<PAGE> 1
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1995
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ______________ to ________________
Commission File No. 0-13668
CORPUS CHRISTI BANCSHARES, INC.
-------------------------------
(Exact name of Registrant as specified in its charter.)
Texas 74-2351663
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
2402 Leopard Street, Corpus Christi, Texas 78408
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(512) 887-3000
----------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past twelve months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at Aug. 11, 1995
- --------------------------------------------------------------------------------
<S> <C>
COMMON STOCK, $5.00 PAR VALUE 1,600,000
</TABLE>
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
1
<PAGE> 2
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX PAGE
NUMBER
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1995 and
December 31, 1994 3
Consolidated Statements of Income -
Three months and six months ended June 30, 1995 and 1994 5
Consolidated Statements of Changes in Stockholders'
Equity - Six months ended June 30, 1995 and June 30,1994 6
Consolidated Statements of Cash Flows -
Three months and six months ended June 30, 1995 and June 30, 1994 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 19
</TABLE>
2
<PAGE> 3
Part I. Financial Information
Item 1. Financial Statements
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 14,629,069 $ 15,138,696
Interest bearing deposits with Federal Home Loan Bank 21,917 22,321
Federal funds sold 15,450,000 5,900,000
Securities available for sale: (Note 3)
U.S. Treasury securities 29,435,781 39,712,210
Mortgage pass-through and related securities 3,847,265 3,886,140
Other securities 560,100 504,100
--------------------------------------------------
Total securities available for sale 33,843,146 44,102,450
Securities held to maturity: (Note 4)
U.S. Government agencies 3,004,159 3,005,108
Obligations of states and political subdivisions 3,761,735 3,762,935
--------------------------------------------------
Total securities held to maturity 6,765,894 6,768,043
Loans (Notes 5 and 6) 104,984,654 97,625,038
Less: Unearned discount (4,463,303) (3,538,959)
Less: Allowance for loan losses (1,953,437) (1,990,638)
--------------------------------------------------
Net loans 98,567,914 92,095,441
Bank premises and equipment, net 4,758,817 4,852,202
Accrued interest receivable 1,387,903 1,483,449
Other real estate 629,111 764,756
Other assets 664,096 402,298
--------------------------------------------------
Total assets $ 176,717,867 $ 171,529,656
==================================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
3
<PAGE> 4
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Demand $ 44,657,116 $ 43,932,959
Interest bearing transaction accounts 55,006,265 58,169,426
Savings 14,585,018 15,294,615
Certificates of deposit (Note 7) 44,003,897 40,261,543
--------------------------------------------------
Total deposits 158,252,296 157,658,543
Securities sold under agreements to repurchase 2,471,929 ----
Accrued interest payable 231,385 202,820
Dividends payable 100,000 100,000
Other liabilities 660,106 129,832
--------------------------------------------------
Total liabilities 161,715,716 158,091,195
--------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock, $5.00 par value;
4,000,000 shares authorized; 1,600,000
shares issued and outstanding 8,000,000 8,000,000
Retained earnings 7,162,571 6,497,204
Unrealized gains on securities available for sale (160,420) (1,058,743)
--------------------------------------------------
Total stockholders' equity 15,002,151 13,438,461
--------------------------------------------------
Total liabilities and stockholders' equity $ 176,717,867 $ 171,529,656
==================================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
4
<PAGE> 5
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six Months Ended June 30,
Interest income: 1995 1994 1995 1994
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest on loans $ 2,168,788 $ 1,637,320 $ 4,205,787 $ 3,096,364
Interest on deposits with other banks 853 1,307 1,674 1,477
Interest on federal funds sold 214,103 61,627 333,385 166,097
Interest on securities available for sale:
U.S Treasury securities 431,017 560,386 912,394 1,001,090
Mortgage pass-through and related securities 62,443 41,623 120,179 203,867
Other securities 9,014 5,181 16,928 6,886
Interest on securities held to maturity:
U.S. Government agencies 74,900 97,585 149,801 199,086
State and Political subdivisions 80,536 84,096 161,073 168,193
--------------------------------------------------------------------------
Total interest income 3,041,654 2,489,125 5,901,221 4,843,060
--------------------------------------------------------------------------
Interest expense:
Interest on deposits:
Interest bearing transaction accounts 496,272 301,137 962,692 580,752
Savings 135,765 98,235 260,916 189,029
Certificates of deposit 532,193 359,791 983,837 713,086
Securities sold with agreements to repurchase 21,846 ---- 21,885 ----
--------------------------------------------------------------------------
Total interest expense 1,186,076 759,163 2,229,330 1,482,867
--------------------------------------------------------------------------
Net interest income 1,855,578 1,729,962 3,671,891 3,360,193
Provision for loan losses (200,000) ---- (400,000) ----
--------------------------------------------------------------------------
Net interest income after provision
for loan losses 2,055,578 1,729,962 4,071,891 3,360,193
--------------------------------------------------------------------------
Other income:
Trust department income 294,541 329,249 605,124 585,677
Service charges 255,155 238,354 497,860 459,587
Credit Card fees 46,512 35,273 87,187 63,526
Net gains on sale of securities available
for sale ---- ---- ---- 165,081
Other income 168,621 91,450 301,429 187,052
--------------------------------------------------------------------------
Total other income 764,829 694,326 1,491,600 1,460,923
--------------------------------------------------------------------------
Other expenses:
Salaries and employee benefits 1,000,457 875,196 1,974,462 1,724,872
Occupancy expense 238,562 208,810 481,761 404,124
Furniture and equipment expenses 171,456 154,390 349,900 312,891
Net cost to operate other real estate 37,748 80,054 52,192 160,961
Legal and professional fees 159,465 218,198 330,223 357,088
Insurance expenses 95,426 94,708 197,856 188,852
Advertising expenses 36,691 69,910 83,998 136,634
Other operating expenses 402,116 294,808 773,056 598,741
--------------------------------------------------------------------------
Total other expense 2,141,921 1,996,074 4,243,448 3,884,163
--------------------------------------------------------------------------
Income before income taxes 678,486 428,214 1,320,043 936,953
Applicable income taxes 233,223 66,000 454,676 218,000
--------------------------------------------------------------------------
Net income $ 445,263 $ 362,214 $ 865,367 $ 718,953
==========================================================================
Weighted average of common stock and common
stock equivalents outstanding 1,681,260 1,675,523 1,680,348 1,678,508
==========================================================================
Net income per common share $ .26 $ .22 $ .51 $ .43
==========================================================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
5
<PAGE> 6
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Net
Unrealized
Gains(Losses) on
Securities
Common Retained Available for
Stock Surplus Earnings Sale Total
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $ 8,000,000 $ ---- $ 5,081,029 $ ---- $ 13,081,029
Effect of adoption of Statement
115 as of January 1, 1994 ---- ---- ---- 475,849 475,849
Net income for six months
ended June 30, 1994 ---- ---- 718,953 ---- 718,953
Cash dividends, declared,
$.1250 per share ---- ---- (200,000) ---- (200,000)
Net change in unrealized gains
on securities available for sale
for the six months ended
June 30, 1994 ---- ---- ---- (864,341) (864,341)
=========================================================================================
Balance at June 30, 1994 $ 8,000,000 $ ---- $ 5,599,982 $ (388,492) $ 13,211,490
=========================================================================================
Balance at January 1, 1995 $ 8,000,000 $ ---- $ 6,497,204 $ (1,058,743) $ 13,438,461
Net income for six months
ended June 30, 1995 ---- ---- 865,367 ---- 865,367
Cash dividends, declared,
$.1250 per share ---- ---- (200,000) ---- (200,000)
Net change in unrealized losses
on securities available for sale
for the six months ended
June 30, 1995 ---- ---- ---- 898,323 898,323
-----------------------------------------------------------------------------------------
Balance at June 30, 1995 $ 8,000,000 $ ---- $ 7,162,571 $ (160,420) $ 15,002,151
=========================================================================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
6
<PAGE> 7
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
Cash flows from operating activities: 1995 1994 1995 1994
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 445,263 $ 362,214 $ 865,367 $ 718,953
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 164,121 133,122 323,575 260,266
Provision for loan losses (200,000) ---- (400,000) ----
Deferred Federal income tax expense 78,111 ---- 160,630 ----
Loss on sale of property and equipment ---- ---- ---- ----
Gain on sale of securities available for sale ---- ---- ---- (165,081)
Gain on sale of other real estate ---- (2,863) (18,344) (2,863)
Net amortization of investment securities available
for sale and securities held to maturity 105,876 136,180 228,068 238,504
Valuation provisions for other real estate 30,000 60,000 60,000 132,832
Decrease (increase) in accrued interest receivable (104,749) (230,277) 95,546 28,450
Decrease (increase) in other assets 229,389 (188,786) (261,798) (195,070)
Increase (decrease) in accrued interest payable 13,131 (9,741) 28,565 (858)
Increase(decrease) in other liabilities 119,316 34,525 530,274 245,894
---------------------------------------------------------------------------
Net cash provided by operating activities 880,458 294,374 1,611,883 1,261,027
---------------------------------------------------------------------------
Cash flows from investing activities:
Net decrease(increase) in federal funds sold (5,125,000) 8,730,000 (9,550,000) 17,323,000
Proceeds from sales of securities available for sale ---- ---- ---- 3,392,102
Proceeds from maturities of securities available
for sale 5,848,933 1,258,800 12,765,828 4,463,212
Proceeds from maturities of securities held
to maturity ---- ---- ---- 1,976,602
Purchase of securities available for sale (56,000) (4,716,368) (1,994,750) (17,622,912)
Purchase of securities held to maturity ---- ---- ---- ----
Net increase in loans (2,898,991) (7,252,267) (6,578,317) (7,499,625)
Recoveries of charged-off loans 350,417 248,404 505,844 416,580
Purchase of bank premises and equipment (96,789) (376,784) (230,190) (668,611)
Proceeds from sale of bank premises and equipment ---- ----- ---- ----
Proceeds from sale of other real estate 4,300 118,917 93,989 140,246
---------------------------------------------------------------------------
Net cash provided by investing activities (1,973,130) (1,989,298) (4,987,596) 1,920,594
---------------------------------------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in demand, interest bearing
transaction and savings accounts (1,509,290) 277,723 (3,148,601) (1,846,719)
Net increase (decrease) in certificates of deposit 2,561,502 1,982,443 3,742,354 1,905,499
Net increase(decrease) in securities sold with
agreements to repurchase 2,068,929 ---- 2,471,929 ----
Dividends paid (100,000) (100,000) (200,000) (200,000)
---------------------------------------------------------------------------
Net cash used by financing activities 3,021,141 2,160,166 2,865,682 (141,220)
---------------------------------------------------------------------------
Net increase(decrease) in cash and
cash equivalents 1,928,469 465,242 (510,031) 3,040,401
Cash and cash equivalents at beginning
of period 12,722,517 11,323,477 15,161,017 8,748,318
---------------------------------------------------------------------------
Cash and cash equivalents at end of quarter $ 14,650,986 $ 11,788,719 $ 14,650,986 $ 11,788,719
===========================================================================
Supplementary Information:
Interest paid $ 1,172,945 $ 768,904 $ 2,200,765 $ 1,483,725
===========================================================================
Income taxes paid $ 260,000 $ 152,000 $ 260,000 $ 153,600
===========================================================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
7
<PAGE> 8
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Consolidated Financial Statements herein have been prepared by
Corpus Christi Bancshares, Inc. ("the Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. The consolidated financial statements include all
adjustments (including normal recurring accruals) which, in the
opinion of management, are necessary for the fair presentation of the
results of the periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto in the Company's latest Annual Report
on Form 10-KSB.
2. Principles of Consolidation
The consolidated financial statements for the Company include the
accounts of Corpus Christi Bancshares, Inc. and its wholly owned
subsidiaries, C.S.B.C.C., Inc. and Citizens State Bank ("Bank"),
consolidated in accordance with generally accepted accounting
principles. All major items of income and expense are recorded on the
accrual basis of accounting, and all significant intercompany accounts
and transactions have been eliminated. In the opinion of management,
the consolidated financial statements present fairly the results of the
periods presented. These statements have not been examined by
independent public accountants and are subject to year-end audit and
adjustments.
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers cash, due from bank accounts and interest bearing deposits
with the Federal Home Loan Bank to be cash equivalent accounts.
Net Income Per Common Share
Primary net income per share is computed on the weighted average number
of shares of common stock outstanding, including common stock assumed
outstanding to reflect the potential dilutive effect of common stock
options. Fully diluted net income per share is computed on the
weighted average number of shares of common stock outstanding,
including the common stock assumed outstanding to reflect the maximum
dilutive effect of common stock options. Fully diluted net income per
share was not applicable for the periods presented because the effect
is not dilutive.
3. Securities Available for Sale
Management determines the appropriate classification of securities at
the time of purchase. Securities to be held for sale for indefinite
periods of time and not intended to be held to maturity or on a
long-term basis are classified as securities available for sale and are
carried at market value.
The securities available for sale portfolio provides the Company with
an additional measure of liquidity and added flexibility in managing
the Company's asset liability management strategy and such securities
may be sold in response to changes in interest rates, resultant
prepayment risk and other factors related to interest rate and
resultant risk changes.
Included in securities classified as securities available for sale are
mortgage pass-through and related securities which represent
participating interest in pools of long-term first mortgage loans
originated and serviced by the issuers of the securities. Mortgage
pass-through and related securities are carried at unpaid principal
balances, adjusted for unamortized premiums and unearned discounts.
Premiums and discounts are amortized using the
8
<PAGE> 9
straight-line method over the remaining period to contractual maturity.
The net unrealized gains or losses on securities available for sale are
recorded as a separate component of stockholders' equity.
The amortized cost and market value of securities available for sale at
June 30, 1995 and December 31, 1994 were as follows:
<TABLE>
<CAPTION>
June 30, 1995
----------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 29,423,787 $ 165,818 $ (153,824) $ 29,435,781
Mortgage pass-through and
related securities 3,857,678 19,675 (30,088) 3,847,265
Other securities 560,100 ---- ---- 560,100
----------------------------------------------------------------------
$ 33,841,565 $ 185,493 $ (183,912) $ 33,843,146
======================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 40,708,000 $ 2,477 $ (998,267) $ 39,712,210
Mortgage pass-through and
related securities 4,044,077 7,612 (165,549) 3,886,140
Other securities 504,100 ---- ---- 504,100
----------------------------------------------------------------------
$ 45,256,177 $ 10,089 $ (1,163,816) $ 44,102,450
======================================================================
</TABLE>
Securities available for sale with market values of $6,639,453 at June 30, 1995
were pledged to secure public deposits and for other purposes required or
permitted by law.
9
<PAGE> 10
4. Securities Held to Maturity
Securities held to maturity are stated at cost adjusted for
amortization of premium and accretion of discounts which are recognized
as adjustments to interest income. Management determines the
appropriate classification of securities at the time of purchase.
Securities held to maturity are acquired for long term investment
purposes. Management is of the opinion that the Company has the
intention and ability to hold such securities to maturity.
The amortized cost and approximate market value of securities
classified as held to maturity at June 30, 1995 and December 31, 1994
are as follows:
<TABLE>
<CAPTION>
June 30, 1995
-----------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agencies $ 3,004,159 $ 78,029 $ ---- $ 3,082,188
Obligations of states and
political subdivisions 3,761,735 172,363 (776) 3,933,322
-----------------------------------------------------------------------
$ 6,765,894 $ 250,392 $ (776) $ 7,015,510
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government agencies $ 3,005,108 $ 72,705 $ ---- $ 3,077,813
Obligations of states and
political subdivisions 3,762,935 49,974 (34,604) 3,778,305
------------------------------------------------------------------------
$ 6,768,043 $ 122,679 $ (34,604) $ 6,856,118
========================================================================
</TABLE>
Securities held to maturity with amortized costs of $575,415 at June 30, 1995
were pledged to secure public and trust- fund deposits and for other purposes
required or permitted by law.
10
<PAGE> 11
5. Loans
Major classifications of loans as of June 30, 1995 and December 31,
1994 are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-----------------------------------------
<S> <C> <C>
Commercial and Industrial $ 27,306,912 $ 26,819,212
Energy 1,535,319 2,017,322
Installment 35,130,113 28,766,338
Real estate-construction 1,412,828 1,228,717
Real estate-mortgage 38,717,324 38,183,212
Agricultural 847,896 585,414
Other 34,262 24,823
-----------------------------------------
104,984,654 97,625,038
Unearned discount (4,463,303) (3,538,959)
-----------------------------------------
100,521,351 94,086,079
Allowance for loan losses (1,953,437) (1,990,638)
-----------------------------------------
$ 98,567,914 $ 92,095,441
=========================================
</TABLE>
6. Allowance for Loan Losses
Transactions in the allowance for loan losses for the months ending
June 30, 1995, and for the year ended December 31, 1994 are summarized
as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------------------------------------------
<S> <C> <C>
Balance at beginning of period $ 1,990,638 $ 1,794,380
Loans charged-off (143,045) (455,179)
Recoveries on loans 505,844 951,437
-------------------------------------------
Net loans recovered 362,799 496,258
Provisions charged to operating expenses (400,000) (300,000)
-------------------------------------------
Balance at end of period $ 1,953,437 $ 1,990,638
===========================================
</TABLE>
7. Certificates of Deposit
Included in certificates of deposits are certificates of deposits in
denominations of $100,000 or more aggregating $11,789,446 and
$10,502,219 at June 30, 1995 and December 31, 1994, respectively.
Interest expense on certificates of deposits in denominations of
$100,000 or more amounted to $261,338 and $183,597 for the six months
ended June 30, 1995 and June 30, 1994, respectively.
8. Nonqualified Stock Option Plan
On October 20, 1993, the Board of Directors authorized 160,000 shares
of Company common stock for issuance under a nonqualified stock option
plan for directors and key officers who the Board of Directors believe
have a significant impact on the profitability of the Company. The
options were granted in 1993 at an option price of $5 per common share,
the estimated market value per common share on the date of the grant.
At June 30, 1995, options for all 160,000 shares were outstanding, all
of which are exercisable, as no options were exercised through that
date. Expiration dates are ten (10) years from the date of the grant.
11
<PAGE> 12
Item 2.
CORPUS CHRISTI BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion highlights the major changes affecting the operations
and condition of the Company for the quarter and six months ended June 30,
1995 as compared to the same periods of 1994.
Overall Performance:
The Company had second quarter 1995 net income of $445,263, or $.26 net income
per share, up $83,049, compared to $362,214, or $.22 net income per share for
the same quarter of 1994. At March 31, 1995, the Company had net income of
$420,104, or $.25 net income per share.
The Company's net income for the six months ended June 30, 1995 was $865,367,
or $.51 net income per share, up $146,414, compared to $718,953, or $.43 net
income per share, for the same period of 1994. The increase in net income for
the six months period ended June 30,1995 compared to the same period of 1994 is
attributable in large part to the increase in net interest income totaling
$311,698 and to a $400,000 "negative" provision for loan losses made during the
six months ended June 30, 1995.
Provision for Loan Losses
A factor in the Company's operating results during the second quarter of 1995
and the six months ended June 30, 1995 was the provision for loan losses. The
Company made a $200,000 "negative" provision for loan losses during the second
quarter of 1995 and had "negative" provisions for loan losses of $400,000 for
the six months ended June 30, 1995. The Company had no provisions for loan
losses for the second quarter ended June 30, 1994 or for the six months ended
June 30, 1994. The "negative" provisions for loan losses made in the first and
second quarters of 1995 were the result of continued improvement in credit
quality and recoveries on loans previously charged off. The Company had net
recoveries totaling $362,799 for the six months ended June 30, 1995 compared to
net recoveries totaling $187,964 for the same period in 1994.
The allowance for loan losses is established through charges to operations in
the form of provisions for loan losses. Loan losses (or recoveries) are
charged (or credited) directly to the allowance for loan losses. The provision
for loan losses is determined by management, based upon considerations of
several factors including: (1) a continuing review by management of the
portfolio with particular emphasis on problem loans; (2) regular examination of
the loan portfolio; (3) loss experience on various types of loans in relation
to outstanding loans; and (4) an ongoing assessment of current and anticipated
economic conditions in the market place served by the subsidiary bank.
The Company's Credit Review Committee ("CRC"), independent consultants, and
Federal and State regulators, conduct periodic examinations of the Company's
subsidiary bank to make evaluations of the subsidiary bank's loan portfolio. In
addition, appropriate regulatory authorities and independent consultants make
evaluations of the effectiveness of the Company's loan review and
administrative functions and make periodic reports to the Company's Board of
Directors.
12
<PAGE> 13
As the Company's CRC examines the loan portfolio, loans are assigned a risk
grading which is used to determine the reserve requirements for each loan. In
addition, to these specific allocations of reserves, an appropriate amount is
set aside to recognize the likelihood that there are unidentified additional
risks in the portfolio.
While there is no precise method of predicting loan losses, it is the judgment
of the Company's management that the allowance for loan losses at June 30,
1995, was adequate to absorb possible losses from the loans in the portfolio at
that date.
Nonperforming assets and past-due accounts:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------------------------------------------------
<S> <C> <C>
Nonperforming assets:
Nonaccrual loans $ 101,819 $ 312,657
Other real estate 629,111 764,756
------------------------------------------------------
$ 730,930 $ 1,077,413
======================================================
Accruing loans past due 90 days or more $ ---- $ ----
======================================================
</TABLE>
Generally, the accrual of income is discontinued when the full collection of
principal and interest is in doubt, or when the payment of principal or
interest has become contractually 90 days past due unless the obligation is
well secured and in the process of collection. Loans are not restored to full
earnings status until the borrower's ability to make payments of principal and
interest at original or prevailing market terms has been demonstrated through
substantial performance on the loan over an extended period of time. At June
30, 1995, nonaccrual loans totaled $101,819 compared to $312,657 and $571,401
at December 31, 1994 and June 30, 1994, respectively. Further information
regarding the balance of nonaccrual loans at June 30, 1995, and related
interest payment information, is as follows:
<TABLE>
<CAPTION>
Book Contractual
Balance Balance
--------------------------------------------------------
<S> <C> <C>
Nonaccrual loans at December 31, 1994 $ 312,657 $ 624,678
Additions ---- ----
Reductions-principal payments (192,503) (387,782)
Reductions-interest payments (18,335) ----
Charge-offs ---- ----
Transferred to other real estate ---- ----
--------------------------------------------------------
Nonaccrual loans at June 30, 1995 $ 101,819 $ 236,896
========================================================
</TABLE>
13
<PAGE> 14
The Company considers a nonaccrual loan to have substantial performance if
eighty (80%) percent of principal payment and interest is collected.
<TABLE>
<CAPTION>
Cash interest payments in 1995
applied as:
Book Balance Contractual ------------------------------------------------------
at Balance at Recoveries of
June 30, June 30, Interest Prior Partial Reduction of
1995 1995 Income Charge-offs Principal
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contractually past due with:
substantial performance $ 3,809 $ 43,563 $ ---- $ ---- $ 1,950
limited performance ---- ---- ---- ---- ----
no performance ---- ---- ----
Contractually current, however:
payment in full of principal
or interest in doubt 98,010 193,333 ---- ---- 16,385
----------------------------------------------------------------------------------------------
$ 101,819 $ 236,896 $ ---- $ ---- $ 18,335
==============================================================================================
</TABLE>
Total nonperforming assets declined to $730,930 at June 30, 1995, down
$346,483, compared to $1,077,413 at December 31, 1994, a trend that has
continued since year-end 1988. Nonperforming assets at June 30, 1994 totaled
$1,659,166. The reduction in the level of nonperforming assets has been the
result of management's efforts to reduce the levels of nonperforming assets and
classified assets by reducing the risk associated with the lending process. The
credit process, from loan approval and origination through ongoing loan
reviews, has been strengthened through improved policy statements thus assuring
better credit underwriting.
As part of the Credit Review Committee process, loans are graded according to
risk. Loans having a greater degree of risk, but not necessarily a greater
potential for loss, are placed on a watchlist. Such loans are performing and
are either considered to be collateralized or higher reserves are allocated for
unsecured exposures. The total amount of such loans at June 30, 1995 and
December 31, 1994 not classified as nonaccrual, restructured, or past due 90
days and still accruing in the above table totaled $4.2 million and $4.2
million, respectively. Such loans totaled $3.9 million at June 30, 1994.
In addition, a substantial amount of the Company's nonperforming assets are
attributable to other real estate located in the Corpus Christi, Texas area.
Other real estate at June 30, 1995 was $629,111, down $135,645, compared to
$764,756 at December 31, 1994. Other real estate totaled $1,087,765 at June 30,
1994. Other real estate has been adjusted to estimated fair value less
estimated selling costs, if lower than cost, and includes some income producing
property.
With respect to other real estate, management of the Company believes it has
made appropriate valuations, using independent appraisers, of these properties
based on strict appraisal guidelines. The carrying value of other real estate
is reviewed at least annually and the valuation allowance is revised through
subsequent valuation provisions charged to other operating expenses. During the
quarter ended June 30, 1995, the Company made valuation provisions for other
real estate totaling $30,000 compared to $60,000 for the same quarter of 1994.
For the six months ended June 30, 1995, the Company made valuation provisions
for other real estate totaling $60,000 compared to $132,832 for the same period
of 1994. In the opinion of management, this appraisal process results in values
which represent approximate current market conditions at June 30, 1995.
14
<PAGE> 15
Net Interest Income
Net interest income (the difference between interest income and interest
expense) for the quarter ended June 30, 1995 was $1,855,578, up $125,616,
compared to $1,729,962 for the same quarter of 1994. Net interest income for
the six months ended June 30, 1995 was $3,671,891, up $311,698, compared to
$3,360,193 for the same period of 1994. The increase for the second quarter and
the six months ended June 30, 1995 was largely attributable to the increase in
the prime lending rate and the increase in earning assets.
Earning assets at June 30, 1995 were $156.5 million, up $12.4 million, compared
to $144.1 million at June 30, 1994. The yield on earning assets at June 30,
1995 was 8.1% compared to 7.0% for the same period last year. Interest-bearing
liabilities at June 30, 1995 were $116.1 million, up $10.2 million, compared to
$105.9 million at June 30, 1994. Yields on interest-bearing liabilities were
4.2% at June 30, 1995 compared to 2.9% at June 30, 1994. Net interest income as
a percentage of average earning assets ("net interest margin") was 5.0% at June
30, 1995 compared to 5.0% at June 30, 1994. The net interest margin averaged
4.7% in 1994.
Noninterest Income
Noninterest income for the six months ended June 30, 1995 was 1,491,600, up
$30,677, compared to $1,460,923 for the same period of 1994. Trust fees for the
six months ended June 30, 1995 were $605,124, up $19,477, compared to $585,677
for the same period last year. The increase was largely attributable to
non-recurring estate and stock transfer fees collected during 1995 totaling
approximately $50,000. Service charges on deposit accounts were $497,860 for
the six months ended June 30, 1995, up $38,273, compared to $459,587 for the
same period in 1994. The increase was largely attributable to an increase in
nonsufficient fund charges totaling $43,357. Credit card fees were $87,187 for
the six months ended June 30, 1995, up $23,661 compared to $63,526 for the same
period last year. The increase in credit card fees was the result of increased
fees charged on Visa/Mastercard merchant services accounts during late 1994.
The Company had no gains on sale of securities available for sale during the
six months ended June 30, 1995. The net gains on sale of securities available
for sale of $165,081 during the six months ended June 30,1994 was attributable
to a restructuring of the securities available for sale portfolio to capitalize
on reinvestment in other securities without a substantial reduction in interest
rates or increased investment risk exposure and to position the Company to fund
future loan growth. Other income totaled $301,429 for the six months ended June
30, 1995, up $114,377, compared to $187,052 for the same period in 1994. The
increase in other income for the first six months of 1995 was largely
attributable to increases in fees generated from investment services totaling
approximately $115,284.
Noninterest income for the second quarter ended June 30, 1995 was $764,829, up
$70,503, compared to $694,326 for the same quarter of 1994.
The following table details the changes in noninterest income for the six
months ended June 30, 1995 as compared with the same period of 1994.
<TABLE>
<CAPTION>
Change for the
Six Months Ended
June 30, June 30, June 30, 1995
1995 1994 Amount Percentage
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trust department income $ 605,124 $ 585,677 $ 19,447 3.3
Service charges 497,860 459,587 38,273 8.3
Credit card fees 87,187 63,526 23,661 37.2
Net gains on sale of securities available
for sale ---- 165,081 (165,081) (100.0)
Other income 301,429 187,052 114,377 61.1
------------------------------------------------------------------------------
Total noninterest income $ 1,491,600 $ 1,460,923 $ 30,677 2.1
==============================================================================
</TABLE>
15
<PAGE> 16
Noninterest expenses
The Company's noninterest expenses were $4,243,448 for the six months ended
June 30, 1995, up $359,285, compared to $3,884,163 for the same period of 1994.
Salaries and employee benefits for the six months ended June 30, 1995 were
$1,974,462, up $249,590, compared to $1,724,872 for the same period of 1994.
The increase in salaries and employee benefits was primarily attributable to
the increase in staff to operate the new South and West Banking facilities
opened in 1994, the additional staffing required to offer Saturday banking
during 1994, and to a three percent (3%) merit increase in salaries approved in
1995. Full time equivalent employees at June 30, 1995 were 130 compared to 128
employees for the same period last year. Net occupancy expenses were $481,761
for the six months ended June 30, 1995, up $77,637, compared to $404,124 for
the same period last year. Furniture and equipment cost totaled $349,900 for
the six months ended June 30, 1995, up $37,009, compared to $312,891 for the
same period last year. The increase in net occupancy expenses and furniture and
equipment cost for the six months ended June 30,1994 compared to the same
period of 1994 was largely attributable to the opening of the South and West
Banking facility and to the additions of motor bank lanes at the Village
Banking Center. Net cost to operate other real estate was $52,192 for the six
months ended June 30, 1995, down $108,769, compared to $160,961 for the same
period of 1994. The decrease in net cost to operate other real estate was
primarily attributable to a decrease in valuation provisions on other real
estate in 1995 totaling $72,832. Legal and professional fees were $330,223 for
the six months ended June 30, 1995, down $26,865, compared to $357,088 for the
same period in 1994. The decrease was largely attributable to a decrease in
legal fees associated with the Company's subsidiary bank totaling $103,731 in
1995. Insurance expenses for the six months ended June 30, 1995 were $197,856,
up $9,004, compared to $188,852 for the same period in 1994. Advertising
expenses totaled $83,998 at June 30, 1995, down $52,636, compared to $136,634
for the same period last year. Other operating expenses totaled $773,056 for
the six months ended June 30, 1995, up $174,315, compared to $598,741 for the
same period last year. The increase in other operating income was largely
attributable to increases in the Company's printing and mailing expenses
related to its 1995 proxy and 1994 annual report totaling approximately
$57,789; increases in postage and freight charges totaling $26,891; increases
in expenses related to Visa/Mastercard merchant services totaling $16,967; and
increases in automated teller machine interchange fees totaling $25,140.
Noninterest expenses for the second quarter ended June 30, 1995 were
$2,141,921, up $145,847, compared to $1,996,074 for the same period last year.
The following table details the changes in noninterest expenses for the six
months ended June 30,1995 as compared to the same period of 1994.
<TABLE>
<CAPTION>
Change for the
Six Months Ended
June 30, June 30, June 30, 1995
1995 1994 Amount Percentage
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 1,974,462 $ 1,724,872 $ 249,590 14.5
Occupancy expenses 481,761 404,124 77,637 19.2
Furniture and equipment expenses 349,900 312,891 37,009 11.8
Net cost to operate other real estate 52,192 160,961 (108,769) (67.6)
Legal and professional fees 330,223 357,088 (26,865) (7.5)
Insurance expenses 197,856 188,852 9,004 4.8
Advertising expenses 83,998 136,634 (52,636) (38.5)
Other operating expenses 773,056 598,741 174,315 29.1
------------------------------------------------------------------------------
Total noninterest expenses $ 4,243,448 $ 3,884,163 $ 359,285 9.25
==============================================================================
</TABLE>
16
<PAGE> 17
Liquidity
Generally, the Company's largest source of funds is provided through deposits.
Total deposits at June 30, 1995 were $158.3 million compared to $157.7 million
at December 31, 1994. Total deposits at June 30, 1995 of $158.3 were up $11.5
million, or 7.8%, compared to total deposits of $146.8 at June 30, 1994. In
addition, at June 30, 1995 and at December 31, 1994, the Company had
approximately $15.5 million and $5.9 million, respectively, in federal funds
sold that could be readily converted to cash. Another source of liquidity, if
the need arises, could come from the liquidation of securities available for
sale totaling $33.8 million at June 30, 1995.
Funds are also generated through loan payoffs. Currently, management believes
that it has an adequate level of liquidity to meet its financial obligations
that will arise during the normal course of business in the coming year.
One principal ratio measurement used by regulatory authorities to measure
liquidity is the ratio of net loans to total deposits. At June 30, 1995, the
Company's ratio of net loans to total deposits was 62.3%, compared to 58.4% at
December 31, 1994. The Company's ratio of net loans to total deposits at June
30, 1994 was 57.4%. At June 30, 1995, the Company's net loans to total deposits
ratio of 62.3% compared favorably to peer banking institutions in Texas with
similar asset sizes which had net loans to total deposit ratios ranging from a
low of 36%, median of 49% and a high of 63% at December 31, 1994. The Company's
long-term strategy projects loan growth to 65% to 70% of total deposits.
Capital Resources
The Company and the Bank are required by federal regulations to meet certain
minimum regulatory guidelines utilizing a risk-based capital framework that
became effective on December 31, 1992. The Company and the Bank must have a
minimum ratio of Tier 1 capital to total risk-adjusted assets of not less than
4%, a ratio of combined Tier 1 and Tier 2 capital to total risk-adjusted assets
of not less than 8% and a leverage ratio of not less than 4%. For the purposes
of these ratios, stockholders' equity does not include unrealized gains or
losses on securities available for sale in accordance with regulatory
guidelines. At June 30, 1995, the Company and the Bank each had a Tier 1
capital ratio of 14.0%, combined Tier 1 and Tier 2 capital ratio of 15.4% and
leverage ratio of 8.6%. At December 31, 1994, the Company and the Bank each had
a Tier 1 capital ratio of 14.6%, combined Tier 1 and Tier 2 capital ratio of
16.0% and leverage ratio of 8.4%.
The Company's equity to assets ratio is one indicator that management uses to
monitor capital adequacy. At June 30, 1995, the Company's equity to assets
ratio was 8.6% compared to 8.4% at December 31, 1994. The Company's equity to
asset ratio at June 30, 1994 was 8.2%.
At June 30, 1995, the Company's subsidiary bank had an equity ratio of 8.6%,
which exceeds the minimum requirement guideline of 6.0% by the Texas Department
of Banking.
Other Matters
On July 5, 1995, the Company announced that its subsidiary bank, Citizens State
Bank of Corpus Christi, Texas had entered into definitive agreement to acquire
The First National Bank of Taft, Texas. A letter of intent regarding the
acquisition had been entered into on April 4, 1995. The First National Bank had
total assets of approximately $40 million at December 31, 1994, and is located
approximately 20 miles from Corpus Christi, Texas. The purchase price for the
proposed acquisition will be approximately $8.1 million, subject to certain
adjustments. The definitive agreement is subject to certain conditions and
approvals, including regulatory approvals and approval by shareholders of The
First National Bank.
17
<PAGE> 18
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The 1995 Annual Meeting of the Shareholders of Corpus Christi Bancshares,
Inc. was held on May 31, 1995 at 3:00 P.M. (Central Daylight Savings Time) at
Citizens State Bank of Corpus Christi, 2402 Leopard Street, Corpus Christi,
Texas.
(b) Not applicable.
(c) A brief description of matters voted upon at the Annual Meeting including
the number of votes cast for, against or abstained from voting are as follows:
To ratify the selection of KPMG Peat Marwick as the independent
auditors of the Company for the current fiscal year.
For: 1,339,500 Against: 88,192 Abstained: 25,303
To amend the Company's Amended Articles of Incorporation to
increase the authorized shares of Common Stock from 2,000,000
shares to 4,000,000 shares.
For: 969,256 Against: 343,235 Abstained: 132,294
To amend the Company's Amended Bylaws to require shareholder
approval for the issuance of stock options to key employees or
directors of the Company and its subsidiaries.
For: 526,750 Against: 799,282 Abstained: 22,124
A shareholder proposal to require shareholders to vote on any
written purchase, merger or consolidation offer where the
aggregate consideration for such offer equals 150% or more of the
then current book value of the issued and outstanding shares of
the Company's Common Stock.
For: 503,595 Against: 820,922 Abstained: 23,639
(d) Not applicable.
18
<PAGE> 19
Item 6. Exhibits and reports on Form-8k.
(a) Exhibits: See Index to Exhibits, Page 21.
(b) The Company was not required to file any report on Form 8-K
during the six-month period ending June 30, 1995.
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.
CORPUS CHRISTI BANCSHARES, INC.
REGISTRANT
Date: August 11, 1995 /s/John T. Wright, III
----------------------------------------
John T. Wright, III
Chairman of the Board
Date: August 11, 1995 /s/R. Jay Phillips
----------------------------------------
R. Jay Phillips
President and Chief Executive Officer
Date: August 11, 1995 /s/Jimmy M. Knioum
----------------------------------------
Jimmy M. Knioum
Treasurer
19
<PAGE> 20
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
EXHIBITS
TO
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
___________________
For the Quarter Ended June 30, 1995
Commission File Number 0-13668
___________________
CORPUS CHRISTI BANCSHARES, INC.
20
<PAGE> 21
CORPUS CHRISTI BANCSHARES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Pages
<S> <C> <C>
10.5 Agreement and Plan of Merger between Citizen State Bank
and The First National Bank of Taft ________
27 Financial Data Schedule ________
</TABLE>
21
<PAGE> 1
Exhibit 10.5
22
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 5, 1995, by and
between Citizens State Bank of Corpus Christi, a bank organized under the laws
of the State of Texas ("Citizens"), and The First National Bank of Taft, a
national banking association ("Taft").
W I T N E S S E T H :
WHEREAS, the respective Boards of Directors of Citizens and
Taft have each determined that it is in the best interests of Citizens and Taft
and their respective shareholders for Taft to merge with and into Citizens (the
"Merger"), with Citizens to be the surviving corporation of the Merger (the
"Surviving Corporation"); and
WHEREAS, the respective Boards of Directors of Citizens and
Taft have each approved the Merger, upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants, agreements and conditions herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
(a) Except as the context may otherwise require, the terms
set forth below shall have the following meanings:
"Affiliate" means any Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the Person specified. For purposes of this definition,
the term "control" (including, with correlative meaning, the terms "controlled
by" and "under common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the Person specified, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this agreement and all schedules, appendices
and exhibits hereto, as the same may be amended from time to time pursuant to
Section 9.11.
"Banking Approvals" shall have the meaning ascribed to it in
Section 3.36.
<PAGE> 3
"Citizens Common Stock" means the common stock of Citizens,
par value $5.00 per share.
"Citizens Material Adverse Effect" means a material adverse
effect on the business, prospects, financial condition or results of operations
of Citizens and its Subsidiaries taken as a whole.
"Closing" shall have the meaning ascribed to it in Section 2.4.
"Closing Date" shall have the meaning ascribed to it in
Section 2.4.
"Closing Date Balance Sheet" means the balance sheet of Taft
dated as of the Closing Date and prepared in accordance with GAAP (as defined
below), which Taft shall deliver to Citizens at the Closing.
"Closing Date Income Statement" means the income statement for
the period from December 31, 1994 to the Closing Date, prepared in accordance
with GAAP, which Taft shall deliver to Citizens no later than five days after
the Closing; provided, however, that Taft shall deliver to Citizens no less
than five days prior to the Closing Date a preliminary Closing Date Income
Statement dated no less than five days prior to the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"December 31, 1994 Financial Statements" shall have the
meaning ascribed to it in Section 3.4.
"Effective Time" shall have the meaning ascribed to it in
Section 2.5.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Agent" shall have the meaning ascribed to it in
Section 2.8.
"Extraordinary Earnings" means, for purposes of calculating
the Purchase Price hereunder, gains recognized on the sale of or marking to
market of any assets sold or held by Taft, negative provisions to the allowance
for loan and lease loss, valuation reserves, any other reserve accounts, and
any other income item not recognized in the ordinary course of business, unless
mutually agreeable to Taft and Citizens.
"FDIC" shall have the meaning ascribed to it in Section 3.1.
2
<PAGE> 4
"Federal Reserve Board" shall have the meaning ascribed to it
in Section 3.16(b).
"Financial Statements" shall have the meaning ascribed to in
it Section 3.4.
"GAAP" shall have the meaning ascribed to it in paragraph (b)
below.
"Governmental Authority" means any court, tribunal,
arbitrator, authority, agency, commission, department, unit, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"IRS" means the Internal Revenue Service.
"Law" means any law, statute, rule, regulation, ordinance,
order, code, arbitration award, judgment, decree or other legal requirement of
any Governmental Authority.
"Lien" means any mortgage, security interest, charge,
encumbrance, lien, assessment, easement, covenant, claim, title defect, pledge,
encroachment, right of first refusal, preemptive right or other encumbrance of
any kind whatsoever.
"Loans" shall have the meaning ascribed to it in Section
3.16(a).
"Original Balance Sheet" shall have the meaning ascribed to it
in Section 3.4.
"PBGC" shall have the meaning ascribed to it in Section
3.11(l).
"Permits" means all permits, licenses, certificates,
franchises and other authorizations, filings, consents and approvals of any
Governmental Authority necessary for any Person to conduct its business as
presently conducted.
"Person" means and includes an individual, a partnership, a
joint venture, a corporation, a trust, an estate, an unincorporated
organization and any Governmental Authority.
"Plan" shall have the meaning ascribed to it in Section
3.11(a).
"Purchase Price" means the amount calculated as follows: (a)
$8,085,734, plus (b) Taft's net income (of if there is no net income, then less
Taft's net losses) recorded from December 31, 1994 through the Effective Time,
if any, in accordance with GAAP applied on a consistent basis, excluding
Extraordinary Earnings, as shown on the Closing Date Income Statement, less (c)
any dividends or other distributions declared
3
<PAGE> 5
or paid after December 31, 1994 (other than a dividend of $630,000 shown as a
dividend payable on Taft's balance sheet as of December 31, 1994).
"Regulatory Agencies" shall have the meaning ascribed to it in
Section 3.16(b).
"Representatives" means, with respect to any party, the
directors, officers and employees of such party or its Subsidiaries and its
accountants, counsel, financial advisors and other such representatives.
"State Regulator" shall have the meaning ascribed to it in
Section 3.16(b).
"SRO" shall have the meaning ascribed to it in Section 3.16(b).
"Subsidiary" means, with respect to any Person, any
corporation or other organization, whether incorporated or unincorporated, of
which more than 50% of either the equity interests in, or the voting control
of, such corporation or other organization is, directly or indirectly, through
subsidiaries or otherwise, beneficially owned by such Person.
"Surviving Corporation" shall have the meaning ascribed to it
in Section 2.1(a).
"Taft Material Adverse Effect" means a material adverse effect
on the business, prospects, financial condition or results of operations of
Taft.
"Taft Stockholder Approval" means adoption of this Agreement
by two-thirds of the stockholders of Taft entitled to vote thereon at a meeting
of such holders held for such purpose, as required under the 12 U.S.C. Section
214a.
"Taxes" means any federal, state, county, local or foreign
taxes, fees, levies, other assessments, withholding taxes or other charges
imposed by any Governmental Authority, and includes any interest and penalties
(civil or criminal) on or additions to any such taxes and any expenses incurred
in connection with the determination, settlement or litigation of any tax
liability.
"TBCA" means the Texas Business Corporations Act.
"Transaction Document" means any agreement, document,
certificate or other instrument delivered or to be delivered pursuant to this
Agreement in connection with the transactions contemplated hereby.
(b) Except as the context may otherwise require, (i) words of
any gender include the other gender; (ii) words using
4
<PAGE> 6
the singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; and (iv) the term "including"
means "including, but not limited to." Whenever this Agreement refers to a
number of days, such number shall refer to calendar days unless business days
are specified. All accounting terms used herein and not expressly defined
herein shall have the meanings given to them under generally accepted
accounting principles ("GAAP").
ARTICLE II
MERGER AND CONVERSION OF SHARES
2.1 THE MERGER.
(a) Upon the terms and subject to the conditions of this
Agreement, at the Effective Time Taft shall be merged with and into Citizens,
whereupon Taft's separate corporate existence shall cease, and Citizens shall
be the Surviving Corporation.
(b) Upon the Merger, Citizens will continue to be
governed by the laws of the State of Texas and all of its rights, privileges,
powers and franchises, public or private, and all of its duties and liabilities
as a corporation organized under the TBCA will continue unaffected by the
Merger. The Merger shall have the effects set forth in the TBCA and this
Agreement.
2.2 ARTICLES OF INCORPORATION AND BY-LAWS OF SURVIVING
CORPORATION. The Articles of Incorporation and By-Laws of Citizens in effect
immediately prior to the Effective Time will be the Articles of Incorporation
and By-Laws of the Surviving Corporation, until duly amended in accordance
with their terms and the TBCA.
2.3 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The
directors and officers of Citizens immediately prior to the Effective Time
shall be the directors and officers, respectively, of the Surviving
Corporation, from and after the Effective Time, until their successors have
been duly elected and qualified or until their earlier death, resignation or
removal in accordance with the terms of the Surviving Corporation's Articles of
Incorporation and By-Laws and the TBCA.
2.4 CLOSING. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at the offices of
Kleberg & Head, P.C., 500 N. Water Street, Suite 1200 N, Corpus Christi, Texas
78471 at 10:00 a.m., local time, on the date which is five business days after
all conditions set forth in Article VII (other than conditions with respect to
actions the respective parties are to take at the Closing) have been satisfied
or waived, or at such other place, time or date as Taft and Citizens may agree
(the "Closing Date").
5
<PAGE> 7
2.5 EFFECTIVE TIME; CONDITIONS. As soon as practicable
following the Closing and the satisfaction or waiver (if permitted) of the
conditions specified in Article VII, Taft and Citizens shall cause a
certificate of merger, substantially in the form of Exhibit A hereto (the
"Certificate of Merger"), to be executed and filed with the Secretary of State
of the State of Texas as provided in the TBCA. The Merger shall become
effective on the date on which the Certificate of Merger has been duly filed
with the Secretary of State of the State of Texas or at the time specified as
the effective time in the Certificate of Merger, which shall be on the last day
of a calendar month, and such time is hereinafter referred to as the "Effective
Time."
2.6 CONTINUANCE OF CITIZENS COMMON STOCK. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holders thereof, each share of Citizens Common Stock outstanding
immediately prior to the Effective Time shall continue to be an issued and
outstanding share of Citizens Common Stock, par value $5.00 per share, of the
Surviving Corporation and thereafter constitute all of the issued and
outstanding shares of capital stock of the Surviving Corporation ("Surviving
Corporation Common Stock").
2.7 CANCELLATION OF TAFT CAPITAL STOCK. At the Effective
Time, without any action on the part of the holders thereof, each share of
capital stock of Taft outstanding or held in Taft's treasury or the treasury of
any of Taft's Subsidiaries immediately prior to the Effective Time (other than
shares which have not been voted in favor of the approval of this Agreement
with respect to which appraisal rights have been perfected in accordance with
12 U.S.C. Section 214a) and each option or other right to purchase any
capital stock of Taft in existence immediately prior to the Effective Time,
shall be canceled and extinguished without payment of any consideration
therefor.
2.8 EXCHANGE OF CERTIFICATES. Any time after the fifth
day after the Effective Time, each holder of a certificate theretofore
evidencing outstanding shares of Taft Common Stock, upon surrender of the same
to such agent or agents (the "Exchange Agent") as may be appointed by Citizens,
shall be entitled to receive in exchange for each share of Taft Common Stock
theretofore represented by the certificate surrendered, the Purchase Price
divided by the number of issued and outstanding shares of Taft Common Stock
immediately prior to the Effective Time. Holders of shares who have lost or
misplaced their certificates shall be entitled to receive a substitute
certificate in the manner described in Section 8.405(b) of the Texas Business
and Commerce Code, and upon their surrender of the same, shall likewise receive
their proportionate share of the Purchase Price, just as Taft stockholders
whose certificates had not been lost. Citizens shall cause to be deposited
with the Exchange Agent, on or prior to the Effective Time, the Purchase Price
(calculated using the preliminary Closing Date Income Statement). On the date
the Closing Date Income Statement is
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delivered to Citizens, Citizens will deposit with the Exchange Agent the
difference between the Purchase Price calculated using the final Closing Date
Income Statement and the Purchase Price calculated using the preliminary
Closing Date Income Statement, if positive, or Exchange Agent will deliver to
Citizens the difference between the Purchase Price calculated using the final
Closing Date Income Statement and the Purchase Price calculated using the
preliminary Closing Date Income Statement, if negative. Exchange Agent will
then hold the Purchase Price in its possession for distribution to holders of
Taft Common Stock. Citizens shall cause the Exchange Agent, as soon as
practicable after the fifth day after the Effective Time, to send a notice and
transmittal form to each holder of an outstanding certificate which immediately
prior to the Effective Time evidenced shares of Taft Common Stock, advising
such holder of the terms of the exchange effected by the Merger and the
procedure for surrendering to the Exchange Agent (which may appoint forwarding
agents) such certificate for exchange for cash. After the Effective Time,
there shall be no further registry of transfers on the records of Taft of
shares of Taft Common Stock and, if a certificate representing shares of Taft
Common Stock is presented to the Surviving Corporation, such certificate shall
be cancelled and exchanged as herein provided.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TAFT
Taft hereby represents and warrants to Citizens as set forth
in this Article III. All representations and warranties of Taft made in this
Agreement shall be deemed to have been made as of the date of this Agreement,
and if the transactions contemplated by this Agreement are consummated, as of
the Closing Date and as of the Effective Time (or on the date as of which made
in the case of any representation or warranty which separately relates to an
earlier date). The omission of an item from one section of the Schedule shall
not constitute a breach of the corresponding representation and warranty in
this Agreement if such item is disclosed in another section of the Schedule.
3.1 CORPORATE EXISTENCE AND QUALIFICATION. Taft is a
national banking association duly organized and validly existing under the laws
of the United States and has the requisite power and authority to own, lease
and operate its assets and properties and to carry on its business as now
conducted. The deposit accounts of Taft are insured by the Federal Deposit
Insurance Corporation ("FDIC") to the fullest extent permitted by law, and all
premiums and assessments required in connection therewith have been paid by
Taft. Taft is qualified or licensed to do business in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
businesses conducted by it makes such qualification or licensing necessary,
except where the failure to be so qualified will not, when taken
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together with all other such failures, have a Taft Material Adverse Effect.
3.2 CAPITALIZATION. The authorized capital stock of Taft
consists of 90,000 shares of Common Stock, par value $5.00 per share, of which
90,000 are validly issued and outstanding, fully paid and nonassessable and
constitute the Taft Common Shares. The Taft Common Shares represent the only
issued and outstanding capital stock of Taft. Other than this Agreement,
neither Taft nor any of its Affiliates has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments, agreements, or other
rights of any character providing for the purchase or issuance of or
outstanding securities convertible into, any shares of any class of the stock
of Taft, or any interest therein, or any securities representing the right to
purchase or otherwise receive any shares of any class of stock of Taft, or any
interest therein, nor are there any obligations to pay any dividend or to make
any other shareholder distribution in respect thereof, or any agreements to do
any of the foregoing.
3.3 AUTHORITY; APPROVALS; NON-CONTRAVENTION.
(a) Taft has full corporate power and authority and has taken
all corporate action necessary to enter into this Agreement and the Transaction
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. This Agreement has been, and the Transaction
Documents, when executed and delivered pursuant to this Agreement by Taft will
be, duly and validly executed and delivered by Taft, and this Agreement
constitutes, and the Transaction Documents to be executed and delivered by Taft
will constitute, valid and binding agreements of Taft enforceable against Taft
in accordance with their respective terms.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required to be obtained or made by or with respect to Taft in connection with
the execution and delivery of this Agreement by Taft or the performance by Taft
of the transactions contemplated hereby, except (i) for the filing of any
required applications or notices with any federal or state Governmental
Authority regulating banks and banking and approval of such applications (the
"Banking Approvals"), (ii) for the filing of the Certificate of Merger with the
Secretary of State of the State of Texas pursuant to the TBCA and of
appropriate documents with the relevant authorities of other states in which
Taft or any of its Subsidiaries is authorized to do business, (iii) for any
consents, approvals, authorizations and filings required under any
environmental, health or safety Law, and (iv) for any consents, approvals,
orders, authorizations, registrations, declarations or filings, which, if not
obtained or made, would not, in the aggregate, have a Taft Material Adverse
Effect or materially and adversely affect the ability of Taft to consummate the
transactions contemplated hereby.
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(c) The execution and delivery of this Agreement and the
Transaction Documents by Taft do not, and as of the Effective Time the
consummation by Taft of the transactions contemplated hereby and thereby will
not, and assuming that the filings, registrations and declarations referred to
in clauses (i) through (iv), inclusive, of Section 3.3(b) have been made, the
consents, approvals, orders and authorizations referred to therein shall have
been obtained and shall remain in full force and effect, and the conditions set
forth in Article VII shall have been satisfied or waived, the performance by
Taft of the transactions contemplated hereby and by the Transaction Documents
will not violate, conflict with or result in a breach of any provision of, or
constitute a default (or result in any event which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Lien upon
any of the properties or assets of Taft or any of its Subsidiaries under, any
of the terms, conditions or provisions of (i) the respective certificates of
incorporation or by-laws of Taft, (ii) any judgment, decree, order or award of
any Governmental Authority applicable to Taft, or any law, rule or regulation
applicable to Taft, or (iii) any note, bond, mortgage, indenture, deed of
trust, Permit, lease, agreement or other instrument to which Taft is now a
party or by which Taft or any of its properties or assets may be bound or
subject and to which the Surviving Corporation or any of its Subsidiaries also
will be a party or by which the Surviving Corporation or any of its
Subsidiaries or any of their respective properties or assets may be bound or
subject from and after the Effective Time, which, in the aggregate, would have
a Taft Material Adverse Effect or materially and adversely affect the ability
of Taft to consummate the transactions contemplated hereby or thereby.
3.4 FINANCIAL STATEMENTS. Taft has previously delivered
to Citizens copies of (a) the audited statement of income of Taft for the year
ended December 31, 1994 and an audited balance sheet as of December 31, 1994 of
Taft (collectively, the "December 31, 1994 Financial Statements") and (b) the
unaudited statement of income of Taft for the three months ended March 31, 1995
and an unaudited balance sheet as of March 31, 1995 of Taft (the "Original
Balance Sheet") (collectively with the December 31, 1994 Financial Statements,
the "Financial Statements"). The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the respective
periods covered by such statements (except as may be indicated in the notes
thereto) and fairly present (subject, in the case of interim periods, to audit
adjustments normal in nature and amount) the financial position of Taft as of
the respective dates thereof and the results of its operations for the period
covered thereby.
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3.5 SUBSIDIARIES OF TAFT. Taft does not own any equity
interest, directly or indirectly, in any Subsidiary.
3.6 UNDISCLOSED LIABILITIES. Taft does not have any
liabilities or obligations of any nature required to be shown on a balance
sheet prepared in accordance with GAAP applied on a consistent basis, except
for liabilities or obligations stated on the Financial Statements and the
Closing Date Balance Sheet or described in the notes thereto, or liabilities or
obligations incurred in the ordinary course of business since March 31, 1995
which would not have a Taft Material Adverse Effect.
3.7 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Sections 3.9 and 3.11(t) hereof, since March 31, 1995, Taft has conducted its
business in the usual and ordinary course consistent with its past practice,
and there has not been any change in the properties, assets, business,
prospects or condition of Taft, financial or otherwise, other than changes in
the ordinary course of business and consistent with prudent banking practices
that have not in any one case or in the aggregate had a Taft Material Adverse
Effect; any adoption of, or increase in, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee
benefit plan for or with any employees of Taft; any cancellation or waiver of
any claims or rights with a value to Taft in excess of $10,000 or which in the
aggregate exceeds $25,000; any damage, destruction or loss, not covered by
insurance, materially and adversely affecting the properties, assets, business,
or condition, financial or otherwise, of Taft; any change in the rate of
compensation, bonus or other direct or indirect remuneration payable, or any
payment or agreement to pay any bonus, extra compensation, pension or insurance
or vacation pay to any director, officer, employee or agent of Taft (except to
officers, directors or employees in the ordinary course of business, in an
amount less than $10,000 and consistent with past practices) or any agreement
whether or not in writing as to any of the foregoing.
3.8 LEGAL PROCEEDINGS. Taft is not a party to any legal,
administrative, arbitral or other proceedings, actions or governmental
investigations pending nor, to the best knowledge of Taft, threatened, against
or affecting Taft thereof which is or could be reasonably expected to result in
a Taft Material Adverse Effect, nor is there any judgment, decree, injunction,
rule or order of any governmental entity or arbitrator, outstanding against
Taft having, or which, insofar as reasonably can be foreseen, in the future
could have, such Taft Material Adverse Effect.
3.9 MATERIAL CONTRACTS. Schedule 3.9 is a complete and
accurate list of the following contracts, agreements, and other written
arrangements (hereinafter collectively referred to as "Contracts"), to which
Taft is a party or any of its assets
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are subject on the date hereof, which meet one or more of the following
criteria:
(i) any Contract (including without limitation
the lease of real or personal property from or to third parties)
providing for payments in excess of $10,000 per annum or in excess of
$25,000 for the remaining term of the Contract;
(ii) any Contract under which Taft is
participating or has agreed to participate as a general partner, joint
venturer or venture capital or similar investor;
(iii) any Contract which shall survive the Closing
under which Taft has created, incurred, assumed, or guaranteed (or may
create, incur, assume, or guarantee) indebtedness for borrowed money
(including without limitation capitalized lease obligations);
(iv) any Contract which shall survive the Closing
that imposes noncompetition obligations upon Taft;
(v) any employment or employee benefit contract
Taft and any of its employees, officers or directors; and
(vi) any other Contract which shall survive the
Closing that will impose any material obligations of the Surviving
Corporation.
Taft has made available to Citizens a correct and complete
copy of each written Contract listed on Schedule 3.9. Except as otherwise
provided on Schedule 3.9, with respect to each Contract so listed: (A) the
Contract is in full force and effect; (B) Taft is not in breach or default
thereof which breach or default would result in a Taft Material Adverse Effect,
and to its knowledge no event has occurred which with notice or lapse of time
or both would constitute such a breach or default by Taft to such Contract, or
permit termination, modification, or acceleration against Taft under the
Contract; and (C) Taft has not repudiated or waived any provision of any such
Contract which repudiation or waiver would result in a Taft Material Adverse
Effect. Except as disclosed on Schedule 3.9, with respect to any lease
disclosed pursuant to this Section 3.9, all rents and other amounts currently
due thereunder have been paid; no waiver or indulgence or postponement of any
material obligation thereunder has been granted by any lessor or sublessor; and
Taft has received no notice that it has materially breached any term,
condition, or covenant.
Taft has entered into a Data processing Service Agreement
("EDS Agreement") with Electronic Data Systems Corporation ("EDS") dated July
21, 1989 which contains an automatic renewal provision that extended the term
of the EDS
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Agreement to July 21, 1998, with a liquidated damages provision for early
termination that would require a payment of 80% of projected service charges
until the end of the contract term. Taft will, at Citizens' request, negotiate
a termination of the EDS Agreement as of the Effective Time, and Taft will pay
any liquidated damages associated with the termination of the EDS Agreement at
such time. If the Surviving Corporation utilizes EDS for data processing
services for any period of time after the Effective Time, the Surviving
Corporation shall be solely liable for all charges for such services after said
date.
3.10 TAXES.
(a) Taft has duly filed (or there has been duly filed on
its behalf) with the appropriate federal, state, local, and foreign taxing
authorities all Tax Returns or other reports required to be filed by or with
respect to Taft for Taxes due or incurred on or before the date hereof, and
such tax returns and reports are true, correct and complete in all material
respects and, as of the time of filing, correctly in all material respects
reflected the facts regarding the income, business, activities, status and
other relevant matters of Taft or any other information required to be shown
thereon. Taft has delivered to Citizens true and complete copies of all such
Tax Returns since December 31, 1988. All monies which Taft is required by law
to withhold from employees, creditors, stockholders and independent third
parties have been withheld and either timely paid to the proper governmental
authority or set aside in accounts for such purposes and accrued on the books
of Taft. Taft has paid in full on a timely basis (or there has been paid on
its behalf) all Taxes due on such tax returns and reports. No claim has been
made by any Governmental Authority in a jurisdiction where Taft does not file a
tax return that Taft is or may be subject to taxation in that jurisdiction. The
balance for Taxes on each of the balance sheets contained in the Financial
Statements and the Closing Date Balance Sheet for the payment of all accrued
but unpaid Taxes through the date thereof has been determined in accordance
with GAAP applied on a consistent basis.
(b) Neither Taft nor any Affiliate thereof has received
any notice of a deficiency or assessment with respect to Taxes of Taft from any
federal, state, local, or foreign taxing authority which has not been fully
paid or finally settled; there are no ongoing audits or examinations of any tax
return or report which includes Taft and no notice of audit or examination of
any such tax return or report has been received by Taft or any of its
Affiliates; Taft has not given nor has there been given on its behalf a waiver
or extension of any statute of limitations relating to the payment of Taxes of
Taft; the federal income tax returns of Taft have been audited by the IRS or
are closed by the applicable statute of limitations for all periods through
December 1988; and no issue has been raised in writing on audit or in any other
proceeding (and is currently pending) with respect to Taxes of Taft by any
federal, state, local, or foreign
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taxing authority which, if resolved against Taft, would have a Taft Material
Adverse Effect.
(c) Taft has not filed a consent under Section 341(f) of
the Code concerning collapsible corporations or any similar provision under
state, local or foreign laws. Taft has not made any payments, is not obligated
to make any payments, and is not a party to any contract, agreement or other
arrangement that could obligate it to make any payments that would not be
deductible under Section 280G of the Code.
(d) There are no Tax balances recorded on the books of
Taft that represent assets, refunds or receivables, and no such balances will
be recorded on the Closing Date Balance Sheet except for deferred tax benefits
authorized by GAAP applied on a consistent basis, if any.
(e) All material elections with respect to Taxes
affecting Taft as of the date hereof have been made. After the date hereof, no
election with respect to Taxes will be made or rescinded without the written
consent of Citizens.
(f) Taft has not agreed to make nor is it required to
make any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
(g) Taft has not participated in and will not
participate in an international boycott within the meaning of Section 999 of
the Code.
(h) Taft is not and has not been a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(i) Taft is not a person other than a United States
person within the meaning of the Code.
(j) Taft does not have and has not had a permanent
establishment in any foreign country, as defined in any applicable tax treaty
or convention between the United States and such foreign country.
(k) Taft is not required to report and pay any Taxes on
income from any joint venture, partnership, or other arrangement or contract
that could be treated as a partnership for federal income tax purposes.
(l) Taft has established a reserve for federal income
taxes payable, with the amount of estimated income taxes payable through the
end of each month credited to said reserve account on the last day of each
month. Said reserve for federal income taxes payable shall be merged into the
Surviving Corporation, which will assume all liability for the payment of all
federal
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income taxes of Taft through the Effective Time. The Surviving Corporation
shall file a final federal income tax return for Taft, and pay all federal
income taxes owing on income earned by Taft through the Effective time, when
due.
(m) Taft has never been a member of a group of
corporations filing a consolidated Tax return, and Taft is not a party to any
Tax allocation or sharing agreement.
(n) No stockholder of Taft (including through
attribution under Code Section 318) owns 50% or more of the stock of Citizens
by vote or value (including through attribution under Code Section 318).
3.11 ERISA.
(a) Taft has heretofore established an employee
retirement plan ("Plan") for the benefit of its existing employees, its
terminated-vested employees, and its retired employees. Taft has delivered to
Citizens a summary of the Plan, a true and complete copy of which has
heretofore been examined by Citizens. Other than the Plan, there is no
employee benefit, compensation or welfare benefit plan, program or agreement
maintained or contributed to or required to be contributed to by Taft, nor does
Taft have any commitment to create any additional employee benefit,
compensation or welfare benefit plan, program or agreement or modify or change
the Plan that would affect any employee or terminated employee of Taft.
(b) All contributions to, and distributions from, the
Plan which are due have been paid. All contributions to, and distributions
from, the Plan (except those to be made from a trust) for any period ending on
or before the Closing Date which are not yet due have been paid or will be
timely paid by Taft.
(c) The Plan has been operated and administered and
complies in all material respects with applicable laws, including without
limitation the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code, and the Plan is "qualified" within the meaning of
Section 401(a) of the Code.
(d) Except as set forth on Schedule 3.11(a), the Plan
provides benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former employees beyond
their retirement or other termination of service (other than (i) coverage
mandated by applicable law or (ii) death benefits or retirement benefits under
any "employee pension plan," as that term is defined in Section 3(2) of ERISA).
(e) Except for claims for benefits in the normal
operation of the Plan, there is no pending or, to the best knowledge of Taft,
threatened litigation in any court or governmental agency with respect to the
Plan.
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(f) Except for retirement benefits which are to be paid
by the Plan, the consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional acts
or events) (i) entitle any current or former employee of Taft to severance pay,
unemployment compensation, or any other payment, benefit or award, or (ii)
accelerate or modify the time of payment or vesting, or increase the amount of
any benefit, award, or compensation due any such employee.
(g) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to the
Plan except where failure to file would have no Taft Material Adverse Effect.
(h) All insurance premiums or other payments under any
insurance policy related to the Plan, and any premium imposed under ERISA
Section 4007 that is required for or payable with respect to the Plan for any
period ending on or before the Closing Date shall have been paid or will be
timely paid by Taft.
(i) The Plan has assets sufficient on a plan termination
basis to be eligible on the Closing Date for standard termination pursuant to
ERISA Section 4041 without Taft being required to make any additional
contributions. The Plan has assets equal to or greater than the Plan's
projected benefit obligation based on the assumptions used in the Original
Balance Sheet. No liability of the Plan has been satisfied by the purchase of
an annuity contract issued by an insurance carrier.
(j) All trusts covering employees and former employees
of Taft that are intended to comply with the provisions of Code Section
501(c)(9) or Section 501(c)(17) are exempt from federal income taxation.
(k) The Plan has not incurred or does not have an
"accumulated funding deficiency" within the meaning of ERISA Section 302 or
Code Section 412, nor has any waiver of the minimum funding standards of ERISA
Section 302 or Code Section 412 been requested, or granted, with respect to the
Plan.
(l) The Pension Benefit Guaranty Corporation ("PBGC")
has not instituted proceedings to terminate the Plan or to appoint a trustee or
administrator of the Plan, and no circumstances exist that constitute grounds
under ERISA Section 4042 for any such proceeding.
(m) No liability under Title IV of ERISA has been
incurred, or is expected to be incurred, for any period ending on or before the
Closing Date that could result in liability to Taft.
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(n) The Plan is not a "multiemployer plan" as defined in
Section 3(37) of ERISA. Taft has no liability or potential liability with
respect to any withdrawal from a multiemployer plan by any "person" within the
meaning of ERISA Section 3(9) that would be regarded together with Taft as a
single employer under Code Sections 414(b), (c), (m) or (o) (a "Controlled
Group Member"), including any withdrawal liability arising from the actions of
Taft or any other Controlled Group Member contemplated by this Agreement.
(o) There has been no "reportable event" within the
meaning of ERISA Section 4043 and the regulations and interpretations
thereunder that has not been fully or accurately reported in a timely fashion,
as required, or which, whether or not reported, would authorize the PBGC to
institute termination proceedings with respect to the Plan.
(p) The Plan does not provide for "parachute payments"
within the meaning of Code Section 280G.
(q) No employee or former employee is entitled to claim
or receive severance pay or benefits under the Plan.
(r) Taft has not engaged in a "prohibited transaction"
(within the meaning of Code Section 4975 or Title I, Part IV of ERISA) for
which no exemption applies.
(s) All liabilities under GAAP for the Plan are properly
reflected in the Original Balance Sheet and will be reflected on the Closing
Date Balance Sheet.
(t) Taft intends to amend the Plan to terminate the
Plan, to provide notice of intent to terminate the Plan to all Plan
beneficiaries, to provide notice to the PBGC, to seek a favorable determination
letter from the IRS, and thereafter to provide a cost of living adjustment for
all Plan beneficiaries, to provide an annuity for previously retired employees,
to provide an annuity or lump sum payment to terminated-vested employees (at
their option), to provide an annuity or lump sum payment to existing employees
(at their option), and to allocate all excess Plan assets to existing employees
or Plan beneficiaries.
3.12 OWNERSHIP OF PROPERTY. Taft has good and marketable
title to all assets and properties, whether real or personal, tangible or
intangible, reflected in each of the Original Balance Sheet and the Closing
Date Balance Sheet as being owned by it at such date, or acquired subsequent
thereto (except to the extent that such assets and properties have a fair
market value less than $10,000, and have been disposed of in the ordinary
course of business and consistent with prudent banking practices since the date
of the Original Balance Sheet or the Closing Date Balance Sheet, as
applicable), subject to no material encumbrances, except (i) those assets and
properties
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that secure liabilities that are reflected on each of the Original Balance
Sheet and the Closing Date Balance Sheet, as the case may be, or the notes
thereto or were incurred in the ordinary course of business and consistent with
prudent banking practices after the date thereof, (ii) statutory liens for
amounts not yet delinquent or which are being contested in good faith, (iii)
with respect to Real Estate Owned ("REO") by Taft, (iv) with respect to assets
and properties acquired subsequent to the date of the Original Balance Sheet
and the Closing Date Balance Sheet, encumbrances created in connection with the
acquisition thereof and (v) such encumbrances that do not in the aggregate
materially detract from the value or interfere with the use or operations of
the assets and properties subject thereto. All leases pursuant to which Taft,
as lessee, leases real or personal property are valid and enforceable in
accordance with their respective terms.
3.13 BROKERS AND FINDERS. Neither Taft nor any of its
officers, directors, employees, or agents has employed any broker, finder, or
financial advisor or incurred any liability for any broker's or finder's fees
or commissions in connection with the transactions contemplated hereby.
3.14 INSURANCE. Schedule 3.14 sets forth all of the
insurance policies, binders, or bonds maintained by Taft (the "Insurance
Policies"). Taft is insured with reputable insurers against such risks and in
such amounts as the management of Taft has determined to be prudent in
accordance with industry practices. All of the Insurance Policies are in full
force and effect; Taft is not in material default thereunder; and all claims
thereunder have been filed in due and timely fashion.
3.15 LABOR MATTERS.
(a) With respect to its employees, Taft is not a party
to any labor agreement with any labor organization, group, or association and
Taft is in material compliance with all applicable laws respecting employment
practices, wages and hours. There is no labor strike or work stoppage pending
or, to the knowledge of Taft, threatened against Taft.
(b) Citizens has reviewed a schedule dated as of May 31,
1995 stating the names, positions, titles, current annual base compensation
rates, the amounts and effective dates of the last increase in such
compensation rates, and dates of hire of all Taft employees who are anticipated
to be employees of Taft immediately prior to the Closing and amount of any
incentive compensation in excess of $5,000 paid or accrued with respect to each
such employee for the year ended May 31, 1995.
3.16 LOAN PORTFOLIO; REPORTS.
(a) Except as set forth on Schedule 3.16(a) Taft is not
a party to any written or oral (i) loan agreement, note or
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borrowing arrangement (including, without limitation, leases, credit
enhancements, commitments, guarantees and interest-bearing assets)
(collectively, "Loans"), other than Loans that have an unpaid principal balance
which does not exceed $100,000, under the terms of which the obligor is over 90
days delinquent in payment of principal or interest or in default under any
other provisions, or (ii) Loan to any director, executive officer or ten
percent stockholder of Taft or, to the knowledge of Taft, any person,
corporation or enterprise controlling, controlled by or under common control
with any of the foregoing. Schedule 3.16(a) sets forth (i) all of the Loans of
Taft that have an unpaid principal amount in excess of (A) $100,000 and that as
of the date of this Agreement are internally classified as "Substandard,"
"Doubtful," "Loss," or "Classified," (B) $100,000 and that as of the date of
this Agreement are internally classified as "Criticized," "Other Loans
Especially Mentioned" or "Special Mention," (C) $750,000 and that as of the
date of this Agreement are internally classified as "Credit Risk Assets, "
"Concerned Loans," "Watch List" or words of similar import, in each case
together with the principal amount of and accrued and unpaid interest on each
such Loan and the identity of the borrower thereunder, and (ii) by category of
Loan (i.e., commercial, consumer, etc.), all of the other Loans of Taft that as
of the date of this Agreement are classified in the manner described above,
together with the aggregate principal amount of and accrued and unpaid interest
on such Loans by category. Taft shall promptly inform Citizens of any Loan
that becomes classified in the manner described in the previous sentence, or
any Loan the classification of which is changed, at any time after the date of
this Agreement. Taft has internally classified, in the manner described above,
all Loans that any auditor or government examiner has criticized or classified,
and the internal classification of such Loans is at least as strict as the
criticism or classification thereof by an auditor in accordance with GAAP
applied on a consistent basis or a governmental examiner of a Governmental
Authority.
(b) Taft has timely filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that they were required to file since January 1, 1990 with (i) the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
(ii) the FDIC, (iii) any state regulatory authority (each a "State Regulator")
and (iv) any self-regulatory organization ("SRO") (collectively "Regulatory
Agencies"), and all other material reports and statements required to be filed
by them since January 1, 1990, including, without limitation, any report or
statement required to be filed pursuant to the laws, rules or regulations of
the United States, any state, the Federal Reserve Board, the FDIC, any State
Regulator or any SRO, and have paid all fees and assessments due and payable in
connection therewith. Except for normal examinations conducted by a Regulatory
Agency in the regular course of the business of Taft and its Subsidiaries, and
no Regulatory Agency or other Governmental Authority has
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initiated any proceeding or, to the knowledge of Taft, investigation into the
business or operations of Taft or any of its Subsidiaries since January 1,
1990. To its knowledge, there is no material unresolved violation, criticism,
or exception by any Regulatory Agency or other Governmental Authority with
respect to any report or statement relating to any examinations of Taft or any
of its Subsidiaries.
3.17 AGREEMENTS WITH REGULATORY AGENCIES. Taft is not
subject to any cease-and-desist or other order issued by, nor is Taft a party
to any written agreement, consent agreement or memorandum of understanding
with, or is a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any extraordinary
supervisory letter from, nor has Taft adopted any board resolutions at the
request of (each, whether or not set forth on Schedule 3.16, a "Regulatory
Agreement"), any Regulatory Agency or other Governmental Authority that
restricts the conduct of Taft's business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor has
Taft been advised by any Regulatory Agency or other Governmental Authority that
it is considering issuing or requesting any Regulatory Agreement.
3.18 INVESTMENT SECURITIES. Schedule 3.18 sets forth the
book and market value as of May 30, 1995 of the investment securities, mortgage
backed securities and securities held for sale of Taft. Schedule 3.18 sets
forth an investment securities report which includes security descriptions,
CUSIP numbers, pool face values, book values, coupon rates, market values, book
yields and weighted average coupon, in each case as of the date indicated.
3.19 ENVIRONMENTAL MATTERS.
(a) The following definitions apply for purposes of this
Section 3.19: (i) "Loan/Fiduciary Property" means any property owned or
controlled by Taft or any Taft Subsidiary or in which Taft or any of its
Subsidiaries holds a security or other interest, and, where required by the
context, said term means the owner or operator of such property; (ii)
"Participation Facility" means any facility in which Taft or any of its
Subsidiaries participates in the management and, where required by the context,
said term means the owner or operator of such property; and (iii) "Hazardous
Material" means any pollutant, contaminant, waste or hazardous or toxic
substance.
(b) Except as set forth on Schedule 3.19, to the
knowledge of Taft:
(i) Each of Taft, its Subsidiaries, the
Participation Facilities and the Loan/Fiduciary Properties (each as
hereinafter defined) are, and have been, in compliance with all
applicable laws, rules, regulations,
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standards and requirements of all federal, state, local and foreign
laws and regulations relating to pollution or protection of human
health or the environment (including without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Material or petroleum or petroleum products, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Material or petroleum or petroleum products), except for violations
which, either individually or in the aggregate, have not had an cannot
reasonably be expected to have a Taft Material Adverse Effect.
(ii) There is no suit, claim, action, proceeding,
investigation or notice pending or threatened (or past or present
actions, activities, circumstances, conditions, events or incidents
that could form the basis of any such suit, claim, action, proceeding,
investigation or notice), before any Governmental Authority or other
forum in which Taft, any Participation Facility or any Loan/Fiduciary
Property (or person or entity whose liability for any such suit,
claim, action, proceeding, investigation or notice of Taft,
Participation Facility or Loan/Fiduciary Property has or may have
retained or assumed either contractually or by operation of law), has
been or, with respect to threatened suits, claims, actions,
proceedings, investigations or notices may be, named as a defendant
(a) for alleged noncompliance (including, without limitation, by any
predecessor), with any environmental law, rule or regulation or (b)
relating to the release or threatened release into the environment of
any Hazardous Material (as hereinafter defined) or petroleum or
petroleum products whether or not occurring at or on a site owned,
leased or operated by Taft, any Participation Facility or any
Loan/Fiduciary Property, except where such noncompliance or release
has not had, and cannot be reasonably expect to have, either
individually or in the aggregate, a Taft Material Adverse Effect.
(iii) During the period of (a) Taft's ownership or
operation of any of its current properties, (b) Taft's participation
in the management of any Participation Facility, or (c) Taft's holding
of a security or other interest in a Loan/Fiduciary Property, there
has been no release of Hazardous Material or petroleum or petroleum
products in, on, under or affecting any such property, except where
such release or threatened release has not had and cannot reasonably
be expected to have, either individually or in the aggregate, a Taft
Material Adverse Effect. Prior to the period of (a) Taft's ownership
or operation of any of their respective current properties, (b) Taft's
participation in the management of any Participation Facility, or (c)
Taft's holding of a security or other interest in a Loan/Fiduciary
Property, there was no release or threatened release of Hazardous
Material or petroleum or
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petroleum products in, on, under or affecting any such property,
Participation Facility or Loan/Fiduciary Property, except where such
release has not had and cannot be reasonably expected to have, either
individually or in the aggregate, a Taft Material Adverse Effect; and
(iv) Taft is the owner of a 135' x 135' lot at the
intersection of Highway 181 and Green Avenue, being a portion of Block
27 of the Original Town of Taft according to the map or plat thereof
recorded at Volume 2, page 34A, Map Records of San Patricio County,
Texas, containing all or a part of Lots 4, 5 and 6 thereof (the
"Texaco Site"), which was obtained by foreclosure of a deed of trust
lien securing a promissory note from Robert N. West, Jr. and Mitchell
K. West, d/b/a West Petroleum. Environmental problems exist on the
Texaco Site which have been disclosed to Citizens and have been fully
investigated by Citizens. The Surviving Corporation will assume full
responsibility for all environmental problems at the Texaco Site.
Taft has established a reserve for estimated costs in the amount of
$15,000, described in Paragraph 6.7 hereof, which reserve will be a
part of the Assets merged into the Surviving Corporation at the
Effective Time.
3.20 COMPLIANCE WITH LAWS AND ORDERS. To its knowledge,
the businesses of Taft have not been, and are not being, conducted in violation
of any law, ordinance, regulation, judgment, order, decree, license or Permit
of any Regulatory Agency or other Governmental Authority (including, without
limitation, all statutes, rules and regulations pertaining to the conduct of
the banking business and the exercise of trust powers), except for possible
violations which individually or in the aggregate do not, and, insofar as
reasonably can be foreseen, in the future shall not, have a Taft Material
Adverse Effect. To the knowledge of Taft, no investigation or review by any
Governmental Authority with respect to any alleged violation of law by Taft is
pending or, to the knowledge of Taft, threatened, nor has any Regulatory Agency
or other Governmental Authority indicated an intention to conduct the same in
each case other than those the outcome of which shall not have a Taft Material
Adverse Effect.
3.21 AGREEMENTS WITH BANKING REGULATORS. Taft is not a
party to any agreement or memorandum of understanding with, or a party to any
commitment letter, board resolution submitted to a regulatory authority or
similar undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, any Regulatory Agency
or other Governmental Authority which restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, its credit or
reserve policies or its management, nor has Taft been advised by any Regulatory
Agency or other Governmental Authority that it is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
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such order, decree, agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter or similar submission.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CITIZENS
Citizens hereby represents and warrants to Taft as set forth
in this Article IV. All representations and warranties of Citizens made in
this Agreement shall be deemed to have been made as of the date of this
Agreement, and if the transactions contemplated by this Agreement are
consummated, as of the Closing Date and as of the Effective Time (or on the
date as of which made in the case of any representation or warranty which
separately relates to an earlier date).
4.1 ORGANIZATION AND QUALIFICATION. Citizens is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas and has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as now
conducted. Citizens is qualified or licensed to do business and is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the businesses conducted by it makes such qualification
or licensing necessary, except where the failure to be so qualified and in good
standing will not, when taken together with all other such failures, have a
Citizens Material Adverse Effect.
4.2 CAPITALIZATION. Citizens has authorized capital
stock consisting of 4 million shares of Citizens Common Stock, of which 1.6
million shares are outstanding as of the date hereof. As of the date hereof,
all of the outstanding shares of Citizens Common Stock are validly issued,
fully paid and non-assessable. Corpus Christi BancShares, Inc. through a
wholly-owned subsidiary, owns all of the issued and outstanding stock of
Citizens. Corpus Christi BancShares, Inc. has ratified, approved or authorized
the transactions contemplated by this Agreement.
4.3 AUTHORITY; APPROVALS; NON-CONTRAVENTION.
(a) Citizens has full corporate power and authority and has
taken all corporate action necessary to enter into this Agreement and to enter
into the Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. This Agreement has been, and the
Transaction Documents, when executed and delivered pursuant to this Agreement
by Citizens will be, duly and validly executed and delivered by Citizens, and
this Agreement constitutes, and the Transaction Agreements to be executed and
delivered by Citizens will constitute valid and binding agreements of Citizens
enforceable against Citizens in accordance with their respective terms.
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(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is
required to be obtained or made by or with respect to Citizens in connection
with the execution and delivery of this Agreement by Citizens or the
performance by Citizens of the transactions contemplated hereby, except (i) for
any Banking Approvals, (ii) for the filing of the Certificate of Merger with
the Secretary of State of the State of Texas pursuant to the TBCA and of
appropriate documents with the relevant authorities of other states in which
Citizens is authorized to do business, (iii) for any consents, approvals,
authorizations or filings required under state or local laws relating to the
taxation of sales or transfers of property, (iv) for any consents, approvals,
authorizations and filings required under any environmental, health or safety
Law, (v) for any consents, approvals, orders, authorizations, registrations,
declarations or filings, which, if not obtained or made, would not, in the
aggregate, have a Citizens Material Adverse Effect or materially and adversely
affect the ability of Citizens to consummate the transactions contemplated
hereby and (vi) for any consents, approvals, orders, authorizations,
registrations, declarations or filings set forth on Schedule 4.3(b).
(c) The execution and delivery by Citizens of this Agreement
does not, and the execution and delivery of the Transaction Documents will not,
and, assuming that the filings, registrations and declarations referred to in
clauses (i) through (vi), inclusive, of Section 4.3(b) have been made, the
consents, approvals, orders and authorizations referred to therein shall have
been obtained and shall remain in full force and effect, and the conditions set
forth in Article VII shall have been satisfied or waived (if permitted), the
performance by Citizens of the transactions contemplated hereby, and by the
Transaction Documents will not violate, conflict with or result in a breach of
any provision of, or constitute a default (or result in any event which, with
notice or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or result in the creation of any
Lien upon any of the properties or assets of Citizens or any of its
Subsidiaries under, any of the terms, conditions or provisions of, (i) the
respective certificates of incorporation or by-laws of Citizens, (ii) any
judgment, decree, order or award of any Regulatory Agency or other Governmental
Authority applicable to Citizens, or any law, rule or regulation applicable to
Citizens, or (iii) except as set forth on Schedule 4.3(c), any note, bond,
mortgage, indenture, deed of trust, Permit, lease, agreement or other
instrument to which Citizens is now a party or by which Citizens or any of
their respective properties or assets may be bound or subject, which, in the
aggregate, would have a Citizens Material Adverse Effect or materially and
adversely affect the ability of Citizens to consummate the transactions
contemplated hereby.
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ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 CONDUCT OF BUSINESS BY TAFT.
(a) Except as required by law or as contemplated by this
Agreement, after the date hereof and prior to the Effective Time or earlier
termination of this Agreement in accordance with Article VIII, Taft shall:
(i) conduct its business in the ordinary course
consistent with prudent banking practices;
(ii) use its reasonable efforts to preserve intact its
business organization and goodwill, keep available the services of its
key employees and maintain its existing relationships with suppliers,
distributors and customers;
(iii) use its reasonable efforts to maintain in effect its
existing (or comparable replacement) property damage, liability and
other insurance; and
(iv) use its reasonable efforts to maintain in effect its
existing Permits.
(b) Without limiting the generality of Section 5.1(a), except
as required by law or as contemplated by this Agreement, after the date hereof
and prior to the Effective Time or earlier termination of this Agreement in
accordance with Article VIII, Taft shall not:
(i) incur any indebtedness for borrowed money, guaranty
or endorse the obligations of any other Person for
indebtedness for borrowed money or create any
material Lien upon any of its material assets or
properties (other than any purchase money Lien),
except in the ordinary course of business consistent
with prudent banking practices (including without
limitation the issuance of letters of credit);
(ii) purchase or sell any assets (other than any sale of
assets held for sale on the date hereof or no longer
used in its business) or make any capital
expenditures (including without limitation the entry
into capitalized leases), in any individual
transaction or series of related transactions
involving more than $50,000;
(iii) enter into any single contract or series of related
contracts involving total annual expenditures by
Taft or any of its Subsidiaries,
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or total annual payments to Taft or its
Subsidiaries, in excess of $50,000;
(iv) issue, sell or grant to any Person, or acquire by
redemption or otherwise, any shares of its capital
stock, any options, warrants, calls, commitments,
agreements or other rights of any character
providing for the purchase or issuance of, or
outstanding securities convertible into, any shares
of its capital stock or any securities convertible
into or exchangeable for any shares of its capital
stock;
(v) merge, combine or consolidate or agree to merge,
combine or consolidate with or into any Person;
(vi) (a) other than as set forth in Section 3.11(t)
hereof, enter into, adopt, terminate or amend (other
than amendments or revisions to comply with
applicable law or any of Taft's collective
bargaining agreements) any compensation, severance,
termination, pension, retirement, employment,
severance, collective bargaining or other employee
benefit agreement, plan, program or arrangement for
the benefit or welfare of, or in respect of, any
current or former director, officer or employee or
(b) increase in any manner the compensation or
benefits of, or in respect of, any current or former
director, officer or employee, in each case except
in the ordinary course of business consistent with
prudent banking practices;
(vii) consent to any agreement or arrangement limiting its
conduct of business in any material respect;
(viii) change any of its accounting practices or procedures
so as to materially and adversely affect its
reported results of operations; or
(ix) enter into any legally binding agreement or
arrangement to do any of the foregoing.
ARTICLE VI
COVENANTS
6.1 ACCESS TO INFORMATION. From and after the date
hereof and until the Effective Time, Taft shall afford Citizens and its
Representatives, upon reasonable notice and during normal business hours, full
access to Taft's facilities, properties, books, contracts, commitments,
records, managerial employees, counsel and auditors and its Subsidiaries, and
shall make available to Citizens and its Representatives any information
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concerning the business, property and personnel of Taft and its Subsidiaries as
the other party may reasonably request; provided that no investigation pursuant
to this Section 6.1 shall affect any representation, warranty or covenant
contained in this Agreement or any condition to the obligations of the parties
hereto.
6.2 CONSENTS AND APPROVALS.
(a) Each of Citizens and Taft shall cooperate with and
assist each other and promptly, at Citizens' expense, (i) prepare and file all
necessary documentation, (ii) effect all necessary applications, notices,
petitions and filings and execute all agreements and documents, and (iii) use
its reasonable efforts to obtain all necessary licenses, franchises, Permits,
consents, approvals and authorizations of all Regulatory Agencies and other
Governmental Authorities and all other parties necessary to consummate the
Merger and the other transactions contemplated hereby or required by the terms
of any note, bond, mortgage, indenture, deed of trust, Permit, concession,
contract, lease or other material instrument to which Taft is a party or by
which it is bound and to otherwise satisfy its conditions to its obligations to
close as set forth in Article VII.
(b) With respect to the matters referred to in Sections
6.2(a), Taft shall have the right to review and approve in advance all
characterizations of the information relating to Taft; Citizens shall have the
right to review and approve in advance all characterizations of the information
relating to Citizens; and each of Taft and Citizens shall have the right to
review and approve in advance all characterizations of the information relating
to the transactions contemplated by this Agreement, in each case which appear
in any filing made in connection with the transactions contemplated hereby, and
in each case including, but not limited to, characterizations with respect to
such party's business, assets, properties, condition (financial or other),
projections, litigation or results of operations, or relating to the
transactions contemplated by this Agreement; provided, however, that any such
approval shall not be unreasonably withheld or delayed by Citizens or Taft, as
the case may be. The parties agree that they shall keep each other fully
informed about any developments relating to obtaining all necessary licenses,
franchises, permits, consents, approvals and authorizations of all Regulatory
Agencies and other Governmental Authorities in connection herewith and shall
supply each other with copies of all correspondence or other written
communications received by them from any such authorities or third parties.
6.3 NOTIFICATION OF CERTAIN ADDITIONAL MATTERS. From
the date hereof until the Effective Time, Taft shall give Citizens prompt
notice of (i) any actual notice of, or communication with respect to, the
occurrence of a default or event which, with notice or lapse of time or both,
would become a default, under any note, bond, mortgage, indenture, deed of
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trust, Permit, concession, contract, lease or other material instrument, which,
in the aggregate, would have a Taft Material Adverse Effect, (ii) any written
notice from any third party alleging that the consent of such third party is or
may be required in connection with the transactions contemplated by this
Agreement and (iii) any material adverse change or development in the business,
prospects or financial condition of Taft.
6.4 TAFT EMPLOYEES AND EMPLOYEE BENEFITS.
Notwithstanding anything to the contrary contained herein, from and after the
Effective Time, the Surviving Corporation shall have sole discretion over the
hiring, promotion, retention, firing and other terms and conditions (including
without limitation employee benefits) of the employment of employees of the
Surviving Corporation.
6.5 INJUNCTIONS. Subject to Section 6.2, each of the
parties shall use its reasonable efforts and cooperate with each other, at
Citizens' expense, to have any injunction, decree or similar order prior to the
Effective Time which prevents or prohibits the consummation of the transactions
contemplated hereby vacated, discharged or dismissed.
6.6 TAXES. Citizens shall be responsible for any and
all excise, sales, value added, use, registration, stamp, property transfer,
gains and similar taxes, levies and charges incurred in connection with the
transactions contemplated by this Agreement.
6.7 ENVIRONMENTAL MATTERS. The holders of Taft Common
Stock shall place into reserve $15,000 of the Purchase Price, which is to be
paid for remediation of that certain parcel of real estate described in Section
3.19(e) hereof, which will be a part of the assets merged into the Surviving
Corporation at the Effective Time.
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO OBLIGATION OF EACH PARTY. Each
party's obligation to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or written waiver at or prior to
the Effective Time of the following conditions:
(i) there shall not be pending any injunction, order or
decree by any foreign, federal or state court or Regulatory Agency or
other Governmental Authority restraining, preventing or prohibiting
the consummation of the transactions contemplated hereby;
(ii) there shall not be any foreign, federal or state Law
promulgated, enacted, entered or enforced by any
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Regulatory Agency or other Governmental Authority that restrains,
prevents or prohibits the transactions contemplated hereby;
(iii) all federal, state and local consents and approvals
of any Regulatory Agency or other Governmental Authority required to
be obtained for the consummation of the Merger shall have been
obtained and be in effect at the Effective Time, other than any such
consents and approvals which, if not obtained, would not have a
material adverse effect on the business, financial condition or
results of operations of the Surviving Corporation or materially and
adversely affect the consummation of the transactions contemplated
hereby;
(iv) all other consents, approvals and authorizations
required to be obtained by either party as contemplated by clause
(iii) of Section 6.2(a) shall have been obtained and be in effect at
the Effective Time, other than any such consents and approvals which,
if not obtained, would not have a material adverse effect on the
business, financial condition or results of operations of the
Surviving Corporation or materially and adversely affect the
consummation of the transactions contemplated hereby; and
(v) Taft Stockholder Approval shall have been obtained.
Notwithstanding the foregoing, each party's obligation to
consummate the transactions contemplated hereby shall not be relieved by the
failure of any of the foregoing conditions if such failure is the result,
direct or indirect, of a breach by such party of its material obligations under
this Agreement.
7.2 CONDITIONS TO OBLIGATION OF CITIZENS. The
obligation of Citizens to consummate the transactions contemplated by this
Agreement shall be further subject to the satisfaction or written waiver (as
provided in Section 7.4) at or prior to the Effective Time of the following
conditions:
(i) Taft shall have performed in all material respects
its covenants and agreements contained in this Agreement required to
be performed by it at or prior to the Closing;
(ii) all representations and warranties made by Taft in
this Agreement shall be true and correct in all material respects as
of the date made, and on and as of the date of the Closing, with the
same force and effect as though made on and as of the Closing Date,
except as affected by the transactions contemplated hereby;
(iii) Citizens shall have received a certificate signed by
the Chief Executive Officer and Chief Financial Officer
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of Taft dated the Closing Date to the effect that, to the best of each
such officer's knowledge, the conditions set forth in Sections 7.2(i)
and 7.2(ii) have been satisfied;
(iv) Citizens shall have received from Taft an affidavit
in the form required under Section 1445 of the Code that Taft is not
a foreign person;
(v) Citizens and Taft shall have agreed that Taft's
reserve for Taxes is adequate to pay Taxes that will be imposed upon
the Surviving Corporation as a result of the operations of Taft prior
to the Effective Time;
(vi) Taft shall have terminated the EDS Agreement and
paid any and all termination fees therefor, and Citizens shall have
arranged with EDS for temporary post-closing data processing services
as Citizens determines advisable or necessary;
(vii) Taft shall have initiated all action necessary to
consummate the termination of the Plan, and shall have made
arrangements, satisfactory to Citizens, to provide for the payment of
all future benefits to be paid under the Plan, at no obligation to the
Surviving Corporation, and Taft shall have delivered an opinion of
Carley & McCaw, Inc., or any other actuarial company satisfactory to
Citizens, that the Plan is overfunded and that the Surviving
Corporation will not be liable for any matters related thereto; and
(viii) since the date hereof, no Taft Material Adverse
Effect shall have occurred.
Notwithstanding the foregoing, Citizens' obligation to
consummate the transactions contemplated hereby shall not be relieved by the
failure of any of the foregoing conditions if such failure is the result,
direct or indirect, of any breach by Citizens of its material obligations under
this Agreement.
7.3 CONDITIONS TO OBLIGATION OF TAFT. The obligation of
Taft to consummate the transactions contemplated by this Agreement shall be
further subject to the satisfaction or written waiver (as provided in Section
7.4) at or prior to the Effective Time of the following conditions:
(i) Citizens shall have performed in all material
respects its covenants and agreements contained in this Agreement
required to be performed by it at or prior to the Closing;
(ii) all representations and warranties made by Citizens
in this Agreement shall be true and correct in all material respects
as of the date made, and on and as of the date of the Closing, with
the same force and effect as
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though made on and as of the Closing Date, except as affected by the
transactions contemplated hereby;
(iii) Taft shall have received a certificate signed by the
Chief Executive Officer and Chief Financial Officer of Citizens dated
the Closing Date, to the effect that, to the best of each such
officer's knowledge, the conditions set forth in Sections 7.3(i) and
7.3(ii) have been satisfied; and
(iv) Holders of no more than ten percent (10%) of the
outstanding capital stock of Taft shall have exercised dissenter's
rights in connection with the transactions contemplated hereby.
Notwithstanding the foregoing, Taft's obligation to consummate
the transactions contemplated hereby shall not be relieved by the failure of
any of the foregoing conditions if such failure is the result, direct or
indirect, of any breach by Taft of its material obligations under this
Agreement.
7.4 WAIVER OF CONDITIONS. Any party, on its own behalf,
may waive any of its conditions to the Merger described in this Article VII and
may extend or reduce any time period described in this Article VII without
requiring action or approval of its shareholders. To be effective, a waiver or
an extension or reduction of a time period must be in writing, executed on
behalf of such party and delivered to the other party.
ARTICLE VIII
TERMINATION AND TERMINATION FEES
8.1 TERMINATION. Notwithstanding anything to the
contrary contained herein, this Agreement may be terminated, subject to Section
8.2, as follows:
(a) by mutual written consent of the parties at any time
prior to the Effective Time;
(b) by either party on March 31, 1996 (or such later
date as may be agreed upon by the parties) (the "Termination Date"), in the
event that the Effective Time shall not have occurred on or before such date
for any reason; or
(c) at any time prior to the Effective Time, by either
party by written notice to the other party, in the event and promptly following
the time that any condition to such party's obligation to consummate the
transactions contemplated hereby is reasonably determined by such party to be
incapable of being satisfied by the Termination Date (other than any incapacity
caused by a breach by such party of any of its material obligations hereunder);
provided, however, that, in the event any injunction, order or decree referred
to in Section
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7.1(i) that was entered prior to the Termination Date continues for 60 days
without being vacated, discharged or dismissed, this Agreement may be
terminated at the close of business on or after such 60th day (even if prior to
the Termination Date).
8.2 CERTAIN EFFECTS OF TERMINATION. (a) In the event
of any termination of this Agreement as provided in Section 8.1 (a) or (b),
this Agreement shall forthwith become void and of no further force or effect
and there shall be no further liability (except for breaches of this Agreement
occurring prior to any such termination) on the part of either party.
(b) In the event of any termination of this Agreement
pursuant to Section 8.1(c) hereof, this Agreement shall forthwith become void
and of no further force or effect upon receipt of written notice of termination
from the party terminating this Agreement because such party has discovered
that it is incapable of satisfying the conditions necessary to consummate the
transactions contemplated thereby, accompanied by a payment of $50,000 to the
party to whom such notice is given; provided, however, that neither party shall
be required to pay $50,000 to the other in the event that such party determines
that it will not be able to obtain any required consent or approval from any
Governmental Authority or Regulatory Agency, and such party used reasonable
efforts to obtain such consent or approval.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. All notices and other communications
required or permitted hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person
(including without limitation by courier), by cable, telegram or telex, by
registered or certified mail (postage prepaid, return receipt requested), by
overnight courier or by facsimile to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) If to Taft, to:
The First National Bank of Taft
Post Office Box 478
Taft, Texas 78390
Attn: John W. Hunt, Jr.
Phone: 512-528-2566
Fax: 512-258-3365
31
<PAGE> 33
with a copy to:
Kleberg & Head, P.C.
500 N. Water Street, Suite 1200 N
Corpus Christi, TX 78471
Attn: Henry Nuss
Phone: 512-889-8668
Fax: 512-889-8686
(b) If to Citizens, to:
Citizens State Bank
Post Office Box 4007
2402 Leopard
Corpus Christi, Texas 78469
Attn: R. Jay Phillips
Phone: 512-887-3000
Fax: 512-887-3017
with a copy to:
Jones, Day, Reavis & Pogue
2001 Ross Avenue, Suite 2300
Dallas, Texas 75201
Attn: Richard K. Kneipper, Esq.
Tel: 214-969-3705
Fax: 214-969-5100
9.2 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations, warranties, covenants and agreements in this
Agreement or in any Transaction Document shall survive the Effective Time,
except for those covenants and agreements contained herein and therein which by
their terms apply in whole or in part after the Effective Time.
9.3 EXPENSES. Except as otherwise expressly provided in
this Agreement, each party shall bear its own costs and expenses relating to
the preparation, negotiation, execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, whether or not such
transactions are consummated.
9.4 ASSIGNMENT. Neither this Agreement (including
without limitation the schedules, documents and instruments referred to
herein), nor any of the rights, interests or obligations hereunder, shall be
assigned by any of the parties hereto, including by operation of Law, without
the prior written consent of the other party. Notwithstanding the foregoing,
no consent shall be necessary for Citizens to assign this Agreement to any of
its Affiliates; provided that such an assignment shall not release Citizens
from any of its obligations under this Agreement.
32
<PAGE> 34
9.5 WAIVERS. No action taken pursuant to this
Agreement, including without limitation any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by such party taking such
action of compliance by any other party with any representation, warranty,
covenant or agreement contained herein. The waiver by or on behalf of any
party hereto of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach.
9.6 BINDING EFFECT; BENEFITS. This Agreement shall
inure to the benefit of the parties hereto and shall be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person,
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations, or liabilities under or by reason
of this Agreement.
9.7 ENTIRE AGREEMENT. This Agreement (including without
limitation the schedules, documents and instruments referred to herein)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements, representations,
warranties, statements, promises and understandings, whether written or oral,
with respect to such subject matter.
9.8 HEADINGS. The section and other headings contained
in this Agreement are for reference purposes only and shall not be deemed to be
a part of this Agreement or to affect the meaning or interpretation of this
Agreement.
9.9 GOVERNING LAW; WAIVER OF JURY TRIAL. Except as the
laws of the United States are by their terms applicable, this Agreement shall
be governed by and construed in accordance with the laws of the State of Texas,
without giving effect to the principles of conflict of laws thereof.
ANY AND ALL RIGHT TO TRIAL BY JURY IS HEREBY WAIVED AND THERE
SHALL BE NO RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
9.10 PUBLIC ANNOUNCEMENTS. Prior to the Closing,
Citizens, on the one hand, and Taft, on the other hand, shall cooperate in
connection with all actions to publicize, advertise, announce, or disclose to
any Regulatory Agency or other Governmental Authority or other third person the
execution or terms of this Agreement or the transactions contemplated hereby.
9.11 AMENDMENTS; INTERPRETATION. This Agreement may not
be modified or changed except by an instrument or instruments in writing signed
by Citizens and Taft. This Agreement may be amended in writing at any time
prior to the Effective Time by mutual consent of the parties, without any
action or approval by
33
<PAGE> 35
shareholders of such parties; provided that any such amendment shall not be
materially inconsistent with the terms and conditions contained in this
Agreement.
9.12 DISCLOSURES. Any disclosure by either party hereto
pursuant to any specific provision of this Agreement shall be deemed a
disclosure for all other purposes of this Agreement.
9.13 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument.
9.14 SPECIFIC PERFORMANCE. The parties hereto recognize
that any breach of the terms of this Agreement may give rise to irreparable
harm for which money damages would not be an adequate remedy and, agree that,
in addition to other remedies, the non-breaching party shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of a remedy of money damages.
9.15 FURTHER ASSURANCES. Each party shall execute such
documents and other papers and perform such further acts as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby. Each party shall use its reasonable efforts to fulfill or
obtain the fulfillment of the conditions to the Closing, including, but not
limited to, the execution and delivery of any documents or other papers, the
execution and delivery of which are conditions precedent to the Closing.
34
<PAGE> 36
9.16 SEVERABILITY. If any term, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against its regulatory policy,
such provision shall thereupon become ineffective, but only to the most limited
extent possible and the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
IN WITNESS WHEREOF, Taft and Citizens have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first written above.
CITIZENS STATE BANK OF CORPUS CHRISTI
By: /s/ R. Jay Phillips
_______________________________
R. Jay Phillips
President and CEO
THE FIRST NATIONAL BANK OF TAFT
By: /s/ John W. Hunt, Jr.
_______________________________
John W. Hunt, Jr.
Chairman of the Board
35
<PAGE> 37
Draft of July 1, 1995
________________________________________________________________________________
AGREEMENT AND PLAN
OF
MERGER
between
CITIZENS STATE BANK
and
THE FIRST NATIONAL BANK OF TAFT
____________________
Dated as of July 5, 1995
____________________
________________________________________________________________________________
<PAGE> 38
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II MERGER AND CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Articles of Incorporation and By-Laws of Surviving Corporation . . . . . . . . . . . . . 5
2.3 Directors and Officers of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . 5
2.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Effective Time; Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Continuance of Citizens Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.7 Cancellation of Taft Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.8 Exchange of Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF TAFT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Corporate Existence and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 Authority; Approvals; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Subsidiaries of Taft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.9 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.12 Ownership of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.13 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.15 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Loan Portfolio; Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17 Agreements With Regulatory Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18 Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.20 Compliance With Laws and Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.21 Agreements With Banking Regulators . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF CITIZENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Authority; Approvals; Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
i
<PAGE> 39
<TABLE>
<S> <C> <C>
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Conduct of Business by Taft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.2 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.3 Notification of Certain Additional Matters. . . . . . . . . . . . . . . . . . . . . . . . 26
6.4 Taft Employees and Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.7 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE VII CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1 Conditions to Obligation of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Conditions to Obligation of Citizens. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.3 Conditions to Obligation of Taft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII TERMINATION AND TERMINATION FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.2 Nonsurvival of Representations and Warranties. . . . . . . . . . . . . . . . . . . . . 32
9.3 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.4 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.5 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.6 Binding Effect; Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.7 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.9 Governing Law; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.10 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.11 Amendments; Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.12 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.14 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
ii
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 14,629,069
<INT-BEARING-DEPOSITS> 21,917
<FED-FUNDS-SOLD> 15,450,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,843,146
<INVESTMENTS-CARRYING> 6,765,894
<INVESTMENTS-MARKET> 7,015,510
<LOANS> 100,521,351
<ALLOWANCE> 1,953,437
<TOTAL-ASSETS> 176,717,867
<DEPOSITS> 158,252,296
<SHORT-TERM> 2,471,929
<LIABILITIES-OTHER> 991,491
<LONG-TERM> 0
<COMMON> 8,000,000
0
0
<OTHER-SE> 7,002,151
<TOTAL-LIABILITIES-AND-EQUITY> 176,717,867
<INTEREST-LOAN> 4,205,787
<INTEREST-INVEST> 1,360,375
<INTEREST-OTHER> 335,059
<INTEREST-TOTAL> 5,901,221
<INTEREST-DEPOSIT> 2,207,445
<INTEREST-EXPENSE> 2,229,330
<INTEREST-INCOME-NET> 3,671,891
<LOAN-LOSSES> (400,000)
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,243,448
<INCOME-PRETAX> 1,320,043
<INCOME-PRE-EXTRAORDINARY> 1,320,043
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 865,367
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
<YIELD-ACTUAL> 4.7
<LOANS-NON> 101,819
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,221,688
<ALLOWANCE-OPEN> 1,990,638
<CHARGE-OFFS> 143,045
<RECOVERIES> 505,844
<ALLOWANCE-CLOSE> 1,953,437
<ALLOWANCE-DOMESTIC> 1,953,437
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
