<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1995
OR
----- Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from ________ TO ________
Commission File Number 0-11033
GULF SOUTHWEST BANCORP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0045946
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4200 WESTHEIMER, SUITE 210,
HOUSTON, TEXAS 77027
(Address of principal executive offices) (zip code)
(713) 622-0042
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X NO
---- -----
As of August 1, 1995, Registrant had outstanding 1,954,841 shares of its $1.00
par value per share common stock.
1
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are provided in response to item 1:
2
<PAGE>
PRESENTATION OF FINANCIAL INFORMATION
The consolidated balance sheet as of June 30, 1995 and the consolidated
statements of income for the three and six months ended June 30, 1995 and 1994
and the consolidated statements of cash flows for the six months ended June
30,1995 and 1994, have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows as of June 30, 1995, and for all periods presented
have been made.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The results of operations for the period ended
June 30, 1995 are not necessarily indicative of the operating results of the
full year.
Effective May 1, 1995, the Company consummated its' acquisition of Texas Gulf
Coast Bancorp, Inc. Such acquisition has been accounted for as a purchase.
3
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
-------- ------------
<S> <C> <C>
Cash and due from banks $ 24,297 $ 14,962
Time deposits in banks 1,344 1,994
Federal funds sold 55,125 26,950
Investment securities:
Held-to-Maturity 115,114 48,889
Available-for-Sale 23,199 7,963
Loans, net of allowance for
loan losses 227,146 142,396
Bank premises and equipment 8,408 4,621
Accrued interest receivable 3,619 2,009
Other assets 4,664 2,931
Excess of cost of subsidiaries
over equity in net assets
acquired, net of accumulated
amortization 1,233 312
------- --------
Total Assets $464,149 $253,027
======== ========
</TABLE>
See note to financial statements.
4
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
(Dollars in thousands)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
--------- -----------
<S> <C> <C>
Deposits:
Non-interest bearing $117,885 $ 71,984
Interest bearing 294,654 154,081
-------- --------
412,539 226,065
Accrued interest, taxes and
other liabilities 2,418 1,423
Borrowings 3,276 0
Minority Interest 267 0
-------- --------
Total Liabilities 418,500 227,488
-------- --------
Stockholders' Equity:
Common stock 1,978 1,281
Paid-in capital 25,767 8,631
Retained earnings 18,174 16,003
Unrealized securities
gains (losses) 43 (63)
-------- --------
45,962 25,852
Less cost of stock held in treasury:
Common Stock (313) (313)
-------- --------
Total Stockholders' Equity 45,649 25,539
-------- --------
Total Liabilities and
Stockholders' Equity $464,149 $253,027
======== ========
</TABLE>
See note to financial statements.
5
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------
1995 1994
-------- --------
<S> <C> <C>
Interest Income:
Interest and fees on loans $ 4,868 $ 2,944
Investment securities:
Taxable 1,488 764
Non-taxable 195 98
Time deposits with banks 19 10
Federal funds sold 611 311
-------- --------
Total Interest Income 7,181 4,127
-------- --------
Interest Expense:
Interest bearing deposits 2,279 1,191
Borrowed funds 78 0
-------- --------
Total Interest Expense 2,357 1,191
-------- --------
Net interest income 4,824 2,936
Provision for possible loan losses 40 0
-------- --------
Net interest income after provision
for loan losses 4,784 2,936
-------- --------
Non-Interest Income:
Service charges and fees 971 657
Other operating income 192 68
Securities gains (losses) 0 0
-------- --------
Total Non-Interest Income 1,163 725
-------- --------
</TABLE>
See note to financial statements.
6
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-----------------------------
1995 1994
--------- --------
<S> <C> <C>
Non-Interest Expense:
Salaries and employee benefits $ 2,083 $ 1,178
Furniture, equipment and
occupancy expense 752 386
Other operating expenses 1,231 876
--------- ---------
Total Non-Interest Expense 4,066 2,440
--------- ---------
Income before income taxes 1,881 1,221
Income taxes 546 307
--------- ---------
Net Income $ 1,335 $ 914
========= =========
Per Share:
Net Income $ .77 $ .73
========= =========
Dividend - Common Stock $ .08 $ .05
========= =========
Average Number of Shares Outstanding 1,722,773 1,258,636
========= =========
</TABLE>
See note to financial statements.
7
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1995 1994
-------- --------
<S> <C> <C>
Interest Income:
Interest and fees on loans $ 8,295 $ 5,762
Investment securities:
Taxable 2,278 1,422
Non-taxable 270 202
Time deposits with banks 43 20
Federal funds sold 929 620
-------- --------
Total Interest Income 11,815 8,026
-------- --------
Interest Expense:
Interest bearing deposits 3,555 2,369
Borrowed funds 78 0
-------- --------
Total Interest Expense 3,633 2,369
-------- --------
Net interest income 8,182 5,657
Provision for possible loan losses 40 50
-------- --------
Net interest income after provision
for loan losses 8,142 5,607
-------- --------
Non-Interest Income:
Service charges and fees 1,587 1,294
Other operating income 394 145
Securities gains (losses) 0 0
-------- --------
Total Non-Interest Income 1,981 1,439
-------- --------
</TABLE>
See note to financial statements.
8
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------
1995 1994
--------- ---------
<S> <C> <C>
Non-Interest Expense:
Salaries and employee benefits 3,316 2,400
Furniture, equipment and
occupancy expense 1,135 753
Other operating expenses 2,212 1,806
--------- ---------
Total Non-Interest Expense 6,663 4,959
--------- ---------
Income before income taxes 3,460 2,087
Income taxes 1,031 504
--------- ---------
Net Income $ 2,429 $ 1,583
========= =========
Per Share:
Net Income $ 1.63 $ 1.26
========= =========
Dividend - Common Stock $ .16 $ .10
========= =========
Average Number of Shares Outstanding 1,490,703 1,258,636
========= =========
</TABLE>
See note to financial statements.
9
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1995 1994
--------- --------
<S> <C> <C>
Increase (Decrease) in Cash and
Cash Equivalents:
Operating Activities:
Net income $ 2,429 $ 1,583
Adjustments to Reconcile Net
Income to Net Cash Provided by
Operating Activities:
Provision for loan losses 40 50
Origination of mortgage loans for sale (1,947) 0
Proceeds from mortgage loans sold 1,499 0
Depreciation and amortization,
net of accretions 516 453
Provision for losses on real
estate and other assets 22 145
Loss (gain) on sale of real estate
and other assets (16) 5
(Increase) decrease in interest
receivable 145 (223)
(Decrease) increase in accrued
interest and other liabilities, taxes
and other (356) 446
--------- --------
Net Cash Flows From Operating Activities 2,332 2,459
--------- --------
</TABLE>
See note to financial statements.
10
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1995 1994
------- -------
<S> <C> <C>
Investing Activities:
Net (increase) decrease in time deposits
in banks 650 (100)
Proceeds from the maturities of held-to-
maturity investment securities 9,359 800
Proceeds from the maturities of available-
for-sale investment securities 5,550 4,500
Purchase of held-to-maturity
investment securities (8,315) (14,051)
Purchase of available-for-sale
investment securities (752) (1,489)
Net decrease (increase) in loans (5,529) (6,347)
Rebates paid to customers (380) (954)
Recoveries of loans charged-off 54 145
Proceeds from sale of premises
and equipment 3 8
Capital expenditures (347) (795)
Proceeds from sale of real estate
and other loan related assets 145 167
------ -------
Net Cash From Investing Activities 438 (18,116)
------ -------
</TABLE>
See note to financial statements.
11
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1995 1994
======= =======
<S> <C> <C>
Financing Activities:
Net increase (decrease) in deposits 5,449 (1,482)
Dividends paid (258) (126)
Purchase Treasury stock 0 (37)
Repayment of borrowings (181) 0
------- -------
Net Cash Flows from Financing Activities 5,010 (1,645)
------- -------
Net Increase (decrease) in Cash
and Cash Equivalents 7,780 (17,302)
Cash and Cash Equivalents at
Beginning of Period 41,912 52,822
Net cash received in acquisition of banks 29,730 0
------- -------
Cash and Cash Equivalents at
End of Period $79,422 $35,520
======= =======
For the six months ended June 30:
Interest paid $ 3,561 $ 2,434
======= =======
Income taxes paid $ 675 $ 89
======= =======
</TABLE>
See note to financial statements.
12
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1995 1994
-------- --------
<S> <C> <C>
Non-Cash Transactions:
Foreclosed properties transferred
to other real estate and loan
related assets $ 314 $ 233
======== ========
Bank loans for other real estate
and loan related assets sold $ 147 $ 0
======== ========
Issuance of 696,205 shares of
common stock for the issued
and outstanding common stock
of Texas Gulf Coast Bancorp, Inc. $ 17,833 $ 0
======== ========
</TABLE>
See note to financial statements.
13
<PAGE>
GULF SOUTHWEST BANCORP, INC. AND SUBSIDIARIES
NOTE TO FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
Note 1 - Acquisition and Merger
On May 1, 1995, the Company through its wholly owned subsidiary Gulf Southwest
Nevada Bancorp, Inc. acquired all of the outstanding common stock of Texas Gulf
Coast Bancorp, Inc. by issuing 696,205 shares of Gulf Southwest Bancorp, Inc.
common stock plus cash of $52,231 for fractional and dissenter shares to effect
the merger. The business combination was accounted for as a purchase
transaction.
The operations of Texas Gulf Coast Bancorp, Inc. since May 1, 1995, are included
in the accompanying financial statements. If Texas Gulf Coast Bancorp, Inc. and
its subsidiaries has been combined with the Company for the entire six months of
the current year and the first six months of the preceding year, results of
operations would have been as follows:
<TABLE>
<CAPTION>
PRO FORMA
SIX MONTHS ENDED JUNE 30,
-------------------------
1995 1994
----------- ----------
(In thousands, except per share)
<S> <C> <C>
Net interest income $ 11,118 $ 9,915
Net income $ 2,931 2,304
Net income per share $ 1.50 1.18
</TABLE>
The accompanying balance sheet at June 30, 1995, included the assets and
liabilities (restated from historical cost to fair values) of Texas Gulf Coast
Bancorp, Inc.
14
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ANALYSIS OF STATEMENT OF INCOME
Effective May 1, 1995, the Company consummated its' acquisition of Texas Gulf
Coast Bancorp, Inc. Such acquisition has been accounted for as a purchase.
The following analysis discusses material changes in the results of operations
for the second quarter of 1995 compared to the second quarter of 1994 and the
first six months of 1995 as compared to the first six months of 1994. The
Company recorded earnings of $1,335,000 in the second quarter of 1995 and
$2,429,000 in the first six months of 1995 compared to $914,000 in the second
quarter of 1994 and $1,583,000 in the first six months of 1994.
NET INTEREST INCOME
Net interest income increased 64.3% in the second quarter of 1995 when compared
to the same period of 1994 and increased by 44.6% during the first six months of
1995 as compared to the first six months of 1994. The net interest income of
Texas Gulf Coast accounted for 77.0% and 57% of the increases for the second
quarter and first six months, respectively.
Disregarding the acquisition of Texas Gulf Coast Bancorp, net interest income
increased 14.8% and 18.9% for the second quarter of 1995 and the first six
months of 1995, respectively. The increase of $434,000 for the second quarter
of 1995 over the second quarter of 1994 resulted from an increase of $786,000
(19.0%) in interest income on earning assets offset by an increase of $352,000
(29.6%) in interest expense. The increase of $1,071,000 for the first six
months of 1995 over the comparable period in 1994 resulted from an increase of
$1,521,000 (19.0%) in interest income offset by an increase of $450,000 (19.0%)
in interest expense. Increases in earning assets and deposits were the primary
reasons for the increases in interest income and interest expense for both
periods in 1995 as compared to the comparable periods in 1994.
The Company's subsidiary banks (the "Subsidiary Banks") attempt to adjust the
rates paid or earned on interest bearing liabilities and interest earning assets
to maintain a consistent net interest margin to the extent possible.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses increased by $40,000 for the second
quarter of 1995 compared to the second quarter of 1994 and decreased by $10,000
for the first six months of 1995 as compared to the same period in 1994. The
second quarter provision was completely attributable to the acquisition of Texas
Gulf Coast Bancorp. The provision for possible loan losses for the first six
months of 1995 was offset by $40,000 in net losses charged to the allowance as
compared with net recoveries of $49,000 for the same period in 1994. The ratio
of the allowance for possible loan losses to outstanding loans was 1.22% on June
30, 1995; as compared to 1.55% on June 30, 1994. The allowance is $716,000 more
at June 30, 1995
15
<PAGE>
than it was on the comparable date a year earlier, all of which is attributable
to the banks acquired May 1,1995. The improving quality of the Subsidiary Banks'
loan portfolios has enabled the Subsidiary Banks to decrease the provision for
possible loan losses for the six months ended June 30, 1995 despite increased
loan balances.
It is the policy of the Subsidiary Banks to maintain a level in the allowance
for possible loan losses that is adequate to cover the loan losses sustained
plus provide for any future possible losses on problem loans. The adequacy of
the allowance is continually monitored and management considers the current
level to be appropriate based on an evaluation of the Subsidiary Banks' loan
portfolios. The transactions in the allowance for possible loan losses were as
follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Loans outstanding at period end $229,947,000 $134,897,000
============ ============
Allowance at beginning of period $ 2,063,000 $ 1,986,000
------------ ------------
Allowance of acquired banks 738,000 0
------------ ------------
Provision charged to expense 40,000 50,000
------------ ------------
Loans charged off:
Commercial and industrial $ (23,000) $ (4,000)
Real estate 0 (51,000)
Installment (71,000) (42,000)
------------ ------------
Total (94,000) (97,000)
------------ ------------
Loans recovered:
Commercial and industrial 27,000 121,000
Real estate 13,000 24,000
Installment 14,000 1,000
------------ ------------
Total 54,000 146,000
------------ ------------
Net Loans recovered (charged off) (40,000) 49,000
------------ ------------
Allowance at end of period $ 2,801,000 $ 2,085,000
============ ============
Ratios:
Allowance as a percent of
loans outstanding 1.22% 1.55%
============ ============
Allowance as a percent of
nonperforming loans 118.2% 147.3%
============ ============
</TABLE>
Non-Accrual loans and past due loans (90 days or more) totaled $1,657,000 and
$713,000, respectively, at June 30, 1995, as compared to $1,209,000 and
$212,000, respectively, at June 30, 1994.
16
<PAGE>
NON-PERFORMING ASSETS
All loans which cause management to have doubt as to the borrower's ability to
substantially comply with present loan repayment terms are included in the
schedule of non-performing loans.
Non-performing loans consist of loans on which interest is not being accrued and
loans which are 90 days or more past due as to principal and/or interest payment
and not yet in a non-accruing status. The policy of the Subsidiary Banks is to
continue to accrue interest on loans which are 90 days or more past due if
periodic payments are being made on the loans. If a loan is classified as past
due and payments then resume on the loan, it continues to be classified as past
due until all past due amounts are paid.
The following table discloses information regarding non-performing assets for
the indicated periods:
<TABLE>
<CAPTION>
JUNE 30,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Non-accrual loans $1,657,000 $1,209,000
Past due 90 days or more 713,000 212,000
---------- ----------
Total 2,370,000 1,421,000
Other real estate owned 2,256,000 1,016,000
---------- ----------
Total non-performing assets $4,626,000 $2,437,000
========== ==========
</TABLE>
Included in the totals of non-accrual loans and past due loans at June 30, 1995
are $501,000 in non-accrual loans and $82,000 in past due loans resulting from
the acquisition of Texas Gulf Coast Bancorp. In addition, $688,000 in other
real estate was owned by the banks acquired in conjunction with the Texas Gulf
Coast Bancorp acquisition.
NON-INTEREST INCOME
Total non-interest income increased by 60.4% for the second quarter of 1995 as
compared to the second quarter of 1994 and increased 37.7% for the first six
months of 1995 compared to 1994. The components included in non-interest income
for the indicated periods are as follows:
<TABLE>
<CAPTION>
FOR THE QUARTER
ENDED JUNE 30,
---------------------
1995 1994
---------- ---------
<S> <C> <C>
Service charges and fees $ 971,000 $ 657,000
Other operating income 192,000 68,000
Securities transactions 0 0
---------- ---------
Total non-interest income $1,163,000 $ 725,000
========== =========
</TABLE>
17
<PAGE>
NON-INTEREST INCOME (CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
------------------------
1995 1994
---------- ----------
<S> <C> <C>
Service charges and fees $1,587,000 $1,294,000
Other operating income 394,000 145,000
Securities transactions 0 0
---------- ----------
Total non-interest income $1,981,000 $1,439,000
========== ==========
</TABLE>
The total of the various service charges and fees earned by the Company and
Subsidiary Banks for the second quarter and the first six months of 1995
increased by 47.8% and 22.6%, respectively, as compared to the comparable
periods of 1994. Other operating income increased by $124,000 and $249,000 for
the second quarter and the first six months of 1995, respectively, as compared
to the same periods of 1994.
The increases in service charges and fees are completely attributable to the
acquisition of Texas Gulf Coast Bancorp. Of the $124,000 increase in other
operating income during the second quarter of 1995, $90,000 is attributable to
the acquisition of Texas Gulf Coast Bancorp. The $249,000 increase in other
operating income for the first six months of 1995 as compared to the same period
in 1994 also includes such $90,000 with the balance of the increase attributable
to the additional income generated by the Company's non-bank subsidiary in
increased data processing revenues.
The Company maintains a policy of constantly monitoring and evaluating service
charges and fees to ensure that the fees charged reflect the cost of service
provided and remain competitive with other financial institutions located in the
Subsidiary Banks' market area.
NON-INTEREST EXPENSE
Non-interest expenses increased 66.6% for the second quarter of 1995 over the
second quarter of 1994 and increased 34.4% for the first six months of 1995
compared to the first six months of 1994. The totals were as follows:
<TABLE>
<CAPTION>
FOR THE QUARTER
ENDED JUNE 30,
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
Salaries and employee benefits $2,083,000 $1,178,000
Furniture, equipment and occupancy
expense 752,000 386,000
Other operating expenses 1,231,000 876,000
---------- ----------
Total non-interest expenses $4,066,000 $2,440,000
========== ==========
</TABLE>
18
<PAGE>
NON-INTEREST EXPENSE (CONTINUED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------
1995 1994
---------- ----------
<S> <C> <C>
Salaries and employee benefits $3,316,000 $2,400,000
Furniture, equipment and occupancy
expense 1,135,000 753,000
Other operating expenses 2,212,000 1,806,000
---------- ----------
Total non-interest expenses $6,663,000 $4,959,000
========== ==========
</TABLE>
Salaries and benefits are the most significant operating expenses of the
Company. Of the 76.8% and 38.2% increases for the second quarter and the first
six months of 1995, respectively, over the comparable periods of 1994, the
acquisition of Texas Gulf Coast Bancorp accounted for approximately 92% of each
of such increases.
Furniture, equipment and occupancy expense increased by 94.8% for the second
quarter of 1995 over the same quarter of 1994 and increased by 50.7% for the
first six months of 1995 as compared to the first six months of 1994. The
occupancy expenses attributable to the acquisition of Texas Gulf Coast Bancorp
represent approximately 72% of the increases. The increases of $355,000 and
$406,000 in other operating expenses for the second quarter and the first six
months of 1995 over the comparable periods of 1994, respectively, are completely
attributable to the acquisition of Texas Gulf Coast Bancorp. The major
components of other operating expenses are legal and accounting fees, data
processing, supplies and advertising expenses. Also included are expenses
related to real estate held for sale and other loan-related assets acquired
through foreclosure; although for 1995 these expenses represent a minimal amount
of the total.
ANALYSIS OF BALANCE SHEET
EARNING ASSETS
When comparing the total of earning assets at June 30, 1995, to the total at
December 31, 1994, earning assets increased 84.5%. Included in the $194,474,000
increase are earning assets previously held by Texas Gulf Coast Bancorp totaling
$186,333,000. The remaining increase is attributable to increases of $4,375,000
and $7,384,000 in federal funds sold and loans, respectively; partially offset
by decreases of $2,969,000 and $650,000 in investment securities and time
deposits in banks, respectively.
Included in the total of earning assets at June 30, 1995 are loans totaling
$1,657,000 which are on a non-accrual status. This compares to non-accrual
loans totaling $1,209,000 and $1,215,000 at June 30, 1994 and December 31, 1994,
respectively. The acquisition of Texas Gulf Coast Bancorp accounts for $501,000
in non-accrual loans at June 30,1995.
19
<PAGE>
DEPOSITS
The most important funding source for earning asset growth is deposits. Total
deposits increased by 82.5% from December 31, 1994 to June 30, 1995. Included
in the $186,474,000 increase are deposits totaling $181,689,000 associated with
the acquisition of Texas Gulf Coast Bancorp. In addition, the deposits of Gulf
Southwest's subsidiary bank increased by $4,785,000, or 2.1%, from the level at
December 31, 1994. Non-interest bearing deposits represent 28.6% of total
deposits at June 30, 1995 as compared to 31.8% at December 31, 1994.
CAPITAL
Shareholders' equity totaled $45,649,000 at June 30, 1995 as compared to
$25,539,000 at December 31, 1994. Included in the total at June 30, 1995 is
equity totaling approximately $18,212,000 attributable to the acquisition of
Texas Gulf Coast Bancorp. The ratio of shareholders' equity to total assets was
9.8% on June 30, 1995, as compared to 10.1% on December 31, 1994 and 9.6% on
June 30, 1994.
Bank holding companies and their bank subsidiaries are required to maintain
certain capital ratios. The Federal Reserve Board's guidelines classify capital
into two tiers, referred to as Tier 1 and Tier 2. Tier 1 capital consists of
common and qualifying preferred shareholders' equity less goodwill. Tier 2
capital consists of mandatory convertible debt, preferred stock not qualifying
as Tier 1, qualifying subordinated debt and the allowance for loan losses up to
1.25% of risk-weighted assets. The minimum ratio for the sum of Tier 1 and Tier
2 to risk weighted assets is 8.0%, at least one-half of which should be in the
form of Tier 1 capital. At June 30, 1995, core capital (Tier 1) and total
capital (Tier 1 and Tier 2) as a percentage of risk-weighted assets was 18.39%
and 19.55%, respectively. The Subsidiary Banks at June 30, 1995 had core
capital of 18.67% and total capital of 19.83% as a percentage of risk weighted
assets.
In addition to the foregoing ratios, bank holding companies are required to
maintain a minimum ratio of core capital to total assets (hereinafter referred
to as the "Leverage Ratio") of at least 3.0%. At June 30, 1995, the Company's
Leverage Ratio was 9.63%. A similar leverage ratio applicable to the Subsidiary
Banks has been adopted by the FDIC. At June 30, 1995, the Subsidiary Banks'
ratio was 9.79%.
LIQUIDITY AND CAPITAL COMMITMENTS
Liquidity is the ability of the Company and its Subsidiary Banks to meet their
short-term needs for cash arising from demands such as operating expenses,
withdrawal of deposits and demand for loans. The liquidity of the Company is
primarily provided by dividends from the Subsidiary Banks and interest on time
deposits in financial institutions.
20
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LIQUIDITY AND CAPITAL COMMITMENTS (CONTINUED)
The Subsidiary Banks' liquidity is primarily provided by maturing loans,
deposits, cash, short-term investments, time deposits in other banks, federal
funds sold and profits. With bank regulators critically reviewing liquidity,
the Company has adopted a policy of maintaining a minimum liquidity level of 20%
as measured by the FDIC formula, at the Subsidiary Banks. As of June 30, 1995,
the liquidity level of the Subsidiary Banks was 48.7%.
The Company believes that both it and the Subsidiary Banks have sufficient
capital and financial resources to meet its current and anticipated capital
commitments.
Under restrictive loan covenants, Gulf Southwest Nevada Bancorp, Inc., a wholly
owned subsidiary of the Company may not pay dividends to the Company in excess
of its net earnings.
21
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PART 2 - OTHER INFORMATION
Item 1. Legal proceedings.
Not applicable
Item 2. Changes in securities.
Not applicable
Item 3. Defaults upon senior securities.
Not applicable
Item 4. Submission of matters to a vote of security
holders.
Not applicable
Item 5. Other information.
Not applicable
Item 6. Exhibits and reports on Form 8-K.
A Form 8-K was filed on May 8, 1995 reporting the April 30, 1995 merger
of Texas Gulf Coast Bancorp, Inc. into Gulf Southwest Nevada Bancorp,
Inc., a wholly-owned subsidiary of Gulf Southwest Bancorp, Inc. The
Financial Statements included in the Form 8-K were as follows:
Consolidated Balance Sheets of Texas Gulf Coast Bancorp, Inc. and
Subsidiaries as of December 31, 1994 and December 31,1993 and
(unaudited) as of March 31, 1995 and March 31, 1994.
Consolidated Statements of Income of Texas Gulf Coast Bancorp, Inc. and
Subsidiaries for the years ended December 31, 1994, 1993 and 1992 and
(unaudited) for the three months ended March 3, 1995 and March 31,
1994.
Statements of Stockholders' Equity of Texas Gulf Coast Bancorp, Inc.
and Subsidiaries for the period from January 1, 1992 through December
31, 1994 and (unaudited) for the three months ended March 31, 1995.
Consolidated Statements of Cash Flows of Texas Gulf Coast Bancorp, Inc.
and Subsidiaries and Texas Gulf Coast Bancorp, Inc. (Parent Company
Only) for the years ended December 31, 1994, 1993 and 1992 and
(unaudited) for the three months ended March 31, 1995 and March 31,
1994.
Balance Sheets of Texas Gulf Coast Bancorp, Inc. (Parent Company Only)
as of December 31, 1994 and December 31, 1993 and (unaudited) as of
March 31, 1995 and March 31, 1994.
Statements of Income of Texas Gulf Coast Bancorp, Inc. (Parent Company
Only) for the years ended December 31, 1994, 1993 and 1992 and
(unaudited) for the three months ended March 31, 1995 and March 31,
1994.
22
<PAGE>
PART 2 - OTHER INFORMATION (CONTINUED)
Item 6. Exhibits and reports on Form 8-K (Continued).
Statements of Cash Flows of Texas Gulf Coast Bancorp, Inc. (Parent
Company Only) for the years ended December 31, 1994, 1993 and 1992 and
(unaudited) for the three months ended March 31, 1995 and March 31,
1994.
Pro Forma Consolidating Balance Sheet of Gulf Southwest Bancorp, Inc.
as of March 31, 1995 (unaudited).
Pro Forma Consolidating Statement of Income of Gulf Southwest Bancorp,
Inc. for the year ended December 31, 1994 (unaudited)
Pro Forma Consolidating Statement of Income of Gulf Southwest Bancorp,
Inc. for the three months ended March 31, 1995 (unaudited).
23
<PAGE>
EXHIBIT INDEX
Exhibit number and description
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession. *)
(4) Instruments defining the rights of security holders, including
indentures. *)
(10) Material contracts.
Exhibit 10.1. Loan Agreement with Texas Commerce Bank
(11) Statement re computation of per share earnings. *)
(15) Letter re unaudited interim financial information. *)
(18) Letter re change in accounting principles. *)
(19) Report furnished to security holders. *)
(22) Published report regarding matters submitted to vote of security
holder. *)
(23) Consent of experts and counsel. *)
(24) Power of attorney. *)
(27) Financial data schedule.
Exhibit 27.1. Financial Data Schedule
(99) Additional exhibits. *)
*) Not applicable.
24
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GULF SOUTHWEST BANCORP, INC.
Date: August _____, 1995 BY: ______________________________
J. W. Lander, Jr., Chairman
Date: August _____, 1995 BY: ______________________________
J. W. Lander, III, President
(principal financial and chief
accounting officer)
25
<PAGE>
ADVANCING CREDIT NOTE
(this "Note")
FOR VALUE RECEIVED, ON OR BEFORE March 31, 1997 ("Stated Maturity"),
TEXAS GULF COAST BANCORP, INC. ("Borrower"), promises to pay to the order of
Bank at its office at 712 Main Street, Houston, Harris County, Texas, or at such
other location as Bank may designate, in immediately available funds and lawful
money of the United States of America, the sum of THREE MILLION FOUR HUNDRED
THOUSAND AND NO/100THS UNITED STATES DOLLARS (U.S. $3,400,000.00) or the
aggregate unpaid amount of all advances hereunder, whichever is lesser, plus
interest on the unpaid principal balance outstanding from time to time at a rate
per annum equal to the lesser of (i) the Prime Rate (as hereinafter defined)
from time to time in effect (the "Stated Rate") or (ii) the Highest Lawful Rate.
If the Stated Rate at any time exceeds the Highest Lawful Rate, the actual rate
of interest to accrue on the unpaid principal amount of this Note will be
limited to the Highest Lawful Rate, but any subsequent reductions in the Stated
Rate due to reductions in the Prime Rate will not reduce the interest rate
payable upon the unpaid principal amount of this Note below the Highest Lawful
Rate until the total amount of interest accrued on this Note equals the amount
of interest which would have accrued if the Stated Rate had at all times been in
effect. "Prime Rate" means that rate as determined from time to time by Bank as
being its prime rate, and thereafter entered in the minutes of Bank's Loan and
Discount Committee. Without notice to Borrower or any other Person, the Prime
Rate shall change automatically from time to time as and in the amount by which
said prime rate shall fluctuate with each such change to be effective as of the
date of each change in such prime rate. THE PRIME RATE IS A REFERENCE RATE AND
DOES NOT NECESSARILY REPRESENT THE LOWEST OR BEST RATE. BANK MAY MAKE LOANS AT
RATES OF INTEREST AT, ABOVE OR BELOW THE PRIME RATE.
This Note is the Note described in Section 1.1 of the Credit Agreement
between Borrower and Texas Commerce Bank National Association ("Bank") dated as
of December 31, 1994 (as amended, restated and supplemented from time to time,
the "Agreement") and sometimes referred to therein as the Note. Capitalized
terms used in this Note have the meanings used in the Agreement.
The unpaid principal balance of this Note at any time shall be the
total amounts loaned or advanced by Bank or holder hereof, less the amount of
all payments or prepayments of principal made hereon by or for Borrower. Absent
manifest error, the records of the Payee or any subsequent holder shall be
conclusive as to amounts owed, both principal and accrued interest, hereunder.
Subject to the terms and conditions of this Note and the Agreement and provided
that there is no default, Borrower may use all or any part of the credit
provided for herein at any time before March 31, 1995 (the "Advance Termination
Date") and may borrow and repay but not reborrow hereunder prior to the Advance
Termination Date and there is no limitation on the number of advances made
hereunder so long as the total amount advanced prior to the Advance Termination
Date does not exceed face amount of this Note.
Accrued interest shall be due and payable quarterly, beginning March
31, 1995, and continuing on each June 30, September 30, December 31, and March
31 thereafter until the Stated Maturity when all accrued and unpaid interest
shall be finally due and payable. Principal payments of $175,000.00 each (or
the remaining unpaid principal if less) shall be due and payable quarterly
beginning June 30, 1995 and continuing on each September 30, December 31, March
31 and June 30 thereafter until the Stated Maturity when all accrued and unpaid
interest shall be finally due and payable. All unpaid principal and accrued and
unpaid interest shall be finally due and payable at the Stated Maturity.
Interest shall be computed on the basis of the actual number of days
elapsed and a year comprised of 360 days, unless such calculation would result
in a usurious interest rate, in which case interest will be calculated on the
basis of a 365 or 366 day year, as applicable.
All past-due principal and, to the extent permitted by applicable law,
interest on this Note, shall, at Bank's option, bear interest at the Highest
Lawful Rate, or if applicable law shall not
Page 1
<PAGE>
provide for a maximum nonusurious rate of interest, at a rate per annum equal to
eighteen percent (18%).
The unpaid principal balance of this Note at any time shall be the
total amounts advanced by Bank, less the amount of all payments of principal.
Absent manifest error, the records of Bank shall be conclusive as to amounts
owed. Subject to the terms and conditions of the Agreement, Borrower may use
all or any part of the credit provided for herein at any time before the
Termination Date.
Time is of the essence. Borrower may at any time pay the full amount
or any part of this Note without the payment of any premium or fee. Any
prepayment shall be in the amount of U.S. $10,000.00, or an integral multiple
thereof. At Bank's sole option, all payments may be applied to accrued
interest, to principal, or to both.
If any Event of Default occurs, then Bank may exercise any and all
rights and remedies under the Loan Documents, at law, in equity or otherwise.
Each and all Obligors severally waive notice, demand, presentment for
payment, notice of nonpayment, notice of intent to accelerate, notice of
acceleration, protest, notice of protest, and the filing of suit and diligence
in collecting this Note and all other demands and notices, and consent and agree
that their liabilities and obligations shall not be released or discharged by
any or all of the following, whether with or without notice to them or any of
them, and whether before or after the stated maturity hereof: (i) extensions of
the time of payment; (ii) renewals; (iii) acceptances of partial payments; (iv)
releases or substitutions of any collateral or any obligor; and (v) failure, if
any, to perfect or maintain perfection of any security interest in any
collateral. Each Obligor agrees that acceptance of any partial payment shall
not constitute a waiver.
Bank and any subsequent owner or holder hereof reserves the right, in
its sole discretion, without notice to Borrower, to sell participations or
assign its interest or both, in all or any part of this Note. For purposes of
this Note, any assignee or subsequent holder of this Note will be considered the
"Bank," and each successor to Borrower will be considered the "Borrower."
IN WITNESS WHEREOF, Borrower has executed this Note effective as of the
Effective Date.
BORROWER: TEXAS GULF COAST BANCORP, INC.
By: ___________________________________________________________________________
Typed Name: ___________________________________________________________________
Title: ________________________________________________________________________
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: ____________________________________________________________________________
Typed Name: ____________________________________________________________________
Title: _________________________________________________________________________
Page 2
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (as amended, restated and supplemented from time to time,
"Agreement") between TEXAS GULF COAST BANCORP, INC. ("Borrower") and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION ("Bank") is dated as of December 31, 1994
(the "Effective Date").
1. THE LOANS.
ADVANCE CREDIT NOTE 1.1 Subject to the terms and conditions hereof, Bank agrees
to make loans ("Loan" or "Loans") to Borrower from time to time before March 31,
1995, not to exceed at any one time outstanding $3,400,000.00 ("Commitment").
Borrower has the right to borrow and repay but not reborrow. Each Loan must be
at least $10,000.00 or the balance of the Commitment, whichever is less and each
repayment must be at lest $10,000.00 or the principal balance of the Note,
whichever is less. The Loans may only be used to (1) refinance Borrower's
existing note dated July 31, 1994 in the original principal amount of
$900,000.00 (together with all prior renewals and other predecessor notes,
"Renewed Note"); and (2) redeem preferred stock issued by Borrower. Chapter 15
of the Texas Credit Code will not apply to this Agreement, the Note or any Loan.
The Loans will be evidenced by, and will bear interest and be payable as
provided in, the promissory note of Borrower dated the Effective Date and
maturing March 31, 1997 (together with any and all renewals, modifications and
replacements thereof and substitutions therefor, the "Note").
COMMITMENT FEE 1.2 THE COMMITMENT IS NOT SUBJECT TO A COMMITMENT FEE.
PAST DUE AMOUNTS 1.3 Each amount due to Bank in connection with the Loan
Documents will bear interest from its due date until paid at the Highest Lawful
Rate unless the applicable Loan Document provides otherwise.
2. CONDITIONS PRECEDENT
ALL LOANS 2.1 Bank is not obligated to make any Loan unless: (a) Bank has
received the following, duly executed and in Proper Form; (1) a Request for
Loan, substantially in the form of Exhibit A, not later than (1) Business Day
before the date (which shall also be a Business Day) of the proposed Loan;
provided however, Bank may accept and act upon verbal advance requests received
from a Borrower's representative reasonably believed by Bank to be authorized to
make such requests; and (2) such other documents as Bank reasonably may require:
(b) no Event of Default exists; and (c) the making of the Loan is not prohibited
by, or subjects Bank to any penalty or onerous condition under any Legal
Requirement.
FIRST LOAN 2.2 In addition to the matters described in the preceding section,
Bank will not be obligated to make the first Loan unless Bank has received all
of the Loan Documents specified on Annex I in Proper Form.
3. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into this
Agreement and to make the Loans, Borrower represents and warrants as of the
Effective Date and the date of each request for a Loan that each of the
following statements is and shall remain true and correct throughout the term of
this Agreement.
ORGANIZATION AND STATUS 3.1 Borrower and each Subsidiary of Borrower is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; has all power and authority to conduct its
business as presently conducted, and is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such qualification desirable. Borrower has no subsidiary other than
those listed on Annex II and each Subsidiary is owned by Borrower in the
percentage set forth on Annex II.
FINANCIAL STATEMENTS 3.2 All financial statements delivered to Bank are
complete and correct and fairly present, in accordance with generally accepted
accounting principles, consistently applied ("GAAP") (except those statements
required to be prepared in accordance with accounting principles prescribed by
banking regulations ("RAP") the financial condition and the results of
operations of Borrower and each Subsidiary of Borrower as of the dates and for
Page 1
<PAGE>
Credit Agreement December 31, 1994 Texas Gulf Coast Bancorp, Inc.
the periods indicated. No material adverse change has occurred in the assets,
liabilities, financial condition, business or affairs of Borrower or any
subsidiary of Borrower since the dates of such financial statements. Neither
Borrower nor any Subsidiary of Borrower is subject to any instrument or
agreement materially and adversely affecting its financial condition, business
or affairs.
ENFORCEABILITY 3.3 The Loan Documents are legal, valid and binding obligations
of the Parties enforceable in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency and other similar laws affecting
creditors' rights generally. The execution, delivery and performance of the
Loan Documents have all been duly authorized by all necessary action; are within
the power and authority of the Parties; do not and will not violate any Legal
Requirement, the Organizational Documents of the Parties or any agreement or
instrument binding or affecting the Parties or any of their respective Property.
COMPLIANCE 3.4 Borrower and each Subsidiary of Borrower has filed all
applicable tax returns and paid all taxes shown thereon to be due, except those
for which extensions have been obtained and those which are being contested in
good faith and for which adequate reserves have been established. Borrower and
each Subsidiary of Borrower is in compliance with all applicable Legal
Requirements and manages and operates (and will continue to manage and operate)
its business in accordance with good industry practices. Neither Borrower nor
any Subsidiary of Borrower is in default in the payment of any other
indebtedness or under any agreement to which it is a party. The Parties have
obtained all consents of and registered with all Governmental Authorities or
other Persons required to execute, deliver and perform the Loan Documents and
all transactions contemplated by the Loan Documents.
LITIGATION 3.5 Except as previously disclosed to Bank in writing, there is no
litigation or administrative proceeding pending or, to the knowledge of
Borrower, threatened against, nor any outstanding judgment, decree, order,
regulatory agreement, memorandum of understanding, or capital directive
affecting Borrower, any Subsidiary of Borrower, or any institution affiliated
party of Borrower (as defined by any banking law or regulation) in his capacity
as such, before, by or with any Governmental Authority.
TITLE AND RIGHTS 3.6 Borrower and each Subsidiary of Borrower has good and
marketable title to its Property, free and clear of any Lien except for Liens
permitted by this Agreement and the other Loan Documents. Except as otherwise
expressly stated in the Loan Documents or permitted by this Agreement, the Liens
of the Loan Documents will constitute valid and perfected first and prior Liens
on the Property described herein, subject to no other Liens whatsoever.
Borrower and each Subsidiary of Borrower possesses all permits, licenses,
patents, trademarks and copyrights required to conducts its business.
REGULATION U; BUSINESS PURPOSE 3.7 None of the proceeds of any Loan will be
used to purchase or carry, directly or indirectly, any margin stock or for any
other purpose which would make this credit a "purpose credit" within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System. All
Loans will be used for business, commercial, investment or other similar purpose
and not primarily for personal, family, or household use or primarily for
agricultural purposes as such terms are used in Chapter One of the Texas Credit
Code.
ENVIRONMENT 3.8 Neither Borrower nor any Subsidiary of Borrower has generated,
handled, used, stored or disposed of any hazardous or toxic waste or substance,
on or off its premises or other real estate owned (whether or not owned by it),
other than in accordance with applicable Legal Requirements. Neither Borrower
nor any Subsidiary of Borrower has any material contingent liability for non-
compliance with environmental or hazardous waste laws. Neither Borrower nor any
Subsidiary of Borrower has received any notice that it or any of its Property or
operations does not comply with, or that any Governmental Authority is
investigating in compliance with, any environmental or hazardous waste laws.
Page 2
<PAGE>
Credit Agreement December 31, 1994 Texas Gulf Coast Bancorp, Inc.
STATEMENTS BY OTHERS 3.9 All statements made by or on behalf of Borrower, any
Subsidiary of Borrower or any other of the Parties in connection with any Loan
Document constitute the joint and several representations and warranties of
Borrower hereunder.
4. AFFIRMATIVE COVENANTS. Borrower agrees to do, and if necessary cause to be
done, and cause in Subsidiaries to do, each of the following:
CORPORATE FUNDAMENTALS 4.1 (a) Pay when due all taxes and governmental charges
of every kind upon it or against its income, profits or Property, unless and
only to the extent that the same shall be contested in good faith and adequate
reserves have been established therefor; (b) Renew and keep in full force and
effect all of its licenses, permits and franchises; (c) Do all things necessary
to preserve its corporate existence and its qualifications and rights in all
jurisdictions where such qualification is necessary or desirable; (d) Comply
with all applicable Legal Requirements; (c) Protect, maintain and keep in good
repair its Property and make all replacements and additions to its Property as
may be reasonably necessary to conduct its business properly and efficiently;
and (f) File within required periods and in proper form all reports required by
any Governmental Authority.
INSURANCE 4.2 Maintain insurance with such reputable financially sound
insurers, on such of its Property and personnel, in such amounts and against
such risks as is customary with similar Persons or as may be reasonably required
by Bank, and furnish Bank satisfactory evidence thereof promptly upon request.
These insurance provisions are cumulative of the insurance provisions of the
other Loan Documents.
FINANCIAL INFORMATION 4.3 Furnish to Bank in Proper Form (i) the financial
statements prepared in conformity with GAAP on consolidated and consolidating
bases and the other information described in, and within the times required by,
Exhibit B, Reporting Requirements, Financial Covenants and Compliance
Certificate attached hereto and incorporated herein by reference; (ii) within
the time required by Exhibit B. Exhibit B signed and certified by the chief
financial officer or president of Borrower; (ii) promptly after such request is
submitted to the appropriate Governmental Authority, any request for waiver of
funding standards or extension of amortization periods with respect to any
employee benefit plan; (iv) copies of special audits, studies, reports and
analyses prepared for the management of Borrower by outside parties and (vi)
such other information relating to the financial condition and affairs of the
Borrower and any Subsidiary of Borrower as Bank may request from time to time in
its discretion.
MATTERS REQUIRING NOTICE 4.4 Notify Bank immediately, upon acquiring knowledge
of (a) the institution or threatened institution of any lawsuit or
administrative proceeding involving Borrower, any Subsidiary of Borrower, or any
institution affiliated party of Borrower (as defined by banking laws and
regulations) which, if adversely determined, might adversely affect Borrower;
(b) any material adverse change in the assets, liabilities, financial condition,
business or affairs of Borrower; (c) any Event of Default; or (d) any reportable
event or any prohibited transaction in connection with any employee benefit
plan.
INSPECTION 4.5 Permit Bank and its affiliates to inspect and photograph its
Property, to examine and copy its files, books and records, and to discuss its
affairs with its officers and accountants, at such time and intervals and to
such extent as Bank reasonably desires.
ASSURANCES 4.6 Promptly execute and deliver any and all further agreements,
documents, instruments, and other writings that Bank may request to cure any
defect in the execution and delivery of any Loan Document or more fully to
describe particular aspects of the agreements set forth or intended to be set
forth in the Loan Documents.
CERTAIN CHANGES 4.7 Notify Bank at least 30 days prior to the date that any of
the Parties changes its name or the location of its chief executive office or
principal place of business or the place where it keeps its books and records or
the location of any of the Collateral.
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Credit Agreement December 31, 1994 Texas Gulf Coast Bancorp, Inc.
EXHIBIT B 4.8 Comply with each of the other affirmative covenants set forth in
Exhibit B.
5. NEGATIVE COVENANTS. The Borrower will not, and no Subsidiary of Borrower
will:
INDEBTEDNESS 5.1 Create, incur, or permit to exist, or assume or guarantee,
directly or indirectly, or become or remain liable with respect to any
Indebtedness, contingent or otherwise unless there is a permitted amount set
forth in Exhibit B; except: (a) Indebtedness to Bank, or secured by Liens
permitted by this Agreement, or otherwise approval in writing by Bank, and
renewals and extensions (but not increases) thereof; and (b) current accounts
payable and unsecured current liabilities, not the result of borrowing, to
vendors, suppliers and Persons providing services, for expenditures for goods
and services annually required by it in the ordinary course of business and on
ordinary trade terms; and (c) for bank Subsidiaries of Borrower, deposits,
endorsements and similar banking liabilities resulting from the ordinary conduct
of the banking business.
LIENS 5.2 Create or permit to exist any Lien upon any of its Property now owned
or hereafter acquired, or acquire any Property upon any conditional sale or
other title retention device or arrangement or any purchase money security
agreement; or in any manner directly or indirectly sell, assign, pledge or
otherwise transfer any of its accounts or other Property, except: (a) Liens, not
for borrowed money, arising in the ordinary course of business; (b) Liens for
taxes not delinquent or being contested in good faith by appropriate
proceedings; (c) Liens in effect on the date hereof and disclosed to Bank in
writing so long as neither the indebtedness secured thereby nor the Property
covered thereby increases, and (d) Liens in favor of Bank, or otherwise approved
in writing by Bank.
FINANCIAL AND OTHER COVENANTS 5.3 Fail to comply with the required financial
covenants and other covenants described, and calculated as set forth in Exhibit
B, Unless otherwise provided on Exhibit B, all such amounts and ratios will be
calculated (a) on the basis of GAAP; and (b) on a consolidated basis.
Compliance with the requirements of Exhibit B will be determined as of the dates
of the financial statements to be provided to Bank.
CORPORATE CHANGES 5.4 In any single transaction or series of transactions,
directly or indirectly; (a) liquidate or dissolve; (b) be a party to any merger
or consolidation except the Permitted Merger; (c) self or dispose of any
interest in any of its Subsidiaries, or permit any of its Subsidiaries to issue
any additional equity other than to Borrower; (d) sell, convey or lease all or
any substantial part of its assets, or (e) permit any change in ownership of
Borrower except in the Permitted Merger. "Permitted Merger" shall mean a merger
between Borrower and Gulf Southwest Nevada Corporation, Inc., a subsidiary of
Gulf Southwest Bancorp, Inc. ("GSWB") meeting the following conditions: (a) as
of the effective time of such merger, GSWB shall have provided its continuing
guaranty of all indebtedness evidenced by the Note and the Loan Documents,
together with GSWB's negative pledge of all stock of all bank Subsidiaries of
GSWB as of the merger date, all in form acceptable to Bank; (b) upon
consummation of such merger, GSWB, its bank Subsidiaries, Borrower, and
Borrower's bank Subsidiaries shall all be in compliance with all regulatory
capital requirements at the "adequately capitalized" level (or comparable
successor term), individually and on any consolidated basis prescribed by
banking regulation or guideline; (c) GSWB shall agree to provide reports and
other financial information substantially comparable to reports required of
Borrower and its Subsidiaries hereunder; (d) Borrower shall be deemed to make
all representations and warranties made in this Agreement as of the effective
date of such merger; (e) consummation of such merger shall not cause any default
hereunder; and (f) Borrower and GSWB shall certify to Bank satisfaction of the
foregoing requirements (a) - (e) in form reasonably acceptable to Bank supported
by such documents (including an opinion of counsel to Borrower in Proper Form)
as Bank may reasonably request.
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Credit Agreement December 31, 1994 Texas Gulf Coast Bancorp, Inc.
RESTRICTED PAYMENTS 5.5 Except as specifically permitted on Exhibit B, at any
time (a) redeem, retire or otherwise acquire, directly or indirectly, any shares
of its capital stock or other equity interest except repurchase and retirement
of Borrower's preferred stock; ((b) declare or pay any dividend (except stock
dividends and dividends paid to Borrower); or (c) make any other distribution or
contribution of any Property or cash or obligation to owners of an equity
interest or to a Subsidiary in their capacity as such.
NATURE OF BUSINESS; MANAGEMENT 5.6 Change the nature of its business or enter
into any business which is substantially different from the business in which it
is presently engaged, or permit any material change in its management.
AFFILIATE TRANSACTIONS 5.7 Enter into any transaction or agreement with any
Affiliate except (1) upon terms substantially similar to those obtainable from
wholly unrelated sources, and (2) in compliance with all Legal Requirements
applicable to such transaction.
SUBSIDIARIES 5.8 Form, create or acquire any Subsidiary except in the Permitted
Merger.
6. EVENTS OF DEFAULT AND REMEDIES.
EVENTS OF DEFAULT 6.1 Each of the following is an "Event of Default":
(a) Any Obligor fails to pay any principal of or interest on the Note or any
other obligation under any Loan Document as and when due; or
(b) Any Obligor or Subsidiary of Borrower fails to pay a maturity, or within any
applicable period of grace, any principal or interest on any other borrowed
money obligation or fails to observe or perform any term, covenant or agreement
contained in any agreement or obligation by which it is bound; or
(c) Any representation or warranty made in connection with any Loan Document was
incorrect, false or misleading when made; or
(d) Any Obligor violates any covenant contained in any Loan Document; or
(e) An event of default occurs under any other Loan Document; or
(f) Final judgment for the payment of money is rendered against Obligor or any
Subsidiary of Borrower and remains undischarged for a period of 30 days during
which execution is not effectively stayed; or
(g) The sale, encumbrance or abandonment (except or otherwise expressly
permitted by this Agreement of any of the Collateral or the making of any levy,
seizure, garnishment, sequestration or attachment thereof or thereon; or the
loss, theft, substantial damage, or destruction of any material portion of such
Property; or
(h) Any order is entered in any proceeding against Borrower or any Subsidiary of
Borrower decreeing the dissolution, liquidation or split-up thereof, and such
order shall remain in effect for 30 days; or
(i) Any Obligor or any subsidiary of Borrower makes a general assignment for the
benefit of creditors or shall petition or apply to any tribunal for the
appointment of a trustee, custodian, receiver conservator or liquidator of all
or any substantial part of its business, estate or assets or shall commence any
proceeding under any bankruptcy , conservation, insolvency, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect or any
such petition, application, or finding of insolvency shall be filed or any such
proceeding shall be commenced against any Obligor or any subsidiary of Borrower
and the Obligor or such subsidiary by any act or omission shall indicate
approval thereof, consent thereto or acquiescence therein, or an order shall be
entered appointing a trustee, custodian, receiver or liquidator of all or any
substantial part of the assets of any Obligor or any subsidiary of Borrower or
granting relief to any Obligor or any subsidiary of Borrower or approving the
petition in any such proceeding, and such order shall remain in effect for more
than 30 days, or any Obligor or any subsidiary of Borrower shall fail generally
to pay its debts as they become due or suffer any writ of attachment or
execution or any similar process to be issued or levied against it or any
substantial part of its property which is not released, stayed, bonded or
vacated within 30 days after its issue or levy; or
(j) Any Obligor or any Subsidiary of Borrower conceals or removes any part of
its Property, with intent to hinder, delay or defraud any of its creditors,
makes or permits a transfer of any of its
Page 5
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Credit Agreement December 31, 1994 Texas Gulf Coast Bancorp, Inc.
Property which may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or makes any transfer of its Property to or for the benefit of a
creditor at a time when other creditors similarly situated have not been paid;
or
(k) A material adverse change occurs in the assets, liabilities, financial
condition, business or affairs of any Obligor or any Subsidiary of Borrower,
such material adverse change deemed conclusively to include, WITHOUT LIMITATION,
(i) any Obligor or any bank Subsidiary of any Obligor ceasing in any respect to
be deemed "adequately capitalized" under any banking law or regulation, (ii) any
Obligor, bank Subsidiary of any Obligor, or any institution affiliated party (as
defined by any banking law) of any of the foregoing shall receive any request,
demand or written notice to consent or enter into any order, regulatory
agreement, memorandum of understanding, capital directive, civil money penalty
assessment or similar order or proceeding; or
(l) Any change occurs in the ownership of Borrower except a Permitted Merger; or
(m) Any Obligor dissolves.
If any Event of Default occurs, then Bank may do any or all of the following:
(1) declare the Obligations to be immediately due and payable without notice of
acceleration or of intention to accelerate, presentment and demand or protest,
all of which are hereby expressly waived; (2) without notice to any Obligor,
terminate the Commitment and accelerate the Termination Date; (3) set off, in
any order, against the indebtedness of Borrower under the Loan Documents any
debt owing by Bank to Borrower (whether such debt is owed individually or
jointly), including, but not limited to, any deposit account, which right is
hereby granted by Borrower to Bank and (4) exercise any and all other rights
pursuant to the Loan Documents, at law, in equity or otherwise.
REMEDIES CUMULATIVE 6.2 No remedy, right or power of Bank is exclusive of any
other remedy, right or power now or hereafter existing by contract, at law, in
equity, or otherwise, and all remedies, rights and powers are cumulative.
7. MISCELLANEOUS.
NO WAIVER 7.1 No waiver of any default or Event of Default will be a waiver of
any other default or Event of Default. No failure to exercise or delay in
exercising any right or power under any Loan Document will be a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude any
further or other exercise thereof or the exercise of any other right or power.
The making of any Loan during either the existence of any default or Event of
Default, or subsequent to the occurrence of an Event of Default will not be a
waiver of any such default or Event of Default. No amendment, modification or
waiver of any Loan Document will be effective unless the same is in writing and
signed by the Person against whom such amendment, modification or waiver is
sought to be enforced. No notice to or demand on any Person shall entitle any
Person to any other or further notice or demand in similar or other
circumstances.
NOTICES 7.2 All notices required under the Loan Documents shall be in writing
and either delivered against receipt therefor, or mailed by registered or
certified mail, return receipt requested, in each case addressed to the address
shown on the signature page hereof or to such other address as a party may
designate, Except for the notices required by Section 2.1, which shall be given
only upon actual receipt by Bank, notices shall be deemed to have been given
(whether actually received or not) when delivered (or, if mailed, on the next
Business Day).
GOVERNING LAW ARBITRATION 7.3 (a) UNLESS OTHERWISE SPECIFIED THEREIN, EACH LOAN
DOCUMENT IS GOVERNED BY TEXAS LAWS AND THE APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA. To the maximum extent permitted by law, any controversy or claim
arising out of or relating to the Loans or any Loan Document, but not limited to
any claim based on or arising from an alleged tort or an alleged breach of any
agreement contained in any of the Loan Documents, shall, at the request of any
party to the Loan or Loan Documents (either before or after the commencement of
judicial proceedings), be settled by mandatory and binding arbitration in
accordance with the Commercial Arbitration Rules of
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<PAGE>
Credit Agreement December 31, 1994 Texas Gulf Coast Bancorp, Inc.
the American Arbitration Association (the "AAA Rules") and pursuant to Title 9
of the United States Code, or if Title 9 does not apply, the Texas General
Arbitration Act. In any arbitration proceeding (i) all statutes of limitations
which would otherwise be applicable shall apply, and (ii) the proceeding shall
be conducted in the city in which the office of Bank originating the Loans is
located, by a single arbitrator if the amount in controversy is $1 million or
less, or by a panel of three arbitrators if the amount in controversy (including
but not limited to all charges, principal, interest fees and expenses) is over
$1 million. Arbitrators are empowered to resolve any controversy by summary
rulings substantially similar to summary judgments and motions to dismiss.
Arbitrators may order discovery conducted in accordance with the Federal Rules
of Civil Procedures. All arbitrators will be selected by the process of
appointment from a panel, pursuant to the AAA Rules. Any award rendered in the
arbitration proceeding will be final and binding, and judgment upon any such
award may be entered in any court having jurisdiction.
(b) If any party to the Loan or Loan Documents files a proceeding in any court
to resolve any controversy or claim, such action will not constitute a waiver of
the right of such party or a bar to the right of any other party to seek
arbitration under the provisions of this Section or that of any other claim or
controversy, and the court shall, upon motion of any party to the proceeding,
direct that the controversy or claim be arbitrated in accordance with this
Section.
(c) No provision of, or the exercise of any rights under, this Section shall
limit or impair the right of any party to the Loan Documents before, during or
after any arbitration proceeding to: (i) exercise self-help remedies including
but not limited to setoff or repossession; (ii) foreclose any Lien on or
security interest in any Collateral; or (iii) obtain relief from a court of
competent jurisdiction to prevent the dissipation, damage, destruction,
transfer, hypothecation, pledging or concealment of assets or Collateral
including, but not limited to attachments, garnishments, sequestrations,
appointments of receivers, injunctions or other relief to preserve the status
quo.
(d) To the maximum extent permitted by applicable law and the AAA Rules, neither
Bank or any Obligor or any Affiliate, officer, director, employee, attorney, or
agent of either shall have any liability with respect to, and Bank and each
Obligor waives, releases, and agrees not to sue any of them upon, any claim for
any special, indirect, incidental and consequential damages suffered or incurred
by such Person in connection with arising out of, or in any way related to, this
Agreement or any of the other Loan Documents. Each of Bank and each Obligor
waives, releases, and agrees not to sue each other or any of their Affiliates,
officers, directors, employees, attorneys, or agents for punitive damages in
respect of any claim in connection with, arising out of, or in any way related
to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
Nothing contained herein, however, shall be construed as a waiver of any
Obligor's or the Bank's right to compel arbitration of disputes pursuant to
subparagraphs (a) and (b), above.
(e) Nothing herein shall be considered a waiver of the right or protections
afforded Bank by 12 U.S.C. 91, Texas Banking Code Art. 342.609 or any similar
statute.
(f) Each party agrees that any other party may proceed against any other liable
Person, jointly or severally, or against one or more of them, less than all,
without impairing rights against any other liable Persons. A party shall not be
required to join the principal Obligor or any other liable Persons (e.g.,
sureties or guarantors) in any proceeding against any Person. A party may
release or settle with one or more liable Persons as the party deems fit without
releasing or impairing right to proceed against any Persons not so released.
SURVIVAL PARTIES BOUND; TERM OF AGREEMENT 7.4 All representations, warranties,
covenants and agreements made by or on behalf of Borrower in connection with the
Loan Documents will survive the execution and delivery of the Loan Documents,
will not be affected by any investigation made by any Person, and will bind
Borrower and the successors, trustees, receivers and assigns of Borrower and
will benefit the successors and assigns of the Bank provided that Bank's
agreement to make Loans to Borrower will not inure to the benefit of any
successor or assign of Borrower. Except as otherwise provided herein, the term
of this Agreement will be until the later of the final maturity of the Note and
the full and final payment of all amounts due under the Loan Documents.
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Credit Agreement December 31, 1994 Texas Gulf Coast Bancorp, Inc.
DOCUMENTARY MATTERS 7.5 This Agreement may be executed in several identical
counterparts, on separate counterparts; each counterpart will constitute an
original instrument, and all separate counterparts will constitute but one and
the same instrument. The headings and captions in the Loan Documents have been
included solely for convenience and should not be considered in construing the
Loan Documents. If any provision of any Loan Document is invalid, illegal or
unenforceable in any respect under any applicable law, the remaining provisions
will remain effective. The Loans and all other obligations and indebtedness of
Borrower to Bank are entitled to the benefit of the Loan Documents.
EXPENSES 7.6 Any provision to the contrary notwithstanding, and whether or not
the transaction contemplated by this Agreement are consummated, Borrower agrees
to pay on demand all out-of-pocket expenses (including, without limitation, the
fee and expenses of counsel for Bank) in connection with the negotiation,
preparation, execution, filing, recording, modification, supplementing and
waiver of the Loan Documents and the making, servicing and collection of the
Loans. Borrower agrees to pay Bank's standard Documentation Preparation and
Processing Fee for preparation, negotiation and handling of this Agreement. The
obligations of the Borrower under this and the following section will survive
the termination of this Agreement.
INDEMNIFICATION 7.7 THE BORROWER AGREES TO INDEMNIFY, DEFEND AND HOLD BANK
HARMLESS FROM AND AGAINST ANY AND ALL LOSS, LIABILITY, OBLIGATION, DAMAGE,
PENALTY, JUDGMENT, CLAIM, DEFICIENCY AND EXPENSE (INCLUDING INTEREST, PENALTIES,
ATTORNEYS' FEES AND AMOUNTS PAID IN SETTLEMENT) TO WHICH THE BANK MAY BECOME
SUBJECT ARISING OUT OF OR BASED UPON THE LOAN DOCUMENTS, OR ANY LOAN, INCLUDING
THAT RESULTING FROM BANK'S OWN NEGLIGENCE, EXCEPT AND TO THE EXTENT CAUSED BY
BANK'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
NATURE OF OBLIGATIONS 7.8 If more than one Borrower executes this Agreement,
all of the representations, warranties, covenants and agreements of Borrower
shall be joint and several obligations of all Borrowers.
USURY NOT INTENDED 7.9 Borrower and Bank intend to conform strictly to
applicable usury laws. Therefore, the total amount of interest (as defined
under applicable law) contracted for, charged or collected under this Agreement
or any other Loan Document will never exceed the Highest Lawful Rate. If Bank
contracts for, charges or receives any excess interest, it will be deemed a
mistake. Bank will automatically reform the Loan Document or change to conform
to applicable law, and if excess interest has been received, Bank will either
refund the excess to Borrower or credit the excess on any unpaid principal
amount of the Note or any other Loan Document. All amounts constituting
interest will be spread throughout the full term of the Loan Document or
applicable Note in determining whether interest exceeds lawful amounts.
NO COURSE OR DEALING 7.10 NO COURSE OF DEALING BY BORROWER WITH BANK, NO COURSE
OF PERFORMANCE AND NO TRADE PRACTICES OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE
MAY BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
AGREEMENT.
8. DEFINITIONS. Unless the context otherwise requires, capitalized terms used
in Loan Documents and not defined elsewhere shall have the meanings provided by
GAAP, except as follows:
Affiliate means, as to any Person, any other Person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of voting
stock of such Person; (c) five percent (5%) or more of the voting stock of which
is directly or indirectly beneficially owned or held by the Person in question;
and (d) an institution affiliated party (as defined in any banking law or
regulation) of any Person. The term "control" means to possess, directly or
indirectly, the power to direct the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise
Page 8
<PAGE>
Credit Agreement December 31, 1994 Texas Gulf Coast Bancorp, Inc.
Bank is not under any circumstances to be deemed an Affiliate of Borrower or any
of its Subsidiaries.
Authority Documents means certificate of authority to transact business,
certificates of good standing, borrowing resolutions (with secretary's
certificate), secretary's certificates of incumbency, and other documents which
empower and enable Borrower or its representatives to enter into agreements
evidenced by Loan Documents or evidence such authority.
Business Day means a day when the main office of Bank is open for the conduct of
commercial lending business.
Collateral means all Property, tangible or intangible, real, person or mixed,
now or hereafter subject to Security Documents, or intended so to be.
Corporation means corporations, partnerships, limited liability companies, joint
ventures, joint stock associations, banks, business trusts and other business
entities.
Governmental Authority means any foreign governmental authority, the United
States of America, any state of the United States and any political subdivision
of any of the foregoing, and any agency, department, commission, board, bureau,
court or other tribunal having jurisdiction over Bank or any Obligor, or any
Subsidiary of Borrower or their respective Property.
Highest Lawful Rate means the maximum nonusurious rate of interest permitted to
be charged by applicable Federal or Texas law (whichever permits the higher
lawful rate) from time to time in effect. If Chapter One of the Texas Credit
Code establishes the Highest Lawful Rate, the Highest Lawful Rate is the
"indicated rate ceiling" as defined in that Chapter.
Indebtedness means and include (a) all items which in accordance with GAAP would
be included on the liability side of a balance sheet on the date as of which
Indebtedness is to be determined (excluding capital stock, surplus, surplus
reserves and deferred credits); (b) all guaranties, endorsements and other
contingent obligations in respect of, or any obligations to purchase or
otherwise acquire, Indebtedness of others (but not including cross-guaranty
liability between bank Subsidiaries of Borrower to the extent created solely by
federal banking law), and (c) all Indebtedness secured by any Lien existing on
any interest of the Person with respect to which indebtedness is being
determined, in Property owned subject to such Lien, whether or not the
Indebtedness secured thereby has been assumed.
Legal Requirement means any law, ordinance, decree, requirement, order
(including an order entered into by consent), agreement, memorandum of
understanding, written commitment, assessment, judgment, rule, regulation (or
interpretation of any of the foregoing) of or with, and the terms of any
license, permit or approval issued by, any Governmental Authority.
Lien shall mean any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether based on
common law, constitutional provision, statute or contract.
Loan Documents means this Agreement, the agreements, documents, instruments and
other writings contemplated by this Agreement or on Annex I, all other
assignments, guaranties, pledges, instruments, certificates and agreements now
or hereafter executed or delivered to the Bank pursuant to any of the foregoing
and all amendments, modifications, renewals, extensions, increases and
rearrangements of, and substitutions for, any of the foregoing.
Obligations means all principal, interest and other amounts which are or become
owing under this Agreement, the Note or any other Loan Document .
Obligor means each Borrower and any guarantor (including GSWB upon the effective
date of the Permitted Merger), surety, co-signer, general partner or other
person who may now or hereafter be obligated to pay all or any part of the
Obligations.
Organizational Documents means, with respect to a Corporation, the certificate
of incorporation, article of incorporation and bylaws of said Corporation; in
each case including all modifications and supplements thereof of the date of the
Loan Documents referring to such Organizational Documents and any and all future
modifications thereof which are consented to by Bank.
Parties means all Persons other than Bank executing any Loan Document.
Person means any individual, Corporation, trust, unincorporated organization,
Governmental Authority or any other form of entity.
Proper Form means in form and substance satisfactory to the Bank.
Property means any interest in any kind of property or asset, whether real,
personal or mixed, tangible or intangible.
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Credit Agreement December 31, 1994 Texas Gulf Coast Bancorp, Inc.
Security Documents means those Security Agreements listed on Annex I and all
supplements, modifications, amendment, extensions thereof and all other
agreements hereafter executed and delivered to Bank to secure the Loans.
Subsidiary means, as to a particular parent Corporation, any Corporation of
which 50% or more of the indicia of equity rights is at the time directly or
indirectly owned by such parent Corporation or by one or more Persons controlled
by, controlling or under common control with such parent Corporation.
THIS WRITEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BANK AND THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF BANK AND THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANK AND THE PARTIES.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date:
BORROWER: TEXAS GULF COAST BANCORP, INC.
By: ___________________________________________________________________________
Name: _________________________________________________________________________
Title: ________________________________________________________________________
Address: ______________________________________________________________________
BANK: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: ___________________________________________________________________________
Name: _________________________________________________________________________
Title: ________________________________________________________________________
Address: ______________________________________________________________________
EXHIBITS: ANNEXES:
A Request for Loan I Loan Documents
B Reporting Requirements, II Subsidiaries
Financial Covenants, and
Compliance Certificate
Page 10
<PAGE>
ANNEX I
LOAN DOCUMENTS
"Loan Documents" includes, but is ot limited to, the following:
1. Agreement
2. Note
3. Compliance Certificate
4. Security Agreements, in Proper Form, covering pledge of 194,264 common
shares (97.55%) Texas City Bank; 129,671 common shares (99.47%) First Bank
Pearland; 30,000 common shares (100%) First Bank Mainland (La Marque TX)
5. Financing Statements
6. Opinion of Borrower's Counsel (to be delivered promptly upon consummation
of the Permitted Merger as provided in Section 5.4)
7. Certified Copies of Organization and Authority Documents
8. Financial statements and regulatory reports of Borrower and Borrower's bank
subsidiaries
<PAGE>
ANNEX II
SUBSIDIARIES
IF NONE AS OF THE EFFECTIVE DATE, CHECK [_] NONE
<TABLE>
<CAPTION>
Subsidiary Name
and Address Jurisdiction % Owned
--------------------- ------------ -------
<S> <C> <C>
Texas City Bank Texas 97.55
Texas City TX
First Bank Mainland Texas 100.00
La Marque TX
First Bank Pearland Texas 99.47
Pearland TX
</TABLE>
<PAGE>
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
SECURITY AGREEMENT - PLEDGE
TEXAS GULF BANCORP, INC., 4200 WESTHEIMER, SUITE 210, HOUSTON, HARRIS COUNTY,
TEXAS 77027-0000 hereinafter called "Debtor," and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, 712 MAIN, P.O. BOX 2558, HOUSTON, HARRIS COUNTY, TEXAS 77252-2558
hereinafter called "Secured Party," agree as follows:
SECTION I. CREATION OF SECURITY INTEREST.
Debtor hereby pledges, grants a security interest in, mortgages, assigns,
transfers, delivers, pledges, sets over and confirms unto Secured Party the
Collateral described in Section II of this Security Agreement to secure
performance and payment of all debts, obligations and liabilities of every kind
and character of Debtor now or hereafter existing in favor of Secured Party
whether such debts, obligations or liabilities be direct or indirect, primary or
secondary, joint or several, fixed or contingent, and whether originally payable
to Secured Party or to a third party and subsequently acquired by Secured Party
and whether such debts, obligations or liabilities are evidenced by note, open
account, overdraft, indorsement, surety agreement, guaranty or otherwise, it
being contemplated that Debtor may hereafter become indebted to Secured Party in
further sum or sums, and all modifications, renewals or extensions of or
substitutions for, any of the foregoing. All such indebtedness is hereinafter
sometimes called "the secured indebtedness" or "the indebtedness secured
hereby."
SECTION II. COLLATERAL.
The Collateral of this Security Agreement consists of all of the investment
securities listed in the portion labeled "Collateral Description" below, and all
other property previously, presently or in the future deposited with Secured
Party. The Collateral includes, without limitation, all property this day
delivered to and deposited with Secured Party, and all money and property
heretofore delivered or which shall hereafter be delivered to or come into the
possession, custody or control of Secured Party in any manner or for any purpose
whatever during the existence of this Security Agreement, and whether held in a
general or special account, or deposited for safekeeping or otherwise together
with all dividends (cash or otherwise), rights to receive dividends, stock
dividends, dividends paid in stock, distributions upon redemption or
liquidation, distributions as a result of split-ups, recapitalizations or
rearrangements, all stock rights, rights to subscribe, voting rights, rights to
receive securities, and all new securities; and all other property which Debtor
may hereafter become entitled to receive on account of such securities or other
property; and in the event Debtor receives any such property, Debtor will
immediately deliver same to Secured Party to be held by Secured Party in the
same manner as the property originally deposited as Collateral. The Collateral
of this Security Agreement also includes (i) the proceeds of any and all
property described above and (ii) any and all cash dividends of and from any and
all property described above. It is expressly contemplated that additional
securities shall from time to time be pledged to Secured Party as additional
security for the indebtedness secured hereby, and the term "Collateral" as used
herein shall be deemed for all purposes hereof to include all such securities,
together with all other property of the types described above related to such
securities.
SECTION III. PAYMENT OBLIGATIONS OF DEBTOR.
3.1 Except as provided below, Debtor shall pay to Secured Party any sum or
sums due or which may become due pursuant to any instrument or agreement
evidencing any indebtedness or obligation of Debtor to Secured Party, now
or hereafter executed by Debtor, in accordance with the terms of such
instrument or agreement and the terms of this Security Agreement.
3.2 Debtor shall pay to Secured Party on demand all expenses and
expenditures, including attorneys' fees and other legal expenses incurred
or paid by Secured Party in exercising or protecting its interests, rights
and remedies under this Security Agreement, plus interest thereon from date
of expenditure until paid at the same rate provided for past-due principal
and interest in the principal obligation (the "Past Due Rate"). The
principal obligation shall be (1) the note secured hereby; (2) if more than
one note is secured hereby, the note with the largest face amount; and (3)
if no note is secured hereby, the obligation with the largest face amount.
Notwithstanding anything in this Agreement to the contrary, if this
Agreement is governed by Chapters 3, 4 or 5 of the Texas Credit Code (the
"Chapters"), Debtor's obligation to pay or reimburse Secured Party shall be
limited to only those charges, expenses, fees, compensation, bonuses,
commissions, brokerage and discounts permitted to be charged or reimbursed
under whichever of such Chapters, if any, shall apply. For Chapters 3, 4
and 5; In addition to the authorized charges provided in each Chapter no
further or other charge or amount whatsoever shall be directly, or
indirectly, charged, contracted for, or received. This includes (but is
not limited by) all charges such as fees, compensation, bonuses,
commissions, brokerage, discounts, expenses, and every other charge of any
nature whatsoever, whether of the types listed herein or not. Without
limitation of the foregoing, such charges may be any form of costs or
compensation whether contracted for or not, received by the lender, or any
other person, in connection with (a) the investigating, arranging,
negotiation, procuring, guaranteeing, making, servicing, collecting or
enforcing of a loan; or (b) for the forbearance of money, credit, goods of
things in action; or (c) for any other service or services performed or
offered. However, the prohibition set out herein shall not apply to
amounts actually incurred by an authorized lender as court costs; attorney
fees assessed by a court; lawful fees for filing, recording, or releasing
in or to any public office any security for a loan or any instrument
securing a loan; the reasonable cost actually expended for repossessing,
storing, preparing for sale, or selling any security; or fees for noting a
lien on or transferring a certificate of title to any motor vehicle offered
as security of a loan made under that Chapter, or premiums or identifiable
charge received in connection with the sale of insurance authorized under
that Chapter. Certain additional charges may be collected in connection
with secondary mortgage loans under Chapter 5; see your builder's and
mechanic's lien contract and promissory note. Unless one of the following
boxes is checked, this Agreement is not subject to Chapters 3, 4 or 5 of
the Texas Credit Code:
N/A This Agreement is subject to Chapter 3 of the Texas Credit Code.
N/A This Agreement is subject to Chapter 4 of the Texas Credit Code.
N/A This Agreement is subject to Chapter 5 of the Texas Credit Code.
Page 1 of 7
<PAGE>
3.3 Debtor shall pay the entire unpaid indebtedness of Debtor to Secured
Party, whether created or incurred pursuant to this Security Agreement or
otherwise, upon Debtor's default under this Security Agreement.
SECTION IV. DEBTOR'S REPRESENTATIONS AND WARRANTIES.
Debtor warrants and represents that:
4.1 All information, reports, statements and other data furnished by or on
behalf of Debtor to Secured Party prior to, contemporaneously with or
subsequent to the execution of this Security Agreement or in connection
with the indebtedness secured hereby are and shall be true, correct and
complete and do not and shall not omit to state any fact necessary to make
the information obtained therein not misleading.
4.2 All investment securities and any like property delivered to Secured
Party as Collateral are genuine, free from any restriction on transfer,
duly and validly authorized and issued, fully paid and nonassessable, free
of all liens, claims, demands, equities or other security interests, and
are hereby duly and validly pledged or hypothecated to Secured Party in
accordance with law.
4.3 No part of the proceeds of the indebtedness secured hereby will be used
to purchase or carry directly or indirectly, any "margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System or to extend credit to others for the purpose of purchasing or
carrying any such "margin stock," or for any other purpose in a manner
which would involve Secured Party in a violation of said Regulation U.
4.4 Except as shown in the portion labeled "Collateral Description" below,
Debtor owns the Collateral and has the right to pledge the same and to
transfer any interest therein; all consents required for the pledge of the
Collateral herein provided have been obtained; the Collateral is free and
clear from all security interests and encumbrances except the security
interest evidenced hereby; there is no financing statement covering the
Collateral or its proceeds on file in any public office; and Debtor will
warrant and forever defend the title to the Collateral and its proceeds
against the claims and demands of all persons whomsoever claiming or to
claim the same or any part thereof.
4.5 The execution, delivery and performance by Debtor of this Security
Agreement do not and will not contravene or violate any provision of any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award presently in effect and applicable to Debtor or the
corporate papers or partnership agreement of Debtor, or result in a breach
of or constitute a default (with or without the giving of notice or the
lapse of time or both) under any indenture or loan, credit or other
agreement to which Debtor is a party or by which Debtor or any of Debtor's
property may be bound or affected.
4.6 This Security Agreement constitutes the legal, valid and binding
obligation of Debtor enforceable against Debtor in accordance with its
terms.
4.7 No authorization, consent, approval, license, order or exemption of, or
filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
is or will be necessary to the valid execution, delivery or performance by
Debtor of this Security Agreement or to the enforcement hereof by Secured
Party.
4.8 No representation or warranty contained herein or made in connection with
the indebtedness secured hereby, and no certificate, schedule or other
document furnished in connection herewith, contains or will contain, at the
time so made or furnished, a misstatement of material fact, or omits or
will omit to state a material fact required to be stated therein in order
to make the statements contained therein not misleading.
4.9 Debtor is now in a solvent condition, and no bankruptcy or insolvency
proceedings are pending or contemplated by or against Debtor.
SECTION V. COVENANTS.
5.1 So long as the indebtedness secured hereby or any part thereof remains
unpaid, Debtor covenants and agrees with Secured Party as follows:
(a) Debtor shall furnish to Secured Party such stock powers and other
instruments as may be required by Secured Party to assure the
transferability of the Collateral when and as often as may be requested by
Secured Party.
(b) If Debtor is a corporation, Debtor will continuously maintain
Debtor's corporate existence.
(c) Debtor will cause to be paid prior to delinquency all taxes and
assessments heretofore or hereafter levied or assessed against the
Collateral, or any part thereof, or, subject to the restrictions in Section
III of this Security Agreement, against the Secured Party for or on account
of the indebtedness secured hereby or the interest created by this Security
Agreement and will furnish Secured Party with receipts or other
satisfactory evidence showing payment of such taxes and assessments at
least ten (10) days prior to the applicable default date therefor.
(d) If the validity or priority of this Security Agreement or of any
right, title, security interest or other interests created or evidenced
hereby shall be attacked, endangered or questioned, or if any legal
proceedings are instituted against Debtor with respect thereto, Debtor will
give prompt written notice thereof to Secured Party and, subject to the
restrictions in Section III of this Security Agreement, at Debtor's own
cost and expense will diligently endeavor to cure any defect that may be
developed or claimed, and will take all necessary and proper steps for the
defense of such legal proceedings, and Secured Party (whether or not named
as a party to legal proceedings with respect thereto) is hereby authorized
and empowered to take such additional steps as in its judgment and
discretion may be necessary or proper for the defense of any such legal
proceedings or the protection of the validity or priority of this Security
Agreement and the right, title, security interest and other interests
created or evidenced hereby, and, subject to the restrictions in Section
III of this Security Agreement, all expenses so incurred of every kind and
character shall be a demand obligation owing by Debtor to Secured Party,
shall bear interest from date of expenditure until paid at the Past Due
Rate and shall be secured hereby and by each other agreement securing the
secured indebtedness. The party incurring such expenses shall be
subrogated to all rights of the person receiving such payment.
(e) Debtor will, on request of Secured Party, (i) promptly correct any
defect, error or omission which may be discovered in the contents of this
Security Agreement or in any other instrument executed in connection
herewith or in the execution or acknowledgement thereof; (ii) execute,
acknowledge, deliver and record or file such further instruments (including
without limitation further security agreements, financing statements and
continuation statements) and do such further acts as may be necessary,
desirable or proper to carry out more effectively the purposes of this
Security Agreement and such other instruments and to subject to the
security interests hereof and thereof any property intended by the terms
hereof and thereof to be covered hereby and thereby, including
specifically, but without limitation, any renewals, additions,
substitutions,
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replacements or appurtenances to the then Collateral and (iii) execute,
acknowledge, deliver, procure and record or file any document or instrument
(including specifically any financing statement) deemed advisable by
Secured Party to protect the security interests hereunder against the
rights or interests of third persons, and Debtor, subject to the
restrictions in Section III of this Security Agreement, will pay all costs
connected with any of the foregoing.
(f) Notwithstanding the security interest in proceeds granted herein,
Debtor will not sell, exchange, lend, assign, transfer or otherwise dispose
of all or any part of the Collateral or any interest therein, or permit any
of the foregoing, without the prior written consent of Secured Party.
(g) Subject to the restrictions in Section III of this Security
Agreement, and to the extent not prohibited by law, Debtor will pay, or
reimburse Secured Party for, all costs and expenses, of every character,
incurred or expended from time to time (including, but not limited to, the
fees and expenses of counsel for Secured Party) in connection with the
negotiation, preparation, execution, filing, recording, refiling and re-
recording of this Agreement and all related financing statements and the
making, servicing and collection of the indebtedness secured hereby; any
and all stamp, mortgage and recording taxes; and all costs of negotiation,
preparation, execution and delivery of any and all amendments,
modifications, supplements, consents, waivers or other documents or
writings relating to the transactions contemplated by this Agreement.
Subject to the restrictions in Section III of this Security Agreement,
Debtor will reimburse Secured Party for all amounts expended by Secured
Party to satisfy any obligation of Debtor under this Agreement or to
protect the Collateral. In addition, whether or not a default shall have
occurred, subject to the restrictions in Section III of this Security
Agreement, Debtor will pay, or reimburse Secured Party for, all costs and
expenses, of every character incurred or expended from time to time in
connection with the evaluation, monitoring, administration and protection
of the Collateral and the exercise by Secured Party of any of its rights
and remedies hereunder or at law (including, but not limited to, all
appraisal fees, consulting fees, brokerage fees and commissions, insurance
premiums, Uniform Commercial Code search fees, investigation costs, escrow
fees, attorneys' fees, legal expenses, fees of auditors and accountants,
court costs, fees of governmental authorities, auctioneer fees and
expenses, and all fees and expenses incurred in connection with the auction
and liquidation of the Collateral). Any amount to be paid or reimbursed by
Debtor to Secured Party shall be a demand obligation owing by Debtor to
Secured Party and, to the extent not prohibited by law, shall bear interest
from the date of expenditure by Secured Party until paid at the Past Due
Rate.
(h) Debtor will not change its address, name, identity or structure
without notifying Secured Party of such change in writing at least thirty
(30) days prior to the effective date of such change.
(i) Debtor shall account fully and faithfully for and, if Secured Party
so elects, shall promptly pay or turn over to Secured Party the proceeds in
whatever form received from disposition in any manner of any of the
Collateral. Debtor shall at all times keep the Collateral and its proceeds
separate and distinct from other property of Debtor and shall keep accurate
and complete records of the Collateral and its proceeds.
(j) Debtor shall furnish Secured Party all such information as Secured
Party may request with respect to the Collateral.
(k) If Secured Party should at any time be of the opinion that the
Collateral is not sufficient or has declined or may decline in value, or
should a decline in the value of the Collateral cause any indebtedness
secured hereby to be in violation of 12 USC 84 or any regulation
implementing such law, or should Secured Party deem payment of Debtor's
obligations to Secured Party to be insecure, then Secured Party may call
for additional Collateral satisfactory to Secured Party, and Debtor
promises to furnish such additional security forthwith, but in no event
later than five days from the date Secured Party requests such additional
Collateral. The call for additional security may be oral or by telegram or
by United States Postal Service addressed to the address of Debtor shown at
the beginning of this Security Agreement.
5.2 Subject to the restrictions in Section III of this Security Agreement,
Debtor agrees that, if Debtor fails to perform any act or to take any
action which hereunder Debtor is required to perform or take, or to pay any
money which hereunder Debtor is required to pay, Secured Party, in Debtor's
name or in its own name, may but shall not be obligated to perform or cause
to be performed such act or take such action or pay such money, and any
expenses so incurred by Secured Party, and any money so paid by Secured
Party, shall be a demand obligation owing by Debtor to Secured Party and
Secured Party, upon making such payment, shall be subrogated to all of the
rights of the person, corporation or body politic receiving such payment.
Any amounts due and owing by Debtor to Secured Party pursuant to this
Security Agreement shall bear interest from the date such amount becomes
due until paid at the Past Due Rate and shall be a part of the secured
indebtedness and shall be secured by this Security Agreement and by any
other instrument securing the secured indebtedness.
SECTION VI. VOTING RIGHTS AND DIVIDENDS.
Unless and until an Event of Default, as hereinafter defined, shall have
occurred, Debtor shall be entitled to exercise all voting and consensual powers
and rights pertaining to the Collateral or any part thereof for all purposes not
inconsistent with the terms of this Security Agreement and shall be entitled to
receive and retain all dividends (other than stock or liquidating dividends) on
the Collateral or any part thereof, provided that all dividends in stock or
property representing stock, and all subscription, warrants or any other rights
or options issued in connection with the Collateral, and all liquidating
dividends or distributions or return of capital upon or in respect of the
Collateral or any part thereof, or resulting from any split, revision or
reclassification of the Collateral or any part thereof, or received in exchange
for the Collateral or any part thereof as a result of a merger, consolidation or
otherwise, shall be paid or transferred directly to Secured Party, or if paid to
or received by Debtor, shall be, immediately upon receipt thereof, paid over,
transferred and delivered to Secured Party and shall be Collateral pledged under
and subject to the terms of this Security Agreement.
SECTION VII. EVENTS OF DEFAULT.
Debtor shall be in default under this Security Agreement upon the happening of
any of the following events or conditions, herein called an "Event of Default":
(a) Debtor's failure to pay when due any of the secured indebtedness; or
(b) Default by Debtor in the punctual performance of any of the
obligations, covenants, terms or provisions contained or referred to in
this Security Agreement or in any indebtedness secured hereby; or
(c) any warranty or representation or statement contained in this
Agreement or made or furnished to Secured Party by or on behalf of Debtor
in connection with this Security Agreement or to induce Secured Party to
make a loan to Debtor shall prove to be false or misleading in any respect
when made or furnished; or
(d) loss, theft, substantial damage, destruction, sale or encumbrance of
or to any of the Collateral, or the making of any levy, seizure or
attachment thereof or thereon; or
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(e) Debtor's death, dissolution, termination of existence, insolvency or
business failure; the failure of Debtor or of any guarantor or surety for
Debtor generally to pay its debts as they become due; the appointment of a
receiver, trustee custodian or liquidator of all or any part of the
property of Debtor; an assignment for the benefit of creditors of Debtor;
the calling of a meeting of creditors of Debtor; or the commencement of any
proceeding under any bankruptcy, insolvency or reorganization laws by or
against Debtor or any guarantor or surety for Debtor; or
(f) any statement of the financial condition of Debtor or of any
guarantor, comaker, surety or endorser of any liability of Debtor to
Secured Party submitted to Secured Party by Debtor or any such guarantor,
surety or endorser proves to be false or misleading in any respect; or
(g) any guarantor, comaker, surety or endorser for Debtor defaults in any
obligation or liability to Secured Party; or
(h) any adverse material change shall occur in the assets, liabilities,
financial condition, business operations, affairs or circumstances of
Debtor.
SECTION VIII. REMEDIES IN EVENT OF DEFAULT.
8.1 Upon the occurrence of an Event of Default, or if Secured Party shall
deem payment of Debtor's obligations to Secured Party to be insecure, and
at any time thereafter, Secured Party shall have the option of declaring,
without notice to any person, all indebtedness secured hereby; principal
and accrued interest, to be immediately due and payable.
8.2 Upon the occurrence of an Event of Default, or if Secured Party shall
deem payment of Debtor's obligations to Secured Party to be insure, and at
any time thereafter, Secured Party may without notice, except as
thereinafter provided, sell the Collateral or any part thereof at public or
private sale or at any broker's board or on any securities exchange for
cash, upon credit, or for future delivery, and at such price or prices as
Secured Party may deem best, and Secured Party may be the purchaser of any
and all of the Collateral so sold and may apply upon the purchase price
therefor any indebtedness secured hereby or any part thereof, and
thereafter hold the same absolutely free from any right or claim of
whatsoever kind. Secured Party is authorized at any such sale, if Secured
Party deems it advisable so to do, to restrict the prospective bidders or
purchasers to persons who will represent and agree that they are purchasing
the Collateral for their own account for investment and not with a view to
the distribution or resale of any of the Collateral. Upon any such sale,
Secured Party shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or right of
whatsoever kind, including any equity or right of redemption, stay or
appraisal which Debtor has or may have under any rule of law or statute now
existing or hereafter adopted. Secured Party shall give Debtor ten (10)
days written notice mailed to Debtor at the address set forth herein (which
shall satisfy any requirement of notice or reasonable notice in any
applicable statute) of Secured Party's intention to make any such public or
private sale. Such notice, in case of public sale, shall state the time
and place fixed for such sale, and in case of sale at broker's board or on
a securities exchange, shall state the board or exchange at which such sale
is to be made and the day on which the Collateral or that portion thereof
so being sold will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within the
ordinary business hours and at such place or places as Secured Party may
fix in the notice of such sale. At any sale, the Collateral may be sold in
one lot as an entirety or in separate parcels as Secured Party may
determine.
Secured Party shall not be obligated to make any sale pursuant to any
such notice. Secured Party may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time
by announcement at any time and place fixed for the sale, and such sale may
be made at any time or place to which the same may be so adjourned. In
case of any sale of all or any part of the Collateral on credit or for
future delivery, the Collateral so sold may be retained by Secured Party
until the selling price is paid by the purchaser thereof, but Secured Party
shall incur no liability in case of the failure of such purchaser to take
up and pay for the Collateral so sold, and in case of any such failure,
such Collateral may again be sold upon like notice. Each and every method
of disposition described in this Section shall constitute disposition in a
commercially reasonable manner. Debtor, subject to the restrictions in
Section III of this Security Agreement, shall remain liable for any
deficiency.
8.3 Upon the occurrence of an Event of Default, or if Secured Party shall
deem payment of Debtor's obligations to Secured Party to be insecure, and
at any time thereafter, Secured Party shall have all the rights of a
secured party after default under the Uniform Commercial Code of Texas, and
in conjunction with, in addition to or in substitution for those rights and
remedies and the rights and remedies provided for herein:
(a) Written notice mailed to Debtor as provided herein ten (10) days
prior to the date of public sale of the Collateral or prior to the date
after which private sale of the Collateral will be made shall constitute
reasonable notice; and
(b) It shall not be necessary that the Collateral or any part thereof be
present at the location of such sale; and
(c) Prior to application of proceeds of disposition of the Collateral to
the secured indebtedness, such proceeds shall be applied, subject to the
restrictions in Section III of this Security Agreement, to the reasonable
expenses of retaking, holding, preparing for sale or lease, selling,
leasing and the like and the attorneys' fees and legal expenses incurred by
Secured Party, Debtor, subject to the restrictions in Section III of this
Security Agreement, to remain liable for any deficiency; and
(d) The sale by Secured Party of less than the whole of the Collateral
shall not exhaust the rights of Secured Party hereunder, and Secured Party
is specifically empowered to make successive sale or sales hereunder until
the whole of the Collateral shall be sold; and, if the proceeds of such
sale of less than the whole of the Collateral shall be less than the
aggregate of the indebtedness secured hereby, this Security Agreement and
the security interest created hereby shall remain in full force and effect
as to the unsold portion of the Collateral just as though no sale had been
made; and
(e) In the event any sale hereunder is not completed or is defective in
the opinion of Secured Party, such sale shall not exhaust the rights of
Secured Party hereunder and Secured Party shall have the right to cause a
subsequent sale or sales to be made hereunder; and
(f) Any and all statements of fact or other recitals made in any bill of
sale or assignment or other instrument evidencing any foreclosure sale
hereunder as to nonpayment of the indebtedness or as to the occurrence of
any default, or as to Secured Party having declared all of such
indebtedness to be due and payable, or as to notice of time, place and
terms of sale and the properties to be sold having been duly given, as to
any other act or thing having been duly done by Secured Party, shall be
taken as prima facie evidence of the truth of the facts so stated and
recited; and
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(g) Secured Party may appoint or delegate any one or more persons as
agent to perform any act or acts necessary or incident to any sale held by
Secured Party, including the sending of notices and the conduct of sale but
in the name and on behalf of Secured Party.
8.4 All remedies herein expressly provided for are cumulative of any and all
other remedies existing at law or in equity and are cumulative of any and
all other remedies provided for in any other instrument securing the
payment of the secured indebtedness, or any part thereof, or otherwise
benefiting Secured Party, and the resort to any remedy provided for
hereunder or under any such other instrument or provided for by law shall
not prevent the concurrent or subsequent employment of any other
appropriate remedy or remedies.
8.5 Secured Party may resort to any security given by this Security Agreement
or to any other security now existing or hereafter given to secure the
payment of the secured indebtedness, in whole or in part, and in such
portions and in such order as may seem best to Secured Party in its sole
and uncontrolled discretion, and any such action shall not be considered as
a waiver of any of the rights, benefits or security interests evidenced by
this Security Agreement.
8.6 Secured Party may at any time cause any or all of the Collateral to be
transferred into its name or into the name or names of any nominee or
nominees of Secured Party.
8.7 To the full extent Debtor may do so, Debtor agrees that Debtor will not
at any time insist upon, plead, claim or take the benefit or advantage of
any law now or hereafter in force provided for any appraisement, valuation,
stay, extension or redemption, and Debtor, for Debtor, Debtor's heirs,
devisees, personal representatives, receivers, trustees, successors and
assigns, and for any and all persons ever claim any interest in the
Collateral, to the extent permitted by law, hereby waives and releases all
rights of redemption, valuation, appraisement, stay of execution, notice of
intention to mature or declare due the whole of the secured indebtedness,
notice of election to mature or declare due the whole of the secure
indebtedness, and all rights to a marshaling of the assets of Debtor,
including the Collateral, or to a sale in inverse order of alienation in
the event of foreclosure of the security interest hereby created. If this
Security Agreement is governed by any of the Chapters, nothing herein shall
be construed to waive any right accruing to Debtor under such Chapter.
SECTION IX. ADDITIONAL AGREEMENTS.
9.1 If all of the secured indebtedness be paid as the same becomes due and
payable, and if all of the covenants, warranties, undertakings and
agreements made in this Security Agreement are kept and performed, then and
in that event only, all rights under this Security Agreement shall
terminate and the Collateral shall become wholly clear of the security
interest evidenced hereby, and such security interest shall be released by
Secured Party in due form and, subject to the restrictions in Section III
of this Security Agreement, at Debtor's cost.
9.2 Secured Party may waive any default without waiving any other prior or
subsequent default. Secured Party may remedy any default without waiving
the default remedied. The failure by Secured Party to exercise any right,
power or remedy upon any default shall not be construed as a waiver of such
default or as a waiver of the right to exercise any such right, power or
remedy at a later date. No single or partial exercise by Secured Party of
any right, power or remedy hereunder shall exhaust the same or shall
preclude any other or further exercise thereof, and every such right, power
or remedy hereunder may be exercised at any time and from time to time. No
modification or waiver of any provision hereof nor consent to any departure
by Debtor therefrom shall in any event be effective unless the same shall
be in writing and signed by Secured Party and then such waiver or consent
shall be effective only in the specific instances, for the purpose of which
given and to the extent therein specified. No notice to nor demand on
Debtor in any case shall of itself entitle Debtor to any other or further
notice or demand in similar or other circumstances. Acceptance by Secured
Party of any payment in an amount less than the amount then due on any
secured indebtedness shall be deemed an acceptance on account only and
shall not in any way affect the existence of a default hereunder.
9.3 Secured Party may at any time and from time to time in writing (a) waive
compliance by Debtor with any covenant herein made by Debtor to the extent
and the manner specified in such writing; (b) consent to Debtor's doing any
act which hereunder Debtor is prohibited from doing, or consent to Debtor's
failing to do any act which hereunder Debtor is required to do, to the
extent and in the manner specified in such writing; (c) release any part of
the Collateral, or any interest therein, from the security interest of this
Security Agreement; or (d) release any party liable, either directly or
indirectly, for the secured indebtedness or for any covenant herein or in
any other instrument now or hereafter securing the payment of the secured
indebtedness. No such act shall in any way impair the rights of Secured
Party hereunder, or impair or release the liability of any party except to
the extent specifically agreed to by Secured Party in such writing.
9.4 The security interest and other rights of Secured Party hereunder shall
not be impaired by any indulgence, moratorium or release granted by Secured
Party, including but not limited to (a) any renewal, extension or
modification which Secured Party may grant with respect to any secured
indebtedness; (b) any surrender, compromise, release, renewal, extension,
exchange or substitution which Secured Party may grant in respect of any
item of the Collateral, or any part thereof or any interest therein; or (c)
any release or indulgence granted to any indorser, guarantor or surety of
any secured indebtedness.
9.5 A carbon, photographic or other reproduction of this Security Agreement
or of any financing statement relating to this Security Agreement shall be
sufficient as a financing statement.
9.6 Debtor will cause all financing statements and confirmation statements
relating hereto to be recorded, filed, re-recorded and refiled in such
manner and in such places as Secured Party may reasonably request, and,
subject to the restrictions in Section III of this Security Agreement, will
pay all such recording, filing, re-recording and refiling taxes, fees and
other charges.
9.7 In the event the ownership of the Collateral or any part thereof becomes
vested in a person other than Debtor, Secured Party may, without notice to
Debtor, deal with such person with reference to this Security Agreement and
to the indebtedness secured hereby in the same manner as with Debtor,
without in any way vitiating or discharging Debtor's liability hereunder or
for the payment of the indebtedness secured hereby. No sale of the
Collateral, no forbearance on the part of Secured Party and no extension of
the time for the payment of the indebtedness secured hereby given by
Secured Party shall operate to release, discharge, modify, change or
affect, in whole or in part, the liability of Debtor hereunder or the
liability of any other person hereunder or for the payment of the
indebtedness secured hereby, except as agreed in writing by Secured Party.
9.8 If any part of the secured indebtedness cannot be lawfully secured by
this Security Agreement, or if any part of the Collateral cannot be
lawfully subject to the security interest hereof to the full extent of such
indebtedness, then all payments
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made shall be applied on said indebtedness first if discharge of that
portion thereof which is not secured by this Security Agreement.
9.9 Secured Party may assign this Security Agreement so that the assignee
shall be entitled to the rights and remedies of Secured Party hereunder.
9.10 Any notice, request, demand or other communication required or
permitted hereunder, or under any note, guaranty, loan agreement or other
instrument securing the payment of the secured indebtedness (unless
otherwise expressly provided therein) shall be given in writing by
delivering same in person to the intended addressee, or by United States
Postal Service, postage prepaid, registered or certified mail, return
receipt requested or by prepaid telegram (provided that such telegram is
confirmed by mail in the manner previously described), sent to the intended
addressee at the address shown in this Agreement, or to such different
address as the addressee shall have designated by written notice sent in
accordance herewith and actually received by the other party at least ten
(10) days in advance of the date upon which such change of address shall be
effective.
9.11 This Security Agreement shall be binding upon Debtor, and the heirs,
devisees, personal representatives, receivers, trustees, successors and
assigns of Debtor, including all successors in interest of Debtor in and to
all or any part of the Collateral, and shall inure to the benefit of
Secured Party and the successors and assigns of Secured Party.
9.12 Secured Party in its discretion may, whether or not any of the
indebtedness secured hereby be due, in its name or in the name of Debtor or
otherwise, demand, sue for, collect or receive any money or other property
at any time payable or receivable on account of or in exchange for, or make
any compromise or settlement deemed desirable with respect to, any of the
Collateral, but Secured Party shall be under no obligation so to do.
9.13 Whenever possible, each provision of this Security Agreement shall be
interpreted in such manner as to be effective and valid under applicable
law. A determination that any provision of this Security Agreement is
unenforceable or invalid shall not affect the enforceability or validity of
any other provision, and any determination that the application of any
provision of this Security Agreement to any person or circumstance is
illegal or unenforceable shall not affect the enforceability or validity of
such provision as it may apply to any other persons or circumstances.
9.14 Secured Party may, by any employee or employees it designates, execute,
sign, indorse, transfer or deliver in the name of Debtor, notes, checks,
drafts or other instruments for the payment of money and receipts or any
other document necessary to evidence, perfect and realize upon the security
interests and obligations of this Security Agreement.
9.15 Secured Party's duty with reference to the Collateral shall be solely
to use reasonable care in the custody and preservation of the Collateral in
Secured Party's possession. Secured Party shall not be responsible in any
way for any depreciation in the value of the Collateral, nor shall any duty
or responsibility whatsoever rest upon Secured Party to take necessary
steps to preserve rights against prior parties or to enforce collection of
the Collateral by legal proceedings or otherwise, the sole duty of the
Secured Party, its successors and assigns, being to receive collections,
remittances and payments on such Collateral as and when made. In the event
Debtor instructs Secured Party, in writing or orally, to deliver any or all
of the Collateral to a broker or other third person, and Secured Party
agrees to do so, the following conditions shall be conclusively deemed to
be a part of secured party's agreement, whether or not they are
specifically mentioned to Debtor at the time of such agreement. Secured
Party shall assume no responsibility for checking the genuineness or
authenticity of any person purporting to be a messenger, employee or
representative of the broker or other third person to whom Debtor has
directed Secured Party to deliver the Collateral, or the genuineness or
authenticity of any document or instructions delivered by any such person.
Debtor will be considered, by requesting any such delivery, to have assumed
all risk of loss as to the Collateral. Secured Party's sole responsibility
will be to deliver the Collateral to the person purporting to be the broker
or other third person described by Debtor, or a messenger, employee or
representative thereof. Secured Party and Debtor hereby expressly agree
that the foregoing actions by Secured Party shall constitute reasonable
care.
9.16 Notwithstanding anything to the contrary contained herein, if any
secured indebtedness shall be indebtedness resulting from an extension of
credit to a consumer (as such terms are defined or described in 12 C.F.R.
227, Regulation AA of the Federal Reserve Board) hereinafter referred to as
"consumer credit obligation" then the collateral securing any such consumer
credit obligation shall not extend to any nonpossessory security interest
in household goods which is not a purchase money security interest (as
defined in said Regulation AA), and no waiver of any notice herein shall be
construed under any circumstances to extend to any waiver of notice which
is prohibited by Regulation AA.
9.17 The term "Debtor" as used in this Security Agreement shall be construed
as singular or plural to correspond with the number of persons executing
this Security Agreement as Debtor. The pronouns used in this Security
Agreement are in the masculine gender but shall be construed as feminine or
neuter as occasion may require. "Secured Party" and "Debtor" as used in
this Security Agreement include the heirs, executors or administrators,
successors, representatives, receivers, trustees and assigns of those
parties.
9.18 If more than one person executes this Security Agreement as Debtor,
their obligations under this Security Agreement shall be joint and several.
9.19 The section headings appearing in this Security Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provision of this
Security Agreement. Terms used in this Security Agreement which are
defined in the Texas Uniform Commercial Code are used with the meanings as
therein defined.
9.20 This Security Agreement shall be governed by and construed in
accordance with the laws of the state of Texas and the United States of
America.
COLLATERAL DESCRIPTION
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<PAGE>
The Collateral of this Security Agreement is of the following description:
194,264 S/S OF TEXAS CITY NATIONAL BANK STOCK CERTIFICATE #2627 & 2628
129,671 S/S OF FIRST NATIONAL BANK OF PEARLAND CERTIFICATE #810-814
30,000 S/S OF FIRST BANK MAINLAND FORMALLY KNOWN AS DICKINSON STATE
BANK CERTIFICATE #542 & 543.
ALL CERTIFICATES ARE ISSUE TO TEXAS GULF COAST BANCORP, INC.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SIGNATURE(S) OF DEBTOR:
TEXAS GULF COAST BANCORP, INC. Date ___________________________
________________________________________ Date ___________________________
BY: TITLE:
________________________________________ Date ___________________________
________________________________________ Date ___________________________
________________________________________ Date ___________________________
________________________________________ Date ___________________________
SECURED PARTY: TEXAS COMMERCE BANK NATIONAL ASSOCIATION
BY: ___________________________________________________________________________
TITLE: ________________________________________________________________________
Page 7 of 7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 24,297,000
<INT-BEARING-DEPOSITS> 1,344,000
<FED-FUNDS-SOLD> 55,125,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,199,000
<INVESTMENTS-CARRYING> 115,114,000
<INVESTMENTS-MARKET> 115,996,000
<LOANS> 229,947,000
<ALLOWANCE> 2,801,000
<TOTAL-ASSETS> 464,149,000
<DEPOSITS> 412,539,000
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,685,000
<LONG-TERM> 3,276,000
<COMMON> 1,978,000
0
0
<OTHER-SE> 43,671,000
<TOTAL-LIABILITIES-AND-EQUITY> 464,149,000
<INTEREST-LOAN> 8,295,000
<INTEREST-INVEST> 2,548,000
<INTEREST-OTHER> 972,000
<INTEREST-TOTAL> 11,815,000
<INTEREST-DEPOSIT> 3,555,000
<INTEREST-EXPENSE> 3,633,000
<INTEREST-INCOME-NET> 8,182,000
<LOAN-LOSSES> 40,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,663,000
<INCOME-PRETAX> 3,460,000
<INCOME-PRE-EXTRAORDINARY> 3,460,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,429,000
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.63
<YIELD-ACTUAL> 4.57
<LOANS-NON> 1,657,000
<LOANS-PAST> 713,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,063,000
<CHARGE-OFFS> 94,000
<RECOVERIES> 54,000
<ALLOWANCE-CLOSE> 2,801,000
<ALLOWANCE-DOMESTIC> 2,801,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
