As Filed with the Securities and Exchange Commission on January 19, 1999
REGISTRATION NO. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------
HIBERNIA CORPORATION
(Exact name of registrant as specified in its charter)
Louisiana 6711 72-0724532
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
313 Carondelet Street
New Orleans, Louisiana 70130
(504) 533-5332
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
Gary L. Ryan
Senior Vice President and Corporate Counsel
Hibernia Corporation
313 Carondelet Street
New Orleans, Louisiana 70130
(504) 533-5560
(Name, address, including zip code, and telephone number, including area code of
agent for service)
------------------------------------------------------
COPIES TO:
Mark A. Fullmer, Esq. Richard E. Brophy, Jr., Esq.
Locke Lidell & Sapp, LLP Naman, Howell, Smith & Lee
601 Poydras Street, Suite 2400 700 Texas Center
New Orleans, Louisiana 70130 9th & Washington
(504) 558-5148 Waco, Texas 76701
(254) 754-6331
------------------------------------------------------
<PAGE>
-----------------------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after this registration statement is declared
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_| ______________
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| ______________
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the
same.|_| ______________
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Title of each Amount to be Proposed maximum Proposed maximum Amount of
class of securities registered offering price aggregate offering registration fee (1)
to be registered per share (1) price (1)
- ----------------------------------------------------------------------------------------------------
Class A 3,450,000 $7.66 $26,441,822 $7,800
Common Stock shares
no par value
</TABLE>
(1) Based upon the book value of the securities to be received by the
registrant or canceled in the exchange or transaction as of September
30, 1998 of $26,441,822 pursuant to Rule 457(f)(2) of the Securities
Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF MARTEX BANCSHARES, INC.
JANUARY ___, 1999
You are hereby notified that a special meeting of shareholders of
MarTex Bancshares, Inc. will be held at the main office of First Service Bank,
401 South Alamo, Marshall, Texas, 75670, on February __, 1999 at ________ p.m..
The following matters will be considered and voted upon at this meeting:
1. A proposal to approve the Amended and Restated Agreement and Plan of
Merger effective as of June 29, 1998, between MarTex Bancshares, Inc.
and Hibernia Corporation. The Merger Agreement provides that MarTex
will be merged into Hibernia Corporation, and Hibernia Corporation will
survive the Merger. As a result of the Merger, each outstanding share
of common stock, $0.01 per share par value, of MarTex will be converted
into shares of Hibernia Corporation Common Stock. The accompanying
Proxy Statement/Prospectus describes the number of shares of Hibernia
Common Stock that will be exchanged for each share of MarTex Common
Stock as a result of the Merger.
2. A proposal to approve the Merger between MarTex and Hibernia
Corporation.
3. A proposal to approve the issuance of shares of MarTex Common Stock,
pursuant to the Stock Grant Agreements in connection with the change in
control of MarTex to be effected by the Merger, to two individuals,
each of whom is an officer and director of MarTex.
Both the Agreement, the Merger and the issuance of shares of MarTex
Common Stock to be made under the Stock Grant Agreements are described in more
detail in the accompanying Proxy Statement - Prospectus.
Any other business that is properly brought before the Special Meeting
will be acted upon at the Meeting.
Each shareholder who is the owner of record of MarTex Common Stock at
the close of business on January ___, 1999 is entitled to vote on the matters
presented at the Special Meeting. Those shareholders are also entitled to
receive notice of the Special Meeting. If there is any adjournment or
postponement of the Special Meeting, those shareholders of record also will be
entitled to vote at the adjournment or postponement as well.
Each share of MarTex Common Stock will entitle its holder to one vote
on all matters that come before the Special Meeting. A majority of the issued
and outstanding shares of MarTex Common Stock must be present in person or by
proxy to constitute a quorum for purposes of the Meeting. If a quorum is
present, the affirmative vote of two-thirds of the issued and outstanding shares
of MarTex Common Stock will be required to approve the Agreement and the Merger
and the affirmative vote of seventy-five percent of the issued and outstanding
shares of MarTex Common Stock (excluding shares owned (actually or
constructively) by shareholders who are parties to Stock Grant Agreements) will
be required to approve the issuance of shares of MarTex Common Stock pursuant to
the Stock Grant Agreements.
THE MARTEX BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF THE AGREEMENT, THE MERGER AND THE ISSUANCE OF SHARES OF MARTEX
COMMON STOCK UNDER THE STOCK GRANT AGREEMENTS.
Your vote is important, even if you do not plan to attend the Special
Meeting. Also, even if you own a small number of shares, please take a moment to
complete, date and sign the enclosed proxy card.
Your proxy may be revoked in three ways:
by notice to the Secretary of MarTex prior to the date of the
Special Meeting; by attending the Special Meeting and voting
in person; or by executing and delivering a later dated proxy
to the Secretary prior to the Special Meeting.
By Order of the Board of Directors,
------------------------------------
George E. Fitts, Secretary
<PAGE>
PROXY STATEMENT
MARTEX BANCSHARES, INC.
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY ___, 1999
PROSPECTUS
HIBERNIA CORPORATION
3,450,000 SHARES OF CLASS A COMMON STOCK
(NO PAR VALUE)
We are furnishing you this Proxy Statement/Prospectus because you are a
holder of MarTex Common Stock. The Board of Directors of MarTex is soliciting
proxies for use at the Special Meeting and at any adjournments or postponements
of the Meeting. The Special Meeting will be held at ______ P.M., local time, on
February ___, 1999, at the office of First Service Bank, 401 South Alamo,
Marshall, Texas, 75670. This Proxy Statement/Prospectus and the accompanying
proxy card are first being mailed to holders of MarTex Common Stock on or about
January ____, 1999.
At the Special Meeting, holders of record of MarTex Common Stock as of
the close of business on the Record Date will vote upon a proposal to approve
the Merger Agreement, the Merger and the issuance of shares of MarTex Common
Stock to two individuals pursuant to the Stock Grant Agreements. If the Merger
is approved, each outstanding share of MarTex Common Stock (with a few
exceptions, discussed below) will be converted into shares of Hibernia Common
Stock. Shares of MarTex Common Stock owned by Hibernia or its subsidiaries and
shares as to which dissenters' rights have been exercised and perfected will not
be converted into Hibernia Common Stock. If the Merger is approved, holders of
MarTex Common Stock will receive for each share of MarTex Common Stock owned
immediately prior to the Effective Date the number of shares of Hibernia Common
Stock described in the Proxy Statement/Prospectus. Fractional shares will not be
issued. Anyone entitled to a fraction of a share of Hibernia Common Stock will
instead receive cash for that portion of a share. The Merger Agreement is
included in its entirety as Appendix A to this Proxy Statement/Prospectus. It is
also described in more detail under the heading "PROPOSED MERGER."
This Proxy Statement/Prospectus is also a prospectus of Hibernia for
the shares of Hibernia Common Stock to be issued if the Merger is consummated.
The outstanding shares of Hibernia Common Stock are listed on the NYSE
under the symbol HIB. The reported last sale price of Hibernia Common Stock on
the NYSE Composite Transactions Reporting System on January __, 1999 was $_____
per share.
No one is authorized to give any information or to make any
representations other than those contained in this Proxy Statement/Prospectus.
If any other information or representations are given or made, you may not rely
upon them as having been made by Hibernia or MarTex.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The shares of Hibernia Common Stock offered hereby are not savings
accounts, deposits or other obligations of a bank or savings association and are
not insured by the Federal Deposit Insurance Corporation or any other
governmental agency.
The date of this Proxy Statement/Prospectus is January ____, 1999.
<PAGE>
TABLE OF CONTENTS
INTRODUCTION
AVAILABLE INFORMATION ..........................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ................................
CERTAIN DEFINITIONS.............................................................
SUMMARY
The Proposed Merger....................................................
Stock Grant Agreements.................................................
Management and Operations After the Merger.............................
Recommendation of the Board of Directors...............................
Basis for the Terms of the Merger .....................................
Advice and Opinion of Financial Advisor................................
Quorum and Vote Required ..............................................
Conditions; Abandonment; Amendments ...................................
Interests of Certain Persons in the Merger ............................
Employee Benefits .....................................................
Material Tax Consequences .............................................
Dissenters' Rights ....................................................
Differences in Shareholders' Rights ...................................
Accounting Treatment ..................................................
Merger Activity .......................................................
RISK FACTORS
Number of Shares of Hibernia Common Stock to be Issued.................
THE PARTIES TO THE MERGER ......................................................
Hibernia 12............................................................
Selected Financial Data ...............................................
Selected Financial Data of Hibernia....................................
MarTex Bancshares, Inc.................................................
Selected Financial Data of MarTex .....................................
Pro Forma Combined Selected Financial Information (Unaudited)..........
Comparative Per Share Information (Unaudited) .........................
MEETING INFORMATION ............................................................
Solicitation and Revocation of Proxies ................................
Quorum and Vote Required ..............................................
Recommendation ........................................................
PROPOSED MERGER
General
Background of and Reasons for the Merger ..............................
Terms of the Merger ...................................................
Opinion of Financial Advisor to MarTex.................................
Closing Date and Effective Date of the Merger .........................
Employee Benefits .....................................................
Surrender and Exchange of Stock Certificates ..........................
Expenses ..............................................................
Representations and Warranties ........................................
Conditions to the Merger; Waiver ......................................
Regulatory and Other Approvals ........................................
Business Pending the Merger ...........................................
Termination ...........................................................
Management and Operations after the Merger ............................
Certain Differences in the Rights of Shareholders .....................
Interests of Certain Persons in the Merger ............................
Material Tax Consequences .............................................
Resale of Hibernia Common Stock .......................................
Rights of Dissenting Shareholders .....................................
Accounting Treatment ..................................................
STOCK GRANT AGREEMENTS..........................................................
CERTAIN REGULATORY CONSIDERATIONS ..............................................
General
Payment of Dividends ..................................................
Restrictions on Extensions of Credit ..................................
PRO FORMA FINANCIAL INFORMATION ................................................
CERTAIN INFORMATION CONCERNING MARTEX...........................................
Description of Business ...............................................
Supervision and Regulation.............................................
Competition ...........................................................
Employees .............................................................
Properties ............................................................
Legal Proceedings .....................................................
Market Prices and Dividends ...........................................
Security Ownership of Principal Shareholders and Management ...........
MARTEX FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1997 (Unaudited)................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF MARTEX FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997......................
MARTEX FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND DECEMBER 31, 1996 (Audited)......................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF MARTEX FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND
DECEMBER 31, 1996......................................................
RELATIONSHIP WITH INDEPENDENT AUDITORS .........................................
VALIDITY OF SHARES .............................................................
EXPERTS
APPENDICES ..............................................................
APPENDIX A AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER..........
APPENDIX B FAIRNESS OPINION OF ALEX. SHESHUNOFF & CO. INVESTMENT
BANKING.......................................................
APPENDIX C CERTAIN PROVISIONS OF STATE LAW
RELATING TO RIGHTS OF DISSENTERS' SHAREHOLDERS................
APPENDIX D TAX OPINION OF ERNST & YOUNG LLP...........................
APPENDIX E STOCK GRANT AGREEMENTS, AS AMENDED..........................
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus describes a proposed merger between
MarTex and Hibernia and the Special Meeting at which shareholders of MarTex will
vote upon the Merger Agreement, the Merger and the issuance of shares of MarTex
Common Stock to two individuals pursuant to the Stock Grant Agreements. It also
contains information about the parties to the Merger and other information of
interest to MarTex shareholders.
If the Merger is completed, MarTex will be merged into Hibernia, and
Hibernia will be the corporation surviving the Merger. In that case,
shareholders of MarTex who do not exercise and perfect their dissenters' rights
under Texas law will receive the number of shares of Hibernia Common Stock
described in the Proxy Statement/Prospectus for each share of MarTex Common
Stock they own at the time the Merger is effective. No fractional shares of
Hibernia Common Stock will be issued. Shareholders of MarTex entitled to receive
a fraction of a share of Hibernia Common Stock will be paid cash instead of that
fractional share. See "PROPOSED MERGER Terms of the Merger."
The maximum number of shares of Hibernia Common Stock that Hibernia
will issue to the shareholders of MarTex in the Merger is 3,450,000. This number
of shares is registered on this Registration Statement.
Shareholders of MarTex will be asked to approve the Merger Agreement,
the Merger and the issuance of shares of MarTex Common Stock to two individuals
pursuant to the Stock Grant Agreements at the Special Meeting which will be held
on February __, 1999. The proxy statement relating to the Special Meeting is
included in this Proxy Statement/Prospectus.
The terms of the Merger are described in this Proxy
Statement/Prospectus (see "Proposed Merger"). Also, a copy of the Merger
Agreement is attached as Appendix A.
AVAILABLE INFORMATION
Hibernia is a public company and is required to file certain reports with
the SEC, such as annual reports (Form 10-K), quarterly reports (Form 10-Q) and
current reports (Form 8-K). You may review and copy these reports, proxy
statements and other information at the following places: the public reference
room of the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
(copies may be made at prescribed rates), at the SEC's Regional Office located
at 7 World Trade Center, Suite 1300, New York, New York 10007 at the SEC's
Regional Office located 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
You may obtain information on the operation of the public reference
room by calling the SEC at 1-800-SEC-0330. The SEC maintains a web site on the
Internet that contains reports, proxy and information statements and other
information about public companies. The address of that site is
http://www.sec.gov.com. Certain recent reports filed with the SEC are also
available at Hibernia's web site at http:/www.hiberniabank.com. Hibernia's
Internet web site also includes news releases and product and service
information about Hibernia.
Hibernia has filed a registration statement on Form S-4 with the SEC
that registers the Hibernia Common Stock included in this Prospectus. This Proxy
Statement/Prospectus does not contain all of the information in the Registration
Statement. Please refer to the Registration Statement for further information
about Hibernia and the Hibernia Common Stock to be exchanged in the Merger.
Statements contained in this Proxy Statement/Prospectus concerning the
provisions of certain documents included in the Registration Statement are not
necessarily complete. A complete copy of each document is filed as an exhibit to
the Registration Statement. You may obtain copies of all or any part of the
Registration Statement, including exhibits thereto, upon payment of the
prescribed fees, at the offices of the SEC and the NYSE listed above.
All information contained in this Proxy Statement/Prospectus relating
to Hibernia and its subsidiaries has been supplied by Hibernia. All information
relating to MarTex and its subsidiaries has been supplied by MarTex.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Hibernia with the SEC are
incorporated by reference in this Proxy Statement/Prospectus: (1) its
Annual Report on Form 10-K for the year ended December 31, 1997; (2) its
definitive Proxy Statement filed with the SEC on March 20, 1998 relating to
its 1998 Annual Meeting of Shareholders held on April 21, 1998 (except for
the information contained therein under the headings "Executive
Compensation -- Report of the Executive Compensation Committee" and
"Executive Compensation -- Stock Performance Graph", which are expressly
excluded from incorporation in this Registration Statement); (3) the
Description of Capital Stock included in its Current Report on Form 8-K
dated December 4, 1998; (4) its Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1998; (5) its Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1998; (6) its Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1998; (7) a Current
Report on Form 8-K dated January 12, 1998; (8) a Current Report on Form 8-K
dated March 4, 1998; (9) a Current Report on Form 8-K dated July 27, 1998;
(10) a Current Report on Form 8-K dated August 26, 1998; (11) and a Current
Report on form 8-K dated December 9, 1998.
All documents filed by Hibernia with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the termination of the offering of Hibernia
Common Stock made hereby will be deemed to be incorporated by reference in this
Proxy Statement/Prospectus from the date they are filed. Statements made in this
Proxy Statement/Prospectus may be modified or superseded by statements contained
in a document incorporated or deemed to be incorporated by reference. Any
statement so modified or superseded will not be deemed to constitute a part of
this Proxy Statement/Prospectus, except as so modified or superseded.
This Proxy Statement/Prospectus incorporates important business and
financial information about Hibernia that is not included in or delivered with
this Proxy Statement/Prospectus. If you are a beneficial owner of MarTex Common
Stock and would like a copy of any of the information incorporated by reference
in this Proxy Statement/Prospectus other than exhibits to such information
(unless such exhibits are specifically incorporated by reference into such
information), Hibernia will provide it to you without charge. If you would like
to receive any of that information, please call or write to Hibernia
Corporation, 313 Carondelet Street, New Orleans, Louisiana 70130, Attention:
Assistant Secretary, Telephone (504) 533-3411. You should make your request
before January ____, 1999 [no later than five business days before the meeting]
in order to receive the information prior to the Meeting.
<PAGE>
CERTAIN DEFINITIONS
We have used certain defined terms and abbreviations throughout the
Proxy Statement/Prospectus for ease of reference and consistency. These defined
terms and their definitions are included below:
Advisor - Alex. Sheshunoff & Co. Investment Banking, the financial advisor to
MarTex
Bank - First Service Bank, a wholly-owned subsidiary of MarTex
Carlile Group - Quinton B. Carlile, Kenneth Q. Carlile, Steve B. Carlile or any
of their brothers, sisters, ancestors, descendants or majority owned
corporations, partnerships or trusts
Carlile Shareholders - Quinton B. Carlile, Kenneth Q. Carlile and Steve B.
Carlile
Change in Control Stock Grant -- shares of MarTex Common Stock issued under the
Stock Grant Agreements upon a change in ownership of MarTex
Change in Ownership --- a sale or exchange of stock, sale of assets, merger,
reorganization or other similar transaction, as a result of which the Carlile
Group does not own or control a majority of the outstanding voting shares of
capital stock of MarTex
Closing Date - the date of the closing of the Merger, as specified in Section 14
of the Merger Agreement
Code or Internal Revenue Code -- the Internal Revenue Code of 1986, as amended
Dissenting Shareholder -- a shareholder who dissents from the Merger by
following the procedures specified in the TBCA.
Effective Date -- the date on which the Merger becomes effective, as specified
in Section 14 of the Merger Agreement
ESOP -- Hibernia Corporation's Employee Stock Ownership Plan, as amended to date
Exchange Act -- the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated under it
Exchange Rate -- the number of shares of Hibernia Common Stock to be exchanged
for each share of MarTex Common Stock in the Merger, as determined in accordance
with Section 3.8 of the Merger Agreement
Fairness Opinion -- the opinion of the Advisor, included as Appendix B to the
Proxy Statement/Prospectus
Federal Reserve or Federal Reserve Board -- the Board of Governors of the
Federal Reserve System
FDIC - the Federal Deposit Insurance Corporation
Heritage - Heritage Texas Group, Inc., a Texas corporation and the holding
company of First Heritage Bank
Hibernia -- Hibernia Corporation, a Louisiana corporation and the holding
company of Hibernia National Bank and Hibernia National Bank of Texas
Hibernia Common Stock or Hibernia Stock -- the Class A Common Stock, no par
value, of Hibernia, which will be exchanged for MarTex Common Stock in the
Merger if the Merger is approved
HNB -- Hibernia National Bank, a national bank and wholly-owned subsidiary of
Hibernia
HNBT - Hibernia National Bank of Texas, a national Bank and wholly-owned
subsidiary of Hibernia
KSOP - Texas Group, Inc. Employee Stock Ownership Plan (with 401(k) provision)
MarTex - MarTex Bancshares, Inc., a Texas corporation
MarTex Common Stock - the common stock, $0.01 per share par value, of MarTex
MarTex Officers - the officers of MarTex for the last five years
Merger -- the merger of MarTex Bancshares, Inc. with and into Hibernia
Corporation described herein and in the Merger Agreement
Merger Agreement or Agreement -- the Amended and Restated Agreement and Plan of
Merger effective as of June 29, 1998, between MarTex and Hibernia, a copy of
which is attached to this Proxy Statement/Prospectus as Appendix A
Merger Consideration - the number of shares of Hibernia Common Stock to be
exchanged for each share of MarTex Common Stock and the cash to be paid to
MarTex shareholders who will receive cash instead of a fractional share of
Hibernia Common Stock
NYSE -- New York Stock Exchange, Inc.
OCC -- Office of the Comptroller of the Currency, the federal regulatory agency
for national banks
Parallel Exit Agreements - collectively, agreements executed by the Carlile
Shareholders in connection with MarTex's acquisition of Security State Bank,
Elysian Fields, Texas; Mineola Bancshares, Inc., Mineola, Texas; Lindale
National Bank, Lindale, Texas; and Heritage
Put Option - an agreement executed by the Carlile Shareholders and certain of
the former shareholders of Heritage
Record Date -- January __, 1999, the date on which an individual or company must
be a shareholder of MarTex in order to vote at the Special Meeting
Registration Statement -- the registration statement filed with the SEC by
Hibernia, including all amendments and exhibits to it, relating to the Hibernia
Common Stock to be exchanged in the Merger
SEC -- the Securities and Exchange Commission
Securities Act -- the Securities Act of 1933, as amended, and the rules and
regulations promulgated under it
Special Meeting or Meeting -- the special meeting of shareholders of MarTex
scheduled to be held at _______ p.m. on February ___, 1999 at which shareholders
of MarTex will vote on the Merger, the Agreement and the issuance of shares of
MarTex Common Stock to two individuals pursuant to the Stock Grant Agreements
Stock Grant Agreements - collectively, the Stock Grant Agreement dated March 28,
1996, as amended, between F. Wayne McWhorter and MarTex and the Stock Grant
Agreement dated March 28, 1996, as amended, between George F. Meisenheimer and
MarTex, each of which is included as Appendix E to this Proxy
Statement/Prospectus
Tax Opinion -- the opinion of Ernst & Young LLP, attached to the Proxy
Statement/Prospectus as Appendix D, relating to certain federal tax implications
of the Merger
TBCA - the Texas Business Corporation Act
SUMMARY
We have prepared this summary to assist shareholders of MarTex in their
review of this Proxy Statement/Prospectus. It is necessarily general and
abbreviated, and it is not intended to be a complete explanation of all of the
matters covered in this Proxy Statement/Prospectus. This summary is qualified in
its entirety by reference to the more detailed information contained elsewhere
in this Proxy Statement/Prospectus, the Appendices and the documents
incorporated herein by reference. We urge shareholders of MarTex to read all of
those documents in their entirety prior to the Special Meeting.
The Proposed Merger
Holders of MarTex Common Stock will consider and vote upon the
Agreement, the Merger and the issuance of shares of MarTex Common Stock to two
individuals pursuant to the Stock Grant Agreements at the Special Meeting. If
the holders of MarTex Common Stock approve the Agreement and the Merger and the
other conditions to completing the Merger are satisfied, the Merger will be
consummated on the date specified in Section 14 of the Agreement or on a date
thereafter chosen by the parties. See "PROPOSED MERGER -- Representations and
Warranties" and "Conditions to the Merger; Waiver" for more information about
the conditions to completing the Merger.
The Agreement provides that Hibernia will issue to the holders of
MarTex Common Stock (other than holders who exercise and perfect dissenters'
rights under Texas law) a maximum of 3,450,000 shares of Hibernia Common Stock.
If the Department of Justice, for anti-trust reasons, requires Hibernia after
the Closing Date to divest a portion of the loans and deposits it acquires from
MarTex by virtue of the Merger, the Agreement provides a formula to reduce the
number of shares of Hibernia Common Stock to be issued in the Merger to reflect
the economic consequences of the divestiture to Hibernia. In December, 1998, the
Department of Justice advised the OCC that the Department of Justice did not
have any anti-trust concerns with respect to the Merger. As a result, Hibernia
will not have to divest any loans or deposits. Consequently, the number of
shares of Hibernia Common Stock that will be exchanged for each share of MarTex
Common Stock will be determined by dividing 3,450,000 by the number of shares of
MarTex Common Stock outstanding on the Effective Date. MarTex shareholders who
would otherwise receive a fraction of a share of Hibernia Stock will receive
cash instead of that fractional share based on the average of the closing price
of one share of Hibernia Common Stock for the ten business days preceding the
last trading day immediately prior to the Closing Date as reported in The Wall
Street Journal.
During the period between the date of this Proxy Statement/Prospectus
and the Effective Date, the number of outstanding shares of MarTex Common Stock
will increase as a result of shares of MarTex Common Stock issued to (a)
officers and directors who exercise existing options prior to the Effective Date
and (b) two individuals pursuant to the Stock Grant Agreements on the day
immediately before the Effective Date. Consequently, MarTex cannot determine the
exact number of shares of Hibernia Common Stock that will be issued to MarTex
shareholders in exchange for each share of MarTex Common Stock. A chart
reflecting the exchange ratio of Hibernia Common Stock for MarTex Common Stock
assuming a range of prices of Hibernia Common Stock is set forth under the
caption "SUMMARY-Stock Grant Agreements."
Stock Grant Agreements
On March 28, 1996, MarTex entered into Stock Grant Agreements with each
of F. Wayne McWhorter and George F. Meisenheimer. The Stock Grant Agreements,
among other things, provide for the issuance of shares of MarTex Common Stock on
the day before the Change in Ownership of MarTex to be effected as a result of
the Merger.
Under the Code, the Change in Control Stock Grants, unless proven to be
reasonable compensation under the facts and circumstances of the grant, will be
"parachute payments" if the Change in Control Stock Grants (a) are in the nature
of compensation to Messrs. McWhorter and Meisenheimer; (b) are contingent on a
change of control of MarTex; and (c) exceed three times the average annual
compensation paid to each of Messrs. McWhorter and Meisenheimer over the
preceding five years. If the conditions in clauses (a), (b) and (c) in the
preceding sentence are satisfied, the Change in Control Stock Grants will be
treated as "excess parachute payments" to the extent that the present value of
the Change in Control Stock Grants exceed the average annual compensation for
the MarTex Officers. MarTex will not be allowed to deduct as a compensation
expense any portion of the shares of MarTex Common Stock issued to Messrs.
McWhorter and Meisenheimer by reason of a Change in Ownership which are
characterized as "excess parachute payments." Also, each of Messrs. McWhorter
and Meisenheimer will have to pay a 20% excise tax on any portion of the Change
in Control Stock Grants characterized as "excess parachute payments."
No portion of the Change in Control Stock Grants will be treated as
"excess parachute payments" if such Change in Control Stock Grants are
authorized by a vote of shareholders of MarTex owning in excess of seventy-five
percent of the issued and outstanding shares of MarTex Common Stock (excluding
shares owned actually and constructively by Messrs. McWhorter and Meisenheimer).
In order to ensure that no portion of the Change in Control Stock Grants will be
treated as "excess parachute payments", each of Messrs. McWhorter and
Meisenheimer entered into amendments to their respective Stock Grant Agreements.
The amendments provide that each of Messrs. McWhorter and Meisenheimer has
agreed to waive any right to receive shares of MarTex Common Stock by reason of
a Change in Ownership due to the Merger which either of them might have been
entitled to under the original terms of their respective Stock Grant Agreements.
The amendments further provide that each of Messrs. McWhorter and Meisenheimer
will receive shares of MarTex Common Stock pursuant to the Change in Control
Stock Grants only if the shareholders of MarTex approve the issuance of those
shares upon a Change in Ownership of MarTex as a result of the Merger. Messrs.
McWhorter and Meisenheimer, however, have not agreed to waive any right to a
Stock Grant that arises by virtue of other provisions of the Stock Grant
Agreements, including a Change in Ownership resulting from a transaction other
than the Merger.
The following table sets forth the Exchange Rate and the number of
shares of Hibernia Common Stock to be issued to each of Messrs. McWhorter and
Meisenheimer assuming that (i) MarTex shareholders approve the issuance to
Messrs. McWhorter and Meisenheimer of shares of MarTex Common Stock pursuant to
the Stock Grant Agreements; (ii) all outstanding options and warrants held by
directors and officers of MarTex have been exercised (an aggregate of 770,092
shares); (iii) no further dividends are paid on MarTex Common Stock prior to the
Effective Date; (iv) the Effective Date of the Merger is January 31, 1999; and
(v) the price of Hibernia Common Stock on the day prior to the last business day
prior to the Effective Date is in the amount set forth below:
<TABLE>
<S> <C> <C> <C>
Price of Number of Shares of
Hibernia Hibernia Common Stock Number of Shares of Number of Shares of
Common Stock to be exchanged for Hibernia Common Stock Hibernia Common Stock
each share of to be issued to to be issued to
MarTex Common Stock Mr. McWhorter Mr. Meisenheimer
$10.00 0.26832982400 51,785 5,178
$11.00 0.26497864800 90,309 9,031
$12.00 0.26174586500 127,471 12,747
$13.00 0.25848633100 164,941 16,494
$14.00 0.25575635300 196,323 19,632
$15.00 0.25343661900 222,990 22,299
$16.00 0.25144108500 245,929 24,593
$17.00 0.24903829700 273,550 27,355
$18.00 0.24687640500 298,402 29,840
$19.00 0.24497363800 320,276 32,028
$20.00 0.24328604600 339,675 33,968
</TABLE>
MarTex shareholders will consider and vote upon the issuance of shares
of MarTex Common Stock pursuant to the Stock Grant Agreements at the Special
Meeting. The Stock Grant Agreements and the amendments are included as Appendix
E to this Proxy Statement/Prospectus. See "STOCK GRANT AGREEMENTS".
Management and Operations After the Merger
MarTex will cease to exist after the Merger. The business of MarTex
will be conducted through HNB after the Merger.
HNB and HNBT filed an application with the OCC to merge HNBT into HNB.
This merger was approved by the OCC. Effective as of January 1, 1999, HNBT was
merged into HNB, HNBT ceased to exist after the merger and the business of HNBT
is now carried on by HNB. The Bank will be merged into HNB on the Effective Date
and all operations of MarTex will be conducted through HNB after the Effective
Date.
The Boards of Directors of Hibernia and HNB will not change as a result
of the Merger.
Recommendation of the Board of Directors
The Board of Directors of MarTex has approved the Agreement, the Merger
and the issuance of shares of MarTex Common Stock to two individuals pursuant to
the Stock Grant Agreements and believes that the Merger is in the best interests
of the MarTex shareholders. The MarTex Board recommends that you vote for the
Merger, the Agreement and the issuance of shares of MarTex Common Stock to two
individuals pursuant to the Stock Grant Agreements. (See "MEETING INFORMATION.")
The Board of Directors has received a fairness opinion from the Advisor that the
Merger Consideration to be received by the MarTex shareholders pursuant to the
Merger is fair, from a financial point of view, to the shareholders of MarTex.
See "PROPOSED MERGER -- Opinion of Financial Advisor to MarTex." The MarTex
Board believes that the Merger will provide significant value to all MarTex
shareholders. In recommending the Merger to the shareholders, the MarTex Board
considered,among other factors: the financial terms of the Merger, the liquidity
the Merger will afford MarTex shareholders; and the business earnings and
potential for future growth of MarTex and Hibernia.
See "RISK FACTORS" and "PROPOSED MERGER -- Background of and Reasons for the
Merger."
Basis for the Terms of the Merger
The MarTex Board considered a number of factors in approving the terms of the
Merger, including: the financial conditions, results of operations and prospects
of Hibernia, MarTex and HNB; the financial terms of the Merger, including the
amount and type of consideration to be received by MarTex's shareholders as a
result of the Merger; MarTex's ability to compete in its relevant banking
markets and to face additional competitive pressures due to changes in the
regulatory environment; the market price of Hibernia Common Stock; the trading
market on NYSE for Hibernia Common Stock which provides liquidity that is
unavailable to holders of MarTex Common Stock for which an active market does
not exist; potential for increased dividends on Hibernia Common Stock compared
to MarTex Common Stock; the consideration to be received by MarTex shareholders
in relation to MarTex earnings and book value; the anticipated tax-free nature
of the Merger to holders of MarTex Common Stock for federal income tax purposes;
and the opinion received from the Advisor that the Merger Consideration to be
received by the MarTex shareholders pursuant to the Merger is fair, from a
financial point of view, to the MarTex shareholders.
See "PROPOSED MERGER -- Background of and Reasons for the Merger."
Advice and Opinion of Financial Advisor
The Advisor has rendered an opinion to MarTex that the Merger
Consideration to be received by the MarTex shareholders pursuant to the Merger
is fair, from a financial point of view, to the shareholders of MarTex. The
opinion is based on and subject to the procedures, matters and limitations
described in it and other matters that the Advisor considered relevant. The
Fairness Opinion is attached to this Proxy Statement - Prospectus as Appendix B.
We urge you to read the entire opinion, which includes a description of the
procedures followed, matters considered, and limitations on the reviews
undertaken by the Advisor. See "PROPOSED MERGER -- Opinion of Financial Advisor
to MarTex."
Quorum and Vote Required
A majority of the issued and outstanding shares of MarTex Common Stock
must be present in person or by proxy at the Meeting in order for a quorum to be
present. If a quorum is not present, the Meeting will be adjourned, and no vote
will be taken until and unless a quorum is present. The affirmative vote of
two-thirds of the issued and outstanding shares of MarTex Common Stock is
required to approve the Agreement and the Merger and the affirmative vote of
seventy-five percent of the issued and outstanding shares of MarTex Common Stock
(excluding shares owned (actually or constructively) by Messrs. McWhorter and
Meisenheimer) will be required to approve the issuance of shares of MarTex
Common Stock pursuant to the Stock Grant Agreements. Votes may be cast in person
or by proxy at the Special Meeting. (See "MEETING INFORMATION.") Those
shareholders who own MarTex Common Stock at the close of business on January __,
1999 will be entitled to vote at the Special Meeting.
Directors and executive officers of MarTex beneficially own 8,728,573
shares of MarTex Common Stock as of the Record Date. These individuals have the
right to vote 73.5% of the MarTex Common Stock issued and outstanding as of the
Record Date and have agreed to vote the stock over which they have voting power
in favor of the Merger and the Agreement at the Special Meeting (except in
certain limited circumstances). See "CERTAIN INFORMATION CONCERNING MARTEX --
Security Ownership of Principal Shareholders and Management." Accordingly, the
directors and executive officers of MarTex hold sufficient shares of MarTex
Common Stock to approve the Merger and the Agreement.
Directors, executive officers and other officers of MarTex beneficially
owning 8,503,944 shares of MarTex Common Stock as of the Record Date (73.3% of
the issued and outstanding shares of MarTex Common Stock) (excluding shares
owned (actually or constructively) by Messrs. McWhorter and Meisenheimer) also
have agreed to vote the stock over which they have voting power in favor of the
issuance of shares of MarTex Common Stock to two individuals pursuant to the
Stock Grant Agreements. See "MEETING INFORMATION", "STOCK GRANT AGREEMENTS" and
"CERTAIN INFORMATION CONCERNING MARTEX -- Security Ownership of Principal
Shareholders and Management." Hibernia shareholders are not required to approve
the Merger under Louisiana law.
Conditions; Abandonment; Amendment
A number of conditions must be met in order for the Merger to be
completed. These conditions include, among others: approval of the Agreement and
the Merger by the required vote of the holders of MarTex Common Stock; approval
of the proposed transactions by the OCC which was obtained on December 15,
1998; and holders of no more than 10% of the MarTex Common Stock exercise and
perfect dissenters' rights.
Nearly all of the conditions to consummation of the Merger may be
waived at any time by the party for whose benefit they were created.
(Shareholder and regulatory approvals may not be waived.) Also, the Agreement
may be amended or supplemented at any time by written agreement of MarTex and
Hibernia. No waiver, amendment or supplement executed after approval of the
Agreement by holders of MarTex Common Stock may reduce the Exchange Rate. Any
other material change to the Agreement after the date of the Special Meeting
would require another special meeting of MarTex shareholders for the purpose of
voting on the Agreement and the Merger. In addition, the Agreement may be
terminated, either before or after shareholder approval, under certain
circumstances. See "PROPOSED MERGER -- Representations and Warranties" and
"--Conditions to the Merger; Waiver" and "PROPOSED MERGER -- Closing Date and
Effective Date of the Merger; Termination."
Interests of Certain Persons in the Merger
The executive officers and directors of MarTex have interests in the
Merger that are in addition to their interests as shareholders of MarTex. These
interests include, among others: continuation of employment pursuant to written
employment agreements currently in effect, the continuation of certain employee
benefits, and provisions in the Agreement relating to the indemnification of
officers,directors and employees of MarTex for certain liabilities up to certain
aggregate limitations.
In addition, Messrs. McWhorter and Meisenheimer will receive additional
shares of MarTex Common Stock pursuant to the Stock Grant Agreements as a result
of the change in control of MarTex effected by the Merger. See "STOCK GRANT
AGREEMENTS". The exact number of shares of MarTex Common Stock to be issued to
Messrs. McWhorter and Meisenheimer will be calculated as of the day immediately
prior to the Effective Date as provided in the Stock Grant Agreements. See
"PROPOSED MERGER -- Employee Benefits" and "Interests of Certain Persons in the
Merger" and "STOCK GRANT AGREEMENTS".
If Hibernia does not continue to employ Mr. McWhorter after the
Effective Date, Mr. McWhorter will be entitled to be paid, pursuant to his Stock
Grant Agreement, a severance payment in an amount equal to two times his annual
base salary in effect as of the date of the termination of his employment.
Finally, Hibernia intends to enter into an employment agreement with
Mr. Meisenheimer. The agreement will have a term of three years, will provide
for a salary, bonus and stock grants and will be on terms mutually acceptable
to Hibernia and Mr. Meisenheimer.
Employee Benefits
Hibernia has agreed to offer to all former employees of MarTex who
become employees of Hibernia or its subsidiaries the same employee benefits as
those offered by Hibernia and HNB to their employees, with certain exceptions.
Hibernia will also give MarTex employees full credit for their years of service
(for both eligibility and vesting) with MarTex for purposes of Hibernia's 401(k)
plan and its ESOP. See "PROPOSED MERGER---Employee Benefits."
Material Tax Consequences
The Merger Agreement requires the parties to obtain an opinion
regarding the federal income tax consequences of the Merger. The parties have
received an opinion of Ernst & Young LLP to the following effects:
the Merger, when consummated in accordance with the terms of the
Agreement, will constitute a reorganization within the meaning of
Section 368(a) of the Code, the exchange of MarTex Common Stock to the
extent exchanged for Hibernia Common Stock will not give rise to gain
or loss to the shareholders of MarTex with respect to such exchange,
the basis of Hibernia Common Stock to be received by the holders of
MarTex Common Stock will be, in each instance, the same as the basis
in their stock surrendered in exchange therefor, decreased by the
amount of cash received, if any, and increased by the amount of gain,
if any, recognized in the exchange, and the holding period of the
Hibernia Common Stock received by holders of MarTex Common Stock in
the Merger will include in each instance the period during which the
MarTex Common Stock surrendered in exchange therefor was held as a
capital asset on the date of surrender.
Ernst & Young LLP serves as independent auditors for Hibernia. A copy of the tax
opinion is attached hereto as Appendix D. See "PROPOSED MERGER -- Material Tax
Consequences."
Tax laws are complex, and the tax consequences of the Merger may vary
depending upon a holder's individual circumstances or tax status. For these
reasons, we recommend that you consult your tax advisor concerning the federal
(and any applicable state, local or other) tax consequences of the Merger to
you.
Dissenters' Rights
If you object to the Merger and perfect your rights to dissent from the
Merger, you will be entitled to the rights and remedies of dissenting
shareholders provided under applicable Texas law. Appendix C includes the
relevant provisions of the applicable Texas law regarding dissenters' rights.
However, if dissenters' rights are exercised and perfected with respect to 10%
or more of the outstanding shares of MarTex Common Stock, Hibernia may abandon
the Merger. See "PROPOSED MERGER -- Rights of Dissenting Shareholders."
Differences in Shareholders' Rights
Holders of MarTex Common Stock who receive shares of Hibernia Common
Stock in the Merger will become shareholders of Hibernia. Their rights as
shareholders then will be governed by Hibernia's Articles of Incorporation and
Bylaws and Louisiana law. The rights of shareholders of Hibernia are different
in certain respects from the rights of holders of MarTex Common Stock. See
"PROPOSED MERGER -- Certain Differences in the Rights of Shareholders."
Accounting Treatment
The parties intend the Merger to be treated as a pooling of interests
for financial accounting purposes. A number of things could prevent the Merger
from qualifying for this accounting treatment. Among those factors are the
number of shareholders of MarTex who exercise and perfect dissenters' rights.
Hibernia may abandon the Merger if it does not qualify for pooling-of-interests
accounting treatment. See "PROPOSED MERGER -- Accounting Treatment."
Merger Activity
The following table shows certain information about one recently
completed merger transaction and one merger that has been announced but not
completed:
<TABLE>
<CAPTION>
Merger Activity
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Name Location Date of Merger Assets Shareholders Equity Share of HiberniaStock Issued
Peoples Holding Minden,Louisiana 7/1/98 $228 million $29.6 million 3,562,367
Corporation
First Guaranty Hammond, Louisiana * $249 million $19.1 million *
Bank
- ------------------------------------------------------------------------------------------------------------------------------------
*not completed as of the date of this Proxy Statement/Prospectus.
</TABLE>
RISK FACTORS
Shareholders of MarTex should carefully consider the following risk
factor, as well as the other information in this Proxy Statement/Prospectus,
before making a decision on how to vote at the Special Meeting.
Number of Shares of Hibernia Common Stock to be Issued
During the period between the date of this Proxy Statement/Prospectus
and the Effective Date, the number of outstanding shares of MarTex Common Stock
will increase as a result of shares of MarTex Common Stock issued to (a)
officers and directors who exercise existing options prior to the Effective Date
and (b) two individuals pursuant to the Stock Grant Agreements on the day
immediately before the Effective Date. Consequently, MarTex cannot determine the
exact number of shares of Hibernia Common Stock that will be issued to MarTex
shareholders in exchange for each share of MarTex Common Stock.
THE PARTIES TO THE MERGER
Hibernia
Hibernia is a Louisiana corporation registered under the Bank Holding
Company Act of 1956, as amended. As of September 30, 1998, Hibernia had total
consolidated assets of approximately $13.2 billion and shareholders' equity of
approximately $1.3 billion. As of that time, Hibernia was ranked, on the basis
of total assets, as the largest bank holding company headquartered in Louisiana.
As of September 30, 1998, Hibernia had two banking subsidiaries:
Hibernia National Bank and Hibernia National Bank of Texas. Hibernia National
Bank provides retail and commercial banking services through approximately 203
banking offices throughout Louisiana. Hibernia National Bank of Texas provides
retail and commercial banking services through approximately 25 banking offices
in 12 Texas counties. As of September 30, 1998, Hibernia was the largest bank
headquartered in Louisiana.
Effective January 1, 1999, Hibernia National Bank of Texas was merged
into Hibernia National Bank which survived the merger. Hibernia National Bank
will carry on the business previously conducted by Hibernia National Bank of
Texas.
From time to time, Hibernia investigates and holds discussions and
negotiations in connection with possible mergers or similar transactions with
other financial institutions. On July 1, 1998, Hibernia completed its merger
with Peoples Holding Corporation, the holding company of Peoples Bank & Trust
Company headquartered in Minden, Louisiana.
In addition to MarTex, Hibernia has entered into a definitive merger
agreement to acquire First Guaranty Bank headquartered in Hammond, Louisiana. As
of September 30, 1998, First Guaranty Bank had total consolidated assets of $249
million and shareholders equity of $19.1 million. After signing the definitive
merger agreement, First Guaranty Bank advised Hibernia that it did not desire to
proceed with the merger. Hibernia sued First Guaranty Bank requesting the court
to order First Guaranty Bank to proceed with the merger. The lawsuit recently
was settled, and First Guaranty Bank intends to hold a special meeting of its
shareholders to vote on the proposed merger between First Guaranty Bank and HNB.
The consummation of the pending transaction with First Guaranty Bank is subject
to certain conditions similar to the conditions to the Merger described in this
Proxy Statement/Prospectus. If the conditions to the pending transaction with
First Guaranty Bank are satisfied, the merger between Hibernia and First
Guaranty Bank may be consummated before or after the consummation of the Merger.
Shareholders of MarTex will not have the right to vote on this or any other
pending merger transaction.
See "SUMMARY - Merger Activity"
On December 1, 1998, Hibernia announced that it has entered into an
agreement to acquire four branches in Texas from Chase Manhattan Corp. for $87
million. Hibernia will acquire $452 million in deposits and will take over $1.3
billion in managed assets which include money in trust or personal asset
accounts. The acquisition of the branches is subject to regulatory approval and
is expected to close in the first quarter of 1999. Shareholders of MarTex will
not have the right to vote on this acquisition or any similar transaction.
Hibernia expects to pursue other possible acquisition opportunities and intends
to continue to pursue such opportunities in the near future. Any transactions
may be entered into before or after the Merger. The terms of any future
transactions cannot be predicted at this time. Also, future transactions would
be subject to regulatory approval and the approval of shareholders of the
acquired institution if required by law.
On January 13, 1999, Hibernia reported net income for the year ended
December 31, 1998 of $178.6 million ($1.12 per share of Hibernia Common Stock),
up 23% from net income of $144.8 million ($.90 per share of Hibernia Common
Stock) for the year ended December 31, 1997. Return on assets and common equity
improved to 1.39% and 14.80%, respectively, in 1998 from 1.29% and 13.36% in
1997.
Hibernia also reported that total deposits at December 31, 1998 were
$10.6 billion, up 8% from $9.8 billion a year earlier, and that total loans
reached $10.0 billion at December 31, 1998, up 21% from $8.3 billion at December
31, 1997.
The principal executive offices of Hibernia are located at 313 Carondelet
Street, New Orleans,Louisiana 70130, and its telephone number is (504) 533-5532.
For additional information concerning the business and financial condition
of Hibernia, please refer to Hibernia's reports incorporated herein by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
Selected Financial Data
The closing market price per share of Hibernia Common Stock on the NYSE
on June 28, 1998 was $20.375. (That day was the business day prior to Hibernia's
and MarTex's announcement of their proposed Merger.) The parties do not know
what the market price of Hibernia Common Stock will be on the Closing Date.
Selected Financial Data of Hibernia
The following table sets forth certain consolidated financial
information for Hibernia. This information is based on the consolidated
financial statements and related notes of Hibernia contained in its Annual
Report on Form 10-K for the year ended December 31, 1997, after giving effect
for mergers with Northwest Bancshares of Louisiana, Inc., ArgentBank and
Firstshares of Texas, Inc., consummated in the first quarter of 1998, and
Peoples Holding Corporation, consummated in the third quarter of 1998, each of
which were accounted for as pooling of interests, and its Quarterly Report on
Form 10-Q for September 30, 1998. See "Incorporation of Certain Documents by
Reference."
<PAGE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
SELECTED FINANCIAL INFORMATION
Year Ended December 31
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts)
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income .................. $ 482,036 $ 422,269 $ 371,360 $ 348,714 $ 343,898
Income from continuing operations .... 144,796 127,893 146,206 117,072 87,667
Per common share:
Income from continuing operations . 0.90 0.83 0.96 0.76 0.57
Income from continuing operations -
assuming dilution ............... 0.89 0.82 0.95 0.76 0.57
Cash dividends .................... 0.33 0.29 0.25 0.19 0.03
Book value ........................ 7.15 6.41 5.93 4.92 4.60
SELECTED PERIOD-END BALANCES
Debt ................................. 506,548 57,192 36,744 23,461 42,614
Total assets ......................... 12,388,184 10,730,936 9,017,639 8,502,277 8,306,930
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
HIBERNIA CORPORATION
SELECTED FINANCIAL INFORMATION
9 Months Ended September 30
- --------------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts)
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net interest income .................. $ 393,123 $ 357,292
Income from continuing operations .... 130,714 111,293
Per common share:
Income from continuing operations . 0.82 0.69
Income from continuing operations -
assuming dilution ............... 0.80 0.68
Cash dividends .................... 0.27 0.24
Book value ........................ 7.85 7.00
SELECTED PERIOD-END BALANCES
Debt ................................. 705,898 109,793
Total assets ......................... 13,272,848 11,540,878
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
MarTex Bancshares, Inc.
MarTex is a Texas corporation and a registered bank holding company
under the Bank Holding Company Act of 1956, as amended, which owns all of the
issued and outstanding shares of stock of the Bank whose main office is in
Marshall, Texas. As of September 30, 1998 MarTex had total consolidated assets
of $319 million and shareholders' equity of $26.4 million. The Bank is a state
banking association having, respectively, one office in Gladewater, one in
Chireno, one in Elysian Fields, one in Mineola, two in Lindale, one in
Pittsburg, and two offices in Marshall, Texas, for a total of nine offices. The
Bank engages in retail and commercial banking services, including taking
deposits and extending secured and unsecured credit.
The principal offices of MarTex are located at 2615 East End Boulevard
South, Marshall, Texas 75670 and its telephone number is (903) 938-9949. For
additional information concerning the business of MarTex and its financial
condition, see "CERTAIN INFORMATION CONCERNING MARTEX", "MARTEX FINANCIAL
STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)",
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF MARTEX FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997",
"MARTEX FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996" AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF MARTEX FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997 AND DECEMBER
31, 1996".
Selected Financial Data of MarTex
The following selected financial information of MarTex with respect to
each year in the three-year period ended December 31, 1997 and the nine-month
periods ended September 30, 1998 and 1997 has been derived from the financial
statements of MarTex. The information set forth below should be read in
conjunction with MarTex's financial statements, the notes thereto, and MarTex's
Management's Discussion and Analysis of Financial Condition and Results of
Operations elsewhere in this Proxy Statement/Prospectus.
<PAGE>
<TABLE>
<CAPTION>
MARTEX BANCSHARES, INC.
SELECTED FINANCIAL INFORMATION
(Unaudited)
Year Ended December 31 9 Months Ended September 30
- -------------------------------------------------------------------------------------------------------------------
($ in thousands, except per share amounts)
1997 1996 1995 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income .................. $ 12,044 $ 8,590 $ 7,971 $ 9,088 $ 8,979
Income from continuing operations .... 3,099 2,186 2,198 2,255 2,075
Per common share:
Income from continuing operations . 0.26 0.18 0.24 0.19 0.18
Income from continuing operations -
assuming dilution ............... 0.26 0.18 0.24 0.19 0.18
Cash dividends .................... 0.04 0.03 0.04 0.03 0.03
Book value ........................ 2.05 1.79 1.58 2.23 1.96
SELECTED PERIOD-END BALANCES
Debt ................................. 1,014 2,563 - 831 1,197
Total assets ......................... 315,855 284,278 158,773 319,066 292,165
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MARTEX BANCSHARES, INC.
QUARTERLY INCOME RESULTS
- ------------------------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts)
- ------------------------------------------------------------------------------------------
3/31/98 6/30/98 9/30/98
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income .... $6,028 $6,066 $5,990
Net interest income 2,955 3,058 3,075
Net income ......... 665 755 835
Net income per share 0.06 0.06 0.07
- ------------------------------------------------------------------------------------------
3/31/97 6/30/97 9/30/97 12/31/97
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income .... $5,486 $5,564 $5,682 $5,914
Net interest income 2,976 2,969 3,034 3,065
Net income ......... 711 667 697 1,024
Net income per share 0.06 0.06 0.06 0.09
- ------------------------------------------------------------------------------------------
3/31/96 6/30/96 9/30/96 12/31/96
- ------------------------------------------------------------------------------------------
Interest income .... $3,354 $3,500 $3,558 $4,208
Net interest income 2,001 2,128 2,087 2,374
Net income ......... 554 483 534 615
Net income per share 0.06 0.05 0.06 0.05
</TABLE>
<PAGE>
Pro Forma Combined Selected Financial Information (Unaudited)
The following table sets forth certain unaudited pro forma combined
selected financial information for Hibernia, after giving effect for the mergers
with Northwest Bancshares of Louisiana, Inc. ("Northwest"), ArgentBank
("Argent") and Firstshares of Texas, Inc. ("Firstshares"), consummated in the
first quarter of 1998, and Peoples Holding Corporation ("Peoples") consummated
in the third quarter of 1998, as discussed in Note A to the Pro Forma Combined
Income Statements, and MarTex Bancshares, Inc. The pro forma information, which
reflects the Merger and the consummated mergers with Northwest, Argent,
Firstshares and Peoples using the pooling-of-interests method of accounting, is
presented for information purposes only. The results shown here are not
necessarily indicative of the actual results that might have occurred had the
mergers been completed at the beginning of the periods presented. Also, this
information is not necessarily indicative of results that might be achieved in
the future if the Merger is completed. See "PRO FORMA FINANCIAL INFORMATION"
contained elsewhere herein.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA HIBERNIA CORPORATION*
PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION
Year Ended December 31 9 Months Ended September 30
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited ($ in thousands, except per share amounts)
1997 1996 1995 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net interest income .................. $ 494,080 $ 430,859 $ 379,331 $ 402,211 $ 366,271
Income from continuing operations .... 147,895 130,079 148,404 132,969 113,368
Per common share:
Income from continuing operations . 0.90 0.82 0.95 0.81 0.69
Income from continuing operations -
assuming dilution ............... 0.89 0.82 0.95 0.80 0.68
Cash dividends .................... 0.33 0.29 0.25 0.27 0.24
Book value ........................ 7.15 6.41 5.89 7.86 6.99
SELECTED PERIOD-END BALANCES
Debt ................................. 507,562 59,755 36,744 706,729 110,990
Total assets ......................... 12,704,039 11,015,214 9,176,435 13,591,914 11,833,043
- ----------------
* Includes Hibernia Corporation and MarTex Bancshares, Inc.
</TABLE>
<PAGE>
Comparative Per Share Information (Unaudited)
The following table sets forth for Hibernia Common Stock and MarTex
Common Stock certain unaudited pro forma combined and unaudited pro forma
equivalent per share financial information for the nine-months periods ended
September 30, 1998 and 1997 and for the years ended December 31, 1997, 1996 and
1995. Information under the column titled "Hibernia Corporation" is based on
Hibernia's Annual Report on Form 10-K for the year ended December 31, 1997 after
giving effect for mergers with Northwest, Argent and Firstshares, consummated in
the first quarter of 1998, and Peoples consummated in the third quarter of 1998,
each of which were accounted for as poolings of interests, and Hibernia's
Quarterly Report on Form 10-Q for the nine-month period ended September 30,
1998. Information under the column titled "MarTex Bancshares, Inc." is based on,
and should be read in conjunction with, the historical financial statements and
related notes and Management's Discussion and Analysis of Financial Condition
and Results of Operations of MarTex contained elsewhere in this Proxy
Statement/Prospectus.
Information under the column entitled "Pro Forma Hibernia Corporation
(with MarTex Bancshares, Inc.)" is based upon the pro forma financial statements
and related notes contained elsewhere herein. Such pro forma combined
information, which reflects the Merger and the consummated mergers with
Northwest, Argent, Firstshares and Peoples, is presented for informational
purposes only and should not be construed as indicative of the actual operations
that would have occurred had the Merger been consummated at the beginning of the
periods indicated or that may be obtained in the future. The pro forma combined
information gives effect to the issuance, in each of the periods presented, of
22,078,237 shares of Hibernia Common Stock for all of the outstanding shares of
Northwest common stock, Argent common stock, Firstshares common stock and
Peoples common stock and 3,450,000 shares of Hibernia Common Stock for all
outstanding shares of MarTex Common Stock.
The information under the column entitled "MarTex Bancshares, Inc. Pro
Forma Equivalent" is derived by multiplying the amounts contained in the column
titled "Pro Forma Hibernia Corporation (with MarTex Bancshares, Inc.)" by
0.24859 (the Exchange Rate for purposes of this pro forma presentation).
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA
HIBERNIA MARTEX
CORPORATION BANCSHARES, INC.
HIBERNIA MARTEX (WITH MARTEX PRO FORMA
CORPORATION BANCSHARES, INC. BANCSHARES, INC.) EQUIVALENT
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Common Share:
Income from continuing operations:
For the nine months ended September 30,
1998 $ 0.82 $ 0.19 $ 0.81 $ 0.20
1997 0.69 0.18 0.69 0.17
For the year ended December 31,
1997 $ 0.90 $ 0.26 $ 0.90 $ 0.22
1996 0.83 0.18 0.82 0.20
1995 0.96 0.24 0.95 0.24
Income from continuing operations -
assuming dilution:
For the nine months ended September 30,
1998 $ 0.80 $ 0.19 $ 0.80 $ 0.20
1997 0.68 0.18 0.68 0.17
For the year ended December 31,
1997 $ 0.89 $ 0.26 $ 0.89 $ 0.22
1996 0.82 0.18 0.82 0.20
1995 0.95 0.24 0.95 0.24
Cash dividends:
For the nine months ended September 30,
1998 $ 0.27 $ 0.03 $ 0.27 $ 0.07
1997 0.24 0.03 0.24 0.06
For the year ended December 31,
1997 $ 0.33 $ 0.04 $ 0.33 $ 0.08
1996 0.29 0.03 0.29 0.07
1995 0.25 0.04 0.25 0.06
Book Value:
At September 30, 1998 $ 7.85 $ 2.23 $ 7.86 $ 1.95
At December 31, 1997 7.15 2.05 7.15 1.78
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MEETING INFORMATION
You have received this Proxy Statement/Prospectus because the MarTex
Board is soliciting your proxy for the Special Meeting. Each copy of this Proxy
Statement/Prospectus mailed to holders of MarTex Common Stock is accompanied by
a proxy card for use at the Special Meeting and at any adjournment of the
Special Meeting. The Special Meeting is scheduled to be held at ____ P.M., local
time, on February ___, 1999, at the main office of First Service Bank, 401 South
Alamo, Marshall, Texas, 75670. Only holders of record of MarTex Common Stock at
the close of business on the Record Date are entitled to vote at the Special
Meeting. At the Special Meeting, holders of MarTex Common Stock will consider
and vote upon the Agreement, the Merger and the issuance of shares of MarTex
Common Stock to two individuals under the Stock Grant Agreements. Any other
matters that are properly brought before the Special Meeting or any adjournment
of the Meeting will also be voted upon.
PLEASE COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED, POSTAGE PAID ENVELOPE.
Solicitation and Revocation of Proxies
If you have delivered a proxy for the Meeting, you may revoke it any
time before it is voted by attending the Special Meeting and voting in person.
You may also give notice in writing to the Secretary of MarTex prior to the date
of the Special Meeting that you are revoking your proxy. Finally, you may submit
a signed proxy card bearing a date later than your initial proxy, and if it is
received before the Special Meeting, the later-dated proxy will be voted. Proxy
cards received at or prior to the Special Meeting and not subsequently revoked
will be voted as directed. If instructions are not given, executed proxy cards
will be voted FOR approval of the Agreement, the Merger and the issuance of
shares of MarTex Common Stock to two individuals under the Stock Grant
Agreements. If any other matters are properly presented at the Special Meeting
for consideration, the persons named in the proxy card will have discretionary
authority to vote on those matters. The MarTex Board is not aware of any matter
to be presented at the Special Meeting other than the proposal to approve the
Merger, the Agreement and the issuance of shares of MarTex Common Stock to two
individuals under the Stock Grant Agreements.
The cost of soliciting proxies from MarTex's shareholders will be borne
by MarTex, except that Hibernia will bear all expenses incurred in printing this
Proxy Statement/Prospectus. The solicitation will be made by mail but also may
be made by telephone or other means of telecommunications or in person by the
directors, officers and employees of MarTex. If these individuals solicit votes
in that manner, they will not receive additional compensation for doing so.
MARTEX SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH
THEIR PROXY CARDS. IF THE MERGER IS APPROVED, SHAREHOLDERS WILL RECEIVE
INSTRUCTIONS REGARDING THE EXCHANGE OF THEIR STOCK CERTIFICATES AFTER THE MERGER
HAS BEEN CONSUMMATED.
Quorum and Vote Required
A majority of the outstanding shares of MarTex Common Stock constitutes
a quorum for purposes of the Special Meeting. The affirmative vote of the
holders of two-thirds of the issued and outstanding shares of MarTex Common
Stock is required to approve the Merger and the affirmative vote of seventy-five
percent of the issued and outstanding shares of MarTex Common Stock (excluding
shares owned (actually or constructively)) by Messrs. McWhorter and
Meisenheimer) is required to approve the issuance of shares of MarTex Common
Stock pursuant to the Stock Grant Agreements. Votes may be cast in person or by
proxy for the Special Meeting. The Record Date is January __, 1999. Shareholders
of record as of the close of business on the Record Date are entitled to notice
of the Special Meeting and to vote at the Meeting. As of the Record Date, there
were _____________ shares of MarTex Common Stock outstanding and entitled to
vote at the Special Meeting. Each share of MarTex Common Stock is entitled to
one vote at the Special Meeting.
An abstention will be considered present for quorum purposes, but will
have the same effect as a vote against the proposals to be considered at the
Special Meeting. Because a quorum is determined based on the total number of
shares outstanding, a broker non-vote would make it more difficult to obtain a
quorum, because the shares would not be present for quorum purposes.
As of the Record Date, the directors and executive officers of MarTex
beneficially owned a total of 8,728,573 shares of MarTex Common Stock, or
approximately 73.5% of the outstanding shares of MarTex Common Stock. These
individuals have agreed to vote their stock in favor of the Merger and the
Agreement. However, if the Fairness Opinion is withdrawn or if any of these
individuals are legally required to abstain from voting or to vote against the
Merger and the related Agreement in the opinion of their counsel, they are not
required to vote in favor of the Merger. The directors of MarTex, executive
officers and other officers beneficially owning 8,503,944 shares of MarTex
Common Stock as the Record Date (73.3% of the issued and outstanding shares of
MarTex Common Stock) (excluding shares owned (actually or constructively by
Messrs. McWhorter and Meisenheimer) have also agreed to vote their stock in
favor of the issuance of shares of MarTex Common Stock pursuant to the Stock
Grant Agreements.
Recommendation
The Board of Directors of MarTex has approved the Agreement and
believes the Merger is in the best interests of MarTex and its shareholders. The
Board of Directors also believes that approval of the issuance of shares of
MarTex Common Stock pursuant to the Stock Grant Agreements is appropriate. The
MarTex Board recommends that holders of MarTex Common Stock vote FOR approval of
the Agreement, the Merger and the issuance of shares of MarTex Common Stock to
two individuals under the Stock Grant Agreements. In making its recommendation
to shareholders regarding approval of the Agreement and the Merger, the MarTex
Board considered, among other things, the Fairness Opinion, which concludes that
the Merger Consideration to be received by the MarTex shareholders pursuant to
the Merger is fair, from a financial point of view, to the shareholders of
MarTex. See "Background of and Reasons for the Merger" and "Opinion of Financial
Advisor" under "PROPOSED MERGER", below.
PROPOSED MERGER
This section of the Proxy Statement/Prospectus describes certain
aspects of the Merger. The following description is not intended to include each
aspect of the Merger, but rather contains only the significant terms of the
Merger. This discussion is qualified in its entirety by reference to the
Agreement, which is attached as Appendix A to this Proxy Statement/Prospectus
and is incorporated herein by reference. We urge you to read the Agreement
carefully and in its entirety.
General
If the holders of MarTex Common Stock approve the Agreement and the
Merger and the other conditions to the consummation of the Merger are satisfied,
MarTex will be merged with and into Hibernia. At that time, the separate
existence of MarTex will cease. Immediately after the merger of MarTex into
Hibernia, the Bank will be merged into HNB. At that time, the separate existence
of the Bank will cease. As soon as practicable following the Effective Date, the
operations previously conducted by the Bank will be conducted under the name of
HNB. See "PROPOSED MERGER - Management and Operations after the Merger".
Hibernia will exchange shares of Hibernia Common Stock, plus cash
instead of any fractional share, for each outstanding share of MarTex Common
Stock as to which dissenters' rights have not been perfected and exercised. Each
share of Hibernia Common Stock outstanding immediately prior to the effective
date of the Merger will remain outstanding and unchanged as a result of the
Merger. See "Terms of the Merger", below, for a discussion of the Exchange Rate
for the MarTex Common Stock.
Background of and Reasons for the Merger
Background. In November, 1997, the Board of MarTex concluded that it
should explore the potential sale of MarTex or the potential merger of MarTex
with another financial institution. The Board engaged the Advisor to assist in
locating potential parties interested in acquiring MarTex and evaluating
expressions of interest and proposals from such parties. The result of this
process was the negotiation and execution of the Agreement on June 29, 1998
(which was amended and restated effective as of the same date).
Reasons for the Merger. The terms of the Agreement, including the
Exchange Rate, are the result of arms-length negotiations between Hibernia and
MarTex and their respective representatives. MarTex's Board of Directors
believes that the Merger is fair and in the best interests of its shareholders.
In reaching that decision, the MarTex Board consulted with its financial and
other advisors, as well as with MarTex's management, and considered a number of
factors, including, but not limited to, the following:
(a) the financial condition and results of operations of, and prospects
for, each of Hibernia and MarTex;
(b) the financial terms of the Merger, including the amount and type of
the merger consideration to be received by MarTex's shareholders
pursuant to the Agreement;
(c) the Hibernia Common Stock to be received by holders of MarTex
Common Stock pursuant to the Agreement will be listed for trading on
the NYSE and will provide liquidity that is unavailable to holders of
MarTex Common Stock, for which an active trading market does not exist;
(d) potential for increased dividends on Hibernia Common Stock compared
to MarTex Common stock;
(e) the Agreement will allow holders of MarTex Common Stock to become
shareholders of Hibernia, an institution which was, as of September 30,
1998 the largest bank holding company headquartered in Louisiana;
(f) the consideration to be received by MarTex shareholders in relation
to MarTex earnings and book value;
(g) the MarTex Board believes that changes in the regulatory
environment will result in MarTex facing additional competitive
pressures in its market area from other financial institutions with
greater financial resources capable of offering a broad array of
financial services;
(h) the Merger is expected to qualify as a tax-free reorganization so
that the holders of MarTex Common Stock will not recognize any gain in
the transaction; and
(i) the opinion received from the Advisor that the Merger Consideration
to be received in the Merger by the holders of MarTex Common Stock
pursuant to the Agreement was fair to such shareholders from a
financial point of view as of the date of such opinion.
The MarTex Board did not assign any specific or relative weight to the
foregoing factors in its considerations. The MarTex Board believes that the
Agreement and the Merger will provide significant value to all MarTex
shareholders.
Based on the foregoing, the MarTex Board has unanimously approved the
Agreement and the Merger, believes that the Agreement and the Merger are in the
best interests of MarTex's shareholders, and recommends that all holders of
MarTex Common Stock vote "FOR" the approval of the Agreement and the Merger.
Terms of the Merger
If the holders of MarTex Common Stock approve the Agreement and the
Merger and the other conditions to the consummation of the Merger are satisfied,
the Merger will be completed on the Effective Date. (See "PROPOSED
MERGER--Representations and Warranties; Conditions to the Merger; Waiver" for a
discussion of the other conditions to completing the Merger.)
The Agreement provides that Hibernia will issue to the holders of
MarTex Common Stock (other than holders who exercise and perfect dissenters'
rights under Texas law) a maximum of 3,450,000 shares of Hibernia Common Stock.
If the Department of Justice, for antitrust reasons, requires Hibernia after the
Closing Date to divest a portion of the loans and deposits it acquires from
MarTex by virtue of the Merger, the Agreement provides a formula to reduce the
number of shares of Hibernia Common Stock to be issued in the Merger to reflect
the economic consequences of the divestiture to Hibernia. In December, 1998, the
Department of Justice advised the OCC that the Department of Justice did not
have any anti-trust concerns with respect to the Merger. As a result, Hibernia
will not have to divest any loans or deposits. Consequently, the number of
shares of Hibernia Common Stock that will be exchanged for each share of MarTex
Common Stock will be determined by dividing 3,450,000 by the number of shares of
MarTex Common Stock outstanding on the Effective Date. MarTex shareholders who
would otherwise receive a fraction of a share of Hibernia Common Stock will
receive cash instead of that fractional share.
During the period between the date of this Proxy Statement/Prospectus
and the Effective Date, the number of outstanding shares of MarTex Common Stock
will increase as a result of shares of MarTex Common Stock issued to (a)
officers and directors who exercise existing options prior to the Effective Date
and (b) two individuals pursuant to the Stock Grant Agreements on the day
immediately before the Effective Date. Consequently, MarTex cannot determine the
exact number of shares of Hibernia Common Stock that will be issued to MarTex
shareholders in exchange for each share of MarTex Common Stock. On the Effective
Date, Hibernia will calculate the exact number of shares of Hibernia Common
Stock that will be exchanged for each share of MarTex Common Stock. A chart
reflecting the exchange ratio of Hibernia Common Stock for MarTex Common Stock
assuming a range of prices of Hibernia Common Stock is set forth under the
caption "SUMMARY-Stock Grant Agreements."
On the Closing Date each outstanding share of MarTex Common Stock,
other than shares held by shareholders who exercise and perfect dissenters'
rights, will automatically convert to the number of shares of Hibernia Common
Stock described herein. Shareholders who held MarTex Common Stock will
automatically be entitled to all of the rights and privileges afforded to
holders of Hibernia Common Stock at that time. However, the exchange of MarTex
stock certificates for certificates representing Hibernia Common Stock will
occur after the Closing Date.
YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO MARTEX OR HIBERNIA
AT THIS TIME.IF THE MERGER IS COMPLETED, YOU WILL RECEIVE INSTRUCTIONS REGARDING
THE EXCHANGE OF YOUR CERTIFICATES OF MARTEX COMMON STOCK FOR HIBERNIA STOCK.
For a discussion of the rights of dissenting shareholders, see "PROPOSED
MERGER -- Rights of Dissenting Shareholders."
Opinion of Financial Advisor to MarTex
MarTex retained the Advisor to provide its opinion of the fairness from
a financial viewpoint, of the Merger Consideration to be received by the
stockholders of MarTex in connection with the Merger with Hibernia. As part of
its investment banking business, the Advisor is regularly engaged in the
valuation of securities in connection with mergers and acquisitions and
valuations for estate, corporate and other purposes. The MarTex Board of
Directors retained the Advisor based upon its experience as a financial advisor
in mergers and acquisitions of financial institutions and its knowledge of
financial institutions. On June 29, 1998, the Advisor rendered its oral opinion
that, as of such date, the Merger Consideration was fair, from a financial point
of view, to MarTex shareholders. The Advisor rendered its written Fairness
Opinion as of January 19, 1999.
The full text of the Fairness Opinion which sets forth, among other
things, assumptions made, procedures followed, matters considered, and
limitations on the review undertaken, is attached as Appendix B to this Proxy
Statement/Prospectus. MarTex shareholders are urged to read the Advisor's
Fairness Opinion carefully and in its entirety. The Fairness Opinion is
addressed to the MarTex Board, and does not constitute a recommendation to any
MarTex shareholder as to how such shareholder should vote at the MarTex Special
Meeting.
In connection with the Fairness Opinion, the Advisor:
1. reviewed the Merger Agreement;
2. reviewed certain publicly available financial statements and regulatory
information concerning Hibernia and MarTex, respectively;
3. reviewed certain internal financial statements and other financial and
operating data of MarTex provided to the Advisor by MarTex's
management;
4. reviewed the reported market prices and trading activity for Hibernia
Common Stock;
5. discussed the past and current operations, financial condition, and
future prospects of MarTex with its executive management;
6. compared MarTex and Hibernia from a financial point of view with
certain other banking companies that the Advisor deemed to be relevant;
7. compared the financial performance of Hibernia and the market prices
and trading activity of Hibernia's Common Stock with that of certain
other indices of publicly traded equity securities;
8. reviewed the financial terms, to the extent publicly available, of
certain comparable merger transactions in the Southwestern United
States and in Texas and;
9. performed such other analyses and reviews as the Advisor deemed
appropriate.
In connection with its review, the Advisor relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available, and the Advisor did not assume any responsibility for
independent verification of such information. The Advisor assumed that internal
confidential financial projections provided by MarTex were reasonably prepared
reflecting the best currently available estimates and judgments of the future
financial performance of MarTex and did not independently verify the validity of
such assumptions. The Advisor did not make any independent evaluation or
appraisal of the assets or liabilities of MarTex, nor was the Advisor furnished
with any such appraisals. The Advisor did not examine any individual loan files
of MarTex. The Advisor is not an expert in the evaluation of loan portfolios for
the purposes of assessing the adequacy of the allowance for losses with respect
thereto and has assumed that such allowance is, in the aggregate, adequate to
cover such losses.
With respect to Hibernia, the Advisor relied solely upon publicly available
data regarding Hibernia's financial condition and performance. The Advisor did
not meet with or discuss this publicly available information with the management
of Hibernia. The Advisor did not conduct any independent evaluation or appraisal
of the assets, liabilities or business prospects of Hibernia, was not furnished
with any evaluations or appraisals, and did not review any individual credit
files of Hibernia.
The Fairness Opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to the Advisor as
of January 18, 1999.
In rendering the Fairness Opinion, the Advisor performed a variety of
financial analyses. The preparation of an opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Consequently, the Fairness Opinion is not readily susceptible to partial
analysis of summary description. Moreover, the evaluation of fairness, from a
financial point of view, of the Merger Consideration is to some extent
subjective, based on the experience and judgment of the Advisor, and not merely
the result of mathematical analysis of financial data. Accordingly,
notwithstanding the separate factors summarized below, the Advisor believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, could create an incomplete view of the evaluation process
underlying its opinion. The ranges of valuations resulting from any particular
analysis described below should not be taken to be the Advisor's view of the
actual value of MarTex.
In performing its analyses, the Advisor made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of MarTex. The analyses performed
by the Advisor are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses, nor are they appraisals. In addition, the Advisor's analyses
should not be viewed as determinative of the opinions of the MarTex Board and
management with respect to the value of MarTex.
The following is a summary of the analyses performed by the Advisor in
connection with its opinion dated as of January 19, 1999. The following
discussion contains financial information concerning MarTex and Hibernia as of
September 30, 1998 and market information as of January 18, 1999.
Analysis of Selected Transactions. The Advisor performed an analysis of
premiums paid in selected pending or recently completed acquisitions of banking
organizations in Texas and in the Southwestern United States with comparable
characteristics to the Merger. Two sets of comparable transactions were analyzed
to ensure a thorough comparison.
The first set of comparable transactions consisted of a group of
comparable transactions based upon the geographical market area of Texas for
which pricing data was available. These comparable transactions consisted of
four (4) mergers and acquisitions of banks located in Texas with assets between
$150 million and $750 million which sold for stock between October 1, 1997 and
January 15, 1999. The analysis yielded multiples of the purchase price in these
transactions relative to:
1. Book value ranging from 2.08 times to 3.10 times with an average of
2.60 times and a median of 2.62 times (compared with the implied
multiples in the Merger of 2.19 times September 30, 1998 book value for
MarTex);
2. Last 12 months earnings ranging from 14.6 times to 20.6 times with an
average of 17.4 times and a median of 17.2 times (compared with the
implied multiples in the Merger of 17.6 times last 12 months earnings
as of September 30, 1998 for MarTex);
3. Total assets ranging between 21.9% and 23.2% with an average of 22.7%
and a median of 22.8% (compared with the implied multiples in the
Merger of 18.1% of September 30, 1998 total assets for MarTex); and
4. Total deposits ranging from 23.9% to 25.8% with an average of 25.3% and
a median of 25.7% (compared with the implied multiples in the Merger of
20.0% of deposits as of September 30, 1998 for MarTex).
The second set of comparable transactions consisted of a group of
comparable transactions based upon the profitability, asset size and
geographical market area of MarTex for which pricing data is available. These
comparable transactions specifically consisted of seven (7) mergers and
acquisitions of banks in the Southwest with total assets between $150 million
and $750 million and which sold for stock between January 1, 1998 and January
15, 1999. The analysis yielded multiples of the purchase price in these
transactions relative to:
1. Book value ranging from 2.08 times to 3.29 times with an average of
2.64 times and a median of 2.55 times (compared with the multiples
implied in the Merger of 2.19 times September 30, 1998 book value for
MarTex);
2. Last 12 months earnings ranging from 9.4 times to 26.6 times with an
average of 19.1 times and a median of 19.4 times (compared with the
multiples implied in the Merger of 17.6 times last 12 months earnings
as of September 30, 1998 for MarTex);
3. Total assets ranging between 20.2% and 32.2% with an average of 25.8%
and a median of 24.2% (compared with the multiples implied in the
Merger of 18.1% of September 30, 1998 total assets for MarTex); and
4. Total deposits ranging from 23.2% to 38.1% with an average of 29.5% and
a median of 26.8% (compared with the multiples implied in the Merger of
20.0% of deposits as of September 30, 1998 for MarTex).
Discounted Cash Flow Analysis. Using discounted cash flow analysis, the
Advisor estimated the present value of the future after-tax cash flow streams
that MarTex could produce through the year 2003, under various circumstances,
assuming that it performed in accordance with the earnings/return projections of
management.
The Advisor estimated the terminal value for MarTex at the end of 2003 by
applying multiples of earnings ranging from 10 times to 21 times to the final
period projected earnings. The Advisor then discounted the annual cash flow
streams (defined as all earnings in excess of that required to maintain a
tangible equity to asset ratio of 7.0%) and the terminal value using discount
rates ranging from 13% to 17%. The discount range was chosen to reflect
different assumptions regarding the required rates of return of MarTex and the
inherent risk surrounding the underlying projections. This discounted cash flow
analysis indicated a range of $26,448,000 to $55,414,000, compared to the value
of the Merger Consideration for MarTex of $57,787,500 as of January 18, 1999.
The Advisor also performed a cash flow analysis using an estimated terminal
value for MarTex at the end of 2003 by applying multiples of book value ranging
from 1.20 times to 2.60 times to the final period projected equity. The Advisor
then discounted the annual cash flow streams (defined as all earnings in excess
of that required to maintain a tangible equity to asset ratio of 7.0%) and the
terminal value using discount rates ranging from 13% to 17%. The discount range
was chosen to reflect different assumptions regarding the required rates of
return of MarTex and the inherent risk surrounding the underlying projections.
This discounted cash flow analysis indicated a range of $23,485,000 to
$48,950,000, compared to the value of the Merger Consideration for MarTex of
$57,787,500 as of January 18, 1999.
Comparable Company Analysis. The Advisor compared selected stock market
results of Hibernia to the publicly available corresponding data of other
composites which the Advisor deemed to be relevant, including SNL Securities,
L.P.'s (i) index of all publicly traded banks and (ii) the SNL index of banks in
the Southeast Region and the S&P 500. Although Hibernia's Common Stock price has
exhibited some recent weakness relative to the selected indices, this weakness
in itself is not material to the fairness from a financial point of view of the
Merger Consideration to be received by MarTex shareholders as of the date
hereof.
No company or transaction used in the comparable company and comparable
transaction analyses is identical to MarTex, Hibernia or the Merger.
Accordingly, an analysis of the results of the foregoing necessarily involves
complex considerations and judgments concerning differences in financial and
operating characteristics of MarTex and Hibernia and other factors that could
affect the public trading value of the companies to which they are being
compared. Mathematical analysis (such as determining the average or median) is
not in itself a meaningful method of using comparable transaction data or
comparable company data.
Pursuant to an engagement letter dated January 20, 1998, between MarTex and
the Advisor, MarTex agreed to pay the Advisor a fee based on the consideration
received by MarTex as a result of the Merger according to the following
schedule:
Consideration up to $60 million .75%
Next $1 million 2.00%
Next $1 million 3.00%
Next $1 million 4.00%
Next $1 million 5.00%
Next $1 million 6.00%
Amount over $65 million 10.00%
MarTex also agreed to indemnify and hold harmless the Advisor and its
officers and employees against certain liabilities in connection with its
services under the engagement letter, except for liabilities resulting from the
negligence, violation of law or regulation or bad faith of the Advisor or any
matter for which the Advisor may have strict liability.
The Fairness Opinion is directed only to the question of whether the
Merger Consideration is fair and equitable from a financial perspective and does
not constitute a recommendation to any MarTex shareholder to vote in favor of
the Merger. No limitations were imposed on the Advisor regarding the scope of
its investigation or otherwise by MarTex.
Based on the results of the various analyses described above, the
Advisor concluded that the Merger Consideration to be received by the MarTex
shareholders pursuant to the Merger is fair, from a financial point of view, to
the shareholders of MarTex.
Closing Date and Effective Date of the Merger
The Agreement provides for a Closing Date on (A) the first business day
after the last to occur of (i) the date that falls 15 days after regulatory
approval of the Merger or (ii) the date that falls five days after the Special
Meeting or (B) such other date within 60 days of the date determined in
accordance with the formula in clause (A). The parties will choose an Effective
Date on which the Merger will be effective. The Effective Date will be the date
and time on which the Secretary of State of Louisiana and the Secretary of State
of Texas issue certificates of merger relating to the Merger. It is expected
that the Effective Date will occur shortly after the Closing Date. The parties
currently anticipate an Effective Date of February ___, 1999.
The necessary shareholder approvals may not be obtained. Other
conditions precedent to the Merger also may not be satisfied. These conditions
are not all within the control of Hibernia and/or MarTex, and the parties cannot
assure you that they will be obtained.
Hibernia and MarTex anticipate that all conditions to completing the
Merger will be satisfied so that the Merger can be completed by February ___,
1999. However, delays in the consummation of the Merger could occur.
The Board of Directors of either Hibernia or MarTex may terminate the
Agreement if the Merger is not completed by March 31, 1999 or any condition to
completing the Merger cannot be satisfied by March 31, 1999 and will not be
waived by the party or parties entitled to waive it. See "PROPOSED MERGER --
Conditions to Consummation of the Merger" and "PROPOSED MERGER --Waiver,
Amendment, and Termination of the Agreement."
Employee Benefits
Former employees of MarTex who become employed by Hibernia or its
subsidiaries as of the Effective Date will be entitled to the same employee
benefits as those offered by Hibernia and HNB to their employees. However,
employees of MarTex will not be required to wait for any period in order to be
eligible to participate in Hibernia's Flex Plan (including its medical and
dental coverage). Hibernia will also give MarTex's employees full credit for
their years of service (for both eligibility and vesting) with MarTex for
purposes of Hibernia's 401(k) plan and its ESOP. If, however, Hibernia decides
that it cannot merge any benefit plan of MarTex into a comparable benefit plan
of Hibernia or HNB without creating material potential liability for Hibernia's
or HNB's plans, then Hibernia may freeze the existing benefit plan of MarTex and
prohibit participation by former employees of MarTex in Hibernia's or HNB's
plans for the period of time required by applicable law to ensure that
Hibernia's and HNB's plans are not deemed to be successor plans of the MarTex
plan in question.
Surrender and Exchange of Stock Certificates
Chase Mellon Shareholder Services will act as Exchange Agent for
purposes of the exchange of MarTex Common Stock for Hibernia Stock. Shortly
after the Effective Date, a letter of transmittal will be mailed to all
non-dissenting shareholders of MarTex. This letter of transmittal will include
instructions for the exchange of their MarTex Common Stock certificates for
certificates representing Hibernia Common Stock. Each certificate representing
MarTex Common Stock outstanding immediately prior to the Effective Date will be
deemed for all purposes to evidence ownership of the number of shares of
Hibernia Common Stock into which such shares have been converted on the
Effective Date, regardless when they are actually exchanged.
MARTEX SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS.
When the Exchange Agent receives certificates for MarTex Common Stock,
together with a properly completed letter of transmittal, it will issue and mail
to each holder of MarTex Common Stock who surrendered those items a certificate
representing the number of shares of Hibernia Common Stock to which such holder
is entitled. If the holder would otherwise be entitled to receive a fraction of
a share of Hibernia Common Stock, the Exchange Agent will mail the holder a
check representing cash paid instead of the fractional share.
Holders of record of MarTex Common Stock on the Effective Date will be
entitled to vote at any meeting of Hibernia shareholders if the record date for
the Hibernia meeting is after the Effective Date of the Merger. In that case,
holders of MarTex Common Stock would be able to vote the number of shares of
Hibernia Common Stock into which their MarTex Common Stock has been converted
regardless of whether they have surrendered their stock certificates. Dividends
or other distributions payable after the Effective Date on Hibernia Common Stock
will be paid only after you surrender your certificates for MarTex Common Stock.
When you surrender your MarTex Common Stock certificate for exchange, the
Exchange Agent will send to you all undelivered dividends and other
distributions on your Hibernia Stock. You will not receive interest on those
distributions for any period during which Hibernia holds them awaiting the
exchange of your MarTex Common Stock. Also, taxes may be deducted from those
distributions.
If you cannot locate your MarTex Common Stock certificate(s), please
contact F. Wayne McWhorter or Debbie Fowler prior to the Special Meeting. MarTex
will issue new certificates to shareholders who have misplaced their
certificates only if (a) the shareholders sign an affidavit certifying that the
certificates cannot be located, and (b) shareholders agree to indemnify MarTex
and Hibernia against any claim that may be made against either of them by the
owner of the lost certificate(s). MarTex or Hibernia may require a shareholder
to post a bond in an amount sufficient to support the shareholder's
indemnification obligation. If you have misplaced your stock certificates or if
you hold certificates in names other than your own, we encourage you to resolve
those matters before the Effective Date of the Merger. This will help to avoid
delays in exchanging your MarTex Common Stock.
Expenses
Hibernia will pay all expenses of printing and distributing this Proxy
Statement/Prospectus. The parties otherwise will pay all of their own expenses
related to negotiating and completing the Merger.
Representations and Warranties
MarTex and Hibernia have made certain representations and warranties
to each other as part of the Agreement. MarTex's representations and
warranties relate to, among other things: its organization and authority
to enter into the Agreement, its capitalization, properties, and financial
statements, pending and threatened litigation against MarTex, and MarTex
contractual obligations and contingent liabilities.
MarTex's representations and warranties are generally contained in Section 7 of
the Merger Agreement.
Hibernia's representations and warranties relate to, among other things: its
organization and authority to enter into the Agreement, its capitalization,
its financial statements and its public reports. Hibernia's representations and
warranties are generally contained in Section 8 of the Merger Agreement.
The representations and warranties of the parties generally will not
survive the Effective Date. Consequently, the parties' only recourse in the
event of a breach of a representation or warranty by the other party is to
re-negotiate the Merger or to terminate the Agreement. Once the Merger is
completed, the parties will have no basis for litigation against each other
based on the Agreement.
Conditions to the Merger; Waiver
The Agreement contains a number of conditions to completing the Merger.
The conditions must either be met or waived (if they are waivable) in order for
the Merger to occur. The conditions to completing the Merger include, among
other things:
the Agreement and Merger must be approved by MarTex shareholders; necessary
regulatory approvals must be obtained (particularly the approval of the OCC
which was obtained on December 15, 1998); the Tax Opinion must be issued;
the Registration Statement must become effective under the Securities Act
and there may not be a stop order suspending its effectiveness; there may
not be an order, decree or injunction enjoining or prohibiting completion
of the Merger; the representations and warranties set forth in the
Agreement must be accurate as of the Closing Date; the Hibernia Common
Stock to be issued in the Merger must be approved for listing on the NYSE;
the Merger must qualify for pooling-of-interests accounting treatment;
receipt by Hibernia of letters reasonably satisfactory to Hibernia from
each director of MarTex pursuant to which the directors indemnify Hibernia
against certain liabilities related to the Stock Grant Agreements; certain
opinions of counsel must be received by the parties; and MarTex must have
received updated Fairness Opinions within five days of the scheduled
mailing of this Proxy Statement and within five days of the Closing Date.
Most of the conditions to completing the Merger may be waived at any
time by the party for whose benefit they were created. Regulatory and
shareholder approvals may not be waived, however. Also, the Agreement may be
amended or supplemented at any time by written agreement of the parties.
Nevertheless, no waiver, amendment or supplement executed after the Agreement
has been approved by MarTex shareholders may reduce the Exchange Rate. Also, any
material change in the terms of the Merger after the Special Meeting would
require another special meeting of MarTex shareholders where the MarTex
shareholders would vote on whether to proceed with the Agreement and the Merger
in light of the material changes in the terms of the Merger.
Regulatory and Other Approvals
Hibernia is a registered bank holding company and is regulated by the
Federal Reserve Board. Although the Federal Reserve Board usually approves
mergers involving bank holding companies such as Hibernia and MarTex, Hibernia
has chosen to avail itself of a provision in the federal banking law whereby
approval of the Merger will not be required by the Federal Reserve Board if the
OCC approves the merger of the Bank with and into HNB.
HNB, as a national bank, is regulated by the OCC. The Merger of the
Bank with and into HNB must be approved by the OCC before it may be completed.
On December 15, 1998, the OCC approved the merger of the Bank with and into HNB.
The 15-day period during which the Department of Justice may object to the
Merger on antitrust grounds has expired.
The exchange of shares of Hibernia Common Stock for MarTex Stock in the
Merger has been registered with the SEC. The transaction will not be registered
in any state due an exemption from state regulation.
Business Pending the Merger
The Agreement requires MarTex to continue to operate its business in
the ordinary course pending the Merger. Among other things, MarTex may not,
without Hibernia's consent:
create or issue any additional shares of capital stock or any options or
other rights to purchase or acquire shares of capital stock, except for
shares of stock issued pursuant to terms of options, warrants and stock
grant agreements in existence on June 29, 1998; enter into employment
contracts with directors, officers or employees or otherwise agree to
increase the compensation of such persons (except in accordance with
existing agreements or past practices in the preceding three years); pay or
agree to pay any bonus to directors, officers or employees (except in
accordance with existing agreements or past practices in the preceding
three years), except that MarTex may pay to employees bonuses that have
been accrued through the Closing Date as long as the amounts of such
accruals and bonus payments are in accordance with past practices during
the preceding three years; enter into or substantially modify (except as
may be required by applicable law) any employee benefits plans; amend its
Articles of Incorporation or Bylaws; establish or add additional automatic
teller machines or branch or other banking offices, other than those
referred to in the Agreement; make any capital expenditures in excess of
$200,000 in connection with the completion of MarTex's branch location at
Hide-A-Way Lake or any capital expenditures in excess of $50,000 (excluding
those capital expenditures for the branch location in Hide-A-Way Lake);
merge with any other company or bank or liquidate or otherwise dispose of
its assets, provided that the officers and directors of MarTex may take
action that, in the opinion of counsel for MarTex, is required by
applicable law or is required to fulfill the fiduciary duties of MarTex
officers and directors; acquire another company or bank (except in
connection with foreclosures of bona fide loan transactions); or in the
case of MarTex (and not the Bank), make, declare, set aside or pay any
dividend or make any distribution on, or directly or indirectly combine,
redeem, purchase or otherwise acquire, any shares of MarTex Common Stock
(other than in a fiduciary capacity).
MarTex may not solicit bids or other transactions that would result in a merger
of MarTex with an entity other than Hibernia except in certain very limited
circumstances.
Termination
Either party may terminate the Agreement prior to the Effective Date
for certain reasons. A party may terminate the Agreement for these reasons even
after the Agreement and the Merger is approved by MarTex shareholders. These
reasons include, among others:
a breach by the other party (i) of any covenant, representation or warranty
in the Agreement if the facts constituting such breach reflect a material
and adverse change in the financial condition, results of operations,
business or prospects taken as a whole, of the breaching party, which
cannot be or is not cured within 60 days after written notice of such
breach is given to the party committing the breach or (ii) in the event of
a breach of a warranty or covenant, such breach results in a material
increase in the cost of the non-breaching parties performance of the
Agreement or a material decrease in the consideration to be received by
MarTex's shareholders; any application for any required federal or state
regulatory approval is denied, and the time for all appeals of the denial
has expired; the holders of MarTex Common Stock fail to approve the Merger
at the Special Meeting; by Hibernia, if Hibernia does not timely receive
releases and indemnification agreements on certain matters from Messrs.
McWhorter and Meisenheimer, affidavits from the directors of MarTex
relative to shares of stock to be issued to Messrs. McWhorter and
Meisenheimer under the Stock Grant Agreements and a legal opinion from
counsel for Messrs. McWhorter and Meisenheimer regarding the enforceability
of their releases; the Merger is not consummated by March 31, 1999 or any
condition to the Merger cannot be satisfied by that date and will not be
waived by the party entitled to waive it. at any time by the mutual consent
of the parties; by Hibernia, if the holders of more than 10% of the
outstanding MarTex Stock exercise statutory rights of dissent and
appraisal; by MarTex, if after March 31, 1998 a material adverse change
occurs in the financial condition, results of operations, business or
prospects of Hibernia or HNB (excluding changes in laws or regulations
affecting banking institutions generally); by Hibernia, if after March 31,
1998 a material adverse change occurs in the financial condition, results
of operations, business or prospects of MarTex or the Bank (excluding
changes in laws or regulations affecting banking institutions generally);
by Hibernia, if it shall determine in good faith that the Merger does not
qualify as a pooling-of-interests for accounting purposes; or by MarTex, if
MarTex does not receive an updated Fairness Opinion dated within five days
of the date of scheduled mailing of this Proxy Statement/Prospectus to its
shareholders, and updated to within five days of the Closing Date.
Certain provisions of the Agreement, including provisions relating to
indemnification and confidentiality survive both the Merger and a termination of
the Agreement without the Merger having been completed.
Management and Operations After the Merger
HNB and HNBT have filed an application with the OCC to merge HNBT into
HNB. This merger was approved by the OCC. Effective as of January 1, 1999, HNBT
was merged into HNB, HNBT ceased to exist after the merger and the business of
HNBT is now carried on by HNB.
If the conditions to the Merger are met or waived, MarTex will be
merged with and into Hibernia on the Effective Date. At that time, MarTex will
cease to exist as a separate company. Immediately after the Merger, the Bank
will be merged with and into HNB. At that time, the Bank will cease to exist as
a separate company. HNB will continue to operate as a wholly-owned subsidiary of
Hibernia after the Merger and will offer banking services similar to those
offered prior to the Merger.
The Boards of Directors of Hibernia and HNB will not change as a result
of the Merger. If you would like more information about the directors of
Hibernia, you may request a copy of Hibernia's Annual Report to Shareholders for
1997 and/or its proxy statement for its 1998 annual meeting of shareholders.
Both of these documents are incorporated herein by reference. See "AVAILABLE
INFORMATION."
Certain Differences in Rights of Shareholders
If the Merger is completed, all holders of MarTex Common Stock, other
than those who exercise and perfect dissenters' rights, will become shareholders
of Hibernia. Their rights as shareholders will then be governed by Hibernia's
Articles of Incorporation and Bylaws and the laws of the State of Louisiana
rather than MarTex's Articles of Incorporation and Bylaws and the laws of the
State of Texas. The following is a summary of the significant differences
between the rights of MarTex shareholders and Hibernia shareholders not
described elsewhere in this Proxy Statement/Prospectus.
Stock. The total number of shares of all classes of stock which
Hibernia has authority to issue is four hundred million. Three hundred million
shares are designated as Class A Common Stock of no par value and one hundred
million shares are designated as Preferred Stock, without par value. The rights,
preferences and privileges with respect to shares of preferred stock may be
determined by the Hibernia Board of Directors. Consequently, shares of preferred
stock could be issued in circumstances in which it would make an attempted
acquisition of Hibernia more difficult. Hibernia currently has 2,000,000 shares
of preferred stock outstanding. The holders of those preferred shares are
entitled to receive dividends on a quarterly basis and would have limited voting
rights if the dividends on their stock were not paid for a certain period of
time. If those voting rights were triggered, the preferred shareholders may be
able to elect a director to the board of directors of Hibernia. The total number
of shares of all classes of stock which MarTex has authority to issue is one
hundred million five hundred thousand. One hundred million shares are designated
common stock, $0.01 par value per share, and five hundred thousand shares are
designated preferred stock, $4.13 per share par value.
Liquidity of Stock. Except to the extent that liquidity exists under
the Put Option and the Parallel Exit Agreements discussed below, there currently
is no ready market for the shares of MarTex Stock, and such a market is not
likely to develop in the future. The shares of Hibernia Common Stock, if issued
in the Merger, will be registered under applicable securities laws and may
therefore be freely resold by persons who are not "affiliates" of MarTex or
Hibernia. See "Resale of Hibernia Common Stock." The Hibernia Common Stock also
is listed on the NYSE and actively traded on that exchange. Current quotes of
the market price of Hibernia Common Stock are available from brokerage firms and
other securities professionals, as well as other sources, and are published in
major newspapers on a daily basis.
The Carlile Shareholders entered into the Put Option when it acquired
Heritage. Generally, the Put Option allows any former shareholder of Heritage
and certain permitted transferees to require the Carlile Shareholders to buy
their MarTex Common Stock for $2.6433 per share, subject to adjustment in the
event of stock dividends or similar transactions. The Put Option may be
exercised during the period beginning on December 13, 1998 and ending on
December 12, 1999 upon 60 days prior notice to the Carlile Shareholders. The
Carlile Shareholders are obligated to buy such stock in the proportions set
forth below:
Quinton B. Carlile 32.03%
Kenneth Q. Carlile 32.60%
Steve B. Carlile 35.37%
The rights of the former Heritage shareholders under the Put Option
terminate on the first to occur of: (i) the date on which the former Heritage
shareholders receive an offer to sell or exchange their MarTex Common Stock for
cash or marketable securities having a value equal to or exceeding $2.6433 per
share; (ii) the date on which the former Heritage shareholders sell or exchange
their MarTex Common Stock pursuant to the terms of the Parallel Exit Agreement
described below; (iii) any merger or other transaction pursuant to which at
least 85% of the MarTex Common Stock would be sold or exchanged at the same
price per share or for the same consideration; or (iv) at midnight on December
12, 1999. This discussion is not intended as a complete statement of the rights
and obligations set forth in the Put Option. Reference is made to a copy of the
Put Option which may be obtained by any MarTex shareholder upon request to
MarTex.
The Merger will not be completed prior to December 13, 1998.
Consequently, the former Heritage shareholders may require the Carlile
Shareholders to purchase their MarTex Common Stock at $2.6433 per share by
following the terms of the Put Option. Former Heritage Shareholders should
evaluate whether they would prefer to sell their MarTex Common Stock to the
Carlile Shareholders for $2.6433 per share or receive Hibernia Common Stock
pursuant to the Merger. Each former Heritage Shareholder is encouraged to seek
their own counsel and advice with regard to this decision.
The Carlile Shareholders have executed Parallel Exit Agreements with
respect to MarTex Common Stock held by former shareholders of Security State
Bank, Elysian Fields, Texas, which was acquired by MarTex in March 1993, Mineola
Bancshares, Inc., Mineola, Texas, which was acquired by MarTex in March 1993,
Lindale National Bank, Lindale, Texas, which was acquired by MarTex in January
1995, and Heritage, which was acquired by MarTex on December 13, 1996. The total
number of shares of MarTex Common Stock subject to Parallel Exit Agreements is
estimated to be 4,278,982 shares, or 36% of the outstanding shares of MarTex
Common Stock.
In general, the Parallel Exit Agreements provide that if any member of
the Carlile Group intends to accept an offer to purchase his or their MarTex
Common Stock such that the number of shares of MarTex Common Stock owned by the
Carlile Group after the sale is less than 50% of the MarTex Common Stock owned
by the Carlile Group prior to such sale, then each holder of MarTex Common Stock
issued pursuant to the mergers described above who is not a member of the
Carlile Group has a right to participate in the sale on the same terms and
conditions. The Parallel Exit Agreements terminate on the first to occur of (i)
the consummation of an underwritten public offering of MarTex's Common Stock
which results in aggregate net proceeds to MarTex of not less than $3,000,000,
including underwriting discounts and commissions, (ii) the dissolution,
termination of existence or sale of all or substantially all of the assets of
MarTex or the merger or reorganization of MarTex in which MarTex is not the
surviving entity, (iii) the date the Carlile Group owns 50% or less of the
MarTex Common Stock, or (iv) December 31, 2022. The Parallel Exit Agreements do
not apply to certain transfers or sales made by members of the Carlile Group,
including (a) any pledge of MarTex Common Stock made by a member of the Carlile
Group pursuant to a bona fide loan transaction; (b) any transfer by a member of
the Carlile Group to any other member of the Carlile Group; (c) a partition,
transfer or sale of the community property interest in all or any part of the
MarTex Common Stock to the spouse of a member of the Carlile Group in connection
with the termination of a marital relationship; (d) any merger or other
transaction pursuant to which substantially all of the shares of MarTex Common
Stock would be sold or exchanged at the same price per share or for the same
consideration; and (e) any offer by an unrelated third party made pro rata to
all the holders of the MarTex Common Stock at the same price per share. This
discussion is not intended as a complete statement of the rights and obligations
created by the Parallel Exit Agreements. Reference is made to a copy of the
Parallel Exit Agreement, a copy of which may be obtained by any MarTex
Shareholder upon request to MarTex.
The Parallel Exit Agreements do not apply to the transfer of MarTex
Common Stock which will occur when the Merger is completed. Following
consummation of the Merger, the Parallel Exit Agreements will terminate.
Directors' Qualifications. Hibernia maintains certain qualifications
for its directors:
o must be no more than 71 years old at the time they are elected
(and must retire at the annual meeting following their having
reached that age),
o they must own at least $1,000 of Hibernia stock at the time
they are first elected as a director, and
o they may not be affiliated with any business competitor of
Hibernia.
MarTex does not have any specific qualifications for its directors.
Removal of Directors. Shareholders of Hibernia may remove a director
for cause (defined as gross negligence or willful misconduct) by the vote of a
majority of the total voting power and may remove a director without cause by a
vote of two-thirds of the total voting power. Directors of MarTex may be removed
at any time, with or without cause, at any meeting of the shareholders called
expressly for that purpose. The affirmative vote of a majority of the issued and
outstanding shares of MarTex entitled to vote on the matter is required to
remove directors of MarTex.
Amendment of Articles and Bylaws. Hibernia's Articles of Incorporation
may be amended by a vote of a majority of the voting power present at any
meeting called for that purpose. MarTex's Articles of Incorporation do not have
similar provisions; however, Texas law requires the affirmative vote of
two-thirds of the issued and outstanding shares entitled to vote unless any
class or series of shares is entitled to vote as a class, in which event, the
proposed amendment must be approved by the affirmative vote of the holders of at
least two-thirds of the issued and outstanding shares within each class or
series of shares entitled to vote as a class and at least two-thirds of the
total issued and outstanding of all shares entitled to vote.
The Bylaws of Hibernia may be amended or repealed by a vote of
two-thirds of the total voting power outstanding or by a vote of two-thirds of
the "continuing directors" of Hibernia, as defined in the Bylaws. A "continuing
director" for this purpose is generally a director who was nominated for
election by a majority of the existing directors. MarTex's Bylaws may be
altered, amended, or repealed and new Bylaws may be adopted by the Board, at any
meeting of the Board at which a quorum is present, by the affirmative vote of a
majority of the directors present. The Bylaws may also be altered, amended or
repealed and new Bylaws may be adopted by the shareholders at any meeting of the
shareholders at which a quorum is present, by the affirmative vote of a majority
of the shareholders present.
Special Meetings of Shareholders. Special meetings of the shareholders
of Hibernia may be called by the Chairman of the Board, the President, the Chief
Executive Officer, the Treasurer, or the Board of Directors. In addition,
shareholders holding one-fifth or more of the total voting power of Hibernia may
request a special meeting of shareholders and, upon receipt of such request, the
Secretary of Hibernia is required to call a special meeting of the shareholders.
A special meeting of shareholders of MarTex may be called at any time by the
Chairman of the Board, the President, the Chief Executive Officer, the
Secretary, the Board of Directors, or the holders of one-tenth or more of the
shares entitled to vote at the meeting.
Shareholder Proposals. Hibernia's Bylaws contain certain provisions
expressly allowing shareholders to submit shareholder proposals and to nominate
individuals for election as directors, under certain circumstances and provided
the shareholder complies with all of the conditions set forth in those
provisions.
MarTex's Bylaws do not contain a similar provision.
Vacancy on Board of Directors. Hibernia's Bylaws permit the Board to
fill any vacancy on the board, however created. MarTex's Bylaws allow the
shareholders or the Board to fill vacancies, provided, however that any vacancy
resulting from an increase in the size of the Board may be filled by the Board
for a term of office continuing only until the next election of one or more
directors by the shareholders and the Board may not fill more than two such
directorships during the period between any two successive meetings of
shareholders.
Merger or Consolidation. Hibernia's Articles allow an agreement of
merger or consolidation to be approved by a majority vote of the voting shares
issued and outstanding, taken at a meeting called for the purpose of such
approval. A merger of MarTex must be approved by the affirmative vote of at
least two-thirds of the issued and outstanding shares of MarTex Common Stock.
Dissenting Shareholder's Rights. Each MarTex shareholder who objects to
the Merger in accordance with the TBCA is entitled to the rights and remedies of
dissenting shareholders provided by Texas law. See "PROPOSED MERGER - Rights of
Dissenting Shareholders." Louisiana law provides that a shareholder's right to
dissent does not exist in the case of shareholders holding shares of any class
of stock that are listed on a national securities exchange, such as Hibernia
Common Stock, unless the articles of incorporation of the issuing corporation
provide otherwise or the shares of such shareholders are not converted by the
merger or consolidation solely into shares of the surviving or new corporation.
In that event, a shareholder who votes against a merger would have the right to
dissent only if the shareholders authorize the merger by less than 80% of the
total voting power.
Interests of Certain Persons in the Merger
In the Agreement, Hibernia has agreed to indemnify officers and
directors of MarTex for certain matters arising while they served as officers,
directors of MarTex to the same extent as they would have been indemnified under
the Articles of Incorporation and Bylaws of Hibernia in effect on the Effective
Date. Hibernia's aggregate liability for indemnification to those people is
limited to $10 million. Also, each officer and director eligible for such
indemnification must execute a joinder agreement in which he or she agrees to
cooperate with Hibernia in any litigation or proceeding giving rise to a claim
of indemnification.
Hibernia also has agreed to indemnify MarTex's officers, directors and
certain affiliates against liability under the Securities Act. In particular,
Hibernia will provide indemnification if any liability is based on an actual or
alleged untrue statement of a material fact (or the actual or alleged omission
of a material fact) contained in this Proxy Statement/Prospectus. This
indemnification does not apply to statements in the Registration Statement on
which Hibernia relied upon information furnished by MarTex.
The executive officers of MarTex employed by Hibernia or HNB subsequent
to the Closing Date have interests in the Merger that are in addition to their
interests as shareholders of MarTex which include, among other interests,
continuation of employment and of certain employee benefits.
F. Wayne McWhorter and George F. Meisenheimer will receive additional
shares of MarTex Common Stock pursuant to the Stock Grant Agreements as a result
of the change in control of MarTex effected by the Merger, assuming the MarTex
shareholders approve the issuance of such shares pursuant to the Stock Grant
Agreements. The exact number of shares of MarTex Common Stock to be issued to
Messrs. McWhorter and Meisenheimer will be calculated on the day immediately
preceding the Effective Date as provided in the Stock Grant Agreements. See
"STOCK GRANT AGREEMENTS."
If Hibernia does not continue to employ Mr. McWhorter after the
Effective Date, Mr. McWhorter will be entitled to be paid, pursuant to his Stock
Grant Agreement, a severance payment in an amount equal to two times his annual
base salary in effect as of the date of the termination of his employment.
Finally, Hibernia intends to enter int an employment agreement with
Mr. Meisenheimer. The agreement will have a term of three years, will provide
for a salary, bonus and stock grants and will be on terms mutually acceptable
to Hibernia and Mr. Meisenheimer.
Material Tax Consequences
The following is a summary description of the material income tax
consequences of the Merger. It is not intended to be a complete description of
the federal income tax consequences of the Merger. Tax laws are complex, and
your individual circumstances may affect the tax consequences to you. In
addition, we have not included information about the tax consequences of the
Merger under state, local or other tax laws. We urge you to consult a tax
advisor regarding the tax consequences of the Merger to you.
Receipt of the Tax Opinion is a condition to completion of the Merger.
The Tax Opinion is included as Appendix D to this Proxy Statement/Prospectus. We
urge you to read the Tax Opinion and to discuss it with your tax and financial
advisors so that you will understand the tax consequences of the Merger to your
situation.
The Tax Opinion is based upon representations made by Hibernia and
MarTex about the terms of the Merger and certain other matters. Based upon the
accuracy of those representations and certain other matters described in the Tax
Opinion, it concludes that: the Merger will constitute a reorganization within
the meaning of Section 368 of the Code; and MarTex's shareholders who exchange
MarTex Common Stock for Hibernia Common Stock in the Merger will not recognize
gain or loss for federal income tax purposes in that exchange to the extent they
receive Hibernia Common Stock.
See "PROPOSED MERGER - Representations and Warranties; Conditions to the Merger;
Waiver."
If the Merger constitutes a reorganization within the meaning of Section
368 of the Code, then: none of MarTex, Hibernia or HNB will recognize any gain
or loss by reason of the Merger; MarTex's shareholders will not recognize any
gain or loss for federal income tax purposes to the extent they receive Hibernia
Common Stock in exchange for MarTex Common Stock in the Merger; the tax basis in
the Hibernia Common Stock received in the Merger will be the same as the tax
basis in the MarTex Common Stock surrendered in exchange therefor; and the
holding period, for federal income tax purposes, for Hibernia Common Stock
received in exchange for MarTex Common Stock will include the period during
which the shareholder held the MarTex Common Stock surrendered in the exchange
(as long as the MarTex Common Stock was held as a capital asset at the Effective
Date).
Tax laws are complex, and the tax consequences to you may be affected
by matters that are not discussed in the Tax Opinion. For these reasons, we
recommend that you consult your own tax advisor concerning the applicable
federal, state and local tax consequences of the Merger to you.
Resale of Hibernia Common Stock
The shares of Hibernia Common Stock that will be exchanged for MarTex
Common Stock in the Merger have been registered under the Securities Act. Those
shares must also be approved for listing, upon official notice of issuance, on
the NYSE as a condition to completing the Merger. Once those shares are listed
on the NYSE, shareholders who are not "affiliates" of MarTex may freely trade
them. The term "affiliate" generally means each person who was an executive
officer, director or a 10% shareholder of MarTex prior to the Merger.
Those shareholders who are deemed to be affiliates of MarTex may only
sell their Hibernia Common Stock as provided by Rule 145 of the Securities Act,
or as otherwise permitted under the Securities Act. Those shareholders may
publicly resell Hibernia Common Stock received by them in the Merger if they
register the resale of those shares or they comply with the restrictions of Rule
145 (unless they are "affiliates" of Hibernia). If you are or may be an
affiliate of MarTex, you should carefully consider the resale restrictions
imposed by Rule 145 before you attempt to transfer any shares of Hibernia Common
Stock after the Merger. In addition, shares of Hibernia Common Stock issued to
affiliates of MarTex in the Merger will not be transferable until financial
results that include at least 30 days of post-Merger combined operations of
Hibernia and MarTex have been published. (This restriction is necessary in order
to satisfy certain requirements for pooling-of-interests accounting treatment.)
MarTex must identify those persons who may be deemed to be affiliates.
Also, MarTex must use its best efforts to have each person it identifies as an
affiliate deliver to Hibernia a written agreement relating to the transfer
restrictions on their Hibernia Common Stock. In addition, Hibernia will place
stop transfer instructions with its transfer agent regarding Hibernia Common
Stock issued to affiliates of MarTex to ensure that transfers by those persons
comply with Rule 145 and the terms of any applicable affiliate resale agreement
with Hibernia.
Rights of Dissenting Shareholders
If you object to the Merger and desire to perfect dissenters' rights,
you will lose the right to dissent from the Merger if you do not take the
following steps timely. If you lose your right to dissent, the shares of MarTex
Common Stock you own will be converted into the right to receive Hibernia Common
Stock in accordance with the terms of the Merger Agreement.
Holders of shares of MarTex Common Stock have a statutory right to
dissent from the Merger by following the specific procedures set forth below. If
the Merger is approved and completed, holders of shares of MarTex Common Stock
who properly perfect their dissenters' rights will be entitled to receive an
amount of cash equal to the fair value of their shares of MarTex Common Stock
rather than being required to accept the Merger Consideration. The following
summary is not a complete statement of the statutory dissenters' rights of
appraisal, and such summary is qualified in its entirety by reference to the
applicable provisions of the TBCA, which are reproduced in full at Appendix C
hereto. A MarTex shareholder must follow the exact procedure required by the
TBCA in order to properly exercise his dissenter's rights of appraisal and avoid
waiver of those rights.
Holders of shares of MarTex Common Stock who desire to dissent from the
Merger must file a written objection to the Merger with the Secretary of MarTex,
Mr. George E. Fitts, 2615 East End Boulevard South, Marshall, Texas 75670, prior
to the Special Meeting at which a vote on the Merger will be taken. The written
notice must state that the shareholder will exercise his right to dissent if the
Merger is consummated and give the shareholder's address to which notice of
effectiveness of the Merger will be sent. A vote against the Merger is not
sufficient to perfect a shareholder's statutory right to dissent from the
Merger. If the Merger is consummated, each shareholder who sent notice to MarTex
as described above and who did not vote in favor of the Merger will be deemed to
have dissented from the Merger. Failure to vote against the Merger will not
constitute a waiver of the dissenters' rights of appraisal; on the other hand, a
vote in favor of the Merger will constitute such a waiver.
Hibernia will be liable for any payments to Dissenting Shareholders and
will, within 10 days of the Effective Date, notify the Dissenting Shareholders
in writing that the Merger has been completed. Each Dissenting Shareholder so
notified must, within 10 days of the delivery or mailing of such notice, make a
written demand on Hibernia at 313 Carondelet Street, New Orleans, Louisiana
70130, Attention: Patricia C. Meringer, Secretary, for payment of the fair value
of the Dissenting Shareholder's shares of MarTex Common Stock as estimated by
the Dissenting Shareholder. Failure to follow this procedure will constitute a
waiver of his dissenter's rights of appraisal by such Dissenting Shareholder.
The demand will state the number of shares of MarTex Common Stock owned by the
Dissenting Shareholder and the fair value of the shares as estimated by the
Dissenting Shareholder. The fair value of the shares will be the value thereof
as of the date immediately preceding the Special Meeting, excluding any
appreciation or depreciation in anticipation of the Merger. Dissenting
Shareholders who fail to make a written demand within the 10 day period will be
bound by the Merger and lose their rights to dissent. Within 20 days after
making a demand, the Dissenting Shareholder must submit certificates
representing his shares of MarTex Common Stock to Hibernia for notation thereon
that such demand has been made. Dissenting Shareholders who have made a demand
for payment of their shares will not thereafter be entitled to vote or exercise
any other rights of a shareholder except the right to receive payment for their
shares pursuant to the provisions of the TBCA and the right to maintain an
appropriate action to obtain relief on the basis of fraud.
Within 20 days after receipt of a Dissenting Shareholder's demand
letter as described above, Hibernia will deliver or mail to the Dissenting
Shareholder written notice (i) stating that Hibernia accepts the amount claimed
in the demand letter and agrees to pay that amount, within 90 days after the
Effective Date, upon surrender of the relevant certificates of MarTex Common
Stock duly endorsed by the Dissenting Shareholder, or (ii) containing Hibernia's
written estimate of the fair value of the shares of MarTex Common Stock together
with an offer to pay such amount within 90 days after the Effective Date if
Hibernia receives notice, within 60 days after the Effective Date, stating that
the Dissenting Shareholder agrees to accept that amount and upon surrender of
the relevant certificates of MarTex Common Stock duly endorsed by the Dissenting
Shareholder. In either case, the Dissenting Shareholder will cease to have any
ownership interest in Hibernia or MarTex following payment of the agreed value.
If the Dissenting Shareholder and Hibernia cannot agree on the fair
value of the shares within 60 days after the Effective Date, the Dissenting
Shareholder or Hibernia may, within 60 days of the expiration of such 60 day
period, file a petition ("Petition") in any court of competent jurisdiction in
Harrison County, Texas, requesting a finding and determination of the fair value
of the Dissenting Shareholder's shares. Each Dissenting Shareholder is not
required to file a separate Petition. If one Dissenting Shareholder files a
Petition, Hibernia must file, with the clerk of the court in which the Petition
was filed, a list containing the names and addresses of the Dissenting
Shareholders with whom agreements as to the value of their shares have not been
reached. The court will give notice of the time and place of the hearing on the
Petition to the Dissenting Shareholders named on the list. Dissenting
Shareholders so notified by the court will be bound by the final judgment of the
court regarding fair value of the shares. If no petition is filed within the
appropriate time period, then all Dissenting Shareholders who have not reached
an agreement with Hibernia on the value of their shares will be bound by the
Merger and lose their right to dissent.
After a hearing concerning the petition, the court will determine which
Dissenting Shareholders have complied with the provisions of the TBCA and have
become entitled to the valuation of, and payment for, their shares, and will
appoint one or more qualified appraisers to determine the value of the shares of
MarTex Common Stock in question. The appraisers will determine such value and
file a report with the court. The court will then in its judgment determine the
fair value of the shares of MarTex Common Stock, which judgment will be binding
on Hibernia and on all Dissenting Shareholders receiving notice of the hearing.
The court will direct Hibernia to pay such amount, together with interest
thereon, beginning 91 days after the Effective Date of the Merger to the date of
judgment, to the Dissenting Shareholders entitled thereto. The judgment will be
payable upon the surrender to Hibernia of certificates representing shares of
MarTex Common Stock duly endorsed by the Dissenting Shareholder. Upon payment of
the judgment, the Dissenting Shareholders will cease to have any interest in
Hibernia. The court will allow the appraisers a reasonable fee as court costs,
and all court costs will be allotted between the parties in the manner that the
court determines to be fair and equitable.
Any Dissenting Shareholder who has made a written demand on Hibernia
for payment of the value of his MarTex Common Stock may withdraw such demand at
any time before payment for his shares has been made or before a petition has
been filed with an appropriate court for determination of the fair value of such
shares but no such demand may be withdrawn after such payment has been made or,
unless Hibernia will consent thereto, after such petition has been filed. If a
Dissenting Shareholder withdraws his demand, or if he is otherwise unsuccessful
in asserting his dissenters' rights of appraisal, such Dissenting Shareholder
will be bound by the Merger and his status as a former shareholder of MarTex
will be restored without prejudice to any corporate proceedings, dividends, or
distributions which may have occurred during the interim.
In the absence of fraud in the transaction, a Dissenting Shareholder's
statutory right of appraisal is the exclusive remedy for the recovery of the
value of his shares or money damages to the shareholder with respect to the
Merger.
Cash received by a Dissenting Shareholder of MarTex in exchange for his
or her MarTex Common Stock will generally be subject to state and federal income
tax and should be treated as having been received by such shareholder as a
distribution in redemption of his or her stock, subject to the provisions and
limitations of Section 302 of the Code. If, as a result of such distribution, a
shareholder owns no stock either directly or through the application of Section
318(a) of the Code, the redemption should be a complete termination of interest
within the meaning of Section 302(b)(3) of the Code and such cash will be
treated as a distribution in full payment in exchange for his or her stock, as
provided by Section 302(a) of the Code. In that case, the shareholder would
recognize ordinary income or capital gain, as the case may be, in an amount
equal to the difference between the amount of cash received in redemption of his
shares and his basis in his MarTex Common Stock.
Accounting Treatment
Hibernia intends to account for the Merger as a pooling of interests.
In order for the Merger to qualify for pooling-of-interests accounting
treatment, among other things, 90% or more of the outstanding MarTex Common
Stock must be exchanged for Hibernia Common Stock. Also, in order for the
pooling-of-interests accounting method to apply, "affiliates" of MarTex cannot
sell, transfer, pledge or otherwise alienate or encumber any shares of Hibernia
Common Stock received in the Merger until the results of at least 30 days of
post-Merger combined operations of MarTex and Hibernia have been published.
Persons believed by MarTex to be "affiliates" have agreed to comply with these
restrictions.
MarTex has agreed to use its best efforts to permit the transaction to
be accounted for as a pooling of interests. Hibernia is not obligated to
consummate the Merger if the Merger does not qualify for pooling-of-interests
accounting treatment under these circumstances.
STOCK GRANT AGREEMENTS
On March 28, 1996, MarTex entered into Stock Grant Agreements with F.
Wayne McWhorter and George F. Meisenheimer. The Stock Grant Agreements provide
generally for the issuance of MarTex Common Stock to Messrs. McWhorter and
Meisenheimer upon the occurrence of a "Triggering Event." One of the Triggering
Events is a Change in Ownership of MarTex. The completion of the Merger is a
Triggering Event because it will cause a Change in Ownership of MarTex.
Section 280G of the Code regulates "excess parachute payments." This
section of the Code will disallow a deduction to MarTex for any portion of the
shares of MarTex Common Stock issued by reason of a Change in Ownership to
Messrs. McWhorter and Meisenheimer which are characterized as "excess parachute
payments." Also, Section 4999 of the Code will impose a 20% nondeductible excise
tax on Messrs. McWhorter and Meisenheimer for any portion of the Change in
Control Stock Grants characterized as "excess parachute payments."
Under the Code, the Change in Control Stock Grants, unless proven to be
reasonable compensation under the facts and circumstances of the grants, would
be "excess parachute payments" if the Change in Control Stock Grants (a) are in
the nature of compensation to Messrs. McWhorter and Meisenheimer; (b) are
contingent on a change of control of MarTex; and (c) exceed three times the
average annual compensation paid to each of Messrs.
McWhorter and Meisenheimer over the preceding five years.
Assuming the foregoing conditions are satisfied, the Change in Control
Stock Grants will be treated as "excess parachute payments" only to the extent
the present value of such Change in Control Stock Grants exceed the average
annual compensation for the MarTex Officers over the preceding five years. If
the foregoing conditions are not satisfied, the Change in Control Stock Grants
are not deemed "parachute payments" and consequently cannot be an "excess
parachute payments."
The Change in Control Stock Grants are in the nature of compensation to
Messrs. McWhorter and Meisenheimer. A Change in Ownership of MarTex will occur
as a result of the Merger and the Change in Control Stock Grants will likely
exceed three times the average annual compensation paid to the MarTex Officers
over the preceding five year period. Accordingly, MarTex has been advised by
counsel that, unless exempted in the manner described below or unless proven to
be reasonable compensation under the facts and circumstances of the grants, the
Change in Control Stock Grants may be parachute payments, a portion of which may
be "excess parachute payments."
Section 280G(b)(5) of the Code provides that no portion of the Change
in Control Stock Grants will be treated as a parachute payment if such Change in
Control Stock Grants are authorized by the vote of shareholders of MarTex owning
in excess of seventy-five percent of the issued and outstanding shares of MarTex
Common Stock; provided, however, that adequate disclosure concerning the Change
in Control Stock Grants is made to all such shareholders. The disclosure set
forth in this Proxy Statement/Prospectus is intended as adequate disclosure to
all shareholders of all material facts concerning the Change in Control Stock
Grants. Because the Change in Ownership Stock Grant due to the Merger could
otherwise constitute a parachute payment, it is conditioned on shareholder
approval as described in this Proxy Statement/Prospectus.
Each of Messrs. McWhorter and Meisenheimer has entered into an
amendment to his Stock Grant Agreement, copies of which are included in Appendix
E annexed hereto. The amendments provide that each of Messrs. McWhorter and
Meisenheimer has agreed to waive any right to receive shares of MarTex Common
Stock by reason of a Change in Ownership due to the Merger which either of them
might have been entitled to under the original terms of their respective Stock
Grant Agreements. The amendments further provide that each of Messrs. McWhorter
and Meisenheimer will receive the shares of MarTex Common Stock pursuant to the
Change in Control Stock Grants if the shareholders of MarTex approve the
issuance of those shares upon a Change in Ownership of MarTex as a result of the
Merger. Messrs. McWhorter and Meisenheimer, however, have not agreed to waive
any right to a Stock Grant that arises by virtue of other provisions of the
Stock Grant Agreements, including a Change in Ownership resulting from a
transaction other than the Merger.
The following table sets forth the Exchange Rate and the number of
shares of Hibernia Common Stock to be issued to each of Messrs. McWhorter and
Meisenheimer assuming that (i) MarTex shareholders approve the issuance to
Messrs. McWhorter and Meisenheimer of shares of MarTex Common Stock pursuant to
the Stock Grant Agreements; (ii) all outstanding options and warrants held by
directors and officers of MarTex have been exercised (an aggregate of 770,092
shares); (iii) no further dividends are paid on MarTex Common Stock prior to the
Effective Date; (iv) the Effective Date of the Merger is January 31, 1999; and
(v) the price of Hibernia Common Stock on the day prior to the last business day
prior to the Effective Date is in the amount set forth below:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Price of Number of Shares of Number of Shares of Number of Shares of
Hibernia Hibernia Common Stock Hibernia Common Stock Hibernia Common Stock
Common Stock to be exchanged for to be issued to to be issued to
each share of Mr. McWhorter Mr. Meisenheimer
MarTex Common Stock
$10.00 0.26832982400 51,785 5,178
$11.00 0.26497864800 90,309 9,031
$12.00 0.26174586500 127,471 12,747
$13.00 0.25848633100 164,941 16,494
$14.00 0.25575635300 196,323 19,632
$15.00 0.25343661900 222,990 22,299
$16.00 0.25144108500 245,929 24,593
$17.00 0.24903829700 273,550 27,355
$18.00 0.24687640500 298,402 29,840
$19.00 0.24497363800 320,276 32,028
$20.00 0.24328604600 339,675 33,968
</TABLE>
The proposed regulations under Section 280G of the Code provide that
stock is not counted as outstanding stock if the stock is actually owned or
constructively owned under Section 318(a) of the Code by or for a "disqualified
individual" who receives or is to receive a payment that would be a parachute
payment absent the requisite shareholder approval. It appears that Messrs.
McWhorter and Meisenheimer are disqualified individuals, and that the Change in
Control Stock Grants could be considered parachute payments. Accordingly, MarTex
Common Stock actually or constructively owned by Messrs. McWhorter and
Meisenheimer will not be considered outstanding for purposes of voting on the
Change in Control Stock Grant to Messrs. McWhorter and Meisenheimer.
Approval of the Change in Control Stock Grants to the employees will
require the affirmative vote of in excess of seventy-five percent of the issued
and outstanding MarTex Common Stock, exclusive of the shares held, either
directly or indirectly under Section 318 of the Code, by Messrs. McWhorter and
Meisenheimer. For this purpose, Mr. McWhorter will be considered to hold, either
directly or indirectly, 206,803 shares and Mr. Meisenheimer will be considered
to hold 59,826 shares. Consequently, the affirmative vote of in excess of
seventy-five percent of the remaining 11,608,300 shares, or 8,706,225 shares is
required for approval of the Change in Control Stock Grants to Messrs. McWhorter
and Meisenheimer. The vote on the Change in Control Stock Grants is structured
in this fashion because MarTex Common Stock held by or attributed to Messrs.
McWhorter and Meisenheimer would not be considered outstanding with respect to
the Change in Control Stock Grants.
For purposes of the shareholder vote discussed above, any MarTex
shareholder that is not an individual may exercise its vote through any person
authorized by the entity to vote such shares. However, if a substantial portion
of the assets of the entity consists of MarTex Common Stock, approval of the
Change in Control Stock Grants must be made by the persons who hold, immediately
before consummation of the Merger, in excess of seventy-five percent of the
voting power of the entity. Accordingly, if a shareholder is not an individual,
then such entity will be deemed to have represented to MarTex, by execution of
the Proxy or voting in person in favor of the Change in Control Stock Grants,
either that (i) the entity owns (directly or indirectly) 1% or less of MarTex
Common Stock (by value) or (ii) the total value of MarTex Common Stock owned
(directly or indirectly) by the entity is less than one-third (by value) of the
assets of the entity, or (iii) the entity's MarTex Common Stock is one-third or
more of its assets, but (a) the Change in Control Stock Grants have been
approved by a separate vote of the persons who hold, as of the Record Date, more
than 75% of the voting power of the entity, and (b) the entity's stock and the
stock of any member of an affiliated group of which the entity is a member is
not readily tradeable on an established securities market or otherwise. For
purposes of the approval by the persons holding the voting power of the entity
in (a) above, the normal voting rights of the entity shareholder determine which
persons shall vote.
The KSOP owns 901,796 or 7.6%, of the outstanding MarTex Common Stock
and such ownership represents more than one-third of the assets of the KSOP.
Applicable law provides that generally the trustee of the KSOP (the "Trustee")
has the authority to vote the shares of MarTex Common Stock held by the KSOP.
With respect to any corporate matter, however, that involves the voting of
MarTex Common Stock as to the approval or disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution or
similar transaction, each participant in the KSOP is entitled to direct the
Trustee as to the exercise of the voting rights attributable to the shares
allocated to such participant. Any allocated MarTex Common Stock with respect to
which voting instructions are not received from participants may not be voted by
the Trustee, and all MarTex Common Stock that is not then allocated is to be
voted in the manner determined by the Trustee.
As of the record date for the Special Meeting of MarTex shareholders at
which such shareholders shall vote upon the Stock Grants, all of the 901,796
outstanding shares of MarTex Common Stock held by the KSOP, will be allocated to
the accounts of participants. Therefore, because of the pass-through voting
rights of the individual participants with respect to the allocated shares, the
"entity shareholder rules" described above are not applicable to the KSOP.
Within a few days of the mailing of this Proxy Statement and the form
of Proxy to MarTex shareholders, there shall be mailed to each participant in
the KSOP a copy of this Proxy Statement, together with a form for the
participants in the KSOP to give instructions to the trustee as to the voting of
shares allocated to such participants in the KSOP. The trustee will vote the
allocated shares as instructed by the participants in the KSOP.
CERTAIN REGULATORY CONSIDERATIONS
General
Hibernia is regulated and supervised by the Federal Reserve Board.
Although the Federal Reserve Board usually approves mergers involving bank
holding companies such as Hibernia and MarTex, Hibernia has chosen to avail
itself of a provision in the federal banking law whereby approval of the Merger
will not be required by the Federal Reserve Board if the OCC approves the merger
of the Bank with and into HNB. On December 15, 1998, the OCC approved the Merger
of the Bank with and into HNB. Bank holding companies also generally are
prohibited from engaging under the BHCA in non-banking activities (with certain
exceptions).
Hibernia's national banking subsidiaries are regulated, supervised and
examined by the OCC. Hibernia's banking subsidiaries also are subject to various
requirements and restrictions under federal and state law, including equirements
to maintain reserves against deposits, restrictions on the types and amounts of
loans that may be made, restrictions on the interest that may be charged on
loans,and limitations on the types of investments that may be made and the types
of services that may be offered.
Various consumer laws and regulations also affect the operations of HNB.
Commercial banks such as HNB also are affected by the Federal Reserve Board's
attempts to control the money supply and credit availability in order to
influence the economy.
Payment of Dividends
Hibernia derives substantially all of its income from the payment of
dividends by its banking subsidiaries. The ability of its banking subsidiaries
to pay dividends affects Hibernia's ability to pay dividends to its
shareholders. Various statutory restrictions apply to the ability of Hibernia's
banking subsidiaries to pay dividends to Hibernia. As of September 30, 1998,
Hibernia's banking subsidiaries had approximately $301 million (plus retained
earnings through December 31, 1998) available to pay dividends to Hibernia.
The OCC may prohibit a national bank from engaging in an unsafe or
unsound practice. Unsafe and unsound practices include, among other things,
payment of dividends if the payment of the dividend would deplete a bank's
capital to an inadequate level. HNB's ability to pay dividends in the future is
influenced by bank regulatory policies or agreements and by capital guidelines.
The level of this influence could increase in the future. Additional information
on this topic is available in some of the documents that are incorporated by
reference herein. See "AVAILABLE INFORMATION."
The Federal Reserve Board maintains a policy that requires bank holding
companies to serve as a source of strength for their subsidiary banks. In
furtherance of this policy, the Federal Reserve has stated that a bank holding
company generally should not maintain a rate of cash dividends unless its net
income available to common stockholders has been sufficient to fully fund the
dividends, and the prospective rate of earnings retention appears to be
consistent with the holding company's capital needs, asset quality and overall
financial condition.
Restrictions on Extensions of Credit
Federal law restricts HNB's ability to: extend credit to affiliates
(including Hibernia), purchase assets of its affiliates, issue a guarantee,
acceptance or letter of credit on behalf of its affiliates (including an
endorsement or standby letter of credit), or purchase or invest in the
stock or securities of an affiliate or to take that stock or securities as
collateral for loans to any borrower.
Extensions of credit and issuances to affiliates generally must be secured by
eligible collateral. In addition, all such transactions with a single affiliate
are generally limited to 10% of HNB's capital and surplus and all such
transactions with affiliates may not exceed 20% of HNB's capital and surplus.
Hibernia's banking subsidiaries are also limited in the aggregate
amount that may be loaned to a single borrower or a group of borrowers that are
deemed to be affiliated with each other for purposes of these rules. These loans
are generally limited to 15% of HNB's capital and surplus.
The limitations described above in this section apply to all national
banks.
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet of Hibernia as
of September 30, 1998 and income statements of Hibernia for the nine month
periods ended September 30, 1998 and 1997 and years ended December 31, 1997,
1996 and 1995 give effect to the pending Merger with MarTex. The statements also
assume that the Merger is accounted for as a pooling of interests. The pro forma
combined balance sheet treats the Merger as if it occurred on September 30,
1998; the pro forma combined income statements treat the Merger as if it had
occurred on January 1, 1995.
The information at September 30, 1998 and for the nine-month periods
ending September 30, 1998 and 1997 in the column titled "Hibernia Corporation"
is summarized from the unaudited consolidated financial statements of Hibernia
contained in Hibernia's Quarterly Report on Form10-Q for the quarter ended
September 30, 1998.
The information for the years ended December 31, 1997, 1996 and 1995,
in the column titled "Hibernia Corporation" is summarized from the consolidated
financial statements of Hibernia contained in Hibernia's Annual Report on Form
10-K for the year ended December 31, 1997. Information in the column titled
"Restated Hibernia Corporation" reflects the impact of the mergers with
Northwest, Argent and Firstshares during the first quarter of 1998 and Peoples
during the third quarter of 1998, each of which were accounted for as poolings
of interests.
The information contained in the column titled "MarTex Bancshares,
Inc." is based on the financial statements and related notes, and Management's
Discussion and Analysis of Financial Condition and Results of Operations, of
MarTex contained elsewhere in this Proxy Statement/Prospectus. We encourage you
to read this column in conjunction with the other financial information about
MarTex contained in this Proxy Statement/Prospectus.
The Pro Forma Financial Statements are presented for information
purposes only. The results shown in them are not necessarily indicative of the
actual results that might have occurred if the Merger had been completed on
January 1, 1995. Also, they are not necessarily indicative of results that might
be achieved in the future if the Merger is completed.
Pro Forma Combined Balance Sheet (Unaudited)
The following unaudited combined balance sheet combines the balance
sheets of Hibernia and MarTex as if the Merger had been effective on September
30, 1998. You should read this balance sheet in conjunction with the financial
statements and related notes of Hibernia (which are contained in Hibernia's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 and
incorporated herein by reference) and the September 30, 1998 financial
statements and related notes of MarTex (which are included elsewhere in this
Proxy Statement/Prospectus).
<PAGE>
pro forma combined balance sheet
<PAGE>
HIBERNIA CORPORATION
NOTES TO PRO FORMA COMBINED BALANCE SHEET
September 30, 1998
A. Hibernia plans to issue 3,450,000 shares of Hibernia Common Stock, with
an aggregate market value at the date of the merger of $58,650,000
based on an assumed market value of $17.00 per share, to effect the
merger with MarTex. The stated value of Hibernia Common Stock is $1.92
per share.
In accordance with the pooling-of-interests method of accounting, the
historical equities of the merged companies are combined for the
purposes of this pro forma combined balance sheet.
In connection with the change in control of MarTex, approximately
$5,211,000 of MarTex Common Stock will be issued to two executive
officers under an existing stock grant agreement.
Pro Forma Combined Income Statements (Unaudited)
The following unaudited pro forma combined income statements for the
nine month periods ended September 30, 1998 and 1997 and the years ended
December 31, 1997, 1996 and 1995 combine the income statements of Hibernia and
MarTex as if the Merger had occurred on January 1, 1995 and reflect the impact
of the mergers with Northwest, Argent and Firstshares, consummated in the first
quarter of 1998 and Peoples consummated in the third quarter of 1998 as
discussed in Note A to the Pro Forma Combined Income Statements. The unaudited
pro forma combined income statements should be read in conjunction with
Hibernia's consolidated financial statements and notes contained in its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 and
Annual Report on Form 10-K for the year ended December 31, 1997, (which are
incorporated by reference into this Proxy Statement/Prospectus), and the
financial statements and related notes for the years ended December 31, 1997 and
1996 and the nine-month periods ended September 30, 1998 and 1997 for MarTex
(contained elsewhere herein). The cost associated with the Merger, estimated to
be approximately $570,000, will be accounted for as a current period expense
when incurred.
<PAGE>
pro forma combined income statement page 1
<PAGE>
pro forma combined income statement page 2
<PAGE>
pro forma combined income statement page 3
<PAGE>
pro forma combined income statement page 4
<PAGE>
pro forma combined income statement page 5
<PAGE>
HIBERNIA CORPORATION
NOTES TO PRO FORMA COMBINED INCOME STATEMENTS
A. During the first quarter of 1998, Hibernia Corporation completed mergers
with Northwest, Argent and Firstshares. During the third quarter of 1998,
Hibernia completed a merger with Peoples. Each of these mergers were
accounted for as poolings of interests. In the transaction with Northwest
on January 1, 1998, Hibernia issued 1,508,019 shares of Hibernia Common
Stock with a market value of $28,275,000. In the transaction with Argent on
February 1, 1998, Hibernia issued 13,317,236 shares of Hibernia Common
Stock with a market value of $247,534,000. In the transaction with
Firstshares on March 15, 1998, Hibernia issued 3,690,615 shares of Hibernia
Common Stock with a market value of $74,204,000. In the transaction with
Peoples on July 1, 1998, Hibernia issued 3,562,367 shares of Hibernia
Common Stock with a market value of $70,980,000.
B. Hibernia expects to achieve savings in the Merger by reducing operating
costs. Most of these savings will occur when certain operations of the two
companies are consolidated. The extent of any savings will depend, among
other things, on the regulatory environment and economic conditions, and
may be affected by unanticipated changes in business activities, inflation
and certain external factors. There can be no assurance that any such
savings will be realized. The unaudited pro forma financial statements have
not been adjusted to reflect any anticipated cost savings.
<PAGE>
CERTAIN INFORMATION CONCERNING
MARTEX
Description of Business
MarTex is a bank holding company formed in 1984 as a business
corporation under the laws of the State of Texas for the purpose of acquiring
the stock of the Bank. MarTex is a registered bank holding company subject to
regulation under the BHCA. At September 30, 1998, MarTex had total consolidated
assets of $319 million, deposits of $289 million and shareholders' equity of
$26.4 million. MarTex derives all of its consolidated revenue and income from
the Bank. MarTex's executive offices are located at 2615 East End Boulevard
South, Marshall, Texas 75670.
The Bank is a state banking association organized in 1935. The Bank
conducts a full service commercial banking business serving businesses,
individuals, industry, public and governmental organizations. The Bank has one
office in Gladewater, one in Chireno, one in Elysian Fields, one in Mineola, two
in Lindale, one in Pittsburg, and two offices in Marshall, Texas, for a total of
nine offices. All offices offer an array of banking services to individuals and
businesses, including demand accounts, NOW accounts, certificates of deposit,
money market accounts, savings, and individual retirement accounts, safe deposit
boxes, night depository, automated teller machines, and drive-in banking
services. The Bank's lending activities consist principally of real estate,
consumer and commercial loans. The Bank also provides depository and related
financial services to commercial, industrial, financial and governmental
customers. The Bank's deposits represent a cross-section of the area's economy,
and there is no material concentration of deposits from any single customer or
group of customers. No significant portion of the Bank's loans is concentrated
within a single industry or group of related industries. There are no material
seasonal factors that would have an adverse effect on MarTex or the Bank.
Supervision and Regulation
As a bank holding company, MarTex is subject to the supervision of and
regulations adopted by the Federal Reserve Board pursuant to he BHCA. MarTex is
required under the BHCA to file quarterly and annual reports with the Federal
Reserve Board and such additional information as the Federal Reserve Board may
require. The Federal Reserve Board may also make examinations of MarTex and the
Bank. Under the BHCA, MarTex also is generally prohibited, with certain
exceptions, from engaging in non-banking activities or from engaging in certain
tie-in arrangements in connection with any extension of credit or provision of
any property or services.
The Bank is chartered under Texas law and is subject to the supervision
and regulation of, and are examined by, the Texas Department of Banking and the
FDIC. The supervision and regulation of the Bank by all these authorities is
intended to protect the interests of depositors rather than shareholders.
The Bank's deposits are insured by the Bank Insurance Fund of the FDIC,
which insures up to $100,000 per each insured deposit account. As of January 1,
1993, the FDIC implemented a traditional risk-related insurance assessment
system whereby the FDIC places each insured bank in one of nine risk categories
based on its level of capital and other relevant information. Under the system,
there is a twenty-seven basis point spread between the highest and lowest
assessment, with the strongest banks (including the Bank) paying an insurance
premium equal to 0.00% of deposits and the weakest banks paying a premium of
0.27% of deposits. The FDIC Board of Directors has the flexibility to adjust the
entire Bank Insurance Fund assessment rate schedule twice a year without seeking
public comments first, but only within a range of five cents per $100 above or
below the premium schedule adopted. Changes in the rate schedule outside the
five cent range above or below the current schedule will be made by the FDIC
Board of Directors only after a full rule making with opportunity for public
comment. The Bank pays a Savings Association Insurance Fund rate equal to
0.0582% on approximately $77 million of deposits and a Bank Insurance Fund rate
equal to 0.01164 on approximately $210 million of deposits. Congress recently
adopted, and the President signed into law, an act requiring Bank Insurance
Fund-insured institutions, such as the Bank, to pay a portion of the interest
due on bonds that were issued by the Financing Corporation to help shore up the
ailing Federal Savings and Loan Insurance Corporation. The amount of Financing
Corporation debt service to be paid by all Bank Insurance Fund-insured
institutions, in the aggregate, is approximately $320,343,000 per year, or .0128
per $100.00 of domestic deposits, from 1997 until the year 2000 when the
obligation of Bank Insurance Fund-insured institutions increases to
approximately $600,000,000 per year, or $.0240 per $100.00 of domestic deposits,
through the year 2019.
The operations of the Bank, and therefore MarTex, are affected
significantly by the actions of the Federal Reserve Board intended to control
the money supply and credit availability in order to influence the national
economy.
Competition
The Bank's market area covers six east Texas counties including
Harrison, Gregg, Smith, Wood, Camp and Nacogdoches Counties. This area covers
approximately 3,835 square miles of land area and had an estimated 1997
population of 441,522 people encompassing 143,200 households. There are
approximately thirty-three banks, six savings and loan associations and ten
credit unions within the market area of the Bank. The Bank competes with these
local institutions and, especially as to larger accounts, with banks and bank
holding companies located outside of these counties.
A number of holding companies with greater resources than those of
MarTex have acquired banks or holding companies or established branches that
operate in the Bank's primary market areas and this process of consolidation is
continuing. MarTex's Board believes that the size of these institutions allows
certain economies of scale that permit their operation on a narrower profit
margin than that of the Bank. Competition among banks for loan customers is
generally governed by such factors as loan terms, including interest charges,
restrictions on borrowers and compensating balances, and other services offered
by such banks. The Bank competes with numerous other commercial banks, savings
and loan associations and credit unions for customer deposits, as well as with a
broad range of financial institutions in consumer and commercial lending
activities. In addition to thrift institutions, other businesses in the
financial service industry compete with the Bank for retail and commercial loan
business. Competition for loans and deposits is intense among financial
institutions in the Bank's respective market areas.
Employees
The Bank had in the aggregate 154 equivalent full time employees as of
September 30, 1998. None of such employees are subject to a collective
bargaining agreement.
Properties
The main office of MarTex is located at 2615 East End Boulevard South,
Marshall, Texas and the Bank's main office is located at 400 S. Alamo in
Marshall, Texas. MarTex rents its office space of approximately 5,000 square
feet. Listed below is a summary description of the Bank's branch facilities:
Square Footage
Location of Facility Drive Thru Lanes ATMs
Marshall 15,390 5 1
Marshall Walmart 600 0 1
Gladewater 10,000 5 1
Elysian Fields 3,000 2 0
Chireno 5,000 1 0
Pittsburg 10,000 3 1
Lindale 5,320 3 1
Hideaway Lake 2,600 4 1
Mineola 5,000 3 1
The Bank owns all of its facilities except the Marshall Walmart facility which
is leased. The lease for the Marshall Walmart facility provides that the lessor
may cancel the lease if the lessor does not consent to the change in control of
MarTex to be effected by the Merger.
Legal Proceedings
In the normal course of its business, MarTex from time to time is
involved in legal proceedings. Other than such legal proceedings incidental to
its business, MarTex's management is not aware of any pending or threatened
legal proceedings, which upon resolution, would have a material adverse effect
upon MarTex's financial condition or results of operations.
Market Prices and Dividends
There is no established public trading market for the MarTex Common
Stock. As of the Record Date, MarTex Common Stock was held by approximately 373
holders of record. MarTex has paid a cash dividend in each year from 1994
through 1998 at a rate per common share of $0.0292, $0.0363, $0.0305, $0.04 and
$0.04, respectively.
Security Ownership of Principal Shareholders and Management
Ownership of Principal Shareholders
The following table sets forth information concerning all persons known
to MarTex to be beneficial owners, directly or indirectly, of more than 5% of
the outstanding shares of MarTex Common Stock, MarTex's only class of voting
securities, as of the Record Date. Unless otherwise indicated, the named persons
have direct beneficial ownership of the shares with sole voting and investment
power
Name and Address of
Beneficial Owner Shares Owned Percent Owned (1)
Steve B. Carlile 2,516,537 21.2%
Garden Oaks Drive
Marshall, Texas
Kenneth O. Carlile 2,337,074 19.7%
703 Bergstrom
Marshall, Texas
Quinton B. Carlile 2,299,561 19.4%
707 Bergstrom
Marshall, Texas
Heritage Texas Group, Inc. 901,796 (2) 7.6%
Employee Stock Ownership Plan
P. O. Box 601
Pittsburg, Texas
James R. Whatley 1,664,461 (2) (3) 14%
814 Charlotte
Longview, Texas
Eugene L. Patterson, Jr. 901,796 (2) 7.6%
P. O. Box 619
Pittsburg, Texas
Rodney Bass 1,044,078 (2) (4) 8.8%
24 Willow
Pittsburg, Texas
(1) Assumes 11,874,929 shares of MarTex Common Stock are issued and outstanding,
unless otherwise indicated.
(2) Eugene Patterson, Rodney Bass and James Whatley serve as trustees for
the KSOP which is the record owner of 901,796 shares of MarTex Common Stock.
Messrs. Patterson, Bass and Whatley, in their respective capacities as trustees
of the KSOP, share with each other investment power with respect to those shares
of MarTex Common Stock and therefore are deemed to beneficially own, under
applicable regulations of the Securities and Exchange Commission, the 901,796
shares of MarTex Common Stock owned of record by the KSOP. With respect to the
voting power of the 901,796 shares of MarTex Common Stock owned of record by
the KSOP, the trustees will vote all shares of MarTex Common Stock owned by the
KSOP in accordance with instructions received by the trustees from each
participant in the KSOP with respect to the shares of MarTex Common Stock
allocated to such participant's KSOP account.
(3) Includes 319,828 shares of MarTex Common Stock that Mr. Whatley has the
right to acquire under certain warrant agreements.
(4) See note (8) to the table under the caption "Ownership of Management".
Ownership of Management
The following table sets forth information concerning the shares of
MarTex Common Stock beneficially owned, directly or indirectly, by each director
and executive officer of MarTex, and all directors and executive officers as a
group as of the Record Date. Unless otherwise indicated, the named persons have
direct beneficial ownership of the shares with sole voting and investment power.
Name and Address of
Beneficial Owner Shares Owned Percent Owned (1)
Steve B. Carlile 2,516,537 21.2%
Garden Oaks
Marshall, Texas
Kenneth O. Carlile 2,337,074 19.7%
703 Bergstrom
Marshall, Texas
Quinton B. Carlile 2,299,561 19.4%
707 Bergstrom
Marshall, Texas
James R. Whatley 1,664,461 (2) 14%
814 Charlotte
Longview, Texas
Don Holcomb 277,784 (3) 2.3%
P. O. Box 469
Deberry, Texas
F. Wayne McWhorter 233,565 (4) 2.0%
906 Bergstrom
Marshall, Texas
George E. Fitts 118,464 1.0%
2503 Waubun
Marshall, Texas
Thomas D. McClenny 118,439 1.0%
Box 216
Mineola, Texas
R. Wayne Collins 113,265 1.0%
Box 330
Mineola, Texas
Jack Jackson 70,210 (5) *
11474 CR 494
Tyler, Texas
George F. Meisenheimer 71,251 (6) *
915 Scenic Loop
Marshall, Texas
H. Barham Fulmer 61,950 (7) *
330 Hie-A-Way Lane
Lindale, Texas
James R. Cavender 23,359 *
232 Rusk
Pittsburg, Texas
Rodney Bass 1,044,078 (8) 8.8%
24 Willow
Pittsburg, Texas
Monte W. Robinson 11,956 (9) *
9715 Windbrooke
Shreveport, Louisiana
Amanda B. Nickerson 8,812 *
Box 494
Pittsburg, Texas
C. Hugh Bowden 10,307 (10) *
Box 454
Gladewater, Texas
Wilson Godfrey 4,287 *
Box 922
Gladewater, Texas
R. E. Phillips 536 *
Box 511
Gladewater, Texas
All Directors and Executive
Officers, As A Group 10,084,100 (11) 84.92%
- -----------------------
* Less than 1%.
(1) Assumes 11,874,929 shares of MarTex Common Stock issued and
outstanding, unless otherwise indicated.
(2) Includes 319,828 shares of MarTex Common Stock that Mr. Whatley
has the right to acquire under certain warrant agreements. See
note (2) to the table under the caption "Ownership of Principal
Shareholders" for a description of Mr. Whatley's role as a
co-trustee of the KSOP.
(3) These shares are owned by Delta Construction, Inc., a corporation
owned by Mr. Holcomb, and Mr. Holcomb exercises sole voting and
investment power with respect to such shares.
(4) Includes 48,762 shares of MarTex Common Stock that Mr. McWhorter
has the right to acquire under certain option agreements and
1,900 shares held by Mr. McWhorter's money purchase pension plan
as to which Mr. McWhorter exercises sole voting and investment
power. Does not include 20,000 shares held by Mr. McWhorter's
children, 2,000 shares held by Mr. McWhorter's wife or any shares
Mr. McWhorter may receive under the Stock Grant Agreements. (See
"STOCK GRANT AGREEMENTS").
(5) Does not include 1,187 shares held by Mr. Jackson's wife.
(6) Includes 31,425 shares that Mr. Meisenheimer has the right to
acquire under certain stock options; does not include 20,000
shares owned by Mr. Meisenheimer's children or any shares to be
issued under the Stock Grant Agreements. (See "STOCK GRANT
AGREEMENTS").
(7) Includes 3,613 shares that Mr. Fulmer has the right to acquire
under certain stock options.
(8) Includes approximately 87,794 shares beneficially owned through
the KSOP as to which Mr. Bass exercises shared voting power and
the trustee of the KSOP exercises sole investment power and
43,998 shares that Mr.Bass has the right to acquire under certain
stock options. See note (2) to the table under the caption
"Ownership of Principal Shareholders" for a description of Mr.
Whatley's role as a co-trustee of the KSOP.
(9) Includes 1,869 shares that Mr. Robinson has the right to acquire
under certain stock options.
(10) Includes 4,236 shares that Mr. Bowden has the right to acquire
under certain stock options.
(11) Include s 453,731 shares that the above directors and officers
have the right to acquire under stock options or agreements and
901,796 shares of MarTex Common Stock owned of record by the
KSOP. See note (2) to the table under the caption "Ownership of
Principal Shareholders."
<PAGE>
MARTEX FINANCIAL STATEMENTS FOR
THE NINE-MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
<PAGE>
<TABLE>
<CAPTION>
MarTex Bancshares, Inc. and Subsidary
Consolidated Statements of Financial Condition (Unaudited)
September 30, 1998 and 1997
1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents ....................................... $ 10,190,631 $ 7,657,038
Federal funds sold .............................................. 13,334,441 3,600,259
Certificates of Deposit ......................................... 5,341,000 2,856,000
Securities available for sale, at fair value .................... 92,386,367 96,845,849
Loans receivable, net ........................................... 183,983,068 167,949,979
Accrued interest receivable ..................................... 2,334,339 2,316,597
Federal income taxes receivable ................................. 176,016 116,534
Premises and equipment, net ..................................... 6,889,720 6,286,242
Other real estate and repossessions, net ........................ 593,078 316,084
Deferred federal income taxes ................................... 183,497
Intangible assets, net .......................................... 2,740,062 3,174,087
Other ........................................................... 1,096,983 862,436
- -----------------------------------------------------------------------------------------------------------------
Total Assets ............................................... $ 319,065,705 $ 292,164,602
=================================================================================================================
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Demand ....................................................... $ 37,669,684 $ 32,764,491
Savings ...................................................... 13,400,042 13,577,363
Money market Accounts ........................................ 67,649,830 57,069,583
NOW accounts ................................................. 10,055,387 10,285,246
Time, $100,000 and over ...................................... 38,806,683 37,009,201
Other time deposits .......................................... 121,479,692 115,293,689
- -----------------------------------------------------------------------------------------------------------------
Total deposits ............................................. 289,061,318 265,999,573
Interest payable ................................................ 1,075,638 920,837
Note payable .................................................... 830,714 1,196,857
Accrued expenses and other liabilities .......................... 1,304,687 820,898
Deferred income taxes ........................................... 351,525 0
- -----------------------------------------------------------------------------------------------------------------
Total Liabilities .......................................... 3,562,564 2,938,592
Commitments and Contingent Liabilities
Shareholders' Equity
Common Stock .................................................... 118,751 118,222
Paid-in capital ................................................. 15,014,666 14,913,124
Paid-in capital -warrants ....................................... 320,311 320,311
Retained earnings ............................................... 10,270,000 7,465,414
Unrealized gain on securities available for sale, net of def. Tax 718,094 409,366
- -----------------------------------------------------------------------------------------------------------------
Total shareholders' equity ................................. 26,441,822 23,226,437
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity ...................... $ 319,065,705 $ 292,164,602
=================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MarTex Bancshares, Inc. and Subsidary
Consolidated Statements of Income (Unaudited)
For the Nine Months Ended September 30, 1998 and 1997
1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Loans .............................................. $ 12,502,991 $ 11,892,312
Federal funds sold ................................. 565,062 355,264
Investment securities:
Subject to federal income tax ................... 4,394,304 4,149,370
Exempt from federal income tax .................. 409,000 298,309
Certificates of deposit ............................ 212,304 37,251
- --------------------------------------------------------------------------------------------------
Total interest income ......................... 18,083,661 16,732,506
Interest Expense
Deposits ........................................... 8,922,698 7,610,023
Borrowed Funds ..................................... 73,166 143,383
- --------------------------------------------------------------------------------------------------
Total interest expense ........................ 8,995,864 7,753,406
Net Interest Income ................................ 9,087,797 8,979,100
Provision for loan losses .......................... 237,500 213,750
- --------------------------------------------------------------------------------------------------
Total interest income after loan loss provision 8,850,297 8,765,350
Other Income
Service charges on deposit accounts ................ 1,231,883 1,330,576
Other service charges, and fees .................... 546,334 429,677
Net realized gains (losses) on sales of securities . 97,149 13,792
- --------------------------------------------------------------------------------------------------
Total other income ............................ 1,875,366 1,774,045
Other Expense
Employee compensation .............................. 3,723,427 3,611,968
Occupancy .......................................... 901,720 774,860
Professional fees .................................. 73,294 179,093
Data processing .................................... 593,048 525,541
Insurance .......................................... 31,764 34,734
Losses and other expenses on ORE and repossessions . 68,612 58,468
Other .............................................. 1,937,426 2,050,520
- --------------------------------------------------------------------------------------------------
Total other expense ........................... 7,329,291 7,235,184
Income before income taxes ......................... 3,396,372 3,304,211
Provision for income taxes ......................... 1,141,768 1,229,255
- --------------------------------------------------------------------------------------------------
Net Income ......................................... $ 2,254,604 $ 2,074,956
==================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MarTex Bancshares, Inc. and Subsidiary
Consolidated Statements of Shareholders' Equity
For the Nine Months Ending September 30, 1998 and 1997
1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock
Beginning balance .......................................... $ 118,465 $ 118,222
Issued for stock grant ..................................... 286
- ------------------------------------------------------------------------------------------------------------------
Ending balance ............................................. 118,751 118,222
- ------------------------------------------------------------------------------------------------------------------
Paid-in Capital
Beginning balance .......................................... 14,956,286 14,913,124
Issued for stock grant ..................................... 58,380
- ------------------------------------------------------------------------------------------------------------------
Ending balance ............................................. 15,014,666 14,913,124
- ------------------------------------------------------------------------------------------------------------------
Paid-in Warrants
Beginning balance .......................................... 320,311 320,311
- ------------------------------------------------------------------------------------------------------------------
Ending balance ............................................. 320,311 320,311
- ------------------------------------------------------------------------------------------------------------------
Retained Earnings
Beginning balance .......................................... 8,370,754 5,745,286
Cash dividends ............................................. 355,358 354,978
Net income ................................................. 2,254,604 2,075,106
- ------------------------------------------------------------------------------------------------------------------
Ending balance ............................................. 10,270,000 7,465,414
- ------------------------------------------------------------------------------------------------------------------
Unrealized Gain (Loss) on Securities Available
For Sale, Net of Deferred Income Taxes
Beginning balance .......................................... 519,685 15,731
Net change ................................................. 198,409 393,635
- ------------------------------------------------------------------------------------------------------------------
Ending balance ............................................. 718,094 409,366
- ------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity ................................. $ 26,441,822 $ 23,226,437
==================================================================================================================
</TABLE>
<PAGE>
MarTex Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
Note A: Basis of Presentation
- -----------------------------
The accompanying unaudited consolidated financial statements for
MarTex Bancshares, Inc. and Subsidiary (MarTex) have been prepared
in accordance with generally accepted principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended
September 30, 1998 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1998. For
further information, refer to the consolidated financial statements
and footnotes thereto included in MarTex financial statements for
the year ended December 31, 1997 and 1996, contained elsewhere in
the Proxy Statement - Prospectus.
Note B: Merger Agreement
- ------------------------
On June 29, 1998, MarTex and Hibernia Corporation (Hibernia)
entered into an Agreement and Plan of Merger pursuant to which
MarTex would merge with and into Hibernia. The Merger, to be
accounted for as a pooling of interests, will be affected with the
exchange of 3,450,000 shares of Hibernia Common Stock for all of
the outstanding shares of MarTex Common Stock. The Merger is
subject, among other things, to receipt of regulatory and
shareholder approval.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
MARTEX BANCSHARES FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
The following discussion provides certain information concerning the
consolidated financial condition and results of operations of MarTex for the
nine months ended September 30, 1998 and 1997. The consolidated financial
position and results of operations of MarTex resulted primarily from operations
of the Bank. Management's discussion should be read in conjunction with the
Martex financial statements and accompanying notes presented elsewhere in this
Proxy Statement-Prospectus.
Overview
MarTex reported net income for the nine months ended September 30, 1998("1998")
of $2,254,604, an increase of 8.65% from net income of $2,074,956 for the nine
months ended September 30, 1997("1997"). Returns on average assets and average
equity for the first nine months of 1998 were 0.71% and 11.85% compared with
0.72% and 9.36% for the same period of 1997.
MarTex's total assets at September 30, 1998 were $319,065,705, an increase of
9.21% from September 30, 1997. Loans increased $15,742,627 from September 30,
1997 to September 30, 1998 due principally to internal growth. Total deposits at
September 30, 1998 of $289,061,318 were up 8.67% compared with September 30,
1997. This increase is attributed principally to the growth resulting from the
issuance of 7-month 7% certificates of deposit.
Results of Operations
Net Interest Income. Net interest income from loans and investments was
$9,087,797 for 1998, which represents a $108,697, or 1.21%, increase from 1997.
This increase was due to an increase in earning assets.
The following table sets forth certain information concerning the average
balances, interest income (on a fully tax equivalent basis), interest expense,
and average rates on MarTex's interest-earning assets and interest-bearing
liabilities for the nine month periods indicated.
<TABLE>
<CAPTION>
(Dollars in Thousands)
September 30,
- -----------------------------------------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------------------------------------
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings assets:
Loans (before
allowance for
loan losses) ..... $177,782 $12,503 9.35% $163,990 $11,892 9.64%
- -----------------------------------------------------------------------------------------------
Investment
securities:
Taxable securities 93,240 4,394 6.27% 84,614 4,149 6.52%
Tax-exempt
securities ..... 11,391 409 7.24% 8,206 298 7.33%
- -----------------------------------------------------------------------------------------------
Total investment
securities ..... 104,631 4,803 6.37% 92,820 4,447 6.59%
- -----------------------------------------------------------------------------------------------
Federal funds sold
and interest-bearing
deposits ....... 18,275 777 5.66% 8,126 392 6.42%
- -----------------------------------------------------------------------------------------------
Total earnings assets $300,689 $18,084 8.09% $264,937 $16,732 8.48%
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
September 30,
- -------------------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------------------
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-bearing
liabilities:
Deposits ........... $293,713 $8,923 4.04% $260,091 $7,610 3.89%
Notes payable ...... 922 73 10.55% 1,880 143 10.14%
- -------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities ........ $294,635 $8,996 4.06% $261,971 $7,753 3.94%
=================================================================================================
Net interest income .. $9,088 $8,979
=================================================================================================
Net yield on
earnings assets .... 3.02% 3.39%
=================================================================================================
</TABLE>
Interest Rate Sensitivity. Interest rate risk is the potential impact on net
interest income due to changes in interest rates in any given time frame and the
opportunity to reprice interest-earning assets and interest-bearing liabilities.
Management uses simulation models to estimate the effect of significant interest
rate changes on net interest income and the fair market value of securities
available for sale. Management may alter the mix of floating and fixed-rate
assets and liabilities, change loan and deposit pricing schedules and adjust
maturities through sales and purchases of securities available for sale as a
means of limiting interest rate risk to an acceptable level.
Provision for Loan Losses. The provision for possible loan losses is the amount
that is added to MarTex's allowance for loan losses, by a charge against
earnings, in order to maintain a balance in the allowance for loan losses that
is deemed by management to be adequate to absorb the inherent risk of future
loan losses in MarTex's loan portfolio. The amount of the provision is dependent
upon many factors, including management's evaluation of historical loan loss
experience in relation to outstanding loans, the existing level of the
allowance, reviews of loan quality, loan growth, changes in the composition of
the loan portfolio, general economic factors, the financial condition of the
borrowers and their ability to repay the loan and the value and liquidity of
collateral.
MarTex's September 30, 1998, provision for loan losses of $237,500 was increased
by $23,750 from September 30, 1997. The allowance for loan losses of $2,004,028
was 1.08% of net loans outstanding at September 30, 1998. The allowance for loan
losses at September 30, 1997, was $2,294,490, or 1.35% of net loans outstanding.
Non-Interest Income. MarTex's non-interest income for 1998 increased 5.71% from
1997 due to increases in other service charges and fees.
Non-Interest Expense. Total non-interest expense for 1998 increased $94,107, or
1.30%, from 1997 due to additional employee and occupancy expenses resulting
from asset growth.
Income Taxes. MarTex's ratio of non-taxdeductible expense to total expense
before income taxes decreased from 1997 to 1998, resulting in a decrease in the
effective tax rate from 36.94% in 1997 to 32.75% in 1998.
Financial Condition
Total Assets. At September 30, 1998, total consolidated assets were
$319,065,705, an increase of $26,901,103, or 9.21% from September 30, 1997. This
increase in total assets is primarily due to an investable fund increase from
the 7-month, 7% certificates of deposit and public funds.
Investment Securities. MarTex adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments and Debt Securities"
("SFAS 115"), as of January 1, 1994. SFAS 115 addresses the accounting and
reporting for investments in equity securities that have readily determinable
fair value and for all investments in debt securities and requires
classification of securities as trading, available for sale, or held to
maturity. Management determines the classification of securities when they are
purchased. Securities which MarTex has the intent and ability to hold to
maturity are classified as held to maturity and are stated at cost, adjusted for
amortization of premiums and accretion of discounts. Securities which may be
sold in response to interest rates, liquidity needs or other factors are
classified as available for sale. These securities are reflected at fair value,
and net unrealized gains or losses are reflected as a separate component of
shareholders' equity, net of income tax effects.
The composition of MarTex's investment portfolio directly reflects MarTex's
investment strategy of maximizing portfolio yields subject to risk and liquidity
considerations. The composition, amortized cost and estimated fair value of
investment securities at September 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Investment Securities
- -----------------------------------------------------------------------------------------
Gross Unrealized
Amortized ---------------- Fair
Cost Gains Losses Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
September 30, 1998:
Government and Agencies .. $26,106 $ 446 $ 26,552
Mortgage backed securities 52,993 418 (81) 53,330
Municipal bonds .......... 12,180 305 12,485
Other securities ......... 19 19
- -----------------------------------------------------------------------------------------
Total .............. $91,298 $1,169 $ (81) $92,386
=========================================================================================
September 30, 1997:
Government and Agencies .. $45,594 $ 215 $ (27) $45,782
Mortgage backed securities 41,492 440 (98) 41,834
Municipal bonds .......... 9,109 101 (11) 9,199
Other securities ......... 31 31
- -----------------------------------------------------------------------------------------
Total .............. $96,226 $ 756 $(136) $96,846
=========================================================================================
</TABLE>
The amortized cost and estimated fair value of securities available for sale at
September 30, 1998, by contractual maturities, are shown below. Actual
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call prepayment
penalties.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Amortized Fair
Cost Value
- ------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less .............. $16,746 $14,758
Due after one year through five years 37,493 37,939
Due after five years through ten years 15,955 17,820
Due after ten years .................. 21,085 21,850
Securities with no maturity .......... 19 19
- ------------------------------------------------------------------------------
Total ............................ $91,298 $92,386
==============================================================================
</TABLE>
Loans. MarTex engages in real estate lending through real estate mortgage and
construction lending, and commercial and consumer lending. The specific
underwriting criteria for each major loan category is outlined in detail in the
formal written loan policy and is approved by the Board of Directors. In
general, each loan is evaluated based on, among other things, character and
leverage capacity of the borrower, capital and investment in a particular
property, if applicable, cash flow, collateral, market conditions for the
borrower's business or project and prevailing economic trends and conditions.
The loan policies of the Bank, including the underwriting criteria for major
loan categories, are adjusted periodically with each change approved by the
Bank's Board of Directors. The Bank's Board of Directors weighs each new
criteria after considering the foregoing factors and in light of the overall
financial condition and performance of the Bank. The Bank's underwriting
criteria are routinely reviewed by management and external examiners consistent
with the Bank's policy and banking regulations.
Major classifications of loans were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C>
Commercial ......................... $ 50,572 $ 49,074
Real Estate Construction ........... 1,761 5,235
Mortgage ........................... 116,686 94,999
Consumer Installment ............... 16,805 21,249
Credit Card ........................ 2,018 2,126
- ---------------------------------------------------------------------------------
187,842 172,683
Unearned income on installment loans (1,855) (2,439)
Allowance for loan losses .......... (2,004) (2,294)
Acquisition reserve ................ - -
- ---------------------------------------------------------------------------------
$ 183,983 $ 167,950
=================================================================================
</TABLE>
As of September 30, 1998 and 1997, MarTex had no major concentrations of its
loan portfolio to any one customer or in any one business or industry
classification. Total loans outstanding increased by $15,742,627 to $188,987,096
at September 30, 1998, compared to $170,244,469 at September 30, 1997. This loan
growth was primarily in the real estate area of loans secured by 1-4 family
residential properties.
The maturity schedule and rate structure of MarTex's loan portfolio has an
impact on MarTex's ability to meet its liquidity demands and respond favorably
to changes in interest rates. At September 30, 1998, approximately 39.61% of
MarTex's total loans were scheduled to mature or reprice within one year or
less. The following table provides information concerning loan portfolio
maturity, based on remaining scheduled repayments of principal.
<TABLE>
<CAPTION>
(Dollars in Thousands)
At September 30, 1998:
Maturity or Earliest Repricing
- -----------------------------------------------------------------------------------------------------------
Over One
One Year Through Over Five
or Less Five Years Years Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Closed-end loans secured by first liens on
1-4 family residential properties ........ $11,506 $27,350 $ 9,695 $ 48,551
All loans and leases excluding closed-end
loans secured by first liens on 1-4 family
residential properties ................... 62,156 63,801 11,479 137,436
- -----------------------------------------------------------------------------------------------------------
Total loans (net of unearned income) ....... $73,662 $91,151 $21,174 $185,987
===========================================================================================================
</TABLE>
Normally borrowers are expected to meet contractual terms. In some cases,
however, borrowers are permitted to renew obligations after appropriate review
of the credit quality and determination of the borrower's ability and
willingness to repay.
The data shown above is in a format which conforms with reports to the bank
regulatory agencies and has not been restated to reflect anticipated rollovers,
which management does not believe would materially affect the data presented.
Non-accrual, Past Due and Restructured Loans. Non-performing assets include
non-performing loans and foreclosed real estate held for sale. Non-performing
loans include loans classified as non-accrual or renegotiated to provide a
reduction or deferral of interest or principal and those past due 90 days or
more on which interest is still being accrued. It is the general policy of
MarTex to place loans on non-accrual status when, in the opinion of management,
there exists sufficient uncertainty as to the collectibility of the contractual
interest or principal or if the loan becomes 90 days delinquent, whichever comes
first. Placing a loan on a non-accrual status causes an immediate charge against
earnings for the interest which has been accrued but not yet collected on the
loan and eliminates future interest earnings with respect to that loan. Interest
on such loans is not recognized until all of the principal is collected or until
the loan is returned to a performing status. Interest income recognized on
non-accrual loans during the nine months ended September 30, 1998 and 1997, was
not significant.
As of September 30, 1998, MarTex had non-performing assets totaling $2,317,270,
or approximately 1.24% of total loans and foreclosed property at such date
compared with $1,199,580, or approximately 0.70% at September 30, 1997.
Total non-performing loans at September 30, 1998 and 1997, were $1,642,198 and
$819,757, respectively.
MarTex's management is not aware of any loans classified for regulatory purposes
and excluded from the above table which represent or result from trends or
uncertainties that will materially impact future operating results, liquidity,
or capital resources, or represent material credits about which management is
aware of any information which causes doubts as to the ability of such borrowers
to comply with the loan repayment terms.
In May of 1993, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan," which was amended by Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure," issued in October of 1994. These statements require
that impaired loans be measured at the present value of expected cash flows
discounted at the loan's effective interest rate, or, as a practical expedient,
at the loan's observable market price or the fair value of the collateral if the
loan is collateral dependent. MarTex's adoption of these new standards did not
have a significant effect on the allowance for loan losses or MarTex's method of
income recognition for impaired loans.
Allowance for Loan Losses. MarTex charges to operating expense an amount
necessary to maintain the balance in the allowance for possible loan losses at a
level that is deemed to be adequate to absorb all expected loan losses.
Management determines the adequacy of its reserve and the amount of any
additional provision or negative provision for possible loan losses based on
many factors, including an evaluation of historical loan loss experience in
relation to outstanding loans, the existing level of the allowance, reviews of
loan quality, loan growth, changes in the composition of the loan portfolio,
general economic factors, the financial condition of the borrowers and their
ability to repay the loan and the value and liquidity of collateral. The amount
in the allowance for possible loan losses is reviewed by management on a monthly
basis to determine whether additional provisions should be made or whether
transfers from the allowance to earnings are justified. MarTex's Board of
Directors reviews the adequacy of the reserve on a quarterly basis.
The following table summarizes averages of loan balances, changes in the
allowance for possible loan losses arising from loans charged off and recoveries
on loans previously charged off, by category, and the provision for possible
loan losses charged to operating expense as of the dates and the periods
indicated.
<TABLE>
<CAPTION>
(Dollars in Thousands)
September 30,
- -----------------------------------------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Average total loans net of discounts ............ $ 185,987 $ 170,244
===============================================================================================
Beginning balance ............................... $ 2,176 $ 2,422
Loans charged off:
Real estate ................................... (181) (89)
Commercial, financial and agricultural ........ (144) (216)
Installment ................................... (220) (187)
- -----------------------------------------------------------------------------------------------
Total charged off ....................... (545) (492)
- -----------------------------------------------------------------------------------------------
Recoveries:
Real estate ................................... - -
Commercial, financial and agricultural ........ 47 127
Installment ................................... 88 23
- -----------------------------------------------------------------------------------------------
Total recoveries ........................ 135 150
- -----------------------------------------------------------------------------------------------
Net loans charged off ........................... (410) (342)
Provision for loan losses ....................... 238 214
- -----------------------------------------------------------------------------------------------
Ending balance .................................. $ 2,004 $ 2,294
===============================================================================================
Ratio of net charge-offs during period to average
loans outstanding ............................. 0.22% 0.20%
===============================================================================================
</TABLE>
MarTex's allowance for possible loan losses at September 30, 1998 was
$2,004,028, which, in management's opinion, is adequate to cover possible losses
in its current loan portfolio. However, no assurance can be given that future
changes in economic conditions that might adversely affect MarTex's principal
market areas, borrowers, or collateral values, and other circumstances will not
result in increased losses in MarTex's loan portfolio in the future.
Deposits and Other Liabilities. MarTex's total deposits increased from
$265,999,573 at September 30, 1997, to $289,061,318 in 1998. The growth in
deposits is primarily the result of deposits acquired by offering a 7%, 7-month
certificate of deposit to potential customers who would bring additional
relationships to the Bank. The product was only offered for a limited time. The
following table summarizes the amounts of deposits for the periods indicated:
<TABLE>
<CAPTION>
(Dollars in Thousands)
September 30,
- ------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
Non-interest-bearing demand deposits ..... $ 37,669 $ 32,765
Interest-bearing money market/NOW deposits 77,705 67,355
Savings deposits ......................... 13,400 13,577
Time deposits under $100,000 ............. 121,480 115,286
Time deposits $100,000 or more ........... 38,807 37,017
- ------------------------------------------------------------------------------------
Total deposits ........................... $289,061 $266,000
====================================================================================
</TABLE>
MarTex had $830,714 and $1,196,857 in 1998 and 1997 respectively related to
acquisition debt to an unaffiliated bank.
Liquidity and Interest Rate Sensitivity Management. The primary functions of
asset and liability management are to assure adequate liquidity and to maintain
an appropriate balance between interest-earning assets and interest-bearing
liabilities. Liquidity represents the Bank's ability to meet the daily demand
for funds from its customers to pay maturing deposits, honor checks and drafts,
extend credit and meet other commitments. Management monitors liquidity
requirements as warranted by interest rate trends, changes in the economy,
changes in the scheduled maturities, and interest rate sensitivity of the
investment and loan portfolios as well as deposits. The Bank attempts to match
rate-sensitive assets and liabilities in order to minimize exposure from
fluctuations in interest rates and to enhance consistent growth of net interest
income through periods of changing interest rates.
The asset portion of the balance sheet provides liquidity primarily through cash
and due from Banks, loan principal repayments, and cash flows from investment
securities, federal funds sold and investment securities available for sale.
The liability portion of the balance sheet provides liquidity through the
various interest and non-interest-bearing deposit accounts, federal funds
purchased, securities sold under agreements to repurchase, and other short-term
borrowings. Long-standing relationships with many institutions have provided the
Bank with the opportunity to buy and sell federal funds on a daily basis.
The Bank's liquidity, which is monitored by an Asset-Liability Committee, is
deemed by management to be adequate.
Capital Resources. Quantitative measures established by regulation to ensure
capital adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the following table) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as
defined) to average assets (as defined). Management believes that the Bank meets
all the capital adequacy requirements to which it is subject, as of the nine
months ended September 30, 1998.
As of September 30, 1998, the most recent notification from the FDIC categorized
the Bank as well-capitalized under the regulatory framework for prompt
corrective action. To remain categorized as well-capitalized, the Bank must
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage
ratios as set forth in the table below. There are no conditions or events since
that notification that management believes have changed the Bank's category.
The annualized return on average shareholders' equity was 11.85% for the first
nine months of 1998, as compared to 12.48% for the same period in 1997.
Shareholders' equity increased to $26.4 million at September 30, 1998, from
$23.2 million at September 30, 1997. Cash dividends declared by MarTex for the
nine months ended September 30, 1998 and 1997, totaled $0.0199 per share,
in each period. The following table illustrates the changes in shareholders'
equity for the nine months ended September 30, 1998, and September 30, 1997.
<TABLE>
<CAPTION>
(Dollars in Thousands)
September 30,
- ----------------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance .......................... $ 24,286 $ 21,113
Net income ................................. 2,255 2,075
Cash dividends declared .................... (355) (355)
Additions due to stock grants .............. 59 -
Net unrealized gain/(loss) on AFS securities 197 393
========================================================================================
Ending balance ............................. $ 26,442 $ 23,226
========================================================================================
</TABLE>
The following table summarizes the risk-based capital ratios of MarTex for the
periods indicated. All three ratios for both periods are considered
well-capitalized by regulatory authorities.
<TABLE>
<CAPTION>
(Dollars in Thousands)
September 30,
- ----------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C>
Tier 1 capital ......... $ 22,984 $ 19,643
Total capital .......... 24,988 21,797
Risk-weighted assets ... 187,441 172,361
Adjusted total assets .. 320,886 289,245
Tier 1 capital ratio ... 12.26% 11.40%
(Regulatory minimum) (4.00%) (4.00%)
Total capital ratio .... 13.33% 12.65%
(Regulatory minimum) (8.00%) (8.00%)
Tier 1 leverage ratio .. 7.16% 6.79%
(Regulatory minimum) (4.00%) (4.00%)
============================================================================
</TABLE>
<PAGE>
MarTex Bancshares, Inc.
and Subsidiary
Consolidated Financial Statements
December 31, 1997
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
MarTex Bancshares, Inc.
Marshall, Texas
We have audited the accompanying consolidated statements of financial condition
of MarTex Bancshares, Inc. and its subsidiary as of December 31, 1997 and 1996,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MarTex Bancshares,
Inc. and its subsidiary as of December 31, 1997 and 1996, and the results of
their operations and their cash flows, for the years then ended, in conformity
with generally accepted accounting principles.
Sproles Woodard LLP
Fort Worth, Texas
March 4, 1998
<PAGE>
Financial Statements
<PAGE>
<TABLE>
<CAPTION>
MarTex Bancshares, Inc. and Subsidiary
Consolidated Statements of Financial Condition
December 31, 1997 and 1996
1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash and cash equivalents ...................................................... $ 10,439,734 $ 15,856,862
Federal funds sold ............................................................. 7,454,721 14,470,000
Certificates of deposit ........................................................ 3,054,000 200,000
Securities available for sale, at fair value (Note 2) .......................... 112,629,574 86,629,978
Loans receivable, net (Note 3) ................................................. 168,144,307 153,569,865
Accrued interest receivable .................................................... 2,592,518 2,256,883
Refundable federal income tax .................................................. 704,158 359,907
Premises and equipment, net (Note 4) ........................................... 6,335,714 5,884,893
Other real estate and repossessions, net of allowance
for losses of $90,104 in 1997 and $71,104 in 1996 ........................ 562,576 371,475
Deferred income taxes, net (Note 7) ............................................ 384,102
Intangible assets, net of accumulated amortization of
$1,034,661 in 1997 and $627,076 in 1996 .................................. 3,058,703 3,430,656
Other .......................................................................... 878,622 863,595
- ----------------------------------------------------------------------------------------------------------------------------------
$ 315,854,627 $ 284,278,216
==================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Demand ...................................................................... $ 37,181,694 $ 32,946,784
Savings ..................................................................... 12,139,488 14,121,536
Money market accounts ....................................................... 55,174,056 59,594,877
Now accounts ................................................................ 10,743,154 3,914,067
Time, $100,000 and over ..................................................... 45,005,882 37,477,946
Other time deposits ......................................................... 128,379,992 110,088,094
- ----------------------------------------------------------------------------------------------------------------------------------
288,624,266 258,143,304
Interest payable ............................................................... 1,039,514 843,755
Note payable (Note 6) .......................................................... 1,013,936 2,563,000
Accrued expenses and other liabilities ......................................... 642,096 1,615,484
Deferred income taxes, net (Note 7) ............................................ 249,314
- ----------------------------------------------------------------------------------------------------------------------------------
291,569,126 263,165,543
- ----------------------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities (Note 8)
Shareholders' Equity
Common stock (Note 12) ......................................................... 118,465 118,221
Paid-in capital ................................................................ 14,956,286 14,913,124
Paid-in capital - warrants (Note 13) ........................................... 320,311 320,311
Retained earnings .............................................................. 8,370,754 5,745,286
Unrealized gain on securities available for sale, net of deferred
income taxes of $267,716 in 1997 and $8,103 in 1996 .......................... 519,685 15,731
- ----------------------------------------------------------------------------------------------------------------------------------
24,285,501 21,112,673
- ----------------------------------------------------------------------------------------------------------------------------------
$ 315,854,627 $ 284,278,216
==================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MarTex Bancshares, Inc. and Subsidiary
Consolidated Statements of Income
For the Years Ended December 31, 1997 and 1996
1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Loans .......................................................................... $ 16,037,686 $ 11,643,310
Federal funds sold ............................................................. 486,638 266,834
Investment securities:
Subject to federal income tax .............................................. 5,583,270 2,472,935
Exempt from federal income tax ............................................. 452,712 236,556
Interest on certificates of deposit ............................................ 85,827
- ----------------------------------------------------------------------------------------------------------------------------------
22,646,133 14,619,635
- ----------------------------------------------------------------------------------------------------------------------------------
Interest Expense
Deposits ....................................................................... 10,433,899 6,029,534
Borrowed funds ................................................................. 168,270
- ----------------------------------------------------------------------------------------------------------------------------------
10,602,169 6,029,534
- ----------------------------------------------------------------------------------------------------------------------------------
Net Interest Income ............................................................ 12,043,964 8,590,101
Provision for loan losses ...................................................... (285,000) (240,000)
- ----------------------------------------------------------------------------------------------------------------------------------
11,758,964 8,350,101
- ----------------------------------------------------------------------------------------------------------------------------------
Other Income
Service charges on deposit accounts ............................................ 1,832,92 1,105,402
Other service charges, commissions and fees .................................... 572,080 333,960
Net realized gains (losses) on sales of securities 13,791 (48,277)
- ----------------------------------------------------------------------------------------------------------------------------------
2,418,800 1,391,085
- ----------------------------------------------------------------------------------------------------------------------------------
Other Expense
Employee compensation .......................................................... 4,674,326 3,147,308
Occupancy ...................................................................... 1,186,179 701,356
Professional fees .............................................................. 369,418 219,343
Data processing ................................................................ 709,483 559,708
Insurance ...................................................................... 134,521 62,122
Losses and other expenses on other real estate and
repossessions .............................................................. 62,236 103,428
Other .......................................................................... 2,488,778 1,686,128
- ----------------------------------------------------------------------------------------------------------------------------------
9,624,941 6,479,393
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes ..................................................... 4,552,823 3,261,793
Provision for income taxes (Note 7) ............................................ 1,454,020 1,076,190
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income ..................................................................... $ 3,098,803 $ 2,185,603
==================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MarTex Bancshares, Inc. and Subsidiary
Consolidated Statements of Shareholders' Equity
For the Years Ended December 31, 1997 and 1996
1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock
Beginning balance .............................................................. $ 118,221 $ 89,958
Issued in merger with Heritage Texas Group, Inc. (Note 14) 27,939
Issued for stock grant ......................................................... 244 324
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance ................................................................. 118,465 118,221
- ----------------------------------------------------------------------------------------------------------------------------------
Paid-in Capital
Beginning balance .............................................................. 14,913,124 9,976,124
Issued in merger with Heritage Texas Group, Inc. (Note 14) 4,886,755
Issued for stock grant ......................................................... 43,162 50,245
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance ................................................................. 14,956,286 14,913,124
- ----------------------------------------------------------------------------------------------------------------------------------
Paid-in Capital - Warrants
Beginning balance .............................................................. 320,311
Issued in merger with Heritage Texas Group, Inc. (Note 14) 320,311
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance ................................................................. 320,311 320,311
- ----------------------------------------------------------------------------------------------------------------------------------
Retained Earnings
Beginning balance .............................................................. 5,745,286 3,920,441
Cash dividends ................................................................. (473,335) (360,758)
Net income ..................................................................... 3,098,803 2,185,603
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance ................................................................. 8,370,754 5,745,286
- ----------------------------------------------------------------------------------------------------------------------------------
Unrealized Gain (Loss) on Securities Available
For Sale, Net of Deferred Income Taxes
Beginning balance .............................................................. 15,731 265,984
Net change ..................................................................... 503,954 (250,253)
- ----------------------------------------------------------------------------------------------------------------------------------
Ending balance ................................................................. 519,685 15,731
- ----------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity ..................................................... $ 24,285,501 $ 21,112,673
==================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MarTex Bancshares, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996
1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income ..................................................................... $ 3,098,803 $ 2,185,603
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .............................................. 908,357 523,729
Net premium amortization and discount accretion ............................ 225,145 57,914
Net realized (gains) losses on securities available for sale (13,791) 48,277
Gain on sale of fixed assets ............................................... (6,087) (9,065)
Loss on sale of other real estate .......................................... 206 44,214
Provision for credit losses ................................................ 285,000 240,000
Provision for losses on other real estate and repossessions 26,000 14,207
Deferred income tax provision .............................................. 373,803 144,974
Stock grant ................................................................ 43,406 50,570
Increase in:
Accrued interest receivable .............................................. (335,635) (204,966)
Refundable federal income tax ............................................ (344,251) (153,494)
Other assets ............................................................. (15,027) (135,604)
Increase (decrease) in:
Interest payable ......................................................... 195,759 148,430
Accrued expenses and other liabilities ................................... (973,388) (269,391)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities ...................................... 3,468,300 2,685,398
- ----------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Net (increase) decrease in federal funds sold .................................. 7,015,279 (7,000,000)
Net increase in certificates of deposit ........................................ (2,854,000)
Net increase in loans made to customers ........................................ (15,317,896) (20,253,147)
Purchase of securities available for sale ...................................... (74,538,990) (35,013,471)
Proceeds from sale of securities available for sale ............................ 17,532,837 24,259,212
Proceeds from maturity of securities available for sale ........................ 31,558,770 11,670,000
Proceeds from maturity of securities held to maturity .......................... 2,667,979
Proceeds from sale of other real estate and repossessions ...................... 241,147 206,826
Cash and cash equivalents received in business acquisitions
(Note 14) .................................................................. 3,618,350
Capital expenditures ........................................................... (961,863) (530,108)
Proceeds from sale of equipment ................................................ 49,834 33,263
Increase in intangible assets .................................................. (69,109) (161,186)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities .......................................... (37,343,991) (20,502,282)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Repayment of borrowed funds .................................................... $(1,549,064) $ -
Net increase in non-interest bearing demand,
savings, money market, and Now account deposits ............................. 4,661,128 5,745,542
Net increase in time deposits .................................................. 25,819,834 22,121,011
Dividends paid ................................................................. (473,335) (360,758)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities ...................................... 28,458,563 27,505,795
- ----------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Cash Equivalents ........................................ (5,417,128) 9,688,911
Cash and cash equivalents - beginning of year .................................. 15,856,862 6,167,951
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents - End of Year ........................................ $ 10,439,734 $ 15,856,862
==================================================================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information
Noncash investing and financing activities:
Business acquisitions (Note 14):
Common stock issued ....................................................... $ - $ 4,914,694
Stock warrants issued ..................................................... 320,311
Loans settled through foreclosure ........................................... 471,538 253,405
Loans charged off, net of recoveries ........................................ 530,985 314,431
Loans made to facilitate sale of other real estate 13,084 140,511
Net increase (decrease) in unrealized gain in
investments ............................................................... 763,567 (379,173)
Cash expenditures for:
Interest .................................................................... 10,406,410 5,881,104
Federal income taxes ........................................................ 1,424,468 1,291,123
- ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
MarTex Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
1. Nature of Operations and Summary of Significant Accounting Policies
MarTex Bancshares, Inc. ("MarTex"), and its wholly owned subsidiary, First
Service Bank (the "Bank"), a chartered banking institution of the state of
Texas, provide depository and lending services to customers located primarily in
East Texas. The Bank has banking operations in Gladewater, Chireno, Elysian
Fields, Lindale, Marshall, Mineola, and Pittsburg, Texas.
Basis of Presentation
The accounting and reporting policies of MarTex Bancshares, Inc. (referred to
individually as "MarTex" or collectively, with its subsidiary, as the "Company")
conform to generally accepted accounting principles. The following is a summary
of the significant accounting policies:
Use of Estimates
The preparation of these consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and reported revenues and expenses during the reported period.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of MarTex and its
wholly owned subsidiary, First Service Bank. All significant intercompany
transactions have been eliminated in consolidation.
Investment Securities
Debt securities for which the Bank has the ability and positive intent to hold
to maturity are classified as held to maturity and carried at cost, adjusted for
amortization of premium and accretion of discounts using methods approximating
the interest method. All other marketable securities are classified as available
for sale and are carried at fair value. Unrealized holding gains and losses, net
of deferred income taxes, on securities available for sale are reported as a net
amount in a separate component of shareholders' equity until realized. Declines
in the fair value of individual held to maturity and available for sale
securities below their cost that are other than temporary result in write-downs
of the individual securities to their fair value. The related write-downs are
included in earnings as realized losses. The Bank does not maintain a trading
portfolio.
Gains and losses on the sale of securities available for sale are determined
using the specific-identification method.
Loans Receivable
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their unpaid
principal balances, less the allowance for loan losses and net deferred loan
fees and unearned discounts. Unearned discounts on installment loans are
recognized over the term of the loans using the interest method. Loan
origination and commitment fees, as well as certain direct origination costs,
are deferred and amortized as a yield adjustment over the lives of the related
loans using the interest method. Amortization of the deferred loan fees is
discontinued when a loan is placed on nonaccrual status.
Loans are placed on nonaccrual when a loan is specifically determined to be
impaired or when principal or interest is delinquent for 90 days or more. Any
unpaid interest previously accrued on those loans is reversed from income.
Interest income generally is not recognized on specific impaired loans unless
the likelihood of further loss is remote. Interest payments received on such
loans are applied as a reduction of the loan principal balance. Interest income
on other nonaccrual loans is recognized only to the extent of interest payments
received.
The allowance for loan losses is maintained at a level adequate to absorb
probable losses. Management determines the adequacy of the allowance based upon
reviews of individual loans, recent loss experience, current economic
conditions, the risk characteristics of the various categories of loans, and
other pertinent factors. Loans considered to be uncollectible are charged to the
allowance. Provisions for loan losses and recoveries on loans previously charged
off are added to the allowance. Because of uncertainties inherent in the
estimation process, management's estimate of the allowance for loan losses may
change in the near term. However, the amount of the change that is reasonably
possible cannot be estimated.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on the straight-line basis over the estimated useful
lives of the assets.
Other Real Estate
Other real estate, acquired through partial or total satisfaction of loans, is
carried at the lower of cost or fair market value. Foreclosure losses are
recognized at the date of repossession, and any subsequent impairment of the
carrying value is recorded when indicated by periodic appraisals.
Intangible Assets
Goodwill represents the excess of cost over the fair value of net assets
received in business combinations and is being amortized primarily using the
sum-of-the-months-digits method, based on a 15 year amortization period. Costs
incurred in connection with the purchase of businesses are capitalized and
amortized using the straight-line method over 5 years.
Cash and Cash Equivalents
For the purpose of presentation in the Consolidated Statements of Cash Flows,
cash and cash equivalents are defined as cash on hand and amounts due from
banks. Cash equivalents are short-term, highly liquid investments that are
readily convertible to cash and have original maturities when acquired of three
months or less.
Income Taxes
MarTex and its subsidiary file a consolidated federal income tax return.
Provisions for income taxes are based on taxes payable or refundable for the
current year (after exclusion of nontaxable income, such as interest on state
and municipal securities) and deferred taxes on temporary differences between
the amount of taxable income and pretax financial income, and between the tax
bases of assets and liabilities and their reported amounts in the financial
statements. Deferred tax assets and liabilities are included in the financial
statements at currently enacted income tax rates applicable to the period in
which the deferred tax assets and liabilities are expected to be realized or
settled. As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Financial Instruments
All derivative financial instruments held or issued by the Bank are held or
issued for purposes other than trading. In the ordinary course of business the
Bank has entered into off-balance-sheet financial instruments consisting of
commitments to extend credit, commitments under credit card arrangements,
commercial letters of credit, and standby letters of credit. Such financial
instruments are recorded in the financial statements when they are funded or
related fees are incurred or received.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Investment securities: Fair values for investment securities are based on quoted
market prices, where available. If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments.
Loans receivable: For variable-rate loans that reprice frequently with no
significant change in credit risk, fair values are based on carrying amounts.
The fair values for other loans (for example, fixed rate commercial and real
estate loans) are estimated using discounted cash flow analysis, based on
interest rates currently being offered for loans with similar terms to borrowers
of similar credit quality. Loan fair value estimates include judgments regarding
future expected loss experience and risk characteristics. The carrying amount of
accrued interest receivable approximates its fair value.
Deposits: The fair values disclosed for demand deposits (for example,
interest-bearing checking accounts and savings accounts) are, by definition,
equal to the amount payable on demand at the reporting date (that is, their
carrying amounts). The fair values for certificates of deposit are estimated
using a discounted cash flow calculation that applies interest rates currently
being offered on certificates to a schedule of aggregated contractual maturities
on such time deposits. The carrying amount of the accrued interest payable
approximates its fair value.
The carrying amounts reported in the Consolidated Statements of Financial
Condition for cash and cash equivalents, federal funds sold, accrued interest
receivable, interest payable, and accrued interest and other liabilities
approximate fair value because of the short maturity of those instruments.
2. Investment Securities
Investment securities have been classified in the Consolidated Statements of
Financial Condition according to management's intent. The carrying amount of
securities and their approximate fair values at December 31 were as follows:
<TABLE>
<CAPTION>
Securities Available for
Sale:
Amortized Gross Unrealized
Cost Gains Losses Fair Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1997:
Debt securities of U.S.
Government and agencies $ 48,185,767 $ 317,527 $ 31,591 $ 48,471,703
Mortgage backed securities . 51,948,941 468,534 119,060 52,298,415
Municipal and state bonds
(net of allowance for loss
of $84,649) ........... 11,676,914 237,376 85,385 11,828,905
Other securities ........... 30,551 30,551
- -----------------------------------------------------------------------------------------------------------
$111,842,173 $ 1,023,437 $ 236,036 $112,629,574
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Amortized Gross Unrealized
Cost Gains Losses Fair Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1996:
Debt securities of U.S.
Government and agencies .. $ 35,573,882 $ 117,223 $ (93,394) $ 35,597,711
Mortgage backed securities .... 41,252,718 273,859 (372,211) 41,154,366
Municipal and state bonds
(net of allowance for loss
of $107,149) ............. 9,415,444 211,295 (112,938) 9,513,801
Other securities .............. 364,100 364,100
- -----------------------------------------------------------------------------------------------------------
$ 86,606,144 $ 602,377 $ (578,543) $ 86,629,978
===========================================================================================================
</TABLE>
During 1996 and in connection with the merger with Heritage Texas Group, Inc.
("HTGI"), the Company transferred securities having a carrying value of
$5,652,984 from the held to maturity category to the available for sale status.
The unrealized gain at the date of transfer was not material.
Securities with a carrying value of about $49,229,000 at December 31, 1997, and
$35,382,000 at December 31, 1996, were pledged for certain public funds deposits
in excess of FDIC insurance coverage.
Gross realized gains and losses on sales of securities available for sale were
as follows:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------
<S> <C> <C>
Gross realized gains $ 53,986 $ 38,893
Gross realized losses (40,194) (87,170)
</TABLE>
The scheduled maturities of securities available for sale at December 31, 1997,
are as follows:
<TABLE>
<CAPTION>
Securities Available for Sale
- ------------------------------------------------------------------------
Amortized Cost Fair Value
- ------------------------------------------------------------------------
<S> <C> <C>
Amounts maturing in:
Less than one year ........ $ 5,578,069 $ 5,570,058
One to five years ......... 59,160,224 59,364,600
Five to ten years ......... 18,566,690 18,706,759
After ten years ........... 28,506,639 28,957,606
Securities with no maturity 30,551 30,551
------------ ------------
$111,842,173 $112,629,574
============ ============
</TABLE>
For the purposes of the maturity table, mortgage-backed securities, which are
not due at a single maturity date, have been allocated over maturity groupings
based on the weighted-average contractual maturities of underlying collateral.
The mortgage-backed securities may mature earlier than their weighted-average
contractual maturities because of principal prepayments.
3. Loans Receivable
Major classifications of loans were as follows:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial ......................... $ 45,935,556 $ 47,432,802
Real estate construction ........... 4,508,560 4,436,407
Mortgage ........................... 100,131,861 83,802,397
Consumer installment ............... 20,114,021 20,922,197
Credit card ........................ 2,185,246 2,173,245
- --------------------------------------------------------------------------------
172,875,244 158,767,048
Unearned income on installment loans (2,554,853) (2,666,115)
Allowance for loan losses .......... (2,176,084) (2,422,068)
Acquisition reserve ................ (109,000)
- --------------------------------------------------------------------------------
$ 168,144,307 $ 153,569,865
================================================================================
</TABLE>
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Balance at beginning of year $ 2,422,068 $ 2,100,634
Allowance acquired in merger 395,865
Provision charged to earnings 285,000 240,000
Recoveries .................. 180,958 117,503
Loans charged off ........... (711,942) (431,934)
----------- -----------
Balance at end of year ...... $ 2,176,084 $ 2,422,068
=========== ===========
</TABLE>
The total recorded investment in impaired loans, all of which had specific
allowances for losses, amounted to approximately $1,211,000 at December 31,
1997, and $940,000 at December 31, 1996. The average balance of these loans
amounted to approximately $1,111,000 during 1997 and $1,010,000 during 1996. The
aggregate allowance for loan losses related to these loans amounted to
approximately $358,000 at December 31, 1997, and $556,000 at December 31, 1996.
Interest income on impaired loans was recognized for receipt of cash payments of
about $92,000 during 1997, and about $63,000 in 1996.
Loans with a balance of about $428,000 in 1997, and $516,000 in 1996, have been
identified as restructured troubled debt. The reduced income, as a result of the
modified terms, does not have a material effect on these consolidated financial
statements.
The Bank has no commitments to loan additional funds to the borrowers of
impaired, nonaccrual or restructured loans.
4. Premises and Equipment
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
Estimated
Useful Lives 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land ................... $ 481,566 $ 481,566
Buildings .............. 10 to 35 years 5,350,094 5,265,679
Furniture and fixtures . 5 to 12 years 2,984,995 2,222,732
Vehicles ............... 5 years 242,904 261,575
- --------------------------------------------------------------------------------------
9,059,559 8,231,552
Accumulated depreciation (2,723,845) (2,346,659)
- --------------------------------------------------------------------------------------
$ 6,335,714 $ 5,884,893
======================================================================================
</TABLE>
Depreciation amounted to $467,295 for 1997, and $272,118 for 1996.
5. Deposits
The aggregate amount of short-term jumbo CDs, each with a minimum denomination
of $100,000, was approximately $33,968,000 at December 31, 1997 and $10,695,000
at December 31, 1996.
At December 31, 1997, the scheduled maturities of CDs are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 $ 92,055,622
1999 17,025,030
2000 34,763,218
2001 2,667,770
2002 and thereafter 26,874,234
- -------------------------------------------------------
$173,385,874
=======================================================
</TABLE>
6. Credit Facilities
Federal Funds
The Bank has three lines of credit to purchase federal funds with commercial
banks, which will bear interest at the current federal funds rate. No amounts
were drawn on these lines of credit at December 31, 1997, or December 31, 1996.
The amounts and expiration of these lines of credit at December 31, 1997, are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Texas Independent Bank . $10,000,000 Expires January 15, 1999
Bank One ............... 3,000,000 Expires November 1, 1998
Commercial National Bank 2,000,000 Expires May 31, 1998
</TABLE>
Note Payable
At December 31, 1997, the Company had a senior note payable to a commercial bank
for $1,013,786 ($2,563,000 at December 31, 1996). This note bears interest at
the Wall Street Journal base rate on corporate loans at large U.S. commercial
banks (8.5% at December 31, 1997 and 8.25% at December 31, 1996). Payments of
principal and accrued interest are due semi-annually. The note is collateralized
by the common stock of the Bank. During 1997 the Company accelerated its
repayment of the note.
At December 31, 1997, the scheduled maturities of the note payable are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 366,142
1999 366,142
2000 281,652
=========================
$1,013,936
=========================
</TABLE>
This note is subject to various financial and other covenants which have been
satisfied as of December 31, 1997.
7. Federal Income Taxes
The consolidated provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------
<S> <C> <C>
Current $1,080,217 $ 931,216
Deferred 373,803 144,974
---------- ----------
$1,454,020 $1,076,190
========== ==========
</TABLE>
Deferred income taxes result from temporary differences between financial and
taxable income. Temporary differences represent the cumulative taxable or
deductible amounts recorded in the financial statements in different years than
recognized in the tax returns.
The components of the net deferred income tax asset (liability) are:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax asset:
Reserve for loan loss .................. $ 404,496 $ 569,600
KSOP (Note 11) ......................... 80,190
Reserve for loss on other real estate .. 42,279 35,819
Municipal securities valuation allowance 16,867 22,576
Nonaccrual and foregone interest ....... 25,396 30,381
Other .................................. 22,561 86,018
- ------------------------------------------------------------------------------------------
511,599 824,584
- ------------------------------------------------------------------------------------------
Deferred tax liability:
Depreciation differences ............... (481,800) (432,379)
Net unrealized gains on securities
available for sale ................... (267,716) (8,103)
Other .................................. (11,397)
- ------------------------------------------------------------------------------------------
(760,913) (440,482)
- ------------------------------------------------------------------------------------------
Net deferred tax asset (liability) ........... $(249,314) $ 384,102
==========================================================================================
</TABLE>
Management believes that the total deferred income tax asset will be fully
realized by future operating results. Accordingly, no valuation allowance has
been provided.
The effective tax rate was 32% in 1997 and 33% in 1996, as compared to an
overall statutory rate of 34%. The primary reasons for differences between these
rates are as follows:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Tax at statutory rate ...................... $ 1,547,960 $ 1,109,010
Tax effect of:
Nondeductible amortization of goodwill 96,892 85,548
Nontaxable municipal interest ........ (177,395) (77,311)
Other ................................ (13,437) (41,057)
- ------------------------------------------------------------------------------------------
$ 1,454,020 $ 1,076,190
==========================================================================================
</TABLE>
8. Financial Instruments
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business. These financial instruments include commitments to
extend credit, letters of credit, and credit card arrangements. Those
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the Consolidated Statements of
Financial Condition. The contract or notional amounts of those instruments
reflect the extent of the Bank's involvement in particular classes of financial
instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit, standby
letters of credit, and financial guarantees written is represented by the
contractual notional amount of those instruments. The Bank uses the same credit
policies in making commitments and contractual obligations as it does for
on-balance-sheet instruments.
The approximate contract or notional amount of financial instruments whose
contract amounts represent credit risk are as follows at December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Unused commitments to extend credit .. $16,237,000
Commercial and other letters of credit 661,000
Credit card arrangements ............. 4,858,000
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses, and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amount does not represent future
cash requirements. The Bank's experience has been that approximately 60% of loan
commitments are drawn upon by customers. While approximately 90% of commercial
letters of credit are utilized, a significant portion of such utilization is on
an immediate payment basis. The Bank applies the same credit policies in making
commitments as it does for on-balance-sheet instruments, mainly by evaluating
each customer's credit worthiness on an individual basis. The amount of
collateral obtained, if considered necessary upon extension of credit, is based
on management's credit evaluation of the borrower. Collateral held varies but
may include investments, inventories, property, plant and equipment and
income-producing commercial properties.
Letters of credit are conditional commitments issued by the Bank guaranteeing
payment on drafts drawn in accordance with the terms of the document. Commercial
letters of credit are used to facilitate trade or commerce, with the drafts
being drawn when the underlying transaction is consummated. The credit risk
involved in issuing letters of credit is essentially the same risk involved in
extending loan commitments to customers. The Bank uses the same credit policies
in making these conditional obligations as it does for on-balance-sheet
instruments. Collateral held for those commitments in which it is considered
necessary varies but may include inventories, investments and real estate.
The estimated fair values of the Bank's financial instruments were as follows
at:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
- ------------------------------------------------------------------------------------------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents ... $ 10,439,734 $ 10,439,734 $ 15,856,862 $ 15,856,862
Federal funds sold .......... 7,454,721 7,454,721 14,470,000 14,470,000
Securities available for sale 112,629,574 112,629,574 86,629,978 86,629,978
Loans, net .................. 168,144,307 168,814,121 153,569,865 156,849,590
Accrued interest receivable . 2,592,518 2,592,518 2,256,883 2,256,883
Financial liabilities:
Deposits .................... 288,624,266 289,241,693 258,143,304 258,947,471
Interest payable ............ 1,039,514 1,039,514 843,755 843,755
Note payable ................ 1,013,936 1,013,936 2,563,000 2,563,000
Other ....................... 891,410 891,410 1,615,484 1,615,484
</TABLE>
The carrying amounts in the preceding table are included in the Consolidated
Statements of Financial Condition under the applicable captions.
A summary of the approximate notional amounts and estimated fair values of the
Bank's financial instruments with off-balance-sheet risk were as follows at:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
- -----------------------------------------------------------------------------------------------------------
Notional Notional
Amount Fair Value Amount Fair Value
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unused commitments to
extend credit ......... $16,237,000 $16,300,000 $12,976,000 $13,253,000
Commercial and other letters
of credit ........... 661,000 661,000 448,000 448,000
Credit card arrangements ... 4,858,000 4,858,000 3,800,000 3,800,000
</TABLE>
9. Concentrations of Credit Risk
The Bank's real estate loans and loan commitments are primarily for properties
located in East Texas and the surrounding area. Approximately $31,000,000 of its
loans at December 31, 1997 involve borrowers in the motel industry. Repayment of
these loans is in part dependent upon the economic conditions in this region.
The Bank evaluates each customer's credit worthiness on an individual basis. The
Bank requires collateral on all real estate exposure, which consists primarily
of land, residential and income-producing properties. The Bank does not extend
credit to any single borrower or group of related borrowers in excess of their
legal lending limit of about $5,000,000 in 1997 and 1996.
The Bank's installment loans and related loan commitments are also primarily
located in East Texas and the surrounding area. Repayment of these loans is in
part dependent upon the regional economic conditions. The average balance of an
installment loan was about $5,000 at December 31, 1997 and 1996. Collateral
typically consists of automobiles and other equipment.
Investments in state and municipal securities also involve governmental entities
within the Company's market area.
Cash equivalents are financial instruments which potentially subject the Company
to concentrations of credit risk. The Company places its cash with
high-credit-quality financial institutions and periodically maintains deposits
in amounts which exceed FDIC insurance coverage. Management believes the risk of
incurring material losses related to this credit risk is remote.
10. Related Party Transactions
In the ordinary course of business, the Bank makes loans directly or indirectly
to its directors and officers. These loans are made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons. Extensions of credit by the Bank
to directors and senior officers, including their affiliated interests,
approximated $8,021,000 at December 31, 1997, and $5,798,000 at December 31,
1996. Outstanding letters of credit to related parties approximated $325,000 at
December 31, 1997, and $300,000 at December 31, 1996.
11. Incentive Compensation Plans
Pension and Retirement Plan
The Bank has a 401(k) deferred compensation program covering most employees with
at least one year of service. Under the plan, the Bank may match up to 50% of
salary reduction contributions made by eligible employees, up to a maximum of 7%
of individual compensation. The Bank contributed $74,734 in 1997, and $66,076 in
1996, under this plan.
Stock Option Plan
The Company has stock option plans covering certain officers and employees.
Options granted vest immediately and expire six years after date of grant (five
years for grantees with the power to vote more than 10% of the voting power of
the Company at the date of grant).
Option activity under the plan was as follows:
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding, beginning of year ..... 71,466 34,802
Options granted ($1.78 per share in 1997,
and $1.32 per share in 1996) ......... 16,070 36,664
- -------------------------------------------------------------------------------------
Options outstanding and exercisable (prices
ranging from $1.15 to $1.78 per share) 87,536 71,466
=====================================================================================
Options available for grant, end of year ... 512,464 128,534
=====================================================================================
</TABLE>
Currently, generally accepted accounting principles allow two alternative
methods of accounting for stock-based employee compensation plans: the intrinsic
value method, and the fair value method. The Company uses the intrinsic value
method, which resulted in no compensation costs being recognized in connection
with this plan. If the fair value method had been utilized, 1996 compensation
expense relating to this plan would have been about $7,000 in 1997 and $15,000
in 1996.
Stock Grant Agreements
During 1996, the Company entered into agreements with two of its officers that
provide for annual stock grants and final stock grants upon the occurrence of
defined triggering events (generally, retirement, termination, death, or a
defined change of ownership of the Company).
Annual stock grants are determined based upon the achievement of specified
levels of return on equity for the immediately preceding three years.
The final grants will be determined based upon varying percentages of the dollar
amount by which the defined fair market value as of the date of the triggering
event exceeds the dollar amount representing a return on investment of 15% per
annum, as of the date of the triggering event. The excess is referred to as a
dollar gain. The award is based upon a percentage of the dollar gain which
varies based on the level of return on investment achieved during the subject
period. The aggregate applicable percentages are as follows:
<TABLE>
<CAPTION>
Achieved Rate of Return Applicable Aggregate Percentage
- -------------------------------------------------------------------
<S> <C>
Greater than 15% and less than 17% 13.2%
Greater than 17% and less than 20% 16.5%
Greater than 20% and less than 25% 22.0%
Greater than 25% ................. 27.5%
</TABLE>
For purposes of a final award, fair market value means (1) the total amount of
consideration to be received by Company shareholders for their capital stock if
the triggering event is a change of ownership, or (2) the appraised value of all
of the outstanding stock of the Company if the triggering event is other than a
defined change of ownership. The total award as computed above is reduced by the
value of Company stock previously issued to the participant under annual stock
grants.
The number of shares to be awarded is determined based upon the market value
share price of Company stock in the case of a final award and net book value per
share in the case of annual awards. The recipient may elect to receive cash
equal to one-third of the value of Company stock awarded under these agreements.
Compensation expense recognized under these agreements was $86,400 for 1997 and
$151,800 for 1996.
Executive Supplemental Income Agreements
As part of the merger with HTGI (see Note 14), certain previously existing
agreements with six former officers of HTGI were modified and restated. Under
the terms of the restated agreements ("ESI Agreements"), each of the officers
is, subject to certain defined limitations, provided defined pre-retirement
death, disability or retirement benefits. Generally the agreements provide that
a participant may receive benefits under only one of the three stated benefit
categories. All participants became full vested as of the date of the merger
(December 13, 1996). However, should a participant be discharged for just cause,
as defined in the agreement, all benefits of the subject participant are
forfeited.
The Company's obligation under these agreements is limited to cash flow from
certain insurance policies which, pursuant to these agreements, have been
transferred to a grantor trust, the First Heritage Bank, N.A. ESI Trust (the
"Trust"). The Trust agreement among other things provides the Trust shall become
irrevocable 30 days after receipt of a private letter ruling from the Internal
Revenue Service. Until the Trust becomes irrevocable, it is revocable by the
Company at any time. At all times during the continuance of the Trust, the Trust
principal and income are subject to claims of general creditors of the Company
should the Company become insolvent as defined by the Trust agreement. After the
Trust becomes irrevocable, except in the case of insolvency, the Company may
receive distributions from the Trust only to the extent that Trust assets exceed
the total of all future obligations under the ESI Agreements and other
administrative costs of the Trust.
The Company has no obligation for additional contributions to fund the ESI
Agreements. If the assets placed in trust are not adequate to provide the full
amount of ESI benefits, the agreements provide for a reduction in benefits to an
amount equal to the excess of Trust assets over liabilities of the Trust, if
any.
A summary of Company assets and liabilities relating to these agreements as of
December 31, 1997, is as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash surrender value of insurance policies placed in trust $590,653
Present value of vested retirement benefits .............. 66,357
</TABLE>
During 1997 the excess of the increase in plan assets over the plan liability
was $19,014. This excess was recognized as a reduction of compensation expense.
Due to the timing of the HTGI merger, the Company recognized no income or
expense in connection with these agreements for 1996.
Heritage KSOP Plan
Prior to its merger with MarTex (see Note 14), HTGI sponsored a leveraged
Employee Stock Ownership Plan with a 401(k) provision (the "KSOP"). Pursuant to
the plan of merger, MarTex and HTGI amended the KSOP as of the merger date to
(1) suspend further entry of employees into the KSOP; (2) accelerate vesting for
all current participants; (3) allocate to participants employed on the closing
date all shares released from suspense (other than shares otherwise required to
be released) in an agreed upon fashion. In addition, MarTex shares replaced the
Heritage shares previously held by the KSOP; HTGI stipulated that unallocated
shares as of the closing date represented consideration to participants employed
as of that date for past services to HTGI; MarTex made an irrevocable commitment
to make such contributions to the KSOP required to discharge the unpaid balance
of the KSOP loan as of the closing date ($235,853); and MarTex and HTGI made an
irrevocable commitment to allocate the previously unallocated shares to
participants as described above.
For financial accounting purposes, MarTex accrued the required contribution of
$235,853 as part of the obligations assumed in connection with the merger. The
required contribution was made on January 3, 1997, and because of the accrual
resulted in no expense to MarTex for either 1996 or 1997. At December 31, 1997,
the KSOP held 901,796 shares of MarTex stock. This consisted of 885,985 shares
allocated to participants and 15,811 shares committed to be released.
12. Common Stock
The Company is currently authorized to issue 100,000,000 shares of $.01 par
value common stock. Shares issued and outstanding were 11,846,469 at December
31, 1997, and 11,822,146 at December 31, 1996.
Each share of the Company's common stock entitles the shareholder to one vote in
all corporate matters calling for a vote of shareholders. Each person owning a
share of the Company's common stock has the same rights, privileges and
preferences of any other person owning a share, and is entitled to share equally
upon liquidation of the Company. The holders of the Company's common stock do
not have the preemptive right to subscribe for additional shares in proportion
to the number of shares owned by the shareholders at the time any increase in
the issued common stock of the Company is authorized. The holders of the
Company's common stock do not have the right to cumulate their votes in the
election of directors. The holders of the Company's common stock are entitled to
dividends, when and if declared by the Board of Directors of the Company. The
Federal Reserve Board has adopted a policy on one-bank holding company
formations, which with certain limited exceptions prohibits companies from
paying dividends on their common stock when its borrowed funds to equity ratio
exceeds 30%.
13. Stock Warrants
As part of the merger with HTGI (see Note 14), the Company issued warrants to
certain former officers of HTGI to convert options of HTGI at the date of
merger. These warrants allow for the purchase of 544,111 shares of MarTex common
stock at exercise prices that range from $1.02 to $1.29 per share. Warrants for
344,283 shares expire in December 2003. The remaining warrants for 199,828
shares have no expiration date. The difference between exercise price and fair
market value amounted to $320,311 at the date of issue (December 13, 1996), and
is included in these financial statements as paid-in capital - warrants. In
addition, the Company issued warrants to a former officer of HTGI to purchase
120,000 shares of MarTex common stock at a purchase price equal to the fair
value per share of MarTex at the effective date of the merger ($1.77). These
warrants expire December 13, 2003.
14. Business Combinations
On December 13, 1996, the Company, in conjunction with its wholly owned
subsidiary, First Service Bank, completed its merger with Heritage Texas Group
Inc., ("HTGI"), a bank holding company, and its wholly owned subsidiary, First
Heritage Bank, National Association. The Company issued approximately 2,793,900
shares of MarTex common stock for the outstanding shares of HTGI. The
transaction was accounted for as a purchase. Accordingly, the assets and
liabilities of HTGI were recorded at fair value at the date of acquisition. The
purchase price of the acquisition consisted of:
<TABLE>
<CAPTION>
<S> <C>
MarTex common stock issued to
HTGI shareholders ........................... $4,914,694
Non-compete agreements with HTGI officers ......... 1,000,000
MarTex stock warrants issued to HTGI option holders 320,311
Acquisition costs incurred ........................ 161,186
- --------------------------------------------------------------------------------
$6,396,191
================================================================================
</TABLE>
The net purchase price was allocated as follows:
<TABLE>
<CAPTION>
<S> <C>
Assets acquired:
Cash and due from banks ........ $ 3,618,350
Federal funds sold ............. 4,970,000
Certificates of deposit ........ 200,000
Investments .................... 49,451,442
Loans and related items ........ 31,690,794
Bank premises and equipment .... 2,913,444
Accrued interest receivable .... 756,046
Other real estate .............. 15,000
Refundable federal income tax .. 206,413
Other assets ................... 632,335
Goodwill ....................... 2,168,639
- ----------------------------------------------------------------------
96,622,463
- ----------------------------------------------------------------------
Liabilities assumed:
Note payable ................... (2,563,000)
Deposits and other related items (86,705,378)
Interest payable ............... (214,664)
Deferred federal income tax .... (6,167)
Other liabilities .............. (737,063)
- ----------------------------------------------------------------------
(90,226,272)
- ----------------------------------------------------------------------
$ 6,396,191
======================================================================
</TABLE>
The financial statements include the operating results of HTGI from the date of
acquisition.
15. Regulatory Matters
The Bank is subject to various capital requirements administered by the federal
banking agencies. Failure to meet the minimum regulatory capital requirements
can initiate certain mandatory, and possibly additional discretionary, actions
by regulators, that if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines involving quantitative measures of the Bank's assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
following table) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average
assets (as defined). Management believes that the Bank meets all the capital
adequacy requirements to which it is subject, as of December 31, 1997.
As of December 31, 1997, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well-capitalized under the
regulatory framework for prompt corrective action. To remain categorized as
well-capitalized, the Bank must maintain minimum total risk-based, Tier 1
risk-based, and Tier 1 leverage ratios as set forth in the table below. There
are no conditions or events since that notification that management believes
have changed the Bank's category.
<TABLE>
<CAPTION>
To Be Well-
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997: (greater than or equal to) (greater than or equal to)
Total Capital (to risk-weighted assets)
Consolidated .......................... $22,841,793 12.98% $ 4,081,268 8.00% N/A
Bank only ............................. 23,644,755 13.40% 14,113,348 8.00% $17,641,686 10.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Tier 1 Capital (to risk-weighted assets)
Consolidated .......................... 20,641,595 11.73% 7,040,634 4.00% N/A
Bank only ............................. 21,439,544 12.15% 7,056,674 4.00% 10,585,011 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Tier 1 Capital (to adjusted total assets)
Consolidated .......................... 20,641,595 6.85% 12,057,000 4.00% N/A
Bank only ............................. 21,439,544 7.11% 12,065,938 4.00% 15,082,422 5.00%
- ------------------------------------------------------------------------------------------------------------------------------------
As of December 31, 1996:
Total Capital (to risk-weighted assets)
Consolidated .......................... 19,876,289 12.18% 13,055,651 8.00% N/A
Bank only ............................. 22,391,229 13.61% 13,162.989 8.00% 16,453,737 10.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Tier 1 Capital (to risk-weighted assets)
Consolidated .......................... 17,971,502 11.01% 6,527,825 4.00% N/A
Bank only ............................. 20,334,512 12.36% 6,581,495 4.00% 9,872,242 6.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Tier 1 Capital (to adjusted total assets)
Consolidated .......................... 17,971,502 6.35% 8,100,012 4.00% N/A
Bank only ............................. 20,334,512 9.90% 8,141,256 4.00% 10,176,570 5.00%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
MARTEX BANCSHARES FOR YEARS ENDED
DECEMBER 31, 1997 AND DECEMBER 31, 1996
The following discussion provides certain information concerning the financial
condition and results of operations of MarTex for years ended December 31, 1997
and 1996. The financial position and results of operations of MarTex resulted
primarily from operations at its banking subsidiary, the Bank. Management's
discussion should be read in conjunction with the MarTex financial statements
and accompanying notes presented elsewhere in this Proxy Statement-Prospectus.
Overview
MarTex reported net income for December 31, 1997 of $3,098,803, an increase of
41.78% from net income of $2,185,603 for 1996. Returns on average assets and
average equity for 1997 were 1.03% and 13.65% compared with 1.22% and 14.11% for
1996. The increase in net income for 1997 is principally attributed to the
acquisition of First Heritage Bank on December 13, 1996.
MarTex's total assets at December 31, 1997 were $315,854,627, an increase of
11.11% from December 31, 1996. Loans increased $14,574,442 from December 31,
1996 to December 31, 1997 due principally to internal growth. Total deposits at
December 31, 1997 of $288,624,266 were up 11.81% compared with December 31,
1996. This increase is attributed to internal growth.
Results of Operations
Net Interest Income. Net interest income for 1997 was $12,043,964, a $3,453,863,
or 40.21%, increase from 1996. This increase was due to the First Heritage Bank
acquisition.
The following table sets forth certain information concerning the average
balances, interest income (on a fully tax equivalent basis), interest expense,
and average rates on MarTex's interest-earning assets and interest-bearing
liabilities for the years indicated.
<TABLE>
<CAPTION>
(Dollars in Thousands)
December 31,
- ------------------------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------------------------
Average Average
Interest Rates Interest Rates
Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings assets:
Loans (before
allowance for
loan losses) ..... $165,821 $16,038 9.67% $118,673 $11,643 9.81%
- ------------------------------------------------------------------------------------------------
Investment
securities:
Taxable securities 88,958 5,583 6.28% 36,316 2,473 6.81%
Tax-exempt
securities ..... 10,671 453 6.43% 5,235 236 6.85%
- ------------------------------------------------------------------------------------------------
Total investment
securities ..... 99,629 6,036 6.29% 41,551 2,709 6.81%
- ------------------------------------------------------------------------------------------------
Federal funds sold
and interest-bearing
deposits ....... 12,589 572 4.54% 6,428 267 4.15%
- ------------------------------------------------------------------------------------------------
Total earnings assets $278,039 $22,646 8.23% $166,652 $14,619 8.85%
================================================================================================
Interest-bearing
liabilities:
Deposits ........... $273,384 $10,434 3.82% $162,468 $ 6,029 3.71%
Notes payable ...... 1,788 168 9.40% 126 - 0.00%
- ------------------------------------------------------------------------------------------------
Total interest-bearing
liabilities ........ $275,172 $10,602 3.85% $162,594 $ 6,029 3.71%
================================================================================================
Net interest income .. $12,044 $ 8,590
================================================================================================
Net yield on
earnings assets .... 4.33% 5.15%
================================================================================================
</TABLE>
Interest Rate Sensitivity. Interest rate risk is the potential impact on net
interest income due to changes in interest rates in any given time frame and the
opportunity to reprice interest-earning assets and interest-bearing liabilities.
Management uses simulation models to estimate the effect of significant interest
rate changes on net interest income and the fair market value of securities
available for sale. Management may alter the mix of floating and fixed-rate
assets and liabilities, change loan and deposit pricing schedules and adjust
maturities through sales and purchases of securities available for sale as a
means of limiting interest rate risk to an acceptable level.
Provision for Loan Losses. The provision for possible loan losses is the amount
that is added to MarTex's allowance for loan losses, by a charge against
earnings, in order to maintain a balance in the allowance for loan losses that
is deemed by management to be adequate to absorb the inherent risk of future
loan losses in MarTex's loan portfolio. The amount of the provision is dependent
upon many factors, including management's evaluation of historical loan loss
experience in relation to outstanding loans, the existing level of the
allowance, reviews of loan quality, loan growth, changes in the composition of
the loan portfolio, general economic factors, the financial condition of the
borrowers and their ability to repay the loan and the value and liquidity of
collateral.
MarTex's 1997 provision for loan losses of $285,000 was increased by $45,000
from 1996. The allowance for loan losses of $2,176,084 was 1.29% of net loans
outstanding at December 31, 1997. The allowance for loan losses at December 31,
1996, was $2,422,068, or 1.58% of net loans outstanding.
Non-Interest Income. MarTex's non-interest income for 1997 increased 73.88% from
1996 due to increases in service charges on deposit accounts from increased
activity associated with the First Heritage Bank acquisition.
Non-Interest Expense. Total non-interest expense for 1997 increased $3,145,548,
or 48.55%, from 1996 due to additional salaries and other expenses resulting
from the First Heritage Bank acquisition.
Income Taxes. MarTex's ratio of taxable income to total income before income
taxes decreased from 1996 to 1997, resulting in a decrease in the effective tax
rate from 33% in 1996 to 32% in 1997.
Financial Condition
Total Assets. At December 31, 1997, total consolidated assets were $315,854,627,
an increase of $31,576,411, or 11.11% from December 31, 1996. This increase in
total assets is due to internal growth.
Investment Securities. MarTex adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments and Debt Securities"
("SFAS 115"), as of January 1, 1994. SFAS 115 addresses the accounting and
reporting for investments in equity securities that have readily determinable
fair value and for all investments in debt securities and requires
classification of securities as trading, available for sale, or held to
maturity. Management determines the classification of securities when they are
purchased. Securities which MarTex has the intent and ability to hold to
maturity are classified as held to maturity and are stated at cost, adjusted for
amortization of premiums and accretion of discounts. Securities which may be
sold in response to interest rates, liquidity needs or other factors are
classified as available for sale. These securities are reflected at fair value,
and net unrealized gains or losses are reflected as a separate component of
shareholders' equity, net of income tax effects.
The composition of MarTex's investment portfolio directly reflects MarTex's
investment strategy of maximizing portfolio yields subject to risk and liquidity
considerations. The composition, amortized cost and estimated fair value of
investment securities at December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Investment Securities (AFS)
- --------------------------------------------------------------------------------
Amortized Gross Unrealized Fair
Cost Gains Losses Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1997:
Government and Agencies .. $ 48,186 $ 318 $ (32) $ 48,472
Mortgage backed securities 51,949 468 (119) 52,298
Municipal bonds .......... 11,677 237 (85) 11,829
Other securities ......... 31 31
- --------------------------------------------------------------------------------
Total .............. $111,843 $1,023 $(236) $112,630
================================================================================
December 31, 1996:
Government and Agencies .. $ 35,574 $ 117 $ (93) $ 35,598
Mortgage backed securities 41,253 274 (372) 41,154
Municipal bonds .......... 9,415 211 (113) 9,514
Other securities ......... 364 364
- --------------------------------------------------------------------------------
Total .............. $ 86,606 $ 602 $(578) $ 86,630
================================================================================
</TABLE>
The amortized cost and estimated fair value of available for sale securities at
December 31, 1997, by contractual maturities, are shown below. Actual maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call prepayment penalties.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Amortized Fair
Cost Value
- --------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less .............. $ 5,578 $ 5,570
Due after one year through five years 59,160 59,364
Due after five years through ten years 18,567 18,707
Due after ten years .................. 28,507 28,958
Securities with no maturity .......... 31 31
- --------------------------------------------------------------------------
Total ............................ $111,843 $112,630
==========================================================================
</TABLE>
Loans. MarTex engages in real estate lending through real estate mortgage and
construction lending, and commercial and consumer lending. The specific
underwriting criteria for each major loan category is outlined in detail in the
formal written loan policy and is approved by the Board of Directors. In
general, each loan is evaluated based on, among other things, character and
leverage capacity of the borrower, capital and investment in a particular
property, if applicable, cash flow, collateral, market conditions for the
borrower's business or project and prevailing economic trends and conditions.
The loan policies of the Bank, including the underwriting criteria for major
loan categories, are adjusted periodically with each change approved by the
Bank's Board of Directors. The Bank's Board of Directors weighs each new
criteria after considering the foregoing factors and in light of the overall
financial condition and performance of the Bank. The Bank's underwriting
criteria are routinely reviewed by management and external examiners consistent
with the Bank's policy and banking regulations.
Major classifications of loans were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
Commercial ......................... $ 45,935 $ 47,433
Real Estate Construction ........... 4,509 4,436
Mortgage ........................... 100,132 83,802
Consumer Installment ............... 20,114 20,922
Credit Card ........................ 2,185 2,174
- ---------------------------------------------------------------------------
172,875 158,767
Unearned income on installment loans (2,555) (2,666)
Allowance for loan losses .......... (2,176) (2,422)
Acquisition reserve ................ (109)
- ---------------------------------------------------------------------------
$ 168,144 $ 153,570
===========================================================================
</TABLE>
The maturity schedule and rate structure of MarTex's loan portfolio has an
impact on MarTex's ability to meet its liquidity demands and respond favorably
to changes in interest rates. At December 31, 1997, 38.90% of MarTex's total
loans were scheduled to mature or reprice within one year or less. The following
table provides information concerning loan portfolio maturity, based on
remaining scheduled repayments of principal.
<TABLE>
<CAPTION>
(Dollars in Thousands)
At December 31, 1997:
Maturity or Earliest Repricing
- -------------------------------------------------------------------------------------------------------
Over One
One Year Through Over Five
or Less Five Years Years Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Closed-end loans secured by first liens on
1-4 family residential properties ........ $12,266 $24,458 $ 9,995 $ 46,719
All loans and leases excluding closed-end
loans secured by first liens on 1-4 family
residential properties ................... 53,823 57,676 12,102 123,601
- -------------------------------------------------------------------------------------------------------
Total loans (net of unearned income) ....... $66,089 $82,134 $22,097 $170,320
=======================================================================================================
</TABLE>
Normally borrowers are expected to meet contractual terms. In some cases,
however, borrowers are permitted to renew obligations after appropriate review
of the credit quality and determination of the borrower's ability and
willingness to repay.
The data shown above is in a format which conforms with reports to the bank
regulatory agencies and has not been restated to reflect anticipated rollovers,
which management does not believe would materially affect the data presented.
Non-accrual, Past Due and Restructured Loans. Non-performing assets include
non-performing loans and foreclosed real estate held for sale. Non-performing
loans include loans classified as non-accrual or renegotiated to provide a
reduction or deferral of interest or principal and those past due 90 days or
more on which interest is still being accrued. It is the general policy of
MarTex to place loans on non-accrual status when, in the opinion of management,
there exists sufficient uncertainty as to the collectibility of the contractual
interest or principal or if the loan becomes 90 days delinquent, whichever comes
first. Placing a loan on a non-accrual status causes an immediate charge against
earnings for the interest which has been accrued but not yet collected on the
loan and eliminates future interest earnings with respect to that loan. Interest
on such loans is not recognized until all of the principal is collected or until
the loan is returned to a performing status. Interest income recognized on
non-accrual loans during the periods ending December 31, 1997 and 1996, was not
significant.
The total recorded investment in impaired loans, all of which had specific
allowances for losses, amounted to approximately $1,211,000 at December 31,
1997, and $940,000 at December 31, 1996. The average balance of these loans
amounted to approximately $1,111,000 during 1997 and $1,010,000 during 1996. The
aggregate allowance for loan losses related to these loans amounted to
approximately $358,000 at December 31, 1997, and $556,000 at December 31, 1996.
Interest income on impaired loans was recognized for receipt of cash payments of
about $92,000 during 1997, and about $63,000 in 1996.
In May of 1993, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan," which was amended by Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure," issued in October of 1994. These statements require
that impaired loans be measured at the present value of expected cash flows
discounted at the loan's effective interest rate, or, as a practical expedient,
at the loan's observable market price or the fair value of the collateral if the
loan is collateral dependent. MarTex's adoption of these new standards did not
have a significant effect on the allowance for loan losses or MarTex's method of
income recognition for impaired loans.
Allowance for Loan Losses. MarTex charges to operating expense an amount
necessary to maintain the balance in the allowance for possible loan losses at a
level that is deemed to be adequate to absorb all expected loan losses.
Management determines the adequacy of its reserve and the amount of any
additional provision or negative provision for possible loan losses based on
many factors, including an evaluation of historical loan loss experience in
relation to outstanding loans, the existing level of the allowance reviews of
loan quality, loan growth, changes in the composition of the loan portfolio,
general economic factors, the financial condition of the borrowers and their
ability to repay the loan and the value and liquidity of collateral. The amount
in the allowance for possible loan losses is reviewed by management on a monthly
basis to determine whether additional provisions should be made or whether
transfers from the allowance to earnings are justified. MarTex's Board of
Directors reviews the adequacy of the reserve on a quarterly basis.
The following table summarizes averages of loan balances, changes in the
allowance for possible loan losses arising from loans charged off and recoveries
on loans previously charged off, by category, and the provision for possible
loan losses charged to operating expense as of the dates and the periods
indicated.
<TABLE>
<CAPTION>
(Dollars in Thousands)
December 31,
- -----------------------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Average total loans net of discounts ............ $ 163,156 $ 130,036
=========================================================================================
Beginning balance ............................... $ 2,422 $ 2,101
Loans charged off:
Real estate ................................... (88) (10)
Commercial, financial and agricultural ........ (313) (150)
Installment ................................... (311) (272)
- -----------------------------------------------------------------------------------------
Total charged off ....................... (712) (432)
- -----------------------------------------------------------------------------------------
Recoveries:
Real estate ................................... - -
Commercial, financial and agricultural ........ 152 81
Installment ................................... 29 36
- -----------------------------------------------------------------------------------------
Total recoveries ........................ 181 117
- -----------------------------------------------------------------------------------------
Net loans charged off ........................... (531) (315)
Provision for loan losses ....................... 285 240
Allowance Acquired in Merger .................... $ 396
- -----------------------------------------------------------------------------------------
Ending balance .................................. $ 2,176 $ 2,422
=========================================================================================
Ratio of net charge-offs during period to average
loans outstanding ............................. 0.33% 0.24%
=========================================================================================
</TABLE>
MarTex's allowance for possible loan losses at December 31, 1997 was $2,176,084,
which, in management's opinion, is adequate to cover possible losses in its
current loan portfolio. However, no assurance can be given that future changes
in economic conditions that might adversely affect MarTex's principal market
areas, borrowers, or collateral values, and other circumstances will not result
in increased losses in MarTex's loan portfolio in the future.
Deposits and Other Liabilities. MarTex's total deposits increased from
$258,143,304 at December 31, 1996, to $288,624,266 in 1997. The growth in
deposits is primarily the result of deposits acquired by offering a 7%, 7-month
certificate of deposit to potential customers who would bring additional
relationships to the Bank. The product was only offered for a limited time. The
following table summarizes the amounts of deposits for the periods indicated:
<TABLE>
<CAPTION>
(Dollars in Thousands)
December 31,
- ------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Non-interest-bearing demand deposits ..... $ 37,182 $ 32,947
Interest-bearing money market/NOW deposits 65,917 63,509
Savings deposits ......................... 12,139 14,122
Time deposits under $100,000 ............. 128,380 110,088
Time deposits $100,000 or more ........... 45,006 37,478
- ------------------------------------------------------------------------------
Total deposits ........................... $288,624 $258,144
==============================================================================
</TABLE>
MarTex had $1,013,936 and $2,563,000 in 1997 and 1996 respectively related to
acquisition debt to an unaffiliated bank.
Liquidity and Interest Rate Sensitivity Management. The primary functions of
asset and liability management are to assure adequate liquidity and to maintain
an appropriate balance between interest-earning assets and interest-bearing
liabilities. Liquidity represents the Bank's ability to meet the daily demand
for funds from its customers to pay maturing deposits, honor checks and drafts,
extend credit and meet other commitments. Management monitors liquidity
requirements as warranted by interest rate trends, changes in the economy,
changes in the scheduled maturities, and interest rate sensitivity of the
investment and loan portfolios as well as deposits. The Bank attempts to match
rate-sensitive assets and liabilities in order to minimize exposure from
fluctuations in interest rates and to enhance consistent growth of net interest
income through periods of changing interest rates.
The asset portion of the balance sheet provides liquidity primarily through cash
and due from Banks, loan principal repayments, and cash flows from investment
securities, federal funds sold and investment securities available for sale.
The liability portion of the balance sheet provides liquidity through the
various interest and non-interest-bearing deposit accounts, federal funds
purchased, securities sold under agreements to repurchase, and other short-term
borrowings. Long-standing relationships with many institutions have provided the
bank with the opportunity to buy and sell federal funds on a daily basis.
The Bank's liquidity, which is monitored by an Asset-Liability Committee, is
deemed by management to be adequate.
Capital Resources. Quantitative measures established by regulation to ensure
capital adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the following table) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as
defined) to average assets (as defined). Management believes that the Bank meets
all the capital adequacy requirements to which it is subject, as of December 31,
1997.
As of December 31, 1997, the most recent notification from the FDIC categorized
the Bank as well-capitalized under the regulatory framework for prompt
corrective action. To remain categorized as well-capitalized, the Bank must
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage
ratios as set forth in the table below. There are no conditions or events since
that notification that management believes have changed the Bank's category.
The annualized return on average shareholders' equity was 13.65% for the year
end 1997, as compared to 14.11% for the same period in 1996. Shareholders'
equity increased to $24.3 million at December 31, 1997, from $21.1 million at
December 31, 1996. Cash dividends declared by MarTex for the year ended December
31, 1997, totaled $0.04 per share, compared to $0.04 for the same period of
1996. The following table illustrates the changes in shareholders' equity for
December 31, 1997, and December 31, 1996.
<TABLE>
<CAPTION>
(Dollars in Thousands)
December 31,
- ------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C>
Beginning balance .......................... $ 21,113 $ 14,253
Net income ................................. 3,099 2,186
Cash dividends declared .................... (473) (361)
Merger with Heritage Texas Group ........... - 5,235
Additions due to stock grants .............. 43 50
Net unrealized gain/(loss) on AFS securities 504 (250)
==============================================================================
Ending balance ............................. $ 24,286 $ 21,113
==============================================================================
</TABLE>
The following table summarizes the risk-based capital ratios of MarTex
for the periods indicated. All three ratios for both periods are considered
well-capitalized by regulatory authorities.
<TABLE>
<CAPTION>
(Dollars in Thousands)
December 31,
- -------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------
<S> <C> <C>
Tier 1 capital ......... $ 20,642 $ 17,972
Total capital .......... 22,842 19,876
Risk-weighted assets ... 176,016 163,196
Adjusted total assets .. 301,337 283,016
Tier 1 capital ratio ... 11.73% 11.01%
(Regulatory minimum) (4.00%) (4.00%)
Total capital ratio .... 12.98% 12.18%
(Regulatory minimum) (8.00%) (8.00%)
Tier 1 leverage ratio .. 6.85% 6.35%
(Regulatory minimum) (4.00%) (4.00%)
=========================================================================
</TABLE>
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
Sproles Woodard, L.L.P., independent auditors, has continuously served
as the independent auditor for MarTex from 1990 through the present. A
representative of Sproles Woodard, L.L.P. is expected to be present at the
Special Meeting. This representative will have an opportunity to make a
statement if he or she desires and will be available to respond to appropriate
questions.
VALIDITY OF SHARES
Patricia C. Meringer, Corporate Counsel and Secretary of Hibernia has
passed upon the validity of the shares to be issued by Hibernia in the Merger.
As of the date of this Proxy Statement/Prospectus, Ms. Meringer beneficially
owned 22,830 shares of Hibernia Common Stock (including options to purchase
shares of Hibernia Common Stock that are currently exercisable).
EXPERTS
The consolidated financial statements of Hibernia Corporation
incorporated by reference in Hibernia Corporation's Annual Report (Form 10-K)
for the year ended December 31, 1997 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
Sproles Woodard, L.L.P., independent certified public accountants, have
audited the consolidated financial statements of MarTex for the years ended
December 31, 1997 and 1996. Those financial statements are included in the Proxy
Statement of MarTex, which is referred to and made a part of this Prospectus and
Registration Statement, and have been included in reliance upon the report of
Sproles Woodard, L.L.P. appearing elsewhere herein, and upon the authority of
said firm as experts in accounting and auditing.
<PAGE>
APPENDIX A
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
OF
MARTEX BANCSHARES, INC. WITH AND INTO
HIBERNIA CORPORATION
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER dated as of January
19, 1999, to be effective as of June 29, 1998, (this "Agreement"), adopted and
made by and between MarTex Bancshares, Inc. ("MarTex") and Hibernia Corporation
("Hibernia").
MarTex is a corporation duly organized and existing under the laws of
the State of Texas and has its office at 2615 East End Boulevard South,
Marshall, Texas 75670; is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Bank Holding Company Act"); and
owns all issued and outstanding shares of First Service Bank (the "Bank"). The
presently authorized capital stock of MarTex consists solely of 100,000,000
shares of common stock of the par value of $0.01 each ("MarTex Common Stock")
and 500,000 shares of preferred stock of the par value of $4.13 each. As of
March 31, 1998, 11,846,469 shares of MarTex Common Stock had been issued and
were outstanding, and no shares of MarTex Common Stock were held in MarTex's
treasury. As of March 31, 1998, no shares of preferred stock had been issued by
MarTex and no such shares were outstanding. All outstanding shares of MarTex
Common Stock have been duly issued and are validly outstanding, fully paid and
nonassessable. The foregoing are the only voting securities of MarTex
authorized, issued, or outstanding. As of March 31, 1998, there were options to
purchase 450,264 shares of MarTex Common Stock outstanding, 319,828 shares
issuable under a Warrant Agreement dated 12/13/96, 28,618 shares of MarTex
Common Stock earned but not yet issued under the Stock Grant Agreements listed
on Schedule 7.26 hereto and additional shares of MarTex Common Stock to be
issued pursuant to such Stock Grant Agreements as a result of the consummation
of the transactions contemplated by this Agreement, and there are no other
existing stock options, warrants, calls, or commitments of any kind obligating
MarTex to issue any share of its capital stock or any other security of which it
is or will be the issuer. None of the shares of MarTex's capital stock has been
issued in violation of preemptive rights of shareholders. MarTex owns 100
percent of the outstanding voting shares of the Bank, a banking corporation
organized and existing under the laws of the State of Texas. All of the issued
and outstanding shares of capital stock of the Bank are directly owned by
MarTex. The Bank is (i) an "insured bank" as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder, and (ii) has been duly
organized and is validly existing as a state bank under the laws of the State of
Texas, and has full authority to conduct its business as and where currently
conducted.
Hibernia is a corporation duly organized and existing under the laws of
the State of Louisiana; has its registered office at 313 Carondelet Street, New
Orleans, Louisiana 70130; and is a bank holding company within the meaning of
the Bank Holding Company Act. Hibernia owns all of the issued and outstanding
shares of capital stock of Hibernia National Bank ("HNB") and Hibernia National
Bank of Texas ("HNBT"). The presently authorized capital stock of Hibernia is
400,000,000 shares, consisting of 100,000,000 shares of preferred stock, no par
value, and 300,000,000 shares of Class A voting common stock, no par value (the
Class A voting common stock being referred to hereinafter as "Hibernia Common
Stock"). As of March 31, 1998, 2,000,000 shares of Hibernia's preferred stock
were issued and outstanding, 152,109,882 shares of Hibernia Common Stock were
outstanding, and no shares of Hibernia Common Stock were held in Hibernia's
treasury. All outstanding shares of Hibernia Common Stock have been duly issued
and are validly outstanding, fully paid and nonassessable. The foregoing
Hibernia Common Stock and (in limited circumstances, the Hibernia Preferred
Stock) are the only voting securities of Hibernia authorized, issued or
outstanding and there are no existing options, warrants, calls or commitments of
any kind obligating Hibernia to issue any share of its capital stock or any
other security of which it is or will be the issuer, except that Hibernia has
authorized or reserved 1,968,750 shares of Hibernia Common Stock for issuance
under its 1987 Stock Option Plan, pursuant to which options covering 1,377,579
shares of Hibernia Common Stock were outstanding as of the date hereof;
9,898,336 (as adjusted) shares of Hibernia Common Stock for issuance under its
1992 Long-Term Incentive Plan, pursuant to which options covering 7,507,271
shares of Hibernia Common Stock were outstanding as of the date hereof;
1,000,000 shares of Hibernia Common Stock for issuance under its 1993 Director
Stock Option Plan, pursuant to which options covering 275,000 shares of Hibernia
Common Stock are outstanding on the date hereof; 24 shares of Hibernia Common
Stock are available for issuance pursuant to Hibernia's Dividend Reinvestment
and Stock Purchase Plan; and warrants covering 213,176 shares of Hibernia Common
Stock are outstanding. None of the shares of Hibernia's capital stock has been
issued in violation of preemptive rights of shareholders.
HNB is a national banking association organized and existing under the
laws of the United States of America having its principal registered office at
313 Carondelet Street, New Orleans, Louisiana 70130. HNBT is a national banking
association organized and existing under the laws of the United States of
America and having its principal office at 100 W. Broad Street, Texarkana, Texas
75501. All of the issued and outstanding shares of capital stock of HNB and HNBT
are owned by Hibernia. HNB and HNBT are (i) an "insured banks" as defined in the
Federal Deposit Insurance Act and applicable regulations thereunder, and (ii)
have been duly organized and are validly existing as national banks under the
laws of the United States, and have full authority to conduct their businesses
as and where currently conducted.
The Boards of Directors of MarTex and Hibernia have duly approved this
Agreement and have authorized the execution hereof by MarTex's Chairman of the
Board, Chief Executive Officer or President and Hibernia's President and Chief
Executive Officer, respectively. MarTex has directed that this Agreement be
submitted to a vote of its shareholders in accordance with Texas law and the
terms of this Agreement.
In consideration of their mutual promises and obligations, the parties
hereto adopt and make this Agreement for the merger of MarTex with and into
Hibernia and prescribe the terms and conditions of such merger and the mode of
carrying it into effect, which shall be as follows:
1. The Merger. On the Effective Date (as defined in Section 14
hereof), MarTex shall be merged with and into Hibernia under the Articles of
Incorporation of Hibernia, pursuant to the provisions of, and with the effect
provided in, (i) Part XI of the Louisiana Business Corporation Law ("LBCL") and
(ii) Section 5.01 through 5.04 of the Texas Business Corporation Act ("TBCA")
(the "Merger") and the Merger Agreement in substantially the form of Exhibit 1
hereto (the "Merger Agreement").
2. Hibernia Capital Stock. The shares of the capital stock of Hibernia
issued and outstanding immediately prior to the Effective Date shall, on the
Effective Date, continue to be issued and outstanding.
3. MarTex Common Stock.
3.1. Conversion in Certain Circumstances. On the Effective
Date and subject to the provisions of Section 3.7 hereof,
(a) shares of MarTex Common Stock which are issued and
outstanding immediately prior to the Effective Date (including MarTex Common
Stock issued pursuant to the options, warrants or grant agreements listed on
Schedule 6(b) hereto) other than (i) shares which are held by shareholders who
have not voted such shares in favor of the Merger and who shall have delivered a
written demand for payment of the fair value of such shares within the time and
manner provided in Article 5.12 of the TBCA (unless such holder shall have
failed to perfect or shall have effectively withdrawn or lost his right to
appraisal and payment under the TBCA), and (ii) shares owned beneficially by
Hibernia or its subsidiaries, shall, by virtue of the Merger automatically and
without any action on the part of the holder thereof, become and be converted
into the number of shares of Hibernia Common Stock that equals the Exchange Rate
set forth in Section 3.8 hereof;
(b) shareholders who hold certificates which represent shares
of MarTex Common Stock outstanding immediately prior to the Effective Date
(hereinafter called "Old Certificates") shall cease to be, and shall have no
rights as, shareholders of MarTex (except to convert their MarTex Common Stock
as set forth herein);
(c) each share of MarTex Common Stock held in the treasury of
MarTex or owned beneficially by Hibernia or any of its subsidiaries shall be
canceled; and
(d) Old Certificates shall be exchangeable by the holders
thereof in the manner provided in the transmittal materials described below for
new certificates for the number of whole shares of Hibernia Common Stock to
which such holders shall be entitled in accordance with the Exchange Rate set
forth in Section 3.8 and a check representing cash paid in lieu of fractional
shares as provided in Section 3.2 hereof.
3.2. Fractional Shares. Each holder of Old Certificates who
would otherwise have been entitled to receive a fraction of a share of Hibernia
Common Stock (after taking into account all shares of MarTex Common Stock
represented by the Old Certificates then delivered by such holder) shall
receive, in lieu thereof, cash (without interest) in an amount equal to such
fractional part of a share multiplied by the average of the closing price of one
share of Hibernia Common Stock for the ten business days preceding the last
trading day immediately prior to the Closing Date as reported in The Wall Street
Journal, and no such holder shall be entitled to dividends, voting rights or any
other right of shareholders in respect of any fractional share.
3.3. Transmittal Materials. As promptly as practicable after
the Effective Date, Hibernia shall send or cause to be sent to each former
shareholder of record of MarTex transmittal materials for use in exchanging Old
Certificates for certificates representing Hibernia Common Stock and a check
representing cash paid in lieu of fractional shares, if any. The letter of
transmittal will contain instructions with respect to the surrender of Old
Certificates and the distribution of either certificates representing Hibernia
Common Stock or cash, if any. If any certificate for shares of Hibernia Common
Stock is to be issued in a name other than that in which an Old Certificate
surrendered for exchange is issued, the Old Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and the person
requesting such exchange shall affix any requisite stock transfer tax stamps to
the Old Certificate surrendered or provide funds for their purchase or establish
to the satisfaction of the exchange agent to be appointed by Hibernia in
connection with such exchange (the "Exchange Agent") that such taxes are not
payable.
3.4. Rights as Shareholders. Former shareholders of MarTex and
any other individuals or entities who or which are entitled to receive Hibernia
Common Stock as a result of the Merger will be able to vote after the Effective
Date at any meeting of Hibernia shareholders or pursuant to any written consent
procedure the number of whole shares of Hibernia Common Stock into which their
shares of MarTex Common Stock are converted, regardless of whether they have
exchanged their Old Certificates. In addition, in that event, whenever a
dividend is declared by Hibernia on the Hibernia Common Stock after the
Effective Date, the declaration shall include dividends on all shares issuable
hereunder, but no shareholder will be entitled to receive his distribution of
such dividends until physical exchange of his Old Certificates shall have been
effected. Upon physical exchange of his Old Certificates, any such person shall
be entitled to receive from Hibernia an amount equal to all dividends (without
interest thereon and less the amount of taxes, if any, that may have been
withheld, imposed or paid thereon) declared, and for which the payment has
occurred, on the shares represented thereby; provided, however, that former
shareholders of MarTex shall not be entitled to receive any dividend on their
Hibernia Common Stock with respect to any period for which MarTex paid a
dividend prior to the Effective Date.
3.5. Maintenance of Stock Transfer Records; Cancellation of
Old Certificates. Prior to the Effective Date, MarTex shall continue to maintain
its stock transfer records and to transfer and replace stock certificates in
accordance with its existing policies and past practices with regard to such
transfers and replacements. On and after the Effective Date there shall be no
transfers on the stock transfer books of MarTex or Hibernia of the shares of
MarTex Common Stock which were issued and outstanding immediately prior to the
Effective Date. If, after the Effective Date, Old Certificates are properly
presented to Hibernia, they shall be canceled and exchanged for certificates
representing shares of Hibernia Common Stock and a check representing cash paid
in lieu of fractional shares as herein provided. Any other provision of this
Agreement notwithstanding, neither the Exchange Agent nor any party hereto shall
be liable to a holder of MarTex Common Stock for any amount paid or property
delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat, or similar law.
3.6. Property Transfers. From time to time, as and when
requested by Hibernia and to the extent permitted by Texas law, the officers and
directors of MarTex last in office shall execute and deliver such deeds and
other instruments and shall take or cause to be taken such further or other
actions as shall be necessary in order to vest or perfect in or to confirm of
record or otherwise to Hibernia title to, and possession of, all the property,
interests, assets, rights, privileges, immunities, powers, franchises, and
authorities of MarTex, and otherwise to carry out the purposes of this
Agreement.
3.7. Dissenters' Shares. Shares of MarTex Common Stock held by
any holder having rights of a dissenting shareholder as provided in Texas law,
who shall have properly objected to the Merger and who shall have properly
demanded payment on his stock in accordance with and subject to the provisions
of Texas law, shall not be converted as provided in Section 3.1 hereof until
such time as such holder shall have failed to perfect, or shall have effectively
lost, his right to appraisal of and payment for his shares of MarTex Common
Stock, at which time such shares shall be converted as provided in Section 3.1
hereof.
3.8. Exchange Rate.
(a) Except as otherwise provided in this Section 3.8 to the
contrary, the Exchange Rate (i.e. the number of shares of Hibernia Common Stock
that will be exchanged for each share of MarTex Common Stock) shall be the
number that is achieved by the following formula : 3,450,000 / the number of
shares of MarTex Common Stock outstanding as of the Effective Date.
(b) (i) In the event that the Department of Justice requires or
requests that Hibernia or HNBT divest a portion of the assets and/or liabilities
of the Bank as a condition to its agreement not to object to the Merger, and the
Parties hereto agree to such divestiture and consummate the Merger, the Exchange
Rate shall be adjusted downward to reflect the divestiture as set forth below in
this Section 3.8(b).
(ii) In the event the aggregate amount of deposits to be divested is $5
million or less and the aggregate amount of loans to be divested is $2 million
or less, there shall be no adjustment in the Exchange Rate.
(iii) In the event the aggregate amount of deposits to be divested is
greater than $5 million or the aggregate amount of loans to be divested is
greater than $2 million, then the Exchange Rate shall be calculated in
accordance with the following steps:
Step 1. If the aggregate amount of deposits to be divested is greater than
$5 million, then the number of shares to be issued by Hibernia in exchange
for the outstanding shares of MarTex shall be reduced by 9,284 for each $1
million of deposits to be divested in excess of $5 million, which reduction
shall be prorated for any amount less than $1 million to be divested. (If
not, then skip to Step 2.)
Step 2. If the aggregate amount of loans to be divested is greater than $2
million, then the number of shares to be issued by Hibernia in exchange for
the outstanding shares of MarTex shall be reduced by 20,073 for each $1
million of loans to be divested in excess of $2 million, which reduction
shall be prorated for any amount less than $1 million to be divested.
Step 3. The aggregate number of shares achieved by applying Steps 1 and 2
shall be added together and subtracted from 3,450,000 to obtain the
aggregate number of shares of Hibernia Common Stock that will be exchanged
for the shares of MarTex Common Stock outstanding.
4. Articles of Incorporation; Bylaws. The Articles of Incorporation
and Bylaws of Hibernia in force immediately prior to the Effective Date shall on
and after the Effective Date continue to be the Articles of Incorporation and
Bylaws of Hibernia, respectively, unless altered, amended or repealed in
accordance with applicable law.
5. Employees. Hibernia shall cause to be provided as soon as
practicable after the Effective Date for the employees of MarTex and the Bank
immediately prior to the Effective Date the employee benefits then made
available to employees of Hibernia and its subsidiaries, subject to the terms
and conditions under which those employee benefits are made available to such
employees; provided, however, that for purposes of determining the eligibility
of an employee of MarTex or the Bank (or both) to receive, and the benefits to
which such employee shall be entitled, under Hibernia's benefits plans after the
Effective Date, any period of employment of such employee with MarTex or the
Bank shall be deemed equivalent to having been employed for that same period by
Hibernia and/or its subsidiaries and provided further, however, that if Hibernia
determines in good faith that it cannot merge any benefit plan of MarTex into a
comparable benefit plan of Hibernia or HNB without creating material potential
liability for Hibernia's or HNB's plan, then Hibernia shall be entitled to
freeze the existing benefit plan of MarTex and prohibit participation by former
employees of MarTex in Hibernia's plan for the period of time required by
applicable law to ensure that Hibernia's and HNB's benefit plans are not deemed
to be successor plans of the MarTex plan in question.
6. Negative Covenants. From the date hereof until the Effective Date,
or until the termination of this Agreement, MarTex covenants and agrees that it
will not do, or agree to commit to do, and MarTex will cause the Bank not to do
and not to agree or commit to do, without the prior written consent of Hibernia,
any of the following:
(a) in the case of MarTex (and not the Bank), make, declare,
set aside or pay any dividend or declare or make any distribution on, or
directly or indirectly combine, redeem, purchase or otherwise acquire, any
shares of MarTex Common Stock (other than in a fiduciary capacity).
(b) authorize the creation or issuance of or issue any
additional shares of its capital stock, or any options, calls, warrants, stock
appreciation rights or commitments relating to its capital stock or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from it, shares of its capital
stock, except for shares issued pursuant to the terms of the stock options,
warrants and stock grant agreements listed on Schedule 6(b) hereto, as those
options, warrants or agreements were in effect on the date hereof, it being
understood that no modification of any of those instruments may be made without
the express written consent of Hibernia;
(c) enter into any employment contracts with, increase the
rate of compensation of, or pay or agree to pay any bonus to, any of its
directors, officers or employees, except in accordance with the terms of any
employment agreement existing on the date hereof or in accordance with past
practices during the preceding three years; provided; however that bonuses that
have been accrued through the Closing Date may be paid to employees as long as
the amounts of such accruals and bonus payments are in accordance with past
practices during the preceding three years.
(d) enter into or substantially modify (except as may be
required by applicable law) any pension, retirement, stock option, stock
purchase, stock appreciation right, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees;
(e) other than as contemplated in this Agreement, (i) carry on
its business other than in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, (ii) amend its or the
Bank's Articles of Incorporation or Bylaws, (iii) impose, or suffer the
imposition, on any share of stock held by MarTex in the Bank, of any material
lien, charge, or encumbrance, or permit any such lien to exist, (iv) establish
or add any automatic teller machines or branch or other banking offices in
addition to those listed on Schedule 6(e) hereto, (v) make any capital
expenditures in excess of $200,000 in connection with the completion of MarTex's
branch location at Hide-A-Way Lake (exit 552 on I-20) or any capital
expenditures in excess of $50,000 (excluding those capital expenditures for the
branch location at Hide-A-Way Lake), or (vi) take any action that would
materially and adversely affect the ability of any party hereto to obtain the
approvals necessary for consummation of the transactions contemplated hereby or
that would materially and adversely affect MarTex's ability to perform its
covenants and agreements hereunder;
(f) except as permitted by Section 9.6 hereof and except with
respect to transactions contemplated hereby, merge with any other corporation or
bank or permit any other corporation or bank to merge into it or consolidate
with any other corporation or bank; acquire control over any other firm, bank,
corporation or organization or create any subsidiary (except in a fiduciary
capacity or in connection with foreclosures in bona fide loan transactions);
liquidate; or sell or dispose of any assets or acquire any assets, otherwise
than in the ordinary course of its business consistent with its past practice;
or
(g) knowingly fail to comply with any laws, regulations,
ordinances, or governmental actions applicable to it and to the conduct of its
business in a manner significant, material and adverse to its business.
7. Representations and Warranties of MarTex. MarTex (and not its
directors or officers in their personal capacities) hereby represents and
warrants as follows (and the parties hereto acknowledge and agree that any
matter disclosed on any schedule hereto shall be deemed to be included on any
other schedule hereto provided by the same party, whether or not the matter is
disclosed on any additional schedule):
7.1. Recitals. The facts set forth in the preamble to this
Agreement with respect to it are true and correct.
7.2. Organization and Qualification. Each of MarTex and the
Bank is a corporation or bank duly organized, validly existing, and, in the case
of MarTex, in good standing under, and, in the case of the Bank, holds a valid
certificate to transact the business of banking under, respectively, the laws of
the State of Texas and the laws of the United States; each of MarTex and the
Bank has the corporate power and authority to carry on its business as it is now
being conducted and to own, lease and operate its assets, properties and
business; and MarTex has all requisite power and authority to execute and
deliver this Agreement and perform its obligations hereunder.
7.3. Ownership of Other Banks. MarTex does not own, directly
or indirectly, 5 percent or more of the outstanding capital stock or other
voting securities of any corporation, bank, or other organization except the
Bank and Pittsburgh Recovery, Inc., a wholly-owned subsidiary of the Bank. The
presently authorized capital stock of the Bank consists solely of 2,071,000
shares of common stock of the par value of $1.00 each, all of which shares of
common stock are outstanding. The outstanding shares of capital stock of the
Bank are validly issued and outstanding, fully paid and nonassessable and,
except as provided on Schedule 7.3 hereto, all of such shares are owned by
MarTex, free and clear of all liens, claims and encumbrances. The presently
authorized capital stock of Pittsburgh Recovery, Inc. consists solely of 1,000
shares of common stock of the par value of $1.00 each, all of which shares of
common stock are outstanding. The outstanding shares of capital stock of
Pittsburgh Recovery, Inc. are validly issued and outstanding, fully paid and
nonassessable and, except as provided on Schedule 7.3 hereto, all of such shares
are owned by the Bank, free and clear of all liens, claims and encumbrances.
7.4. Corporate Authorization. The execution, delivery and
performance of this Agreement have been authorized by MarTex's Board of
Directors, and, subject to the approval of this Agreement by its shareholders in
accordance with the applicable Texas law and the approval of the appropriate
regulatory authorities, all corporate acts and other proceedings required for
the due and valid authorization, execution, delivery and performance by MarTex
of this Agreement and the consummation of the Merger have been validly and
appropriately taken. Subject to such shareholder approval and to such regulatory
approvals as are required by law, this Agreement is a legal, valid and binding
obligation of MarTex, enforceable against MarTex in accordance with its terms,
except that enforcement may be limited by bankruptcy, reorganization, insolvency
and other similar laws and court decisions relating to or affecting the
enforcement of creditors' rights generally and by general equitable principles
or principles of Texas law that are similar to equitable principles in
jurisdictions that recognize a distinction between law and equity.
7.5. No Conflicts. Except as disclosed on Schedule 7.5 hereto,
the execution and delivery of this Agreement by MarTex does not, and the
consummation of the transactions contemplated hereby by it will not, constitute
(i) a breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of MarTex or the Bank or to which MarTex or the Bank is
subject, which breach, violation or default would have a material and adverse
effect on the financial condition, properties, businesses or results of
operations of MarTex and the Bank taken as a whole or on the transactions
contemplated hereby, (ii) to the best of the knowledge of MarTex's management, a
breach or violation of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement, indenture
or instrument of MarTex or the Bank or to which MarTex or the Bank is subject,
or (iii) a breach or violation of, or a default under, the Articles of
Incorporation or Bylaws of MarTex or the Bank; and the consummation of the
transactions contemplated hereby will not require any consent or approval under
any such law, rule, regulation, judgment, decree, order, governmental permit or
license or the consent or approval of any other party to any such agreement,
indenture or instrument, other than any required approvals of shareholders and
applicable regulatory authorities.
7.6. Financial Statements; Dividend Restrictions. MarTex has
delivered to Hibernia prior to the execution of this Agreement true and correct
copies of the following consolidated financial statements (collectively referred
to herein as the "MarTex Financial Statements"): MarTex's Balance Sheets as of
March 31, 1998 and 1997 (unaudited); MarTex's Consolidated Balance Sheets as of
December 31, 1997 and 1996 (audited); MarTex's Consolidated Statements of Income
and Changes in Stockholders' Equity and Consolidated Statements of Cash Flows
for the years ended December 31, 1997 and 1996 (audited) and as of March 31,
1998 and 1997 (unaudited);. Each of the MarTex Financial Statements (including
the related notes) fairly presents the consolidated results of operations of
MarTex and the Bank for the respective periods covered thereby and the
consolidated financial condition of MarTex and the Bank as of the respective
dates thereof (subject, in the case of unaudited statements, to year-end audit
adjustments that will not be material in amount or effect), in each case in
accordance with GAAP consistently applied during the periods involved, except as
may be noted therein. Except as disclosed in the MarTex Financial Statements,
including the notes thereto, or Schedule 7.6 hereto, and except as otherwise
required by this Agreement, there are no restrictions in any note, indenture,
agreement, statute or otherwise (except for statutes or regulations applicable
to Texas corporations or Texas state banks generally) precluding MarTex or the
Bank from paying dividends, in each case when, as and if declared by its Board
of Directors.
7.7. No Material Adverse Change. Since March 31, 1998, there
has been no event or condition of any character (whether actual, or to the
knowledge of MarTex or the Bank, threatened or contemplated) that has had or can
reasonably be anticipated to have, or that, if concluded or sustained adversely
to MarTex, would reasonably be anticipated to have, a material adverse effect on
the financial condition, results of operations, business or prospects of MarTex
or the Bank, excluding changes in laws or regulations that affect banking
institutions generally.
7.8. Litigation and Proceedings. Except as set forth on
Schedule 7.8 hereto, no litigation, proceeding or controversy before any court
or governmental agency is pending against MarTex that in the opinion of its
management is likely to have a material and adverse effect on the business,
results of operations or financial condition of MarTex and the Bank taken as a
whole, and, to the best of its knowledge, no such litigation, proceeding or
controversy has been threatened or is contemplated. Except as disclosed on
Schedule 7.8 hereto, no member of MarTex's consolidated group is subject to any
written agreement, memorandum, or order with or by any bank or bank holding
company regulatory authority restricting its operations or requiring any
material actions.
7.9. Material Contracts. Except for this Agreement and
arrangements made in the ordinary course of business or disclosed on Schedule
7.9 hereto, neither MarTex nor the Bank is bound by any material contract to be
performed after the date hereof that is not terminable by MarTex or the Bank
without penalty or liability on thirty days prior notice.
7.10. Brokers' or Finders' Fees. No agent, broker, investment
banker, investment or financial advisor or other person acting on behalf of
MarTex or the Bank or under their authority is entitled to any commission,
broker's or finder's fee from any of the parties hereto in connection with any
of the transactions contemplated by this Agreement except Alex. Sheshunoff &
Co., which has been engaged by MarTex in connection with the Merger.
Notwithstanding anything contained herein to the contrary, MarTex shall be
permitted to pay to Alex. Sheshunoff & Co. the fee required by its engagement
letter, a copy of which is attached hereto as Exhibit 7.10, relating to the
transaction contemplated by this Agreement, provided that, MarTex is obligated
to pay such fee at the time payment is made.
7.11. Contingent Liabilities. Except as disclosed on Schedule
7.11 hereto or as reflected in the MarTex Financial Statements and except in the
case of the Bank for unfunded loan commitments made in the ordinary course of
business consistent with past practices, as of March 31, 1998, neither MarTex
nor the Bank has any obligation or liability (contingent or otherwise) that was
material, or that when combined with all similar obligations or liabilities
would have been material, to MarTex and the Bank taken as a whole and there does
not exist a set of circumstances resulting from transactions effected or events
occurring prior to, on, or after March 31, 1998, or from any action omitted to
be taken during such period that, to the knowledge of MarTex, could reasonably
be expected to result in any such material obligation or liability.
7.12. Tax Liability. The amounts set up as liabilities for
taxes in the MarTex Financial Statements are sufficient for the payment of all
respective taxes (including, without limitation, federal, state, local, and
foreign excise, franchise, property, payroll, income, capital stock, and sales
and use taxes) accrued in accordance with GAAP and unpaid at the respective
dates thereof.
7.13. Material Obligations Paid. Other than as set forth on
Schedule 7.13 hereto, since March 31, 1998, neither MarTex nor the Bank has
incurred or paid any obligation or liability that would be material to MarTex on
a consolidated basis, except for obligations incurred or paid in connection with
transactions by it in the ordinary course of its business consistent with its
past practices.
7.14. Tax Returns; Payment of Taxes. All federal, state,
local, and foreign tax returns (including, without limitation, estimated tax
returns, withholding tax returns with respect to employees, and FICA and FUTA
returns) required to be filed by or on behalf of MarTex or the Bank have been
timely filed or requests for extensions have been timely filed and granted and
have not expired for periods ending on or before December 31, 1995, and all
returns filed are complete and accurate to the best information and belief of
their respective managements; all taxes shown on filed returns have been paid.
As of the date hereof, there is no audit, examination, deficiency or refund
litigation or matter in controversy with respect to any taxes that might result
in a determination materially adverse to MarTex or the Bank except as reserved
against in the MarTex Financial Statements. All taxes, interest, additions and
penalties due with respect to completed and settled examinations or concluded
litigation have been paid, and MarTex's reserves for bad debts at December 31,
1995, 1996 and 1997, as filed with the Internal Revenue Service, were not
greater than the maximum amounts permitted under the provisions of Section 585
of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").
7.15. Loans. To the best knowledge and belief of its
management, each loan reflected as an asset of MarTex in the MarTex Financial
Statements, as of March 31, 1998, or acquired since that date, is the legal,
valid, and binding obligation of the obligor named therein, enforceable in
accordance with its terms, and no loan is subject to any asserted defense,
offset or counterclaim known to MarTex, except as disclosed in writing to
Hibernia on or prior to the date hereof.
7.16. Allowance for Loan Losses. To the best of MarTex's
knowledge and belief, allowances for possible loan losses shown on the balance
sheets of MarTex as of March 31, 1998 are adequate in all material respects
under the requirements of GAAP to provide for possible losses, net of
recoveries, relating to loans previously charged off, on loans outstanding
(including accrued interest receivable) as of March 31, 1998, and each such
allowance has been established in accordance with GAAP.
7.17. Title to Assets; Adequate Insurance Coverage.
(a) As of March 31, 1998, MarTex or the Bank, as the case may
be, had, and except with respect to assets disposed of for adequate
consideration in the ordinary course of business since such date, now have, good
and indefeasible title to all real property and good and indefeasible title to
all other material properties and assets reflected in the MarTex Financial
Statements, free and clear of all mortgages, liens, pledges, restrictions,
security interests, charges and encumbrances of any nature except for (i)
mortgages and encumbrances which secure indebtedness which is properly reflected
in the MarTex Financial Statements or which secure deposits of public funds as
required by law; (ii) liens for taxes accrued but not yet payable; (iii) liens
arising as a matter of law in the ordinary course of business with respect to
obligations incurred after March 31, 1998, provided that the obligations secured
by such liens are not delinquent or are being contested in good faith; (iv) such
imperfections of title and encumbrances, if any, as do not materially detract
from the value or materially interfere with the present use of any of such
properties or assets or the potential sale of any such owned properties or
assets; (v) capital leases and leases, if any, to third parties for fair and
adequate consideration; (vi) securities pledged for interest rate swap, cap and
floor contracts and (vii) as set forth on Schedule 7.17. MarTex and the Bank
own, or have valid leasehold interests in, all material properties and assets,
tangible or intangible, used in the conduct of its business. Any real property
and other material assets held under lease by MarTex or the Bank are held under
valid, subsisting and enforceable leases with such exceptions as are not
material and such leases do not interfere with the continued use made or
proposed to be made by Hibernia in such lease of such property by Hibernia in
the manner presently being utilized by the Bank or MarTex, except as set forth
on Schedule 7.17.
(b) With respect to each lease of any real property or a
material amount of personal property to which MarTex or the Bank is a party,
except for financing leases in which MarTex or the Bank is lessor, (i) such
lease is in full force and effect in accordance with its terms; (ii) all rents
and other monetary amounts that have become due and payable thereunder have been
paid; (iii) there exists no default or event, occurrence, condition or act which
with the giving of notice, the lapse of time or the happening of any further
event, occurrence, condition or act would become a default under such lease; and
(iv) except as set forth on Schedule 7.17, the Merger will not constitute a
default or a cause for termination or modification of such lease.
(c) Neither MarTex nor the Bank has any legal obligation,
absolute or contingent, to any other person to sell or otherwise dispose of any
substantial part of its assets or to sell or dispose of any of its assets except
in the ordinary course of business consistent with past practices.
(d) To the knowledge and belief of its management, the
policies of fire, theft, liability and other insurance maintained with respect
to the assets or businesses of MarTex and the Bank provide adequate coverage
against loss and the fidelity bonds in effect as to which MarTex or the Bank is
named insured provide adequate coverage with respect to amounts, types and risks
involved.
7.18. Employee Plans. To the best of MarTex's knowledge and
belief, it, the Bank, and all "employee benefit plans," as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that cover one or more employees employed by MarTex or the Bank:
(i) is in compliance with all laws, regulations,
reporting and licensing requirements and orders applicable to its business or
to such plan or any of its employees (because of such employee's activities on
behalf of it),the breach or violation of which could have a material and adverse
effect on such business; and
(ii) has received no notification from any agency or
departmen of federal, state or local government or the staff thereof asserting
that any such entity is not in compliance with any of the statutes, regulations
or ordinances that such governmental authority enforces, or threatening
to revoke any license, franchise, permit or governmental authorization, and
is subject to no agreement with any such governmental authority with respect to
its assets or business.
7.19. Copies of Employee Plans. On or prior to the date
hereof, MarTex has provided Hibernia with true, complete and accurate copies of
all pension, retirement, stock purchase, stock bonus, stock ownership, stock
option, savings, stock appreciation right or profit-sharing plans, any
employment, deferred compensation, consultant, severance, bonus, or collective
bargaining agreement or group insurance contract, or any other incentive,
welfare, or employee benefit plan or agreement maintained by it or the Bank for
its or the Bank's' employees or former employees.
7.20. Plan Liability. Except for liabilities to the Pension
Benefit Guaranty Corporation pursuant to Section 4007 of ERISA, all of which
have been fully paid, and except for liabilities to the Internal Revenue Service
under section 4971 of the Internal Revenue Code, all of which have been fully
paid, neither MarTex nor the Bank has any liability to the Pension Benefit
Guaranty Corporation or to the Internal Revenue Service with respect to any
pension plan qualified under Section 401 of the Internal Revenue Code.
7.21. No Default. Neither MarTex nor the Bank is in default in
any material respect under any contract, agreement, commitment, arrangement,
lease, insurance policy or other instrument to which it is a party or by which
its respective assets, business or operations may be bound or affected or under
which it or its respective assets, business or operations receive benefits, and
there has not occurred any event that with the lapse of time or the giving of
notice or both would constitute such a default.
7.22. Minutes. Prior to the date hereof, MarTex has made
available to Hibernia, for inspection pursuant to the terms of Section 9.5
hereof, the minutes of meetings of MarTex's and the Bank' Board of Directors and
all committees thereof held during the period beginning March 31, 1993 and prior
to the date hereof, which minutes are complete and correct in all material
respects and fairly present the actions of such Boards and committees and
accurately reflect in all material respects the business condition and
operations of MarTex and the Bank as of the dates and for the periods indicated
therein.
7.23. Insurance Policies. Attached hereto as Schedule 7.23 is
a schedule detailing all policies of fire, theft, public liability, and other
insurance (including without limitation fidelity bonds insurance) maintained by
MarTex or the Bank at the date hereof. Except as disclosed on Schedule 7.23
hereto, neither MarTex nor the Bank has received any notice of a premium
increase or cancellation with respect to any of its insurance policies or bonds,
and within the last three years, neither MarTex nor the Bank has been refused
any insurance coverage sought or applied for, and it has no reason to believe
that existing insurance coverage cannot be renewed as and when the same shall
expire, upon terms and conditions as favorable as those presently in effect,
other than possible increases in premiums or unavailability of coverage that do
not result from any extraordinary loss experience of MarTex or the Bank.
7.24. Investments. Except for securities pledged for interest
rate swap, cap and floor contracts or pledged to secure public trust deposits
and except as set forth on Schedule 7.24, none of the investments reflected in
the MarTex Financial Statements under the heading "Investment Securities," and
none of the investments made by MarTex or the Bank since March 31, 1998, and
none of the assets reflected in the MarTex Financial Statements under the
heading "Cash and Due From Banks," is subject to any restriction, whether
contractual or statutory, that materially impairs the ability of MarTex or the
Bank freely to dispose of such investment at any time. With respect to all
repurchase agreements to which MarTex or the Bank is a party, MarTex or the
Bank, as the case may be, has a valid, perfected first lien or security interest
in the government securities or other collateral securing each such repurchase
agreement which equals or exceeds the amount of the debt secured by such
collateral under such agreement.
7.25. Environmental Matters. Except as set forth on Schedule
7.25, neither MarTex nor the Bank nor, to the knowledge of MarTex and the Bank,
any previous owner or operator of any properties at any time owned (including
any properties owned as a result of foreclosure of a loan, whether still owned
or subsequently resold) leased, or occupied by MarTex or the Bank or used by
MarTex or the Bank in their respective business ("MarTex Properties") used,
generated, treated, stored, or disposed of any hazardous waste, toxic substance,
or similar materials on, under, or about MarTex Properties except in compliance
with all applicable federal, state, and local laws, rules, and regulations
pertaining to air and water quality, hazardous waste, waste disposal, air
emissions, and other environmental matters ("Environmental Laws"). Neither
MarTex nor the Bank has received any notice of noncompliance with Environmental
Laws, applicable laws, orders, or regulations of any governmental authorities
relating to waste generated by any such party or otherwise or notice that any
such party is liable or responsible for the remediation, removal, or clean-up of
any site relating to MarTex Properties.
7.26. Change in Control Contracts and Benefits. Attached as
Schedule 7.26 are true and correct copies of agreements with Wayne McWhorter and
George Meisenheimer regarding the issuance of shares of MarTex Common Stock upon
a change in control of MarTex. These are the only contracts or other
arrangements that provide for the grant of any benefit (including acceleration
of any benefit) or the making of any payment by MarTex or any successor of
MarTex, as a result of a change in control of similar transaction, to any
employee, officer or director of MarTex.
7.27 Year 2000 Compliance. MarTex has developed and
implemented portions of, and is in the process of implementing other portions
of, a plan designed to ensure that its computer and other mission critical
systems will be substantially Year 2000 compliant, and all material work and
testing required to be performed under that plan as of the date hereof have been
performed.
7.28 No Trading Market. The shares of MarTex Common Stock are
not readily tradable on an "Established Securities Market" or otherwise. For
purposes of this Agreement, the term "Established Securities Market" shall mean
(i) a national securities exchange which is registered under section 6 of the
Securities Exchange Act of 1934, as amended, (ii) a foreign national securities
exchange which is officially recognized, sanctioned or supervised by any
governmental authority or (iii) any over-the-counter market with an interdealer
quotation system.
8. Representations and Warranties of Hibernia. Hibernia (and not its
directors or officers in their personal capacities) hereby represents and
warrants as follows:
8.1. Recitals. The facts set forth in the preamble to this
Agreement with respect to it are true and correct.
8.2. Organization and Qualification. Hibernia is a
corporation, and HNB and HNBT are national banking associations, duly organized,
validly existing and in good standing under the laws of the State of Louisiana
in the case of Hibernia, and the United States of America, in the cases of HNB
and HNBT. Each of Hibernia and its material subsidiaries has the corporate power
and authority to carry on its business as it is now being conducted and to own,
lease and operate its assets, properties and business, and Hibernia has all
requisite power and authority to execute and deliver this Agreement and perform
its obligations hereunder.
8.3. Shares Fully Paid and Non Assessable. The outstanding
shares of capital stock of Hibernia, HNB and HNBT are validly issued and
outstanding, fully paid and nonassessable (subject, in the cases of HNB and
HNBT, to 12 U.S.C. Section 55) and all of such shares of HNB and HNBT are owned
directly or indirectly by Hibernia free and clear of all liens, claims, and
encumbrances. The shares of Hibernia Common Stock to be issued in connection
with the Merger pursuant to this Agreement will have been duly authorized and,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid, and nonassessable.
8.4. Due Authorization. The execution, delivery and
performance of this Agreement have been authorized by Hibernia's Board of
Directors, and, subject to the regulatory and other approvals required by
Section 12 hereof, all corporate acts and other proceedings required for the due
and valid authorization, execution, delivery and performance by Hibernia of this
Agreement and the consummation of the Merger have been validly and appropriately
taken. Subject to receipt of the regulatory and other approvals required by
Section 12 hereof, this Agreement is a legal, valid, and binding obligation of
Hibernia enforceable against Hibernia in accordance with its terms, except that
enforcement may be limited by bankruptcy, insolvency, and other laws of general
applicability relating to or affecting creditors' rights generally and by
general equitable principles or principles of Louisiana law that are similar to
equitable principles in jurisdictions that recognize a distinction between law
and equity.
8.5. No Conflicts. Except as disclosed on Schedule 8.5 hereto,
the execution and delivery of this Agreement by Hibernia does not, and the
consummation of the transactions contemplated hereby by it will not, constitute
(i) a breach or violation of, or a default under, any law, rule, or regulation
or any judgment, decree, order, governmental permit or license, or agreement,
indenture, or instrument of Hibernia or its subsidiaries or by which Hibernia or
any of its subsidiaries is subject, which breach, violation or default would
have a material and adverse effect on the financial condition, properties,
businesses, or results of operations of Hibernia and its subsidiaries taken as a
whole or on the transactions contemplated hereby, (ii) to the best of the
knowledge of Hibernia's management, a breach or violation of, or a default
under, any law, rule, or regulation or any judgment, decree, order, governmental
permit or license, or agreement, indenture, or instrument of Hibernia or its
subsidiaries or to which Hibernia or any of its subsidiaries is subject, or
(iii) a breach or violation of, or a default under the Articles of Incorporation
or Association or Bylaws of Hibernia, or of its subsidiaries, and the
consummation of the transactions contemplated hereby will not require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license or the consent or approval of any other
party to any such agreement, indenture, or instrument, other than any required
approvals of shareholders and applicable regulatory authorities.
8.6. Reports of Hibernia. As of their respective dates, none
of its Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
its Quarterly Report on Form 10-Q for the period ended March 31, 1998, and its
proxy statement for its 1998 annual meeting of shareholders, each in the form
(including exhibits) filed with the Securities and Exchange Commission (the
"SEC") and its quarterly report to shareholders for the period ended March 31,
1998 (collectively, the "Hibernia Reports"), contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. There is no fact or circumstance
that, individually or in the aggregate, materially and adversely has affected or
is so affecting, or, in the opinion of the executive officers of Hibernia, may
reasonably be expected in the future to so affect, the business, financial
condition, net worth, properties, prospects or results of operations of Hibernia
and its subsidiaries, taken as a whole, that has not been disclosed in the
Hibernia Reports. Each of the balance sheets in or incorporated by reference
into the Hibernia Reports (including the related notes) fairly presents the
financial position of the entity or entities to which it relates as of its date
and each of the statements of income and stockholders' equity and statement of
cash flows or equivalent statements in the Hibernia Reports (including any
related notes and schedules) fairly presents the results of operations and
changes in stockholders' equity, as the case may be, of the entity or entities
to which it relates for the periods set forth therein (subject, in the case of
unaudited statements, to year-end audit adjustments that will not be material in
amount or effect), in each case in accordance with GAAP consistently applied
during the periods involved, except as may be noted therein. Copies of the
Hibernia Reports have been furnished to MarTex on or before the date hereof.
Except as disclosed on Schedule 8.6 hereto or in the Hibernia Financial
Statements, including the notes thereto, there are no restrictions in any note,
indenture, agreement, statute or otherwise (except for statutes or regulations
applicable to Louisiana corporations or national banks generally) precluding
Hibernia or HNB or HNBT from paying dividends, in each case when, as and if
declared by its Board of Directors.
The Hibernia Reports (i) were prepared in accordance with the
applicable requirements of the Securities Act and/or Exchange Act, as the case
may be, and the applicable rules and regulations thereunder, and (ii) at the
time they were filed did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances in
which they were made, not misleading. All Current Reports on Form 8-K and
Quarterly Reports on Form 10-Q filed after the date hereof and prior to the
Effective Date will be prepared in accordance with the applicable requirements
of the Securities Act and/or Exchange Act, as the case may be, and the
applicable rules and regulations thereunder, and at the time they are filed will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances in which they were made, not
misleading.
8.7. No Material Adverse Change. Since March 31, 1998, there
has been no event or condition of any character (whether actual, or to the
knowledge of Hibernia or HNB, threatened or contemplated) that has had or can
reasonably be anticipated to have, or that, if concluded or sustained adversely
to Hibernia, would reasonably be anticipated to have, a material adverse effect
on the financial condition, results of operations, business or prospects of
Hibernia or HNB, excluding changes in laws or regulations that affect banking
institutions generally.
8.8. Year 2000 Compliance. Hibernia and HNBT have developed
and have implemented portions of, and are in the process of implementing other
portions of, a plan designed to ensure that their computer and other mission
critical systems will be substantially Year 2000 compliant, and all material
work and testing required to be performed under that plan as of the date hereof
has been performed.
8.9. Community Reinvestment Act Performance Evaluation.
Hibernia has delivered to MarTex prior to the execution of this Agreement a copy
of the Community Reinvestment Act Performance Evaluation presently in effect for
HBNT (the "CRA"). To the best of Hibernia's knowledge, Hibernia is unaware of
any facts or circumstances that are likely to cause any change in the CRA
between the date of this Agreement and the Effective Date which would have a
material and adverse effect on the ability to obtain regulatory approval of the
transactions contemplated by this Agreement or on the financial condition,
results of operations, business or prospects of Hibernia, HNB and HNBT taken as
a whole.
8.10. Sufficient Authorized Shares. Hibernia has, and as of
the Effective Date will have, a sufficient number of shares of Hibernia Common
Stock to issue the number of shares required by Section 3.8 hereof to be issued
to the holders of MarTex Common Stock upon the consummation of the transactions
contemplated by this Agreement.
9. Agreements and Covenants. Hibernia and MarTex each hereby agrees
and covenants to the other that:
9.1. Shareholder Approvals. This Agreement shall be submitted
to MarTex's shareholders at a special meeting called and held in accordance with
applicable provisions of law (to be scheduled to the extent possible for the
date of the shareholders' meeting for the other party hereto, if any) at which
its shareholders shall be asked to consider and vote upon (a) the issuance of
shares of MarTex Common Stock to each of F. Wayne McWhorter and George F.
Meisenheimer as a result of the Merger pursuant to Stock Grant Agreements dated
March 28, 1996 between MarTex and each of Messrs. McWhorter and Meisenheimer, as
amended (referred to herein individually as a "Stock Grant Agreement" and
collectively as the "Stock Grant Agreements"), and (b) this Agreement and the
transactions contemplated hereby.
9.2. Actions Necessary to Complete Merger. It shall use its
best efforts to take or cause to be taken all action necessary or desirable
under this Agreement on its part as promptly as practicable so as to permit the
consummation of this Agreement at the earliest possible date (including
obtaining the consent or approval of each governmental authority and individual,
partnership, corporation, association, or any other form of business or
professional entity whose consent or approval is required for the consummation
of the transactions contemplated hereby, requesting the delivery of appropriate
opinions and letters from its counsel and recommending that this Agreement be
approved by its shareholders) and cooperate fully with the other party hereto to
that end, subject to the provisions of Section 9.6 hereof.
9.3. Preparation of Registration Statement and Proxy
Statement. It shall prepare as promptly as practicable jointly with the other
party hereto a proxy statement to be mailed to the shareholders of each party
the shareholders of which are to vote upon this Agreement in connection with the
transactions contemplated hereby and to be part of a registration statement (the
"Registration Statement") to be filed by Hibernia with the SEC pursuant to the
Securities Act of 1933, as amended (the "1933 Act") with respect to the shares
to be issued in the Merger. When the Registration Statement or any
post-effective amendment thereto shall become effective, and at all times
subsequent to such effectiveness, up to and including the time of the last
shareholder meeting with respect to the transactions contemplated hereby, such
Registration Statement and all amendments or supplements thereto, with respect
to all information set forth therein furnished or to be furnished by Hibernia
relating to Hibernia and by MarTex relating to MarTex, (i) will comply in all
material respects with the provisions of the 1933 Act and the rules and
regulations of the SEC thereunder and (ii) will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements contained therein not misleading.
Hibernia will advise MarTex promptly after it receives notice thereof of the
time when the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of the suspension
of the qualification of the Hibernia Common Stock issuable in connection with
the Merger for offering or sale in any jurisdiction, of the initiation or threat
of any proceeding for any such purpose, or of any request by the SEC for the
amendment or supplement of the Registration Statement or for additional
information.
9.4. Press Releases and Public Statements. Unless approved by
Hibernia in advance, MarTex will not issue any press release, marketing or
advertising material or other written statement for general circulation relating
to the transactions contemplated hereby, except as otherwise required by law.
The parties will cooperate in any public announcements directly related to the
Merger; provided, however, that, in the event Hibernia determines to file a
current report on Form 8-K that discloses only the substantive facts of a
previously released press release, such filing may be made without prior
consultation with MarTex so long as MarTex is furnished with a copy of such
report within a reasonable time after its filing.
9.5. Material Developments; Access to Information.
(i)In order to afford MarTex access to such information
as it may reasonably deem necessary to perform its due diligence review with
respect to Hibernia and its assets in connection with the Merger, Hibernia shall
(and shall cause HNB to), (A) upon reasonable notice, afford MarTex and its
officers, employees, counsel,accountants and other authorized representatives,
during normal business hours throughout the period prior to the Effective Date
and to the extent consistent with applicable law, access to its premises,
properties, books and records, and to furnish MarTex and such representatives
with such financial and operating data and other information of any kind
respecting its business and properties as MarTex shall from time to time
reasonably request to perform such review, (B)furnish MarTex with copies of all
reports filed by Hibernia with the Securities and Exchange Commission ("SEC")
throughout the period after the date hereof prior to the Effective Date promptly
after such reports are so filed, and (C)promptly advise MarTex of the occurrence
before the Effective Date of any event or condition of any character (whether
actual or to the knowledge of Hibernia, threatened or contemplated) that has had
or can reasonably be anticipated to have, or that, if concluded or sustained
adversely to Hibernia, would reasonably be anticipated to have, a material
adverse effect on the financial condition, results of operations, business or
prospects of its consolidated group as a whole.
(ii) In order to afford Hibernia access to such
information as it may reasonably deem
necessary to perform any due diligence review with respect to the assets of
MarTex to be acquired as a result of the Merger, MarTex shall (and shall cause
the Bank to), upon reasonable notice, afford Hibernia and its officers,
employees, counsel, accountants, and other authorized representatives access,
during normal business hours throughout the period prior to the Effective Date,
to all of its and the Bank' properties, books, contracts, commitments, loan
files, litigation files, and records (including, but not limited to, the minutes
of the Boards of Directors of MarTex and the Bank and all committees thereof),
and it shall (and shall cause the Bank to), upon reasonable notice and to the
extent consistent with applicable law, furnish promptly to Hibernia such
information as Hibernia may reasonably request to perform such review; provided,
however, that neither MarTex nor the Bank shall be required to disclose any
information subject to the attorney-client, work product or party communication
privileges.
(iii) No investigation pursuant to this Section 9.5
shall affect or be deemed to
modify any representation or warranty made by, or the conditions to the
obligations to consummate the Merger of, either party to this Agreement.
9.6. Prohibited Negotiations. Prior to the Effective Date,
neither MarTex nor the Bank shall solicit or encourage inquiries or proposals
with respect to, furnish any information relating to, or participate in any
negotiations or discussions concerning, any acquisition or purchase of all or a
substantial portion of the assets of, or of a substantial equity interest in,
MarTex or the Bank or any business combination with MarTex or the Bank other
than as contemplated by this Agreement. MarTex shall instruct each officer,
director, agent, or affiliate of it or the Bank to refrain from doing any of the
above, and MarTex will notify Hibernia promptly if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, MarTex; provided,
however, that nothing contained in this section or in any other section of this
Agreement shall be deemed to prohibit any officer or director of MarTex or the
Bank from taking any action that, in the opinion of counsel to MarTex or the
Bank, a copy of which opinion shall be furnished to Hibernia upon its request,
is required by applicable law or is required to fulfill such director's or
officer's fiduciary duty.
9.7. Affiliates. Prior to the Closing Date (as defined in
Section 14 hereof), MarTex shall deliver to Hibernia a letter identifying all
persons whom it believes to be "affiliates" of MarTex for purposes of Rule
145(c) or Rule 144 (as applicable) under the 1933 Act ("Affiliates"). MarTex
shall use its best efforts to cause each person so identified to deliver to
Hibernia prior to the Effective Date a written agreement in substantially the
form of Exhibit 9.7 hereto providing, among other things, that such person will
not dispose of Hibernia Common Stock received in the Merger except in compliance
with the 1933 Act and the rules and regulations thereunder and except in
accordance with Section 201.01 of the SEC's Codification of Financial Reporting
Policies; provided, however, that MarTex shall have no such obligation to use
its best efforts to cause any such identified person to deliver to Hibernia such
agreement if such person may not lawfully execute such agreement.
9.8. Adjustment for Changes in Outstanding Shares. In the
event that prior to the Effective Date the outstanding shares of Hibernia Common
Stock shall have been increased, decreased, or changed into or exchanged for a
different number or kind of shares or securities by reorganization,
recapitalization, reclassification, stock dividend, stock split, or other like
changes in the Hibernia's capitalization, then an appropriate and proportionate
adjustment shall be made in the number and kind of shares of Hibernia Common
Stock to be thereafter delivered pursuant to Section 3.1 hereof.
9.9. Accounting Treatment. It shall use its best efforts to
cause the Merger to qualify for pooling-of-interests accounting treatment to the
extent factors affecting such treatment are within its control.
9.10. Adoption of Accounting Policies. As soon as practicable
after the satisfaction or waiver of all conditions to the Closing set forth in
Section 12 of this Agreement and at such time as consummation of the
transactions contemplated by this Agreement seems reasonably assured and in any
event prior to the Effective Date (unless this Agreement is terminated pursuant
to Section 13 hereof), MarTex shall, and it shall cause the Bank to, take any
and all necessary or appropriate actions to adopt all Hibernia accounting
procedures and policies (including without limitation those policies pertaining
to charged-off and non-accrual assets); provided, however, that no such action
taken by MarTex or the Bank at the request of Hibernia or HNB pursuant to this
Section shall be deemed to be, or be deemed to cause, a breach of any
representation or warranty made by MarTex herein.
9.11. Indemnification of Directors and Officers of MarTex and
the Bank.
(a) From and after the Effective Date of the Merger, Hibernia
agrees to indemnify and hold harmless each person who, as of the date
immediately prior to the Closing Date, served as an officer or director of
MarTex or the Bank or served in a similar capacity at the request or on behalf
of MarTex or the Bank, including but not limited to, any person who acted as a
trustee or administrator of any employee benefit plan maintained by MarTex or
the Bank, ( an "Indemnified Person") from and against all damages, liabilities,
judgments and claims (and related expenses including, but not limited to,
attorney's fees and amounts paid in settlement) based upon or arising from his
capacity as an officer or director of MarTex, or the Bank to the same extent as
he would have been indemnified under the Articles of Incorporation and/or Bylaws
of Hibernia, as such documents were in effect on the date of this Agreement as
if he were an officer or director of Hibernia at all relevant times.
(b) The rights granted to the Indemnified Persons hereby shall
be contractual rights inuring to the benefit of all Indemnified Persons and
shall survive this Agreement and any merger, consolidation or reorganization of
Hibernia or HNB.
(c) The rights to indemnification granted by this subsection
9.11 are subject to the following limitations: (i) the total aggregate
indemnification to be provided by Hibernia pursuant to subsection 9.11(a) shall
not exceed, as to all of the Indemnified Persons as a group, the sum of $10
million and Hibernia shall have no responsibility to any Indemnified Person for
the manner in which such sum is allocated among that group (but nothing in this
subsection is intended to prohibit the Indemnified Persons from seeking
reallocation among themselves); (ii) a director or officer who would otherwise
be an Indemnified Person under this subsection 9.11 shall not be entitled to the
benefits hereof unless such director or officer has executed a Joinder Agreement
(the "Joinder Agreement") in the form of Exhibit 9.11 hereto; (iii) amounts
otherwise required to be paid by Hibernia to an Indemnified Person pursuant to
this subsection 9.11 shall be reduced by any amounts that such Indemnified
Person recovers by virtue of the claim for which other employees and officers
indemnification is sought; and (iv) the indemnification to be provided by
Hibernia pursuant to subsection 9.11(a) shall not apply to any claims by F.
Wayne McWhorter and/or George E. Meisenheimer against an Indemnified Person
based upon, arising in connection with or in respect of or related to matters
released by Messrs. McWhorter and Meisenheimer pursuant to the agreement in the
form annexed hereto as Exhibit 10(h).
(d) Hibernia agrees that the $10 million indemnification limit
set forth in paragraph (c) of this Section 9.11 shall not apply to any damages,
liabilities, judgments and claims (and related expenses, including but not
limited to attorney's fees and amounts paid in settlement) insofar as they arise
out of or are based upon the matters for which indemnification is provided in
Section 11.2 hereof.
9.12 Covenant to Close. At such time as is deemed appropriate
by the parties hereto or as otherwise set forth in this Agreement, and upon
satisfaction or waiver of each of the conditions to Closing of the Merger, the
parties agree to take such actions as are reasonably necessary or appropriate to
effect the Closing and the Merger.
9.13 Agreements with Officers. MarTex will use its best
efforts to obtain an written agreement from the individual parties to the
agreements listed on Schedule 7.26 in substantially the form of Schedule 9.13
hereto.
9.14 Continuation of Year 2000 Compliance Efforts. MarTex and
Hibernia will continue their respective efforts to bring their respective
computer systems in compliance with Year 2000, to comply with their respective
existing plan for such compliance and to test the systems and the plans for
compliance from time to time in accordance with their respective plans for Year
2000 compliance.
9.15 Stock Grant Agreements. The parties hereto acknowledge
and agree that the number of additional shares of MarTex Common Stock to be
issued to F. Wayne McWhorter and George F. Meisenheimer pursuant to the terms of
the Stock Grant Agreements identified on Schedule 7.26 hereto, as a result of
the Merger, assuming the fair market value of Hibernia Common Stock is $20 per
share, assuming no reduction in the Exchange Rate pursuant to Section 3.8(b) and
further assuming that the Merger was effective as of June 30, 1998, is 1,552,256
and 155,226 shares, respectively. Hibernia agrees that no W-2 will be issued or
filed with the Internal Revenue Service following the Merger with respect to the
shares of MarTex Common Stock issued to Messrs. McWhorter and Meisenheimer
pursuant to those Stock Grant Agreements until the restrictions on sale by them
of their Hibernia Common Stock imposed pursuant to Accounting Series Release NO.
135 (and their agreement to abide thereby set forth in Exhibit 9.7 hereto) have
lapsed.
9.16 Cooperation on Transfers. Hibernia will use its
reasonable efforts to provide assistance to former shareholders of MarTex who
desire after the Effective Date to sell shares of Hibernia Common Stock received
pursuant to the Merger, including, without limitation, issuance of legal
opinions to Hibernia's transfer agent which are reasonably requested by the
transfer agent in connection with sales of Hibernia Common Stock under Rules 144
and 145(d) under the Securities Act of 1933, as amended.
10. Permits, Consents and Approvals. As promptly as practicable after
the date hereof (or as otherwise provided below):
(a) Hibernia shall submit an application to the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") for
approval of the transactions contemplated hereby in accordance with the
provisions of the Bank Holding Company Act;
(b) Hibernia shall submit an application to any other
regulatory authority whose approval of the transactions contemplated hereby is
required;
(c) MarTex shall endeavor to have its Affiliates execute a
written agreement in substantially the form of Exhibit 9.7 hereto; provided,
however, that MarTex shall have no such obligation prior to the receipt by the
Board of Directors of MarTex of the Fairness Opinion;
(d) MarTex shall endeavor to have each director of MarTex
and/or the Bank who is not an employee of MarTex and/or the Bank execute a
Non-Competition Agreement in substantially the form of Exhibit 10(d)-A hereto,
and to have each director of MarTex and/or the Bank who is an employee of MarTex
and/or the Bank, other than F. Wayne McWhorter, George F. Meisenheimer and
Rodney Bass, execute a Non-Competition Agreement in substantially the form of
Exhibit 10(d)-B hereto; and to have F. Wayne McWhorter, George F. Meisenheimer
and Rodney Bass execute a Lock-Up Agreement in substantially the form of Exhibit
10(d)-C hereto, provided, however, that MarTex shall have no such obligation
prior to the receipt by the Board of Directors of MarTex of the Fairness
Opinion;
(e) MarTex shall endeavor to have each of Messrs. McWhorter
and Meisenheimer execute an agreement in substantially the form of Schedule 9.13
hereto;
(f) MarTex shall endeavor to have each of Messrs. McWhorter
and Meisenheimer execute an amendment to their respective Stock Grant Agreement
in substantially the form of Exhibit 10(f) hereto prior to the special meeting
of MarTex shareholders to consider the Merger;
(g) MarTex shall endeavor to have each director of MarTex
execute an affidavit in substantially the form of Exhibit 10(g) hereto prior to
the special meeting of MarTex shareholders to consider the Merger; and
(h) MarTex shall endeavor to have each of Messrs. McWhorter
and Meisenheimer execute releases substantially in the form of Exhibit 10(h)
hereto and indemnity agreements substantially in the form of Exhibit 10(i)
hereto prior to the special meeting of MarTex shareholders to consider the
Merger.
11. Confidentiality; Hold Harmless; Restriction on Acquisitions.
11.1. Confidentiality. For a period of five years after the
date hereof, the parties hereto acknowledge that each of them or their
representatives or agents has engaged in, and may continue to engage in, certain
due diligence reviews and examinations with respect to the other and that, in
the course of such reviews and examination, has received or may receive in the
future confidential or proprietary information. Hibernia and MarTex agree, on
behalf of themselves, their respective officers, directors, employees,
representatives and agents, that they will not use any information obtained
pursuant to due diligence investigations for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement, and, if the
Merger is not consummated, will hold all such information and documents in
confidence unless and until such time as such information or documents otherwise
become publicly available or as it is advised by counsel that any such
information or document is required by law to be disclosed, in which event the
party required to make such disclosure shall advise and consult with the other
party reasonably in advance of such disclosure regarding the information
proposed to be disclosed. In the event of the termination of this Agreement,
Hibernia and MarTex shall, promptly upon request by the other party, either
destroy or return any documents so obtained. The parties hereto expressly
acknowledge and agree that the terms of this Section 11.1 shall supersede any
prior agreements relating to the confidentiality of information received by the
parties hereto from each other, specifically the terms of the confidentiality
agreement between Alex. Sheshunoff & Co. Investment Bankers, as agent for
MarTex, and Hibernia.
11.2. Hold Harmless. Hibernia will indemnify and hold harmless
MarTex, each of its directors and officers and each person, if any, who controls
MarTex or the Bank within the meaning of the 1933 Act against any losses,
claims, damages or liabilities, joint, several or solidary, to which they or any
of them may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, or in any amendment or
supplement thereto, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will pay or
promptly reimburse each such person for any legal or other expenses reasonably
incurred by such person in connection with investigating or defending any such
action or claim; provided, however, that Hibernia shall not be liable in any
such case to the extent that any such loss, claim, damage or liability (or
action in respect thereof) arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement or any such amendment or supplement in reliance upon and
in conformity with information furnished to Hibernia by MarTex or the Bank for
use therein. Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against Hibernia under this Section, notify
Hibernia in writing of the commencement thereof. In case any such action shall
be brought against any indemnified party and it shall notify Hibernia of the
commencement thereof, Hibernia shall be entitled to participate therein, and to
the extent that it shall wish, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and, after notice from Hibernia to such
indemnified party of its election to so assume the defense thereof, Hibernia
shall not be liable to such indemnified party under this Section 11.2 for any
legal expenses of other counsel or any other expenses subsequently incurred by
such indemnified party.
12. Conditions. The consummation of the Merger is conditioned upon:
12.1. Shareholder Approval; Dissenters. Approval of this
Agreement by the required vote of shareholders of MarTex and exercise and
perfection of dissenters' rights pursuant to Texas law by holders of MarTex
Common Stock holding in the aggregate no more than 10% of the MarTex Common
Stock outstanding on the Closing Date.
12.2. Federal Reserve Board and Other Approvals. Procurement
by Hibernia of the approval of the Federal Reserve Board and any other
regulatory authorities whose approval is required by law or regulation of the
Merger and any and all other transactions contemplated hereby.
12.3. Other Approvals. Procurement of all other consents and
approvals and satisfaction of all other requirements prescribed by law that are
necessary to the consummation of the transactions contemplated by this
Agreement.
12.4. No Restraining Action. No litigation or proceeding
initiated by any governmental authority shall be pending before any court or
agency that shall present a claim to restrain, prohibit or invalidate the
transactions contemplated hereby and neither Hibernia nor MarTex shall be
prohibited by any order of any court or other governmental authority from
consummating the transactions provided for in this Agreement.
12.5. Opinion of Hibernia Counsel. MarTex and its directors
shall have received an opinion, dated the Closing Date, of counsel for Hibernia,
in form and substance satisfactory to MarTex, as to such matters as MarTex may
reasonably request with respect to the transactions contemplated hereby.
12.6. Opinion of MarTex Counsel. Hibernia, its directors and
its officers who sign the Registration Statement shall have received an opinion,
dated the Closing Date, of Naman, Howell, Smith & Lee, a professional
corporation, as counsel for MarTex, in form and substance satisfactory to
Hibernia, which shall cover such matters as Hibernia may reasonably request with
respect to the transactions contemplated hereby.
12.7. Representations, Warranties and Agreements of MarTex.
Each of the representations, warranties, and agreements of MarTex contained
herein in all material respects shall be true on, or complied with by, the
Closing Date as if made on such date (or on the date when made in the case of
any representation or warranty which specifically relates to an earlier date)
and Hibernia shall have received a certificate signed by the Chief Executive
Officer and the President of MarTex, dated the Closing Date, to such effect;
MarTex shall have furnished to Hibernia such other certificates as Hibernia
shall reasonably request in connection with the Closing (as defined in Section
14 hereof), evidencing compliance with the terms hereof and its status, business
and financial condition. MarTex shall have furnished Hibernia with such further
documents or other materials as Hibernia shall have reasonably requested in
connection with the transactions contemplated hereby.
12.8. Representations, Warranties and Agreements of Hibernia.
Each of the representations, warranties and agreements of Hibernia contained
herein in all material respects shall be true on, or complied with by, the
Closing Date as if made on such date (or the date when made in the case of any
representations or warranty which specifically relates to an earlier date) and
MarTex shall have received a certificate signed by the Chief Executive Officer
and the Chief Financial Officer of Hibernia, dated the Closing Date, to such
effect; Hibernia shall have furnished to MarTex such other certificates as
MarTex shall reasonably request in connection with the Closing, evidencing
compliance with the terms hereof and its status, business and financial
condition. Hibernia shall have furnished MarTex with such further documents or
other materials as MarTex shall have reasonably requested in connection with the
transactions contemplated hereby.
12.9. Effective Registration Statement. The Registration
Statement shall have become effective and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC
and MarTex shall have received a certificate to such effect from the officer of
Hibernia designated as its agent for service on the cover page of the
Registration Statement (which certificate may be to the knowledge of such
officer).
12.10. Tax Opinion. Hibernia and the shareholders of MarTex
shall have received an opinion of a nationally recognized public accounting firm
satisfactory to MarTex, which opinion shall be satisfactory in form and
substance to Hibernia and MarTex, to the effect that the Merger when consummated
in accordance with the terms hereof will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, and that the exchange of
MarTex Common Stock to the extent exchanged for Hibernia Common Stock will not
give rise to gain or loss to the shareholders of MarTex with respect to such
exchange.
12.11. Listing on New York Stock Exchange. The shares of
Hibernia Common Stock issuable to the holders of MarTex Common Stock in the
Merger shall have been approved for listing on the New York Stock Exchange, Inc.
on or before the Closing Date, subject to official notice of issuance.
12.12. Fairness Opinion. MarTex shall have received a letter
from Alex. Sheshunoff & Co. dated within five days of the scheduled date of
mailing of the Proxy Statement to its shareholders, and updated to within five
days of the Closing Date to the effect that the terms of the Merger are fair to
its shareholders from a financial point of view.
12.13. Amendments to Stock Grant Agreements. MarTex shall have
received from each of Messrs. McWhorter and Meisenheimer prior to the date of
the special meeting of the MarTex shareholders to approve this Agreement and the
Merger amendments to their respective Stock Grant Agreements in substantially
the form of Exhibit 10(f) hereto.
12.14. Affidavits from MarTex Directors. Hibernia shall have
received from each director of MarTex an affidavit in substantially the form of
Exhibit 10(g) hereto.
12.15 Releases and Indemnity Agreements. MarTex shall receive
from each of Messrs. McWhorter and Meisenheimer prior to the date of the special
meeting of the MarTex shareholders to approve this Agreement and the Merger
releases substantially in the form of Exhibit 10(h) hereto and indemnity
agreements substantially in the form of Exhibit 10(i) hereto.
12.16 Opinion of Counsel for Messrs. McWhorter and
Meisenheimer. Hibernia shall have received an opinion, dated the Closing Date,
of Bracewell & Patterson, L.L.P., as counsel for Messrs. McWhorter and
Meisenheimer, in form and substance satisfactory to Hibernia, which shall state
that the releases referred to in Section 12.15 above are enforceable against
each of Messrs. McWhorter and Meisenheimer in accordance with their terms.
12.17. Assertion of Conditions. A failure to satisfy any of
the requirements set forth in Section 12.5, 12.8 or 12.12 shall only constitute
conditions to consummation of the Merger if asserted by MarTex and a failure to
satisfy any of the requirements set forth in Section 12.6, 12.7, 12.13, 12.14,
12.15 or 12.16 shall only constitute conditions to consummation of the Merger if
asserted by Hibernia.
13. Termination. This Agreement may be terminated prior to the Closing
Date, either before or after its approval by the shareholders of the parties
hereto, in any of the following events:
13.1. Mutual Consent. By the mutual consent of the parties
hereto, if the Board of Directors of each party so determines by vote of a
majority of the members of its entire Board.
13.2. Breach of Representation, Warranty or Covenant. By
either party hereto, in the event of a breach by the other party (a) of any
covenant or agreement contained herein or (b) of any representation or warranty
herein, if (i) the facts constituting such breach reflect a material and adverse
change in the financial condition, results of operations, business, or prospects
taken as a whole, of the breaching party, which in either case cannot be or is
not cured within 60 days after written notice of such breach is given to the
party committing such breach, or (ii) in the event of a breach of a warranty or
covenant, such breach results in a material increase in the cost of the
non-breaching party's performance of this Agreement or a material decrease in
the consideration to be received by MarTex's shareholders.
13.3. Passage of Time; Inability to Satisfy Conditions. By
either party hereto, in the event that (i) the Merger is not consummated by
March 31, 1999, or (ii) any condition to Closing cannot be satisfied by March
31, 1999 and will not be waived by the party or parties entitled to waive it.
13.4. Failure to Obtain Regulatory Approval. By either party
hereto, at any time after the Federal Reserve Board, the Federal Reserve Bank or
any other regulatory authority whose approval is required by law or regulation
has denied any application for any approval or clearance required to be obtained
as a condition to the consummation of the Merger and the time period for all
appeals or requests for reconsideration thereof has run.
13.5. Failure to Obtain Shareholder Approval. By either party
hereto, if the Merger is not approved by the required vote of shareholders of
MarTex.
13.6. Dissenters. By Hibernia, if holders of more than 10
percent of the outstanding MarTex Common Stock exercise statutory rights of
dissent and appraisal pursuant to Texas law.
13.7. Material Adverse Change. By MarTex, if a material
adverse change as described in Section 8.7 of this Agreement occurs, and by
Hibernia, if a material adverse change as described in Section 7.7 hereof
occurs, after the date hereof and prior to the Closing.
13.8. Use of Pooling-of-Interests Accounting Treatment under
Certain Circumstances. By Hibernia, in the event it shall determine in good
faith, that the Merger does not qualify as a pooling-of-interests for accounting
purposes, if and only if the Exchange Rate is determined in accordance with
paragraph (a) or (b) of Section 3.8 hereof.
13.9. Fairness Opinion. By MarTex, if it shall not have
received an updated fairness letter from Alex. Sheshunoff & Co. Investment
Bankers dated within five days of the scheduled date of mailing of its proxy
statement to its shareholders, and updated to within five days of the Closing
Date, to the effect that the terms of the Merger are fair to MarTex from a
financial point of view.
13.10 Receipt of Certain Documents. By Hibernia, if (i) MarTex
shall have not timely received the amendments to the Stock Grant Agreements
referred to in Section 12.13 above, (ii) Hibernia shall not have timely received
the affidavits referred to in Section 12.14 above, (iii) Hibernia shall have not
timely received the releases and indemnity agreements referred to in Section
12.15 above or (iv) Hibernia shall have not timely received the legal opinion
referred to in Section 12.16 above.
14. Closing and Effective Date. The closing of the Merger (the
"Closing") shall take place at the office of Hibernia at 313 Carondelet Street,
New Orleans, Louisiana, at 11:00 a.m. local time, or at such other place or time
as shall be mutually agreeable to the parties hereto, on the first business day
occurring after the last to occur of: (i) the date that falls 15 days after the
date of the order of the Federal Reserve Board approving the Merger pursuant to
the Bank Holding Company Act; and (ii) the date that falls 5 days after the date
on which the last meeting of shareholders called to approve this Agreement is
held; or such later date within 60 days of such date as may be agreed upon
between the parties hereto (the date and time of the Closing being referred to
herein as the "Closing Date"). Immediately upon consummation of the Closing, or
on such other later date as the parties hereto may agree, the Merger Agreement
shall be certified, executed, acknowledged and delivered to (i) the Secretary of
State of the State of Louisiana (the "Secretary") for filing pursuant to and in
accordance with the provisions of Section 12:112 of the LBCL and (ii) the
Secretary of State of the State of Texas for filing pursuant to and in
accordance with Section 5.05 of the TBCA. The Merger shall become effective as
of the date and time of issuance by both Secretaries of a certificate of merger
relating to the Merger (such date and time being referred to herein as the
"Effective Date").
15. Survival and Termination of Representations, Warranties and
Covenants.
15.1. Except as otherwise provided in this Section 15, the
representations, warranties and covenants contained in this Agreement shall
terminate as of the earlier of the Effective Date or the termination of this
Agreement. Upon termination of such representations, warranties and covenants,
such provisions shall be of no further force or effect, and no party hereto
shall have any legal right to redress, whether for breach of contract or
otherwise, as a result of a breach of any such provision.
15.2. The provisions and agreements set forth in Sections 3,
5, 9.11, 9.12, 9.16 and 11 and the last sentence of Section 8.3 hereof shall
survive the Closing, if the Closing occurs, for the benefit of the shareholders,
directors and officers of MarTex who are the intended beneficiaries of such
provisions.
15.3. The provisions of Section 11 and liabilities for a
breach of the provisions of Section 9.2 shall survive the termination of this
Agreement if this Agreement terminates without the Closing or the Merger having
occurred, in which event liability for a breach of Section 9.2 shall survive the
termination of the Agreement for a period of 180 days following the date on
which the Agreement terminates. Nevertheless, no party to this Agreement shall
have a legal right to redress or cause of action for a breach of Section 9.2
except in those circumstances in which such breach directly resulted in the
termination of the Agreement.
15.4. In consideration of the mutual benefits and agreements
contained in this Agreement, each of the parties hereto, on behalf of itself and
its successors and assigns, hereby irrevocably waives any right or cause of
action which otherwise would survive in the absence of this Section 15.
16. Amendment; Waivers. To the extent permitted under applicable law,
prior to the Closing Date any provision of this Agreement may be amended or
modified at any time, either before or after its approval by the shareholders of
the parties hereto, (i) by an agreement in writing among the parties hereto
approved by their respective Boards of Directors and executed in the same manner
as this Agreement, and (ii) as provided in Section 12:112 of the LBCL. Except
with respect to any required shareholder or regulatory approval, each party
hereto, by written instrument signed by a duly authorized officer of such party,
may at any time (whether before or after approval of this Agreement by the
shareholders of Hibernia or MarTex) extend the time for the performance of any
of the obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this agreement or any document delivered pursuant hereto, (ii) compliance
with any of the covenants, undertakings, or agreements of the other party, or
satisfaction of any of the conditions precedent to its obligations, contained
herein or (iii) the performance by the other party of any of its obligations set
out herein or therein; provided that no such waiver executed after approval of
this Agreement by the shareholders of Hibernia or MarTex shall change the number
of shares of Hibernia Common Stock into which shares of MarTex Common Stock will
be converted by the Merger.
17. Execution in Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to constitute an original. Each such
counterpart shall become effective when one counterpart has been signed by each
party hereto.
18. Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of Louisiana applicable to agreements
made and entirely to be performed within such State, except as federal law may
be applicable.
19. Expenses. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby,
including all fees, expenses and disbursements of its counsel and auditors,
provided that printing expenses and filing fees shall be borne by Hibernia.
20. No Assignment. Prior to the Effective Date, neither party hereto
may assign any of its rights or obligations under this Agreement to any other
person without the prior written consent of the other bank holding company that
is a party hereto, including any transfer or assignment by operation of law.
21. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by registered or certified mail, postage prepaid, to the Chief Executive
Officer of each party hereto at the address of such party set forth in the
preamble to this Agreement and shall be deemed to have been given as of the date
so personally delivered or mailed. A copy of all notices or other communications
directed to Hibernia shall be sent to:
HNB
313 Carondelet Street
New Orleans, Louisiana 70130
Attention: Corporate Law Division
and a copy of all notices or other communications directed to MarTex shall be
sent to:
MarTex Bancshares, Inc.
2615 East End Boulevard South
Marshall, Texas 75670
Attention: Chief Executive Officer
With a copy to:
Richard E. Brophy, Jr., Esq.
Naman, Howell, Smith & Lee
9th & Washington
700 Texas Center
P.O. Box 1470
Waco, Texas 76703
22. Headings. The headings in this Agreement 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.
23. Entire Agreement. This Agreement and the Schedules and Exhibits
hereto supersede any and all oral or written agreements and understandings
heretofore made relating to the subject matter hereof and contain the entire
agreement of the parties relating to the subject matter hereof. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto, and their respective successors. Nothing in this Agreement
or in the Merger Agreement is intended to or shall be construed to confer upon
or to give any person other than the parties hereto any rights, remedies,
obligation or liabilities under or by reason of this Agreement except as
expressly provided herein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed in counterparts by their duly authorized officers and their
corporate seals to be hereunto affixed, all as of the day and year first above
written, effective as of June 29, 1998.
Hibernia Corporation
By: /S/ Stephen A. Hansel
Stephen A. Hansel
President and Chief Executive Officer
Attest:
/S/ Patricia C. Meringer
Patricia C. Meringer
Secretary
MARTEX BANCSHARES, INC.
By: /S/ F. Wayne McWhorter
F. Wayne McWhorter
Attest:
/S/ George E. Fitts
George E. Fitts
<PAGE>
APPENDIX B
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
January 19, 1999
Board of Directors
MarTex Bancshares, Inc.
2615 East End Boulevard
Marshall, Texas 75670
Members of the Board:
You have requested us to update our oral opinion rendered on June 29, 1998, as
to the fairness, from a financial point of view, to the holders of the
outstanding shares of common stock of MarTex Bancshares, Inc. ("MarTex") of the
Merger Consideration to be received in the proposed merger between MarTex and
Hibernia Corporation, New Orleans, Louisiana, ("Hibernia"). In consideration of
the Merger, Hibernia has offered to exchange up to a maximum of 3,450,000 shares
of its common stock (the "Merger Consideration") for the outstanding shares of
MarTex common stock. The shares will be exchanged pursuant to an Agreement and
Plan of Merger dated June 29, 1998 (the "Merger Agreement"). Pursuant to the
Merger Agreement, Hibernia shall cause MarTex to be merged with and into
Hibernia.
Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") is regularly engaged in
the valuation of securities in connection with mergers and acquisitions, private
placements, and valuations for estate, corporate and other purposes.
In connection with our opinion, we have, among other things:
1. Evaluated MarTex's consolidated results based upon a review of its
annual financial statements for the four-year period ending
December 31, 1997 and of the interim internal financial statements
for 1998 through September 30, 1998;
2. Reviewed Call Report information as of December 1997 and June 1998
for MarTex;
3. Conducted conversations with executive management regarding recent
and projected financial performance of MarTex;
4. Compared MarTex's recent operating results with those of certain
other banks in the Southwest region of the United States which
have recently been acquired;
5. Compared MarTex's recent operating results with those of certain
other banks in Texas which have recently been acquired;
6. Compared the pricing multiples for MarTex in the Merger to those
of certain other banks in the Southwest region of the United
States which have recently been acquired;
7. Compared the pricing multiples for MarTex in the Merger to those
of certain other banks in Texas which have recently been acquired;
8. Analyzed the net present value of the after-tax cash flows MarTex
could produce through the year 2003, based on assumptions provided
by management;
9. Performed an affordability analysis based on the projections of
earnings for the combined entity subsequent to the Merger;
10. Reviewed the historical stock price data and trading volume of
Hibernia common stock and the lack of any active market for the
common stock of MarTex; and
11. Performed such other analyses as we deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information provided to us by MarTex for the purposes of
this opinion. In addition, where appropriate, we have relied upon publicly
available information that we believe to be reliable, accurate and complete;
however, we cannot guarantee the reliability, accuracy or completeness of any
such publicly available information.
We have not made an independent evaluation of the assets or liabilities of
MarTex or Hibernia, nor have we been furnished with any such appraisals. We are
not experts in the evaluation of loan portfolios for the purposes of assessing
the adequacy of the allowance for loan and lease losses and have assumed that
such allowances for each of the companies are, in the aggregate, adequate to
cover such losses.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Events occurring after the date hereof including, but not limited to a
divestiture, could materially affect the assumptions used in preparing this
opinion.
Our opinion is limited to the fairness, from a financial point of view, to the
holders of MarTex common stock. Moreover, this letter, and the opinion expressed
herein, does not constitute a recommendation to any shareholder as to any
approval of the Merger or the Merger Agreement. It is understood that this
letter is for the information of the Board of Directors of MarTex and may not be
used for any other purpose without our prior written consent.
Based on the foregoing and such other matters we have deemed relevant, it is our
opinion, as of the date hereof, that the Merger Consideration to be received by
the MarTex shareholders pursuant to the Merger is fair, from a financial point
of view, to the holders of MarTex common stock.
Very truly yours,
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
<PAGE>
APPENDIX C
PROVISIONS OF THE TEXAS BUSINESS CORPORATION ACT
RELATING TO
RIGHTS OF DISSENTING SHAREHOLDERS
(Articles 5.11 - 5.13)
Article 5.11.Rights of Dissenting Shareholders in the Event of Certain Corporate
Actions
A. Any shareholder of a domestic corporation will have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if shareholder
approval is required by Article 5.03 or 5.16 of this Act and the shareholder
holds shares of a class or series that was entitled to vote thereon as a class
or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise provided in
the articles of incorporation) of all, or substantially all, the property and
assets, with or without goodwill, of a corporation requiring the special
authorization of the shareholders as provided by this Act;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which
the shares of the corporation of the class or series held by the shareholder are
to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder will not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if (1) the shares held by the shareholder are part of a class
shares of which are listed on a national securities exchange, or are held of
record by not less than 2,000 holders, on the record date fixed to determine the
shareholders entitled to vote on the plan of merger or the plan of exchange, and
(2) the shareholder is not required by the terms of the plan of merger or the
plan of exchange to accept for his shares any consideration other than (a)
shares of a corporation that, immediately after the effective time of the merger
or exchange, will be part of a class or series of shares of which are (i)
listed, or authorized for listing upon official notice of issuance, on a
national securities exchange, or (ii) held of record by not less than 2,000
holders, and (b) cash in lieu of fractional shares otherwise entitled to be
received.
Article 5.12. Procedure for Dissent by Shareholders as to Said Corporate Actions
B. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:
(1)(a)With respect to proposed corporate action that is submitted to a
vote of shareholders at a meeting, the shareholder will file with the
corporation, prior to the meeting, a written objection to the action, setting
out that the shareholder's right to dissent will be exercised if the action is
effective and giving the shareholder's address, to which notice thereof will be
delivered or mailed in that event. If the action is effected and the shareholder
will not have voted in favor of the action, the corporation, in the case of
action other than a merger, or the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, will, within ten (10) days after the action is
effected, deliver or mail to the shareholder written notice that the action has
been effected, and the shareholder may, within ten (10) days from the delivery
or mailing of the notice, make written demand on the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, for
payment of the fair value of the shareholder's shares. The fair value of the
shares will be the value thereof as of the day immediately preceding the
meeting, excluding any appreciation or depreciation in anticipation of the
proposed action. The demand will state the number and class of the shares owned
by the shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the ten (10) day
period will be bound by the action.
(b) With respect to proposed corporate action that is approved pursuant
to Section A of Article 9.10 of this Act, the corporation, in the case of action
other than a merger, and the surviving or new corporation (foreign or domestic)
or other entity that is liable to discharge the shareholder's right of dissent,
in the case of a merger, will, within ten (10) days after the date the action is
effected, mail to each shareholder of record as of the effective date of the
action notice of the fact and date of the action and that the shareholder may
exercise the shareholder's right to dissent from the action. The notice will be
accompanied by a copy of this Article and any articles or documents filed by the
corporation with the Secretary of State to effect the action. If the shareholder
will not have consented to the taking of the action, the shareholder may, within
twenty (20) days after the mailing of the notice, make written demand on the
existing, surviving, or new corporation (foreign or domestic) or other entity,
as the case may be, for payment of the fair value of the shareholder's shares.
The fair value of the shares will be the value thereof as of the date the
written consent authorizing the action was delivered to the corporation pursuant
to Section A of Article 9.10 of this Act, excluding any appreciation or
depreciation in anticipation of the action. The demand will state the number and
class of shares owned by the dissenting shareholder and the fair value of the
shares as estimated by the shareholder. Any shareholder failing to make demand
within the twenty (20) day period will be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, of a
demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or other
entity will deliver or mail to the shareholder a written notice that will either
set out that the corporation (foreign or domestic) or other entity accepts the
amount claimed in the demand and agrees to pay that amount within ninety (90)
days after the date on which the action was effected, and, in the case of shares
represented by certificates, upon the surrender of the certificates duly
endorsed, or will contain an estimate by the corporation (foreign or domestic)
or other entity of the fair value of the shares, together with an offer to pay
the amount of that estimate within ninety (90) days after the date on which the
action was effected, upon receipt of notice within sixty (60) days after that
date from the shareholder that the shareholder agrees to accept that amount and,
in the case of shares represented by certificates, upon the surrender of the
certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares will be
made within ninety (90) days after the date on which the action was effected,
and in the case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the shareholder
will cease to have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service or a copy thereof
will be made upon the corporation (foreign or domestic) or other entity, which
will, within ten (10) days after service, file in the office of the clerk of the
court in which the petition was filed a list containing the names and addresses
of all shareholders of the domestic corporation who have demanded payment for
their shares and with whom agreements as to the value of their shares have not
been reached by the corporation (foreign or domestic) or other entity. If the
petition will be filed by the corporation (foreign or domestic) or other entity,
the petition will be accompanied by such a list. The clerk of the court will
give notice of the time and place fixed for the hearing of the petition by
registered mail to the corporation (foreign or domestic) or other entity and to
the shareholders named on the list at the addresses therein stated. The forms of
the notices by mail will be approved by the court. All shareholders thus
notified and the corporation (foreign or domestic) or other entity will
thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court will determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and will
appoint one or more qualified appraisers to determine that value. The appraisers
will have power to examine any of the books and records of the corporation the
shares of which they are charged with the duty of valuing, and they will make a
determination of the fair value of the shares upon such investigation as to them
may seem proper. The appraisers will also afford a reasonable opportunity to the
parties interested to submit to them pertinent evidence as to the value of the
shares. The appraisers will also have such power and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers will determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and will file their report of their value in the office of the clerk of the
court. Notice of the filing of the report will be given by the clerk to the
parties in interest. The report will be subject to exceptions to be heard before
the court both upon the law and the facts. The court will by its judgment
determine the fair value of the shares of the shareholders entitled to payment
for their shares and will direct the payment of that value by the existing,
surviving, or new corporation (foreign or domestic) or other entity, together
with interest thereon, beginning 91 days after the date on which the applicable
corporate action from which the shareholder elected to dissent was affected to
the date of such judgment, to the shareholders entitled to payment. The judgment
will be payable to the holders of uncertificated shares immediately but to the
holders of shares represented by certificates only upon, and simultaneously
with, the surrender to the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, of duly endorsed certificates for
those shares. Upon payment of the judgment, the dissenting shareholders will
cease to have any interest in those shares or in the corporation. The court will
allow the appraisers a reasonable fee as court costs, and all court costs will
be allotted between the parties in the manner that the court determines to be
fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the judgment
entered for the value of the shares, as in this Article provided, will, in the
case of a merger, be treated as provided in the plan of merger and, in all other
cases, may be held and disposed of by the corporation as in the case of other
treasury shares.
F. The provisions of this Article will not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article will not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
Article 5.13. Provisions Affecting Remedies of Dissenting Shareholders
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act will not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded will not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation will make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment will submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so will, at the option
of the corporation, terminate such shareholder's rights under Articles 5.12 and
5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown will otherwise direct. If uncertificated shares for which
payment has been demanded or shares represented by a certificate on which
notation has been so made will be transferred, any new certificate issued
therefor will bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares will acquire by
such transfer no rights in the corporation other than those which the original
dissenting shareholder had after making demand for payment of the fair value
thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation will
consent thereto, after any such petition has been filed. If, however, such
demand will be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation will terminate the shareholder's rights under
Article 5.12 of 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court will
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court will determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him will be conclusively presumed to have
approved and ratified the corporate action from which he dissented and will be
bound thereby, the right of such shareholder to be paid the fair value of his
shares will cease, and his status as a shareholder will be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholders will be entitled to receive any dividends or
other distributions made to shareholders in the interim.
<PAGE>
APPENDIX D
(date)
Hibernia Corporation
313 Carondelet Street
New Orleans, Louisiana 70130
Shareholders of MarTex Bancshares, Inc.
2615 East End Boulevard South
Marshall, Texas 75670
Dear Sir or Madam:
This letter is in response to your request that we provide you with our opinion
concerning certain federal income tax consequences which would arise from
consummation of the proposed merger of MarTex Bancshares, Inc. ("MarTex") with
and into Hibernia Corporation ("Hibernia") (the "MarTex Merger"), and the
proposed merger of First Service Bank ("Bank") with and into Hibernia National
Bank of Texas ("HNBT") (the "Bank Merger"). (Hereinafter, the MarTex Merger and
the Bank Merger are referred to collectively as the "Proposed Mergers.")
In rendering this opinion, we have relied upon the facts, summarized below, as
they have been presented to us orally by the management of Hibernia and verified
in: the Statements of Facts and Representations dated (date) provided by the
respective managements of MarTex, Bank, Hibernia, and HNBT; the Agreement and
Plan of Merger made and entered into by and between MarTex and Hibernia as of
June 29, 1998 (the "Agreement"); the Agreement to Merge between Bank and HNBT
(the "Bank Plan of Merger"); and the Registration Statement (Form S-4), as
declared effective by the Securities and Exchange Commission on (date)
containing the Proxy Statement - Prospectus of MarTex and Hibernia dated (date)
("Prospectus"). (These are sometimes hereinafter referred to collectively as
"Documents.")
You have represented to us that the facts contained in the Documents provide an
accurate and complete description of the facts and circumstances concerning the
Proposed Mergers. We have made no independent investigation of the factual
matters and circumstances and, therefore, have relied upon the facts and
representations in the Documents for purposes of this letter. Any changes to the
facts or Documents may affect the conclusions stated herein.
We understand that reference to Ernst & Young LLP and our opinion is included in
the Prospectus relating to the issuance of Hibernia Common Stock in connection
with the Proposed Mergers and the special meeting of the MarTex shareholders
with respect thereto. We consent to such reference in the Prospectus under the
captions "Summary," "Proposed Merger; Conditions to the Merger; Waiver" and
"--Material Tax Consequences." We also understand that the form of this letter
is included as an appendix to the Form S-4 Registration Statement and the
Prospectus. We consent to such inclusion.
STATEMENT OF FACTS
MarTex is a corporation organized and existing under the laws of the State of
Texas, and is a bank holding company within the meaning of the Bank Holding
Company Act of 1956, as amended. As of September 30, 1998, the authorized
capital stock of MarTex was 100,000,000 shares of common stock, of $0.01 par
value ("MarTex Common Stock") and 500,000 shares of preferred stock of $4.13 par
value ("MarTex Preferred Stock"). As of September 30, 1998, 11,875,087 shares of
MarTex Common Stock had been issued and were outstanding, and no shares of
MarTex Common Stock were held in MarTex's treasury. As of September 30, 1998, no
shares of MarTex Preferred Stock had been issued by MarTex and no such shares
were outstanding. The shares of MarTex Common Stock are held by approximately
373 shareholders. As of September 30, 1998, there were options to purchase
450,264 shares of MarTex Common Stock outstanding, 319,828 shares issuable under
a Warrant Agreement dated December 13, 1996, and additional shares of MarTex
Common Stock to be issued pursuant to the Stock Grant Agreements as a result of
the consummation of the Proposed Mergers.
Bank is principally engaged in the banking business. The presently authorized
capital stock of Bank is 2,071,000 shares of common stock, par value $1.00 per
share, all of which were issued and outstanding and held by MarTex as of the
date hereof (referred to as "Bank Common Stock").
Hibernia is a bank holding company organized and existing under the laws of the
State of Louisiana. The presently authorized capital stock of Hibernia is
400,000,000 shares, consisting of 100,000,000 shares of preferred stock, no par
value, and 300,000,000 shares of Class A voting common stock, no par value (the
Class A voting common stock being referred to hereinafter as "Hibernia Common
Stock"). As of September 30, 1998, 2,000,000 shares of Hibernia's preferred
stock were issued and outstanding, 156,133,824 shares of Hibernia Common Stock
were issued and outstanding, and no shares of Hibernia Common Stock were held in
Hibernia's treasury. As of September 30, 1998, Hibernia has the following
existing options, warrants, calls or commitments obligating Hibernia to issue
any share of its capital stock or any other security of which it is or will be
the issuer: Hibernia has options covering 1,229,500 shares of Hibernia Common
Stock outstanding as of September 30, 1998 under its 1987 Stock Option Plan;
8,182,980 (as adjusted) shares of Hibernia Common Stock for issuance under its
Long-Term Incentive Plan, pursuant to which options covering 7,162,576 shares of
Hibernia Common Stock were outstanding as of September 30, 1998; 912,500 shares
of Hibernia Common Stock for issuance under its 1993 Directors' Stock Option
Plan, pursuant to which options covering 335,000 shares of Hibernia Common Stock
are outstanding as of September 30, 1998; 24 shares of Hibernia Common Stock are
available for issuance pursuant to Hibernia's Dividend Reinvestment and Stock
Purchase Plan; and warrants covering 213,176 shares of Hibernia Common Stock are
outstanding. One transaction currently pending, when consummated, will result in
the issuance of no more than 4,022,000 additional shares of Hibernia Common
Stock.
Additionally, on March 14, 1995, Hibernia and its Board of Directors authorized
an employee stock ownership plan ("ESOP") to be funded with $30.0 million of
Hibernia Common Stock. The $30.0 million purchase of Hibernia Common Stock was
funded through a loan from Hibernia National Bank ("HNB"). At September 30,
1998, 2,855,567 shares have been acquired. Hibernia Common Stock is traded on
the New York Stock Exchange. On October 22, 1998, the ESOP acquired 1,018,675
additional shares of Hibernia Common Stock, funded by a $15.0 million addition
to the borrowing from HNB.
HNB is a nationally chartered bank engaged principally in the banking business
in the state of Louisiana. HNB is a wholly owned subsidiary of Hibernia.
HNBT is a nationally chartered bank engaged principally in the banking business
in the state of Texas. HNBT is a wholly owned subsidiary of Hibernia.
BUSINESS PURPOSE
The management of Hibernia has represented to us that Hibernia desires to
consummate the Proposed Mergers in order to improve its presence in the Texas
market. As discussed in the Prospectus under the caption, "Proposed
Merger-Background of and Reasons for Merger," the MarTex Board of Directors
believes the shareholders of MarTex will benefit from being part of a larger
banking entity, the stock of which is publicly traded.
PROPOSED TRANSACTIONS
In accordance with the above-stated business purpose, the following transactions
have been proposed:
1. After all necessary regulatory and shareholder approvals have been granted,
there will be simultaneous mergers (i.e., the Proposed Mergers) of MarTex
with and into Hibernia in accordance with the Louisiana Business
Corporation Law ("LBCL") and the Texas Business Corporation Act ("TBCA"),
and Bank with and into HNBT in accordance with the provisions of Bank
Merger Act, 12 U.S.C. Sections 1828 et. seq. and 12 U.S.C. Section 215a
("Bank Merger Act"). Upon the completion of the MarTex Merger, Hibernia
will cause the Bank Merger to occur.
2. In the MarTex Merger, Hibernia will acquire all of the assets and assume
all of the liabilities of MarTex solely in exchange for Hibernia Common
Stock (except for cash for fractional shares and dissenters, if any). As a
result of the MarTex Merger, each share of the issued and outstanding
MarTex Common Stock shall be converted into and become the number of shares
of Hibernia Common Stock determined in accordance with the exchange rate
(the "Exchange Rate"). The Exchange Rate shall be the number that is agreed
to by Hibernia and MarTex.
3. Holders of shares of MarTex Common Stock outstanding immediately prior to
the effective date of the MarTex Merger shall cease to be, and shall have
no rights as, shareholders of MarTex after the MarTex Merger.
4. In the Bank Merger, HNBT will acquire all the assets and assume all of the
liabilities of Bank in constructive exchange for Hibernia Common Stock. As
a result of the Bank Merger, each share of the issued and outstanding Bank
Common Stock shall cease to be outstanding and will be canceled. No
additional shares of Hibernia Common Stock will actually be issued, nor
will shares of HNBT Common Stock be issued in the Bank Merger.
5. In the MarTex Merger, no fractional shares will be issued. Each holder of
MarTex Common Stock who would otherwise have been entitled to receive a
fraction of a share of Hibernia Common Stock shall receive in lieu thereof,
cash (without interest) in an amount equal to such fractional part of a
share multiplied by the average of the closing price of one share of
Hibernia Common Stock for the ten business days preceding the last trading
day immediately prior to the Closing Date as reported in The Wall Street
Journal.
6. Shareholders of MarTex Common Stock, by following certain statutory
procedures, may exercise dissenter's rights entitling them to receive in
cash the value of their respective MarTex Common Stock in lieu of receiving
Hibernia Common Stock in the MarTex Merger.
REPRESENTATIONS
For purposes of our evaluation, we have received from the respective managements
of MarTex, Bank, Hibernia and HNBT, Statements of Facts and Representations,
dated (date), as set forth below. References to the "Code" are to the Internal
Revenue Code of 1986, as amended.
The following representations have been made in connection with the MarTex
Merger:
(a) The fair market value of the Hibernia Common Stock to be
received by each shareholder of MarTex Common Stock will be
approximately equal to the fair market value of the MarTex
Common Stock surrendered in the exchange.
(b) Prior to and in connection with the plan of reorganization,
neither MarTex nor a related person (as defined in Treas. Reg.
section 1.368-1(e)(3) determined without regard to Treas. Reg.
section 1.368-1(e)(3)(i)(A)) redeemed or otherwise acquired
stock having a value of more than 50 percent of all of the
stock of MarTex as of the same date, or made an extraordinary
distribution with respect to the stock of MarTex.
(c) Hibernia will issue stock to the shareholders of MarTex having
a value, as of the date of the transaction, of at least 50
percent of all of the formerly outstanding stock of MarTex as
of the same date, taking into account any redemptions,
acquisitions, or extraordinary distributions made by MarTex.
Neither Hibernia nor a related person (as defined in Treas.
Reg. section 1.368-1(e)(3)) has any plan or intention, in
connection with the plan of reorganization, to redeem or
otherwise acquire stock of Hibernia issued in the transaction.
(d) Hibernia has no plan or intention to sell or otherwise dispose
of any of the assets of MarTex acquired in the transaction
except for dispositions made in the ordinary course of
business.
(e) Any liabilities of MarTex assumed by Hibernia and any
liabilities to which the transferred assets of MarTex are
subject were incurred by MarTex in the ordinary course of its
business.
(f) Following the transaction, Hibernia will continue,
substantially unchanged, the business of MarTex as operated,
prior to the Proposed Mergers, through MarTex's subsidiary
(Bank) which will be merged with and into HNBT.
(g) Except for expenses relating to the registration of the
Hibernia Common Stock and certain proxy printing and mailing
expenses to be paid solely by Hibernia, which are directly
related to the Proposed Mergers in accordance with the
guidelines established in Revenue Ruling 73-54, 1973-1 C.B.
187, Hibernia, MarTex, and the shareholders of MarTex will pay
their respective expenses, if any, incurred in connection with
the transactions.
(h) There is no intercorporate indebtedness existing between
MarTex and its affiliates on the one hand and Hibernia and its
affiliates on the other hand which was issued, acquired, or
will be settled at a discount.
(i) No two parties to the transaction are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(j) MarTex is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
(k) The fair market value of the assets of MarTex to be
transferred to Hibernia will equal or exceed the sum of the
liabilities assumed by Hibernia plus the amount of
liabilities, if any, to which the transferred assets are
subject.
(l) The payment of cash in lieu of fractional shares of Hibernia
Common Stock is solely for the purpose of avoiding the expense
and inconvenience to Hibernia of issuing fractional shares
and does not represent separately bargained for consideration.
The total cash consideration that will be paid in the
transaction to the MarTex shareholders instead of issuing
fractional shares of Hibernia will not exceed one percent of
the total consideration that will be issued in the transaction
to the MarTex shareholders in exchange for their shares of
MarTex Common Stock. The fractional share interests of each
holder of MarTex Common Stock will be aggregated,and no MarTex
shareholder will receive cash in an amount equal to or greater
than the value of one full share of Hibernia Common Stock for
its MarTex Common Stock.
(m) None of the compensation received by any shareholder-employees
of MarTex or its affiliates will be separate consideration
for, or allocable to, any of their shares of MarTex Common
Stock; none of the shares of Hibernia Common Stock received by
any shareholder-employees will be separate consideration for,
or allocable to, any employment agreement; and the
compensation paid to any shareholder-employees will be for
services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's-length for
similar services.
(n) The Merger will qualify as a statutory merger under the LBCL
and the TBCA.
(o) The shareholders of MarTex (immediately before the proposed
transaction) receiving shares of Hibernia Common Stock will
not own (immediately after the proposed transaction) more than
50 percent of the fair market value of Hibernia Common Stock.
(p) The options, warrants, subordinated rights or other rights to
purchase MarTex Common Stock will be exercised in exchange for
shares of MarTex Common Stock prior to the Proposed Mergers
with the result that no options, warrants, subordinated rights
or other rights to purchase MarTex Common Stock will be
outstanding as of the date of the Proposed Mergers.
The following representations have been made in connection with the Bank Merger:
(aa) No additional Hibernia Common Stock will be issued or
exchanged in the Bank Merger. No HNBT Common Stock will be
issued or exchanged in the Bank Merger.
(bb) Prior to and in connection with the plan of reorganization,
neither Bank nor a related person (as defined in Treas. Reg.
section 1.368-1(e)(3) determined without regard to Treas. Reg.
section 1.368-1(e)(3)(i)(A)) redeemed or otherwise acquired
stock having a value of more than 50 percent of all of the
stock of Bank as of the same date, or made an extraordinary
distribution with respect to the stock of Bank.
(cc) Hibernia will constructively issue stock to the shareholder of
Bank having a value, as of the date of the transaction, of at
least 50 percent of all of the formerly outstanding stock of
Bank as of the same date, taking into account any redemptions,
acquisitions, or extraordinary distributions made by Bank.
Neither Hibernia nor a related person (as defined in Treas.
Reg. section 1.368-1(e)(3)) has any plan or intention, in
connection with the plan of reorganization, to redeem or
otherwise acquire stock of Hibernia constructively issued in
the transaction.
(dd) HNBT will acquire at least 90 percent of the fair market value
of the net assets and at least 70 percent of the fair market
value of the gross assets held by Bank immediately prior to
the Bank Merger. For purposes of this representation, amounts
paid by Bank to dissenters, Bank assets used to pay its
reorganization expenses, and all redemptions and distributions
(except for regular, normal dividends) made by Bank
immediately preceding the transfer, will be included as assets
of Bank held immediately prior to the transaction.
(ee) Prior to the transaction, Hibernia will be in control of HNBT
within the meaning of Section 368(c) of the Code wherein
"control" is defined to mean the ownership of stock possessing
at least 80 percent of the total combined voting power of all
classes of stock entitled to vote and at least 80 percent of
the total number of shares of all other classes of the
corporation.
(ff) Following the transaction, HNBT will not issue additional
shares of its Common Stock that would result in Hibernia
losing control of HNBT within the meaning of Section 368(c) of
the Code.
(gg) Hibernia has no plan or intention to liquidate HNBT; to merge
HNBT into another corporation; to sell or otherwise dispose
of the Common Stock of HNBT; or to cause HNBT to sell or
otherwise dispose of any of the assets of Bank acquired in
the transaction, except for dispositions made in the ordinary
course of business or dispositions that may be required by
the Department of Justice to meet certain regulatory
requirements. The fair market value of these dispositions, if
any,will not exceed 20 percent of the fair market value of the
gross assets held by Bank immediately prior to the Bank
Merger, and the proceeds from any dispositions will be
used in the business of HNBT and will not be distributed
to the shareholders of Bank or HNBT. As Hibernia consummates
other mergers in Texas, it is likely that some or all of the
merged banks will be merged with and into HNBT. At this time,
the discussion provided under the caption "Summary - Other
Pending Transactions for Hibernia" in the Prospectus provides
a complete list of all pending mergers that are covered
by definitive agreements as of (date). However, no Common
Stock of HNB will be issued as consideration in any of the
pending mergers.
(hh) The liabilities of Bank assumed by HNBT and the liabilities to
which the transferred assets of Bank are subject were incurred
by Bank in the ordinary course of its business.
(ii) Following the transaction, HNBT will continue the historic
business of Bank or will use a significant portion of Bank's
historic business assets in its business.
(jj) Except for expenses relating to the registration of Hibernia
Common Stock and certain proxy printing and mailing expenses
to be paid solely by Hibernia, which are directly related to
the Proposed Mergers in accordance with the guidelines
established in Revenue Ruling 73-54, 1973-1 C.B. 187,
Hibernia, HNBT, Bank and the shareholder of Bank will pay
their respective expenses, if any, incurred in connection with
the transaction.
(kk) There is no intercorporate indebtedness existing between
Hibernia and Bank and their affiliates or between HNBT and
Bank that was issued, acquired, or will be settled at a
discount.
(ll) No two parties to the Bank Merger are investment companies
as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(mm) Bank is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the
Code.
(nn) The basis and fair market value of the assets of Bank
transferred to HNBT will each equal or exceed the sum of the
liabilities assumed by HNBT, plus the amount of liabilities,
if any, to which the transferred assets are subject.
(oo) The merger of Bank into HNBT will qualify as a statutory
merger under the Bank Merger Act.
TECHNICAL ANALYSIS
Section 368(a)(1)(A) of the Code provides that a reorganization (a "Type A"
reorganization) includes a statutory merger or consolidation. Such a
reorganization can only be achieved by strict compliance with the applicable
corporation laws of the United States or a state or territory of the United
States. A statutory merger occurs wherein one party (the surviving corporation)
to the transaction absorbs the other party whose corporate existence ceases. It
has been represented by the management of Hibernia that the merger of MarTex
with and into Hibernia, wherein Hibernia Common Stock is to be exchanged for
MarTex Common Stock, is to occur as a statutory merger under applicable state
law.
Section 368(a)(2)(D) of the Code provides that the acquisition by one
corporation in exchange for stock of a corporation which is in control of the
acquiring corporation, of substantially all of the properties of another
corporation, shall not disqualify a transaction under Section 368(a)(1)(A) if
(i) no stock of the acquiring corporation is used in the transaction and (ii)
the transaction would have otherwise qualified as a Type A reorganization had
the merger been into the controlling corporation. It has been represented by the
management of Hibernia that the merger of Bank with and into HNBT, wherein
Hibernia Common Stock is to be constructively exchanged for Bank Common Stock,
is to occur as a statutory merger under applicable state and national law.
Revenue Procedure 77-37, 1977-2 C.B. 568 (ss.3.01) provides that, for advance
ruling purposes, the "substantially all" requirement of Section 368(a)(2)(D) is
satisfied if there is a transfer of assets representing at least 90 percent of
the fair market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by the transferor corporation immediately
prior to the transfer. Any payments to dissenters and any redemptions and
distributions (except for regular dividend distributions) made by the
corporation immediately preceding the transfer and which are a part of the
transaction will be considered as assets held by the corporation immediately
prior to the transfer. Additionally, the payment of expenses incurred in
connection with the Proposed Mergers is taken into consideration in applying the
"substantially all" test.
In the proposed Bank Merger, it has been represented by the respective
managements of Bank and HNBT that HNBT will acquire assets representing at least
90 percent of the fair market value of the net assets and 70 percent of the fair
market value of the gross assets of Bank and that, for this purpose, the fair
market value of the net and gross assets of Bank will be determined before
payment by Bank of any expenses incurred by it in connection with the Bank
Merger, before payment to any dissenters to the Bank Merger, and before any
redemptions and distributions (except for regular, normal dividends) made by
Bank immediately preceding the transfer. Based upon the foregoing
representations, the "substantially all" requirement will be met in the Bank
Merger.
Additional Requirements
Sections 1.368-1(b) and 1.368-2(g) of the Income Tax Regulations (the
"Regulations") provide that the following additional requirements must be met
for a transaction to qualify as a reorganization within the meaning of Section
368 of the Code:
(i) "continuity of interest" must be present,
(ii) "continuity of business enterprise" must exist, and
(iii) the transaction must be undertaken for reasons pertaining to
the continuance of the business of a corporation which is a
party to the transaction.
Continuity of Interest
In general, the continuity of interest test requires the owners of the
reorganized entity to receive and retain a meaningful equity in the surviving
entity. See e.g., Pinellas Ice & Cold Storage Co. v. Comm'r, 287 U.S.462 (1933);
Cortland Specialty Company v. Comm'r, 60 F.2d 937 (2d Cir. 1932), cert. denied,
288 U.S. 599 (1932); Helvering v. Minnesota Tea Co., 296 U.S. 378 (1935).
The Internal Revenue Service (the "Service") has issued final and temporary
regulations (T.D. 8760 and T.D. 8761) providing rules for satisfying the
continuity of interest requirement. These regulations substantially liberalize
the historic rules, generally providing that continuity of interest is satisfied
if a substantial part of the value of the proprietary interest in the target
corporation is preserved in the reorganization. Generally, continuity of
interest is not preserved to the extent that the acquiring corporation acquires
target stock for consideration other than acquiring stock, or if, in connection
with the plan of reorganization, the acquiring stock is redeemed (or purchased
by a related party). In addition, continuity of interest is not preserved to the
extent that, prior to and in connection with the plan of reorganization, the
target (or a related party) acquires the stock with consideration other than
stock of the target, or makes an extraordinary distribution with respect to the
stock. Generally, a related party includes any member of the same affiliated
group (without regard to the exceptions in section 1504(b)) as the acquiring
corporation, or any other corporation where the purchase of the acquiring stock
by such corporation would result in the purchase being a redemption under
section 304(a)(2). Sales by the target shareholders of stock of the acquiror
received in the transaction to unrelated third parties occurring before or after
a reorganization are disregarded.
Based upon our understanding of the facts presented to us orally and as set
forth in the Statements of Facts and Representations dated (date), the MarTex
Merger and the Bank Merger will satisfy the continuity of interest requirement.
The management of Hibernia has represented that all of the stock of MarTex and
Bank outstanding immediately prior to the merger will be exchanged (actually or
constructively) solely for stock of Hibernia. Hibernia has represented further
that neither Hibernia nor a related person (as defined in Treas. Reg. Section
1.368-1(e)(3)) has any plan or intention, in connection with the plan of
reorganization, to (i) acquire a proprietary interest in MarTex or Bank for
consideration other than stock of Hibernia, or (ii) redeem any of the stock
issued in the transaction. In addition, the management of MarTex and Bank have
represented that neither MarTex, Bank, nor a related person (as defined in
Treas. Reg. Section 1.368-1(e)(3) determined without regard to Treas. Reg.
Section 1.368-1(e)(3)(i)(A)) has any plan or intention, prior to and in
connection with the plan of reorganization, to redeem, acquire, or make an
extraordinary distribution with respect to the stock of either entity.
In Revenue Ruling 68-526, 1968-2 C.B. 156, the Service held that the acquisition
of the assets (and assumption of liabilities) of a parent corporation and its 60
percent owned subsidiary constituted separate tax-free reorganizations when the
transactions occurred pursuant to one plan of reorganization and for valid
business reasons. In Revenue Ruling 76-528, 1976-2 C.B. 103, the Service
clarified that the continuity of interest requirement was met in Revenue Ruling
68-526 with respect to the subsidiary acquisition even when the parent had no
assets other than stock of a subsidiary because, in light of the acquisition of
the parent's assets, and its dissolution pursuant to the plan of reorganization,
the parent's shareholders, in effect, "stepped into the parent's shoes" as the
only qualified parties to receive and continue the stock interest formerly held
by the parent corporation. Although no assurance can be given that the Service
will agree, the rationale of the above Revenue Rulings suggests that the
continuity of interest maintained by the MarTex shareholders in the MarTex
Merger is relevant in determining whether the continuity of interest requirement
is satisfied in the Bank Merger. See also PLR 9109044 (December 4, 1990) where
the Service, after applying the step transaction doctrine, ruled that a sideways
merger of a Bank Holding Company and its wholly owned banking subsidiary into an
acquiring bank holding company and its banking subsidiary respectively
constituted reorganizations under Section 368(a)(1)(C) and Section 368(a)(2)(D).
In the past, the Service has frequently ruled on certain facts that the
simultaneous mergers of a parent and its wholly-owned subsidiary into an
acquiring parent corporation and its wholly-owned subsidiary, respectively each
qualified as a Section 368(a)(1)(A) reorganization (see e.g., PLR 9111025
(December 14, 1990), 9047015 (August 24, 1990) and 9003053 (October 26, 1989)).
In other rulings involving slightly different facts (i.e., minority shareholders
in the subsidiary), the Service held that the subsidiary mergers were Section
368(a)(1)(A) reorganizations by reason of Section 368(a)(2)(D) (see e.g., PLR
9109044 (December 4, 1990), 8943067 (August 2, 1989) and 8942090 (July 27,
1989)).
Although private letter rulings are not binding on the Service as precedent,
they are cited to illustrate a consistent rulings position. In recent years,
while the Service has declined to rule on whether a transaction qualifies as a
reorganization pursuant to Section 368(a)(1)(A) of the Code (see section
3.01(24) of Rev. Proc. 98-3) it has consistently ruled that the receipt by a
target parent's shareholders of stock of an acquiring corporation will not
prevent a lower tier target's merger from satisfying the continuity of interest
requirement of Section 1.368-1(b) of the Regulations. See, for example, PLR
9237031 (June 16, 1992), PLR 9317027 (January 29, 1993), PLR 9510059 (March 10,
1995) and PLR 9743050 (July 31, 1997).
Continuity of Business Enterprise
Section 1.368-1(b) of the Regulations also provides that a continuity of
business enterprise (as described in Section 1.368-1(d) of the Regulations) is a
requisite to a reorganization. Section 1.368-1(d) of the Regulations (and as
modified by T.D. 8760) provides that continuity of business enterprise requires
that the acquiring corporation either continue the acquired corporation's
historic business or use a significant portion of the acquired corporation's
historic assets in a business. The proposed Bank Merger will meet the continuity
of business enterprise test of Section 1.368-1(d) because, based upon the
representation of the management of HNBT, HNBT will continue the historic
business of Bank or will use a significant portion of Bank's historic assets in
a business. See also Section 1.368-1(d)(5), Ex. (1).
Revenue Ruling 85-197, 1985-2 C.B. 120, provides that for purposes of the
continuity of business enterprise requirement, the historic business of a
holding company is the business of its operating subsidiary. Similarly, Revenue
Ruling 85-198, 1985-2 C.B. 120, held that the continuity of business enterprise
requirement was met upon the merger of two bank holding companies where the
business of a former subsidiary of the acquired holding company was continued
through a subsidiary of the acquiring corporation. Accordingly, the continuity
of business enterprise requirement is met with regard to the MarTex Merger
because Hibernia through its wholly-owned subsidiary HNBT, will continue the
banking business indirectly conducted by MarTex.
Business Purpose
Section 1.368-2(g) of the Regulations provides that a reorganization must be
undertaken for reasons germane to the continuance of the business of a
corporation which is a party to the reorganization. As heretofore indicated in
the "Business Purpose" Section set forth above, there are substantial business
reasons for the Proposed Mergers. Accordingly, the Proposed Mergers each satisfy
the business purpose requirement as set forth in the Regulations.
Constructive Exchange of Shares
To avoid the expense and inconvenience of issuing Hibernia shares to itself in
the Bank Merger, and because MarTex's shareholders will have already received
fair value for their shares, the shares of Bank Common Stock obtained by
Hibernia in the MarTex Merger shall be canceled without the actual issuance of
additional shares by Hibernia. (See the preceding discussion regarding Rev. Rul.
76-528). In the Bank Merger, which occurs simultaneously, but is to be described
in the closing documents covering the Proposed Mergers as a step following the
MarTex Merger, HNBT technically would acquire the assets of Bank by issuing
shares of Hibernia Common Stock to the Bank shareholder, Hibernia (as the result
of the MarTex Merger).
The tax court has consistently held that the physical transfer of shares is
not necessary if it would be a "meaningless gesture," particularly in situations
where common ownership is present. See, Fowler Hosiery Co., 36 T.C. 201 (1961),
aff'd 301 F.2d 394 (7th Cir. 1962) and William Holton George, 26 T.C. 396
(1956). In fact, the Service has ruled that the absence of an actual physical
exchange of shares does not prevent a transaction from qualifying as a tax-free
reorganization if such an exchange would have been a "meaningless gesture" or a
"useless task." See Rev. Rul. 70-240, 1970-1 C.B. 81 and Rev. Rul. 75-383,
1975-2 C.B. 127. See also Davant v. Commissioner, 366 F.2d 874 (5th Cir. 1966);
James Armour, Inc., 43 T.C. 295 (1964); American Manufacturing Co., 55 T.C. 204
(1970). In addition, the Service held in Revenue Ruling 78-47, 1978-1 C.B. 113,
that a physical issuance of shares was unnecessary in order to eliminate certain
expenses associated with a reorganization.
The Service has also consistently permitted constructive exchanges in private
letter rulings. See e.g., PLR 9247019 (August 24, 1992) and 9137029 (June 13,
1991) citing Revenue Ruling 78-47; PLR 9319017 (February 5, 1993) citing Revenue
Ruling 70-240; PLR 8750071 (September 17, 1987), 8722021 (February 25, 1987),
8620043 (February 14, 1986), 8403028 (October 17, 1983), and 8306010 (November
4, 1982).
Based on the above, the constructive exchange described herein does not prevent
the Bank Merger from qualifying as a tax-free reorganization.
Other Statutory Provisions
Section 368(b) of the Code defines the term "a party to a reorganization" to
include a corporation resulting from a reorganization, and both corporations, in
the case of a reorganization resulting from the acquisition by one corporation
of stock or properties of another.
Section 361(a) of the Code provides that no gain or loss shall be recognized to
a transferor corporation which is a party to a reorganization on any exchange
pursuant to the plan of reorganization solely for stock or securities in another
corporation which is a party to the reorganization.
Section 1032 of the Code provides that no gain or loss shall be recognized
to a corporation on the receipt of money or other property in exchange for stock
of such corporation. Revenue Ruling 57-278, 1957-1 C.B. 124, provides that a
subsidiary will not recognize gain upon the exchange of its parent's stock for
property in connection with a tax-free reorganization. See also Treasury
Regulations (Treas. Regs.) Section 1.1032-2.
Section 354(a)(1) of the Code provides that no gain or loss shall be recognized
if stock or securities in a corporation which is a party to a reorganization
are, in pursuance of the plan of reorganization, exchanged solely for stock or
securities in such corporation or in another corporation which is a party to the
reorganization.
Cash received by shareholders of MarTex Common Stock who dissent, if any,
will be treated as received in exchange for his or her stock subject to the
provisions and limitations of Section 302 of the Code. See Treas. Reg. Sec.
1.354-1(d), Ex. (3). If, as a result of such distribution, a shareholder owns
no MarTex Common Stock either directly or indirectly through the application of
Section 318 of the Code,the redemption will be treated as a complete termination
of interest under Section 302(b)(3) of the Code and such cash will be treated
as a distribution in exchange for stock under Section 302(a) of the Code.
Section 362(b) of the Code generally provides that if property is acquired by a
corporation in connection with the reorganization, then the basis shall be the
same as it would be in the hands of the transferor, increased by the amount of
gain recognized to the transferor on such transfer.
Section 1223(2) of the Code provides that in determining a taxpayer's holding
period for property, there shall be included the period for which such property
was held by another person, if such property has, for the purpose of determining
gain or loss from a sale or exchange, the same basis in whole or in part in such
taxpayer's hands as it would have had in the hands of such other person.
Section 381 of the Code applies to certain transactions, including those
transactions to which Section 361 of the Code applies, where there is a transfer
in connection with a reorganization described in Section 368(a)(1)(A) or in
Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code.
FEDERAL INCOME TAX CONSEQUENCES
Based solely upon the Statements of Facts and Representations, the Agreement,
and the Bank Plan of Merger, it is our opinion that the following federal income
tax consequences will result:
In the merger of MarTex with and into Hibernia:
(1) Provided the proposed merger of MarTex with and into Hibernia qualifies
as a statutory merger under Louisiana and Texas law, the MarTex Merger
will be a reorganization within the meaning of Section 368(a)(1)(A) of
the Code. MarTex and Hibernia will each be a party to a reorganization
within the meaning of Section 368(b) of the Code.
(2) No gain or loss will be recognized by MarTex upon the transfer of its
assets to Hibernia in exchange solely for Hibernia Common Stock, cash
for dissenters, if any, and the assumption by Hibernia of the
liabilities of MarTex, since any cash for dissenters will be
distributed to the shareholders (Sections 361(a), 361(b), and 357(a) of
the Code).
(3) No gain or loss will be recognized by Hibernia on receipt of the MarTex
assets in exchange for Hibernia Common Stock, cash for dissenters, if
any, and the assumption by Hibernia of the liabilities of MarTex
(Section 1032(a) of the Code).
(4) The basis of the assets of MarTex in the hands of Hibernia will, in
each case, be the same as the basis of those assets in the hands of
MarTex immediately prior to the transaction (Section 362(b) of the
Code).
(5) The holding period of the assets of MarTex in the hands of Hibernia
will, in each case, include the period for which such assets were held
by MarTex (Section 1223(2) of the Code).
(6) No gain or loss will be recognized, with respect to the receipt of
Hibernia Common Stock, by the shareholders of MarTex who receive solely
Hibernia Common Stock and cash for fractional shares in exchange for
their shares of MarTex Common Stock (Section 354(a)(1) of the Code).
With respect to the cash received in lieu of fractional shares, see
Item 12 below.
(7) The cash received by a dissenting shareholder of MarTex in exchange for
his or her MarTex Common Stock will be treated as having been received
by such shareholder as a distribution in redemption of his or her stock
subject to the provisions and limitations of Section 302 of the Code.
If, as a result of such distribution, a shareholder owns no MarTex
Common Stock either directly or indirectly through the application of
Section 318, the redemption will be treated as a complete termination
of interest under Section 302(b)(3) and such cash will be treated as a
distribution in exchange for stock under Section 302(a).
(8) The basis of Hibernia Common Stock to be received by the shareholders
of MarTex Common Stock will be, in each instance, the same as the basis
of their stock surrendered in exchange therefor, decreased by the
amount of cash received, if any, and increased by the amount of gain,
if any, recognized in the exchange. (Section 358(a)(1) of the Code).
(9) The holding period of the Hibernia Common Stock to be received by the
shareholders of MarTex Common Stock in the transaction will include in
each instance, the period during which the MarTex Common Stock
surrendered in exchange therefor is held as a capital asset on the date
of the surrender (Section 1223(l) of the Code).
(10) Hibernia will succeed to and take into account those tax attributes of
MarTex described in Section 381(c) of the Code. (Section 381(a) of the
Code and Section 1.381(a)-1 of the Regulations.) These items will be
taken into account by Hibernia subject to the conditions and
limitations specified in Sections 381, 382, 383, and 384 of the Code
and the Regulations thereunder.
(11) As provided by Section 381(c)(2) of the Code and Section 1.381(c)(2)-1
of the Regulations, Hibernia will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of MarTex as
of the date of transfer. Any deficit in the earnings and profits of
MarTex will be used only to offset the earnings and profits accumulated
after the date of transfer.
(12) The payment of cash in lieu of fractional share interests of Hibernia
Common Stock will be treated as if the fractional shares were
distributed as part of the exchange and then were redeemed by Hibernia.
These cash payments will be treated as distributions in full payment in
exchange for the stock redeemed, subject to the provisions and
limitations of Section 302(a) of the Code (Rev. Rul.
66-365, 1966-2 C.B. 116 and Rev. Proc. 77-41, 1977-2 C.B. 574).
(13) MarTex will close its taxable year as of the date of the distribution
or transfer. Hibernia will not close its taxable year merely because of
the MarTex Merger. (Section 381(b) of the Code).
In the merger of Bank with and into HNBT:
(14) Provided the proposed merger of Bank with and into HNBT qualifies as
statutory merger under the Bank Merger Act, the acquisition by HNBT of
substantially all of the assets of Bank solely in constructive exchange
for Hibernia Common Stock and the assumption by HNBT of the liabilities
of Bank, will qualify as a reorganization under the provisions of
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. Bank, Hibernia and
HNBT will each be a party to a reorganization within the meaning of
Section 368(b) of the Code.
(15) No gain or loss will be recognized by either Hibernia or HNBT upon the
acquisition by HNBT of substantially all of the assets of Bank in
constructive exchange for Hibernia Common Stock and the assumption of
Bank's liabilities (Section 1032(a) of the Code). (See Treas. Regs.
Section 1.1032-2 and Rev. Rul. 57-278, 1957-1 C.B. 124.)
(16) The basis of the assets of Bank acquired by HNBT will be the same in
the hands of HNBT as the basis of such assets in the hands of Bank
immediately prior to the exchange (Section 362(b) of the Code).
(17) The basis of the HNBT Common Stock in the hands of Hibernia will be
increased by an amount equal to the basis of the Bank assets in the
hands of HNBT and decreased by the sum of the amount of the liabilities
of Bank assumed by HNBT and the amount of liabilities to which the
assets of Bank are subject (Section 1.358-6(c)(1) of Treas. Regs.).
(18) The holding period of the assets of Bank received by HNBT will, in each
instance, include the period for which such assets were held by Bank
(Section 1223(2) of the Code).
(19) As provided by Section 381(c) of the Code and Section 1.381(c)(2)-1 of
the Regulations, HNBT will succeed to and take into account the
earnings and profits, or deficit in earnings and profits, of Bank as of
the date of transfer. Any deficit in the earnings and profits of Bank
or HNBT will be used only to offset the earnings and profits
accumulated after the date of transfer.
(20) The shareholder of HNBT will recognize no gain or loss upon the
constructive exchange of Bank Common Stock solely for Hibernia Common
Stock. (Section 354(a)(1) of the Code.)
(21) Bank will recognize no gain or loss on the transfer of its assets to
HNBT in constructive exchange for Hibernia Common Stock and the
assumption by HNBT of the liabilities of Bank, as described above.
(Sections 361(a) and 357(a) of the Code.)
(22) Bank will close its taxable year as of the date of the distribution or
transfer. HNBT will not close its taxable year merely because of the
Bank Merger. (Section 381(b) of the Code.)
(23) Pursuant to Section 381(a) of the Code and Section 1.381(a)-1 of the
Regulations, HNBT will succeed to and take into account the items of
Bank described in Section 381(c) of the Code. These items will be taken
into account by HNBT subject to the provisions and limitations
specified in Sections 381, 382, 383 and 384 of the Code and Regulations
promulgated thereunder.
SCOPE OF OPINION
The scope of this opinion is expressly limited to the federal income tax issues
specifically addressed in (1) through (23) in the section entitled "Federal
Income Tax Consequences" above. Specifically, our opinion has not been requested
and none is expressed with regard to the federal, foreign, state or local income
tax consequences for the shareholders of Hibernia or with regard to the foreign,
state or local income tax consequences for the shareholders of MarTex, Bank, and
HNBT. Our opinion has not been requested and none is expressed with regard to
the treatment of the exercise of MarTex options, warrants, subordinated rights
or other rights that will be exercised prior to the Proposed Mergers. We have
made no determination nor expressed any opinion as to any limitations, including
those which may be imposed under Section 382, on the availability of net
operating loss carryovers (or built-in gains or losses), if any, after the
Proposed Mergers, the application (if any) of the alternative minimum tax to
this transaction, nor the application of any consolidated return or employee
benefit issues which may arise as a result of the Proposed Mergers unless
expressly stated above. Further, we have made no determination as whether MarTex
dividend distributions have been sufficient to eliminate any undistributed
personal holding company tax liability, if applicable. We have made no
determination nor expressed any opinion as to the fair market value of any of
the assets being transferred in the Proposed Mergers nor the common shares being
exchanged in the Proposed Mergers. Furthermore, our opinion has not been
requested and none is expressed with respect to any foreign, state or local tax
consequences to MarTex, Bank, Hibernia, and HNBT.
Our opinion, as stated above, is based upon the analysis of the Code, the
Regulations thereunder, current case law, and published rulings. The foregoing
are subject to change, and such change may be retroactively effective. If so,
our views, as set forth above, may be affected and may not be relied upon.
Further, any variation or differences in the facts or representations recited
herein, for any reason, might affect our conclusions, perhaps in an adverse
manner, and make them inapplicable. In addition, we have undertaken no
obligation to update this opinion for changes in facts or law occurring
subsequent to the date hereof.
This letter represents our opinions as to the interpretation of existing law
and, accordingly, no assurance can be given that the Service or the courts will
agree with the above analysis.
<PAGE>
APPENDIX E
STOCK GRANT AGREEMENTS, AS AMENDED
AMENDMENT TO
STOCK GRANT AGREEMENT
This Amendment to Stock Grant Agreement is entered into on ,
1998, by and between F. Wayne McWhorter, an individual ("McWhorter") and MarTex
Bancshares, Inc., a Texas corporation and registered bank holding company under
the Bank Holding Company Act of 1956, as amended (the "Company"), upon the
following terms and conditions:
W I T N E S S E T H:
WHEREAS, the Company has employed McWhorter; and
WHEREAS, the Company and McWhorter have previously entered into a Stock
Grant Agreement dated March 28, 1996; and
WHEREAS, the terms of the Stock Grant Agreement provide that in the
event of a "Change in Ownership", as therein defined, McWhorter shall be issued
the number of shares of Company stock calculated in accordance with Schedule A
attached to the Stock Grant Agreement; and
WHEREAS, the Company and Hibernia Corporation ("Hibernia") have entered
into an Amended and Restated Agreement and Plan of Merger of MarTex Bancshares,
Inc. with and into Hibernia Corporation (the "Merger"); and
WHEREAS, the Company and McWhorter desire to amend the Stock Grant
Agreement to condition McWhorter's right to a stock grant by reason of a "Change
in Ownership" (as defined in the Stock Grant Agreement) upon the Shareholders'
approval, in accordance with the terms hereof so as to assure that no portion of
any stock grant to McWhorter by reason of a Change in Ownership is a "parachute
payment" within the meaning of Section 280G(b)(2) of the Internal Revenue Code
of 1986 (the "Code");
NOW THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
Section 2(c) of the Stock Grant Agreement is amended by the addition of
the following provision:
"Provided further, that if the Triggering Event is a Change of
Ownership by reason of a Merger with Hibernia, no stock grant shall be made
under the provisions of this Section 2(c) unless, prior to such Merger with
Hibernia, the stock grant to McWhorter by reason of such Merger is approved by a
separate vote of the Shareholders holding, immediately before such Merger, more
than seventy-five percent (75%) of the voting power of all outstanding stock of
the Company in a manner that satisfies the requirements of Code Section
280G(b)(5)(B) and the regulations promulgated thereunder. In the event
Shareholder approval is not so obtained, McWhorter hereby waives any right to a
stock grant by reason of a Change of Ownership due to the Merger.
McWhorter expressly waives and relinquishes any right that he might
otherwise have to a stock grant by reason of a Change of Ownership due to the
Merger to which McWhorter had been entitled prior to adoption of this Amendment.
McWhorter is not, however, waiving any right to a stock grant by reason of any
other Triggering Event (including a Change of Ownership) other than the Merger.
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date and year first above written.
"Company"
MARTEX BANCSHARES, INC.
By:
Title:
"McWhorter"
F. Wayne McWhorter
AMENDMENT TO
STOCK GRANT AGREEMENT
This Amendment to Stock Grant Agreement is entered into on , 1998, by
and between George F. Meisenheimer, an individual ("Meisenheimer") and MarTex
Bancshares, Inc., a Texas corporation and registered bank holding company under
the Bank Holding Company Act of 1956, as amended (the "Company"), upon the
following terms and conditions:
W I T N E S S E T H:
WHEREAS, the Company has employed Meisenheimer; and
WHEREAS, the Company and Meisenheimer have previously entered into a
Stock Grant Agreement dated March 28, 1996; and
WHEREAS, the terms of the Stock Grant Agreement provide that in the
event of a "Change in Ownership", as therein defined, Meisenheimer shall be
issued the number of shares of Company stock calculated in accordance with
Schedule A attached to the Stock Grant Agreement; and
WHEREAS, the Company and Hibernia Corporation ("Hibernia") have entered
into an Amended and Restated Agreement and Plan of Merger of MarTex Bancshares,
Inc. with and into Hibernia Corporation (the "Merger"); and
WHEREAS, the Company and Meisenheimer desire to amend the Stock Grant
Agreement to condition Meisenheimer's right to a stock grant by reason of a
"Change in Ownership" (as defined in the Stock Grant Agreement) upon the
Shareholders' approval, in accordance with the terms hereof so as to assure that
no portion of any stock grant to Meisenheimer by reason of a Change in Ownership
is a "parachute payment" within the meaning of Section 280G(b)(2) of the
Internal Revenue Code of 1986 (the "Code");
NOW THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
Section 2(c) of the Stock Grant Agreement is amended by the addition of
the following provision:
"Provided further, that if the Triggering Event is a Change of
Ownership by reason of a Merger with Hibernia, no stock grant shall be made
under the provisions of this Section 2(c) unless, prior to such Merger with
Hibernia, the stock grant to Meisenheimer by reason of such Merger is approved
by a separate vote of the Shareholders holding, immediately before such Merger,
more than seventy-five percent (75%) of the voting power of all outstanding
stock of the Company in a manner that satisfies the requirements of Code Section
280G(b)(5)(B) and the regulations promulgated thereunder. In the event
Shareholder approval is not so obtained, Meisenheimer hereby waives any right to
a stock grant by reason of a Change of Ownership due to the Merger.
Meisenheimer expressly waives and relinquishes any right that he might
otherwise have to a stock grant by reason of a Change of Ownership due to the
Merger to which Meisenheimer had been entitled prior to adoption of this
Amendment. Meisenheimer is not, however, waiving any right to a stock grant by
reason of any other Triggering Event (including a Change of Ownership) other
than the Merger.
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date and year first above written.
"Company"
MARTEX BANCSHARES, INC.
By:
Title:
"Meisenheimer"
George F. Meisenheimer
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Louisiana Business Corporation Law ("LBCL") contains two provisions
that directly affect the liability of officers and directors of Louisiana
corporations to the corporations and shareholders whom they serve. Section 83
permits Louisiana corporations to indemnify officers and directors, as well as
certain other individuals who act on behalf of such corporations. Sections 91
and 92 set forth the liability of officers and directors of Louisiana
corporations.
Section 91 of the LBCL provides that officers and directors of
Louisiana corporations are fiduciaries with respect to the corporation and its
shareholders and requires that they discharge the duties of their positions as
such in good faith and with the diligence, care, judgment and skill which
ordinarily prudent men would exercise under similar circumstances in like
positions. Section 91 specifically provides that it is not intended to derogate
from any indemnification permitted under Section 83, discussed below.
Section 92 of the LBCL limits the liability of officers and directors
with respect to certain matters, as well as imposes personal liability for
certain actions, such as the knowing issuance of shares in violation of the
LBCL. Paragraph E of Section 92 permits a director, in the performance of his
duties, to be fully protected from liability in relying in good faith on the
records of the corporation and upon such information, opinions, reports or
statements presented to the corporation, the board of directors, or any
committee of the board by any of the corporation's officers or employees, or by
any committee of the board of directors, or by any counsel, appraiser, engineer
or independent or certified public accountant selected with reasonable care by
the board of directors or any committee thereof or any officer having the
authority to make such a selection or by any other person as to matters the
directors reasonably believe are within such other person's professional or
expert competence and which person is selected with reasonable care by the board
of directors or any committee thereof or any officer having the authority to
make such selection.
Section 83 of the LBCL permits a Louisiana corporation to indemnify any
person who is or was a party or is threatened to be made a party to any action,
suit or proceeding by reason of the fact that he or she was a director, officer,
employee or agent of the corporation, or was serving at the request of the
corporation in one of those capacities for another business. Such persons may be
indemnified against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such persons in
connection with any such action as long as the indemnified party acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the corporation. With respect to criminal actions or
proceedings, the indemnified person must not only have acted in good faith and
in a manner believed to be in or not opposed to the best interest of the
corporation; he or she must also not have had any reasonable cause to believe
that his or her conduct was unlawful.
The LBCL treats suits by or in the right of the corporation, or
derivative suits, differently from other legal actions. Indemnification is not
permitted in a derivative action for any expenses if the individual seeking
indemnification is adjudged liable for negligence or misconduct in the
performance of his or her duty to the corporation unless specifically ordered by
the court. Otherwise, officers and directors may be indemnified in derivative
actions only with respect to expenses (including attorneys' fees) actually and
reasonably incurred in connection with the defense or settlement of the action.
Indemnification of officers and directors may only be made by the
corporation if the corporation has specifically authorized indemnification after
determining that the applicable standard of conduct has been met. This
determination may be made (i) by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable or a quorum of
disinterested directors so directs, by independent legal counsel, or (iii) by
the shareholders.
Indemnification of officers and directors against reasonable expenses
is mandatory under Section 83 of the LBCL to the extent the officer or director
is successful on the merits or in the defense of any action or suit against him
giving rise to a claim of indemnification.
Louisiana corporations are permitted to advance the costs of defense to
officers and directors with respect to claims for which they may be indemnified
under Section 83 of the LBCL. In order to advance such costs, however, such
procedure must be approved by the board of directors by a majority of a quorum
consisting of disinterested directors. In addition, a corporation may only
advance defense costs if it has received an undertaking from the officer or
director to repay the amounts advanced unless it is ultimately determined that
he or she is entitled to be indemnified as otherwise authorized by Section 83.
Louisiana corporations are also specifically permitted to procure
insurance on behalf of officers and directors and former officers and directors
for actions taken in their capacities as such. Insurance coverage may be broader
than the limits of indemnification under Section 83. Also, the indemnification
provided for in Section 83 is not exclusive of any other rights to
indemnification, whether arising from contracts or otherwise.
Hibernia Corporation (the "Registrant") has adopted an indemnification
provision in its articles of incorporation that provides for indemnification of
officers and directors under the circumstances permitted by Louisiana law. The
Registrant's indemnification provision requires indemnification, except as
prohibited by law, of officers and directors of the Registrant or any of its
wholly-owned subsidiaries against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with any action, suit
or proceeding, whether civil or criminal, administrative or investigative
(including any action by or in the right of the Registrant) by reason of the
fact that the person served as an officer or director of the Registrant or one
of its subsidiaries. Officers and directors may only be indemnified against
expenses in cases brought by the officer or director against the Registrant if
the action is a claim for indemnification, the officer or director prevails in
the action, or indemnification is included in any settlement or is awarded by
the court. The indemnification provision further requires the Registrant to
advance defense costs to officers and directors in such suits and proceedings
upon receipt of an undertaking to repay such expenses unless it is ultimately
determined that the officer or director is entitled to indemnification as
authorized by the Article.
The Registrant's Articles of Incorporation further provide that no
director or officer of the Registrant will be personally liable to the
Registrant or its shareholders for monetary damages for breach of fiduciary duty
as an officer or director. This provision is limited to those circumstances in
which such a limitation of liability is permitted under applicable law and would
not be operative in any circumstances in which the law prohibits such an
limitation.
Item 21. Exhibits and Financial Statement Schedules.
(a) EXHIBIT DESCRIPTION
2 Amended and Restated Agreement and Plan of Merger (included
as Appendix A to the Proxy Statement/Prospectus)
3.1 Exhibit 3.1 to the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Articles of Incorporation of the Registrant, as
amended to date)
3.2 Exhibit 3.2 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, filed with the Commission
by the Registrant (Commission File No. 0-7220) is hereby
incorporated by reference(By-Laws of the Registrant,as amended
to date)
5 Opinion of Patricia C. Meringer, Esq. re: legality of shares
8 Opinion of Ernst & Young LLP, certified public accountants,
regarding certain tax matters (included as Appendix D to the
Proxy Statement/Prospectus)
10.13 Exhibit 10.13 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1988, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Deferred Compensation Plan for Outside Directors
of Hibernia Corporation and its Subsidiaries, as amended to
date)
10.14 Exhibit 10.14 to the Annual Report on Form 10-K for the fiscal
year ended December 31, 1990, filed with the Commission by the
Registrant (Commission File No. 0-7220) is hereby incorporated
by reference (Hiberni Corporation Executive Life Insurance
Plan)
10.16 Exhibit 4.7 to the Registration Statement on Form S-8 filed
the Commission by the Registrant (Registration No. 33-26871)
is hereby incorporated by reference (Hibernia Corporation
1987 Stock Option Plan, as amended to date)
10.34 Exhibit C to the Registrant's definitive proxy statement dated
August 17, 1992 relating to its 1992 Annual Meeting of
Shareholders filed by the Registrant with the Commission is
hereby incorporated by reference (Long-Term Incentive Plan of
Hibernia Corporation)
10.35 Exhibit A to the Registrant's definitive proxy statement dated
March 23, 1993 relating to its 1993 Annual Meeting of
Shareholders filed by the Registrant with the Commission is
hereby incorporated by reference (1993 Director Stock Option
Plan of Hibernia Corporation)
10.36 Exhibit 10.36 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 filed with the
Commission (Commission file no.0-7220) is hereby incorporated
by reference (Employment agreement between Stephen A. Hansel
and Hibernia Corporation)
10.37 Exhibit 10.37 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 filed with
the Commission (Commission File No. 0-7220) is hereby
incorporated by reference (Employment Agreement between J.
Herbert Boydstun and Hibernia Corporation)
10.38 Exhibit 10.38 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 filed with the
Commission (Commission File No. 0-7220) is hereby
incorporated by reference (Employment Agreement between E.R.
"Bo" Campbell and Hibernia Corporation)
10.39 Exhibit 10.39 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Employment Agreement between B.D. Flurry and
Hibernia Corporation)
10.40 Exhibit 10.40 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Split-Dollar Life Insurance Plan of Hibernia
Corporation effective as of July 1996)
10.41 Exhibit 10.41 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Nonqualified Deferred Compensation Plan for Key
Management Employees of Hibernia Corporation effective as of
July 1996)
10.42 Exhibit 10.42 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby incorporated
by reference (Supplemental Stock Compensation Plan for Key
Management Employees effective as of July 1996)
10.43 Exhibit 10.43 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission No. 0-7220) is hereby incorporated by
reference (Nonqualified Target Benefit (Deferred Award) Plan
of Hibernia Corporation effective as of July 1996))
10.44 Exhibit 10.44 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 filed with the
Commission (Commission No. 0-7220) is hereby incorporated by
reference (Form of Change of Control Employment Agreement for
Executive and Senior Officers of the Registrant
10.45 Exhibit 10.45 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 filed with the
Commission (Commission No. 0-7220) is hereby incorporated by
reference (Employment Agreement between Randall A.
Howard and Hibernia Corporation)
13 Exhibit 13 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31,1997 filed with the Commission
(Commission File No. 0-7220) is hereby incorporated by reference
(1997 Annual Report to security holders of Hibernia Corporation).
21 Exhibit 21 to the Annual Report on Form 10-K of the Registrant
for the fiscal year ended December 31, 1996 filed with the
Commission (Commission File No. 0-7220) is hereby
incorporated by reference (Subsidiaries of the Registrant)
23(a) Consent of Patricia C. Meringer, Esq. included with Exhibit 5)
23(b)(i) Consent of Sproles Woodard, L.L.P.
(ii) Consent of Ernst & Young LLP
(iii) Consent of Alex. Sheshunoff & Co. Investment Banking
24 Powers of Attorney
Form of Proxy of MarTex Bancshares, Inc.
(b) FINANCIAL STATEMENT SCHEDULES
N/A
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(i) to file, during any period in which offers or sales are being made
pursuant to this Registration Statement, a post-effective amendment to this
Registration Statement:
(a) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(b) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; and
(c) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(ii) that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment will be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof;
(iii) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering;
(iv) that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement will be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof;
(v) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
information called for by the other Items of the applicable form;
(vi) that every prospectus (a) that is filed pursuant to the preceding
paragraph, or (b) that purports to meet the requirements of section 10(a)(3) of
the Act and is used in connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the registration statement and
will not be used until such amendment is effective and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment will be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time will be deemed to be the initial bona fide offering thereof;
(vii) to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of Form S-4
within one business day of receipt of such request and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request; and
(viii) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
Orleans, State of Louisiana, on January 19, 1999.
HIBERNIA CORPORATION
By:
Patricia C. Meringer
Senior Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on January 19, 1999.
Signatures Title
*
_____________________________ Chairman of the Board
Robert H. Boh
*
_____________________________ President and Chief Executive
Stephen A. Hansel Officer and Director
*
_____________________________ Chief Financial Officer
Marsha M. Gassan
*
_____________________________ Chief Accounting Officer
Ron E. Samford, Jr.
*
_____________________________ Director
J. Herbert Boydstun
*
_____________________________ Director
E. R. Campbell
*
_____________________________ Director
Richard W. Freeman, Jr.
*
_____________________________ Director
Dick H. Hearin
*
_____________________________ Director
Robert T. Holleman
*
_____________________________ Director
Elton R. King
*
_____________________________ Director
Sidney W. Lassen
*
_____________________________ Director
Donald J. Nalty
*
_____________________________ Director
Ray B. Nesbitt
*
_____________________________ Director
William C. O'Malley
*
_____________________________ Director
James R. Peltier
*
_____________________________ Director
Robert T. Ratcliff
*
_____________________________ Director
Janee M. Tucker
*
_____________________________ Director
Virginia Eason Weinmann
*
_____________________________ Director
Robert E. Zetzmann
*By: ____________________________________
Patricia C. Meringer
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit Sequential Page Number
5 (a) Opinion of Patricia C. Meringer, Esq.
23 Consent of Patricia C. Meringer, Esq.
(included with Exhibit 5)
23(b) (i) Consent of Sproles Woodard, L.L.P.
(ii) Consent of Ernst & Young LLP
(iii) Consent of Alex. Sheshunoff & Co. Investment Banking
24 Powers of Attorney
99 Form of Proxy of MarTex Bancshares, Inc.
<PAGE>
EXHIBIT 5(a)
January 19, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
I am Corporate Counsel and Secretary of Hibernia Corporation (the
"Company") and am delivering this opinion in connection with the registration by
the Company of shares of Class A Common Stock (the "Shares) to be issued by the
Company in a proposed merger (the "Merger") between MarTex Bancshares, Inc.
("MarTex") and the Company, in which the shareholders of MarTex will receive the
Shares in exchange for their shares of common stock of MarTex, to which
registration statement (the "Registration Statement") this opinion is attached.
The Shares will be reserved for issuance upon the closing of the Merger. The
Shares will be issued to shareholders of MarTex upon consummation of the Merger
pursuant to the registration statement after it has been declared effective by
the Securities and Exchange Commission.
In furnishing this opinion, I have examined such documents and have
made such investigation of matters of fact and law as I have deemed necessary or
appropriate to provide a basis for the opinions set forth herein. In such
examination and investigation, I have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted as originals and the conformity to original documents of all documents
submitted as certified or photostatic copies.
In rendering this opinion, I do not express any opinion concerning any
law other than the law of the State of Louisiana and the federal law of the
United States, and I do not express any opinion, either implicitly or otherwise,
on any issue not expressly addressed below.
Based upon and limited by the foregoing, and based upon legal
considerations which I deem relevant and upon laws or regulations in effect as
of the date hereof, I am of the opinion that:
1. The Company has been duly incorporated and is validly existing and
in good standing under the laws of the State of Louisiana.
2. The Shares have been duly authorized and either are, or, upon
issuance thereof pursuant to the terms of the offering thereof, will be, validly
issued, fully paid and non-assessable.
I hereby expressly consent to the inclusion of this Opinion as exhibit
to the Registration Statement and to the reference to this Opinion therein.
This opinion is being furnished to you pursuant to the filing of the
Registration Statement and may not be relied upon by any other person or used
for any other purpose, except as provided for in the preceding paragraph.
Very truly yours,
Patricia C. Meringer
Corporate Counsel and Secretary
PCM/gbp
<PAGE>
Exhibit 23(b)(i)
Independent Auditor's Consent
We consent to the use of our report dated March 4, 1998 related to the financial
statements of MarTex Bancshares, Inc. as of and for the years ended December 31,
1997 and 1996 included herein and to the reference to our firm under the heading
"Experts" in this Registration Statement (Form S-4) and related Prospectus of
Hibernia Corporation for the registration of shares of its common stock to be
issued in connection with the proposed merger of MarTex Bancshares, Inc. with
and into Hibernia Corporation.
/s/ SPROLES WOODARD, L.L.P.
Sproles Woodard, L.L.P.
Fort Worth, Texas
January 19, 1999
<PAGE>
Exhibit 23(b)(ii)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in this
Registration Statement (Form S-4) and related Prospectus of Hibernia Corporation
for the registration of 3,450,000 shares of its common stock to be issued
pursuant to its proposed merger with MarTex Bancshares, Inc. and to the
incorporation by reference therein of our report dated January 13, 1998, with
respect to the consolidated financial statements of Hibernia Corporation
incorporated by reference in its Annual Report (Form 10-K) for the year ended
December 31, 1997, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
New Orleans, Louisiana
January 18, 1999
<PAGE>
Exhibit 23(b)(iii)
Consent of Alex. Sheshunoff & Co. Investment Banking
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Hibernia Corporation of our opinion, dated January 19,
1999 with respect to the merger of Hibernia Corporation and MarTex Bancshares,
Inc. and to our firm, respectively, included in the Registration Statement No.
333-_____ of Hibernia Corporation (the "Initial Registration Statement") and to
the inclusion of such opinion as an annex to the Initial Registration Statement.
By giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933 or the rules and regulations of the Securities and Exchange Commission
thereunder.
/s/ ALEX. SHESHUNOFF & CO. INVESTMENT BANKING
Alex. Sheshunoff & Co. Investment Banking
Austin,Texas
January 19, 1999
<PAGE>
EXHIBIT 24
POWERS OF ATTORNEY
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ ROBERT H. BOH
Robert H. Boh
Chairman and Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ J. HERBERT BOYDSTUN
J. Herbert Boydstun
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ E. R. "BO" CAMPBELL
E. R. "Bo" Campbell
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ RICHARD W. FREEMAN, JR.
Richard W. Freeman, Jr.
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned President, Chief
Executive Officer and Director of Hibernia Corporation, a Louisiana corporation
(the "Corporation"), does hereby name, constitute and appoint Marsha M. Gassan,
Patricia C. Meringer and Ron E. Samford, Jr., and each of them (with full power
to each of them to act alone), his true and lawful agents and attorneys-in-fact,
for him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute, acknowledge, deliver, and file (a) with the
Securities and Exchange Commission (or any other governmental or regulatory
authority), a Registration Statement on Form S-4 (or other appropriate form) and
any and all amendments (including post-effective amendments) thereto, with any
and all exhibits and any and all other documents required to be filed with
respect thereto or in connection therewith, relating to the registration under
the Securities Act of 1933 of Common Stock of the Corporation to be issued in
the merger between the Corporation and MarTex Bancshares, Inc. ("MarTex")
wherein the Corporation agrees to exchange shares of its common stock for all of
the outstanding shares of common stock of MarTex and merge MarTex into the
Corporation, authorized by resolutions adopted by the Board of Directors on July
22, 1998 and (b) with the securities agencies or officials of various
jurisdictions, all applications, qualifications, registrations or exemptions
relating to such offering under the laws of any such jurisdiction, including any
amendments thereto or other documents required to be filed with respect thereto
or in connection therewith, granting unto said agents and attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as the undersigned
might or could do if personally present, and the undersigned hereby ratifies and
confirms all that said agents and attorneys-in-fact, or any of them may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ STEPHEN A. HANSEL
Stephen A. Hansel
President, Chief Executive Officer
and Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ DICK H. HEARIN
Dick H. Hearin
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ ROBERT T. HOLLEMAN
Robert T. Holleman
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ ELTON R. KING
Elton R. King
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ SIDNEY W. LASSEN
Sidney W. Lassen
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ DONALD J.NALTY
Donald J. Nalty
Vice Chairman and Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of
the 27th day of January, 1999.
/s/ RAY B. NESBITT
Ray B. Nesbitt
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ WILLIAM C.O'MALLEY
William C. O'Malley
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ JAMES R. PELTIER
James R. Peltier
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ ROBERT T. RATCLIFF
Robert T. Ratcliff
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
her true and lawful agents and attorneys-in-fact, for her and on her behalf and
in her name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the
22nd day of July, 1998.
/s/ JANEE M."GEE" TUCKER
Janee M. "Gee" Tucker
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
her true and lawful agents and attorneys-in-fact, for her and on her behalf and
in her name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the
22nd day of July, 1998.
/s/ VIRGINIA E. WEINMANN
Virginia E. Weinmann
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of
Hibernia Corporation, a Louisiana corporation (the "Corporation"), does hereby
name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer and Ron E.
Samford, Jr., and each of them (with full power to each of them to act alone),
his true and lawful agents and attorneys-in-fact, for him and on his behalf and
in his name, place and stead, in any and all capacities, to sign, execute,
acknowledge, deliver, and file (a) with the Securities and Exchange Commission
(or any other governmental or regulatory authority), a Registration Statement on
Form S-4 (or other appropriate form) and any and all amendments (including
post-effective amendments) thereto, with any and all exhibits and any and all
other documents required to be filed with respect thereto or in connection
therewith, relating to the registration under the Securities Act of 1933 of
Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ ROBERT E. ZETZMANN
Robert E. Zetzmann
Director
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Chief Accounting
Officer of Hibernia Corporation, a Louisiana corporation (the "Corporation"),
does hereby name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer
and Ron E. Samford, Jr., and each of them (with full power to each of them to
act alone), his true and lawful agents and attorneys-in-fact, for him and on his
behalf and in his name, place and stead, in any and all capacities, to sign,
execute, acknowledge, deliver, and file (a) with the Securities and Exchange
Commission (or any other governmental or regulatory authority), a Registration
Statement on Form S-4 (or other appropriate form) and any and all amendments
(including post-effective amendments) thereto, with any and all exhibits and any
and all other documents required to be filed with respect thereto or in
connection therewith, relating to the registration under the Securities Act of
1933 of Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the
22nd day of July, 1998.
/s/ RON E. SAMFORD, JR.
Ron E. Samford, Jr.
Controller and Chief Accounting Officer
HIBERNIA CORPORATION
<PAGE>
P0WER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Chief Financial
Officer of Hibernia Corporation, a Louisiana corporation (the "Corporation"),
does hereby name, constitute and appoint Marsha M. Gassan, Patricia C. Meringer
and Ron E. Samford, Jr., and each of them (with full power to each of them to
act alone), her true and lawful agents and attorneys-in-fact, for her and on her
behalf and in her name, place and stead, in any and all capacities, to sign,
execute, acknowledge, deliver, and file (a) with the Securities and Exchange
Commission (or any other governmental or regulatory authority), a Registration
Statement on Form S-4 (or other appropriate form) and any and all amendments
(including post-effective amendments) thereto, with any and all exhibits and any
and all other documents required to be filed with respect thereto or in
connection therewith, relating to the registration under the Securities Act of
1933 of Common Stock of the Corporation to be issued in the merger between the
Corporation and MarTex Bancshares, Inc. ("MarTex") wherein the Corporation
agrees to exchange shares of its common stock for all of the outstanding shares
of common stock of MarTex and merge MarTex into the Corporation, authorized by
resolutions adopted by the Board of Directors on July 22, 1998 and (b) with the
securities agencies or officials of various jurisdictions, all applications,
qualifications, registrations or exemptions relating to such offering under the
laws of any such jurisdiction, including any amendments thereto or other
documents required to be filed with respect thereto or in connection therewith,
granting unto said agents and attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, and the undersigned hereby ratifies and confirms all that said agents
and attorneys-in-fact, or any of them may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand as of the
22nd day of July, 1998.
/s/ MARSHA M. GASSAN
Marsha M. Gassan
Chief Financial Officer
HIBERNIA CORPORATION
<PAGE>
EXHIBIT 99
MARTEX BANCSHARES, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF MARTEX BANCSHARES, INC.
The undersigned shareholder of MarTex Bancshares, Inc., a Texas corporation
("MarTex"), hereby constitutes and appoints ____________________ and
___________________, or either of them, proxies with full power of substitution
to vote and act for the undersigned, as designated below, with respect to the
number of shares of common stock, $0.01 par value, of MarTex the undersigned
would be entitled to vote if personally present at the Special Meeting of
Shareholders of MarTex, which will be held at the office of MarTex Bancshares,
Inc., 2615 East End Boulevard South, Marshall, Texas, 75670 on February ____,
1999 at _________ P.M., and at any adjournments or postponements thereof. In
their discretion, the proxies are authorized to vote upon such other business as
may properly come before the Special Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED HEREIN
BY THE SHAREHOLDER. IF NO DIRECTION IS SPECIFIED WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATION OF THE
BOARD OF DIRECTORS OF MARTEX, OR, IN THE EVENT A MATTER IS PROPERLY BROUGHT
BEFORE THE SPECIAL MEETING AS TO WHICH THE BOARD OF DIRECTORS HAS MADE NO
RECOMMENDATION, THE PROXIES WILL VOTE THE SHARES IN THEIR DISCRETION.
The Board of Directors of MarTex recommends that you vote FOR the
approval of the Amended and Restated Agreement and Plan of Merger between MarTex
and Hibernia Corporation effective as of June 29, 1998 and the merger of MarTex
into Hibernia Corporation and FOR the approval of the issuance of shares of
MarTex Common Stock under the Stock Grant Agreements.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
IN THE ENCLOSED POSTAGE PAID ENVELOPE
<PAGE>
PLEASE MARK YOUR CHOICE LIKE
THIS |_| IN BLUE OR BLACK INK
---------------------
Common Stock
Approval of the Amended and Restated Agreement and Plan of Merger
between MarTex Bancshares, Inc. and Hibernia Corporation effective as of June
29, 1998 and the Merger of MarTex with and into Hibernia Corporation.
FOR |_| AGAINST |_| ABSTAIN |_|
Approval of the issuance of shares of MarTex Common Stock under the
Stock Grant Agreements.
FOR |_| AGAINST |_| ABSTAIN |_|
The undersigned hereby acknowledges receipt of a copy of the
accompanying Notice of Special Meeting of Shareholders and Proxy Statement and
hereby revokes any proxy or proxies heretofore given.
Date ___________________________
Signature ___________________________
Please mark, date and sign as your account name appears and return in
the enclosed envelope. If acting as executor, administrator, trustee,
guardian, or in a similar capacity, you should so indicate when
signing. If the person signing is a corporation, partnership or other
entity, please sign the full name of the corporation or partnership or
other entity by a duly authorized officer, partner or other person. If
the shares are held jointly, each shareholder named should sign.
