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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 24, 1999
STERLING BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C> <C>
Texas 0-20750 74-2175590
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation or organization)
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15000 Northwest Freeway
Houston, Texas 77040
(Address of principal
executive offices
and zip code)
(713) 466-8300
(Registrant's telephone number,
including area code)
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Item 5. Other Events
On February 24, 1999, Sterling Bancshares, Inc. (the "Company") entered
into an Agreement and Plan of Merger (the "Merger Agreement") to acquire B.O.A.
Bancshares, Inc. ("B.O.A.") and its wholly-owned subsidiary, Houston Commerce
Bank ("Houston Commerce"), in a stock-for-stock merger (the "Merger"). At
December 31, 1998, Houston Commerce had total assets of approximately $105
million and total deposits of approximately $96 million. Houston Commerce
operates three banking offices in the greater Houston area. The Merger
Agreement, which is subject to approval of B.O.A.'s shareholders and various
banking regulatory authorities, provides that the Company will issue
approximately 1.85 million shares of the Company's common stock to the
shareholders of B.O.A. in exchange for all of the outstanding shares of B.O.A.
common stock , or 1.10 shares of the Company's common stock for each share of
B.O.A. common stock. The transaction is expected to be accounted for as a
pooling of interests. Additional information regarding the proposed Merger is
included in the Merger Agreement, Exhibit 2.1 of this Report.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED AND PRO FORMA
FINANCIAL INFORMATION
The transaction described in Item 5 did not constitute an acquisition
of a significant amount of assets by the Company, and, did not require the
furnishing of separate financial statements of B.O.A. and pro forma financial
information.
(b) EXHIBITS
Exhibit No. Description
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2.1 Agreement and Plan of Merger dated as of
February 24, 1999 by and among Sterling
Bancshares, Inc., Sterling Bancorporation,
Inc. and B.O.A. Bancshares, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STERLING BANCSHARES, INC.
Date: March 17, 1999
By: /s/ J. Downey Bridgwater
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President
AGREEMENT AND PLAN OF MERGER
AMONG
STERLING BANCSHARES, INC.
STERLING BANCORPORATION, INC.
AND
B.O.A. BANCSHARES, INC.
Dated as of February 24, 1999
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TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS...................................................2
Section 1.01 Certain Definitions...................................2
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS...................................7
Section 2.01 Merger................................................7
Section 2.02 Time and Place of Closing.............................8
Section 2.03 Effective Time........................................8
Section 2.04 Reservation of Right to Revise Transaction;
Further Actions.......................................8
ARTICLE III
MERGER CONSIDERATION; EXCHANGE PROCEDURES............................8
Section 3.01 Merger Consideration..................................8
Section 3.02 Stockholder's Meeting.................................9
Section 3.03 Rights Under Stock Plans.............................10
ARTICLE IV
EXCHANGE OF SHARES...................................................10
Section 4.01 Exchange Agent.......................................10
Section 4.02 Exchange Procedures..................................10
Section 4.03 No Further Ownership Rights in Company Common Stock..11
Section 4.04 Termination of Exchange Fund.........................11
Section 4.05 Escheat of Exchange Fund.............................11
Section 4.06 No Fractional Shares.................................12
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................12
Section 5.01 Organization, Standing and Authority.................12
Section 5.02 Company Capital Stock................................13
Section 5.03 Subsidiaries.........................................14
Section 5.04 Authorization of Merger and Related Transactions.....14
Section 5.05 Financial Statements and Regulatory Reports..........15
Section 5.06 Absence of Undisclosed Liabilities...................15
Section 5.07 Tax Matters..........................................16
Section 5.08 Allowance for Credit Losses..........................17
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Section 5.09 Other Regulatory Matters.............................17
Section 5.10 Properties...........................................17
Section 5.11 Compliance with Laws.................................17
Section 5.12 Employee Benefit Plans...............................18
Section 5.13 Commitments and Contracts............................19
Section 5.14 Material Contract Defaults...........................20
Section 5.15 Legal Proceedings....................................20
Section 5.16 Absence of Certain Changes or Events.................21
Section 5.17 Reports..............................................21
Section 5.18 Insurance............................................21
Section 5.19 Labor................................................21
Section 5.20 Material Interests of Certain Persons................21
Section 5.21 Registration Obligations.............................21
Section 5.22 Brokers and Finders..................................22
Section 5.23 State Takeover Laws..................................22
Section 5.24 Environmental Matters................................22
Section 5.25 Company Action.......................................22
Section 5.26 Software.............................................23
Section 5.27 Year 2000 Compliance.................................23
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF STERLING...........................24
Section 6.01 Organization, Standing and Authority.................24
Section 6.02 Sterling and Bancorporation Capital Stock............24
Section 6.03 Authorization of Merger and Related Transactions.....25
Section 6.04 Financial Statements.................................25
Section 6.05 Sterling SEC Reports.................................26
Section 6.06 Regulatory Matters...................................26
Section 6.07 Legal Proceedings....................................26
Section 6.08 Brokers and Finders..................................26
ARTICLE VII
CONDUCT OF THE COMPANY'S BUSINESS....................................26
Section 7.01 Conduct of Business Prior to the Effective Time......26
Section 7.02 Forbearances.........................................27
ARTICLE VIII
ADDITIONAL AGREEMENTS................................................29
Section 8.01 Access and Information...............................29
Section 8.02 Registration Statement; Proxy Statement..............30
Section 8.03 Press Releases.......................................30
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Section 8.04 Notice of Defaults...................................31
Section 8.05 Miscellaneous Agreements and Consents;
Affiliates Agreements................................31
Section 8.06 Indemnification......................................31
Section 8.07 Certain Change of Control Matters....................33
Section 8.08 Employee Benefits....................................33
Section 8.09 Certain Actions......................................33
Section 8.10 No Solicitation......................................33
Section 8.11 Termination Fee......................................35
Section 8.12 Accruals.............................................36
Section 8.13 Certain Agreements...................................36
Section 8.14 Notification; Updated Disclosure Schedules...........36
Section 8.15 Nasdaq Listing.......................................36
Section 8.16 Future Board Representation..........................36
ARTICLE IX
CONDITIONS TO MERGER.................................................37
Section 9.01 Conditions to Each Party's Obligation to Effect
the Merger...........................................37
Section 9.02 Conditions to Obligations of The Company to Effect
the Merger...........................................37
Section 9.03 Conditions to Obligations of Sterling and
Bancorporation to Effect the Merger..................38
ARTICLE X
TERMINATION..........................................................39
Section 10.01 Termination.........................................39
Section 10.02 Effect of Termination...............................41
Section 10.03 Non-Survival of Representations, Warranties
and Covenants.......................................41
ARTICLE XI
GENERAL PROVISIONS...................................................41
Section 11.01 Expenses............................................41
Section 11.02 Entire Agreement; Parties in Interest...............41
Section 11.03 Amendments..........................................41
Section 11.04 Waivers.............................................42
Section 11.05 No Assignment.......................................42
Section 11.06 Notices.............................................42
Section 11.07 Specific Performance................................43
Section 11.08 Governing Law.......................................43
Section 11.09 Counterparts........................................43
Section 11.10 Captions............................................43
Section 11.11 Severability........................................43
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
February 24, 1999, is by and among STERLING BANCSHARES, INC. ("Sterling"), a
Texas corporation and a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), STERLING BANCORPORATION, INC., a
Delaware corporation which is a registered bank holding company and a wholly
owned subsidiary of Sterling ("Bancorporation") and B.O.A. BANCSHARES, INC., a
Texas corporation and a registered bank holding company under the BHCA (the
"Company"). Capitalized terms not otherwise defined herein shall have the
meanings set forth in Article I.
WITNESSETH:
WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, Sterling will acquire the Company through the merger of the Company
with and into Bancorporation, or by such other means as provided for herein (the
"Merger"); and
WHEREAS, pursuant to the Merger, each issued and outstanding share of
Company Common Stock will be converted into shares of Sterling Common Stock upon
the terms and subject to the conditions of this Agreement; and
WHEREAS, (i) the respective Boards of Directors of Sterling,
Bancorporation and the Company have each determined that this Agreement, the
Merger and the transactions contemplated hereby are in the best interests of
their respective companies and stockholders and have approved this Agreement,
the Merger and the other transactions contemplated hereby, (ii) the Board of
Directors of the Company has unanimously (a) determined that the consideration
to be paid for the outstanding shares of Company Common Stock is fair to the
stockholders of the Company and (b) resolved to recommend to the stockholders of
the Company that they vote in favor of adoption of this Agreement and (iii)
Sterling, as the sole stockholder of Bancorporation, has approved and adopted
this Agreement, the Merger and the transactions contemplated hereby; and
WHEREAS, to induce Sterling to enter into this Agreement, the Company
Specified Stockholders have agreed to execute and deliver to Sterling an
Agreement and Irrevocable Proxy in substantially the form set forth as Annex A
to this Agreement; and
WHEREAS, after the Merger, Sterling intends to effect the merger (the
"Bank Merger") of Houston Commerce Bank, a wholly owned subsidiary of the
Company (the "Bank"), with and into Sterling Bank, a wholly owned subsidiary of
Bancorporation and an indirect wholly owned subsidiary of Sterling ("Sterling
Bank"), with Sterling Bank as the surviving bank; and
WHEREAS, for federal income tax purposes the Merger is intended to
qualify as a tax-free reorganization pursuant to Section 368 of the Code; and
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WHEREAS, for accounting purposes it is intended that the Merger be
accounted for as a pooling of interests in accordance with APB Opinion 16; and
WHEREAS, Sterling, Bancorporation and the Company desire to provide for
certain undertakings, conditions, representations, warranties and covenants in
connection with the Merger and the related transactions contemplated by this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
benefits to be derived by each party hereunder and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01 Certain Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
"Acquisition Proposal" shall have the meaning set forth in Section
8.10.
"Acquisition Transaction" shall have the meaning set forth in Section
8.10.
"Affiliate" shall mean, with respect to any Person, any Person that,
directly or indirectly, controls or is controlled by or is under common control
with such Person.
"Agreement" shall have the meaning set forth in the introduction to
this Agreement.
"APB Opinion 16" shall mean Accounting Principles Board Opinion No. 16.
"Approvals" shall mean any and all filings, permits, consents,
authorizations and approvals of any governmental or regulatory authority or of
any other third person necessary to give effect to the arrangement contemplated
by this Agreement or necessary to consummate the Merger.
"Authorizations" shall have the meaning set forth in Section 5.01.
"Average Closing Price" shall have the meaning set forth in Section
10.01.
"BHCA" shall have the meaning set forth in the introduction to this
Agreement.
"Bancorporation" shall have the meaning set forth in the introduction
to this Agreement.
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"Bank" shall have the meaning set forth in the recitals to this
Agreement.
"Bank Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Business Day" shall mean any day that is not a Saturday, Sunday or
other day on which commercial banks in Houston, Texas are authorized or required
by law to remain closed.
"Certificates" shall have the meaning set forth in Section 4.02.
"Closing" shall have the meaning set forth in Section 2.02.
"Closing Date" shall have the meaning set forth in Section 2.02.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Commissioner" shall mean the Texas Banking Commissioner.
"Company" shall have the meaning set forth in the introductory
paragraph to this Agreement.
"Company Benefit Plans" shall have the meaning set forth in Section
5.12.
"Company Board" shall mean the Board of Directors of the Company.
"Company Common Stock" shall mean the common stock, par value $1.00 per
share, of the Company.
"Company Disclosure Schedule" shall mean that document containing the
written detailed information required to be furnished pursuant to the terms of
this Agreement prepared and delivered by the Company to Sterling prior to the
execution of this Agreement.
"Company ERISA Plan" shall have the meaning set forth in Section 5.12.
"Company Financial Statements" shall have the meaning set forth in
Section 5.05.
"Company Material Adverse Effect" shall have the meaning set forth in
Section 5.01.
"Company Options" shall have the meaning set forth in Section 3.03.
"Company Specified Stockholders" shall mean Eloise O. Pohlad as Trustee
of the Eloise O. Pohlad Revocable Trust created under Agreement dated 6/28/91 as
amended, Howard Wolf, John Knox, Jr., Nationsbank, N.A. as Trustee for the Cole
Thomson Revocable Trust, The Trust Company N.A. as Trustee for Cole Thompson IRA
Rollover, Cole Thomson, Frost National
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Bank as Trustee for David Moulton IRA, David B. Moulton, John Carson, Terrence
Schillaci & Rebecca Lee Schillaci WROS, Sam Sicola, Charles A. Vernon & Alyse
Vernon WROS, Lynda C. Keene, P. Michael Wells, and Dan Platt, Jr.
"Company Stock Plan" shall have the meaning set forth in Section 5.12.
"Company Stockholders' Meeting" shall have the meaning set forth in
Section 3.02.
"Condition" shall have the meaning set forth in Section 5.01.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"Determination Date" shall have the meaning set forth in Section 10.01.
"Dissenting Share" shall have the meaning set forth in Section 3.01.
"Effective Time" shall have the meaning set forth in Section 2.03.
"Employee" shall mean any current or former employee, officer or
director, independent contractor or retiree of the Company, its Subsidiaries and
any dependent or spouse thereof.
"Environmental Law" shall have the meaning set forth in Section 5.24.
"ERISA" shall have the meaning set forth in Section 5.12.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall have the meaning set forth in Section 4.01.
"Exchange Fund" shall have the meaning set forth in Section 4.01.
"Expenses" shall have the meaning set forth in Section 8.11.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System and any Federal Reserve Bank.
"GAAP" shall mean generally accepted accounting principles in the
United States, applied on a consistent basis.
"Indemnified Party" shall have the meaning set forth in Section 8.06.
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"Index" shall have the meaning set forth in Section 10.01.
"Law" shall mean any United States (federal, state or local) or foreign
law, statute, ordinance, rule, regulation, order, judgment or decree;
"Liens" shall have the meaning set forth in Section 5.03.
"Maximum Amount" shall have the meaning set forth in Section 8.06.
"Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Merger Consideration" shall have the meaning set forth in Section
3.01.
"OCC" shall mean the Office of the Comptroller of the Currency.
"Order" shall mean any decree, judgment, injunction, ruling, writ or
other order (whether temporary, preliminary or permanent);
"Permitted Liens" shall mean (i) Liens for current taxes not yet due
and payable and incurred in the ordinary course of business, (ii) with respect
to a lease, the interest of the lessor thereunder, including any Liens on the
interest of such lessor, and (iii) such imperfections of title, Liens,
restrictions and easements that do not materially impair the use or value of the
properties or assets or otherwise materially impair the current operations
relating to the business of the Company or its Subsidiaries or the Company's
consolidated financial condition or consolidated results of operations.
"Person" or "person" shall mean any individual, corporation, limited
liability company, association, partnership, group (as defined in Section
13(d)(3) of the Exchange Act), joint venture, trust or unincorporated
organization, or a government or any agency or political subdivision thereof.
"Proxy Statement" shall have the meaning set forth in Section 8.02.
"Registration Statement" shall have the meaning set forth in Section
8.02.
"Regulatory Agreement" shall have the meaning set forth in Section
5.11.
"Regulatory Authorities" shall have the meaning set forth in Section
5.11.
"Regulatory Reporting Document" shall have the meaning set forth in
Section 5.05.
"Remedies Exception" shall mean any bankruptcy, reorganization,
insolvency, fraudulent conveyance or transfer, moratorium or similar law
affecting creditors' rights generally
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and general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).
"Reports" shall have the meaning set forth in Section 5.17.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sterling" shall have the meaning set forth in the introduction to this
Agreement.
"Sterling Bank" shall have the meaning set forth in the recitals to
this Agreement.
"Sterling Common Stock" shall mean the common stock, par value
$1.00 per share, of Sterling.
"Sterling Disclosure Schedule" shall mean that document containing the
written detailed information required to be furnished pursuant to the terms of
this Agreement prepared and delivered by Sterling to the Company prior to the
execution of this Agreement.
"Sterling Preferred Stock" shall have the meaning set forth in Section
6.02.
"Sterling Financial Statements" shall have the meaning set forth in
Section 6.04.
"Sterling Material Adverse Effect" shall have the meaning set forth in
Section 6.01.
"Sterling SEC Reports" shall have the meaning set forth in Section
6.05.
"Subsidiary" shall mean, in the case of either Sterling or the Company,
any corporation, association or other entity in which it owns or controls,
directly or indirectly, 25% or more of the outstanding voting securities or 25%
or more of the total equity interest; provided, however, that the term shall not
include any such entity in which such voting securities or equity interest is
owned or controlled in a fiduciary capacity, without sole voting power, or was
acquired in securing or collecting a debt previously contracted in good faith.
"Superior Proposal" shall have the meaning set forth in Section 10.01.
"Surviving Corporation" shall have the meaning set forth in Section
2.01.
"Tax" or "Taxes" shall mean all federal, state, local and foreign
taxes, charges, fees, levies, imposts, duties or other assessments, including,
without limitation, income, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, occupation, windfall
profits, environmental, federal highway use, commercial rent, customs duties,
capital stock, paid up capital, profits, withholding, Social Security, single
business and unemployment, disability,
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real property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental fee of
any kind whatsoever, imposed or required to be withheld by the United States or
any state, local, foreign government or subdivision or agency thereof,
including, without limitation, any interest, penalties or additions thereto.
"Taxable Period" shall mean any period prescribed by any governmental
authority, including, but not limited to, the United States or any state, local,
foreign government or subdivision or agency thereof for which a Tax Return is
required to be filed or Tax is required to be paid.
"Tax Return" shall mean any report, return, information return or other
information required to be supplied to a taxing authority in connection with
Taxes, including, without limitation, any return of an affiliated or combined or
unitary group that includes the Company or any of its Subsidiaries.
"TBCA" shall mean the Texas Business Corporation Act, as amended.
"Termination Fee" shall have the meaning set forth in Section 8.11.
"Year 2000 Guidelines" shall have the meaning set forth in Section
5.27.
"Year 2000 Problem" shall have the meaning set forth in Section 5.27.
ARTICLE II
THE MERGER AND RELATED
TRANSACTIONS
Section 2.01 Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement and in accordance with the DGCL and the TBCA, at the Effective Time,
the Company shall be merged with and into Bancorporation. As a result of the
Merger, the separate existence of the Company shall thereupon cease, and
Bancorporation shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
(b) The certificate of incorporation of Bancorporation as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation.
(c) The bylaws of the Bancorporation as in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation.
(d) The directors of Bancorporation immediately prior to the Effective
Time shall become the directors of the Surviving Corporation and the officers of
Bancorporation immediately prior to
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the Effective Time shall become the officers of the Surviving Corporation, in
each case until their respective successors are duly elected and qualified.
(e) The Merger shall have the effects set forth in the DGCL and the
TBCA.
Section 2.02 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") will take place at the offices of Andrews &
Kurth L.L.P. in Houston, Texas on the date (the "Closing Date") that the
Effective Time occurs, or at such other time, and at such place, as may be
agreed to in writing by the parties hereto.
Section 2.03 Effective Time. On the Business Day selected by Sterling
occurring within ten (10) Business Days following the date on which the
expiration of all applicable waiting periods in connection with approvals of
governmental authorities necessary to effectuate the Merger occurs and all
conditions to the consummation of this Agreement are satisfied or waived, unless
an earlier or later date has been agreed by the parties, appropriate articles of
merger or certificates of merger shall be executed and filed in accordance with
the DGCL and the TBCA, and the Merger provided for herein shall become effective
upon such filing or at such time as may be specified in such articles or
certificates of merger. The time of such filing or such later effective time is
herein called the "Effective Time."
Section 2.04 Reservation of Right to Revise Transaction; Further
Actions.
(a) Notwithstanding anything to the contrary provided elsewhere in this
Agreement, if Sterling notifies the Company in writing prior to the Closing that
Sterling prefers to change the method of effecting the acquisition of the
Company by Sterling (including, without limitation, the provisions as set forth
in Article II) the parties hereto shall forthwith execute an appropriate
amendment or restatement of this Agreement to reflect such changes; provided,
however, that no such change shall (i) alter or change the amount or the kind of
the consideration to be received by the holders of Company Common Stock as
provided for in this Agreement; (ii) take the form of an asset purchase; or
(iii) adversely affect the timing or tax treatment of the transaction described
herein.
(b) In addition, the parties hereto agree that if Sterling so
determines, each of the parties will execute such additional agreements and
documents and take such other actions as Sterling determines necessary or
appropriate to facilitate the Merger and the acquisition of the Company by
Sterling, including, without limitation, entering into agreements to facilitate
the Bank Merger.
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ARTICLE III
MERGER CONSIDERATION;
EXCHANGE PROCEDURES
Section 3.01 Merger Consideration. Subject to the provisions of this
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any party or stockholder:
(a) Each share of Company Common Stock outstanding immediately prior to
the Effective Time shall (except as otherwise provided in Sections 3.01(b) and
(c)) be converted into the right to receive 1.10 shares of Sterling Common Stock
(the "Merger Consideration").
(b) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Sterling, Bancorporation
or any direct or indirect wholly owned Subsidiary of Sterling or the Company
immediately prior to the Effective Time shall be canceled without any conversion
and no payment or distribution shall be made with respect thereto.
(c) Notwithstanding anything in this Agreement to the contrary, no
share of Company Common Stock, the holder of which shall have complied with the
provisions of Article 5.12 of the TBCA as to appraisal rights (a "Dissenting
Share"), shall be deemed converted into and to represent the right to receive
the Merger Consideration, and the holders of Dissenting Shares, if any, shall be
entitled to payment, solely from the Surviving Corporation, of the appraised
value of such Dissenting Shares to the extent permitted by and in accordance
with the provisions of Article 5.12 of the TBCA; provided, however, that (i) if
any holder of Dissenting Shares shall, under the circumstances permitted by the
TBCA, subsequently deliver a written withdrawal of his or her demand for
appraisal of such Dissenting Shares, (ii) if any holder fails to establish his
or her entitlement to rights to payment as provided in such Article 5.12, or
(iii) if neither any holder of Dissenting Shares nor the Surviving Corporation
has filed a petition demanding a determination of the value of all Dissenting
Shares within the time provided in such Article 5.12, such holder or holders (as
the case may be) shall forfeit such right to payment for such Dissenting Shares
pursuant to such Article 5.12 and each such Dissenting Share shall thereupon be
converted into and shall represent the right to receive the Merger
Consideration. The Company shall give Sterling (i) prompt notice of any written
objections to the Merger submitted to the Company in accordance with Article
5.12A, attempted withdrawals of such objections, and any other instruments
served pursuant to applicable law received by the Company relating to
stockholders' rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
TBCA. The Company shall not, except with the prior written consent of Sterling,
voluntarily make any payment with respect to any demands for appraisals of
Company Common Stock, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
(d) In the event Sterling changes (or establishes a record date for
changing) the number of shares of Sterling Common Stock issued and outstanding
prior to the Effective Date as a result
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of a stock split, stock dividend, recapitalization or similar transaction with
respect to the outstanding Sterling Common Stock and the record date therefor
shall be prior to the Effective Date, the Merger Consideration shall be
correspondingly adjusted to reflect such stock split, stock dividend,
recapitalization or similar transaction.
Section 3.02 Stockholder's Meeting. Subject to applicable law, the
Company, acting through the Company Board, shall, in accordance with applicable
law, duly call, give notice of, convene and hold a special meeting (the "Company
Stockholders' Meetings") of its stockholders as soon as practicable for the
purpose of approving and adopting this Agreement and approving the Merger and,
subject to the fiduciary duties of the Company Board under applicable law as
determined by such directors in good faith after consultation with and based
upon the advice of outside counsel, include in the Proxy Statement of the
Company for use in connection with the Company Stockholders' Meeting, the
recommendation of the Company Board that the Company stockholders vote in favor
of the approval and adoption of the Merger and this Agreement. The Company
agrees to use commercially reasonable efforts to cause the Company Stockholders'
Meeting to occur within 30 days after the Proxy Statement is mailed to the
Company's stockholders.
Section 3.03 Rights Under Stock Plans. Prior to the Effective Time, the
Company shall cause each unexpired and unexercised option to purchase shares of
Company Common Stock as set forth in Section 5.02 of the Company Disclosure
Schedule ("Company Options") to be converted into Company Common Stock.
ARTICLE IV
EXCHANGE OF SHARES
Section 4.01 Exchange Agent. As of the Effective Time, Sterling shall
deposit with a bank or trust company designated by Sterling (the "Exchange
Agent"), for the benefit of the holders of shares of Company Common Stock, for
exchange in accordance with this Article IV, the aggregate Merger Consideration
(the "Exchange Fund") issuable pursuant to Section 3.01(a) in exchange for
outstanding shares of Company Common Stock. The Exchange Agent shall, pursuant
to irrevocable instructions, deliver the Merger Consideration contemplated to be
issued pursuant hereto out of the Exchange Fund. The Exchange Fund shall not be
used for any other purpose.
Section 4.02 Exchange Procedures. (a) Promptly after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates which, immediately prior to the Effective Time, represented
outstanding shares of Company Common Stock (the "Certificates"), other than
shares canceled in accordance with Section 3.01(b): (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the certificates theretofore representing shares of Company Common Stock
shall pass, only upon proper delivery of such certificates to the Exchange
Agent, and shall be in such form and have such other provisions as Sterling
shall specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the
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Exchange Agent (or to such other agent or agents as may be appointed by
Sterling), together with such letter of transmittal, duly executed, and any
other required documents, the holder of such Certificate(s) shall be entitled to
receive in exchange therefor the Merger Consideration which such holder has the
right to receive pursuant to Section 3.01(a), and the Certificate(s) so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Company Common Stock which is not registered in the transfer records of the
Company, the Merger Consideration with respect to such Company Common Stock may
be issued to a transferee if the Certificate(s) representing such Company Common
Stock is (are) presented to the Exchange Agent accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 4.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration with respect to such Company Common Stock.
The Certificate(s) for Company Common Stock so surrendered shall be duly
endorsed as the Exchange Agent may require. Sterling shall not be obligated to
deliver the Merger Consideration to which any former holder of Company Common
Stock is entitled as a result of the Merger until such holder surrenders his
Certificate(s) formerly representing shares of Company Common Stock for exchange
as provided in this Article IV.
(b) No dividends or other distributions with respect to shares of
Sterling Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered certificate for shares of Company Common
Stock with respect to the shares of Sterling Common Stock represented thereby
and no cash payment in lieu of fractional shares of Sterling Common Stock shall
be paid to any such holder pursuant to Section 4.06 until the surrender of the
Certificate with respect to the shares of Sterling Common Stock represented
thereby in accordance with this Article IV. Subject to the effect of applicable
laws, following surrender of any such Certificates, these shall be paid to the
holder of the certificate representing whole shares of Sterling Common Stock
issued in connection therewith, without interest (i) at the time of such
surrender the amount of any cash payable in lieu of fractional shares to which
such holder is entitled pursuant to Section 4.06 and the proportionate amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such shares of Sterling Common Stock, and (ii)
at the appropriate payment date, the proportionate amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender payable with respect
to such whole shares of Sterling Common Stock.
Section 4.03 No Further Ownership Rights in Company Common Stock. The
Merger Consideration shall be deemed to have been issued in full satisfaction of
all rights pertaining to shares of Company Common Stock, and after the Effective
Time there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation or its transfer agent of the shares of
Company Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation or its transfer agent for any reason, they shall be canceled and
exchanged as provided in this Article IV.
Section 4.04 Termination of Exchange Fund. Any portion of the Exchange
Fund that remains undistributed to the former stockholders of the Company for
six months after the Effective
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Time shall be delivered to Sterling upon demand, and any stockholders of the
Company who have not theretofore complied with this Article IV shall thereafter
look only to Sterling for payment of their claim for the Merger Consideration.
Section 4.05 Escheat of Exchange Fund. None of Sterling,
Bancorporation, the Company, or the Exchange Agent shall be liable to any person
in respect of any shares of Sterling Common Stock from the Exchange Fund
delivered to a public office pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates representing shares of Company
Common Stock shall not have been surrendered immediately prior to the date on
which any Merger Consideration in respect of such Certificate would otherwise
escheat to or become the property of any government authority, any such Merger
Consideration in respect of such Certificate shall, at such time and to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
Section 4.06 No Fractional Shares. No certificates representing
fractional shares of Sterling Common Stock shall be issued upon the surrender
for exchange of Certificates, and no dividend or other distribution, stock split
or interest shall relate to any such fractional security, and such fractional
interests shall not entitle the owner thereof to any voting or other rights of a
security holder of Sterling. In lieu of any fractional security, each holder of
shares of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Sterling Common Stock upon surrender of the
Certificate(s) for such Company Common Stock for exchange will be paid an amount
in cash (without interest) equal to such holder's proportionate interest in the
amount of the net proceeds from the sale or sales by the Exchange Agent in
accordance with the provisions of this Section 4.06, on behalf of all such
holders, of the aggregate fractional shares of Sterling Common Stock issued
pursuant to Article III. As soon as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (A) the number of whole shares
of Sterling Common Stock delivered to the Exchange Agent by Sterling pursuant to
Section 4.01 over (B) the aggregate number of whole shares of Sterling Common
Stock to be distributed to holders of Company Common Stock pursuant to Article
III (such excess being herein called the "Excess Securities") and the Exchange
Agent, as agent for the former holders of Company Common Stock, shall sell the
Excess Securities at the prevailing prices on the Nasdaq Stock Market. The sale
of the Excess Securities by the Exchange Agent shall be executed on the Nasdaq
Stock Market through one or more member firms of the Nasdaq Stock Market and
shall be executed in round lots to the extent practicable. Sterling shall pay
all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent, incurred in
connection with such sale of Excess Securities. Until the net proceeds of such
sale of Excess Securities have been distributed to the former stockholders of
the Company, the Exchange Agent will hold such proceeds and dividends in trust
for such former stockholders. As soon as practicable after the determination of
the amount of cash to be paid to former stockholders of the Company in lieu of
any fractional interests, the Exchange Agent shall make available in accordance
with this Agreement such amounts to such former stockholders.
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ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company represents and warrants to Sterling and Bancorporation as
follows:
Section 5.01 Organization, Standing and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. The Company is duly qualified to do business and in good
standing in all jurisdictions (whether federal, state, local or foreign) where
its ownership or leasing of property or the conduct of its business requires it
to be so qualified and in which the failure to be duly qualified would have a
material adverse effect on the financial condition, results of operations,
business, properties (the "Condition") of the Company and any of its
Subsidiaries or on the ability of the Company or its Subsidiaries to consummate
the transactions contemplated hereby (a "Company Material Adverse Effect"). The
Company has all requisite corporate power and authority (i) to carry on its
business as now conducted, (ii) to own, lease and operate its assets, properties
and business and (iii) to execute and deliver this Agreement and perform the
terms of this Agreement. The Company is duly registered as a bank holding
company under the BHCA. The Company has in effect all federal, state, local and
foreign governmental, regulatory and other authorizations, franchises, permits
and licenses (collectively, "Authorizations") necessary for it to own or lease
its properties and assets and to carry on its business as now conducted.
Section 5.02 Company Capital Stock.
(a) The authorized capital stock of the Company consists of 3,000,000
shares of Company Common Stock. At December 31, 1998, 1,500,000 shares of
Company Common Stock were issued and outstanding. Since December 31, 1998, the
Company has issued no additional capital stock and has no commitments, options
or agreements to issue any additional shares. As of the date hereof, all of the
issued and outstanding shares of Company Common Stock are duly and validly
issued and outstanding and are fully paid and nonassessable. None of the
outstanding shares of Company Common Stock has been issued in violation of any
preemptive rights or any provision of the Company's Articles of Incorporation or
bylaws. As of the date of this Agreement, no shares of Company Common Stock have
been reserved for any purpose except as set forth in Section 5.02 of the Company
Disclosure Schedule.
(b) Except as set forth in Section 5.02 of the Company Disclosure
Schedule, there are no equity securities of the Company outstanding (other than
the shares of Company Common Stock described in Section 5.02(a)) and no
outstanding options, warrants, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of the capital stock of the Company or contracts,
commitments, understandings or arrangements by which the Company is or may be
bound to issue additional shares of its capital stock or options, warrants or
rights to purchase or acquire any additional shares of its capital stock. There
are no contracts, commitments, understandings or arrangements by which the
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Company or any of its Subsidiaries is or may be bound to transfer any shares of
the capital stock of any Subsidiary of the Company, and there are no agreements,
understandings or commitments relating to the right of the Company or any of its
Subsidiaries to vote or to dispose of any such shares.
(c) Except as set forth in Section 5.02 of the Company Disclosure
Schedule, there are no securities required to be issued by the Company under any
Company Stock Plan, dividend reinvestment or similar plan.
Section 5.03 Subsidiaries. Section 5.03 of the Company Disclosure
Schedule contains a complete list of the Company's Subsidiaries. All of the
outstanding shares of each Subsidiary are owned by the Company and no equity
securities are or may be required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any Subsidiary, and there are no contracts, commitments,
understandings or arrangements by which any Subsidiary is bound to issue
additional shares of its capital stock or options, warrants or rights to
purchase or acquire any additional shares of its capital stock. Except as set
forth in Section 5.03 of the Company Disclosure Schedule, all of the shares of
capital stock of each Subsidiary are fully paid and nonassessable and are owned
free and clear of any claim, lien, pledge or encumbrance of whatsoever kind
("Liens"). Each Subsidiary (i) is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated or
organized, (ii) is duly qualified to do business and in good standing in all
jurisdictions (whether federal, state, local or foreign) where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and in which the failure to be so qualified would have a Company
Material Adverse Effect, (iii) has all requisite corporate power and authority
to own or lease its properties and assets and to carry on its business as now
conducted, and (iv) has in effect all Authorizations necessary for it to own or
lease its properties and assets and to carry on its business as now conducted.
Section 5.04 Authorization of Merger and Related Transactions.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby (including, without limitation, the
consummation of the Merger) have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of the Company,
including unanimous approval of the Merger by the Company Board, subject to the
approval of the Merger by the stockholders of the Company to the extent required
by applicable law. The only stockholder approval required for the approval of
the Merger is the approval of two-thirds of the outstanding shares of Company
Common Stock voting as a single class. This Agreement, subject to any requisite
stockholder approval hereof with respect to the Merger, represents a valid and
legally binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforcement may be limited by the
Remedies Exception.
(b) Neither the execution and delivery of this Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
nor compliance by the Company with any of the provisions hereof will (i)
conflict with or result in a breach of any
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provision of the Company's Articles of Incorporation or bylaws, (ii) constitute
or result in a breach or violation of any term, condition or provision of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon, any property or assets of the Company or any of its Subsidiaries
pursuant to any note, bond, mortgage, indenture, license, agreement, lease or
other instrument or obligation to which any of them is a party or by which any
of them or any of their properties or assets may be subject and that would have,
individually or in the aggregate, a Company Material Adverse Effect or (iii)
subject to receipt of the requisite approvals referred to in Section 9.01 of
this Agreement, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or its Subsidiaries or any of their
properties or assets.
(c) Other than consents, authorizations, approvals or exemptions
required from the Commissioner, the OCC, the FDIC, or the Federal Reserve Board
and the filing of certificates or articles of merger in accordance with the DGCL
and the TBCA, no notice to, filing with, authorization of, exemption by, or
consent or approval of any governmental body or authority is necessary for the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement.
Section 5.05 Financial Statements and Regulatory Reports.
(a) The Company (i) has delivered to Sterling copies of the audited
consolidated balance sheets and the related audited consolidated statements of
income, stockholders' equity and cash flows (including related notes and
schedules) of the Company and its consolidated Subsidiaries as of and for the 12
months ended June 30, 1996 and June 30, 1997, together with the report thereof
of Grant Thornton LLP, and of the unaudited balance sheet and the related
unaudited statement of income, as of and for the years ended December 31, 1996
and December 31, 1997 and the nine months ended September 30, 1998 (the "Company
Financial Statements"), and (ii) has furnished Sterling with a true and complete
copy of each material report filed by the Company with the Federal Reserve Board
or by any of its Subsidiaries with any Regulatory Authorities from and after
January 1, 1995 (each a "Regulatory Reporting Document"), which are all the
material documents that the Company was required to file with the Regulatory
Authorities since such date and all of which complied when filed in all material
respects with all applicable laws and regulations.
(b) The Company Financial Statements (as of the dates thereof and for
the periods covered thereby) (i) are in accordance with the books and records of
the Company and its Subsidiaries, which are complete and accurate in all
material respects and which have been maintained in accordance with good
business practices, and (ii) present fairly the consolidated financial position
and the consolidated results of operations, changes in stockholders' equity and
cash flows of the Company and its Subsidiaries as of the dates and for the
periods indicated, in accordance with GAAP, subject in the case of unaudited
interim financial statements for the nine months ended September 30, 1998 to
normal recurring year-end adjustments and except for the absence of certain
footnote information in such unaudited interim financial statements. Neither
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Grant Thornton LLP nor any other firm of independent certified public
accountants has prepared or delivered to the Company any management letters
since January 1, 1995.
Section 5.06 Absence of Undisclosed Liabilities. Neither the Company
nor any of its Subsidiaries has any obligations or liabilities (contingent or
otherwise) in the amount of $50,000 in the aggregate, except obligations and
liabilities (i) which are fully accrued or reserved against in the consolidated
balance sheet of the Company and its Subsidiaries as of September 30, 1998,
included in the Company Financial Statements or reflected in the notes thereto,
or (ii) which were incurred after September 30, 1998, in the ordinary course of
business consistent with past practice. Since September 30, 1998, neither the
Company nor any of its Subsidiaries has incurred or paid any obligation or
liability which would have a Company Material Adverse Effect.
Section 5.07 Tax Matters. Except as set forth in Section 5.07 of the
Company Disclosure Schedule:
(a) All Tax Returns required to be filed by or on behalf of the Company
or any of its Subsidiaries have been timely filed, or requests for extensions
have been timely filed, granted and have not expired, all such returns filed are
complete and accurate in all material respects and all Taxes shown as due on
those Tax Returns have been paid.
(b) The Company is not involved in any audit examination, deficiency or
refund litigation or matter in controversy with respect to any Taxes. All Taxes
due with respect to completed and settled examinations or concluded litigation
have been paid or adequately reserved for.
(c) Neither the Company nor any of its Subsidiaries has executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax due that is currently in effect.
(d) Adequate provision for any Taxes due or to become due for the
Company and any of its Subsidiaries for any period or periods through and
including September 30, 1998, has been made and is reflected on the September
30, 1998 financial statements included in the Company Financial Statements.
Deferred Taxes of the Company and its Subsidiaries have been provided for in the
Company Financial Statements in accordance with GAAP.
(e) The Company and its Subsidiaries have collected and withheld all
Taxes which they have been required to collect or withhold and have timely
submitted all such collected and withheld amounts to the appropriate
authorities. The Company and its Subsidiaries are in compliance with the back-up
withholding and information reporting requirements under (i) the Code, and (ii)
any state, local or foreign laws, and the rules and regulations, thereunder.
(f) Neither the Company nor any of its Subsidiaries has made any
payments, is obligated to make any payments, or is 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.
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(g) No consent has been filed under Section 341(f) of the Code with
respect to the Company or any of its Subsidiaries; none of the Subsidiaries was
acquired in a "qualified stock purchase" under Section 338(d)(3) of the Code,
and no elections under Section 338(g) of the Code, protective carryover basis
elections or offset prohibition elections are applicable to the Company or any
of its Subsidiaries; neither the Company nor any of its Subsidiaries has
participated in, or cooperated with, an international boycott within the meaning
of Section 999 of the Code, nor has any such corporation had operations which
are or may hereafter become reportable under Section 999 of the Code; neither
the Company nor any of its Subsidiaries owns any interest in an entity or
arrangement characterized as a partnership for United States federal income tax
purposes; no election under Section 1504(d) of the Code has been made with
respect to the Company or any of its Subsidiaries; none of the assets of the
Company or any of its Subsidiaries is required to be treated as being owned by
some other person pursuant to Section 168(f)(8) of the Code; neither the Company
nor any of its Subsidiaries is a United States real property holding company
under Section 897 of the Code; and no debt of the Company or any of its
Subsidiaries is "corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code.
Section 5.08 Allowance for Credit Losses. Each allowance for credit
losses shown in the consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1997 and as of September 30, 1998, and included
in the Company Financial Statements, complies in all material respects with GAAP
and, to the knowledge of the Company's management, OCC Bank Circular 201.
Section 5.09 Other Regulatory Matters. Neither the Company nor any of
its Subsidiaries has taken or agreed to take any action or has any knowledge of
any fact or circumstance that would materially impede or delay receipt of any
approval referred to in Section 9.01(b).
Section 5.10 Properties. Except as set forth in Section 5.10 of the
Company's Disclosure Schedule the Company and its Subsidiaries have good and
indefeasible title, free and clear of all Liens except Permitted Liens, to all
their properties and assets whether tangible or intangible, real, personal or
mixed. All buildings, and all fixtures, equipment and other property and assets
which are material to its business on a consolidated basis, held under leases or
subleases by any of the Company or its Subsidiaries are held under valid
instruments enforceable in accordance with their respective terms, subject to
the Remedies Exception. All of the Company's and its Subsidiaries' equipment in
regular use has been well maintained and is in good, serviceable condition,
reasonable wear and tear excepted, except where a failure to so maintain or to
be in such condition would not have a Company Material Adverse Effect.
Section 5.11 Compliance with Laws.
(a) Each of the Company and its Subsidiaries is in compliance with all
laws, rules, regulations, policies, guidelines, reporting and licensing
requirements and orders applicable to its business or to its employees
conducting its business, and with its internal policies and procedures, except
for failures to comply which will not result in a Company Material Adverse
Effect.
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(b) Neither the Company nor any of its Subsidiaries has received any
notification or communication from any agency or department of any federal,
state or local government, including the Federal Reserve Board, the OCC, the
FDIC, the Commissioner, the SEC and the staffs thereof (collectively, the
"Regulatory Authorities") (i) asserting that since January 1, 1995, the Company
or any of its Subsidiaries is not in substantial compliance with any of the
statutes, regulations, or ordinances which such agency, department or Regulatory
Authority enforces, or the internal policies and procedures of the Company or
its Subsidiaries, (ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to the Condition of the Company or
any of its Subsidiaries, (iii) requiring or threatening to require the Company
or any of its Subsidiaries, or indicating that the Company or any of its
Subsidiaries may be required, to enter into a cease and desist order, agreement
or memorandum of understanding or any other agreement restricting or limiting or
purporting to restrict or limit in any manner the operations of the Company or
any of its Subsidiaries, including, without limitation, any restriction on the
payment of dividends, or (iv) directing, restricting or limiting, or purporting
to direct, restrict or limit in any manner the operations of the Company or any
of its Subsidiaries, including, without limitation, any restriction on the
payment of dividends (any such notice, communication, memorandum, agreement or
order described in this sentence being herein referred to as a "Regulatory
Agreement").
(c) Since January 1, 1995, neither the Company nor any of its
Subsidiaries has been a party to any effective Regulatory Agreement.
(d) Neither the Company nor any of its Subsidiaries is required by
Section 32 of the Federal Deposit Insurance Act to give prior notice to a
federal banking agency of the proposed addition of an individual to the Company
Board or the employment of an individual as a senior executive officer.
Section 5.12 Employee Benefit Plans.
(a) The Company has delivered to Sterling prior to the execution of
this Agreement true and complete copies (and, in the case of each material plan,
financial data with respect thereto) of all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus or other incentive plans, all other employee programs,
arrangements or agreements, all material medical, vision, dental or other health
plans, all life insurance plans and all other material employee benefit plans or
fringe benefit plans, including, without limitation, all "employee benefit
plans" as that term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not terminated, and trust
agreements and insurance contracts under or with respect to which the Company or
any of its Subsidiaries has or could have any liability, contingent, secondary
or otherwise (collectively, the "Company Benefit Plans"). Any of the Company
Benefit Plans which is an "employee pension benefit plan," as that term is
defined in Section 3(2) of ERISA, is referred to herein as a "Company ERISA
Plan". Any of the Company Benefit Plans pursuant to which the Company is or may
become obligated to, or obligated to cause any of its Subsidiaries or any other
Person to, issue, deliver or sell shares of capital stock of the Company or any
of its Subsidiaries, or grant, extend or enter into any option, warrant, call,
right, commitment or agreement to issue, deliver
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or sell shares, or any other interest in respect of capital stock of the Company
or any of its Subsidiaries, is referred to herein as a "Company Stock Plan". No
Company Benefit Plan is or has been a multi-employer plan within the meaning of
Section 3(37) of ERISA. The Company has set forth in Section 5.12 of the Company
Disclosure Schedule (i) a list of all of the Company Benefit Plans, (ii) a list
of the Company Benefit Plans that are Company ERISA Plans, (iii) a list of the
Company Benefit Plans that are Company Stock Plans and (iv) a list of the number
of shares covered by, exercise prices for, and holders of, all stock options
granted and available for grant under Company Stock Plans.
(b) From their inception, all the Company Benefit Plans have been and
are in compliance with the applicable terms of ERISA and the Code and any other
applicable laws, rules and regulations, including the terms of such plans, the
breach or violation of which, individually or in the aggregate, could reasonably
be expected to result in a Company Material Adverse Effect.
(c) All liabilities (contingent or otherwise) under any Company Benefit
Plan are fully accrued or reserved against in the Company Financial Statements
in accordance with GAAP. No Company ERISA Plan is or has ever been subject to
Title IV of ERISA or Section 412 of the Code.
(d) Neither the Company nor any of its Subsidiaries has any obligations
for retiree health or other welfare benefits under any Company Benefit Plan or
otherwise. There are no restrictions on the rights of the Company or its
Subsidiaries to unilaterally amend or terminate any such Company Benefit Plan at
any time without incurring any material liability thereunder.
(e) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, golden parachute or
otherwise) becoming due to any person under any Company Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Company
Benefit Plan or (iii) result in any acceleration of the time of payment or
vesting of any such benefits. No amounts payable under any Company Benefit Plan
will be nondeductible pursuant to either Section 280G or 162(m) of the Code.
Section 5.13 Commitments and Contracts. Except as set forth in Section
5.13 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party or subject to, or has amended or waived any rights
under, any of the following (whether written or oral, express or implied):
(a) any employment contract or understanding (including any
understandings or obligations with respect to severance or termination pay
liabilities or fringe benefits) with any Employee, including in any such
person's capacity as a consultant (other than those which either (i) are
terminable at will by the Company or such Subsidiary without requiring any
payment by the Company or (ii) do not involve payments with a present value of
more than $10,000 individually or $50,000 in the aggregate by the Company or
such Subsidiary during the remaining term thereof (without giving effect to
extensions or renewals of the existing term thereof) which payments may be made
at the election or with the consent or concurrence of the Company;
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(b) any labor contract or agreement with any labor union;
(c) any contract not made in the usual, regular and ordinary course of
business containing non-competition covenants which limit the ability of the
Company or any of its Subsidiaries to compete in any line of business or which
involve any restriction of the geographical area in which the Company or any of
its Subsidiaries may carry on its business (other than as may be required by law
or applicable Regulatory Authorities);
(d) any other contract or agreement for which the Company or any
Subsidiary was or is required to obtain the approval of any Regulatory Authority
prior to becoming bound or to consummating the transactions contemplated
thereby;
(e) any real property lease with annual rental payments aggregating
$5,000 or more;
(f) any contract requiring the payment of any penalty, termination or
other additional amounts as "change of control" payments or otherwise as a
result of the transactions contemplated by this Agreement, or providing for the
vesting or accrual of benefits or rights upon a "change of control" or otherwise
as a result of the transactions contemplated by this Agreement;
(g) any contract providing for the payment of any liquidated damages or
other penalties aggregating $5,000 or more;
(h) any agreement with respect to (i) the acquisition of any bank, bank
branch or other assets or stock of another financial institution or any other
Person or (ii) the sale of one or more bank branches; or
(i) any outstanding interest rate exchange or other derivative
contracts.
Section 5.14 Material Contract Defaults. Except as set forth in Section
5.14 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is, or has received any notice or has any knowledge that any party
is, in breach, violation or default in any respect under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or the assets, business or operations thereof
may be bound or affected or under which it or its respective assets, business or
operations receives benefits, except for those breaches, violations or defaults
which would not have, individually or in the aggregate, a Company Material
Adverse Effect; and there has not occurred any event that with the lapse of time
or the giving of notice or both would constitute such a default.
Section 5.15 Legal Proceedings. Except as set forth in Section 5.15 of
the Company Disclosure Schedule, there are no claims or charges filed with, or
proceedings or investigations by, Regulatory Authorities or actions or suits
instituted or pending or, to the knowledge of the Company's management,
threatened against the Company or any of its Subsidiaries, or against any
property, asset, interest or right of any of them, that might reasonably be
expected to result in a
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judgment in excess of $10,000 or that might reasonably be expected to threaten
or impede the consummation of the transactions contemplated by this Agreement.
Neither the Company nor any of its Subsidiaries is a party to any agreement or
instrument or is subject to any charter or other corporate restriction or any
Law or Order that, individually or in the aggregate, might reasonably be
expected to have a Company Material Adverse Effect or might reasonably be
expected to threaten or impede the consummation of the transactions contemplated
by this Agreement.
Section 5.16 Absence of Certain Changes or Events. Since January 1,
1995, except (i) as disclosed in any Regulatory Reporting Document filed since
January 1, 1995 and prior to the date hereof or (ii) as set forth in Section
5.16 of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries has (A) incurred any liability which has had a Company Material
Adverse Effect, (B) suffered any change in its Condition which would have a
Company Material Adverse Effect, other than changes after the date hereof which
affect the banking industry as a whole, (C) failed to operate its business
consistent in all material respects in the ordinary course in accordance with
past practice or (D) changed any accounting practices.
Section 5.17 Reports. Since January 1, 1995, the Company and each of
its Subsidiaries have filed on a timely basis all reports and statements,
together with all amendments required to be made with respect thereto
(collectively "Reports"), that they were required to file with any Regulatory
Authority. No Regulatory Reporting Document with respect to periods beginning on
or after January 1, 1995, contained any information that was false or misleading
with respect to any material fact or omitted to state any material fact
necessary in order to make the statements therein not misleading.
Section 5.18 Insurance. The Company and each of its Subsidiaries are
presently insured, and during each of the past four calendar years have been
insured, for reasonable amounts against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured. To the knowledge of the Company's management, the policies of fire,
theft, liability (including directors and officers liability insurance) and
other insurance set forth in Section 5.18 of the Company Disclosure Schedule and
maintained with respect to the assets or businesses of the Company and its
Subsidiaries provide adequate coverage against all pending or threatened claims,
and the fidelity bonds in effect as to which any of the Company or any of its
Subsidiaries is a named insured are sufficient for their purpose.
Section 5.19 Labor. No material work stoppage involving the Company or
its Subsidiaries is pending or, to the knowledge of the Company's management,
threatened. Neither the Company nor any of its Subsidiaries is involved in, or,
to the knowledge of the Company's management, threatened with or affected by,
any labor or other employment-related dispute, arbitration, lawsuit or
administrative proceeding. Employees of the Company and its Subsidiaries are not
represented by any labor union, and, to the knowledge of the Company's
management, no labor union is attempting to organize employees of the Company or
any of its Subsidiaries.
Section 5.20 Material Interests of Certain Persons. Except as set forth
in Section 5.20 of the Company Disclosure Schedule, no officer or director of
the Company, or any "associate" (as
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such term is defined in Rule 14a-1 under the Exchange Act) of any such officer
or director, has any interest in any contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of the Company or
any of its Subsidiaries.
Section 5.21 Registration Obligations. Neither the Company nor any of
its Subsidiaries is under any obligation, contingent or otherwise, presently in
effect or which will survive the Merger by reason of any agreement to register
any of its securities under the Securities Act.
Section 5.22 Brokers and Finders. Neither the Company nor any of its
Subsidiaries nor any of their respective officers, directors or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or finder's fees, and no broker or
finder has acted directly or indirectly for the Company or any of its
Subsidiaries in connection with this Agreement or the transactions contemplated
hereby.
Section 5.23 State Takeover Laws. The transactions contemplated by this
Agreement are exempt from any applicable charter or contractual provision
containing change of control or anti-takeover provisions and, to the knowledge
of the Company, from any applicable state takeover law.
Section 5.24 Environmental Matters. To the knowledge of the Company,
neither the Company, any of its Subsidiaries, nor any properties owned or
operated by the Company or any of its Subsidiaries or held as collateral by any
of its Subsidiaries has been or is in violation of or liable under any
Environmental Law (as hereinafter defined), except for such violations or
liabilities that, individually or in the aggregate, are not reasonably likely to
have a Company Material Adverse Effect. Except as set forth in Section 5.24 of
the Company Disclosure Schedule, none of which could be reasonably expected to
have, individually or in the aggregate, a Company Material Adverse Effect, there
are no actions, suits or proceedings, or demands, claims, notices or
investigations (including without limitation notices, demand letters or requests
for information from any environmental agency) instituted or pending, or to the
knowledge of the Company's management, threatened relating to the liability of
any properties owned or operated by the Company or any of its Subsidiaries under
any Environmental Law.
"Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
Regulatory Authority relating to (i) the protection, preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (ii) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic radioactive or dangerous,
or otherwise regulated, whether by type or by quantity, including any material
containing any such substance as a component.
Section 5.25 Company Action. The Company Board, at a meeting duly
called and held on January 27, 1999, unanimously (a) determined that the Merger
is fair to and in the best interests of
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the Company and its stockholders, (b) approved this Agreement and the Merger in
accordance with the TBCA, (c) resolved to recommend approval and adoption of
this Agreement and the Merger and the other transactions contemplated hereby by
the Company's stockholders and (d) directed that this Agreement and the Merger
be submitted to the Company's stockholders for approval.
Section 5.26 Software.
(a) The Company owns all right, title and interest in and to, or holds
valid licenses or sub-licenses to use, all of the computer software used by the
Company in its operations, free and clear of any liens, claims or encumbrances
of any kind or nature (excluding the rights of the owner or licensor in the case
of software licensed or sub-licensed by the Company from others). Except as
specified on Schedule 5.26, all computer software owned by the Company was
developed by the Company entirely through its own efforts and for its own
account. The use by the Company of computer software licensed to the Company
from third parties (including the sublicensing of such licensed software to
customers) does not violate the terms of the respective license agreements with
respect to such licensed software.
(b) No director, officer or employee of the Company owns, directly or
indirectly, in whole or in part, any computer software or other intellectual
property right which the Company is using or which is necessary for the business
of the Company as now conducted.
Section 5.27 Year 2000 Compliance.
(a) The Company has (i) initiated a review and assessment of all areas
within its and each of the Subsidiaries' business and operations (including
those affected by suppliers, vendors and customers) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Company or any of the Subsidiaries (or suppliers,
vendors and customers) that are material to the Company's or any of the
Subsidiaries' business or operations may be unable to recognize and perform
properly date-sensitive functions involving certain dates on and after January
1, 2000), (ii) developed a plan and timeline for addressing the Year 2000
Problem on a timely basis, and (iii) to date, implemented that plan in
accordance with that timetable. Based on the foregoing, the Company believes
that all computer applications (including those of its suppliers, vendors and
customers) that are material to its or any of its Subsidiaries' business and
operations are reasonably expected on a timely basis to be able to perform
properly date-sensitive functions for all dates before and after January 1, 2000
except to the extent that a failure to do so could not reasonably be expected to
have Company Material Adverse Effect.
(b) The Company and its Subsidiaries have followed the procedures set
forth in, and have taken and will continue to take all actions required by, the
FFIEC Safety and Soundness Guidelines Concerning the Year 2000 Business Risk
(the "Year 2000 Guidelines") to ensure that all computer software owned by or
licensed to the Company is fully compliant with the Year 2000 Guidelines.
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(c) Neither the Company nor any of its Subsidiaries has received a
regulatory rating of less than satisfactory from any Regulatory Authority with
respect to any review of its compliance with the Year 2000 Guidelines or the
adequacy of its Year 2000 planning efforts.
ARTICLE VI
REPRESENTATIONS AND
WARRANTIES OF STERLING
Each of Sterling and Bancorporation represent and warrant to the
Company as follows:
Section 6.01 Organization, Standing and Authority.
(a) Sterling is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. Bancorporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Sterling and Bancorporation is duly qualified
to do business and in good standing in all jurisdictions where its ownership or
leasing of property or the conduct of its business requires it to be so
qualified and in which the failure to be duly qualified would have a material
adverse effect on the Condition of Sterling and its Subsidiaries taken as a
whole or on the ability of Sterling or Bancorporation to consummate the
transactions contemplated hereby (a "Sterling Material Adverse Effect"). Each of
Sterling and Bancorporation has all requisite corporate power and authority to
carry on its business as now conducted and to own, lease and operate its assets,
properties and business, and to execute and deliver this Agreement and perform
the terms of this Agreement. Each of Sterling and Bancorporation is duly
registered as a bank holding company under the BHCA. Each of Sterling and
Bancorporation has in effect all Authorizations necessary for it to own or lease
its properties and assets and to carry on its business as now conducted, except
for those Authorizations the absence of which, either individually or in the
aggregate, would not have a material adverse effect on the Condition of Sterling
and its Subsidiaries on a consolidated basis.
Section 6.02 Sterling and Bancorporation Capital Stock.
(a) The authorized capital stock of Sterling consists of 50,000,000
shares of Sterling Common Stock and 1,000,000 shares of preferred stock, par
value $1.00 per share (the "Sterling Preferred Stock"). As of December 31, 1998
there were outstanding 23,876,267 shares of Sterling Common Stock and 138,733
shares of Sterling Preferred Stock and no other shares of capital stock of any
class. The authorized capital stock of Bancorporation consists of 1,000 shares
of common stock, par value $0.01 per share, of which 1,000 shares are issued and
outstanding and owned by Sterling. All of the issued and outstanding shares of
Sterling Common Stock and Bancorporation capital stock are duly and validly
issued and outstanding and are fully paid and nonassessable.
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(b) The shares of Sterling Common Stock to be issued in exchange for
shares of Company Common Stock in the Merger, when issued in accordance with the
terms of this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable.
Section 6.03 Authorization of Merger and Related Transactions.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action in respect thereof on the part of each of
Sterling and Bancorporation, to the extent required by applicable law. This
Agreement represents a valid and legally binding obligation of each of Sterling
and Bancorporation, enforceable against Sterling and Bancorporation in
accordance with its terms except as such enforcement may be limited by the
Remedies Exception.
(b) Neither the execution and delivery of this Agreement by Sterling or
Bancorporation, the consummation by Sterling or Bancorporation of the
transactions contemplated hereby nor compliance by Sterling or Bancorporation
with any of the provisions hereof will (i) conflict with or result in a breach
of any provision of Sterling's Articles of Incorporation or bylaws or the
Certificate of Incorporation or bylaws of Bancorporation, (ii) constitute or
result in a breach or violation of any term, condition or provision of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon any property or assets of Sterling or Bancorporation pursuant to any
note, bond, mortgage, indenture, license, agreement, lease or other instrument
or obligation to which it is a party or by which it or any of its properties or
assets may be subject, and that would, individually or in the aggregate, have a
Sterling Material Adverse Effect or (iii) subject to receipt of the requisite
approvals referred to in Section 9.01(c) of this Agreement, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Sterling or
Bancorporation or any of its properties or assets.
Section 6.04 Financial Statements. Sterling has delivered to the
Company copies of the audited consolidated balance sheets and the related
audited consolidated statements of income, consolidated statements of
stockholders' equity and consolidated statements of cash flows (including
related notes and schedules) of Sterling and its consolidated Subsidiaries as of
and for the periods ended December 31, 1996 and December 31, 1997, and its
unaudited consolidated balance sheet at September 30, 1998, and the related
unaudited consolidated statements of income, stockholders' equity and cash flows
for the nine months then ended and included in its annual report filed on Form
10-K for the year ended December 31, 1997 and its quarterly report filed on Form
10-Q for the quarter ended September 30, 1998, respectively, filed by Sterling
pursuant to the Exchange Act and the rules and regulations of the SEC
promulgated thereunder (collectively, the "Sterling Financial Statements"). The
Sterling Financial Statements (as of the dates thereof and for the periods
covered thereby) (A) are in accordance with the books and records of Sterling
and its consolidated Subsidiaries, which are complete and accurate in all
material respects and which have been maintained in accordance with good
business practices, and (B) present fairly the consolidated financial position
and the consolidated statements of income, changes in shareholders' equity and
cash flows of Sterling and its Subsidiaries as of the dates and for the periods
indicated, in accordance
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with GAAP, subject in the case of unaudited interim financial statements to
normal recurring year-end adjustments and except for the absence of certain
footnote information in the unaudited interim financial statements.
Section 6.05 Sterling SEC Reports. Since January 1, 1994, Sterling has
filed on a timely basis all reports and statements, together with all amendments
required to be made with respect thereto and, that as an issuer it is required
to file with the SEC pursuant to the Exchange Act (the "Sterling SEC Reports").
No Sterling SEC Report with respect to periods beginning on or after January 1,
1994 and until the Closing contained or will contain any information that was
false or misleading with respect to any material fact or omitted or will omit to
state any material fact necessary in order to make the statements therein not
misleading.
Section 6.06 Regulatory Matters. Neither Sterling nor any of its
Subsidiaries has taken or agreed to take any action or has any knowledge of any
fact or circumstance that would materially impede or delay receipt of any
approval referred to in Section 9.0l(b).
Section 6.07 Legal Proceedings. Except as set forth in Section 6.07 of
the Sterling Disclosure Schedule, there are no claims or charges filed with, or
proceedings or investigations by, Regulatory Authorities or actions or suits
instituted or pending or, to the knowledge of Sterling's management, threatened
against Sterling or any of its Subsidiaries, or against any property, asset,
interest or right of any of them, that might reasonably be expected to result in
a judgment in excess of $100,000 or that might reasonably be expected to
threaten or impede the consummation of the transactions contemplated by this
Agreement. Neither Sterling nor any of its Subsidiaries is a party to any
agreement or instrument or is subject to any charter or other corporate
restriction or any Law or Order that, individually or in the aggregate, might
reasonably be expected to have a Sterling Material Adverse Effect or might
reasonably be expected to threaten or impede the consummation of the
transactions contemplated by this Agreement.
Section 6.08 Brokers and Finders. Neither Sterling, Bancorporation nor
any of their respective officers, directors or employees has employed any broker
or finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions or finder's fees, and no broker or finder has acted directly
or indirectly for Sterling or Bancorporation in connection with this Agreement
or the transactions contemplated hereby.
ARTICLE VII
CONDUCT OF THE COMPANY'S
BUSINESS
Section 7.01 Conduct of Business Prior to the Effective Time. During
the period from the date of this Agreement to the Effective Time, the Company
shall, and shall cause each of its Subsidiaries to, (i) conduct its business in
the usual, regular and ordinary course consistent with past practice and (ii)
use its best efforts to maintain current customer relationships and preserve
intact its
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business organization, employees, advantageous business relationships and retain
the services of its officers and key Employees.
Section 7.02 Forbearances. During the period from the date of this
Agreement to the Effective Time, the Company shall not, and shall not permit any
of its Subsidiaries to, without the prior written consent of Sterling (and the
Company shall provide Sterling with prompt notice of any events referred to in
this Section 7.02 occurring after the date hereof):
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness and indebtedness of
the Company or any of its Subsidiaries to the Company or any of its
Subsidiaries; it being understood and agreed that incurrence of indebtedness in
the ordinary course of business shall include, without limitation, the creation
of deposit liabilities, purchases of federal funds, and sales of certificates of
deposit), assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other Person, or make any loan or advance
other than in the ordinary course of business consistent with past practice;
(b) adjust, split, combine or reclassify any capital stock; make,
declare or pay any dividend (other than cash dividends payable in each of March,
1999 and June, 1999 by Houston Commerce Bank to the Company, which dividends (i)
shall be used by the Company to pay the interest due on March 31, 1999 and June
30, 1999 on that certain Term Note dated October 14, 1998 in the original
principal amount of $3.0 million payable by the Company to U.S. Bank National
Association and (ii) shall each be in an amount equal to the interest payment
due on such Term Note but not to exceed $40,000) or make any other distribution
on, or directly or indirectly redeem, purchase or otherwise acquire, any shares
of its capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock, grant any stock options or
stock awards, or grant any Person any right to acquire any shares of its capital
stock; or issue any additional shares of capital stock (except upon exercise of
Company Options as provided in Section 3.03), or any securities or obligations
convertible into or exchangeable for any shares of its capital stock;
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its properties or assets to any Person, or cancel, release or assign any
indebtedness to such Person or any claims held by any such Person, except in the
ordinary course of business consistent with past practice or pursuant to
contracts or agreements in force at the date of this Agreement;
(d) make any material investment (other than trades in investment
securities in the ordinary course) either by purchase of stock or securities,
contributions to capital, property transfers, or purchase of any property or
assets of any other Person;
(e) enter into, terminate or fail to exercise any material right under,
any contract or agreement involving annual payments in excess of $10,000 and
which cannot be terminated without penalty upon 30 days' notice, or make any
change in, or extension of (other than automatic
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extensions) any of its leases or contracts involving annual payments in excess
of $10,000 and which cannot be terminated without penalty upon 30 days' notice;
(f) modify the terms of any Company Benefit Plan (including any
severance pay plan) or increase or modify in any manner the compensation or
fringe benefits of any of its Employees or pay any pension or retirement
allowance not required by any existing plan or agreement to any such Employees,
or become a party to, amend or commit itself to any pension, retirement,
profit-sharing or welfare benefit plan or agreement or employment agreement with
or for the benefit of any Employee other than routine adjustments in
compensation and fringe benefits in the ordinary course of business consistent
with past practice or accelerate the vesting of any stock options or other
stock-based compensation;
(g) settle any claim, action or proceeding involving the payment of
money damages in excess of $10,000;
(h) amend its Articles of Incorporation or its bylaws;
(i) fail to maintain its Regulatory Agreements, material Authorizations
or to file in a timely fashion all federal, state, local and foreign Tax
Returns;
(j) make any capital expenditures of more than $10,000 individually or
$50,000 in the aggregate;
(k) fail to maintain or administer each Company Benefit Plan in
accordance with applicable Law or timely make all contributions or accruals
required thereunder in accordance with GAAP;
(l) issue any additional shares of the Company's capital stock, except
upon exercise of Company Options as provided in Section 3.03;
(m) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue at any time prior to the Effective Time, or in any of
the conditions to the Merger set forth in Article IX not being satisfied or in a
violation of any provision of this Agreement, except, in every case, as may be
required by applicable law;
(n) change any methods or policies of accounting from those used in the
Company Financial Statements;
(o) take any action which would prevent the Merger from being accounted
for as a pooling of interests in accordance with APB Opinion 16; or
(p) agree, or make any commitment, to take, in writing or otherwise,
any of the actions described in clauses (a) through (o) of this Section 7.02.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.01 Access and Information.
(a) During the period from the date of this Agreement through the
Effective Time, (i) the Company shall, and shall cause its Subsidiaries to,
afford Sterling and its accountants, counsel and other representatives full
access during normal business hours to the properties, books, contracts, Tax
Returns, Reports, commitments and records of the Company and its Subsidiaries at
any time, and from time to time, for the purpose of conducting any review or
investigation reasonably related to this Agreement or the Merger, and the
Company and its Subsidiaries will cooperate fully with all such reviews and
investigations provided that Sterling provides the Company with reasonable
notice of Sterling's on-site visits and that Sterling does not unreasonably
interfere with the business operations of the Company during the course of such
visits, and (ii) Sterling shall upon reasonable notice make personnel and copies
of its SEC reports and other information reasonably related to Sterling's
operations or financial performance available to the Company and its advisors
for purposes of any review or report to the Company Board in evaluating the
Merger.
(b) During the period from the date of this Agreement through the
Effective Time, the Company shall furnish to Sterling (i) all Reports which are
filed after the date hereof promptly upon the filing thereof, (ii) a copy of
each Tax Return filed by it after the date hereof, and (iii) monthly and other
interim financial statements in the form prepared by the Company for its
internal use. During this period, the Company shall notify Sterling promptly of
any material change in the Condition of the Company or any of its Subsidiaries.
(c) Notwithstanding the foregoing provisions of this Section 8.01, no
investigation by any party hereto made heretofore or hereafter shall affect the
representations and warranties of the other parties which are contained herein
and each such representation and warranty shall survive such investigation.
(d) Sterling agrees that it will keep confidential any information
furnished to it by the Company in connection with the transactions contemplated
by this Agreement which is reasonably designated as confidential at the time of
delivery, except to the extent that such information (i) was already known to
Sterling and was received from a source other than the Company or any of its
Subsidiaries, directors, officers, employees or agents, (ii) thereafter was
lawfully obtained from another source or was publicly disclosed by the Company
or its agent or representative, or (iii) is required to be disclosed to any
Regulatory Authority, or is otherwise required to be disclosed by law. Sterling
agrees not to use such confidential information, and to implement safeguards and
procedures that are reasonably designed to prevent such confidential information
from being used, for any purpose other than in connection with the transactions
contemplated by this Agreement. Upon any termination of this Agreement, Sterling
will return to the Company or will destroy all documents furnished Sterling for
its review and all copies of such documents made by Sterling. The Company
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agrees to keep confidential, in accordance with the provisions of this clause
(d), any information furnished to it by Sterling in connection with transactions
contemplated by this Agreement that is reasonably designated as confidential at
the time of delivery.
(e) The Company shall cooperate, and shall cause its Subsidiaries,
accountants, counsel and other representatives to cooperate, with Sterling and
its accountants, counsel and other representatives, in connection with the
preparation by Sterling of any applications and documents required to obtain the
Approvals which cooperation shall include providing all information, documents
and appropriate representations as may be necessary in connection therewith and,
when requested by Sterling, preparing and filing regulatory applications.
(f) From and after the date of this Agreement, each of Sterling and the
Company shall use reasonable commercial efforts to satisfy or cause to be
satisfied all conditions to their respective obligations under this Agreement.
While this Agreement is in effect, neither Sterling nor the Company shall take
any actions, or omit to take any actions, which would cause this Agreement to
become unenforceable in accordance with its terms.
Section 8.02 Registration Statement; Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement,
the Company shall (i) prepare and mail to its stockholders and (ii) if required
by applicable law file with the appropriate Regulatory Authorities a proxy or
information statement (the "Proxy Statement") relating to the Company
Stockholders' Meeting. Sterling shall furnish all information concerning
Sterling and its Affiliates as the Company may reasonably request in connection
with and the preparation of the Proxy Statement. The Company shall give Sterling
and its counsel the opportunity to review the Proxy Statement and each document
to be incorporated by reference therein.
(b) Unless otherwise required pursuant to the applicable fiduciary
duties of the Company Board (as determined in good faith by the Company Board
based upon the advice of its outside counsel), no amendment or supplement to the
Proxy Statement will be made by the Company without the approval of Sterling,
which approval shall not be unreasonably withheld.
(c) The information supplied by the Company for inclusion in the Proxy
Statement shall not, at (i) the time the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to the stockholders of the
Company and (ii) the time of the Company Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading.
(d) The information supplied or to be supplied by Sterling for
inclusion in the Proxy Statement will not, at the time it is supplied to the
Company, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein not
misleading.
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(e) The shares of Sterling Common Stock to be issued as the Merger
Consideration will be issued under Sterling's effective shelf registration
statement on Form S-4 (Registration No. 333-46345) ("Registration Statement")
under the Securities Act. Rule 145 under the Securities Act will be available to
the Company stockholders that receive these shares of Sterling Common Stock
under Article III to sell these shares without further registration under the
Securities Act. As of its effective date, the Registration Statement complied as
to form in all material respects with the applicable requirements of the
Securities Act. The prospectus (the "Prospectus"), included in the Registration
Statement, at the time of delivery to Company stockholders and at the time of
the Company Stockholders Meeting, has complied and will comply as to form in all
material respects with the applicable requirements of the Securities Act. The
Registration Statement and Prospectus do not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
Section 8.03 Press Releases. Prior to the public dissemination of any
press release or other public disclosure of information about this Agreement,
the Merger or any other transaction contemplated hereby, the parties to this
Agreement shall mutually agree as to the form and substance of such release or
disclosure, except as otherwise provided by applicable law or by rules of the
Nasdaq Stock Market.
Section 8.04 Notice of Defaults. The Company shall promptly notify
Sterling of (i) any material change in its business, operations or prospects,
(ii) any complaints, investigations or hearings (or communications indicating
that the same may be contemplated) of any Regulatory Authority, (iii) the
institution or the threat of any material litigation against the Company, or
(iv) any event or condition that might be reasonably expected to cause any of
its representations, warranties or covenants set forth herein not to be true and
correct as of the Effective Time. For purposes of this Section 8.04, the term
material litigation shall mean any claim involving $10,000 or more.
Section 8.05 Miscellaneous Agreements and Consents; Affiliates
Agreements. Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its respective commercially reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement as
expeditiously as reasonably practicable, including, without limitation, using
their respective commercially reasonable efforts to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby. Sterling and
the Company shall, and shall cause each of their respective Subsidiaries to, use
their commercially reasonable efforts to obtain consents of all third parties
and Regulatory Authorities necessary or, in the reasonable opinion of Sterling
or the Company, desirable for the consummation of the transactions contemplated
by this Agreement including the Merger and the Bank Merger. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of
Sterling shall be deemed to have been granted authority in the name of the
Company to take all such necessary or desirable action. Without limiting the
foregoing, the Company will take such actions as may be reasonably necessary to
identity each of its "affiliates"
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for purposes of Rule 145 under the Securities Act and to cause each person so
identified to deliver to Sterling prior to the Effective Time, a written
agreement, substantially in the form of Annex B to this Agreement, providing
that such person shall not sell, pledge, transfer or otherwise dispose of any
Sterling Common Stock to be received by such person as part of the Merger
Consideration except in compliance with the applicable provisions of the
Securities Act and applicable SEC rules and in compliance with applicable SEC
rules and regulations and GAAP regarding treatment of the Merger as a "pooling
of interest" for accounting purposes. For a period of not less than two years
after the date hereof (or such shorter period of time as may be applicable for
such "affiliates" to sell shares of Sterling Common Stock in accordance with
Rule 144 under the Securities Act), Sterling will continue to file in a timely
manner all reports required to be filed by it pursuant to Section 13 and Section
15(d) of the Exchange Act.
Section 8.06 Indemnification.
(a) Sterling shall indemnify, defend and hold harmless the directors,
officers, employees, and agents of the Company and its Subsidiaries (each, an
"Indemnified Party") against all losses, expenses (including reasonable
attorneys' fees), claims, damages or liabilities and amounts paid in settlement
arising out of actions or omissions or alleged acts or omissions occurring at or
prior to the Effective Time (including the transactions contemplated by this
Agreement) to the full extent permitted under the TBCA and by the Company's
Articles of Incorporation and bylaws as in effect on the date hereof, including
provisions relating to advances of expenses incurred in the defense of any
proceeding to the full extent permitted by the TBCA upon receipt of any
undertaking required by the TBCA, except that the right to indemnification shall
not arise in those instances in which the party seeking indemnification has
participated in the breach of any covenant or agreement contained herein or
knowingly caused any representation or warranty of the Company contained herein
to be false or inaccurate in any respect and the claim arises principally from
such breach or the falsity or inaccuracy of such representation or warranty.
Without limiting the foregoing, in any case in which a determination by Sterling
is required to effectuate any indemnification, Sterling shall direct, at the
election of the Indemnified Party, that the determination shall be made by
independent counsel mutually agreed upon between Sterling and the Indemnified
Party.
(b) Sterling shall use its commercially reasonable efforts (and the
Company shall cooperate prior to the Effective Time in these efforts) to
maintain in effect for a period of four years after the Effective Time the
Company's existing directors' and officers' liability insurance policy (provided
that Sterling may substitute therefor (i) policies of at least the same coverage
and amounts containing terms and conditions which are substantially no less
advantageous in the aggregate or (ii) with the consent of the Company given
prior to the Effective Time, any other policy) with respect to claims arising
from facts or events which occurred prior to the Effective Time and covering
persons who are currently covered by such insurance; provided, however, that
Sterling shall not be obligated to make premium payments for such four-year
period in respect of such policy (or coverage replacing such policy) which
exceed, for the portion related to the Company's directors and officers, 100% of
the annual premium payments on the Company's current policy in effect as of the
date of this Agreement (the "Maximum Amount"). If the amount of the premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, Sterling shall use its
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commercially reasonable efforts to maintain the most advantageous policies of
directors' and officers' liability insurance obtainable for a premium equal to
the Maximum Amount.
(c) If Sterling shall consolidate with or merge into any other person
and shall not be the continuing or surviving person of such consolidation or
merger or shall transfer all or substantially all of its assets to any person,
then and in each case, proper provision shall be made so that the successors and
assigns of Sterling shall assume the obligations set forth in this Section 8.06.
(d) The provisions of this Section 8.06 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, and his or her
heirs and representatives.
(e) Sterling shall pay all expenses, including reasonable attorneys'
fees, that may be incurred by any Indemnified Party in successfully enforcing
the indemnity and other obligations provided for in this Section 8.06 if
Sterling has been finally determined to have acted in bad faith in refusing such
indemnity. The Indemnified Party shall pay all expenses, including reasonable
attorneys' fees, incurred by Sterling if the indemnification or other
obligations provided in this Section 8.06 are denied by a court of competent
jurisdiction by final and nonappealable order.
Section 8.07 Certain Change of Control Matters. From and after the date
hereof, the Company shall take all action necessary so that none of the
execution and delivery of this Agreement, the consummation of the Merger or the
consummation of the other transactions contemplated hereby will increase any
benefits otherwise payable under any Company Benefit Plan.
Section 8.08 Employee Benefits. As soon as practicable following the
Effective Time, Sterling shall provide generally to officers and employees of
the Company and its Subsidiaries employee benefits, including without limitation
health and welfare benefits, life insurance and vacation arrangements, on terms
and conditions which when taken as a whole are substantially similar, in the
good faith opinion of Sterling, to those provided from time to time by Sterling
and its Subsidiaries to their similarly situated officers and employees. In that
regard, such officers and employees of the Company shall be credited under the
employee benefit plans of Sterling for their years of "eligibility service" and
"vesting service" earned under the Company Benefit Plans as if such service had
been earned with Sterling. Such officers and employees of the Company shall be
credited with "benefit service" under the employee benefit plans of Sterling
only with respect to their period of employment with Sterling and its
Subsidiaries after the Effective Time in accordance with the terms and
conditions of such employee benefit plans. As of the Effective Time, the
employees and their dependents, if any, previously covered as of the Effective
Time under the Company's health insurance plan shall be covered under Sterling's
health insurance plan and, to the extent possible under the terms of Sterling's
then current health insurance plan, will not be subject to any pre-existing
condition limitations or exclusions, except those excluded under Sterling's
health insurance plan. The Company's employees shall not be required to satisfy
the deductible and employee payments required by Sterling's comprehensive
medical and/or dental plans for the calendar year of the Effective Time to the
extent of amounts previously credited during such calendar year under comparable
plans maintained by the Company. Nothing in this Agreement shall operate or be
construed as requiring Sterling or any of its Subsidiaries to continue to
maintain or to
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terminate any Company Benefit Plan or any employee benefit plan of Sterling or
to limit in any way Sterling's ability to amend any such plan.
Section 8.09 Certain Actions. No party shall take any action which
would adversely affect or delay the ability of either Sterling or the Company to
obtain any necessary approvals of any Regulatory Authority or other governmental
authority required for the transactions contemplated hereby or to perform its
covenants and agreements under this Agreement.
Section 8.10 No Solicitation. (a) Neither the Company nor any of its
Subsidiaries shall, nor shall it authorize or permit any of its officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its Subsidiaries to
initiate, solicit, encourage (including by way of furnishing information), or
take any other action to facilitate, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal (as defined herein), or enter into or maintain or continue discussions
or negotiate with any person in furtherance of such inquiries or to obtain an
Acquisition Proposal, or agree to or endorse any Acquisition Proposal, and the
Company shall notify Sterling orally (within one business day) and in writing
(as promptly as practicable), in reasonable detail, as to any inquiries and
proposals which it or any of its Subsidiaries or any of their respective
representatives or agents may receive; provided, however, that (i) the Company
may furnish or cause to be furnished confidential and non-public information
concerning the Company and its businesses, properties or assets to a third party
(subject to execution by such third party of a confidentiality agreement
containing confidentiality provisions substantially similar to those of the
letter agreement entered into between the Company and Sterling dated January 27,
1999), (ii) following the execution of such a confidentiality agreement, the
Company may engage in discussions or negotiations with a third party executing
such an agreement, (iii) following receipt of an Acquisition Proposal, the
Company may take and disclose to its stockholders a position with respect to
such Acquisition Proposal, including, if such Acquisition Proposal is a tender
offer, the Company's Board may take and disclose to the Company's stockholders a
position contemplated by Rule 14e-2 under the Exchange Act, and/or (iv)
following receipt of an Acquisition Proposal, the Company's Board may withdraw
or modify its recommendation referred to in Section 5.25, but in each case
referred to in the foregoing clauses (i) through (iv) only to the extent that
the Company's Board shall conclude in good faith (on the basis of advice from
outside counsel) that such action is required in order for the Company's Board
to satisfy its fiduciary obligations under applicable law; provided, further,
that the Company's Board shall not take any of the foregoing actions referred to
in clauses (i) through (iv) until after reasonable notice to and consultation
with Sterling with respect to such action and that the Company's Board shall
continue to consult with Sterling after taking such action and, in addition, if
the Company Board receives an Acquisition Proposal or any request for
confidential and non-public information or for access to the properties, books
or records of the Company or any Subsidiary for the purpose of making, or in
connection with, an Acquisition Proposal, then the Company shall promptly inform
Sterling as provided above of the terms and conditions of such proposal or
request and the identity of the person making it. As used herein, the term
"Acquisition Proposal" means: (x) any acquisition or purchase of a significant
amount of the assets of the Company and its Subsidiaries on a consolidated
basis, or any equity interest in the Company or any of its Subsidiaries or any
take-over bid or tender offer (including an issuer bid or self-tender offer)
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or exchange offer, merger, plan of arrangement, reorganization, consolidation,
business combination, sale of substantially all of the assets, sale of
securities, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its Subsidiaries (other than the transactions
contemplated by this Agreement) or any other transaction the consummation of
which would or could reasonably be expected to impede, interfere with, prevent
or materially delay the consummation of the Merger or which would or could
reasonably be expected to materially dilute the benefits to Sterling and
Bancorporation of the transactions contemplated hereby or (y) any proposal, plan
or intention to do any of the foregoing either publicly announced or
communicated to the Company or any agreement to engage in any of the foregoing.
The Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. "Acquisition Transaction" means the
transaction(s) by which an Acquisition Proposal is consummated. Nothing in this
Section 8.10 shall (A) permit the Company to terminate this Agreement or (B)
permit the Company or any of its Subsidiaries to enter into any written
agreement with respect to an Acquisition Proposal during the term of this
Agreement (it being agreed that during the term of this Agreement neither the
Company nor any of its Subsidiaries shall enter into any written agreement with
any person that provides for, or in any way facilitates, an Acquisition
Proposal, other than a confidentiality agreement in the form referred to above),
it being understood that Section 10.01 sets forth the rights of the Company to
terminate this Agreement.
(b) Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the first sentence of Section 8.10(a) by any
employee, officer or director or authorized employee, agent or representative of
the Company or any of its Subsidiaries (including, without limitation, any
investment banker, financial advisor, attorney or accountant or other
representative retained by the Company or any of its Subsidiaries) or otherwise
shall be deemed to be a breach of Section 8.10(a) by the Company.
Section 8.11 Termination Fee. To compensate Sterling for entering into
this Agreement, taking actions to consummate the transactions contemplated
hereunder and incurring the costs and expenses related thereto and other losses
and expenses, including foregoing the pursuit of other opportunities by
Sterling, the Company and Sterling agree as follows:
(a) Provided that neither Sterling nor Bancorporation shall be in
material breach of its obligations under this Agreement (which breach has not
been cured promptly following receipt of written notice thereof by the Company
specifying in reasonable detail the basis of such alleged breach), the Company
shall pay to Sterling the sum of $600,000 (the "Termination Fee"), plus
reasonable out-of-pocket expenses, not in excess of $150,000 (including, without
limitation, amounts paid or payable to banks and investment bankers, fees and
expenses of counsel and printing expenses) (such expenses are hereinafter
referred to as the "Expenses") incurred by Sterling or any of its Affiliates in
connection with or arising out of the transactions contemplated by this
Agreement, regardless of when those expenses are incurred, if this Agreement is
terminated (i) by the Company under the provisions of Section 10.01(e), (ii) by
either Sterling or the Company under the provisions of Section 10.01(f) due to
the failure of the Company's stockholders to approve and adopt this Agreement
and the Merger, if at the time of such failure to so approve and adopt this
Agreement and
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the Merger there shall exist an Acquisition Proposal with respect to the Company
and, within nine months of the termination of this Agreement, the Company enters
into a definitive agreement with any third party with respect to any Acquisition
Proposal with respect to the Company or (iii) by Sterling under the provisions
of Section 10.01(g). Sterling shall provide the Company with an itemization of
Expenses.
(b) Any payment required by paragraph (a) of this Section 8.11 shall
become payable within two business days after termination of this Agreement or,
in the case of reimbursement to Sterling of the Expenses, promptly after (but in
no event later than three business days following) delivery to the Company of
the itemization of Expenses.
(c) The Company acknowledges that the agreements contained in this
Section 8.11 are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, Sterling would not enter into
this Agreement; accordingly, if the Company fails to promptly pay the
Termination Fee or Expenses when due, the Company shall in addition thereto pay
to Sterling all costs and expenses (including fees and disbursements of counsel)
incurred in collecting such Termination Fee or Expenses, as the case may be,
together with interest on the amount of the Termination Fee or Expenses (or any
unpaid portion thereof) from the date such payment was required to be made until
the date such payment is received by Sterling at the prime rate as reported in
The Wall Street Journal as in effect from time to time during such period.
Section 8.12 Accruals. Prior to the Effective Time and after
consultation with Sterling, the Company shall, consistent with GAAP, make such
changes and modifications to its loan, accrual and reserve policies and
practices (including loan classification and allowance for credit losses levels)
to conform such policies and practices with those presently followed by
Sterling, including appropriate increases in its allowance for credit losses.
Section 8.13 Certain Agreements. Neither the Company nor any Subsidiary
(nor any of their agents or representatives) will waive any provision of any
confidentiality or standstill or similar agreement to which it is a party
without the prior written consent of Sterling, unless the Company Board or the
board of directors of such Subsidiary concludes in good faith (based upon advice
from outside counsel) that waiving such provision is necessary or appropriate in
order for such board of directors to act in a manner which is consistent with
its fiduciary obligations under applicable law. The Company will immediately
advise Sterling of the termination or waiver of any confidentiality or
standstill or similar agreement to which it is a party by the other party or
parties to such agreement.
Section 8.14 Notification; Updated Disclosure Schedules. The Company
shall give prompt notice to Sterling, and Sterling or Bancorporation shall give
prompt notice to the Company, of (i) any representation or warranty made by it
in this Agreement becoming untrue or inaccurate in any respect, including,
without limitation, as a result of any change in the Company Disclosure
Schedule, or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no
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such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
Section 8.15 Nasdaq Listing. Sterling shall use its commercially
reasonable efforts to have the shares of Sterling Common Stock to be issued to
holders of Company Common Stock in the Merger included for quotation on the
Nasdaq Stock Market prior to the Effective Time.
Section 8.16 Future Board Representation. As soon as practicable
following the Effective Time and subject to the Articles of Incorporation, as
amended, and bylaws of Sterling, Sterling shall increase the size of its Board
of Directors by one and shall appoint or nominate for election to the vacancy on
the board of directors of Sterling created thereby one representative designated
by the Company Board prior to the Effective Time (the "Company Designee"),
subject to the reasonable approval of Sterling, to be elected as a director of
Sterling to serve until 2000. Prior to the expiration of the initial term of
office of the Company Designee, Sterling shall cause the Company Designee to be
nominated for reelection to one additional term of not less than two years.
ARTICLE IX
CONDITIONS TO MERGER
Section 9.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each of Sterling, Bancorporation and the
Company to effect the Merger and the other transactions contemplated hereby
shall be subject to the fulfillment or waiver at or prior to the Effective Time
of the following conditions:
(a) The Company stockholders shall have approved and adopted all
matters relating to this Agreement, the Merger and the transactions contemplated
hereby and as required under the TBCA and the Company's Articles of
Incorporation at the Company Stockholders' Meeting.
(b) This Agreement, the Merger, the Bank Merger and the other
transactions contemplated hereby shall have been approved by the Federal Reserve
Board, the Commissioner, the FDIC and any other Regulatory Authorities whose
approval is required for consummation of the transactions contemplated hereby
and all applicable waiting periods shall have expired. No such approval or
consent shall be conditioned or restricted in any manner (including requirements
relating to the disposition of assets) which in the good faith judgment of
Sterling would so adversely impact the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
restriction been known, it would not have entered into this Agreement.
(c) Neither Sterling, Bancorporation nor the Company shall be subject
to any litigation which seeks any order, decree or injunction of a court or
agency of competent jurisdiction to enjoin or prohibit the consummation of the
Merger or the other transactions contemplated by this Agreement.
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(d) The shares of Sterling Common Stock issuable pursuant to the Merger
shall have been approved for quotation on the Nasdaq Stock Market.
(e) Deloitte & Touche LLP, independent public accountants for Sterling,
shall have delivered a letter, dated the Closing Date, addressed to Sterling, in
form and substance reasonably satisfactory to Sterling, to the effect that the
Merger will qualify for pooling-of-interests accounting treatment if consummated
in accordance with this Agreement.
(f) Price WaterhouseCoopers LLP, independent public accountants for the
Company, shall have delivered a letter, dated the Closing Date, addressed to the
Company, in form and substance reasonably satisfactory to the Company, stating
that no conditions exist that would preclude the Company from being a party to a
merger accounted for as a pooling of interests.
Section 9.02 Conditions to Obligations of The Company to Effect the
Merger. The obligations of the Company to effect the Merger shall be subject to
the fulfillment or waiver at or prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. The representations and warranties
of Sterling set forth in Article VI hereof shall be true and correct in all
respects as of the date of this Agreement and as of the Effective Time (as
though made on and as of the Effective Time except to the extent such
representations and warranties are by their express provisions made as of a
specified date) and the Company shall have received a certificate signed by the
chairman, president or other duly authorized officer of Sterling to that effect.
(b) Performance of Obligations. Sterling shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and the Company shall have received a
certificate signed by the chairman, president or other duly authorized officer
of Sterling to that effect and as to the absence of litigation as described in
Section 9.01(c).
(c) Material Adverse Change. Prior to the Closing, there shall not have
occurred any material adverse change in the Condition of Sterling and its
Subsidiaries taken as a whole, nor shall any event have occurred which, with the
lapse of time, may cause or create any material adverse change in the Condition
of Sterling and its Subsidiaries taken as a whole in the reasonable and good
faith judgment of the Company Board. The Company shall have received a
certificate signed by the chairman and chief executive officer, president or
other duly authorized officer of Sterling to that effect.
(d) Tax Opinion. The Company shall have received an opinion of
Bracewell & Patterson, L.L.P., counsel to the Company, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368 of the
Code and no gain or loss will be recognized by the stockholders of the Company
to the extent that they receive Sterling Common Stock in exchange for their
Company Common Stock in the Merger.
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Section 9.03 Conditions to Obligations of Sterling and Bancorporation
to Effect the Merger. The obligations of Sterling and Bancorporation to effect
the Merger shall be subject to the fulfillment at or prior to the Effective Time
of the following additional conditions:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in Article V hereof shall be true and correct in all
respects as of the date of this Agreement and as of the Effective Time (as
though made on and as of the Effective Time except to the extent such
representations and warranties are by their express provisions made as of a
specified date) and Sterling and Bancorporation shall have received a
certificate signed by the senior chairman and chief executive officer, president
or other duly authorized officer of the Company to that effect.
(b) Performance of Obligations. The Company shall have performed in all
material respects all obligations required to be performed by it under this
Agreement prior to the Effective Time, and Sterling and Bancorporation shall
have received a certificate signed by the senior chairman and chief executive
officer, president or other duly authorized officer of the Company to that
effect and as to the absence of litigation as described in Section 9.01(c).
(c) Material Adverse Change. Prior to the Closing, there shall not have
occurred any material adverse change in the Condition of the Company and any of
its Subsidiaries, taken as a whole, nor shall any event have occurred which,
with the lapse of time, may cause or create any material adverse change in the
Condition of the Company and any of its Subsidiaries, taken as a whole, in the
reasonable and good faith judgment of the Board of Directors of Sterling, and
Sterling and Bancorporation shall have received a certificate signed by the
senior chairman and chief executive officer, president or other duly authorized
officer of the Company to that effect.
(d) Opinion of Counsel. Sterling shall have received an opinion of
Charles A. Vernon, counsel for the Company, addressed to Sterling and in form
reasonably satisfactory to it (i) as to the validity of the approvals of the
Merger by the Company Board and the stockholders of the Company and (ii) to the
effect set forth in Section 9.02(d).
(e) Dissenting Shares. The number of Dissenting Shares shall not exceed
ten percent (10%) of the total issued and outstanding shares (as of the
Effective Time) of Company Common Stock.
(f) David B. Moulton, the Senior Chairman of the Board and Chief
Executive Officer of the Company, shall have entered into a Consulting and
Non-Competition Agreement with Sterling substantially in the form of Annex C to
this Agreement.
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ARTICLE X
TERMINATION
Section 10.01 Termination. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement, the Merger and
the transactions contemplated hereby by the stockholders of the Company, this
Agreement may be terminated and the Merger may be abandoned at any time prior to
the Effective Time:
(a) by mutual consent of the Board of Directors of Sterling and the
Company; or
(b) by the Company Board or the Board of Directors of Sterling if (i)
the Federal Reserve, the FDIC or the Commissioner has denied approval of the
Merger or the Bank Merger and such denial has become final and nonappealable or
has approved the Merger subject to conditions that in the judgment of Sterling
would restrict it or its Subsidiaries or Affiliates in their respective spheres
of operations and business activities after the Effective Time or (ii) the
Effective Time does not occur by July 31, 1999, provided, however, that the
right to terminate this Agreement under clause (ii) of this Section 10.01(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of the
Effective Time to occur prior to such date; or
(c) by Sterling (if it is not in breach of any of its obligations
hereunder) pursuant to notice in the event of a breach or failure by the Company
that would cause a failure of the conditions in Section 9.03, which breach or
failure has not been, or cannot be, cured within 30 days after written notice of
such breach is given to the Company; or
(d) by the Company (if it is not in breach of any of its obligations
hereunder) pursuant to notice in the event of a breach or failure by Sterling
that would cause a failure of the conditions in Section 9.02, which breach or
failure has not been, or cannot be, cured within 30 days after written notice of
such breach is given to Sterling; or
(e) by the Company if (i) there shall not have been a breach of any
covenant or agreement on the part of the Company under this Agreement and (ii)
prior to the Effective Time, the Company shall have received a bona fide
Acquisition Proposal and the Company Board determines in its good faith judgment
and in the exercise of its fiduciary duties, based as to legal matters on the
written opinion of independent legal counsel and as to financial matters on the
written opinion of an investment banking firm of national reputation, that such
alternative Acquisition Proposal (if consummated pursuant to its terms) would
result in an alternative Acquisition Transaction that is more favorable to the
Company stockholders than the Merger ("Superior Proposal") and that the failure
to terminate this Agreement and accept such alternative Acquisition Proposal
would be inconsistent with the proper exercise of such fiduciary duties;
provided, however, that termination under this clause (ii) shall not be deemed
effective until payment of the Termination Fee and Expenses required by Section
8.11; or
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(f) by either Sterling or the Company, if the Merger and this Agreement
shall fail to receive the requisite vote for approval and adoption at the
Company Stockholders' Meeting;
(g) by Sterling if the Company Board shall have (i) resolved to accept
a Superior Proposal, or (ii) recommended to the stockholders of the Company that
they tender their shares in a tender or exchange offer commenced by a third
party or (iii) withdrawn or modified, in any manner that is adverse to Sterling
or Bancorporation, its recommendation or approval of this Agreement or the
Merger or recommended to the Company stockholders acceptance or approval of any
alternative Acquisition Proposal, or shall have resolved to do the foregoing.
(h) by the Company by a vote of a majority of the members of the
Company Board, at any time during the two-day period commencing on the
Determination Date, that both of the following conditions are satisfied: (i) the
Average Closing Price of Sterling Common Stock as of the Determination Date is
less than $12 (as adjusted for any stock splits or stock dividends effected
after the date of this Agreement) and (ii) the Index as of the Determination
Date is greater than 1,584.
For purposes of this Section 10.01(h), the following terms shall have
the meanings indicated:
"Average Closing Price" shall mean the average of the daily closing
sales prices of Sterling Common Stock on the Nasdaq Stock Market (as reported by
The Wall Street Journal or, if not reported thereby, another authoritative
source as chosen by Sterling) for the ten consecutive trading days in which such
shares are quoted on the Nasdaq Stock Market ending at the close of trading on
the Determination Date.
"Determination Date" shall mean the later to occur of (i) the date on
which the Federal Reserve Board (or its delegate) shall have issued its order
approving the Merger and (ii) the date that the condition set forth in Section
9.01(a) is satisfied.
"Index" shall mean the Nasdaq Stock Market Bank Composite Index.
Section 10.02 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 10.01, this Agreement
shall become void and have no effect, except that (i) the provisions of this
Section 10.02 and Sections 8.01(d), 8.11 and 11.01 shall survive any such
termination and abandonment; and (ii) no party shall be relieved or released
from any liability arising out of an intentional breach of any provision of this
Agreement.
Section 10.03 Non-Survival of Representations, Warranties and
Covenants. Except for Articles III and IV and Sections 8.06 and 11.01, none of
the respective representations, warranties, obligations, covenants and
agreements of the parties shall survive the Effective Time.
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ARTICLE XI
GENERAL PROVISIONS
Section 11.01 Expenses. Except as provided in Section 8.11, each party
hereto shall bear its own expenses incident to preparing, entering into and
carrying out this Agreement and consummating the Merger, including, without
limitation in the Company's case, all expenses related to the preparation,
printing and mailing of the Proxy Statement.
Section 11.02 Entire Agreement; Parties in Interest. Except as
otherwise expressly provided herein, this Agreement contains the entire
agreement between the parties hereto with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or understandings
with respect thereto, written or oral. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors. Other than Section 8.06, nothing in this
Agreement, expressed or implied, is intended to confer upon any individual,
corporation or other entity (including, without limitation, any employee or
stockholder of the Company), other than Sterling, Bancorporation and the Company
or their respective successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
Section 11.03 Amendments. To the extent permitted by law, this
Agreement may be amended by a subsequent writing signed by each of Sterling,
Bancorporation, and the Company; provided however, that the provisions hereof
relating to the amount of the Merger Consideration shall not be amended after
the Company Stockholders' Meeting without any requisite approval of the holders
of the issued and outstanding shares of Company Common Stock entitled to vote
thereon.
Section 11.04 Waivers. Prior to or at the Effective Time, each of
Sterling, Bancorporation, and the Company shall have the right to waive any
default in the performance of any term of this Agreement by the other, to waive
or extend the time for the compliance or fulfillment by any other party of any
and all of such other party's obligations under this Agreement and to waive any
or all of the conditions precedent to its obligations under this Agreement,
except any condition which, if not satisfied, would result in the violation of
any law or applicable governmental regulation.
Section 11.05 No Assignment. Except as provided in Section 2.04, none
of the parties hereto may assign any of its rights or delegate any of its
obligations under this Agreement to any other person or entity without the prior
written consent of the other parties to this Agreement.
Section 11.06 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
by courier, by facsimile transmission, or by registered or certified mail,
postage prepaid to the persons at the addressees set forth below (or at such
other address as may be provided hereunder), and shall be deemed to have been
delivered as of the date so delivered:
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<PAGE>
Company: B.O.A. Bancshares, Inc.
3100 Richmond Avenue
Houston, Texas 77098
Attention: David B. Moulton, Senior Chairman of
the Board and Chief Executive Officer
Telecopy: (713) 520-5623
With a copy to: Charles A. Vernon
Law Offices of Charles A. Vernon
3120 Southwest Freeway, Suite 214
Houston, Texas 77098
Telecopy: (713) 528-3231
Sterling and
Bancorporation: Sterling Bancshares, Inc.
15000 Northwest Freeway
Houston, Texas 77040
Attention: George Martinez, Chairman
Michael A. Roy, Senior Vice President
Telecopy: (713) 849-5498
With a copy to: Andrews & Kurth L.L.P.
600 Travis, Suite 4200
Houston, Texas 77002
Attention: Dan A. Fleckman
Telecopy: (713) 238-7113
Section 11.07 Specific Performance. The parties hereby acknowledge and
agree that the failure of either party to fulfill any of its covenants and
agreements hereunder, including the failure to take all such actions as are
necessary on its part to cause the consummation of the Merger, will cause
irreparable injury for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of the other
party's obligations and to the granting by any such court of the remedy of
specific performance hereunder.
Section 11.08 Governing Law. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the state of Texas
applicable to contracts executed and to be performed in that state. All actions
and proceedings arising out of or relating to this Agreement shall be heard and
determined in any state or federal court sitting in Houston, Harris County,
Texas.
Section 11.09 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to constitute an original but
all of which together shall constitute one and the same instrument.
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<PAGE>
Section 11.10 Captions. The captions contained in this Agreement are
for reference purposes only and are not part of this Agreement.
Section 11.11 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Merger be consummated as originally contemplated to the fullest extent possible.
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<PAGE>
IN WITNESS WHEREOF, Sterling Bancorporation and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
STERLING BANCSHARES, INC.
By: /s/ George Martinez
--------------------------------
Name: George Martinez
Title: Chairman
STERLING BANCORPORATION, INC.
By: /s/ Michael A. Roy
-------------------------------
Name: Michael A. Roy
Title: Vice President
B.O.A. BANCSHARES, INC.
By: /s/ David B. Moulton
-------------------------------
Name: David B. Moulton
Title: Senior Chairman of the Board
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<PAGE>
ANNEX A
AGREEMENT AND IRREVOCABLE PROXY
This Agreement and Irrevocable Proxy, dated as of February __,
1999 (the "Agreement"), is by and between Sterling Bancshares, Inc., a Texas
corporation ("Sterling"), and the party identified as the "Stockholder" on the
signature page hereof (the "Stockholder").
R E C I T A L S:
WHEREAS, Sterling and B.O.A. Bancshares, Inc., a Texas
corporation (the "Company"), propose to enter into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), providing, among
other things, for the merger of the Company with and into a wholly owned
subsidiary of Sterling in accordance with the terms and provisions of, and
subject to the conditions set forth in, the Merger Agreement (the "Merger"); and
WHEREAS, the Stockholder is the owner, beneficially and of
record, of the number of shares of Company Common Stock (the "Shares")
identified on the signature page of this Agreement; and
WHEREAS, the Stockholder has agreed to vote the Shares in
favor of the Merger at a special meeting of the stockholders of the Company for
the purpose of approving and adopting the Merger Agreement and approving the
Merger (the "Company Stockholders' Meeting");
NOW, THEREFORE, to induce Sterling to enter into the Merger
Agreement and in consideration of the aforesaid and the representations,
warranties, covenants and agreements set forth herein and in the Merger
Agreement, including the benefits that the parties hereto expect to derive from
the Merger, the receipt and sufficiency of all of which are hereby acknowledged
by the parties, the parties hereto agree as follows:
1. Revocation of Prior Proxies. The Stockholder hereby revokes
all previous proxies granted with respect to any of the Shares owned by
the Stockholder that would conflict with the terms of the Proxy granted
hereby.
2. Grant of Irrevocable Proxy. The Stockholder hereby
irrevocably constitutes and appoints Sterling and George Martinez,
Chairman of the Board and Chief Executive Officer of Sterling, and
Michael A. Roy, Senior Vice President of Sterling, in their respective
capacities as officers of Sterling, and any individual, who shall
hereafter succeed to the office of Chairman of the Board and Chief
Executive Officer or Senior Vice President, respectively, of Sterling,
and each of them individually, as its true and lawful proxy and
attorney-in-fact, with full power of substitution, for and in the name,
place and stead of the Stockholder, to call and attend any and all
meetings of the Company's stockholders, including the Company
Stockholders' Meeting, at which the Merger is to be considered and
voted upon by the
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<PAGE>
Company's stockholders, and any adjournments thereof, to execute any
and all written consents of stockholders of the Company and to vote all
of the Shares and any and all shares of any other class of capital
stock of the Company presently or at any future time owned beneficially
or of record by the Stockholders, including any and all securities
having voting rights issued or issuable in respect thereof, which the
Stockholder is entitled to vote (all of the foregoing being
collectively referred to as the "Subject Stock"), and to represent and
otherwise act as the Stockholder could act, in the same manner and with
the same effect as if the Stockholder were personally present, at any
such annual, special or other meeting of the stockholders of Sterling
(including the Company Stockholders' Meeting), and at any adjournment
thereof (a "Meeting"), or pursuant to any written consent in lieu of
meeting or otherwise; provided, however, that any such vote or consent
in lieu thereof or any other action so taken shall be solely for the
purposes of voting in favor of the Merger, the Merger Agreement and any
transactions contemplated thereby. Such attorneys and proxies are
hereby authorized to vote the Subject Stock in accordance with the
terms of the Proxy granted hereby.
3. Vote in Favor of Stock Consideration. If Sterling is unable
or declines to exercise the power and authority granted by the Proxy
for any reason, the Stockholder covenants and agrees to vote all the
Subject Stock in favor of approval of the Merger and the Merger
Agreement at any Meeting (including the Company Stockholders' Meeting)
and, upon request of Sterling, to provide the Stockholder's written
consent thereto.
4. No Action Without Sterling's Consent. The Stockholder
hereby covenants and agrees that it will not vote or take any action by
written consent of stockholders in lieu of meeting on any matter that
is subject to the Proxy without Sterling's prior written consent.
5. Negative Covenants of the Stockholder. Except to the extent
contemplated herein or in the Merger Agreement, the Stockholder hereby
covenants and agrees that the Stockholder will not, and will not agree
to, directly or indirectly, (a) sell, transfer, assign, cause to be
redeemed or otherwise dispose of any of the Subject Stock or enter into
any contract, option or other agreement or understanding with respect
to the sale, transfer, assignment, redemption or other disposition of
any Subject Stock; (b) grant any proxy, power-of-attorney or other
authorization or interest in or with respect to such Subject Stock
pertaining or relating to the Merger, the Merger Agreement or any of
the transactions contemplated thereby; or (c) deposit such Subject
Stock into a voting trust or enter into a voting agreement or
arrangement with respect to such Subject Stock, unless and until, in
the case of (a), (b) or (c) above, the Stockholder shall have taken all
actions (including, without limitation, the endorsement of a legend on
the certificates evidencing such Subject Stock) reasonably necessary to
ensure that such Subject Stock shall at all times be subject to all the
rights, powers and privileges granted or conferred, and subject to all
the restrictions, covenants and limitations imposed, by this Agreement,
and shall have caused any transferee of any of the Subject Stock to
execute and deliver to Sterling an Agreement and Irrevocable Proxy, in
substantially the form of this Agreement, with respect to the Subject
Stock.
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<PAGE>
Nothing contained herein shall be construed in any way as affecting the
right of the Stockholder to grant a security interest, by way of
pledge, by hypothecation or otherwise, in the Subject Stock in
connection with bona fide credit arrangements or as requiring the
lender in such bona fide credit arrangement to be bound by the terms of
this Agreement, provided that the Stockholder shall promptly notify
Sterling of any such grant.
6. Negative Covenants of Sterling. Sterling covenants and
agrees that it will not (a) amend in any material respect the Merger
Agreement so as to adversely affect the Stockholder, unless it obtains
the Stockholder's prior written consent to, or (b) modify the terms of
any other Agreement and Irrevocable Proxy between Sterling and any
other stockholder of the Company, dated as of even date herewith,
unless Sterling shall have offered to modify the terms of this
Agreement and Irrevocable Proxy in the same manner and the Stockholder
has elected not to accept such offer. If Sterling shall have notified
the Stockholder of any such amendment or modification, Sterling and the
Stockholder hereby agree that the sole remedy of the Stockholder for a
breach by Sterling of the foregoing covenant shall be to elect to
terminate this Agreement and Irrevocable Proxy by notice to Sterling.
7. Stockholder's Representations and Warranties. The
Stockholder represents and warrants to Sterling that (a) the
Stockholder has duly authorized, executed and delivered this Agreement
and this Agreement constitutes a valid and binding agreement,
enforceable in accordance with its terms and neither the execution and
delivery of this Agreement nor the consummation by the Stockholder of
the transactions contemplated hereby will constitute a violation of, a
default under, or conflict with any contract, commitment, agreement,
understanding, arrangement or restriction of any kind to which the
Stockholder is a party or by which the Stockholder is bound; (b)
consummation by the Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under,
any provision of law; (c) except to the extent provided in Section 5,
the Subject Stock and the certificates representing same are now and at
all times during the term of this Agreement will be held by the
Stockholder, or by a nominee or custodian for the benefit of the
Stockholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreement or any other encumbrances
whatsoever ("Encumbrances") with respect to the ownership or voting of
the Subject Stock or otherwise, other than Encumbrances created by or
arising pursuant to this Agreement, and there are no outstanding
options, warrants or rights to purchase or acquire, or proxies,
powers-of-attorney, voting agreements, trust agreements or other
agreements relating to, the Subject Stock other than this Agreement;
(d) such Subject Stock constitutes all of the securities of the Company
owned beneficially or of record by the Stockholder on the date hereof;
and (e) the Stockholder has the present power and right to vote all of
the Subject Stock as contemplated herein.
8. Certain Defined Terms. Unless otherwise expressly provided
herein, all capitalized terms used herein without definition shall have
the meanings assigned to them in the Merger Agreement.
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<PAGE>
9. Choice of Law. The terms and provisions of this Agreement
shall be governed by and construed in accordance with the laws of the
State of Texas without giving effect to the provisions thereof relating
to conflicts of law.
10. Binding Effect; Assignability. The terms and provisions of
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the successors and permitted assigns of the parties
hereto. This Agreement and the rights hereunder may not be assigned or
transferred by Sterling, except with the prior written consent of the
Stockholder.
11. Term. This Agreement shall terminate at the earlier of (i)
the Effective Time, (ii) the termination of the Merger Agreement in
accordance with its terms, (iii) the revocation by the Company Board of
the recommendation to its stockholders to approve the Merger, the
Merger Agreement and the transactions contemplated thereby, (iv)
termination of this Agreement in accordance with Section 6 hereof or
(v) July 31, 1999.
12. Irrevocable Proxy Coupled with an Interest. The
Stockholder acknowledges that Sterling will enter into the Merger
Agreement in reliance upon this Agreement, including the Proxy, and
that the Proxy is granted in consideration for the execution and
delivery of the Merger Agreement by Sterling. THE STOCKHOLDER AGREES
THAT THE PROXY AND ALL OTHER POWER AND AUTHORITY INTENDED TO BE
CONFERRED HEREBY IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO
SUPPORT AN IRREVOCABLE POWER AND, EXCEPT AS PROVIDED IN SECTION 11
HEREOF, SHALL NOT BE TERMINATED BY ANY ACT OF THE STOCKHOLDER, BY LACK
OF APPROPRIATE POWER OR AUTHORITY OR BY THE OCCURRENCE OF ANY OTHER
EVENT OR EVENTS.
13. Specific Performance. The parties acknowledge and agree
that performance of their respective obligations hereunder will confer
a unique benefit on Sterling and that a failure of performance will
result in irreparable harm to Sterling and will not be compensable by
money damages. The parties therefore agree that this Agreement,
including the Proxy, shall be specifically enforceable and that
specific enforcement and injunctive relief shall be a remedy properly
available to Sterling for any breach of any agreement, covenant or
representation of the Stockholder hereunder.
14. Further Assurance. The Stockholder will, upon request,
execute and deliver any additional documents and take such further
actions as may reasonably be deemed by Sterling or its counsel to be
necessary or desirable to carry out the provisions of this Agreement.
15. Severability. If any term, provision, covenant or
restriction of this Agreement, or the application thereof to any
circumstance shall, to any extent, be held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the
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<PAGE>
terms, provisions, covenants and restrictions of this Agreement or the
application thereof to any other circumstance, shall remain in full
force and effect, shall not in any way be affected, impaired or
invalidated and shall be enforced to the fullest extent permitted by
law.
16. Counterparts. This Agreement and Irrevocable Proxy may be
executed in counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the same
document.
17. Notice. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses
(or such other address for a party as shall be specified by like
notice): (i) if to Sterling, to the address set forth in Section 11.06
of the Merger Agreement; and (ii) if to a Stockholder, to the address
set forth on the signature page hereof, or such other address as may be
specified in writing by such Stockholder.
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<PAGE>
IN WITNESS WHEREOF, Sterling and the Stockholder have duly
executed this Agreement or caused this Agreement to be duly executed as of the
date first set forth hereinabove.
STOCKHOLDER:
[NAME]
-----------------------------
Shares Owned:
Address:
STERLING BANCSHARES, INC.
By:
--------------------------
Name: Michael A. Roy
Title: Senior Vice President
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<PAGE>
ANNEX B
AFFILIATE LETTER FOR
AFFILIATES OF B.O.A. BANCSHARES, INC.
______________, 1999
STERLING BANCSHARES, INC.
15000 Northwest Freeway
Houston, Texas 77040
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may
be deemed to be an "affiliate" of B.O.A. Bancshares, Inc., a Texas corporation
(the "Company"), as the term "Affiliate" is defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules And
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of February __, 1999 (the "Merger
Agreement"), by and among Sterling Bancshares, Inc., a Texas corporation
("Sterling"), Sterling Bancorporation, a Texas corporation and a wholly owned
subsidiary of Sterling, and the Company, the Company will be merged with and
into Bancorporation (the "Merger"). Capitalized terms used but not defined
herein shall have the same meanings given to them in the Merger Agreement unless
otherwise defined herein.
As a result of the Merger, I will receive shares (the
"Shares") of common stock, par value $1.00 per share, of Sterling ("Sterling
Common Stock") in exchange for shares owned by me of common stock, par value
$_____ per share of the Company ("Company Common Stock").
I represent, warrant and covenant to Sterling that with
respect to any of the Shares:
1. I shall not make any sale, transfer or other disposition of
the Shares in violation of the Act or the Rules and Regulations.
2. I have carefully read this letter and the Merger Agreement
and discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of the
Shares, to the extent I felt necessary, with my counsel or counsel for the
Company.
<PAGE>
3. I have been advised that the issuance of the Shares to me
pursuant to the Merger has been registered with the Commission under the Act on
a Registration Statement on Form S-4. However, I have also been advised that,
because at the time the Merger was submitted for a vote of the shareholders of
the Company, (a) I may be deemed to have been an affiliate of the Company and
(b) distribution by me of the Shares has not been registered under the Act, I
may not sell, transfer or otherwise dispose of any of the Shares issued to me in
the Merger unless (x) such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by the
Commission under the Act, (y) such sale, transfer or other disposition has been
registered under the Act, or (z) in the opinion of counsel reasonably acceptable
to Sterling, such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
D. I understand that Sterling is under no obligation to
register the sale, transfer or other disposition of the Shares by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
E. I understand that there will be placed on the certificates
for the Shares issued to me, or any substitutions therefor, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES."
F. I understand that unless a sale or transfer is made in
conformity with the provisions of Rule 145, or pursuant to an effective
registration statement under the Act, Sterling reserves the right to place the
following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
G. From and after the date that is 30 days prior to the
Effective Time (as defined in the Agreement) I will not offer to sell, sell or
otherwise dispose of, or in any other way reduce the my risk relative to, any
shares of Sterling Common Stock in any case until an earnings statement
containing at least 30 days of post-Merger combined financial results of
Sterling and the Company has been issued in a manner satisfying the requirements
of Commission Accounting Release No. 135.
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<PAGE>
H. I will not take or fail to take any action reasonably
likely to cause the Merger not to qualify as a tax free reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended, or to be treated
as a pooling of interests for accounting purposes.
I. I further understand and agree that my representations,
warranties, covenants and agreements set forth herein are for the benefit of
Sterling, the Company and the Surviving Corporation (as defined in the
Agreement) and will be relied upon by such entities and their respective counsel
and accountants.
J. Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of the Company as described in the
first paragraph of this letter, nor as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of this
letter.
By Sterling's acceptance of this letter, Sterling agrees with
me that certificates with the legends set forth in paragraphs E and F above will
be substituted by delivery of certificates without such legend if (i) one year
shall have elapsed from the date the undersigned acquired the Shares and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii) two
years shall have elapsed from the date the undersigned acquired the Shares
received in the Merger and the provisions of Rule 145(d)(3) are then applicable
to the undersigned, or (iii) Sterling has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to Sterling, or a "no
action" letter obtained by the undersigned from the staff of the Commission, to
the effect that the restrictions imposed by Rule 145 under the Act no longer
apply to the undersigned.
Very truly yours,
Name:
---------------------------
Agreed and accepted this ____ day of
____________, 1999, by
STERLING BANCSHARES, INC.
By:
------------------------------
Name: Michael A. Roy
Title: Senior Vice President
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<PAGE>
ANNEX C
CONSULTING AND NON-COMPETITION AGREEMENT
This Consulting and Non-Competition Agreement (this
"Agreement") dated as of the ___ day of ___________, 1999 is entered into
between Sterling Bancshares, Inc., a Texas corporation (the "Company"), and
David B. Moulton (the "Consultant") as follows:
WHEREAS, the Company and its wholly owned subsidiaries,
Sterling Bancorporation Inc., Sterling Bank, Sterling Capital Mortgage Company
and other future subsidiaries are collectively referred to herein as the
"Sterling Companies" and individually, as a "Sterling Company;"
WHEREAS, the Sterling Companies are engaged in banking and
providing other financial services (the "Business"); and
WHEREAS, the Company is acquiring B.O.A. Bancshares, Inc., a
Texas corporation ("B.O.A.") and its wholly owned subsidiary, Houston Commerce
Bank; and
WHEREAS, Consultant has valuable experience with and
understanding of the business strategy and operations of B.O.A. and Houston
Commerce Bank and the Company desires to engage Consultant to provide, and
Consultant desires to provide, certain consulting services to the Company on the
terms and conditions provided herein;
NOW, THEREFORE, for and in consideration of the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Appointment of the Consultant. The Company hereby
engages the Consultant as consultant, and the Consultant hereby agrees to
provide, consulting services and business advice to the Company in the operation
of the Business. The Consultant shall from time to time, as reasonably requested
by the Company, consult with and provide business advice to representatives of
the Company and Sterling Bank concerning matters relating to the operation of
the Business.
Such services shall include, but not be limited to, consulting
with the Company and with Sterling Bank as to the operations of Sterling Bank
and the implementation of strategies to profitably grow and expand Sterling
Bank's business. In addition, from time to time, the Company may request
Consultant to assist the Company in connection with its merger and acquisition
activities, including contacting acquisition candidates and evaluating their
suitability to become a part of the Company. It is understood and acknowledged
by Consultant that, over the term of this Agreement, the Company intends to
utilize his services for such portion of his business-related time and advisor
agrees to devote such time to the Company as may be reasonably requested by the
Company from time to time.
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<PAGE>
Section 2. Consulting Fees.
(a) In consideration of the Consultant entering into this
Agreement and providing services as herein provided, the Company agrees to pay
to the Consultant (in addition to the compensation he shall receive for serving
as a director of the Company pursuant to the terms of the Merger Agreement) a
monthly fee in an amount equal to One Thousand Dollars ($1,000). Such monthly
fee shall be paid on the last regularly scheduled payday of each month for
Company's employees; the monthly fee shall be prorated, based on a thirty day
month, for the first and last months of this Agreement if the Agreement does not
commence or terminate as of the first or last day of a month.
As an independent contractor, Consultant shall be responsible for the
payment of all income and any other taxes assessed upon all payments received by
the Consultant under this Agreement. Consultant hereby agrees to indemnify and
hold the Sterling Companies harmless from and against any tax, withholding,
unemployment insurance and other employment-related obligations of Consultant.
Section 3. Reimbursement of Expenses. The Company shall
promptly pay or reimburse the Consultant for, or cause to be paid or reimbursed,
all business travel and other out-of-pocket expenses reasonably incurred by
Consultant in the performance of his services pursuant to this Agreement and in
accordance with Company and Sterling Bank's policies. All reimbursable expenses
shall be appropriately documented in reasonable detail by Consultant upon
submission of any request for reimbursement, and in a format and manner
consistent with the Company's expense reporting policy.
Section 4. Term and Termination. This Agreement shall be for a
term ("Term") commencing on the date hereof and continuing through five years
from the date hereof; provided that Consultant or the Company can terminate this
Agreement immediately upon 30 days notice for breach by the other party if such
breach is not cured within such 30 days.
Section 5. Non-Competition Agreement.
(a) Consultant recognizes that the Company's willingness to
enter into (i) this Agreement, including the compensation arrangements set forth
in Section 2, and (ii) that certain Merger Agreement dated as of February ___,
1999 (the "Merger Agreement") by and among the Company, Sterling Bancorporation,
Inc. and B.O.A., is based in material part on Consultant's agreement to the
provisions of this Section 5 and that Consultant's breach of any of the
provisions of this Section 5 could materially damage the Sterling Companies.
Consultant will not, during the Term of this Agreement, and for a period of five
years immediately following such Term, directly or indirectly, for himself or on
behalf of or in conjunction with any other person, company, partnership,
corporation or business of whatever nature:
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<PAGE>
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, whether paid
or unpaid, in any business in direct competition with any Sterling
Company, within 100 miles of any location where any of the Sterling
Companies now conducts, or shall conduct during the term, its Business;
(ii) call upon any person who is, at that time, an employee of
any Sterling Company for the purpose or with the intent of enticing
such employee away from or out of the employ of a Sterling Company;
(iii) call upon any person or business entity which is, at
that time, or which has been, within two (2) years prior to that time,
a customer of any Sterling Company, for the purpose of soliciting or
selling products or services in competition with any of the Sterling
Companies;
(iv) call upon any prospective acquisition candidate, on
Consultant's own behalf or on behalf of any competitor, which candidate
was, to Consultant's knowledge after due inquiry, either called upon by
a Sterling Company or for which the Company has made an acquisition
analysis, for the purpose of acquiring such entity; or
(v) voluntarily testify as an expert witness in banking or
financial service matters for an adverse party to any Sterling Company
in litigation or arbitration.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Consultant from acquiring as an investment not more than five
percent (5%) of the capital stock of a competing business, whose stock is traded
on a national securities exchange or on the Nasdaq Stock Market.
(b) Because of the difficulty of measuring economic losses to
the Company as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Sterling
Companies for which they would have no other adequate remedy, Consultant agrees
that the foregoing covenant may be enforced by the Company, in the event of
breach by Consultant, by injunctions, restraining orders and orders of specific
performance issued by a court. Consultant further agrees to waive any
requirement for the Company's securing or posting of any bond in connection with
such remedies.
(c) The parties agree that the foregoing covenants in this
Section 5 impose a reasonable restraint on Consultant in light of the activities
and Business of the Sterling Companies on the date hereof and the current plans
of the Sterling Companies. It is also the intent of the Company and Consultant
that such covenants be construed and enforced in accordance with the changing
activities, Business and locations of the Sterling Companies throughout the Term
of this Agreement. For example, if, during the Term of this Agreement, a
Sterling Company engages in new and different activities, enters a new business
or establishes new locations for its current
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activities or business in addition to or other than the activities or the
Business enumerated under the Recitals above or the locations currently
established therefor, then Consultant will be precluded from soliciting the
customers or employees of such new activities and business or from directly
competing with such new activities or business within one hundred (100) miles of
its then-established operating locations through the Term of this covenant. If
Consultant shall cease to consult on behalf of the Company and shall enter into
a business or pursue other activities not in competition with a Sterling
Company, or shall engage in similar activities or business in locations the
proximity and activities of which do not violate clause (a) of this Section 5,
Consultant shall not be chargeable with a violation of this Section 5 if a
Sterling Company shall thereafter enter the same, similar or a competitive
business, course of activities or location, as applicable.
(d) The covenants in this Section 5 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth herein are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable, and this Agreement shall thereby be reformed.
(e) All of the covenants in this Section 5 shall be construed
as an agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Consultant against a Sterling
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of such covenants. It is
specifically agreed that the period of five years during which the agreements
and covenants of Consultant made in this Section 5 shall be effective, shall be
computed by excluding from such computation any time during which Consultant is
in violation of any provision of this Section 5.
Section 6. Return of Company Property. All records, designs,
patents, business plans, financial statements, manuals, memoranda, lists and
other property delivered to or compiled by Consultant by or on behalf of any
Sterling Company, its representatives, vendors or customers which pertain to the
Business of any Sterling Company shall be and remain the property of the
Sterling Companies, and be subject at all times to their discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans of
the Sterling Companies which is collected by Consultant shall be delivered
promptly to the Company without request by it upon termination of this
Agreement.
Section 7. Trade Secrets. Consultant agrees that he will not,
during or after the Term of this Agreement, disclose the specific terms of any
Sterling Company's relationships or agreements with its significant vendors or
customers or any other significant and material trade secret of any Sterling
Company, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever, except in pursuit
of the Company's Business (e.g. interaction with outside auditors and
consultants engaged by the Company) consistent with policies of the Company.
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<PAGE>
Section 8. Confidentiality.
(a) Consultant acknowledges and agrees that all Confidential
Information (as defined below) of the Sterling Companies is confidential and a
valuable, special and unique asset of the Company that gives the Company an
advantage over its actual and potential, current and future competitors.
Consultant further acknowledges and agrees that Consultant owes the Company a
fiduciary duty to preserve and protect all Confidential Information from
unauthorized disclosure or unauthorized use, that certain Confidential
Information constitutes "trade secrets" under applicable laws, and that
unauthorized disclosure or unauthorized use of the Company's Confidential
Information could irreparably injure the Company.
(b) Both during the Term of this Agreement and thereafter,
Consultant shall hold all Confidential Information in strict confidence, and
shall not use any Confidential Information except for the benefit of the
Company, in accordance with the duties assigned to Consultant. Consultant shall
not, at any time (either during or after the Term of this Agreement), disclose
any Confidential Information to any person or entity (except to employees of the
Sterling Companies who have a need to know the information in connection with
the performance of their employment duties), or copy, reproduce, modify,
decompile or reverse engineer any Confidential Information, or remove any
Confidential Information from the Company's premises, without the prior written
consent of the Chairman and Chief Executive Officer of the Company, or permit
any other person to do so except for the benefit of the Company. In the event
Consultant is requested or required (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand or
other process) to disclose any Confidential Information, Consultant will provide
the Company with immediate written notice of any such request or requirement so
that the Company may seek an appropriate protective order or seek with
Consultant's cooperation to narrow the request or demand or waive Consultant's
compliance with the provisions of this Agreement. If, failing the entry of a
protective order or the receipt of a waiver hereunder, Consultant is, in the
opinion of his counsel, compelled to disclose Confidential Information,
Consultant may disclose only that portion of the Confidential Information which
Consultant's counsel advises Consultant in writing that Consultant is compelled
to disclose and Consultant will exercise his best efforts to obtain assurance
that confidential treatment will be accorded such Confidential Information. In
any event, Consultant will not oppose action by the Company to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information. Consultant shall take
reasonable precautions to protect the physical security of all documents and
other material containing Confidential Information (regardless of the medium on
which the Confidential Information is stored). This Agreement applies to all
Confidential Information, whether now known or which later becomes known to
Consultant.
(c) Upon the termination of this Agreement, and upon written
request of the Company at any other time, Consultant shall promptly surrender
and deliver to the Company all documents and other written material of any
nature containing or pertaining to any Confidential Information and shall not
retain any such document or other material. Within five (5) days of any
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such request, Consultant shall certify to the Company in writing that all such
materials have been returned.
(d) As used in this Agreement, the term "Confidential
Information" shall mean any information or material known to or used by or for
any Sterling Company (whether or not owned or developed by a Sterling Company
and whether or not developed by Consultant) that is not generally known to the
public and has been generally treated by a Sterling Company as confidential
information. Confidential Information includes, but is not limited to, the
following: all trade secrets of the Sterling Companies; all information that any
Sterling Company has marked as confidential or has otherwise described to
Consultant (either in writing or orally) as confidential; all nonpublic
information concerning the Sterling Companies' products, services, prospective
products or services, research, product designs, prices, discounts, costs,
marketing plans, marketing techniques, market studies, test data, customers,
customer lists and records, loans, loan data, suppliers and contracts; all
business records and plans; all personnel files; all financial information of or
concerning the Sterling Companies; all information relating to operating system
software, application software, software and system methodology, hardware
platforms, technical information, inventions, computer programs and listings,
source codes, object codes, copyrights and other intellectual property; all
technical specifications; any proprietary information belonging to the Sterling
Companies; and all data and all computer system passwords and user codes.
"Confidential Information" shall not include information which (i) is
in the public domain to such an extent as to be readily available to competitors
of the Sterling Companies, (ii) becomes generally known to the public other than
by disclosure by Consultant, or (iii) is received by Consultant, outside his
capacity as an advisor of the Company, from a third party which was under no
legal obligation of confidentiality with a Sterling Company with respect to such
information.
Section 9. Indemnification. In the event Consultant is made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by the Company against Consultant), by reason of the fact that he is or was
performing services in good faith under this Agreement, the Company shall
indemnify Consultant against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, as actually and reasonably
incurred by Consultant in connection therewith. In the event that both
Consultant and the Company are made a party to the same third-party action,
complaint, suit or proceeding, the Company will engage competent legal
representation, and Consultant agrees to use the same representation, provided
that if counsel selected by the Company shall have a conflict of interest that
prevents such counsel from representing Consultant, Consultant may engage
separate counsel and the Company shall pay all reasonable attorneys' fees and
reasonable expenses of such separate counsel. Further, while Consultant is
expected at all times to use his best efforts to faithfully discharge his duties
under this Agreement, Consultant cannot be held liable to the Company for errors
or omissions made in good faith where Consultant has not exhibited gross,
willful and wanton negligence and misconduct nor performed criminal and
fraudulent acts which materially damage the business of the Company.
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<PAGE>
Section 10. Notices. Any and all notices, requests or other
communications hereunder shall be given in writing and delivered by hand
delivery or by registered or certified mail, return-receipt requested, with
first class postage prepaid, or by facsimile transmission or overnight courier
service to the parties at the following addresses or facsimile numbers:
(a) if to the Company, to:
Sterling Bancshares, Inc.
15000 Northwest Freeway
Houston, Texas 77040
Attention: George Martinez, Chairman
Facsimile Number: (713) 849-5498
with a copy to:
Facsimile Number:
(b) if to the Consultant, to:
David B. Moulton
Houston, Texas
Facsimile Number: (713)
or at such other address or number as shall be designated by such party in a
notice to the other party given in accordance with this Section. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given: (i) in the case of a notice sent by facsimile, upon
transmission subject to telephone confirmation of receipt; (ii) when personally
delivered; (iii) in the case of a notice sent by overnight courier, the next
business day after such notice is delivered to such courier; or (iv) in the case
of a notice sent by regular or certified mail return receipt requested, three
business days after it is duly deposited in the mails, in each case given or
addressed as aforesaid.
Section 11. Benefit and Burden. This Agreement shall inure to
the benefit of, and shall be binding upon, the parties hereto and their
respective successors and permitted assigns.
Section 12. No Third Party Rights. Nothing in this Agreement
shall be deemed to create any right in any creditor or other person or entity
not a party hereto and this Agreement
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<PAGE>
shall not be construed in any respect to be a contract in whole or in part for
the benefit of any third party.
Section 13. Complete Agreement. This Agreement is not a
contract of employment, a promise of future employment or a promise or contract
regarding the election of Consultant as a director of the Company. Consultant is
a party to no other agreements, whether written or verbal, with any Sterling
Company, or any of their respective officers, directors or representatives
covering the subject matter covered by this Agreement. This Agreement is the
final, complete and exclusive statement and expression of the agreement between
the Company and Consultant and of all the terms of this Agreement, and it cannot
be varied, contradicted or supplemented by evidence of any prior or
contemporaneous verbal or written agreements.
Section 14. Amendments and Waiver. No amendment, modification,
restatement or supplement of this Agreement shall be valid unless the same is in
writing and signed by the parties hereto. No waiver of any provision of this
Agreement shall be valid unless in writing and signed by the party against whom
that waiver is sought to be enforced. No failure or delay on the part of any
party hereto in exercising any right, power or privilege hereunder and no course
of dealing between the parties hereto shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. No notice to or demand on any party in any
case shall entitle such party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of any party
to any other or further action in any circumstances without notice or demand.
Section 15. Assignments. The Consultant may not assign his
rights, interests and obligations under this Agreement. The Company may assign
its rights, interests and obligations under this Agreement to a successor of all
or substantially all of the business and/or assets of the Company. Except for
the foregoing, neither this Agreement nor any right, interest or obligation
hereunder may be assigned by any party hereto and any attempt to do so shall be
null and void; provided, however, that in connection with any assignment
permitted pursuant to this Section, the assignee shall expressly assume all of
the obligations of the Company hereunder and the Company shall remain fully
liable for the performance of all such obligations in the manner prescribed in
this Agreement.
Section 16. Counterparts. This Agreement may be executed in
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed an original and all of which taken
together shall constitute but one and the same agreement.
Section 17. Captions and Headings. The captions and headings
contained in this Agreement are inserted and included solely for convenience and
shall not be considered or given any effect in construing the provisions hereof
if any question of intent should arise.
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Section 18. Construction. The parties acknowledge that each of
them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by the parties hereto.
Section 19. Severability. Should any clause, sentence,
paragraph, subsection or Section of this Agreement be judicially declared to be
invalid, unenforceable or void, such decision will not have the effect of
invalidating or voiding the remainder of this Agreement, and the parties hereto
agree that the part or parts of this Agreement so held to be invalid,
unenforceable or void will be reformed by a court of competent jurisdiction as
provided in Section 5 or deemed to have been stricken herefrom by the parties
hereto, as the case may be, and to the extent so stricken, the remainder will
have the same force and effectiveness as if such stricken part or parts had
never been included herein.
Section 20. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas without regard
to conflict of law principles.
Section 21. Survival. Sections 6, 7, 8 and 19 shall survive
the termination or expiration of this Agreement and Section 5 shall survive the
termination of this Agreement prior to the end of the Term.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day and year first above written.
"COMPANY"
STERLING BANCSHARES, INC.
By:
-------------------------------
George Martinez, Chairman
"ADVISOR"
--------------------------------
David B. Moulton
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