 1998, the pro forma book value per share
of the combined company would have been $5.98.
FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus, including information incorporated by
reference, contains certain forward-looking statements with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of each of Southwest and Fort Bend, as well as certain
information relating to the merger, including, without limitation (1) statements
relating to the cost savings and accretion to reported earnings estimated to
result from the merger, (2) statements relating to revenues estimated to result
from the merger, (3) statements relating to the merger and integration costs
estimated to be incurred in connection with the merger and (4) statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "estimates" or similar expressions. These forward-looking
statements involve certain risks and uncertainties. Actual results may differ
materially from those expected by such forward-looking statements due to, among
others, the following factors: (a) expected cost savings from the merger are not
fully realized or are not realized within the expected time frame or additional
or unexpected costs are incurred; (b) revenues following the merger are lower
than expected; (c) competitive pressures among financial services companies
increase; (d) costs or difficulties related to the integration of the businesses
of Southwest and Fort Bend or other acquired businesses are greater than
expected; (e) changes in the interest rate environment may reduce interest
margins, cause prepayment of loans being serviced and reduce the demand for
loans; (f) general economic conditions, either internationally or nationally or
in the states in which Southwest or Fort Bend is doing business are less
favorable than expected; (g) legislative or regulatory changes adversely affect
the businesses in which Southwest or Fort Bend are engaged; (h) personal or
commercial customers' bankruptcies increase; (i) technological changes,
including "Year 2000" data systems compliance issues, are more difficult or
expensive than anticipated; and (j) changes occur in the securities markets. See
"Where You Can Find More Information" on pages 36 and 37 for a list of the
documents incorporated by reference in this Proxy Statement/Prospectus.
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of the
common stock, par value $0.01 per share, of Fort Bend ("Fort Bend Common Stock")
in connection with the solicitation of proxies by the Fort Bend Board of
Directors (the "Fort Bend Board") for use at a special meeting (the "Special
Meeting") to be held on February __, 1999, and at any adjournments or
postponements thereof. At the Special Meeting, stockholders of Fort Bend will
consider and vote upon a proposal to approve the Agreement and Plan of Merger
dated October 20, 1998 (the "Merger Agreement") between Fort Bend and Southwest.
The Merger Agreement provides that Fort Bend will merge (the "Merger") with and
into Southwest and stockholders of Fort Bend will receive 1.45 shares of the
common stock, par value $1.00 per share, of Southwest ("Southwest Common Stock")
in exchange for each of their shares of Fort Bend Common Stock. The Fort Bend
Board is not aware as of the date of this Proxy Statement/Prospectus of any
business to be acted upon at the Special Meeting other than the proposal to
approve the Merger Agreement. If other matters are properly brought before the
Special Meeting or any adjournments or postponements thereof, the persons
appointed as proxies will have discretion to vote or act on such matters
according to their best judgment.
RECORD DATE; VOTING RIGHTS; VOTE REQUIRED
The Fort Bend Board has fixed the close of business on January __, 1999
as the record date for the determination of stockholders of Fort Bend entitled
to receive notice of and to vote at the Special Meeting (the "Record Date"). On
the Record Date, there were 2,786,817 shares of Fort Bend Common Stock
outstanding. Each holder of Fort Bend Common Stock is entitled to one vote per
share held of record on the Record Date.
- 8 -
<PAGE>
The presence in person or by proxy at the Special Meeting of the
holders of a majority of the outstanding shares of Fort Bend Common Stock will
constitute a quorum for the transaction of business at the Special Meeting.
Under the Delaware General Corporation Law (the "DGCL"), approval of the Merger
Agreement will require the affirmative vote of the holders of a majority of the
outstanding shares of Fort Bend Common Stock. Directors and executive officers
of Fort Bend and their affiliates beneficially owned on the Record Date an
aggregate of 230,192, or approximately 8.26%, of the outstanding shares of Fort
Bend Common Stock. MEMBERS OF FORT BEND'S MANAGEMENT AND THEIR AFFILIATES INTEND
TO VOTE ALL SHARES OF FORT BEND COMMON STOCK HELD BY THEM IN FAVOR OF APPROVAL
OF THE MERGER AGREEMENT.
VOTING AND REVOCATION OF PROXIES
Shares of Fort Bend Common Stock represented by a proxy properly signed
and received at or prior to the Special Meeting, unless subsequently revoked,
will be voted at the Special Meeting in accordance with the instructions on the
proxy. If a proxy is signed and returned without indicating any voting
instructions, shares of Fort Bend Common Stock represented by such proxy will be
voted "FOR" approval of the Merger Agreement. If your shares of Fort Bend Common
Stock are held in street name by your broker, your broker will not be able to
vote your shares without instructions from you. You should instruct your broker
to vote your shares following the procedure provided by your broker.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before the proxy is voted by filing either an
instrument revoking it or a duly executed proxy bearing a later date with the
Secretary of Fort Bend prior to or at the Special Meeting or by voting the
shares subject to the proxy in person at the Special Meeting. Attendance at the
Special Meeting will not in and of itself constitute a revocation of a proxy.
A proxy may indicate that all or a portion of the shares represented
thereby are not being voted with respect to a specific proposal. This could
occur, for example, when a broker is not permitted to vote shares held in street
name on certain proposals in the absence of instructions from the beneficial
owner. Shares that are not voted with respect to a specific proposal will be
considered as not present for such proposal, even though such shares will be
considered present for purposes of determining a quorum and voting on other
proposals. Abstentions on a specific proposal will be considered as present but
will not be counted as voting in favor of such proposal. The proposal to approve
the Merger Agreement must be approved by the holders of a majority of the shares
of Fort Bend Common Stock outstanding on the Record Date. Because the proposal
to approve the Merger Agreement requires the affirmative vote of a specified
percentage of outstanding shares, any nonvoted shares and abstentions with
regard to this proposal will have the same effect as votes against the proposal.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, employees
and agents of Fort Bend may solicit proxies from Fort Bend's stockholders,
either personally or by telephone or other form of communication. None of the
foregoing persons who solicit proxies will be specifically compensated for such
services. Nominees, fiduciaries and other custodians will be requested to
forward soliciting materials to beneficial owners. Fort Bend will reimburse such
nominees, fiduciaries and other custodians for the reasonable out-of-pocket
expenses incurred by them in connection therewith. In addition, Fort Bend will
bear its own expenses in connection with the solicitation of its proxies for the
Special Meeting; however, the cost of printing and mailing this Proxy
Statement/Prospectus and the filing fees of the Securities and Exchange
Commission (the "Commission") will be borne equally by Southwest and Fort Bend.
See "The Merger--Expenses."
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE STOCKHOLDERS OF FORT BEND. STOCKHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT/PROSPECTUS
AND TO COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO
FORT BEND IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
- 9 -
<PAGE>
PRINCIPAL HOLDERS OF FORT BEND COMMON STOCK
Information regarding ownership of Fort Bend Common Stock as of
December 31, 1998, by (1) beneficial owners of more than 5% of the outstanding
shares of Fort Bend Common Stock, as set forth in the latest Schedule 13D or 13G
filings by such persons, (2) each director and each executive officer whose
salary and bonus for the fiscal year ended March 31, 1998 exceeded $100,000 and
(3) all directors and executive officers of Fort Bend and the Association as a
group, is set forth in the following table:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY % OF
NAME AND ADDRESS OWNED CLASS
----------------------- ------------------- ------
<S> <C> <C>
The Woodlands Operating Company, L.P., as Agent for 213,516 (1) 7.12%
The Woodlands Land Development Company L.P.
2201 Timberloch Place
The Woodlands, Texas 77380
Wellington Management Company, LLP 155,400 (2) 5.58
75 State Street
Boston, Massachusetts 02109
First Financial Fund, Inc. 154,000 (3) 5.53
Gateway Center Three
100 Mulberry Street, 9th Floor
Newark, New Jersey 07102-4077
Lane Ward 79,061 (4) 2.94
David D. Rinehart 32,565 (4) 1.17
Directors and executive officers of Fort Bend 230,192 (5) 8.26
and the Association as a group (9 persons)
</TABLE>
- ------------------
(1) Represents shares that the named party has the right to acquire after
January 1, 1999, by converting the book value of its 49% ownership
interest (as of December 31, 1998) in Mitchell Mortgage Company L.L.C.
into shares of Fort Bend Common Stock. See "The Merger -- Mitchell
Mortgage Company L.L.C."
(2) Wellington has reported shared dispositive power as to 155,400 shares.
(3) First Financial Fund, Inc. reported sole voting and shared dispositive
power as to 154,000 shares.
(4) Includes shares held directly and jointly with family members, as well
as shares that are held in retirement accounts, or held by certain
members of the named individual's families, or held by trusts of which
the named individual is a trustee or substantial beneficiary, with
respect to which shares the respective individuals may be deemed to
have sole or shared voting and/or dispositive powers. Also includes (a)
4,600 and 2,640 restricted shares of Fort Bend Common Stock awarded
under Fort Bend's Recognition and Retention Plan (the "Restricted Stock
Plan") to Mr. Ward and Mr. Rinehart, respectively, that have not yet
vested but over which such individuals have sole voting power, (b)
33,836 and 17,162 shares subject to options granted under the Fort Bend
Stock Option Plan to Mr. Ward and Mr. Rinehart, respectively, that are
currently exercisable and (c) 6,037 and 4,578 shares allocated to the
ESOP (as defined) accounts of Mr. Ward and Mr. Rinehart, respectively.
(5) Includes shares held directly, as well as jointly with family members,
and shares held in retirement accounts, in a fiduciary capacity or by
certain family members, with respect to which shares the listed
individuals or group members may be deemed to have sole voting and/or
dispositive powers. Also includes (a) 400, 3,400, 1,920, 920 and 400
restricted shares of Fort Bend Common Stock awarded under the
Restricted Stock Plan to Robert W. Lindsey, Mr. Ward, Mr. Rinehart, Mr.
Dobrava and Ms. Sandra C. Samford (Vice President and Corporate
Secretary), respectively, that have not yet vested but over which such
individuals have sole voting power, (b) 33,836, 17,162, 9,776, 2,256,
467 and 8,145 shares subject to options granted under the Fort Bend
Stock Option Plan to Mr. Ward, Mr. Rinehart, Mr. Dobrava, Ms. Samford,
Mr. Workman and each of Directors Gubbels, Poldrack, Little and Brady,
respectively, that are currently exercisable and (c) 6,037, 4,578,
4,061, 465 and 1,610 shares allocated to the ESOP accounts of Mr. Ward,
Mr. Rinehart, Mr. Dobrava, Mr. Lindsey and Ms. Samford, respectively.
PRINCIPAL HOLDERS OF SOUTHWEST COMMON STOCK
Information regarding ownership of Southwest Common Stock by (1) each
director and each of the five most highly compensated executive officers and (2)
all directors and executive officers of Southwest as a group, is contained in
Southwest's Proxy Statement dated April 20, 1998, for its Annual Meeting of
Shareholders held on May 26, 1998, which is incorporated by reference in
Southwest's Annual Report on Form 10-K for the year ended
-10-
<PAGE>
December 31, 1997, incorporated by reference herein. No person is known by
Southwest to own beneficially 5% or more of the outstanding shares of Southwest
Common Stock.
THE MERGER
THIS SECTION OF THE PROXY STATEMENT/PROSPECTUS DESCRIBES CERTAIN
ASPECTS OF THE MERGER. THE FOLLOWING DESCRIPTION DOES NOT PURPORT TO BE COMPLETE
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, A COPY OF
WHICH IS ATTACHED AS APPENDIX A TO THIS PROXY STATEMENT/PROSPECTUS AND
INCORPORATED HEREIN BY REFERENCE. YOU ARE URGED TO READ THE MERGER AGREEMENT
CAREFULLY IN ITS ENTIRETY.
CLOSING AND EFFECTIVE TIME OF THE MERGER
The closing of the Merger will take place on the last business day of
the month when all conditions to the Merger are satisfied, unless the parties
agree to another closing date (the "Closing Date"). The Merger will become
effective at the time that Southwest and Fort Bend agree to be the effective
time (the "Effective Time"). At the Effective Time, Fort Bend will be merged
with and into Southwest. Following the Merger, Southwest will continue as the
surviving corporation, and Fort Bend will no longer exist as an independent
entity. The merger of the Association with and into Southwest Bank (the "Bank
Merger") shall be effectuated simultaneously with the Merger at the Effective
Time. Except with respect to fractional shares as discussed below, if the Merger
Agreement is approved and the Merger becomes effective, stockholders of Fort
Bend will receive 1.45 shares of Southwest Common Stock for each of their shares
of Fort Bend Common Stock. See "--Merger Consideration." Shares of Southwest
Common Stock issued and outstanding immediately before the Effective Time will
remain issued and outstanding immediately after the Effective Time.
The market price for Southwest Common Stock will fluctuate between the
date of this Proxy Statement/Prospectus and the Effective Time. The market value
of the shares of Southwest Common Stock that stockholders of Fort Bend receive
at the Effective Time may be more or less than the market value of such shares
on the date of this Proxy Statement/Prospectus.
BACKGROUND OF THE MERGER
BACKGROUND. Fort Bend was organized in 1993 as the holding company for
the Association, which had converted from a mutual savings and loan to a stock
savings and loan in 1993 raising $9.6 million in Fort Bend's initial public
offering. In December 1995, Fort Bend issued its 8% Convertible Subordinated
Debentures due December 1, 2005 (the "Fort Bend Debentures") in the original
aggregate principal amount of $12.1 million to provide capital for acquisitions
by Fort Bend. In August 1996, Fort Bend acquired FirstBanc Savings Association
of Missouri City, Texas in a cash purchase totaling $4.21 million, which
provided Fort Bend with an additional $31 million in assets and an expanded
presence in East Fort Bend County. Fort Bend consummated a second acquisition in
January 1997, when it acquired a 51% controlling interest in Mitchell Mortgage
Company L.L.C. ("Mitchell"), a mortgage banking company originating and
servicing single family purchase loans, single family construction loans and
commercial and multi-family real estate loans headquartered in The Woodlands, a
community north of Houston.
Southwest was incorporated in 1996 as the holding company for Southwest
Bank, which was organized as a national banking association in 1982. On January
27, 1997, Southwest completed its initial public offering of Southwest Common
Stock. On August 1, 1997, Pinemont Bank was merged into Southwest Bank in
exchange for 3,337,500 shares of Southwest Common Stock issued to the Pinemont
shareholders in a transaction accounted for as a pooling of interests. Since the
completion of its initial public offering, Southwest has pursued selected
acquisitions of other financial institutions as a means for expansion in
addition to its internal growth. As of September 30, 1998, Southwest had assets
of $1.98 billion, net loans of $1.19 billion, deposits of $1.64 billion and
shareholders' equity of $137.5 million. Substantially all of Southwest's revenue
and income is derived from the operations of Southwest Bank, which has 17 full
service banking facilities in the Houston area.
Through the years Fort Bend has, on an ongoing basis, attempted to
increase the value of Fort Bend to its stockholders by building a strong retail
franchise in one of the fastest growing counties, Fort Bend County, in the
nation. The Mitchell acquisition added substantial mortgage banking expertise
and gave Fort Bend a growth
-11-
<PAGE>
opportunity in The Woodlands. Since becoming a stock company, Fort Bend has also
increased its stockholders' value with the payment of quarterly cash dividends
and several share repurchase programs.
In March 1998, Millers Mutual Fire Insurance Co. ("Millers"), one of
Fort Bend's securityholders, delivered an unsolicited letter to Fort Bend
stating its interest in acquiring Fort Bend for between $28 and $32 per share.
Millers subsequently disclosed publicly this intention. At that time, Fort Bend
engaged Charles Webb & Company, a Division of Keefe, Bruyette & Woods, Inc.
("Webb"), to evaluate its business plan and current prospects relative to the
interest expressed by Millers. In May 1998, Fort Bend announced that Millers
failed to pursue its unsolicited expression of interest and that Fort Bend had
been advised through third party sources that Millers had allowed its expression
of interest to expire. Millers later confirmed this position and, as a result,
no further discussions were pursued by Fort Bend.
Subsequent to this event, Fort Bend decided to consider a strategic
alliance in keeping with its goals to increase Fort Bend's value. On July 13,
1998, Fort Bend engaged Webb to evaluate a number of alternatives, including
soliciting interest in a strategic alliance with another financial institution.
Throughout the second and third calendar quarters of 1998, Fort Bend,
in conjunction with Webb, evaluated its business plan, including its historical
strategy of growth through operations and selective acquisitions. Discussions
included, among other things: (1) an analysis of competition at the retail
franchise level and competition for acquisition candidates that would meet Fort
Bend's asset mix and geographic goals; (2) Fort Bend's ability to grow at
historical levels; (3) the strategy as it related to retiring at the call date
the Fort Bend Debentures and the subsequent effect on earnings per share; and
(4) the amount of "takeover premium" that remained in the market price of Fort
Bend Common Stock from the effect of the Millers public announcement and its
effect on stockholder expectations. Webb also reviewed the status of the current
merger market, the relative pricing and the opportunities that might be
available for Fort Bend. All of these issues were analyzed in conjunction with
Fort Bend's goal to continue to increase stockholder value. Based on this
review, the Fort Bend Board elected to explore a strategic affiliation with
another financial institution.
Webb, working with Fort Bend, prepared a Confidential Investor Profile
containing financial and operating information about Fort Bend and the
Association. In July 1998, Webb, on behalf of Fort Bend, began a confidential
inquiry and contacted 24 potential candidates. Eighteen of those companies
executed confidentiality agreements, 13 of which, including Southwest, received
the Confidential Investor Profile. The five who did not receive the Confidential
Investor Profile after signing a confidentiality agreement opted to not proceed
for a variety of reasons. In August 1998, Southwest and two other financial
institutions submitted preliminary, non-binding indications of interest to
acquire Fort Bend. Upon receipt of the preliminary indications of interest, Webb
reviewed with the Fort Bend Board the details of each of the indications of
interest received. Additionally, Webb reviewed with the Fort Bend Board the
relative value of the stock consideration offered by each of the interested
parties. After discussion, the Fort Bend Board determined to go back to each
party submitting a proposal to explore the possibility for a stronger offer.
Fort Bend gave each potential acquiror additional information and access to its
management to answer questions about the operations of Fort Bend and to provide
additional information to revise their proposal. From this process, Southwest
and one other potential acquiror delivered revised proposals in September 1998.
In addition to the factors set forth below under "-- Reasons for the
Merger; Recommendation of Fort Bend's Board of Directors," Fort Bend determined
that the Southwest proposal was for the highest consideration and therefore,
Fort Bend elected to begin discussions with Southwest. Due diligence and
discussion of the definitive agreement commenced immediately. Upon completion of
the due diligence and negotiation of a definitive agreement, the pricing, as
detailed in the revised indication of interest, with a fixed exchange rate of
1.45 shares of Southwest Common Stock for each share of Fort Bend Common Stock,
was unchanged.
On October 20, 1998, the Fort Bend Board met with Webb and Fort Bend's
legal counsel. Prior to this meeting, the definitive agreement and fairness
presentation were distributed to the Fort Bend Board for their review. At the
Fort Bend Board meeting on October 20, 1998 Fort Bend's legal counsel reviewed
the terms of the Merger Agreement and other relevant documents and the
contemplated transaction. Webb delivered its fairness opinion that the merger
consideration was fair, from a financial point of view, to the holders of Fort
Bend Common Stock. After a thorough discussion of the transaction, including a
review of the due diligence findings, the Fort Bend Board voted
-12-
<PAGE>
unanimously to approve the Merger Agreement and authorized execution of the
Merger Agreement and related documents.
REASONS FOR THE MERGER; RECOMMENDATION OF FORT BEND'S BOARD OF DIRECTORS
The terms of the Merger Agreement, including the merger consideration
to be paid to Fort Bend's stockholders, were the result of arm's length
negotiations between the representatives of Southwest and Fort Bend. The
material factors considered by the Fort Bend Board in deciding to approve and
recommend the terms of the Merger were:
- the merger consideration to be paid to Fort Bend's
stockholders in relation to the market value, tangible book
value and earnings per share of Fort Bend Common Stock;
- information concerning the financial condition, results of
operations, capital levels, asset quality and prospects for
Fort Bend;
- industry and economic conditions;
- the impact of the Merger on the depositors, employees,
customers and communities served by Fort Bend;
- the opinion of Fort Bend's financial advisor as to the
fairness of the merger consideration, from a financial point
of view, to the holders of Fort Bend Common Stock;
- the general structure of the transaction and the compatibility
of management and business philosophy;
- the likelihood of receiving the required approvals in a timely
manner; and
- the ability of the combined enterprise to compete in relevant
banking and non-banking markets.
In making its determination, the Fort Bend Board did not assign any relative or
specific weights to the factors which it considered, and individual directors
may have given differing weights to different factors.
The Fort Bend Board believes that the Merger is fair to and in the best
interest of Fort Bend and its stockholders.
THE FORT BEND BOARD UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS VOTE
FOR THE APPROVAL OF THE MERGER.
OPINION OF FORT BEND'S FINANCIAL ADVISOR
On July 13, 1998, Fort Bend retained Webb to evaluate Fort Bend's
strategic alternatives as part of a stockholder enhancement program and to
review and evaluate any specific proposals for a strategic alliance that might
be received regarding an alliance with Fort Bend. Webb, as part of its
investment banking business, is regularly engaged in the evaluation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings and distributions of listed and unlisted securities.
Webb is familiar with the market for common stocks of publicly traded banks,
thrifts and bank and thrift holding companies. The Fort Bend Board selected Webb
on the basis of the firm's reputation and its experience and expertise in
transactions similar to the Merger and its prior work for, and relationship
with, Fort Bend.
Pursuant to its engagement, Webb was asked to render an opinion as to
the fairness, from a financial point of view, of the merger consideration to
stockholders of Fort Bend. Webb delivered its opinion to the Fort Bend Board
that, as of October 20, 1998, the merger consideration is fair, from a financial
point of view, to the stockholders of Fort Bend. No limitations were imposed by
the Fort Bend Board upon Webb with respect to the investigations made or
procedures followed by it in rendering its opinion. Webb has consented to the
inclusion
-13-
<PAGE>
herein of the summary of its opinion to the Fort Bend Board and to the reference
to the entire opinion attached hereto as Appendix B.
THE FULL TEXT OF THE OPINION OF WEBB, WHICH IS ATTACHED AS APPENDIX B
TO THIS PROXY STATEMENT/PROSPECTUS, SETS FORTH CERTAIN ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY WEBB, AND SHOULD BE READ
IN ITS ENTIRETY. THE SUMMARY OF THE OPINION OF WEBB SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPINION.
In rendering its opinion, Webb:
- reviewed the Merger Agreement;
- reviewed Fort Bend's Annual Reports, Proxy Statements and Form
10-KSB's for the prior three fiscal years of 1998, 1997 and
1996 and Southwest's Annual Reports, Proxy Statements and Form
10-K's for the prior three fiscal years of 1997, 1996 and 1995
and certain other information considered relevant, including
internal reports, such as board reports, asset-liability
reports, asset-quality reports and loan files;
- discussed with senior management and the boards of directors
of Fort Bend and its wholly-owned subsidiary, Fort Bend
Federal Savings and Loan Association of Rosenberg, the current
position and prospective outlook for Fort Bend;
- discussed with senior management of Southwest their
operations, financial performance and future plans and
prospects;
- considered historical quotations, levels of activity and
prices of recorded transactions in Fort Bend's and Southwest's
common stock;
- reviewed financial and stock market data of other thrifts in a
comparable asset range to Fort Bend;
- reviewed financial and stock market data of other thrifts in a
comparable asset range to Southwest;
- reviewed certain recent business combinations with thrifts as
the acquired company, which Webb deemed comparable in whole or
in part; and
- performed other analyses that Webb considered appropriate.
In rendering its opinion, Webb assumed and relied upon the accuracy and
completeness of the financial information provided to it by Fort Bend and
Southwest. In its review, with the consent of the Fort Bend Board, Webb did not
undertake any independent verification of the information provided to it, nor
did it make any independent appraisal or evaluation of the assets or liabilities
nor of potential exposure resulting from Year 2000 issues, if any, of Fort Bend
or Southwest, and potential or contingent liabilities of Fort Bend or Southwest.
In rendering its opinion, Webb analyzed certain comparable merger and
acquisition transactions of both pending and completed thrift deals, comparing
the merger consideration relative to tangible book value, last 12 months
earnings, total assets, total deposits and premium to core deposits. The
analysis of comparable acquisition transactions evaluated two groups: (1) all
thrift acquisitions pending as of October 20, 1998 ("Pending Deals"); and (2)
all thrift acquisitions closed between June 1, 1998 and October 20, 1998
("Completed Deals").
The information in the following table summarizes the comparable group
results analyzed by Webb with respect to the Merger. The summary does not
purport to be a complete description of the analysis performed by Webb and
should not be construed independently of the other information considered by
Webb in rendering its opinion. Selecting portions of Webb's analysis or
isolating certain aspects of the comparable transactions without considering all
analysis and factors could create an incomplete or potentially misleading view
of the evaluation process.
-14-
<PAGE>
<TABLE>
<CAPTION>
PRICE TO
------------------------------------------------------------------------------------
LAST 12 MONTHS
EARNINGS PER CORE DEPOSIT
TANG. BOOK (A) SHARE (B) DEPOSITS ASSETS PREMIUM (C)
NUMBER (%) (X) (%) (%) (%)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consideration to Fort Bend: $21.75(d): 189.3 22.8 23.7 20.0 11.2
Median of Pending Deals: 51 211.7 25.5 30.9 22.5 18.2
Median of Completed Deals: 28 175.7 18.9 23.4 18.7 12.5
</TABLE>
(a) Assumes Fort Bend fully-diluted tangible book value of $11.49.
Includes the conversion of debt and the exercise of stock options.
(b) Last 12 months ending September 30, 1998 earnings per fully diluted
share of $0.95. Includes the conversion of debt and the exercise of
stock options.
(c) Calculated by the premium of the purchase price over book value divided
by the amount of core deposits. Core deposits include all deposits
except for certificates of deposit greater than $100,000.
(d) Based on Southwest closing price of $15.00 on October 20, 1998 and the
exchange ratio of 1.45.
Particular analysis and discussion was given to those pending
transactions that had been announced since the market for financial institution
equities began its market correction in August 1998. As of the date the fairness
opinion was delivered, of all the 51 Pending Deals, 40 of those had been
announced prior to August 1, 1998. The following information regarding the
market movement was taken into consideration in the fairness presentation:
<TABLE>
<CAPTION>
% PRICE CHANGE % PRICE CHANGE
FROM DECEMBER 31, 1997 FROM JULY 31, 1998
---------------------- ------------------
<S> <C> <C>
KBW Index (a) -2.7% -9.0%
Thrift Index (b) -25.2% -19.0%
Fort Bend Stock Price -13.8% -8.5%
Southwest Stock Price -5.2% -17.5%
</TABLE>
(a) The KBW Index is an index of 24 large banking institutions consolidated
as an index that trades on the Philadelphia Options Exchange. This
index generally tracks the overall market movement in financial
institution stocks.
(b) The Thrift Index used is a group of 20 large thrift holding companies
consolidated as an index for evaluation purposes.
Based on the above information, Webb concluded that the above
comparable group analysis as it relates to the multiples implied by the 1.45
exchange ratio and the implied per share price of $21.75 were fair from a
financial point of view relative to comparable transactions. Further, the
fairness analysis considered:
- the relative market performance of the Southwest Common Stock
since December 31, 1997 versus the thrift industry index (used
instead of Fort Bend Common Stock due to the implied takeover
premium in the Fort Bend Common Stock price as a result of the
earlier public indication of interest discussed under "--
Background and Reasons for the Merger");
- the relative annual returns on equity of Southwest (16.54%)
and Fort Bend (10.0%) for the four quarters ending June 30,
1998; and
- the expected performance of each company given additional
considerations such as the business plan, asset mix, net
interest margin, net interest spread and asset quality.
In preparing its analysis, Webb made numerous assumptions with respect
to industry performance, business and economic conditions and other matters,
many of which are beyond the control of Webb and Fort Bend. The analyses
performed by Webb are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses and do not purport to be appraisals or reflect the prices at which
a business may be sold.
-15-
<PAGE>
Webb will receive a fee of approximately $650,000 for services rendered
in connection with advising and issuing a fairness opinion regarding the Merger.
As of the date of this Proxy Statement/Prospectus, Webb has received $100,000 of
such fee, the remainder of the fee is due upon the closing of the Merger.
MERGER CONSIDERATION
SHARES OF SOUTHWEST COMMON STOCK. Except with respect to fractional
shares as described below, if the Merger Agreement is approved and the Merger
becomes effective, each share of Fort Bend Common Stock outstanding immediately
prior to the Effective Time will be automatically converted into the right to
receive 1.45 shares of Southwest Common Stock. At the Effective Time, the
2,786,817 outstanding shares of Fort Bend Common Stock will be converted into a
total of 4,040,884 shares of Southwest Common Stock, each unexercised Fort Bend
Stock Option will, in accordance with its terms, be converted into an option to
purchase Southwest Common Stock as described under "--Fort Bend Stock Options,"
and the 49% equity interest in Mitchell owned by The Woodlands Land Development
Company L.P. will become convertible into shares of Southwest Common Stock as
described under "-- Mitchell Mortgage Company L.L.C."
CASH IN LIEU OF FRACTIONAL SHARES. Southwest will not issue any
fractional shares of Southwest Common Stock in the Merger. Southwest will pay
cash to each holder of Fort Bend Common Stock who would otherwise be entitled to
receive a fractional share of Southwest Common Stock. The cash payment will be
equal to the product of the fractional part of the share of Southwest Common
Stock multiplied by the average closing sales price per share of Southwest
Common Stock as reported by THE WALL STREET JOURNAL for the five consecutive
trading days immediately preceding the date of the Special Meeting.
FORT BEND STOCK OPTIONS
At the Effective Time, each outstanding Fort Bend Stock Option will be
automatically converted into an option, having the same terms, including
vesting, as such Fort Bend Stock Option, to purchase a number of shares of
Southwest Common Stock equal to the total number of shares subject to such Fort
Bend Stock Option multiplied by 1.45, at an exercise price per share equal to
the exercise price per share of such Fort Bend Stock Option divided by 1.45. As
of the date of this Proxy Statement/Prospectus, a total of 221,313 shares of
Fort Bend Common Stock were subject to outstanding Fort Bend Stock Options. At
the Effective Time, such options will automatically be converted into options to
purchase a total of 320,903 shares of Southwest Common Stock, assuming none are
exercised prior to that time, at exercise prices equal to the respective
original exercise prices divided by 1.45, in accordance with their terms and the
terms of the Merger Agreement. All other terms and provisions of the option
agreements governing the Fort Bend Stock Options, including vesting, will remain
unchanged. THE OPTION AGREEMENTS ALSO PROVIDE THAT ALL PREVIOUSLY UNVESTED FORT
BEND STOCK OPTIONS WILL BECOME FULLY EXERCISABLE FOR A PERIOD OF 60 DAYS
FOLLOWING THE DATE OF APPROVAL OF THE MERGER BY THE FORT BEND STOCKHOLDERS,
AFTER WHICH TIME THEY WILL REVERT TO THEIR ORIGINAL VESTING SCHEDULE. The
following table sets forth the name of each director and executive officer of
Fort Bend who holds unvested Fort Bend Stock Options that would become fully
exercisable for the above described 60-day period:
<TABLE>
<CAPTION>
FORT BEND EQUIVALENT
NAME OF DIRECTOR POSITION STOCK-OPTIONS SOUTHWEST STOCK
OF EXECUTIVE OFFICER TO-VEST OPTIONS TO VEST
- ----------------------- ------------------------------------ ------------- ---------------
<S> <C> <C> <C>
Robert W. Lindsey Chairman of the Board 933 1,352
George C. Brady Director 933 1,352
J. Patrick Gubbels Director 933 1,352
William A. Little Director 933 1,352
Wayne O. Poldrack Director 933 1,352
Doyle G. Callender Director 933 1,352
Ron L. Workman Director 933 1,352
Lane Ward Vice Chairman, President and Chief 4,042 5,860
Executive Officer
Executive Vice President, Chief
David D. Rinehart Financial Officer 5,558 8,059
Larry J. Dobrava Senior Vice President, Lending 933 1,352
</TABLE>
-16-
<PAGE>
FORT BEND RESTRICTED STOCK AWARDS
A total of 52,150 outstanding restricted shares of Fort Bend Common
Stock ("Restricted Shares") have been issued as a form of compensation to
certain Fort Bend employees under the terms of the Restricted Stock Plan. Each
Restricted Share will be converted into the right to receive 1.45 shares of
Southwest Common Stock in the Merger. All Restricted Shares vest at the rate of
20% per year, beginning on the first anniversary of the date of grant. The
restrictions have expired on 40,704 Restricted Shares, and the restrictions on
the remaining 11,446 Restricted Shares are scheduled to expire at different
times over the next five years. The Restricted Stock Plan provides that if the
employment of an employee who holds any Restricted Shares is terminated for any
reason following the Merger, all remaining restrictions on those Restricted
Shares will expire at that time.
The following table sets forth the name of each director and executive
officer of Fort Bend who holds Restricted Shares and the number of unvested
Restricted Shares that would vest immediately upon the termination of such
person's employment following the Merger:
<TABLE>
<CAPTION>
EQUIVALENT SOUTHWEST
NAME OF DIRECTOR OR FORT BEND RESTRICTED RESTRICTED SHARES TO
EXECUTIVE OFFICER SHARES TO VEST VEST
------------------------- --------------------- --------------------
<S> <C> <C>
Robert W. Lindsey 400 580
Lane Ward 3,400 4,980
David D. Rinehart 1,920 2,784
Larry J. Dobrava 920 1,334
Sandra C. Samford 400 580
</TABLE>
FORT BEND EMPLOYEE STOCK OWNERSHIP PLAN
Each of the 117,941 outstanding shares of Fort Bend Common Stock held
in Fort Bend's Employee Stock Ownership Plan (the "ESOP") will be converted into
1.45 shares of Southwest Common Stock in the Merger. The Fort Bend employees who
own an interest in those shares immediately prior to the Merger will retain that
interest following the Merger. Southwest currently intends to merge the ESOP
into Southwest's 401(k) Plan at or shortly after the Effective Time. Upon that
merger, the respective accounts of the Fort Bend employees in the ESOP would be
carried forward to the Southwest 401(k) Plan.
MITCHELL MORTGAGE COMPANY L.L.C.
Mitchell is owned 51% by the Association and 49% by The Woodlands Land
Development Company L.P. ("The Woodlands"), which is not affiliated with either
Fort Bend or Southwest. Following January 1, 1999, The Woodlands has the right
to convert the book value of its 49% ownership interest in Mitchell into shares
of Fort Bend Common Stock, at a conversion rate equal to 82.304 shares of Fort
Bend Common Stock for each $1,000 of The Woodlands' ownership interest in
Mitchell. This equates to a conversion price of $12.15 per share of Fort Bend
Common Stock. The number of shares of Fort Bend Common Stock that may be
acquired by The Woodlands upon exercise of this right is limited to 9.9% of the
outstanding Fort Bend shares, after taking into account the shares being issued
to The Woodlands, with any excess being paid in cash in an amount equal to the
book value of such remaining ownership interest.
At the Effective Time, The Woodlands' conversion right will become the
right to convert its ownership interest into shares of Southwest Common Stock at
a conversion price of $8.38 per share of Southwest Common Stock. Based on The
Woodlands' ownership interest of $2,594,242, as of December 31, 1998, The
Woodlands would have the right to acquire 213,516 shares of Fort Bend Common
Stock before the Effective Time or 309,598 shares of Southwest Common Stock
after the Effective Time. No cash would be paid to The Woodlands in either
situation since the shares to be received would be less than the 9.9%
limitation.
-17-
<PAGE>
NO DISSENTERS' RIGHTS
Under Delaware law, holders of Fort Bend Common Stock are not entitled
to any appraisal or dissenters' rights in connection with the Merger.
SURRENDER OF CERTIFICATES
As soon as practicable after the Effective Time, Southwest's transfer
agent, American Securities Transfer & Trust, Inc., acting in the capacity of
exchange agent for Southwest (the "Exchange Agent"), will mail to each holder of
record of shares of Fort Bend Common Stock a form letter of transmittal,
together with instructions for the exchange of such holder's stock certificates
for a certificate representing the shares of Southwest Common Stock and the cash
in lieu of fractional shares of Southwest Common Stock to which he or she is
entitled.
STOCKHOLDERS OF FORT BEND SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of one or more certificates for
Fort Bend Common Stock, together with a properly completed letter of
transmittal, there will be issued and mailed to the holder a certificate
representing the number of whole shares of Southwest Common Stock to which such
holder is entitled and, if applicable, a check for the amount representing any
fractional share, without interest. A certificate for Southwest Common Stock may
be issued in a name other than the name in which the surrendered certificate is
registered only if (a) the certificate surrendered is properly endorsed and is
otherwise in proper form for transfer and (b) the person requesting the issuance
of such certificate either pays to the Exchange Agent any transfer or other
taxes required by reason of the issuance of a certificate for such shares in a
name other than the registered holder of the certificate surrendered or
establishes to the satisfaction of the Exchange Agent that such taxes have been
paid or are not due.
All Southwest Common Stock issued pursuant to the Merger will be deemed
issued as of the Effective Time. No dividends in respect of the Southwest Common
Stock with a record date after the Effective Time will be paid to the former
stockholders of Fort Bend entitled to receive certificates for shares of
Southwest Common Stock until such shareholders surrender their certificates
representing shares of Fort Bend Common Stock. Upon such surrender, there shall
be paid to the stockholder in whose name the certificates representing such
shares of Southwest Common Stock are issued any dividends the record and payment
dates of which shall have been after the Effective Time and before the date of
such surrender. After such surrender, there shall be paid to the person in whose
name the certificate representing such shares of Southwest Common Stock is
issued, on the appropriate dividend payment date, any dividend on such shares of
Southwest Common Stock that shall have a record date after the Effective Time
and prior to the date of surrender, but a payment date subsequent to the
surrender. In no event shall the persons entitled to receive such dividends be
entitled to receive interest on amounts payable as dividends.
CONDITIONS TO THE MERGER
The effectiveness of the Merger is subject to the satisfaction as of
the Closing Date of a number of conditions or, if permissible under the Merger
Agreement, waiver of such conditions.
CONDITIONS TO THE OBLIGATIONS OF BOTH PARTIES. Following are the
material conditions to the obligations of both parties to effect the Merger:
- the approval of the Merger Agreement by the requisite vote
of Fort Bend's stockholders;
- the receipt of all requisite regulatory approvals; and
- the absence of any pending or threatened suits, claims,
actions, investigations or proceedings challenging or in any
manner seeking to restrict or prohibit the transactions
contemplated by the Merger Agreement or seeking to obtain any
damages against any person as a result of the transactions
contemplated by the Merger Agreement.
-18-
<PAGE>
CONDITIONS TO THE OBLIGATIONS OF SOUTHWEST. Conditions to the
obligations of Southwest to effect the Merger:
- the receipt by Southwest of a certificate from Fort Bend's
chief executive officer certifying compliance with Fort Bend's
representations, warranties and covenants and confirming the
absence of any pending or threatened litigation against Fort
Bend that, when aggregated with any breaches of
representations and warranties, would have a material adverse
effect on Fort Bend;
- the absence of any general banking moratorium or general
suspension of payments in respect of banks in the United
States or any event that significantly and adversely affects
the normal functioning or operation of the convertibility of
major European currencies into United States dollars;
- the receipt by Southwest of an opinion of counsel to Southwest
at the Closing Date regarding certain federal income tax
consequences of the Merger to Southwest and Southwest Bank;
- the execution and delivery by holders of Fort Bend Stock
Options of acknowledgments confirming the conversion of such
options into options to purchase Southwest Common Stock as
described under "--Fort Bend Stock Options;"
- the qualification of the Merger as a "pooling of interests"
for financial accounting purposes and the receipt by Southwest
of an appropriate opinion from PricewaterhouseCoopers LLP to
that effect;
- the receipt by Southwest of agreements substantially in the
form of Exhibit B to the Merger Agreement from each of the
"affiliates" of Fort Bend;
- the receipt by Southwest of releases from the directors and
officers of Fort Bend substantially in the forms of Exhibit
E and Exhibit F, respectively, to the Merger Agreement; and
- the receipt by Southwest of an opinion of counsel from Silver,
Freedman & Taff, L.L.P., special counsel to Fort Bend,
substantially in the form of Exhibit D to the Merger
Agreement.
CONDITIONS TO THE OBLIGATION OF FORT BEND. Following are the material
conditions to the obligations of Fort Bend to effect the Merger:
- the receipt of an opinion of counsel to Fort Bend at the
Closing Date regarding certain federal income tax consequences
of the Merger to Fort Bend stockholders as described under
"--Certain Federal Income Tax Consequences;"
- the receipt by Fort Bend of a certificate from Southwest's
chief executive officer, president or any executive vice
president, certifying compliance with Southwest's
representations, warranties and covenants; and
- the receipt by Fort Bend of an opinion of Vinson & Elkins
L.L.P., counsel to Southwest and Southwest Bank, substantially
in the form of Exhibit C to the Merger Agreement.
For a complete description of all of the conditions to the obligations
of the parties to effect the Merger, see Article VI of the Merger Agreement.
REGULATORY APPROVALS
The Merger is subject to prior approval by the Office of the
Comptroller of the Currency (the "OCC") under the National Bank Act. The Merger
is also subject to certain filing and other requirements of the Office of Thrift
Supervision (the "OTS") and the Board of Governors of the Federal Reserve Board.
Southwest has filed an application with the OCC requesting approval of the
Merger; however, there can be no assurances that the necessary regulatory
approval will be obtained or as to the timing of or conditions placed on such
approval.
-19-
<PAGE>
The approval of any application merely implies satisfaction of
regulatory criteria for approval, which does not include review of the Merger
from the standpoint of the adequacy of the consideration to be received by, or
fairness to, stockholders. Regulatory approvals do not constitute an endorsement
or recommendation of the proposed Merger.
Southwest and Fort Bend are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for the Merger to
become effective other than those described above. The parties currently intend
to seek to obtain any other approval and to take any other action that may be
required to effect the Merger. There can be no assurance that any required
approval or action can be obtained or taken prior to the Special Meeting. The
receipt of all necessary regulatory approvals is a condition to effecting the
Merger. See "--Conditions to the Merger" and "--Termination of the Merger
Agreement."
CONDUCT OF BUSINESS PENDING THE MERGER
The Merger Agreement requires Fort Bend to maintain the general
character of its business and conduct its business in the ordinary and usual
manner at all times prior to the Effective Time. In addition, without the prior
written consent of Southwest, Fort Bend and its subsidiaries may not, among
other things:
- make any loans or other extensions of credit to any borrower
in excess of $500,000, with certain exceptions;
- enter into, amend or terminate any material agreement,
contract or commitment exceeding $50,000, other than banking
transactions in the ordinary course of business;
- issue, sell or otherwise dispose of any shares of its capital
stock except for shares issued upon the exercise of Fort Bend
Stock Options, the conversion of Fort Bend Debentures or the
Mitchell Exchange;
- sell or otherwise dispose of any of its or its subsidiaries
material assets or properties other than in the ordinary
course of business;
- declare, set aside, make or pay any dividend or other
distribution with respect to its capital stock other than its
regular quarterly dividend in the amount of $0.10 per share;
- amend its Certificate of Incorporation or Bylaws or any of
the organizational documents of any of its subsidiaries;
- open or close any branch office, other than The Woodlands
branch office; or
- make any material change in the interest rate risk profile of
the Association from that as of June 30, 1998.
See Article V of the Merger Agreement for additional restrictions on
the conduct of the business of Fort Bend pending the Merger.
NO SOLICITATION
Fort Bend has agreed under the Merger Agreement that neither it nor any
of its directors, officers, employees or agents, will, directly or indirectly,
solicit, initiate, encourage or facilitate any proposal for a merger or other
business combination involving Fort Bend or for the acquisition of a substantial
equity interest in, or a substantial portion of the assets of, Fort Bend (an
"Acquisition Proposal"), or, except as otherwise required in the opinion of
counsel to Fort Bend in order for the Fort Bend Board to fulfill its fiduciary
duties to Fort Bend's stockholders, participate in any negotiation in respect of
or cooperate with any Acquisition Proposal. If any third party makes an offer or
inquiry to Fort Bend concerning any Acquisition Proposal, Fort Bend is required
to promptly disclose such offer or inquiry, including the terms thereof, to
Southwest.
-20-
<PAGE>
CERTAIN ADDITIONAL AGREEMENTS
FORT BEND. Fort Bend has also agreed under the Merger Agreement to (a)
terminate on or prior to the Closing Date, certain employment, consulting,
severance or similar agreements with Fort Bend or any of its subsidiaries that
would otherwise extend past the Closing Date; (b) if requested by Southwest,
after approval of the Merger by Fort Bend's stockholders and receipt of all
regulatory approvals, make accounting entries prior to the Effective Time in
order to conform the accounting records of Fort Bend to the accounting policies
and practices of Southwest and its subsidiaries, provided they are consistent
with generally accepted accounting principles; and (c) cooperate with Southwest
in obtaining and delivering environmental assessment reports on certain
properties.
SOUTHWEST. Southwest has also agreed under the Merger Agreement to
indemnify the directors, officers, employees and agents of Fort Bend and its
subsidiaries against all losses, expenses, claims, damages, liabilities or
amounts in connection with any claim, action, suit, proceeding or investigation
based in whole or in part on the fact that such person is or was a director,
officer, employee or agent of Fort Bend or any of its subsidiaries and arising
out of actions or omissions occurring at or prior to the Effective Time, in each
case to the fullest extent permitted under applicable law, and, in addition, to
maintain liability insurance for such purpose through October 20, 2000.
For information concerning additional agreements and covenants of Fort
Bend and Southwest, see Article V of the Merger Agreement.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the
Effective Time:
- by mutual written consent of the parties;
- by either party if the Merger has not become effective by
March 31, 1999, unless the party seeking to terminate is in
default under the Merger Agreement;
- by either party upon the expiration of 15 days after any
governmental authority having jurisdiction over the Merger
indicates that it intends to deny or to refuse to grant its
approval, provided, that with respect to governmental
authorities other than the OCC or the Federal Reserve Board,
the parties shall use their reasonable efforts during such
15-day period to obtain the withdrawal of such denial or
refusal;
- by Southwest upon the expiration of 30 days after the date
Southwest has given notice to Fort Bend of Fort Bend's
material failure to satisfy any covenant or agreement in the
Merger Agreement or of Fort Bend's breach of any
representations or warranties that in the aggregate represent
a material adverse effect on Fort Bend, provided Fort Bend has
not corrected the grounds for such termination within such
30-day period;
- by Fort Bend upon the expiration of 30 days following the date
that Fort Bend has given written notice to Southwest of
Southwest's material failure to satisfy any covenant or
agreement contained in the Merger Agreement or of Southwest's
breach of any representations or warranties that in the
aggregate represent a material adverse effect on Southwest,
provided that Southwest has not corrected such grounds for
termination within such 30-day period;
- by either Southwest or Fort Bend if the requisite approval of
Fort Bend's stockholders is not obtained at the Special
Meeting thereof or the Fort Bend Board has determined not to
recommend approval of the Merger to Fort Bend's stockholders
in order to fulfill its fiduciary duty to such stockholders,
provided, that if the terminating party is Fort Bend, Fort
Bend shall not be in material breach of any of its obligations
under the Merger Agreement;
-21-
<PAGE>
- by Southwest if there shall have occurred since June 30, 1998,
any change in or effect on the business of Fort Bend or its
subsidiaries or any occurrence, development or event of any
nature that has had or may reasonably be expected to have,
together with all such other changes and effects, a material
adverse effect on Fort Bend; and
- by Fort Bend, if there shall have occurred since June 30,
1998, any change in or effect on the business of Southwest or
any occurrence, development or event of any nature that has
had or may reasonably be expected to have, together with all
such other changes and effects, a material adverse effect on
Southwest.
AMENDMENT OF MERGER AGREEMENT
The Merger Agreement may be amended by the parties thereto, pursuant to
action taken by their respective boards of directors at any time before or after
approval of the Merger Agreement by Fort Bend's stockholders. Unless required by
law, no amendment of the Merger Agreement effected after the Merger Agreement is
approved by Fort Bend's stockholders shall require any further stockholder
approval.
WAIVER OF PERFORMANCE OF OBLIGATIONS
Either of the parties to the Merger Agreement may, by a signed writing,
give any consent, take any action with respect to the termination of the Merger
Agreement or otherwise, or waive any of the inaccuracies in the representations
and warranties of the other party or compliance by the other party with any of
the covenants or conditions contained in the Merger Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Southwest has agreed to assume the obligations under the existing
Employment Agreement between Fort Bend and Lane Ward upon completion of the
Merger, subject to the following changes:
(a) the expiration date of the Employment Agreement will be
extended from March 31, 2001 to December 31, 2001;
(b) Mr. Ward's annual salary will increase from $140,000 to
$150,000;
(c) Mr. Ward will receive an incentive stock option under
Southwest's 1996 Stock Option Plan to purchase 12,000 shares of
Southwest Common Stock at an exercise price per share equal to the fair
market value per share of Southwest Common Stock on the date the option
is granted following completion of the Merger; and
(d) for the 1999 calendar year, Mr. Ward has the opportunity
to earn a bonus of up to $60,000.
Following the Merger, Mr. Ward will be elected Vice Chairman of the
Board of Southwest Bank, with responsibility for all mortgage banking and
mortgage servicing operations of Southwest Bank. He will also be responsible for
coordinating all business development activities in all branch offices of
Southwest Bank located in Fort Bend County, Wharton County and Montgomery County
and for assisting line of business managers in the implementation of their
strategic business objectives in those offices. As soon as practicable following
the Effective Time, the respective Boards of Directors of Southwest and
Southwest Bank will be increased by one member, and Lane Ward will be elected to
fill the vacancies created by each such increase.
Southwest has agreed to assume Fort Bend's obligations under its
existing employment agreements with David D. Rinehart and Larry J. Dobrava.
Southwest has also agreed to grant Mr. Rinehart an incentive stock option to
purchase 2,000 shares of Southwest Common Stock at an exercise price per share
equal to the fair market value per share of Southwest Common Stock on the date
the option is granted following completion of the Merger.
-22-
<PAGE>
Existing employment agreements between Fort Bend and each of Lane Ward,
David D. Rinehart and Larry J. Dobrava provide that if there is a voluntary or
involuntary termination of employment within 12 months after a "change of
control" of Fort Bend (such as the merger with Southwest), the employee is
entitled to receive all remaining payments under his employment agreement at the
times they would otherwise become payable. In addition, if he is involuntarily
terminated (other than for cause) during such 12-month period he is also
entitled to receive a lump sum payment equal to his then current annual
compensation. Mr. Rinehart's employment agreement currently expires on March 31,
2001, and his current annual salary is $108,300. Mr. Dobrava's employment
agreement currently expires on March 31, 2000, and his current annual salary is
$92,423.
See "-- Fort Bend Stock Options" and "-- Fort Bend Restricted Stock
Awards" for information regarding the possible acceleration of vesting of such
awards held by certain directors and executive officers of Fort Bend as a result
of the Merger.
FEDERAL INCOME TAX CONSEQUENCES
The receipt of the following opinions from Silver, Freedman & Taff,
L.L.P., Fort Bend's counsel, as to the federal income tax consequences of the
Merger, in form and substance satisfactory to Fort Bend, is a condition to the
consummation of the Merger:
(a) the proposed merger qualifies as a tax-free
"reorganization" within the meaning of Section 368(a) of the Code;
(b) Southwest and Fort Bend will each be a party to that
reorganization;
(c) no gain or loss will be recognized by the stockholders of
Fort Bend on the receipt by them of shares of Southwest Common Stock in
exchange for their shares of Fort Bend Common Stock, except to the
extent they receive cash;
(d) the basis of Southwest Common Stock received by the
stockholders of Fort Bend will be the same as the basis of the Fort
Bend Common Stock surrendered in exchange therefor (reduced by the
excess, if any, of the cash received over the amount of gain recognized
on the exchange); and
(e) the holding period of Southwest Common Stock received by
stockholders of Fort Bend will include the period during which Fort
Bend Common Stock exchanged therefor was held, provided the surrendered
Fort Bend Common Stock was held as a capital asset on the date of the
exchange.
The above opinion of counsel, which will be delivered on the Closing
Date, is filed as an exhibit to the Registration Statement. A further condition
to the consummation by Southwest of the Merger is the receipt of additional
opinions of Southwest's counsel, in form and substance satisfactory to
Southwest, as to the federal income tax consequences of the Merger and the Bank
Merger as they affect Southwest and Southwest Bank.
The foregoing discussion is a summary of all of the material tax
consequences of the Merger. An opinion of counsel only represents counsel's best
legal judgment and has no binding effect or official status of any kind, and no
assurance can be given that contrary positions may not be taken by the Internal
Revenue Service or a court considering the issues. Neither Fort Bend nor
Southwest has requested or will request a ruling from the Internal Revenue
Service with regard to the federal income tax consequences of the Merger.
THE ABOVE SUMMARY OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING ON AN
INDIVIDUAL BASIS. IN ADDITION TO THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED
ABOVE, CONSUMMATION OF THE MERGER MAY HAVE SIGNIFICANT STATE AND LOCAL INCOME
TAX CONSEQUENCES THAT ARE NOT DISCUSSED IN THIS PROXY STATEMENT/PROSPECTUS.
ACCORDINGLY, PERSONS CONSIDERING THE MERGER ARE URGED TO CONSULT THEIR TAX
ADVISORS WITH SPECIFIC REFERENCE TO THE EFFECT OF THEIR OWN PARTICULAR FACTS AND
CIRCUMSTANCES ON THE MATTERS DISCUSSED HEREIN.
-23-
<PAGE>
RESALE OF SOUTHWEST COMMON STOCK
The shares of Southwest Common Stock issuable to stockholders of Fort
Bend upon the Merger becoming effective have been registered under the
Securities Act of 1933, as amended (the "Securities Act"). Such shares may be
traded freely and without restriction by those shareholders not deemed to be
"affiliates" of Fort Bend or Southwest as that term is defined in the rules
under the Securities Act. Persons who may be deemed to be affiliates of Fort
Bend generally include individuals or entities that control, are controlled by
or are under common control with Fort Bend and may include the executive
officers and directors of Fort Bend, as well as certain principal stockholders
of Fort Bend.
NASDAQ LISTING
The Merger Agreement provides that Southwest will, prior to the
Effective Time, notify NASDAQ of the listing of the shares of Southwest Common
Stock to be issued pursuant to the Merger and will obtain any approval required
by NASDAQ necessary in connection with the issuance of the Southwest Common
Stock.
ACCOUNTING TREATMENT
Management of Southwest anticipates that the Merger will be accounted
for as a "pooling of interests" under generally accepted accounting principles,
pursuant to which Southwest will carry forward to Southwest's consolidated
balance sheet the net assets of Fort Bend at their historical cost.
EXPENSES
Except as otherwise provided in the Merger Agreement, Southwest and
Fort Bend will each pay their own expenses in connection with the Merger and the
Bank Merger, including fees and expenses of their respective independent
auditors and counsel, except that all out-of-pocket costs and expenses of the
parties relating to the printing, filing, shipping and distribution of the
Registration Statement and this Proxy Statement/Prospectus shall be borne
equally by Southwest, on the one hand, and Fort Bend, on the other hand. In
addition, if the Merger Agreement is terminated because the Board of Directors
of Fort Bend has either failed to recommend approval of the Merger to Fort
Bend's stockholders or has recommended against approval of the Merger because of
the receipt by Fort Bend of an acquisition proposal from a third party, Fort
Bend shall pay Southwest, concurrently with such termination, a termination fee
of $3,000,000.
IMPACT OF THE YEAR 2000 ISSUE
GENERAL
With the new millennium approaching, organizations are examining their
computer systems to ensure they are Year 2000 compliant. The Year 2000 issue is
that many existing computer systems use only two numbers to identify a year in
the date field with the assumptions that the first two digits are always 19. As
the century is implied in the date, on January 1, 2000, computers that are not
Year 2000 compliant will assume the year is 1900. Systems that calculate,
compare, or sort using the incorrect date will cause erroneous results, ranging
from system malfunctions to incorrect or incomplete transaction processing. If
not remedied, potential risks include business interruption or shut down,
financial loss, reputation loss and/or legal liability.
In May 1997, the Federal Financial Institutions Examination Council
("FFIEC") issued an interagency statement to the chief executive officers of all
federally supervised financial institutions, including Southwest and Fort Bend,
regarding Year 2000 project management awareness. The FFIEC statement provides
guidance to financial institutions, providers of data services and all examining
personnel of the federal banking agencies regarding the Year 2000 issue. The
federal banking agencies have been conducting Year 2000 compliance examinations,
and the failure to implement an adequate Year 2000 program can be identified as
an unsafe and unsound banking practice. The OCC and the OTS have established
examination procedures that contain three categories of ratings: "Satisfactory,"
"Needs Improvement," and "Unsatisfactory." Institutions that receive a Year 2000
rating of Unsatisfactory may be subject to formal enforcement action,
supervisory agreements, cease and desist orders, civil money penalties, or the
appointment of a conservator. In addition, federal banking agencies will be
-24-
<PAGE>
taking into account Year 2000 compliance programs when reviewing applications
and may deny an application based on Year 2000 related issues.
FORT BEND
In September 1997, Fort Bend inventoried its suppliers, hardware,
software and facilities and quantified the extent of its business impact. Fort
Bend has received written assurances from most suppliers or third party
providers that their products or services are Year 2000 ready or in-process of
becoming Year 2000 ready. While Fort Bend will continue to monitor the progress
being made by these vendors in addressing their own Year 2000 issues, to date
Fort Bend is generally satisfied with their responses and their progress in
addressing Year 2000 risk.
In May 1998, Fort Bend began discussions with large borrowers. All
commercial and construction loans in excess of $200,000 were evaluated for Year
2000 exposure by using a questionnaire developed by Fort Bend. The questionnaire
was either mailed or handed out at a group meeting with borrowers. As a part of
the current credit approval process loans are evaluated for Year 2000 risk. Fort
Bend is continuing to monitor the progress being made by its larger borrowers in
addressing Year 2000 issues and to date is generally satisfied with borrowers'
responses and their progress in addressing Year 2000 risk.
Renovation and validation testing of mission critical hardware is
substantially complete after installation of vendor upgrades. As a result of the
Merger, mission critical software and outside service bureau systems will not be
in service at the end of 1999, therefore Fort Bend has discontinued Year 2000
efforts on these systems. However, a contingency plan has been developed in the
event the Merger does not occur. In this case renovation and testing would
resume with the resources originally planned for these systems.
The majority of Fort Bend's mission critical systems fall into the
category of core-banking software that is provided by an outside service bureau.
It is the intention of Fort Bend to convert accounts to Southwest Bank's
in-house system. While no warranty has been received with respect to the
core-banking system, that system is used by a number of banking institutions and
has been reviewed by Federal Banking Regulators for Year 2000 readiness. Fort
Bend has also reviewed its facilities for Year 2000 issues including elevators,
vaults, security alarms, heating and air conditioning. Most of these systems do
not have imbedded computer chips or date sensitive systems that would have an
adverse impact on operations.
Fort Bend has no internally generated programmed software coding to
correct, as substantially all of the software utilized by Fort Bend is purchased
or licensed from external providers. Fort Bend has determined that it has little
to no exposure to contingencies related to the Year 2000 issue for products it
has sold. For the six months ended September 30, 1998, Fort Bend had incurred
costs of approximately $44,000, and has budgeted $140,000 for the fiscal year
ending March 31, 1999, for Year 2000 compliance, based on currently available
information. The Merger, however, may eliminate the expense of upgrading systems
that may not be in place after the Merger.
SOUTHWEST
Southwest has undertaken a company-wide initiative to address the Year
2000 issue and has developed a comprehensive plan to prepare, as appropriate,
its computer systems and facilities. Southwest has completed a thorough
education and awareness initiative and an inventory and assessment of its
technology and application portfolio to understand the scope of the Year 2000
impact. Southwest is presently renovating, in the way of upgrades, and testing
these technologies and applications in partnership with software development
organizations.
Southwest has focused on developing appropriate policies or risk
mitigation actions to address Year 2000 related failures prior to the millennium
due to reliance on internal or external dependencies. Southwest is working with
key external parties, including customers, counterparties, vendors, exchanges,
depositories, utilities, suppliers, agents, and regulatory agencies, to
eliminate the potential risks posed by the Year 2000 problem. Year 2000
compliance by Southwest's borrowers is now an integral part of its underwriting
procedures. Southwest is prepared to curtail credit availability to customers
identified as having material exposure to the Year 2000 issue. However, its
ability to exercise such curtailment may be limited by various factors,
including existing legal agreements and potential concerns regarding lender
liability.
-25-
<PAGE>
Southwest has also completed an extensive review of its non-information
technology systems, such as elevators, escalators, bank vaults and security
systems. Most of these systems do not have date sensitive systems or imbedded
computer chips, and Southwest has received written confirmation from
substantially all vendors of these systems that they are Year 2000 compliant.
The failure of external parties to resolve their own Year 2000 issues
in a timely manner could result in a material financial risk to Southwest. For
potential failure scenarios where the risk to Southwest is deemed significant
and where such risk is considered to have higher probability of occurrence,
Southwest has developed business recovery/contingency plans. These plans define
the infrastructure that should be put in place for managing a failure after
January 1, 2000.
Costs to prepare Southwest's systems for the Year 2000 are estimated at
approximately $4.0 million, for internal systems renovation and testing, testing
equipment and both internal and external resources working on the project.
Through December 31, 1998, Southwest had incurred approximately $2.4 million of
these costs. Capital expenditures total approximately $584,000 and non-capital
expenditures total approximately $1.8 million.
DIRECTORS AND OFFICERS OF SOUTHWEST
FOLLOWING THE MERGER
Following consummation of the Merger, the Southwest Board of Directors
(the "Southwest Board") intends to increase its size by adding one Class III
position and to elect Lane Ward as a director of Southwest to fill that position
(to be held until the 1999 Annual Meeting of Shareholders). Mr. Ward will also
be elected a director of Southwest Bank and will hold the title of Vice Chairman
of Southwest Bank. For information concerning Mr. Ward, see Fort Bend's Proxy
Statement dated June 29, 1998 for its Annual Meeting of Stockholders held on
July 28, 1998, a copy of which accompanies this Proxy Statement/Prospectus. For
information regarding the directors and executive officers of Southwest, see
Southwest's Proxy Statement dated April 20, 1998 for its Annual Meeting of
Shareholders held on May 26, 1998, which is incorporated by reference in
Southwest's Annual Report on Form 10-K for the year ended December 31, 1997,
incorporated by reference herein.
DESCRIPTION OF SOUTHWEST CAPITAL STOCK
GENERAL
Southwest has authorized two classes of stock: (i) 50,000,000
authorized shares of Southwest Common Stock, par value $1.00 per share,
23,215,048 shares of which are issued and outstanding as of September 30, 1998;
and (ii) 1,000,000 authorized shares of Preferred Stock, par value $0.01 per
share ("Preferred Stock"), none of which have been issued. The following summary
is qualified in its entirety by reference to the Articles of Incorporation and
Bylaws of Southwest (the "Southwest Articles" and "Southwest Bylaws,"
respectively), copies of which have been filed as exhibits to the Registration
Statement of which this Proxy Statement/Prospectus is a part.
SOUTHWEST COMMON STOCK
The holders of Southwest Common Stock are entitled to one vote for each
share of Southwest Common Stock owned. Except as expressly provided by law and
except for any voting rights which may be conferred on any shares of Preferred
Stock issued by the Southwest Board, all voting power is in Southwest Common
Stock. Holders of Southwest Common Stock may not cumulate their votes for the
election of directors. Holders of Southwest Common Stock do not have preemptive
rights to acquire any additional, unissued or treasury shares of the Company, or
securities of Southwest convertible into or carrying a right to subscribe to or
acquire shares of Southwest.
Holders of Southwest Common Stock will be entitled to receive dividends
out of funds legally available therefor, if and when properly declared by the
Southwest Board. However, the Southwest Board may not declare or pay cash
dividends on Southwest Common Stock, and no Southwest Common Stock may be
purchased by Southwest, unless full dividends on outstanding Preferred Stock for
all past dividend periods and for the current dividend period, if any, have been
declared and paid.
-26-
<PAGE>
On liquidation of Southwest, the holders of Southwest Common Stock are
entitled to share pro rata in any distribution of the assets of Southwest, after
the holders of shares of Preferred Stock have received the liquidation
preference of their shares plus any cumulated but unpaid dividends (whether or
not earned or declared), if any, and after all other indebtedness of Southwest
has been retired.
PREFERRED STOCK
Southwest is authorized to issue 1,000,000 shares of Preferred Stock.
The Preferred Stock is available for issuance from time to time for various
purposes as determined by the Southwest Board, including, without limitation,
making future acquisitions, raising additional equity capital and financing.
Subject to certain limits set by the Southwest Articles, the Preferred Stock may
be issued on such terms and condition, and at such times and in such situations,
as the Southwest Board in its sole discretion determines to be appropriate,
without any further approval or action by the shareholders (unless otherwise
required by laws, rules, regulations or agreements applicable to Southwest).
Moreover, except as otherwise limited by the Southwest Articles or
applicable laws, rules or regulations, the Southwest Board has the sole
authority to determine the relative rights and preferences of the Preferred
Stock and any series thereof without shareholder approval. The Southwest
Articles require all shares of Preferred Stock to be identical, except as to the
following characteristics, which may vary between different series of Preferred
Stock; (i) dividend rate, preference of dividend with respect to any other class
or series of stock, and cumulativity, non-cumulativity or partial cumulativity
of dividends; (ii) redemption price and terms, including, to the extent
permitted by law, the manner in which shares are to be chosen for redemption if
less than all the shares of a series are to be redeemed; (iii) sinking fund
provisions, if any, for the redemption or purchase of share; (iv) the amount
payable upon shares in the event of voluntary or involuntary liquidation; (v)
the terms and conditions on which shares may be converted, if the shares of any
series are issued with the privilege of conversion and (vi) voting rights.
The Southwest Board does not intend to seek shareholder approval prior
to any issuance of Preferred Stock or any series thereof, unless otherwise
required by law or the rules of any applicable securities exchange. Under the
Texas Business Corporation Act (the "TBCA"), shareholder approval prior to the
issuance of shares of Southwest Common Stock is required in connection with
certain mergers. Frequently, opportunities arise that require prompt action,
such as the possible acquisition of a property or business or the private sale
of securities, and it is the belief of the Southwest Board that the delay
necessary for shareholder approval of a specific issuance could be to the
detriment of Southwest and its shareholders.
The Preferred Stock could be deemed to have an anti-takeover effect in
that, if a hostile takeover situation should arise, shares of Preferred Stock
could be issued to purchasers sympathetic with Southwest's management or others
in such a way as to render more difficult or to discourage a merger, tender
offer, proxy contest, the assumption of control by a holder of a large block of
Southwest's securities or the removal of incumbent management.
The effects of the issuance of the Preferred Stock on the holders of
Southwest Common Stock could include, among other things, (i) reduction of the
amount otherwise available for payments of dividends on Southwest Common Stock
if dividends are payable on the series of Preferred Stock; (ii) restrictions on
dividends on Southwest Common Stock if dividends on the series of Preferred
Stock are in arrears; (iii) dilution of the voting power of Southwest Common
Stock if the series of Preferred Stock has voting rights, including a possible
"veto" power if the series of Preferred Stock has class voting rights; (iv)
dilution of the equity interest of holders of Southwest Common Stock if the
series of Preferred Stock is convertible, and is converted, into Southwest
Common Stock and (v) restrictions on the rights of holders of Southwest Common
Stock to share in Southwest's assets upon liquidation until satisfaction of any
liquidation preference granted to the holders of the series of Preferred Stock.
TEXAS LAW AND CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS
Certain provisions of Texas law, the Southwest Articles and the
Southwest Bylaws could make more difficult the acquisition of Southwest by means
of a tender offer, a proxy contest or otherwise and the removal of incumbent
officers and directors. These provisions are intended to discourage certain
types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of Southwest to negotiate first
with Southwest.
-27-
<PAGE>
The following discussion is a summary of certain material provisions of
the Southwest Articles and the Southwest Bylaws, copies of which are filed as
exhibits to the Registration Statement of which this Proxy Statement/Prospectus
is a part.
CLASSIFIED BOARD OF DIRECTORS. Under the Southwest Bylaws, the
Southwest Board is classified into three classes, with the directors being
elected for staggered, three-year terms. The classification of the Southwest
Board has the effect of making it more difficult to change the composition of
the Southwest Board, because at least two annual meetings of the shareholders
would be required to change the control of the Southwest Board rather than one.
In addition, the Bylaws provide that directors may be removed by the
shareholders only for cause and that vacancies on the Southwest Board may be
filled by the remaining directors.
ADVANCE NOTICE OF SHAREHOLDER PROPOSALS AND NOMINATIONS. The Southwest
Bylaws establish an advance notice procedure for shareholders to make
nominations of candidates for election as directors or bring other business
before an annual meeting of shareholders of Southwest (the "Shareholder Notice
Procedure"). The Shareholder Notice Procedure provides that only persons who are
nominated by, or at the direction of, the Southwest Board, or by a shareholder
who has given timely written notice to the Secretary of Southwest prior to the
meeting at which directors are to be elected, will be eligible for election as
directors of Southwest and that, at an annual meeting, only such business may be
conducted as has been brought before the meeting by, or at the direction of the
Southwest Board or by a shareholder who has given timely written notice to the
Secretary of Southwest of such shareholder's intention to bring such business
before such meeting.
Under the Shareholder Notice Procedure, for notice of shareholder
nominations or other business to be made at an annual meeting to be timely, such
notice must be received by Southwest not less than 90 days prior to the first
anniversary of the previous year's annual meeting (or if the date of the annual
meeting is advanced by more than 20 days not later than the 10th day after
public announcement of the date of such meeting is first made). Notwithstanding
the foregoing, in the event that the number of directors to be elected is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Southwest Board made by
Southwest at least 80 days prior to the first anniversary of the preceding
year's annual meeting, a shareholder's notice will be timely, but only with
respect to nominees for any new positions created by such increase, if it is
received by Southwest not later than the 10th day after such public announcement
is first made by Southwest. The Southwest Bylaws further provide that, for
notice of a shareholder nomination to be made at a special meeting at which
directors are to be elected to be timely, such notice must be received by
Southwest not later than the 10th day after public announcement of the date of
such meeting is first made.
Under the Shareholder Notice Procedure, a shareholder's notice to
Southwest proposing to nominate a person for election as a director or proposing
other business must contain certain information specified in the Southwest
Bylaws, including the identity and address of the nominating shareholder, the
class and number of shares of stock of Southwest owned by such shareholder,
information regarding the proposed nominee that would be required under the
federal securities laws to be included in a proxy statement soliciting proxies
for the proposed nominee and, with respect to business other than a nomination,
a brief description of the business the shareholder proposes to bring before the
meeting, the reasons for conducting such business at such meeting and any
material interest of such shareholder in the business so proposed.
The Shareholder Notice Procedure may have the effect of precluding a
contest for the election of directors or the consideration of shareholder
proposals if the proper procedures are not followed, and of discouraging or
deterring a third party from conducting a solicitation of proxies to elect its
own slate of directors or to approve its own proposal, without regard to whether
consideration of such nominees or proposals might be harmful or beneficial to
Southwest and its shareholders.
SPECIAL MEETINGS OF SHAREHOLDERS. The Southwest Articles and Southwest
Bylaws provide that special meetings of shareholders can be called by
shareholders only upon a written request signed by holders of one-third of the
outstanding shares of stock entitled to vote at the meeting.
-28-
<PAGE>
REDUCED SHAREHOLDER VOTE REQUIRED FOR CERTAIN ACTIONS. The Southwest
Articles provide that, notwithstanding any provision of the TBCA that would
require approval of more than a majority of the shares entitled to vote on such
matter, the vote or approval of a majority of the shares of Southwest stock
entitled to vote on such matter will be sufficient to approve such matter. This
provision reduces the required shareholder approval level for certain actions
such as a merger, a consolidation, a share exchange, certain sales of
substantially all of Southwest's assets, a dissolution or an amendment to the
Southwest Articles, each of which would otherwise require the approval of
two-thirds of the Southwest stock entitled to vote on such matter under Texas
law.
AMENDMENT OF BYLAWS. The Southwest Articles and Southwest Bylaws
provide that the Southwest Bylaws may be amended only by the Southwest Board.
Shareholders do not have the power to amend the Southwest Bylaws.
COMPARATIVE RIGHTS OF HOLDERS OF SOUTHWEST COMMON
STOCK AND HOLDERS OF FORT BEND COMMON STOCK
GENERAL
Southwest is incorporated under the laws of the State of Texas. Fort
Bend is incorporated under the laws of the State of Delaware. The rights of Fort
Bend's stockholders are currently governed by the DGCL and Fort Bend's
Certificate of Incorporation (the "Fort Bend Certificate") and Bylaws. If Fort
Bend's stockholders approve the Merger Agreement and the Merger becomes
effective, stockholders of Fort Bend will become shareholders of Southwest. For
that reason, after the Effective Time, their rights will be governed by the
TBCA, the Southwest Articles and the Southwest Bylaws.
THE FOLLOWING IS A COMPARISON OF THE MATERIAL RIGHTS OF HOLDERS OF
SOUTHWEST COMMON STOCK WITH THE RIGHTS OF HOLDERS OF FORT BEND COMMON STOCK. IT
IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE RELEVANT PROVISIONS OF THE LAWS AND DOCUMENTS DISCUSSED BELOW.
DIRECTORS
FORT BEND. The Fort Bend Certificate provides that the number of
directors shall be fixed from time to time exclusively by the Fort Bend Board
and that the directors, other than those who may be elected by the holders of
any class or series of preferred stock, shall be divided into three classes,
each serving a three-year term. The number of directors of Fort Bend is
currently fixed at eight. Vacancies and newly created directorships on the Fort
Bend Board may be filled only by a majority vote of the directors then in
office, though less than a quorum, and directors so chosen shall hold office for
a term expiring at the annual meeting of stockholders at which the term of
office of the class to which they have been elected expires, and until such
director's successor shall have been duly elected and qualified. Directors of
Fort Bend are elected by a plurality of the votes cast present in person or by
proxy at the meeting at which directors are elected. The Fort Bend Bylaws
establish an advance notice procedure for stockholders to make nominations of
candidates for election as directors or to bring other business before an annual
meeting of stockholders of Fort Bend. See "--Proposal of Business; Nomination of
Directors--Fort Bend."
SOUTHWEST. The Southwest Bylaws provide that the number of directors
shall be fixed from time to time by the Southwest Board and that the directors
shall be divided into three classes, each serving a three-year term. The number
of directors of Southwest is currently fixed at 11. Vacancies on the Southwest
Board may be filled by a majority of the remaining directors or, in the event a
vacancy is not so filled or if no director remains, by a majority vote of
Southwest shareholders. Directors of Southwest are elected by a plurality of the
votes of shares of Southwest capital stock entitled to vote thereon present in
person or by proxy at the meeting at which directors are elected. The Southwest
Bylaws establish an advance notice procedure for shareholders to make
nominations of candidates for election as directors or to bring other business
before an annual meeting of shareholders of Southwest. See "--Proposal of
Business; Nomination of Directors--Southwest."
VOTING OF SHARES
FORT BEND. Each stockholder of Fort Bend has one vote for every share
of stock entitled to vote; provided, however, in no event will any record owner
of any outstanding Fort Bend Common Stock that is beneficially owned, directly
or indirectly, by a person who, as of any record date for the determination of
stockholders entitled to vote on
-29-
<PAGE>
any matter, beneficially owns in excess of 10% of the then-outstanding shares of
Fort Bend Common Stock (the "Limit"), be entitled, or permitted to any vote in
respect of the shares held in excess of the Limit. The number of votes that may
be cast by any record owner of Fort Bend Common Stock that is beneficially owned
by a person owning shares in excess of the Limit shall be a number equal to the
total number of votes that a single record owner of all Fort Bend Common Stock
owned by such person would be entitled to cast, multiplied by a fraction, the
numerator of which is the number of shares of such class or series beneficially
owned by such person and owned of record by such record owner and the
denominator of which is the total number of shares of Fort Bend Common Stock
beneficially owned by such person owning shares in excess of the Limit.
SOUTHWEST. Each share of Southwest Common Stock is entitled to one vote
on each matter submitted to a vote at a meeting of shareholders.
AMENDMENT OF ARTICLES OR CERTIFICATE AND BYLAWS
FORT BEND. The Fort Bend Certificate provides that Fort Bend reserves
the right to amend or repeal any provision contained in the Certificate in the
manner prescribed by the DGCL and all rights conferred upon stockholders are
granted subject to this reservation; provided, however, the affirmative vote of
the holders of at least 80% of the voting power of all of the then-outstanding
shares of capital stock of Fort Bend entitled to vote in the election of
directors, voting together as a single class, is required to amend or repeal
certain provisions of the Fort Bend Certificate, including those relating to
certain business combinations, liability and indemnification of officers and
directors, amendment of the Fort Bend Certificate, action by written consent,
the calling of special meetings and the amendment of the Bylaws. The Fort Bend
Bylaws may be adopted, amended or repealed by either (i) the approval of a
majority of the Fort Bend Board or (ii) the affirmative vote of the holders of
at least 80% of the voting power of all of the then-outstanding shares of
capital stock of Fort Bend entitled to vote in the election of directors, voting
together as a single class. Shares of Fort Bend preferred stock currently
authorized in the Fort Bend Certificate may be issued by the Fort Bend Board
without amending the Fort Bend Certificate or otherwise obtaining the approval
of Fort Bend's stockholders.
SOUTHWEST. The Southwest Articles may be amended only if the proposed
amendment is approved by the Southwest Board and thereafter approved by the
holders of a majority of the outstanding shares of stock entitled to vote
thereon. The Southwest Bylaws may be amended only by a majority of the Southwest
Board. Shares of Southwest Preferred Stock currently authorized in the Southwest
Articles may be issued by the Southwest Board without amending the Southwest
Articles or otherwise obtaining the approval of Southwest's shareholders.
SHAREHOLDER APPROVAL OF MERGERS AND ASSET SALES
IN ADDITION TO BEING SUBJECT TO THE LAWS OF THEIR RESPECTIVE STATES OF
INCORPORATION, SOUTHWEST, AS A BANK HOLDING COMPANY, AND FBHC, AS A SAVINGS AND
LOAN HOLDING COMPANY, ARE SUBJECT TO VARIOUS PROVISIONS OF FEDERAL LAW WITH
RESPECT TO MERGERS, CONSOLIDATIONS AND CERTAIN OTHER CORPORATE TRANSACTIONS.
FORT BEND. Under the DGCL, the recommendation of the Board of Directors
and the approval of a simple majority of the outstanding shares of Fort Bend
entitled to vote thereon are required to effect a merger or consolidation or to
sell, lease or exchange substantially all of Fort Bend's assets. Subject to the
provisions of the Fort Bend Certificate and Section 203 of the DGCL described
below under "-- Business Combinations with Interested Stockholders," no vote of
the stockholders of Fort Bend is required with respect to a merger or
consolidation if Fort Bend is the surviving corporation of such merger or
consolidation and (a) the related agreement of merger or consolidation does not
amend the Fort Bend Certificate, (b) each share of stock of Fort Bend
outstanding immediately prior to the merger is an identical outstanding or
treasury share of Fort Bend after the merger and (c) the number of shares of
Fort Bend Common Stock to be issued in such merger or consolidation (or to be
issuable upon conversion of any convertible instruments to be issued in such
merger or consolidation) does not exceed 20% of the shares of Fort Bend Common
Stock outstanding immediately prior to such merger or consolidation.
-30-
<PAGE>
SOUTHWEST. Except as described below, the affirmative vote of a
majority of the outstanding shares of stock entitled to vote thereon is required
to approve a merger or consolidation involving Southwest or the sale, lease or
exchange of all or substantially all of Southwest's assets. No vote of the
shareholders is required, however, in connection with a merger in which
Southwest is the surviving corporation and (i) the agreement of merger for the
merger does not amend in any respect the Southwest Articles, (ii) each share of
capital stock outstanding immediately before the merger is to be an identical
outstanding or treasury share of Southwest after the merger and (iii) the number
of shares of capital stock to be issued in the merger (or to be issuable upon
conversion of any convertible instruments to be issued in the merger) does not
exceed 20% of the shares of Southwest's capital stock outstanding immediately
before the merger.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
FORT BEND. Section 203 of the DGCL prohibits a "business combination"
(as defined in Section 203, generally including mergers, sales and leases of
assets, issuances of securities and similar transactions) by a corporation or
its subsidiary with an "interested stockholder" (as defined in Section 203,
generally the beneficial owner of 15% or more of the voting stock of such
corporation) within three years after the person or entity became an interested
stockholder, unless (a) the business combination or the transaction pursuant to
which such person or entity became an interested stockholder was approved by the
board of directors of the corporation prior to the person or entity becoming an
interested stockholder, (b) upon the consummation of the transaction in which
the person or entity became an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
(excluding, for purposes of determining the number of shares outstanding, shares
held by persons who are both officers and directors of the corporation and
shares held by certain employee benefit plans) or (c) the business combination
is approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 662/3% of the outstanding voting stock that is not owned by the
interested stockholder.
Article Eighth of the Fort Bend Certificate includes some additional
protections to those provided for by Section 203 of the DGCL. Article Eighth
provides that an affirmative vote of 80% of Fort Bend's outstanding shares of
stock, voting together as a single class, is required to approve a merger or
other business combination involving a beneficial owner of more than 10% of Fort
Bend's outstanding voting shares (an "interested stockholder"). An affirmative
vote of 80% of Fort Bend's outstanding shares of stock, voting together as a
single class, is also required if the consideration offered in connection with
such a transaction does not satisfy certain "fair price" requirements. These
requirements do not apply if the transaction is approved by a majority of the
"disinterested directors" of Fort Bend's Board (defined as a director who is
either (i) a director who is unaffiliated with the interested stockholder and
was a member of the Board prior to the time the interested stockholder became an
interested stockholder or (ii) a director thereafter chosen to fill a vacancy on
the Board or who is elected, and in either case, is unaffiliated with the
interested stockholder and is recommended by a majority of the disinterested
directors then on the Board). The foregoing provision may only be altered,
amended or repealed by the affirmative vote of the holders of at least 80% of
the outstanding shares of voting stock, voting together as a single class.
The Merger is not subject to the limitations set forth in Section 203
of the DGCL, because Southwest is not an interested stockholder of Fort Bend.
SOUTHWEST. The TBCA does not have a comparable provision to the DGCL's
Section 203, and no such provision is included in the Southwest Articles or the
Southwest Bylaws.
SPECIAL MEETINGS
FORT BEND. Under the DGCL, special meetings of stockholders may be
called by the board of directors or by such persons as may be authorized in the
certificate of incorporation or bylaws. The Fort Bend Bylaws provide, subject to
the rights of the holders of any class or series of preferred stock, that
special meetings of stockholders may be called only by the Fort Bend Board
pursuant to a resolution adopted by a majority of the Fort Bend Board.
-31-
<PAGE>
SOUTHWEST. Under the TBCA, special meetings of shareholders may be
called by the president, the board of directors, or such other person or persons
as may be authorized in the articles of incorporation or the bylaws, or by the
holders of at least 10% of all the shares entitled to vote at the proposed
special meeting (unless the articles of incorporation require a number of shares
greater than or less than 10%, but in no event greater than 50%). The Southwest
Bylaws provide that a special meeting of shareholders may be called by the
Chairman of the Board, the President or a majority of the Southwest Board, and
shall be called by the President at the request of the holders of not less than
one-third of the shares entitled to vote at the meeting.
LIMITATION OF DIRECTOR LIABILITY
FORT BEND. The Fort Bend Certificate provides that a director of Fort
Bend shall not be liable personally to Fort Bend or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Fort Bend or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision protects Fort Bend's directors against
personal liability for monetary damages from breaches of their duty of care. It
does not eliminate the director's duty of care and has no effect on the
availability of equitable remedies, such as an injunction or rescission, based
upon a director's breach of his duty of care. In addition, the Certificate
provides that if, after it is filed, the DGCL is amended to further eliminate or
limit the personal liability of directors, then the liability of a director of
Fort Bend shall be eliminated or limited to the fullest extent permitted by the
DGCL, as so amended.
SOUTHWEST. Article 1302-7.06 of the Texas Civil Statutes provides that
the articles of incorporation may provide that a director of the corporation
shall not be liable, or shall be liable only to the extent provided in the
articles of incorporation, to the corporation or its shareholders for monetary
damages for an act or omission in the director's capacity as a director,
provided that there shall be no limitation of liability of a director to the
extent the director is found liable for (i) a breach of the director's duty of
loyalty to the corporation or its shareholders, (ii) an act or omission not in
good faith that constitutes a breach of duty of the director to the corporation
or that involves intentional misconduct or a knowing violation of law, (iii) a
transaction from which the director received an improper benefit, whether or not
the benefit resulted from an action taken within the scope of the director's
office, or (iv) an act or omission for which the liability of a director is
expressly provided by an applicable statute. The Southwest Articles provide that
no director of Southwest will be liable to Southwest or its shareholders for
monetary damages for an act or omission in the director's capacity as a
director, except to the extent the foregoing exemption from liability is not
permitted under Texas law.
APPRAISAL RIGHTS
FORT BEND. Section 262 of the DGCL provides for stockholder appraisal
rights in connection with mergers and consolidations generally; HOWEVER,
appraisal rights are not available to holders of any class or series of stock
that, at the record date fixed to determine stockholders entitled to receive
notice of and to vote at the meeting to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 stockholders, so long as stockholders receive shares
of the surviving corporation or another corporation whose shares are so listed
or designated or held by more than 2,000 stockholders. Fort Bend Common Stock is
quoted on the Nasdaq National Market System; therefore, holders of Fort Bend
Common Stock will not have appraisal rights in connection with mergers and
consolidations involving Fort Bend.
SOUTHWEST. Articles 5.11 through 5.13 of the TBCA provide for
shareholder appraisal rights in connection with mergers and corporate
combinations generally; however, appraisal rights are not available to holders
of any class or series of class that, at the record date fixed to determine
shareholders entitled to receive notice of and to vote at the meeting to act
upon the agreement of merger or combination, were either (i) listed on a
national securities exchange, or (ii) held of record by more than 2,000
shareholders, so long as shareholders are not required by the terms of the plan
of merger or combination to accept for their shares any consideration other than
(a) shares of the corporation that, immediately after the effective time of the
merger or combination, will be part of a class or series of shares which are
listed, or authorized for listing upon official notice of issuance, on a
national securities exchange or held of record by not less than 2,000 holders
and (b) cash in lieu of fractional shares otherwise entitled to be received.
-32-
<PAGE>
ACTION WITHOUT A MEETING
FORT BEND. Subject to the rights of the holders of any class or series
of preferred stock, any action required or permitted to be taken by the Fort
Bend stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing by such
stockholders.
SOUTHWEST. As permitted by Article 9.10 of the TBCA, any action
required or permitted to be taken at a shareholders' meeting may be taken
without a meeting pursuant to the written consent of the holders of all of the
shares entitled to vote with respect to the action that is subject to the
consent. Article 9.10 of the TBCA also states that the articles of incorporation
may provide that any action required to be taken at a meeting of shareholders
may instead be taken without a meeting pursuant to the written consent of the
holders of the number of shares that would have been required to effect the
action at an actual meeting of shareholders. The Southwest Bylaws provide that
action may be taken by the written consent of all of the shareholders entitled
to vote with respect to the subject matter thereof, and such consent shall have
the same force and effect as a unanimous vote of the shareholders.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
FORT BEND. The Fort Bend Certificate provides that Fort Bend will
indemnify, to the fullest extent authorized by the DGCL at the time the
Certificate was filed or as the DGCL may be amended in the future (but only to
the extent such amendment provides broader indemnification rights), each person
who was or is made a party or is threatened to be made a party to or is
otherwise involved in any action, suit, or proceeding because he is or was a
director or officer of Fort Bend (or is or was serving at the request of Fort
Bend as a director or officer of another corporation, including any subsidiary
of Fort Bend, partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan), whether the basis of such
proceeding is alleged action in an official capacity as a director or officer or
in any other capacity while serving as a director or officer, against all
expense, liability and loss reasonably incurred by such person in connection
therewith, provided that indemnification in connection with a proceeding brought
by such person will be permitted only if the proceeding was authorized by the
Fort Bend Board. The Fort Bend Certificate also provides that Fort Bend must pay
expenses incurred in defending the proceedings specified above in advance of
their final disposition, provided that if the DGCL requires, such advance
payments for expenses incurred by a director or officer may be made only if such
director or officer undertakes to repay all amounts so advanced if it is
ultimately determined that the person receiving such payments is not entitled to
be indemnified.
The Fort Bend Certificate authorizes Fort Bend, by a majority vote of
the disinterested directors, to provide similar rights to indemnification and
advancement of expenses to employees or agents of Fort Bend.
Pursuant to the Fort Bend Certificate, Fort Bend may maintain
insurance, at its expense, to protect itself and any directors, officers,
employees or agents of Fort Bend or another entity against any expense,
liability or loss, regardless of whether Fort Bend has the power or obligation
to indemnify that person against such expense, liability or loss under the DGCL.
The rights to indemnification and advancement of expenses are not
exclusive of any other rights that any person may have or acquire under any
statute, provision of the Fort Bend Certificate or Fort Bend Bylaws, agreement,
vote of stockholders or disinterested directors or otherwise.
SOUTHWEST. The Southwest Articles provide that, subject to certain
limitations, its officers and directors (and certain other individuals acting on
behalf of Southwest) will be indemnified by Southwest against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by such
persons, to the fullest extent permitted under the TBCA. Generally, Article
2.01-1 of the TBCA permits a corporation to indemnify a person who was, is, or
is threatened to be made a named defendant or respondent in a proceeding because
the person was or is a director or officer if it is determined that such person
(i) conducted himself in good faith, (ii) reasonably believed (a) in the case of
conduct in his official capacity as a director or officer of the corporation,
that his conduct was in the corporation's best interests, or (b) in other cases,
that his conduct was at least not opposed to the corporation's best interests,
and (iii) in the case of any criminal proceeding, had no reasonable cause to
believe that his conduct was unlawful. In addition, the TBCA requires a
corporation to indemnify a director or officer for any action that such director
or officer is wholly successful in defending on the merits.
-33-
<PAGE>
The Southwest Articles provide that a director of Southwest will not be
liable to the corporation for monetary damages for an act or omission in the
director's capacity as a director, except to the extent not permitted by law.
Texas law does not permit exculpation of liability in the case of (i) a breach
of the director's duty of loyalty to the corporation or the shareholders, (ii)
an act or omission not in good faith that involves intentional misconduct or a
knowing violation of the law, (iii) a transaction from which a director received
an improper benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office, (iv) an action or omission for which
the liability of the director is expressly provided by statute, or (v) an act
related to an unlawful stock repurchase or dividend.
DIVIDENDS
IN ADDITION TO RESTRICTIONS IMPOSED UNDER TEXAS AND DELAWARE LAW,
RESPECTIVELY, SOUTHWEST AND THE ASSOCIATION ARE SUBJECT TO FEDERAL RESERVE
BOARD, OTS, OCC AND OTHER REGULATORY POLICIES REGARDING PAYMENT OF DIVIDENDS,
WHICH GENERALLY LIMIT DIVIDENDS TO OPERATING EARNINGS.
FORT BEND. Delaware corporations may pay dividends out of surplus or,
if there is no surplus, out of net profits for the fiscal year in which declared
and for the preceding fiscal year. Section 170 of the DGCL also provides that
dividends may not be paid out of net profits if, after the payment of the
dividend, capital is less than the capital represented by the outstanding stock
of all classes having a preference upon the distribution of assets. Fort Bend's
principal source of funds to pay cash dividends on its common stock is cash
dividends from the Association. Generally, savings associations, such as the
Association, that before and after the proposed distribution meet their capital
requirements, may make capital distributions during any calendar year equal to
the greater of 100% of net income for the year-to-date plus 50% of the amount by
which the lesser of the association's tangible, core or risk-based capital
exceeds its capital requirement for such capital component, as measured at the
beginning of the calendar year, or 75% of its net income for the most recent
four quarter period. However, an association deemed to be in need of more than
normal supervision by the OTS may have its dividend authority restricted by the
OTS. The Association may pay dividends in accordance with this general
authority.
Savings associations proposing to make any capital distribution need
only submit written notice to the OTS 30 days prior to such distribution.
Savings associations that do not, or would not meet their current minimum
capital requirements following a proposed capital distribution, however, must
obtain OTS approval prior to making such distribution. The OTS may object to the
distribution during that 30-day period notice based on safety and soundness
concerns.
SOUTHWEST. Texas corporations may pay dividends out of surplus provided
that after giving effect to the dividend payment, the corporation would not be
insolvent. Southwest's principal source of funds to pay cash dividends on its
common stock would be cash dividends from Southwest Bank. There are certain
statutory limitations on the payment of dividends by national banks. Without
approval of the OCC, dividends in any calendar year may not exceed Southwest
Bank's total net profits for that year, plus its retained profits for the
preceding two years, less any required transfers to capital surplus or to a fund
for the retirement of any preferred stock. In addition, a dividend may not be
paid in excess of a bank's cumulative net profits after deducting bad debts in
excess of the allowance for loan losses. Regulatory authorities could impose
administratively stricter limitations on the ability of Southwest Bank to pay
dividends to Southwest if such limits were deemed appropriate to preserve
certain capital adequacy requirements. As of September 30, 1998, approximately
$44.9 million was available for payment of dividends by Southwest Bank to
Southwest under these restrictions without regulatory approval.
PROPOSAL OF BUSINESS; NOMINATION OF DIRECTORS
FORT BEND. The Fort Bend Bylaws contain detailed advance notice and
informational procedures which must be complied with in order for a stockholder
to nominate a person to serve as a director. The Fort Bend Bylaws require a
stockholder to give notice of a proposed nominee in advance of the stockholders'
meeting at which directors will be elected. In addition, the Fort Bend Bylaws
contain detailed advance notice and informational procedures which must be
followed in order for a Fort Bend stockholder to propose an item of business for
consideration at a meeting of Fort Bend stockholders. To be timely, a
stockholder's notice must be delivered to Fort Bend no less than 30 days prior
to the date of the meeting; provided, however, that in the event less than 40
days' notice of the meeting date is given, the notice must be received no later
than the 10th day following the day on which such notice of the date of the
meeting was mailed.
-34-
<PAGE>
SOUTHWEST. The Southwest Bylaws contain detailed advance notice and
informational procedures which must be complied with in order for a shareholder
to nominate a person to serve as a director. The Southwest Bylaws generally
require a shareholder to give notice of a proposed nominee in advance of the
shareholders' meeting at which directors will be elected. In addition, the
Southwest Bylaws contain detailed advance notice and informational procedures
which must be followed in order for a Southwest shareholder to propose an item
of business for consideration at a meeting of Southwest shareholders. To be
timely, a shareholder's notice must be delivered to Southwest no later than the
70th day prior to the anniversary of the immediately preceding annual meeting;
provided, however, if the date of the annual meeting is more than 20 days before
such anniversary, the notice must be delivered to Southwest no later than the
10th day following the day public disclosure of the date of such meeting is
first made by Southwest.
LEGAL MATTERS
The validity of the shares of Southwest Common Stock to be issued by
Southwest will be passed upon by Vinson & Elkins L.L.P., Houston, Texas. Certain
legal matters with respect to the Merger will be passed upon for Fort Bend by
Silver, Freedman & Taff, L.L.P., Washington, D.C.
EXPERTS
The consolidated balance sheets of Southwest Bancorporation of Texas,
Inc. as of December 31, 1997 and 1996 and the consolidated statements of income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1997, incorporated in this Proxy
Statement/Prospectus by reference to the Southwest Annual Report on Form 10-K
for the year ended December 31, 1997 have been so incorporated by reference
herein in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
With respect to the unaudited interim financial information for the
periods ended September 30, 1998 and 1997, incorporated by reference in this
Proxy Statement/Prospectus, the independent accountants have reported that they
have applied limited procedures in accordance with professional standards for a
review of such information. However, their separate report included in
Southwest's Quarterly Reports on Form 10-Q for the quarters ended September 30,
1998, June 30, 1998 and March 31, 1998, and incorporated by reference herein,
states that they did not audit and they do not express an opinion on that
interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted in light of the limited nature
of the review procedures applied. The accountants are not subject to the
liability provisions of Section 11 of the Securities Act for their report on the
unaudited interim financial information because that report is not a "report" or
a "part" of the registration statement prepared or certified by the accountants
within the meaning of Sections 7 and 11 of the Securities Act.
The consolidated statements of financial condition of Fort Bend as of
March 31, 1998 and 1997 and the statements of income, changes in stockholders'
equity and cash flows for each of the three years in the period ended March 31,
1998 incorporated in this Proxy Statement/Prospectus by reference to the
accompanying Fort Bend Annual Report on Form 10-KSB for the year ended March 31,
1998, have been so incorporated by reference herein in reliance on the report,
which includes an explanatory paragraph for changes in accounting principles, of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
As disclosed in the proxy materials for Fort Bend's 1998 Annual Meeting
of Stockholders, in order to be eligible for inclusion in Fort Bend's proxy
materials for the 1999 Annual Meeting of Stockholders, any stockholder proposal
to take action at such meeting (which meeting will only be held if the Merger is
not consummated) must be received at the main office of Fort Bend, 3400 Avenue
H, Rosenberg, Texas 77471, no later than March 7, 1999. Any such proposal will
be subject to the requirements of the proxy rules adopted under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
-35-
<PAGE>
OTHER MATTERS
The Fort Bend Board is not aware of any business to come before the
Special Meeting other than those matters described above in this Proxy
Statement/Prospectus. However, if any other matters should properly come before
the Special Meeting, including proposals to adjourn the Special Meeting to
permit further solicitation of proxies in the event that there are not
sufficient votes to approve any proposal at the time of the Special Meeting, it
is intended that holders of the proxies will act in accordance with their best
judgment; provided, however, that no proxy that is voted against a proposal will
be voted in favor of adjournment to solicit further proxies for such proposal.
WHERE YOU CAN FIND MORE INFORMATION
Southwest and Fort Bend each file annual, quarterly and current
reports, proxy statements and other information with the Commission. You may
read and copy any reports, statements or other information that the companies
file at the Commission's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for
further information on the public reference rooms. Southwest and Fort Bend's
public filings are also available to the public from commercial document
retrieval services and at the Internet web site maintained by the Commission at
http://www.sec.gov.
Southwest has filed a Form S-4 Registration Statement (the
"Registration Statement") to register with the Commission the offering and sale
of the shares of Southwest Common Stock to be issued to Fort Bend stockholders
in the Merger. This Proxy Statement/Prospectus is a part of the Registration
Statement and constitutes a prospectus of Southwest, as well as a proxy
statement of Fort Bend for the Special Meeting.
As allowed by Commission rules, this Proxy Statement/Prospectus does
not contain all the information that stockholders can find in the Registration
Statement or the exhibits to the Registration Statement.
The Commission allows Southwest and Fort Bend to incorporate
information into this Proxy Statement/Prospectus "by reference," which means
that the companies can disclose important information to you by referring you to
another document filed separately with the Commission. The information
incorporated by reference is deemed to be part of this Proxy
Statement/Prospectus, except for any information superseded by information
contained directly in this Proxy Statement/Prospectus. This Proxy
Statement/Prospectus incorporates by reference the documents set forth below
that Southwest and Fort Bend have previously filed with the Commission. These
documents contain important information about the companies and their financial
condition.
<TABLE>
<CAPTION>
SOUTHWEST FILINGS (FILE NO. 000-22007) PERIOD
- -------------------------------------- ------
<S> <C>
Annual Report on Form 10-K......................... Year ended December 31, 1997
Quarterly Reports on Form 10-Q..................... Quarter ended March 31, 1998; quarter ended June 30,
1998; quarter ended September 30, 1998
Current Report on Form 8-K......................... Filed October 22, 1998
Description of Southwest Common Stock from
Registration Statement on Form 8-A filed on
January 17, 1997, including any amendment or
report filed with the Commission for the purpose
of updating such description
FORT BEND FILINGS (FILE NO. 0-21328) PERIOD
- -------------------------------------- ------
Annual Report on Form 10-KSB....................... Year ended March 31, 1998
Quarterly Report on Form 10-QSB.................... Quarter ended June 30, 1998; quarter ended September 30,
1998
Current Reports on Form 8-K........................ Filed August 5, 1998, October 23, 1998 and October 30,
1998
Description of Fort Bend Common Stock from
Registration Statement on Form 8-A filed on
March 10, 1993, including any amendment or report
filed with the Commission for the purpose of
updating such description
</TABLE>
-36-
<PAGE>
This Proxy Statement/Prospectus is accompanied by copies of Fort Bend's
Annual Report on Form 10-KSB for the year ended March 31, 1998, Proxy Statement
dated June 29, 1998 for its Annual Meeting of Stockholders held on July 28, 1998
and Quarterly Report on Form 10-QSB for the quarter ended September 30, 1998.
Southwest and Fort Bend hereby incorporate by reference additional
documents that Southwest or Fort Bend may file with the Commission between the
date of this Proxy Statement/Prospectus and the date of the Special Meeting.
These include periodic reports, such as Annual Reports on Form 10-K or 10-KSB,
Quarterly Reports on Form 10-Q or 10-QSB and Current Reports on Form 8-K, as
well as proxy statements.
Southwest has supplied all information contained or incorporated by
reference in this Proxy Statement/Prospectus relating to Southwest or Southwest
Bank, and Fort Bend has supplied all such information relating to Fort Bend or
the Association.
You may obtain any of the documents incorporated by reference in this
document from the appropriate company or the Commission through the Commission's
Internet web site described above. Documents incorporated by reference are
available from the appropriate company without charge, excluding all exhibits to
those documents unless specifically incorporated by reference as an exhibit in
this Proxy Statement/Prospectus. You may obtain documents incorporated by
reference in this Proxy Statement/Prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
SOUTHWEST BANCORPORATION OF TEXAS, INC.
4400 Post Oak Parkway
Houston, Texas 77027
Attention: R. John McWhorter
Tel: (713) 235-8800
FORT BEND HOLDING CORP.
3400 Avenue H
Rosenberg, Texas 77471
Attention: David D. Rinehart
Tel: (281) 342-5571
If you would like to request documents, please do so by [five business
days before Special Meeting], 1999 to receive them before the Special Meeting.
If you request any incorporated documents, the appropriate company will mail
them to you by first-class mail, or other equally prompt means, within one
business day of receipt of your request.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE YOUR SHARES AT THE SPECIAL
MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
DIFFERS FROM THAT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY
STATEMENT/PROSPECTUS IS DATED JANUARY ____, 1999. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY
DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF SHARES OF SOUTHWEST
COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SOUTHWEST COMMON STOCK OFFERED BY THIS
PROXY STATEMENT/PROSPECTUS, NOR DOES IT CONSTITUTE THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
-37-
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
LOCATION OF
TERM DEFINED TERM
- ----- ------------
<S> <C>
Acquisition Proposal..................................................................... 20
Bank Merger.............................................................................. 11
Closing Date............................................................................. 11
Commission............................................................................... 9
Completed Deals.......................................................................... 14
DGCL..................................................................................... 9
Effective Time........................................................................... 11
ESOP..................................................................................... 17
Exchange Act............................................................................. 35
Exchange Agent........................................................................... 18
FFIEC.................................................................................... 24
Fort Bend Board.......................................................................... 8
Fort Bend Certificate.................................................................... 29
Fort Bend Common Stock................................................................... 8
Fort Bend Debentures..................................................................... 11
interested stockholder................................................................... 31
Limit.................................................................................... 30
Merger................................................................................... 8
Merger Agreement......................................................................... 8
Millers.................................................................................. 12
Mitchell................................................................................. 11
OCC...................................................................................... 19
OTS...................................................................................... 19
Pending Deals............................................................................ 14
Preferred Stock.......................................................................... 26
Record Date.............................................................................. 8
Registration Statement................................................................... 36
Restricted Shares........................................................................ 17
Restricted Stock Plan.................................................................... 10
Securities Act........................................................................... 24
Shareholder Notice Procedure............................................................. 28
Southwest Articles....................................................................... 26
Southwest Board.......................................................................... 26
Southwest Bylaws......................................................................... 26
Southwest Common Stock................................................................... 8
Special Meeting.......................................................................... 8
TBCA..................................................................................... 27
The Woodlands............................................................................ 17
Webb..................................................................................... 12
</TABLE>
-38-
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
SOUTHWEST BANCORPORATION OF TEXAS, INC.
AND
FORT BEND HOLDING CORP.
Dated as of October 20, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
THE MERGER
Section 1.1 The Merger................................................................................A-2
Section 1.2 Conversion of FBHC Common Stock and FBHC Stock Options....................................A-3
Section 1.3 Surrender of FBHC Stock Certificates......................................................A-3
ARTICLE II
THE CLOSING
Section 2.1 Closing Date..............................................................................A-5
Section 2.2 Effective Time; Procedure.................................................................A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FBHC
Section 3.1 Organization.............................................................................A-6
Section 3.2 Binding Effect...........................................................................A-7
Section 3.3 Capitalization...........................................................................A-7
Section 3.4 Financial Statements and Reports.........................................................A-8
Section 3.5 Compliance with Applicable Laws; Operating Authorities...................................A-9
Section 3.6 Other Activities of FBHC................................................................A-10
Section 3.7 Contracts and Commitments...............................................................A-11
Section 3.8 Broker's and Finder's Fees..............................................................A-12
Section 3.9 Corporate Records; Other Information....................................................A-12
Section 3.10 Real Property Owned or Leased...........................................................A-13
Section 3.11 Personal Property.......................................................................A-13
Section 3.12 Accounting Records; Data Processing.....................................................A-14
Section 3.13 Absence of Certain Changes..............................................................A-14
Section 3.14 Litigation..............................................................................A-15
Section 3.15 Tax Matters.............................................................................A-16
Section 3.16 Employment and Similar Agreements; Obligations
Upon Change in Control.............................................................A-17
Section 3.17 Benefit Plans...........................................................................A-18
Section 3.18 Labor and Employment Matters............................................................A-20
Section 3.19 Certain Interests.......................................................................A-21
Section 3.20 Registration Statement and Regulatory Applications......................................A-22
Section 3.21 Insurance...............................................................................A-22
Section 3.22 Environmental Matters...................................................................A-23
Section 3.23 Intellectual Property Rights............................................................A-24
Section 3.24 Site Locations..........................................................................A-24
Section 3.25 Loans...................................................................................A-24
Section 3.26 Allowance for Losses....................................................................A-25
Section 3.27 Real Estate Owned.......................................................................A-25
Section 3.28 Interest Rate Risk Management Instruments...............................................A-26
Section 3.29 Disclosure..............................................................................A-26
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 Organization............................................................................A-26
Section 4.2 Binding Effect..........................................................................A-27
Section 4.3 Capitalization..........................................................................A-27
Section 4.4 Financial Statements and Reports........................................................A-28
Section 4.5 Registration Statement and Regulatory Applications......................................A-29
Section 4.6 Compliance with Applicable Laws; Operating Authorities..................................A-29
Section 4.7 Absence of Certain Changes..............................................................A-30
Section 4.8 Litigation..............................................................................A-30
Section 4.9 Broker's and Finder's Fees..............................................................A-31
Section 4.10 Tax Matters.............................................................................A-31
Section 4.11 Environmental Matters...................................................................A-31
Section 4.12 Allowance for Losses....................................................................A-31
Section 4.13 Disclosure..............................................................................A-31
ARTICLE V
COVENANTS OF THE PARTIES
Section 5.1 Preparation of Registration Statement and
Prospectus/Proxy Statement.........................................................A-32
Section 5.2 Pursuit of Regulatory Approvals.........................................................A-32
Section 5.3 Other Consents..........................................................................A-33
Section 5.4 FBHC Activities Pending Closing.........................................................A-33
Section 5.5 Ongoing Financial Disclosure............................................................A-35
Section 5.6 Access to Information...................................................................A-35
Section 5.7 Confidentiality.........................................................................A-36
Section 5.8 Meeting of Shareholders.................................................................A-37
Section 5.9 Stock Listing...........................................................................A-37
Section 5.10 Affiliates' Letters.....................................................................A-37
Section 5.11 Plan Amendments and Participation in Company Plans;
Option Registration................................................................A-37
Section 5.12 Assumption of FBHC Stock Options........................................................A-38
Section 5.13 Termination of Severance and Consulting Arrangements....................................A-38
Section 5.14 Certain Notifications...................................................................A-39
Section 5.15 No Shopping.............................................................................A-39
Section 5.16 No Inconsistent Actions; Pooling; Tax Treatment.........................................A-40
Section 5.17 Taxes; Consent..........................................................................A-40
Section 5.18 Transactions with Affiliates and Insiders...............................................A-40
Section 5.19 Classification of Loans.................................................................A-40
Section 5.20 Compliance with Applicable Law..........................................................A-41
Section 5.21 Certain Accounting Adjustments..........................................................A-41
Section 5.22 Environmental Investigation; Right to Terminate Agreement...............................A-41
Section 5.23 Indemnification of Directors and Officers; Insurance....................................A-42
Section 5.24 Access to Information of the Company....................................................A-43
Section 5.25 Further Assurances......................................................................A-44
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to FBHC's Obligation to Close.................................................A-45
Section 6.2 Conditions to the Company's Obligations to Close.........................................A-47
ARTICLE VII
TERMINATION
Section 7.1 Termination..............................................................................A-50
Section 7.2 Effect of Termination....................................................................A-51
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Non-Survival of Representations and Warranties..........................................A-52
Section 8.2 Notices.................................................................................A-52
Section 8.3 Governing Law...........................................................................A-53
Section 8.4 Entire Agreement........................................................................A-53
Section 8.5 Amendments and Waivers..................................................................A-53
Section 8.6 Severability............................................................................A-53
Section 8.7 Counterparts............................................................................A-53
Section 8.8 Interpretation of Agreement.............................................................A-54
Section 8.9 Expenses................................................................................A-54
Section 8.10 Attorneys' Fees.........................................................................A-54
Section 8.11 Publicity...............................................................................A-54
Section 8.12 Binding Effect..........................................................................A-55
Section 8.13 Third Parties...........................................................................A-55
Section 8.14 Gender; Number..........................................................................A-55
Section 8.15 Certain Definitions.....................................................................A-55
EXHIBITS
Exhibit A - Plan of Merger for the Bank Merger
Exhibit B - Form of Affiliates' Letter
Exhibit C - Form of Opinion of Counsel for the Company
Exhibit D - Form of Opinion of Counsel for FBHC
Exhibit E - Form of Release (Director)
Exhibit F - Form of Release (Officer)
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
BETWEEN
SOUTHWEST BANCORPORATION OF TEXAS, INC.
AND
FORT BEND HOLDING CORP.
This Agreement and Plan of Merger ("Agreement") is entered into as of
October 20, 1998 between Southwest Bancorporation of Texas, Inc., a Texas
corporation (the "Company"), and Fort Bend Holding Corp., a Delaware corporation
("FBHC").
RECITALS
A. The parties hereto desire to effect a business combination pursuant
to which (i) FBHC will be merged with and into the Company, with the Company
being the surviving corporation (the "Merger"), and (ii) the shareholders of
record, as of the date of the Merger, of the common stock, $.01 par value, of
FBHC ("FBHC Common Stock") (such holders of record of FBHC Common Stock are
hereinafter referred to as the "Shareholders") will receive shares of Common
Stock, $1.00 par value, of the Company ("Company Common Stock") in accordance
with the terms and conditions of this Agreement, all for the purpose of
effecting a tax-free reorganization pursuant to Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code").
B. In connection with the Merger, all options to purchase shares of
FBHC Common Stock outstanding as of the date of the Merger ("FBHC Stock
Options") pursuant to FBHC's 1993 Stock Option and Incentive Plan (as amended
and restated July 29, 1997) (the "FBHC Stock Option Plan") shall be converted
into options to purchase Company Common Stock as described herein.
C. The parties hereto also desire to effect a merger of Fort Bend
Federal Savings and Loan Association of Rosenberg (the "Association"), a
federally chartered savings and loan association and wholly-owned subsidiary of
FBHC, with and into Southwest Bank of Texas National Association ("SW Bank"), a
national banking association and wholly-owned subsidiary of the Company,
pursuant to a Plan of Merger between the Association and SW Bank, a form of
which is attached hereto as Exhibit A (the "Bank Plan of Merger") for the
purpose of effecting a tax-free reorganization pursuant to Section 368(a)(1) of
the Code. Such merger (the "Bank Merger") shall be effectuated on the same date
as, and simultaneously with, the effectiveness of the Merger.
D. The Merger and the Bank Merger require certain shareholder and
regulatory approvals as described herein and shall be effected only after the
necessary approvals have been obtained. Certain capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in Section 8.15 hereof.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
A-1
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER.
(a) PROCEDURE FOR MERGER. The Merger shall take place upon the terms
and subject to the conditions of this Agreement, and in accordance with the
applicable provisions of the Texas Business Corporation Act (the "TBCA") and the
General Corporation Law of the State of Delaware (the "DGCL"), pursuant to
which, at the Effective Time:
(i) FBHC shall be merged with and into the Company by a
statutory merger; the separate corporate existence of FBHC shall
thereupon cease; and the Company shall continue as the surviving
corporation in the Merger (the "Surviving Corporation");
(ii) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of the holder thereof, continue to
be outstanding as one share of Company Common Stock;
(iii) each share of FBHC Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of the holder thereof, be canceled
and converted into the right to receive, upon surrender of the
certificate representing such share, 1.45 shares of Company Common
Stock, as provided in Section 1.2 hereof;
(iv) the Articles of Incorporation and the Bylaws of the
Company shall be unchanged and shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation;
(v) the authorized capital stock of the Surviving Corporation
shall be unchanged, consisting of 1,000,000 shares of preferred stock,
$.01 par value, and 50,000,000 shares of Company Common Stock, $1.00
par value;
(vi) the directors of the Company at the Effective Time shall
be the directors of the Surviving Corporation and the officers of the
Company at the Effective Time shall be the officers of the Surviving
Corporation, in each case until their respective successors are duly
elected and qualified;
(vii) the corporate existence of each of FBHC and the Company
shall be merged into and continued in the Surviving Corporation, and
such Surviving Corporation shall be deemed to be the same corporation
as FBHC and the Company; all rights, title and interests to all real
estate and other property owned by FBHC and the Company shall be vested
in the Surviving Corporation without reversion or impairment, without
further act or deed, and without any transfer or assignment having
occurred, but subject to any existing liens and other encumbrances
thereon; and
A-2
<PAGE>
(viii) the Merger shall have the other effects set forth in
Article 5.06 of the TBCA and Sections 259, 260 and 261 of the DGCL,
including, without limitation, that the Surviving Corporation shall be
liable for all liabilities of FBHC and the Company.
SECTION 1.2 CONVERSION OF FBHC COMMON STOCK AND FBHC STOCK OPTIONS.
(a) OUTSTANDING FBHC COMMON STOCK. At the Effective Time, each share of
FBHC Common Stock issued and outstanding immediately prior to the Effective Time
shall, by virtue of this Agreement and without any action on the part of the
holder thereof, be converted into and exchangeable for 1.45 (the "Exchange
Ratio") shares of Company Common Stock. All of the shares of FBHC Common Stock
converted into Company Common Stock pursuant to this Section 1.2(a) shall no
longer be outstanding and shall automatically be canceled and shall cease to
exist, and each certificate (each a "Certificate") previously representing any
such shares of FBHC Common Stock shall thereafter represent the right to receive
(i) the number of whole shares of Company Common Stock and (ii) cash in lieu of
fractional shares into which the shares of FBHC Common Stock represented by such
Certificate have been converted pursuant to this Section 1.2(a) and Section
1.3(e) hereof. Certificates previously representing shares of FBHC Common Stock
shall be exchanged for certificates representing whole shares of Company Common
Stock and cash in lieu of fractional shares issued in consideration therefor
upon the surrender of such Certificates in accordance with Section 1.3 hereof,
without any interest thereon. If prior to the Effective Time, the Company should
split or combine the outstanding shares of Company Common Stock, recapitalize,
or pay a dividend or other distribution payable in Company Common Stock, then
the Exchange Ratio shall be appropriately adjusted to reflect such split,
recapitalization, combination, dividend or distribution.
(b) TREASURY STOCK. At the Effective Time, all shares of FBHC Common
Stock that are held in FBHC's treasury or otherwise owned by FBHC as treasury
stock shall be canceled and shall cease to exist, and no stock of the Company or
other consideration shall be delivered in exchange therefor.
(c) FBHC STOCK OPTIONS. At the Effective Time, each FBHC Stock Option
shall, in accordance with its terms, be converted (automatically and without any
action on the part of the holder thereof) into an option, having the same terms
as such FBHC Stock Option, to purchase a number of shares of Company Common
Stock equal to the number of shares of FBHC Common Stock subject thereto
multiplied by the Exchange Ratio, at an exercise price per share equal to the
exercise price per share subject thereto divided by the Exchange Ratio. The
total number of shares subject to each FBHC Stock Option shall be rounded to the
nearest whole share, and all exercise prices shall be rounded to the nearest
whole cent.
SECTION 1.3 SURRENDER OF FBHC STOCK CERTIFICATES.
(a) As soon as practicable after the Effective Time, American
Securities Transfer & Trust, Inc., as Exchange Agent (the "Exchange Agent"),
shall mail to each holder of record of a Certificate or Certificates a form
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Exchange Agent) and instructions for use in effecting
the surrender of the
A-3
<PAGE>
Certificates in exchange for certificates representing the shares of Company
Common Stock and the cash in lieu of fractional shares into which the shares of
FBHC Common Stock represented by such Certificate or Certificates shall have
been converted pursuant to this Agreement. Upon surrender of a Certificate for
exchange and cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor (x) a certificate representing that number of whole
shares of Company Common Stock to which such holder of FBHC Common Stock shall
have become entitled pursuant to the provisions of Section 1.2 hereof and (y) a
check representing the amount of cash in lieu of fractional shares, if any,
which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Section 1.3, and the Certificate
so surrendered shall forthwith be canceled. No interest will be paid or accrued
on the cash in lieu of fractional shares and unpaid dividends and distributions,
if any, payable to holders of Certificates.
(b) No dividends or other distributions declared after the Effective
Time with respect to Company Common Stock and payable to the holders of record
thereof shall be paid to the holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in accordance with this Section
1.3. After the surrender of a Certificate in accordance with this Section 1.3,
the record holder thereof shall be entitled to receive any such dividends or
other distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Company Common Stock represented by such
Certificate.
(c) If any certificate representing shares of Company Common Stock is
to be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance thereof
that the Certificate so surrendered shall be appropriately endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form (reasonably satisfactory to the Company) for transfer, and that the person
requesting such exchange shall pay to the Exchange Agent in advance any transfer
or other taxes required by reason of the issuance of a certificate representing
shares of Company Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or required for any other reason, or
shall establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.
(d) At the Effective Time, the stock transfer books of FBHC shall be
closed, and no transfer of the shares of FBHC Common Stock shall thereafter be
recognized. If, after the Effective Time, Certificates representing such shares
are presented for transfer to the Exchange Agent, they shall be canceled and
exchanged for the certificates representing shares of Company Common Stock and
cash in lieu of fractional shares as provided in Section 1.2 hereof.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Company Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend or
distribution with respect to Company Common Stock shall be payable on or with
respect to any fractional share, and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a shareholder of the
Company. In lieu of the issuance of any such fractional share, the Company shall
pay to each former holder of FBHC Common Stock who otherwise would be entitled
to receive a fractional share of Company Common Stock an amount in cash
determined by multiplying (i) the Average Closing Price by (ii) the fraction of
a share of Company Common Stock which such holder would otherwise be entitled to
receive
A-4
<PAGE>
pursuant to Section 1.2 hereof. The term "Average Closing Price" means the
average closing sales price per share of Company Common Stock on The Nasdaq
Stock Market ("Nasdaq"), (as reported by THE WALL STREET JOURNAL or, if not
reported thereby, another authoritive source selected by the Company), for the
five consecutive Nasdaq trading days immediately prior to the date of the
Shareholders' Meeting.
(f) None of the Company, FBHC, the Exchange Agent or any other person
shall be liable to any former holder of shares of FBHC Common Stock for any
Company Common Stock (or dividends or distributions with respect thereto) or
cash properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Company, the posting by such person of a bond in such amount as the Company may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Company Common Stock and cash in
lieu of fractional shares deliverable in respect thereof pursuant to this
Agreement.
ARTICLE II
THE CLOSING
SECTION 2.1 CLOSING DATE. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place on a date to which
the Company and FBHC may agree (the "Closing Date"); PROVIDED, HOWEVER, that in
the absence of an agreement by the parties to the contrary, such Closing Date
shall be the last business day of the month in which the last of the conditions
to Closing set forth in Sections 6.1 and 6.2 have been satisfied, but in no
event later than the date specified in Section 7.1(h) hereof.
SECTION 2.2 EFFECTIVE TIME; PROCEDURE.
(a) The Company and FBHC shall, in accordance with Section 5.04 of the
TBCA and Sections 103 and 251(c) of the DGCL, file Articles of Merger with the
Secretary of State of Texas and a Certificate of Merger with the Secretary of
State of Delaware regarding the Merger. The Merger shall become effective as of
the close of business on the date on which both such filings have been completed
and the Secretary of State of Texas has issued a Certificate of Merger with
respect to the Merger (the "Effective Time"). The parties hereto shall take all
such other and further actions as may be required by Applicable Law to make the
Merger and the Bank Merger effective simultaneously at the Effective Time.
(b) If at any time the Company shall consider or be advised that any
further assignment or assurances in law or any other actions are reasonably
necessary or desirable to vest the title of any property or rights of FBHC in
the Surviving Corporation after the Effective Time, the last acting officers and
directors of FBHC (prior to the Effective Time) shall execute and make all such
proper
A-5
<PAGE>
assignments and assurances and do all things necessary or proper to vest title
in such property or rights in the Surviving Corporation after the Effective
Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FBHC
FBHC has delivered to the Company prior to the execution hereof a
disclosure schedule with respect to the representations and warranties set forth
below (the "Disclosure Schedule"). Sections of the Disclosure Schedule are
hereinafter sometimes referred to as a "Schedule." The representations and
warranties of FBHC made with respect to or subject to the Disclosure Schedule,
any exception taken therein or any information or documentation provided or
required to be provided thereby shall be deemed to have been made as of the date
of this Agreement. The Disclosure Schedule shall in each case specifically
reference the Section or subsection of this Agreement to which any exception,
information or documentation set forth therein applies (disclosure in any
Section or subsection of the Disclosure Schedule shall apply only to the
referenced Section or subsection of this Agreement).
FBHC hereby represents and warrants to the Company as follows:
SECTION 3.1 ORGANIZATION.
(a) FBHC is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware. FBHC is duly qualified to do
business as a foreign corporation and is in good standing in the State of Texas.
FBHC is a unitary savings and loan holding company subject to regulatory
oversight by the Office of Thrift Supervision (the "OTS").
(b) FBHC owns all of the outstanding capital stock of the Association,
and the Association is the only direct Subsidiary of FBHC. The Association is
duly organized and validly existing as a federally chartered savings and loan
association. The Association is a member of the Federal Home Loan Bank ("FHLB")
of Dallas, and its deposits are insured by the Savings Association Insurance
Fund ("SAIF") to the maximum extent permitted by law. The Association is duly
authorized by the OTS or otherwise by federal law to conduct a savings and loan
business at all locations at which it is now conducting business.
(c) Fairview, Inc. ("Fairview") and Mitchell Mortgage Corporation, LLC
("Mitchell") are the only Subsidiaries of the Association, and the Association
does not own any equity interest in any other entity other than stock in the
FHLB of Dallas and readily marketable securities. Fairview is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Texas. Mitchell is a limited liability company, duly organized, validly
existing and in good standing under the laws of the State of Texas. The
Association owns all of the outstanding capital stock of Fairview and 51% of the
outstanding equity interests in Mitchell.
A-6
<PAGE>
(d) Each of FBHC, the Association, Fairview and Mitchell has all
requisite power and authority to own or lease its properties and to carry on its
business as currently conducted. Except as set forth in Schedule 3.5(c), the
nature of the business of each such entity and its activities, as currently
conducted, do not require it to be qualified or registered to do business in any
jurisdiction other than the State of Texas.
(e) FBHC has the corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated herein, subject to receipt of the approval of the
Shareholders and any required Regulatory Approvals.
(f) FBHC has delivered to the Company true and complete copies of the
Certificate or Articles of Incorporation or Association and Bylaws (or
comparable organizational documents in the case of Mitchell) of FBHC, the
Association, Fairview and Mitchell and all amendments thereto. All such
documents are in full force and effect.
SECTION 3.2 BINDING EFFECT. Subject to receipt of Shareholder approval,
this Agreement has been duly and validly authorized, executed and delivered by
FBHC and constitutes the legal, valid and binding obligations of FBHC,
enforceable against FBHC in accordance with its terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of equitable remedies).
FBHC's Board of Directors has determined that the Merger is fair to, and in the
best interest of, FBHC's shareholders and has resolved to recommend approval and
adoption of this Agreement by FBHC's shareholders, subject to its fiduciary
duties. Except as otherwise disclosed on Schedule 3.2, neither the execution and
delivery of this Agreement by FBHC, nor the consummation by FBHC of the
transactions contemplated hereby, nor compliance with any of the provisions
hereof will (i) conflict with or result in the breach of any provision of FBHC's
Certificate of Incorporation or Bylaws or the organizational documents of any of
its Subsidiaries, (ii) conflict with or result in the breach of any term,
condition or provision of, or constitute a default under (upon the giving of
notice, the lapse of time or otherwise), or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or assets of FBHC
or any of its Subsidiaries or otherwise require the consent of any Person under
any agreement or obligation to which FBHC or any of its Subsidiaries is a party
or by which any of their properties or assets may be bound, which conflict,
breach, default, right, lien or right of consent could reasonably be expected to
cause a Material Adverse Effect on FBHC, or (iii) violate or conflict with (or
require any filing, notification, report, approval or other similar action
under) any Applicable Laws, subject to obtaining the approval of the
Shareholders and the Regulatory Approvals specified in Section 5.2(a).
SECTION 3.3 CAPITALIZATION.
(a) The authorized capital stock of FBHC consists of 1,000,000 shares
of serial preferred stock, $.01 par value, none of which are issued, and
4,000,000 shares of FBHC Common Stock. As of September 30, 1998, 1,866,304
shares of FBHC Common Stock are issued and outstanding, 176,348 shares of FBHC
Common Stock are held in FBHC's treasury, 917,586 shares of FBHC Common Stock
are reserved for issuance upon conversion of the Company's 8% Convertible
Subordinated Debentures (the "FBHC Debentures"), a number of shares of Common
Stock equal
A-7
<PAGE>
to up to 9.9% of the outstanding shares of FBHC Common Stock at any point in
time are reserved for issuance in exchange for the equity interests in Mitchell
which are not currently owned by the Association (the "Mitchell Exchange") and
225,467 shares of which are reserved for issuance upon the exercise of options
granted under FBHC's Stock Option Plan. As of September 30, 1998, FBHC
Debentures in the aggregate principal amount of $9,910,000 are outstanding. All
outstanding shares of FBHC Common Stock have been and are, duly authorized and
validly issued, fully paid and nonassessable and have not been issued in
violation of the preemptive rights of any person. There are outstanding FBHC
Stock Options to purchase 225,413 shares of FBHC Common Stock. Schedule 3.3(a)
sets forth a list of the exercise prices, vesting schedules, expiration dates,
holders of and numbers of shares subject to all such FBHC Stock Options and any
stock appreciation rights outstanding thereunder. All FBHC Stock Options have
been duly authorized and all FBHC Stock Options (i) were granted at a per share
price which was not less than the fair market value per share of FBHC Common
Stock at the date of grant and (ii) all FBHC Stock Options intended to qualify
as "incentive" stock options under Section 422(b) of the Code meet all
requirements under the Code for such qualification.
(b) Except for the FBHC Stock Options, the FBHC Debentures, the
Mitchell Exchange or as otherwise disclosed on Schedule 3.3(a), there are no
outstanding or authorized subscriptions, options, warrants, convertible
securities, calls, rights, commitments or any other agreements of any character
relating to the issued or unissued capital stock or other securities of FBHC
obligating FBHC to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other securities of FBHC or
convertible security or other similar agreement or commitment. There are no
outstanding contractual obligations of FBHC to repurchase, redeem or otherwise
acquire any outstanding shares of FBHC Common Stock and there are no outstanding
stock appreciation rights or similar rights granted by FBHC, except as otherwise
disclosed on Schedule 3.3(a). There are no voting trusts or other agreements
with respect to the voting of FBHC Common Stock (i) to which FBHC is a party or
(ii) to FBHC's knowledge, to which any other Person is a party. Except for the
FBHC Debentures, no bonds, debentures, notes or other indebtedness having the
right to vote (or convertible into or exercisable for securities having the
right to vote) on any matters on which Shareholders may vote are issued and
outstanding, and none will be outstanding as of the Effective Time. All
outstanding FBHC Common Stock was issued, and all shares of Common Stock
issuable pursuant to FBHC Stock Options, the FBHC Debentures and the Mitchell
Exchange will be issued, in compliance with or pursuant to an exemption from,
Applicable Law. Except as set forth in Schedule 3.3(b), no Person holds of
record, or, to FBHC's knowledge, beneficially, 5% or more of the outstanding
shares of FBHC Common Stock.
(c) There is no arrangement pursuant to which the stock of any
corporation is held in trust (whether express, resulting or otherwise) for the
benefit of the shareholders of FBHC.
SECTION 3.4 FINANCIAL STATEMENTS AND REPORTS.
(a) FBHC has delivered to the Company true and complete copies of its
(i) Annual Report on Form 10-KSB for the year ended March 31, 1998 (the "FBHC
Annual Report"), as filed with the SEC, which contains FBHC's audited
consolidated statements of financial condition as of March 31, 1998 and 1997 and
related consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years ended March 31, 1998, 1997 and 1996, and (ii)
Quarterly
A-8
<PAGE>
Report on Form 10-QSB for the three month period ended June 30, 1998 (the "FBHC
Quarterly Report"), as filed with the SEC, which contains the unaudited
consolidated statements of financial condition and related consolidated
statements of income, changes in stockholders' equity and cash flows for the
three-month periods ended June 30, 1998 and 1997. Such financial statements have
been prepared from the books and records of FBHC, present fairly the financial
condition as of the relevant dates, and the results of operations and cash flows
for the relevant periods, all in accordance with generally accepted accounting
principles consistently applied throughout the periods covered, except as stated
therein (subject, in the case of unaudited financial statements, to the
exclusion of normal year-end adjustments and footnote disclosures required by
generally accepted accounting principles). FBHC does not have any Liabilities of
a type which should be included in or reflected in such financial statements or
the notes thereto, whether related to tax or non-tax matters, accrued or
contingent, due or not yet due, liquidated or unliquidated, or otherwise, except
(i) as to the extent disclosed or reflected in such financial statements, (ii)
Liabilities incurred in the ordinary course of business since June 30, 1998,
which individually or in the aggregate would not result in a Material Adverse
Effect upon FBHC, or (iii) Liabilities under this Agreement and fees and
expenses related thereto. The FBHC Annual Report and the FBHC Quarterly Report
did not, at the respective times at which they were filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The FBHC Annual
Report and the FBHC Quarterly Report comply in all material respects with the
applicable requirements of the Exchange Act. FBHC has delivered to the Company
true and complete copies of all management letters delivered to FBHC by
PricewaterhouseCoopers LLP (or any predecessor thereto) relating to the internal
controls of FBHC during any period from and after March 31, 1995.
(b) FBHC and its Subsidiaries have filed all material documents and
reports required to be filed by them with the OTS, the SEC, the FDIC and any
other Governmental Authority under all other Applicable Laws (the "Governmental
Filings"). All such Governmental Filings, as finally amended or corrected,
complied in all material respects at the time of filing and at the time of any
amended or supplemented filing with all requirements of their respective forms
and with all Applicable Laws.
(c) FBHC has not changed its independent auditing firm since March 31,
1995, and there has been no disagreement (as such term is used in Item 304 of
Regulation S-K promulgated under the Securities Act) between FBHC and its
independent auditing firm(s) since March 31, 1995 concerning any aspect of the
manner in which FBHC maintains its books and records or the manner in which it
has reported upon its financial condition and results of operations during such
period.
SECTION 3.5 COMPLIANCE WITH APPLICABLE LAWS; OPERATING AUTHORITIES.
(a) Except as described in Schedule 3.5(a), the business of FBHC and
its Subsidiaries and any advertising related to such business or otherwise
conducted by or on their behalf, including without limitation the business of
originating, acquiring, holding or disposing of assets and liabilities, is being
conducted in compliance in all material respects with all Applicable Laws, and
the forms, procedures, disclosures and practices now or previously used by it
are or were in compliance in all material respects with all Applicable Laws as
in effect at the relevant times. No formal investigation or review by any
Governmental Authority concerning any possible conflicts or
A-9
<PAGE>
violations of Applicable Laws is pending, nor to FBHC's knowledge, is any such
investigation threatened, nor has any such investigation occurred during the
last three years. Since March 31, 1995, no Governmental Authority has delivered
any written notice to FBHC or its Subsidiaries, or to FBHC's knowledge,
otherwise asserted an intention to conduct any such investigation or review,
nor, to FBHC's knowledge, is there any basis for any investigation or review of
the type described above.
(b) Neither FBHC nor any of its Subsidiaries is (i) a party to any
written agreement, stipulation, conditional approval, memorandum of
understanding or notice of determination with any Governmental Authority or (ii)
subject to any judgment, order, decree or directive of such a Governmental
Authority which specifically identifies FBHC or any of its Subsidiaries, that,
in either case, restricts or monitors the conduct of its business, or in any
manner relates to its capital adequacy, credit policies, management or customer
base, other than regular examination reports of regulatory authorities.
(c) FBHC and its Subsidiaries hold all material registrations,
licenses, permits and franchises as are required to conduct their business as
now conducted (including, without limitation, any insurance or securities
activities), and all such licenses, permits and franchises which they hold are
valid and in full force and effect. To FBHC's knowledge, no suspension of any of
the foregoing operating rights or cancellation thereof has been initiated or
threatened and all filings, applications and registrations with respect thereto
are current. Schedule 3.5(c) contains a list of and true, correct and complete
copies of all material registrations, licenses, permits and franchises currently
held by FBHC and its Subsidiaries.
(d) To the knowledge of FBHC, no Person or Persons acting in concert
are deemed to "control" FBHC under the Federal Deposit Insurance Act, as
amended, and the regulations promulgated thereunder.
SECTION 3.6 OTHER ACTIVITIES OF FBHC.
(a) FBHC and its Subsidiaries engage only in activities permissible
under the OTS and applicable FDIC regulations.
(b) Except as set forth on Schedule 3.6(b), FBHC and its Subsidiaries
do not engage in any insurance activities. Schedule 3.5(c) contains a list of
and true and correct copies of all licenses and approvals held by FBHC and its
Subsidiaries (and any of their officers, directors or employees) to conduct any
insurance activities, whether as principal, agent, broker or otherwise.
(c) Except as set forth in Schedule 3.6(c), FBHC and its Subsidiaries
do not engage in any securities sales, underwriting, brokerage, management or
dealing activities, whether as principal or agent, either directly or under
contractual or other arrangements with third parties. Schedule 3.5(c) contains a
list of and true and correct copies of all licenses and approvals held by FBHC
and its Subsidiaries (and any of their officers, directors or employees) to
conduct any such activities.
A-10
<PAGE>
(d) Except as set forth on Schedule 3.6(d), neither FBHC nor any of its
Subsidiaries, in connection with activities relating to funds transfers, (i) is
in default under any agreement to which it is a party relating to the transfer
of funds or settlement with respect to such transfers; or (ii) has agreed to be
or, to its knowledge, is liable for consequential damages for its error or delay
in acting on requests for the transfer of funds. FBHC and its Subsidiaries, to
the extent applicable, have adopted procedures to reduce the likelihood of such
errors and delay; have adopted reasonable security procedures for verifying the
authenticity of requests received for the transfer or funds, which procedures
are identified on or attached to Schedule 3.6(d); and are in compliance with
Applicable Law in all material respects relating to the transfer of funds and
settlement with respect thereto with the applicable operating laws of each funds
transfer system of which they are members or by which they are bound.
(e) FBHC and its Subsidiaries do not engage in any trust activities.
SECTION 3.7 CONTRACTS AND COMMITMENTS.
(a) Except for Plans, Employee Agreements, deposits, securities sold
under repurchase agreements, bankers' acceptances and loans and extensions of
credit by the Association in the ordinary course of business, Schedule 3.7(a)
contains a list of each agreement that: (i) obligates FBHC or any of its
Subsidiaries to pay an amount of $50,000 or more in any twelve-month period;
(ii) binds FBHC or any of its Subsidiaries and has an unexpired term in excess
of two years and requires aggregate payments by any party of $50,000 or more;
(iii) relates to the purchase or sale by FBHC or any of its Subsidiaries of any
loan (including any participation interest), lease or other extension or
commitment to extend credit or any interest therein, or the servicing rights or
obligations with respect thereto, in each case for an aggregate amount exceeding
$50,000, whether or not servicing rights or obligations have been retained by
FBHC; (iv) restricts FBHC or any of its Subsidiaries (or would, to FBHC's
knowledge, restrict the Company or any of its Subsidiaries after the Effective
Time) from carrying on their business or any part thereof anywhere in the world
or from competing in any line of business with any Person, (v) is a debt
obligation of FBHC or any of its Subsidiaries for borrowed money in excess of
$50,000 to the extent not itemized in the financial statements or notes thereto
included as part of the FBHC Annual Report or the FBHC Quarterly Report,
including, without limitation, guarantees of or agreements to acquire any such
debt obligation of others or for a leasing transaction of a type required to be
capitalized in accordance with SFAS No. 13 (in the case of any such leasing
transaction, under which payments to such third Person exceed $50,000 per
annum); (vi) obligates FBHC or any of its Subsidiaries as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise (including any "recourse"
sale of assets) in respect of the obligations of any other Person (other than
routine endorsements and other routine bank collection obligations entered into
in the ordinary course of the operations of the Association) in the amount of
$50,000 or more; (vii) is an agreement involving the payment of a commission in
the amount of $10,000 or more per annum to any Person; (viii) obligates FBHC or
any of its Subsidiaries in an amount of $50,000 or more in respect of any
capital expenditure or commitment therefor for additions to property,
facilities, equipment or leasehold interests; (ix) is a lease of personal
property involving aggregate payments by or to FBHC or any of its Subsidiaries
of $50,000 or more; (x) is a mortgage, pledge, conditional sales contract,
security agreement, option or any other similar agreement with respect to any
asset of FBHC or any of its Subsidiaries (other than as mortgagee, secured party
or deed of trust beneficiary in the ordinary course of its lending
A-11
<PAGE>
business) in property having a value of $150,000 or more to the extent not
itemized in the financial statements or notes thereto included as part of the
FBHC Annual Report or the FBHC Quarterly Report; (xi) is an agreement for the
sale of any property or assets having a value of $150,000 or more in which FBHC
or any of its Subsidiaries has an ownership interest (other than leasehold
interests that do not become subject to termination upon such sale) or for the
grant of any preferential right to purchase any such property or asset
(excluding properties and assets in which FBHC or any of its Subsidiaries hold a
security interest granted in the ordinary course of their lending business); or
(xii) involves the ownership or licensing of software or hardware or involves
the provision of data processing services (other than incidental software
products involving annual expenditures of less than $10,000). All items included
or required to be included in Schedule 3.7(a) are being referred to herein as
"Scheduled Contracts." FBHC has delivered to the Company true and complete
copies of each of the Scheduled Contracts.
(b) Except as disclosed in Schedule 3.7(b), to the knowledge of FBHC,
each Scheduled Contract is a legal, valid and binding obligation enforceable in
accordance with its terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies), and is in full force and
effect; FBHC or its applicable Subsidiary has duly performed all of its
obligations thereunder to the extent that such obligations to perform have
accrued; there are no breaches, violations, defaults (or events that have
occurred that with notice, lapse of time or the happening or occurrence of any
other event would constitute a default) or allegations or assertions of any of
the foregoing by FBHC or its applicable Subsidiary or, to FBHC's knowledge, any
other party under any such agreement, except for such non-performances,
breaches, violations or defaults which could not in the aggregate reasonably be
expected to cause a Material Adverse Effect on FBHC; each such agreement was
entered into in the ordinary course of business consistent with prudent banking
practice; and, except as disclosed in Schedule 3.7(b) or as a result of the
consummation of the Merger or the Bank Merger, no breaches disclosed therein,
individually, could reasonably be expected to result in a loss to FBHC in excess
of $50,000 and all of such breaches, in the aggregate, could not reasonably be
expected to result in a loss to FBHC in excess of $100,000.
SECTION 3.8 BROKER'S AND FINDER'S FEES. Except as disclosed in Schedule
3.8, neither FBHC, nor anyone acting on its behalf has paid or become obligated
to pay any fee or commission to any broker, finder, intermediary, financial
advisor or financial consultant or other Person (other than legal and accounting
advisors acting as such) in connection with the transactions contemplated hereby
(including, without limitation, any restructuring of obligations, refinancings
or other transactions that have been entered into as part of the transactions
contemplated hereby) and, except as stated above, no Person is entitled to
receive from FBHC any such fee or commission.
SECTION 3.9 CORPORATE RECORDS; OTHER INFORMATION. The respective minute
books of FBHC and its Subsidiaries constitute complete and accurate records of
all material actions taken by their respective Boards of Directors, committees
of the Boards of Directors and shareholders. All documents and other written
information as to existing facts relating to FBHC and its Subsidiaries and their
respective assets and liabilities provided to the Company by FBHC or its agents
in connection with this Agreement are true and complete in all material respects
except to the extent that any documents or other written information was later
specifically supplemented or corrected
A-12
<PAGE>
prior to the date of this Agreement with additional documents or written
information that was provided to the Company.
SECTION 3.10 REAL PROPERTY OWNED OR LEASED.
(a) Other than Real Estate Owned, Schedule 3.10(a) contains a true,
correct and complete list of all real property owned or leased by FBHC and its
Subsidiaries (the "FBHC Real Property"). FBHC has delivered to the Company true
and complete copies of all of its deeds, leases and title insurance policies for
the properties referred to in Schedule 3.10(a).
(b) No lease with respect to any FBHC Real Property and no deed with
respect to any FBHC Real Property contains any restrictive covenant that
materially restricts the use, transferability or value of such FBHC Real
Property. To FBHC's knowledge, each of such leases is a legal, valid and binding
obligation enforceable in accordance with its terms (except as may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the
rights of creditors generally and the availability of equitable remedies), and
is in full force and effect; there are no existing defaults by FBHC or any of
its Subsidiaries or, to FBHC's knowledge, the other party thereunder; to FBHC's
knowledge, there are no allegations or assertions of such by any party under
such agreement or any events that with notice, lapse of time or the happening or
occurrence of any other event would constitute a default thereunder.
(c) None of the buildings and structures located on any FBHC Real
Property, nor any appurtenances thereto or equipment therein, nor the operation
or maintenance thereof, violates in any material manner any restrictive
covenants or encroaches on any property owned by others, nor does any building
or structure of third parties encroach upon any FBHC Real Property, except for
those violations and encroachments which in the aggregate could not reasonably
be expected to cause a Material Adverse Effect on FBHC. No condemnation
proceeding is pending or, to FBHC's knowledge, threatened, which would preclude
or materially impair the use of any FBHC Real Property in the manner in which it
is currently being used.
(d) FBHC and its Subsidiaries have good and indefeasible title to, or a
valid and enforceable leasehold interest in, or a contract vendee's interest in,
FBHC Real Property, and such interest is free and clear of all liens, charges or
other encumbrances, except (i) statutory liens for amounts not yet delinquent or
which are being contested in good faith through proper proceedings and (ii)
those liens related to real property taxes, local improvement district
assessments, easements, covenants, restrictions and other matters of record
which do not individually or in the aggregate materially adversely affect the
use and enjoyment of the relevant real property.
(e) All buildings and other facilities used in the business of FBHC and
its Subsidiaries are adequately maintained and are free from defects which could
materially interfere with the current or future use of such facilities.
SECTION 3.11 PERSONAL PROPERTY. FBHC and its Subsidiaries have good
title to, or a valid leasehold interest in, all personal property, whether
tangible or intangible, used in the conduct of their business (the "FBHC
Personalty"), free and clear of all liens, charges or other encumbrances, except
(a) statutory liens for amounts not yet delinquent or which are being contested
in good faith
A-13
<PAGE>
through proper proceedings and (b) such other liens, charges, encumbrances and
imperfections of title as do not individually or in the aggregate materially
adversely affect the use and enjoyment of the relevant FBHC Personalty. Subject
to ordinary wear and tear, the FBHC Personalty is in good operating condition
and repair and is adequate for the uses to which it is being put.
SECTION 3.12 ACCOUNTING RECORDS; DATA PROCESSING.
(a) FBHC and its Subsidiaries maintain records that accurately, validly
and fairly reflect their transactions and dispositions of assets and maintain a
system of internal accounting controls, policies and procedures sufficient to
insure that (i) such transactions are executed in accordance with their
management's general or specific authorization, (ii) such transactions are
recorded in such a manner as to permit preparation of financial statements in
accordance with generally accepted accounting principles and any other criteria
applicable to such statements and to maintain accountability for assets, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization, (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals as determined by FBHC and its
Subsidiaries and appropriate action is taken with respect to any differences and
(v) records of such transactions are retained, protected and duplicated in
accordance with prudent banking practices and applicable regulatory
requirements.
(b) The data processing equipment, data transmission equipment, related
peripheral equipment and software used by FBHC and its Subsidiaries in the
operation of their business to generate and retrieve such records (whether owned
or leased by FBHC or any of its Subsidiaries, or provided under any agreement or
other arrangement with a third party for data processing services) are adequate
for the needs of FBHC and its Subsidiaries.
SECTION 3.13 ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Schedule 3.13, there has not been since June 30, 1998:
(a) any change in or effect on the business of FBHC and its
Subsidiaries or any occurrence, development or event of any nature, that has had
or may reasonably be expected to have, together with all such other changes and
effects, a Material Adverse Effect on FBHC;
(b) any direct or indirect redemption, purchase or other acquisition of
shares of FBHC's Common Stock, convertible securities or securities exercisable
for FBHC Common Stock or other capital stock of FBHC, by FBHC; any declaration,
setting aside or payment of any dividend by FBHC other than its regular
quarterly dividend in the amount of $.10 per share; or any alteration of any
right attaching to any shares of capital stock of FBHC; or any combination or
subdivision of any shares of capital stock of FBHC;
(c) any increase in the compensation or benefits payable or to become
payable by FBHC or any of its Subsidiaries, including, without limitation,
compensation or benefits under any Plan (as defined in Section 3.17 hereof)
other than as set forth in Schedule 3.13(c), pursuant to Employee Agreements, as
may be required to comply with Applicable Law or consistent with past practices;
A-14
<PAGE>
(d) any amendment or termination of any agreement to which FBHC is a
party, other than amendments or terminations which do not and will not,
individually or in the aggregate, have a Material Adverse Effect on FBHC;
(e) any adoption, assumption or entrance into any Plan or, except as
required by Applicable Law or the current provisions of any Plan, the amendment
or any other action including, but not limited to, acceleration of vesting and
waiver of performance criteria with respect to any Plan;
(f) any amendment to the Certificate of Incorporation or Bylaws of FBHC
or any of the organizational documents of any of the Subsidiaries;
(g) any change by FBHC in accounting principles or methods, except as
required by the Financial Accounting Standards Board ("FASB") or FDIC or OTS
regulations and listed on Schedule 3.13(g);
(h) any loss, damage or destruction (whether or not covered by
insurance) affecting any of the tangible assets or business of FBHC and its
Subsidiaries that may involve a loss of more than $50,000, individually, or
$150,000, in the aggregate (including deductibles), in excess of applicable
insurance coverage; or
(i) any sale, transfer or other disposition of any material properties
or assets of FBHC and its Subsidiaries except in the ordinary course of
business.
SECTION 3.14 LITIGATION.
(a) Schedule 3.14(a) contains a true, correct and complete list, as of
the date of this Agreement, of all suits, claims, actions, investigations or
proceedings of any nature by any Person that are pending or, to FBHC's
knowledge, threatened (as used in this Agreement, the term "threatened" shall
include matters that are under consideration or investigation whether or not any
formal demand has been made) (i) against or otherwise involving, directly or
indirectly, FBHC or any of its Subsidiaries, or any of their properties
(including, without limitation, any such matter with respect to Taxes), or (ii)
against or otherwise involving, directly or indirectly, any officer, director,
employee or agent of FBHC or any of its Subsidiaries (in connection with such
officer's, director's, employee's or agent's activities on behalf of them or
that otherwise relate, directly or indirectly, to FBHC or any of its
Subsidiaries or any of their properties, securities or activities).
(b) Schedule 3.14(b) contains a true, correct and complete list as of
the date of this Agreement of all pending suits, claims, actions, investigations
and proceedings of any nature involving claims in the amount of $50,000 or more
or involving claims for specific performance or injunctive relief by or on
behalf of FBHC or any of its Subsidiaries, or any officer, director, employee or
agent thereof that relate, directly or indirectly, to FBHC or any of its
Subsidiaries or any of their properties, securities or activities, including,
without limitation, the types of actions referred to in Section 3.14(a), but
excluding routine collection actions involving single family home loans and
consumer loans in which the debtor has not asserted a counterclaim of $50,000 or
more.
A-15
<PAGE>
SECTION 3.15 TAX MATTERS.
(a) DEFINITIONS. For purposes of this Agreement, the following
definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including, without limitation, any interest, penalties or
other additions that may become payable in respect thereof, imposed by
any Governmental Authority, which taxes shall include, without limiting
the generality of the foregoing, all income or profits taxes
(including, without limitation, federal income taxes and state income
taxes), payroll and employee withholding taxes, back-up withholding and
other withholding taxes, unemployment insurance, social security taxes,
sales and use taxes, AD VALOREM taxes, excise taxes, franchise taxes,
gross receipts taxes, business license taxes, occupation taxes, real
and personal property taxes, stamp taxes, environmental taxes, transfer
taxes, workers' compensation and Pension Benefit Guaranty Corporation
premiums, and other obligations of the same or of a similar nature to
any of the foregoing, which FBHC or any of its Subsidiaries is required
to pay, withhold or collect.
(ii) The term "Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns
required to be prepared or filed in connection with, any Taxes.
(b) RETURNS FILED AND TAXES PAID. FBHC and its Subsidiaries have filed
with the appropriate agencies all material Returns required to be filed, and
such Returns are true, correct and complete in all material respects. All Taxes
shown to be payable on the Returns or on subsequent assessments with respect
thereto have been paid in full on a timely basis, and no other Taxes are owing
or payable by FBHC or its Subsidiaries with respect to items or periods covered
by such Returns or with respect to any period prior to the date of this
representation and warranty. No security interests, liens, encumbrances,
attachments or similar interests exist on or with respect to any of the assets
of FBHC or its Subsidiaries that arose in connection with any failure or alleged
failure to pay any Taxes. FBHC and its Subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any officer, director, employee or agent (including, without
limitation, any independent contractor, foreign Person or other third Person) in
compliance with all tax withholding provisions of applicable federal, state,
local and foreign law (including, without limitation, income, social security,
employment tax withholding, and withholding under Code Sections 1441 through
1445). FBHC and its Subsidiaries have timely complied in all material respects
with all requirements under Applicable Laws relating to information, reporting
and withholding and other similar matters for customer and other accounts
(including back-up withholding and furnishing of Forms 1099 and all similar
reports).
(c) TAX RESERVES. With respect to the periods for which Returns have
not yet been filed, FBHC and its Subsidiaries have established adequate reserves
determined in accordance with generally accepted accounting principles for the
payment of all material Taxes.
A-16
<PAGE>
(d) RETURNS FURNISHED. FBHC has delivered or made available to the
Company true and complete copies of FBHC's federal income tax returns for all
periods for which the statute of limitations has not expired. FBHC has made
available to the Company true and complete copies of all other Returns and other
reports and statements relating to Taxes arising during such periods, including,
without limitation, income tax audit reports, statements or income or gross
receipts tax, franchise tax, sales tax and transfer tax, deficiencies, and
closing or other agreements relating to income or gross receipts tax, franchise
tax, sales tax and transfer tax received by FBHC in the possession of FBHC or
any of its Subsidiaries. FBHC will promptly furnish to the Company true and
correct copies of any other Returns filed by FBHC or any of its Subsidiaries
prior to the Closing Date. Except as set forth on Schedule 3.15(d), neither FBHC
nor any of its Subsidiaries is (nor ever has been) a party to any tax sharing
agreement.
(e) TAX DEFICIENCIES; AUDITS; STATUTES OF LIMITATIONS. Except as set
forth in Schedule 3.15(e), (i) no deficiencies have been formally asserted with
respect to Taxes that remain unpaid; (ii) neither FBHC nor any of its
Subsidiaries is a party to any formal action or proceeding for assessment or
collection of Taxes, and no such action or proceeding has been asserted or
threatened against FBHC or any of its Subsidiaries or any of their assets; and
(iii) no waiver or extension of any statute of limitations is in effect with
respect to Taxes or Returns. Except as set forth in Schedule 3.15(e), the
Returns for all tax years for which the statute of limitations has not expired
have never been audited by a Governmental Authority (which term includes any
taxing authority), nor is any such audit in process, pending or threatened.
SECTION 3.16 EMPLOYMENT AND SIMILAR AGREEMENTS; OBLIGATIONS UPON CHANGE
IN CONTROL. Except as set forth in Schedule 3.16 or Schedule 3.17(a), there are
no written or oral employment, consulting, non-competition, retirement,
parachutes, severance or indemnification agreements or other agreements of any
nature whatsoever (collectively, "Employee Agreements") between FBHC or any of
its Subsidiaries, on the one hand, and any officer, director, employee or agent
thereof, or any of their respective family members, on the other hand,
including, without limitation, any such agreement concerning the continued
employment or use of such officer, director, employee, agent or family member
after the consummation of the transactions contemplated by this Agreement, or
any other benefits to be granted to any such officer, director, employee, agent
or family member, upon, after or in connection with the consummation of the
transactions contemplated by this Agreement. Except as set forth in Schedule
3.16 and except for FBHC Stock Options and shares issued under the FBHC
Recognition and Retention Plan ("FBHC RRP"), there are no such Employee
Agreements or any other agreements under which the transactions contemplated by
this Agreement (including, without limitation, the change in control resulting
from the Merger) (i) will require any payment by FBHC or any of its Subsidiaries
to, or any consent or waiver from, any officer, director, employee or agent
thereof, or any other Person, or (ii) will result in a change of any nature in
the rights of any party under an agreement with any officer, director, employee
or agent of FBHC or any of its Subsidiaries, or any other Person, including,
without limitation, any acceleration or change in the award, grant, vesting or
determination of options, warrants, rights, severance payments, or other
contingent obligations of any nature whatsoever of FBHC or any of its
Subsidiaries. Except as set forth in Schedule 3.16, neither FBHC nor any of its
Subsidiaries has any agreements with any employee or officer that are
inconsistent with the status of all employees and officers thereof being
"at-will" employees. Each reference in this Agreement to "officer," "director,"
"employee" or "agent" of FBHC or any of its Subsidiaries, unless otherwise
specified, shall include,
A-17
<PAGE>
without limitation, consultants of FBHC or any of its Subsidiaries. FBHC has
delivered to the Company true, correct and complete copies of all Employee
Agreements.
SECTION 3.17 BENEFIT PLANS.
(a) FBHC has delivered to the Company true and complete copies of all
Plans (as defined below), and related trusts, if applicable, including all
amendments thereto. FBHC has also delivered to the Company, with respect to each
Plan required to file such report and/or description, the most recent report on
Form 5500 and/or the summary plan description, as applicable. Further, FBHC has
delivered the most recent determination letter, if any issued by the Internal
Revenue Service, with respect to any Plan intended to be qualified under Section
401 of the Code. All Plans are listed on Schedule 3.16 or Schedule 3.18(a).
There are no Plans of FBHC or any of its Subsidiaries which are not evidenced by
such written documents. The term "Plan" shall include each of the following that
are sponsored, maintained, or contributed to by FBHC or any of its Subsidiaries
for the benefit of any of the present or former directors, officers, employees,
agents, consultants, or other similar representatives providing services to or
for FBHC or any of its Subsidiaries in connection with such service or any of
the following that have been so sponsored maintained, or contributed to within
six years prior to the date of this Agreement: (i) any "employee benefit plan"
within the meaning of Section 3(3) of ERISA, (ii) any plans that would be
employee benefit plans within the meaning of Section 3(3) of ERISA if they were
subject to ERISA, such as foreign plans and plans for directors or independent
contractors, (iii) any profit-sharing, pension, deferred compensation, incentive
compensation, or bonus plan, arrangement, contract, or agreement, (iv) any stock
option, stock purchase, stock bonus, stock ownership, stock appreciation rights,
phantom stock, or other stock plan (whether qualified or nonqualified),
arrangement, contract, or agreement, (v) any severance, retainer, consulting,
"cafeteria" benefits under Section 125 of the Code, health, welfare or incentive
plan or agreement, including any post-employment benefits, (iii) any plan,
agreement, contract, program, arrangement, or policy providing for "fringe
benefits", including, but not limited to, vacation, paid holidays, personal
leave, employee discount, educational benefit or similar programs and (iv) any
Employee Agreement.
(b) With respect to each Plan:
(i) to the extent applicable, it has been administered in all
material respects in accordance with its terms and all Applicable Laws
applicable to the Plan, including, without limitation, ERISA and the
Code;
(ii) no investigation by any Governmental Authority and no
actions, suits or claims (other than routine claims for benefits made
in the ordinary course of Plan administration) are pending, or to the
knowledge of FBHC, threatened or imminent against or with respect to
the Plan, the Plan's assets, FBHC or any employer who is participating
(or who has participated) in any Plan or any fiduciary of the Plan;
(iii) except with respect to Employee Agreements, it provides
that it may be amended or terminated at any time and, except for
benefits already accrued or which will have accrued at the time of
Closing, claims already incurred or benefits protected under Section
411(d) of the Code, all benefits payable to current, terminated or
retired employees
A-18
<PAGE>
or any beneficiary, including, without limitation, post-employment
health care or insurance benefits, if any, may be amended or terminated
by FBHC or the relevant employer at any time without liability;
(iv) no event has occurred and, to the knowledge of FBHC,
there exists no condition or set of circumstances in connection with
which FBHC or any of its Subsidiaries could be subject to any liability
under the terms of such Plan, ERISA, the Code, or any other Applicable
Law, other than any condition or set of circumstances that could not
reasonably be expected to have a Material Adverse Effect on FBHC; and
(v) to the knowledge of FBHC, there is no matter pending
(other than routine qualification determination filings) with respect
to any Plan before the Internal Revenue Service, the Department of
Labor, or any other Governmental Authority.
(c) With respect to each Plan which is an employee benefit plan, as
defined under Section 3(3) of ERISA:
(i) no prohibited transaction (as defined in Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred that could result in a Material Adverse
Effect on FBHC; and
(ii) except as set forth in Schedule 3.17(c) and except for
any non-compliance that would not have a Material Adverse Effect on
FBHC, all reports, forms and other documents required to be filed with
any Governmental Authority or distributed to Plan participants
(including, without limitation, summary plan descriptions, Forms 5500
and summary annual reports) have been timely filed (if applicable) and
distributed (if applicable) and were accurate. FBHC has made available
for inspection by the Company copies of all such reports, forms and
documents required to have been filed or distributed since January 1,
1995.
(d) Except as set forth in Schedule 3.17(d), each Plan that is intended
to qualify under Section 401(a) of the Code (i) satisfies in form the
requirements of such Section except to the extent amendments are not required by
law to be made yet, (ii) has received a favorable determination letter from the
Internal Revenue Service regarding such qualified status, (iii) has not, since
receipt of the most recent favorable determination letter, been amended, and
(iv) has not been operated in a way that would adversely affect its qualified
status.
(e) Neither FBHC nor any of its Subsidiaries has within the past six
years (i) maintained or made any contribution to, (ii) been a member of a
controlled group which has maintained or contributed to, or (iii) been under
common control with an employer that maintained or contributed to, any Plan
subject to Title IV of ERISA, (including a Multiemployer Plan), Section 302 of
ERISA or Section 412 of the Code.
A-19
<PAGE>
(f) All contributions required to be made to each Plan pursuant to its
terms and the provisions of ERISA, the Code, or any Applicable Law have been
timely made.
(g) All insurance premiums have been paid in full, subject only to
normal retrospective adjustments in the ordinary course, with regard to the
Plans for policy years or other applicable policy periods ending before the date
of this representation and have been paid as required under the policies for
policy years or other applicable policy periods beginning on or before the date
of its representation and ending on or after such Closing Date.
(h) All expenses and Liabilities relating to all of the Plans have been
properly accrued on FBHC's consolidated books and records in accordance with
generally accepted accounting principles.
(i) As to any Plan intended to be qualified under Section 401(a) of the
Code, there has been no termination or partial termination of the Plan within
the meaning of Section 411(d)(3) of the Code.
(j) In connection with the consummation of the transactions
contemplated by this Agreement, no payments of money or other property,
acceleration of benefits, or provision of other rights have been or will be made
under any of the Plans that would be reasonably likely to be nondeductible under
Section 280G of the Code, whether or not some other subsequent action or event
would be required to cause such payment, acceleration, or provision to be
triggered.
(k) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (i) require FBHC or any of its
Subsidiaries to make a larger contribution to, or pay greater benefits or
provide other rights under any Plan (other than the FBHC Stock Options, the FBHC
RRP and the Employee Agreements) than it otherwise could, whether or not some
other subsequent action or event would be required to cause such payment or
provision to be triggered, or (ii) create or give rise to any additional vested
rights or service credits under any Plan (other than the FBHC Stock Options, the
FBHC RRP and the Employee Agreements), whether or not some subsequent action or
event would be required to cause such creation or acceleration to be triggered.
(l) No Plan provides retiree medical or retiree life insurance benefits
to any Person and neither FBHC nor any of its Subsidiaries is contractually or
otherwise obligated (whether or not in writing) to provide any Person with life
insurance or medical benefits upon retirement or termination of employment,
other than as required by the provisions of Sections 601 through 608 of ERISA
and Section 4980B of the Code.
(m) The written vacation policies of FBHC and its Subsidiaries do not
provide for carryover of vacation from one calendar year to the next.
SECTION 3.18 LABOR AND EMPLOYMENT MATTERS. Except to the extent set
forth in Schedule 3.18, (a) FBHC and its Subsidiaries are and have been in
compliance with all Applicable Laws respecting employment and employment
practices, terms and conditions of employment, wages and hours, including,
without limitation, the Immigration Reform and Control Act ("IRCA"), the
A-20
<PAGE>
Worker Adjustment and Retraining Notification Act ("WARN"), any Applicable Law
respecting employment discrimination, disability rights and benefits, equal
opportunity, plant closure issues, affirmative action, worker's compensation,
employee benefits, severance payments, labor relations, employee leave issues,
wage and hour standards, occupational safety and health requirements and
unemployment insurance and related matters, and is not engaged in and has not
engaged in any unfair labor practice, except for such noncompliances which in
the aggregate could not reasonably be expected to cause a Material Adverse
Effect on FBHC; (b) to the knowledge of FBHC, no investigation or review by or
before any Governmental Authority concerning any possible conflicts with or
violations of any such Applicable Law is pending, nor is any such investigation
threatened, nor has any such investigation occurred during the last three years
and no Governmental Authority has provided any notice to FBHC or otherwise
asserted an intention to conduct any such investigation or review, nor is there
any basis for any such investigation or review; (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to FBHC's knowledge,
threatened against or directly affecting FBHC or any of its Subsidiaries; (d) no
union representation question or, to FBHC's knowledge, union organizational
activity exists respecting the employees of FBHC or any of its Subsidiaries; (e)
no collective bargaining agreement exists which is binding on FBHC or any of its
Subsidiaries, nor has FBHC or any of its Subsidiaries been a party to any
collective bargaining agreement within the last ten years; (f) neither FBHC nor
any of its Subsidiaries has experienced any work stoppage or other labor
difficulties; (g) neither FBHC nor any of its Subsidiaries is delinquent in
payments to any of its officers, directors, employees or agents for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them or amounts required to be reimbursed to such officers,
directors, employees or agents; (h) except as provided in any Plan or Employee
Agreement, neither FBHC nor any of its Subsidiaries has done anything or entered
into any agreement that would cause FBHC or any of its Subsidiaries, the Company
or the Surviving Corporation to be liable to any of said officers, directors,
employees or agents, in the event of termination for any reason of the
employment of any said officers, directors, employees or agents, for so-called
"severance pay" or any other similar payments or benefits, including, without
limitation, post-employment healthcare (other than pursuant to COBRA) or
insurance benefits; and (i) within the three-year period prior to the date
hereof there has not been any termination of employment of any officer,
director, employee or agent of FBHC or any of its Subsidiaries who receives
salary or compensation in excess of $40,000 per annum or any termination of any
officer, director, employee or agent of FBHC or any of its Subsidiaries that
could result in a Liability to the Company in excess of $40,000. In furtherance
and not in limitation of the representations and warranties set forth in Section
3.14, there are no pending or, to FBHC's knowledge, threatened suits, claims,
actions, charges, investigations or proceedings of any nature (A) under or
alleging violation of IRCA, WARN or any Applicable Law respecting employment and
employment practices, including, without limitation, discrimination, disability
rights or benefits, equal opportunity, plant closures, affirmative action,
worker's compensation, employee benefits, severance payments, labor relations,
employee leave issues, wage and hour standards, occupational safety and health
requirements or unemployment insurance and related matters, (B) relating to
alleged unfair labor practices (or the equivalent thereof under any Applicable
Law).
SECTION 3.19 CERTAIN INTERESTS. Except as set forth in Schedule 3.19,
to FBHC's knowledge: (i) no officer, director, employee or agent of FBHC or any
of its Subsidiaries, any of their respective family members, any corporation or
organization (other than FBHC or any of its Subsidiaries) of which any of the
foregoing Persons is an officer, director or beneficial owner of 10%
A-21
<PAGE>
or more of any class of its equity securities, or any trust or other estate in
which any of the foregoing Persons has a substantial beneficial interest or as
to which such Person serves as a trustee or in a similar capacity, nor any
Affiliate of FBHC or any of its Subsidiaries, nor any current or former
beneficial owner of 5% or more of any of the outstanding stock of FBHC has any
material interest in any property, real or personal, tangible or intangible,
used in or pertaining to the business of FBHC or any of its Subsidiaries or in
any transaction or series of similar transactions to which FBHC or any of its
Subsidiaries is a party; (ii) no such Person is indebted to FBHC or any of its
Subsidiaries except for (A) normal business expense advances and (B) loans that
have been entered into in the ordinary course of business on terms no less
favorable to such Person, or the lender, as the case shall be, than if the loan
had been entered into on an arm's length basis pursuant to normal commercial
terms and conditions and in compliance with Applicable Law; (iii) neither FBHC
nor any of its Subsidiaries is indebted to any such Person except for amounts
due under normal salary or reimbursement or ordinary business expenses; and (iv)
no such Person is a party to an agreement (other than an Employee Agreement, a
Plan, FBHC Stock Options or agreements under the FBHC RRP) with FBHC or any of
its Subsidiaries. Except as set forth in Schedule 3.19, to FBHC's knowledge,
none of the Persons or entities described in clause (i) hereto has any other
relationship or has engaged or proposes to engage in any other transaction or
series of transactions that would be required to be disclosed pursuant to Item
404 of Regulation S-B under the Securities Act.
SECTION 3.20 REGISTRATION STATEMENT AND REGULATORY APPLICATIONS.
(a) When the Prospectus/Proxy Statement referred to in Section 5.1, or
any amendment or supplement thereto, shall be mailed to the Shareholders, and at
all times subsequent to such mailing up to and including the date of the
Shareholders' Meeting, (i) such Prospectus/Proxy Statement and all amendments or
supplements thereto, with respect to all information set forth therein provided
by FBHC or its Subsidiaries, will comply in all material respects with the
provisions (to the extent applicable) of the Securities Act and the Exchange Act
and the rules and regulations of the SEC thereunder and (ii) the information set
forth in the Prospectus/Proxy Statement with respect to FBHC and its
Subsidiaries, as filed with the SEC under the Securities Act and the Exchange
Act and the Registration Statement as filed with the SEC under the Securities
Act, will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading.
(b) When the applications for the Regulatory Approvals are filed, or
amended or supplemented, information that is provided to the Company by FBHC for
inclusion in applications for such Regulatory Approvals shall comply in all
material respects with all Applicable Laws and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
SECTION 3.21 INSURANCE.
(a) Schedule 3.21 contains an accurate and complete description of all
policies of general liability, theft, life, fire, worker's compensation, health,
directors and officers, and other forms of insurance owned or held by FBHC and
its Subsidiaries (other than title insurance, FHA mortgage insurance and private
mortgage insurance obtained in the ordinary course of business that, to FBHC's
knowledge, have been entered into on an arm's length basis pursuant to normal
commercial
A-22
<PAGE>
terms and conditions) specifying the insurer, amount of coverage, deductions,
exclusions, type of insurance, policy number and any pending claims thereunder
involving more than $50,000 of which FBHC has knowledge.
(b) All policies of general liability, theft, life, fire, worker's
compensation, health, directors and officers, and other forms of insurance owned
or held by FBHC and its Subsidiaries (i) are in full force and effect and all
premiums that are due and payable with respect thereto are currently paid; (ii)
are sufficient for compliance with all requirements of Applicable Law and of all
agreements to which FBHC or any of its Subsidiaries is a party; (iii) are, to
FBHC's knowledge, valid, outstanding and enforceable policies (except as may be
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of equitable
remedies); and (iv) to FBHC's knowledge will remain in full force and effect
through the Closing Date. No insurer under any such policy or bond has canceled
or indicated an intention to cancel or not to renew any such policy or bond
effective at any time prior to the Closing Date or generally disclaimed
liability thereunder. Neither FBHC nor any of its Subsidiaries is in default
under any such policy or bond, and all material claims thereunder have been
filed in a timely fashion. Neither FBHC nor any of its Subsidiaries has been
denied or had revoked or rescinded any policy of insurance during the last three
fiscal years.
SECTION 3.22 ENVIRONMENTAL MATTERS. To the knowledge of FBHC, neither
FBHC nor any of its Subsidiaries, nor any properties or businesses owned or
operated by any of them, whether or not held in a fiduciary or representative
capacity, has been or is in violation of or liable under any Environmental Law
(as hereinafter defined). There are no actions, suits or proceedings, or
demands, claims, notices or investigations (including, without limitation,
notices, demand letters or requests for information from any environmental
agency) instituted, pending, or, to the knowledge of FBHC, threatened relating
to the liability of any properties or businesses owned or operated by FBHC or
any of its Subsidiaries, whether or not held in a fiduciary or representative
capacity, under any Environmental Law. To the knowledge of FBHC, neither FBHC
nor any of its Subsidiaries is responsible under any Environmental Law for any
release by any Person at or in the vicinity of real property of any contaminant,
pollutant, hazardous substance, hazardous waste, hazardous pollutant, toxic
pollutant, toxic waste or toxic substance ("Contaminant"), including, without
limitation, by spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing of any such
Contaminant into the environment (collectively, "Release") nor, to the knowledge
of FBHC is FBHC or any of its Subsidiaries responsible for any material costs of
any response action required by virtue of any Release of any Contaminant into
the environment including, without limitation, costs arising from investigation,
removal or remediation of Contaminants, security fencing, alternative water
supplies, temporary evacuation and housing and other emergency assistance
undertaken by any environmental regulatory body or any other person. The
representations contained in the foregoing three sentences are qualified to the
extent that there may be certain exceptions to such representations; however,
all exceptions to such representations in the aggregate could not reasonably be
expected to cause a Material Adverse Effect on FBHC. Notwithstanding the
foregoing, "Contaminant" shall not include materials employed in normal consumer
or office uses, such as gasoline, lubricants, printing materials, cleaners,
disinfectants, pesticides, building materials, fluorescent lights and ballasts,
batteries and refrigerants, as long as such materials are used and stored only
in quantities typical of consumer and office uses. "Environmental Law" means any
federal, state, local or foreign law, statute, ordinance, rule,
A-23
<PAGE>
regulation, code, license, permit, authorization, approval, consent, order,
judgment, decree, injunction or agreement with any Governmental Authority
relating to (i) the protection, preservation or restoration of the environment
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface soil, subsurface soil, plant and animal life or
any other natural resource), and/or (ii) the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
(or threatened release) or disposal of any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous by any
Governmental Authority or otherwise regulated, whether by type or by quantity,
including any material containing any such substance as a component.
SECTION 3.23 INTELLECTUAL PROPERTY RIGHTS. Schedule 3.23 contains a
true, correct and complete list of all registered trademarks, registered service
marks, trademark and service mark applications, trade names and registered
copyrights presently owned or held by FBHC and its Subsidiaries or used under
license by them in the conduct of their business (the "Intellectual Property").
FBHC and its Subsidiaries own or have the right to use and continue to use the
Intellectual Property in the operation of their business. Except as set forth on
Schedule 3.23, neither FBHC nor any of its Subsidiaries is infringing or
violating any patent, copyright, trademark, service mark, label filing or trade
name owned or otherwise held by any other party, nor has FBHC or any of its
Subsidiaries used any confidential information or any trade secrets owned or
otherwise held by any other party, without holding a valid licence for such use.
Neither FBHC nor any of its Subsidiaries is engaging, nor has it been charged
with engaging, in any kind of unfair or unlawful competition. Neither the
execution, delivery and performance of this Agreement nor the consummation of
the transactions contemplated hereby will in any way impair the right of FBHC or
any of its Subsidiaries or the Surviving Corporation to use, sell, license or
dispose of, or to bring any action for the infringement of, the Intellectual
Property.
SECTION 3.24 SITE LOCATIONS.
(a) Schedule 3.24(a) contains a true, correct and complete list of all
locations of offices in which FBHC and its Subsidiaries are doing business as of
the date hereof, including, without limitation, any branch, loan production and
agency offices. Except as disclosed on Schedule 3.24(a), the Association has not
applied for or received permission to open any additional offices at any such
location or any other locations.
(b) The Association has not filed any application, made any agreement
or taken any other action to discontinue operations at any existing branch or
agency, commence operations at any new branch or agency, or relocate any
existing branch or agency, except for such applications, agreements or other
actions as are set forth in Schedule 3.24(b).
SECTION 3.25 LOANS.
(a) Except as disclosed on Schedule 3.25(a) and except for those
matters which, in the aggregate, could not reasonably be expected to cause a
Material Adverse Effect on FBHC, (i) each outstanding loan, lease or other
extension of credit or commitment to extend credit of FBHC or any of its
Subsidiaries is a legal, valid and binding obligation, is in full force and
effect and is enforceable in accordance with its terms except as may be limited
by bankruptcy, insolvency,
A-24
<PAGE>
moratorium, reorganization or similar laws affecting the rights of creditors
generally or equitable principles limiting the right to obtain specific
performance or other similar relief; (ii) FBHC and its Subsidiaries have duly
performed all of their respective obligations thereunder to the extent that such
obligations to perform have accrued; (iii) all documents and agreements
necessary to FBHC or any of its Subsidiaries to enforce such loan, lease or
other extension of credit are in existence and in their possession; (iv) no
claims, counterclaims, set-off rights or other rights exist, nor do the grounds
for any such claim, counterclaim, set-off rights or other rights exist, with
respect to any such loans, leases or other extensions of credit which could
impair the collectability thereof; and (v) each such loan, lease and extension
of credit has been originated and served in accordance with the lender's then
applicable underwriting guidelines, the terms of the relevant credit documents
and agreements and Applicable Law. Except as set forth in Schedule 3.25(a), as
of June 30, 1998: (i) there are no loans, leases, other extensions of credit or
commitments to extend credit of the Association that have been or, to FBHC's
knowledge, should have been classified by the Association in its reasonable
determination as "Other Assets Especially Mentioned," "Substandard," "Doubtful,"
"Loss" or any comparable classification and (ii) as of August 31, 1998, there
were no loans due to the Association as to which any payment of principal,
interest or any other amount is 30 days or more past due.
(b) Schedule 3.25(b) lists all loan commitments of FBHC and its
Subsidiaries (with conforming single family loan commitments and consumer
commitments less than $500,000 listed in the aggregate only) outstanding as of
the date hereof.
SECTION 3.26 ALLOWANCE FOR LOSSES. To FBHC's knowledge, the
Association's allowance for possible credit losses is adequate in relation to
the outstanding loans, leases and other extensions of credit of the Association
and is in accordance with the safety and soundness standards administered by,
and the practices and procedures of, the OTS for federal stock savings and loan
associations, as such standards, practices and procedures may be amended from
time to time (the "OTS Standards").
SECTION 3.27 REAL ESTATE OWNED.
(a) Schedule 3.27(a) contains a true, correct and complete list of all
Real Estate Owned by FBHC and its Subsidiaries, stating with respect to each its
type and carrying value.
(b) All Real Estate Owned is booked at the lower of cost or "fair
value."
(c) Except as set forth in Schedule 3.27(c) or reflected in the
financial statements or notes thereto included as part of the FBHC Annual Report
or the FBHC Quarterly Report, FBHC or one of its Subsidiaries has good and
indefeasible title to, or a valid and enforceable leasehold interest in, all of
its Real Estate Owned, and such interest is free and clear of all liens, charges
or other encumbrances, except those related to real property taxes, local
improvement district assessments, easements, covenants, restrictions and other
matters of record that do not individually or in the aggregate materially
adversely affect the use and enjoyment of the relevant real property.
A-25
<PAGE>
SECTION 3.28 INTEREST RATE RISK MANAGEMENT INSTRUMENTS.
(a) Schedule 3.28 contains a true, correct and complete list of all
interest rate swaps, caps, floors, and option agreements and other interest rate
risk management arrangements or financial derivative products to which FBHC or
one of its Subsidiaries is a party or by which any of their properties or assets
may be bound. True and complete copies of all such interest rate risk management
agreements and arrangements have been provided to the Company.
(b) All interest rate swaps, caps, floors and option agreements and
other interest rate risk management arrangements to which FBHC or one of its
Subsidiaries is a party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business and, to FBHC's
knowledge, in accordance with prudent banking practice and all applicable rules,
regulations and policies of applicable Governmental Authorities with
counterparties believed to be financially responsible at the time and are legal,
valid and binding obligations enforceable in accordance with their terms (except
as may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and the availability of
equitable remedies), and are in full force and effect. FBHC and its Subsidiaries
have duly performed in all material respects all of their obligations thereunder
to the extent that such obligations to perform have accrued; and to FBHC's
knowledge, there are no breaches, violations or defaults or allegations or
assertions of such by any party thereunder.
SECTION 3.29 DISCLOSURE. Without limiting any of the representations
and warranties contained herein, no representation or warranty by FBHC in this
Agreement, no statement contained in any document (including, without
limitation, the financial statements, the Disclosure Schedule and the
information to be provided pursuant to Section 5.5 hereof), certificate or other
writing and no other information furnished or to be furnished by FBHC to the
Company or any of its representatives pursuant to the provisions hereof or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of material fact or omits or will omit to state any
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties
to FBHC:
SECTION 4.1 ORGANIZATION.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas. The Company is a
registered bank holding company pursuant to 12 U.S.C. Sections 1841 et seq.
(b) SW Bank is a national banking association duly organized, validly
existing and in good standing under the laws of the United States of America.
The Company owns directly all of the outstanding capital stock of SW Bank. The
Company owns no other material Subsidiary.
A-26
<PAGE>
(c) Each of the Company and SW Bank has all requisite corporate power
and corporate authority to own or lease its properties and to carry on its
business as currently conducted. The nature of the business and activities of
the Company and SW Bank, as currently conducted, does not require either of them
to be qualified or registered to do business in any jurisdiction other than the
State of Texas.
(d) The Company has the corporate power and authority to execute and
deliver this Agreement and perform its obligations hereunder and to consummate
the transactions contemplated herein, subject to any required Regulatory
Approvals.
(e) The Company has delivered to FBHC true and complete copies of
the Articles of Incorporation and Bylaws of the Company and the Articles of
Association and Bylaws of SW Bank. All such documents are in full force and
effect.
SECTION 4.2 BINDING EFFECT. This Agreement has been duly and validly
authorized, executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms (except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally and the availability of equitable remedies). Neither the execution and
delivery of this Agreement by the Company nor the consummation by the Company of
the transactions contemplated hereby, nor compliance with any of the provisions
hereof, will (i) conflict with or result in a breach of any provision of the
Company's Articles of Incorporation or Bylaws or the Articles of Association or
Bylaws of SW Bank, (ii) conflict with or result in the breach of any term,
condition or provision of, or constitute a default under (upon the giving of
notice, the lapse of time or otherwise), or give rise to any right of
termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or assets of the
Company or SW Bank pursuant to, or otherwise require the consent of any Person
under, any agreement or obligation to which the Company or SW Bank is a party or
by which any of their properties or assets may be bound, which conflict, breach,
default, right, lien or right of consent could reasonably be expected to cause a
Material Adverse Effect on the Company, or (iii) violate or conflict with any
Applicable Laws applicable to the Company or SW Bank or any of their respective
properties or assets, subject to obtaining any necessary approvals of
Shareholders and the Regulatory Approvals specified in Section 5.2(a).
SECTION 4.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 1,000,000 shares of preferred stock, $.01 par value, none of which
shares are issued, and 50,000,000 shares of Company Common Stock, of which
23,206,748 shares were issued and outstanding as of August 31, 1998. All
outstanding shares of Company Common Stock have been and are duly authorized and
validly issued, fully paid and nonassessable and have not been issued in
violation of the preemptive rights of any Person. The shares of Company Common
Stock to be issued to the Shareholders pursuant to the provisions of this
Agreement have been duly authorized, will be validly issued, fully paid and
nonassessable and will not be issued in violation of the preemptive rights of
any Person. At August 31, ,1998 options to purchase a total of 2,707,799 shares
of Company Common Stock were outstanding under the Company's stock option plans,
and a total of 447,093 additional such shares were available for future option
grants under such plans.
A-27
<PAGE>
SECTION 4.4 FINANCIAL STATEMENTS AND REPORTS. The Company has delivered
to FBHC true and complete copies of its (i) Annual Report on Form 10-K for the
year ended December 31, 1997 (the "Company Annual Report"), as filed with the
SEC, which contains the Company's audited consolidated balance sheets as of
December 31, 1997 and 1996 and related consolidated statements of income,
changes in shareholders' equity and cash flows for the years ended December 31,
1997, 1996 and 1995, and (ii) Quarterly Report on Form 10-Q for the six-month
period ended June 30, 1998 (the "Company Quarterly Report"), as filed with the
SEC, which contains the unaudited consolidated balance sheets and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the six-month periods ended June 30, 1998 and 1997. Such financial
statements have been prepared from the books and records of the Company and its
Subsidiaries, present fairly the financial position and operating results of the
Company and its Subsidiaries as of the date and during the periods indicated and
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered, except as stated therein
(subject, in the case of unaudited financial statements, to the exclusion of
normal year-end adjustments and footnote disclosures required by generally
accepted accounting principles). The Company does not have any Liabilities of a
type that should be included in or reflected in such financial statements or the
notes thereto, whether related to tax or non-tax matters, accrued or contingent,
due or not yet due, liquidated or unliquidated, or otherwise, except (i) as to
the extent disclosed or reflected in such financial statements, (ii) Liabilities
incurred in the ordinary course of business since June 30, 1998, which
individually or in the aggregate would not result in a Material Adverse Effect
upon the Company, or (iii) Liabilities under this Agreement and fees and
expenses relating thereto. The Company Annual Report and the Company Quarterly
Report did not at the respective times at which they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
Company Annual Report and the Company Quarterly Report comply in all material
respects with the applicable requirements of the Exchange Act. The Company has
delivered to FBHC true and complete copies of all management letters delivered
to the Company by PricewaterhouseCoopers LLP (or any predecessor thereto)
relating to the internal controls of the Company during any period from and
after December 31, 1995.
(b) The Company and SW Bank have filed all material documents and
reports required to be filed by them with the OCC, the SEC, the FDIC and any
other Governmental Authority under all other Applicable Laws (the "Governmental
Filings"). All such Governmental Filings, as finally amended or corrected,
complied in all material respects at the time of filing and at the time of any
amended or supplemented filing with all requirements of their respective forms
and with all Applicable Laws.
(c) The Company has not changed its independent auditing firm since
December 31, 1995, and there has been no disagreement (as such term is used in
Item 304 of Regulation S-K promulgated under the Securities Act) between the
Company and its independent auditing firm(s) since December 31, 1995 concerning
any aspect of the manner in which the Company maintains its books and records or
the manner in which it has reported upon its financial condition and results of
operations during such period.
A-28
<PAGE>
SECTION 4.5 REGISTRATION STATEMENT AND REGULATORY APPLICATIONS.
(a) When the Prospectus/Proxy Statement referred to in Section 5.1, or
any amendment or supplement thereto, shall be mailed to the Shareholders, and at
all times subsequent to such mailing up to and including the date of the
Shareholders' Meeting, (i) such Prospectus/Proxy Statement and all amendments or
supplements thereto, with respect to all information set forth therein provided
by the Company and its Subsidiaries, will comply in all material respects with
the provisions (to the extent applicable) of the Securities Act and the Exchange
Act and the rules and regulations of the SEC thereunder and (ii) the information
relating to the Company and its Subsidiaries, set forth in the Prospectus/Proxy
Statement as filed with the SEC under the Securities Act and the Exchange Act
and the Registration Statement as filed with the SEC under the Securities Act,
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading.
(b) When the applications for the Regulatory Approvals are filed, or
amended or supplemented, the information relating to the Company and its
Subsidiaries or to this Agreement that is provided by the Company or any of its
Subsidiaries shall comply in all material respects with all Applicable Laws and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading.
SECTION 4.6 COMPLIANCE WITH APPLICABLE LAWS; OPERATING AUTHORITIES.
(a) The business of the Company and SW Bank and any advertising related
to such business or otherwise conducted by or on their behalf, including without
limitation the business of originating, acquiring, holding or disposing of
assets and liabilities, is being conducted in compliance in all material
respects with all Applicable Laws, and the forms, procedures, disclosures and
practices now or previously used by them are or were in compliance in all
material respects with all Applicable Laws, as in effect at the relevant times.
No formal investigation or review by any Governmental Authority concerning any
possible conflicts or violations of Applicable Laws is pending, nor to the
Company's knowledge, is any such investigation threatened, nor has any such
investigation occurred during the last three years. Since December 31, 1995, no
Governmental Authority has delivered any written notice to the Company or SW
Bank, or to the Company's knowledge, otherwise asserted an intention to conduct
any such investigation or review, nor, to the Company's knowledge, is there any
basis for any investigation or review of the type described above.
(b) Neither the Company nor SW Bank is (i) a party to any written
agreement, stipulation, conditional approval, memorandum of understanding or
notice of determination with any Governmental Authority or (ii) subject to any
judgment, order, decree or directive of such a Governmental Authority, that, in
either case, restricts or monitors the conduct of its business, or in any manner
relates to its capital adequacy, credit policies, management or customer base.
(c) The Company and SW Bank hold all material registrations, licenses,
permits and franchises as are required to conduct their business as now
conducted (including, without limitation, any insurance or securities
activities), and all such licenses, permits and franchises which they hold are
valid and in full force and effect. To the Company's knowledge, no suspension of
any of the
A-29
<PAGE>
foregoing operating rights or cancellation thereof has been initiated or
threatened and all filings, applications and registrations with respect thereto
are current.
(d) To the Company's knowledge, no Person or Persons acting in concert
are deemed to "control" the Company under the Federal Deposit Insurance Act, as
amended, and the regulations promulgated thereunder.
SECTION 4.7 ABSENCE OF CERTAIN CHANGES. There has not been since June
30, 1998:
(a) any change in or effect on the business of the Company or SW Bank
or any occurrence, development or event of any nature, that has had or may
reasonably be expected to have, together with all such other changes and
effects, a Material Adverse Effect on the Company;
(b) any direct or indirect redemption, purchase or other acquisition of
shares of the Company's capital stock, convertible securities or securities
exercisable for capital stock of the Company by the Company, any declaration,
setting aside or payment of any dividend by the Company, any alteration of any
right attaching to any shares of capital stock of the Company, or any
combination or subdivision of any shares of capital stock of the Company;
(c) any amendment or termination of any agreement to which the Company
or SW Bank is a party, other than amendments or terminations which do not and
will not, individually or in the aggregate, have a Material Adverse Effect on
the Company;
(d) any amendment to the Articles of Incorporation or Bylaws of the
Company;
(e) any change by the Company in accounting principles or methods,
except as required by the FASB or OCC regulations;
(f) any loss, damage or destruction (whether or not covered by
insurance) affecting any of the tangible assets or business of the Company and
SW Bank that may involve a loss of more than $400,000, individually, or
$1,000,000 in the aggregate (including deductibles) in excess of applicable
insurance coverage; or
(g) any sale, transfer or other disposition of any material properties
or assets of the Company or SW Bank except in the ordinary course of business.
SECTION 4.8 LITIGATION. As of the date of this Agreement there are no
suits, claims, actions, investigations or proceedings of any nature by any
Person which are pending or, to the Company's knowledge, threatened (i) against
or otherwise involving, directly or indirectly, the Company or SW Bank, or any
of their properties (including, without limitation, any such matter with respect
to Taxes), or (ii) against or otherwise involving, directly or indirectly, any
officer, director, employee or agent of the Company or SW Bank (in connection
with such officer's, director's, employee's or agent's activities on behalf of
them or that otherwise relate, directly or indirectly, to the Company or SW Bank
or any of their properties, securities or activities), which in the aggregate
have had or may reasonably be expected to have a Material Adverse Effect on the
Company.
A-30
<PAGE>
SECTION 4.9 BROKER'S AND FINDER'S FEES. Neither the Company nor anyone
acting on its behalf has paid or become obligated to pay any fee or commission
to any broker, finder, intermediary, financial advisor or financial consultant
or other Person (other than legal and accounting advisors acting as such and
Legg Mason Wood Walker, Incorporated) in connection with the transactions
contemplated hereby (including, without limitation, any restructuring of
obligations, financings or other transactions that have been entered into as
part of the transactions contemplated hereby) and, except as stated above, no
Person is entitled to receive from the Company any such fee or commission.
SECTION 4.10 TAX MATTERS. The Company has filed with the appropriate
agencies all material Returns required to be filed, and such Returns are true,
correct and complete in all material respects. All Taxes shown to be payable on
the Returns or on subsequent assessments with respect thereto have been paid in
full on a timely basis, and no other Taxes are owing or payable by the Company
with respect to items or periods covered by such Returns or with respect to any
period prior to the date of this representation and warranty.
SECTION 4.11 ENVIRONMENTAL MATTERS. To the knowledge of the Company,
neither the Company nor SW Bank, nor any properties or businesses owned or
operated by either of them, whether or not held in a fiduciary or representative
capacity, has been or is in violation of or liable under any Environmental Law.
There are no actions, suits or proceedings, or demands, claims, notices or
investigations (including, without limitation, notices, demand letters or
requests for information from any environmental agency) instituted, pending, or,
to the knowledge of the Company, threatened relating to the liability of any
properties or businesses owned or operated by the Company or SW Bank, whether or
not held in a fiduciary or representative capacity, under any Environmental Law.
The representations contained in this Section 4.11 are subject to the same
qualifications as those set forth in Section 3.22.
SECTION 4.12 ALLOWANCE FOR LOSSES. To the Company's knowledge, SW
Bank's allowance for possible credit losses is adequate in relation to the
outstanding loans, leases and other extensions of credit of SW Bank and is in
accordance with the safety and soundness standards administered by, and the
practices and procedures of, the OCC, as such standards, practices and
procedures may be amended from time to time.
SECTION 4.13 DISCLOSURE. Without limiting any of the representations
and warranties contained herein, no representation or warranty by the Company in
this Agreement, no statement contained in any document (including, without
limitation, the Company Annual Report and the Company Quarterly Report and the
information to be provided pursuant to Section 5.5 hereof), certificate or other
writing and no other information furnished or to be furnished by the Company to
FBHC or any of its representatives pursuant to the provisions hereof or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of material fact or omits or will omit to state any
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
A-31
<PAGE>
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.1 PREPARATION OF REGISTRATION STATEMENT AND PROSPECTUS/PROXY
STATEMENT. FBHC and the Company contemplate that a Registration Statement on
Form S-4 (the "Registration Statement") will be filed with the SEC under the
Securities Act for registration of the Company Common Stock to be issued in
connection with the transactions contemplated hereby and that the parties will
prepare a related Prospectus/Proxy Statement (the "Prospectus/Proxy Statement")
to be mailed to the shareholders of FBHC in connection with the Shareholders'
Meeting. The parties hereby agree to cooperate with each other in preparing and
filing such Registration Statement and Prospectus/Proxy Statement. The parties
hereby further agree (i) to file such Registration Statement with the SEC as
soon as reasonably practicable after the date hereof and (ii) to use their
reasonable efforts to obtain the clearance of the SEC and to issue such
Prospectus/Proxy Statement as soon as practicable thereafter. Without limiting
the generality of the foregoing, nothing shall be contained in the Registration
Statement or the Prospectus/Proxy Statement or any proxy soliciting materials
with respect to any party unless approved by such party, which approval shall
not be unreasonably withheld.
SECTION 5.2 PURSUIT OF REGULATORY APPROVALS.
(a) The parties shall cooperate and use their reasonable efforts (i) to
obtain all necessary approvals, consents, authorizations and the like from
Governmental Authorities required to consummate the Merger and the Bank Merger,
including, without limitation, the approval of the Federal Reserve, the OCC and
such other Persons as may be required under Applicable Law. In addition, the
consummation of the transactions contemplated hereby is subject to the
following:
(i) the expiration of any applicable waiting period with
respect to any of the foregoing matters (including, without limitation,
any extension thereof by reason of a request for additional information
or as a result of any pending or threatened action, suit or proceeding
by the U.S. Department of Justice or the Federal Trade Commission under
federal antitrust laws), and the publication of any notice required by
Applicable Law;
(ii) the declaration of effectiveness of the Registration
Statement, which must not be the subject of a stop order or threatened
stop order on the Closing Date; and
(iii) the shares of Company Common Stock being delivered by
the Company to the Shareholders in exchange for their shares of FBHC
Common Stock having been qualified or registered for offering and sale
under the securities or Blue Sky laws of each jurisdiction in which the
Shareholders reside (or having been exempted therefrom); provided that
the Company shall not be obligated to execute or file any general
consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified.
All such approvals, together with any other approvals of Governmental
Authorities that are necessary to effectuate the Merger and the Bank Merger, are
referred to herein as the "Regulatory Approvals."
A-32
<PAGE>
(b) The Company shall have primary responsibility for the preparation
of all Federal Reserve and OCC applications and filings required in connection
with Section 5.2(a) above, and the parties shall be jointly responsible for the
preparation of all applications and filings, if any, with the OTS required in
connection with Section 5.2(a) above. Each party shall cooperate with the other
party hereto in preparation of all applications for such Regulatory Approvals
and will furnish promptly upon request all documents, information, financial
statements or other materials as may be required in order to complete such
applications. Should the appearance of any of the officers, directors, employees
or agents of either of the parties hereto be requested by either of the parties
or by any Governmental Authority at any hearing or otherwise in connection with
any such application, such party shall promptly use its reasonable efforts to
arrange for those appearances.
SECTION 5.3 OTHER CONSENTS. FBHC and the Company agree to apply for and
reasonably and diligently seek to obtain all waivers, consents and approvals of
other Persons required in connection with the transactions contemplated by this
Agreement, including, without limitation, the consent of any Person which may be
required under any Scheduled Contract. FBHC will take or cause to be taken on a
timely basis all actions necessary with respect to the authorization, adoption
and approval by the Association of the Bank Merger. The Company will take or
cause to be taken on a timely basis all actions necessary with respect to the
authorization, adoption and approval by SW Bank of the Bank Merger.
SECTION 5.4 FBHC ACTIVITIES PENDING CLOSING. Except as otherwise
specifically provided in this Agreement and subject to Applicable Law, from the
date hereof to and including the Effective Time, FBHC and its Subsidiaries
shall, as long as this Agreement remains in effect or unless the Company
otherwise consents in writing (which consent shall not be unreasonably
withheld):
(a) conduct its affairs (including, without limitation, the making of
or agreeing to make any loans or other extensions of credit) only in the
ordinary course of business consistent with prudent banking practice and in
accordance with Applicable Laws and their compliance, loan and other policies,
including, without limitation, using its best efforts to make all changes
required upon completion of any regulatory examination, and use all reasonable
efforts to preserve intact their present business organizations, keep available
the services of their present officers, directors, key employees and agents and
preserve their relationships and goodwill with all Persons having business
dealings with them, PROVIDED that FBHC and its Subsidiaries shall not make or
agree to make any loans or other extensions of credit to any borrower in excess
of $500,000 without the prior consent of the Company, except that the following
types of loans in excess of $500,000 shall not require the prior consent of the
Company: (i) all single family loans of $650,000 or less which are underwritten
to usual and customary secondary market standards and are to be sold in the
secondary market pursuant to takeout commitments obtained in conjunction with
the funding of the loans; (ii) all commercial loans which are to be sold in the
secondary market for which there is an enforceable takeout commitment for the
full amount of such loans in place at the time of closing; and (iii) commercial
loans which are $1,000,000 or less and which are in the ordinary course of
business of FBHC and its Subsidiaries; and provided further, that if the Company
does not disapprove in writing any loan requiring the Company's prior approval
within two business days following its receipt of a request for approval, such
loan shall be deemed approved by the Company.
A-33
<PAGE>
(b) refrain from issuing or selling or obligating itself to issue or
sell any shares of its capital stock or any warrants, rights or options to
acquire, or any securities convertible into, any shares of its capital stock,
except for shares issued upon the exercise of FBHC Stock Options, the conversion
of FBHC Debentures or the Mitchell Exchange;
(c) except as set forth in Schedule 3.24(b), refrain from opening or
closing any branch office, or acquiring or selling or agreeing to acquire or
sell, any branch office or any deposit liabilities, and otherwise consult with
and seek the advice of the Company with respect to basic policies relating to
branching, site location and relocation;
(d) not enter into, amend or terminate (other than the annual renewal
of Employment Agreements consistent with past practice) any agreement of the
type that would be required to be disclosed on Schedule 3.7(a), or any other
material agreement, or acquire or dispose of any material amount of assets or
liabilities, except in the ordinary course of business consistent with prudent
banking practices;
(e) not grant any severance or termination pay (other than pursuant to
FBHC's policies in effect on the date hereof) to, or enter into any employment,
consulting, non-competition, retirement, parachute, severance or indemnification
agreement with, any officer, director, employee or agent of FBHC or its
Subsidiaries, either individually or as part of a class of similarly situated
persons;
(f) not cause or allow any of the things listed in Section 3.13 to
occur (except with respect to Section 3.13(a) and (h), FBHC and its Subsidiaries
shall use their best efforts to not cause or allow any of the things listed
therein to occur), except that FBHC may declare and pay a dividend to holders of
FBHC Common Stock with respect to the results for the quarters ended September
30, 1998 and December 31, 1998 in an amount equal to the cash dividend paid to
such holders for the quarter ended June 30, 1998 and FBHC may redeem the FBHC
Debentures in accordance with their terms;
(g) not foreclose upon or otherwise acquire any real property described
in Section 3.22 hereof or any non-residential property prior to receipt and
approval by the Company of a Phase I environmental review therefor;
(h) not change its deposit account interest rate pricing policies or
its loan pricing policies except in response to changes in the applicable
market;
(i) not establish any new Subsidiary;
(j) not voluntarily make any material change in the interest rate risk
profile of the Association from that as of June 30, 1998;
(k) not materially deviate from policies and procedures existing as of
the date of this Agreement with respect to (i) classification of assets, (ii)
the allowance for possible credit losses and (iii) accrual of interest on
assets, except as otherwise required by the provisions of this Agreement; and
A-34
<PAGE>
(l) not make or agree to make any overdrafts in excess of $100,000 per
account, unless an overdraft line of credit is in place consistent with the
Association's ordinary course of business and policies and Applicable Laws.
SECTION 5.5 ONGOING FINANCIAL DISCLOSURE. FBHC shall provide to the
Company as soon as practicable but in no event later than twenty (20) days
following the end of each calendar month, from the date hereof through the
Closing Date, copies of all financial statements and other written information
provided to the Boards of Directors of FBHC or any of its Subsidiaries (other
than information relating to this Agreement and the transactions relating to
this Agreement), and, to the extent permitted by Applicable Law, all reports
filed by FBHC or any of its Subsidiaries with federal or state regulatory
agencies. The Company shall send to FBHC, promptly after they become publicly
available, copies of all Company filings from and after the date hereof made
under Sections 13(a) and 14 of the Exchange Act and copies of all news releases
made by the Company from and after the date hereof. The Company shall provide to
a single designee of FBHC copies of all non-public financial and other written
information provided to the Boards of Directors of the Company and SW Bank, and,
to the extent permitted by Applicable Law, all reports filed by the Company or
SW Bank with federal or state regulatory agencies. Such designee shall not copy
or circulate any such information to anyone without the prior written consent of
the Company, which consent shall not be unreasonably withheld, and FBHC hereby
acknowledges its obligations under the federal securities laws with respect to
maintaining the confidentiality of such information and insider trading matters.
SECTION 5.6 ACCESS TO INFORMATION OF FBHC.
(a) During the period from the date hereof until the Effective Time,
FBHC shall provide the information and access described in paragraphs (b) and
(c) below during normal business hours, upon reasonable written or oral notice
and in such manner as will not unreasonably interfere with the conduct of the
business of FBHC and its Subsidiaries.
(b) To the extent permitted by law and consistent with Section 5.6(a),
FBHC shall authorize and permit the Company and its representatives, accountants
and counsel to have full and complete access to all of the properties, books,
records, branch operating reports, branch audit reports, customer accounts and
records, any reports of Governmental Authorities and responses thereto,
operating instructions and procedures (and all correspondence with Governmental
Authorities), tax returns, tax settlement letters, financial statements and
other financial information (including the work papers of PricewaterhouseCoopers
LLP used to audit FBHC's consolidated statements of condition as of March 31,
1998 and 1997 and its consolidated statements of income, changes in
stockholders' equity and cash flows for the years ended March 31, 1998, 1997 and
1996), contracts and documents of FBHC and its Subsidiaries and all other
information with respect to the business affairs, financial condition, assets
and Liabilities of FBHC and its Subsidiaries as the Company may from time to
time request, to make copies of such books, records and other documents, and to
discuss the business affairs, condition (financial and otherwise), assets and
Liabilities of FBHC and its Subsidiaries with such third persons, including,
without limitation, the directors, officers, employees, agents, accountants
(including PricewaterhouseCoopers LLP) and attorneys of FBHC and its
Subsidiaries, as the Company considers reasonably necessary or appropriate for
the purposes of familiarizing itself with the business and operations of FBHC
and
A-35
<PAGE>
its Subsidiaries, determining any breach of the representations, warranties and
covenants of FBHC set forth herein, obtaining any necessary orders, consents or
approvals of the transactions contemplated by this Agreement by Governmental
Authorities, conducting further evaluations of the assets and Liabilities of
FBHC and its Subsidiaries, and accomplishing the integration of the business
operations of FBHC and its Subsidiaries with those of the Company and SW Bank at
the earliest possible date.
(c) For purposes of the Company's investigation pursuant to this
Section 5.6, FBHC shall use its reasonable efforts to cause any service bureau,
accountant, third party servicer or other third party under contract to it to
furnish to the Company and its authorized representatives, at the Company's
cost, full access to such party's premises and all of its books, records and
properties, including, without limitation, all loan, investment, regulatory,
financial, accounting, tax and property records and files relating to the
operations of FBHC and its Subsidiaries including, without limitation, all
files, computer records and customer information, relating to assets serviced by
third parties or necessary for the conversion on the Closing Date of all
accounts, products and branch operating systems of FBHC and its Subsidiaries to
such systems as the Company may designate. FBHC shall use its reasonable efforts
to cause any service bureau, accountant, third party servicer or other third
party to provide adequate space and facilities and the cooperation of its
personnel at the Company's cost, including, without limitation, copying
facilities, to the end that such examination shall be completed expeditiously,
completely and accurately. FBHC shall, upon request, provide the Company and its
authorized representatives with reasonable access to any and all real and
personal properties securing loans made by FBHC, to the extent legally
permissible. Without limiting any of the foregoing, the Company and its
authorized representatives shall be specifically entitled to conduct at the
Company's own expense (and FBHC shall use its reasonable efforts to enable them
to conduct) such tests of accounts receivable and other matters as they deem
appropriate. Any examination or investigation made by the Company or other
Persons as contemplated by this Section shall not affect any of the
representations and warranties hereunder.
SECTION 5.7 CONFIDENTIALITY. Except as contemplated by this Agreement
or as necessary to carry out the transactions contemplated herein, all
information or documents furnished hereunder by any party hereto or any other
party shall be kept confidential by the party to whom it is furnished (and such
party shall use reasonable efforts to cause its agents and representatives to
maintain the confidentiality of such documents) and in the event such
transactions are not consummated, each shall return to the other or destroy all
information furnished hereunder and shall not thereafter use the same for any
purpose until such time as such information becomes publicly available, except
to the extent (i) it was known by such other party prior to being received other
than through the violation or breach of such party or any other Person of any
duty of confidentiality, (ii) it is or thereafter becomes lawfully obtainable
from other sources, (iii) it is necessary or appropriate to disclose the same to
any Governmental Authority having jurisdiction over the parties or their
Subsidiaries or as otherwise may be required by Applicable Laws (to the extent
permitted by law, the party intending to make disclosure in such circumstances
shall give the other party hereto prompt notice prior to making such disclosures
so that such other parties may seek a protective order or other appropriate
remedy prior to such disclosure), or (iv) such duty of confidentiality is waived
in writing by the other party, and that none of this information shall be used
for competitive purposes. Notwithstanding the foregoing, information and
documents furnished by or on behalf of FBHC hereunder may be disclosed by the
Company or SW Bank to the Federal Reserve, the OCC, the OTS
A-36
<PAGE>
and any other Governmental Authority whose approval, consent, authorization or
other action is necessary for the consummation of the Merger and the
transactions contemplated hereby.
SECTION 5.8 MEETING OF SHAREHOLDERS.
(a) FBHC shall duly call a meeting of its shareholders (the
"Shareholders' Meeting") for the purpose of obtaining the adoption of this
Agreement, this Agreement and all other matters necessary to consummate the
transactions contemplated by this Agreement, which meeting shall be held not
earlier than 20 nor later than 30 business days following the date upon which
the Registration Statement shall have been declared effective. In connection
with the Shareholders' Meeting, the Board of Directors of FBHC shall recommend
approval of the transactions contemplated by this Agreement, indicate the
determination by the Board of Directors that the Merger is fair to and in the
best interests of FBHC's shareholders and use its reasonable efforts (including,
without limitation, soliciting proxies for such approvals) to obtain such
shareholder approval, subject to its fiduciary duties. Notice of the
Shareholders' Meeting shall be accompanied by the Prospectus/Proxy Statement.
(b) In obtaining the approval of shareholders referred to in this
Section 5.8, FBHC will comply, and will use reasonable efforts to cause its
officers, directors and 5% shareholders to comply, with applicable provisions of
and the rules and regulations under the Securities Act, the Exchange Act and any
other Applicable Law.
SECTION 5.9 STOCK LISTING. The Company shall, prior to the Effective
Time, notify Nasdaq with respect to the listing of the shares of Company Common
Stock to be issued pursuant to the Merger and shall obtain any approval required
by Nasdaq necessary in connection with the issuance of the Company Common Stock.
SECTION 5.10 AFFILIATES' LETTERS. No later than the 30th day following
the date hereof, FBHC shall deliver to the Company, after consultation with
legal counsel, a list of names and addresses of those persons who are
"Affiliates" of FBHC with respect to the Merger within the meaning of Rule 145
under the Securities Act. There shall be added to such list the names and
addresses of any other person (within the meaning of such Rule) which the
Company identifies (by written notice to FBHC within three business days after
receipt of such list) as possibly being a person who may be deemed to be an
"Affiliate" of FBHC within the meaning of Rule 145. FBHC shall use all
reasonable efforts to deliver, or cause to be delivered, to the Company, not
later than the Closing Date from each of the "Affiliates" of FBHC identified as
aforesaid, a letter dated as of the date of delivery thereof in the form of
Exhibit B attached hereto.
SECTION 5.11 PLAN AMENDMENTS AND PARTICIPATION IN COMPANY PLANS; OPTION
REGISTRATION.
(a) FBHC shall execute and deliver such instruments and take such other
actions as the Company may reasonably require in order to cause the amendment or
termination of any Plan on terms satisfactory to the Company and in accordance
with Applicable Law and effective as of the Effective Time. The Company agrees
that the employees of FBHC and its Subsidiaries who continue their employment
after the Effective Time (the "FBHC Employees") will be entitled to
A-37
<PAGE>
participate as newly hired employees in the employee benefit plans and programs
maintained for employees of the Company and SW Bank, in accordance with the
respective terms of such plans and programs, and the Company shall take all
actions necessary or appropriate to facilitate coverage of the FBHC Employees in
such plans and programs from and after the Effective Time, subject to the
following:
(i) Each FBHC Employee will be entitled to credit for prior
service with FBHC and its Subsidiaries for all purposes under the
employee welfare benefit plans and other employee benefit plans and
programs (other than those described in subparagraph (ii) below and any
stock option plans) sponsored by the Company and SW Bank to the extent
FBHC and its Subsidiaries sponsored a similar type of plan in which the
FBHC Employees participated immediately prior to the Effective Time.
Any pre-existing condition exclusion applicable to such plans and
programs shall be waived with respect to each FBHC Employee. For
purposes of determining an FBHC Employee's benefit for the calendar
year in which the Merger occurs under the Company's vacation program,
any vacation taken by the FBHC Employee immediately preceding the
Effective Time for the calendar year in which the Merger occurs will be
deducted from the total Company vacation benefit available to such FBHC
Employee for such calendar year. The Company further agrees to credit
each FBHC Employee for the year during which coverage under the
Company's group health plan begins, with any deductibles already
incurred during such year, under FBHC's group health plan.
(ii) Each FBHC Employee shall be entitled to credit for past
service with FBHC and its Subsidiaries for the purpose of satisfying
any eligibility or vesting periods applicable to the Company employee
benefit plans which are subject to Sections 401(a) and 501(a) of the
Code (including, without limitation, the Company's 401(k) Savings
Plan).
(b) Following the Effective Time and prior to the first date on which
"Affiliates" of FBHC may sell shares of Company Common Stock pursuant to Rule
145, the Company shall (i) cause a registration statement on Form S-8
registering the shares of Company Common Stock issuable pursuant to the exercise
of the FBHC Options to be filed and to become effective under the Securities
Act, and (ii) use its best efforts to maintain the effectiveness of such
registration statement until all FBHC Options have been exercised or have
expired.
SECTION 5.12 ASSUMPTION OF FBHC STOCK OPTIONS. FBHC shall use its
reasonable efforts to cause each of the holders of FBHC Stock Options to execute
and deliver to the Company, at least 10 days prior to the Closing Date, an
acknowledgment that such holder's FBHC Stock Option shall be converted, in
accordance with its terms, into an option to purchase a number of shares of
Company Common Stock equal to the number of shares of FBHC Common Stock subject
thereto multiplied by 1.45, at an exercise price per share equal to the exercise
price per share subject thereto divided by 1.45, consistent with the provisions
of Section 1.2 hereof.
SECTION 5.13 TERMINATION OF SEVERANCE AND CONSULTING ARRANGEMENTS. On
or prior to the Closing Date, subject to Applicable Law, FBHC shall use its
reasonable efforts to terminate those arrangements other than the Employee
Agreements (pursuant to reasonable severance arrangements and subject to any
vested rights) as the Company shall notify FBHC in writing pursuant to which
FBHC or any of its Subsidiaries is or may be obligated to make payments after
the Closing Date to
A-38
<PAGE>
any Person pursuant to any employment, consulting, severance, employment
termination or other similar agreement with any current or former officer,
director, employee or agent of FBHC or any of its Subsidiaries.
SECTION 5.14 CERTAIN NOTIFICATIONS.
(a) Each party to this Agreement shall notify the other party promptly
both orally and in writing (i) after becoming aware of any misrepresentation or
breach of warranty on its part under this Agreement, (ii) after becoming aware
of the occurrence of, or the impending or threatened occurrence of, any event
that would constitute a breach on its part of any obligation under this
Agreement or the occurrence of any event that would cause any representation or
warranty made by it herein to be false or misleading in any material respect if
such representation and warranty were restated at such time, or (ii) upon the
occurrence of, or the discovery of, any event that could reasonably be expected
to cause it to be unable to satisfy a condition to any other party's obligation
to proceed with the Merger.
(b) Each party to this Agreement shall notify the other party promptly
both orally and in writing if it becomes aware that there exists a basis for any
material suit, claim, action, investigation or proceeding of any nature to be
brought against or by or on behalf of the notifying party, or any of its
properties.
SECTION 5.15 NO SHOPPING.
(a) FBHC shall not, directly or indirectly, through any officer,
director, employee or agent or otherwise, solicit, initiate or encourage any
Acquisition Proposal, or, except as otherwise required in the opinion of Silver,
Freedman & Taff, L.L.P. or such other nationally recognized, independent counsel
in order for its Board of Directors to fulfill its fiduciary duties, participate
in any negotiation in respect of or cooperate with (including, without
limitation, by way of furnishing any nonpublic information concerning the
business, properties or assets of FBHC or its Subsidiaries or any access to such
properties or assets) any Acquisition Proposal. FBHC shall notify the Company
promptly by telephone, and thereafter promptly confirm such notification in
writing, if any such information is requested from, or any Acquisition Proposal
or inquiry with respect to any Acquisition Proposal is received by, FBHC and
shall provide the Company with a reasonably detailed description of the contents
thereof, including without limitation, the identity of the other persons or
entities involved.
(b) Unless and until FBHC shall have exercised its right to terminate
this Agreement pursuant to Section 7.1(e) hereof (or shall exercise such right
simultaneously with any of the following), no Acquisition Proposal shall be
accepted, approved, adopted or recommended by the Board of Directors of FBHC, or
presented by FBHC, or by its Board of Directors or management, to the
shareholders of FBHC for vote or approval by written consent, the Board of
Directors of FBHC shall not rescind the approval of this Agreement or any of the
transactions contemplated hereby, and no such meeting of shareholders shall be
called by FBHC or noticed for purposes of taking shareholder action with respect
to any Acquisition Proposal.
(c) Unless and until FBHC shall have exercised its right to terminate
this Agreement pursuant to Section 7.1(e) hereof, or except as otherwise
required by any Governmental Authority
A-39
<PAGE>
having jurisdiction with respect to a party, FBHC shall not prepare or assist in
the preparation of or file or assist in the filing of any notice or application
to any Governmental Authority pertaining to or seeking approval of any change in
control incident to or which would result from any Acquisition Proposal.
SECTION 5.16 NO INCONSISTENT ACTIONS; POOLING; TAX TREATMENT. None of
the parties hereto will voluntarily take or omit to take any action, the effect
of the taking or omission of which would reasonably be expected to cause any of
its representations and warranties herein to be inaccurate in any material
respect at the Closing or at any time prior to the Closing as if such
representation and warranty were restated at such time. Each party hereto shall
use all reasonable efforts to cause the Merger to be treated for financial
accounting purposes as a "pooling of interests," and shall not take, and shall
use all reasonable efforts to prevent any Affiliate of such party from taking,
any actions which could prevent the Merger from being treated as such for
financial accounting purposes. Each party hereto shall use all reasonable
efforts to cause the Merger and the Bank Merger to qualify, and shall not take,
and shall use all reasonable efforts to prevent any Affiliate of such party from
taking, any actions which could prevent the Merger or the Bank Merger from
qualifying, as a reorganization under the provisions of Section 368(a) of the
Code.
SECTION 5.17 TAXES; CONSENT. FBHC shall prepare and timely file all
Returns and amendments thereto required to be filed by FBHC and its Subsidiaries
on or before the Closing Date. The Company shall have a reasonable opportunity
to review all Returns and amendments thereto prior to filing. FBHC shall pay and
discharge all Taxes, assessments and governmental charges upon or against it or
any of its properties or assets, and all liabilities at any time existing,
before the same shall become delinquent and before penalties accrue thereon,
except to the extent and as long as: (a) the same are being contested in good
faith and by appropriate proceedings pursued diligently and in such a manner as
not to cause any Material Adverse Effect on FBHC; and (b) FBHC shall have set
aside on its books reserves (segregated to the extent required by sound
accounting practice) in the amount of the demanded principal imposition
(together with interest and penalties relating thereto, if any).
SECTION 5.18 TRANSACTIONS WITH AFFILIATES AND INSIDERS. From the date
hereof until the Effective Time, FBHC shall not, without the prior written
consent of the Company, make, or allow any of its Subsidiaries to make, any loan
or establish any relationship, of the type or engage or propose to engage in any
transaction of the type that would be required to be disclosed on Schedule 3.19
had such loan been made, relationship been established or transaction been
entered into or proposed as of the date hereof.
SECTION 5.19 CLASSIFICATION OF LOANS. During the period from the
execution of this Agreement until the Effective Time, FBHC (i) to the extent
permitted by Applicable Law, shall promptly inform the Company of the amounts
and categories of any loans, leases or other extensions of credit that are
classified by any Governmental Authority or by the Association as "Other Assets
Especially Mentioned," "Substandard," "Doubtful," "Loss" or any comparable
classification; (ii) shall classify all assets in accordance with OTS Standards
and its own current internal classification system; and (iii) shall apply the
standards regarding accrual of interest set forth in the then most recent Thrift
Financial Report Instructions of the Federal Financial Institutions Examination
Council.
A-40
<PAGE>
SECTION 5.20 COMPLIANCE WITH APPLICABLE LAW. During the period from the
date of this Agreement until the Effective Time, FBHC shall take any and all
actions reasonably requested by the Company in order to conform the conduct of
the business of FBHC and its Subsidiaries, including, without limitation, the
business of originating, acquiring, holding or disposing of assets and
liabilities, with the requirements of any Applicable Law.
SECTION 5.21 CERTAIN ACCOUNTING ADJUSTMENTS. After the approval of the
Shareholders and all of the Regulatory Approvals have been obtained, FBHC shall,
if requested by the Company, make such accounting entries prior to the Effective
Time as the Company may reasonably request in order to conform the accounting
records of FBHC to the accounting policies and practices of the Company and its
Subsidiaries, subject to compliance with generally accepted accounting
principles and all appropriate regulatory requirements, such adjustments to be
effective immediately prior to the Effective Time. No such adjustment shall of
itself constitute grounds for termination of this Agreement or an acknowledgment
by FBHC (i) of any adverse circumstances for purposes of determining whether the
conditions to the Company's obligations under this Agreement have been
satisfied, or (ii) that such adjustment is required for purposes of determining
satisfaction of the condition to the Company's obligations under this Agreement
set forth in Section 6.2(a) hereof or (iii) that such adjustment has any bearing
on the number of shares of Company Common Stock issuable hereunder.
SECTION 5.22 ENVIRONMENTAL INVESTIGATION; RIGHT TO TERMINATE AGREEMENT.
(a) The Company and its designated consultants, agents and
representatives shall have the right to the same extent that FBHC has such
right, but not the obligation or responsibility, at the Company's expense, to
inspect any FBHC Real Property or Real Estate Owned, including, without
limitation, conducting asbestos surveys and sampling, environmental assessments
and investigation, and other environmental surveys and analyses including soil
and ground sampling ("Environmental Inspections") at any time on or prior to [30
days after execution of Agreement], 1998. The Company shall notify FBHC prior to
any physical inspections of any such properties, and FBHC may place reasonable
restrictions on the time of such inspections. (If, as a result of any such
Environmental Inspection, further investigation ("secondary investigation")
including, without limitation, test borings, soil, water and other sampling is
deemed desirable by the Company, the Company shall (i) notify FBHC of any
property for which it intends to conduct such a secondary investigation and the
reasons for such secondary investigation, and (ii) commence such secondary
investigation, on or prior to [60 days after execution of Agreement], 1998. All
secondary investigations must be approved in advance by FBHC. The Company shall
give reasonable notice to FBHC of such secondary investigations, and FBHC may
place reasonable time and place restrictions on such secondary investigations.
(b) FBHC agrees to indemnify and hold harmless the Company for any
claims for damage to property, or injury or death to persons, made as a result
of any Environmental Inspection or secondary investigation conducted by the
Company or its agents, which damage or injury is attributable solely to the
negligent actions or negligent omissions of FBHC or its agents. The Company
agrees to indemnify and hold harmless FBHC for any claims for damage to
property, or injury or death to persons, attributable solely to the negligent
actions or omissions of the Company or its agents in performing any
Environmental Inspection or secondary investigation except to the
A-41
<PAGE>
extent caused in whole or in part by the negligence of FBHC. In addition, the
Company shall, after any physical testing, restore such tested property to its
original condition at the Company's sole cost and expense. The Company shall not
have any liability or responsibility of any nature whatsoever for the results,
conclusions or other findings related to any Environmental Inspection, secondary
investigation or other environmental survey. If this Agreement is terminated,
then except as otherwise required by law, reports to any governmental authority
of the results of any Environmental Inspection, secondary investigation or other
environmental survey shall be made by FBHC and not by the Company. The Company
shall make no such report prior to the Closing unless required to do so by law,
and in such case will give FBHC reasonable notice of the Company's intentions.
(c) The Company shall have the right to terminate this Agreement if (i)
FBHC has refused to allow the Company to conduct an Environmental Inspection or
secondary investigation in a manner that the Company reasonably considers
necessary; or (ii) the Environmental Inspection, secondary investigation or
other environmental survey identifies any past or present events, conditions or
circumstances (including but not limited to the presence of any
asbestos-containing material or underground storage tank) that would require
remedial or cleanup action at the expense of FBHC or any of its Subsidiaries in
an aggregate estimated cost which is in excess of $500,000 on an after-tax
basis. On or prior to [75 days after execution of Agreement], 1998, the Company
shall advise FBHC in writing if the Company intends to terminate this Agreement
because the Company disapproves of the results of the Environmental Inspection,
secondary investigation or other environmental survey.
(d) FBHC agrees to make available to the Company and its consultants,
agents and representatives all documents and other material relating to
environmental conditions of any FBHC Real Property and Real Estate Owned
including, without limitation, the results of other environmental inspections
and survey. FBHC also agrees that all engineers and consultants who prepared or
furnished such reports may discuss such reports and information with the Company
and shall be entitled to certify the same in favor of the Company and its
consultants, agents and representatives and make all other data available to the
Company and its consultants, agents and representatives.
SECTION 5.23 INDEMNIFICATION OF DIRECTORS AND OFFICERS; INSURANCE. (a)
The indemnification provisions contained in the Certificate of Incorporation and
Bylaws of the Company, the Articles of Association and Bylaws of SW Bank, the
Articles of Incorporation and Bylaws of Fairview and the organizational
documents of Mitchell shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at any time prior to the
Effective Time were directors or officers of FBHC or any of its Subsidiaries in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), unless such modification is required by Applicable Law.
(b) From and after the Effective Time, the Company shall indemnify,
defend and hold harmless the present and former directors, officers, employees
and agents of FBHC and its Subsidiaries (collectively, the "Indemnified
Parties") against all losses, expenses, claims, damages, liabilities or amounts
(including all amounts paid in settlement with the approval of the Company,
which approval shall not unreasonably be withheld) in connection with, any
claim, action, suit,
A-42
<PAGE>
proceeding or investigation (a "Claim"), based in whole or in part on the fact
that such person is or was a director, officer, employee or agent of FBHC or any
of its Subsidiaries and arising out of actions or omissions occurring at or
prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), in each case to the fullest extent permitted
under applicable law (and shall pay reasonable expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
fullest extent permitted under applicable law, upon receipt from the Indemnified
Party to whom expenses are advanced an undertaking to repay such advances, if
any, contemplated by Applicable Law).
(c) Without limiting the foregoing, in the event any Claim is brought
against any Indemnified Party (whether arising before or after the Effective
Time) after the Effective Time (i) the Indemnified Parties may retain FBHC's
regularly engaged independent legal counsel, or other independent legal counsel
satisfactory to them provided that such other counsel shall be reasonably
acceptable to the Company, (ii) the Company shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received and (iii) the Company will use its reasonable efforts to
assist in the vigorous defense of any such matter, provided that the Company
shall not be liable for any settlement of any Claim effected without its written
consent, which consent shall not be unreasonably withheld. Any Indemnified Party
wishing to claim indemnification under this Section 5.23, upon learning of any
such Claim, shall notify the Company (although the failure so to notify the
Company shall not relieve the Company from any liability which the Company may
have under this Section 5.23 except to the extent such failure prejudices the
Company or SW Bank), and shall deliver to the Surviving Corporation the
undertaking to repay such advances, if any, contemplated by Applicable Law. The
Indemnified Parties as a group may retain one law firm to represent them with
respect to each such matter unless there is, under applicable standards of
professional conduct (as determined by counsel to the Indemnified Parties), a
conflict on any significant issue between the positions of any two or more
Indemnified Parties, in which event, such additional counsel as may be required
may be retained by the Indemnified Parties.
(d) After the Effective Time, the Company shall, at its election,
either cause to be maintained in effect FBHC's existing prepaid directors' and
officers' liability insurance policy, until its expiration date, or convert such
policy into "tail" coverage through such expiration date with terms and
conditions substantially similar to such current insurance policy, but only
covering claims arising from facts or events which occurred before the Effective
Time (including the transactions which are the subject of this Agreement).
(e) This Section 5.23 is intended to be for the benefit of, and shall
be enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on the Company and the Surviving
Corporation and their representative successors and assigns.
SECTION 5.24 ACCESS TO INFORMATION OF THE COMPANY.
(a) During the period from the date hereof until the Effective Time,
the Company shall provide the information and access described in paragraphs (b)
and (c) below during normal business hours, upon reasonable written or oral
notice and in such manner as will not unreasonably interfere with the conduct of
the Company's or SW Bank's business.
A-43
<PAGE>
(b) To the extent permitted by law and consistent with Section 5.24(a),
the Company shall authorize and permit FBHC and its representatives, accountants
and counsel to have full and complete access to all of the properties, books,
records, branch operating reports, branch audit reports, customer accounts and
records, any reports of Governmental Authorities and responses thereto,
operating instructions and procedures (and all correspondence with Governmental
Authorities), tax returns, tax settlement letters, financial statements and
other financial information (including the work papers of PricewaterhouseCoopers
used to audit the Company's balance sheets as of December 31, 1997 and 1996 and
its statements of income, changes in shareholders' equity and cash flows for the
years ended December 31, 1997, 1996 and 1995), contracts and documents of the
Company and SW Bank and all other information with respect to the business
affairs, financial condition, assets and Liabilities of the Company and SW Bank
as FBHC may from time to time reasonably request, to make copies of such books,
records and other documents and to discuss the business affairs, condition
(financial and otherwise), assets and Liabilities of the Company and SW Bank
with such third persons, including, without limitation, the directors, officers,
employees, agents, accountants (including PricewaterhouseCoopers) and attorneys
of the Company and SW Bank, as FBHC considers reasonably necessary or
appropriate for the purposes of familiarizing itself with the business and
operations of the Company and SW Bank, determining any breach of the
representations, warranties and covenants of the Company and SW Bank set forth
herein, obtaining any necessary orders, consents or approvals of the
transactions contemplated by this Agreement by Governmental Authorities and
conducting further evaluations of the assets and Liabilities of the Company and
SW Bank.
(c) For purposes of FBHC's investigation pursuant to this Section 5.24,
the Company shall use its reasonable efforts to cause any service bureau,
accountant, third party servicer or other third party under contract to it to
furnish to FBHC and its authorized representatives, at FBHC's cost, full access
to such party's premises and all of its books, records and properties,
including, without limitation, all loan, investment, regulatory, financial,
accounting, tax and property records and files relating to the operations of the
Company and SW Bank including, without limitation, all files, computer records
and customer information, relating to assets serviced by third parties. The
Company shall use its reasonable efforts to cause any service bureau,
accountant, third party servicer or other third party to provide adequate space
and facilities and the cooperation of its personnel at FBHC's cost, including,
without limitation, copying facilities, to the end that such examination shall
be completed expeditiously, completely and accurately. Without limiting any of
the foregoing, FBHC and its authorized representatives shall be specifically
entitled to conduct at FBHC's own expense (and the Company and SW Bank shall use
their reasonable efforts to enable them to conduct) such tests of accounts
receivable and other matters as they deem appropriate. Any examination or
investigation made by FBHC or other Persons as contemplated by this Section
shall not affect any of the representations and warranties hereunder.
SECTION 5.25 FURTHER ASSURANCES. Each party hereto shall execute and
deliver such instruments and take such other actions as the other party may
reasonably require in order to carry out the intent of this Agreement.
A-44
<PAGE>
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 CONDITIONS TO FBHC'S OBLIGATION TO CLOSE. The obligation of
FBHC to consummate the transactions contemplated by this Agreement is subject to
the satisfaction or waiver on or before the Closing Date (or as otherwise
provided below) of all of the following conditions.
(a) REPRESENTATIONS AND WARRANTIES.
(i) Except for such breaches of the representations and
warranties contained in Article IV hereof as have not had, and cannot
reasonably be expected to have, in the aggregate, a Material Adverse
Effect on the Company, all representations and warranties of the
Company contained in Article IV of this Agreement shall be true and
correct on and as of the Closing Date with the same force and effect as
though such representations and warranties were being made on and as of
the Closing Date (except to the extent such representations and
warranties speak as of a specific date, in which case they shall be
deemed to have been made as of the Closing Date but speaking only as of
such specific date). Solely for purposes of this Section and in
determining compliance with the condition set forth herein, any
representation and warranty made by the Company in this Agreement shall
be read and interpreted as if the qualification set therein with
respect to materiality or Material Adverse Effect were not contained
therein;
(ii) The Company shall have performed and satisfied in all
material respects all covenants and conditions required by this
Agreement to be performed and satisfied at or prior to the Closing
Date;
(iii) There shall not have been instituted or threatened any
suit, claim, action, investigation or proceeding of any nature by any
Person that, individually or when aggregated with other suits, claims,
actions, investigations or proceedings, if any, and breaches, if any,
of the representations and warranties contained in Article IV hereof,
has had, or can reasonably be expected to have, a Material Adverse
Effect on the Company; and
(iv) There shall have been delivered to FBHC on the Closing
Date, a certificate executed by the Chief Executive Officer, the
President or any Executive Vice President, of the Company certifying
compliance with all the provisions of this Section 6.1(a).
(b) REGULATORY APPROVALS. All of the Regulatory Approvals for the
transactions contemplated by this Agreement shall have been obtained; such
Regulatory Approvals shall be in effect and no proceedings shall have been
initiated or threatened with respect thereto; all applicable waiting periods
with respect to such Regulatory Approvals shall have expired; and all conditions
and requirements prescribed by Applicable Law or by such Regulatory Approvals
shall have been satisfied.
(c) REGISTRATION STATEMENT. The Registration Statement, as it may have
been amended or supplemented, shall have become effective and no stop order
suspending the effectiveness of such
A-45
<PAGE>
Registration Statement shall have been issued and shall remain in effect, and no
proceedings for that purpose shall have been initiated or threatened by the SEC
the basis for which shall remain in effect.
(d) BOARD AND SHAREHOLDER APPROVAL.
(i) The Company shall have furnished FBHC with:
(A) a certified copy of the resolutions duly adopted
by the Board of Directors of the Company approving this
Agreement, the Merger and the transactions contemplated hereby
and thereby; and
(B) certified copies of resolutions duly adopted by
the Board of Directors of SW Bank and the Company, as the sole
shareholder of SW Bank, approving the Bank Merger; and
(ii) At least a majority of the outstanding shares of FBHC
Common Stock entitled to vote shall have approved this Agreement, the
Merger and the transactions contemplated hereby and thereby.
(e) NO VIOLATIONS OF LAW, LITIGATION. The transactions contemplated by
this Agreement shall not violate any Applicable Law. There shall be no pending
or threatened suits, claims, actions, investigations or proceedings by any
Person or Governmental Authority (or determinations by any Governmental
Authority) challenging or in any manner seeking to restrict or prohibit the
transactions contemplated hereby or seeking to obtain any material damages
against any Person as a result of the transactions contemplated hereby.
(f) OPINIONS OF COUNSEL. FBHC shall have received an opinion addressed
to them of Vinson & Elkins L.L.P., counsel to the Company and SW Bank, dated the
Closing Date, substantially in the form of Exhibit C hereto.
(g) TAX OPINION. FBHC shall have received from Silver, Freedman & Taff,
an opinion of counsel reasonably satisfactory to FBHC to the effect that for
federal income tax purposes (i) the Merger will constitute a tax-free
reorganization within the meaning of Section 368(a) of the Code; (ii) the
Company and FBHC will each be a party to that reorganization; (iii) no gain or
loss will be recognized to the former Shareholders of FBHC who receive Company
Common Stock in exchange for their FBHC Common Stock, except to the extent they
receive cash; (iv) the basis of the Shareholders in the Company Common Stock
received in the Merger will be the same as the basis of FBHC Common Stock
surrendered in exchange therefor (reduced by the excess, if any, of the cash
received over the amount of gain recognized on the exchange); and (v) the
holding period of the shares of Company Common Stock received by a Shareholder
will include the holding period of the shares of FBHC Common Stock surrendered
therefor, provided that such FBHC Common Stock was held as a capital asset by
such Shareholder. In rendering any such opinion, such counsel may require and,
to the extent they deem necessary or appropriate, may rely upon representations
made in certificates of officers of FBHC and the Company, affiliates of the
foregoing, and others.
A-46
<PAGE>
SECTION 6.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS TO CLOSE. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the satisfaction or waiver on or before the Closing
Date (or as otherwise provided below) of all of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS.
(i) Except for such breaches of the representations and
warranties contained in Article III hereof as have not had, and cannot
reasonably be expected to have, in the aggregate, a Material Adverse
Effect on FBHC, all representations and warranties of FBHC contained in
Article III of this Agreement shall be true and correct on and as of
the Closing Date, with the same force and effect as though such
representations and warranties were being made on and as of the Closing
Date (except to the extent such representations and warranties speak as
of a specific date, in which case they shall be deemed to have been
made as of the Closing Date but speaking only as of such specific
date). Solely for purposes of this Section and in determining
compliance with the condition set forth herein, any representation and
warranty made by FBHC in this Agreement shall be read and interpreted
as if the qualification stated therein with respect to materiality or
Material Adverse Effect were not contained therein;
(ii) FBHC shall have performed and satisfied in all material
respects all covenants and conditions required by this Agreement to be
performed and satisfied at or prior to the Closing Date;
(iii) There shall not have been instituted or threatened any
suit, claim, action, investigation or proceeding of any nature by any
Person that would have been required to be listed on Schedule 3.14(a)
hereto had such suit, claim, action or proceeding been instituted or
threatened as of the date of this Agreement, and that, individually or
in the aggregate, or when aggregated with the breaches, if any, of
representations and warranties contained in Article III hereof, has
had, or can reasonably be expected to have, a Material Adverse Effect
on FBHC; and
(iv) There shall have been delivered to the Company on the
Closing Date a certificate executed by the Chief Executive Officer of
FBHC certifying compliance with all the provisions of this Section
6.2(a).
(b) REGULATORY APPROVALS. All the Regulatory Approvals for the
transactions contemplated by this Agreement shall have been obtained without the
imposition of any non-standard conditions that are or would become applicable to
the Company, the Surviving Corporation, SW Bank or any other Subsidiary of the
Company after the Effective Time that the Company in good faith determines would
be unduly burdensome (in the context of the transactions contemplated by this
Agreement) upon the conduct of the business of the Company, the Surviving
Corporation, or SW Bank, as such businesses have been conducted prior to the
Effective Time or as such businesses are anticipated to be conducted after the
Effective Time, other than activity restrictions resulting from the activities
of FBHC or its Subsidiaries constituting non-permissible activities of a bank or
a bank holding company. All such Regulatory Approvals shall be in effect and
A-47
<PAGE>
no proceedings shall have been instituted or threatened with respect thereto;
all applicable waiting periods with respect to such Regulatory Approvals shall
have expired; and all conditions and requirements prescribed by Applicable Law
or by such Regulatory Approvals shall have been satisfied. All other consents,
approvals, waivers and other actions required from any other Person pursuant to
the Scheduled Contracts in connection with the transactions contemplated by this
Agreement shall have been obtained in form satisfactory to the Company, except
where the failure to obtain such consents, approvals and waivers, and to take
such other action, will not result in a Material Adverse Effect.
(c) REGISTRATION STATEMENT. The Registration Statement, as it may have
been amended or supplemented, shall have become effective and shall remain in
effect, and no stop order suspending the effectiveness of such Registration
Statement shall have been issued, and no proceedings for that purpose shall have
been initiated or threatened by the SEC the basis for which shall remain in
effect.
(d) BOARD AND SHAREHOLDER APPROVAL.
(i) The holders of at least a majority of the outstanding
shares of FBHC Common Stock entitled to vote thereon shall have
approved this Agreement, the Merger and the transactions contemplated
hereby and thereby; and
(ii) FBHC shall have furnished the Company with:
(A) a certified copy of the resolutions duly adopted
by the Board of Directors of FBHC approving this Agreement,
the Merger and the transactions contemplated hereby and
thereby and directing the submission thereof to a vote of
FBHC's shareholders;
(B) a certified copy of resolutions duly adopted by
the holders of at least a majority of the outstanding shares
of FBHC Common Stock entitled to vote thereon approving this
Agreement, the Merger and the transactions contemplated hereby
and thereby; and
(C) certified copies of resolutions duly adopted by
the Board of Directors of the Association and by FBHC, as the
sole shareholder of the Association, approving the Bank
Merger.
(e) NO VIOLATIONS OF LAW; NO LITIGATION. The transactions contemplated
by this Agreement shall not violate any Applicable Law. There shall be no
pending or threatened suits, claims, actions, investigations, or proceedings by
any Person or Governmental Authority (or determinations by any Governmental
Authority) challenging or in any manner seeking to restrict or prohibit the
transactions contemplated hereby or seeking to obtain any damages against any
Person as a result of the transactions contemplated hereby.
A-48
<PAGE>
(f) OPINION OF COUNSEL. The Company shall have received an opinion
addressed to them of Silver, Freedman & Taff, L.L.P., special counsel to FBHC,
dated the Closing Date, substantially in the form of Exhibit D hereto.
(g) TAX OPINION. The Company shall have received from Vinson & Elkins
L.L.P. an opinion of counsel, to the effect that for federal income tax purposes
(i) the Merger will constitute a tax-free reorganization within the meaning of
Section 368(a) of the Code; (ii) the Company and FBHC will each be a party to
that reorganization; (iii) no gain or loss will be recognized by the Company or
FBHC by reason of the Merger; (iv) the Bank Merger will constitute a tax free
reorganization within the meaning of Section 368(a) of the Code; (v) SW Bank and
the Association will each be a party to that reorganization; and (vi) no gain or
loss will be recognized by SW Bank or the Association by reason of the Bank
Merger. In rendering any such opinion, such counsel may require and, to the
extent they deem necessary or appropriate, may rely upon representations made in
certificates of officers of FBHC and the Company, affiliates of the foregoing,
and others.
(h) BANKING CRISIS. There shall not have occurred and be continuing any
general banking moratorium or general suspension of payments in respect of banks
in the United States, or any event that significantly and adversely affects the
normal functioning or operation of the convertibility of major European
currencies into United States dollars.
(i) FBHC STOCK OPTIONS. Each of the holders of FBHC Stock Options shall
have executed and delivered to the Company the agreement contemplated by Section
5.12 hereof.
(j) RELEASES OF OFFICERS AND DIRECTORS.
(i) Each director of FBHC and its Subsidiaries shall have
delivered to the Company an instrument, substantially in the form of
Exhibit E hereto, dated as of the Effective Time, releasing FBHC and
its Subsidiaries from any and all claims of such directors (except as
to their deposits and accounts at FBHC and its Subsidiaries and as to
their rights under any benefit plans of FBHC, and as to rights of
indemnification pursuant to Applicable Law, this Agreement and the
organizational documents of FBHC and its Subsidiaries, which shall
survive the Merger) and shall have delivered to the Company their
resignations as directors of FBHC and its Subsidiaries.
(ii) Each executive officer of FBHC and its Subsidiaries shall
have delivered to the Company an instrument, substantially in the form
of Exhibit F hereto in form and substance satisfactory to the Company
and dated the Effective Time, releasing FBHC and its Subsidiaries from
any and all claims of such officers (except as to deposits and
accounts, and as to their rights under any Employee Agreements,
severance arrangements or benefit plans of FBHC, accrued compensation
permitted by their respective agreements and rights of indemnification
pursuant to Applicable Law, this Agreement and the organizational
documents of FBHC and its Subsidiaries, which shall survive the
Merger).
(k) AFFILIATES' LETTERS. Each Affiliate of FBHC shall have delivered to
the Company an executed copy of the letter contemplated by Section 5.10 hereof.
A-49
<PAGE>
(l) POOLING OF INTERESTS. The Merger shall qualify as a "pooling of
interests" for financial accounting purposes, and the Company shall have
received appropriate opinions from PricewaterhouseCoopers LLP dated the Closing
Date to that effect.
(m) AGREEMENT AS TO MITCHELL EXCHANGE. The Company shall have received
from the holder of the equity interests in Mitchell which are not held by the
Association (the "Mitchell Equity Holder") an agreement in form and substance
satisfactory to the Company to the effect that the Mitchell Equity Holder will
not cause the Mitchell Exchange to occur at a time that would cause the Merger
to not qualify as a "pooling of interests" for financial accounting purposes.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. This Agreement and the obligations of the
parties hereunder may be terminated:
(a) By mutual written consent of the parties at any time whether or not
theretofore approved by FBHC's shareholders;
(b) By the Company or FBHC upon the expiration of 15 days after any
Governmental Authority having jurisdiction over any of the transactions set
forth herein indicates that it intends to deny or to refuse to grant any
Regulatory Approval; provided, however, that in the case of a denial or refusal
to grant approval by any Governmental Authority other than the OCC or the
Federal Reserve Board, the parties shall use their reasonable efforts during
such 15 day period to obtain the withdrawal of such denial or refusal;
(c) By the Company immediately upon the expiration of 30 days from the
date that the Company has given notice to FBHC of FBHC's material failure to
satisfy any covenant or agreement herein, or of FBHC's breach of any warranties
or representations contained herein that in the aggregate represent a change in
FBHC from that represented to the Company that is equivalent to a Material
Adverse Effect on FBHC; PROVIDED, HOWEVER, that no termination under this
Section 7.1(c) shall take effect if FBHC shall have fully and completely
corrected the grounds for termination as specified in the aforementioned notice
within the earlier to occur of (i) 30 days after the date of receipt of such
notice and (ii) the date specified in paragraph (h) below, and PROVIDED FURTHER,
HOWEVER, that solely for purposes of this Section 7.1(c), any representation and
warranty made by FBHC in this Agreement shall be read and interpreted as if the
qualification stated therein with respect to materiality or Material Adverse
Effect were not contained therein;
(d) By FBHC immediately upon the expiration of 30 days from the date
that FBHC has given written notice to the Company of the Company's material
failure to satisfy any covenant or agreement contained herein, or of the
Company's breach of any warranties or representations contained herein that in
the aggregate represent a change in the Company from that represented to FBHC
that is equivalent to a Material Adverse Effect on the Company; PROVIDED,
HOWEVER, that no termination under this Section 7.1(d) shall take effect if the
Company shall have fully and completely corrected the grounds for termination as
specified in the aforementioned notice within the earlier to
A-50
<PAGE>
occur of (i) 30 days after the date of receipt of such notice and (ii) the date
specified in paragraph (h) below, and PROVIDED FURTHER, HOWEVER, that solely for
purposes of this Section 7.1(d), any representation and warranty made by the
Company in this Agreement shall be read and interpreted as if the qualification
stated therein with respect to materiality or Material Adverse Effect were not
contained therein;
(e) By either the Company or FBHC (provided that if the terminating
party is FBHC, FBHC shall not be in material breach of any of its obligations
under this Agreement) if any approval of the Shareholders required for the
consummation of the Merger shall not have been obtained by reason of the failure
to obtain the required vote at the Shareholders' Meeting or any adjournment or
postponement thereof or the Board of Directors of FBHC has determined not to
recommend approval of the Merger to the Shareholders pursuant to the exercise of
its fiduciary duties;
(f) By the Company, if there shall have occurred since June 30, 1998,
any change in or effect on the business of FBHC or its Subsidiaries or any
occurrence, development or event of any nature that has had or may reasonably be
expected to have, together with all such other changes and effects, a Material
Adverse Effect on FBHC;
(g) By FBHC, if there shall have occurred since June 30, 1998, any
change in or effect on the business of the Company or any occurrence,
development or event of any nature that has had or may reasonably be expected to
have, together with all such other changes and effects, a Material Adverse
Effect on the Company; or
(h) Notwithstanding any of the foregoing, immediately by a party hereto
that is not in default hereunder, if the Closing has not occurred on or before
March 31, 1999.
SECTION 7.2 EFFECT OF TERMINATION. In the event of a termination under
Section 7.1, this Agreement shall become void, and there shall be no liability
on the part of any party or any of such party's directors, officers, employees,
agents or shareholders to the other party or such other party's directors,
officers, employees, agents or shareholders; PROVIDED, HOWEVER, that the
obligations of any party under Sections 5.7, 5.22, 8.9, 8.10 and 8.11 shall
survive the termination of this Agreement; and PROVIDED FURTHER that a
termination under Section 7.1(c) or (d) shall not relieve any party of any
liability for breach of this Agreement or for any misrepresentation hereunder as
of the date of this Agreement or be deemed to constitute a waiver of any remedy
available for such breach or misrepresentation. Liability, if any, for an
inadvertent or non-intentional breach or misrepresentation under the foregoing
provisions shall be limited to the recovery of out-of-pocket costs and expenses
and shall not include punitive, special or consequential damages. The parties
acknowledge and agree that breaches of representations and warranties that in
the aggregate do not give rise to a right of termination hereunder shall not
give any right to any party as to offset or any other remedy or right hereunder.
ARTICLE VIII
MISCELLANEOUS
A-51
<PAGE>
SECTION 8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations, warranties, conditions, covenants and agreements of the parties
contained in this Agreement or in any instrument of transfer or other document
delivered in connection with the transactions contemplated hereby shall survive
the Closing, except for those covenants and agreements that are contemplated by
their terms to be performed after the Closing. No party, including any of its
directors, officers, employees, agents and shareholders, shall be under any
liability whatsoever with respect to such representations, warranties,
conditions and covenants following the Closing, except that the Company shall be
responsible for all of its covenants and agreements that are contemplated by
their terms to be performed after the Closing.
SECTION 8.2 NOTICES. Any notice or communication required or permitted
hereunder shall be sufficiently given if in writing and (i) delivered in person
or by overnight delivery or courier service (ii) sent by facsimile or (iii)
deposited in the United States mail, by certified mail postage prepaid and
return receipt requested (provided that any notice given pursuant to clause (ii)
is also confirmed by the means described in clause (i) or (iii)), as follows:
To the Company:
Southwest Bancorporation of Texas, Inc.
4400 Post Oak Parkway
Houston, Texas 77027
Attention: Paul B. Murphy, Jr.
President and Chief Operating Officer
Fax: (713) 439-5905
With a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
Attention: Michael P. Finch, Esq.
Fax: (713) 615-5282
To FBHC:
Fort Bend Holding Corp.
3400 Avenue H
Rosenberg, Texas 77471
Attention: Lane Ward
Vice Chairman, President
and Chief Executive Officer
Fax: (281) 238-7071
With a copy to:
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
A-52
<PAGE>
7th Floor, East Tower
Washington, D. C. 20005
Attention: Martin L. Meyrowitz, P.C.
Fax: (202) 682-0354
Such notice or other communication shall be deemed given when so
delivered personally, or sent by facsimile transmission, or, if sent by
overnight delivery or courier service, the business day after being sent from
within the United States, or if mailed, four days after the date of deposit in
the United States mails.
SECTION 8.3 GOVERNING LAW. Except as otherwise provided in any exhibit
hereto, this Agreement and the legal relations between the parties shall be
governed by and construed in accordance with the internal laws of the State of
Texas without taking into account provisions regarding choice of law.
SECTION 8.4 ENTIRE AGREEMENT. All exhibits and schedules (including,
without limitation, the Disclosure Schedule) referred to in this Agreement are
integral parts hereof, and this Agreement, together with such exhibits and
schedules (including, without limitation, the Disclosure Schedule), constitutes
the entire agreement among the parties hereto with respect to the matters herein
and therein and supersedes all prior agreements and understandings between the
parties with respect thereto, including, without limitation, the Letter
Agreement dated September 15, 1998 between FBHC and the Company.
SECTION 8.5 AMENDMENTS AND WAIVERS. This Agreement may not be amended
except upon a written consent authorized and approved by the board of directors
of each party hereto. By an instrument in writing, the Company may waive
compliance by FBHC and FBHC may waive compliance by the Company with any term or
provision of this Agreement that such other party was or is obligated to comply
with or perform; PROVIDED, HOWEVER, that such waiver shall not operate as a
waiver of, or estoppel with respect to, any other or subsequent failure. No
failure to exercise and no delay in exercising any right, remedy or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy or power hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy or power provided
herein or by law or in equity. The waiver by any party of the time for
performance of any act or condition hereunder does not constitute a waiver of
the act or condition itself. Unless required by Applicable Law, no such waiver,
amendment or modification effected after approval of this Agreement by the
shareholders of FBHC shall require any further shareholder approval.
SECTION 8.6 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
SECTION 8.7 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall constitute one and the same instrument.
A-53
<PAGE>
SECTION 8.8 INTERPRETATION OF AGREEMENT. The article, section and other
headings used in this Agreement are for reference purposes only and shall not
constitute a part hereof or affect the meaning or interpretation of this
Agreement. References herein to the transactions contemplated by this Agreement
or other similar words shall include, without limitation, the Merger, the Bank
Merger and all of the other transactions contemplated hereunder.
SECTION 8.9 EXPENSES.
(a) Subject to paragraphs (b) through (d) below and except as otherwise
provided in this Agreement, whether or not the Merger is consummated, all costs
and expenses incurred in connection with the Merger and the Bank Merger and all
other terms and conditions of this Agreement, and the transactions contemplated
hereby, will be paid by the party incurring such costs and expenses.
(b) In the event this Agreement is terminated pursuant to Section 7.1
hereof, all out-of-pocket costs and expenses of the parties relating to the
printing, filing, shipping and distribution of the Registration Statement and
Prospectus/Proxy Statement shall be borne equally by the Company, on the one
hand, and FBHC, on the other hand.
(c) In the event this Agreement is terminated pursuant to Section
7.1(e) hereof and the Board of Directors of FBHC has either failed to recommend,
or has recommended against, approval of the Merger because of the receipt by
FBHC of an Acquisition Proposal, the parties agree that FBHC shall pay to the
Company, concurrently with such termination, a termination fee of $3,000,000
(the "Damages"). The Company hereby agrees that its sole remedy in such case
shall be such termination fee.
FBHC acknowledges that the agreements contained in this Section 8.9(c)
are an integral part of the transactions contemplated in this Agreement, and
that without these agreements, the Company would not enter into this Agreement;
accordingly, if FBHC fails to promptly pay such termination fee when due, FBHC
shall in addition thereto pay to the Company all costs and expenses (including
fees and disbursements of counsel) incurred in collecting such termination fee,
together with interest thereon (or any unpaid portion thereof) from the date
such payment was required to be made to the date such payment is received by the
Company at the prime rate of SW Bank as in effect from time to time during such
period.
(d) Except as provided in paragraph (c) above, the rights and remedies
provided in this Section 8.9 are cumulative and not exclusive of any rights and
remedies provided by Applicable Law.
SECTION 8.10 ATTORNEYS' FEES. In addition to the rights granted
pursuant to Section 8.9, if any legal action is brought for the enforcement of
this Agreement or because of an alleged dispute, breach or default in connection
with this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in such action or
proceeding, in addition to any other relief to which it may be entitled.
SECTION 8.11 PUBLICITY. The parties hereto will consult with each other
with regard to the terms and substance of any and all press releases,
announcements or other public statements with respect to the transactions
contemplated hereby. The parties agree further that neither of them will
A-54
<PAGE>
release any such press release, announcement or other public statement without
the prior approval of the other party, unless such release is required by law
and the parties cannot reach agreement upon a mutually acceptable form of
release, in which event the party releasing the information, announcement or
public statement shall not be deemed to be in breach of this Agreement. The
parties agree further that such approval will not be unreasonably withheld, and
they pledge to make a good faith effort to reach agreement expeditiously on the
terms of any such press release, announcement or other public statement.
SECTION 8.12 BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
SECTION 8.13 THIRD PARTIES. Except as otherwise provided herein, each
party intends that this Agreement shall not benefit or create any right or cause
of action or remedy of any nature whatsoever in any Person other than the
parties to this Agreement, including, without limitation, conferring upon any
Person the right to remain an employee of FBHC, the Company or any of their
Subsidiaries, or restraining FBHC, the Surviving Corporation or any of their
Subsidiaries from changing the terms and conditions of employment of any Person
or terminating such Person's employment, following the Effective Time.
SECTION 8.14 GENDER; NUMBER. Whenever the context of this Agreement
requires, the masculine gender shall include the feminine or neuter, and the
singular number shall include the plural.
SECTION 8.15 CERTAIN DEFINITIONS.
"ACQUISITION PROPOSAL" shall mean any proposal for a merger or other
business combination involving FBHC or for the acquisition of a substantial
equity interest in, or a substantial portion of the assets of, FBHC.
"AFFILIATE" or "ASSOCIATE" shall have the meaning assigned thereto in
Rule 405, as presently promulgated under the Securities Act of 1933, as amended.
"AGENT" of FBHC shall have the meaning as defined in Section 3.16
hereof.
"AGREEMENT" shall mean this Agreement and Plan of Merger.
"AGREEMENT" shall mean with respect to any Person any note, bond,
indenture, license, agreement, lease, contract, indenture, mortgage, deed of
trust, lien, instrument, commitment, arrangement or other understanding, whether
written or oral, to which such Person is a party or by which its properties or
assets may be bound or affected or under which it or its respective business,
properties or assets receive benefits.
"APPLICABLE LAW" shall mean any domestic or foreign, federal, state or
local statute, law, ordinance, rule, administrative interpretation, regulation,
order, writ, injunction, directive, judgment, decree or other requirement of any
Governmental Authority applicable, in the case of FBHC, to FBHC or its
properties, assets, officers, directors, employees or agents (in connection with
such officers', directors', employees' or agents' activities on behalf of it),
and, in the case of the Company, SW Bank or any other Subsidiary of the Company,
to the Company, SW Bank, or such
A-55
<PAGE>
other Subsidiary of the Company, respectively, or the respective properties,
assets, officers, directors, employees or agents (in connection with such
officers', directors', employees' or agents' activities on behalf of them) of
any of them.
"BANK MERGER" shall have the meaning as defined in Recital C hereof.
"CERTIFICATE" shall have the meaning as defined in Section 1.2(a)
hereof.
"CLOSING" shall have the meaning as defined in Section 2.1 hereof.
"CLOSING DATE" shall have the meaning as defined in Section 2.1 hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1986.
"COMPANY" shall mean Southwest Bancorporation of Texas, Inc., a Texas
corporation.
"COMPANY COMMON STOCK" shall mean the Company's Common Stock, $1.00 par
value.
"CONTAMINANT" shall have the meaning as defined in Section 3.22 hereof.
"DAMAGES" shall mean all demands, claims, actions or causes of action,
assessments, losses, damages, Liabilities, judgments, awards, fines, sanctions,
penalties, charges, and amounts paid in settlement of any such matter,
including, without limitation, interest, penalties, costs, fees and expenses of
attorneys, experts, witnesses, investigators and any other agents.
"DIRECTOR" of FBHC shall have the meaning as defined in Section 3.16
hereof.
"DISCLOSURE SCHEDULE" shall have the meaning as defined in Article III
hereof.
"EFFECTIVE TIME" shall have the meaning as defined in Section 2.2(a)
hereof.
"EMPLOYEE" of FBHC shall have the meaning as defined in Section 3.16
hereof.
"EMPLOYEE AGREEMENTS" shall have the meaning as defined in Section 3.16
hereof.
"ENVIRONMENTAL LAW" shall have the meaning as defined in Section 3.22
hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCHANGE AGENT" shall have the meaning as defined in Section 1.3(a)
hereof.
"EXCHANGE RATIO" shall have the meaning as defined in Section 1.2(a)
hereof.
"FASB" shall have the meaning as defined in Section 3.13(g) hereof.
A-56
<PAGE>
"FBHC" shall mean Fort Bend Holding Corp., a Delaware corporation.
"FBHC COMMON STOCK" shall mean the common stock, $.01 par value, of
FBHC.
"FBHC PERSONALTY" shall have the meaning as defined in Section 3.11
hereof.
"FBHC REAL PROPERTY" shall have the meaning as defined in Section 3.10
(a).
"FBHC RRP" shall mean the FBHC Recognition and Retention Plan.
"FBHC STOCK OPTIONS" shall have the meaning as defined in Recital B
hereof.
"FBHC STOCK OPTION PLAN" shall have the meaning as defined in Recital B
hereof.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FHA" shall mean the U.S. Federal Housing Authority.
"FHLB" shall mean the Federal Home Loan Bank.
"GOVERNMENTAL AUTHORITY" shall mean any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, court, government or self-regulatory organization, commission,
tribunal, organization or any regulatory, administrative or other agency, or any
political or other subdivision, department or branch of any of the foregoing.
"GOVERNMENTAL FILINGS" shall have the meaning as defined in Section
3.4(b) hereof.
"IRCA" shall have the meaning as defined in Section 3.18 hereof.
"JOINT VENTURE" shall mean with respect to an entity any general or
limited partnership or joint venture interest which is owned directly or
indirectly by such entity.
"KNOWLEDGE" when used with respect to any party means actual knowledge
of any current executive officer or director of such party or any of its
Subsidiaries or any other officer with supervising responsibility for the matter
to which knowledge refers.
"LIABILITIES" shall mean obligations of any nature (absolute, accrued,
contingent or otherwise, and whether due or to become due) that are required to
be reflected in financial statements under generally accepted accounting
principles consistently applied.
"Material Adverse Effect" shall mean any change or effect that would be
material and adverse to the consolidated business, operations, condition
(financial or other), properties or results of operations of a specified Person
and its Subsidiaries taken as a whole; PROVIDED, HOWEVER, that Material Adverse
Effect shall not be deemed to include the impact of (a) changes in banking and
similar laws of general applicability or interpretations thereof by courts or
governmental authorities, (b) changes in generally accepted accounting
principles or regulatory accounting requirements applicable to financial
institutions and their holding companies generally, (c) any modifications or
changes to valuation policies and practices and connection with the Merger or
restructuring charges
A-57
<PAGE>
taken in connection with the Merger, in each case in accordance with generally
accepted accounting principles, and (d) changes in general economic conditions
or interest rates applicable generally to financial institutions located in the
Texas Gulf coast area.
"MERGER" shall have the meaning as defined in Recital A hereof.
"MITCHELL EXCHANGE" shall have the meaning as defined in Section 3.3
hereof.
"MULTIEMPLOYER PLAN" shall mean a plan described in Section 3(37) of
ERISA.
"NASDAQ" shall have the meaning as defined in Section 1.3(e) hereof.
"OCC" shall mean the Office of the Comptroller of the Currency.
"OFFICER" of FBHC shall have the meaning as defined in Section 3.16
hereof.
"OTS" shall mean the Office of Thrift Supervision.
"OTS STANDARDS" shall have the meaning as defined in Section 3.26
hereof.
"PERSON" shall include any individual, partnership, joint venture,
corporation, trust or unincorporated organization, any other business entity and
any Governmental Authority, in each case whether acting in an individual,
fiduciary or other capacity.
"PLANS" shall have the meaning as defined in Section 3.17(a) hereof.
"PROSPECTUS/PROXY STATEMENT" shall have the meaning as defined in
Section 5.1 hereof.
"REAL ESTATE OWNED" shall mean all real property acquired through
foreclosure or deed in lieu of foreclosure.
"REGISTRATION STATEMENT" shall have the meaning as defined in Section
5.1 hereof.
"REGULATORY APPROVALS" shall have the meaning as defined in Section
5.2(a) hereof.
"RELEASE" shall have the meaning as defined in Section 3.22 hereof.
"RETURNS" shall have the meaning as defined in Section 3.15(a)(ii)
hereof.
"SCHEDULED CONTRACTS" shall have the meaning as defined in Section
3.7(a) hereof.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SFAS" shall mean a Statement of Financial Accounting Standards,
promulgated by the Financial Accounting Standards Board.
A-58
<PAGE>
"SHAREHOLDERS" shall have the meaning as defined in Recital A hereof.
"SHAREHOLDERS' MEETING" shall have the meaning as defined in Section
5.8 hereof.
"SUBSIDIARY" shall mean, as to any particular parent corporation, any
corporation as to which more than 50% of the outstanding stock having ordinary
voting rights or power (and excluding stock having voting rights only upon the
occurrence of a contingency unless and until such contingency occurs and such
rights are to be exercised) at the time is owned or controlled, directly or
indirectly, by such parent corporation and/or by one or more Subsidiaries, and
any general partnership, limited partnership, association, joint venture
arrangement or trust of any kind with respect to which such parent corporation
or any Subsidiary thereof has an equity or management interest or as to which
any such entity serves as trustee.
"SURVIVING CORPORATION" shall mean the Company, after consummation of
the Merger.
"SW BANK" shall mean Southwest Bank of Texas National Association, a
national banking association.
"TAXES" shall have the meaning as defined in Section 3.15(a)(i) hereof.
"TBCA" shall have the meaning as defined in Section 1.1(a) hereof.
"THREATENED" shall have the meaning as defined in Section 3.14(a)
hereof.
"WARN" shall have the meaning as defined in Section 3.18 hereof.
A-59
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SOUTHWEST BANCORPORATION OF TEXAS, INC.
By: /S/ PAUL B. MURPHY
-----------------------------------------------------
Paul B. Murphy, Jr.
President and Chief Operating Officer
FORT BEND HOLDING CORP.
By: /S/ LANE WARD
-----------------------------------------------------
Lane Ward
Vice Chairman, President and Chief Executive Officer
A-60
<PAGE>
EXHIBIT A
PLAN OF MERGER
PLAN OF MERGER dated the _____ day of ___________, 1998, between
Southwest Bank of Texas National Association, Houston, Texas ("SW Bank"), and
Fort Bend Federal Savings and Loan Association of Rosenberg, Rosenberg, Texas
(the "Association").
W I T N E S S E T H:
SW Bank is a national banking association duly organized under the laws
of the United States of America and has its principal office in Houston, Texas,
Harris County, Texas. The Association is a savings and loan association duly
organized under the laws of the United States of America and has its principal
office in Rosenberg, Fort Bend County, Texas. SW Bank has authorized capital
stock of 5,000,000 shares, $5.00 par value ("SW Bank Stock"), of which 3,090,349
shares are issued and outstanding on the date hereof, all of which are owned by
Southwest Bancorporation of Texas, Inc., a Texas corporation having its
principal office in Houston, Harris County, Texas ("Southwest"). The Association
has authorized capital stock of 2,500,000 shares, 2,000,000 of which shares are
common stock, $.01 par value, and 500,000 of which shares are serial preferred
stock, $.01 par value ("Association Stock"), of which _________ shares are
issued and outstanding on the date hereof, all of which are owned by Fort Bend
Holding Corp., a Delaware corporation having its principal office in Rosenberg,
Fort Bend County, Texas ("FBHC").
Southwest and FBHC have entered into an Agreement and Plan of Merger,
dated as of October 20, 1998 (the "Merger Agreement"), which contemplates the
merger provided for by this Plan of Merger (the "Merger"). The Merger Agreement
also contemplates the merger of FBHC with and into Southwest, which is to be
effectuated on the same date as, and simultaneously with, the merger provided
for by this Plan of Merger.
A majority of the entire Board of Directors of SW Bank and two-thirds
of the entire Board of Directors of the Association have, respectively, approved
and made this Plan of Merger and authorized its execution.
At or prior to the time the Merger becomes effective (hereinafter
called the "Effective Date"), SW Bank and the Association shall take all such
action as may be necessary or appropriate in order to effectuate the Merger.
In consideration of the premises contained herein, SW Bank and the
Association hereby make this Plan of Merger and prescribe the terms and
conditions of the Merger of SW Bank and the Association and the mode of carrying
it into effect, as follows:
1. The Association shall be merged with and into SW Bank (which, as the
receiving association, is herein referred to as the "Continuing Bank" whenever
reference is made to it on or after the Effective Date) which shall continue to
be governed by the laws of the United States of America. The Merger shall be
pursuant to the provisions of, and with the effect provided in 12 U.S.C. Section
215c and 1828(c), and pursuant to the provisions of, and with the effect
provided in 12 C.F.R. Sections 552.13 and 563.22.
AA-1
<PAGE>
2. At the Effective Date, the Articles of Association and Bylaws of SW
Bank as in effect at the Effective Date shall become the Articles of Association
and Bylaws of the Continuing Bank until altered, amended or repealed as therein
provided.
3. Until changed by the Board of Directors of the Continuing Bank, the
established office and facilities of the Continuing Bank shall be the
established office and facilities of SW Bank and the Association as at the
Effective Date, and until thereafter changed in accordance with law or the
Articles of Association or Bylaws of the Continuing Bank, all corporate acts,
plans, policies, contracts, approvals and authorizations of SW Bank and its
stockholders, board of directors, committees elected or appointed thereby,
officers and agents, which were valid and effective immediately prior to the
Effective Date, shall be taken for all purposes as the acts, plans, policies,
contracts, approvals and authorizations of the Continuing Bank and shall be as
effective and binding thereon as the same were with respect to SW Bank. The
locations of the offices of the Continuing Bank are set forth in the Application
to Merge relating to the Merger filed with the Office of the Comptroller of the
Currency.
4. At the Effective Date, the corporate existence of SW Bank and the
Association shall, as provided in 12 U.S.C. Section 215c and the Office of
Thrift Supervision regulations heretofore mentioned, be merged into and
continued in the Continuing Bank, the Continuing Bank shall be deemed to be the
same association as SW Bank and the Association, and the separate existence of
the Association shall terminate. All rights, franchises and interests of SW Bank
and the Association, respectively, in and to every type of property (real,
personal and mixed) and choses in action shall be transferred to and vested in
the Continuing Bank by virtue of such merger without any deed or other transfer,
and the Continuing Bank, without any order or action on the part of any court or
otherwise, shall hold and enjoy all rights and property, franchises and
interests, including appointments, designations and nominations, and all other
rights and interests as trustee, executor, administrator, registrar of stocks
and bonds, guardian of estates, assignee, receiver and committee of estates of
lunatics, and in every other fiduciary capacity, in the same manner and to the
same extent as such rights, franchises and interests were held or enjoyed by SW
Bank and the Association, respectively, at the Effective Date, subject, however,
to the condition that, where SW Bank or the Association, at the Effective Date,
was acting under appointment of any court as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver or
committee of estates of lunatics, or in any other fiduciary capacity, the
Continuing Bank shall be subject to removal by a court of competent jurisdiction
in the same manner and to the same extent as was SW Bank or the Association.
5. At the Effective Date, the Continuing Bank shall be liable for all
liabilities of SW Bank and the Association including the liquidation account
established by the Association pursuant to 12 C.F.R. Section 563b.3(c)(13); and
all deposits, debts, liabilities and contracts of SW Bank and of the
Association, respectively, matured or unmatured, whether accrued, absolute,
contingent or otherwise, and whether or not reflected or reserved against on
balance sheets, books of accounts or records of SW Bank or the Association, as
the case may be, shall be those of the Continuing Bank and shall not be released
or impaired by the Merger; and all savings accounts of the Association shall
continue in place and unimpaired as savings accounts of the Continuing Bank; and
all rights of creditors and other obligees and all liens on property of either
SW Bank or the Association shall be preserved unimpaired.
AA-2
<PAGE>
6. The mode of carrying into effect and the manner and basis of
converting or exchanging the shares of SW Bank and the Association into shares
of the Continuing Bank in the Merger shall be as follows:
(a) The shares of SW Bank Stock issued and outstanding at the
Effective Date shall continue to be issued and outstanding shares of
the Continuing Bank, shall be unaffected by the Merger, and the holder
thereof shall retain its rights therein.
(b) Each share of Association Stock which shall be outstanding
on the Effective Date and all rights in respect thereof shall, without
any action on the part of the holder thereof, be cancelled.
(c) The Continuing Bank shall have capital, surplus and
undivided profits equal to the combined capital structures of SW Bank
and the Association immediately prior to the Effective Date. All such
amounts of surplus and undivided profits shall be adjusted for normal
earnings and expenses, and for any accounting adjustments relating to
the Merger.
7. At the Effective Date, the Continuing Bank will adopt and continue
all insurance policies maintained by SW Bank and the Association and which are
in effect immediately prior to the Effective Date, including all group and
employee benefit insurance policies.
8. Subject to qualification of directors as required by statute, the
board of directors and the principal officers of the Continuing Bank at the
Effective Date shall consist of all persons who are directors or principal
officers of SW Bank immediately prior to the Effective Date.
9. SW Bank and the Association shall proceed expeditiously and
cooperate fully in the procurement of any other consents and approvals and the
taking of any other action, and the satisfaction of all other requirements
prescribed by law or otherwise, necessary for consummation of the Merger on the
terms herein provided, including, without limitation, the preparation and
submission of an application to the Comptroller of the Currency for approval as
required by law. In addition, the Merger shall not become effective until
notification of the Merger has been provided to the Office of Thrift Supervision
pursuant to and in accordance with 12 C.F.R.Section 563.22(h).
10. Effectuation of the Merger herein provided is conditioned upon
fulfillment or waiver of the conditions precedent set forth in Article VI of the
Merger Agreement.
11. This Plan of Merger may be terminated in the manner set forth in
Article VII of the Merger Agreement and may be amended in the manner set forth
in Section 8.5 of the Merger Agreement.
12. Subject to the terms and upon satisfaction of all requirements of
law and the conditions specified in this Plan of Merger including, among other
conditions, receipt of the approval of the Comptroller of the Currency, the
Merger shall become effective on the date specified in the certificate to be
issued by the Comptroller of the Currency under the seal of his office approving
the Merger. Such date is herein referred to as the "Effective Date."
AA-3
<PAGE>
IN WITNESS WHEREOF, SW Bank and the Association have caused this Plan
of Merger to be executed in counterparts by their duly authorized officers and
their corporate seals to be hereunto affixed as of the date first above written.
SOUTHWEST BANK OF TEXAS
NATIONAL ASSOCIATION
By
------------------------------------------------
Paul B. Murphy, Jr.
President and Chief Operating Officer
FORT BEND FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ROSENBERG
By
----------------------------------------------
Lane Ward
Vice Chairman, President and Chief Executive
Officer
AA-4
<PAGE>
EXHIBIT B
[To be dated the closing date]
Southwest Bancorporation of Texas, Inc.
4400 Post Oak Parkway
Houston, Texas 77027
Gentlemen:
I have been advised that as of the date hereof I am an "affiliate" of
Fort Bend Holding Corp., a Delaware Corporation ("FBHC"), as that term is
defined for purposes of paragraphs (c) and (d) of Rule 145 of the Rules and
Regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933 (the "Act").
Pursuant to the terms of the Agreement and Plan of Merger dated October 20, 1998
(the "Agreement"), between Southwest Bancorporation of Texas, Inc., a Texas
corporation (the "Company"), and FBHC, providing for the merger of FBHC with and
into the Company (the "Merger"), as a result of which I will receive shares of
Company Common Stock (the "Company Shares") in exchange for the shares of FBHC
Common Stock owned by me at the Effective Time of the Merger as defined in the
Agreement.
I represent and warrant that:
A. I shall not make any sale, transfer or other disposition of the
Company Shares in violation of the Act or the Rules and Regulations.
B. [The following sentence to be included only if the affiliate is a
record or beneficial owner of 5% or more of the outstanding FBHC Common Stock.]
I have no present plan or intention to sell, exchange, transfer, distribute
(including, without limitation, a distribution by a partnership to its partners
or by a corporation to its stockholders), pledge or otherwise dispose of, reduce
the risk of loss by short sale or otherwise, enter into any contract or
arrangement with respect thereto, or consent to the sale, exchange, transfer,
distribution or other disposition of any interest in (i) shares of FBHC Common
Stock in a transaction the consideration for which is to be provided by FBHC,
the Company, or any party related to FBHC or the Company or (ii) shares of
Company Common Stock to be received in the Company Merger in a transaction the
consideration for which is to be provided by the Company or any part related to
the Company.
C. I have been advised that the issuance of the Company Shares to me
pursuant to the Merger has been registered by the Company under the Act on a
Registration Statement on Form S-4. However, I have also been advised that,
since at the time the Agreement was submitted for a vote of the shareholders of
FBHC, I was an "affiliate" of FBHC, any public offering or sale by me of any of
the Company Shares will, under current law, require either (i) the further
registration under the Act of the Company Shares to be sold or (ii) compliance
with Rule 145 promulgated under the Act or (iii) the availability of another
exemption from such registration.
D. I have carefully read this letter and discussed its requirements and
other applicable limitations upon the sale, transfer or other disposition of the
Company Shares, to the extent I felt necessary, with my counsel or counsel for
FBHC.
B-1
<PAGE>
E. I have carefully read the Agreement and discussed its requirements
and impact upon my ability to sell, transfer or otherwise dispose of the Company
Shares, to the extent I felt necessary, with my counsel or counsel for FBHC.
F. I have been informed by the Company that the distribution by me of
the Company Shares has not been registered under the Act and that the Company
Shares must be held by me indefinitely unless (i) such distribution of the
Company Shares has been registered under the Act, (ii) a sale of the Company
Shares is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of counsel
acceptable to the Company, some other exemption from registration is available
with respect to any such proposed sale, transfer or other disposition of the
Company Shares.
G. I have been informed by the Company that I may not transfer, or in
any way reduce my risk with respect to, the Company Shares between the period
starting thirty (30) days prior to the Effective Time and ending at such time as
the Company shall have publicly released its first regular earnings report after
the Effective Time which includes the results of the combined operations of the
Company and FBHC for a period of at least thirty (30) days subsequent to the
Effective Time.
H. I understand that the Company is under no obligation to register the
sale, transfer or other disposition of the Company Shares by me or on my behalf,
or to take any other action necessary in order to make compliance with an
exemption from registration available, other than as set forth in the Agreement.
I. I also understand that stop transfer instructions will be given to
the Company's transfer agent with respect to the Company Shares and that there
will be placed on the certificates for the Company Shares, or any substitutions
therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933 applies. The shares represented by this certificate may only be
transferred in accordance with the terms of an agreement dated
______________, 1999, between the registered holder hereof and
Southwest Bancorporation of Texas, Inc., a copy of which agreement is
on file at the principal office of Southwest Bancorporation of Texas,
Inc."
J. I also understand that unless the transfer by me of my Company
Shares has been registered under the Act or is a sale made in conformity with
the provisions of Rule 145, the Company reserves the right to put the following
legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired from a
person who received such shares in a transaction to which Rule 145
promulgated under the Securities Act of 1933 applies. The shares have
been acquired by the holder not with a view to, or for resale in
connection with, any distribution thereof, within the meaning of the
Securities Act of 1933 and may not be sold, pledged or otherwise
transferred except in accordance with an exemption from the
registration requirements of the Securities Act of 1933."
B-2
<PAGE>
It is understood and agreed that the legend set forth in paragraphs I
and J above shall be removed by delivery of substitute certificates without such
legend (i) if the undersigned shall have delivered to the Company a copy of a
letter from the staff of the Commission or an opinion of counsel in form and
substance satisfactory to the Company to the effect that such legend is not
required for purposes of the Act or (ii) upon request of the undersigned at any
time after two years following the Effective Time, provided that the undersigned
has not been an "affiliate" of the Company within the three-month period
immediately prior to the date of such request.
Very truly yours,
ACCEPTED this _____ day
of ____________, 1999, by
SOUTHWEST BANCORPORATION OF TEXAS, INC.
By
----------------------------------------
David C. Farries
Executive Vice President
and
Chief Financial Officer
B-3
<PAGE>
EXHIBIT C
OPINION OF COUNSEL FOR THE COMPANY
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. SW Bank is a national
banking association duly organized, validly existing and in good standing under
the laws of the United States of America. The Company owns directly all of the
outstanding capital stock of SW Bank. Each of the Company and SW Bank has the
corporate power to own or lease its properties and to carry on its business as
currently conducted and is not required to be licensed or qualified to do
business as a foreign corporation in any jurisdiction in which the failure to be
so licensed, qualified or in good standing would have a Material Adverse Effect
on the Company.
2. The authorized capital stock of the Company consists of 1,000,000
shares of Preferred Stock, $.01 par value, none of which shares are issued, and
50,000,000 shares of Company Common Stock, of which ___________ shares were
issued and outstanding as of ________, 1998. All outstanding shares of Company
Common Stock have been duly authorized and validly issued, are fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any person. The shares of Company Common Stock to be issued to the Shareholders
pursuant to the provisions of the Agreement have been duly authorized, will be
validly issued, fully paid and nonassessable and will not be issued in violation
of the preemptive rights of any person.
3. The Company has full corporate power and authority to execute and
deliver the Agreement and to consummate the transactions contemplated thereby.
The Agreement has been duly authorized by all necessary corporate action on the
part of the Company, has been duly and validly executed and delivered by and
constitutes the valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors' rights
generally and by general principles of equity (whether applied at law or in
equity).
4. The Company and SW Bank have received approval from all necessary
governmental agencies and authorities (including the Federal Reserve and the
OCC) for the consummation of the transactions contemplated by the Agreement.
Neither the execution nor delivery of the Agreement nor the consummation by the
Company and SW Bank of the transactions contemplated thereby, nor the compliance
with and fulfillment of the terms and provisions thereof by the Company and SW
Bank will conflict with, or result in a breach of, any term, condition or
provisions of, or constitute a default under, (a) the Articles of Incorporation
or Bylaws of the Company, (b) the Articles of Association or Bylaws of SW Bank,
(c) to our knowledge, any material agreement or instrument to which the Company
or SW Bank is a party or by which either of them is bound, or (d) to our
knowledge, any material order, judgment, or decree to which the Company or SW
Bank is subject, or result in the creation of any material lien, charge or
encumbrance on any properties of the Company or SW Bank.
C-1
<PAGE>
EXHIBIT D
OPINION OF COUNSEL FOR FBHC
1. FBHC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. FBHC is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of the State of Texas, has the corporate power
to own or lease its properties and to carry on its business as
currently conducted, and is not required to be licensed or qualified to
do business as a foreign corporation in any other jurisdiction in which
the failure to be so licensed, qualified or in good standing would have
a Material Adverse Effect on FBHC. FBHC is a unitary savings and loan
holding company subject to regulatory oversight by the Office of Thrift
Supervision. The Association is a savings and loan association duly
organized, validly existing and in good standing under the laws of the
United States of America. FBHC owns directly all the outstanding
capital stock of the Association. The Association has the corporate
power to own or lease its properties and to carry on its business as
currently conducted, and is not required to be licensed or qualified to
do business as a foreign corporation in any jurisdiction in which the
failure to be so licensed, qualified or in good standing would have a
Material Adverse Effect on FBHC.
2. The authorized capital stock of FBHC consists of 1,000,000 shares of
serial preferred stock, $.01 par value, none of which are issued, and
4,000,000 shares of FBHC Common Stock, of which, ____________ shares
are issued and outstanding. All such shares have been duly authorized
and validly issued, are fully paid and nonassessable, and have not been
issued in violation of the preemptive rights of any person. To our
knowledge, there are no outstanding options, warrants, subscriptions,
calls, contracts or other rights, arrangements or commitments of any
kind, however denominated, relating to the purchase or other
acquisition of capital stock of FBHC, or securities convertible into,
capital stock of FBHC, except for the outstanding FBHC Stock Options to
purchase _________ shares of FBHC Common Stock. The FBHC Stock Option
Plan and FBHC Stock Options have been duly authorized by all necessary
corporate action on part of FBHC and constitute valid and legally
binding obligations of FBHC, enforceable in accordance with their
terms, except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting enforcement of creditors' rights generally and by
general principles of equity (whether applied at law or in equity).
[FBHC Debentures, Mitchell exchange]
3. FBHC has full corporate power and authority to execute and deliver the
Agreement and to consummate the transactions contemplated thereby. The
Agreement has been duly authorized by all necessary corporate action on
the part of FBHC, has been duly and validly executed and delivered by
and constitutes the valid and binding agreement of FBHC, enforceable
against FBHC in accordance with its terms, except to the extent that
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement
of creditors' rights generally and by general principles of equity
(whether applied at law or in equity).
4. Neither the execution nor delivery of the Agreement nor the
consummation by FBHC of the transactions contemplated thereby, nor the
compliance with and fulfillment of the terms and provisions thereof by
FBHC will conflict with, or result in a breach of, any term, condition,
or provision of, or constitute a default under, (a) the Certificate of
Incorporation or Bylaws
D-1
<PAGE>
of FBHC, (b) the Articles of Association or Bylaws of the Association,
(c) to our knowledge, any material agreement or instrument to which
FBHC or the Association is a party or by which either of them is bound,
or (d) to our knowledge, any material order, judgment, or decree to
which FBHC or the Association is subject, or result in the creation of
any material lien, charge or encumbrance on any properties of FBHC or
the Association.
5. To our knowledge, except as disclosed on the Disclosure Schedule, there
is no action, suit, proceeding or claim pending, or any investigation
by any government or governmental agency or instrumentality, domestic
or foreign, pending or threatened, against FBHC or any of its
Subsidiaries or any employee benefit plan maintained by it or the
assets, business or goodwill of FBHC or any of its Subsidiaries before
any court, government or governmental agency or instrumentality,
domestic or foreign, nor is there any outstanding order, writ,
judgment, stipulation, injunction, decree, determination, award or
other order of any court, government or governmental agency or
instrumentality, domestic or foreign, against FBHC or any of its
Subsidiaries.
D-2
<PAGE>
EXHIBIT E
RELEASE
(Director)
This Release (the "Release"), dated as of ___________, 1999, is made by
______________ (the "Director"), in favor of Fort Bend Holding Corp., a Delaware
corporation ("FBHC"), and its Subsidiaries (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the
"Merger Agreement"), dated as of October 20, 1998, by and between FBHC and
Southwest Bancorporation of Texas, Inc., it is a condition to the consummation
of the transactions contemplated by the Merger Agreement that the Director shall
have executed and delivered to FBHC an instrument releasing FBHC and its
Subsidiaries (as defined in the Merger Agreement) from any and all claims of
such Director;
WHEREAS, the purpose of this Release is to serve as the instrument
referred to in Section 6.2(j)(i) of the Merger Agreement as discussed above;
WHEREAS, the Director desires to enter into this Release in
consideration of the matters set forth herein;
NOW, THEREFORE, for and in consideration of $1.00 and other good and
valuable consideration, the receipt and sufficiency of which is hereby expressly
acknowledged, the Director agrees as follows:
1. The Director acknowledges that he has no existing claims or
defenses, personal or otherwise, or rights of set off whatsoever against FBHC or
any of its Subsidiaries, except as a result of the Director's capacity as a
depositor with Fort Bend Federal Savings and Loan Association of Rosenberg (the
"Association"). The Director for himself and on behalf of his heirs and assigns
(the "Director Releasing Parties") releases, acquits and forever discharges FBHC
and each of its Subsidiaries (the "Released Parties"), their predecessors,
successors, assigns, officers, directors, employees, agents and servants, and
all persons, natural or corporate, in privity with them or any of them, from any
and all claims or causes of action of any kind whatsoever, at common law,
statutory or otherwise, which the Director Releasing Parties, or any of them,
has now or might have in the future, known or unknown, now existing or that
might arise hereafter, except such claims or causes of action as may exist as a
result of or may arise out of (i) the Director's capacity as a depositor with
the Association, (ii) any claim for indemnification by the Released Parties the
Director may have in the future pursuant to applicable laws or the
organizational documents of the Released Parties (a "Statutory Indemnification")
or the indemnity and insurance covenants contained in the Merger Agreement (a
"Contractual Indemnification"), or (iii) the matters set forth on Schedule A
hereto. It is intended that this Release shall release all claims of any kind or
nature that any of the Director Releasing Parties might have against those
hereby released whether asserted or not and except as may exist as a result of
or may arise out of (i) the Director's capacity as a depositor with the
Association or (ii) Statutory Indemnifications and Contractual Indemnifications.
E-1
<PAGE>
2. It is expressly understood and agreed that the terms hereof are
contractual and not merely recitals, and that the agreements herein contained
and the consideration herein transferred is to compromise doubtful and disputed
claims, if any, and that no releases made or other consideration given hereby or
in connection herewith shall be construed as an admission of liability, all
liability being expressly denied by the Released Parties. The Director hereby
represents and warrants that the consideration hereby acknowledged for entering
into this Release and the transactions contemplated hereby is greater than the
value of all claims, demands, actions and causes of action, if any, herein
relinquished, released, renounced, abandoned, acquitted, waived and/or
discharged, and that this Release is in full settlement, satisfaction and
discharge of any and all such claims, demands, actions and causes of action that
the Director may have or be entitled to against the Released Parties, and its
predecessors, assigns, legal representatives, officers, directors, employees,
attorneys and agents.
3. The Director represents and warrants that he has full power and
authority to enter into, execute and deliver this Release, all proceedings
required to be taken to authorize the execution, delivery and performance of
this Release and the agreements and undertakings relating hereto and the
transactions contemplated hereby have been validly and properly taken and this
Release constitutes a valid and binding obligation of the Director in the
capacity in which executed. The Director further represents and warrants that he
has entered into this Release freely of his own accord and without reliance on
any representations of any kind or character not set forth herein. The Director
enters into this release upon the advice of and in concurrence with legal
counsel.
4. This Release shall be construed and enforced in accordance with the
laws of the State of Texas, and to the extent applicable, the laws of the United
States. If any provision of this Release or the application thereof to any
person or circumstances shall be determined to be invalid or unenforceable to
any extent, such provision shall be deemed severable, the remainder of this
Release and the application of all other provisions shall not be affected
thereby and shall be enforced to the greatest extent permitted by law,
consistent with the intent of the parties hereto to enter into a mutual release.
This Release is executed as of the date first above written. As used herein, the
singular includes the plural, the masculine includes the feminine and neuter,
and vice versa.
THE DIRECTOR:
---------------------------------------------
Print Name:
----------------------------------
E-2
<PAGE>
STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on _________________, 1998,
by _______________________, Individually.
-----------------------------------------------
Notary Public in and for the State of Texas
Printed Name:
----------------------------------
My Commission Expires:
-------------------------
E-3
<PAGE>
EXHIBIT F
RELEASE
(Officer)
This Release (the "Release"), dated as of ___________, 1999, is made by
______________ (the "Officer"), in favor of Fort Bend Holding Corp., a Delaware
corporation ("FBHC"), and its Subsidiaries (as defined below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the
"Merger Agreement"), dated as of October 20, 1998, by and between FBHC and
Southwest Bancorporation of Texas, Inc., it is a condition to the consummation
of the transactions contemplated by the Merger Agreement that the Officer shall
have executed and delivered to FBHC an instrument releasing FBHC and its
Subsidiaries (as defined in the Merger Agreement) from any and all claims of
such Officer;
WHEREAS, the purpose of this Release is to serve as the instrument
referred to in Section 6.2(j)(ii) of the Merger Agreement as discussed above;
WHEREAS, the Officer desires to enter into this Release in
consideration of the matters set forth herein;
NOW, THEREFORE, for and in consideration of $1.00 and other good and
valuable consideration, the receipt and sufficiency of which is hereby expressly
acknowledged, the Officer agrees as follows:
1. The Officer acknowledges that he or she has no existing claims or
defenses, personal or otherwise, or rights of set off whatsoever against FBHC or
any of its Subsidiaries, except as a result of the Officer's capacity as a
depositor with Fort Bend Federal Savings and Loan Association of Rosenberg (the
"Association"), or for salary or bonus due to such Officer in the ordinary
course of business. The Officer for himself or herself and on behalf of his
heirs or her heirs and assigns (the "Officer Releasing Parties") releases,
acquits and forever discharges FBHC and each of its Subsidiaries (the "Released
Parties"), their predecessors, successors, assigns, officers, directors,
employees, agents and servants, and all persons, natural or corporate, in
privity with them or any of them, from any and all claims or causes of action of
any kind whatsoever, at common law, statutory or otherwise, which the Officer
Releasing Parties, or any of them, has now or might have in the future, known or
unknown, now existing or that might arise hereafter, except such claims or
causes of action as may exist as a result of or may arise out of (i) the
Officer's capacity as a depositor with the Association, (ii) for salary, bonus
and other compensation and benefits due to such Officer in the ordinary course
of business, (iii) any claim for indemnification by the Released Parties the
Officer may have in the future pursuant to applicable law or the organizational
documents of the Released Parties (a "Statutory Indemnification") or the
indemnity and insurance covenants contained in the Merger Agreement (a
"Contractual Indemnification"), or (iv) the matters set forth on Schedule A
hereto. It is intended that this Release shall release all claims of any kind or
nature that any of the Officer Releasing Parties might have against those hereby
released whether asserted or not and except as may exist as a result of or may
arise out of (i) the Officer's capacity as a depositor with the Association, for
salary, bonus and other compensation and benefits due to such Officer in
F-1
<PAGE>
the ordinary course of business or (ii) for Statutory Indemnifications and
Contractual Indemnifications.
2. It is expressly understood and agreed that the terms hereof are
contractual and not merely recitals, and that the agreements herein contained
and the consideration herein transferred is to compromise doubtful and disputed
claims, if any, and that no releases made or other consideration given hereby or
in connection herewith shall be construed as an admission of liability, all
liability being expressly denied by the Released Parties. The Officer hereby
represents and warrants that the consideration hereby acknowledged for entering
into this Release and the transactions contemplated hereby is greater than the
value of all claims, demands, actions and causes of action, if any, herein
relinquished, released, renounced, abandoned, acquitted, waived and/or
discharged, and that this Release is in full settlement, satisfaction and
discharge of any and all such claims, demands, actions and causes of action that
the Officer may have or be entitled to against the Released Parties, and its
predecessors, assigns, legal representatives, officers, directors, employees,
attorneys and agents.
3. The Officer represents and warrants that he or she has full power
and authority to enter into, execute and deliver this Release, all proceedings
required to be taken to authorized the execution, delivery and performance of
this Release and the agreements and undertakings relating hereto and the
transactions contemplated hereby have been validly and properly taken and this
Release constitutes a valid and binding obligation of the Officer in the
capacity in which executed. The Officer further represents and warrants that he
or she has entered into this Release freely of his or her own accord and without
reliance on any representations of any kind or character not set forth herein.
The Officer enters into this release upon the advice of and in concurrence with
legal counsel.
4. This Release shall be construed and enforced in accordance with the
laws of the State of Texas, and to the extent applicable, the laws of the United
States. If any provision of this Release or the application thereof to any
person or circumstances shall be determined to be invalid or unenforceable to
any extent, such provision shall be deemed severable, the remainder of this
Release and the application of all other provisions shall not be affected
thereby and shall be enforced to the greatest extent permitted by law,
consistent with the intent of the parties hereto to enter into a mutual release.
This Release is executed as of the date first above written. As used herein, the
singular includes the plural, the masculine includes the feminine and neuter,
and vice versa.
THE OFFICER:
---------------------------------------------
Print Name:
----------------------------------
F-2
<PAGE>
STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on ______________, 1998, by
______________________, Individually.
---------------------------------------------
Notary Public in and for the State of Texas
Printed Name:
--------------------------------
My Commission Expires:
-----------------------
F-3
<PAGE>
APPENDIX B
October 20, 1998
Board of Directors
Fort Bend Holding Corp.
3400 Avenue H
Rosenberg, TX 77471-2832
Dear Gentlemen:
You have requested our opinion as an independent investment banking firm
regarding the fairness, from a financial point of view, to the stockholders of
Fort Bend Holding Corp. ("FBHC" or the "Company"), of the consideration to be
received by such stockholders in the merger (the "Merger") between the Company
and Southwest Bancorporation of Texas, Inc., ("SWBT"). We have not been
requested to opine as to, and our opinion does not in any manner address, the
Company's underlying business decision to proceed with or effect the Merger.
Pursuant to the Agreement and Plan of Merger, dated October 20, 1998, by and
among the Company and SWBT (the "Agreement"), at the effective time of the
Merger, SWBT will acquire all of the Company's issued and outstanding shares of
common stock. The holders of the Company's common stock will receive in exchange
for each share of Company common stock, shares of SWBT common stock based on an
Exchange Ratio of 1.45 shares of SWBT common stock for each share of Company
common stock.
In addition, the holders of unexercised and outstanding options awarded pursuant
to the Company's Stock Option Plans will receive merger consideration as
described in Section 1.2(c) of the Agreement. The complete terms of the proposed
transaction are described in the Agreement, and this summary is qualified in its
entirety by reference thereto.
Charles Webb & Company, a Division of Keefe, Bruyette & Woods, Inc., as part of
its investment banking business, is regularly engaged in the evaluation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, and distributions of listed and unlisted securities.
We are familiar with the market for common stocks of publicly traded banks,
savings institutions and bank and savings institution holding companies.
In connection with this opinion we reviewed certain financial and other business
data supplied to us by the Company including (i) Annual Reports, Proxy
Statements and Form 10-Ks for the years ended March 31, 1996, 1997 and 1998,
(ii) Form 10-Qs for the quarter ended June 30, 1998, and preliminary results for
the quarter ended September 30, 1998 and other information we deemed relevant.
We discussed with senior management and the boards of directors of the Company
and its wholly owned subsidiary, Fort Bend Federal Savings and Loan Association
of Rosenberg, the current position and prospective outlook for the Company. We
considered historical quotations and the prices of recorded transactions in the
Company's common stock since its initial public offering. We reviewed financial
and stock market data of other savings institutions, particularly in the
southwestern region of the United States, and the financial and structural terms
of several other recent transactions involving mergers and acquisitions of
savings institutions or proposed changes of control of comparably situated
companies.
For SWBT, we reviewed the audited financial statements, 10-k's, and Proxy
Statements for the fiscal years ended December 31, 1997, 1996, and 1995, and
certain other information deemed relevant. We also discussed with senior
management of SWBT, the current position and prospective outlook for SWBT.
For purposes of this opinion we have relied, without independent verification,
on the accuracy and completeness of the material furnished to us by the Company
and SWBT and the material otherwise made available to us, including information
from published sources, and we have not made any independent effort to verify
such data. With respect to the financial information, including forecasts and
asset valuations we received from the Company, we assumed (with your consent)
that they had been reasonably prepared reflecting the best currently available
estimates and judgment of the Company's management. In addition, we have not
made or obtained any independent appraisals or
B-1
<PAGE>
evaluations of the assets or liabilities, and potential and/or contingent
liabilities of the Company or SWBT. We have further relied on the assurances of
management of the Company and SWBT that they are not aware of any facts that
would make such information inaccurate or misleading. We express no opinion on
matters of a legal, regulatory, tax or accounting nature or the ability of the
Merger, as set forth in the Agreement, to be consummated.
In rendering our opinion, we have assumed that in the course of obtaining the
necessary approvals for the Merger, no restrictions or conditions will be
imposed that would have a material adverse effect on the contemplated benefits
of the Merger to the Company or the ability to consummate the Merger. Our
opinion is based on the market, economic and other relevant considerations as
they exist and can be evaluated on the date hereof.
Consistent with the engagement letter with you, we have acted as financial
advisor to the Company in connection with the Merger and will receive a fee for
such services, a majority of which is contingent upon the consummation of the
Merger. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement by the Company in connection with the
Merger.
Based upon and subject to the foregoing, as outlined in the foregoing paragraphs
and based on such other matters as we considered relevant, it is our opinion
that as of the date hereof, the consideration to be received by the stockholders
of the Company in the Merger is fair, from a financial point of view, to the
stockholders of the Company.
This opinion may not, however, be summarized, excerpted from or otherwise
publicly referred to without our prior written consent, although this opinion
may be included in its entirety in the proxy statement of the Company used to
solicit stockholder approval of the Merger. It is understood that this letter is
directed to the Board of Directors of the Company in its consideration of the
Agreement, and is not intended to be and does not constitute a recommendation to
any stockholder as to how such stockholder should vote with respect to the
Merger.
Very truly yours,
Charles Webb & Company,
A Division of Keefe, Bruyette, & Woods, Inc.
B-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of Southwest provide that, subject to
certain limitations, its officers and directors (and certain other individuals
acting on behalf of Southwest) will be indemnified by Southwest against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by such persons, to the fullest extent permitted under the Texas
Business Corporation Act (the "TBCA"). Generally, Article 2.01-1 of the TBCA
permits a corporation to indemnify a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding because the person was or
is a director or officer if it is determined that such person (i) conducted
himself in good faith, (ii) reasonably believed (a) in the case of conduct in
his official capacity as a director or officer of the corporation, that his
conduct was in the corporation's best interests, or (b) in other cases, that his
conduct was at least not opposed to the corporation's best interests, and
(iii) in the case of any criminal proceeding, had no reasonable cause to
believe that his conduct was unlawful. In addition, the TBCA requires a
corporation to indemnify a director or officer for any action that such
director or officer is wholly successful in defending on the merits.
Southwest's Articles of Incorporation provide that a director of
Southwest will not be liable to the corporation for monetary damages for an act
or omission in the director's capacity as a director, except to the extent not
permitted by law. Texas law does not permit exculpation of liability in the case
of (i) a breach of the director's duty of loyalty to the corporation or the
shareholders, (ii) an act or omission not in good faith that involves
intentional misconduct or a knowing violation of the law, (iii) a transaction
from which a director received an improper benefit, whether or not the benefit
resulted from an action taken within the scope of the director's office, (iv) an
action or omission for which the liability of the director is expressly provided
by statute, or (v) an act related to an unlawful stock repurchase or dividend.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
*2.1 -- Agreement and Plan of Merger dated October 20, 1998,
between Southwest Bancorporation of Texas, Inc. and Fort
Bend Holding Corp. (included as Appendix A to Proxy
Statement/Prospectus)
3.1 -- Articles of Incorporation of Southwest (1)
3.2 -- Bylaws of Southwest (Restated as of December 31,
1996) (1)
3.3 -- Amendment dated December 18, 1996 to Articles of
Incorporation of Southwest (1)
4.1 -- Specimen Common Stock certificate (1)
*5.1 -- Opinion of Vinson & Elkins L.L.P.
*8.1 -- Tax Opinion of Silver, Freedman & Taff, L.L.P.
10.1 -- 1989 Stock Option Plan (1)
10.2 -- 1993 Stock Option Plan (1)
10.3 -- Form of Stock Option Agreement under 1989 Stock Option
Plan and 1993 Stock Option Plan (1)
10.4 -- 1996 Stock Option Plan, as amended February 23,
1998 (incorporated by reference to Exhibit 10.4 to
Southwest's Annual Report on Form 10-K for the year
ended December 31, 1997)
10.5 -- Form of Incentive Stock Option Agreement under 1996
Stock Option Plan (1)
10.6 -- Form of Non-Qualified Stock Option Agreement under 1996
Stock Option Plan (1)
10.7 -- Directors Stock Option Plan adopted October
1993 (1)
10.8 -- Form of Stock Option Agreement under
Directors Stock Option Plan (1)
10.9 -- Form of Change in Control Agreement between Southwest
and each of Walter E. Johnson, Paul B. Murphy, Jr.,
Joseph H. Argue, David C. Farries, Sharon K. Sokol, Yale
Smith, Steve D. Stephens and Anthony Torentinos (1)
II-1
<PAGE>
10.10 -- Form Employment Contract between Southwest and J.
Nolan Bedford (incorporated by reference to Exhibit
B-1 to Exhibit 2.1 of Southwest's Form S-4
Registration Statement No. 333-27897, filed with the
Commission on May 28, 1997)
10.11 -- Employment Contract between Fort Bend and Lane Ward
(incorporated by reference to Fort Bend's Form S-1
Registration Statement, Reg. No. 33-57722)
*10.12 -- Form of Assumption of and Amendment to Employment
Contract between Southwest and Lane Ward
*10.13 -- Operating Agreement dated January 1, 1997 of Mitchell
Mortgage Servicing Company L.L.C. (predecessor of
Mitchell Mortgage Company L.L.C.)
*10.14 -- Letter Agreement dated January 1, 1997 among Fort
Bend Federal Savings and Loan Association of
Rosenberg, Fort Bend Holding Corp., The Woodlands
Corporation and Mitchell Mortgage Company, containing
conversion rights as to ownership interest in
Mitchell Mortgage Company L.L.C.
*10.15 -- Letter Agreement dated October 29, 1998 between
Southwest Bancorporation of Texas,
Inc. and The Woodlands Operating Company, LP as Agent
for The Woodlands Land Development Company, L.P.
21.1 -- List of subsidiaries of Southwest (incorporated
herein by reference to Exhibit 21.1 to Southwest's
Annual Report on Form 10-K for the year ended
December 31, 1997)
*23.1 -- Consent of PricewaterhouseCoopers LLP
*23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 hereto)
*23.3 -- Consent of Silver, Freedman & Taff, L.L.P.
(contained in Exhibit 8.1 hereto)
*23.4 -- Consent of Charles Webb & Company (included in Appendix
B to Proxy Statement/Prospectus)
*24.1 -- Powers of Attorney (included on the signature page to
this Registration Statement)
*99 -- Form of Proxy for Special Meeting of Stockholders of
Fort Bend Holding Corp.
- -------------------------
(1) Incorporated herein by reference to the Exhibit bearing the same
Exhibit number in the Registrant's Form S-1 Registration Statement No.
333-16509, declared effective by the Commission on January 27, 1997.
* Filed herewith.
(b) Financial Statement Schedules:
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are omitted either because
they are not required or because the required information is included in the
financial statements and notes thereto incorporated by reference herein.
ITEM 22. UNDERTAKINGS
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(2) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to
II-2
<PAGE>
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(3) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (2) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415 under the
Securities Act, will be filed as a part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(4) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(5) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(6) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired therein, that was not the subject of and included in the
registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS
DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS,
ON THE 12TH DAY OF JANUARY, 1999.
SOUTHWEST BANCORPORATION
OF TEXAS, INC.
By:/S/ WALTER E. JOHNSON
-----------------------------------
Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul B. Murphy, Jr., David C. Farries and
R. John McWhorter, or any of them, his true and lawful attorney-in-fact and
agent, with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- -----
<S> <C> <C>
/S/ WALTER E. JOHNSON Chairman of the Board and Chief Executive January 12, 1999
- ----------------------------------------------- Officer (Principal Executive Officer)
Walter E. Johnson
/S/ DAVID C. FARRIES Executive Vice President, Treasurer and January 12, 1999
- ----------------------------------------------- Secretary (Principal Financial Officer)
David C. Farries
/S/ R. JOHN MCWHORTER Senior Vice President and Controller January 12, 1999
- ----------------------------------------------- (Principal Accounting Officer)
R. John McWhorter
/S/ JOHN W. JOHNSON Director and Chairman of the Executive January 12, 1999
- ----------------------------------------------- Committee of the Board
John W. Johnson
/S/ PAUL B. MURPHY, JR. Director, President and Chief Operating January 12, 1999
- ----------------------------------------------- Officer
Paul B. Murphy, Jr.
/S/ J. DAVID HEANEY Director January 12, 1999
- -----------------------------------------------
J. David Heaney
Director January 12, 1999
- -----------------------------------------------
John B. Brock III
/S/ ERNEST H. COCKRELL Director January 12, 1999
- -----------------------------------------------
Ernest H. Cockrell
/S/ WILHELMINA R. MORIAN Director January 12, 1999
- -----------------------------------------------
Wilhelmina R. Morian
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/S/ ANDRES PALANDJOGLOU Director January 12, 1999
- -----------------------------------------------
Andres Palandjoglou
Director January 12, 1999
- -----------------------------------------------
Adolph A. Pfeffer, Jr.
Director January 12, 1999
- -----------------------------------------------
Stanley D. Stearns, Jr.
Director January 12, 1999
- -----------------------------------------------
Michael T. Willis
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF EXHIBITS NUMBER
- ------------------ ------------------------------------------------------------------------------------ ---------------
<S> <C> <C>
* 2.1 Agreement and Plan of Merger dated October 20, 1998, between Southwest
Bancorporation of Texas, Inc. and Fort Bend Holding Corp. (included as Appendix A
to Proxy Statement/Prospectus)
3.1 Articles of Incorporation of Southwest (1)
3.2 Bylaws of Southwest (Restated as of December 31, 1996) (1)
3.3 Amendment dated December 18, 1996 to Articles of Incorporation of Southwest (1)
4.1 Specimen Common Stock certificate (1)
* 5.1 Opinion of Vinson & Elkins L.L.P.
* 8.1 Tax Opinion of Silver, Freedman & Taff, L.L.P.
10.1 1989 Stock Option Plan (1)
10.2 1993 Stock Option Plan (1)
10.3 Form of Stock Option Agreement under 1989 Stock Option Plan and 1993 Stock
Option Plan (1)
10.4 1996 Stock Option Plan, as amended February 23, 1998 (incorporated by reference
to Exhibit 10.4 to Southwest's Annual Report on Form 10-K for the year ended
December 31, 1997)
10.5 Form of Incentive Stock Option Agreement under 1996 Stock Option Plan (1)
10.6 Form of Non-Qualified Stock Option Agreement under 1996 Stock Option Plan (1)
10.7 Directors Stock Option Plan adopted October 1993 (1)
10.8 Form of Stock Option Agreement under Directors Stock Option Plan (1)
10.9 Form of Change in Control Agreement between Southwest and each of Walter E.
Johnson, Paul B. Murphy, Jr., Joseph H. Argue, David C. Farries, Sharon K. Sokol,
Yale Smith, Steve D. Stephens and Anthony Torentinos (1)
10.10 Form Employment Contract between Southwest and J. Nolan Bedford (incorporated
by reference to Exhibit B-1 to Exhibit 2.1 of Southwest's Form S-4 Registration
Statement No. 333-27897, filed with the Commission on May 28, 1997)
10.11 Employment Contract between Fort Bend and Lane Ward (incorporated by reference
to Fort Bend's Form S-1 Registration Statement, Reg. No. 33-57722)
*10.12 Form of Assumption of and Amendment to Employment Contract between Southwest
and Lane Ward
*10.13 Operating Agreement dated January 1, 1997 of Mitchell Mortgage Servicing
Company L.L.C. (predecessor of Mitchell Mortgage Company L.L.C.)
*10.14 Letter Agreement dated January 1, 1997 among Fort Bend
Federal Savings and Loan Association of Rosenberg, Fort Bend
Holding Corp., The Woodlands Corporation and Mitchell
Mortgage Company, containing conversion rights as to
ownership interest in Mitchell Mortgage Company L.L.C.
*10.15 Letter Agreement dated October 29, 1998 between Southwest Bancorporation of
Texas, Inc. and The Woodlands Operating Company, LP as Agent for The
Woodlands Land Development Company, L.P.
21.1 List of subsidiaries of Southwest (incorporated herein by
reference to Exhibit 21.1 to Southwest's Annual Report on
Form 10-K for the year ended December 31, 1997)
* 23.1 Consent of PricewaterhouseCoopers LLP
* 23.2 Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1 hereto)
* 23.3 Consent of Silver, Freedman & Taff, L.L.P. (contained in Exhibit 8.1 hereto)
* 23.4 Consent of Charles Webb & Company (included in Appendix B to Proxy
Statement/Prospectus)
* 24.1 Powers of Attorney (included on the signature page to this Registration
Statement)
* 99 Form of Proxy for Special Meeting of Stockholders of Fort Bend
Holding Corp.
</TABLE>
- --------------------------
(1) Incorporated herein by reference to the Exhibit bearing the same
Exhibit number in the Registrant's Form S-1 Registration Statement No.
333-16509, declared effective by the Commission on January 27, 1997.
* Filed herewith.
<PAGE>
EXHIBIT 5.1
[VINSON & ELKINS L.L.P. LETTERHEAD]
(713) 758-2128 (713) 615-5282
January 12, 1999
Southwest Bancorporation of Texas, Inc.
4400 Post Oak Parkway
Houston, Texas 77027
Gentlemen:
We have acted as counsel for Southwest Bancorporation of Texas, Inc.
(the "Company") and have participated in all proceedings in connection with the
registration by the Company with the Securities and Exchange Commission
("Commission") on a Form S-4 Registration Statement under the Securities Act of
1933, as amended, of an aggregate of 4,671,386 shares of Company Common Stock,
par value $1.00 ("Common Stock"), which may be issued to the shareholders of
Fort Bend Holding Corp. ("Fort Bend") in exchange for their shares of Common
Stock of Fort Bend, $.01 par value ("Bank Common Stock"), at an exchange ratio
of 1.45 shares of Company Common Stock for each share of Bank Common Stock, in
connection with the proposed merger of Fort Bend with and into Southwest Bank of
Texas National Association, a wholly-owned subsidiary bank of the Company ("SW
Bank").
Before rendering the opinion set forth below, we have examined, among
other things, the Articles of Incorporation, as amended, and bylaws of the
Company, the corporate proceedings of the Company with respect to the proposed
merger with Fort Bend, the Agreement and Plan of Merger ("Agreement") entered
into between the Company and Fort Bend, and the Registration Statement on Form
S-4 ("Registration Statement") filed by the Company with the Commission in
connection with the above described proposed merger. In addition, we have relied
as to factual matters on certificates of certain public officials and officers
of the Company. We are rendering this opinion as of the date on which the
Registration Statement becomes effective.
Based on the foregoing, we are of the opinion that the 4,671,386 shares
of Company Common Stock, which are proposed to be exchanged by the Company for
shares of capital stock of Fort Bend pursuant to the Agreement at the exchange
ratio of 1.45 shares of Company Common Stock for each share of Fort Bend Common
Stock have been validly authorized for issuance, and, subject to compliance with
any applicable Blue Sky laws, upon the issuance and delivery of such 4,671,386
shares in accordance with the provisions of the Agreement, as set forth in the
Registration Statement, such shares of Company Common Stock will be validly
issued, fully paid and nonassessable.
We hereby consent to the use of our name in the Registration Statement
and to the filing of this opinion as an exhibit to the Registration Statement.
In giving this consent, however, we do not admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933 and the rules and regulations of the Commission thereunder.
Very truly yours,
VINSON & ELKINS L.L.P.
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF SILVER, FREEDMAN & TAFF, L.L.P.]
January 4, 1999
Board of Directors
Fort Bend Holding Corp.
3400 Avenue H
Rosenberg, Texas 77471
RE: FEDERAL INCOME TAX CONSEQUENCES ARISING FROM THE MERGER
CONTEMPLATED BY THAT CERTAIN AGREEMENT AND PLAN OF MERGER BY AND
AMONG SOUTHWEST BANCORPORATION OF TEXAS, INC. AND FORT BEND
HOLDING CORP., DATED OCTOBER 20, 1998, (THE "AGREEMENT")
Gentlemen:
In connection with filings to be made pursuant to the Agreement
relating to the Merger with the SEC, OTS, Federal Reserve and/or OCC, set forth
hereinbelow is this firm's opinion relating to certain federal income tax
consequences applicable to the Merger contemplated by the Agreement. Capitalized
terms used herein which are not expressly defined herein shall have the meaning
assigned to them in the Agreement.
FACTS
Each of the Company and FBHC is a stock corporation organized and
existing under the laws of the States of Texas and Delaware, respectively. The
principal business of each of the Company and FBHC consists of lending and
deposit taking activities through one or more financial institution
subsidiaries.
The Merger will be implemented at the Effective Time through the merger
of FBHC with and into the Company. In the Merger all of the outstanding FBHC
Common Stock will be exchanged solely for Company Common Stock or cash in lieu
of fractional share interests. The stockholders of the Company are not entitled
to dissenters rights in connection with the Merger.
ASSUMPTIONS
A. The Merger will constitute a statutory merger.
B. All conditions precedent contained in the Agreement shall be
performed or waived prior to the Effective Time.
C. The representations of FBHC and the Company made in their respective
tax representation letters to us of even date herewith are true and correct and
will be true and correct at the Effective Time.
D. All of the stockholders of FBHC are citizens or residents of the
United States of America ("U.S. Holders"). For purposes hereof, U.S. Holders do
not include certain classes of taxpayers including but not limited to foreign
persons, insurance companies, tax-exempt organizations, financial institutions,
dealers in securities, persons who acquired or acquire FBHC Common Stock
pursuant to the exercise of employee stock options or otherwise as compensation
and persons who hold shares of FBHC Common Stock in a hedging transaction or as
part of a straddle or similar transaction.
OPINIONS
Subject to the foregoing and to the conditions and limitations
expressed elsewhere herein, we are of the opinion that for federal income tax
purposes:
1. the Merger will constitute a tax-free reorganization within the
meaning of Section 368(a) of the Code and FBHC and the Company will each be a
party to the reorganization;
<PAGE>
Board of Directors
January 4, 1999
Page 2
2. except as provided in paragraph 4 below, no gain or loss will be
recognized by any U.S. Holder upon the exchange of FBHC Common Stock solely for
Company Common Stock in the Merger; the aggregate adjusted tax basis of shares
of Company Common Stock (including a fractional share interest in Company Common
Stock deemed received and redeemed as described below) received by a U.S. Holder
will be the same as the aggregate adjusted tax basis of the shares of the FBHC
Common Stock exchanged therefor;
3. the holding period of Company Common Stock received by a U.S. Holder
in the Merger will include the holding period of the FBHC Common Stock
surrendered and exchanged therefor, provided that such shares of FBHC Common
Stock were held as a capital asset by such stockholder at the Effective Time;
and
4. a U.S. Holder who receives cash in lieu of a fractional share
interest in Company Common Stock in the Merger will be treated as having
received such fractional share interest and then as having received the cash in
redemption of such fractional share interest. Under Section 302 of the Code, if
such deemed distribution was "substantially disproportionate" with respect to
the U.S. Holder or was "not essentially equivalent to a dividend" after giving
effect to the constructive ownership rules of the Code, the U.S. Holder would
generally recognize capital gain or loss equal to the difference between the
amount of cash received and the U.S. Holder's adjusted tax basis in the
fractional share interest (determined as described in paragraph 2 above). Such
capital gain or loss would be long-term capital gain or loss if the U.S.
Holder's holding period in a fractional share interest (determined as described
in paragraph 3 above) is more than one year. Long-term capital gain of a
non-corporate U.S. Holder is generally subject to a maximum tax rate of 20% if
the holding period exceeds one year.
The foregoing opinion reflects our legal judgment based upon the facts
and assumptions presented herein. This opinion has no official status or binding
effect of any kind. Accordingly, we cannot assure you that the Internal Revenue
Service or any court of competent jurisdiction will agree with this opinion.
We hereby consent to the filing of this letter with the SEC as an
exhibit to the Registration Statement and to all references made to this letter
in the Registration Statement.
Very truly yours,
SILVER, FREEDMAN & TAFF, L.L.P.
<PAGE>
EXHIBIT 10.13
OPERATING AGREEMENT
FOR
MITCHELL MORTGAGE SERVICE COMPANY, L.L.C.
As of the date of this Operating Agreement, we have requested that the
law firm of Silver, Freedman & Taff, L.L.P. organize a limited liability company
in Texas on our behalf. It is the intent of the parties hereto that this
Operating Agreement constitute the regulations of the limited liability company
of the Texas Limited Liability Company Act (the "Act"), as well as a membership
agreement between the members of Mitchell Mortgage Service Company, L.L.C.
1. The name of the limited liability company shall be Mitchell Mortgage
Service Company, L.L.C. ("New Mitchell") and the members of the limited
liability company shall be Fort Bend Federal Savings and Loan Association of
Rosenberg ("Fort Bend") and Mitchell Mortgage Company, a Texas corporation
("Mitchell Mortgage") or its successor as permitted by Section 8 hereof.
2. Management of New Mitchell shall be reserved to a board of managers
(hereinafter called the "board of directors"), which shall be comprised of five
individuals (with three directors to be appointed by Fort Bend and two directors
to be appointed by Mitchell Mortgage). In addition, each of Fort Bend and
Mitchell Mortgage may appoint up to two advisory directors to the board of
directors who shall not have any voting or decision-making authority. The board
of directors of New Mitchell shall hire such officers as it deems appropriate to
manage the day-to-day operations of New Mitchell, and adopt such other
regulations for the operation and governance of New Mitchell as they deem
necessary and appropriate provided the same does not conflict with this
Operating Agreement.
3. Fort Bend shall own fifty-one percent (51%) of New Mitchell and
Mitchell Mortgage shall own forty-nine percent (49%) of New Mitchell. Profits,
losses and distributions shall be made in accordance with the members'
percentage ownership interest in New Mitchell. Members shall be entitled vote in
accordance with their percentage ownership interest, subject to Section 2 above.
4. The capital contributions by each member are as follows:
Fort Bend: $2,586,719.49 in cash
Mitchell Mortgage: an undivided 49% interest in certain
assets and liabilities being transferred
to New Mitchell having a value equal to
49% of the initial capitalization of New
Mitchell.
5. New Mitchell's minimum member's equity will at all time be
maintained at a minimum of eight percent of its assets; and to the extent it
shall ever be reduced below such minimum level, both Fort Bend and Mitchell
Mortgage shall agree to either: (x) provide a capital infusion to increase
members' equity to the minimum amount required on a pro rata basis equal to
their respective equity ownership percentage in New Mitchell or (y) take other
steps deemed appropriate to have members' equity in an amount equal to at least
eight percent. Except as set forth in the preceding sentence, there are no
agreements between the members regarding any times at
<PAGE>
which or events on the happening of which any additional contributions by each
member are to be made.
6. New Mitchell shall make periodic capital distributions of earnings
and profits to Fort Bend and Mitchell Mortgage which, on an annualized basis,
will be equal to at least a ten percent return on equity; provided, however that
to the extent New Mitchell does not generate earnings and profits sufficient to
support such distributions it will distribute all of its earnings and profits
for the year; and provided further, however, that no distribution shall be made
at any time that New Mitchell's member's equity is less than the greater of (x)
eight percent of total assets and (y) $5,000,000. The ten percent return on
equity shall include any amounts distributed to Fort Bend and Mitchell Mortgage
of the purpose of paying income tax liabilities resulting from New Mitchell
being a limited liability company.
7. The only events upon the happening of which New Mitchell is to be
dissolved and its affairs wound up are those events specified in the Act.
8. The members' ownership interests in New Mitchell are not
transferrable, for any reason, except upon the prior written unanimous consent
of all New Mitchell members, and except as set forth a letter agreement between
Fort Bend Holding Corp., Fort Bend, The Woodland's and Mitchell Mortgage, of
even date herewith; provided, however, in the case of a member that is not an
individual, such member may transfer its ownership interest to an entity which
is at least the majority owner of such member without the prior written
unanimous consent of the other members of New Mitchell.
9. New Mitchell will maintain an office in the Woodlands development
for at least five years from its formation, subject to a unanimous decision by
New Mitchell's board of directors that such a location would no longer be
prudent or economically feasible.
10. Notwithstanding a change in control of FBHC (as discussed in
Section 3(c) of the Letter Agreement executed contemporaneously with this
Operating Agreement), New Mitchell, to the extent prudently available and
economically feasible, intends to maintain at least $25,000,000 in construction
loans or commitments in The Woodlands development with additional amount to be
lent on properties located both within and without The Woodlands development,
subject to Section 5 and 6 hereto, at all time during the five years following
its formation.
11. Fort Bend will provide, as soon as possible after formation, a
master credit facility to New Mitchell for a period of at least five years after
formation, and will become the primary warehouse lender for New Mitchell at
rates which will be: (i) for loan amounts that are match funded with New
Mitchell escrow deposits, the rate would be 1.5% over Fort Bend's cost for such
funds (which currently would be zero); and (ii) for loan amounts in excess of
the match funded amounts, the rate would be 1.5% over the comparable term
Federal Home Loan Bank advance rate. In all other respects, the facility will be
substantially similar to that in place at the time of New Mitchell's formation.
12. All other aspects of the operations of New Mitchell shall be
governed by the provisions of the Act as may be in effect from time to time.
-2-
<PAGE>
13. Nothing in this Operating Agreement shall be deemed to restrict in
any way the rights of any member to conduct any other business of activity
whatsoever, and the member shall not be accountable to New Mitchell or to any
member with respect to that business or activities unless the business or
activity competes with New Mitchell's business, as may be further spelled out in
a Non-Competition Agreement executed by Mitchell Mortgage and its affiliates (a
copy of which is attached hereto). To the extent this Section 13 conflicts with
the Non-Competition Agreement, the terms of the Non-Competition Agreement shall
control. The organization of New Mitchell shall be without prejudice to their
respective rights to maintain, expand or diversity such other interests and
activities and to receive and enjoy profits or compensation therefrom. Each
member waives any rights the member might otherwise have to share or participate
in such other interest or activities of any other member.
14. Each member shall execute all such certificates and other documents
and shall do all such filing, recording, publishing, and other acts appropriate
to comply with the requirements of law for the formation and operation of New
Mitchell and to comply with any laws, rules, and regulations relating to the
acquisition, operation, or holding of the property of New Mitchell.
15. Any notice, demand, consent, election, offer, approval, request, or
other communication (collectively, a "notice") required or permitted under this
Operating Agreement must be in writing and either delivered personally, by
recognized national overnight carrier or sent by certified or registered mail,
postage prepaid, return receipt requested. A notice must be addressed to a
member or interest holder at the such person's last known address on the records
of New Mitchell. A notice to New Mitchell must be addressed to New Mitchell's
principal office. A notice delivered personally will be deemed given only when
acknowledged in writing by the person to whom it is delivered. A notice given by
overnight carrier will be deemed given the next day. A notice that is sent by
mail will be deemed given upon receipt or refusal. Any party may designate, by
notice to all of the others, substitute addresses or addressees for notices;
and, thereafter, notices are to be directed to those substitute addresses or
addressees.
16. The members recognize that irreparable injury will result form a
breach of any provision of this Operating Agreement and that money damages will
be inadequate to fully remedy the injury. Accordingly, in the event of a breach
or threatened breach of one or more of the provisions of this Operating
Agreement, any party who may be injured (in addition to any other remedies which
may be available to that party) shall be entitled to one or more preliminary or
permanent orders (i) restraining and enjoining any act which would constitute a
breach of this Operating Agreement and (ii) compelling the performance of any
obligation under this Agreement which, if not performed, would constitute a
breach.
17. This Operating Agreement constitutes the complete and exclusive
regulations of the Company and the statement of the agreement among the members.
It supersedes all prior written and oral statements, including any prior
representation, statement, condition, or warranty. Except as expressly provided
otherwise herein, this Operating Agreement may not be amended without the
written unanimous consent of the members.
-3-
<PAGE>
18. All questions concerning the construction, validity, and
interpretation of this Operating Agreement and the performance of the
obligations imposed by this Operating Agreement shall be governed by the
internal law, not the law of conflicts, of the State of Texas.
19. This Operating Agreement is binding upon, inures to the benefit of,
the parties hereto and their respective heirs, executors, administrators,
personal and legal representatives, successors, and permitted assigns.
20. Each provision of this Agreement shall be considered separable; and
if, for any reason, any provision or provisions herein are determined to be
invalid and contrary to any existing or future law, such invalidity shall not
impair the operation of or affect those portions of this Operating Agreement
which are valid.
21. This Operating Agreement may be executed simultaneously in
counterparts each of which shall be deemed an original, and all of which, when
taken together, constitute one and the same document. The signature of any party
to any counterpart shall be deemed a signature to, and may be appended to, any
other counterpart.
IN WITNESS WHEREOF, the parties have executed, or caused this Operating
Agreement to be executed as of the date set forth herein above.
Date: January 1, 1997 FORT BEND FEDERAL SAVINGS AND
LOAN ASSOCIATION OF ROSENBERG
By: /S/ LANE WARD
--------------------------------------
Lane Ward, President
MITCHELL MORTGAGE COMPANY
By: /S/ MICHAEL H. RICHMOND
--------------------------------------
Michael H. Richmond, President
-4-
<PAGE>
EXHIBIT 10.14
January 12, 1999
Mitchell Mortgage Company
The Woodlands Corporation
c/o Michael Richmond
The Woodlands Corporation
2201 Timberloch Place
The Woodlands, Texas 77380
Dear Sirs:
In connection with the Agreement (the "Agreement") dated as of October
31, 1996 by and among The Woodlands Corporation ("The Woodlands"), Mitchell
Mortgage Company ("Mitchell Mortgage") and Fort Bend Federal Savings and Loan
Association of Rosenberg ("Fort Bend"), and the transactions contemplated
thereby, this Transaction Letter Agreement (the "Letter") is to set out various
agreements and clarifications regarding the matters discussed herein, and is
intended to be fully binding.
1. All capitalized terms used without definition in this Letter shall
have the meaning set forth in the Agreement.
2. Mitchell Mortgage agrees to provide to New Mitchell an amount equal
to $78,000 as transitional costs related to the new entity. This amount shall be
deemed to be a net adjustment to the purchase price set forth in the Agreement.
3. (a) Fort Bend and Mitchell Mortgage hereby agree that Mitchell
Mortgage's ownership interest in New Mitchell will be convertible in whole, but
not in part, (beginning on the second anniversary of its formation and ending on
the fifth anniversary of its formation) into common stock of Fort Bend Holding
Corp. ("FBHC"), the parent of Fort Bend, at a conversion rate of 41.152 shares
of FBHC common stock for each $1,000 of ownership interest in New Mitchell
(equivalent to a conversion price of $24.30 per share), subject to adjustment in
certain events as set forth below. The right to convert will terminate at the
close of business on the fifth anniversary of New Mitchell's formation and will
expire if not exercised prior to that time. In the event Mitchell Mortgage
elects to convert its ownership interest in New Mitchell into common stock of
FBHC, FBHC will issue shares of its common stock to Mitchell Mortgage, based on
the above stated conversion rate, in an amount up to 9.9% of the outstanding
common stock of FBHC. In the event that Mitchell Mortgage's ownership interest
in New Mitchell should convert to an amount of FBHC common stock which exceeds
9.9% of the outstanding common stock of FBHC (after taking into account the
shares being issued to Mitchell Mortgage), such excess will be paid to Mitchell
Mortgage in cash in an amount equal to the book value of such remaining
ownership interest in New Mitchell after taking into account the value of the
9.9% of the FBHC common stock being issued as a result of the conversion.
<PAGE>
Mitchell Mortgage Company
The Woodlands Corporation
January 12, 1999
Page 2
The conversion price will be subject to adjustment upon the occurrence
of certain events, including: (i) dividends (and other distributions) payable in
common stock on any class of capital stock of FBHC, (ii) the issuance to all
holders of FBHC common stock of rights, warrants or options entitling them to
subscribe for or purchase common stock at less than the market price at the time
of issuance, (iii) subdivisions, combinations and reclassifications of FBHC
common stock, (iv) distributions to all holders of FBHC common stock of
evidences of indebtedness or assets (including securities, but excluding those
dividends, rights, warrants, options and distributions referred to above and
dividends and distributions paid exclusively in cash) of FBHC, (v) distributions
consisting exclusively of cash (excluding any cash portion of distributions
referred to in (iv) above or cash distributed upon a merger or consolidation of
FBHC) to all holders of common stock in an aggregate amount that, combined
together with (x) all other such all-cash distributions made within the
preceding 123 months in respect of which no adjustment has been made and (y) the
aggregate of any cash and the fair market value of other consideration payable
in respect of any tender offer by FBHC or any of its subsidiaries for FBHC
common stock concluded within the preceding 12 months in respect of which no
adjustment has been made, exceeds 10% of FBHC's market capitalization (being the
product of the current market price of the FBHC common stock on the date for the
determination of holders of shares of FBHC common stock entitled to receive such
distribution times the number of shares of FBHC common stock then outstanding)
on the record date for such distribution, and (vi) the purchase of FBHC common
stock pursuant to a tender offer made by FBHC or any of its subsidiaries which
involves an aggregate consideration that, together with (x) the aggregate of any
cash and the fair market value of consideration payable in any other tender
offer by FBHC or any of its subsidiaries for FBHC common stock expiring within
the 12 months preceding such tender offer in respect of which no adjustment has
been made and (y) the aggregate amount of any such all-cash distributions
referred to in (v) above to all holders of FBHC common stock within the 12
months preceding the expiration of such tender offer in respect of which no
adjustments have been made, exceeds 10% of FBHC's market capitalization on the
expiration of such tender offer. In no event will any adjustment of the
conversion price be required to be made until cumulative adjustments amount to
1% or more of the conversion price as last adjusted.
(b) PIGGYBACK RIGHTS. (i) If FBHC at any time proposed to file on its
behalf and/or on behalf of any other of its security holders a registration
statement under the Securities Act of 1933, as amended on Form S-1, S-2 or S-3
(or on any other form for the general registration of securities to be sold for
cash other than with respect to employee stock option plans, employee incentive
pans or other similar employee plans with respect to which a registration
statement or Form S-8 is filed) with respect to its common stock or other
securities convertible into, or exchangeable for its common stock, FBHC shall
give written notice (the "FBHC Notice") to Mitchell Mortgage at least 30 days
prior to the filing with the SEC of such registration statement and such notice
shall set forth the intended method of disposition of the securities proposed to
be registered. Mitchell Mortgage shall have the right, upon giving written
notice to FBHC within 20 days of receipt of the FBHC Notice
<PAGE>
Mitchell Mortgage Company
The Woodlands Corporation
January 12, 1999
Page 3
and subject to the provisions of this Section 3, to request that FBHC include in
such registration the number of shares of FBHC common stock owned by Mitchell
Mortgage indicated in such notice to the extent required to permit the
disposition of such shares in accordance with the intended method of disposition
set out in the FBHC Notice.
(ii) With respect to any registration statement referred to in
subsection (i) of this Section 3(b), FBHC shall include in such registration
statement any shares of common stock so requested to be included by Mitchell
Mortgage, provided that if the underwriters (or any managing underwriter) shall
advise FBHC in writing that, in their reasonable opinion and in good faith, the
distribution of the FBHC shares requested to be included in such registration
statement together with all other shares of FBHC common stock or other equity
securities being registered would materially adversely affect the distribution
of the securities to be offered solely for the account of FBHC, then Mitchell
Mortgage shall be entitled to participate in the registration, on a pro rata
basis, up to an amount whereby the underwriters or managing underwriter may
advise in good faith that such registration will not materially adversely affect
the distribution of securities to be offered solely for the account of FBHC.
With respect to all registrations referred to in this Section 3(b):
(A) If, at any time after giving written notice of its
intention to register common stock and prior to the effective date of
such registration statement filed in connection with such registration,
FBHC shall determine for any reason not to register such securities,
FBHC may, at its election, give written notice of such determination to
Mitchell Mortgage, and, thereupon, shall be relieved of its obligation
to register any of its common stock in connection with such
registration; and
(B) If such registration involved an underwritten offering,
Mitchell Mortgage must sell its shares to the underwriter selected by
FBHC on the same terms and conditions as applied to FBHC.
(C) The pro rata cost of registering and selling Mitchell
Mortgage's shares shall be borne by Mitchell Mortgage.
(c) Notwithstanding the time frame for Mitchell Mortgage's right to
convert its ownership interest in New Mitchell into common stock of FBHC set
forth in Section 3(a) hereof, such right shall accelerate immediately upon a
"change in control" of FBHC. A "change in control" means (i) a merger,
consolidation or sale of all or substantially all of the assets of FBHC, or (ii)
a change in control of a nature that would be required to be reported in
response to Item 1 of the current report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the
<PAGE>
Mitchell Mortgage Company
The Woodlands Corporation
January 12, 1999
Page 4
Securities Exchange Act of 1934, as amended. Under no circumstances, however,
will the right to convert extend beyond the fifth anniversary date of the
formation of New Mitchell.
4. New Mitchell will reimburse Mitchell Mortgage for the interest
expense on the outstanding balance of the Bank One, Texas, National Association
line of credit for January 1, 1997.
5. The Woodlands agrees to participate in the outstanding principal
balance of that certain commercial loan made by Mitchell Mortgage to A.K.
Interests -- Remington, L.P. on December 20, 1996 in the original principal
amount of $3,260,000 (which loan will be part of the Assets Transferred to New
Mitchell); provided, however, The Woodlands' participation shall be limited to
the amount that the balance of such commercial loan exceeds Fort Bend's, and
consequently New Mitchell's, lending limit of $2,800,000 per loan.
6. The provisions of this Letter shall cease and terminate upon a
proper termination of the Agreement in accordance with its terms.
7. FBHC has executed this Letter for the purpose of agreeing to the
provisions of this document that relate to it.
8. This Letter is contemporaneously executed with the Operating
Agreement which is a part of the Agreement.
<PAGE>
Mitchell Mortgage Company
The Woodlands Corporation
January 12, 1999
Page 5
If the foregoing correctly states our agreements, please execute and
return a copy of this Letter acknowledging your acceptance and agreement to the
terms hereof.
FORT BEND FEDERAL SAVINGS AND LOAN
ASSOCIATION OF ROSENBERG
By: /s/ LANE WARD
------------------------------------------
Name: Lane Ward
----------------------------------------
Title: President and Vice Chairman
---------------------------------------
FORT BEND HOLDING CORP.
By: /s/ LANE WARD
------------------------------------------
Name: Lane Ward
----------------------------------------
Title: President and Vice Chairman
----------------------------------------
THE WOODLANDS CORPORATION
By: /s/ MICHAEL H. RICHMOND
------------------------------------------
Name: Michael H. Richmond
----------------------------------------
Title: Executive Vice President
---------------------------------------
MITCHELL MORTGAGE COMPANY
By: /s/ DALE H. ANDREAS
------------------------------------------
Name: Dale H. Andreas
-----------------------------------------
Title: Vice President/General Manager
----------------------------------------
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of Southwest Bancorporation of Texas, Inc. on Form S-4 (File 333-___)
of our report dated February 10, 1998, on our audits of the consolidated
financial statements of Southwest Bancorporation of Texas, Inc. and our report,
which includes an explanatory paragraph for the change in method of accounting
for mortgage servicing rights, dated May 5, 1998, on our audits of the
consolidated financial statements of Fort Bend Holding Corp., which reports are
included in the annual reports on Form 10-K of Southwest Bancorporation of
Texas, Inc. and Fort Bend Holding Corp., respectively. We also consent to the
reference to our firm under the captions "Experts" and "Selected Financial
Data."
PricewaterhouseCoopers LLP
Houston, Texas
January 12, 1999
<PAGE>
EXHIBIT 99
REVOCABLE PROXY
FORT BEND HOLDING CORP.
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
Special Meeting of Stockholders
_____________, 1999
The undersigned hereby appoints the Board of Directors of Fort Bend Holding
Corp. (the "Company"), with full powers of substitution, to act as attorneys and
proxies for the undersigned to vote all shares of capital stock of the Company
that the undersigned is entitled to vote at the Special Meeting of Stockholders
(the "Meeting") to be held at the Fort Bend Country Club located at 2627 Farm to
Market Road 762, Richmond, Texas, on ___________, 1999 at ____ __.m., local
time, and at any and all adjournments and postponements thereof.
-------------------
Please be sure to sign and date this Date
Proxy in the box below.
- ----------------------------------------------------------
Stockholder sign above Co-holder (if any) sign above
- ----------------------------------------------------------
1. Approval and adoption of the Agreement and Plan of Merger dated as of
October 20, 1998, between the Company and Southwest Bancorporation of Texas,
Inc. ("Southwest"), pursuant to which the Company will merge with and into
Southwest, which shall be the surviving entity, and whereupon the stockholders
of the Company will receive 1.45 shares of Southwest Common Stock in exchange
for each share of Company Common Stock, as described in the Proxy
Statement/Prospectus relating to such Meeting:
For Against Abstain
/ / / / / /
2. In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting or any adjournment or
postponement thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN
OF MERGER. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE
VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME,
THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
MEETING.
The Board of Directors recommends a vote "FOR" the approval and adoption of
the Agreement and Plan of Merger.
Detach above card, sign, date and mail in postage paid envelope provided.
FORT BEND HOLDING CORP.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy may be revoked at any time before it is voted by: (i) filing
with the Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than the Proxy; (ii) duly executing a subsequent
proxy relating to the same shares and delivering it to the Secretary of the
Company at or before the Meeting; or (iii) attending the Meeting and voting in
person (although attendance at the Meeting will not in and of itself constitute
revocation of a proxy). If this Proxy is properly revoked as described above,
then the power of such attorneys or proxies shall be deemed terminated and of no
further force and effect.
The above signed hereby acknowledges receipt from the Company, prior to the
execution of this Proxy, of the Notice of the Special Meeting and the related
Proxy Statement/Prospectus, accompanied by copies of the Company's Annual Report
on Form 10-KSB for the fiscal year ended March 31, 1998, Proxy Statement dated
June 29, 1998 and Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1998.
Please sign exactly as your name(s) appear(s) on this Proxy. When signing
as attorney, executor, administrator, trustee or guardian, please give you full
title. If shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
