SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the Period Ended June 30, 1994 Commission File No. 0-6032
COMPASS BANCSHARES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 63-0593897
- ----------------------- ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
15 South 20th Street
Birmingham, Alabama 35233
----------------------------------------
(Address of principal executive offices)
(205) 933-3000
-------------------------------
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $2 par value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1994
- -------------------------- ----------------------------
Common Stock, $2 Par Value 36,950,173
The number of pages of this report is 22.
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1 Financial Statements
Consolidated Balance Sheets as of June 30, 1994 and December 31, 1993 3
Consolidated Statements of Income for the Three and Six Months Ended
June 30, 1994 and 1993 4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1994 and 1993 5
Notes to Consolidated Financial Statements 7
Item 2
Management's Discussion & Analysis of Results of Operations and Financial
Condition 9
PART II. OTHER INFORMATION
- ---------------------------
Item 4 Submission of Matters to a Vote of Security Holders 17
Item 6 Exhibits and Reports on Form 8-K 17
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
June 30, 1994 December 31, 1993
------------- -----------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 343,638 $ 283,783
Federal funds sold and securities purchased
under agreements to resell 91,579 144,764
Interest bearing deposits with other banks 10,099 10,474
Investment securities 930,721 604,464
Investment securities available for sale 781,799 645,454
Trading account securities 64,547 239,491
Loans, net of unearned income 5,311,865 5,197,464
Allowance for loan losses (110,523) (110,616)
------------ ------------
Net loans 5,201,342 5,086,848
Premises and equipment, net 193,262 176,790
Other assets 152,650 141,526
------------ ------------
Total assets $ 7,769,637 $ 7,333,594
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest bearing $ 1,195,289 $ 1,156,039
Interest bearing 4,840,716 4,469,058
------------ ------------
Total deposits 6,036,005 5,625,097
Federal funds purchased and securities
sold under agreements to repurchase 440,116 623,443
Other short-term borrowings 372,030 171,014
Accrued expenses and other liabilities 26,852 37,266
FHLB and other borrowings 325,370 325,437
------------ ------------
Total liabilities 7,200,373 6,782,257
Shareholders' equity:
Common stock of $2 par value:
Authorized--100,000,000 shares;
Issued--36,947,883 shares in 1994 and
36,927,277 shares in 1993 73,896 73,854
Surplus 37,342 36,815
Loans to finance stock purchases (6,034) (6,576)
Net unrealized holding gain (loss) on
available-for-sale securities (8,074) 6,545
Retained earnings 472,134 440,699
------------ ------------
Total shareholders' equity 569,264 551,337
------------ ------------
Total liabilities and shareholders'
equity $ 7,769,637 $ 7,333,594
============ ===========
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In Thousands Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 107,420 $ 102,952 $ 211,220 $ 204,574
Interest and dividends on
investment securities 14,562 18,056 26,206 37,806
Interest on investment
securities available for sale 12,084 8,136 22,717 17,115
Interest on trading account
securities 3,343 2,039 7,630 3,401
Interest on federal funds sold
and securities purchased
under agreements to resell 959 631 2,586 1,198
Interest on interest bearing
deposits with other banks 214 222 431 446
---------- ---------- ---------- ----------
Total interest income 138,582 132,036 270,790 264,540
Interest expense:
Interest on deposits 44,426 40,271 85,473 80,973
Interest on federal funds
purchased and securities sold
under agreements to repurchase 5,783 4,456 11,130 9,822
Interest on other short-term
borrowings 2,468 1,957 3,789 3,639
Interest on FHLB and other
borrowings 3,731 2,591 7,130 4,408
---------- ---------- ---------- ----------
Total interest expense 56,408 49,275 107,522 98,842
---------- ---------- ---------- ----------
Net interest income 82,174 82,761 163,268 165,698
Provision for loan losses 27 10,001 2,305 21,775
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 82,147 72,760 160,963 143,923
Noninterest income:
Service charges on deposit
accounts 11,032 10,029 21,110 19,076
Trust fees 4,371 3,966 8,822 7,895
Trading account profits and
commissions (2,388) 3,353 (6,265) 7,830
Investment securities gains,
net 3,159 592 3,159 772
Loss on purchase of securities
from common trust fund (8,222) - (8,222) -
Other 7,765 8,901 16,141 17,001
---------- ---------- ---------- ----------
Total noninterest income 15,717 26,841 34,745 52,574
Noninterest expense:
Salaries and benefits 30,836 33,925 63,031 65,455
Net occupancy expense 5,655 5,194 10,947 9,620
Equipment expense 4,776 4,031 9,665 8,564
FDIC insurance premium 3,344 2,946 6,656 5,997
Other 17,697 18,322 33,022 36,845
---------- ---------- ---------- ----------
Total noninterest expense 62,308 64,418 123,321 126,481
---------- ---------- ---------- ----------
Net income before income
tax expense 35,556 35,183 72,387 70,016
Income tax expense 11,134 12,539 24,053 25,464
---------- ---------- ---------- ----------
Net income $ 24,422 $ 22,644 $ 48,334 $ 44,552
========== ========== ========== ==========
Net income per common share $ 0.66 $ 0.59 $ 1.30 $ 1.17
Weighted average shares
outstanding 37,255 37,184 37,210 37,188
Dividends per common share $ 0.23 $ 0.19 $ 0.46 $ 0.38
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended June 30,
----------------------------
1994 1993
------------- -------------
<S> <C> <C>
Operating Activities:
Net income $ 48,334 $ 44,552
Adjustments to reconcile net income to cash
provided by operations:
Depreciation and amortization 14,367 12,822
Accretion of discount and loan fees (5,816) (4,182)
Provision for loan losses 2,305 21,775
Net change in trading account securities 196,931 (59,982)
Net change in mortgage loans available for sale 932 (5,254)
Gain on sale of investment securities (3,159) (772)
Loss on purchase of securities from common
trust fund 8,222 -
Gain on sale of premises and equipment (35) (77)
(Gain) loss on sale of other real estate owned 148 (4)
Provision for losses on other real estate owned (511) 902
(Increase) decrease in interest receivable (2,540) 5,990
Increase in other assets (3,460) (4,625)
Increase (decrease) in interest payable 643 (2,658)
Decrease in taxes payable (4,818) (7,968)
Increase in other payables 1,041 1,705
----------- -----------
Net cash provided by operating activities 252,584 2,224
----------- -----------
Investing Activities:
Proceeds from sales of investment securities 3,360 35,158
Proceeds from maturities/calls of securities 173,696 175,628
Purchases of investment securities (510,161) (13,541)
Proceeds from sales of securities available
for sale 220,027 50,575
Proceeds from maturities/calls of securities
available for sale 95,982 111,351
Purchases of securities available for sale (472,779) (106,015)
Net (increase) decrease in federal funds sold
and securities purchased under agreements
to resell 199,735 (36,443)
Net increase in loan portfolio (37,349) (222,679)
Acquisitions 6,132 1,242
Purchases of premises and equipment (15,307) (20,938)
Proceeds from sales of premises and equipment 185 329
Net decrease in interest bearing deposits with
other banks 376 586
Proceeds from sales of other real estate owned 3,357 4,693
----------- -----------
Net cash used by investing activities (332,746) (20,054)
----------- -----------
</TABLE>
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended June 30,
----------------------------
1994 1993
------------- -------------
<S> <C> <C>
Financing Activities:
Net increase (decrease) in demand deposits,
NOW accounts and savings accounts $ (8,154) $ 28,020
Net increase (decrease) in time deposits 153,527 (48,058)
Net decrease in federal funds purchased (150,371) (185,610)
Net decrease in securities sold under agreements
to repurchase (40,056) (19,322)
Net increase in short-term borrowings 200,948 166,366
Issuance of FHLB advances and other borrowings - 74,472
Repayment of long-term debt (94) (75)
Purchase of treasury shares (6) -
Common dividends paid (16,896) (13,782)
Preferred dividends paid - (1,036)
Proceeds from issuance of common stock - 934
Repayment of loans to finance stock purchases 542 -
Proceeds from exercise of stock options 577 1,368
----------- -----------
Net cash provided by financing activities 140,017 3,277
----------- -----------
Net increase (decrease) in cash and cash equivalents 59,855 (14,553)
Cash and cash equivalents at beginning of period 283,783 316,092
----------- -----------
Cash and cash equivalents at end of period $ 343,638 $ 301,539
=========== ===========
Schedule of noncash investing and financing
activities:
Transfers of loans to other real estate owned $ 1,167 $ 3,531
Loans to facilitate the sale of other real
estate owned 9,967 3,493
Transfer of securities to investment securities
available for sale - 28,671
Acquisition of banks:
Fair value of assets acquired $ 309,037
Liabilities assumed 273,725
-----------
Cash paid $ 35,312
===========
</TABLE>
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 1 - General
The consolidated financial statements in this report have not been audited.
In the opinion of management, all adjustments necessary to present fairly the
financial position and the results of operations for the interim periods have
been made. All such adjustments are of a normal recurring nature. The results
of operations are not necessarily indicative of the results of operations for
the full year or any other interim periods. For further information, refer to
the consolidated financial statements and footnotes included in the Company's
annual report on Form 10-K for the year ended December 31, 1993.
NOTE 2 - Business Combinations
On October 14, 1993, the Company purchased First Federal Savings Bank of
Northwest Florida ("First Federal"), of Ft. Walton Beach, Florida, for $13.7
million in cash. The acquisition was accounted for under the purchase method
of accounting. At the date of acquisition, First Federal had assets of
approximately $101 million, deposits of $91 million and equity of $10 million.
On October 21, 1993, the Company purchased all of the outstanding shares of
Peoples Holding Company, Inc. ("Liberty") and its bank subsidiary, Liberty Bank
of Ft. Walton Beach, Florida, for $4.95 million in cash. At the date of
acquisition, Liberty had assets of $43 million, deposits of $35 million and
equity of $4 million. The acquisition was accounted for as a purchase.
The Company completed the acquisition of Spring National Bank ("Spring
National"), of Houston, Texas on November 3, 1993, with the issuance of 326,940
shares of the Company's common stock. At the date of acquisition, Spring
National had assets of $75 million, deposits of $66 million and equity of $6
million. The acquisition was accounted for as a pooling-of-interests and
accordingly all prior period information has been restated.
On January 27, 1994, the Company completed the acquisition of 1st
Performance National Bank ("1st Performance"), of Jacksonville, Florida, in a
cash transaction. The acquisition was accounted for as a purchase. At the
date of acquisition, 1st Performance had assets of $267 million, deposits of
$235 million and equity of $25 million.
The Company completed the acquisition of Security Bank, N.A. ("Security") of
Houston, Texas on May 5, 1994, with the issuance of 465,297 shares of the
Company's common stock. At the date of acquisition, Security had assets of $76
million, deposits of $69 million, and equity of $6 million. The transaction
was accounted for under the pooling-of-interests method of accounting and
accordingly all prior period information has been restated.
On May 12, 1994, the Company completed the acquisition of three branches of
Anchor Savings Bank in the Jacksonville, Florida area with deposits of $31
million. The acquisition was accounted for as a purchase.
On April 4, 1994, the Company announced an agreement to acquire 22 branches
of First Heights Bank, of Houston, Texas, with deposits of approximately $885
million and assets of $54 million, for approximately $6.8 million in a purchase
transaction. The acquisition is expected to close in the fourth quarter of
1994.
The Company announced on June 20, 1994, an agreement to acquire Southwest
Bankers, Inc. ("Southwest") and its bank subsidiary, The Bank of San Antonio,
for 950,000 shares of the Company's common stock. At June 30, 1994, Southwest
had assets of $135 million, deposits of $120 million, and equity of $10
million. It is anticipated that the transaction will close in the first
quarter of 1995 and will be accounted for under the pooling-of-interests method
of accounting.
<PAGE>
NOTE 3 - Recently Issued Accounting Standards
During the second quarter of 1993, the Financial Accounting Standards Board
("FASB") issued FASB Statement No. 114, Accounting by Creditors for Impairment
of a Loan ("FAS114"). FAS114 requires that impaired loans be measured based
on the present value of expected future cash flows discounted at the loan's
effective interest rate, which is the contractual interest rate adjusted for
any deferred loan fees or costs, premium, or discount existing at the inception
or acquisition of the loan. FAS114 is effective for fiscal years beginning
after December 15, 1994, with early adoption permitted. The Company does not
anticipate adopting FAS114 prior to its effective date. Presently, the Company
is unable to determine the impact that adoption of FAS114 will have on the
consolidated financial statements of the Company, but management anticipates
that the impact will not be material.
On December 31, 1993, the Company adopted FASB Statement No. 115, Accounting
for Certain Investments in Debt and Equity Securities ("FAS115"). FAS115
requires that a company's debt and equity securities be classified into one of
three categories based on management's intent to hold the securities: i.
trading account securities, ii. held-to-maturity securities, and iii.
securities available for sale. Securities held in a trading account are
required to be reported at fair value, with unrealized gains and losses
included in earnings. Securities designated to be held to maturity are
required to be reported at amortized cost. Securities classified as available
for sale are required to be reported at fair value with unrealized gains and
losses excluded from earnings and shown separately as a component of
shareholders' equity. At June 30, 1994, tax-effected net unrealized losses in
the Company's available-for-sale portfolio totaled $8.1 million, a decrease of
$14.6 million from net unrealized gains of $6.5 million at December 31, 1993.
This decline in the market value of the Company's available-for-sale portfolio
was reflected as a reduction of shareholders' equity in accordance with FAS115.
NOTE 4 - Loss on Purchase of Securities From Common Trust Fund
During the second quarter of 1994, the Company recorded losses
of approximately $8.2 million from the purchase of collateralized mortgage
obligation inverse floaters ("inverse floaters") from a common trust
fund managed by the trust division of the Company's lead bank. Due to the
increase in the general level of interest rates, the common trust fund
customers faced significant losses on inverse floaters held in the portfolio.
In evaluating the suitability of these investments for the common trust fund
subsequent to the decline in market value, the Company determined that it
would be in the best interests of the Company, its lead bank, and its trust
customers to purchase these securities at book value from the common trust
fund. As a result of this decision, the Company purchased inverse floaters
with a fair value of $27.0 million from the common trust fund at the fund's
cost of $35.2 million with the difference between purchase price and fair value
reflected in the Company's Statement of Income as a component of noninterest
income. These securities are reflected at cost in the Company's held-to-
maturity investment securities portfolio at June 30, 1994.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Overview
Net income for the quarter ended June 30, 1994, increased 8 percent to $24.4
million while net income for the first six months of 1994 increased 8 percent
to $48.3 million from the comparable prior year periods. Net income per common
share for the second quarter increased 12 percent to $0.66 compared to the same
period in 1993 while net income per common share for the first six months of
1994 increased 11 percent to $1.30. The larger increase in net income per
common share as compared to net income is due to the lack of preferred stock
dividends in 1994 as a result of the Company's redemption of its outstanding
preferred stock during the third quarter of 1993. Net interest income decreased
less than one percent during the second quarter of 1994 while decreasing one
percent for the first six months of 1994 over the prior year period. The
provision for loan losses decreased significantly in 1994 from prior periods
due to a decrease in nonperforming assets and credit losses. For the three
months ended June 30, 1994, the provision for loan losses declined $10.0
million from the second quarter of 1993 to $27,000 while decreasing 89 percent
to $2.3 million for the six months ended June 30, 1994. Noninterest income for
the second quarter of 1994 decreased 41 percent from 1993 while noninterest
expense decreased 3 percent. For the first six months of 1994, noninterest
income and noninterest expense declined 34 percent and 2 percent, respectively,
over the prior year.
In November of 1993, the Company completed the acquisition of Spring
National Bank in Houston, Texas ("Spring National"). During May, 1994, the
Company acquired Security Bank, N.A. ("Security") in Houston, Texas. The
acquisitions of Spring National and Security were accounted for under the
pooling-of-interests method of accounting and accordingly the financial
statements have been restated for all periods to reflect the acquisitions.
During the first quarter of 1994, the Company completed the purchase of 1st
Performance National Bank ("1st Performance"), of Jacksonville, Florida, with
assets of $267 million. A complete list of acquisitions is included in
"Acquisitions" and "Pending Acquisitions" under Item I - Business in the
Company's 1993 Form 10-K and in Note 2, "Business Combinations", in the Notes
to the Consolidated Financial Statements in this Form 10-Q.
Net Interest Income
Net interest income for the three months ended June 30, 1994, decreased less
than $1 million from the second quarter of 1993. On a tax-equivalent basis,
net interest income decreased $1.3 million, or 1 percent. This decrease was a
result of a $7.1 million, or 14 percent, increase in interest expense and a
$5.9 million, or 4 percent, increase in interest income on a tax-equivalent
basis. The increase in interest income was due to an increase in average
earning assets of $694 million which more than offset a decrease in the average
yield on earning assets from 8.26 percent to 7.79 percent. The largest portion
of the increase in earning assets occurred in the average balances of real
estate and commercial loans and total investment securities, specifically
investment securities available for sale. This increase in the average balance
of loans and investment securities was funded predominantly by growth in all
categories of deposits as well as an increase in FHLB and other borrowings.
Interest expense for the three months ended June 30, 1994, increased by $7.1
million or 14 percent from the prior year, due principally to a 14 percent
increase in average total deposits offset by a 11 basis point decline in the
average rate paid on deposits. Additionally, the average balances of Fed funds
purchased and securities sold under agreements to repurchase declined 4 percent
while the average balance of FHLB advances and other borrowings increased by
$75 million. Subordinated debentures issued by the Company in the second
quarter of 1993 and additional FHLB advances of $48 million in the third
quarter of 1993 were used to reduce Fed funds purchased and securities sold
under agreements to repurchase and other short-term borrowings.
Net interest income for the six months ended June 30, 1994, decreased $2.4
million to $163.3 million. Tax-equivalent net interest income for the six
months ended June 30, 1994, decreased $3.4 million, or 2 percent, over the
first six months of 1993. On a tax-equivalent basis, the decrease in net
interest income resulted from an increase in interest expense of $8.7 million,
or 9 percent, offset by a $5.3 million, or 2 percent, increase in interest
income. The increase in interest income resulted from a 9 percent increase in
average earning assets, primarily real estate loans, coupled with a decrease in
the average yield on earning assets of 57 basis points from 8.35 percent for
the six months ended June 30, 1993, to 7.78 percent for the comparable period
in 1994.
Interest expense increased as a result of a 10 percent increase in average
interest bearing liabilities, primarily total deposits and FHLB and other
borrowings, offset by a 4 basis point decline in the rate paid on interest
bearing liabilities, from 3.72 percent in 1993 to 3.68 percent in 1994. Total
average deposits increased by $488 million, or 11 percent, due in part to the
acquisition of 1st Performance in January, 1994. The increase in FHLB and
other borrowings discussed previously more than offset a decrease in Fed funds
purchased and securities sold under agreements to repurchase and other short-
term borrowings.
Net Interest Margin
Net interest margin, stated as a percentage, is the yield on average earning
assets obtained by dividing the difference between the overall interest income
on earning assets and the interest expense paid on all funding sources by
average earning assets. For the first six months of 1994, the net interest
margin, on a tax-equivalent basis, was 4.73 percent compared to 5.28 percent
for the same period in 1993. This 55 basis point decrease resulted from the
changes in rates and volumes of earning assets and the corresponding funding
sources noted previously. A 55 basis point decrease in the rates earned on
loans was the major contributor to the continued decline in the net interest
margin. The impact of this decline on net interest margin was partially offset
by an 8 percent increase in noninterest bearing demand deposits and a decrease
in the average rate paid on interest bearing deposits from 3.84 percent to 3.64
percent. During the first six months of 1994, the Company's net interest
margin was positively impacted by the Company's use of interest rate contracts,
increasing taxable equivalent net interest margin by 16 basis points as
compared to a positive impact of 22 basis points for the same period in 1993.
The decline in the impact of interest rate contracts on the Company's net
interest margin was due to the increase in the general level of interest rates
during the first six months of 1994.
For the quarter ended June 30, 1994, the net interest margin was 4.65
percent compared to 5.23 percent for the same period in 1993. This 58 basis
point decline resulted from a 47 basis point decrease in the yield on total
earning assets and a 9 basis point increase in the rate paid on interest
bearing liabilities. The decrease in the yield on average earning assets was
due to a 37 basis point decline in the yield on loans while the yield on
investment securities and investment securities available for sale declined by
53 and 101 basis points, respectively. For the quarter ended June 30, 1994,
the taxable equivalent net interest margin was increased by 14 basis points due
to the Company's use of interest rate contracts. This impact was down from a
23 basis point increase for the comparable prior year period.
The tables on the following page detail the components of the changes in net
interest income (on a tax-equivalent basis) by major category of interest
earning assets and interest bearing liabilities for the six months and three
months ended June 30, 1994, as compared to the comparable periods of 1993 (in
thousands):
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1994
---------------------------------------------
Change
1994 Attributed to
to ---------------------------------
1993 Volume Rate Mix
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 6,497 $ 20,911 $ (13,084) $ (1,330)
Investment securities (12,408) (12,658) 364 (114)
Investment securities available
for sale 5,607 9,330 (2,417) (1,306)
Trading account securities 4,209 2,171 1,250 788
Fed funds and resale agreements 1,388 1,017 201 170
Time deposits in other banks (15) (21) 6 -
---------- ---------- ---------- ---------
Increase in interest income $ 5,278 $ 20,750 $ (13,680) $ (1,792)
========== ========== ========== =========
Interest expense:
Deposits $ 4,500 $ 9,049 $ (4,095) $ (454)
Fed funds purchased and repos 1,308 (345) 1,714 (61)
Other short-term borrowed funds 150 (374) 584 (60)
FHLB and other borrowings 2,722 1,902 573 247
---------- ---------- ---------- ---------
Increase in interest expense $ 8,680 $ 10,232 $ (1,224) $ (328)
========== ========== ========== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1994
---------------------------------------------
Change
1994 Attributed to
to ---------------------------------
1993 Volume Rate Mix
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Interest Income:
Loans $ 4,390 $ 9,248 $ (4,459) $ (399)
Investment securities (4,058) (3,035) (1,212) 189
Investment securities available
for sale 3,927 6,170 (1,280) (963)
Trading account securities 1,283 211 973 99
Fed funds and resale agreements 328 81 219 28
Time deposits in other banks (8) (10) 2 -
---------- ---------- ---------- ---------
Increase in interest income $ 5,862 $ 12,665 $ (5,757) $ (1,046)
========== ========== ========== =========
Interest expense:
Deposits $ 4,155 $ 5,751 $ (1,354) $ (242)
Fed funds purchased and repos 1,327 (191) 1,586 (68)
Other short-term borrowed funds 511 93 399 19
FHLB and other borrowings 1,140 775 281 84
---------- ---------- ---------- ---------
Increase in interest expense $ 7,133 $ 6,428 $ 912 $ (207)
========== ========== ========== =========
</TABLE>
Noninterest Income and Noninterest Expense
For the six months ended June 30, 1994, noninterest income decreased $17.8
million, or 34 percent, to $34.7 million from $52.6 million for the first six
months of 1993. Noninterest income for the second quarter of 1994 decreased by
$11.1 million, or 41 percent, from the same period in 1993. Service charges on
deposit accounts and trust fees both increased 10 percent during the second
quarter of 1994 while increasing 11 and 12 percent, respectively, for the first
six months of 1994. The increase in service charges resulted from the increase
in deposits while the increase in trust fee income is due to increased trust
activity at River Oaks Trust Company, a subsidiary, and at the Company's lead
bank as assets under trust increased from $5.1 billion at June 30, 1993 to
$5.5 billion at June 30, 1994. Securities gains and losses increased from
gains of $592,000 during the second quarter of 1993 to gains of $3.2 million
during the comparable period of 1994. During the second quarter, trading
account profits and commissions on bond sales and trading activities decreased
by $5.7 million from income of $3.3 million during the second quarter of 1993
to a loss of $2.4 million due chiefly to additional losses on collateralized
mortgage obligation inverse floaters ("inverse floaters") held in the Company's
trading account. Similarly, the $14.1 million decrease in trading account
profits and commissions from the first six months of 1993 was due to the
decline in the market values of inverse floaters as a result of an increase in
the general level of interest rates during the first two quarters of the year.
All inverse floaters previously held in the trading account that were
responsible for the losses incurred in the first and second quarters have been
sold at June 30, 1994. It should be noted that changes in the trading account
profits and commissions in future quarters cannot be predicted accurately
because of the uncertainty of changes in market conditions. There can be no
assurance that such amounts will or will not continue at their current levels.
The $8.2 million loss on purchase of securities from common trust fund
resulted from the purchase of inverse floaters by the Company during the
second quarter from a common trust fund managed by the trust division of
the Company's lead bank. Due to the increase in the general level of interest
rates, the common trust fund customers faced significant losses on inverse
floaters held in the portfolio. In evaluating the suitability of these
investments for the common trust fund subsequent to the decline in market
value, the Company determined that it would be in the best interests of the
Company, its lead bank, and its trust customers to purchase these securities at
book value from the common trust fund. As a result of this decision, the
Company purchased inverse floaters with a fair value of $27.0 million from the
common trust fund at the fund's cost of $35.2 million with the difference
between purchase price and fair value reflected in the Company's Statement of
Income as a separate component of noninterest income. The securities purchased
by the Company are reflected at its cost of $27.0 million in its held-to-
maturity investment securities portfolio at June 30, 1994.
Following the purchase of the inverse floaters, the Company conducted a
review of all securities held by the common trust funds managed by the Company
or its subsidiaries. No inverse floaters or other high risk derivatives are
held by the common trust funds, however, certain individual trust accounts hold
derivative securities which may include high risk derivative securities. In
those cases where there are derivative securities, the Company believes after
reasonable investigation that the customer is sophisticated, is aware of the
risks associated with holding such securities, and is capable of holding such
securities to maturity. No other "high risk" derivatives are held by the
Company in its held-to-maturity and available-for-sale portfolios at December
31, 1993, or at June 30, 1994, other than those inverse floaters held by the
parent company as of June 30, 1994, as discussed above.
Noninterest expense decreased $2.1 million, or 3 percent, during the second
quarter of 1994 from the same period in 1993. For the six months ended June
30, 1994, noninterest expense decreased by $3.2 million or 2 percent. Salaries
decreased $1.3 million or 5 percent for the second quarter while employee
benefits decreased 29 percent. During the first six months of 1994, salaries
decreased by $437,000 or less than one percent and employee benefits decreased
by 17 percent. The decrease in salaries from 1993 levels is the result of a
decrease in executive incentives partially offset by normal business growth and
regular merit increases while the decrease in employee benefits is due to
decreased ESOP expense and decreased pension expense. Other noninterest
expense decreased $625,000, or 3 percent, in the second quarter of 1994 and
$3.8 million, or 10 percent, in the first two quarters of 1994. These
decreases resulted principally from decreased legal expenses and acquisition
expenses during the period along with the reversal of a portion of the
allowance for losses on other real estate owned.
Income Taxes
Income tax expense declined by $1.4 million, or 11 percent, during the
second three months of 1994 compared to the same period in 1993 while
decreasing $1.4 million, or 6 percent, during the first six months of 1994.
The effective tax rates for the six months ended June 30 decreased from 36
percent in 1993 to 33 percent in 1994. Similarly, the effective tax rate
decreased from 36 percent for the quarter ended June 30, 1993, to 31 percent
during the second quarter of 1994. The higher effective tax rate in 1993 was
due to the Company's provision for potentially nondeductible acquisition
expenses incurred during the second quarter of 1993 which was subsequently
reversed during the second quarter of 1994 following the completion of an IRS
audit. Conversely, the effective tax rate in 1994 was adversely impacted by a
decrease in tax-exempt income as a percentage of pretax income, from 9 percent
in 1993 to 7 percent in 1994.
Provision and Allowance for Loan Losses
The provision for loan losses decreased from $10.0 million during the three
months ended June 30, 1993, to $27,000 in the comparable period in 1994. For
the six months ended June 30, 1994, the provision decreased by $19.5 million,
or 89 percent, to $2.3 million. This decrease reflected the 24 percent
decrease in nonperforming assets from December 31, 1993, while net chargeoffs
as a percentage of average loans declined. Management considers changes in the
size and character of the loan portfolio, changes in nonperforming and past
due loans, historical loan loss experience, the existing risk of individual
loans, concentrations of loans to specific borrowers or industries and existing
and prospective economic conditions when determining the adequacy of the loan
loss allowance. The allowance for loan losses at June 30, 1994, was $110.5
million compared to $110.6 million at December 31, 1993. The ratio of the
allowance for loan losses to loans outstanding was 2.08 percent at June 30,
1994, down slightly from 2.13 percent at December 31, 1993. Net loan
chargeoffs expressed as an annualized percentage of average loans for the first
six months of 1994 were 0.12 percent compared with 0.14 percent for the first
six months of 1993.
Nonperforming Assets and Past Due Loans
Nonperforming assets, comprised of nonaccrual loans, renegotiated loans and
other real estate owned, totaled $30.4 million at June 30, 1994, compared to
$40.1 million at December 31, 1993. At June 30, 1994, the allowance for loan
losses as a percentage of nonperforming loans was 525 percent as compared to
573 percent at December 31, 1993. The allowance for loan losses as a
percentage of nonperforming loans and accruing loans ninety days or more past
due decreased from 472 percent at December 31, 1993, to 442 percent at June 30,
1994.
Nonperforming assets as a percentage of total loans and other real estate
owned were 0.57 percent at June 30, 1994, down from 0.77 percent at December
31, 1993. The amount carried in other repossessed assets at June 30, 1994, was
$152,000 at June 30, 1994, and $375,000 at December 31, 1993. Loans past due
90 days or more but still accruing interest decreased 4 percent at June 30,
1994, from the $4.1 million at December 31, 1993, representing 0.07 percent of
total loans and other real estate owned. During 1994, other real estate owned
declined 55 percent from $20.8 million at December 31, 1993, to $9.4 million at
June 30, 1994.
The Company regularly monitors selected accruing loans for which general
economic conditions or changes within a particular industry could cause the
borrowers financial difficulties. This continuous monitoring of the loan
portfolio and the related identification of loans with a high degree of credit
risk are essential parts of the Company's credit management. Management
continues to emphasize maintaining a low level of nonperforming assets and
returning current nonperforming assets to an earning status.
Financial Condition
Overview
Total assets at June 30, 1994, were $7.8 billion, up 6 percent from December
31, 1993. The majority of this increase was due to the acquisition of 1st
Performance in January, 1994. Retained earnings remained the primary source of
growth for the Company's capital base.
Assets and Funding
At June 30, 1994, earning assets totaled $7.2 billion, an increase of 5
percent from December 31, 1993. The mix of earning assets shifted moderately
in the first six months of 1994 with total investment securities at June 30,
1994, increasing by $463 million, or 37 percent, from year end while loans
increased by $114 million, or 2 percent. The growth in loans and total
investment securities was funded principally by a $175 million, or 73 percent,
decrease in trading account securities and a $410 million, or 7 percent,
increase in total deposits. Loans comprised 74 percent of total earning assets
at June 30, 1994, as compared to 76 percent at December 31, 1993, while the
percentage of earning assets represented by total investment securities
increased from 18 percent to 24 percent.
Interest bearing deposits at June 30, 1994, increased $372 million from
December 31, 1993, while noninterest bearing deposits increased by $39 million.
During the second quarter of 1994, the mix of short-term liabilities shifted
toward other short-term borrowings, primarily short-term notes. At June 30,
1994, deposits accounted for 78 percent of the Company's funding, up from 77
percent at year end.
Liquidity and Capital Resources
Net cash provided by operating activities totaled $253 million for the six
months ended June 30, 1994, consisting principally of the decrease in trading
account securities. For the first six months of 1994, net cash used by
investing activities of $333 million consisted of proceeds from maturities of
investment securities of $174 million, proceeds from maturities of securities
available for sale of $96 million, proceeds from sales of securities available
for sale of $220 million, and a $200 million decrease in federal funds sold and
securities sold under agreements to repurchase with cash outflows of $510
million in investment securities purchases, $473 million in purchases of
securities available for sale, and a $37 million increase in loans outstanding.
Net cash provided by financing activities of $140 million was composed of
increases in time deposits and other short-term borrowings which funded the
payment of $17 million in common stock dividends and the decrease in federal
funds purchased.
Total shareholders' equity at June 30, 1994, was 7.33 percent of total
assets compared to 7.52 percent at December 31, 1993. The decrease since year-
end 1993 reflects the six percent growth in total assets, due primarily to the
acquisition of 1st Performance, which outpaced the growth in total
shareholders' equity of three percent. The growth in shareholders' equity
consisted of earnings retained after payment of dividends on common stock
offset by the decrease in the net unrealized holding gain/loss on available-
for-sale securities. On December 31, 1993, the Company adopted Financial
Accounting Standard No. 115, Accounting for Certain Investments in Debt and
Equity Securities, ("FAS115"). At the date of adoption, the tax-effected
unrealized holding gain of $6.5 million on the Company's securities available
for sale was reflected as an additional component of shareholders' equity.
Pursuant to the requirements of FAS115, the after tax change in the unrealized
holding gain/loss in the Company's available-for-sale portfolio from December
31, 1993, to June 30, 1994, of $14.6 million has been reflected as a reduction
of equity.
The leverage ratio, defined as period-end common equity adjusted for
goodwill divided by average assets adjusted for goodwill, was 7.08 percent at
June 30, 1994, compared to 7.33 percent at December 31, 1993. Similarly, the
Company's tangible leverage ratio, defined as period-end common equity adjusted
for all intangibles divided by average assets adjusted for all intangibles,
decreased from 6.96 at December 31, 1993, to 6.76 at June 30, 1994. The
decrease in these ratios is due to goodwill and other intangibles recorded in
connection with the purchase of 1st Performance.
Tier I capital and total qualifying capital (Tier I capital plus Tier II
capital), as defined by regulatory agencies, as of June 30, 1994, exceeded the
target ratios of 6.0 percent and 10.0 percent, respectively, under current
regulations. The Tier I and total qualifying capital ratios at June 30, 1994,
were 10.47 percent and 13.15 percent, respectively. Tier II capital includes
supplemental capital components such as qualifying allowances for loan losses,
certain qualifying classes of preferred stock and qualifying subordinated debt.
Increased regulatory activity in the financial industry as a whole will
continue to impact the structure of the industry; however, management does not
anticipate any negative impact on the capital resources or operations of the
Company.
<PAGE>
<TABLE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
Allowance for Loan Losses/Nonperforming Assets
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended June 30,
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
Allowance for Loan Losses
Balance at beginning of period $ 110,616 $ 83,859
Add: Provision charged to earnings 2,305 21,775
Balance due to acquisition 810 439
Deduct: Loans charged off 6,951 7,909
Loan recoveries (3,743) (4,629)
---------- ----------
Net charge-offs 3,208 3,280
---------- ----------
Balance at end of period $ 110,523 $ 102,793
========== ==========
Net charge-offs as a percentage of
average loans (annualized) 0.12% 0.14%
Recoveries as a percentage of charge-offs 53.85% 58.53%
</TABLE>
<TABLE>
<CAPTION>
At June 30, 1994 At December 31, 1993
---------------- --------------------
<S> <C> <C>
Nonperforming Assets
Nonaccrual loans $ 14,732 $ 12,165
Renegotiated loans 6,303 7,143
---------- ----------
Total nonperforming loans 21,035 19,308
Other real estate 9,393 20,831
---------- ----------
Total nonperforming assets $ 30,428 $ 40,139
========== ==========
Accruing loans ninety days past due $ 3,984 $ 4,143
========== ==========
Other repossessed assets $ 152 $ 375
========== ==========
Allowance for loan losses $ 110,523 $ 110,616
========== ==========
Allowance as a percentage of loans 2.08% 2.13%
Total nonperforming loans as a percentage
of loans and ORE 0.40% 0.37%
Total nonperforming assets as a percentage
of loans and ORE 0.57% 0.77%
Accruing loans ninety days past due as a
percentage of loans and ORE 0.07% 0.08%
Allowance for loan losses as a percentage of
nonperforming loans 525.42% 572.90%
Allowance for loan losses as a percentage of
nonperforming assets 363.23% 275.58%
</TABLE>
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
- ------------------------------------------------------------------------------
Item 4 Submission of Matters to a Vote of Security Holders
On May 16, 1994, at the Company's annual shareholder meeting, the share-
holders of the Company approved an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of the Company's
common stock from 50,000,000 shares to 100,000,000 shares. With respect to the
vote, 23,721,963 shares of the Company's common stock were voted in favor of
the amendment, 420,892 shares were voted against the amendment, and 240,009
shares abstained.
Item 6 Exhibits and Reports on Form 8-K Page
----
(a) Exhibits
(10)(a) Compass Bancshares, Inc., 1982 Long Term Incentive Plan
(incorporated by reference to Exhibit 1 to the Company's
Registration Statement on Form S-8 filed June 15, 1983,
with the Securities and Exchange Commission)
(10)(b) Compass Bancshares, Inc., 1989 Long Term Incentive Plan
(incorporated by reference to Exhibit 28 to the Company's
Registration Statement on Form S-8 filed February 21, 1991,
with the Securities and Exchange Commission)
(10)(c) Supplemental Retirement Agreement, dated as of March 18,
1991, between Compass Bank and Harry B. Brock, Jr.
(incorporated by reference to Exhibit 10(c) to the Company's
Form 10-K for the year ended December 31, 1991, filed March
26, 1992, with the Securities and Exchange Commission)
(10)(d) Purchase and Assumption Agreement, dated as of April 1, 1994, 22
between Compass Bancshares, Inc. and Pulte Diversified
Companies, Inc.
(11) Computation of Per Share Earnings 19
(12)(a) Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends 20
(12)(b) Ratio of Earnings to Fixed Charges 21
(b) Reports on Form 8-K
None
<PAGE>
COMPASS BANCSHARES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
November 14, 1994 /s/ GARRETT R. HEGEL
- ----------------- ---------------------------
Date By Garrett R. Hegel, as its
Chief Financial Officer
<TABLE>
Exhibit (11)
Compass Bancshares, Inc.
Computation of Earnings Per Share
Three and Six Months Ended June 30, 1994 and 1993
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1994 1993 1994 1993
-------- --------- --------- ---------
(in Thousands Except Per Share Data)
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average shares outstanding 36,940 36,871 36,935 36,870
Net effect of the assumed exercise
of stock options - based on the
treasury stock method using average
market price 315 313 275 318
--------- --------- --------- ---------
Total weighted average shares and
common stock equivalents
outstanding 37,255 37,184 37,210 37,188
========= ========= ========= =========
Net income $ 24,422 $ 22,644 $ 48,334 $ 44,552
Preferred dividends - 521 - 1,036
--------- --------- --------- ---------
Net income available
to common shareholders $ 24,422 $ 22,123 $ 48,334 $ 43,516
========= ========= ========= =========
Net income per common share $ 0.66 $ 0.59 $ 1.30 $ 1.17
========= ========= ========= =========
FULLY DILUTED:
Weighted averages shares outstanding 36,940 36,871 36,935 36,870
Net effect of the assumed conversion
of the preferred stock - 1,066 - 1,066
Net effect of the assumed exercise
of stock options - based on the
treasury stock method using average
market price or period-end market
price, whichever is higher 315 325 294 329
--------- --------- --------- ---------
Total weighted average shares and
common stock equivalents
outstanding 37,255 38,262 37,229 38,265
========= ========= ========= =========
Net income $ 24,422 $ 22,644 $ 48,334 $ 44,552
========= ========= ========= =========
Net income per common share $ 0.66 $ 0.59 $ 1.30 $ 1.16
========= ========= ========= =========
</TABLE>
<TABLE>
Exhibit (12)(a)
Compass Bancshares, Inc. and Subsidiaries
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Six Months Ended June 30, 1994 and 1993
<CAPTION>
Six Months Ended
June 30,
--------------------------
1994 1993
---------- ----------
(in Thousands)
<S> <C> <C>
Pretax income $ 72,387 $ 70,016
Add fixed charges:
Interest on deposits 85,473 80,973
Interest on borrowings 22,049 17,869
Portion of rental expense representing
interest expense 1,383 1,309
---------- ----------
Total fixed charges 108,905 100,151
---------- ----------
Income before fixed charges $ 181,292 $ 170,167
========== ==========
Total fixed charges $ 108,905 $ 100,151
Preferred stock dividends - 1,036
Tax effect of preferred stock dividends - 592
---------- ----------
Combined fixed charges and preferred stock
dividends $ 108,905 $ 101,779
========== ==========
Pretax income $ 72,387 $ 70,016
Add fixed charges (excluding interest on
deposits):
Interest on borrowings 22,049 17,869
Portion of rental expense representing
interest expense 1,383 1,309
---------- ----------
Total fixed charges 23,432 19,178
---------- ----------
Income before fixed charges (excluding
interest on deposits) $ 95,819 $ 89,194
========== ==========
Total fixed charges $ 23,432 $ 19,178
Preferred stock dividends - 1,036
Tax effect of preferred stock dividends - 592
---------- ----------
Combined fixed charges and preferred stock
dividends $ 23,432 $ 20,806
========== ==========
Ratio of Earnings to Fixed Charges:
Including interest on deposits 1.66x 1.67x
Excluding interest on deposits 4.09x 4.29x
</TABLE>
<PAGE>
<TABLE>
Exhibit (12)(b)
Compass Bancshares, Inc. and Subsidiaries
Ratio of Earnings to Fixed Charges
Six Months Ended June 30, 1994 and 1993
<CAPTION>
Six Months Ended
June 30,
--------------------------
1994 1993
---------- ----------
(in Thousands)
<S> <C> <C>
Pretax income $ 72,387 $ 70,016
Add fixed charges:
Interest on deposits 85,473 80,973
Interest on borrowings 22,049 17,869
Portion of rental expense representing
interest expense 1,383 1,309
---------- ----------
Total fixed charges 108,905 100,151
---------- ----------
Income before fixed charges $ 181,292 $ 170,167
========== ==========
Pretax income $ 72,387 $ 70,016
Add fixed charges (excluding interest on
deposits):
Interest on borrowings 22,049 17,869
Portion of rental expense representing
interest expense 1,383 1,309
---------- ----------
Total fixed charges 23,432 19,178
---------- ----------
Income before fixed charges (excluding
interest on deposits) $ 95,819 $ 89,194
========== ==========
Ratio of Earnings to Fixed Charges:
Including interest on deposits 1.66x 1.70x
Excluding interest on deposits 4.09x 4.65x
</TABLE>
PURCHASE AND ASSUMPTION AGREEMENT
Providing for
the Purchase of Certain Assets
of and Assumption of Certain Liabilities
of
First Heights Bank, fsb
By
Compass Bank-Houston
Dated as of April 1, 1994
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................ 1
1.1 Certain Definitions................................................ 1
1.2 Certain Rules of Construction...................................... 9
ARTICLE II PURCHASE AND SALE OF SELLER'S ASSETS....................... 10
2.1 Assets to be Purchased by Purchaser................................ 10
2.2 Assets Excluded by Seller.......................................... 10
ARTICLE III ASSUMPTION OF LIABILITIES.................................. 11
3.1 Liabilities to be Assumed by Purchaser............................. 11
3.2 Liabilities Excluded by Seller..................................... 12
ARTICLE IV PAYMENT FOR PURCHASED ASSETS............................... 12
4.1 Payment for Purchased Assets....................................... 12
4.2 Asset and Liability Schedules...................................... 13
4.3 Adjustment of Interim Amount and Final Amount...................... 14
ARTICLE V AGREEMENTS CONCERNING CERTAIN RIGHTS AND OBLIGATIONS
WITH RESPECT TO PURCHASED ASSETS........................... 15
5.1 Agreement with Respect to Safe Deposit Business.................... 15
5.2 Agreement with Respect to Leased Premises.......................... 15
5.3 Title Insurance.................................................... 16
5.4 Tax Matters........................................................ 17
ARTICLE VI DUTIES WITH RESPECT TO DEPOSIT LIABILITIES ASSUMED......... 22
6.1 Payment of Checks, Drafts and Orders............................... 22
6.2 Interest on Deposit Liabilities Assumed............................ 22
6.3 Notices to Depositors.............................................. 22
ARTICLE VII RECORDS.................................................... 23
7.1 Transfer of Records................................................ 23
7.2 Delivery of Assigned Records....................................... 24
7.3 Preservation of Records............................................ 24
7.4 Access to Records; Copies.......................................... 24
ARTICLE VIII REPRESENTATIONS AND WARRANTIES............................. 25
8.1 Representations and Warranties of Seller and PDCI.................. 25
8.2 Representations and Warranties of the Purchaser and Compass........ 34
ARTICLE IX CONTINUING COOPERATION..................................... 36
9.1 General Matters.................................................... 36
9.2 Additional Title Documents......................................... 37
9.3 Payment of Deposits................................................ 37
9.4 Cooperation in Proceedings......................................... 37
9.5 First Heights Name................................................. 37
9.6 Environmental Investigations....................................... 38
9.7 Unisys Rental...................................................... 41
ARTICLE X CONDITIONS PRECEDENT....................................... 41
10.1 Conditions Precedent to Obligations of Seller and PDCI............ 41
10.2 Conditions Precedent to Obligations of Purchaser.................. 43
ARTICLE XI CERTAIN COVENANTS.......................................... 45
11.1 Certain Covenants of PDCI and Seller.............................. 45
11.2 Certain Covenants of Purchaser.................................... 48
11.3 Certain Covenants Regarding Employees............................. 49
11.4 Purchase of Channelview Assets and Assumption of Liabilities...... 50
11.5 Channelview Loan and ORE Review................................... 50
11.6 Insurance Cooperation............................................. 51
11.7 Wholesale Deposits................................................ 51
11.8 Downtown Branch................................................... 52
ARTICLE XII SURVIVAL; INDEMNIFICATION.................................. 52
12.1 Survival.......................................................... 52
12.2 Seller's and PDCI's Indemnities................................... 52
12.3 Purchaser's and Compass' Indemnities.............................. 53
12.4 Notice of Claim................................................... 54
ARTICLE XIII CLOSING.................................................... 56
13.1 Closing........................................................... 56
13.2 Deliveries at Closing............................................. 56
ARTICLE XIV MISCELLANEOUS.............................................. 58
14.1 Termination of Agreement.......................................... 58
14.2 Assignment of Agreement........................................... 58
14.3 Notices........................................................... 59
14.4 Press Release..................................................... 60
14.5 Choice of Law..................................................... 61
14.6 Entire Agreement; Amendments and Waivers.......................... 61
14.7 Multiple Counterparts............................................. 61
14.8 Expenses.......................................................... 61
14.9 Severability...................................................... 61
14.10 Headings......................................................... 62
14.11 DTPA............................................................. 62
14.12 Confidentiality Agreements....................................... 62
TERMS DEFINED OTHER THAN IN ARTICLE I
Agreement............................................................... 1
PDCI.................................................................... 1
Seller.................................................................. 1
Compass................................................................. 1
Purchaser............................................................... 1
CERCLA.................................................................. 4
SARA.................................................................... 4
RCRA.................................................................... 4
HSWA.................................................................... 4
HMTA.................................................................... 4
TSCA.................................................................... 4
NESHAP.................................................................. 4
OSHA.................................................................... 4
including............................................................... 9
Interim Asset and Liability Schedule.................................... 13
Final Asset and Liability Schedule...................................... 13
IRS..................................................................... 17
Allocation Schedule..................................................... 21
1060 Forms.............................................................. 21
Permitted Encumbrances.................................................. 27
First City P&A Agreement................................................ 31
Property................................................................ 32
Environmental Inspections............................................... 38
Potential Environmental Problem......................................... 39
TNRCC................................................................... 39
Unisys Assets........................................................... 41
Facilities Agreement.................................................... 41
Title Report............................................................ 44
Title Insurance Company................................................. 44
Former Seller Employees................................................. 49
Purchaser Indemnified Parties........................................... 52
Purchaser Indemnified Liabilities....................................... 52
Purchaser Indemnified Liability......................................... 52
Seller Indemnified Parties.............................................. 53
Seller Indemnified Liabilities.......................................... 53
Seller Indemnified Liability............................................ 53
Indemnifying Party...................................................... 54
Indemnified Party....................................................... 54
Claim Notice............................................................ 54
Closing................................................................. 56
Closing Date............................................................ 56
DTPA.................................................................... 62
SCHEDULES
Schedule 1.1-- Loans
Schedule 2.2-- Excluded Assets
Schedule 8.1(g)-- Absence of Certain Changes or Events
Schedule 8.1(h)-- Exceptions to Title to Seller's Assets
Schedule 8.1(i)-- Litigation Matters
Schedule 8.1(j)-- Assumed Contracts
Schedule 8.1(k)-- Failures to Comply with Applicable Laws and
Governmental Authorizations
Schedule 8.1(l)-- Loans and Loan Commitment Exceptions
Schedule 8.1(n)-- Environmental Compliance Exceptions
Schedule 8.1(r)-- Purchased Branches
Schedule 8.1(v)-- Deposits
Schedule 8.1(w)-- Approvals and Consents Required
Schedule 10.2(k)-- Deposit Characteristics
Schedule 11.1(b)-- List of Regulatory Agreements to Which PDCI or
Seller is Subject
PURCHASE AND ASSUMPTION AGREEMENT
THIS PURCHASE AND ASSUMPTION AGREEMENT (this "Agreement"), dated
as of April 1, 1994, is entered into by and among Pulte
Diversified Companies, Inc., a Michigan corporation ("PDCI"),
First Heights Bank, fsb, a federal savings bank ("Seller"),
Compass Bancshares, Inc., a Delaware corporation ("Compass"), and
Compass Bank-Houston, a Texas state bank ("Purchaser").
Recitals
A. Seller is a wholly owned subsidiary of PDCI.
B. Seller desires to sell certain of its business operations to
Purchaser on the terms and conditions set forth in this Agreement.
C. Purchaser desires to purchase certain of Seller's assets and
assume certain of Seller's liabilities on the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, the
following terms shall have the following designated meanings:
Accrued Interest shall mean, with respect to any Loan at any
time, the amount of earned and unpaid interest payable by the
Obligor accrued on or with respect to such Loan.
Accounting Records shall mean the general ledger and subsidiary
ledgers and supporting schedules which support the general ledger
balances.
Adjustment shall mean the difference between the Final Amount
and the Interim Amount. If the Final Amount is a greater positive
number or a smaller negative number, as the case may be, than the
Interim Amount or if the Interim Amount is a negative number and
the Final Amount is a positive number, the Adjustment shall be
expressed as a positive number. Otherwise, the Adjustment shall
be expressed as a negative number.
Affiliate shall mean, with respect to any Person, any Person
which, directly or indirectly, controls, is controlled by, or is
under common control with, such Person.
Assumed Contracts shall mean those agreements, contracts, and
real and personal property leases of the Seller relating to the
Purchased Branches, including related agreements, contracts or
leases, and any other agreements or contracts described on
Schedule 8.1(j).
Assumed Liabilities shall mean the contracts, liabilities and
obligations to be assumed by Purchaser pursuant to Article III
hereof.
Banking Commissioner means the Texas Banking Commissioner.
Book Value shall mean, with respect to any of the Purchased
Assets and any Assumed Liabilities, the dollar amount thereof
stated on the Accounting Records of the Seller as of the relevant
date. The Book Value of any item shall be determined as of the
relevant date after adjustments for differences in accounts,
suspense items, unposted debits and credits, and other similar
adjustments or corrections. Without limiting the generality of
the foregoing, (i) the Book Value of a liability shall include all
accrued and unpaid interest thereon as of the relevant date and
(ii) the Book Value of a Loan shall reflect adjustments for earned
or unearned interest, if any, as of the relevant date, and
adjustments for the portion of earned or unearned loan-related
credit life and/or disability insurance premiums, if any,
attributable to the Seller with respect to the Purchased Branches,
as of the relevant date, in each case as determined for financial
reporting purposes, and (iii) the Book Value of a Commitment shall
be deemed to be zero. The Book Value of a Purchased Asset shall
be adjusted by any amount reflected as a discount, premium,
deferred income or a reserve specifically allocated to such asset
on the Accounting Records of the Seller. The Book Value of Loans
shall be gross of the general loan loss reserve.
Business shall mean the business and operations of Seller,
including the Purchased Assets and the Assumed Liabilities, other
than that related to the Excluded Assets, the Excluded Branches
and the Excluded Liabilities.
Business Day shall mean a day other than a Saturday, Sunday,
Federal legal holiday or legal holiday under the laws of the State
of Texas.
Channelview Agreement shall mean that certain Purchase and
Assumption Agreement dated as of April 1, 1994 by and among PDCI,
Seller and Channelview Bank.
Channelview Assets shall mean the Excluded Assets which are
actually transferred to Channelview Bank, a Texas state bank,
pursuant to the Channelview Agreement.
Channelview Liabilities shall mean the Excluded Liabilities
which are actually assumed by Channelview Bank, a Texas state
bank, pursuant to the Channelview Agreement.
Claims shall mean any and all judgments, claims, causes of
action, charges, arbitrations, demands, suits, proceedings,
governmental investigations or audits, losses, assessments, fines,
penalties, orders, consents, decrees, obligations, costs,
expenses, liabilities and damages (whether actual, consequential
or punitive), including interest, penalties, reasonable attorneys'
fees, disbursements and costs of investigations, deficiencies and
imposts.
Closing shall have the meaning set forth in Section 13.1 of this
Agreement.
Closing Date shall have the meaning set forth in Section 13.1 of
this Agreement.
Commitment shall mean an unfunded commitment to make an
extension of credit (or additional advances with respect to a
Loan) and all amendments, modifications, renewals, and extensions
of the foregoing as reflected on the books and records of Seller
with respect to the Purchased Branches that were made in the
ordinary course of business and are legally binding on the Seller,
as of the Closing Date (other than any Commitment that, upon being
funded, would give rise to an Excluded Asset).
Covered Assets shall mean those assets reflected in the
Accounting Records as "Assets Covered by FRF" together with all
assets, including notes and other receivables, reflected in the
Accounting Records as payable to Seller by the FSLIC Resolution
Fund, and all rights and benefits of Seller under the Assistance
Agreement dated September 9, 1988, as amended, among the Federal
Savings and Loan Insurance Corporation, Seller's predecessors and
PDCI, as amended, and under the acquisition agreements and other
related agreements entered into among Seller's predecessors, the
receivers of various insolvent thrifts and applicable regulatory
agencies in connection with the acquisition of insolvent thrifts
by such predecessors.
Credit Documents shall mean the agreements, instruments,
certificates or other documents at any time evidencing or
otherwise relating to, governing or executed in connection with,
or as security for, a Loan, including, without limitation, notes,
bonds, loan agreements, letter of credit applications, lease
financing contracts, banker's acceptances, drafts, interest
protection agreements, currency exchange agreements, repurchase
agreements, reverse repurchase agreements, guarantees, deeds of
trust, mortgages, assignments, security agreements, pledges,
subordination or priority agreements, lien priority agreements,
undertakings, security instruments, certificates, documents, legal
opinions, participation agreements and inter-creditor agreements,
and all amendments, modifications, renewals, extensions,
rearrangements and substitutions with respect to any of the
foregoing.
Deposit shall mean a deposit as defined in 12 U.S.C. 1813(1),
including overdrafts of customers and all uncollected items
included in the depositor's balances and credited on the books of
the Seller, reflected on the books and records of Seller with
respect to the Purchased Branches.
Environmental Laws shall mean laws, including, without
limitation, federal, state or local laws, ordinances, rules,
regulations and orders of courts or administrative agencies or
authorities in and as in effect on the date of this Agreement
relating to pollution or protection of the environment (including,
without limitation, ambient air, surface water, ground water, land
surface, and subsurface strata), including, without limitation,
the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1987, as amended ("SARA"),
the Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), Hazardous and Solid Waste Amendments of 1984, as amended
("HSWA"), Hazardous Materials Transportation Act, as amended
("HMTA"), the Toxic Substance Control Act ("TSCA"), National
Emissions Standard for Hazardous Pollutants ("NESHAP"),
Occupational Safety and Health Act, but only to the extent such
Act relates to the pollution of the applicable premises ("OSHA"),
Federal Water Pollution Control Act, Clean Air Act, and other laws
relating to pollution or protection of the environment, or to the
manufacture, processing, distribution, use, treatment, handling,
storage, disposal or transportation of Polluting Substances.
ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
Excluded Assets shall mean those assets set out and described in
Section 2.2 of this Agreement.
Excluded Branches shall mean all branch locations of Seller not
included as a Purchased Branch, and the related assets and
liabilities, including the related premises, furniture and
equipment, loans, deposits and contracts, unless expressly
identified as a Purchased Asset or Assumed Liability.
Excluded Liabilities shall mean those liabilities set out and
described in Section 3.2 of this Agreement and made a part hereof,
and any other liabilities not expressly assumed in Article III
hereof.
FDIC shall mean the Federal Deposit Insurance Corporation, or
any successor agency.
Federal Funds Rate shall mean an interest rate per annum equal
for each day to
(a) The weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York; or
(b) If such rate is not so published for any day which is a
Business Day, the average of the quotations for such transactions
received by the Purchaser from three federal funds brokers of
recognized standing mutually agreeable to Purchaser and Seller.
Final Amount shall mean an amount equal to (a) the Book Value of
the Purchased Assets as reflected on the Final Asset and Liability
Schedule, less (b) 1% of the amount by which (i) the Book Value of
the Loans exceeds (ii) the amount, if any, of Deposits which are
pledged as security for such Loans as reflected on the Final Asset
and Liability Schedule, for a loan loss reserve, less (c) the Book
Value of the Assumed Liabilities as reflected on the Final Asset
and Liability Schedule, plus (d) $ 6,788,000.
Final Asset and Liability Schedule shall mean the Schedule to be
prepared in accordance with Section 4.2(b).
Financial Statement Date shall mean December 31, 1993.
FRB means the Board of Governors of the Federal Reserve System.
Interim Amount shall mean an amount equal to (a) the Book Value
of the Purchased Assets as reflected on the Interim Asset and
Liability Schedule, less (b) 1% of the amount by which (i) the
Book Value of the Loans exceeds (ii) the amount, if any, of
Deposits which are pledged as security for such Loans as reflected
on the Interim Asset and Liability Schedule, for a loan loss
reserve, less (c) the Book Value of the Assumed Liabilities as
reflected on the Interim Asset and Liability Schedule, plus (d) $
6,788,000.
Interim Asset and Liability Schedule shall mean the Schedule to
be prepared in accordance with Section 4.2(a).
Interim Date shall mean the latest month end date as of which an
asset and liability schedule of the Seller shall, as of the date
which is two weeks prior to the anticipated Closing Date, be
available.
Knowledge or known -- An individual shall be deemed to have
"knowledge" or to have "known" a particular fact or other matter
if (i) such individual is actually aware of such fact or other
matter, or (ii) a prudent individual serving as an executive
officer would reasonably be expected, in the ordinary course of
business and consistent with Seller's past practices, to discover
or otherwise become aware of such fact or other matter. A
corporation or bank shall be deemed to have "knowledge" of or to
have "known" a particular fact or other matter if any individual
who is serving as an executive officer (or in any similar
capacity) of the corporation or the bank, has knowledge of such
fact or other matter.
Lease shall mean any lease to Seller of any portion of the
Premises.
Loans shall mean all of the following owed to Seller immediately
prior to the Closing and (i) reflected on the books and records of
Seller with respect to the Purchased Branches: loans on the books
of Seller, lines of credit and other extensions of credit,
including credit card plans, lease-financing contracts and other
accounts and receivables owing to Seller immediately prior to the
Closing, together with any and all instruments, documentation,
security, guaranties and other rights and interests related to or
pledged with respect to such Loans, but excluding any such loans
which are Excluded Assets, and (ii) the additional loans described
on Schedule 1.1.
Material in any form, when applied to the Seller or the
Purchased Branches, refers to facts or matters which, individually
or in the aggregate, are material to the business, operations,
results of operations, properties, assets or condition (financial
or otherwise) of the Business (including the Purchased Assets and
the Assumed Liabilities), as the case may be, and Material Adverse
Effect refers to facts or matters which, individually or in the
aggregate, would have a material adverse effect on the business,
operations, results of operations, properties, assets or condition
(financial or otherwise) of the Business (including the Purchased
Assets and the Assumed Liabilities).
Obligor shall mean each Person liable for the full or partial
payment or performance of any Loan, whether such Person is
obligated directly, indirectly, primarily, secondarily, jointly or
severally.
Other Real Property shall mean all of the rights, title and
interest in any real property interest of Seller reflected on the
books and records of Seller with respect to the Purchased
Branches, other than as security for Loans and other than the
Premises and the Excluded Assets.
OTS shall mean the Office of Thrift Supervision, or any
successor agency.
Person shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust,
unincorporated organization, or government or any agency or
political subdivision thereof.
Plan shall mean, with respect to the employees of Seller, any
"employee benefit plan", as such term is defined in Section 3(3)
of ERISA and any other employee benefit plan, program, agreement,
arrangement, policy, practice or understanding, including any
foreign plan, personnel policy, stock option plan, bonus plan or
arrangement, profit-sharing or pension plan or arrangement,
incentive award plan or arrangement, vacation policy, severance
pay plan, policy or agreement, deferred compensation agreement or
arrangement, executive compensation or supplemental income
arrangement, and any collective bargaining, consulting,
employment, termination or change-of-control agreement or
arrangement.
Polluting Substances shall mean (a) asbestos, (b) urea
formaldehyde foam insulation, (c) oil and gasoline products or
wastes, and (d) all pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes and shall
include, without limitation, any flammable explosives, radioactive
materials, oil, hazardous materials, hazardous or solid wastes,
hazardous or toxic substances or regulated materials defined in
CERCLA, SARA, RCRA, HSWA, HMTA, TSCA, OSHA, NESHAP and/or any
other Environmental Laws, as amended, and in the regulations
promulgated pursuant thereto; provided to the extent that the laws
of the State of Texas establish a meaning for "hazardous
substance," "hazardous waste," "hazardous materials," "solid
waste," or "toxic substance," which is broader than that specified
in any of CERCLA, SARA, RCRA, HSWA, HMTA, TSCA, OSHA or other
Environmental Laws, such broader meaning shall apply.
Premises shall mean (i) the banking houses, drive-in banking
facilities and teller facilities (staffed or automated) together
with appurtenant parking, storage and service facilities and
structures connecting remote facilities to banking houses, and
land on which the foregoing are located, that are owned or leased
by the Seller on the date hereof and that are occupied by the
Purchased Branches at the opening of business on the Closing Date,
all as described on Schedule 8.1(r), (ii) those leasehold
improvements, additions, alterations and installations
constituting all or a part of the premises described in clause (i)
and which were acquired, added, built, installed or purchased at
the expense of the Seller, regardless of the holder of legal title
thereto as of the Closing Date, and (iii) the furniture and
equipment, leased or owned by the Seller and reflected on the
books of the Seller with respect to the Purchased Branches as of
the Closing Date, including automated teller machines, carpeting,
furniture, office machinery (including personal computers),
shelving, office supplies, safe deposit boxes, telephone,
surveillance and security systems, artwork and data processing
equipment (including hardware and software).
Purchased Assets shall mean all of the Seller's assets, other
than the Excluded Assets, as of the close of business on the
Closing Date, including, without limitation, all business, assets,
contracts, rights and properties, whether real or personal,
tangible or intangible, wherever situated, and all of the books,
records and files (irrespective of storage method and wherever
situated) pertaining primarily thereto or to the Business, the
employees of Seller to be employed by Purchaser after the Closing,
or the operations of the Purchased Branches (other than those
books, records and files of Seller prepared in connection with the
negotiation of this Agreement and those related to the Excluded
Assets), and the following:
(a) All cash and receivables from depository institutions related
to the Purchased Assets and Assumed Liabilities, including cash
items in the process of collection, plus any accrued interest
thereon computed through and including the Closing Date;
(b) All Loans (other than Loans which are Excluded Assets),
including Accrued Interest thereon computed through and including
the Closing Date;
(c) The Premises;
(d) All Commitments;
(e) All Assumed Contracts;
(f) Safe Deposit Boxes and related business, subject to
Section 5.1; and
(g) All Other Real Property and any other property, real or
personal, acquired in connection with the foreclosure of or other
collection activity with respect to any loan originated out of a
Purchased Branch.
The Purchased Assets shall include all the related properties and
assets which are reflected on the Accounting Records of the Seller
as of the Financial Statement Date (excluding Loans collected,
inventory sold and those other properties and assets collected or
disposed of, all in the ordinary course of business and consistent
with past practice, after the Financial Statement Date and prior
to the Closing Date, and excluding the Excluded Assets) and all
unpaid accrued interest, dividends and other income now or
hereafter owing thereon.
Purchased Branches shall mean the branch locations of the Seller
identified on the attached Schedule 8.1(r).
Required Regulatory Approvals shall mean all approvals required
for Seller and Purchaser to effect the transactions set forth in
this Agreement, whether required by the OTS, FDIC, FRB, Banking
Commissioner or any other regulatory authority with supervisory
authority over Purchaser, Seller or PDCI.
Safe Deposit Boxes shall mean the safe deposit boxes of the
Purchased Branches, if any, including the removable safe deposit
boxes and safe deposit stacks in the Purchased Branches' vault(s),
all rights, benefits and obligations under rental agreements with
respect to such safe deposit boxes, and all keys and combinations
thereto.
Taxes shall mean any federal, state, local or foreign taxes,
including but not limited to taxes on or measured by income,
estimated income, alternative or add-on minimum tax, gross
receipts, sales, use, ad valorem, franchise, capital stock,
transfer, gains, profit, license, employees' withholding, foreign
person withholding, backup withholding, social security,
occupation, unemployment, disability, excise, severance, stamp,
premium, value added taxes, taxes on services, real property,
personal property, inventory and merchandise, business privilege,
or windfall profit tax, custom, duty or other tax or other like
assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by
any governmental authority responsible for the imposition of such
tax whether or not disputed.
WARN shall mean the Workers Adjustment and Retraining
Notification Act of 1988.
1.2 Certain Rules of Construction. For purposes of this
Agreement.
(a) Certain References. The words "herein," "hereof" and
"hereunder," and words of similar import, refer to this Agreement
as a whole and not to any particular provision of this Agreement,
and references to Articles, Sections, Exhibits or Schedules, and
similar references, are to Articles or Sections of, or Exhibits or
Schedules to, this Agreement unless otherwise specified.
(b) General Rules. Unless the context otherwise requires; (i)
the singular includes the plural, and vice versa; (ii) all
definitions and references to an agreement, instrument or document
shall mean such agreement, instrument or document together with
all exhibits and schedules thereto and any and all amendments,
supplements or modifications thereto as the same may be in effect
at the time such definition or reference is applicable for any
purpose; (iii) all references to any party shall include such
party's successors and permitted assigns; (iv) the term
"including" means including, without limitation; and (v)
reasonable attorneys' fees shall include allocated costs of
in-house counsel.
(c) Accounting Terms. All accounting terms used herein which are
not expressly defined in this Agreement shall have the meanings
given to them in accordance with generally accepted accounting
principles, consistently applied, and all computations made
pursuant to this Agreement shall be made in accordance with such
principles.
ARTICLE II
PURCHASE AND SALE OF SELLER'S ASSETS
2.1 Assets to be Purchased by Purchaser. In exchange for the
Purchase Price and the assumption of the Assumed Liabilities, and
upon the terms and subject to the conditions provided for in this
Agreement, on the Closing Date, Seller shall grant, sell, convey,
transfer, assign and deliver to Purchaser, and Purchaser shall
purchase and acquire, effective as of the Closing Date, the
Purchased Assets.
2.2 Assets Excluded by Seller. Notwithstanding anything to the
contrary contained in this Agreement, the Purchased Assets shall
not include, and Seller shall retain, the following assets of
Seller, which assets shall be the "Excluded Assets":
(a) any action, judgment or claim of Seller against (i) any
officer, director, employee, accountant, attorney, or any other
Person employed or retained by Seller or any predecessor
institution on or prior to the Closing Date arising out of any act
or omission of such Person in such capacity, (ii) any underwriter
of financial institution bonds, banker's blanket bonds or any
other insurance policy of Seller or any predecessor institution,
and (iii) any other Person whose action or inaction may be related
to any loss (exclusive of any loss resulting from such Person's
failure to pay on an extension of credit from Seller or any
predecessor institution) of Seller accrued prior to the Closing
Date in respect of an Excluded Asset; provided, however, that for
purposes hereof, the acts, omissions or other events giving rise
to any such claim shall have occurred on or before the Closing
Date, regardless of whether any such claim is discovered and
regardless of whether any such claim is made with respect to a
financial institution bond, banker's blanket bond or other
insurance policy of Seller or any predecessor institution in force
as of the Closing Date;
(b) any legal or equitable interest in tax refunds or tax
receivables of Seller, if any, including any claims arising as a
result of Seller having entered into any agreement or otherwise
being joined with PDCI or any other Affiliate with respect to the
filing of tax returns or payment of taxes, except to the extent
accrued and reflected on the Final Asset and Liability Schedule;
(c) any asset securing any Excluded Liability and all rights of
recovery or mitigation against third parties for Claims against
Seller or any Affiliate of Seller, or their assets or properties,
arising out of or relating to any Excluded Liability or any
Excluded Asset;
(d) any right, title and interest of Seller in any payment to be
made pursuant to Article IV hereof, or any other right of Seller
under this Agreement;
(e) the name "First Heights Bank" and any variation thereof;
(f) the Excluded Branches and the related assets and operations,
including real or personal property acquired in connection with
the foreclosure of or other collection activity with respect to
any loan originated out of an Excluded Branch, but excluding the
loans described on Schedule 1.1;
(g) assets described on the attached Schedule 2.2; and
(h) any of the books, records and files related primarily to any
Excluded Asset.
ARTICLE III
ASSUMPTION OF LIABILITIES
3.1 Liabilities to be Assumed by Purchaser. On the terms and
subject to the conditions provided for in this Agreement,
Purchaser shall assume effective as of the Closing, and pay,
discharge and perform when due all of the following, and only the
following, contracts, liabilities and obligations of Seller as
they exist in respect of the Purchased Branches as of the Closing
(other than the Excluded Liabilities):
(a) All liabilities accrued and reflected in the Final Asset and
Liability Schedule, including Deposits and accrued interest
thereon through and including the Closing Date, ad valorem taxes
applicable to any of the Purchased Assets, and advances from
borrowers relating to Loans, in each case only to the extent
accrued and reflected on the Final Asset and Liability Schedule,
which schedule shall not reflect any Excluded Assets;
(b) All Commitments;
(c) All Assumed Contracts, but only to the extent the assignment
and assumption of such Assumed Contract will not constitute a
breach thereof or in any way adversely affect the benefits, rights
or obligations of Seller thereunder so that Purchaser would not in
fact receive all such benefits and rights or would be subject to
increased obligations;
(d) Liabilities and obligations (other than Commitments or
Assumed Contracts) relating to, or arising out of, the Purchased
Assets and not reflected on the Final Asset and Liability Schedule
(fixed, contingent or otherwise), but only to the extent such
liabilities or obligations were incurred or have arisen in the
ordinary course of business and are not known to Seller as of the
Closing Date; and
(e) the liabilities described on Schedule 8.1(i) that are
identified as Assumed Liabilities, as such Schedule may be updated
until the Closing Date for litigation arising out of the
activities of the Purchased Branches after the date hereof and
before the Closing Date.
3.2 Liabilities Excluded by Seller. Notwithstanding anything to
the contrary contained in this Agreement, the Assumed Liabilities
shall not include, and Seller shall remain responsible for, the
following liabilities of Seller, which liabilities shall be the
"Excluded Liabilities" provided that Seller shall have no
obligation or responsibility for any of the Channelview
Liabilities:
(a) liabilities for the payment of income taxes resulting from
the sale of the Business and any other liabilities for Taxes which
are the responsibility of Seller pursuant to Section 5.4;
(b) liabilities relating to, or arising out of, the Excluded
Assets;
(c) liabilities, including deposits, arising out of the
operations of the Excluded Branches, and all deposits of Seller
reflected on its books and records as money desk deposits;
(d) liabilities arising out of Seller's engagement of Merrill
Lynch, Pierce Fenner & Smith Incorporated and BFM Advisory L.P.;
(e) liabilities relating to or arising under any Plan, and any
other liabilities to employees of Seller, in either case arising
prior to the Closing;
(f) any liability of Seller to make a payment pursuant to Article
IV hereof or any other liability of Seller or PDCI under this
Agreement; and
(g) the liabilities described on Schedule 8.1(i) that are not
identified as Assumed Liabilities.
ARTICLE IV
PAYMENT FOR PURCHASED ASSETS
4.1 Payment for Purchased Assets. (a) At the Closing, if the
Interim Amount is a positive number, the Purchaser shall pay to
Seller to such account as Seller shall have designated in writing
to Purchaser prior to the Closing Date funds immediately available
in Houston, Texas in an amount equal to the absolute value of the
Interim Amount. If the Interim Amount is a negative number,
Seller shall pay to Purchaser to such account as Purchaser shall
have designated in writing to Seller prior to the Closing Date
funds immediately available in Houston, Texas in an amount equal
to the absolute value of the Interim Amount.
(b) Upon the availability of the Final Asset and Liability
Schedule prepared pursuant to Section 4.2(b), Seller shall
calculate the amount of the Adjustment. If the Adjustment is a
positive number, Purchaser shall promptly pay to Seller the
absolute value of the amount of such Adjustment, together with
interest from the Closing Date to the date of payment at the
average of the Federal Funds Rate or Rates in effect from time to
time during such period. If the Adjustment is a negative number,
Seller shall promptly pay to Purchaser the absolute value of the
amount of such Adjustment, together with interest from the Closing
Date to the date of payment at the average of the Federal Funds
Rate or Rates in effect from time to time during such period.
4.2 Asset and Liability Schedules. (a) The Seller shall cause to
be prepared a schedule (the "Interim Asset and Liability
Schedule") setting forth (i) the Book Value of all Purchased
Assets and (ii) the Book Value of all Assumed Liabilities, in each
case as of the close of business on the Interim Date. Seller
shall provide a copy of such Schedule to Purchaser no later than
five Business Days prior to the Closing Date, together with copies
of all work papers relating thereto and a duly completed and
executed certificate of the chief executive officer of Seller to
the effect that, to the best knowledge of such officer, such
Schedule has been prepared in accordance with the requirements of
this Agreement, and such Schedule shall, absent manifest error,
serve as the basis for the calculation of the Interim Amount
payable on the Closing Date.
(b) As promptly as practicable but no later than 90 days after
the Closing Date, the Purchaser shall cause to be prepared a
schedule (the "Final Asset and Liability Schedule") substantially
in the form of the Interim Asset and Liability Schedule setting
forth (i) the Book Value of all Purchased Assets, and (ii) the
Book Value of all Assumed Liabilities, in each case through the
close of business on the Closing Date. Such Schedule shall be
prepared by application of generally accepted accounting
principles and procedures consistent with those utilized by Seller
prior to the Closing Date. Upon the availability of the Final
Asset and Liability Schedule, Purchaser shall deliver same to
Seller, together with copies of all work papers relating thereto
and a duly completed and executed certificate of the chief
executive officer of Purchaser to the effect that, to the best
knowledge of such officer, such Schedule has been prepared in
accordance with the requirements of this Agreement.
(c) In the event of any disagreement concerning the Final Asset
and Liability Schedule, each party shall make available to the
other such books and records relating to the Seller, the Purchased
Branches, the Purchased Assets and the Assumed Liabilities as are
relevant to such disagreement and are in the possession of such
party, and the parties shall work together in good faith to
resolve such disagreement. The portion of the Final Asset and
Liability Schedule, if any, as to which the parties are unable to
agree after 60 days shall be referred for resolution to a
nationally recognized accounting firm (other than the regular
accounting firm for Purchaser or Seller), mutually and reasonably
acceptable to Seller and Purchaser. Within 60 days after its
engagement, such accounting firm shall determine (based solely on
presentations by Seller and Purchaser and not by independent
review) only those issues in dispute and shall render a report as
to the disputes. In resolving any disputed item, the accounting
firm may not assign a value to any particular item greater than
the greatest value for such item claimed by either party or less
than the smallest value for such item claimed by either party, in
each case, as presented to the accounting firm. The determination
of such third party, whose costs and expenses shall be borne
equally by Seller and Purchaser, shall be final and determinative
for purposes of amounts to be included in the Final Asset and
Liability Schedule. Upon such determination, the appropriate
party shall make any additional payment required to be made in
accordance with Section 4.1(b) (together with interest pursuant to
Section 4.1(b)) in respect of the finally determined Adjustment.
4.3 Adjustment of Interim Amount and Final Amount.
Notwithstanding the foregoing, the Interim Amount and the Final
Amount shall be adjusted as follows:
(i) In the event that the aggregate Book Value of the Deposits
relating to the Purchased Branches as of the Interim Date or
the Closing Date, as the case may be, is less than 95% of the
aggregate Book Value of the Deposits relating to the Purchased
Branches as of the Financial Statement Date, the Interim
Amount or the Final Amount, as the case may be, shall be
reduced by an amount equal to the product of 0.76% multiplied
by such difference.
(ii) In the event the aggregate Book Value of the Deposits
relating to the Purchased Branches as of the Interim Date or
the Closing Date, as the case may be, is more than 105% of the
aggregate Book Value of the Deposits relating to the Purchased
Branches as of the Financial Statement Date, the Interim
Amount or the Final Amount, as the case may be, shall be
increased by an amount equal to the product of 0.76%
multiplied by such difference.
(iii) In the event that any overdraft of a customer exceeds
$5,000 or has been uncollected for 60 days or more as of the
Closing Date, the Final Amount shall be adjusted by the amount
of such overdraft and credited to the benefit of Purchaser if
not collected as of 10 days before the date of delivery of the
Final Asset and Liability Schedule, in which event, if such
overdraft is subsequently collected by Purchaser, Purchaser
shall promptly remit the amount so collected to Seller.
ARTICLE V
AGREEMENTS CONCERNING CERTAIN RIGHTS AND OBLIGATIONS
WITH RESPECT TO PURCHASED ASSETS
5.1 Agreement with Respect to Safe Deposit Business. The
Purchaser hereby assumes and agrees to discharge from and after
the Closing Date, in the usual course of conducting a banking
business, the duties and obligations of the Seller with respect to
all Safe Deposit Boxes, if any, located at the Purchased Branches
and to maintain all the necessary facilities for the use of such
boxes by the renters thereof during the period for which such
boxes have been rented and the rent therefor paid to the Seller,
subject to the provisions of the rental agreements between the
Seller and the respective renters of such boxes, including
Purchaser's or Seller's rights to relocate such boxes in a manner
consistent with applicable law and the rental agreements between
Seller and the respective renters of such boxes.
5.2 Agreement with Respect to Leased Premises.
(a) Seller agrees promptly to seek to obtain all necessary
consents or approvals to the assignment or sublease of the Leases
of leased Premises, and to keep Purchaser apprised of its efforts
in that regard and the results of such efforts. Purchaser hereby
agrees to accept an assignment from Seller of any or all Leases
for leased Premises, and to assume the obligations thereunder, to
the extent that such Leases may, as of the Closing Date, be
assigned to and assumed by Purchaser. If an assignment cannot be
made of any such Leases, Purchaser shall, if permitted by such
Leases, enter into sublease agreements with Seller containing the
same terms and conditions, and providing Purchaser with the same
benefits and obligations, as provided under such existing Leases
for such leased Premises.
(b) Purchaser hereby agrees to give written notification to the
appropriate lessor(s) that it has accepted an assignment or
sublease of any such Leases.
(c) In the event that Purchaser accepts an assignment or enters
into a sublease, Seller agrees to facilitate the assumption,
assignment or sublease (including by assisting the Purchaser in
obtaining the consent of any party which may be necessary in order
to effect such assignment or sublease) or the negotiation of new
leases by Purchaser. Seller's assistance in facilitating any of
the foregoing shall be limited to informal negotiation or
resolution of disputed issues with third parties. Seller shall
not be obligated to engage in litigation or make payments to
Purchaser or to third parties in connection with facilitating any
such assumption, assignment, sublease or negotiation of a new
lease.
(d) In the event Purchaser accepts an assignment or sublease of a
Lease pursuant to this Section 5.2, Seller shall assign to
Purchaser its rights to any security deposit with respect to such
Lease and Purchaser shall pay to Seller the amount of any security
deposit the rights to which are so assigned.
(e) Purchaser shall, during its period of occupancy of any leased
Premises, pay all operating costs with respect thereto accruing
during occupancy and comply with all relevant terms of the
applicable Lease(s) entered into by Seller, including the payment
of all rent, taxes, fees, charges, utilities, insurance, and
assessments to the lessor.
(f) Notwithstanding the foregoing, in the event that within 90
days after the date hereof Seller is unable to obtain any
necessary consent or approval for the assignment or sublease of
any Lease of leased Premises, Purchaser shall not be obligated to
assume any such Lease or enter into any such sublease; provided,
that Seller may set forth in a writing to Purchaser the status of
its efforts to obtain such consent or approval, the reasons that
it has been unable to obtain such consent or approval prior to
such date, and its judgment as to its ability to obtain such
consent or approval after such date but before the Closing Date,
and request that Purchaser extend for up to an additional 30 days
the period of time which Seller shall have to obtain any such
approval or consent, which extension shall not be unreasonably
withheld by Purchaser.
5.3 Title Insurance. Purchaser may obtain, at Purchaser's
expense, title insurance commitments (or such functional
equivalents as Purchaser reasonably deems satisfactory) with
respect to any or all of the Purchased Branches. Within 45 days
after the date hereof, Purchaser shall give written notice to
Seller of all exceptions (shown on such reports) that cannot be
insured against or in respect of which affirmative insurance is
unavailable and which do not constitute Permitted Encumbrances, as
defined in Section 8.1(h). On Purchaser's request, Seller agrees
to provide Purchaser with copies of any title policies, title
commitments, title reports, abstracts of title or other title
information in Seller's possession with respect to any or all of
the Purchased Branches or Other Real Property.
5.4 Tax Matters.
(a) Tax Representations. Seller represents and warrants to
Purchaser on the date hereof and as of the Closing Date as
follows:
(i) Any and all Taxes relating to the Purchased Assets, the
Assumed Liabilities, and the operations of the Purchased
Branches which are due and payable on or prior to the Closing
Date have been paid in full, or will be so paid on or prior to
the Closing Date. All Tax Returns (including extensions or
amendments thereto) required to be filed with any relevant
taxing authority on or prior to the Closing Date with respect
to any and all Taxes relating to the Purchased Assets, Assumed
Liabilities, or the operations of the Purchased Branches have
been timely filed or will be timely filed on or prior to the
Closing Date.
(ii) With respect to the assumed Deposit liabilities, Seller is
in compliance with applicable laws and Internal Revenue
Service ("IRS") regulations relative to obtaining from
depositors of the assumed Deposit liabilities executed IRS
Forms W-8 and W-9, or is back-up withholding on such accounts.
(iii) All information returns, reports and forms required to be
furnished by Seller and any predecessor of Seller that was an
Affiliate of Seller or PDCI to any depositor or to any taxing
authority with respect to the Purchased Assets, Assumed
Liabilities, or the Purchased Branches have been or will be
furnished to such depositors or such taxing authority within
the time required by applicable law. All employment tax
information reports, returns and forms required to be
furnished by Seller and any such predecessor of Seller, as
predecessor employer, to any employee of Seller or to any
taxing authority with respect to compensation paid by Seller
and any such predecessor of Seller to such employee (such as
IRS Form W-2) have been or will be furnished to such employees
within the time required by applicable law.
(b) Liability for Taxes. (i) Liability of Seller. Except as set
forth in Section 5.4(c), with respect to the Purchased Assets, the
Assumed Liabilities, and the operations of the Purchased Branches
transferred at the Closing, Seller shall be liable for and
indemnify Purchaser for all Taxes imposed on such Purchased Assets
or income therefrom, such Assumed Liabilities or payments in
respect thereof, or the operation of the Purchased Branches
(including employment taxes) for (1) any taxable year or period
that ends on or before the Closing Date and (2), with respect to
any taxable year or period beginning before and ending after the
Closing Date, the portion of such taxable year or period ending on
and including the Closing Date.
(ii) Liability of Purchaser. With respect to the Purchased
Assets, Assumed Liabilities, and the operations of the
Purchased Branches transferred at the Closing, Purchaser shall
be liable for and indemnify Seller for all Taxes imposed on
such Purchased Assets or income therefrom, such Assumed
Liabilities or payments in respect thereof, or the operation
of such Purchased Branches for (1) any taxable year or period
that begins after the Closing Date and (2), with respect to
any taxable year or period beginning before and ending after
the Closing Date, the portion of such taxable year beginning
after the Closing Date. Notwithstanding the foregoing,
Purchaser shall be liable for and indemnify Seller for all
real and personal property ad valorem Taxes relating to the
Purchased Assets for the calendar year in which the Closing
occurs, which Taxes shall be accrued on the Interim Asset and
Liability Schedule or the Final Asset and Liability Schedule
and shall be Assumed Liabilities.
(iii) Proration of Taxes. Except as otherwise agreed to by the
parties, for purposes of subsections (i) and (ii), whenever it
is necessary to determine the liability for Taxes for a
portion of a taxable year or period that begins before and
ends after the Closing Date, the determination of the Taxes
for the portion of the year or period ending on, and the
portion of the year or period beginning after, the Closing
Date shall be determined by assuming that the taxable year or
period ended at the close of business on the Closing Date.
With respect to any real property or personal property Taxes
for a period that begins before and ends after the Closing
Date, such Taxes shall be apportioned based on the number of
days in the taxable period on or prior to the Closing Date.
(iv) Limitation of Liability of Purchaser. Seller and Purchaser
expressly acknowledge and agree that (1) Purchaser's liability
for Taxes arising out of the consummation of the purchases and
sales contemplated by this Agreement is limited to the Taxes
described in subsection (ii) above, (2) Purchaser is not
assuming, expressly or by implication, any other Taxes of
Seller (and specifically is not assuming liability for any
income or franchise taxes measured by Seller's or any
affiliate of Seller's net income) attributable to the conduct
of Seller's business or to its assets or liabilities and (3)
Seller shall indemnify and hold Purchaser harmless from and
against any Taxes not described in subsection (b) above.
(c) Sales and Transfer Taxes. All excise, sales, use, transfer
and similar Taxes that are payable or that arise as a result of
the consummation of the purchase and sale contemplated by this
Agreement shall be borne by Seller whether such Taxes are imposed
upon Seller or Purchaser.
(d) Payments of Amounts Due under Section 5.4. All subsequent
payments under this Section 5.4 shall be made as soon as
determinable and shall be made and bear interest from the date due
to the date of payment at the average of the Federal Funds Rate or
Rates in effect from time to time during such period. Any
payments made by Seller to Purchaser or by Purchaser to Seller
after the Closing shall be treated by both parties to the extent
permitted by applicable law as an adjustment to the Purchase
Price.
(e) Information Reporting and Withholding.
(i) Unless otherwise agreed by the parties and except as
otherwise provided in this Section, Seller shall be
responsible for the filing of all information returns or
reports required by state or federal law with the IRS, other
applicable taxing authority, and depositors and customers with
respect to interest and points paid by or to Seller or any
predecessor of Seller that was an Affiliate of Seller or PDCI
on or prior to the Closing Date with respect to the Purchased
Assets and Assumed Liabilities. Seller shall be responsible
for delivering to payees all IRS notices with respect to
information reporting and tax identification numbers required
to be delivered through the Closing Date with respect to the
assumed Deposit liabilities. Purchaser shall be responsible
for filing such returns and reports for interest paid or
received after the Closing Date and for delivering notices to
payees required to be delivered after the Closing Date.
(ii) Notwithstanding paragraph (i) above, and unless otherwise
agreed to by the parties, Seller and Purchaser agree that they
will comply with IRS Revenue Procedure 90-57, 1990-2 C.B. 641
with respect to the filing of Forms 1099-INT for the calendar
year including the Closing Date, and accordingly, Purchaser
will assume Seller's obligation to file such forms with
respect to interest payments made on the assumed Deposit
liabilities for such year.
(iii) Any amounts required by any governmental agencies to be
withheld from any of the assumed Deposits through the Closing
Date will be withheld by Seller in accordance with applicable
law or appropriate notice from any governmental agency and
will be remitted by Seller to the appropriate agency on or
prior to the applicable due date. Any such withholding
required to be made subsequent to the Closing Date shall be
withheld by Purchaser in accordance with applicable law or the
appropriate notice from any governmental agency and will be
remitted by Purchaser to the appropriate agency on or prior to
the applicable due date.
(iv) Seller and Purchaser shall, prior to the Closing Date,
consult (and each party shall take such actions as are
necessary) to permit the other party timely to file any
information returns or reports and to deliver notices required
to be filed or delivered in the post-Closing period.
(v) On or prior to the Closing Date, Seller will deliver to
Purchaser a certificate certifying that Seller is a United
Sates person and that Seller is not a foreign person for the
purpose of the provisions of Sections 7701 and 1445 of the
Internal Revenue Code of 1988, as amended.
(f) Tax Returns. Except as provided in Section 5.4 and as
otherwise agreed to by the parties, with respect to the Purchased
Assets, Assumed Liabilities, and the Purchased Branches
transferred at the Closing, (a) Seller shall file or cause to be
filed when due all Tax Returns that are required to be filed with
respect to such Purchased Assets or income therefrom, such Assumed
Liabilities or payments in respect thereof, or the operation of
such Purchased Branches for taxable years or periods ending on or
before the Closing Date and shall pay any Taxes due in respect of
such Tax Returns and (b) Purchaser shall file or cause to be filed
when due all Tax Returns with respect to such Purchased Assets or
income therefrom, such Assumed Liabilities or payments in respect
thereof, or the operation of such Purchased Branches for taxable
years or periods ending after the Closing Date and shall remit any
Taxes due in respect of such Tax Returns. If Seller (or
Purchaser) shall be liable hereunder for any portion of the Tax
shown due on any Tax Return prepared by the other party, the party
preparing the Tax Return shall deliver a copy to the party so
liable not less than 10 days prior to the date on which such Tax
Return is due to be filed (taking into account any applicable
extensions). Seller or Purchaser as the case may be shall pay in
immediately available funds the Taxes for which it is liable
pursuant to Section 5.4(b)(i) or 5.4(b)(ii) but which are payable
with Tax Returns to be filed by the other party pursuant to the
previous sentence on the due date for the payment of such Taxes.
(g) Assistance and Cooperation. Seller and Purchaser shall as of
the Closing Date:
(i) Assist (and cause their respective Affiliates to assist) the
other party in preparing any Tax Returns which such other
party is responsible for preparing and filing in accordance
with this Section 5.4 including any returns or forms required
pursuant to Section 5.4(h); provided, however, that either
party may withhold, or excise portions of, confidential
records, documents or information if it is necessary to do so
to reasonably protect the confidentiality thereof;
(ii) Cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns with
respect to the Purchased Assets or income therefrom, the
Assumed Liabilities or payments in respect thereof or the
operations of the Purchased Branches;
(iii) Make available to the other and to any taxing authority as
reasonably requested all relevant information, records, and
documents relating to Taxes with respect to the Purchased
Assets or income therefrom, the Assumed Liabilities or
payments in respect thereof, or the operation of the Purchased
Branches;
(iv) Provide timely notice to the other in writing of any
pending or proposed tax audits or assessments with respect to
the Purchased Assets or the income therefrom, the Assumed
Liabilities or payments in respect thereof, or the operation
of the Purchased Branches for taxable periods for which the
other may have a liability under this Section 5.4;
(v) Furnish the other with copies of all relevant correspondence
received from any taxing authority in connection with any tax
audit or information request with respect to any taxable
period referred to in subsection (iv) above; and
(vi) The party requesting assistance or cooperation shall bear
the other party's reasonable out-of-pocket expenses in
complying with such request to the extent that those expenses
are attributable to fees and other costs of unaffiliated
third-party service providers.
(h) Allocation of Final Amount.
(i) The parties to this Agreement agree to allocate the
consideration for the Purchased Assets in accordance with the
rules under Section 1060 of the Code, and the Treasury
Regulations promulgated thereunder. Such allocation shall be
based on the fair market values of the Purchased Assets and
Assumed Liabilities. Prior to Closing, the parties shall use
their reasonable best efforts to make an agreed allocation in
a schedule (the "Allocation Schedule"). If the parties cannot
so agree on an Allocation Schedule, each party shall be
entitled to comply with Section 1060 in accordance with its
own discretion.
(ii) If the parties shall agree on the Allocation Schedule,
Seller and Purchaser agree to act in accordance with the
computations and allocations contained in the Allocation
Schedule in any relevant Tax Returns or similar filings
(including any forms or reports required to be filed pursuant
to Section 1060 of the Code or the Treasury Regulations
promulgated thereunder and any comparable provision of state
or local tax laws ("1060 Forms")) and to file such 1060 Forms
in the manner required by applicable law. Seller and
Purchaser will promptly notify each other in accordance with
Section 5.4(i) of any challenge by any Tax authority to such
computations or allocations.
(i) Period of Indemnification. Without limiting the provisions
of Section 5.4(g), the notification and contest provisions of
Article XII shall apply to claims for indemnification under
Section 5.4; provided, however, that notice of claim for
indemnification pursuant to Section 5.4 shall be given prior
to the expiration of the applicable statute of limitations (as
extended) for the assertion of the claims for Taxes by the
relevant Tax authority. The representations in Section 5.4(a)
shall survive the Closing until the expiration of the relevant
limitations period for the assertion of claims by the relevant
Tax authority.
ARTICLE VI
DUTIES WITH RESPECT TO DEPOSIT LIABILITIES ASSUMED
6.1 Payment of Checks, Drafts and Orders. Effective on the day
after the Closing Date, Purchaser agrees to pay all properly drawn
checks, drafts and withdrawal orders presented to it by mail, over
its counter or through clearing by depositors in respect of all
Deposits and other liabilities assumed pursuant to Section 3.1,
whether drawn on the check or draft forms provided by Seller or by
Purchaser, to the extent that the Deposit balances (calculated in
a manner consistent with applicable law and applicable agreements
between Seller and depositors) to the credit of the respective
makers or drawers assumed by Purchaser under this Agreement are
sufficient to permit the payment thereof, and in all other
respects to discharge, in the usual course of conducting a banking
business, the duties and obligations of the Purchased Branches
with respect to the Deposit balances due and owing to the
depositors of the Purchased Branches assumed by the Purchaser
under this Agreement. Purchaser will assume responsibility for
obtaining and maintaining deposit insurance from FDIC in respect
of all Deposits to be assumed hereunder, effective on and after
the Closing Date, including all costs, fees and expenses
associated therewith.
6.2 Interest on Deposit Liabilities Assumed. Purchaser agrees
that after the Closing Date, it will accrue and pay interest on
the Deposits and other liabilities assumed pursuant to Section 3.1
in accordance with the terms of the respective Deposits and other
agreements between the Seller and the depositors or other third
persons to the extent required by such agreements, subject to
Purchaser's right to change terms in accordance with such
agreements and applicable law.
6.3 Notices to Depositors. Prior to the Closing, the Purchaser
and the Seller shall cooperate with each other in sending notices
to depositors in respect of all Deposits to be assumed by
Purchaser hereunder which, in the judgment of Seller or Purchaser,
are necessary or advisable in light of the transactions
contemplated by this Agreement, and neither Seller nor Purchaser
shall unreasonably object to any notice desired to be sent by the
other party to such depositors. Within a reasonable period of
time after the Closing Date and in compliance with any applicable
law, Purchaser shall give notice to depositors in respect of all
Deposits being assumed by Purchaser of its assumption of the
Deposit liabilities of each such Purchased Branch by mailing to
each such depositor a notice with respect to such assumption;
provided, however, that any such notice shall be subject to the
prior approval of Seller to the extent such notice refers to
Seller, which approval shall not be unreasonably withheld. Seller
agrees that on the Closing Date it will provide to Purchaser a
true and correct list of the Deposits to be assumed by Purchaser
hereunder as of the Closing Date in a medium mutually acceptable
to Seller and Purchaser.
ARTICLE VII
RECORDS
7.1 Transfer of Records.
(a) As of the Closing, Seller will assign, transfer and convey to
Purchaser all of the records, including computer records,
reflecting, among other things, transaction histories, pertaining
primarily to the Purchased Assets and all of the records,
reflecting, among other things, transaction histories, including
computer records, pertaining primarily to the Assumed Liabilities,
including, with the consent of each affected employee, all records
relating to employees of the Seller that are to be employed by
Purchaser after the Closing (including records relating to date of
hire, length of employment, compensation history and I-9 forms),
records relating to the operations of the Purchased Branches, and
the following records pertaining to the Deposit liabilities to be
assumed by Purchaser:
(i) all signature cards, orders, contracts between the Seller
with respect to the Purchased Branches and their depositors
and records of similar character;
(ii) all passbooks of depositors held by the Seller with respect
to the Purchased Branches, deposit slips, cancelled checks and
withdrawal orders representing charges to accounts of
depositors, and all other records evidencing the transaction
history with respect to any Deposit liability;
and the following records pertaining to the Purchased Assets:
(iii) all records of deposit balances carried with other banks,
bankers or trust companies;
(iv) all Credit Documents, collateral records and credit files
and other documents;
(v) all deeds, mortgages, abstracts, surveys, and other
instruments or records of title pertaining to real estate or
real estate mortgages;
(vi) all signature cards, agreements and records pertaining to
safe deposit boxes, if any; and
(vii) all passbooks of depositors held by the Seller with
respect to the Purchased Branches, deposit slips, cancelled
checks and withdrawal orders representing charges to accounts
of depositors, and all other records evidencing the
transaction history with respect to any Purchased Asset.
(b) Seller, at its option, may assign and transfer to Purchaser
by a single blanket assignment or otherwise any other records
primarily relating to the Purchased Assets and the Assumed
Liabilities not assigned and transferred to Purchaser as provided
in this Agreement, including loan disbursement checks, general
ledger tickets, official bank checks, proof transactions
(including proof tapes) and paid out loan files.
7.2 Delivery of Assigned Records. Seller shall deliver or make
available to Purchaser all records described in Section 7.1 not
later than the Closing Date.
7.3 Preservation of Records. Purchaser agrees that it will
preserve and maintain for the joint benefit of Seller and
Purchaser all records relating to the Purchased Branches of which
it has custody for a period of seven years after the Closing Date.
Seller agrees to preserve and maintain for the joint benefit of
Seller and Purchaser all records relating to the Purchased
Branches of which it has custody for a period of seven years after
the Closing Date.
7.4 Access to Records; Copies. To the extent permitted by law
and applicable agreements, Purchaser agrees to provide Seller,
upon Seller's written request stating the reason therefor, a copy
of any record acquired from Seller pursuant hereto of which
Purchaser has custody. To the extent permitted by law and
applicable agreements, Seller agrees to provide Purchaser, upon
Purchaser's written request stating the reason therefor, a copy of
any record relating to the Purchased Assets or the Assumed
Liabilities of which Seller has custody. The party requesting a
copy of any record shall bear the cost (based on standard accepted
industry charges to the extent applicable for providing such
duplicate records). A copy of each record requested shall be
provided as soon as practicable by the party having custody
thereof.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Representations and Warranties of Seller and PDCI. Seller
has delivered to Purchaser on the date hereof the schedules to
this Agreement in final form. At the Closing, Seller shall
provide Purchaser with supplemental schedules to this Agreement
reflecting changes thereto based on changes between the date of
initial delivery of such schedules and the Closing Date as
contemplated by this Agreement. Seller represents and warrants to
Purchaser, as of the date of this Agreement and as of the Closing
Date, and PDCI represents and warrants to Purchaser with respect
to the matters described in Sections 8.1(b), (c), (d), (e) and (w)
to the extent applicable to PDCI, as of the date of this Agreement
and as of the Closing Date, the following:
(a) Organization of Seller. Seller is a federal savings bank
duly organized, validly existing and in good standing under the
laws of the United States of America and has corporate power and
authority to own and operate its properties and to conduct its
business as it is currently conducted.
(b) Organization of PDCI. PDCI is a corporation duly organized,
validly existing and in good standing under the laws of the state
of Michigan.
(c) Power. PDCI and Seller each has the corporate power and
authority to enter into and, subject to obtaining all requisite
governmental approvals, perform this Agreement and to carry out
the terms hereof.
(d) Authorization, Execution and Enforceability. The execution
and delivery by PDCI and Seller of this Agreement and the
performance by PDCI and Seller of their respective obligations
hereunder have been duly authorized by all necessary corporate
action on the part of PDCI and Seller, except for the approval of
Seller's board of directors, which Seller shall obtain within
three Business Days after the date hereof, or this Agreement will
terminate. This Agreement has been duly executed and delivered by
PDCI and Seller, and upon the due authorization, execution, and
delivery of this Agreement by Purchaser and Compass, this
Agreement will be the legal, valid and binding obligation of PDCI
and Seller, enforceable against each of them in accordance with
its terms, subject to obtaining all requisite governmental
approvals and subject to applicable bankruptcy, insolvency,
moratorium, reorganization or other similar laws relating to or
affecting the enforcement of rights of creditors generally and to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(e) No Conflict With Other Instruments. The execution and
delivery of this Agreement by Seller and PDCI and the consummation
of the transactions contemplated hereby by Seller and PDCI,
subject to obtaining all Required Regulatory Approvals, do not and
will not violate any provision of, or constitute a breach of or
default under, (i) their respective charter documents, or (ii) any
applicable law, rule, regulation, judgment, ruling, order, writ,
injunction or decree of any court, government or governmental
agency, or any contract, agreement or instrument (other than
contracts, leases or agreements included as Assumed Liabilities to
the extent the assignment of which to Purchaser requires the
consent of a third party), to which either PDCI or Seller is a
party or by which either of them is bound, or constitute an event
which with the lapse of time or action by a third party could
result in a default under any of the foregoing or result in the
creation of any lien, charge or encumbrance upon any of the assets
or properties of either PDCI or Seller, which in the event of any
such violation, default, or creation of lien, charge or
encumbrance described in (ii) above would reasonably be expected
to have a Material Adverse Effect.
(f) Books and Records. The books and records of Seller,
including the Accounting Records, are complete and correct in all
material respects and have been maintained in accordance with good
business practice. The Accounting Records have been prepared in
accordance with generally accepted accounting principles
consistently applied throughout the periods involved. The
Accounting Records fairly present the financial position of Seller
as of the date thereof, and the results of operations for Seller
for the periods referred to therein. Seller did not have, as of
the Financial Statement Date, any liabilities (absolute or
contingent) which are material to the Business and are not
reflected or provided for in the Accounting Records.
(g) Absence of Certain Changes or Events. Except as otherwise
set forth on the attached Schedule 8.1(g), since the Financial
Statement Date, Seller has not:
(i) suffered any Material Adverse Effect;
(ii) except in the ordinary course of business and consistent
with prudent banking practices, (A) sold, transferred, leased,
pledged, mortgaged, or otherwise encumbered or (except for
this Agreement) agreed to sell, transfer, lease, pledge,
mortgage or otherwise encumber, any of the Purchased Assets or
rights with respect thereto, or (B) cancelled, waived,
compromised or agreed to cancel, waive or compromise any
debts, claims or rights with respect to the Purchased Assets
or the Assumed Liabilities, involving in any such case an
amount in excess of $100,000;
(iii) except for (or as permitted by) this Agreement, entered
into or agreed to enter into any agreement or arrangement
granting any rights to purchase or lease any of the Purchased
Assets or related property or rights of Seller or requiring
the consent of any party to the transfer, assignment or lease
of any of such Purchased Assets, property or rights;
(iv) made or permitted any amendment, termination or lapse of
any contract, lease, agreement, license or permit, if such
amendment, termination or lapse (individually or in the
aggregate) would reasonably be expected to have a Material
Adverse Effect;
(v) made any change in any method of management or operation not
in the ordinary course of business, or any accounting change;
(vi) granted any general increase in the compensation of its
officers or employees (including any increase pursuant to any
bonus, pension, profit-sharing or other Plan or commitment),
except for normal periodic increases made pursuant to
established compensation policies of Seller applied on a basis
consistent with that of the prior year, other than increases
and payments necessary, in Seller's reasonable discretion, to
maintain and preserve the operation of its business, all of
which increases that relate to employees with respect to
Purchased Branches shall be promptly disclosed in writing to
Purchaser by Seller; or
(vii) entered into any other transaction or conducted its
affairs, in either case related to the Business, other than in
the ordinary course of business and consistent with prudent
banking practices except as contemplated by this Agreement.
(h) Title to Seller's Assets. Seller has, and prior to the
consummation of the transactions contemplated hereby, Seller will
have, and upon consummation of the transactions contemplated
hereby Purchaser will have, good and indefeasible title in and to
all of the Purchased Assets (other than those assets disposed of
in the ordinary course of business of Seller ), in each case, free
and clear of all mortgages, pledges, security interests, liens,
charges, claims and encumbrances, except (i) as set forth in the
attached Schedule 8.1(h), and (ii) liens for Taxes not yet due and
payable (such items described in clauses (i) and (ii) are
collectively referred to as "Permitted Encumbrances").
(i) Litigation. Except for matters described in the attached
Schedule 8.1(i), there are no legal, quasi-judicial or
administrative proceedings of any kind or nature now pending or,
to Seller's knowledge, threatened against Seller before any court,
government agency, administrative body or arbitrator. There is no
litigation or proceeding pending or, to Seller's knowledge,
threatened against PDCI or Seller which challenges the legality or
enforceability of this Agreement or which seeks to prohibit or
delay the consummation of the transactions contemplated herein.
(j) Contracts. The Assumed Contracts described in
Schedule 8.1(j) constitute all agreements, contracts and real and
personal property leases (other than Credit Documents entered into
in the ordinary course of business) to which the Seller is a party
or otherwise relating to the Purchased Branches (but excluding any
agreement, contract or lease relating to the Excluded Branches or
the Excluded Assets) which, in the case of any such contract,
agreement or lease, involve aggregate expenditures by the Seller
of more than $100,000 during the entire relevant term in effect as
of the date hereof or are not due to be terminated in accordance
with the terms thereof within 12 months after the date hereof.
Except for matters contained in the attached Schedule 8.1(j) and
for Excluded Liabilities, Seller is not a party to or bound by any
of the following, to the extent they relate to the Business: (i)
employment contract (including without limitation any collective
bargaining contract or union agreement) (ii) any Plan, including
any bonus, stock option, deferred compensation or profit-sharing,
pension or retirement plan or arrangements; (iii) lease or license
with respect to any property, real or personal, whether as
landlord, tenant, licensor or licensee, other than personal
property leases involving annual payments of less than $50,000;
(iv) contract or commitment for capital expenditures in excess of
$25,000 for any one project; (v) contract or commitment made in
the ordinary course of business for the purchase of materials or
supplies or for the performance of services over a period of more
than sixty (60) days from the date of this Agreement, (vi)
agreement or instrument or charter or other corporate restriction
which materially and adversely affects the financial condition,
assets, liabilities, business or prospects of Seller; (vii)
contract or option to purchase or sell any real or personal
property otherwise than in the ordinary course of business; (viii)
indenture, mortgage, note, debenture, guaranty, security agreement
or other debt instrument or agreement (exclusive of obligations
entered into in the ordinary course of business) under which
Seller has a liability; (ix) consulting or other similar
contracts; (x) agreement between Seller and any present or former
officer, director, employee or agent of Seller or PDCI or any
business in which any of such persons has a material financial
interest; or (xi) contract, other than the foregoing, not made in
the ordinary course of business. Complete and correct copies of
all such contracts, commitments, leases, agreements, Plans and
other documents described in Schedule 8.1(j) have been made
available to Purchaser.
Seller (to the extent a failure of such performance would
reasonably be expected to have a Material Adverse Effect) has in
all material respects performed all obligations required to be
performed by it to date and is not in default under, and no event
has occurred which, with the lapse of time or action by a third
party, could result in default under, any outstanding indenture,
mortgage, contract, lease or other agreement to which Seller is a
party or by which the Business, the Purchased Assets or the
Assumed Liabilities are bound or affected. Except as set forth in
Schedule 8.1(j), to the knowledge of Seller, all contracts,
agreements and commitments disclosed to Purchaser pursuant to this
Section 8.1(j) and assumed by the Purchaser pursuant to this
Agreement are valid, binding and in full force and effect, and no
event has occurred and remains uncured which constitutes a
material default or results in a right of acceleration,
termination or any similar right by any party (or would, but for
the passage of time or the giving of notice, constitute a material
default or result in a right of acceleration, termination or
similar right) under any such contract.
(k) Applicable Laws and Governmental Authorizations. Except with
respect to tax matters and environmental matters, as to which
separate representations are made herein, (i) Seller is in
compliance in all material respects with all applicable federal,
state and local statutes, rules, regulations, orders and
ordinances, including those relating to labor matters, civil
rights matters and occupational safety and health matters relating
to the Business, and (ii) except as described in Schedule 8.1(k),
since January 1, 1989, the Seller has not received any written
notification of any asserted past or present failure to comply
with any such statutes, rules, regulations, orders, ordinances,
codes, licenses, franchises, permits, authorizations, and
concessions from any governmental authority or agency (other than
relating to capitalization or profitability), where such failure
has not been cured or waived.
(l) Loans and Loan Commitments. Seller has provided Purchaser
with a true and correct list of all Commitments requiring
aggregate advances in excess of $25,000 and all Loans as of the
Financial Statement Date, and before the Closing Date shall
provide Purchaser a true and correct list of all Commitments and
Loans as of the Interim Date. Other than with respect to Loans
constituting Excluded Assets and other than as set forth in
Schedule 8.1(l):
(i) Each Loan or Commitment included in the Purchased Assets was
made or acquired by the Seller or the Purchased Branches, as
the case may be, in the ordinary course of business at the
time such Loan or Commitment was made or acquired, as the case
may be.
(ii) Except for loan participations held by the Seller or the
Purchased Branches, none of the Loans or Commitments included
in the Purchased Assets is presently serviced by third
parties, and there are no obligations, agreements or
understandings whatsoever that could result in any such Loan
or Commitment becoming subject to any such third party
servicing.
(iii) There are no intentional misrepresentations of material
facts made by officers or employees of the Seller or the
Purchased Branches in the credit files relating to the Loans
and Commitments comprising the Purchased Assets, provided that
the term "facts" shall not include judgments or opinions of
such officers or employees which were made in good faith.
(iv) With respect to each Loan or Commitment transferred to
Purchaser:
(A) Such Loan or Commitment was solicited, originated and
currently exists in material compliance with all applicable
requirements of federal, state, and local laws and regulations
promulgated thereunder (for purposes of this clause (A), a Loan or
Commitment would not be in material compliance if the
non-compliance adversely affects the value or collectibility of
the Loan or Commitment or subjects the lender to any penalty or
liability);
(B) Each note, agreement or other instrument evidencing a Loan
or Commitment and any related security agreement or instrument
(including, without limitation, any guaranty or similar
instrument) constitutes a valid, legal and binding obligation of
the obligor thereunder, enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium, laws governing fraudulent conveyance
or equitable subordination principles and other laws of general
applicability relating to or affecting creditors' rights generally
and to general principles of equity; and all actions necessary to
perfect any related security interest have been duly taken;
provided that certain provisions of such notes, agreements, other
instruments, security agreements or instruments are or may be
unenforceable in whole or in part, but the unenforceability of
such provisions does not affect the validity thereof or make the
rights or remedies established therein inadequate for the
practical realization of the material benefits and security
intended to be afforded thereby.
(C) The terms of the applicable loan documents with respect to
all Loans are consistent in all material respects with the terms
of the internal loan approval for such Loan in effect at the time
such Loan was made or Commitment and there has been no material
modification to or material waiver of such terms except as
evidenced in documents executed by the parties and included in
such loan documents;
(D) There is no valid claim or valid defense to the enforcement
of such Loans or Commitments and the Seller has not taken or
failed to take any action that would entitle any obligor or other
party to assert successfully any claim against the Seller or the
Purchaser (including without limitation any right not to repay any
such obligation or any part thereof); and
(E) Such Loan or Commitment, if originated by Seller, was made
substantially in accordance with the Seller's standard
underwriting and documentation guidelines as in effect at the time
of its origination and has been administered substantially in
accordance with the Seller's standard loan servicing and operating
procedures as in effect from time to time.
With respect to any Loans or Commitments acquired or assumed by
Seller from the FDIC, Receiver of New First City, Texas - Lake
Jackson, National Association pursuant to that certain Purchase
and Assumption Agreement dated as of February 13, 1993 by and
among the FDIC, Receiver of New First City, Texas - Lake Jackson,
National Association, the FDIC and Seller (the "First City P&A
Agreement"), the representations and warranties made in this
Section 8.1(l) are made only to the extent of Seller's knowledge.
(m) Reserve for Possible Loan Losses. Seller's reserves for
possible loan losses have been calculated in accordance with
generally accepted accounting principles as applied to savings and
loan associations and in accordance with all applicable laws,
rules and regulations.
(n) Environmental Compliance. Except as set forth in
Schedule 8.1(n), to Seller's knowledge and only with respect to
the Business and any of the Property:
(i) The Seller and any Property owned, leased or operated by it
is in compliance in all material respects with all applicable
Environmental Laws, and the Seller has obtained and is in
compliance in all material respects with all permits and
licenses required under any applicable Environmental Law.
There is no past or present event, condition or circumstance
that is reasonably likely to interfere with the conduct of the
business of the Seller at any of the Purchased Branches in the
manner now conducted relating to the Seller's compliance with
applicable Environmental Laws or constitute a violation
thereof which, in any such event, would reasonably be expected
to have a Material Adverse Effect upon Purchaser, the
Purchased Assets or the Assumed Liabilities;
(ii) There are no actions, investigations or proceedings
pending or threatened against the Seller, or involving any
Property or any property where Polluting Substances generated
by the Seller have been disposed, under any applicable
Environmental Law, including any such action involving the
release or threat of release of any Polluting Substance in
excess of permitted levels, and the Seller has not received
any notice in writing (whether from any regulatory body or
private person) of violation, or potential or threatened
violation, of any applicable Environmental Law which remains
unresolved;
(iii) There is no Property for which the Seller is or was
required to give any notice or to obtain any permit or license
under an applicable Environmental Law to construct, demolish,
renovate, occupy, operate, or use such Property or any portion
of it, where such notice was not given or such permit or
license was not obtained or where any such requirement was not
waived by the applicable regulatory authority;
(iv) Except as disclosed in writing to Purchaser, the Seller has
not generated or disposed of any Polluting Substances in an
unlawful manner and for any such Polluting Substances, to the
extent required by applicable law, properly executed manifests
are on record with them and any appropriate regulatory agency;
(v) There has been no release in or on any Property of Polluting
Substances in violation of any applicable Environmental Laws
and which would require any report or notification to any
governmental or regulatory authority, where such report or
notification was not given;
(vi) There are no underground or above ground storage tanks on
or under any Purchased Asset which are not in conformity with
applicable Environmental Laws and any Purchased Asset
previously containing such tanks has been remediated to the
extent required under applicable Environmental Laws; and
(vii) There is no asbestos containing material on any Purchased
Asset other than in ordinary building materials in lawful use
or which is naturally occurring or which consists of
background concentrations.
(viii) For purposes of this Section 8.1(n) and Section 9.6,
"Property" includes any property (whether real or personal)
which is leased, owned, operated or managed by Seller and
which is included in the Purchased Assets or Premises, or is
held as security for a Loan or Commitment listed on the
attached Schedule 8.1(n) .
(o) No Distributions. Since the Financial Statement Date, Seller
has not declared or set aside or paid any dividend or made any
other distribution with respect to its outstanding securities, or,
directly or indirectly, purchased, redeemed or otherwise acquired
any of its securities.
(p) Regulatory Approvals. Neither Seller nor any of its
Affiliates has received any indication from any federal, state or
other governmental agency that such agency would oppose or refuse
to grant or issue its consent or approval, if required, with
respect to the transactions contemplated hereby, including any
Required Regulatory Approval.
(q) Brokers' Fees. Except for Merrill Lynch, Pierce Fenner &
Smith Incorporated and BFM Advisory L.P., neither Seller nor PDCI
has employed any broker, finder or other investment advisor or
incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by
this Agreement. Seller or PDCI will pay the fees of Merrill
Lynch, Pierce Fenner & Smith Incorporated and BFM Advisory L.P.,
as applicable.
(r) Purchased Branches. Attached hereto as Schedule 8.1(r) is a
list, complete and accurate in all respects, of each Purchased
Branch owned in fee by the Seller and each Purchased Branch which
is leased by the Seller. Such list sets forth the address of each
Purchased Branch, the legal description of each Purchased Branch
owned in fee and a list of the lease agreement and all amendments
thereto with respect to each Purchased Branch which is leased by
the Seller.
(s) Condition of Premises. The Premises are in good working
condition for the conduct of the business of the Purchased
Branches as currently conducted by the Seller. There are no
condemnation proceedings or eminent domain proceedings of any kind
pending or, to the best knowledge of the Seller, threatened
against any Premises. All of the Premises are in compliance in
all material respects with all applicable laws, rules and codes
(including, without limitation, the Americans with Disabilities
Act), and requirements and regulations of all governmental
authorities having jurisdiction over such Premises. The rental
set forth in each Lease is the actual rental being paid, and there
are no separate agreements or understandings with respect to the
same.
(t) Employment-Related Matters. At Purchaser's request, Seller
shall provide a true and complete list of all persons employed by
the Seller, including those on leave of absence, disability,
layoff and vacation, as of the date hereof, together with the
title, location, date of hire, compensation of each and, for
purposes of benefit plan accrual calculations, date of birth. The
Seller is not a party to or bound by any collective bargaining
agreement or other contract or agreement with any labor
organization or other representative of any of the Seller's
employees, nor is any such contract or agreement presently being
negotiated. There is no unfair labor practice charge or complaint
pending or, to the best knowledge of the Seller, threatened
against or otherwise affecting the Seller. There is no labor
strike, slowdown, work stoppage, dispute, lockout or other labor
controversy in effect, threatened against or otherwise affecting
the Seller. There is no activity or proceeding of any labor
organization (or representative thereof) or employee group to
organize any employees of Seller. Seller is in compliance in all
material respects with all applicable laws respecting employment
and employment practices, terms and conditions of employment and
wages and hours, and Seller is not engaged in any unfair labor
practice.
(u) Disclosure. The copies of all contracts, reports,
agreements, correspondence and other documents relating in any
manner to the Purchased Assets and Assumed Liabilities, furnished
or made available at any time to Purchaser by or on behalf of
Seller pursuant to this Agreement or in the data room are true,
accurate and complete in all material respects.
(v) Deposits. Schedule 8.1(v) sets forth in detail: (i) the
categories of Deposits which are anticipated to be Assumed
Liabilities, indicating the dollar amount of Deposits in each
category and the percentage which such amount constitutes of all
Deposits which are Assumed Liabilities as of the Financial
Statement Date, (ii) the weighted average interest rate paid with
respect to each such category of Deposits as of the Financial
Statement Date, (iii) the weighted average maturity of each such
category of Deposits as of the Financial Statement Date, and (iv)
the other material terms and conditions applicable to each such
category of Deposits, if any.
(w) Approvals and Consents. Except as described in
Schedule 8.1(w), no notices, reports or other filings are required
to be made by PDCI or Seller with, nor are any consents,
registrations, approvals, permits or authorizations required to be
obtained by any of them from, any governmental or regulatory
authorities of the United States or the several States or any
other persons to which any of them is obligated (including,
without limitation, from any landlord under any Lease or from any
other party to any Assumed Contract) in connection with the
execution and delivery by them of this Agreement and the
consummation by them of the transactions contemplated hereby.
8.2 Representations and Warranties of the Purchaser and Compass.
Compass and Purchaser hereby represent and warrant to Seller and
PDCI, as of the date of this Agreement and as of the Closing Date,
the following:
(a) Organization of Purchaser. Purchaser is a bank duly
organized, validly existing and in good standing under the laws of
the State of Texas and has corporate power and authority to own
and operate its properties and to conduct its business as
currently conducted.
(b) Power. Each of Compass and Purchaser has the corporate power
and authority to enter into and, subject to obtaining all
requisite governmental approvals, perform this Agreement and to
carry out the terms hereof.
(c) Authorization, Execution and Enforceability. The execution
and delivery by Purchaser and Compass of this Agreement and the
performance by Purchaser and Compass of their respective
obligations hereunder have been duly authorized by all necessary
corporate action on the part of Purchaser and Compass, except for
the approval of the board of directors of Purchaser, which
approval will be obtained within three Business Days after the
date hereof, or this Agreement will terminate. This Agreement has
been duly executed and delivered by Purchaser and Compass, and
upon the due authorization, execution, and delivery of this
Agreement by Seller and PDCI, this Agreement will be the legal,
valid and binding obligation of Purchaser and Compass, enforceable
against each of them in accordance with its terms, subject to
obtaining all requisite governmental approvals and subject to
applicable bankruptcy, insolvency, moratorium, reorganization or
other similar laws relating to or affecting the enforcement of
rights of creditors generally and to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(d) No Conflict With Other Instruments. The execution and
delivery of this Agreement by Purchaser and Compass and the
consummation of the transactions contemplated hereby by Purchaser
and Compass, subject to obtaining all Required Regulatory
Approvals, will not violate any provision of, or constitute a
breach of or default under, (i) their respective charter
documents, or (ii) any law, rule, regulation, judgment, ruling,
any order, writ, injunction or decree of any court, government or
governmental agency, or any contract, agreement or instrument, to
which either Purchaser or Compass is a party or by which it is
bound, or constitute an event which with the lapse of time or
action by a third party could result in a default under any of the
foregoing, which in the event of any such violation or default
would reasonably be expected to adversely impact Purchaser's
ability to consummate the transactions contemplated under this
Agreement.
(e) Litigation. There is no litigation or proceeding pending or,
to Purchaser's knowledge, threatened against Purchaser or Compass
which challenges the legality or enforceability of this Agreement
or which seeks to prohibit or delay the consummation of the
transactions contemplated herein.
(f) Regulatory Matters. Neither Purchaser nor any of its
Affiliates has received any indication from any federal, state or
other governmental agency that such agency would oppose or refuse
to grant or issue its consent or approval, if required, with
respect to the transactions contemplated hereby, including any
Required Regulatory Approval.
(g) Brokers' Fees. Neither Compass nor Purchaser has employed
any broker, finder or other investment advisor or incurred any
liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
(h) Financing. Purchaser has either sufficient internally
generated funds or committed financing arrangements to make all
payments to Seller contemplated to be made hereunder.
(i) Sophistication of Purchaser. Purchaser is a sophisticated
investor, has knowledge and experience in financial and business
matters that enable it to evaluate the merits and risks of the
transactions contemplated by this Agreement, and that its bid and
decision to acquire the Purchased Assets and assume the Assumed
Liabilities are based upon the Purchaser's own independent
evaluation of information deemed relevant to the Purchaser, and of
information made available by Seller or Seller's personnel, agents
or representatives. Purchaser has relied solely on its own
investigation and it has not relied nor acted in reliance upon any
oral or written information provided by Seller or its personnel,
agents or representatives, other than that information
specifically provided pursuant to this Agreement, the Accounting
Records, the credit files of the Seller provided to Purchaser, or
written information provided to Purchaser by Seller in the data
room. Purchaser acknowledges that no employee, agent or
representative of Seller has been authorized to make any
statements, other than those specifically provided pursuant to
this Agreement, the Accounting Records, the credit files of the
Seller provided to Purchaser, or those written statements provided
to Purchaser by Seller in the data room. Purchaser agrees and
represents that the information made available to it is adequate
and provides a sufficient basis on which to determine whether to
consummate the transaction contemplated hereunder.
(j) Organization of Compass. Compass is a corporation duly
organized, validly existing and in good standing under the laws of
the state of Delaware.
ARTICLE IX
CONTINUING COOPERATION
9.1 General Matters. The parties hereto agree that they will, in
good faith and with their best efforts, cooperate with each other
to carry out the transactions contemplated by this Agreement and
effect the purposes hereof. In particular, Seller agrees to
cooperate in all reasonable respects with Purchaser before the
Closing so as to assist Purchaser in minimizing the time and
expense required of Purchaser after the Closing in order to
integrate the Business into its operations; provided, however,
that the foregoing duty of cooperation by Seller shall not impose
any requirement or obligation on Seller which is materially
burdensome or materially interferes with the conduct by Seller of
its business and operations in the ordinary course. In addition,
Purchaser agrees to provide Seller with transitional services as
Seller shall reasonably request, of a nature, for a duration and
for a fee (which fee shall be based on applicable market rates or
standards), in support of Seller's operation and administration of
the Excluded Branches which Seller will retain after the Closing
Date, and consistent with the operation and administration of such
retained Excluded Branches before the Closing Date.
9.2 Additional Title Documents. Seller and Purchaser each agree,
at any time, and from time to time, upon the request of the other
party, to execute and deliver such additional instruments and
documents of conveyance as shall be reasonably necessary to vest
in such other party its full legal or equitable title in and to
the property transferred or retained pursuant to this Agreement or
in accordance herewith.
9.3 Payment of Deposits. In the event any depositor does not
accept the obligation of Purchaser to pay any Deposit liability
assumed by the Purchaser pursuant to this Agreement and asserts a
claim against Seller for all or any portion of any such Deposit
liability, Purchaser agrees on demand to provide to Seller funds
sufficient to pay such claim in an amount not in excess of the
Deposit liability reflected on the books of Purchaser at the time
funds for the payment of such claim are provided to Seller by
Purchaser. Upon payment by Purchaser to Seller of such amount,
Purchaser shall be discharged from any further obligation under
this Agreement to pay to any such depositor the amount of such
Deposit liability paid to Seller.
9.4 Cooperation in Proceedings. In connection with any
investigation, proceeding or other matter with respect to any
Excluded Asset or Excluded Liability, or any Purchased Asset or
Assumed Liability, Purchaser and Seller shall reasonably cooperate
with each other, including making available to the other party,
during business hours, such books, records and files in its
possession as the other party shall reasonably request and
providing copies of such books, records and files as the other
party shall reasonably request. The cost of making any such
copies shall be borne by the requesting party.
9.5 First Heights Name. Purchaser acknowledges and agrees that
(a) no rights of any kind whatsoever in the name "First Heights,"
"First Heights Bank" or any name similar thereto are being granted
or transferred in connection with this Agreement, (b) from and
after the Closing Date, Purchaser shall refrain from using such
words or any word or expression similar thereto in the name under
which it does business or in any corporate name, trademark,
service mark or other name or mark used in connection with its
business, and (c) as promptly as practicable after the Closing
Date, but in any event within 30 days after the Closing Date with
respect to exterior, primary signage and within 60 days after the
Closing Date with respect to all interior and secondary, exterior
signage, the foregoing names shall be removed from the Premises.
Nothing herein shall require the Purchaser, except in the ordinary
course of business or as required by the terms thereof, to reissue
or replace deposits, checkbooks, passbooks, automated teller
machine cards, Commitments or other Credit Documents relating to
the Purchased Assets. Seller acknowledges and agrees that, after
the Closing Date, it will not advertise, it will not otherwise
solicit Deposits or other loan business except in relation to the
Excluded Branches that Seller will retain after the Closing Date,
and it will not contact any customer or former customer of Seller
with respect to the Purchased Branches (other than a customer who
was also a customer of any Excluded Branch retained by Seller
after the Closing Date) for the purpose of seeking Deposits or any
other business from such person. Seller further agrees not to
directly or indirectly transfer the name "First Heights" to any
financial institution or person or entity affiliated with any
financial institution, and after such time as Seller ceases to
operate any Excluded Branch retained by Seller after the Closing
Date, Seller agrees not to and shall not use the name "First
Heights" for any purpose whatsoever other than in connection with
the winding up of its business and affairs. PDCI and Seller agree
in the event of any sale of Seller to any financial institution or
person or entity affiliated with any financial institution, any
such Purchaser shall be required to agree not to use the name
"First Heights" and promptly to change the name of Seller to a
name not containing the words "First Heights". The parties agree
and acknowledge that, in the event of a breach or threatened
breach of any of the provisions of this Section 9.5, the injured
party shall be entitled to immediate and temporary injunctive
relief, as any such breach would cause such injured party
irreparable injury for which it would have no adequate remedy at
law. Nothing herein shall be construed so as to prohibit any
party hereto from pursuing any other remedies available to it for
any such breach or threatened breach.
9.6 Environmental Investigations. (a) Purchaser and its
consultants, agents and representatives, shall have the right to
the same extent Seller has or can obtain the right to inspect the
Property, but not the obligation or responsibility, to inspect the
Property during normal business hours or at other mutually agreed
times and without interference with the conduct of Seller's
business, including, without limitation, conducting asbestos
surveys and sampling, environmental assessments and
investigations, and other environmental surveys and analyses
including test borings and soil, water, ground and other sampling
("Environmental Inspections") at any time prior to the Closing.
Purchaser shall notify the Seller prior to any physical
inspections of Property, and the Seller may place reasonable
restrictions on the time of such inspections. Purchaser shall
conduct any such Environmental Inspection at its sole expense and
shall restore any Property damaged as a result of such inspection.
Purchaser shall indemnify and hold Seller harmless against any
injury, damage, cost or expense caused by, or arising out of, any
such Environmental Inspection, except to the extent caused by the
negligence of Seller. If the Purchaser has notified the Seller
that (i) the factual substance of any warranty or representation
set forth in Section 8.1(n) is not true and accurate with respect
to any Property, irrespective of the knowledge or lack of
knowledge of the Seller; (ii) any Environmental Inspection or
other environmental survey has identified violations of applicable
Environmental Laws with respect to any Property; (iii) any
Environmental Inspection or other environmental survey has
identified any past or present event, condition or circumstance
with respect to any Property that would require remediation; (iv)
there is present any underground or above ground storage tank in,
on or under any Property which is not registered properly with
appropriate governmental authorities (to the extent such
registration is required under applicable Environmental Laws) and
otherwise entitled to applicable governmental remediation funds,
or which has resulted in a release of any Polluting Substances in
violation of applicable Environmental Laws, or is otherwise in
violation of applicable Environmental Laws; or (v) there is any
asbestos containing material in, on or under any Property, the
removal of which is required by applicable law in order for it to
continue to be owned, occupied or operated as owned, occupied or
operated prior to the Closing Date or the failure to remove which
would subject the owner or operator of such Property to potential
liability based on the then existing ownership or operation of
such Property ("Potential Environmental Problem"), then the Seller
shall, to the extent such Potential Environmental Problem can be
cured or the Property can be remediated, have the right to cure
such Potential Environmental Problem to Purchaser's reasonable
satisfaction or to prepare a remediation plan for such Property
reasonably acceptable to Purchaser and seek the approval of such
remediation plan by the Texas Natural Resource Conservation
Commission ("TNRCC"). Purchaser shall notify Seller of any
Potential Environmental Problem not later than 105 days after the
date hereof. Purchaser shall regularly advise Seller of the
status of its environmental due diligence activities and of any
Potential Environmental Problem promptly after it has been
identified by Purchaser. To the extent such a plan is prepared
and accepted, Seller shall, on Purchaser's request, perform or
cause to be performed the remediation contemplated by any such
plan to Purchaser's reasonable satisfaction, which remediation may
be completed by Seller after the Closing if Seller is attempting
to complete the remediation in a commercially reasonably manner.
In the event that Seller is unable or unwilling to cure any
Potential Environmental Problem or remediate any Property to
Purchaser's reasonable satisfaction prior to Closing (subject to
Seller's obligation to continue to complete in a commercially
reasonable manner any remediation which is commenced but not
completed prior to the Closing), and with respect to any Property
which is Premises or Other Real Property only if the cost of any
such cure or remediation is reasonably expected by Purchaser to
exceed 20% of the Book Value of the Property in question,
Purchaser or Seller shall have the right to exclude from the
Purchased Assets and Assumed Liabilities any such Property, or any
Loan or Commitment secured by any such Property, pursuant to
written notice to the other party on or prior to the Closing. In
the event that Purchaser elects to exclude any Loan or Commitment
from the Purchased Assets or the Assumed Liabilities pursuant to
the preceding sentence, Seller shall have the option to
nevertheless include the Loan or Commitment in the Purchased
Assets or Assumed Liabilities by reducing the Interim Amount and
Final Amount by an amount equal to the amount of the reserve which
Purchaser in its reasonable discretion advises Seller is necessary
with respect to such Loan or Commitment. To the extent that any
such reserve exceeds any losses suffered by Purchaser with respect
to any such Loan or Commitment, which losses shall be reported to
Seller by Purchaser in writing on not less than an annual basis,
Purchaser shall be obligated to repay the amount of any such
excess reserve to Seller upon the payment or other final
satisfaction of any such Loan (or loan made pursuant to any such
Commitment) or the termination of any such Commitment.
(b) The Seller agrees to make available to Purchaser and its
consultants, agents and representatives all documents and other
material in the possession of Seller relating to pollution or
violation of applicable Environmental Laws at any Property, or a
review of conditions of any Property conducted for the purpose of
assessing the existence of any of the foregoing, including,
without limitation, the results of other environmental inspections
and surveys, but excluding any information subject to any
applicable attorney-client or attorney work product privilege
(which exclusions based on privilege shall be disclosed to
Purchaser with an identification of the Property to which such
non-disclosed information relates). Seller also agrees that all
engineers and consultants engaged by Seller who prepared or
furnished such reports may discuss such reports and information
with Purchaser and make all other related data available to
Purchaser and its consultants, agents and representatives;
provided, however, that Purchaser, its consultants, agents and
representatives shall not discuss such matters with Seller's
engineers and consultants except in the presence of a
representative of Seller (other than such engineer or consultant).
Purchaser agrees promptly to provide the Seller with a copy of
all environmental reports prepared by its consultants as a result
of the Environmental Inspections.
(c) Subject to the requirements of applicable law, the results
of, and any information obtained as a result of, any Environmental
Inspection or discussions with Seller's engineers and consultants
will be retained in confidence by Purchaser and its consultants,
agents and representatives, will be made available to Seller upon
request and will not be disclosed to any third party without the
prior written consent of Seller. Purchaser will obtain in writing
the agreement of all its personnel and such consultants, agents
and representatives to this confidentiality requirement.
9.7 Unisys Rental. Until not later than the last day of the
calendar month which is at least six months after the Closing
Date, Seller agrees to rent to Purchaser, and Purchaser agrees to
rent, the Unisys A11-211 computer and its related operating
software and laser printer ("Unisys Assets") for a rental of
$25,368 per month. The rental shall be prorated for any period of
less than one month. Purchaser shall be entitled to terminate
this rental agreement at any time on 30 days' notice to Seller,
and Purchaser agrees to terminate its rental of the Unisys Assets
not later than the date of termination of that certain Facilities
Management Agreement dated March 21, 1989 by and between Seller
and The Newtrend Group ("Facilities Agreement") which agreement is
being assigned to and assumed by Purchaser pursuant to this
Agreement. Seller shall not terminate (to the extent within
Seller's control), or agree to any date for the termination of,
the Facilities Agreement without Purchaser's prior consent.
ARTICLE X
CONDITIONS PRECEDENT
10.1 Conditions Precedent to Obligations of Seller and PDCI. The
obligations of Seller and PDCI under this Agreement are subject to
the satisfaction of each of the conditions precedent set forth in
this Section 10.1.
(a) Compliance. Purchaser shall have complied in all material
respects with each of its covenants and agreements contained in
this Agreement, if any, which are required to be performed or
complied by it on or prior to the Closing Date.
(b) Accuracy of Representations and Warranties. Each of the
representations and warranties of Purchaser contained in
Section 8.2 of this Agreement shall be true and correct (without
qualification as to the requirement of any consents or approvals)
in all material respects at and as of the Closing Date as if made
at and as of the Closing Date.
(c) Consents and Approvals. Seller shall have received evidence
reasonably satisfactory to Seller of all governmental approvals
(including approvals, authorizations, declarations, licenses,
registrations and filings) which are required under or pursuant to
applicable laws and regulations, or which are otherwise required
by or on the part of Seller and/or Purchaser, in connection with
the execution, delivery and performance of this Agreement and any
agreements related to this Agreement and the transactions
contemplated hereby and thereby. Seller shall have received
evidence reasonably satisfactory to Seller of all third party
consents other than governmental approvals (including approvals,
authorization, declarations, licenses, registrations and filings)
which are required to permit Seller to transfer the material
Purchased Assets, or to assign the material Assumed Liabilities,
to Purchaser as contemplated by this Agreement.
(d) Legal or Governmental Proceedings. No suit, action,
investigation, inquiry or other proceeding by any governmental
body or other Person or legal or administrative proceeding shall
have been instituted or threatened in writing which questions the
validity or legality of the transactions contemplated hereby, or
which would reasonably be expected to materially and adversely
affect Seller if the transactions contemplated hereby are
consummated.
(e) Secretary's Certificate. Seller shall have received a
certificate from the Secretary of Purchaser in form and substance
reasonably satisfactory to Seller, dated as of the Closing Date
and certifying that (i) the Board of Directors of Purchaser has
duly adopted a resolution, a copy of which shall be attached to
such Secretary's Certificate, approving this Agreement and any
agreements related to this Agreement and authorizing an officer or
officers to execute and deliver this Agreement and such related
agreements, (ii) such resolution is in full force and effect, and
(iii) such resolution has not been amended or modified in any
respect. The Secretary's Certificate shall further certify (i)
the name of each officer authorized to execute and deliver this
Agreement and any agreements related to this Agreement, (ii) that
each person so named is an officer of Purchaser holding the office
or offices specified therein, and (iii) that the signature of each
such person set forth in such Secretary's Certificate is his or
her genuine signature.
(f) Chief Executive Officer's Certificate. Seller shall have
received a certificate from the Chief Executive Officer of
Purchaser (or his designee) in form and substance satisfactory to
Seller, dated as of the Closing Date and certifying as to the
matters specified in Sections 10.1(a) and 10.1(b), which shall
constitute a representation of Purchaser with respect thereto.
(g) Consummation of Channelview Agreement. The transactions
contemplated by the Channelview Agreement shall be concurrently
consummated, or the Channelview Agreement shall have been
terminated or closed in accordance with its terms.
(h) Other Documents and Proceedings. Purchaser shall have
executed and delivered to Seller such other documents in
connection with the transactions contemplated by this Agreement as
Seller may reasonably request, and Seller shall have received
evidence reasonably satisfactory to Seller that any other
corporate or other proceedings required on the part of Purchaser
and any shareholder or holding company of Purchaser to be taken on
or before the Closing Date in connection with this Agreement and
any agreements related to this Agreement and the transactions
contemplated hereby and thereby shall have been duly taken, and
all documents incidental hereto and thereto shall be reasonably
satisfactory in form and substance to Seller, and Seller shall
have received all such counterpart originals or certified or other
copies of such documents as Seller may reasonably request.
10.2 Conditions Precedent to Obligations of Purchaser. The
obligations of Purchaser under this Agreement are subject to the
satisfaction of each of the conditions precedent set forth in this
Section 10.2.
(a) Compliance. Seller and PDCI shall have complied in all
material respects with each of their covenants and agreements
contained in this Agreement, if any, which are required to be
performed or complied with by them on or prior to the Closing
Date.
(b) Accuracy of Representations and Warranties. Each of the
representations and warranties of Seller contained in Section 8.1
of this Agreement shall be true and correct (without qualification
as to the requirement of any consents or approvals) in all
material respects at and as of the Closing Date as if made at and
as of the Closing Date.
(c) Consents and Approvals. Purchaser shall have received
evidence reasonably satisfactory to Purchaser of all governmental
approvals (including approvals, authorizations, declarations,
licenses, registrations and filings) which are required under or
pursuant to applicable laws and regulations, or which are
otherwise required by or on the part of Purchaser and/or Seller,
in connection with the execution, delivery and performance of this
Agreement and any agreements related to this Agreement and the
transactions contemplated hereby and thereby. Purchaser shall
have received evidence reasonably satisfactory to Purchaser of all
third party consents other than governmental approvals (including
approvals, authorizations, declarations, licenses, registrations
and filings) which are required to permit Seller to transfer the
material Purchased Assets, or to assign the material Assumed
Liabilities, to Purchaser as contemplated by this Agreement.
(d) Legal or Governmental Proceedings. No suit, action,
investigation, inquiry or other proceeding by any governmental
body or other Person or legal or administrative proceeding shall
have been instituted or threatened in writing which questions the
validity or legality of the transactions contemplated hereby or
which would reasonably be expected to materially adversely affect
Purchaser if the transactions contemplated hereby are consummated.
(e) Secretary's Certificate. Purchaser shall have received a
certificate from the Secretary of each of Seller and PDCI in form
and substance reasonably satisfactory to Purchaser, dated as of
the Closing Date and certifying that (i) the Board of Directors of
such party has duly adopted a resolution, a copy of which shall be
attached to such Secretary's Certificate, approving this Agreement
and any agreements related to this Agreement to which such Person
is a party and authorizing an officer or officers to execute and
deliver this Agreement and such related agreements, (ii) such
resolution is in full force and effect, and (iii) such resolution
has not been amended or modified in any respect. The Secretary's
Certificate shall further certify (i) as to the name of each
officer authorized to execute and deliver this Agreement and any
agreements related to this Agreement on behalf of such party, (ii)
that each person so named is an officer of such party holding the
office or offices specified therein, and (iii) that the signature
of each such person set forth in such Secretary's Certificate is
his or her genuine signature.
(f) Chief Executive Officer's Certificate. Purchaser shall have
received a certificate from the Chief Executive Officer of Seller
in form and substance reasonably satisfactory to Purchaser, dated
as of the Closing Date, and certifying as to the matters specified
in Sections 10.2(a) and 10.2(b), which shall constitute a
representation of Seller with respect thereto.
(g) Other Documents and Proceedings. Seller and PDCI shall have
executed and delivered to Purchaser such other documents in
connection with the transactions contemplated by this Agreement as
Purchaser may reasonably request, and Purchaser shall have
received evidence reasonably satisfactory to Purchaser that any
other corporate or other proceedings required on the part of
Seller and any shareholder or holding company of Seller to be
taken on or before the Closing Date in connection with this
Agreement and any agreements related to this Agreement and the
transactions contemplated hereby and thereby shall have been duly
taken, and all documents incidental hereto and thereto shall be
reasonably satisfactory in form and substance to Purchaser, and
Purchaser shall have received all such counterpart originals or
certified or other copies of such documents as Purchaser may
reasonably request.
(h) Title Insurance Commitments. Purchaser shall have received
binding title insurance commitments (each a "Title Report") from a
title insurance company reasonably acceptable to Purchaser (the
"Title Insurance Company") for the issuance of a policy in the
form of an owner's policy of title insurance, insuring good and
indefeasible title in the owned Purchased Branches at Closing in
an amount not less than the Book Value of such Purchased Branches,
subject to standard printed exceptions for such policy and
otherwise free and clear of any and all liens, encumbrances,
highways, rights-of-way, easements, leases, restrictions,
licenses, tenancies, mineral leases, reservations or severances,
agreements, covenants, conditions, limitations and other
exceptions, except for Permitted Encumbrances.
(i) Minimum Transfer of Premises. There shall have been
transferred by the Seller to the Purchaser, either by special
warranty deed, assignment of lease or sublease, Premises in
respect of which at least 85% of the Deposits to be assumed by the
Purchaser pursuant to this Agreement relate. If Purchaser
identifies and occupies before Closing any new premises
satisfactory to Purchaser which in Purchaser's reasonable judgment
adequately replace the Premises of any particular Purchased Branch
which Seller did not transfer to Purchaser, the Deposits
associated with such new premises shall be treated as being
related to transferred Premises for the purpose of this condition.
(j) No Material Adverse Effect. There shall not have occurred a
Material Adverse Effect with respect to the Business.
(k) Deposit Characteristics . After the date hereof, Seller
shall have priced its Deposits in accordance with Schedule
10.2(k).
ARTICLE XI
CERTAIN COVENANTS
11.1 Certain Covenants of PDCI and Seller. During the period
from the date of this Agreement to the Closing Date, PDCI and
Seller hereby covenant to and with Purchaser as follows:
(a) Best Efforts. PDCI and Seller will use their best efforts to
take or cause to be taken all reasonable actions necessary, proper
or advisable to consummate this Agreement and to satisfy the
conditions to their obligations hereunder, including such actions
as Purchaser may reasonably consider necessary, proper or
advisable in connection with filing applications and other
instruments with, or obtaining approvals of, all requisite
governmental bodies as contemplated by this Agreement, including
assisting with the preparation of Purchaser's applications for all
Required Regulatory Approvals.
(b) Operations. From and after the date of this Agreement to the
Closing Date, except with the prior approval of Purchaser (which
approval shall not be unreasonably withheld) and except with
regard to Excluded Assets and Excluded Liabilities, PDCI will use
its best efforts to cause Seller to, and Seller will use its best
efforts to, (i) carry on its business as currently conducted, (ii)
maintain and keep its properties in as good repair and condition
as at present, except for deterioration due to ordinary wear and
tear and damage due to casualty, (iii) perform in all material
respects all of its obligations under contracts, leases and
documents relating to or affecting its assets and business except
such obligations as the Seller may in good faith reasonably
dispute, (iv) maintain and preserve its business as presently
conducted, (v) retain its present employees and customers, and
(vi) comply with and perform in all material respects all
obligations and duties imposed upon it by all federal and state
laws, and all rules, regulations and orders imposed by federal,
state or local governmental authorities. It is specifically
agreed that the use of best efforts for purposes of this
Section 11.1(b) shall not require PDCI or Seller to violate or
contravene any written regulatory agreement with regulatory
authorities to which PDCI or Seller is subject, each of which is
listed on Schedule 11.1(b).
(c) Restriction on Dividends. Seller shall not declare or pay
any dividend on or make any other distribution in respect of its
capital stock.
(d) Regulatory Events. Seller shall provide notice to Purchaser
of any written communication received by Seller from any
regulatory authority regarding the existence of any pending or
threatened enforcement proceeding which would reasonably be
expected to have a Material Adverse Effect, which notice shall
describe the nature of such proceeding in general terms, exclusive
of any information, the disclosure which is prohibited by law.
(e) No Other Bids. Except with regard to Excluded Assets or
Excluded Liabilities, neither PDCI nor Seller shall authorize or
knowingly permit any officer, director, employee, investment
banker, attorney, accountant or other agent or representative to
entertain, solicit or encourage any inquiries or the making of any
proposal which may reasonably be expected to lead to any proposal
for a purchase of assets, assumption of liabilities, merger,
business combination or acquisition of a substantial direct or
indirect equity interest, or participate in any discussions or
negotiations with respect thereto, or provide third-parties with
any information relating to any such inquiry or proposal other
than to inform third parties of the existence of the Agreement.
PDCI or Seller, as the case may be, shall immediately inform
Purchaser in writing of any such inquiries or proposals.
(f) Access to Properties and Records. Seller will afford to the
officers and authorized representatives of the Purchaser full
access to the properties, books and records of Seller, during
normal business hours, in order that Purchaser may have full
opportunity to make such reasonable investigation as it shall
desire to make of the affairs of Seller. In the event that the
transactions contemplated by this Agreement are not consummated,
Purchaser will return to Seller all information and data relating
to Seller delivered to Purchaser by, or on behalf of, PDCI or
Seller, including any extracts or analyses thereof, and any and
all copies thereof, and in such event, Purchaser agrees to use its
best efforts to ensure that none of its officers, employees or
agents divulges any confidential information relating to the
business or assets of Seller to a third party or uses the same in
any manner for the profit or to the benefit of Purchaser or any
such officer, employee, agent or a third party.
(g) Prohibited Dispositions; Lines of Business; Expenditures.
Seller shall not, without the prior approval of Purchaser (which
approval shall not be unreasonably withheld), (i) transfer,
encumber or dispose of any of the Purchased Assets which are
material, individually or in the aggregate, to Seller except in
the ordinary course of business and consistent with prior
practice, (ii) enter into any material new line of business, (iii)
change its lending, investment, liability or other material
banking policies in any material respect, provided, however, that
Seller shall be obligated to maintain its single-family
residential mortgage origination and related operations as
currently maintained only to the extent that Seller believes it is
commercially reasonable to do so, (iv) enter into any transaction
with PDCI or any of its Affiliates affecting or relating to the
Purchased Assets or Assumed Liabilities except as permitted or
contemplated by this Agreement, (v) enter into any agreement or
understanding which could result in any of the Loans or
Commitments becoming subject to third party servicing, or (vi)
commit to any capital expenditures or other capital obligation in
respect of any Purchased Branch, other than for emergency repair
or other maintenance matters requiring immediate attention
therewith, in excess of $50,000. Notwithstanding anything to the
contrary in this Section 11.1(g), any unsecured Loan or Commitment
in excess of $400,000 or secured Loan or Commitment in excess of
$1,250,000 made by Seller between the date hereof and the Closing
Date may be determined by Purchaser to be an Excluded Asset, or
Excluded Liability if a Commitment, in which case, such Loan or
Commitment shall not be acquired or assumed by Purchaser on the
Closing Date; provided that Purchaser shall have so advised Seller
of such determination within five Business Days after approval of
such Loan or Commitment by the applicable loan committee of Seller
and such a determination shall be made only with respect to Loans
or Commitments which do not substantially conform to Purchaser's
existing credit and lending policies, as applied in the ordinary
course of business consistent with past practices; and provided
further that the foregoing restrictions shall not apply to the
renewal of existing Loans or Commitments nor to any Loan or
Commitment for which an application had been received from the
borrower prior to the execution of this Agreement.
(h) No Recordkeeping Changes. There shall be no significant
change in the internal auditing program, bookkeeping and
recordkeeping practices, or any change in accounting principles,
standards and practices according to which the books and records
of the Seller or Purchased Branches are kept.
(i) Information for Applications and Statements. PDCI and the
Seller will promptly furnish the Purchaser with all information
concerning PDCI and the Seller required for inclusion in any
application or statement, to be made by the Purchaser to or filed
by the Purchaser with any governmental body in connection with the
transactions contemplated by this Agreement.
(j) Financial Information. Promptly after each calendar month
ending after the date hereof and before the Closing, and in any
event within 20 days after the end of each such month, Seller
shall provide to Purchaser monthly unaudited financial
information, in the form prepared for Seller's branch managers or
otherwise reasonably acceptable to Purchaser, relating to the
Purchased Branches.
11.2 Certain Covenants of Purchaser. During the period from the
date of this Agreement to the Closing Date, Purchaser hereby
covenants to and with PDCI and Seller as follows:
(a) Best Efforts. Purchaser will use its best efforts to take or
cause to be taken as promptly as possible all actions necessary,
proper or advisable to consummate this Agreement, including such
actions as Seller and PDCI may reasonably consider necessary,
proper or advisable in connection with filing applications and
other instruments with, or obtaining all Required Regulatory
Approvals as contemplated by this Agreement. To the extent
required or appropriate to assure prompt consideration of each
such application, Purchaser covenants and agrees promptly to file
any and all necessary amendments, supplements or explanations to
such applications. Within five (5) days after filing each
application, amendment or supplement thereto, Purchaser shall
deliver to Seller a copy of all non-confidential portions of such
application, amendment, supplement or explanation thereto as
filed.
(b) Confidentiality. Purchaser covenants and agrees that all
information, whether written or oral, regarding Seller, PDCI or
any Affiliate of Seller or PDCI, received directly or indirectly
from the OTS, FDIC or any other regulatory agency, Seller, PDCI,
or their respective employees, officers, directors, agents,
attorneys, accountants, consultants or other representatives
(including any such information provided pursuant to
Section 11.1(i)), shall be confidential and shall not be disclosed
by Purchaser, its employees, officers, directors, agents,
attorneys, accountants, consultants or representatives, except to
the extent such disclosure is required by applicable law or should
be disclosed in filings with regulatory agencies or governmental
authorities; provided, however, there shall be excluded from the
foregoing restrictions any such information which is part of the
public domain or which is available from sources publicly
available and access to which shall not violate any law,
regulation or confidentiality restriction to which Seller or PDCI
is subject. After the Closing, this Section 11.2(b) shall cease
to apply to Purchaser with respect to any confidential information
relating to the Business.
Except as required by applicable law, Seller and PDCI covenant
and agree that all information, whether written or oral, regarding
the Business shall be kept confidential after the Closing and
shall not be disclosed by Seller or PDCI, or their respective
employees, officers, directors, agents, attorneys, accountants,
consultants and representatives, and prior to the Closing such
information shall be kept confidential to the same extent and in
the same manner as it has been kept confidential prior to the date
hereof.
11.3 Certain Covenants Regarding Employees.
(a) After the Closing Date, Purchaser, in its sole discretion,
may employ, but shall have no obligation to employ, any employees
of Seller that it elects to employ. Nothing contained herein is
meant as or should be construed as an agreement to employ or an
employment contract for any such employee. Nothing contained
herein shall preclude Purchaser from attempting to hire or hiring
any other employee of Seller or PDCI.
(b) Seller shall be solely responsible for and shall pay in full
to all of Seller's employees all compensation, bonuses and other
payments, and all sick pay, vacation pay, deferred compensation
and profit sharing benefits, accrued through the Closing Date for
which PDCI or Seller is obligated under any Plan, or under any
personnel or employee manual or policy or under any law or
regulation, including any liability or obligation arising as a
result of or in conjunction with the transactions contemplated
hereby, and Seller shall satisfy all such obligations to such
employees. Seller shall be solely responsible for any retirement
annuity payable to any of its employees and for satisfying any
obligations under Section 4980(B) of the Internal Revenue Code and
Part 6 of Title I of ERISA with respect to continuation of group
medical coverage with respect to its employees.
(c) Purchaser is not assuming, nor shall it have any
responsibility whatsoever for the continuation of, or any
liabilities under or in connection with, any Plan or any
employment contract, collective bargaining agreement or severance
arrangement. Purchaser is not, and shall not be deemed to be, a
successor employer to Seller with respect to any Plan; and no plan
adopted or maintained by Purchaser after the Closing is or shall
be deemed to be a "successor plan," as such term is defined in
Section 4021(a) of ERISA, of any Plan. No assets held under any
Plan shall be transferred, pursuant to this Agreement, to
Purchaser or to any plan adopted or maintained by Purchaser.
(d) Neither Purchaser nor Seller intend this Agreement to create
any rights or interests, except as between Purchaser and Seller,
and no present, former or future employee of Purchaser or Seller
shall be treated as a third party beneficiary in or under this
Agreement.
(e) Notwithstanding the foregoing, with regard to employees of
Seller who will be employed by Purchaser ("Former Seller
Employees"): (i) all Former Seller Employees who accept
employment with Purchaser as of the Closing Date shall be eligible
to participate in the employee benefit plans and other fringe
benefits of Purchaser on the same basis as such plans and benefits
are offered to employees of Purchaser with comparable positions
with Purchaser, and (ii) Purchaser shall credit such Former Seller
Employees for their length of service with Seller (including any
predecessor of Seller) for all purposes under each employee
benefit plan and fringe benefit to be provided by Purchaser to
such Former Seller Employees, other than under the Purchaser's
Retirement Plan and the Purchaser's ESOP Plan. For purposes of
this Section, "employee benefit plan and other fringe benefits"
includes pension and profit-sharing plans, retirement and post-
retirement welfare benefits, health insurance benefits,
disability, life and accident insurance, sickness benefits,
vacation, employee loans and banking privileges. Purchaser will
use its best efforts to identify any employees of Seller that it
does not intend to offer employment as soon as possible and will,
in any event, provide a list of such employees to Seller no later
than ten days prior to the Closing Date.
(f) Seller agrees that it shall be responsible for compliance
with WARN or any similar state law applicable to Seller's
employees, and that Seller's obligations under WARN and any
applicable state law are not Assumed Liabilities. Seller shall
take such actions to comply with the notification requirements of
any such laws in such a manner that the consummation of the
transactions contemplated hereby will not be delayed or otherwise
adversely affected.
11.4 Purchase of Channelview Assets and Assumption of
Liabilities. Seller will promptly advise Purchaser of the
termination of the Channelview Agreement. Upon the termination of
the Channelview Agreement, and subject to Section 11.5, Purchaser
shall be obligated to purchase and assume, and Seller shall be
obligated to sell and transfer, the "Purchased Assets" and the
"Assumed Liabilities" (as such terms are respectively defined in
the Channelview Agreement, and hereinafter referred to as the
"Channelview Purchased Assets" and the "Channelview Assumed
Liabilities," respectively), pursuant to the terms and conditions
of the Channelview Agreement, except that the dollar amount
included in clause (d) of the definitions of "Final Amount" and
"Interim Amount" in the Channelview Agreement shall be zero, and
that the Purchaser shall have no obligation to pay any liquidated
damages pursuant to Section 14.1(b) of the Channelview Agreement.
The parties hereto agree promptly to enter into any necessary
agreement or amendment of this Agreement to evidence these
obligations.
11.5 Channelview Loan and ORE Review. Upon the termination of
the Channelview Agreement, Seller shall make available to
Purchaser all information which Purchaser may request with respect
to the "Loans," "Commitments" and "Other Real Property" (as such
terms are respectively defined in the Channelview Agreement, and
hereinafter referred to as the "Channelview Loans," "Channelview
Commitments" and "Channelview ORE, respectively), and Purchaser
shall conduct due diligence with respect to such items in a manner
consistent with the manner in which it conducted due diligence on
the Purchased Assets and Assumed Liabilities. Within two weeks,
or three weeks with the consent of Seller to a one-week extension
requested in writing by Purchaser before the expiration of such
two week period (which consent shall not be unreasonably
withheld), after the date Purchaser receives notice of the
termination of the Channelview Agreement, Purchaser shall advise
Seller of (i) the extent, if any, to which Purchaser believes the
Channelview Loans should be reserved in excess of 2.07% of the
Book Value of the Channelview Loans, in the aggregate, and the
extent, if any, to which the reserve on the Channelview ORE should
be increased above $200,000 (collectively, the "Additional
Reserve"), (ii) Purchaser's reasons therefor, and (iii) the
identity of, and the portions of the additional reserve allocable
to each of, the Channelview Loans and Channelview ORE which Seller
shall be entitled to exclude from the Channelview Purchased Assets
in order to eliminate the Additional Reserve. Upon receipt of
such notice, Seller shall be entitled, at Seller's option, either
(i) to exclude from the Channelview Purchased Assets such that the
additional reserve shall be eliminated, (ii) to pay to Purchaser
an amount equal to the Additional Reserve and require Purchaser to
retain such assets in the Channelview Purchased Assets, or (iii)
to exclude from the Channelview Purchased Assets all the
commercial Channelview Loans or all the installment Channelview
Loans and require Purchaser to retain all assets not falling
within the Channelview Loan portfolio to be retained by Seller, so
long as the exclusion of such portfolio results in the elimination
of the Additional Reserve with respect to the Channelview Loans
and Channelview ORE to be included in the Channelview Purchased
Assets. Seller shall make the foregoing election within 10 days
after receiving the required notice from Purchaser.
11.6 Insurance Cooperation. Seller agrees to assist Purchaser in
obtaining the benefits of any insurance policies of Seller
providing coverage with respect to the Business for periods prior
to the Closing to the extent that such insurance coverage is then
available, whether by assignment of such policies, making claims
on behalf of Purchaser at Purchaser's expense and direction, or
otherwise.
11.7 Wholesale Deposits. Seller shall use its reasonable efforts
to transfer to a party other than the Purchaser or pay in full
prior to the Closing the deposits of Seller reflected on its books
and records as money desk deposits as of the date hereof In the
event that Seller is unable to so transfer or pay in full such
money desk deposits prior to the Closing, Seller may, at its
option on or prior to the Closing, require Purchaser to assume
such deposits, in which event the Interim Amount and the Final
Amount shall each be reduced by $563,000.
11.8 Downtown Branch. In the event that Seller shall advise the
Purchaser in writing prior to the Closing that Seller does not
desire to retain following the Closing the branch of the Seller
situated in downtown Houston, Texas, Purchaser shall agree to
acquire such downtown branch from Purchaser and the related
Premises, in which event the downtown branch shall be deemed to be
a Purchased Branch for all purposes of this Agreement and Seller
shall amend Schedule 8.1(r) hereof to reflect the inclusion of the
downtown branch as a Purchased Branch. In the event that
Purchaser is unable to occupy the Premises of such branch,
Purchaser will use its best efforts to otherwise assume the
deposits of such branch with no premium due to be paid by
Purchaser to Seller with respect to the assumption of the deposits
of such branch.
ARTICLE XII
SURVIVAL; INDEMNIFICATION
12.1 Survival. The representations and warranties set forth in
this Agreement and in any exhibit or schedule hereto or in any
certificate or document delivered pursuant to any provision of
this Agreement requiring such delivery shall survive two years
after the Closing Date, following which date (subject to the
provisions below) no party may bring any action or present any
claim for a breach of any such representation or warranty;
provided, however, that the expiration of any representation or
warranty shall not affect the rights of an indemnified party under
this Article XII with respect to a bona fide claim that has been
asserted and remains unresolved if the indemnifying party has
received a Claim Notice (as defined in Section 12.4(b) below) with
respect thereto prior to the time at which such representation and
warranty expired.
12.2 Seller's and PDCI's Indemnities. From and after the Closing
Date, Seller and PDCI jointly and severally agree to and shall
absolutely and irrevocably indemnify, defend and hold harmless
Purchaser and every Affiliate of Purchaser and their respective
directors, stockholders, officers, partners, employees, agents,
consultants, representatives, successors, transferees and
assignees (collectively, the "Purchaser Indemnified Parties"),
from, against and in respect of any and all Claims which arise or
result from or relate to the following (herein collectively
referred to as the "Purchaser Indemnified Liabilities," and
individually as a "Purchaser Indemnified Liability"):
(a) the Excluded Liabilities (other than the Channelview
Liabilities);
(b) the Excluded Assets (other than the Channelview Assets);
(c) the Purchased Assets or the Assumed Liabilities, to the
extent that such claim arose or is based upon any action occurring
prior to the Closing Date and such claim was not reflected in the
Accounting Records or the Final Asset and Liability Statement, as
approved by Seller or as revised by the arbitrator pursuant to
Section 4.2(c) (unless it arose in the ordinary course of
business);
(d) liabilities and expenses incurred by Purchaser or Compass in
excess of $200,000, in the aggregate, for litigation or
administrative or regulatory proceedings whether or not accrued
and reflected in the Accounting Records or the Final Asset and
Liability Statement or identified as an Assumed Liability on
Schedule 8.1(i), arising out of Seller's actions or omissions to
act that occurred prior to the Closing, and regardless of whether
such actions or omissions to act occurred in or out of the
ordinary course of business;
(e) any misrepresentation or any breach of any representation or
warranty made by Seller or PDCI pursuant to this Agreement; and
(f) any breach of any agreement or covenant to be performed by
Seller or PDCI pursuant to this Agreement.
12.3 Purchaser's and Compass' Indemnities. From and after the
Closing Date, Purchaser and Compass jointly and severally agree to
and shall absolutely and irrevocably indemnify, defend and hold
harmless Seller and every Affiliate of Seller and their respective
directors, stockholders, officers, partners, employees, agents,
consultants, representatives, successors, transferees and
assignees (collectively, the "Seller Indemnified Parties"), from,
against and in respect of any and all Claims which arise or result
from or relate to the following (herein collectively referred to
as the "Seller Indemnified Liabilities," and individually as a
"Seller Indemnified Liability"):
(a) The Assumed Liabilities, except to the extent that such claim
arose or is based upon any action occurring prior to the Closing
Date and such claim was not reflected on the Accounting Records or
the Final Asset and Liability Schedule, as approved by Seller or
as revised by the arbitrator pursuant to Section 4.2(c) (unless it
arose in the ordinary course of business and was not known to
Seller prior to the Closing);
(b) the Purchased Assets, except to the extent that such claim
arose or is based upon any action occurring prior to the Closing
Date and such claim was not reflected on the Accounting Records or
the Final Asset and Liability Schedule, as approved by Seller or
as revised by the arbitrator pursuant to Section 4.2(c) (unless it
arose in the ordinary course of business and was not known to
Seller prior to the Closing);
(c) any misrepresentation or breach of any representation or
warranty made by Purchaser pursuant to this Agreement; and
(d) any breach of any agreement or covenant to be performed by
Purchaser pursuant to this Agreement.
12.4 Notice of Claim.
(a) For purposes of this Article XII, the term "Indemnifying
Party" when used in connection with a particular Claim shall mean
the party having an obligation to indemnify the other party with
respect to such Claim pursuant to this Article XII, and the term
"Indemnified Party" when used in connection with a particular
Claim shall mean the party having the right to be indemnified with
respect to such Claim by the other party pursuant to this
Article XII.
(b) Each of Purchaser, on the one hand, and Seller and PDCI, on
the other, agrees that promptly after it becomes aware of facts
giving rise to a claim by it for indemnification pursuant to this
Article XII, such party will, if a claim with respect thereto is
to be made under this Article XII, provide notice thereof in
writing to the other party (a "Claim Notice") specifying the
nature and specific basis for such claim and a copy of all papers
served with respect to such claim (if any); provided, however,
that the omission to so provide such notice shall not relieve the
Indemnifying Party from any liability it may have to an
Indemnified Party to the extent the Indemnifying Party is not
materially prejudiced by such omission. Each Claim Notice shall
set forth all material information respecting the claim as the
applicable party shall then have and shall contain a statement to
the effect that the party giving the notice is making a claim
pursuant to and demand for indemnification under this Article XII.
(c) To exercise its indemnification rights under this Article XII
as the result of the assertion against it of any claim or
potential liability for which indemnification is provided, the
Indemnified Party shall promptly furnish a Claim Notice to the
Indemnifying Party; provided, however, that notice of an original
claim for indemnification under Section 12.2(d) or Section 12.3(c)
shall have been given prior to the expiration of two years after
the Closing Date. The Indemnified Party shall advise the
Indemnifying Party of all facts relating to such assertion within
the knowledge of the Indemnified Party, and shall afford the
Indemnifying Party the opportunity, at the Indemnifying Party's
sole cost and expense, to defend against such Claims. In any such
action or proceeding, the Indemnified Party shall have the right
to retain its own counsel, but the fees and expenses of such
counsel shall be at its own expense unless (i) the Indemnifying
Party and the Indemnified Party mutually agree to the retention of
such counsel, or (ii) the named parties to any such suit, action,
or proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party, and in the
reasonable judgment of the Indemnified Party, representation of
the Indemnifying Party and the Indemnified Party by the same
counsel would be inadvisable due to actual or potential differing
or conflicts of interests between them; provided, however, that
the Indemnifying Party shall not be liable for the fees and
expenses of more than one counsel representing the Indemnified
Parties.
(d) The Indemnified Party shall have the right, but not the
obligation, to defend, settle or compromise any claim or liability
subject to indemnification under this Section, and to be
indemnified from and against all Claims resulting therefrom,
unless the Indemnifying Party, within 30 calendar days after
receiving written notice of the claim or liability in accordance
with this Section 12.4, notifies the Indemnified Party that it
intends to defend against such claim or liability and undertakes
such defense, or, if required in a shorter time than 30 calendar
days, the Indemnifying Party makes the requisite response to such
claim or liability asserted.
(e) Notwithstanding any other provision hereof, an Indemnifying
Party shall not be liable under this Article XII for any Claims
sustained by the Indemnified Party unless and until the aggregate
amount of all such Claims sustained by the Indemnified Party shall
exceed $100,000, in which event the Indemnifying Party shall be
liable for all such Claims without regard to such minimum amount
of Claims. Notwithstanding the provisions of Section 12.4(d), an
Indemnifying Party shall not be liable under this Article XII for
any settlement effected, without its consent, of any claim or
liability or proceeding for which indemnity may be sought
hereunder except in the case of a settlement in any amount which
does not exceed $100,000.
(f) Anything in this Article to the contrary notwithstanding, the
Indemnifying Party shall not, without the Indemnified Party's
prior written consent, settle or compromise any such defense or
proceedings or consent to the entry of any judgment with respect
to any such defense or proceedings for anything other than money
damages paid by the Indemnifying Party. The Indemnifying Party
may, without the Indemnified Party's prior written consent, settle
or compromise any such defense or proceeding or consent to entry
of any judgment with respect to any such proceeding that requires
solely the payment of money damages by the Indemnifying Party and
that includes as an unconditional term thereof the release by the
claimant or the plaintiff of the Indemnified Party from all
liability in respect of such proceeding.
(g) Notwithstanding the protection afforded by this Article XII,
no investigation by an Indemnified Party at or prior to the
Closing shall relieve any Indemnifying Party of any liability
hereunder.
ARTICLE XIII
CLOSING
13.1 Closing. The closing of the transactions provided for in
this Agreement ("Closing") shall be held at the offices of
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., Houston, Texas, at
10:00 a.m. local time on a date that is mutually agreeable to the
parties after the conditions for closing have been met (the
"Closing Date"). The parties covenant and agree that the Closing
shall occur within 10 days after all Required Regulatory Approvals
have been obtained. Each Required Regulatory Approval shall be
considered to have been obtained upon (A) the earlier to occur of:
(i) written notification by each such regulatory agency that its
approval has been given or (ii) failure of any such regulatory
agency to disapprove any such application within any mandatory
time period for taking action thereon; (B) the expiration of any
waiting period imposed by law or the terms of the Required
Regulatory Approval; and (C) satisfaction of any conditions
prerequisite to Closing imposed by the terms of each Required
Regulatory Approval. For purposes of this Agreement, the Closing
shall be deemed to be effective immediately following the close of
business on the Closing Date.
13.2 Deliveries at Closing. Subject to the terms and conditions
of this Agreement, at the Closing on the Closing Date, Seller will
grant, bargain, sell, convey, transfer, assign, and deliver to
Purchaser, and Purchaser will purchase and acquire from Seller,
all the Purchased Assets, and Purchaser shall assume the Assumed
Liabilities. To effect such sale and delivery, Seller will, at
the Closing on the Closing Date, execute and deliver to Purchaser:
(a) (i) one or more special warranty deeds, conveying the
Premises and the Other Real Property, and (ii) one or more Bills
of Sale, conveying in the aggregate all personal property of
Seller other than negotiable instruments included in the Purchased
Assets;
(b) an Assignment of Leases, conveying Seller's interest under
all the Leases and evidencing Purchaser's assumption of Seller's
obligations thereunder;
(c) a general conveyance, transfer and assignment conveying all
of the Purchased Assets;
(d) all such certificates of title, agreements, documents and
other instruments as shall be reasonably requested by Purchaser to
vest fully in Purchaser good and indefeasible title in and to the
Purchased Assets;
(e) assignments, without recourse, of mortgage loans, which may
be blanket assignments by county; and
(f) all cash and federal funds included in the Purchased Assets
held by Seller or held on account by third parties on behalf of
Seller.
Seller shall deliver to Purchaser a power of attorney in form and
substance reasonably satisfactory to Purchaser and Seller to
permit Purchaser to endorse or execute instruments of transfer for
the Purchased Assets.
Simultaneously with and after such delivery, Seller will execute
all such other documents and take all additional steps as may be
reasonably necessary to put Purchaser in possession and operating
control of the Purchased Assets. Seller will also deliver or
otherwise make available to Purchaser on the Closing Date all of
Seller's books, records, files, data and documents (in whatever
form) included in or primarily related to any employee of Seller
to be employed by Purchaser after the Closing Date, the Purchased
Assets and the Assumed Liabilities (copies of which will be made
available to Seller under Section 7.4 if requested).
To effect delivery of the cash and federal funds held by Seller
or held on account by third parties on behalf of Seller, Purchaser
will provide wire transfer instructions to Seller at the Closing
on the Closing Date in a form reasonably satisfactory to Seller.
Seller will execute such wire transfer instructions on the Closing
Date and take all additional steps as shall reasonably be
requested by the Purchaser to assure Purchaser's receipt of the
cash and federal funds.
To effect the assumption of the Assumed Liabilities, Purchaser
shall, at the Closing on the Closing Date, execute and deliver to
Seller an Assumption Agreement, and simultaneously with and after
such delivery, Purchaser will execute all other instruments and
documents and take all additional steps as shall be reasonably
requested by Seller to assure Purchaser's assumption of the
Assumed Liabilities.
All conveyance, assignment and assumption documents to be
delivered pursuant to this Section 13.2 shall be in form and
content reasonably satisfactory to the parties.
Anything in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement or an attempted
agreement to assign, transfer or sublease any claim, contract,
license, lease, commitment, sales order, purchase order or any
claim or right or any benefit arising thereunder or resulting
therefrom if an attempted assignment, transfer or sublease
thereof, without the consent of a third party thereto, would
constitute a breach thereof or in any way adversely affect the
benefits and rights of Seller thereunder so that Purchaser would
not in fact receive all such benefits and rights. Until such
consent is obtained, or if an attempted assignment, transfer or
sublease thereof would be ineffective or would adversely affect
the rights of Seller thereunder so that Purchaser would not in
fact receive all such benefits and rights, Seller will cooperate
with Purchaser in any mutually agreeable arrangement designed to
provide to Purchaser all the material benefits and rights under
any such claim, contract, license, lease, commitment, sales order,
purchase order, benefit or right (such that the effect on
Purchaser is that Purchaser realizes all material rights and
benefits thereunder which it would have realized had such consent
been obtained), including enforcement for the benefit of Purchaser
of any and all rights of Seller against a third party hereto
arising out of the breach or cancellation by such third party or
otherwise; and any transfer or assignment to Purchaser of any
property or property rights or any contract or agreement which
shall require the consent or approval of any third party shall be
made subject to such consent or approval being obtained. At
Closing, Seller will deliver to Purchaser a list of such consents
and approvals which have not, as of the Closing Date, been
obtained.
ARTICLE XIV
MISCELLANEOUS
14.1 Termination of Agreement. This Agreement may be terminated
at any time prior to the Closing without any obligation or
liability of any party, (i) by mutual written consent of the
parties hereto, (ii) if the Closing shall not have occurred by the
later of December 31, 1994 or 45 days after the termination of the
Channelview Agreement (if so terminated), or (iii) by either
Seller or Purchaser by written notice thereof to the other if
consummation of the transactions contemplated hereby would
constitute a violation of law or any court order. This Agreement
may also be terminated at any time prior to the Closing Date by
Seller or Purchaser, in the event of a material breach by the
other of any representation, warranty or agreement contained
herein which is not cured or cannot be cured with 30 days after
written notice of such breach has been delivered to the breaching
party; provided, however, that termination pursuant to this
sentence shall not relieve the breaching party of liability for
such breach or otherwise. In the event of termination of this
Agreement and abandonment of the transactions contemplated hereby
pursuant to this Section 14.1, no party hereto (or any of its
directors, officers, employees, agents or Affiliates) shall have
any liability or further obligation to any other party, except
with regard to all continuing obligations regarding
confidentiality (including those set forth in Sections 11.1(f) and
11.2(b) and the Confidentiality Agreement referred to in
Section 14.12) and except that nothing herein will relieve any
party from liability for any breach of this Agreement.
14.2 Assignment of Agreement. Neither this Agreement nor any of
the rights or obligations hereunder may be assigned by Seller or
PDCI without the prior written consent of Purchaser, nor by
Purchaser without the prior written consent of Seller, provided
that Purchaser may assign such rights (but shall retain such
obligations) to a subsidiary or subsidiaries or a parent company
of Purchaser or to a successor to all or part of its business or
the Purchased Assets without such consent. Subject to the
foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns; and no other Person shall have any right, benefit or
obligation hereunder, other than Persons who may be Indemnified
Parties under Article XII hereof to the extent of the benefits
conferred thereon in Article XII.
14.3 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by
any party to another party shall be in writing, and delivered
personally or mailed by certified mail, postage prepaid, return
receipt requested (such mailed notice to be effective on the date
such receipt is acknowledged), or by facsimile transmission, as
follows:
If to Seller or PDCI, addressed to:
First Heights Bank, fsb
2727 N. Loop West
P. O. Box 7483
Houston, Texas 77248
Attention: Robert E. Zambie
Facsimile: (713) 802-3144
With a copy to:
Debra Ruby, Esq.
Senior Vice President
First Heights Bank, fsb
2727 N. Loop West
P. O. Box 7483
Houston, Texas 77248
Facsimile: (713) 802-3144
And:
Pulte Diversified Companies, Inc.
33 Bloomfield Hills Parkway
Suite 200
Bloomfield Hills, Michigan 48304
Attention: Gregory M. Nelson
Facsimile: (313) 433-4643
With a copy to:
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Attention: Norman H. Beitner, Esq.
Facsimile: (313) 962-0176
If to Compass or Purchaser, addressed to:
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attention: D. Paul Jones, Jr.
Facsimile: (205) 933-3043
and
Compass Banks of Texas, Inc.
24 Greenway Plaza, Suite 1402
Houston, Texas 77046
Attention: Charles E. McMahen
Facsimile: (713) 993-8500
With a copy to:
Compass Bancshares, Inc.
15 South 20th Street
Birmingham, Alabama 35233
Attention: Jerry W. Powell
Facsimile: (205) 933-3043
and
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
3300 Texas Commerce Tower
Houston, Texas 77002
Attention: Gene G. Lewis
Facsimile: (713) 223-3717
Or to such other place and with such other copies as either party
may designate as to itself by written notice given in accordance
herewith to the other.
14.4 Press Release. Purchaser, Seller and PDCI shall consult
with each other as to the form, substance and timing of any press
release or other public disclosure of matters related to this
Agreement or any of the transactions contemplated thereby;
provided, however, that nothing in this Section 14.4 shall be
deemed to prohibit any party hereto from making any disclosure
which its legal counsel deems necessary or advisable in order to
fulfill such party's disclosure obligations imposed by law.
14.5 Choice of Law. This Agreement shall be construed and
interpreted, and the rights of the parties determined, in
accordance with the laws of the State of Texas (regardless of the
laws that might be applicable under principles of conflicts of
law) as to all matters, including but not limited to matters of
validity, construction, effect and performance.
14.6 Entire Agreement; Amendments and Waivers. Except as
otherwise provided in Section 14.12 below, this Agreement, which
includes all Exhibits and Schedules hereto, constitutes the entire
agreement between the parties pertaining to the subject matter
hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties,
representations or other agreements between the parties in
connection with the subject matter hereof except as set forth
specifically herein or contemplated hereby. No amendment,
supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver, unless otherwise expressly
provided.
14.7 Multiple Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
14.8 Expenses. Each party hereto shall pay its own legal and
other costs and expenses incident to this Agreement and all action
taken or to be taken in preparation for carrying this Agreement
into effect.
14.9 Severability. If any term or provisions of this Agreement
is held by a court or other governmental authority to be invalid,
illegal, void or incapable of being enforced by any rule of law or
public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect and shall in no
way be affected, impaired or invalidated so long as the economic
or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to either party. Upon
such determination that any term or other provisions is invalid,
illegal, void or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties with respect to the
relative benefits, rights and obligations thereof as closely as
possible in an acceptable manner so that the transactions
contemplated hereby may be fulfilled to the extent possible.
14.10 Headings. The headings of the several Articles and
Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
14.11 DTPA. TO THE EXTENT SUCH PROVISIONS WOULD OTHERWISE BE
APPLICABLE, PURCHASER HEREBY EXPRESSLY WAIVES THE PROVISIONS OF
CHAPTER XVII, SUBCHAPTER 3, SECTIONS 17.41 THROUGH 17.63,
INCLUSIVE (OTHER THAN SECTION 17.555, WHICH, IF IT IS APPLICABLE,
IS NOT WAIVED), VERNON'S TEXAS CODE ANN., BUSINESS AND COMMERCE
CODE (the "DTPA"). Purchaser expressly recognizes that the price
for which Seller has agreed to sell the Purchased Assets and
perform its obligations under this Agreement has been predicated
upon the inapplicability of the DTPA and this waiver of the DTPA.
Purchaser further recognizes that Seller, in determining to
proceed with the entering into of this Agreement, has expressly
relied on this waiver and the inapplicability of the DTPA.
14.12 Confidentiality Agreements. Until the Closing, the
existing confidentiality agreement between Seller and Purchaser
shall remain in full force and effect and shall be unaffected by
this Agreement or the termination hereof.
IN WITNESS WHEREOF, each party hereto has caused this Agreement
to be duly executed on its behalf, by their respective officers,
thereunto duly authorized, in multiple originals, all as of the
day and year first above written.
COMPASS BANCSHARES, INC.
By:
Name: D. Paul Jones, Jr.
Title: Chairman and Chief Executive Officer
COMPASS BANK-HOUSTON
By:
Name: Charles E. McMahen
Title: Chairman and Chief Executive Officer
FIRST HEIGHTS BANK, fsb
By:
Name: Robert E. Zambie
Title: President
PULTE DIVERSIFIED COMPANIES, INC.
By:
Name: Gregory M. Nelson
Title: Vice President
